WEBVTT - Tesla, US GDP, and Markets (Podcast) 0:00:00.800 --> 0:00:04.040 Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney alongside 0:00:04.040 --> 0:00:06.920 my co host Matt Miller. Every business day we bring 0:00:06.960 --> 0:00:11.520 you interviews from CEOs, market pros, and Bloomberg experts, along 0:00:11.520 --> 0:00:15.600 with essential market moving news. Find the Bloomberg Markets Podcast 0:00:15.600 --> 0:00:18.439 on Apple Podcasts or wherever you listen to podcasts, and 0:00:18.480 --> 0:00:21.919 at Bloomberg dot com slash podcast. All right, here's the 0:00:22.200 --> 0:00:24.200 to me. Here's the headline of the day, Tesla, and 0:00:24.200 --> 0:00:26.480 of course Bloomberg News comes up with these great headlines. 0:00:26.720 --> 0:00:33.519 Tesla rallies from the low's pushing valuation over five hundred billion. Dan, 0:00:33.600 --> 0:00:35.800 I've joints us here on O Bloomberg and Actor Brooker Studio. 0:00:35.880 --> 0:00:39.240 What Bush Securities? Uh? Dan? What'd you take away from 0:00:39.360 --> 0:00:43.240 the Tesla news last night? That was a Goldilocks quarter, 0:00:43.360 --> 0:00:46.280 I meaning for the bulls, they were popping champagne because 0:00:46.680 --> 0:00:49.760 the demand out look was strong for two thousand twenty 0:00:49.800 --> 0:00:53.240 three and margins are holding. So now that dream scenario 0:00:53.440 --> 0:00:56.880 for Tesla's back on the table and look sentiment was 0:00:57.000 --> 0:00:59.800 just so negative. Mini and fire in a crowd theater. 0:00:59.880 --> 0:01:02.440 I think you combine it. This is stock now it 0:01:02.440 --> 0:01:05.160 starts to run towards two. So did the band What 0:01:05.200 --> 0:01:07.360 did Elon Musk say? I think he quantified it saying 0:01:07.360 --> 0:01:09.960 there's like two buyers for every production. Well, that's the 0:01:10.240 --> 0:01:11.959 I mean, as you just hit. I mean, that was 0:01:12.000 --> 0:01:14.479 really the thing that I think stood out. I'd almost 0:01:14.520 --> 0:01:17.440 call it a jaw dropper in terms of two x 0:01:17.480 --> 0:01:20.760 demand over production. And why are they offering all these incentives. 0:01:21.520 --> 0:01:23.360 There's no doubt you're starting to see cracks in the 0:01:23.440 --> 0:01:26.319 armor in China. You've seen in the US. But they 0:01:26.360 --> 0:01:29.120 read the room cut prices ripped the band aid off 0:01:29.200 --> 0:01:32.240 and then now they're able, because of their scale, which 0:01:32.280 --> 0:01:36.640 is unique, keep margins still well above industry norm. So 0:01:36.760 --> 0:01:38.880 what they're able to do now is scaleing that and 0:01:38.920 --> 0:01:41.000 I think coming at the gates and we've done this 0:01:41.040 --> 0:01:44.440 with survey work in China, it's just been on fire. 0:01:44.600 --> 0:01:47.600 And I think that's really the takeaway here. There's the 0:01:47.640 --> 0:01:51.040 bears go into hibernation mood. I mean, when the when 0:01:51.040 --> 0:01:54.560 the worst case scenario is only boosting production by thirty 0:01:54.640 --> 0:01:58.640 seven percent, that's insane. Right when the streets like, no, 0:01:58.760 --> 0:02:01.400 we want you to boost production by in a year 0:02:01.480 --> 0:02:06.279 for Carmaker, that's insane. That's why in my opinion, along 0:02:06.320 --> 0:02:09.919 with Apple, the most transformational companies in the world, and 0:02:09.960 --> 0:02:12.720 I think it continues to be testa. I never viewed 0:02:12.720 --> 0:02:15.480 as an auto company. Have views disruptive where I want 0:02:15.520 --> 0:02:17.080 to go and I should We should have had Kevin Tyner. 0:02:17.240 --> 0:02:18.760 We had him on the last I were Tom Keene. 0:02:18.800 --> 0:02:22.320 Kevin Tynan is the auto analyst for Bloomberg Intelligence, traditional 0:02:22.360 --> 0:02:25.720 auto guy, and he's of you know, he's never bought 0:02:25.760 --> 0:02:29.120 into this story because he's just simply it's not profitable, 0:02:29.480 --> 0:02:32.240 and be when it is profitable, everybody else Toyota and 0:02:32.400 --> 0:02:35.480 Volkswagen can commit and they'll on the market, and this company, 0:02:35.520 --> 0:02:38.400 whatever it is, will be a niche whatever. That's kind 0:02:38.400 --> 0:02:41.240 of I think, not just Kevin's call, but the call 0:02:41.320 --> 0:02:43.600 that made a lot of the traditional auto guys, you 0:02:43.680 --> 0:02:45.200 and a lot of other tech guys have viewed it 0:02:45.240 --> 0:02:48.000 more as a technology It seems like to me more 0:02:48.040 --> 0:02:51.280 of a technology company, a technology play, and that's how 0:02:51.320 --> 0:02:53.560 investors should look at it. Are we at the point though, 0:02:54.120 --> 0:02:56.280 that we do have the Toyota's, the Volkswagens and the 0:02:56.280 --> 0:03:00.200 Generalmotan's affords coming in where maybe it can it would 0:03:00.200 --> 0:03:02.400 be viewed more as an auto company no doubt. I mean, 0:03:02.560 --> 0:03:04.600 many thought Apple was going to be in the next 0:03:04.600 --> 0:03:07.480 BlackBerry at two in a billion and then went to 0:03:07.560 --> 0:03:09.959 three trillions. So I think it's just one of those 0:03:09.960 --> 0:03:13.520 situations where you have competition come from all angles, no 0:03:13.600 --> 0:03:15.839 doubt in Auto and especially coming out of the three 0:03:15.840 --> 0:03:18.480 win three area co GM and for what they're doing. 0:03:18.960 --> 0:03:22.679 But Tesla because of the vertical integration, because of the 0:03:22.760 --> 0:03:24.960 unique of the brand, the software, and you see that 0:03:25.000 --> 0:03:28.839 in the margins, and it's the must DNA all right. Now, 0:03:28.880 --> 0:03:31.520 the Musk DNA was a super net positive for a 0:03:31.520 --> 0:03:33.720 long time. Not now are you concerned that it is 0:03:33.960 --> 0:03:36.480 turned to a negative? Specifically, I don't. I don't care 0:03:36.480 --> 0:03:39.000 about him and his views, but does it damage the 0:03:39.000 --> 0:03:41.720 Tesla brand because he was so closely associated with the 0:03:41.760 --> 0:03:44.600 Tesla brand we talked about I think sent the sell 0:03:44.640 --> 0:03:48.480 off in two thousand twenty two was Musk Twitter fiasco driven. 0:03:48.560 --> 0:03:50.120 Is any of that permanent? Do you think? I think 0:03:50.160 --> 0:03:52.600 there's there's some of it, You know that that maybe 0:03:52.600 --> 0:03:55.200 you could quantify a small amoun that could be permanent. 0:03:55.240 --> 0:03:57.440 But that's why it was really the reason yesterday was 0:03:57.440 --> 0:04:00.600 probably the most important earnings called for Tesla. Many many 0:04:00.680 --> 0:04:03.600 years is because Musk, you need a pilot on the 0:04:03.640 --> 0:04:06.520 plant for him really to navigate. And I think that 0:04:06.680 --> 0:04:10.320 when he came off confident really I think even owned 0:04:10.480 --> 0:04:13.280 some of the twitters on the call last night. Was 0:04:13.280 --> 0:04:17.080 he reasonable? Do you think was he reassuring to some 0:04:17.160 --> 0:04:20.200 of the big investors. He was a lot more dialed 0:04:20.240 --> 0:04:23.159 in than I've seen him in many calls. And I 0:04:23.200 --> 0:04:26.840 think that was another thing that investors takeaway was because 0:04:26.880 --> 0:04:29.800 now you feel like this is a company that's actually 0:04:29.800 --> 0:04:32.360 going to do the right strategic things. That Twitter situation 0:04:32.440 --> 0:04:34.600 is going to continue to be there in the background. 0:04:34.880 --> 0:04:37.880 But I think not necessarily that albatross over the name, 0:04:38.160 --> 0:04:40.520 but now right, I mean, I've dated girls who had 0:04:40.520 --> 0:04:43.359 a good night. They appeared to be completely rational and 0:04:43.400 --> 0:04:46.360 reasonable at dinner with my parents, but then they weren't, 0:04:46.720 --> 0:04:49.640 you know. I mean there is an argument that Elon 0:04:49.720 --> 0:04:51.960 Musk is Cucu per coco puffs, right. I Mean, the 0:04:51.960 --> 0:04:56.240 guy is out there sometimes he's he always has been, 0:04:56.320 --> 0:04:59.520 but he's now willing to embarrass himself publicly more than 0:04:59.560 --> 0:05:02.400 he more than a normal rational person would look. And 0:05:02.440 --> 0:05:05.120 I think that's the controversy of Musk because that many 0:05:05.160 --> 0:05:08.480 of you, as a modern day Thomas Edison Albert Einstein 0:05:08.720 --> 0:05:11.359 that essentially went through a Howard Hughes moment. You know, 0:05:11.360 --> 0:05:13.840 when you think about the Twitter situation now from Musk, 0:05:14.200 --> 0:05:18.000 it's recognizing the Golden Child tests. So that's that has 0:05:18.080 --> 0:05:21.560 been an overhang because of the Twitter Spiderweb. Dan, do 0:05:21.600 --> 0:05:24.280 they have to come out with new models because it 0:05:24.360 --> 0:05:26.600 is the original model? S isn't that the same as 0:05:26.640 --> 0:05:29.080 it's been for ten years? And they all look like that. 0:05:29.600 --> 0:05:30.920 Do they need to come up with anything? How do 0:05:31.000 --> 0:05:32.960 they talk about that? Well? They do, because then you 0:05:33.000 --> 0:05:37.279 start to get into four nineteen nineteen going into seven 0:05:37.320 --> 0:05:40.760 where GM basically overtook him because they didn't innovate. I 0:05:40.760 --> 0:05:44.200 think if you look Cybertruck coming out later this year, 0:05:44.600 --> 0:05:47.520 I think potentially in SUV you know, in terms of 0:05:47.560 --> 0:05:50.320 some of the roads during some others, they're gonna need 0:05:50.400 --> 0:05:53.800 to expand that from penetration respective. But then you take 0:05:53.839 --> 0:05:57.039 a step back. We are in the early days of 0:05:57.080 --> 0:06:00.360 the biggest transformation to the auto industry since nineteen of these. 0:06:00.440 --> 0:06:02.839 I mean, the cyber truck will be huge when it 0:06:02.880 --> 0:06:06.000 comes out. It's just a bummer that it keeps getting 0:06:06.000 --> 0:06:09.039 delayed and delayed and delayed and everybody else gets to 0:06:09.120 --> 0:06:13.800 some extent and advantage. UM. The Ford, you know, has 0:06:13.839 --> 0:06:17.960 gotten great reviews. Paul loved it. It looks very traditional. UM. 0:06:18.000 --> 0:06:21.000 The Chevy seems like it's going to be even better. 0:06:21.240 --> 0:06:24.400 The GMC Hummer is like on another level, the cyber 0:06:24.400 --> 0:06:26.800 truck could be a better product than all of those. 0:06:26.839 --> 0:06:28.960 But it's just coming so many years late that everybody 0:06:29.000 --> 0:06:31.679 with a hundreds and spend an electric truck has already 0:06:31.680 --> 0:06:33.520 done it. And now I maybe if you look at 0:06:33.520 --> 0:06:36.520 this stuff coming at GM and Ford, it is it's 0:06:36.520 --> 0:06:39.960 a renaissance that I believe it's happened in Detroit. And 0:06:40.000 --> 0:06:42.200 that's why for tests, it's about making sure that this 0:06:42.320 --> 0:06:46.240 window opportunity they don't lose. But if the ultimate takeaway 0:06:46.279 --> 0:06:48.880 here is that they are putting iron fence around their 0:06:48.920 --> 0:06:53.680 backyard by the price cut and that call last night felt, 0:06:54.120 --> 0:06:57.279 I'd say exactly what the bulls needed to sort of 0:06:57.279 --> 0:06:58.719 take this out of the way. I always forget to 0:06:58.720 --> 0:07:01.599 mention Rivan and I feel because we have listeners who 0:07:02.080 --> 0:07:05.760 love the rib they look pretty, I look amazing. What 0:07:05.839 --> 0:07:08.240 do you think about the company about Ribbon? Is there 0:07:08.240 --> 0:07:10.400 going to be a challenger because they have also got 0:07:10.440 --> 0:07:13.840 production nightmares the likes of which you know Elon Musk 0:07:13.840 --> 0:07:15.600 got a dreamt of back in the day, no doubt. 0:07:15.600 --> 0:07:17.080 I mean, it's been a lot of time riving at 0:07:17.080 --> 0:07:20.000 their head. You're at their factory in Illinois. I'm bullish 0:07:20.000 --> 0:07:21.720 on Ribby in terms of where they could take this. 0:07:22.120 --> 0:07:25.120 Clearly there have been just massive speed bumps coming at 0:07:25.160 --> 0:07:27.640 the gate. They need to navigate that. But they are 0:07:27.640 --> 0:07:30.360 gonna be a player for many, many years. And then 0:07:30.600 --> 0:07:33.760 you're a Football Giants New York Giants Football Giants fan. 0:07:33.960 --> 0:07:36.760 What do they do with Daniel Jones and se Kwon Barkley? Oh? 0:07:36.800 --> 0:07:39.720 I think they resigned both then, especially the goat Kwan. 0:07:39.840 --> 0:07:41.760 I think that's a no brainer that they have to 0:07:41.800 --> 0:07:45.680 resign them. Okay, all right, I mean that's in my opinion. 0:07:46.120 --> 0:07:48.280 You get those are two. I think that proved it 0:07:48.400 --> 0:07:51.560 this year that I'd be shocked if they don't resign them. 0:07:51.600 --> 0:07:54.600 How about Pensiley football? Increasingly bullish and a good year. 0:07:55.520 --> 0:07:57.920 Didn't beat Ohio Stat or Michigan, but still a good 0:07:58.000 --> 0:08:01.520 year and still have those ruises that I'm wearing after 0:08:01.600 --> 0:08:04.360 being two time packed twelve champ, and I believe they 0:08:04.360 --> 0:08:06.960 are top five team next year. I think that they've 0:08:07.080 --> 0:08:10.560 now made that weep into the elite category, all right, 0:08:10.800 --> 0:08:15.520 and bullish. I just I just configured my Tesla Model 0:08:15.800 --> 0:08:21.840 X and it's only a five, so it's not I know, 0:08:21.920 --> 0:08:24.440 but I didn't add the auto full autopilot, full self 0:08:24.520 --> 0:08:27.600 driving feature, so I'm saving like six six thou dollars there? 0:08:27.600 --> 0:08:30.160 All right, Dan, eys, what but security joining us here 0:08:30.160 --> 0:08:37.360 in our Bloomberg in Actress Broker studio talking all things Tesla. 0:08:38.080 --> 0:08:40.199 Seems like the markets are just trying to really digest 0:08:40.640 --> 0:08:43.640 not only the earnings that we're getting every single day, 0:08:43.640 --> 0:08:46.880 but the slow of economic data we had today, trying 0:08:46.880 --> 0:08:48.400 to figure out what that means for the FED, what 0:08:48.440 --> 0:08:50.560 that means for this economy, and what that means for 0:08:50.600 --> 0:08:54.079 their portfolios. Who better to check in with and David Kelly, 0:08:54.160 --> 0:08:57.800 chief Global strategist for JP Morgan Asset Management. David thinks, 0:08:57.800 --> 0:08:59.200 so much for taking the time. I know you're busy 0:08:59.200 --> 0:09:01.679 today with your client Anson kind of sitting through all 0:09:01.720 --> 0:09:04.559 the data. What's your takeaway when you look at your 0:09:04.600 --> 0:09:07.000 ECO screen on your Bloomberg terminal and you see all 0:09:07.000 --> 0:09:10.040 the economic data that came out today, what's your takeaway? 0:09:11.280 --> 0:09:14.840 I think the slowdown is on track despite a lot 0:09:14.880 --> 0:09:17.720 of confusing data. So we did get that stronger than 0:09:17.760 --> 0:09:20.960 expected GDP read of two point nine percent, But I 0:09:21.040 --> 0:09:23.640 really think it's important to recognize that all that two 0:09:23.679 --> 0:09:27.200 point nine percent one point five percent was was coming 0:09:27.240 --> 0:09:30.480 from a pile up in inventories. So inventories grew at 0:09:30.480 --> 0:09:33.560 a pace of a hundred and thirty billion. Now normally 0:09:33.600 --> 0:09:36.439 they grow at about pace about fifty billions. So necessarily 0:09:36.480 --> 0:09:38.880 that means that inventories are actually gonna drag on growth 0:09:39.160 --> 0:09:42.320 in three And when we look at consumer spending, we 0:09:42.360 --> 0:09:44.360 know on a monthly basis a wall is slowing down. 0:09:44.360 --> 0:09:46.920 In the fourth quarter, we think we're still gonna we're 0:09:46.960 --> 0:09:50.199 gonna get worse trade numbers going forward. UM housing is 0:09:50.240 --> 0:09:51.920 still going to be weak, although it's a lot of 0:09:51.920 --> 0:09:54.560 the damage has been done. But overall, we we think 0:09:54.600 --> 0:09:56.960 we're still slowing down here. I mean we're on the 0:09:57.040 --> 0:09:58.640 edge of something that we don't we don't think we're 0:09:58.640 --> 0:09:59.960 on the edge of a cliff. We're probably in the 0:10:00.040 --> 0:10:01.880 edge of a swamp, but we still think the economy 0:10:01.920 --> 0:10:04.959 is slowing here. So David, does that mean, um, the 0:10:04.960 --> 0:10:07.480 Fed really does have to worry about the long and 0:10:07.600 --> 0:10:10.719 varied lags of monetary policy because they've hiked so much 0:10:10.720 --> 0:10:17.400 in the last year and nonetheless financial conditions are super loose. Well, well, 0:10:17.520 --> 0:10:18.880 yes they do. I mean they've got to look at 0:10:18.920 --> 0:10:21.840 not just monetary conditions but also fisical conditions. So what 0:10:21.920 --> 0:10:24.920 we've got is a lot of fiscal drag in the economy. Um, 0:10:25.000 --> 0:10:27.040 we're just slowing things down, and that's you know, that's 0:10:27.080 --> 0:10:30.160 really where the the main economic problem is here, because 0:10:30.160 --> 0:10:32.960 the personal savings rates down at two point nine. You know, 0:10:33.000 --> 0:10:35.200 normally it's up at seven percent, which which means a 0:10:35.200 --> 0:10:37.240 lot of people wrecked up credit card debt over the 0:10:37.360 --> 0:10:39.920 last year. The asian to their savings just to maintain 0:10:40.160 --> 0:10:42.320 a standard living that they can't maintain in the long run. 0:10:42.440 --> 0:10:44.640 So we're going to see consumer cutbacks this year because 0:10:44.640 --> 0:10:47.480 of what's going on really with fiscal policy, and the 0:10:47.480 --> 0:10:50.920 Federal Reserve should not be making things worse by overtightening 0:10:50.920 --> 0:10:54.440 monetary posts. Hang on, when you say they ate into 0:10:54.520 --> 0:10:56.880 their savings, I know the savings rate is dropped, but 0:10:56.920 --> 0:10:59.960 bank balances are still really high. Yeah, but they are 0:11:00.200 --> 0:11:02.400 coming down. But I'm also about the way you look 0:11:02.440 --> 0:11:05.240 at this is it's also an accumulation of debt. So 0:11:05.280 --> 0:11:07.320 when you've got you've got credit card debt going up 0:11:07.320 --> 0:11:11.760 by more than fifteen percent year over year in November, um, 0:11:11.840 --> 0:11:15.040 you know that particularly lower and middle income households are 0:11:15.240 --> 0:11:18.800 adding on debt in order to just try to maintain 0:11:18.800 --> 0:11:21.880 a certain standard living. And and you can't raise raise 0:11:21.920 --> 0:11:25.040 credit card debt by fifteen percent per year going forward. 0:11:25.120 --> 0:11:27.120 So we know consumers are going to slow down here. 0:11:27.120 --> 0:11:28.440 And we know the job growth is going to slow 0:11:28.480 --> 0:11:30.479 down here because we're three and a half percent unemployment 0:11:30.520 --> 0:11:33.439 that there very there aren't enough unemployed people out there 0:11:33.760 --> 0:11:36.200 to to to grow jobs quickly. So we know slow 0:11:36.240 --> 0:11:39.520 down is coming. And what I don't quite get about 0:11:39.559 --> 0:11:41.600 what the Federal Reserve is doing is that they say 0:11:41.640 --> 0:11:43.680 they want to get the federal funds right up above 0:11:43.720 --> 0:11:46.959 five percent and then cut it by one percent next 0:11:47.040 --> 0:11:48.679 year and cut it by another one percent the year 0:11:48.720 --> 0:11:50.640 after that. And that doesn't make any sense to me. 0:11:50.679 --> 0:11:53.200 I mean, which you should do with monetary policy, because 0:11:53.240 --> 0:11:55.400 the lags you mentioned, you should try to slide in, 0:11:55.880 --> 0:11:58.160 slide into first space, so as you know, just very 0:11:58.240 --> 0:12:00.440 gently raise it to about the right level and left 0:12:00.440 --> 0:12:03.440 the economy adjust instead, they're overshooting, and I think that 0:12:03.440 --> 0:12:05.920 that that is an economic risk. They could put the 0:12:05.920 --> 0:12:08.320 economy in recession by the end of the year. So 0:12:08.960 --> 0:12:11.480 if you were FED Chairman J. Pale, if you were 0:12:11.480 --> 0:12:13.120 sitting in his seat, what would you do over the 0:12:13.120 --> 0:12:17.160 next several meetings? Well, first of all, I would, UM, 0:12:17.200 --> 0:12:20.160 I would express confidence that inflation is coming down. We 0:12:20.240 --> 0:12:23.280 think we've we've we've beaten this. UM. We recognize that 0:12:23.360 --> 0:12:27.320 interest rates are low by historical standards, but they're not 0:12:27.520 --> 0:12:30.359 low by the standards to which the economy has become accustomed. 0:12:30.800 --> 0:12:33.400 You know, we've had fifteen years of everybody getting used 0:12:33.400 --> 0:12:35.920 to the morphine drip of zero present interest rates. In 0:12:35.960 --> 0:12:38.040 that kind of economy, you do have to adjust a 0:12:38.080 --> 0:12:41.839 bit UM. So I would say enough for now, UM, 0:12:41.840 --> 0:12:44.640 I would stop raising rates UM, and let's see how 0:12:44.679 --> 0:12:47.559 this all plays out. And we are we stand ready 0:12:47.600 --> 0:12:51.680 to raise or lower rates going forward if things UM change. 0:12:51.760 --> 0:12:53.960 But right now it looks like inflation is coming down, 0:12:54.160 --> 0:12:57.120 growth is slowing. Let's just leave well enough alone at 0:12:57.120 --> 0:12:59.440 this point and not tighten any further. So that's what 0:12:59.800 --> 0:13:02.240 that what you would do. What do you think that 0:13:02.320 --> 0:13:04.800 that is going to do? And I think they'll raise. 0:13:05.040 --> 0:13:07.319 I think they will raise rates by one quarter of 0:13:07.480 --> 0:13:11.600 percent on next Wednesday, and I think they'll probably do 0:13:11.640 --> 0:13:15.600 the same thing on March four. Now, their own forecast 0:13:15.640 --> 0:13:17.800 states they will again come back and raise rates by 0:13:17.840 --> 0:13:20.640 another quarter point on May three, and that I don't 0:13:20.640 --> 0:13:23.720 think they'll do. I think they'll probably stop on, you know, 0:13:23.760 --> 0:13:25.720 with the with the last rate hike in March, and 0:13:25.720 --> 0:13:28.120 then let's wait and see what happens, because, as I say, 0:13:28.160 --> 0:13:31.720 inflation is coming down pretty rapidly here, and the great 0:13:31.800 --> 0:13:34.559 danger is that they overshoot put the economy and recession, 0:13:34.559 --> 0:13:36.720 and then they're going to have to come rate very aggressively, 0:13:36.920 --> 0:13:40.640 which is not the way you should be conducting monetary policy, David. 0:13:40.760 --> 0:13:44.640 Just on the labor market front, we had another initial 0:13:44.679 --> 0:13:50.400 jobs claims print below two hundred thousand and eighty six thousand. Boy, 0:13:50.440 --> 0:13:54.439 this market is really strong. This surprise you how strong 0:13:54.440 --> 0:13:57.200 the labor market is. Uh, irrespective of kind of what 0:13:57.240 --> 0:14:00.320 we're here from some of the silific Silicon Valley companies, Well, 0:14:00.920 --> 0:14:03.920 there's a difference between you know, I remember watching an 0:14:03.920 --> 0:14:06.520 exercise video which talked and talked about tightening and strengthening 0:14:06.600 --> 0:14:09.000 various parts of my of my body, and I think 0:14:09.040 --> 0:14:11.320 this is this is a labor market that is very tight, 0:14:11.440 --> 0:14:14.440 but not necessarily very strong. Um. In other words, there 0:14:14.440 --> 0:14:18.040 aren't enough There aren't a reserve pool of unemployed workers. 0:14:18.040 --> 0:14:20.800 The labor force itself is growing by about one tenth 0:14:20.800 --> 0:14:24.000 of a percent um per year, so it's it's the 0:14:24.360 --> 0:14:27.600 working population, so there's no extra workers. Now, that means 0:14:27.600 --> 0:14:30.040 that there aren't that many layoffs, but even there would 0:14:30.040 --> 0:14:32.680 be a little careful because we've got a very unusual economy. 0:14:32.680 --> 0:14:36.000 We're probably not seeing the normal retail layoffs we'd see 0:14:36.560 --> 0:14:39.280 um after the holiday season because we probably didn't see 0:14:39.320 --> 0:14:43.520 as much on the ground retail hiring as you would 0:14:43.520 --> 0:14:46.360 normally see in retail season. So I'm I'm a little 0:14:46.400 --> 0:14:48.960 skeptical about that. I do think that the pace of 0:14:49.040 --> 0:14:51.760 hiring in the economy is slowing down, and I think 0:14:51.760 --> 0:14:54.440 that some of these job openings are kind of, you know, 0:14:54.560 --> 0:14:56.840 no longer relevant, even though they're they're staying on the 0:14:56.880 --> 0:14:58.920 boards here. So I don't, you know, I do think 0:14:58.920 --> 0:15:01.240 the labor market is very night, but I don't think 0:15:01.280 --> 0:15:03.760 it's actually very strong. Yeah, I mean, three and a 0:15:03.760 --> 0:15:07.280 half percent unemployment points to a very tight labor market. 0:15:07.280 --> 0:15:09.200 But the question is does it rise quickly? Do we 0:15:09.240 --> 0:15:12.520 get to five percent by the middle of the year. No, 0:15:12.680 --> 0:15:14.840 I don't think we do because I think, as I say, 0:15:14.880 --> 0:15:17.360 it's it's very tied. So just aren't enough workers for 0:15:17.400 --> 0:15:20.360 that to happen, to be enough to lay awful lot 0:15:20.400 --> 0:15:22.320 of workers. But I think another thing to look at 0:15:22.400 --> 0:15:24.640 here is wage growth, because wage growth has actually been 0:15:24.720 --> 0:15:28.800 decelerating in the last few months. Wages for all you know, 0:15:28.800 --> 0:15:31.640 for production non supervisor workers are five percent to year 0:15:31.640 --> 0:15:34.080 over year, but inflation six and a half percent year 0:15:34.120 --> 0:15:36.680 over year. So workers aren't keeping up with inflation. I 0:15:36.680 --> 0:15:40.760 think increasingly they won't because they again they don't feel 0:15:40.760 --> 0:15:43.040 like they've got that much bargaining power. So you know, 0:15:43.080 --> 0:15:44.920 as I say, it's a tight labor market. There aren't 0:15:44.920 --> 0:15:47.880 a lot of available workers, but the working age population 0:15:47.920 --> 0:15:50.800 is growing slowly. I think the economy after this morning's report, 0:15:51.200 --> 0:15:53.040 is going to be growing slowly in the first half 0:15:53.080 --> 0:15:55.240 of this year. And you know, I think we just 0:15:55.240 --> 0:15:58.320 need to get used to a slow growth, lower lower 0:15:58.360 --> 0:16:01.520 inflation economy. Again, David, how are you factoring in just 0:16:01.640 --> 0:16:03.400 switch gears a little bit, How are you factoring in 0:16:03.600 --> 0:16:08.880 the reopening and maybe they're reopening faster than expected of China. Um. 0:16:08.920 --> 0:16:11.640 I think it's I think it's kind of a it's 0:16:11.680 --> 0:16:15.000 a positive for global economic growth. I think it's probably 0:16:15.040 --> 0:16:19.200 almost a net neutral for inflation. Um so um we 0:16:19.200 --> 0:16:21.920 were clearly getting you know, because they've gone to a 0:16:22.040 --> 0:16:24.360 got rid of their zero COVID policy. I think that 0:16:24.440 --> 0:16:28.320 we will see um surges in output from China, and 0:16:28.320 --> 0:16:31.400 I think you'll see more Chinese spending on services, but 0:16:31.480 --> 0:16:33.880 I don't think you'll see a huge surge in Chinese 0:16:33.880 --> 0:16:37.160 spending on goods. And because of that, you know, that's 0:16:37.200 --> 0:16:40.880 how higher Chinese demand would translate into higher inflation around 0:16:40.880 --> 0:16:42.240 the world. So I don't think that's going to push 0:16:42.320 --> 0:16:45.080 up inflation, but it will help with global growth. And 0:16:45.120 --> 0:16:47.320 I think the interesting thing is this year the US 0:16:47.400 --> 0:16:49.200 is going to be slowing down while the rest of 0:16:49.240 --> 0:16:51.080 the world is picking up in terms of growth, and 0:16:51.120 --> 0:16:53.160 that couldn't be negative for the dollar, which you think. 0:16:53.160 --> 0:16:56.240 It's got some pretty interesting investment implications. I just have 0:16:56.400 --> 0:16:58.880 this image in my head at one point four billion 0:16:58.920 --> 0:17:01.320 people finally allowed to getting their cars and drive. They 0:17:01.320 --> 0:17:03.120 have to stop at the gas station, right, I mean, 0:17:04.160 --> 0:17:08.040 um h. Jeff Curry compared this to two thousand eight 0:17:08.080 --> 0:17:11.720 when we saw crewde go to barrel. You're not worried 0:17:11.720 --> 0:17:14.760 about that, no, not at all. Is we've had very 0:17:14.840 --> 0:17:18.080 high prices very recently, and the best here for high 0:17:18.080 --> 0:17:21.040 prices is high prices. Uh. This year is going to 0:17:21.119 --> 0:17:24.560 be the biggest year in US history for liquid fuels production. 0:17:25.320 --> 0:17:29.000 We've we've got a huge production of natural gas, and 0:17:29.000 --> 0:17:31.800 and Europe is now all stocked up the natural gas. 0:17:32.440 --> 0:17:34.639 But I, you know, I see plenty of conservation. I 0:17:34.640 --> 0:17:37.040 don't think the global economy is going to grow that fast, 0:17:37.880 --> 0:17:39.760 you know, if you I do think it's going to 0:17:39.840 --> 0:17:41.320 grow fast in the US, but the US is going 0:17:41.359 --> 0:17:44.240 to grow very slowly, and China will be picking up, 0:17:44.240 --> 0:17:46.720 but Europe is going to be slow. The UK is 0:17:46.760 --> 0:17:49.400 in recession. So I don't see a boom in global 0:17:49.800 --> 0:17:53.600 energy demand this year. Um. I think because of the 0:17:53.680 --> 0:17:57.000 high prices last year, we are going to see pretty 0:17:57.040 --> 0:18:00.520 strong growth in energy supply. So I don't unless something 0:18:00.520 --> 0:18:03.320 else happens to supply that we're not anticipating right now, 0:18:03.640 --> 0:18:06.159 I don't think we'll see another surge in oil prices 0:18:06.200 --> 0:18:08.560 in this kind of economy. All right, David, great stuff, 0:18:08.600 --> 0:18:10.920 Really appreciate getting a few minutes of your time. David Kelly, 0:18:11.000 --> 0:18:13.800 Chief Global Strategist, JP Morgan asset Management and even more 0:18:13.840 --> 0:18:17.280 importantly Bachelor and economics from the University College of Dublin. 0:18:17.320 --> 0:18:19.480 You can probably get a little bit of the Irish 0:18:19.600 --> 0:18:22.639 accent there through the radio and a PhD in economics 0:18:22.680 --> 0:18:27.119 from Michigan State University. Spartans about that parties I won 0:18:27.200 --> 0:18:29.280 if he comes over from you know, Ireland and becomes 0:18:29.280 --> 0:18:31.880 like this crazy big ten football fan, do you think 0:18:31.880 --> 0:18:34.960 that happens? I could imagine that. Why how could you 0:18:35.000 --> 0:18:36.800 not when you're in that part of the part of 0:18:36.800 --> 0:18:42.800 the country. I think in the in the big picture, 0:18:43.320 --> 0:18:47.720 huge news, and that is the Akio Toyota is stepping 0:18:47.760 --> 0:18:52.520 down as the CEO president of his namesake firm. So 0:18:52.600 --> 0:18:55.720 that was Toyota as in the founder of the company. Yeah, 0:18:55.760 --> 0:18:58.879 I think his grandfather founded the company. Um they changed 0:18:58.920 --> 0:19:02.560 the name from Toyota uh with a D to Toyota 0:19:02.920 --> 0:19:05.679 with a T because of something to do with like 0:19:05.800 --> 0:19:08.520 numbers and luck. I'm not sure, but someone who does 0:19:08.600 --> 0:19:11.960 know for sure is Craig Trudel. He's our Global Autos czar. 0:19:12.080 --> 0:19:14.639 He ran the auto's coverage for the US then he 0:19:14.680 --> 0:19:17.399 went over to Tokyo and ran Auto's coverage in Asia, 0:19:17.800 --> 0:19:20.200 and now he's in London. He runs auto coverage globally. 0:19:20.280 --> 0:19:22.720 Just he just can't stay put anywhere. Well, I think 0:19:23.080 --> 0:19:24.760 it's cool. It's like he worked in a different part 0:19:24.760 --> 0:19:26.239 of the company and now he runs the whole thing. 0:19:26.240 --> 0:19:29.240 So okay, Craig, thanks so much for joining us. Talk 0:19:29.280 --> 0:19:30.880 to me about well, first of all, what's the deal 0:19:30.920 --> 0:19:32.760 with Toyota with a D versus Toyota with a T. 0:19:33.880 --> 0:19:36.320 You know what you You have put me on the spot, 0:19:36.440 --> 0:19:38.840 and I know that I've I know that I've been 0:19:39.000 --> 0:19:41.280 that this has been explained to me, but I don't remember. 0:19:41.520 --> 0:19:45.320 I don't remember. I'm pretty sure that he's like Toyota 0:19:45.400 --> 0:19:48.960