1 00:00:02,640 --> 00:00:05,320 Speaker 1: Welcome to the Bloomberg Penel podcast. I'm Paul swing you, 2 00:00:05,360 --> 00:00:07,680 Speaker 1: along with my co host Lisa Brahma wits. Each day 3 00:00:07,720 --> 00:00:10,240 Speaker 1: we bring you the most noteworthy and useful interviews for 4 00:00:10,280 --> 00:00:12,520 Speaker 1: you and your money. Whether at the grocery store or 5 00:00:12,560 --> 00:00:15,480 Speaker 1: the trading floor. Find a Bloomberg Penl podcast on Apple 6 00:00:15,520 --> 00:00:17,960 Speaker 1: podcast or wherever you listen to podcasts, as well as 7 00:00:17,960 --> 00:00:23,279 Speaker 1: at Bloomberg dot com. The pound today is rallying on 8 00:00:23,320 --> 00:00:27,520 Speaker 1: the prospect of the lesser chance of a hard Brexit 9 00:00:27,600 --> 00:00:29,520 Speaker 1: joining us now. Are very glad to say, as Terrace 10 00:00:29,600 --> 00:00:33,400 Speaker 1: Raphael Bloomberg Opinion edited away in on the latest on Brexit, 11 00:00:33,520 --> 00:00:36,720 Speaker 1: and I think that probably the most interesting story of 12 00:00:36,760 --> 00:00:39,280 Speaker 1: the day are certainly one of them to me, Teres 13 00:00:39,640 --> 00:00:44,160 Speaker 1: was the relationship between Joe Johnson and Boris Johnson, two brothers. 14 00:00:44,640 --> 00:00:49,239 Speaker 1: Joe quitting parliament because he couldn't reconcile his relationship with 15 00:00:49,280 --> 00:00:54,240 Speaker 1: his family Boris and his view that the UK should 16 00:00:54,360 --> 00:00:58,920 Speaker 1: remain part of the European Union. What's the relationship like 17 00:00:59,040 --> 00:01:01,640 Speaker 1: between these two? Well, I think the bigger surprise was 18 00:01:01,680 --> 00:01:04,800 Speaker 1: that Johnson actually joined his brother's cabinet to begin with. 19 00:01:04,959 --> 00:01:09,039 Speaker 1: Um Joe Johnson resigned uh from when when he was 20 00:01:09,120 --> 00:01:14,399 Speaker 1: part of UH Theresa May's government over his UH, his 21 00:01:14,560 --> 00:01:17,240 Speaker 1: preference for his second referendum. So he is a remainder, 22 00:01:17,319 --> 00:01:20,880 Speaker 1: but he wants a second referendum rather than you know, 23 00:01:20,920 --> 00:01:24,000 Speaker 1: his position isn't that just simply that that Britain should 24 00:01:24,000 --> 00:01:26,080 Speaker 1: stay in the He would like to have a referendum 25 00:01:26,080 --> 00:01:29,240 Speaker 1: on it. Now obviously that puts him into direct conflict 26 00:01:29,319 --> 00:01:31,840 Speaker 1: with h with his brother, the Prime Minister, and it 27 00:01:31,880 --> 00:01:34,320 Speaker 1: was quite a surprise when he announced that he would 28 00:01:34,360 --> 00:01:37,320 Speaker 1: be that that Joe Johnson would be part of the cabinet. 29 00:01:37,600 --> 00:01:41,160 Speaker 1: The timing of Joe's resignation is of course very pointed. 30 00:01:41,400 --> 00:01:45,440 Speaker 1: Boris Johnson has just suffered major defeats in Parliament. His 31 00:01:45,560 --> 00:01:49,880 Speaker 1: prorogration strategy, the decision to suspend parliament for five weeks, 32 00:01:50,200 --> 00:01:55,920 Speaker 1: is hugely controversial. He is now uh potentially unable to 33 00:01:55,960 --> 00:01:59,080 Speaker 1: get the election that he wants on October fifteenth, after 34 00:01:59,080 --> 00:02:00,920 Speaker 1: parliament was he was not able to get the two 35 00:02:01,000 --> 00:02:03,520 Speaker 1: thirds majority for that, and then on top of that, 36 00:02:03,600 --> 00:02:06,880 Speaker 1: to have his brother say, you know, I'm out seems 37 00:02:06,920 --> 00:02:08,760 Speaker 1: to be a sign that this purge of the of 38 00:02:08,840 --> 00:02:13,000 Speaker 1: the Conservative Party, um, you know, has provoked a backlash, 39 00:02:13,120 --> 00:02:15,000 Speaker 1: and you know he now has that to deal with 40 00:02:15,160 --> 00:02:18,040 Speaker 1: on top of everything else. So Tos, I almost hate 41 00:02:18,040 --> 00:02:20,360 Speaker 1: to put you on the spot here, but you know, 42 00:02:20,360 --> 00:02:23,000 Speaker 1: because I'm sure nobody really has a good sense. But 43 00:02:23,080 --> 00:02:24,560 Speaker 1: what are the next steps here? What do you how 44 00:02:24,560 --> 00:02:25,639 Speaker 1: do you think this is going to play out in 45 00:02:25,680 --> 00:02:29,200 Speaker 1: your term? I guess I heard someone say if you 46 00:02:29,280 --> 00:02:31,240 Speaker 1: know what's going to happen, you haven't been paying attention. 47 00:02:31,960 --> 00:02:35,200 Speaker 1: I think that's that's pretty accurate. So the next step 48 00:02:35,320 --> 00:02:37,639 Speaker 1: is that Johnson will try one more time to get 49 00:02:37,880 --> 00:02:40,480 Speaker 1: the October fifteenth election date, and he'll try to do 50 00:02:40,520 --> 00:02:46,240 Speaker 1: that by a different parliamentary mechanism. You can't bring the 51 00:02:46,280 --> 00:02:50,240 Speaker 1: same motion before in a parliamentary session twice, so he's 52 00:02:50,240 --> 00:02:52,960 Speaker 1: going to use a different mechanism. Nowth that fails, and 53 00:02:53,000 --> 00:02:57,639 Speaker 1: it may well fail. Parliament is suspended parode now until 54 00:02:58,000 --> 00:03:01,840 Speaker 1: um the middle of October, and the no further attempt 55 00:03:01,880 --> 00:03:04,880 Speaker 1: to get that election, and therefore it becomes impossible to 56 00:03:04,919 --> 00:03:08,240 Speaker 1: imagine how he would get an election before October thirty one. 57 00:03:08,320 --> 00:03:11,360 Speaker 1: And that puts us into slightly different territory because remember 58 00:03:11,440 --> 00:03:14,880 Speaker 1: Johnson promised he would pull Britain out do or die 59 00:03:14,960 --> 00:03:18,320 Speaker 1: by October thirty one. An election into November means he's 60 00:03:18,360 --> 00:03:21,119 Speaker 1: broken that promise. Now, some polls are showing that Leave 61 00:03:21,240 --> 00:03:24,520 Speaker 1: supporters would not blame him, they'd blame parliament or they 62 00:03:24,639 --> 00:03:27,840 Speaker 1: blame the EU. But I think the longer this drags 63 00:03:27,840 --> 00:03:30,080 Speaker 1: out before an election, the harder it will be for 64 00:03:30,200 --> 00:03:34,320 Speaker 1: Johnson to just come in and sweep up that parliamentary majority. 65 00:03:34,400 --> 00:03:38,000 Speaker 1: That is the key to him, um, to him delivering 66 00:03:38,040 --> 00:03:41,280 Speaker 1: the Brexit that he's promising. What political leader in the 67 00:03:41,360 --> 00:03:46,240 Speaker 1: United Kingdom could potentially get the support necessary to push 68 00:03:46,280 --> 00:03:49,680 Speaker 1: this process forward, Well, depends on what process I mean that. 69 00:03:49,920 --> 00:03:52,360 Speaker 1: You know, the problem for those that oppose Johnson's plan 70 00:03:52,480 --> 00:03:55,720 Speaker 1: is that they don't have a single leader they can 71 00:03:55,800 --> 00:03:58,960 Speaker 1: rally behind. Jeremy Corbyn, the Labor leader, is very unpopular 72 00:03:59,000 --> 00:04:02,200 Speaker 1: even with many of his own MPs. The other opposition 73 00:04:02,240 --> 00:04:05,880 Speaker 1: parties refused to have Corbin become a sort of national 74 00:04:05,960 --> 00:04:09,320 Speaker 1: unity candidate. Uh And the Conservatives also don't have a 75 00:04:09,400 --> 00:04:11,600 Speaker 1: leader other than Johnson that they would rally behind now 76 00:04:11,640 --> 00:04:14,960 Speaker 1: and that party is utterly split between its two wings. 77 00:04:15,040 --> 00:04:17,840 Speaker 1: So um, you know, the answer is an election could 78 00:04:17,839 --> 00:04:21,640 Speaker 1: throw up any number of options from a Conservative majority, 79 00:04:21,680 --> 00:04:24,200 Speaker 1: which is what Johnson is betting onto a hung parliament. 80 00:04:24,320 --> 00:04:27,000 Speaker 1: It doesn't really solve the problem. So what is the 81 00:04:27,040 --> 00:04:28,800 Speaker 1: sense of timing here? I mean, is there is there 82 00:04:28,920 --> 00:04:34,560 Speaker 1: some drop dead date where something really has to happen. Well, 83 00:04:34,560 --> 00:04:37,920 Speaker 1: October thirty one, something has to happen. Either Britain has 84 00:04:37,960 --> 00:04:41,400 Speaker 1: to UH receive an extension from the EU. And now 85 00:04:41,640 --> 00:04:44,719 Speaker 1: you know, let's let's uh remind listeners that that has 86 00:04:44,760 --> 00:04:48,719 Speaker 1: to be unanimously approved by all of the EU's members. 87 00:04:48,720 --> 00:04:50,920 Speaker 1: So even if one of them, say Emmanuel Macon in 88 00:04:51,000 --> 00:04:54,160 Speaker 1: France or Victor Orbon of Hungary, some have suggested say no, 89 00:04:54,279 --> 00:04:57,120 Speaker 1: we don't approve an extension that can happen in Britain 90 00:04:57,120 --> 00:04:59,680 Speaker 1: crashes out on October thirty one. There is the other 91 00:04:59,800 --> 00:05:04,120 Speaker 1: key date is the European Council summit in October seventeenth, 92 00:05:04,400 --> 00:05:07,760 Speaker 1: and that is the UH the summit in which Johnson 93 00:05:07,800 --> 00:05:10,839 Speaker 1: was promising to bring back a deal. Finally, closer date 94 00:05:10,839 --> 00:05:14,240 Speaker 1: that we should all watch is Monday, UH. Next week 95 00:05:14,279 --> 00:05:18,200 Speaker 1: Boris Johnson meets with the Irish T shirt Leah um 96 00:05:18,279 --> 00:05:21,320 Speaker 1: Leo Vodka and that will be very interesting because Johnson 97 00:05:21,360 --> 00:05:25,240 Speaker 1: has been promising that he will bring um solutions to 98 00:05:25,440 --> 00:05:30,040 Speaker 1: this impass over the Irish backstop. He'll bring alternative ideas, 99 00:05:30,320 --> 00:05:33,200 Speaker 1: so we shall hopefully see next week what he has 100 00:05:33,240 --> 00:05:36,040 Speaker 1: in mind and whether there is any possibility that ire 101 00:05:36,200 --> 00:05:39,279 Speaker 1: that Ireland or the E would take it seriously. Tres Rafael, 102 00:05:39,320 --> 00:05:41,720 Speaker 1: thank you so much for bringing some clarity to an 103 00:05:41,800 --> 00:05:46,440 Speaker 1: absolutely chaotic situation. Tres Rafael, Bloomberg opinion editor covering European politics, 104 00:05:46,800 --> 00:05:50,040 Speaker 1: UH and economics for Bloomberg, calling this UH in from 105 00:05:50,360 --> 00:05:52,320 Speaker 1: our London bureau. You can read more on this and 106 00:05:52,360 --> 00:05:56,480 Speaker 1: other stories from Bloomberg Opinion at Bloomberg dot com, slash 107 00:05:56,480 --> 00:05:59,640 Speaker 1: Opinion and on the terminal by typing O, P, I 108 00:06:00,040 --> 00:06:16,120 Speaker 1: and go. Let's talk about trade because that seems to 109 00:06:16,120 --> 00:06:18,960 Speaker 1: be one of the presiding factors when it comes to 110 00:06:19,000 --> 00:06:20,680 Speaker 1: what direction the markets are going to be in any 111 00:06:20,720 --> 00:06:23,120 Speaker 1: given day. There seems to be a little bit more 112 00:06:23,160 --> 00:06:25,400 Speaker 1: optimism right now because there are talks about talks about 113 00:06:25,400 --> 00:06:27,839 Speaker 1: talks about talks about getting maybe together to talk about trade. 114 00:06:28,000 --> 00:06:30,560 Speaker 1: So let's have talk to Sean Donna, who's Bloomberg new 115 00:06:30,600 --> 00:06:34,200 Speaker 1: senior trade reporter coming to us from our Washington d 116 00:06:34,240 --> 00:06:37,440 Speaker 1: C studios. Sean, what actually do we know that has 117 00:06:37,480 --> 00:06:41,279 Speaker 1: happened in order with respect to moving closer to some 118 00:06:41,320 --> 00:06:43,960 Speaker 1: sort of trade resolution. Well, I think you nailed it there. 119 00:06:43,960 --> 00:06:47,160 Speaker 1: We've got more talks about talks about talks coming, and 120 00:06:47,600 --> 00:06:51,400 Speaker 1: we are expecting at some point in uh coming weaker 121 00:06:51,560 --> 00:06:56,400 Speaker 1: ten days or so UH to see the Chinese send 122 00:06:56,400 --> 00:06:59,080 Speaker 1: a delegation over here to Washington. Will be a working 123 00:06:59,160 --> 00:07:04,600 Speaker 1: level delegation to try and hash out where they resumed 124 00:07:04,640 --> 00:07:09,840 Speaker 1: these negotiations. And that's really the point to stress here. UH. 125 00:07:09,960 --> 00:07:13,520 Speaker 1: When we when these talks broke down in May, UH, 126 00:07:13,600 --> 00:07:16,640 Speaker 1: they had a hundred and fifty pages of text. UH. 127 00:07:16,760 --> 00:07:21,880 Speaker 1: They were close to uh something meaningful on both sides 128 00:07:22,080 --> 00:07:25,440 Speaker 1: and h then the Chinese walked away from that, in 129 00:07:25,520 --> 00:07:30,280 Speaker 1: part because President Trump wasn't willing to withdraw tariffs or 130 00:07:30,320 --> 00:07:33,360 Speaker 1: commit to that at that point. And what we've seen 131 00:07:33,400 --> 00:07:35,760 Speaker 1: since is an escalation in tariffs, is a lot more 132 00:07:35,800 --> 00:07:39,760 Speaker 1: tariffs in place. Now, the mistrust on both sides has 133 00:07:39,840 --> 00:07:42,680 Speaker 1: grown over the summer, UH, and they're getting back to 134 00:07:42,720 --> 00:07:46,160 Speaker 1: the table, but again they're they're trying to figure out 135 00:07:46,440 --> 00:07:50,920 Speaker 1: how to start having substantive negotiations. Again, that doesn't mean 136 00:07:50,920 --> 00:07:54,200 Speaker 1: that they are having substantive negotiations, and that doesn't mean 137 00:07:54,200 --> 00:07:57,160 Speaker 1: that we're any closer to a deal today than we 138 00:07:57,160 --> 00:07:59,679 Speaker 1: were before this call happened last night and the announced 139 00:07:59,680 --> 00:08:02,720 Speaker 1: he's talked last night. So Sean, what does it mean 140 00:08:02,800 --> 00:08:07,080 Speaker 1: typically historically when a country like China or the United 141 00:08:07,120 --> 00:08:12,360 Speaker 1: States sends over a relatively high level negotiating team, does 142 00:08:12,400 --> 00:08:15,120 Speaker 1: it is it? You know, does that typically mean oh boy, 143 00:08:15,200 --> 00:08:18,000 Speaker 1: work close to something or serious or can it just 144 00:08:18,040 --> 00:08:22,240 Speaker 1: be it for show one In First of all, we're 145 00:08:22,280 --> 00:08:24,320 Speaker 1: not in a normal situation in terms, so if you know, 146 00:08:24,360 --> 00:08:27,160 Speaker 1: the history is a tough guide here in terms of 147 00:08:27,160 --> 00:08:29,880 Speaker 1: trade negotiations, just because the President Trump's approach to these things. 148 00:08:29,960 --> 00:08:33,080 Speaker 1: We've seen that with his approach to dealing with Japan, 149 00:08:33,200 --> 00:08:36,040 Speaker 1: for example. We have a great story up on on 150 00:08:36,120 --> 00:08:39,760 Speaker 1: Bloomberg today from my colleague Jennie Lenard talking about how 151 00:08:39,760 --> 00:08:42,640 Speaker 1: they're racing to try and work out some really important 152 00:08:42,679 --> 00:08:46,080 Speaker 1: stuff in a deal that President Trump announced as being 153 00:08:46,120 --> 00:08:49,640 Speaker 1: all all done at the G seven just a week 154 00:08:49,720 --> 00:08:52,920 Speaker 1: or ten days ago, and and they're still negotiating some 155 00:08:52,960 --> 00:08:56,440 Speaker 1: really substitutive stuff and they're hoping to sign that deal 156 00:08:56,520 --> 00:08:59,319 Speaker 1: or or get an announce a final deal at the 157 00:08:59,440 --> 00:09:02,439 Speaker 1: end of septem When you look at what's happening with China. Uh. 158 00:09:02,480 --> 00:09:06,920 Speaker 1: It is not unusual for ministers to shuttle around the 159 00:09:06,920 --> 00:09:09,840 Speaker 1: world as part of trade negotiations. That's what they do. 160 00:09:09,920 --> 00:09:12,920 Speaker 1: That's what trade ministers do, That's what US trade representatives 161 00:09:12,960 --> 00:09:16,760 Speaker 1: have done for years. So in some ways that's not 162 00:09:16,920 --> 00:09:20,680 Speaker 1: meaningful and in itself. But that's where this is different, 163 00:09:20,800 --> 00:09:25,040 Speaker 1: right because over the summer, these negotiations broke down and 164 00:09:25,240 --> 00:09:27,920 Speaker 1: we are kind of seizing and markets certainly are seizing 165 00:09:28,559 --> 00:09:31,840 Speaker 1: on any news of the two sides. Even talking is 166 00:09:32,360 --> 00:09:35,000 Speaker 1: is something meaningful, So you know, I think we need 167 00:09:35,040 --> 00:09:39,079 Speaker 1: to be really careful, uh, in terms of managing our 168 00:09:39,080 --> 00:09:42,360 Speaker 1: own expectations with these things. This does not mean that 169 00:09:42,400 --> 00:09:45,960 Speaker 1: a deal is nigh. Uh. It just means that they're 170 00:09:46,000 --> 00:09:48,640 Speaker 1: back to talk. I think that a lot of investors 171 00:09:48,720 --> 00:09:50,600 Speaker 1: right now, and you'll talk to people and they'll say, 172 00:09:51,120 --> 00:09:55,160 Speaker 1: you know, we're trying to understand President Trump's motivations, the psychology, 173 00:09:55,240 --> 00:09:57,600 Speaker 1: which you know, good luck. But I think that there 174 00:09:57,679 --> 00:10:00,840 Speaker 1: is a question here of President Trump. Does he kind 175 00:10:00,880 --> 00:10:03,080 Speaker 1: of have a put on the market? People are counting 176 00:10:03,080 --> 00:10:06,920 Speaker 1: on him to, at some point close to elections try 177 00:10:06,960 --> 00:10:09,360 Speaker 1: to make some sort of deal with China in order 178 00:10:09,400 --> 00:10:12,160 Speaker 1: to give a boost to market. Uh, and and sort 179 00:10:12,200 --> 00:10:15,679 Speaker 1: of have have sort of some momentum heading into the election. 180 00:10:16,760 --> 00:10:18,840 Speaker 1: Is your sense from the people that you talked to 181 00:10:19,200 --> 00:10:23,800 Speaker 1: that that belief is legitimate. Look, there's no doubt that 182 00:10:23,880 --> 00:10:27,080 Speaker 1: President Trump has wanted to make a deal. That's that's 183 00:10:27,080 --> 00:10:31,200 Speaker 1: in his nature. Uh. And the question is whether something 184 00:10:31,520 --> 00:10:35,200 Speaker 1: has changed over the summer. And that's where what we're 185 00:10:35,240 --> 00:10:38,480 Speaker 1: really trying to figure out. I've had people close to 186 00:10:38,480 --> 00:10:42,600 Speaker 1: this administration say to me as recently as yesterday that 187 00:10:42,720 --> 00:10:45,000 Speaker 1: they thought that they were seeing a new hard line 188 00:10:45,760 --> 00:10:49,000 Speaker 1: from President Trump in his tweets, and that they thought 189 00:10:49,000 --> 00:10:51,400 Speaker 1: that he had moved from wanting a deal to to 190 00:10:51,640 --> 00:10:55,760 Speaker 1: wanting uh, to just sort of embracing this idea of 191 00:10:55,800 --> 00:11:00,520 Speaker 1: the need for a standoff with China, for someone to 192 00:11:00,559 --> 00:11:02,800 Speaker 1: take on China. We saw that in his comments yesterday 193 00:11:02,880 --> 00:11:05,040 Speaker 1: about where he literally said, you know, I don't care 194 00:11:05,080 --> 00:11:08,640 Speaker 1: about the economy. This is bigger than the economy, when 195 00:11:08,679 --> 00:11:11,400 Speaker 1: he was talking to reporters about the China talx. So. 196 00:11:11,480 --> 00:11:15,760 Speaker 1: I mean, the swings in sentiment here are are remarkable, 197 00:11:15,800 --> 00:11:20,160 Speaker 1: and it makes it really really hard to try and uh, 198 00:11:20,200 --> 00:11:24,120 Speaker 1: you know, discern the signal from the noise, you know, 199 00:11:24,280 --> 00:11:26,320 Speaker 1: that's what we try to do every day. We talked 200 00:11:26,320 --> 00:11:30,360 Speaker 1: to people inside administration, around the administration, and it's, you know, 201 00:11:30,440 --> 00:11:32,760 Speaker 1: it's it's hard to know on a day to day 202 00:11:32,760 --> 00:11:36,480 Speaker 1: basis where the President wants to take this, and it 203 00:11:36,600 --> 00:11:39,720 Speaker 1: changes on a day to basis. Socialan just thirty seconds, 204 00:11:39,760 --> 00:11:42,720 Speaker 1: any sense of where China is? Has anything changed for 205 00:11:42,800 --> 00:11:45,840 Speaker 1: China over the summer from your perspective, Yeah, I think 206 00:11:46,080 --> 00:11:48,120 Speaker 1: what we hear from Beijing, and what we hear from 207 00:11:48,280 --> 00:11:52,480 Speaker 1: from people who meet with Chinese officials regularly, is that 208 00:11:52,480 --> 00:11:55,880 Speaker 1: there's been a change in Beijing and in their approach 209 00:11:55,920 --> 00:11:59,320 Speaker 1: of this, they now believe that they are involved in 210 00:11:59,320 --> 00:12:03,720 Speaker 1: a longer term fight with the Chinese. They have a 211 00:12:03,800 --> 00:12:07,360 Speaker 1: higher level of suspicion of Donald Trump and his ability 212 00:12:07,480 --> 00:12:12,320 Speaker 1: to deliver a deal. Uh and UH. They are approaching 213 00:12:12,360 --> 00:12:15,880 Speaker 1: this much more warily than they were even six months ago. 214 00:12:16,600 --> 00:12:18,840 Speaker 1: Sean Donna, thank you so much. I feel like we're 215 00:12:18,840 --> 00:12:21,600 Speaker 1: gonna be talking to you a lot more going forward. 216 00:12:21,720 --> 00:12:24,160 Speaker 1: There's still much more to go on this story, obviously, 217 00:12:24,200 --> 00:12:27,720 Speaker 1: Sean don and senior trade reporter for Bloomberg News. Uh, 218 00:12:28,160 --> 00:12:46,360 Speaker 1: talking to us from our d C of bureau crewed 219 00:12:46,760 --> 00:12:49,120 Speaker 1: very much getting a bid today on the heels of 220 00:12:49,200 --> 00:12:52,000 Speaker 1: some softening and trade talks between at the US and China, 221 00:12:52,160 --> 00:12:54,320 Speaker 1: perhaps talks about talks about talks. We're saying crewed up 222 00:12:54,920 --> 00:12:57,760 Speaker 1: about one percent today following a two point three percent 223 00:12:57,840 --> 00:13:00,920 Speaker 1: gain yesterday. But really, what is going to be the 224 00:13:01,040 --> 00:13:04,600 Speaker 1: longer term driver of crude prices? Joining us now, Stephen Short, 225 00:13:04,679 --> 00:13:07,240 Speaker 1: president of the Short Group Group and editor of the 226 00:13:07,280 --> 00:13:10,640 Speaker 1: Short Report, joining us on the phone. So Stephen, let's 227 00:13:10,640 --> 00:13:14,800 Speaker 1: just get started. Um crude prices they've been bouncing around 228 00:13:14,880 --> 00:13:19,280 Speaker 1: pretty much in sandem with the feeling from trade. How 229 00:13:19,320 --> 00:13:23,040 Speaker 1: long is this sustainable? Uh? Well, for the foreseeable future. 230 00:13:23,080 --> 00:13:26,440 Speaker 1: We're going into Lisa now, a very volatile time in 231 00:13:26,480 --> 00:13:30,040 Speaker 1: the market. Uh To your point, oil is rallying hard. 232 00:13:30,160 --> 00:13:32,920 Speaker 1: We got some good numbers a DP employment. We have 233 00:13:33,000 --> 00:13:36,920 Speaker 1: some bullish support numbers from today's weekly update on petroleum stocks. 234 00:13:37,600 --> 00:13:40,320 Speaker 1: But first and foremost, the driver currently now is the 235 00:13:40,360 --> 00:13:44,240 Speaker 1: market's taken another hit of hopium, that is to say, 236 00:13:44,400 --> 00:13:47,080 Speaker 1: hope that we might actually get some sort of resolution 237 00:13:47,120 --> 00:13:51,199 Speaker 1: with the China trade riff. So at this point, this 238 00:13:51,280 --> 00:13:54,960 Speaker 1: is where these speculators are pouring their hearts and souls into. 239 00:13:55,480 --> 00:13:59,079 Speaker 1: Uh so going forward, now when we talk about volatility, 240 00:13:59,240 --> 00:14:02,360 Speaker 1: it is September. So over the next two months, oil 241 00:14:02,440 --> 00:14:06,320 Speaker 1: refineries here in North America in northern Europe are going 242 00:14:06,360 --> 00:14:08,760 Speaker 1: to go into their maintenance season, so they're going to 243 00:14:08,840 --> 00:14:12,120 Speaker 1: be buying fewer barrels as they shut in operations to 244 00:14:12,120 --> 00:14:14,600 Speaker 1: get ready for the winter demand season. So when you 245 00:14:14,640 --> 00:14:16,800 Speaker 1: take that fundamental out of the market, when you take 246 00:14:16,840 --> 00:14:20,800 Speaker 1: that fundamental um driver, that buyer out of the market, 247 00:14:20,880 --> 00:14:23,360 Speaker 1: it creates a void. And when you have that void, 248 00:14:23,360 --> 00:14:26,440 Speaker 1: you have the chance for volatility. So once again we're 249 00:14:26,440 --> 00:14:29,000 Speaker 1: gonna be looking at markets that can can continue over 250 00:14:29,040 --> 00:14:32,119 Speaker 1: the next two three months to trade off of headlines. 251 00:14:32,480 --> 00:14:35,520 Speaker 1: Today we happen to have a bullish headline and so 252 00:14:35,600 --> 00:14:38,640 Speaker 1: the market is finding good support here. So it's interesting 253 00:14:38,640 --> 00:14:40,720 Speaker 1: when you know, when we talked to you, um Stephen 254 00:14:40,760 --> 00:14:42,680 Speaker 1: about the you know, the energy markets, we always have 255 00:14:42,680 --> 00:14:45,080 Speaker 1: discussions about the you know, the demand side of the 256 00:14:45,080 --> 00:14:47,360 Speaker 1: equation and the supply side of the equation. But it 257 00:14:47,480 --> 00:14:51,040 Speaker 1: seems like what's really driving oil prices, energy prices in 258 00:14:51,320 --> 00:14:54,200 Speaker 1: general is really the demand side, and again tied very 259 00:14:54,280 --> 00:14:56,480 Speaker 1: much to trade. Is that kind of how the traders 260 00:14:56,480 --> 00:14:59,840 Speaker 1: are positioning themselves. Yes, and absolutely and in fact, we 261 00:14:59,840 --> 00:15:03,160 Speaker 1: we had some numbers that came out the surveys before. 262 00:15:03,720 --> 00:15:07,440 Speaker 1: And keep in mind demand is still strong. The the 263 00:15:07,440 --> 00:15:11,600 Speaker 1: the economy is still finding support. It's just this this 264 00:15:11,760 --> 00:15:15,560 Speaker 1: overhang of this trade riff, and and everyone's talking about 265 00:15:15,600 --> 00:15:18,760 Speaker 1: potential recession, and we're starting to see the pull back 266 00:15:18,800 --> 00:15:22,720 Speaker 1: on the manufacturing side. And the manufacturing side tends to 267 00:15:22,760 --> 00:15:25,560 Speaker 1: be a bell weather. So even though it is only 268 00:15:25,560 --> 00:15:28,440 Speaker 1: ten to twelve of the U S economy, it's still 269 00:15:28,480 --> 00:15:32,080 Speaker 1: a significant driver. And and that is really where the 270 00:15:32,120 --> 00:15:36,880 Speaker 1: concern is um so on the supply side. Look, we're 271 00:15:36,920 --> 00:15:40,040 Speaker 1: starting to degluct the market here in the United States. 272 00:15:40,040 --> 00:15:43,040 Speaker 1: Over the past month, we've had two major pipelines that 273 00:15:43,080 --> 00:15:45,640 Speaker 1: have started shipping crude oil out of the West Texas 274 00:15:45,720 --> 00:15:49,320 Speaker 1: Permian Basin to the export markets near in Corpus Christie. 275 00:15:49,760 --> 00:15:52,040 Speaker 1: By the end of the year, we'll have another pipeline 276 00:15:52,040 --> 00:15:55,640 Speaker 1: that comes online. So our takeaway capacity with all that 277 00:15:55,680 --> 00:15:58,320 Speaker 1: oil being produced in West Texas is going to increase 278 00:15:58,400 --> 00:16:01,520 Speaker 1: by by two thirds. So we're starting to deglute and 279 00:16:01,520 --> 00:16:04,840 Speaker 1: we're starting to balance the market at this point. So, yes, 280 00:16:04,960 --> 00:16:07,400 Speaker 1: it is the demand, and keep in mind the underlying 281 00:16:07,440 --> 00:16:10,800 Speaker 1: economic demand story is still firm at this point. But 282 00:16:10,880 --> 00:16:13,160 Speaker 1: it's all about the future. It's all about perception, and 283 00:16:13,280 --> 00:16:16,920 Speaker 1: right now people are are very cautious and that is 284 00:16:16,920 --> 00:16:21,240 Speaker 1: certainly a concern that is overhanging the commodity markets. Stephen, 285 00:16:21,320 --> 00:16:23,520 Speaker 1: I remember when people cared about what was going on 286 00:16:23,640 --> 00:16:27,200 Speaker 1: with respect to Iran, what was happening with with respect 287 00:16:27,280 --> 00:16:32,640 Speaker 1: to Libya, Venezuela, Argentina. I mean, they're all of these 288 00:16:32,760 --> 00:16:37,760 Speaker 1: issues that used to matter and that don't seem to anymore. Yep. 289 00:16:37,920 --> 00:16:40,440 Speaker 1: And again right, and to your point's an excellent point, 290 00:16:40,440 --> 00:16:43,880 Speaker 1: And it's all about perception. I mean, OPEC, when's the 291 00:16:43,960 --> 00:16:47,880 Speaker 1: last time headline of OPEC actually moved this market? Uh, 292 00:16:47,880 --> 00:16:51,320 Speaker 1: this is a US centric story. United States is the 293 00:16:51,440 --> 00:16:54,280 Speaker 1: nine pound gerrilla in the oil market. At this point. 294 00:16:54,920 --> 00:16:59,440 Speaker 1: We are burgeoning export, uh powerhouse with all this production 295 00:16:59,520 --> 00:17:02,520 Speaker 1: coming out out and and that kind of masks you know, 296 00:17:02,600 --> 00:17:07,480 Speaker 1: the concerns here to your point, Iran, Venezuela, Right, Venezuela 297 00:17:07,560 --> 00:17:11,119 Speaker 1: used to be our fourth largest supplier of crudel and 298 00:17:11,200 --> 00:17:16,840 Speaker 1: now their production has has fallen off significantly, and so 299 00:17:16,960 --> 00:17:21,080 Speaker 1: that is the concern that potentially that will start to 300 00:17:21,119 --> 00:17:26,159 Speaker 1: see a pullback in demand. Uh. You know that is 301 00:17:26,240 --> 00:17:28,240 Speaker 1: being masked right now by the loss of supply, and 302 00:17:28,560 --> 00:17:31,520 Speaker 1: all it's going to take is what one good good 303 00:17:31,520 --> 00:17:35,520 Speaker 1: disruption and uh, you know, all of this goes to 304 00:17:35,640 --> 00:17:38,040 Speaker 1: not Stephen, what are your thoughts on the natural gas 305 00:17:38,040 --> 00:17:40,240 Speaker 1: market as we look ahead to kind of the colder 306 00:17:40,240 --> 00:17:44,119 Speaker 1: months coming up. It's pathetic, I mean the natural gas market. 307 00:17:44,480 --> 00:17:49,960 Speaker 1: And yeah, exactly. Now, natural gas market is getting a 308 00:17:50,080 --> 00:17:52,720 Speaker 1: nice rally right now. If and I've been telling all 309 00:17:52,760 --> 00:17:55,880 Speaker 1: my hedging hedging clients in the short report that over 310 00:17:55,880 --> 00:17:58,200 Speaker 1: the past month, if you have not been buying every 311 00:17:58,200 --> 00:18:01,200 Speaker 1: single molecule of natural gas at these levels for your 312 00:18:01,240 --> 00:18:04,399 Speaker 1: winter needs, you're really being foolish because the market is 313 00:18:04,440 --> 00:18:08,199 Speaker 1: really gifting you this opportunity. Uh. To that point, we 314 00:18:08,240 --> 00:18:10,520 Speaker 1: have so much gas. There is the pullback on the 315 00:18:10,560 --> 00:18:15,520 Speaker 1: industrial side, so that is overhang. Supplies are plentiful, but 316 00:18:15,600 --> 00:18:18,200 Speaker 1: the market has rallied about twenty cents at Decca therm 317 00:18:18,880 --> 00:18:21,639 Speaker 1: over the past month, and that is because Wall Street 318 00:18:21,760 --> 00:18:24,840 Speaker 1: speculators have never been more barished this market. So this 319 00:18:24,880 --> 00:18:27,560 Speaker 1: is a market that is extremely over sold. So we're 320 00:18:27,600 --> 00:18:31,200 Speaker 1: getting kind of a counter uh intuitive rise in price 321 00:18:31,280 --> 00:18:33,600 Speaker 1: right now, which probably has a lot of speculatives scratch 322 00:18:33,640 --> 00:18:36,760 Speaker 1: in their head because the fundamentals are so barrashed. So 323 00:18:36,840 --> 00:18:38,879 Speaker 1: that's to say that we tend to see in the 324 00:18:38,960 --> 00:18:42,560 Speaker 1: natural gas market, we get this rally before the winter, 325 00:18:42,640 --> 00:18:45,880 Speaker 1: before the heat heating season kicks in, and I think 326 00:18:45,880 --> 00:18:48,840 Speaker 1: we're in the midst of that. How high can we go? 327 00:18:49,520 --> 00:18:53,160 Speaker 1: Our quant models right now are looking at potentially this 328 00:18:53,240 --> 00:18:56,520 Speaker 1: month we could see natural gas prices rally about another 329 00:18:56,600 --> 00:19:00,520 Speaker 1: forty cents higher, which would really be more of a 330 00:19:00,600 --> 00:19:04,280 Speaker 1: short covering rally, not fundamentally driven. But we're looking going 331 00:19:04,320 --> 00:19:07,240 Speaker 1: into the winter and market that if you're hedging, you 332 00:19:07,280 --> 00:19:10,199 Speaker 1: should have been buying. You'll still have opportunities. We're in 333 00:19:10,200 --> 00:19:14,200 Speaker 1: the midst of a counter shortcovering rally, but the overall 334 00:19:14,400 --> 00:19:17,720 Speaker 1: is still barish. Stephen Short, thanks so much for that overview. 335 00:19:17,800 --> 00:19:20,560 Speaker 1: Excellent overview as always on the energy markets looking accrued 336 00:19:20,600 --> 00:19:23,639 Speaker 1: and nanny guess at the moment. Right Stephen Shark's President 337 00:19:23,760 --> 00:19:41,960 Speaker 1: Short Group of phoning in from Pennsylvania. Right now, we 338 00:19:42,080 --> 00:19:45,640 Speaker 1: have the honor of speaking with Auto Nations new chief 339 00:19:45,680 --> 00:19:50,320 Speaker 1: executive officer, Cheryl Miller. She came in about forty five 340 00:19:50,400 --> 00:19:54,560 Speaker 1: days ago to head Auto Nation, which she's normally based 341 00:19:54,600 --> 00:19:57,200 Speaker 1: in Fort Lauderdale in Florida, but she's here in Ourlubritter 342 00:19:57,240 --> 00:20:00,760 Speaker 1: Active Broker Studios. Sharyl, congratulations. The shares of the company 343 00:20:00,920 --> 00:20:04,159 Speaker 1: up more than thirty six percent year to date. I 344 00:20:04,200 --> 00:20:07,159 Speaker 1: want to start with the transition in your first forty 345 00:20:07,200 --> 00:20:10,800 Speaker 1: five days, taking over after a very brief stint uh 346 00:20:11,000 --> 00:20:16,119 Speaker 1: for the previous CEO, Carl Liebert. So what what's it 347 00:20:16,200 --> 00:20:18,000 Speaker 1: been like, given the fact that it's been a little 348 00:20:18,000 --> 00:20:20,440 Speaker 1: bit tumultuous over the past couple of months. Yes, it's 349 00:20:20,440 --> 00:20:22,840 Speaker 1: great to be here today with you, Lisa, with you, Paul, 350 00:20:23,359 --> 00:20:25,560 Speaker 1: and it's been great. The last forty five days have 351 00:20:25,680 --> 00:20:30,360 Speaker 1: been fantastic. And coming in, my core focus was execution, right, 352 00:20:30,440 --> 00:20:34,240 Speaker 1: so we're an operating business execution of our existing play 353 00:20:34,320 --> 00:20:36,239 Speaker 1: and then also I'm making sure we're working on this 354 00:20:36,320 --> 00:20:40,400 Speaker 1: automation brand extension strategy. So when I stepped into the role, 355 00:20:40,480 --> 00:20:43,080 Speaker 1: I met immediately with our leadership team I've known for 356 00:20:43,240 --> 00:20:46,840 Speaker 1: many years, our operational leadership team. I met with them personally, 357 00:20:46,880 --> 00:20:50,480 Speaker 1: we talked about the strategy, had their full confidence, and 358 00:20:50,520 --> 00:20:53,199 Speaker 1: I also met with the corporate team. I reminded the 359 00:20:53,240 --> 00:20:55,879 Speaker 1: corporate team, as we always do, that our focuses on 360 00:20:55,960 --> 00:21:00,359 Speaker 1: servicing our customers and really pulled together that leadership team 361 00:21:00,440 --> 00:21:03,280 Speaker 1: to focus on the core. I've had some initial O 362 00:21:03,320 --> 00:21:05,520 Speaker 1: E M discussions, but certainly I've known many of them, 363 00:21:05,560 --> 00:21:08,400 Speaker 1: having been in the industry for years as well. So 364 00:21:08,600 --> 00:21:11,159 Speaker 1: I'm just looking at the stock stocks done well, up 365 00:21:11,200 --> 00:21:14,840 Speaker 1: thirty seven percent this year, there's only one analysts recommending 366 00:21:14,840 --> 00:21:16,600 Speaker 1: it in nine have a hold, and there's a couple 367 00:21:16,600 --> 00:21:18,680 Speaker 1: of cells. What are what's the bear case out there? 368 00:21:18,680 --> 00:21:21,280 Speaker 1: What are analysts not seeing having missed kind of this 369 00:21:21,320 --> 00:21:23,199 Speaker 1: run up in the stock? Yes, and Paul, I think 370 00:21:23,240 --> 00:21:25,680 Speaker 1: it's a great observation. I think what people are missing 371 00:21:26,000 --> 00:21:28,000 Speaker 1: is really the thought out there has been. Are we 372 00:21:28,080 --> 00:21:32,040 Speaker 1: at peak auto? And if you think about that, years ago, 373 00:21:32,119 --> 00:21:34,199 Speaker 1: we knew we would have a gradual climb out of 374 00:21:34,200 --> 00:21:36,720 Speaker 1: those lower star levels, and we always said we thought 375 00:21:36,760 --> 00:21:40,280 Speaker 1: we would level off somewhere between sixteen and seventeen million 376 00:21:40,359 --> 00:21:42,560 Speaker 1: units of sales, and and that is where we have 377 00:21:42,800 --> 00:21:44,840 Speaker 1: leveled off. But keep in mind that we're not just 378 00:21:44,920 --> 00:21:47,600 Speaker 1: about new vehicle sales. We also do a lot of 379 00:21:47,800 --> 00:21:51,200 Speaker 1: nearly new, and you've seen the customer preference shifts somewhat 380 00:21:51,240 --> 00:21:54,680 Speaker 1: towards nearly new and we also have the service aspects 381 00:21:54,680 --> 00:21:57,840 Speaker 1: of the business. And so I think the analyst thesis 382 00:21:57,880 --> 00:22:00,880 Speaker 1: has been around sort of peak auto, and I think 383 00:22:00,920 --> 00:22:04,080 Speaker 1: we've got a lot more than that. And you've been 384 00:22:04,119 --> 00:22:07,280 Speaker 1: with automation for years, so you have a sense of 385 00:22:07,320 --> 00:22:12,040 Speaker 1: the sort of h the breakdown between used and new 386 00:22:12,080 --> 00:22:14,880 Speaker 1: cars and car sales. Can you speak a little bit 387 00:22:14,920 --> 00:22:17,679 Speaker 1: more about the shift that you've seen recently in preference 388 00:22:17,720 --> 00:22:22,000 Speaker 1: for almost new vehicles by the US consumer. Yeah, absolutely, 389 00:22:22,040 --> 00:22:23,720 Speaker 1: So I've certainly been in the industry for a while, 390 00:22:23,760 --> 00:22:25,680 Speaker 1: and my one of my fun facts is the fact 391 00:22:25,680 --> 00:22:27,840 Speaker 1: that I actually was an automation the first time before 392 00:22:27,920 --> 00:22:30,280 Speaker 1: Mike so I was was there back in ninety eight, 393 00:22:30,280 --> 00:22:32,320 Speaker 1: and I saw the early days of the company through 394 00:22:32,359 --> 00:22:36,600 Speaker 1: the evolution today. But as I think about the consumer, um, 395 00:22:36,680 --> 00:22:39,159 Speaker 1: I think about most of the customers coming back into 396 00:22:39,240 --> 00:22:42,160 Speaker 1: our show rooms are coming online to interact with us. 397 00:22:42,440 --> 00:22:45,000 Speaker 1: The last time they may have purchased a vehicle could 398 00:22:45,000 --> 00:22:47,439 Speaker 1: have been when interest rates are basically at zero. So 399 00:22:47,520 --> 00:22:51,399 Speaker 1: now they're coming back in and although rates fortunately we're 400 00:22:51,400 --> 00:22:54,000 Speaker 1: not going to have the hikes we originally anticipated this year, 401 00:22:54,040 --> 00:22:56,640 Speaker 1: but but rates are a little higher than zero certainly, 402 00:22:57,000 --> 00:23:00,520 Speaker 1: and customer affordabilities a little bit tougher. So the average 403 00:23:00,680 --> 00:23:04,600 Speaker 1: new vehicle payment monthly it's five dollars a month. So 404 00:23:04,680 --> 00:23:06,639 Speaker 1: for some customers there's a little bit of a sticker 405 00:23:06,680 --> 00:23:10,240 Speaker 1: shock as they come into the stores, and therefore they 406 00:23:10,320 --> 00:23:12,280 Speaker 1: look over to the side and say, hey, that's that's 407 00:23:12,280 --> 00:23:15,879 Speaker 1: a nearly new vehicle. It's got great technology, it maybe 408 00:23:15,880 --> 00:23:18,520 Speaker 1: two to three four years old, and they'll opt in 409 00:23:18,600 --> 00:23:21,680 Speaker 1: for that. So we're actually seeing very strong pre owned 410 00:23:21,680 --> 00:23:23,639 Speaker 1: sales this year, and you've seen us with two record 411 00:23:23,720 --> 00:23:26,040 Speaker 1: quarters and part of that was supported by great pre 412 00:23:26,080 --> 00:23:29,280 Speaker 1: owned sales. So I'm just looking at the consensus estimates 413 00:23:29,280 --> 00:23:32,280 Speaker 1: out on the on the Bloomberg terminal. Not much revenue growth, 414 00:23:32,640 --> 00:23:34,840 Speaker 1: but some very strong margins here. So it give us 415 00:23:34,840 --> 00:23:37,080 Speaker 1: a sense of kind of the business mix for you guys, 416 00:23:37,119 --> 00:23:39,720 Speaker 1: between kind of the the sales of cars and maybe 417 00:23:39,720 --> 00:23:42,280 Speaker 1: the services for your business and kind of which is 418 00:23:42,280 --> 00:23:44,640 Speaker 1: really driving the growth for you. Yes, they think about 419 00:23:44,640 --> 00:23:47,840 Speaker 1: the growth drivers within the business. The service or we 420 00:23:47,880 --> 00:23:51,080 Speaker 1: call customer care side of the business has great margins. 421 00:23:51,119 --> 00:23:53,760 Speaker 1: So those margins are in the forty five percent range 422 00:23:53,800 --> 00:23:57,120 Speaker 1: plus or minus compared to new and used vehicle sales 423 00:23:57,160 --> 00:23:59,600 Speaker 1: that are in the case of used vehicles sub eight 424 00:23:59,640 --> 00:24:03,640 Speaker 1: percent new vehicle sales certainly much lower on a percentage basis. 425 00:24:03,640 --> 00:24:06,440 Speaker 1: So as we continue to shift and focus on growth 426 00:24:06,880 --> 00:24:09,040 Speaker 1: in the customer care side of the business, you're seeing 427 00:24:09,080 --> 00:24:11,639 Speaker 1: some margin improvement but also flow through. So if you 428 00:24:11,680 --> 00:24:15,520 Speaker 1: think about our bottom line improvement, we've made some good 429 00:24:15,520 --> 00:24:18,159 Speaker 1: steps with respect to s g n A. So so 430 00:24:18,240 --> 00:24:20,320 Speaker 1: the nice thing of having said in the CFO roll 431 00:24:20,400 --> 00:24:26,760 Speaker 1: previously is that continued focus on cost optimization. So going forward, 432 00:24:26,880 --> 00:24:28,840 Speaker 1: you know, you talked a little bit about how people 433 00:24:29,080 --> 00:24:31,920 Speaker 1: analysts perhaps are thinking more about are we hitting peak 434 00:24:31,960 --> 00:24:35,920 Speaker 1: auto than they are your specific business model, but that 435 00:24:36,000 --> 00:24:38,000 Speaker 1: you can't lose sight of that either, right, the whole 436 00:24:38,000 --> 00:24:40,960 Speaker 1: idea that cars, that the cost of cars is getting 437 00:24:41,000 --> 00:24:44,600 Speaker 1: a lot more expensive as companies try to offset the 438 00:24:44,640 --> 00:24:47,320 Speaker 1: fact that people are buying fewer of them. So what 439 00:24:47,480 --> 00:24:49,800 Speaker 1: is sort of the key price level that you're seeing 440 00:24:49,880 --> 00:24:52,520 Speaker 1: is the sweet spot where sales are continuing and sort 441 00:24:52,520 --> 00:24:54,880 Speaker 1: of what's the sort of tipping point at which point 442 00:24:54,920 --> 00:24:57,640 Speaker 1: sales drop off. Well, one of the great things about 443 00:24:57,680 --> 00:25:00,359 Speaker 1: that question relative to price for the con zoom or 444 00:25:00,440 --> 00:25:01,600 Speaker 1: is we're going to have a little bit of a 445 00:25:01,600 --> 00:25:04,480 Speaker 1: tail win with interest rates, So coming into the year 446 00:25:04,600 --> 00:25:08,040 Speaker 1: thinking we might have three hikes versus now having one 447 00:25:08,080 --> 00:25:10,840 Speaker 1: cut so far, and hopefully with the next month here 448 00:25:10,880 --> 00:25:14,359 Speaker 1: you may see a second cut with respect to rates. 449 00:25:14,560 --> 00:25:18,480 Speaker 1: That actually improves affordability. So as I think about that, 450 00:25:18,480 --> 00:25:21,040 Speaker 1: that provides some more balance for the customers, so it 451 00:25:21,040 --> 00:25:23,520 Speaker 1: provides them a little bit more running room. But at 452 00:25:23,560 --> 00:25:26,320 Speaker 1: the same time, if people aren't buying new, maybe they're 453 00:25:26,359 --> 00:25:29,080 Speaker 1: buying nearly new. If they're not buying nearly new, they're 454 00:25:29,080 --> 00:25:31,639 Speaker 1: holding their vehicles. And we saw this play out in 455 00:25:31,680 --> 00:25:34,719 Speaker 1: the recession back in two thousand and eight, two thousand nine. 456 00:25:34,920 --> 00:25:38,040 Speaker 1: It's a countercyclical part of our business parts and service 457 00:25:38,160 --> 00:25:40,320 Speaker 1: because if you're not buying, you need to service and 458 00:25:40,359 --> 00:25:43,160 Speaker 1: maintain your existing vehicle. So that's the way I think 459 00:25:43,160 --> 00:25:45,719 Speaker 1: about the composition of the business. But I'm also excited 460 00:25:45,760 --> 00:25:49,960 Speaker 1: to have one ft into the future and thinking about relationships, 461 00:25:49,960 --> 00:25:53,960 Speaker 1: strategic partnerships like Weymo, where we're thinking about forward looking 462 00:25:53,960 --> 00:25:56,399 Speaker 1: consumer mobility, which may look a little bit different than 463 00:25:56,440 --> 00:25:58,480 Speaker 1: it has in the past. One of the things you 464 00:25:58,680 --> 00:26:02,960 Speaker 1: mentioned just peak auto, are you concerned that uber and 465 00:26:03,040 --> 00:26:05,000 Speaker 1: lift and those types of things are going to result 466 00:26:05,040 --> 00:26:09,240 Speaker 1: in fewer people driving. It's a really interesting question, Paul. 467 00:26:09,320 --> 00:26:11,320 Speaker 1: And so the way I think about it is when 468 00:26:11,320 --> 00:26:14,440 Speaker 1: you look at what Uber and Lift have replaced to date, 469 00:26:14,920 --> 00:26:17,040 Speaker 1: they've really replaced a lot of the shared use. So 470 00:26:17,200 --> 00:26:19,840 Speaker 1: think taxi cabs where we are here today in New 471 00:26:19,920 --> 00:26:23,440 Speaker 1: York City, UH, think about rental car companies. That's really 472 00:26:23,480 --> 00:26:26,080 Speaker 1: a lot of what it is replaced today. What we 473 00:26:26,160 --> 00:26:29,040 Speaker 1: are hearing from customers is they'll occasionally take an Uber 474 00:26:29,200 --> 00:26:31,480 Speaker 1: lift if they're going out to dinner, if they're going 475 00:26:31,520 --> 00:26:34,240 Speaker 1: into this city somewhere it's expensive to park. We have 476 00:26:34,359 --> 00:26:38,040 Speaker 1: not really seen it replacing traditional ownership at this stage, 477 00:26:38,320 --> 00:26:41,119 Speaker 1: but we'll continue to to watch the market as it evolves, 478 00:26:41,359 --> 00:26:43,800 Speaker 1: and as we look at our core capabilities. We've got 479 00:26:43,960 --> 00:26:47,679 Speaker 1: great retail locations, we've got a ton of experience selling 480 00:26:47,720 --> 00:26:51,439 Speaker 1: twelve million vehicles, servicing forty five million vehicles, and so 481 00:26:51,480 --> 00:26:54,639 Speaker 1: we've got great experience to meet the customer where they are. 482 00:26:54,680 --> 00:26:57,480 Speaker 1: But at this point, the customer isn't dropping off their 483 00:26:57,480 --> 00:27:01,680 Speaker 1: car and droves and UH and opting exclusively for Uber Lift. 484 00:27:02,040 --> 00:27:04,959 Speaker 1: So let's talk a little bit about the Weymo partnership 485 00:27:05,040 --> 00:27:08,040 Speaker 1: because you did mention it and Auto Nation does have 486 00:27:08,400 --> 00:27:11,920 Speaker 1: UH some partnership with them. Can you describe a little 487 00:27:11,920 --> 00:27:14,920 Speaker 1: bit more about that. Weymo, of course is the self 488 00:27:15,000 --> 00:27:20,320 Speaker 1: driving project formerly of Google, now an alphabet company. Yeah. Absolutely. 489 00:27:20,359 --> 00:27:24,119 Speaker 1: So I had the great opportunity in two thousand seventeen 490 00:27:24,720 --> 00:27:27,920 Speaker 1: to be at the starting point of that relationship, So 491 00:27:28,000 --> 00:27:30,920 Speaker 1: being out in Phoenix where that was started, as well 492 00:27:30,920 --> 00:27:33,840 Speaker 1: as in discussions out in California, And as we looked 493 00:27:33,880 --> 00:27:36,800 Speaker 1: at this potential relationship, I had to say, what is 494 00:27:36,800 --> 00:27:40,320 Speaker 1: Auto Nation really good at? What core compencies does AutoNation 495 00:27:40,400 --> 00:27:42,639 Speaker 1: bring to the table that may or may not be 496 00:27:42,760 --> 00:27:46,280 Speaker 1: things that Weymo is interested as a company and doing directly. 497 00:27:46,840 --> 00:27:48,960 Speaker 1: And that really came down to service. So if you 498 00:27:49,000 --> 00:27:52,880 Speaker 1: think about the quality of our technicians the technical complexity 499 00:27:52,880 --> 00:27:55,800 Speaker 1: of vehicles, were really good at the hard stuff. And 500 00:27:55,840 --> 00:27:58,679 Speaker 1: so if you think about hybrids and electrics, we've serviced 501 00:27:58,720 --> 00:28:01,439 Speaker 1: a ton of hybrid and a tricks already. We were 502 00:28:01,440 --> 00:28:04,280 Speaker 1: ready to think about how do we service autonomous This 503 00:28:04,359 --> 00:28:06,760 Speaker 1: is this is fascinating because there there's been a big 504 00:28:06,800 --> 00:28:09,959 Speaker 1: discussion about self driving vehicles and who would be the 505 00:28:10,000 --> 00:28:13,240 Speaker 1: maintainer of those, right would be okay, well, this is 506 00:28:13,240 --> 00:28:16,440 Speaker 1: really interesting, right and it's sort of at the intersection 507 00:28:16,520 --> 00:28:18,000 Speaker 1: over A lot of people think is this sort of 508 00:28:18,080 --> 00:28:21,320 Speaker 1: see change in the way people get around. The question 509 00:28:21,440 --> 00:28:23,679 Speaker 1: is are we really getting the kind of traction in 510 00:28:23,720 --> 00:28:25,520 Speaker 1: the self driving space that a lot of people have 511 00:28:25,600 --> 00:28:28,280 Speaker 1: thought that we would At this point, it's really early days. 512 00:28:28,280 --> 00:28:30,280 Speaker 1: It's a great point. So the great thing is we 513 00:28:30,280 --> 00:28:31,840 Speaker 1: want to have a foot in the future. We want 514 00:28:31,840 --> 00:28:35,160 Speaker 1: to be learning today and we want to be assisting today. 515 00:28:35,200 --> 00:28:37,680 Speaker 1: So the way I think about it is we bring 516 00:28:37,720 --> 00:28:40,800 Speaker 1: these great technicians and now they're they're they're used to 517 00:28:40,800 --> 00:28:43,640 Speaker 1: working on complex vehicles. So if you think about a 518 00:28:43,840 --> 00:28:46,320 Speaker 1: DAS and all that technology that's already in the cars, 519 00:28:46,400 --> 00:28:50,360 Speaker 1: lane assists, they're working on things with sensors and computers 520 00:28:50,360 --> 00:28:54,520 Speaker 1: today already. This is an expansion of that great technician 521 00:28:54,680 --> 00:28:58,440 Speaker 1: base where we have existing technicians that are now learning 522 00:28:58,480 --> 00:29:02,280 Speaker 1: how to work around and autonomous vehicles. So it's something 523 00:29:02,280 --> 00:29:04,960 Speaker 1: that's really within our sweet spot. We also have great 524 00:29:05,040 --> 00:29:08,520 Speaker 1: retail locations. If you think about it, where do customers 525 00:29:08,560 --> 00:29:12,040 Speaker 1: live and work? Automation is located near where customers live 526 00:29:12,080 --> 00:29:14,960 Speaker 1: and work, not in a remote area, So we're already 527 00:29:15,000 --> 00:29:19,240 Speaker 1: around that daily traffic flow of where customers live and work. 528 00:29:19,280 --> 00:29:21,040 Speaker 1: And that's where they where they want their vehicles to 529 00:29:21,080 --> 00:29:24,960 Speaker 1: be traveling. So you're obviously with all your locations and 530 00:29:25,200 --> 00:29:26,960 Speaker 1: the sales and service, you can have a great feel 531 00:29:27,040 --> 00:29:31,160 Speaker 1: for the consumer. We know, despite slowing manufacturing data and whatever, 532 00:29:31,280 --> 00:29:33,760 Speaker 1: we see it pretty strong consumer. What are your what 533 00:29:33,800 --> 00:29:35,479 Speaker 1: are you seeing on the ground in your business? Just 534 00:29:35,600 --> 00:29:37,720 Speaker 1: is it relates to kind of the health of the consumer. 535 00:29:38,200 --> 00:29:40,280 Speaker 1: So what we're seeing an automation is is pretty good 536 00:29:40,360 --> 00:29:42,680 Speaker 1: health at the consumer. Right. People have jobs and that's 537 00:29:42,680 --> 00:29:44,840 Speaker 1: the great thing. When I contrast that to how it 538 00:29:44,920 --> 00:29:47,480 Speaker 1: felt back in two thousand and eight, two thousand nine 539 00:29:47,480 --> 00:29:51,200 Speaker 1: when jobs were tough, it feels decidedly different. That being said, 540 00:29:51,240 --> 00:29:54,080 Speaker 1: we've talked about affordability, so I think a little bit 541 00:29:54,120 --> 00:29:56,280 Speaker 1: of relief on the interest rates will help with that. 542 00:29:56,400 --> 00:29:59,640 Speaker 1: But fundamentally, I'm seeing a pretty strong consumer showing up 543 00:29:59,640 --> 00:30:03,720 Speaker 1: in our in our stores and online. This has been fascinating. 544 00:30:03,840 --> 00:30:06,000 Speaker 1: Cheryl Miller Miller, thank you so much for being with 545 00:30:06,080 --> 00:30:09,400 Speaker 1: us in congratulations on your first forty five days. Cheryl 546 00:30:09,440 --> 00:30:13,040 Speaker 1: Miller is chief executive officer and President of Auto Nation, 547 00:30:13,320 --> 00:30:16,800 Speaker 1: joining us here in our Bloomberg Interactive Broker's studio. She 548 00:30:17,000 --> 00:30:20,000 Speaker 1: came into the company about forty five days ago after 549 00:30:20,080 --> 00:30:24,959 Speaker 1: it's long term leader and now the company's chairman, Mike Jackson, 550 00:30:25,200 --> 00:30:29,240 Speaker 1: stepped down in a brief tenure by another temporary executive. 551 00:30:29,920 --> 00:30:32,160 Speaker 1: Thanks for listening to the Bloomberg P and L podcast. 552 00:30:32,320 --> 00:30:34,920 Speaker 1: You can subscribe and listen to interviews at Apple Podcasts 553 00:30:35,000 --> 00:30:38,000 Speaker 1: or whatever podcast platform you prefer. I'm Paul Sweeney, I'm 554 00:30:38,000 --> 00:30:40,560 Speaker 1: on Twitter at pt Sweeney. I'm Lisa A. Bram Woods. 555 00:30:40,600 --> 00:30:43,040 Speaker 1: I'm on Twitter at Lisa A. Bram Woods. One before 556 00:30:43,080 --> 00:30:46,240 Speaker 1: the podcast, you can always catch us worldwide on Bloomberg Radio.