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Fiduciary's Andersen Assesses the Trump Speculation Premium · Bloomberg Intelligence

• 0:04
  Speaker 1: Welcome to the Bloomberg P and L Podcast. I'm Pim Fox.
• 0:08
  Speaker 1: Along with my co host Lisa Abramowitz. Each day we
• 0:11
  Speaker 1: bring you the most important, noteworthy, and useful interviews for
• 0:14
  Speaker 1: you and your money, whether at the grocery store or
• 0:16
  Speaker 1: the trading floor. Find the Bloomberg P L Podcast on iTunes,
• 0:20
  Speaker 1: SoundCloud and at Bloomberg dot com. We'd like to learn
• 0:29
  Speaker 1: more about investing, so we turned to Peter Anderson, chief
• 0:32
  Speaker 1: investment officer and vice president for Fiduciary Trust based in Boston.
• 0:38
  Speaker 1: Thanks very much for being with us, Peter, all right,
• 0:41
  Speaker 1: here's the scenario. SMP five hundred is up more than
• 0:47
  Speaker 1: on a fifty two week basis. Forget this three month stuff.
• 0:51
  Speaker 1: Let's just say rolling one year returns. Um, how do
• 0:56
  Speaker 1: you extract some of your profits safely? Uh? Even as
• 1:01
  Speaker 1: an institutional manager? How do you extract some profits safely?
• 1:05
  Speaker 1: And where do you redeploy? If you say, all right,
• 1:10
  Speaker 1: there's no reason to uh think that you've become a genius, well,
• 1:15
  Speaker 1: you know the best way to navigate through uncertain times
• 1:18
  Speaker 1: them is to commit to sound principles. So I think
• 1:22
  Speaker 1: what the heart of your question really is going forward
• 1:26
  Speaker 1: with all the uncertainties that we have right now. What
• 1:28
  Speaker 1: is the best way to stick to your principles if
• 1:31
  Speaker 1: you have set them early in your investment horizon, and
• 1:35
  Speaker 1: do you make changes in midstream? And given that there
• 1:39
  Speaker 1: are so many uncertainties and we're having so much difficulty,
• 1:43
  Speaker 1: uh discerning facts from what I would call pure hopes,
• 1:47
  Speaker 1: that this isn't really the time to make major changes
• 1:52
  Speaker 1: given where we are what I would call in this
• 1:54
  Speaker 1: you know, the phases of the Trump administration. You know, Peter,
• 1:58
  Speaker 1: I think a lot of people would probably agree with you,
• 2:00
  Speaker 1: which is the reason why we're not seeing a lot
• 2:01
  Speaker 1: of direction in stock or bond markets recently. Given that backdrop,
• 2:05
  Speaker 1: are you stockpiling cash, You're preparing for better liquidity when
• 2:10
  Speaker 1: there is some kind of uh reality or facts that
• 2:13
  Speaker 1: come out that uh, that's for for people to actually, well,
• 2:17
  Speaker 1: let me answer it this way. You know, what we
• 2:19
  Speaker 1: try to do is we go back to basics and
• 2:21
  Speaker 1: we say, look, there's a baseline right now. You always
• 2:23
  Speaker 1: have to focus on what do you think the baseline
• 2:25
  Speaker 1: is for say, US equities, and then you take an observation,
• 2:29
  Speaker 1: you say, where is the SMP right now? And you
• 2:32
  Speaker 1: have to discern what is the difference between where your
• 2:34
  Speaker 1: baseline is. So, for instance, most people would rationally say
• 2:38
  Speaker 1: the SMP five D is going to return anywhere from
• 2:40
  Speaker 1: say six to eight percent annual lives in a year. However,
• 2:44
  Speaker 1: as Pam was saying, when you look at what the
• 2:46
  Speaker 1: return is now the SMP five, you have to account
• 2:49
  Speaker 1: for what is that giant gap between what you would
• 2:52
  Speaker 1: say your baseline is and what you're actually observing. And
• 2:56
  Speaker 1: the large extent of that, in our opinion, is what
• 2:59
  Speaker 1: we would call, you know, the Trump premium, the details
• 3:02
  Speaker 1: of the future tax reform, infrastructure, all that, and you
• 3:07
  Speaker 1: have to get a sense of is that a reasonable premium?
• 3:10
  Speaker 1: And if it is, I would say you stay with
• 3:12
  Speaker 1: your program. If you determine that the premium is you know, overvalued,
• 3:18
  Speaker 1: then maybe you take some chips off the table. But
• 3:21
  Speaker 1: for our measurements right now, we think as long as
• 3:23
  Speaker 1: you're diversified and you do have reasonable exposure in the
• 3:26
  Speaker 1: SP I think you stay the course until you get
• 3:29
  Speaker 1: more data. Before you get that data, tell us one
• 3:35
  Speaker 1: level down industry groups and specific cases if you can,
• 3:41
  Speaker 1: so that we learn what exactly you're talking about. Yeah, okay, well,
• 3:44
  Speaker 1: first off, let's just talk about how about even fixed income,
• 3:48
  Speaker 1: investor grade fixed income that's been getting a bad rap
• 3:51
  Speaker 1: recently because him most people think it's the equivalent of
• 3:54
  Speaker 1: asking to put your hand into an open flame, right
• 3:57
  Speaker 1: when the FED is an a rising interest rate environment?
• 4:00
  Speaker 1: And why would we stay in an exposure to investment
• 4:03
  Speaker 1: grade fixed income? And I think the answer overwhelmingly is
• 4:07
  Speaker 1: because it acts as ballot to the portfolio. So while
• 4:10
  Speaker 1: you can have debates about our spreads, um you know,
• 4:14
  Speaker 1: valued fairly, what will happen when rates rise? We still
• 4:18
  Speaker 1: advocate staying in fixed income to a certain degree in
• 4:22
  Speaker 1: case things don't go all the way everybody is expecting
• 4:25
  Speaker 1: and you want to have something that will most likely
• 4:29
  Speaker 1: are outperform in a disappointing environment. Well, in fairness, just
• 4:33
  Speaker 1: to give a sense of what the market, the investment
• 4:35
  Speaker 1: grade corporate bond market has done, it has been an
• 4:38
  Speaker 1: unprecedented quarter first quarter of investment grade bond sales in
• 4:42
  Speaker 1: the US, and the debt has preserved its value, actually
• 4:46
  Speaker 1: increasing by one point four uh in that first quarter
• 4:49
  Speaker 1: even with all of those sales. So it seems like
• 4:51
  Speaker 1: a lot of people, Peter do agree with you. I
• 4:54
  Speaker 1: want to just get your thoughts on a front page
• 4:56
  Speaker 1: story on the Wall Street Journal this morning talking about
• 4:59
  Speaker 1: a new posal at the FED to do two more
• 5:02
  Speaker 1: rate hikes this year and then begin unwinding their balance
• 5:06
  Speaker 1: sheet in a in a gradual process. My first impression
• 5:10
  Speaker 1: was this would be incredibly disruptive, particularly it's the longer
• 5:12
  Speaker 1: dated debt. What about what about you? What was your reaction?
• 5:15
  Speaker 1: I think it is and you know, I think it's
• 5:17
  Speaker 1: a little bit premature. I was somewhat surprised that that
• 5:20
  Speaker 1: was reported on given where we are right now, Lisa,
• 5:23
  Speaker 1: it seems to me that, uh, even with the rate hike,
• 5:27
  Speaker 1: when you see how the tenure has done, I think
• 5:30
  Speaker 1: it is surprising to most people where it began and
• 5:33
  Speaker 1: where it ended in a rising rate environment. So to
• 5:36
  Speaker 1: actually project that we're going to have two more hikes
• 5:40
  Speaker 1: and then the unwinding, that's a lot of things have
• 5:43
  Speaker 1: to go a certain way in order to hang your
• 5:46
  Speaker 1: hat on that, and then to make investment decisions based
• 5:49
  Speaker 1: on this, And you know, this chicken little mentality about
• 5:52
  Speaker 1: bonds is not appropriate when you think about diversified portfolio.
• 5:56
  Speaker 1: So let's assume there are even more multiple hikes. I
• 6:00
  Speaker 1: would still argue that unless you're a pure speculator to
• 6:04
  Speaker 1: have a balanced portfolio. You still, you know, we're not
• 6:07
  Speaker 1: always right, as we know, and you do have to
• 6:10
  Speaker 1: have fixed income in case you are wrong. Well, and
• 6:13
  Speaker 1: just to be clear, the direction of rates longer term
• 6:15
  Speaker 1: rates has been down as the Federal Reserve raises interest
• 6:18
  Speaker 1: rates in the shorter terms. So this has been sort
• 6:20
  Speaker 1: of the surprise going forward. Do you think that this
• 6:22
  Speaker 1: will continue, That we're going to see a flattening yield curve,
• 6:24
  Speaker 1: We're going to see this sort of lower growth expectation
• 6:26
  Speaker 1: within the bond market despite all the hopes that we've
• 6:29
  Speaker 1: seen reflected and stocks, well, let's just talk about and
• 6:31
  Speaker 1: here's uh, let's separate the facts from the hope. So
• 6:35
  Speaker 1: what we know for facts right now is that there
• 6:37
  Speaker 1: have been two travel bands attempted and they've been forwarded.
• 6:42
  Speaker 1: The health care reform has not been successful, and now
• 6:45
  Speaker 1: we're seeing the NAFTA. You know, the preliminary disclosure of
• 6:49
  Speaker 1: that seems to be I would say most people would
• 6:52
  Speaker 1: would agree that it's it's less, it's been blunted, it's
• 6:56
  Speaker 1: not as aggressive as it has been. So you have
• 6:59
  Speaker 1: to factor that into the sense of did we get
• 7:01
  Speaker 1: ahead of ourselves in November and December, thinking that all
• 7:05
  Speaker 1: this was going to be easily accepted and reflected in
• 7:09
  Speaker 1: the fixed income market is rising rates. I think now
• 7:12
  Speaker 1: what people are saying is, now that we have some
• 7:14
  Speaker 1: data points, let's project the success of tax reform infrastructure,
• 7:19
  Speaker 1: and maybe we've gotten a little bit too optimistic, and
• 7:22
  Speaker 1: in that case rates might actually slow down, given that
• 7:26
  Speaker 1: the Trump administration hasn't been as successful as people that
• 7:29
  Speaker 1: had originally fought back when he was elected. Peter Anderson,
• 7:33
  Speaker 1: thank you so much for joining us. A pleasure to
• 7:35
  Speaker 1: hear what you have to say, Chief investment officer and
• 7:37
  Speaker 1: vice president at Fiduciary Trust, coming to us from Boston.
• 7:41
  Speaker 1: Definitely the conundrum of the time, which is who is
• 7:44
  Speaker 1: right this sort of incredibly enthusiastic stock pickers or the
• 7:49
  Speaker 1: pretty parish, persistently barish fund investors. Well, Lisa Abrama's everybody
• 8:06
  Speaker 1: wants to know how many times the Federal Reserve will
• 8:09
  Speaker 1: raise interest rates, and since nobody knows, we try to
• 8:13
  Speaker 1: find people let at least have some thoughts in that direction,
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  Speaker 1: and Holly List is one of them, Managing director of
• 8:18
  Speaker 1: Futures and Commodities Group for b t I G, joining
• 8:22
  Speaker 1: us from Chicago, Holly, thank you very much for being
• 8:25
  Speaker 1: on with us as always. You've been recently quoted as
• 8:28
  Speaker 1: saying the f O m C is like a US. Uh, well,
• 8:32
  Speaker 1: you said air for you know, air carrier, Um, what
• 8:37
  Speaker 1: do you mean by that? And and maybe tell us
• 8:39
  Speaker 1: who you're following in that convoy. I'm following myself and
• 8:44
  Speaker 1: that in that statement. I just think that they're slow
• 8:47
  Speaker 1: to move. They tend to make a decision and they
• 8:50
  Speaker 1: stick with it. Now we've seen over the past couple
• 8:53
  Speaker 1: of years they've raised once per year. They raised first
• 8:56
  Speaker 1: in December, they raised again in December, ones they just
• 9:02
  Speaker 1: raised again mid March. Now that's not to say that
• 9:04
  Speaker 1: they're only raising once per year, but I think they
• 9:07
  Speaker 1: tend to move on a course of action, and they
• 9:09
  Speaker 1: don't tend to change that decision rapidly or tend to
• 9:14
  Speaker 1: stop that decision and reverse course. So I don't think
• 9:17
  Speaker 1: that they're certainly moving to ease anytime soon. I don't
• 9:20
  Speaker 1: think we've moved into that direction. But I don't think
• 9:23
  Speaker 1: that they're necessarily accelerating at this point either, And I
• 9:27
  Speaker 1: don't think that they're going I don't think that the
• 9:30
  Speaker 1: economic data has shown us that they necessarily need to
• 9:33
  Speaker 1: raise four times per per year, although we have seen
• 9:37
  Speaker 1: a couple of non voting FED members have said that
• 9:41
  Speaker 1: they think that they're going to that they should be
• 9:43
  Speaker 1: raising four times per year at each meeting this year,
• 9:46
  Speaker 1: which would imply most likely every other meeting, which is
• 9:50
  Speaker 1: when we get a press conference out of FED share yelling.
• 9:54
  Speaker 1: So I don't necessarily think that they go from one
• 9:57
  Speaker 1: hike per year to four hikes per year, which would
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  Speaker 1: certainly be a change in direction out of that aircraft carrier. Yeah,
• 10:04
  Speaker 1: at that aircraft carrier, I love it high. You know,
• 10:06
  Speaker 1: last week we heard from a lot of FED members,
• 10:09
  Speaker 1: and one of the dominant themes was that there is
• 10:13
  Speaker 1: a pretty heated discussion going on right now at the
• 10:16
  Speaker 1: FED about shifting policy from rate hikes to curtailing the
• 10:21
  Speaker 1: balance sheet and sort of not reinvesting all of the
• 10:24
  Speaker 1: proceeds that they're earning from their holdings. There was a
• 10:27
  Speaker 1: story in the Wall Street Journal today talking about how
• 10:29
  Speaker 1: the FED is thinking about possibly starting that unwind later
• 10:32
  Speaker 1: this year. How disruptive do you think that would be? Well,
• 10:35
  Speaker 1: I think if they don't give us any advanced notice,
• 10:37
  Speaker 1: that would certainly be disruptive. But probably the least disruptive
• 10:41
  Speaker 1: of it. Once they start giving us some advanced notice
• 10:44
  Speaker 1: about how they're going to re be reducing their balance
• 10:46
  Speaker 1: sheet would certainly be a reduction in I shouldn't say
• 10:50
  Speaker 1: a reduction in, but certainly not reinvesting the proceeds. That
• 10:53
  Speaker 1: would certainly just be a reduction in the balance sheet.
• 10:56
  Speaker 1: By letting those proceeds not be reinvested, it would just
• 11:00
  Speaker 1: be a natural reduction. You'd be using the money they
• 11:03
  Speaker 1: returning it to the treasury, just not be reinvesting it.
• 11:07
  Speaker 1: It would just be a natural decline in their balance sheet.
• 11:12
  Speaker 1: Use the money for something else or just returning it
• 11:14
  Speaker 1: to the treasury, and and that would just reduce it.
• 11:17
  Speaker 1: They'd give us some advanced notice and that we would
• 11:19
  Speaker 1: all just know that the balance sheet is going away.
• 11:22
  Speaker 1: I mean it started at a trillion, now you're up
• 11:24
  Speaker 1: to four and a half trillion. If they didn't give
• 11:27
  Speaker 1: us advanced notice, that would certainly be a different story.
• 11:30
  Speaker 1: And maybe if they also gave us some advanced warning
• 11:33
  Speaker 1: about what portion of the balance sheet maybe they would
• 11:36
  Speaker 1: let run off first. Maybe that would also give us
• 11:39
  Speaker 1: a better inclination about where it would be. As you know,
• 11:42
  Speaker 1: we all had that paper tantrum years ago under Bernaki,
• 11:45
  Speaker 1: and that would certainly exactly and that was sort of, uh,
• 11:49
  Speaker 1: not an advanced warning. And so we had that tantrum.
• 11:52
  Speaker 1: But if they gave us some advanced notice, that would
• 11:55
  Speaker 1: be a little bit better for all of us to
• 11:56
  Speaker 1: get used to that. And that would certainly be a
• 11:59
  Speaker 1: type of hike that we wouldn't necessarily need them to
• 12:03
  Speaker 1: raise rates as aggressively. And and so that could also
• 12:06
  Speaker 1: be the type of tightening contraction that we wouldn't need
• 12:10
  Speaker 1: additional rate hikes. So you know, at the end of
• 12:13
  Speaker 1: last year, after the U. S Election, a lot of
• 12:15
  Speaker 1: analysts were saying, look, we know we've been wrong about
• 12:18
  Speaker 1: the direction of interest rates. We know we've been wrong
• 12:20
  Speaker 1: about treasury yields, but this time we really think something
• 12:24
  Speaker 1: is different. Yields are going to rise materially given President
• 12:28
  Speaker 1: Trump's plans for infrastructure spending and regulatory cuts. Now at
• 12:33
  Speaker 1: this point do you hear from analysts and people you
• 12:36
  Speaker 1: work with, Well, maybe it's it's the same scene. Maybe
• 12:40
  Speaker 1: we're looking at the exact same picture as we were
• 12:42
  Speaker 1: earlier last year. Uh, just some of the furniture has
• 12:45
  Speaker 1: moved around. Well, and it's interesting because we haven't heard
• 12:50
  Speaker 1: that that rates have to rise. They are on a
• 12:52
  Speaker 1: tightening cycle, and certainly some people have put line in
• 12:55
  Speaker 1: the sand two point six percent that to the long
• 12:58
  Speaker 1: term bear market we've seen basic the long term bull
• 13:01
  Speaker 1: market we've seen since n that will be over and
• 13:04
  Speaker 1: we haven't seen that. And we've gotten as close to
• 13:06
  Speaker 1: to sixty as you can just within the past month,
• 13:09
  Speaker 1: and we've certainly turned around since then, so it doesn't
• 13:13
  Speaker 1: necessarily have to be I mean, the markets are gonna
• 13:15
  Speaker 1: test that resolve very frequently, and we've certainly been up
• 13:20
  Speaker 1: at to sixty just within the last month, and now
• 13:23
  Speaker 1: in ten years, we're back to the bottom end of
• 13:25
  Speaker 1: that range that we've seen over the past four months,
• 13:28
  Speaker 1: just within the past couple of weeks. So just when
• 13:32
  Speaker 1: you think it's gonna get bad, it sort of turns around.
• 13:34
  Speaker 1: And I think that's what we're seeing the past couple
• 13:36
  Speaker 1: of weeks and the data, Lisa, we haven't seen it
• 13:39
  Speaker 1: be as strong as it could be, and so I
• 13:42
  Speaker 1: think they're testing the resolve of the federal Reserve, they're
• 13:45
  Speaker 1: testing the resolve of the markets, and even if you
• 13:48
  Speaker 1: look in future space, we had a lot of investors
• 13:51
  Speaker 1: and traders be very short the treasury curve. They were
• 13:55
  Speaker 1: short treasuries from two years on out to the ultra bonds,
• 13:59
  Speaker 1: and now they've used those short positions fairly dramatically over
• 14:02
  Speaker 1: the past few weeks, and I think that's telling you
• 14:05
  Speaker 1: the marketplace does not see as significantly strong dad as
• 14:10
  Speaker 1: they did just a few weeks ago. Polly, as a
• 14:13
  Speaker 1: managing director of futures and Commodities, can you tell us
• 14:17
  Speaker 1: about gold, Well, you've certainly seen it move around a
• 14:22
  Speaker 1: little bit, but it hasn't gotten as strong there were.
• 14:24
  Speaker 1: There was just recently where people were talking about it
• 14:27
  Speaker 1: hitting two thousand dollars and now we've backed off of
• 14:30
  Speaker 1: that level. So I think if we're going today, yeah,
• 14:34
  Speaker 1: and if you were going to see inflation, I think
• 14:37
  Speaker 1: you would certainly see it higher than we've seen it recently,
• 14:39
  Speaker 1: and you haven't now the Fed. One of the Fed's
• 14:43
  Speaker 1: favorite inflation numbers is that core year over year PC.
• 14:47
  Speaker 1: It has been well below the two percent level that
• 14:50
  Speaker 1: they'd like to see it. And I think if inflation
• 14:53
  Speaker 1: was going to percolate almost where the FED would like
• 14:56
  Speaker 1: to see it, closer to that two percent level, I
• 14:58
  Speaker 1: think you would see old being moving higher, and we haven't.
• 15:02
  Speaker 1: For me, I like to look at the techno goals
• 15:05
  Speaker 1: and right now that twelve seventy one, now you're within
• 15:07
  Speaker 1: fifteen sixteen dollars of it. But until it gets above
• 15:11
  Speaker 1: that twelve seventy one level technically, and for me, it
• 15:14
  Speaker 1: would need to sustain above that level for at least
• 15:17
  Speaker 1: a couple of weeks, then I just don't see the
• 15:19
  Speaker 1: inflationary pressures percolating in the gold market. Polly Less, thank
• 15:23
  Speaker 1: you so much for joining us. Holly Less is Managing
• 15:25
  Speaker 1: director of Futures and Commodities at B T I G
• 15:29
  Speaker 1: in Chicago. Thanks again for joining us. We're gonna take
• 15:45
  Speaker 1: a little bit into the numbers that we've been getting
• 15:46
  Speaker 1: out of GM, Ford, Fiat Chrysler, disappointing sales across the board.
• 15:52
  Speaker 1: UH car sales are plunging despite the fact that these
• 15:56
  Speaker 1: automakers are discounting their vehicles more heavily. To a little
• 16:00
  Speaker 1: bit more perspective on how significant these declines and these
• 16:03
  Speaker 1: disappointments are. I want to bring in Kevin Tynan, senior
• 16:06
  Speaker 1: Auto's analyst for Bloomberg Intelligence. Kevin, what stands out to
• 16:11
  Speaker 1: you about this about all reports? Yeah, well, I think.
• 16:16
  Speaker 1: I think the auto consumer is probably exhausted. Um. I
• 16:20
  Speaker 1: also think that c March is a funny month, and
• 16:23
  Speaker 1: that if the weather and parts of the country is
• 16:26
  Speaker 1: particularly bad in January February, March can be a strong month.
• 16:30
  Speaker 1: I think we saw some bad weather at least here
• 16:33
  Speaker 1: in the Northeast late in March, which probably will delay
• 16:36
  Speaker 1: things into if there was more significant demand. Wa wa, Kevin,
• 16:41
  Speaker 1: Hold on a second, you're blaming the weather. I think
• 16:44
  Speaker 1: that a lot of people have been expecting for a
• 16:45
  Speaker 1: long time. We've seen cooling demand and the fact that
• 16:48
  Speaker 1: people are tightening up their credit conditions, that they're this
• 16:50
  Speaker 1: lending standards. No no, no no, not just let it happen, Kevin,
• 16:55
  Speaker 1: let it happen. I'm just saying that some of what
• 17:00
  Speaker 1: would have happened in March might just slip into April
• 17:04
  Speaker 1: when we get uh tax rebates and tax returns are filed.
• 17:09
  Speaker 1: Uh So, I I agree the consumers probably a little
• 17:13
  Speaker 1: bit exhausted here. I think incentives an inventory are running high.
• 17:17
  Speaker 1: We'll probably use the next couple of months to bring
• 17:19
  Speaker 1: that down in line. But on the other hand, I
• 17:22
  Speaker 1: think that the the downturn in demand will be good
• 17:27
  Speaker 1: from if you look at the stocks of these companies
• 17:31
  Speaker 1: and that it will be a little bit of a test,
• 17:33
  Speaker 1: a little bit of a stress test to see the
• 17:36
  Speaker 1: work that has been done, you know, the cost rationalization
• 17:39
  Speaker 1: post two thousand nine, to see where these companies come
• 17:43
  Speaker 1: in in terms of operating profit in a period of
• 17:46
  Speaker 1: less than spectacular demand that we've had recently. Well, looking
• 17:50
  Speaker 1: at the stocks right now, Fiat Chrysler down four Look
• 17:55
  Speaker 1: at General Motors the shares are down three and a
• 17:58
  Speaker 1: half percent and Ford Motor down two and a half percent.
• 18:02
  Speaker 1: Is that enough? Um? Probably not? But I think, like
• 18:07
  Speaker 1: I said, when you see earnings, you know you're gonna
• 18:10
  Speaker 1: be talking about a run rate on operating income. You know,
• 18:13
  Speaker 1: for General Motors will be in the two billion dollars
• 18:15
  Speaker 1: of quarter range. You know. So, so is that warrant
• 18:18
  Speaker 1: that kind of downturn or does it warrant something like
• 18:21
  Speaker 1: you're seeing at Tesla five and a half on on
• 18:26
  Speaker 1: twenty you know on on the news that they're going
• 18:28
  Speaker 1: to hit a hundred thousand units globally in a year.
• 18:32
  Speaker 1: You know, at this rate, so UM, I think there's
• 18:34
  Speaker 1: some disconnecting the valuations there, obviously, But I think what
• 18:39
  Speaker 1: it'll do for the General Motors and Ford and FI.
• 18:43
  Speaker 1: Crisis of the world is to show that they can
• 18:45
  Speaker 1: still be profitable when demand is not just constantly ramping
• 18:49
  Speaker 1: up and ramping up. Okay, Kevin, I'm before we moved
• 18:52
  Speaker 1: to Tesla. I want I want to just keep going
• 18:54
  Speaker 1: a little bit on the GM and the Ford and Chrysler. Yes,
• 18:57
  Speaker 1: this could be a little bit of a stress test,
• 18:59
  Speaker 1: but by all accounts, this dynamic could only get worse
• 19:03
  Speaker 1: given the fact that a whole slew of leases are
• 19:06
  Speaker 1: are set to come up, and that will basically flood
• 19:09
  Speaker 1: the market with supply. On the secondary market, decrease prices
• 19:13
  Speaker 1: create bigger losses for some of the financing companies that
• 19:17
  Speaker 1: are they have been fueling this auto purchasing boom that
• 19:20
  Speaker 1: we've seen in recent years. I mean, how can this
• 19:22
  Speaker 1: how can this be a stress test if potentially will
• 19:25
  Speaker 1: only get worse from here. Well, yeah, you're gonna see
• 19:28
  Speaker 1: a lot of off lease vehicles. When when you when
• 19:30
  Speaker 1: you think about that though, if you think about the
• 19:32
  Speaker 1: registered vehicles in the US alone, we're million vehicles. There's
• 19:38
  Speaker 1: gonna be five million coming off lease. So is the
• 19:41
  Speaker 1: market big enough to absorb that? Yeah, it certainly is,
• 19:45
  Speaker 1: and we're talking about a run rate of seventeen seventeen
• 19:49
  Speaker 1: point five million vehicles. So the new vehicle market will
• 19:53
  Speaker 1: certainly have to react in terms of pricing and or
• 19:56
  Speaker 1: volume to UH slightly more robust in terms of units
• 20:01
  Speaker 1: pre owned market, and I think it will. I don't
• 20:04
  Speaker 1: think it's the end of the world in terms of
• 20:07
  Speaker 1: pricing for the industry. In fact, I would say that
• 20:10
  Speaker 1: it's an opportunity for those dealer groups that are focused
• 20:14
  Speaker 1: on the pre owned market. I think you're getting a
• 20:16
  Speaker 1: lot of late mileage I'm sorry, late model, low mileage,
• 20:20
  Speaker 1: high tech vehicles coming back off of lease, and it
• 20:23
  Speaker 1: may just cause an adjustment in the new vehicle market,
• 20:26
  Speaker 1: but I don't think in that, especially at retail, it's
• 20:28
  Speaker 1: necessarily a bad thing that the gap between the two. Right,
• 20:31
  Speaker 1: we look at the affordability gap and it's gotten way
• 20:34
  Speaker 1: out of control. New vehicles are averaging transactions of thirty
• 20:38
  Speaker 1: five thou dollars, and with more used vehicles coming back,
• 20:42
  Speaker 1: those prices will have to come down to to maintain
• 20:45
  Speaker 1: that gap. That's a little bit more reasonable. Hey, Kevin,
• 20:49
  Speaker 1: you mentioned a hundred thousand units at Tesla UH. Tesla
• 20:54
  Speaker 1: stock is of five and a half percent. Just do
• 20:56
  Speaker 1: the comparison, let's say Tesla versus one of the big three.
• 21:02
  Speaker 1: So we got the perspective because the stock certainly isn't
• 21:04
  Speaker 1: telling you that today, right. So if you look at
• 21:08
  Speaker 1: let's take a measures like market cap, where Kuzla is
• 21:12
  Speaker 1: in the Ford range coming up on General Motors arguably, uh,
• 21:16
  Speaker 1: you know, a couple of billion dollars away there. And
• 21:19
  Speaker 1: if you were to look at Ford six million units
• 21:22
  Speaker 1: globally and off the top of my head, somewhere in
• 21:26
  Speaker 1: the range of eight billion in operating income last year,
• 21:29
  Speaker 1: General Motors was ten on roughly nine plus million units.
• 21:33
  Speaker 1: So you're talking about a hundred thousand units with uh
• 21:36
  Speaker 1: no profitability and cash burned comparable in terms of market
• 21:41
  Speaker 1: cap with companies that are doing six to ten million
• 21:45
  Speaker 1: units and six to ten billion in operating in globally.
• 21:49
  Speaker 1: And I'm just perfect, that's perfect. You did it in
• 21:52
  Speaker 1: exactly the right amount of time. To Kevin Tynan, senior
• 21:55
  Speaker 1: autos analyst for Bloomberg Intelligence, I want to turn to
• 22:11
  Speaker 1: a Senate Judiciary vote that may happen within the next
• 22:14
  Speaker 1: few hours. Senators are considering denomination of Neil Gorsage to
• 22:19
  Speaker 1: be the new member of the U. S. Supreme Court.
• 22:23
  Speaker 1: We're hearing things about nuclear option. We're thinking about is
• 22:26
  Speaker 1: there going to be a filibuster. To give us a
• 22:28
  Speaker 1: better sense of what we can expect to hear about.
• 22:30
  Speaker 1: Kimberly Robinson joins us now. She's Supreme Court reporter for
• 22:34
  Speaker 1: Bloomberg b n A and is currently in Arlington, Virginia. Kimberly,
• 22:39
  Speaker 1: I want to start with the nuclear option. We've heard
• 22:41
  Speaker 1: a lot about Democrats that do not want Neil Gorsie
• 22:44
  Speaker 1: to get confirmed. What is the nuclear option? Well, the
• 22:48
  Speaker 1: nuclear option is really just a way to reinterpret Senate
• 22:52
  Speaker 1: rules so uh that they can stop a filibuster and
• 22:56
  Speaker 1: put it forth or vote on the candidate um with
• 23:00
  Speaker 1: just a simple majority um, which currently Republicans have. Now,
• 23:06
  Speaker 1: is it possible that they will be uh going through
• 23:10
  Speaker 1: this exercise in front of the television and the public.
• 23:15
  Speaker 1: I mean, will this vote be carried live to the
• 23:17
  Speaker 1: point where it's going to be some uh end, you know,
• 23:20
  Speaker 1: down to the wire. Well, we actually have several votes
• 23:24
  Speaker 1: that um will be televised. So today we're hearing on
• 23:27
  Speaker 1: whether or not the committee will vote him out to
• 23:30
  Speaker 1: the full floor. We expect that they will, so, given
• 23:33
  Speaker 1: that Republicans have a majority on the committee and they
• 23:37
  Speaker 1: just need a simple majority to move him on. The
• 23:39
  Speaker 1: votes that we've been talking about where these nuclear options
• 23:42
  Speaker 1: might happen will come sometime later in the week, UM,
• 23:45
  Speaker 1: probably on Thursday or Friday, and then we'll see about
• 23:49
  Speaker 1: a final vote on his actual confirmation UM sometime likely
• 23:53
  Speaker 1: on Friday. UM. So these will all these things we
• 23:55
  Speaker 1: can all watch. Kimberly, what have we learned about how
• 23:59
  Speaker 1: much support ealk course which has among Democrats. Well, it's
• 24:03
  Speaker 1: it's involving minute by minute. So just today, Uh, we
• 24:07
  Speaker 1: saw from a handful of Democrats that Republicans are really
• 24:10
  Speaker 1: trying to get on their side. Um. We saw one
• 24:13
  Speaker 1: come out and say that she'll join the sylibuster um.
• 24:17
  Speaker 1: So there hasn't been much support. Um. Only three individuals
• 24:21
  Speaker 1: have come out saying that they or three Democrats have
• 24:24
  Speaker 1: come out saying that they won't a filibuster the nominee. Um.
• 24:27
  Speaker 1: Republicans will need to find five more and UM, it's
• 24:31
  Speaker 1: really going to come down to the wire. I think, alright, well,
• 24:34
  Speaker 1: I guess I'll make for good for good drama. Is
• 24:36
  Speaker 1: there any any thought to the repercussions if indeed the
• 24:40
  Speaker 1: vote he is not confirmed. Well, there has been a
• 24:43
  Speaker 1: lot of talk about whether or not Republicans can change
• 24:46
  Speaker 1: this rule because it has been such an important rule. Um.
• 24:50
  Speaker 1: Music Senate is really known as a great deliberative body
• 24:53
  Speaker 1: in part because they do things not by by a
• 24:56
  Speaker 1: majority rule that they do in the House, but they
• 24:58
  Speaker 1: need a number of minority votes as well to get
• 25:01
  Speaker 1: past bilibusters. So this could really change things for judicial
• 25:05
  Speaker 1: nominees versus Supreme Court um. And it could have the
• 25:08
  Speaker 1: potential to leak over to the legislative side too. Have
• 25:11
  Speaker 1: you noticed a shift in rhetoric or tone after the
• 25:16
  Speaker 1: health care bill that was proposed by the gop uh
• 25:19
  Speaker 1: group was didn't come for a vote, right, Well, you
• 25:24
  Speaker 1: know I did, and Um, we saw kind of some
• 25:28
  Speaker 1: shakiness on whether or not Democrats were going to attempt
• 25:31
  Speaker 1: the silibuster after the health care bills failed, it did
• 25:34
  Speaker 1: seem like they were somewhat emboldened, and shortly after the
• 25:37
  Speaker 1: committee here finished questioning gorstage, many of them came out
• 25:41
  Speaker 1: um and said that they were going to try and
• 25:43
  Speaker 1: mount the silibuster, and it seems like they might be
• 25:46
  Speaker 1: able to pull it off. What about on the Republican side,
• 25:49
  Speaker 1: is there pretty much universal support for gors Yes, so
• 25:53
  Speaker 1: this is something that is contrary to the healthcare bill.
• 25:56
  Speaker 1: Here all Republicans support Gorsage and support uh getting him
• 26:00
  Speaker 1: through without the filibuster. Are there other vacancies that have
• 26:05
  Speaker 1: yet to be filled that you can tell us about? Well?
• 26:08
  Speaker 1: On the Supreme Court, No, this is the ninth seat. Um. However,
• 26:12
  Speaker 1: we do expect that there there will be some soon.
• 26:14
  Speaker 1: There are a number of Supreme Court justices who are
• 26:18
  Speaker 1: in their upper seventies or eighties, so we had just
• 26:20
  Speaker 1: made that they would retire soon. Um. So what happens
• 26:23
  Speaker 1: this week with courses domination could have a big impact
• 26:26
  Speaker 1: on on the kinds of nominees we see for those
• 26:29
  Speaker 1: uh Supreme Court vacancies. What's the biggest argument that Democrats
• 26:32
  Speaker 1: have for not wanting him confirmed? Well, this morning we've
• 26:35
  Speaker 1: been hearing a lot about how evasive uh the nominineal course,
• 26:39
  Speaker 1: which was during the confirmation hearing, and uh so we
• 26:42
  Speaker 1: heard UH Senator Lay say that he was being patronizing
• 26:46
  Speaker 1: and excruciatingly um evasive in his answers, and he said
• 26:51
  Speaker 1: that that really prevents senators from being able to determine
• 26:55
  Speaker 1: his judicial philosophy and his cooler constitutional belief something that
• 27:00
  Speaker 1: they think that they should be considering during this this
• 27:02
  Speaker 1: sharing time. Well, I want to thank you very much
• 27:05
  Speaker 1: for being with us. Kimberly Robinson is our Supreme Court
• 27:08
  Speaker 1: reporter for Bloomberg b n A, giving us detail about
• 27:12
  Speaker 1: the ascent of Judiciary Committee to vote on Neil Gore,
• 27:15
  Speaker 1: such as his nomination to the Supreme Court. Thanks for
• 27:24
  Speaker 1: listening to the Bloomberg P and L podcast. You can
• 27:27
  Speaker 1: subscribe and listen to interviews at iTunes, SoundCloud, or whatever
• 27:32
  Speaker 1: podcast platform you prefer. I'm Pim Fox. I'm out there
• 27:35
  Speaker 1: on Twitter at pim Fox. I'm out there on Twitter
• 27:38
  Speaker 1: at Lisa Abramo. It's one before the podcast. You can
• 27:41
  Speaker 1: always at catch us worldwide on Bloomberg Radio.