Speaker 1: Welcome to the Bloomberg P and L Podcast. I'm Pim Fox.
Speaker 1: Along with my co host Lisa Abramowitz. Each day we
Speaker 1: bring you the most important, noteworthy, and useful interviews for
Speaker 1: you and your money, whether at the grocery store or
Speaker 1: the trading floor. Find the Bloomberg P L Podcast on iTunes,
Speaker 1: SoundCloud and at Bloomberg dot com. Well earlier, we spoke
Speaker 1: with Lex churs Macker, senior vice president of the America's
Speaker 1: Region and president and chief executive officer of Volver Cars
Speaker 1: of North America, to talk about the new x C sixty,
Speaker 1: their new plant in Charleston, and electric vehicles. We kicked
Speaker 1: things off by asking Lex how Volvo has managed to
Speaker 1: increase both the price point of cars as well as
Speaker 1: the volume. Take a listen. I think it's it's fair
Speaker 1: to say that we are on a turnaround in the
Speaker 1: United States. We have been out of sight, out of mind.
Speaker 1: Now with entering the market with absolute fabulous products, we
Speaker 1: are a to and grow because we have the right
Speaker 1: products and also increase our price steps because the products
Speaker 1: are very competitive compared to compared to the rest of
Speaker 1: the market. So it's a little bit of a rare situation,
Speaker 1: low volume, start great products, and by that we can
Speaker 1: combine those factors. I wonder if you could just help
Speaker 1: people a little bit about Volvo, because your parent company
Speaker 1: obviously based in China. Geely Automotive, the largest, one of
Speaker 1: the largest manufacturers of automobiles in the world, described the
Speaker 1: split between the United States and China as far as
Speaker 1: your markets go, volume and so on. I think what
Speaker 1: you see in the in the in in China happening
Speaker 1: now is that their their their volume prediction for two
Speaker 1: thousand seven, the total market is twenty seven million cars,
Speaker 1: whereas in the United States, as you know, we're operating
Speaker 1: between sixteen and seventeen. It's it's only two years ago,
Speaker 1: probably one and a half year ago, if I remember well,
Speaker 1: that they passed the US the sixteen million borderline. So
Speaker 1: what we see in in China is extremely rapid growth.
Speaker 1: How concerned are you about the rebound in commodity prices
Speaker 1: steel in particular, as China does stabilize their growth and
Speaker 1: how expensive it is becoming too manufacturer cars Now at
Speaker 1: the moment, I am not so worried at all. I
Speaker 1: think it's that at the end we are we're working
Speaker 1: in a in a in a free world with free economy,
Speaker 1: and at the end we will we will resolve it.
Speaker 1: But of course, I mean steel production is a generic issue,
Speaker 1: but it's it's not our biggest concern for the moment.
Speaker 1: So what's your biggest concern? My biggest concerns here in
Speaker 1: the United States is to secure sustainable growth. I mean,
Speaker 1: we want to go as soon as possible to a
Speaker 1: one percent market share. That's exactly where we were in
Speaker 1: two thousand four. That's what our retailers are are aiming for.
Speaker 1: They have invested accordingly, and we have all more as
Speaker 1: such is on a on a on a great path.
Speaker 1: So my major concern is to get sufficient cars to
Speaker 1: the United States to enable that growth. Can you tell
Speaker 1: us what volumes you're doing in the United States currently
Speaker 1: and what your goals are um At the moment, we
Speaker 1: are operating around thousand units, and that's why I would
Speaker 1: like to end up somewhere between in the United States
Speaker 1: between ninety and nine five thousand units. And that's that's
Speaker 1: based on supply. It's not necessarily based on demand because
Speaker 1: demand is higher, especially on the ex ninety So just
Speaker 1: tell us about the new plant in Charleston, South Carolina. UM.
Speaker 1: We decided about two years two and a half years
Speaker 1: ago to build a plant in South Carolina. We wanted
Speaker 1: to be in the United States. This is this is
Speaker 1: we have been in the US for more than sixty years.
Speaker 1: This is more or less our second home market, UM,
Speaker 1: and we we took a deliberate choice to be in
Speaker 1: the United States already two years as ago and for
Speaker 1: exactly the reasons I said, this is our whole market,
Speaker 1: this is where our customers are since long and we
Speaker 1: have faced very loyal retailers. So we wanted to give
Speaker 1: a very clear signal United States. It is how concerned
Speaker 1: are you about pushing into the US at a time
Speaker 1: when auto sales numbers are coming down and there is
Speaker 1: concern about deteriorating resale values of cars. That is an issue.
Speaker 1: And I think what we what we face generally is
Speaker 1: that we all want to get to the sixteen and
Speaker 1: a half seventeen million units in the US and that
Speaker 1: that drives and sentenced and that's not necessarily sustainable. In
Speaker 1: respect of the factory in South Carolina, it will be
Speaker 1: a global factory. We will produce as sixty on the
Speaker 1: new based on the new platform, same as the x
Speaker 1: C sixty and we will also export as sixties to
Speaker 1: the rest of the world, so we're not only dependent
Speaker 1: on the US market. Although it isn't labor more expensive here.
Speaker 1: It is, but at the end, you know, it's it's
Speaker 1: it's it's about you produce where you sell, and we
Speaker 1: have a global manufacturing footprint. That's why it's so important
Speaker 1: to stress that it's not only about the US. We
Speaker 1: are a global company. We produce cars in Europe, we
Speaker 1: produce cars in China, and depending on the demand and
Speaker 1: the model, we distribute them all over the world. And
Speaker 1: that's one of the reasons why I'm very concerned about
Speaker 1: the adjustable text discussions here at the United States, because
Speaker 1: that is that's not aligned with free trade, that's not
Speaker 1: in line with what we face in the automotive industry,
Speaker 1: a very global footprint. The Swedish government has made it
Speaker 1: a policy in order to eliminate the use of fossil fuels,
Speaker 1: particularly in automobiles. What kind of hybrid or electric cardio
Speaker 1: bills can we expect to see from Volvo. We took
Speaker 1: in two thousand eight the deliberate choice to abandon five
Speaker 1: cylinders and six cylinders and to focus on very fuel
Speaker 1: efficient force force cylinder turbo engines combined with electrification. So
Speaker 1: we are totally on track with ever demand any government
Speaker 1: where ever in the world is putting on on environment.
Speaker 1: We strongly believe in electrification. We will launch our first
Speaker 1: full electrical car in two thousand nineteen. And those markets
Speaker 1: where electrification does not bite yet, we have extremely fuel
Speaker 1: efficient engines in all our car ranges, so I feel
Speaker 1: very comfortable with actually any demand. What about self driving cars?
Speaker 1: And Evolvo had been making a big push, pulled back
Speaker 1: after some high profile accidents. Where is this now? Um
Speaker 1: Autonomous drive is an integrated part of our vision. We
Speaker 1: have a vision that by twenty nobody should be killed
Speaker 1: or heavily injured in Evolvo, and that's quite a statement.
Speaker 1: And with passive safety and active safety alone, we do
Speaker 1: not manage to reach that statement because we know that
Speaker 1: of the accident is caused by distraction of the driver.
Speaker 1: There's only one tool which can resolve that, and that
Speaker 1: is a tautomers drive. So we continue to to roll
Speaker 1: out very aggressively our development plan and and and Uber
Speaker 1: you mentioned it is one partner. We see one accident
Speaker 1: that doesn't that doesn't hold us back. It's it's a revolution,
Speaker 1: so it will be a snak umpy roads and there
Speaker 1: are you know, there are sometimes some obstacles. That was
Speaker 1: Lex Cursor Macker, senior vice president of the America's Region
Speaker 1: and president and chief executive officer of Volvo Cars of
Speaker 1: North America. He was talking about the new X sixty,
Speaker 1: their new plant in Charleston electric vehicles, as well as
Speaker 1: breaking into a US market or expanding a presence in
Speaker 1: a US market that currently has a couple of road
Speaker 1: speed bombs just based on the long deterioration as well
Speaker 1: as lower resale values of cars. Many of the automobile
Speaker 1: companies here say that they are leading the charge when
Speaker 1: it comes to automated driving systems and the latest technology
Speaker 1: inside the cabin. Maybe not. Sam Abel Zamid is a
Speaker 1: senior analyst for mobility for Navigant Research. He's based in Detroit,
Speaker 1: but luckily he's here with us today. Sam, thanks very
Speaker 1: much for being with us. And you okay, you give
Speaker 1: away the the answer here. I keep thinking, you know,
Speaker 1: maybe it's Ford or GM or maybe Mercedes. Somebody's got
Speaker 1: this great you know in cabin technology. You're saying, uh,
Speaker 1: that's not the group you need to be paying attention to. Well,
Speaker 1: what we did was we took a look at a
Speaker 1: lot all of the major companies that are developing automated
Speaker 1: driving systems and took a holistic look at who is
Speaker 1: best positioned to actually succeed in commercializing the technology, not
Speaker 1: just the core technologies of a self driving car, but
Speaker 1: who can actually make a business out of it. And
Speaker 1: when we did that and scored scored these companies on
Speaker 1: ten different criteria for strategy and execution, we came out
Speaker 1: with several of the major automakers as the leaders in
Speaker 1: the space. Overall, uh SO, um Ford and GM came
Speaker 1: out on top for just slightly ahead of General Motors,
Speaker 1: followed by Reno Nissan Alliance, and then Diemler and um Weymo,
Speaker 1: the Google self driving car spinoff uh came in seventh overall.
Speaker 1: Uh we scored them highest for vision and for technology.
Speaker 1: But they have no manufacturing capability, and you know they're
Speaker 1: they're talking to O E. M s about partnering to
Speaker 1: produce cars for them they can install their their platform
Speaker 1: on and and developing the services. But right now they
Speaker 1: don't have that piece. And some of the other companies
Speaker 1: that have obviously gotten a lot of media attention. Like
Speaker 1: Tesla and uber Uh, they actually came quite a bit
Speaker 1: further down in the rankings UM based on factors in
Speaker 1: Tesla's case um poor qualit and reliability of the cars
Speaker 1: they built today, and um uber um their technology just
Speaker 1: doesn't actually seem to work all that well and their
Speaker 1: company as a business doesn't seem all that sustainable. Well, Sam,
Speaker 1: you know, I have to bring this back to recent
Speaker 1: market action where all of a sudden, Tesla's market cap
Speaker 1: surpassed g MS, which was a surprising landmark to a
Speaker 1: lot of people. If Tesla is in seventh place or
Speaker 1: way down there, right, I think twelve place, sorry, twelve
Speaker 1: place when it comes to their ability to commercialize self
Speaker 1: driving technology, what does that mean about current valuations? Well,
Speaker 1: I'm not a stock market analyst or financial analysts. I'm
Speaker 1: a technology analyst and look at the business side of it.
Speaker 1: But um, frankly, you know, it's it's a mystery to
Speaker 1: me how how they have such a valuation. I mean,
Speaker 1: I hear you know, uh people investors talking about their
Speaker 1: talking about their the company's future potential. But frankly, they
Speaker 1: haven't really demonstrated they necessarily have a long term future
Speaker 1: as a large scale automaker. UH. Building cars at small scale,
Speaker 1: they haven't done a particularly good job at product quality
Speaker 1: and reliability. UM, they certainly haven't been profitable, and UH
Speaker 1: as as they scale up to larger, you know, higher
Speaker 1: volume vehicles at lower price points, UH somewhat UH. Counterintuitively,
Speaker 1: customers that buy mainstream cars in the thirty thirty five
Speaker 1: thou dollar price point are actually much have much higher
Speaker 1: expectations of quality and reliability than customers buying premium cars.
Speaker 1: Those affluent customers that buy a hundred thousand dollars in
Speaker 1: up cars often have more than one vehicle, and they're
Speaker 1: not necessarily reliant on a specific vehicle to be running
Speaker 1: every day. People that you know, company customers that buy
Speaker 1: toy To cameras and Honda accords, don't buy them because
Speaker 1: they're exciting or sexy. They buy them because they know
Speaker 1: they're gonna get in that car every morning, turn the key,
Speaker 1: press the start button. It's gonna beat, it's gonna fire up,
Speaker 1: and take them to work, to school, wherever they need
Speaker 1: to go, and if they need service, it's gonna be
Speaker 1: handled promptly, something Tesla has not demonstrated a capability to
Speaker 1: do so far, and if they can't execute properly on
Speaker 1: launching the Model three, they could be in serious trouble.
Speaker 1: I gotta say, you know, when you said press the
Speaker 1: start button, that just took me all the way back
Speaker 1: to the nineteen sixties. You know, the turn the key,
Speaker 1: press the ignition and you know, maybe play a little
Speaker 1: bit with the throttle. Now you've been working almost twenty
Speaker 1: you worked twenty years working on electronic control systems. Uh
Speaker 1: in in the automobile. I've always wanted to know the
Speaker 1: start stop capability relatively new. Right you stopped at a
Speaker 1: red light, the engine cuts off then instantly turns on.
Speaker 1: But we're going to see more innovation like that. And
Speaker 1: who was responsible? Do you know who came up with that? Uh?
Speaker 1: You know, I I'm not sure who did the first
Speaker 1: auto start stop systems. Most of them were implemented in
Speaker 1: in Europe by a number of European manufacturers, UM, Folkswagen,
Speaker 1: BMW some of the first ones. Um. And we're going
Speaker 1: to see more stuff like that, yeah, absolutely, Um. You
Speaker 1: know they're they're very cost effective solutions that give you,
Speaker 1: you know, two three four percent more fuel economy, especially
Speaker 1: in city driving. Uh, and so that it doesn't cost
Speaker 1: much in manufacturers will use that to improve their fuel
Speaker 1: economy in a way that isn't going to add a
Speaker 1: lot to the sticker price of the car. Sam, when
Speaker 1: you were analyzing which companies were most adept at making
Speaker 1: a market out of autonomous driving vehicles, did you get
Speaker 1: a sense of what the true self driving car would
Speaker 1: look like, the one that actually would be sold that
Speaker 1: we'd end up seeing possibly in the next couple of years. Um,
Speaker 1: I think a good hint of the direction we're going
Speaker 1: to see as cars like the Chevrolet Bolt ev UM.
Speaker 1: You know, when GM was designing that car, they specifically
Speaker 1: factored in mobility services ride hailing services as one of
Speaker 1: the potential use cases for that car, which is why
Speaker 1: it has the form factor it does. It's a relatively
Speaker 1: short wheelbase, it's a little bit taller, it's very easy
Speaker 1: to get in and out of. It's actually got a
Speaker 1: lot of room for for four or five adults, uh,
Speaker 1: even in the back seat. Uh. So they designed it
Speaker 1: for that kind of application, and now it's their primary
Speaker 1: platform that they're using to develop self driving technology and
Speaker 1: what they're going to planning to deploy with lift in
Speaker 1: the next few years. Well, fascinating stuff. Thank you so
Speaker 1: much for training us. How is sam Abu Wilsa Sammon
Speaker 1: Abu Wilsamond? Yeah, you pronounced it place buil Salmon. Thank you. Uh.
Speaker 1: Senior analyst of Mobility at Navigant Research joins us here
Speaker 1: at the New York Auto Show at the Javitt Center, Uh,
Speaker 1: talking about autonomous cars and how Ford and GM he
Speaker 1: a leg up on the Tesla's and the Google's of
Speaker 1: the world despite all the hype. This is Bloomberg. I
Speaker 1: want to learn more about Puerto Rico, in particular a
Speaker 1: new study that shows that bondholder losses maybe substantially bigger
Speaker 1: than the current ratings suggest. Michelle Caski is back with us. Michelle.
Speaker 1: We are so happy to have you back. She's a
Speaker 1: Puerto Rico reporter UH for Bloomberg News and she joins
Speaker 1: us from our Bloomberg eleven three oh studios. Michelle, can
Speaker 1: you talk a little bit about why bondholders might be
Speaker 1: in for bigger losses than Puerto Rico ratings currently suggest. Well,
Speaker 1: they might be in for bigger losses just because there's
Speaker 1: so much uncertainty surrounding this. According to municipal market Advisors
Speaker 1: UM and Analytics, and they, you know, their their whole
Speaker 1: theory is, look, you know, everything is still so up
Speaker 1: in the air, and how do we really even know
Speaker 1: um that you can get what Moody's is estimating UM
Speaker 1: that you could get, which would be the on the
Speaker 1: lower end of thirty five to sixty five cents on
Speaker 1: the dollar, right, UM. This uh, this report that's challenging
Speaker 1: the ratings is coming from Matt Right, Matt Fabian, a
Speaker 1: partner at Concord, Massachusetts based Municipal Market Analytics. He was
Speaker 1: talking in a note that was distributed on Tuesday. I
Speaker 1: find it interesting that, frankly, there are even ratings at
Speaker 1: a time when there's so much ambiguity. I mean, is
Speaker 1: there anything that you can kind of anchor your estimates
Speaker 1: on at this point? Well, Fabian doesn't even anchor his
Speaker 1: estimates on anything. He comes out and he says, look,
Speaker 1: you know, we're not even going to um speculate on
Speaker 1: arrange because it's just there's what what could happen in
Speaker 1: the future is just so unknown. And he also talks
Speaker 1: about how it's ultimately what will need to happen is
Speaker 1: something that we haven't seen yet, which would be um,
Speaker 1: whether the federal government gets involved in some sort of
Speaker 1: way more than they have already, not not in the
Speaker 1: sense of writing out a check, but um, creating some
Speaker 1: sort of super bond, or where the I R s
Speaker 1: would you maybe collect Puerto Rico's um taxes or creating
Speaker 1: something like the New York UM New York Municipal water
Speaker 1: what what they did in terms of a really complex
Speaker 1: security structure. So again, and these are all speculations, but
Speaker 1: because of that, UM, that's why many people are just
Speaker 1: reluctant to really kind of put a gauge on this
Speaker 1: and so zooming out. I mean, there's seventy billion dollars
Speaker 1: of Puerto Rico debt outstanding. A lot of it is
Speaker 1: held by hedge funds who came in late to the
Speaker 1: game as speculators, buying the bonds at a discount, but
Speaker 1: a lot of it is still held by mutual funds.
Speaker 1: I mean, how big could the losses be at this
Speaker 1: point for retail investors who have money and some of
Speaker 1: these funds well there, I mean, they are gonna have
Speaker 1: to say there's going to be some sort of a loss.
Speaker 1: Right now, The most actively traded Puerto Rico g O
Speaker 1: trades at today is training trading at sixties six six
Speaker 1: sixty five cents on the dollar. And that's down from well,
Speaker 1: how much is sent down when it first sold? It's
Speaker 1: sold at. Um, let's see here, it's sold it was
Speaker 1: in thees in cents on the dollar. So it's sold
Speaker 1: at it's sold at a discount, right, but that was right,
Speaker 1: it's sold at a discount. Indition, you're talking about a
Speaker 1: body that is traded down pretty dramatically after being sold
Speaker 1: in two fourteen, So we're talking, you know about three
Speaker 1: years later, it's lost about a third of its value.
Speaker 1: And those those uh, those losses are going to be
Speaker 1: felt across the board. So what are the deadlines coming up?
Speaker 1: To give people a better sense of what to expect
Speaker 1: respect to losses? I mean, I know that the governor
Speaker 1: has managed to solidify, uh some kind of deal with
Speaker 1: some bondholders. What negotiations lie ahead? Well, right, actually this
Speaker 1: day as we speak, um, there are GEO and and
Speaker 1: Cofina sales tax bond holders and others um talking today. Um,
Speaker 1: how how far that will progress? Where they'll get We'll
Speaker 1: we'll see, UM. Some people are doubtful that they'll really
Speaker 1: be able to hammer out in an actual and agreement
Speaker 1: before May one, which is when a legal stay that
Speaker 1: sort of shields and protects Puerto Rico from from litigation,
Speaker 1: that that will end and uh, and then the any
Speaker 1: lawsuits that are currently in the works will um be
Speaker 1: able to move forward and um and and we'll see
Speaker 1: what happens after May one. Who are the main firms
Speaker 1: that are leading the charge on behalf of the creditors
Speaker 1: to negotiate with Puerto Rico right now? You mean the
Speaker 1: main the main investors, I mean Franklin, Yeah, Franklin, Templeton
Speaker 1: and Oppenheimer are two of the biggest mutual funds out
Speaker 1: there holding Puerto Rico debt. And then there's just a
Speaker 1: whole slate of hedge funds out there as well, UM
Speaker 1: that that hold the debts. So but pretty much, I mean,
Speaker 1: Franklin and and Oppenheimer are the ones that that bought
Speaker 1: in UM at full price. So they're they're they're they're
Speaker 1: they're on the hug for a lot of the laws,
Speaker 1: and they hold a lot of different types of Puerto
Speaker 1: Rico debt. So well, it's a messy situation. I'm sure
Speaker 1: we'll have you back to talk more about what's going on.
Speaker 1: Michelle Casky, thank you so much for joining us. Michelle
Speaker 1: Casky is Puerto Rico reporter for Bloomberg News. Talking about
Speaker 1: the situation. We're talking seventy billion dollars of debts spread
Speaker 1: across mutual funds, hedge funds. A new governor came into place,
Speaker 1: Congress did allow a Fiscal Control Board to get in
Speaker 1: UH to oversee the finances of Puerto Rico, and yet
Speaker 1: they signed off on a bill recently on a budget
Speaker 1: that would materially reduce the potential recoveries for bondholders. There's
Speaker 1: a lot at stake, a lot of people are watching, Michelle.
Speaker 1: We really appreciate you joining us. Yesterday, President Trump was interviewer.
Speaker 1: I should say The Wall St Journal published an article
Speaker 1: in which President Trump was interviewed saying that I think
Speaker 1: our dollar is getting too strong, and partially that's my
Speaker 1: fault because people have confidenced me. While the dollar plunged
Speaker 1: major move UH and people were wondering what this means
Speaker 1: for the path ahead to break this down. I want
Speaker 1: to bring in Bob SnCH, Global strategistic AMers to pure
Speaker 1: pont Securities. Bob was the fall of the dollar yesterday
Speaker 1: in response to President Trump's comments, or has the decline
Speaker 1: in the green back come from something else? You know,
Speaker 1: at least I think it's, Uh, it's pretty fundamentally driven. Look,
Speaker 1: we've had a pretty good rally in the bond market
Speaker 1: over the last week or so, and uh, as we
Speaker 1: look at at the movement in the dollar index, particularly
Speaker 1: against major currencies, is really very consistent with the interest
Speaker 1: rate differential between the US and those same countries. So
Speaker 1: you know, I think that you know, if you look
Speaker 1: at the dollar move I'd say more has been related
Speaker 1: to changing interest rates and interest rate differentials, and a
Speaker 1: very small part of it was was really in response
Speaker 1: to the president's comments. I mean, the dollar took about
Speaker 1: a three quarters quarters of a percent hit um on
Speaker 1: the initial which is a big deal for the dollar.
Speaker 1: But that's it's a big deal for the dollar. Well,
Speaker 1: I mean, yes, I guess in a in a short
Speaker 1: period of time. But it's regained two thirds of that
Speaker 1: um this morning. So basically the dollars down dollar indext
Speaker 1: is down about a quarter of a percent from where
Speaker 1: it was before those comments were published. Bob, if you
Speaker 1: could just speak a little bit more about currencies. But
Speaker 1: in this case the Japanese yen and the euro, as
Speaker 1: well as falling tenure US treasury yields, doesn't that send
Speaker 1: a non inflationary kind of risk off signal? You know,
Speaker 1: it definitely sends a risk off signal. We've seen that
Speaker 1: in uh in movement into the end, which which you
Speaker 1: know that that risk off movement in the end persists
Speaker 1: despite the fact that Japan has you know, huge, huge
Speaker 1: deficits and uh uh and their own long term pro blums.
Speaker 1: But but certainly, I think we had an interesting test
Speaker 1: this morning. Uh if you look at a two d
Speaker 1: day moving averages, is one of those that the technical
Speaker 1: guys will look at for sort of trend movements. One
Speaker 1: S five is dollar yen's two hundred day moving average.
Speaker 1: We went down and tested that having closed or gotten
Speaker 1: below it. So I think that's an important one to
Speaker 1: watch in terms of risk aversion in this movement in
Speaker 1: in dollar yen. But I think in general, um again,
Speaker 1: I think it's it's been this retreat in interest rates,
Speaker 1: uh you know, ten year yields, you know, down a
Speaker 1: good fifteen basis points in the last week, and I
Speaker 1: think that's been the key driver of the of the
Speaker 1: week er dollar in particularly dollar yen, which is which
Speaker 1: is sensitive to ten year interest rate differential. So um. Again,
Speaker 1: I think a lot of it's going to depend on
Speaker 1: what happens to to rates from here and uh, you know,
Speaker 1: and I think the dollar will respond accordingly. Do you
Speaker 1: think that ten your treasury you will continue to fall?
Speaker 1: Doesn't seem to be but it is not supposed to
Speaker 1: be doing that at at the moment, right And bank
Speaker 1: lending also in the United States that period to befalling. Yeah,
Speaker 1: on the bank lending side, I think a lot of
Speaker 1: that is companies that are just very liquid um. And
Speaker 1: obviously capital spending has not been a has not been robust,
Speaker 1: and so the demand and need for capital frankly um
Speaker 1: isn't all that great in terms of yield. Certainly, the
Speaker 1: market got caught off sides after the March of f
Speaker 1: o MC meeting. I think a lot of people were
Speaker 1: short bonds. But I think the one thing that is
Speaker 1: sort of creeping into market sensitivity is that this little
Speaker 1: bubble of inflation that everyone was focused on, I think
Speaker 1: is fading pretty quickly. Obviously, when you look at year
Speaker 1: over year inflation numbers, it looks like February UM for
Speaker 1: many countries will have been the peak, and that's when
Speaker 1: oil prices and and gasoline prices were up the most
Speaker 1: on a year on year basis. But you look at China,
Speaker 1: inflation has suddenly retreated to below one percent. Europe a
Speaker 1: year from over to the Eurozone, the headline cp I
Speaker 1: touched two for a month and is now retreating their
Speaker 1: core numbers only zero point seven. So I think after
Speaker 1: a focus early in the year, that maybe inflation is
Speaker 1: picking up around the world, and and maybe yield levels
Speaker 1: will be picking up. I think we are seeing this
Speaker 1: turn globally UM that inflation pressures are cooling a little bit,
Speaker 1: and with the market that was heavily short US treasuries,
Speaker 1: there's been a pretty painful shortcovering rally. I think in
Speaker 1: that market. You know, Bob just going back to the dollar,
Speaker 1: because I really was struck by President Trump's comments, especially
Speaker 1: ahead of a Treasury report that we're expecting that should
Speaker 1: address UH some of the same issues. I mean, can
Speaker 1: you just put in a perspective how unusual it is
Speaker 1: for a standing president to comment about the strength of
Speaker 1: the dollar, especially in a year where it has declined. UH,
Speaker 1: And at a time when in recent, very recent history,
Speaker 1: a strong dollar was you as a positive and a
Speaker 1: sign of strength of the economy, or so at least
Speaker 1: an official said, yeah, you got me. Um, Like, I'm
Speaker 1: just I'm just I'm struggling to understand the strategy here. Yeah, well,
Speaker 1: I think that's the problem as if you're referring to
Speaker 1: it as a strategy. Look, I think the president is
Speaker 1: um uh you know, speaks his mind. Um, you know,
Speaker 1: is not afraid to make off the cuff comments. I
Speaker 1: think this was in the same category as um. You know,
Speaker 1: I'd like the dollar to be a little weaker. I'd
Speaker 1: like I like low interest rates, I like meat loaf.
Speaker 1: I mean, I just think this was a dialogue and
Speaker 1: and these things were on his mind. Obviously the whole
Speaker 1: issue of of China. You know, China does not qualify
Speaker 1: UM as a currency manipulator under the Treasury's guideline, so
Speaker 1: it's gonna be extremely difficult to name them a currency manipulator.
Speaker 1: So now I think, you know, the tradeoff is, well,
Speaker 1: we weren't going to name them a manipulator. In this way,
Speaker 1: maybe they'll help us with North Korea. It's a it's
Speaker 1: a good versl it sells reasonably well. But I think
Speaker 1: these topics, you know, talking to the to the Wall
Speaker 1: Street Journal, these topics were front and the center, and
Speaker 1: I think he made some comments that you know, he
Speaker 1: likes a weaker dollar, you know, But I don't. I
Speaker 1: don't think there's a strategy here. I think it was
Speaker 1: just a dialogue, a conversation, and one of those things
Speaker 1: that happened to come up, well, is there anything tangible
Speaker 1: that President Trump or his administration would do or could
Speaker 1: do to lower the value of the dollar that seems
Speaker 1: feasible in the near term. Well, you know, I think
Speaker 1: that one of the factors that's been driving the dollar
Speaker 1: has been an expectation of a change in the policy mix.
Speaker 1: And what I mean by that is less reliance on
Speaker 1: monetary policy, more reliance on fiscal policy in terms of
Speaker 1: stimulus for the economy. And certainly history and and and
Speaker 1: theory would suggest that the combination of a stimulative fiscal
Speaker 1: policy and a tighter monetary policy UH is one that's
Speaker 1: very supportive of a currency. So I think to the
Speaker 1: extent that we don't see the follow through on tax
Speaker 1: reform and things like that, a result of that could
Speaker 1: be a weaker dollar, but I don't think there's a
Speaker 1: real objective in terms of occurrency. You know, you know,
Speaker 1: administrations policymakers talk a lot about currencies, but you don't
Speaker 1: really see a lot of action on a consistent basis
Speaker 1: where the currency is really the objective of policy. I
Speaker 1: mean you you you may see that in in Hong
Speaker 1: Kong and Saudi Arabia where they're linked to the dollar,
Speaker 1: but most most countries are trying to generate domestic growth,
Speaker 1: domestic jobs, tame inflation, keep inflation from being too low.
Speaker 1: The dollar or or their currency is a way of
Speaker 1: getting to those objectives, but not the objectives themselves. Thanks
Speaker 1: very much, Bob stinch is global strategist Amherst Pure Punt Curities.
Speaker 1: Thanks for listening to the Bloomberg pien L podcast. You
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