WEBVTT - Nobody Should Be Killed in a Volvo by 2020, CEO Says 0:00:04.760 --> 0:00:08.080 Welcome to the Bloomberg P and L Podcast. I'm Pim Fox. 0:00:08.119 --> 0:00:11.200 Along with my co host Lisa Abramowitz. Each day we 0:00:11.280 --> 0:00:14.480 bring you the most important, noteworthy, and useful interviews for 0:00:14.520 --> 0:00:16.880 you and your money, whether at the grocery store or 0:00:16.920 --> 0:00:20.680 the trading floor. Find the Bloomberg P L Podcast on iTunes, 0:00:20.840 --> 0:00:29.280 SoundCloud and at Bloomberg dot com. Well earlier, we spoke 0:00:29.280 --> 0:00:32.680 with Lex churs Macker, senior vice president of the America's 0:00:32.720 --> 0:00:36.320 Region and president and chief executive officer of Volver Cars 0:00:36.400 --> 0:00:39.440 of North America, to talk about the new x C sixty, 0:00:39.680 --> 0:00:42.520 their new plant in Charleston, and electric vehicles. We kicked 0:00:42.520 --> 0:00:45.479 things off by asking Lex how Volvo has managed to 0:00:45.520 --> 0:00:48.160 increase both the price point of cars as well as 0:00:48.280 --> 0:00:50.720 the volume. Take a listen. I think it's it's fair 0:00:50.800 --> 0:00:52.519 to say that we are on a turnaround in the 0:00:52.600 --> 0:00:55.200 United States. We have been out of sight, out of mind. 0:00:55.880 --> 0:00:59.560 Now with entering the market with absolute fabulous products, we 0:00:59.600 --> 0:01:02.279 are a to and grow because we have the right 0:01:02.320 --> 0:01:08.360 products and also increase our price steps because the products 0:01:08.360 --> 0:01:12.440 are very competitive compared to compared to the rest of 0:01:12.480 --> 0:01:15.520 the market. So it's a little bit of a rare situation, 0:01:16.360 --> 0:01:20.280 low volume, start great products, and by that we can 0:01:20.319 --> 0:01:23.080 combine those factors. I wonder if you could just help 0:01:23.120 --> 0:01:25.679 people a little bit about Volvo, because your parent company 0:01:25.720 --> 0:01:29.280 obviously based in China. Geely Automotive, the largest, one of 0:01:29.280 --> 0:01:32.080 the largest manufacturers of automobiles in the world, described the 0:01:32.120 --> 0:01:34.840 split between the United States and China as far as 0:01:34.840 --> 0:01:37.880 your markets go, volume and so on. I think what 0:01:38.000 --> 0:01:40.320 you see in the in the in in China happening 0:01:40.319 --> 0:01:43.840 now is that their their their volume prediction for two 0:01:43.880 --> 0:01:48.120 thousand seven, the total market is twenty seven million cars, 0:01:48.200 --> 0:01:51.320 whereas in the United States, as you know, we're operating 0:01:51.400 --> 0:01:55.400 between sixteen and seventeen. It's it's only two years ago, 0:01:55.720 --> 0:01:58.040 probably one and a half year ago, if I remember well, 0:01:58.280 --> 0:02:02.320 that they passed the US the sixteen million borderline. So 0:02:02.440 --> 0:02:05.760 what we see in in China is extremely rapid growth. 0:02:06.960 --> 0:02:10.840 How concerned are you about the rebound in commodity prices 0:02:10.960 --> 0:02:15.799 steel in particular, as China does stabilize their growth and 0:02:15.919 --> 0:02:20.760 how expensive it is becoming too manufacturer cars Now at 0:02:20.760 --> 0:02:23.000 the moment, I am not so worried at all. I 0:02:23.040 --> 0:02:26.840 think it's that at the end we are we're working 0:02:26.919 --> 0:02:29.240 in a in a in a free world with free economy, 0:02:29.280 --> 0:02:31.880 and at the end we will we will resolve it. 0:02:32.120 --> 0:02:36.120 But of course, I mean steel production is a generic issue, 0:02:36.200 --> 0:02:39.160 but it's it's not our biggest concern for the moment. 0:02:39.639 --> 0:02:43.040 So what's your biggest concern? My biggest concerns here in 0:02:43.040 --> 0:02:46.720 the United States is to secure sustainable growth. I mean, 0:02:46.760 --> 0:02:48.960 we want to go as soon as possible to a 0:02:49.040 --> 0:02:51.760 one percent market share. That's exactly where we were in 0:02:51.800 --> 0:02:56.680 two thousand four. That's what our retailers are are aiming for. 0:02:56.800 --> 0:03:00.359 They have invested accordingly, and we have all more as 0:03:00.360 --> 0:03:03.480 such is on a on a on a great path. 0:03:03.800 --> 0:03:07.520 So my major concern is to get sufficient cars to 0:03:07.600 --> 0:03:11.160 the United States to enable that growth. Can you tell 0:03:11.240 --> 0:03:13.560 us what volumes you're doing in the United States currently 0:03:13.600 --> 0:03:16.760 and what your goals are um At the moment, we 0:03:16.800 --> 0:03:22.160 are operating around thousand units, and that's why I would 0:03:22.240 --> 0:03:24.840 like to end up somewhere between in the United States 0:03:25.240 --> 0:03:28.400 between ninety and nine five thousand units. And that's that's 0:03:28.480 --> 0:03:32.280 based on supply. It's not necessarily based on demand because 0:03:32.320 --> 0:03:36.640 demand is higher, especially on the ex ninety So just 0:03:36.680 --> 0:03:41.000 tell us about the new plant in Charleston, South Carolina. UM. 0:03:41.040 --> 0:03:43.560 We decided about two years two and a half years 0:03:43.600 --> 0:03:46.360 ago to build a plant in South Carolina. We wanted 0:03:46.400 --> 0:03:48.760 to be in the United States. This is this is 0:03:49.160 --> 0:03:51.840 we have been in the US for more than sixty years. 0:03:51.920 --> 0:03:55.080 This is more or less our second home market, UM, 0:03:55.120 --> 0:03:57.920 and we we took a deliberate choice to be in 0:03:57.960 --> 0:04:00.960 the United States already two years as ago and for 0:04:01.080 --> 0:04:03.600 exactly the reasons I said, this is our whole market, 0:04:03.720 --> 0:04:06.400 this is where our customers are since long and we 0:04:06.480 --> 0:04:09.360 have faced very loyal retailers. So we wanted to give 0:04:09.360 --> 0:04:13.320 a very clear signal United States. It is how concerned 0:04:13.360 --> 0:04:16.000 are you about pushing into the US at a time 0:04:16.080 --> 0:04:19.320 when auto sales numbers are coming down and there is 0:04:19.360 --> 0:04:24.080 concern about deteriorating resale values of cars. That is an issue. 0:04:24.080 --> 0:04:26.919 And I think what we what we face generally is 0:04:26.960 --> 0:04:29.440 that we all want to get to the sixteen and 0:04:29.440 --> 0:04:32.200 a half seventeen million units in the US and that 0:04:32.200 --> 0:04:36.000 that drives and sentenced and that's not necessarily sustainable. In 0:04:36.080 --> 0:04:39.080 respect of the factory in South Carolina, it will be 0:04:39.120 --> 0:04:42.320 a global factory. We will produce as sixty on the 0:04:42.360 --> 0:04:44.599 new based on the new platform, same as the x 0:04:44.600 --> 0:04:48.640 C sixty and we will also export as sixties to 0:04:48.680 --> 0:04:51.239 the rest of the world, so we're not only dependent 0:04:51.279 --> 0:04:54.680 on the US market. Although it isn't labor more expensive here. 0:04:55.800 --> 0:04:58.280 It is, but at the end, you know, it's it's 0:04:58.400 --> 0:05:01.120 it's it's about you produce where you sell, and we 0:05:01.200 --> 0:05:05.040 have a global manufacturing footprint. That's why it's so important 0:05:05.080 --> 0:05:07.880 to stress that it's not only about the US. We 0:05:07.920 --> 0:05:10.640 are a global company. We produce cars in Europe, we 0:05:10.680 --> 0:05:13.760 produce cars in China, and depending on the demand and 0:05:13.800 --> 0:05:16.359 the model, we distribute them all over the world. And 0:05:16.400 --> 0:05:19.159 that's one of the reasons why I'm very concerned about 0:05:19.200 --> 0:05:22.320 the adjustable text discussions here at the United States, because 0:05:22.480 --> 0:05:25.520 that is that's not aligned with free trade, that's not 0:05:25.640 --> 0:05:28.600 in line with what we face in the automotive industry, 0:05:28.920 --> 0:05:33.680 a very global footprint. The Swedish government has made it 0:05:33.720 --> 0:05:36.680 a policy in order to eliminate the use of fossil fuels, 0:05:36.680 --> 0:05:40.760 particularly in automobiles. What kind of hybrid or electric cardio 0:05:40.839 --> 0:05:44.320 bills can we expect to see from Volvo. We took 0:05:44.360 --> 0:05:48.000 in two thousand eight the deliberate choice to abandon five 0:05:48.040 --> 0:05:51.880 cylinders and six cylinders and to focus on very fuel 0:05:51.880 --> 0:05:56.800 efficient force force cylinder turbo engines combined with electrification. So 0:05:57.680 --> 0:06:02.080 we are totally on track with ever demand any government 0:06:02.279 --> 0:06:06.680 where ever in the world is putting on on environment. 0:06:07.000 --> 0:06:10.480 We strongly believe in electrification. We will launch our first 0:06:10.520 --> 0:06:14.440 full electrical car in two thousand nineteen. And those markets 0:06:14.839 --> 0:06:19.440 where electrification does not bite yet, we have extremely fuel 0:06:19.440 --> 0:06:22.520 efficient engines in all our car ranges, so I feel 0:06:22.640 --> 0:06:27.320 very comfortable with actually any demand. What about self driving cars? 0:06:27.320 --> 0:06:29.760 And Evolvo had been making a big push, pulled back 0:06:29.839 --> 0:06:34.279 after some high profile accidents. Where is this now? Um 0:06:34.800 --> 0:06:38.320 Autonomous drive is an integrated part of our vision. We 0:06:38.440 --> 0:06:42.039 have a vision that by twenty nobody should be killed 0:06:42.160 --> 0:06:46.360 or heavily injured in Evolvo, and that's quite a statement. 0:06:46.520 --> 0:06:50.080 And with passive safety and active safety alone, we do 0:06:50.200 --> 0:06:53.440 not manage to reach that statement because we know that 0:06:54.520 --> 0:06:57.119 of the accident is caused by distraction of the driver. 0:06:57.279 --> 0:07:00.359 There's only one tool which can resolve that, and that 0:07:00.480 --> 0:07:04.479 is a tautomers drive. So we continue to to roll 0:07:04.560 --> 0:07:09.000 out very aggressively our development plan and and and Uber 0:07:09.400 --> 0:07:13.400 you mentioned it is one partner. We see one accident 0:07:14.120 --> 0:07:17.800 that doesn't that doesn't hold us back. It's it's a revolution, 0:07:17.840 --> 0:07:20.080 so it will be a snak umpy roads and there 0:07:20.120 --> 0:07:24.280 are you know, there are sometimes some obstacles. That was 0:07:24.360 --> 0:07:27.480 Lex Cursor Macker, senior vice president of the America's Region 0:07:27.760 --> 0:07:31.120 and president and chief executive officer of Volvo Cars of 0:07:31.400 --> 0:07:34.200 North America. He was talking about the new X sixty, 0:07:34.360 --> 0:07:38.360 their new plant in Charleston electric vehicles, as well as 0:07:38.520 --> 0:07:41.640 breaking into a US market or expanding a presence in 0:07:41.640 --> 0:07:45.200 a US market that currently has a couple of road 0:07:45.560 --> 0:07:49.680 speed bombs just based on the long deterioration as well 0:07:49.720 --> 0:08:06.760 as lower resale values of cars. Many of the automobile 0:08:06.800 --> 0:08:10.040 companies here say that they are leading the charge when 0:08:10.040 --> 0:08:13.440 it comes to automated driving systems and the latest technology 0:08:13.480 --> 0:08:17.480 inside the cabin. Maybe not. Sam Abel Zamid is a 0:08:17.560 --> 0:08:22.200 senior analyst for mobility for Navigant Research. He's based in Detroit, 0:08:22.280 --> 0:08:24.760 but luckily he's here with us today. Sam, thanks very 0:08:24.800 --> 0:08:27.560 much for being with us. And you okay, you give 0:08:27.560 --> 0:08:30.320 away the the answer here. I keep thinking, you know, 0:08:30.360 --> 0:08:34.000 maybe it's Ford or GM or maybe Mercedes. Somebody's got 0:08:34.000 --> 0:08:37.600 this great you know in cabin technology. You're saying, uh, 0:08:37.720 --> 0:08:40.840 that's not the group you need to be paying attention to. Well, 0:08:41.320 --> 0:08:43.680 what we did was we took a look at a 0:08:43.760 --> 0:08:46.880 lot all of the major companies that are developing automated 0:08:46.960 --> 0:08:50.280 driving systems and took a holistic look at who is 0:08:50.320 --> 0:08:53.480 best positioned to actually succeed in commercializing the technology, not 0:08:53.600 --> 0:08:56.680 just the core technologies of a self driving car, but 0:08:56.880 --> 0:08:59.440 who can actually make a business out of it. And 0:08:59.559 --> 0:09:03.160 when we did that and scored scored these companies on 0:09:03.280 --> 0:09:07.000 ten different criteria for strategy and execution, we came out 0:09:07.120 --> 0:09:10.920 with several of the major automakers as the leaders in 0:09:10.920 --> 0:09:15.679 the space. Overall, uh SO, um Ford and GM came 0:09:15.720 --> 0:09:18.400 out on top for just slightly ahead of General Motors, 0:09:18.400 --> 0:09:23.320 followed by Reno Nissan Alliance, and then Diemler and um Weymo, 0:09:23.559 --> 0:09:28.160 the Google self driving car spinoff uh came in seventh overall. 0:09:29.080 --> 0:09:32.840 Uh we scored them highest for vision and for technology. 0:09:32.880 --> 0:09:36.040 But they have no manufacturing capability, and you know they're 0:09:36.160 --> 0:09:38.600 they're talking to O E. M s about partnering to 0:09:38.679 --> 0:09:41.840 produce cars for them they can install their their platform 0:09:41.920 --> 0:09:44.480 on and and developing the services. But right now they 0:09:44.480 --> 0:09:47.720 don't have that piece. And some of the other companies 0:09:47.720 --> 0:09:50.600 that have obviously gotten a lot of media attention. Like 0:09:50.640 --> 0:09:54.000 Tesla and uber Uh, they actually came quite a bit 0:09:54.000 --> 0:09:57.880 further down in the rankings UM based on factors in 0:09:57.920 --> 0:10:01.320 Tesla's case um poor qualit and reliability of the cars 0:10:01.320 --> 0:10:05.560 they built today, and um uber um their technology just 0:10:05.679 --> 0:10:08.160 doesn't actually seem to work all that well and their 0:10:08.240 --> 0:10:11.320 company as a business doesn't seem all that sustainable. Well, Sam, 0:10:11.440 --> 0:10:13.120 you know, I have to bring this back to recent 0:10:13.320 --> 0:10:16.800 market action where all of a sudden, Tesla's market cap 0:10:17.400 --> 0:10:21.480 surpassed g MS, which was a surprising landmark to a 0:10:21.559 --> 0:10:24.760 lot of people. If Tesla is in seventh place or 0:10:24.840 --> 0:10:29.000 way down there, right, I think twelve place, sorry, twelve 0:10:29.040 --> 0:10:33.439 place when it comes to their ability to commercialize self 0:10:33.520 --> 0:10:38.480 driving technology, what does that mean about current valuations? Well, 0:10:38.520 --> 0:10:41.559 I'm not a stock market analyst or financial analysts. I'm 0:10:41.559 --> 0:10:44.920 a technology analyst and look at the business side of it. 0:10:44.960 --> 0:10:49.200 But um, frankly, you know, it's it's a mystery to 0:10:49.240 --> 0:10:51.600 me how how they have such a valuation. I mean, 0:10:51.600 --> 0:10:55.719 I hear you know, uh people investors talking about their 0:10:55.760 --> 0:10:58.679 talking about their the company's future potential. But frankly, they 0:10:58.720 --> 0:11:02.480 haven't really demonstrated they necessarily have a long term future 0:11:02.720 --> 0:11:06.840 as a large scale automaker. UH. Building cars at small scale, 0:11:06.880 --> 0:11:09.200 they haven't done a particularly good job at product quality 0:11:09.200 --> 0:11:13.640 and reliability. UM, they certainly haven't been profitable, and UH 0:11:13.720 --> 0:11:16.480 as as they scale up to larger, you know, higher 0:11:16.520 --> 0:11:22.080 volume vehicles at lower price points, UH somewhat UH. Counterintuitively, 0:11:22.360 --> 0:11:25.280 customers that buy mainstream cars in the thirty thirty five 0:11:25.320 --> 0:11:28.439 thou dollar price point are actually much have much higher 0:11:28.440 --> 0:11:32.720 expectations of quality and reliability than customers buying premium cars. 0:11:32.760 --> 0:11:35.160 Those affluent customers that buy a hundred thousand dollars in 0:11:35.240 --> 0:11:38.680 up cars often have more than one vehicle, and they're 0:11:38.720 --> 0:11:41.280 not necessarily reliant on a specific vehicle to be running 0:11:41.280 --> 0:11:45.079 every day. People that you know, company customers that buy 0:11:45.120 --> 0:11:47.640 toy To cameras and Honda accords, don't buy them because 0:11:47.679 --> 0:11:50.080 they're exciting or sexy. They buy them because they know 0:11:50.120 --> 0:11:52.800 they're gonna get in that car every morning, turn the key, 0:11:52.840 --> 0:11:55.640 press the start button. It's gonna beat, it's gonna fire up, 0:11:55.679 --> 0:11:57.600 and take them to work, to school, wherever they need 0:11:57.640 --> 0:12:00.079 to go, and if they need service, it's gonna be 0:12:00.160 --> 0:12:03.360 handled promptly, something Tesla has not demonstrated a capability to 0:12:03.400 --> 0:12:07.200 do so far, and if they can't execute properly on 0:12:07.720 --> 0:12:10.840 launching the Model three, they could be in serious trouble. 0:12:11.600 --> 0:12:13.199 I gotta say, you know, when you said press the 0:12:13.320 --> 0:12:16.120 start button, that just took me all the way back 0:12:16.160 --> 0:12:19.160 to the nineteen sixties. You know, the turn the key, 0:12:19.280 --> 0:12:21.960 press the ignition and you know, maybe play a little 0:12:22.000 --> 0:12:24.080 bit with the throttle. Now you've been working almost twenty 0:12:24.320 --> 0:12:29.199 you worked twenty years working on electronic control systems. Uh 0:12:29.240 --> 0:12:32.200 in in the automobile. I've always wanted to know the 0:12:32.320 --> 0:12:36.640 start stop capability relatively new. Right you stopped at a 0:12:36.679 --> 0:12:40.480 red light, the engine cuts off then instantly turns on. 0:12:40.960 --> 0:12:42.720 But we're going to see more innovation like that. And 0:12:42.760 --> 0:12:46.679 who was responsible? Do you know who came up with that? Uh? 0:12:46.800 --> 0:12:49.440 You know, I I'm not sure who did the first 0:12:49.440 --> 0:12:52.000 auto start stop systems. Most of them were implemented in 0:12:52.000 --> 0:12:56.160 in Europe by a number of European manufacturers, UM, Folkswagen, 0:12:56.280 --> 0:13:00.440 BMW some of the first ones. Um. And we're going 0:13:00.480 --> 0:13:03.040 to see more stuff like that, yeah, absolutely, Um. You 0:13:03.080 --> 0:13:06.840 know they're they're very cost effective solutions that give you, 0:13:06.840 --> 0:13:09.760 you know, two three four percent more fuel economy, especially 0:13:09.760 --> 0:13:13.640 in city driving. Uh, and so that it doesn't cost 0:13:13.720 --> 0:13:17.080 much in manufacturers will use that to improve their fuel 0:13:17.080 --> 0:13:19.560 economy in a way that isn't going to add a 0:13:19.600 --> 0:13:22.480 lot to the sticker price of the car. Sam, when 0:13:22.640 --> 0:13:28.680 you were analyzing which companies were most adept at making 0:13:29.200 --> 0:13:32.839 a market out of autonomous driving vehicles, did you get 0:13:32.840 --> 0:13:35.640 a sense of what the true self driving car would 0:13:35.640 --> 0:13:37.520 look like, the one that actually would be sold that 0:13:37.520 --> 0:13:41.920 we'd end up seeing possibly in the next couple of years. Um, 0:13:41.960 --> 0:13:44.600 I think a good hint of the direction we're going 0:13:44.640 --> 0:13:47.839 to see as cars like the Chevrolet Bolt ev UM. 0:13:47.880 --> 0:13:51.640 You know, when GM was designing that car, they specifically 0:13:51.720 --> 0:13:55.360 factored in mobility services ride hailing services as one of 0:13:55.400 --> 0:13:58.440 the potential use cases for that car, which is why 0:13:58.520 --> 0:14:00.800 it has the form factor it does. It's a relatively 0:14:00.840 --> 0:14:03.760 short wheelbase, it's a little bit taller, it's very easy 0:14:03.800 --> 0:14:05.520 to get in and out of. It's actually got a 0:14:05.520 --> 0:14:08.480 lot of room for for four or five adults, uh, 0:14:08.520 --> 0:14:11.480 even in the back seat. Uh. So they designed it 0:14:11.520 --> 0:14:14.400 for that kind of application, and now it's their primary 0:14:14.400 --> 0:14:17.200 platform that they're using to develop self driving technology and 0:14:17.240 --> 0:14:19.680 what they're going to planning to deploy with lift in 0:14:19.720 --> 0:14:22.680 the next few years. Well, fascinating stuff. Thank you so 0:14:22.760 --> 0:14:26.000 much for training us. How is sam Abu Wilsa Sammon 0:14:26.200 --> 0:14:30.720 Abu Wilsamond? Yeah, you pronounced it place buil Salmon. Thank you. Uh. 0:14:30.880 --> 0:14:35.000 Senior analyst of Mobility at Navigant Research joins us here 0:14:35.120 --> 0:14:39.280 at the New York Auto Show at the Javitt Center, Uh, 0:14:39.520 --> 0:14:42.320 talking about autonomous cars and how Ford and GM he 0:14:42.480 --> 0:14:44.760 a leg up on the Tesla's and the Google's of 0:14:44.800 --> 0:15:00.040 the world despite all the hype. This is Bloomberg. I 0:15:00.120 --> 0:15:02.560 want to learn more about Puerto Rico, in particular a 0:15:02.600 --> 0:15:07.480 new study that shows that bondholder losses maybe substantially bigger 0:15:07.520 --> 0:15:12.240 than the current ratings suggest. Michelle Caski is back with us. Michelle. 0:15:12.280 --> 0:15:14.200 We are so happy to have you back. She's a 0:15:14.240 --> 0:15:17.880 Puerto Rico reporter UH for Bloomberg News and she joins 0:15:17.960 --> 0:15:21.560 us from our Bloomberg eleven three oh studios. Michelle, can 0:15:21.600 --> 0:15:24.280 you talk a little bit about why bondholders might be 0:15:24.320 --> 0:15:28.000 in for bigger losses than Puerto Rico ratings currently suggest. Well, 0:15:28.040 --> 0:15:30.480 they might be in for bigger losses just because there's 0:15:30.520 --> 0:15:35.360 so much uncertainty surrounding this. According to municipal market Advisors 0:15:35.480 --> 0:15:38.640 UM and Analytics, and they, you know, their their whole 0:15:38.680 --> 0:15:41.200 theory is, look, you know, everything is still so up 0:15:41.200 --> 0:15:43.640 in the air, and how do we really even know 0:15:44.160 --> 0:15:48.200 um that you can get what Moody's is estimating UM 0:15:48.240 --> 0:15:50.240 that you could get, which would be the on the 0:15:50.280 --> 0:15:52.920 lower end of thirty five to sixty five cents on 0:15:52.960 --> 0:15:57.240 the dollar, right, UM. This uh, this report that's challenging 0:15:57.240 --> 0:16:01.560 the ratings is coming from Matt Right, Matt Fabian, a 0:16:01.640 --> 0:16:05.680 partner at Concord, Massachusetts based Municipal Market Analytics. He was 0:16:05.720 --> 0:16:08.920 talking in a note that was distributed on Tuesday. I 0:16:09.000 --> 0:16:13.320 find it interesting that, frankly, there are even ratings at 0:16:13.320 --> 0:16:16.360 a time when there's so much ambiguity. I mean, is 0:16:16.360 --> 0:16:18.920 there anything that you can kind of anchor your estimates 0:16:18.920 --> 0:16:23.240 on at this point? Well, Fabian doesn't even anchor his 0:16:23.360 --> 0:16:25.280 estimates on anything. He comes out and he says, look, 0:16:25.320 --> 0:16:28.320 you know, we're not even going to um speculate on 0:16:29.600 --> 0:16:34.000 arrange because it's just there's what what could happen in 0:16:34.000 --> 0:16:37.040 the future is just so unknown. And he also talks 0:16:37.040 --> 0:16:41.800 about how it's ultimately what will need to happen is 0:16:42.080 --> 0:16:45.440 something that we haven't seen yet, which would be um, 0:16:45.560 --> 0:16:48.240 whether the federal government gets involved in some sort of 0:16:48.240 --> 0:16:50.480 way more than they have already, not not in the 0:16:50.520 --> 0:16:53.360 sense of writing out a check, but um, creating some 0:16:53.400 --> 0:16:55.440 sort of super bond, or where the I R s 0:16:55.480 --> 0:16:59.640 would you maybe collect Puerto Rico's um taxes or creating 0:16:59.680 --> 0:17:03.840 something like the New York UM New York Municipal water 0:17:03.960 --> 0:17:07.800 what what they did in terms of a really complex 0:17:08.240 --> 0:17:12.280 security structure. So again, and these are all speculations, but 0:17:12.600 --> 0:17:16.560 because of that, UM, that's why many people are just 0:17:16.680 --> 0:17:19.359 reluctant to really kind of put a gauge on this 0:17:20.240 --> 0:17:22.720 and so zooming out. I mean, there's seventy billion dollars 0:17:22.720 --> 0:17:25.119 of Puerto Rico debt outstanding. A lot of it is 0:17:25.560 --> 0:17:28.159 held by hedge funds who came in late to the 0:17:28.200 --> 0:17:31.359 game as speculators, buying the bonds at a discount, but 0:17:31.400 --> 0:17:34.000 a lot of it is still held by mutual funds. 0:17:34.040 --> 0:17:36.040 I mean, how big could the losses be at this 0:17:36.119 --> 0:17:40.040 point for retail investors who have money and some of 0:17:40.080 --> 0:17:43.879 these funds well there, I mean, they are gonna have 0:17:44.000 --> 0:17:45.800 to say there's going to be some sort of a loss. 0:17:45.920 --> 0:17:49.119 Right now, The most actively traded Puerto Rico g O 0:17:49.560 --> 0:17:54.960 trades at today is training trading at sixties six six 0:17:55.440 --> 0:18:00.640 sixty five cents on the dollar. And that's down from well, 0:18:00.800 --> 0:18:03.120 how much is sent down when it first sold? It's 0:18:03.200 --> 0:18:07.480 sold at. Um, let's see here, it's sold it was 0:18:07.520 --> 0:18:11.800 in thees in cents on the dollar. So it's sold 0:18:11.800 --> 0:18:15.160 at it's sold at a discount, right, but that was right, 0:18:15.240 --> 0:18:17.639 it's sold at a discount. Indition, you're talking about a 0:18:17.640 --> 0:18:20.960 body that is traded down pretty dramatically after being sold 0:18:20.960 --> 0:18:23.760 in two fourteen, So we're talking, you know about three 0:18:23.840 --> 0:18:26.840 years later, it's lost about a third of its value. 0:18:26.920 --> 0:18:29.560 And those those uh, those losses are going to be 0:18:29.560 --> 0:18:32.080 felt across the board. So what are the deadlines coming up? 0:18:32.119 --> 0:18:34.560 To give people a better sense of what to expect 0:18:34.640 --> 0:18:36.560 respect to losses? I mean, I know that the governor 0:18:36.600 --> 0:18:39.960 has managed to solidify, uh some kind of deal with 0:18:40.200 --> 0:18:44.760 some bondholders. What negotiations lie ahead? Well, right, actually this 0:18:44.880 --> 0:18:47.800 day as we speak, um, there are GEO and and 0:18:47.960 --> 0:18:53.359 Cofina sales tax bond holders and others um talking today. Um, 0:18:53.359 --> 0:18:56.560 how how far that will progress? Where they'll get We'll 0:18:56.600 --> 0:18:59.040 we'll see, UM. Some people are doubtful that they'll really 0:18:59.040 --> 0:19:02.280 be able to hammer out in an actual and agreement 0:19:02.840 --> 0:19:07.120 before May one, which is when a legal stay that 0:19:07.200 --> 0:19:11.040 sort of shields and protects Puerto Rico from from litigation, 0:19:11.240 --> 0:19:15.080 that that will end and uh, and then the any 0:19:15.160 --> 0:19:18.720 lawsuits that are currently in the works will um be 0:19:18.800 --> 0:19:22.200 able to move forward and um and and we'll see 0:19:22.240 --> 0:19:25.760 what happens after May one. Who are the main firms 0:19:25.800 --> 0:19:29.000 that are leading the charge on behalf of the creditors 0:19:29.080 --> 0:19:32.320 to negotiate with Puerto Rico right now? You mean the 0:19:32.359 --> 0:19:36.800 main the main investors, I mean Franklin, Yeah, Franklin, Templeton 0:19:36.840 --> 0:19:41.240 and Oppenheimer are two of the biggest mutual funds out 0:19:41.280 --> 0:19:43.879 there holding Puerto Rico debt. And then there's just a 0:19:43.880 --> 0:19:48.280 whole slate of hedge funds out there as well, UM 0:19:48.320 --> 0:19:51.560 that that hold the debts. So but pretty much, I mean, 0:19:51.600 --> 0:19:54.520 Franklin and and Oppenheimer are the ones that that bought 0:19:54.560 --> 0:19:59.600 in UM at full price. So they're they're they're they're 0:19:59.640 --> 0:20:00.840 they're on the hug for a lot of the laws, 0:20:00.880 --> 0:20:02.640 and they hold a lot of different types of Puerto 0:20:02.720 --> 0:20:06.359 Rico debt. So well, it's a messy situation. I'm sure 0:20:06.400 --> 0:20:08.679 we'll have you back to talk more about what's going on. 0:20:08.760 --> 0:20:11.159 Michelle Casky, thank you so much for joining us. Michelle 0:20:11.200 --> 0:20:14.639 Casky is Puerto Rico reporter for Bloomberg News. Talking about 0:20:14.760 --> 0:20:17.520 the situation. We're talking seventy billion dollars of debts spread 0:20:17.520 --> 0:20:21.199 across mutual funds, hedge funds. A new governor came into place, 0:20:21.640 --> 0:20:24.919 Congress did allow a Fiscal Control Board to get in 0:20:25.359 --> 0:20:28.680 UH to oversee the finances of Puerto Rico, and yet 0:20:28.800 --> 0:20:31.800 they signed off on a bill recently on a budget 0:20:32.080 --> 0:20:35.960 that would materially reduce the potential recoveries for bondholders. There's 0:20:35.960 --> 0:20:38.200 a lot at stake, a lot of people are watching, Michelle. 0:20:38.200 --> 0:20:53.760 We really appreciate you joining us. Yesterday, President Trump was interviewer. 0:20:53.920 --> 0:20:56.240 I should say The Wall St Journal published an article 0:20:56.320 --> 0:20:59.640 in which President Trump was interviewed saying that I think 0:20:59.760 --> 0:21:02.520 our dollar is getting too strong, and partially that's my 0:21:02.680 --> 0:21:06.200 fault because people have confidenced me. While the dollar plunged 0:21:06.640 --> 0:21:09.960 major move UH and people were wondering what this means 0:21:09.960 --> 0:21:11.720 for the path ahead to break this down. I want 0:21:11.720 --> 0:21:14.400 to bring in Bob SnCH, Global strategistic AMers to pure 0:21:14.400 --> 0:21:19.480 pont Securities. Bob was the fall of the dollar yesterday 0:21:19.560 --> 0:21:23.520 in response to President Trump's comments, or has the decline 0:21:23.680 --> 0:21:28.000 in the green back come from something else? You know, 0:21:28.040 --> 0:21:31.000 at least I think it's, Uh, it's pretty fundamentally driven. Look, 0:21:31.000 --> 0:21:33.520 we've had a pretty good rally in the bond market 0:21:33.920 --> 0:21:37.000 over the last week or so, and uh, as we 0:21:37.040 --> 0:21:41.280 look at at the movement in the dollar index, particularly 0:21:41.280 --> 0:21:45.399 against major currencies, is really very consistent with the interest 0:21:45.480 --> 0:21:49.120 rate differential between the US and those same countries. So 0:21:49.600 --> 0:21:51.240 you know, I think that you know, if you look 0:21:51.280 --> 0:21:55.960 at the dollar move I'd say more has been related 0:21:56.040 --> 0:21:59.520 to changing interest rates and interest rate differentials, and a 0:21:59.680 --> 0:22:02.480 very small part of it was was really in response 0:22:02.520 --> 0:22:05.480 to the president's comments. I mean, the dollar took about 0:22:05.480 --> 0:22:08.879 a three quarters quarters of a percent hit um on 0:22:08.960 --> 0:22:10.760 the initial which is a big deal for the dollar. 0:22:11.359 --> 0:22:13.560 But that's it's a big deal for the dollar. Well, 0:22:13.760 --> 0:22:15.800 I mean, yes, I guess in a in a short 0:22:15.840 --> 0:22:18.479 period of time. But it's regained two thirds of that 0:22:19.200 --> 0:22:23.040 um this morning. So basically the dollars down dollar indext 0:22:23.080 --> 0:22:25.600 is down about a quarter of a percent from where 0:22:25.600 --> 0:22:30.399 it was before those comments were published. Bob, if you 0:22:30.440 --> 0:22:32.399 could just speak a little bit more about currencies. But 0:22:32.600 --> 0:22:35.880 in this case the Japanese yen and the euro, as 0:22:35.920 --> 0:22:39.840 well as falling tenure US treasury yields, doesn't that send 0:22:39.840 --> 0:22:43.800 a non inflationary kind of risk off signal? You know, 0:22:43.880 --> 0:22:46.720 it definitely sends a risk off signal. We've seen that 0:22:46.920 --> 0:22:51.000 in uh in movement into the end, which which you 0:22:51.040 --> 0:22:53.600 know that that risk off movement in the end persists 0:22:53.640 --> 0:22:56.840 despite the fact that Japan has you know, huge, huge 0:22:56.880 --> 0:23:00.359 deficits and uh uh and their own long term pro blums. 0:23:00.400 --> 0:23:03.920 But but certainly, I think we had an interesting test 0:23:04.040 --> 0:23:07.280 this morning. Uh if you look at a two d 0:23:07.480 --> 0:23:10.440 day moving averages, is one of those that the technical 0:23:10.480 --> 0:23:13.600 guys will look at for sort of trend movements. One 0:23:14.080 --> 0:23:17.639 S five is dollar yen's two hundred day moving average. 0:23:17.640 --> 0:23:20.440 We went down and tested that having closed or gotten 0:23:20.440 --> 0:23:23.040 below it. So I think that's an important one to 0:23:23.080 --> 0:23:25.800 watch in terms of risk aversion in this movement in 0:23:25.800 --> 0:23:29.600 in dollar yen. But I think in general, um again, 0:23:29.640 --> 0:23:31.879 I think it's it's been this retreat in interest rates, 0:23:32.119 --> 0:23:35.199