WEBVTT - MS' Zezas: Relief Funds Are Enough for State, Local Needs 0:00:00.800 --> 0:00:04.040 Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, alongside 0:00:04.040 --> 0:00:06.920 my co host Matt Miller. Every business day we bring 0:00:06.960 --> 0:00:11.480 you interviews from CEOs, market pros, and Bloomberg experts, along 0:00:11.560 --> 0:00:15.600 with essential market moving news. Find the Bloomberg Markets Podcast 0:00:15.600 --> 0:00:18.479 on Apple Podcasts or wherever you listen to podcasts, and 0:00:18.480 --> 0:00:23.720 at Bloomberg dot com slash podcast. One point nine trillion 0:00:23.760 --> 0:00:27.360 dollar fiscal stimulus about to be signed into law tomorrow 0:00:27.400 --> 0:00:31.320 by President Biden. Seems to be a lot of things 0:00:31.360 --> 0:00:33.400 in this package for a lot of folks. Let's break 0:00:33.400 --> 0:00:35.960 it down. We can do that with Michael zzas Uh. 0:00:35.960 --> 0:00:39.400 He is the chief US public Policy and municipal strategists 0:00:39.440 --> 0:00:42.000 for Morgan Stanley based in New York. Michael, thanks so 0:00:42.120 --> 0:00:43.959 much for joining us here. I want to look at 0:00:44.040 --> 0:00:47.479 initially the amount of money that is going to states 0:00:47.520 --> 0:00:51.760 and local municipalities. Is it enough and how do you 0:00:51.800 --> 0:00:55.920 think it will be utilized? Yeah, I think it's enough. 0:00:56.040 --> 0:00:59.440 I think it's enough. We had estimated back in May 0:00:59.640 --> 0:01:04.000 that state and local governments would be short of their 0:01:04.080 --> 0:01:07.119 budget estimates through the end of calendar one by about 0:01:07.120 --> 0:01:09.920 two hundred and seventy billion dollars. This is three fifty 0:01:09.920 --> 0:01:12.840 billion dollars in our two hundred and seventy billion dollars 0:01:13.040 --> 0:01:16.880 probably now is actually too high of an estimate because 0:01:17.040 --> 0:01:19.920 we we were looking at an SMP level that was 0:01:20.000 --> 0:01:24.040 lower back than UM. We did not account for unemployment 0:01:24.080 --> 0:01:28.039 being skewed towards lower income workers so that the tax 0:01:28.080 --> 0:01:30.600 base didn't suffer nearly as much as we thought. So 0:01:30.640 --> 0:01:33.759 three d fifty billion we think will will relatively well 0:01:33.760 --> 0:01:37.679 cover the revenue that state and local officials UM expect 0:01:37.720 --> 0:01:40.200 should have been there. So what does that money get 0:01:40.280 --> 0:01:42.240 used for at the end of the day, Well, you know, 0:01:42.360 --> 0:01:45.360 it will depend on a state by state basis, but 0:01:45.800 --> 0:01:51.240 ultimately it replaces lost revenue from lost economic activity. UH. 0:01:51.240 --> 0:01:56.640 Probably enables operating budgets to stay intact, UM capital budgets 0:01:56.680 --> 0:02:00.800 to continue to flow UH. And it basically just it 0:02:00.920 --> 0:02:04.600 ensures that thing governments can undertake the normal amount of 0:02:04.600 --> 0:02:08.600 economic activity they otherwise would have. So does it change 0:02:09.639 --> 0:02:14.120 UM issuance plans? Were they changed before the bill came along? 0:02:14.200 --> 0:02:20.079 Does it change rates? Has it already been priced in well? 0:02:20.680 --> 0:02:22.800 With regard to the MUNI market, I mean, the muni 0:02:22.880 --> 0:02:28.440 market is pricing in a way that I think reflects 0:02:28.480 --> 0:02:31.200 a substantial amount of optimism, and I think well placed 0:02:31.240 --> 0:02:35.400 optimism about the strength of credit quality, which is to 0:02:35.400 --> 0:02:39.000 say that if you're providing three fifty billion dollars of 0:02:39.520 --> 0:02:42.240 grant money when the amount of revenue LASS was going 0:02:42.280 --> 0:02:46.160 to be less than that, then the credit quality of 0:02:46.200 --> 0:02:48.600 the asset class is more or less what it was 0:02:48.680 --> 0:02:51.000 before the pandemic, which is not to say it didn't 0:02:51.040 --> 0:02:56.320 have its flaws, but UM certainly UM not nearly experienced 0:02:56.320 --> 0:02:59.520 the weakness that it was perceived too. So I don't 0:02:59.560 --> 0:03:02.919 think this as an impact on yields per se that 0:03:03.000 --> 0:03:06.160 the muni yields will go down relative to treasury yields, 0:03:06.200 --> 0:03:10.360 but it sort of justifies where market pricing is with 0:03:10.400 --> 0:03:13.680 regard to supply. I think potentially a transform supply, Whereas 0:03:13.760 --> 0:03:16.839 without this aid you might have looked at municipalities doing 0:03:16.919 --> 0:03:20.880 some refunding activity to create budget savings. Now they're probably 0:03:20.919 --> 0:03:23.760 more likely to be aggressive in their capital plans and 0:03:23.760 --> 0:03:27.399 and borrow money to UM match the money they would 0:03:27.400 --> 0:03:29.040 have used on I pay as you go basis to 0:03:29.080 --> 0:03:33.440 pay for roads and bridges, etcetera. Alright, so, Michael, this 0:03:34.760 --> 0:03:40.360 UH bill passed strictly along partisan lines. Party lines. That 0:03:40.440 --> 0:03:43.800 does not bode well. I wouldn't think for the next 0:03:43.920 --> 0:03:47.600 round of stimiles that presumably would have some bigger ticket items, 0:03:47.640 --> 0:03:51.000 some you know, some infrastructure. How are you guys thinking 0:03:51.040 --> 0:03:54.360 about that? Well, I think the way that I think 0:03:54.360 --> 0:03:57.960 you're right that there there's nothing in this process that 0:03:58.120 --> 0:04:03.080 suggests that infrastructure can be done in a bipartisan way, 0:04:03.080 --> 0:04:06.040 at least easily, and so I think that sets up 0:04:06.040 --> 0:04:10.920 a process that is long and arduous, uh and probably 0:04:10.920 --> 0:04:13.560 one that we think will ultimately be a bill that 0:04:13.600 --> 0:04:16.880 has to be mostly deficit financed. So if you're going 0:04:17.000 --> 0:04:22.320 to have an infrastructure bill that approaches the ambition of 0:04:22.320 --> 0:04:24.960 what the Biden administration has laid out, there are just 0:04:25.080 --> 0:04:28.480 aspects of that bill are probably nonstarters for Republicans, starting 0:04:28.480 --> 0:04:31.360 with some of the tax increases uh that they want 0:04:31.440 --> 0:04:33.840 to be adjacent to it, as well as many of 0:04:33.839 --> 0:04:36.400 the environmental standards that they want to be adjacent to it. 0:04:36.640 --> 0:04:38.560 So if the Democrats have to go it alone, then 0:04:38.640 --> 0:04:41.719 they're probably going to follow this budget reconciliation process. Again, 0:04:42.640 --> 0:04:47.120 that probably means that you're looking at October passage the earliest, 0:04:47.240 --> 0:04:49.920 because that has to the next fiscal year, and then 0:04:50.040 --> 0:04:52.359 the Party amongst themselves, has to develop a kind of 0:04:52.480 --> 0:04:56.440 unanimous view on the nitty gritty of what's in the 0:04:56.480 --> 0:04:59.320 bill in terms of labor standards, environmental standards, not just 0:04:59.360 --> 0:05:01.719 how much more they want to spend on roads and bridges. 0:05:02.040 --> 0:05:05.919 It's a complicated negotiation, it will take much of the year. Ultimately, 0:05:05.960 --> 0:05:08.599 we think it will get over the finish line, But 0:05:08.960 --> 0:05:11.320 this one is a much harder lift than the COVID 0:05:11.360 --> 0:05:14.000 relief package. Do you think it'll be more than four 0:05:14.040 --> 0:05:18.640 trillion dollar bill coming over the finish line? That's not 0:05:18.680 --> 0:05:21.360 in our base case, And I think it's important to 0:05:21.360 --> 0:05:25.919 defind time frames here too, So yeah, I mean the 0:05:25.960 --> 0:05:28.600 COVID relief bill is one point nine trillion. The CBO 0:05:28.680 --> 0:05:31.000 says one point two will be spent this calendar year. 0:05:32.080 --> 0:05:34.919 The numbers quoted on infrastructure bills, they tend to be 0:05:34.920 --> 0:05:39.280 either five or ten year numbers. So um, in our view, yeah, 0:05:39.360 --> 0:05:42.599 you could look at a multi trillion dollar number over 0:05:42.640 --> 0:05:46.520 ten years. Um, it's entirely possible that the first proposals 0:05:46.520 --> 0:05:48.159 are five year numbers. So there's a little bit of 0:05:48.160 --> 0:05:50.839 apples and orange comparisons here. At the end of the day, 0:05:50.880 --> 0:05:53.560 we think you'll see something that is at least one 0:05:53.600 --> 0:05:56.440 and a half trillion dollars spread out over five years 0:05:56.520 --> 0:05:59.240 or more. What else are you looking for? What else 0:05:59.240 --> 0:06:00.640 are you guys looking at? What are you working on 0:06:00.760 --> 0:06:04.200 right now that we should be focusing on. Well, I 0:06:04.240 --> 0:06:08.080 think the the tax debate inside of this legislative debate 0:06:08.839 --> 0:06:13.560 on infrastructure is critical. We're assuming at the end of 0:06:13.560 --> 0:06:16.960 the day that there's only fifty Democratic Senate votes for 0:06:17.240 --> 0:06:20.480 about five to six hundred billion dollars worth of tax 0:06:20.520 --> 0:06:23.680 increases over a ten year period, and that's out of 0:06:23.680 --> 0:06:27.160 a menu of over three trillion dollars of tax increases 0:06:27.200 --> 0:06:30.719 that the by administrations proposed. But but we would expect 0:06:31.120 --> 0:06:34.240 that the initial proposal here will probably include almost all 0:06:34.240 --> 0:06:36.880 of those tax increases. So there's there's a It's it's 0:06:36.920 --> 0:06:38.800 important to understanding diffence between the two because that could 0:06:38.800 --> 0:06:41.400 affect markets in the short term. Alright, tough to do 0:06:41.440 --> 0:06:45.120 a bipartisan bill on big tax increases. Americans much prefer 0:06:45.920 --> 0:06:48.839 free money. Michael zesus, Thanks very much, Cheek us public 0:06:48.880 --> 0:06:56.520 policy and municipal strategists at Morgan Stanley. Well, it's Thursday, 0:06:56.560 --> 0:06:59.800 so we had another jobless claims number hit today. The 0:07:00.080 --> 0:07:02.720 news is it was the lowest since November. Came in 0:07:02.720 --> 0:07:04.400 a little bit better and expected. It's a hundred and 0:07:04.400 --> 0:07:07.960 twelve thousand, But that's still a stubbornly, stubbornly high number. 0:07:08.000 --> 0:07:11.960 And it's against it that backdrop that President Biden will 0:07:12.000 --> 0:07:16.360 sign tomorrow. I believe the UH one point nine trillion 0:07:16.360 --> 0:07:20.000 dollar fiscal stimulus UH plans. Let's bring that all together. 0:07:20.080 --> 0:07:22.720 We can do that with Chris Lewis, a senior fellow 0:07:22.760 --> 0:07:26.679 at the University of Virginia Miller Center. UH. He's former 0:07:26.720 --> 0:07:29.720 Deputy Secretary of Labor under President Obama, joining us on 0:07:29.760 --> 0:07:33.080 the phone from Charlottesville. Chris, thanks so much for joining 0:07:33.160 --> 0:07:37.200 us here. Let's start with the jobs claims. I love 0:07:37.240 --> 0:07:40.080 to get your thoughts, as a former deputy secretary of 0:07:40.200 --> 0:07:45.720 labor about how you view this labor market today. Are 0:07:45.760 --> 0:07:48.200 you concerned about some of this permanent unemployment that we 0:07:48.280 --> 0:07:51.080 may be seeing out there? Yeah, you know, I really am. 0:07:51.240 --> 0:07:54.280 I mean, we have with these weekly numbers. This is 0:07:54.320 --> 0:07:57.560 now the fifty one week in a row that has 0:07:57.600 --> 0:08:00.640 exceeded the worst of the Great Recession. So while the 0:08:00.680 --> 0:08:03.880 numbers are kind of inching down very slowly, there's still 0:08:03.920 --> 0:08:07.000 at a really elevated level. And I think what I'm 0:08:07.040 --> 0:08:09.840 as concerned about is, you know, the four million people 0:08:10.760 --> 0:08:16.120 who UH who have lost their jobs permanently, about six 0:08:16.200 --> 0:08:20.040 million people who are working part time but would rather 0:08:20.080 --> 0:08:23.640 be working full time. We've got a long term unemployment 0:08:23.800 --> 0:08:27.280 at rates that um, you know, we haven't seen really 0:08:27.320 --> 0:08:29.240 since the Great Recession at this point. And what we 0:08:29.320 --> 0:08:32.480 know is that the longer people are out of work, 0:08:32.960 --> 0:08:35.320 the harder is to get them back. And I think 0:08:35.320 --> 0:08:38.079 what we've also seen over the pandemic is a lot 0:08:38.120 --> 0:08:41.360 of the broader changes in the economy, like the shift 0:08:41.400 --> 0:08:44.840 to online retail, have been accelerated, so a lot of 0:08:44.840 --> 0:08:47.560 the jobs that people have left probably aren't there anymore. 0:08:47.640 --> 0:08:52.640 Right now. You know, the uh the automation UM, which 0:08:52.679 --> 0:08:55.240 isn't the same as on shifting to online, but it's 0:08:55.280 --> 0:08:59.840 similar UM. And the shift of manufacturing label to four 0:09:00.080 --> 0:09:03.880 labor to foreign insurers was something that Donald Trump was 0:09:04.800 --> 0:09:07.400 working to turn around in some ways. He wanted to 0:09:07.440 --> 0:09:10.240 bring jobs back to America. President Biden thinks he can 0:09:10.240 --> 0:09:12.080 do a better job of it. Do you see that too, 0:09:13.280 --> 0:09:15.400 You know, Look, I I am confident that the plan 0:09:15.480 --> 0:09:17.640 they're going to put forward will do that, and I 0:09:17.679 --> 0:09:20.360 am hopeful that if we can get an infrastructure bill, 0:09:20.400 --> 0:09:22.840 a real infrastructure bill, that can bring back some of 0:09:22.840 --> 0:09:25.080 those jobs as well. But you know, as you said, 0:09:25.080 --> 0:09:28.800 they're broader globalization trends that make this very challenging, you know, 0:09:28.880 --> 0:09:30.680 And so I think we need to understand that the 0:09:30.720 --> 0:09:34.600 manufacturing jobs, many of them that have gone overseas, probably 0:09:34.760 --> 0:09:37.360 aren't going back because labor costs are just too high 0:09:37.400 --> 0:09:39.920 in the United States. But when you move to things 0:09:39.960 --> 0:09:42.920 like advanced manufacturing, that is a place that we can 0:09:43.240 --> 0:09:45.719 continue to dominate here in the United States. But it's 0:09:45.720 --> 0:09:48.960 going to require a level of training of workers that 0:09:49.000 --> 0:09:52.160 exceeds what we have right now. Chris, you know, we've 0:09:52.200 --> 0:09:56.160 talked about the uh, the bigger fiscal stimulus plan, maybe 0:09:56.200 --> 0:10:00.240 one that focuses on infrastructure. Um that see used to 0:10:00.240 --> 0:10:03.240 be something that is on the ad Biden's plate right now. 0:10:04.000 --> 0:10:07.920 Are you concerned that there's just been no bipartisan support 0:10:07.960 --> 0:10:11.120 of the this one point nine trained dollar plan that 0:10:11.520 --> 0:10:13.640 really would call in the question ability to do anything 0:10:13.800 --> 0:10:16.680 bigger down the line. You know, I am concerned, and 0:10:16.720 --> 0:10:19.400 I think in part because look, we can we can, 0:10:19.480 --> 0:10:21.920 you know, quibble about some of the things in the bill, 0:10:22.280 --> 0:10:24.840 but there's so many other things that are just wildly popular. 0:10:24.920 --> 0:10:28.200 Leaving aside the stimulus checks, uh, you know, the extension 0:10:28.240 --> 0:10:31.760 of unemployment benefits, which really needs to happen otherwise eleven 0:10:31.800 --> 0:10:34.319 million people are going to start to lose uh their 0:10:34.400 --> 0:10:37.520 check starting next week. But it's the rental assistance, it's 0:10:37.520 --> 0:10:41.720 the assistance to small businesses, UM money that goes for 0:10:41.840 --> 0:10:44.679 vaccines and opening school So all of those things there 0:10:44.720 --> 0:10:47.480 should be consensus on. And I think it's an unfortunate 0:10:47.520 --> 0:10:51.200 sign of where partisanship is in Washington right now. That 0:10:51.320 --> 0:10:54.199 being said, look, we've talked now for for the entire 0:10:54.240 --> 0:10:57.480 Trump administration and now the beginning of the Biden administration, 0:10:57.840 --> 0:10:59.800 is that maybe the sweet spot when it comes to 0:10:59.800 --> 0:11:03.720 buy parsonship is infrastructural. So we'll have to see whether 0:11:03.760 --> 0:11:06.600 that happens or not. How do you think Republicans on 0:11:06.679 --> 0:11:12.600 Capitol Hill are going to UM are going to react 0:11:12.679 --> 0:11:15.679 to the infrastructure bill because you know, they didn't vote 0:11:15.679 --> 0:11:19.400 for this bill, but the Republican base was overwhelmingly in 0:11:19.480 --> 0:11:22.880 favor of it. So even though none of the representatives 0:11:23.240 --> 0:11:25.520 UM we're able to cast a vote for it, the 0:11:25.559 --> 0:11:29.880 people they represent want it past. Yeah, and I think 0:11:29.920 --> 0:11:32.640 that's obviously one of the contradictions here right now. I mean, 0:11:32.679 --> 0:11:35.559 I think with infrastructure, as with everything else, the question 0:11:35.679 --> 0:11:37.840 is going to be how to pay for it. We've 0:11:37.920 --> 0:11:40.840 kind of tossed the settle depth sit out the window 0:11:41.040 --> 0:11:43.439 over the last couple of administrations. You're not an M 0:11:43.559 --> 0:11:47.640 M T guy. You don't like the magic money tree. Look, 0:11:47.679 --> 0:11:49.920 I'm not one of these people who think that inflation 0:11:49.960 --> 0:11:52.000 is going to be a problem. But uh, you know, 0:11:52.080 --> 0:11:55.800 once we got that cut done, we've kind of stopped 0:11:55.800 --> 0:11:59.080 talking about the debt of that being said. Look, you know, 0:11:59.280 --> 0:12:02.600 how you pay for infrastructure will be a critical issue. 0:12:02.600 --> 0:12:05.319 And obviously one of the things that the President President 0:12:05.320 --> 0:12:08.280 Biden has talked about is rolling back some of those 0:12:08.320 --> 0:12:11.840 two tax cuts. So that will be an area where 0:12:11.840 --> 0:12:14.200 I think Republicans are gonna have a hard time swallowing that. 0:12:15.000 --> 0:12:16.480 But I do think when it comes to you know, 0:12:16.520 --> 0:12:20.200 the nuts and bolts of infrastructure like roads and bridges 0:12:20.240 --> 0:12:24.120 and airports, Uh, there is broad agreement. So hopefully we 0:12:24.160 --> 0:12:28.400 will come to that, Chris, we hope. Look, Chris lou 0:12:28.480 --> 0:12:31.800 from the University of Virginia went to Harvard with UM. 0:12:32.040 --> 0:12:35.160 Barack Obama worked at Sidney with the Obamas, went to 0:12:35.200 --> 0:12:39.000 Washington with Obama, and we we're guessing that the Biden 0:12:39.040 --> 0:12:42.440 team brings you back to d C very quickly. So 0:12:42.480 --> 0:12:44.360 please come back and talk to us after you get 0:12:44.440 --> 0:12:47.720 hired by the Biden administration. Chris Leu there a senior 0:12:47.760 --> 0:12:53.480 fellow at the University of Virginia Miller Center. Now I 0:12:53.480 --> 0:12:56.120 want to get straight over to Gaby Coppola. She covers 0:12:56.520 --> 0:12:59.959 UM well, she covers cars for us, and today we're 0:13:00.040 --> 0:13:02.640 going to talk to her about Apple because we're all 0:13:02.679 --> 0:13:05.400 excited once again about the possibility of an Apple car. 0:13:05.440 --> 0:13:07.840 I feel like Gabby, we've been we've been pretty stoked 0:13:07.840 --> 0:13:12.000 about this possibility for well on a decade. Now, is 0:13:12.040 --> 0:13:16.280 it ever going to happen? I think we're seeing very 0:13:16.360 --> 0:13:18.920 clear signals that it is going to happen. Um. I 0:13:18.960 --> 0:13:21.440 mean just the talk, you know with automakers that have 0:13:21.520 --> 0:13:23.800 been leaking. My colleagues and I did a story a 0:13:23.840 --> 0:13:26.360 couple of weeks ago about you know, they're in talks 0:13:26.400 --> 0:13:29.000 trying to find um lighter, which is sort of sensors 0:13:29.040 --> 0:13:32.520 for self driving car features. UM. I think it is good. 0:13:32.520 --> 0:13:35.000 It really does look like it's going to happen. This time, 0:13:35.480 --> 0:13:37.760 I think that it's still a few years away. Are 0:13:37.800 --> 0:13:40.560 reporting suggest that we're still several years away from seeing 0:13:40.600 --> 0:13:44.840 an actual product? Why would Apple want to get into 0:13:44.880 --> 0:13:49.240 the auto business, Gabby? What's kind of their strategy? Yeah, well, 0:13:49.280 --> 0:13:52.120 I think, um it's almost become a cliche in my world, 0:13:52.200 --> 0:13:54.439 but thinking of a of a car as an iPhone 0:13:54.480 --> 0:13:58.200 on wheels, especially when the cars do you have, um, 0:13:58.480 --> 0:14:02.040 do have autonomous capabilities? Think about it. I mean, think 0:14:02.080 --> 0:14:04.040 about what you're going to do in your car if 0:14:04.080 --> 0:14:07.280 you don't have to pay attention to the road. I mean, 0:14:07.280 --> 0:14:09.079 probably I'm going to be taking work email, but you 0:14:09.120 --> 0:14:13.360 could also be you know, watching TV, or you know, 0:14:13.400 --> 0:14:16.240 playing video games or basically all the kind of data 0:14:16.320 --> 0:14:19.200 and services and things shop taking a selfie for the 0:14:19.240 --> 0:14:23.000 Graham exactly, you'll be Graham and all of that. Apple 0:14:23.080 --> 0:14:26.960 wants to own that space. And so if this is 0:14:27.000 --> 0:14:29.240 the future, and I think even though it's you know, 0:14:29.320 --> 0:14:32.320 still pretty far away, if the future is cars that 0:14:32.360 --> 0:14:35.560 can drive themselves, then you're going to basically be living 0:14:35.560 --> 0:14:38.520 inside your phone when you're commuting, and Apple wants to 0:14:38.520 --> 0:14:41.240 be able to kind of provide you all the services 0:14:41.480 --> 0:14:43.760 and that. Let's let's try and guess how far away 0:14:43.760 --> 0:14:47.440 it is from your experience reporting on UM, you know, 0:14:47.480 --> 0:14:51.120 the traditional automakers. How long does it take from start 0:14:51.160 --> 0:14:55.000 to finish when somebody at GM or somebody at Ford 0:14:55.600 --> 0:14:58.080 UH comes up with a concept for a new car 0:14:58.840 --> 0:15:04.720 to you know, design it, to organize production, to figure 0:15:04.720 --> 0:15:09.640 out the supply chain, They get the prototype, then they 0:15:10.280 --> 0:15:12.880 you know, start testing it. I mean, what does that 0:15:12.920 --> 0:15:18.640 process take and cost? Gabby um billions of dollars? UH 0:15:19.080 --> 0:15:22.280 costs billions of dollars. And I mean a lot of 0:15:22.320 --> 0:15:24.320 that depends on if you're doing something brand new, which 0:15:24.320 --> 0:15:27.280 obviously Apple would be doing. So that means everything you 0:15:27.320 --> 0:15:32.480 just talked about, design, engineering, UH, testing for safety, you know, 0:15:32.560 --> 0:15:34.920 things like that, that takes years. So I think that 0:15:34.960 --> 0:15:37.880 whole process, I mean, I think you probably know as 0:15:37.920 --> 0:15:39.360 well as I do, but I want to say, like 0:15:39.400 --> 0:15:45.520 five years, you know, UM, And that's exactly that's UM. 0:15:45.560 --> 0:15:47.560 That's if you're an automaker who's been doing this for 0:15:47.600 --> 0:15:50.720 a hundred years or exactly exactly. I was thinking five 0:15:50.800 --> 0:15:53.160 years and and a couple of billion dollars. But that's 0:15:53.160 --> 0:15:57.000 if you already have factories. That's if you're already designing 0:15:57.000 --> 0:15:59.280 and making cars. So Apple. We know, it was just 0:15:59.320 --> 0:16:03.080 talking with Day and a couple of others. Chances are 0:16:03.600 --> 0:16:05.560 they're gonna need to do a whole lot of that 0:16:05.600 --> 0:16:10.920 footwork themselves. Yeah. Although the story I did today with 0:16:11.160 --> 0:16:13.520 my colleague Mark German in in l A, who's our 0:16:13.840 --> 0:16:18.200 stellar Apple reporter, UM talked about how, you know, Apple 0:16:18.280 --> 0:16:20.880 may want to take its iPhone handbook and kind of 0:16:20.880 --> 0:16:24.160 trying to transfer that to the auto industry and UM, 0:16:24.200 --> 0:16:26.400 you know, they're very used to managing supply chains, and 0:16:26.720 --> 0:16:29.280 fox Con, who we all know is supplier to Apple, 0:16:30.000 --> 0:16:33.520 UM is trying to get into the electric vehicle manufacturing business. 0:16:33.880 --> 0:16:37.240 So that's why people are looking at them. UM. But 0:16:37.320 --> 0:16:41.680 I think you know, Apple, as many Silicon Valley UH 0:16:41.960 --> 0:16:43.960 companies that have tried to get into the auto industry 0:16:44.000 --> 0:16:47.160 have realized it's really not fun making a car. I mean, 0:16:47.280 --> 0:16:50.040 maybe it's fun to design it, but the money involved, 0:16:50.080 --> 0:16:52.360 the thin margins that you get for it is very 0:16:52.360 --> 0:16:55.480 different from um, you know, writing some software and then 0:16:55.560 --> 0:16:58.480 charging huge margins on it. So I don't think they 0:16:58.480 --> 0:17:01.000 want to get their hands dirty with the manufacturing stuff. 0:17:01.000 --> 0:17:03.720 That's not what they do. UM. So that's why we 0:17:03.800 --> 0:17:05.320 think that you know, it would make a lot of 0:17:05.320 --> 0:17:09.080 sense for them to go after a contract manufacturer, which 0:17:09.200 --> 0:17:11.880 you know in our story we talked about Magna, which 0:17:11.960 --> 0:17:16.159 is a Canadian global. This Dyer built my truck, the 0:17:16.200 --> 0:17:19.800 truck I drive today. Yeah, yeah, yeah, So they can 0:17:19.800 --> 0:17:22.280 do stup to nuts car manufacturing and they've got a 0:17:22.320 --> 0:17:26.880 really long track record and a good reputation. Fox Cott 0:17:26.920 --> 0:17:31.160 already has a good um. Obviously they're already in deep 0:17:31.160 --> 0:17:32.719 with that. Well, it's just a question that can they 0:17:32.760 --> 0:17:35.920 really make cards? Can they make cars? Bending metal? That's 0:17:36.000 --> 0:17:39.000 the tough part, is Kevin Tyne from Bloomberg Intelligence always says, 0:17:39.040 --> 0:17:41.800 Gabby Coppla, thank you so much for joining us. Gabby Copple, 0:17:41.840 --> 0:17:44.760 as the auto reporter for Bloomberg News, joining us on 0:17:44.800 --> 0:17:52.359 the phone from Detroit. European Central Bank President Christine Lagar 0:17:52.440 --> 0:17:55.560 discussed her monetary policy decision at a news conference this 0:17:55.600 --> 0:17:59.840 morning and had this to say about inflation. Inflation hospited 0:18:00.400 --> 0:18:05.760 over recent months, mainly on account of some transitory factors 0:18:05.840 --> 0:18:10.800 and an increase in energy price inflation. At the same time, 0:18:11.480 --> 0:18:16.520 underlying price pressures remain subdued in the context of weak 0:18:16.640 --> 0:18:23.320 demand and significance luck in labor and product markets, so 0:18:23.440 --> 0:18:26.600 with that, the e c B also upped its inflation 0:18:26.760 --> 0:18:31.560 forecast not UM to an absolute level that is scary 0:18:31.560 --> 0:18:33.560 at all, one percent to one point five percent. And 0:18:33.560 --> 0:18:38.159 of course Europe has had a much more difficult time 0:18:38.800 --> 0:18:43.199 bringing about inflation than has the US. Right Um, the 0:18:43.280 --> 0:18:45.680 e c B just simply hasn't been able to move 0:18:45.720 --> 0:18:50.000 the needle UM the way the Federal Reserve had UM. 0:18:50.040 --> 0:18:54.760 And it's very interesting also the comparison, because here in Europe, 0:18:54.760 --> 0:18:58.159 I would say inflation is probably considered more of an evil. 0:18:58.240 --> 0:19:01.680 Certainly in Germany it's the last thing that people want 0:19:01.720 --> 0:19:05.840 to see. UM. Memories of the memories are are are 0:19:05.920 --> 0:19:09.440 are very long here and the Weimar Republic, although very 0:19:09.440 --> 0:19:13.040 few people alive now lived through it, UM still uh 0:19:13.520 --> 0:19:16.760 still leaves a serious scar in the German psyche. It's 0:19:16.800 --> 0:19:18.640 not nearly as bad I think in the US, Paul, 0:19:18.720 --> 0:19:21.600 do you think that's the case, you know? And it's 0:19:21.600 --> 0:19:23.560 been a while since we've had real inflation here, the 0:19:23.640 --> 0:19:26.840 kind that hurts UM, you know, so there's a discussion of, 0:19:26.920 --> 0:19:31.280 you know, kind of good inflation versus bad inflation. UM. 0:19:31.400 --> 0:19:33.520 And I think we saw the ten year spike a 0:19:33.520 --> 0:19:36.359 couple of weeks ago matt to one point six percent. 0:19:36.440 --> 0:19:39.760 That kind of got people's attention, um, and caused them 0:19:39.800 --> 0:19:42.840 to say, Okay, do we have some inflation creeping into 0:19:43.160 --> 0:19:46.920 uh this economy more so than maybe we were forecasting, 0:19:46.960 --> 0:19:49.920 and maybe quicker than we were forecasting. And boy, when 0:19:49.920 --> 0:19:51.520 you to take a look at some of the commodities 0:19:51.560 --> 0:19:54.879 out there, you can certainly get some confirmation. Um. But 0:19:54.960 --> 0:19:56.879 you know, I was talking about this with Lisa Bramwitz, 0:19:56.960 --> 0:19:58.960 and you know she's of the opinion that and you know, 0:19:59.080 --> 0:20:02.280 unless you get real wage inflation, you're not gonna get 0:20:02.280 --> 0:20:05.879 real inflation in this country. Well, I mean then the 0:20:05.960 --> 0:20:08.280 kind of inflation that isn't real is still going to 0:20:08.400 --> 0:20:11.640 leave a lot of people hungry and unable to drive. Right. So, 0:20:12.520 --> 0:20:15.200 even if you don't get real inflation in the eyes 0:20:15.240 --> 0:20:19.320 of an economist or Lisa who is close enough to 0:20:19.359 --> 0:20:21.680 be an economist, um, it's still going to be the 0:20:21.720 --> 0:20:24.119 kind of inflation that that makes it hard for people 0:20:24.200 --> 0:20:26.960 to do grocery shopping and get to work and back 0:20:27.000 --> 0:20:29.440 if they still have a job. And the other thing 0:20:29.440 --> 0:20:32.880 I think is interesting is I'll never forget watching Ben 0:20:32.920 --> 0:20:37.280 bernanke on sixty Minutes when he said, look, deflation is 0:20:37.320 --> 0:20:40.639 the big scare. Um, that's what we need to worry about. 0:20:40.680 --> 0:20:44.159 Inflation we can deal with, no problem. And you can 0:20:44.200 --> 0:20:47.000 understand where he's coming from. We heard it from Janet 0:20:47.040 --> 0:20:50.320 Yellen recently as well, who of course no longer at 0:20:50.320 --> 0:20:53.560 the FED but now in charge of Treasury said, inflation 0:20:53.680 --> 0:20:55.760 is something that we have the tools to deal with. 0:20:55.880 --> 0:20:58.960 But Um, you and I were talking to someone recently 0:20:58.960 --> 0:21:03.240 who pointed out that, yeah, Um, the FED can stop inflation, 0:21:03.320 --> 0:21:06.000 no problem. Um. The only issue that they is that 0:21:06.080 --> 0:21:08.160 they crushed the economy when they do it. The last 0:21:08.200 --> 0:21:11.320 time we saw it happened was Paul Volker Um, and 0:21:11.400 --> 0:21:15.400 he was practically assaulted by members of the public as 0:21:15.400 --> 0:21:19.119 he raised rate to try and stop double digit inflation. 0:21:19.440 --> 0:21:22.880 Let's bring in John Author's who wrote a Bloomberg opinion 0:21:22.880 --> 0:21:28.320 piece about um. The only problem basically with the inflation 0:21:28.359 --> 0:21:32.280 scare being that he doesn't see any inflation. John, Um, 0:21:32.720 --> 0:21:36.560 are you saying that, yeah, the opportunity word yet? But 0:21:36.680 --> 0:21:40.359 yes there is. There is very little clear inflation showing 0:21:40.440 --> 0:21:43.360 up in official numbers yet, so we've seen it so far. 0:21:43.600 --> 0:21:45.760 I was just looking at beef prices and they have 0:21:45.880 --> 0:21:49.760 been steadily rising. Paul noted that UM, it costs now 0:21:49.800 --> 0:21:53.680 three dollars a gallon to fill up his tank with gas, 0:21:53.760 --> 0:21:56.520 which is certainly a rising price. And I noticed that 0:21:56.920 --> 0:21:59.600 the kids think rent is gonna cost nine percent more 0:21:59.720 --> 0:22:03.480 next year. So some things are definitely starting to scare people. 0:22:04.320 --> 0:22:08.480 Oh yes, definitely. What what is interesting and the thing 0:22:08.520 --> 0:22:12.000 is we have always known, UM, people have been braced 0:22:12.040 --> 0:22:14.520 for months for an inflation scare in the early months 0:22:14.520 --> 0:22:18.879 of this year because the big lockdown and also the 0:22:18.920 --> 0:22:21.360 big fall in the oil price for March last year, 0:22:21.359 --> 0:22:25.359 are going to drop out of year on your year comparisons, uh, 0:22:25.520 --> 0:22:28.480 and you're suddenly going to have headline inflation figures that 0:22:28.520 --> 0:22:32.680 look not like a return to the seventies but sharply worse. 0:22:33.440 --> 0:22:36.120 So a lot of people have been nervous about what 0:22:36.200 --> 0:22:41.359 that psychology, psychological effect will have. What is intriguing to me, 0:22:41.680 --> 0:22:46.000