Speaker 1: This is Bloomberg Business Week. I'm Carol Masser and I'm
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Speaker 1: All right, right now, we want to get to another
Speaker 1: story that caught our attention, certainly earlier in the day,
Speaker 1: and that is what's going on in the chip space.
Speaker 1: Some news out of China pausing massive investments aimed at
Speaker 1: building a chip industry to compete with the US as
Speaker 1: a nationwide COVID resurgence strains the world's number two economy
Speaker 1: and Beijing's finances. Tim, we have a great voice when
Speaker 1: it comes to what's going on in global Semis very
Speaker 1: pleased to have back with us. Chris Miller. He's the
Speaker 1: author of Chip War. It's the fight for the World's
Speaker 1: most critical Technology. Chris's associate professor of international history at
Speaker 1: Tufts University. He joins us once again via zoom for Boston.
Speaker 1: I do want to note that Chris's book was recently
Speaker 1: highlighted in a selection of the best business books of
Speaker 1: the year from the New York Times. Chris, good to
Speaker 1: have you back with us. Uh, this exclusive from our
Speaker 1: team here at Bloomberg News. How should our investing audience
Speaker 1: understand China potentially scaling back its investments to compete with
Speaker 1: international ship manufacturers. Well, I would say first off that
Speaker 1: we need to wait for more information and corroboration from
Speaker 1: China to see how true uh this is. I don't
Speaker 1: doubt the report itself, but the Chinese policy making process
Speaker 1: works in complicated ways, and focusing on domesticating semiconductor technology
Speaker 1: has been a core goal of the Chinese government since
Speaker 1: and so it would really be a dramatic shift if
Speaker 1: overnight China where to really scale back ship making. Somebodies,
Speaker 1: especially because it would only about a month ago when
Speaker 1: China announced over a hundred billion dollars of new subsidies
Speaker 1: for the chip industry. So I think we need to
Speaker 1: wait for some more information to understand what exactly does
Speaker 1: this new report mean in the context of what China's
Speaker 1: policy has been for almost a decade. Chris, that's a
Speaker 1: great point. I do feel like sometimes I'm getting smacked
Speaker 1: in many directions when it comes to China policy and
Speaker 1: trying to make sense of what are they really doing,
Speaker 1: especially for a country that we know lays out long
Speaker 1: term policy. Chips are in everything chip. You know, China
Speaker 1: has come out very clearly and said it wants to
Speaker 1: dominate on a higher technology level, right, So I mean
Speaker 1: having said that, you know, we're seeing the socks you know,
Speaker 1: a little bit of a rally today. Again, we kind
Speaker 1: of have to wait longer term, but doesn't it I mean,
Speaker 1: just using our brains say that China is gonna have
Speaker 1: to invest in this space because this is the future. Well,
Speaker 1: I certainly think that's been what China's signaled over the
Speaker 1: path decade, both from officials with high up the changing
Speaker 1: paying all the way down until local level. We've heard
Speaker 1: all sorts of uh Chinese visual talk about the industry
Speaker 1: being important, and if you look at the Chinese economy, um,
Speaker 1: whether it's manufacturing or the tech sector, there's deep reliance
Speaker 1: on sem conductors, and today China has been more money
Speaker 1: importing chips that's been importing oil. So there's a really
Speaker 1: strong rationale for China to want to domesticate. Uh. Some
Speaker 1: of that it has to import from abroad. On the
Speaker 1: other hand, though, it is the case that the restrictions
Speaker 1: the US imposed on China late last year are really
Speaker 1: top and it will just be really expensive to get around,
Speaker 1: So it would be economically rational I think for China
Speaker 1: to recognize the ways it's just going to have to
Speaker 1: remain reliant on important technology. But it hasn't in the
Speaker 1: past focused on economic issues when national security is in play. Hey, Chris, Uh,
Speaker 1: We've been talking over the last few months about investments
Speaker 1: that companies including Intel, TSMC, and more have made in
Speaker 1: the US in places like Ohio, Arizona, and more. When
Speaker 1: it comes to building facility, these that perhaps one day
Speaker 1: will build chips or parts of chips up on the
Speaker 1: supply chain. Uh. What more do you think the American
Speaker 1: government needs needs to do in order to uh spur
Speaker 1: innovation manufacturing here at home? How would you advise policymakers
Speaker 1: if you were doing that. I think the first thing
Speaker 1: the US needs to do and is doing is implement
Speaker 1: the policies that have already been passed. The Congress pass
Speaker 1: the chip stacked last year, but it's still in the
Speaker 1: really early stages of implementation, and it's going to take
Speaker 1: a couple of years to have all of the changes
Speaker 1: that were put into that law actually enacted and the
Speaker 1: incentive programs dispersed. The other fact of this is that
Speaker 1: a key input the company's decisions about where to UH
Speaker 1: where to invest is tact policy, and in the past,
Speaker 1: US tact policy has been much less favorable to UH
Speaker 1: some anconductor investment and then in places like Taiwan or
Speaker 1: in China, and so right now that the key area
Speaker 1: of focus is making sure that the US has the
Speaker 1: best tax policy UH in terms of providing deductions for
Speaker 1: manufacturing investment in low tax rates to make it viable
Speaker 1: to operate a semi facility here relative to other countries
Speaker 1: that have lower taxes. I mean, Chris in some ways,
Speaker 1: like as you say, you know microchips, semis, you know
Speaker 1: the new oil. So I do wonder do we think
Speaker 1: about kind of the model of the Middle East, right
Speaker 1: and their dominance and control and hold over most of
Speaker 1: the world, certainly the developed world for decades, you know,
Speaker 1: is that the model could you know essentially, if one player,
Speaker 1: whether it's China, whether it's the US, is a dominant
Speaker 1: player when it comes to semis is that how we
Speaker 1: need to think about it. Well, the chip industry is
Speaker 1: actually much more concentrated than even the oil industry. We
Speaker 1: think of Thoudy as being really important, but the study
Speaker 1: produced only fifteen or so percent of the world oil,
Speaker 1: whereas Taiwan produces of the world's most advanced processor chips.
Speaker 1: But even more concentration and therefore even more risk of
Speaker 1: to your political disruption when it comes to semiconductors relative
Speaker 1: uh to oil. And that's why the concept of a
Speaker 1: chip war is is so important, not just for the
Speaker 1: security implications, but also for the economic implications, because it's
Speaker 1: far worse in terms of it's not kind of effect
Speaker 1: than just the disruptions to the oil larks that we've
Speaker 1: seen with the Russia stactions this year. You would imagine,
Speaker 1: for example, a disruption to its high want ability to
Speaker 1: exupport chips. Does the world outside of China have what
Speaker 1: it takes to actually cut China out of the process
Speaker 1: at any point in the next decade, Well, China is
Speaker 1: already far cut off, cut out of the process of
Speaker 1: making advanced chips. China can't make the most advanced ships
Speaker 1: and because of the latest U S controls, it won't
Speaker 1: be able to make the second generation most advanced ships
Speaker 1: going forward. China can make fairly low TEX chips and
Speaker 1: it will be able to UH for some time. But
Speaker 1: China is really not a major player when it comes
Speaker 1: to advanced ships. Where things stand today, what does it
Speaker 1: mean to you? We know t SMC, what investing some
Speaker 1: forty billion UH in that US plant here, giant US
Speaker 1: planted in the United States. Um, is that a new
Speaker 1: t SMC going forward in terms of being here, having
Speaker 1: a physical presence and just got about thirty seconds. Well,
Speaker 1: it's a big change for t SNC to have major
Speaker 1: facilities outside of Taiwan. Before this year, t SMC had
Speaker 1: almost volve its manufacturing in Taiwan and just a little
Speaker 1: bit in China. So t SMC becoming a more globalized
Speaker 1: company as it invests in the US and also in Japan,
Speaker 1: maybe down the road in Europe too. Yeah, that investment
Speaker 1: by t SMC one of the largest foreign investments in
Speaker 1: the United States and the largest I believe in the
Speaker 1: State of Arizona. So pretty big deal, Chris Miller, you
Speaker 1: are a big deal. Associate Professor of International History at
Speaker 1: Tufts University. Check out his book Chip Or The Fight
Speaker 1: for the World's Most Critical Technology as to mention, recently
Speaker 1: winning the Book of the Year award from The Financial Times.
Speaker 1: This is Bloomberg Radio. This is Bloomberg Business Week with
Speaker 1: Carol Messer and Tim Stanovic on Bloomberg Radio. Well McDonald's
Speaker 1: commitment to Russia a long and deep, nothing short of
Speaker 1: a revolution to make it all happen, officially creating a
Speaker 1: restaurant from the ground up more than three decades ago. Well,
Speaker 1: the upcoming new issue of Bloomberg business Week, Bloomberg's Clint Rainy,
Speaker 1: a contributor to the magazine, takes us throughout the iconic
Speaker 1: fast foods journey that changed the way Russia did business
Speaker 1: and how it all came to an end. We've got
Speaker 1: with us this afternoon. Bloomberg Business Week editor Joel Weber,
Speaker 1: who's in our Bloomberg Interactive Broker's studio. Jeremy Keane joins
Speaker 1: us as well. These Business Week Features editor on the
Speaker 1: phone from New York City, Joel, I want to start
Speaker 1: with you just give us an idea of how this
Speaker 1: story came together, because it's a real deep dive into
Speaker 1: sort of McDonald's history. And really, you know, when when
Speaker 1: the Russia's invasion of Ukraine happened, McDonald's did something that
Speaker 1: it's never done in its history. Yeah. So the story
Speaker 1: begins thirty three years ago, in three weeks and that's
Speaker 1: that's um the day that McDonald's opened up in Pushing
Speaker 1: Square in Moscow and basically brought capitalism to Russia. And boy,
Speaker 1: that's a really interesting, uh storyline to be thinking about
Speaker 1: over the past year. And I think actually one of
Speaker 1: the big business stories of last year was to watch
Speaker 1: business russell with what to do with Russia's invasion of Ukraine.
Speaker 1: And a lot of companies immediately left, others got stuck
Speaker 1: in the middle for a while, and some are still
Speaker 1: there and quietly kind of trying to figure out what
Speaker 1: their moves are. McDonald's was one that got called out
Speaker 1: early and then walked away. Um and that was um
Speaker 1: no doubt of really trying business conversation within the company
Speaker 1: because of this kind of amazing history story. Is that
Speaker 1: to me, this is the kind of story that we
Speaker 1: do every once in a while. It feels like the
Speaker 1: kind of thing of business school is going to talk
Speaker 1: about forever, which is, boy, you have a success story
Speaker 1: and then you know, maybe a situation out of your
Speaker 1: control makes you have to reevaluate what you're doing. And
Speaker 1: you know, in this case, Russia um ended up walking
Speaker 1: away from from this. McDonald's end up walking away from
Speaker 1: this really interesting story. Um. But you know, Jeremy, the
Speaker 1: thing that I found that was so interesting here was
Speaker 1: that the raw ingredients that you need to make uh
Speaker 1: for McDonald's, Russia has them, but they weren't. They weren't
Speaker 1: really you know, turning it into Big Max to start with.
Speaker 1: But you think, you know, dairy potatoes, meat bread, those
Speaker 1: are all like raw ingredients that you would need to
Speaker 1: make McDonald's happen. So what was the magic that allowed
Speaker 1: McDonald's to crack Russia initially? Yeah, so, I mean they
Speaker 1: had a first mover advantage because the George Collen, a
Speaker 1: longtime executive McDonald has kind of made it his mission
Speaker 1: to get into the Soviet Union. That took him a
Speaker 1: very long time to kind of work through the communist
Speaker 1: bureaucracy and get permission to do that. And then you know,
Speaker 1: they were sort of the first of these Western companies
Speaker 1: to me in there. UM and you know, a bunch
Speaker 1: of others uh followed over over the nineties and into
Speaker 1: the two thousand's UM, but you know McDonald's initially it
Speaker 1: caught on quickly because it was a symbol of capitalism.
Speaker 1: It was something that I think Russians were hungry for
Speaker 1: at that moment, that terrible pun sorry, uh, at that
Speaker 1: moment in history and UM and then and then it
Speaker 1: kind of worked that advantage, you know, it built on it.
Speaker 1: They what old talking about is UM over the two
Speaker 1: thousands in particular, you know that they developed they realized
Speaker 1: that they needed to do a better job of working
Speaker 1: with Russian ingredients, that they had everything available, and started
Speaker 1: building this this big supply chain to complement the the
Speaker 1: operation that they that they developed to you know, to
Speaker 1: service the restaurants themselves. And they built it out and
Speaker 1: built it out to the point that you know, by
Speaker 1: the time Putin came along, UM and and now nationalism
Speaker 1: increased in Russia, they were able to say like, well,
Speaker 1: look like we're already very Russian in terms of you
Speaker 1: look at our supply chain and and the way that
Speaker 1: we do you know, even the potatoes for their fries,
Speaker 1: which they know they struggled to find. Really, even the
Speaker 1: Russia produces a lot of potatoes, they struggled to find
Speaker 1: the ones that would produce the Christmas that they were
Speaker 1: after with surprise, and you know, after a long time
Speaker 1: they eventually figured that out too. So you know, for them,
Speaker 1: they had they had invested and kind of built deep
Speaker 1: roots in the country by the time the envision of
Speaker 1: Ukraine happened, and you know they yah, it's pretty incredible. Jeremy,
Speaker 1: just to share, well, actually, before I get to these numbers, Clint,
Speaker 1: did you know, go a few years ago and actually
Speaker 1: eat at the restaurant and pushkin square and he does,
Speaker 1: right that it actually seems like a big mac or
Speaker 1: you know what they call it there. You know, I
Speaker 1: actually don't even know what they call it in Russia.
Speaker 1: Helped me out, y'all um, but it's it's the Jeremy,
Speaker 1: what is it? The mac uh? What macdac is McDonald's that. Yeah,
Speaker 1: but it's pretty you know, he said it did actually
Speaker 1: taste better there, and you know they said, oh, well,
Speaker 1: that's because all the ingredients come come locally. But I
Speaker 1: want to talk about the economic impact of the restaurant
Speaker 1: on the country. H In the chain purchased about four
Speaker 1: percent of Russia's potatoes, two percent of its cheese, paid
Speaker 1: a billion dollars in taxes h during the years of
Speaker 1: this study, so between roughly by it accounted for seven
Speaker 1: percent of all Russian restaurants sales. So what's going on
Speaker 1: now with sort of the I don't want to call
Speaker 1: it a reinvention, but a rebrand of the existing McDonald's,
Speaker 1: which they were close to a thousand. Yeah, so they
Speaker 1: basically sold, they suspended operations and then sold all their
Speaker 1: assets to Alexander go our Um Mining Executive and he
Speaker 1: Um spent Um. They rebranded it of Crucial which tasty
Speaker 1: period and kind of continued along the way that they were.
Speaker 1: And you know, Clint gets into the story. It's kind
Speaker 1: of a sub sub theme of the story that there
Speaker 1: was sort of a long tradition of Russian imitators of
Speaker 1: McDonald's who would pop up and try and do what
Speaker 1: they were doing. Sometimes the the rip offs boiled down
Speaker 1: to even using essentially the same menus um and so
Speaker 1: you know, and and also over the years, like Russian
Speaker 1: competitors responds, there are companies like Terra Mock, who speaks
Speaker 1: with the CEO of that company, and they make their
Speaker 1: BLEMI chain and they really followed McDonald's textbook too, so
Speaker 1: you know that the market I guess has become more
Speaker 1: mature and there's more local options and that sort of thing.
Speaker 1: So there, you know, there there's local operators who are
Speaker 1: they're kind of doing what was going on before. And
Speaker 1: I think they also, I found not mistake and retained
Speaker 1: a fair bit of the staff um from before, so
Speaker 1: that you know they they have to some degree, I believe,
Speaker 1: continued the operations and the brand. It's pretty incredible when
Speaker 1: you think about it, because it's like, wow, like McDonald's
Speaker 1: came in, there's no mistaken McDonald's, Like anywhere you go
Speaker 1: in the world, every body knows what double Archers look like.
Speaker 1: And then all of a sudden, like kind of almost overnight,
Speaker 1: it's like this huge geopolitical catastrophe happens and then they're gone,
Speaker 1: but yet the brand has been rebranded and like is
Speaker 1: in new ownership now and yet sort of sort of
Speaker 1: still there. It's it's wild. It's a really interesting story
Speaker 1: that I think, um, you know, before we totally wrap up,
Speaker 1: it's worth mentioning like how how big of a business?
Speaker 1: Uh deal? This was? You do think about how peace
Speaker 1: schools too? Will like use that. It's like a case study, right,
Speaker 1: and like as a CEO of this, you know, hey,
Speaker 1: your business is being impacted by events that you don't like.
Speaker 1: What are you gonna do about it? All right? Thanks
Speaker 1: to Joe Weber, Editor Bloomberg Business Week. This story in
Speaker 1: the upcoming issue of Bloomberg Business Week magazine. Jeremy Keane,
Speaker 1: Features editor Bloomberg Business Week. This is Bloomberg Radio. You're
Speaker 1: listening to Bloomberg Business Week with Carol Messer and Tim
Speaker 1: Stenovic on Bloomberg Radio. We'll get into a Tessa and
Speaker 1: you can definitely be in the fast lane and it
Speaker 1: can even use all up pilot, but be careful. She
Speaker 1: got to stay awake in hands on the wheel. I
Speaker 1: was wondering where that was going. We learned that lesson
Speaker 1: Tesla for a long time was in the Fascela in
Speaker 1: terms of the share price. But it's been a very
Speaker 1: different story in the last year or so. Stock though
Speaker 1: up today after twelve sell off yesterday, stuck still down
Speaker 1: about from it's November one high. But Tim and I
Speaker 1: talked about this earlier, Tesla shares getting a boost thanks
Speaker 1: to Kathy Wood of our investment. She's been on a
Speaker 1: buying spree really in the last couple of months as
Speaker 1: Tesla has really tanked and doing some big buying yesterday
Speaker 1: as well. And why wouldn't she, I mean back in
Speaker 1: carried her to triple digit a triple digit returns and
Speaker 1: really brought our invest to the forefront of Benny investors
Speaker 1: mind with more on Tesla. Let's bring in Bloomberg News
Speaker 1: technology reporter Dana Hole. She's a go to voice for
Speaker 1: us on all things Tesla. She joins us on the
Speaker 1: phone from San Francisco. Danna, good to have you with us.
Speaker 1: What the conversation about Tesla in recent days, recent months
Speaker 1: has really been about, well, a few things. One, supply
Speaker 1: and demand. We learned that, you know over the weekend
Speaker 1: when we learned that deliveries for the most recent quarter
Speaker 1: for the third time in a row, missed expectations. But
Speaker 1: it's also been one about Elon Musk and his focus
Speaker 1: and where that focus has been of late. What's top
Speaker 1: of mind for you and indeed for Tesla investors too,
Speaker 1: is they kind of determined, Well, Hey, where's this company
Speaker 1: going to go in Yeah, I mean I think for
Speaker 1: a long time, you know, Tesla under promised and over delivered.
Speaker 1: Now it's kind of the opposite where they're over promising
Speaker 1: and under delivering, and that has investors really rattled. I mean,
Speaker 1: if you'll remember, in the third quarter, Musk said that
Speaker 1: there was going to be this epic year end, and
Speaker 1: then they ended the year like missing not only like
Speaker 1: Wall Street consensus for delivery figures, but their own company
Speaker 1: compiled consensus and thirty four cars were like still in transit,
Speaker 1: which begs all these questions about like why can't they
Speaker 1: figure out their logistical issues? Um? And then here we
Speaker 1: are heading into three. Musk still seems to be very
Speaker 1: focused on Twitter, the company that he bought in October. Um.
Speaker 1: He has said that he'll eventually name him a new
Speaker 1: CEO Twitter, but it's not clear who actually wants that job.
Speaker 1: Twitter doesn't even have a board of directors. At Tesla,
Speaker 1: there's only three named executive officers. Like, there's no clear
Speaker 1: secession plan at Tesla, So it's sort of like how
Speaker 1: stretched thin can this guy be? I mean, he already
Speaker 1: runs SpaceX, so now he's basically running three companies and
Speaker 1: no one company has his full attention. Well, sorry, Carolin,
Speaker 1: I want to cop in here. Is SpaceX a little
Speaker 1: different because it has you know, Gwen Shotwell who sort
Speaker 1: of seems to be running day to day operations there
Speaker 1: And could that be some sort of model for what
Speaker 1: Tesla could be if he does indeed install some number two. Yes,
Speaker 1: I mean I think I think SpaceX is very different
Speaker 1: when is the clear number two has been for quite
Speaker 1: some time? And space X is a private company, um,
Speaker 1: you know, and its customers are like the military and NASA,
Speaker 1: whereas well you're saying the government gives money to Elon
Speaker 1: musk Oh, Yeah, has just want to confirm, like Tesla,
Speaker 1: Tesla sells a consumer facing product, and I mean you
Speaker 1: know that. The two other named officers are Zach kirk Corn,
Speaker 1: the highly regarded CFO, and Drew Biglino, who is basically
Speaker 1: the CTO. But it's not like there's no clear number
Speaker 1: two there. And then we've had a lot of reporting
Speaker 1: here in Bloomberg recently about Tom Zoo, who's kind of ascendant.
Speaker 1: He has been the guy overseeing Tesla China. He has
Speaker 1: been brought in recently to kind of help with production
Speaker 1: in Texas and he seems to be like a rising
Speaker 1: star at the company, but there has been no press
Speaker 1: release or eight K or any announcement like promoting Tom officially.
Speaker 1: So it's like, well, so what's up with that? Like,
Speaker 1: I mean, it's just kind of time for Tesla to
Speaker 1: fill out its bench and give some clarity as to
Speaker 1: like what is Elon's Like, what is how is Elon
Speaker 1: spending his time? I mean, um, so, yeah, it's and
Speaker 1: people are just very rattled. I mean, beat beat is
Speaker 1: a beat, a miss as a miss. They were promising
Speaker 1: fifty year of rear growth and this year it was
Speaker 1: I mean, that's that's a significant off the market. Tart,
Speaker 1: That's that's significantly off the market from what they promised.
Speaker 1: So growing pains for Tesla distracted el On, you know,
Speaker 1: and investors just not willing to give Ellen some space
Speaker 1: and a break because we used to all the time,
Speaker 1: Our investors used to all the time. So how do you,
Speaker 1: from someone who has really watched the trajectory of this
Speaker 1: company and of this individual, how do we assess it
Speaker 1: Like at this moment of time of the company's history.
Speaker 1: I think that we just have to remember the kind
Speaker 1: of larger macroeconomic picture, which is that Tesla was born
Speaker 1: in the last recession, got through the recession thanks to
Speaker 1: funding from the Recovery Act and the Obama administration, and
Speaker 1: then kind of ran wild in this era of low
Speaker 1: interest rates. That era is over, like the FED rates
Speaker 1: are high, we are we are in an inflationary environment
Speaker 1: and Tesla cars still cost luckily sixty and you know,
Speaker 1: so it's just a very different scenario. And I mean
Speaker 1: Ellen himself basically keeps bashing the said, you know, for
Speaker 1: all of his problems, and um, so I don't want to.
Speaker 1: I don't so, I just want to It's like when
Speaker 1: the when the era of free money and low interest
Speaker 1: rates and the you know it, it does change the
Speaker 1: equations for cars as a whole. I mean, I think
Speaker 1: we're just sort of entering an environment where, um, you know,
Speaker 1: people are thinking quite carefully about making a big purchase
Speaker 1: like a vehicle. And you know, for a decade, Tesla
Speaker 1: basically ran the field. And now there are other options.
Speaker 1: I mean, if you want to buy an electric car,
Speaker 1: you can get a Rivian pickup truck. You can look
Speaker 1: at you know, what Hyundai has to offer. I mean,
Speaker 1: Tesla is not the only game in town anymore? Do
Speaker 1: you feel like a Tesla buyer is the same as
Speaker 1: a Hyundai buyer, And forgive me, that's not like the
Speaker 1: electric keyas the electric Undas are cool. I'm just saying, Okay,
Speaker 1: I'm not making forgive me and it's it's better than
Speaker 1: the other. I just feel like they're different markets. Is
Speaker 1: that well? So I think for a long time people
Speaker 1: were like, you know, the consumers weren't like, I want
Speaker 1: to buy an electric vehicle. They were like, I want
Speaker 1: to buy a Tesla. But now you have this whole
Speaker 1: swath of consumers that are like, I want to buy
Speaker 1: a Tesla. But I am really turned off by on
Speaker 1: Musk and his politics and his the things that he
Speaker 1: said about Dr Fauci and the way that he's acting,
Speaker 1: And so I'm gonna look elsewhere and I'm gonna option shop.
Speaker 1: And so you're seeing like that core constituency, which for
Speaker 1: so long was like the liberal Californian who wanted to
Speaker 1: save the planet, now like now just thinking twice about
Speaker 1: buying a Tesla. I mean that said, you know, Tesla
Speaker 1: cars still have the best range and the best charging
Speaker 1: infrastructure and the techne you know, and the best software.
Speaker 1: And so it's not like there's going to be this
Speaker 1: huge cannibalization. But for a long time, like there really
Speaker 1: wasn't another electric car on the market and now there is.
Speaker 1: Danna back to this interest rates discussion because I mentioned
Speaker 1: this last week, but during my week the week before Christmas,
Speaker 1: Elon must did this Twitter spaces and he really bashed
Speaker 1: the idea of higher interest rates and UM. He's tweeted
Speaker 1: about UM and he's he's talked about it being a
Speaker 1: challenge for the company. But what what rings hollow to
Speaker 1: me about that argument is that that's a that's an
Speaker 1: environment that every single company out there has to face.
Speaker 1: Higher interest rates are not unique to Tesla, Folkswagon, everybody
Speaker 1: out there, Microsoft, Apple, we all live in a higher
Speaker 1: interest rate environment. Yeah, no, we do for sure, and UM.
Speaker 1: And so it's interesting. So it's just sort of interesting
Speaker 1: that he's he's kind of blaming the macro and not
Speaker 1: taking any responsibility for his own action. I mean, the
Speaker 1: same thing to do would have been on the last quarter.
Speaker 1: They could have they could have lowered their guidance. They
Speaker 1: could have said, listen, we've got disibility into you know,
Speaker 1: orders for the for the fourth quarter, we're we're heading
Speaker 1: into and you know, we're heading into a downturn. You know,
Speaker 1: we originally gave guidance year year growth. Now I think
Speaker 1: it's going to be closer, but they didn't do that.
Speaker 1: I mean, if you'd listen to the call, Zach Kirkhorn
Speaker 1: was very like, sort of frugal and kind of was
Speaker 1: like we we might be short of fifty percent, and
Speaker 1: then Ellen was like, no, no, it's going to be
Speaker 1: an epic year end. And so it's like, come on,
Speaker 1: like just be honest with your investors. I mean, I
Speaker 1: feel like that's that's what's happening here. You're sharing me
Speaker 1: see cracks in people believing what Elon has said. Kathy
Speaker 1: what is still a believer? Oh yeah? And like for
Speaker 1: long term fans, I mean they see this as like
Speaker 1: a once in a generation buying opportunity, you know. And
Speaker 1: I mean there's people on Twitter that I've talked about
Speaker 1: mortgaging their houses so that they can load up on
Speaker 1: more shares because it's never been this cheap. Um. I mean,
Speaker 1: we shall see, you know, I mean the you know,
Speaker 1: and you know, the stock could make a comeback. I
Speaker 1: mean when it drops as far as it did in two.
Speaker 1: There's you know, it's like how there's only sort of
Speaker 1: one way to go. I mean, I guess, I mean
Speaker 1: it could drop further, of course, but like you know,
Speaker 1: they could climb, it could also climb back. Um. But
Speaker 1: it's it's just it's just it's just so fascinating. I mean,
Speaker 1: if you had told me in the beginning of that
Speaker 1: Elon Musk was gone by Twitter and that the company,
Speaker 1: and that the company would lose two thirds of its value,
Speaker 1: I would have never ever forecast that. And uh so
Speaker 1: here we are at the beginning of the new year,
Speaker 1: and I'm like, what's the theme for this year? Um?
Speaker 1: But I think it's like Ellen's got to make a decision,
Speaker 1: like where is he going to focus his energy? Like
Speaker 1: being a CEO is not a part time job, and
Speaker 1: he's basically the CEO of three companies and overseeing two
Speaker 1: other startups. As I've said before, Peter Attward always reminds me,
Speaker 1: I'm always say when it comes to Ellen, where weary
Speaker 1: of him and wary of him because you just never
Speaker 1: quite know where it's going to go. Danna, I think
Speaker 1: I may have asked this type of question for you before.
Speaker 1: I've only got about thirty seconds. But if you could
Speaker 1: sit down with Ellen and ask him one one question,
Speaker 1: what would it be? When are you gonna when are
Speaker 1: you going to name a CEO at Tesla? And who isn't? Okay,
Speaker 1: we'll see what the new year brings. Um, maybe an
Speaker 1: interview with Musque, Danna, I don't think why would he
Speaker 1: so he doesn't need to interview with me. He'll just
Speaker 1: go on Twitter speed and heard it out. It's so true,
Speaker 1: right if they would need a PR department to to
Speaker 1: start with it. Well, gets a lot of attention, Danna.
Speaker 1: Thank you as always, looking forward to all your reporting
Speaker 1: in the new year. Donna Hall, she is a go
Speaker 1: to voice for us when it comes to Tesla and
Speaker 1: Elon Musk. We've said it before, because it's true. Donna's
Speaker 1: Bloomberg News Technology reporter joining us on the phone. Uh
Speaker 1: in San Francisco shares a Tesla. Right now, they are
Speaker 1: up about five percent, but as we know, way way
Speaker 1: down from their high back in one. All right, you're
Speaker 1: listening watching Bloomberg Business Week, Carol Master, Tim Steinfeck. This
Speaker 1: is Bloomberg Radio. I'm Brolo Maca turn on. Yeah, but
Speaker 1: you let me drive. No, no, no no, who's all right, please,
Speaker 1: I'll do the riding gravels. I want to drive. It's
Speaker 1: a good question. Drive this good ride to the clothes
Speaker 1: well Briar on Bloomberg Radio. All Right, folks, just got
Speaker 1: about eighteen minutes left in today's trading session. We've got
Speaker 1: stocks up and down, if you will, off our highs
Speaker 1: and loads of this session, still down on the Dow
Speaker 1: Jones Industrial average. And now i's like just going back
Speaker 1: into the red. Of course, Charlie breaking down the numbers here.
Speaker 1: We've got a great guest to talk about those fed
Speaker 1: minutes and a way forward here in very please to
Speaker 1: app back with us. Liz Young, head of investment Strategy.
Speaker 1: It's so Fi Technologies. It's the online personal finance services company.
Speaker 1: She joins us from New York this afternoon. Liz, Happy
Speaker 1: New year. How are you? Happy New Year to you?
Speaker 1: I am, well, hopefully in for a better year than
Speaker 1: That's that's the question. I think one person who's kind
Speaker 1: of in charge of that right now is true Oo
Speaker 1: and Powell at the Federal Reserve kind of you know,
Speaker 1: putting a little uh damper on the enthusiasm that we
Speaker 1: got earlier in the day when those minutes came out
Speaker 1: at two o'clock today. What was your read on the
Speaker 1: way that the FED talked about not pivoting in and
Speaker 1: not cutting rates in twenty three and how that kind
Speaker 1: of goes against what the tone of the market has been,
Speaker 1: at least in the first part of December. Well, well, look,
Speaker 1: I mean, if you look at what happened in December,
Speaker 1: it was actually not a very good month all things considered.
Speaker 1: We were down seven percent in a month that we
Speaker 1: were supposed to have seasonal tail winds, and there might
Speaker 1: have been a year end rally. None of that ever
Speaker 1: really materialized. So I think what happened so far in
Speaker 1: three is that the sentiment, that bearish sentiment, the selling sentiment,
Speaker 1: has carried over. Obviously, we've seen a couple of swings
Speaker 1: today and we're only two days in, so we can't
Speaker 1: really talk about this as a year to date situation yet.
Speaker 1: But what we heard from the Fed again is the
Speaker 1: same thing that we keep hearing. And I don't know
Speaker 1: why people are hoping that they're going to change their minds,
Speaker 1: because the data has not shown them that they should
Speaker 1: change their minds. So we are going to continue hearing
Speaker 1: from them that they intend to fight inflation, They intend
Speaker 1: to raise rates up to a point that is probably
Speaker 1: close to five percent, and that they don't intend to
Speaker 1: cut rates in Now that being said, everything that they
Speaker 1: intend to do obviously will change if there is an
Speaker 1: event that would change their minds or change the sentiment
Speaker 1: in the market. So if the consensus view is that
Speaker 1: we have a recession in three, that likely pulls the
Speaker 1: Fed's reaction function forward, and I would expect to see
Speaker 1: a little bit more of a dubbish conversation later in
Speaker 1: the year, but that's just not something that we're going
Speaker 1: to know in the first quarter of this year. So
Speaker 1: we just don't know, right So would you love to
Speaker 1: kind of fast forward list like six months from now.
Speaker 1: Do you feel like there'll be more clarity. Yes, I
Speaker 1: think there'll be more clarity at the end of the
Speaker 1: first quarter, and the way that the market is pricing
Speaker 1: it in right now, we're going to see a twenty
Speaker 1: five basis point hike in February and another one in March,
Speaker 1: and that might be it. So we may know by
Speaker 1: the end of the first quarter that they're done hiking rates,
Speaker 1: and then we'll just move to the question of Okay,
Speaker 1: how long do they keep rates this high? And that's
Speaker 1: really more along the lines of what does the economy
Speaker 1: look like in the meantime and our capital markets functioning
Speaker 1: in a healthy manner. Now, when I want to be
Speaker 1: really clear here, capital markets functioning in a healthy manner
Speaker 1: doesn't mean always going up. They can go down. We
Speaker 1: can continue to see draw downs, and we can see
Speaker 1: a drawdown beyond if we're going into a recession. The
Speaker 1: FED would not likely characterize that as an unhealthy thing.
Speaker 1: So I don't want investors to get kind of twisted
Speaker 1: with the idea that, my gosh, if the market goes
Speaker 1: down that means they'll pivot. That is not at all
Speaker 1: the case. So we do not think, Lisen, that the
Speaker 1: recession is already factored in in the markets. You don't.
Speaker 1: I do not think it's already factored and I think
Speaker 1: we've gotten close. So the biggest drawdown that we saw
Speaker 1: in from from a peak to a trough in was
Speaker 1: that's pretty mild when you look at the context of
Speaker 1: prior recessionary drawdowns. Usually a recessionary drawdown is beyond and
Speaker 1: actually on average beyond we may not get down that far,
Speaker 1: but I don't think it's all entirely priced in yet
Speaker 1: and I think there are a decent amount of investors
Speaker 1: still hoping for that soft landing. The soft landing is
Speaker 1: maybe what's priced And yet some individual names you could
Speaker 1: argue maybe could be in a recession, a pretty deep recession,
Speaker 1: right do you So are they outliers exceptional cases? How
Speaker 1: do you think about that? Uh? They're not necessarily outliers.
Speaker 1: And I can't speak to specific names, but if you
Speaker 1: just look at basically the industry groups, the sectors that
Speaker 1: have been hit hardest, that are beyond that draw down,
Speaker 1: those are the ones that were most sensitive to an
Speaker 1: environment like this, or the ones that enjoyed so much
Speaker 1: of the upside before this environment began, So there was
Speaker 1: a lot more to give back and there was a
Speaker 1: lot more to bring back in balance, Also, this has
Speaker 1: affected different parts of the economy at different speeds. So
Speaker 1: right now we're sort of sitting on this waiting game
Speaker 1: of when will it affect the consumer and when will
Speaker 1: it affect the labor market? I think actually once the
Speaker 1: labor market gets affected is when the consumer pulls back
Speaker 1: meaningfully and they're spending, and then we start to see
Speaker 1: that in the data. But because it's happened at different speeds.
Speaker 1: It's also happened at different speeds in the market, and
Speaker 1: different sectors have taken it on the chin more than others.
Speaker 1: Is there any indication to you that we're getting any
Speaker 1: closer to a time when this will affect the labor market?
Speaker 1: I mean, look at the Jolts number that we got
Speaker 1: this morning, another another strong report for employees right now,
Speaker 1: I mean people who are looking for a job there,
Speaker 1: you know what, one point seven jobs for every person
Speaker 1: looking for one. Yeah, a Jolts data certainly has not
Speaker 1: shown any meaningful weakness yet. But I would point out
Speaker 1: that that Jolts number was from November. So when we
Speaker 1: start to get the December data in labor, I think
Speaker 1: that that will be the first month where we say,
Speaker 1: you know what, things changed a little bit when we
Speaker 1: have to look back on it. Right this might be
Speaker 1: in May that we're looking back on December data and
Speaker 1: saying that that was the month that it changed. But
Speaker 1: I do think we're going to start to see weakness.
Speaker 1: And the reason I say that is because we heard
Speaker 1: about a lot of those tech layoffs, but technology really
Speaker 1: doesn't make up that big of a portion of the
Speaker 1: labor force. In December, we started to hear about layoffs
Speaker 1: and other sectors. It bled into some of the big banks,
Speaker 1: We heard about it across other sectors of the economy,
Speaker 1: and that's when it starts to hit the actual data,
Speaker 1: the monthly data that we hear from jobs and also
Speaker 1: the continuing claims information that we've gotten has shown a
Speaker 1: pretty decidedly upward move in claims. That's been consistent over
Speaker 1: the last few weeks. So continuing claims is people that
Speaker 1: have been claiming jobless for more than two weeks. So
Speaker 1: once that starts to bake into the data too, we'll
Speaker 1: see it in the monthly numbers. Interesting year. I feel
Speaker 1: like it could be another tricky year. Having said that,
Speaker 1: what do you think investors should watch more closely that's
Speaker 1: going to be more accurate and kind of of where
Speaker 1: we are and where we're going. The bond market or
Speaker 1: the equity marketing just got about thirty seconds. Well, if
Speaker 1: you read my outlook or anything that I've written in
Speaker 1: the last thirty days, I think the bond market has
Speaker 1: this right. But when I say bond market, I mean
Speaker 1: the treasury market, and the treasury market is calling for
Speaker 1: a recession. I think the credit market has yet to
Speaker 1: really get that message, so we'll probably see spread blowout
Speaker 1: a little bit more. Alright, Gonna leave it on that note, Hey, listen,
Speaker 1: Thank you so much. Liz Young, Happy New Year. She's
Speaker 1: head of investment strategy over its so Fi Technologies, the
Speaker 1: online personal financial services company, joining us as you saw
Speaker 1: via zoom For those who are watching on YouTube and
Speaker 1: Bloomberg Quicktakes, she's there in New York City. Thanks for
Speaker 1: listening to Bloomberg Business Week. Download the podcast on iTunes, SoundCloud,
Speaker 1: or Bloomberg dot com. You can also listen to our
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