Speaker 1: Welcome to the Bloomberg p m L Podcast. I'm Pim Fox.
Speaker 1: Along with my co host Lisa Bramowitz. Each day we
Speaker 1: bring you the most important, noteworthy, and useful interviews for
Speaker 1: you and your money, whether you're at the grocery store
Speaker 1: or the trading floor. Find the Bloomberg p m L
Speaker 1: Podcast on Apple Podcasts, SoundCloud, and Bloomberg dot com. Joining
Speaker 1: us now, we are very pleased to say, is Jim Anderson.
Speaker 1: He is chief executive officer of Social Flow in New York.
Speaker 1: Just to be fully transparent. Social Flow is a platform
Speaker 1: used by Bloomberg for social media purposes. Jim, thank you
Speaker 1: so much for being here. You've already read the prepared
Speaker 1: statement which Stars has just delivered. From your perspective, one,
Speaker 1: are the most important things that he should address when
Speaker 1: he does get these questions from representatives. Well, I think
Speaker 1: first and foremost, he did exactly what you said. He
Speaker 1: waived the big American flag. He did what you want
Speaker 1: to do. You talk about the possibility and the optimism
Speaker 1: of technology. You know, the story about not having to
Speaker 1: ride a bus for two hours to find out your
Speaker 1: blood results. I mean those are true and authentic stories
Speaker 1: and it's certainly to his interest to try to emphasize
Speaker 1: that and make sure that people don't lose sight of
Speaker 1: the good. That being said, we're about to get the
Speaker 1: rest of the story, right, and they've got a lot
Speaker 1: of things to worry about, whether it be privacy, whether
Speaker 1: it be the alleged bias against conservatives, whether it be
Speaker 1: sort of the EU issues, and just data in general.
Speaker 1: You know, there's a lot of things that I'm sure
Speaker 1: we're about to to hear a lot of fairly pointed
Speaker 1: questions about. But Jim, the whole purpose of the hearing
Speaker 1: isn't excuse me, is not the point of the good
Speaker 1: right right? I mean, the idea is to figure out
Speaker 1: where the data goes. Well, that is absolutely one very
Speaker 1: important thing, and I think ultimately that that data and
Speaker 1: privacy issue is one of the most foundational ones. I'm
Speaker 1: not sure that's going to be the biggest issue. I
Speaker 1: think you're gonna hear a lot about the alleged bias
Speaker 1: against conservatives, and we've talked about that before. This idea
Speaker 1: of shadow banning. If I type in social into Google,
Speaker 1: because I'm the CEO of social Flow, I wanted to
Speaker 1: autocomplete social flow. It's more likely though, to autocomplete social
Speaker 1: security because that's a more common search than Social Flow,
Speaker 1: and so you get these annexies. You believe there's a
Speaker 1: bias when it comes to search results. I don't, actually,
Speaker 1: I truly. First off, you can't prove a negative. I
Speaker 1: can't prove that there's no bias. And again there's billions
Speaker 1: and billions of search results and what really constitutes bias?
Speaker 1: But Google could prove it. I'm not sure Google could
Speaker 1: prove and real, right, because think about your search and
Speaker 1: my search are different, right, it's unless we're using an
Speaker 1: anonymous browser and incognito mode. Google knows a lot about you.
Speaker 1: Google knows a lot about me. So actually, when I
Speaker 1: searched for social it may actually autocomplete Social flow because
Speaker 1: Google knows that I search for Social flow a lot.
Speaker 1: I don't think Google could demonstrably prove that they never
Speaker 1: discriminate against anyone. What do you think is the main issue?
Speaker 1: Is it privacy? I do think it's it's privacy and data.
Speaker 1: And I think we can get look to the EU
Speaker 1: as to what's going on. Different gular Corey Tory construct
Speaker 1: different sort of cultural expectations. But I think that is
Speaker 1: the vanguard of what you're gonna see in the rest
Speaker 1: of the world too, and not just privacy but also antitrust.
Speaker 1: And think about it. So Google is being accused of
Speaker 1: effectively bundling, right, the Android operating system and Google Maps.
Speaker 1: You're you're sort of inappropriately bundling those together. Does anybody
Speaker 1: other than me think that's exactly what happened to Microsoft
Speaker 1: two decades ago? Right? It was Windows operating System and
Speaker 1: Internet Explore. The Department of Justice in the US said
Speaker 1: you're inappropriately bundling those. It took twenty years for Microsoft
Speaker 1: to effectively recover from that, and they've done so quite nicely,
Speaker 1: but in a very different way with cloud computing, etcetera.
Speaker 1: So I think that's that, in some combination of the
Speaker 1: privacy and data are really where you're going to see
Speaker 1: the big focus for Google. I'm not sure though today
Speaker 1: in the testimony that's going to be the big area focus.
Speaker 1: Is there also a necessary focus on the dominance that
Speaker 1: Google has in search? Absolutely? I mean, and I think
Speaker 1: any of those anti trust points is predicated on a
Speaker 1: dominant position. Right that the reason the Microsoft issue was
Speaker 1: so big was they were so dominant. I think that's
Speaker 1: exactly right. Google is incredibly dominant in regard. So the
Speaker 1: implication here in the Microsoft analogy is that there is
Speaker 1: going to be a big effort to break up Google
Speaker 1: for its dominance. Ah, we don't see where political pressure
Speaker 1: comes from. That's a remedy. I'm not I'm not jumping
Speaker 1: all the way to remedy. I think first you have
Speaker 1: to prove that there's an issue, and I think that's
Speaker 1: going to start and continue in the EU. I think
Speaker 1: you're exactly right. I don't see the political pressure in
Speaker 1: the U S building for any kind of breakup anytime
Speaker 1: in the near future. I think that's not in the cards.
Speaker 1: But it's a big world out there. Google is a
Speaker 1: global company, global company, so I think what happens in
Speaker 1: the EU could very well propagate elsewhere, first, you know,
Speaker 1: beyond the US, and then ultimately maybe in a little
Speaker 1: bit of a different political climate back here to the States.
Speaker 1: Is it worth noting that this does not just take
Speaker 1: place on your mobile device, but also on whatever devices
Speaker 1: you use at home, whether they are television monitors or
Speaker 1: PCs or some kind of computer. I think that's exactly right.
Speaker 1: So you know, the Amazon Echo obviously different, come any
Speaker 1: different competitor, and it is worth bringing up. By the way,
Speaker 1: I think one of Google's big risks here is actually
Speaker 1: not necessarily just the government and regulation, but Amazon. So
Speaker 1: Google knows what you search for, Amazon knows what you buy.
Speaker 1: So there aren't a lot of companies that the Google
Speaker 1: is afraid of giving their size and scale. But I'm
Speaker 1: sure they're paying a lot of attention to what Amazon
Speaker 1: is doing. And but but your core point about the devices,
Speaker 1: you know, the connected home everything. It's not just a
Speaker 1: mobile device, it's not just a computer, it's everything that's
Speaker 1: connected to the internet. All right, So you said that
Speaker 1: it's very difficult to prove a negative that there is
Speaker 1: not bias. Can Google prove that it is doing everything
Speaker 1: that it can prevent foreign actors from interfering in elections?
Speaker 1: And that's a tough one as well. I mean, these
Speaker 1: are two sides of the same coin. Right. At the
Speaker 1: same time Google is being criticized for alleged bias against conservatives,
Speaker 1: it's also being accused of not doing enough to protect
Speaker 1: against hate speech. Right And by the way, they're advertisers,
Speaker 1: which is how they make all their money. Are the
Speaker 1: ones who are principally concerned with that who wants they're
Speaker 1: advertising associated with hate speech or potentially offensive videos. Well,
Speaker 1: you know, the the the implication there is that Google
Speaker 1: needs to play a heavier hand and be more controlling
Speaker 1: about the type of speech that's allowed on his platform.
Speaker 1: But when you talk about alleged bias against conservatives, well,
Speaker 1: now you're you're putting your heavy hand to work in
Speaker 1: a in a biased way. And these are issues, I mean,
Speaker 1: they're not technology issues. Their policy issues right, and their
Speaker 1: values issues. So again you can't their First Amendment issues.
Speaker 1: They really are free speech versus you know, hate speech. Right,
Speaker 1: where's the one beginning the other end. As far as
Speaker 1: the hearing is concerned, do you believe that this is
Speaker 1: more of a show for the people asking the questions
Speaker 1: or is this something that Google can really come away
Speaker 1: with with a gold star? Well, I would say it's
Speaker 1: gonna be very tough for them to come away with
Speaker 1: a gold star. I think all political hearings like this
Speaker 1: or congressional hearings to have an element of show, because
Speaker 1: politics is showmanship or show personship. Um, So you know,
Speaker 1: if he can just not avoid making a serious misstep,
Speaker 1: that's probably a win. I do think his prepared remarks
Speaker 1: were sort of merciful short. I mean, so it doesn't
Speaker 1: appear that he's trying to run run out the clock
Speaker 1: strategy to just keep talking until the time is up.
Speaker 1: We'll see whether the question is an answer. You sort
Speaker 1: of follow that, But I thought it was really interesting
Speaker 1: that it was such a short set of prepared remarks.
Speaker 1: What's the one question you'd ask him? I would focus
Speaker 1: on the data and say, well, what are your values?
Speaker 1: What are your policies about data and privacy? And I
Speaker 1: might just stop right there and let let him give
Speaker 1: it as an expansive and answer as he's willing to.
Speaker 1: Thanks very much for being with us. Jim Anderson is
Speaker 1: the chief executive of a social flow and in full disclosure.
Speaker 1: Social Flow is a platform that is used by Bloomberg
Speaker 1: for social media purposes. The price of oil moves higher today.
Speaker 1: It is up more than two percent right now fifty
Speaker 1: two dollars for a barrel of oil on the NYMEX
Speaker 1: natural Gas, though going the other wright down more than
Speaker 1: three and a quarter percent. Here to tell us all
Speaker 1: about the energy complex. Neil Dingman. He is Managing director
Speaker 1: for Energy for sun Trust. Robinson Humphrey also joining us
Speaker 1: here in our Bloomberg Interactor Broker Studios as well as
Speaker 1: Fitzpatrick also managing director as well as and he covers
Speaker 1: exploration and production research for sun Trust Robinson Humphrey. They're
Speaker 1: both from Houston, and we're glad to have them here,
Speaker 1: all right, So you're great to have you, all right,
Speaker 1: So let's just dive right into it. Um fifty two
Speaker 1: dollars a barrel for West Texas, sixty dollars a barrel
Speaker 1: for Brent and you've got that gas you know, under
Speaker 1: four and a half dollars per million b to you,
Speaker 1: what are those prices due to the companies you cover?
Speaker 1: I think for most of us they might say their
Speaker 1: break even. They'll suggest the break even is in the forties.
Speaker 1: But from what we're hearing, when the new budgets come
Speaker 1: out for nineteen, you're gonna see cuts. Um, you've already
Speaker 1: saw who was it earlier this week, just a day
Speaker 1: or two ago. Konico one of the very largest that
Speaker 1: we don't follow, but talk about um single digit growth
Speaker 1: and returning share shareholder valued, and again I think that's
Speaker 1: going to be a common trend, even with our smaller companies.
Speaker 1: I think overall him you're going to see a lot
Speaker 1: more cuts um as long as oil is anything under
Speaker 1: sixty dollars wells, what's the pain point at which E
Speaker 1: m P companies have to start going out of business again? Yeah,
Speaker 1: going out of businesses is tough. You really have had
Speaker 1: the balance sheets improved dramatically since we saw the last
Speaker 1: slug of those rolls through. But I think Neil's right.
Speaker 1: I mean to that point, you had tin oil rigs
Speaker 1: drop out last week. That's the biggest one week dropped
Speaker 1: since we've had in sixteen. So these these year over
Speaker 1: year estimates going into nineteen for US oil growth are
Speaker 1: are almost surely overstated, and probably largely so. Combine that
Speaker 1: with the OPEC plus cuts and a little bit more
Speaker 1: from Iran and Canada, and all of a sudden you're
Speaker 1: in a pretty decent position. So you know, what characterizes
Speaker 1: a company that you want to be buying stock in.
Speaker 1: I think one that has a very low break even
Speaker 1: phim in one that you know, we look at a
Speaker 1: couple like a Magnolia and the Eagle Ford. It's a
Speaker 1: run by the former head of Oxy or Continental or
Speaker 1: Whiting both in the baking. And the type that we
Speaker 1: like is even in the low fifties. We think all
Speaker 1: three can generate free cash flow. To me, it's really
Speaker 1: interesting because as both of you speak, I'm thinking, all right,
Speaker 1: so if OPEC plus is going to be cutting production,
Speaker 1: and then you have riggs already coming off and probably
Speaker 1: cuts to production further in January from US companies, you
Speaker 1: guys both are expecting much higher oil prices. Is that correct? Wells,
Speaker 1: I think I think there's upside from here. I think
Speaker 1: your rally. I mean, look, those those rigs will probably
Speaker 1: go back to work if you cross the sixty threshold again.
Speaker 1: The other thing that you have going on is the
Speaker 1: Midland differential is going to be coming in, So the
Speaker 1: prices that these guys are getting is going to be
Speaker 1: much higher in later and nineteen, even with a flat
Speaker 1: w T I price. So uh, I think that the
Speaker 1: fundamentals are improving for all of these guys. I think
Speaker 1: that the real zations are going to improve for all
Speaker 1: of them. But but to your point, I think you're right,
Speaker 1: you do have more levers that are pressing oil up
Speaker 1: than down. I would agree as well. I think the
Speaker 1: only thing I'm nervous about is if you get a
Speaker 1: snap back and it and it goes up too quickly. Again,
Speaker 1: we've seen that happen. I mean again, we're down almost
Speaker 1: since the first of October. Could we go up as
Speaker 1: quick Probably not, but we certainly could go up very quickly. Well,
Speaker 1: talk about cash flow. If you can free cash flow
Speaker 1: at some of these companies, which ones have it and
Speaker 1: which ones don't, and why would they would? Why would
Speaker 1: that change your decision on what to invest in? Yeah,
Speaker 1: there's there. There's a huge discrepancy across the MP. And
Speaker 1: it's interesting because in this recent pullback, everything's been hit
Speaker 1: relatively universally, and so you have companies like a Highlight
Speaker 1: PDC or or NBL Noble, both of them have double
Speaker 1: digit free cash flow yields in both of them are
Speaker 1: training out less than four times. These are high quality
Speaker 1: companies with little to no debt and a lot of
Speaker 1: free cash flow. Now on the other side, you have
Speaker 1: some small caps and microcaps that are gonna be a
Speaker 1: little bit tighter, but you certainly have enough companies that
Speaker 1: that that fit that mold. They're growing under their own
Speaker 1: power with great assets. So it just I'm curious from
Speaker 1: your perspective, Neil, I'm looking right now at the SMP
Speaker 1: five Energy subsector. It's down a lot. Um. I have
Speaker 1: a feeling you are talking and trying to comfort a
Speaker 1: lot of your clients, to soothe their their tears drive
Speaker 1: them up. Um. What makes you confident that we're going
Speaker 1: to see some stability from here? I think just the
Speaker 1: comments from some OPEC plus I mean, I'm gonna mentioned
Speaker 1: that earlier, and I think by them more than willing
Speaker 1: to come in, and you know, I would call that
Speaker 1: sort of the stabilization you didn't have that prior to sixteen.
Speaker 1: Sixteen was the first time that you saw them in
Speaker 1: a material way come in, and now they're continuing to
Speaker 1: say that both Russia, both Zaudi, etcetera, etcetera. So again,
Speaker 1: I think it's very unlikely if we do go under
Speaker 1: fifty we stay there long. Wells, if you loved energy
Speaker 1: stocks seventy five, sixty five, and fifty five, don't you
Speaker 1: have to really fall in love with them at fifty two.
Speaker 1: I think that's right. And the other thing that that
Speaker 1: that I've note is that you are at multi year
Speaker 1: lows on on multiples, like we've talked about, you have
Speaker 1: a constructive set up in the commodity, both gas and oil.
Speaker 1: So I think I think now is the time to
Speaker 1: be buying. And I think when people sharpen their pencils
Speaker 1: going into January and start building books, you could see
Speaker 1: reversal in these names. When you guys talk to clients
Speaker 1: generally right now, Neil, any optimism whatsoever, very very little. Still,
Speaker 1: they're they're doing the work, but they're they're certainly not there.
Speaker 1: And this is both the big long only mutual funds
Speaker 1: here in town and the hedge funds, and both what
Speaker 1: the mutual funds says, why be an energy if it's
Speaker 1: this volatile and you see tech or retail go up
Speaker 1: every other day, well maybe not go up every other day?
Speaker 1: Thank you so much. Be careful about those sharpened pencils. Yeah,
Speaker 1: the sharpen pencils can be can be daggers, Neil Dingman,
Speaker 1: thank you so much. Wells Flitzpatrick, both of you really
Speaker 1: appreciate you coming in Managing directors in the energy space
Speaker 1: for sun Trust. Robinson Humphrey based in Houston, Texas, but
Speaker 1: coming here to our frigid New York City and our
Speaker 1: eleven three oh studios here joining me and my co
Speaker 1: host and colleague him Fox. The topic now China, the
Speaker 1: Trump administration preparing a series of actions to call out
Speaker 1: Beijing for what it says our China's continued efforts to
Speaker 1: steal America's trade secrets and advanced technologies and compromise sensitive
Speaker 1: government and corporate computers. It's all according to US officials.
Speaker 1: Here to tell us more about the relationship between the
Speaker 1: United States and China is Michael Smart, Managing Director, Rock
Speaker 1: Creek Global Advisors, and previously Mr Art was the Director
Speaker 1: for International Trade and Investment on the staff of the
Speaker 1: National Security Council at the White House, and he's previously
Speaker 1: served as International Trade Counsel on the Democratic Staff of
Speaker 1: the US Senate Committee on Finance. Thank you very much
Speaker 1: for being with us, Michael Smart, What can you tell
Speaker 1: us about the ongoing confrontation and challenges that the relationship
Speaker 1: between the United States and China face? Yeah, well, first,
Speaker 1: I would say it is undoubtedly positive that the two leaders,
Speaker 1: Donald Trump and Chi Jinping agreed uh to avoid further
Speaker 1: escalation for now and agree to have discussions. That's the
Speaker 1: good news. The not so good news is I'm not
Speaker 1: optimistic that they can actually tackle the agenda that the
Speaker 1: US has in mind over the ninety day period they
Speaker 1: set out for themselves. It involves some very difficult issue uh,
Speaker 1: preferential treatment of Chinese data and enterprises. You mentioned, violation
Speaker 1: of intellectual property rights, restriction on foreign ownership of Chinese enterprises.
Speaker 1: This is difficult stuff and I don't think ninety days
Speaker 1: is nearly enough to tackle that. And tweets about auto
Speaker 1: tariffs are really kind of a distraction from the core
Speaker 1: issue of structural reform. That's that's the first point. Well, Michael,
Speaker 1: I actually want to follow up on that. What is
Speaker 1: the primary agenda of the U S mean, is this
Speaker 1: a national security issue? Is this a trade deficit issue?
Speaker 1: You know, what sort of the primary driver here. It's
Speaker 1: a really good question. So the structural reforms are those
Speaker 1: that I mentioned, Those are the ones that U S,
Speaker 1: tr Lightheiser and Leuha will be focused on in their negotiation.
Speaker 1: But I have a real question about whether China has
Speaker 1: enough incentive to make those reforms if the only thing
Speaker 1: on offer is the reduction of US terroiffs. And the
Speaker 1: reason is because they've seen this dispute spread into the
Speaker 1: areas Lisa you just mentioned, which is national security, and
Speaker 1: in these areas they see the potential for even more
Speaker 1: harm UH than UH than comes from the U S tariffs,
Speaker 1: and here I'm talking about export controls, So basically the
Speaker 1: denial of US technologies to Chinese companies, tight restrictions on
Speaker 1: inbound Chinese investment into the United States. UH, the the
Speaker 1: the u S efforts around the world to encourage other
Speaker 1: company countries to keep Chinese telecommunications equip equipment out of
Speaker 1: their infrastructure. These and other efforts are are undertaken by
Speaker 1: national security officials and I think are of concern to
Speaker 1: the Chinese and will and will make the trade negotiation
Speaker 1: more difficult. Michael Smart, if there were to be Justice
Speaker 1: Department moves to announce indictments of hackers suspected of working
Speaker 1: for Chinese intelligence services and participating in espionage campaigns targeting
Speaker 1: US networks, what would that do to the talks? Well,
Speaker 1: certainly it would make them more challenging. But those efforts
Speaker 1: must continue and they must be on a a separate track.
Speaker 1: In the same way the detention and potential extradition of
Speaker 1: of Mrs Mung the cfo UM of Huawei UH. These
Speaker 1: are criminal law enforcement matters, national security matters, UH and UH.
Speaker 1: The timing certainly complicates the early stages of this discussion,
Speaker 1: but I don't expect them to be traded off at
Speaker 1: the negotiating table. You know, Michael Smart, since you did
Speaker 1: serve as international trade counsel and the credit staff of
Speaker 1: the of the U. S. Senate Committee on Finance, I'm
Speaker 1: curious from a partisan perspective your take on what sides
Speaker 1: are are for what trade negotiations, because interestingly, Democratic senators
Speaker 1: have come out in favor of the Huahwei prosecutions. Not
Speaker 1: that it's there say anyway, it's the federal court in
Speaker 1: the Eastern District in Brooklyn, But I'm just wondering, you know,
Speaker 1: what's the common ground here between Republicans and Democrats as
Speaker 1: to how the US China trade relationship has to change. Yeah,
Speaker 1: I think there's a lot of common ground. Um that
Speaker 1: the US can't follow the same policy that it's followed
Speaker 1: in the past of bilateral dialogues and discussions that did
Speaker 1: not produce adequate results, and so I think when they
Speaker 1: see this opportunity, uh, they're going to look for the
Speaker 1: same kinds of results, whether you're a Democrat are Republican,
Speaker 1: getting at structural issues that will improve US access to
Speaker 1: the China market, both in terms of exports, and investment
Speaker 1: for the long term. And I think there is a
Speaker 1: reluctance for the U s simply to be satisfied, you know,
Speaker 1: with a series of Chinese purchases of US goods to
Speaker 1: maybe make a temporary reduction in the trade deficits. They're
Speaker 1: looking for a more substantive deal. Michael, who dropped the
Speaker 1: ball then in not dealing with this earlier? Oh gosh,
Speaker 1: I mean, I think you have to go back twenty years.
Speaker 1: I mean, uh, certainly, when China acceded to the w
Speaker 1: t OH, there was an expectation that they were on
Speaker 1: the trajectory of economic reform. Uh. That changed in the
Speaker 1: late two thousands and became much more state centric. And
Speaker 1: this year will be the first year that the private
Speaker 1: sector has actually contracted as a share of the Chinese economy.
Speaker 1: So lots of people got it wrong and trying to
Speaker 1: see where the Chinese economy was headed. And now we're
Speaker 1: trying to go back and do the reforms that are
Speaker 1: necessary for China to be really part of the international
Speaker 1: trading system. If a if an executive of an American company,
Speaker 1: a chief financial officer, for example, called Michael Smart for
Speaker 1: advice on whether he or she should go on a
Speaker 1: trip to China for business. What would you say? I
Speaker 1: would say, can you postpone that trip to the second quarter.
Speaker 1: I'm mean, it's seriously, I really would I mean, I
Speaker 1: hope that the evidence UH and the case that they
Speaker 1: have against Mrs Mung becomes clear. From the early reports,
Speaker 1: it does appear that she has some individual responsibility for
Speaker 1: the alleged sanctions violations that occurred. If that's true, then
Speaker 1: then the course that the US is taking will be
Speaker 1: seen as justified and and just one off retaliation by
Speaker 1: the Chinese. That will be much harder for them to undertake.
Speaker 1: But we don't know that yet, and so for the
Speaker 1: time being, I would let the waters calm and see
Speaker 1: if you can take care of that business a couple
Speaker 1: of months down the road. And that's certainly the advice
Speaker 1: that a number of big companies are telling their top
Speaker 1: executives right now. Michael Smart, thank you so much for
Speaker 1: being with us. I love your perspective. Michael Smart managing
Speaker 1: director at Rock Creek Global Advisors in Washington, d C.
Speaker 1: He's worked with the Senate on crafting trade policies. So
Speaker 1: coming from a very much in FORO view, I want
Speaker 1: to turn our attention now to the big news of
Speaker 1: at least the beginning of the morning, and that was
Speaker 1: that China is a sensibly moving toward lowering tariffs on
Speaker 1: US made cars that are imported to the nation. Joining
Speaker 1: us down to talk about this is David Welch, Detroit
Speaker 1: bureau chief for Bloomberg. David, how big of a deal
Speaker 1: is this, considering the fact that imports to China's car
Speaker 1: market comprise an infinitesimal part of the cars that they sell. Yeah,
Speaker 1: I've sort of wondered every time there seems to be
Speaker 1: progress with a deal with China and car tariffs, why
Speaker 1: Ford and GM stocks getting nice boost and they both
Speaker 1: an up two or three percent at least today. Uh,
Speaker 1: in a time when they're out of favor. Um, they
Speaker 1: don't sell very much over here over there that's made
Speaker 1: here basically, and really most carmakers are that way because
Speaker 1: the tariffs have always been pretty big. Could they use
Speaker 1: some of their excess capacity maybe and sell it in
Speaker 1: China with lower tariffs? Possibly, but you still have shipping costs,
Speaker 1: You're still looking at a tariff. It's it's not a
Speaker 1: great business. No one's going to build a new plant
Speaker 1: in the US because they can sell all those cars
Speaker 1: in China. It does. It is a big deal for
Speaker 1: the German carmakers, especially BMW. BMW exports more cars from
Speaker 1: the United States than any carmaker and they sell a
Speaker 1: lot of SUVs in China that are made in South Carolina,
Speaker 1: so would certainly help them. It would certainly help DIME
Speaker 1: more with os Mercedes. And that's kind of about it.
Speaker 1: You're really not seeing a lot of cars go that way.
Speaker 1: It's maybe more of a sentiment play where Okay, if
Speaker 1: Trump is happy, maybe who will rattle the saber lesson?
Speaker 1: Do fewer things with UH, with tariffs on other commodities
Speaker 1: of products with other markets. I think maybe that's what's
Speaker 1: going on, David. The majority of the vehicles that are
Speaker 1: made by US automakers that are sold in China are
Speaker 1: made in China, right, right, and usually with a joint
Speaker 1: venture partner, So GM shares about half of its income
Speaker 1: with one of a couple of partners they have UH
Speaker 1: and UH, you know, it just makes more sense to
Speaker 1: do it over there because of the long shipping lines
Speaker 1: and that sort of thing, and the tariffs have always
Speaker 1: made it almost impossible. Cadillacs sold vehicles to start that
Speaker 1: were made in the US, but that was just kind
Speaker 1: of a way to introduce the brand to the Chinese
Speaker 1: consumer while getting plants up and running. They were actually
Speaker 1: going to make the cars over there. Between GM and Ford,
Speaker 1: who potentially benefits more from a potential thawing in Chinese
Speaker 1: tariffs or other restrictions and carmakers from the US going
Speaker 1: to China probably at this point forward because they're they're
Speaker 1: still trying to expand over there. GM got to jump
Speaker 1: by setting up shop in China in the nineties. Uh,
Speaker 1: and and word is also manufacturing vehicles over there. But
Speaker 1: if if the tariff barriers do come down, there are
Speaker 1: other vehicles that they may want to want to send
Speaker 1: from here to there. While they get manufacturing up and running.
Speaker 1: It's not a bad way to test the market and
Speaker 1: see if if consumers over there like a certain model.
Speaker 1: Um and and and so I think given it Forward's
Speaker 1: kind of behind GM in developing the brand, and a
Speaker 1: consumer following in China could help them more. How about Tesla,
Speaker 1: does this really benefit them? It could, although they're talking
Speaker 1: about manufacturing over there, and uh, they've got plans for
Speaker 1: a factory in China underway. But yeah, it certainly would
Speaker 1: help them because even though the cars are already expensive
Speaker 1: um and and wealthier consumers are buying them, are pretty
Speaker 1: big tariffs they've had to pay on things like the
Speaker 1: models and Model three with it, you know, getting up
Speaker 1: to production. I'm sure they'd love to sell cars in China,
Speaker 1: and tariff is still a pretty big disadvantage. But when
Speaker 1: you're one of the few companies selling an all electric car,
Speaker 1: um it certainly would help them kick start things until
Speaker 1: they can get the cash and get everything going to
Speaker 1: get a new factory open running in China. And by
Speaker 1: the way, we know how long it tastes Testa to
Speaker 1: get full production and a new factory going, so they
Speaker 1: could be exporting cars from here for quite a while
Speaker 1: if that was the plan. David Welch, the cars that
Speaker 1: are made by US automobile makers are not necessarily cars
Speaker 1: right there. Pickup trucks, isn't that they make here in
Speaker 1: the United States and support utility vehicles, Yeah, quite a
Speaker 1: few of them. Sure, those the kind of cars that
Speaker 1: the Chinese consumer wants. Chinese consumers aren't buying pickup trucks
Speaker 1: the way Americans do, but SUVs absolutely in a lot
Speaker 1: of ways Chinese consumer tastes are very similar to what
Speaker 1: Americans like before the suv craze. They liked big, long
Speaker 1: sedans and that that was always a truly American thing.
Speaker 1: To go back to the forties, fifties and sixties. Smell
Speaker 1: really fifties and sixties here there were British political cartoons
Speaker 1: about these ridiculously long American sedans, and Chinese have always
Speaker 1: the Chinese consumers always liked the big sit in and
Speaker 1: then when there were many more SUVs available, they started
Speaker 1: latching onto those. And and it's very similar, not not
Speaker 1: quite the urban cowboy pickup market over there, but that
Speaker 1: could develop a construction continues, uh and you know, once
Speaker 1: the economy kind of gets back into overdrive there. But
Speaker 1: it's very much as for utility vehicle market at this point.
Speaker 1: Thanks very much, David Well, Charge Detroit Bureau Chief for Bloomberg.
Speaker 1: Thanks for listening to the Bloomberg P and L podcast.
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Speaker 1: on Twitter at pim Fox. I'm on Twitter at Lisa
Speaker 1: abramowits one before the podcast. You can always catch us
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