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Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney. Along

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Speaker 1: with my co host of Bonnie Quinn. Every business day,

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Speaker 1: we bring you interviews from CEO, market pros, and Bloomberg experts,

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Speaker 1: along with essential market moving news. Find the Bloomberg Markets

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Speaker 1: Podcast on Apple Podcasts or wherever you listen to podcasts,

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Speaker 1: and on Bloomberg dot com. The Senate passed an extension

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Speaker 1: of the popular paycheck Protection Program for small businesses, which

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Speaker 1: was set to close down last night with more than

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Speaker 1: a hundred and thirty billion in funding left over. The

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Speaker 1: extension goes to August eighth. To get a latest on

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Speaker 1: the p p P and where the money is going,

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Speaker 1: we welcome Karen Miller. She's a senior fellow at the

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Speaker 1: Harvard Business School, former Small Business administrator for President Obama

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Speaker 1: from two thousand nine to two thousand thirteen. Karen, thanks

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Speaker 1: so much for joining us here. So I guess the

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Speaker 1: question is how effective do you think, UM, the p

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Speaker 1: p P has been for small businesses in this country? Well,

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Speaker 1: I think it's been very effective, and I was delighted

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Speaker 1: by our midnight Surprised last night, I really UM had

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Speaker 1: not anticipated that the Senate would take leadership and renew

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Speaker 1: the p p P. A hundred and thirty billion dollars

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Speaker 1: is a lot of money in the land is small business,

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Speaker 1: and so far the results side of the p p

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Speaker 1: P have actually been pretty good. I know, the headlines

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Speaker 1: have been about, you know, big companies who didn't need it,

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Speaker 1: who took it, but literally five million small businesses have

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Speaker 1: gotten funding without which they would just not be alive today.

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Speaker 1: So if we can get a little bit more out,

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Speaker 1: I think we can save some more businesses. Karen, what

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Speaker 1: about those those that opened and have to now reclosed

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Speaker 1: because the virus is actually not going away at all.

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Speaker 1: The carves deepening in the US, and not just those

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Speaker 1: that we opened not to close, but those who took

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Speaker 1: the money and kept people on their pay rolls and

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Speaker 1: are not getting the revenue, and you know this will

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Speaker 1: finish them. Well, you're exactly right. You know, the virus

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Speaker 1: is not done yet. And even though you know there's

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Speaker 1: been an attempt at all these reopenings, small business owners

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Speaker 1: are worried, their customers are worried, and they're desperate, you know,

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Speaker 1: because otherwise they're going to go out of business. So

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Speaker 1: anything we can do to get money into their hands,

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Speaker 1: so they can you know, survive, whether they're partially open,

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Speaker 1: whether they just do take out. We just need to

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Speaker 1: get them funding because as you know, small businesses have

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Speaker 1: almost no cash reserves and whatever they had that's gone

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Speaker 1: by now, so they are just living hand to mouth

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Speaker 1: and if we can, um what I'd really like to

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Speaker 1: do with this extra money is let them apply again,

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Speaker 1: because the p p P extension would only go to

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Speaker 1: new folks who haven't applied, and I'd like to let

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Speaker 1: you know, eligible businesses get another a few weeks UH

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Speaker 1: of funding if they possibly can. I think that would

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Speaker 1: be helpful. Karen, what do we know about where the

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Speaker 1: initial chunk of money you went to? Is there is

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Speaker 1: there a good sense that there's oversight there that we

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Speaker 1: kind of know where the money went, who got it,

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Speaker 1: who didn't get it, and so on. Well, it's ridiculous

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Speaker 1: that the SPA is not disclosing this. We disclosed everything.

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Speaker 1: It's just table stakes. You know, the American people need

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Speaker 1: to know where their money is used. Um, So I

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Speaker 1: can't imagine why you wouldn't disclose. And now they've said

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Speaker 1: they're going they're going to. What we do know is

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Speaker 1: that about five million small businesses got money, most of

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Speaker 1: them got small amounts, and thank goodness, we had some

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Speaker 1: um new players, some tech players stepped in and helped

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Speaker 1: the banks because the banks, we're really struggling to get

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Speaker 1: the small players their money. They just didn't have the mechanism.

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Speaker 1: So then PayPal came men and square and into it,

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Speaker 1: and they put up these automated portals which still are

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Speaker 1: up and allowed the sole proprietors who are eligible, they

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Speaker 1: actually are eligible for p PP a seamless way without

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Speaker 1: going to a bank. Maybe they didn't have a bank.

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Speaker 1: So that's done a lot of good to UM the

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Speaker 1: small business owner. But disturbingly, there is an underrepresentation of

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Speaker 1: minority owned businesses and the p p P and that's

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Speaker 1: from some survey data from Alignable, and I think that's

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Speaker 1: quite worrisome. I would like to see that percentage go

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Speaker 1: up because, as you know, there's a lot of inequity

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Speaker 1: and access to capital among underserved minority owned businesses and

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Speaker 1: by the way, among women owned businesses, and if they

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Speaker 1: fail in greater proportions, that's just going to hurt everything. Yeah, exactly,

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Speaker 1: there's a lot of problems with it in many many ways.

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Speaker 1: Karen talked to me, though, about what you would do

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Speaker 1: if you were, say a restaurant owner, or you know,

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Speaker 1: the owner of a franchise of some chain of restaurants,

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Speaker 1: and you knew that in order to access this money

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Speaker 1: you have to keep on sevent of your staff. But

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Speaker 1: you're also pretty well aware that you're not going to

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Speaker 1: be able to do of your business even in six months.

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Speaker 1: Yet this is only supposed to tie you over for

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Speaker 1: two months. I mean, wouldn't you much rather just pulled

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Speaker 1: up shop in order not to get up the hopes

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Speaker 1: of all your previous employees, all your customers, your family.

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Speaker 1: So small business owners now, um really are in a dilemma.

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Speaker 1: And I think what they've realized is if you want

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Speaker 1: to keep your business going, you've got to maintain some

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Speaker 1: relationship with your set of employees. The good news is

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Speaker 1: that Congress actually passed something called the Flexibility Act a

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Speaker 1: few weeks ago, and they took that seventy number down

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Speaker 1: to sixt so only sixty of the money has to

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Speaker 1: pay employees. They gave you more week to spread it over.

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Speaker 1: And what that does is allow a business to stay

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Speaker 1: closed longer and take that other of the money and

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Speaker 1: pay the rent and pay for utilities and pay for

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Speaker 1: debt service if they've got another loan, So it's well

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Speaker 1: worth doing. And if you're a small business owner out

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Speaker 1: there and Congress does get their act together and the

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Speaker 1: President does sign an extension of P P P, I

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Speaker 1: would go right away to one of these online portals

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Speaker 1: or your bank. And uh, if you haven't gotten one

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Speaker 1: of these loans, I have to say, even if you're closed,

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Speaker 1: you will find it useful and your people will get

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Speaker 1: paid and you'll keep your relationship with them. You'll get

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Speaker 1: to pay your rent. So I think it is well

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Speaker 1: worth doing. And the forgiveness aspect, they are saying they're

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Speaker 1: gonna do blanket forgiveness and very small dollar loans, so

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Speaker 1: I would recommend doing it. So, Karen, what have we

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Speaker 1: seen on the on the you know, um, for these

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Speaker 1: small businesses, how many of them are in fact going

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Speaker 1: out of business? How many do you expect to go

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Speaker 1: out of business during due to this pandemic? Well, when

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Speaker 1: you talk about this percentage going out of business, you know,

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Speaker 1: my heart just uh, you know, rings about it because

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Speaker 1: I think it's going to be very bad. My prediction

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Speaker 1: is twenty tot of small businesses will fail, right, now

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Speaker 1: we're seeing five to ten, but we really haven't seen

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Speaker 1: the bankruptcy is come and that's going to happen in

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Speaker 1: I would say two to four months will be the

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Speaker 1: peak of that. And the reason the number is so

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Speaker 1: high in part is sadly there are a lot of

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Speaker 1: businesses operating just on the edge, and particularly we've seen

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Speaker 1: in the older generation people will just pack it in.

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Speaker 1: They'll just say, you know what, UM, I'm going to

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Speaker 1: fold my tents. This is the time. So that is

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Speaker 1: going to count for some percentage in that will come

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Speaker 1: all at once, not distributed over a year or two years.

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Speaker 1: And the problem with the number like twenty or thirty

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Speaker 1: percent means that it's very hard to have a U

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Speaker 1: shape recovery because it takes six to twelve months to

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Speaker 1: get a new business started on mainstream. So Karen will

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Speaker 1: be a while before the game of play. It's going

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Speaker 1: to be heartbreaking and hopefully it will lead to some

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Speaker 1: sort of rebirth of entrepreneurialism at some point in this country.

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Speaker 1: Karen Mill's former sp A head currently senior fellow at

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Speaker 1: the Harvard Business School, thank you for joining a very

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Speaker 1: interesting day for Hong Kong, China. Describing Hong Kong's new

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Speaker 1: security law as a sword of damocles hanging over its

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Speaker 1: most strident critics. In other words, China is very pleased

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Speaker 1: about it. It's not quite clear exactly what Hong Kong

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Speaker 1: residents think about it. However, we did have Boris Johnson

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Speaker 1: coming out today and offering citizenship to people who wish

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Speaker 1: to move to Britain from Hong Kong. It's, of course

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Speaker 1: former colony. Let's bring in somebody who is on the

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Speaker 1: ground there right now, as well as somebody who knows

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Speaker 1: a lot about all of this. Jody Schneider is senior

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Speaker 1: International editor in Hong Kong. We're also welcoming Andy Brown,

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Speaker 1: editorial director for Bloomberg in New Economy, Jody Easy. Details

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Speaker 1: of the law came out last night, about thirty five pages.

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Speaker 1: Have residents managed to digest exactly what's in it? And

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Speaker 1: could you give us bullet points? Yeah? So this is

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Speaker 1: of course very historic and it's coming. Uh, it's the

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Speaker 1: day twenty three years ago when China took over Hong Kong.

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Speaker 1: Hong Kong was handed over to China from the UK.

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Speaker 1: And uh, this of course is very um. It's concerning

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Speaker 1: a lot of people here because it's very um, the

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Speaker 1: tough provisions in this national security I've really gone beyond

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Speaker 1: what many investors and um, even pro Beijing politicians had

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Speaker 1: thought was in there. Uh. There's a lot of concern

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Speaker 1: about whether it's going to have a chilling of not

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Speaker 1: only in descent to the city, but over free speech

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Speaker 1: and uh and maybe even freedom and depressed. Of course,

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Speaker 1: the business communities are concerned about what it could mean

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Speaker 1: for them and if they start to see have trouble

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Speaker 1: getting talent here, and also how it could affect their businesses.

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Speaker 1: So what theyue language um in the law, and so

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Speaker 1: it's really generating a lot of confusion about what is allowed. Um,

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Speaker 1: you know, what kinds of speech are even allowed anymore here?

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Speaker 1: And of course it's very suddenly kind of change. You know.

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Speaker 1: One day um uh, well you could be arrested for

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Speaker 1: certain kinds of things. Now you could be arrested. And

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Speaker 1: the very opaque kind of system. They were already arrested today.

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Speaker 1: That came with with the protests here against the law

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Speaker 1: and on on the shamed over day. Um, there were

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Speaker 1: already arrests that they said were made that Bagian kind

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Speaker 1: of boasted came under the law including someone flying the

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Speaker 1: flag UM that was proclaiming independent, but they seeking independence

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Speaker 1: for Hong Kong. Andrew I was. I just happened to

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Speaker 1: be in Hong Kong on this day twenty three years

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Speaker 1: ago on a business trip, and I remember the handover clearly,

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Speaker 1: and I remember thinking to myself this there's there's just

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Speaker 1: no way this is going to end well for the

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Speaker 1: folks of Hong Kong. China is going to assert full

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Speaker 1: control over Hong Kong. It's just a matter of time.

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Speaker 1: I'm actually quite surprised it's it's taken this long. What's

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Speaker 1: the feeling, you know, as you think about the Greater

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Speaker 1: China's policy strategy, what is their view towards Hong Kong?

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Speaker 1: Do you think? Wellful I, I was in Hong Kong

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Speaker 1: that day to UM and you obviously very precedent because

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Speaker 1: I think UM quite a lot of people hoped and

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Speaker 1: expected that since UM, China and the United Kingdom had

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Speaker 1: signed an international agreement under which Hong Kong would retain

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Speaker 1: its autonomy and retain its freedoms, retain its judicial independence,

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Speaker 1: freedom of speech, UM, freedom of the press, and so on, UM,

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Speaker 1: that this would continue as promised for fifty years and

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Speaker 1: what we've now seen, of course, is that Hong Kong

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Speaker 1: is becoming, to all intents and purposes, another Chinese city.

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Speaker 1: It's going to lose its international personality. Um. And the

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Speaker 1: trend is very clear now it's going to become a

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Speaker 1: financial center, more financial center for China and less in

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Speaker 1: international and those parts of this sort of the international

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Speaker 1: mandate of Hong Kong as a as a global hub

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Speaker 1: will migrate to other parts of the region of the Singapore, Tokyo,

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Speaker 1: perhaps even Taipei. Who is the moral arbiter here though, Andy,

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Speaker 1: I mean, is it clear that the wrong thing is happening?

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Speaker 1: I was China wants Hong Kong to help it become

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Speaker 1: stronger in the international financial system, for example. Isn't it

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Speaker 1: doing the right thing for its citizens? Um? This is

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Speaker 1: a it is a sort of Dama pleas Um. And

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Speaker 1: it's not a sort of Dama please that is handing

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Speaker 1: hanging over extremists in Hong Ng. It's a sort of

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Speaker 1: damocles that hangs over the whole territory. As Jody says,

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Speaker 1: this is way worse than anybody had predicted, not just

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Speaker 1: in the fact that, um, you know, you have four

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Speaker 1: new categories of crime, sedition, secession, terrorism, UM, you know,

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Speaker 1: and collusion with foreign forces, which are broad enough to

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Speaker 1: encompass pretty much any action or expression that the Chinese

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Speaker 1: state doesn't like. UM. And also, by the way, UM

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Speaker 1: has no borders, so it doesn't just apply to Hong

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Speaker 1: Kong and Hong Kong residents. It applies to actions and

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Speaker 1: to people anywhere in the world. So this is really

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Speaker 1: China stamping its authority over Hong Kong and defiantly saying

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Speaker 1: to the rest of the world, we don't care what

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Speaker 1: your reaction is. Jody, what do you expect the reaction

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Speaker 1: to be from the folks on the ground. We've seen protests,

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Speaker 1: you know, really over the last year or so. What

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Speaker 1: do you expect the response to be. Well, they obviously

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Speaker 1: UM their law and come the law coming out in

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Speaker 1: July one was you know, that was not coincidental. I

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Speaker 1: mean it was meant to try to quell dissent. This

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Speaker 1: is UH. It has been put into effect after eight

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Speaker 1: months of increasingly UH anti China, viarrantly anti China and

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Speaker 1: UM and somewhat violent, they got more violent protests UH,

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Speaker 1: and there was this was something that embarrassed central government

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Speaker 1: and UH, and they found that they didn't have any

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Speaker 1: tools at that time to deal with it. Then you

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Speaker 1: had the pandemic and thinks uh just uh demonstration stopped.

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Speaker 1: So they were this is when they were decided to

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Speaker 1: come in in this way to really quell not only

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Speaker 1: the dissent, but to really try to to um, you know,

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Speaker 1: take take charge in a much more um, much more

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Speaker 1: significant way than they had, even though in recent years

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Speaker 1: there had been more intrusions into Hong Kong's economy autonomy

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Speaker 1: excuse me. So at this point the question is just, um,

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Speaker 1: you know, how do companies read this, How do people

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Speaker 1: read this in terms of whether you know, when they

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Speaker 1: decide um that they might leave or um, if they stay,

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Speaker 1: what kinds of accommodations they're going to have to make?

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Speaker 1: And that's really that's the question. That's where we are.

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Speaker 1: Jody Schneider, thanks so much for joining your senior international

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Speaker 1: editor in co Lea of Women's Voices in Asia four

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Speaker 1: Bloomberg News, and Andrew Brown, editorial director Bloomberg New Economy Form.

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Speaker 1: We appreciate your thoughts. Markets rebounding pretty dramatically off of

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Speaker 1: those bottoms that we experienced right at the beginning of

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Speaker 1: the pandemic in March. In April, a lot of folks saying, Gee,

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Speaker 1: have I missed the bounce? Is it too far? Is

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Speaker 1: a market too rich? What do I do here? Jack

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Speaker 1: Channes See Which, senior vice president portfolio strategists and portfolio

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Speaker 1: manager for uh Nactisis Investment Managers, joins us. They have

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Speaker 1: about a trillion dollars and assets under management, so they

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Speaker 1: know a thing or two about the markets. Jackson, thanks

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Speaker 1: so much for joining us here. Again, probably the commentary

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Speaker 1: that we hear most from investors is have I missed it?

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Speaker 1: The market cratered during the pandemic. Certainly we're gonna understand that,

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Speaker 1: but it's had a dramatic rebound off of the bottom.

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Speaker 1: What do we do here? What are you telling your clients? Yeah,

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Speaker 1: so thanks for having me on this morning. Um, you know,

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Speaker 1: right now I would sort of characterize the market. It's

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Speaker 1: a it's a push and pull right now between fundamentals

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Speaker 1: and technicals and sentiment. And you know, the fundamental backdrop

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Speaker 1: is still I think a little bit squishy. But the

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Speaker 1: bigger overriding factor, I think are the are the technicals

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Speaker 1: in the positioning in the marketplace, And so when we

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Speaker 1: have our conversations with clients and they ask those sort

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Speaker 1: of same questions. To us, we're simply saying we think

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Speaker 1: there's further upside, and a lot of that is simply

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Speaker 1: because some of the things that we follow, meaning that

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Speaker 1: the positionings that we've see with our clients, some of

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Speaker 1: the internal models that we run, for example for looking

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Speaker 1: at ct A exposure along short funds, um retail investors,

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Speaker 1: and I mean, we've been basically seeing that outflow since

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Speaker 1: the beginning of March, I started beginning of February. To us,

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Speaker 1: you know, the positioning is still fairly light, and so

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Speaker 1: even though we've bounced off the bottom, there's still plenty

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Speaker 1: of people that I think have been caught sort of

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Speaker 1: more defensively positioned, haven't really enjoyed the games that we've seen,

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Speaker 1: and as a result, to us, the pain trade is

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Speaker 1: still higher and these guys are gonna have to chase

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Speaker 1: the market higher in here. So you know, we're telling

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Speaker 1: our clients were leaning a little bit more to being

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Speaker 1: still risk on and think the upside is where the

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Speaker 1: market is probably going to continue to grind right now,

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Speaker 1: we will convince these people to get in. And I

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Speaker 1: agree with you this is a sort of a contrarian

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Speaker 1: point for many. They say that particularly gen xers and

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Speaker 1: and boomers for example, haven't really participated because it didn't

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Speaker 1: look like the most sure of things. But will there

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Speaker 1: be something that will convince them or do we have

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Speaker 1: to see it like lower before they jump in. No,

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Speaker 1: my guess is that, you know, the biggest the biggest

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Speaker 1: impact I think to that sentiment backdrop is simply seeing

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Speaker 1: other people around you making money, right, and so there's

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Speaker 1: more people sort of start to kind of capitulate and

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Speaker 1: put money back to work, and then you have those

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Speaker 1: conversations with your friends about how well your you know,

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Speaker 1: your portfolio is doing. I think that's one of the

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Speaker 1: things that you're gonna start to see people get squeezed

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Speaker 1: back in on. But uh, so that sentiment perspective I

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Speaker 1: think matters, and then the other one, I think it

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Speaker 1: is just getting a better sense in terms of feeling

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Speaker 1: more safe with regard to the virus. And you know,

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Speaker 1: at the end of the day, we've been sort of

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Speaker 1: telling our clients listen, until we get a vaccine, you're

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Speaker 1: gonna have to learn to live with this um. We're

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Speaker 1: slowly learning things along the way, and I think that's

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Speaker 1: gonna help. So when we start to have to sort

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Speaker 1: of think about the potential for a second wave coming

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Speaker 1: towards the end of the year, you know, we've learned

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Speaker 1: how to deal with this, so maybe we don't have

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Speaker 1: to have these draconian lockdowns, so to speak. They could

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Speaker 1: be more targeted, and that's going to help people feel

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Speaker 1: a little bit better about getting back into the markets

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Speaker 1: because you're not going to have these severe lockdowns and

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Speaker 1: have the ramifications filtering through the equity space as a result. So, Jack,

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Speaker 1: what are some of the sectors that you guys are

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Speaker 1: looking at right now? Yeah, so we've been basically looking

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Speaker 1: at someone of a barbell approach. Um. You know, it's interesting.

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Speaker 1: We still think tech is going to continue to be

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Speaker 1: a leader going forward, but more recently tech seems to

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Speaker 1: become more of a defensive play. Right. Um, you're seeing

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Speaker 1: a lot more of the UH in the downside markets.

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Speaker 1: You know, the NASA continue to outperform, and I think

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Speaker 1: that's a function of that sort of stay at home

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Speaker 1: economy will continue to benefit the tech side of the equation.

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Speaker 1: But you know, a longer term, we still think tech

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Speaker 1: is the right way to play this, UM, but we're

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Speaker 1: also thinking that the reopening is going to continue. It's

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Speaker 1: gonna be choppy, it's gonna be uneven UM. But as

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Speaker 1: that continues to sort of move forward, that cyclical bias

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Speaker 1: is going to come back and leak back into the market.

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Speaker 1: So we're sort of thinking, you know, have a little

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Speaker 1: bit of exposure to the cyclical side of the equation,

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Speaker 1: also have a little bit of exposure to the tech side,

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Speaker 1: and that sort of barbel It's trade. I think it

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Speaker 1: provides you with a little bit of upside, also with

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Speaker 1: a little bit of cushing to the downside. If we

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Speaker 1: get a little bit of weakness to going forward, what

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Speaker 1: about elsewhere? What kind of assets look cheaper now? A

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Speaker 1: lot ab real assets for example, like real estate or gold. Yeah,

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Speaker 1: so gold is the interesting one for us, because you know,

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Speaker 1: we've been doing a little bit of digging on the

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Speaker 1: back of this. When you start to talk about your

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Speaker 1: traditional sixty portfolio. You know, with the ten years sitting

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Speaker 1: close to seventy basis points on yield, you're not getting

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Speaker 1: a ton of cushion UM. And so even if let's

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Speaker 1: say rates collapsed to zero UM, I don't think there's

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Speaker 1: a ton of downside or a ton of cushioning that

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Speaker 1: the spreads will give you with regard to trying to

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Speaker 1: opposite some of your equity risk. And so I think

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Speaker 1: we started to look at gold really becoming more of

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Speaker 1: that defensive posture for the portfolio. And so maybe we're

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Speaker 1: thinking about replacing some of our fixed income treasury safe

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Speaker 1: haven assets with gold. So maybe the sixty forty is

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Speaker 1: no longer sixty for example. So um, you know, it's

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Speaker 1: tough with with field as low as they already give

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Speaker 1: you that sort of defensive cushion for the equity side

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Speaker 1: of your portfolios. And as a result, you know, gold

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Speaker 1: probably makes a little bit more sense just given the opportunities,

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Speaker 1: with the lack of opportunity out there for that sort

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Speaker 1: of equity offset in the typical portfolios. Jack, fascinating to

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Speaker 1: speak with you. Thank you very much, and do come

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Speaker 1: on again soon. Jack Switz is portfolio strategist, a manager

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Speaker 1: under Texas Investment Managers. Plenty of money in assets under management,

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Speaker 1: about a trillion dollars in facts Pole So there. Yeah,

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Speaker 1: they're all over in every market, in every geography exactly right.

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Speaker 1: So it's interesting to see, uh, you know, Jack still

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Speaker 1: talking about some upside and this market given you know,

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Speaker 1: the uh pop off of that bottom that we saw

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Speaker 1: there in late March early April. I've got some auto

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Speaker 1: sales data today. Fiat Chrysler General Motors reported their US

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Speaker 1: auto sales. I guess they dropped less than expected. Let's

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Speaker 1: get the details. We can do that with Kevin Tynan.

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Speaker 1: He's a senior autos analyst for Bloomberg Intelligence. So, Kevin,

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Speaker 1: what are some of your takeaways here as we take

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Speaker 1: a look at auto sales and we take a look

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Speaker 1: at perhaps a signal of how the consumer and the

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Speaker 1: economy is doing right here. Yeah, and I think, um,

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Speaker 1: from for me looking at the numbers, I think something

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Speaker 1: like Fia Chrysler gets a little bit lost in that.

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Speaker 1: That's a quarterly number, right, so nothing really happened in

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Speaker 1: in April and May, and just like in the first quarter,

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Speaker 1: you know, a lot happened in January and February and

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Speaker 1: half of March. But I think you know what you're

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Speaker 1: gonna get is pretty strong June. Um, if you break

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Speaker 1: out those numbers and can see the monthly, which you

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Speaker 1: can do with some of the Asia based automakers that

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Speaker 1: are still reporting monthly, like HU the Hyundai brand out

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Speaker 1: of Hundai Kia was plus six percent in June. So

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Speaker 1: I think that's what you're getting is that this less

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Speaker 1: bad of big you know, a big drop number is

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Speaker 1: actually pretty decent coming out of June. I'm not sure

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Speaker 1: how sustainable that is given supply issues, but um, I

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Speaker 1: think there's reason for hope that we get back to

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Speaker 1: normalize numbers relatively quickly. We're people spending their stimulus checks

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Speaker 1: or how are they paying for Kevin or is this

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Speaker 1: all going on sor the never never? And will that

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Speaker 1: become a problem. Yeah, Well, it looks like Bonnie that

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Speaker 1: the you know, the incentives that are being rolled out,

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Speaker 1: and and I tell people this all the time. Look,

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Speaker 1: incentives are about managing inventory. There is no inventory. So

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Speaker 1: I think people think this might be a buyer's market

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Speaker 1: because automakers want, you know, need to generate revenue. But

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Speaker 1: if dealerships only have so many of a specific product,

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Speaker 1: they're not really going to throw good money after bad

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Speaker 1: uh and sell down supply at lower margins. So what

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Speaker 1: you're getting the incentives are these long term loans or

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Speaker 1: zero percent or deferred payments, which you know, it looks

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Speaker 1: good and it entices the buyer into the showroom. But

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Speaker 1: really all it does is create negative equity where you know,

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Speaker 1: you have to own that vehicle even longer otherwise you're

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00:23:55,640 --> 00:23:58,720
Speaker 1: going to continue to owe on it. So, Kevin, where

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00:23:58,720 --> 00:24:02,199
Speaker 1: are we in terms of men facturing capacity? We know

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00:24:02,280 --> 00:24:05,240
Speaker 1: the most of the US auto plants were shut down

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00:24:05,320 --> 00:24:07,920
Speaker 1: because of the virus. They're starting to open up right now.

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00:24:07,920 --> 00:24:12,760
Speaker 1: Where are we? Yeah, not very close yet. Um you know,

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00:24:12,840 --> 00:24:15,879
Speaker 1: looked at the May numbers of production and it was

436
00:24:15,960 --> 00:24:20,960
Speaker 1: like a minus you know, seventy, So we're still you know,

437
00:24:21,000 --> 00:24:24,440
Speaker 1: in April was basically zero. Nothing was built in April.

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00:24:25,400 --> 00:24:29,520
Speaker 1: May was just under four hundred thousand units. But to

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00:24:29,560 --> 00:24:32,640
Speaker 1: put that in context, May of was one point five

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00:24:32,680 --> 00:24:35,760
Speaker 1: million units. So that's about how far away we are.

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00:24:36,880 --> 00:24:39,840
Speaker 1: One of the better performers was Toyota. In fact, their

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00:24:39,880 --> 00:24:42,000
Speaker 1: sales were done twenty six point seven percent. The estimate

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00:24:42,000 --> 00:24:45,000
Speaker 1: was th But the other notable thing about Toyota today

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00:24:45,040 --> 00:24:48,880
Speaker 1: is that it became the second most valuable car maker

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00:24:48,920 --> 00:24:51,560
Speaker 1: in the world behind Tesla. That might all change and

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00:24:51,600 --> 00:24:55,880
Speaker 1: as soon as trading starts up again, particularly in Japan obviously,

447
00:24:56,280 --> 00:24:59,520
Speaker 1: but you know, what does that say about the whole system?

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00:24:59,680 --> 00:25:02,760
Speaker 1: Are we looking at kind of you know, legacy companies.

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00:25:02,760 --> 00:25:07,119
Speaker 1: At this point, I guess it's such a difficult topic.

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00:25:07,200 --> 00:25:10,600
Speaker 1: I mean almost I've gotten to the point, Vonnie, where

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00:25:10,640 --> 00:25:14,119
Speaker 1: I look at ranking auto companies by market cap is

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00:25:14,160 --> 00:25:17,480
Speaker 1: like ranking them alphabetically. So you know, by that measure,

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00:25:17,520 --> 00:25:21,159
Speaker 1: Aston Martin is way ahead of Tesla's so for whatever

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00:25:21,200 --> 00:25:23,600
Speaker 1: that's worth. But you know, I mean, if you're gonna

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00:25:23,760 --> 00:25:28,199
Speaker 1: pick that one measure, yeah, but you know, talk about volume,

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00:25:28,320 --> 00:25:31,840
Speaker 1: talk about profitability, talk about you know, all these other

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00:25:31,960 --> 00:25:35,600
Speaker 1: things that we used to value automakers, and it you're right,

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00:25:35,640 --> 00:25:39,119
Speaker 1: it doesn't make a whole lot of sense. Um. But

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00:25:39,240 --> 00:25:41,439
Speaker 1: you know, if I'm looking at the fundamentals and the

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00:25:41,560 --> 00:25:44,199
Speaker 1: structure of a company, you know, I still kind of

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00:25:44,240 --> 00:25:49,399
Speaker 1: like Toyota. So anyway, just Kevin, thanks so much for

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00:25:49,480 --> 00:25:51,720
Speaker 1: joining us. I note that this is gonna be something

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00:25:51,760 --> 00:25:55,040
Speaker 1: bonny for Kevin, that Teslas has a bigger market Captain Toyota,

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00:25:55,080 --> 00:25:57,399
Speaker 1: as you were mentioning, is for tried and true auto analysts.

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Speaker 1: It's gotta be tough to swallow. Yeah, I mean, he

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00:26:00,080 --> 00:26:02,280
Speaker 1: didn't sound too convinced, So let's just put it that way.

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Speaker 1: We'll see what happens in the in the trading for

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Speaker 1: the rest of the month. Thanks for listening to the

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Speaker 1: Bloomberg Markets podcast. You can subscribe and listen to interviews

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00:26:11,600 --> 00:26:14,960
Speaker 1: at Apple Podcasts or whatever a podcast platform you prefer.

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00:26:15,160 --> 00:26:18,159
Speaker 1: I'm Bonnie Quinn. I'm on Twitter at Bonnie Quinn. And

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00:26:18,200 --> 00:26:20,800
Speaker 1: I'm Paul Sweeney. I'm on Twitter at pt Sweeney. Before

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00:26:20,840 --> 00:26:24,000
Speaker 1: the podcast, you can always catch us worldwide at Bloomberg Radio.