WEBVTT - FTA First Decision for Obrador, says Petersen 0:00:09.840 --> 0:00:13.800 Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane Jailey. 0:00:13.960 --> 0:00:17.560 We bring you insight from the best in economics, finance, investment, 0:00:18.000 --> 0:00:23.480 and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 0:00:23.600 --> 0:00:34.280 Bloomberg dot Com, and of course on the Bloomberg Seth 0:00:34.320 --> 0:00:36.720 Masters with us. Let's get to it seriously, Johnson weight 0:00:36.800 --> 0:00:41.400 to the tape risk he add one ten seventy five. 0:00:42.120 --> 0:00:44.879 Can we do China with Seth Masters? We should do it. 0:00:44.960 --> 0:00:46.199 Let's do it. We've talked a lot of a lot 0:00:46.240 --> 0:00:49.320 of other things, including the second half reset here as well. 0:00:49.800 --> 0:00:52.960 President she has to have a second half reset with 0:00:53.040 --> 0:00:56.080 the president of the United States. That short term for 0:00:56.120 --> 0:01:00.560 the Chinese, the stereotype as they don't think short term, 0:01:00.560 --> 0:01:02.760 and yet they do, don't they very much? So, I 0:01:02.800 --> 0:01:06.320 mean that's why, in fact, the Chinese Central Bank just 0:01:06.600 --> 0:01:09.679 eased off on on the reserve requirements for for banks 0:01:09.680 --> 0:01:13.319 there um. And you know, their stock market has been 0:01:13.319 --> 0:01:16.520 extremely weak in the last few months. It's it's down 0:01:16.720 --> 0:01:20.800 a little over and that that reflects a number of 0:01:20.840 --> 0:01:23.360 things that are importantly in a different place for China 0:01:23.400 --> 0:01:24.600 then for the rest of the world. So part of 0:01:24.600 --> 0:01:28.160 it is that Chinese stocks had gotten quite expensive UM, 0:01:28.280 --> 0:01:31.080 and so I think some of that correction we're actually 0:01:31.080 --> 0:01:34.520 bear market just is a sensible revaluation. But on top 0:01:34.560 --> 0:01:36.959 of that, there's a big structural issue in China, which 0:01:37.000 --> 0:01:39.920 is that the corporate sector has way too much debt 0:01:40.920 --> 0:01:44.280 and UM. Systematically, the Chinese were trying to rebalance the 0:01:44.480 --> 0:01:47.160 corporate balanty by having a huge amount eequity issuece come 0:01:47.200 --> 0:01:49.800 through the system, and I think that to some excent, 0:01:49.840 --> 0:01:52.400 the markets choking on that. But all of my readings 0:01:52.440 --> 0:01:56.000 says the assumption is it's different rule book, and the 0:01:56.080 --> 0:01:59.640 government will clear at a Haykien basis of government will 0:01:59.680 --> 0:02:02.560 clear of that that private debt, that corporate debt. The 0:02:02.600 --> 0:02:05.840 government's there to bail out everybody in sight. Is that 0:02:06.080 --> 0:02:09.919 feasible or possible? Well, it's feasible right now. And one 0:02:09.960 --> 0:02:13.560 reason why it's feasible is that you have pretty much 0:02:13.600 --> 0:02:17.359 a goldilock situation for a while where the economy is 0:02:17.400 --> 0:02:20.280 growing at something like six and a half percent reel 0:02:20.840 --> 0:02:24.840 an inflation right now remains fairly tame. The problem is 0:02:24.880 --> 0:02:27.520 you can't count on those things remaining in place forever, 0:02:28.040 --> 0:02:32.520 and especially a trade war right now is incredibly poorly 0:02:32.600 --> 0:02:36.600 timed for the Chinese because it would really hurt them 0:02:36.680 --> 0:02:39.760 on the traditional part of their economy, which they're trying 0:02:39.800 --> 0:02:43.400 to transition smoothly to a higher value add more consumer 0:02:43.760 --> 0:02:47.160 based economy. But they can't do that smoothly if they're 0:02:47.200 --> 0:02:50.440 getting crushed by high tariffs. So Seth, let's take you back. 0:02:50.600 --> 0:02:52.320 I'm going to give you your old job, the c 0:02:52.440 --> 0:02:54.040 IO of a b burn Stain. And you know that 0:02:54.080 --> 0:02:56.120 at the end of the week there's a standoff between 0:02:56.720 --> 0:02:59.520 China and the United States where they could implement tariffs 0:02:59.560 --> 0:03:02.360 on each other, and this thing could really escalate. What 0:03:02.400 --> 0:03:04.280 would you be telling, it seems right now about how 0:03:04.280 --> 0:03:07.639 they allocate capital given this current bank drop. I think 0:03:07.680 --> 0:03:10.480 you want to be very careful not to make extreme 0:03:10.520 --> 0:03:14.000 moves in the absence of actual facts, because right now 0:03:14.040 --> 0:03:19.240 there's no way to handicap a UM well, a Mexican 0:03:19.280 --> 0:03:22.320 standoff as they sometimes tell it UM, but in this case, 0:03:22.360 --> 0:03:24.520 it's a it's a U S China one, which actually 0:03:24.880 --> 0:03:28.480 is part of a broader, you know, geopolitical issue that 0:03:28.720 --> 0:03:30.760 people have talked a lot about their being a Thucidites 0:03:30.800 --> 0:03:35.720 trap potentially between the US and China and UM you know, 0:03:35.760 --> 0:03:38.760 as as we know, most times when there is a 0:03:38.920 --> 0:03:43.520 rising power in the world, the current dominant one overreacts 0:03:43.520 --> 0:03:47.200 to that and it ends up hurting both. Occasionally we've 0:03:47.200 --> 0:03:51.200 had times when that wasn't that mistake wasn't made, but 0:03:51.240 --> 0:03:54.440 it takes a lot of really thoughtful work on both 0:03:54.440 --> 0:03:59.160 sides to prevent those traps from becoming permanent problems. I 0:03:59.200 --> 0:04:02.600 think what we we're seeing over the last fifteen years 0:04:02.880 --> 0:04:05.560 was a lot of engagement with China which was broadly 0:04:05.560 --> 0:04:08.840 constructive for both sides, and we benefited tremendously from that. 0:04:09.480 --> 0:04:12.080 The concern is if you start to see escalation and 0:04:12.160 --> 0:04:14.520 if the Chinese are put in a position where they 0:04:14.560 --> 0:04:18.320 have to think geo politically about their US treasury holdings, 0:04:18.320 --> 0:04:23.520 for example, you could get a series of let's collect 0:04:23.520 --> 0:04:27.760 tit for tat moves that actually hurt both sides, but 0:04:28.120 --> 0:04:30.360 we're both have to play to their domestic political basis. 0:04:30.400 --> 0:04:33.400 I think at this point, if I were advising each 0:04:33.400 --> 0:04:36.120 of those two teams, I'd say make sure you're at 0:04:36.160 --> 0:04:38.800 least talking with back channels so whatever stuff comes out 0:04:38.800 --> 0:04:43.719 in public isn't polluting the actual real negotiations face to face. 0:04:44.080 --> 0:04:46.080 And what I'd be talking about with my investment teams 0:04:46.160 --> 0:04:48.839 is make sure that you're well diversified so you don't 0:04:48.880 --> 0:04:52.960 have too much exposure to sectors which will be sentiment 0:04:53.040 --> 0:04:55.760 driven if there is a miscalculation. It just seems that 0:04:55.880 --> 0:04:58.839 Tom this morning once again sentiment driven by maybe one 0:04:58.960 --> 0:05:01.840 key data point. If I tell you whether Chinese currency is, 0:05:02.160 --> 0:05:04.080 you can probably tell me where global risk is at 0:05:04.080 --> 0:05:07.480 the moment. Chinese currency week, a global risk has taken 0:05:07.520 --> 0:05:09.000 a hit, And it seems to be that kind of 0:05:09.040 --> 0:05:10.880 morning over the last week where you just pick up 0:05:10.880 --> 0:05:12.640 on where the Chinese currency is and you get a 0:05:12.640 --> 0:05:17.080 decent gauge of where if the analysis. Well also that 0:05:17.120 --> 0:05:19.160 you can look at the gap between the Chinese currency 0:05:19.240 --> 0:05:21.080 has traded in China and it's traded in Hong Kong. 0:05:21.320 --> 0:05:23.320 I think that's that's probably actually the signal you want 0:05:23.360 --> 0:05:26.440 to look for. The traditional investment is cash avail you 0:05:26.640 --> 0:05:29.880 to you? Are you fully invested whether it's bonds or equities, 0:05:29.960 --> 0:05:33.120 or your seth master is comfortable in cash? Well, I 0:05:33.120 --> 0:05:35.000 would think of it a little bit differently than that. 0:05:35.080 --> 0:05:37.640 Right now, I'd say that you want to be fully invested, 0:05:37.640 --> 0:05:39.839 but you should probably think of cash as part of 0:05:39.880 --> 0:05:42.159 your fixed income allocation, and you might want to be 0:05:42.200 --> 0:05:44.840 a bit shorter. You probably want to be a bit 0:05:44.839 --> 0:05:47.679 shorter in your fixed income exposures than you would normally 0:05:47.720 --> 0:05:50.520 be because right now, if there's one asset class which 0:05:50.520 --> 0:05:53.000 I think is very exposed globally, it is fixed income. 0:05:53.120 --> 0:05:54.920 We are going to see higher rates, which is really 0:05:54.960 --> 0:05:57.400 a normalization of rates, and that's not going to be 0:05:57.440 --> 0:06:00.360 good for longer duration bonds. Seth Masters think so much 0:06:00.360 --> 0:06:18.039 greatly appreciated formally with Alliance Bernstein as well. It's sort 0:06:18.080 --> 0:06:21.520 of ancient history, you know, it's it's it's sort of 0:06:21.600 --> 0:06:25.520 old news and Saudi Arabian in the U S and 0:06:25.640 --> 0:06:28.560 oil because the news flows happened so fast. I'm reading 0:06:28.560 --> 0:06:31.360 to sign with us with Energy aspects to give us 0:06:31.400 --> 0:06:35.440 some forward view here and reading my simple question, given 0:06:35.480 --> 0:06:37.960 the doom and gloom in the media in America all weekend, 0:06:38.880 --> 0:06:43.599 is Saudi Arabia beholden to President Trump in the United States? 0:06:45.720 --> 0:06:49.240 I think Thomas, it's extremely complicated because I think we 0:06:49.320 --> 0:06:52.760 all know that Iran is at the middle of this 0:06:52.920 --> 0:06:55.839 whole issue, which is clearly the US administration is going 0:06:55.920 --> 0:06:59.279 very hard on Iran, cutting off their exportily that's what 0:06:59.320 --> 0:07:01.560 they plan to do. To add I think what Trump 0:07:01.600 --> 0:07:05.240 said was that Ivan he thinks is the problem in 0:07:05.279 --> 0:07:08.760 the region, and therefore he is saving Saudi Arabia from Iran, 0:07:08.800 --> 0:07:11.520 and therefore Saudi Arabia has to increase production. At least 0:07:11.520 --> 0:07:15.360 that's what the kind of official line was given his 0:07:15.400 --> 0:07:18.720 interviews over the weekend. Um. Yes, I think there is 0:07:18.760 --> 0:07:21.320 an enormous amount of pressure in Saudi Arabia right now 0:07:21.320 --> 0:07:25.440 to increase production. However, the tricky bit over here is 0:07:25.480 --> 0:07:28.400 that they are doing what they can. Mean Sustainable productive 0:07:28.400 --> 0:07:31.720 capacity in the short term is about eleven million barrels 0:07:31.720 --> 0:07:34.520 today and they are pretty much there. Anything beyond that 0:07:34.560 --> 0:07:36.920 close to twelve will take a minimum of nine to 0:07:36.920 --> 0:07:39.840 twelve months, will need more capex, will need more rigs. 0:07:40.120 --> 0:07:42.960 So it's a very very difficult situation, and I'm ready 0:07:43.000 --> 0:07:45.000 to the market just doesn't buy the story. I mean, 0:07:45.040 --> 0:07:47.240 Tom's calling it on old news, and it certainly feels 0:07:47.280 --> 0:07:49.760 like that Saturday morning. If I've said so many people 0:07:49.840 --> 0:07:52.280 in the moment, just in the moment when the President's waited, 0:07:52.480 --> 0:07:55.880 I'm asking that Saudi Arabia increased production, maybe up to 0:07:55.880 --> 0:07:58.160 two million barrows a day to make up the difference 0:07:58.200 --> 0:08:01.440 prices too high, he has agreed. I imagine people might 0:08:01.520 --> 0:08:04.960 think Monday morning would be aggressively lower. W T I 0:08:05.040 --> 0:08:07.400 is positive a tenth of one percent, Brent down four 0:08:07.480 --> 0:08:09.680 tenths of one percent. Do you think the market just 0:08:09.720 --> 0:08:11.560 doesn't buy any of this now? I'm retoern as the 0:08:11.560 --> 0:08:14.920 buyers shifted from real concerns about not being enough there 0:08:14.960 --> 0:08:19.160 not being enough supply. I completely agree with you, and 0:08:19.200 --> 0:08:21.800 I mean, I think initially you may have thought it 0:08:21.920 --> 0:08:24.200 that crisis might come off. I think the fact that 0:08:24.240 --> 0:08:27.800 the White House backtracked a little bit on that, saying 0:08:27.800 --> 0:08:29.720 that they talked about it, and even as how the 0:08:29.760 --> 0:08:32.319 official statement was that, you know, it is very much 0:08:32.360 --> 0:08:36.160 about keeping that spec capacity as and when it's needed. 0:08:36.400 --> 0:08:39.600 And I also think the market generally knows that the 0:08:39.640 --> 0:08:43.319 capacity isn't there um And I think the bigger issue 0:08:43.400 --> 0:08:46.200 right now is I don't think we have ever ever 0:08:46.320 --> 0:08:48.640 been in a situation with such low spect capacity in 0:08:48.679 --> 0:08:51.960 this market at the time when there are enormous amounts 0:08:51.960 --> 0:08:55.679 of supplied disruptions. Right now, all the focus has been 0:08:55.720 --> 0:08:57.880 on Iran and Saudi Arabia. Just look at Libya. Libyan 0:08:57.920 --> 0:09:00.400 production right now is down eight hundred thousand barrels the day. 0:09:00.600 --> 0:09:04.000 We don't have spare with Permian capacity constraints, and therefore 0:09:04.000 --> 0:09:07.320 the US can grow fast. You just don't have anyone 0:09:07.360 --> 0:09:10.680 else who can make yes. I mean, I mean read, 0:09:10.880 --> 0:09:12.480 I mean folks. I don't know if you're aware of this. 0:09:12.559 --> 0:09:17.120 We'red eighty dollars a barrel. I'm bran crew is going up, 0:09:17.200 --> 0:09:20.640 rounded up, seventy nine, round there, up, we're at eighty. 0:09:20.760 --> 0:09:24.200 What's the energy aspect call? Given all that you just 0:09:24.240 --> 0:09:28.840 told us, um the interest. The funny thing is that call, 0:09:28.920 --> 0:09:31.760 even before any of this happened, or any of this 0:09:31.960 --> 0:09:36.480 got snowballed into such a lens, was eight dollars in 0:09:36.600 --> 0:09:40.640 Q four. Clearly that's coming two quarters earlier, given all 0:09:40.640 --> 0:09:43.320 the bits that are happening right now. Look, I wouldn't 0:09:43.480 --> 0:09:45.640 I wouldn't rule out hundred dollars by yes, thank you, 0:09:45.720 --> 0:09:47.160 That's where I wanted to go. You're gonna be the 0:09:47.200 --> 0:09:50.079 first person in Bloomberg surveying. Let's just say this. John 0:09:50.120 --> 0:09:53.240 Ferrell and his other properties has heard this. Are we 0:09:53.360 --> 0:09:57.200 going back to a hundred dollars of barrel oil? I 0:09:57.280 --> 0:10:00.840 do think it's very very possible. Be who's anywhere close 0:10:00.880 --> 0:10:03.000 to a million and a half barrels per day from 0:10:03.160 --> 0:10:06.400 um from Iran and Libyan Nigeria, given all the problems 0:10:06.440 --> 0:10:08.880 we have there in Venezuela. Look, I do think in 0:10:08.920 --> 0:10:11.319 the short term the market is a little bit oversupplied 0:10:11.400 --> 0:10:14.200 because what's ended up happening is that Saudi Arabia has 0:10:14.280 --> 0:10:17.880 raised production too fast and Iran hasn't gone off yet, 0:10:18.280 --> 0:10:21.080 which is why I don't think Q three prices will 0:10:21.120 --> 0:10:23.360 necessarily do a lot. I think we'll be in this range, 0:10:23.640 --> 0:10:25.559 but come Q four and towards the R end, I 0:10:25.600 --> 0:10:29.360 think that's when things can be very, very very tight. However, 0:10:29.760 --> 0:10:32.319 all of this could change if the US administration stands 0:10:32.400 --> 0:10:35.280 changes right. It just really depends on where we are 0:10:35.320 --> 0:10:37.480 going with Iran on this and rate it just quickly. 0:10:37.679 --> 0:10:41.800 Can the global economy tolerate one dollar crude? I think 0:10:41.800 --> 0:10:43.520 it's going to be tough. Yes, the economy is a 0:10:43.559 --> 0:10:47.360 lot better than it was in but demand growth will 0:10:47.400 --> 0:10:49.640 start to throw down next year. I'm really sent a 0:10:49.760 --> 0:10:51.680 energy aspects with a big cold tomb kine, and I 0:10:51.679 --> 0:10:53.120 wonder how many people are gonna come out with the 0:10:53.120 --> 0:10:56.360 triple digital for crude over the next several months. Given 0:10:56.360 --> 0:10:58.480 a price section this morning, even as the President ramps 0:10:58.559 --> 0:11:01.160 up pressure on the Saundies, I will say this and 0:11:01.240 --> 0:11:04.000 it goes back to commodities work done in the Midwest, 0:11:04.040 --> 0:11:05.960 the heartland of the country. At a G Edwards a 0:11:05.960 --> 0:11:09.360 million years ago, oil is the toughest thing to predict. 0:11:09.600 --> 0:11:11.680 There's a lot of really good math on this, John, 0:11:12.200 --> 0:11:15.240 and it's like it's like, because of the politics and 0:11:15.320 --> 0:11:18.600 because of it's crazy tightness and all that between supply 0:11:18.640 --> 0:11:23.800 and demand, it's just you just go down in flames eyeballing. 0:11:23.960 --> 0:11:27.400 I mean when people give me a forecast, folks, I always, 0:11:27.400 --> 0:11:31.040 with great respect and great humility, say yeah, maybe it's 0:11:31.040 --> 0:11:33.360 not that they're wrong or right, it's just a barter. 0:11:33.559 --> 0:11:36.080 I think. I think the individual delivered in the forecast 0:11:36.120 --> 0:11:38.719 would would say the same thing. I think my my 0:11:38.840 --> 0:11:41.280 kind of pushback would just be can the global economy 0:11:41.360 --> 0:11:45.520 really ton right part of the equation? I just don't 0:11:45.600 --> 0:11:47.360 know if it can. I guess we can talk about 0:11:47.360 --> 0:12:00.520 it through the shot. John Farrow, and I'm keen with 0:12:00.600 --> 0:12:03.240 us now. A gentleman who played for the Mexican rugby 0:12:03.320 --> 0:12:07.280 national team years ago, Carlos Peterson. He's with your Asia 0:12:07.280 --> 0:12:11.040 group and we're gonna talk about the Mexican elections. Carlos, 0:12:11.040 --> 0:12:13.880 do you take Ian Bremer today down to the Guadaloupe 0:12:14.040 --> 0:12:18.000 in in Bushwick and a Viva Mexico quissadillas green, white 0:12:18.040 --> 0:12:19.920 and red? Is That was this? That the morning plan 0:12:20.320 --> 0:12:23.240 for all of your Agia group. That was the morning plan. 0:12:23.360 --> 0:12:25.720 But we have a bigger brazil team, So we're going 0:12:25.760 --> 0:12:29.840 probably to have some fishal on the resolved afterwards. Maybe 0:12:29.880 --> 0:12:32.840 maybe we can celebrate with Margarita because I'm betting on Mexico. 0:12:32.920 --> 0:12:36.480 So well, if the Brazilians throw you out the door 0:12:36.480 --> 0:12:38.920 at your age group, come on over to Bloomberg. Carlos, 0:12:39.000 --> 0:12:43.840 You've had a huge, huge value on the domestic calculus 0:12:43.840 --> 0:12:47.920 of this Mexican election. This is a huge loss for 0:12:48.000 --> 0:12:52.640 the elites. What do the elites do this morning in Mexico? 0:12:53.800 --> 0:12:57.120 I think I think they're playing out the plans that 0:12:57.160 --> 0:12:59.720 they will have to operate in under a new, completely 0:12:59.720 --> 0:13:03.600 new environment and with completely different views coming from the government. 0:13:04.360 --> 0:13:07.680 Lopez Overadora has been someone that has been very very 0:13:07.679 --> 0:13:10.520 critical from the of the of the elites over the 0:13:10.559 --> 0:13:13.920 past twenty years, and now he's going to be in charge. 0:13:13.960 --> 0:13:17.520 So so that relationship is going to change dramatically and 0:13:17.600 --> 0:13:20.440 they will have to understand how to deal with him, 0:13:20.720 --> 0:13:24.080 and I think will be a pretty contentious relationships. Some 0:13:24.160 --> 0:13:28.000 businessmen will have will collaborate and will work well with 0:13:28.000 --> 0:13:30.120 with with Lopezo a lot, But others, I think you're 0:13:30.120 --> 0:13:32.560 going to try to to trump and and and and 0:13:32.640 --> 0:13:35.360 stop him from implementing his policy. And that's obviously going 0:13:35.400 --> 0:13:40.640 to become something UH noisy and problematic, and in some instances, myself, 0:13:40.679 --> 0:13:43.560 carlors some an emerging market tourists. So I won't pretend 0:13:43.600 --> 0:13:45.400 to be an expert, but I will ask two basic 0:13:45.480 --> 0:13:48.760 questions that tourists typically ask. It's what is his position 0:13:48.800 --> 0:13:51.840 on fiscal responsibility? And the other is what is his 0:13:51.880 --> 0:13:56.840 position on central bank independence? He has taken very fairly 0:13:57.120 --> 0:14:00.240 orthodox positions on that. On on the fiscal for what 0:14:00.320 --> 0:14:02.440 he claims is that he wants to keep the fiscal 0:14:02.480 --> 0:14:05.320 accounts at bay. He wants he doesn't want to increase 0:14:05.640 --> 0:14:09.240 UH depth too much. However, I'm a little bit skeptic 0:14:09.320 --> 0:14:11.439 there how much he can do that, because he has 0:14:11.440 --> 0:14:14.360 also promised a lot of different spending plans that he 0:14:14.440 --> 0:14:18.560 has so so conciliating both the spending site with the 0:14:18.679 --> 0:14:20.720 with the with the with the fiscal front. I think 0:14:20.880 --> 0:14:23.520 he's going to be challenging and that's a potential source 0:14:23.560 --> 0:14:25.680 of disruptions and we can see in the future from 0:14:25.680 --> 0:14:28.040 the central bank perspective. He has also said that he 0:14:28.120 --> 0:14:30.880 respects the autonomy of the central bank, that he's fine 0:14:30.920 --> 0:14:33.680 with it. Again, he has been very critical of what 0:14:33.720 --> 0:14:37.640 the technocratic class in Mexico has been doing over the passengagers, 0:14:37.680 --> 0:14:40.800 and those are the ones that are ruling the at 0:14:40.800 --> 0:14:43.720 the central bank right now. So the potential source of 0:14:43.760 --> 0:14:47.520 contention is between his administration and the en bang Kiko 0:14:47.720 --> 0:14:50.720 could also trigger at some point. So I think I 0:14:50.720 --> 0:14:54.880 think there are potential sources of of of contentiousness along 0:14:54.880 --> 0:14:59.480 the road under these two specific issues. Mexico has to 0:14:59.520 --> 0:15:02.200 do a as negotiations and all that, but what they 0:15:02.280 --> 0:15:04.760 really got to do is get their economy going again. 0:15:05.280 --> 0:15:09.520 What is the biggest constraint to getting per capita GDP? 0:15:09.720 --> 0:15:13.640 Are just good economic growth that actually assists the left. 0:15:13.760 --> 0:15:17.840 What's the what's the first factor for Carlos Peterson. I 0:15:17.880 --> 0:15:22.280 think that something that Lopezo Alora has actually a good 0:15:22.320 --> 0:15:25.040 position on, which is investing in the south of the country. 0:15:25.360 --> 0:15:29.320 Mexico is if you look at that as a country 0:15:29.320 --> 0:15:32.280 overall has had a very sluggish growth over the past 0:15:32.360 --> 0:15:34.800 thirty years. But if you look at its regions, the 0:15:34.880 --> 0:15:38.240 ones that have been really integrated to NAFTA have actually 0:15:38.440 --> 0:15:42.280 grown at very high rates and have been doing fairly well. 0:15:42.320 --> 0:15:44.040 The problem is the south of the country that is 0:15:44.080 --> 0:15:47.600 more disconnected, that doesn't have a strong economy, that has 0:15:47.760 --> 0:15:51.880 actually lacked behind. And Lopezovato has proposed to invest strongly 0:15:51.960 --> 0:15:55.720 in the south to to develop an infrastructure program there 0:15:56.040 --> 0:15:59.120 uh in order to to to trigger growth in that region. 0:15:59.160 --> 0:16:01.880 And I actually think that's that's not a bad idea 0:16:01.920 --> 0:16:05.880 because of these uh like the discurbancies that exists between regions, 0:16:06.040 --> 0:16:08.520 and that could actually help the economy overall to grow. 0:16:08.760 --> 0:16:11.200 So Carlos Terra say he might have something in common 0:16:11.640 --> 0:16:13.240 with the President of the United States, how are those 0:16:13.240 --> 0:16:16.480 two lunely to get on. I think it's going to 0:16:16.520 --> 0:16:21.000 be a difficult relationship, right. I think that Lopez Other 0:16:21.120 --> 0:16:23.200 is not going to come after Donald Trump and use 0:16:23.320 --> 0:16:25.680 him as a as a as a political punching back 0:16:25.720 --> 0:16:27.520 in Mexico a little bit like Donald Trump does with 0:16:27.600 --> 0:16:30.560 Mexican in many occasions. Because Lopez of Other tends to 0:16:30.600 --> 0:16:33.280 focus more on the domestic side, and every time that 0:16:33.360 --> 0:16:36.480 he's asked to talk about even President Trump or any 0:16:36.520 --> 0:16:39.480 other foreign leader, he refrains from it. He says that 0:16:39.560 --> 0:16:42.040 he's not going to get into politics from other places. 0:16:42.040 --> 0:16:44.360 So I think he will. He will be concrained until 0:16:44.480 --> 0:16:46.960 Donald Trump comes out and tweet something or say something 0:16:46.960 --> 0:16:50.000 about Mexico that lopezot will clearly respond to. Tends to 0:16:50.000 --> 0:16:53.080 be tracked into politics on the international stage, whether he 0:16:53.120 --> 0:16:55.680 likes it or not. With naftur an immigration at the 0:16:55.680 --> 0:16:58.920 forefront of this administration in the United States, I mean, Carlos, 0:16:58.960 --> 0:17:01.720 how does he avoid it? Absolutely, he will not be 0:17:01.800 --> 0:17:03.640 able to avoid. And I think that's one of the 0:17:03.800 --> 0:17:06.720 main issues that actually will constrain him from doing other things. 0:17:06.800 --> 0:17:11.040 Because the main uh, like the first like a policy 0:17:11.119 --> 0:17:12.919 decision that we will have to make or deal with 0:17:13.119 --> 0:17:16.440 is an after negotiations is going to be very important. Yeah, 0:17:16.480 --> 0:17:19.840 and we'll have to get like hands down without right 0:17:19.840 --> 0:17:23.280 away curls. Let's go back to you know, I guess 0:17:23.359 --> 0:17:27.360 Mexican chat of too twenty years ago to zero twenty 0:17:27.440 --> 0:17:30.920 years ago? Can oil save Mexico? Those days are over right, 0:17:31.520 --> 0:17:34.720 Those days are over. The Mexican economy has diversified significantly. 0:17:35.040 --> 0:17:38.200 Oil used to be up until two thousand and fourteen 0:17:38.240 --> 0:17:40.720 a very important parts from for fiscal accounts because it 0:17:40.760 --> 0:17:45.280 would represented the of the government's revenue. Now it's down 0:17:45.320 --> 0:17:49.840 to and really yet investing in the sector is but 0:17:50.680 --> 0:17:53.159 is positive, etcetera. But he's not going to be the 0:17:53.160 --> 0:17:56.720 main leader lead the economy moving ahead. I mean manufacturing 0:17:56.760 --> 0:18:00.439 processes is in la in labor arbitrarge is still the 0:18:00.520 --> 0:18:03.880 same thing today. Have a beneficial labor arbitrage is Steve 0:18:03.960 --> 0:18:07.560 Roach of Yale University would say versus Asia, I mean, 0:18:07.680 --> 0:18:10.520 is their wage differential when you pouncer the math at 0:18:10.560 --> 0:18:13.480 your Asia group or some other think tank is Mexico 0:18:13.520 --> 0:18:17.680 and the driver's seated that labor differential with Asia. I 0:18:18.240 --> 0:18:20.160 think I think it is. I think it is. Mexico 0:18:20.200 --> 0:18:23.960 has been benefiting from from low wages over the past 0:18:24.080 --> 0:18:26.199 ten years. And that's one one of the most like 0:18:26.840 --> 0:18:29.320 factors that have been able to make the manufacturing Mexico 0:18:29.400 --> 0:18:32.919 very competitive and attract business from the whole world and 0:18:33.080 --> 0:18:35.320 in order to export it to the US mainly right 0:18:35.640 --> 0:18:38.040 uh And and that's actually one of the potential sources 0:18:38.080 --> 0:18:41.600 of risk from the NATA negotiations because what Donald Trump 0:18:41.640 --> 0:18:44.879 and his administration want to do is make Mexico less competitive, 0:18:45.119 --> 0:18:47.800 and that's why they have been pushing for higher wages 0:18:47.840 --> 0:18:51.200 in Mexico in order to limit the number of companies 0:18:51.240 --> 0:18:53.240 moving from the U S to Mexico. That's a potential 0:18:53.240 --> 0:18:56.840 source of risk for the economy overall and Mexico's competitiveness. 0:18:56.880 --> 0:19:00.320 For sure. I believe it's five months before the president 0:19:00.320 --> 0:19:02.800 elect actually becomes the president. Is that right? I didn't 0:19:02.840 --> 0:19:05.320 know that. Is that true? Yes, it's a very very 0:19:05.320 --> 0:19:07.800 long periods, So it's five months that takes us through 0:19:07.840 --> 0:19:09.960 to the end of the year. Do you think not 0:19:10.160 --> 0:19:12.680 to gets done before the end of the year, No, 0:19:12.840 --> 0:19:16.920 it won't. I think that there are two main factors 0:19:16.920 --> 0:19:20.080 that will will not allow enough to to move forward. 0:19:20.119 --> 0:19:22.120 One is the midterms elections in the US. I think 0:19:22.160 --> 0:19:25.640 the focus on on the political perspective for the Trump 0:19:25.640 --> 0:19:28.760 administration are now are now on on domestic politics, and 0:19:29.160 --> 0:19:32.040 the NAHA negotiation is something too contentious and too complicated 0:19:32.080 --> 0:19:35.440 to deal with in Mexico and the US and Canada 0:19:35.560 --> 0:19:37.560 grew in Canada have not been able to come up 0:19:37.680 --> 0:19:40.639 like into middle ground and to and to uh, like 0:19:41.080 --> 0:19:44.080 make these more contentious issues that they have been negotiations 0:19:44.240 --> 0:19:46.920 and negotiating about, like solve them. So I don't think 0:19:46.960 --> 0:19:48.320 that they will be able to do that in the 0:19:48.359 --> 0:19:51.199 next three months. CARLS. Peterson, thank you so much with 0:19:51.200 --> 0:20:08.760 the Erasier group this morning. Greatly appreciate it. Well, you know, 0:20:08.800 --> 0:20:10.439 one of the stories that we're gonna be watching this 0:20:10.480 --> 0:20:12.919 week has to do with Tesla and the production of 0:20:12.960 --> 0:20:16.000 the Model three. And here to help us kind of 0:20:16.000 --> 0:20:19.720 make sense of all this is Tasha Keeny, ARC analyst 0:20:19.840 --> 0:20:23.160 on Tesla. Latasha always a pleasure. UM, give us your 0:20:23.240 --> 0:20:26.119 your reaction to this idea of what's so, what's the 0:20:26.160 --> 0:20:30.280 big deal about producing five thousand Model threes? What is 0:20:30.320 --> 0:20:33.040 I mean, come on, five thousand, that's not a lot 0:20:33.119 --> 0:20:38.159 of cars. Yeah. So, you know, I think UM investors 0:20:38.200 --> 0:20:40.160 want to know that Tesla I can sort of make 0:20:40.240 --> 0:20:42.960 the step from graduating from a startup to a full 0:20:42.960 --> 0:20:46.840 scale auto company. UM. But you know, I actually think 0:20:46.880 --> 0:20:50.000 that a lot of UM perhaps UNDO focus has put 0:20:50.040 --> 0:20:54.320 on these production numbers because these are very short term targets. 0:20:54.880 --> 0:20:58.199 You know, at ARCCRE long term investors UM even if 0:20:58.240 --> 0:21:01.120 they were to miss the product action targets by say 0:21:01.119 --> 0:21:03.800 a week or two weeks. UM. We're really looking at 0:21:03.800 --> 0:21:06.040 the long term and we think that a lot of 0:21:06.080 --> 0:21:08.000 people are missing the point that this is not just 0:21:08.200 --> 0:21:12.439 an electric vehicle company, it's an autonomous vehicle company. And 0:21:12.680 --> 0:21:15.080 UM we think that is the largest opportunity ahead of 0:21:15.080 --> 0:21:18.080 Tesla in the next two years, autonomous vehicles. So you 0:21:18.200 --> 0:21:23.760 think that driverless automobiles that are made by Tesla is 0:21:23.800 --> 0:21:27.560 what is going to win over the public. Yes, so, 0:21:27.720 --> 0:21:30.359 so right now people are so focused on production because 0:21:30.440 --> 0:21:33.120 the business model is this, this one off sales model, 0:21:33.200 --> 0:21:36.520 right you exel Um one Tesla. But in the future, 0:21:36.720 --> 0:21:40.360 we think, UM, when they turn on autonomous capability through autopilot, 0:21:40.600 --> 0:21:43.320 this will become a recurring revenue model because they'll launch 0:21:43.359 --> 0:21:46.560 the Tesla network, their version of Uber. UM. They'll collect 0:21:46.600 --> 0:21:50.080 really nice margins off of the revenues the per mile 0:21:50.400 --> 0:21:53.000 rates that they're collecting off of the customers in this 0:21:53.119 --> 0:21:57.280 taxi network. UM, and that's that's you know, UM. That 0:21:57.320 --> 0:22:01.240 will certainly help cash flow and calm those concerns. And 0:22:01.840 --> 0:22:05.480 we think that's roughly two trillion dollar opportunity with within 0:22:05.600 --> 0:22:10.760