Speaker 1: Bloomberg Audio Studios, Podcasts, radio news.
Speaker 2: This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along
Speaker 2: with Lisa Bromwitz and Amrie Hordern. Join us each day
Speaker 2: for insight from the best in markets, economics, and geopolitics
Speaker 2: from our global headquarters in New York City. We are
Speaker 2: live on Bloomberg Television weekday mornings from six to nine
Speaker 2: am Eastern. Subscribe to the podcast on Apple, Spotify, or
Speaker 2: anywhere else you listen, and as always on the Bloomberg
Speaker 2: Terminal and the Bloomberg Business App. Julian and Manuel of
Speaker 2: Evercore looking for deals. Our base case is that the
Speaker 2: lows of this sell off have been seen and that
Speaker 2: a recession will be narrowly averted. But the clock is ticking.
Speaker 2: The art of the deal needs to begin bearing through. Julian,
Speaker 2: good morning, Good morning. How exhausting is all of this?
Speaker 3: You said twenty four hours. It's felt like twenty four weeks. Basically, Look,
Speaker 3: we knew this was going to be this way.
Speaker 4: Okay.
Speaker 3: I think if you go back to January twentieth and
Speaker 3: you saw everything that was done on inauguration.
Speaker 4: Day, to expect this.
Speaker 3: Is part for the course, really, but again, it is
Speaker 3: the narrative of.
Speaker 4: Several weeks ago.
Speaker 3: There were still questions as to whether the Trump administration
Speaker 3: was willing to tolerate a recession to achieve some of
Speaker 3: its aims. What we've seen in the last twenty four
Speaker 3: hours and going back to.
Speaker 4: The pivot in early April, is.
Speaker 3: That is absolutely not the case, and removing the large
Speaker 3: left tail outcome in markets has been very positive.
Speaker 2: Rewiring the system is difficult. We've talked about it a
Speaker 2: few times on this program, that you've got both a
Speaker 2: shock to the cycle and a potential shock to the system.
Speaker 2: But what we've also seen and witnessed down in Washington,
Speaker 2: DC is that some of these policies are so extreme,
Speaker 2: so out there that they're somewhat self limiting, that are
Speaker 2: almost negotiating with themselves on certain issues. You get the
Speaker 2: same sense when you look at what's happening down in Washington.
Speaker 3: There is an element to that, and again it is
Speaker 3: is the you know, the shock to the system.
Speaker 4: This this concept that you know.
Speaker 3: The all in raw number to global way to taris
Speaker 3: is higher than smooth Hawley. You don't really need to
Speaker 3: say much more than that, And that is the element
Speaker 3: of you know, self limiting. But again it goes back
Speaker 3: to the negotiating style. You know, throw out the maximalist
Speaker 3: case out there and then see and wait for the
Speaker 3: other side to start responding.
Speaker 1: And we saw that in Trump's first administration.
Speaker 5: This is a phrase.
Speaker 1: I don't think the president likes this idea of a
Speaker 1: Trump put. But have we now seen that there is
Speaker 1: a Trump put and there is a level that they
Speaker 1: are unwilling to deal with.
Speaker 3: Well, I wouldn't necessarily call it a put per se,
Speaker 3: but again it just goes back to this idea that
Speaker 3: there's an acknowledgment that the extremity of what they're trying
Speaker 3: to do and the speed with which they're trying to
Speaker 3: do it. And remember all of this is set against
Speaker 3: a debt ceiling negotiation that has to happen in the
Speaker 3: next two months, and then further on down the line,
Speaker 3: the acknowledgement that the traditional historical tendency is for the
Speaker 3: Republicans will lose the House of Representatives in twenty twenty six,
Speaker 3: so you have to front.
Speaker 4: Load all of this. So that is the shock to
Speaker 4: the system.
Speaker 3: But again, you know there is no wish for a recession,
Speaker 3: and so you know by that virtue the Trump put
Speaker 3: itself does seem to exist south of five thousand.
Speaker 1: On the end desk, John brought up a great point
Speaker 1: on whether or not they're negotiating with themselves. Maybe the
Speaker 1: President is going through the motions out loud, but also
Speaker 1: behind the scenes there are two three different rivals. This
Speaker 1: is a cast of characters. In terms of the cabinet.
Speaker 1: At this moment, it does look like Scott Besson, the
Speaker 1: Treasury Secretary, is leading the charge on a lot of this.
Speaker 5: Is this rally?
Speaker 1: Is this relief just temporary? I say, if Peter Navarro
Speaker 1: comes back into being one of those driving forces.
Speaker 3: Well, if you look at the cast of characters, there
Speaker 3: are some who are more volatile, some who are less volatile.
Speaker 3: Secretary Bestent is clearly the lower volatility, the vic sub
Speaker 3: thirty type individual, which is what we have this morning.
Speaker 3: But again going back to the first Trump administration, that's
Speaker 3: the way he likes to run it. The court fights
Speaker 3: amongst itself.
Speaker 2: The problem that Jindine, you've touched on it. That's what
Speaker 2: we have this morning. What do we have tomorrow? You've
Speaker 2: got a constructive view that goes beyond just five minutes.
Speaker 2: What does the rest of the year break.
Speaker 3: The rest of the year brings progress on the initiatives
Speaker 3: that have been brought forth. You know, look, from our
Speaker 3: point of view, if you think about a timeline, what
Speaker 3: you're going to get on May seventh from the Fed
Speaker 3: is a we told you we weren't budging.
Speaker 4: We're waiting to see more data.
Speaker 3: We have every indication that we don't need to move
Speaker 3: on interest rates now. So by that virtue, you've actually
Speaker 3: got to put some tariff points on the board between
Speaker 3: now and May seventh more likely, and you know it
Speaker 3: seem reasonable to expect you'll start to hear better news.
Speaker 2: I think this is an important exercise. You've got to
Speaker 2: try and get your head through summer. Let's get to
Speaker 2: the end of the summer and look out twelve months.
Speaker 2: What does that world look like.
Speaker 3: We actually have to project that far out, Jonathan. I mean,
Speaker 3: investing is only a one week thing now. No, Look,
Speaker 3: the bottom line here is all of this has been
Speaker 3: a disruption to the way America does business, no question
Speaker 3: about that. And what you're hearing from companies now is
Speaker 3: earning season gets into full swing is how they're trying
Speaker 3: to deal with it. But the bottom line is is
Speaker 3: after they're dealing with it. The last two years of
Speaker 3: really being incredibly diligent and responsible about guarding and maintaining
Speaker 3: margins at the corporate America level means there is going
Speaker 3: to be an ability to make the transition. And so
Speaker 3: from our point of view, if you're thinking about the markets,
Speaker 3: the fact that consensus is looking for nine percent earnings
Speaker 3: growth this year down from fourteen our views, you're still
Speaker 3: going to get.
Speaker 4: Five actually means that, you.
Speaker 3: Know, the implication is a, there won't be a recession,
Speaker 3: which we is our base case, but B for equity markets,
Speaker 3: that's fine, that's his quote unquote transition period.
Speaker 1: What would make you change your mind and think we
Speaker 1: the US could tip into a recession.
Speaker 3: The data would have to start rolling over severely, you know.
Speaker 3: And look, we do think the data is going to moderate.
Speaker 3: But again it goes back to this idea that what
Speaker 3: we have seen post pandemic is a different world pre pandemic.
Speaker 3: So the sentiment data has been absolutely abysmal, but it
Speaker 3: really hasn't had any material effect on the hard data.
Speaker 3: If that is no longer the case, and we switch
Speaker 3: back to pre pandemic relationship, which we don't see, and
Speaker 3: that's why everyone is so much on pins and needles,
Speaker 3: particularly for the May second employment report and then the
Speaker 3: weekly jobless data. That's a different set of circumstances. We
Speaker 3: just don't see that right now.
Speaker 2: We're already seeing the data be distorted, though flatted, by
Speaker 2: some pull forward. We saw that in retail sales, particularly
Speaker 2: auto purchases, which I find amazing. You're worried about the economy,
Speaker 2: so you've got to buy car America. That's where we are.
Speaker 2: I want to understand what the rest of the summer
Speaker 2: brings once you pull forward activity. Are we going to
Speaker 2: hit some an pockets in the next few months.
Speaker 4: I think there will be.
Speaker 3: And if you go back to that last inflation report,
Speaker 3: which was softer than expected, is that a lot of
Speaker 3: the distortion was by a decline in price in used
Speaker 3: cars because people were buying new cars in front of
Speaker 3: the tariffs. So I think, again, this is one of
Speaker 3: these things in this higher volatility environment we're living with
Speaker 3: the data being distorted. But if the overall trend remains intact,
Speaker 3: you know, our assumption is we're going to be.
Speaker 4: Able to get through this without a recess.
Speaker 2: So I spick up the pieces. We've done a lot
Speaker 2: of damage, not just at the index level, but Nathan index.
Speaker 2: We're seeing some real damage to some big tech names,
Speaker 2: some high fliers of the last several years. As you
Speaker 2: look at picking up the pieces what you like this.
Speaker 3: Morning, we actually are of the view and this is
Speaker 3: typical in when bear markets end, is that the things
Speaker 3: that got sold off the harders, which in this case
Speaker 3: where the bull market leaders of the prior two years.
Speaker 4: Are going to resume the mantle.
Speaker 3: Call it mag seven, call whatever you want, but the
Speaker 3: fact is is that part of the US market's, a
Speaker 3: large part of the US market's out performance has been
Speaker 3: driven by technology, and for US, that is a story
Speaker 3: that has further to run.
Speaker 2: Alphabet and it's twenty four rounds of white Julian. It
Speaker 2: is good to see you, sir. As a wise, Ji
Speaker 2: and Emmanuel have evercore kitchigs of self gen writing. Less
Speaker 2: FED independence equals a weeker dollar. Even if we assume
Speaker 2: the president can't or won't fire the FED chair, the
Speaker 2: makeup of the FMC can change over time. Kit joined
Speaker 2: us now for more, Kit, welcome to the program, Sir?
Speaker 2: Do those words do enough to repair the damage done?
Speaker 6: They do enough to stop the move We've had and
Speaker 6: calm things down. You know, it looked stretched, But no,
Speaker 6: I think that the heart of the issue is that
Speaker 6: the rest of the world is dramatically overinvested in US
Speaker 6: assets and probably now realizes that they need to.
Speaker 2: Like not, Kit, we've seen that rebalancing it started, and
Speaker 2: to your point, the dollar long that's built up goes
Speaker 2: beyond just a couple of years. It's been built up
Speaker 2: over the space of more than a decade.
Speaker 5: Kit.
Speaker 2: How much but rebalancing do you expect to see in
Speaker 2: the years to come?
Speaker 4: How long would be the string? I guess.
Speaker 6: I mean, it's still the world strongest economy, biggest economy.
Speaker 6: You know, they still do great things, So I don't
Speaker 6: think it'll all get reversed. I do sort of sit
Speaker 6: and ponder the nineteen eighties when the dollar went straight
Speaker 6: up on the back of President Reagan's policies, and it
Speaker 6: gave it all up without the lews US losing its exceptionalism.
Speaker 6: So I, you know, kind of it could go down
Speaker 6: in the long run further than I think.
Speaker 1: Kid, the Treasury Secretary recently said to me last week
Speaker 1: that the US still has a strong dollar policy. Do
Speaker 1: their policies actually match that?
Speaker 5: Well?
Speaker 6: Yes, well, okay, the dollar is strong. The US has
Speaker 6: been running fiscal policies that are consistent with a strong currency,
Speaker 6: not a weaker one. But I don't see how the
Speaker 6: current policies are consistent with the dollar not losing some
Speaker 6: of its exceptional.
Speaker 1: Strength, except some strength maybe will be lost. But you
Speaker 1: still think that the US is the reserve currency.
Speaker 6: Yeah, Look, we still don't have a candidate or an alternative.
Speaker 6: You know, we've done We've done gold, silver, the pround,
Speaker 6: and the dollar in the last five hundred years.
Speaker 2: Which is why a lot of people are going to
Speaker 2: stick with the US dollar.
Speaker 4: Kate.
Speaker 2: There are questions though about the current account deficit that's
Speaker 2: currently been ran and how you would track that foreign capital.
Speaker 2: You're either going to do that through the FX channel
Speaker 2: through a weaker currency, or you need much higher rates.
Speaker 2: Is it one or the other or both for you?
Speaker 2: And how do you think that plays out in the
Speaker 2: coming months.
Speaker 6: I think it's going to be both over time. But
Speaker 6: I think part of the challenges if domestic capital leaves,
Speaker 6: for example, you know, the world's biggest net investor abroad,
Speaker 6: Germany has work to do at home, so they'll attract
Speaker 6: capital back. Then the US needs to save more at
Speaker 6: the margin as well. They can't go on running such
Speaker 6: a big current account deathits can't necessarily run such a
Speaker 6: commodative fiscal policy, and so I think we'll see a
Speaker 6: change in the States as well.
Speaker 2: The most interesting chart for me KIT is over in Europe,
Speaker 2: and it's the euro versus China EUROCNY. I think over
Speaker 2: the last several months has been fascinating KIT, because, as
Speaker 2: we've talked about in this program, the biggest threat to
Speaker 2: price stability in Europe at the moment might be Chinese exports.
Speaker 2: Based on that chart, could become a bigger problem in
Speaker 2: the months to camp. KIT. What kind of relationship do
Speaker 2: you anticipate in between the two trading blocks in the
Speaker 2: next year or so, What does it mean for this
Speaker 2: currency pair, and what ultimately does it mean for interest
Speaker 2: rates to the ECB.
Speaker 6: I think it's going to be a difficult relationship at
Speaker 6: the margin anyway, just because China needs to find other
Speaker 6: places to export to and Europe is going to be
Speaker 6: very wary of them dumping in any form into the
Speaker 6: European market. The challenge that we have at the foreign
Speaker 6: ex change level is that the yuan, the Chinese currency,
Speaker 6: really doesn't move very much, so it's static. So if
Speaker 6: the euro goes up against the dollar, it's going to
Speaker 6: go up again against the yuan. Kit you said that, no, continue, sorry,
Speaker 6: and I was gonna say so. The result of that
Speaker 6: is that we're getting a very strong euro against the yuan,
Speaker 6: which is going to deflate Europe at a time when
Speaker 6: that's not really what they want to do, and it
Speaker 6: leans against the fiscal expansion, and it limits how strong
Speaker 6: the euro can stay and get.
Speaker 1: You said that the Europeans are going to be weary
Speaker 1: of the Chinese dumping on their market. Kit, do you
Speaker 1: think it's enough for the Europeans to put up their
Speaker 1: own tier walls when it comes to China.
Speaker 6: No, I don't think. I think Europe is very aggressively
Speaker 6: against formal tariffs, so, but I do think that once
Speaker 6: you've started kind of challenging free trade, that the whole
Speaker 6: thing is a more fragile edifice. And so it'll with
Speaker 6: a splinter a bit because we just get all these
Speaker 6: knock on effects.
Speaker 2: Quick final question for your kit, Euro dollar one fourteen.
Speaker 2: At the moment, we will remember the day's pre negative
Speaker 2: rates back in twenty fourteen, when they were implemented that summer.
Speaker 2: We remember how stubborn the euro was, stubborn euro strength.
Speaker 2: What are we going back to? What kind of world? Kit?
Speaker 2: Are we going back to the pre negative rate era
Speaker 2: of say one twenty one, thirty one, forty? How do
Speaker 2: you think about that?
Speaker 6: I can't see how in real terms that the europe
Speaker 6: can justify the levels of sort of sly, the one
Speaker 6: thirty one to forty levels, I think they're gone. Frankly,
Speaker 6: I think we'll see one twenty again. I think that's
Speaker 6: probably that's the bit I can manage in my head.
Speaker 6: But the European economy needs to develop much stronger underlying
Speaker 6: growth to get above that for a lot, to stay above.
Speaker 2: That, Kit, appreciate your input as always, sir, Thank you.
Speaker 2: Kit Jig's there of selk gen danis of Wentworth raising
Speaker 2: its price targets a three point fifty writing recommitting a
Speaker 2: CEO and leaving its dogs Roll is the biggest and
Speaker 2: best possible news investors could have heard. Tesla got back
Speaker 2: its biggest asset, Musk Dana. I've joined this now for
Speaker 2: more Dank and Monica to see it. Okay, so you're
Speaker 2: saying this is a recommitment other people would look at
Speaker 2: this and say, well, he's still going to be that
Speaker 2: two days a week, and that's a problem.
Speaker 7: I mean, I view this this was an off rahnd.
Speaker 7: I mean, however, you want to sort of weave what
Speaker 7: one to two days. I think this is the beginning
Speaker 7: of the end for him at duge with Trump Whitehouse,
Speaker 7: because that was a different musque. On the conference call,
Speaker 7: that was a different musk. And we've seen actually over
Speaker 7: the years he dressed it head on, read the.
Speaker 4: Room, and we've talked about it. This was it was
Speaker 4: a fork.
Speaker 8: In the road, a moment of truth.
Speaker 7: Sure he took advantage of it, and I believe now
Speaker 7: it's a new chapter.
Speaker 4: And anyway, the dark chapter.
Speaker 7: In the past.
Speaker 2: Let's unpack the perceived problem of the last few months
Speaker 2: that you called a dark chapter. Some people believe money
Speaker 2: in fact, that the president and Elon Musk relationship has
Speaker 2: damaged the brand in the mind of liberals. Want to
Speaker 2: be very clear about that. Points had the stock. Do
Speaker 2: you acknowledge that that is what's happened over the past
Speaker 2: few months.
Speaker 4: We've talked about it.
Speaker 9: I mean, it's the brand damage is real.
Speaker 7: It's been a dark cloud on Tesla's that we talked
Speaker 7: about anywhere from ten to twenty percent because Tessa became
Speaker 7: a political symbol.
Speaker 2: Why would that change If Elon Musk is still that
Speaker 2: two days a week.
Speaker 7: Again and I don't believe he's a good again. The
Speaker 7: one two days a week, however you want to like
Speaker 7: phrase it. My view is, and we talked about in
Speaker 7: the show, this is the off ram to be like, okay,
Speaker 7: one two days a week and I'm gone. I'm not
Speaker 7: saying that you're not going to see him at times
Speaker 7: with Trump, but we believe this is his taking a
Speaker 7: massive step back recommitting to Tesla. And look, this was
Speaker 7: a different Musk on the conference call. This was not
Speaker 7: the normal Musk. This is one reading the room, aware
Speaker 7: of everything going on from a brand perspective, and I
Speaker 7: believe this it's going to start a new chapter with
Speaker 7: the brand damage is still going to be there, but
Speaker 7: I believe at least it will be continued. He doesn't
Speaker 7: double down, and this was an important time I think
Speaker 7: would define the future of Tesla if Musk actually doubled down.
Speaker 1: Dude, But how does he fix a brand damage? Now,
Speaker 1: to Jonathan's point, one to two weeks in the White House,
Speaker 1: he's also still the self proclaimed first buddy. He's still
Speaker 1: going to be out there advocating for the president.
Speaker 7: I think that's gonna be significantly diminished. I mean, I'd
Speaker 7: be surprised if we sit here one two, three months
Speaker 7: and that's still happening, even on social media. I mean,
Speaker 7: he's still gonna say what he wants, but I think
Speaker 7: even some of that will be diminished. Look, I don't
Speaker 7: know if it's the board, if it's some of his confidence,
Speaker 7: but the reality is for Tesla.
Speaker 4: Look, that's why this was a code read.
Speaker 1: Is this a moment though for Tesla to realize that
Speaker 1: they actually need to brand themselves as Tesla, not as
Speaker 1: synonymous with Elon Musk.
Speaker 7: I think that's that ship sailed because I think the
Speaker 7: reality is.
Speaker 9: Musk as Tesla, Tesla is Musk.
Speaker 7: And so much of that has been a positive despite
Speaker 7: you know, maybe some critic the last three months.
Speaker 9: It's been the reason it's.
Speaker 7: Been a dark chapter, not just because of the quarter delivered,
Speaker 7: but the brand damage and what ultimately Tess became a
Speaker 7: political symbol. And I think it's a recognition that needs
Speaker 7: to end.
Speaker 1: Where in the world do they need to do the
Speaker 1: most work to bring customers back.
Speaker 7: Well, I think China or China's the hearts and lungs
Speaker 7: of the growth story. I mean BYD has obviously been
Speaker 7: very strong Neo and others, and I think China is
Speaker 7: where you really need to start to turn this around.
Speaker 7: The brand damage in Europe, I think a.
Speaker 9: Lot of that you might be permanent.
Speaker 7: And we've talked about potentially twenty percent US maybe ten
Speaker 7: percent brand damage. And my view is just that's still
Speaker 7: going to be there, but you had to contain it.
Speaker 7: You have to start to in terms of autonomous robotics
Speaker 7: and this was this was a moment, so.
Speaker 2: Show me the gross where does it come from and
Speaker 2: how soon does it come.
Speaker 7: Well, I believe a huge part of the valuation is
Speaker 7: going to be autonomous and robotics. I mean my view,
Speaker 7: like on Supervised FST, you will start in Austin in June,
Speaker 7: when you look out over the coming years, I I
Speaker 7: believe autonomous and robotics will be ninety percent of the
Speaker 7: valuation of the story over the coming years.
Speaker 2: You spend a lot of time with the product. How
Speaker 2: good is it right now? Full self trying to think.
Speaker 7: I mean, I think we're probably what's called seventy five
Speaker 7: percent that to where you need to.
Speaker 2: Be seventy progress half we made so I think seventy
Speaker 2: five to I see now where we say, twelve months ago,
Speaker 2: three months ago.
Speaker 9: I think we were probably if I go back maybe
Speaker 9: a year.
Speaker 7: Ago, say we're probably sixty percent sixty five. No, you
Speaker 7: got now technically you gotta get to nine nine point
Speaker 7: nine nine us to get there. But I believe they're
Speaker 7: making huge traction. And I think when we get to
Speaker 7: unsupervised FSD in Austin, it's a huge step to where
Speaker 7: the story needs to get to. And my whole point
Speaker 7: is if this was an Intel, a Boeing, okay it's
Speaker 7: a disaster, it doesn't even matter in terms of but
Speaker 7: for Tesla, it's my view, along with the video too
Speaker 7: best often technology companies in the world. That's what was
Speaker 7: so frustrating and why we were so loud, because you
Speaker 7: can't burn the house down now on this. You need
Speaker 7: to actually focus in the future. And I think that's
Speaker 7: why that's why that was a different Musk on the conference, cause.
Speaker 1: When do we get to the point where we see
Speaker 1: Elon Musk's realization of Americans really won't go out and
Speaker 1: be buying cars anymore.
Speaker 7: Look, I think that that's still much more of a
Speaker 7: longer term view.
Speaker 9: I mean, I think for decade.
Speaker 7: Look, I think that's something that you're gonna have to
Speaker 7: go past to twenty thirty.
Speaker 9: And I'm not a believer in that.
Speaker 7: I'm believer autonomous is gonna be a huge piece. Robotics
Speaker 7: is a huge piece. But that's much more, you know,
Speaker 7: I think when you will long return. But the reality now,
Speaker 7: it's about turning it around. It's about containing the brand damage.
Speaker 7: And it's also it's about must leaders lead? This is
Speaker 7: the time to lead, and I think I think Must
Speaker 7: took for him a huge step forward on.
Speaker 1: We're not just dowage. He's involved in neuralink x XAI.
Speaker 1: He is spread very thin. So why do you think
Speaker 1: all that tension is going to come rushing back to Tesla?
Speaker 7: And And that's who much is always going to be.
Speaker 7: But it's about the political damage that he did, because
Speaker 7: ultimately it became a political symbol for Trump administration, for Duge.
Speaker 9: And that can't happen.
Speaker 7: And I think this, I truly believe he underestimated the
Speaker 7: life of its own, that this was ultimately going to become.
Speaker 7: And I think over the last few weeks there was
Speaker 7: a recognition like, look this, this cannot sustain showing forward.
Speaker 2: Are you over estimating the leadership accunty has in the
Speaker 2: SEC test. So this is the question that comes from
Speaker 2: my blowback subscriber. Let me to read it to you.
Speaker 2: B Y d If introduced CONTs with double the range
Speaker 2: of Tesla and a five minute recharge. Tesla has the
Speaker 2: same caress seven years ago, numb innovation in the range
Speaker 2: and recharge. They were an also ran in China. Won't
Speaker 2: you sent back to that?
Speaker 7: I'd say, let's talk in six months when we actually
Speaker 7: start to actually have from an autonomous perspective in terms
Speaker 7: of new vehicles that I believe are ultimately going to
Speaker 7: be out there, Refreshes and Musk and Tesla. How many
Speaker 7: times have been count out? I mean, I can tell
Speaker 7: you in the last decade, I probably count on both hands.
Speaker 2: I remember how many times Speed why DA would count
Speaker 2: it out as well.
Speaker 9: But I'm more posit. I'm not negative on BYD.
Speaker 7: My view is just when you look at the opportunity
Speaker 7: for Tesla, it is going to be really about autonomous
Speaker 7: and the robotics future.
Speaker 9: And I think from.
Speaker 7: Musk last night, this this will be a moment in time. Historically,
Speaker 7: he had a choice. He made the right choice in
Speaker 7: my opinion, And I think now we start a new chapter,
Speaker 7: still out with the chop ahead challenges.
Speaker 1: But byd has something Tesla doesn't, which is easy access
Speaker 1: to the batteries. And China has eighty five percent of
Speaker 1: the lithium. They have the processing to make these batteries
Speaker 1: and the raw materials. How challenging is that path forward
Speaker 1: for Tesla and other American EV makers, But.
Speaker 7: Also it goes back to Musk in terms of Beijing
Speaker 7: and in terms of everything we've seen with Giga in Shanghai.
Speaker 7: I mean the point is, like Tesla is, you know,
Speaker 7: is cemented in China. It's not like they're just a
Speaker 7: US car man you're trying to get into China. That's
Speaker 7: why from a raw material from production, from a vertically
Speaker 7: integrated perspective. But when you talk about the raw materials,
Speaker 7: and we've said it like that, that comes down to
Speaker 7: talk about tariffs and talk about everything. Where where's the
Speaker 7: materials coming from. They're not coming from New Jersey and
Speaker 7: they're come from China. And I think that's also why
Speaker 7: a lot of things happen in the white house walls
Speaker 7: cave it in, and it's you could talk fairytale reality.
Speaker 7: And that's why I also Musca's anti tariffs speaks to
Speaker 7: some of the issues.
Speaker 1: You all the bad things to be the first buddy,
Speaker 1: but not the good things.
Speaker 7: You literally got all the bad things, like all the
Speaker 7: bad things in a horror show, none of the good.
Speaker 9: And that's why we're here where we are.
Speaker 2: It's certainly not the conversation we have with you back
Speaker 2: in November decemba time.
Speaker 7: It's a lot different than that Cinderella story that turned
Speaker 7: into basically Nightmare and Elm Street.
Speaker 9: But now we take a new chapter.
Speaker 2: Then we'll say it's another famiery tale. It's gonna say it,
Speaker 2: so my question.
Speaker 10: I am here at the International Monetary Fund. It is
Speaker 10: a very different series of meetings. There aren't the same
Speaker 10: kinds of banners outside. It's a more subdued kind of feeling.
Speaker 10: And yet there are people collecting in Washington, DC for
Speaker 10: the first time since President Trump was inaugurated from all
Speaker 10: around the world, including the president of the Bundesberg, Jachham Nagel,
Speaker 10: who joins us, now, I'm so glad to see you,
Speaker 10: and I want to start with this question of how
Speaker 10: different are these IMF meetings.
Speaker 11: I guess this year, I guess this meeting is a
Speaker 11: very special one. I think the world economy is in
Speaker 11: a very delicate situation, and I will use this time
Speaker 11: here to learn a little bit more of what we
Speaker 11: can do to make it better, to make the economy running.
Speaker 11: Have you better understanding what's going on? And there are
Speaker 11: a lot of There are really a lot of uncertainties.
Speaker 10: One of the uncertainties is what's coming from the United States,
Speaker 10: in particular when it comes to tariffs, and how much
Speaker 10: that not only is a ramification for the US economy
Speaker 10: but also the global economy.
Speaker 5: How are you thinking about.
Speaker 10: Tariffs and how much they could depress growth?
Speaker 5: Say in Germany, I.
Speaker 11: Said a couple of months ago, when it comes to tariffs,
Speaker 11: I was of the opinion that this will trigger a
Speaker 11: lot of problems. And now we see how the problems
Speaker 11: evolved over the last couple of weeks and months, and
Speaker 11: so we have to have a better understanding how we
Speaker 11: can find, let me say, a kind of a compromise,
Speaker 11: a kind of a level playing field that brings us
Speaker 11: closer together. Because chists, these are so tervists are not
Speaker 11: a good policy.
Speaker 8: This is for sure.
Speaker 5: If they stay.
Speaker 10: Is there a sense that it gives you more room
Speaker 10: to cut rates?
Speaker 11: I think, first of all, I guess we have to
Speaker 11: take into account as central bankers also terrorists.
Speaker 8: What does it mean for Europe? I guess when.
Speaker 11: We're talking about monitor policy in the US system, we
Speaker 11: are on a good pass. I guess we can come
Speaker 11: close to price stability over the course of this year.
Speaker 11: And this is good news. But there's a lot of uncertainty,
Speaker 11: and so we said last week because of that, we
Speaker 11: have to be very cautious. We have to wait what
Speaker 11: might come, how this uncertainty might evolve over the next week.
Speaker 11: So we have this meeting to meeting approach, and this,
Speaker 11: I guess is the best way to conduct monitor policy.
Speaker 5: Since the beginning of last year.
Speaker 10: Since a peak rate of four and a half percent
Speaker 10: at the ECB, you've cut right seven times deposit rate
Speaker 10: of two and a quarter percent.
Speaker 5: Is that neutral?
Speaker 8: I will not speculate about neutral.
Speaker 11: I guess only in a hindsight we really know where
Speaker 11: neutral may be war or maybe is so I guess
Speaker 11: I have to look what the numbers, the figures are
Speaker 11: telling me, and there I see a lot of let
Speaker 11: me say good news when it comes to the inflation story.
Speaker 11: When we talk about economic cross there's a lot of
Speaker 11: more uncertainty because terravices are not good for economic crows.
Speaker 8: So the latest news.
Speaker 11: That we got from the IMF here we know that
Speaker 11: this is for Europe not good news. We are in
Speaker 11: a stagnating situation. So stagnation is the picture for this year.
Speaker 11: Maybe recession for my country, for Germany, I cannot exclude
Speaker 11: a slide. Let me say recession this year. So this
Speaker 11: is what we have to work on, and monetary policy
Speaker 11: can only give us a good indication when it comes
Speaker 11: to a good direction when it comes to when it
Speaker 11: comes to stable prices.
Speaker 10: The thread of tariffs has had an unexpected effect in
Speaker 10: market of actually weakening the dollar pretty substantially and strengthening
Speaker 10: the euro, which on the margins could actually be a
Speaker 10: disinflationary force, especially if you're important goods from overseas That
Speaker 10: would lead to lower effective prices in euros.
Speaker 5: Does that give you some.
Speaker 10: Breathing room to actually cut rates in response to potential weakness,
Speaker 10: if that reduces some of the inflationary pressure.
Speaker 11: I guess it's much too early to really come to
Speaker 11: the final conclusion, what does this tariff scenario mean for
Speaker 11: both sides of the Atlantic. It seems to be, at
Speaker 11: least from the moment, that the price of that tariffic
Speaker 11: decision has to be paid in the United States and
Speaker 11: not in Europe. It seems to be that prices might
Speaker 11: go up much more in the United States compared to
Speaker 11: the European Union. When it comes to economic growth, I
Speaker 11: think the picture is pretty much the same. It's also
Speaker 11: a track on the economic growth here in the United States.
Speaker 8: Also in Europe.
Speaker 11: But I will not speculate about monitory policy and what
Speaker 11: we will do next in our next meeting.
Speaker 10: How much are you watching what China is doing in
Speaker 10: terms of any trade barriers from the US causing them
Speaker 10: to export more of their productions, say to Germany and
Speaker 10: potentially lower prices with respect to an abundance of exports
Speaker 10: to the countrary, I think.
Speaker 8: China is an important player here. This is for sure.
Speaker 11: I guess it's not only for US the Europeans, let
Speaker 11: me say, a very uncomfortable situation.
Speaker 8: I guess also for China.
Speaker 11: And yes, there might be a scenario that they are
Speaker 11: looking for new markets. Additional markets was already being a
Speaker 11: market for Chinese products, but now maybe they can maybe
Speaker 11: use your more compared to the past, as an additional market.
Speaker 11: But as I alluded to already, I think it's a
Speaker 11: lot of speculating. It's a lot of speculation. What does
Speaker 11: that mean this tarriff discussion? And it's too early to
Speaker 11: really assess what is the detail in really any aspect.
Speaker 10: It's much too early just to add to the confusion.
Speaker 10: And if you really are looking for any kind of
Speaker 10: compass and want to just change everything. Germany has been
Speaker 10: known for the zero depth break and this idea of
Speaker 10: not raising the deficit any capacity that has changed. We've
Speaker 10: been talking extensively about spending not only for defense but
Speaker 10: also for a whole host of different investments. Does that
Speaker 10: create more inflationary pressure? Does that just improve the growth picture?
Speaker 10: How does that sort of influence some of your modeling.
Speaker 11: It is important to say that the role of Germany
Speaker 11: does not change, or that didn't change, because the stabilica
Speaker 11: anchor of Germany is still there. So, as I said,
Speaker 11: I think we're living in a very complicated world, so
Speaker 11: it was necessary from a German perspective to do more
Speaker 11: regarding defense spending.
Speaker 8: Was also clear that we have to do.
Speaker 11: Much more when it comes to overcoming our infrastructure issue.
Speaker 11: So I guess this fiscal package is an important message
Speaker 11: to the world that Germany is doing its homework and
Speaker 11: we will improve over time. The economy will do much
Speaker 11: better over the next years, and for me as a
Speaker 11: center panker, this is at the end good news.
Speaker 5: But is it inflationary?
Speaker 11: As far as I can overseee the current situation, it
Speaker 11: will not be inflationary because we are coming out of
Speaker 11: a situation stagnation tea maybe a kind of a recession,
Speaker 11: so it's not inflationary over the next course of the years.
Speaker 11: It's helpful to the economy, means more economic growth, and
Speaker 11: this is good news.
Speaker 10: One thing that's happened over the past couple of weeks
Speaker 10: in particular, has been this fear of the United States
Speaker 10: losing its position as the currency of the world, as
Speaker 10: well as treasury is having a special status.
Speaker 5: And one thing that we've seen in the flow is a.
Speaker 10: Lot of money going into German boots as we're the
Speaker 10: new haven and we're hearing a lot about diversification away
Speaker 10: from the United States into German assets.
Speaker 5: Do you welcome that? Do you think that would be positive.
Speaker 11: Well, I think that it is not good news that
Speaker 11: there's a lot of let me say, doubt regarding the
Speaker 11: safe haven of US treasuries. Think this is not good news.
Speaker 11: And you're absolutely right. Some of that money went to
Speaker 11: German boons. But all in all, we need the US
Speaker 11: treasury market is a good stable market that gives a
Speaker 11: lot of let me say, certainty, and we should overcome
Speaker 11: this turbulent situation and we should give back the US
Speaker 11: treasure it is safe haven status because it is not
Speaker 11: helpful to all of us. If there are some doubts
Speaker 11: uncertainty around you here about the US treasuring market, it.
Speaker 10: Wouldn't necessarily provide a support the same kind of privilege
Speaker 10: of spending I don't want to say recklessly, but with
Speaker 10: abundance in Germany.
Speaker 5: If Germany were to have that safe heaven status.
Speaker 11: I think Germany, and I alluded to that is the
Speaker 11: stability anchor of Europe. In Europe, German boons is a
Speaker 11: perfect example for this. And this will not go away.
Speaker 11: But we need a good US treasuring market. This is
Speaker 11: so important for the financial markets worldwide.
Speaker 10: Speaking of which you're going to be meeting with Jerome Powell,
Speaker 10: the Fed chair at these meetings this week.
Speaker 5: What are you going to ask him?
Speaker 8: I think Jarum Paul he is a great guy.
Speaker 11: I really admire him what he did over his career
Speaker 11: in center banking. And so we talk about the current situations.
Speaker 10: So the current situation is potentially some sort of threat
Speaker 10: to central bank independence. That was taken off the table
Speaker 10: to some degree when President Trump yesterday, in response to
Speaker 10: a reporter, said that he has no intention of firing
Speaker 10: Veeder J. Powell and that this was media speculation that
Speaker 10: was RONA. Mack, not necessarily any real indication that he
Speaker 10: was planning to remove him before his term was up
Speaker 10: early next year. How concerned are you about threats to
Speaker 10: central bank independence?
Speaker 11: So what is important to me is that independence of
Speaker 11: center banks. This is the DNA of center banking, of
Speaker 11: good center banking. So we shouldn't let me say a
Speaker 11: question to a certain that this is maybe something that
Speaker 11: we could see in danger. So independence of central bank
Speaker 11: is of utmost importance.
Speaker 8: And J.
Speaker 11: Powley, he is a great center banker. He did a
Speaker 11: marvelous good job. And I guess this is also seen
Speaker 11: here in the United States.
Speaker 10: Do you worry about some sort of financial instability if
Speaker 10: that continues to be called into question.
Speaker 11: I will not speculate here, but in a scenario that
Speaker 11: you just mentioned, I cannot exclude such a scenario that
Speaker 11: there is then maybe a lot of globulence coming to
Speaker 11: the market if this is in question, and we should
Speaker 11: avoid that that shouldn't come as a realistic scenario, should
Speaker 11: avoid that this is of such a danger for the
Speaker 11: world economy. And so I really hope that there's enough
Speaker 11: understanding how dangerous this could be.
Speaker 10: There's a question about what Europe can do to insulate
Speaker 10: itself and to draw itself closer, and that maybe some
Speaker 10: of the finance ministers and central banking chiefs can form
Speaker 10: something of a closer union to try to fortify themselves
Speaker 10: away from that type of volatility. Have you seen material
Speaker 10: steps toward that to try to establish that type of
Speaker 10: stability in the continent.
Speaker 8: Absolutely.
Speaker 11: I think Europe has I guess now better understanding that
Speaker 11: we have to do our homework becoming more resilient.
Speaker 8: We have to implement all what.
Speaker 11: To be discussed over the years, just allude to the
Speaker 11: captain market union, banking union, maybe a little bit more
Speaker 11: physical integration. So Europe has to stand together in these
Speaker 11: complicated times. But on top of that, also these meetings here,
Speaker 11: the IMF meeting, Development Meeting, these two three days are
Speaker 11: so important to all of us to work on international
Speaker 11: cooperation Module Letter. So the Mulji letteralism of our work
Speaker 11: is so important in these days.
Speaker 8: So I will use these days.
Speaker 11: Here in Washington, TC to get a better understanding to
Speaker 11: convince the partners here that the corporation is key in
Speaker 11: these days.
Speaker 10: In the United States, there seems to be a move
Speaker 10: away from financial debt or incurring more debt, and there's
Speaker 10: this concern about the fiscal deficit in a pretty significant way.
Speaker 10: There is a goal to try to retrench some of
Speaker 10: the spending over the past few years. In Europe, it
Speaker 10: seems like there is a move in the opposite direction.
Speaker 10: We talked about that with respect to Germany, that there
Speaker 10: is a greater degree of willingness to spend. Do you
Speaker 10: think that that is appropriate throughout the entirety of the continent,
Speaker 10: given the fact that there is this desire to try
Speaker 10: to rebuild and regenerate a whole host of industries.
Speaker 11: Let me disagree a little bit here because I do
Speaker 11: not see that there is a momentum that we're going
Speaker 11: away from physical discipline. We have still a good understanding
Speaker 11: in Europe that we are currently in this complicated situation,
Speaker 11: so we have to do much more compared to defense
Speaker 11: spending to compared to the past. But if that period
Speaker 11: is history, then we have to come back to physical discipline.
Speaker 11: And this is a and this is understood in Europe,
Speaker 11: and we will go back to that physical.
Speaker 5: Discipline going forward.
Speaker 10: Do you ever see a time when you can see
Speaker 10: zero rates again from the ECB or even negative?
Speaker 11: Well, as I said, I will not speculate here.
Speaker 8: I think we do what we have to do in.
Speaker 11: Our next meeting, and this is this is our mandate,
Speaker 11: this is our huge responsibility, and we did I guess
Speaker 11: pretty well over the past three years, and I'm very
Speaker 11: optimistic when it comes to price stability that mission will
Speaker 11: be accomplished over the course of this year.
Speaker 10: So do you think that you are going to get
Speaker 10: back down to two percent over the course of this year?
Speaker 8: Absolutely?
Speaker 5: Okay.
Speaker 10: And you don't think that necessarily there has to be
Speaker 10: any material change whatsoever to policy to get there.
Speaker 11: No, there's no autopilot. I think we are decent central bankers.
Speaker 11: So we'll us did the data and then we will
Speaker 11: find maybe the right decisions.
Speaker 10: You Ukham Nagle, thank you so much for being with us.
Speaker 10: Jachem Nagle, the President of the BUNDESPEG.
Speaker 2: This is the Bloomberg Surveillance Podcast, bringing you the best
Speaker 2: in markets, economics, and geopolitics. You can watch the show
Speaker 2: live on Bloomberg TV weekday mornings from six am to
Speaker 2: nine am Eastern. Subscribe to the podcast on Apple, Spotify,
Speaker 2: or anywhere else you listen, and as always, on the
Speaker 2: Bloomberg Terminal and the Bloomberg Business app.