November 10, 2025 • 35 mins
Watch Carol and Tim LIVE every day on YouTube: http://bit.ly/3vTiACF.
Warren Buffett, the billionaire investor who turned an aging textile mill into a more than $1 trillion conglomerate, said he’s “going quiet,” marking the end of an era for one of the business world’s most-watched investing gurus.
In a letter disclosing that he’s donating more than $1.3 billion to four family foundations, the 95-year-old investor, who is stepping down from his role of chief executive officer at the end of the year, said he’s going to stop writing Berkshire Hathaway Inc.’s annual letters and speaking at its meetings
.
And while he said he generally feels “good,” he is planning to “step up the pace” of his charitable giving to his kids’ foundations while he’s still alive.
“Though I move slowly and read with increasing difficulty, I am at the office five days a week where I work with wonderful people,” Buffett said in the letter released Monday. “Occasionally, I get a useful idea or am approached with an offer we might not otherwise have received. Because of Berkshire’s size and because of market levels, ideas are few – but not zero.”
Buffett is expected to hand his role of CEO to his successor Greg Abel at year-end. Letters such as the one released Monday, along with the ones that accompany the firm’s annual results, have become a must-read for his fans, who seek out the pearls of wisdom, investment advice and witticisms that drew a legion of fans to the billionaire investor.
Today's show features:
- Bloomberg News Senior Editor, Equities Americas Eric Weiner on Warren Buffett's final weeks at the helm of Berkshire Hathaway
- Henrietta Treyz, Co-Founder and Director of Economic Policy at Veda Partners, on what a potential end to the shutdown could mean for SNAP recipients and the Affordable Care Act
- Alli McCartney, Managing Director of Wealth Management with Alignment Partners at UBS, on whether the equities market can sustain recent gains
- Swamy Kotagiri, Chief Executive Officer of Magna International, on recent earnings, the global automotive market and the impact of tariffs
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Transcript
Episode Transcript
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Speaker 1 (00:00):
Bloomberg Audio Studios, Podcasts, Radio News. This is Bloomberg Business
Week Daily reporting from the magazine that helps global leaders
stay ahead with insight on the people, companies, and trends
shaping today's complex economy. Plus global business, finance and tech
(00:23):
news as it happens. The Bloomberg Business Week Daily Podcast
with Carol Masser and Tim Stenebeck On Bloomberg Radio.
Speaker 2 (00:33):
Show, Here, let's get this.
Speaker 3 (00:42):
We'll drive.
Speaker 1 (00:44):
Do I look like I drive a Mini vans? Shut
up and draft, don't drive angry, don't drive angry.
Speaker 4 (00:58):
I'll dry show.
Speaker 5 (01:00):
This is the drive to the clothes.
Speaker 6 (01:01):
If you had access to a car like this, would
you take it back right away?
Speaker 1 (01:05):
On Bloomberg Radio.
Speaker 7 (01:07):
All right, everybody, we've got just about eighteen nineteen minutes
to go until we wrap up the trade on this Monday.
As you know, we've got stocks bouncing around but really
holding on to their best levels of the session, bouncing meeting.
They're way off their lows today, up one point six
percent on the S and P five hundred two and
a quarter percent higher on the Nasdaq one hundred. So
the risk on trade is certainly out there in a
(01:29):
big way. Let's get to our Eric Wiener, he's Bloomberg
new senior editor Equities America's joining us right here in
our Bloomberg Interactive Broker studio. As Bill Maloney was leaving,
and we're listening to Alexis and we're all talking, and
Tim think you leaned over to.
Speaker 5 (01:43):
Eric, and you know, it's the end of an era.
Speaker 7 (01:45):
In terms of Warren Buffett right talking at his annual
shareholder meetings.
Speaker 5 (01:49):
We all look to him.
Speaker 7 (01:51):
Every year, and really in moments of crisis, he was
the voice that really investors wanted to hear from.
Speaker 4 (01:56):
Absolutely.
Speaker 3 (01:57):
He also was a sort of a voice of reason
on Wall Street, so he would be one who would
point out that things had gotten a little bit far,
you know, out over their skis. He would be the
one to say that it was time to step back in.
Speaker 4 (02:13):
You know.
Speaker 3 (02:14):
They called him the oracle, and there was a good
reason for that, you know, just we're not going to
see something like that again for a very long time.
Speaker 8 (02:24):
If ever, remember that two thousand and eight op ed
in the New York Times by American I Am This
was at the depths of the financial crisis. Everybody's freaking out,
he writes, I've been buying American stocks. Why a simple rule,
be fearful when others are greedy, and be greedy when
others are fearful. I feel like I hear that repeated
all the time.
Speaker 3 (02:43):
Now it's so easy to say, it is so hard
to do, and it's not that simple in the sense that,
like what he saw, the way that he hedged himself.
He was a very heavy user of derivatives. Nobody really
points that out. He would always hedge himself. He was
just really really savvy with what he could see in
(03:08):
terms of demand and what he could see in terms
of the permanence of the American consumer. That he could
tell that there was like he was in front of
newspapers when that was the only way to do advertising.
He was in front of Coca Cola whenever he was saying, yeah,
that's not going to be the thing to buy, and
he's like, yeah, but people just like a coke.
Speaker 9 (03:30):
You know.
Speaker 3 (03:31):
It's those kinds of really really simple Like Peter.
Speaker 5 (03:34):
Lynch, right, I need to understand the company.
Speaker 3 (03:37):
And then bring that in with very very sophisticated positioning
within his portfolio. And you don't see that kind of
thing anymore.
Speaker 5 (03:46):
Yeah, is there somebody out there that you think.
Speaker 7 (03:49):
I mean, I think about how much we listen to
what Jamie Diamond has to say, and I do feel
like he is the loan remaining big bank CEO that
was there during the Great Financial Crisis. All the others
are no longer in that top spot. So he has
definitely seen a lot and has really created a bank
that I think people turned to and respect very highly.
Speaker 3 (04:10):
Buffett believed in Jamie Dine. I remember I.
Speaker 5 (04:13):
Interviewed and they appeared together like off it.
Speaker 4 (04:15):
Yeah.
Speaker 3 (04:16):
I remember when I interviewed him from my first book,
and he was he had left City Group and was debating.
Speaker 4 (04:21):
Going to Bank one.
Speaker 3 (04:22):
We actually talked about that, Yeah, And I just had
a feeling that he was a guy who a bank
could use. He was already eyeing how to put things together.
He's just a really really savvy individual in terms of
the way finances work. Buffett was different in that he
(04:43):
managed portfolios, like you know, he really put his money
where his mouth is. Diamond understands an industry. Buffett understood industries,
and that's unique.
Speaker 8 (04:53):
So I guess the question I have is like, there's
not Look, he's he's still with us, yet we're talking
about this.
Speaker 7 (05:01):
Because we've been seeing the transition slowly happening and putting
people in charge to continue Berkshire Hathaway for the next
fifty one hundred years.
Speaker 5 (05:10):
Whatep.
Speaker 8 (05:10):
He's expected to end his role of CEO to successor
Greg Abel at the end of the year. But it
doesn't matter. There's no you know, when people listen to
Warren Buffett and Charlie Munger who passed away just the
last couple of years, at the annual shareholder meeting, there
was those were like events where that people would flock
too from around the world. I don't see anyone else
(05:31):
having that same draw.
Speaker 3 (05:33):
No, no, And it's also because they spoke about macro issues,
They spoke about the world around them, and they addressed
issues that affected you whether or not you were investing.
So it was like, you know, the woodstock of capitalism
they called it. But it's unlike a normal shareholder meeting
where they're talking about their business, they're talking about the company.
(05:54):
He was talking about the world and Berkshire was a
part of the world. The biggest, the most amazing thing
about him was that he was a real portfolio manager.
If you look at him from the sixties, the return
is insane. And then he built a conglomerate and ran
that successfully too. I mean, who can really do that.
That's just not in the cards right now for what's
(06:16):
available to you in this economy.
Speaker 7 (06:18):
I also think, you know, when you think about something
like Rahm and Dodd, like he was their their method,
you know, value investing.
Speaker 5 (06:25):
I mean that was the foundation for Warren Buffett.
Speaker 7 (06:28):
And you know we talk about value a lot, but
he really did it and did it well.
Speaker 3 (06:32):
And it's again it's the courage of the convictions, like
he could spot what was he felt was undervalued and
then pile into it.
Speaker 9 (06:38):
And be right.
Speaker 4 (06:39):
You know.
Speaker 8 (06:40):
One thing that we love doing is talking to CEOs
of companies that are owned by Berkshire Hathaway. Dan Sheridan
was on with us just a few weeks ago ahead
of the New York City Marathon. He's the CEO of
Brooks Running. If you missed the conversation, check it out.
It's great on our podcast feed. But he made the
comment to us that he doesn't get micromanaged by Berkshire
Hathaway executives.
Speaker 3 (07:00):
That that was the whose whole point, that he just
does his managements. He bought managements that he believed in
and then gave them the room to do what they
were going to do. It's such a bizarre level of
confidence where we, you know, take confidence as intervening, as
stepping in.
Speaker 4 (07:17):
I know better.
Speaker 3 (07:18):
What he knew was he could spot a good company
and good management and then give them the money that
they needed to succeed and get out of the way.
And that that is like the most admirable level of
confidence that you can have.
Speaker 7 (07:31):
And someone who invested, yes in publicly held companies, but
private companies, whether it sees Candies or whether it was Brooks.
Speaker 8 (07:36):
I mean there were so many durisl Charter Brokerage, Benjamin Moore, Yeah, guy.
Speaker 3 (07:42):
The lows and bought at the load like we would
get would see these brands when they were discounted and
go after them.
Speaker 8 (07:49):
My favorite is Seized Candy right now, it was just
been in an airport.
Speaker 7 (07:52):
I'm like, I get those the nuts, you know, the
nuts and the chewy ones.
Speaker 5 (07:55):
Yeah, I really love them.
Speaker 7 (07:56):
Hey, just get about a minute ago, just quickly the
trade today it's obviously risk one I don't know, but
doesn't feel like it has conviction.
Speaker 3 (08:05):
Well, I mean it makes sense in that if you
were worried about airplanes getting off the ground, and you
were worried about like things being you know, crushed to
a halt by the by the shutdown that appears to
be ending. However, the risks in front of us are
the FED and what they're.
Speaker 4 (08:22):
Going to do.
Speaker 3 (08:23):
Earnings look great, but like what where the economy is
going to go? Where jobs are? Those questions aren't answered.
But today you should be buying. Like if you sold
last week on the chaos, today you step back in.
Speaker 7 (08:36):
Yeah, exactly right, and you definitely are seeing investors doing that.
Speaker 5 (08:39):
Eric, thank you so much.
Speaker 7 (08:40):
Let me go anywhere back there. I know, I love it,
like the perspective on Buffett. Very cool stuff, Eric Green
or Bloomberg new Senior Editor, Equities America's.
Speaker 8 (08:49):
Stay with us. More from Bloomberg Business Week Daily coming
up after this.
Speaker 1 (08:56):
You're listening to the Bloomberg Business Week Daily Podcast. Catch
us live weekday afternoons from two to five eas during
Listen on Apple Karplay and Android Otto with the Bloomberg
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Speaker 7 (09:10):
Well, today, the White House expressing support for the bipartisan
deal to end the US shut down, a key development
that makes it likely the government reopens within days, we
shall see. The Senate is resuming deliberations on its deal
with centrist Democrats, but as yet scheduling a vote for
final passage, although our hearing some talk that it could
happen maybe later this evening.
Speaker 8 (09:30):
Okay, well be tuned to that. Sen and lawmakers also
still must wind its way through potentially time consuming procedures,
and then the House members must travel back to Washington
to vote for the first time since September nineteenth. That's
a little bit of schoolhouse rock.
Speaker 4 (09:44):
Yeah is that?
Speaker 2 (09:45):
Yeah?
Speaker 7 (09:45):
But you can leave I guess see when the government
shuts down and still get paid. But yeah, okay, okay,
Carol Masser, go ahead, aw you all right, Let's see
what the co founder and director of Economic Policy and
Vada Partners has to say. She is Henrietta Trey's certainly
a friend to us all here at Bloomberg. She joins
us from New Orleans. Henrietta, glad you could join us.
(10:06):
We talked to you. The surveillance team does a lot
in terms of what's going in and around the belt Way.
Speaker 5 (10:11):
So is this real progress? Is it a political win?
And if so, for whom?
Speaker 9 (10:16):
Yeah, we definitely have progress. Overnight, very excited about it.
I'm optimistic that they will be able to get the
House vote done as early as tomorrow. I think there's
no better Veterans Day gift to give to our veterans
than making sure that the military are paid and all
the seven hundred thousand furloughed workers can get their paychecks
and some back pay as well.
Speaker 6 (10:35):
So hopeful that that starts moving forward. For investors.
Speaker 9 (10:38):
The most important thing is that we're open by Friday,
so we might start to get some BLS data from September.
I think that that's possible. Staff's still getting briefed, but
that's my expectation and fingers crossed, we're there.
Speaker 8 (10:50):
Do you think this is a solution.
Speaker 6 (10:52):
Yes, I mean I think that we've got the final package.
We're going to have opportunities to keep.
Speaker 9 (10:56):
Having these ACA subsidy fights into December, and then we
know that there's a January thirty a cr so we'll
have the same exact fight all over again. Some of
my smartest clients are saying, you know, what are the
odds of a continued, you know, round after round of
government shutdowns. And I think that if you look at
what the two sides are taking away here. The Democrats
(11:16):
are mad that they caved, and the Republicans and in
particular President Trump have suffered quite a lot just on
their own personal approval ratings. So it's kind of like
playing chicken with a crazy person. You know, they're happy
to see what happens, and that's that's what we walked
into this den.
Speaker 8 (11:32):
You know, does it does it seem like Democrats gave
in on this they're not getting what they wanted.
Speaker 9 (11:38):
Yeah, to the far left, that's definitely how they view it.
They wanted the actual ACA subsidies extended. You can see
why for voters over the age of sixty, your ACA
premiums are going up nine hundred and nineteen dollars. It's
pretty substantial. The average one people in their thirties forties
is almost two hundred dollars. So these are you know,
(11:59):
very real benefits for I think it's forty two million Americans.
So definitely something that Democrats wanted to see delivered. But
the good news for them is that they got the
fight back on the front burner. And when you were
standing at a low thirties percent approval rating, you really
don't have much further to drop, So the Democrats getting
engaged in this fight and pushing back against what has
otherwise been ten months of Trump running the board is
(12:20):
not all bad on the Republican side for President Trump.
His disapproval rating has doubled since October.
Speaker 6 (12:28):
So there's a lot of reason to.
Speaker 9 (12:30):
Think that even though the ACA subsidies didn't get extended,
Democrats fought the right fight.
Speaker 6 (12:34):
I think that that's what Schumer and Jeffries believe.
Speaker 7 (12:36):
You know, as we watch the political fights that go
on in Washington and have for a long time, no
matter who's in the White House, at least over the
last few administrations, I think it's safe to say, Henrietta,
what really struck us all? And I want to go
back to those snap benefits that one in eight Americans
need food assistants.
Speaker 5 (12:54):
Why is that?
Speaker 7 (12:55):
What does that say about lawmakers, Republicans and Democrats through
several White House and the job that they have not
been doing for the bulk of Americans. I mean, aren't
we the world's largest, in richest nation.
Speaker 6 (13:07):
Yeah, we sure are.
Speaker 9 (13:08):
And I think it's important to note that seventy percent
of those recipients have full time jobs, so it's not
like these.
Speaker 6 (13:12):
People aren't working.
Speaker 9 (13:14):
A disproportionate number of them are young people and also
old people over the age of sixty or sixty five.
But you know, if you really want to get into
the nitty gritty, why are people seventy percent of these
recipients on food stamps if they have full time jobs,
what is their pay? I think there's some really interesting
conversation that always comes up when we talk about snap
(13:34):
benefits of what are these giant corporations Walmart, Target, Dollar, General,
et cetera. What are they paying their employees that they
still also need to have food stamps? So it's it's
really everyone to blame here on this front.
Speaker 7 (13:46):
Why is this though, not something that gets pushed further
in Congress with lawmakers.
Speaker 9 (13:53):
Well, especially in a year like this one where they're
focused on cutting federal spending.
Speaker 6 (13:59):
I mean, and you look at the one big, beautiful bill.
Speaker 9 (14:01):
There were repeated instances of cutting food stamps, back limiting eligibility,
all in the name of saving money, which is interesting
given that it was a three and a half trillion
dollar deficit increasing bill, and they eliminated the current policy baseline,
which forces Congress to pay for things going forward. So
the decisions around trimming federal spending are very proactive. They're
(14:24):
on purpose, and that was across Medicaid and Snap in
the One Big Beautiful Bill.
Speaker 1 (14:29):
So I don't know.
Speaker 9 (14:30):
That this is necessarily seen as a problem. To see
the limitations. It's part of making the government smaller, which
is what COP and the Republican Conference are trying to do.
Speaker 7 (14:38):
Let me throw on top of this and forgive men.
I don't have the details right in front of us,
but we were talking about this in the news, and
that the President is now proposing giving Americans a two
thousand dollars check, Like, how.
Speaker 5 (14:46):
Do we do that? I don't understand.
Speaker 7 (14:48):
We talk about deficit and if the economy is doing well,
why do we have to do that.
Speaker 8 (14:51):
Secretary Busons said it could come in the form.
Speaker 5 (14:53):
Of tax cuts, okay, but.
Speaker 8 (14:56):
The President said today that any extra would go down
to pay the debt.
Speaker 6 (15:00):
And that's exactly the problem. There is no extra.
Speaker 9 (15:02):
So the trade deficit, the tariffs is my bread and butter.
Speaker 6 (15:06):
And I would just say the following.
Speaker 9 (15:07):
When we did the Cares Act under the President Trump's
first term, at the height of the pandemic, we sent
out rebate checks. The President was very happy to send
those checks out. They were very popular. They cost two
hundred and ninety two billion dollars. The tariffs have thus
far this year, for AIBA brought an eighty nine billion dollars.
So if you're going to increase the rebate check from
(15:28):
fourteen hundred bucks to two thousand dollars, and you know
the presumer they'll be a qualifying child credit a five
hundred bucks something along those lines, you now have to
spend four hundred billion dollars of the eighty nine billion
dollars in revenue that you brought in from tariffs. And
why are you sending the rebate checks in the first place.
Is it because costs of goods are increased? Is it
because of the tariffs? It sure enough is so you
(15:50):
have this really circular logic. That's a huge problem, and
there is no leftover revenue to reduce the deficit, which
is of course what bond markets are so focused on.
Speaker 8 (15:58):
Hey, Henrietta, just last quest on healthcare and whether or
not Republicans come to the negotiating table in good faith
when it comes to the Affordable Care Act later on.
That's what Democrats want to see. Does that can get
kicked down the road to January and do they meet.
Speaker 6 (16:14):
I've gotten that question a lot this afternoon from clients.
I think yes.
Speaker 9 (16:18):
When I speak with Republican staff, they say that it's
going to take two or three weeks to hammer out
any kind of an agreement on income cap levels, on
the high amendments related to abortion, on the phasing and
the duration of any ACA subsidies. I think it's a
bridge too far to ask this extremely acrimonious Congress to
come together in the twelve legislative days they have before
the end of the year to get a solution. I
(16:40):
think it's much more realistic that they need a deadline,
and so January thirtieth, that January time horizon is probably
going to be more intense around the EC subsidies getting
extended or not.
Speaker 7 (16:49):
All right, so love, thank you so much, Henriette co
founder and director of Economic Policy at VTA Partners, Henrietta
Trees joining us from New Orleans. All Right, that's the
latest tim on the US government shut down and expectations
that were nearing an end. Has definitely put the risk
on trade on Wall Street.
Speaker 8 (17:06):
Yeah, traders rushing to the riskiest corners of the market.
Stocks climbing alongside bitcoin, as the US Senate advanced have planned,
and the longest ever government shutdown also removes significant economic
headwind bond ed bonds edged lower. We've got a great
guest back with us, Sally McCartney as managing director of
wealth management and private wealth advisor with Alignment Partners at UBS.
She's got more than a billion dollars in assets under management.
(17:28):
She joins us here in the Bloomberg BusinessWeek studio. The
risk on trade today sustainable. I mean, it seems like
we're seeing the riskiest corners of the market get a bid.
Speaker 2 (17:38):
We've seen a lot of back and forth in this
kind of trade. So last week was the worst week
for the Nasdaq since April, since we began the Terarff tantrum.
So what happened last week I think was a combination
of a lull in earnings news. First of all, we
had gotten all the good earnings news out and then
everybody waits till Nvidia. We also had the end of October,
which is a fiscal end for a lot of fund
(17:59):
so there was a lot of purging and taking profits.
And then, for whatever reason, the sentiment in data was
really unpleasant last week, and people chose investors small and
large retail investors chose not chose not to show up,
which has been the bid that's been getting the market through,
(18:20):
and they chose to focus on things that, given what
you just talked about, are not particularly surprising, like the
lowest consumer sentiment out of your Michigan ever. Right, So,
I think you know when I look at everything that
you talk about, and I love the way that you
talk about it on the show because it's from an
economic perspective, but also from a social and human perspective. Clearly,
(18:40):
what's happening is the low end consumer is getting squeezed.
Things are much more expensive. There are probably many of
those people who are on snap benefits who haven't gotten
paychecks in a long time, and they're having a real
hard time, and they see in that Michigan's sentiment number
(19:00):
more hard times. Whereas you look at the five or
ten percent that now spends fifty to sixty percent, and
what are we seeing? Markets are at all time highs
AI is increasing the productivity of our jobs and our labor.
We see interest rates going low, so we can probably
have more of a tail in and more of an
ability to borrow. But that same movement and interest rates
(19:24):
doesn't give the general population access to a housing market.
So we really are like a tale of two cities
right now, right right?
Speaker 7 (19:33):
I mean that's the other thing about access to lending.
Who really gets it ultimately right? And I thought it
was striking what Henrietta said that seventy percent of the
SNAP recipients have full time jobs.
Speaker 5 (19:43):
That shocked me.
Speaker 2 (19:44):
I was very surprised to hear that that's not the
narrative that I think we push on Wall Street or
from a government perspective.
Speaker 7 (19:52):
We've got one of our reporters on shortly Mark Niquette.
They've got a story at on the Bloomberg it's Trump's
economy now, and Americans don't seem to love it, and
they get into how the US economy ali is so
increasingly dependent on three narrow, interconnected a pillars affluent consumers,
artificial intelligence, field investment, and acid price gains, making it
(20:12):
less stable if any of these pillars weekends, those are
kind of the three pillars of the market run up.
Speaker 2 (20:18):
They absolutely are. It is not hugely atypical of sort
of the end of a bull market or a boom cycle.
And the question that everybody's asking now is not if,
but when right. These are called cycles for a reason.
Portfolios are built the way they are to have things
(20:39):
that go down when other things go up. You're not
supposed to have gold rally sixty five percent while stocks
are up twenty eight percent while bonds are sort of
mildly up. So we are in a very strange period
where something will have to give. The question is when
and will it be on the federal side, will it
be on the AI side, because.
Speaker 5 (21:01):
You know the thing, what I do think most likely.
Speaker 2 (21:05):
The federal side is interesting to me because the AI side,
I see that there is a concern and an issue
around circularity, circularity of investments, circularity of hyperscalar, circularity of financing.
But I also see and believe that this is transformative
and catalytical, like the steam engine, wise, like telecom, like
(21:28):
electrification of the grid. And this not surprisingly is happening
quicker than all of those other capital expenditure cycles happen.
But it's actually not from a like percent of GDP
perspective concerning it actually probably has a lot of room
to run. So I think that you know, the affluent
works until it doesn't work, and whether that's because it
(21:51):
gets litigated away or redistributed in some sense. Again, not
a conversation we have in terms of portfolio managers on
a daily point. But what all this means to me
is that every day I have to wake up and
ask myself three questions. With everything I own, is it
time to buy it? Is it time to sell it?
Or do I not yet have enough information to make
(22:12):
a different decision? And the truth has been that there
have been times in the last year, for example, where
the answer has been sell a little or the answer
has been buy a little more, or the answer is
I need to wait to see what happens with tariff negotiations.
But nothing that happened last week in that sort of
purge or today in Monday's excitement makes me change any
(22:34):
of those three issues.
Speaker 8 (22:36):
So you're not buying, you're not selling, You're waiting for
more info.
Speaker 2 (22:39):
We're waiting for more info. The one thing we are
taking advantages is given all of the massive uncertainty long term,
short term Wall Street DC, I'm still happy to buy gold, palladium, silver.
Though there's more gold buying this year than we've seen
since twenty eleven, it's by distrust in the US government
(23:02):
concern about national treasuries, full stop alienation from the US
declining dollar. All of those things are going to continue.
And when you look at the other precious metals, they
have a lot of the same catalysts, but also with
a real demand against a supply constraint. So those are
interesting to me. And then to the extent we can
(23:24):
get into some of those megacaps are into say financial
names at lower prices, those are interesting given all the
tailwinds behind them.
Speaker 7 (23:32):
You title together as always, thank you so much, really appreciate.
Ally McCartney, Managing director of Wealth Management and private wealth
advisor with Alignment Partners over at ubs.
Speaker 8 (23:41):
Stay with us more from Bloomberg Business Week Daily coming
up after this.
Speaker 1 (23:49):
You're listening to the Bloomberg Business Week Daily Podcast. Catch
us live weekday afternoons from two to five these during
the listen on Applcarpley and Android Otto with the Bloomberg
Business app, or watch us live on YouTube.
Speaker 5 (24:03):
Hey listen.
Speaker 7 (24:05):
When Magna International reported earnings on Halloween, shares of the
autoparts manufacturer rallied as much as seven percent inter day
in response to third quarter sales and adjusted EPs beats.
Magna Management also raised its fiscal year sales forecast thanks
to strengthen North America and China. There was a lot
going on. Company based in Canada, biggest automotive supplier of
North America. Everything from automated driving control modules, powertrains, lighting mirrors,
(24:30):
complete engineering systems, so much. It is a great, great,
great read on the auto economy.
Speaker 8 (24:36):
Back with us is Swami Coda Geary, president and CEO
of nearly fourteen billion dollar market cap autoparts maker Magna International.
The stock up close to eighteen percent so far this year.
I want to start with kind of where we left
off when we spoke to you back in April. This
was just after the president's so called Liberation Day tariffs
you liken them and the additional cost to drawing upon
(24:57):
the playbooks from past rotating UAW strikes, COVID, the Great
Financial Crisis, the Chip crisis all rolled together. We were
pretty shocked about those comments because you said it was big.
Is it still that big of an impact? Has it
been that big of an impact?
Speaker 4 (25:13):
Hi, Echonon, Thanks for having me.
Speaker 10 (25:15):
Yes, there has been a lot of dynamic challenges in
the industry, as you know, and when you spoke to
me last week was fresh, you know, at that time,
as we sit here and look at it, I think
our annualized tariff impact is roughly in the range of
two hundred million. But we continue to work with our team,
with our customers, with our supply base in mitigating as
(25:38):
much as possible, you know, adhering to the USMCA compliance.
All in all, I think we have been able to
with a lot of self help, a lot of work
with our customers, we've been able to bring down that
impact to roughly ten bass points, which means about thirty
million for Magna this year.
Speaker 7 (25:59):
So I will say our BI team reacted to our
Bloomberg intelligence team, Swamy reacted and they said they believe
that your company's continuous cost cutting and operational excellence could
further release margin gains in twenty twenty six. And they
talk about in the US major customers are benefiting from
a more profitable sales mix, with higher sales and pickups
(26:19):
and SUVs offsetting lower EV production, which should enhance Magnus
program economics for upcoming twenty twenty six launches.
Speaker 4 (26:27):
Do they have it right, Yes, they do.
Speaker 10 (26:30):
There's a lot of hard work and thanks to the team,
there's been a lot of traction in our operational activities,
including some of the activities that you men mentioned cost restructuring,
optimizing our operations. We have really worked through about forty
divisions in terms of restructuring, consolidation, bringing things together. And
when the mix in the volume becomes stable and it
(26:53):
comes through, you see profitability going to the bottom line,
and that has been our focusduction, margin expansion and free
cash flow generation. We've talked about one hundred and fifty
basis points over the last three years, and I'm glad
to say we have an additional visibility of thirty five
to forty basis points going into twenty twenty six.
Speaker 4 (27:15):
So this is a journey.
Speaker 10 (27:16):
It's never going to stop you in an industry that
we need to constantly work on improvements. We call them
continuous improvements, and we are starting to see the result
of that.
Speaker 7 (27:25):
But you did talk about demand destruction the short term
when we talked with you in April, right after Liberation Day.
Has it played out as bad as you expected? And
where are we today? Your top customers are who's who
of the global auto industry, So where are we today
in that demand destruction?
Speaker 5 (27:40):
Are we done?
Speaker 4 (27:42):
I wish I could have that crystal ball.
Speaker 10 (27:44):
But you know, the way I look at it is
we peaked out as our industry in North America about
seventeen and a half million units. Interestingly, I was looking
at the data go back twenty years. In two thousand
and four two thousand and six time frame, North American
production volumes were somewhere between fifteen to sixteen.
Speaker 4 (28:02):
We are still at fifteen to sixteen million units today.
I think the.
Speaker 10 (28:06):
Volumes held up this year, but I always like to
stand back a little and see where it was. Magna
Magna twenty years ago was a twenty billion dollar company.
Today we are a forty billion dollar company. And it's
the result in the efforts of the team to continue
to gain CPV and to diversifire customer base, and that's
where our focus is right And to your point, though,
(28:28):
I hope this is the trough. If you look at
the average age of the fleet, it's pretty high. The
inventories are pretty normal. So I like to say, you know,
there is an elasticity of demand that's going to come
back looking forward if there is no more externalities like
we have had in the last four years.
Speaker 8 (28:47):
Your company is based in Ontario. We are curious about
the US and Canada trade negotiations or lack thereof. Given
the impasse between the US and Canada, how is that
affecting your industry and you specifically.
Speaker 10 (29:04):
Yeah, as you know, auto industry is very interdependent ecosystem
and it's pretty complex in North America, so it has
been challenging. But I would like to look at Magna
really as a global company. We have tens of thousands
of people in Mexico, in Canada and in US, and
(29:25):
obviously we are following the footprint of our customers, looking
at the economics, looking at transportation, looking at logistics, and
that is the competitiveness that ultimately lets you be the
player that you are. Right, So the focus has been
on it. Whatever the policy is, if there is certainty
and visibility to the policy going forward, I think it's
(29:47):
just going to be a tailwind to everybody, the OEMs
and the supply base.
Speaker 5 (29:51):
In all but Tswami, Is it broken the US? Canada?
I mean it's been so intertwined.
Speaker 7 (29:58):
Really the North American and you know, global auto supply chain.
Speaker 5 (30:02):
But is it especially the US and Canada? Is it
changed forever?
Speaker 10 (30:09):
Again, I'm not an international trade policy expert.
Speaker 7 (30:12):
Speaking from it, but you have a great advantage and
a great window on how it has worked and how
it feels today.
Speaker 10 (30:21):
It's definitely been strained, right, there's no question about that.
But I've lived in this industry for twenty six years,
and what we're talking today is going to impact maybe
twenty seven or twenty eight. So we're always looking at
what we are doing today impacts three or four years
down the road. What we're doing today has been planned
(30:42):
and decided three or four years ago, So I tend
to think a little bit in longer cycles.
Speaker 4 (30:48):
You know.
Speaker 10 (30:48):
I'm still hopeful that the policy is going to get
to a point where it's mutually beneficial to everyone the president.
Speaker 8 (30:55):
In the past, the President of the US has talked
about his back and forth in his conversations with executives
at North American auto companies. Have you had conversations with
the President or his team.
Speaker 10 (31:08):
We have had obviously a seat at the table in
being able to communicate facts that possible impacts, the challenges
of the industry and what could benefit I always say
we are able to give an opinion. One of the opinions,
I hope it's a dot on the chart, and definitely
We have talked to all three regions right expressing what
(31:29):
is the jobs that we have, what is the investments
that we've made, and how it could impact right Definitely,
that is the conversation that's always ongoing.
Speaker 7 (31:38):
Hey, Swami, one thing we wanted to ask you the
EV retrenchment that we continue to talk about here at Bloomberg,
how is it affecting your business and the auto industry
in general. You've got Ford considering killing the F one
fifty lightning, Stilanti is killing the ram EV, and GM
taking a one point six billion dollar impairment charge on
its EV assets.
Speaker 5 (31:57):
That feels pretty chilling. How is that if impacting you guys?
Speaker 10 (32:02):
In the past, we've always looked at EV and if
you look at some of the comments that we've made,
I think we were a little bit conservative. But definitely
the North American EV penetration has had an impact on us.
We came back and talked about the impact of our
revenue going forward in the August I think of twenty
twenty four. But the key thing has been how we've
(32:26):
been able to pivot. We had our peak cap X
spend in twenty three twenty two. We got back to
the sales to capex ratio shows our agility and being
able to get back and look at optimizing how we
can re use some of the capital with the help
of the customers and so on and so forth. But overall, EV,
I think in other regions continues and as a global company,
(32:48):
we see that continuing in China and Europe. But when
it does come back, and we still believe EV is
a secular trend, that take rate is very different than
what we all expected a couple of years ago. But
with the investments already there, with the development that's behind us,
and our ability to hit whether it's an internal combustion
(33:09):
engine or a or a hybrid, that flexibility in our
product line has helped us whether the storm pretty well.
And I think that's what we need to continue to
do going forward.
Speaker 8 (33:22):
I know that the decisions you make now are decisions
for four years from now. So are you changing product
plans to develop more gas powered vehicles or helps make
supplies for more gas powered vehicles?
Speaker 10 (33:33):
Yes, Tim, I think we have had a lot of
content in obviously the internal combustion engine platforms right and
as some of these programs are delayed or pushed out,
we continue to get leverage on the existing programs and
we continue to win. The other thing to note is
a lot of our products, almost eighty percent of our
product is propulsion agnostic. That means whether a make a
(33:56):
mirror or a door, or a structure or a seat,
we'll make it for whatever propulsion it is.
Speaker 4 (34:03):
Right.
Speaker 10 (34:04):
So, as far as we are flexible and continue to
do that in our processes, we've been able to take
advantage of that of that flexibility and gain market and
continue to grow our revenues.
Speaker 7 (34:16):
So I want me just thirty seconds here, any signs
of a US recession, a global recession? What's the word
that you would use to describe the marketplace right now?
Speaker 5 (34:25):
Just quickly?
Speaker 10 (34:27):
Yeah, I think there is signs of stress, I would say.
And obviously that you know, puts us all us on
a cautionary foot. But like I said, from a auto industry,
the inventory seem normal. The average age of the fleet
is pretty high, so we are looking for order demand
not to be impacted that much. But we still remain
(34:48):
very cautious.
Speaker 7 (34:49):
Say I need a new car pretty soon, so Miller,
I know, Yeah, he's got a bunch, hey, so Amy.
We always appreciate when you carve out some time for
Tim and me. The Bloomberg BusinessWeek Daily team Swami Kudigary.
He is Chief executive Officer Magna International, joining us from Troy,
Michigan on this Monday.
Speaker 5 (35:07):
Thanks again.
Speaker 1 (35:09):
This is the Bloomberg Business Weekdaily podcast, available on Apple, Spotify,
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(35:30):
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(00:23):
news as it happens. The Bloomberg Business Week Daily Podcast
with Carol Masser and Tim Stenebeck On Bloomberg Radio.
Speaker 2 (00:33):
Show, Here, let's get this.
Speaker 3 (00:42):
We'll drive.
Speaker 1 (00:44):
Do I look like I drive a Mini vans? Shut
up and draft, don't drive angry, don't drive angry.
Speaker 4 (00:58):
I'll dry show.
Speaker 5 (01:00):
This is the drive to the clothes.
Speaker 6 (01:01):
If you had access to a car like this, would
you take it back right away?
Speaker 1 (01:05):
On Bloomberg Radio.
Speaker 7 (01:07):
All right, everybody, we've got just about eighteen nineteen minutes
to go until we wrap up the trade on this Monday.
As you know, we've got stocks bouncing around but really
holding on to their best levels of the session, bouncing meeting.
They're way off their lows today, up one point six
percent on the S and P five hundred two and
a quarter percent higher on the Nasdaq one hundred. So
the risk on trade is certainly out there in a
(01:29):
big way. Let's get to our Eric Wiener, he's Bloomberg
new senior editor Equities America's joining us right here in
our Bloomberg Interactive Broker studio. As Bill Maloney was leaving,
and we're listening to Alexis and we're all talking, and
Tim think you leaned over to.
Speaker 5 (01:43):
Eric, and you know, it's the end of an era.
Speaker 7 (01:45):
In terms of Warren Buffett right talking at his annual
shareholder meetings.
Speaker 5 (01:49):
We all look to him.
Speaker 7 (01:51):
Every year, and really in moments of crisis, he was
the voice that really investors wanted to hear from.
Speaker 4 (01:56):
Absolutely.
Speaker 3 (01:57):
He also was a sort of a voice of reason
on Wall Street, so he would be one who would
point out that things had gotten a little bit far,
you know, out over their skis. He would be the
one to say that it was time to step back in.
Speaker 4 (02:13):
You know.
Speaker 3 (02:14):
They called him the oracle, and there was a good
reason for that, you know, just we're not going to
see something like that again for a very long time.
Speaker 8 (02:24):
If ever, remember that two thousand and eight op ed
in the New York Times by American I Am This
was at the depths of the financial crisis. Everybody's freaking out,
he writes, I've been buying American stocks. Why a simple rule,
be fearful when others are greedy, and be greedy when
others are fearful. I feel like I hear that repeated
all the time.
Speaker 3 (02:43):
Now it's so easy to say, it is so hard
to do, and it's not that simple in the sense that,
like what he saw, the way that he hedged himself.
He was a very heavy user of derivatives. Nobody really
points that out. He would always hedge himself. He was
just really really savvy with what he could see in
(03:08):
terms of demand and what he could see in terms
of the permanence of the American consumer. That he could
tell that there was like he was in front of
newspapers when that was the only way to do advertising.
He was in front of Coca Cola whenever he was saying, yeah,
that's not going to be the thing to buy, and
he's like, yeah, but people just like a coke.
Speaker 9 (03:30):
You know.
Speaker 3 (03:31):
It's those kinds of really really simple Like Peter.
Speaker 5 (03:34):
Lynch, right, I need to understand the company.
Speaker 3 (03:37):
And then bring that in with very very sophisticated positioning
within his portfolio. And you don't see that kind of
thing anymore.
Speaker 5 (03:46):
Yeah, is there somebody out there that you think.
Speaker 7 (03:49):
I mean, I think about how much we listen to
what Jamie Diamond has to say, and I do feel
like he is the loan remaining big bank CEO that
was there during the Great Financial Crisis. All the others
are no longer in that top spot. So he has
definitely seen a lot and has really created a bank
that I think people turned to and respect very highly.
Speaker 3 (04:10):
Buffett believed in Jamie Dine. I remember I.
Speaker 5 (04:13):
Interviewed and they appeared together like off it.
Speaker 4 (04:15):
Yeah.
Speaker 3 (04:16):
I remember when I interviewed him from my first book,
and he was he had left City Group and was debating.
Speaker 4 (04:21):
Going to Bank one.
Speaker 3 (04:22):
We actually talked about that, Yeah, And I just had
a feeling that he was a guy who a bank
could use. He was already eyeing how to put things together.
He's just a really really savvy individual in terms of
the way finances work. Buffett was different in that he
(04:43):
managed portfolios, like you know, he really put his money
where his mouth is. Diamond understands an industry. Buffett understood industries,
and that's unique.
Speaker 8 (04:53):
So I guess the question I have is like, there's
not Look, he's he's still with us, yet we're talking
about this.
Speaker 7 (05:01):
Because we've been seeing the transition slowly happening and putting
people in charge to continue Berkshire Hathaway for the next
fifty one hundred years.
Speaker 5 (05:10):
Whatep.
Speaker 8 (05:10):
He's expected to end his role of CEO to successor
Greg Abel at the end of the year. But it
doesn't matter. There's no you know, when people listen to
Warren Buffett and Charlie Munger who passed away just the
last couple of years, at the annual shareholder meeting, there
was those were like events where that people would flock
too from around the world. I don't see anyone else
(05:31):
having that same draw.
Speaker 3 (05:33):
No, no, And it's also because they spoke about macro issues,
They spoke about the world around them, and they addressed
issues that affected you whether or not you were investing.
So it was like, you know, the woodstock of capitalism
they called it. But it's unlike a normal shareholder meeting
where they're talking about their business, they're talking about the company.
(05:54):
He was talking about the world and Berkshire was a
part of the world. The biggest, the most amazing thing
about him was that he was a real portfolio manager.
If you look at him from the sixties, the return
is insane. And then he built a conglomerate and ran
that successfully too. I mean, who can really do that.
That's just not in the cards right now for what's
(06:16):
available to you in this economy.
Speaker 7 (06:18):
I also think, you know, when you think about something
like Rahm and Dodd, like he was their their method,
you know, value investing.
Speaker 5 (06:25):
I mean that was the foundation for Warren Buffett.
Speaker 7 (06:28):
And you know we talk about value a lot, but
he really did it and did it well.
Speaker 3 (06:32):
And it's again it's the courage of the convictions, like
he could spot what was he felt was undervalued and
then pile into it.
Speaker 9 (06:38):
And be right.
Speaker 4 (06:39):
You know.
Speaker 8 (06:40):
One thing that we love doing is talking to CEOs
of companies that are owned by Berkshire Hathaway. Dan Sheridan
was on with us just a few weeks ago ahead
of the New York City Marathon. He's the CEO of
Brooks Running. If you missed the conversation, check it out.
It's great on our podcast feed. But he made the
comment to us that he doesn't get micromanaged by Berkshire
Hathaway executives.
Speaker 3 (07:00):
That that was the whose whole point, that he just
does his managements. He bought managements that he believed in
and then gave them the room to do what they
were going to do. It's such a bizarre level of
confidence where we, you know, take confidence as intervening, as
stepping in.
Speaker 4 (07:17):
I know better.
Speaker 3 (07:18):
What he knew was he could spot a good company
and good management and then give them the money that
they needed to succeed and get out of the way.
And that that is like the most admirable level of
confidence that you can have.
Speaker 7 (07:31):
And someone who invested, yes in publicly held companies, but
private companies, whether it sees Candies or whether it was Brooks.
Speaker 8 (07:36):
I mean there were so many durisl Charter Brokerage, Benjamin Moore, Yeah, guy.
Speaker 3 (07:42):
The lows and bought at the load like we would
get would see these brands when they were discounted and
go after them.
Speaker 8 (07:49):
My favorite is Seized Candy right now, it was just
been in an airport.
Speaker 7 (07:52):
I'm like, I get those the nuts, you know, the
nuts and the chewy ones.
Speaker 5 (07:55):
Yeah, I really love them.
Speaker 7 (07:56):
Hey, just get about a minute ago, just quickly the
trade today it's obviously risk one I don't know, but
doesn't feel like it has conviction.
Speaker 3 (08:05):
Well, I mean it makes sense in that if you
were worried about airplanes getting off the ground, and you
were worried about like things being you know, crushed to
a halt by the by the shutdown that appears to
be ending. However, the risks in front of us are
the FED and what they're.
Speaker 4 (08:22):
Going to do.
Speaker 3 (08:23):
Earnings look great, but like what where the economy is
going to go? Where jobs are? Those questions aren't answered.
But today you should be buying. Like if you sold
last week on the chaos, today you step back in.
Speaker 7 (08:36):
Yeah, exactly right, and you definitely are seeing investors doing that.
Speaker 5 (08:39):
Eric, thank you so much.
Speaker 7 (08:40):
Let me go anywhere back there. I know, I love it,
like the perspective on Buffett. Very cool stuff, Eric Green
or Bloomberg new Senior Editor, Equities America's.
Speaker 8 (08:49):
Stay with us. More from Bloomberg Business Week Daily coming
up after this.
Speaker 1 (08:56):
You're listening to the Bloomberg Business Week Daily Podcast. Catch
us live weekday afternoons from two to five eas during
Listen on Apple Karplay and Android Otto with the Bloomberg
Business app, or watch US live on YouTube.
Speaker 7 (09:10):
Well, today, the White House expressing support for the bipartisan
deal to end the US shut down, a key development
that makes it likely the government reopens within days, we
shall see. The Senate is resuming deliberations on its deal
with centrist Democrats, but as yet scheduling a vote for
final passage, although our hearing some talk that it could
happen maybe later this evening.
Speaker 8 (09:30):
Okay, well be tuned to that. Sen and lawmakers also
still must wind its way through potentially time consuming procedures,
and then the House members must travel back to Washington
to vote for the first time since September nineteenth. That's
a little bit of schoolhouse rock.
Speaker 4 (09:44):
Yeah is that?
Speaker 2 (09:45):
Yeah?
Speaker 7 (09:45):
But you can leave I guess see when the government
shuts down and still get paid. But yeah, okay, okay,
Carol Masser, go ahead, aw you all right, Let's see
what the co founder and director of Economic Policy and
Vada Partners has to say. She is Henrietta Trey's certainly
a friend to us all here at Bloomberg. She joins
us from New Orleans. Henrietta, glad you could join us.
(10:06):
We talked to you. The surveillance team does a lot
in terms of what's going in and around the belt Way.
Speaker 5 (10:11):
So is this real progress? Is it a political win?
And if so, for whom?
Speaker 9 (10:16):
Yeah, we definitely have progress. Overnight, very excited about it.
I'm optimistic that they will be able to get the
House vote done as early as tomorrow. I think there's
no better Veterans Day gift to give to our veterans
than making sure that the military are paid and all
the seven hundred thousand furloughed workers can get their paychecks
and some back pay as well.
Speaker 6 (10:35):
So hopeful that that starts moving forward. For investors.
Speaker 9 (10:38):
The most important thing is that we're open by Friday,
so we might start to get some BLS data from September.
I think that that's possible. Staff's still getting briefed, but
that's my expectation and fingers crossed, we're there.
Speaker 8 (10:50):
Do you think this is a solution.
Speaker 6 (10:52):
Yes, I mean I think that we've got the final package.
We're going to have opportunities to keep.
Speaker 9 (10:56):
Having these ACA subsidy fights into December, and then we
know that there's a January thirty a cr so we'll
have the same exact fight all over again. Some of
my smartest clients are saying, you know, what are the
odds of a continued, you know, round after round of
government shutdowns. And I think that if you look at
what the two sides are taking away here. The Democrats
(11:16):
are mad that they caved, and the Republicans and in
particular President Trump have suffered quite a lot just on
their own personal approval ratings. So it's kind of like
playing chicken with a crazy person. You know, they're happy
to see what happens, and that's that's what we walked
into this den.
Speaker 8 (11:32):
You know, does it does it seem like Democrats gave
in on this they're not getting what they wanted.
Speaker 9 (11:38):
Yeah, to the far left, that's definitely how they view it.
They wanted the actual ACA subsidies extended. You can see
why for voters over the age of sixty, your ACA
premiums are going up nine hundred and nineteen dollars. It's
pretty substantial. The average one people in their thirties forties
is almost two hundred dollars. So these are you know,
(11:59):
very real benefits for I think it's forty two million Americans.
So definitely something that Democrats wanted to see delivered. But
the good news for them is that they got the
fight back on the front burner. And when you were
standing at a low thirties percent approval rating, you really
don't have much further to drop, So the Democrats getting
engaged in this fight and pushing back against what has
otherwise been ten months of Trump running the board is
(12:20):
not all bad on the Republican side for President Trump.
His disapproval rating has doubled since October.
Speaker 6 (12:28):
So there's a lot of reason to.
Speaker 9 (12:30):
Think that even though the ACA subsidies didn't get extended,
Democrats fought the right fight.
Speaker 6 (12:34):
I think that that's what Schumer and Jeffries believe.
Speaker 7 (12:36):
You know, as we watch the political fights that go
on in Washington and have for a long time, no
matter who's in the White House, at least over the
last few administrations, I think it's safe to say, Henrietta,
what really struck us all? And I want to go
back to those snap benefits that one in eight Americans
need food assistants.
Speaker 5 (12:54):
Why is that?
Speaker 7 (12:55):
What does that say about lawmakers, Republicans and Democrats through
several White House and the job that they have not
been doing for the bulk of Americans. I mean, aren't
we the world's largest, in richest nation.
Speaker 6 (13:07):
Yeah, we sure are.
Speaker 9 (13:08):
And I think it's important to note that seventy percent
of those recipients have full time jobs, so it's not
like these.
Speaker 6 (13:12):
People aren't working.
Speaker 9 (13:14):
A disproportionate number of them are young people and also
old people over the age of sixty or sixty five.
But you know, if you really want to get into
the nitty gritty, why are people seventy percent of these
recipients on food stamps if they have full time jobs,
what is their pay? I think there's some really interesting
conversation that always comes up when we talk about snap
(13:34):
benefits of what are these giant corporations Walmart, Target, Dollar, General,
et cetera. What are they paying their employees that they
still also need to have food stamps? So it's it's
really everyone to blame here on this front.
Speaker 7 (13:46):
Why is this though, not something that gets pushed further
in Congress with lawmakers.
Speaker 9 (13:53):
Well, especially in a year like this one where they're
focused on cutting federal spending.
Speaker 6 (13:59):
I mean, and you look at the one big, beautiful bill.
Speaker 9 (14:01):
There were repeated instances of cutting food stamps, back limiting eligibility,
all in the name of saving money, which is interesting
given that it was a three and a half trillion
dollar deficit increasing bill, and they eliminated the current policy baseline,
which forces Congress to pay for things going forward. So
the decisions around trimming federal spending are very proactive. They're
(14:24):
on purpose, and that was across Medicaid and Snap in
the One Big Beautiful Bill.
Speaker 1 (14:29):
So I don't know.
Speaker 9 (14:30):
That this is necessarily seen as a problem. To see
the limitations. It's part of making the government smaller, which
is what COP and the Republican Conference are trying to do.
Speaker 7 (14:38):
Let me throw on top of this and forgive men.
I don't have the details right in front of us,
but we were talking about this in the news, and
that the President is now proposing giving Americans a two
thousand dollars check, Like, how.
Speaker 5 (14:46):
Do we do that? I don't understand.
Speaker 7 (14:48):
We talk about deficit and if the economy is doing well,
why do we have to do that.
Speaker 8 (14:51):
Secretary Busons said it could come in the form.
Speaker 5 (14:53):
Of tax cuts, okay, but.
Speaker 8 (14:56):
The President said today that any extra would go down
to pay the debt.
Speaker 6 (15:00):
And that's exactly the problem. There is no extra.
Speaker 9 (15:02):
So the trade deficit, the tariffs is my bread and butter.
Speaker 6 (15:06):
And I would just say the following.
Speaker 9 (15:07):
When we did the Cares Act under the President Trump's
first term, at the height of the pandemic, we sent
out rebate checks. The President was very happy to send
those checks out. They were very popular. They cost two
hundred and ninety two billion dollars. The tariffs have thus
far this year, for AIBA brought an eighty nine billion dollars.
So if you're going to increase the rebate check from
(15:28):
fourteen hundred bucks to two thousand dollars, and you know
the presumer they'll be a qualifying child credit a five
hundred bucks something along those lines, you now have to
spend four hundred billion dollars of the eighty nine billion
dollars in revenue that you brought in from tariffs. And
why are you sending the rebate checks in the first place.
Is it because costs of goods are increased? Is it
because of the tariffs? It sure enough is so you
(15:50):
have this really circular logic. That's a huge problem, and
there is no leftover revenue to reduce the deficit, which
is of course what bond markets are so focused on.
Speaker 8 (15:58):
Hey, Henrietta, just last quest on healthcare and whether or
not Republicans come to the negotiating table in good faith
when it comes to the Affordable Care Act later on.
That's what Democrats want to see. Does that can get
kicked down the road to January and do they meet.
Speaker 6 (16:14):
I've gotten that question a lot this afternoon from clients.
I think yes.
Speaker 9 (16:18):
When I speak with Republican staff, they say that it's
going to take two or three weeks to hammer out
any kind of an agreement on income cap levels, on
the high amendments related to abortion, on the phasing and
the duration of any ACA subsidies. I think it's a
bridge too far to ask this extremely acrimonious Congress to
come together in the twelve legislative days they have before
the end of the year to get a solution. I
(16:40):
think it's much more realistic that they need a deadline,
and so January thirtieth, that January time horizon is probably
going to be more intense around the EC subsidies getting
extended or not.
Speaker 7 (16:49):
All right, so love, thank you so much, Henriette co
founder and director of Economic Policy at VTA Partners, Henrietta
Trees joining us from New Orleans. All Right, that's the
latest tim on the US government shut down and expectations
that were nearing an end. Has definitely put the risk
on trade on Wall Street.
Speaker 8 (17:06):
Yeah, traders rushing to the riskiest corners of the market.
Stocks climbing alongside bitcoin, as the US Senate advanced have planned,
and the longest ever government shutdown also removes significant economic
headwind bond ed bonds edged lower. We've got a great
guest back with us, Sally McCartney as managing director of
wealth management and private wealth advisor with Alignment Partners at UBS.
She's got more than a billion dollars in assets under management.
(17:28):
She joins us here in the Bloomberg BusinessWeek studio. The
risk on trade today sustainable. I mean, it seems like
we're seeing the riskiest corners of the market get a bid.
Speaker 2 (17:38):
We've seen a lot of back and forth in this
kind of trade. So last week was the worst week
for the Nasdaq since April, since we began the Terarff tantrum.
So what happened last week I think was a combination
of a lull in earnings news. First of all, we
had gotten all the good earnings news out and then
everybody waits till Nvidia. We also had the end of October,
which is a fiscal end for a lot of fund
(17:59):
so there was a lot of purging and taking profits.
And then, for whatever reason, the sentiment in data was
really unpleasant last week, and people chose investors small and
large retail investors chose not chose not to show up,
which has been the bid that's been getting the market through,
(18:20):
and they chose to focus on things that, given what
you just talked about, are not particularly surprising, like the
lowest consumer sentiment out of your Michigan ever. Right, So,
I think you know when I look at everything that
you talk about, and I love the way that you
talk about it on the show because it's from an
economic perspective, but also from a social and human perspective. Clearly,
(18:40):
what's happening is the low end consumer is getting squeezed.
Things are much more expensive. There are probably many of
those people who are on snap benefits who haven't gotten
paychecks in a long time, and they're having a real
hard time, and they see in that Michigan's sentiment number
(19:00):
more hard times. Whereas you look at the five or
ten percent that now spends fifty to sixty percent, and
what are we seeing? Markets are at all time highs
AI is increasing the productivity of our jobs and our labor.
We see interest rates going low, so we can probably
have more of a tail in and more of an
ability to borrow. But that same movement and interest rates
(19:24):
doesn't give the general population access to a housing market.
So we really are like a tale of two cities
right now, right right?
Speaker 7 (19:33):
I mean that's the other thing about access to lending.
Who really gets it ultimately right? And I thought it
was striking what Henrietta said that seventy percent of the
SNAP recipients have full time jobs.
Speaker 5 (19:43):
That shocked me.
Speaker 2 (19:44):
I was very surprised to hear that that's not the
narrative that I think we push on Wall Street or
from a government perspective.
Speaker 7 (19:52):
We've got one of our reporters on shortly Mark Niquette.
They've got a story at on the Bloomberg it's Trump's
economy now, and Americans don't seem to love it, and
they get into how the US economy ali is so
increasingly dependent on three narrow, interconnected a pillars affluent consumers,
artificial intelligence, field investment, and acid price gains, making it
(20:12):
less stable if any of these pillars weekends, those are
kind of the three pillars of the market run up.
Speaker 2 (20:18):
They absolutely are. It is not hugely atypical of sort
of the end of a bull market or a boom cycle.
And the question that everybody's asking now is not if,
but when right. These are called cycles for a reason.
Portfolios are built the way they are to have things
(20:39):
that go down when other things go up. You're not
supposed to have gold rally sixty five percent while stocks
are up twenty eight percent while bonds are sort of
mildly up. So we are in a very strange period
where something will have to give. The question is when
and will it be on the federal side, will it
be on the AI side, because.
Speaker 5 (21:01):
You know the thing, what I do think most likely.
Speaker 2 (21:05):
The federal side is interesting to me because the AI side,
I see that there is a concern and an issue
around circularity, circularity of investments, circularity of hyperscalar, circularity of financing.
But I also see and believe that this is transformative
and catalytical, like the steam engine, wise, like telecom, like
(21:28):
electrification of the grid. And this not surprisingly is happening
quicker than all of those other capital expenditure cycles happen.
But it's actually not from a like percent of GDP
perspective concerning it actually probably has a lot of room
to run. So I think that you know, the affluent
works until it doesn't work, and whether that's because it
(21:51):
gets litigated away or redistributed in some sense. Again, not
a conversation we have in terms of portfolio managers on
a daily point. But what all this means to me
is that every day I have to wake up and
ask myself three questions. With everything I own, is it
time to buy it? Is it time to sell it?
Or do I not yet have enough information to make
(22:12):
a different decision? And the truth has been that there
have been times in the last year, for example, where
the answer has been sell a little or the answer
has been buy a little more, or the answer is
I need to wait to see what happens with tariff negotiations.
But nothing that happened last week in that sort of
purge or today in Monday's excitement makes me change any
(22:34):
of those three issues.
Speaker 8 (22:36):
So you're not buying, you're not selling, You're waiting for
more info.
Speaker 2 (22:39):
We're waiting for more info. The one thing we are
taking advantages is given all of the massive uncertainty long term,
short term Wall Street DC, I'm still happy to buy gold, palladium, silver.
Though there's more gold buying this year than we've seen
since twenty eleven, it's by distrust in the US government
(23:02):
concern about national treasuries, full stop alienation from the US
declining dollar. All of those things are going to continue.
And when you look at the other precious metals, they
have a lot of the same catalysts, but also with
a real demand against a supply constraint. So those are
interesting to me. And then to the extent we can
(23:24):
get into some of those megacaps are into say financial
names at lower prices, those are interesting given all the
tailwinds behind them.
Speaker 7 (23:32):
You title together as always, thank you so much, really appreciate.
Ally McCartney, Managing director of Wealth Management and private wealth
advisor with Alignment Partners over at ubs.
Speaker 8 (23:41):
Stay with us more from Bloomberg Business Week Daily coming
up after this.
Speaker 1 (23:49):
You're listening to the Bloomberg Business Week Daily Podcast. Catch
us live weekday afternoons from two to five these during
the listen on Applcarpley and Android Otto with the Bloomberg
Business app, or watch us live on YouTube.
Speaker 5 (24:03):
Hey listen.
Speaker 7 (24:05):
When Magna International reported earnings on Halloween, shares of the
autoparts manufacturer rallied as much as seven percent inter day
in response to third quarter sales and adjusted EPs beats.
Magna Management also raised its fiscal year sales forecast thanks
to strengthen North America and China. There was a lot
going on. Company based in Canada, biggest automotive supplier of
North America. Everything from automated driving control modules, powertrains, lighting mirrors,
(24:30):
complete engineering systems, so much. It is a great, great,
great read on the auto economy.
Speaker 8 (24:36):
Back with us is Swami Coda Geary, president and CEO
of nearly fourteen billion dollar market cap autoparts maker Magna International.
The stock up close to eighteen percent so far this year.
I want to start with kind of where we left
off when we spoke to you back in April. This
was just after the president's so called Liberation Day tariffs
you liken them and the additional cost to drawing upon
(24:57):
the playbooks from past rotating UAW strikes, COVID, the Great
Financial Crisis, the Chip crisis all rolled together. We were
pretty shocked about those comments because you said it was big.
Is it still that big of an impact? Has it
been that big of an impact?
Speaker 4 (25:13):
Hi, Echonon, Thanks for having me.
Speaker 10 (25:15):
Yes, there has been a lot of dynamic challenges in
the industry, as you know, and when you spoke to
me last week was fresh, you know, at that time,
as we sit here and look at it, I think
our annualized tariff impact is roughly in the range of
two hundred million. But we continue to work with our team,
with our customers, with our supply base in mitigating as
(25:38):
much as possible, you know, adhering to the USMCA compliance.
All in all, I think we have been able to
with a lot of self help, a lot of work
with our customers, we've been able to bring down that
impact to roughly ten bass points, which means about thirty
million for Magna this year.
Speaker 7 (25:59):
So I will say our BI team reacted to our
Bloomberg intelligence team, Swamy reacted and they said they believe
that your company's continuous cost cutting and operational excellence could
further release margin gains in twenty twenty six. And they
talk about in the US major customers are benefiting from
a more profitable sales mix, with higher sales and pickups
(26:19):
and SUVs offsetting lower EV production, which should enhance Magnus
program economics for upcoming twenty twenty six launches.
Speaker 4 (26:27):
Do they have it right, Yes, they do.
Speaker 10 (26:30):
There's a lot of hard work and thanks to the team,
there's been a lot of traction in our operational activities,
including some of the activities that you men mentioned cost restructuring,
optimizing our operations. We have really worked through about forty
divisions in terms of restructuring, consolidation, bringing things together. And
when the mix in the volume becomes stable and it
(26:53):
comes through, you see profitability going to the bottom line,
and that has been our focusduction, margin expansion and free
cash flow generation. We've talked about one hundred and fifty
basis points over the last three years, and I'm glad
to say we have an additional visibility of thirty five
to forty basis points going into twenty twenty six.
Speaker 4 (27:15):
So this is a journey.
Speaker 10 (27:16):
It's never going to stop you in an industry that
we need to constantly work on improvements. We call them
continuous improvements, and we are starting to see the result
of that.
Speaker 7 (27:25):
But you did talk about demand destruction the short term
when we talked with you in April, right after Liberation Day.
Has it played out as bad as you expected? And
where are we today? Your top customers are who's who
of the global auto industry, So where are we today
in that demand destruction?
Speaker 5 (27:40):
Are we done?
Speaker 4 (27:42):
I wish I could have that crystal ball.
Speaker 10 (27:44):
But you know, the way I look at it is
we peaked out as our industry in North America about
seventeen and a half million units. Interestingly, I was looking
at the data go back twenty years. In two thousand
and four two thousand and six time frame, North American
production volumes were somewhere between fifteen to sixteen.
Speaker 4 (28:02):
We are still at fifteen to sixteen million units today.
I think the.
Speaker 10 (28:06):
Volumes held up this year, but I always like to
stand back a little and see where it was. Magna
Magna twenty years ago was a twenty billion dollar company.
Today we are a forty billion dollar company. And it's
the result in the efforts of the team to continue
to gain CPV and to diversifire customer base, and that's
where our focus is right And to your point, though,
(28:28):
I hope this is the trough. If you look at
the average age of the fleet, it's pretty high. The
inventories are pretty normal. So I like to say, you know,
there is an elasticity of demand that's going to come
back looking forward if there is no more externalities like
we have had in the last four years.
Speaker 8 (28:47):
Your company is based in Ontario. We are curious about
the US and Canada trade negotiations or lack thereof. Given
the impasse between the US and Canada, how is that
affecting your industry and you specifically.
Speaker 10 (29:04):
Yeah, as you know, auto industry is very interdependent ecosystem
and it's pretty complex in North America, so it has
been challenging. But I would like to look at Magna
really as a global company. We have tens of thousands
of people in Mexico, in Canada and in US, and
(29:25):
obviously we are following the footprint of our customers, looking
at the economics, looking at transportation, looking at logistics, and
that is the competitiveness that ultimately lets you be the
player that you are. Right, So the focus has been
on it. Whatever the policy is, if there is certainty
and visibility to the policy going forward, I think it's
(29:47):
just going to be a tailwind to everybody, the OEMs
and the supply base.
Speaker 5 (29:51):
In all but Tswami, Is it broken the US? Canada?
I mean it's been so intertwined.
Speaker 7 (29:58):
Really the North American and you know, global auto supply chain.
Speaker 5 (30:02):
But is it especially the US and Canada? Is it
changed forever?
Speaker 10 (30:09):
Again, I'm not an international trade policy expert.
Speaker 7 (30:12):
Speaking from it, but you have a great advantage and
a great window on how it has worked and how
it feels today.
Speaker 10 (30:21):
It's definitely been strained, right, there's no question about that.
But I've lived in this industry for twenty six years,
and what we're talking today is going to impact maybe
twenty seven or twenty eight. So we're always looking at
what we are doing today impacts three or four years
down the road. What we're doing today has been planned
(30:42):
and decided three or four years ago, So I tend
to think a little bit in longer cycles.
Speaker 4 (30:48):
You know.
Speaker 10 (30:48):
I'm still hopeful that the policy is going to get
to a point where it's mutually beneficial to everyone the president.
Speaker 8 (30:55):
In the past, the President of the US has talked
about his back and forth in his conversations with executives
at North American auto companies. Have you had conversations with
the President or his team.
Speaker 10 (31:08):
We have had obviously a seat at the table in
being able to communicate facts that possible impacts, the challenges
of the industry and what could benefit I always say
we are able to give an opinion. One of the opinions,
I hope it's a dot on the chart, and definitely
We have talked to all three regions right expressing what
(31:29):
is the jobs that we have, what is the investments
that we've made, and how it could impact right Definitely,
that is the conversation that's always ongoing.
Speaker 7 (31:38):
Hey, Swami, one thing we wanted to ask you the
EV retrenchment that we continue to talk about here at Bloomberg,
how is it affecting your business and the auto industry
in general. You've got Ford considering killing the F one
fifty lightning, Stilanti is killing the ram EV, and GM
taking a one point six billion dollar impairment charge on
its EV assets.
Speaker 5 (31:57):
That feels pretty chilling. How is that if impacting you guys?
Speaker 10 (32:02):
In the past, we've always looked at EV and if
you look at some of the comments that we've made,
I think we were a little bit conservative. But definitely
the North American EV penetration has had an impact on us.
We came back and talked about the impact of our
revenue going forward in the August I think of twenty
twenty four. But the key thing has been how we've
(32:26):
been able to pivot. We had our peak cap X
spend in twenty three twenty two. We got back to
the sales to capex ratio shows our agility and being
able to get back and look at optimizing how we
can re use some of the capital with the help
of the customers and so on and so forth. But overall, EV,
I think in other regions continues and as a global company,
(32:48):
we see that continuing in China and Europe. But when
it does come back, and we still believe EV is
a secular trend, that take rate is very different than
what we all expected a couple of years ago. But
with the investments already there, with the development that's behind us,
and our ability to hit whether it's an internal combustion
(33:09):
engine or a or a hybrid, that flexibility in our
product line has helped us whether the storm pretty well.
And I think that's what we need to continue to
do going forward.
Speaker 8 (33:22):
I know that the decisions you make now are decisions
for four years from now. So are you changing product
plans to develop more gas powered vehicles or helps make
supplies for more gas powered vehicles?
Speaker 10 (33:33):
Yes, Tim, I think we have had a lot of
content in obviously the internal combustion engine platforms right and
as some of these programs are delayed or pushed out,
we continue to get leverage on the existing programs and
we continue to win. The other thing to note is
a lot of our products, almost eighty percent of our
product is propulsion agnostic. That means whether a make a
(33:56):
mirror or a door, or a structure or a seat,
we'll make it for whatever propulsion it is.
Speaker 4 (34:03):
Right.
Speaker 10 (34:04):
So, as far as we are flexible and continue to
do that in our processes, we've been able to take
advantage of that of that flexibility and gain market and
continue to grow our revenues.
Speaker 7 (34:16):
So I want me just thirty seconds here, any signs
of a US recession, a global recession? What's the word
that you would use to describe the marketplace right now?
Speaker 5 (34:25):
Just quickly?
Speaker 10 (34:27):
Yeah, I think there is signs of stress, I would say.
And obviously that you know, puts us all us on
a cautionary foot. But like I said, from a auto industry,
the inventory seem normal. The average age of the fleet
is pretty high, so we are looking for order demand
not to be impacted that much. But we still remain
(34:48):
very cautious.
Speaker 7 (34:49):
Say I need a new car pretty soon, so Miller,
I know, Yeah, he's got a bunch, hey, so Amy.
We always appreciate when you carve out some time for
Tim and me. The Bloomberg BusinessWeek Daily team Swami Kudigary.
He is Chief executive Officer Magna International, joining us from Troy,
Michigan on this Monday.
Speaker 5 (35:07):
Thanks again.
Speaker 1 (35:09):
This is the Bloomberg Business Weekdaily podcast, available on Apple, Spotify,
and anywhere else you get your podcasts. Listen live weekday
afternoons from two to five pm Eastern on Bloomberg dot com,
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(35:30):
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