Your market is negative this morning. Tk, your headline of the we can come israel is or. Tom bond market close. We will cover this continued bond debacle but certainly front and center in the news, still happening according to our people in tel aviv, this is a dynamic story on a typical monday morning. Jonathan we have to work through 3 this morning. Where is this going next . The big one for many after seeing the shocking images, how on earth did this happen . Lisa it shook a sense of security, invincibility, intelligence. The ability to foresee what was going to happen within israel. At this point there are a lot of questions as well as how far this will percolate in a geopolitical sense. How this will really affect the israelisaudi arabia packed that was in the works of the past couple of weeks and months. Jonathan through equity market pulling back on the s p 500 by 0. 6 sent. Looking or exchange market, the dollar is stronger against the euro, and there is the move in the oil market wti up by 3. 5 . Tom that is of course a day we are not getting bond information for the United States. But one tea leaf really captured my attention. A stronger swiss franc. We really havent seen this in the last number of weeks. Swiss franc strengthens. That is an indication of the tension that we see. Jonathan working out next in the commodity market, rightly pointing to iran and for goldman sachs, sticking with that triple digit crude forecast for next year. That is where our focus will be for some of the morning. Lisa the risk that this could potentially increase sanctions on iran from the u. S. , and if that really is one of the key constraints on some line, there isnt necessarily any disruption seen as of yet, but you have to understand and this is what everybodys is trying to grapple with you have true geopolitical risk, true conflict in the middle east, a major producer of oil. This is potentially going to be disruptive preparing for that today. It is a big week this week. When it comes to Economic Data, cpi, ppi. We do have a host of fed speak down in dallas for the conference. Dallas fed president lori logan, philip jefferson, michael barr who i know tom will be listening to. How they frame will be cut on friday given the fact that we did get a surprisingly hot number. Today, the world bank and imf annual meetings kickoff through sunday. Tom will be heading there later in the week. We did hear from Christine Lagarde today saying that the imf cut its global forecast, and today, also percolating in the headlines, undoing strikes, this time in canada. The canadian equivalent to that uaw trying to come to some sort of Labor Agreement with gm having a factory there and some parts and engine manufacturing areas as well. Jonathan lisa, thank you. Its time to the top story, the israelhamas conflict entering the third day. Israeli forces responded with strikes, taking hostages over the weekend. The wall street journal reported are bonnie and Security Officials held will be the biggest Israeli Security failure in decades. Antony blinken maintaining they have not seen evidence to confirm cooperation. Theres a long relationship between iran and hamas. Hamas wouldnt be hamas without the support has gotten from many years of iran. We havent yet seen direct evidence, but the support over many years is clear. Jonathan joining us now is the Senior Advisor for the transnational threats project, the center for strategic and international studies. It has been 34 years in the Central Intelligence agency. Wonderful to catch up with you under tragic circumstances, obviously. We have to start with the main question on the lips of everybody. What happened and how did this happen over the weekend . Israeli Security Forces and responsibility for gaza and the occupied territories and they have over the is demonstrated the very capable architecture of surveilling palestinian activity. This has allowed them to frustrate multiple palestinian attacks and identify, locate, and neutralize other officials. In this case, it appears hamas was able to execute within that security bubble that not only deviated israeli clearance, but unable this operation to be undertaken without israel seen indicated that this existed. To be clear, this is an intelligence failure by israel. However, they have a very capable Intelligence Service and also to be clear, this is a failure by the International Community as well. America and other countries do not cede the protection of their nationals to Israeli Security services and we also did not see the indicators of these. Tom wonderful to have you with us with your years and years at the cia. This is not matt damon in a movie, this is reality. How do you take over a geography that is two times the size of washington, d. C. And has 2 Million People crammed into it . How do you link your intelligence knowledge with the military effort to dehamas gaza . It is possible, and israel has done this for some time the west bank and for lebanon. However, you raised an extremely important point. For israel to consider ground operations or rescue operations, this is one of the most challenging environment on the planet. Its not just concentrated in certain areas. This is a concentrated civilian area with very top buildings. The United States and iraq have some experience in working this in the iran afghanistan, but these are much smaller areas with much larger buildings. For israel, this is an extraordinarily difficult challenge and no one should underplay the casualty count is likely to happen for israelis and palestinians in ground operations. Tom you look at the narrow like that, in the writings you talk of a multipolar dynamic and you take the tensions of the middle east back to 1870 and 1930, way before 1967 as well. What is the multi polar dynamic that israel faces right now . Norman is a good newsbad news story. On the good news side, there is strategic, longterm and continuing drivers for the saudis and for others to promote regional integration that must include israel because of its geographic location. That hasnt gone away, and that will sustain the ongoing diplomatic process between the u. S. , saudi arabia and israel to restore relations. On the downside, you have an International Community that is pulling together russia, china, and the European Community in a way that actually promotes a peaceful plaintiffs in consequence which will be impossible. Lisa theres also the question about the role of iran especially at the wall street journals and they had an active role in helping to plan this attack. Weve not heard from the u. S. Government confirming that. They said they are investigating. What i the potential consequences, the escalation potential if iran is deemed to have had an active role in planning these attacks . Should be careful about the report. Iran is unlikely to have played a robust, active role in planning attacks simply because they are not on the ground. They do not have personnel on the ground. They would not be able to provide an intelligence input to those operations, and their involvement compromise the operation. However, iran has provided drones, training, money. Hamas would not be hamas that iran. But that is their modus operandi. But they do is they enable proxies to conduct operations that parallel irans strategic objectives. Those operations play out, iran is able to stay and support, iran achieves its strategic goals, but their direct hand is not seen and thus iran Escapes International punishment. Lisa the speculation is that one of the strategic aims was to disrupt the saudi arabiaisraeli agreement that was being worked on and coming to some sort of fruition in the next couple of weeks and days. How much do you think that has been iced . How much are people to be discussing that aspect of the Strategic Potential motivation the timing of this attack . Norman theres no question that was likely one of the motivations, but this is a pie that has multiple pieces in it. This operation was clearly developed over many, many months. It would have taken a very long time because of the complication requirements. The government and its proxies have maintained a posture for a very long time. There was no specific incident that provoked this, but certainly one of the benefits for hardliners in iran is this will complicate if not disrupt the diplomatic process underway. Jonathan we know based on reports they have taken scores of hostages. Does that complicate israels response to this . Norman usually. We should note these are international hostages. Reports are unconfirmed but there may be a chinese, french, thai, as well as american hostages as well as among the dead in israel. In many ways this is a hamas attack against the International Community. These hostages will be dispersed within gaza, isolating them and identifying their locations and elevate rescue plans will be very, very difficult. The United States has considerable experience here and will no doubt be sending intelligence and security personnel to assist the israelis who are also very good at this. This fall also inject considerable complications into diplomacy. United states, saudi arabia and others engage in turkey and a variety of actors to see how this plays out. It is not inconceivable that you will have iran itself insisting on this. That rarely works out well. Tom norman, ala kissinger, Robert Kaplan and frankly you, is this a day where america shifts back to real politics . Forget about shuttle diplomacy and all of that. This morning is all about a realpolitik that we think we have forgotten and moved on from. Norman the slime of the middle east is unlike las vegas. What happens in the middle east never stays in the middle east. The Biden Administration will need not only a strategy to address this issue, a strategy to see how this impacts existing programs such as the iran and 70 initiatives, but likewise they might have to staff this out. Theyre going to have to apply a lot of personnel and policymaker bandwidth which will come at a cost of other issues. This is a seismic issue which will transform regional policymaking and international policymaking. The ripples of this attack in terms of policy and domestic politics are still playing out. Jonathan i want to ask you this question to wrap things up. No speaker of the house, no ambassador. Is that a symbolic failure, or one with real consequences . Certainly a symbolic problem, but we shouldnt discount the capabilities and roles in these intelligence personnel, military help. This Communication Channels remain robust and these capitals often deal directly with United States and washington through their very able ambassadors. A system of handling this is underway and will be executed crisply. It just might be better and easier if these personnel were in place. Israel has received a considerable boost in the number of iron to interceptors and that is without the house being order, what we need to fix this. Jonathan hopefully we can catch up again before the end of the week. Tk, they are going to have to staff this and fast. Tom that is the key phrase for me. We will have to staff assad. How many administrations have a shortstaffed in the Eastern Mediterranean . Jonathan on the market in the next hour, amy silverman. Amh a look later in the next hour. From new york, this is bloomberg. J. P. Morgan Wealth Management knows its easy to get lost in investment research. Get help with j. P morgan personal advisors. Hey, david ready to get started . Work with advisors who create a plan with you, and help you find the right investments. So great getting to know you, lets take a look at your new investment plan. Ok, great this should have you moving in the right direction. Thanks jen. Get ongoing advice; and manage your investments in the chase mobile app. Im sam morrison. My brother max recommended you. So my best friend sophie says youve been a huge help. At ameriprise financial, more than 9 out of 10 of our clients are likely to recommend us. Our neighbors, the garcias, love working with you. Because the advice we give is personalized, hey, john reese, jr. Hows your father doing . To help reach your goals with confidence. My sister has told me so much about you. Thats why its more than advice worth listening to. Its advice worth talking about. Ameriprise financial. There is a long relationship between iran and hamas. Hamas hamas wouldnt be hamas without the support has gotten from iran. We havent seen direct proof iran was behind this, but the over the years is clear. Jonathan those comments running counter to what we heard in the report from the wall street journal yesterday evening. The journal reporting iranian Security Officials have planned what would be the biggest Israeli Security failure in decades. We will return to that in just a moment. If you are just joining us, welcome to the program. There equity market in the s p looks a Little Something like this. 0. 5 on the s p 500. Treasury market is closed today for columbus day. Elsewhere, that risk off story, yields lower by about or basis point on the german 10year. And in the commodity market, rally anticipated up by 3. 5 . Tom i didnt look at the standard deviation move, but i did look at the stated deviation move in the israeli shekel and it was 3. 8 which i would then, given the angst, is normative to be polite and the central bank is acting on that. We grew by 3. 8 standard deviations. That is within the realm of reason. Jonathan the question this morning, whether this has the potential to have a conflict beyond hamas and israel. Tom i thought lisa capture this brilliantly, the idea here of the back and the fourth in the news report and who has got it and who doesnt, that is all secondary to the sheer fury of day three of any kind of war. I would look geographically off of that wonderful conversation from norman and look to the lebanese border. To me, the idea this is a onefront war we learned in 1967, no. Jonathan steve, a question i think people will be asking the markets, whether this represents a curable headwind to investor sentiment. Do you think it could . Steve it certainly adds uncertainty. Just watching the footage over the weekend, i know we have a job to do, but i feel like equities are the least important thing considering some of the images we saw over the weekend. All things being considered, just trying to decipher it, it is an upward pressure on the commodity complex and adds to the uncertainty in the markets. Yeah, you saw bonds rally a little bit, but not anything major. Weeks and treasury yields go up 10 basis points in a day, four basis point decline. I think the point you just made is the appropriate one. What happens next . Does this become a wider regional conflict . At this point, we all have to wait and see. Tom you are wonderful at the crossasset analysis. This bond debacle but we are in right now. How does it affect steve . Is he getting his requisite nine hours sleep a night . Steve steve and i are very close. Dont know what he does at night. It is a hard one to tell. You got a yield curve that is on inverting and historically when that happens, that is a real imminent sign of recession but it is never uninverted this way. Does not like the two year yield is falling in anticipation of you got a 10 year that is rising in the question, it is very buyers strike on the treasury, or if the market trying to normalize to a new normal of 5 , 6 nominal gdp . One of those is much more bullish than the other. Tom i was shocked on the x on pioneer trend last week that these are 10, 12, 13 multiple companies where we are talking about the chosen seven for 25 and 30 multiple companies as well. How do you define federated growth . Steve a simple russell 1000 growth versus value. Coming into the year, we thought inflation the bit more adorable and that would hike more than the market expected. We still think that this market broadens out. We think it broadens out the cyclicals pricing at some Recession Risk in the short run. We think the dividend players and their safety are attractive. We have nibbled on largecap growth because we have been so underweight, but we still think there is an opportunity for the market to broaden now. Lisa theres a question about how much can change in a minute given some of the concerns out of yet another front for a geopolitical conflagration. How much would your view change should oil bear the brunt of this, if we do see any kind of disruption and we do see Oil Prices Climb above 100 per barrel on a sustainable basis . Steve what the market in the fed are trying to pilaf year is a softer landing. And so anything that makes that path more difficult is a challenge, whether or not that is Higher Oil Prices, resurgent inflation, rising delinquencies, a 10 year yield that becomes unhinged to the upside. Those are all risk factors. But last year pulled us as you want to be humble. You have portfolios that are cost neutral, pointed in the direction of your fundamental view. But you want to stay close to neutral, because theres a lot of risk factors out here that are really unprecedented. Jonathan the conflict in israel, stagflation a shock to the israeli economy. Could you say the same thing about the Global Economy right now . Steve it is certainly possible. What has to happen for there to be a real stagflationary event is you need to draw in some of the northern countries, you need attacks on iranian refineries and things of that nature. Thats probably not enough of an Oil Price Shock where things are located today, but a spreading of that certainly can. And again, on this theme of humility, if you would have asked me what would have happened in the wake of the ukrainian invasion, who would have gotten the Mar