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Speaker 1: Bloomberg Audio Studios, Podcasts, radio News. This is Bloomberg day

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Speaker 1: Break Weekend, our global look at the top stories in

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Speaker 1: the coming week from our day Break anchors all around

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Speaker 1: the world. Straight ahead on the program, and look ahead

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Speaker 1: to some fresh new home sales data and what the

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Speaker 1: US housing sector has insored with twenty twenty five. Also

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Speaker 1: what to expect next year in the US retail market.

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Speaker 1: I'm Tom Busby in New York.

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Speaker 2: I'm Stephen Carolyn London. We're asking what's on the horizon

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Speaker 2: for Europe's stock markets in twenty twenty five.

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Speaker 3: I'm Derek Prisoner, looking at SoftBank's announcement of a major

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Speaker 3: investment in the US, as well as a potential merger

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Speaker 3: of Honda and Nissan.

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Speaker 4: That's all straight ahead on Bloomberg Daybreak Weekend on Bloomberg

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Speaker 4: eleven three on New York, bloombergon ninety nine to one, Washington, DC,

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Speaker 4: Bloomberg ninety two nine Boston, DAB, Digital Radio, London one,

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Speaker 4: and around the world on Bloomberg Radio, dot Com and

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Speaker 4: the Bloomberg Business App.

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Speaker 1: Good day to you. I'm Tom Busby, and we begin

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Speaker 1: today's program with a fifty trillion dollar US housing sector

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Speaker 1: twenty twenty four a dismal year for housing because of

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Speaker 1: sky high home prices, stubbornly high lending rates, and so

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Speaker 1: few homes on the market. This year on track to

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Speaker 1: be one of the slowest in decades for home sales,

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Speaker 1: but there have been some bright spots. We could see

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Speaker 1: another on Tuesday with November new home sales data, and

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Speaker 1: there's hope for the year ahead. For more on what

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Speaker 1: to expect along with his outlook for home building and

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Speaker 1: sales in twenty twenty five, we're joined by Drew Redding,

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Speaker 1: Bloomberg Intelligence, US home building analyst. Drew, thank you so

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Speaker 1: much for being here.

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Speaker 5: Thanks for having me well.

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Speaker 1: After we saw last week existing home sales for November

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Speaker 1: rose nearly five percent, what do you expect to see

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Speaker 1: this Tuesday in that November new home sales report?

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Speaker 5: So for the new home market, we do expect to

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Speaker 5: see a pretty ch sequential bump, just like we saw

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Speaker 5: with housing starts. You're probably going to see a snapback

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Speaker 5: in the South, which was down in with thirty percent

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Speaker 5: sequentially last month due to the disruption from the hurricanes.

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Speaker 5: So we should see a nice pickup with that being said, though,

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Speaker 5: you know, while the new home market has outperformed. The

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Speaker 5: recent rise in rates to more than seven percent has

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Speaker 5: definitely slowed activity in the market. We recently heard results

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Speaker 5: from Lenar, who's the second largest builder in the country

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Speaker 5: and one who's focused on driving higher volumes, and basically

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Speaker 5: their orders were more than ten percent below the low

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Speaker 5: end of their guidance. So, you know, while the new

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Speaker 5: home market has outperformed with affordability as bad as it

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Speaker 5: is in rates actually creeping up, we are seeing a

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Speaker 5: slow down there as well.

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Speaker 1: Now are you seeing that slow down nationwide or is

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Speaker 1: it in the south where you know where Lenaar is

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Speaker 1: or you also heard from Toll Brothers recently too, saying

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Speaker 1: they see a bit of a slow down, right that's

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Speaker 1: a East Coast high end builder.

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Speaker 5: Yeah, that's a good question because when we look into

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Speaker 5: twenty twenty five, we see regional dynamics taking more of

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Speaker 5: a front seat to how the builders actually perform. Now,

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Speaker 5: the challenges we're seeing on the affordability side, and you

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Speaker 5: know with higher rates and how that's compacting demand that's

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Speaker 5: across the nation. Everybody's experiencing that. But when you look

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Speaker 5: at local markets, are some issues that you have with

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Speaker 5: supply and a lot of that is in the South.

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Speaker 5: So inventory levels have been a big part of the discussion.

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Speaker 5: You know, over the last couple of years, not a

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Speaker 5: lot of resale supply, so builders have benefited. But now

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Speaker 5: we're starting to see existing home supply meet or even

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Speaker 5: exceed twenty nineteen levels. And where we're seeing that the

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Speaker 5: most is in markets in Florida and Texas, which are

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Speaker 5: among the most important markets for the builders. So that's

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Speaker 5: something that we have to keep our eye on as

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Speaker 5: we look out the next year.

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Speaker 1: So inventory is going up in the hottest housing market

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Speaker 1: since the COVID nineteen hit, is that mean they've matured

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Speaker 1: or saturated the market?

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Speaker 5: So there's been a lot of construction there. You know,

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Speaker 5: in Florida, one of the problems you have is with

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Speaker 5: all the storm related activity, you have more homes coming

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Speaker 5: on the market. The condom market has really slowed down.

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Speaker 5: I think you probably have some people who invest it

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Speaker 5: in rental properties perhaps putting their homes back on the market. So,

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Speaker 5: you know, those were two of the strongest markets certainly

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Speaker 5: since COVID, we saw a lot of migration into Florida

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Speaker 5: and Texas, which is starting to slow down as well.

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Speaker 5: So I think part of it is, you know, market saturation,

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Speaker 5: which is leading to those higher mentories, and what we

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Speaker 5: think you could see is a shift in the competitive dynamic.

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Speaker 5: So as I mentioned, builders have benefited from a lack

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Speaker 5: of resale supply, so as more of that comes on,

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Speaker 5: we think they're going to have to continue to get

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Speaker 5: more aggressive, aggressive on pricing and incentives which could put

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Speaker 5: pressure on prices in those local markets.

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Speaker 1: And some of those incentives not just financing, but also

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Speaker 1: upgrades on appliances, courts, cabinets, you know that type of thing.

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Speaker 1: Is that what you mean?

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Speaker 5: Yeah, that's right. I think you know, for the most part,

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Speaker 5: you'll see the financing incentives used by the lower end

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Speaker 5: of the market, so entry level buyers and maybe the

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Speaker 5: first time move a buyer. But when you start to

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Speaker 5: kind of get up the income spectrum, think of a

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Speaker 5: Toll Brothers home buyer, typically you're seeing them use any

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Speaker 5: incentive dollars to make upgrades to the house. So it's

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Speaker 5: a little different depending on what part of the market

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Speaker 5: you're talking about.

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Speaker 1: You would think with the Federal Reserve lowering rates for

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Speaker 1: a third time to end this year, that you know,

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Speaker 1: happy days are here. We're going to see lower rates,

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Speaker 1: but there's no indication of that in the mortgage lending market,

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Speaker 1: is there not yet?

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Speaker 5: No, there's not. And you know, as I mentioned earlier,

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Speaker 5: we're actually above seven percent now. I think last time

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Speaker 5: I checked her about seven on the thirty year, So

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Speaker 5: we're up about one hundred basis points since the Fed

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Speaker 5: started cutting rates, which isn't what a lot of people

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Speaker 5: were expecting. You know, A lot of that has to

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Speaker 5: do with the fact that you still got a solid economy,

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Speaker 5: and I think some of the policies put forth by

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Speaker 5: the new administration are expected to perhaps be inflationary, which

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Speaker 5: is why the market is reacting the way it has.

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Speaker 1: Wow, a lot of challenges in twenty twenty four looks

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Speaker 1: like a lot ahead well our thanks to Drew Redding,

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Speaker 1: Bloomberg Intelligence US home Building Analyst. We move now to

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Speaker 1: the US retail sector, how it's faring during this make

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Speaker 1: or break Christmas holiday season, and what to look for

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Speaker 1: in twenty twenty five and for more. We're joined by

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Speaker 1: Mary Ross Gilbert Bloomberg Intelligence, senior equity analyst covering retail Well,

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Speaker 1: no doubt, Mary, Americans continued to spend a ton of

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Speaker 1: money at stores restaurants, auto dealerships, travel and more, despite

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Speaker 1: stubbornly high inflation affecting them along with a lot of

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Speaker 1: economic uncertainty. How has the retail sector fared this year,

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Speaker 1: especially the last few weeks leading up to Christmas.

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Speaker 6: Yeah, so the retail sector has actually been doing quite well,

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Speaker 6: and we got that with data that came out this

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Speaker 6: past week with GDP coming in at three point two percent,

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Speaker 6: ahead of estimates of two point eight and that's really

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Speaker 6: driven by consumer spending. So when you look at the

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Speaker 6: retail sector, we think that some of the retailers that

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Speaker 6: could outperform. Two that really come to mind on the

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Speaker 6: specialty apparel side would be Aritzia, an Abercrombie and Fitch,

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Speaker 6: and we were looking at consumer transaction data during this

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Speaker 6: holiday season and they're tracking well ahead of estimates right now.

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Speaker 6: In the department store space, if you look at the

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Speaker 6: players there, you've got Nordstrom, and Nordstrom also has an

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Speaker 6: off price concept which also caters to consumers looking for values.

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Speaker 6: Speaking to high inflation that we're experiencing right now, we

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Speaker 6: think Nordstrom could be a leader in terms of outperforming

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Speaker 6: estimates out there. And then it looks like Macy's is

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Speaker 6: tracking a little bit ahead. Cole's is kind of close,

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Speaker 6: but they could be at a greater risk of missing

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Speaker 6: and that's mainly due to merchandise issues that they've had.

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Speaker 6: So the estimates for them is for comp sales to

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Speaker 6: decline seven percent in the quarter. In the off price sector,

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Speaker 6: we think they're going to benefit from strong sales during

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Speaker 6: the holiday season. They tend to be a big draw,

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Speaker 6: especially as we get closer to Christmas. Right now, according

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Speaker 6: to consumer Transaction data, their sales are tracking in line

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Speaker 6: with estimates, so we think they could be an outperformer

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Speaker 6: as well in the space.

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Speaker 4: Now.

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Speaker 1: The off price center is obviously attracting a lot of

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Speaker 1: lower wage earners other consumers, but some consumers have changed

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Speaker 1: their shopping routines because of high inflation, higher wage earners

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Speaker 1: shopping where they've never shopped before. Is that right, That's

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Speaker 1: absolutely right.

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Speaker 6: It's happening at off Price, and it's also happening at Walmart,

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Speaker 6: and so Walmart is able to capture additional share in

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Speaker 6: other categories such as apparel in general merchandise when they

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Speaker 6: have those higher end consumers in their shopping groceries for

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Speaker 6: the lower prices an off price. They're also these higher

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Speaker 6: end consumers are able to get even the designer brands.

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Speaker 6: They're able to get Gucci Praduct.

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Speaker 7: You know, all of.

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Speaker 6: These brands will also have some of their products in

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Speaker 6: the stores. So it does have the higher end, it

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Speaker 6: also has the middle end and the low end in

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Speaker 6: terms of brand breadth across off price, and so that's

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Speaker 6: been a big draw.

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Speaker 1: Now Walmart, what have they done right? Walmart stock is

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Speaker 1: of eighty percent this year. They have hit it out

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Speaker 1: of the park. What is it that they've really latched

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Speaker 1: onto here?

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Speaker 6: Walmart has really done a good job in a number

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Speaker 6: of ways. One is with their delivery, and they have

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Speaker 6: this Walmart Plus program where you get free delivery usually

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Speaker 6: same day. Frankly, even without using that you can get delivery,

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Speaker 6: so you can buy all your household goods that way.

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Speaker 6: But most consumers really like to shop up weekly in store,

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Speaker 6: and so while they're there, they're able to capture other merchandise.

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Speaker 6: So they're just doing a really good job executing and

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Speaker 6: really delivering what the consumer wants.

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Speaker 1: So groceries, necessities and everything else as well.

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Speaker 6: Huh exactly.

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Speaker 4: Wow.

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Speaker 1: Now, we have seen though a lot of store closures

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Speaker 1: over the past year, Family Dollar, CVS, Macy's also dozens

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Speaker 1: of bankruptcy filings, big lots Rout, twenty one, Express, the

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Speaker 1: Body Shop. Do you expect to see even more? I mean,

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Speaker 1: is the retail environment that cutthroat that tough and with

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Speaker 1: the e commerce you know that factored in? Is it

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Speaker 1: getting tougher for smaller retailers if you're not Walmart, Target,

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Speaker 1: Coals or some of the others.

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Speaker 6: It really comes down to a retailer by retailer basis,

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Speaker 6: and it also depends on how levered they are. So

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Speaker 6: usually it's the ones that have a lot of debt

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Speaker 6: and where they're mis executing.

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Speaker 8: So for example, if you.

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Speaker 6: Look at Cole's, holes piled on extra debt when they

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Speaker 6: ended up doing a stock repurchase a few years ago,

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Speaker 6: it was about a seven hundred million cash that they

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Speaker 6: spent on repurchasing their The business is underperformed, and even

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Speaker 6: this year when they were supposed to be showing traction

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Speaker 6: with a turnaround, and they have so fora so they

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Speaker 6: are getting consumers in and the sofora business is up

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Speaker 6: nine percent on a comp basis, but the overall comp

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Speaker 6: sales are down six to eight percent. In the latest quarter,

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Speaker 6: and part of it was just mis executing. They took

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Speaker 6: some of their private brands and shrunk it in the store,

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Speaker 6: and that those private brands were a great draw to

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Speaker 6: the lower end consumer and that's where they got hurt.

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Speaker 6: So now they're having to backtrack and bring back in

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Speaker 6: those brands. They also took out jewelry when they brought

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Speaker 6: in sofa and jewelry was really important, especially when you

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Speaker 6: think about the holidays. So it's going to take some

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Speaker 6: time for them to turn around. So they're struggling right now.

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Speaker 6: But some of the other companies Nordstrom. Nordstrom is really

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Speaker 6: up their game with their full line business and that's

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Speaker 6: now comping positive. And then of course they also benefit

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Speaker 6: from having the off price it's a fast growing off

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Speaker 6: price business, so that's helping Nordstrom sort of lead I

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Speaker 6: think in the department store space. And you spoke about

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Speaker 6: Macy's closing stores. Yes, they will be closing about one

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Speaker 6: hundred and fifty stores. They haven't happened yet. They always

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Speaker 6: wait until after the holiday. Solvill is shutting sixty five

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Speaker 6: stores when their quarter ends at the end of January,

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Speaker 6: and then of course they'll close the other eighty five

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Speaker 6: over the next two years, and maybe they'll be able

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Speaker 6: to accelerate it and get it done next year.

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Speaker 1: Loom Boy, Well, a lot to look forward to. Our

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Speaker 1: thanks to Mary Ross, Gilbert Bloomberg Intelligence senior equity analysts

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Speaker 1: covering retail and coming up on Bloomberg day Break weekend,

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Speaker 1: we'll look at what's on the horizon for Europe's stock markets.

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Speaker 1: Tom Busby and this is Bloomberg. This is Bloomberg day

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Speaker 1: Break weekend, our global look ahead at the top stories

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Speaker 1: for investors in the coming week. I'm Tom Busby in

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Speaker 1: New York. Up later in our program, we'll discuss soft

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Speaker 1: Bank announcing a major investment in the US, as well

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Speaker 1: as a potential merger of Honda and Nissan. But first,

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Speaker 1: in twenty twenty four, Europe's political situation has been decidedly rocky.

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Speaker 1: The Block's two largest economies, France and Germany, both facing

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Speaker 1: tumultuous governmental shifts, sending shockwaves reverberating around the continent and

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Speaker 1: in its economies. Will twenty twenty five bring better fortunes

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Speaker 1: for European investors? For more, let's go to London and

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Speaker 1: bring in Bloomberg Daybreak Europe banker Stephen Carroll.

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Speaker 2: Tom European equities this year have underperformed their American peers,

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Speaker 2: which have benefited from a high concentration of technology stocks.

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Speaker 2: According to Bloomberg Sarah of twenty strategists, the stock six

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Speaker 2: hundred index will end twenty twenty five at five hundred

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Speaker 2: and thirty five points, indicating gains of less than three percent.

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Speaker 2: Compare that with the forecast for the S and P

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Speaker 2: five hundred to rise seven and a half percent on average,

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Speaker 2: and as much as seventeen percent under the most bullish outlook.

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Speaker 2: This year, the European Index is heading for one of

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Speaker 2: its worst annual performances against the SMP on record. Despite

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Speaker 2: the gap, the index has managed to rally towards the

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Speaker 2: year end. The benchmarks up almost one percent in December

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Speaker 2: as optimism over potential Chinese stimulus measures boosted sectors most

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Speaker 2: exposed to the Eightian nation's economy, such as makers of

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Speaker 2: luxury goods and autos. But could there be more trouble

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Speaker 2: on the horizon. Twenty twenty five will bring elections in

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Speaker 2: Germany also looming. President elect Donald Trump's touted trade tariffs.

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Speaker 2: Uncertainty looks to be on the cards during the coming year.

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Speaker 2: But some investors are still optimistic. Lucy Baldwin, global head

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Speaker 2: of research at City Group Global Markets, says European equities

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Speaker 2: will still serve a purpose in her portfolio.

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Speaker 8: Clearly, the consensus out there is that you've got a

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Speaker 8: set of policies coming through across trade, across fiscal, across immigration,

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Speaker 8: and obviously across the regulatory reset that net netter probably

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Speaker 8: going to boost US growth, maybe a little bit inflationary.

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Speaker 8: Hence this view that you're going to see now less

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Speaker 8: rate cuts. You've seen obviously the back ends deepening as

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Speaker 8: people are a bit nervous about the fiscal impact on

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Speaker 8: of course the overall debt burn that the US is carrying.

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Speaker 8: All of those things together I think have obviously given

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Speaker 8: rise to this view of US exceptionalism as a trade continuing.

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Speaker 8: I think, to be honest, it's really hard to bet

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Speaker 8: against it. We'd still be overweight US equities. We're still

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Speaker 8: expecting double digit returns just about next year. But what

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Speaker 8: we are saying is to barbell it with some other

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Speaker 8: exposure around the world. Don't have all of your eggs

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Speaker 8: in one basket, so we would barbel it with actually

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Speaker 8: some European exposure.

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Speaker 7: What is in the US part of that barbell on

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Speaker 7: that end. And secondly, what is giving you conviction? Is

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Speaker 7: it a valuation story in Europe now or is it

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Speaker 7: the ECB is essentially going to be the backstop for

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Speaker 7: your Yeah.

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Speaker 8: I think you're right. I think there's a range of

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Speaker 8: factors for Europe that are potential catalysts. I definitely think

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Speaker 8: the path of the ECB to cut is a more

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Speaker 8: clear cut one than the US debate.

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Speaker 5: Right.

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Speaker 8: I think we can see a scenario where you get

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Speaker 8: really substantial cutting from the ECB all the way through

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Speaker 8: next year, a little bit like the Bank of England story.

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Speaker 8: So that's definitely one support slash catalyst. I think another

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Speaker 8: could be potential ceasefires resolutions of various conflicts around the globe.

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Speaker 8: I think another could clearly be China. So although I

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Speaker 8: think the caution on China is that it may well

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Speaker 8: be a sort of shorter term fix, we would expect

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Speaker 8: to see some fairly substantial fiscal coming through. I think

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Speaker 8: that's increasingly becoming the consensus that you're going to see

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Speaker 8: that as we go into next year, that China will

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Speaker 8: do what is required there to support that market, and

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Speaker 8: obviously to try and get the households out there, the

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Speaker 8: consumers out there spending, feeling confident. But obviously they've got

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Speaker 8: to do that without further jeopardizing the housing market.

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Speaker 7: A big bazooka call from China. Is it more marginal

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Speaker 7: and incremental?

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Speaker 8: I think it could well turn into more of a

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Speaker 8: big bazooka call depending on where things go. It's a

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Speaker 8: really delicate balance for them, I think, because you've got

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Speaker 8: to let that housing market clear somehow. You know, at

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Speaker 8: the end of the day, you've got too many properties

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Speaker 8: relative to the declining population in big chunks of the country.

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Speaker 8: So it's a very difficult thing for them to manage

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Speaker 8: that transition away from a very property investment led economy

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Speaker 8: into one that is hopefully going to be increasingly about

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Speaker 8: GDP being consumption driven. But to make that happen, you've

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Speaker 8: got to do it very carefully and thoughtfully. It's going

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Speaker 8: to take some time, but we would be surprised if

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Speaker 8: you don't see some fairly concerted focus on the fiscal

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Speaker 8: side in China as we go into next year, which

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Speaker 8: should help Europe and certainly a lot of sectors. Hence,

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Speaker 8: for example, our recent upgrade in.

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Speaker 2: Luxury talk to US about where else. You're seeing strength

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Speaker 2: in European equities as well. So it looks read into

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Speaker 2: the Chinese picture too. But is there anything that's a

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Speaker 2: bit more domestically focused that actually might look better next year.

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Speaker 9: Yeah.

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Speaker 8: I think there's going to be some interesting areas where,

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Speaker 8: for example, we've had interest and demand from clients to

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Speaker 8: look at you names that are exposed to potentially you know,

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Speaker 8: a Ukraine rebuild, areas that are exposed to the US story. Right,

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Speaker 8: maybe more positively, there's a view, I think forming that

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Speaker 8: the tariff trade war risk increasingly morphs into more of

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Speaker 8: a negotiating set of tactics, and maybe therefore Europe can

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Speaker 8: play some of that to its advantage next year. I

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Speaker 8: mean we saw in Trump one point, Oh, the reality

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Speaker 8: was that the carmakers, if you want to get access

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Speaker 8: European carmakers to the US consumer, you've got to go build,

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Speaker 8: invest put your factories up in the United States, employ

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Speaker 8: some American workers, and that's how you get your access

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Speaker 8: to that market. I think that's likely to be part

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Speaker 8: of what we see again this time. So I think

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Speaker 8: there's going to be stocks in Europe they're going to

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Speaker 8: be positively exposed to a fairly constructive domestic backdrop in

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Speaker 8: the US if that is to continue. Clearly that is

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Speaker 8: a big, big if, and there are some risks around that,

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Speaker 8: but that would be how we think about it.

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Speaker 10: Actually.

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Speaker 8: Weirdly, in many ways, we think that the biggest wildcard

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Speaker 8: next year is actually the US economy.

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Speaker 2: Baldwin from City Group there speaking to me on Bloomberg Radio.

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Speaker 1: Now.

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Speaker 2: Bloomberg's research also offers comfort for investors in that relatively

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Speaker 2: few strategists predict major declines for the stocks six hundred

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Speaker 2: eighty five percent of them actually see the index closing

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Speaker 2: out next year at above five hundred and thirty points.

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Speaker 2: In fact, earnings growth expectations for next year spooking some

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Speaker 2: market participants. So called bottom up estimates for twenty twenty

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Speaker 2: five from analysts studying individual companies see earnings per share

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Speaker 2: growth of eight percent for Europe. That's only slightly shy

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Speaker 2: of the projections for the US. So guaranteed instability and

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Speaker 2: potential profits. What else is in store for Europe's equity

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Speaker 2: markets in twenty twenty five. I've been discussing this with

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Speaker 2: our senior equities reporter, Michael Masika.

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Speaker 10: Let's say nothing went really wrong, but I guess it

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Speaker 10: didn't go as right as for the US. Europe is

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Speaker 10: you know, kind of have problems with the politics, and

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Speaker 10: that has had a big impact on market this year.

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Speaker 10: Since the European elections, the stock six hundred has done

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Speaker 10: pretty much nothing. And the following French election, the political

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Speaker 10: instability that we're seeing in the core European markets now

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Speaker 10: we have election in Germany as well coming in next February,

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Speaker 10: have been you know, kind of deterring investors from being

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Speaker 10: in the European equity market.

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Speaker 2: Is that continuing into twenty twenty five, then it will

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Speaker 2: political turmoil be the dominant theme of the coming months

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Speaker 2: as well.

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Speaker 9: Well.

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Speaker 10: What's funny this year is normally political instability is kind

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Speaker 10: of a temporary thing, and you have a market reacting

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Speaker 10: quite strongly at first and then things quite down. And

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Speaker 10: you can see that on the bond market, things tend

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Speaker 10: to quiet down. But at the same time Europe has

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Speaker 10: like a habit of messing things up like that, and

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Speaker 10: so yes, I think we can have an overhang that's

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Speaker 10: going to remain, especially in France and in Germany, because

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Speaker 10: people want to know, investors want to know where things

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Speaker 10: are going, how money is going to be spent. Is

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Speaker 10: there going to be stimulus in Europe? Those are the

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Speaker 10: big questions. It's a sluggish there's a sluggish growth economic

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Speaker 10: growth on the continent, and that needs to be addressed.

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Speaker 10: And it can't be solely addressed by the ECV, which

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Speaker 10: is expected to catch rates quite a few times next year.

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Speaker 10: I mean at least four times by the summer, I guess,

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Speaker 10: and you know, there's more needed to spur that economic growth.

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Speaker 10: And that's the only way that you will have an

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Speaker 10: equity market performing strongly, and especially compared to the US.

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Speaker 2: What is the comparison. The key issue here is that

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Speaker 2: essentially the performance of stocks in the US, and particularly

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Speaker 2: some of those AI length stocks, have been so spectacular

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Speaker 2: that it's just drawing investor interest, and Europe looks relatively unshre,

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Speaker 2: shiny and a bit dull by comparison.

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Speaker 10: Yes, exactly. And you have also the impact from passive flows.

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Speaker 10: I mean, you got to realize that today seventy five

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Speaker 10: percent of the MSCI world is US equities. So when

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Speaker 10: you put money into a global fund, it's going to

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Speaker 10: be like driven to to the to the US. A

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Speaker 10: lot of it is going to be driven to the

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Speaker 10: US and so that's that's a that's a problem for Europe.

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Speaker 10: So on that side, it makes things much more complicated.

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Speaker 10: Having said that, you have a region, which is the US,

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Speaker 10: which is price for perfection, I mean, super high earning growth,

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Speaker 10: good economic growth, very very high valuations. And on the

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Speaker 10: other hand, you have another region which has great companies

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Speaker 10: that are heavily discounted to their US peers, that are

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Speaker 10: priced to fail. And you know, the symmetrial return is

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Speaker 10: a kind of a positive for the for the for

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Speaker 10: the continentity should look at that on a relative basis.

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Speaker 10: So uh, you know, investors have to be diversified.

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Speaker 2: I mean, is that is that the Polish case for

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Speaker 2: European equities.

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Speaker 10: They're cheap now, well they've been cheap for a while,

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Speaker 10: especially compared to the US, and the evaluation gap has

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Speaker 10: been widening over the years. But you know, there's a

438
00:23:22,119 --> 00:23:26,119
Speaker 10: point when things can't be ignored and that that's usually

439
00:23:26,200 --> 00:23:30,160
Speaker 10: when when there's a when there's a turning points. So yeah,

440
00:23:30,160 --> 00:23:34,000
Speaker 10: we need a catalyst to to to narrow that gap.

441
00:23:35,240 --> 00:23:37,560
Speaker 10: It won't it won't go back to zero. That's pretty

442
00:23:37,600 --> 00:23:41,240
Speaker 10: much impossible, just given the split in terms of sector

443
00:23:41,320 --> 00:23:46,200
Speaker 10: exposure from the European markets. Uh, we're not as tech

444
00:23:47,080 --> 00:23:49,720
Speaker 10: heavy as the US and valuation in tech a much higher.

445
00:23:49,760 --> 00:23:54,000
Speaker 10: So just on that basis, it's impossible. But there is

446
00:23:54,160 --> 00:23:57,920
Speaker 10: narrowing possible, especially in some sectors like you know, oil

447
00:23:58,480 --> 00:24:03,639
Speaker 10: or mining or industry as where some discounts are still visible.

448
00:24:04,160 --> 00:24:06,480
Speaker 2: What about the sectors that have been leading lights in

449
00:24:06,480 --> 00:24:09,320
Speaker 2: Europe in recent years. I'm thinking about luxury and I'm

450
00:24:09,320 --> 00:24:12,359
Speaker 2: thinking about pharmaceuticals, some of the you know, Novanordous and

451
00:24:12,400 --> 00:24:14,760
Speaker 2: Denmark being one example as well. I mean, what does

452
00:24:14,920 --> 00:24:17,360
Speaker 2: just twenty twenty five look like for those sectors.

453
00:24:18,160 --> 00:24:19,399
Speaker 11: So for the.

454
00:24:19,440 --> 00:24:24,800
Speaker 10: Luxury it's a very specific case because the industry has

455
00:24:24,840 --> 00:24:30,520
Speaker 10: been driven by the Chinese consumer most of mostly during

456
00:24:30,520 --> 00:24:32,800
Speaker 10: the past ten years. And the way the way that

457
00:24:33,080 --> 00:24:38,160
Speaker 10: the sector has been working was eight percent price increase

458
00:24:38,359 --> 00:24:40,919
Speaker 10: and two percent growth a year, and that's how you

459
00:24:41,000 --> 00:24:45,880
Speaker 10: managed to grow your revenues over the years. That might

460
00:24:45,960 --> 00:24:48,680
Speaker 10: not be possible in the year to come. In the

461
00:24:48,760 --> 00:24:51,680
Speaker 10: years to come because the consumer might not be ready

462
00:24:51,720 --> 00:24:56,240
Speaker 10: to pay as much for luxury items. And having said that,

463
00:24:56,560 --> 00:24:59,920
Speaker 10: they are nowt trading on much lower multiple than the

464
00:25:00,160 --> 00:25:05,440
Speaker 10: used to. China has pledged like a lot of stimulus

465
00:25:05,480 --> 00:25:08,160
Speaker 10: and keeps pledging stimulus. They're now focusing on the consumer,

466
00:25:09,320 --> 00:25:12,880
Speaker 10: so you know, we can we can find some growth

467
00:25:13,920 --> 00:25:16,680
Speaker 10: in in within the Chinese consumer that would that would

468
00:25:16,680 --> 00:25:19,920
Speaker 10: be positive for the sector. But that's that's the key

469
00:25:20,240 --> 00:25:23,600
Speaker 10: for the sector to perform next year. As for the

470
00:25:23,600 --> 00:25:28,520
Speaker 10: pharmaceutical industry, I think it's gonna be about the US

471
00:25:28,520 --> 00:25:32,320
Speaker 10: policy and we'll need a bit more clues after the

472
00:25:35,040 --> 00:25:38,359
Speaker 10: after the notes Trump text office to have a clear picture.

473
00:25:38,840 --> 00:25:41,920
Speaker 2: My thanks to Bloomberg, Michael Masika, I'm Stephen Carolyn London.

474
00:25:41,960 --> 00:25:44,280
Speaker 2: You can catch us every weekday morning here for Bloomberg

475
00:25:44,320 --> 00:25:46,600
Speaker 2: day Break Europe, getting at six am in London and

476
00:25:46,760 --> 00:25:48,080
Speaker 2: one am on Wall Streets.

477
00:25:48,200 --> 00:25:51,679
Speaker 1: Tom, thanks Steven, and coming up on Bloomberg day Break weekend,

478
00:25:51,680 --> 00:25:54,760
Speaker 1: we'll discuss what comes next after soft Bank announced as

479
00:25:54,800 --> 00:25:58,639
Speaker 1: a major investment in the US. I'm Tom Busby and

480
00:25:58,720 --> 00:26:11,600
Speaker 1: this is Bloomberg. This is Bloomberg day Break Weekend, our

481
00:26:11,640 --> 00:26:13,840
Speaker 1: global look ahead at the top stories for investors in

482
00:26:13,880 --> 00:26:16,880
Speaker 1: the coming week. I'm Tom Busby in New York. This

483
00:26:16,920 --> 00:26:20,159
Speaker 1: past week, the founder of Japan's second largest publicly traded

484
00:26:20,160 --> 00:26:23,719
Speaker 1: company pledged to invest one hundred billion dollars in the

485
00:26:23,840 --> 00:26:27,080
Speaker 1: US over the next four years. For more, let's get

486
00:26:27,080 --> 00:26:29,760
Speaker 1: to Doug Christner, a host of the Daybreak Asia podcast,

487
00:26:29,960 --> 00:26:30,840
Speaker 1: for a closer look.

488
00:26:31,240 --> 00:26:34,679
Speaker 3: Tom It's an eye popping pledge in making it, The

489
00:26:34,720 --> 00:26:39,160
Speaker 3: CEO of SoftBank, Masayoshi's son, appeared alongside President elect Trump

490
00:26:39,400 --> 00:26:40,200
Speaker 3: at mar A Lago.

491
00:26:40,920 --> 00:26:46,919
Speaker 11: My confidence level to the economy of the United States

492
00:26:47,000 --> 00:26:52,000
Speaker 11: has tremendously increased with his victory. So because of that,

493
00:26:52,600 --> 00:26:58,680
Speaker 11: I'm now excited to commit this one hundred billion dollars

494
00:26:58,680 --> 00:27:02,159
Speaker 11: and one hundred thousand jobs into the United States. This

495
00:27:02,359 --> 00:27:07,800
Speaker 11: is double of last time. As President Crump said.

496
00:27:07,720 --> 00:27:11,880
Speaker 3: That is Masayoshi's son, the CEO of SoftBank. Now, the

497
00:27:11,920 --> 00:27:15,480
Speaker 3: one hundred thousand jobs that he is pledging focused primarily

498
00:27:15,520 --> 00:27:20,000
Speaker 3: on artificial intelligence and some related infrastructure that would include

499
00:27:20,040 --> 00:27:24,040
Speaker 3: things like data centers, semiconductors, even energy. But there is

500
00:27:24,080 --> 00:27:28,119
Speaker 3: one major question looming, where will this money come from?

501
00:27:28,520 --> 00:27:32,440
Speaker 3: To help us answer that, let's bring in Bloomberg's Katherine Thorbeck,

502
00:27:32,480 --> 00:27:35,160
Speaker 3: who covers tech for Bloomberg Opinion. She joins us from

503
00:27:35,160 --> 00:27:38,040
Speaker 3: our studios in Tokyo. Thanks for taking time to chat

504
00:27:38,080 --> 00:27:40,960
Speaker 3: with us. I'm going to ask you that, point blank,

505
00:27:41,200 --> 00:27:44,399
Speaker 3: where is one hundred billion dollars going to come from.

506
00:27:44,760 --> 00:27:46,840
Speaker 3: Where is Masa Yoshi San going to get this?

507
00:27:47,840 --> 00:27:50,679
Speaker 12: So that's a very good question, Doug. And right now,

508
00:27:51,080 --> 00:27:53,560
Speaker 12: soft Bank on the balance sheet has about twenty five

509
00:27:53,600 --> 00:27:57,240
Speaker 12: billion dollars in cash, so it's not immediately clear where

510
00:27:57,240 --> 00:27:58,959
Speaker 12: this money will come from. It seems like he's going

511
00:27:59,000 --> 00:28:01,879
Speaker 12: to have to go out there and raise it. And

512
00:28:01,920 --> 00:28:04,160
Speaker 12: I also think, you know, a lot of tech reporters

513
00:28:04,160 --> 00:28:06,320
Speaker 12: were sort of getting deja vu when we heard this

514
00:28:06,359 --> 00:28:10,360
Speaker 12: announcement because flashback eight years ago in twenty sixteen, when

515
00:28:10,400 --> 00:28:14,400
Speaker 12: Trump was first selected, Masayoshisson came out and he pledged

516
00:28:14,440 --> 00:28:16,960
Speaker 12: fifty billion dollars, a fifty billion dollar investment in the

517
00:28:17,040 --> 00:28:20,439
Speaker 12: US tech ecosystem and said he'd create fifty thousand jobs.

518
00:28:20,880 --> 00:28:24,840
Speaker 12: And it does seem like SoftBank came through on that investment,

519
00:28:25,040 --> 00:28:27,920
Speaker 12: that fifty billion dollar figure, and mostly from its Vision Fund.

520
00:28:28,480 --> 00:28:30,880
Speaker 12: But one thing that's not totally clear is if those

521
00:28:30,880 --> 00:28:33,760
Speaker 12: fifty thousand jobs were actually created. A lot of the

522
00:28:33,760 --> 00:28:37,199
Speaker 12: investments went into startups and you know, private companies that

523
00:28:37,320 --> 00:28:39,840
Speaker 12: don't disclose sort of their hiring figures, and you know,

524
00:28:39,880 --> 00:28:42,320
Speaker 12: some of it went to sort of rework and Uber

525
00:28:42,520 --> 00:28:45,080
Speaker 12: and door Dash, which some of those companies actually had

526
00:28:45,120 --> 00:28:48,400
Speaker 12: layoffs and we work obviously you know, went bankrupt. So

527
00:28:48,520 --> 00:28:50,920
Speaker 12: I think we should really be keeping a close eye

528
00:28:50,960 --> 00:28:53,080
Speaker 12: and sort of demanding a little bit more accountability this

529
00:28:53,160 --> 00:28:56,040
Speaker 12: time on the jobs figure, specifically this one hundred thousand

530
00:28:56,080 --> 00:28:59,960
Speaker 12: jobs figure. And that's said, I mean, I am curious

531
00:29:00,080 --> 00:29:02,440
Speaker 12: how much of this hundred billion dollar investment was sort

532
00:29:02,440 --> 00:29:06,480
Speaker 12: of pre planned versus sort of timed to Trump's win

533
00:29:06,800 --> 00:29:09,720
Speaker 12: in his victory, and how much of it, Like I said,

534
00:29:10,040 --> 00:29:11,680
Speaker 12: he doesn't seem to have the cash on hand, so

535
00:29:12,160 --> 00:29:13,720
Speaker 12: we'll have to see how it all plays out. But

536
00:29:13,840 --> 00:29:14,880
Speaker 12: there's a lot of questions.

537
00:29:14,960 --> 00:29:17,280
Speaker 3: Can you conceive of a situation where he has to

538
00:29:17,360 --> 00:29:20,800
Speaker 3: actually sell assets in the portfolio in order to raise

539
00:29:20,840 --> 00:29:21,360
Speaker 3: these funds.

540
00:29:21,920 --> 00:29:24,400
Speaker 12: So I think it was kind of a wise, sort

541
00:29:24,400 --> 00:29:27,520
Speaker 12: of suave move on Masa's part to sort of go

542
00:29:27,560 --> 00:29:29,320
Speaker 12: out there with Trump and show that he has Trump

543
00:29:29,400 --> 00:29:32,080
Speaker 12: support and his backing, and I think that in some

544
00:29:32,120 --> 00:29:34,040
Speaker 12: ways will sort of raise his profile as he goes

545
00:29:34,040 --> 00:29:37,360
Speaker 12: out there and tries to raise more funds. And it's

546
00:29:37,400 --> 00:29:39,800
Speaker 12: been a little hit or miss with Massa's investments over

547
00:29:39,840 --> 00:29:42,080
Speaker 12: the years. There's been some big wins and obviously some

548
00:29:42,160 --> 00:29:45,840
Speaker 12: very high profile losses, but he has recently been doing better.

549
00:29:45,880 --> 00:29:48,400
Speaker 12: I mean, arm was a very good investment, especially ahead

550
00:29:48,400 --> 00:29:50,880
Speaker 12: of this AI wave, and you know, more recently, Masa

551
00:29:50,880 --> 00:29:53,280
Speaker 12: has been coming out at events in Tokyo and speaking

552
00:29:53,360 --> 00:29:55,680
Speaker 12: very passionately about how he wants to go all in

553
00:29:55,760 --> 00:29:58,160
Speaker 12: on AI and how this is the future. And you know,

554
00:29:58,200 --> 00:30:00,960
Speaker 12: he's made comments at investor saying that this is what

555
00:30:01,000 --> 00:30:03,280
Speaker 12: he was born to do. So he does seem to

556
00:30:03,880 --> 00:30:06,280
Speaker 12: have a lot of enthusiasm for AI, and it does

557
00:30:06,320 --> 00:30:08,719
Speaker 12: seem like he was planning to invest in it heavily,

558
00:30:08,760 --> 00:30:10,760
Speaker 12: and the US sort of makes sense because of its

559
00:30:10,760 --> 00:30:15,200
Speaker 12: AI ecosystem. So yeah, I'm curious how he will exactly

560
00:30:15,200 --> 00:30:17,720
Speaker 12: get this money and where it will go, but it

561
00:30:17,760 --> 00:30:19,320
Speaker 12: does seem like this this was sort of on his

562
00:30:19,440 --> 00:30:20,240
Speaker 12: radar for a while.

563
00:30:20,360 --> 00:30:22,680
Speaker 3: The title of one of your recent columns, as I recall,

564
00:30:22,880 --> 00:30:25,880
Speaker 3: was Masa tries to make up for past mistakes. And

565
00:30:25,920 --> 00:30:28,040
Speaker 3: one of the things you point out is that some

566
00:30:28,080 --> 00:30:32,080
Speaker 3: of his investments have really been aimed at reinvigorating Japan's

567
00:30:32,560 --> 00:30:35,640
Speaker 3: technology arena, and I'm wondering whether or not this move

568
00:30:35,680 --> 00:30:39,440
Speaker 3: into the US would come at the expense of putting

569
00:30:39,440 --> 00:30:40,640
Speaker 3: more money to work in Japan.

570
00:30:41,200 --> 00:30:43,200
Speaker 12: That's a good question. And you know, I have a

571
00:30:43,200 --> 00:30:45,960
Speaker 12: lot of respect for Masa. I think sometimes he sort

572
00:30:45,960 --> 00:30:49,280
Speaker 12: of gets a bad reputation in Western media. But I

573
00:30:49,320 --> 00:30:51,959
Speaker 12: recently read a biography about him which which kind of

574
00:30:52,120 --> 00:30:54,520
Speaker 12: explains a lot about where his sort of appetite for

575
00:30:54,640 --> 00:30:57,120
Speaker 12: risk comes from. And you know, he really has one

576
00:30:57,120 --> 00:31:01,600
Speaker 12: of those like stranger than fiction sort of stories. I mean,

577
00:31:01,600 --> 00:31:05,240
Speaker 12: he was born to Korean immigrants in post or Japan,

578
00:31:05,320 --> 00:31:07,720
Speaker 12: faced a lot of discrimination, was essentially born in a

579
00:31:07,760 --> 00:31:11,000
Speaker 12: slum in southern Japan, and then he became the biggest

580
00:31:11,040 --> 00:31:14,160
Speaker 12: single foreign investor in both communist China and the US.

581
00:31:14,920 --> 00:31:17,200
Speaker 12: So he has quite a rise. And I think when

582
00:31:17,240 --> 00:31:20,720
Speaker 12: you sort of come from nothing, you're losing it all

583
00:31:20,800 --> 00:31:23,000
Speaker 12: as sort of relative, if that makes sense. And some

584
00:31:23,080 --> 00:31:25,920
Speaker 12: of this is from a recent biography that came out

585
00:31:25,920 --> 00:31:29,760
Speaker 12: from a Financial Times editor, Lionel Barber. But I think

586
00:31:29,920 --> 00:31:32,400
Speaker 12: he's had a really interesting sort of run of it,

587
00:31:32,840 --> 00:31:35,840
Speaker 12: and I think, you know, not all of his bold

588
00:31:35,880 --> 00:31:39,640
Speaker 12: proclamations actually play out, but I think he's not afraid

589
00:31:39,640 --> 00:31:42,040
Speaker 12: to sort of go all in and make these big

590
00:31:42,080 --> 00:31:45,240
Speaker 12: bets and then sort of see how it all sort

591
00:31:45,280 --> 00:31:46,240
Speaker 12: of falls together.

592
00:31:46,520 --> 00:31:48,360
Speaker 3: Yeah, he was a big backer of Wei Work. We

593
00:31:48,440 --> 00:31:51,480
Speaker 3: know how that ended. But as I kind of mentioned earlier,

594
00:31:51,560 --> 00:31:53,640
Speaker 3: a lot of the focus on this one hundred billion

595
00:31:53,680 --> 00:31:57,480
Speaker 3: dollar investment will be on artificial intelligence. And one of

596
00:31:57,480 --> 00:32:00,840
Speaker 3: the things that we know of mas Yoshi Son's big

597
00:32:00,880 --> 00:32:03,720
Speaker 3: bets has been on what is being referred to as

598
00:32:03,800 --> 00:32:06,680
Speaker 3: super artificial intelligence. Can you help me understand that?

599
00:32:07,080 --> 00:32:07,400
Speaker 5: Sure?

600
00:32:07,520 --> 00:32:10,200
Speaker 12: So he has said super artificial intelligence is what he

601
00:32:10,280 --> 00:32:14,320
Speaker 12: was born to do. He speaks very boldly about that

602
00:32:14,400 --> 00:32:17,840
Speaker 12: in his sort of true Massa fashion, and that's basically

603
00:32:17,920 --> 00:32:21,920
Speaker 12: artificial intelligence that's hundreds or thousands of times smarter than humans.

604
00:32:22,440 --> 00:32:24,400
Speaker 12: And you know, there's there's a big debate going around

605
00:32:24,400 --> 00:32:26,360
Speaker 12: in the tech sector of whether we'll see this in

606
00:32:26,400 --> 00:32:28,680
Speaker 12: our lifetimes, whether we'll see this at all, whether it's

607
00:32:28,760 --> 00:32:31,320
Speaker 12: you know, just more hype, and it's very possible that

608
00:32:31,440 --> 00:32:34,920
Speaker 12: you know, Masa's sort of feeding into this AI hype cycle,

609
00:32:35,400 --> 00:32:38,560
Speaker 12: you know, and inflating a lot of sort of AI companies.

610
00:32:38,960 --> 00:32:41,080
Speaker 12: But at the same time, you know, he was sort

611
00:32:41,080 --> 00:32:42,720
Speaker 12: of humbled by We Work, I think, and he was

612
00:32:42,760 --> 00:32:44,520
Speaker 12: sort of humbled by by some of his more high

613
00:32:44,520 --> 00:32:47,080
Speaker 12: profile losses and sort of you know, going back to

614
00:32:47,160 --> 00:32:49,800
Speaker 12: his his initial fifty billion dollar investment in the US,

615
00:32:49,840 --> 00:32:52,640
Speaker 12: it was very wide. It was like sort of any startup,

616
00:32:52,680 --> 00:32:55,960
Speaker 12: any tech company, you know, robots that make pizza, we

617
00:32:56,080 --> 00:32:58,920
Speaker 12: work was sort of the high profile one. I think

618
00:32:58,960 --> 00:33:02,120
Speaker 12: this time around he is very focused on Okay, does

619
00:33:02,120 --> 00:33:04,440
Speaker 12: this have an AI element? Will this help build you know,

620
00:33:04,880 --> 00:33:08,240
Speaker 12: AI infrastructure? Will this you know help how does this

621
00:33:08,280 --> 00:33:11,280
Speaker 12: sort of tie into creating super artificial intelligence? So I

622
00:33:11,600 --> 00:33:13,480
Speaker 12: do think we'll see a little bit more sort of

623
00:33:13,520 --> 00:33:16,600
Speaker 12: discipline in that sense. But at the same time, A,

624
00:33:17,040 --> 00:33:19,960
Speaker 12: so many tech companies right now are all touching AI,

625
00:33:20,080 --> 00:33:21,680
Speaker 12: so it's you know, a little bit less harder to

626
00:33:22,480 --> 00:33:25,720
Speaker 12: miss in that sense. And b you know, we just

627
00:33:25,800 --> 00:33:29,560
Speaker 12: sort of never know with Masa I mean yeah, I think,

628
00:33:29,600 --> 00:33:32,080
Speaker 12: well there's there's just really more questions and answers at

629
00:33:32,080 --> 00:33:33,920
Speaker 12: this point. But I do think we should try to,

630
00:33:34,200 --> 00:33:37,000
Speaker 12: you know, hold them too account, especially with this job's figure,

631
00:33:37,200 --> 00:33:38,280
Speaker 12: the one hundred thousand jobs.

632
00:33:38,440 --> 00:33:40,120
Speaker 3: So what do we know about the way in which

633
00:33:40,400 --> 00:33:44,920
Speaker 3: the investors in soft bank have been reacting to this news?

634
00:33:45,040 --> 00:33:49,520
Speaker 3: Are there? Are they giving confidence their confidence in Masayoshi

635
00:33:49,600 --> 00:33:50,040
Speaker 3: Son or not?

636
00:33:50,640 --> 00:33:54,520
Speaker 12: So I think initially after and I'd have to check

637
00:33:54,520 --> 00:33:56,840
Speaker 12: the latest figures, but there was initially a sort of

638
00:33:57,160 --> 00:34:00,440
Speaker 12: small jump in soft bank in the US after Masa

639
00:34:00,440 --> 00:34:02,320
Speaker 12: appeared with Trump, And I think some of that is,

640
00:34:02,520 --> 00:34:04,640
Speaker 12: like I said, he's I think he was sort of

641
00:34:04,680 --> 00:34:07,080
Speaker 12: wise to go out, step out with Trump and you know,

642
00:34:07,400 --> 00:34:10,680
Speaker 12: take advantage of this moment and show that, you know,

643
00:34:10,719 --> 00:34:13,879
Speaker 12: he has Trump's blessing, and you know, show that they're

644
00:34:13,880 --> 00:34:16,240
Speaker 12: sort of side by side and get all those eyes

645
00:34:16,280 --> 00:34:18,120
Speaker 12: on him. So I think that was sort of a

646
00:34:18,120 --> 00:34:21,799
Speaker 12: wise move. But going off that, you know, I don't

647
00:34:21,840 --> 00:34:25,760
Speaker 12: think it's clear that this investment announcement was necessarily timed

648
00:34:25,760 --> 00:34:28,799
Speaker 12: to Trump's win, or if it was sort of there

649
00:34:28,840 --> 00:34:31,080
Speaker 12: was a series of pre planned, set in motion events

650
00:34:31,719 --> 00:34:33,400
Speaker 12: to invest in AI in the US.

651
00:34:33,719 --> 00:34:36,000
Speaker 3: Catherine, thank you so much for your time. She is

652
00:34:36,080 --> 00:34:40,440
Speaker 3: Catherine Thorbeck, Asia tech columnist for Bloomberg Opinion. Joining us

653
00:34:40,440 --> 00:34:43,640
Speaker 3: from Tokyo, we move next to the Japanese auto industry,

654
00:34:43,760 --> 00:34:47,839
Speaker 3: where Honda and Nissan are reportedly exploring a merger. Now,

655
00:34:47,960 --> 00:34:51,480
Speaker 3: these negotiations hold the potential to create the world's third

656
00:34:51,600 --> 00:34:54,800
Speaker 3: largest car maker, giving it a better position to compete

657
00:34:54,800 --> 00:34:58,960
Speaker 3: against industry leader Toyota, and we hear the transaction could

658
00:34:58,960 --> 00:35:02,600
Speaker 3: be expanded to an include Mitsubishi Motors. The NIKA is

659
00:35:02,680 --> 00:35:06,600
Speaker 3: reporting official talks and possibly a public announcement could come

660
00:35:06,640 --> 00:35:09,359
Speaker 3: as soon as December twenty third. For more, we are

661
00:35:09,440 --> 00:35:13,920
Speaker 3: joined by Tatsuo Yoshida, senior auto analyst at Bloomberg Intelligence,

662
00:35:14,200 --> 00:35:16,799
Speaker 3: joining us from the Japanese capital. Thank you for making

663
00:35:16,840 --> 00:35:19,520
Speaker 3: time to chat with us. So obviously this is one

664
00:35:19,560 --> 00:35:24,160
Speaker 3: way of dealing with competition globally in the market for automobiles.

665
00:35:24,200 --> 00:35:27,080
Speaker 3: But can you help me understand the degree to which

666
00:35:27,120 --> 00:35:32,080
Speaker 3: there is perhaps excess capacity and auto manufacturing in Japan.

667
00:35:32,760 --> 00:35:37,000
Speaker 9: Yes, there's an excess capacity, and all the manufacturers are

668
00:35:37,040 --> 00:35:41,600
Speaker 9: now consolidating the production lines or closing the factory, so

669
00:35:41,880 --> 00:35:44,560
Speaker 9: they have to deal with it. The reason behind that

670
00:35:44,640 --> 00:35:47,840
Speaker 9: these two things. One is diminishing population in Japan domestic

671
00:35:48,200 --> 00:35:52,040
Speaker 9: cassers is declining over time, and then also extension of

672
00:35:52,080 --> 00:35:55,600
Speaker 9: the overseas production. Make the vehicle where the demand is.

673
00:35:55,719 --> 00:35:57,000
Speaker 9: That's the Japanese policy.

674
00:35:57,280 --> 00:35:59,759
Speaker 3: One of the things that's very interesting, especially when it

675
00:35:59,760 --> 00:36:04,399
Speaker 3: comes to electric vehicles, Tatsuho, as you know, China has

676
00:36:04,440 --> 00:36:08,239
Speaker 3: really been dominating this space. How much of this consolidation

677
00:36:08,360 --> 00:36:12,200
Speaker 3: in Japan is related to competition from China.

678
00:36:13,120 --> 00:36:17,279
Speaker 9: It's a big threat. As far as right now, the

679
00:36:17,640 --> 00:36:21,680
Speaker 9: big EV market is limited to the China, more or

680
00:36:21,719 --> 00:36:25,600
Speaker 9: less Europe and then California and then other states following

681
00:36:25,680 --> 00:36:31,160
Speaker 9: California regulations. But from long term perspective, EV is the

682
00:36:31,200 --> 00:36:34,759
Speaker 9: way to go. So the EV moved to the EV

683
00:36:35,200 --> 00:36:39,160
Speaker 9: is flowed a little bit. But Japanese car companies should

684
00:36:39,200 --> 00:36:44,280
Speaker 9: not stop the EV development. And then EV development requires money,

685
00:36:44,680 --> 00:36:50,520
Speaker 9: people and then technology. So getting together joining forces for

686
00:36:50,560 --> 00:36:55,480
Speaker 9: example Honda, Nissan, Mitsubishi, that will help those three entities.

687
00:36:55,840 --> 00:36:58,120
Speaker 3: Yeah, earlier in the year, I think Honda and Nissan

688
00:36:58,200 --> 00:37:02,600
Speaker 3: decided to work together on electric vehicle batteries and software.

689
00:37:03,000 --> 00:37:05,640
Speaker 3: Is it fair to say that Toyota is a little

690
00:37:05,640 --> 00:37:08,520
Speaker 3: bit behind the game when it comes to evs. The

691
00:37:08,600 --> 00:37:11,759
Speaker 3: company made a bet maybe that hybrid vehicles would be

692
00:37:11,800 --> 00:37:14,120
Speaker 3: the path forward. Maybe they were caught a little bit

693
00:37:14,480 --> 00:37:16,520
Speaker 3: flat footed with electric vehicles.

694
00:37:17,040 --> 00:37:20,279
Speaker 9: Actually it looks further is behind, but it's kind of

695
00:37:20,320 --> 00:37:25,880
Speaker 9: purposely though. Thurda strategy is three hundred and sixty degree strategy.

696
00:37:26,080 --> 00:37:29,359
Speaker 9: They have money, they have people, they have a lot

697
00:37:29,360 --> 00:37:32,040
Speaker 9: of resources, they can do everything. Of course, Toda is

698
00:37:32,080 --> 00:37:36,200
Speaker 9: developing EV for China, Europe and then California.

699
00:37:36,440 --> 00:37:41,520
Speaker 3: Help me understand how Honda and Nissan use mechanized manufacturing

700
00:37:41,560 --> 00:37:45,280
Speaker 3: processes robotics as a part of their production process.

701
00:37:45,600 --> 00:37:49,120
Speaker 9: When it comes to the conventional vehicles like internal combustion

702
00:37:49,200 --> 00:37:52,440
Speaker 9: engine vehicles, their production system is kind of state over

703
00:37:52,480 --> 00:37:56,640
Speaker 9: the art. Actually they are not behind the others. Actually

704
00:37:56,719 --> 00:38:02,319
Speaker 9: they're leading the global mobile but when it comes to

705
00:38:02,440 --> 00:38:08,719
Speaker 9: the ED manufacturing, they tend to use the existing system. So,

706
00:38:08,760 --> 00:38:11,480
Speaker 9: in other words, it's different from the newcomers like a

707
00:38:11,600 --> 00:38:16,719
Speaker 9: Tesla or Bid. They can start from the scratch dedicated

708
00:38:17,160 --> 00:38:20,040
Speaker 9: production system for the ED they can do that, but

709
00:38:20,400 --> 00:38:21,440
Speaker 9: Japanese cannot do that.

710
00:38:21,760 --> 00:38:24,600
Speaker 3: Tatsuo, thank you so much for joining us. Tatsuo Yoshida

711
00:38:24,840 --> 00:38:28,720
Speaker 3: is senior autos analyst for Bloomberg Intelligence. I'm Doug Krisner.

712
00:38:28,760 --> 00:38:31,880
Speaker 3: You can catch us weekdays for the Daybreak Asia podcast.

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00:38:32,160 --> 00:38:37,000
Speaker 3: It's available on Apples, Spotify or wherever you get your podcast. Tom.

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Speaker 1: Thanks Doug, and that does it for this edition of

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Speaker 1: Bloomberg day Break Weekend. Join us again Monday morning at

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00:38:42,560 --> 00:38:44,800
Speaker 1: five am Wall Street Time for the latest on markets

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00:38:44,800 --> 00:38:47,160
Speaker 1: overseas and the news you need to start your day.

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00:38:47,640 --> 00:38:50,760
Speaker 1: I'm Tom Busby. Stay with US. Top stories and global

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Speaker 1: business headlines are coming up right now.

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Speaker 12: S