WEBVTT - CPI, Auto Prices, Crypto, and ESG (Podcast) 0:00:00.800 --> 0:00:04.040 Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, alongside 0:00:04.040 --> 0:00:06.920 my co host Matt Miller. Every business day, we bring 0:00:06.960 --> 0:00:11.520 you interviews from CEOs, market pros, and Bloomberg experts, along 0:00:11.520 --> 0:00:15.560 with essential market moving news. Find the Bloomberg Markets Podcast 0:00:15.600 --> 0:00:18.439 on Apple Podcasts or wherever you listen to podcasts, and 0:00:18.480 --> 0:00:21.759 at Bloomberg dot com slash podcast. Let's check in with 0:00:21.800 --> 0:00:25.000 Ira Jersey. He actually thinks about this stuff all day 0:00:25.079 --> 0:00:27.680 when he's not thinking about soccer. Uh. That's because he's 0:00:27.720 --> 0:00:30.520 a US interest rate strategist for Bloomberg Intelligence, so we 0:00:30.600 --> 0:00:33.159 pay him to think about this stuff. So, Ira, you 0:00:33.200 --> 0:00:35.760 looked at the data this morning, and I'm gonna ask 0:00:35.760 --> 0:00:38.519 you to put your little FED chairman hat on. What 0:00:38.560 --> 0:00:42.040 are you taken away from today's data? Uh? Really not 0:00:42.320 --> 0:00:43.960 very much. I mean I think this is more or 0:00:44.040 --> 0:00:47.160 less what the Fed was thinking. Um. You know, Matt 0:00:47.159 --> 0:00:49.280 just mentioned a second ago that you know, inflation is 0:00:49.320 --> 0:00:51.880 not coming down very quickly. That's you know, very true. 0:00:51.920 --> 0:00:54.080 And I think that that's always been the risk and 0:00:54.120 --> 0:00:57.080 the danger is that, um, you know, the market was 0:00:57.200 --> 0:01:00.080 pricing for inflation to come down much faster than it 0:01:00.160 --> 0:01:02.200 was ever likely to come down, and that's one of 0:01:02.200 --> 0:01:04.880 the reasons why what you're seeing today and and the 0:01:04.880 --> 0:01:07.280 reason why two year yields are are off so much, 0:01:07.360 --> 0:01:11.039 is that we're now pricing out some potential cuts later 0:01:11.040 --> 0:01:13.000 in the year. And I think that that's probably the 0:01:13.080 --> 0:01:15.440 right move. I do think that the FED is going 0:01:15.520 --> 0:01:17.200 to do what it says and hike two or three 0:01:17.200 --> 0:01:20.200 more times at twenty five basis points each then basically 0:01:20.240 --> 0:01:22.360 do nothing for the better part of the year. And 0:01:22.360 --> 0:01:24.680 and the market is starting to come around to that 0:01:24.720 --> 0:01:27.000 way of thinking, which you know, Paul, I've told the 0:01:27.080 --> 0:01:30.600 stock market due the last six weeks, not the stock market. 0:01:30.760 --> 0:01:34.639 I mean, we rallied yesterday into this inflation print. Today 0:01:34.640 --> 0:01:37.960 we got it and it was at expectations are higher 0:01:38.000 --> 0:01:42.039 than expected, and were continue to see prices rise. I 0:01:42.120 --> 0:01:45.080 just can't work it out. What what's the disconnect between 0:01:45.520 --> 0:01:49.440 stocks and bonds? Uh, well, I can't. I can't really 0:01:49.440 --> 0:01:53.120 speak about equity valuations, but I think maybe, um, you know, 0:01:53.200 --> 0:01:55.160 maybe part of it is the idea that there still 0:01:55.200 --> 0:01:58.200 is some some pricing power for certainly for some goods 0:01:58.240 --> 0:02:00.480 and services, um you know. But I can tell you 0:02:00.520 --> 0:02:02.920 that that from the rates perspective, you know, the reason 0:02:02.920 --> 0:02:05.680 why you're seeing this deeper inversion of the yield curve 0:02:05.680 --> 0:02:08.799 where now the deepest inverted that we've been in decades UM, 0:02:08.960 --> 0:02:11.360 and we're at the and and we're likely to see 0:02:11.360 --> 0:02:13.440 more um. You know, we have fair value on the 0:02:13.480 --> 0:02:16.120 two year yield assuming that the Fed does what we 0:02:16.160 --> 0:02:18.600 think it will do at around four so we still 0:02:18.600 --> 0:02:21.680 have another five basis points to go here in in 0:02:21.680 --> 0:02:24.040 the two year yield. And you know, we're looking for 0:02:24.160 --> 0:02:26.320 ten year yield maybe to get up towards three ninety, 0:02:26.400 --> 0:02:29.400 but not break four percent. So that's an interesting you know, 0:02:29.440 --> 0:02:32.200 I think a really interesting dynamic where you can see 0:02:32.600 --> 0:02:34.880 very inverted yield curves. You wind up with in an 0:02:35.240 --> 0:02:38.880 environment where um, where that that probably persists for most 0:02:38.880 --> 0:02:41.839 of the year UM and people are gonna be saying like, hey, 0:02:41.840 --> 0:02:43.160 that that's a signal that we're going to be in 0:02:43.200 --> 0:02:45.760 a recession blah blah blah, and and you know, maybe so, 0:02:46.200 --> 0:02:47.800 but it's going to take a long time for that 0:02:47.840 --> 0:02:50.359 to filter through to the to the rest of the market. 0:02:50.360 --> 0:02:53.799 And maybe that's what the equity markets uh really thinking here, 0:02:53.840 --> 0:02:55.320 is that we're not going to be in a recession, 0:02:55.360 --> 0:02:57.680 that there's not going to be a very hard landing. 0:02:58.120 --> 0:03:01.080 I mean, if you look at the ursion, it's crazy 0:03:01.160 --> 0:03:04.240 that this is the most inversion we've been as far 0:03:04.280 --> 0:03:07.960 as I can see since what the seventies, because you 0:03:08.040 --> 0:03:12.360 had so the early eighties, which means that you know, 0:03:12.480 --> 0:03:16.120 the bursting of the Internet bubble was nothing on this. 0:03:16.400 --> 0:03:20.360 You know, nationwide housing bust, well, global housing bust uh 0:03:20.440 --> 0:03:23.799 in the two thou eight global financial crisis didn't hold 0:03:23.840 --> 0:03:27.160 a candle to this, right, It's it's only this recession 0:03:27.200 --> 0:03:29.280 that gets us back to like the blow up of 0:03:29.320 --> 0:03:32.600 Breton Woods. Well, I think though, Matt, you know, what 0:03:32.639 --> 0:03:34.360 we have to appreciate is that this is also the 0:03:34.360 --> 0:03:36.480 first time since the early eighties that we've had inflation 0:03:36.560 --> 0:03:39.560 like this, right, and and it's coming down so uh 0:03:39.640 --> 0:03:42.760 so slowly that the market is trying to adjust to 0:03:43.040 --> 0:03:46.920 what is the near term outlook for both inflation and 0:03:47.280 --> 0:03:49.280 you know, policy rates, which is that they're going to 0:03:49.480 --> 0:03:51.440 it's going to remain a little bit higher for longer 0:03:51.480 --> 0:03:54.640 than the market was initially thinking versus where are we 0:03:54.680 --> 0:03:57.240 going to be in four years? Um So, in four 0:03:57.320 --> 0:04:00.160 years we might be in a deflationary environment and you know, 0:04:00.160 --> 0:04:02.640 we're not there yet, and hopefully we won't get there, 0:04:02.680 --> 0:04:04.880 but but you can you can see an environment where 0:04:04.880 --> 0:04:09.560 we go back more to like es level of interest 0:04:09.640 --> 0:04:12.480 rates and of of an economy where you know, a 0:04:12.520 --> 0:04:15.160 five or six percent mortgage is just normal. Look, I 0:04:15.560 --> 0:04:17.240 keep on bringing this up. My first mortgage that I 0:04:17.279 --> 0:04:19.839 got in the late nineties was seven and I thought 0:04:19.880 --> 0:04:22.720 that was a decent rate. You know, so so, but 0:04:22.720 --> 0:04:25.640 but what we've gotten accustomed to very low interest rates, right, 0:04:25.680 --> 0:04:28.000 so we have to get readjusted to a higher interest 0:04:28.080 --> 0:04:32.040 rate environment, which especially considering the prices paid. You know, uh, 0:04:33.360 --> 0:04:37.080 who was it iceman Um from the Big Short Steve 0:04:37.120 --> 0:04:39.720 Eisman was. I keep bringing this up, but on the 0:04:39.760 --> 0:04:42.800 Odd Lots podcast he said, I do the back of 0:04:42.839 --> 0:04:46.599 the napkin math from three percent rates to the seven 0:04:46.600 --> 0:04:50.200 percent rate mortgage that we're looking at now, housing prices 0:04:50.200 --> 0:04:54.480 have to drop thirty in order to make up for that. 0:04:54.680 --> 0:04:58.159 People don't maybe realize what a big jump that is. Well, 0:04:58.200 --> 0:05:00.159 but in fairness too, you have to also look the 0:05:00.160 --> 0:05:02.040 income side of the equation, right, because if you look 0:05:02.040 --> 0:05:05.240 at something like housing affordability. And Erica Heidelberg, who's our 0:05:05.240 --> 0:05:07.479 mortgage strategist, who reports to me she's been doing some 0:05:07.520 --> 0:05:10.120 great work on this. Um. You have to appreciate that 0:05:10.320 --> 0:05:13.279 affordability is certainly lower because of the higher interest rates, 0:05:13.279 --> 0:05:15.880 but you also have have wages that are growing at 0:05:15.880 --> 0:05:17.520 six percent a year, right, So if you think about 0:05:17.520 --> 0:05:20.440 it from an affordability perspective, it doesn't necessarily have to drop. 0:05:20.960 --> 0:05:23.200 Does it have to drop you know, some level you know, 0:05:23.279 --> 0:05:26.960 five and fiftent? Yeah? Maybe, but we also rallied yea, 0:05:27.040 --> 0:05:29.000 you know, but but houseprace has also went up massively 0:05:29.000 --> 0:05:30.919 over the last couple of years as well, so you 0:05:30.920 --> 0:05:33.680 would expect potentially some type of adjustment. And quite frankly, 0:05:33.760 --> 0:05:36.040 that's what the FET is trying to engineer right there, 0:05:36.040 --> 0:05:37.479 trying to get some of the froth out of the 0:05:37.520 --> 0:05:41.640 real economy. Um. That hasn't necessarily translated as directly to 0:05:41.760 --> 0:05:44.719 the financial economy, right, That's one reason why the equity 0:05:44.760 --> 0:05:47.159 market is maybe where it is at the moment um. 0:05:47.279 --> 0:05:49.760 But the but but we're still much lower, right, We're 0:05:49.760 --> 0:05:52.440 still very far off the highs, and in terms of 0:05:52.440 --> 0:05:55.119 of equity markets, we haven't we're not making new highs 0:05:55.200 --> 0:05:58.320 yet and um, and an environment where we're not going 0:05:58.320 --> 0:06:01.280 to fall into recession, than then try waters probably not 0:06:02.240 --> 0:06:06.320 can't be completely unexpected. All right, so, Ira, super bowls 0:06:06.360 --> 0:06:08.839 over pitchers and catchers not yet, so I can actually 0:06:08.839 --> 0:06:11.080 focus a little bit in European soccer or any soccer. 0:06:11.200 --> 0:06:14.280 What am I? What am I watching this coming weekend? Um? 0:06:14.400 --> 0:06:16.200 You know I haven't looked at the fixtures for this weekend, 0:06:16.240 --> 0:06:19.159 but I know after this past weekend that the battle 0:06:19.200 --> 0:06:20.920 at the top of the Premier League is heating up 0:06:20.920 --> 0:06:23.400 where you don't have Manchester City up there at the moment, 0:06:23.440 --> 0:06:26.159 you have Arsenal and Manchester United currently one and two 0:06:26.400 --> 0:06:28.960 in the in the table. So he's gotta keep mean. 0:06:29.040 --> 0:06:31.640 John Farrow is pretty happy, I think an Arsenal guy. 0:06:33.040 --> 0:06:38.760 He's a Chelsea guy, but um Arsenal because Manchester UH 0:06:39.040 --> 0:06:41.800 United about to be bought by Dubai, right, and don't know, 0:06:42.520 --> 0:06:45.680 the little Easterner has already owned Manchester City a lot. 0:06:45.760 --> 0:06:47.960 So all right, Ira, thanks so much for joining us, 0:06:47.960 --> 0:06:51.640 our Jersey chief US interest rate strategist for Bloomberg Intelligence, 0:06:52.000 --> 0:06:53.960 uh breaking down some of the inflation data and what 0:06:54.120 --> 0:06:56.640 how the FED might interpret that data going forward and 0:06:56.720 --> 0:07:00.560 next upcoming meetings, well more coming up. This is Bloomber. 0:07:04.480 --> 0:07:08.680 I am in a bit of a tough spot, right, 0:07:08.720 --> 0:07:11.840 now I'm looking for a couple of cars that you 0:07:11.880 --> 0:07:13.800 have a couple of cars I have to have. Well, 0:07:13.840 --> 0:07:17.920 there's there's certain first, especially the Dodge Challenger. I have 0:07:18.280 --> 0:07:26.000 to get um not really uh before they are done 0:07:26.080 --> 0:07:27.880 making them. So this is the last year for the 0:07:27.920 --> 0:07:30.600 six point four Leader hemmy, and I must have that's 0:07:30.640 --> 0:07:34.600 what I hear. A Challenger scat pack wide body. Tough 0:07:34.640 --> 0:07:37.640 to find allocations for that, and the prices are off 0:07:37.680 --> 0:07:40.120 the charts. I also want a Bronco, but I was 0:07:40.160 --> 0:07:42.400 at the Ford dealership the other day and they said, 0:07:42.520 --> 0:07:46.360 look forwards, putting a stop to the good combinations with 0:07:46.440 --> 0:07:50.800 the big sasquatchas package you know. Um, they're just giving 0:07:50.800 --> 0:07:53.720 out the little ones right now. So that's that's hard. 0:07:53.920 --> 0:07:56.400 And that's not even getting into electric car territory. Because 0:07:56.400 --> 0:07:58.520 if I wanted a Lightning right now, or if I 0:07:58.520 --> 0:08:01.600 wanted to order a Silver to e V, I mean, 0:08:01.760 --> 0:08:04.760 I would be paying probably a hundred grand. It's crazy. 0:08:04.960 --> 0:08:07.400 Prices are off the charts right now. I want to 0:08:07.400 --> 0:08:10.640 bring in David Welch, who wrote our Big Take story 0:08:10.760 --> 0:08:15.280 today about this pricing situation. Car prices hit record highs 0:08:15.320 --> 0:08:18.320 as automaker's limit output UM and we're seeing it really 0:08:18.360 --> 0:08:22.679 across the industry. But evs play a big, big piece 0:08:23.080 --> 0:08:26.400 into this right now. David joined us out of Detroit, 0:08:26.480 --> 0:08:29.640 the motor city obviously, So David, what are you finding 0:08:29.720 --> 0:08:32.439 Because we've been in this situation for a couple of 0:08:32.559 --> 0:08:35.240 years now, our prices are just ramping up and it 0:08:35.280 --> 0:08:39.920 doesn't seem like there's any end in sight. Yeah, they've 0:08:40.120 --> 0:08:43.520 they've been going nuts since really the pandemic started. A 0:08:43.520 --> 0:08:46.920 lot of it is production related, but going forward and 0:08:47.000 --> 0:08:50.200 even to a circumstance right now, car companies want to 0:08:50.440 --> 0:08:55.959 keep productions somewhat constrained because they've learned that making fewer 0:08:56.040 --> 0:08:58.120 vehicles and selling them a big prices is just a 0:08:58.160 --> 0:09:01.040 way better business than atting deal or loss with a 0:09:01.080 --> 0:09:04.120 bunch of production and hoping it will sell and when 0:09:04.120 --> 0:09:07.840 it doesn't, inevitably putting four or five dollars in rebates 0:09:07.840 --> 0:09:11.160 out there to make it move. Um, But that's how 0:09:11.200 --> 0:09:14.120 they've always done it. There's no way they're going to 0:09:14.240 --> 0:09:20.280 maintain this discipline, are they. Well, we'll see, but let's 0:09:20.280 --> 0:09:23.959 look at a few numbers first. So Too and General 0:09:24.000 --> 0:09:26.880 Motors say that the industry probably has enough semi conductor 0:09:26.960 --> 0:09:29.920 chips this year in the US, let's start with to 0:09:29.920 --> 0:09:32.640 make fifteen million vehicles, which is two to two and 0:09:32.679 --> 0:09:36.680 a half million fewer than they usually make, you know, 0:09:37.000 --> 0:09:41.360 years with pretty strong economies and low unemployment like this one, Um, 0:09:41.400 --> 0:09:43.200 And that's been the case for the past couple of years. 0:09:43.200 --> 0:09:45.360 In fact, they only sold about thirteen million last year. 0:09:45.960 --> 0:09:48.840 So there's a lot of pent up demand out there, 0:09:48.840 --> 0:09:51.320 people looking for cars, people like you, who either couldn't 0:09:51.320 --> 0:09:53.760 find what they wanted because it didn't exist, or they 0:09:53.760 --> 0:09:56.079 didn't find what they wanted but a dealer was charging 0:09:56.080 --> 0:09:57.719 two thousands over stick er and they walked, and for 0:09:57.840 --> 0:10:00.439 that they just keep driving their card wait until prices 0:10:00.480 --> 0:10:04.280 came back. What I would give two that would be 0:10:04.320 --> 0:10:07.760 a dream come true. I'm hearing, David, I'm hearing on 0:10:07.840 --> 0:10:12.080 the Challenger, Um, I'm hearing the best deal I've heard 0:10:12.080 --> 0:10:15.080 so far as five thousand over sticker. And good friends 0:10:15.120 --> 0:10:18.640 of mine whom I've grown up with since elementary school 0:10:18.720 --> 0:10:23.240 are saying ten to twenty k over. I mean, look, 0:10:23.559 --> 0:10:26.599 there's there are some crazy galaging. Those are the exceptions. 0:10:26.640 --> 0:10:29.040 And I was searching for a key for my daughter, 0:10:29.640 --> 0:10:32.319 helping her find a car, and you know, she ended 0:10:32.400 --> 0:10:36.559 up having to buy some stupid thing where you basically 0:10:36.559 --> 0:10:39.040 scotch guard the seats for four d over sticker and 0:10:39.360 --> 0:10:41.880 that was it. And you know some are one or 0:10:41.880 --> 0:10:44.120 two thousand over sticker. A lot of that has actually 0:10:44.120 --> 0:10:46.880 gone away. So prisons are sockening up a little. But 0:10:46.960 --> 0:10:48.880 there's just there's not enough production out there and still 0:10:48.960 --> 0:10:50.920 enough pent up demand where these high prices are probably 0:10:50.960 --> 0:10:56.559 gonna last this year and maybe into and that's when 0:10:56.720 --> 0:11:00.360 we'll kind of figure out do they really have disciplined Yeah, 0:11:00.440 --> 0:11:03.000 that's kind of production. I mean, I'm just looking at 0:11:03.160 --> 0:11:05.120 you know, you have the Big Take story today out 0:11:05.160 --> 0:11:07.319 on this topic. So you can find that at bloomber 0:11:07.360 --> 0:11:10.120 dot com, Slash Big Take or ni space Big Take 0:11:10.200 --> 0:11:12.800 go on the Bloomberg terminal, and it is a deeply 0:11:12.840 --> 0:11:15.920 reported story here. But it just comes down to, I 0:11:15.960 --> 0:11:18.720 think back to the Henry Ford. I mean, that's the 0:11:18.760 --> 0:11:23.680 business model. Crank out, seventeen millions are and you move them. 0:11:23.720 --> 0:11:25.360 But I mean I understand that this is a better 0:11:25.400 --> 0:11:27.760 economic model. David. I will tell you that Paul has 0:11:27.760 --> 0:11:31.079 been pushing for automakers to get back to peak start 0:11:31.440 --> 0:11:32.920 for a couple of years now, so it's one of 0:11:33.040 --> 0:11:34.920 this is along with working from home. This is one 0:11:34.960 --> 0:11:38.600 of his pet peeves. And and there's no shortages of 0:11:39.240 --> 0:11:41.560 chips and stuff, right, I mean so there still are, 0:11:41.679 --> 0:11:46.000 right David, there's still Yeah, there's still It's like the 0:11:46.080 --> 0:11:48.160 chip shortage. It is not binary. We don't go from 0:11:48.200 --> 0:11:50.800 having nuns having as many as you possibly wanted things 0:11:50.840 --> 0:11:53.640 all over by the roadside like that. We we're like 0:11:53.720 --> 0:11:57.280 I said, we're going to go from having a dearth 0:11:57.360 --> 0:11:59.360 of chips to being able to make about fifteen million 0:12:00.080 --> 0:12:03.000 US this year. That's not near peak ins fact, that's 0:12:03.080 --> 0:12:05.760 twelve fifty percent Bulle peak. So if you have if 0:12:05.760 --> 0:12:07.920 you're still twelve to fifty Bullie peak in terms of 0:12:07.920 --> 0:12:10.280 what you canm produce this year, and there's still a 0:12:10.280 --> 0:12:12.640 lot of consumers out there, like you guys who want 0:12:12.640 --> 0:12:16.720 a car, then it's still a sellers market. And I'll 0:12:16.760 --> 0:12:19.480 throw one more thing at you. This year and next 0:12:19.559 --> 0:12:22.040 we're gonna have about five or six hundred thousand fewer 0:12:22.240 --> 0:12:25.280 vehicles coming off lease because automakers and fevers were not 0:12:25.440 --> 0:12:29.000 leasing as much. So people can the cars they purchased, 0:12:29.000 --> 0:12:30.760 they can hold longer than at least least you gotta 0:12:30.840 --> 0:12:32.800 you gotta buy the car, get something new. It's just 0:12:32.840 --> 0:12:36.760 what's the contract siss. So the used market, even though 0:12:36.760 --> 0:12:41.280 that has been softening up a bit, is still not 0:12:41.360 --> 0:12:43.600 going to come roaring back as a source for cars 0:12:43.600 --> 0:12:45.520 because you don't have as many coming off least. I'm 0:12:45.559 --> 0:12:47.640 not saying prices won't weaken this year for new and 0:12:47.760 --> 0:12:49.560 used cars. I think they will. But in order for 0:12:49.720 --> 0:12:51.480 to get really affordable, which is the whole point of 0:12:51.520 --> 0:12:53.600 the big take, for middle class buyers to be able 0:12:53.600 --> 0:12:55.360 to afford this and get a payment from the current 0:12:55.440 --> 0:12:57.679 rate of seven seventy bucks a month down to more 0:12:58.080 --> 0:13:01.040 affordable four month, prices will need to soften the world 0:13:01.040 --> 0:13:04.199 this year. They need to collapse. They're not, they're not, 0:13:04.320 --> 0:13:07.520 but we do see some softening. You put up point 0:13:07.559 --> 0:13:10.199 out in the story, and I remember, um, Paul and 0:13:10.280 --> 0:13:13.800 I spoke with Keith Notton when he when he when 0:13:13.800 --> 0:13:16.640 he had talked just talked to Ford about cutting prices 0:13:16.640 --> 0:13:19.960 on the Mockee that and they told him in response 0:13:20.080 --> 0:13:22.360 this question, why, um, well, we got to do it 0:13:22.360 --> 0:13:24.920 because Tesla just cut prices. So you're starting to see 0:13:24.960 --> 0:13:29.920 little cracks, right, And the question is can uh you know, 0:13:30.080 --> 0:13:33.880 if if Jim Farley and Elon Musk are already um 0:13:34.040 --> 0:13:39.760 you know, are already falling falling out of rank um 0:13:39.880 --> 0:13:43.400 can Mary Barra and Mark Royce and the rest of 0:13:43.440 --> 0:13:47.679 the industry. You know, hold hold hold the line for 0:13:47.800 --> 0:13:51.000 the moment. I think the EV market and the internal 0:13:51.040 --> 0:13:54.160 combustion vehicle market are kind of two different markets. Uh. 0:13:54.200 --> 0:13:56.760 And also after after Chess of cut prices, they went 0:13:56.760 --> 0:14:00.520 back and it's not increase um. There are some other 0:14:00.600 --> 0:14:02.960 dynamics going on there. Some of the price decreases we 0:14:03.000 --> 0:14:06.320 saw from Forward and Tessa were so they can get 0:14:06.320 --> 0:14:08.920 their sticker prices under the thresholds where their customers can 0:14:08.960 --> 0:14:12.280 get federal tax credits. So you drop your the price 0:14:12.320 --> 0:14:14.079 of your car by three thousand, you get under a 0:14:14.120 --> 0:14:16.320 certain threshold, and the government gives that from swing under 0:14:16.320 --> 0:14:19.840 seventy bucks or bucks whatever, you know, whatever it comes 0:14:19.880 --> 0:14:22.480 out to for that vehicle, and it's an even bigger 0:14:22.480 --> 0:14:25.240 bonus and they'll sell more thanks to Uncle Sam. So 0:14:25.320 --> 0:14:27.520 there was some of that going on, and I do 0:14:27.640 --> 0:14:31.360 think Look, Test was in a funky position right now. 0:14:31.560 --> 0:14:34.360 They have a ton of production capacity coming online that's 0:14:34.400 --> 0:14:38.080 pretty new, and and the plant now some types hasn't 0:14:38.080 --> 0:14:41.440 even really begun to get close to full production. So 0:14:41.560 --> 0:14:44.280 Ellen saw his sales goals being missed. He wanted to 0:14:44.280 --> 0:14:47.520 grow sales. He only grew up by forty still great 0:14:47.520 --> 0:14:50.720 by anyone else's standards, but that was it um and 0:14:50.760 --> 0:14:52.760 he didn't like that. He has a ton of production 0:14:52.800 --> 0:14:56.040 coming online. All of his vehicles, particularly the models and 0:14:56.040 --> 0:14:59.720 the modeloques haven't been redesigned in almost a decade. The 0:14:59.720 --> 0:15:03.120 model as almost told enough to shave. So he's got 0:15:03.440 --> 0:15:07.040 and look at his cars. People love them. They're good products, 0:15:07.080 --> 0:15:09.840 but they all go like so the like tests with 0:15:09.960 --> 0:15:13.040 vehicles are different sizes and shapes of the same sauceage. 0:15:13.640 --> 0:15:16.240 So you know, I think he's got three things going on. 0:15:16.360 --> 0:15:19.520 He does have new competition coming in from Foard, GM, 0:15:19.680 --> 0:15:23.720 Volkswagen out uh BMW Mercendies had vehicles out the Koreans 0:15:23.760 --> 0:15:25.840 Hunt i KA have some very good products out there, 0:15:26.040 --> 0:15:27.800 so that he has competition, He has a ton of 0:15:27.800 --> 0:15:29.960 compassion becoming online, and he has I'm fresh in any 0:15:29.960 --> 0:15:32.040 of his vehicles. All of that, all of that is 0:15:32.440 --> 0:15:35.800 any other vehicle market, any of the vehicles segment says 0:15:35.800 --> 0:15:37.840 you gotta cut prices, and I think that David Real 0:15:37.920 --> 0:15:41.200 Real quickly thirty seconds. What are consumers doing today? Are they? 0:15:41.200 --> 0:15:43.240 Are they paying a hundred thousand dollars for a pickup trend? 0:15:44.920 --> 0:15:47.960 Some of them are. Yeah, So like there are a 0:15:48.000 --> 0:15:52.280 variety of things going on. People are buying expensive vehicles, 0:15:52.320 --> 0:15:55.160 but that's your wealthy or more fooling consumers. A lot 0:15:55.200 --> 0:15:58.520 of your middle class consumers are either writing or vehicle 0:15:58.560 --> 0:16:01.120 for another year or two and just putting money into repairs, 0:16:01.560 --> 0:16:04.560 or they're buying like eight nine year old vehicles in 0:16:04.600 --> 0:16:06.800 the youth markets because that's where you can really get affordably. 0:16:06.880 --> 0:16:10.160 Right now, all right, amazing stuff. I mean, I'll be 0:16:10.280 --> 0:16:13.840 it's fascinating to see if this industry can maintain its discipline. Uh, 0:16:13.880 --> 0:16:17.440 but we'll see. David Watch, Detroit Bureau Chief or Bloomberg News. 0:16:20.440 --> 0:16:23.040 All right, let's talk crypto and there's a million ways 0:16:23.080 --> 0:16:26.920 we can go here, but I want to go crypto regulation. 0:16:27.160 --> 0:16:29.760 I mean, is this a space that's going to be regulated? 0:16:29.880 --> 0:16:32.200 Needs to be regulated? For all that stuff? We turn 0:16:32.240 --> 0:16:35.800 to Nathan Dean, He's a senior policy analysts for Bloomberg Intelligence. Nathan, 0:16:36.120 --> 0:16:38.400 you're the smart guy in the room. BS and management 0:16:38.400 --> 0:16:40.520 from Purdue Heckla Hoops team. This year. Where did that 0:16:40.560 --> 0:16:43.040 come from? And then an NBA from Chicago, So you 0:16:43.040 --> 0:16:45.360 are over educated to that to the max. What do 0:16:45.400 --> 0:16:47.880 you make of all this crypto space in terms of regulation? 0:16:48.520 --> 0:16:51.000 You know, it sounds like there's a massive crackdown coming. 0:16:51.000 --> 0:16:53.240 And I mean just putting it in Purdue terms, it's 0:16:53.280 --> 0:16:56.160 like if produced you know, playing the uh you know, 0:16:56.240 --> 0:16:58.280 one of the smallest teams out there. It's just one 0:16:58.280 --> 0:17:00.080 of those things where you know, we've seen over the 0:17:00.120 --> 0:17:02.400 past year the SEC c come in and register, come 0:17:02.440 --> 0:17:05.080 and talk to us. In the industry largely has not, 0:17:05.359 --> 0:17:08.200 and just within the last few months we've started to 0:17:08.240 --> 0:17:10.560 see the SEC start to crack the whip. One of 0:17:10.640 --> 0:17:12.480 the things that they've done is they've sent out what 0:17:12.560 --> 0:17:15.920 are known as wells notices out to many different crypto players. 0:17:16.080 --> 0:17:19.160 In fact, packs so's announced that they had received one. Essentially, 0:17:19.160 --> 0:17:21.320 what this is is the SEC has decided we're going 0:17:21.359 --> 0:17:23.879 to take an enforcement action against you, but we're just 0:17:23.920 --> 0:17:25.800 giving you a heads up so that you can give 0:17:25.880 --> 0:17:28.280 us a written response of why we shouldn't do this. 0:17:28.600 --> 0:17:31.479 It's not going to stop the SEC, but we are 0:17:31.480 --> 0:17:33.840 going to see a lot more enforcement actions between now 0:17:34.200 --> 0:17:36.359 and the next few months. And that's really going to 0:17:36.400 --> 0:17:39.240 issue a further chill to the industry. I get how 0:17:39.320 --> 0:17:43.200 staking could be considered a security, certainly staking as a service, 0:17:43.920 --> 0:17:47.359 um in the cracking case. It's harder for me to 0:17:47.480 --> 0:17:51.359 grasp how stable coin is a security because you're not 0:17:51.400 --> 0:17:55.240 expecting any return from a stable coin. No. So, actually, 0:17:55.359 --> 0:17:57.600 sec each chairman Gary Ginsler gave a speech last year 0:17:57.600 --> 0:18:00.000 where you essentially insinuated a stable coins of money mark 0:18:00.040 --> 0:18:03.520 good funds and money market funds has its own, you know, 0:18:03.560 --> 0:18:07.119 regulatory regime, and in the sec S eyes, you know 0:18:07.160 --> 0:18:10.440 potentially they should be following that money market reform. Now, 0:18:10.480 --> 0:18:12.439 if you assume that they're not a security, well then 0:18:12.480 --> 0:18:14.480 they could be considered a deposit. And if they are 0:18:14.480 --> 0:18:17.880 a deposit, then there are other types of banking regulations 0:18:17.880 --> 0:18:20.440 that need to apply here. And so I think when 0:18:20.440 --> 0:18:22.880 you move forward with stable coins, the idea here is 0:18:22.880 --> 0:18:25.160 is that there's got to be some type of regulation. 0:18:25.520 --> 0:18:27.959 You can't have nothing. But the question is what does 0:18:28.000 --> 0:18:30.840 it look like now. I still believe that Congress will 0:18:30.840 --> 0:18:33.840 eventually move forward on a stable coin regulation. In fact, 0:18:34.119 --> 0:18:36.359 as we speak right now, the Senate Banking Committee is 0:18:36.400 --> 0:18:39.880 talking about this. But you know, outside of stable coins. 0:18:39.920 --> 0:18:42.959 For the rest of the crypto industry, it's really not 0:18:43.000 --> 0:18:46.040 looking good right now in terms of new regulations. Is 0:18:46.080 --> 0:18:51.879 this to what extent? Is this maybe increased regulatory attention 0:18:52.240 --> 0:18:55.080 a function of FTX going bust and Sam Bankman freedom 0:18:55.119 --> 0:18:58.280 all that mess. Oh? Absolutely, I mean this gave it 0:18:58.359 --> 0:19:00.600 was like given the politicians a piece of andy and 0:19:00.680 --> 0:19:03.080 making them all excited because it gave them a talking point. 0:19:03.440 --> 0:19:06.119 You know, they can understand the failure of a company. 0:19:06.119 --> 0:19:09.520 They understand that there are over nine million creditors out 0:19:09.520 --> 0:19:12.399 there who potentially may not get their funds back. And 0:19:12.440 --> 0:19:15.760 this is essentially giving politicians the ability to say, we 0:19:15.840 --> 0:19:19.280 need new regulation, we need customer protections, we need anti 0:19:19.359 --> 0:19:22.439 money launching. The problem is that there are multiple different 0:19:22.440 --> 0:19:25.359 ideas out there right now. Senator Brown is talking about 0:19:25.400 --> 0:19:27.520 doing this. Senator Tim Scott, the ranking member for the 0:19:27.560 --> 0:19:31.240 Senate Banking Committee, was talking about putting in new customer protections. 0:19:31.480 --> 0:19:35.400 Senator Elizabeth Warren is actually building a coalition including some 0:19:35.440 --> 0:19:39.480 conservative Republicans, to come up with her own crypto bill, 0:19:39.840 --> 0:19:41.439 and this is where it's going to play out over 0:19:41.480 --> 0:19:44.840 the next six months. The problem for the crypto industry, though, 0:19:45.040 --> 0:19:48.360 is that they've always said they want clarity. The problem 0:19:48.440 --> 0:19:50.359 is is that the clarity is coming, or it could 0:19:50.359 --> 0:19:53.000 be coming, and it may not be exactly what they want. 0:19:53.080 --> 0:19:57.040 It may be very very onerous, very restrictive, and it's 0:19:57.040 --> 0:19:58.960 gonna cost a lot of money to comply with it. 0:19:59.280 --> 0:20:00.919 All right, let's get onto it. Well. First of all, 0:20:00.960 --> 0:20:04.840 let me plug my show, uh Bloomberg Bloomberg Crypto one 0:20:04.880 --> 0:20:08.320 pm this afternoon. We are focused on this issue for 0:20:08.359 --> 0:20:11.320 a full thirty minutes. Nice, which is I guarantee the 0:20:11.359 --> 0:20:14.920