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Tesla, US GDP, and Markets (Podcast) · Bloomberg Intelligence

0:00
Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney alongside
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Speaker 1: my co host Matt Miller. Every business day we bring
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Speaker 1: you interviews from CEOs, market pros, and Bloomberg experts, along
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Speaker 1: with essential market moving news. Find the Bloomberg Markets Podcast
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Speaker 1: on Apple Podcasts or wherever you listen to podcasts, and
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Speaker 1: at Bloomberg dot com slash podcast. All right, here's the
0:22
Speaker 1: to me. Here's the headline of the day, Tesla, and
0:24
Speaker 1: of course Bloomberg News comes up with these great headlines.
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Speaker 1: Tesla rallies from the low's pushing valuation over five hundred billion. Dan,
0:33
Speaker 1: I've joints us here on O Bloomberg and Actor Brooker Studio.
0:35
Speaker 1: What Bush Securities? Uh? Dan? What'd you take away from
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Speaker 1: the Tesla news last night? That was a Goldilocks quarter,
0:43
Speaker 1: I meaning for the bulls, they were popping champagne because
0:46
Speaker 1: the demand out look was strong for two thousand twenty
0:49
Speaker 1: three and margins are holding. So now that dream scenario
0:53
Speaker 1: for Tesla's back on the table and look sentiment was
0:57
Speaker 1: just so negative. Mini and fire in a crowd theater.
0:59
Speaker 1: I think you combine it. This is stock now it
1:02
Speaker 1: starts to run towards two. So did the band What
1:05
Speaker 1: did Elon Musk say? I think he quantified it saying
1:07
Speaker 1: there's like two buyers for every production. Well, that's the
1:10
Speaker 1: I mean, as you just hit. I mean, that was
1:12
Speaker 1: really the thing that I think stood out. I'd almost
1:14
Speaker 1: call it a jaw dropper in terms of two x
1:17
Speaker 1: demand over production. And why are they offering all these incentives.
1:21
Speaker 1: There's no doubt you're starting to see cracks in the
1:23
Speaker 1: armor in China. You've seen in the US. But they
1:26
Speaker 1: read the room cut prices ripped the band aid off
1:29
Speaker 1: and then now they're able, because of their scale, which
1:32
Speaker 1: is unique, keep margins still well above industry norm. So
1:36
Speaker 1: what they're able to do now is scaleing that and
1:38
Speaker 1: I think coming at the gates and we've done this
1:41
Speaker 1: with survey work in China, it's just been on fire.
1:44
Speaker 1: And I think that's really the takeaway here. There's the
1:47
Speaker 1: bears go into hibernation mood. I mean, when the when
1:51
Speaker 1: the worst case scenario is only boosting production by thirty
1:54
Speaker 1: seven percent, that's insane. Right when the streets like, no,
1:58
Speaker 1: we want you to boost production by in a year
2:01
Speaker 1: for Carmaker, that's insane. That's why in my opinion, along
2:06
Speaker 1: with Apple, the most transformational companies in the world, and
2:09
Speaker 1: I think it continues to be testa. I never viewed
2:12
Speaker 1: as an auto company. Have views disruptive where I want
2:15
Speaker 1: to go and I should We should have had Kevin Tyner.
2:17
Speaker 1: We had him on the last I were Tom Keene.
2:18
Speaker 1: Kevin Tynan is the auto analyst for Bloomberg Intelligence, traditional
2:22
Speaker 1: auto guy, and he's of you know, he's never bought
2:25
Speaker 1: into this story because he's just simply it's not profitable,
2:29
Speaker 1: and be when it is profitable, everybody else Toyota and
2:32
Speaker 1: Volkswagen can commit and they'll on the market, and this company,
2:35
Speaker 1: whatever it is, will be a niche whatever. That's kind
2:38
Speaker 1: of I think, not just Kevin's call, but the call
2:41
Speaker 1: that made a lot of the traditional auto guys, you
2:43
Speaker 1: and a lot of other tech guys have viewed it
2:45
Speaker 1: more as a technology It seems like to me more
2:48
Speaker 1: of a technology company, a technology play, and that's how
2:51
Speaker 1: investors should look at it. Are we at the point though,
2:54
Speaker 1: that we do have the Toyota's, the Volkswagens and the
2:56
Speaker 1: Generalmotan's affords coming in where maybe it can it would
3:00
Speaker 1: be viewed more as an auto company no doubt. I mean,
3:02
Speaker 1: many thought Apple was going to be in the next
3:04
Speaker 1: BlackBerry at two in a billion and then went to
3:07
Speaker 1: three trillions. So I think it's just one of those
3:09
Speaker 1: situations where you have competition come from all angles, no
3:13
Speaker 1: doubt in Auto and especially coming out of the three
3:15
Speaker 1: win three area co GM and for what they're doing.
3:18
Speaker 1: But Tesla because of the vertical integration, because of the
3:22
Speaker 1: unique of the brand, the software, and you see that
3:25
Speaker 1: in the margins, and it's the must DNA all right. Now,
3:28
Speaker 1: the Musk DNA was a super net positive for a
3:31
Speaker 1: long time. Not now are you concerned that it is
3:33
Speaker 1: turned to a negative? Specifically, I don't. I don't care
3:36
Speaker 1: about him and his views, but does it damage the
3:39
Speaker 1: Tesla brand because he was so closely associated with the
3:41
Speaker 1: Tesla brand we talked about I think sent the sell
3:44
Speaker 1: off in two thousand twenty two was Musk Twitter fiasco driven.
3:48
Speaker 1: Is any of that permanent? Do you think? I think
3:50
Speaker 1: there's there's some of it, You know that that maybe
3:52
Speaker 1: you could quantify a small amoun that could be permanent.
3:55
Speaker 1: But that's why it was really the reason yesterday was
3:57
Speaker 1: probably the most important earnings called for Tesla. Many many
4:00
Speaker 1: years is because Musk, you need a pilot on the
4:03
Speaker 1: plant for him really to navigate. And I think that
4:06
Speaker 1: when he came off confident really I think even owned
4:10
Speaker 1: some of the twitters on the call last night. Was
4:13
Speaker 1: he reasonable? Do you think was he reassuring to some
4:17
Speaker 1: of the big investors. He was a lot more dialed
4:20
Speaker 1: in than I've seen him in many calls. And I
4:23
Speaker 1: think that was another thing that investors takeaway was because
4:26
Speaker 1: now you feel like this is a company that's actually
4:29
Speaker 1: going to do the right strategic things. That Twitter situation
4:32
Speaker 1: is going to continue to be there in the background.
4:34
Speaker 1: But I think not necessarily that albatross over the name,
4:38
Speaker 1: but now right, I mean, I've dated girls who had
4:40
Speaker 1: a good night. They appeared to be completely rational and
4:43
Speaker 1: reasonable at dinner with my parents, but then they weren't,
4:46
Speaker 1: you know. I mean there is an argument that Elon
4:49
Speaker 1: Musk is Cucu per coco puffs, right. I Mean, the
4:51
Speaker 1: guy is out there sometimes he's he always has been,
4:56
Speaker 1: but he's now willing to embarrass himself publicly more than
4:59
Speaker 1: he more than a normal rational person would look. And
5:02
Speaker 1: I think that's the controversy of Musk because that many
5:05
Speaker 1: of you, as a modern day Thomas Edison Albert Einstein
5:08
Speaker 1: that essentially went through a Howard Hughes moment. You know,
5:11
Speaker 1: when you think about the Twitter situation now from Musk,
5:14
Speaker 1: it's recognizing the Golden Child tests. So that's that has
5:18
Speaker 1: been an overhang because of the Twitter Spiderweb. Dan, do
5:21
Speaker 1: they have to come out with new models because it
5:24
Speaker 1: is the original model? S isn't that the same as
5:26
Speaker 1: it's been for ten years? And they all look like that.
5:29
Speaker 1: Do they need to come up with anything? How do
5:31
Speaker 1: they talk about that? Well? They do, because then you
5:33
Speaker 1: start to get into four nineteen nineteen going into seven
5:37
Speaker 1: where GM basically overtook him because they didn't innovate. I
5:40
Speaker 1: think if you look Cybertruck coming out later this year,
5:44
Speaker 1: I think potentially in SUV you know, in terms of
5:47
Speaker 1: some of the roads during some others, they're gonna need
5:50
Speaker 1: to expand that from penetration respective. But then you take
5:53
Speaker 1: a step back. We are in the early days of
5:57
Speaker 1: the biggest transformation to the auto industry since nineteen of these.
6:00
Speaker 1: I mean, the cyber truck will be huge when it
6:02
Speaker 1: comes out. It's just a bummer that it keeps getting
6:06
Speaker 1: delayed and delayed and delayed and everybody else gets to
6:09
Speaker 1: some extent and advantage. UM. The Ford, you know, has
6:13
Speaker 1: gotten great reviews. Paul loved it. It looks very traditional. UM.
6:18
Speaker 1: The Chevy seems like it's going to be even better.
6:21
Speaker 1: The GMC Hummer is like on another level, the cyber
6:24
Speaker 1: truck could be a better product than all of those.
6:26
Speaker 1: But it's just coming so many years late that everybody
6:29
Speaker 1: with a hundreds and spend an electric truck has already
6:31
Speaker 1: done it. And now I maybe if you look at
6:33
Speaker 1: this stuff coming at GM and Ford, it is it's
6:36
Speaker 1: a renaissance that I believe it's happened in Detroit. And
6:40
Speaker 1: that's why for tests, it's about making sure that this
6:42
Speaker 1: window opportunity they don't lose. But if the ultimate takeaway
6:46
Speaker 1: here is that they are putting iron fence around their
6:48
Speaker 1: backyard by the price cut and that call last night felt,
6:54
Speaker 1: I'd say exactly what the bulls needed to sort of
6:57
Speaker 1: take this out of the way. I always forget to
6:58
Speaker 1: mention Rivan and I feel because we have listeners who
7:02
Speaker 1: love the rib they look pretty, I look amazing. What
7:05
Speaker 1: do you think about the company about Ribbon? Is there
7:08
Speaker 1: going to be a challenger because they have also got
7:10
Speaker 1: production nightmares the likes of which you know Elon Musk
7:13
Speaker 1: got a dreamt of back in the day, no doubt.
7:15
Speaker 1: I mean, it's been a lot of time riving at
7:17
Speaker 1: their head. You're at their factory in Illinois. I'm bullish
7:20
Speaker 1: on Ribby in terms of where they could take this.
7:22
Speaker 1: Clearly there have been just massive speed bumps coming at
7:25
Speaker 1: the gate. They need to navigate that. But they are
7:27
Speaker 1: gonna be a player for many, many years. And then
7:30
Speaker 1: you're a Football Giants New York Giants Football Giants fan.
7:33
Speaker 1: What do they do with Daniel Jones and se Kwon Barkley? Oh?
7:36
Speaker 1: I think they resigned both then, especially the goat Kwan.
7:39
Speaker 1: I think that's a no brainer that they have to
7:41
Speaker 1: resign them. Okay, all right, I mean that's in my opinion.
7:46
Speaker 1: You get those are two. I think that proved it
7:48
Speaker 1: this year that I'd be shocked if they don't resign them.
7:51
Speaker 1: How about Pensiley football? Increasingly bullish and a good year.
7:55
Speaker 1: Didn't beat Ohio Stat or Michigan, but still a good
7:58
Speaker 1: year and still have those ruises that I'm wearing after
8:01
Speaker 1: being two time packed twelve champ, and I believe they
8:04
Speaker 1: are top five team next year. I think that they've
8:07
Speaker 1: now made that weep into the elite category, all right,
8:10
Speaker 1: and bullish. I just I just configured my Tesla Model
8:15
Speaker 1: X and it's only a five, so it's not I know,
8:21
Speaker 1: but I didn't add the auto full autopilot, full self
8:24
Speaker 1: driving feature, so I'm saving like six six thou dollars there?
8:27
Speaker 1: All right, Dan, eys, what but security joining us here
8:30
Speaker 1: in our Bloomberg in Actress Broker studio talking all things Tesla.
8:38
Speaker 1: Seems like the markets are just trying to really digest
8:40
Speaker 1: not only the earnings that we're getting every single day,
8:43
Speaker 1: but the slow of economic data we had today, trying
8:46
Speaker 1: to figure out what that means for the FED, what
8:48
Speaker 1: that means for this economy, and what that means for
8:50
Speaker 1: their portfolios. Who better to check in with and David Kelly,
8:54
Speaker 1: chief Global strategist for JP Morgan Asset Management. David thinks,
8:57
Speaker 1: so much for taking the time. I know you're busy
8:59
Speaker 1: today with your client Anson kind of sitting through all
9:01
Speaker 1: the data. What's your takeaway when you look at your
9:04
Speaker 1: ECO screen on your Bloomberg terminal and you see all
9:07
Speaker 1: the economic data that came out today, what's your takeaway?
9:11
Speaker 1: I think the slowdown is on track despite a lot
9:14
Speaker 1: of confusing data. So we did get that stronger than
9:17
Speaker 1: expected GDP read of two point nine percent, But I
9:21
Speaker 1: really think it's important to recognize that all that two
9:23
Speaker 1: point nine percent one point five percent was was coming
9:27
Speaker 1: from a pile up in inventories. So inventories grew at
9:30
Speaker 1: a pace of a hundred and thirty billion. Now normally
9:33
Speaker 1: they grow at about pace about fifty billions. So necessarily
9:36
Speaker 1: that means that inventories are actually gonna drag on growth
9:39
Speaker 1: in three And when we look at consumer spending, we
9:42
Speaker 1: know on a monthly basis a wall is slowing down.
9:44
Speaker 1: In the fourth quarter, we think we're still gonna we're
9:46
Speaker 1: gonna get worse trade numbers going forward. UM housing is
9:50
Speaker 1: still going to be weak, although it's a lot of
9:51
Speaker 1: the damage has been done. But overall, we we think
9:54
Speaker 1: we're still slowing down here. I mean we're on the
9:57
Speaker 1: edge of something that we don't we don't think we're
9:58
Speaker 1: on the edge of a cliff. We're probably in the
10:00
Speaker 1: edge of a swamp, but we still think the economy
10:01
Speaker 1: is slowing here. So David, does that mean, um, the
10:04
Speaker 1: Fed really does have to worry about the long and
10:07
Speaker 1: varied lags of monetary policy because they've hiked so much
10:10
Speaker 1: in the last year and nonetheless financial conditions are super loose. Well, well,
10:17
Speaker 1: yes they do. I mean they've got to look at
10:18
Speaker 1: not just monetary conditions but also fisical conditions. So what
10:21
Speaker 1: we've got is a lot of fiscal drag in the economy. Um,
10:25
Speaker 1: we're just slowing things down, and that's you know, that's
10:27
Speaker 1: really where the the main economic problem is here, because
10:30
Speaker 1: the personal savings rates down at two point nine. You know,
10:33
Speaker 1: normally it's up at seven percent, which which means a
10:35
Speaker 1: lot of people wrecked up credit card debt over the
10:37
Speaker 1: last year. The asian to their savings just to maintain
10:40
Speaker 1: a standard living that they can't maintain in the long run.
10:42
Speaker 1: So we're going to see consumer cutbacks this year because
10:44
Speaker 1: of what's going on really with fiscal policy, and the
10:47
Speaker 1: Federal Reserve should not be making things worse by overtightening
10:50
Speaker 1: monetary posts. Hang on, when you say they ate into
10:54
Speaker 1: their savings, I know the savings rate is dropped, but
10:56
Speaker 1: bank balances are still really high. Yeah, but they are
11:00
Speaker 1: coming down. But I'm also about the way you look
11:02
Speaker 1: at this is it's also an accumulation of debt. So
11:05
Speaker 1: when you've got you've got credit card debt going up
11:07
Speaker 1: by more than fifteen percent year over year in November, um,
11:11
Speaker 1: you know that particularly lower and middle income households are
11:15
Speaker 1: adding on debt in order to just try to maintain
11:18
Speaker 1: a certain standard living. And and you can't raise raise
11:21
Speaker 1: credit card debt by fifteen percent per year going forward.
11:25
Speaker 1: So we know consumers are going to slow down here.
11:27
Speaker 1: And we know the job growth is going to slow
11:28
Speaker 1: down here because we're three and a half percent unemployment
11:30
Speaker 1: that there very there aren't enough unemployed people out there
11:33
Speaker 1: to to to grow jobs quickly. So we know slow
11:36
Speaker 1: down is coming. And what I don't quite get about
11:39
Speaker 1: what the Federal Reserve is doing is that they say
11:41
Speaker 1: they want to get the federal funds right up above
11:43
Speaker 1: five percent and then cut it by one percent next
11:47
Speaker 1: year and cut it by another one percent the year
11:48
Speaker 1: after that. And that doesn't make any sense to me.
11:50
Speaker 1: I mean, which you should do with monetary policy, because
11:53
Speaker 1: the lags you mentioned, you should try to slide in,
11:55
Speaker 1: slide into first space, so as you know, just very
11:58
Speaker 1: gently raise it to about the right level and left
12:00
Speaker 1: the economy adjust instead, they're overshooting, and I think that
12:03
Speaker 1: that that is an economic risk. They could put the
12:05
Speaker 1: economy in recession by the end of the year. So
12:08
Speaker 1: if you were FED Chairman J. Pale, if you were
12:11
Speaker 1: sitting in his seat, what would you do over the
12:13
Speaker 1: next several meetings? Well, first of all, I would, UM,
12:17
Speaker 1: I would express confidence that inflation is coming down. We
12:20
Speaker 1: think we've we've we've beaten this. UM. We recognize that
12:23
Speaker 1: interest rates are low by historical standards, but they're not
12:27
Speaker 1: low by the standards to which the economy has become accustomed.
12:30
Speaker 1: You know, we've had fifteen years of everybody getting used
12:33
Speaker 1: to the morphine drip of zero present interest rates. In
12:35
Speaker 1: that kind of economy, you do have to adjust a
12:38
Speaker 1: bit UM. So I would say enough for now, UM,
12:41
Speaker 1: I would stop raising rates UM, and let's see how
12:44
Speaker 1: this all plays out. And we are we stand ready
12:47
Speaker 1: to raise or lower rates going forward if things UM change.
12:51
Speaker 1: But right now it looks like inflation is coming down,
12:54
Speaker 1: growth is slowing. Let's just leave well enough alone at
12:57
Speaker 1: this point and not tighten any further. So that's what
12:59
Speaker 1: that what you would do. What do you think that
13:02
Speaker 1: that is going to do? And I think they'll raise.
13:05
Speaker 1: I think they will raise rates by one quarter of
13:07
Speaker 1: percent on next Wednesday, and I think they'll probably do
13:11
Speaker 1: the same thing on March four. Now, their own forecast
13:15
Speaker 1: states they will again come back and raise rates by
13:17
Speaker 1: another quarter point on May three, and that I don't
13:20
Speaker 1: think they'll do. I think they'll probably stop on, you know,
13:23
Speaker 1: with the with the last rate hike in March, and
13:25
Speaker 1: then let's wait and see what happens, because, as I say,
13:28
Speaker 1: inflation is coming down pretty rapidly here, and the great
13:31
Speaker 1: danger is that they overshoot put the economy and recession,
13:34
Speaker 1: and then they're going to have to come rate very aggressively,
13:36
Speaker 1: which is not the way you should be conducting monetary policy, David.
13:40
Speaker 1: Just on the labor market front, we had another initial
13:44
Speaker 1: jobs claims print below two hundred thousand and eighty six thousand. Boy,
13:50
Speaker 1: this market is really strong. This surprise you how strong
13:54
Speaker 1: the labor market is. Uh, irrespective of kind of what
13:57
Speaker 1: we're here from some of the silific Silicon Valley companies, Well,
14:00
Speaker 1: there's a difference between you know, I remember watching an
14:03
Speaker 1: exercise video which talked and talked about tightening and strengthening
14:06
Speaker 1: various parts of my of my body, and I think
14:09
Speaker 1: this is this is a labor market that is very tight,
14:11
Speaker 1: but not necessarily very strong. Um. In other words, there
14:14
Speaker 1: aren't enough There aren't a reserve pool of unemployed workers.
14:18
Speaker 1: The labor force itself is growing by about one tenth
14:20
Speaker 1: of a percent um per year, so it's it's the
14:24
Speaker 1: working population, so there's no extra workers. Now, that means
14:27
Speaker 1: that there aren't that many layoffs, but even there would
14:30
Speaker 1: be a little careful because we've got a very unusual economy.
14:32
Speaker 1: We're probably not seeing the normal retail layoffs we'd see
14:36
Speaker 1: um after the holiday season because we probably didn't see
14:39
Speaker 1: as much on the ground retail hiring as you would
14:43
Speaker 1: normally see in retail season. So I'm I'm a little
14:46
Speaker 1: skeptical about that. I do think that the pace of
14:49
Speaker 1: hiring in the economy is slowing down, and I think
14:51
Speaker 1: that some of these job openings are kind of, you know,
14:54
Speaker 1: no longer relevant, even though they're they're staying on the
14:56
Speaker 1: boards here. So I don't, you know, I do think
14:58
Speaker 1: the labor market is very night, but I don't think
15:01
Speaker 1: it's actually very strong. Yeah, I mean, three and a
15:03
Speaker 1: half percent unemployment points to a very tight labor market.
15:07
Speaker 1: But the question is does it rise quickly? Do we
15:09
Speaker 1: get to five percent by the middle of the year. No,
15:12
Speaker 1: I don't think we do because I think, as I say,
15:14
Speaker 1: it's it's very tied. So just aren't enough workers for
15:17
Speaker 1: that to happen, to be enough to lay awful lot
15:20
Speaker 1: of workers. But I think another thing to look at
15:22
Speaker 1: here is wage growth, because wage growth has actually been
15:24
Speaker 1: decelerating in the last few months. Wages for all you know,
15:28
Speaker 1: for production non supervisor workers are five percent to year
15:31
Speaker 1: over year, but inflation six and a half percent year
15:34
Speaker 1: over year. So workers aren't keeping up with inflation. I
15:36
Speaker 1: think increasingly they won't because they again they don't feel
15:40
Speaker 1: like they've got that much bargaining power. So you know,
15:43
Speaker 1: as I say, it's a tight labor market. There aren't
15:44
Speaker 1: a lot of available workers, but the working age population
15:47
Speaker 1: is growing slowly. I think the economy after this morning's report,
15:51
Speaker 1: is going to be growing slowly in the first half
15:53
Speaker 1: of this year. And you know, I think we just
15:55
Speaker 1: need to get used to a slow growth, lower lower
15:58
Speaker 1: inflation economy. Again, David, how are you factoring in just
16:01
Speaker 1: switch gears a little bit, How are you factoring in
16:03
Speaker 1: the reopening and maybe they're reopening faster than expected of China. Um.
16:08
Speaker 1: I think it's I think it's kind of a it's
16:11
Speaker 1: a positive for global economic growth. I think it's probably
16:15
Speaker 1: almost a net neutral for inflation. Um so um we
16:19
Speaker 1: were clearly getting you know, because they've gone to a
16:22
Speaker 1: got rid of their zero COVID policy. I think that
16:24
Speaker 1: we will see um surges in output from China, and
16:28
Speaker 1: I think you'll see more Chinese spending on services, but
16:31
Speaker 1: I don't think you'll see a huge surge in Chinese
16:33
Speaker 1: spending on goods. And because of that, you know, that's
16:37
Speaker 1: how higher Chinese demand would translate into higher inflation around
16:40
Speaker 1: the world. So I don't think that's going to push
16:42
Speaker 1: up inflation, but it will help with global growth. And
16:45
Speaker 1: I think the interesting thing is this year the US
16:47
Speaker 1: is going to be slowing down while the rest of
16:49
Speaker 1: the world is picking up in terms of growth, and
16:51
Speaker 1: that couldn't be negative for the dollar, which you think.
16:53
Speaker 1: It's got some pretty interesting investment implications. I just have
16:56
Speaker 1: this image in my head at one point four billion
16:58
Speaker 1: people finally allowed to getting their cars and drive. They
17:01
Speaker 1: have to stop at the gas station, right, I mean,
17:04
Speaker 1: um h. Jeff Curry compared this to two thousand eight
17:08
Speaker 1: when we saw crewde go to barrel. You're not worried
17:11
Speaker 1: about that, no, not at all. Is we've had very
17:14
Speaker 1: high prices very recently, and the best here for high
17:18
Speaker 1: prices is high prices. Uh. This year is going to
17:21
Speaker 1: be the biggest year in US history for liquid fuels production.
17:25
Speaker 1: We've we've got a huge production of natural gas, and
17:29
Speaker 1: and Europe is now all stocked up the natural gas.
17:32
Speaker 1: But I, you know, I see plenty of conservation. I
17:34
Speaker 1: don't think the global economy is going to grow that fast,
17:37
Speaker 1: you know, if you I do think it's going to
17:39
Speaker 1: grow fast in the US, but the US is going
17:41
Speaker 1: to grow very slowly, and China will be picking up,
17:44
Speaker 1: but Europe is going to be slow. The UK is
17:46
Speaker 1: in recession. So I don't see a boom in global
17:49
Speaker 1: energy demand this year. Um. I think because of the
17:53
Speaker 1: high prices last year, we are going to see pretty
17:57
Speaker 1: strong growth in energy supply. So I don't unless something
18:00
Speaker 1: else happens to supply that we're not anticipating right now,
18:03
Speaker 1: I don't think we'll see another surge in oil prices
18:06
Speaker 1: in this kind of economy. All right, David, great stuff,
18:08
Speaker 1: Really appreciate getting a few minutes of your time. David Kelly,
18:11
Speaker 1: Chief Global Strategist, JP Morgan asset Management and even more
18:13
Speaker 1: importantly Bachelor and economics from the University College of Dublin.
18:17
Speaker 1: You can probably get a little bit of the Irish
18:19
Speaker 1: accent there through the radio and a PhD in economics
18:22
Speaker 1: from Michigan State University. Spartans about that parties I won
18:27
Speaker 1: if he comes over from you know, Ireland and becomes
18:29
Speaker 1: like this crazy big ten football fan, do you think
18:31
Speaker 1: that happens? I could imagine that. Why how could you
18:35
Speaker 1: not when you're in that part of the part of
18:36
Speaker 1: the country. I think in the in the big picture,
18:43
Speaker 1: huge news, and that is the Akio Toyota is stepping
18:47
Speaker 1: down as the CEO president of his namesake firm. So
18:52
Speaker 1: that was Toyota as in the founder of the company. Yeah,
18:55
Speaker 1: I think his grandfather founded the company. Um they changed
18:58
Speaker 1: the name from Toyota uh with a D to Toyota
19:02
Speaker 1: with a T because of something to do with like
19:05
Speaker 1: numbers and luck. I'm not sure, but someone who does
19:08
Speaker 1: know for sure is Craig Trudel. He's our Global Autos czar.
19:12
Speaker 1: He ran the auto's coverage for the US then he
19:14
Speaker 1: went over to Tokyo and ran Auto's coverage in Asia,
19:17
Speaker 1: and now he's in London. He runs auto coverage globally.
19:20
Speaker 1: Just he just can't stay put anywhere. Well, I think
19:23
Speaker 1: it's cool. It's like he worked in a different part
19:24
Speaker 1: of the company and now he runs the whole thing.
19:26
Speaker 1: So okay, Craig, thanks so much for joining us. Talk
19:29
Speaker 1: to me about well, first of all, what's the deal
19:30
Speaker 1: with Toyota with a D versus Toyota with a T.
19:33
Speaker 1: You know what you You have put me on the spot,
19:36
Speaker 1: and I know that I've I know that I've been
19:39
Speaker 1: that this has been explained to me, but I don't remember.
19:41
Speaker 1: I don't remember. I'm pretty sure that he's like Toyota
19:45
Speaker 1: with a D means like ten and but eight is
19:48
Speaker 1: a luckier number, and that's with a T. So I
19:51
Speaker 1: don't know something like that, but google it. The thing
19:54
Speaker 1: I know about Akio Toyota for sure is that he
19:57
Speaker 1: is I don't want to say micromanages, but he is
20:00
Speaker 1: involved in every aspect of Toyota car production. Like he's
20:04
Speaker 1: responsible for the reason that Toyota's look and run the
20:07
Speaker 1: way they do, for the reason that Toyota strategy is
20:10
Speaker 1: the way it is. So it's really a sea change,
20:13
Speaker 1: right if he is leaving and putting someone else in
20:16
Speaker 1: the UM in the chief executive seat. Yeah, I think
20:21
Speaker 1: I think he absolutely Uh is a tough cookie too
20:25
Speaker 1: in terms of his evaluation of cars. We've heard over
20:28
Speaker 1: the years that you know, he is no pushover and
20:32
Speaker 1: and Uh is not, you know, shy about giving tough feedback.
20:36
Speaker 1: And I got a kick out of, you know, a
20:38
Speaker 1: video about a year ago when Lexus was was bringing
20:41
Speaker 1: out its first fully electric vehicle. And we actually embed
20:44
Speaker 1: this tweet in our story today about the new the
20:47
Speaker 1: new incoming CEO of of of Toyota, Akio Toyota and
20:53
Speaker 1: his his uh, you know air apparent now Kist are
20:57
Speaker 1: in this Flexus STUV and in in the early goings,
21:01
Speaker 1: you see Ako kind of you know, this thing drafts
21:04
Speaker 1: kind of heavy, and you see Soto kind of you know,
21:07
Speaker 1: hang his head a little bit, and and it isn't
21:09
Speaker 1: until he really hits the accelerator that they both get
21:12
Speaker 1: really excited. So I think that's that that the reason
21:15
Speaker 1: I tell that story is because you know, I think
21:18
Speaker 1: Toyota has to get more excited about electric vehicles. There's
21:22
Speaker 1: been some real reluctance for them to sort of, you know,
21:25
Speaker 1: come around to this idea that you know, the world
21:28
Speaker 1: wants fully electric cars. They were people, i mean they
21:33
Speaker 1: started boring environmentally sound cars, and that's i mean, that's
21:40
Speaker 1: you know, maybe not in those words, but that's been
21:42
Speaker 1: you know, Toyota has really sort of clung to this
21:45
Speaker 1: idea of, look, you know, the more realistic uh, you
21:48
Speaker 1: know way forward here is absolutely we should move into
21:52
Speaker 1: electric vehicles quickly. But the more realistic path here is
21:57
Speaker 1: more people are going to be able to afford you know,
21:59
Speaker 1: gas electric car are Shortages of batteries are going to
22:02
Speaker 1: continue for many years. We're already seeing you know, these
22:05
Speaker 1: massive run up and run ups and prices of things
22:08
Speaker 1: like lithium. As long as that's this is the case,
22:13
Speaker 1: going fully electric is not doable, and it's not a
22:16
Speaker 1: case of of necessarily even you know, dragging your feet
22:20
Speaker 1: in terms of emissions production. If you can, if you
22:23
Speaker 1: can electrify more cars, uh, you know, by using smaller
22:27
Speaker 1: batteries in cars that still rely on part on an engine.
22:31
Speaker 1: Toyota's view is that this is the more effective way,
22:34
Speaker 1: and they've really struggled to sort of make that nuanced
22:38
Speaker 1: case when you've got a guy in Elon Musk who
22:40
Speaker 1: just says this can be done, where we should go
22:43
Speaker 1: all electric. I'm gonna make twenty million teslas a year. Uh,
22:47
Speaker 1: you know one of these years. Uh. It's really hard
22:51
Speaker 1: for that you know, messaging battle to to win out
22:55
Speaker 1: when one is is nuanced complicated, the other is is
22:59
Speaker 1: much simple. So, Craig lu can you tell us about
23:02
Speaker 1: Cogi Sato the replacement here as CEO, And what do
23:06
Speaker 1: you expect his you know, to do list to look like.
23:09
Speaker 1: I mean, Alexis interestingly is going to be on the
23:12
Speaker 1: sort of cutting edge of of you know, Toyota coming
23:14
Speaker 1: around to electric vehicles, and and that makes sense right
23:17
Speaker 1: where we're we're seeing much faster adoption and on the
23:21
Speaker 1: higher end, Uh, it makes more sense for the companies
23:25
Speaker 1: and that they're able to forward to charge uh more
23:29
Speaker 1: for the fact that that batteries are are still very expensive. Uh.
23:33
Speaker 1: And so you know, I think you know, Lexus uh
23:37
Speaker 1: is a bit divisive in in the world of car geeks. Uh.
23:41
Speaker 1: You know, they they are not prummy cars, but you
23:44
Speaker 1: know they maybe do get you know, still panned. Uh.
23:48
Speaker 1: You know, to this day is less exciting than say
23:50
Speaker 1: a Porsche or or even you know, an Audie. But
23:55
Speaker 1: but you know, they're also really solid vehicles. They've they've
23:58
Speaker 1: been growing their international presence over the years under cost
24:03
Speaker 1: Uh and so you know, he has been building up
24:06
Speaker 1: international experience. He knows that division well. And the fact
24:10
Speaker 1: that they're going electric first. I think it is something
24:13
Speaker 1: that you know, Toyota is going to to point to
24:15
Speaker 1: as they sort of introduce him to the world. Yeah.
24:17
Speaker 1: I think for for me the design is I can't
24:21
Speaker 1: get with that, but that's totally subjective, right of Lexus cars.
24:24
Speaker 1: I also feel like they have an American nous in
24:28
Speaker 1: their quality, you know, because they have these cushy, padded seats,
24:33
Speaker 1: and they're also a little too complex for me. I
24:35
Speaker 1: don't like um small displacement with turbo chargers. I like
24:39
Speaker 1: big naturally aspirated. Who doesn't like big naturally asked by
24:43
Speaker 1: the way, I'm looking, Craig under So. I found this
24:45
Speaker 1: website opex Learning. They give a few reasons for the
24:48
Speaker 1: name change, but apparently it's debated why they change the name.
24:52
Speaker 1: Apparently in Japanese UH the D is a voiceless consonant.
24:56
Speaker 1: I don't really know what that means. But the T
24:59
Speaker 1: is a voiced constant that makes it more appealing. Also,
25:01
Speaker 1: there's a practice called jukaku, which is the counting of
25:05
Speaker 1: strokes in kanji and katakana, which is like the way
25:09
Speaker 1: you write um letters and Toyota with a D is
25:13
Speaker 1: ten strokes, but Toyota with a T is eight strokes,
25:17
Speaker 1: so that's luckier. Some people say eight is considered to
25:21
Speaker 1: be a lucky number of Japanese culture. So the name
25:23
Speaker 1: Toyota was chosen. Yes, that makes sense. Also it's a reduction,
25:27
Speaker 1: it's a reduction and waste. You know, it takes fewer
25:31
Speaker 1: strokes to write Toyota Toyota. And then one thing I
25:35
Speaker 1: did not know until just now. And I've been a
25:37
Speaker 1: car geek since I was like six. In the emblem
25:42
Speaker 1: um you can actually see the T O y o
25:46
Speaker 1: T and egg. I did not know that did not
25:50
Speaker 1: he got on the screen. Now it's awesome. So they
25:53
Speaker 1: didn't just pick a name. Who knows why it really happened.
25:57
Speaker 1: But if Craig Trudella doesn't know for sure, then I
25:59
Speaker 1: don't think anyone knows. No, But this is a big
26:01
Speaker 1: change for Toyota. I mean, the you know, the founding
26:03
Speaker 1: que grandson, and now that it looks like they're gonna
26:06
Speaker 1: make a pivot too, It's both to me. It's like
26:08
Speaker 1: it's a it's a shift away from tradition, which is
26:12
Speaker 1: kind of a bummer in my eyes, but it's also
26:16
Speaker 1: a new beginning. I'm excited to see if Sato changes
26:20
Speaker 1: the design tok what's going on. If he changes the
26:22
Speaker 1: design language, I think it's gonna be very interesting because
26:25
Speaker 1: I haven't loved a Toyota since the Selka. I know
26:28
Speaker 1: the gt S Craig Rudale, Global Automotive editor for Bloomberg News.
26:32
Speaker 1: He's based in London, giving us the lowdown on big,
26:36
Speaker 1: big CEO changes at Toyota. As a company continues, it's
26:39
Speaker 1: pivot towards electric vehicles, tons of ECO data today. We
26:46
Speaker 1: don't know which way to go. So he said, let's
26:49
Speaker 1: call Yelena. She's only one floor away. She can just
26:52
Speaker 1: walk up and come into the studio. But no, no, no,
26:54
Speaker 1: no no, she has left Bloomberg and gone to BNP
26:59
Speaker 1: Parry Bah I mean, junior US economist at BNP Perry
27:03
Speaker 1: box Elenava, which is the way I'm going to continue
27:06
Speaker 1: to pronounce it. I don't care. It's a way of
27:08
Speaker 1: doing it for years. I think you did a great job.
27:10
Speaker 1: You learned it over the years, so the seven years
27:12
Speaker 1: I was here, So Elena, welcome back. Great to have
27:16
Speaker 1: you in studio here. We need you like we always have.
27:20
Speaker 1: We rely upon you to give us a sense of
27:22
Speaker 1: what's going on out There's a lot of eco data.
27:24
Speaker 1: What's your takeaway? So we got GDP results for the
27:28
Speaker 1: fourth quarter today and the report is way weaker than
27:32
Speaker 1: the headline number is telling you. So we got an
27:35
Speaker 1: upside surprise as we watched the alboom brick terminals. But
27:40
Speaker 1: if you start, was the que over a quarter of
27:43
Speaker 1: a quarter number and two point six percent was what
27:46
Speaker 1: we were looking for, right, But they're both a slow
27:48
Speaker 1: down from three in the previous quarter, which is fine,
27:52
Speaker 1: but it's still solid growth if you just look at
27:55
Speaker 1: the headline number. But if you look beneath the surface,
27:58
Speaker 1: you will see that a lot of this is driven
28:01
Speaker 1: by unwanted accumulation in inventories and of decline in imports,
28:09
Speaker 1: and a combination of this too is telling you that demand.
28:13
Speaker 1: Consumer demand is slowing down, business demand is slowing down.
28:16
Speaker 1: GDP was not the only report we received today. If
28:20
Speaker 1: you look at durable goods report, you will see that
28:22
Speaker 1: shipments core good shipments are falling as well. So that
28:26
Speaker 1: is the headline. That was the headline, A headline, guy,
28:31
Speaker 1: that's all I am. I took two semesters back. That's
28:33
Speaker 1: why you Yeah, that's the headline. Number is driven by
28:39
Speaker 1: orders of aircraft. But if you look at broader picture,
28:42
Speaker 1: so beneath the surface again, so you you see a
28:45
Speaker 1: significant deceleration in consumer and business demand going forward. So
28:50
Speaker 1: our call is for a recession to start in the
28:53
Speaker 1: second quarter of this year, and today's data actually in
28:56
Speaker 1: the second quarter, so in just two more months, basically
28:58
Speaker 1: a few months away. It's hard to believe given the
29:01
Speaker 1: strength in the label market. But so alright, a recession,
29:05
Speaker 1: how long and how deep do you think? We think
29:08
Speaker 1: slightly less than one percent decline in GDP overall, we're
29:12
Speaker 1: about like, uh that mark, but we think it's gonna
29:17
Speaker 1: last for like three quarters maybe a little bit longer,
29:20
Speaker 1: and we assume at least the two percentage point increase
29:24
Speaker 1: in the unemployment try. So I look at these Yeah,
29:29
Speaker 1: you know what she says right when she comes in here,
29:30
Speaker 1: I mean, she just gives you the numbers that you
29:32
Speaker 1: need to know. Yes, I mean now I got it.
29:34
Speaker 1: I got the BNP Perry back Hall. So all right,
29:37
Speaker 1: what I wonder is what happens then to inflation. We
29:40
Speaker 1: got the core PC at three point nine percent, which
29:44
Speaker 1: is good. We're get coming in under four right, we
29:46
Speaker 1: were four point seven percent the previous reading. I everybody
29:49
Speaker 1: knows I desperately want a Dodge Challenger hell Cat. Who does.
29:53
Speaker 1: There's seventy seven thousand dollars right now test driving a
29:56
Speaker 1: Cadillac Escalade V, which is basically a land yacht yep
30:00
Speaker 1: with a supercharge seven most I know, But there are
30:03
Speaker 1: a hundred and fifty one grand to start before I
30:06
Speaker 1: put any options. So I'm hope hoping that we get
30:10
Speaker 1: a milder recession because I don't want people lose their jobs,
30:13
Speaker 1: but that prices come down, that these companies make too
30:16
Speaker 1: many cars and they have to cut the price at dealers.
30:18
Speaker 1: We're gonna see that. So we we are seeing this
30:21
Speaker 1: already in goods. And what you're talking about is goods, uh,
30:25
Speaker 1: you know, disinflation basically and declines outright declines and goods prices.
30:30
Speaker 1: What is really important for the fit and for the
30:32
Speaker 1: policy and for everybody, here is what is happening with
30:36
Speaker 1: services prices, and they remain sticky. So if you exclude
30:40
Speaker 1: some components like shelter and medical care services, that part
30:46
Speaker 1: of inflation remains really sticky. And that's why what is
30:50
Speaker 1: that by everyone says this, and I think a massage
30:53
Speaker 1: that services that we're talking like tennis lessons? What are we?
30:56
Speaker 1: What is it? What is the service that is less
30:59
Speaker 1: pleasant than that? I would say because prices, consumer prices
31:03
Speaker 1: for services continue to grow and continue to grow at
31:07
Speaker 1: a very unacceptable pace. So that means the FAT has
31:11
Speaker 1: not done their job and they will continue to tighten policy.
31:14
Speaker 1: So our call is for the FED to uh continue
31:18
Speaker 1: to talk about terminal rate of five and a quarter
31:22
Speaker 1: and as they you know, uh uh basis points. You're
31:28
Speaker 1: way beyond this point, Paul and Helena. You probably are
31:31
Speaker 1: to a babysitter now it's like an hour, yes, and
31:36
Speaker 1: that's for a high school kid. They're ballsy enough to say,
31:39
Speaker 1: I won't do it for less than twenty five an hour.
31:41
Speaker 1: And don't get me started talking about daycare prices. Yeah,
31:45
Speaker 1: I have to in I just wrote another check for
31:47
Speaker 1: like four grand. Insane. That's just because somebody got the
31:52
Speaker 1: idea to put a daycare in quotes in the basement
31:56
Speaker 1: of a Korean church, like unbelievable the prices for these,
32:00
Speaker 1: So that also weighs on consumer demand and on real
32:03
Speaker 1: consumer demand. That these are the numbers that we see
32:07
Speaker 1: in GDP numbers. And again today when the headline GDP
32:12
Speaker 1: number surprise to the upside, consumer spending surprise to the downside,
32:16
Speaker 1: and we see that the trajectory of intra trajectory of
32:21
Speaker 1: growth in consumer spending is decelerating sharply. Tomorrow's numbers will
32:25
Speaker 1: show most likely and negative reading tomorrow personal income, personal spending. Um.
32:32
Speaker 1: We were talking about this with David Kelly earlier as well. UM,
32:36
Speaker 1: we're gonna get University of Michigan sentiment as well. Tomorrow
32:39
Speaker 1: is that tomorrow? Um state it's rough to even bring
32:43
Speaker 1: that up. Um. We we uh have seen savings rates
32:47
Speaker 1: come down substantially, And I always look up the savings
32:50
Speaker 1: rate on the Bloomberg terminal and I'm like, wow, we
32:53
Speaker 1: were at twelve and now we're at three, like it's horrible.
32:56
Speaker 1: But then Michael McKee says, hey, you gotta look at
32:58
Speaker 1: bank balances. I don't know the index that he pulls up,
33:00
Speaker 1: but the guy knows everything about the terminal, and I
33:02
Speaker 1: see bank balances are still at a pretty high level.
33:06
Speaker 1: David call from JP Morgan is saying that's going to
33:08
Speaker 1: come off because debts rising, credit card spending is rising,
33:11
Speaker 1: and that's just gonna fall. So Mike and other guys
33:13
Speaker 1: are talking about something called excess savings. So the savings
33:17
Speaker 1: rate that you see on your terminal every month with
33:19
Speaker 1: that personally spending report is like, what is happening in
33:23
Speaker 1: the flow of savings? But we already have a large
33:26
Speaker 1: stock of accumulated savings which is depleting very fast. And
33:31
Speaker 1: that's that's the worry. Is it depleting very quickly. It's
33:33
Speaker 1: depleting very quickly. It's still some cursion and that's why
33:37
Speaker 1: we see consumers spending is still growing, but that will
33:40
Speaker 1: continue to deplete this year, and it will deplete to
33:43
Speaker 1: the point at which, yes, consumers will either have to
33:47
Speaker 1: rely on their wages, which is also decelerating, or on
33:52
Speaker 1: borrowing as you mentioned. But at that or no more daycare.
33:56
Speaker 1: You know, well one of us has to stay home.
34:00
Speaker 1: You can you can broadcast put all that together next Wednesday.
34:05
Speaker 1: What are we can hear from our Federal Reserve chairman.
34:07
Speaker 1: I think their task is getting really much more difficult.
34:11
Speaker 1: So you see deceleration in growth a shop one, Uh,
34:15
Speaker 1: you see some deceleration and goods prices, but at the
34:18
Speaker 1: same time inflation and services is still very high. So
34:23
Speaker 1: I think you know, if you look at the whole picture,
34:27
Speaker 1: you will probably expect them to continue to tighten policy.
34:33
Speaker 1: They will hike again twenty five basis points, but they
34:35
Speaker 1: will know that they will reduce it to And it
34:40
Speaker 1: seems like you know, a common expectations hawk for the Fed.
34:45
Speaker 1: He wants on to keep jacking rates up, but at
34:48
Speaker 1: the same time they will keep talking about a higher
34:50
Speaker 1: terminal rate, and I don't think they're ready to step
34:53
Speaker 1: back from that call. So because inflation is still uncomfortably high,
34:58
Speaker 1: even though it's de cl reading, they need to have
35:01
Speaker 1: the job done. The recent comments we can't risk inflation
35:04
Speaker 1: coming back exactly, and some communications from both sides of
35:09
Speaker 1: the Duff Hawk spectrum UH tells us that they're not
35:13
Speaker 1: ready to give up. So Waller and ladle Brian and
35:16
Speaker 1: they're all talking about like they need to be vigilant
35:20
Speaker 1: on inflation. That is obvious. Yea, you know what. You
35:24
Speaker 1: know what I did before Elena walked in and went
35:27
Speaker 1: bio for Elena, just to check if she's a terminal
35:29
Speaker 1: user still, and she is, otherwise I was going to
35:32
Speaker 1: show her the door. I mean, if you're not a
35:34
Speaker 1: terminal user, absolutely, how can you do it? How can
35:37
Speaker 1: do just a message? Yeah? I type like message Carl
35:40
Speaker 1: Ricka Donna nice. He still has a terminal yeah, and
35:42
Speaker 1: he's coming in next week. So we're bringing the band
35:44
Speaker 1: back together, all the grade economists we had here at Bloomberg.
35:47
Speaker 1: So Elena, she let you have a joining us here.
35:49
Speaker 1: She's a senior US economist for BNP Parry Bad. But
35:53
Speaker 1: of course her claim to fame is she once worked
35:55
Speaker 1: with me at Bloomberg Intelligence. That's what you know. People,
35:58
Speaker 1: we missed you, but that's not clear. And there's everybody
36:00
Speaker 1: who message us from the news. I'm like, oh, Yolene
36:02
Speaker 1: is gonna be here. I'm gonna later. It was so
36:04
Speaker 1: good to be bad guys, and I am so grateful
36:07
Speaker 1: for the time that I worked here. So that I
36:09
Speaker 1: also wanted to mention that the market is trying to
36:14
Speaker 1: figure out what the heck is going on there today,
36:16
Speaker 1: tons of stuff that digests from Tesla, earnings from earning
36:19
Speaker 1: asist in general across the board. We had a whole
36:22
Speaker 1: slew of eco data today. We just had, you know,
36:26
Speaker 1: some some thoughts here about where what that means for
36:28
Speaker 1: the economy, what that means for the FED, what that
36:29
Speaker 1: means for the markets. Let's break it down with somebody
36:32
Speaker 1: who does this for living, David Coudla, founder, CEO and
36:35
Speaker 1: CIO of Mainstay Capital Management. David, thanks so much for
36:38
Speaker 1: joining us here. It's a busy, busy day. And and David,
36:41
Speaker 1: Matt and I were just speaking with one of our
36:42
Speaker 1: favorite economists from BNP, Parry Bad and she's saying, Hey,
36:45
Speaker 1: recession starting second quarter, maybe last three quarters, maybe more,
36:50
Speaker 1: maybe one percent or so. Contraction in the economy. Is
36:53
Speaker 1: that something you guys are having your calculus as you
36:56
Speaker 1: think about your portfolio. Uh, Hi, Paul and Matt, Good
37:01
Speaker 1: afternoon or good morning. Uh. You know, I think that
37:06
Speaker 1: calling for a recession the second quarter is probably premature. Uh.
37:11
Speaker 1: You know, what we've seen recently is the markets pricing
37:16
Speaker 1: in more and more very shallow or no recession. But
37:19
Speaker 1: let's look at the data. Right, if we go around
37:21
Speaker 1: just in the US and go around the world, we
37:24
Speaker 1: still have strong jobs in the US. That was confirmed
37:27
Speaker 1: again today with weekly job as claims. We have strong GDP.
37:31
Speaker 1: Now that's backward looking into the fourth quarter at two
37:33
Speaker 1: point nine better than expected. GDP keeps coming in better
37:36
Speaker 1: than expected. We've been have housing recovering with yields coming down.
37:42
Speaker 1: Some mortgages are coming down. If we look at Europe, Uh,
37:46
Speaker 1: they were supposed to have a worse recession than US.
37:49
Speaker 1: Now there's calls for no recession in Europe because the
37:52
Speaker 1: energy crunch hasn't materialized with a warmer winner or it
37:55
Speaker 1: has abated, I should say. And then we go over
37:58
Speaker 1: to Asia China. Uh, surprisingly too many probably abandoned zero
38:03
Speaker 1: COVID policy. Uh. Their holiday travel right now is quadrupled
38:08
Speaker 1: over this time last year. So there are a lot
38:11
Speaker 1: of factors that show we still have strong growth, driving
38:15
Speaker 1: and driving growth. I just I can't see a recession
38:19
Speaker 1: starting in a couple of months. Uh, you know you're
38:22
Speaker 1: out there in Michigan. I start to think more and
38:25
Speaker 1: more about the possibility of too much production at GM.
38:28
Speaker 1: Too much production at I guess it's Stlantis now. UM
38:34
Speaker 1: inventories starting to rise compared to sales. Do you see
38:38
Speaker 1: that out there. Uh, it depends. Um, I'm still waiting
38:46
Speaker 1: on my order for my zero six Corvette to go through. Dude,
38:49
Speaker 1: I gotta tell you something real quick. I went for
38:52
Speaker 1: a ride with Mark Royce in a zero six at
38:55
Speaker 1: the Milford proven Grounds on believable viah Just amazing what
39:01
Speaker 1: they could get out of five and a half leaders.
39:04
Speaker 1: Just I was blown away. And for the price, it
39:09
Speaker 1: was like a GT three killer. Yeah. Yeah. So, so
39:14
Speaker 1: you know, there is still pent up demand for uh
39:18
Speaker 1: new autos because of the chip shortage. There's still pent
39:21
Speaker 1: up demand and in some areas where we're still catching
39:25
Speaker 1: up even though we know the used car market has
39:29
Speaker 1: been declined for the past several months, but it, you know,
39:32
Speaker 1: during the pandemic had gone up, had rose so much,
39:35
Speaker 1: had risen so much, so I know, you know, the
39:38
Speaker 1: automakers here are are still humming along. Now. If we
39:42
Speaker 1: get a contraction the economy or god forbid a deeper recession,
39:47
Speaker 1: that all changes their cyclical companies. But for now, there's
39:52
Speaker 1: really still some some catch up to that pent up demand.
39:56
Speaker 1: So what do we do here? I mean again, I'm
39:57
Speaker 1: just looking at my Eco screen on the Bloomberg terminal.
40:00
Speaker 1: I'm trying to digest all this economic data being deluged
40:03
Speaker 1: with earnings. We had some you know, I guess some
40:06
Speaker 1: good news from Tesla last night. Not that that's reflective
40:09
Speaker 1: in the economy, but what are you doing with your
40:11
Speaker 1: portfolio here given that economic backdrop and earnings backdrop. Yeah,
40:16
Speaker 1: so this I would say, this first month of this
40:19
Speaker 1: year is shaping up a little bit different than some
40:22
Speaker 1: had expected, you know, some of the forecasts we had
40:24
Speaker 1: from Morgan Stanley or JP Morgan or you know. And
40:27
Speaker 1: we'll see how the rest of the quarter turns out.
40:29
Speaker 1: But you know, we've had a good market now. With that,
40:33
Speaker 1: that's good for our growth stocks that we hold, but
40:36
Speaker 1: we are still biased towards the defensive because of this
40:40
Speaker 1: concern about procession. I'd say though that our biggest change
40:44
Speaker 1: in our portfolios is going overseas. With China recovering, that's
40:49
Speaker 1: great for Asia stocks, and of course they've been on
40:52
Speaker 1: a terror so we like e M specifically Asia. Uh
40:57
Speaker 1: And of course CONNA duration and in bonds has made
41:00
Speaker 1: more since here recently too, so we've had it there.
41:03
Speaker 1: So the e M call we heard, I guess we're
41:05
Speaker 1: hearing a little bit more and more these days. Um,
41:08
Speaker 1: what's the basis of that for you? Is that just
41:11
Speaker 1: simply the growth there is better relative to to the valuation. Yeah,
41:16
Speaker 1: we've got you know E M E M. Undervalued certainly
41:20
Speaker 1: relative to the US. When we look at historical historical basis,
41:25
Speaker 1: and if we look at the factors, what is really
41:28
Speaker 1: and I'm talking about Asia now specifically Asia. Uh, if
41:32
Speaker 1: the Chinese economy is opening up, that's good for China,
41:37
Speaker 1: that's good for the region, that's good for all of Asia.
41:40
Speaker 1: And we're seeing that are already in stock prices. So
41:43
Speaker 1: and we think that has further to run because being undervalued. Uh,
41:47
Speaker 1: specifically China having sold off so far, and you know
41:51
Speaker 1: that I don't know that, Uh, it was expected, but
41:54
Speaker 1: they have certainly done an about face. And whether you're
41:57
Speaker 1: looking at holiday travel, hotels demand, you know, immediately increasing
42:03
Speaker 1: as COVID policy, COVID zero policy becomes a thing of
42:06
Speaker 1: a past there. So that's just another factor that is
42:09
Speaker 1: in favor of Asia stocks. More broadly. You know, I'm
42:12
Speaker 1: looking at the Bloomberg Dollar Index and you know, I've
42:15
Speaker 1: been asking people for years what's the bear case for
42:19
Speaker 1: the U. S. Dollar? I mean, the dollar index is
42:22
Speaker 1: down ten percent from its peak, So maybe we're kind
42:24
Speaker 1: of there. How do you think about the dollar and
42:27
Speaker 1: how does that impact kind of how you construct your portfolio? Yeah,
42:32
Speaker 1: and a and another good thank you. That's another dynamic
42:35
Speaker 1: I should have mentioned relative to overseas. Right, that's another
42:39
Speaker 1: factor that's working in our favor is the weakening dollar. Um.
42:42
Speaker 1: And you know, I think it's a function of we
42:44
Speaker 1: see the FED is tapering off in their purchases. Uh.
42:49
Speaker 1: Certainly the dollar was on a just a care last
42:52
Speaker 1: year with an aggressive faid. We see the FED tapering
42:55
Speaker 1: off I'm sorry, tapering off in the rate hikes, not purchases.
42:59
Speaker 1: And so we have Europe that still needs to catch up.
43:04
Speaker 1: They were behind the curb. Uh. You know, we look
43:06
Speaker 1: at that around the world and or just looking locally
43:10
Speaker 1: at the US. Uh. You know, the dollar has just
43:15
Speaker 1: declined with this this uh tapering of FED rate heights. Um.
43:22
Speaker 1: I'm just sorry, sorry, I got sidetracked looking at the
43:24
Speaker 1: Zeo six here. This is I'm so excited for you
43:28
Speaker 1: because it's the most powerful naturally aspirated V eight ever
43:33
Speaker 1: put in a production car. SI power zero to sixty
43:37
Speaker 1: and two and a half seconds, and it's not electric.
43:41
Speaker 1: Zero to sixty and two and a half seconds and
43:44
Speaker 1: it costs not electric, I mean half of what you
43:47
Speaker 1: would pay. That's just an unbelievable I hope you've got
43:51
Speaker 1: the orange or maybe a bright green color. Uh there
43:56
Speaker 1: when you get take delivery, I'm gonna come over to
43:57
Speaker 1: Michigan and do a few laps with you. It's a day.
44:01
Speaker 1: It's a day, It's a day. What do you think
44:03
Speaker 1: it is? What do you think, David about the about
44:06
Speaker 1: the American consumer, Because a lot of people have been
44:09
Speaker 1: kind of raining on my parade today saying the consumer
44:12
Speaker 1: is starting to borrow a lot more, a lot more
44:14
Speaker 1: on credit cards. Savings rates has dropped to nothing, the
44:18
Speaker 1: bank balances are going to start to get depleted. Yeah,
44:21
Speaker 1: you nailed it. The consumer is still strong, but where
44:24
Speaker 1: it was savings from the pandemic, it's now more credit
44:30
Speaker 1: card debt. We're seeing bank bank accounts decline. So you
44:37
Speaker 1: know that becomes a concern as we roll further into
44:40
Speaker 1: this year. Uh, because the consumers two thirds of the economy,
44:45
Speaker 1: and some of those numbers I cited at the beginning
44:46
Speaker 1: of the segment, Uh, those are get impacted very quickly.
44:51
Speaker 1: If the consumer starts to weaken, and look what's happening
44:54
Speaker 1: with jobs in some areas at least and big tech.
44:59
Speaker 1: You know, almost every day we're seeing a mass layoff
45:01
Speaker 1: at a company. Yeah, and those you know, started out
45:05
Speaker 1: just being West Coast things tech stocks that you would
45:08
Speaker 1: have expected because they hired you know, fifty more employees
45:11
Speaker 1: in one year. Then you start to see three M,
45:14
Speaker 1: then you start to see IBM. It's starting to creep
45:16
Speaker 1: into Dow and old economy stocks. How concerned are you
45:20
Speaker 1: about layoffs? Uh, well, it depends. We we want to
45:26
Speaker 1: see the FED have a reason to to stop. I
45:31
Speaker 1: think they've gone too far already. Um. I know that
45:34
Speaker 1: that you guys have a debate internally between where the
45:37
Speaker 1: FED should be. But I think they've gone too far already,
45:40
Speaker 1: and I think that's that's that's the risk that they
45:43
Speaker 1: break something later in the year. But uh, you know,
45:47
Speaker 1: we're all eyes are on that because because the stock
45:50
Speaker 1: markets a liquidity junkie um more important than earnings even
45:54
Speaker 1: but uh yeah, if we if we can continue to
45:57
Speaker 1: see that, or if we see that really and pack
46:00
Speaker 1: the broader jobs numbers, uh, than that makes an issue.
46:04
Speaker 1: Finally caused the FED to pause, all right, David, great stuff.
46:06
Speaker 1: Always appreciate getting your thoughts. David Coudla, founder at CEO
46:09
Speaker 1: of Mainstay Capital Management. Thanks for listening to the Bloomberg
46:17
Speaker 1: Markets podcast. You can subscribe and listen to interviews with
46:20
Speaker 1: Apple Podcasts or whatever podcast platform you prefer. I'm Matt Miller.
46:25
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46:29
Speaker 1: Sweeney I'm on Twitter at pt Sweeney. Before the podcast.
46:32
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