Speaker 1: This is Bloomberg Wall Street Week.
Speaker 2: I mean may not have an overall recession, We're having
Speaker 2: a rolling recession. To kind of roll looks pretty strongly.
Speaker 2: It is when it comes to jobs. The financial stories
Speaker 2: that shape our world. Three major regional bank failures send
Speaker 2: shockwaves through the banking system. We're all trying to figure
Speaker 2: out what to make of generative AI.
Speaker 1: Through the eyes of the most influential voices.
Speaker 2: Welcome down, Doctor Paul Krugman, Bryan moynihan, a Bank of America,
Speaker 2: deebro Lair of the Paulson Institute, well Then Hubbard of
Speaker 2: the Columbia Business School.
Speaker 1: Bloomberg Wall Street Week with David Weston from Bloomberg Radio.
Speaker 2: The Fed decides not to decide, Reddit goes public and
Speaker 2: former President Trump faces foreclosure. This is Bloomberg Wall Street Week.
Speaker 2: I'm David Weston. This week, Brian dies on what's really
Speaker 2: going on with electric vehicles?
Speaker 3: I think those headlines would make you more concerned than
Speaker 3: you should be. The demise of electric vehicles has greatly exaggerated.
Speaker 2: And Kristin Roth, the Clark of Barclays, on a comeback
Speaker 2: for tech IPOs.
Speaker 4: Investor appetite is as strong as it's been in a
Speaker 4: very long time for IPOs.
Speaker 2: But we begin with our very special contribut Larry Summers
Speaker 2: of Harvard, as we address what the FED decided is
Speaker 2: a week, what we've heard from JPOM, and also maybe
Speaker 2: a little microeconomics before we're done. So Lari, thanks for
Speaker 2: being back with us. Let's start with the FED. Though
Speaker 2: what we heard, I heard more growth, less inflation, low unemployment.
Speaker 2: That sounds pretty good to me. Is it too good
Speaker 2: to be true?
Speaker 5: I don't know.
Speaker 6: Certainly there's been some encouraging data flow during twenty twenty three,
Speaker 6: though the last two months haven't been quite so encouraging.
Speaker 6: It's great and right to hope for the best, but
Speaker 6: hoping isn't planning, And certainly, from that scenario laid out
Speaker 6: in the dot plots, I think there's more room for
Speaker 6: things to surprise on the bad side than to surprise
Speaker 6: on the better side. We may have the path that's
Speaker 6: described there materialized. It's certainly got to be recognized as
Speaker 6: a very real possibility. My sense is still that the
Speaker 6: Fed is itchy fingers to start cutting rates, and I
Speaker 6: don't fully get it. We've got unemployment, if anything, below
Speaker 6: what they think is full capacity, we've got inflation clearly
Speaker 6: even in their forecast for the next two years above target.
Speaker 6: We've got GDP growth rising, if anything, faster than potential.
Speaker 6: We have financial conditions the holistic measure of monetary policy
Speaker 6: at a very loose level. I don't know why we're
Speaker 6: in such a hurry to be talking about moving to
Speaker 6: moving towards the accelerator.
Speaker 2: So we heard from a chair pal that in fact
Speaker 2: he thinks these conditions are restrictive. Right now they are
Speaker 2: decidedly justking even if we're not seeing a lot of restriction.
Speaker 2: But that depends in part on where the neutral rate is,
Speaker 2: something we've talked about before.
Speaker 5: I still don't get a sense.
Speaker 2: From the FED that they figured out where they think
Speaker 2: the neutralit is, and do they need to know that
Speaker 2: before they can decide where they're going.
Speaker 6: They need to take a view, because if you don't
Speaker 6: know what's neutral, you don't know how expansionary or restrictive
Speaker 6: your being. And I find their view that the ultimate
Speaker 6: neutral rate is two point six to be bizarre. In
Speaker 6: current circumstances. Here's what we have relative to a few
Speaker 6: years ago when they said it was two point five.
Speaker 6: We've got fiscal policy in a much much more expansionary
Speaker 6: place with much higher deficits, much larger role of debt
Speaker 6: that puts pressure on credit markets. We've got a huge
Speaker 6: set of new private sector investments going on with respect
Speaker 6: to green investment in the IRA going on with respect
Speaker 6: to resilience and reducing dependence on single sources. We've got
Speaker 6: a potential huge source of demand for chips and for
Speaker 6: electricity coming out of the AI Revolution. And we've got
Speaker 6: a huge wealth effect as markets in for both housing
Speaker 6: and stocks have run way up for the last few years.
Speaker 6: So with all of those impulses to demand, I cannot
Speaker 6: understand why someone would form the view that the neutral
Speaker 6: rate was essentially the same as they thought it was
Speaker 6: four years ago. And I think the neutral rate is
Speaker 6: far more likely to have a fore handle on it
Speaker 6: right now than it is to have a two handle
Speaker 6: on it. And from that perspective, I'm not at all
Speaker 6: sure how restrictive monetary policy really is, and the proofs
Speaker 6: really in the putting monetary policies by now had a
Speaker 6: very long time for the lags to work through. The
Speaker 6: transmission variables, stock prices, interest rates, long term interest rates,
Speaker 6: credit spreads are flashing green and loose, and the economy
Speaker 6: keeps surprising on the high side.
Speaker 5: So either if you look at the fundamental.
Speaker 6: Determinants of neutral interest rates or you look at how
Speaker 6: fast the economy is growing, seems to me you've got
Speaker 6: to read a high neutral interest rate. And I just
Speaker 6: can't understand why the FED is talking about two point
Speaker 6: six as a best guess.
Speaker 5: I would be the first to.
Speaker 6: Recognize that this is a number that fluctuates, that we
Speaker 6: can't gauge it precisely that economists don't have great models.
Speaker 6: So I'm not saying that I'm.
Speaker 5: Sure that they're wrong.
Speaker 6: I'm not, but I think the challenge in policy making
Speaker 6: is to try to make best estimates where you're equally
Speaker 6: likely to be wrong in both directions.
Speaker 2: Larry accurs me, there are policies going beyond monetary policy
Speaker 2: that could well affect future inflation. Now I'll mention a
Speaker 2: couple of them, trade and tariffs. What are the other
Speaker 2: factors that might be driving inflation.
Speaker 6: Part of the story of the great moderation of low
Speaker 6: inflation for forty years hash to have been the ways
Speaker 6: in which globalization held down prices, flows of capital that
Speaker 6: promoted productivity, enhancing investment flows of workers, that enhanced labor supply,
Speaker 6: lower priced goods that provided competition. The best forms of
Speaker 6: competition we get in the US economy are often from
Speaker 6: imported goods, and so if globalization held prices down, it
Speaker 6: follows the deglobalization will tend to push prices up, which
Speaker 6: will mean for some interval higher rates of inflation. And
Speaker 6: I don't think the prospects of tariffing, creases of reductions
Speaker 6: and immigration, of more restriction on foreign foreign investment and
Speaker 6: what that means for the dollar. I don't think that's
Speaker 6: reflected in consensus inflation views, and so I think that's
Speaker 6: another upside risk to inflation, and frankly, it's one that
Speaker 6: would be substantially exacerbated if the Trump program economic program,
Speaker 6: at least as it's been described in recent months, were
Speaker 6: to be implemented.
Speaker 2: Larry, thank you so much for being with us. As always,
Speaker 2: that's our special contributor to Larry Summers of Harvard. Higher
Speaker 2: interest rates have taken momentum away from tech IPOs, but
Speaker 2: we've read it up this week and asked Sarah on
Speaker 2: Deck twenty twenty four may be the year of the
Speaker 2: comeback for tech companies going public to take us through it.
Speaker 2: We welcome back Kristin Roth to Clark Barclay's global head
Speaker 2: of Technology Investment Banking. So welcome. It's great to have
Speaker 2: you here in person, say San Francisco. Yes, great to
Speaker 2: be here. So give us a sense we do have
Speaker 2: read It and Asteria right right in front of us
Speaker 2: as we speak this week. But are we seeing perhaps
Speaker 2: a break in the log jam in tech? IPOs?
Speaker 4: Investor appetite is as strong as it's been in a
Speaker 4: very long time for IPOs. Part of that is because
Speaker 4: there really is a dearth of growth technology assets in
Speaker 4: the public market that are at scale today. And if
Speaker 4: you look at all of the public tech companies over
Speaker 4: two billion dollar market cap, less than thirty have growth
Speaker 4: rates over thirty percent. So investors are looking for opportunities
Speaker 4: for growth in the IPO market.
Speaker 7: So is there a.
Speaker 2: Profile for the companies they're most likely be successful. Reddit's
Speaker 2: very different from Astera. Those are two very different companies
Speaker 2: right well.
Speaker 5: Scale matters to investors.
Speaker 4: We saw, you know, some of the carnage a little
Speaker 4: bit from the twenty twenty and twenty twenty one IPO
Speaker 4: classes where IPOs were priced at pretty significant premiums to
Speaker 4: where the you know multiples have been on a historical
Speaker 4: basis and then traded down significantly. The ones that had
Speaker 4: the you know, smaller market caps, smaller float were disproportionately impacted.
Speaker 4: And for that reason, you know, the scale really matters
Speaker 4: in terms of revenue scale. The second piece is you know,
Speaker 4: growth rate and the interplay between growth rate and profitability.
Speaker 4: So it's important to be to have kind of a
Speaker 4: balance that works.
Speaker 5: Growth.
Speaker 4: You get paid more for growth, but that's only if
Speaker 4: the unit economics work and there is a either a
Speaker 4: break even or a very strong near term path the profitability.
Speaker 4: You'll get paid more for growth. If the business is
Speaker 4: not growing you know, thirty percent or north of even
Speaker 4: twenty percent, then having very significant margins and visibility and
Speaker 4: durability of those margins.
Speaker 2: Has the definition of significant growth change. I mean, given
Speaker 2: when you see some of like an Nvidia, some of
Speaker 2: these growth stocks in tech have just been really really strong.
Speaker 4: Yeah, so I think for an IPO, I would say
Speaker 4: a growth stock is something north of twenty percent thirty
Speaker 4: percent plus is really very you know, differentiated growth rate.
Speaker 5: But that's how I would.
Speaker 2: Think about it today. What's your sense of the pipeline
Speaker 2: out there for perspective IPOs in the tech era, I will.
Speaker 4: Tell you we're tracking over two hundred companies that we
Speaker 4: really think have a credible exit in the public market
Speaker 4: or entry into the public market. I guess over the
Speaker 4: next two years they could also be sold to strategics
Speaker 4: or to sponsors. But that's kind of the cohort of
Speaker 4: the private companies that were highly focused on for potential
Speaker 4: IPOs over the next two years.
Speaker 2: Structure, we might be looking at two very different revenue models.
Speaker 2: If you have a consumer facing products such as Reddit,
Speaker 2: for example, what the consumer can do, what they can afford,
Speaker 2: how much they spend could really affect it. On the
Speaker 2: other hand, if you're over in the artificial intelligence if
Speaker 2: I can mentioned that term area that's more of a
Speaker 2: business of business and need for semiconductors and things, are
Speaker 2: there two different revenue models here?
Speaker 4: Yeah, I'd say that the I mean investors right now
Speaker 4: are anything that's AI and anything that is security related
Speaker 4: are probably the two areas that have the strongest bid.
Speaker 4: The consumer facing stuff is a little bit more challenged
Speaker 4: in terms of a multiple. You're just not getting the
Speaker 4: same multiple as you get for an enterprise sale that
Speaker 4: has those two kind of end markets AI. We're just
Speaker 4: at the beginning of a decade long you know, shift
Speaker 4: and change to what we can do from a productivity standpoint.
Speaker 4: And so we've seen a lot of the stocks that
Speaker 4: are being you know, that are really being driven by
Speaker 4: the advancements in AI trade up significantly and that will continue.
Speaker 4: I think there are going to be the fits and
Speaker 4: starts and play times where investors think, Okay, this has
Speaker 4: been a little bit overbought take, you know, a little
Speaker 4: bit of profit taking. But I think by and large,
Speaker 4: this is a decade long plus shift.
Speaker 2: Kristin, really great to have you on and particularly here
Speaker 2: in New York. Thank you for coming to New York.
Speaker 2: That is Kristin Roth to Clark of Barclay's. Coming up,
Speaker 2: we go through the week in the Markets with Chris
Speaker 2: Harvey of Wells Fargo. That's next on Wall Street Week
Speaker 2: on Bloomberg.
Speaker 1: This is Bloomberg Wells Street Week with David Weston from
Speaker 1: Bloomberg Radio.
Speaker 2: This is Wall Street Week. I'm David Weston. Market's found
Speaker 2: a lot to like and what the Fed did and
Speaker 2: said this week as the SMP five hundred was up
Speaker 2: another two point three percent to end at fifty two
Speaker 2: thirty four, saying well above the medium projection of the
Speaker 2: Bloomberg ls for a year and number of only fifty
Speaker 2: one hundred. The Nasdaq added two point sixty five percent,
Speaker 2: while the yield on the tenure was down sixteen basis
Speaker 2: points to end the week at four point four point
Speaker 2: two percent. To take us through where we are, welcome
Speaker 2: back now one of the Bloomberg Alves himself, Chris Harvey,
Speaker 2: Wells Fargo's securities equity analysts. Great to have you back, Chris,
Speaker 2: good to be back. So give us your sense of
Speaker 2: how the markets interpreted what they heard from J Powell
Speaker 2: this week.
Speaker 8: Oh, it was game on. So what they heard was, Hey,
Speaker 8: the macro backdrop is hotter than we expected on a
Speaker 8: growth and an inflation side, but we're going to keep
Speaker 8: the same accommodation we had before. So the only thing
Speaker 8: that's going to change are equity prices, and they're going
Speaker 8: to move higher. What that was is to a lot
Speaker 8: of investors, I need to put on I'm not going
Speaker 8: to be penalized for risks, so I'm going to put
Speaker 8: more risk on. I probably won't be penalized for leverage.
Speaker 8: I'm going to put more leverage on and things got
Speaker 8: We had a pretty healthy move, let's just say that.
Speaker 2: So one of the things that I find surprising is
Speaker 2: at the beginning of the year we expected something like
Speaker 2: six countries. We've gone from six to three. I feel
Speaker 2: there may be less than that, and yet the equity
Speaker 2: markets didn't really discount to that. And why is that?
Speaker 7: So?
Speaker 8: I agree with that, and that's something we've been talking about,
Speaker 8: but there's more than one equity market. So higher rates
Speaker 8: did affect smaller caps, it affected value, and it held
Speaker 8: those back. But when you look at the S and
Speaker 8: P five hundred, the S and P five hundred is
Speaker 8: really a growth index, and growth has just been lackluster.
Speaker 8: And the fact that you're actually pulling it back to
Speaker 8: an odd degree actually helps because you're not accelerating the economy.
Speaker 8: You're keeping the economy right where it.
Speaker 5: Is, which is perfect for gross stocks.
Speaker 8: And the last thing I would say is that you
Speaker 8: have this amazing secular growth story in AI that's not
Speaker 8: going anywhere fast.
Speaker 2: Well, that's what exactly what I was going to ask about,
Speaker 2: because it's great we have AI, at least for the moment.
Speaker 2: We hope it's all going to improve out as brilliantly
Speaker 2: as people think it is. But is there a risk
Speaker 2: there in the narrowness of the market because it's so
Speaker 2: tied into high tech and AI.
Speaker 5: There is a risk to it.
Speaker 2: Right.
Speaker 8: We don't like to see the market this narrow, but
Speaker 8: it does make sense. Right when we see a market
Speaker 8: that's a bit broader, typically see different things. We see
Speaker 8: an economy that's moving from contraction to expansion. We're pretty
Speaker 8: much in this what I would call economic malaise where
Speaker 8: things aren't great, but they're not terrible, and you should
Speaker 8: expect a pretty narrow market. And again, the real story here,
Speaker 8: and I don't want to be too repetitive with it,
Speaker 8: is this this secular growth story that's in play, and
Speaker 8: the fact that the FED is adding a significant amount
Speaker 8: of accommodation to a period or a situation that really
Speaker 8: doesn't need it.
Speaker 2: So you like momentum, we do explain that to us.
Speaker 2: What do you like in this picture that really tells
Speaker 2: you momentum is a way to go.
Speaker 8: So it's not what do we really like about it?
Speaker 8: Because the market's so narrow, because there's not a ton
Speaker 8: of opportunities, everyone's chasing the same names, and so what
Speaker 8: happens is you get stocks that do well continue to
Speaker 8: do well, and people say, well, Chris, that's kind of
Speaker 8: a silly way to invest, and it's kind of naive,
Speaker 8: and I understand that. But if you look at the
Speaker 8: fundamentals for the stocks that are doing very well, the fundamentals.
Speaker 2: Are actually quite good.
Speaker 8: And what we keep saying is people are very scared
Speaker 8: about momentum because momentum.
Speaker 2: If you go back to.
Speaker 8: Financial crisis, say March of nine, momentum or momentum factors
Speaker 8: turned on their head and people lost a lot of
Speaker 8: money playing momentum. Same thing with the pandemic. But what
Speaker 8: we're saying right here, right now, a lot of the
Speaker 8: macro factors that would cause a point of inflection just
Speaker 8: aren't there be a credit spreads, be the economy going
Speaker 8: from contraction to expansion, or the fact that the contrarian
Speaker 8: basket or a lot of broken stocks just don't have
Speaker 8: very good valuations and good fundamentals.
Speaker 2: So momentum is good, tell me about valuation, at what
Speaker 2: point are they fully valued? And tie that back in
Speaker 2: if you would to earnings, what we're expecting out of
Speaker 2: earnings is that could take care of the valuation problem.
Speaker 8: So, David, what I would say is that we don't
Speaker 8: have I talk a lot of about valuation, but our
Speaker 8: clients aren't talking about valuation all that much. And I
Speaker 8: understand why we're in a relative We're in a chart
Speaker 8: looks good relative growth type market, and so if growth
Speaker 8: is going higher, you're going to be rewarded by that.
Speaker 8: At some point valuation will matter. But because growth is
Speaker 8: moving so quickly for a select number of stocks, there's
Speaker 8: really just one game in town and that will continue.
Speaker 2: For a while.
Speaker 8: What I think, and what you have to worry about
Speaker 8: with the rotation or brought out in the market is
Speaker 8: will the economy accelerate faster than we expect and that
Speaker 8: could cause a rotation and we just don't see that
Speaker 8: right now.
Speaker 2: One last one with another game in town coming out
Speaker 2: with in November. It's called an election. Do we take
Speaker 2: that into account at all as we take a look
Speaker 2: at investing in the stock market right now?
Speaker 5: We do.
Speaker 8: I don't know how to handicap the presidential election, and
Speaker 8: luckily I don't have to. The real game in town
Speaker 8: here is the Senate. Who wins the Senate, and it
Speaker 8: looks like the GOP has a better than a fifty
Speaker 8: to fifty chance at winning the Senate. Why is this important?
Speaker 8: This is important because this could chase is a regulatory environment.
Speaker 8: The M and A market is improving, and if the
Speaker 8: GOP does take the Senate, we would expect an acceleration
Speaker 8: of the M and A market later on the year
Speaker 8: because of the potential change with regulation.
Speaker 2: So you think the antitrust enforcement policy of the BODOM
Speaker 2: is to have held back some M and A.
Speaker 8: That's part of the reason we've seen is absolutely there's
Speaker 8: not a question. It has absolutely held back some m and.
Speaker 2: A last one taxes because there's a question we're renewing
Speaker 2: the Trump's tax cuts. How important is that in the Senate.
Speaker 8: It's important, but it's not something a lot of people
Speaker 8: are talking to us right now. So I think it's
Speaker 8: more of a twenty five to twenty six issue. It's
Speaker 8: not really a big issue in top of mind for
Speaker 8: many investors at this point in time.
Speaker 2: Infascinating, but you don't want to handicap the election. You sure,
Speaker 2: we can still do that if you want. You can
Speaker 2: tell us who's going to win.
Speaker 8: If you want, I'll just say we'll have we'll have
Speaker 8: a president.
Speaker 5: We'll have just go and vote. I'm going to vote.
Speaker 2: We go, I can handicap. Well, we'll have a president,
Speaker 2: which is good news. Thank you so much, Chris for
Speaker 2: being back with us. Chris Harvey of Wells Fargo. Electric
Speaker 2: vehicles are a policy priority in the United States, in Europe,
Speaker 2: and in China, even as automakers, at least the United
Speaker 2: States trim back their ambitious goals. Brian Deese has been
Speaker 2: at the center of auto policy in the United States,
Speaker 2: first as a member of the Obama administration team that
Speaker 2: rescued the industry during the Great Financial Crisis, and then
Speaker 2: more recently as director of President Biden's National Economic Council.
Speaker 2: And we welcome them down to Wall Street week. Brian, welcome.
Speaker 2: It's good to have you here.
Speaker 5: I'm happy to be here.
Speaker 2: It brings up to speed on electric vehicles, says they
Speaker 2: were all the rage just a couple of years ago,
Speaker 2: and now when you're reading the press, maybe not quite
Speaker 2: so much. Maybe the consumers are not rushing to buy them.
Speaker 2: You see some US automakers cutting back on their goals.
Speaker 2: What's going on?
Speaker 3: Well, I think those headlines would make you more concerned
Speaker 3: than you should be that the demise of electric vehicles
Speaker 3: has greatly exaggerated.
Speaker 5: So let's start with the number.
Speaker 3: So in twenty twenty three, there were about one point
Speaker 3: four million electric vehicles sold in the United States. That
Speaker 3: was almost ten percent of overall sales. That was up
Speaker 3: fifty percent from a year before, so really significant growth.
Speaker 5: First couple of months of.
Speaker 3: This year, EV sales are up about fifteen to twenty percent.
Speaker 3: So the rate of growth is slowing, but I think
Speaker 3: that that's actually reasonablely what you would expect. This is
Speaker 3: a market that as it matures and as it becomes
Speaker 3: a larger share of overall vehicle sales, expecting year on
Speaker 3: year fifty percent growth rates was never realistic, and so
Speaker 3: I think the question is where will this growth trajectory
Speaker 3: lead out, and also when will the appetite for those
Speaker 3: electric feels butt up against consumer concerns and consumer adoption.
Speaker 3: I don't think we're there yet, and so, you know,
Speaker 3: a rate of growth that's twenty percent year over year
Speaker 3: would be pretty good for a lot of industries, but
Speaker 3: we're certainly seeing a slow and compared to the rate
Speaker 3: to pick up in twenty twenty two and twenty twenty three,
Speaker 3: which was really quite extraordinary.
Speaker 2: Overall, the demand for EVS in the United States continues
Speaker 2: to go up, even if more slowly, but different makers
Speaker 2: are taking different approaches to stimulating that demand.
Speaker 9: For example, cut prices significantly on the Mustang Marquee as
Speaker 9: a response to demand. All eyes will be on Tesla,
Speaker 9: of course, because Tesla is the market incumbent.
Speaker 5: The pure playev name.
Speaker 9: How it fares in the first court will be critically important.
Speaker 9: You know, there is something happening where the early adopters
Speaker 9: in America have been and gone in terms of the consumer,
Speaker 9: and there is still an assessment to be done on
Speaker 9: how impactful the incentives provided by the Inflation Reduction Act
Speaker 9: are going to be.
Speaker 2: And it's not just the traditional Big three US automakers
Speaker 2: seeking to take advantage of those incentives, raising the spectra
Speaker 2: of the US being left behind by overseas producers the
Speaker 2: way we saw in the nineteen seventies.
Speaker 3: I think there's a risk. I think you listen to
Speaker 3: what the leadership of Ford in GM INSTALLMENTUS as well
Speaker 3: are saying, they recognize there behind that this is fundamentally
Speaker 3: a technology play electric vehicles. It's a it's a fundamental
Speaker 3: shift in technology. It's not just an incremental shift in
Speaker 3: vehicle technology, and they were behind. Tesla Hanbakia are both ahead.
Speaker 3: That said, I think you're seeing a certainly GM and
Speaker 3: four both invest a lot in saying we need to
Speaker 3: we need to catch up, and we need to catch
Speaker 3: up quickly. I would say Ford's CEO Jim Farley has
Speaker 3: been very blunt about this in saying, we're going to
Speaker 3: need to remake this company. We're going to need to
Speaker 3: do things differently in terms of how we organize ourselves
Speaker 3: to drive innovation, to actually catch up and catch up
Speaker 3: quickly in a growing global market as well. So I
Speaker 3: am hopeful that what we'll see is that that kind
Speaker 3: of commitment actually manifests in the marketplace, and we've certainly
Speaker 3: seen some we're seeing those companies increase their sales sequentially
Speaker 3: as well. But I think that that's always a risk, right, We're.
Speaker 5: Going to have to stay ahead and it's a dynamic
Speaker 5: global marketing.
Speaker 2: Is there a challenge in the price point, because certainly
Speaker 2: a GM for will started out with the more expensive
Speaker 2: vehicles made sense because they needed to cover the costs
Speaker 2: at the same time, Again, going back to my recollection
Speaker 2: of when Japan really made in rows, they start out
Speaker 2: pretty inexpensively. You have some less expensive models coming forwardseas. Yeah.
Speaker 3: Look, there's different different approaches to this electric vehicle market
Speaker 3: that are really fascinating. Where I think the dominant approach
Speaker 3: is to start at the very high price point, try
Speaker 3: to capture that margin, and then drive prices down across
Speaker 3: the board. I would argue that actually, learning from history,
Speaker 3: there's a real opportunity to own the lower cost segment
Speaker 3: of this market, right, to be the electric vehicle provider
Speaker 3: for typical middle class folks across the country. We've seen
Speaker 3: some innovation on that front. GM introduced the Chevy Bolt
Speaker 3: and for part of last year it was the fastest
Speaker 3: growing electric vehicle in the country, and.
Speaker 5: So I think it's possible.
Speaker 3: And the other thing that's good news for consumers is,
Speaker 3: in addition to seeing this electric vehicle growth, prices are
Speaker 3: coming down very significantly. We've seen a twenty percent reduction
Speaker 3: in the cost the purchase price of electric vehicles just
Speaker 3: over the course of the.
Speaker 5: Last several months.
Speaker 3: That presents a constructive challenge to the auto companies, but
Speaker 3: it's good news for consumers that we're seeing more and
Speaker 3: more of these vehicles get into a price point which
Speaker 3: is really in many ways, you know, comparable, particularly when
Speaker 3: you take into account the overall cost of ownership.
Speaker 2: Finally, it talks about the labor consequences of electric vehals.
Speaker 2: As I understand, it takes significantly fewer workers to produce
Speaker 2: an electric vehicle than an internal combustion engine car. What
Speaker 2: does this mean for the auto worker, which is very
Speaker 2: much on everyone's mind right now.
Speaker 3: Well, look, I think what you need to look at
Speaker 3: is the entire value chain. And so the electric vehicle
Speaker 3: itself from an assembly perspective has fewer parts and therefore
Speaker 3: less labor. The building of the batteries and the whole
Speaker 3: upstream supply chain there creates new opportunity and new opportunity
Speaker 3: for workers and for labor. So that whole battery supply
Speaker 3: chain that I was just talking about, it's referred now
Speaker 3: often as the battery belt from Michigan down to Georgia.
Speaker 3: We're seeing this investment in the manufacturing and the processing
Speaker 3: and these upstream components as well. Taken together, that creates
Speaker 3: real new opportunities for American workers, American labor. I think
Speaker 3: it's one of the reasons why these things aren't easy.
Speaker 3: But you've seen even the UAW come around and recognize
Speaker 3: that this is the future of the industry and the
Speaker 3: opportunity is to effectively organize that whole value chain, and
Speaker 3: they're seeing more opportunity than threat from that.
Speaker 2: I'm happy to say that Brian is going to be
Speaker 2: staying with us as we turn to what this false
Speaker 2: presidential election could mean for the US economy. That's next time,
Speaker 2: Wall Street Week on Bloomberg.
Speaker 1: This is Bloomberg Wall Street Week with David Weston from
Speaker 1: Bloomberg Radio.
Speaker 2: This is Wall Street Week. I'm David Weston. Former National
Speaker 2: Economic Council Director Brian Deese has stayed with us to
Speaker 2: talk about the economy. So, Brian, we've got an election
Speaker 2: coming up. You may not have noticed it coming in November,
Speaker 2: and it looks like it's going to be Joe Biden
Speaker 2: versus Donald Trump. Once again, give us your sense, having
Speaker 2: been in the White House, what difference does it make?
Speaker 2: Because it occurs to me sometimes I think we put
Speaker 2: too much pressure on the president in the White House.
Speaker 2: They can't control everything in the economy. How much of
Speaker 2: a difference does it really make?
Speaker 3: Well, Look, I don't know if this election is going
Speaker 3: to be decided on policy and policy differences but it
Speaker 3: should be because if you look at the difference between
Speaker 3: these two candidates, the differences are as stark as certainly
Speaker 3: any election in modern history.
Speaker 5: We've got President Biden's.
Speaker 3: Got a basic approach to the economy that he has
Speaker 3: laid out, and now you can see we're talking about
Speaker 3: significant investment in industrial renewal in the United States, a
Speaker 3: commitment to the idea that public investment and things like infrastructure,
Speaker 3: things like clean energy, build out of a semiconductor industry
Speaker 3: will help to expand productive capacity ultimately expand real wage growth.
Speaker 5: And that's his strategy.
Speaker 3: And then frankly, it's consistent with who he is and
Speaker 3: how he's approached the economy for some time. Candidate Trump,
Speaker 3: on the other hand, is dramatic, dramatic departure. And the
Speaker 3: thing that I think we're probably paying insufficient attention to
Speaker 3: is at a moment where prices are the top issue
Speaker 3: on Americans minds, and we've finally seen real progress and
Speaker 3: bringing inflation down and bringing prices down. The basic Trump
Speaker 3: approach of protectionism across the board, in discriminated tariff, shutting
Speaker 3: down immigration, and raising costs like health care costs by
Speaker 3: getting rid of pharmaceutical regulations. Getting rid of the Affordable
Speaker 3: Care Act is a recipe for significant inflationary pressures in
Speaker 3: the economy and price increases for typical families. So I
Speaker 3: think that that's a real short term effect and a
Speaker 3: real difference between these two candidates.
Speaker 2: So let's talk about a couple of those if we could.
Speaker 2: And they are immigration and they are protectionism as you
Speaker 2: put it. On trade, President Biden has not really dialed
Speaker 2: back substantially on the tariffs put in place under President Trump,
Speaker 2: as I recall, and certainly when it comes to China,
Speaker 2: it doesn't sound like they have a very different position.
Speaker 5: Is there really a.
Speaker 2: Difference when it comes to trade between these two men.
Speaker 5: I think there is.
Speaker 3: I think it's pretty stark. President Biden has had a
Speaker 3: sort of a basic two part approach when it comes
Speaker 3: to trade, which is, one, have a very targeted approach
Speaker 3: to protecting American interests, economic and national security when it's warranted,
Speaker 3: and two really committing to work with partners and allies
Speaker 3: to try to build more capability and effectiveness when that
Speaker 3: is the case. So if you look at something like semiconductors,
Speaker 3: the Trump administration really didn't take any action when we're
Speaker 3: looking at sensitive dual use technologies that were potentially getting
Speaker 3: in the hands of the Chinese or other adversaries.
Speaker 5: The Biden administration came in.
Speaker 3: President Biden came in and said, I am going to
Speaker 3: put a stop to that, but I'm going to work
Speaker 3: with my allies and partners to do so because otherwise
Speaker 3: it's fundamentally ineffective. You contrast that with the Trump approach,
Speaker 3: which it's still emerging, so we have to see what
Speaker 3: happens on the campaign. But if it does turn out
Speaker 3: that what we're talking about is a ten percent across
Speaker 3: the board tariff on all products coming into the United
Speaker 3: States from allied countries, from countries or from products where
Speaker 3: we don't produce anything here in the.
Speaker 5: United States, a cup of coffee.
Speaker 3: That is a very extreme and new step. You talk
Speaker 3: about completely eliminating permanent, normal trade relationships to China. Candidate
Speaker 3: Trump has said at times, I want to literally eliminate
Speaker 3: all imports from China, period and stuff. The macroeconomic impact
Speaker 3: of those steps would be significant, potentially a couple of
Speaker 3: points off at GDP, and the practical impact on those
Speaker 3: for families would be quite significant too.
Speaker 5: People would start to see.
Speaker 3: It, and I think that general Trump approach is one
Speaker 3: of core isolationism, which is not only to wreck those barriers,
Speaker 3: but basically to alienate our alley in the process that creates,
Speaker 3: you know, potentially larger risks across the board. So I
Speaker 3: think that the top line, well, you know, there's not
Speaker 3: that much difference in them on trade is a complicated
Speaker 3: position when you unpack it.
Speaker 2: And what about immigration. There was a time there seemed
Speaker 2: to be a very big difference between them. Former President
Speaker 2: Trump certainly would say there's a big difference, But it
Speaker 2: feels like President Biden has moved toward the position of
Speaker 2: President Trump. Is there a big difference to this point,
Speaker 2: isn't any president going to have to address that southern
Speaker 2: board no matter.
Speaker 3: What, one hundred percent the border will need to be addressed,
Speaker 3: and don't need to be addressed in a appropriate and
Speaker 3: aggressive way. I think the big difference in what I
Speaker 3: worry about is with respect to the legal immigration system.
Speaker 3: So one of the significant things we've seen over the
Speaker 3: past couple of years, the reason why we've seen significant
Speaker 3: increases in labor supply and labor force participation, it's legal
Speaker 3: immigration has come back after COVID and after the Trump
Speaker 3: administration as well as more women coming into the workforce.
Speaker 3: That process of legal immigration that is now normalized, and
Speaker 3: the Biden administration prioritized, for example, working down visa backlogs
Speaker 3: and trying to get to a more normal system. I
Speaker 3: think under a Trump administration you could expect that to revert.
Speaker 3: And I think in addition to that being bad for
Speaker 3: innovation and bad for broader economic growth, it could also
Speaker 3: be quite inflationary in the short term, because what you're
Speaker 3: doing is constricting labor supply at a moment.
Speaker 5: Where we need more. We need more workers in the
Speaker 5: United States.
Speaker 3: Our legal immigration system has been an engine for growth
Speaker 3: for decades. For a long time, I think that there
Speaker 3: would be a big difference on that front, because I
Speaker 3: think you're right with respect to the southern border, it
Speaker 3: will need to be addressed. It will need to be
Speaker 3: addressed in a realistic but aggressive way.
Speaker 2: What about fiscal policy, and as you said, present Biden
Speaker 2: is really pursued a policy of investment, which is a
Speaker 2: mounded to fiscal stimulus as a practicmaty, so's a paramoida.
Speaker 2: It's still to be expressed. It hasn't come through the
Speaker 2: system yet. Is there a big difference in addressing the
Speaker 2: deficit and the debt because a lot of people at
Speaker 2: least on Wall Street are concerned about at this point.
Speaker 5: Yeah, well, and I think there's reason for concern.
Speaker 3: The big different the biggest difference here is with respect
Speaker 3: to tax policy, and there the numbers are very large.
Speaker 5: So if you look at.
Speaker 3: There's a reason analysis of what would it look like
Speaker 3: for Trump policy to go into effect. If you're talking
Speaker 3: about both extending the Trump tax cuts that were put
Speaker 3: in place in twenty seventeen, many of which expire in
Speaker 3: twenty twenty five, and then you add on to that
Speaker 3: things that Trump has been talking about to include a
Speaker 3: reduction in the corporate tax rate to fifteen percent. All told,
Speaker 3: that would be about four point six trillion dollars in
Speaker 3: additional tax cuts over a decade.
Speaker 5: It's almost two percentage points of GDP.
Speaker 3: It would take our revenue down below fifteen percent of GDP.
Speaker 5: Very different from what a President Biden is.
Speaker 3: Talking about, where he's talking about actually trying to increase taxes,
Speaker 3: raise that corporate tax rate back up from twenty one
Speaker 3: closer to twenty eight percent, Increase taxes on the very
Speaker 3: wealthy by a significant amount. That could raise a couple
Speaker 3: of trillion dollars. That gap between the two is well
Speaker 3: over five trillion dollars. That will be a line of
Speaker 3: debate and a line of demarcation in twenty twenty five.
Speaker 5: But given the fiscal backdraft we have, I think if.
Speaker 3: The market actually internalizes the idea that we're not going
Speaker 3: to do anything about the Trump tax cut extension, and
Speaker 3: in fact we're going to come and we're going to
Speaker 3: layer on that with additional tax cuts, then I think
Speaker 3: that you'll start to see that in impact on long
Speaker 3: to borrowing costs, because it will send a signal that
Speaker 3: we don't really have any serious plan to address the
Speaker 3: revenue short falls we have in this country.
Speaker 2: Rian, thank you so much for being on Wilsher. Really
Speaker 2: good to have you here. That is former National Economic
Speaker 2: Council Director Brian Deese Socrates said, my friend, care for
Speaker 2: your psyche, know thyself. For once we know ourselves, we
Speaker 2: may learn how to care for ourselves. And let's face it,
Speaker 2: just about all of us could take better care of ourselves,
Speaker 2: like getting enough sleep and reducing stress.
Speaker 10: We see that these five daily behaviors of sleep, food, move, month, stress,
Speaker 10: and connection dramatically affect our health and our longevity.
Speaker 2: People who've run big companies, like Indra Nui of PEPSI
Speaker 2: see a greater need than ever to care for the
Speaker 2: psyches of their employees.
Speaker 11: I think post pandemic, we're seeing more and more people
Speaker 11: say I have to worry about me as a person.
Speaker 11: I have to worry about my family, worry about my
Speaker 11: well being, my mental health. So we've got to start
Speaker 11: encompassing people as holistic humans, as opposed to a tool
Speaker 11: of the trade.
Speaker 2: Some of us turn to psychotherapists, as mob boss Tony Soprano.
Speaker 7: Did any thoughts at all on WHYU planted out?
Speaker 2: I don't know, stress maybe, But for some it's not
Speaker 2: enough to get more sleep, or have a more thoughtful boss,
Speaker 2: or have someone to talk to. Some of us turn
Speaker 2: to chemistry, like Elon Musk, who is talking about his
Speaker 2: use of ketamine. Again.
Speaker 5: There are times when I have.
Speaker 2: Sort of a.
Speaker 12: I don't know, like a negative chemical state in my brain,
Speaker 12: like depression, I guess, you know, or like depression that's
Speaker 12: not linked to any negative views. And then keadomy is
Speaker 12: helpful for getting getting one outside out of a negative
Speaker 12: frame of mind.
Speaker 2: And now there's a new game in town, or really
Speaker 2: an old game that some of us may remember, perhaps hazily,
Speaker 2: from the nineteen sixties. Yes, there's a return to magic mushrooms.
Speaker 2: Mike Tyson does it, even when he was partying in
Speaker 2: Saint Bart's with Jake Paul the Man He's due to
Speaker 2: fight this July.
Speaker 5: Are you taking shrooms before the workout just because.
Speaker 2: You like the space of thinking?
Speaker 6: It comes up absolutely, of the focusedness of shrooms.
Speaker 2: It can't. It compared nothing. Now, Chelsea Handler does it
Speaker 2: with her employees.
Speaker 5: You took them camping and everyone took mushroom. I didn't
Speaker 5: provide the mushrooms just for legal reasons.
Speaker 2: I want that to be stated very soon.
Speaker 5: Where in the budget is that is that craft service.
Speaker 8: People can pick mushrooms in the forest.
Speaker 2: Bloomberg this week reported on so called magic mushrooms being
Speaker 2: touted by executive coaches, and the Wall Street Journal had
Speaker 2: a piece on these magic mushrooms being quote the working
Speaker 2: woman's newest life hack. Steve Cohen has doubled down on
Speaker 2: his investment in cybin That's a biopharmaceutical firm in clinical
Speaker 2: trials for a medicine to handle serious depression. A medicine
Speaker 2: that uses you guessed it. The active element found in
Speaker 2: magic mushrooms. Given all the buzz, maybe this really is
Speaker 2: the way to go. But as my wife could tell you,
Speaker 2: I'm pretty conservative and back in the nineties when I
Speaker 2: was General counsel of Capsudy's ABC, we had a big
Speaker 2: commitment to the Partnership for a Drug Free America. That's
Speaker 2: a charity founded by J and J CEO Jim Burke,
Speaker 2: who just happened to be the brother of my boss,
Speaker 2: Dan Burr, and the PSAs we ran on ABC had
Speaker 2: a decidedly different approach to psychedelics.
Speaker 7: This is your brain, this is drugs, This is your
Speaker 7: brain on drug that does it.
Speaker 2: For this episode of Wall Street Week, I'm David Weston
Speaker 2: This is Bloomberg. See you next week.