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Chapter 1: What is the main topic discussed in this episode?
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Donald Trump has unleashed in a series of extraordinary social media posts swearing and threatening Iran's civilian infrastructure if the Strait of Hormuz isn't reopened. So are we on the edge of a dangerous escalation in this war that has already wrought havoc on energy markets?
And while time ticks down on Trump's deadline, buyers seem to be biding their time to purchase property in Australia, with the auction clearance rates continuing to fall. Welcome to ABC Business Daily. I'm Carrington Clark.
And I'm ABC Business Correspondent David Taylor.
So, DT, thank you so much for joining us. Pleasure. The long weekend has interrupted the usual flow of market trading, and Trump is demonstrating this pattern of making his most inflammatory remarks when markets are closed. What do you make of the most recent social media posts and the comments that he has made to journalists regarding this deadline?
Are we at the point of a further escalation in this war?
Well, if you look at the social media posts, then yes. But what I am struggling with is an existential journalism crisis. That's what I'm struggling with because... What are the tweets supposed to be doing? Are they supposed to be scaring the Iranians? Are they supposed to be moving markets? Are they supposed to be hedging Donald Trump's own personal interests? I have no idea.
And as a journalist, you are used to receiving information from different sources. Some of those sources are credible, some of them aren't. And to have a moment where the source is the president of the United States, you would assume it's credible, but the social media posts are contradictory. What he says is contradictory. So as a journalist, it is really annoying.
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Chapter 2: What recent actions has Donald Trump taken regarding Iran?
That process has been short-circuited, if you like. So it's impossible to work out. Based on what I've seen over the weekend, I would say that there is a real threat that over the next 48 hours, there will be either a serious escalation of the war or Donald Trump will find another off-ramp.
But again, Carrington, this idea of an off-ramp, I'd never heard of an off-ramp before this Iran war started. I mean, what is an off-ramp? I mean, I think of a boat coming off a ramp just in my own head. That's what I think of an off-ramp or a car. And to think of it as a strategy to exit a major war just annoys me.
Yeah, Donald Trump is a difficult political figure to cover because he doesn't play by the usual rules when it comes to conveying information. Previously, it might be a case that a politician might choose not to say something or might avoid potential answers if they thought it could get in the way of operations.
Chapter 3: Are we on the brink of a dangerous escalation in the Iran conflict?
But Donald Trump... is very available to media. He is constantly doing interviews with media, different media organizations, often back to back and seemingly contradicting himself as the hours tick by. And then we have the social media posts, which are a direct line, as he sees it, to the American people and to the world. And as you say, it's confusing in these social media posts.
Are they just meant as a form of brinkmanship?
Chapter 4: How are energy markets reacting to the situation in the Strait of Hormuz?
Is it him trying to convey to the Iranian regime that he does mean business and he is going to go through with these threats to bomb them back to the Stone Age in his terminology? Or Or is this a message to the American people that he wants to look like a strong man? Is it a message to other world leaders, again, to convey a certain position?
You've been in Washington, though. When you're with the press gallery in Washington, what is the sense from other American journalists? Do they take every word verbatim?
No, and I think people struggle with this concept, right? Because on one hand, he is the American president and he is the source of He is a legitimate source of information because he does know what they are planning behind the scenes. But as he himself will say often when answering these questions, I wouldn't tell you even if I was when people asked him about putting ground forces into action.
into the region. And so on this particular issue about this impending deadline, we've seen him move the goalposts now multiple times when it comes to opening up the Strait of Hormuz. He gave them 48 hours. He moved it out by a week. He then moved it out to five days and he moved it out to 10 days. He seems to be sticking to this current deadline. and the language has become more inflammatory.
But then at one point during this 10-day period, he also said, or the White House said, the opening of the Strait of Hormuz was not necessarily a priority of the American administration. So I think It could well be that we're at the point of an escalation. It's also possible he finds a way of avoiding that deadline. But you would be wrong to discount the possibility completely.
And I think one of the things that's interesting when we look at the market implications for this is that on one hand, you have organizations like the International Energy Agency suggesting that this is the worst interruption of the flow of energy in history. We're on par with what was going on in the 1970s, which would indicate that we could be on the edge of a major economic disaster.
But markets, yes, they have fallen, but they appear to be mostly shrugging this off, right? We actually saw a bounce back last week. So is it that investors are choosing to be optimistic or is it that based on their experience with Donald Trump, they think eventually –
the market cost to him, which in turn translates into a political cost to him, will be so high that he will try to find that mystic off-ramp.
Look, I go by the efficient markets hypothesis, and I do believe that I'm a markets purist. I do believe that markets are telling a story. And what was interesting last Thursday when Donald Trump was speaking and everyone wanted to know every word of that announcement, that update on Iran,
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Chapter 5: What challenges do journalists face when reporting on Trump's statements?
He's looking for an off ramp, can't find it. Looking for an off ramp over here, can't find it. So the markets are pricing that in. As people try to get cash and liquidate their positions, you're seeing the price of gold sell off. Huge bubble in the price of gold. And now we're looking at the price of gold. It's about 16%, 17% down from its all-time high.
And it's consistently now in a bear market. So central banks and other major investors are liquidating gold in order to cash up their positions. So you've got a premium in the price of oil. You've got gold being sold off to cover margin calls or any kind of leverage position where people need cash. And the equity market still is down.
Any equity market across the globe is still down between 7% and 10%. So there is hope that things will work out. But there is a broader thematic that Donald Trump doesn't have control over this situation anymore. And I think that premium is being placed in the oil market.
One of the difficulties with the taco trade has been, and the reason people talk about this is we saw, for example, when it came to the Liberation Day tariffs, which is really where this terminology came from, that Donald Trump announces this sweeping reform of the way that America taxes countries that try to export to the United States.
And he went with some extraordinary tariffs on individual countries. And it looked like he was going to hold on to that tariff position, even when we started to see major sell-offs in markets. But eventually, it appeared it got too much for him particularly with what was happening in the bond market. And so we saw him pare back considerably the tariffs that were being placed.
The main one was on China, where we got up to extraordinary heights. But I think this is starting to remind me more of what happened during the COVID pandemic. And just like with the COVID pandemic, Donald Trump did not have control of the virus.
And although he would go to these daily briefings, and he actually used terminology last week that echoed almost exactly what he said with COVID, which is that it'll be like a miracle. Eventually, it'll just disappear. And that was the same terminology he used when it came to the Strait of Hormuz. It'll just open up almost naturally. It'll just reopen once we leave.
And what experts are now suggesting when it comes to energy supply is that there is not going to be a miraculous recovery in oil supply. Not only have we seen infrastructure destroyed or badly damaged around the Gulf on the Iranian side, but also in the Gulf states.
But also there is going to be much greater fear about ships moving through that strait, even if we don't have a hot war, as it were, between the United States and Iran that they can now quickly become potential targets if something else happens. And also just a general dislocation over how markets are supplied.
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Chapter 6: What implications do Trump's social media posts have on market behavior?
One thing I will say about following the property market for a long time is it's very hard to bet against the Australian property market. There are many theoretical reasons why you can come up with why the Australian property market is overpriced when you try to link it to how much people earn income-wise when you try to work out what a fundamental fair cost of that property is.
But what we have seen over decades now is in most places, property prices continuing to go up. And that's partly because it's seen as a safe place for investment, but also because Australia has very high population growth. The most recent statistics from the ABS show population still growing by 1.6%, more than 400,000 people moving to Australia. Those people need to be housed somewhere.
And so that does mean that there's demand for more housing. And that's why I think we've seen it. But you're right to point out there are risks here. And anyone who thinks property is a one-way bet has not looked at different countries around the world who have had long periods of high house property price growth only to see something hit that market. And then you can see value dissipate.
You have to admit, the preliminary clearance rates are interesting. Yeah. I mean, I think what we're seeing is vendors, sellers are just not getting the price that they thought their house was worth a month ago. And I think talking to real estate agents, they say the biggest difficulty for them right now is trying to convince a seller that this current price is the proper price.
The value of the house is whatever someone's willing to pay for it, not what it was a month ago.
You can imagine that conversation, can't you? Wow. Because people get really emotionally attached to this stuff.
I think they get emotionally attached to the house particularly that they live in, but also I think for most people this is your biggest investment. 100%. And if you've suddenly gone from your house being worth – Whatever the number might be, and now they're telling you it's worth 10% than what you thought it was a month ago in some extreme examples.
And of course, that's a difficult discussion to have.
It's literally coming up in the data, though. That tension is there, which is fascinating.
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