Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene. Along
Speaker 1: with Jonathan Ferrell and Lisa Brownwitz Jay Leie. We bring
Speaker 1: you insight from the best and economics, finance, investment, and
Speaker 1: international relations. Find Bloomberg Surveillance on Apple podcast, SoundCloud, Bloomberg
Speaker 1: dot Com, and of course, on the Bloomberg Tournament. John
Speaker 1: us now mana chan senior investment strategist at Edward Jones
Speaker 1: Minor move on and move on quickly. Ben Laidler of
Speaker 1: Vitro joined us the kickoff two. He's looking for a
Speaker 1: fourth straight year of double digit gains after three of them,
Speaker 1: after a gain of on the SMP last year. Mona,
Speaker 1: I understand you're looking for gains, but not more of
Speaker 1: the same. Yeah, Yeah, absolutely, and thanks John. Happy new year. Um. Look,
Speaker 1: I think the good news for investors is this BOOL
Speaker 1: market probably does have some legs, but what we're calling
Speaker 1: for is an era of moderation in two. So for US,
Speaker 1: that means not only moderating economic and earnings growth, moderating
Speaker 1: inflation to some extent, moderating FED policy support, but it
Speaker 1: also means moderating returns. So we do expect SMP returns
Speaker 1: to be more in line with earnings growth, which we
Speaker 1: see as single digits this year UM. But expect a
Speaker 1: little bit more volatility, you know, as we get as
Speaker 1: you noted in the fourth year of this tremendous will
Speaker 1: run for the SMP, we probably will get more normal
Speaker 1: levels of volatility pull backs. Historically that's meant one to
Speaker 1: three corrections in the five to ten percent range UM.
Speaker 1: But the good news again is that those bouts of
Speaker 1: volatility or pullbacks could actually offer opportunities to maybe add
Speaker 1: to or diversify risk. I'm on a very important question here,
Speaker 1: As you mentioned return total return lesson total return. Is
Speaker 1: that aspersion of return that we saw in two thousand
Speaker 1: twenty one the Financial Times with a superb summary of
Speaker 1: hedge fund under performance that we've seen, does the dispersion
Speaker 1: of return continue? Yeah? You know, look, if you look
Speaker 1: at the SMP five, uh, the the top line or
Speaker 1: the headline doesn't really tell the full story of what's
Speaker 1: happening underneath the surface. One was a great example of that.
Speaker 1: We had a rotation into value, as you know, the
Speaker 1: vaccine rollout happened earlier in the year, but then after
Speaker 1: that we saw a rotation back into growth, a rotation
Speaker 1: perhaps back into value as as the delta variant waned.
Speaker 1: But towards the end of the year we actually saw
Speaker 1: a little bit of defensive moves. We saw defensive sectors
Speaker 1: like healthcare and staples take a leadership role in the
Speaker 1: last month. We expect a little bit more of the
Speaker 1: same this year. You know, we do expect the year
Speaker 1: to begin perhaps a little bit more strongly, driven by
Speaker 1: the value cyclical rotation. We do expect at some point
Speaker 1: we will get another re opening two point oh a
Speaker 1: little softer than what we saw last year. But as
Speaker 1: the ear progresses, we would definitely recommend um having a
Speaker 1: more balanced portfolio. You know, as as your progresses and
Speaker 1: comps get harder for value uh and growth slows a
Speaker 1: little bit, perhaps still above trend, we would expect areas
Speaker 1: like growth, like defensives like those quality names to really
Speaker 1: pick up the mantle, and so a more balanced approach
Speaker 1: to portfolio management this year we think makes a lot
Speaker 1: of sense. Keep in mind, you know, our old friend
Speaker 1: Tina does come back into play. There is no alternative UM.
Speaker 1: You know, investors as always are putting new money to work.
Speaker 1: Where do they go UM, While an environment where liquidity
Speaker 1: is waning, they're looking for large liquid markets, and the
Speaker 1: US equity market does come front and center once again,
Speaker 1: at least for now until the global story picks up. Mona,
Speaker 1: do you get the sense that basically a balanced portfolio
Speaker 1: is the way to go And frankly, just owning the
Speaker 1: index continues to be the best bet at a time
Speaker 1: when rotations happen. Uh, and it's unpredictable when you know,
Speaker 1: I think investors that have owned the index have done
Speaker 1: well over the last three years and will continue to
Speaker 1: do well this year. To Tom's point on active management,
Speaker 1: you know hasn't panned out. You know, it hasn't outperformed,
Speaker 1: and all investors are looking for some alpha and so yeah,
Speaker 1: in our view, owning an SMPI index is part of
Speaker 1: a strong balanced portfolio. And certainly that UM index ownership
Speaker 1: will help you outperform over the long run. And so
Speaker 1: certainly that's part of a portfolio. This can be you know,
Speaker 1: complemented by certainly parts of active management that that perhaps
Speaker 1: do give you outside exposure to a value set sector
Speaker 1: or a growth sector, depending on where you're you know,
Speaker 1: underweights and overweights are so it's important to have a
Speaker 1: combination of both, Um, but you know, certainly we are
Speaker 1: in favor of having some exposure to index UH index
Speaker 1: ETFs index management as well. Not always awesome to hear
Speaker 1: from you as we kick up one too and look
Speaker 1: ahead to the year ahead, Madam john that of Edward
Speaker 1: Johns on the equity market from Harvard University in Krall,
Speaker 1: Megan Green joins us UH to give us a first
Speaker 1: look into two thousand twenty two. Megan, thank you so
Speaker 1: much for joining. I want to frame out the many
Speaker 1: uncertainties we have into the boom economy of the United
Speaker 1: States of America. Greg Vllier quotes Atlanta g d P
Speaker 1: now six seven buoyant g d P in America. What
Speaker 1: is your belief in our ability to sustain and to
Speaker 1: surprise a better economy than many people predict. Yeah, so
Speaker 1: on that, friend, Tom, I actually think our conversation around
Speaker 1: growth and inflation in the US will look fundamentally different
Speaker 1: in nine months from now from how it looks right
Speaker 1: now and from how it looks towards the end of
Speaker 1: last year, as everyone seemed to be jumping down the
Speaker 1: Fed's throat for being behind the all allowing the economy
Speaker 1: to overheat driving up sustained inflation. I think that could
Speaker 1: be exacerbated in the short term because of the omicron variant.
Speaker 1: I think supply chain chain disruptions could be exacerbated. But
Speaker 1: looking over the next six to nine months, actually I
Speaker 1: see a number of risks to growth in the US,
Speaker 1: whereby will still be growing by well above potential, but
Speaker 1: but growth should look weaker this year than it did
Speaker 1: last year. Certainly, one reason is that we're facing into
Speaker 1: a significant fiscal drag that was already going to be
Speaker 1: the case if we had passed build back Better for
Speaker 1: next year, in particular because a lot of build back
Speaker 1: Better is is backloaded, not frontloaded, and even if we
Speaker 1: get individual pieces of legislation passing pieces of build back
Speaker 1: Better again, that will be backloaded. So we'll see a
Speaker 1: fiscal drag going into this year. Also, I think a
Speaker 1: lot of our growth in the second half of last
Speaker 1: year was driven by inventories as companies were restocking. They're
Speaker 1: only going to do that for along and I think
Speaker 1: that this year we'll see de stocking, which is a
Speaker 1: headwind for growth. And then, finally linking it to Ian
Speaker 1: Bremer's top risks, I think a Chinese slowdown it's a
Speaker 1: pretty significant risk, not at least of all because China
Speaker 1: has a zero COVID policy that I think will be
Speaker 1: really difficult to pull off in the face of more
Speaker 1: transmissive variants like the Omicron variant, and so Chinese authorities
Speaker 1: are certainly pressing on the gas pedal in terms of
Speaker 1: Slo monetary policy. But I think there is a fundamental
Speaker 1: commitment to things like common prosperity, taking moral hazard out
Speaker 1: of the property market, and so I don't think that
Speaker 1: authorities are going to fundamentally reverse those those two priorities
Speaker 1: and and go ahead and pull on the same lever
Speaker 1: as they have in the past to prop up growth,
Speaker 1: namely fixed acid investment in the property market. So well,
Speaker 1: I think China will stop slowing down as much as
Speaker 1: it did last year. I think a slower China poses
Speaker 1: risks for demand not only for the US, but also
Speaker 1: for emerging markets. Megan, you have an earned expertise at
Speaker 1: the transatlantic view, your academics in England, your academics here
Speaker 1: as well. How much right now is Jerome Powell central
Speaker 1: banker to the world, and much more specifically central banker
Speaker 1: to the EU in the United Kingdom? I think that J.
Speaker 1: Powell and the rest of the f O m C
Speaker 1: are really primarily focused on what's going on domestically, and
Speaker 1: so while there are repercussions of course for FED policy elsewhere,
Speaker 1: they're not taking into account much what's happening in Europe
Speaker 1: UH and also in the u k UM. That being said,
Speaker 1: there will be repercussions, and so while the FED is
Speaker 1: going ahead and tightening UH and and tapering already, the
Speaker 1: Bank of England might also see some tightening. The e
Speaker 1: c B, on the other hand, will probably keep policy
Speaker 1: loose for much longer. So there will be some monetary
Speaker 1: policy divergence with implications not just for inflation but for
Speaker 1: currencies as well. The dollars should strengthen relative to new
Speaker 1: euro um and and the EU will be importing disinflationary
Speaker 1: pressures if if FED policy is tightening faster than the
Speaker 1: ECB is megan. There's an idea right now in markets
Speaker 1: that the omicron variant will accelerate inflation and will actually
Speaker 1: accelerate Fed FED rate hikes. How much do you buy
Speaker 1: into that given that it will also likely slow growth
Speaker 1: at least on the margins. Yeah, So it all depends
Speaker 1: on how long this like lasts. If it's actually going
Speaker 1: to be as short as as a South African data suggests,
Speaker 1: then I don't think that the FED will end up
Speaker 1: accelerating policy in order to address the omicron variant. Um Yesterday,
Speaker 1: I looked at a bunch of the high frequency data
Speaker 1: that comes out looking at Apple mobility data, open table bookings,
Speaker 1: uh T s, A security spreadings, and actually it looks
Speaker 1: like the impact of omicron on demand has been fairly mild.
Speaker 1: That being said, it's only been dominating for about a month,
Speaker 1: and that was of course over the holiday period uh
Speaker 1: and so people could have decided, you know what, we're
Speaker 1: just going to have a better Christmas than we had
Speaker 1: the previous year and ignore this, and the demand hit
Speaker 1: could could come from now on that's yet to be seen.
Speaker 1: On the inflation front, I do think that the omicron
Speaker 1: variant will affect supply chains, not only because workers won't
Speaker 1: be able to go to work in the US and
Speaker 1: also along the entire supply chain. But we've already seen
Speaker 1: factory closures in China with a zero COVID policy off
Speaker 1: the back of the omicron variant, and so in the
Speaker 1: first quarter, I think we could see inflation continue to rise.
Speaker 1: But but going beyond that, I think not only because
Speaker 1: of the fistical drag the de stocking slowdown in China
Speaker 1: that I mentioned suggests that growth should be lower this year,
Speaker 1: but also just statistics the base effects suggests that inflation
Speaker 1: should be a bit lower as well. And I think
Speaker 1: the supply chain insruptions should start to alleviate towards the
Speaker 1: second half of this year, and and so in in
Speaker 1: nine months from now, I think, well the FED might
Speaker 1: see more alarming inflation data coming out in the first quarder.
Speaker 1: By the second half of this year, I think inflation
Speaker 1: should abate. I should confess I'm a paid up member
Speaker 1: of team Transitory on this front. Even if the FED
Speaker 1: has dropped that term, I don't think towards the end
Speaker 1: of this year that will continue to be so alarmed
Speaker 1: about higher inflation. Well, it does matter though where the
Speaker 1: inflation comes from, and there's this idea that perhaps it's
Speaker 1: going to shift from supply chain disruptions and labor market
Speaker 1: disruptions to a wage driven, a rent driven type of inflation,
Speaker 1: which will be really exemplified by the savings rates going
Speaker 1: down and people having to go out and get a job.
Speaker 1: How much do you expect that to be the dynamic
Speaker 1: of inflation and actually encourage the Fed to raise rates
Speaker 1: more heading into your end. So I think that there
Speaker 1: are legitimate concerns to worry that higher rents will reset
Speaker 1: this year and feeded through into inflation. But when it
Speaker 1: comes to the labor market and a wage price spiral,
Speaker 1: I actually think part of the reason the labor force
Speaker 1: participation rate is lower now than it was before the
Speaker 1: pandemic is that a number of hourly service workers are
Speaker 1: are waiting to figure out They're waiting on the sidelines
Speaker 1: to figure out how they can get into higher wage,
Speaker 1: higher our jobs um. And at a certain point, uh,
Speaker 1: they they'll have burned through their savings cushion and will
Speaker 1: end up having to capitulate and jump back into the
Speaker 1: labor market. Debit Card data from JP Morgan, for example,
Speaker 1: suggests that might start to happen in the next couple
Speaker 1: of months. UM, So we'll wait and see. But if
Speaker 1: that does happen, then actually, even with the omicron variant,
Speaker 1: keeping some people home because they're a freight going to
Speaker 1: work will get them sick. Others will end up having
Speaker 1: to jump back into the labor market, and that should
Speaker 1: should alleviate some of the labor supply shortages that we've had.
Speaker 1: Um I also think we've seen wage hikes over the
Speaker 1: past year. So there have been wage pressures, but that
Speaker 1: needn't be inflationary if we also see productivity growth, and
Speaker 1: so that is one of the upside risks I see
Speaker 1: for the outlook actually is that we've had even more
Speaker 1: productivity growth than we expected because companies have taken the
Speaker 1: opportunity to automates and digitalized, and therefore, even with higher wages,
Speaker 1: you won't drive inflation higher. Mike and Green of the
Speaker 1: calls you and of course the Hamma Kennedy School as well.
Speaker 1: Something's out front and center. And our next guest, of course,
Speaker 1: leading to charge. We've been thrilled at the support we've
Speaker 1: had from viologists, epidemiologists and outright just playing doctors during
Speaker 1: this pandemic and giving us great leadership is Amashdalgo the
Speaker 1: Johns Hopkins at University. Dr Dolgo, I want to talk
Speaker 1: about the mystery of the moment. It's a mystery for
Speaker 1: Mayor Adams of New York, it is a mystery for
Speaker 1: the President of the United States, and it's a miss
Speaker 1: three for the woman that lives three doors down from
Speaker 1: Lisa A. Bramo. It's trying to figure out what to
Speaker 1: do next on COVID. What is the timeline forward of
Speaker 1: this variant. What does the research show of what to
Speaker 1: expect one week out, in three weeks out and the
Speaker 1: glide pass of cases, hospitalizations, and deaths. What we've seen
Speaker 1: from other countries and we have to see if this
Speaker 1: is extrapolable to the US, is that the omicron variant
Speaker 1: takes a very quick, a very quick tour through a country.
Speaker 1: It's not something that lasts for months the way delta does.
Speaker 1: That it comes in week intervals rather than in months.
Speaker 1: So two to three weeks seems to be what it
Speaker 1: takes for it to peak and then to rapidly decline,
Speaker 1: maybe because not not because it's infecting everyone, but because
Speaker 1: it's infecting those people who are most susceptible to get infected,
Speaker 1: those people that are out there, and then everybody else
Speaker 1: starts to change their behavior and then it collapses. That's
Speaker 1: how people are predicting will happen. Maybe by maybe the
Speaker 1: next couple of days two weeks, we should be able
Speaker 1: to see if that pattern holds. But it is going
Speaker 1: to cause a lot of disruption in its wake because
Speaker 1: many people get infected, and we have to worry about
Speaker 1: hospitalizations even if they're lower, with a macron being at
Speaker 1: least of a magnitude big enough for some hospitals that
Speaker 1: are already kind of act capacity to get pushed over
Speaker 1: the edge. Speak of our understanding of its virulence. If
Speaker 1: I do the easy mass of three hundred thousand dead
Speaker 1: at a given rate, or I look at a normal
Speaker 1: flu of forty or fifty thousand a year dead, speak
Speaker 1: of the relative virulence of a macron. So it's probably
Speaker 1: about half of what delta was in terms of its
Speaker 1: ability to hospitalize and kill based on what we're seeing
Speaker 1: from other countries, but it still is likely a little
Speaker 1: bit higher than influenza. And you have to also take
Speaker 1: into account than the transmissibility, because O macron is much
Speaker 1: more transmissible. Even if it has a lower case fatality ratio,
Speaker 1: if it infects more people quickly, that could still end
Speaker 1: up being awash in the end that the same amount
Speaker 1: of people get infected because the attack rate is so
Speaker 1: much higher. But what we do know is that yes,
Speaker 1: people tend to be hospitalized less, less oxygen less. I
Speaker 1: see you use, and I think that's good, but it's
Speaker 1: still maybe too much for the system to handle. Dr Adlga.
Speaker 1: How long are people contagious? Most people are contagious for
Speaker 1: maybe about five five or so days. That's the average
Speaker 1: of the median contagiousness of time period. So there are
Speaker 1: some people that are contagious US for less contagious for
Speaker 1: less maybe two or three days, and some people more
Speaker 1: maybe ten days. And that's what we were trying to
Speaker 1: do with changing the guidelines for isolation and quarantine, realizing
Speaker 1: that the one size fits all way of thinking about
Speaker 1: this doesn't actually work, and you could precision guide by
Speaker 1: using anagen tests to see when someone goes negative. But
Speaker 1: the contagiousness is clustered in the very first part of infection.
Speaker 1: We knew that from case control studies looking at contact
Speaker 1: contact tracing, seeing when people got infected in was always
Speaker 1: clustered in the first half of illness. Dr Dalgo. Let's
Speaker 1: say we are moving into an endemic phase of the pandemic,
Speaker 1: which you said probably happened a while back. What should
Speaker 1: the guide be for workplaces in order to get people
Speaker 1: back into the office and back into rotation, Which aspect,
Speaker 1: which tests, which quarantine period should they really be looking
Speaker 1: at for organizations, I think that they could use ANAGIN
Speaker 1: tests because they're trying to make sure that it's not
Speaker 1: transmission in their workplace, so that means trying to exclude
Speaker 1: people who are contagious. So I think they could do
Speaker 1: daily ANAGIN testing for people, and when people get infected,
Speaker 1: stick with maybe a five day default isolation period, and
Speaker 1: then have rapid tests to kind of precision guide when
Speaker 1: that can come off, and then you can use masks
Speaker 1: as you need to in that situation. But if you're
Speaker 1: using a lot of rapid tests, if you've got a
Speaker 1: fully vaccinated workforce, I think you're in a good position.
Speaker 1: But what's happening is many organizations have zero tolerance for cases.
Speaker 1: And if you have zero tolerance for cases of COVID nineteen,
Speaker 1: there's no path into opening your office because there's always
Speaker 1: going to be cases there. So you've got to find
Speaker 1: a way to come over with a sustainable approach that
Speaker 1: you're not getting outbreaks in your office, but that you
Speaker 1: know that there's gonna be cases and you can't shut
Speaker 1: down go to virtual every time. Just like schools and
Speaker 1: universities have to do the very same thing, don't do.
Speaker 1: They them just have zero tolerance for cases. They also
Speaker 1: have requirements, right, PCR test not just a rapid test.
Speaker 1: Can you explain to us the usefulness of that after
Speaker 1: someone has been isolating for five days they've had a
Speaker 1: positive case. Is a PCR test useful in the weeks afterwards?
Speaker 1: Absolutely not. It's actually the wrong test to be using.
Speaker 1: They should be using anagen tests because PCR positivity can
Speaker 1: go on for maybe twelve weeks, and it doesn't correlate
Speaker 1: with anybody's contagiousness because there may be viral debris that's
Speaker 1: taking some time to clear, and someone who's fully recovered
Speaker 1: not contagious, and the PCR is going to continue testing positive.
Speaker 1: So that's an incorrect way to do it, and it's
Speaker 1: going to artificially disrupt your office workplace much more than
Speaker 1: if you actually use anagen tests or use time based
Speaker 1: saying maybe ten days or just ten days with out
Speaker 1: of the tests. That would also be better than using
Speaker 1: PCR test. PCR tests should not be used for a
Speaker 1: screening of asymptomatic individuals. That's not what they were designed for.
Speaker 1: It's the wrong test that's giving you the wrong answer.
Speaker 1: Don't thank you Sir, that's exactly what they've been used
Speaker 1: for in some casis right now with you know, he
Speaker 1: thought to Amada of John's help kids right now and
Speaker 1: as well understood as we saw Ian Bremmer with Elizabeth
Speaker 1: Economy yesterday in China that Dr Bremer like a magnet,
Speaker 1: attracts qualified people to the Eurasia Group to generate their
Speaker 1: top ten risks for any given year. This year's Nuanced
Speaker 1: Brilliant list includes around We get an update from Henry Rome,
Speaker 1: who was with Eurasia Group, Henry Rome of Cambridge. Henry
Speaker 1: Rome of his journalism at the Jerusalem Post, gives us
Speaker 1: the immediacy of the moment. Henry Rome, what I know
Speaker 1: is there's worries about drones in the air flying in
Speaker 1: I believe it's to Baghdad in danger. Give us the
Speaker 1: immediate right now of drones in the danger of drones
Speaker 1: from Tehran. Sure, well, good morning and great great to
Speaker 1: be here again. I think what what we've seen over
Speaker 1: the past day or so with the anniversary of the
Speaker 1: assassination of customs Sulamani. Of course from a couple of
Speaker 1: years ago, UH the Iran backed militias in in Iraq
Speaker 1: flying these explosive drones at at bases that house US forces. Now,
Speaker 1: I think the real kind of risk here is is
Speaker 1: is the kind of ever present one that that you
Speaker 1: get US forces killed or or or injured in some
Speaker 1: of these attacks, and then pressure on the Biden administration
Speaker 1: to retaliate, to try to show that there's a cost
Speaker 1: for this kind of activity. Now, there's there's a lot
Speaker 1: of ambiguity with drones like these about whether they're ordered
Speaker 1: from Iran or whether these are the actions of the
Speaker 1: kind of local militias. But I think the concern overall
Speaker 1: is real. Henrit help us with our stereotypes. We are
Speaker 1: all molded, certainly of my generation by nine nine and
Speaker 1: permanent damage of our relationship with Iran. Give us the update.
Speaker 1: What is the number one thing Americans get wrong about
Speaker 1: Tehran and all of Iran? You know? I think the
Speaker 1: number one thing is that, you know, despite that image
Speaker 1: kind of seared in in our collective memory, the Iranian
Speaker 1: leadership today UH is quite rational in the sense of
Speaker 1: making cost benefit calculations when pursuing its policies. They might
Speaker 1: not have the same kind of way of looking at
Speaker 1: things that that we do, certainly in different ways of
Speaker 1: assessing costs and benefits. But when you ask questions like
Speaker 1: why and under what circumstances would they ramp up their
Speaker 1: nuclear program? Why or under what circumstances would they seek
Speaker 1: a nuclear weapon? What is their policy around the region?
Speaker 1: You know, I think it's easy to get caught up
Speaker 1: in a lot of the rhetoric, which is fiery, is explosive,
Speaker 1: But I think when you look at the actions at
Speaker 1: least over the past several decades here, you see a
Speaker 1: pretty consistent through line of of of a fairly sober
Speaker 1: weighing of costs and benefits. And I think we're seeing
Speaker 1: that today with with the ramp up on the nuclear
Speaker 1: program and the fairly imperiled nuclear talks andry. There's an
Speaker 1: issue of this being a regional up problem. And then
Speaker 1: there is the more geopolitical risk that your Asia groups
Speaker 1: seem to identify in their latest report of risks when
Speaker 1: you talk about it, potentially less come year for Iran,
Speaker 1: where there can be a conflagration of some of these tensions.
Speaker 1: What's the broader read through the geopolitics of two yeah,
Speaker 1: so so so. I think we were a bit lulled
Speaker 1: to a false sense of security last year given the
Speaker 1: kind of on again, off again nuclear talks, I think
Speaker 1: the real key to stability in in in the region
Speaker 1: are these negotiations, and the negotiations aren't aren't going well,
Speaker 1: and I think the kind of real pivot point here
Speaker 1: will be likely over the next month or two when
Speaker 1: it most likely becomes clear that a deal is is
Speaker 1: out of reach. You have the US, you have Israel,
Speaker 1: the Gulf States, and of course Iran, all kind of
Speaker 1: pivoting to their respective plan bs, and those plan b
Speaker 1: s are all different, and I think that as you
Speaker 1: see Iran start to realize it's it's its goals of
Speaker 1: increasing leverage against the US, the israelis increasingly concerned about
Speaker 1: what is an unconstrained Iranian nuclear program, as well as
Speaker 1: concerned from the US. I think all of those pressures
Speaker 1: collide uh this year and that's why that's why it
Speaker 1: made it onto our list. Henry, how much does this
Speaker 1: lead to higher oil prices? I know you're not an
Speaker 1: oil strategist, but usually that's the direct market read through
Speaker 1: from this type of tension. Yeah, you know, I think
Speaker 1: that's right. I mean, over over time, I think this
Speaker 1: is a kind of factor that that that will push
Speaker 1: oil prices higher. Of course, there's there's a whole number
Speaker 1: of factors that that go into that, but I think
Speaker 1: on the kind of bullish side, this is certainly one
Speaker 1: of them, especially if you get into a scenario that
Speaker 1: that that we talk about, that starts to look like
Speaker 1: a conflict that I think we're going to have conversations
Speaker 1: like this again and again about will the Israeli's attack
Speaker 1: or won't they attack? Will there be air strikes on
Speaker 1: Irani nuclear facilities or won't they And if that sounds
Speaker 1: a lot like conversations, that's because it is. We're essentially
Speaker 1: back to a position where where it appears diplomacy is
Speaker 1: not going to succeed at this present time, and that
Speaker 1: they're more aggressive options are being contemplated. And and anytime
Speaker 1: you talk about military action in the Gulf region, I
Speaker 1: think that that immediately has a pass through two concerns
Speaker 1: about the stability of supply. Henry Rhyme, Henry, thank you
Speaker 1: if you write your group, thank you very much and
Speaker 1: thank you to you right a gree putting imprema over
Speaker 1: the last twenty four hours working through those talp risks
Speaker 1: again this time, it has been extraordinary what we've seen
Speaker 1: in terms of action and particularly in electronic vehicles. Electric vehicles,
Speaker 1: I should say in response a competitive response to Tesla
Speaker 1: joining us now from dearborn, and that can only mean
Speaker 1: the Ford Motor Company Kamagalatro joins us right now. Thank
Speaker 1: you so much, sir for joining us with your leadership
Speaker 1: at Ford Motor on electric vehicles. I am thunderstruck by
Speaker 1: the response to the manly F one fifty pickup truck.
Speaker 1: It does appear at two hundred thousand units. People want
Speaker 1: to buy an electric F one fifty. Tell us how
Speaker 1: important price is to that decision? At thirty nine thousand plus?
Speaker 1: Has that been the trick to get that preorder? You've got?
Speaker 1: Good morning and thanks for having me. Um prices one factor,
Speaker 1: I would say, But I think it's the compelling nature
Speaker 1: of the product. Uh that's really important here. Uh this
Speaker 1: product has when we were doing research with our customers, UH,
Speaker 1: they love the acceleration of it, they love the torque
Speaker 1: it brings in. They love the payload of two thousand pounds. Uh,
Speaker 1: it's it's great driving truck. It's credibly fast. You know,
Speaker 1: truck owners love torque, and torque is what this electric
Speaker 1: vehicle brings. It's more than seventy seven hundred seventy feet
Speaker 1: pound of torque. All of that capability, it's for built
Speaker 1: for tough. UH. You know, it's one of the vehicles
Speaker 1: that's been in a leading high selling vehicle for US,
Speaker 1: you know, more than more than forty five years in
Speaker 1: a row, UH, leading its segment. So combine all that
Speaker 1: into a very compelling product proposition with a starting price
Speaker 1: of under forty thousand, nine hundred seventy four is what's
Speaker 1: made this uh such a compelling proposition for our customers.
Speaker 1: I am I'm so glad, Kumar you brought up the
Speaker 1: physics of this. The first time I felt the modern
Speaker 1: torque of electric vehicles was an electric cab Chinese made
Speaker 1: I believe in London and I the pull down the
Speaker 1: road was absolutely extraordinary. Explained the new torque. The physics
Speaker 1: of a new torque versus our stereotype view of a tesla.
Speaker 1: So the torque, uh, you know, especially for truck buyers,
Speaker 1: is incredibly important. And if you start with an internal
Speaker 1: combustion engine, we're all used to what's what's the traditional
Speaker 1: torque curve? As you start pushing on the gas pedal,
Speaker 1: the torque starts building up and eventually piques at some
Speaker 1: point and then sort of stabilizes at that point. In
Speaker 1: electric vehicles, there are two key things that are different.
Speaker 1: The torque is instantaneous the moment, so that build up
Speaker 1: that's in the elect in the s vehicles is not there.
Speaker 1: It's almost instantaneously. You push on the the pedal, accelerator,
Speaker 1: pedal and it's instantaneously there. The second is the amount
Speaker 1: of torque that's available is incredible. Uh. For for this
Speaker 1: weekle it's going to be over seven pound feet, which
Speaker 1: is just just an incredible number. And that's really important
Speaker 1: for our customers for not only for driving dynamics as
Speaker 1: well as for towing. UH. And go ahead, Well, no, Kumar,
Speaker 1: is is the issue here selling it to consumers or
Speaker 1: is it actually producing enough to sell to consumers? Because
Speaker 1: that's been the real hang up when it's come to
Speaker 1: auto sales over the past twenty four months. Yeah. You know,
Speaker 1: between the COVID crisis the chip crisis, UH, the entire
Speaker 1: industry has struggled to produce that at the levels that
Speaker 1: we were producing U. So you take that crisis, those
Speaker 1: two twin crisis and then as we're transforming the company
Speaker 1: to go from internal combustion engines to battery electric vehicles. Uh.
Speaker 1: Changing the demand has been a real trick. We thought
Speaker 1: we were setting up our factories appropriately for the demand,
Speaker 1: but as soon as we revealed the vehicle, we had
Speaker 1: to nearly double the capacity to eighty And that's why
Speaker 1: today's announcement is so important, because even after we increased
Speaker 1: capacity for this vehicle to eighty thousand Lightnings, that the
Speaker 1: reservations continue to come in at record pace. And today
Speaker 1: that's why we're announcing that we're going to now increase
Speaker 1: capacity in this plant, Lightnings, and that involves then you know,
Speaker 1: all the entire supply chain, the batteries that motors, the controllers. So,
Speaker 1: given the fact that you have increased production, that you
Speaker 1: have seen such robust demand, and that the potential of
Speaker 1: additional stimulus from the federal government in a broader base
Speaker 1: of electric vehicle manufacturers, do you think the electric vehicle
Speaker 1: could reach ten of the American market by the end
Speaker 1: of this year. That's that's difficult to say, like you said,
Speaker 1: because it will be both not only demand based on
Speaker 1: the demand are we are seeing for our vehicles and
Speaker 1: and the rest of the industry is seeing. It feels
Speaker 1: like the demand is certainly there, but the question will
Speaker 1: be how quickly can we all of us execute to
Speaker 1: build capacity to meet that demand. And that's what we
Speaker 1: are very busy doing. By the next twenty four months,
Speaker 1: we expect to get to about six hundred thousand battery
Speaker 1: electric units globally, and that's before our bigger investments that
Speaker 1: we're making in Kentucky and Tennessee. Votes for barried batteries
Speaker 1: as well as assembly come online, because they don't come
Speaker 1: on line until about Kamar, thank you so much. I've
Speaker 1: got about fourteen more questions, including charging stations, but we'll
Speaker 1: do that another time. And and Comar, I just gotta
Speaker 1: tell you, Lisa Bramowitz looks good on the streets of
Speaker 1: Manhattan in a Ford F one fifty pickup truck. I
Speaker 1: just think that's that's a natural there as well. Camar
Speaker 1: Galatra with us of course running the shop for Ford
Speaker 1: Motor Company Dearborn, Michigan as well. This is the Bloomberg
Speaker 1: Surveillance Podcast. Thanks for listening. Join us live weekdays from
Speaker 1: seven to ten am Eastern on Bloomberg Radio and on
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Speaker 1: Tom Keene, and this is Bloomberg.