Latest / Bloomberg Intelligence / Xi Sees Tariffs As Aggravation He Doesn't Need: Magnus (Podcast)

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Xi Sees Tariffs As Aggravation He Doesn't Need: Magnus (Podcast) · Bloomberg Intelligence

• 0:05
  Speaker 1: Welcome to the Bloomberg p m L Podcast. I'm Pim Fox.
• 0:08
  Speaker 1: Along with my co host Lisa Bramowitz. Each day we
• 0:11
  Speaker 1: bring you the most important, noteworthy, and useful interviews for
• 0:15
  Speaker 1: you and your money, whether you're at the grocery store
• 0:17
  Speaker 1: or the trading floor. Find the Bloomberg p m L
• 0:20
  Speaker 1: Podcast on Apple Podcasts, SoundCloud, and Bloomberg dot Com. I'm
• 0:33
  Speaker 1: Lisa bram woids Enjoining me here in the Bloomberg Interactive
• 0:36
  Speaker 1: Broker Studios is Paul Sweeney, head of North American Research
• 0:40
  Speaker 1: for Bloomberg Intelligence. A lot of focus on China because
• 0:44
  Speaker 1: even though there is this trade tension between the US
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  Speaker 1: and China, perhaps the real story is the slowing Chinese economy.
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  Speaker 1: And joining us now to really talk about that is
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  Speaker 1: George Magnus, associate that China Center at Oxford University, former
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  Speaker 1: chief economist of U B a US. George, I want
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  Speaker 1: to start with that. With the retail sales and the
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  Speaker 1: other data that we got overnight out of China, not
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  Speaker 1: great came coming in below estimates and showing a cool
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  Speaker 1: down even with additional stimulus from the government. Yeah, it's
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  Speaker 1: um it's a conundrum that's been playing out really for
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  Speaker 1: pretty much all year to be honestly. So, um, you know,
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  Speaker 1: some of the regular monthly numbers, like the ones we
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  Speaker 1: had today that show retail sales really I mean not
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  Speaker 1: I would say kind of falling off the edge of
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  Speaker 1: the cliff, but certainly quite weak. And car sales in
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  Speaker 1: China have been dropping year over year for the last
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  Speaker 1: five or six months, which is quite unusual. M The
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  Speaker 1: monthly data which released which came out today for investment
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  Speaker 1: spending for November is at its lowest levels really in
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  Speaker 1: terms of growth since two thousand and three. The property
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  Speaker 1: market is showing kind of mixed signals, but a lot
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  Speaker 1: of the indicators that will watch about how much floor
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  Speaker 1: space is being started and how much construction is going
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  Speaker 1: on are starting to roll over. So yeah, I mean
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  Speaker 1: this is um, it's becoming quite serious actually because the
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  Speaker 1: official rhetoric is changing as well about stimulus, and I
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  Speaker 1: think that's something we're going to watch quite closely over
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  Speaker 1: the next few weeks. Switching gearge George, a little bit
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  Speaker 1: to trade. Aside from the immediate political fallout from the
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  Speaker 1: Huawei arrest for US and China, how material is this
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  Speaker 1: incident do you believe to us China trade relationship as
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  Speaker 1: tenures as it may be. How you mean the arrest, Yes, yeah,
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  Speaker 1: well so far. I think from the Chinese perspective, I
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  Speaker 1: think they are trying to kind of twin track this,
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  Speaker 1: which is uh, you know, just to to certainly tell
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  Speaker 1: the Canadians in no uncertain terms what they think about
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  Speaker 1: what's just happened. I mean, I think it's interesting at
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  Speaker 1: their anger has been focused on Canada rather than the
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  Speaker 1: United States, but they're not very happy about it, as
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  Speaker 1: you know. And they've also kind of detained two Canadian citizens,
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  Speaker 1: which looks like a kind of tip for tat kind
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  Speaker 1: of measure. But at the same time, um, it's interesting
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  Speaker 1: that they don't really want this trade truce to blow up.
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  Speaker 1: They have certainly been taking a lot of care to
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  Speaker 1: try to keep it on track. So their imports of
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  Speaker 1: American sawyer beans and liquefied natural gas have already kind
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  Speaker 1: of risen. They've made kind of this offer, which I
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  Speaker 1: think you've covered in your news package about cutting the
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  Speaker 1: punitive tariff on American automobile imports back to where it
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  Speaker 1: was before. And there are other things going on very
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  Speaker 1: very importantly actually with their industrial strategy called made in China,
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  Speaker 1: which we may hear a lot more out over the
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  Speaker 1: next few days and weeks, which which may have substance,
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  Speaker 1: it may just be optics, but they certainly want to
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  Speaker 1: try to twin track this, and I don't think the
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  Speaker 1: arrest of the Huawei kind of CFO is going to
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  Speaker 1: do well that trade talks for the moment at least,
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  Speaker 1: you know, Georgia, I kind of want to pair these
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  Speaker 1: two ideas of the slowing Chinese economy and some of
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  Speaker 1: the trade tensions. Do you think that all of the
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  Speaker 1: headlines about trade negotiations between US and China are masking
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  Speaker 1: the bigger story of China's economy and the failure of
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  Speaker 1: stimulus to increase growth more well, I think it's um.
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  Speaker 1: I just think it's in a way, it's a bit
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  Speaker 1: of an accident, because I think if, if, let's say,
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  Speaker 1: you know, the the tension between the United States and
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  Speaker 1: China had broken out last year rather than this year,
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  Speaker 1: then you know, we wouldn't really at that point, we
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  Speaker 1: wouldn't really have been talking about the Chinese economy very much,
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  Speaker 1: because it was it was still kind of responding to
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  Speaker 1: the kind of stimulus that had previously still been in
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  Speaker 1: the system, but it has all come together in a
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  Speaker 1: very untimely way from Beijing's perspective. So the trade the
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  Speaker 1: impact of the trade tariffs up until now has not
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  Speaker 1: really been that significant in terms of kind of economic growth,
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  Speaker 1: and what it has done has been offset really by
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  Speaker 1: some of the incremental changes which have taken place in
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  Speaker 1: Chinese monetary policy. But this is why the truth is
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  Speaker 1: really so valuable to them, because had the tariffs gone
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  Speaker 1: up from ten to twenty five on the first of January,
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  Speaker 1: and if President Trump had extended, as he had threatened
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  Speaker 1: to do, the punitive tariffs to the other half of
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  Speaker 1: the goods which America imports from China, then by the
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  Speaker 1: end of two thousand nineteen and certainly in two thousand
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  Speaker 1: and twenty, we would certainly have seen a much more
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  Speaker 1: marked impact on what is already a slowing economy. So
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  Speaker 1: for China it's an aggravation which they don't really need
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  Speaker 1: and which I think this is why Seeging being probably
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  Speaker 1: would like to reach some kind of accord if he can, so.
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  Speaker 1: George just to follow up on that, so I guess
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  Speaker 1: you you talked about a twin track approach to the
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  Speaker 1: Huawei incident and others, And so how incentivized do you
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  Speaker 1: believe China is to negotiate meaningful trade agreements in this
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  Speaker 1: environment where you know, President Trump has really ratcheted up
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  Speaker 1: the rhetoric are pretty significantly. Yeah, well, I mean this
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  Speaker 1: is a moving fast him. I think we're not quite
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  Speaker 1: sure actually which way this is a game. Because the
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  Speaker 1: latest kind of thing that I think China watches are
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  Speaker 1: kind of focused on is really the suggestion, that's all
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  Speaker 1: it is at this point, but the suggestion that the
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  Speaker 1: Made in China Industrial Policy, which has been the long
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  Speaker 1: running store for American businesses in China and European for matter,
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  Speaker 1: but also for the White House, that there may be
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  Speaker 1: some flexibility in the China's approach to branding and well
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  Speaker 1: implementing the policy. Having said that, if it's just a
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  Speaker 1: question of changing the branding and kind of reformulating the
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  Speaker 1: strategy that makes it look less threatening, I don't think
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  Speaker 1: that what will be fooled for one minute. Um, But
• 7:25
  Speaker 1: if there is some substance in it, and President Seizing
• 7:29
  Speaker 1: things certainly has been minded to respond to criticism at
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  Speaker 1: home rather than abroad for his approach here to industrial policy,
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  Speaker 1: then there may be some meat on this. You know,
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  Speaker 1: there may be reasons to expect this trade, these trade
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  Speaker 1: talks to actually end up at least partially successful, but
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  Speaker 1: it's early days. I wouldn't I certainly wouldn't want to
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  Speaker 1: be drawn on this myself. I mean, I remain rather
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  Speaker 1: skeptical that that president seizing thing as a closet reformer
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  Speaker 1: and to kind of change China's technological ambitions. But anyway,
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  Speaker 1: we shall see before long how this evolves. George Magnus,
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  Speaker 1: and we will have you back on to discuss it.
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  Speaker 1: George Magnus, economist and associate at the China Center at
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  Speaker 1: Oxford University, formerly chief economist at UBS. Talking of China
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  Speaker 1: and the data that we got out overnight that showed
• 8:23
  Speaker 1: a weakening economy as well as trade. In order to
• 8:40
  Speaker 1: get some more insight on what Michael Cohen's allegations as
• 8:44
  Speaker 1: well as some of President Trump's responses mean for the president,
• 8:48
  Speaker 1: I want to bring a Noah Feldman, Professor of law
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  Speaker 1: at Harvard University, also a Bloomberg Opinion columnist. Noah, thank
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  Speaker 1: you so much for being with us. You wrote a
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  Speaker 1: really interesting column analyzing some of President Trump's recent responses.
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  Speaker 1: To this interview. Can you just lay out what your
• 9:03
  Speaker 1: main point was there. Sure, President Trump often tweets stream
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  Speaker 1: of consciousness, but yesterday was not one of those days.
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  Speaker 1: His tweet, which sounds a lot like he was written
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  Speaker 1: with a lawyer at his shoulder, laid out three defenses
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  Speaker 1: that he has to offer to the charge that he
• 9:19
  Speaker 1: is guilty of the felony because he directed Michael Cohen
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  Speaker 1: to commit a felony of campaign finance violations. No. Uh.
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  Speaker 1: First of all, thank you so much for writing this column,
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  Speaker 1: because I find myself I often need help parsing the
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  Speaker 1: President's tweets and and this column was a big help
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  Speaker 1: in parsing this morning's um tweets from the president. Can
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  Speaker 1: you summarize kind of what his defense you think, the
• 9:41
  Speaker 1: defense that he is laying out in these tweets, and
• 9:43
  Speaker 1: how they, um, you know, kind of really relate to
• 9:46
  Speaker 1: what Michael Cohen is saying. Sure, basically what the President
• 9:50
  Speaker 1: saying is first of all, Michael Cohen was my lawyer,
• 9:53
  Speaker 1: and I told my lawyer to pay off Stormy Daniels,
• 9:56
  Speaker 1: and that was legal. It was okay to tell him
• 9:58
  Speaker 1: to do that. It's the way he did at the
• 10:00
  Speaker 1: was illegal. And what did I know about that he
• 10:01
  Speaker 1: was my lawyer and I expected him to do it legally,
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  Speaker 1: So I may have directed him to pay her off,
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  Speaker 1: but that shouldn't consider the crime on my side. His
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  Speaker 1: second defense is if it was a crime, if it
• 10:12
  Speaker 1: was a violation of camping and finance violation, it wasn't
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  Speaker 1: a severe one. And if it wasn't a severe one,
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  Speaker 1: it should be treated as a civil violation. That is
• 10:19
  Speaker 1: to say, you pay a fine, but you don't go
• 10:21
  Speaker 1: to prison, not as a criminal one. And his third
• 10:25
  Speaker 1: and final, and admittedly a little bit desperate claim is
• 10:28
  Speaker 1: that even though Michael Cohen fled guilty to it being
• 10:31
  Speaker 1: a crime, Cohen only did that as part of a
• 10:33
  Speaker 1: deal with prosecutors and he didn't get any extra jail
• 10:35
  Speaker 1: time for that, according to Trump, and therefore that shouldn't
• 10:39
  Speaker 1: be weighed as significant in deciding with the president when
• 10:42
  Speaker 1: he leads office should be charged facility. Now, what do
• 10:44
  Speaker 1: you think President Trump is worried about? I mean, is
• 10:46
  Speaker 1: he worried about impeachment? Is he worried about prosecution? What
• 10:49
  Speaker 1: is this? What is this responding? I really don't think
• 10:51
  Speaker 1: he's worried right now about impeachment in connection with this
• 10:53
  Speaker 1: stormy Daniels pay out. I think he believes, and there
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  Speaker 1: seems to be evidence for this, that his base is
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  Speaker 1: continuing to support him and the unlikely to be removed
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  Speaker 1: by the Senate or even impeached by the House for this.
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  Speaker 1: What he is worried about, and what he should be
• 11:05
  Speaker 1: worried about, and what his lawyers must be worried about,
• 11:07
  Speaker 1: is it once he's out of office, you know whether
• 11:10
  Speaker 1: in twenty five that he's vulnerable to a criminal prosecution
• 11:16
  Speaker 1: not brought by Bob Mueller, but bought by the Southern
• 11:18
  Speaker 1: District of New York. Because the usual practice is if
• 11:21
  Speaker 1: they get so much aslee guilty to a felony and
• 11:22
  Speaker 1: that person says I did that the behest of the
• 11:25
  Speaker 1: higher up, they then go after the higher up, and
• 11:27
  Speaker 1: he's the higher up according to Michael Cohen. Now you know,
• 11:30
  Speaker 1: I couldn't find it. I found it. You know, not
• 11:33
  Speaker 1: coincidental that the day that Michael Cohen um pled guilty
• 11:37
  Speaker 1: that the National Enquirer and his parent company, American Media,
• 11:41
  Speaker 1: acknowledged paying off playboy model U Karen McDougall. How significant
• 11:47
  Speaker 1: is that piece of news as it relates to the
• 11:51
  Speaker 1: President and his legal exposure? Here I think it's actually
• 11:54
  Speaker 1: pretty important because what it does is it provides independent
• 11:57
  Speaker 1: verification of what Cohen said. In the past. It was
• 12:00
  Speaker 1: possible for Trump to say, well, Michael Cohen's a liar,
• 12:02
  Speaker 1: this this never happened. But here you have independent sources,
• 12:05
  Speaker 1: the directors of the parent company of the National Enquirer,
• 12:09
  Speaker 1: who were saying, we also engaged in a parallel, illegal
• 12:13
  Speaker 1: campaign finance violation arrangement to pay off McDougal. And so
• 12:18
  Speaker 1: that means that it's not all about coming now. It's
• 12:20
  Speaker 1: also about another set of witnesses who can testify that
• 12:24
  Speaker 1: the president was directly involved in the campaign fence fience violation.
• 12:27
  Speaker 1: That counts as a selony. Professor Elman, I gotta be honest.
• 12:30
  Speaker 1: When I talked to a lot of market participants, they say,
• 12:32
  Speaker 1: we're growing numb to the president Trump news and or
• 12:35
  Speaker 1: to everything that's coming out. It comes fast and furious
• 12:38
  Speaker 1: and more sensational, and we just don't care because the
• 12:40
  Speaker 1: economy is doing just fine. So I'm just wondering, is
• 12:44
  Speaker 1: this different or is this just more pile on that's
• 12:47
  Speaker 1: not going to really essentially amount to anything with respect
• 12:50
  Speaker 1: to his presidency or anything else. Well, it depends on
• 12:55
  Speaker 1: whether you think that a president who seriously realizes that
• 12:58
  Speaker 1: he may face criminal indict is going to govern differently.
• 13:02
  Speaker 1: And my own view is that, although it's not the
• 13:04
  Speaker 1: easiest thing to quantify, a president who's walking around thinking
• 13:07
  Speaker 1: that prosecutors are going to charge in the day you
• 13:09
  Speaker 1: leaves office is going to be effected in how he
• 13:11
  Speaker 1: does things. He's going to have to be more cautious
• 13:13
  Speaker 1: on a range of things. He's gonna have to be
• 13:15
  Speaker 1: more focused on protecting himself. He may be tempted to
• 13:19
  Speaker 1: use the part in power in ways that create backlash.
• 13:22
  Speaker 1: So you know, I understand the sense of, oh, my goodness,
• 13:26
  Speaker 1: not another story, and that's an understandable sensation, But from
• 13:29
  Speaker 1: the standpoint of the future of the Republican in the
• 13:32
  Speaker 1: next two or two and a half years, I think
• 13:33
  Speaker 1: this is actually pretty significant. Real quickly, professor, what do
• 13:36
  Speaker 1: you think prosecutors will do here at this defense that
• 13:39
  Speaker 1: you kind of summarized here um is incredible, and what
• 13:42
  Speaker 1: do you think prosecutors ultimately do well? I think as
• 13:46
  Speaker 1: a legal defense, what the president suggests me is not
• 13:48
  Speaker 1: especially credible. I don't think he would save him from
• 13:51
  Speaker 1: being convicted. What's interesting is whether it would lead prosecutors
• 13:54
  Speaker 1: to say, well, you know what, we're not going to
• 13:56
  Speaker 1: go after him criminally. We'll just try to hit him
• 13:59
  Speaker 1: with a civil ye lation. And I think a lot
• 14:01
  Speaker 1: of that would depend on who was the president and
• 14:03
  Speaker 1: who was running the Department of Justice after his presence
• 14:06
  Speaker 1: he was over. You can easily imagine a Democrat saying,
• 14:09
  Speaker 1: you know, let's who's become president thing, let's put this
• 14:11
  Speaker 1: to bed. Let's see if there's any reasonable way we
• 14:14
  Speaker 1: can avoid charging a president with a crime. And in
• 14:16
  Speaker 1: those circumstances, they would probably get away with it. Noah Feldman,
• 14:19
  Speaker 1: thank you so much for being with us. Noah Feldman,
• 14:21
  Speaker 1: Professor of Law at Harvard University, also a Bloomberg Opinion calumnist,
• 14:25
  Speaker 1: speaking to myself and Paul Sweeney filling in for Pim Fox.
• 14:28
  Speaker 1: Paul Sweeney, head of North American Research for Bloomberg Intelligence.
• 14:47
  Speaker 1: Joined by Paul Sweeney filling in for Pim Fox. Paul Sweeney,
• 14:50
  Speaker 1: of course, is the head of North American Research at
• 14:52
  Speaker 1: Bloomberg Intelligence. And we were just speaking with a futurist
• 14:55
  Speaker 1: for the car industry. Let's now speak to a futurist
• 14:57
  Speaker 1: for the fixed income industry. Kathleen Gaffney, who I'm sure
• 15:00
  Speaker 1: it is so excited to look into her crystal ball
• 15:02
  Speaker 1: for us CO, director of Diversified Fixed Income at Eaton Vans,
• 15:05
  Speaker 1: overseeing helping to oversee four billion dollars of assets and
• 15:10
  Speaker 1: based in Boston. She joins US here in eleven three studios. So, Kathleen,
• 15:14
  Speaker 1: for next year, we saw a pretty rough year this
• 15:16
  Speaker 1: year for investment grade, credit, great year for cash. Next year,
• 15:20
  Speaker 1: what will be the best performer and what will be
• 15:22
  Speaker 1: the worst performer? And credit? We'll pull out that crystal ball.
• 15:25
  Speaker 1: Come on, you can do it. It's getting it's getting
• 15:30
  Speaker 1: a lot trickier right now. But I do think that
• 15:35
  Speaker 1: the most important lever in fixed income for next year
• 15:39
  Speaker 1: is going to be, uh, the dollar a week dollar
• 15:44
  Speaker 1: and the currencies that perform better relative will be what
• 15:48
  Speaker 1: saves performance for the year. So as you think about
• 15:53
  Speaker 1: let's let's bring the FED into this, I mean, what
• 15:56
  Speaker 1: is your outlook for rates? And maybe you know give
• 16:00
  Speaker 1: us your out look for if you want to go
• 16:02
  Speaker 1: that far, how about I did say futurist um. There
• 16:10
  Speaker 1: you go. I think obviously rates are going to go higher.
• 16:14
  Speaker 1: But what's getting tricky right now is the amount of
• 16:17
  Speaker 1: uncertainty that's weighing on the market makes that a very
• 16:20
  Speaker 1: difficult call. Uh, they should move up a little bit,
• 16:26
  Speaker 1: but given the amount of uncertainty, I'm less certain that
• 16:31
  Speaker 1: there's going to be a big move. Um. A weaker
• 16:34
  Speaker 1: dollar is going to be a big part of keeping
• 16:37
  Speaker 1: growth going. I think that's what the FED has really
• 16:40
  Speaker 1: been focused on. So in week dollar that means emerging
• 16:43
  Speaker 1: markets out before. I mean, that's sort of the implication here,
• 16:46
  Speaker 1: and I'm just wondering how does that play into the
• 16:48
  Speaker 1: global economic slowdown that we're seeing, Because usually e M
• 16:52
  Speaker 1: gets the flu when developed markets get a cold, and
• 16:55
  Speaker 1: it seems like develop markets are getting a little bit
• 16:57
  Speaker 1: of a cold. They definitely are, but I think there's
• 17:01
  Speaker 1: much too much pessimism out there. It feels a little
• 17:05
  Speaker 1: bit like once again, um really yeah really, but like
• 17:12
  Speaker 1: this time around is a little bit different because central
• 17:14
  Speaker 1: banks are actually withdrawing stimulus, they are making it less accommodative.
• 17:20
  Speaker 1: It's still a very low interest rate environment, and if
• 17:24
  Speaker 1: they're not going to move up quickly, there's just enough
• 17:28
  Speaker 1: to go around. China UH is definitely slowing and that's
• 17:33
  Speaker 1: impacting the trade tensions in probably a positive way, at
• 17:38
  Speaker 1: least in the short term. That's what I mean about tricky.
• 17:41
  Speaker 1: Everything in the short term is different for the long term. Uh.
• 17:46
  Speaker 1: And there are enough things that are causing a slow down,
• 17:50
  Speaker 1: but enough things that will keep everything just right. But
• 17:55
  Speaker 1: you still don't have enough value in the fixed income
• 18:00
  Speaker 1: markets in the developed world, rates, the rate markets and
• 18:04
  Speaker 1: credit are still not cheap enough, and they may not
• 18:08
  Speaker 1: cheapen up and up enough. But if the economy is
• 18:11
  Speaker 1: going to keep going, and if the central banks are
• 18:16
  Speaker 1: more dovish right now, that's what will weaken the dollar
• 18:22
  Speaker 1: and that will get things going again. So you mentioned
• 18:24
  Speaker 1: the markets being tricky. Does that mean volatile because the
• 18:28
  Speaker 1: volatility this market, I know has been unnerving for many
• 18:32
  Speaker 1: What is your expectation for the level of volatility in
• 18:35
  Speaker 1: this market as we look into next year. It's going
• 18:36
  Speaker 1: to continue to be high. I I believe that the
• 18:40
  Speaker 1: hardest part of transitioning from a secular decline to a
• 18:44
  Speaker 1: secular rise is this near term getting back to normal
• 18:49
  Speaker 1: off the zero bound. Once we get through a full
• 18:52
  Speaker 1: cycle and we're back to normal, then it becomes normal cycles.
• 18:57
  Speaker 1: But this is going to be challenging, and a lot
• 18:59
  Speaker 1: of that is due to We're transitioning from monetary policy
• 19:03
  Speaker 1: to fiscal policy, and it's very difficult to read the
• 19:07
  Speaker 1: politicians from the developed markets to the emerging markets. It
• 19:12
  Speaker 1: has been so almost almost easy to listen to the
• 19:16
  Speaker 1: central bankers, and it's either a risk off day or
• 19:20
  Speaker 1: a risk on day, and then you know what to do.
• 19:23
  Speaker 1: Do we take more risk or reduce risk? This is
• 19:26
  Speaker 1: far trickier. Lots of different things going on all right,
• 19:31
  Speaker 1: leverage loans. We've heard a lot about the souring of
• 19:33
  Speaker 1: leverage loans. How this is armageddon. This is the epicenter
• 19:36
  Speaker 1: of everything going south. Are you seeing opportunities at this
• 19:39
  Speaker 1: point has been oversold or do you think that this
• 19:41
  Speaker 1: is an area of more pain to come. I'm not
• 19:45
  Speaker 1: a big believer in chasing yield spread for spread sake.
• 19:48
  Speaker 1: It's all relative. I believe you want to look for
• 19:51
  Speaker 1: good total return. Loans have cheapened a bit with the concerns,
• 19:56
  Speaker 1: but not enough. As a total return investor, I think
• 20:00
  Speaker 1: they're going to be incredibly important in the years ahead
• 20:04
  Speaker 1: because there will be a much uh more integrated market
• 20:11
  Speaker 1: in high yield, between loans and high yield. I'm gonna
• 20:14
  Speaker 1: put you on the spot here, do you think the
• 20:16
  Speaker 1: banks are going to suffer big losses due to hung
• 20:18
  Speaker 1: Bridge loans are basically loans that they've extended to private
• 20:21
  Speaker 1: equity firms for buyouts that they now have to sell
• 20:24
  Speaker 1: into a market that's deteriorating. It is deteriorating, but not
• 20:29
  Speaker 1: enough at this point. Um the supply demand is in balance.
• 20:34
  Speaker 1: When that shifts, the prices that are attractive for a
• 20:38
  Speaker 1: total return investor will come back. We're not there yet.
• 20:43
  Speaker 1: I think we had a yeah, Earli in the show.
• 20:44
  Speaker 1: We had the CEO of a home builder, Taylor Marson,
• 20:49
  Speaker 1: on the show, just talking about the home market here
• 20:52
  Speaker 1: in the US. How do you guys think about that sector?
• 20:55
  Speaker 1: You know, giving that interest rates rising a little bit?
• 20:57
  Speaker 1: Are do you have any exposure there? What are you
• 20:59
  Speaker 1: looking to do? We do have some small exposure. It's
• 21:02
  Speaker 1: been uh challenging to find uh homebuilder credits that are
• 21:07
  Speaker 1: cheap enough. Most of them are below investment grade but
• 21:10
  Speaker 1: still higher quality high yield double b um. But there
• 21:15
  Speaker 1: are a few on on the edge of investment grade
• 21:20
  Speaker 1: that do look attractive because they cheapened up. Was everyone
• 21:23
  Speaker 1: worried about rates moving higher now that they're taking a
• 21:26
  Speaker 1: more gradual path uh. And I believe with wages rising
• 21:31
  Speaker 1: and that pent up demand from millennials um my own
• 21:37
  Speaker 1: children is going to foster that demand. So we're comfortable
• 21:41
  Speaker 1: with home builders next year, which which as a class
• 21:45
  Speaker 1: will perform high yield or investment grade. It's a tough
• 21:52
  Speaker 1: call between those two. I'm gonna say potentially high yield
• 21:58
  Speaker 1: if rates don't if rates just move up gradually because
• 22:02
  Speaker 1: we're not gonna get that default cycle yet, right. And
• 22:05
  Speaker 1: the pressures in investment grade with triple bees uh, create
• 22:12
  Speaker 1: enough idiosyncratic risk throughout the year, which will be good
• 22:15
  Speaker 1: pickings for just the right names. Kathleen Gaffney. Always a
• 22:19
  Speaker 1: pleasure having you. We love having you here. Kathleen Gaffney
• 22:21
  Speaker 1: is co director of Diversified Fixed Income four Eaton Vance. Paul,
• 22:38
  Speaker 1: our next guest has the most amazing job title. Yeah,
• 22:43
  Speaker 1: very cool. To be a futurist, Yeah, and to be
• 22:46
  Speaker 1: a future setting card company, pretty amazing. Cheryl Connolly, futurist
• 22:50
  Speaker 1: at Ford Motor Company. Cheryl, what is a futurist? So,
• 22:54
  Speaker 1: the futurist is somebody who helps an organization to long
• 22:57
  Speaker 1: term planning thinking strategy so that they can get ahead
• 23:00
  Speaker 1: of the marketplace, and in the auto industry that's particularly
• 23:02
  Speaker 1: important because it takes about three years to come up
• 23:05
  Speaker 1: with a concept and actually have it hit the road. Cheryl,
• 23:09
  Speaker 1: you know, it's it's interesting. I've been going to the
• 23:11
  Speaker 1: Consumer Electronics Show in Las Vegas, uh, you know, where
• 23:13
  Speaker 1: they highlight all the cool new technologies and gadgets for
• 23:16
  Speaker 1: about thirty years, and I've noticed over the last five
• 23:18
  Speaker 1: to seven years that the electronics show has really become
• 23:21
  Speaker 1: an auto show where the auto companies take up about
• 23:24
  Speaker 1: half of the floor space. It's just amazing to see
• 23:27
  Speaker 1: how tech is really front and center in the car business.
• 23:30
  Speaker 1: So you know, at Ford, what are the top tech
• 23:33
  Speaker 1: priorities or opportunities for you guys, And you know where's
• 23:35
  Speaker 1: forward putting its money as it thinks, uh, several years out. Well,
• 23:39
  Speaker 1: it's interesting that you mentioned see yes, because Ford actually
• 23:41
  Speaker 1: was the first automaker to uh show there, and it
• 23:45
  Speaker 1: was in recognition that a car isn't just a car anymore.
• 23:48
  Speaker 1: It is a complex collection of computers. I mean back
• 23:52
  Speaker 1: in the day, my dad, your grandfather, like a tinker
• 23:54
  Speaker 1: under the hood, and how you need a computer science
• 23:56
  Speaker 1: degree to do so. Um, And so that's going to
• 23:59
  Speaker 1: continue in. My job is really to look at tech
• 24:03
  Speaker 1: to the lens the consumer. And right now, people have
• 24:06
  Speaker 1: concerned about tech. I mean they readily recognize technologies made
• 24:09
  Speaker 1: their lives better, that it's been a force for good,
• 24:12
  Speaker 1: but there are lingering concerns about the unforeseen consequences that
• 24:16
  Speaker 1: tech might bring. So we did some research in fourteen
• 24:19
  Speaker 1: different countries and we spoke specifically to people of all ages.
• 24:23
  Speaker 1: But in one part of the study, we found that
• 24:26
  Speaker 1: eighteen to twenty four year olds close to them worry
• 24:30
  Speaker 1: that technology is trying to get inside their head. Well,
• 24:34
  Speaker 1: I mean they can give up that worry because I'll
• 24:36
  Speaker 1: just give you the answer it is. I guess the
• 24:39
  Speaker 1: one question I have as a car company, how do
• 24:42
  Speaker 1: you make sure that the interface is user friendly, that
• 24:46
  Speaker 1: people can actually use all of the technology currently available.
• 24:49
  Speaker 1: Because people are talking about this high tech stuff. But
• 24:51
  Speaker 1: when I talk about people who go to car shows,
• 24:53
  Speaker 1: they say their main job as representatives of the car
• 24:56
  Speaker 1: companies are simply to explain to people how to use
• 24:59
  Speaker 1: their cars. Well, that is something that we really have
• 25:02
  Speaker 1: to take take a lot of measure and care in
• 25:05
  Speaker 1: terms of delivering. So we have teams that work on
• 25:08
  Speaker 1: human machine interface, and we want to make everything seamless.
• 25:11
  Speaker 1: So when we introduced our our platform that connected Bluetooth
• 25:15
  Speaker 1: technology with the entertainment system called stink Uh, we've made
• 25:18
  Speaker 1: sure that it was voice activated and hands free so
• 25:21
  Speaker 1: that it would be seamless. And we're increasingly using platforms
• 25:24
  Speaker 1: that mirror the ones that were most comfortable with, So
• 25:26
  Speaker 1: we do UM, the Apple Car Play UM, and so
• 25:30
  Speaker 1: the interface that you used to seeing on your digital
• 25:33
  Speaker 1: device often mirrors what's on your dashboard. But as we
• 25:36
  Speaker 1: go forward and when we bring more advanced technology, it's
• 25:39
  Speaker 1: really about making sure customers are comfortable with it. So
• 25:43
  Speaker 1: a number of people are very concerned about artificial intelligence.
• 25:45
  Speaker 1: For instance, of men say they're afraid of it. Women
• 25:50
  Speaker 1: agree with that statement, and if you were to ask
• 25:52
  Speaker 1: a little bit more, almost to the exact same percentage,
• 25:55
  Speaker 1: men and women say they don't understand artificial intelligence. And
• 25:58
  Speaker 1: so for twenty nine we have the Ford Edge, which
• 26:01
  Speaker 1: uses AI to look at the vehicle's powertrain. But if
• 26:06
  Speaker 1: you break it down and explain to the driver, basically
• 26:08
  Speaker 1: all that means is that we have sensors around the
• 26:10
  Speaker 1: vehicle that are evaluating the driving road conditions. We have
• 26:14
  Speaker 1: software and algorithms that work together to make a decision
• 26:17
  Speaker 1: about whether the vehicle should be in two wheel drive
• 26:19
  Speaker 1: or all wheel drive. And that's all it is. So
• 26:22
  Speaker 1: you have to demystify what artificial intelligence is so that
• 26:24
  Speaker 1: you make sure people are comfortable using the technology, Cheryl,
• 26:28
  Speaker 1: self driving cars? What is Ford saying about the self
• 26:32
  Speaker 1: driving car? Are we going to see it? When are
• 26:34
  Speaker 1: we going to go? When are we going to see it?
• 26:36
  Speaker 1: Is that? Is that something that's going to be in
• 26:38
  Speaker 1: the near term? Yes, yes, yes, and yes, Ford will
• 26:44
  Speaker 1: have self driving vehicles on the road. But to be
• 26:47
  Speaker 1: very clear about that, uh, self driving vehicles will be
• 26:51
  Speaker 1: available and limited capacity, probably for commercial application like package
• 26:55
  Speaker 1: delivery or some right highling services. And we actually have
• 26:58
  Speaker 1: pilots running today in cities like Miami as well as Washington,
• 27:03
  Speaker 1: d C. And for the most part, believe people believe
• 27:07
  Speaker 1: that in the countries, about half the people we spoke
• 27:10
  Speaker 1: to say they actually believe a self driving car will
• 27:12
  Speaker 1: be um safer on the road than humans driving cars,
• 27:17
  Speaker 1: particularly with all the digital distractions that we have, Cheryl
• 27:20
  Speaker 1: ten seconds. Do you think a child born today will
• 27:24
  Speaker 1: learn how to actually physically drive a car when they're
• 27:26
  Speaker 1: an adult yes, with caveat that it depends on where
• 27:30
  Speaker 1: they live, because a ton of vehicles will be a
• 27:33
  Speaker 1: norm when they grow up. But it's very context driven,
• 27:36
  Speaker 1: and so there are still people who love to drive
• 27:38
  Speaker 1: their cars, and we'll have to work in partnerships with
• 27:40
  Speaker 1: cities that want to bring it to the marketplace. But
• 27:42
  Speaker 1: the thing I would leave you with is that seventies
• 27:46
  Speaker 1: six of the adults that we spoke to said that
• 27:48
  Speaker 1: they would rather their child ride in a self driving
• 27:51
  Speaker 1: vehicle than ride with a stranger. As a parent of
• 27:54
  Speaker 1: two boys who I hope are not listening, I agree,
• 27:59
  Speaker 1: Cheryl Connolly, Pay you so much. Sheryl Connolly is a
• 28:01
  Speaker 1: futurist for Ford Motorco. Thanks for listening to the Bloomberg
• 28:10
  Speaker 1: P and L podcast. You can subscribe and listen to
• 28:12
  Speaker 1: interviews at Apple Podcasts, SoundCloud, or whatever podcast platform you prefer.
• 28:17
  Speaker 1: I'm pim Fox. I'm on Twitter at pim Fox. I'm
• 28:21
  Speaker 1: on Twitter at Lisa Abramo wits one. Before the podcast,
• 28:24
  Speaker 1: you can always catch us worldwide on Bloomberg Radio.