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Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney alongside

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Speaker 1: my co host Matt Miller. Every business day we bring

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Speaker 1: you interviews from CEOs, market pros, and Bloomberg experts, along

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Speaker 1: with essential market moving news. Find the Bloomberg Markets Podcast

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Speaker 1: on Apple Podcasts or wherever you listen to podcasts, and

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Speaker 1: at Bloomberg dot com slash podcast. All right, here's the

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Speaker 1: to me. Here's the headline of the day, Tesla, and

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Speaker 1: of course Bloomberg News comes up with these great headlines.

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Speaker 1: Tesla rallies from the low's pushing valuation over five hundred billion. Dan,

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Speaker 1: I've joints us here on O Bloomberg and Actor Brooker Studio.

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Speaker 1: What Bush Securities? Uh? Dan? What'd you take away from

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Speaker 1: the Tesla news last night? That was a Goldilocks quarter,

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Speaker 1: I meaning for the bulls, they were popping champagne because

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Speaker 1: the demand out look was strong for two thousand twenty

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Speaker 1: three and margins are holding. So now that dream scenario

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Speaker 1: for Tesla's back on the table and look sentiment was

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Speaker 1: just so negative. Mini and fire in a crowd theater.

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Speaker 1: I think you combine it. This is stock now it

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Speaker 1: starts to run towards two. So did the band What

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Speaker 1: did Elon Musk say? I think he quantified it saying

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Speaker 1: there's like two buyers for every production. Well, that's the

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Speaker 1: I mean, as you just hit. I mean, that was

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Speaker 1: really the thing that I think stood out. I'd almost

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Speaker 1: call it a jaw dropper in terms of two x

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Speaker 1: demand over production. And why are they offering all these incentives.

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Speaker 1: There's no doubt you're starting to see cracks in the

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Speaker 1: armor in China. You've seen in the US. But they

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Speaker 1: read the room cut prices ripped the band aid off

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Speaker 1: and then now they're able, because of their scale, which

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Speaker 1: is unique, keep margins still well above industry norm. So

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Speaker 1: what they're able to do now is scaleing that and

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Speaker 1: I think coming at the gates and we've done this

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Speaker 1: with survey work in China, it's just been on fire.

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Speaker 1: And I think that's really the takeaway here. There's the

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Speaker 1: bears go into hibernation mood. I mean, when the when

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Speaker 1: the worst case scenario is only boosting production by thirty

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Speaker 1: seven percent, that's insane. Right when the streets like, no,

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Speaker 1: we want you to boost production by in a year

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Speaker 1: for Carmaker, that's insane. That's why in my opinion, along

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Speaker 1: with Apple, the most transformational companies in the world, and

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Speaker 1: I think it continues to be testa. I never viewed

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Speaker 1: as an auto company. Have views disruptive where I want

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Speaker 1: to go and I should We should have had Kevin Tyner.

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Speaker 1: We had him on the last I were Tom Keene.

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Speaker 1: Kevin Tynan is the auto analyst for Bloomberg Intelligence, traditional

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Speaker 1: auto guy, and he's of you know, he's never bought

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Speaker 1: into this story because he's just simply it's not profitable,

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Speaker 1: and be when it is profitable, everybody else Toyota and

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Speaker 1: Volkswagen can commit and they'll on the market, and this company,

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Speaker 1: whatever it is, will be a niche whatever. That's kind

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Speaker 1: of I think, not just Kevin's call, but the call

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Speaker 1: that made a lot of the traditional auto guys, you

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Speaker 1: and a lot of other tech guys have viewed it

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Speaker 1: more as a technology It seems like to me more

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Speaker 1: of a technology company, a technology play, and that's how

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Speaker 1: investors should look at it. Are we at the point though,

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Speaker 1: that we do have the Toyota's, the Volkswagens and the

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Speaker 1: Generalmotan's affords coming in where maybe it can it would

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Speaker 1: be viewed more as an auto company no doubt. I mean,

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Speaker 1: many thought Apple was going to be in the next

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Speaker 1: BlackBerry at two in a billion and then went to

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Speaker 1: three trillions. So I think it's just one of those

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Speaker 1: situations where you have competition come from all angles, no

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Speaker 1: doubt in Auto and especially coming out of the three

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Speaker 1: win three area co GM and for what they're doing.

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Speaker 1: But Tesla because of the vertical integration, because of the

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Speaker 1: unique of the brand, the software, and you see that

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Speaker 1: in the margins, and it's the must DNA all right. Now,

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Speaker 1: the Musk DNA was a super net positive for a

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Speaker 1: long time. Not now are you concerned that it is

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Speaker 1: turned to a negative? Specifically, I don't. I don't care

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Speaker 1: about him and his views, but does it damage the

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Speaker 1: Tesla brand because he was so closely associated with the

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Speaker 1: Tesla brand we talked about I think sent the sell

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Speaker 1: off in two thousand twenty two was Musk Twitter fiasco driven.

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Speaker 1: Is any of that permanent? Do you think? I think

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Speaker 1: there's there's some of it, You know that that maybe

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Speaker 1: you could quantify a small amoun that could be permanent.

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Speaker 1: But that's why it was really the reason yesterday was

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Speaker 1: probably the most important earnings called for Tesla. Many many

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Speaker 1: years is because Musk, you need a pilot on the

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Speaker 1: plant for him really to navigate. And I think that

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Speaker 1: when he came off confident really I think even owned

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Speaker 1: some of the twitters on the call last night. Was

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Speaker 1: he reasonable? Do you think was he reassuring to some

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Speaker 1: of the big investors. He was a lot more dialed

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Speaker 1: in than I've seen him in many calls. And I

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Speaker 1: think that was another thing that investors takeaway was because

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Speaker 1: now you feel like this is a company that's actually

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Speaker 1: going to do the right strategic things. That Twitter situation

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Speaker 1: is going to continue to be there in the background.

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Speaker 1: But I think not necessarily that albatross over the name,

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Speaker 1: but now right, I mean, I've dated girls who had

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Speaker 1: a good night. They appeared to be completely rational and

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Speaker 1: reasonable at dinner with my parents, but then they weren't,

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Speaker 1: you know. I mean there is an argument that Elon

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Speaker 1: Musk is Cucu per coco puffs, right. I Mean, the

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Speaker 1: guy is out there sometimes he's he always has been,

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Speaker 1: but he's now willing to embarrass himself publicly more than

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Speaker 1: he more than a normal rational person would look. And

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Speaker 1: I think that's the controversy of Musk because that many

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Speaker 1: of you, as a modern day Thomas Edison Albert Einstein

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Speaker 1: that essentially went through a Howard Hughes moment. You know,

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Speaker 1: when you think about the Twitter situation now from Musk,

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Speaker 1: it's recognizing the Golden Child tests. So that's that has

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Speaker 1: been an overhang because of the Twitter Spiderweb. Dan, do

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Speaker 1: they have to come out with new models because it

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Speaker 1: is the original model? S isn't that the same as

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Speaker 1: it's been for ten years? And they all look like that.

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Speaker 1: Do they need to come up with anything? How do

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Speaker 1: they talk about that? Well? They do, because then you

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Speaker 1: start to get into four nineteen nineteen going into seven

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Speaker 1: where GM basically overtook him because they didn't innovate. I

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Speaker 1: think if you look Cybertruck coming out later this year,

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Speaker 1: I think potentially in SUV you know, in terms of

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Speaker 1: some of the roads during some others, they're gonna need

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Speaker 1: to expand that from penetration respective. But then you take

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Speaker 1: a step back. We are in the early days of

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Speaker 1: the biggest transformation to the auto industry since nineteen of these.

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Speaker 1: I mean, the cyber truck will be huge when it

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Speaker 1: comes out. It's just a bummer that it keeps getting

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Speaker 1: delayed and delayed and delayed and everybody else gets to

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Speaker 1: some extent and advantage. UM. The Ford, you know, has

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Speaker 1: gotten great reviews. Paul loved it. It looks very traditional. UM.

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Speaker 1: The Chevy seems like it's going to be even better.

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Speaker 1: The GMC Hummer is like on another level, the cyber

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Speaker 1: truck could be a better product than all of those.

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Speaker 1: But it's just coming so many years late that everybody

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Speaker 1: with a hundreds and spend an electric truck has already

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Speaker 1: done it. And now I maybe if you look at

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Speaker 1: this stuff coming at GM and Ford, it is it's

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Speaker 1: a renaissance that I believe it's happened in Detroit. And

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Speaker 1: that's why for tests, it's about making sure that this

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Speaker 1: window opportunity they don't lose. But if the ultimate takeaway

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Speaker 1: here is that they are putting iron fence around their

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Speaker 1: backyard by the price cut and that call last night felt,

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Speaker 1: I'd say exactly what the bulls needed to sort of

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Speaker 1: take this out of the way. I always forget to

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Speaker 1: mention Rivan and I feel because we have listeners who

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Speaker 1: love the rib they look pretty, I look amazing. What

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Speaker 1: do you think about the company about Ribbon? Is there

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Speaker 1: going to be a challenger because they have also got

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Speaker 1: production nightmares the likes of which you know Elon Musk

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Speaker 1: got a dreamt of back in the day, no doubt.

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Speaker 1: I mean, it's been a lot of time riving at

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Speaker 1: their head. You're at their factory in Illinois. I'm bullish

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Speaker 1: on Ribby in terms of where they could take this.

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Speaker 1: Clearly there have been just massive speed bumps coming at

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Speaker 1: the gate. They need to navigate that. But they are

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Speaker 1: gonna be a player for many, many years. And then

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Speaker 1: you're a Football Giants New York Giants Football Giants fan.

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Speaker 1: What do they do with Daniel Jones and se Kwon Barkley? Oh?

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Speaker 1: I think they resigned both then, especially the goat Kwan.

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Speaker 1: I think that's a no brainer that they have to

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Speaker 1: resign them. Okay, all right, I mean that's in my opinion.

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Speaker 1: You get those are two. I think that proved it

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Speaker 1: this year that I'd be shocked if they don't resign them.

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Speaker 1: How about Pensiley football? Increasingly bullish and a good year.

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Speaker 1: Didn't beat Ohio Stat or Michigan, but still a good

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Speaker 1: year and still have those ruises that I'm wearing after

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Speaker 1: being two time packed twelve champ, and I believe they

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Speaker 1: are top five team next year. I think that they've

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Speaker 1: now made that weep into the elite category, all right,

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Speaker 1: and bullish. I just I just configured my Tesla Model

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Speaker 1: X and it's only a five, so it's not I know,

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Speaker 1: but I didn't add the auto full autopilot, full self

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Speaker 1: driving feature, so I'm saving like six six thou dollars there?

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Speaker 1: All right, Dan, eys, what but security joining us here

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Speaker 1: in our Bloomberg in Actress Broker studio talking all things Tesla.

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Speaker 1: Seems like the markets are just trying to really digest

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Speaker 1: not only the earnings that we're getting every single day,

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Speaker 1: but the slow of economic data we had today, trying

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Speaker 1: to figure out what that means for the FED, what

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Speaker 1: that means for this economy, and what that means for

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Speaker 1: their portfolios. Who better to check in with and David Kelly,

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Speaker 1: chief Global strategist for JP Morgan Asset Management. David thinks,

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Speaker 1: so much for taking the time. I know you're busy

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Speaker 1: today with your client Anson kind of sitting through all

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Speaker 1: the data. What's your takeaway when you look at your

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Speaker 1: ECO screen on your Bloomberg terminal and you see all

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Speaker 1: the economic data that came out today, what's your takeaway?

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Speaker 1: I think the slowdown is on track despite a lot

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Speaker 1: of confusing data. So we did get that stronger than

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Speaker 1: expected GDP read of two point nine percent, But I

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Speaker 1: really think it's important to recognize that all that two

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Speaker 1: point nine percent one point five percent was was coming

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Speaker 1: from a pile up in inventories. So inventories grew at

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Speaker 1: a pace of a hundred and thirty billion. Now normally

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Speaker 1: they grow at about pace about fifty billions. So necessarily

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Speaker 1: that means that inventories are actually gonna drag on growth

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Speaker 1: in three And when we look at consumer spending, we

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Speaker 1: know on a monthly basis a wall is slowing down.

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Speaker 1: In the fourth quarter, we think we're still gonna we're

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Speaker 1: gonna get worse trade numbers going forward. UM housing is

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Speaker 1: still going to be weak, although it's a lot of

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Speaker 1: the damage has been done. But overall, we we think

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Speaker 1: we're still slowing down here. I mean we're on the

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Speaker 1: edge of something that we don't we don't think we're

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Speaker 1: on the edge of a cliff. We're probably in the

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Speaker 1: edge of a swamp, but we still think the economy

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Speaker 1: is slowing here. So David, does that mean, um, the

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Speaker 1: Fed really does have to worry about the long and

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Speaker 1: varied lags of monetary policy because they've hiked so much

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Speaker 1: in the last year and nonetheless financial conditions are super loose. Well, well,

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Speaker 1: yes they do. I mean they've got to look at

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Speaker 1: not just monetary conditions but also fisical conditions. So what

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Speaker 1: we've got is a lot of fiscal drag in the economy. Um,

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Speaker 1: we're just slowing things down, and that's you know, that's

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Speaker 1: really where the the main economic problem is here, because

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Speaker 1: the personal savings rates down at two point nine. You know,

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Speaker 1: normally it's up at seven percent, which which means a

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Speaker 1: lot of people wrecked up credit card debt over the

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Speaker 1: last year. The asian to their savings just to maintain

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Speaker 1: a standard living that they can't maintain in the long run.

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Speaker 1: So we're going to see consumer cutbacks this year because

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Speaker 1: of what's going on really with fiscal policy, and the

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Speaker 1: Federal Reserve should not be making things worse by overtightening

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Speaker 1: monetary posts. Hang on, when you say they ate into

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Speaker 1: their savings, I know the savings rate is dropped, but

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Speaker 1: bank balances are still really high. Yeah, but they are

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Speaker 1: coming down. But I'm also about the way you look

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Speaker 1: at this is it's also an accumulation of debt. So

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Speaker 1: when you've got you've got credit card debt going up

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Speaker 1: by more than fifteen percent year over year in November, um,

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Speaker 1: you know that particularly lower and middle income households are

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Speaker 1: adding on debt in order to just try to maintain

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Speaker 1: a certain standard living. And and you can't raise raise

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Speaker 1: credit card debt by fifteen percent per year going forward.

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Speaker 1: So we know consumers are going to slow down here.

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Speaker 1: And we know the job growth is going to slow

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Speaker 1: down here because we're three and a half percent unemployment

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Speaker 1: that there very there aren't enough unemployed people out there

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Speaker 1: to to to grow jobs quickly. So we know slow

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Speaker 1: down is coming. And what I don't quite get about

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Speaker 1: what the Federal Reserve is doing is that they say

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Speaker 1: they want to get the federal funds right up above

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Speaker 1: five percent and then cut it by one percent next

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Speaker 1: year and cut it by another one percent the year

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Speaker 1: after that. And that doesn't make any sense to me.

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Speaker 1: I mean, which you should do with monetary policy, because

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Speaker 1: the lags you mentioned, you should try to slide in,

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Speaker 1: slide into first space, so as you know, just very

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Speaker 1: gently raise it to about the right level and left

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Speaker 1: the economy adjust instead, they're overshooting, and I think that

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Speaker 1: that that is an economic risk. They could put the

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Speaker 1: economy in recession by the end of the year. So

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Speaker 1: if you were FED Chairman J. Pale, if you were

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Speaker 1: sitting in his seat, what would you do over the

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Speaker 1: next several meetings? Well, first of all, I would, UM,

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Speaker 1: I would express confidence that inflation is coming down. We

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Speaker 1: think we've we've we've beaten this. UM. We recognize that

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Speaker 1: interest rates are low by historical standards, but they're not

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Speaker 1: low by the standards to which the economy has become accustomed.

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Speaker 1: You know, we've had fifteen years of everybody getting used

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Speaker 1: to the morphine drip of zero present interest rates. In

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Speaker 1: that kind of economy, you do have to adjust a

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Speaker 1: bit UM. So I would say enough for now, UM,

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Speaker 1: I would stop raising rates UM, and let's see how

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Speaker 1: this all plays out. And we are we stand ready

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Speaker 1: to raise or lower rates going forward if things UM change.

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Speaker 1: But right now it looks like inflation is coming down,

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Speaker 1: growth is slowing. Let's just leave well enough alone at

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Speaker 1: this point and not tighten any further. So that's what

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Speaker 1: that what you would do. What do you think that

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Speaker 1: that is going to do? And I think they'll raise.

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Speaker 1: I think they will raise rates by one quarter of

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Speaker 1: percent on next Wednesday, and I think they'll probably do

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Speaker 1: the same thing on March four. Now, their own forecast

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Speaker 1: states they will again come back and raise rates by

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Speaker 1: another quarter point on May three, and that I don't

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Speaker 1: think they'll do. I think they'll probably stop on, you know,

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Speaker 1: with the with the last rate hike in March, and

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Speaker 1: then let's wait and see what happens, because, as I say,

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Speaker 1: inflation is coming down pretty rapidly here, and the great

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Speaker 1: danger is that they overshoot put the economy and recession,

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Speaker 1: and then they're going to have to come rate very aggressively,

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Speaker 1: which is not the way you should be conducting monetary policy, David.

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Speaker 1: Just on the labor market front, we had another initial

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Speaker 1: jobs claims print below two hundred thousand and eighty six thousand. Boy,

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Speaker 1: this market is really strong. This surprise you how strong

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Speaker 1: the labor market is. Uh, irrespective of kind of what

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Speaker 1: we're here from some of the silific Silicon Valley companies, Well,

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Speaker 1: there's a difference between you know, I remember watching an

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Speaker 1: exercise video which talked and talked about tightening and strengthening

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Speaker 1: various parts of my of my body, and I think

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Speaker 1: this is this is a labor market that is very tight,

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Speaker 1: but not necessarily very strong. Um. In other words, there

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Speaker 1: aren't enough There aren't a reserve pool of unemployed workers.

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Speaker 1: The labor force itself is growing by about one tenth

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Speaker 1: of a percent um per year, so it's it's the

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Speaker 1: working population, so there's no extra workers. Now, that means

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Speaker 1: that there aren't that many layoffs, but even there would

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Speaker 1: be a little careful because we've got a very unusual economy.

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Speaker 1: We're probably not seeing the normal retail layoffs we'd see

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Speaker 1: um after the holiday season because we probably didn't see

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Speaker 1: as much on the ground retail hiring as you would

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Speaker 1: normally see in retail season. So I'm I'm a little

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Speaker 1: skeptical about that. I do think that the pace of

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Speaker 1: hiring in the economy is slowing down, and I think

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Speaker 1: that some of these job openings are kind of, you know,

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Speaker 1: no longer relevant, even though they're they're staying on the

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Speaker 1: boards here. So I don't, you know, I do think

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Speaker 1: the labor market is very night, but I don't think

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Speaker 1: it's actually very strong. Yeah, I mean, three and a

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Speaker 1: half percent unemployment points to a very tight labor market.

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Speaker 1: But the question is does it rise quickly? Do we

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Speaker 1: get to five percent by the middle of the year. No,

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Speaker 1: I don't think we do because I think, as I say,

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Speaker 1: it's it's very tied. So just aren't enough workers for

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Speaker 1: that to happen, to be enough to lay awful lot

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Speaker 1: of workers. But I think another thing to look at

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Speaker 1: here is wage growth, because wage growth has actually been

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Speaker 1: decelerating in the last few months. Wages for all you know,

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Speaker 1: for production non supervisor workers are five percent to year

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Speaker 1: over year, but inflation six and a half percent year

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Speaker 1: over year. So workers aren't keeping up with inflation. I

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Speaker 1: think increasingly they won't because they again they don't feel

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Speaker 1: like they've got that much bargaining power. So you know,

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Speaker 1: as I say, it's a tight labor market. There aren't

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Speaker 1: a lot of available workers, but the working age population

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Speaker 1: is growing slowly. I think the economy after this morning's report,

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Speaker 1: is going to be growing slowly in the first half

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Speaker 1: of this year. And you know, I think we just

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Speaker 1: need to get used to a slow growth, lower lower

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Speaker 1: inflation economy. Again, David, how are you factoring in just

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Speaker 1: switch gears a little bit, How are you factoring in

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Speaker 1: the reopening and maybe they're reopening faster than expected of China. Um.

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Speaker 1: I think it's I think it's kind of a it's

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Speaker 1: a positive for global economic growth. I think it's probably

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Speaker 1: almost a net neutral for inflation. Um so um we

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Speaker 1: were clearly getting you know, because they've gone to a

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Speaker 1: got rid of their zero COVID policy. I think that

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Speaker 1: we will see um surges in output from China, and

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Speaker 1: I think you'll see more Chinese spending on services, but

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Speaker 1: I don't think you'll see a huge surge in Chinese

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Speaker 1: spending on goods. And because of that, you know, that's

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Speaker 1: how higher Chinese demand would translate into higher inflation around

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Speaker 1: the world. So I don't think that's going to push

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Speaker 1: up inflation, but it will help with global growth. And

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Speaker 1: I think the interesting thing is this year the US

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Speaker 1: is going to be slowing down while the rest of

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Speaker 1: the world is picking up in terms of growth, and

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Speaker 1: that couldn't be negative for the dollar, which you think.

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Speaker 1: It's got some pretty interesting investment implications. I just have

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Speaker 1: this image in my head at one point four billion

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Speaker 1: people finally allowed to getting their cars and drive. They

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Speaker 1: have to stop at the gas station, right, I mean,

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Speaker 1: um h. Jeff Curry compared this to two thousand eight

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Speaker 1: when we saw crewde go to barrel. You're not worried

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Speaker 1: about that, no, not at all. Is we've had very

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Speaker 1: high prices very recently, and the best here for high

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Speaker 1: prices is high prices. Uh. This year is going to

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Speaker 1: be the biggest year in US history for liquid fuels production.

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Speaker 1: We've we've got a huge production of natural gas, and

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Speaker 1: and Europe is now all stocked up the natural gas.

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Speaker 1: But I, you know, I see plenty of conservation. I

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Speaker 1: don't think the global economy is going to grow that fast,

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Speaker 1: you know, if you I do think it's going to

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Speaker 1: grow fast in the US, but the US is going

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Speaker 1: to grow very slowly, and China will be picking up,

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Speaker 1: but Europe is going to be slow. The UK is

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Speaker 1: in recession. So I don't see a boom in global

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Speaker 1: energy demand this year. Um. I think because of the

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Speaker 1: high prices last year, we are going to see pretty

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Speaker 1: strong growth in energy supply. So I don't unless something

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Speaker 1: else happens to supply that we're not anticipating right now,

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Speaker 1: I don't think we'll see another surge in oil prices

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Speaker 1: in this kind of economy. All right, David, great stuff,

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Speaker 1: Really appreciate getting a few minutes of your time. David Kelly,

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Speaker 1: Chief Global Strategist, JP Morgan asset Management and even more

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Speaker 1: importantly Bachelor and economics from the University College of Dublin.

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Speaker 1: You can probably get a little bit of the Irish

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Speaker 1: accent there through the radio and a PhD in economics

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Speaker 1: from Michigan State University. Spartans about that parties I won

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Speaker 1: if he comes over from you know, Ireland and becomes

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Speaker 1: like this crazy big ten football fan, do you think

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Speaker 1: that happens? I could imagine that. Why how could you

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Speaker 1: not when you're in that part of the part of

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Speaker 1: the country. I think in the in the big picture,

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Speaker 1: huge news, and that is the Akio Toyota is stepping

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Speaker 1: down as the CEO president of his namesake firm. So

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Speaker 1: that was Toyota as in the founder of the company. Yeah,

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Speaker 1: I think his grandfather founded the company. Um they changed

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Speaker 1: the name from Toyota uh with a D to Toyota

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Speaker 1: with a T because of something to do with like

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Speaker 1: numbers and luck. I'm not sure, but someone who does

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Speaker 1: know for sure is Craig Trudel. He's our Global Autos czar.

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Speaker 1: He ran the auto's coverage for the US then he

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Speaker 1: went over to Tokyo and ran Auto's coverage in Asia,

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Speaker 1: and now he's in London. He runs auto coverage globally.

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Speaker 1: Just he just can't stay put anywhere. Well, I think

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Speaker 1: it's cool. It's like he worked in a different part

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Speaker 1: of the company and now he runs the whole thing.

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Speaker 1: So okay, Craig, thanks so much for joining us. Talk

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Speaker 1: to me about well, first of all, what's the deal

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Speaker 1: with Toyota with a D versus Toyota with a T.

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Speaker 1: You know what you You have put me on the spot,

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Speaker 1: and I know that I've I know that I've been

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Speaker 1: that this has been explained to me, but I don't remember.

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Speaker 1: I don't remember. I'm pretty sure that he's like Toyota

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Speaker 1: with a D means like ten and but eight is

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Speaker 1: a luckier number, and that's with a T. So I

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Speaker 1: don't know something like that, but google it. The thing

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Speaker 1: I know about Akio Toyota for sure is that he

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Speaker 1: is I don't want to say micromanages, but he is

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Speaker 1: involved in every aspect of Toyota car production. Like he's

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Speaker 1: responsible for the reason that Toyota's look and run the

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Speaker 1: way they do, for the reason that Toyota strategy is

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Speaker 1: the way it is. So it's really a sea change,

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Speaker 1: right if he is leaving and putting someone else in

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Speaker 1: the UM in the chief executive seat. Yeah, I think

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Speaker 1: I think he absolutely Uh is a tough cookie too

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Speaker 1: in terms of his evaluation of cars. We've heard over

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Speaker 1: the years that you know, he is no pushover and

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Speaker 1: and Uh is not, you know, shy about giving tough feedback.

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Speaker 1: And I got a kick out of, you know, a

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Speaker 1: video about a year ago when Lexus was was bringing

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Speaker 1: out its first fully electric vehicle. And we actually embed

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Speaker 1: this tweet in our story today about the new the

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Speaker 1: new incoming CEO of of of Toyota, Akio Toyota and

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Speaker 1: his his uh, you know air apparent now Kist are

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Speaker 1: in this Flexus STUV and in in the early goings,

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Speaker 1: you see Ako kind of you know, this thing drafts

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Speaker 1: kind of heavy, and you see Soto kind of you know,

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Speaker 1: hang his head a little bit, and and it isn't

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Speaker 1: until he really hits the accelerator that they both get

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Speaker 1: really excited. So I think that's that that the reason

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Speaker 1: I tell that story is because you know, I think

429
00:21:18,400 --> 00:21:22,240
Speaker 1: Toyota has to get more excited about electric vehicles. There's

430
00:21:22,240 --> 00:21:25,040
Speaker 1: been some real reluctance for them to sort of, you know,

431
00:21:25,240 --> 00:21:28,280
Speaker 1: come around to this idea that you know, the world

432
00:21:28,320 --> 00:21:33,600
Speaker 1: wants fully electric cars. They were people, i mean they

433
00:21:33,640 --> 00:21:39,880
Speaker 1: started boring environmentally sound cars, and that's i mean, that's

434
00:21:40,000 --> 00:21:42,000
Speaker 1: you know, maybe not in those words, but that's been

435
00:21:42,119 --> 00:21:44,960
Speaker 1: you know, Toyota has really sort of clung to this

436
00:21:45,040 --> 00:21:48,080
Speaker 1: idea of, look, you know, the more realistic uh, you

437
00:21:48,119 --> 00:21:52,000
Speaker 1: know way forward here is absolutely we should move into

438
00:21:52,000 --> 00:21:56,960
Speaker 1: electric vehicles quickly. But the more realistic path here is

439
00:21:57,000 --> 00:21:58,919
Speaker 1: more people are going to be able to afford you know,

440
00:21:59,000 --> 00:22:02,080
Speaker 1: gas electric car are Shortages of batteries are going to

441
00:22:02,160 --> 00:22:05,040
Speaker 1: continue for many years. We're already seeing you know, these

442
00:22:05,119 --> 00:22:08,040
Speaker 1: massive run up and run ups and prices of things

443
00:22:08,040 --> 00:22:12,320
Speaker 1: like lithium. As long as that's this is the case,

444
00:22:13,359 --> 00:22:16,840
Speaker 1: going fully electric is not doable, and it's not a

445
00:22:16,880 --> 00:22:20,160
Speaker 1: case of of necessarily even you know, dragging your feet

446
00:22:20,160 --> 00:22:23,080
Speaker 1: in terms of emissions production. If you can, if you

447
00:22:23,119 --> 00:22:27,120
Speaker 1: can electrify more cars, uh, you know, by using smaller

448
00:22:27,160 --> 00:22:30,600
Speaker 1: batteries in cars that still rely on part on an engine.

449
00:22:31,400 --> 00:22:34,800
Speaker 1: Toyota's view is that this is the more effective way,

450
00:22:34,960 --> 00:22:38,080
Speaker 1: and they've really struggled to sort of make that nuanced

451
00:22:38,080 --> 00:22:40,400
Speaker 1: case when you've got a guy in Elon Musk who

452
00:22:40,440 --> 00:22:43,280
Speaker 1: just says this can be done, where we should go

453
00:22:43,320 --> 00:22:47,600
Speaker 1: all electric. I'm gonna make twenty million teslas a year. Uh,

454
00:22:47,600 --> 00:22:51,040
Speaker 1: you know one of these years. Uh. It's really hard

455
00:22:51,480 --> 00:22:55,720
Speaker 1: for that you know, messaging battle to to win out

456
00:22:55,800 --> 00:22:59,359
Speaker 1: when one is is nuanced complicated, the other is is

457
00:22:59,440 --> 00:23:02,440
Speaker 1: much simple. So, Craig lu can you tell us about

458
00:23:02,440 --> 00:23:06,720
Speaker 1: Cogi Sato the replacement here as CEO, And what do

459
00:23:06,720 --> 00:23:09,320
Speaker 1: you expect his you know, to do list to look like.

460
00:23:09,960 --> 00:23:12,280
Speaker 1: I mean, Alexis interestingly is going to be on the

461
00:23:12,280 --> 00:23:14,840
Speaker 1: sort of cutting edge of of you know, Toyota coming

462
00:23:14,840 --> 00:23:17,880
Speaker 1: around to electric vehicles, and and that makes sense right

463
00:23:17,880 --> 00:23:21,560
Speaker 1: where we're we're seeing much faster adoption and on the

464
00:23:21,640 --> 00:23:25,040
Speaker 1: higher end, Uh, it makes more sense for the companies

465
00:23:25,080 --> 00:23:29,680
Speaker 1: and that they're able to forward to charge uh more

466
00:23:29,840 --> 00:23:33,800
Speaker 1: for the fact that that batteries are are still very expensive. Uh.

467
00:23:33,840 --> 00:23:37,119
Speaker 1: And so you know, I think you know, Lexus uh

468
00:23:37,400 --> 00:23:41,200
Speaker 1: is a bit divisive in in the world of car geeks. Uh.

469
00:23:41,320 --> 00:23:44,800
Speaker 1: You know, they they are not prummy cars, but you

470
00:23:44,840 --> 00:23:48,080
Speaker 1: know they maybe do get you know, still panned. Uh.

471
00:23:48,200 --> 00:23:50,800
Speaker 1: You know, to this day is less exciting than say

472
00:23:50,840 --> 00:23:55,040
Speaker 1: a Porsche or or even you know, an Audie. But

473
00:23:55,040 --> 00:23:58,560
Speaker 1: but you know, they're also really solid vehicles. They've they've

474
00:23:58,680 --> 00:24:02,760
Speaker 1: been growing their international presence over the years under cost

475
00:24:03,440 --> 00:24:05,959
Speaker 1: Uh and so you know, he has been building up

476
00:24:06,000 --> 00:24:10,040
Speaker 1: international experience. He knows that division well. And the fact

477
00:24:10,080 --> 00:24:13,119
Speaker 1: that they're going electric first. I think it is something

478
00:24:13,160 --> 00:24:15,199
Speaker 1: that you know, Toyota is going to to point to

479
00:24:15,320 --> 00:24:17,480
Speaker 1: as they sort of introduce him to the world. Yeah.

480
00:24:17,480 --> 00:24:20,960
Speaker 1: I think for for me the design is I can't

481
00:24:21,000 --> 00:24:24,359
Speaker 1: get with that, but that's totally subjective, right of Lexus cars.

482
00:24:24,400 --> 00:24:28,320
Speaker 1: I also feel like they have an American nous in

483
00:24:28,359 --> 00:24:33,040
Speaker 1: their quality, you know, because they have these cushy, padded seats,

484
00:24:33,080 --> 00:24:35,520
Speaker 1: and they're also a little too complex for me. I

485
00:24:35,520 --> 00:24:39,159
Speaker 1: don't like um small displacement with turbo chargers. I like

486
00:24:39,320 --> 00:24:43,040
Speaker 1: big naturally aspirated. Who doesn't like big naturally asked by

487
00:24:43,040 --> 00:24:45,480
Speaker 1: the way, I'm looking, Craig under So. I found this

488
00:24:45,560 --> 00:24:48,320
Speaker 1: website opex Learning. They give a few reasons for the

489
00:24:48,400 --> 00:24:51,680
Speaker 1: name change, but apparently it's debated why they change the name.

490
00:24:52,480 --> 00:24:56,840
Speaker 1: Apparently in Japanese UH the D is a voiceless consonant.

491
00:24:56,960 --> 00:24:58,680
Speaker 1: I don't really know what that means. But the T

492
00:24:59,040 --> 00:25:01,399
Speaker 1: is a voiced constant that makes it more appealing. Also,

493
00:25:01,720 --> 00:25:05,199
Speaker 1: there's a practice called jukaku, which is the counting of

494
00:25:05,280 --> 00:25:09,200
Speaker 1: strokes in kanji and katakana, which is like the way

495
00:25:09,240 --> 00:25:13,840
Speaker 1: you write um letters and Toyota with a D is

496
00:25:13,880 --> 00:25:17,160
Speaker 1: ten strokes, but Toyota with a T is eight strokes,

497
00:25:17,640 --> 00:25:21,199
Speaker 1: so that's luckier. Some people say eight is considered to

498
00:25:21,200 --> 00:25:23,400
Speaker 1: be a lucky number of Japanese culture. So the name

499
00:25:23,920 --> 00:25:27,080
Speaker 1: Toyota was chosen. Yes, that makes sense. Also it's a reduction,

500
00:25:27,520 --> 00:25:31,560
Speaker 1: it's a reduction and waste. You know, it takes fewer

501
00:25:31,600 --> 00:25:35,320
Speaker 1: strokes to write Toyota Toyota. And then one thing I

502
00:25:35,359 --> 00:25:37,639
Speaker 1: did not know until just now. And I've been a

503
00:25:37,680 --> 00:25:42,520
Speaker 1: car geek since I was like six. In the emblem

504
00:25:42,640 --> 00:25:46,080
Speaker 1: um you can actually see the T O y o

505
00:25:46,480 --> 00:25:50,359
Speaker 1: T and egg. I did not know that did not

506
00:25:50,800 --> 00:25:53,639
Speaker 1: he got on the screen. Now it's awesome. So they

507
00:25:53,640 --> 00:25:57,040
Speaker 1: didn't just pick a name. Who knows why it really happened.

508
00:25:57,119 --> 00:25:59,520
Speaker 1: But if Craig Trudella doesn't know for sure, then I

509
00:25:59,560 --> 00:26:01,439
Speaker 1: don't think anyone knows. No, But this is a big

510
00:26:01,520 --> 00:26:03,600
Speaker 1: change for Toyota. I mean, the you know, the founding

511
00:26:03,680 --> 00:26:06,080
Speaker 1: que grandson, and now that it looks like they're gonna

512
00:26:06,119 --> 00:26:07,840
Speaker 1: make a pivot too, It's both to me. It's like

513
00:26:08,119 --> 00:26:12,639
Speaker 1: it's a it's a shift away from tradition, which is

514
00:26:12,720 --> 00:26:15,679
Speaker 1: kind of a bummer in my eyes, but it's also

515
00:26:16,080 --> 00:26:20,360
Speaker 1: a new beginning. I'm excited to see if Sato changes

516
00:26:20,359 --> 00:26:22,879
Speaker 1: the design tok what's going on. If he changes the

517
00:26:22,920 --> 00:26:24,960
Speaker 1: design language, I think it's gonna be very interesting because

518
00:26:25,000 --> 00:26:27,840
Speaker 1: I haven't loved a Toyota since the Selka. I know

519
00:26:28,320 --> 00:26:32,840
Speaker 1: the gt S Craig Rudale, Global Automotive editor for Bloomberg News.

520
00:26:32,840 --> 00:26:36,040
Speaker 1: He's based in London, giving us the lowdown on big,

521
00:26:36,080 --> 00:26:39,760
Speaker 1: big CEO changes at Toyota. As a company continues, it's

522
00:26:39,760 --> 00:26:46,919
Speaker 1: pivot towards electric vehicles, tons of ECO data today. We

523
00:26:46,960 --> 00:26:49,600
Speaker 1: don't know which way to go. So he said, let's

524
00:26:49,640 --> 00:26:51,960
Speaker 1: call Yelena. She's only one floor away. She can just

525
00:26:52,000 --> 00:26:54,840
Speaker 1: walk up and come into the studio. But no, no, no,

526
00:26:54,840 --> 00:26:59,159
Speaker 1: no no, she has left Bloomberg and gone to BNP

527
00:26:59,280 --> 00:27:03,520
Speaker 1: Parry Bah I mean, junior US economist at BNP Perry

528
00:27:03,520 --> 00:27:06,400
Speaker 1: box Elenava, which is the way I'm going to continue

529
00:27:06,440 --> 00:27:07,920
Speaker 1: to pronounce it. I don't care. It's a way of

530
00:27:08,040 --> 00:27:10,480
Speaker 1: doing it for years. I think you did a great job.

531
00:27:10,680 --> 00:27:12,880
Speaker 1: You learned it over the years, so the seven years

532
00:27:12,960 --> 00:27:16,280
Speaker 1: I was here, So Elena, welcome back. Great to have

533
00:27:16,359 --> 00:27:20,000
Speaker 1: you in studio here. We need you like we always have.

534
00:27:20,400 --> 00:27:22,040
Speaker 1: We rely upon you to give us a sense of

535
00:27:22,080 --> 00:27:24,120
Speaker 1: what's going on out There's a lot of eco data.

536
00:27:24,359 --> 00:27:28,159
Speaker 1: What's your takeaway? So we got GDP results for the

537
00:27:28,200 --> 00:27:32,040
Speaker 1: fourth quarter today and the report is way weaker than

538
00:27:32,400 --> 00:27:35,560
Speaker 1: the headline number is telling you. So we got an

539
00:27:35,640 --> 00:27:39,679
Speaker 1: upside surprise as we watched the alboom brick terminals. But

540
00:27:40,480 --> 00:27:43,760
Speaker 1: if you start, was the que over a quarter of

541
00:27:43,760 --> 00:27:45,959
Speaker 1: a quarter number and two point six percent was what

542
00:27:46,000 --> 00:27:48,800
Speaker 1: we were looking for, right, But they're both a slow

543
00:27:48,840 --> 00:27:52,119
Speaker 1: down from three in the previous quarter, which is fine,

544
00:27:52,320 --> 00:27:54,920
Speaker 1: but it's still solid growth if you just look at

545
00:27:55,280 --> 00:27:58,280
Speaker 1: the headline number. But if you look beneath the surface,

546
00:27:58,320 --> 00:28:01,280
Speaker 1: you will see that a lot of this is driven

547
00:28:01,359 --> 00:28:08,880
Speaker 1: by unwanted accumulation in inventories and of decline in imports,

548
00:28:09,000 --> 00:28:12,840
Speaker 1: and a combination of this too is telling you that demand.

549
00:28:13,240 --> 00:28:16,560
Speaker 1: Consumer demand is slowing down, business demand is slowing down.

550
00:28:16,840 --> 00:28:20,040
Speaker 1: GDP was not the only report we received today. If

551
00:28:20,080 --> 00:28:22,560
Speaker 1: you look at durable goods report, you will see that

552
00:28:22,720 --> 00:28:26,439
Speaker 1: shipments core good shipments are falling as well. So that

553
00:28:26,600 --> 00:28:31,840
Speaker 1: is the headline. That was the headline, A headline, guy,

554
00:28:31,920 --> 00:28:33,760
Speaker 1: that's all I am. I took two semesters back. That's

555
00:28:33,760 --> 00:28:38,440
Speaker 1: why you Yeah, that's the headline. Number is driven by

556
00:28:39,160 --> 00:28:41,880
Speaker 1: orders of aircraft. But if you look at broader picture,

557
00:28:42,080 --> 00:28:45,000
Speaker 1: so beneath the surface again, so you you see a

558
00:28:45,000 --> 00:28:49,959
Speaker 1: significant deceleration in consumer and business demand going forward. So

559
00:28:50,000 --> 00:28:53,200
Speaker 1: our call is for a recession to start in the

560
00:28:53,240 --> 00:28:56,280
Speaker 1: second quarter of this year, and today's data actually in

561
00:28:56,320 --> 00:28:58,600
Speaker 1: the second quarter, so in just two more months, basically

562
00:28:58,640 --> 00:29:01,640
Speaker 1: a few months away. It's hard to believe given the

563
00:29:01,800 --> 00:29:05,320
Speaker 1: strength in the label market. But so alright, a recession,

564
00:29:05,480 --> 00:29:07,880
Speaker 1: how long and how deep do you think? We think

565
00:29:08,520 --> 00:29:12,880
Speaker 1: slightly less than one percent decline in GDP overall, we're

566
00:29:12,920 --> 00:29:17,000
Speaker 1: about like, uh that mark, but we think it's gonna

567
00:29:17,080 --> 00:29:20,040
Speaker 1: last for like three quarters maybe a little bit longer,

568
00:29:20,120 --> 00:29:24,400
Speaker 1: and we assume at least the two percentage point increase

569
00:29:24,520 --> 00:29:28,520
Speaker 1: in the unemployment try. So I look at these Yeah,

570
00:29:29,000 --> 00:29:30,800
Speaker 1: you know what she says right when she comes in here,

571
00:29:30,960 --> 00:29:32,320
Speaker 1: I mean, she just gives you the numbers that you

572
00:29:32,320 --> 00:29:34,400
Speaker 1: need to know. Yes, I mean now I got it.

573
00:29:34,440 --> 00:29:36,920
Speaker 1: I got the BNP Perry back Hall. So all right,

574
00:29:37,600 --> 00:29:40,840
Speaker 1: what I wonder is what happens then to inflation. We

575
00:29:40,920 --> 00:29:44,360
Speaker 1: got the core PC at three point nine percent, which

576
00:29:44,400 --> 00:29:46,120
Speaker 1: is good. We're get coming in under four right, we

577
00:29:46,120 --> 00:29:49,240
Speaker 1: were four point seven percent the previous reading. I everybody

578
00:29:49,280 --> 00:29:52,880
Speaker 1: knows I desperately want a Dodge Challenger hell Cat. Who does.

579
00:29:53,080 --> 00:29:56,120
Speaker 1: There's seventy seven thousand dollars right now test driving a

580
00:29:56,160 --> 00:29:59,840
Speaker 1: Cadillac Escalade V, which is basically a land yacht yep

581
00:30:00,080 --> 00:30:03,680
Speaker 1: with a supercharge seven most I know, But there are

582
00:30:03,680 --> 00:30:06,040
Speaker 1: a hundred and fifty one grand to start before I

583
00:30:06,040 --> 00:30:10,120
Speaker 1: put any options. So I'm hope hoping that we get

584
00:30:10,760 --> 00:30:13,120
Speaker 1: a milder recession because I don't want people lose their jobs,

585
00:30:13,200 --> 00:30:16,080
Speaker 1: but that prices come down, that these companies make too

586
00:30:16,080 --> 00:30:18,520
Speaker 1: many cars and they have to cut the price at dealers.

587
00:30:18,520 --> 00:30:21,040
Speaker 1: We're gonna see that. So we we are seeing this

588
00:30:21,240 --> 00:30:25,640
Speaker 1: already in goods. And what you're talking about is goods, uh,

589
00:30:25,680 --> 00:30:29,880
Speaker 1: you know, disinflation basically and declines outright declines and goods prices.

590
00:30:30,400 --> 00:30:32,600
Speaker 1: What is really important for the fit and for the

591
00:30:32,720 --> 00:30:36,520
Speaker 1: policy and for everybody, here is what is happening with

592
00:30:36,600 --> 00:30:40,280
Speaker 1: services prices, and they remain sticky. So if you exclude

593
00:30:40,320 --> 00:30:46,560
Speaker 1: some components like shelter and medical care services, that part

594
00:30:46,560 --> 00:30:50,080
Speaker 1: of inflation remains really sticky. And that's why what is

595
00:30:50,120 --> 00:30:53,560
Speaker 1: that by everyone says this, and I think a massage

596
00:30:53,960 --> 00:30:56,440
Speaker 1: that services that we're talking like tennis lessons? What are we?

597
00:30:56,840 --> 00:30:59,240
Speaker 1: What is it? What is the service that is less

598
00:30:59,280 --> 00:31:03,560
Speaker 1: pleasant than that? I would say because prices, consumer prices

599
00:31:03,560 --> 00:31:07,080
Speaker 1: for services continue to grow and continue to grow at

600
00:31:07,480 --> 00:31:11,200
Speaker 1: a very unacceptable pace. So that means the FAT has

601
00:31:11,280 --> 00:31:14,440
Speaker 1: not done their job and they will continue to tighten policy.

602
00:31:14,720 --> 00:31:18,640
Speaker 1: So our call is for the FED to uh continue

603
00:31:18,720 --> 00:31:22,200
Speaker 1: to talk about terminal rate of five and a quarter

604
00:31:22,560 --> 00:31:28,080
Speaker 1: and as they you know, uh uh basis points. You're

605
00:31:28,160 --> 00:31:31,080
Speaker 1: way beyond this point, Paul and Helena. You probably are

606
00:31:31,120 --> 00:31:36,440
Speaker 1: to a babysitter now it's like an hour, yes, and

607
00:31:36,520 --> 00:31:39,160
Speaker 1: that's for a high school kid. They're ballsy enough to say,

608
00:31:39,200 --> 00:31:41,280
Speaker 1: I won't do it for less than twenty five an hour.

609
00:31:41,880 --> 00:31:45,160
Speaker 1: And don't get me started talking about daycare prices. Yeah,

610
00:31:45,200 --> 00:31:47,640
Speaker 1: I have to in I just wrote another check for

611
00:31:47,720 --> 00:31:52,320
Speaker 1: like four grand. Insane. That's just because somebody got the

612
00:31:52,400 --> 00:31:56,240
Speaker 1: idea to put a daycare in quotes in the basement

613
00:31:56,280 --> 00:32:00,280
Speaker 1: of a Korean church, like unbelievable the prices for these,

614
00:32:00,280 --> 00:32:03,600
Speaker 1: So that also weighs on consumer demand and on real

615
00:32:03,640 --> 00:32:06,760
Speaker 1: consumer demand. That these are the numbers that we see

616
00:32:07,080 --> 00:32:12,240
Speaker 1: in GDP numbers. And again today when the headline GDP

617
00:32:12,320 --> 00:32:16,600
Speaker 1: number surprise to the upside, consumer spending surprise to the downside,

618
00:32:16,640 --> 00:32:21,080
Speaker 1: and we see that the trajectory of intra trajectory of

619
00:32:21,120 --> 00:32:25,680
Speaker 1: growth in consumer spending is decelerating sharply. Tomorrow's numbers will

620
00:32:25,720 --> 00:32:32,720
Speaker 1: show most likely and negative reading tomorrow personal income, personal spending. Um.

621
00:32:32,800 --> 00:32:36,480
Speaker 1: We were talking about this with David Kelly earlier as well. UM,

622
00:32:36,680 --> 00:32:39,479
Speaker 1: we're gonna get University of Michigan sentiment as well. Tomorrow

623
00:32:39,520 --> 00:32:43,960
Speaker 1: is that tomorrow? Um state it's rough to even bring

624
00:32:43,960 --> 00:32:47,760
Speaker 1: that up. Um. We we uh have seen savings rates

625
00:32:47,800 --> 00:32:50,000
Speaker 1: come down substantially, And I always look up the savings

626
00:32:50,080 --> 00:32:53,200
Speaker 1: rate on the Bloomberg terminal and I'm like, wow, we

627
00:32:53,200 --> 00:32:55,800
Speaker 1: were at twelve and now we're at three, like it's horrible.

628
00:32:56,120 --> 00:32:58,400
Speaker 1: But then Michael McKee says, hey, you gotta look at

629
00:32:58,400 --> 00:33:00,720
Speaker 1: bank balances. I don't know the index that he pulls up,

630
00:33:00,720 --> 00:33:02,840
Speaker 1: but the guy knows everything about the terminal, and I

631
00:33:02,880 --> 00:33:05,560
Speaker 1: see bank balances are still at a pretty high level.

632
00:33:06,000 --> 00:33:08,160
Speaker 1: David call from JP Morgan is saying that's going to

633
00:33:08,280 --> 00:33:11,360
Speaker 1: come off because debts rising, credit card spending is rising,

634
00:33:11,400 --> 00:33:13,600
Speaker 1: and that's just gonna fall. So Mike and other guys

635
00:33:13,600 --> 00:33:17,240
Speaker 1: are talking about something called excess savings. So the savings

636
00:33:17,320 --> 00:33:19,719
Speaker 1: rate that you see on your terminal every month with

637
00:33:19,800 --> 00:33:23,640
Speaker 1: that personally spending report is like, what is happening in

638
00:33:23,680 --> 00:33:26,680
Speaker 1: the flow of savings? But we already have a large

639
00:33:26,720 --> 00:33:30,960
Speaker 1: stock of accumulated savings which is depleting very fast. And

640
00:33:31,000 --> 00:33:33,680
Speaker 1: that's that's the worry. Is it depleting very quickly. It's

641
00:33:33,680 --> 00:33:37,120
Speaker 1: depleting very quickly. It's still some cursion and that's why

642
00:33:37,160 --> 00:33:40,520
Speaker 1: we see consumers spending is still growing, but that will

643
00:33:40,560 --> 00:33:43,400
Speaker 1: continue to deplete this year, and it will deplete to

644
00:33:43,440 --> 00:33:46,840
Speaker 1: the point at which, yes, consumers will either have to

645
00:33:47,040 --> 00:33:51,920
Speaker 1: rely on their wages, which is also decelerating, or on

646
00:33:52,080 --> 00:33:56,640
Speaker 1: borrowing as you mentioned. But at that or no more daycare.

647
00:33:56,680 --> 00:33:59,440
Speaker 1: You know, well one of us has to stay home.

648
00:34:00,120 --> 00:34:05,080
Speaker 1: You can you can broadcast put all that together next Wednesday.

649
00:34:05,120 --> 00:34:07,120
Speaker 1: What are we can hear from our Federal Reserve chairman.

650
00:34:07,480 --> 00:34:11,520
Speaker 1: I think their task is getting really much more difficult.

651
00:34:11,640 --> 00:34:15,319
Speaker 1: So you see deceleration in growth a shop one, Uh,

652
00:34:15,480 --> 00:34:18,600
Speaker 1: you see some deceleration and goods prices, but at the

653
00:34:18,640 --> 00:34:23,760
Speaker 1: same time inflation and services is still very high. So

654
00:34:23,880 --> 00:34:27,200
Speaker 1: I think you know, if you look at the whole picture,

655
00:34:27,760 --> 00:34:32,920
Speaker 1: you will probably expect them to continue to tighten policy.

656
00:34:33,040 --> 00:34:35,719
Speaker 1: They will hike again twenty five basis points, but they

657
00:34:35,719 --> 00:34:40,799
Speaker 1: will know that they will reduce it to And it

658
00:34:40,840 --> 00:34:45,879
Speaker 1: seems like you know, a common expectations hawk for the Fed.

659
00:34:45,960 --> 00:34:48,560
Speaker 1: He wants on to keep jacking rates up, but at

660
00:34:48,600 --> 00:34:50,759
Speaker 1: the same time they will keep talking about a higher

661
00:34:50,840 --> 00:34:53,880
Speaker 1: terminal rate, and I don't think they're ready to step

662
00:34:53,880 --> 00:34:58,279
Speaker 1: back from that call. So because inflation is still uncomfortably high,

663
00:34:58,560 --> 00:35:01,759
Speaker 1: even though it's de cl reading, they need to have

664
00:35:01,840 --> 00:35:04,760
Speaker 1: the job done. The recent comments we can't risk inflation

665
00:35:04,840 --> 00:35:09,040
Speaker 1: coming back exactly, and some communications from both sides of

666
00:35:09,120 --> 00:35:12,960
Speaker 1: the Duff Hawk spectrum UH tells us that they're not

667
00:35:13,040 --> 00:35:16,200
Speaker 1: ready to give up. So Waller and ladle Brian and

668
00:35:16,239 --> 00:35:20,239
Speaker 1: they're all talking about like they need to be vigilant

669
00:35:20,320 --> 00:35:24,719
Speaker 1: on inflation. That is obvious. Yea, you know what. You

670
00:35:24,760 --> 00:35:27,040
Speaker 1: know what I did before Elena walked in and went

671
00:35:27,120 --> 00:35:29,880
Speaker 1: bio for Elena, just to check if she's a terminal

672
00:35:29,960 --> 00:35:32,920
Speaker 1: user still, and she is, otherwise I was going to

673
00:35:32,960 --> 00:35:34,360
Speaker 1: show her the door. I mean, if you're not a

674
00:35:34,440 --> 00:35:37,000
Speaker 1: terminal user, absolutely, how can you do it? How can

675
00:35:37,160 --> 00:35:40,280
Speaker 1: do just a message? Yeah? I type like message Carl

676
00:35:40,360 --> 00:35:42,880
Speaker 1: Ricka Donna nice. He still has a terminal yeah, and

677
00:35:42,920 --> 00:35:44,640
Speaker 1: he's coming in next week. So we're bringing the band

678
00:35:44,640 --> 00:35:47,719
Speaker 1: back together, all the grade economists we had here at Bloomberg.

679
00:35:47,760 --> 00:35:49,920
Speaker 1: So Elena, she let you have a joining us here.

680
00:35:49,960 --> 00:35:53,279
Speaker 1: She's a senior US economist for BNP Parry Bad. But

681
00:35:53,320 --> 00:35:55,760
Speaker 1: of course her claim to fame is she once worked

682
00:35:55,840 --> 00:35:58,279
Speaker 1: with me at Bloomberg Intelligence. That's what you know. People,

683
00:35:58,320 --> 00:36:00,480
Speaker 1: we missed you, but that's not clear. And there's everybody

684
00:36:00,480 --> 00:36:02,040
Speaker 1: who message us from the news. I'm like, oh, Yolene

685
00:36:02,080 --> 00:36:04,120
Speaker 1: is gonna be here. I'm gonna later. It was so

686
00:36:04,160 --> 00:36:06,960
Speaker 1: good to be bad guys, and I am so grateful

687
00:36:07,040 --> 00:36:09,440
Speaker 1: for the time that I worked here. So that I

688
00:36:09,480 --> 00:36:14,400
Speaker 1: also wanted to mention that the market is trying to

689
00:36:14,440 --> 00:36:16,160
Speaker 1: figure out what the heck is going on there today,

690
00:36:16,239 --> 00:36:19,880
Speaker 1: tons of stuff that digests from Tesla, earnings from earning

691
00:36:19,880 --> 00:36:22,279
Speaker 1: asist in general across the board. We had a whole

692
00:36:22,280 --> 00:36:26,000
Speaker 1: slew of eco data today. We just had, you know,

693
00:36:26,440 --> 00:36:28,239
Speaker 1: some some thoughts here about where what that means for

694
00:36:28,239 --> 00:36:29,759
Speaker 1: the economy, what that means for the FED, what that

695
00:36:29,800 --> 00:36:32,200
Speaker 1: means for the markets. Let's break it down with somebody

696
00:36:32,239 --> 00:36:35,120
Speaker 1: who does this for living, David Coudla, founder, CEO and

697
00:36:35,160 --> 00:36:38,239
Speaker 1: CIO of Mainstay Capital Management. David, thanks so much for

698
00:36:38,320 --> 00:36:40,720
Speaker 1: joining us here. It's a busy, busy day. And and David,

699
00:36:41,040 --> 00:36:42,440
Speaker 1: Matt and I were just speaking with one of our

700
00:36:42,480 --> 00:36:45,120
Speaker 1: favorite economists from BNP, Parry Bad and she's saying, Hey,

701
00:36:45,440 --> 00:36:49,439
Speaker 1: recession starting second quarter, maybe last three quarters, maybe more,

702
00:36:50,000 --> 00:36:53,200
Speaker 1: maybe one percent or so. Contraction in the economy. Is

703
00:36:53,200 --> 00:36:56,000
Speaker 1: that something you guys are having your calculus as you

704
00:36:56,000 --> 00:37:01,319
Speaker 1: think about your portfolio. Uh, Hi, Paul and Matt, Good

705
00:37:01,400 --> 00:37:05,600
Speaker 1: afternoon or good morning. Uh. You know, I think that

706
00:37:06,320 --> 00:37:10,960
Speaker 1: calling for a recession the second quarter is probably premature. Uh.

707
00:37:11,040 --> 00:37:16,240
Speaker 1: You know, what we've seen recently is the markets pricing

708
00:37:16,239 --> 00:37:19,040
Speaker 1: in more and more very shallow or no recession. But

709
00:37:19,120 --> 00:37:21,160
Speaker 1: let's look at the data. Right, if we go around

710
00:37:21,640 --> 00:37:24,160
Speaker 1: just in the US and go around the world, we

711
00:37:24,280 --> 00:37:27,000
Speaker 1: still have strong jobs in the US. That was confirmed

712
00:37:27,040 --> 00:37:31,360
Speaker 1: again today with weekly job as claims. We have strong GDP.

713
00:37:31,520 --> 00:37:33,719
Speaker 1: Now that's backward looking into the fourth quarter at two

714
00:37:33,719 --> 00:37:36,839
Speaker 1: point nine better than expected. GDP keeps coming in better

715
00:37:36,840 --> 00:37:42,560
Speaker 1: than expected. We've been have housing recovering with yields coming down.

716
00:37:42,600 --> 00:37:46,600
Speaker 1: Some mortgages are coming down. If we look at Europe, Uh,

717
00:37:46,640 --> 00:37:49,360
Speaker 1: they were supposed to have a worse recession than US.

718
00:37:49,520 --> 00:37:52,440
Speaker 1: Now there's calls for no recession in Europe because the

719
00:37:52,560 --> 00:37:55,400
Speaker 1: energy crunch hasn't materialized with a warmer winner or it

720
00:37:55,440 --> 00:37:58,040
Speaker 1: has abated, I should say. And then we go over

721
00:37:58,080 --> 00:38:03,160
Speaker 1: to Asia China. Uh, surprisingly too many probably abandoned zero

722
00:38:03,160 --> 00:38:07,960
Speaker 1: COVID policy. Uh. Their holiday travel right now is quadrupled

723
00:38:08,520 --> 00:38:11,640
Speaker 1: over this time last year. So there are a lot

724
00:38:11,680 --> 00:38:15,080
Speaker 1: of factors that show we still have strong growth, driving

725
00:38:15,200 --> 00:38:18,920
Speaker 1: and driving growth. I just I can't see a recession

726
00:38:19,560 --> 00:38:22,520
Speaker 1: starting in a couple of months. Uh, you know you're

727
00:38:22,560 --> 00:38:25,200
Speaker 1: out there in Michigan. I start to think more and

728
00:38:25,239 --> 00:38:28,640
Speaker 1: more about the possibility of too much production at GM.

729
00:38:28,719 --> 00:38:34,000
Speaker 1: Too much production at I guess it's Stlantis now. UM

730
00:38:34,280 --> 00:38:38,600
Speaker 1: inventories starting to rise compared to sales. Do you see

731
00:38:38,640 --> 00:38:46,080
Speaker 1: that out there. Uh, it depends. Um, I'm still waiting

732
00:38:46,080 --> 00:38:49,439
Speaker 1: on my order for my zero six Corvette to go through. Dude,

733
00:38:49,440 --> 00:38:52,200
Speaker 1: I gotta tell you something real quick. I went for

734
00:38:52,239 --> 00:38:55,160
Speaker 1: a ride with Mark Royce in a zero six at

735
00:38:55,200 --> 00:39:01,640
Speaker 1: the Milford proven Grounds on believable viah Just amazing what

736
00:39:01,680 --> 00:39:04,719
Speaker 1: they could get out of five and a half leaders.

737
00:39:04,719 --> 00:39:09,160
Speaker 1: Just I was blown away. And for the price, it

738
00:39:09,200 --> 00:39:13,960
Speaker 1: was like a GT three killer. Yeah. Yeah. So, so

739
00:39:14,160 --> 00:39:18,040
Speaker 1: you know, there is still pent up demand for uh

740
00:39:18,200 --> 00:39:21,640
Speaker 1: new autos because of the chip shortage. There's still pent

741
00:39:21,719 --> 00:39:25,680
Speaker 1: up demand and in some areas where we're still catching

742
00:39:25,719 --> 00:39:29,000
Speaker 1: up even though we know the used car market has

743
00:39:29,040 --> 00:39:32,319
Speaker 1: been declined for the past several months, but it, you know,

744
00:39:32,400 --> 00:39:35,200
Speaker 1: during the pandemic had gone up, had rose so much,

745
00:39:35,320 --> 00:39:38,480
Speaker 1: had risen so much, so I know, you know, the

746
00:39:38,560 --> 00:39:42,200
Speaker 1: automakers here are are still humming along. Now. If we

747
00:39:42,320 --> 00:39:46,960
Speaker 1: get a contraction the economy or god forbid a deeper recession,

748
00:39:47,320 --> 00:39:52,279
Speaker 1: that all changes their cyclical companies. But for now, there's

749
00:39:52,320 --> 00:39:54,880
Speaker 1: really still some some catch up to that pent up demand.

750
00:39:56,040 --> 00:39:57,879
Speaker 1: So what do we do here? I mean again, I'm

751
00:39:57,920 --> 00:40:00,000
Speaker 1: just looking at my Eco screen on the Bloomberg terminal.

752
00:40:00,160 --> 00:40:03,759
Speaker 1: I'm trying to digest all this economic data being deluged

753
00:40:03,800 --> 00:40:06,200
Speaker 1: with earnings. We had some you know, I guess some

754
00:40:06,280 --> 00:40:09,000
Speaker 1: good news from Tesla last night. Not that that's reflective

755
00:40:09,000 --> 00:40:11,239
Speaker 1: in the economy, but what are you doing with your

756
00:40:11,280 --> 00:40:16,920
Speaker 1: portfolio here given that economic backdrop and earnings backdrop. Yeah,

757
00:40:16,920 --> 00:40:19,360
Speaker 1: so this I would say, this first month of this

758
00:40:19,440 --> 00:40:22,120
Speaker 1: year is shaping up a little bit different than some

759
00:40:22,200 --> 00:40:24,359
Speaker 1: had expected, you know, some of the forecasts we had

760
00:40:24,400 --> 00:40:27,920
Speaker 1: from Morgan Stanley or JP Morgan or you know. And

761
00:40:27,960 --> 00:40:29,719
Speaker 1: we'll see how the rest of the quarter turns out.

762
00:40:29,760 --> 00:40:32,799
Speaker 1: But you know, we've had a good market now. With that,

763
00:40:33,360 --> 00:40:36,319
Speaker 1: that's good for our growth stocks that we hold, but

764
00:40:36,440 --> 00:40:40,160
Speaker 1: we are still biased towards the defensive because of this

765
00:40:40,280 --> 00:40:44,200
Speaker 1: concern about procession. I'd say though that our biggest change

766
00:40:44,360 --> 00:40:49,799
Speaker 1: in our portfolios is going overseas. With China recovering, that's

767
00:40:49,840 --> 00:40:52,200
Speaker 1: great for Asia stocks, and of course they've been on

768
00:40:52,239 --> 00:40:57,080
Speaker 1: a terror so we like e M specifically Asia. Uh

769
00:40:57,160 --> 00:40:59,960
Speaker 1: And of course CONNA duration and in bonds has made

770
00:41:00,040 --> 00:41:02,120
Speaker 1: more since here recently too, so we've had it there.

771
00:41:03,040 --> 00:41:05,600
Speaker 1: So the e M call we heard, I guess we're

772
00:41:05,600 --> 00:41:08,800
Speaker 1: hearing a little bit more and more these days. Um,

773
00:41:08,840 --> 00:41:10,960
Speaker 1: what's the basis of that for you? Is that just

774
00:41:11,000 --> 00:41:16,880
Speaker 1: simply the growth there is better relative to to the valuation. Yeah,

775
00:41:16,960 --> 00:41:19,960
Speaker 1: we've got you know E M E M. Undervalued certainly

776
00:41:20,000 --> 00:41:24,600
Speaker 1: relative to the US. When we look at historical historical basis,

777
00:41:25,320 --> 00:41:28,120
Speaker 1: and if we look at the factors, what is really

778
00:41:28,320 --> 00:41:32,040
Speaker 1: and I'm talking about Asia now specifically Asia. Uh, if

779
00:41:32,080 --> 00:41:36,800
Speaker 1: the Chinese economy is opening up, that's good for China,

780
00:41:37,080 --> 00:41:39,960
Speaker 1: that's good for the region, that's good for all of Asia.

781
00:41:40,280 --> 00:41:43,080
Speaker 1: And we're seeing that are already in stock prices. So

782
00:41:43,440 --> 00:41:47,080
Speaker 1: and we think that has further to run because being undervalued. Uh,

783
00:41:47,080 --> 00:41:51,319
Speaker 1: specifically China having sold off so far, and you know

784
00:41:51,400 --> 00:41:54,239
Speaker 1: that I don't know that, Uh, it was expected, but

785
00:41:54,280 --> 00:41:57,560
Speaker 1: they have certainly done an about face. And whether you're

786
00:41:57,600 --> 00:42:02,480
Speaker 1: looking at holiday travel, hotels demand, you know, immediately increasing

787
00:42:03,000 --> 00:42:06,200
Speaker 1: as COVID policy, COVID zero policy becomes a thing of

788
00:42:06,200 --> 00:42:09,279
Speaker 1: a past there. So that's just another factor that is

789
00:42:09,320 --> 00:42:12,480
Speaker 1: in favor of Asia stocks. More broadly. You know, I'm

790
00:42:12,480 --> 00:42:15,759
Speaker 1: looking at the Bloomberg Dollar Index and you know, I've

791
00:42:15,800 --> 00:42:19,200
Speaker 1: been asking people for years what's the bear case for

792
00:42:19,400 --> 00:42:22,239
Speaker 1: the U. S. Dollar? I mean, the dollar index is

793
00:42:22,239 --> 00:42:24,920
Speaker 1: down ten percent from its peak, So maybe we're kind

794
00:42:24,920 --> 00:42:27,239
Speaker 1: of there. How do you think about the dollar and

795
00:42:27,480 --> 00:42:32,000
Speaker 1: how does that impact kind of how you construct your portfolio? Yeah,

796
00:42:32,080 --> 00:42:35,120
Speaker 1: and a and another good thank you. That's another dynamic

797
00:42:35,160 --> 00:42:38,680
Speaker 1: I should have mentioned relative to overseas. Right, that's another

798
00:42:39,280 --> 00:42:42,800
Speaker 1: factor that's working in our favor is the weakening dollar. Um.

799
00:42:42,880 --> 00:42:44,719
Speaker 1: And you know, I think it's a function of we

800
00:42:44,760 --> 00:42:49,439
Speaker 1: see the FED is tapering off in their purchases. Uh.

801
00:42:49,560 --> 00:42:52,399
Speaker 1: Certainly the dollar was on a just a care last

802
00:42:52,480 --> 00:42:55,320
Speaker 1: year with an aggressive faid. We see the FED tapering

803
00:42:55,360 --> 00:42:58,440
Speaker 1: off I'm sorry, tapering off in the rate hikes, not purchases.

804
00:42:59,000 --> 00:43:04,000
Speaker 1: And so we have Europe that still needs to catch up.

805
00:43:04,080 --> 00:43:06,600
Speaker 1: They were behind the curb. Uh. You know, we look

806
00:43:06,640 --> 00:43:10,920
Speaker 1: at that around the world and or just looking locally

807
00:43:10,960 --> 00:43:15,080
Speaker 1: at the US. Uh. You know, the dollar has just

808
00:43:15,239 --> 00:43:22,680
Speaker 1: declined with this this uh tapering of FED rate heights. Um.

809
00:43:22,719 --> 00:43:24,759
Speaker 1: I'm just sorry, sorry, I got sidetracked looking at the

810
00:43:24,840 --> 00:43:28,440
Speaker 1: Zeo six here. This is I'm so excited for you

811
00:43:28,520 --> 00:43:33,319
Speaker 1: because it's the most powerful naturally aspirated V eight ever

812
00:43:33,440 --> 00:43:37,760
Speaker 1: put in a production car. SI power zero to sixty

813
00:43:37,760 --> 00:43:41,600
Speaker 1: and two and a half seconds, and it's not electric.

814
00:43:41,840 --> 00:43:44,759
Speaker 1: Zero to sixty and two and a half seconds and

815
00:43:44,840 --> 00:43:47,840
Speaker 1: it costs not electric, I mean half of what you

816
00:43:47,880 --> 00:43:51,440
Speaker 1: would pay. That's just an unbelievable I hope you've got

817
00:43:51,600 --> 00:43:55,839
Speaker 1: the orange or maybe a bright green color. Uh there

818
00:43:56,160 --> 00:43:57,920
Speaker 1: when you get take delivery, I'm gonna come over to

819
00:43:57,960 --> 00:44:01,160
Speaker 1: Michigan and do a few laps with you. It's a day.

820
00:44:01,239 --> 00:44:02,920
Speaker 1: It's a day, It's a day. What do you think

821
00:44:03,360 --> 00:44:06,440
Speaker 1: it is? What do you think, David about the about

822
00:44:06,440 --> 00:44:09,200
Speaker 1: the American consumer, Because a lot of people have been

823
00:44:09,280 --> 00:44:12,280
Speaker 1: kind of raining on my parade today saying the consumer

824
00:44:12,360 --> 00:44:14,680
Speaker 1: is starting to borrow a lot more, a lot more

825
00:44:14,719 --> 00:44:18,200
Speaker 1: on credit cards. Savings rates has dropped to nothing, the

826
00:44:18,239 --> 00:44:21,759
Speaker 1: bank balances are going to start to get depleted. Yeah,

827
00:44:21,800 --> 00:44:24,959
Speaker 1: you nailed it. The consumer is still strong, but where

828
00:44:24,960 --> 00:44:30,440
Speaker 1: it was savings from the pandemic, it's now more credit

829
00:44:30,480 --> 00:44:37,080
Speaker 1: card debt. We're seeing bank bank accounts decline. So you

830
00:44:37,120 --> 00:44:40,640
Speaker 1: know that becomes a concern as we roll further into

831
00:44:40,680 --> 00:44:44,880
Speaker 1: this year. Uh, because the consumers two thirds of the economy,

832
00:44:45,000 --> 00:44:46,880
Speaker 1: and some of those numbers I cited at the beginning

833
00:44:46,920 --> 00:44:50,880
Speaker 1: of the segment, Uh, those are get impacted very quickly.

834
00:44:51,840 --> 00:44:54,840
Speaker 1: If the consumer starts to weaken, and look what's happening

835
00:44:54,840 --> 00:44:59,000
Speaker 1: with jobs in some areas at least and big tech.

836
00:44:59,360 --> 00:45:01,680
Speaker 1: You know, almost every day we're seeing a mass layoff

837
00:45:01,680 --> 00:45:05,120
Speaker 1: at a company. Yeah, and those you know, started out

838
00:45:05,160 --> 00:45:08,239
Speaker 1: just being West Coast things tech stocks that you would

839
00:45:08,239 --> 00:45:11,400
Speaker 1: have expected because they hired you know, fifty more employees

840
00:45:11,440 --> 00:45:13,920
Speaker 1: in one year. Then you start to see three M,

841
00:45:14,000 --> 00:45:16,480
Speaker 1: then you start to see IBM. It's starting to creep

842
00:45:16,520 --> 00:45:20,560
Speaker 1: into Dow and old economy stocks. How concerned are you

843
00:45:20,560 --> 00:45:26,920
Speaker 1: about layoffs? Uh, well, it depends. We we want to

844
00:45:26,960 --> 00:45:31,160
Speaker 1: see the FED have a reason to to stop. I

845
00:45:31,200 --> 00:45:34,920
Speaker 1: think they've gone too far already. Um. I know that

846
00:45:34,920 --> 00:45:37,520
Speaker 1: that you guys have a debate internally between where the

847
00:45:37,560 --> 00:45:40,400
Speaker 1: FED should be. But I think they've gone too far already,

848
00:45:40,640 --> 00:45:43,920
Speaker 1: and I think that's that's that's the risk that they

849
00:45:43,920 --> 00:45:47,200
Speaker 1: break something later in the year. But uh, you know,

850
00:45:47,239 --> 00:45:50,160
Speaker 1: we're all eyes are on that because because the stock

851
00:45:50,200 --> 00:45:53,879
Speaker 1: markets a liquidity junkie um more important than earnings even

852
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Speaker 1: but uh yeah, if we if we can continue to

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Speaker 1: see that, or if we see that really and pack

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Speaker 1: the broader jobs numbers, uh, than that makes an issue.

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Speaker 1: Finally caused the FED to pause, all right, David, great stuff.

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Speaker 1: Always appreciate getting your thoughts. David Coudla, founder at CEO

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Speaker 1: of Mainstay Capital Management. Thanks for listening to the Bloomberg

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Speaker 1: Markets podcast. You can subscribe and listen to interviews with

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Speaker 1: Apple Podcasts or whatever podcast platform you prefer. I'm Matt Miller.

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Speaker 1: I'm on Twitter at Matt Miller three pt On Ball

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Speaker 1: Sweeney I'm on Twitter at pt Sweeney. Before the podcast.

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Speaker 1: You can always catch us worldwide at Bloomberg Radio