WEBVTT - Tesla Layoffs, Iran Attack 0:00:00.600 --> 0:00:10.799 Bloomberg Audio Studios, Podcasts, radio News. You're listening to the 0:00:10.840 --> 0:00:15.040 Bloomberg Intelligence Podcast. Catch us live weekdays at ten am 0:00:15.040 --> 0:00:18.040 Eastern on Apple Cardplay and Android Auto with the Bloomberg 0:00:18.079 --> 0:00:21.400 Business App. Listen on demand wherever you get your podcasts, 0:00:21.640 --> 0:00:24.480 or watch us live on YouTube. 0:00:25.079 --> 0:00:27.200 A couple pieces of news. One, you have the senior 0:00:27.280 --> 0:00:30.840 VP resigns, So that's Drew, but Baglino, that's one part 0:00:30.880 --> 0:00:32.440 of the story. The other part of the story is 0:00:32.440 --> 0:00:36.879 at the carmaker slashing headcount by about ten percent. So 0:00:36.960 --> 0:00:38.760 put those two things together and what does that tell 0:00:38.840 --> 0:00:41.040 us about where Tesla is right now? So joining us 0:00:41.080 --> 0:00:45.000 is Steve Man, Bloomberg Intelligence Global Autos and Industrial Research analyst. 0:00:45.159 --> 0:00:47.400 This is a great example of why Bloomberg Intelligence Radio 0:00:47.440 --> 0:00:49.559 can bring you the best analyst from all of our 0:00:49.600 --> 0:00:51.919 guys all around the world, and Steve is definitely one 0:00:51.960 --> 0:00:54.000 of them. What has been your take over the last 0:00:54.000 --> 0:00:58.480 few hours on management shakeups as well as headcount at Tesla? 0:00:58.600 --> 0:01:01.760 Wow, it's actually worse than I thought I thought. You know, 0:01:01.840 --> 0:01:07.280 the first quarter sales drop was you know, hopefully close 0:01:07.319 --> 0:01:10.080 to the end, but you know, there's seems to be 0:01:10.280 --> 0:01:11.920 the light at the end of the tunnel is not 0:01:12.120 --> 0:01:17.000 really here yet, and it looks like, you know, it's running. 0:01:17.600 --> 0:01:21.480 Their plants are running just pretty much well below capacity 0:01:21.520 --> 0:01:25.240 at the moment, and there's still a lot of cost 0:01:25.319 --> 0:01:28.520 headwinds facing them. They're trying to balance a lot of 0:01:28.560 --> 0:01:32.840 things in terms of deliveries production. They're raising prices. I 0:01:32.880 --> 0:01:36.839 don't know how long that's gonna last. So execution is risk. 0:01:37.280 --> 0:01:40.840 Execution is key for the company in the next you know, 0:01:40.920 --> 0:01:42.360 six to nine months. 0:01:42.880 --> 0:01:45.520 So Steve, where are we now or where is the 0:01:45.560 --> 0:01:47.880 market when you talk to investors in terms of getting 0:01:47.880 --> 0:01:51.960 a sense of where EV demand is in the US 0:01:52.040 --> 0:01:53.720 and then maybe globally. 0:01:54.440 --> 0:01:58.200 Well, EV demand is is waning. I think the interest 0:01:58.280 --> 0:02:01.920 rate is not helping, you know, it's uh they're looking 0:02:01.960 --> 0:02:04.160 to you know, as you know, the FED is probably 0:02:04.200 --> 0:02:07.080 not going to cut rates anytime soon in the next 0:02:07.600 --> 0:02:10.560 couple of months, next quarter or so, so that's going 0:02:10.639 --> 0:02:15.320 to condude away on big purchases like automobiles. We're seeing 0:02:15.320 --> 0:02:19.200 that across the board in the US as well as 0:02:19.240 --> 0:02:22.080 in China. Trying is a little bit worse for Tesla 0:02:22.160 --> 0:02:26.320 because there's so much new competition there. But you know, 0:02:26.720 --> 0:02:30.440 sales is slowing for GM, sales is slowing for Ford 0:02:30.560 --> 0:02:35.240 for just had to cut production of their lightning recently 0:02:35.280 --> 0:02:37.120 announced about a couple of weeks ago. 0:02:37.600 --> 0:02:41.200 So I think this year will be tough for the industry. 0:02:41.919 --> 0:02:44.040 Now, you know, we probably won't see any improvement until 0:02:45.440 --> 0:02:47.360 as far as I'm concerned in twenty twenty six. 0:02:47.760 --> 0:02:49.919 Oh wow, Okay, well that pushes it a way out. 0:02:49.919 --> 0:02:52.440 Here was interesting headline too, Paul. To your point is 0:02:52.440 --> 0:02:55.880 that Reuters is reporting that BP is cutting over one 0:02:55.919 --> 0:02:58.840 hundred jobs and it's electric vehicle charging unit. And we 0:02:58.880 --> 0:03:01.519 all talk about how we really need chargers to deal 0:03:01.560 --> 0:03:03.280 with the range anxiety, and now you have a big 0:03:03.320 --> 0:03:08.200 player here studding some jobs in this EV charging unit. Steve, 0:03:08.240 --> 0:03:10.600 why twenty twenty six? Why is it going to take 0:03:10.639 --> 0:03:11.000 that long? 0:03:11.720 --> 0:03:12.600 Yeah? I think. 0:03:13.120 --> 0:03:17.000 I think what the market, the EV market is facing 0:03:17.160 --> 0:03:21.320 today is that we had early adopters, especially on the 0:03:21.600 --> 0:03:25.359 high end, they're you know, they're pretty much tapped out. 0:03:25.520 --> 0:03:28.440 You know, they they can buy only so many The 0:03:28.480 --> 0:03:32.440 market is relatively small, smaller than the mass market. I'm 0:03:32.480 --> 0:03:35.440 looking at twenty twenty six because if you look at 0:03:35.440 --> 0:03:39.800 the Inflation Reduction Act, it's bringing in on shoring a 0:03:39.800 --> 0:03:42.880 lot of the EV battery production in the US, hopefully 0:03:42.880 --> 0:03:45.880 it will cut costs. And at the same time, in 0:03:45.960 --> 0:03:50.080 twenty twenty six, where we're looking at more affordable evs 0:03:50.760 --> 0:03:54.000 coming into the market, that's going to expand the addressable 0:03:54.000 --> 0:03:58.040 market for EV's and that's why we're we're thinking, you know, 0:03:58.120 --> 0:04:02.120 twenty twenty six will probably be a better time for 0:04:02.200 --> 0:04:04.400 the EV market than it is today. 0:04:05.080 --> 0:04:08.480 So how about profitability in that scenario, Steve, It's tough 0:04:08.480 --> 0:04:10.680 to make an argument that, you know, these evs can 0:04:10.720 --> 0:04:13.160 be profitably manufactured at a higher price point. 0:04:14.280 --> 0:04:16.480 How are they going to adjust their cost structure to get. 0:04:16.440 --> 0:04:18.400 Be profitable with maybe have a lower price point, I 0:04:18.400 --> 0:04:20.159 don't know, thirty thousand dollars or something like that. 0:04:21.160 --> 0:04:21.919 That's a good question. 0:04:21.960 --> 0:04:24.800 I think if you look at the EV startups in 0:04:24.839 --> 0:04:29.320 the US, you know that the only one that's really 0:04:29.520 --> 0:04:35.080 still profitable is Tesla. You saw Fisker being delisted. There's 0:04:35.279 --> 0:04:40.599 risk of them filing bankruptcy. Both Lucid and Rivian will need, 0:04:41.080 --> 0:04:43.240 you know, billions of dollars just to get them through 0:04:43.279 --> 0:04:45.520 the next couple of years. We're not sure if they're 0:04:45.520 --> 0:04:49.320 gonna get that money. Given the slowdown and the EV market. 0:04:49.720 --> 0:04:52.240 But on a bright side, I think Tesla is still 0:04:52.320 --> 0:04:55.479 generating cash. You know, they're making some of the cuts today, 0:04:55.560 --> 0:04:59.159 I think really to maintain cash generation so they can 0:04:59.200 --> 0:05:01.960 continue it in vests for the long term, you know. 0:05:02.040 --> 0:05:05.840 For them, I think what's really important for them is 0:05:06.200 --> 0:05:11.400 the AI, the FSD, the full self driving systems that 0:05:11.400 --> 0:05:13.840 they're trying to build out. That that's going to be 0:05:13.880 --> 0:05:17.560 the future of the automotive industry. It's really those software 0:05:17.640 --> 0:05:21.760 based subscriptions that's going to drive revenue, not so much 0:05:21.839 --> 0:05:25.120 of the automaking. So if they're trying to get there, 0:05:25.120 --> 0:05:28.960 trying to maintain cash, maintain some level of profitability, profitability 0:05:29.279 --> 0:05:31.200 to make those investments to get them there. 0:05:31.920 --> 0:05:33.719 Interesting, I was thinking about self driving as I was 0:05:33.760 --> 0:05:36.080 coming up the Taconic, oring down the Taconic yesterday, and 0:05:36.120 --> 0:05:37.520 I was like, would I want to be in a 0:05:37.560 --> 0:05:39.640 self driving car right now? In the Taconic. I don't 0:05:39.640 --> 0:05:41.680 need the answer to that. I was driving and I 0:05:41.720 --> 0:05:43.520 was like, I don't know, man, I think I want 0:05:43.520 --> 0:05:45.880 to trust myself behind the wheel. Anyway, before we let 0:05:45.920 --> 0:05:48.800 you go, Steve, let's go to the SVP departing, So 0:05:48.880 --> 0:05:53.120 Drew Baglino. He leaving the company. As I mentioned senior 0:05:53.200 --> 0:05:56.800 vice president, who is he? Do we care? Like how 0:05:56.839 --> 0:05:58.440 big a deal he was in Tesla? What did he 0:05:58.560 --> 0:05:59.560 do walk us through it? 0:06:00.279 --> 0:06:01.320 Yeah, we do care. 0:06:01.480 --> 0:06:04.120 He's he's you know, I think he's the face to 0:06:04.279 --> 0:06:07.559 he's also the face of Tesla. Seems to be looks 0:06:07.600 --> 0:06:10.760 like to be the right hand person for Elon Musk. 0:06:11.240 --> 0:06:13.479 So it's a big loss for the company, no doubt 0:06:13.520 --> 0:06:16.720 about it. But you know, he's a he's a powertrain 0:06:16.800 --> 0:06:21.160 engineer for the most part, energy engineer, so he's you know, 0:06:21.240 --> 0:06:23.320 he's really involved in the battery if you saw him 0:06:23.360 --> 0:06:26.520 on battery day. I think, you know, if you look 0:06:26.560 --> 0:06:30.520 at Tesla and what Elon Musk have been saying about 0:06:30.520 --> 0:06:35.320 Tesla's future, which is on AI, which is on full 0:06:35.360 --> 0:06:36.600 self driving. 0:06:37.880 --> 0:06:38.760 Is it a big loss? 0:06:38.800 --> 0:06:41.200 I mean, you can you can argue that, hey, you know, 0:06:41.279 --> 0:06:44.680 Tesla's moving on to the next phase. It's not about 0:06:45.120 --> 0:06:49.000 building the motor, is not about building the batteries. They've 0:06:49.080 --> 0:06:52.839 gone through that process over the past fifteen eighteen years. 0:06:53.279 --> 0:06:56.680 You know, I think, you know, looking forward, they probably 0:06:56.720 --> 0:07:01.320 need somebody more people around. You know, AI, you know, 0:07:01.400 --> 0:07:04.520 developed them algorithms for the future of the car. 0:07:05.520 --> 0:07:07.320 All right, Steve Man, thanks so much for joining us. 0:07:07.360 --> 0:07:10.200 As always, Steve Mann, he covers the global auto industry 0:07:10.200 --> 0:07:13.640 for Bloomberg Intelligence base down there in Princeton, New Jersey. 0:07:14.120 --> 0:07:15.920 It's got to be tough, I think, to be like 0:07:15.920 --> 0:07:19.160 a Kathy would be so invested in this company, you know, 0:07:19.360 --> 0:07:22.200 not only financially, but kind of reputationally, and to have 0:07:22.280 --> 0:07:25.360 that to deal with a CEO like Elon Musk is 0:07:25.400 --> 0:07:26.360 so mercurial. 0:07:26.400 --> 0:07:27.640 I guess it is maybe the right term. 0:07:27.680 --> 0:07:30.600 And one of the you know, the results of that 0:07:30.720 --> 0:07:33.680 is you know, executive turnover, and that's got to be 0:07:33.760 --> 0:07:35.840 really challenging for investors. 0:07:36.120 --> 0:07:37.680 Yeah, but you know what's interesting with her view is 0:07:37.680 --> 0:07:39.840 that it's so long term that I wonder if these 0:07:39.880 --> 0:07:42.000 things become just blips to her, you know. 0:07:42.280 --> 0:07:42.480 Yep. 0:07:43.000 --> 0:07:45.240 On the other side of it, Yeah, she's very you know, 0:07:45.320 --> 0:07:49.760 obviously had great success with this disruption kind of theory. 0:07:49.800 --> 0:07:54.120 But boy, got to ride with Elon Musk and his foibles. 0:07:53.440 --> 0:07:55.400 It's true. Yeah, No, that'd be really hard. Would you 0:07:55.400 --> 0:07:58.240 do self driving? By the way, I really yeah, okay, good, 0:07:58.280 --> 0:08:00.640 so we're on the same page, But well. 0:08:00.880 --> 0:08:03.080 Can drive me around? I mean, you know, I trust him? 0:08:03.080 --> 0:08:05.520 Well, that's his second job makes sense. 0:08:07.280 --> 0:08:11.160 You're listening to the Bloomberg Intelligence Podcast. Catch us live 0:08:11.240 --> 0:08:14.280 weekdays at ten am Eastern on Apple card Play and 0:08:14.280 --> 0:08:17.200 Android Otto with the Bloomberg Business App. You can also 0:08:17.280 --> 0:08:20.760 listen live on Amazon Alexa from our flagship New York station, 0:08:21.160 --> 0:08:24.640 Just say Alexa Play Bloomberg eleven thirty. 0:08:25.120 --> 0:08:29.040 Let's pivot to the geopolitical front, because another busy weekend 0:08:29.160 --> 0:08:33.760 in the Middle East with the Iranian attack on Israel. Response, 0:08:34.000 --> 0:08:36.560 Doctor Aeriel Cohen joins us. He's a senior fellow at 0:08:36.600 --> 0:08:39.559 the Atlantic Council. Doctor Cohen, thanks so much for joining 0:08:39.640 --> 0:08:43.680 us here. How would you characterize the I guess the 0:08:44.240 --> 0:08:48.360 Iranian back attack on Israel over the weekend? 0:08:48.559 --> 0:08:49.920 How would you characterize it? 0:08:51.880 --> 0:08:54.920 First of all, it's an avert act of war. Israel 0:08:55.040 --> 0:08:59.680 was attacked with three hundred missiles, ballistic missiles, cruise missiles, 0:08:59.720 --> 0:09:04.880 and owns. The systems worked very well. Both in sentcam 0:09:05.000 --> 0:09:09.040 US Central Command that Israel was joined several years ago. 0:09:09.120 --> 0:09:12.480 That was the right decision to integrate Israel was its 0:09:12.600 --> 0:09:20.880 Arab neighbors, and the US, UK, France, Saudi Jordan and 0:09:21.000 --> 0:09:26.120 apparently UAE all participated in shooting down the Iranian missiles. 0:09:26.640 --> 0:09:31.440 But this is just a first try. 0:09:31.280 --> 0:09:36.120 By the Iranians, and a successful try, the largest drone 0:09:36.120 --> 0:09:39.960 and missile attack of the twenty first century. Both the 0:09:40.000 --> 0:09:44.240 Americans and Israelis and the Iranians, the Russians and the 0:09:44.320 --> 0:09:48.680 Chinese are going to learn do lessons learn from this, 0:09:49.360 --> 0:09:57.200 and probably moved to program to plan bigger and worse. 0:09:57.640 --> 0:09:58.920 Strikes against each other. 0:09:59.400 --> 0:10:02.480 We saw many, many, many drone attacks in Ukraine, and 0:10:03.600 --> 0:10:07.600 one of the lessons learned is the massive drone type 0:10:07.600 --> 0:10:11.400 of swarms of drones as we saw can be counted. 0:10:12.040 --> 0:10:13.000 So that's a good news. 0:10:13.000 --> 0:10:16.040 The bad news is the Iranian regime is dead set 0:10:16.400 --> 0:10:20.480 on destroying Israel. The chant every Friday in Tehran is 0:10:20.520 --> 0:10:23.720 death to America, death to Israel, and they will continue 0:10:24.160 --> 0:10:24.959 on their merry way. 0:10:25.160 --> 0:10:29.680 So, doctor Cohen, the question yesterday was is this the 0:10:29.720 --> 0:10:32.840 start of a direct war between Iran and Israel and 0:10:32.880 --> 0:10:38.439 its allies or was Iran's attack calibrated and telegraphed retaliation. 0:10:38.600 --> 0:10:40.760 It sounds like you're in the former camp of that. 0:10:44.480 --> 0:10:48.880 The direct war all Iran against the US and Israel 0:10:49.160 --> 0:10:52.120 is going on since the days of the founder of 0:10:52.200 --> 0:10:53.560 the Islamic Republic. 0:10:53.960 --> 0:10:58.120 The Ayatolla Komani. You remember the. 0:10:57.800 --> 0:11:03.120 American ci A station chief was kidnapped and tortured and 0:11:03.280 --> 0:11:06.520 then murdered in Lebanon in nineteen eighty three, Colonel Buckley, 0:11:07.080 --> 0:11:10.679 And one way or another I was covering a studying 0:11:12.000 --> 0:11:16.920 these events now for forty years. So it's an ongoing war. 0:11:17.559 --> 0:11:21.840 But this was an escalatory operation, and this is the 0:11:21.840 --> 0:11:26.200 Middle East. Israelis sooner or later will have to retaliate, 0:11:26.320 --> 0:11:30.720 even as President Biden is telling them to step down 0:11:30.880 --> 0:11:34.280 and take a win. When you have three hundred missiles 0:11:34.600 --> 0:11:40.400 lobbed against your country, this is not going to stop there. 0:11:40.960 --> 0:11:45.120 So, doctor Cole, what do you think Israel's response will 0:11:45.160 --> 0:11:46.840 be and or should be. 0:11:49.440 --> 0:11:53.720 I think that as Israel has ongoing business of Gaza 0:11:53.800 --> 0:11:59.440 in the northern border against Gizabala in Lebanon, they will. 0:11:59.200 --> 0:12:00.000 Not be able to. 0:12:01.640 --> 0:12:05.400 Launch a large scale attack against around They shouldn't not 0:12:05.559 --> 0:12:06.040 right now. 0:12:06.840 --> 0:12:08.040 But they have other tools. 0:12:08.040 --> 0:12:12.079 They have cyber They were very successful with cyber attacks 0:12:12.440 --> 0:12:16.960 against the Iranian nuclear program, and they have other means 0:12:17.320 --> 0:12:22.440 to disrupt the Iranian military establishment and the Iranian economy. 0:12:23.520 --> 0:12:29.560 Will this side step in many ways containment of Russia. 0:12:29.640 --> 0:12:31.920 So I follow the oil markets. And there is an 0:12:31.960 --> 0:12:35.559 narrative out there that if you wind up moving deeper 0:12:35.559 --> 0:12:38.280 into sanctioned territory or even enforcing the sanctions that are 0:12:38.280 --> 0:12:41.720 there on Iran, that opens up an avenue for Russia 0:12:41.760 --> 0:12:44.360 to sell more oil and make more money. How does 0:12:44.400 --> 0:12:46.360 the US weigh these two events? 0:12:48.080 --> 0:12:50.679 Well, let me connect this to something that Biden administration 0:12:50.840 --> 0:12:55.960 just recently did, the foot of freeze on our LNG 0:12:57.320 --> 0:13:03.200 development going forward. And I think when we have malign 0:13:03.320 --> 0:13:08.120 actors like Russia, like Iran who are oil exporters, we 0:13:08.360 --> 0:13:12.600 the United States, Canada and others need to produce more, 0:13:12.880 --> 0:13:15.559 not less oil and natural gas for the market. 0:13:17.240 --> 0:13:19.839 All right, doctor Cohen, So I guess one of the 0:13:19.920 --> 0:13:22.440 questions here is we think about next steps is the 0:13:22.480 --> 0:13:25.840 positions of mister net Nyahu within Israel itself. 0:13:25.880 --> 0:13:28.000 How is his gripple on power? 0:13:28.040 --> 0:13:31.480 How is his ability to continue to move forward with 0:13:31.520 --> 0:13:33.480 this conflict? 0:13:34.880 --> 0:13:38.080 Well, I was in Israel during the attack. The morale 0:13:38.200 --> 0:13:41.439 is high, but people are sick and tired of NATANIAO. 0:13:41.520 --> 0:13:46.560 If the elections took place today, he would lose and 0:13:46.960 --> 0:13:51.960 his credibility is shot, both because of the criminal investigation 0:13:52.080 --> 0:13:53.280 that predate. 0:13:53.240 --> 0:13:55.760 The Hamas attack, of October seventh. 0:13:55.800 --> 0:14:00.960 And because of the huge, unprecedented failure of the Israeli 0:14:01.040 --> 0:14:06.440 intelligence and the military on Netanyao's watch. So he may 0:14:06.600 --> 0:14:11.559 be trying to distract the attention to move on towards 0:14:11.559 --> 0:14:15.680 the Iranian confrontation. I do not want to speculate, but 0:14:16.440 --> 0:14:19.680 I think sooner or later Israel will do the right thing. 0:14:20.000 --> 0:14:23.640 There'll be a judiciary commission of inquiry like there. 0:14:23.640 --> 0:14:28.160 Was after the Young People War of nineteen seventy three, 0:14:28.200 --> 0:14:31.920 when Israel also got a huge to teach a surprise 0:14:32.720 --> 0:14:37.760 fifty years ago to the day of the attack of 0:14:37.840 --> 0:14:43.200 October seventh, And after that commission of inquiry there will 0:14:43.240 --> 0:14:48.840 be consequences can etaniao after including criminal proceedings. I don't 0:14:48.840 --> 0:14:54.360 want to speculate right now, but he is politically living 0:14:54.400 --> 0:14:55.160 corpse walking. 0:14:56.080 --> 0:14:58.400 Doctor thanks a lot. We really appreciate Doctor Ala Cohen, 0:14:58.680 --> 0:15:02.760 senior Fellow at the Atlantic Council, has had extensive experience 0:15:02.840 --> 0:15:05.360 twenty years. He served at a senior research fellow in 0:15:05.440 --> 0:15:08.840 Russia and Eurasian Studies and International Energy Policy at the 0:15:08.840 --> 0:15:11.960 Heritage Foundation. Wonderful to get his perspective. I think what's 0:15:11.960 --> 0:15:15.080 interesting Paul for the markets is how do you hedge 0:15:15.080 --> 0:15:17.600 the unthinkable, like going into Friday. It's like, okay, you 0:15:17.640 --> 0:15:19.320 don't want to take risk into the weekend. You want 0:15:19.320 --> 0:15:22.480 to take some safety. But now, now, how do you 0:15:22.520 --> 0:15:25.720 do that? Do you sell puts? Like you know, I 0:15:25.720 --> 0:15:26.040 don't know. 0:15:26.160 --> 0:15:28.560 Well, some folks are some folks are selling oil here 0:15:28.600 --> 0:15:31.280 Brent Crue down now about one point seven percent still, 0:15:31.360 --> 0:15:33.800 you know, up around eighty nine dollars per barrel. But 0:15:33.840 --> 0:15:36.640 maybe a little bit of a breathe of sigh relief a. 0:15:36.600 --> 0:15:37.160 Little bit there. 0:15:37.280 --> 0:15:40.000 Oh, absolutely, And also there's a seminary about there, like 0:15:40.280 --> 0:15:42.720 why would Iron want to hurt themselves even more on 0:15:42.760 --> 0:15:44.160 the oil front. Anyway, we'll discuss. 0:15:46.560 --> 0:15:50.440 You're listening to the Bloomberg Intelligence podcast. Catch us live 0:15:50.520 --> 0:15:53.120 weekdays at ten am Eastern on Apple car Play and 0:15:53.160 --> 0:15:55.800 then broud Otto with the Bloomberg Business app. Listen on 0:15:55.880 --> 0:15:59.160 demand wherever you get your podcasts, or watch us live 0:15:59.240 --> 0:16:00.600 on YouTube. 0:16:01.040 --> 0:16:03.160 Let's get the Ben Emmetts Senior portfolio manager and had 0:16:03.160 --> 0:16:05.560 to fixed income, new age wealth, the joints here in 0:16:05.600 --> 0:16:08.800 our Bloomberg Interactive Brooker Studio Ben A million ways to 0:16:08.840 --> 0:16:11.200 go here. Let's start with some of the economic data 0:16:11.200 --> 0:16:14.960 we got today. Some retail sales came in really strong. Here. 0:16:15.520 --> 0:16:18.280 The consumer seems to be in pretty good shape. I 0:16:18.280 --> 0:16:19.240 guess it. 0:16:19.280 --> 0:16:20.000 Still is BOM. 0:16:20.040 --> 0:16:22.800 I think that the employment reporters start to have an 0:16:22.800 --> 0:16:26.160 effect here, you know, because this was actually the numbers 0:16:26.200 --> 0:16:28.760 that were weak in generary ferry as we talked about earlier, 0:16:29.440 --> 0:16:31.400 and as I looked through these reports that you're seeing, 0:16:31.760 --> 0:16:34.120 you know, basically items that are going to be feeding 0:16:34.120 --> 0:16:37.800 directly into GDP that were up as well. 0:16:37.680 --> 0:16:38.840 As those non star sales. 0:16:38.840 --> 0:16:41.480 So I think what the market is doing today is 0:16:41.480 --> 0:16:45.440 to say, you know, GDP's once again accelerating. This brings 0:16:45.520 --> 0:16:47.360 us actually back to the summer of last year we 0:16:47.400 --> 0:16:50.400 had a similar phase of having higher bond yields started 0:16:50.440 --> 0:16:53.480 indicating that having a stronger economy, and this report then 0:16:54.080 --> 0:16:58.040 confirms it. So I think it's a yeah, this just shows. 0:16:57.760 --> 0:16:59.800 Once again like we just cannot be knocked off course 0:17:00.040 --> 0:17:02.200 no matter what guest is. The prices are doing, these 0:17:02.200 --> 0:17:02.640 sales are. 0:17:02.640 --> 0:17:04.800 Up to I mean I'm looking at the tenure, I 0:17:04.800 --> 0:17:06.800 mean rates are higher. Alex and I've been talking about 0:17:06.800 --> 0:17:08.840 this all day. Rach are up another twelve basis points 0:17:08.880 --> 0:17:11.640 on the tenure. The four point sixty five percent here, 0:17:11.680 --> 0:17:14.560 the two year run a five percent watch here. So 0:17:14.600 --> 0:17:17.280 the bond market is telling you, I don't know, rach 0:17:17.280 --> 0:17:18.160 are higher for longer. 0:17:18.200 --> 0:17:19.760 I guess higher for longer. 0:17:19.800 --> 0:17:23.080 And if you, if you, if this continues, then the 0:17:23.119 --> 0:17:25.240 tenure is going to drift towards where the fat fund's 0:17:25.280 --> 0:17:27.879 rate is, maybe not exactly but not too far off. 0:17:28.280 --> 0:17:30.399 That would, I think be a really interesting moment for 0:17:30.520 --> 0:17:32.920 Marcus because that means that if you're getting a ten 0:17:33.320 --> 0:17:35.960 fet funds rate about equal, it puts all should puts 0:17:35.960 --> 0:17:38.600 a lot of pressure on the economy. So but I 0:17:38.640 --> 0:17:41.480 think for now, and this is our view, that we're 0:17:41.480 --> 0:17:43.639 going to probably move into this four seventy five to 0:17:43.680 --> 0:17:46.440 five percent zone. You know, if this type of data 0:17:46.480 --> 0:17:48.760 shows that the GDP is going to be upgraded and 0:17:48.800 --> 0:17:51.080 the PC is going to be higher, we're going to 0:17:51.160 --> 0:17:53.159 have to expect that it's also going to be continued 0:17:53.200 --> 0:17:54.520 to reflect better growth. 0:17:54.560 --> 0:17:56.400 On top of the supply. 0:17:56.359 --> 0:17:58.600 We're going to continue a half it was very substantial 0:17:58.720 --> 0:17:59.359 terasury supply. 0:17:59.600 --> 0:18:02.760 So Ben that definitely means like a biotech thing because 0:18:02.800 --> 0:18:05.080 like they have the growth, they have the cash flow, 0:18:05.880 --> 0:18:07.720 they're not going to be subject to any of the 0:18:07.760 --> 0:18:10.480 refinancing et cetera. But I'm wondering if this scenario just 0:18:10.560 --> 0:18:13.280 dens the rotation that we've seen. Right, this I'm sure 0:18:13.359 --> 0:18:14.960 is bad for small caps. What does it do the 0:18:14.960 --> 0:18:16.080 cickle goals space. 0:18:17.080 --> 0:18:19.560 Yeah, you could think of that that anything interest rates 0:18:19.640 --> 0:18:24.560 sensitive as in the small cap space typically underperforms. With 0:18:24.800 --> 0:18:27.760 the view though that that we think the rotation, you know, 0:18:27.800 --> 0:18:31.720 the financial energy rotations really happens that that's not so 0:18:31.800 --> 0:18:34.720 much deriilty one it shows today with golden sacks like 0:18:34.760 --> 0:18:38.040 it's just you know, good trading environments. The energy market's 0:18:38.040 --> 0:18:40.520 obviously in play with because of the geopolitics. So I 0:18:40.520 --> 0:18:43.720 think that part of rotation is we think is working. 0:18:44.840 --> 0:18:46.840 But you're right about tech like that you gotta let 0:18:46.880 --> 0:18:50.040 your winners ride as Cameras said too, like we really 0:18:50.080 --> 0:18:53.480 have to not trade them but basically invest in them 0:18:53.560 --> 0:18:56.520 and stay with them because that is that is where 0:18:56.880 --> 0:18:59.920 it's happening in the economy. I think this is part 0:18:59.920 --> 0:19:03.159 of an impact to once again from all the infrastructure 0:19:03.200 --> 0:19:05.920 spending that starts to show up in the economists, making 0:19:05.920 --> 0:19:08.960 it each time stronger. Right, So why getting so much 0:19:09.480 --> 0:19:14.040 strength of unemployment rate? Unemployment and it feits to spending 0:19:14.320 --> 0:19:19.520 so I think concluding tech remains in play here even 0:19:19.560 --> 0:19:21.399 though the tay yield may go to five percent. 0:19:22.520 --> 0:19:25.000 So I mean, oh, your head of fix thing comes, 0:19:25.119 --> 0:19:27.080 let me ask you, I can sit into your treasury 0:19:27.080 --> 0:19:28.439 at four point ninety five percent. 0:19:28.880 --> 0:19:29.520 Should I do that? 0:19:29.640 --> 0:19:31.399 Or should I go out on the credit curve a 0:19:31.400 --> 0:19:34.160 little bit and maybe look at some corporate bonds, whether 0:19:34.160 --> 0:19:35.600 it's an investment grade or high yield. 0:19:35.760 --> 0:19:36.800 How are you guys positioning? 0:19:37.320 --> 0:19:40.399 So I put a little note out on Friday for 0:19:40.520 --> 0:19:42.600 New Edge that was I was sort of coming to 0:19:42.640 --> 0:19:44.480 the point of looking at the very short of the 0:19:44.520 --> 0:19:48.680 ye curve where anything that's floating rate, investment grade, or treasury. 0:19:48.760 --> 0:19:51.600 So even someone to extent howgh yield, it's just performing 0:19:51.680 --> 0:19:54.840 like so incredibly stable because you're getting all this interest. 0:19:54.880 --> 0:19:57.080 Right, So the spread of floating rate. 0:19:57.000 --> 0:20:00.480 Bonds over the treasury are anywhere but to two hundred 0:20:00.440 --> 0:20:03.040 three hundred basis points depending which area. 0:20:02.840 --> 0:20:05.000 In, that's pretty attractive. 0:20:05.040 --> 0:20:07.880 You keep collecting that interest and if you think about 0:20:07.880 --> 0:20:09.960 what's going on with the ten year yields. So on 0:20:10.040 --> 0:20:12.359 Friday we rally a lot. On geopolitics, we come in 0:20:12.400 --> 0:20:15.479 today we have a completely opposite picture. That's a lot 0:20:15.520 --> 0:20:18.159 of volatility. So I think from our point of view, 0:20:18.640 --> 0:20:20.160 you want to be a little bit more positioned down 0:20:20.160 --> 0:20:22.160 on the shorter end of yel curved because the yuka 0:20:22.280 --> 0:20:24.520 is not going to normalize much as fats on holds. 0:20:24.520 --> 0:20:26.680 You collect all that interest and give you very stable 0:20:26.720 --> 0:20:29.480 performance and sort of wait it down until we get 0:20:29.800 --> 0:20:32.399 higher yields in the low end that at some point 0:20:32.440 --> 0:20:35.000 is going to start slowing down the economy. We do 0:20:35.040 --> 0:20:37.320 think though, that the by zone for the ten year 0:20:37.359 --> 0:20:39.360 will probably be in that for the four seventy five 0:20:39.359 --> 0:20:41.959 five percent range, that we would think that a lot 0:20:41.960 --> 0:20:44.280 of people will start looking at it and buying. 0:20:45.040 --> 0:20:46.240 We probably do. 0:20:46.240 --> 0:20:48.080 Do you think we get to five percent on the tenure? 0:20:48.600 --> 0:20:51.919 I think it's fairly likely, and that's not just because 0:20:52.000 --> 0:20:55.800 of just today's number. But one thing with bonds Kurrny 0:20:55.880 --> 0:20:57.919 is that if you look at term premium as we 0:20:58.000 --> 0:21:00.520 call it a little like wonky term. But if you 0:21:00.560 --> 0:21:02.680 take what's expect from the fatter the next couple of 0:21:02.760 --> 0:21:05.040 years and where inflation is, you take that out of 0:21:05.040 --> 0:21:07.160 the ten year, there's almost no yield there. 0:21:07.040 --> 0:21:08.600 There's very little compensation. 0:21:09.440 --> 0:21:12.040 And if I then judge the way this geopolitical event 0:21:12.119 --> 0:21:15.680 is played out against an economy that doesn't get off thrown. 0:21:15.760 --> 0:21:19.040 Of course, it stays above trend. The volatility of bonds 0:21:19.160 --> 0:21:21.560