WEBVTT - Forget Supply. Demand For Tesla Cars At $70,000+ Will Dry Up 0:00:00.080 --> 0:00:12.960 Yeah, Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene 0:00:13.480 --> 0:00:16.960 Jay Ley. We bring you insight from the best in economics, finance, 0:00:17.040 --> 0:00:23.520 investment and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 0:00:23.600 --> 0:00:33.879 Bloomberg dot Com, and of course on the Bloomberg A 0:00:34.080 --> 0:00:37.080 rate hike from the Bank of England as expected, coming 0:00:37.080 --> 0:00:40.400 through at zero point seven five from zero point five 0:00:40.440 --> 0:00:43.920 percent previously, So a twenty five basis point hike from 0:00:43.960 --> 0:00:46.559 Governor Carney in the MPC. Let's cross over to just 0:00:46.680 --> 0:00:48.919 outside of thread Needles Street and around the corner where 0:00:48.960 --> 0:00:51.720 near a church is standing by Bloomberg's very own Nara 0:00:51.800 --> 0:00:53.400 go through the headlines for us and get us up 0:00:53.440 --> 0:00:55.720 to speed on what we're learning this morning from the 0:00:55.720 --> 0:00:58.080 Bank of England. Yes, thanks so much, Sean. This is 0:00:58.080 --> 0:01:00.320 a unanimous vote for that rate rise. Of course, the 0:01:00.400 --> 0:01:03.279 rate rise was highly expected, but economists were perhaps expecting 0:01:03.440 --> 0:01:06.600 a seven to vote. We've got nine zero on the MPC, 0:01:06.680 --> 0:01:09.160 so perhaps that might send a little bit of a 0:01:09.280 --> 0:01:11.759 hawkish signal to the markets. More than that as well, 0:01:11.880 --> 0:01:14.920 what we've got is the long term trend equilibrium rate 0:01:14.959 --> 0:01:17.640 the bo ecs that at about two to three percent. 0:01:17.760 --> 0:01:19.880 This is interesting because remember this is the first time 0:01:19.880 --> 0:01:22.319 we're getting that our star from the BOE might give 0:01:22.360 --> 0:01:24.520 some signal to wear rates settle in the future and 0:01:24.560 --> 0:01:28.280 perhaps effect that forward curve somewhat. Now, some economists, many 0:01:28.319 --> 0:01:30.120 of them, were saying we could get a range of 0:01:30.200 --> 0:01:32.840 one point five to two point five per cent, So this, 0:01:32.920 --> 0:01:35.880 of course is slightly higher at two to three percent. 0:01:36.120 --> 0:01:38.760 Is that also a little bit of a hawkish signal here? 0:01:38.760 --> 0:01:40.800 Other things that we've had in terms of comments from 0:01:40.800 --> 0:01:43.280 the BOE, there are tentative signs that protection is um 0:01:43.560 --> 0:01:46.039 is affecting global growth, so that's a little bit of 0:01:46.040 --> 0:01:48.560 a sign of some of the risks. No mentions yet 0:01:48.560 --> 0:01:50.680 of Brexit, but no doubt Mark Carney will get a 0:01:50.680 --> 0:01:53.120 lot of questions out of that in the news conference, 0:01:53.160 --> 0:01:55.560 because of course, one of the questions here that a 0:01:55.560 --> 0:01:57.440 lot of people were asking is why the Bank of 0:01:57.480 --> 0:02:00.640 England would hike into a potential down to turn ahead 0:02:00.680 --> 0:02:03.440 of all that uncertainty around Brexit. But nonetheless that highly 0:02:03.440 --> 0:02:06.720 anticipated hike has come. We do still have the comment 0:02:06.800 --> 0:02:11.079 though of limited and gradual the boecing interest rate increases 0:02:11.120 --> 0:02:13.960 from here being limited and gradual, and of course in 0:02:14.000 --> 0:02:16.320 the news conference, there will be a lot of questions 0:02:16.360 --> 0:02:19.520 around the guidance of the forward curve and when or 0:02:19.880 --> 0:02:22.200 how rate hikes might come from here. Is it going 0:02:22.240 --> 0:02:24.080 to be a one and done? What sort of signals 0:02:24.080 --> 0:02:25.840 will we get on that John now a chair. It 0:02:25.880 --> 0:02:27.600 is great to cat show with you much more from there. 0:02:27.760 --> 0:02:31.200 Through the afternoon and morning right here on Bloomberg Radio 0:02:31.240 --> 0:02:33.280 saw a great height from the Bank of England. Guilt 0:02:33.360 --> 0:02:35.839 yields just jump a little bit higher off the back 0:02:35.880 --> 0:02:37.920 of this decision to unchanged on the down a ten 0:02:38.000 --> 0:02:39.840 year and at the front end the communication for the 0:02:39.880 --> 0:02:43.320 Bank of England policymakers agreeing that more rate hikes will 0:02:43.400 --> 0:02:45.080 be needed. Off the back of this, a little bit 0:02:45.080 --> 0:02:47.920 of a bounce on sterling, a stronger dollar story today, 0:02:47.960 --> 0:02:50.080 so that kind of sort of warp in the move 0:02:50.120 --> 0:02:52.840 here cable now almost unchanged on a session down by 0:02:52.919 --> 0:02:55.160 just a tenth of one percent now at one dollar 0:02:55.320 --> 0:02:58.680 thirty one. Tom Keane expected, it was expected, but the 0:02:58.840 --> 0:03:00.839 street wondering whether this has wanted done in the bank 0:03:00.840 --> 0:03:03.320 having the communicating that more could be coming, and then 0:03:03.560 --> 0:03:06.440 just as remarkable is the complete opposite of what we 0:03:06.480 --> 0:03:09.000 saw yesterday afternoon with a fed. This is some real 0:03:09.080 --> 0:03:13.800 substance to our US listeners. There's real substance here. And 0:03:13.880 --> 0:03:18.280 I would suggest John knock on effect to the American economy. 0:03:18.320 --> 0:03:22.840 This is not discreetly about the United Kingdom and whether 0:03:22.840 --> 0:03:25.359 the guy from Arsenal will leave Racy Milan. We can 0:03:25.360 --> 0:03:26.960 get that to that a little bit. We can do that. 0:03:27.000 --> 0:03:29.240 But we have got some really good guests coming up. 0:03:29.240 --> 0:03:31.840 And we got two individuals that used to serve on 0:03:31.880 --> 0:03:34.360 the Bank aving the Monekey Policy Committee, and we can 0:03:34.400 --> 0:03:38.160 begin with Adam Poston, Peterson Institute for International Economics President, 0:03:38.160 --> 0:03:40.040 and he joins us on the phone. Now, Adam, it's 0:03:40.040 --> 0:03:41.680 great to have you with us. Let's just begin with 0:03:41.720 --> 0:03:43.760 the decision itself. If you were back on the MPC, 0:03:44.320 --> 0:03:47.320 would this have been nine zero? No, I would have 0:03:48.000 --> 0:03:50.120 I would have voted against it. I know Danny by 0:03:50.200 --> 0:03:52.760 char you're having on later, would vote against it. And 0:03:52.800 --> 0:03:56.200 I would presume that a couple of the members currently 0:03:56.280 --> 0:04:00.160 more importantly, like the speech John Kunloft gave month out 0:04:00.200 --> 0:04:03.040 and a half ago, would vote against it. It's very 0:04:03.040 --> 0:04:05.960 hard to justify this decision in my view. How are 0:04:06.000 --> 0:04:09.800 they justifying it, Adam? They seem to have two things 0:04:09.840 --> 0:04:12.360 going on as as time put up on the TV 0:04:12.480 --> 0:04:17.320 bloom A TV surveillance um that they think that their 0:04:17.400 --> 0:04:20.440 output gap is closing, so inflations around the corner, and 0:04:20.480 --> 0:04:24.440 they believe their wage forecasts that there's going to be 0:04:24.560 --> 0:04:27.200 rising wages, even though, as Blanche Flower and others have 0:04:27.279 --> 0:04:29.600 pointed out, those forecasts going back to the time I 0:04:29.640 --> 0:04:33.000 was on the NBC years ago, have repeatedly been wrong. 0:04:33.920 --> 0:04:36.560 We can bring in Danny now, Danny Blanchelind Datmouth professor 0:04:36.600 --> 0:04:39.680 and former bankinging the Monetary Policy Committee member. Danny have 0:04:39.760 --> 0:04:43.080 got no doubt where your vote would have gone last night. 0:04:43.520 --> 0:04:47.599 Your thoughts on the decision, well, I I completely agree 0:04:47.640 --> 0:04:50.360 with Adam. Um. I think what's really interesting is now 0:04:50.360 --> 0:04:53.279 we're in the world if we still thinking and guessing. Um. 0:04:53.320 --> 0:04:57.400 I'm actually trying to read the last four paragraphs of 0:04:57.480 --> 0:05:01.320 the decision and there's actually no day to whatsoever that 0:05:01.440 --> 0:05:05.520 sustains they can't come up with any data. Adams right, 0:05:05.600 --> 0:05:09.880 They seem to think the output gap has actually has 0:05:10.000 --> 0:05:12.599 closed a lot, and the only word is based upon 0:05:12.600 --> 0:05:16.720 is I would sencely Caclaric summarize what they've written as 0:05:16.720 --> 0:05:20.080 the data is absolutely horrible. There's no data to support it, 0:05:20.160 --> 0:05:22.719 but we think it's temporary and wage growth is about 0:05:22.760 --> 0:05:26.719 to explode. Um, I think it's I think, I know. 0:05:26.800 --> 0:05:29.800 How is it right? This is a classic Red mistake 0:05:30.120 --> 0:05:32.359 that will be reversed. Can I just tell you what 0:05:32.440 --> 0:05:35.680 the data looks like. There's no inflation, no wage growth. 0:05:35.720 --> 0:05:39.599 The people are borrowing like crazy, raised uncertainty, potential trade 0:05:39.600 --> 0:05:43.159 wars and Brexit. Commercial property values and house prices are falling. 0:05:43.480 --> 0:05:46.839 Business confidence is low, household debts through the roof insolvent 0:05:47.000 --> 0:05:50.000 is a rising GDP. Growth is weak, and there's no 0:05:50.160 --> 0:05:55.000 data whatsoever. Sounds like more rate hikes on Adam Poston, 0:05:55.040 --> 0:05:57.559 because that's the communication coming from the Bank of England today, 0:05:57.760 --> 0:06:01.360 not just one hike, but agreeing that more is to come. Yeah. 0:06:01.440 --> 0:06:05.840 And again, often not always, but often I agree with Danny, 0:06:06.040 --> 0:06:09.120 and in this case, especially on wages. I always agree 0:06:09.160 --> 0:06:12.039 with Danny because he gets right. But I mean, it 0:06:12.200 --> 0:06:15.479 is interesting, I've said on the show before and elsewhere. 0:06:15.520 --> 0:06:17.640 You know, I could imagine the bank aving and filling 0:06:17.680 --> 0:06:22.279 hamstrung visa vi bregsit Because they politically have to play 0:06:22.320 --> 0:06:26.120 it straight and just be reacting. They can't argue against it, 0:06:26.520 --> 0:06:29.640 and because the currency could move in crazy ways, but 0:06:30.400 --> 0:06:32.720 that's not where we are right now, and so I 0:06:33.120 --> 0:06:37.160 do not understand. I honestly don't get it. Dr Pos 0:06:37.200 --> 0:06:41.000 And I've I've had the privilege of attending a packed 0:06:41.160 --> 0:06:43.800 lecture of David blanche Flower and having the privilege of 0:06:44.080 --> 0:06:47.799 opining to the young Turks of Dartmouth. David blanche Flower, 0:06:47.920 --> 0:06:50.680 if you were in your lecture hall right now, and 0:06:50.720 --> 0:06:52.719 you and Pose it are having a love fest over 0:06:52.800 --> 0:06:56.280 no rate rise. Others disagree. So if I think of 0:06:56.440 --> 0:07:00.120 Charles Plash or the Fresh Freshwater School or others. But 0:07:00.240 --> 0:07:04.080 Professor Blanchflower state the case of those who feel Curney's 0:07:04.080 --> 0:07:06.320 got to raise rates to get some room for the 0:07:06.360 --> 0:07:11.720 next slowdown, Well, the case for those folks is that 0:07:11.760 --> 0:07:14.200 you have to ignore the data. You go and look 0:07:14.200 --> 0:07:16.520 at the forecast that you've got wrong the last twenty 0:07:16.600 --> 0:07:19.040 meetings in a row, and you say we need to 0:07:19.160 --> 0:07:23.600 raise rates in case the economy slows um and pretend 0:07:23.680 --> 0:07:26.120 that the fact that you raise rate won't cause the 0:07:26.120 --> 0:07:29.080 economy to flow. And you're don't going to ignore the 0:07:29.120 --> 0:07:33.400 fact that, um, there's a potential Brexit disaster coming and 0:07:33.480 --> 0:07:35.480 there's trade wars coming. So you have to take a 0:07:35.560 --> 0:07:38.680 huge leap of faith and stay to yourself. Um. Now 0:07:38.840 --> 0:07:42.960 is the moment something is fundamentally changed. Um, And you've 0:07:42.960 --> 0:07:45.280 gotta have to persuade Blanchdown Post them that you know 0:07:45.320 --> 0:07:47.360 what it is, but you can't tell us because there's 0:07:47.400 --> 0:07:50.160 nothing in the data that actually tells you that this 0:07:50.320 --> 0:07:53.440 is fundamentally altered. So the risk are to the downside. 0:07:53.600 --> 0:07:56.760 And you've been saying for the last five years that 0:07:56.880 --> 0:07:59.400 inflation is going to take off and wage growth is 0:07:59.440 --> 0:08:02.040 going to take off, and you're going to say that 0:08:02.120 --> 0:08:05.600 it's really going to happen now. Um. And I'm afraid 0:08:05.640 --> 0:08:09.960 my class is gonna get to vote Adam Post And 0:08:09.960 --> 0:08:12.080 I want to get a final thought from you. Typically, 0:08:12.080 --> 0:08:14.680 when a central bank hikes, especially a developed one, the 0:08:14.760 --> 0:08:17.040 some optimism around it. It sounds like growth is going 0:08:17.080 --> 0:08:19.400 to improve, and that's why we're normalizing. This is a 0:08:19.440 --> 0:08:22.080 thoroughly depressing interest rate hike. Even the Bank of England 0:08:22.280 --> 0:08:25.160 might admit that themselves, because they're talking about lower potential 0:08:25.440 --> 0:08:29.680 for the economy and bumping up against limitations, which means 0:08:29.760 --> 0:08:32.960 inflation pressures around the corner. How do they convince people 0:08:32.960 --> 0:08:35.600 in the news conference that there's some optimism out there. 0:08:36.080 --> 0:08:38.040 I don't think they do. I do want to say 0:08:38.120 --> 0:08:40.400 that you've hit your you put your finger on the point. 0:08:40.920 --> 0:08:43.560 The most legitimate argument they can make, and they started 0:08:43.600 --> 0:08:47.160 making this some months ago, was an argument that potential 0:08:47.200 --> 0:08:50.320 had fallen. And when you your estimate of potential, meaning 0:08:50.360 --> 0:08:53.200 the trend rate of growth, is off, you are more 0:08:53.240 --> 0:08:55.960 prone to mistakes. But central bankers, they said in a 0:08:55.960 --> 0:09:00.600 Bloomberg list of mistakes economists are making, are two caught 0:09:00.640 --> 0:09:03.440 up in the nineteen seventies mistake. The classic nineteen seventies 0:09:03.480 --> 0:09:06.960 mistake Arthur Burns us fed was potential was going down. 0:09:07.040 --> 0:09:10.600 They thought it was rising. Therefore inflation took off. In 0:09:10.640 --> 0:09:15.000 this case, they're probably going the wrong way. They're overestimating 0:09:15.000 --> 0:09:16.800 how much potential is down. So they're going to make 0:09:16.800 --> 0:09:18.960 a mistake in the wrong direction and impose. And it's 0:09:19.000 --> 0:09:20.240 great to have you with us. He's gonna stay with 0:09:20.320 --> 0:09:22.679 us alongside Danny blanch Flower'll get their thoughts or not. 0:09:24.120 --> 0:09:27.240 But on central banks worldwide, great starts at the morning. 0:09:27.320 --> 0:09:43.760 Tom It was plenty to talk about with this h 0:09:43.960 --> 0:09:47.679 Danny blanch Flower, who's got us six thousand square foot man, 0:09:47.720 --> 0:09:51.040 it's just north to Hanover, New Hampshire with Dartmouth at College. 0:09:51.280 --> 0:09:54.800 Danny within the good comments of the governor is truly 0:09:54.840 --> 0:09:58.839 he makes history raising rates into a huge political debate 0:09:58.920 --> 0:10:02.760 called Brexit. He said policy and this is very Matthew Danny. 0:10:02.960 --> 0:10:06.720 This is something you'd say, policy needs to walk and 0:10:06.880 --> 0:10:11.280 not run for us to stand still. Boy, are there 0:10:11.360 --> 0:10:15.200 a lot of dynamics. Is policy needs to walk in 0:10:15.240 --> 0:10:18.959 that run? You and Adam pose and say policy needs 0:10:19.000 --> 0:10:23.120 to stand still in that walk in that run. Why 0:10:23.280 --> 0:10:28.360 why can't we get a little bit of normalization in here? Well, 0:10:28.440 --> 0:10:31.440 times are not normal? Um? I mean so that the 0:10:31.559 --> 0:10:34.440 UK economy prior to the Brexit boat was really doing 0:10:34.679 --> 0:10:38.400 very well. Um. And now we essentially see the forecast 0:10:38.440 --> 0:10:41.840 showing in many senses to come the sick man of Europe. 0:10:42.200 --> 0:10:45.960 So you see very low growth. Um. You see lots 0:10:46.040 --> 0:10:50.319 of pieces of data flashing amber if not read. And 0:10:50.440 --> 0:10:54.720 the MPC's answer is that the capacity of the economy 0:10:54.800 --> 0:10:58.520 has permanently gone downwards and now we have to start 0:10:58.559 --> 0:11:01.440 to raise rates to make things is worse. So, I mean, 0:11:01.480 --> 0:11:03.800 I've been since we since this all started at seven, 0:11:04.040 --> 0:11:07.040 I've desperately been trying to read the inflation reports in 0:11:07.080 --> 0:11:10.800 the minute, and it's really completely incoherent is to actually 0:11:10.960 --> 0:11:14.440 why they raised rates. I mean, the one thing that 0:11:14.559 --> 0:11:16.160 really gets me is if you look at one of 0:11:16.160 --> 0:11:18.520 the charts they have, they see, if we don't raise 0:11:18.640 --> 0:11:21.520 rates to inflation is going to be two percent m 0:11:22.200 --> 0:11:24.760 So you raise rates because of inflation, but the forecast 0:11:24.760 --> 0:11:27.520 says there isn't any and you say, well, we think 0:11:27.559 --> 0:11:30.080 it's because the economy is at full and point, but 0:11:30.120 --> 0:11:32.959 we have no evidence to support that. So I'm afraid 0:11:33.000 --> 0:11:37.839 that this is a sort of utter incoherence. People to 0:11:37.920 --> 0:11:40.000 look at it and say, why the heck did they 0:11:40.040 --> 0:11:43.320 do this when the economy is under space, is huge 0:11:43.400 --> 0:11:46.840 uncertainty and Brexit presume it is a major downside risk. 0:11:46.880 --> 0:11:49.360 So I think this is the most incoherent decision I've 0:11:49.400 --> 0:11:51.400 ever seen from the banks, because they don't if you 0:11:51.480 --> 0:11:53.840 read the thing through, you can't really work out why 0:11:53.920 --> 0:11:55.800 they raise rates. Well, there is this concern that the 0:11:55.800 --> 0:11:59.640 economic potential of the United Kingdom has been diminished by 0:11:59.720 --> 0:12:02.520 the exit conversation and that the UK is about to 0:12:02.559 --> 0:12:05.360 bump up against supply constraints. You're just flat out saying 0:12:05.400 --> 0:12:08.800 that's not going to happen. Danny I'm flat out are 0:12:09.000 --> 0:12:12.280 I mean, I mean, you're you're right, that's what they say, 0:12:12.320 --> 0:12:15.040 But what's the evidence consistent with that? I mean, I'm 0:12:15.040 --> 0:12:18.599 allowed to respond by saying, show me something that's consistent 0:12:18.679 --> 0:12:21.120 with that. Um. And I think the big thing that 0:12:21.120 --> 0:12:23.559 they've said that the big basis of this is that 0:12:23.800 --> 0:12:25.599 they think that means that wage growth is going to 0:12:25.679 --> 0:12:27.880 take off. And I've tweeted a chart from the paper 0:12:27.960 --> 0:12:31.120 this morning. They said that the last nineteen forecast in 0:12:31.120 --> 0:12:34.720 a road said exactly the same thing, so over nineteen, 0:12:35.080 --> 0:12:37.640 but now they think it really, really really is going 0:12:37.679 --> 0:12:41.199 to happen now, So essentially this forecast is based on 0:12:41.640 --> 0:12:45.000 which we're thinking and guessing because the forecasts have been 0:12:45.120 --> 0:12:48.320 completely worthless. So now so, I mean, you're right, I 0:12:48.360 --> 0:12:50.560 mean I agree with you. But what what the public 0:12:50.559 --> 0:12:53.120 and the markets have to think is well, why should 0:12:53.120 --> 0:12:57.320 we believe them that today things fundamentally have changed. So 0:12:57.440 --> 0:13:01.440 Danny leap of faith? What's going to come next? I 0:13:01.440 --> 0:13:03.160 know what you think the Bank in England should do? 0:13:03.480 --> 0:13:05.080 I want to ask you what you think the Bank 0:13:05.120 --> 0:13:08.720 of England will do? It's the next move really going 0:13:08.760 --> 0:13:10.920 to be a hike or do you think it could 0:13:10.920 --> 0:13:14.319 actually be a cut. Well, I think the answer is 0:13:14.320 --> 0:13:18.160 obviously what would at imposing a Denny branch. First, they'd say, well, 0:13:18.240 --> 0:13:21.040 let's see what the data looks like. Let's see how 0:13:21.120 --> 0:13:25.360 things look going forward. Um, I think the expectation. I mean, 0:13:25.480 --> 0:13:27.839 I think what we'll see will be the data and 0:13:27.960 --> 0:13:30.520 not really going to improve. There won't be any rising inflation, 0:13:30.559 --> 0:13:33.120 there won't be much wage growth, and we'll start to 0:13:33.160 --> 0:13:36.319 see some bad numbers coming and so that will mean 0:13:36.320 --> 0:13:39.240 the pressure will be on to reverse the cart and 0:13:39.280 --> 0:13:41.719 start to think about putting more stimulus in. I think 0:13:41.760 --> 0:13:43.880 that's probably where we got. But I would sit and 0:13:43.920 --> 0:13:46.080 look at the data and I would say, well, let's 0:13:46.080 --> 0:13:49.320 see if things have things proceed. But I would be 0:13:49.360 --> 0:13:52.040 trying to make a decision based upon the data from 0:13:52.040 --> 0:13:54.840 the real world, rather than guessing about the world that 0:13:54.880 --> 0:13:57.319 they're dreaming about. And I think Adam has pretty much 0:13:57.320 --> 0:13:59.280 said the same thing. So I'd be a data guy, 0:13:59.320 --> 0:14:01.440 and I think the mark get some people listening should 0:14:01.480 --> 0:14:03.199 say let's look at the data. So we just had 0:14:03.280 --> 0:14:05.840 in the last twenty minutes the construction t m I 0:14:05.920 --> 0:14:08.240 came in quite strong. So I would be looking at 0:14:08.240 --> 0:14:10.600 the data, and I think I think the chances are 0:14:10.640 --> 0:14:12.640 the data is going to come in bad. If you 0:14:12.840 --> 0:14:16.760 ever seen a divergence like we've seen in the last 0:14:16.760 --> 0:14:23.240 eighteen hours between an American monetary forecast in a UK forecast, 0:14:24.560 --> 0:14:28.360 well I haven't, but think about tom. Actually, let's expand 0:14:28.360 --> 0:14:31.560 it a little further. Let's expand it to Japan. I mean, 0:14:31.600 --> 0:14:33.760 so we saw a couple of days before that we 0:14:33.840 --> 0:14:38.720 saw and talking about extending quee, further, buying, further, e 0:14:38.840 --> 0:14:42.240 t s, keeping rates negative. I mean, obviously the fair 0:14:42.320 --> 0:14:45.440 has been raising rates and put things on hold, and 0:14:45.440 --> 0:14:48.520 I've been critical of the US, but obviously you you 0:14:48.560 --> 0:14:51.520 would be hard to argue against the four point one 0:14:51.960 --> 0:14:54.800 GDP growth for the first quarter. I mean that there 0:14:54.920 --> 0:14:58.400 is some evidence that there is strength in the US economy. 0:14:58.720 --> 0:15:01.320 I mean that that's the d That number is a 0:15:01.360 --> 0:15:05.000 big deal. So the data for the UK, we're talking 0:15:05.040 --> 0:15:08.240 about some probably some GDP growth for the whole year 0:15:08.960 --> 0:15:12.040 of about what we caught for the US for one quarter. 0:15:12.440 --> 0:15:15.000 So if you have data like that, how does a 0:15:15.080 --> 0:15:18.240 member of the MPC vote and say we should raise weights. 0:15:18.280 --> 0:15:20.960 The only thing they can say is, oh, it's temporary, 0:15:21.160 --> 0:15:24.720 and I guess I'm hopeful and I guess that this 0:15:24.800 --> 0:15:26.560 is temporary and it's all gonna be okay. So I 0:15:26.560 --> 0:15:29.440 think the answer is the divergence, perhaps if you focus 0:15:29.480 --> 0:15:32.240 on is driven by the data. I mean, it's hard 0:15:32.280 --> 0:15:34.360 to say that you should be rooting for a rate 0:15:34.400 --> 0:15:36.920 cut in the US with a four point one when 0:15:36.960 --> 0:15:40.360 you've got a point three in Britain. Okay, Danny, thank 0:15:40.400 --> 0:15:42.120 you so much. David blanche Flower where us? So we 0:15:42.200 --> 0:15:45.840 greatly appreciate dr proposing of Peterson Institute being with us 0:15:45.840 --> 0:15:49.680 as well. Professor blanch Flower holds court at Dartmouth. Colin, 0:16:02.040 --> 0:16:04.480 why don't you bring in? I guess you do. You 0:16:04.480 --> 0:16:08.040 you don't have a tesla because I don't have a tesla. Note, 0:16:08.200 --> 0:16:10.120 but I can tell you I'm not church rating in 0:16:10.160 --> 0:16:13.440 the national some some rare positive price action in a 0:16:13.520 --> 0:16:16.560 risk aversion session. We're up by almost nine percent in 0:16:16.600 --> 0:16:18.360 the pre market. I want to bring in Brian Johnson, 0:16:18.400 --> 0:16:21.160 Barclay's Capital senior order analyst, to get his thoughts on 0:16:21.160 --> 0:16:25.200 the earnings. The headline from the Barclays research this morning 0:16:25.800 --> 0:16:29.720 boring with a touch of tech row. Brian walked me 0:16:29.760 --> 0:16:35.160 through what that means boring, because what we had on 0:16:35.200 --> 0:16:38.640 the phone calls compared to last quarter. Was a Mr 0:16:38.760 --> 0:16:43.400 Musk who sounded like he's stuck to a script prepared 0:16:43.480 --> 0:16:48.720 by professional touch of check brow because they Philipbuster to 0:16:48.920 --> 0:16:53.040 ran down the clock with an extensive discussion of the 0:16:53.440 --> 0:16:57.520 progress over on the Autopilot team, including three members of 0:16:57.560 --> 0:17:02.560 the AUTOPILOTUE team, Geeky out like a podcast about neural 0:17:02.640 --> 0:17:07.240 nets and co operates on fast chips. So what have 0:17:07.320 --> 0:17:12.960 we learn about the capital position? Uh? You know, cash 0:17:13.040 --> 0:17:15.919 deteriorated for the quarter, bid less than we were looking 0:17:15.960 --> 0:17:20.800 for UM with UM and we'll wait for the kid 0:17:20.880 --> 0:17:23.719 to see some of the pathetics on cash. But what 0:17:23.760 --> 0:17:26.840 we learned is that they are guys we expected, continuing 0:17:26.960 --> 0:17:31.880 to target profitability for next quarter. Capex is being potentially 0:17:32.520 --> 0:17:36.280 produced for the second time UM and by not selling 0:17:36.400 --> 0:17:38.960 ZEP credits, that makes it clear that they're going to 0:17:39.000 --> 0:17:42.920 sell some next quarter to help them get there. Portia 0:17:43.440 --> 0:17:48.760 as revenues of I'm gonna call it, I guess Tesla 0:17:48.840 --> 0:17:52.639 is on its way to Does Elon Musk want to 0:17:52.680 --> 0:17:55.480 be Portia? Does he want to be Forward in a 0:17:55.560 --> 0:17:58.399 hundred and fifty seven billion or does he want to 0:17:58.440 --> 0:18:02.080 be something? What's the scale? What's the scale dream here 0:18:02.440 --> 0:18:05.560 for Tesla. You know that that is I think the 0:18:05.760 --> 0:18:10.800 great um the question that this gets to, we've actually, 0:18:11.240 --> 0:18:13.440 you know, with a two dollar price target. Well, we 0:18:13.520 --> 0:18:17.320 think it's over valued. We're certainly not out there predicting bankruptcy. 0:18:17.840 --> 0:18:22.320 But the Tesla could make a fine niche manufacturer along 0:18:22.400 --> 0:18:26.800 the lines supports selling a premium brand to products globally 0:18:26.840 --> 0:18:30.359 that yet is an expensive way well with competition getting 0:18:30.440 --> 0:18:33.879 free to be, but brings other attributes. Um, you know, 0:18:34.160 --> 0:18:37.479 if to compare a Porch to Toyota in terms of 0:18:37.800 --> 0:18:42.720 practicality and economy, obviously the Toyota will win, But instead 0:18:42.800 --> 0:18:47.080 the Aspirations seemed to be to be the next Toyota. 0:18:47.200 --> 0:18:50.439 And I think the most interesting thing about the quarter 0:18:50.560 --> 0:18:53.760 and the new guide is, and part of my headline 0:18:53.760 --> 0:18:58.600 around Boring, is they're at least willing temporarily to pull 0:18:58.640 --> 0:19:02.000 back some of their aspiration ships. China is not likely 0:19:02.160 --> 0:19:08.080 to be in production until um you know. And I 0:19:08.119 --> 0:19:11.720 think there's actually the YouTuber run at the end and saying, 0:19:11.760 --> 0:19:14.240 wait a second, what about all these brand growth plans? 0:19:14.280 --> 0:19:18.919 Still after trucks pickup trucks, dude, So we'd actually be 0:19:19.080 --> 0:19:22.800 very happy and probably more supportive of Tesla shares if 0:19:22.960 --> 0:19:27.000 it reigned in its growth aspirations. However, I wonder if 0:19:27.000 --> 0:19:31.119 the tech world, which is temporarily entranced by revenue growth, 0:19:31.359 --> 0:19:34.800 they will get supporter We actually want that. Okay, Well, 0:19:34.880 --> 0:19:36.600 what's and I want to broaden this out with US 0:19:36.800 --> 0:19:41.159 Brian Johnston Johnson running all of autos for Barclays. If 0:19:41.200 --> 0:19:44.600 we broaden this out to the greater US economy, have 0:19:44.720 --> 0:19:47.119 you done the tariff math yet? I mean John Farrell 0:19:47.160 --> 0:19:50.919 has been great about saying BMW's in the Carolinas, and 0:19:50.960 --> 0:19:53.760 you got the whole Detroit complex and you're making cars 0:19:53.760 --> 0:19:57.800 out in a tent in California. What's the Barclays tariff 0:19:58.080 --> 0:20:03.400 math for the American no industry? Yeah. Really three fronts 0:20:03.480 --> 0:20:09.280 to the terrorist trade wars with different implications across the board. Uh. 0:20:09.520 --> 0:20:11.879 First of all, China, which is probably the most heated, 0:20:12.280 --> 0:20:15.160 definitely affects Tesla because it's an exporter there, as well 0:20:15.200 --> 0:20:19.520 as BMW and Daimler because of their plants in South 0:20:19.520 --> 0:20:23.359 Carolina and Alabama. But for the most of my US 0:20:23.400 --> 0:20:27.040 auto parts and autos coverage, it's built in China, stay 0:20:27.080 --> 0:20:30.920 in China. So let's there's some sort of retaliation against 0:20:30.960 --> 0:20:34.280 General Motors and other joint ventures. They're not a major 0:20:34.320 --> 0:20:37.439 worry U S e U not a whole lot of 0:20:37.440 --> 0:20:41.679 either parts or trade flow for the American based automakers 0:20:41.720 --> 0:20:45.200 and auto parts suppliers. B Chrysler is the one exception. 0:20:45.640 --> 0:20:48.640 Watually see light at the end of the tunnel there 0:20:48.680 --> 0:20:54.560 after last week's meeting. It's frankly in the German automaker's interest, 0:20:54.800 --> 0:20:58.399 you know, to have low sheriffs between the US and 0:20:58.440 --> 0:21:01.040 Europe a LA. Then take those TVs that aren't going 0:21:01.080 --> 0:21:04.160 to China into your more prost efectively question is though 0:21:04.200 --> 0:21:09.879 connect get through the EU bureaucracy. Third is NAFTA, which 0:21:10.119 --> 0:21:13.159 is absolutely essential to mind US auto and out of 0:21:13.240 --> 0:21:16.200 FIRS thage companies like General Motors are can actual top 0:21:16.240 --> 0:21:19.399 pick um. We see some light at the end of 0:21:19.440 --> 0:21:25.120 the tunnel there around the local content high wage um 0:21:25.440 --> 0:21:28.840 requirements in that US and Mexico and christ Canada's high 0:21:28.840 --> 0:21:31.240 wage and will go along. I could see an agreement 0:21:31.280 --> 0:21:34.280 there that would be inflationary somewhat to the cost space 0:21:34.600 --> 0:21:37.280 of the O E M S, but frankly less than 0:21:37.440 --> 0:21:40.200 the swing we've had a year to data around stealing 0:21:41.800 --> 0:21:45.480 Brian really appreciated, particularly early this morning as well. Brian Johnson, 0:21:45.760 --> 0:21:48.080 Barclays and Tessa Johnfer. What are you out over there 0:21:48.560 --> 0:21:53.119 listening to the the MPC decision and the consequences of it? 0:21:53.200 --> 0:21:55.680 Governor Khani? In the news conference after the right Hike, 0:21:56.080 --> 0:21:58.399 someone of the audience asked him about Danny blanche flat 0:21:58.840 --> 0:22:02.320 and one thought about whether Danny blanch was was right 0:22:02.400 --> 0:22:04.480 or wrong? Take a listen to this, it just took place. 0:22:04.920 --> 0:22:09.240 A former member of this committee, Professor blanch Flower says 0:22:09.280 --> 0:22:11.840 that the natural rate is actually a lot lower than 0:22:11.840 --> 0:22:15.240 that could be as low as three. And given that 0:22:15.520 --> 0:22:20.480 Professor blanch flowers predictions for labor market and particularly earn 0:22:20.560 --> 0:22:23.560 his growth have been yeah, recently a lot more accurate 0:22:23.560 --> 0:22:27.080 in the banks, why is he wrong? And you're right? Yeah, 0:22:28.680 --> 0:22:34.720 where do I begin? Um um? Great respect for a 0:22:34.720 --> 0:22:38.560 Professor blanch Flower, but his time in the MPC has passed, 0:22:38.680 --> 0:22:42.360