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Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane. Daily

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Speaker 1: we bring you insight from the best in economics, finance, investment,

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Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud,

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Speaker 1: Bloomberg dot Com, and of course on the Bloomberg Right

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Speaker 1: Now joining us David Balan. He is a city group

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Speaker 1: that global head of Investment's David, I want to cut

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Speaker 1: to the chase and take from your note you focus

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Speaker 1: on gridlock. Is the gridlock forward than the different than

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Speaker 1: the gridlock of recent years? Well, in terms of economic policy, Tom,

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Speaker 1: probably not. I mean what we're gonna see, I think

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Speaker 1: is some level of stimulus package. It won't be what

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Speaker 1: it would have been, um, you know, had there been

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Speaker 1: a control by the Democrats, but there will be a package.

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Speaker 1: And if you think about the trifecta from a stock

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Speaker 1: market standpoint, you have the FED, you know, holding rates

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Speaker 1: very low for the next two and a half years.

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Speaker 1: You've got some level of stimios in January, and perhaps

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Speaker 1: most importantly, you have four different vaccines that could basically

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Speaker 1: be announced between the end of November and January, and

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Speaker 1: they're being made in hundreds of millions of doses by

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Speaker 1: each of the country, each of the companies. The combination

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Speaker 1: of knowing that there would be an end of the

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Speaker 1: pandemic in you know, stimulus in the market sometime in January,

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Speaker 1: and the known who the president is is quite a

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Speaker 1: you know, a bollus of news that can propel the

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Speaker 1: market higher. And I believe that that's a combination of

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Speaker 1: those things that's actually happening right now. The market not

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Speaker 1: really competent in nature of this rally. Well, yeah, and

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Speaker 1: that's where I wanted to go, David. The market is

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Speaker 1: not a monolith, and right now we're seeing is a

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Speaker 1: doubling down on the growth stocks and the tech stocks

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Speaker 1: and not the reflation trade that people have been hoping for.

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Speaker 1: The neat narrative that we were talking about is the

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Speaker 1: FETE is going to have to provide more support. Rates

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Speaker 1: are going to stay low, and that necessarily we're not

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Speaker 1: going to get that faster growth from a higher fiscal

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Speaker 1: support pack. It is the neat narrative. Correct Or are

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Speaker 1: we going to get that stimulus in the form of

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Speaker 1: just economic growth and recovery as the vaccine gets implemented. Yeah,

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Speaker 1: I think that that narrative is actually wrong. We'll talk

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Speaker 1: a little bit about the rotation too. But but the

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Speaker 1: reason that the narrative is wrong is that you've got

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Speaker 1: an enormous sort of you know, tail wind here. You've

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Speaker 1: got basically between twelve and fifteen percent of the global

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Speaker 1: economy shut down in terms of travel, leisure, retail, education, healthcare,

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Speaker 1: all of it shut down. You take a look at

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Speaker 1: consumer demand in the the United States, it's higher than it

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Speaker 1: was in December of two thousand and nineteen before we

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Speaker 1: turn that back on. So there's quite a bit of

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Speaker 1: a tail wind in that way, and also in terms

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Speaker 1: of the actual amount of velocity of money which will

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Speaker 1: actually take place when everyone leaves their house. Um. And

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Speaker 1: that's where you get to this whole rotation of the market. Um.

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Speaker 1: It's shocking to me that, you know, the Nasdaq is

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Speaker 1: up this way, but that is the defensive trade rates down,

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Speaker 1: technology up, and that's what tells me that people actually

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Speaker 1: are still scared. Um. Once we see that change, I

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Speaker 1: think that will be an indicative of what will have

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Speaker 1: been over the next couple of years as the as

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Speaker 1: the regular market, uh, you know, comes to comes to

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Speaker 1: bear it. David Gratz, as always David Baiden, that a

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Speaker 1: city group this is a joy. Rick Michigan joins us

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Speaker 1: now Frederick Michigan of Columbia University, a former Federal Reserve governor.

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Speaker 1: And we can wax philosophical about the FED, about our

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Speaker 1: central Bank. Forget about that. Let's wax philosophical about his

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Speaker 1: wonderful textbooks on policy. He has thought more than anyone

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Speaker 1: I know about policy and linking it into the American

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Speaker 1: good Rick Michigan. Does Mr Biden run a traditional Democratic

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Speaker 1: Party Democratic president policy or does he have to carve

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Speaker 1: a new path if he's elected? Who knows? It's it's

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Speaker 1: so complicated, uh, and uh that what's happened has been

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Speaker 1: a real polarization, not just in terms of Americans but

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Speaker 1: the parties themselves. So we've seen, uh the right in

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Speaker 1: the Republican Party go uh to quite extreme positions, and

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Speaker 1: we've seen the left in the Democratic Party doing the

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Speaker 1: same thing. Uh. And Biden is is a centrist. But

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Speaker 1: it's going to be very complicated, particularly uh that that

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Speaker 1: the Senate will almost surely be the the Republican Senate,

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Speaker 1: So getting anything done is going to be very difficult.

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Speaker 1: I do think that there will be some stimulus that

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Speaker 1: will put you put in place because it's really clear cut.

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Speaker 1: I think from both parties that something needs to be done.

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Speaker 1: But it certainly won't be what the Democrats would have

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Speaker 1: liked if, in fact it was a Democratic Senate and

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Speaker 1: a Democratic president, because this is certainly not going to

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Speaker 1: be the kind of money going to the States that

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Speaker 1: the Democrats have initially initially wanted. So it's a very

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Speaker 1: complicated environment for him. I think it's gonna be very

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Speaker 1: tough for for for for Biden, who's you know, I

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Speaker 1: don't necessarily think that he's a super strong u A person. Uh.

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Speaker 1: He's got a tough, tough shop to do and and

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Speaker 1: uh and of course it's not absolutely sure that he's

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Speaker 1: going to win the election, but it looks increasingly likely

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Speaker 1: the accounting continues. He has his nose in front just

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Speaker 1: about at the moment. Brick, the choreography this morning and

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Speaker 1: the Unted Kingdom was phenomenal. The bank offing the make

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Speaker 1: six cal pulls the decision early. They chance that the

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Speaker 1: Treasury follows up. They work hand in glove almost perfectly

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Speaker 1: over the last several hours, Rick Doy, You assume that

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Speaker 1: the Federal Reserve and the person leading that institution is

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Speaker 1: going to be much much closer to the president and

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Speaker 1: whoever that president might be, not just through the next

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Speaker 1: four years, but over the next several decades. Well. I

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Speaker 1: think that that there's clearly an issue in terms of

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Speaker 1: the relationship between j Powell and Donald Trump. Is was

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Speaker 1: not good at all. We've never seen quite the vociferous

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Speaker 1: tax that we've seen from President Trump. In fact, uh

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Speaker 1: mentioned by textbook in a new addition coming out, I

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Speaker 1: have a whole new section on presidential attacks on on

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Speaker 1: the FED and how unique these are. There always been

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Speaker 1: some attacks, but these are really very unique. So I think, certainly,

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Speaker 1: uh uh, if Joe Biden is elected, that the relationship

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Speaker 1: between the FED and the the president will be much

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Speaker 1: better than it will have been before. In fact, I

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Speaker 1: think that Joe Biden will just leave the FED alone

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Speaker 1: and let it do it do its job. Now. In practice,

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Speaker 1: it really hasn't influenced very much what the FED has

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Speaker 1: done the criticisms of Donald Trump, but it does politicize

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Speaker 1: the FED. So hopefully the little less politicization of the FED,

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Speaker 1: I think that would be a good thing, but we'll

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Speaker 1: have to wait and see. I think the FED has

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Speaker 1: a very tough job right now. They're Basically you're out

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Speaker 1: of tools that the action really has to come from

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Speaker 1: from from federal government spending. Uh, and that's something that

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Speaker 1: FED can control. They clearly want more expansionary and policy

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Speaker 1: from the from the federal government, but who knows exactly

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Speaker 1: how much that will be. Well, when you say that

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Speaker 1: they're basically out of tools of profession Michigan, this is

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Speaker 1: really important to people are saying they aren't a tools,

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Speaker 1: but doesn't mean they're not going to act further, whether

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Speaker 1: it's expanding the balance sheet or playing around with other

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Speaker 1: ways of stimulating the economy. Do you expect them to

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Speaker 1: double down on their existing policies even if they are

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Speaker 1: not proving to be effective and actually stimulating economic growth. Well,

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Speaker 1: it's a key issue is is what do you mean

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Speaker 1: by effective That you're supposed to do what you what

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Speaker 1: you can to help. It's just that you have to

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Speaker 1: be aware that that the tools are not sufficient at

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Speaker 1: this point. UH. This is one of the problems that

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Speaker 1: occurs when we hit what we call the zero lower

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Speaker 1: bound or effective lower bound on policy rates. You can't

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Speaker 1: go much below zero. In fact, countries have tried to

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Speaker 1: go below zero zero. It's not all clear that that

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Speaker 1: actually even helps. So the FED has a has an

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Speaker 1: issue to conduced things through suiciassi and purchases and its lending.

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Speaker 1: In fact, I thought that the FED performed brilliantly uh

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Speaker 1: in the early phase of the of the coronavirus pandemic,

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Speaker 1: but to make sure that we didn't have another depression,

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Speaker 1: to be honest, that things were very scary right then.

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Speaker 1: Luckily the FED had basically done more games by actually

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Speaker 1: figuring out what to do. It took about eighteen months

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Speaker 1: in total to do everything during the global financial crisis.

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Speaker 1: They were able to basically do it in two weeks,

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Speaker 1: so that was very helpful. But all that could do

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Speaker 1: is stabilize the situation, getting u uh the economy to

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Speaker 1: bounce back when the coronavirus seems to be getting worse.

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Speaker 1: I mean, my view is right now, it's happened economy,

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Speaker 1: it's all about the coronavirus. Coronavirus pandemic. Uh. Clearly we

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Speaker 1: have not handled this particularly well UH and it has

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Speaker 1: actually uh we're now at at record level cases. I

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Speaker 1: think it's gonna get much worse in the winter. Just

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Speaker 1: think about people getting together Thanksgiving and then not being

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Speaker 1: able to go outside when it gets really cold. I

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Speaker 1: think it's gonna be pretty grim and that's gonna be

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Speaker 1: a real problem for the economy. And the FED basically

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Speaker 1: is gonna do what it has to do. But on

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Speaker 1: the other hand, h it can't solve the problem, and

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Speaker 1: that's why we we actually need action from the from

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Speaker 1: the Federal Gun. We would love to get you back

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Speaker 1: on the program soon. We appreciate your time this morning,

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Speaker 1: Sir Frederick Misganet, formerly of the Federal Reserve Board of Governors.

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Speaker 1: Always with questions for the feed is Peter Hooper. He

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Speaker 1: is the Deutsche Bank and their global head of economic research.

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Speaker 1: What a thrill to speak on one day to David

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Speaker 1: Fulkers Lando and now to his colleague Dr Hooper. Peter Hooper,

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Speaker 1: There's so much to talk about, but I need to

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Speaker 1: immediately go to the cautious view Deutsche Bank has had

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Speaker 1: on the American economy. Do you reaffirm that within this

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Speaker 1: political moment, yes, Tom uh near term, certainly things are

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Speaker 1: there are studding slow. We have had a very good September,

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Speaker 1: but but the data for October have hadn't begun to soften.

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Speaker 1: And what we're seeing in the labor market right now,

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Speaker 1: I think agrees with that. This morning's number certainly don't

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Speaker 1: in line with the sense that the labor market is

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Speaker 1: not improving further ADP number yesterday three six five. We

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Speaker 1: we may get some downward surprise, downward drift in in

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Speaker 1: payroll games on Friday as well. So our sense is

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Speaker 1: the economy is slowing too noticeably below the consensus expectation.

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Speaker 1: Consensus still around something like three and a half four

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Speaker 1: percent growth in the fourth quarter. We put it a

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Speaker 1: bit under one percent, perhaps given what we're seeing now

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Speaker 1: as some slowing in consumer spending. We had a drop

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Speaker 1: off in auto sales. UH, some high frequency numbers on

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Speaker 1: apparel purchases also pointing in this direction. What's happening here

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Speaker 1: is that the drop in support the unemployment unemployment benefit,

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Speaker 1: the extra unemployment benefits came off in October. Household income

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Speaker 1: growth is slowed substantially. We're starting to take it out

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Speaker 1: of saving. So yes, we do think the economy is

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Speaker 1: flowing near term, and the election results UH certainly at

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Speaker 1: this point have taken out the upside risk on on

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Speaker 1: substantial fiscal stimulus next year. Peter, what is the nature

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Speaker 1: of grid luck right now? When you talked to Matt

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Speaker 1: Lozetti about an American Deutsche Bank view. Does a grid

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Speaker 1: luck get us closer to stimulus salvation? Good luck getting

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Speaker 1: a stimulus salvation. I suppose Ben's Ben is on your

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Speaker 1: point of view, but but certainly we're not going to

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Speaker 1: be getting anything like the two two, two, three, four

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Speaker 1: trillion dollar packages that people were dreaming about under a

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Speaker 1: blue wave. Uh misch. McConnell came out yesterday he said,

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Speaker 1: we have to put high priority and getting something done

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Speaker 1: before the end of the year. The Republican Senate had

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Speaker 1: been talking, had been talking about a five billion dollar

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Speaker 1: support package. I think, uh, it's it's with the election

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Speaker 1: results we're seeing at this point. My sense is and

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Speaker 1: with a present if if, if the things turn out

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Speaker 1: the way they seem to be right now, if if

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Speaker 1: Biden as president, a president that's going to be trying

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Speaker 1: to do something to bring the country together to get

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Speaker 1: something done here. Yes, you have a bridlock, you have

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Speaker 1: a Republican Senate and a a Democratic House with a

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Speaker 1: democratic administration, but you're going to have, I think, an

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Speaker 1: effort to try to get things done. So I'm not

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Speaker 1: quite as pessimistic. Peter's still a lot of ivs. The

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Speaker 1: counting continues. One thing we can look at is the

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Speaker 1: economic data, the hard data claims we have the I

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Speaker 1: m out yesterday services, the employment component, a little bit

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Speaker 1: of sluggishness in the mix their page. I just wanted

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Speaker 1: from your perspective, how you think the Federal Reserve when

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Speaker 1: they meet today will actually pour through the job stats

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Speaker 1: we've seen in the last couple of weeks. I think

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Speaker 1: they'll be seeing economy that was starting a slow and

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Speaker 1: this certainly tells you why Pal has been upfront saying

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Speaker 1: we need more physical stimulus at this juncture. It's it's

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Speaker 1: an economy that's still herding from the show that it's

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Speaker 1: that it's faced, and the support coming off is going

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Speaker 1: to be giving us a significant slowing of growth. It's

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Speaker 1: not enough to get them to do anything today. I

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Speaker 1: expect to see something, Uh if if, if the numbers

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Speaker 1: come in the way we're anticipating, I wouldn't be surprised

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Speaker 1: to see some action by the December meeting, in in

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Speaker 1: in terms of balance sheet increasing, the maturity of purchases,

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Speaker 1: this sort of thing. Wait, let's build on that, bitter

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Speaker 1: How much do you expect the Fed to potentially expand

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Speaker 1: their balance sheet if there is no promise of fiscal support. Um,

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Speaker 1: you know, on on on balance sheet. The first thing

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Speaker 1: I expect is in increasing the maturity of their purchases,

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Speaker 1: on actually expanding from the pace of a hundred and

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Speaker 1: twenty billion per month. Uh. They told us that they

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Speaker 1: would continue at at least that pace. So certainly, if

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Speaker 1: the economy is flowing, we could see some pick up

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Speaker 1: on that. How much we haven't made a we haven't

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Speaker 1: made a forecast on that yet, but be surprised to

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Speaker 1: see some something. Uh. If we don't get any more

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Speaker 1: fiscal support before the end of the year, If the

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Speaker 1: economy is slowing to well below, well below current expectations, yes,

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Speaker 1: I think the fetch steps in and because it begins

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Speaker 1: to do something there all right. So how big is

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Speaker 1: the spread between the streets expectation currently of growth in

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Speaker 1: the US versus Deutsche banks house view of growth given

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Speaker 1: where we are politically, given where we are with the virus. Okay,

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Speaker 1: our our current forecast is in the range of half

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Speaker 1: a percent for the annual growth in the fourth quarter.

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Speaker 1: I think the the latest Bloomberg survey that I've seen

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Speaker 1: is in the in the neighborhood of three and a

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Speaker 1: half to four percent, so well above the numbers we're

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Speaker 1: putting in there. We do see growth picking up next

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Speaker 1: year too, between three and a half and four percent,

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Speaker 1: even without the extra UH. I mean we we had viewed,

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Speaker 1: we had viewed the possibility of a large stimulus package

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Speaker 1: next year as an upside risk to our baseline forecast.

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Speaker 1: At this point, we're looking at something in the in

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Speaker 1: the half half a trillion to one trillion range of

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Speaker 1: fiscal emaulists next year, which supports that growth picking up

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Speaker 1: into the three and a half four percent range, along

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Speaker 1: with the assumption that we will get released through vaccination

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Speaker 1: and better testing. Peter Hope, great to catch up you, sir.

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Speaker 1: Thank you Deutsche Bank ahead of global economic research. Right

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Speaker 1: now we need to consider Michigan. We need to consider

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Speaker 1: the state of the Michigan economy, in the state of

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Speaker 1: General Motors, and there was no one more qualified to

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Speaker 1: do that. David Weston here with Ms Barr. David, thank

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Speaker 1: you so very much, Tom Keane. We now welcome the

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Speaker 1: General Motors Chairman and CEO. She is Mary Barrows. So Mary,

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Speaker 1: thank you for being with us. Do you have your

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Speaker 1: earnings at just a short time ago? I think congratulations

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Speaker 1: are in order or you exceed the expectations people thought

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Speaker 1: you'd come back. You'd come back more than people thought.

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Speaker 1: Give us your perspective on what drove that. How much

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Speaker 1: of that was general motors and what you're doing general

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Speaker 1: was how much of that was the economy and some

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Speaker 1: of the massive stimulus that's going to the pockets of Americans. Well,

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Speaker 1: thanks David, it's great to be here. And you know, really,

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Speaker 1: when you look at one of the key reasons was

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Speaker 1: the GM team members. Uh, they have done just a

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Speaker 1: phenomenal job across all areas of our business, working and

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Speaker 1: demonstrating their commitment to the business. Also priced prioritizing safety

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Speaker 1: and following our safety protocols, and that has been a

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Speaker 1: key ingredient to driving this very successful quarter. I would

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Speaker 1: also say it's on the strong demand for trucks. A

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Speaker 1: couple of years ago, as we started to roll out

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Speaker 1: our new full size trucks, we talked about the fact

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Speaker 1: that we were going to cover the whole market um

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Speaker 1: both from a value perspective but also from a feature perspective.

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Speaker 1: That strategy is working out extremely well, and we see

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Speaker 1: very high demand for our full size pickups at all levels,

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Speaker 1: but especially in those high end pickups with the A

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Speaker 1: T four for example. With the GMC, we also continue

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Speaker 1: to have very strong cost performance, not only the specific

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Speaker 1: austerity measures that we took because of the pandemic, but

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Speaker 1: also the work we've already been doing as part of

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Speaker 1: the transformation. And then finally g MFU performed extremely well.

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Speaker 1: So all of that coming together, I think our products,

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Speaker 1: the discipline of the team, and are just our focus

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Speaker 1: on costs is what allowed us to have this strong quarter.

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Speaker 1: As you say, I looked at your Waterfall truck there

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Speaker 1: carefully and so it was price and some of was

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Speaker 1: cost saving. So well done. You have a balance. Let's

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Speaker 1: talk about tracks. They clearly powered you. You've talked about

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Speaker 1: them for some time. Now your pickup trucks. Do you

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Speaker 1: have enough of them? Can you produce enough? What are

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Speaker 1: you seeing in demand? We're seeing a strong and growing

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Speaker 1: demand and right now we're building every truck we can

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Speaker 1: make that. I think very shortly you'll hear us taking

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Speaker 1: action to how we're going to further our capability to

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Speaker 1: to build more trucks, because what we see is the

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Speaker 1: man continues to grow. We think the shift to trucks,

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Speaker 1: especially with the luxury trucks, the premium trucks that we're

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Speaker 1: offering for both GMC and Chevrolet, that that is going

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Speaker 1: to be a continuing trend. So, Mary, you talked about

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Speaker 1: the safety of your colleagues at General Motors. Is the

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Speaker 1: coronavirus at this point inhibiting at all your ability to

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Speaker 1: produce enough product, enough trucks. Well, you know, we've worked

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Speaker 1: hand in hand, not only with all of the GM

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Speaker 1: team members, and I'm just so proud of the way

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Speaker 1: everyone is following the safety protocols and staying safe. And

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Speaker 1: I think there are even in many cases taking them home.

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Speaker 1: Our employees tell us they feel safer at work than

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Speaker 1: they do at a grocery store, and I think that's

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Speaker 1: that speaks to um what we're doing and their commitment

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Speaker 1: to to following the protocols that we jointly developed with

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Speaker 1: the U a W and our peers across the industry.

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Speaker 1: We've shared all that with the supply base and that

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Speaker 1: is allowing us to continue to make sure we have

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Speaker 1: the parts necessary. It's it's a very dynamic situation and

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Speaker 1: we just worked to address each situation as it occurs,

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Speaker 1: but right now really pleased with how the team is

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Speaker 1: being creative to keep keep our ability to build as

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Speaker 1: many trucks as we can looking out into the future.

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Speaker 1: You have been consistent in saying an important part of

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Speaker 1: the GM strategy is electric vehicles and autonomous vehicles. Give

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Speaker 1: us a little bit of insight of that, particularly as

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Speaker 1: we are now waiting for a result on the election.

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Speaker 1: Does it make a material difference to your strategy whether

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Speaker 1: we have a Democrat or Republican in the White House

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Speaker 1: because they have very different approaches to things like fossil

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Speaker 1: fuels and green energy. We are committed to e V

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Speaker 1: s and we're working to accelerate our our e V transformation.

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Speaker 1: I think some of the examples of that are the

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Speaker 1: GMC hummery V, the Catalect Lyric, and then the bolt

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Speaker 1: Um e V as well. We also just recently announced

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Speaker 1: a multibillion dollar manufacturing commitments at Factory zero and Detroit

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Speaker 1: ham Tramic, the ulti um cell Um LLC in Lordstown, Ohio,

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Speaker 1: and then just most recently at our spring Hill assembly

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Speaker 1: plan in Tennessee. So we've got the manufacturing capability, we

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Speaker 1: have great vehicles, and we've got the expertise and the

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Speaker 1: technology with ultium speed is vitally important as well, and

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Speaker 1: that's why we're working so quickly. So regardless of who

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Speaker 1: wins the election, we're going to continue on a rapid

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Speaker 1: pace to transform to two E vs. Mary, you mentioned

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Speaker 1: the Hummer EV. A lot of people out there are

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Speaker 1: excited about that Hummer V. How many orders pre orders

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Speaker 1: have you got so far? Are The demand has well

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Speaker 1: exceeded our expectation. As you know, this is a very

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Speaker 1: premium um entry, So we're incredibly pleased at the strong

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Speaker 1: demand and uh, you know, we'll continue to monitor that

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Speaker 1: as we go forward. And so Mary, it's not just

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Speaker 1: electric vehicles, it's also fuel cell. You announced the deal

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Speaker 1: with nicola As. I understand that there's a deadline on

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Speaker 1: that deal in December. Where are you on that right now?

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Speaker 1: Do you expect to go through it and will there

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Speaker 1: be material changes in the terms of the deal. So

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Speaker 1: right now we are in ongoing discussions with nicola Um

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Speaker 1: regarding the transaction. That transaction has not closed and so

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Speaker 1: we'll provide for their updates at the appropriate time. But

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Speaker 1: I think what's important to note is our fuel cell technology,

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Speaker 1: the hydro tech hydrogen fuel cells that we've developed with Honda.

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Speaker 1: They they are industry leading, and that's from external sources,

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Speaker 1: and so we're going to continue to look for ways

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Speaker 1: to not only UM commercialize our fuel cells, but also

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Speaker 1: the ultium battery platform because I think that continues to

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Speaker 1: advance our zero emission future. Finally, very briefly, do you

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Speaker 1: expect a continued rebound? One? What are you looking at? Uh?

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Speaker 1: You know, a lot depends on UM. If we across

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Speaker 1: the globe, get the coronavirus under control, and we know

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Speaker 1: what we need to do from a safety protocol perspective,

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Speaker 1: so we're hopeful that will start to make some progress there.

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Speaker 1: Obviously in the United States were monitoring if they're what

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Speaker 1: will happen with additional stimulus. But if those factors UH

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Speaker 1: stay uh, if we get the virus under control and

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Speaker 1: other elements stay on track, we think we can continue

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Speaker 1: the recovery into twenty one and definitely we believe we'll

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Speaker 1: continue to see strong full face truck demand. Mary, it's

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Speaker 1: always a great treat to get to talk to you.

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Speaker 1: Thank you so much as Mary Barr, She's General Motors

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Speaker 1: chairman and CEO. Tom David Weston, thank you so much,

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Speaker 1: really appreciate that. Thanks for listening to the Bloomberg Surveillance Podcast.

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Speaker 1: Subscribe and listen to interviews on Apple Podcasts, SoundCloud, or

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Speaker 1: whichever podcast platform you prefer. I'm on Twitter at Tom

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Speaker 1: Keene before the podcast. You can always catch us worldwide.

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Speaker 1: I'm Bloomberg Radio