WEBVTT - Boeing Share Sale, VW Seeks Plant Closings 0:00:02.440 --> 0:00:09.119 Bloomberg Audio Studios, podcasts, radio news. You're listening to the 0:00:09.160 --> 0:00:13.280 Bloomberg Intelligence Podcast. Catch us live weekdays at ten am 0:00:13.360 --> 0:00:16.360 Eastern on Affo, cardplay and Android Auto with the Bloomberg 0:00:16.400 --> 0:00:19.720 Business App. Listen on demand wherever you get your podcasts, 0:00:19.960 --> 0:00:22.320 or watch us live on YouTube. 0:00:23.079 --> 0:00:25.840 Boeing hitting the market. I'm raising some money up to 0:00:26.000 --> 0:00:30.440 nineteen large, maybe fourteen billion in common, maybe five billion 0:00:30.480 --> 0:00:34.800 in preferred. I think they can get this done pretty quickly. 0:00:34.840 --> 0:00:37.360 Everybody knows the Boeing name. It's been trading in these 0:00:37.479 --> 0:00:39.560 levels for a long time, so we know where the 0:00:39.640 --> 0:00:43.080 value is. George Ferguson, he's the analysts responsible for all 0:00:43.120 --> 0:00:45.920 this stuff. He's a senior airspace, defense and airlines analysts 0:00:45.960 --> 0:00:49.120 for Bloomberg Intelligence. George, if they are able to get 0:00:49.159 --> 0:00:54.200 this deal done again, roughly nineteen billion of incremental new equity, 0:00:54.640 --> 0:00:55.920 what's that going to do for him? How much time 0:00:55.960 --> 0:00:56.680 is I going to buy him? 0:00:57.680 --> 0:01:01.480 So we think it probably buys them a couple of quarters, right. 0:01:01.560 --> 0:01:04.800 So on the call the other day, on the evening's 0:01:04.880 --> 0:01:07.759 call for three Q, they indicated that they thought they'd 0:01:07.760 --> 0:01:11.040 burn four four and a half billion dollars in four 0:01:11.160 --> 0:01:14.920 Q similar to what they burned in two Q at 0:01:14.920 --> 0:01:18.120 that burn rate, what it gets maybe even you know, 0:01:18.160 --> 0:01:21.319 three quarters or the burn I wouldn't I would hope 0:01:21.319 --> 0:01:24.319 they wouldn't need all that, but we did here. Again 0:01:24.360 --> 0:01:27.000 their outlook that the first half of next year they 0:01:27.040 --> 0:01:30.399 expect to be largely a cash use scenario and for 0:01:30.440 --> 0:01:32.800 the full year they'd be cash used'd go sounded like 0:01:32.800 --> 0:01:35.559 they would go cash positive sometime in the second half, 0:01:35.600 --> 0:01:39.400 they hoped, so two three quarters. 0:01:39.800 --> 0:01:42.720 So, George, just in terms of how large this can be, 0:01:42.760 --> 0:01:45.679 we know that they launched the shelf to raise up 0:01:45.720 --> 0:01:48.680 to twenty five billion. Do you think that gets close 0:01:48.720 --> 0:01:51.840 to maxing it out just because it's going and they 0:01:51.880 --> 0:01:53.040 simply probably can. 0:01:54.920 --> 0:01:57.080 Well, I guess you know they have to, you know, 0:01:57.120 --> 0:01:59.600 sort of really, I mean, there's a lot of dilution here, right, 0:01:59.600 --> 0:02:02.680 so really be concerned about dilution. But you know, last 0:02:02.760 --> 0:02:05.360 I look, the shares were down a couple percent, so 0:02:05.360 --> 0:02:09.080 it seemed like the market's not that concerned about whatever 0:02:09.200 --> 0:02:12.000 delution is going to occur here. I think the bigger 0:02:12.040 --> 0:02:14.800 amount they have, right, the more staying power, obviously, the 0:02:14.840 --> 0:02:18.000 more they can look at the union across the negotiating table. 0:02:18.080 --> 0:02:20.600 And say we can hang out for a long time. 0:02:20.680 --> 0:02:24.200 We really need you to rethink your idea on let's 0:02:24.200 --> 0:02:25.600 say something like a pension, right. 0:02:26.520 --> 0:02:29.080 And so I think, you know, more money helps them there. 0:02:30.480 --> 0:02:34.480 And look, the aerospace supply chain still isn't stable, right, 0:02:34.560 --> 0:02:38.639 so Airbus should be sort of moving towards fifty rate 0:02:38.880 --> 0:02:41.160 on a three twenty as they close out the year. 0:02:41.200 --> 0:02:42.919 Here, we're not seeing it. 0:02:43.639 --> 0:02:46.119 We're seeing them in the forties still, so they're sort 0:02:46.160 --> 0:02:47.240 of proof positive to us. 0:02:47.320 --> 0:02:48.000 You know, we're. 0:02:47.800 --> 0:02:51.440 Seeing more noise out of the engine makers. They're still 0:02:51.480 --> 0:02:54.800 sort of working to get their supply chains fully functioning 0:02:54.840 --> 0:02:57.880 coming out of the pandemic. So it's not a given 0:02:57.960 --> 0:03:00.120 that just once they get this strike past them that 0:03:00.200 --> 0:03:04.280 Bowe's going to have, you know, clear skies ramp up quickly, 0:03:04.480 --> 0:03:07.480 generate cash and not have any additional problems. So I 0:03:07.480 --> 0:03:10.239 think raising more, raising above twenty billion, which yeah, I 0:03:10.280 --> 0:03:14.680 think could certainly happen here, just buys them more time 0:03:14.840 --> 0:03:17.000 in a world that is just has a lot more 0:03:17.120 --> 0:03:20.600 variables in it than you know, than most other industries. 0:03:20.639 --> 0:03:23.200 The airspace industry is more more variables right. 0:03:23.120 --> 0:03:25.520 Now, George, what are you hearing about this strike here? 0:03:25.560 --> 0:03:27.840 Has there been any movement here? Have they been able 0:03:27.880 --> 0:03:31.600 to narrow in on a or a topic or two 0:03:31.680 --> 0:03:33.280 or three? What are what are you hearing? 0:03:34.400 --> 0:03:37.200 I'm hearing it has a lot to do about pensions, 0:03:37.280 --> 0:03:40.040 right I'm still this weekend, I'm hearing noise out of 0:03:40.040 --> 0:03:43.680 the unions on the on the West coast, and that 0:03:43.680 --> 0:03:47.080 that noise, you know, not trying to demean it. It's 0:03:47.160 --> 0:03:50.080 it's the commentary is probably better way of putting it. 0:03:50.320 --> 0:03:53.040 Out of the union is really around a pension now, 0:03:54.040 --> 0:03:56.680 you know, I have heard the machinists presidents say that, 0:03:58.120 --> 0:04:00.320 you know, if they can't give a pension, they should 0:04:00.760 --> 0:04:03.360 Boeing should be prepared to give somewhere else. So it 0:04:03.400 --> 0:04:06.800 sounds like there is flexibility, but it sounds like a 0:04:06.840 --> 0:04:10.280 lot of it has to do with retirement plans and 0:04:10.320 --> 0:04:12.520 what the union thought they lost a decade ago. They 0:04:12.560 --> 0:04:14.840 did lose the pension a decade ago, and they think 0:04:14.880 --> 0:04:17.960 they lost a very valuable benefit. And it sounds like 0:04:18.000 --> 0:04:20.080 there's a lot of focus on that right now. 0:04:21.000 --> 0:04:22.680 And we saw the report at the end of last 0:04:22.720 --> 0:04:26.440 week that the company could sell their Starliner space program. 0:04:26.800 --> 0:04:30.159 What's your thinking on that? Is a more streamlined Boeing 0:04:30.240 --> 0:04:32.160 more attractive to equity investors. 0:04:33.720 --> 0:04:37.120 Look, I think Boeing could potentially do some streamlining. I 0:04:37.200 --> 0:04:41.400 frankly think the space business isn't necessarily the place. 0:04:41.160 --> 0:04:43.360 For them to do the streamlining. 0:04:43.440 --> 0:04:45.520 But I do think they're looking for pieces of the 0:04:45.560 --> 0:04:49.479 company that aren't core to sort of aircraft, you know, 0:04:49.520 --> 0:04:53.440 defense aircraft, commercial aircraft, and so space I think stands 0:04:53.440 --> 0:04:56.400 out for that. The problem I have though with the 0:04:56.400 --> 0:04:59.120 space business is they've got a launch business called the 0:04:59.200 --> 0:04:59.960 United Launch a line. 0:05:00.080 --> 0:05:00.880 It's with Lockheed. 0:05:01.440 --> 0:05:04.960 It's not as competitive as SpaceX, right, I know from 0:05:04.960 --> 0:05:07.880 people I talked to in the industry, SpaceX can deliver 0:05:08.000 --> 0:05:13.000 things into orbit much cheaper. You know, I think the 0:05:13.080 --> 0:05:17.200 Boeing Lockheed joint venture suffers from I think some of 0:05:17.240 --> 0:05:21.000 those sort of structural challenges inside any big defense contract 0:05:21.040 --> 0:05:24.240 that they're not nimble and they're not cheap. And I 0:05:24.279 --> 0:05:27.479 think you know, star Liner, they took four point six 0:05:27.560 --> 0:05:30.200 billion to develop a capsule. It's supposed to be the 0:05:30.240 --> 0:05:34.480 second capsule to the SpaceX capsule, which one as well. 0:05:34.920 --> 0:05:38.520 You know, NASA wantce redundancy to deliver to the International 0:05:38.600 --> 0:05:39.200 Space Station. 0:05:40.320 --> 0:05:42.160 There's a commitment in there. I think they have to. 0:05:42.120 --> 0:05:44.440 Deliver or at least have to go to the space 0:05:44.480 --> 0:05:48.080 station at least twice a year for a number of years. 0:05:48.600 --> 0:05:52.440 I don't see NASA, you know, letting them off that 0:05:52.440 --> 0:05:54.960 that requirement. So they're gonna have to find someone else 0:05:55.000 --> 0:05:58.960 to step in to a program they've already developed, to 0:05:59.120 --> 0:06:03.200 take it over and commit to making you know, deliveries 0:06:03.240 --> 0:06:05.359 to the space station or shots to the space station 0:06:05.480 --> 0:06:09.000 twice a year. I think that they're going to be 0:06:09.040 --> 0:06:11.599 hard pressed to really get much money from that, because again, 0:06:11.640 --> 0:06:13.000 they don't they don't deliver cheap. 0:06:13.040 --> 0:06:17.680 They're overruns on Starliner two. So I just think it's. 0:06:17.560 --> 0:06:20.120 Going to be a real challenge to really generate much 0:06:20.200 --> 0:06:22.719 cash from that. That's been on the market too for 0:06:22.800 --> 0:06:25.599 a while, and nobody's bitten so far. I understand Blue 0:06:25.640 --> 0:06:27.520 Origin looked at it, and now they're going to the 0:06:27.560 --> 0:06:30.800 equity markets for twenty billion in equity. So I think 0:06:30.839 --> 0:06:33.279 that's a sign of what they think they can generate 0:06:33.320 --> 0:06:35.840 for that business just isn't there, I don't think all. 0:06:35.839 --> 0:06:37.960 Right, George, thanks so much for the update. Appreciate it 0:06:38.000 --> 0:06:38.400 as always. 0:06:38.440 --> 0:06:42.480 George Ferguson, Senior Aerospace, Defense and Airlines sentists for Bloomberg Intelligence, 0:06:43.800 --> 0:06:46.000 Boeing in the market for you know, up to nineteen 0:06:46.040 --> 0:06:51.360 billion dollars in some equity common stock, preferred stock. We'll 0:06:51.400 --> 0:06:53.479 see stock's only off one percent years. So, as George 0:06:53.520 --> 0:06:56.320 was suggesting, it seems like the market's okay with the delution. 0:06:56.440 --> 0:06:57.600 I mean, it is what it is. You kind of 0:06:57.680 --> 0:06:59.920 knew this was coming. It's been well telegraphed. 0:07:00.240 --> 0:07:03.760 We reported it back in early October, so almost four 0:07:03.760 --> 0:07:06.000 weeks ago. At this point that they were in talks 0:07:06.040 --> 0:07:08.360 with advisors, that stock was about one point fifty three. 0:07:08.440 --> 0:07:10.600 Right now it's one fifty three to five. So when 0:07:10.640 --> 0:07:12.920 you think about it, we're continuing to see the stock 0:07:12.960 --> 0:07:15.400 move sideways. As you mentioned, the big question is what 0:07:15.480 --> 0:07:17.720 kind of a discount, How quickly does this deal get done, 0:07:17.920 --> 0:07:19.880 and what are the terms that actually get agreed upon 0:07:20.040 --> 0:07:23.239 for that convertible debt, Just because when as George mentioned, 0:07:23.240 --> 0:07:25.840 when you talk dilution, if you're an equity investor, I'm 0:07:25.880 --> 0:07:27.520 sure you want to clean balance sheet, but you also 0:07:27.600 --> 0:07:29.000 don't want to get squeezed out of your position. 0:07:29.200 --> 0:07:31.960 Yep, it's actually and then presumably that'll strengthen their position 0:07:32.040 --> 0:07:34.160 with the union. Just in terms of talking about this 0:07:34.280 --> 0:07:35.240 upcoming contract. 0:07:36.640 --> 0:07:40.520 You're listening to the Bloomberg Intelligence Podcast. Catch us live 0:07:40.600 --> 0:07:44.120 weekdays at ten am Eastern on applecar Play and Android 0:07:44.160 --> 0:07:46.920 Auto with the Bloomberg Business app. You can also listen 0:07:47.040 --> 0:07:50.120 live on Amazon Alexa from our flagship New York station. 0:07:50.520 --> 0:07:53.280 Just say Alexa Play Bloomberg eleven thirty. 0:07:54.440 --> 0:07:57.320 Let's switch hears to the global auto industry. A little 0:07:57.360 --> 0:07:59.520 bit different story there is. The best I could tell 0:07:59.520 --> 0:08:01.400 the two may your headwinds for the auto industry is 0:08:01.400 --> 0:08:03.960 one China, which is obviously a huge growth market for 0:08:04.040 --> 0:08:07.880 the global auto industry. It's slowing and the local brands 0:08:07.920 --> 0:08:11.200 there are improving dramatically, so they're getting much more competitive there. 0:08:11.600 --> 0:08:13.080 And then the second thing is, oh, yeah, they got 0:08:13.120 --> 0:08:16.000 this whole transition to evs and how do you do that? 0:08:16.720 --> 0:08:20.800 We heard some some really cautious news out of Volkswagen today. 0:08:21.040 --> 0:08:25.280 Volkswagen eyes closing three German factories in a cost cutting push. 0:08:25.360 --> 0:08:27.520 Let's check them with Steve Man, he covers the global 0:08:27.560 --> 0:08:30.400 auto industry for Bloomberg Intelligence. Steve talked to us first 0:08:30.400 --> 0:08:34.760 about this Volkswagen news here, I mean shutting German factories. 0:08:34.840 --> 0:08:38.679 They don't typically do that, So how much, how much 0:08:38.720 --> 0:08:40.839 hurt are they feeling over their VW. 0:08:41.480 --> 0:08:44.320 Oh, they're in the world of pain at the moment. 0:08:44.520 --> 0:08:49.040 You kind of mentioned it, Paul. They are hurting around 0:08:49.040 --> 0:08:53.880 the world in all three major regions of the auto market. 0:08:54.080 --> 0:08:56.600 You know, US, they're not They're not that big of 0:08:56.640 --> 0:08:58.240 a they don't have that big of a presence in 0:08:58.280 --> 0:09:01.800 the US. You're up, you know, it's sales are down. 0:09:01.880 --> 0:09:05.520 You're not only hearing it from Volkswagen, but also Silentis 0:09:05.640 --> 0:09:07.960 as well. You know, their stock is down quite a 0:09:08.000 --> 0:09:12.760 bit over the past few months. And in China, you know, China, 0:09:13.160 --> 0:09:16.760 the Chinese OEMs are taking a lot of market share 0:09:17.320 --> 0:09:21.440 in China, They're they're entering the EU market. Like you 0:09:21.480 --> 0:09:26.720 said earlier, you know, Chinese automaker are just much quicker 0:09:26.760 --> 0:09:30.960 in transitioning to EVS in that region than any of 0:09:31.000 --> 0:09:35.720 the foreign OEMs operating in China at the moment. So, 0:09:36.360 --> 0:09:37.880 you know, Volkswagen is feeling it. 0:09:38.600 --> 0:09:41.079 And how does that kind of position a company And 0:09:41.200 --> 0:09:44.679 you're up one of the biggest automakers trying to compete 0:09:45.080 --> 0:09:47.680 with US automakers who are having their own issues and 0:09:47.720 --> 0:09:50.600 as well as kind of the potential pent up demand 0:09:50.640 --> 0:09:55.319 at least in terms of capacity production capacity in China. 0:09:55.520 --> 0:09:59.920 Yeah, there, I mean de pent up the capacity in China. 0:10:00.520 --> 0:10:04.800 It is really not EV capacity. It's actually really ICE capacity, 0:10:04.840 --> 0:10:07.160 internal combuntion engine vehicle capacity. 0:10:07.800 --> 0:10:07.880 Uh. 0:10:08.080 --> 0:10:11.880 There's been a lot of closing of those plants in China. 0:10:12.000 --> 0:10:15.680 Volkswagen has closed one of its plants in China with 0:10:15.760 --> 0:10:19.679 his partner Shanghai Auto sai C. You know, Ford has 0:10:19.720 --> 0:10:22.240 closed a number of plants. Hyundai has closed a number 0:10:22.280 --> 0:10:25.960 of plants. And these are all companies that have not 0:10:26.640 --> 0:10:31.040 transitioned to EV as fast as the OEM's companies like 0:10:31.120 --> 0:10:35.880 GM and BUYD taking huge market share from the foreign automakers. 0:10:35.920 --> 0:10:39.160 By D is actually the biggest now biggest automaker in 0:10:39.240 --> 0:10:40.480 terms of volume in China. 0:10:41.480 --> 0:10:45.120 All right, So what is Global Auto to do about China? 0:10:45.160 --> 0:10:46.360 What is the strategy? 0:10:46.360 --> 0:10:46.760 Do you think? 0:10:46.800 --> 0:10:50.200 Because I think if I've got these Chinese companies that are, 0:10:50.200 --> 0:10:52.719 you know, getting better and better every day, what do. 0:10:52.720 --> 0:10:53.120 I do there? 0:10:53.120 --> 0:10:55.000 Do I walk away from this market? I can't do that. 0:10:55.040 --> 0:10:55.600 It's too big. 0:10:56.679 --> 0:10:58.360 Yeah, that's I know. 0:10:58.520 --> 0:11:01.120 You know, if you look at the four OEMs operating 0:11:01.120 --> 0:11:04.559 in China five years ago, they were they had market 0:11:04.600 --> 0:11:07.959 share over fifty percent in the last couple of years, 0:11:08.360 --> 0:11:10.040 they basically have changed position. 0:11:10.360 --> 0:11:10.560 Uh. 0:11:10.679 --> 0:11:13.559 You know, the Chinese OEM has more and more capacity, 0:11:14.040 --> 0:11:17.400 more and more market share, uh, and it's growing. There's 0:11:17.400 --> 0:11:20.199 a number of ways they can attack this. They need, 0:11:20.280 --> 0:11:23.200 you know, they either invest a lot of money uh 0:11:23.240 --> 0:11:27.000 and and really grow evs and not just evs, but 0:11:27.160 --> 0:11:32.040 these user interface. Chinese consumers are buying cars because they 0:11:32.160 --> 0:11:35.280 like the user interface that the Chinese OEMs are offering them. 0:11:35.840 --> 0:11:38.280 So they need to build more evs. They need to 0:11:38.320 --> 0:11:44.280 look at revamping their software to cater the local customers 0:11:44.320 --> 0:11:44.920 in China. 0:11:45.320 --> 0:11:45.480 Well. 0:11:45.520 --> 0:11:48.720 The other the other option is really to close shop 0:11:49.040 --> 0:11:54.319 and you know, focus, refocus their their investments and their costs. 0:11:54.679 --> 0:11:56.240 They know how to you know, they know how to 0:11:56.280 --> 0:11:58.520 operate in Europe, they know how to operate in the US. 0:11:58.840 --> 0:12:01.079 They know how to do, you know, sell more cars 0:12:01.080 --> 0:12:04.280 in their local markets. That that may be one option 0:12:04.400 --> 0:12:07.360 is to just retrench. But you know, that's that's not 0:12:07.400 --> 0:12:10.440 an unfortunate approach if they had to do that in 0:12:10.480 --> 0:12:12.760 the biggest auto market in the world. 0:12:13.080 --> 0:12:16.760 When I look at Europe, are there any automakers well positioned? 0:12:16.800 --> 0:12:19.160 I mean, Stilantis is hitting getting hit by four performance 0:12:19.160 --> 0:12:22.720 in the US BMW has an expensive recall. Mercedes Bins 0:12:22.720 --> 0:12:26.760 has been struggling in China, Like is anyone winning well? 0:12:26.800 --> 0:12:32.400 Relatively speaking, I think the German luxury automakers, the BMW, 0:12:32.520 --> 0:12:36.880 Mercedes are faring better than the mass market, but they're 0:12:36.920 --> 0:12:40.880 also feeling the pain, right They're all the luxury brands 0:12:40.920 --> 0:12:42.240 are also feeling the pain. 0:12:42.559 --> 0:12:42.720 You know. 0:12:42.800 --> 0:12:48.319 BMW and Mercedes just reported, you know, lower sales in China. 0:12:49.320 --> 0:12:53.360 And you know, I also am concerned. And it's a 0:12:53.400 --> 0:12:57.559 matter of time because there are companies like Neil, there 0:12:57.559 --> 0:13:00.400 are companies that are xpunk, you know, they're also moving 0:13:00.520 --> 0:13:04.600 up market competing with the Mercedes and BMW. So I think, 0:13:04.679 --> 0:13:08.320 relatively speaking, just to answer your question, the luxuries are 0:13:08.360 --> 0:13:11.480 doing better, but you know, time will tell if they 0:13:11.480 --> 0:13:15.240 can you know, maintain you know, some of the sales 0:13:15.240 --> 0:13:16.680 that they have in China. 0:13:17.000 --> 0:13:19.360 All right, Steve, thanks so much for joining us there. 0:13:19.360 --> 0:13:22.760 Steve Man, he covers the global global autos and industrials 0:13:23.160 --> 0:13:27.520 for Bloomberg Intelligency spased down in our Princeton, New Jersey office, 0:13:27.760 --> 0:13:30.680 So getting the latest on VW closing some plants, cutting 0:13:30.720 --> 0:13:33.199 some staff, trying to cut some costs here as they 0:13:33.200 --> 0:13:35.640 face the some headwinds coming out of China, as well 0:13:35.640 --> 0:13:39.439 as the continued costs of going over to electric vehicles. 0:13:40.880 --> 0:13:44.760 You're listening to the Bloomberg Intelligence Podcast. Catch us live 0:13:44.840 --> 0:13:47.560 weekdays at ten am Eastern on fo Car Playing and 0:13:47.679 --> 0:13:50.560 Broun Auto with the Bloomberg Business App. Listen on demand 0:13:50.600 --> 0:13:55.400 wherever you get your podcasts, or watch us live on YouTube. 0:13:56.120 --> 0:13:57.480 All right, our next guest, let me see if I 0:13:57.520 --> 0:14:01.320 got this conjugated right. She's in Chicago, though, but she's 0:14:01.360 --> 0:14:04.640 a Boston native and fan of the Red Sox, which 0:14:04.679 --> 0:14:07.480 means she's rooting for the Dodgers. I think I've got 0:14:07.520 --> 0:14:10.280 that rate. Shane Sissel, president and CEO of a ban 0:14:10.480 --> 0:14:14.080 Rionn Capital Management, joins us here in our Bloomberg Interactive Broker. 0:14:13.840 --> 0:14:14.800 Studio that I get that right. 0:14:14.880 --> 0:14:16.760 We totally got that right. I think, guys we were 0:14:16.800 --> 0:14:20.560 saying before, Dave Roberts has to continue to do everything 0:14:20.600 --> 0:14:22.360 he can to help the Red Sox, whether it be 0:14:22.400 --> 0:14:25.680 win a World Series as a player, as give the 0:14:25.720 --> 0:14:28.200 Red Sox World Series as a manager, and now he 0:14:28.280 --> 0:14:29.040 needs to make sure. 0:14:28.920 --> 0:14:31.040 That the Yankees prevent the Yankees. I get the whole 0:14:31.080 --> 0:14:32.800 concept there, all right, Before we get to your market 0:14:32.800 --> 0:14:35.680 call which we want to talk about pink ETF. Talk 0:14:35.720 --> 0:14:36.240 to me about that. 0:14:36.520 --> 0:14:39.680 Yes, so pink ETF is near and dear to my heart. 0:14:40.440 --> 0:14:44.800 I am a breast cancer survivor and October is breast 0:14:44.840 --> 0:14:48.760 cancer Awareness month. The pink ETF is issued by Simplify 0:14:48.840 --> 0:14:53.080 Asset Management. It is a healthcare ETF. It invests in healthcare, 0:14:53.120 --> 0:14:56.800 is not specific to cancer or breast cancer in general. 0:14:57.040 --> 0:14:59.880 It's the only pro bono ETF on the market, meaning 0:15:00.800 --> 0:15:05.920 the manager does it pro bono and they donate all 0:15:05.960 --> 0:15:09.880 of the net profits of the fund through its expense 0:15:10.000 --> 0:15:14.280 ratio to the Susan G. Comen Foundation for Breast Cancer Research. 0:15:14.360 --> 0:15:18.240 So you know it's October, yeap breast cancer on this month. 0:15:18.600 --> 0:15:21.480 You can do your part and this is an interesting 0:15:21.480 --> 0:15:24.040 way to do that. Fund has a great track record. 0:15:24.120 --> 0:15:27.880 Yeah, absolutely, nice Caaren from Springlake. That's for you. Talk 0:15:27.920 --> 0:15:29.840 to us about the markets. What do we do here? 0:15:29.840 --> 0:15:31.880 Do we just sit on the sidelines until the election's 0:15:31.920 --> 0:15:35.480 over and then become investors again? What are you telling 0:15:35.480 --> 0:15:37.040 your clients about these markets these days? 0:15:37.400 --> 0:15:37.720 Well? 0:15:38.280 --> 0:15:40.280 I mean yeah, I mean the election is the number 0:15:40.360 --> 0:15:44.920 one most important piece of news that the markets is 0:15:44.920 --> 0:15:47.920 waiting for we have a virtual tie and almost all 0:15:47.960 --> 0:15:50.440 the polls and I have opinions on where I think 0:15:50.480 --> 0:15:55.080 that kind of leans. But in that kind of environment, 0:15:55.800 --> 0:16:00.200 companies are reluctant to make any big Capex decision, are 0:16:00.240 --> 0:16:03.400 kind of putting a pause on policy, waiting to see, 0:16:03.480 --> 0:16:06.440 you know, who wins, because the rules could be substantially 0:16:06.440 --> 0:16:11.600 different depending on who becomes the victor. 0:16:12.200 --> 0:16:15.080 Well, what do you make, Shana of the betting market? 0:16:15.120 --> 0:16:18.000 We talk kind of ad nauseum. It feels like at 0:16:18.200 --> 0:16:20.680 poly market and predicted and how that impacts it. What 0:16:20.720 --> 0:16:23.280 the Trump trade is or isn't. If we're still in 0:16:23.480 --> 0:16:27.720 agreement that it's a coin flip, how are people positioning 0:16:27.800 --> 0:16:30.760 if we are kind of at least reading about in 0:16:30.760 --> 0:16:33.640 Bloomberg's reporting about kind of the so called Trump trade, 0:16:33.760 --> 0:16:35.800 if it still feels kind of like a deadlock. 0:16:36.400 --> 0:16:43.480 Well, I think there's this one little caveat nuance to this, 0:16:43.960 --> 0:16:47.480 which is that I think in polls that are showing 0:16:47.920 --> 0:16:54.800 a deadlocked electorate that is actually pro Trump in my opinion, right, 0:16:55.480 --> 0:16:57.400 I think we've seen this in every election he's been 0:16:57.400 --> 0:17:03.200 involved in. The Polls tend to underestimate his voting, his 0:17:03.280 --> 0:17:07.720 voters because being associated as a Trump voter has some 0:17:07.800 --> 0:17:10.760 negative connotation in the broad public right, so people are 0:17:10.880 --> 0:17:14.120 less likely to be honest about it until they get 0:17:14.160 --> 0:17:18.080 into the the voting booth, and then it doesn't matter 0:17:18.280 --> 0:17:23.600 because it's truly anonymous or we hope. So in that case, 0:17:24.160 --> 0:17:26.320 I think that when you see something where it's a 0:17:26.400 --> 0:17:30.920 virtual tie, it's probably leaning more in Trump's direction. 0:17:30.640 --> 0:17:31.959 Than it is in Harris's direction. 0:17:32.200 --> 0:17:35.720 That's just my opinion, all right, So elections aside, it 0:17:35.760 --> 0:17:38.879 seems like we've got a FED that's accommodative, seems like 0:17:38.960 --> 0:17:43.760 earnings generally remain fairly strong, the economy remains fairly strong, 0:17:43.880 --> 0:17:45.760 in inflation coming down. 0:17:46.680 --> 0:17:46.879 Is that? 0:17:47.040 --> 0:17:48.840 How constructive is that for you guys in terms of 0:17:48.880 --> 0:17:50.399 taking risk in this market in place? 0:17:50.800 --> 0:17:53.280 Well, I think this is a market where you can 0:17:53.440 --> 0:17:57.320 take risk. So for me, the way I position portfolios 0:17:57.480 --> 0:18:00.240 is I want to make sure I can get the 0:18:00.280 --> 0:18:01.200 most upside. 0:18:00.920 --> 0:18:02.560 I can from the equity markets because I. 0:18:02.560 --> 0:18:05.320 Think that the probability of upside in the equity markets 0:18:05.400 --> 0:18:09.359 is quite high, and I think it's also high probability 0:18:09.400 --> 0:18:12.480 of risk assets outperforming, so I want to be able 0:18:12.480 --> 0:18:16.000 to take that risk. I'm not as certain about fixed 0:18:16.000 --> 0:18:19.640 income markets. So I'm taking some of my fixed income 0:18:19.640 --> 0:18:23.000 allocation and putting it into more alternative strategies, which I 0:18:23.040 --> 0:18:27.359 think do better than fixed income but allow me to 0:18:27.400 --> 0:18:30.679 take more risk and equities because they are diversifiers that 0:18:30.760 --> 0:18:33.879 tend to reduce overall portfolio risk. So that's kind of 0:18:33.880 --> 0:18:35.320 how I'm positioning myself. 0:18:35.040 --> 0:18:38.600 Right now within taking on risk. When you say that, 0:18:38.640 --> 0:18:41.400 do you mean within large caps? Are you skewing out 0:18:41.400 --> 0:18:43.320 more towards like a small cap? I just am looking 0:18:43.400 --> 0:18:45.720 at in terms of earnings we're going to hear from 0:18:45.760 --> 0:18:50.040 this week alone Alphabet, AMD, Microsoft, Meta, Apple, Amazon, and 0:18:50.080 --> 0:18:53.159 that's really cap X comments have been making up so 0:18:53.280 --> 0:18:55.320 much of the Nvidia trade. So when you're looking at 0:18:55.400 --> 0:18:58.280 allocating risks to equities, what does that look like? 0:18:58.840 --> 0:19:01.480 So I do think it involved some of the high 0:19:01.480 --> 0:19:05.720 flyer growth stocks. We haven't had an environment that's conducive 0:19:05.800 --> 0:19:08.919 to small caps or value in a while. Jason Trendert 0:19:08.920 --> 0:19:11.280 from STRTIGAZ did a great piece last week called ten 0:19:11.320 --> 0:19:14.040 Things I Think, I Think, and one of the things 0:19:14.040 --> 0:19:16.640 he talked about is in since two thousand and nine, 0:19:16.640 --> 0:19:20.399 we've been in this perpetual QE cycle where companies haven't 0:19:20.440 --> 0:19:25.320 been permitted to fail, and we've been in this perpetual 0:19:25.520 --> 0:19:29.679 late cycle business cycle. The business cycles kind of disappeared, 0:19:30.720 --> 0:19:34.280 and in doing that, it's been a complete headwind to 0:19:34.400 --> 0:19:38.120 anything that would benefit from things winning and losing and 0:19:38.160 --> 0:19:41.760 not allowing companies to fail has kind of also increased 0:19:41.800 --> 0:19:45.040 the haves and have nots. So I'm willing to take 0:19:45.080 --> 0:19:48.000 more risk in those larger cap names. That's where I 0:19:48.080 --> 0:19:50.960 actually think there is more risk, but also things like bitcoin, 0:19:52.040 --> 0:19:55.480 which is not a stock obviously, but is a risk asset. 0:19:55.520 --> 0:19:58.879 In my opinion, I would argue small caps could be 0:19:58.880 --> 0:20:02.320 considered a risk asset, but value wouldn't be right. So 0:20:03.080 --> 0:20:06.040 you're probably staying away from some of your cyclicals and 0:20:06.359 --> 0:20:09.639 you're going with your more risk growth beta names. 0:20:10.040 --> 0:20:12.760 Is where I would be paying attention right. 0:20:12.680 --> 0:20:14.360 Now, Shane. I know you have a lot of experience 0:20:14.400 --> 0:20:16.760 in alternatives, and I've been surprised when I talk to 0:20:17.240 --> 0:20:22.120 retail advisors how willing they are to embrace alternatives and 0:20:22.440 --> 0:20:25.320 to a much higher percentage of their portfolio than I 0:20:25.320 --> 0:20:28.679 would have thought. Where do you see opportunities in alternatives 0:20:28.680 --> 0:20:31.320 these days? Private equity, private credit has becomes so big. 0:20:31.400 --> 0:20:33.240 Hedge funds where do you see alternatives? How do you 0:20:33.280 --> 0:20:34.199 talk your clients about that? 0:20:34.359 --> 0:20:39.760 So private credit is credit, it's correlated to credit markets. 0:20:39.880 --> 0:20:42.760 Private equity is equity, it's correlated to equity markets. So 0:20:42.800 --> 0:20:45.439 they belong in equity and fixed income. And while they 0:20:45.480 --> 0:20:47.920 are alternatives in the sense that their liquidity terms and 0:20:48.200 --> 0:20:52.000 not available to everyone, they're not necessarily diverse fying alternatives. 0:20:52.000 --> 0:20:54.560 I think the opportunities lie in those diverse fying alternatives, 0:20:55.240 --> 0:20:57.680 things like hedge equity, and there's a million different ways 0:20:57.720 --> 0:21:01.160 to slice that pie. That's a pro and a con 0:21:01.240 --> 0:21:03.920 of that asset class. It's you know, they all kind 0:21:03.920 --> 0:21:06.040 of get thrown in together, but you can do hedge 0:21:06.040 --> 0:21:09.800 equity a million different ways, market neutral, managed future is 0:21:09.840 --> 0:21:13.080 global macro, more those hedge fund type strategies, but also 0:21:13.160 --> 0:21:16.600 looking at you know, things like sports rights. I've talked 0:21:16.600 --> 0:21:18.879 about this a million times because I'm a huge sports 0:21:18.920 --> 0:21:22.680 fan and it resonates with me. But there's real opportunity 0:21:22.760 --> 0:21:25.760 here for you to be able to bring diversification into 0:21:25.760 --> 0:21:30.120 your portfolio using things like that. And while advisors are 0:21:30.280 --> 0:21:33.200 definitely more open to alternatives than they've been before, it's 0:21:33.440 --> 0:21:35.320 mostly because their clients are demanding it. 0:21:35.440 --> 0:21:35.640 Right. 0:21:35.960 --> 0:21:40.600 It's because if they don't, then they could lose those relationships. 0:21:40.640 --> 0:21:43.440 And ALTS, I would argue, is a relationship builder because 0:21:43.480 --> 0:21:45.760 you can really I mean, it's such a huge universe, 0:21:45.760 --> 0:21:47.760 you can really find things that will resonate with your 0:21:47.760 --> 0:21:50.880 client on a million different levels. So they're seeing that, 0:21:51.000 --> 0:21:55.680 but seventy five percent advisors still don't use alts and 0:21:56.000 --> 0:21:59.160 the vast majority are allocating something like five percent, where 0:21:59.200 --> 0:22:01.800 institutions is more like twenty five to thirty. So there's 0:22:01.840 --> 0:22:04.600 a huge gap there. Still, it's going to take a 0:22:04.600 --> 0:22:07.440 long time to get there, and we as an industry 0:22:07.440 --> 0:22:11.280 have not done advisors any favor by making investing in 0:22:11.320 --> 0:22:16.200 any sort of alternative incredibly difficult, operationally cumbersome, and in some. 0:22:16.200 --> 0:22:18.200 Cases just annoying. 0:22:18.640 --> 0:22:23.159 Like just a trade BTL, which is an alternative ETF. 0:22:23.440 --> 0:22:25.040 If you tried to do that in your Fidelity or 0:22:25.080 --> 0:22:27.000 Schwab account, you'd get a pop up saying that you 0:22:27.080 --> 0:22:31.000 need to change your risk tolerance to aggressive. And I 0:22:31.040 --> 0:22:33.760 would argue, if I am an aggressive investor, i am 0:22:33.800 --> 0:22:36.720 definitely not doing hedge, dequity or market neutral like that's 0:22:36.760 --> 0:22:41.080 like completely counterintuitive. But because of that, it sort of 0:22:41.119 --> 0:22:43.520 makes people shy away because you've got to change your 0:22:43.520 --> 0:22:46.399 client's risk tolerance and it's not reflective of reality just 0:22:46.440 --> 0:22:47.680 to be able to make a trade. 0:22:47.960 --> 0:22:51.240 And when you talk sports diversification sports rights, like, I 0:22:51.240 --> 0:22:53.280 immediately think of the fact that the Atlanta Braids are 0:22:53.280 --> 0:22:55.399 publicly traded. Is that what you mean or how do 0:22:55.480 --> 0:22:59.440 you think about allocation to sports is an alternative investment? 0:22:59.560 --> 0:23:01.919 No, I think the private equity aspect of it. 0:23:02.040 --> 0:23:06.120 So my favorite fund in that space is the one 0:23:06.160 --> 0:23:10.960 managed by Avenue Capital because I think that what they're 0:23:10.960 --> 0:23:13.120 doing is really interesting. They weren't one of the high 0:23:13.119 --> 0:23:16.200 flyers that was approved by the NFL, but they invest 0:23:16.240 --> 0:23:18.320 in MLB and NBA and things of that. 0:23:18.840 --> 0:23:22.320 Mark Lazari is the kind of founder of that firm. 0:23:22.400 --> 0:23:23.120 He used to own the. 0:23:23.040 --> 0:23:28.600 Box, but he talks about it also in the credit sense. 0:23:29.000 --> 0:23:31.639 Most people don't realize that banks won't lend to sports 0:23:31.680 --> 0:23:35.920 teams because the goal to have a franchise that's worth 0:23:35.960 --> 0:23:38.479 anything is based on whether or not you win, and 0:23:38.480 --> 0:23:40.960 you don't win if you don't spend, and banks don't 0:23:41.000 --> 0:23:44.200 like that so much. So, you know, teams, when they 0:23:44.240 --> 0:23:46.919 need access to the credit markets, they don't really have 0:23:46.960 --> 0:23:49.360 any place to go, so that fund does that. They 0:23:49.400 --> 0:23:52.720 also do what they call emerging sports. So I've done 0:23:52.720 --> 0:23:56.320 a bunch of interviews talking about cricket, Like, cricket is 0:23:56.320 --> 0:23:59.000 an incredibly interesting area of private equity is looking at 0:23:59.040 --> 0:24:00.320 buying cricket teams. 0:24:01.200 --> 0:24:02.760 Women's sports is huge. 0:24:03.080 --> 0:24:06.000 You know, you have the yacht league that's out there 0:24:06.080 --> 0:24:08.840 and some of this as we have the proliferation of 0:24:08.840 --> 0:24:11.800 streaming services and everybody trying to get live events because 0:24:11.800 --> 0:24:13.840 that's really the only way you can get ad dollars. 0:24:14.200 --> 0:24:15.840 You're seeing this more and more. 0:24:15.840 --> 0:24:19.800 Which gives you more and more opportunity to make money 0:24:19.800 --> 0:24:21.679 in sports that maybe we wouldn't have paid attention for. 0:24:21.800 --> 0:24:22.320 A while back. 0:24:22.400 --> 0:24:25.440 Yeah, lots of different opportunities out there. Shana Sisil, thank 0:24:25.440 --> 0:24:27.240 you so much for joining us. Shane Sisil, She's a 0:24:27.280 --> 0:24:31.640 president and CEO of ban reON Capital Management based in Chicago, 0:24:32.119 --> 0:24:35.479 but originally from Boston. We've got that all cleared up. 0:24:37.119 --> 0:24:41.000 You're listening to the Bloomberg Intelligence Podcast. Catch us live 0:24:41.080 --> 0:24:44.639 weekdays at ten am Eastern on applecar Play and Android 0:24:44.640 --> 0:24:47.399 Auto with the Bloomberg Business app. You can also listen 0:24:47.520 --> 0:24:50.639 live on Amazon Alexa from our flagship New York station 0:24:51.000 --> 0:24:54.720 just say Alexa playing Bloomberg eleven thirty. 0:24:55.600 --> 0:24:58.439 Let's switch gears and touch base on the ever changing 0:24:58.680 --> 0:25:02.159 situation in the Middle East. Kirsten Fulton Rose joins as 0:25:02.200 --> 0:25:06.840 president of Red six Solutions. Kirsten, I guess the most 0:25:06.840 --> 0:25:09.399 recent data point that everyone's trying to digest here is 0:25:09.800 --> 0:25:14.560 the Israeli response in its attack on Iran. How would 0:25:14.560 --> 0:25:19.440 you characterize Israel's response sending approximate one hundred fighter jets 0:25:19.440 --> 0:25:23.720 to attack some key logistical targets. What do you make 0:25:23.720 --> 0:25:24.640 of that move? 0:25:26.280 --> 0:25:28.600 It's interesting. One hundred fighter jets sounds like a lot. 0:25:29.119 --> 0:25:31.560 They were sent in three waves, but this response was 0:25:31.600 --> 0:25:35.640 actually designed to allow Iran to declare it requires no response. 0:25:35.880 --> 0:25:39.840 Israel only hit military sites. They hit outside densely populated areas. 0:25:40.200 --> 0:25:43.879 They had it most one civilian casualty. The Israeli defense 0:25:43.880 --> 0:25:47.240 forces say that they targeted border radar systems with very 0:25:47.320 --> 0:25:51.640 light warheads direct quote to remove Aroan's early warning capability, 0:25:51.720 --> 0:25:54.800 and then they followed with the jets that struck carefully 0:25:54.840 --> 0:25:55.800 selected sites. 0:25:56.320 --> 0:25:57.760 If we look at those sites. 0:25:58.280 --> 0:26:01.760 According to some experience US analysts who were looking at 0:26:01.880 --> 0:26:05.359 unclassified imagery, Israel struck buildings in a couple of places, 0:26:05.359 --> 0:26:09.280 including in Parchen and in Klojure, and there are two 0:26:09.280 --> 0:26:13.400 reasons why these locations matter. One, Israel hit Clgier, which 0:26:13.440 --> 0:26:16.159 is a large missile production site that's near Tehran but 0:26:16.240 --> 0:26:19.560 not in it. The reports back in July that Hadro 0:26:19.760 --> 0:26:22.639 was being expanded, So according to these analysts looking at 0:26:22.640 --> 0:26:26.880 the imagery, Israel's pinpointed strikes could have significantly reduced Iran's 0:26:26.880 --> 0:26:29.919 capacity to produce missiles, which then make it less apt 0:26:30.200 --> 0:26:32.720 to want to continue this fight with Israel right now. 0:26:33.280 --> 0:26:37.440 Second Partschen is a large military complex near Tehran as well, 0:26:37.520 --> 0:26:40.200 so capital pays attention, but it's not actually feeling the hit. 0:26:40.560 --> 0:26:43.199 The satellite imagery analysts tell us that Israel hit a 0:26:43.200 --> 0:26:46.160 building there that was used for testing in an old 0:26:46.280 --> 0:26:49.440 nuclear weapon weapons program that was called the Ahmad Plan. 0:26:49.680 --> 0:26:52.760 This program was shut down about twenty years ago according 0:26:52.800 --> 0:26:56.439 to international watchdogs, but Iran denied it ever worked on 0:26:56.440 --> 0:26:59.320 a nuclear weapon there. So this target, we think was 0:26:59.359 --> 0:27:03.080 a message to Tehran. We hit an old facility without personnel, 0:27:03.119 --> 0:27:07.960 without nuclear material present this time, but we can reach 0:27:07.960 --> 0:27:10.760 your nuclear facilities without you being able to prevent it 0:27:10.800 --> 0:27:11.440 in the future. 0:27:11.720 --> 0:27:13.479 If we think it's necessary. 0:27:13.880 --> 0:27:17.040 And Kirsten, you have more than two decades of experience 0:27:17.040 --> 0:27:19.480 working in our security with a focus in the Middle 0:27:19.520 --> 0:27:21.560 East and Africa. One of the things that stood out 0:27:21.600 --> 0:27:24.560 to me was that Israel distributed videos of Prime Minister 0:27:24.640 --> 0:27:28.080 Benjamin n Yahoo and military chiefs coordinating the defense from 0:27:28.119 --> 0:27:33.639 a ministry bunker, which was a rare acknowledgment of an 0:27:33.640 --> 0:27:36.480 attack on Islamic Republican expansion what had been mostly a 0:27:36.520 --> 0:27:39.040 shadow war. What do you make of the video being 0:27:39.080 --> 0:27:42.439 distributed and how does that potentially impact kind of the 0:27:42.480 --> 0:27:43.119 path forward. 0:27:44.240 --> 0:27:47.000 I think the reason for distributing the video was to 0:27:47.040 --> 0:27:49.800 make it clear to the international community that Israel is 0:27:49.920 --> 0:27:52.800 in a real war, that it is truly the existential 0:27:52.840 --> 0:27:55.320 threat it feels it wants the international community to have 0:27:55.400 --> 0:27:57.879 a sense of as well. While we're planning our response 0:27:57.920 --> 0:28:01.520 on Israel on Iran, we are still taking hits from 0:28:01.560 --> 0:28:05.080 Hazbala and from Hemas and perhaps from the Huthis. So 0:28:05.119 --> 0:28:08.080 they're trying to let the international community know that this 0:28:08.200 --> 0:28:11.120 is not something they're taking lately, that they're being arrogant, 0:28:11.119 --> 0:28:14.159 that they really see the threat as serious. So that 0:28:14.200 --> 0:28:16.800 means US support needs to stay high, that means Europe 0:28:16.800 --> 0:28:18.800 needs to stay behind them. They're trying to make sure 0:28:18.800 --> 0:28:22.679 that they continue to maintain this level of support and 0:28:22.760 --> 0:28:26.439 this level of attention on the threat from their international 0:28:26.440 --> 0:28:30.639 partners while they stage these responses, sometimes without listening closely 0:28:30.680 --> 0:28:32.040 to their international partners. 0:28:33.119 --> 0:28:35.600 Kirsen, what do you think the end game is now 0:28:35.640 --> 0:28:38.440 for Israel and maybe the timing associated with that. 0:28:40.240 --> 0:28:42.520 For Israel? The endgame is not with the international community 0:28:42.560 --> 0:28:43.320 you would like to hear. 0:28:43.520 --> 0:28:47.200 The arguments for a ceasefire are ongoing from almost every 0:28:47.240 --> 0:28:52.240 corner except from inside Israel, and often except from inside 0:28:52.280 --> 0:28:54.040 parts of Hamas and parts of Habeala. 0:28:54.320 --> 0:28:54.800 For instance. 0:28:54.840 --> 0:28:56.840 You see that Hasbala right now is saying it will 0:28:56.840 --> 0:28:59.880 not negotiate less it's not under attack, and their own 0:29:00.080 --> 0:29:02.680 speaker of the parliament in Lebanon is negotiating for them. 0:29:02.880 --> 0:29:05.240 So Israel saying, look, we don't. 0:29:05.000 --> 0:29:08.080 Have space to talk about a ceasefire unless it's short 0:29:08.280 --> 0:29:10.320 we get some of our hostages back so that we 0:29:10.360 --> 0:29:13.360 can reduce the domestic pressure on us to bring hostages home. 0:29:13.680 --> 0:29:16.320 But this conflict is not over as long as there 0:29:16.360 --> 0:29:18.480 is still a threat, As long as all of these 0:29:18.480 --> 0:29:20.960 groups continue to say one of their primary objectives is 0:29:21.000 --> 0:29:24.360 to eliminate our state from the map. This threat will 0:29:24.400 --> 0:29:27.640 continue to face us. We will continue to fight this 0:29:27.920 --> 0:29:31.120 kind of onslaught every few years like we have for 0:29:31.200 --> 0:29:34.760 decades now, unless we do something decisive. So they're looking 0:29:34.800 --> 0:29:38.520 to uproot Hamas, uproot Hu's Baalah, shut down the Khuthi's 0:29:38.560 --> 0:29:43.160 ability or will to fight this war on behalf of Hamas, 0:29:43.200 --> 0:29:45.040 and to put Yourn on the back foot where it 0:29:45.120 --> 0:29:48.320 is no longer has the capacity to strike and perhaps 0:29:48.360 --> 0:29:50.480 no longer the will. It certainly does not have the 0:29:50.520 --> 0:29:54.600 domestic support, but the hardliners in Iran's leadership are going 0:29:54.640 --> 0:29:56.960 to push that fight going forward as well. 0:29:57.000 --> 0:29:57.720 This is not over. 0:29:58.400 --> 0:30:00.680 Yep, all right, That's kind of what what we're hearing 0:30:00.680 --> 0:30:02.960 across the board. Kirsten, thank you so much for joining us. 0:30:03.040 --> 0:30:07.520 Kirsten fontin Rose, she is the president of Red six Solutions, 0:30:08.120 --> 0:30:10.440 joining us in Washington, DC via zoom kind of getting 0:30:10.480 --> 0:30:13.600 the latest there. But again, it seems like this is 0:30:13.600 --> 0:30:16.720 Israel saying, you know, we're going to settle everything here. 0:30:16.960 --> 0:30:18.719 That's kind of our goal as opposed to maybe when 0:30:18.760 --> 0:30:20.800 we started out a year ago, which is, you know, 0:30:21.400 --> 0:30:25.200 neutralize Hamas and get her hostages back. This obviously is 0:30:25.280 --> 0:30:26.400 much broader, much wider. 0:30:27.920 --> 0:30:31.800 You're listening to the Bloomberg Intelligence Podcast. Catch us live 0:30:31.880 --> 0:30:35.400 weekdays at ten am Eastern on applecar Play and Android 0:30:35.440 --> 0:30:38.200 Auto with the Bloomberg Business App. You can also listen 0:30:38.320 --> 0:30:41.400 live on Amazon Alexa from our flagship New York station, 0:30:41.800 --> 0:30:44.480 Just Say Alexa Play Bloomberg eleven. 0:30:44.280 --> 0:30:48.560 Thirty Billy Lipschild sitting in for Alex steel On Paul Sweeney. 0:30:48.720 --> 0:30:50.760 We're live here on O Bloomberg in Arrector Brokers Studio, 0:30:50.760 --> 0:30:53.240 streaming live on YouTube as well. Boy, if you we're 0:30:53.280 --> 0:30:56.000 paying attention, the ten year treasury just in the last 0:30:56.040 --> 0:30:58.680 five weeks has gone from a yield of three point 0:30:58.840 --> 0:31:02.400 six percent to four point two six percent. Kind of 0:31:02.400 --> 0:31:05.160 where we are today, that's a big time move here. 0:31:05.600 --> 0:31:06.840 I don't know what's going on out there in the 0:31:06.880 --> 0:31:09.240 bond market, but our next guest does. R J Gallow. 0:31:09.320 --> 0:31:11.680 He's a senior portfolio manager of fixed income and Federated 0:31:11.680 --> 0:31:15.320 at Hermes, coming to us from Pittsburgh, PA. No, they 0:31:15.360 --> 0:31:17.520 do not have a team in the World Series, but 0:31:17.560 --> 0:31:20.800 they have a good football team. So r J, thanks 0:31:20.840 --> 0:31:22.760 so much for joining us here. My giants are coming 0:31:22.760 --> 0:31:26.360 out to Pittsburgh tonight. It'd be nice to them. What's 0:31:26.360 --> 0:31:27.600 going on in fixed income market? 0:31:27.600 --> 0:31:27.840 Again? 0:31:27.880 --> 0:31:29.840 That ten year treasury kind of got me by surprise 0:31:29.920 --> 0:31:32.680 that the moves we've seen in rates, what's going on 0:31:32.720 --> 0:31:33.040 out there? 0:31:34.360 --> 0:31:38.280 Yeah, well, good morning, Yeah, steals giants side always excited 0:31:39.040 --> 0:31:42.480 in terms of the rates market. There's been quite a 0:31:42.520 --> 0:31:46.520 turn of events basically since the Fed's ease. The fedies 0:31:46.640 --> 0:31:50.080 fifty basis points, and you might recall leading into that meeting, 0:31:50.200 --> 0:31:53.080 the expectation was twenty five. The Fed seemed to use 0:31:53.160 --> 0:31:56.720 media outlets to lay the groundwork for a fifty basis 0:31:56.720 --> 0:31:59.680 point ease, a bold move when the economy isn't back 0:31:59.720 --> 0:32:02.920 doing well. Since the data, excuse me, since the FED 0:32:02.920 --> 0:32:05.040 meeting and the fifty basis point ees, the data has 0:32:05.040 --> 0:32:07.880 in fact affirmed that the economy is doing pretty well. 0:32:08.240 --> 0:32:11.920 So you have the Fed layering in a large first 0:32:12.000 --> 0:32:14.520 move in what will be a path of easing, and 0:32:14.560 --> 0:32:17.719 an economy that has been quite resilient on the on 0:32:17.760 --> 0:32:20.400 the labor and growth front, terms of things like retail 0:32:20.440 --> 0:32:23.480 sales and CPI came in a little firmer than expected. 0:32:23.840 --> 0:32:26.360 So you have an economy that's not showing signs of recession, 0:32:26.600 --> 0:32:31.960 a FED that's committed to landing the economy outside of recession, 0:32:31.960 --> 0:32:33.959 a soft landing as we've all come to call it. 0:32:34.880 --> 0:32:38.240 And then you have the election coming up. All those 0:32:38.280 --> 0:32:41.840 factors have leaned towards a significant repricing hire and yield. 0:32:41.920 --> 0:32:44.520 You mentioned the ten year treasury I think if you 0:32:44.520 --> 0:32:48.560 take a look at the implied rate on SOFA futures 0:32:49.480 --> 0:32:53.680 out in June of twenty twenty six, the implied rate 0:32:53.840 --> 0:32:57.520 has risen almost eighty basis points since September tenth. It 0:32:57.560 --> 0:33:00.480 is now three point fifty five. It was one below 0:33:00.520 --> 0:33:01.120 to eighty. 0:33:01.680 --> 0:33:02.000 Wow. 0:33:02.040 --> 0:33:05.040 So all those factors have really hit the bond market 0:33:05.040 --> 0:33:08.320 pretty hard. It's now priced i think for perhaps an 0:33:08.360 --> 0:33:11.600 inflationary election outcome, and that's the next big focus the 0:33:11.640 --> 0:33:12.400 election itself. 0:33:12.680 --> 0:33:15.320 Well within that, we're eight days from the election. How 0:33:15.400 --> 0:33:18.960 should investors be positioning just given the polls that we've 0:33:19.000 --> 0:33:21.520 been seeing and how kind of markets have seemingly been 0:33:21.560 --> 0:33:22.280 moving ahead of it. 0:33:23.920 --> 0:33:26.840 Yeah, well, the markets certainly have been moving, and by markets, 0:33:27.040 --> 0:33:30.480 I'm sort of speaking broadly, the betting markets, starting probably 0:33:30.480 --> 0:33:34.280 in the first week of October, just started shifting in 0:33:34.320 --> 0:33:36.959 the direction of a Trump win and a red sweep 0:33:37.000 --> 0:33:40.239 as the most probable of outcomes according to some of them, 0:33:40.280 --> 0:33:42.880 you know, forty five to fifty percent probability of a 0:33:42.920 --> 0:33:45.440 red sweep. That's a big change from where they were 0:33:45.440 --> 0:33:49.320 in September. The financial markets, including the impact on rates, 0:33:49.560 --> 0:33:52.440 I think the economy's resilience that I just described, and 0:33:52.800 --> 0:33:55.640 the unwind of expectations to some degree of a deep 0:33:55.680 --> 0:33:58.800 fed easing path, those were the primary drivers. But the 0:33:58.880 --> 0:34:02.360 election risk and the prospect of an inflationary setup policies 0:34:02.400 --> 0:34:05.960 from a Trump two point zero, we're secondary factors there. 0:34:06.640 --> 0:34:08.440 I think it's safe to say that the market now 0:34:08.560 --> 0:34:11.279 is leaning heavily in the direction that we just described, 0:34:12.320 --> 0:34:14.759 but I would still think some caution is warranted. We're 0:34:14.840 --> 0:34:18.279 leaning a little bit short, not aggressively. So there's a 0:34:18.280 --> 0:34:21.279 lot of other complex factors out there. Kamala Harris could 0:34:21.280 --> 0:34:23.480 surprise us on election day. We could actually have an 0:34:23.480 --> 0:34:27.000 indeterminate election outcome. You go back to two thousand, a 0:34:27.080 --> 0:34:31.200 highly indeterminate outcome between Gore and George W. Bush led 0:34:31.239 --> 0:34:34.160 to yields falling, in flight to quality demand and risk 0:34:34.200 --> 0:34:37.399 assets struggling. If we have prolonged and decision this time, 0:34:37.440 --> 0:34:39.720 you might see a rerun of that script. 0:34:40.640 --> 0:34:43.040 So when you guys get together for your Monday morning 0:34:43.040 --> 0:34:45.799 meeting plot out the week, where do you guys see 0:34:45.880 --> 0:34:49.680 value these days? 0:34:49.719 --> 0:34:51.320 A great question, you know. So we started off the 0:34:51.400 --> 0:34:53.239 year thinking the bond market was going to produce us 0:34:53.239 --> 0:34:56.759 pretty good total returns, and then that was sort of 0:34:56.800 --> 0:34:59.640 tempered earlier in twenty twenty four by the fact that 0:34:59.680 --> 0:35:02.960 Inflame had a bit of a resurgence and started getting 0:35:03.160 --> 0:35:06.719 a little sticky. We had a great run there from 0:35:06.760 --> 0:35:10.480 say April all the way up through the expectations of 0:35:10.520 --> 0:35:13.240 the FED easing, but now the total returns are getting 0:35:13.239 --> 0:35:15.160 diminished yet again. So for example, if you look at 0:35:15.200 --> 0:35:18.080 the aggregate index, your today's total return is just up 0:35:18.080 --> 0:35:21.600 two percent over the last three months, it's just one 0:35:21.640 --> 0:35:25.239 point two And it's been a brutal October. Over the 0:35:25.320 --> 0:35:27.320 last thirty days we've lost two and a half percent. 0:35:27.320 --> 0:35:29.280 A month to day, we've lost two point three percent. 0:35:30.120 --> 0:35:33.400 So just betting on rates has not been compelling. But 0:35:33.440 --> 0:35:35.920 that's not all that we do. We obviously look at 0:35:35.960 --> 0:35:38.440 and actively managed duration, but we realize calling rates is 0:35:38.440 --> 0:35:41.920 a dicey prospect, so we focus very heavily on other variables. 0:35:42.000 --> 0:35:45.440 So the yield curve has steepened sharply in relation to 0:35:45.719 --> 0:35:49.320 the FEDS easing and the prospect of inflationary policies to come. 0:35:50.160 --> 0:35:53.280 We've played that rather well in our number of our portfolios, 0:35:53.520 --> 0:35:56.239 positioning for YELD curve steepening, and that's been a way 0:35:56.280 --> 0:36:00.239 to generate alpha within a fixed income portfolio. When it 0:36:00.239 --> 0:36:03.680 comes to credit, we've been overweight mortgages. We remain cautious 0:36:03.719 --> 0:36:05.480 on how you in corpus where we think spreads are 0:36:05.520 --> 0:36:08.600 just not enticing enough. But the good news about a 0:36:08.640 --> 0:36:11.799 fixed income portfolio, a highly diversified one is you can 0:36:11.840 --> 0:36:14.520 move across sectors to look for opportunities. You can move 0:36:14.600 --> 0:36:16.759 up and down the YOK curve for changes and it's 0:36:16.760 --> 0:36:19.960 slope and shape in addition to taking some positions on duration. 0:36:20.080 --> 0:36:23.440 So all in all, we've been deploying all those different 0:36:23.480 --> 0:36:26.560 tools to varying degrees throughout what's been a moderate return 0:36:26.600 --> 0:36:27.799 but a positive return year. 0:36:28.520 --> 0:36:30.520 All right, Urjie, thanks so much for joining us as always. 0:36:30.600 --> 0:36:30.719 R J. 0:36:30.840 --> 0:36:33.279 Gallow, Senior Portfolio Manager Fixed and come over there at 0:36:33.280 --> 0:36:34.600 Federated Hermes. 0:36:35.719 --> 0:36:39.600 You're listening to the Bloomberg Intelligence Podcast. Catch us live 0:36:39.680 --> 0:36:43.200 weekdays at ten am Eastern on Applecar Play and Android 0:36:43.200 --> 0:36:46.000 Auto with a Bloomberg Business app. You can also listen 0:36:46.120 --> 0:36:49.200 live on Amazon Alexa from our flagship New York station. 0:36:49.560 --> 0:36:52.320 Just say Alexa Play Bloomberg eleven thirty. 0:36:53.440 --> 0:36:56.879 All right, you're listening to Bloomberg Intelligence Belly Lipschultz sitting 0:36:56.920 --> 0:36:58.600 in for alexel On Paul Sweeney live here in our 0:36:58.600 --> 0:37:01.520 Bloomberg Interactive Brooker Studio, streaming live on YouTube as well. 0:37:01.560 --> 0:37:04.600 We're eight days away from the election, and one aspect 0:37:04.600 --> 0:37:06.440 the election we haven't really had to think about up 0:37:06.520 --> 0:37:09.440 until the most cycled, most recent cycle or two is 0:37:09.480 --> 0:37:13.480 just ensuring that we have safe and secure elections. That 0:37:13.719 --> 0:37:16.440 is now a big deal, particularly with early voting and 0:37:16.440 --> 0:37:18.759 mail and voting and all those things that came out 0:37:18.760 --> 0:37:21.040 of the pandemic. Somebody who does think about that is 0:37:21.080 --> 0:37:24.279 Rhet Buddle. He's the CEO of the Public Private Strategies 0:37:25.120 --> 0:37:28.800 joining us here via zoom sod. How are you thinking 0:37:29.960 --> 0:37:33.399 these elections are going to go next Tuesday and then 0:37:33.480 --> 0:37:37.160 Wednesday and then Thursday? Are you what is your concern 0:37:37.280 --> 0:37:39.800 level that we will in fact have safe and secure elections? 0:37:41.520 --> 0:37:43.319 Well, great to be with you. So, first of all, 0:37:43.360 --> 0:37:45.319 I mean you know, America, as we know, you know, 0:37:45.360 --> 0:37:48.440 over the last you know, set of election cycles has 0:37:48.480 --> 0:37:51.239 primarily had very safe and secure elections, and I think 0:37:51.239 --> 0:37:54.960 we're feeling confident about all the elections to date, and 0:37:55.120 --> 0:37:57.919 many of the you know, state local officius have worked 0:37:58.000 --> 0:38:00.760 very hard to prepare. I think, you know, one of 0:38:00.480 --> 0:38:04.640 the bigger questions is, you know, we probably will not 0:38:04.880 --> 0:38:07.520 have the exact results of the election on election night, 0:38:08.040 --> 0:38:10.080 and so you know, it might be until Saturday or 0:38:10.080 --> 0:38:12.480 Sunday until we know an official winner. And so one 0:38:12.480 --> 0:38:14.400 of the pieces that we've been thinking a lot about 0:38:14.480 --> 0:38:17.000 is really making sure that folks are preparing for that, 0:38:17.000 --> 0:38:19.200 that they know that every vote is still being counted 0:38:19.719 --> 0:38:21.520 and that the process might just take a while. But 0:38:21.600 --> 0:38:24.279 that is the important role of democracy, making sure every 0:38:24.320 --> 0:38:28.200 vote gets counted, and particularly for business owners, understanding that 0:38:28.280 --> 0:38:31.440 this sort of period of uncertainty is a really important 0:38:31.480 --> 0:38:34.080 moment for businesses to be able to you know, bring 0:38:34.120 --> 0:38:36.160 some calm to the market, to be able to say 0:38:36.160 --> 0:38:38.680 this is how democracy plays out, not just in the 0:38:38.719 --> 0:38:40.160 role that they play in the markets, but also in 0:38:40.200 --> 0:38:42.360 the role that they play as community leaders. You know, 0:38:42.400 --> 0:38:44.600 for a lot of CEOs who have employees this can 0:38:44.640 --> 0:38:47.399 be a fraught time, for example, and so it's really 0:38:47.400 --> 0:38:50.560 important to know that, you know, every vote will be counted. 0:38:50.719 --> 0:38:53.120 The elections are on part of be very safe and secure, 0:38:53.560 --> 0:38:55.840 but we may have a period of uncertainty and that's okay, 0:38:56.160 --> 0:38:58.960 and we just need to understand that that might be 0:38:59.000 --> 0:39:02.160 the case. But it's an important part of letting democracy 0:39:02.160 --> 0:39:02.520 play out. 0:39:02.800 --> 0:39:05.239 Well, I think back to twenty twenty when it took 0:39:05.280 --> 0:39:07.440 a few days, but we were still in the midst 0:39:07.440 --> 0:39:10.120 of the pandemic. Now in twenty twenty four, people will 0:39:10.160 --> 0:39:12.640 be back into the office, back at work, back on 0:39:12.960 --> 0:39:15.800 subways here in the New York and commuting around the country. 0:39:16.160 --> 0:39:20.440 How does that actually kind of impact a delayed ruling 0:39:20.520 --> 0:39:23.160 or delayed decision on who in fact will win the election, 0:39:23.280 --> 0:39:26.600 especially as we see a number of contested seats across 0:39:26.880 --> 0:39:27.640 the House and Senate. 0:39:28.800 --> 0:39:29.040 Yeah. 0:39:29.080 --> 0:39:31.400 Look, we're so used to having everything, you know, be 0:39:31.560 --> 0:39:34.760 so instant instantaneous. We're used to obviously having a result, 0:39:34.880 --> 0:39:37.239 you know, called on election night. The reality is, at 0:39:37.320 --> 0:39:40.440 least for the national presidential election, we expect it to 0:39:40.440 --> 0:39:43.080 be very close, and there's a number of states that 0:39:43.239 --> 0:39:45.520 probably will take a few days to make sure that 0:39:45.560 --> 0:39:49.239 every ballot is counted, and so you know, unlike where 0:39:49.239 --> 0:39:51.240 we were all sort of huddled in our homes around 0:39:51.280 --> 0:39:54.880 zoom screens or around TV screens, before you know, we 0:39:54.920 --> 0:39:56.840 are going to have people going back into the office 0:39:57.239 --> 0:39:59.560 and we know want the things we learned in twenty 0:39:59.600 --> 0:40:02.920 sixty was that elections can invoke a lot of emotions 0:40:02.920 --> 0:40:06.000 with employees and start a lot of conversation. And the 0:40:06.040 --> 0:40:09.280 reality is is the workplace has become a really important 0:40:09.320 --> 0:40:11.840 square for civic engagement. Right It's one of the places 0:40:11.840 --> 0:40:14.279 where people interact, they talk to each other, and so 0:40:14.320 --> 0:40:17.520 it's become increasingly important that business leaders and CEOs think 0:40:17.560 --> 0:40:19.400 about the role they can play and sort of setting 0:40:19.400 --> 0:40:21.440 the tone of the role that they can play in 0:40:21.440 --> 0:40:24.160 sort of depoliticizing things and making sure that there's a 0:40:24.200 --> 0:40:26.920 safe space. We've see in a lot of companies with 0:40:27.040 --> 0:40:30.080 employee research groups that there's the opportunity to provide space 0:40:30.120 --> 0:40:32.600 for dialogue. And so part of the work that we've 0:40:32.640 --> 0:40:34.920 been doing under an initiative we created it's called the 0:40:34.920 --> 0:40:37.920 Business and Democracy Initiative, is we've been working with business 0:40:37.960 --> 0:40:40.719 leaders to help them prepare for this election to not 0:40:40.760 --> 0:40:42.880 only sort of raise their voice in their communities to 0:40:42.880 --> 0:40:45.279 talk about how this is the normal part of democracy, 0:40:45.520 --> 0:40:48.680 but also to play an important role in sort of depolarizing, 0:40:48.800 --> 0:40:51.560 de escalating and making sure that everyone's voices are heard 0:40:52.080 --> 0:40:53.920 in this process over the next few weeks. 0:40:54.560 --> 0:40:57.560 And the business leaders that you do speak to, what 0:40:57.680 --> 0:40:59.640 is a concern level, if at all, that we have 0:40:59.840 --> 0:41:03.560 a recreation of something like January sixth to that level. 0:41:04.880 --> 0:41:07.160 Look, I think overall people feel that the election is 0:41:07.160 --> 0:41:08.719 going to be safe and secure and that every vote 0:41:08.800 --> 0:41:11.719 is counted. So that's that is a good point, you know. 0:41:11.840 --> 0:41:14.719 I think generally what I hear from business leaders is, 0:41:14.760 --> 0:41:18.480 you know, increasingly, you know, risk has become an issue 0:41:18.680 --> 0:41:22.080 with just instability, and so even beyond the elections, you know, 0:41:22.280 --> 0:41:24.840 there's a broader issue with the government, for example, not 0:41:25.040 --> 0:41:27.440 being able to pass you know, funding bills that go 0:41:27.520 --> 0:41:30.520 on for years, or the debate over the debt selling 0:41:30.560 --> 0:41:33.440 for example, and not being able to reach resolution. So 0:41:33.440 --> 0:41:36.720 there's that broader sort of risk level. You know, America, 0:41:36.760 --> 0:41:38.520 as we all know, is the most important economy in 0:41:38.560 --> 0:41:41.040 the world, and so having that certainty is really important 0:41:41.040 --> 0:41:43.760 for business leaders. And I think over the last few years, 0:41:43.800 --> 0:41:47.239 businesses have become increasingly frustrated that the government hasn't been 0:41:47.239 --> 0:41:50.960 able to provide more stability and that partisanship is continued 0:41:51.000 --> 0:41:53.480 to sort of really you know, make it difficult for 0:41:53.520 --> 0:41:56.879 business leaders to make decisions, especially businesses who rely upon 0:41:56.920 --> 0:41:59.640 the government for you know, a wide variety of factors. 0:41:59.640 --> 0:42:02.640 So it's a broader sort of risk appetite rather than 0:42:02.800 --> 0:42:05.640 just in this moment. But it's definitely something that boardrooms 0:42:05.640 --> 0:42:07.360 and businesses are starting to look at. 0:42:07.920 --> 0:42:11.560 All right, fascinating times. And we'll have election day eight 0:42:11.640 --> 0:42:13.359 days and then we'll have to see how many days 0:42:13.360 --> 0:42:16.960 are for that it takes to get a declared winner 0:42:17.160 --> 0:42:20.440 and loser. Redbuttle, he's the CEO of the Public PRIVCT Strategies, 0:42:20.440 --> 0:42:22.799 that's the name of the firm there, and again eight 0:42:22.880 --> 0:42:24.759 days away, so we'll have to see. 0:42:24.800 --> 0:42:26.000 Here. 0:42:26.520 --> 0:42:30.399 You're listening to the Bloomberg Intelligence Podcast. Catch us live 0:42:30.480 --> 0:42:33.560 weekdays at ten am Eastern on Apple car Play and 0:42:33.560 --> 0:42:36.480 Android Auto with the Bloomberg Business app. You can also 0:42:36.520 --> 0:42:40.040 listen live on Amazon Alexa from our flagship New York station, 0:42:40.400 --> 0:42:43.160 Just say Alexa Play Bloomberg eleven thirty. 0:42:44.880 --> 0:42:47.319 We got an election coming up, so I'm told next 0:42:47.400 --> 0:42:51.360 week one of the major issues from a policy perspective 0:42:51.360 --> 0:42:54.719 that might see us a big difference depending upon who's 0:42:54.719 --> 0:42:59.120 in the White House. Is kind of renewable energy, electric vehicles, 0:42:59.160 --> 0:43:01.680 all that kind of stuff. So let's check out Corey 0:43:01.719 --> 0:43:05.359 Kantra joins us, the lead US electric vehicle analysts. Yes, 0:43:05.400 --> 0:43:07.520 we have one of those. He's at bn EF. Those 0:43:07.520 --> 0:43:10.400 are the new energy finance people. He's in our Bloomberg 0:43:10.480 --> 0:43:14.800 Interactive Broker's studio. Corey, how does your market, the electric 0:43:14.880 --> 0:43:17.600 vehicle market looking at this election as to a Trump 0:43:17.640 --> 0:43:20.640 presidency versus the potential Harris presidency is it? 0:43:20.800 --> 0:43:21.880 Are there material differences? 0:43:21.960 --> 0:43:23.879 Yeah, they're pretty big differences and great to be here 0:43:23.880 --> 0:43:25.719 with you again. Paul and Bailey, still still doing the 0:43:25.760 --> 0:43:29.520 EV thing. We basically are one week out of a 0:43:29.560 --> 0:43:32.919 pretty pivotal moment of implementation of some pretty major US 0:43:33.000 --> 0:43:37.279 federal policies. So everything from federal fuel economy standards that's 0:43:37.320 --> 0:43:39.719 the kind of miles per gallon of new vehicles which 0:43:39.760 --> 0:43:44.000 electric vehicles help automakers achieve, to the implementation of the 0:43:44.520 --> 0:43:47.120 Inflation Reduction Act. So even though the law has passed 0:43:47.120 --> 0:43:49.759 now over two years ago, you're going to see those 0:43:49.840 --> 0:43:52.640 loans and grants from the federal government impacted all the 0:43:52.680 --> 0:43:55.600 way up to the seventy five hundred dollars Clean Car 0:43:55.680 --> 0:43:58.839 ev tax credit that people know and love in some 0:43:58.880 --> 0:44:02.279 cases depending on who wins. Obviously, with the IRA, you're 0:44:02.280 --> 0:44:04.200 going to need Congresses input on that, but there are 0:44:04.239 --> 0:44:06.919 things that the Trump administration could do very early on 0:44:06.920 --> 0:44:09.440 on the implementation side to make those credits a bit 0:44:09.480 --> 0:44:12.719 more restrictive. So it's going to be big, but also 0:44:12.880 --> 0:44:14.920 a split decision could have an impact too if you have, 0:44:15.280 --> 0:44:19.640 say a Republican Congress with Kamala Harris's president or vice versa. 0:44:19.480 --> 0:44:22.040 And how does that actually impact the ability for these 0:44:22.160 --> 0:44:25.440 car makers to sell cars? When I look at targets 0:44:25.480 --> 0:44:28.279 of Biden administration having a certain number of evs. I'm 0:44:28.280 --> 0:44:31.680 from California, where they lay out these overly ambitious goals five, six, 0:44:31.760 --> 0:44:34.160 seven years down the road and then seemingly chop them 0:44:34.160 --> 0:44:35.360 down when they get closer. 0:44:35.560 --> 0:44:37.759 Yeah, Bailey, I mean even beyond that, there's been a 0:44:37.840 --> 0:44:40.040 kind of back and forth between California and the rest 0:44:40.040 --> 0:44:42.040 of the country for a long time, known as you know, 0:44:42.080 --> 0:44:46.960 the California Advanced Clean Cars to policy, which aims to 0:44:46.960 --> 0:44:48.879 have one hundred percent of all new sales by twenty 0:44:48.920 --> 0:44:51.720 thirty five is electric eighty percent fully electric, twenty percent 0:44:52.000 --> 0:44:54.600 plug in hybrid. And so last time Trump was elected, 0:44:54.960 --> 0:44:57.239 there is a lot of lawsuits, a lot of uncertainty 0:44:57.239 --> 0:44:59.440 in the market. Makes it very difficult from an automaker 0:44:59.480 --> 0:45:03.040 perspective actually planned. And so these automakers for a long 0:45:03.080 --> 0:45:05.359 time have wanted both the carrots, which are these IRA 0:45:05.600 --> 0:45:08.560 kind of subsidies and incentives on grants and loans, and 0:45:08.560 --> 0:45:10.279 then they'd be willing to take the stick, which is 0:45:10.280 --> 0:45:11.719 the fuel economy standards. 0:45:11.960 --> 0:45:13.719 So we have to see how it shapes out. 0:45:13.760 --> 0:45:16.319 But from the automakers that we speak to, it's a 0:45:16.360 --> 0:45:19.800 pretty confusing policy environment. But given that the globe is 0:45:19.840 --> 0:45:22.759 moving towards electric vehicles and cleaner cars in general, they 0:45:22.800 --> 0:45:24.960 have to kind of prepare to move that way regardless. 0:45:24.960 --> 0:45:26.920 And it's just how quickly in the US are they 0:45:26.960 --> 0:45:27.920 going to move in that direction? 0:45:28.520 --> 0:45:31.680 The Chinese are moving very aggressively. How do you expect 0:45:31.680 --> 0:45:35.040 them to do outside of China? Will there be market 0:45:35.080 --> 0:45:37.440 for Chinese evs in Europe? 0:45:37.640 --> 0:45:40.160 In the US? Yeah, it's a really good question, Paul. 0:45:40.239 --> 0:45:42.080 And you know, looking at the data which we do 0:45:42.120 --> 0:45:45.680 at BNEF, you can see Chinese automakers like BYD making 0:45:45.880 --> 0:45:49.200 upground in places like Brazil, in places like Latin America, 0:45:49.280 --> 0:45:51.279 in places like Israel, you know where you might not 0:45:51.400 --> 0:45:55.640 expect to see Chinese automakers. They've been moving into Europe 0:45:55.880 --> 0:45:57.759 and there's been a pushback with all the tariffs and 0:45:57.800 --> 0:45:59.719 back and forth there. I think that's also why the 0:45:59.800 --> 0:46:01.919 US election does have a big impact, because if there's 0:46:01.920 --> 0:46:04.960 no kind of counter bailing force coming out of the US. 0:46:05.080 --> 0:46:07.480 You see what's going on with Volkswagen on the European 0:46:07.520 --> 0:46:10.200 side today, it's going to maybe make the road easier 0:46:10.239 --> 0:46:13.440 for those Chinese automakers on electric to kind of shift 0:46:13.440 --> 0:46:16.440 into those export markets, because if Tesla isn't focused on 0:46:16.520 --> 0:46:19.560 making more affordable evs, then there's really only going to 0:46:19.600 --> 0:46:21.880 be one major player in town. It doesn't mean, you 0:46:21.920 --> 0:46:24.399 know that Chinese automakers are going to be the only 0:46:24.480 --> 0:46:27.400 ones who are making mass evs, but it's a pretty 0:46:27.440 --> 0:46:30.759 big transformation at the global auto market level, just like 0:46:30.800 --> 0:46:32.879 when the Japanese automakers came onto the scene. 0:46:32.880 --> 0:46:34.120 So I think that's the way I like to think 0:46:34.160 --> 0:46:34.520 about it. 0:46:34.520 --> 0:46:36.520 It doesn't mean that you know evs are going to 0:46:36.560 --> 0:46:39.399 be sold everywhere overnight, but without a kind of other 0:46:39.520 --> 0:46:41.279 major automaker, that's where I. 0:46:41.280 --> 0:46:42.680 Think a lot of these countries are going to turn. 0:46:43.120 --> 0:46:46.960 And if we do see tariffs on some magnitude, yeah, 0:46:47.360 --> 0:46:50.560 what does that actually mean for the market for Elon 0:46:50.680 --> 0:46:53.760 Musk's Tesla who he's had a very prominent role campaign 0:46:53.840 --> 0:46:55.760 for Donald Trump as well as other companies. 0:46:56.200 --> 0:46:58.520 I think when it comes to US tariffs, you know 0:46:58.560 --> 0:47:00.960 that could buy you. I think some time you look 0:47:01.000 --> 0:47:03.920 at the one hundred percent tariff that the Buying Administration 0:47:04.000 --> 0:47:06.520 put on Chinese EV makers. While there weren't that many 0:47:06.600 --> 0:47:09.879 Chinese EV makers selling electric vehicles here currently, Jili Group, 0:47:09.920 --> 0:47:12.880 which owns Volvo and Pollstar, was pretty much the major 0:47:13.200 --> 0:47:14.280 automaker impacted. 0:47:14.360 --> 0:47:15.800 So that's why you saw those prices. 0:47:15.880 --> 0:47:18.160 Or the Volvo Ex thirty, which is a really popular 0:47:18.200 --> 0:47:22.120 model globally not sold here yet. It's keeping BYD out 0:47:22.120 --> 0:47:24.600 for a little bit longer. But if the automakers like 0:47:24.680 --> 0:47:27.759 GM or Stillantis or Ford aren't helped or don't move 0:47:27.800 --> 0:47:30.520 towards electric vehicles, you know, maybe it buys you two, three, 0:47:30.600 --> 0:47:33.560 four years. But all the while BYD and other Chinese 0:47:33.600 --> 0:47:36.719 automakers are making more investments in battery technology, and I 0:47:36.760 --> 0:47:38.759 think regardless of who wins, you need to see more 0:47:38.800 --> 0:47:41.359 of those investments here on batteries because those are going 0:47:41.400 --> 0:47:43.600 to be important not only for electric vehicles but for 0:47:43.680 --> 0:47:45.440 the grid as well, and you're letting China get a 0:47:45.480 --> 0:47:46.879 major competitive advantage. 0:47:47.080 --> 0:47:50.319 What are the US manufacturers doing? Have they pulled back 0:47:50.360 --> 0:47:51.440 on their EV investments. 0:47:51.760 --> 0:47:54.200 We've definitely seen at the global level those EV targets 0:47:54.239 --> 0:47:56.960 moving back. I think Ford in particular, you saw them 0:47:57.000 --> 0:47:58.800 move their new EV models. 0:47:58.520 --> 0:47:59.319 Out a couple of years. 0:47:59.360 --> 0:48:01.560 So it's let's so on the dollar amount and more 0:48:01.560 --> 0:48:04.919 pushing it back. GM has seen better EV sales. In fact, 0:48:04.920 --> 0:48:06.719 the third quarter this year was the best in the 0:48:06.800 --> 0:48:09.080 US that they had seen to date, with the Equinox 0:48:09.080 --> 0:48:12.440 and Blazer and Lyric really taking off. To make one 0:48:12.480 --> 0:48:15.080 bright point, Bailey, your home state of California actually saw 0:48:15.120 --> 0:48:17.360 in that third quarter the best EV share of sales 0:48:17.360 --> 0:48:20.440 they've ever had at twenty seven percent, So that's twenty 0:48:20.480 --> 0:48:23.400 three percent, about almost twenty four percent fully electric, the 0:48:23.440 --> 0:48:24.400 rest plug in hybrid. 0:48:25.360 --> 0:48:27.760 So it's pretty good calif Like, what's the US average? 0:48:27.960 --> 0:48:31.160 US average has been at about ten percent now nine 0:48:31.160 --> 0:48:34.880 and a half ten percent. Yeah, far California twice twice 0:48:34.880 --> 0:48:37.759 the average. But what's significant about that is California had 0:48:37.800 --> 0:48:41.160 been stuck at about twenty five percent. Tesla actually for 0:48:41.200 --> 0:48:43.760 four quarters in a row in California has seen decline 0:48:43.920 --> 0:48:47.719 in deliveries because of I think some of the kind 0:48:47.719 --> 0:48:51.200 of Tesla or musk fatigue, and so to see California 0:48:51.280 --> 0:48:53.719 begin to grow again from the other automakers, even as 0:48:53.760 --> 0:48:55.560 Tesla's pullback is pretty significant. 0:48:55.760 --> 0:48:58.600 All right, Corey, good stuff. As always Corey Canter. He's 0:48:58.640 --> 0:49:02.080 a lead US electric Vehicle analyst at b n e F. 0:49:02.400 --> 0:49:06.920 This is the Bloomberg Intelligence podcast, available on apples, Spotify, 0:49:07.080 --> 0:49:10.279 and anywhere else you get your podcasts. Listen live each 0:49:10.320 --> 0:49:13.720 weekday ten am to noon Eastern on Bloomberg dot com, 0:49:13.800 --> 0:49:17.200 the iHeartRadio app, tune In, and the Bloomberg Business app. 0:49:17.320 --> 0:49:20.320 You can also watch us live every weekday on YouTube 0:49:20.560 --> 0:49:22.400 and always on the Bloomberg terminal.