WEBVTT - Surveillance: Tesla 4Q Is A Big Question Mark, Johnson Says 0:00:02.600 --> 0:00:13.800 Yeah, Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene Jailey. 0:00:13.960 --> 0:00:17.560 We bring you insight from the best in economics, finance, investment, 0:00:18.000 --> 0:00:23.520 and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 0:00:23.600 --> 0:00:32.479 Bloomberg dot Com, and of course on the Bloomberg Big 0:00:32.520 --> 0:00:36.400 Big move from Testa. Tom within the reg your reporting 0:00:36.440 --> 0:00:40.640 it correctly. Others are saying it's it's surged. Come on, 0:00:40.720 --> 0:00:43.480 it's it's back to the top of its range. Absolutely 0:00:43.520 --> 0:00:47.599 crushed estimates though, yes, the third prophet in its history. UM, 0:00:47.600 --> 0:00:50.040 I think on a quarterly basis. Gordon Johnson joining US 0:00:50.040 --> 0:00:54.240 now Vertical Group Managing director an analyst. Gordon, your view 0:00:54.240 --> 0:00:59.320 on this company on whether these numbers accurately reflect the 0:00:59.440 --> 0:01:02.800 company and it positions this company is in right now, Yeah, 0:01:02.840 --> 0:01:05.080 we don't think so. And what we want to highlight 0:01:05.200 --> 0:01:07.959 is that, you know, they essentially started putting the Model 0:01:08.000 --> 0:01:10.839 three out there. They opened reservations up in twenty sixteen. 0:01:10.880 --> 0:01:13.160 The promise then was twenty seven and a half thousand 0:01:13.200 --> 0:01:16.959 dollar car um fully autonomous. You mean you climbing the 0:01:16.959 --> 0:01:19.520 back seat, drive coast to coast, sleeping, and you'd have 0:01:19.560 --> 0:01:21.760 free supercharging. None of those things are true. But on 0:01:21.800 --> 0:01:24.360 that promise in twenty sixteen, they got a bunch of reservations. 0:01:24.520 --> 0:01:26.720 We believe they pulled those reservations into two Q and 0:01:26.760 --> 0:01:28.800 three Q and that's the numbers look great. We don't 0:01:28.800 --> 0:01:31.200 think they're repeatable. UM So we think four Q is 0:01:31.200 --> 0:01:34.000 a big, big um question mark and we think it's 0:01:34.000 --> 0:01:36.360 going to prove negative. We're we're we're more confident in 0:01:36.360 --> 0:01:38.560 the short than we've ever been. So you've come on 0:01:38.560 --> 0:01:40.399 my show, come on this show many many times. You've 0:01:40.400 --> 0:01:43.319 been very outspoken about your coal, which is a cell 0:01:43.520 --> 0:01:46.000 on this stalk. The cash flow position, though it looks 0:01:46.000 --> 0:01:48.080 more positive now than it has done for quite a while, 0:01:48.480 --> 0:01:50.560 um Gold, did you think they're gonna have to raise capital? 0:01:51.000 --> 0:01:52.720 It doesn't look like they're gonna have to raise capital, 0:01:52.760 --> 0:01:54.240 and that was one of the key positives. Clearly the 0:01:54.320 --> 0:01:56.160 numbers were good. Uh, it doesn't look like they're gonna 0:01:56.160 --> 0:01:57.960 have to raise capital. But I think a couple of 0:01:58.040 --> 0:01:59.640 key questions were made. We need to see the tank 0:01:59.680 --> 0:02:02.440 Q think about this. Their DNA depreciation amortization was up 0:02:02.440 --> 0:02:05.360 only five percent, despite the fact that they advertized their 0:02:05.360 --> 0:02:07.840 tooling costs on a per unit basis and their productions 0:02:07.920 --> 0:02:10.639 up fifty so that doesn't pass the smell test. This 0:02:10.720 --> 0:02:13.320 is really important and this goes to just breaking all 0:02:13.320 --> 0:02:16.440 that Vertical does in terms of acute research. You're gonna 0:02:16.440 --> 0:02:19.480 wait for the quarterly statement, which I'm gonna guess is 0:02:19.520 --> 0:02:23.120 thirty to sixties single space boring pages, where I would 0:02:23.160 --> 0:02:25.880 not often John Tuck, John Ferroll, John Tucker would not 0:02:25.919 --> 0:02:27.640 off as well, what are you going to look for 0:02:27.800 --> 0:02:33.640 in the ten Q about manufacturing processes? Yes, so I 0:02:33.680 --> 0:02:35.760 think that's a very good question. One other thing, though, 0:02:35.760 --> 0:02:37.640 I wanted to highlight their s g n A was 0:02:37.720 --> 0:02:40.360 down despite the fact that the unit deliveries are up 0:02:40.360 --> 0:02:42.600 a hundred and five percent. They opened four new stores 0:02:42.600 --> 0:02:45.680 and forty four new superchargers. So we need to understand 0:02:46.120 --> 0:02:49.240 how their SGNA is dropping, i e. How are they 0:02:49.280 --> 0:02:52.760 basically paying less to their workers despite the fact that 0:02:52.760 --> 0:02:54.720 they're ramping up all these new facilities. We don't know 0:02:54.760 --> 0:02:56.800 the ansis critical because we don't want, we don't need. 0:02:56.919 --> 0:03:02.880 Mr musk dalical. But are you suggesting malfeasance or is 0:03:02.880 --> 0:03:06.520 this just the normal debate that any major accounting firm 0:03:06.520 --> 0:03:09.760 would have about accounting. Well, we think that there's definitely 0:03:09.840 --> 0:03:12.799 some accounting shenanigans going on. Um, if you go back 0:03:12.800 --> 0:03:15.440 to the last quarter they had a profit Q three 0:03:15.520 --> 0:03:17.880 of twenty I think it was sixteen, and you look 0:03:17.919 --> 0:03:20.360 at that quarterly report, they were they were guiding to 0:03:20.440 --> 0:03:23.720 a profit thereafter and if you go go to the 0:03:23.800 --> 0:03:26.280 last time they reported a profit, their profits then after 0:03:26.320 --> 0:03:29.640 that quarter went significantly negative. Listen, they did a bunch 0:03:29.639 --> 0:03:32.280 of things to pull forward demand into Q three. They 0:03:32.360 --> 0:03:35.960 offered free supercharging, They opened up their Freemont facility to 0:03:36.000 --> 0:03:39.040 buy cars, They did discounting, etcetera. We gotta rip John. 0:03:39.040 --> 0:03:41.760 This is really important because the word shenanigans goes back 0:03:41.760 --> 0:03:45.600 to Howard Schille. It's like a famous word in American counting. 0:03:45.600 --> 0:03:48.320 I don't know if that's when when we used that 0:03:48.360 --> 0:03:52.600 word shenanigans. You're not saying anything untoward is going going. Yes, 0:03:53.040 --> 0:03:54.640 we don't want to go as far as to say that, 0:03:54.840 --> 0:03:58.040 but we do believe that, for instance, their services and 0:03:58.040 --> 0:04:01.600 other division margins are negative thirty five percent. Why is that? 0:04:01.640 --> 0:04:03.520 Elon must said a few quarters ago that that was 0:04:04.600 --> 0:04:07.040 a major firms are in them writers. They got some 0:04:07.160 --> 0:04:09.680 local shop out of Palm Dell. Which is it. It's 0:04:09.680 --> 0:04:12.200 price price Waterhouse Coopers. But one thing go highlight. There 0:04:12.200 --> 0:04:14.800 was an l A Times article last week that stated 0:04:15.000 --> 0:04:18.200 that they were taking employee costs and taking those out 0:04:18.240 --> 0:04:20.960 of cost a good soul and capitalizing them. So this 0:04:21.000 --> 0:04:23.640 isn't just us saying this. That is a respectable newspaper 0:04:23.720 --> 0:04:28.600 essentially alleging accounting impropriety. Fascinating stuff and golden. I'm sure 0:04:28.640 --> 0:04:30.200 we'll have to get you back on and of course 0:04:30.200 --> 0:04:32.520 we'll have to try and get a comment from the 0:04:32.560 --> 0:04:35.839 company as well. Going to Johnson Vertical Group managing director 0:04:36.080 --> 0:04:39.080 and analyst. But he just said, is so important John? 0:04:39.520 --> 0:04:41.560 Can we keep john You're in charge of the show. 0:04:41.600 --> 0:04:44.120 Can we keep Mr Johnson around? You can to do 0:04:44.279 --> 0:04:46.960 five things we need to know about accounting because what 0:04:47.040 --> 0:04:50.400 he just said is really really critical, really important. Is 0:04:50.440 --> 0:04:52.120 just believed in the street or do you feel like 0:04:52.160 --> 0:04:55.359 you're alone on the idea of shenanigans? I feel like 0:04:55.400 --> 0:04:58.040 I'm alone. One other thing I'll highlight that it really 0:04:58.080 --> 0:05:00.279 gets to the core and really upsets me as a person. 0:05:00.640 --> 0:05:03.960 Tesla keeps talking about how safe their cars are. There's 0:05:04.160 --> 0:05:07.880 a medium called Medium Transportation that did an analysis and 0:05:07.920 --> 0:05:11.599 basically their analysis suggested you're four times more likely to 0:05:11.839 --> 0:05:15.599 die if you're in a Tesla car versus other luxury markets. 0:05:15.960 --> 0:05:18.320 Go on. Johnson joining us now from Vertical Group managing 0:05:18.400 --> 0:05:22.679 director and analyst after Tesla reports a really good quarter, 0:05:22.839 --> 0:05:26.679 the third positive course for the company. Um the question, 0:05:26.720 --> 0:05:29.120 I guess, Gordon, and you use the word shenanigan. So 0:05:29.200 --> 0:05:32.440 let's talk about that again. Whether that word implies as 0:05:32.440 --> 0:05:34.520 something untoward is going on or whether they are just 0:05:34.560 --> 0:05:38.320 sort of artificially making things look better by squeezing suppliers, 0:05:38.360 --> 0:05:41.680 bringing orders forward, those kind of things. Which one is it? Well, 0:05:41.720 --> 0:05:44.800 I think it may be that there the latter and 0:05:45.279 --> 0:05:46.719 a couple of things we want to talk about with 0:05:46.760 --> 0:05:49.040 respect to the queue. One thing we definitely want to 0:05:49.040 --> 0:05:50.919 see is their warranty reserves. You want to see what 0:05:50.960 --> 0:05:53.600 that number looks like, because we've definitely gotten comments from 0:05:53.600 --> 0:05:56.600 the Tesla Motor Club that there's issues with respect to quality, 0:05:56.640 --> 0:05:58.720 there's issues with respect the parts following off the car. 0:05:59.080 --> 0:06:01.560 So if that number ops, that number takes away from 0:06:01.600 --> 0:06:05.000 gross revenue and drops down to the gross profit line. 0:06:05.040 --> 0:06:07.440 So if warranty reserves are dropping out of time when 0:06:07.440 --> 0:06:10.279 complaints are increasing, that is a concern. We we know 0:06:10.360 --> 0:06:13.479 that all of our audiences worldwide. Gordon Johnson have an 0:06:13.520 --> 0:06:17.200 accounting acuity there in financer in business, they have an 0:06:17.279 --> 0:06:20.800 interest in this. Does warranty reserves move the needle for 0:06:21.000 --> 0:06:25.080 Mr Musk? Is he gonna say that's inconsequential or is 0:06:25.080 --> 0:06:28.480 it a tangible reason to be cautious on the stock? 0:06:28.800 --> 0:06:31.320 It's it's It's one of the key things that I think. 0:06:31.320 --> 0:06:33.480 It does move a needle. One other thing we definitely 0:06:33.480 --> 0:06:36.760 want to look at as well is we've gotten indications 0:06:36.800 --> 0:06:40.000 that they sold large amounts of cars being returned to 0:06:40.279 --> 0:06:42.800 enterprise I either rental car company and you can see 0:06:42.800 --> 0:06:45.039 that with respect to be almost the more than doubling 0:06:45.040 --> 0:06:47.479 in their accounts receivable. John does this cf A level 0:06:47.520 --> 0:06:53.039 five today. But this goes back to revenue recognition right, 0:06:53.320 --> 0:06:55.560 which you know in England John has been a big 0:06:55.600 --> 0:06:58.520 deal over the years in Germany particularly. I mean, are 0:06:58.560 --> 0:07:02.040 you this is important? You're saying one of the things 0:07:02.080 --> 0:07:05.680 we need to know is revenue recognition is an issue 0:07:06.400 --> 0:07:10.720 Mr Musk company. In the auto industry. When accounts receivable 0:07:10.760 --> 0:07:13.560 show a significant increase, that is indicative of cells to 0:07:13.600 --> 0:07:17.480 the commercial space i e. Rental car companies and those 0:07:17.480 --> 0:07:19.760 cells are done at huge discounts. But if Tesla does 0:07:19.800 --> 0:07:23.280 not recognize the cost associated with those cells in this quarter, 0:07:23.520 --> 0:07:26.480 that is a huge boost to gross margins. And and 0:07:26.560 --> 0:07:28.200 one other thing I'll highlight we we want to look 0:07:28.200 --> 0:07:29.600 at this and see if it's it's it's covered in 0:07:29.640 --> 0:07:32.920 the queue. We've heard of multiple instances of people getting 0:07:32.920 --> 0:07:35.440 a VIN number, paying for their Tesla car, going to 0:07:35.480 --> 0:07:37.600 pick the car up, and then the then being reassigned 0:07:37.600 --> 0:07:41.160 to someone else. That potentially enables Tesla to double book 0:07:41.360 --> 0:07:45.040 car sells in the quarter. Um that effectively selling one 0:07:45.080 --> 0:07:47.640 car to two people that boost their cash flows. So 0:07:47.640 --> 0:07:50.000 these are all items that we think need to be 0:07:50.240 --> 0:07:52.680 looked into specifically, and we think the tim Q will 0:07:52.680 --> 0:07:55.240 provide some insights. We haven't seen that yet. So Golden 0:07:55.320 --> 0:07:58.360 essentially is saying this quota company repeates it. We think 0:07:58.400 --> 0:08:00.920 this quarter cannot be repeated one and we highlighted on 0:08:01.000 --> 0:08:04.000 the that the prior appearance was if you look at Norway. 0:08:04.000 --> 0:08:05.840 The reason why we highlight Norway is in Norway, if 0:08:05.840 --> 0:08:07.880 you buy an i C E engine car and tunnel 0:08:07.920 --> 0:08:10.600 combustion engine car, you pay double the price. There's an 0:08:10.600 --> 0:08:12.400 excess tax that means you have to pay dull the price. 0:08:12.400 --> 0:08:15.800 So the cars in Norway are ev right now. The 0:08:15.840 --> 0:08:18.920 first month I eat October, that Jaguar I Pace is available, 0:08:18.920 --> 0:08:22.880 They've all sold Tesla by six those cars. Those cars 0:08:22.880 --> 0:08:26.160 are coming to America in the fourth quarter. I'm sorry 0:08:26.240 --> 0:08:28.840 you're wearing Dodger blue today. That's what it looks like. Well, 0:08:28.880 --> 0:08:31.240 the last thing we need to know, Gordon Johnson, and 0:08:31.320 --> 0:08:33.439 what do the Dodgers do about their pitching? I mean, 0:08:33.440 --> 0:08:35.960 forget about all the distractions. They got to get somebody 0:08:35.960 --> 0:08:37.880 to put the ball over the plate. Where he is 0:08:37.960 --> 0:08:41.160 the next Cofax? I don't know, and I'm a Dodger 0:08:41.200 --> 0:08:43.599 fair it was. It was tough last night. Uh. You know, 0:08:43.640 --> 0:08:46.280 I can't root for the Red Sox because I believe 0:08:46.520 --> 0:08:49.320 New York Yankees blue. So Um. I don't know the 0:08:49.320 --> 0:08:55.640 answer to the question, but they have my backing. What 0:08:55.760 --> 0:08:58.040 he wanted to sign back to that you're supposed to say, 0:08:58.080 --> 0:09:01.640 but you're sick, you say, if they don't have a 0:09:01.720 --> 0:09:05.439 co Fax, where's their Drysdal? Do you think I have 0:09:05.480 --> 0:09:07.679 a clue what you're talking about? God, I love it. 0:09:07.760 --> 0:09:10.640 Gordon Johnson, Thank you so much. A special Five things 0:09:10.880 --> 0:09:14.080 you need to know? Thank you. Interactive brokers. This is 0:09:14.120 --> 0:09:28.080 Bloomberg surveillance. I think we should bring in a man 0:09:28.160 --> 0:09:31.280 that really needs no introduction on Wall Street, Gary Shilling. 0:09:31.640 --> 0:09:33.560 We now get to call him a Bloomberg opinion columnist. 0:09:34.960 --> 0:09:37.080 Dr Shilling. I'm very pleased about that. So, Gary, what 0:09:37.160 --> 0:09:38.760 is going on in fixed income right now that you 0:09:38.760 --> 0:09:41.600 think we need to be paying attention to? I'm sorry, 0:09:41.720 --> 0:09:43.880 what is going on in fixed income now that you 0:09:43.920 --> 0:09:46.720 think we need to pay attention to? I think it's 0:09:46.880 --> 0:09:52.440 I think it's emerging markets because they face it on 0:09:52.440 --> 0:09:58.240 on cheap borrowing UH, and after the financial crisis, UH, 0:09:58.440 --> 0:10:01.720 investors were only happen to happen to end there. They're 0:10:01.840 --> 0:10:04.600 zealous for yield. And of course a lot of this 0:10:04.679 --> 0:10:08.440 was dollar denominated, but now the dollars rising, so it 0:10:08.480 --> 0:10:12.680 makes it much more difficult for them to service those debts. Also, 0:10:12.800 --> 0:10:16.920 as a dollar strengthens, UH, the commodity imports for most 0:10:16.960 --> 0:10:19.360 of these countries are are through the roof. You look 0:10:19.400 --> 0:10:22.040 at Turkey, for example, their price of price of oil 0:10:22.080 --> 0:10:24.640 in Turkish leras basically dollar. But you and I have 0:10:24.760 --> 0:10:27.880 seen this before in the basic difference. Now I'm told 0:10:27.880 --> 0:10:32.080 as dollarization, whatever that means. Are you suggesting dr showing 0:10:32.160 --> 0:10:36.719 that this is different, different than Ecuador, different than the 0:10:36.880 --> 0:10:40.320 Three Mexicos. Well, that remains to be sane, Tom, because 0:10:40.360 --> 0:10:43.480 so far you haven't really got contagion in a big way. 0:10:43.559 --> 0:10:48.199 It's it's Argentina, Turkey, mainly UH and and of course 0:10:48.200 --> 0:10:51.439 in the late nineties that started in Thailand spread throughout 0:10:51.880 --> 0:10:55.719 Asia and then to UH, to Brazil and Argentina and 0:10:55.800 --> 0:11:00.119 ultimately to UH Russia and long term capital management. But 0:11:00.120 --> 0:11:04.040 but you very well could have a contagion uh. But 0:11:04.040 --> 0:11:06.280 but you know, it's it's interesting so far you're getting 0:11:06.320 --> 0:11:09.360 you're seeing signs of access. Is you're talking earlier about 0:11:09.400 --> 0:11:12.360 this leverage loans, I mean they've they've basically doubled I 0:11:12.360 --> 0:11:15.880 think one point three trillion dollars in the in the 0:11:16.080 --> 0:11:20.000 sense of financial crisis. But you haven't seen junk bonds 0:11:20.160 --> 0:11:25.280 disappear junk bonds. You've had a punishment in emerging market equity, 0:11:25.280 --> 0:11:28.120 in debt, but you haven't seen it in in domestic 0:11:28.200 --> 0:11:30.680 junk bonds. So you know, there's the real question. Is 0:11:30.720 --> 0:11:32.720 this In other words, it's this simply the calm before 0:11:32.760 --> 0:11:35.320 the storm, and we're gonna wake up one of these days. 0:11:35.360 --> 0:11:37.559 It's a huge contagion. There are a lot of things 0:11:37.600 --> 0:11:39.719 that are potentially in that category, but we haven't seen 0:11:39.800 --> 0:11:43.679 them yet. So which one are you expecting, Gary, Well, 0:11:43.760 --> 0:11:47.600 I I would I don't know, there's one country I would. 0:11:47.679 --> 0:11:51.760 I would definitely point out uh. But uh, you know, 0:11:51.840 --> 0:11:55.240 you gotta look at countries like South Africa, Brazil. I mean, 0:11:55.240 --> 0:11:57.480 they've got election. You don't know how that's going to 0:11:57.559 --> 0:12:02.160 come out. But uh, I think you can almost throw 0:12:02.200 --> 0:12:04.240 a dart Bard and try to figure out which one. 0:12:04.400 --> 0:12:07.760 Can you maintain your history call on lower interests? I 0:12:07.800 --> 0:12:10.120 want you to justify that right now. You've got a 0:12:10.120 --> 0:12:12.600 few people in Wall Street. Good morning Steve Major at 0:12:12.720 --> 0:12:16.280 HSBC who are in the vicinity of shilling. But do 0:12:16.400 --> 0:12:19.400 you maintain that we haven't seen a turn in the 0:12:19.480 --> 0:12:23.319 Great Vulgar disinflation? Yeah? I think I think that's true, Tom, 0:12:23.360 --> 0:12:26.560 because we're basically in a deflationary world. You look at 0:12:26.800 --> 0:12:28.640 you look at all the forces out there, you look 0:12:28.679 --> 0:12:31.679 at the UH, you look at globalization first and FOREMO 0:12:31.800 --> 0:12:34.559 was probably the most important development on the world seen 0:12:34.640 --> 0:12:37.080 in the last three decades. I mean that is massively 0:12:37.480 --> 0:12:41.120 deflation areas. You simply take Western technology and put it 0:12:41.160 --> 0:12:45.400 in areas of very cheap labor costs, principally in Asia, 0:12:45.960 --> 0:12:49.240 other things that you know, the Amazon, the Almazon effect 0:12:49.280 --> 0:12:54.800 just really knocks out retailers. And and you've seen another services. Well, 0:12:54.840 --> 0:12:58.520 it's the highest thirty year bond you've ever remembered, the 0:12:58.559 --> 0:13:03.320 highest third year twelve point six twelve point six point six. 0:13:04.440 --> 0:13:07.480 So how do you respond to three point three six 0:13:07.559 --> 0:13:10.520 percent in the world's gonna fall apart if we get 0:13:10.520 --> 0:13:14.079 the four point zero percent thirty year. But well, I 0:13:14.520 --> 0:13:17.600 think that's I think that's overdone. I mean, we've we've 0:13:17.640 --> 0:13:21.120 done work on this and and uh, in terms of 0:13:21.280 --> 0:13:23.160 you know, a debt bomb pre example, the point at 0:13:23.160 --> 0:13:26.320 which interest on the federal debt gets such a big 0:13:26.600 --> 0:13:29.920 element in the devilsit that it then it takes off geometrically. 0:13:30.520 --> 0:13:32.880 And and the worst you had was in the nineties 0:13:33.400 --> 0:13:36.440 and and and and today. To get to the equivalent, 0:13:36.840 --> 0:13:39.600 you'd have to go to eight percent yellow and Treasury. 0:13:39.600 --> 0:13:42.040 The distinction here is a John Farren and I on 0:13:42.080 --> 0:13:47.400 a Thursday. Today's Thursday. Right, Oh, I'm gonna blur. You know, 0:13:47.840 --> 0:13:49.719 me and my good friend David Price can't fig out 0:13:49.720 --> 0:13:55.600 which day we got from which we did, thank you. Okay, 0:13:55.880 --> 0:13:59.080 So John Farren and I agree that every Friday the 0:13:59.160 --> 0:14:02.719 dooming gloom are nticles come out. Your charm, Gary is 0:14:02.800 --> 0:14:07.640 you've been cautious on yields, but you haven't been dooming gloom. 0:14:07.720 --> 0:14:11.400 What do the doom and gloom people get wrong about 0:14:11.400 --> 0:14:14.640 their worry about the economy, worry about the stock market 0:14:14.679 --> 0:14:17.640 and the rest of it. I think that they have 0:14:17.960 --> 0:14:22.320 really our feel that we've had low rick rates for 0:14:22.360 --> 0:14:26.520 so long, that's how any any any break on that 0:14:26.680 --> 0:14:28.720 is the end of the world. I don't think they're 0:14:28.760 --> 0:14:31.360 looking at the greater scope of history, which is a 0:14:31.400 --> 0:14:35.440 technological progress and the new technology overlay which keeps driving 0:14:35.480 --> 0:14:38.840 this forward. Yeah, you've written about this for bloom Bird Opinion, 0:14:38.960 --> 0:14:41.600 you know, like five six eight essays on China. Yeah, 0:14:42.000 --> 0:14:44.080 what did I say? I think there's there's there's so 0:14:44.160 --> 0:14:45.880 much of a tendency to look at the last couple 0:14:45.880 --> 0:14:48.120 of years and project that into the next millennium. Then 0:14:48.160 --> 0:14:50.000 how do you bring it over to the equity markets 0:14:50.000 --> 0:14:53.080 in the primal urge to go to cash? Well, you 0:14:53.120 --> 0:14:57.040 know equities, equities are are very expansive, and you have 0:14:57.160 --> 0:14:59.720 the FED no longer as a wind that you're back 0:15:00.000 --> 0:15:02.120 out the wind of your face. You know, they were 0:15:02.160 --> 0:15:03.800 saying is don't fight the fat, And I'd say you 0:15:04.080 --> 0:15:06.440 can you own white Well shares today? White Well john 0:15:06.560 --> 0:15:08.720 was a firm a few years ago that Mr Shilling 0:15:08.920 --> 0:15:11.200 had a business card at. But can you own the 0:15:11.240 --> 0:15:14.760 banking shares right now who have not participated in the 0:15:14.800 --> 0:15:18.720 recent foolishness. I don't think so, because maybe maybe that 0:15:18.920 --> 0:15:21.720 has maybe well the banks in terms of spread lending, 0:15:21.760 --> 0:15:24.280 that that action may be over because of course their 0:15:24.320 --> 0:15:28.240 their rate increases led the increased costs they have for funds, 0:15:28.240 --> 0:15:29.840 and now they got to pay more for their money. 0:15:30.160 --> 0:15:32.480 But you know the problem with banks is actually ad banks. 0:15:32.760 --> 0:15:34.400 They don't want to be in the banking business. They 0:15:34.440 --> 0:15:36.520 want to be in the growth stock business. And that's 0:15:36.560 --> 0:15:38.600 what's gotten them into all these things. We're hearing that 0:15:38.680 --> 0:15:43.920 a lot of inter loans and and and derivati origination 0:15:43.960 --> 0:15:45.560 and trading, all the kinds of things you got them 0:15:45.600 --> 0:15:49.000 into trouble in two thousand and eight, and and they 0:15:49.080 --> 0:15:51.120 you know that the traditional banker just wants to take 0:15:51.120 --> 0:15:52.600 the positives and lend them out. They don't want to 0:15:52.640 --> 0:15:54.800 do make jokes about you being the poet from Amates. 0:15:54.880 --> 0:15:58.600 You are the physicists from AMATES steeped in Newtonian mechanics. 0:15:58.840 --> 0:16:01.480 What do you think of our art? Think of what 0:16:01.720 --> 0:16:05.520 our start, John Williams, And we're gonna, you know, we're 0:16:05.520 --> 0:16:08.960 gonna do three plugins and run some differential equations and 0:16:09.200 --> 0:16:14.120 figure out where I am. Um. I think that the 0:16:14.200 --> 0:16:18.720 idea that you are going to use mechanical means I 0:16:18.880 --> 0:16:23.240 A or whatever to beat the human brain is a 0:16:23.280 --> 0:16:25.520 long way from fruition. And that's I think what all 0:16:25.560 --> 0:16:28.400 that that amounts to. Innother ways, you're you're looking, you're 0:16:28.400 --> 0:16:31.840 looking for patterns and you're assuming repetition. And you know, 0:16:32.000 --> 0:16:36.200 Mark Twain said history, Uh doesn't repeat, but it does rhyme, 0:16:36.240 --> 0:16:38.720 but it doesn't repeat enough. Very cool. He's with us 0:16:38.800 --> 0:16:41.560 next week. Gary Shilling, thank you so much. Greatly appreciated 0:16:41.880 --> 0:16:54.760 a Gary Shilling and is important newsletter worth pointing out 0:16:54.760 --> 0:16:57.600 that we actually um we crossed over to test and 0:16:57.640 --> 0:17:00.520 asked for some comment on the comments from Johnson. I 0:17:00.520 --> 0:17:03.440 have a medical group on the Shenanigans in the accounting 0:17:03.760 --> 0:17:08.120 um Tesla saying nothing to add, so no comment from 0:17:08.119 --> 0:17:11.480 Tesla on the record. We we will see and we 0:17:11.560 --> 0:17:15.760 will feature Mr Johnson's comments on our podcast today. Thank 0:17:15.800 --> 0:17:20.600 you Spotify, thank you Apple Podcast for their support. We've 0:17:20.640 --> 0:17:24.400 been thunderstruck by the success of the podcast and part 0:17:24.440 --> 0:17:27.240 of it is our team led by McKinnon d kiper 0:17:27.960 --> 0:17:32.199 Uh featuring those interviews john We don't have any I 0:17:32.200 --> 0:17:34.040 want to make clear I don't have an opinion by 0:17:34.080 --> 0:17:36.840 old cell and Tesla. I would hope you don't. I don't. 0:17:37.000 --> 0:17:40.520 I don't know, but I think within the intense questioning 0:17:40.520 --> 0:17:43.360 of Mr Johnson it may have been allowed to believe that, 0:17:43.520 --> 0:17:48.679 but his his statements were really something. There was something 0:17:48.720 --> 0:17:50.400 and it's a judgment Cole, and I'm sure there will 0:17:50.400 --> 0:17:52.600 be a big debate off the back of them. Interesting 0:17:52.600 --> 0:17:54.960 that President drunks late to this one. Tom, He's late 0:17:55.040 --> 0:17:57.080 to the news conference side from Franklin. What is it signal? 0:17:57.280 --> 0:17:59.879 I have no idea, probably absolutely nothing. Wanting us on 0:17:59.920 --> 0:18:03.040 the bone is Christian Shield City Economics team direct. He 0:18:03.080 --> 0:18:06.960 knows what Christian was? He like, well, it's a it's 0:18:06.960 --> 0:18:10.920 a sensitive press conference today given what's going on in 0:18:11.200 --> 0:18:15.080 UM in the Eurozone politically. Of course UM and Joy 0:18:15.240 --> 0:18:17.960 is right in the middle of things, so of course 0:18:18.200 --> 0:18:21.719 he might be having some last instructions and briefings on 0:18:21.960 --> 0:18:24.080 what to say and what not to say. But I mean, 0:18:24.640 --> 0:18:28.320 I think seriously, Um, it's very much so far at 0:18:28.400 --> 0:18:32.280 least a non event all changes at all in the decisions. Um. 0:18:32.320 --> 0:18:33.600 And let's see what he makes of it in the 0:18:33.600 --> 0:18:35.600 press conference. Well, he's walking into the room right now. 0:18:35.600 --> 0:18:38.080 Have you had a question for him in the news conference? 0:18:38.080 --> 0:18:43.160 What would it be, Christian? Um? The I mean, the 0:18:43.160 --> 0:18:47.159 the key question is and what conditions the path that 0:18:47.200 --> 0:18:50.400 they've laid out until September next year for both acid 0:18:50.440 --> 0:18:54.360 purchases and for interest rates, and what conditions could they 0:18:54.359 --> 0:18:58.240 shift from that in both directions? Christian Schild's City Economics 0:18:58.240 --> 0:19:01.720 team director joining us says, President Mario Drunkie walks into 0:19:01.840 --> 0:19:04.960 the headquarters of the European Central Bank kid Frankfurt, Germany, 0:19:05.080 --> 0:19:07.480 about to take a seat and take questions of the 0:19:07.480 --> 0:19:22.359 news conference. Gene Munster remains with us here he, of course, 0:19:22.680 --> 0:19:26.639 of Loup Adventures, managing partner and analysts. Gene Munster, we 0:19:26.640 --> 0:19:28.880 were talking about Tesla and I want to ask you 0:19:28.960 --> 0:19:33.080 about Apple in relationship to automobiles, because during the break 0:19:33.119 --> 0:19:35.439 we got a chance to chat about that. You have 0:19:35.640 --> 0:19:40.639 the most expensive version of Apple Play. Correct. That's right, Pam, 0:19:40.640 --> 0:19:43.600 I UH, in some ways paid forty two hours for 0:19:43.640 --> 0:19:47.159 a version of Apple Play. Recent not so proud owner 0:19:47.280 --> 0:19:52.680 of a Mazda nine. It is their larger suv, and 0:19:52.880 --> 0:19:54.960 I had the privilege of getting it tricked out to 0:19:55.040 --> 0:19:57.600 the kind of the full Touring edition, which is a 0:19:57.640 --> 0:20:02.520 forty two edition. Uh. The reason we purchased these cars 0:20:02.520 --> 0:20:05.280 we wanted something bigger, but ultimately wanted the biggest car 0:20:05.480 --> 0:20:08.480 with Apple Play that in in a matrix I put together. 0:20:08.760 --> 0:20:11.439 Even thoughts is a lot of money, it was the 0:20:11.520 --> 0:20:15.040 cheapest largest car that had Apple Play. Okay. The reason 0:20:15.080 --> 0:20:18.360 I mentioned this is not to uh comment on your 0:20:18.359 --> 0:20:22.520 purchase of a Mazda, but to demonstrate how technology and 0:20:22.560 --> 0:20:28.080 the desire for technology drives purchases in ways that may 0:20:28.119 --> 0:20:32.280 not have been the normal consumer pattern in the past. 0:20:32.880 --> 0:20:37.240 And you mentioned Tesla not just as an automobile company, 0:20:37.280 --> 0:20:39.520 but as a company that is going to challenge the 0:20:39.560 --> 0:20:45.040 business model of companies such as Uber and Lift as well. Tesla's, 0:20:45.240 --> 0:20:48.000 as we talked about earlier, is this concept of accelerating 0:20:48.040 --> 0:20:50.800 the globe's adoption renewable energy. It's not just a car company, 0:20:50.880 --> 0:20:53.840 but car is an important segment and when they think 0:20:53.880 --> 0:20:57.320 about that, they have a really a radical view about 0:20:57.320 --> 0:21:01.399 how transportation can be changed and really de segmented. And 0:21:01.440 --> 0:21:04.679 so ultimately, and Elon Musk is very clear on the 0:21:04.680 --> 0:21:07.360 call last night, as the company has ambitions to compete 0:21:07.400 --> 0:21:11.639 directly with Uber and left that means a Tesla owned fleet, 0:21:12.040 --> 0:21:13.920 so they own the cars and they put it out 0:21:13.960 --> 0:21:18.239 there and they would presumably offer transportation, offer rides at 0:21:18.480 --> 0:21:21.600 less and then separately an Airbnb option where they allow 0:21:22.040 --> 0:21:24.600 Tesla owners when they're at work to turn their car 0:21:24.720 --> 0:21:27.320 over to the fleet. That's just one example of how 0:21:27.359 --> 0:21:29.760 they're really taking the blinders off and thinking different about 0:21:29.760 --> 0:21:33.400 the future transportation, like the jets. Does the public want 0:21:33.440 --> 0:21:35.920 this stuff? Not very many people I think are gonna 0:21:35.960 --> 0:21:39.879 want to within the monster thing you did with Apple Play, 0:21:39.960 --> 0:21:45.600 does the public want that stuff? Yeah? I think if 0:21:45.640 --> 0:21:47.639 you have a let's say you have a children and 0:21:47.680 --> 0:21:50.320 they love Apple and Apple Play and everyone's got an 0:21:50.320 --> 0:21:53.600 Apple device, what are you gonna buy? You're gonna buy 0:21:53.640 --> 0:21:57.159 cars that are Apple enable, which opens up the conversation 0:21:57.160 --> 0:21:58.680