Allison Schrager, Senior Fellow at the Manhattan Institute, explains why the trade-off between bringing down inflation and harming growth will come back with a vengeance for the economy. Bloomberg Technology Co-Host Ed Ludlow breaks down fourth-quarter vehicle delivery numbers for Tesla and Rivian. Dan Ives, Senior Equity Analyst at Wedbush Securities, shares his outlook for Apple and Tesla. And we Drive to the Close with Rich Weiss, CIO of Multi-Asset Strategies at American Century Investments.
Hosts: Carol Massar and Tim Stenovec. Producer: Paul Brennan.
This is Bloomberg Business Wait inside from the reporters and editors who bring you America's most trusted business magazine, plus global business, finance and tech news. The Bloomberg Business Week Podcast with Carol Messer and Tim Stenebeck from Bloomberg Radio.
It's all right, so you know, I love this song. It's all right like I feel like Traveling Wilbury's.
Yeah, yeah, Traveling Wilbury's. Well, well, I was. I was a big Roy Orbison fan when I was little. You know, when you're a kid, you like are you could become obsessed with a certain artist, Like my son's you know, going to be five soon. He likes David Byrne. Just like every time we get in the car, he wants to listen to David.
But is it quse you guys play it.
It's because it's because we played, you know, the the concert that he did a few years ago, and it's like that's his reference point for music at this point. So it's like, okay, that was me and Roy Orbison. I will say, so I like the Traveling.
I totally get it. My daughter grew up on the concert for George because that's what my husband and I were so into So it was all about, unfortunately the passing of George Harrison. But Eric Clapton put together this incredible concert of all his music and the amount the musicians who were part of it, and so yeah, there was no party.
There was none of that in our house.
Hey, and we would play it and she would bop around to it. So it was like kind of great because we loved it and there was It was a really big concert and lots of music, and you.
Get spared from the traditional kids fair, which leaves a little bit desired. Anyway, we'll play some traveling Wilburies at home tonight.
All you knew parents, just a little advice, just play that and you'll be very, very happy.
I wanted to take a look at the markets, Carol. Yes, the Nasdaq, as you mentioned, is down over two percent. We're seeing shares of the major industries at their lowest levels of the day. Yes. Me, if I've entered down more than nine tenths of one percent right now, the Dow down more than two, I guess what.
I would say.
It was interesting. I actually finally made it back after traveling in COVID last week and joining Katie and Maniscrani on the surveillance team in the morning, and we'd talked to a lot of different market guests, and I feel like in terms of a theme as we were getting ready for twenty twenty four, is that there was a bit of a dialing back in terms of the thoughts about how aggressive the US Central Bank, the Federal Reserve would be. You know, markets have been pricing in what about one hundred and fifty bases points of cuts this year, and there was a dialing back in terms of that as we try to keep kind of still a close watch to make sure inflation doesn't rear its ugly head again.
So this is a question that I have for our market's guests a little later in the program. But is this a macro story or is it a collection of micro story? It is the decline that we're seeing today a result of you know, the socks being down as a result of ASML holdings canceling shipments of some of its machine or is it because Apple's down the most since August and at its lowest level since a couple months ago, and all of this is just putting pressure on the industries. Tesla missing on deliveries Rivian taking a hit. It's like a lot of micro company specific stories today rather than any macro themes or economic news that we're doing.
We did hear a lot of guests saying it. You know, you got to look for specific fundamental stories and look for stocks that are undervalued versus some of those who really had a big run up in twenty twenty three. All Right, so folks, you know, it is a new year, and we've got a bunch of economic data points coming this week, a lot of it on the labor market, culminating in the monthly jobs report come Friday. We also get FOMC minutes from the last meeting of twenty twenty three. As you know, we have constantly, constantly tim couched everything in the past four years against the global pandemic.
Yeah, the big question, of course, is you know what do we see moving forward? Well, according to Bloomberg opinion columnist Allison Schregor, this year we can probably put the pandemic dividend to rest. With more on her column, let's bring in Alison Schregor. She's Bloomberg opinion columnist and senior fellow at the Manhattan Institute. Alison, good to have you with us. This afternoon. So what exactly has been the pandemic dividend? Carolyn and I were talking about it earlier. I can't believe it's been almost four years since the start of the pandemic, And what's the impact that the pandemic dividend has had?
Well, I mean, it's hard to say a dividend because although I call it that, just because it's been an economy that effectively gave us a free lunch when it came to monetary policy. There's a reason why every economist thought there'd be a recession to bring down inflation, because that it's always been true in the past. There are certain things about the pandemic that made the economy kind of a little unusual this time. That meant that we pretty much could have what seems like a soft landing so far. Effectively, you had a very tight labor market, and you had household with a lot with a sort of very healthy balance sheet, which if you compare that to two thousand and eight, was really different. So you had more trade offs, so effectively you could raise rates. You also had people less sensitive to rates, largely because the mortgage market, and you could just effectively have what seemed like costless monetary policy, but it that there's a lot of reasons to think this was be the case going forward.
So in terms of household spending, Alison, I don't need to tell you, right, it's so important in terms of consumer spending to the US economy, specifically household spending. Are they I mean, at this point we keep talking about you know, credit card debt, you know the buy now, pay later programs. We've seen an increase in an uptick on that. Is it going to be tough for consumers to continue spending after getting you're really some nice juice if you will, through the pandemic courtesy of the government.
Well, I think what we're seeing if we look at the data bay carefully is a tale of two economies. So the bottom fifty percent had some savings left over from the pandemic, but those are largely gone and that might be why we're starting to see the link we use up for credit cards. For the top fifty percent, they still have a lot of cash, and housing crises are still largely higher, and you have a lot of people locked into cheap housing costs. So it's sort of the have and the have not. Some people are walking away richer, and some people finally have caught up with them, and we're seeing saving rates fall and we're seeing much then our ballot file on cheeps from bomb fifty percent.
What about when it comes to the labor market. We keep hearing about this incredibly strong labor market month after month, we're seeing hundreds of thousands of jobs added to the payrolls. We're not hearing it from companies the same way when it comes to the fight for talent. But how are you reading into labor numbers?
Well, I mean, if you look at vacancies, they still look way up, which suggests still a labor market. And anecdotally I keep hearing employers saying they can't find talent. But a say came out from the University of sorry the Minneapolis Central Bank that found that how we're measuring vacancies might be wronged, and they have an adjusted measure that accounts for new technology and how people search for jobs, and they found that actually vacancies are pretty much where they were pre pandemic. So, you know, a healthy labor market, but not the tons of say slacken it that we had like maybe a year ago.
Alison, that two percent mark that the FED has promised reading a bunch stories lastyear. I think by one metric we've already gotten there. But there's still that concern in talking to a lot of market guests that we could see another uptick potentially. So how will the FEDS pursuit of making sure no more inflation can come back and rear its ugly head is going to potentially put a soft landing at risk.
Yeah, well, I think is though I'm thinking of it, it's a lot less room for error. I suppose you had a lot of room for error before. And I think the way I think about it is we have no idea what's going to happen. One thing's for sure. Shocks are going to happen, we can't anticipate, and the economy just all around less resilient. So if there is an oil price shock, it said, expectations appear to be anchored, but they might. There's some signs that they're not so well anchored anymore. So if we do see this uptick in inflation, it could really take hold. Do you think pre pandemic people have no concept of inflation? People our age really didn't have much memory of it, But now people sort of expect it. So if there is a shock that increases inflation in any way, then we could see expectations can be stabilized and then the FED will be.
In a much more But buying, I went to buy a Christmas tree. It was off the chart.
Where did you buy it locally?
Like you know, on the street. I'm not even gonna tell I'll tell you.
I'll tell you how much I paid for our Christmas tree.
Hundreds of dollars.
Hundreds Wow, Wow, I paid eighty dollars.
I'm just contact think it.
Was actually seventy four dollars plus tax.
It was crazy. It was crazy, and they were kind of you know.
I'm going to throw out some advice for next year. Apparently you have to go to the big box stores, just what we did.
I remember someone.
I think it was like half the price just going up.
The street, home depot, even a whole Foods like they do trees. They think like right away and it's less expensive.
But I threw out my back pulling it off the car. So your doctor bill, so that's the payment that I got. Okay, I want to get back to Alison. First of all, Allison, thank you for saying that we have no idea what's actually going to happen. That's a refreshing thing to hear at the beginning of the year when everyone is out predicting everything. You mentioned a potential oil price shock. What else is on your radar that we should be watching here?
Well, as I said, like, I'm also looking for a sort of surprises things to happen to the labor market. I think that that's the big concern, because that's you know, ultimately we're really I think if people experience of job in security, then that will make spending completely collapse, and that's largely been holding up the economy is a feeling of this resilience. So I think anything could happen to the labor market. Certainly that your political situation can mean all sorts of sort of surprising things. So I mean, those are the two things I'm really looking at. Because oil prices tend to anyway, they're not really in core inflation that the FED looks at. They do really sort of shape perceptions, and honestly, the bottom line is the most housefuls.
Yeah, they only mean something if you fill at the tank, which I do.
Just a reminder of our friends in California, well, they don't need to be reminded our friends outside of California how expensive gas is there routinely five bucks a gallon. Yeah, and driving back from the airport here the other night, it was, you know, under three bucks a gallon. Just a reminder how much more expensive it is in California.
It's a really big difference. Yea, all right, Allison Traker, As we said, Bloomberg opinion columnist Senior Fell at the Manhattan Institute. Check her out on the Bloomberg term on at Bloomberg dot com.
Hundreds of dollars for a tree.
It was delivered, Oh but still just a piece.
So it's the delivery person's. It has been thrown out result of the tree.
And it got kind of lost in the shuffle.
My daughter was trying to do us a favor.
Is it's still up. I'm keeping it through story.
This is Bloomberg Business Week.
You're listening to the Bloomberg Business Week podcast. Catch us live weekday afternoons from three to six Eastern Listen on Bloomberg dot com, the iHeartRadio app, and the Bloomberg Business App, or watch us live on YouTube.
Hey listen, I don't know if you guys have noticed more challenges, it seems for Vivie. Mode of automotive shares are tanking. They've done about ten percent today, so near their lows of the session after missing expectations for coarly electric vehicle deliveries. And then Tim, you've got something being made official. Tesla no longer the global top seller of evs and that stuck. It's been bouncing around today right now, down about seven tens percent.
Yeah, China's BYD delivered more, becoming the new number one in EV's, driven mainly by its much broader lineup of cheaper models in China. We've got a lot to talk about for Bloomberg Plugged In. It's our weekly look at the world of evs with us as Ed Ludlow, the co host of Bloomberg Technology. He's in our San Francisco bureau, and I want to start with Tesla versus BYD because most people listening right now, even if they've heard of BYD, the Warren Buffett backed Tesla competitor EV maker in China, they've never even seen one of these cars driving around. What does BYD's lineup look like.
Well, that is the story that the concentration of what they do is in mainland China, serving a domestic market where they make lots of different EV models. But the principal difference between BYD and Tesla is that it's at a lower price point. And one thing that BYD does that's very different from Tesla is that alongside battery electric car full plug in battery electric, they also do plug in hybrids, where they sell many of them as well. So you're quite right to point out that in the fourth quarter, the final three months of twenty twenty three, BYD sold five hundred and twenty six thousand, four hundred and nine fully battery electric cars, most of them in China, whereas Tesla handed over four hundred and eighty four thousand, five hundred and seven globally. But if you aggregate it over the course of the year, BYD is only bigger than Tesla on an annual basis in twenty twenty three if you include plug in hybrids.
But is this still sold more battery electric over all that year?
But is the trend clear?
Oh, the trend is clear, and so we knew that this was going to happen going into these fourth quarter deliveries. You know, the question more on Tesla's side is where are they still growing geographically? And I had Dan Levy of Barclay's on the show earlier today saying that, yeah, look, it's possible you can have Tesla continuing to grow in China because because it doesn't make the lower end EV, it's used price cuts as a lever, particularly in China, but it's still seen as more of a premium product there than BYD. Then the next question is what about those early adopters. If you were an early adopter and you were like the first to get into an EV and you've been and gone, what's left over on the demand side?
I do wonder what about China? Do they love having Tesla there? Not only you know, making vehicles, it's a higher end product. Give us some backdrop and some history there.
Yeah, it's fair to say that Tesla, and indeed Elon Must directly has kind of had a up and down relationship with China. The Chinese government was incredibly supportive for the construction in the first place of the Shanghai plant.
Fifty percent of.
All of Tesla's vehicles globally are built in China and Shanghai, so it's clearly an engine room for their production base and that you know, they were very helpful and financing things like that. There have been some clashes over data the ownership of Tesla vehicles by government officials, for example, but on the whole, it's clearly an important relationship between the two. The big difference between what's happening in China and what's happening here in North America is there are just many, many different EV makers. There are so many more models out there that you can buy, and as you pointed out the top of the segment, many of them the average American would never even have heard of the brand nor the model, and so it's a more fiercely competitive and market with many more players.
Does it tell us anything about how an EV market could unfold here in the US? Or are we are the big three just two entrenched in American society?
Tim, I think I heard you praising your last guests for saying that we don't know what's going to happen in twenty twenty four, and that's refreshing, and I think that is the answer for the EV market. There is certainly now a big question mark over demand. You know, in the past, Tesla, as an example, has leaned on the idea that its production was greater than its deliveries because there's always a mad scramble at the end of the quarter where vehicles get caught in transit. But you know, if you move past that, and it's relevant with Rivian as well, you do come to the point where you ask is the demand really there? That will be the question for twenty twenty four and in this market, in particular North America, you will have seen the news over the holidays about the federal tax credit. The number of EV models in this country that are eligible has basically half, from two dozen to just thirteen. And those rules are now determined by basically, if you want to buy an EV and you want it to be eligible for the full seventy five hundred dollars federal tax credit, which is a big incentive right to buy something if seventy five hundred dollars off, it depends on the exposure that its components have to Chinese ownership. In other words, if your battery has a component that has ownership by a Chinese company greater than twenty five percent, it won't be eligible for that tax credit. And incentives are really key in this market.
Still you know, I do wonder too, Ed when we talk about the EV space. You know, Tesla certainly had the first mover advantage. We talked about that. I feel like, you know for some time here how that really helped elon Musk and Tesla specifically. But as more and more companies higher end, lower end, you know, come into the EV market, you know, doesn't make it more complicated for Tesla or is it just a case if it's going to be a market with you know, like the auto market today, a lot of different players.
Yeah, I mean the concern that a lot of analysts have about Tesla is that it doesn't have a very refreshed lineup. You know, we talk about the cyber truck being the kind of big story at the end of twenty twenty three, but most analysts see that being a pretty low volume product. If you are kind of a sci fi fan and you're an adventurer and you like being a bit different, you might buy the cyber truck.
So that's the risk.
There is an advantage, and many maintain that being the market incumbent, particularly in North America, is Tesla's strong point, but there is also brand loyalty in this country. I think I've brought this up on this segment so many times. But if you're fin drove in F one fifty and your grandfather drove in F one fifty and somebody offers you an electric F one fifty, there's a good chance you'll buy it. And so that's the concern for and lists. They want to see tests that bring in different types of models to keep the line up fresh to attract new buyers, or bring in models that more closely match the type of car that a gas engine car owner already drives well.
And Elon is a bit said to be right doing a revamp of its Model Y from its China plan, so maybe he is listening to what the public is saying.
Yeah, and they did that with the Model three two.
But what was so interesting is they did it in Asia or China first, then Europe, and we're waiting for those things to materialize in North America. Conversely, you know, the cyber truck is in North America only right now in really low volumes. So they have different strategies depending on that product type.
Hey, just want to get your thoughts on. Rivian ed shares down now by about ten point seven percent following the most in almost three months. The company reported quarterly deliveries that missed expectations. Why is start taking such a hit with this kind of you know, slight miss.
Yeah, it depends how much you believe the delivery story that Rivian tried to paint on the last earnings call. Rivian makes two consumer evs, a pickup truck and an suv, and it makes a commercial van for Amazon. And what they guided us going into this quarter was that the holidays are the biggest time of year for Amazon. They're not going to take delivery of brand new vans while they're trying to maximize those already on the road.
It's just logistically too hard.
So they said there would be a discrepancy between production and delivery where delivery was lower because Amazon would opt not to take delivery of those bug eyed delivery vans.
But the CEO RJ.
Scarrange has told me over a number of years now, the van is only twenty percent of production. So you do the math and say, okay, well you warned us this would happen. You're going to deliver fewery electric vans, but the van's are only twenty percent of your production. So why is overall production so much higher than delivery, and what does that tell us about the demand for your consumer vehicles? And there seems to be a lot of that that's not adding up somewhere in the market's mind.
All right, we're gonna leave it on that note. Is Tim mentioned Vivian shares down about ten percent in today's session. Company reports February twenty first, So mark your calendars in terms of an update. Ed Ludlow so appreciate it, co host of Bloomberg Technology in our San Francisco bureau.
You're listening to the Bloomberg Business Week podcast. Catch us live weekday afternoons from three to six Eastern on Bloomberg Radio, the Bloomberg Business app, and YouTube. You can also listen live on Amazon Alexa from our flagship New York station. Just say Alexa play Bloomberg eleven thirty.
All right, everybody, Apple something the most aid September shares down three point six percent. You heard Charlie just talking about it after Barklay's cutting their ratings and price target on the stock.
Alic's there bearish of expectation of soft.
Demand for the latest iPhone and a lack of new features in the next iteration of the iPhone, arguing that's just not going to prompt customers go out and upgrade. I don't know, I need a new phone. I need a new watch. There's a lot of the.
Apple that definitely need to watch. Like the first at Anti roadshow is calling, which phone do you have?
Twelve twelve?
Okay, yeah, you should probably get a new phone.
Well, Dan Ives has the opposite take. He is not a bear, just a couple of weeks ago coming out with a note that argued that Apple is going to be the first four trillion dollar market cap company and that will happen by the end of this year.
It's two point eight trillion dollars right now.
Yeah, so a little ways to go.
He's got an app or form and a two hundred and fifty dollars a share twelve month price target on Apple. Dan by the Way, managing director, senior equity research analyst atweb Bush Securities. He's joining us from New York City on the phone.
Hey Dan, so good to have you here.
My new year already feels better. What do you make of this call?
At Barkley's.
I'm going to assume if you were in a debate, you'd be like, Nope, you got it wrong.
I mean it's like the Groundhog Day and the movie.
Look, we've seen this before, right, I mean every year the fire and a crowded theater, you know, first few days of the year scares everyone. The reality is, I mean, is someone that spends so much time in Asia? This iPhone fifteen upgrade cycle has actually been strong. I mean, China has come through, I think, actually much better than feared. It's about the install based that many just continue to underestimate. You're talking about the best install based in the world. Services, double digital growth. I think a year from now, we look, this is gonna be a four trillion dollar market.
What do you make of the channel check weakness that Barkley's analysts are talking about. Are you not seeing channel check weakness?
I mean, look, I mean everyone has their opinion, but for the last year, people have talked about channel check weakness and it's essentially been a fictional Netflix story, you know, in terms of what to actually come through, I'm not saying it's Roses and Champagne. But when I look relative to street expectations and relative to the upgrades, I mean, tim, we have not seen any cuts at this point in the cycle out of our Asian supply chain checks and you would have already seen that now.
And I think that's Look, Apple's like.
Rocky Balboa every time it's over the growth at a trillion, trillion and a half two trillion, three trips, and I think that cycle it speaks to our view of we're in the beginning, in our opinion, of a new tech bowl market and to be bearish on Apple going into this, it's the exact opposite of what we would be doing.
Having said that, Dan, you know, up almost fifty percent last year, is there some expectation that some investors are going to be taking profits that there could be a little bit of a pullback after such a run like that? I mean, do the fundamentals justify that almost fifty percent run ups in twenty twenty three?
Yeah, And look, and we've talked about it.
You're going to have pullbacks like we always do, and pullbacks are healthy.
But if from a valuation, I mean our view, it's just some of the parts.
And that's really what started to happen with tech with the godfather of AI and video.
We've seen it with Google, We've seen it with Microsoft. That's what's happened with Apple.
I mean, when you look at the valuation today, this is Apple with zero valuation for AI, which is going to be the next phase of the story. So our view is we'll have some ebbs and flows here, but this is one where fundamentally we continue to think it's one where it goes higher on multiple it goes higher in numbers.
Does Apple Like I'm looking at revenues for twenty twenty three, Greater China was about almost seventy three billion, America's as a group one hundred and sixty two billion, So certainly the biggest market. Will there always be a Chinese market for Apple products?
In your view?
I mean and look and I think ink it's important because if you go back over the last seventy years, the bear story in Apple, if you go back to trillion ago, it's China, right, Eventually that's the big bad way. Eventually that's going to that market domestically, geopolitical. The reality right now twenty percent iPhones coming out of China and you have one hundred million iPhones and trying just in an upgrade opportunity to lose. So that's something where the growth continues to actually expand in China for Apple, and I think you'll you'll continue to have This is kind of a debatable point, but this is something that's just going to continue to expand, not contract, relative to what the average Chinese consumer wants.
Well, it's interesting because we just talked about ASML and the Biden administration putting pressure on it to not sell some of its really key China semi manufacturing equipment to that country. Do you think politics geopolitics between the US and China ultimately find a way to get along or does that continue to though I just wonder doesn't it eventually make it more complicated for a company like Apple. Although Apple very important to China in terms of the amount of workers it's got putting to work.
Yeah, I mean, I peek its second biggest employer in China, right and I think even look at Tesla today, China numbers strong. So I think when you look at the political you know, sort of tightrope that's happened right now because it's an AI arms or so let's just call it get it between US and China and right now out because in video because of Microsoft and the US is actually ahead, it's going to be a balancing act. But our view is geopolitical as a background noise. I mean, this is the biggest tech transformation we've seen in thirty years, and it's one you're always going to have these worries.
The reality is it's a.
Dysfunctional relationship that continues. They both need each other in terms of US and China, and that will continue to go down this path. And actually the tensions, I'd say, if anything, has maybe been toned down a bit relative to what we've seen over the last three four months.
Hey, Dan, Ives want to get your take on another part of the Barkley's downgrade, which has to do with the iPhone sixteen. It's a little early for us to be talking about the iPhone sixteen, after all, these things are unvailed usually in September, but analyst at Barclays argue that there are no features or upgrades that are likely to make the iPhone sixteen more compelling. What do you make of that?
Look, they're probably the same ones that said you wouldn't have a big ten team in the National Championship and now you have two. So look, it's just look, it's always going to be. It's easy to take shots, right, But the reality you're talking about two billion iOS devices and you have one point three billion iPhones.
That upgrade opportunity alone.
Is going to be two hundred forty two and fifty million units. And you look at iPhones sixteen, it goes back to Apple. They played chess, others played checkers. That's most valuable company in the world. But you will look, the heaters are going to heat and you're gonna come out, especially coming out in the new year, the fire and a crowd theater call I get it. You know, we've seen it many times in our almost twenty five years covering tech, but we've view as a golden buying opportunity and not time to you know, to hit the you know, the elevator of the cell button.
So what brings what brings Apple to four trillion dollars? What is the next big thing from Apple? What's the one more thing? Is Steve Jobs used to say.
It's good and look and obviously, you know, one of the best thought leaders out there at German. You know, it talks about a bit, but it's ai. I mean, you have the biggest install based in the world. It's about monetized. We viewed it's going to be an AI app store. It's going to be ultimately something that gets rolled out over next year, and this is going to be AI apps within the services flywheel.
But is that vision pro is that the conduit is that the device is that the platform?
Vision pro from a form factor is the early stages of where this is all head and see the see the The quick take would be like vision Pro thirty five hundred. It's not going to change the mat that that's not really a focused vision Pro because two years from now that's gonna be a twelve hundred dollars basically look like sunglasses.
It's all about developers. Now, developers are going to build more and more apps.
They're gonna be AI generate, ar VR, and that's going to further mind to the insalt base. But tim it just goes back to whinen AirPods when they release AirPods and everyone's like, if.
They sell more than five million in a year, that.
Would be the most unbelievable eighth wonder of the world.
I think I bought five million. Yes, sure.
They sold ninety eight million in a year.
So I'm just saying, like Apple's want it goes back to the Rocky about Boa just continues to think it's over.
Next thing. You know, you're watching Rocky eight.
If though some of what Barkleay's comes true and there are some issues, would you start to rethink a little bit differently or would you just say, maybe this is a little bit of a slower year than we thought.
I just view it as here and there, even some conservatism.
I view it as overall slight turbulence.
Chop that's ultimately going to forty thousand feet was smooth out in terms of where this.
Is all heading.
So that that's sort of my view in terms of how this is going to go. I'm not saying it's not gonna be. I can hit some chop getting there, But that's the NATS for Apple. That's that's how it always is, and that's why you're always going to have one where the skeptics try to say this is the year, it's over, innovations done, and yet at the top of that mountain is Cook and Cooper Tina.
So what about Musk and Tesla? A little bit of a transition, not a good one, sorry, another, but.
You've got an outpor form.
You've got a three hundred and fifty dollars I think a share price target on this one. Some news about them falling behind BYD and Corley ev sales growth slowing. What's your thoughts on Tesla here?
I mean deliveries today was the fucks the muscles, I mean beef the street China. A lot of the price cut, that price war is actually subsided strong China numbers, cyber truck. You know, we look demand to supplies ten to one, you know, in terms of what we see out there, and I think this is actually the next phase of the Tesla growth story that's come in the next one two three years in terms of full self driving supercharger as well as they you know, ultimately they're diving into deep end of the pool.
Others are peeling back in Detroit. So for Tesla, it's another one.
Where many continue to bet against Musk and Tessa that's been the wrong bet.
How do you feel Dan about by D it's now ahead of Tesla when it comes to quarterly EV cells.
I mean, I'm a big fan of BYD. What they've done, I've seen it firsthand is amazing. It's a two horse race in terms of essentially what's happening here. But this is not a zeros gat. There's there's not just one play. We're talking about the biggest tech trans the biggest transformation to the auto industry since nineteen fifties, the green tidal wave that's come.
And others will say, oh, is the demand.
Is Yeah, that's what I was going to say, is the demand there? I was having a conversation with my dad about this. Who loves his EV and you know he has a Ford and I've talked about this a lot, Carol, but yeah, you know, he took him so long to get it after he ordered it, Dan, And now they can't get these things off of lots because people aren't buying them. And he had a good point. He said, you know, everyone who has an EV actually wants them, and you can get an internal combustion engine car for a lot less money. What about the demand question.
Dan just got about thirty forty seconds.
I mean, for demand, I think it's it was maybe overestimated a bit, but we're still going at twenty five to thirty percent of automobiles are going to be EV from three to four percent today. And that's why eventually likely your dad might be driving in the EV in your future.
Oh, he's got the Machi loves it, but he had to wait for ever. Right, Yeah, he had to wait forever to get it. My mom loves it too, she drives it more than my dad.
Do you drive an evy just quickly?
Yeah?
So.
And I'm also on the cyber truck list. So when I'm in the cyber truck, I'll pick you guys up. Yeah, on the waxing and then we can drive it.
Deal deal, deal, den Ives. I'm such a treat. Great to have you here on this first trading day of twenty twenty four. Only thing as I wish we could see you because you are a killer dresser.
It's so weasy.
Next time, yeah, next time, get home safely. Dan Ives, Managing director, Senior equity Research Channel set Woulbush Security is talking to us about Apple and Tesla, two of some big app performers last year.
He's bullish on twenty four.
He is, indeed, all right, you're listening and watching Bloomberg BusinessWeek.
This is Bloomberg. I'm brothering Marco.
Journal.
Now about you let me drive?
No, no, no, no, honey, please, I'll do the gravel.
Wait, I want to drive.
It's a good question, Drives.
This is the Drive to the Globe on Bloomberg Radio.
All Right, just under eighteen minutes to go in the first trading day of twenty twenty four here in the United States, and we've got stocks down across the board, as you just turned from Charlie. Really the underperformance today in the NASDAC down about two percent.
I'm still writing twenty twenty three on my checks.
I just gonna think, does anybody you still like that?
No?
Is it?
The joke is that we don't write checks anymore.
I think I have one or two people that I sometimes write a check to.
But yeah, remember we used to run out.
Like oh I got to order new checks. No, the checks that I have are like three addresses a go. What do you say?
What are you saying?
I will tell you what Our next guest is saying. He says, cash is still king. Let's get to the drive for the clothes with us. As Rich Wise, chief investment officer of Multi Asset Strategist, over to American Century Investments two hundred and thirty billion in assets under management, and Tim Ridge is joining us on zoom from a Los Angeles.
May Rich good to have you with us this afternoon. From Sunny La why is cash still king?
Well, it's been king, i'd argue, you know, for the last two years. If you look from the start of twenty twenty two through the end of twenty twenty three, cash basically outperformed most equities, maybe not the Magnificent seven, but most equity portfolios. So cash has been king, likely to be king at least for the first half of this coming year, at least, we believe, you know, you can make the argument that stocks have gotten a little ahead of themselves, whether or not we have a harder soft landing. We don't believe there's going to be six fed rate cuts this year, and right now the US has this I guess you'd call it a dubious distinction of topping the charts in the developed economy world on two key financial ratios debt to GDP and PE ratio, which you're hard to reconcile if you're betting on equities. This for six months of this year.
But what if you had cash that you wanted to deploy over the last couple of years and you kept it on the sidelines because money market funds were paying you five to five and a quarter and you missed this run up at the end of twenty twenty three, and you're sitting there with this pile of cash and you're like, wait a second. Now, I'm back to where I started in early twenty twenty.
Money manager of mine. Yeah, and we missed the rally.
Yeah, listen, you know, market timing. In the short term, it's a tough thing. I'd rather call sun spot activity quite frankly. But for the longer term, any reasonable investment horizon. Again, I think that the downside potential of stocks, the disappointment potential here economically and in earnings outweighs, you know, the potential upside, and cash is safe. High grade fixed income just suggest you wait a little bit longer here, just wait for some capitulation.
Well, I feel like people are back, I got to say, Rich, I feel like investors are getting the memo. US money market fund assets rebounded after two weekly outflows, so assets rose to five point eight nine trillion in the week to December twenty seventh. This is coming from the Investment Company Institute. So we did see some back to back weekly declines, but we saw the money market assets come back, led higher by flows into government funds. You know, we talked a lot last week on air about all of the money sitting in money market funds and when it comes back, does it ultimately head into the equity market? Is that your best guess right now?
Yeah, I'd say that's a nice summary of it. Money building on the sidelines, But it's just hard to bet on equities right now, again because it's hard to see where the fuel is for higher pe ratios. If you assume a corporate is going to grow by what maybe five percent this year, maybe five to ten percent at best, with interest rates where they are, where's the fuel. The manufacturing sector still in recession, housing sector still not doing well. Arguably might might be turning the corner, but yet to be seen. You have the lagged effects of monetary policy still rafting their way through the economy. Obviously, you have geopolitics out there as a cloud and horizon and an election year. It's just there's a lot, a lot of headwinds here for equities, a lot of potential downside. It's just the safe play, Okay, a bird in hand seems to be the more prudent path, at least for many of our portfolios at the margin. Not saying that get out of stocks altogether. But as you're seeing today, taking some profits from a very healthy last year, at least in the last quarter, run up and wait and see what happens here on the economic side, especially in the labor markets. And we're going to get a good look at that this week, right.
Yeah, we will. So my question for you is about capitulation and what capitulation actually looks like. When you say people should wait and see or wait for capitulation, what's a signal to you that they should be buying again?
Oh, it's good, it's going to mean a ten or a twenty percent crack in the equity market. So let's say ten percent draw down. You'll forgive the expression. They call it the market puke, okay, but it's basically when the market gets it out of its system, it takes out some of this fluff in pe ratios. Right now, where's the SMP sitting. I think it's somewhere around twenty twenty three times earnings again, with rates where they are now, corporate earnings maybe in the single digitus year. That that's a lot to ask from equities, and so we would expect to draw back inequities in this first quarter at.
Some point a little perspective that I just want to jump in for a second, because, you know, listening in on some of the guests on earlier morning TV and radio, one of the guests pointing out that if you look at the market over the last two years, the S and P five hundred, it's really been a sideways move. We really haven't gone anywhere. We're up maybe point zero eight percent. So having said that, I don't know, what does that what kind of insight does that tell you about kind of the levels we are today? And maybe there is some more room to the upsite despite the dramatic rally we saw late last year, and how much of it is contingent on soft landing versus hard landing.
Right, I think mark equity market arguably fairly priced. To your point, Carol, that it's basically gone sideways and it's a coin flip depending on where we're going economically here. But our view if you look, let's say at the last I think it's twelve, you know, monetary policy hike sessions. I think that goes back to nineteen sixty or so. Eight of those have led to recession. Only four were soft landings, and the eight that did lead to a hard landing were very similar to the scenario we just sold, where rates rose precipitously in a hurry and the manufacturing and housing sectors got hit hard. So this scenario looks a lot more to us like those hard landing scenarios. But again, whether it's a hard or soft landing, I think that's an academic debate to some point, because I believe the equity markets already priced in at least a good portion of the soft landing, Goldielocks, immaculate disinflation, Santa Claus rally, all of which have one thing in common, which is that they're fairy tales.
All right, Well, we shall see.
Of course, it's just the first trading day of twenty twenty four. Which why is chief Investment Officer to ascid Strategies at American Century Investments On zoom from La This is Bloomberg.
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