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Why The US Dollar Is Poised to Weaken Vs Euro · Bloomberg Intelligence

0:02
Speaker 1: Welcome to the Bloomberg Penel Podcast. I'm Paul swing you,
0:05
Speaker 1: along with my co host Lisa Brahma wits. Each day
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Speaker 1: we bring you the most noteworthy and useful interviews for
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Speaker 1: you and your money, whether at the grocery store or
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Speaker 1: the trading floor. Find a Bloomberg Penl podcast on Apple
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Speaker 1: podcast or wherever you listen to podcasts, as well as
0:17
Speaker 1: at Bloomberg dot com. Well, the Mexican pay so today
0:22
Speaker 1: is close to its weakest since December, as trade tensions
0:26
Speaker 1: emerge from the US and there are questions, frankly about
0:30
Speaker 1: the health of the Mexican economy. Here joining us in
0:33
Speaker 1: studios at Al Hasseani. He is senior interest rate and
0:36
Speaker 1: currency analyst for Columbia thread Needle Investments uh from overseas
0:40
Speaker 1: four and fifty nine billion dollars from Minneapolis. Although you
0:44
Speaker 1: are here in our Bloomberg Atta Active Broker Studios, I
0:47
Speaker 1: want to talk about the Mexican pay so. How much
0:49
Speaker 1: of this has to do with the economy itself. We
0:53
Speaker 1: did get last night Moodies and Fitch downgrading the nation
0:56
Speaker 1: based on Pemax, it's stayed owned oil company, as well
0:59
Speaker 1: as other economic headwins and how much is due to
1:02
Speaker 1: potential ramifications from these US Mexico trade tensions. Yeah, it's
1:07
Speaker 1: a At the moment, I put more weight on the
1:09
Speaker 1: former in terms of the weakening economy, the contingental liabilities
1:13
Speaker 1: from from PEMM x um UM, and the fact that
1:16
Speaker 1: you know, both fiscal and monetary space in in Mexico
1:19
Speaker 1: is shrinking relatively quickly. Uh. You know that to me
1:23
Speaker 1: is kind of the key set of drivers for for
1:25
Speaker 1: a weaker pay. So in terms of trade tensions with
1:28
Speaker 1: the US, we actually haven't started pricing that into aggressively.
1:31
Speaker 1: We haven't seen that in US risk assets. We still
1:34
Speaker 1: haven't seen it fully priced into Mexican risk assets either.
1:37
Speaker 1: So I think from from the perspective of upside downside
1:41
Speaker 1: for the Mexico, for the Mexican pay so, I think
1:43
Speaker 1: there's still more downside to come through. So. UM. Earlier
1:46
Speaker 1: today we had the married drag from the e C
1:48
Speaker 1: b Uh, you know, give his commentary. What did you
1:52
Speaker 1: take away from it? Yeah? I thought, you know, this
1:55
Speaker 1: was for me, one of the more interesting and one
1:57
Speaker 1: of the more consequential meetings of the past two years. UM.
2:00
Speaker 1: A number of things came out. First, we cemented the
2:03
Speaker 1: fact that the path for policy rates really is flat
2:07
Speaker 1: to lower from here. Um. You know, this is an
2:09
Speaker 1: important change for them versus where they've been the course
2:12
Speaker 1: of the past, you know, EU plus Uh, there's been
2:15
Speaker 1: sort of an implicit upward bias to to the rate story,
2:19
Speaker 1: and I think that's now gone. The discussion about deeper
2:22
Speaker 1: negative rates and additional queis now firmly on the table, um,
2:26
Speaker 1: And I think that's that's a new part of the
2:28
Speaker 1: discussion as well. And um, you know, in terms of
2:31
Speaker 1: the growth and the outlook, the growth on the inflation
2:35
Speaker 1: mixing the outlook, you know, that continues to to weigh
2:38
Speaker 1: to the downsides. In terms of downside risks continue to intensify.
2:41
Speaker 1: So the e c B isn't it's in a tough spot.
2:44
Speaker 1: It doesn't have a lot of tools. But in terms
2:46
Speaker 1: of the tools that does have, I think the willingness
2:48
Speaker 1: to use those tools to ease policy has increased. The
2:50
Speaker 1: interesting thing to me, First of all, the ECB has
2:52
Speaker 1: pushed on a string at this point, right, I mean,
2:54
Speaker 1: if they cut rates further into negative territory, what's it
2:57
Speaker 1: going to do, Because it's not exactly fostering loan growth
3:00
Speaker 1: to a tremendous degree among consumers and risk your businesses.
3:03
Speaker 1: Uh So that's that's a big question, um. But it's
3:08
Speaker 1: also a question from your perspective, from the currency perspective today,
3:10
Speaker 1: the euro strengthening versus the dollar, what gives that's not
3:14
Speaker 1: what you would expect? Sure, so, um, two things. Let
3:19
Speaker 1: me let me push back a little bit on the
3:20
Speaker 1: on the credit growth story. The credit growth story has
3:23
Speaker 1: actually been one of the bright spots for for the
3:26
Speaker 1: Eurozone and the ECB, and it's been one of the
3:28
Speaker 1: success points in terms of the successive TOELTRA programs. The
3:32
Speaker 1: fact that the European banking system, which is relatively weak,
3:35
Speaker 1: relatively under capitalized, has actually seen very solid loan growth.
3:40
Speaker 1: And what the ECB doing right now is essentially risk management.
3:43
Speaker 1: They're seeing these risks intensified to the downside, which essentially
3:47
Speaker 1: means they can add best maintain their current policy stands um.
3:51
Speaker 1: But more likely they will increase the amount of easing
3:54
Speaker 1: just to keep the current level of credit growth alive. Um.
3:58
Speaker 1: And one one interesting I think takeaway I think from
4:01
Speaker 1: the last you know, take four or five you know
4:03
Speaker 1: ECB discussions on the negative rate, is that they've come
4:06
Speaker 1: to the conclusion that inaggregate, the impact of negative interest
4:10
Speaker 1: rates on loan growth is negligible. They're definitely certain banks
4:15
Speaker 1: where negative rates are eating into profitability, but the fact
4:18
Speaker 1: that they're providing these teltrual loans is actually cushions the
4:21
Speaker 1: banking system, and the banking overall continues to do quite well.
4:25
Speaker 1: So it given the rising trade tensions around the world
4:29
Speaker 1: relates China, Mexico, g maybe Indian so on, where do
4:34
Speaker 1: you see value in emerging market currencies? So I one
4:40
Speaker 1: of the more interesting I think turning points in the
4:43
Speaker 1: course of the past you know, month or so has
4:45
Speaker 1: been the break and the dollar. It's it's very early days,
4:49
Speaker 1: but it does look like the buffer we have for
4:53
Speaker 1: the dollar versus developed market currencies has shrunk significantly. We
4:57
Speaker 1: had essentially US growth that was more solid than European
5:01
Speaker 1: and Asian growth, and we had US interest rates that
5:03
Speaker 1: were significantly higher both in real and nominal terms. That
5:06
Speaker 1: buffer has shrunk very aggressively, with the Treasury rally and
5:09
Speaker 1: with growth expectations for the US being being downgraded, and
5:13
Speaker 1: we've seen that turn in the dollar versus the euro.
5:16
Speaker 1: And Lisa's question earlier, this is one of the reasons
5:19
Speaker 1: why the euro continues to rally today despite despite the
5:22
Speaker 1: fact that these e CBS announced, you know, additional easing
5:25
Speaker 1: measures UH U s real rates continue to come down. UM.
5:29
Speaker 1: That weakness in the dollar, I think we'll start to
5:31
Speaker 1: feed into e m f X. And the question is
5:34
Speaker 1: are there idiosocratic stories where you know, real yields are
5:37
Speaker 1: high enough UH to provide us with that buffer. A
5:41
Speaker 1: couple of currencies rise to the top of my list.
5:43
Speaker 1: I think, you know, Russia is a good spot UM,
5:46
Speaker 1: limited external vulnerabilities, very good fiscal picture UH. Indonesia is
5:50
Speaker 1: another one. Well, there's there's been an improvement in the
5:52
Speaker 1: growth story UH. And increasingly we're starting to take a
5:55
Speaker 1: look at South Africa in part because the currency is
5:58
Speaker 1: weakened quite significantly over the course of the past month.
6:02
Speaker 1: So from a value perspective, I think that that looks
6:04
Speaker 1: quite attractive. The Turkish lira, the Turkish lera is is
6:07
Speaker 1: interesting because look on on on most valuation metrics, it's
6:11
Speaker 1: creates exceptionally cheap UM. And the question is is the
6:15
Speaker 1: current account or it's some of the external vulnerabilities shrinking
6:18
Speaker 1: fast enough to warrant the carry Are you gonna ever
6:21
Speaker 1: get will you ever get paid that carry? Um? And
6:25
Speaker 1: you know increasingly it's not terrible. UM, I would say
6:28
Speaker 1: the picture there is becoming a little bit more positive.
6:31
Speaker 1: Real rates remain quite high. Obviously there's policy risk with
6:35
Speaker 1: respect um to to the central banks next set of actions.
6:39
Speaker 1: Given an inflation that's coming down, there will be under
6:41
Speaker 1: pressure to cut rates, which will be negative for the currency.
6:44
Speaker 1: Policy risk, by the way, is the understatement of the
6:46
Speaker 1: year when it comes to Ara to Wan's regime. But
6:50
Speaker 1: go on, but look, I mean, look, we're we're in
6:52
Speaker 1: in in in e M space. This this is what
6:55
Speaker 1: you live with, and this is what you're getting paid for. UM.
6:59
Speaker 1: Policy risk in Turkey and in Argentina taken another place
7:03
Speaker 1: where you have high high high carry this one UM,
7:07
Speaker 1: I would say, of course Turkey and Argentina are at
7:10
Speaker 1: an extreme place in in in the m f X
7:13
Speaker 1: spectrum high risk, exceptionally high carry uh. And it's not
7:17
Speaker 1: very clear that you'll you'll make money over the next
7:19
Speaker 1: twelve months in those places. So I'm gonna take the
7:21
Speaker 1: risk and not clear that I'm going to make money.
7:23
Speaker 1: So I think I know where to kind of avoid
7:25
Speaker 1: a little bit. That's Hey, there's no there's no big
7:27
Speaker 1: return without big risk big So there you go, right,
7:30
Speaker 1: I mean yep, ed Alf HUSSAINI thanks so much for
7:33
Speaker 1: joining us as a senior interest rate and currency analyst
7:36
Speaker 1: for Clumbia thread Needle based in Minneapolish thread Needle is
7:40
Speaker 1: but joining us here in our Bloomberg Interactor Broker studio.
7:42
Speaker 1: Thank you so much. Just looking at the currencies here, um,
7:45
Speaker 1: you know the your euro up slightly, the pound up today,
7:49
Speaker 1: but you mentioned the ruble. The rubles also up a
7:52
Speaker 1: little bit as well. Well. Back at the day when
7:57
Speaker 1: I wanted to, I guess go to a Broadway show,
8:00
Speaker 1: I'd stand in line in Times Square at the t
8:02
Speaker 1: K T S kind of thing and wondering why am
8:05
Speaker 1: I doing this? This is so inconvenient. But I'm guessing
8:08
Speaker 1: there's a technology out there that can fix that, and
8:10
Speaker 1: in fact there is. We welcome Brian Fenty. Brian is
8:12
Speaker 1: a co founder and CEO of Today Ticks, based in
8:16
Speaker 1: New York City, joining us here in a Bloomberg Interactive
8:18
Speaker 1: Broker studio. Brian, thanks so much for joining us today Ticks.
8:21
Speaker 1: Does that solve my problem? We try to solve your problem. Yes,
8:25
Speaker 1: we started about six years ago to take the t
8:28
Speaker 1: KTS booth and do all the heavy lifting of searching
8:31
Speaker 1: for discounts and putting it right in your in your
8:34
Speaker 1: hand through a mobile app. And of course now we're
8:37
Speaker 1: on a website and we're in seventeen cities and doing
8:39
Speaker 1: a lot more than just that. Um. But that's really
8:42
Speaker 1: what it is. It's best prices, best seats, last minute
8:44
Speaker 1: on demand. How did you create this? Well, my partner
8:48
Speaker 1: and I were not technologists, um, which is always a challenge. Actually,
8:52
Speaker 1: you know, everybody always talks about the technical founder. Um.
8:55
Speaker 1: We were Broadway producers, we were private equity guys UM
8:59
Speaker 1: and I worked for the New York Yankees for a
9:01
Speaker 1: couple of years, so we had very diverse experience, and
9:04
Speaker 1: we knew that Broadway was a broken business in terms
9:06
Speaker 1: of getting millennials to the table, um, and so we
9:09
Speaker 1: sort of penciled out what was Uber doing an open
9:13
Speaker 1: table and Airbnb and these great mobile millennial companies what
9:16
Speaker 1: were they doing? And the answer was just great, simple
9:19
Speaker 1: seamless technology, having everything at your fingertips and making sure
9:22
Speaker 1: that it was a complete solution. So talking about talking
9:26
Speaker 1: about the business and Broadway, is it is? It a
9:28
Speaker 1: growing business. Is a big business? Is this something that
9:31
Speaker 1: people need a technical solution for? It's an unbelievable business.
9:34
Speaker 1: It's it's often overlooked. So you know, the first piece
9:36
Speaker 1: of it is Broadway, meaning the the five block radius
9:39
Speaker 1: in New York, and that's, you know, a multibillion dollar industry.
9:43
Speaker 1: It's grown more this year than it did in any
9:45
Speaker 1: other year. It's it's honestly, it's a resilient potter to
9:50
Speaker 1: Hamilton's and Deer of Enhanson. It's a great it's the
9:53
Speaker 1: golden age of Broadway right now. It's just an amazing,
9:56
Speaker 1: amazing time. Um. So, it's a huge industry. But you
9:59
Speaker 1: know most people don't know is it's twice the size
10:01
Speaker 1: of the film business on a revenue basis in the US.
10:03
Speaker 1: Um So it's a big business. Um But it's hard
10:06
Speaker 1: to access. It feels inaccessible to people, it feels expensive,
10:10
Speaker 1: it feels hard to engage with. And so we're trying
10:13
Speaker 1: to break down those walls. And it's not just Broadway, right,
10:15
Speaker 1: I mean, it's it's sort of theater. More broadly, are
10:18
Speaker 1: you thinking of expanding into sports or into music or
10:22
Speaker 1: other types of live ventures. So we started with theater
10:25
Speaker 1: traditionally plays musicals. We've gone to performing arts now and
10:28
Speaker 1: we've sort of expanded our definition as we go to markets.
10:31
Speaker 1: So when we went to Chicago, comedy is everywhere. So
10:34
Speaker 1: if you don't have the second city, you're nobody. And
10:36
Speaker 1: so we went to Chicago. We got comedy, We have opera,
10:39
Speaker 1: we have dance, improv immersive sleep, no more, you know,
10:42
Speaker 1: all of these different types of experiences. So really, as
10:45
Speaker 1: I say to our team, we don't compete with ticketing companies.
10:47
Speaker 1: We compete with a picture of Margarita's and Netflix. That is,
10:51
Speaker 1: you know, ultimately what we're trying to do. That's stiff competition. So, Brian,
10:56
Speaker 1: I guess thinking about Broadway per se that you know
10:58
Speaker 1: the five square blocks. You know, as my understanding is
11:01
Speaker 1: the kind of the theaters are kind of controlled by
11:03
Speaker 1: a handful of companies or a few companies. Did they
11:05
Speaker 1: welcome you, did they embrace you today? Where they concerned
11:07
Speaker 1: about you? How do they how do you kind of
11:08
Speaker 1: work with a big theater company? They did not embrace
11:11
Speaker 1: this at the beginning. I'll tell you you know, this
11:13
Speaker 1: is a true story of disrupting. When we went and
11:16
Speaker 1: met with the three theater owners, you know. The first
11:18
Speaker 1: theater owners said, I owned the tickets, you don't have them, goodbye.
11:22
Speaker 1: Door shut. The second theater owner that we talked to said, millennials,
11:26
Speaker 1: who needs them? They'll become adults someday. Shut the door.
11:29
Speaker 1: The third theater owners said mobile, who needs that? No
11:31
Speaker 1: one's going to spend money on it. And so we said, okay, guys, fine,
11:35
Speaker 1: if we go try to build this, will you support us?
11:38
Speaker 1: And they said, you know what, go try to build, Go,
11:40
Speaker 1: try to build the technology. And so for the last
11:43
Speaker 1: six years that's what we've been doing. And now five
11:45
Speaker 1: and a half million users later, Um, I think we've
11:47
Speaker 1: proven that there really is a space for this. And
11:49
Speaker 1: you did just raise seventy three million dollars from Great
11:53
Speaker 1: Health Partners that which is a private equity company. What
11:56
Speaker 1: are you gonna do with the money? So I'd say
11:59
Speaker 1: three may vehicles. One is talent talent. Talent talent, make
12:02
Speaker 1: sure that we have the smartest people, the best subject
12:05
Speaker 1: matter experts terms of tech are in terms of tech,
12:09
Speaker 1: product growth, marketing. So it's amazing is we have theaters
12:13
Speaker 1: that work with us across the country and not a
12:15
Speaker 1: single salesperson on our team. And so that hopefully speaks
12:18
Speaker 1: to the brand that we've built among the venues, UM
12:22
Speaker 1: and our audiences. So talent is number one. UM. Number
12:25
Speaker 1: two is content, making sure that we have the best
12:27
Speaker 1: content out there. UM. Millennials do hold you to a
12:30
Speaker 1: very high standard in terms of the types of content, programming,
12:34
Speaker 1: exclusivity that you have. And then the third piece is
12:37
Speaker 1: just data. Data, data, So making sure that we use
12:40
Speaker 1: data to make the experience seamless for everyone, so that
12:43
Speaker 1: if you open the app, it's different from when I
12:45
Speaker 1: open the app, and we can see the shows that
12:47
Speaker 1: we want to see. So when I think of the
12:49
Speaker 1: ticketing experience, certainly in this country, really even globally, I
12:53
Speaker 1: think ticket master. So how do you guys compete against
12:55
Speaker 1: the ticket masters of the world. So what we learned
12:59
Speaker 1: is that primary ticketers, because they have to do so
13:02
Speaker 1: many different things, they're selling for sports, concerts, large venues,
13:06
Speaker 1: small venues, their technology isn't great. And and how do
13:09
Speaker 1: we validate that it takes seven to nine minutes to
13:12
Speaker 1: buy a ticket on a major primary ticketing platform on
13:15
Speaker 1: today takes it's thirty seconds or less. UM. So really
13:18
Speaker 1: what we do is we kill you with convenience UM
13:21
Speaker 1: and we try to bring you through that funnel in
13:23
Speaker 1: a big way, and I think that's why we have
13:25
Speaker 1: such high ratings. Are our net promoter scores about four
13:28
Speaker 1: times the next highest primary ticketer. How do you make money?
13:33
Speaker 1: Consumer fees? Um and And what I'll tell you is,
13:35
Speaker 1: though we make it slow and steady, so we have
13:38
Speaker 1: fixed fees for our consumers. We have the lowest fees
13:41
Speaker 1: in the industry. And our view is to build a
13:44
Speaker 1: community of as many theater goers, arts goers and quite frankly,
13:48
Speaker 1: anyone who wants to do something in a night, we're
13:50
Speaker 1: your customer, were your place to go, and uh we
13:53
Speaker 1: grow from there. I know the Tony's are Sunday night,
13:56
Speaker 1: I believe on CBS when Broadway comes together to celebrate
14:00
Speaker 1: all the great work of the year, does that drive business?
14:03
Speaker 1: If a play wins Best Musical or Best Picture? How
14:05
Speaker 1: important is that? There's a few awards. So obviously it's
14:09
Speaker 1: the moment of the year for for theater and it's
14:11
Speaker 1: an amazing evening and this year James Cordon's hosting, so
14:14
Speaker 1: it'll be a blast um. But what I'll say is
14:16
Speaker 1: there's one or two awards that really move the needle.
14:19
Speaker 1: And as you say it's best musical. Um, it's best
14:21
Speaker 1: revival of a musical, it's best play. Those are the
14:24
Speaker 1: three awards that can actually make what we call boffo,
14:28
Speaker 1: but you know, make the box office really hit. Thank
14:32
Speaker 1: you so much for being with us. I have to
14:33
Speaker 1: say Today Ticks is something that I've just recently come
14:37
Speaker 1: to learn about and I'm excited. Still there, no mobile,
14:42
Speaker 1: no website, Still waiting in line Brian Fenti, co founder
14:46
Speaker 1: and CEO of Today Ticks, joining us here in our
14:50
Speaker 1: Bloombergetter Active Brokers Studios disrupting the theater industry. Right now,
14:54
Speaker 1: we're looking at a market still searching for direction, taking
14:57
Speaker 1: a breather after a series of risk off moves and
15:01
Speaker 1: then fluctuating around coming up though, the focus really is
15:05
Speaker 1: going to be always on Washington, d C. Which is
15:07
Speaker 1: also the focus of markets right now at Bloomberg Politics, policy,
15:11
Speaker 1: power and law. Amy Morris, what do you have on?
15:15
Speaker 1: So she's gonna be talking about US and Mexico extending
15:18
Speaker 1: their talks, which, of course markets are expecting that there
15:21
Speaker 1: will be some kind of deal. Also, we got some
15:23
Speaker 1: numbers with respect to the trade deficits showing as stalling
15:27
Speaker 1: out of imports and exports. We're gonna be looking ahead
15:31
Speaker 1: to the jobs data as well. Meanwhile, we are looking
15:35
Speaker 1: at a day finishing up. I mean, honestly, today, I'm
15:39
Speaker 1: I find it fascinating to me that we're taking a
15:41
Speaker 1: breather and yet there still is complacency there. Iss. Deals
15:45
Speaker 1: are gonna get done. Deals are gonna get done. And
15:48
Speaker 1: Lisa brom WIT's along with Paul Sweeney, this is Bloomberg Markets.
15:54
Speaker 1: Tensions are rising between the US and Mexico. This certainly
15:59
Speaker 1: has hit particularly the automaker shares pretty hard, considering how
16:03
Speaker 1: much supply chain or sort of intra company activity goes
16:07
Speaker 1: cross border. Joining us to talk about what the effect
16:10
Speaker 1: is on small businesses is Hector Baretto. He's chairman of
16:13
Speaker 1: the Latino Coalition, former US Small Business Administrator under George W.
16:19
Speaker 1: Bush through two thousand and six, joining us from Irvine, California. Hector,
16:23
Speaker 1: I'm so glad that you're here with us. What are
16:26
Speaker 1: you hearing from the people who you represent small business
16:29
Speaker 1: owners about the potential impact of these additional tariffs on
16:33
Speaker 1: goods from Mexico. Well, they're very concerned, and as you know, uh,
16:38
Speaker 1: probably of all businesses in the United states that do
16:41
Speaker 1: international trade are small businesses. They've seen their businesses grow
16:47
Speaker 1: over the last six months or so and they don't
16:49
Speaker 1: want to see that stop. So they really feel we're
16:51
Speaker 1: kind of at a tipping point right now. So hector,
16:54
Speaker 1: how about on the other side of the border, what
16:56
Speaker 1: are you hearing from your contacts there about how the
16:58
Speaker 1: business community in Mexico views kind of these rising trade tensions. Well,
17:04
Speaker 1: I was just down there last week. We we opened
17:06
Speaker 1: up an office for our organization, and two months ago
17:08
Speaker 1: I met with the President of Mexico. They were cautiously optimistic.
17:12
Speaker 1: You know, they've kind of gotten used to some of
17:15
Speaker 1: the rhetoric, but they're much more paying attention to the actions.
17:18
Speaker 1: They know that, you know, they can't respond to every tweet,
17:21
Speaker 1: every press release, every news uh, you know, but they've
17:25
Speaker 1: re sien some positive signs and obviously a lot of
17:28
Speaker 1: those leaders, business leaders and government leaders are in Washington
17:31
Speaker 1: today to talk to their counterparts and see if we
17:34
Speaker 1: can get to some kind of a compromise or solution
17:36
Speaker 1: on this issue. So it's very interesting because we hear
17:39
Speaker 1: about positive signs from people, and certainly the market doesn't
17:43
Speaker 1: think that there's going to be some sort of increase
17:46
Speaker 1: in tariffs in Mexico that substantial at least, that's what
17:49
Speaker 1: a lot of analysts and fund managers seemed to be
17:51
Speaker 1: saying this morning. And yet President Trump seems to be
17:54
Speaker 1: the one driving the bus here, and it's sort of
17:56
Speaker 1: unclear he's not backed away from his dance on tariff's right. Well,
18:00
Speaker 1: you know, uh, ironically, uh, in the last quarter Mexico,
18:04
Speaker 1: with our largest trading partner, we overtook China. So you know,
18:07
Speaker 1: they're starting to see some positive signs and again they
18:10
Speaker 1: don't want to see that derailed. And at the end
18:12
Speaker 1: of the day, you're right, President is going to decide,
18:15
Speaker 1: but there's gonna be other voices are gonna be part
18:17
Speaker 1: of this equation. You're starting to see members of Congress,
18:20
Speaker 1: both sides of the ail, that are very concerned about this.
18:22
Speaker 1: They're tracking this issue very very closely. And the last
18:26
Speaker 1: thing we need to do is put a break on
18:28
Speaker 1: this economy. The economy has been pretty good over the
18:30
Speaker 1: last you know, year, better than we've seen it over
18:34
Speaker 1: the preceding six seven years, and so uh, you know,
18:37
Speaker 1: this is the wrong time to actually, you know, derail
18:40
Speaker 1: the economy. And we're both affected. You know, days when
18:44
Speaker 1: we could say, oh, they're gonna be hurt more than
18:47
Speaker 1: we are. I don't see it that way. I think
18:49
Speaker 1: we're very interdependent and if one side gets hurt, the
18:52
Speaker 1: other side is gonna get hurt. And at the end
18:54
Speaker 1: of the day, you know that those costs are gonna
18:56
Speaker 1: be passed on to consumers. So you know, there's some
18:58
Speaker 1: big stakes at hand right now. So the hector, the
19:02
Speaker 1: businesses that you represent, what are they how are they
19:04
Speaker 1: thinking about the Trump administration's you know, use of tariffs
19:08
Speaker 1: to kind of curb immigration. Well it can. Well, they
19:12
Speaker 1: don't like the fact that these two issues are being conjoined.
19:15
Speaker 1: I was in the White House yesterday. I'm actually in
19:18
Speaker 1: d C. And they're doing everything they could to say, look,
19:21
Speaker 1: there are two separate issues. We're going to continue on
19:24
Speaker 1: the trade track. We want U s m C A pass,
19:26
Speaker 1: but we've got to deal with this immigration crisis. And
19:29
Speaker 1: it is a crisis. You can understand why there's so
19:32
Speaker 1: much frustration in the administration. They have not been able
19:35
Speaker 1: to turn this thing around. For months. People were saying,
19:38
Speaker 1: is Oh, it's not a big deal, it's going to
19:40
Speaker 1: go away. It's just seasonal. We haven't seen that. We've
19:42
Speaker 1: seen spikes at the border that we've never seen before.
19:45
Speaker 1: So there is a mutual responsibility on both sides of
19:48
Speaker 1: the border. Mexico can do a better job of enforcing
19:51
Speaker 1: their southern border. We need to work with Mexico as
19:54
Speaker 1: our number one trading partner and work on things like
19:57
Speaker 1: you know, we used to have something called the Medida
19:59
Speaker 1: initiative where we would work with Mexico, and we've done
20:01
Speaker 1: that with other countries. We need to go back to
20:03
Speaker 1: those kinds of cooperative efforts. I guess that. You know,
20:07
Speaker 1: it's interesting because if you are in Washington, what is
20:11
Speaker 1: sort of the consensus among the people you're speaking with
20:15
Speaker 1: who are within the administration as to the path of
20:18
Speaker 1: these negotiations, Because it seems like this kind of came
20:21
Speaker 1: I don't want to say out of the blue, but
20:22
Speaker 1: kind of out of the blue. Well, the the administration
20:25
Speaker 1: would say, for the people to say it's coming out
20:27
Speaker 1: of the blue, they haven't been listening, because you know,
20:29
Speaker 1: it hasn't been that long ago. The president was very upset.
20:32
Speaker 1: He was talking about closing the border. There was a
20:34
Speaker 1: time when he said he was going to do away
20:36
Speaker 1: with NAPTA and not have anything to replace it with. UM.
20:39
Speaker 1: You know, he's talked about tariffs before. Obviously we're doing
20:42
Speaker 1: tariffs with China. So uh, you know that the business community,
20:46
Speaker 1: and I say this across the board. You know, I
20:48
Speaker 1: also sit on the US Chamber of Commerce. Border directors,
20:51
Speaker 1: big business, medium business, small business are all watching this
20:55
Speaker 1: very closely. And by the way, it's not just our
20:57
Speaker 1: businesses that are watching it. Businesses around the world are watching.
21:00
Speaker 1: China's watching this to see if they can actually come
21:03
Speaker 1: to some agreement with the administration. So trust is in
21:06
Speaker 1: low supply right now. But at least they're talking. They're
21:10
Speaker 1: at the table with each other, and that's much better
21:12
Speaker 1: than just screaming across the fence to each other. Hector
21:16
Speaker 1: burnetto chairman of the Latino Coalition and former US Small
21:20
Speaker 1: Business Administrator, thank you so much for joining us and
21:22
Speaker 1: helping us understand better. What is you know, a rising
21:25
Speaker 1: trade tensions between the the US and Mexico. They don't
21:28
Speaker 1: seem to be abating, but there is a As Hector
21:30
Speaker 1: mentioned Lisa, a group of Mexican business people on government
21:33
Speaker 1: officials in Washington today meeting with US representatives. Uh. The
21:37
Speaker 1: hope obviously is that some resolution, at least a temporary resolution,
21:41
Speaker 1: can forestall uh, the terroiffs that are threatened to be
21:45
Speaker 1: going in place. But clearly, as Hector mentioned this, Mexico
21:49
Speaker 1: is our largest trading partner because just recently became a
21:52
Speaker 1: uh you know, certainly right there with China, So it's
21:55
Speaker 1: not just China, it's also in Mexico, uh, and these
21:57
Speaker 1: issues are certainly weighing on the mark places. Let's turn
22:03
Speaker 1: our focus now to automobiles, in particular the murder that
22:07
Speaker 1: wasn't Fiat Chrysler saying that is no longer going to
22:11
Speaker 1: continue its bid for Renault. Renault shares tumbling more than
22:15
Speaker 1: seven percent. Both sides blame each other, joining us now
22:18
Speaker 1: Kevin Tynan, senior Auto's analyst for Bloomberg Intelligence. So who's
22:22
Speaker 1: to blame Kevin Well, Um, everybody? Nobody? Um, so I think.
22:30
Speaker 1: And there's also Nissan involved in here too. So as
22:34
Speaker 1: difficult as a deal would be between f c A
22:37
Speaker 1: and and Rena, you know, you you also have that
22:40
Speaker 1: Nissan angle in there as well, So I think, you know,
22:43
Speaker 1: doing a deal between two big companies like that is
22:46
Speaker 1: difficult enough. And then when you add in the Nissan angle,
22:49
Speaker 1: and I'm not sure it's completely dead yet. Um, you
22:53
Speaker 1: know it's not. It wouldn't have been unlike Sergio Marcioni,
22:57
Speaker 1: and you see that down through fc A management now
23:01
Speaker 1: and up to the chairman and John el Con to
23:03
Speaker 1: say it's as important to sit down as it is
23:06
Speaker 1: to walk away. So I think, uh, there may be
23:08
Speaker 1: a little bit of gamesmanship going on here, um, and
23:12
Speaker 1: then the deal might not be completely dead just yet. Well, Kevin,
23:15
Speaker 1: I think when we talked to you, you know, when
23:17
Speaker 1: this deal was announced. You know, one of the things
23:20
Speaker 1: that you mentioned to us was the Fiat Chrysler's need
23:22
Speaker 1: for scale. Um, presumably that need is still there. What
23:26
Speaker 1: do you think their options are for them? Yeah? And
23:29
Speaker 1: I think, look at that's a company that has spent
23:33
Speaker 1: a lot of time and effort to make itself very
23:37
Speaker 1: attractive to you know, this kind of situation M and
23:40
Speaker 1: A or alliances and partnerships. So you know it doesn't
23:45
Speaker 1: end here for sure. Um. I if this does fall apart, ultimately,
23:50
Speaker 1: I think it takes two players off the table. It
23:52
Speaker 1: probably takes Reno and most likely Pougeau off the table.
23:55
Speaker 1: But you know, this is a company that has spent
23:57
Speaker 1: years uh, and a lot of time to be this
24:01
Speaker 1: lean basically ram and Jeep business, you know, focused in
24:06
Speaker 1: North America on light truck market which is now of
24:10
Speaker 1: a volume here, uh, and huge profitability there to to
24:15
Speaker 1: look like it does to be attractive to other companies.
24:18
Speaker 1: So how bad is this forward? Know, if this deal
24:22
Speaker 1: is off the table, and frankly, if any other suitor
24:25
Speaker 1: uh sort of starts to think about other options, just
24:29
Speaker 1: because it is so complicated, right, yeah, And I think
24:32
Speaker 1: the the issue is the valuation, and we talked about
24:35
Speaker 1: this on the show over the weekend. Um, there is
24:37
Speaker 1: that valuation of Rena and while that's one of the
24:41
Speaker 1: aspects that makes it attractive to other automakers and that
24:46
Speaker 1: European presence, uh, it's also what puts them at a
24:50
Speaker 1: disadvantage in negotiations. So you know, it's it's not unlike
24:55
Speaker 1: buying buying a car, right, the seller wants as much
24:58
Speaker 1: as they can get and the buyer wants to get
25:00
Speaker 1: for as little as possible. And that's really the situation here.
25:03
Speaker 1: So Kevin, I think you mentioned poop Pougou and Pougeot
25:06
Speaker 1: and it's just interesting. The French government here seems to
25:09
Speaker 1: be a real sticking point for deal making in the
25:13
Speaker 1: auto industry. Um, how does that really play out? If
25:16
Speaker 1: you're a buyer, you absolutely have to win over the government, correct, Yeah,
25:19
Speaker 1: I mean, and I think that's why I say, you know,
25:21
Speaker 1: Pougeot might be off the table as well, because it
25:24
Speaker 1: looks like it's the same you know, angry father, different
25:26
Speaker 1: daughter kind of scenario there. Um. You know that if
25:31
Speaker 1: IF and and Peugeot also and talking about valuation, is
25:35
Speaker 1: a much more valuable company in that sense. Um. And
25:39
Speaker 1: I think the issue with f C as they really
25:43
Speaker 1: want to control whatever company emerges from this or or
25:47
Speaker 1: whatever the alliance looks like going forward. And I think
25:50
Speaker 1: that again is part of the issue with Nissan right there,
25:54
Speaker 1: they're saying the state stake in the enterprise gets smaller. Um,
25:59
Speaker 1: and f c A at least steps in and commands
26:02
Speaker 1: this this enterprise from the top down. Uh, And that's
26:05
Speaker 1: difficult and even for the government to accept that. Meanwhile,
26:09
Speaker 1: from Fiat Chrysler's standpoint, is there some pressure to buy
26:12
Speaker 1: something else or sort of a mass more scale right now?
26:16
Speaker 1: Do you think that that's something in the near term
26:18
Speaker 1: that we're going to see. Oh? Yeah, absolutely, And I
26:20
Speaker 1: think this was, you know, back in Sergio's days, this
26:25
Speaker 1: was what was you know, the goal. Um. I think
26:28
Speaker 1: through this process you're starting to see start to see
26:32
Speaker 1: it happen. And again, I don't think this is the
26:34
Speaker 1: end of it. Um. It just maybe with different partners.
26:37
Speaker 1: But you know, this company has worked itself into this
26:40
Speaker 1: shape for this very reason, and just because of one
26:44
Speaker 1: bad date here, I don't think they sort of get
26:46
Speaker 1: off the market. Kevin Tynan, Thank you so much. Kevin Tynan,
26:50
Speaker 1: senior auto analysts for Bloomberg Intelligence, calling us on the
26:53
Speaker 1: phone from ba's headquarters in Princeton, New Jersey. At least,
26:56
Speaker 1: I'm just looking at the trailing twelve months a stock
26:58
Speaker 1: price performance for Down General Motors down seven percent, Fiat
27:03
Speaker 1: Chrysler Down. I think there's really is a concern here
27:07
Speaker 1: among all the investors. I think obviously about long term
27:10
Speaker 1: demand for Yes, definitely that although we have to sort
27:15
Speaker 1: of put in the caveat here, which is uh that
27:18
Speaker 1: Mexico US trade would hit the automakers in the US
27:22
Speaker 1: much more substantially than arguably any other group of industries.
27:26
Speaker 1: So that's been an additional hit in the recent weeks
27:30
Speaker 1: that sort of come out of out of nowhere. Yeah,
27:32
Speaker 1: exactly right. So and we saw that just for some
27:34
Speaker 1: of the commentaries from some of the auto manufacturers. Thanks
27:38
Speaker 1: for listening to the Bloomberg p m L podcast. You
27:41
Speaker 1: can subscribe and listen to interviews at Apple Podcasts, SoundCloud,
27:45
Speaker 1: or whatever podcast platform you prefer. I'm pim Fox. I'm
27:48
Speaker 1: on Twitter at pim Fox. I'm on Twitter at Lisa
27:52
Speaker 1: Abramo wits one. Before the podcast, you can always catch
27:55
Speaker 1: us worldwide on Bloomberg Radio.