00:00Joining us now is Adam Hodge, Managing Director at Bully Pulpit International.
00:04He's also a Democratic strategist who advised senior government officials
00:06and political leaders through high-stakes global challenges.
00:10Adam, thanks for joining us this morning.
00:11And I just wonder what you make of this, the message from the president this morning
00:15saying that there are more reasonable people in Iran, the regime, to negotiate,
00:18but then issues this big threat.
00:20If the Strait of Hormuz is not immediately open for business,
00:23we will conclude our lovely stay in Iran by blowing up and completely obliterating
00:27all of their electric-generating plants, oil wells, and Karg Island.
00:31What do you do with that, Adam?
00:34I mean, Danny, it's really hard to tell.
00:36It's a bit of a mixed bag, to say the least.
00:38Look, what you've seen from the beginning of this conflict
00:41is a bit of mixed messaging out of the White House, from the president himself on down.
00:46And I think what I keep coming back to is that just overall,
00:49there seems to be this hope that there's some grand plan that's going to come together.
00:53But hope is not a strategy.
00:54Hope is not a strategy to alleviate stress in the private credit markets.
00:59It's not a strategy to getting out of this conflict in the Middle East.
01:04And so what I think the president needs to do over the next couple weeks
01:07is just lay out clearly to the American people what he hopes to get out of this conflict.
01:12Is it regime change?
01:14Is it some sort of lack of stress in the Strait of Hormuz?
01:20Or is there some other broader regional pact that you can come together that brings some stability?
01:25That, I think, is what is needed most and foremost.
01:28And that's clearly what the market is hoping that they can get out of the White House.
01:31Adam, where are lawmakers in all of this?
01:33Congress decided to go on their break.
01:35Is there support or pushback or anything coming from the Hill?
01:41It's a pretty embarrassing act, to be honest.
01:45I mean, to go on a two-week recess when there's a war in the Middle East,
01:49when there's a shutdown with DHS and ICE,
01:53I can't fathom in all my years working on Capitol Hill
01:56that a Speaker of the House and the Senate would go on a recess
01:59when you're in the middle of a war and you've got part of the government shut down.
02:03And so I think Congress should come back and try to help address this issue.
02:07Look, the president has asked for $200 billion.
02:10There should be an honest, an open debate about how soon that money gets flowed
02:15or whether it should in the first place.
02:17Now, Democrats have been pretty clear that that's a non-starter,
02:19that they don't think that the president both needs more money,
02:22but also that he shouldn't be funding this war that they deem as illegal.
02:26Obviously, the Republicans, on the other hand,
02:28want to give the president all the tools that he has to wage the war.
02:33And that's, I think, a debate that the American people deserve to see from the lawmakers in Washington.
02:37What is your advice to Democrats in this moment and their ability to push back
02:41not just the funding of the war, but perhaps the war itself?
02:46I think they need to press the administration about what its objectives are.
02:50That fundamentally is what they owe the American people.
02:53And I think they're on the higher ground if they put that pressure on the White House,
02:58while also making clear that none of this does anything to reduce costs for the American people.
03:04And what we've seen is the number one political issue that is driving races across the country.
03:09Democrats, since President Trump took office, have won about 30 special election races.
03:15And in all of those wins, they've focused on affordability.
03:18And a war in the Middle East does not do anything,
03:21certainly with crude at $115, with aluminum spiking,
03:25with all the other downstream effects on key metals and inputs into the economy.
03:30It's hard to see prices going down anytime soon.
03:34And that also puts more pressure on the Fed, right?
03:36I mean, we know that they are watching what's going on.
03:39And we're going to get CPI and PPI in about two weeks now.
03:43There'll be two weeks between for the Fed to digest that information.
03:47And the White House and Congress are going to have to try to figure out a solution here,
03:51hopefully, by the time that.
03:52Otherwise, I think it makes the outlook for, you know, a cut in rates even more cloudy.
03:58On the point of affordability, Adam, we are still looking at gasoline prices that are under $4.
04:03And I mean, literally just under $4.
04:05$3.99 is where the national average gasoline price stands at this moment.
04:09Is there a pain point?
04:11Is there a threshold that we cross that you get some real pushback,
04:15not even just for Congress, maybe the president himself, the taco trade comes in?
04:20Is there a level which would really concern consumers and therefore concern Washington, D.C.?
04:27I think you've seen a little bit of the taco over the president kind of bounces back and forth there.
04:33I think, you know, gas at $4.50, $4.75 a gallon certainly is something to watch out for.
04:41But let's not forget, diesel prices have also spiked tremendously over the last couple weeks.
04:46And that hits people, farmers, that hurts producers around the country.
04:50And so this focus on just the average consumer driving, you know, getting to work, while important, is only a
04:56small part of the picture.
04:58And I think what Democrats, what Republicans, what they should try to do is how do we force the president's
05:03hand to negotiate an end to this conflict that helps relieve some of that pressure?
05:08Otherwise, I think you're looking at increased Democratic enthusiasm.
05:12I think you're looking at more likelihood that Democrats win the House and maybe the Senate in the future.
05:19And then, you know, that adds to more pressure on the president politically.
05:22But, again, hope is not a strategy, right?
05:24The president has to find a way to put out clear objectives for the administration how this conflict comes to
05:31an end.
05:32If we can do that, maybe you'll see a little bit of a break in this dam.
05:36Well, even if there is that push, Adam, to end this conflict, what could that possibly even look like?
05:42And would it put the Middle East on even more fragile footing?
05:45Because you have an Iranian regime that says we control the flows through the Strait of Hormuz and they've demonstrated
05:51their ability to do so.
05:53They have a huge negotiating hand at this moment.
05:55Even if the president were to turn around tomorrow and say, I want to end this thing, what could that
05:59even look like?
06:01Is there an outcome that doesn't include caving into Iranian demands at this point?
06:07I think what we have learned over the course of the last month is that the fundamental dynamics in the
06:15Strait of Hormuz and in the Gulf have changed.
06:17And I don't think there's any going back anytime soon.
06:19Iran has learned, no matter who is leading the country, that they can essentially shut off the large share of
06:28global oil flow.
06:29And that has a downstream effect for countries around the world, not just here in the U.S., but look
06:34at Southeast Asia, right?
06:35And the splits of unrest you're starting to see over there.
06:39So I think the Iran regime has learned that they can hold the global economy hostage.
06:46And our partners in the Gulf have seen the impact.
06:49And that's why they're pushing the administration in some ways to go even further to try to help create some
06:55regime change.
06:56The key question I have is, like, regime change to what?
06:58There's no other force in Iran.
07:01There's no sort of uprising that seems to be on the horizon that will lead to a different fundamental setup
07:10in Iran.
07:11The IRGC is even more empowered.
07:14The new Ayatollah is even closer to the IRGC.
07:18And there seems to be even more extremism from those leaders than were in place before.
07:24So I think that, again, gets to this fundamental change that we've seen in the region.
07:28It's hard to see us going back to times before.
07:31And I think that means higher commodity prices, higher overall prices for the foreseeable future.
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