1 00:00:05,800 --> 00:00:08,720 Speaker 1: Welcome to the Bloomberg P and L Podcast. I'm Pim Fox. 2 00:00:08,760 --> 00:00:11,520 Speaker 1: Along with my co host Lisa Bramowitz. Each day we 3 00:00:11,640 --> 00:00:15,120 Speaker 1: bring you the most important, noteworthy, and useful interviews for 4 00:00:15,200 --> 00:00:17,840 Speaker 1: you and your money, whether you're at the grocery store 5 00:00:17,960 --> 00:00:20,720 Speaker 1: or the trading floor. Find the Bloomberg P M L 6 00:00:20,840 --> 00:00:32,519 Speaker 1: Podcast on Apple Podcasts, SoundCloud, and Bloomberg dot Com. In 7 00:00:32,600 --> 00:00:35,720 Speaker 1: the wake of Hurricane Harvey, we've talked a lot about 8 00:00:35,840 --> 00:00:40,599 Speaker 1: gasoline prices spiking, crude values falling. But there's another chemical 9 00:00:40,960 --> 00:00:45,640 Speaker 1: that is big produced, big production in Texas, and uh 10 00:00:45,720 --> 00:00:48,760 Speaker 1: it possibly could be more important. I'm talking about ethylene, 11 00:00:48,800 --> 00:00:51,480 Speaker 1: and I want to bring in Jack Caskey, who highlighted 12 00:00:51,520 --> 00:00:53,800 Speaker 1: this in a recent Bloomberg News story. He's our chemical 13 00:00:54,040 --> 00:00:57,200 Speaker 1: company's reporter and he is based in Houston. Also, I 14 00:00:57,240 --> 00:01:00,480 Speaker 1: want to bring in Jason Minor, senior global chemical analyst 15 00:01:00,520 --> 00:01:04,520 Speaker 1: for Bloomberg Intelligence based in Princeton, New Jersey. Jack, let's 16 00:01:04,520 --> 00:01:07,080 Speaker 1: start with you. Can you give us a sense of 17 00:01:07,120 --> 00:01:11,120 Speaker 1: the importance of this chemical that you highlighted, ethylene, and 18 00:01:11,240 --> 00:01:15,080 Speaker 1: why the production of this chemical in Texas could be 19 00:01:15,360 --> 00:01:18,759 Speaker 1: a bigger impact on what we consume every day than 20 00:01:18,800 --> 00:01:25,080 Speaker 1: even gas prices. Yeah, lista UM ethylene is the world 21 00:01:25,240 --> 00:01:30,399 Speaker 1: most produced petrochemical. Uh. It's in everything. It's in plastics 22 00:01:30,480 --> 00:01:34,399 Speaker 1: or food packaging, your toys, it's entires and diapers and 23 00:01:34,840 --> 00:01:38,199 Speaker 1: pretty much anything I thinks they don't even think about. 24 00:01:38,200 --> 00:01:42,280 Speaker 1: You know, rubber, Uh contains athletes anthetic rubber. UM. The 25 00:01:42,360 --> 00:01:47,000 Speaker 1: list is hundreds, if not thousands of products long. Uh, 26 00:01:47,640 --> 00:01:52,440 Speaker 1: it's converted into you know, vinyls um. It's it's likely 27 00:01:52,520 --> 00:01:54,280 Speaker 1: said plastics. I'm not going to go to the whole list, 28 00:01:54,320 --> 00:01:59,120 Speaker 1: but it is the core of the petrochemical industry. Right. 29 00:01:59,160 --> 00:02:02,440 Speaker 1: If it's the core of the petro chemical industry, Jason, 30 00:02:02,560 --> 00:02:04,880 Speaker 1: I would like you to come in and comment on this. 31 00:02:05,240 --> 00:02:07,520 Speaker 1: How long, what kind of time frame, and what are 32 00:02:07,560 --> 00:02:10,840 Speaker 1: some of the specific challenges that are going to be 33 00:02:10,880 --> 00:02:14,160 Speaker 1: faced by the industry to get it up and running. Yeah, 34 00:02:14,160 --> 00:02:17,320 Speaker 1: they're there. Thanks. There's a couple of effects here actually 35 00:02:17,440 --> 00:02:21,079 Speaker 1: UM two waves perhaps so in the near term. The 36 00:02:21,200 --> 00:02:24,520 Speaker 1: estimates range between sort of forty and six of golf 37 00:02:24,520 --> 00:02:28,040 Speaker 1: ethylene being down. That's maybe a fifth the u S 38 00:02:28,080 --> 00:02:30,400 Speaker 1: maybe a fifth of the world's athlete supply. So the 39 00:02:30,480 --> 00:02:34,040 Speaker 1: numbers sound big, of course, depends how long the adages 40 00:02:34,080 --> 00:02:37,320 Speaker 1: are and remember, um, we haven't starved this industry for Capex, 41 00:02:37,400 --> 00:02:40,120 Speaker 1: There's been a lot of spending which is operating in 42 00:02:40,160 --> 00:02:43,160 Speaker 1: our favor. The second wave that might be more impactful 43 00:02:43,320 --> 00:02:47,120 Speaker 1: is logistics. Um, we did have a massive wave, so 44 00:02:47,200 --> 00:02:51,000 Speaker 1: ethylene first and biggest step it turns into plastic polyethylene. 45 00:02:51,400 --> 00:02:52,959 Speaker 1: That's that's where it becomes kind of the face of 46 00:02:52,960 --> 00:02:55,480 Speaker 1: petro chemicals. We use it every day. We had a 47 00:02:55,520 --> 00:02:58,400 Speaker 1: massive wave of expansion in the US coming in plastic 48 00:02:58,480 --> 00:03:01,160 Speaker 1: this year, and with that sort of coming over the 49 00:03:01,200 --> 00:03:03,440 Speaker 1: next twenty four months, you know, it's it's as much 50 00:03:03,440 --> 00:03:06,720 Speaker 1: as a quarter of additional capacity if those plants get 51 00:03:06,720 --> 00:03:09,679 Speaker 1: back online fast. The next wave would be that that 52 00:03:09,840 --> 00:03:12,480 Speaker 1: those pellets create sort of a local glut. They need 53 00:03:12,480 --> 00:03:15,720 Speaker 1: to be exported. And clearly if you look at on 54 00:03:15,760 --> 00:03:17,880 Speaker 1: the terminal, we have a nice map, real time map 55 00:03:17,880 --> 00:03:20,440 Speaker 1: of the ships in the gulf. There it's a big 56 00:03:20,440 --> 00:03:23,240 Speaker 1: parking lot, a lot of ships waiting, and the rail 57 00:03:23,240 --> 00:03:27,000 Speaker 1: washouts could be pretty significant as well. Jason, I'd love 58 00:03:27,000 --> 00:03:29,520 Speaker 1: to get your sense of why so much of the 59 00:03:29,520 --> 00:03:34,560 Speaker 1: production of ethylene is based in Texas. Energy energy, energy, 60 00:03:35,160 --> 00:03:39,160 Speaker 1: back to oil and then more recently shale gas and 61 00:03:39,160 --> 00:03:42,800 Speaker 1: and uh the wave of expansion. Really, the US because 62 00:03:42,800 --> 00:03:46,360 Speaker 1: of gale gas, has become the world's plastic and ethylene hub. 63 00:03:46,360 --> 00:03:49,080 Speaker 1: I mean, we're at a moment where since two thousand, 64 00:03:49,400 --> 00:03:52,320 Speaker 1: about a hundred and seventy nine billion of capex new 65 00:03:52,360 --> 00:03:55,320 Speaker 1: projects have been announced and it's all driven by our 66 00:03:55,480 --> 00:03:59,840 Speaker 1: very low cost position. And that's because of shale gas. So, uh, 67 00:04:00,160 --> 00:04:02,880 Speaker 1: the supplies right there, and then you can ship, of 68 00:04:02,920 --> 00:04:06,280 Speaker 1: course in good times from there quite effectively the rest 69 00:04:06,280 --> 00:04:10,320 Speaker 1: of the world jack the companies that are specifically involved. 70 00:04:10,320 --> 00:04:13,720 Speaker 1: We've seen pictures of the Archema plant and so on 71 00:04:14,120 --> 00:04:20,359 Speaker 1: owned by out non US uh enterprises. What what kind 72 00:04:20,360 --> 00:04:24,280 Speaker 1: of sort of new manufacturing or news you know, equipment 73 00:04:24,320 --> 00:04:26,360 Speaker 1: is going to be necessary because I mean, if the 74 00:04:26,440 --> 00:04:29,159 Speaker 1: motors of the electric motors are out, aren't they going 75 00:04:29,200 --> 00:04:33,920 Speaker 1: to require rewiring? Yeah, that can happen. I mean it's 76 00:04:33,960 --> 00:04:35,919 Speaker 1: really not going to be clear until they get in 77 00:04:35,920 --> 00:04:38,640 Speaker 1: there and trying start these plants up what the problems 78 00:04:38,680 --> 00:04:42,080 Speaker 1: are at any Yeah, electoral problems historically have been at 79 00:04:42,120 --> 00:04:47,400 Speaker 1: the laid plants startups for months in past storms. You know, 80 00:04:47,680 --> 00:04:50,960 Speaker 1: not commonly, but it does happen. Um. But yeah, water 81 00:04:51,360 --> 00:04:55,680 Speaker 1: who knows where the water gets when it's a flood situation. So, um, 82 00:04:55,720 --> 00:05:01,640 Speaker 1: there's I mean, and it's contaminated water. Correct, Well, brackish 83 00:05:01,680 --> 00:05:04,839 Speaker 1: water is corrosive if it's uh you know if on 84 00:05:04,960 --> 00:05:07,560 Speaker 1: these plants around the coast, so the water would be brackish. 85 00:05:07,760 --> 00:05:09,800 Speaker 1: I don't know that it's contaminated. It just has salt 86 00:05:09,880 --> 00:05:13,400 Speaker 1: in it, which is not good for metal. Jason, I'd 87 00:05:13,440 --> 00:05:15,320 Speaker 1: love to get your sense and whether there's a precedent 88 00:05:15,400 --> 00:05:20,080 Speaker 1: for this type of disruption in the ethylene production industry, 89 00:05:20,240 --> 00:05:24,280 Speaker 1: going back to Trina Rita were really the the big 90 00:05:24,279 --> 00:05:27,359 Speaker 1: precedent and um, you go back to two thousand and five. 91 00:05:27,440 --> 00:05:30,520 Speaker 1: Now what's interesting is these companies and let's remember doubt 92 00:05:30,560 --> 00:05:32,840 Speaker 1: you pot merged today, so what I'm about to say 93 00:05:32,920 --> 00:05:35,360 Speaker 1: is even more true. But these are behemoth companies with 94 00:05:35,400 --> 00:05:38,320 Speaker 1: a lot of diversification. Um, when you go back to 95 00:05:38,440 --> 00:05:42,200 Speaker 1: the third quarterb oh five, um, Dow Chemical had only 96 00:05:42,360 --> 00:05:46,240 Speaker 1: a two negative impact on their volumes from the Katrina 97 00:05:46,279 --> 00:05:49,800 Speaker 1: and Arina Rita hurricanes. That just speaks to how hugely 98 00:05:49,800 --> 00:05:53,280 Speaker 1: diversity these companies are. But that's really the precedent. Um, 99 00:05:53,400 --> 00:05:56,560 Speaker 1: and again it kind of mutes what from an investor's perspective, 100 00:05:56,560 --> 00:05:59,520 Speaker 1: you might see uh, some of the company impacts, although 101 00:06:00,000 --> 00:06:02,880 Speaker 1: perhaps in chlor al kali maybe at old and UH 102 00:06:02,920 --> 00:06:05,680 Speaker 1: and maybe some of the industrial gases for the rebuilding 103 00:06:05,720 --> 00:06:08,440 Speaker 1: into thousand eighteen, the welding gases will see a little 104 00:06:08,440 --> 00:06:10,640 Speaker 1: bit of improvement in earnings from this. I want to 105 00:06:10,640 --> 00:06:13,159 Speaker 1: thank you both very much. Sorry, go ahead, Jack, you 106 00:06:13,200 --> 00:06:16,160 Speaker 1: got a final comment. Yeah, I was just going to 107 00:06:16,240 --> 00:06:18,960 Speaker 1: add that. Um. Some analyst Jeffreys in particular, is out 108 00:06:19,160 --> 00:06:22,320 Speaker 1: with a note this overnight saying, you know, it could 109 00:06:22,320 --> 00:06:26,560 Speaker 1: be until November until the petro chemical industry is you know, 110 00:06:26,600 --> 00:06:29,760 Speaker 1: reaches the pre hurricane level. So that's two months from now, 111 00:06:30,240 --> 00:06:33,719 Speaker 1: so that we could of course, nobody really knows, but 112 00:06:34,080 --> 00:06:37,640 Speaker 1: it could be a month long process. Here. Thanks very 113 00:06:37,720 --> 00:06:42,120 Speaker 1: much for joining us, gentlemen. Jason Miner, senior chemical global 114 00:06:42,160 --> 00:06:46,320 Speaker 1: chemicals analysts for Bloomberg Intelligence, and A Jackkaski here is 115 00:06:46,320 --> 00:06:50,440 Speaker 1: our chemical companies reporter for Bloomberg News. They're both reporting 116 00:06:50,520 --> 00:07:06,440 Speaker 1: from Houston. So it turns out pim fox that algorithms 117 00:07:06,480 --> 00:07:09,560 Speaker 1: get bored sometimes, uh, And it seems like perhaps in 118 00:07:09,640 --> 00:07:14,080 Speaker 1: this market where trading volumes are just sagging away, even 119 00:07:14,120 --> 00:07:17,600 Speaker 1: those computerized systems just can't seem to get their mojo back. 120 00:07:17,680 --> 00:07:20,080 Speaker 1: Matt Mainlee joins US now. He's managing director and equity 121 00:07:20,120 --> 00:07:23,440 Speaker 1: strategist at Miller, tay Back and Company. He is uh 122 00:07:23,720 --> 00:07:27,400 Speaker 1: speaking with us uh after writing a note earlier today 123 00:07:27,720 --> 00:07:29,400 Speaker 1: in which you say it's going to be a very 124 00:07:29,440 --> 00:07:33,400 Speaker 1: boring day in front of the long weekend. Um, you're right, 125 00:07:33,720 --> 00:07:36,440 Speaker 1: But I think that this is important because it's been 126 00:07:36,480 --> 00:07:38,520 Speaker 1: boring for a while and there have been these lulls 127 00:07:38,600 --> 00:07:40,800 Speaker 1: and the market has sort of either drifted along or 128 00:07:40,880 --> 00:07:44,200 Speaker 1: gone up. What do you see in your models that 129 00:07:44,560 --> 00:07:47,400 Speaker 1: is going to break this this sort of uh, this 130 00:07:47,480 --> 00:07:51,760 Speaker 1: sort of trend and push it in one direction or another. Well, 131 00:07:51,800 --> 00:07:54,200 Speaker 1: it's well, one thing is we we do have to 132 00:07:54,240 --> 00:07:57,080 Speaker 1: get past the kind of the late August adul drums 133 00:07:57,080 --> 00:07:59,600 Speaker 1: that we get every year, whether the Algals long before 134 00:07:59,600 --> 00:08:02,120 Speaker 1: the Apple were involved the markets that it's going to 135 00:08:02,160 --> 00:08:05,400 Speaker 1: be listless, uh, you know, late late in August. Uh. 136 00:08:05,440 --> 00:08:07,760 Speaker 1: So that's gonna be one thing. But more importantly, we're 137 00:08:07,760 --> 00:08:09,800 Speaker 1: gonna have to see what's gonna I think people you know, 138 00:08:09,840 --> 00:08:11,320 Speaker 1: there's gonna be a lot of focus. Of course, what's 139 00:08:11,320 --> 00:08:14,400 Speaker 1: gonna happen in Washington with the UH dead ceiling and 140 00:08:14,440 --> 00:08:17,240 Speaker 1: things like that. But we also have, of course, what 141 00:08:17,440 --> 00:08:20,640 Speaker 1: is the FED going to do on the UH, on 142 00:08:20,640 --> 00:08:23,200 Speaker 1: on drinking their balance sheet? And will that have an impact? 143 00:08:23,200 --> 00:08:25,160 Speaker 1: Because a lot of people are saying it's definitely gonna 144 00:08:25,160 --> 00:08:26,960 Speaker 1: do this, or it's definitely gonna do that, But we 145 00:08:27,120 --> 00:08:28,920 Speaker 1: but the most people and the smartest people. I think 146 00:08:28,920 --> 00:08:30,720 Speaker 1: you're saying, we don't really know what's gonna what had 147 00:08:30,720 --> 00:08:32,240 Speaker 1: happened with that. I think a lot of people are 148 00:08:32,240 --> 00:08:34,679 Speaker 1: sitting on our hands because of that. UM. That's an 149 00:08:34,679 --> 00:08:37,760 Speaker 1: interesting take, Matt, because when do you think that we're 150 00:08:37,800 --> 00:08:40,520 Speaker 1: actually going to get a sense of what the effect 151 00:08:40,559 --> 00:08:43,360 Speaker 1: will be? Because even if the FED announces some plan 152 00:08:43,440 --> 00:08:46,600 Speaker 1: and say September, which is the absolute earliest, and it's 153 00:08:46,600 --> 00:08:49,560 Speaker 1: more likely October, uh, we are going to see the 154 00:08:49,640 --> 00:08:53,680 Speaker 1: real impact for a while. Right, Well, yes, I mean 155 00:08:54,240 --> 00:08:57,160 Speaker 1: they can they We expect that they will tell us 156 00:08:57,200 --> 00:08:59,160 Speaker 1: when they're going to start doing. Some people say they 157 00:08:59,240 --> 00:09:01,720 Speaker 1: could start doing as early September, but I agree it's 158 00:09:01,760 --> 00:09:04,760 Speaker 1: something that that is probably gonna be October at the earliest. UM. 159 00:09:04,800 --> 00:09:07,559 Speaker 1: But there will be less liquidity in the system and 160 00:09:07,720 --> 00:09:11,080 Speaker 1: UH by definition, and people a little worried about that. 161 00:09:11,120 --> 00:09:14,720 Speaker 1: Now they're gonna go gradually, so that should be positive. 162 00:09:14,840 --> 00:09:16,360 Speaker 1: And I do think that the you know that the 163 00:09:16,400 --> 00:09:19,440 Speaker 1: market has uh, they've kind of signaled, and some of 164 00:09:19,440 --> 00:09:22,680 Speaker 1: these other global central bankers have been saying that if 165 00:09:22,720 --> 00:09:25,560 Speaker 1: things get majorlygue disrupted, though, they can step back on 166 00:09:25,600 --> 00:09:28,920 Speaker 1: the accelerator. But it's still it's been a key driver 167 00:09:29,040 --> 00:09:31,000 Speaker 1: to the markets in the last eight years. Not the 168 00:09:31,040 --> 00:09:33,560 Speaker 1: only driver, Bunny and stretch of the imagination. But with 169 00:09:33,559 --> 00:09:36,360 Speaker 1: with with liquidity going to be less plentiful, people are 170 00:09:36,400 --> 00:09:39,480 Speaker 1: worried about Matt. You're joining us from Boston, home to 171 00:09:39,520 --> 00:09:43,120 Speaker 1: Bloomberg one six one Boston, Newburyport, as well as thirteen 172 00:09:43,200 --> 00:09:46,160 Speaker 1: thirty metro Western and the South Shore. And I want 173 00:09:46,160 --> 00:09:50,120 Speaker 1: trick thoughts on the biotech industry, which has a great 174 00:09:50,160 --> 00:09:53,199 Speaker 1: presence in the area. Bluebird Bio for example, these stocks, 175 00:09:53,240 --> 00:09:55,440 Speaker 1: you know, you look at them every day. We're Bio 176 00:09:55,559 --> 00:09:58,480 Speaker 1: up another four and a half percent, Biogen moves higher, 177 00:09:58,559 --> 00:10:02,440 Speaker 1: Vertex Pharmaceuticals. What is the biotech industry tell you about 178 00:10:02,480 --> 00:10:06,000 Speaker 1: the market, Well, it's it's it's certainly a bullish, uh 179 00:10:06,559 --> 00:10:08,920 Speaker 1: bullish move in this group. I mean, we turned a 180 00:10:08,960 --> 00:10:10,640 Speaker 1: positive on the group back in the in the spring, 181 00:10:10,640 --> 00:10:13,319 Speaker 1: back in March, uh, and it kind of moved sideways 182 00:10:13,320 --> 00:10:15,160 Speaker 1: for a while, but it broke out very nicely. And 183 00:10:15,440 --> 00:10:18,480 Speaker 1: on a technical basis, it's had this great move. Uh. 184 00:10:18,800 --> 00:10:21,040 Speaker 1: It made a double bottom in two thousand and sixteen, 185 00:10:21,360 --> 00:10:23,320 Speaker 1: and then this year, after a little bit of rally, 186 00:10:23,360 --> 00:10:25,319 Speaker 1: it's sold back off but held its two under day 187 00:10:25,360 --> 00:10:27,880 Speaker 1: moving average, and since then it's been making It's made 188 00:10:27,880 --> 00:10:30,400 Speaker 1: three higher high sense then, so it's very very bullish 189 00:10:30,400 --> 00:10:32,600 Speaker 1: on a technical basis. And one of the things though, 190 00:10:32,600 --> 00:10:35,120 Speaker 1: and I think it's gonna be very important because some 191 00:10:35,160 --> 00:10:37,400 Speaker 1: of the innovations there on the fundamental side, things look 192 00:10:37,520 --> 00:10:39,800 Speaker 1: very very good. But people a little bit worried. Geez, 193 00:10:39,840 --> 00:10:41,520 Speaker 1: will we get a repeat of what happened in two 194 00:10:41,559 --> 00:10:44,080 Speaker 1: thousand and fifteen when the group has been rolling very 195 00:10:44,160 --> 00:10:46,920 Speaker 1: very strongly, Hillary Clinton came out and made comments about 196 00:10:47,320 --> 00:10:50,160 Speaker 1: drug prices and the group basically crashed if it felt 197 00:10:50,280 --> 00:10:54,560 Speaker 1: three the differences. There's a much different set up this time. 198 00:10:54,800 --> 00:10:57,400 Speaker 1: In two thousand and fifteen, the group had rallied eighty 199 00:10:57,840 --> 00:11:02,079 Speaker 1: percent over the previous fifteen months and wildly outperformed the SMP, 200 00:11:02,360 --> 00:11:04,920 Speaker 1: which is only up about seventeen percent. Over that time frame. 201 00:11:05,200 --> 00:11:07,200 Speaker 1: So what it is that gave so many people a 202 00:11:07,360 --> 00:11:10,000 Speaker 1: huge amount of conference confidence to add leverage to their 203 00:11:10,360 --> 00:11:13,520 Speaker 1: to their positions. So when the group rolled over, Uh, 204 00:11:13,800 --> 00:11:16,680 Speaker 1: it became much worse than otherwise there should have have 205 00:11:16,880 --> 00:11:19,640 Speaker 1: because the fundamentals hadn't really changed, but people had to 206 00:11:19,720 --> 00:11:22,640 Speaker 1: unwind their leverage. There was forced selling, you know, margin 207 00:11:22,679 --> 00:11:25,280 Speaker 1: calls and things like that. Right now, this rally has 208 00:11:25,360 --> 00:11:27,640 Speaker 1: been very good, but it hasn't been anything more than 209 00:11:27,640 --> 00:11:30,760 Speaker 1: the the SMP has been. It's had percent rally along 210 00:11:30,800 --> 00:11:34,920 Speaker 1: with a percent rally and the SMP, so we don't 211 00:11:34,960 --> 00:11:37,360 Speaker 1: shouldn't have the same kind of leverage. So there's no 212 00:11:37,400 --> 00:11:39,520 Speaker 1: guarantee the stock of the group can't go down, especially 213 00:11:39,559 --> 00:11:42,600 Speaker 1: if the broader market corrects. But we don't have that 214 00:11:42,679 --> 00:11:44,839 Speaker 1: leverage in there, So I don't I strongly believe that 215 00:11:44,840 --> 00:11:46,960 Speaker 1: people don't have to worry about the same kind of 216 00:11:47,160 --> 00:11:49,680 Speaker 1: disaster taking place at this time around. Uh, if the 217 00:11:49,679 --> 00:11:51,600 Speaker 1: market sells off a little bit that took place at 218 00:11:51,679 --> 00:11:54,479 Speaker 1: night and in two thousand fifteen, Matt, what a specific 219 00:11:54,559 --> 00:11:56,679 Speaker 1: sector do you think is most at risk of a 220 00:11:56,760 --> 00:12:01,240 Speaker 1: sell off? Well, I mean, you know, it's funny because 221 00:12:01,280 --> 00:12:03,439 Speaker 1: the one thing that the people keep pointing to is 222 00:12:03,440 --> 00:12:06,400 Speaker 1: in the energy stocks and and and how oil could 223 00:12:06,600 --> 00:12:08,240 Speaker 1: dip back down and it took forty two and tests 224 00:12:08,240 --> 00:12:10,640 Speaker 1: forty two again or even drop into the thirties. But 225 00:12:10,720 --> 00:12:12,920 Speaker 1: that group is, you know, it is pretty washed out 226 00:12:12,960 --> 00:12:15,400 Speaker 1: and and and so I would not look for that group. 227 00:12:15,600 --> 00:12:17,680 Speaker 1: The one group that that I do get a little 228 00:12:17,679 --> 00:12:20,120 Speaker 1: bit worried about. Of course, as a technology sector, the 229 00:12:20,160 --> 00:12:25,080 Speaker 1: facts have just had this great amount of uh I'm sorry, 230 00:12:25,080 --> 00:12:29,160 Speaker 1: obviously the great run this year, but the stock semiconductor 231 00:12:29,240 --> 00:12:31,480 Speaker 1: endixes things stalling out a little bit lately, and that's 232 00:12:31,480 --> 00:12:34,880 Speaker 1: been a great leadership group within the technology sector. So 233 00:12:35,080 --> 00:12:37,680 Speaker 1: if we see a you know, a rolling over of 234 00:12:37,840 --> 00:12:40,600 Speaker 1: the tech stocks or the semiconductor stocks, uh, and then 235 00:12:40,640 --> 00:12:42,760 Speaker 1: of course the thank stocks lose any kind of momentum 236 00:12:42,800 --> 00:12:45,320 Speaker 1: again uh, that could lead to the kind of at 237 00:12:45,360 --> 00:12:47,800 Speaker 1: least minor unwinding of leverage that some people have added 238 00:12:47,800 --> 00:12:50,280 Speaker 1: to their portfolios recently. And again I'm not saying we'll 239 00:12:50,280 --> 00:12:52,280 Speaker 1: see a complete crash in the group like we saw 240 00:12:52,440 --> 00:12:54,880 Speaker 1: this in the biotechs a couple of years ago, but 241 00:12:54,960 --> 00:12:57,520 Speaker 1: it could, you know, could leave the group vulnerable. If so, 242 00:12:57,600 --> 00:12:59,560 Speaker 1: keep an eye on those semiconductor stocks more so than 243 00:12:59,600 --> 00:13:02,440 Speaker 1: the fang. As we move forward, Matt, we keep hearing 244 00:13:02,480 --> 00:13:07,680 Speaker 1: all about the valuation, in other words, how expensive stocks are, 245 00:13:07,760 --> 00:13:11,440 Speaker 1: at least on a relative basis. Does that make any 246 00:13:11,440 --> 00:13:15,160 Speaker 1: sense in a market like this, Well, on a long 247 00:13:15,280 --> 00:13:18,679 Speaker 1: term basis, you know, evaluations do matter. I mean, it's funny, 248 00:13:18,720 --> 00:13:22,360 Speaker 1: how uh you know? I guess my My key point 249 00:13:22,400 --> 00:13:24,240 Speaker 1: is that if you've you've got a lot in the 250 00:13:24,240 --> 00:13:26,440 Speaker 1: stock market, you've had a great run here, that's great. 251 00:13:26,480 --> 00:13:28,880 Speaker 1: But the one thing is that people say they're afraid 252 00:13:28,880 --> 00:13:31,840 Speaker 1: they're gonna move miss the next move. I mean, there's 253 00:13:31,840 --> 00:13:33,160 Speaker 1: a lot of fear. And I can understand that with 254 00:13:33,200 --> 00:13:36,319 Speaker 1: institutional investors because they get measured on you know, every 255 00:13:36,440 --> 00:13:39,640 Speaker 1: quarter every year. But the individuals, it's like, hey, I've 256 00:13:39,640 --> 00:13:41,880 Speaker 1: had this great run since two thousand and nine, uh, 257 00:13:41,960 --> 00:13:44,800 Speaker 1: and do I really do I really have to worry 258 00:13:44,840 --> 00:13:47,200 Speaker 1: about missing the next five percent move? I guess. My 259 00:13:47,280 --> 00:13:49,839 Speaker 1: point is that on a long term basis, the market 260 00:13:49,880 --> 00:13:53,240 Speaker 1: should be fine, but most people do much better when 261 00:13:53,280 --> 00:13:56,800 Speaker 1: they're buying more when the market is inexpensive and cheap 262 00:13:57,280 --> 00:13:59,920 Speaker 1: and and oversold than they do when the market is 263 00:14:00,080 --> 00:14:02,720 Speaker 1: overbought and expensive, Like it is now. I mean there's 264 00:14:02,720 --> 00:14:05,240 Speaker 1: a reason that that the Warren Buffett has got his 265 00:14:05,240 --> 00:14:09,200 Speaker 1: biggest cast position ever he became a billionaire. But buying cheap, 266 00:14:09,320 --> 00:14:10,960 Speaker 1: I'm not saying it out of the stock market many 267 00:14:10,960 --> 00:14:13,960 Speaker 1: stretch of imagination, but you have a little bit. There's 268 00:14:13,960 --> 00:14:15,640 Speaker 1: nothing wrong with taking a few chips off the table, 269 00:14:15,679 --> 00:14:18,560 Speaker 1: so you have something if and when the market does correct, Matt, 270 00:14:18,760 --> 00:14:20,760 Speaker 1: real quick, the dollar. Do you think this is the 271 00:14:20,800 --> 00:14:22,600 Speaker 1: year's biggest pain trade, that we're going to see a 272 00:14:22,640 --> 00:14:27,680 Speaker 1: strengthening against all of the current short positions. The potential 273 00:14:27,800 --> 00:14:30,760 Speaker 1: is definitely there. We have with the d s I, 274 00:14:30,840 --> 00:14:33,920 Speaker 1: which is a daily sentiment index, with UH which is 275 00:14:33,960 --> 00:14:37,280 Speaker 1: a sentiment indicator that's very low only temper cent bulls. 276 00:14:37,400 --> 00:14:40,000 Speaker 1: And then plus, as you mentioned, the positioning everybody short. 277 00:14:40,080 --> 00:14:42,720 Speaker 1: The thing was just the zact opposite of what we 278 00:14:42,720 --> 00:14:44,520 Speaker 1: saw at the beginning of the year when everybody was long. 279 00:14:44,760 --> 00:14:46,840 Speaker 1: Now everybody's short. I think the pain trade in the 280 00:14:46,880 --> 00:14:48,200 Speaker 1: last four months of the year could be to the 281 00:14:48,280 --> 00:14:50,520 Speaker 1: upside in the dollar. Thank you very much for being 282 00:14:50,520 --> 00:14:53,520 Speaker 1: with us, Matt Maine. He is managing director and equity 283 00:14:53,600 --> 00:14:57,520 Speaker 1: strategist for Miller tay Back, joining us from Boston. He's 284 00:14:57,560 --> 00:15:12,280 Speaker 1: on site at the Boston Convention and Exhibition Center. Can 285 00:15:12,400 --> 00:15:16,440 Speaker 1: President Trump get very rapid action from Congress on emergency 286 00:15:16,560 --> 00:15:19,520 Speaker 1: funding for Texas? Here to tell us more is our 287 00:15:19,560 --> 00:15:23,760 Speaker 1: senior White House correspondent, Margaret Talive. She joins us from Washington, 288 00:15:23,800 --> 00:15:27,080 Speaker 1: and you can follow Margaret on Twitter at Margaret Tala. 289 00:15:27,240 --> 00:15:30,520 Speaker 1: That's t a l e V. Alright, Margaret, So what 290 00:15:30,560 --> 00:15:33,720 Speaker 1: are the chances that the build or when Congress comes back, 291 00:15:33,720 --> 00:15:35,320 Speaker 1: that we get a bill that includes all of this 292 00:15:35,400 --> 00:15:39,080 Speaker 1: emergency funding. I think the chances are very good. I mean, 293 00:15:39,360 --> 00:15:42,160 Speaker 1: with the caveats that anything can happen, and as we've 294 00:15:42,200 --> 00:15:45,400 Speaker 1: seen time and time again, unexpected drama has become injected 295 00:15:45,400 --> 00:15:47,880 Speaker 1: in some of these events. But look um, from the 296 00:15:47,880 --> 00:15:51,280 Speaker 1: White House's perspective, there is a real desire to not 297 00:15:51,440 --> 00:15:54,400 Speaker 1: have a debt limit crisis at the end of September, 298 00:15:54,440 --> 00:15:56,720 Speaker 1: to not have a debt limit crisis or a default 299 00:15:56,720 --> 00:15:59,640 Speaker 1: situation that can affect markets and blow up plans for 300 00:15:59,720 --> 00:16:03,480 Speaker 1: a x CUB plan. There is also this parallel request 301 00:16:03,800 --> 00:16:07,240 Speaker 1: to have a real debate over the government spending bill, 302 00:16:08,000 --> 00:16:10,880 Speaker 1: including yes, the wall, even if that fight gets deferred, 303 00:16:10,880 --> 00:16:13,240 Speaker 1: and yes, the possibility of a shutdown, even if it's 304 00:16:13,320 --> 00:16:17,000 Speaker 1: temporary shutdown that some fiscal conservatives want to be able 305 00:16:17,120 --> 00:16:20,640 Speaker 1: to decouple those events is something they'd like to do, 306 00:16:20,840 --> 00:16:25,640 Speaker 1: and everybody across the spectrum within the Republican Party as 307 00:16:25,640 --> 00:16:28,720 Speaker 1: well as Democrats, understands the need and wants to support 308 00:16:28,760 --> 00:16:31,760 Speaker 1: the need UH to cover you know, FEMA's bills in 309 00:16:31,880 --> 00:16:33,840 Speaker 1: the next few weeks. So the money doesn't right now 310 00:16:33,880 --> 00:16:35,920 Speaker 1: before the end of the fiscal year. So linking the 311 00:16:35,960 --> 00:16:39,360 Speaker 1: two UH in theory could be risky if it denied 312 00:16:39,640 --> 00:16:43,200 Speaker 1: UM the emergency money. But I think the calculation at 313 00:16:43,200 --> 00:16:45,320 Speaker 1: this point is going to be that this will be 314 00:16:45,320 --> 00:16:47,960 Speaker 1: an offer that the lawmakers can't refuse, and it gives 315 00:16:47,960 --> 00:16:51,440 Speaker 1: the ones who have constituencies that would be troubled by 316 00:16:51,440 --> 00:16:54,000 Speaker 1: the debt failing increased clean um some cover to do it. 317 00:16:54,320 --> 00:16:58,880 Speaker 1: So basically, this is shaming the more conservative side of 318 00:16:59,000 --> 00:17:03,120 Speaker 1: the GOP into passing a bill that they might otherwise 319 00:17:03,160 --> 00:17:05,399 Speaker 1: feel uncomfortable with because they can't go back to their 320 00:17:05,400 --> 00:17:08,160 Speaker 1: constituents and say, yeah, I voted against helping all those 321 00:17:08,160 --> 00:17:10,480 Speaker 1: people who are now homeless, those thousands and thousands of 322 00:17:10,480 --> 00:17:13,040 Speaker 1: people in shelters. Yeah, you could look at it a shamming. 323 00:17:13,119 --> 00:17:15,320 Speaker 1: You could look at this as political cover. You also 324 00:17:15,320 --> 00:17:17,680 Speaker 1: could look at it as sort of a tacit. Uh 325 00:17:17,920 --> 00:17:21,560 Speaker 1: promised to let them have the fight over government spending, 326 00:17:21,840 --> 00:17:24,679 Speaker 1: just not to attach it to paying debts that are 327 00:17:24,720 --> 00:17:28,679 Speaker 1: already incurred. Margaret, You know, I was looking recently at 328 00:17:28,720 --> 00:17:35,440 Speaker 1: renderings of the border wall that the president has been 329 00:17:35,480 --> 00:17:39,600 Speaker 1: speaking about, and uh, this set aside the issue of 330 00:17:39,600 --> 00:17:41,320 Speaker 1: whether it's a good thing or bad thing for just 331 00:17:41,359 --> 00:17:44,520 Speaker 1: a moment. But it struck me that building a wall 332 00:17:44,840 --> 00:17:47,439 Speaker 1: might is it possible that we could build those kinds 333 00:17:47,480 --> 00:17:50,960 Speaker 1: of projects to prevent against future catastrophes or at least 334 00:17:51,119 --> 00:17:55,720 Speaker 1: mitigate against uh, this kind of catastrophic flooding. Oh, you 335 00:17:55,800 --> 00:17:58,840 Speaker 1: were talking about a two for that would be a 336 00:17:58,880 --> 00:18:03,280 Speaker 1: border wall construction and as an emergency management preventative tactics 337 00:18:03,280 --> 00:18:06,520 Speaker 1: gone into politics. Right, this is amazing Well, or at 338 00:18:06,560 --> 00:18:08,760 Speaker 1: least in other words, I mean to kind of shift 339 00:18:08,800 --> 00:18:11,359 Speaker 1: the well seriously, to shift the focus. I maybe because 340 00:18:11,400 --> 00:18:13,960 Speaker 1: I mean, we're facing the potential of another hurricane that 341 00:18:14,080 --> 00:18:18,520 Speaker 1: is forming in the Eastern Atlantic, and many experts say that, 342 00:18:18,560 --> 00:18:22,040 Speaker 1: you know, we should expect more types of this extreme weather. 343 00:18:22,680 --> 00:18:25,159 Speaker 1: Why not, uh, you know, why not shift the attention. 344 00:18:25,160 --> 00:18:26,960 Speaker 1: They all right, we're gonna build this, but first we're 345 00:18:26,960 --> 00:18:30,240 Speaker 1: gonna build you know, these systems and infrastructure to prevent 346 00:18:30,240 --> 00:18:32,879 Speaker 1: against future catastrophes. Okay, I'm going to tell you that 347 00:18:32,920 --> 00:18:36,200 Speaker 1: I have not heard any sort of extensive substance scientific 348 00:18:36,200 --> 00:18:38,320 Speaker 1: debate about this, but that if we hear that there's 349 00:18:38,359 --> 00:18:40,720 Speaker 1: funding for an Army Corps of Engineer study to figure 350 00:18:40,760 --> 00:18:43,760 Speaker 1: out overlays for a border wall and for flood management, 351 00:18:44,240 --> 00:18:46,400 Speaker 1: calling you, you're gonna get the credit for this one. 352 00:18:46,480 --> 00:18:49,040 Speaker 1: But but I will say that President Trump has looked, 353 00:18:49,040 --> 00:18:51,520 Speaker 1: of course and putting solar panels on his conception for 354 00:18:51,560 --> 00:18:53,720 Speaker 1: a wall, has looked at a number of different ways 355 00:18:53,760 --> 00:18:57,359 Speaker 1: to uh both sell it rhetorically and politically, and to 356 00:18:58,080 --> 00:19:00,640 Speaker 1: try to come up with funding macan isms that could 357 00:19:00,640 --> 00:19:02,720 Speaker 1: in theory work or at least keep the debate alive. 358 00:19:02,760 --> 00:19:05,479 Speaker 1: I would say nothing is off the table in this debate. 359 00:19:05,560 --> 00:19:08,360 Speaker 1: But for now, this administration has decided that the one 360 00:19:08,359 --> 00:19:10,159 Speaker 1: thing they'd like to take off the table is this 361 00:19:10,200 --> 00:19:12,320 Speaker 1: debate over the debt limit, over the debt ceiling. And 362 00:19:12,359 --> 00:19:14,840 Speaker 1: they think I think that they think, and we'll know, 363 00:19:15,400 --> 00:19:18,959 Speaker 1: uh perhaps later today that this that the coupling of 364 00:19:19,000 --> 00:19:22,080 Speaker 1: that with the emergency FEMA and s b A assistance, 365 00:19:22,119 --> 00:19:24,679 Speaker 1: at least just to patch through the fiscal year is uh, 366 00:19:25,200 --> 00:19:27,479 Speaker 1: maybe the smartest way to do it. Margaret, I'd love 367 00:19:27,480 --> 00:19:29,879 Speaker 1: to you to take a little bit bigger picture of 368 00:19:29,920 --> 00:19:33,600 Speaker 1: view on the GOP and the mood right now in 369 00:19:33,960 --> 00:19:36,800 Speaker 1: Washington and just get a sense of as we move 370 00:19:36,880 --> 00:19:39,760 Speaker 1: beyond the healthcare debate and towards something that is much 371 00:19:39,760 --> 00:19:42,280 Speaker 1: more comfortable for everybody within the g OP, which is 372 00:19:42,320 --> 00:19:47,120 Speaker 1: tax reform. Have have things gotten less acrimonious well over 373 00:19:47,160 --> 00:19:50,680 Speaker 1: the summer, No, they've gotten more acrimonious, and something that 374 00:19:51,280 --> 00:19:55,520 Speaker 1: that should be easier than healthcare, tax reform has complexities 375 00:19:55,600 --> 00:19:57,680 Speaker 1: of its own, which we're going to see emerge. That's 376 00:19:57,680 --> 00:20:00,399 Speaker 1: part of the reason why the Trump administration is looking 377 00:20:00,440 --> 00:20:03,240 Speaker 1: for ways again to at least take the death healing 378 00:20:03,240 --> 00:20:05,520 Speaker 1: fight out of the way and let this be a 379 00:20:05,560 --> 00:20:08,879 Speaker 1: fight over government spending. But look, the earlier plans for 380 00:20:09,000 --> 00:20:14,320 Speaker 1: broad stroke tax reform, you know, have shrunk in terms 381 00:20:14,359 --> 00:20:17,880 Speaker 1: of ambition, so that the must pass situation now really 382 00:20:17,960 --> 00:20:20,680 Speaker 1: is a tax cut as far as the Republican Party 383 00:20:20,720 --> 00:20:24,280 Speaker 1: is concerned. And there are divisions within the Republican Party 384 00:20:24,400 --> 00:20:27,080 Speaker 1: about those who think that uh, any cuts have to 385 00:20:27,119 --> 00:20:29,280 Speaker 1: be offset, how are they going to be offset? Uh? 386 00:20:29,520 --> 00:20:32,520 Speaker 1: Is the Trump administration and the Congression leadership going to 387 00:20:32,520 --> 00:20:36,440 Speaker 1: propose tax increases on the very wealthy or no tax cut? 388 00:20:36,800 --> 00:20:39,639 Speaker 1: Uh for the wealthy? What are the thresholds going to be? 389 00:20:39,680 --> 00:20:42,000 Speaker 1: What's the size of the middle class tax cut? What's 390 00:20:42,040 --> 00:20:45,240 Speaker 1: more important? Middle class tax cuts or the corporate tax cut? 391 00:20:45,600 --> 00:20:48,760 Speaker 1: Can President Trump live with something that's uh, not a 392 00:20:48,800 --> 00:20:51,320 Speaker 1: fift cut, but something in the mid twenties. These are 393 00:20:51,359 --> 00:20:54,359 Speaker 1: all questions that the White House has not answered because 394 00:20:54,359 --> 00:20:58,119 Speaker 1: they haven't put details to paper, and that um converse 395 00:20:58,119 --> 00:21:00,320 Speaker 1: hasn't answered because they've been gone for several weeks. All 396 00:21:00,359 --> 00:21:01,920 Speaker 1: of this will come to the four in the next 397 00:21:01,960 --> 00:21:05,080 Speaker 1: couple of weeks as lawmakers come back. Margaret Tellivan, thank 398 00:21:05,080 --> 00:21:06,680 Speaker 1: you so much for joining us, and I really hope 399 00:21:06,720 --> 00:21:09,720 Speaker 1: that you can have some quality time off over this 400 00:21:09,840 --> 00:21:25,120 Speaker 1: long weekend. Shares of General Motors are up more than 401 00:21:25,160 --> 00:21:28,159 Speaker 1: two and a quarter percent, as other shares of Ford Motor. 402 00:21:28,240 --> 00:21:31,040 Speaker 1: Chrysler shares are up nearly five percent. What does this 403 00:21:31,119 --> 00:21:34,520 Speaker 1: tell us about the automobile industry and August auto sales? 404 00:21:34,840 --> 00:21:37,800 Speaker 1: We'll here to answer that question. Is Jessica Caldwell, executive 405 00:21:37,800 --> 00:21:41,159 Speaker 1: director of industry analysis for Edmunds dot Com, joining us 406 00:21:41,160 --> 00:21:45,280 Speaker 1: from Santa Monica, California. Jessica, thank you for being with us. 407 00:21:45,600 --> 00:21:51,160 Speaker 1: Give us your view of today's report for August automobile sales. Yeah, 408 00:21:51,200 --> 00:21:53,200 Speaker 1: I was looking a little disappointing, to be quite honest. 409 00:21:53,240 --> 00:21:56,200 Speaker 1: We thought August would be the first month in seen 410 00:21:56,240 --> 00:21:59,760 Speaker 1: that can possibly be a month in in but it 411 00:21:59,800 --> 00:22:02,280 Speaker 1: does look like that's going to be the case. I 412 00:22:02,320 --> 00:22:04,680 Speaker 1: think a lot of sales were hampered by the last 413 00:22:04,720 --> 00:22:08,080 Speaker 1: week with Hurricane Harvey, especially for brands like Ford, who 414 00:22:08,160 --> 00:22:11,400 Speaker 1: reported a decrease of two point one per cent um. 415 00:22:11,440 --> 00:22:13,600 Speaker 1: But I think overall it's it's a little all over 416 00:22:13,640 --> 00:22:15,159 Speaker 1: the place. But I would say I would sum it 417 00:22:15,240 --> 00:22:18,960 Speaker 1: up with the word disappointing, Jessica. You know, as PIM 418 00:22:19,040 --> 00:22:21,600 Speaker 1: was saying, shares her up and I'm wondering how much 419 00:22:21,960 --> 00:22:26,240 Speaker 1: investors are looking beyond the disappointing numbers, saying, you know what, 420 00:22:26,480 --> 00:22:29,600 Speaker 1: give them some slack because Texas is a huge market 421 00:22:29,640 --> 00:22:31,359 Speaker 1: and it was basically all but shut down in the 422 00:22:31,400 --> 00:22:33,680 Speaker 1: past in the last week of the month, and then 423 00:22:33,720 --> 00:22:36,440 Speaker 1: looking ahead, you're going to see all of these sales 424 00:22:36,440 --> 00:22:39,120 Speaker 1: to people who lost their cars. It's going to actually 425 00:22:39,240 --> 00:22:41,240 Speaker 1: end up being kind of a lifeline for some of 426 00:22:41,240 --> 00:22:43,680 Speaker 1: these companies. What do you say to that. Yeah, I 427 00:22:43,680 --> 00:22:45,879 Speaker 1: mean that's pretty much exactly right. And I would imagine 428 00:22:45,880 --> 00:22:47,280 Speaker 1: why there is a bit of a rally because we 429 00:22:47,280 --> 00:22:51,520 Speaker 1: would expect to see replacement demand really fulfill in the 430 00:22:52,200 --> 00:22:54,879 Speaker 1: rest of sen So I think that that is is 431 00:22:54,920 --> 00:22:57,240 Speaker 1: certainly going to happen. And it seems as if from 432 00:22:57,280 --> 00:22:59,760 Speaker 1: what I'm hearing in UM from Houston dealers is that 433 00:23:00,119 --> 00:23:02,119 Speaker 1: a lot of the inventory is not as effective as 434 00:23:02,160 --> 00:23:04,760 Speaker 1: people think it is. So those trucks and those cars 435 00:23:04,760 --> 00:23:08,000 Speaker 1: will be available for people who may have lost UM 436 00:23:08,240 --> 00:23:10,439 Speaker 1: during the hurricane. And we saw this with other storms 437 00:23:10,480 --> 00:23:12,679 Speaker 1: like Hurricanes Andy for instance, we saw a big boost 438 00:23:12,720 --> 00:23:15,320 Speaker 1: auto cells for the rest of the year. I'm wondering, 439 00:23:15,359 --> 00:23:20,920 Speaker 1: do you think this will also boost used car sale values? UM? 440 00:23:20,920 --> 00:23:23,760 Speaker 1: Probably so. UM. I would imagine Texas is a is 441 00:23:23,800 --> 00:23:25,360 Speaker 1: a pretty big used car state. They do a high 442 00:23:25,400 --> 00:23:28,080 Speaker 1: percentage of used vehicles and used it as a bit 443 00:23:28,119 --> 00:23:30,439 Speaker 1: tricky because there is a lot of demand for you know, 444 00:23:30,440 --> 00:23:32,480 Speaker 1: pickup trucks, and you know Texas has a lot of 445 00:23:32,520 --> 00:23:35,400 Speaker 1: pickup trucks. That they're selling UM, So I think that 446 00:23:35,400 --> 00:23:38,639 Speaker 1: that would probably put more pressure on US prices, particularly 447 00:23:38,680 --> 00:23:41,199 Speaker 1: for trucks and SUVs, because there is a bit of 448 00:23:41,280 --> 00:23:45,560 Speaker 1: a scarcity in those segments. What makes the Texas automobile 449 00:23:45,640 --> 00:23:51,040 Speaker 1: market different from perhaps the national market, Well, I think 450 00:23:51,080 --> 00:23:53,719 Speaker 1: that Texas, um, you know, it's it's a it's a 451 00:23:53,760 --> 00:23:55,919 Speaker 1: big open space. So these people are going to need 452 00:23:55,960 --> 00:23:58,920 Speaker 1: cars because not as if it's a disaster is hit 453 00:23:58,920 --> 00:24:01,840 Speaker 1: in a place where public trainsportation is something that people 454 00:24:01,840 --> 00:24:03,560 Speaker 1: could rely on in the interim. A lot of these 455 00:24:03,560 --> 00:24:06,560 Speaker 1: folks they're gonna need cars pretty much, you know, right away, 456 00:24:06,600 --> 00:24:09,280 Speaker 1: to to continue their lives. So I think that that's 457 00:24:09,320 --> 00:24:11,639 Speaker 1: probably makes it a little bit different. And they just 458 00:24:11,680 --> 00:24:15,080 Speaker 1: tend to they tend to buy more trucks, more SUVs, 459 00:24:15,240 --> 00:24:19,080 Speaker 1: so those profit rich vehicles for for automakers are gonna 460 00:24:19,080 --> 00:24:20,760 Speaker 1: make a lot more money selling the F one fifty 461 00:24:20,800 --> 00:24:23,200 Speaker 1: than they would a for Fiesta. So I think that 462 00:24:23,240 --> 00:24:25,480 Speaker 1: makes it a you know, right market for these these 463 00:24:25,480 --> 00:24:28,000 Speaker 1: auto companies. Jessica, do you have any sense of how 464 00:24:28,000 --> 00:24:31,199 Speaker 1: many cars, how many vehicles in general, were destroyed in 465 00:24:31,480 --> 00:24:35,280 Speaker 1: the flooding and what type of volumes that would mean 466 00:24:35,359 --> 00:24:39,919 Speaker 1: for companies like Forward. Yeah. I mean it's hard to say, um, 467 00:24:39,920 --> 00:24:41,960 Speaker 1: because it does seem as if, you know, we did 468 00:24:41,960 --> 00:24:44,280 Speaker 1: some estimates, Um, but some of the reports that we're 469 00:24:44,280 --> 00:24:46,320 Speaker 1: hearing is that, you know, the damage to cars was 470 00:24:46,320 --> 00:24:48,760 Speaker 1: perhaps not as great as as you know, it feared 471 00:24:48,760 --> 00:24:50,320 Speaker 1: in the beginning of the week or you know, the 472 00:24:50,359 --> 00:24:52,040 Speaker 1: beginning of the storm and we start to realize, wow, 473 00:24:52,080 --> 00:24:54,920 Speaker 1: this is getting really bad. But for someone like Floor, 474 00:24:55,040 --> 00:24:58,399 Speaker 1: Texas is their their number one market, so getting these uh, 475 00:24:58,520 --> 00:25:02,280 Speaker 1: you know, these vehicles to dealers is probably going to be, 476 00:25:02,520 --> 00:25:04,800 Speaker 1: you know, a top priority for the company moving forward. 477 00:25:04,840 --> 00:25:06,480 Speaker 1: It's you know, it's a it's a big money state 478 00:25:06,520 --> 00:25:09,800 Speaker 1: for them, Jessica. In today's non farm payroll report, we 479 00:25:09,920 --> 00:25:12,840 Speaker 1: learned that about thirty six thousand jobs were added to 480 00:25:12,840 --> 00:25:16,640 Speaker 1: the manufacturing sector, and more than ten thousand of those 481 00:25:16,720 --> 00:25:20,400 Speaker 1: jobs were in the automobile industry. Does that indicate that 482 00:25:20,480 --> 00:25:26,120 Speaker 1: the auto manufacturers will start ramping up production? M Um. 483 00:25:26,160 --> 00:25:28,800 Speaker 1: I think that's probably still tentative. I mean, inventory numbers 484 00:25:28,800 --> 00:25:31,040 Speaker 1: look really high, So not only our inventory numbers high, 485 00:25:31,280 --> 00:25:34,240 Speaker 1: but also the amount of time cars sit on dealership 486 00:25:34,320 --> 00:25:37,720 Speaker 1: lots that's been mounting all through seen. Um. I think 487 00:25:37,720 --> 00:25:41,520 Speaker 1: that there probably is pockets of inventor or of manufacturing 488 00:25:41,520 --> 00:25:44,640 Speaker 1: that needs to be addressed, especially as it relates to UM, 489 00:25:44,680 --> 00:25:47,000 Speaker 1: you know, new features like autonomous features, all, you know, 490 00:25:47,000 --> 00:25:49,560 Speaker 1: all of that sector. UM. But it seems as if 491 00:25:49,880 --> 00:25:53,560 Speaker 1: inventory for now is is doing okay. But there may 492 00:25:53,560 --> 00:25:56,520 Speaker 1: be pockets, you know, as we look to replace damaged 493 00:25:56,640 --> 00:25:59,679 Speaker 1: cars in Texas, Louisiana those areas, there maybe a bit 494 00:25:59,720 --> 00:26:01,600 Speaker 1: of a ramp up in production, but I'd say that 495 00:26:01,600 --> 00:26:04,399 Speaker 1: that's probably pretty tentative at this point. Jessica, I know 496 00:26:04,480 --> 00:26:07,159 Speaker 1: this may be a sideline, but I'm wondering if electric 497 00:26:07,240 --> 00:26:12,040 Speaker 1: and hybrid vehicles will be hurt by the publicity related 498 00:26:12,080 --> 00:26:15,639 Speaker 1: to Hurricane Harvey. Because clearly you might be able to start, 499 00:26:15,800 --> 00:26:18,520 Speaker 1: you know, a fossil fuel vehicle, but trying to get 500 00:26:18,520 --> 00:26:22,720 Speaker 1: an electric vehicle started when everything is wet, that's not 501 00:26:22,760 --> 00:26:26,879 Speaker 1: necessarily going to be an easy challenge. Yeah. Yeah, I 502 00:26:26,880 --> 00:26:29,880 Speaker 1: know what you're saying. Definitely, um, probably not. I mean, 503 00:26:29,920 --> 00:26:31,879 Speaker 1: I think when you look at the you know, the 504 00:26:31,920 --> 00:26:34,719 Speaker 1: electric vehicle like PEP, you look at pure electric vehicles 505 00:26:34,760 --> 00:26:36,680 Speaker 1: about her electric they make up blessed in one person 506 00:26:36,720 --> 00:26:38,680 Speaker 1: in the market about point six percent this year. So 507 00:26:38,720 --> 00:26:40,400 Speaker 1: I don't think you're necessarily going to see a big 508 00:26:40,480 --> 00:26:43,720 Speaker 1: hit a fallout from folks that are you know, saying 509 00:26:43,960 --> 00:26:46,640 Speaker 1: maybe not. Um. I think people that like electric they're 510 00:26:46,720 --> 00:26:49,480 Speaker 1: you know, they're fairly either you know, motivated by some 511 00:26:49,520 --> 00:26:51,200 Speaker 1: of the price or they're you know, they're they're die 512 00:26:51,240 --> 00:26:53,120 Speaker 1: hard in terms of, you know, that's what they want. 513 00:26:53,200 --> 00:26:55,560 Speaker 1: So I would imagine that any any effects would be 514 00:26:55,600 --> 00:26:59,879 Speaker 1: pretty pretty small. The effects of higher gasoline prices, we 515 00:27:00,080 --> 00:27:03,560 Speaker 1: know that they may be temporary because of the output 516 00:27:03,880 --> 00:27:07,720 Speaker 1: constraints from refineries in the Gulf region. What will that 517 00:27:07,840 --> 00:27:10,920 Speaker 1: do to drivers, uh, sort of driving on the and 518 00:27:11,000 --> 00:27:13,840 Speaker 1: the sales outlook, Yeah, it's gonna be a bit of 519 00:27:13,880 --> 00:27:15,679 Speaker 1: a shock for folks because I think that we've been 520 00:27:15,760 --> 00:27:18,160 Speaker 1: you so used to low gas prices for so long. 521 00:27:18,440 --> 00:27:20,960 Speaker 1: I don't think it's necessarily going to change the Uh, 522 00:27:21,200 --> 00:27:22,960 Speaker 1: people that need to buy a car that you know, 523 00:27:22,960 --> 00:27:24,480 Speaker 1: had planned to buy a car for the rest of 524 00:27:24,520 --> 00:27:27,679 Speaker 1: the year. Um, you could possibly see shifts and what 525 00:27:27,760 --> 00:27:30,240 Speaker 1: people buy, I would imagine, not just because of the 526 00:27:30,280 --> 00:27:33,719 Speaker 1: shift towards crossovers, but crossovers a lot more fuel efficient 527 00:27:33,720 --> 00:27:35,840 Speaker 1: than they were than the the SUVs of the past. 528 00:27:36,200 --> 00:27:38,440 Speaker 1: So I think people are willing to accept that difference 529 00:27:38,480 --> 00:27:41,560 Speaker 1: in in fuel economy changes. So I think that it 530 00:27:41,600 --> 00:27:43,920 Speaker 1: could put it, you know, in terms hamper or made 531 00:27:43,920 --> 00:27:46,640 Speaker 1: delay some purchases, um you know, depending on how long 532 00:27:46,720 --> 00:27:49,720 Speaker 1: really the gas price spikes um uh you know is 533 00:27:49,720 --> 00:27:51,760 Speaker 1: for I think when you see temporary, when people see 534 00:27:51,800 --> 00:27:55,199 Speaker 1: temporary expected spikes, it doesn't really change the purchasing behavior. 535 00:27:55,240 --> 00:27:58,920 Speaker 1: I think gas shock will start to change people's purposes 536 00:27:58,920 --> 00:28:01,879 Speaker 1: behavior after an extended period like six months. That's kind 537 00:28:01,880 --> 00:28:03,320 Speaker 1: of what we saw in two thousand and eight when 538 00:28:03,359 --> 00:28:05,800 Speaker 1: gas prices got you know, really out of control during 539 00:28:05,840 --> 00:28:09,680 Speaker 1: the spring and summertime. Well, other equipment makers see better 540 00:28:09,720 --> 00:28:12,840 Speaker 1: times ahead because of all the repairs that will need 541 00:28:12,880 --> 00:28:18,080 Speaker 1: to be made for these automobiles, likely especially um you know, 542 00:28:18,160 --> 00:28:20,720 Speaker 1: part suppliers. I think that there could be um you know, 543 00:28:20,800 --> 00:28:22,760 Speaker 1: for those vehicles that are able to be salvage. Of course, 544 00:28:22,800 --> 00:28:24,480 Speaker 1: that's a big question in terms of what can be 545 00:28:24,520 --> 00:28:27,000 Speaker 1: saved and what cannot be saved. Um. But I think 546 00:28:27,160 --> 00:28:30,280 Speaker 1: replacement parts um you know, trying to to fix some 547 00:28:30,359 --> 00:28:33,560 Speaker 1: of these cars, um is you know, could see a boost. 548 00:28:33,720 --> 00:28:35,159 Speaker 1: I think there's a lot of questions because of all 549 00:28:35,160 --> 00:28:38,240 Speaker 1: the electric componentry now in cars of how much can really, 550 00:28:38,320 --> 00:28:40,880 Speaker 1: you know, be saved and if they should be so. 551 00:28:40,920 --> 00:28:43,040 Speaker 1: I think there probably are a lot of questions around 552 00:28:43,120 --> 00:28:46,600 Speaker 1: that right now. Thank you very much. Jessica Caldwell's executive 553 00:28:46,640 --> 00:28:50,280 Speaker 1: director of industry analysis for Edmunds dot com, joining us 554 00:28:50,320 --> 00:28:55,520 Speaker 1: from Santa Monica. Thanks for listening to the Bloomberg P 555 00:28:55,640 --> 00:28:58,640 Speaker 1: and L podcast. You can subscribe and listen to interviews 556 00:28:58,640 --> 00:29:02,720 Speaker 1: at Apple Podcasts, SoundCloud, or whatever podcast platform you prefer. 557 00:29:03,120 --> 00:29:06,680 Speaker 1: I'm pim Fox. I'm on Twitter at pim Fox. I'm 558 00:29:06,720 --> 00:29:10,000 Speaker 1: on Twitter at Lisa Abramo wits one. Before the podcast, 559 00:29:10,040 --> 00:29:12,640 Speaker 1: you can always catch us worldwide on Bloomberg Radio