Speaker 1: Bloomberg Audio Studios, podcasts, radio news. You're listening to the
Speaker 1: Bloomberg Intelligence Podcast. Catch us live weekdays at ten am
Speaker 1: Eastern on Applecarplay and Android Auto with the Bloomberg Business App.
Speaker 1: Listen on demand wherever you get your podcasts, or watch
Speaker 1: us live on YouTube.
Speaker 2: We have some economic data coming out right now. I
Speaker 2: have some services data coming out forty nine point nine.
Speaker 2: That headline consensus on US was fifty two, so not
Speaker 2: kind of flirting with a little bit of a contraction
Speaker 2: there in the services part of the economy, which again
Speaker 2: is about seventy percent of the US economy.
Speaker 3: Let's get right to it.
Speaker 2: Steve Miller, a chair of the is some services PMI
Speaker 2: on that data. Steve, I'm looking at that headline data
Speaker 2: forty nine point nine.
Speaker 3: That's below fifty. Talk to us about that.
Speaker 4: Good morning, Thanks for having me back. You know, zo
Speaker 4: point one percent below the flat in services industries.
Speaker 3: Flat is bad.
Speaker 4: You know, we've seen we see long term growth when
Speaker 4: we get to flat or just below flat, certainly negative indicators.
Speaker 4: On the positive side, we track the numbers by industry
Speaker 4: and how they contribute to overall GDP. What we're seeing
Speaker 4: is a slight increase in the percent of GDP that's
Speaker 4: representing growth, and a slight decrease in those that are
Speaker 4: saying that they're in contraction territory. What we saw bringing
Speaker 4: the number overall down was for accommodations and food services
Speaker 4: and the real estate rental and leasing. Although both still
Speaker 4: an expansion territory, they're not as high or as fast
Speaker 4: level of expansion as they were last month.
Speaker 5: So I was confused as to how im services employment
Speaker 5: actually ticked above that fifty level, whereas a new order
Speaker 5: is just tanked to forty six and the overall index
Speaker 5: is below fifty, what does that.
Speaker 4: Mean well on the employment side, my interpretation of those
Speaker 4: numbers is that we're still seeing confidence that the terror
Speaker 4: situation is going to get worked out and we're going
Speaker 4: to be able to return to growth. But the new
Speaker 4: orders and actually seeing backlog as well backlocker orders, we're
Speaker 4: seeing those very low. And another data point is when
Speaker 4: I look at the average of new orders and backlog,
Speaker 4: this is the lowest that it's been since two other
Speaker 4: points in the last twenty years. One was the beginning
Speaker 4: of the pandemic in March and April, and the other
Speaker 4: was in the two thousand and eight two thousand and
Speaker 4: nine time frame in the Great Recession. So for me,
Speaker 4: that's the biggest red flag is the drop in new
Speaker 4: orders as well as both the average level between the
Speaker 4: new orders and the backlog of orders.
Speaker 2: So we've got new orders lower that's concerned about just
Speaker 2: the economy slowing down, and we've got services prices paid
Speaker 2: coming in much higher than expected.
Speaker 3: Is that inflation?
Speaker 4: So I can't say yet whether it's inflationary, but I
Speaker 4: would tell you that the two month growth rate is
Speaker 4: what we saw just at the start of the acceleration
Speaker 4: and inflation back during the pandemic.
Speaker 3: So definitely that's right.
Speaker 2: See, we appreciate it.
Speaker 6: Thank you.
Speaker 5: Yeah, we know you've got to run, so we'll let
Speaker 5: you go. Steve Miller, Chair of the Ism Services, joining us.
Speaker 5: They're really rough new order, so we will keep track
Speaker 5: of all of that as it goes.
Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live
Speaker 1: weekdays at ten am Eastern on Apple, Cocklay and Android
Speaker 1: Auto with the Bloomberg Business App. Listen on demand wherever
Speaker 1: you get your podcasts, or watch us live on YouTube.
Speaker 5: So the economic data we keep hearing is going to
Speaker 5: be a few months off till we see any negativity
Speaker 5: hit the hard data. But let's just go over some
Speaker 5: of the data we got today. We got the ADP
Speaker 5: employment number, disappointing, coming in at just thirty seven thousand jobs.
Speaker 5: Then you had the ISM services number and it was
Speaker 5: pretty rough. You had the overall index below fifty. That's
Speaker 5: contraction territory. But the big thing was new orders coming
Speaker 5: in at the lowest level. Like we saw bask in
Speaker 5: April twenty twenty. No one likes April of twenty twenty.
Speaker 5: Also back in two thousand and eight, two thousand and nine,
Speaker 5: no one liked two thousand and eight and two thousand
Speaker 5: and nine joining us now for more. Michael mckeib when
Speaker 5: we're going to National Economics and Policy correspondent, I'm like,
Speaker 5: is this the stagflation kind of thing?
Speaker 7: Well, if you took it at face value, it is
Speaker 7: in the sense that we're looking at prices going up
Speaker 7: and activity going down.
Speaker 3: What we haven't seen.
Speaker 7: Is, as you note, the hard data completely reflecting this,
Speaker 7: we're starting to get numbers that do. Remember we saw
Speaker 7: a big drop in imports during the last month, and
Speaker 7: that was largely because so much was pulled forward because
Speaker 7: of the impending tariffs, and so that will have an
Speaker 7: impact on second quarter growth, but we're not at this
Speaker 7: point able to say exactly where we go from there.
Speaker 7: It looks like service are bad, and I know you
Speaker 7: had the director of the Ism services on earlier and
Speaker 7: he said that the new orders really are looking bad
Speaker 7: right now. And that's just kind of a scary thought.
Speaker 2: Hey, Mike in our group chat here, I dropped in
Speaker 2: a note earlier that I said, you know, maybe a
Speaker 2: few months time, we're going to look back on today
Speaker 2: as the beginning of something, you know, whether it's tagflation,
Speaker 2: whether it's recession, whether it's inflation really warring its head.
Speaker 3: Am I being over dramatic there?
Speaker 7: I don't know if I would say today, but it
Speaker 7: could be this week in let's see what happens on
Speaker 7: Friday with the jobs report.
Speaker 3: This may be sort of the last.
Speaker 7: Hurrah week where we see numbers that are okay in
Speaker 7: terms of those things. The big question is going to
Speaker 7: be whether ADP reflects reality or not, because any number
Speaker 7: like that for Friday's payrolls figures would really scare the
Speaker 7: pants off Wall Street and get everybody excited about FED
Speaker 7: rate cuts, even if they're not going to happen right away,
Speaker 7: So yes, this could be not mincing those time to remember,
Speaker 7: Oh nice new us.
Speaker 5: Then how do you square how do we think about
Speaker 5: ADP versus the jolts that we got yesterday. I was thinking, like,
Speaker 5: is it the companies just aren't hiring, but they're not
Speaker 5: necessarily laying off either, Like how do we square those
Speaker 5: two together in the broader economic jobs picture.
Speaker 7: Well, it's not easy to square the two, except that
Speaker 7: you note that ADP that the jolts rather is two
Speaker 7: months old, so it is past data and things could
Speaker 7: certainly have changed, which ADP suggests might be the case.
Speaker 7: Now with ADP, what we're not seeing is whether companies
Speaker 7: were letting anybody go and whether they have openings that
Speaker 7: they want to fill. It just tells you they didn't
Speaker 7: hire very many people or add to payrolls. Now, it
Speaker 7: has historically been that ADP is usually way off from
Speaker 7: the private sector hiring is in the non farm payrolls figure,
Speaker 7: so we'll have to see how that proves out. On
Speaker 7: Friday last month, ADP said there were only sixty thousand
Speaker 7: private sector jobs created and the government found one hundred
Speaker 7: and sixty seven thousand, So I don't know whether ADP
Speaker 7: or Jolts gives us a better idea of what's going on,
Speaker 7: But I don't think people are going to pay a
Speaker 7: whole lot of attention to either one once we get
Speaker 7: the Friday figures.
Speaker 2: Tariffs, Mike, we have so many tariffs are very hard
Speaker 2: to kind of keep them, keep them in focus here.
Speaker 3: There's so many out there.
Speaker 2: Do we have any idea kind of what percentage of
Speaker 2: the tariffs have found their way into the economy at
Speaker 2: this stage or is it just too early to tell here?
Speaker 7: Well, there have been some rough back of the envelope
Speaker 7: calculations that about what Bloomberg Economics has done one about
Speaker 7: six percent of US imports have been affected by tariffs,
Speaker 7: because we're looking at autos and we're looking at steel
Speaker 7: and aluminum. Basically, tariff's likely coming. The Congressional Budget Office
Speaker 7: just a short time ago put out a couple of
Speaker 7: new reports, one suggesting that the Big Beautiful Bill is
Speaker 7: going to add something like ten trillion dollars on to
Speaker 7: the overall deficits over a period of years, and then
Speaker 7: that the tariffs would reduce that by about three trillion.
Speaker 7: So if all the tariffs were carried through and that's
Speaker 7: the caveat that the CBO puts on their numbers today
Speaker 7: that they don't know what tariffs are actually going to
Speaker 7: be imposed. So that's the hard part for everybody at
Speaker 7: the moment is how much are we going to tariff people?
Speaker 7: And who are we going to tariff?
Speaker 5: Mike, what's what's that nerdy chart that you have on
Speaker 5: your desktop right now?
Speaker 3: Actually?
Speaker 7: I was looking at steel today and because of you,
Speaker 7: of course, Alex Steele, the fact that when Trump put
Speaker 7: on tariffs in twenty seventeen, we saw a short term
Speaker 7: rise in employment at steel mills, but then that rolled
Speaker 7: over and the number of jobs in the downstream people
Speaker 7: who use steel in their industries fabricated medical metal producers
Speaker 7: really fell significantly, lost about seventy five thousand jobs there.
Speaker 7: So it'll be something we're gonna have to watch those
Speaker 7: two numbers in Friday and the following month's reports on
Speaker 7: how the steel tariffs are affecting the economy.
Speaker 3: Yeah. I love that. I think I better come in
Speaker 3: on Friday, Big Day. Are you going to be off Friday? No,
Speaker 3: I think I'll be d I mean the thing is
Speaker 3: from what we've been.
Speaker 5: Learning, like maybe we'll get little cracks, but it's stillly
Speaker 5: going to be in the next two months, maybe that
Speaker 5: we'll get hard data. So I feel like you can
Speaker 5: still get that on the Jersey Shore, but it's gonna
Speaker 5: be rainy tvd oh well, then definitely come in from that.
Speaker 5: All right, thanks, Mike, really appreciate it. Michael mckei, Bloomberger
Speaker 5: National Economics and Policy Correspondent.
Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live
Speaker 1: weekdays at ten am Eastern on Apple, Cocklay and Android
Speaker 1: Auto with the Bloomberg Business App. Listen on demand wherever
Speaker 1: you get your podcasts, or watch us live on YouTube.
Speaker 5: All right, let's pick up with one of the stocks
Speaker 5: that Norm was just talking about, and that is Wells
Speaker 5: Fargo taking a look at that asset cat finally being
Speaker 5: removed and what does it then mean after the seven
Speaker 5: year old cap is removed for CEO Charlie Sharp, joining
Speaker 5: us now is Hannah Levett, senior finance reporter from Bloomberg News. Now, Hannah,
Speaker 5: Wells Fargo's been working at this for a very very
Speaker 5: long time. How are they then positioned for this next
Speaker 5: stage of growth?
Speaker 8: Yeah, so this has truly been such a long saga
Speaker 8: for them. Like I started covering Wells Fargo more than
Speaker 8: seven years ago, they had just gotten put under this cap.
Speaker 8: At the time, I was still enjoying my mid twenties,
Speaker 8: and you know, now we are no longer there. For
Speaker 8: Charlie Sharp, this means that he can finally play offense.
Speaker 8: He can you know, they're not capped in size to
Speaker 8: their level at the end of twenty seventeen anymore. And
Speaker 8: remember that's been a huge deal for them along the way.
Speaker 8: I mean some of the businesses that he's marked for growth,
Speaker 8: like the trading business most notably, that's been constrained because
Speaker 8: it's more balance sheet heavy and they haven't been able
Speaker 8: to allocate that balance sheet because they're restricted. And like
Speaker 8: just for context, JP Morgan, the biggest US bank, has
Speaker 8: grown almost an entire Wells Fargo in terms of assets
Speaker 8: in the time that Wells has been capped.
Speaker 2: Wow, all right, hann I you know full discorder. I
Speaker 2: have my checking account with Wells Fargo, but I'm guessing
Speaker 2: the CEO and the management team there they want to
Speaker 2: do something more than that. They think they can do
Speaker 2: a little bit bigger and better than Paul's. And he's
Speaker 2: checking account. So what are some of the businesses you
Speaker 2: mentioned trading? Are there other eritors where they think they
Speaker 2: can really grow by allocating more capital there?
Speaker 8: Yeah, absolutely, so the businesses that Charlie Sharff marked for growth,
Speaker 8: you know in time while he was running the firm,
Speaker 8: but it was still under the cap where investment, banking
Speaker 8: and trading and wealth management and credit card. But he
Speaker 8: was saying on CNBC today that virtually every business aside
Speaker 8: from mortgage, which they've said they're shrinking, and remember wells
Speaker 8: Farga used to be huge, and mortgage at one point
Speaker 8: they were churning out one in every three home loans
Speaker 8: in the country. Every business other than that should grow
Speaker 8: now and they have room to do that. But I
Speaker 8: think those businesses where they've already said that they're targeting growth,
Speaker 8: that may be where the earliest moves are. You know,
Speaker 8: we've reported that they're working on a high end credit card,
Speaker 8: so that could be something that people see. But yeah,
Speaker 8: so it really just it goes across all of those
Speaker 8: and beyond now because they don't have this constraint anymore, so.
Speaker 5: How quickly can they scale in the other parts of
Speaker 5: their business.
Speaker 8: Yeah, Well, it's an interesting question, right because we've seen,
Speaker 8: you know, the tales of banks trying to grow too
Speaker 8: fast and then having you know, a calamitous blow up,
Speaker 8: and so that's something that they definitely want to avoid.
Speaker 8: And Charlie Sharff has talked about that that it's not
Speaker 8: like an on switch day one, but it does give
Speaker 8: them more flexibility so they can you know, the most
Speaker 8: immediate thing is the trading business, where they just have
Speaker 8: capacity today that they didn't have yesterday. But besides that,
Speaker 8: it's more being able to lean into more enthusiastically those
Speaker 8: growth initiatives that they've already kind of outlined.
Speaker 2: Right, So, Hannah, they now have the regulatory capability to
Speaker 2: maybe do more, to maybe grow a little bit more quickly.
Speaker 3: Did they have the balance sheet to do that? Did
Speaker 3: they have the capital to do that?
Speaker 8: Yeah, they have a ton of excess capital. And that's
Speaker 8: been a theme throughout. I mean even in the earliest
Speaker 8: days of the asset cap like they couldn't deploy that capital,
Speaker 8: so they gave investors a bigger dividend and more buybacks
Speaker 8: than they were expecting. It was sort of like a
Speaker 8: you wouldn't think that would be the outcome, but it
Speaker 8: was at the time so they've had excess capital, and
Speaker 8: also because the banks in general were preparing for the
Speaker 8: possibility of tougher capital rules that have not panned out,
Speaker 8: so they were a lot of them have been hoarding
Speaker 8: capital anyway, sitting on a bunch of extra.
Speaker 5: Well, we're seeing in Wall Street it's definitely a competition
Speaker 5: for talent, particularly if you wrap in hedge funds as
Speaker 5: well as huge ass at managers.
Speaker 3: Are private equity.
Speaker 5: Can weils Haargo play in that game?
Speaker 8: Yeah, they already have been. I mean they hired Fernando
Speaker 8: Rivas who is the head of the corporate investment bank there.
Speaker 8: He was a major hire from JP Morgan, so that
Speaker 8: that was huge for them. And you know they've made
Speaker 8: other hires over the years. Doug Bronstein is there, another
Speaker 8: former JPM executive and he's vice chair. They have Vary
Speaker 8: Summers running wealth, so they have you know, they've been
Speaker 8: able to get talent at the highest level and then
Speaker 8: you know even further down as well.
Speaker 2: All Right, I think the street kind of like this.
Speaker 2: Stocks up about seven tens to one percent today, It's
Speaker 2: up eight and a half percent year to date, up
Speaker 2: thirty percent over the trailing twelve months, so it looks
Speaker 2: like this street is kind of warming up to a
Speaker 2: story which has been going to middle of the road.
Speaker 2: Given some of the regulatory constraints, will stay on top
Speaker 2: of that.
Speaker 3: He a lovit.
Speaker 2: Thanks so much for joining us at Bloomberg Senior financi
Speaker 2: reporter on Wells Fargo.
Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live
Speaker 1: weekdays at ten am Eastern on Apple Cocklay and Android
Speaker 1: Auto with the Bloomberg Business App. Listen on demand wherever
Speaker 1: you get your podcasts, or watch us live on YouTube during.
Speaker 5: Alex Seal alongside Paul Sweeney. This is Bloomberg Intelligence Radio.
Speaker 5: We are broadcasting to live from the Galor National Convention
Speaker 5: Center right here in Maryland. We're overlooking the Potomac. We
Speaker 5: are at BNY Insight twenty twenty five as we talk
Speaker 5: about wealth management and all the tools and tricks that
Speaker 5: can be used to help navigate these markets. We're also
Speaker 5: continuing to take a check in here on what's happening
Speaker 5: in the overall market. We turned out to today's a
Speaker 5: Big Take story. It talks about Tesla and what autonomous
Speaker 5: driving and robotaxis say in Austin as Elon Musks keeps
Speaker 5: talking about them, are talking about investigating whether the system
Speaker 5: is actually too dangerous even if you have a human
Speaker 5: behind the wheel. Joining us now is Global Autos editor
Speaker 5: Craig Trudell. Craig, So, here's the title of the big take,
Speaker 5: A fatal Tesla crash shows the limits of full self
Speaker 5: driving walk us through the details of what the issues
Speaker 5: are surrounding completely autonomous vehicles.
Speaker 6: Yeah, so, I guess maybe the thing to start with
Speaker 6: is the Teslas that you can buy today that are
Speaker 6: on the road now are not that right, They are
Speaker 6: not autonomous. You can pay extra for a system called
Speaker 6: full self driving, and yet it's a miss snowmer. It's
Speaker 6: a system that you have to pay attention to at
Speaker 6: all times. You know, if you get into a crash,
Speaker 6: it is on you. And we've seen that, you know,
Speaker 6: play out. When Tesla customers have you know, tried to
Speaker 6: come after the company, the company says, look, you know,
Speaker 6: we we warned you. We told you that you know
Speaker 6: you're you're responsible for driving while using this system. The
Speaker 6: company is trying to make this leap that's been trying
Speaker 6: to make the sleep for years to eventually get to
Speaker 6: a point where you do not have to to supervise
Speaker 6: and you know, even to take it further than that,
Speaker 6: you know, take the human out from behind the wheel altogether.
Speaker 6: And we hear Musk, you know, talk about that quite
Speaker 6: a bit lately because it's something that they're actually trying
Speaker 6: to commercialize, even just in the next matter of you know,
Speaker 6: next week or so. There's a lot of questions about
Speaker 6: how exactly they intend to do that, whether they can
Speaker 6: do it, especially after he's predicted, you know, year after
Speaker 6: year that they're on the cusp of doing it. And
Speaker 6: part of the reason there are doubts is is because
Speaker 6: of the hardware. And I think that's kind of an
Speaker 6: important aspect of today's story is is this particular crash involves,
Speaker 6: you know, an incident where a driver was using full
Speaker 6: self driving driving into the sun, and that appeared to
Speaker 6: play a part in the crash, which resulted in a fatality,
Speaker 6: and it led to a federal investigation that is ongoing.
Speaker 5: I mean, this is all very much feels as part
Speaker 5: of the growing pains as we kind of understand this
Speaker 5: technology and how it works itself out. So what are
Speaker 5: the steps that Tesla's taking and that the regulators are
Speaker 5: taking at this time?
Speaker 6: Yeah, so you know, we should acknowledge that this incident
Speaker 6: happened in November twenty twenty three. You know, Tesla has
Speaker 6: has changed. They've they've made upgrades both to hardware and software.
Speaker 6: You know, hardware for certain customers, they should say, but
Speaker 6: you know, in terms of their approach to the sensor
Speaker 6: system for their vehicles, Elon Musk has been you know,
Speaker 6: really sort of down a limb and having this view
Speaker 6: that all you need is cameras and company companies that
Speaker 6: are also in this space. I think the one people
Speaker 6: recognize the most is Weymo, the Google company, and they
Speaker 6: use a mix of camera, radar and wide R and
Speaker 6: their sensor set is much more expensive. It's more extensive.
Speaker 6: You know, these sensors are placed all over the vehicle.
Speaker 6: But you know, the sort of bet here on the
Speaker 6: part of Weimo is that is worth it. It will
Speaker 6: mean this system is safer. What Musk has tried to
Speaker 6: do is go with the cheaper route, go with the
Speaker 6: you know system that he can afford to put in
Speaker 6: every Tesla, and make this bet that you know, he
Speaker 6: can develop his way to autonomy faster by sort of
Speaker 6: leveraging the broader Tesla fleet. Even if it means putting
Speaker 6: you know, cars on the road that you know, draw
Speaker 6: scrutiny from federal regulators as to whether or not that
Speaker 6: this is you know, unreasonably unsafe.
Speaker 2: So, Craig, I think Elon Musk is back at the company.
Speaker 3: What does that mean?
Speaker 2: I mean, are you hearing anything like, Okay, now we
Speaker 2: can get back on track, Now we can really move forward,
Speaker 2: maybe at you know, a higher velocity.
Speaker 3: What's that mean?
Speaker 6: Yeah, I'm you know, I think it's difficult to tell
Speaker 6: at this point because he's kind of coming back to
Speaker 6: business means coming back to so many businesses, right, and
Speaker 6: so on a day to day Yeah, we're you know,
Speaker 6: we're seeing him travel to to his various companies, you know,
Speaker 6: devoting some time and attention to to them. But it's
Speaker 6: not as though he's sort of one hundred percent, uh,
Speaker 6: you know, focusing in on Tesla and neglecting all of
Speaker 6: his other businesses. We see him you know, regularly engaging
Speaker 6: with you know, users on x about you know, troubleshooting
Speaker 6: problems that they have with that service. You know, I
Speaker 6: would say he is you know more actively engaging there
Speaker 6: on Tesla matters and definitely is trying to sort of
Speaker 6: send this signal that you know, okay, it's it's time
Speaker 6: to get back to business here. But whether or not
Speaker 6: that's you know, resulting in sort of tangible changes at
Speaker 6: the company, I think remains to be seen.
Speaker 5: I guess, I mean quickly twenty seconds. What's the rush
Speaker 5: for autonomous driving?
Speaker 6: You know, I think forty thousand people die on US
Speaker 6: roads every year, right, and so the rush, of course
Speaker 6: is to bend that, you know, to change that. And
Speaker 6: I think one of the challenges that you have if
Speaker 6: you're a company in this space is we've now you know,
Speaker 6: seen a lot of companies pursue this for you know,
Speaker 6: roughly a decade that number has not budged. So you know,
Speaker 6: we still have a long way to go to where
Speaker 6: this capability is you know, making putting a dent in
Speaker 6: those figures.
Speaker 5: All right, Craig, Thanks A Lott, Really appreciate credit you
Speaker 5: Dale joining US Global Auto's editor on Tesla and autonomous driving.
Speaker 1: This is the Bloomberg Intelligence podcast, available on Apple, Spotify,
Speaker 1: and anywhere else you get your podcasts. Listen live each
Speaker 1: weekday ten am to noon Eastern on Bloomberg dot com,
Speaker 1: the iHeartRadio app, Tune in and the Bloomberg Business app.
Speaker 1: You can also watch us live every weekday on YouTube
Speaker 1: and always on the Bloomberg terminal