1 00:00:02,640 --> 00:00:05,320 Speaker 1: Welcome to the Bloomberg Penl podcast on Paul Swing You. 2 00:00:05,360 --> 00:00:07,680 Speaker 1: Along with my co host Lisa Brahma Waits, each day 3 00:00:07,720 --> 00:00:10,240 Speaker 1: we bring you the most noteworthy and useful interviews for 4 00:00:10,280 --> 00:00:12,520 Speaker 1: you and your money, whether at the grocery store or 5 00:00:12,560 --> 00:00:15,480 Speaker 1: the trading floor. Find a Bloomberg Penl podcast on Apple 6 00:00:15,520 --> 00:00:17,960 Speaker 1: podcast or wherever you listen to podcasts, as well as 7 00:00:17,960 --> 00:00:24,439 Speaker 1: that Bloomberg dot com. President Trump said there is a 8 00:00:24,520 --> 00:00:27,360 Speaker 1: quote very good chance to make a trade deal with China, 9 00:00:27,680 --> 00:00:31,080 Speaker 1: but the unrest in Hong Kong is a quote complicating factor. 10 00:00:31,120 --> 00:00:33,960 Speaker 1: He was speaking on Fox and Friends earlier this morning. 11 00:00:33,960 --> 00:00:36,479 Speaker 1: He also said that he would not commit necessarily or 12 00:00:36,479 --> 00:00:39,800 Speaker 1: didn't necessarily say whether he was going to sign the 13 00:00:39,840 --> 00:00:43,240 Speaker 1: bill that was passed by both houses of Congress, basically 14 00:00:43,320 --> 00:00:45,319 Speaker 1: saying that that that that the U S stands by 15 00:00:45,520 --> 00:00:49,720 Speaker 1: Hong Kong. Brendan Murray joining us now Bloomberg's Bloomberg's reporter 16 00:00:49,840 --> 00:00:52,559 Speaker 1: and editor covering all things trade. Can you give us 17 00:00:52,600 --> 00:00:55,160 Speaker 1: a sense of where we are and what kind of 18 00:00:55,200 --> 00:00:57,360 Speaker 1: credence we can give to a statement like this by 19 00:00:57,400 --> 00:01:00,640 Speaker 1: President Trump? Well, you heard the President's say, uh, I 20 00:01:00,760 --> 00:01:03,200 Speaker 1: send a couple of different signals there one was yes, 21 00:01:03,240 --> 00:01:05,720 Speaker 1: we're very close to a deal. But he also talked 22 00:01:05,920 --> 00:01:09,000 Speaker 1: about some of the tougher issues that they still have 23 00:01:09,160 --> 00:01:14,840 Speaker 1: yet to resolve, among those being, uh, the intellectual property 24 00:01:16,040 --> 00:01:18,360 Speaker 1: oversight that China that the US wants China to have 25 00:01:18,480 --> 00:01:21,440 Speaker 1: greater uh control over and and and and the and 26 00:01:21,480 --> 00:01:24,640 Speaker 1: the forced transfer of technology. So these are these are 27 00:01:24,680 --> 00:01:27,480 Speaker 1: issues that uh you know that that they still have 28 00:01:27,600 --> 00:01:30,440 Speaker 1: yet to to come to an agreement on. Uh. You know, 29 00:01:30,800 --> 00:01:33,559 Speaker 1: Trump has said four weeks now that we're very close 30 00:01:33,560 --> 00:01:35,560 Speaker 1: to a trade deal. It was six weeks ago today 31 00:01:36,000 --> 00:01:38,319 Speaker 1: when he sat in the Oval Office and said, we 32 00:01:38,400 --> 00:01:40,000 Speaker 1: have a deal. All we have to do is get 33 00:01:40,000 --> 00:01:42,360 Speaker 1: it on paper. Uh so, and he said we could 34 00:01:42,400 --> 00:01:44,280 Speaker 1: do that in three to five weeks. Here we are 35 00:01:44,360 --> 00:01:47,280 Speaker 1: week six and he's still saying it. And we still 36 00:01:47,280 --> 00:01:51,240 Speaker 1: don't have any sign that that that an agreement is 37 00:01:51,720 --> 00:01:55,160 Speaker 1: in fact imminent. Um, it could come any day now, 38 00:01:55,360 --> 00:01:58,600 Speaker 1: or it could drag on from several more weeks. So Brendan, 39 00:01:58,720 --> 00:02:00,720 Speaker 1: both sides, the U S And China have said that 40 00:02:00,760 --> 00:02:04,200 Speaker 1: they ideally would like to keep the Hong Kong issue 41 00:02:04,280 --> 00:02:08,480 Speaker 1: and the trade negotiation issue separate. Do you think that's possible? 42 00:02:09,800 --> 00:02:12,120 Speaker 1: I think this is one of the things that that 43 00:02:12,200 --> 00:02:15,400 Speaker 1: that that President Trump will offer as a concession to 44 00:02:16,480 --> 00:02:19,360 Speaker 1: his Chinese counterpart if if they can indeed get close 45 00:02:19,400 --> 00:02:21,560 Speaker 1: to a deal, he could just say, you know what, 46 00:02:22,160 --> 00:02:24,520 Speaker 1: I won't sign that bill, and but you know, this 47 00:02:24,600 --> 00:02:26,880 Speaker 1: is what I want from you. It's it's it's leverage 48 00:02:27,360 --> 00:02:31,120 Speaker 1: in trade negotiations and and uh, and that's that's what 49 00:02:31,280 --> 00:02:34,240 Speaker 1: this piece of legislation is likely to become. What are 50 00:02:34,240 --> 00:02:37,720 Speaker 1: we hearing from the Chinese side? We heard President Shi 51 00:02:37,800 --> 00:02:41,280 Speaker 1: Jim ping speak overnight about the need for mutual respect 52 00:02:41,840 --> 00:02:44,440 Speaker 1: and equality in a deal, which is which are some 53 00:02:44,480 --> 00:02:47,919 Speaker 1: guiding principles that China has demanded all along. But is 54 00:02:47,960 --> 00:02:50,160 Speaker 1: that significant? Because I saw that headline and I was thinking, 55 00:02:50,160 --> 00:02:52,000 Speaker 1: how do I frame that in terms of does this 56 00:02:52,040 --> 00:02:54,040 Speaker 1: make a trade deal more or less likely? It is 57 00:02:54,080 --> 00:02:56,800 Speaker 1: significant when you hear President Trump, as he did just 58 00:02:57,280 --> 00:02:59,600 Speaker 1: you know, a few hours ago, say I don't like 59 00:02:59,680 --> 00:03:02,560 Speaker 1: that we're equality. China has been ripping us off for 60 00:03:02,840 --> 00:03:06,360 Speaker 1: decades now. Uh, you know that this can't be a 61 00:03:06,400 --> 00:03:08,000 Speaker 1: fair deal. This is going to be a deal that 62 00:03:08,040 --> 00:03:11,480 Speaker 1: benefits us. So you you add those two things together, 63 00:03:11,600 --> 00:03:15,520 Speaker 1: and you've got two leaders who are still apparently very 64 00:03:15,560 --> 00:03:19,040 Speaker 1: far apart, brendon what are next steps? I think the 65 00:03:19,160 --> 00:03:23,160 Speaker 1: last thing I read was a US delegation had been 66 00:03:23,200 --> 00:03:27,200 Speaker 1: invited to Beijing by China. Is there anything on the calendar? 67 00:03:27,919 --> 00:03:31,560 Speaker 1: We don't have any information that that invitation has been 68 00:03:31,600 --> 00:03:36,400 Speaker 1: accepted yet. Uh that that uh was made last week 69 00:03:36,960 --> 00:03:40,520 Speaker 1: and the the U s Trade representative, Robert Leitheiser, has 70 00:03:40,520 --> 00:03:42,600 Speaker 1: been running around Capitol Hill in the past few days 71 00:03:42,880 --> 00:03:46,920 Speaker 1: trying to work out the US Canada Mexico deal and 72 00:03:46,960 --> 00:03:50,320 Speaker 1: get a speaker Pelosi to sign up to that. So 73 00:03:50,600 --> 00:03:52,880 Speaker 1: he said his hands full with with some other things. 74 00:03:52,920 --> 00:03:56,040 Speaker 1: Now he can do multiple things at once, but his 75 00:03:56,160 --> 00:03:58,760 Speaker 1: priority is not flying to Beijing in the next couple 76 00:03:58,840 --> 00:04:01,760 Speaker 1: of days. Uh uh. And certainly with the US holiday 77 00:04:01,800 --> 00:04:05,400 Speaker 1: next week, you know it's it would be. It would 78 00:04:05,440 --> 00:04:07,440 Speaker 1: be a stretch to think it could come together before 79 00:04:07,640 --> 00:04:10,160 Speaker 1: the middle of next week. As Paul was mentioning, the 80 00:04:10,440 --> 00:04:13,920 Speaker 1: trade negotiators on both sides are trying to distinguish the 81 00:04:13,960 --> 00:04:17,720 Speaker 1: Hong Kong issue is unique and separate from other negotiations 82 00:04:17,720 --> 00:04:20,920 Speaker 1: having to do with trade. What's the tipping point here 83 00:04:21,440 --> 00:04:24,760 Speaker 1: for when that is impossible? Well, I think the real 84 00:04:25,600 --> 00:04:30,520 Speaker 1: this whole thing will I think tip when the US 85 00:04:31,240 --> 00:04:35,800 Speaker 1: agrees or disagrees to roll back tariffs that are already 86 00:04:35,800 --> 00:04:40,080 Speaker 1: in place. That seems to be where the US is. 87 00:04:40,680 --> 00:04:42,880 Speaker 1: You know, China really wants the US to to give 88 00:04:42,920 --> 00:04:45,560 Speaker 1: some ground on that, and the US is, you know, 89 00:04:45,600 --> 00:04:49,080 Speaker 1: the whole, the whole US economic strategy with China is 90 00:04:49,120 --> 00:04:54,200 Speaker 1: to apply tariffs and keep them applied until you extract 91 00:04:54,640 --> 00:04:56,920 Speaker 1: you know, changes out of China that you know, bringing 92 00:04:56,960 --> 00:04:59,000 Speaker 1: it more in line with you know, other sort of 93 00:04:59,040 --> 00:05:04,000 Speaker 1: market economy. Uh. So that is where sort of the 94 00:05:04,080 --> 00:05:08,920 Speaker 1: rubber meets the road in this whole, in this whole saga. Um, 95 00:05:09,040 --> 00:05:12,560 Speaker 1: the Hong Kong issue, as President Trump said, you know, 96 00:05:12,680 --> 00:05:15,719 Speaker 1: it is definitely complicating things. But whether it's enough to 97 00:05:15,960 --> 00:05:18,039 Speaker 1: you know, totally throw it off the rails, uh, you 98 00:05:18,080 --> 00:05:19,600 Speaker 1: know as a total as a different question that I 99 00:05:20,480 --> 00:05:23,679 Speaker 1: don't I don't see it happening. So, Brendan, we're talking 100 00:05:23,720 --> 00:05:26,560 Speaker 1: really about a phase one type of deal. That's all 101 00:05:26,600 --> 00:05:29,640 Speaker 1: we're talking about right now, Is that right? That's right? 102 00:05:29,760 --> 00:05:33,080 Speaker 1: So Phase one, as President Trump laid out a couple 103 00:05:33,080 --> 00:05:37,440 Speaker 1: of weeks ago, involves agriculture purchases on China's behalf, you know, 104 00:05:37,480 --> 00:05:41,880 Speaker 1: protection of intellectual property of American companies and some of 105 00:05:41,880 --> 00:05:46,200 Speaker 1: these other sort of structural issues, whether they can get those, 106 00:05:46,560 --> 00:05:48,440 Speaker 1: you know, as a whole. Another question the you know 107 00:05:48,480 --> 00:05:51,320 Speaker 1: they've we've heard you know, phase two. Well we'll come 108 00:05:51,440 --> 00:05:55,520 Speaker 1: right afterwards, and maybe even a phase three, so you know, 109 00:05:55,680 --> 00:05:58,400 Speaker 1: these things we're we're about to head into year number 110 00:05:58,440 --> 00:06:01,480 Speaker 1: three of these negotiations with you know, not even the 111 00:06:01,800 --> 00:06:05,880 Speaker 1: simplest issues worked out in phase one. So we could 112 00:06:05,920 --> 00:06:08,000 Speaker 1: be you know, we could be looking at something that lasts, 113 00:06:08,040 --> 00:06:10,839 Speaker 1: you know, through the election next year and beyond. Perhaps 114 00:06:11,080 --> 00:06:13,680 Speaker 1: Brendon Mury, thanks so much for joining us. Brendan Murray 115 00:06:13,680 --> 00:06:15,960 Speaker 1: covers all things trade for Bloomberg News, joining us from 116 00:06:15,960 --> 00:06:30,239 Speaker 1: our London bureau DIDGA. Under the surface of credit markets, 117 00:06:30,279 --> 00:06:32,400 Speaker 1: you could find a bit of a conundrum. You can 118 00:06:32,400 --> 00:06:35,080 Speaker 1: see that everything seems to be chugging along on average, 119 00:06:35,120 --> 00:06:37,920 Speaker 1: but if you take a look at the riskiest credits, 120 00:06:37,920 --> 00:06:41,039 Speaker 1: the triple C rated debt, it has sold off and 121 00:06:41,080 --> 00:06:44,000 Speaker 1: continued to sell off, with yields on the securities extra 122 00:06:44,080 --> 00:06:46,880 Speaker 1: yields now rising to the highest since two thousand sixteen. 123 00:06:46,960 --> 00:06:49,560 Speaker 1: Joining us is Ken Monahan, co director of Global High 124 00:06:49,600 --> 00:06:54,239 Speaker 1: Yield in a Moondy pioneer in our Bloomberg Interactive Broker Studios, Ken, 125 00:06:54,440 --> 00:06:56,920 Speaker 1: do you think that this is a harbinger of more 126 00:06:57,000 --> 00:07:00,040 Speaker 1: pain to calm the weakness that's been persistent with in 127 00:07:00,080 --> 00:07:03,279 Speaker 1: the triple C rated UH category here? Well, a Lisa, 128 00:07:03,360 --> 00:07:05,520 Speaker 1: you know, the triple C portion of the market has 129 00:07:05,560 --> 00:07:08,160 Speaker 1: often been viewed as kind of a big risk indicator 130 00:07:08,200 --> 00:07:10,680 Speaker 1: for the overall credit markets, and when those trade to 131 00:07:10,800 --> 00:07:13,240 Speaker 1: very high levels, which they're at right now, where spreads 132 00:07:13,240 --> 00:07:16,680 Speaker 1: are wide, yields are high, and they've underperformed woefully in 133 00:07:16,720 --> 00:07:19,320 Speaker 1: two thousand and nineteen, usually people say, Okay, well, that's 134 00:07:19,320 --> 00:07:21,080 Speaker 1: a sign of not such good things to come and 135 00:07:21,120 --> 00:07:23,600 Speaker 1: perhaps a recession. I would think in this case, actually 136 00:07:23,600 --> 00:07:25,840 Speaker 1: it's a little different because there's so much of it 137 00:07:25,880 --> 00:07:27,680 Speaker 1: that's tied up with the energy sector and then a 138 00:07:27,720 --> 00:07:31,920 Speaker 1: few other idiosyncratic situations that that's really driving it. You know. 139 00:07:32,000 --> 00:07:35,440 Speaker 1: You know, we had said earlier that sometimes triple cs 140 00:07:35,480 --> 00:07:37,440 Speaker 1: are the tail that wagged the dog. This time, I 141 00:07:37,480 --> 00:07:39,200 Speaker 1: don't think the fact that the dog the tail is 142 00:07:39,200 --> 00:07:42,400 Speaker 1: wagging that hard is indicative of a major problem. And 143 00:07:42,400 --> 00:07:44,200 Speaker 1: this is what a lot of people are saying. This 144 00:07:44,280 --> 00:07:48,160 Speaker 1: is a specific sector issue energy and then there are 145 00:07:48,160 --> 00:07:51,600 Speaker 1: a couple of retailers, etcetera that have also struggled, along 146 00:07:51,600 --> 00:07:54,920 Speaker 1: with some pharmaceutical companies a number of other uh types 147 00:07:54,960 --> 00:07:58,240 Speaker 1: of stories. I'm just wondering what it says about a 148 00:07:58,280 --> 00:08:01,200 Speaker 1: time when we have so much, such a liquidity, when 149 00:08:01,200 --> 00:08:04,040 Speaker 1: we have you know, such a risk on kind of 150 00:08:04,160 --> 00:08:07,200 Speaker 1: overall feel that there are an increasing number of companies 151 00:08:07,200 --> 00:08:10,640 Speaker 1: going bankrupt, even in some of these troubled sectors right Well, 152 00:08:10,760 --> 00:08:12,840 Speaker 1: you know, I think the energy is a key piece 153 00:08:12,880 --> 00:08:14,920 Speaker 1: of that. And I think if you look at the 154 00:08:15,000 --> 00:08:17,680 Speaker 1: energy sector and you recognize how much money had gone 155 00:08:17,720 --> 00:08:21,280 Speaker 1: into it over the previous ten years and really facilitated 156 00:08:21,600 --> 00:08:25,800 Speaker 1: the expansion of the shale boom in the United States, um, 157 00:08:25,880 --> 00:08:28,840 Speaker 1: you maybe had too much money chasing too few opportunities. 158 00:08:29,040 --> 00:08:31,160 Speaker 1: And I think if you look at those companies, by 159 00:08:31,200 --> 00:08:34,720 Speaker 1: and large, they have not been able to generate a 160 00:08:34,760 --> 00:08:39,440 Speaker 1: sustainable return on capital. And companies that can't return capital 161 00:08:39,720 --> 00:08:42,720 Speaker 1: or generator return on capital over time, I just can't 162 00:08:42,800 --> 00:08:45,679 Speaker 1: raise new money, which is why these companies are in difficulty. 163 00:08:45,960 --> 00:08:48,320 Speaker 1: So I actually talked to a lot of it distressed 164 00:08:48,320 --> 00:08:51,520 Speaker 1: investors and they are actually highlighting energy as one of 165 00:08:51,559 --> 00:08:54,120 Speaker 1: the sectors they think they can actually find value and 166 00:08:54,200 --> 00:08:58,160 Speaker 1: add value? Is it if you do your real bottoms 167 00:08:58,240 --> 00:09:01,320 Speaker 1: up research. Are there still opportunities there? I think you're 168 00:09:01,400 --> 00:09:04,280 Speaker 1: right that there are opportunities and uh, you know, but 169 00:09:04,320 --> 00:09:06,440 Speaker 1: they're they're not a whole lot of them out there. 170 00:09:06,679 --> 00:09:08,760 Speaker 1: I think you really kind of look under rocks here, 171 00:09:09,120 --> 00:09:11,920 Speaker 1: um and uh, but there are some out there, and 172 00:09:11,920 --> 00:09:14,160 Speaker 1: I think we are looking at them. But I would 173 00:09:14,160 --> 00:09:17,600 Speaker 1: not expect in two thousand and twenty necessarily that you'll 174 00:09:17,600 --> 00:09:21,200 Speaker 1: see a wholesale return or surge or returns for the 175 00:09:21,320 --> 00:09:25,079 Speaker 1: energy sector. And if you do, because it's not impossible, 176 00:09:25,240 --> 00:09:27,240 Speaker 1: what it will probably indicate is that a lot of 177 00:09:27,280 --> 00:09:29,920 Speaker 1: the companies have washed out of the index. So when 178 00:09:30,760 --> 00:09:33,360 Speaker 1: a company goes bankrupt, it drops out of the index. 179 00:09:33,360 --> 00:09:35,640 Speaker 1: So if you had enough energy companies going bankrupt in 180 00:09:35,640 --> 00:09:38,280 Speaker 1: early two thousand twenty, um, the rest of them that 181 00:09:38,320 --> 00:09:41,040 Speaker 1: are maybe sustainable, they could have a big rally. How 182 00:09:41,080 --> 00:09:44,880 Speaker 1: far in the shake up are we It's interesting. I 183 00:09:44,920 --> 00:09:47,120 Speaker 1: was up with the capital markets team of one of 184 00:09:47,120 --> 00:09:50,760 Speaker 1: the largest banks yesterday and and talking to them about it, 185 00:09:50,800 --> 00:09:55,000 Speaker 1: and it's amazing how few companies have gotten religion. Um, 186 00:09:55,040 --> 00:09:57,960 Speaker 1: you know, they were offered a second lean paper early 187 00:09:58,040 --> 00:10:01,080 Speaker 1: this year at seven percent, then by midsummer it was 188 00:10:01,160 --> 00:10:04,480 Speaker 1: nine percent. Now there maybe eleven or twelve percent, and 189 00:10:04,720 --> 00:10:07,120 Speaker 1: they still haven't gotten on board. They still haven't figured 190 00:10:07,120 --> 00:10:09,600 Speaker 1: out there's still hope springs eternal. But you know, it's 191 00:10:09,600 --> 00:10:12,000 Speaker 1: the old adage hopes is not a business plan and 192 00:10:12,120 --> 00:10:14,600 Speaker 1: uh and we're we're stuck in that situation right now 193 00:10:14,640 --> 00:10:17,640 Speaker 1: for many of these companies. All right, so energies, dicey 194 00:10:17,720 --> 00:10:20,240 Speaker 1: only for the brave. What are some of the sectors 195 00:10:20,240 --> 00:10:22,480 Speaker 1: that you think are attractive range? I mean high you market, 196 00:10:22,480 --> 00:10:24,240 Speaker 1: I guess up eleven twelve percent this year, it's had 197 00:10:24,240 --> 00:10:26,280 Speaker 1: a pretty good year. Are there still areas that you 198 00:10:26,280 --> 00:10:29,040 Speaker 1: still find attractive? You know, it's it's we're still looking 199 00:10:29,120 --> 00:10:31,840 Speaker 1: under rocks as well in general in this market because 200 00:10:31,880 --> 00:10:35,440 Speaker 1: the returns have been so significant this year. Let's recognize, though, 201 00:10:35,480 --> 00:10:37,880 Speaker 1: what happened is in the fourth quarter of last year, 202 00:10:37,920 --> 00:10:41,200 Speaker 1: we all experienced misery. If anything you had that was risk, 203 00:10:41,240 --> 00:10:44,200 Speaker 1: whether it's equities or high yield, got absolutely pummeled. So 204 00:10:44,240 --> 00:10:46,760 Speaker 1: effectively the return that should have taken place in two 205 00:10:46,760 --> 00:10:49,840 Speaker 1: thousand and eighteen got sucked into two thousand and nineteen, 206 00:10:49,880 --> 00:10:53,680 Speaker 1: so effectively is supercharged the performance for two thousand and nineteen. 207 00:10:53,960 --> 00:10:55,720 Speaker 1: But where we look at when we look at things 208 00:10:55,840 --> 00:10:58,480 Speaker 1: where they are now, it's much going to be much 209 00:10:58,480 --> 00:11:01,000 Speaker 1: more difficult to generate a return Next year. Two thousand 210 00:11:01,080 --> 00:11:03,160 Speaker 1: twenties not going to be a double digit year for 211 00:11:03,160 --> 00:11:05,160 Speaker 1: for high yield. It's just not possible. What's it going 212 00:11:05,200 --> 00:11:07,360 Speaker 1: to be? I think you're looking at kind of mid 213 00:11:07,400 --> 00:11:09,800 Speaker 1: single digits. It could be even lower depending on what 214 00:11:09,880 --> 00:11:13,280 Speaker 1: happens with the washout of certain sectors like energy. Do 215 00:11:13,320 --> 00:11:16,200 Speaker 1: you think that you are guaranteed bigger returns going into 216 00:11:16,240 --> 00:11:18,760 Speaker 1: the double B or into the single B or into 217 00:11:18,800 --> 00:11:23,240 Speaker 1: the triple C. That's the big question. I would tell 218 00:11:23,280 --> 00:11:26,280 Speaker 1: you that the problem with double bees right now is 219 00:11:26,440 --> 00:11:28,199 Speaker 1: one they've got a lot of interest rate to risk 220 00:11:28,240 --> 00:11:31,080 Speaker 1: on them. And to the other problem I would suggest 221 00:11:31,280 --> 00:11:33,480 Speaker 1: is that there's been so much money that's gone into 222 00:11:33,520 --> 00:11:38,040 Speaker 1: double bees from what we call crossover investors otherwise investment 223 00:11:38,080 --> 00:11:40,680 Speaker 1: grade buyers that are so desperate to get some extra 224 00:11:40,760 --> 00:11:43,679 Speaker 1: yield into their portfolio that they're dipping down into buy 225 00:11:43,720 --> 00:11:46,839 Speaker 1: things they don't normally buy. Double be credits, that they've 226 00:11:46,840 --> 00:11:48,920 Speaker 1: compressed the spread on those bonds, And if we look 227 00:11:48,960 --> 00:11:50,960 Speaker 1: at those new issues that come out recently a little 228 00:11:51,040 --> 00:11:53,280 Speaker 1: last several weeks, for example, in the double B space, 229 00:11:53,840 --> 00:11:56,120 Speaker 1: very few of them are trading up significantly. They kind 230 00:11:56,120 --> 00:11:58,280 Speaker 1: of come out, they price it par four and a 231 00:11:58,320 --> 00:12:00,560 Speaker 1: half four and three quarter coupon, and it just sits 232 00:12:00,600 --> 00:12:04,040 Speaker 1: there now arguably, you know, maybe if you know, if 233 00:12:04,040 --> 00:12:05,839 Speaker 1: it stays there at that level for all, the two 234 00:12:05,840 --> 00:12:08,240 Speaker 1: thousand and twenty four and three quarter return may not 235 00:12:08,320 --> 00:12:11,360 Speaker 1: look so bad relative to investment grade, particularly if interest 236 00:12:11,440 --> 00:12:14,040 Speaker 1: rates rise a bit from here. But it's not exactly 237 00:12:15,440 --> 00:12:18,520 Speaker 1: attracting a lot of interest. So outside of energy, how's 238 00:12:18,520 --> 00:12:21,040 Speaker 1: the credit quality in your portfolio? I would say that, 239 00:12:21,080 --> 00:12:24,320 Speaker 1: you know, if we look at our portfolio, historically, we 240 00:12:24,640 --> 00:12:28,080 Speaker 1: generally own credits that on average rated about a notch 241 00:12:28,160 --> 00:12:31,480 Speaker 1: below that of the index. So we tend to seek 242 00:12:31,559 --> 00:12:34,400 Speaker 1: seek value in single bees and that's where we are 243 00:12:34,480 --> 00:12:36,679 Speaker 1: right now. Doesn't mean we're not buying double bees. We are, 244 00:12:36,920 --> 00:12:38,720 Speaker 1: we're a bit more selective about it, but we're very 245 00:12:38,800 --> 00:12:41,720 Speaker 1: much overweight single bees. We're kind of underweight double bees, 246 00:12:41,720 --> 00:12:43,800 Speaker 1: and we're about market way triple cs right now. How 247 00:12:43,880 --> 00:12:47,560 Speaker 1: close are we to our session? Um? Well, not between 248 00:12:47,600 --> 00:12:50,600 Speaker 1: here and Christmas? How's that? And? Uh, I don't think 249 00:12:50,600 --> 00:12:55,240 Speaker 1: it's you know, and I don't think it happens in 250 00:12:55,280 --> 00:12:57,840 Speaker 1: twenty either, but will you know, it will remains to 251 00:12:57,880 --> 00:13:01,520 Speaker 1: be seen obviously, the however happens. We supposedly are on 252 00:13:01,559 --> 00:13:03,800 Speaker 1: the verge, as we have been for over a year now. 253 00:13:03,800 --> 00:13:08,280 Speaker 1: It seems of of of a completion of these trade talks, 254 00:13:08,800 --> 00:13:11,960 Speaker 1: uh and if that keeps getting pushed out or there's 255 00:13:11,960 --> 00:13:15,280 Speaker 1: more saber rattling that goes on on either side, that 256 00:13:15,280 --> 00:13:18,439 Speaker 1: could facilitate something. Yeah, alright, alright, I mean, come on, 257 00:13:18,520 --> 00:13:22,280 Speaker 1: this is literally what we live every day. So can 258 00:13:22,360 --> 00:13:24,839 Speaker 1: just real quickly what's the most attractive area that you 259 00:13:24,880 --> 00:13:27,880 Speaker 1: guys are looking at right now? You know, it's interesting 260 00:13:27,960 --> 00:13:30,600 Speaker 1: the the auto sector had been beaten up fairly bad 261 00:13:31,120 --> 00:13:33,280 Speaker 1: um and there's a bit of a recovery going on there. 262 00:13:33,320 --> 00:13:36,240 Speaker 1: We've found some opportunities there and that's one of the 263 00:13:36,240 --> 00:13:38,760 Speaker 1: places we would point to where there's it maybe had 264 00:13:38,800 --> 00:13:41,920 Speaker 1: gotten oversold. People thought perhaps a recession was coming, people 265 00:13:43,200 --> 00:13:44,959 Speaker 1: sales were going to come down, and that really has 266 00:13:44,960 --> 00:13:50,920 Speaker 1: not happened. Bonds backed by the cyber truck exactly hopefully. 267 00:13:51,080 --> 00:13:53,960 Speaker 1: Ken Monahan, co director at Global Hi, a Monday pioneer 268 00:13:54,200 --> 00:13:57,320 Speaker 1: joining us here in our Bloomberg Interactive Broker Studio. He's 269 00:13:57,320 --> 00:13:59,920 Speaker 1: based in Durham, North Carolina, home of the Durham Bowl, 270 00:14:00,559 --> 00:14:03,640 Speaker 1: amongst other institutions down there and Derham. Looking at quick 271 00:14:03,720 --> 00:14:07,640 Speaker 1: data check right here the SMP. We are absolutely flat 272 00:14:07,720 --> 00:14:10,160 Speaker 1: on the SMP today, no change now at forty two 273 00:14:10,520 --> 00:14:14,240 Speaker 1: uh nasdak off just a little bit. Looking at yields again, 274 00:14:14,320 --> 00:14:17,480 Speaker 1: not much movement there to ten year up three thirty seconds, 275 00:14:17,520 --> 00:14:20,480 Speaker 1: pushing that ten year yield down just slightly to one 276 00:14:20,520 --> 00:14:24,080 Speaker 1: point seven six. Compared that to the two year at 277 00:14:24,120 --> 00:14:28,120 Speaker 1: one point, So the curve flattening just a little bit. 278 00:14:28,480 --> 00:14:48,320 Speaker 1: This is Bloomberg twos, the era of forecasts. A lot 279 00:14:48,320 --> 00:14:51,360 Speaker 1: of the big banks are coming out with the predictions. 280 00:14:51,440 --> 00:14:53,920 Speaker 1: Joining us now is Dan Skelly, head of Equity Model, 281 00:14:53,960 --> 00:14:57,680 Speaker 1: Portfolios and market Strategy at Morgan Stanley Wealth Management, joining 282 00:14:57,760 --> 00:15:00,120 Speaker 1: us here in New York. I'm trying to unders and 283 00:15:01,040 --> 00:15:04,720 Speaker 1: the consensus so far, which is a resurgence in a 284 00:15:04,720 --> 00:15:07,320 Speaker 1: way at least in equities next year that potentially could 285 00:15:07,360 --> 00:15:10,520 Speaker 1: even see double digit returns in the US and perhaps 286 00:15:10,520 --> 00:15:13,680 Speaker 1: even bigger in Europe. Do you agree with that consensus? So, 287 00:15:13,720 --> 00:15:15,960 Speaker 1: I think that at this point in the cycle, you 288 00:15:15,960 --> 00:15:18,880 Speaker 1: want to be more selective. In the US market in particular, 289 00:15:18,920 --> 00:15:21,480 Speaker 1: we think there's less upside to the index in the 290 00:15:21,560 --> 00:15:24,880 Speaker 1: US where we could see more absolute returns as overseas. 291 00:15:24,880 --> 00:15:27,680 Speaker 1: In Europe in particular, just given how much it's lagged, 292 00:15:27,680 --> 00:15:31,480 Speaker 1: and then also given the potential for some rising catalysts 293 00:15:31,480 --> 00:15:33,640 Speaker 1: on the fiscal front. You know, the only game in 294 00:15:33,680 --> 00:15:36,520 Speaker 1: town forever in Europe has been monetary stimulus, and I 295 00:15:36,560 --> 00:15:39,880 Speaker 1: think should we see some fiscal improvement there, that could 296 00:15:39,880 --> 00:15:42,200 Speaker 1: be a potential catalyst. You think we will see that 297 00:15:42,240 --> 00:15:45,040 Speaker 1: because I know, you know, particularly Germany, which is where 298 00:15:45,040 --> 00:15:48,120 Speaker 1: everybody I think kind of focuses, has been pretty resolute 299 00:15:48,120 --> 00:15:50,280 Speaker 1: and saying they're not into that game. Yes, So I 300 00:15:50,280 --> 00:15:52,720 Speaker 1: think that's an interesting question. It's right now. I would 301 00:15:52,760 --> 00:15:55,920 Speaker 1: label it a small probability, but a rising probability, and 302 00:15:56,240 --> 00:15:59,360 Speaker 1: guard and ECB. Maybe she's the you know, the she 303 00:15:59,400 --> 00:16:01,600 Speaker 1: could be the cha agent. I think Merkel, who had 304 00:16:01,600 --> 00:16:04,720 Speaker 1: always been loath to do more spendings obviously leaving. So 305 00:16:04,760 --> 00:16:07,800 Speaker 1: I think that swap in personnel is actually net positive 306 00:16:07,840 --> 00:16:10,640 Speaker 1: for the for the potential um And you know, listen 307 00:16:10,640 --> 00:16:14,520 Speaker 1: when you heard Mario dragging on his way out addressing policymakers. 308 00:16:14,760 --> 00:16:16,680 Speaker 1: He was basically saying, we've gotten to the point of 309 00:16:16,720 --> 00:16:19,920 Speaker 1: diminishing returns on negative interest rates. So I'm trying to 310 00:16:20,040 --> 00:16:23,800 Speaker 1: understand how much a trade truce is priced into the 311 00:16:23,840 --> 00:16:26,360 Speaker 1: idea that we're going to see pretty good year next year. 312 00:16:27,040 --> 00:16:28,840 Speaker 1: I think that's part of it. I think the other 313 00:16:29,040 --> 00:16:31,760 Speaker 1: driving factor has been liquidity. And when you look at 314 00:16:31,800 --> 00:16:34,240 Speaker 1: what's happened in the US the last call it three months, 315 00:16:34,240 --> 00:16:37,240 Speaker 1: the FETE isn't calling it qui, but effectively we're seeing 316 00:16:37,320 --> 00:16:40,280 Speaker 1: QUEI four in terms of generating more liquidity. So I 317 00:16:40,320 --> 00:16:43,640 Speaker 1: think there's this expectation that you're going to continue to 318 00:16:43,680 --> 00:16:45,560 Speaker 1: have the FETE at your back and a tail win 319 00:16:45,640 --> 00:16:48,040 Speaker 1: in the markets. And we don't see that this program 320 00:16:48,120 --> 00:16:50,520 Speaker 1: ends early next year, as we all know, and so 321 00:16:50,600 --> 00:16:52,920 Speaker 1: that could be a potential source of altility next year. 322 00:16:53,120 --> 00:16:56,480 Speaker 1: I'm looking right now at equities uh SMP and NASTAC 323 00:16:56,560 --> 00:16:59,320 Speaker 1: a little little down, but the doubt up all of 324 00:16:59,360 --> 00:17:02,280 Speaker 1: them near the highs. And how much of the gains 325 00:17:02,280 --> 00:17:04,919 Speaker 1: of next year have already been brought forward and priced 326 00:17:04,960 --> 00:17:06,800 Speaker 1: in now. So that's a key question, and I think 327 00:17:06,840 --> 00:17:09,560 Speaker 1: we would argue Morgan Stanley, a majority of the gains, 328 00:17:09,720 --> 00:17:12,000 Speaker 1: and we rely not just our own on our own 329 00:17:12,080 --> 00:17:15,400 Speaker 1: judgment and experience, but also on quantitative models, and our 330 00:17:15,440 --> 00:17:17,919 Speaker 1: earnings model a year ago was telling us that earnings 331 00:17:17,920 --> 00:17:20,160 Speaker 1: were at risk, and what we've seen the last three 332 00:17:20,240 --> 00:17:24,199 Speaker 1: quarters is a meaningful slowdown from we've seen flat to 333 00:17:24,240 --> 00:17:28,359 Speaker 1: down earnings, and frankly, our numbers for next year is 334 00:17:28,400 --> 00:17:31,080 Speaker 1: predicting flat earnings once again in the streets at plus 335 00:17:31,119 --> 00:17:34,399 Speaker 1: ten percent. So we're that spread to normalize in the 336 00:17:34,440 --> 00:17:38,040 Speaker 1: street to come down ten percent. We think that provides 337 00:17:38,080 --> 00:17:41,040 Speaker 1: the genesis behind a potential ten percent correction. I want 338 00:17:41,040 --> 00:17:43,720 Speaker 1: to be perfectly clear though, because we think that's all 339 00:17:43,720 --> 00:17:45,520 Speaker 1: it is. We don't think it's more than that. We 340 00:17:45,600 --> 00:17:48,800 Speaker 1: think we're still amid a twenty year secular bowl market 341 00:17:49,119 --> 00:17:52,719 Speaker 1: that started in and we're just going through some volatility 342 00:17:52,720 --> 00:17:55,280 Speaker 1: and some potential hiccups. So if you see the potential 343 00:17:55,359 --> 00:17:58,400 Speaker 1: for perhaps a ten percent pull back in the equity markets, 344 00:17:58,680 --> 00:18:00,600 Speaker 1: what are you telling your clients to do today to 345 00:18:00,760 --> 00:18:04,600 Speaker 1: get some build some cash or just get defensive. Interestingly, 346 00:18:04,680 --> 00:18:08,960 Speaker 1: our clients are already fairly conservatively positioned already, so when 347 00:18:09,000 --> 00:18:11,919 Speaker 1: you look at our system, cash levels are above average 348 00:18:12,040 --> 00:18:14,640 Speaker 1: versus the last ten years, so we wouldn't be telling 349 00:18:14,680 --> 00:18:17,680 Speaker 1: folks to necessarily raise more cash. Here it goes back 350 00:18:17,720 --> 00:18:20,119 Speaker 1: to my earlier comment at the onset about where you 351 00:18:20,160 --> 00:18:23,040 Speaker 1: position within the equity market. We're saying avoid some of 352 00:18:23,080 --> 00:18:26,520 Speaker 1: the more crowded, expensive areas of the market, like technology 353 00:18:26,600 --> 00:18:28,880 Speaker 1: like growth that have really been on fire this year, 354 00:18:29,160 --> 00:18:31,960 Speaker 1: and being some of the more value oriented areas of 355 00:18:31,960 --> 00:18:35,480 Speaker 1: the market. If text not leading, what will I think 356 00:18:35,600 --> 00:18:38,160 Speaker 1: that's a it's a really great question because you need 357 00:18:38,240 --> 00:18:41,679 Speaker 1: something of size to lead mathematically. And so if I 358 00:18:41,720 --> 00:18:44,440 Speaker 1: look at what has size today, the money center, banks, 359 00:18:44,520 --> 00:18:46,960 Speaker 1: or really what could what could lead so that to us? 360 00:18:46,960 --> 00:18:49,480 Speaker 1: If the FED stays on pause and we have a 361 00:18:49,600 --> 00:18:52,159 Speaker 1: resurgence in the old curve like we've already seen the 362 00:18:52,240 --> 00:18:55,320 Speaker 1: last couple of months. Wait wait, I'm sorry, we need 363 00:18:55,359 --> 00:18:58,399 Speaker 1: to have a just data check because we are seeing 364 00:18:58,440 --> 00:19:01,120 Speaker 1: an eighth straight day of yield curve latining today, which 365 00:19:01,160 --> 00:19:03,399 Speaker 1: I believe is the longest streak in about two years. 366 00:19:03,440 --> 00:19:05,639 Speaker 1: So we're seeing a bit of a reversal already of 367 00:19:05,680 --> 00:19:08,199 Speaker 1: that trade. Yeah, and that's I think related to this 368 00:19:08,280 --> 00:19:12,080 Speaker 1: day to day headline back and forth around China and trade. Right, 369 00:19:12,080 --> 00:19:14,960 Speaker 1: But I think the greater point of the larger point 370 00:19:14,960 --> 00:19:17,000 Speaker 1: I'd like to make is that if the FED truly 371 00:19:17,080 --> 00:19:19,320 Speaker 1: is on hold next year, you could see it an 372 00:19:19,400 --> 00:19:22,000 Speaker 1: environment where the yeld curve does steep and eventually, and 373 00:19:22,040 --> 00:19:24,720 Speaker 1: given how cheap the banks are, and given how big 374 00:19:24,720 --> 00:19:27,040 Speaker 1: again their market caps are, that could be an area 375 00:19:27,040 --> 00:19:29,880 Speaker 1: of leadership. Once you're once you're selling out of large 376 00:19:29,880 --> 00:19:33,080 Speaker 1: cap technology, you need something else of size to buy into. 377 00:19:33,119 --> 00:19:35,920 Speaker 1: You're not just gonna go into microcap stocks or small 378 00:19:35,920 --> 00:19:38,520 Speaker 1: cap stocks, so that, in our opinion, is a logical 379 00:19:38,520 --> 00:19:41,280 Speaker 1: source of funds. Dan Skelly, thanks so much for joining us. 380 00:19:41,280 --> 00:19:44,760 Speaker 1: Really appreciate your smart thoughts there. Dan Skelly, head of 381 00:19:44,800 --> 00:19:48,280 Speaker 1: Equity Model Portfolios, a market strategy at Morgan Stanley Wealth Management, 382 00:19:48,359 --> 00:19:51,280 Speaker 1: joining us here in our Bloomberg Interactive Broker studio. Kind 383 00:19:51,280 --> 00:19:53,440 Speaker 1: of you know a little bit of caution there. Perhaps 384 00:19:53,480 --> 00:19:57,200 Speaker 1: you know the potential for a pullback into markets next year, 385 00:19:57,240 --> 00:20:00,960 Speaker 1: but uh, not interrupting the longer term bowl market. I 386 00:20:01,000 --> 00:20:03,679 Speaker 1: think it's interesting the idea of yield curve steepening. And 387 00:20:03,720 --> 00:20:06,439 Speaker 1: this goes to something that Priamsra was talking about of 388 00:20:06,440 --> 00:20:10,040 Speaker 1: TV securities earlier today, where she was saying she expects 389 00:20:10,040 --> 00:20:12,399 Speaker 1: the FED to cut rates actually at the beginning of 390 00:20:12,440 --> 00:20:15,159 Speaker 1: the year, and some people are expecting the consumer to 391 00:20:15,160 --> 00:20:17,639 Speaker 1: show a couple of signs of weakness heading into the 392 00:20:17,680 --> 00:20:20,840 Speaker 1: new year, as you see a stabilization in the manufacturing 393 00:20:20,840 --> 00:20:23,479 Speaker 1: sector and that that could push the FED over. And 394 00:20:23,520 --> 00:20:27,200 Speaker 1: that's sort of the base is increasingly becoming the base 395 00:20:27,280 --> 00:20:31,080 Speaker 1: case of a number of these reflationary trade bets, which 396 00:20:31,119 --> 00:20:34,160 Speaker 1: is interesting because the market is pricing in a September 397 00:20:34,960 --> 00:20:38,560 Speaker 1: eight cut, not in March. I just think it's an 398 00:20:38,640 --> 00:20:42,200 Speaker 1: interesting kind of dissonance there. Yeah, exactly, exactly. Just a 399 00:20:42,280 --> 00:20:44,439 Speaker 1: quick data check here, we do have the SMP just 400 00:20:44,520 --> 00:20:47,600 Speaker 1: again continues very flat today up only one percent and 401 00:20:47,680 --> 00:20:52,320 Speaker 1: now up so fifty seven points. So very quiet day 402 00:20:52,480 --> 00:21:08,320 Speaker 1: on the US equity market. I want to shift gears. 403 00:21:08,440 --> 00:21:10,240 Speaker 1: We've been talking about the auto sector and it was 404 00:21:10,280 --> 00:21:13,159 Speaker 1: interesting Ken Monahan was saying that he likes bonds of 405 00:21:13,200 --> 00:21:15,600 Speaker 1: automakers have gotten a little bit beaten up. A big 406 00:21:15,720 --> 00:21:18,760 Speaker 1: question in my mind is resell values of used cars. 407 00:21:18,760 --> 00:21:21,400 Speaker 1: And joining us now is Karl Brower. He's executive publisher 408 00:21:21,440 --> 00:21:24,119 Speaker 1: of the Telly Blue Book US as sort of the 409 00:21:24,160 --> 00:21:27,679 Speaker 1: bible when it comes to determining what the value of 410 00:21:27,720 --> 00:21:30,160 Speaker 1: your car is that you're trying to resell. Carl, I'd 411 00:21:30,200 --> 00:21:32,320 Speaker 1: love to get your sense of what we're seeing in 412 00:21:32,440 --> 00:21:35,320 Speaker 1: terms of trend lines, Uh, for car and truck values. 413 00:21:36,800 --> 00:21:39,200 Speaker 1: It's a great question. And uh, you know, for years, 414 00:21:39,240 --> 00:21:42,720 Speaker 1: the used car values have been very strong. Uh, and 415 00:21:42,760 --> 00:21:44,400 Speaker 1: we kept thinking they we're gonna drop with all these 416 00:21:44,400 --> 00:21:46,760 Speaker 1: cars coming off least so many, so many times in 417 00:21:46,800 --> 00:21:49,399 Speaker 1: the last three years, a lot of vehicles coming off least. 418 00:21:49,760 --> 00:21:53,119 Speaker 1: We are finally now starting to see a shift down 419 00:21:53,320 --> 00:21:56,720 Speaker 1: in used car values. Not a tanking, not a dramatic shift, 420 00:21:57,040 --> 00:21:59,440 Speaker 1: but a shift down, you know, to to a degree 421 00:21:59,480 --> 00:22:02,119 Speaker 1: we hadn't see in years. So it looks like the 422 00:22:02,160 --> 00:22:05,639 Speaker 1: new car pricing that's gotten, you know, high keeps going up. 423 00:22:05,640 --> 00:22:07,600 Speaker 1: It's up around thirty eight thousand dollars now for the 424 00:22:07,600 --> 00:22:10,520 Speaker 1: average new car. I think it's finally starting to drive 425 00:22:10,600 --> 00:22:13,600 Speaker 1: some new car buyers back into the used market. Um. 426 00:22:13,680 --> 00:22:16,240 Speaker 1: And I used car values are are are dropping a 427 00:22:16,240 --> 00:22:19,000 Speaker 1: little bit as well. So, Carl, I know you guys 428 00:22:19,119 --> 00:22:23,280 Speaker 1: just published your blue book best Buy Award winners. What 429 00:22:23,320 --> 00:22:27,320 Speaker 1: are some of the highlights. Well, you know, there's sixteen 430 00:22:27,320 --> 00:22:29,679 Speaker 1: categories and we've got a bunch of vehicles that we've 431 00:22:29,720 --> 00:22:33,520 Speaker 1: been testing for resale value and ownership costs, plus of 432 00:22:33,520 --> 00:22:36,760 Speaker 1: course things like fuel efficiency, safety and technology and how 433 00:22:36,800 --> 00:22:39,000 Speaker 1: well they drive. And I think the big winner this 434 00:22:39,080 --> 00:22:41,360 Speaker 1: year was the keya Telier Ride. First year, the Key 435 00:22:41,359 --> 00:22:44,159 Speaker 1: has made a three row suv and a one not 436 00:22:44,280 --> 00:22:46,680 Speaker 1: just the three row suv category, but also our best 437 00:22:46,960 --> 00:22:48,840 Speaker 1: New Vehicle category, which is kind of like just the 438 00:22:48,920 --> 00:22:52,080 Speaker 1: overall car we're most impressed with for the year. So 439 00:22:52,200 --> 00:22:54,480 Speaker 1: really a lot of value packed in that car starting 440 00:22:54,480 --> 00:22:57,840 Speaker 1: around thirty dollars, and a loaded one for low forties 441 00:22:57,880 --> 00:23:00,560 Speaker 1: that has he didn't cool seats and all sorts of features. 442 00:23:01,240 --> 00:23:03,720 Speaker 1: All right, Carl, I'm sorry we can't have you on 443 00:23:03,840 --> 00:23:06,200 Speaker 1: and not ask you about the cyber truck. I mean, 444 00:23:06,359 --> 00:23:08,320 Speaker 1: you must have known that it was going to be coming, 445 00:23:08,359 --> 00:23:12,119 Speaker 1: the Elon Musk cyber truck that was tested on stage 446 00:23:12,160 --> 00:23:15,240 Speaker 1: and failed the shadow proof window test. What do you 447 00:23:15,240 --> 00:23:19,439 Speaker 1: think of it? Did you like it? You know, he 448 00:23:19,560 --> 00:23:21,679 Speaker 1: threatened to have some kind of a sci fi you know, 449 00:23:21,920 --> 00:23:24,560 Speaker 1: a blade runner truck, and he didn't. He didn't disappoint 450 00:23:24,680 --> 00:23:27,680 Speaker 1: He had a truck that nobody I think thought was real, 451 00:23:27,800 --> 00:23:30,480 Speaker 1: myself included. I kept waiting seriously, for him to say, 452 00:23:30,520 --> 00:23:32,160 Speaker 1: all right, right, this is kind of an early sketch, 453 00:23:32,200 --> 00:23:34,560 Speaker 1: here's the real truck. No, it was it was that 454 00:23:34,680 --> 00:23:38,240 Speaker 1: was the truck. Uh. And I'm gonna be interesting to 455 00:23:38,240 --> 00:23:40,159 Speaker 1: see if the final production version looks like that. But 456 00:23:40,200 --> 00:23:42,600 Speaker 1: I really think that it's good. There's this kind of 457 00:23:42,600 --> 00:23:46,280 Speaker 1: built up fan club for Tesla models because there'll be 458 00:23:46,280 --> 00:23:48,080 Speaker 1: plenty people who will want that truck. And you're not 459 00:23:48,080 --> 00:23:49,840 Speaker 1: going to answer what you really think of this truck, 460 00:23:49,840 --> 00:23:53,080 Speaker 1: are you? That's quite clear what I'm saying. I think 461 00:23:53,119 --> 00:23:55,240 Speaker 1: it's just gonna be hard for traditional truck buyers to 462 00:23:55,359 --> 00:23:56,760 Speaker 1: buy into it. I think that it's just been a 463 00:23:56,800 --> 00:23:59,159 Speaker 1: pure electric truck with traditional styling that would have been 464 00:23:59,200 --> 00:24:01,520 Speaker 1: somewhat of a leaf traditional truck fires, but you add 465 00:24:01,560 --> 00:24:03,760 Speaker 1: in the styling. I just don't think he's going to 466 00:24:03,840 --> 00:24:05,320 Speaker 1: get much of that. You know, one and a half 467 00:24:05,320 --> 00:24:08,800 Speaker 1: million volume full size truck market, which is a great 468 00:24:08,840 --> 00:24:11,280 Speaker 1: market that tapped into now a couple of years go by. 469 00:24:11,440 --> 00:24:14,560 Speaker 1: It's dependable, it doesn't have any issues. Maybe you'll start 470 00:24:14,600 --> 00:24:17,080 Speaker 1: to pull, you know, stifon off some of that huge segment, 471 00:24:17,160 --> 00:24:19,480 Speaker 1: but for the near term, you're going to mostly get 472 00:24:19,520 --> 00:24:22,879 Speaker 1: Tesla or tech oriented fans, not really truck fans on 473 00:24:22,960 --> 00:24:25,800 Speaker 1: that truck. So Carl looking again at your best Buy 474 00:24:25,840 --> 00:24:29,080 Speaker 1: award winners, you know, outside of the pickup trucks, and 475 00:24:29,160 --> 00:24:32,720 Speaker 1: again the cybertruck is Leasa's favorite. I think now you're 476 00:24:32,720 --> 00:24:34,520 Speaker 1: trying to get back to real stuff high I think, 477 00:24:34,680 --> 00:24:37,240 Speaker 1: I mean, I don't see. It's pretty much all uh 478 00:24:37,320 --> 00:24:41,439 Speaker 1: international nameplates. Where are the US carmakers in terms of 479 00:24:41,520 --> 00:24:45,320 Speaker 1: quality right now? They've come a long way and there 480 00:24:45,320 --> 00:24:47,639 Speaker 1: the truth is, the markets more competitive than it's been 481 00:24:47,680 --> 00:24:51,240 Speaker 1: in a long time. Every you know, continent is contributing 482 00:24:51,320 --> 00:24:55,440 Speaker 1: great cars, whether it's Asia or Europe or the US. UM. 483 00:24:55,520 --> 00:24:57,440 Speaker 1: But you're right, that's set, you know, when it comes 484 00:24:57,480 --> 00:24:59,920 Speaker 1: to resell value, which is a key part of Kelly 485 00:25:00,080 --> 00:25:02,639 Speaker 1: u book, you know, and how we value vehicles and 486 00:25:02,680 --> 00:25:04,240 Speaker 1: we want people to buy a car and had to 487 00:25:04,359 --> 00:25:07,000 Speaker 1: suffer the least drop in value over time. That's one 488 00:25:07,000 --> 00:25:09,120 Speaker 1: of the biggest most expensive things. People don't think about. 489 00:25:09,160 --> 00:25:10,840 Speaker 1: They buy the car, and they don't often think about 490 00:25:10,840 --> 00:25:13,159 Speaker 1: the drop in value and the and a lot of 491 00:25:13,160 --> 00:25:16,199 Speaker 1: the you know, Japanese cars and uh, some of the 492 00:25:16,200 --> 00:25:18,560 Speaker 1: European cars they do better in those areas than a 493 00:25:18,600 --> 00:25:21,040 Speaker 1: lot of the US cars. Still it's a much tighter race. 494 00:25:21,240 --> 00:25:24,680 Speaker 1: US cars keep getting better and they're closer, but Honda's, 495 00:25:25,359 --> 00:25:28,760 Speaker 1: Hyundai's auties, they still have a lot of the advantage 496 00:25:28,800 --> 00:25:31,040 Speaker 1: in that area. Carl, just real quick here thirty seconds. 497 00:25:31,040 --> 00:25:34,560 Speaker 1: I'm wondering which kind of vehicle is seeing the biggest 498 00:25:34,600 --> 00:25:40,879 Speaker 1: price drop in resale values? Uh? You know, uh sedans. 499 00:25:40,920 --> 00:25:43,960 Speaker 1: As you know, the market has just kind of abandoned them. 500 00:25:44,119 --> 00:25:47,440 Speaker 1: So I think when you've got uh Sadan's, especially non 501 00:25:47,480 --> 00:25:50,080 Speaker 1: popular sedans, you still have strength in like the Honda 502 00:25:50,119 --> 00:25:53,639 Speaker 1: Accord or a Toad to camera. But I think the 503 00:25:53,680 --> 00:25:55,560 Speaker 1: reason that all the domestics bailed out of this of 504 00:25:55,640 --> 00:25:58,720 Speaker 1: the sedan market is, among other things beyond not selling 505 00:25:58,760 --> 00:26:00,639 Speaker 1: them when they're new, is they don't hold their value 506 00:26:00,720 --> 00:26:03,240 Speaker 1: when they're used. They're just not just not popular cars 507 00:26:03,280 --> 00:26:05,680 Speaker 1: with consumers today. Carl Brower, thank you so much for 508 00:26:05,800 --> 00:26:08,720 Speaker 1: joining us. Carl is the executive publisher of Kelly Blue 509 00:26:08,720 --> 00:26:12,840 Speaker 1: Book the Phone. They're based in Irvine, California. Giving us 510 00:26:12,840 --> 00:26:15,480 Speaker 1: some thoughts about the some of the hot and maybe 511 00:26:15,480 --> 00:26:19,480 Speaker 1: not so hot cars coming for of course, I guess 512 00:26:19,480 --> 00:26:21,720 Speaker 1: we now when we think about one, we can think 513 00:26:21,720 --> 00:26:24,800 Speaker 1: about this cybertruck I thought what he said was actually 514 00:26:24,840 --> 00:26:28,040 Speaker 1: a really important point, which is, it's one thing if 515 00:26:28,080 --> 00:26:32,800 Speaker 1: they had a truck that just was the Incorporated Electric Technologies. 516 00:26:32,840 --> 00:26:35,040 Speaker 1: It's another if it looks like it's yes, I'm going 517 00:26:35,080 --> 00:26:37,439 Speaker 1: to repeat this Doctor Who all over again. If you 518 00:26:37,440 --> 00:26:39,960 Speaker 1: start to, you know, have this sort of sci fi aspect, 519 00:26:40,080 --> 00:26:43,240 Speaker 1: you're not going to get the rank and file truck 520 00:26:43,280 --> 00:26:46,399 Speaker 1: buyer exactly, which is an interesting point, but that probably 521 00:26:46,440 --> 00:26:50,199 Speaker 1: wouldn't have been in keeping with who Elon Musk is. Anyway, 522 00:26:50,240 --> 00:26:52,480 Speaker 1: Thanks for listening to the Bloomberg P and L podcast. 523 00:26:52,640 --> 00:26:55,240 Speaker 1: You can subscribe and listen to interviews at Apple Podcasts 524 00:26:55,320 --> 00:26:58,399 Speaker 1: or whatever podcast platform you prefer. Paul Sweeney, I'm on 525 00:26:58,440 --> 00:27:01,119 Speaker 1: Twitter at pt Sweeney. I'm Lisa Abramo Woods. I'm on 526 00:27:01,119 --> 00:27:04,000 Speaker 1: Twitter at Lisa abramow Woods. One before the podcast, you 527 00:27:04,000 --> 00:27:06,560 Speaker 1: can always catch us worldwide on Bloomberg Radio