Speaker 1: This is Bloomberg business Week Inside from the reporters and
Speaker 1: editors who bring you America's most trusted business magazine, plus
Speaker 1: global business, finance and tech news. The Bloomberg Business Week
Speaker 1: Podcast with Carol Masser and Tim Stinebec from Bloomberg Radio.
Speaker 1: Well you like Paul. Last week, Ross Gerber, a vocal
Speaker 1: Tesla shareholder, Tesla car owner, frequent guests on our air,
Speaker 1: saying he will pursue a board seat on the electric
Speaker 1: vehicle maker's board well at the time, also saying that
Speaker 1: it's time for Tesla to grow up. Gerber's firm holding
Speaker 1: about four forty shares as of the end of last
Speaker 1: year of Tesla. That's according to our data. Ross's co
Speaker 1: founder president CEO Gerber Kawasaki Wealth and Investment Management. He
Speaker 1: joins us lucky for us via zoom from Santa Monica, California. Hey, Ross,
Speaker 1: good to have you here. Your fund. By the way,
Speaker 1: your e t F is that more than fourteen percent
Speaker 1: year to date, Tesla's your biggest shareholder, at least according
Speaker 1: to our data. UM talk to us about pursuing a
Speaker 1: board seat on Tesla. Why do you want to do
Speaker 1: it and what progress have you made? Towards that end. Well,
Speaker 1: I think mostly it's because I feel like it's time
Speaker 1: for Tesla's board to sort of take a more active
Speaker 1: role in some of the main issues that involve Tesla,
Speaker 1: which seemed to be i don't know, sort of ignored.
Speaker 1: And a lot of founder led companies, you know, grow
Speaker 1: to be very, very successful, um, and then they reach
Speaker 1: a point like where Tesla has, where certain things just
Speaker 1: need to change. And and I don't think these are
Speaker 1: you know, bad things. I think it's a good thing,
Speaker 1: um for Tesla to focus on, you know, really three
Speaker 1: main things that you know, I'm most concerned about, which is,
Speaker 1: you know, public relations, marketing, and lobbying so that things
Speaker 1: like full self driving you know, are you know appropriately
Speaker 1: understood by the public UM and the risks and rewards UM. Secondly,
Speaker 1: I'd love to see Tesla focus on the customer. The
Speaker 1: consumer is constantly having bad experience is with Tesla service
Speaker 1: and and and I just think somebody needs to really
Speaker 1: be focused on the customer over at Tesla. And then thirdly,
Speaker 1: a secession plan. Um. Ellen is clearly running Twitter here
Speaker 1: and that's his priority, which is fine, But if something
Speaker 1: ever happened in Eilani I mean, he is working, you know,
Speaker 1: like twenty hours a day, you know, you know, what's
Speaker 1: what's the plan for Tesla. So these things don't seem
Speaker 1: to be answered from Tesla. And and so now I'm
Speaker 1: pushing for board seat because I think it's time for
Speaker 1: there to be some accountability to these issues. So, Ross,
Speaker 1: you mentioned the PR situation when it comes to Tesla.
Speaker 1: To what extent are you concerned about Elon's impact on
Speaker 1: the company's PR. Well, I think that you know, for
Speaker 1: a long time, we got a lot of free advertising
Speaker 1: out of Ellen, and there was a perception of Ellen
Speaker 1: that was much more positive today now that Ellen runs
Speaker 1: Twitter and has taken many political positions, and I think
Speaker 1: it's his right to do that. But it's certainly unfortunate
Speaker 1: how many customers and shareholders here at least that I know,
Speaker 1: and which are a lot that really have now taken
Speaker 1: a negative you towards Ellen. And it's really kind of
Speaker 1: sad to me. And the bottom line is it's time
Speaker 1: for Tesla to build its brand around Tesla and about
Speaker 1: you know, the values that Tesla really stands for and
Speaker 1: versus what Elon's values are. And and so I don't
Speaker 1: really have any issue with his per se values. But
Speaker 1: we're in the selling car business, and you know, I
Speaker 1: don't know if that's what he's thinking every day when
Speaker 1: he gets up and tweets. So I think Tesla can
Speaker 1: take an active role in shaping the public perception of
Speaker 1: its wonderful products and services. Hey listen, are reporting via
Speaker 1: Ed Ludlow and Caroline Hyde. Um noted how you have
Speaker 1: a good relationship with UM. Some of the biggest shareholders
Speaker 1: in Tesla, someone who I've talked to a lot, Kathy
Speaker 1: would have our investment, and also Baily Gifford. Have you
Speaker 1: have they said that they would support you in your
Speaker 1: pursuit of a seat. Well, I haven't talked to any
Speaker 1: of the institutions yet because I haven't you know, I'm
Speaker 1: still officially got to send out my letter and get
Speaker 1: this going, which you will do that right now. Yeah,
Speaker 1: I will definitely be doing that, and and we're certainly
Speaker 1: and that's one of the reasons I'm running is just
Speaker 1: so that there is an option for people. I'm not
Speaker 1: like doing this for any like personal gain. Let me
Speaker 1: tell you, it's a very time absuming process and and
Speaker 1: most of my clients and and friends you know, are
Speaker 1: sort of like, we want you focusing on our money,
Speaker 1: not running Tesla or dealing with Tesla. And that said,
Speaker 1: you know, I just feel compelled that there needs to
Speaker 1: be a choice for investors, individual investors, so that they
Speaker 1: actually even know somebody on the board. You know, a
Speaker 1: lot of people are like, oh, we support Tesla's board currently.
Speaker 1: I'm like, do you even know who's on the board?
Speaker 1: And they're like no, And would you like, would you
Speaker 1: like to see there's another person. Ellen's obviously on the board,
Speaker 1: but Kimball Lusk is also on the board. Would you
Speaker 1: like to do Do you think it is just a
Speaker 1: board of people who really like Elon? And there do I?
Speaker 1: I do? And granted I really like Elon too, so
Speaker 1: it's you know, I'm not uh, I'm not a negative
Speaker 1: person here, and this is a friendly activist. I'm trying
Speaker 1: to help Tesla in a way that they're not good at. Okay,
Speaker 1: So there, you know. I'm a marketing pr kind of guru.
Speaker 1: That's kind of my thing, and and I think I
Speaker 1: could help the company dramatically, and I've been doing it
Speaker 1: for a long time behind the scenes, and a lot
Speaker 1: of people don't realize that that behind the scenes I've
Speaker 1: been you know, advising them for years and years and
Speaker 1: years about the way they handle many different elements of
Speaker 1: their marketing and PR. And that said, they've implemented a
Speaker 1: lot of these things over the years and it's been
Speaker 1: very successful. But I think at this point, you know,
Speaker 1: Tesla is now a six billion dollar company and and
Speaker 1: things like. You know, there was an anti Tesla ad
Speaker 1: that was run during the Super Bowl and how this
Speaker 1: even happened is mind blowing to me. And then there
Speaker 1: was no counter to that, and if you look at
Speaker 1: the headlines, they're just very misleading and it and it
Speaker 1: becomes very tiring. Well, Ross, I know you mentioned that
Speaker 1: you are a fan of Tesla, of course, but you
Speaker 1: would be referred to as a dissident shareholder if this
Speaker 1: went through and management did not support your efforts, which
Speaker 1: is interesting here. Um, I wonder have you spoken to
Speaker 1: Ellen No. Last time he spoke was on a Twitter
Speaker 1: spaces in December where I addressed many of the issues
Speaker 1: that I had and he addressed them back in a
Speaker 1: way that I was pretty happy with. But you know,
Speaker 1: we still don't have a CEO of Twitter, and that
Speaker 1: was one of the things, you know, I was hoping
Speaker 1: for you know that he would, you know, refocus on
Speaker 1: Tesla and find a CEO of Twitter and and and
Speaker 1: maybe even work a little bit less on creating you know,
Speaker 1: political comments that creates so much dissonance among so many
Speaker 1: Tesla owners. Um. But you know, I don't expect him
Speaker 1: to change his opinion or what he wants to say
Speaker 1: on Twitter. But I do think his focus. I mean,
Speaker 1: he's working three jobs. He's admitted to himself, he's exhausted,
Speaker 1: he's working seven. But in that Twitter space that you mentioned,
Speaker 1: Ross Musk did tell you that Twitter is about ten
Speaker 1: percent of the complexity of Tesla. Did you believe him
Speaker 1: when he told you that. I I think that I
Speaker 1: think he meant that after he's done dealing with what
Speaker 1: he's dealing with. But I don't think he's right. I
Speaker 1: think Twitter is a beast. It's super difficult to manage,
Speaker 1: and we're coming into an election cycle very soon, and
Speaker 1: and boy, it's a hard thing to be Twitter during
Speaker 1: an election, clearly, And so I just think this is
Speaker 1: a very big task that he's taken on. And and
Speaker 1: you know, once again, I I hope he said he
Speaker 1: would get a CEO for Twitter, and and I think
Speaker 1: that's one of the things I'm pushing for. The sooner
Speaker 1: the better he can have more help and leadership at Twitter,
Speaker 1: the more he can refocus on what's important to me,
Speaker 1: which is getting the cybertruck out and scaling production. And
Speaker 1: we've got battery production scaling so in Mega pac So
Speaker 1: it's a very important time for Tesla, and and and
Speaker 1: I just think he's a human being. And at some
Speaker 1: point you can't work seven days a week, twenty hours
Speaker 1: a day. UM. A couple of quick questions, because we've
Speaker 1: only got a couple of minutes left. Um. Tesla shares
Speaker 1: are up about sixty year to date, they're still down
Speaker 1: more than from that high back in early November. Ross.
Speaker 1: First of all, have you been buying at all this
Speaker 1: year and adding to your position? Yeah? Within my fund,
Speaker 1: we've added to our position, so we were able to
Speaker 1: buy Tesla shares cheaper to add to our position. Um
Speaker 1: when it went down. UM. So you know last year,
Speaker 1: this year, last year, this year, and and at the
Speaker 1: end of last year and early this year. UM. So
Speaker 1: you know, I can only really comment about my public
Speaker 1: fund because what happens in my firm, you know, varies
Speaker 1: by client and risk and all these other factors um
Speaker 1: but within my fund we've added to Tesla, it is
Speaker 1: a ten percent waiting currently, a littless than ten percent
Speaker 1: waiting currently, which is the highest waiting that we have
Speaker 1: for a position. So Tesla's are number one stock. I
Speaker 1: love the company. I think it has a wonderful future,
Speaker 1: but I would like to see some changes in the
Speaker 1: way that they're running the business. Final quick question for you.
Speaker 1: A lot of retail investors, as you know, have a
Speaker 1: p of their funds in Tesla. Where do you see
Speaker 1: the biggest upside for them? Well, right now, I think
Speaker 1: the biggest upside for Tesla is number one, successfully scaling
Speaker 1: their product in Berlin and Austin of the model why,
Speaker 1: number two getting the cybertruck out this year at some point.
Speaker 1: And number three it's clearly you know, mega pac production.
Speaker 1: You know, energy storage is going to be a phenomenal
Speaker 1: business for Tesla over time, and and now they're ramping
Speaker 1: this business, so trucks and mega packs. It was really
Speaker 1: the next level for Tesla, and and so you know,
Speaker 1: we're on the verge of a very good growth stage
Speaker 1: for Tesla over the next several years. But I'd love
Speaker 1: to see them really focused on their image in the public.
Speaker 1: Ross too quick questions Twitter. If he wasn't pursuing Twitter,
Speaker 1: do you think you and I would be having this
Speaker 1: question very quickly? No, if he wasn't involved with Twitter,
Speaker 1: I don't think we'll be having this conversation at all.
Speaker 1: And you still want Ellen running this company? Yeah? Absolutely, pcent.
Speaker 1: I mean what I really wanted him refocus back on Tesla. Listen,
Speaker 1: so appreciate your time, great conversation, Ross, and looking forward
Speaker 1: to seeing what comes next. Um Ross Gerber, President, chief
Speaker 1: executive officer at Gerber Kawasaki Wealth and Investment Management, investor
Speaker 1: in Tesla. It is his top hole. We heard him say,
Speaker 1: tempercent waiting in that fund of his and also an
Speaker 1: owner of the cars. Joining us via zoom from Santa Monica, California,
Speaker 1: you're listening to the Bloomberg Business Week podcast. Catch us
Speaker 1: live week days from two to five pm Easter on
Speaker 1: Bloomberg Radio, the Bloomberg Business Band. You too. You can
Speaker 1: also listen live to our flagship New York station, Just
Speaker 1: Say Alexa Play Bloomberg e Love and Didi Promising and
Speaker 1: watching Blomberg Business Week. On this Tuesday, Carol Master along
Speaker 1: with Madison Mills. So as technology seeks into every walk
Speaker 1: of life, an increasing proportion of Supreme Court decisions require
Speaker 1: at least a basic literacy and subjects that may not
Speaker 1: come naturally to the aging members. Not my words, they
Speaker 1: are the words of Bloomberg's Gregg Store, who writes about it.
Speaker 1: The upcoming new issue of Bloomberg Business Week out on
Speaker 1: newstands later this week, already on the Bloomberg and at
Speaker 1: Bloomberg dot com slash business Week. Greg as you know,
Speaker 1: Supreme Court reporter here at Bloomberg. He joins us from
Speaker 1: our nine and nine one studio in Washington, d C.
Speaker 1: Also with us, the editor of Bloomberg Business Week to Webber,
Speaker 1: he's in our Bloomberg Interactive Brokers studio. I've often thought
Speaker 1: about this, and we talked about this with lawmakers, like
Speaker 1: do they understand kind of all the high tech stuff
Speaker 1: that they're legislating. Well, that's what Greg came to us
Speaker 1: with UM, and this is just one of those ones
Speaker 1: where he really picked up the phone. He was very excited.
Speaker 1: He was like, Joel Children, I got to talk to
Speaker 1: you about this idea and and it turns out that, um,
Speaker 1: this is not a totally new idea, But it's really
Speaker 1: relevant right now because of the case they're gonna here
Speaker 1: next year, which we will basically focus on section to
Speaker 1: thirty and what that means for the future of the Internet. Um,
Speaker 1: so rewind the clock a little bit for us, Greg
Speaker 1: What what happens when Elena Kagan and Stephen Bryer sit
Speaker 1: down and play Grand Theft Auto like they did about
Speaker 1: a decade ago. We just soak in that moment for her. Yeah,
Speaker 1: I wish I could have been a fly on the
Speaker 1: wall for that that one. Yeah, this is a case
Speaker 1: about a decade ago. It was a California law that
Speaker 1: banned the sale of violent video games to my ears,
Speaker 1: and so Justice brier who was then in his early seventies,
Speaker 1: and Justice Kagan decided, we don't know a whole lot
Speaker 1: about violent video games, so we're going to check them out.
Speaker 1: And so, uh, they had it set up in Justice
Speaker 1: Briar's chambers and went down there and played Grand Theft
Speaker 1: Auto to try to learn a little bit about it.
Speaker 1: And as it turns out, according to Justice Kagan, she
Speaker 1: was a lot more enthusiastic about it than he was.
Speaker 1: He thought it was really awful and disgusting and she
Speaker 1: was like, next round, next round. Uh, you know, we
Speaker 1: have more, we have more reporting to do on Kagan's
Speaker 1: video game obsession, if it, if it became that, you know,
Speaker 1: including maybe what console she's in do But to keep
Speaker 1: it back on the Supreme Court. Um, you know, we're
Speaker 1: obviously Briar's not going to be on the bench when
Speaker 1: they hear this case next week. But what what do
Speaker 1: they have to do in order to get ready for
Speaker 1: a big case like the one they're going to hear
Speaker 1: when maybe they don't have as much expertise as people
Speaker 1: in the industry might. Well, the short answer is they
Speaker 1: do a lot of res with a lot of help
Speaker 1: from people around the court. You know, all of them
Speaker 1: have four twenty something are generally twenty something law clerks
Speaker 1: who can help him out. They've also got a whole
Speaker 1: courthouse full of people. So there's a case back in
Speaker 1: the late nineteen nineties having to do with restrictions on
Speaker 1: posting adult oriented material in the way that children might
Speaker 1: see them. And so i was back before the court
Speaker 1: was really connected to the internet. And so they set
Speaker 1: up a computer in the library where justices and their
Speaker 1: clerks would go there and and uh, you know, put
Speaker 1: in searches to see if you know, pornography popped up
Speaker 1: or something like that. UH. In a more recent case,
Speaker 1: I actually talked to Justice Bryer interviewed him last week,
Speaker 1: and he said, this is a copyright case involving Google
Speaker 1: and Oracle, and he said he just spent a lot
Speaker 1: of time trying to understand the Java programming language and
Speaker 1: how it worked, because that was central to the case
Speaker 1: whether Google infringed Oracles copyright and UH spent a lot
Speaker 1: of time. He has a very lengthy explanation in his
Speaker 1: opinion siding with Google. UH that for the most part,
Speaker 1: was pretty well received in terms of understanding the technology
Speaker 1: at issue in the case. I would love to be
Speaker 1: on the fly, a fly on the wall when they
Speaker 1: try to teach lawmakers about TikTok and the importance of
Speaker 1: that moving forward. You got to open it and spent
Speaker 1: about five hours a day on it. But in all seriousness, Greg,
Speaker 1: you know, to be fair to scout this. This is
Speaker 1: an issue that plagues a lot of lawmakers. We always
Speaker 1: hear these funny sound bites from members of Congress too,
Speaker 1: when they're you know, in a social media hearing or
Speaker 1: crypto hearing for example, we remember dog Coin from the
Speaker 1: ft X hearing the Internet runs on tubes most yes,
Speaker 1: exactly exactly. So how how does Scout is compared to
Speaker 1: Congress when it comes to understanding the Internet. Yes, it's
Speaker 1: a good question, Madison. There there are certainly some examples
Speaker 1: of the Supreme Court saying similar type things. Maybe not
Speaker 1: quite as bad as you know, the Internet being a
Speaker 1: collection of tubes. But you know, over the years, the
Speaker 1: Supreme Court is asked some questions during arguments that suggests, yeah,
Speaker 1: they may not understand the technology. But I think there
Speaker 1: are a couple of important points. One, the Court has
Speaker 1: gotten younger, so you have more justices who are uh,
Speaker 1: you know, in their fifties rather than in their seventies
Speaker 1: and eighties, or maybe understand the technology a little better.
Speaker 1: Uh they have kids as well. And secondly, regardless of
Speaker 1: the age of the justices, for the most part, when
Speaker 1: I talk to people, actually almost entirely when I talk
Speaker 1: to people, they said, despite some occasionally uh confused sounding questions,
Speaker 1: the Court generally does a pretty good job by the
Speaker 1: end of the day when it puts out the really
Speaker 1: important thing, which are its opinions, And no doubt that
Speaker 1: does get some help from the law clerks who maybe
Speaker 1: understand the technology better. Uh. But but for the most part,
Speaker 1: the court based on the people I talked to them,
Speaker 1: My reporting gets better grades than than a lot of
Speaker 1: members of Congress do. Greg. So, what's at stake with
Speaker 1: the case that they're going to hear next week and
Speaker 1: what exactly is it? What are they gonna hear? Yeah,
Speaker 1: so this is as you said, this is an argument
Speaker 1: they're going to have on a Tuesday of next week Tuesday,
Speaker 1: and a somewhat less important case case on on Wednesday.
Speaker 1: The Tuesday case is all about the saying called Section
Speaker 1: to thirty, which has been around sin It basically shields
Speaker 1: social media companies other Internet companies from liability because of
Speaker 1: posts put up by their users by third parties. And
Speaker 1: that has basically served as a very broad shield for
Speaker 1: Internet companies. And this is the case involving a lawsuit
Speaker 1: by the victim, the family of a terrorism victim, saying Google,
Speaker 1: through its YouTube service, UH, basically recommended terrorists content, terrorists
Speaker 1: videos and provided support to ISIS. And the question is
Speaker 1: whether that lawsuit can can even get in the door.
Speaker 1: If the Supreme Court says yes, it can get in
Speaker 1: the door. We're carving out a bit of a bit
Speaker 1: of an exception to section to thirty. Computer companies social
Speaker 1: media companies say, we are really worried that there will
Speaker 1: be no stopping that and and that that will force
Speaker 1: us to be a lot more restrictive about the content
Speaker 1: that our members are users can put up on the
Speaker 1: Internet because we're worried about being sued over it. Okay,
Speaker 1: so what does industry have to say about this? And
Speaker 1: this won't be the only two thirty case that they hear, right, well, so,
Speaker 1: so they have a two thirty case on Tuesday, as
Speaker 1: they said, there's a second case on Wednesday involving Twitter,
Speaker 1: and it's actually kind of a related question about whether
Speaker 1: the family of a terrorist victim can sue under this
Speaker 1: law that's it's called the Anti Terrorism Act. Uh. You know,
Speaker 1: the industry is basically saying this case has the potential
Speaker 1: to really transform the Internet, and not in a good way.
Speaker 1: It will force us to be it could force us
Speaker 1: to be censors to a large degree, it could restrict
Speaker 1: speech on the Internet. And they are arguing that there's
Speaker 1: going to be a carve out in section to thirty.
Speaker 1: This is really something that Congress ought to be able
Speaker 1: to do, because it can be a lot more precise
Speaker 1: rather than the kind of the blunt instrument of a
Speaker 1: Supreme Court opinion. Let's just hope they haven't playing video
Speaker 1: games exactly. Oh my god, that image. Um Gregg Store,
Speaker 1: thank you so much. He is, of course, Supreme Court reporter.
Speaker 1: Here at Bloomberg News from our not and I One
Speaker 1: studio in Washington, DC, are thanks to Joel Weber, the
Speaker 1: editor of Bloomberg business Week. This story, as we mentioned
Speaker 1: in the upcoming new issue of Business Week, out on
Speaker 1: newsstands already on the Bloomberg and Bloomberg dot Com. You're
Speaker 1: listening to the Bloomberg Business Week Podcast. Catch us live
Speaker 1: week days from two to five pm Easter on Bloomberg Radio,
Speaker 1: the Bloomberg Business app band you too. You can also
Speaker 1: listen live to our flagship New York station, Just Say Alexa,
Speaker 1: Play Bloomberg, e Love and Verdi. We mentioned higher price
Speaker 1: as we mentioned inflation. So this is a perfect segue
Speaker 1: to our next story, which is a most read on
Speaker 1: the Bloomberg. It's the Bloomberg Big Take. It's about car
Speaker 1: prices in the US hitting a record. I want to
Speaker 1: get right to it because Bloomberg Detroit. Your chief David
Speaker 1: Welch joins us via zoom from Detroit. David, good to
Speaker 1: have you here with Maddie and myself. So tell me
Speaker 1: what's going on. Although it's not a surprise because my
Speaker 1: husband I were looking at car prices and we were like,
Speaker 1: oh god, oh my god, everything's expensive. Yeah. Look, it's
Speaker 1: it's started with the pandemic because you had production constrained. Obviously,
Speaker 1: factories shut down and got worse with the semiconductor shortage,
Speaker 1: and now you've got high interest rates. So car payments
Speaker 1: are at a record seven seventy a month for new
Speaker 1: cars and about five fifty for use cars, which is
Speaker 1: quite a lot um. So what has happened up there's
Speaker 1: because of the semi conductor shortage. Production was slashed at factories.
Speaker 1: Dealers had shortages. They're often selling vehicles right off the
Speaker 1: trucks as they came in, prepping them and handing them
Speaker 1: over the consumers who paid for them weeks before, and
Speaker 1: so dealers were charging above sticker. Automakers were getting maximum price.
Speaker 1: There was no rebating, no zero percent financing deals, and
Speaker 1: they were also raising prices over the base. You know,
Speaker 1: the M S R. P has gone up about over
Speaker 1: for a lot of vehicles over the past to three years.
Speaker 1: So it's all very expensive and it could come down
Speaker 1: and probably will soften up as uh sending conductor production
Speaker 1: gets back and it is coming back. But in order
Speaker 1: for vehicles to get as affordable as they were three
Speaker 1: years ago, vehicle prices will have to basically crater, and
Speaker 1: I just don't see that happening. I think they will
Speaker 1: come down a bit, but I think it's gonna be
Speaker 1: We're gonna be paying more for a while, and a
Speaker 1: lot of middle class people cannot sensibly afford these new cars.
Speaker 1: It's like you said, the average monthly payment of seven
Speaker 1: hundred and seventy seven dollars is insane. Another stat that
Speaker 1: was jaw dropping to me of the market for these
Speaker 1: cars is of people who make a d fifty thou
Speaker 1: a year. Is that right? Am I saying that statistic? Right?
Speaker 1: That is crazy to me. I wonder people are paying
Speaker 1: a thousand dollars a month a third of the new
Speaker 1: car buyers. That's that's just it's so it's wild, wild
Speaker 1: numbers here. I wonder just outside the norm these numbers are, though,
Speaker 1: Could you put it into contact for US. So for
Speaker 1: most of the past decade, the average new car monthly
Speaker 1: payment was bouncing around four ten a month, and and
Speaker 1: there's a reason for that that the economist and Cocks,
Speaker 1: by their measurements, about four hundred a month is what
Speaker 1: middle income households should be paying for a new car payment,
Speaker 1: so that they can responsibly put some money away, safer
Speaker 1: college education, you know, pay their mortgage, healthcare bills, the
Speaker 1: rest of it. That that's sort of a responsible payment,
Speaker 1: and for the longest time, it was where consumers would
Speaker 1: give pushback above. So those payments stayed around at that
Speaker 1: level for at least ten years. In fact, they were
Speaker 1: lower than that for a long time, and that's why
Speaker 1: you saw four or five dollar rebates and financing deals
Speaker 1: and a lot of leasing. Leasing is another thing that's
Speaker 1: that's been on the decline. Once car companies had a
Speaker 1: shortage and they didn't have to discount, they realized, hey,
Speaker 1: we make a lot of money selling fewer cars at
Speaker 1: much bigger David, going to stick to that, David, I
Speaker 1: feel like everybody took an economics one on one class,
Speaker 1: like supply demand, right, so you know, reduce the supply,
Speaker 1: there's going to be greater demand and you can keep
Speaker 1: up the prices. I almost feel like it's the airline model,
Speaker 1: like taking out capacity to some extent. Is it going
Speaker 1: to be a different model going forward in terms of
Speaker 1: the auto industry, And is some of it also going
Speaker 1: after those higher margins to help pay for the transition
Speaker 1: to renewable fuels and alternative energy vehicles. I'll take your
Speaker 1: last question first. It is car companies need to generate
Speaker 1: a lot of cash to pay for battery plants and
Speaker 1: electric vehicle platforms and motors and all of that stuff.
Speaker 1: It's a very expensive transition, and they're ironically paying forward
Speaker 1: with the expensive pickup trucks that get very bad feel
Speaker 1: kind of. UM. So that that's absolutely true. They need
Speaker 1: to generate as much cash as they can. Whether or
Speaker 1: not they will stick to this model is sort of
Speaker 1: the That's like the six hundred and sixty billion dollar question.
Speaker 1: And I picked that number all because that's the revenue
Speaker 1: they got to, which was greater than the year before
Speaker 1: while selling a fewer vehicles. UM actually brought grew revenue
Speaker 1: while selling fewer cars. UM. They're going to try. It
Speaker 1: only takes one or two competitors to break ranks. And
Speaker 1: start discounting. So here here's what I think will happen.
Speaker 1: UM car companies used to carry on average eighty days
Speaker 1: worth the vehicles on de Ro Watson in the pipeline,
Speaker 1: and that's when they were in the habit of discounting
Speaker 1: like crazy. They ran their factories as hot as they
Speaker 1: could build tons of inventory, discounted it to sell it.
Speaker 1: They want to keep like fifty or sixty days or
Speaker 1: maybe forty or fifty days. That way, they're not discounting
Speaker 1: as much to move it. They can get better pricing,
Speaker 1: but they do have better choice for consumers, and people
Speaker 1: aren't going away frustrated. So I do think we're at
Speaker 1: a peak for praising right now. It will soften up
Speaker 1: and come down. I don't think it's going to come
Speaker 1: crashing down to the point where we're seeing four a
Speaker 1: month average payments. Again, I think affordability is going to
Speaker 1: be an issue going forward, unless there's we do go
Speaker 1: into a recession and things have to go back to
Speaker 1: normal just to move vehicles. Uh So, if we do
Speaker 1: stay out of recession, and you know, employment levels are
Speaker 1: great right now, everybody's working, I think we're gonna have
Speaker 1: a tough time getting back to those normal price levels.
Speaker 1: One other reason to Toyota and GM only think we're
Speaker 1: gonna have enough semi conductor chips to make about fifteen
Speaker 1: million vehicles for the US this year, and those normal
Speaker 1: days with four month price payments, we're making seventeen seventeen
Speaker 1: and a half million vehicles a year, So we're still
Speaker 1: all the way out of the chip graces. Yeah, and
Speaker 1: that's another critical factor. Does market share come into play here?
Speaker 1: This is always what I cling to when I'm hoping
Speaker 1: that I'll get to see some more friendly prices for consumers.
Speaker 1: You know, if every single automaker is gonna raise prices,
Speaker 1: is there not an opportunity for someone to come in
Speaker 1: and gain some more market share with a cheaper option.
Speaker 1: There is, And that's why I do think we're going
Speaker 1: to see prices come down. That the trouble is, the
Speaker 1: story is. And look, I've got plenty of critics online saying, oh,
Speaker 1: the car companies are gonna go back to their old habits.
Speaker 1: And they might, but I think it will take a
Speaker 1: while because we're not out of the woods on semiconductors,
Speaker 1: and I do think they're going to try really hard
Speaker 1: to maintain pricing and you will get in this. They're
Speaker 1: going to look for a sweet spot where they can
Speaker 1: get a good get better volumes than they have in
Speaker 1: the last two years, but also better pricing and and
Speaker 1: they probably know what that sweets, but is in fact,
Speaker 1: I think it probably is around fifteen million vehicles a
Speaker 1: year um. At some point they may have to get
Speaker 1: in because we also we don't have a lot of
Speaker 1: used cars coming back. The other side of this is
Speaker 1: this year will have six hundred thousand fewer used vehicles
Speaker 1: coming off of least because for the last couple of
Speaker 1: years of buyers at least, and it was traditionally thirty
Speaker 1: so you've got a big drop in leasing. And leasing
Speaker 1: has always brought three four year old vehicles that were
Speaker 1: still in pretty good shape a little miles coming back
Speaker 1: into the used market. So there's there's going to be
Speaker 1: a bit of a shortage from those off police vehicles
Speaker 1: that will even though use car prices are also softening,
Speaker 1: but they're sort of it puts a little bit of
Speaker 1: a floor under it. So again all these factors I
Speaker 1: look at, Yeah, vehicle prices will come down, it's not
Speaker 1: going to be crazy sellers market forever, but they have
Speaker 1: to come crashing down, and I don't think they will
Speaker 1: in the next you know, eighteen months or so. All right,
Speaker 1: so I'm going to put off buying a car for
Speaker 1: eighteen months at least, grateful to take the subway, which
Speaker 1: is not something I feel that often. So in that way,
Speaker 1: I'm really like thankful for this story. I lived in
Speaker 1: New Jersey when I worked in you know that the
Speaker 1: headquarters at Bloomberg New Jersey transit in the subway. It
Speaker 1: made me to love sitting on the GW bridge and
Speaker 1: like many trying to get across to I think I'm
Speaker 1: talking to working it so bad. Yeah, um, David, thank
Speaker 1: you so much Bloomberg to Tripio chief David Welch. As
Speaker 1: we said, it is the big take on the Bloomberg
Speaker 1: and you can certainly catch the Bloomberg Big Take on
Speaker 1: Bloomberg Radio every evening at eleven pm Wall Street Time.
Speaker 1: Aren't you listening in watching Bloomberg Business Week Carol Master
Speaker 1: along with Madison Mills, And this is Bloomberg. This is
Speaker 1: Bloomberg Business Week inside from the reporters and editors who
Speaker 1: bring you America's most trusted business magazine, plus blomal Business
Speaker 1: finance and tech news. The Bloomberg Business Week Podcast with
Speaker 1: Carol Masser and Tim Stinebec from Bloomberg Radio Roomercael the
Speaker 1: Journal Now, but you let me drive? Oh no, no,
Speaker 1: no, no no, who's going home? Please? I'll do the riding revels.
Speaker 1: I want to drive. It's good question. This is the
Speaker 1: Drive to Clue Radio. All right, everybody, Just about seventeen
Speaker 1: minutes left in today's trading session. Carol Master along with
Speaker 1: Madison Mills, live in our Bloomberg Interactive Broker's studio, streaming
Speaker 1: on Bloomberg Originals and of course on YouTube. Let's get
Speaker 1: right to it. You heard Charlie breaking down the numbers.
Speaker 1: But let's get to our Drive to the Close. Guest,
Speaker 1: Doug Sioca is back with us. He see you, and
Speaker 1: partner at our Capital Partners. They've got roughly a billion
Speaker 1: dollars over a billion dollars in assets under management. And
Speaker 1: Doug is based in Leewood, Kansas, and that's where we
Speaker 1: find him via zoom. And I am completely disappointed because
Speaker 1: I don't see any of the red and yellow on you.
Speaker 1: Come on the Chiefs one, the Chiefs one. The town's
Speaker 1: in an incredibly celebratory mood. We got clients and friends
Speaker 1: in Philly, so we wanted to keep a pretty neutral posture.
Speaker 1: But I'll tell you what it's it's a great time
Speaker 1: to be in Kansas City. We absolutely love this team.
Speaker 1: It was I don't blame you. It was a great
Speaker 1: game and they are an incredible team. Um, incredible market.
Speaker 1: How do you describe it, Doug? Yeah, I mean the
Speaker 1: mark has been very resilient and undeniably and you know,
Speaker 1: I think it's it's interesting because, um, it's almost pollyannish
Speaker 1: to suggest that a soft landing is possible. It's not
Speaker 1: very popular opinion, right, But when you take strong employment
Speaker 1: combined with moderate wage growth comblined combined with a shrinking
Speaker 1: balance sheet, declining product inflation, improving non housing services inflation,
Speaker 1: and pretty resilient profitability, resilient profit reporting coming out of
Speaker 1: the fourth quarter, I don't know. I think you can
Speaker 1: make the case, and I think the market's reflecting such.
Speaker 1: Can I just say, Ken Rogoff, I've been obsessed with
Speaker 1: this interview he did on Surveillance earlier and he said, thanks,
Speaker 1: soft landing without the landing, I mean, and this is
Speaker 1: that kind of whether it's the rolling recession idea or
Speaker 1: lack there of a recession like this whole idea that
Speaker 1: everybody is kind of confused, UG that we are seeing
Speaker 1: still that strong labor market, that maybe we won't ultimately
Speaker 1: see growth come undone um despite the FED continuing to
Speaker 1: raise rates. Yeah. I actually saw an interview this morning
Speaker 1: and it followed one by the Richmond Fed President's Top Barkin,
Speaker 1: and he made a good a couple of great comments
Speaker 1: in their carol. But the two actually wrote down one was,
Speaker 1: you know, managing markets as a fool's errand, and I
Speaker 1: feel like the FED governing body feels like that is
Speaker 1: a responsibility of theirs to assess their commentary on interday
Speaker 1: activity in both the VIX and the SMP hundred, I
Speaker 1: don't know that that's a wise allocation of their time
Speaker 1: and effort. But the other the comment that that the
Speaker 1: President Barkin made was make policy in the economy you
Speaker 1: are given, not in the one you wish you have.
Speaker 1: And I think that just so critical if you're going
Speaker 1: to retain that that that UM emphasis on being data dependent,
Speaker 1: and I think having that flexibility is inherit in crafting
Speaker 1: good monetary policy. So, Doug, if it is a fool's
Speaker 1: erron to try and get the market to kind of
Speaker 1: align with the Fed. Is there anything the Fed could
Speaker 1: do to kind of shake the equities market and get
Speaker 1: get equities on its side on this kind of like
Speaker 1: hawkish anti inflationary path. Well, I think, Maddie rate the
Speaker 1: market is a leading indicator. So it is really interesting
Speaker 1: to remember because they raised rates for the first time
Speaker 1: thirteen months ago, and and then and I guess it's
Speaker 1: probably maybe fifteen months ago. They're not quite us said
Speaker 1: the other way eleven months ago. Uh FED President Bullard
Speaker 1: came out and he said something that absolutely shook the
Speaker 1: market to its core back in March April last year,
Speaker 1: and he said, hey, look we're nowhere near to being done.
Speaker 1: We're actually just getting started, and we may raise rates
Speaker 1: in bunches. In fact, we may raise rates by seventy
Speaker 1: basis points or so at a meeting, because this is
Speaker 1: a direct quote. We did that n and the world
Speaker 1: didn't end. If you remember that, well, they didn't go once.
Speaker 1: Last year. They raised rates by seventy basis points four
Speaker 1: times and the world didn't end. But it was a
Speaker 1: very invisible year for equities. So I think the equities
Speaker 1: were anticipating just how core being shaken as you mentioned
Speaker 1: that it could actually be experienced by some of that
Speaker 1: fed rhetoric in implementation. So it got out to a
Speaker 1: large part. But go back to like this whole idea
Speaker 1: that typically in a higher rate environment, right, that you
Speaker 1: don't see the tech names or the NASDAC do well.
Speaker 1: And yet it has been and so that seems a
Speaker 1: little confusing. But going back to what Rogoff said, you know,
Speaker 1: and just like you were talking about, you know, we're
Speaker 1: seeing resiliency when it comes to the economy. We're seeing
Speaker 1: it when it comes to some of the numbers that
Speaker 1: we've got in terms of corporate profits. Surprisingly so, and
Speaker 1: so does that provide a floor when it comes to equities.
Speaker 1: Maybe we don't see it a really strong rally for
Speaker 1: a while, but maybe we've created a floor. Could be
Speaker 1: care It's a great point, I think obviously, as quickly
Speaker 1: as the NAZAC has gotten out of the gate, it
Speaker 1: could be the underwind of some shortcovery that took place,
Speaker 1: combined with than expected proper reports, combined with and this
Speaker 1: is a really important point, right, the cresting that we've
Speaker 1: seen in the dollar going back to November of last year,
Speaker 1: because so many of these big tech companies are multi
Speaker 1: nash will in scope. If you have highly efficient business
Speaker 1: models that are doing what they can't control costs because
Speaker 1: they're the ones that are on the forefront of all
Speaker 1: the layoffs that we've seen. Now you're repatriating profits in
Speaker 1: weaker dollar terms, which is gonna enhance and preserve those
Speaker 1: margins that are right now under assault and high introspection.
Speaker 1: So it could just create this floor because they ober
Speaker 1: discounted them to death, and the reality is for the
Speaker 1: economy to move along at all, even if not in
Speaker 1: a vibert fashion, they're going to need that contribution from
Speaker 1: high technology companies. Does wage disinflation give you hope that
Speaker 1: the FED can pause or pivot at any point in
Speaker 1: the near future, Doug, it does, Manny. I think what
Speaker 1: we saw yesterday that kind of catalyzed the big one
Speaker 1: and a half percent move we saw in the SMP
Speaker 1: where you had that household Income survey pointed a wage
Speaker 1: disinflation expectations, the single largest one month drop in the
Speaker 1: nearly ten year history of that series. That was really
Speaker 1: really powerful and for those who have been predicting this
Speaker 1: wage quite spiral to really catalyze that next leg of
Speaker 1: holatility and market drop. It hasn't happened yet. You mentioned
Speaker 1: the dollar Dollar index down almost ten percent since late September. Hey,
Speaker 1: real quickly, uh, Doug thirty seconds. Got some money to
Speaker 1: put to work? Where do I put it right now? Yeah?
Speaker 1: Two places within kroll, I mean one in fixed income right,
Speaker 1: just playing somewhat on the mean reversion trade. Worst year
Speaker 1: in the history of the bondmarket last year. I think
Speaker 1: good having having good cloud diversification is going to give
Speaker 1: you sustainable task equivalent to you'ld pick up. And then
Speaker 1: also look internationally, right, international investments, if you just look
Speaker 1: at the IFA over the past fifteen years, is actually
Speaker 1: trailed the SMP by two hundred and fourteen percent. You've
Speaker 1: got a trailing multiple of twelve times versus seventeen or
Speaker 1: eighteen for the SMP. You have a lot more value
Speaker 1: than growth in the international season. Lastly, typically they pay
Speaker 1: two times the dividend of the domestic company. Open up. Yeah,
Speaker 1: I feel like there's been a pig pile among investment
Speaker 1: managers when it comes to emerging markets, in particular looking
Speaker 1: outside the U S. Doug Cioca, congratulations on the chiefs.
Speaker 1: I know you are being very fair, but nonetheless great
Speaker 1: to check in with you again. Doug Ciocca, chief executive
Speaker 1: Officer to partner Cavar Little Partners over a billion in
Speaker 1: assets under management joining us. This is the Bloomberg Business
Speaker 1: Week podcast, available on Apple, Spotify, and anywhere else you
Speaker 1: get your podcast. Listen live each weekday starting at two
Speaker 1: pm Eastern on Bloomberg dot com, the I Heart Radio
Speaker 1: app tune In, and the Bloomberg Business App. You can
Speaker 1: also watch us live every weekday on YouTube and always
Speaker 1: on the Bloomberg terminal