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Speaker 1: Runch you by Bank of America Mary Lynch with virtual reality,

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Speaker 1: Virtually everything will change. Discover opportunities in a transforming world.

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Speaker 1: VI of a mL dot Com slash VR, Mary Lynch,

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Speaker 1: Pierced Fenner, and Smith Incorporated. Welcome to the Bloomberg Surveillance Podcast.

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Speaker 1: I'm Tom Keene with David Gura. Daily we bring you

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Speaker 1: insight from the best of economics, finance, investment, and international relations.

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Speaker 1: Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, Bloomberg dot Com,

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Speaker 1: and of course on the Bloomberg Pleasures. Always to have

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Speaker 1: Robert Gormatz with this, particularly today before the President speaks

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Speaker 1: in Warsaw, Bob formats these Vice chair, as I said,

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Speaker 1: I Kissinger Associates and former Under Secretary of State for

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Speaker 1: Economic Growth and Energy in the environment a defense of

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Speaker 1: Western civilization. What are you expecting to hear from the

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Speaker 1: President today? Tell us a bit about that. The location

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Speaker 1: in which you'll be speaking this morning, well, it's a

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Speaker 1: great place to speak because it's really the center of

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Speaker 1: action for a lot of things that have happened in

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Speaker 1: the Polish movement toward being part of h really a

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Speaker 1: part of Western Europe again or a part of the

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Speaker 1: whole Europe again, the serve resurrection of Poland. From a

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Speaker 1: political and an economic and a social point of view, UH,

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Speaker 1: it's an opportunity for him to underscore the fact that

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Speaker 1: liberal Western democracies, with values of pluralism, tolerance, openness to

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Speaker 1: the exchange of information, a free, untrammeled, unintimidated press, freedom

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Speaker 1: of speech, all these things are part of Western values

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Speaker 1: that the unite Europe and the United States and have

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Speaker 1: for centuries. The question people are gonna want to hear

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Speaker 1: answered is does the United States still support those values

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Speaker 1: and does it still support the institutions that embody those values,

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Speaker 1: NATO for common security, cooperation on trade, for more openness, UH,

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Speaker 1: cooperation in supporting the freedom of the press, cooperation in

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Speaker 1: resisting Russian interference in the politics of Western Europe and

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Speaker 1: the West in general. What the Russians clearly are trying

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Speaker 1: to undermine stability among European countries, within Europe and the

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Speaker 1: NATO alliance. Is he going to stick up for those

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Speaker 1: values and those institutions in a full throated way. That's

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Speaker 1: what people are going to want to hear. There's a

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Speaker 1: background presentation, background briefing before this reporter asked if he

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Speaker 1: was going to stand up for Article five of NATO,

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Speaker 1: and the senior administration officials said that he wasn't going

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Speaker 1: to step on the president's speech. Will listen to see

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Speaker 1: what what the president has to say about NATO in particular.

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Speaker 1: A president often sets the table before a summit like

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Speaker 1: the G twenty coming up here in Hamburg with a

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Speaker 1: speech like this. I wonder if he's going to do

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Speaker 1: that more effectively with this speech or the tweets that

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Speaker 1: we saw yesterday. Of course we'll be meeting on the

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Speaker 1: sidelines at the President of China among other world leaders.

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Speaker 1: But he's used Twitter ahead of this meeting to to

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Speaker 1: comment on trade, to comment on North Korea. How's that

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Speaker 1: going to shape what he's gonna have to say? I

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Speaker 1: would say that if he wants to appear presidential and

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Speaker 1: appear to be the leader of the United States with

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Speaker 1: a credible are about him, he ought to put his

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Speaker 1: uh cell phone away, his smartphone away, and give a

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Speaker 1: serious speech along the lines I have indicated, and that

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Speaker 1: most presidents do, like Reagan at the Berlin Wall for instance,

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Speaker 1: or Kennedy when he gave his Shpini and Berliner speech,

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Speaker 1: a speech of that quality would go a long way.

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Speaker 1: The Europeans want reassurance at the United States is still

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Speaker 1: their ally in a strong way, still supports Western values,

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Speaker 1: still supports the kind of institutions of the United States

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Speaker 1: took the lead in developing after World War Two. These

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Speaker 1: are the things they want to hear, and they want

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Speaker 1: to hear it in a comprehensive statesman like speech. They

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Speaker 1: don't want to hear it on Twitter. Let me ask

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Speaker 1: you just about the agenda of the G twenty was

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Speaker 1: supposed to center on trade, it was supposed to center

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Speaker 1: on climate. I'm sure there will be discussions of both

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Speaker 1: of those issues. But how has what happened on July

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Speaker 1: four over the Sea of Japan changed to what this

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Speaker 1: agenda is going to look like. Well, it certainly has

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Speaker 1: changed that. You're absolutely right, the Koreans did this. In fact,

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Speaker 1: focus more attention on them. So there are a number

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Speaker 1: of very important meetings. One is the one you mentioned,

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Speaker 1: President meeting with Prime Minister Abbey and President Moon, the

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Speaker 1: new president of South Korea. To demonstrate unity. What the

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Speaker 1: United States does Vias v. North Korea has to be

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Speaker 1: done hand in hand with our two major allies in

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Speaker 1: the in the region South Korea and Japan, so that

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Speaker 1: meeting will be important. There's another meeting that's not talked

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Speaker 1: about much. President Moon is going to meet with President

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Speaker 1: Shi Jinping. That will be a very interesting conversation as well,

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Speaker 1: because the South South Koreans want to work with the Chinese,

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Speaker 1: and I think the United States still does, although it

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Speaker 1: doesn't seem to be indicating that very much anymore. But

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Speaker 1: the North issue is very complicated because they do have

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Speaker 1: formidio military capability. Leaving aside their intercontinentabilistic missiles and their

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Speaker 1: nuclear capability, they have tactical capability of destroying a very

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Speaker 1: wide swath of the northern part of South Korea, and

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Speaker 1: the United States and its allies in the end would

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Speaker 1: prevail over the North, but a lot of carnage could

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Speaker 1: take place in the interim. So this has to be

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Speaker 1: worked out very carefully with the Chinese and the Russians,

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Speaker 1: but particularly with America's Japanese and South Korean allies. Rabint

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Speaker 1: hormance with this Good morning everyone, David gerin Tom Key,

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Speaker 1: Bloomberg Smillance worldwide coast to coast. Good morning to the

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Speaker 1: Polish Americans across this nation. A huge part of the

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Speaker 1: American population. The running statistic is seven percent of Chicago,

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Speaker 1: but that barely does justice to the American re of

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Speaker 1: the Polish community. We've been looking at the president in Warsaw,

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Speaker 1: at the Royal Uh, the castle rather, which was largely rebuilt.

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Speaker 1: I'm told by American donations, David coming out of World

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Speaker 1: War two, and then David will be here. Have you been, Ambassador.

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Speaker 1: Have you been to Kristynsky Square in Warsaw. This is

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Speaker 1: not no, but I want to. My wife's mother's family

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Speaker 1: is Uh Polish, and my wife Katherine and I would

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Speaker 1: love to go to Warsaw and get a feel for

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Speaker 1: the whole town. In the history here, Ambassador is so

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Speaker 1: important because, for example, it goes back hundreds of years

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Speaker 1: and there was the sixteenth century of Polish ascendency, which

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Speaker 1: many have touched on today. Ambrose Evans Pritchard mentioned that

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Speaker 1: in the Telegraph. But one of the ideas here is

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Speaker 1: still the legacies at World War two and that the

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Speaker 1: Warsaw Ghetto buttressed right up against the Kristynski Scare Square

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Speaker 1: pack now with people waiting for the President of the

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Speaker 1: United States. It has great symbolism and and part of

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Speaker 1: the solidarity movement. Demonstrated very very robustly in that square

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Speaker 1: as well, particularly when the Pope came. So this does

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Speaker 1: hold a major role in in Polish history past and

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Speaker 1: and currently. So it's as simple squares as we've seen

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Speaker 1: in Tahrere Square and many other squares around the world

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Speaker 1: do tend to be gathering places for strong social and

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Speaker 1: political movements and for big speeches. So there's I think

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Speaker 1: will be will be a very significant thing. And as

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Speaker 1: I was saying, I think the speech ought to be

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Speaker 1: a very clear ringing reinforcement of Western liberal democratic values,

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Speaker 1: the strength of the West in dealing with cantilitarianism. This

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Speaker 1: is the place to do it. Be a statesman, use

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Speaker 1: this venue to make a strong statement about American support

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Speaker 1: for Europe and why Western value to unite Europe in

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Speaker 1: the United States. And you want to think, David Girl,

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Speaker 1: that'll be different than the press conference we saw an

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Speaker 1: hour and a half ago, which was basically the Washington

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Speaker 1: media doing an East room press conference in Poland before everyone.

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Speaker 1: That was something really something to behold folks. The President

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Speaker 1: bringing up a few other media outlets, including one over

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Speaker 1: at the southwest corner of Central Park in Poland. Uh

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Speaker 1: Ambassadories let me ask you just about the issue of

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Speaker 1: Russian interfere and something, as Tom says, is the hot

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Speaker 1: issue here in the US. And I wonder if you

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Speaker 1: think it's likely that the president, the US president, is

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Speaker 1: going to bring that up with his Russian counterpart while

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Speaker 1: he's there. So far, there's very little indication that he's

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Speaker 1: going to do that. He spent a lot of time

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Speaker 1: criticizing President Obama for not taking action, and this morning

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Speaker 1: as well, there is something to that. I think President

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Speaker 1: Obama should have taken more robust action. But President Obama

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Speaker 1: is no longer president and the States President Trump is

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Speaker 1: and the question is what is he going to do

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Speaker 1: about what is he going to say to putin about it?

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Speaker 1: And it's and it's an important issue for the United

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Speaker 1: States because our democracy is precious to Americans, whether a

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Speaker 1: Republican or Democrat, and foreign interference is something the United

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Speaker 1: States has always resisted very strongly. But there's a broader message.

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Speaker 1: The Russians are also interfering in the politics of virtually

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Speaker 1: every country in Western Europe. So the United States takes

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Speaker 1: a lukewarm or position on this or doesn't say anything,

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Speaker 1: it gives the Russians a sense Gee, the Americans becare

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Speaker 1: we can do whatever we want, and they're trying to

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Speaker 1: do it in Germany. They try to do it in France,

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Speaker 1: they certainly try to do it in in Britain by

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Speaker 1: supporting UKIP. They've supported a whole range of right wing

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Speaker 1: populist parties and at some point the United States and

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Speaker 1: it's democratic allies have to get together and figure out

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Speaker 1: how to deal with this issue. It's corrosive of democracy.

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Speaker 1: It does destabilize and will continue to destabilize European governments.

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Speaker 1: It didn't work so well in France for thankfully mcrawn one.

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Speaker 1: But the Russians try to use this and putin understands

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Speaker 1: how to use it. And I think it's a threat

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Speaker 1: to the stability of Europe and our friendship with in

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Speaker 1: our alliance. If you're just joining us, folks throw to

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Speaker 1: bringing Robert Hormace this morning with the G twenty meeting

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Speaker 1: at Hamburg, Germany, UH coming up, UH, and of course

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Speaker 1: the President's day in Poland. Amid some interesting sites, I

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Speaker 1: believe I see right now a gentleman in a Union

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Speaker 1: Army Civil War hat UH, in some form of American uniform.

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Speaker 1: It seems maybe he's involved with someone, so he may

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Speaker 1: be speaking with Mr Kushner and Ivanka Trump. They're attending

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Speaker 1: as well. David helped me here with my eyes are

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Speaker 1: faded Horman vision across that We've been privileged folks the

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Speaker 1: last number of days by a team. David and I

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Speaker 1: have a team with Francie mcqua that just gets us

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Speaker 1: the best minds we can find. One of those is

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Speaker 1: Barry Iken Green at the University of California at Berkeley

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Speaker 1: are pre eminent economic historian and star student of international economics.

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Speaker 1: Professor Iken Green, good morning to you. I guess we're

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Speaker 1: globalizing Europe right now. We're told interview after interview it

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Speaker 1: is a better economy and as send an economy with

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Speaker 1: the funeral of Helmet Cole and with this important G twenty,

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Speaker 1: would you suggest that Europe has has reached escape velocity

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Speaker 1: from decades of eurosclerosis. I was in Hamburg yesterday actually

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Speaker 1: Tom and asked a very similar question. My answer was,

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Speaker 1: curb your enthusiasm. I think people were overly pessimistic about

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Speaker 1: Europe for the last three or four years, thinking the

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Speaker 1: euro in the Ropean Union were in the throes of

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Speaker 1: an existential crisis. Now they think escape velocity in all

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Speaker 1: of Europe has becoming German economically. I think they still

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Speaker 1: have banking problems, growth problems, and the challenges not entirely

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Speaker 1: behind them. I don't know if you were listening to

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Speaker 1: what the President just had to say. He didn't talk

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Speaker 1: about trade and specific but as I mentioned, I think

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Speaker 1: trade is going to be a big issue at the

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Speaker 1: G twenty. What do you what do you make of

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Speaker 1: what's been floated and reported discussions within the White House

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Speaker 1: that the President and his staff are weighing twenty or

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Speaker 1: more at terriffun goods on on medals and other goods.

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Speaker 1: What could the ramifications of that be if such a

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Speaker 1: thing were to be implemented. I think the ramifications would

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Speaker 1: be dire in fact, because no one would take it

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Speaker 1: lying down. The Europeans would retaliate in some form, the

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Speaker 1: Chinese would retaliate in some form, and that would UH

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Speaker 1: jeopardize I think not only economic cooperation, but cooperation on

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Speaker 1: North Korea, which is going to be not the the subtext,

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Speaker 1: but the text of the G twenty. This president is

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Speaker 1: frustrated on tax reform, healthcare reform, UH, infrastructure spending CREDE

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Speaker 1: policy is the one thing he can do, and there's

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Speaker 1: a real danger he will do it. In that speech

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Speaker 1: just a few minutes ago, he talked about the importance

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Speaker 1: of a community of nations. He said that we are

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Speaker 1: the fastest and the greatest community. Can you have a

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Speaker 1: community of nations that isn't tied together, at least in

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Speaker 1: part by multilateral trade agreements? Crede. I think UH is

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Speaker 1: a critical glue here, and the United States is going

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Speaker 1: to learn in the same way that the UK is

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Speaker 1: learning as a result of Brexit, how hard it is

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Speaker 1: to go it alone and UH the advantages of having

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Speaker 1: a multilateral framework, be at the EU and Europe or

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Speaker 1: the w t O in the case of the United States. Well,

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Speaker 1: I'm sure, Verry, I agree that you're a critic of

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Speaker 1: what was called Navarra Ross or Ross Navarro, which is

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Speaker 1: a more zero sum, neo mercantilistic approach of this administration.

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Speaker 1: Have you seen an amendment or change by this administration

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Speaker 1: to a more traditional, modern post World War two trade policy.

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Speaker 1: I think there has been some progress or evolution in

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Speaker 1: the rhetoric since January that we're not talking about slapping

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Speaker 1: across the board tariffs on on everyone or even across

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Speaker 1: the board tariffs on China, Mexico, whomever, but trying to

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Speaker 1: target egregious violations, specific products and so forth. But I

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Speaker 1: do not here progress, uh in the the rationale for

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Speaker 1: these tariffs, etcetera. Are you teaching at Berkeley that we

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Speaker 1: are beleaguered? Like if I look at something like steel,

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Speaker 1: is a president onto something there with Secretary of Commerce Ross.

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Speaker 1: We've got to defend our steel markets. I think we

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Speaker 1: need to defend the steel users equally in the same

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Speaker 1: way that coal is not the future of the United States.

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Speaker 1: Steel is not the future of the U. S economy either.

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Speaker 1: That's what I would tell my students. What is there? Well,

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Speaker 1: I think the future is uh, information technology. I live

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Speaker 1: on the West Coast, after all. The future is artificial intelligence.

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Speaker 1: The future is all the services that are going to

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Speaker 1: go along with that. And I think there is a

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Speaker 1: growing amount of evidence that we're going to need human

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Speaker 1: beings to educate the machines, train the machines, and and

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Speaker 1: work with machines. So the jobs are still gonna be there. Uh.

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Speaker 1: If the education and training that are the prerequisites are

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Speaker 1: put in place, and whose best equipped to provide that?

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Speaker 1: Is that something that should be done engineered at the

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Speaker 1: Fed level at the state level by companies themselves. Who's

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Speaker 1: the best trainer? The system that's worked in the in

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Speaker 1: the United States over the years that has relied very

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Speaker 1: heavily on federal state cooperation, which is not a happy

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Speaker 1: response given the difficulty the federal government and states like

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Speaker 1: Minor are currently experiencing and working together. In Europe, they

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Speaker 1: rely on companies and trade associations, employers associations and unions

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Speaker 1: because they have unions. Uh, that is much harder to

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Speaker 1: do in the United States. We lack the framework for

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Speaker 1: letting the private sector lead in terms of providing the

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Speaker 1: training workers need. Let's come back with very grain of Berkeley,

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Speaker 1: University of California, Berkeley will continue this discussion and international

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Speaker 1: economics and this is a real pleasure now folks, Thank

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Speaker 1: you Professor Iken Green for being on this today with Berkeley.

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Speaker 1: Roberto also Vedo is a Director General of the World

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Speaker 1: Trade Organization. One of the more recent director generals has

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Speaker 1: been Pascal lamy Um. Mr Oservedo is from Brazil, a

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Speaker 1: lifelong diplomat, and he joins US now on a new

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Speaker 1: and striving World Trade Organization. He's of course in Hamburg,

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Speaker 1: for the G twenty UH meetings. Director General, Good morning,

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Speaker 1: there must be a new w t O that moves

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Speaker 1: on from Doha. What will the next w t O

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Speaker 1: look like? Good morning, David and listeners. I think that

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Speaker 1: W two is is on the path to UH more delivery. UM.

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Speaker 1: I think we had pretty good ministerial conferences both in

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Speaker 1: in Bali and Airobi. A lot was achieved. We reached

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Speaker 1: the Trade Facilitation Agreement, which is the biggest deal in

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Speaker 1: the history of the W two. Eliminated exports, subsidies for

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Speaker 1: agricultural products, expanded the information technology agreements. So UH, the

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Speaker 1: new W two has to be something that builds on

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Speaker 1: top of all this and that we're working very hard

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Speaker 1: on that. What's your level of engagement, Ben, Like with

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Speaker 1: with this administration in the US, I've talked to cabinet officials,

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Speaker 1: including Secretary of Commerce Wilburt Ross, who talked about how

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Speaker 1: when it comes to trade, they want to see more enforcement.

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Speaker 1: It sounds like they want to bring more cases to

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Speaker 1: the w t O. What are your conversations Ben, like

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Speaker 1: with the Trump administration. Well, I met recently in Washington

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Speaker 1: the Seal with with Bob Leinheiser, Wilbert Ross, Steve Nushin,

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Speaker 1: and all those conversations were good. Of course, what came

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Speaker 1: out clearly to me is that they have the United

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Speaker 1: States a number of concerns about global trade and how

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Speaker 1: it's being conducted in the kind of agreements and deals

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Speaker 1: that are in place today. Um, we are in the

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Speaker 1: early stages of this conversation. I think we the first

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Speaker 1: thing to do is listen, understand what their concerns are,

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Speaker 1: and see how the system and other members together we

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Speaker 1: can agree to improve the environment for for trade and

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Speaker 1: global economic growth, because at the end of the day,

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Speaker 1: that's the main that's the main purpose. As you as

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Speaker 1: you listen, do do you worry that the foundation is shifting,

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Speaker 1: that the role of the w TL might somehow change,

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Speaker 1: if if this America First thing takes off, if if

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Speaker 1: if the direction that the Trump administration has laid out

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Speaker 1: comes to pass. I think the US administration is is

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Speaker 1: still figuring out the details of what they want to do.

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Speaker 1: I think in general, they would like to see a

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Speaker 1: reduction of the trade deficit. They would like to get

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Speaker 1: more market opening UM to the US products and UH

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Speaker 1: and UH and businesses. But I think it's the details

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Speaker 1: of that is we don't know. We don't yet. I

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Speaker 1: think we're still in the process of figuring that out. UM. Clearly, UM,

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Speaker 1: we need to talk a lot more. And I think

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Speaker 1: that's what the G twenty here in Hamburg is going

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Speaker 1: to do is give leaders UH and and US international

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Speaker 1: organizations a chance to explore some of that stuff in

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Speaker 1: face to face Environment Director General. When we look at

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Speaker 1: w t O, when we look at the history back

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Speaker 1: to the eighties and nineties, the various GAT meetings, what

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Speaker 1: was anathema was zero sum economics. Anathema was seventeenth century

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Speaker 1: mercantil is Um. Is there a risk that we go

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Speaker 1: back to that where you sit with all the meetings,

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Speaker 1: you take the delicacies of a w t O day

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Speaker 1: to day grind. Is there a risk of a neo

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Speaker 1: mercantilist world? I think that prospect is a catastrophe. Really,

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Speaker 1: that's where we're going. I think the the global economy

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Speaker 1: is changing, its changing the dramatically. I don't think there

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Speaker 1: is any room for that. UM. At this point in time.

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Speaker 1: People are still trying to come to grips with a

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Speaker 1: new reality of of of the twenty first economy. To

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Speaker 1: begin with, tensions in the in the in the labor markets. Um,

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Speaker 1: so people are losing jobs, and they're not losing jobs

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Speaker 1: frankly too. Imports are losing jobs to new technologies, to innovation,

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Speaker 1: to higher productivity. Eight out of ten jobs that are

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Speaker 1: lost in advanced economies are lost to these things, not

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Speaker 1: to trade. And of course this is a structural change,

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Speaker 1: and structural changes impose um almost by definition rethinking of

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Speaker 1: the models that we have in place. And I think

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Speaker 1: that's that's the painful process that we're experiencing right now.

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Speaker 1: Can trade move faster? Can deal speak craft in a

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Speaker 1: quicker way? We have two tracks. Actually, one is the

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Speaker 1: market access to rex so cutting tarroriffs, improving conditions of

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Speaker 1: access through quotas and things like that. And that is

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Speaker 1: more easily done by letterally or through regional agreements, rules

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Speaker 1: and harmonization of rules and disciplines. That is more productive

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Speaker 1: if it's done multilaterally with more people. You can't harmonize

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Speaker 1: between two, three and four. You have to have more

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Speaker 1: people around the table. Thank you so much. Vert As

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Speaker 1: a Veda, he's a Director General of the World Trade

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Speaker 1: Organization from Brazil. The president with the Polish fag and

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Speaker 1: the left bumper and the American flag and the right

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Speaker 1: bump bumper pulling up the Air Force one in Warsaw

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Speaker 1: to Hamburg. Stay with us worldwide. This is Bloomberg Runch

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Speaker 1: you by Bank of America Mary Lynch. With virtual reality,

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Speaker 1: virtually everything will change. Discover opportunities in a transforming world,

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Speaker 1: be of a mL dot Com, slash VR, Mary Lynch,

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Speaker 1: Pierced Fenner and Smith Incorporated. Let's get right to it.

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Speaker 1: We've been so distracted by international relations and politics that

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Speaker 1: it is wonderful to bring in Michael Faroli of JP Morgan.

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Speaker 1: It's always good to speak to Michael Faroli with this

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Speaker 1: wonderful call on a slower potential GDP and slower American

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Speaker 1: economy from a number of years ago. Michael, is all

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Speaker 1: we're doing day to day is radio people, TV people

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Speaker 1: like me and David, our audience and all of America.

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Speaker 1: Are we just still trying to get used to the

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Speaker 1: Michael Faroli g d P. Well, uh, I don't know

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Speaker 1: about that, but it does seem like we're still gradually

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Speaker 1: revising down our expectations. Now. More and more you hear

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Speaker 1: people talk about two percent growth like hey, that's a

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Speaker 1: good thing, that's okay. Whereas I think a couple of

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Speaker 1: years ago that was viewed more of a disappointment. You

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Speaker 1: you nailed the top down analysis of looking at nominal GDP,

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Speaker 1: lack of inflation, getting the real GDP, etcetera. But our

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Speaker 1: new slower growth, which part of the equation is it

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Speaker 1: out of? Is it slower consumption, is it slower to

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Speaker 1: zero investment, is it a slower government or is it

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Speaker 1: just as world trade dearth that some people talk about,

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Speaker 1: Which is so I prefer to look at it rather

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Speaker 1: from rather than aggurate demand, looking at it from the

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Speaker 1: drivers of aggurate supply, and in particular growth and labor

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Speaker 1: force and growth in labor productivity. And the trend in

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Speaker 1: labor force has obviously been down because of demographic factors,

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Speaker 1: and I think people have known that for or knew

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Speaker 1: that that was coming, you know, even ten twenty years ago.

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Speaker 1: I think it's been the decline in labor productivity growth

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Speaker 1: that has been more surprising. Uh. And I think that

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Speaker 1: has been as I said, people weren't expecting that, particularly

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Speaker 1: after the very strong productivity growth we've got in the

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Speaker 1: late nineties and early two thousands. Uh. But when we

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Speaker 1: see a little reason why that is going to suddenly

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Speaker 1: accelerate from here. In particular, as you mentioned, investment growth

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Speaker 1: has been okay, but you haven't really seen the sort

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Speaker 1: of rates of capital deepening that you did back in

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Speaker 1: the nineties, so absent that it's I think a hard

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Speaker 1: story to say why we're going to see a really

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Speaker 1: big acceleration, uh in trend growth from here. Is the

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Speaker 1: is the yawning gap between the hard data and the

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Speaker 1: soft data starting to narrow a bit? I think so? Uh.

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Speaker 1: I think first of all, for second quarter GDP, we're

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Speaker 1: tracking pretty close to three, so that's a that's a

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Speaker 1: good outcome. Uh. And then we've also seen some of

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Speaker 1: the survey measures start to come off the boil, which

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Speaker 1: really obviously popped after the election. So I do think

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Speaker 1: that now that gap doesn't look all that unusual compared

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Speaker 1: to a few months ago. We're talking with Michael McKee

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Speaker 1: just a few moments ago, our colleague about retail. How

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Speaker 1: does the retail picture look look to you? How worried

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Speaker 1: are you about what we see anecdotally here a lot

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Speaker 1: of stories closing in and around New York, and certainly

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Speaker 1: we're hearing stories of that across the country. How were

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Speaker 1: you are you about retail. Yeah, in the arrogant consumer

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Speaker 1: spending is holding up actually uh fairly well. And uh

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Speaker 1: recently and in past quarters, you have had a compositional

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Speaker 1: shift away from brick and mortar towards online. But uh,

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Speaker 1: you know that that as I said that the total

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Speaker 1: quantum of good and services being consumed um the growth

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Speaker 1: and that still looks pretty good. Now you are going

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Speaker 1: to have I think, you know, some pretty significant reallocation

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Speaker 1: effects of declining brick and mortar. We've seen that in

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Speaker 1: the jobs numbers over the past four months. Retail employment

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Speaker 1: has declined um. So but you know, not to make

430
00:26:40,880 --> 00:26:43,920
Speaker 1: light of that. The hardship of that reallocation. It's sort

431
00:26:43,920 --> 00:26:47,240
Speaker 1: of like the the the issue with the buggy whip manufacturers.

432
00:26:47,320 --> 00:26:50,120
Speaker 1: They're gonna they're they're out of business, but somehow we've

433
00:26:50,160 --> 00:26:54,240
Speaker 1: reallocated those labor resources to other, uh, to other sectors.

434
00:26:54,280 --> 00:26:56,560
Speaker 1: And I think with an economy at a four point

435
00:26:56,560 --> 00:26:59,600
Speaker 1: three percent unemployment rate, you should probably expect most of

436
00:26:59,640 --> 00:27:03,240
Speaker 1: those would be retail employees to find jobs in other

437
00:27:03,280 --> 00:27:06,040
Speaker 1: sectors of the economy. Michael Farola Day brought you by

438
00:27:06,119 --> 00:27:09,760
Speaker 1: my magnifying glass, brought you by Zeiss of Germany. David

439
00:27:09,760 --> 00:27:12,280
Speaker 1: Gurrows stay with Michael Farol here because I'm trying. I

440
00:27:12,320 --> 00:27:15,080
Speaker 1: told Jamie Diamond and Davos Michael that you need a

441
00:27:15,080 --> 00:27:18,960
Speaker 1: bigger font in your research reports. Okay, I'm gonna talk

442
00:27:19,000 --> 00:27:21,800
Speaker 1: to Mr Diamond about this. I mean, David continue, I'm

443
00:27:21,840 --> 00:27:25,160
Speaker 1: working on it, folks on core inflation. Let me let

444
00:27:25,160 --> 00:27:27,920
Speaker 1: me let let's let's talk about let's talk about transitory

445
00:27:28,000 --> 00:27:30,800
Speaker 1: nature of of the inflationary headwinds we're saying. We've heard,

446
00:27:31,000 --> 00:27:33,520
Speaker 1: uh Fed Cherrill make the case for these these headwinds

447
00:27:33,600 --> 00:27:36,280
Speaker 1: being transitory. Is she puts it? How hard is it

448
00:27:36,320 --> 00:27:38,600
Speaker 1: for to make that that case? Are you? Are you

449
00:27:38,800 --> 00:27:42,680
Speaker 1: sympathetic to the argument she's made. I'm mostly sympathetic because

450
00:27:42,760 --> 00:27:44,639
Speaker 1: I think most people, most of your listeners probably know

451
00:27:45,600 --> 00:27:49,080
Speaker 1: the one obvious area where you see the transitory influences

452
00:27:49,119 --> 00:27:52,240
Speaker 1: on cell phone and self service prices, which took a

453
00:27:52,240 --> 00:27:54,800
Speaker 1: big level step down a few months ago, and that

454
00:27:54,880 --> 00:27:56,800
Speaker 1: has been affecting and we'll continue effect at least a

455
00:27:56,880 --> 00:28:00,479
Speaker 1: year ago numbers through next spring. And that looks like

456
00:28:00,480 --> 00:28:03,440
Speaker 1: it's a one off. Mostly, Uh. There are some other

457
00:28:03,520 --> 00:28:06,439
Speaker 1: things in the inflation data which looked like they may

458
00:28:06,480 --> 00:28:09,440
Speaker 1: be a little more persistent. In particular some of these

459
00:28:09,640 --> 00:28:13,840
Speaker 1: measures of rental inflation and homeowners rent. Uh, those things

460
00:28:13,880 --> 00:28:16,000
Speaker 1: have been looking at touch softer, and there are some

461
00:28:16,040 --> 00:28:18,600
Speaker 1: reasons to think that the acceleration in rents we've seen

462
00:28:19,560 --> 00:28:24,639
Speaker 1: probably slowing. So uh. I mostly agree with Care. I

463
00:28:24,680 --> 00:28:26,720
Speaker 1: do think there are some areas that they're you know,

464
00:28:26,800 --> 00:28:29,440
Speaker 1: closest scrutiny. Though I've given up on the research report.

465
00:28:29,480 --> 00:28:32,080
Speaker 1: I got a selfie stick here with the report on

466
00:28:32,119 --> 00:28:33,920
Speaker 1: the end of it. I'm holding that puppy like three

467
00:28:33,920 --> 00:28:36,879
Speaker 1: ft away from me trying to read it. Michael Firley,

468
00:28:36,960 --> 00:28:40,200
Speaker 1: we were privileged yesterday to have a wonderful and collegial

469
00:28:40,280 --> 00:28:44,000
Speaker 1: debate with the great Adam Posing of the Peterson Institute

470
00:28:44,080 --> 00:28:48,040
Speaker 1: and John writing for years at bear Stearn's Economics in

471
00:28:48,080 --> 00:28:51,800
Speaker 1: his own shop r d Q, and abasionly devolved down

472
00:28:51,840 --> 00:28:57,920
Speaker 1: to the orthodoxy of Philip's curve traditional economics versus a

473
00:28:58,040 --> 00:29:01,200
Speaker 1: neo vix Scelian market center. Rick, we've got to change

474
00:29:01,840 --> 00:29:04,920
Speaker 1: um corporate texts, his view of Johnett writing a much

475
00:29:04,920 --> 00:29:09,320
Speaker 1: more market based solution to our economics. Where's the FED

476
00:29:09,360 --> 00:29:12,520
Speaker 1: in this debate? Day after day? Are they wedded to

477
00:29:12,600 --> 00:29:16,000
Speaker 1: traditional economics? Are they in a middle ground. Are they

478
00:29:16,040 --> 00:29:20,240
Speaker 1: just making it up as they go? I think the

479
00:29:20,320 --> 00:29:23,840
Speaker 1: FED UH in particular, the staff and the leadership are

480
00:29:24,760 --> 00:29:28,000
Speaker 1: uh quite firmly in the Phillips curve tradition of viewing

481
00:29:28,440 --> 00:29:31,560
Speaker 1: inflation as being driven by slack. That said, I don't

482
00:29:31,600 --> 00:29:35,760
Speaker 1: think they view it as a relation that has engineering

483
00:29:35,800 --> 00:29:39,360
Speaker 1: like precision. So you are going to have flags, you

484
00:29:39,400 --> 00:29:41,560
Speaker 1: are going to have uncertainty as to where narrow is,

485
00:29:41,600 --> 00:29:45,120
Speaker 1: You're going to have transitory outside influences like import and

486
00:29:45,240 --> 00:29:48,440
Speaker 1: energy prices. But if you look at the research coming

487
00:29:48,440 --> 00:29:51,440
Speaker 1: out of the FED, it's still is firmly in the

488
00:29:51,440 --> 00:29:54,480
Speaker 1: Philips curve tradition. And as you may know, Yelling kind

489
00:29:54,480 --> 00:29:59,160
Speaker 1: of earned her academic jops by h working on issues

490
00:29:59,200 --> 00:30:01,320
Speaker 1: related to the Philip To cur event into labor market

491
00:30:01,360 --> 00:30:06,840
Speaker 1: and wage inflation. So I think they that As I said,

492
00:30:06,840 --> 00:30:09,000
Speaker 1: they're in that tradition, and also they're looking at these

493
00:30:09,040 --> 00:30:12,239
Speaker 1: things at a quarterly and annual frequency, whereas you know,

494
00:30:12,600 --> 00:30:15,600
Speaker 1: we in the market sometimes get so hyper focused on

495
00:30:15,640 --> 00:30:18,600
Speaker 1: the latest that kind of lose the big picture. Chasman

496
00:30:18,680 --> 00:30:21,200
Speaker 1: is guilty of that. David Gerrol what Michael Faroli was

497
00:30:21,240 --> 00:30:24,000
Speaker 1: talking about there, But Michael Faroli is talking about to

498
00:30:24,000 --> 00:30:26,160
Speaker 1: cut to the chase because he's two nice. A guy

499
00:30:26,400 --> 00:30:30,800
Speaker 1: is cherry yelling agrees with Adam Posen. Cherry yelling agrees

500
00:30:31,040 --> 00:30:34,080
Speaker 1: less so with John riding. That's how you translate. That's

501
00:30:34,080 --> 00:30:35,800
Speaker 1: the the utility of the way that we view the

502
00:30:35,800 --> 00:30:37,800
Speaker 1: Phillips curve changed. How do you how do you see

503
00:30:37,800 --> 00:30:45,160
Speaker 1: it today? Um? There is uh. I think certainly since

504
00:30:45,240 --> 00:30:49,240
Speaker 1: the mid eighties you have decreased statistical power of the

505
00:30:49,280 --> 00:30:52,400
Speaker 1: unemployment rate in terms of forecasting inflation. Part of that

506
00:30:52,520 --> 00:30:56,640
Speaker 1: is simply since the mid eighties, inflation is then so

507
00:30:57,440 --> 00:30:59,840
Speaker 1: relatively steady, right, So when you don't have a lot

508
00:30:59,840 --> 00:31:03,480
Speaker 1: of variability on the left hand side variable, it makes

509
00:31:03,480 --> 00:31:06,640
Speaker 1: it harder to identify what's driving the changes there. So

510
00:31:06,760 --> 00:31:09,080
Speaker 1: you get a lot more noise and fewer big ups

511
00:31:09,080 --> 00:31:10,800
Speaker 1: and down trends like you did in the sixth seas

512
00:31:10,800 --> 00:31:15,760
Speaker 1: and seventies. So it has become uh less useful. But

513
00:31:15,800 --> 00:31:17,719
Speaker 1: at the end of the day, you know, as they

514
00:31:17,760 --> 00:31:19,640
Speaker 1: often say, you need a model to beat a model,

515
00:31:19,680 --> 00:31:23,960
Speaker 1: and so far we haven't found another model that, at

516
00:31:24,000 --> 00:31:27,440
Speaker 1: least on a quarterly and annual frequency outperforms the Philip's curve.

517
00:31:28,080 --> 00:31:29,760
Speaker 1: I've got my glasses on, I can see that. You know,

518
00:31:29,840 --> 00:31:31,960
Speaker 1: we've got a three more CPI reports to come before

519
00:31:31,960 --> 00:31:34,000
Speaker 1: the September meeting. What are you gonna be looking for

520
00:31:34,080 --> 00:31:36,400
Speaker 1: in those reports? How? How? What measure do they have

521
00:31:36,440 --> 00:31:37,800
Speaker 1: to be? Do you think for for the Fed to

522
00:31:38,120 --> 00:31:41,600
Speaker 1: judge that what they've done is accurators is correct? Yeah?

523
00:31:41,680 --> 00:31:44,760
Speaker 1: So second quarter, of course CPI ran out of zero

524
00:31:44,800 --> 00:31:47,680
Speaker 1: point six percent annualized rate. I think we need to

525
00:31:47,720 --> 00:31:50,360
Speaker 1: see that back up above at least above one and

526
00:31:50,400 --> 00:31:53,479
Speaker 1: a half percent, closer to on the core CPI measure.

527
00:31:54,440 --> 00:31:57,080
Speaker 1: I think if you don't see that, some of those

528
00:31:57,160 --> 00:32:02,600
Speaker 1: voices of concern probably start to UH to elevate. But again, yeah,

529
00:32:03,560 --> 00:32:07,800
Speaker 1: you've seen, even with these disappointments um on on the

530
00:32:07,800 --> 00:32:11,760
Speaker 1: CPI UH and the pc pretty steady set. And I

531
00:32:11,760 --> 00:32:13,360
Speaker 1: think part of that reflects the fact that we've been

532
00:32:13,400 --> 00:32:18,280
Speaker 1: equally surprised by how far the unemployment rate has shot expectations.

533
00:32:18,320 --> 00:32:21,720
Speaker 1: So you've got these conflicting issues which make it make

534
00:32:21,760 --> 00:32:23,640
Speaker 1: it difficult. Well, so this let's come back with Michael

535
00:32:23,640 --> 00:32:26,440
Speaker 1: Faroli and talk about the shack and OUV you've heard

536
00:32:26,480 --> 00:32:30,880
Speaker 1: in surveillance, which is an unemployment rate that can drive lower. Uh,

537
00:32:30,920 --> 00:32:34,840
Speaker 1: and and there'll there'll be no quizzes. Measuring labor force

538
00:32:35,040 --> 00:32:39,600
Speaker 1: and unemployment is a squishy business. Michael Feroli with us,

539
00:32:39,640 --> 00:32:42,320
Speaker 1: and I really want to dive now, folks into the

540
00:32:42,360 --> 00:32:44,200
Speaker 1: great mry. I get a lot of mail on this,

541
00:32:44,960 --> 00:32:49,800
Speaker 1: Michael Feroli. Ten unemployment, we migrate down, we get to

542
00:32:49,880 --> 00:32:53,880
Speaker 1: four and a half percent, and we drive ever ever lower.

543
00:32:53,960 --> 00:32:56,480
Speaker 1: Let's begin with just a simple idea of the numerator

544
00:32:56,600 --> 00:33:01,040
Speaker 1: in the denominator, the unemployment rate. Who's the horse, who's

545
00:33:01,040 --> 00:33:04,400
Speaker 1: the car? Which which one matters more? A numerator of

546
00:33:04,440 --> 00:33:08,000
Speaker 1: the unemployed or the denominator which is the vast force

547
00:33:08,040 --> 00:33:11,959
Speaker 1: of America. I think it's still the numerator, and that

548
00:33:12,000 --> 00:33:15,880
Speaker 1: has been I think in present terms, certainly changing a

549
00:33:15,960 --> 00:33:22,200
Speaker 1: lot more in recent years and explains why we've, uh,

550
00:33:22,360 --> 00:33:25,560
Speaker 1: why the umployment rate has come down. That said, the

551
00:33:25,600 --> 00:33:28,320
Speaker 1: denominator of the labor force has been a little more

552
00:33:28,480 --> 00:33:32,640
Speaker 1: variable than historically it has been. And we've seen, uh,

553
00:33:32,680 --> 00:33:36,320
Speaker 1: you know, some declines in labor force participation, but we

554
00:33:36,320 --> 00:33:38,640
Speaker 1: think those are mostly driven by demographic trends. But I

555
00:33:38,680 --> 00:33:40,360
Speaker 1: think in terms of that move from ten to four

556
00:33:40,400 --> 00:33:43,160
Speaker 1: point three, it's really been the numerator right when I

557
00:33:43,200 --> 00:33:45,240
Speaker 1: when I read those minutes yesterday, it seems like the

558
00:33:45,560 --> 00:33:47,480
Speaker 1: members of the f wemacy you're still convinced that the

559
00:33:47,560 --> 00:33:50,880
Speaker 1: unemployment rate could go lower. Uh, they are not convinced.

560
00:33:50,880 --> 00:33:54,240
Speaker 1: It seems to me that we're at full employment. Uh, well,

561
00:33:54,240 --> 00:33:57,320
Speaker 1: it could go lower. But so I mean, if it

562
00:33:57,360 --> 00:34:00,160
Speaker 1: goes lower and inflation starts to pick up, then are

563
00:34:00,200 --> 00:34:02,480
Speaker 1: at full employment, right, so that you can go lower

564
00:34:02,520 --> 00:34:06,400
Speaker 1: in a sustainable way or in an inflationary way. But look,

565
00:34:06,440 --> 00:34:09,400
Speaker 1: the pattern has certainly been that the f onm C

566
00:34:09,600 --> 00:34:14,200
Speaker 1: as well as private forecasters have consistently overestimated in this

567
00:34:14,239 --> 00:34:19,000
Speaker 1: business cycle, um, the unemployment rate. So stands to reason

568
00:34:19,040 --> 00:34:22,640
Speaker 1: that after a certain time, he might of making errors

569
00:34:22,640 --> 00:34:24,680
Speaker 1: in the same direction, he might worry about making a

570
00:34:24,719 --> 00:34:27,240
Speaker 1: similar error again. So I think it's it's only reasonable

571
00:34:27,280 --> 00:34:31,919
Speaker 1: to think that we could undershoot expectations on the unemployment rate. Uh,

572
00:34:31,960 --> 00:34:35,680
Speaker 1: and months ahead, get your perspective on the housing sector

573
00:34:35,719 --> 00:34:37,919
Speaker 1: if I could. We had a couple of conversations about

574
00:34:37,920 --> 00:34:40,319
Speaker 1: that little earlier in the week. Have the data ban

575
00:34:40,440 --> 00:34:42,640
Speaker 1: and and what's your sense of the degree to which

576
00:34:42,640 --> 00:34:46,560
Speaker 1: that's dragging down growth here in the US. I'm sorry,

577
00:34:46,560 --> 00:34:49,960
Speaker 1: I wish just just the housing, the housing market right now,

578
00:34:49,960 --> 00:34:52,680
Speaker 1: and that the effect it's having on the economy overall. Yeah, Yes,

579
00:34:52,760 --> 00:34:56,000
Speaker 1: the housing has been relatively surprisingly steady. Actually in terms

580
00:34:56,000 --> 00:34:57,759
Speaker 1: of housing demand. We have seen a little bit of

581
00:34:57,760 --> 00:35:02,360
Speaker 1: disappointment lately and how in construction, but overall, uh, it

582
00:35:02,440 --> 00:35:04,720
Speaker 1: looks to us like you're going to have modest growth

583
00:35:04,760 --> 00:35:07,680
Speaker 1: and residential investment in the second quarter after a pretty

584
00:35:07,680 --> 00:35:10,279
Speaker 1: strong first quarter. And I said, as I said at

585
00:35:10,280 --> 00:35:13,520
Speaker 1: the outset, that's been a little bit surprising because weight

586
00:35:13,640 --> 00:35:15,600
Speaker 1: last year we had a seventy five days is point

587
00:35:15,600 --> 00:35:18,400
Speaker 1: back up in mortgage rates. Uh, Normally we would have

588
00:35:18,440 --> 00:35:21,360
Speaker 1: expected within six months, three to six months, that that

589
00:35:21,400 --> 00:35:24,839
Speaker 1: would start to restrain housing demand. And instead what you've

590
00:35:24,840 --> 00:35:26,960
Speaker 1: seen as existing home sales and new home sales have

591
00:35:27,040 --> 00:35:31,680
Speaker 1: been relatively steady. So we're actually, um pretty pleased, is

592
00:35:31,719 --> 00:35:34,359
Speaker 1: what we've seen overall from the housing sector. Are we

593
00:35:34,440 --> 00:35:39,600
Speaker 1: seeing two American economies and are we getting ever more

594
00:35:39,640 --> 00:35:43,880
Speaker 1: to American economies or were the Feroly prosperity Are we

595
00:35:43,920 --> 00:35:48,359
Speaker 1: actually getting back to one economy? Well, when you say

596
00:35:48,480 --> 00:35:51,760
Speaker 1: to that phrase has been used in many different ways.

597
00:35:51,800 --> 00:35:56,279
Speaker 1: So do you mean origin up poor economy. No, I

598
00:35:56,360 --> 00:36:01,760
Speaker 1: mean the animal spirit of one econ me having buoyant

599
00:36:01,880 --> 00:36:06,880
Speaker 1: nominal g d P, good real GDP, better productivity, better

600
00:36:06,920 --> 00:36:10,680
Speaker 1: wage growth. They go home at night with prospects forward.

601
00:36:11,160 --> 00:36:13,680
Speaker 1: And another part of America that just doesn't feel like

602
00:36:13,719 --> 00:36:16,680
Speaker 1: they're part of it. It's always been there, but people

603
00:36:16,719 --> 00:36:20,880
Speaker 1: would suggest in the last ten years it's worse. Yeah. Well,

604
00:36:20,920 --> 00:36:25,560
Speaker 1: I think most measures of incommend equality really started deteriorating

605
00:36:25,680 --> 00:36:31,000
Speaker 1: in the nineteen seventies and have continued in the decades since.

606
00:36:31,800 --> 00:36:36,080
Speaker 1: I haven't seen evidence that's accelerated necessarily over the last

607
00:36:36,120 --> 00:36:39,279
Speaker 1: ten years, but certainly the mood seems to be UM

608
00:36:39,320 --> 00:36:43,160
Speaker 1: consistent with that. Uh, And sometimes the mood is more

609
00:36:43,200 --> 00:36:47,000
Speaker 1: important than the published at US. So UH. Certainly some

610
00:36:47,080 --> 00:36:52,800
Speaker 1: of the trends we've seen and inequality have deteriorated. Um. Arguably,

611
00:36:52,840 --> 00:36:54,719
Speaker 1: if we start to see some of the benefits of

612
00:36:54,840 --> 00:36:57,680
Speaker 1: labor market tightening in the form of wage growth, that

613
00:36:57,760 --> 00:37:01,120
Speaker 1: does tend to usually prop up wages at the bottom

614
00:37:01,200 --> 00:37:03,040
Speaker 1: end of the distribution a little a little more than

615
00:37:03,120 --> 00:37:06,840
Speaker 1: at the top end. So UH, perhaps in the quarters

616
00:37:06,880 --> 00:37:10,480
Speaker 1: to come to the lay market tightening can help to

617
00:37:10,640 --> 00:37:13,759
Speaker 1: UH soften some of the disparities we're seeing, but uh,

618
00:37:14,640 --> 00:37:18,279
Speaker 1: I think most of it has been a transitioning rather

619
00:37:18,320 --> 00:37:21,359
Speaker 1: than a business cycle issue. Micael Froli, thank you so much,

620
00:37:21,440 --> 00:37:24,759
Speaker 1: greatly appreciated. He's with JP Morgan again. We protect the

621
00:37:24,800 --> 00:37:27,880
Speaker 1: copyright of our guests. You can get even when the

622
00:37:28,320 --> 00:37:30,400
Speaker 1: small Yeah, even when the fun is small. Let you

623
00:37:30,440 --> 00:37:32,919
Speaker 1: give the Kasmin for really, you know it really must

624
00:37:32,920 --> 00:37:36,440
Speaker 1: read Friday afternoons and early into Friday. Even you can

625
00:37:36,520 --> 00:37:52,759
Speaker 1: get that from J. P. Morgan. We're gonna go to

626
00:37:52,840 --> 00:37:56,880
Speaker 1: Gean Munster now with Loop Ventures formerly with Piper Jeffrey

627
00:37:56,920 --> 00:37:58,640
Speaker 1: and Tesla, and of course we've got to ask about

628
00:37:58,640 --> 00:38:01,360
Speaker 1: Apple as well, gene I, Tesla, When do they go

629
00:38:01,480 --> 00:38:04,960
Speaker 1: cash positive? When do they develop free cash flow? When

630
00:38:04,960 --> 00:38:09,000
Speaker 1: do they develop some iba I can believe in that

631
00:38:09,080 --> 00:38:11,440
Speaker 1: you can believe in. It's probably five years that you

632
00:38:11,440 --> 00:38:14,799
Speaker 1: can actually measure it's probably two years. We're to go

633
00:38:14,840 --> 00:38:17,799
Speaker 1: from a negative four percent operating margin this year to

634
00:38:18,239 --> 00:38:21,600
Speaker 1: minus one next year to nineteen plus one. So it's

635
00:38:21,600 --> 00:38:24,640
Speaker 1: going to be fractional, but that should nicely ramp nicely

636
00:38:24,800 --> 00:38:28,440
Speaker 1: as the Model three ramps. Okay, brilliantly said, can I

637
00:38:28,480 --> 00:38:31,759
Speaker 1: own the stock at three eighteen per share based on

638
00:38:31,840 --> 00:38:36,800
Speaker 1: a two year, five year Gene Monster open prayer. Absolutely,

639
00:38:36,960 --> 00:38:38,480
Speaker 1: I think that this company is going to be a

640
00:38:38,520 --> 00:38:42,040
Speaker 1: pioneer in a paradigm shift not only two electric vehicles,

641
00:38:42,080 --> 00:38:44,960
Speaker 1: but also to autonomy our work. Today it looks at

642
00:38:45,000 --> 00:38:47,400
Speaker 1: the cost of ownership, this one is a surprised. This

643
00:38:47,440 --> 00:38:50,279
Speaker 1: is your your your data point of the day over

644
00:38:50,320 --> 00:38:53,799
Speaker 1: a five year period, excluding any tax benefits that are

645
00:38:53,800 --> 00:38:56,040
Speaker 1: going to go away in so let's just wipe those

646
00:38:56,080 --> 00:38:59,080
Speaker 1: off the table. Owning a Tesla Model three, which will

647
00:38:59,120 --> 00:39:02,239
Speaker 1: be fully autonomous sin two to three years, will be

648
00:39:03,239 --> 00:39:06,200
Speaker 1: more expensive than owning your everyday Toyota camera. And I

649
00:39:06,239 --> 00:39:08,960
Speaker 1: think that once that sinks in with people, that this

650
00:39:09,000 --> 00:39:11,279
Speaker 1: stock is going to start to move higher. And there

651
00:39:11,280 --> 00:39:13,480
Speaker 1: first one now on the ground in Hamburg. We're talking

652
00:39:13,520 --> 00:39:15,719
Speaker 1: with that Gene Muster of Loop Ventures. Tell me about

653
00:39:15,719 --> 00:39:18,239
Speaker 1: the hundred kilowatt hour batteries that Tesla has been trying

654
00:39:18,280 --> 00:39:20,120
Speaker 1: to make. You you look at the delays the Tesla

655
00:39:20,200 --> 00:39:23,560
Speaker 1: again flagged here. What's the what's the production issue been here?

656
00:39:23,600 --> 00:39:28,120
Speaker 1: And how surmountable is it. It's a major issue, just

657
00:39:28,200 --> 00:39:30,760
Speaker 1: given that this is a hard thing to do building

658
00:39:30,800 --> 00:39:32,880
Speaker 1: these batteries. So they have a giga factory. They're the

659
00:39:32,920 --> 00:39:35,160
Speaker 1: only one in the world that can do this, and

660
00:39:35,320 --> 00:39:38,000
Speaker 1: they came in at the low end of their expectations

661
00:39:38,160 --> 00:39:43,520
Speaker 1: for the June quarter. I think that investors are overreacting

662
00:39:43,600 --> 00:39:46,319
Speaker 1: in terms of this problem. Ultimately, they're going to fix it.

663
00:39:46,320 --> 00:39:48,359
Speaker 1: It might take three months, it might take a year.

664
00:39:48,719 --> 00:39:51,600
Speaker 1: But if you think about electric vehicles are our mode

665
00:39:51,640 --> 00:39:54,520
Speaker 1: of transportation for the next hundred years. Uh, this near

666
00:39:54,640 --> 00:39:57,160
Speaker 1: term hiccup is something that you shouldn't be concerned about.

667
00:39:59,800 --> 00:40:02,239
Speaker 1: You look at the demand for this model three. What

668
00:40:02,400 --> 00:40:04,840
Speaker 1: what excites you the most about that that field? What

669
00:40:04,840 --> 00:40:07,000
Speaker 1: excites you in so many other tens of thousands of

670
00:40:07,000 --> 00:40:09,000
Speaker 1: people about Why does it have the potential to be

671
00:40:09,080 --> 00:40:14,480
Speaker 1: so revolutionary? Two reasons. First of the cost is mainstream,

672
00:40:14,520 --> 00:40:17,080
Speaker 1: like we just talked about, more than a camera. And

673
00:40:17,200 --> 00:40:20,680
Speaker 1: second is being fully autonomous in two to three years

674
00:40:20,880 --> 00:40:23,719
Speaker 1: is going to change the paradigm. When you go and

675
00:40:23,800 --> 00:40:26,520
Speaker 1: test drive cars today, they're all kind of the same,

676
00:40:26,600 --> 00:40:29,520
Speaker 1: slightly different style, funally different entertainment systems. When we talk

677
00:40:29,560 --> 00:40:32,760
Speaker 1: about a fully autonomous car, this is a paradigm shift,

678
00:40:32,800 --> 00:40:35,200
Speaker 1: and that's what gets us excited about this company and

679
00:40:35,239 --> 00:40:37,840
Speaker 1: their ability to be first to market with an affordable

680
00:40:37,840 --> 00:40:41,320
Speaker 1: autonomous car. Give us a quick update. You're on Apple

681
00:40:41,400 --> 00:40:43,719
Speaker 1: by hold cell gene Monster on Apple, which is it?

682
00:40:44,520 --> 00:40:46,680
Speaker 1: I think the next two months it's more of a

683
00:40:46,800 --> 00:40:49,160
Speaker 1: hole that you could see the stock under pressure as

684
00:40:49,200 --> 00:40:52,879
Speaker 1: investors unwind going into the next iPhone release. I think

685
00:40:52,880 --> 00:40:56,080
Speaker 1: it's too fast forward, uh into the later this year

686
00:40:56,239 --> 00:40:58,640
Speaker 1: for a year two years out. The growth and services,

687
00:40:58,960 --> 00:41:01,040
Speaker 1: I think is a reason. That's right where I wanted

688
00:41:01,040 --> 00:41:03,400
Speaker 1: to go. Growth in services is it like a sustained

689
00:41:03,400 --> 00:41:10,560
Speaker 1: double digit forever? It is probably high percent of the

690
00:41:10,640 --> 00:41:13,520
Speaker 1: next five years. Extra gene Monster, thank you so much.

691
00:41:13,520 --> 00:41:16,399
Speaker 1: With Luke Ventre's I just love Heaven. We'll get him

692
00:41:16,400 --> 00:41:18,799
Speaker 1: on here, folks as we get out new you know

693
00:41:18,920 --> 00:41:21,960
Speaker 1: Apple products in that if you I've never driven a Tesla,

694
00:41:22,080 --> 00:41:25,840
Speaker 1: I have not either. No um, but I drove into

695
00:41:25,880 --> 00:41:30,719
Speaker 1: the place at New Jersey that had my Nash conveniently

696
00:41:30,719 --> 00:41:34,520
Speaker 1: one right by the the DC Bureau. There's a Tesla store.

697
00:41:34,560 --> 00:41:36,400
Speaker 1: I guess they're calling right around the corner. They wouldn't

698
00:41:36,440 --> 00:41:41,560
Speaker 1: let me get out of the NASH with the Tesla.

699
00:41:41,680 --> 00:41:43,800
Speaker 1: We're not where we can't take the Nash as a

700
00:41:43,840 --> 00:41:49,000
Speaker 1: trade in. Somebody sent me a photo of a nash

701
00:41:49,080 --> 00:41:51,759
Speaker 1: the other day. My nash is not as fancy as

702
00:41:51,800 --> 00:41:55,600
Speaker 1: the photo. The photo the thing must have cost two dollars. Wow,

703
00:41:55,760 --> 00:41:59,120
Speaker 1: it was gorgeous. It looked like something you know. Ike

704
00:41:59,280 --> 00:42:03,200
Speaker 1: was in the president taxi. There he is, there's the plane.

705
00:42:03,239 --> 00:42:06,080
Speaker 1: Could you just see our our our impatient president. He's

706
00:42:06,120 --> 00:42:09,600
Speaker 1: probably by the door ready to let's go priority to

707
00:42:09,640 --> 00:42:11,160
Speaker 1: the gate. There won't be a gate. They'll we allow

708
00:42:11,239 --> 00:42:13,720
Speaker 1: the staircases they did in in Warsaw. But the President

709
00:42:13,760 --> 00:42:15,719
Speaker 1: moving quickly here from the airport in Hamburg to a

710
00:42:15,760 --> 00:42:19,920
Speaker 1: meeting Instruman Chancellor that'll be tomorrow on the sidelines of

711
00:42:19,920 --> 00:42:22,080
Speaker 1: the g twenty, but a meeting one on one I believe,

712
00:42:22,120 --> 00:42:24,239
Speaker 1: with the German Chancellor tonight she of course the host

713
00:42:24,280 --> 00:42:26,480
Speaker 1: of this GEK twenty summit in Hamburg. And then he's

714
00:42:26,520 --> 00:42:28,560
Speaker 1: also going to have a dinner with the Prime Minister

715
00:42:28,560 --> 00:42:30,600
Speaker 1: of Japan and the President of South Korea. Obviously, the

716
00:42:31,040 --> 00:42:33,719
Speaker 1: UH the incident over the Sea of Japan over the

717
00:42:33,719 --> 00:42:44,920
Speaker 1: weekend going to be central to that tonight. Thanks for

718
00:42:45,000 --> 00:42:49,080
Speaker 1: listening to the Bloomberg Surveillance podcast. Subscribe and listen to

719
00:42:49,200 --> 00:42:55,240
Speaker 1: interviews on Apple Podcasts, SoundCloud, or whichever podcast platform you prefer.

720
00:42:55,800 --> 00:42:58,759
Speaker 1: I'm on Twitter at Tom Keene David Gura. Is that

721
00:42:59,000 --> 00:43:02,839
Speaker 1: David Gura? Before the podcast? You could always catch us

722
00:43:03,160 --> 00:43:17,719
Speaker 1: worldwide on Bloomberg Radio. Runt You by Bank of America

723
00:43:17,800 --> 00:43:22,720
Speaker 1: Mary Lynch. With virtual reality, virtually everything will change. Discover

724
00:43:22,840 --> 00:43:27,640
Speaker 1: opportunities in a transforming world. Be of a mL dot com,

725
00:43:27,719 --> 00:43:32,600
Speaker 1: slash VR, Mary Lynch, Pierced Fenner and Smith Incorporated