Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane Jailey.
Speaker 1: We bring you insight from the best in economics, finance, investment,
Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud,
Speaker 1: Bloomberg dot Com, and of course on the Bloomberg Seth
Speaker 1: Masters with us. Let's get to it seriously, Johnson weight
Speaker 1: to the tape risk he add one ten seventy five.
Speaker 1: Can we do China with Seth Masters? We should do it.
Speaker 1: Let's do it. We've talked a lot of a lot
Speaker 1: of other things, including the second half reset here as well.
Speaker 1: President she has to have a second half reset with
Speaker 1: the president of the United States. That short term for
Speaker 1: the Chinese, the stereotype as they don't think short term,
Speaker 1: and yet they do, don't they very much? So, I
Speaker 1: mean that's why, in fact, the Chinese Central Bank just
Speaker 1: eased off on on the reserve requirements for for banks
Speaker 1: there um. And you know, their stock market has been
Speaker 1: extremely weak in the last few months. It's it's down
Speaker 1: a little over and that that reflects a number of
Speaker 1: things that are importantly in a different place for China
Speaker 1: then for the rest of the world. So part of
Speaker 1: it is that Chinese stocks had gotten quite expensive UM,
Speaker 1: and so I think some of that correction we're actually
Speaker 1: bear market just is a sensible revaluation. But on top
Speaker 1: of that, there's a big structural issue in China, which
Speaker 1: is that the corporate sector has way too much debt
Speaker 1: and UM. Systematically, the Chinese were trying to rebalance the
Speaker 1: corporate balanty by having a huge amount eequity issuece come
Speaker 1: through the system, and I think that to some excent,
Speaker 1: the markets choking on that. But all of my readings
Speaker 1: says the assumption is it's different rule book, and the
Speaker 1: government will clear at a Haykien basis of government will
Speaker 1: clear of that that private debt, that corporate debt. The
Speaker 1: government's there to bail out everybody in sight. Is that
Speaker 1: feasible or possible? Well, it's feasible right now. And one
Speaker 1: reason why it's feasible is that you have pretty much
Speaker 1: a goldilock situation for a while where the economy is
Speaker 1: growing at something like six and a half percent reel
Speaker 1: an inflation right now remains fairly tame. The problem is
Speaker 1: you can't count on those things remaining in place forever,
Speaker 1: and especially a trade war right now is incredibly poorly
Speaker 1: timed for the Chinese because it would really hurt them
Speaker 1: on the traditional part of their economy, which they're trying
Speaker 1: to transition smoothly to a higher value add more consumer
Speaker 1: based economy. But they can't do that smoothly if they're
Speaker 1: getting crushed by high tariffs. So Seth, let's take you back.
Speaker 1: I'm going to give you your old job, the c
Speaker 1: IO of a b burn Stain. And you know that
Speaker 1: at the end of the week there's a standoff between
Speaker 1: China and the United States where they could implement tariffs
Speaker 1: on each other, and this thing could really escalate. What
Speaker 1: would you be telling, it seems right now about how
Speaker 1: they allocate capital given this current bank drop. I think
Speaker 1: you want to be very careful not to make extreme
Speaker 1: moves in the absence of actual facts, because right now
Speaker 1: there's no way to handicap a UM well, a Mexican
Speaker 1: standoff as they sometimes tell it UM, but in this case,
Speaker 1: it's a it's a U S China one, which actually
Speaker 1: is part of a broader, you know, geopolitical issue that
Speaker 1: people have talked a lot about their being a Thucidites
Speaker 1: trap potentially between the US and China and UM you know,
Speaker 1: as as we know, most times when there is a
Speaker 1: rising power in the world, the current dominant one overreacts
Speaker 1: to that and it ends up hurting both. Occasionally we've
Speaker 1: had times when that wasn't that mistake wasn't made, but
Speaker 1: it takes a lot of really thoughtful work on both
Speaker 1: sides to prevent those traps from becoming permanent problems. I
Speaker 1: think what we we're seeing over the last fifteen years
Speaker 1: was a lot of engagement with China which was broadly
Speaker 1: constructive for both sides, and we benefited tremendously from that.
Speaker 1: The concern is if you start to see escalation and
Speaker 1: if the Chinese are put in a position where they
Speaker 1: have to think geo politically about their US treasury holdings,
Speaker 1: for example, you could get a series of let's collect
Speaker 1: tit for tat moves that actually hurt both sides, but
Speaker 1: we're both have to play to their domestic political basis.
Speaker 1: I think at this point, if I were advising each
Speaker 1: of those two teams, I'd say make sure you're at
Speaker 1: least talking with back channels so whatever stuff comes out
Speaker 1: in public isn't polluting the actual real negotiations face to face.
Speaker 1: And what I'd be talking about with my investment teams
Speaker 1: is make sure that you're well diversified so you don't
Speaker 1: have too much exposure to sectors which will be sentiment
Speaker 1: driven if there is a miscalculation. It just seems that
Speaker 1: Tom this morning once again sentiment driven by maybe one
Speaker 1: key data point. If I tell you whether Chinese currency is,
Speaker 1: you can probably tell me where global risk is at
Speaker 1: the moment. Chinese currency week, a global risk has taken
Speaker 1: a hit, And it seems to be that kind of
Speaker 1: morning over the last week where you just pick up
Speaker 1: on where the Chinese currency is and you get a
Speaker 1: decent gauge of where if the analysis. Well also that
Speaker 1: you can look at the gap between the Chinese currency
Speaker 1: has traded in China and it's traded in Hong Kong.
Speaker 1: I think that's that's probably actually the signal you want
Speaker 1: to look for. The traditional investment is cash avail you
Speaker 1: to you? Are you fully invested whether it's bonds or equities,
Speaker 1: or your seth master is comfortable in cash? Well, I
Speaker 1: would think of it a little bit differently than that.
Speaker 1: Right now, I'd say that you want to be fully invested,
Speaker 1: but you should probably think of cash as part of
Speaker 1: your fixed income allocation, and you might want to be
Speaker 1: a bit shorter. You probably want to be a bit
Speaker 1: shorter in your fixed income exposures than you would normally
Speaker 1: be because right now, if there's one asset class which
Speaker 1: I think is very exposed globally, it is fixed income.
Speaker 1: We are going to see higher rates, which is really
Speaker 1: a normalization of rates, and that's not going to be
Speaker 1: good for longer duration bonds. Seth Masters think so much
Speaker 1: greatly appreciated formally with Alliance Bernstein as well. It's sort
Speaker 1: of ancient history, you know, it's it's it's sort of
Speaker 1: old news and Saudi Arabian in the U S and
Speaker 1: oil because the news flows happened so fast. I'm reading
Speaker 1: to sign with us with Energy aspects to give us
Speaker 1: some forward view here and reading my simple question, given
Speaker 1: the doom and gloom in the media in America all weekend,
Speaker 1: is Saudi Arabia beholden to President Trump in the United States?
Speaker 1: I think Thomas, it's extremely complicated because I think we
Speaker 1: all know that Iran is at the middle of this
Speaker 1: whole issue, which is clearly the US administration is going
Speaker 1: very hard on Iran, cutting off their exportily that's what
Speaker 1: they plan to do. To add I think what Trump
Speaker 1: said was that Ivan he thinks is the problem in
Speaker 1: the region, and therefore he is saving Saudi Arabia from Iran,
Speaker 1: and therefore Saudi Arabia has to increase production. At least
Speaker 1: that's what the kind of official line was given his
Speaker 1: interviews over the weekend. Um. Yes, I think there is
Speaker 1: an enormous amount of pressure in Saudi Arabia right now
Speaker 1: to increase production. However, the tricky bit over here is
Speaker 1: that they are doing what they can. Mean Sustainable productive
Speaker 1: capacity in the short term is about eleven million barrels
Speaker 1: today and they are pretty much there. Anything beyond that
Speaker 1: close to twelve will take a minimum of nine to
Speaker 1: twelve months, will need more capex, will need more rigs.
Speaker 1: So it's a very very difficult situation, and I'm ready
Speaker 1: to the market just doesn't buy the story. I mean,
Speaker 1: Tom's calling it on old news, and it certainly feels
Speaker 1: like that Saturday morning. If I've said so many people
Speaker 1: in the moment, just in the moment when the President's waited,
Speaker 1: I'm asking that Saudi Arabia increased production, maybe up to
Speaker 1: two million barrows a day to make up the difference
Speaker 1: prices too high, he has agreed. I imagine people might
Speaker 1: think Monday morning would be aggressively lower. W T I
Speaker 1: is positive a tenth of one percent, Brent down four
Speaker 1: tenths of one percent. Do you think the market just
Speaker 1: doesn't buy any of this now? I'm retoern as the
Speaker 1: buyers shifted from real concerns about not being enough there
Speaker 1: not being enough supply. I completely agree with you, and
Speaker 1: I mean, I think initially you may have thought it
Speaker 1: that crisis might come off. I think the fact that
Speaker 1: the White House backtracked a little bit on that, saying
Speaker 1: that they talked about it, and even as how the
Speaker 1: official statement was that, you know, it is very much
Speaker 1: about keeping that spec capacity as and when it's needed.
Speaker 1: And I also think the market generally knows that the
Speaker 1: capacity isn't there um And I think the bigger issue
Speaker 1: right now is I don't think we have ever ever
Speaker 1: been in a situation with such low spect capacity in
Speaker 1: this market at the time when there are enormous amounts
Speaker 1: of supplied disruptions. Right now, all the focus has been
Speaker 1: on Iran and Saudi Arabia. Just look at Libya. Libyan
Speaker 1: production right now is down eight hundred thousand barrels the day.
Speaker 1: We don't have spare with Permian capacity constraints, and therefore
Speaker 1: the US can grow fast. You just don't have anyone
Speaker 1: else who can make yes. I mean, I mean read,
Speaker 1: I mean folks. I don't know if you're aware of this.
Speaker 1: We'red eighty dollars a barrel. I'm bran crew is going up,
Speaker 1: rounded up, seventy nine, round there, up, we're at eighty.
Speaker 1: What's the energy aspect call? Given all that you just
Speaker 1: told us, um the interest. The funny thing is that call,
Speaker 1: even before any of this happened, or any of this
Speaker 1: got snowballed into such a lens, was eight dollars in
Speaker 1: Q four. Clearly that's coming two quarters earlier, given all
Speaker 1: the bits that are happening right now. Look, I wouldn't
Speaker 1: I wouldn't rule out hundred dollars by yes, thank you,
Speaker 1: That's where I wanted to go. You're gonna be the
Speaker 1: first person in Bloomberg surveying. Let's just say this. John
Speaker 1: Ferrell and his other properties has heard this. Are we
Speaker 1: going back to a hundred dollars of barrel oil? I
Speaker 1: do think it's very very possible. Be who's anywhere close
Speaker 1: to a million and a half barrels per day from
Speaker 1: um from Iran and Libyan Nigeria, given all the problems
Speaker 1: we have there in Venezuela. Look, I do think in
Speaker 1: the short term the market is a little bit oversupplied
Speaker 1: because what's ended up happening is that Saudi Arabia has
Speaker 1: raised production too fast and Iran hasn't gone off yet,
Speaker 1: which is why I don't think Q three prices will
Speaker 1: necessarily do a lot. I think we'll be in this range,
Speaker 1: but come Q four and towards the R end, I
Speaker 1: think that's when things can be very, very very tight. However,
Speaker 1: all of this could change if the US administration stands
Speaker 1: changes right. It just really depends on where we are
Speaker 1: going with Iran on this and rate it just quickly.
Speaker 1: Can the global economy tolerate one dollar crude? I think
Speaker 1: it's going to be tough. Yes, the economy is a
Speaker 1: lot better than it was in but demand growth will
Speaker 1: start to throw down next year. I'm really sent a
Speaker 1: energy aspects with a big cold tomb kine, and I
Speaker 1: wonder how many people are gonna come out with the
Speaker 1: triple digital for crude over the next several months. Given
Speaker 1: a price section this morning, even as the President ramps
Speaker 1: up pressure on the Saundies, I will say this and
Speaker 1: it goes back to commodities work done in the Midwest,
Speaker 1: the heartland of the country. At a G Edwards a
Speaker 1: million years ago, oil is the toughest thing to predict.
Speaker 1: There's a lot of really good math on this, John,
Speaker 1: and it's like it's like, because of the politics and
Speaker 1: because of it's crazy tightness and all that between supply
Speaker 1: and demand, it's just you just go down in flames eyeballing.
Speaker 1: I mean when people give me a forecast, folks, I always,
Speaker 1: with great respect and great humility, say yeah, maybe it's
Speaker 1: not that they're wrong or right, it's just a barter.
Speaker 1: I think. I think the individual delivered in the forecast
Speaker 1: would would say the same thing. I think my my
Speaker 1: kind of pushback would just be can the global economy
Speaker 1: really ton right part of the equation? I just don't
Speaker 1: know if it can. I guess we can talk about
Speaker 1: it through the shot. John Farrow, and I'm keen with
Speaker 1: us now. A gentleman who played for the Mexican rugby
Speaker 1: national team years ago, Carlos Peterson. He's with your Asia
Speaker 1: group and we're gonna talk about the Mexican elections. Carlos,
Speaker 1: do you take Ian Bremer today down to the Guadaloupe
Speaker 1: in in Bushwick and a Viva Mexico quissadillas green, white
Speaker 1: and red? Is That was this? That the morning plan
Speaker 1: for all of your Agia group. That was the morning plan.
Speaker 1: But we have a bigger brazil team, So we're going
Speaker 1: probably to have some fishal on the resolved afterwards. Maybe
Speaker 1: maybe we can celebrate with Margarita because I'm betting on Mexico.
Speaker 1: So well, if the Brazilians throw you out the door
Speaker 1: at your age group, come on over to Bloomberg. Carlos,
Speaker 1: You've had a huge, huge value on the domestic calculus
Speaker 1: of this Mexican election. This is a huge loss for
Speaker 1: the elites. What do the elites do this morning in Mexico?
Speaker 1: I think I think they're playing out the plans that
Speaker 1: they will have to operate in under a new, completely
Speaker 1: new environment and with completely different views coming from the government.
Speaker 1: Lopez Overadora has been someone that has been very very
Speaker 1: critical from the of the of the elites over the
Speaker 1: past twenty years, and now he's going to be in charge.
Speaker 1: So so that relationship is going to change dramatically and
Speaker 1: they will have to understand how to deal with him,
Speaker 1: and I think will be a pretty contentious relationships. Some
Speaker 1: businessmen will have will collaborate and will work well with
Speaker 1: with with Lopezo a lot, But others, I think you're
Speaker 1: going to try to to trump and and and and
Speaker 1: stop him from implementing his policy. And that's obviously going
Speaker 1: to become something UH noisy and problematic, and in some instances, myself,
Speaker 1: carlors some an emerging market tourists. So I won't pretend
Speaker 1: to be an expert, but I will ask two basic
Speaker 1: questions that tourists typically ask. It's what is his position
Speaker 1: on fiscal responsibility? And the other is what is his
Speaker 1: position on central bank independence? He has taken very fairly
Speaker 1: orthodox positions on that. On on the fiscal for what
Speaker 1: he claims is that he wants to keep the fiscal
Speaker 1: accounts at bay. He wants he doesn't want to increase
Speaker 1: UH depth too much. However, I'm a little bit skeptic
Speaker 1: there how much he can do that, because he has
Speaker 1: also promised a lot of different spending plans that he
Speaker 1: has so so conciliating both the spending site with the
Speaker 1: with the with the with the fiscal front. I think
Speaker 1: he's going to be challenging and that's a potential source
Speaker 1: of disruptions and we can see in the future from
Speaker 1: the central bank perspective. He has also said that he
Speaker 1: respects the autonomy of the central bank, that he's fine
Speaker 1: with it. Again, he has been very critical of what
Speaker 1: the technocratic class in Mexico has been doing over the passengagers,
Speaker 1: and those are the ones that are ruling the at
Speaker 1: the central bank right now. So the potential source of
Speaker 1: contention is between his administration and the en bang Kiko
Speaker 1: could also trigger at some point. So I think I
Speaker 1: think there are potential sources of of of contentiousness along
Speaker 1: the road under these two specific issues. Mexico has to
Speaker 1: do a as negotiations and all that, but what they
Speaker 1: really got to do is get their economy going again.
Speaker 1: What is the biggest constraint to getting per capita GDP?
Speaker 1: Are just good economic growth that actually assists the left.
Speaker 1: What's the what's the first factor for Carlos Peterson. I
Speaker 1: think that something that Lopezo Alora has actually a good
Speaker 1: position on, which is investing in the south of the country.
Speaker 1: Mexico is if you look at that as a country
Speaker 1: overall has had a very sluggish growth over the past
Speaker 1: thirty years. But if you look at its regions, the
Speaker 1: ones that have been really integrated to NAFTA have actually
Speaker 1: grown at very high rates and have been doing fairly well.
Speaker 1: The problem is the south of the country that is
Speaker 1: more disconnected, that doesn't have a strong economy, that has
Speaker 1: actually lacked behind. And Lopezovato has proposed to invest strongly
Speaker 1: in the south to to develop an infrastructure program there
Speaker 1: uh in order to to to trigger growth in that region.
Speaker 1: And I actually think that's that's not a bad idea
Speaker 1: because of these uh like the discurbancies that exists between regions,
Speaker 1: and that could actually help the economy overall to grow.
Speaker 1: So Carlos Terra say he might have something in common
Speaker 1: with the President of the United States, how are those
Speaker 1: two lunely to get on. I think it's going to
Speaker 1: be a difficult relationship, right. I think that Lopez Other
Speaker 1: is not going to come after Donald Trump and use
Speaker 1: him as a as a as a political punching back
Speaker 1: in Mexico a little bit like Donald Trump does with
Speaker 1: Mexican in many occasions. Because Lopez of Other tends to
Speaker 1: focus more on the domestic side, and every time that
Speaker 1: he's asked to talk about even President Trump or any
Speaker 1: other foreign leader, he refrains from it. He says that
Speaker 1: he's not going to get into politics from other places.
Speaker 1: So I think he will. He will be concrained until
Speaker 1: Donald Trump comes out and tweet something or say something
Speaker 1: about Mexico that lopezot will clearly respond to. Tends to
Speaker 1: be tracked into politics on the international stage, whether he
Speaker 1: likes it or not. With naftur an immigration at the
Speaker 1: forefront of this administration in the United States, I mean, Carlos,
Speaker 1: how does he avoid it? Absolutely, he will not be
Speaker 1: able to avoid. And I think that's one of the
Speaker 1: main issues that actually will constrain him from doing other things.
Speaker 1: Because the main uh, like the first like a policy
Speaker 1: decision that we will have to make or deal with
Speaker 1: is an after negotiations is going to be very important. Yeah,
Speaker 1: and we'll have to get like hands down without right
Speaker 1: away curls. Let's go back to you know, I guess
Speaker 1: Mexican chat of too twenty years ago to zero twenty
Speaker 1: years ago? Can oil save Mexico? Those days are over right,
Speaker 1: Those days are over. The Mexican economy has diversified significantly.
Speaker 1: Oil used to be up until two thousand and fourteen
Speaker 1: a very important parts from for fiscal accounts because it
Speaker 1: would represented the of the government's revenue. Now it's down
Speaker 1: to and really yet investing in the sector is but
Speaker 1: is positive, etcetera. But he's not going to be the
Speaker 1: main leader lead the economy moving ahead. I mean manufacturing
Speaker 1: processes is in la in labor arbitrarge is still the
Speaker 1: same thing today. Have a beneficial labor arbitrage is Steve
Speaker 1: Roach of Yale University would say versus Asia, I mean,
Speaker 1: is their wage differential when you pouncer the math at
Speaker 1: your Asia group or some other think tank is Mexico
Speaker 1: and the driver's seated that labor differential with Asia. I
Speaker 1: think I think it is. I think it is. Mexico
Speaker 1: has been benefiting from from low wages over the past
Speaker 1: ten years. And that's one one of the most like
Speaker 1: factors that have been able to make the manufacturing Mexico
Speaker 1: very competitive and attract business from the whole world and
Speaker 1: in order to export it to the US mainly right
Speaker 1: uh And and that's actually one of the potential sources
Speaker 1: of risk from the NATA negotiations because what Donald Trump
Speaker 1: and his administration want to do is make Mexico less competitive,
Speaker 1: and that's why they have been pushing for higher wages
Speaker 1: in Mexico in order to limit the number of companies
Speaker 1: moving from the U S to Mexico. That's a potential
Speaker 1: source of risk for the economy overall and Mexico's competitiveness.
Speaker 1: For sure. I believe it's five months before the president
Speaker 1: elect actually becomes the president. Is that right? I didn't
Speaker 1: know that. Is that true? Yes, it's a very very
Speaker 1: long periods, So it's five months that takes us through
Speaker 1: to the end of the year. Do you think not
Speaker 1: to gets done before the end of the year, No,
Speaker 1: it won't. I think that there are two main factors
Speaker 1: that will will not allow enough to to move forward.
Speaker 1: One is the midterms elections in the US. I think
Speaker 1: the focus on on the political perspective for the Trump
Speaker 1: administration are now are now on on domestic politics, and
Speaker 1: the NAHA negotiation is something too contentious and too complicated
Speaker 1: to deal with in Mexico and the US and Canada
Speaker 1: grew in Canada have not been able to come up
Speaker 1: like into middle ground and to and to uh, like
Speaker 1: make these more contentious issues that they have been negotiations
Speaker 1: and negotiating about, like solve them. So I don't think
Speaker 1: that they will be able to do that in the
Speaker 1: next three months. CARLS. Peterson, thank you so much with
Speaker 1: the Erasier group this morning. Greatly appreciate it. Well, you know,
Speaker 1: one of the stories that we're gonna be watching this
Speaker 1: week has to do with Tesla and the production of
Speaker 1: the Model three. And here to help us kind of
Speaker 1: make sense of all this is Tasha Keeny, ARC analyst
Speaker 1: on Tesla. Latasha always a pleasure. UM, give us your
Speaker 1: your reaction to this idea of what's so, what's the
Speaker 1: big deal about producing five thousand Model threes? What is
Speaker 1: I mean, come on, five thousand, that's not a lot
Speaker 1: of cars. Yeah. So, you know, I think UM investors
Speaker 1: want to know that Tesla I can sort of make
Speaker 1: the step from graduating from a startup to a full
Speaker 1: scale auto company. UM. But you know, I actually think
Speaker 1: that a lot of UM perhaps UNDO focus has put
Speaker 1: on these production numbers because these are very short term targets.
Speaker 1: You know, at ARCCRE long term investors UM even if
Speaker 1: they were to miss the product action targets by say
Speaker 1: a week or two weeks. UM. We're really looking at
Speaker 1: the long term and we think that a lot of
Speaker 1: people are missing the point that this is not just
Speaker 1: an electric vehicle company, it's an autonomous vehicle company. And
Speaker 1: UM we think that is the largest opportunity ahead of
Speaker 1: Tesla in the next two years, autonomous vehicles. So you
Speaker 1: think that driverless automobiles that are made by Tesla is
Speaker 1: what is going to win over the public. Yes, so,
Speaker 1: so right now people are so focused on production because
Speaker 1: the business model is this, this one off sales model,
Speaker 1: right you exel Um one Tesla. But in the future,
Speaker 1: we think, UM, when they turn on autonomous capability through autopilot,
Speaker 1: this will become a recurring revenue model because they'll launch
Speaker 1: the Tesla network, their version of Uber. UM. They'll collect
Speaker 1: really nice margins off of the revenues the per mile
Speaker 1: rates that they're collecting off of the customers in this
Speaker 1: taxi network. UM, and that's that's you know, UM. That
Speaker 1: will certainly help cash flow and calm those concerns. And
Speaker 1: we think that's roughly two trillion dollar opportunity with within
Speaker 1: this and this goes back to our investments in UH
Speaker 1: you know your your heritage with Catherine, would you know
Speaker 1: Alliance Bernstein is the X axis, the waiting for innovation
Speaker 1: to happen and the waiting for big vision stories like
Speaker 1: you're talking about with Tesla takes time. Does Mr Musk
Speaker 1: have the advantage of time to wait for that? You know? Actually, Tesla,
Speaker 1: if if we're talking about time with autonomous, Tesla is
Speaker 1: years ahead of the competition. UM, I mean just on
Speaker 1: electric vehicles alone. Of course they have the Giga factory,
Speaker 1: which gives them more capacity than any other automaker. But
Speaker 1: um with the autonomous opportunity tells us the only automaker
Speaker 1: that has turned on this capability of collecting data off
Speaker 1: of the cars in the road. It uses that data
Speaker 1: to train its neural nets. UM. And that's how that's
Speaker 1: how you improve a deep Okay, with the deep learning perspective,
Speaker 1: Is there sat black flies in a manufacturing tent out
Speaker 1: in the middle of nowhere in the West. How does
Speaker 1: you know you guys are high end fancy innovation technologists.
Speaker 1: Again with Katherine wooded Arkin investments, how do you rationalize
Speaker 1: your big, big picture innovation with the fact he's making
Speaker 1: these things out of a tent? You know tessl is
Speaker 1: always there's there's a lot of doubt in the stock
Speaker 1: um and and for us as investors, I mean we
Speaker 1: think if you if you look at what Elon Musk
Speaker 1: has done, um, it's you shouldn't put it past them
Speaker 1: to to produce a car, right. I mean he's he's
Speaker 1: actually capable of rocket science. They've lended reusable rockets SpaceX.
Speaker 1: Come on, let's be clear here, the SpaceX and the
Speaker 1: Newman project. That's not related to making cars, is it.
Speaker 1: It's I would say it's a great example of the
Speaker 1: the feats that Elon Musk is able to pull off. UM.
Speaker 1: So I think manufacturing is a very tough problem. I
Speaker 1: think he's taking that very seriously. UM. He's he's actually
Speaker 1: you know, he sets these really lofty targets, but he's
Speaker 1: actually pretty honest and in tweeting out you know that
Speaker 1: you know when they're in production, hell, when they're having difficulties. Um.
Speaker 1: And you know, I think the fact that they're ramping
Speaker 1: up um automation and sort of just fine tuning that
Speaker 1: now pulling back a little bit um to make sure
Speaker 1: that they have the right amount of manual labor mix. UM.
Speaker 1: I think that you know, Tesla's advantage is really that
Speaker 1: it's built from the ground up as a as a
Speaker 1: software company. Um and that and I think in in
Speaker 1: doing that, I think they'll be able to sort of
Speaker 1: produce this fine, fine tuned manufacturing machine. UM. That'll that
Speaker 1: I think will surprise most um And and again, I
Speaker 1: mean I think, uh, we really want to focus on
Speaker 1: the long term because if you look at these like
Speaker 1: monthly even quarterly figures for vehicles, I mean, we're we're
Speaker 1: much more concerned about what happens in the next few
Speaker 1: years versus what happened. From my point, I get that theory, Tasha,
Speaker 1: but my point him as you've got to get there first. Well, Tasha,
Speaker 1: you're I'm assuming you're long Tesla basically are okay, all right,
Speaker 1: so you're you're you're long Tesla. Is there anything that
Speaker 1: would lead you to believe that other automobile companies like
Speaker 1: four GM and name the rest of them, whether it's Mercedes,
Speaker 1: a BMW, that they don't have the technology and the
Speaker 1: expertise and the experience to go one better. So, I mean,
Speaker 1: so one, if we're talking about battery production capacity, I mean,
Speaker 1: no other automakers there yet, right, And when we're seeing
Speaker 1: these major investments in EVS happening now, um, but there's
Speaker 1: still not at Tesla scale. Um. And in terms of
Speaker 1: the software side of things, I mean a great example
Speaker 1: is no other automaker has enabled over their updates, these
Speaker 1: updates that affect the performance of the vehicle, not just
Speaker 1: say the mapping system. And um, if you ask the CEO,
Speaker 1: so GM was asked in arnis call a couple quarters ago,
Speaker 1: when are you going to do this? And I mean
Speaker 1: they're looking at Tesla's had this for you know, a
Speaker 1: couple of years now. So Um. From the software perspective,
Speaker 1: I think that's that's the other automakers, the traditional players,
Speaker 1: major problem. It's that they have to undergo this major
Speaker 1: transformation and it's sort of like an old DNA issue
Speaker 1: where they have to transition to this new new future
Speaker 1: where software really matters. And that's that's how you get
Speaker 1: a tone of miss driving. All right, Well, thanks very
Speaker 1: much for the for the perspective. Clearly um your bullish
Speaker 1: on what's going on at Tesla. Pasha Kini of our
Speaker 1: our investments. Thanks for listening to the Bloomberg Surveillance Podcast.
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