WEBVTT - Surveillance: 3% GDP with Matus 0:00:05.120 --> 0:00:07.119 This is the Bloomberg Surveillance Podcast. 0:00:07.160 --> 0:00:11.080 I'm Tom Keene, along with Jonathan Farrow and Lisa Abramowitz. 0:00:11.280 --> 0:00:15.760 Join us each day for insight from the best and economics, geopolitics, 0:00:15.760 --> 0:00:20.720 finance and investment. Subscribe to Bloomberg Surveillance on demand on Apple, 0:00:20.960 --> 0:00:25.400 Spotify and anywhere you get your podcasts, and always on 0:00:25.520 --> 0:00:29.840 Bloomberg dot Com, the Bloomberg Terminal, and the Bloomberg Business App. 0:00:30.000 --> 0:00:33.960 Drew Matis's chief market strategist at MetLife Investment Management. He 0:00:34.000 --> 0:00:37.839 has been wonderful about gaming the optimism of the American 0:00:37.920 --> 0:00:41.320 economic experiment. Drew, let's start with that glass half full, 0:00:41.720 --> 0:00:44.559 glass half empty at MetLife. 0:00:44.880 --> 0:00:46.640 Well, the good news is there's not gonna be a 0:00:46.680 --> 0:00:49.200 recession this year. The bad news is it's still coming, 0:00:49.880 --> 0:00:52.919 and you know it's we've had to move back our 0:00:52.960 --> 0:00:56.240 forecast from midyear to the start of next year. The 0:00:56.280 --> 0:00:59.640 reason we went that far actually is because we think 0:00:59.720 --> 0:01:03.280 can so comers are still in this ballgame. They're still 0:01:03.720 --> 0:01:06.080 in this you only live once mentality post COVID. 0:01:07.240 --> 0:01:09.480 But we do think when you get to the. 0:01:09.120 --> 0:01:11.560 Start of next year, you'll have a lot of more 0:01:11.600 --> 0:01:15.039 headwinds and some of the data now that's currently pointing 0:01:15.040 --> 0:01:18.640 towards a recession will probably be even worse. And we 0:01:18.680 --> 0:01:20.800 think the turn of the year is about the right time. 0:01:21.000 --> 0:01:24.200 The raging economic debate, and maybe this will be alluded 0:01:24.200 --> 0:01:28.679 to in the academics of Jackson Hole is whither our start? 0:01:28.840 --> 0:01:33.600 Whither the rate post pandemic? We're gliding too, Matt life 0:01:33.720 --> 0:01:40.000 is riveted to the actuaro return expected within longer term portfolios. 0:01:40.280 --> 0:01:43.920 Have you adjusted that view, have you lowered your expectations 0:01:43.959 --> 0:01:47.240 for return or can you be more optimistic about a 0:01:47.280 --> 0:01:49.040 better return post pandemic? 0:01:50.200 --> 0:01:53.320 So I'll say this when we think about you know, 0:01:53.600 --> 0:01:56.200 so let's get past the next recession whenever that is right. 0:01:56.240 --> 0:01:58.960 We think it's next year. But let's just say in. 0:01:58.920 --> 0:02:01.360 The future, when you come out of that recession, what 0:02:01.400 --> 0:02:04.360 are you going to have? We're very optimistic there, and 0:02:04.400 --> 0:02:07.360 that means higher potential growth rates. We think that there's 0:02:07.400 --> 0:02:12.239 the potential for participation rate rebound even beyond what we're seeing. 0:02:13.200 --> 0:02:16.880 Higher productivity, although it's hard to get lower than we 0:02:16.919 --> 0:02:19.480 currently are, but we expect the rebound and productivity that's 0:02:19.480 --> 0:02:24.000 sustainable and will be sizable, and we expect therefore that 0:02:24.080 --> 0:02:27.560 potential growth will be higher, and with potential growth being higher, 0:02:27.560 --> 0:02:31.239 we expect neutral interest rates to also be higher. 0:02:31.280 --> 0:02:32.120 At that point, do. 0:02:32.080 --> 0:02:33.920 You build that out a little bit more. What's going 0:02:34.000 --> 0:02:38.280 to drive higher that productivity, potential growth, high neutral interest rates? 0:02:38.280 --> 0:02:39.920 Where does all that come from? 0:02:40.720 --> 0:02:43.280 I think so, first of all, from kind of a 0:02:43.320 --> 0:02:46.200 worker perspective, I think you're going to have people engaging 0:02:46.240 --> 0:02:49.400 in the workforce for longer, over longer periods of their lives, 0:02:50.360 --> 0:02:53.040 and during healthier periods of their lives. I think the 0:02:53.080 --> 0:02:56.160 healthy period of people's lives are going to expand, and 0:02:56.200 --> 0:02:59.160 I think that that's a consequence of some of the 0:02:59.480 --> 0:03:04.800 gains made in biotech during the during the COVID problem. 0:03:05.560 --> 0:03:08.280 So I think that that So that's first and foremost. Secondly, 0:03:08.320 --> 0:03:10.720 work from home will encourage older workers potentially stay in 0:03:10.760 --> 0:03:13.120 the workforce for a little bit longer, and I think 0:03:13.160 --> 0:03:15.000 firms are going to respond to that by making it 0:03:15.040 --> 0:03:18.000 easier for older workers to stay in the workforce for longer. 0:03:18.080 --> 0:03:20.839 And so not only are we going to potentially have 0:03:20.919 --> 0:03:23.280 this rebound that we're seeing in kind of the so 0:03:23.360 --> 0:03:26.200 called prime working age group, but we're also going to 0:03:26.200 --> 0:03:30.040 see other groups actually engaging more aggressively in the workforce 0:03:30.080 --> 0:03:32.000 and that'll be good for the US economy as a 0:03:32.000 --> 0:03:35.920 whole productivity wise. You know, I'm doing this for my 0:03:35.960 --> 0:03:40.040 office via zoom, right. I mean, in the past, this 0:03:40.080 --> 0:03:42.320 would have been very difficult for us to pull off, 0:03:43.280 --> 0:03:48.480 and it's just a much more convenient and productivity enhancing arrangement. 0:03:49.200 --> 0:03:51.160 And I think if you go through and look at 0:03:51.640 --> 0:03:55.040 whether it's the cost of putting objects in space which 0:03:55.120 --> 0:03:59.120 is deteriorate significantly or lowered significantly, when you look at 0:03:59.160 --> 0:04:04.040 gains in biotech. You know, for twenty five years we 0:04:04.120 --> 0:04:07.080 were promised miracles in biotech and we finally saw some, 0:04:07.160 --> 0:04:10.240 and no one's paying attention, right because we were distracted 0:04:10.240 --> 0:04:12.640 by the fact that, you know, it was a crisis situation. 0:04:13.720 --> 0:04:16.479 But you know, those things all add up and they'll 0:04:16.520 --> 0:04:18.880 all begin to interact with each other in ways that 0:04:19.040 --> 0:04:22.960 you know, I can't probably fathom completely how they'll all interact, 0:04:23.600 --> 0:04:27.240 but they'll be productivity enhancing and I think we're in 0:04:27.320 --> 0:04:29.840 for a big productivity ride once we get through this 0:04:29.880 --> 0:04:30.520 next countern. 0:04:30.640 --> 0:04:32.680 How right sensitive do you think the economy will be 0:04:32.760 --> 0:04:33.600 that you describe? 0:04:36.320 --> 0:04:38.600 You know, I think initially every every economy is very 0:04:38.680 --> 0:04:41.160 sensitive because you have to finance all this stuff. But 0:04:41.240 --> 0:04:44.080 I think you know, in some ways, you know, the 0:04:44.160 --> 0:04:47.520 die is cast in some of these industries. You're seeing 0:04:47.600 --> 0:04:50.640 the deteriorate or the lowering of price and cost of 0:04:50.680 --> 0:04:55.200 getting things into orbit. That's already happened, and so you know, 0:04:55.320 --> 0:04:57.120 I think for Noaly, it's just a matter of how 0:04:57.120 --> 0:05:00.600 do we exploit it best? And you know whether or not, 0:05:01.080 --> 0:05:03.440 you know, my forecast is going to hinge on on 0:05:03.680 --> 0:05:04.320 on kind. 0:05:04.160 --> 0:05:07.320 Of you know, you know, am I right? Am I wrong? 0:05:07.400 --> 0:05:10.960 Which I know sounds obvious, but I do think that 0:05:11.080 --> 0:05:14.000 you know, the history has shown you should be optimistic 0:05:14.080 --> 0:05:16.560 for developments in technology, not pessimistic. 0:05:16.880 --> 0:05:19.480 So then what does that give your GDP statistic out 0:05:19.560 --> 0:05:21.680 one year? I'm not talking about quarter to quarter or 0:05:21.680 --> 0:05:24.279 that on a longer broader term. You're in a meeting 0:05:24.360 --> 0:05:26.640 in met life for people's idea of short term is 0:05:26.680 --> 0:05:29.720 ten years? What's your GDP run rate? Can you get 0:05:29.760 --> 0:05:31.279 above two percent real GDP? 0:05:32.640 --> 0:05:35.080 If I had to put potential growth ten years from now, 0:05:35.360 --> 0:05:37.240 I'd probably put it closer to three than two and 0:05:37.279 --> 0:05:37.560 a half. 0:05:38.279 --> 0:05:41.520 Wow, three real percent real GDP? 0:05:43.240 --> 0:05:45.239 I think that that is a reasonable estimation. 0:05:45.560 --> 0:05:49.279 Wow, that John, that is a Wow, statistic from dumatics. 0:05:49.400 --> 0:05:52.760 I can't convey how off norm that is. And that 0:05:52.880 --> 0:05:56.560 goes to the responsibilities of an insurance company. Yeah, where 0:05:56.560 --> 0:05:59.000 they're really focused every day on a long term view. 0:05:58.880 --> 0:06:00.719 As tray, can we finish on and this just quickly. 0:06:01.040 --> 0:06:03.520 If we get a rate hiking cycle ending with a 0:06:03.600 --> 0:06:06.400 hike this week, let's just say that, maybe you get 0:06:06.440 --> 0:06:09.040 another one, but who knows when they start cutting. Have 0:06:09.160 --> 0:06:11.120 you got firm ideas on what they cut back to, 0:06:11.480 --> 0:06:13.479 because clearly there's a consensus out there that we don't 0:06:13.520 --> 0:06:16.200 go back to zero. What's your view on that currently? 0:06:17.360 --> 0:06:18.960 I think that I think there'll be a three handle 0:06:19.000 --> 0:06:20.320 at the low point for the next. 0:06:20.160 --> 0:06:22.960 Cycle, Okay, and you think the bond market is well 0:06:23.000 --> 0:06:24.440 priced for that. Given the way you see the yell 0:06:24.480 --> 0:06:27.600 curve evolving in the last few months, I'm actually. 0:06:27.360 --> 0:06:29.599 A little surprised at where the your curve is given 0:06:29.640 --> 0:06:32.440 this expectation that we're in a you know, we're going 0:06:32.520 --> 0:06:34.920 to have a soft landing. To be honest, I think 0:06:35.080 --> 0:06:37.720 you know, when you think about what a soft landing means, 0:06:37.720 --> 0:06:40.120 it means that the FED probably wouldn't have to refers course, 0:06:41.000 --> 0:06:42.600 so they're going to be stuck a kind of this fire, 0:06:42.720 --> 0:06:45.839 you know, five percent five percent plus for a FED funds, right, 0:06:46.480 --> 0:06:47.920 And so where should the rest of the your curve 0:06:47.960 --> 0:06:49.840 be in that kind of scenario? And what should that 0:06:49.920 --> 0:06:52.800 yr curve be shaped like? And when I look at 0:06:52.800 --> 0:06:54.800 the current shape of the your curve, I don't I 0:06:54.800 --> 0:06:56.719 don't see that reflecting that belief. 0:06:57.000 --> 0:06:59.560 Dree Matis, thank you of MetLife Investment Management. 0:07:03.760 --> 0:07:06.640 Marilyn Watson briefs now had a global fundamental fixed income 0:07:06.640 --> 0:07:11.000 strategy at Blackrock. This is an incredibly important conversation, folks 0:07:11.240 --> 0:07:14.640 on what the prescription is forward which Maryland is to 0:07:14.680 --> 0:07:19.040 be flexible in nimble. I'm going to editorialize into twenty 0:07:19.160 --> 0:07:24.280 twenty five how am I flexible in nimble clipping coupons 0:07:24.360 --> 0:07:25.320 in fixed income? 0:07:27.000 --> 0:07:29.160 So in fixed income at the moment, as you say, 0:07:29.200 --> 0:07:31.120 I think you do need to be flexible, and you 0:07:31.160 --> 0:07:34.320 need to be nimble because it's a very uncertain environment. 0:07:34.400 --> 0:07:37.400 Still at the moment you can get very attractive carry 0:07:37.960 --> 0:07:40.480 at the front end of the curve. Still also in 0:07:40.800 --> 0:07:45.920 commercial paper, in some short dated investment grade bonds, and 0:07:46.240 --> 0:07:49.800 at the moment it pays to actually not take too 0:07:49.880 --> 0:07:52.720 much duration risk, not take too much risk, but just 0:07:52.760 --> 0:07:56.640 clip those coupons and get the income. But as the 0:07:56.680 --> 0:07:59.680 economy evolves in the US and in Europe and elsewhere, 0:08:00.000 --> 0:08:02.800 as we get more information from the FED tomorrow, from 0:08:02.800 --> 0:08:06.200 the ECB on Thursday, and over the next few weeks 0:08:06.240 --> 0:08:08.680 and next couple of months, as we continue to see 0:08:08.720 --> 0:08:12.160 more economic data from the US or from the Eurozone, 0:08:12.200 --> 0:08:14.600 which as you mentioned earlier, has seen some pretty weak 0:08:14.680 --> 0:08:17.480 data in the Eurozone at the moment, then we will 0:08:17.520 --> 0:08:20.040 continue to see a shift both in the Yelk curve 0:08:20.120 --> 0:08:22.720 and in the opportunities that I think they're available. So 0:08:22.880 --> 0:08:25.960 at the moment, I think it pays to get the carry, 0:08:26.600 --> 0:08:28.640 to not take too much risk, but then to be 0:08:28.680 --> 0:08:32.120 able to really deploy that dry powder when the opportunities arise. 0:08:33.040 --> 0:08:35.920 I need to conflate in here, Maryland the news now, 0:08:35.960 --> 0:08:39.360 and it's Torsen Slack writing for Apollo. Looking at loans. 0:08:39.400 --> 0:08:42.720 I mentioned loans in the previous hour is a mystery 0:08:42.760 --> 0:08:45.320 to me. The default rate of high yield and such. 0:08:46.000 --> 0:08:49.600 Is the market too complacent about what is to come 0:08:50.280 --> 0:08:53.760 in commercial real estate, what is to come in these 0:08:53.800 --> 0:08:58.719 strange leverage loan vehicles in derivatives within your world? Are 0:08:58.760 --> 0:08:59.679 we too complacent. 0:09:01.520 --> 0:09:04.240 So I don't know that it's too complacent, but I 0:09:04.320 --> 0:09:07.360 don't think there's a very clear view on the trajectory 0:09:07.440 --> 0:09:10.880 of the economy going forward. At the moment, you know, 0:09:11.480 --> 0:09:13.280 our core view is that there won't be your recession 0:09:13.440 --> 0:09:15.880 this year in the US. We think that the US 0:09:15.920 --> 0:09:19.280 remains pretty resilient, and while it is slowing, it remains 0:09:19.720 --> 0:09:22.440 on a pretty solid footing. And when you look at 0:09:22.480 --> 0:09:26.520 the commercial real estate sector then it has already been 0:09:26.520 --> 0:09:30.120 negatively impacted by the very aggressive rate hikes, but as 0:09:30.120 --> 0:09:32.440 you say, perhaps not as much as some people may 0:09:32.440 --> 0:09:35.080 have expected. When you look at leverage loans and elsewhere 0:09:35.200 --> 0:09:37.920 you look at, you know, high yield overall has performed 0:09:38.480 --> 0:09:40.760 very well this year. But I think at the moment, 0:09:41.679 --> 0:09:44.000 you know, a lot of investors are still looking at 0:09:44.400 --> 0:09:47.920 really getting in, i think, in the bottom up fundamentals. 0:09:48.280 --> 0:09:51.560 So there's a big difference between the different bonds and 0:09:51.600 --> 0:09:54.960 the different issuers that you also buy within the highal 0:09:55.040 --> 0:09:57.920 sector and the spread and the total yield that you 0:09:57.920 --> 0:09:59.839 can get there as well. But at the moment, I 0:10:00.000 --> 0:10:03.120 think there isn't really a consensus on the trajectory of 0:10:03.120 --> 0:10:06.079 the economy and how bad if it's bad at all. 0:10:06.160 --> 0:10:07.960 It will be next year, so I don't know if 0:10:07.960 --> 0:10:10.600 it's complacent. I think there's just not yet enough data 0:10:11.000 --> 0:10:12.520 for the market to be able to tell. 0:10:12.679 --> 0:10:14.960 Let's work through some of this work from Torston Slot 0:10:14.960 --> 0:10:16.880 this morning and Marilond good morning, all able to share 0:10:16.880 --> 0:10:19.680 their full quote. Markets are not taking the ongoing rise 0:10:19.720 --> 0:10:22.720 in default rates for high yield and loads seriously. Many 0:10:22.720 --> 0:10:25.240 investors argue that this is just normalization, or these are 0:10:25.240 --> 0:10:28.160 companies nobody has heard about, the reality is that more 0:10:28.200 --> 0:10:30.559 and more companies are defaulting because the cost of capital 0:10:30.640 --> 0:10:33.680 is higher. Higher cost of capital is precisely how monetary 0:10:33.720 --> 0:10:37.000 policy works by making it more difficult to get financing. 0:10:37.040 --> 0:10:40.120 The FED hikes are biting harder and harder, and all 0:10:40.120 --> 0:10:42.000 investors should have a view on how high they think 0:10:42.040 --> 0:10:45.560 default rates will go during this cycle. Marilyn, can you 0:10:45.600 --> 0:10:48.440 have a view on that today? And would that leads 0:10:48.440 --> 0:10:51.400 you to believe that you should back away from easure 0:10:51.400 --> 0:10:53.520 of this market which are going to face much much 0:10:53.600 --> 0:10:56.080 higher funding costs when they come back to market in 0:10:56.120 --> 0:10:57.760 maybe twelve months eighteen months from now. 0:10:59.280 --> 0:11:02.280 Yeah, I think you can. And as I say, at 0:11:02.320 --> 0:11:05.200 the moment, you don't need to take the credit risk 0:11:05.360 --> 0:11:07.320 in the high yield sector when you can get very 0:11:07.360 --> 0:11:12.280 decent carry elsewhere much higher up the credit spectrum. I 0:11:12.280 --> 0:11:16.079 think also, you know, when you're looking at your overall allocation, 0:11:16.160 --> 0:11:18.480 when you look at the equity market versus the high 0:11:18.480 --> 0:11:20.600 old market, for example, we also like some of the 0:11:20.640 --> 0:11:22.640 beta in the equity markets, so you don't need to 0:11:22.640 --> 0:11:24.640 take the risk there, you don't need to take the 0:11:24.640 --> 0:11:27.720 credit risk. So you can take a view, and our 0:11:27.760 --> 0:11:30.640 position at the moment, I would say is relatively cautious. 0:11:30.760 --> 0:11:33.959 It's relatively you know, high quality, and as I say, 0:11:34.000 --> 0:11:37.000 we're being very nimble and we're really stirring clear of 0:11:37.920 --> 0:11:40.600 too much duration risk, although we have added a little 0:11:40.600 --> 0:11:43.480 bit there. But we're also just being very very cautious 0:11:43.480 --> 0:11:45.880 from a bottom up perspective, and we want to know 0:11:46.080 --> 0:11:50.200 and understand exactly what we're buying in every single issuer, 0:11:50.640 --> 0:11:53.360 in every securitized asset, in every investment grade bond. We 0:11:53.400 --> 0:11:57.120 want to understand exactly the fundamentals from bottom up perspective 0:11:57.480 --> 0:11:59.480 of the issue itself and of the sector as a whole. 0:12:00.040 --> 0:12:01.960 I think you can take a view and at the moment, 0:12:02.080 --> 0:12:04.840 we don't think it pays to take the risk further 0:12:04.880 --> 0:12:05.800 down the credit spectrum. 0:12:05.800 --> 0:12:08.680 You mentioned they're taking on a little bit more duration risk. 0:12:08.800 --> 0:12:10.360 Can you give us a little bit more kind of there? 0:12:10.360 --> 0:12:11.080 What have you been doing? 0:12:12.760 --> 0:12:14.840 So we've added a little bit on the margins because 0:12:15.320 --> 0:12:18.440 you know, it is our view that the Fed, you know, 0:12:18.480 --> 0:12:23.080 will hike again this week and then maybe pause. The 0:12:23.120 --> 0:12:26.560 Fed itself has indicated in the you know, the previous 0:12:26.800 --> 0:12:31.760 summary of Economic projections potentially one more hike, but we 0:12:31.800 --> 0:12:33.520 don't know that yet. Obviously, we need to see a 0:12:33.559 --> 0:12:35.680 lot more data to see whether that comes through or not. 0:12:36.080 --> 0:12:38.080 But we have been adding a little bit more duration 0:12:38.679 --> 0:12:40.520 in the front end and the belly of the curve 0:12:40.559 --> 0:12:44.800 in the US. Also in the Eurozone, you know, we 0:12:44.880 --> 0:12:47.079 think that the ec people will hike again this week. 0:12:47.160 --> 0:12:50.160 They may hike again in September, but that's nowhere near 0:12:50.160 --> 0:12:55.120 a clear cut scenario anymore given the data, and it 0:12:55.160 --> 0:12:56.880 does we do think it now pays to take a 0:12:56.880 --> 0:12:59.840 little bit duration, more duration risk, a little bit more yields, 0:13:00.559 --> 0:13:02.520 and just to lock in some of those rates. 0:13:02.280 --> 0:13:03.880 Not even the hawks on the ECB you want to 0:13:03.880 --> 0:13:06.480 commit to an I think beyond this week. Find that interesting, 0:13:06.480 --> 0:13:08.240 marinin Thank you, Mariam, what's in a black rock and 0:13:08.320 --> 0:13:09.800 Joy London mantin it's good to see it. 0:13:20.080 --> 0:13:22.520 Yeah, I remember John when you whispered to me somewhere 0:13:22.520 --> 0:13:26.880 in May of twenty twenty General Motors, Tom, General Motors 0:13:26.840 --> 0:13:30.520 are going to do it twenty to sixty and then 0:13:30.559 --> 0:13:33.000 a challenge last year to say the least, and now 0:13:33.080 --> 0:13:36.079 ebbing and flowing you thirty five to forty. It has 0:13:36.120 --> 0:13:39.520 been a challenge for General Motives, including all manufacturers through 0:13:39.559 --> 0:13:42.920 the pandemic and now they look to profitability. Joining us 0:13:42.920 --> 0:13:46.840 as chief financial officer driving the financial ratios at the 0:13:46.880 --> 0:13:50.880 complexities of the future of General Motors, Paul Jacobson joins. 0:13:50.720 --> 0:13:52.000 Us this morning. 0:13:52.120 --> 0:13:55.400 Paul defined profitability. We're in the income statement. Are you 0:13:55.520 --> 0:13:59.719 zeroed in on on profitability out twenty four months out 0:14:00.000 --> 0:14:01.800 five years for General Motors. 0:14:03.600 --> 0:14:06.120 Well, good morning, Tom, and thanks again for having us. 0:14:06.160 --> 0:14:08.480 It's always always a pleasure to be with you, especially 0:14:08.520 --> 0:14:11.320 on a day like today where we're announcing the tremendous 0:14:11.400 --> 0:14:14.440 results that the GM team put forward, and I just 0:14:14.480 --> 0:14:17.720 want to extend a great big thanks to them worldwide 0:14:17.720 --> 0:14:21.320 for the results that they posted during the quarter. You know, 0:14:21.360 --> 0:14:24.160 when we're looking at when we're looking at profitability, you know, 0:14:24.200 --> 0:14:27.240 it's a whole range of outcomes. Obviously, ebit matters. But 0:14:27.320 --> 0:14:29.600 one of the things I think we've been really focused on, 0:14:29.760 --> 0:14:33.160 and I think it's worked for us, is the combination 0:14:33.280 --> 0:14:37.280 of market share and margin and growth. So the end 0:14:37.280 --> 0:14:39.400 of the day, it's not just about producing and selling 0:14:39.480 --> 0:14:42.040 more vehicles. It's about making sure that we're maintaining and 0:14:42.080 --> 0:14:44.680 expanding our margins going forward. And when you look at 0:14:44.960 --> 0:14:47.240 the track record that we've had, especially over the last 0:14:47.240 --> 0:14:49.800 six months, but really over kind of the last six quarters, 0:14:50.400 --> 0:14:54.440 the team's done an amazing job producing vehicles that customers demand, 0:14:54.960 --> 0:14:57.400 and you know, our biggest challenges we can't get them 0:14:57.480 --> 0:15:00.920 fast enough. But customers have really responded and we really 0:15:00.960 --> 0:15:01.640 appreciate that. 0:15:01.720 --> 0:15:03.880 Okay, that's right where I want to go, and that 0:15:03.960 --> 0:15:06.400 there's a shortage of you know, there's always in every 0:15:06.400 --> 0:15:09.280 company four or five vehicles. Everybody wants the same car. 0:15:10.000 --> 0:15:13.200 Do you have a lot of pricing flexibility now into 0:15:13.280 --> 0:15:17.080 twenty twenty four, Can you raise prices? 0:15:19.400 --> 0:15:21.240 Well, I'm not sure that we're going to be able 0:15:21.280 --> 0:15:23.320 to raise prices across the board, but one of the 0:15:23.320 --> 0:15:26.200 things that we've seen that has really manifested itself is 0:15:26.680 --> 0:15:30.480 customers demanding higher trim levels. In fact, we created over 0:15:30.480 --> 0:15:33.520 the last eighteen months the Denali Ultimate, which was a 0:15:34.040 --> 0:15:36.920 higher end trim level than our high end Denali on 0:15:36.960 --> 0:15:40.440 the GMC Ukon's in response to customers wanting them. And 0:15:40.480 --> 0:15:42.200 now what we see when we look at our trucks 0:15:42.200 --> 0:15:45.160 in our SUVs, about seventy to seventy five percent of 0:15:45.200 --> 0:15:48.120 them are being priced at premium levels where customers are 0:15:48.120 --> 0:15:50.600 demanding that. So I think we've done a good job 0:15:50.640 --> 0:15:54.560 of responding to where customer demand is and what they're 0:15:54.600 --> 0:15:57.400 looking for in our products. As far as the core prices, 0:15:57.440 --> 0:16:00.600 obviously the business is really competitive. We focus on price 0:16:00.640 --> 0:16:03.840 stability and I think I think our results show that 0:16:03.840 --> 0:16:04.720 we've done a good job with that. 0:16:05.000 --> 0:16:08.000 John a pickup truck. This used to be you know, you. 0:16:07.760 --> 0:16:10.560 You you wanted an old GM pickup truck that you 0:16:10.560 --> 0:16:13.080 could drive around with your guitar next to you, and 0:16:13.120 --> 0:16:13.560 you know, the. 0:16:13.520 --> 0:16:14.400 Whole scrump yourself. 0:16:14.400 --> 0:16:16.640 If you're done at Auburn University and you get an 0:16:16.680 --> 0:16:19.600 old GM pickup truck that you paid dead paid three 0:16:19.600 --> 0:16:22.480 thousand dollars, you could see the road through the floor. 0:16:23.080 --> 0:16:29.600 GMC Sierra Denali Ultimate Ready ninety one dollars. That's not 0:16:29.760 --> 0:16:30.760 Paul sell them today. 0:16:30.840 --> 0:16:33.080 So Paul, are you telling us that you're expecting higher 0:16:33.120 --> 0:16:36.120 average selling prices in the second half. 0:16:36.960 --> 0:16:40.560 Yeah, so, John, we we saw we saw higher ATPs 0:16:40.600 --> 0:16:43.320 in the second quarter, about sixteen hundred dollars higher than 0:16:43.760 --> 0:16:46.960 the first quarter sequentially. You know, I think we're going 0:16:47.000 --> 0:16:49.320 to continue to watch it. We've taken this whole year 0:16:49.400 --> 0:16:52.880 with a little bit of caution, just understanding the macro 0:16:52.960 --> 0:16:55.680 that's out there, and what we said at the beginning 0:16:55.760 --> 0:16:58.240 of the year was if the customer held in and 0:16:58.280 --> 0:17:01.840 we were able to maintain pricing, we expected to significantly 0:17:01.920 --> 0:17:05.439 outperform the guidance that we posted. And then after the 0:17:05.480 --> 0:17:08.240 first quarter, we raise guidance by five hundred million dollars 0:17:08.280 --> 0:17:10.600 on the EBIT line, and now we're raising it by 0:17:10.600 --> 0:17:13.080 a billion dollars. So we see a lot of stability 0:17:13.119 --> 0:17:15.840 in the market. We're just kind of taking it one day, 0:17:15.880 --> 0:17:18.919 one month at a time and watching the results come in. 0:17:19.240 --> 0:17:21.280 We've got to be focused on quality, and we've got 0:17:21.280 --> 0:17:23.480 to be focused on getting production in the vehicles that 0:17:23.520 --> 0:17:24.200 customers want. 0:17:24.280 --> 0:17:26.080 Let's just talk about customers a little bit more. We 0:17:26.080 --> 0:17:28.119 saw some data recently I think from the further reserve 0:17:28.160 --> 0:17:30.680 in the last couple of weeks about people being rejected 0:17:30.680 --> 0:17:33.240 for auto loans, Paul, can you give us an idea 0:17:33.240 --> 0:17:35.960 of how some of these purchases are being financed and 0:17:36.000 --> 0:17:37.399 the kind of trends you seeing develop. 0:17:39.520 --> 0:17:41.720 So, you know, we've got a lot of good insight 0:17:41.800 --> 0:17:46.280 on that through our GM Financial captive company, and their 0:17:46.320 --> 0:17:51.200 results are pretty strong. We continue to write new loans. 0:17:51.200 --> 0:17:54.240 In fact, we've written at a higher share the first half 0:17:54.280 --> 0:17:57.520 of the year than traditionally, which is not a bad thing. 0:17:57.880 --> 0:18:00.439 We're there to meet our customers where they need us, 0:18:00.760 --> 0:18:02.800 and GM Financial has done a great job of that. 0:18:02.920 --> 0:18:06.679 We watch the credit metrics on a weekly basis across 0:18:06.720 --> 0:18:09.560 their entire portfolio, and we haven't seen anything that gives 0:18:09.600 --> 0:18:13.360 us a reason for concern. You know, we have really good, 0:18:13.400 --> 0:18:17.520 high quality borrowers on our new vehicles and the credit 0:18:17.600 --> 0:18:21.680 is performing quite well from that, so we understand obviously 0:18:21.680 --> 0:18:23.720 in the subprime world in some of the used cars, 0:18:23.720 --> 0:18:26.639 where we've seen banks tightening a little bit, that's not 0:18:26.840 --> 0:18:30.920 necessarily our Forte, but certainly where we're lending on new vehicles, 0:18:31.160 --> 0:18:32.480 the results are pretty strong. 0:18:32.320 --> 0:18:34.320 And Paul, I'm going to pick on Ittey mccaulley. It's 0:18:34.320 --> 0:18:37.520 City Group, and that you know from the pandemic from 0:18:37.600 --> 0:18:40.240 the end of twenty nineteen, I got a shareholder return 0:18:40.280 --> 0:18:43.159 of three percent, four percent per year, whatever the number is, 0:18:43.200 --> 0:18:47.439 it's low single digit. Clearly it's not acceptable. The fact is, 0:18:47.560 --> 0:18:50.560 somebody is knowledgeable, as Ittay mccaullay or the team over 0:18:50.560 --> 0:18:54.919 at Bloomberg Intelligence looks for huge share price. 0:18:54.760 --> 0:18:56.080 Performance from GM. 0:18:56.520 --> 0:18:59.520 What is going to be the catalyst for people to 0:18:59.600 --> 0:19:02.560 realize a new profitability of GM. 0:19:02.640 --> 0:19:04.439 What's the thing that's going to. 0:19:04.480 --> 0:19:08.440 Get me to it's McCauley's price target, which is a double. 0:19:10.480 --> 0:19:10.760 Yeah. 0:19:10.800 --> 0:19:13.560 So that's the question of the day, Tom, and one 0:19:13.600 --> 0:19:15.720 that we spend a lot of time thinking about. Obviously 0:19:15.800 --> 0:19:18.000 for our shareholders, you know, one of the things that 0:19:18.040 --> 0:19:19.719 we've got to do is we've just got to continue 0:19:19.760 --> 0:19:22.480 to consistently perform. I'm a big believer that the market 0:19:22.520 --> 0:19:25.600 can ignore fundamentals too long, and when you look at 0:19:25.600 --> 0:19:28.120 the type of performance that we've been driving, I think 0:19:28.160 --> 0:19:31.480 we're establishing a really good track record of credibility. So 0:19:31.520 --> 0:19:34.480 that's job one number two. On the macro side, Clearly, 0:19:34.560 --> 0:19:36.639 it's been a bit of a headwind over the last 0:19:36.680 --> 0:19:41.800 eighteen months. As you know, expectations are consistently downward from 0:19:42.040 --> 0:19:44.919 where we are, which is why it's so important now 0:19:44.960 --> 0:19:47.440 that we've put two quarters out there with a raise 0:19:47.480 --> 0:19:50.080 on the guidance this year will be really, really strong. 0:19:50.119 --> 0:19:54.840 We're overcoming pension headwinds, we're overcoming some normalization at GM 0:19:54.920 --> 0:19:58.119 Financials earnings. But you know, the results are going to 0:19:58.160 --> 0:20:01.760 be very similar, if not, if not potentially better better 0:20:01.800 --> 0:20:04.639 than last year. So that's what we're focused on. On 0:20:05.080 --> 0:20:07.440 the market, I think it'll come around. You know, we've 0:20:07.440 --> 0:20:09.280 got to make sure that the macro clears up a 0:20:09.320 --> 0:20:11.600 little bit. I think we've seen that over the last 0:20:11.600 --> 0:20:13.360 couple of months. And you know, I think we've got 0:20:13.400 --> 0:20:14.960 to make sure that we reach an agreement with the 0:20:15.040 --> 0:20:18.240 UAW not just for us, but as an industry because 0:20:18.280 --> 0:20:21.720 obviously there's some uncertainty around that in investors' eyes. But 0:20:21.800 --> 0:20:24.440