Bloomberg Audio Studios, podcasts, radio news.

Bloomberg Audio Studios, podcasts, radio news.

You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at ten am Eastern on Affle Car Playing and Broud Auto with the Bloomberg Business app. Listen on demand wherever you get your podcasts, or watch us live on YouTube.

You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at ten am Eastern on Affle Car Playing and Broud Auto with the Bloomberg Business app. Listen on demand wherever you get your podcasts, or watch us live on YouTube.

Interesting on those isms expansionary territory here ism manufacturing coming in at over fifty. So let's get to the man behind the data. Tim Fioria's chair for the Institute of Supply Management's Manufacturing Business Survey Committee. Tim we knew we were in the trough. Is this legit expansion here?

Interesting on those isms expansionary territory here ism manufacturing coming in at over fifty. So let's get to the man behind the data. Tim Fioria's chair for the Institute of Supply Management's Manufacturing Business Survey Committee. Tim we knew we were in the trough. Is this legit expansion here?

Yeah?

Yeah?

Absolutely, Alex, Good morning, Paul, Good morning Alex. So this is the third month for covering demand and there's not a lot to complain about in this report. I mean, we've got good demand to beat the seasonals expanded for it's on average the last three months, it's an expansionary period. We had production go up, which is output pretty significantly. We were continuing to have layoffs, which I think is good, but that should probably end soon. Suppliers are starting to stiffen up. So overall, this is a very good report. Remember last time we spoke August September, we declared that we thought we were in the manufacturing trough. In January we indicated that we thought we're starting to climb out. We climbed out in January, a little bit of February, even more now in March. So we're well on our path here to a good manufacturing recovery.

Absolutely, Alex, Good morning, Paul, Good morning Alex. So this is the third month for covering demand and there's not a lot to complain about in this report. I mean, we've got good demand to beat the seasonals expanded for it's on average the last three months, it's an expansionary period. We had production go up, which is output pretty significantly. We were continuing to have layoffs, which I think is good, but that should probably end soon. Suppliers are starting to stiffen up. So overall, this is a very good report. Remember last time we spoke August September, we declared that we thought we were in the manufacturing trough. In January we indicated that we thought we're starting to climb out. We climbed out in January, a little bit of February, even more now in March. So we're well on our path here to a good manufacturing recovery.

And Tim you always tell us to kind of focus on the new orders, and new orders showed some expansion as well.

And Tim you always tell us to kind of focus on the new orders, and new orders showed some expansion as well.

Yeah, they sure did. They pop back above fifty. We also had pretty significant new expert orders. There were a flat expansion to the prior month, but they're expanding. Nonetheless, backlog was stable, which is okay, it's in the mid forties. That's all right. That'll come back probably in the early summer. And cuss Er inventories went way too low again, which is very good. So we've got demand increasing, we've got production increasing, we've got staffing being finalized.

Yeah, they sure did. They pop back above fifty. We also had pretty significant new expert orders. There were a flat expansion to the prior month, but they're expanding. Nonetheless, backlog was stable, which is okay, it's in the mid forties. That's all right. That'll come back probably in the early summer. And cuss Er inventories went way too low again, which is very good. So we've got demand increasing, we've got production increasing, we've got staffing being finalized.

Here.

Here.

We still had a one to one hired a fire ratio, which means that we still have a lot of companies letting people go. Seventy percent of our layoffs attrition freeze activities were actually layoffs, so you know, people have been getting a little bit more urgent on the tool to use, and like I said, on the input side, we had inventory still contracting by getting very close to fifty. Across all the industry sectors.

We still had a one to one hired a fire ratio, which means that we still have a lot of companies letting people go. Seventy percent of our layoffs attrition freeze activities were actually layoffs, so you know, people have been getting a little bit more urgent on the tool to use, and like I said, on the input side, we had inventory still contracting by getting very close to fifty. Across all the industry sectors.

They all did well.

They all did well.

None of them did exceptionally well, but most of them came in above fifty of the top six. If they didn't come in above fifty, they were like forty nine. So, you know, March is a big manufacturing month. We have seasonal factors that hit us. We overcame the seasonal factors. We only had thirty percent of manufacturing GDP declining in the month, down from forty percent to prior month. And even more importantly, only one percent of manufacturing GDP contracted below forty five.

None of them did exceptionally well, but most of them came in above fifty of the top six. If they didn't come in above fifty, they were like forty nine. So, you know, March is a big manufacturing month. We have seasonal factors that hit us. We overcame the seasonal factors. We only had thirty percent of manufacturing GDP declining in the month, down from forty percent to prior month. And even more importantly, only one percent of manufacturing GDP contracted below forty five.

Yes, alex So Tim, so you were mentioning the layoffs, like legit layoffs. Do we expect that to end if we wind up seeing manufacturing truly recover? So, like you mentioned recovery, and I'm wondering what that looks like, and then what the reflection is on the job market.

Yes, alex So Tim, so you were mentioning the layoffs, like legit layoffs. Do we expect that to end if we wind up seeing manufacturing truly recover? So, like you mentioned recovery, and I'm wondering what that looks like, and then what the reflection is on the job market.

So you know, a couple of reasons I think companies are cleaning up their staffing. You know, we did a lot of urgent things over the last couple of years to get headcount, probably hired some people that we don't really want to keep, so some of that cleansing is going on. But we are going to cross that conversion line where you need the labor regardless of whether it's one hundred percent productive or ninety five percent production. So I think we're going to see that layout activity start to diminish. In fact, I'm going to start to reverse symmetric and start to look for hiring activities. So I would guess that probably by June we'll see that slow down, especially for the second half of the year.

So you know, a couple of reasons I think companies are cleaning up their staffing. You know, we did a lot of urgent things over the last couple of years to get headcount, probably hired some people that we don't really want to keep, so some of that cleansing is going on. But we are going to cross that conversion line where you need the labor regardless of whether it's one hundred percent productive or ninety five percent production. So I think we're going to see that layout activity start to diminish. In fact, I'm going to start to reverse symmetric and start to look for hiring activities. So I would guess that probably by June we'll see that slow down, especially for the second half of the year.

Tim thanks so much for joining us. As always, always appreciate getting your insights here for this data. Tim Fury, chairman of the Manufacturing Business Survey at the Institute for Supply Management. Again, the ISM manufacturing headline number came into fifty point three, signaling expansion above fifty. The consensus was for forty eight point three, so a well above consensus and last period a last month was forty seven point eight. So it's TIMO saying a good momentum there for the manufacturing site.

Tim thanks so much for joining us. As always, always appreciate getting your insights here for this data. Tim Fury, chairman of the Manufacturing Business Survey at the Institute for Supply Management. Again, the ISM manufacturing headline number came into fifty point three, signaling expansion above fifty. The consensus was for forty eight point three, so a well above consensus and last period a last month was forty seven point eight. So it's TIMO saying a good momentum there for the manufacturing site.

You're listening to the Bloomberg Intelligence podcast. Catch us live weekdays at ten am Eastern on applecar Play and Android Auto with the Bloomberg Business. You can also listen live on Amazon Alexa from our flagship New York station Just Say Alexa playing Bloomberg eleven thirty.

You're listening to the Bloomberg Intelligence podcast. Catch us live weekdays at ten am Eastern on applecar Play and Android Auto with the Bloomberg Business. You can also listen live on Amazon Alexa from our flagship New York station Just Say Alexa playing Bloomberg eleven thirty.

The avenue is It's interesting. Is UPS as well as FedEx?

The avenue is It's interesting. Is UPS as well as FedEx?

Two things to watch one.

Two things to watch one.

FedEx won a contract to be the cargo carrier for the USPS. FedEx, on the other hand, failed to come up with a deal at a container deal for the government as well, So a little bit of divergence between the two.

FedEx won a contract to be the cargo carrier for the USPS. FedEx, on the other hand, failed to come up with a deal at a container deal for the government as well, So a little bit of divergence between the two.

So who do we go to?

So who do we go to?

Lee Clasgow, Bloomberg Intelligence senior transport logistics and shipping analyst who was off last week during the biggest shipping logistic nightmare that we've.

Lee Clasgow, Bloomberg Intelligence senior transport logistics and shipping analyst who was off last week during the biggest shipping logistic nightmare that we've.

Seen quite a long time.

Seen quite a long time.

That nicely, Yeah, Lee, did you get a vacation or not so much?

That nicely, Yeah, Lee, did you get a vacation or not so much?

Not so much. I got woken up pretty early with one US coast time, so it was a fun day for me.

Not so much. I got woken up pretty early with one US coast time, so it was a fun day for me.

Yeah, I can imagine that.

Yeah, I can imagine that.

Hence the beard.

Hence the beard.

Now, hence the beard.

Now, hence the beard.

He just got a lot older over the last week or so. So there's a lot to kind.

He just got a lot older over the last week or so. So there's a lot to kind.

Of get through.

Of get through.

Let's get to the positive UPS news about being that cargo carrier for USPS.

Let's get to the positive UPS news about being that cargo carrier for USPS.

Yeah, so you know, This is somewhat of a surprise.

Yeah, so you know, This is somewhat of a surprise.

I think most people were expecting the FedEx would lose maybe about half of that business, but they ended up losing all of it. It's about one point seven to one point nine billion dollars in revenue, makes up roughly around four to five percent of their express business, maybe two percent of their total business.

I think most people were expecting the FedEx would lose maybe about half of that business, but they ended up losing all of it. It's about one point seven to one point nine billion dollars in revenue, makes up roughly around four to five percent of their express business, maybe two percent of their total business.

So it's a.

So it's a.

Big loss for FedEx. And you know, while FedEx is losing, Ups is gaining. What's great about this is maybe not so much the revenue and.

Big loss for FedEx. And you know, while FedEx is losing, Ups is gaining. What's great about this is maybe not so much the revenue and.

The yields that it provides.

The yields that it provides.

It's the stability of the freight that it's going to be getting into its network. And when you have any sort of freight network, you want equilibrium. You want you want to be able to predict what you're going to to need in terms of resources, and this provides a good level set of predictability for them, and they can build density onto these routes where the US Postal Service will be leveraging.

It's the stability of the freight that it's going to be getting into its network. And when you have any sort of freight network, you want equilibrium. You want you want to be able to predict what you're going to to need in terms of resources, and this provides a good level set of predictability for them, and they can build density onto these routes where the US Postal Service will be leveraging.

Why is the Postal Service making the switch, that's a great question.

Why is the Postal Service making the switch, that's a great question.

They were negotiating with fed X. I guess the two parties couldn't come to a conclusion in terms of an agreement, so therefore they just decided to part ways. You know, one would guess that this isn't maybe not the most high margin business for whether it's UPS or fed X. But again, I think there is a benefit to having this because it does create a lot of density in their network.

They were negotiating with fed X. I guess the two parties couldn't come to a conclusion in terms of an agreement, so therefore they just decided to part ways. You know, one would guess that this isn't maybe not the most high margin business for whether it's UPS or fed X. But again, I think there is a benefit to having this because it does create a lot of density in their network.

Let me ask a silly question. When I'm looking to mail package, the United States Postal Service does not even come into my mindset.

Let me ask a silly question. When I'm looking to mail package, the United States Postal Service does not even come into my mindset.

Oh god, no, no, who still.

Oh god, no, no, who still.

Uses the US Postal Service versus FedEx? Or or you know a UPS store that's right next to the Starbucks in town. I can go, you know, get my cafe mocha there. I'm not going to the post office. Who uses a post office these days?

Uses the US Postal Service versus FedEx? Or or you know a UPS store that's right next to the Starbucks in town. I can go, you know, get my cafe mocha there. I'm not going to the post office. Who uses a post office these days?

I mean I do?

I mean I do?

I guess I'm you do, but I do sometimes. But but the reality is the Postal service. You know, obviously you were not sending letters to Grandma anymore. But you know what we are doing is we're ordering stuff online and the US Postal Service provides a lot of the final mile delivery.

I guess I'm you do, but I do sometimes. But but the reality is the Postal service. You know, obviously you were not sending letters to Grandma anymore. But you know what we are doing is we're ordering stuff online and the US Postal Service provides a lot of the final mile delivery.

So you might be.

So you might be.

Ordering from a department store or you know, a dot com etailer, and you know they might be using UPS and FedEx for the line haul, but they might be leveraging the postal service for that final mile deliver because the postal service at the end of the day has to go to everyone's address, and it's it's a cheap way to do it, you know. And as more and more people are willing to maybe you don't need something, maybe you don't need that T shirt overnight, you can wait a couple of days, you know, injecting that freight into the postal service.

Ordering from a department store or you know, a dot com etailer, and you know they might be using UPS and FedEx for the line haul, but they might be leveraging the postal service for that final mile deliver because the postal service at the end of the day has to go to everyone's address, and it's it's a cheap way to do it, you know. And as more and more people are willing to maybe you don't need something, maybe you don't need that T shirt overnight, you can wait a couple of days, you know, injecting that freight into the postal service.

That makes sense.

That makes sense.

And Amazon's is a big user of that final mile delivery as well.

And Amazon's is a big user of that final mile delivery as well.

My daughter does send letters to her grandmother.

My daughter does send letters to her grandmother.

I'm just putting that out there on the flip side, and I should point out they mentioned the margin part of it. So we talked to the UPS CEO last week on television, and their whole pitch is that going forward they want to focus on margin and pricing over volume.

I'm just putting that out there on the flip side, and I should point out they mentioned the margin part of it. So we talked to the UPS CEO last week on television, and their whole pitch is that going forward they want to focus on margin and pricing over volume.

Does this fit into that strategy.

Does this fit into that strategy.

Yes and no.

Yes and no.

So yes, because so what they're going to be focusing on are verticals like small to mid sized shippers, and those shippers come with very high margins relative to you know, large enterprise companies that are out there, so they're going to be really focused on that type of that type of business.

So yes, because so what they're going to be focusing on are verticals like small to mid sized shippers, and those shippers come with very high margins relative to you know, large enterprise companies that are out there, so they're going to be really focused on that type of that type of business.

But you know, what the what the.

But you know, what the what the.

Volumes from the postal service brings is a level of density that you can leverage because it's all about operational leverage, right. You know, no matter what you are in transportation, operational leverage is pretty high. Because you add like one more piece of freight, that piece of freight tends to have higher margins than the first twenty pieces of freight. And so what this will do is this will probably help them provide a base level of cost coverage and you know what a profitable cost coverage at that and then all these additional volumes that they're getting from higher margin might even carrier, might even carry higher.

Volumes from the postal service brings is a level of density that you can leverage because it's all about operational leverage, right. You know, no matter what you are in transportation, operational leverage is pretty high. Because you add like one more piece of freight, that piece of freight tends to have higher margins than the first twenty pieces of freight. And so what this will do is this will probably help them provide a base level of cost coverage and you know what a profitable cost coverage at that and then all these additional volumes that they're getting from higher margin might even carrier, might even carry higher.

Incremental margins for UPS.

Incremental margins for UPS.

So long term it could have a very positive impact on margins. Near term, it might have somewhat of a mix, a negative mixshift, if you will, but you know, we think that it does make sense for them to take this volume. And other verticals also that they talked about during their analyst day were the healthcare vertical, which tends to be highly profitable just because of the high touch nature and the high service level of that freight that goes through their network.

So long term it could have a very positive impact on margins. Near term, it might have somewhat of a mix, a negative mixshift, if you will, but you know, we think that it does make sense for them to take this volume. And other verticals also that they talked about during their analyst day were the healthcare vertical, which tends to be highly profitable just because of the high touch nature and the high service level of that freight that goes through their network.

So Lee looking at the air freight companies to the FedEx, the UPS, how is business? How are volumes these days that they kind of peeled off from the pandemic or how is volume?

So Lee looking at the air freight companies to the FedEx, the UPS, how is business? How are volumes these days that they kind of peeled off from the pandemic or how is volume?

Yeah, so, you know, we're coming off those highs that we reached during the pandemic when everyone was sitting at home and ordering toilet paper online or at least trying to get some toilet paper online.

Yeah, so, you know, we're coming off those highs that we reached during the pandemic when everyone was sitting at home and ordering toilet paper online or at least trying to get some toilet paper online.

You know, we're back to a more normalized level. You know.

You know, we're back to a more normalized level. You know.

But the reality is what the pandemic has done, is it really increased that e commerce penetration. It kind of kind of brought brought the penetration forward by three to five years.

But the reality is what the pandemic has done, is it really increased that e commerce penetration. It kind of kind of brought brought the penetration forward by three to five years.

Which is a net positive.

Which is a net positive.

But you know, we have to go back to this quote unquote normalization process, which feels like a negative, but it's really not because once we get this space, which I think we're building right now, you know, we should see positive growth from here on out.

But you know, we have to go back to this quote unquote normalization process, which feels like a negative, but it's really not because once we get this space, which I think we're building right now, you know, we should see positive growth from here on out.

Well, now since you're back, I can also ask you about Baltimore. What is the news today?

Well, now since you're back, I can also ask you about Baltimore. What is the news today?

Like?

Like?

Where are we I know that there's some salvage ships that are coming in to try and get the stuff.

Where are we I know that there's some salvage ships that are coming in to try and get the stuff.

Off the bottom of the port. Where are we here? How's it going?

Off the bottom of the port. Where are we here? How's it going?

I'm not there, and I'm not My hands won't get dirty because I just I don't have those kind of hands. But you know, it could take four to six weeks to clean up the channel area to get the port reopened. You know, obviously to rebuild the bridge, we're talking two to four years, probably closer to four than two, and.

I'm not there, and I'm not My hands won't get dirty because I just I don't have those kind of hands. But you know, it could take four to six weeks to clean up the channel area to get the port reopened. You know, obviously to rebuild the bridge, we're talking two to four years, probably closer to four than two, and.

So that's going to take time.

So that's going to take time.

The freight that is going to be impacted can be moved to other ports, whether it's coal going to the Port of Norfolk versus you.

The freight that is going to be impacted can be moved to other ports, whether it's coal going to the Port of Norfolk versus you.

Know, going out of Baltimore.

Know, going out of Baltimore.

A lot of roll on roll off equipment, whether it's ag or commercial equipment in addition to automotives could go to Philly or New York, New Jersey ports. So there's going to be you know, there's going to be other ports that can pull the slack what you're going to see. Because we track weekly rail volumes, you're probably can see some volatility and the rail volumes, especially for Norfolk, Southern and CSX, the two eastern railroads, and that might make earnings maybe a little lumpy or a little lighter than what expectations were. But this is not like a huge dislocation like we saw, whether it's during the pandemic, and it's probably even less of.

A lot of roll on roll off equipment, whether it's ag or commercial equipment in addition to automotives could go to Philly or New York, New Jersey ports. So there's going to be you know, there's going to be other ports that can pull the slack what you're going to see. Because we track weekly rail volumes, you're probably can see some volatility and the rail volumes, especially for Norfolk, Southern and CSX, the two eastern railroads, and that might make earnings maybe a little lumpy or a little lighter than what expectations were. But this is not like a huge dislocation like we saw, whether it's during the pandemic, and it's probably even less of.

Of a big deal if you will.

Of a big deal if you will.

Then what we saw in what we're seeing right now in the Red Sea in terms of the impact, I think we're gonna this is really like a from a supply chain standpoint, It is really a short term negative impact where we'll find the new normal. I guess you know, I do say that a lot in my job, what the new normal is. But we will find a new normal as freight finds other ports to go short term until the Port of Baltimore opens up, which hopefully will be in less than two months time.

Then what we saw in what we're seeing right now in the Red Sea in terms of the impact, I think we're gonna this is really like a from a supply chain standpoint, It is really a short term negative impact where we'll find the new normal. I guess you know, I do say that a lot in my job, what the new normal is. But we will find a new normal as freight finds other ports to go short term until the Port of Baltimore opens up, which hopefully will be in less than two months time.

Hey.

Hey.

Lee, when you talk to your institutional investor clients and you're talking about the transportation space broadly defined, where are people most excited?

Lee, when you talk to your institutional investor clients and you're talking about the transportation space broadly defined, where are people most excited?

Is it the rails?

Is it the rails?

Is it the trucks? Is it the marine shippers?

Is it the trucks? Is it the marine shippers?

Yeah, so that's a great question.

Yeah, so that's a great question.

I don't really think it's it's it's on a mode basis right now.

I don't really think it's it's it's on a mode basis right now.

I think it's really by a company's story.

I think it's really by a company's story.

You know, you have a Norfolk Southern where you have a lot of activist investor activists activity going on there, so there's a lot of excitement about, you know, how that company can improve its margins.

You know, you have a Norfolk Southern where you have a lot of activist investor activists activity going on there, so there's a lot of excitement about, you know, how that company can improve its margins.

Uh.

Uh.

In the West, you have a new Pacific on on the rail side, where you have a new CEO that comes in with a lot of precisions scheduling, railroading experience and uh, you know, expectations are he's going to be able to improve margins. And then on the growth side of things in the rail industry, you have a Canadian Pacific uh Kansas City, which is uh, you know, the byproduct of a merger that happened last year, and they had some great growth opportunities because you know, they're the only railroad that touches Canada.

In the West, you have a new Pacific on on the rail side, where you have a new CEO that comes in with a lot of precisions scheduling, railroading experience and uh, you know, expectations are he's going to be able to improve margins. And then on the growth side of things in the rail industry, you have a Canadian Pacific uh Kansas City, which is uh, you know, the byproduct of a merger that happened last year, and they had some great growth opportunities because you know, they're the only railroad that touches Canada.

The US and Mexico. And as you know, near.

The US and Mexico. And as you know, near.

Shoring is a long term, slow, but long term secular growth story that you know, we're looking at and they're they're they're expected to benefit the most from from there. And then broadly speaking, I think people are just waiting to see the truckload cycle rate cycle start to turn.

Shoring is a long term, slow, but long term secular growth story that you know, we're looking at and they're they're they're expected to benefit the most from from there. And then broadly speaking, I think people are just waiting to see the truckload cycle rate cycle start to turn.

We believe it's going to.

We believe it's going to.

Happen this quarter. We believe we're bouncing along the bottom. What happened in Baltimore could kind of give a boost to certain kind of equipment types like flatbed equipment near term here, which could be a great base to work on positive pricing, which the truckload industry.

Happen this quarter. We believe we're bouncing along the bottom. What happened in Baltimore could kind of give a boost to certain kind of equipment types like flatbed equipment near term here, which could be a great base to work on positive pricing, which the truckload industry.

Does really needs before we let you go.

Does really needs before we let you go.

I mean on that point, we had the ISM manufacturing data coming in really strong, and you have been expansionary territory for the first time since July of twenty twenty two. It has been bouncing along the bottom and troughing for like five or six months. You're saying something similar for the transportation sector in some ways, does it reaccelerate, Like what does the upturn look like?

I mean on that point, we had the ISM manufacturing data coming in really strong, and you have been expansionary territory for the first time since July of twenty twenty two. It has been bouncing along the bottom and troughing for like five or six months. You're saying something similar for the transportation sector in some ways, does it reaccelerate, Like what does the upturn look like?

So the ISM index is probably a great precursor to less than truckload demand. So think companies like XPO, Old Dominion, even FedEx Freight is the largest LTL carrier out there. Tonnage has been in decline h broadly speaking, and what the ISM usually is, it kind of leads demand.

So the ISM index is probably a great precursor to less than truckload demand. So think companies like XPO, Old Dominion, even FedEx Freight is the largest LTL carrier out there. Tonnage has been in decline h broadly speaking, and what the ISM usually is, it kind of leads demand.

By by three to six months.

By by three to six months.

So the fact that it inflected into expansion territory is a positive.

So the fact that it inflected into expansion territory is a positive.

Sign for the LTL space. You know, That's how we look when we're looking at the is m all right?

Sign for the LTL space. You know, That's how we look when we're looking at the is m all right?

Lee great Stuff has always appreciated, uh bringing it as he always does. Leek Clasicow, senior Transportation Logistics and shipping analysts for Bloomberg Intelligence coming to us from our Princeton studio via that technology, the kids call zoom. So that worked out worst. Yeah, just looking at the logistics, it seems like we're back to normalized logistics, getting up, you know, our product from point A to point B. Kind of back to where we were. I guess, I guess. My My question is what happens to justin time inventory? Is that still thing? Or do people learn their lesson like that just in time that's a little too dice meat, right.

Lee great Stuff has always appreciated, uh bringing it as he always does. Leek Clasicow, senior Transportation Logistics and shipping analysts for Bloomberg Intelligence coming to us from our Princeton studio via that technology, the kids call zoom. So that worked out worst. Yeah, just looking at the logistics, it seems like we're back to normalized logistics, getting up, you know, our product from point A to point B. Kind of back to where we were. I guess, I guess. My My question is what happens to justin time inventory? Is that still thing? Or do people learn their lesson like that just in time that's a little too dice meat, right.

But it's not like a huge build up of inventory, right.

But it's not like a huge build up of inventory, right.

It's like you have enough but not too much and kind of finding that sweet spot as I feel like retailers have been trying to find for a bit can be quite tricky, you know, but it will be interesting. I know that we're writing off what happened in Baltimore in terms of logistics.

It's like you have enough but not too much and kind of finding that sweet spot as I feel like retailers have been trying to find for a bit can be quite tricky, you know, but it will be interesting. I know that we're writing off what happened in Baltimore in terms of logistics.

I know, I know we're doing that.

I know, I know we're doing that.

There's space, there's capacity at different ports, railroads have capacity, et cetera. We have to wonder, though, if it doesn't take any shorter than four to six weeks, do we have to rethink the disinflationary trend that we're seeing, Like not inflation, not something crazy, but just.

There's space, there's capacity at different ports, railroads have capacity, et cetera. We have to wonder, though, if it doesn't take any shorter than four to six weeks, do we have to rethink the disinflationary trend that we're seeing, Like not inflation, not something crazy, but just.

You know, stops the stops the decline.

You know, stops the stops the decline.

You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at ten am Eastern on Apple car Playing and broyd Outo with the Bloomberg Business app. Listen on demand wherever you get your podcasts, or watch us live on YouTube.

You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at ten am Eastern on Apple car Playing and broyd Outo with the Bloomberg Business app. Listen on demand wherever you get your podcasts, or watch us live on YouTube.

But we're looking to sell off all across the bond market here, particularly in the long end, and it seems like the good data is going to be bad then for the market.

But we're looking to sell off all across the bond market here, particularly in the long end, and it seems like the good data is going to be bad then for the market.

Are we seeing actually a re ex of the economy. I think that's going to be my question of the.

Are we seeing actually a re ex of the economy. I think that's going to be my question of the.

Day, Pall, I like that.

Day, Pall, I like that.

Let's do it.

Let's do it.

Carol Pepper is founder and CEO at Pepper International and she joins us. Now, Carol, are we seeing a reacceleration.

Carol Pepper is founder and CEO at Pepper International and she joins us. Now, Carol, are we seeing a reacceleration.

Now?

Now?

I think we're seeing a steady, continuing good performance. Reacceleration would imply that it's going to get a lot hotter too quickly and it will not allow the FED to cut. I don't believe that's the case. I think we're just going to continue to see a good, strong, muscular market that's doing well. I don't see it as a reacceleration. I see it as fairly a steady state, almost a goldilocks market, not too hot, not too cold.

I think we're seeing a steady, continuing good performance. Reacceleration would imply that it's going to get a lot hotter too quickly and it will not allow the FED to cut. I don't believe that's the case. I think we're just going to continue to see a good, strong, muscular market that's doing well. I don't see it as a reacceleration. I see it as fairly a steady state, almost a goldilocks market, not too hot, not too cold.

So if that back. With that background, Carol, what do you think are Feeder Reserve is going to do in the upcoming meetings.

So if that back. With that background, Carol, what do you think are Feeder Reserve is going to do in the upcoming meetings.

I'm definitely in the camp that says they're going to cut in June because they have no reason to keep the.

I'm definitely in the camp that says they're going to cut in June because they have no reason to keep the.

Rates so high.

Rates so high.

I mean, there's just there's not a lot of justification if we don't have rampant inflation and the rates being so high do threaten the real estate markets, which in turn threaten the banks. So you know, a lot of people have been holding on by their fingernails, and a lot of banks don't want to take back all that real estate, so they really need to start cutting.

I mean, there's just there's not a lot of justification if we don't have rampant inflation and the rates being so high do threaten the real estate markets, which in turn threaten the banks. So you know, a lot of people have been holding on by their fingernails, and a lot of banks don't want to take back all that real estate, so they really need to start cutting.

Okay, So if we just do so things are just humming along and doing all right. As you were just saying, is that enough for equities to keep going up?

Okay, So if we just do so things are just humming along and doing all right. As you were just saying, is that enough for equities to keep going up?

Well, remember, we're going to have the stimulus coming, a real stimulus, which is the cut of interest rates.

Well, remember, we're going to have the stimulus coming, a real stimulus, which is the cut of interest rates.

That will help real estate.

That will help real estate.

That will help banks, That will help consumers because the credit card rates will go down.

That will help banks, That will help consumers because the credit card rates will go down.

But if we don't get that, Carol, if we don't get the cuts, or if that gets pushed off even by a month, et cetera, can stocks will go up?

But if we don't get that, Carol, if we don't get the cuts, or if that gets pushed off even by a month, et cetera, can stocks will go up?

Yes? I think so.

Yes? I think so.

Because again we're at the beginning of another level of secular change. I was around trading the Internet when it first launched, and everybody said it was too expensive, don't buy it.

Because again we're at the beginning of another level of secular change. I was around trading the Internet when it first launched, and everybody said it was too expensive, don't buy it.

And look where we are today. You know, will there be.

And look where we are today. You know, will there be.

Blips, yes, but the AI revolution really is going to be another huge leg up in productivity. And that's why you see the NASDAC running as strongly as it is, because people, a lot of people you know, still around to remember how it worked out last time. So AI is a secular change. The money that's been poured in by the Inflation Reduction Act is a secular change. These are real things that are causing real things to happen in the real world, and those are additional boosts even if we don't.

Blips, yes, but the AI revolution really is going to be another huge leg up in productivity. And that's why you see the NASDAC running as strongly as it is, because people, a lot of people you know, still around to remember how it worked out last time. So AI is a secular change. The money that's been poured in by the Inflation Reduction Act is a secular change. These are real things that are causing real things to happen in the real world, and those are additional boosts even if we don't.

Get the rate cuts. So there are very positive headwinds.

Get the rate cuts. So there are very positive headwinds.

And certainly if you compare what's going on here to the threat of Russia looming over Europe, the threat of China looming over Asia, you know, where do you go in the world, Middle East or here.

And certainly if you compare what's going on here to the threat of Russia looming over Europe, the threat of China looming over Asia, you know, where do you go in the world, Middle East or here.

Really that's why you see a lot of people moving.

Really that's why you see a lot of people moving.

To you know, Ua, and people bringing their money to the United States, lots of international clients.

To you know, Ua, and people bringing their money to the United States, lots of international clients.

As you know, I work with family offices.

As you know, I work with family offices.

I manage money for people with over one hundred million who are who have single family offices, and they're all looking at the US as a safe haven. And that's going to continue because on a relative basis, the US looks fantastic if you think about going to other regions of the world.

I manage money for people with over one hundred million who are who have single family offices, and they're all looking at the US as a safe haven. And that's going to continue because on a relative basis, the US looks fantastic if you think about going to other regions of the world.

So do I stick with my large cap growth stocks, Carol, that have been working for me? Or do I try try to go out there and find some value?

So do I stick with my large cap growth stocks, Carol, that have been working for me? Or do I try try to go out there and find some value?

No?

No?

No, no, forget value in my opinion, I mean you can honestly value has I've been hearing about the renaissance of value for forty years.

No, no, forget value in my opinion, I mean you can honestly value has I've been hearing about the renaissance of value for forty years.

Okay, it just never happens. It's like waiting for goodo.

Okay, it just never happens. It's like waiting for goodo.

I mean, the the United States is a leader in technology globally. And if you stick with the large cap growth stocks, particularly ones with lots and lots of cash on their.

I mean, the the United States is a leader in technology globally. And if you stick with the large cap growth stocks, particularly ones with lots and lots of cash on their.

Balance sheet, which you can easily see if you look on you know, any any online.

Balance sheet, which you can easily see if you look on you know, any any online.

System you're a trader on Bloomberg channel wherever you can see how much cash they have on their balance sheet.

System you're a trader on Bloomberg channel wherever you can see how much cash they have on their balance sheet.

That means they can weather any storm.

That means they can weather any storm.

So you know, Microsoft, Amazon, Google, these big names are going to continue powering upward.

So you know, Microsoft, Amazon, Google, these big names are going to continue powering upward.

So okay, to that point if I didn't own though, say the mag four Fab four. Is it too late to do that or do I need to sort of play the themes that you're talking about that are real structural shifts in different ways.

So okay, to that point if I didn't own though, say the mag four Fab four. Is it too late to do that or do I need to sort of play the themes that you're talking about that are real structural shifts in different ways.

No way, you have to play the big guys.

No way, you have to play the big guys.

This is the leader's market and there are lots of fear days coming.

This is the leader's market and there are lots of fear days coming.

Don't think we're done with fear days.

Don't think we're done with fear days.

Fear days of the days when something spooks the market. Let's say Paul says something that makes the traders fret that.

Fear days of the days when something spooks the market. Let's say Paul says something that makes the traders fret that.

Oh he really isn't going to cut. Oh my god, what's going to happen?

Oh he really isn't going to cut. Oh my god, what's going to happen?

And everything will drop like a stone, and you smart trader are waiting on the sidelines, and you'll get into those big names. There will be fear days, there will be fear events. That's just the way things roll these days. So on those days you can get in if you want to get a better entry point. But frankly, you know, I remember when Amazon first came out and everybody said it was too expensive. Event it's you know or Microsoft. These are up two hundred three hundred thousand percent. I mean, there's no waiting for the exact right day. Isn't the answer. The answer is get into those stocks, particularly for your retirement accounts or your kids college stick the stick them somewhere, don't look at them every day, and.

And everything will drop like a stone, and you smart trader are waiting on the sidelines, and you'll get into those big names. There will be fear days, there will be fear events. That's just the way things roll these days. So on those days you can get in if you want to get a better entry point. But frankly, you know, I remember when Amazon first came out and everybody said it was too expensive. Event it's you know or Microsoft. These are up two hundred three hundred thousand percent. I mean, there's no waiting for the exact right day. Isn't the answer. The answer is get into those stocks, particularly for your retirement accounts or your kids college stick the stick them somewhere, don't look at them every day, and.

Just know that you've made a great, solid investment for years to come.

Just know that you've made a great, solid investment for years to come.

Em XC What is EMXC and why should we buy it?

Em XC What is EMXC and why should we buy it?

Okay, EMXC is the Emerging Markets Mexico Fund. So I've been spending a lot of time lately in Mexico. Mexico is the destination for a lot of the near shoring activity, meaning people are moving their operations out of China's sphere, not only China, but anywhere China for example, like Hong Kong, anywhere where China has undue influence, They're moving those operations to Mexico. Mexico is on fire. If you go to Monterey, the building is unbelievable. If you go to Tijuana, the building is incredible. Why because all these both European and US corporations are moving operations there.

Okay, EMXC is the Emerging Markets Mexico Fund. So I've been spending a lot of time lately in Mexico. Mexico is the destination for a lot of the near shoring activity, meaning people are moving their operations out of China's sphere, not only China, but anywhere China for example, like Hong Kong, anywhere where China has undue influence, They're moving those operations to Mexico. Mexico is on fire. If you go to Monterey, the building is unbelievable. If you go to Tijuana, the building is incredible. Why because all these both European and US corporations are moving operations there.

So that country is doing extremely well. Of course, they have, like a lot of countries.

So that country is doing extremely well. Of course, they have, like a lot of countries.

Right now, they're a little nervous about the presidential election coming up, but once we get past that, that country is going to continue to do extremely well. So that's a way the small percentage of your money to play a trend that's going to only get bigger over time.

Right now, they're a little nervous about the presidential election coming up, but once we get past that, that country is going to continue to do extremely well. So that's a way the small percentage of your money to play a trend that's going to only get bigger over time.

Do that also go to Canada, Carol? Or is that purely in Mexico?

Do that also go to Canada, Carol? Or is that purely in Mexico?

You know?

You know?

Because the wages are too high in Canada, so that's why they go to Mexico. So it's sort of you get emerging market wages and labor in a market that where you can literally, like Canada, drive into the US. But unfortunately Canada doesn't have enough labor to take all of our near shoring, and they're they're more like US, they have high wage structure, So that's why people go to Mexico.

Because the wages are too high in Canada, so that's why they go to Mexico. So it's sort of you get emerging market wages and labor in a market that where you can literally, like Canada, drive into the US. But unfortunately Canada doesn't have enough labor to take all of our near shoring, and they're they're more like US, they have high wage structure, So that's why people go to Mexico.

Do people Are people going to increasingly go to India if China is less investible here? A lot of folks have been suggesting that's the next trend in emerging markets.

Do people Are people going to increasingly go to India if China is less investible here? A lot of folks have been suggesting that's the next trend in emerging markets.

Absolutely.

Absolutely.

I mean, for example, two important things happen in February MSCI the index for the Rest of the World. If you will increase the waiting for India and decrease the waiting for China, India.

I mean, for example, two important things happen in February MSCI the index for the Rest of the World. If you will increase the waiting for India and decrease the waiting for China, India.

Up two points, China down a point.

Up two points, China down a point.

JP Morgan this coming month is going to be adding India bonds for the first time into their International Bond Index.

JP Morgan this coming month is going to be adding India bonds for the first time into their International Bond Index.

So India is.

So India is.

Muscling in and China is falling behind because they're just not playing ball with the rest of the world.

Muscling in and China is falling behind because they're just not playing ball with the rest of the world.

So, yes, India is a great trend right now. It's easier to buy India through some emerging market ETFs that are equity focused.

So, yes, India is a great trend right now. It's easier to buy India through some emerging market ETFs that are equity focused.

There's really not a lot of great debt options yet, but I think those will come because what tends to happen, the street gets excited when when a country is included an index is now it's worthwhile to go and build products around that country. So that's why there's Ida, which is a great ETF that you can look at, and there's gli In. Both of these you know, gli In was up fifty three percent last year. It's smaller, but Ida is nine billion dollars already and.

There's really not a lot of great debt options yet, but I think those will come because what tends to happen, the street gets excited when when a country is included an index is now it's worthwhile to go and build products around that country. So that's why there's Ida, which is a great ETF that you can look at, and there's gli In. Both of these you know, gli In was up fifty three percent last year. It's smaller, but Ida is nine billion dollars already and.

It was up over thirty percent last year.

It was up over thirty percent last year.

So yeah, here Before we let you go, though, I just want to get one day, like, what's the biggest question? Like we covered a lot of ground, what's the biggest question you're getting right now from your clients?

So yeah, here Before we let you go, though, I just want to get one day, like, what's the biggest question? Like we covered a lot of ground, what's the biggest question you're getting right now from your clients?

Well, it's really will this good time last? And I say yes, I say this year it's an election year, the good time will last. Don't be too frightened and jump out because you're scared, and don't try to time the market. Look for long term trends that will work for you in the right proportion for your portfolio, and stick with them. Don't go crazy unless you have a day trading account. That's a whole other story. But if you're investing, bind the right trends and ride them over the long term.

Well, it's really will this good time last? And I say yes, I say this year it's an election year, the good time will last. Don't be too frightened and jump out because you're scared, and don't try to time the market. Look for long term trends that will work for you in the right proportion for your portfolio, and stick with them. Don't go crazy unless you have a day trading account. That's a whole other story. But if you're investing, bind the right trends and ride them over the long term.

Carol, thanks a lot.

Carol, thanks a lot.

We really appreciated Carol Pepper, a founder and CEO over at Pepper International. So interesting because it just flies in the face of like my philosophy, which is gold and soup canes kind of under the bed, but speaking of gold at a record high, but that you know, like, don't get scared, we'll have down days and sort of buy the dip in the large guys.

We really appreciated Carol Pepper, a founder and CEO over at Pepper International. So interesting because it just flies in the face of like my philosophy, which is gold and soup canes kind of under the bed, but speaking of gold at a record high, but that you know, like, don't get scared, we'll have down days and sort of buy the dip in the large guys.

I always wonder what the first member.

I always wonder what the first member.

Advantage is for the AI trade, Like do you want to buy the first guys or do you want to buy the fourth derivative fourth guys?

Advantage is for the AI trade, Like do you want to buy the first guys or do you want to buy the fourth derivative fourth guys?

I don't know. I mean a lot of Apple investors are suggesting, you know, Apple may arguably has missed the early move, but they often missed the early move. They wait for people and so don't worry that Apple will be there. There'll be an AI play there, maybe as soon as their June Developer meeting. But the chip makers have been the ones that are just the clear winners. Obviously in Vidio, but just a chip sector broadly defined has been I guess, the initial winners for the AI and then the questions get brought that out to software like a Microsoft and yeah, so on and so forth.

I don't know. I mean a lot of Apple investors are suggesting, you know, Apple may arguably has missed the early move, but they often missed the early move. They wait for people and so don't worry that Apple will be there. There'll be an AI play there, maybe as soon as their June Developer meeting. But the chip makers have been the ones that are just the clear winners. Obviously in Vidio, but just a chip sector broadly defined has been I guess, the initial winners for the AI and then the questions get brought that out to software like a Microsoft and yeah, so on and so forth.

And then also I liked your question about value because I feel like the theme of the second quarter is rotation, rotation, broadening out of the rally, broadening out of the rally the rally. And then she's like, no, not gonna happen. Yeah, I just go by the big guys, which is quite interesting.

And then also I liked your question about value because I feel like the theme of the second quarter is rotation, rotation, broadening out of the rally, broadening out of the rally the rally. And then she's like, no, not gonna happen. Yeah, I just go by the big guys, which is quite interesting.

It's a very aggressive call. I would say, it's even a little out of consensus call, sticking with and kind of you know, literally in her notes she's saying, go out and buy Nvidia today, basically in her notes. So we'll have to see. So Carol Pepper's some bold call, staying aggressive.

It's a very aggressive call. I would say, it's even a little out of consensus call, sticking with and kind of you know, literally in her notes she's saying, go out and buy Nvidia today, basically in her notes. So we'll have to see. So Carol Pepper's some bold call, staying aggressive.

If you will, you're listening to the Bloomberg Intelligence podcast. Catch us live weekdays at ten am Eastern on Apple car Play and rout Auto with the Bloomberg business. You can also listen live on Amazon Alexa from our flagship New York station. Just say Alexa playing Bloomberg eleven.

If you will, you're listening to the Bloomberg Intelligence podcast. Catch us live weekdays at ten am Eastern on Apple car Play and rout Auto with the Bloomberg business. You can also listen live on Amazon Alexa from our flagship New York station. Just say Alexa playing Bloomberg eleven.

T s l A Tesla as mister musklakes to pronounce it stops down twenty seven percent year to date. There's a million cross currents there, So let me just bring in someone who kind of think can clear it up for us, Alex Steve Man. He's global autos analyst for Bloomberg Intelligence. A Steve stocks down twenty seven percent. You know, I'm sorry, stucks on thirty percent year to date. What's the rub on Tesla right now? What's the big bear case for Tesla?

T s l A Tesla as mister musklakes to pronounce it stops down twenty seven percent year to date. There's a million cross currents there, So let me just bring in someone who kind of think can clear it up for us, Alex Steve Man. He's global autos analyst for Bloomberg Intelligence. A Steve stocks down twenty seven percent. You know, I'm sorry, stucks on thirty percent year to date. What's the rub on Tesla right now? What's the big bear case for Tesla?

Hey, Paul, thanks for having me on the big bearcas is really you know, how are they going to do this year? You know, EV sales and the US markets slowing down, China sales have slowed down as well as you know, even with steep price cuts in both regions, and then you know they have the cyber truck ramping up, and you know it's not the most easiest product to build, so that you're facing some challenges there. So earnings, you know, I think earning is going to growth is going to slow down this year. Free cash flow growth is going to slow down this year, So that's the main overhang on that stock right now.

Hey, Paul, thanks for having me on the big bearcas is really you know, how are they going to do this year? You know, EV sales and the US markets slowing down, China sales have slowed down as well as you know, even with steep price cuts in both regions, and then you know they have the cyber truck ramping up, and you know it's not the most easiest product to build, so that you're facing some challenges there. So earnings, you know, I think earning is going to growth is going to slow down this year. Free cash flow growth is going to slow down this year, So that's the main overhang on that stock right now.

Well, also we're waiting for first quarter deliveries.

Well, also we're waiting for first quarter deliveries.

I'm totally unclear as to when we get that number, but it does look like Wall Street analysts are getting more negative and more negative and what they'll actually be able to deliver.

I'm totally unclear as to when we get that number, but it does look like Wall Street analysts are getting more negative and more negative and what they'll actually be able to deliver.

What are you modeling?

What are you modeling?

Yeah, so their number is supposed to come out tomorrow. But if you look at yeah, if you look at the Chinese auto sales like Neo X Punk BYD they all have reported they have really strong March sales number, but that's on the back of really steep price cuts over the past few weeks. So if you look at those number, you kind of infer that probably, you know, Tesla is going to report you know, probably low single digit growth, may flat to slightly up year on year in the first quarter. That's that's pretty much in line with consensus because consensus estimates have come down over the past few months already.

Yeah, so their number is supposed to come out tomorrow. But if you look at yeah, if you look at the Chinese auto sales like Neo X Punk BYD they all have reported they have really strong March sales number, but that's on the back of really steep price cuts over the past few weeks. So if you look at those number, you kind of infer that probably, you know, Tesla is going to report you know, probably low single digit growth, may flat to slightly up year on year in the first quarter. That's that's pretty much in line with consensus because consensus estimates have come down over the past few months already.

So you know, Steve, what do you what's your view of you know, overall demand for electric vehicles. It seems a lot of folks feel like, boy that it's kind of peaked. The early adopters, they're done. The tree huggers like Matt Miller, they're done. What's the ultimate demand for EV's?

So you know, Steve, what do you what's your view of you know, overall demand for electric vehicles. It seems a lot of folks feel like, boy that it's kind of peaked. The early adopters, they're done. The tree huggers like Matt Miller, they're done. What's the ultimate demand for EV's?

Do you think I'm actually optimistic about ev I think ev that ship have sailed, and I think we're just seeing a cyclical downturn. Part of it is because the product that's available to the masses is still not there yet. A lot of the EV's that are on sale today are over fifty thousand dollars. A lot of people cannot afford fifty thousand dollars cars, especially in a high interest rate environment. So I think a lot of the automakers, including Tesla, G and the rest, are introducing more affordable evis in twenty twenty five and twenty twenty six. I think that's going to expand the market of a little bit more and hopefully my hope is that you know, sales will come back at that.

Do you think I'm actually optimistic about ev I think ev that ship have sailed, and I think we're just seeing a cyclical downturn. Part of it is because the product that's available to the masses is still not there yet. A lot of the EV's that are on sale today are over fifty thousand dollars. A lot of people cannot afford fifty thousand dollars cars, especially in a high interest rate environment. So I think a lot of the automakers, including Tesla, G and the rest, are introducing more affordable evis in twenty twenty five and twenty twenty six. I think that's going to expand the market of a little bit more and hopefully my hope is that you know, sales will come back at that.

Time well to that point.

Time well to that point.

And this ties into Tesla delivery sales because Elon Musk has talked about the facts that getting from their sexy models now to the affordable models later, there will be a sales slump as they kind of fix production and they ramp it up et cetera. How long do you think that gap slump, et cetera is going to last?

And this ties into Tesla delivery sales because Elon Musk has talked about the facts that getting from their sexy models now to the affordable models later, there will be a sales slump as they kind of fix production and they ramp it up et cetera. How long do you think that gap slump, et cetera is going to last?

For Well, Tesla's going to introduce to the compact vehicle that's supposed to be supposedly under thirty thousand dollars. They're going to start production in the second half of next year, and we probably don't see any contribution to profitability and cash flow until twenty twenty six and twenty twenty seven. So it's not that too far. It's not that far are from now. And you know, GM is doing the same thing. They're reintroducing the cheaper version or less lower cost version of the Bolt in twenty twenty five as well. So I think it's it's it's it's not that far away. Twenty twenty four. Like I've always said, it's gonna be an adjustment year for for a lot of automakers. They gotta they gotta reevaluate the cost structure, reevaluate the portfolio, and uh, you know again, this is why I think it's a cyclical downturn. In twenty twenty five twenty twenty six, you're gonna have cheaper cars, lower costs, and hopefully better earnings for the EV market. EV automakers.

For Well, Tesla's going to introduce to the compact vehicle that's supposed to be supposedly under thirty thousand dollars. They're going to start production in the second half of next year, and we probably don't see any contribution to profitability and cash flow until twenty twenty six and twenty twenty seven. So it's not that too far. It's not that far are from now. And you know, GM is doing the same thing. They're reintroducing the cheaper version or less lower cost version of the Bolt in twenty twenty five as well. So I think it's it's it's it's not that far away. Twenty twenty four. Like I've always said, it's gonna be an adjustment year for for a lot of automakers. They gotta they gotta reevaluate the cost structure, reevaluate the portfolio, and uh, you know again, this is why I think it's a cyclical downturn. In twenty twenty five twenty twenty six, you're gonna have cheaper cars, lower costs, and hopefully better earnings for the EV market. EV automakers.

So, Steve, do we know whether the industry I'm even gonna call out TESLA or GM. Can the industry replicate the profitability it has on its internal combustion engine vehicles, which I understand now the unit economics are very good. Can you replicate that? Or in the EV space.

So, Steve, do we know whether the industry I'm even gonna call out TESLA or GM. Can the industry replicate the profitability it has on its internal combustion engine vehicles, which I understand now the unit economics are very good. Can you replicate that? Or in the EV space.

It's very possible because battery lithium prices have come down quite a bit, destabilizing at a lower level. The whole auto industry is re evaluating their manufacturing, how they build cars. So vertical integration has become a very important kind of strategy for automakers to cut costs across the supply chain. That will take time. And then thirdly, the IRA, the Inflation Reduction Act is supposedly on shore a lot of the battery manufacturing. Again, that is supposed to cut costs for automakers. And that's why I think in twenty twenty five, twenty twenty six they're able to roll out more affordable evs at a lower price and hopefully, you know, if volume does get there, it's going to be a lower cost per unit.

It's very possible because battery lithium prices have come down quite a bit, destabilizing at a lower level. The whole auto industry is re evaluating their manufacturing, how they build cars. So vertical integration has become a very important kind of strategy for automakers to cut costs across the supply chain. That will take time. And then thirdly, the IRA, the Inflation Reduction Act is supposedly on shore a lot of the battery manufacturing. Again, that is supposed to cut costs for automakers. And that's why I think in twenty twenty five, twenty twenty six they're able to roll out more affordable evs at a lower price and hopefully, you know, if volume does get there, it's going to be a lower cost per unit.

A Steve thirty seconds, why is GM at a fifty two week high today?

A Steve thirty seconds, why is GM at a fifty two week high today?

Well, they've done a great job in managing the investors by buying stock, you know, a very spending a lot of money to buystock and an accelerated rate, and you know investors love that on that return of cash to.

Well, they've done a great job in managing the investors by buying stock, you know, a very spending a lot of money to buystock and an accelerated rate, and you know investors love that on that return of cash to.

That nice all right, you can't, you know, beat him, join them. That's a good thing. Steve Man covers all the auto stuff for Bloomberg Intelligence. We've got a great global team following the global auto of business. Steve just relocated from Hong Kong back to the US to Princeton, New Jersey, so he knows that global auto space, including the Chinese market, which is such a key market for the global auto manufacturers, particularly Tesla, who's got a big commitment there.

That nice all right, you can't, you know, beat him, join them. That's a good thing. Steve Man covers all the auto stuff for Bloomberg Intelligence. We've got a great global team following the global auto of business. Steve just relocated from Hong Kong back to the US to Princeton, New Jersey, so he knows that global auto space, including the Chinese market, which is such a key market for the global auto manufacturers, particularly Tesla, who's got a big commitment there.

You're listening to the Bloomberg Intelligence podcast. Catch us live weekdays at ten am Eastern on applecar Play and Android Auto with the Bloomberg Business. You can also listen live on Amazon Alexa from our flagship New York station just Say Alexa playing Bloomberg eleven thirty again.

You're listening to the Bloomberg Intelligence podcast. Catch us live weekdays at ten am Eastern on applecar Play and Android Auto with the Bloomberg Business. You can also listen live on Amazon Alexa from our flagship New York station just Say Alexa playing Bloomberg eleven thirty again.

Heck of a first quarter four equity markets up ten percent for the S and P five hundred looking at that October low, up over just over twenty five percent, so a big, big move just in the last five to six months, I've gone too far? Do we still have more room to grow? Let's check out with Christina Hooper. She's a chief Global market strategist for Invesco. Christina, again, a lot of people, I think are kind of looking back at this first quarter we had and looking back up to October and say, boy, that was a nice move. Now what do we do? What are you telling them?

Heck of a first quarter four equity markets up ten percent for the S and P five hundred looking at that October low, up over just over twenty five percent, so a big, big move just in the last five to six months, I've gone too far? Do we still have more room to grow? Let's check out with Christina Hooper. She's a chief Global market strategist for Invesco. Christina, again, a lot of people, I think are kind of looking back at this first quarter we had and looking back up to October and say, boy, that was a nice move. Now what do we do? What are you telling them?

Well, I think it's important to keep our focus on the longer term. Yes, it seems likely that stocks will take something of a breather after such a strong quarter and such a strong rally since October. But the reality is that we are still waiting for the start of rake cuts, which could very well be a positive catalyst for stocks. We also have a very significant cash sitting on the sidelines that could easily start to move into equities as well as fixed income as rates start to go down. So what we're saying is don't overreact to the environment, but be well diversified, because we could very well see a rotation. For example, one more unnoticed development last week was the Russell two thousand, surpassing the high hit in early March, and I think it's a reminder that there are opportunities outside of large cap US stocks if we go across the pond, if we look internationally, as well as if we look into the smaller capped space. But again, the key is to be well diversified across the major asset classes and within them.

Well, I think it's important to keep our focus on the longer term. Yes, it seems likely that stocks will take something of a breather after such a strong quarter and such a strong rally since October. But the reality is that we are still waiting for the start of rake cuts, which could very well be a positive catalyst for stocks. We also have a very significant cash sitting on the sidelines that could easily start to move into equities as well as fixed income as rates start to go down. So what we're saying is don't overreact to the environment, but be well diversified, because we could very well see a rotation. For example, one more unnoticed development last week was the Russell two thousand, surpassing the high hit in early March, and I think it's a reminder that there are opportunities outside of large cap US stocks if we go across the pond, if we look internationally, as well as if we look into the smaller capped space. But again, the key is to be well diversified across the major asset classes and within them.

So Christina does that?

So Christina does that?

Is that a value call or is that just own lots of different things because we don't know what form the economy will really take in what the FED will do.

Is that a value call or is that just own lots of different things because we don't know what form the economy will really take in what the FED will do.

Well.

Well.

I would argue that it's a call on expectations of what is going to happen later this year and next year. So what I think we're going to see is a rather brief and mild slowed down for the global economy followed by a reacceleration. And typically asset classes discount these events before they happen, which is why I think we're starting to see improvement in small caps, why we're seeing a broadening of the stock market.

I would argue that it's a call on expectations of what is going to happen later this year and next year. So what I think we're going to see is a rather brief and mild slowed down for the global economy followed by a reacceleration. And typically asset classes discount these events before they happen, which is why I think we're starting to see improvement in small caps, why we're seeing a broadening of the stock market.

Does a broadening of the stock market include China? There's a lot of folks out there that say China, for a variety of reasons, is uninvestable. What do you think?

Does a broadening of the stock market include China? There's a lot of folks out there that say China, for a variety of reasons, is uninvestable. What do you think?

So I would argue that sentiment has gotten far too negative on Chinese equities, and it really creates a situation in which we could see some very positive Chinese equity market performance with a little positive surprise. And an example of that is the some data we saw, the pm I data better than expected and of course no surprise that we saw positive reaction because China is just Chinese equities have been over sold. There are opportunities there.