1 00:00:05,800 --> 00:00:08,720 Speaker 1: Welcome to the Bloomberg p m L Podcast. I'm Pim Fox. 2 00:00:08,760 --> 00:00:11,520 Speaker 1: Along with my co host Lisa Bramowitz. Each day we 3 00:00:11,640 --> 00:00:15,120 Speaker 1: bring you the most important, noteworthy, and useful interviews for 4 00:00:15,200 --> 00:00:17,840 Speaker 1: you and your money, whether you're at the grocery store 5 00:00:17,960 --> 00:00:20,720 Speaker 1: or the trading floor. Find the Bloomberg p m L 6 00:00:20,840 --> 00:00:33,599 Speaker 1: Podcast on Apple Podcasts, SoundCloud, and Bloomberg dot com. There 7 00:00:33,640 --> 00:00:36,680 Speaker 1: has been a lot of discussion that has led up 8 00:00:36,760 --> 00:00:39,760 Speaker 1: to a story yesterday that was published by the New 9 00:00:39,800 --> 00:00:42,200 Speaker 1: York Times magazine that has garnered a lot of attention 10 00:00:42,680 --> 00:00:47,360 Speaker 1: about the disrepair of the New York City subway system 11 00:00:47,440 --> 00:00:52,239 Speaker 1: and potential catastrophe that could ensue if these problems are 12 00:00:52,280 --> 00:00:55,280 Speaker 1: not fixed. Here to speak with us about that is 13 00:00:55,280 --> 00:00:58,200 Speaker 1: somebody who has intimate knowledge with the m t A 14 00:00:58,400 --> 00:01:01,560 Speaker 1: and the New York City subway system, Richard Ravitch, who 15 00:01:01,640 --> 00:01:04,360 Speaker 1: is the chairman and partner of Ravage, Rice and Co. 16 00:01:04,600 --> 00:01:08,360 Speaker 1: Also though former Lieutenant Governor of New York State and 17 00:01:08,520 --> 00:01:12,959 Speaker 1: head of the Metropolitan Transportation Authority. Thank you so much 18 00:01:13,120 --> 00:01:16,600 Speaker 1: for coming in on this incredibly snowy day. I want 19 00:01:16,600 --> 00:01:19,680 Speaker 1: to start with this story in the New York Times 20 00:01:19,720 --> 00:01:22,760 Speaker 1: magazine that put the bill at a hundred and eleven 21 00:01:22,800 --> 00:01:25,880 Speaker 1: billion dollars conservatively that would be needed to fix the 22 00:01:25,920 --> 00:01:28,920 Speaker 1: New York City subway system. Did you think that the 23 00:01:28,920 --> 00:01:31,480 Speaker 1: tone of it was accurate, that we're kind of at 24 00:01:31,480 --> 00:01:35,640 Speaker 1: a do or die point for the entire subway system. Well, 25 00:01:35,880 --> 00:01:41,679 Speaker 1: there is no instant solution. What has been lacking because 26 00:01:41,840 --> 00:01:49,600 Speaker 1: of the board's failure to fulfill their responsibilities properly, Uh, 27 00:01:50,360 --> 00:01:53,560 Speaker 1: has been There is no analysis of what it would 28 00:01:53,560 --> 00:01:56,560 Speaker 1: take to restore the system. It was stating good repair. 29 00:01:56,880 --> 00:01:59,720 Speaker 1: The number that the author of that article came up 30 00:01:59,760 --> 00:02:04,640 Speaker 1: with was a composite of what other people said. But 31 00:02:04,880 --> 00:02:09,680 Speaker 1: what you need is an analysis of what the replacement 32 00:02:09,760 --> 00:02:14,240 Speaker 1: cost and useful life of every component part of the 33 00:02:14,280 --> 00:02:19,760 Speaker 1: subway system is. Then you decide from that how much 34 00:02:19,840 --> 00:02:24,239 Speaker 1: is necessary. Then you prioritize, and then you look at 35 00:02:24,680 --> 00:02:30,760 Speaker 1: new stations, new new challenges, and you make policy choices. 36 00:02:31,160 --> 00:02:36,000 Speaker 1: But you can't start when you don't have the fundamental knowledge. 37 00:02:36,240 --> 00:02:41,200 Speaker 1: And the board has failed to fulfillix responsibility in a 38 00:02:41,320 --> 00:02:47,080 Speaker 1: very serious manner. They have acted negligently and irresponsibly. So, uh, 39 00:02:47,960 --> 00:02:52,000 Speaker 1: how can this be fixed? The legislature of the State 40 00:02:52,040 --> 00:02:56,399 Speaker 1: of New York it has a responsibility to look into this. 41 00:02:57,320 --> 00:03:00,520 Speaker 1: They are the authors of laws. They pass for Law 42 00:03:01,360 --> 00:03:05,919 Speaker 1: UH in two thousand and nine, making it abundantly clear 43 00:03:06,000 --> 00:03:10,800 Speaker 1: that the fiduciary responsibility of the boards of authorities like 44 00:03:10,880 --> 00:03:14,320 Speaker 1: the m t A is to the purposes of the authority, 45 00:03:14,520 --> 00:03:18,919 Speaker 1: and the legislature has the power to investigate, to hold hearings, 46 00:03:19,280 --> 00:03:24,720 Speaker 1: to bring public's attention UH, to demand that the people 47 00:03:24,720 --> 00:03:28,639 Speaker 1: who will hold these appointments fulfill their responsibility is as 48 00:03:28,680 --> 00:03:32,560 Speaker 1: the law intended that they be fulfilled. Mr Ravitch, I 49 00:03:32,639 --> 00:03:36,200 Speaker 1: understand that back in nineteen seventy nine, cast your mind back. 50 00:03:36,280 --> 00:03:38,160 Speaker 1: You came up with such a plan. You took a 51 00:03:38,240 --> 00:03:41,880 Speaker 1: detailed look at the entire system, and you put together 52 00:03:42,280 --> 00:03:45,360 Speaker 1: a playlist for what needed to happen, even how to 53 00:03:45,360 --> 00:03:49,760 Speaker 1: wear a bulletproof vest. I think at one point it 54 00:03:49,760 --> 00:03:52,000 Speaker 1: didn't work out the way you thought it was. You 55 00:03:52,040 --> 00:03:55,040 Speaker 1: had a call of gentleman named David Rockefeller. I'm wondering 56 00:03:55,000 --> 00:03:58,360 Speaker 1: if you could just didn't you have to call him 57 00:03:58,360 --> 00:04:01,440 Speaker 1: and take him from them at five am in the morning. 58 00:04:01,520 --> 00:04:06,760 Speaker 1: I did because there were upstate Republicans who are reluctant 59 00:04:06,840 --> 00:04:11,400 Speaker 1: to approve all the revenue measures that I had recommended 60 00:04:11,440 --> 00:04:15,520 Speaker 1: to the legislature to provide a stream of revenue that 61 00:04:15,640 --> 00:04:18,880 Speaker 1: we would use to support the borrowing, the capital borrowing 62 00:04:18,880 --> 00:04:22,160 Speaker 1: that we needed to fix the subway system. So I 63 00:04:22,680 --> 00:04:26,000 Speaker 1: needed the support of the business community in New York 64 00:04:26,040 --> 00:04:28,800 Speaker 1: to get the Republican support. But we had the support 65 00:04:28,839 --> 00:04:31,880 Speaker 1: of the governor, the active support of the governor, the 66 00:04:31,920 --> 00:04:35,600 Speaker 1: active support of the New York State Assembly, the active 67 00:04:35,640 --> 00:04:38,919 Speaker 1: support of of the Mayor of the City of New York, 68 00:04:39,560 --> 00:04:45,440 Speaker 1: um and and the unions and the business community, and 69 00:04:45,440 --> 00:04:49,240 Speaker 1: and they got behind this, and they authorized or enacted 70 00:04:49,720 --> 00:04:53,600 Speaker 1: legislation that provided hundreds of millions of dollars of revenue 71 00:04:53,600 --> 00:04:57,240 Speaker 1: which we used to support the indebtedness that enabled me 72 00:04:57,279 --> 00:05:00,680 Speaker 1: to buy three billion dollars of subway cars. Well, but 73 00:05:01,000 --> 00:05:03,479 Speaker 1: I want to sort of broaden out here, because you're 74 00:05:03,600 --> 00:05:07,600 Speaker 1: underscoring fundamental flaws in the management of the subway system 75 00:05:07,640 --> 00:05:11,360 Speaker 1: at a time when more broadly, we're talking about infrastructure 76 00:05:11,400 --> 00:05:15,480 Speaker 1: spending and how much we can invest. Just real quick, 77 00:05:16,200 --> 00:05:20,680 Speaker 1: can we even make these infrastructure investments without a wholesale 78 00:05:20,800 --> 00:05:28,880 Speaker 1: change in the management? Uh. I obviously am no longer 79 00:05:28,960 --> 00:05:33,680 Speaker 1: familiar with the technicians who operate at the m t A. 80 00:05:34,120 --> 00:05:37,360 Speaker 1: But I have to tell you. The professional engineers who 81 00:05:37,440 --> 00:05:40,960 Speaker 1: I've known over the years have very eminently qualified. The 82 00:05:41,720 --> 00:05:46,719 Speaker 1: problem isn't the professional technical management people know how to 83 00:05:46,800 --> 00:05:49,880 Speaker 1: fix this. People know how to buy subway cars. People 84 00:05:49,960 --> 00:05:55,680 Speaker 1: know how to change the signal system to uh triple 85 00:05:55,880 --> 00:05:58,960 Speaker 1: the throughput of so we don't have as many people 86 00:05:59,040 --> 00:06:02,880 Speaker 1: waiting in stations for two or three trains because of 87 00:06:02,880 --> 00:06:06,800 Speaker 1: all we're crowding. Everybody knows how to do it. That's 88 00:06:06,839 --> 00:06:11,360 Speaker 1: not what's missing. What's missing his money, and money requires 89 00:06:11,440 --> 00:06:14,920 Speaker 1: paying for the person was going to pay it. And 90 00:06:14,920 --> 00:06:18,200 Speaker 1: and therefore the question is, in the best sense of 91 00:06:18,200 --> 00:06:20,920 Speaker 1: the word in a democracy, a political question. How do 92 00:06:20,960 --> 00:06:24,239 Speaker 1: you allocate the burden? We are speaking with Richard Ravitch. 93 00:06:24,320 --> 00:06:28,520 Speaker 1: He is the former chairman of the Metropolitan Transportation Authority, 94 00:06:28,560 --> 00:06:31,520 Speaker 1: former Lieutenant Governor of the State of New York, the 95 00:06:31,600 --> 00:06:33,680 Speaker 1: author of the book So Much to Do, A Full 96 00:06:33,720 --> 00:06:39,040 Speaker 1: Life of business, politics and confronting fiscal crises. One crisis 97 00:06:39,080 --> 00:06:41,960 Speaker 1: that we've been following is Puerto Rico, and Mr Ravitch 98 00:06:42,080 --> 00:06:46,480 Speaker 1: has been looking at the situation in the devastated Commonwealth. 99 00:06:46,560 --> 00:06:48,800 Speaker 1: And Mr Ravitch, and maybe you could offer us some 100 00:06:48,839 --> 00:06:52,960 Speaker 1: thoughts about the current conditions and what if you were 101 00:06:53,000 --> 00:06:56,520 Speaker 1: given a clean slate. If you were given a white board, 102 00:06:57,160 --> 00:07:01,200 Speaker 1: what would you suggest be one of the first steps 103 00:07:01,200 --> 00:07:03,440 Speaker 1: that has taken in order to right the ship at 104 00:07:03,520 --> 00:07:06,720 Speaker 1: the first of all the three And they have million 105 00:07:06,800 --> 00:07:11,840 Speaker 1: people and it's unfortunately it's probably closer to three today. UH. 106 00:07:11,880 --> 00:07:15,840 Speaker 1: Our United States citizens and they have not been treated 107 00:07:15,920 --> 00:07:19,320 Speaker 1: the same way that the United States citizens in Houston, 108 00:07:19,400 --> 00:07:25,160 Speaker 1: Texas or New Orleans were treated after devastating hurricanes. Are 109 00:07:25,240 --> 00:07:29,960 Speaker 1: distinguished President through paper towels at them, but has failed 110 00:07:30,520 --> 00:07:34,440 Speaker 1: to make any serious effort to get an amount of 111 00:07:34,480 --> 00:07:38,760 Speaker 1: money to restore the power, to restore the physical infrastructure. 112 00:07:39,320 --> 00:07:42,720 Speaker 1: And as a consequence, people are leaving the island. There 113 00:07:42,800 --> 00:07:46,240 Speaker 1: is no incentive for people to invest. UM. The health 114 00:07:46,280 --> 00:07:50,280 Speaker 1: care system is in jeopardy. Uh. There is still a 115 00:07:50,320 --> 00:07:53,280 Speaker 1: substantial percentage of the population that has to boil the 116 00:07:53,360 --> 00:07:58,800 Speaker 1: water uh to um before they drink it. UM. And 117 00:07:58,880 --> 00:08:00,640 Speaker 1: I talked to a friend of I know was the 118 00:08:00,720 --> 00:08:03,800 Speaker 1: chairman of one of the largest banks in Puerto Rico 119 00:08:03,840 --> 00:08:05,640 Speaker 1: who told me he still doesn't have power in his 120 00:08:05,720 --> 00:08:08,480 Speaker 1: home and it's not because he's not rich and can't 121 00:08:08,480 --> 00:08:12,080 Speaker 1: afford it. You advise the government, correct, I advise the 122 00:08:12,120 --> 00:08:15,600 Speaker 1: government and the U. S. Treasury Department, So you're advising 123 00:08:16,600 --> 00:08:20,280 Speaker 1: no longer h One major issue that was facing the 124 00:08:20,320 --> 00:08:23,600 Speaker 1: government is the pension obligations, and this has been one 125 00:08:23,640 --> 00:08:26,280 Speaker 1: of the most onerous issues apart from the seventy billion 126 00:08:26,320 --> 00:08:31,480 Speaker 1: dollars of debt UM. I'm wondering what lessons we can 127 00:08:31,560 --> 00:08:33,880 Speaker 1: draw from that, you know, what, what sort of the 128 00:08:34,000 --> 00:08:36,160 Speaker 1: rout out is and sort of extract lay out to 129 00:08:36,160 --> 00:08:39,760 Speaker 1: the pension issues that we're seeing across the US right now. 130 00:08:41,280 --> 00:08:44,480 Speaker 1: How how bleak of a situation is this with obligations 131 00:08:44,520 --> 00:08:49,720 Speaker 1: that way outstripped potential income and current current reserves. These 132 00:08:49,800 --> 00:08:54,559 Speaker 1: were not obligations in curtain bad faith. They were incurred 133 00:08:55,000 --> 00:08:59,959 Speaker 1: without a realistic expectation and understanding of how they would 134 00:09:00,040 --> 00:09:03,600 Speaker 1: be ultimately met. So that the underfunding of the pension 135 00:09:03,679 --> 00:09:08,560 Speaker 1: system in Puerto Rico, where it's particularly egregious, they've essentially 136 00:09:08,640 --> 00:09:11,880 Speaker 1: run out of the principal amount of the pension funds, 137 00:09:12,320 --> 00:09:15,800 Speaker 1: and how gonna have to pay whatever benefits they wish 138 00:09:15,880 --> 00:09:20,040 Speaker 1: to pay out of current revenue, which is of course 139 00:09:20,080 --> 00:09:26,600 Speaker 1: diminishing UM. Elsewhere in the United States, uh from Chicago 140 00:09:26,840 --> 00:09:31,680 Speaker 1: to New Jersey to Kentucky to California, I could give 141 00:09:31,720 --> 00:09:35,839 Speaker 1: you a list, Colorado, there's no capacity to meet their 142 00:09:35,880 --> 00:09:39,360 Speaker 1: pension obligations. There are a lot of very serious efforts 143 00:09:39,480 --> 00:09:45,040 Speaker 1: that intellectually. There are four or five major foundations that 144 00:09:45,080 --> 00:09:50,680 Speaker 1: are funding studies on this subject um. And you have 145 00:09:50,760 --> 00:09:55,480 Speaker 1: a very serious moral and political question. If you say 146 00:09:55,600 --> 00:09:59,320 Speaker 1: you want to reduce the pension benefits for somebody who 147 00:09:59,360 --> 00:10:02,600 Speaker 1: worked for govern and for twenty years, why is that 148 00:10:03,200 --> 00:10:08,520 Speaker 1: morally acceptable? But you don't want to cut the interest 149 00:10:08,640 --> 00:10:11,360 Speaker 1: that you're paying this somebody who lent you money they 150 00:10:11,360 --> 00:10:13,640 Speaker 1: shouldn't have lent you because you were solving when you 151 00:10:13,720 --> 00:10:19,040 Speaker 1: borrowed it. And why why people in New York City 152 00:10:19,160 --> 00:10:21,600 Speaker 1: billions of dollars, which is what led to the New 153 00:10:21,679 --> 00:10:25,360 Speaker 1: York City fiscal crisis in all these hedge funds that 154 00:10:25,480 --> 00:10:29,840 Speaker 1: lent Puerto Rico had brought hundreds of or billions and 155 00:10:29,920 --> 00:10:32,760 Speaker 1: billions of dollars of the debt when they were broke, 156 00:10:32,800 --> 00:10:35,360 Speaker 1: when they didn't even have a worded in financial statements, 157 00:10:35,559 --> 00:10:41,120 Speaker 1: they gambled. Why is their entitlement to interest morally superior 158 00:10:41,480 --> 00:10:49,119 Speaker 1: to the payment of the pension to a former public servant. Unfortunately, 159 00:10:49,120 --> 00:10:50,959 Speaker 1: we're gonna have to to leave it there. Richard Ravitch, 160 00:10:51,240 --> 00:10:54,120 Speaker 1: who is the author of So Much to Do as 161 00:10:54,120 --> 00:10:56,440 Speaker 1: well as former Lieutenant Governor of New York and head 162 00:10:56,520 --> 00:11:13,280 Speaker 1: of the m t A. All right, we want to 163 00:11:13,360 --> 00:11:15,800 Speaker 1: learn about Tesla, and we have Liam Denning are a 164 00:11:15,800 --> 00:11:20,840 Speaker 1: Bloomberg Gadfly columnists, to tell us about the Model three. Liam, 165 00:11:20,920 --> 00:11:23,920 Speaker 1: is Tesla really going to be able to meet their 166 00:11:24,000 --> 00:11:28,600 Speaker 1: targets when it comes to that five thousand unit mark? 167 00:11:28,760 --> 00:11:30,520 Speaker 1: And how much is it going to cost for them 168 00:11:30,520 --> 00:11:36,280 Speaker 1: to produce those cars? Well, the question is, well, you know, 169 00:11:36,360 --> 00:11:38,680 Speaker 1: you need to take a step. I can say what 170 00:11:38,800 --> 00:11:43,679 Speaker 1: actually is a target here? Because that five thousand number 171 00:11:43,800 --> 00:11:46,080 Speaker 1: or and other numbers have been thrown around, like the 172 00:11:46,080 --> 00:11:49,640 Speaker 1: old tens thousand a week rate that was spoken of. Um. 173 00:11:50,800 --> 00:11:56,600 Speaker 1: If a target moves over time enough, does it? Is 174 00:11:56,640 --> 00:12:00,439 Speaker 1: it really still a target? I mean, it's it's it's 175 00:12:00,440 --> 00:12:04,440 Speaker 1: fairly certain that Tesla will get to producing five thousand 176 00:12:04,480 --> 00:12:09,439 Speaker 1: Model three a week at some point. UM. But I'm 177 00:12:09,480 --> 00:12:11,040 Speaker 1: not sure we can even call it a target at 178 00:12:11,040 --> 00:12:13,320 Speaker 1: this point because it has been moved around so much. 179 00:12:13,440 --> 00:12:16,920 Speaker 1: We just have to call it an expectation. UM. And 180 00:12:16,920 --> 00:12:19,240 Speaker 1: that was kind of the point of the column that 181 00:12:19,280 --> 00:12:23,520 Speaker 1: I published today. UM. Because the thing is, if you're 182 00:12:23,520 --> 00:12:29,160 Speaker 1: really relying on these targets, um, then it's kind of 183 00:12:29,160 --> 00:12:31,320 Speaker 1: hard to say that you're actually investing on the strength 184 00:12:31,480 --> 00:12:33,880 Speaker 1: of those. What you're really investing on is just a 185 00:12:34,000 --> 00:12:41,000 Speaker 1: general belief that Tesla will get to profitability and volume 186 00:12:41,080 --> 00:12:44,559 Speaker 1: production at some point. But you're not really you're sort 187 00:12:44,600 --> 00:12:46,920 Speaker 1: of trusting them, but you're not really following up with 188 00:12:46,960 --> 00:12:49,480 Speaker 1: the with the verifying bit. In other words, this is 189 00:12:49,559 --> 00:12:52,000 Speaker 1: pure faith and nothing based in particular numbers. I mean, 190 00:12:52,000 --> 00:12:55,040 Speaker 1: I guess that uh, sort of edifying that point is 191 00:12:55,120 --> 00:12:57,640 Speaker 1: Tesla shares today they're down a little bit less than 192 00:12:57,720 --> 00:13:01,000 Speaker 1: one percent. You would expect a much bigger decline with 193 00:13:01,080 --> 00:13:05,520 Speaker 1: yet another disappointment from their actual production when this has 194 00:13:05,559 --> 00:13:08,720 Speaker 1: been one of the key concerns. Also, there's still they're 195 00:13:08,720 --> 00:13:11,600 Speaker 1: still burned through a billion dollars of cash every quarter 196 00:13:11,840 --> 00:13:13,760 Speaker 1: and are probably going to have to raise more money 197 00:13:13,760 --> 00:13:17,280 Speaker 1: now you would expect. So, I mean, if you if 198 00:13:17,280 --> 00:13:19,840 Speaker 1: you think back to when they reported third quarter results, 199 00:13:19,840 --> 00:13:25,160 Speaker 1: which was early November, now those results were, um, you know, 200 00:13:25,200 --> 00:13:28,120 Speaker 1: they missed targets across the board. There a miss forecast 201 00:13:28,160 --> 00:13:31,320 Speaker 1: across the board. Um, they cut the the outlook for 202 00:13:31,440 --> 00:13:33,640 Speaker 1: production of the Model three, which is kind of at 203 00:13:33,720 --> 00:13:36,760 Speaker 1: all that anyone really cares about at this point. Um, 204 00:13:36,800 --> 00:13:39,440 Speaker 1: and the stork did actually fall quite sharply after that, 205 00:13:39,559 --> 00:13:43,559 Speaker 1: went back below three hundred bucks a share, But since 206 00:13:43,640 --> 00:13:46,600 Speaker 1: came back, I mean partly because um, you know, we 207 00:13:46,640 --> 00:13:49,000 Speaker 1: had the launch of the well we call it launch, 208 00:13:49,080 --> 00:13:52,640 Speaker 1: but we had the the sort of demo of of 209 00:13:52,760 --> 00:13:57,040 Speaker 1: the Tesla Electric semitrucks since then, and the stock went 210 00:13:57,120 --> 00:13:58,880 Speaker 1: up a bit on that and it's actually higher now 211 00:13:59,280 --> 00:14:04,480 Speaker 1: than it was in the immediate aftermas of those results. Um. 212 00:14:04,520 --> 00:14:06,560 Speaker 1: But if you look forward to this year, I mean 213 00:14:06,559 --> 00:14:09,240 Speaker 1: what you have a combination of here is Tesla has 214 00:14:09,320 --> 00:14:13,480 Speaker 1: invested already a lot of money into building this production line, 215 00:14:13,480 --> 00:14:18,200 Speaker 1: which isn't working as planned. They haven't reached um, you know, 216 00:14:18,400 --> 00:14:21,280 Speaker 1: smooth mass production of the car yet and they've had 217 00:14:21,320 --> 00:14:26,040 Speaker 1: to scale back um at the pace of growth in 218 00:14:26,080 --> 00:14:27,880 Speaker 1: that And if you think about that, what that means 219 00:14:28,000 --> 00:14:32,080 Speaker 1: is you've invested all the money in this production line, 220 00:14:32,360 --> 00:14:35,120 Speaker 1: but you're still waiting to really produce the cars that 221 00:14:35,160 --> 00:14:39,080 Speaker 1: are going to generate the revenue to pay back on 222 00:14:39,200 --> 00:14:41,960 Speaker 1: that investment. And as we look forward to the rest 223 00:14:42,000 --> 00:14:44,880 Speaker 1: of the year, you know, it does seem likely that 224 00:14:45,160 --> 00:14:49,600 Speaker 1: unless something drastic changes in the pace at which Tesla 225 00:14:49,640 --> 00:14:53,720 Speaker 1: can produce these cars, um, they are probably going to 226 00:14:53,800 --> 00:14:57,800 Speaker 1: have to tap the markets for more financing this year. 227 00:14:58,080 --> 00:14:59,920 Speaker 1: Whether now, whether that comes in the form of equit 228 00:15:00,400 --> 00:15:03,520 Speaker 1: or another bond or a convertible or something else, um, 229 00:15:03,560 --> 00:15:08,200 Speaker 1: that is looking ever more likely. Of course, the flip 230 00:15:08,240 --> 00:15:12,600 Speaker 1: side of that is, as long as the stock doesn't 231 00:15:12,640 --> 00:15:17,040 Speaker 1: react badly to this, you know, consistent missing of targets, 232 00:15:17,880 --> 00:15:21,440 Speaker 1: then Tesla does appear to have a ready way of 233 00:15:21,560 --> 00:15:23,760 Speaker 1: raising that money. Liam Denning, thank you so much for 234 00:15:23,840 --> 00:15:27,840 Speaker 1: joining us. Liam Denning, Energy Mining and Commodities calumnist for 235 00:15:28,040 --> 00:15:47,960 Speaker 1: Bloomberg Gadfly Research. No, forget about it. Meeting chief executive 236 00:15:48,000 --> 00:15:51,920 Speaker 1: officers a waste of time for this fund manager, and 237 00:15:51,960 --> 00:15:54,560 Speaker 1: they've actually done pretty well here to help us understand 238 00:15:54,600 --> 00:15:57,200 Speaker 1: their strategy. As Kurt Kara, he is the chief investment 239 00:15:57,240 --> 00:16:01,760 Speaker 1: strategist for my invest They're based in Copenhagen, Denmark, and 240 00:16:01,800 --> 00:16:03,960 Speaker 1: he joins us on the phone. Kurt, thank you very 241 00:16:04,000 --> 00:16:07,080 Speaker 1: much for being with us. Just described for people your 242 00:16:07,200 --> 00:16:10,960 Speaker 1: strategy and how you came to put this all together 243 00:16:12,320 --> 00:16:14,960 Speaker 1: all right, Well, thank you for letting me call in 244 00:16:16,160 --> 00:16:21,320 Speaker 1: very Briefly, we are very focused on being rational when 245 00:16:21,360 --> 00:16:24,520 Speaker 1: we invest, So we try to be as stringent and 246 00:16:24,560 --> 00:16:27,200 Speaker 1: the rational out of a sort of a moral imperative 247 00:16:27,200 --> 00:16:29,840 Speaker 1: wing invest. So one of the things that we find 248 00:16:29,880 --> 00:16:32,400 Speaker 1: it is very important is to be driven by data 249 00:16:32,560 --> 00:16:36,480 Speaker 1: and rationality and economic understanding of the businesses we invest in. 250 00:16:36,960 --> 00:16:39,360 Speaker 1: So what we do is basically we look for if 251 00:16:39,400 --> 00:16:41,680 Speaker 1: you want to catch some sort of if you want 252 00:16:41,680 --> 00:16:43,560 Speaker 1: to if you want to hunt a dinosaur, you look 253 00:16:43,600 --> 00:16:46,160 Speaker 1: for din dinosaur footprints and then you ask yourself if 254 00:16:46,200 --> 00:16:48,280 Speaker 1: this is a dinosaur, and then you then you go 255 00:16:48,360 --> 00:16:51,200 Speaker 1: for the hunting itself. So so that's basically what we do. 256 00:16:52,360 --> 00:16:55,040 Speaker 1: How many stocks do you invest in at any given time? 257 00:16:55,080 --> 00:16:57,560 Speaker 1: In other words, do you have to kind of concentrate 258 00:16:57,640 --> 00:17:00,920 Speaker 1: your bets with this type of strategies since it requires 259 00:17:01,440 --> 00:17:05,879 Speaker 1: uh profound understanding of the businesses. Yeah, well, it's a 260 00:17:05,880 --> 00:17:10,000 Speaker 1: good question because I think one of the conventional um 261 00:17:10,240 --> 00:17:13,480 Speaker 1: cardinal points of investment is that you should diversify a lot. 262 00:17:13,760 --> 00:17:17,640 Speaker 1: I think that there's a big difference between diversification and diversification. 263 00:17:18,119 --> 00:17:22,520 Speaker 1: If we diversify too much, we actually diversify. We believe 264 00:17:22,560 --> 00:17:26,240 Speaker 1: that twenty five to thirty five names is adequate. Anything 265 00:17:26,240 --> 00:17:28,720 Speaker 1: about thirty five names and we will start to become 266 00:17:29,160 --> 00:17:31,480 Speaker 1: index Haugust, And that's really not what we want to be. 267 00:17:31,520 --> 00:17:35,800 Speaker 1: We want to be active managers, picking the best businesses 268 00:17:35,840 --> 00:17:39,800 Speaker 1: we can find that at attractive prices. And I honestly 269 00:17:39,840 --> 00:17:41,800 Speaker 1: believe that if you look at, for instance, the financial 270 00:17:41,840 --> 00:17:46,159 Speaker 1: crisis in in oh eight, very diversified portfolios didn't do 271 00:17:46,240 --> 00:17:49,840 Speaker 1: much better than less diversified portfolios. So so in theory 272 00:17:50,000 --> 00:17:51,800 Speaker 1: it may work, but in reality, I don't think the 273 00:17:51,920 --> 00:17:57,560 Speaker 1: versification works. Once you're above thirty five forty names, Kurt, 274 00:17:57,920 --> 00:18:02,159 Speaker 1: where do you get the confidence to maintain this level 275 00:18:02,320 --> 00:18:07,600 Speaker 1: of discipline? Oh? Well, yeah, Well, first of all, I 276 00:18:07,640 --> 00:18:10,359 Speaker 1: have some good colleagues and they'll kick me if I 277 00:18:10,680 --> 00:18:14,720 Speaker 1: don't if I'm not discipline. But my confidence in my 278 00:18:15,000 --> 00:18:19,120 Speaker 1: and the discipline comes from I would say, first of all, 279 00:18:19,240 --> 00:18:22,399 Speaker 1: having this system. We have that that sort of looks 280 00:18:22,440 --> 00:18:25,520 Speaker 1: at the marketplace, looks at all the stocks in the marketplace, 281 00:18:25,560 --> 00:18:29,600 Speaker 1: and gives us ideas and scores every single stock out there. 282 00:18:30,119 --> 00:18:33,280 Speaker 1: And that is a very good neutral, objective view on 283 00:18:33,680 --> 00:18:36,240 Speaker 1: the marketplace. And then we have our subjective views and 284 00:18:36,240 --> 00:18:40,479 Speaker 1: our subjective understanding of the businesses we invest in. The discipline, however, 285 00:18:40,600 --> 00:18:43,720 Speaker 1: is obviously something which has to be learned over the years, 286 00:18:43,720 --> 00:18:47,800 Speaker 1: and I believe we have done so. Uh. There is 287 00:18:47,840 --> 00:18:50,400 Speaker 1: a big difference between basically eating the menu and eating 288 00:18:50,400 --> 00:18:53,600 Speaker 1: the menu card, and a lot of investors perhaps eat 289 00:18:53,640 --> 00:18:56,359 Speaker 1: the card more than the menu. So it's easy to 290 00:18:56,400 --> 00:18:59,360 Speaker 1: say your value invest It's easy to say we're active 291 00:18:59,400 --> 00:19:03,600 Speaker 1: investors and we manage risk, but actually doing it requires discipline, 292 00:19:03,640 --> 00:19:05,480 Speaker 1: and this is something we've been working on over the 293 00:19:05,560 --> 00:19:07,840 Speaker 1: years and we still work on it. Maybe just use 294 00:19:08,000 --> 00:19:12,359 Speaker 1: one UH investment idea General Motors as an example, because 295 00:19:12,359 --> 00:19:14,320 Speaker 1: you know when you when you hear about your strategy, 296 00:19:14,359 --> 00:19:17,119 Speaker 1: you think, oh, there's some like super secret company that 297 00:19:17,160 --> 00:19:19,360 Speaker 1: they're going to invest in it, and it turns out 298 00:19:19,440 --> 00:19:22,480 Speaker 1: it may just be that you find a company that 299 00:19:22,520 --> 00:19:26,200 Speaker 1: everybody knows about, but the way you perceive the company 300 00:19:26,280 --> 00:19:30,720 Speaker 1: and the confidence you have in the decision is different. Yeah. Well, 301 00:19:30,760 --> 00:19:33,520 Speaker 1: I guess GM is a great example. I mean, we 302 00:19:33,600 --> 00:19:37,040 Speaker 1: bought GM in September last year. Uh. I believe the 303 00:19:37,040 --> 00:19:40,120 Speaker 1: market value was roughly around fifty billion dollars and they 304 00:19:40,040 --> 00:19:42,720 Speaker 1: the enterprise value is forty billion dollars and GM generates 305 00:19:42,720 --> 00:19:44,880 Speaker 1: ten billion dollars in earnings and and ten billion dollars 306 00:19:44,880 --> 00:19:47,840 Speaker 1: in free cash flow. Uh. It has a female CEO, 307 00:19:48,000 --> 00:19:50,480 Speaker 1: which is quite rare, so she's obviously doing a great 308 00:19:50,560 --> 00:19:53,960 Speaker 1: job in a in a sector which is dominated by males. 309 00:19:54,480 --> 00:19:57,680 Speaker 1: Uh So, Uh, all the things when you look at 310 00:19:57,720 --> 00:20:01,399 Speaker 1: it looked okay because you know, they have autonomus driving. 311 00:20:01,840 --> 00:20:04,320 Speaker 1: They have the Chevallet bowl, the Chevallet bowl, They have 312 00:20:04,400 --> 00:20:07,439 Speaker 1: the Cadillac, which is the only limo priced as a 313 00:20:07,440 --> 00:20:11,520 Speaker 1: as a Mercedes basically. Uh, they have the Camaro and 314 00:20:11,560 --> 00:20:13,360 Speaker 1: you know, you name it they have. They have nine 315 00:20:13,359 --> 00:20:16,200 Speaker 1: percent of lift as far as I understand. So they 316 00:20:16,240 --> 00:20:19,080 Speaker 1: have all these areas. And when you look at GM, 317 00:20:19,320 --> 00:20:23,160 Speaker 1: it's not the old dust covered company that some people 318 00:20:23,200 --> 00:20:26,800 Speaker 1: may believe it is. It is actually a company which 319 00:20:26,840 --> 00:20:29,880 Speaker 1: is up to date technologically speaking. And the price tag 320 00:20:30,000 --> 00:20:32,040 Speaker 1: was very, very attractive, so you could say, you know, 321 00:20:33,160 --> 00:20:35,679 Speaker 1: we don't necessarily buy gold just because it's goal. We 322 00:20:35,720 --> 00:20:38,520 Speaker 1: want to buy gold when it's priced as silver. GM 323 00:20:38,600 --> 00:20:41,720 Speaker 1: is perhaps silver. Priceless bronze are actually more like junk metal, 324 00:20:42,080 --> 00:20:44,720 Speaker 1: whereas some of the more golden stocks in the stock 325 00:20:44,720 --> 00:20:47,480 Speaker 1: market right now, they're priceless diamonds and they're not diamonds. 326 00:20:47,560 --> 00:20:51,560 Speaker 1: So for us, it's all about buying the on the 327 00:20:51,640 --> 00:20:54,360 Speaker 1: valued stuff. And just wanted the breaking because I want 328 00:20:54,560 --> 00:20:56,919 Speaker 1: to come into but just quickly give you ten seconds, 329 00:20:57,000 --> 00:21:00,720 Speaker 1: Mary Barra, as the chairman, chief executive, it's important to 330 00:21:00,720 --> 00:21:06,719 Speaker 1: you explain well, very briefly. I mean it's important because 331 00:21:06,840 --> 00:21:10,679 Speaker 1: if you can make it as a CEO with your 332 00:21:11,040 --> 00:21:14,800 Speaker 1: biometric measures against you and your your biological measures against you, 333 00:21:14,840 --> 00:21:17,119 Speaker 1: in the sense that we know that there is an 334 00:21:17,160 --> 00:21:21,440 Speaker 1: overrepresentation in boardrooms and amongst the CEOs when we look 335 00:21:21,440 --> 00:21:26,280 Speaker 1: at for instance, Caucasian males uh. Tall, slim Caucasian males 336 00:21:26,280 --> 00:21:28,840 Speaker 1: are overrepresented. So if you have a CEO which is 337 00:21:29,160 --> 00:21:32,560 Speaker 1: which doesn't have these features, it must be because they're 338 00:21:32,600 --> 00:21:35,520 Speaker 1: doing some sort of you know, good stuff. As a CEO, 339 00:21:35,600 --> 00:21:39,160 Speaker 1: they have to be outperforming significantly since they can, they 340 00:21:39,160 --> 00:21:41,320 Speaker 1: can get to that position. And I think she's doing 341 00:21:41,320 --> 00:21:44,000 Speaker 1: a great job and I don't have to meet her. 342 00:21:44,040 --> 00:21:45,840 Speaker 1: I mean, we don't have to meet the CEO. We 343 00:21:45,840 --> 00:21:49,520 Speaker 1: we look at the results they generate, uh, and that's 344 00:21:49,520 --> 00:21:51,880 Speaker 1: more important for us. Kurt Kara, thank you so much 345 00:21:52,000 --> 00:21:56,119 Speaker 1: for joining us. Kurt Carra, chief investment strategist at my invest, 346 00:21:56,720 --> 00:22:00,800 Speaker 1: which runs the my Invest Value Act here and which 347 00:22:00,920 --> 00:22:04,800 Speaker 1: has returned on average each year in the past five years, 348 00:22:04,840 --> 00:22:13,439 Speaker 1: better than percent of its peers. Thanks for listening to 349 00:22:13,440 --> 00:22:16,320 Speaker 1: the Bloomberg P and L podcast. You can subscribe and 350 00:22:16,400 --> 00:22:20,360 Speaker 1: listen to interviews at Apple Podcasts, SoundCloud, or whatever podcast 351 00:22:20,400 --> 00:22:23,880 Speaker 1: platform you prefer. I'm pim Fox. I'm on Twitter at 352 00:22:24,040 --> 00:22:27,440 Speaker 1: pim Fox. I'm on Twitter at Lisa Abramo. It's one 353 00:22:27,640 --> 00:22:30,359 Speaker 1: before the podcast. You can always catch us worldwide on 354 00:22:30,400 --> 00:22:31,240 Speaker 1: Bloomberg Radio.