April 15, 2025 • 42 mins
Watch Carol and Tim LIVE every day on YouTube: http://bit.ly/3vTiACF.
Today's show features:
- Bloomberg Businessweek National Correspondent Josh Green on Trump’s Tariff Obsession
- Bloomberg News Finance Reporter Katherine Doherty on Bank of America Earnings & Bloomberg News US Finance Team Leader Sally Bakewell on Citi Earnings
- Bloomberg Detroit Bureau Chief David Welch, on today's Big Take: Mary Barra Is Trying to Sell EVs in Trump’s America
- and we Drive to the Close with Alan Zafran, Founding Partner and Co-CEO at IEQ Capital
Hosts: Carol Massar and Tim Stenovec Producer: Sebastian Escobar
See omnystudio.com/listener for privacy information.
Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:02):
Bloomberg Audio Studios, Podcasts, radio News.
Speaker 2 (00:08):
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 news as it happens. The Bloomberg Business Weekdaily
Podcast with Carol Masser and Tim Steneveek on Bloomberg Radio.
Speaker 3 (00:32):
Well, it is the most beautiful word, and so he
says this, and it is a word he says a
lot and has been for a very very long time.
Speaker 4 (00:40):
We're talking about the president tariff, tariff, tariff.
Speaker 5 (00:43):
I am a tariff man.
Speaker 6 (00:45):
To me, the most beautiful word in the dictionary is tariff.
Build your plant in the United States and you don't
have any tariffs. We will establish a minimum baseline tariff
of ten percent. You notice that on the chart, and
that'll be on other countries to help build our economy
and to prevent cheating. The tariffs give us great power
to negotiate, always have, and I really think we're helped
(01:07):
a lot by the tariff situation that's going on, which
is a good situation, not a bit. It's great.
Speaker 7 (01:11):
It's going to be legendary.
Speaker 5 (01:13):
You watch well.
Speaker 3 (01:14):
And I got to say, if you talk to our
Bloomberg News team who visited mar A Lago last summer
to talk to then candidate Donald Trump, tariffs definitely came
up in their conversation and interview with him as well,
or at least somebody who also liked Tariff's writing about
Trump's fascination with them and the marri A Lago connection.
Let's head to Washington, DC and Bloomberg BusinessWeek National correspondent
(01:35):
Josh Green. Josh, we all do remember the cover story
a BusinessWeek ahead of the presidential elections, A picture of
Donald Trump. You in a group of Bloomberg editorial really
our finest went to mari A Lago to talk with him,
interview him, take us back there and some of the
things that you guys covered and what really struck you
the most, maybe surprised you the most.
Speaker 5 (01:58):
Yeah, you know.
Speaker 8 (01:58):
So last July we went down mar A Lago to
interview Trump. A team of us did from Business Week
A couple of days before his first and what turned
out to be infamous debate with Joe Biden. Trump had
wrapped up the Republican nomination, and so we were down
there to talk about what Trump's plans for the economy
would look like in a second term, and so we
covered what we thought were all the major issues, you know,
(02:19):
tax cuts, deregulation, climate, the Federal Reserve, what his plans
were for Jerome Powell. But Trump kept bringing up William McKinley, unprompted,
the twenty fifth President, And as we were leaving the interview,
me and my college kind of looked at each other
and thought, you know, that was a lodd I haven't
heard Trump bring up.
Speaker 5 (02:39):
William McKinley before.
Speaker 8 (02:41):
And I thought about it that on Liberation Day April second,
when Trump instituted this global regime of tariffs that temporarily
crashed the stock market, have a lot of banks and
analysts worry about recession calls, and so in the new
issue of Business Week, I kind of went back over
that interview because I think, in hindsight, it offered a
(03:02):
lot of insight into kind of the way Trump's mind works,
especially around tariffs, and kind of what he might be
thinking and what might be driving the obsession that you
guys so ably illustrated there on the intro that has
Trump so keyed on ratcheting up tariffs even as starf
markets are falling around the world and a lot of
people are worrying more and more about recessions.
Speaker 1 (03:23):
I mean, you can go back and read that story
the cover of BusinessWeek. It was the August issue, and
a lot has certainly changed since then. I mean, even
back then he was running against Joe Biden, but Josh
I still think tariff's caught a lot of people off guard.
Even if you go back, as you write to members
of his inner circle his administration, even back then, they
(03:45):
didn't necessarily think that he would do what he did
on April. Second, why did it catch everyone off guard?
Speaker 8 (03:51):
I think caught everybody off guard for a couple of reasons.
Number One, obviously, Trump cared and instituted tariffs during his
first term, but he did it at a level that
wasn't so extreme that markets sort of plunged right away.
A lot of people thought that, of course Trump is
going to do something on tariffs. He'll probably do something
on tariffs in China, you know, maybe some other sectoral
(04:12):
tariffs around the margins, but he's not going to do
anything extreme. I think that was the belief because most
economists on the right hand, the left agree that tariffs
are inflationary, including his own Treasury Secretary Scott Besson, who
I mentioned in the piece. I think the other reason, though,
is that a lot of folks believe that Trump's rhetoric
around tariffs was really a negotiating ploy, and there was
(04:34):
a kind of comfort, I think, in hindsight, false comfort
in the conventional wisdom that while Trump talked a big
game on tariffs, what he really cared about was the
stock market, and he views that as kind of like
an imprimature of his own success. At the stock market's high,
Trump gets on social media and brags about it. I
think the belief was that it dropped too low, Trump
(04:56):
would stop whatever he was doing to drive it down
and do whatever he could to talk it back up,
and that really hasn't happened much this time around. He
did relent on some of the tariffs, but you know,
we're now in this sort of ninety day holding period
where he may reinstitute them, and he's ratcheted up other
tariffs on China. So I think people just misread and misunderstood,
and I would certainly include myself in this camp. The
degree to which Trump was intent upon raising up these
(05:19):
tariffs and some My piece explores why that might be
and what we might have missed the first time around.
Speaker 3 (05:24):
Yeah, I got to tell you, you know this idea
and you say this that to take the president at
least the first time around, you know, take them seriously,
but not literally. And now we realize wait, no, no, no,
he really wants us to take them literally.
Speaker 4 (05:35):
That was all wrong.
Speaker 3 (05:35):
And so since our read on President Trump was not
necessarily on the money or the guardrails were there during
the first term, and it's different this time around.
Speaker 4 (05:45):
We don't really know, Josh, whata comes next?
Speaker 2 (05:47):
Do we?
Speaker 5 (05:48):
No?
Speaker 8 (05:49):
And when I say we, that includes Trump's inner circle,
because you know, we talked to a lot of them,
and a lot of them were blindsided. I actually moderated
a panel discussion on Liberation Day with one of his
former top advisors, Steve Bannon, and I asked Bannon on stage,
do you know what's coming? What countries are going to
get hit? And he said, well, this is all still
up in the air. It's still being litigated. So even
(06:10):
Trump's closest allies didn't really know what was coming then,
and I'm pretty confident don't know what's coming next. Because
Trump is an impulsive guy. He reacts to what other
countries do, and so really anything could happen looking forward.
So what I tried to do was kind of go
back to what I think of his first principles when
it comes to Trump and tariff and explore a little
(06:30):
bit what his motivation might be and what he might
be thinking.
Speaker 1 (06:33):
So let's talk a little bit about that and kind
of go more with what Bannon told you then and
what you've learned from Steve Bann. And we should know
you're also the author of Devil's Bargain, a book that
really goes deep on Steve Bannon, among other books that
you've written, Josh, So you've spent many years reporting on him,
writing about him, you know him really, Well, what did
we learn about his goals President Trump's goals through Steve Bannon? Well,
(06:56):
you know, I think I've spent the last couple of
weeks going around to people and Trump's or people on
Wall Street, people on politics and saying, what do you
think is what do you think is driving Trump's obsession
with tariffs?
Speaker 8 (07:07):
How does he view them? And why is he moving
in a direction that seems to run counter to the
economic interests of the United States in his own administration,
or at least that's the argument that a lot of
people had been making. I thought one of the best
answers came from Steve Bannon. Bannon said that Trump looks
at the United States much in the same way that
he looks like mar A Lagos private club as this
(07:29):
prime piece of real estate, and that foreign countries should
have to pay more, essentially a VIP rate, to have
access to America's market. And that made me recall like
an odd thing that had happened during this Business Week
Trump interview last July. In the middle of the interview,
(07:49):
the club manager for mar A Lago wandered in, and
Trump stopped the interview, called him over and had him
sort of boast to us, the Bloomberg reporters about how
Trump was raising club dues at mar Lago from seven
hundred thousand dollars to a million dollars. And you know,
in hindsight, I really do think that that shed some
(08:12):
light on the way that Trump's mind works when it
comes to tariffs.
Speaker 5 (08:16):
He was making clear to us at the time.
Speaker 8 (08:17):
You know, Trump felt vindicated he'd been ostracized from politics.
Briefly after January sixth, but he'd managed to kind of
return and climb back and win the GOP nomination in
a route people now wanted to be close to him,
important people, business leaders, and so he was raising the
price of admissions to his club. And I think the
same view kind of prevails for Trump when it comes
(08:39):
to the United States trading with foreign countries. That Trump
views the US market as a prime piece of real estate.
He's gotten into office, and now what he's going to
do is sort of raise the membership fees for countries
who want to do business with the United States. That's
really what these tariffs are, you know, never mind the
economic effects, the side effects, and the ripple effects that
this has had on international trade patterns, on equities markets
(09:02):
around the world, on the uncertainty it's caused for US
and foreign businesses, that's what seems to be driving Trump.
And I found that a pretty compelling answer from Bannon
and a pretty compelling insight into the way that Trump's
mind works when he thinks about these big issues.
Speaker 3 (09:16):
I think it's safe to say that I think both
Tim and I felt like when we read it, were like,
oh my gosh, like a light bulb like it just
makes sense, and you know, it's interesting, Josh, Like everybody
keeps talking about the marral Lago accord, but I think
this kind of maral Lago connection makes so much and
explains what he's doing. You know, some of the concerns
you just kind of laid out some of the things
that is it kind of shortsighted, like his ability to
(09:37):
use his power here as president and the US economy
and all its might in terms of negotiating better trade deals.
But it might be short sighted in that there are
longer term implications, certainly for the US economy and the
US's position in the world.
Speaker 5 (09:54):
Absolutely.
Speaker 8 (09:55):
I mean, within what a week, you know, we were
on the cusp of a bear market. Now have rebounded
since when Trump relented a little bit, but all the
messaging we get from the White House is more tariffs
are coming. He's going to ratchet it up, and look,
it's difficult to go as his treasure Secretary Scott Bessett
now intends to do and negotiate individual trade deals with
I think seventy seventy odd countries in the next ninety days.
(10:19):
So this has caused an awful lot of chaos. We've
seen business sentiment, consumer sentiment plunging in the wake of
Liberation Day, and so, you know, seemingly he's created a
kind of macroeconomic problem for himself, for the United States,
for his position in the world, that seems to be
largely self inflicted.
Speaker 5 (10:37):
And so I think there's still a.
Speaker 8 (10:38):
Lot of puzzlement and a lot of fear, including among
Trump supporters and some of whom I talked to for
the piece, about what exactly the plan and the intention
is here and what kind of damage may come as
a result of that. I think that's the thing we're
going to see play out over the rest of the year.
Does it seem like to you that the president is
less concerned about the bond market and the equity market
this time around than he was during my first term.
(11:01):
Much less concern, much less concern. Yeah, it's not exactly
clear to me why it is. I think part of
it is that Trump is more insulated from bad news
in this administration that he was in previous administrations. I've
seen some reporting. I've talked to some people who tell
me that Trump is being told by a lot of
his pro tariff advisors at Hey, the working class really
(11:22):
loves these tariffs.
Speaker 5 (11:23):
They're popular.
Speaker 8 (11:24):
You're doing a good thing here when most public opinion
would indicate the opposite. I talk in my BusinessWeek piece
about just how singularly unpopular Trump's tariffs are with a
lot of voters, across partisan groups, across age groups, across
income groups. So he may be getting bad information about this.
I do think that reality sort of pierced that inner
(11:45):
circle a little bit. You saw this when the bond
market began to fall apart a week or so ago,
and Scott Besson, among others, jumped in and convinced Trump
to relent temporarily.
Speaker 5 (11:54):
But we really don't know.
Speaker 8 (11:55):
Whether they've changed his views and whether they've curbed his
appetite to keep imposing these terrors on allies and enemies alike.
Speaker 3 (12:02):
Josh, I'm curious and all your reporting. And I mean
this with no disrespect in terms of the president, not you.
Speaker 5 (12:09):
But I mean thanks, Carol.
Speaker 4 (12:11):
No no, no, no, you door, you know our door. But
I mean sorry that came out wrong. That's one of
those days.
Speaker 3 (12:18):
What I mean is, you know, I was thinking about
his fascination with McKinley, right, And if you really go
back and read history books and so on, and so forth,
you realize how that just turned out so badly.
Speaker 4 (12:28):
Does the president read history? Does he read? You know?
I am curious.
Speaker 3 (12:34):
I know there's a lot that probably crosses his desks,
and he relies on advisors, as a lot of presidents
do right for some reason, so on and so forth.
But a lot of past presidents have also been incredible readers,
right and trying to understand situations.
Speaker 4 (12:45):
What do we know about President Trump in terms of
how he assesses a situation?
Speaker 8 (12:50):
You know, I have wondered this myself. Trump definitely does read,
but what he tends to read are paper printouts of
like computer screens.
Speaker 5 (12:58):
Like I was in his office once.
Speaker 8 (12:59):
Interview him, and he had a folder of like paper
printouts from the Drudge Report. So I don't think he's
reading history books about the McKinley era yet. At the
same time, and you can go back and actually read
the unredacted transcript of our interview with Trump from July,
he makes several specific citations to things like the McKinley
Tariff Act of eighteen ninety, So clearly he had been
(13:20):
either reading or well briefed on a lot of what
he was talking about. This kind of late nineteenth century
American history and McKinley and tariffs. So it's kind of
a mystery to me, and one I've wondered a lot about,
you know, who exactly imparted this information to him, how
he absorbed it.
Speaker 5 (13:37):
But clearly it's something.
Speaker 8 (13:38):
That he's really keyed on and continues to key on.
It shaped and affected his worldview, and it's obviously affecting
US policy like right now in the moment. So it's
something I hope to keep kind of doing more reporting on.
But I have to be honest, it's a little baffling
to me to understand quite how he became so obsessed
with McKinley. I suspect it was somebody around him, an advisor,
whether Peter Navarro or a Steve Bannon someone like that
(14:00):
who really is pro tariffs, had kind of filled his
head with this stuff. But Trump was pretty bought in
then and still seems pretty bought in now.
Speaker 1 (14:08):
So, Josh, based on the reporting that you've done, the
time you've spent with the president in recent years, the
time you've spent with Steve benn and other close advisors
to the president, what do you think our audience needs
to understand about the longevity of tariffs and how they
will be present in our lives during this administration.
Speaker 8 (14:28):
I think the main thing is is like tariffs are
a core Donald Trump belief going back as long as
he has commented on public policy. So I think he
means this. He isn't doing these things or taking these
positions opportunistically. This is core to his being and how
he sees the world.
Speaker 5 (14:46):
As I right in the Business Week.
Speaker 8 (14:47):
You know, generally when presidents have a big idea, all presidents,
they tend to cling to it come hell or high water,
whether things are going well or whether they're not going well.
And so I would expect Trump, you know, while he
may relent on the margin, well, he may adjust things
on the tariff front, to.
Speaker 5 (15:02):
Stick with these is a key policy tool throughout his administration.
Speaker 8 (15:06):
So I think it's something people are going to have
to watch and continue to grapple with.
Speaker 3 (15:09):
So basically TBD and time will tell, right if he
does stick to his guns, how it all plays out
for all of us, or whether there could be some
really serious consequences for individuals in this country as well
as the US economy, as many economists predict.
Speaker 5 (15:21):
Josh, I think that's exactly right.
Speaker 8 (15:23):
And the only thing I feel any confidence about if
somebody who's done a lot of reporting on him and
the people around him, is the tariffs are not something
that he's going to suddenly lose interest in and disappear
and go away the way a lot of folks would
like to. I think they're going to be here for
the duration.
Speaker 3 (15:37):
So appreciate it and see I do. I totally respect
everything you do. Josh, Thank you so much. Incredible piece
of reporting Bloomberg BusinessWeek National Course by it, Josh Green.
Speaker 4 (15:48):
Out there in DC, all right. Coming up next.
Speaker 3 (15:50):
Amid the tire off kerfuffle, I'm kind of liking that
word that Jamie Dimond recently used.
Speaker 4 (15:56):
Other people have said it too, I know, I do.
I just kind of like it. It's in my mind.
Speaker 1 (16:00):
Wow, he does speak. It kind of like leaves us
with things to keep repeating for a few weeks. I know, right, Yeah,
really basically it does.
Speaker 5 (16:08):
It stays with us for sure.
Speaker 4 (16:09):
So amid the tower kerfuffle, we're going to stay with that.
Speaker 3 (16:11):
Understanding American power in the age of economic warfare. Columbia's
Edward Fishman back with us to talk choke points. That's
coming up on Bloomberg Business Week Daily.
Speaker 4 (16:19):
Stay with us.
Speaker 2 (16:21):
You're listening to the Bloomberg Business Week Podcast. Catch us
live weekday afternoons from two to five pm Eastern. Listen
on Apple CarPlay and Android Auto with the Bloomberg Business app,
or watch us live on YouTube. Hey, the last of
the big banks have reported.
Speaker 1 (16:37):
Bank of America shares moving higher after stock traders there
posted a record quarter over its City Group. The bank
inch closer to a key forroppitability target in the first quarter,
as the firm's traders surpassed expectations and the banke drew
a record hall from its wealth and retail businesses. From
where we bring in Katherine Dougherty and Sally bake Well.
Kati is Bloomberg News finance reporter. Sally is a Bloomberg
(16:58):
News America's Finance team leader. They both join us here
in the Bloomberg Interactive Brokers Studio. Sally, We're going to
start with you. We're going to talk City. It was
these two are the last of the big banks to report.
Speaker 4 (17:09):
I think the big.
Speaker 1 (17:10):
Headline here is that the bank is getting closer and
closer to this key profitability target that the CEO set out.
Speaker 9 (17:17):
That is correct, And I think what was interesting with
this earnings quarter from City is that beyond the numbers
which were good, there were records for retail and wealth,
as you said, and the traders surpassed expectations thanks to
this volatility, and they had a good performance from its
services business. But what was also notable was how much
the executives kind of exuded a lot of confidence and
(17:38):
self assurance about cities ability to maintain a strong position
and also to navigate the economic uncertainty that is approaching.
And indeed Fraser was particularly forceful about that and voiced
a lot of support Jane Lewis, Jane Fraser, the CEO,
She voiced a lot of support for the US, said
(17:59):
that one you know, when all is said and done,
when we've got through this these structural issues and the
trade inbalances, the US will emerge victorious as the sort
of world leader, world economic leader, and the dollar will
remain the reserve currency.
Speaker 3 (18:12):
I'm what she's having. Where does she get that from? Sorry,
where does she get that from?
Speaker 4 (18:19):
Well, because you.
Speaker 3 (18:21):
Know what some of the other CEOs, the big banks,
Jamie Diamond and others right have said.
Speaker 4 (18:26):
David Solomon of Gonemin I feel like have been a
bit more cautious.
Speaker 9 (18:30):
Well, she did also echo that cautiousness, and you know,
she kept their sort of same line, which is to
say that things are impossible to predict right now. But
she probably was buoyed by some of the numbers and
the fact that they do.
Speaker 4 (18:43):
It's such a slag for her, right, it's been.
Speaker 9 (18:45):
Such a slog. They've had to cut nearly twenty thousand
members of staff, they've brought in new leaders, they've undertaken
this dramatic modernization of infrastructure, and you can probably see
in the numbers that they are starting to see progress
and they are getting close to this profitability metric. But
it is important to note that they do sort of
front load that profitability metric. They often post a sort
(19:08):
of more positive one and then it kind of cycles
down through the quarters. Why is that It might just
be a sort of cyclical thing generally. But all that
said and done, there were other positive signs. The consumer
remains resilient, they said, so you know, the impacts of
the sort of economic downturn aren't necessary. Potential economic downturn
(19:30):
aren't necessarily filtering through there yet either. And they also
said even on the deal front, that their pipeline remains strong, robust,
and healthy despite the fact that there is a sort
of chilling effect of a lot of Trump's tariffy.
Speaker 1 (19:44):
It's so interesting to hear this because if we were
sitting here a week ago, we'd be talking about we'd
be going through the list of the companies that have
pulled their IPOs. We'd be talking about risks to capital
markets businesses at these big international banks because of a
pullback in m and a pullback in IPOs. And that's
just not the impression that we got Friday, Monday, and today, right.
Speaker 9 (20:02):
I mean, they did acknowledge, and they have acknowledged for
a little while that a lot of their corporate clients
are pausing. Pausing is the word that they're using as
they assess and wait for more clarity. But they did
seem to emphasize that they do have these pipelines and
that they are expecting activity once there is a bit
more clarity. But again they fell back on this sort
(20:22):
of message of not really being able to predict the
future at this stage.
Speaker 4 (20:25):
Yeah, kind of interesting.
Speaker 3 (20:26):
I am feeling like there's a little momentum maybe potentially
among the financials that if we get the go ahead sign.
There is a lot of stuff in the pipeline, whether
it's M and A, whether it's IPOs, just kind of
waiting for that sign that things have calmed down. Sally,
thank you so much, so appreciate it. Shares A City,
by the way, are up about three percent. Sally, of course,
is Bloomberg News America's finance team leader.
Speaker 4 (20:45):
All right, from.
Speaker 3 (20:45):
City to BFA, we go BAA also rallying Kat, come
on in on what we got from BAA.
Speaker 10 (20:51):
So BFVA is also exuding that same confidence that we
heard from City. Brian moynihan and his statement today, he's saying,
our business clients have been performing well and consumers have
shown resilience, they're continuing to spend, and they're maintaining healthy
credit quality. So it was quite a positive note. But
he does then go into the uncertainty that is hard
(21:14):
to predict, so there is a note of caution. But
I would say that the confidence was louder than the
caution this morning.
Speaker 1 (21:21):
What's his note of caution, specifically.
Speaker 4 (21:23):
The level to which you cannot predict the future.
Speaker 1 (21:26):
So it's all about uncertainty, yes, and not necessarily about
anything that he's seeing yes.
Speaker 10 (21:32):
But they believe that the strength of specifically for BAA
and for City BFA, being the second largest US bank
by assets, they have this window into the consumer. A
lot of today's call was putting an emphasis on here's
where the bank was in two thousand and nine during
the financial crisis, and here's where we are today, And
they really spent a lot of time comparing the strength
(21:56):
that they said they've been working towards over fifteen years,
and how even if you go into the FICO scores
of their consumers, the types of clients and the write
offs or the potential soured loans that they might see
from both consumers and from corporates, they say that based
on the quality of the actual customers they have, they
(22:18):
don't expect to have the same downfall as they once
experienced fifteen years ago.
Speaker 1 (22:23):
So the message is we are more prepared now than
we were fifteen years ago.
Speaker 10 (22:27):
Absolutely, and they are emphasizing that that didn't just happen overnight,
that they made steps along the way, and.
Speaker 3 (22:35):
A case that we're choosier about our clients we make
sure we work with, whether it's corporate, whether it's retail,
right that they're a better level of clients. I think
it's they're economically secure, they're more.
Speaker 10 (22:49):
Cautious, and they've changed their metrics over time of the
level to which they're able to engage and do business.
And I mean, well, if we're talking about FICO scores, yes,
they're saying that the concentration of their customer base has
changed over time. But when you're talking about the Wall
(23:09):
Street businesses, trading, investment, banking, those kind of businesses are
less about well, they do do due diligence to pick
who their customers are and who they're doing business with.
But what they're saying is that the strength and the
pipeline what they see coming down the road, that they
believe that that will continue the strong momentum that they're
(23:32):
reporting for this quarter.
Speaker 3 (23:33):
So how are you guys thinking about now that we're
kind of done right the big banks?
Speaker 4 (23:36):
Right, there's nobody else.
Speaker 10 (23:37):
Today was the last of the six banks, thanks big
US Bank.
Speaker 3 (23:40):
So earning season off and running, we've been like counting
down to this, especially so it gave us something else
to talk about in terms of terrorists, but also to
get a window into the economy. Sally, is there a
message a narrative from all of them that you felt
like was a takeaway because it seems like we had
a big buyback. Was it at a Goldman like you know,
it seemed like they're doing really well. Did it tell
(24:01):
us something very significant or is it just a case
the big banks really know how to do their business?
Speaker 5 (24:04):
Now?
Speaker 9 (24:05):
I think that the line was actually what we wrote
about in our earnings our broader earning story today is
that whatever they said about uncertainty in the economy, it
wasn't necessarily reflected in their actions because they didn't quite
put their money where their mouth is. In terms of
things like share buybacks. They continued those at a pace
(24:27):
and provisions for loan losses they actually didn't set aside
as much as necessarily we potentially expected, which is a
sort of a window into their view on the economy.
If they don't believe there will be so many soured loans,
they don't need to put so much money. So those
two things that we saw in the first quarter are
unquite necessarily reflective of what they the sort of uncertain
(24:49):
message that they got about that they echoed about the future.
Speaker 10 (24:52):
But I do think that's appropriate given that the first
quarter is the activity for the first three months of
the year, and the volatility that we saw in April
is not captured in so it's two different tales. I
think that the tail significantly changed, the world changed since
April second, or really the beginning of April, which is
again not going to be captured until he starts seeing
(25:15):
the numbers for the second quarter for next quarter.
Speaker 1 (25:19):
I think that's fair to say. And look, we got
the consumer suentiment numbers last Friday that were pretty dismal,
and that really went across party lines, it went across
different income lines. But Carol, I keep thinking, you know,
when you're you know, we talked to Mike McKee and
other folks who follow the consumer. Follow what consumers are doing,
not what they're saying. Necessarily, if these banks are saying
(25:41):
they're spending money and they're confident, then or not the consumers,
but the banks are confident, then that's certainly a good takeaway.
Speaker 5 (25:47):
I guess I'm a.
Speaker 3 (25:47):
Little confused because I feel like there's been some other
data points to talk about rising consumer debt and some
other issues.
Speaker 10 (25:53):
So it's like interesting, Bank of America said that their
charge offs were roughly flat compared to the fourth quarter. Yeah,
but I was thinking about, well, what's happening right now
if you're if have you seen a change in behavior
even since the first quarter ended of this year, right
And they're actually projecting that based on the metrics they
saw for the first three months of the year, that
(26:15):
the next three months, which we will get very relatively soon,
that they're actually expecting it to be either flat or
maybe even down, which was exactly.
Speaker 4 (26:25):
The opposite of what you might think interesting times to
say the least.
Speaker 3 (26:28):
Cat Dougherty and Sally bakewell, guys, thank you so much,
so appreciate it.
Speaker 4 (26:31):
This is Bloomberg.
Speaker 2 (26:34):
This is the Bloomberg Business Week podcast. Listen live each
weekday starting at two pm Eastern on Apple car Play
and Android Auto with the Bloomberg Business App. You can
also listen live on Amazon Alexa from our flagship New
York station, Just Say Alexa played Bloomberg eleven thirty. So.
Speaker 3 (26:52):
President Trump said he was considering tariff exemptions on imported
vehicles and auto parts.
Speaker 4 (26:56):
That would be a big deal, big big deal for.
Speaker 3 (26:59):
You as auto makers, who, as you know, are facing
numerous challenges. Take GM, who currently finds itself up against tariffs.
An oil loving president and Elon Musk in the White House.
That's a trifecta that can make it really tough. The
story that we're going to talk about among the most
read on the Bloomberg terminal. It is the Bloomberg Big Take,
which means our Bloomberg editorial team says it's a must read.
(27:19):
The story two featured in the upcoming new issue of
Bloomberg Business Week, soon out on newsstands, already on the
Bloomberg terminal and at Bloomberg dot com. Let's get to
it with Bloomberg News Detroit bureau chief David Welchi is
in our Detroit bureau.
Speaker 4 (27:31):
David, let's jump right in.
Speaker 3 (27:32):
I mean GM, it has been on a mission when
it comes to EV's, and now it finds itself in
a tricky place laid out for us.
Speaker 7 (27:39):
The tariff's alone. That's not exclusive to EV's obviously, but
GM's two most affordable EV's Chevy Equinox and Chevy Blazer.
They're assembled in Mexico. They would be USMCA compliance. They
wouldn't get hit with a full twenty five percent, but
they would be They would face tariffs on the non
US parts content in them, so they would face some
pressure some sort of cost hike on them, and whether
(28:01):
GM has to eat that try to pass it on
to consumers. That's something companies are working out with any
vehicle they bring into the US from another market, it
just adds more pressure for them. The bigger thing, though,
really is Trump's pledge to get rid of EV tax
credits up to seventy five hundred dollars for every consumer
who buys one. And that's a way of bringing the
(28:23):
higher prices, higher costs of evs in line with internal
combustion vehicles to make them more desirable. Help automakers get
sales up. Therefore, they get economies of scale going, and
they can reduce battery costs and just make this technology
more affordable. So these are two things that don't help
anyone who's any company that's trying to sell evs. But
(28:43):
GM's got a dozen models on the market, they've got
a lot of investment tied up in this. They haven't
backed off nearly as much as other car companies have.
So it puts pressure on them for this big push
that they've had going on eight years now.
Speaker 1 (28:55):
So does it mean that GM will have to push
back on this investment, back on this investment, as we've
seen from other companies such as Ford, for example.
Speaker 7 (29:05):
They could and in some ways they have. Right there's
a pick up electric pickup truck plant outside Detroit. They've
delayed the opening of that until next year. They're waiting
to see, you know, what electric pickup truck volume is.
And that's been the slowest segment in the market for
EV growth. And they did they sold out of a
joint venture with LG to build a third battery plant
(29:27):
in Michigan, but they do have They've broken ground on
another battery plant in Indiana that will make a different
kind of battery sell it's the one they want to
use going forward. So while they have backed off, they
haven't done like say Ford has. Where Ford was going
to make an electric vehicle on Ontario, They've instead decided
to make pickup trucks in that plant. That's a big
pullback there, and some others have slowed down some new
(29:49):
vehicle launches and some investments, but overall, GM's got a
pretty big push here and you can see why they're
gaining market share with evs. Their market share in the
EV market itself doubledlast year from six to twelve percent,
and they do better with people who've never bought GM
brands before, about sixty percent of buyers or new to
General motors. So they see this as a way to
find a new buyer. And if they could cost down
(30:11):
and they can get prices down, they'll continue to gain.
So for them, it's it's an opportunity for growth and
a new kind of buyer. And they also think it's
the future. BYD of China is there. They're gaining market
share in Mexico and South America and in Europe, and
so GA wants to keep pushing this technology and they
want to be in that game, and that just give
up on it because of near term market pressure or
(30:31):
near term changes in the political wins out of Washington.
Speaker 1 (30:35):
You mentioned, BYD, so I got to go there. We
were just speaking with Edward Fishman over at Columbia. He's
got the new book Choke points Out. We just wrapped
up that conversation. It's going to go in our weekend
show if you missed it. But he mentioned that China
vehicles and the fact that Biden put these one hundred
percent tariffs on Chinese evs. So we're not going to
see you know, BYD or Shami vehicles here in the US.
(30:57):
Why are the Chinese able to do these vehicles so
much cheaper? And I think some would argue better than
American companies. What is it exactly?
Speaker 7 (31:06):
Yeah, they've been at it for a longer amount of
time here, which means they've got more sales volume. I
think thirty to forty percent of the Chinese market is
now evs, so that means you have better scales, you
can get your battery costs down. They have a supply
chain that's built up there and has been just developing
getting its cost down for a long time now. They
do some really good technology over there in terms of
(31:26):
infotainment and that sort of thing, which makes the vehicles
very appealing. But also look that Chinese government is pushing
this pretty hard. In some cities, you can't even get
a registration for your vehicle unless it's what they call
a new energy vehicle which is either a plug in
hybrid or an electric vehicle. So that's the stick side
of it. And they've also they've given the companies themselves
(31:47):
over the last ten or fifteen years. We've got the
number in my story, two hundred and thirty billion dollars
in different subsidies. So part of it's the subsidies. Part
of it is policy, and we haven't had, nor is
Europe that kind of push for evs the way the
Chinese have. That's not to say they don't have good technology.
Bid and Shell made and some of these companies have
(32:08):
really great technology, but they've had it's been a policy
with the CCP to make this happen in China and
become the dominant forest and electric drive.
Speaker 3 (32:19):
One thing I'm curious to though, David, is you writing
your story. GM loses money on every EV that it sells.
Is this just a matter of you know, it needs
to sell large numbers and then the cost of each
comes down, or is it that they've got to kind
of retool or rethink how they are currently manufacturing.
Speaker 5 (32:39):
It's really all of it.
Speaker 7 (32:40):
So there's a lot of this in the story. So
GM's doing everything from you know, going through the factories
and just ringing you know, a couple hours here out
of the assembly process and finding more efficient ways to
do things. And remember these are for these vehicles are
GM's first time evs with the Aultium platform and with
these model so you always get efficiencies in subsequent model
(33:02):
years but they have that on the fast track. They're
working hard really to get those costs down, and that's
just basic carmaking. And then they're looking at ways to
get their battery costs down, which they got sixty hours
per kill a lot hour out of their battery last year.
They're looking for another thirty this year, which would get
them down to about one hundred dollars per kill a
wide hour, and that's roughly according to one analyst I
(33:24):
talked to, where Tesla is. And if they keep pushing that,
you start to get blow one hundred hours per kill
a white hour. For example, that Chevy Economics has one
hundred kill a white hour battery, right, so if it's
one hundred bucks at one hundred kill a whit hours,
that's a ten thousand dollars battery. You start to get that.
You know, if you can cut that in half, you
get closer to what an internal combustion vehicle would cost.
(33:44):
So now there's still a cost penalty there, but if
you get efficiencies in other places, you work toward getting
the program profitable. They think they're going to cut the
Dragon earnings from EVS in half this year and take
two billion dollars out of it, and they they told
me when I was working on the story, they're not
that far off from being able to break even on these.
(34:04):
And by the way, some of the vehicles are pretty expensive.
So with higher sticker prices lower costs, you can make
money on Electrica, school aides and hummers that sell for
big amounts of money, and if you keep getting the
cost down, you can make money on the others.
Speaker 6 (34:16):
Well.
Speaker 3 (34:16):
It's a deep dive into what GM has been working
on for the past eight years and what's at stake here. David,
Thank you so much. Bloomberg News Detroit bureau chief David
Welch out there in Detroit. Check out his Bloomberg Business
Week's story. It's in the upcoming new issue soon out
on newsstands and also at Bloomberg dot com and on
the Bloomberg and you can also check out other coverage.
(34:36):
There's a great new issue coming up and it's all
about trade, so look for some more stories on that.
Speaker 2 (34:41):
You're listening to the Bloomberg Business Week podcast. Catch us
live weekday afternoons from two to five pm Eastern. Listen
on Applecarplay and Android Auto with the Bloomberg Business app,
or watch us live on YouTube.
Speaker 3 (34:55):
All right, everybody, we are coming up on just about
seventeen and a half minutes to go until we wrap
up the t on this Tuesday, and we're definitely off
the best levels of the session, just a little bit
lower on the S and P five hundred down about
one tenth of a percent, the down Jones Industrial Average
down one hundred and thirty two points, a decline of
one third of one percentage point, and the Nasdaq one
hundred just up one tenth of one percent. That's good
(35:17):
for a gain of about eighteen points. Dig into the
S and P five hundred, and folks, you do see
a little bit more to the downside risk off two
hundred and ninety four names lower in today's session.
Speaker 4 (35:29):
Two hundred and eight to the upside. One unchanged him.
Speaker 1 (35:31):
The S and P five hundred has not recovered everything
from the shock that had experienced the day after April second,
That was the day that Trump referred to a liberation day.
So I'm wondering what Alan Zafran has to say about
the mild recovery that we've seen, and if he's changing
investor portfolios, making new investments, changing acid allocations. Alan's founding
(35:54):
partner and co CEO at IEQ Capital.
Speaker 5 (35:56):
He joins us from the Bay Area.
Speaker 1 (35:58):
Alan, good as always to have you with us. I
think a lot of investors and certainly no question the
market was caught off guard earlier this month. Are you
changing asset allocations as a result of Trump's tariff policies?
Speaker 11 (36:15):
Tim Carrol, thanks for again having me on your show.
The quick answer to your question is no, We're sticking
with people's long term asset allocations. However, for those individuals
that either have a greater degree of risk tolerance with
a long term time horizon, or are aiming to be
modestly opportunistic if and as prices fall enough, we're beginning
(36:36):
to encourage people think about dollar cost averaging into equity
prices as they fall, or where you get unique situations
like in the municipal bond market where we've see in
such a dramatic drop and price, we're actually encouraging people
to take a look now at investment grade, high quality
municipal bonds is part of a well diversified portfolio. So
(36:56):
the answer is the big picture, don't change your long
term objective?
Speaker 3 (37:00):
Yes, well, and that's what I want to ask you,
Alan what gives you the confidence to think about that
going forward. I can't tell you how many guests come
in and we talk and on air or sometimes off air,
are saying we could be at a moment in time
where the US economy and the role of the United
States in the global financial system is being changed forever
(37:23):
and the biggest change in our lifetimes.
Speaker 4 (37:25):
And so if that's the case, if dollar.
Speaker 3 (37:29):
Denominated assets aren't so important going forward, if the US
dollar doesn't rain supreme, that could change things dramatically.
Speaker 4 (37:39):
So if that's the case, and.
Speaker 3 (37:41):
If our global trading partners look elsewhere and the world
looks different for other assets other than US based assets,
that would be a very dramatic change. And I'm not
you know, So if that's the case, why is it
going to be okay in the long term in your view?
Speaker 4 (37:58):
Or maybe you don't buy that case.
Speaker 11 (38:01):
Well, I don't buy that take in case entirely. I
think US exceptionalism is still a valid claim, albeit on
the margin. You can argue that other countries companies may
become relatively greater beneficiaries from a change in the currency
relationship that transposes. What we're arguing is you should have
(38:22):
holdings that serve well in a variety of economic outcomes.
That would include the notion of potentially owning non US
denominated assets or simply owning non US stocks as part
of well diversified portfolio. The reality is the vast preponderance
of our clients are US centric clients. They spend and
living in US dollars, albeit they have a modest amount
(38:44):
of non dollar exposure in the purchases when you buy
foreign goods and services, that's actually earned by owning companies
that are multi national companies that generate the profits that
come back to you by operating in foreign countries. And
there's not a problem with having a well diversified portfolio
that on the margin will add those other assets. But
to claim that the suddenly the US capitalist system is
(39:07):
completely broken and will fall apart seems to be very
extremist in our opinion.
Speaker 5 (39:12):
And really the aim of.
Speaker 11 (39:13):
A well diversified portfolio is to grow at our moderate
pace and excess of inflation with respect to your risk tolerance.
So when an asset class like tax exempt bonds trade
at the highest level of the trade at in fifteen years,
because the client base of municipal bonds retail investors are
selling their bonds to create liquidity in a panic from
the stock market, you're getting very attractive risk adjuster return.
(39:36):
So just to pick on investment grade bond municipal bonds.
Depending on what state of residence you're in, you're in
anywhere from three and a half to four and a
quarter percent state and federal tax free, which is equivalent
if you're in the high stax bracket of seven to
eight and a half percent, has a diversifier against some
of the other riskier assets you're now going to look
(39:58):
and step into. So can debate the merits of having
non US assets, but also if you're a US centric
investor spending most of your capital and US dollars, you
need to make sure that you're taking advantage of price dislocations.
When there's an excessive level of panic, which we are
still amidst today, with the vix elevated, its level of
consumer confidence down at a very low rating we haven't
(40:18):
seen since the nineteen fifties. It feels as if the
panic is a little bit greater than the fundamental changes
that are swirling in the global economy.
Speaker 1 (40:27):
Why are you so confident that we won't see a
fundamental reorganization of the global economic order.
Speaker 11 (40:35):
I think you are witnessing the beginnings of a reorganization
to a degree. But let's put it in context. A
world in which you have ten percent baseline tariffs and
maybe the average teriff rate with Chara China is fourteen
percent puts the US in a slower growing environment with
moderately higher inflation. But it doesn't put the US in
(40:56):
a recession. It misallocates resources they might otherwise go a bit,
but it still allows for global trade. And so there's
a world in which stocks can still grow earnings. Technology
companies that are not as economically sensitive to some of
these political and economic gyrations will still flourish, and as
(41:17):
a relative benefit, those that are sitting with the highest
quality businesses that are continue to generate positive cash flows
despite whatever the terrific rules might be, are still going
to be perfectly fine as part of a well diversified portfolio.
So our view is, don't throw away basic asset allocation
and fundamentals for the sake of headlines. There's still a
(41:39):
large degree of uncertainty, but there isn't a lot of
certainty yet that the world's going to completely change. So
oftentimes when challenge we face challenging times, the best thing
to do is stay with your long term course or
further diversify to mitigate their likelihood. They have too much
in anyone thinking that if things go wrong, you'll obliterate
(42:00):
a good portion of your capital.
Speaker 5 (42:01):
That's what we're aiming to avoid.
Speaker 3 (42:03):
All right, interesting stuff, Alan, Thank you so much, Alan Zachron.
He's founding partner co CEO at i EQ Capital, joining
us from the Bay Area on this Tuesday afternoon.
Speaker 2 (42:14):
This is the Bloomberg Business Week 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,
the iHeartRadio app, tune In, and the Bloomberg Business App.
You can also watch us live every weekday on YouTube
and always on the Bloomberg terminal.
Bloomberg Audio Studios, Podcasts, radio News.
Speaker 2 (00:08):
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 news as it happens. The Bloomberg Business Weekdaily
Podcast with Carol Masser and Tim Steneveek on Bloomberg Radio.
Speaker 3 (00:32):
Well, it is the most beautiful word, and so he
says this, and it is a word he says a
lot and has been for a very very long time.
Speaker 4 (00:40):
We're talking about the president tariff, tariff, tariff.
Speaker 5 (00:43):
I am a tariff man.
Speaker 6 (00:45):
To me, the most beautiful word in the dictionary is tariff.
Build your plant in the United States and you don't
have any tariffs. We will establish a minimum baseline tariff
of ten percent. You notice that on the chart, and
that'll be on other countries to help build our economy
and to prevent cheating. The tariffs give us great power
to negotiate, always have, and I really think we're helped
(01:07):
a lot by the tariff situation that's going on, which
is a good situation, not a bit. It's great.
Speaker 7 (01:11):
It's going to be legendary.
Speaker 5 (01:13):
You watch well.
Speaker 3 (01:14):
And I got to say, if you talk to our
Bloomberg News team who visited mar A Lago last summer
to talk to then candidate Donald Trump, tariffs definitely came
up in their conversation and interview with him as well,
or at least somebody who also liked Tariff's writing about
Trump's fascination with them and the marri A Lago connection.
Let's head to Washington, DC and Bloomberg BusinessWeek National correspondent
(01:35):
Josh Green. Josh, we all do remember the cover story
a BusinessWeek ahead of the presidential elections, A picture of
Donald Trump. You in a group of Bloomberg editorial really
our finest went to mari A Lago to talk with him,
interview him, take us back there and some of the
things that you guys covered and what really struck you
the most, maybe surprised you the most.
Speaker 5 (01:58):
Yeah, you know.
Speaker 8 (01:58):
So last July we went down mar A Lago to
interview Trump. A team of us did from Business Week
A couple of days before his first and what turned
out to be infamous debate with Joe Biden. Trump had
wrapped up the Republican nomination, and so we were down
there to talk about what Trump's plans for the economy
would look like in a second term, and so we
covered what we thought were all the major issues, you know,
(02:19):
tax cuts, deregulation, climate, the Federal Reserve, what his plans
were for Jerome Powell. But Trump kept bringing up William McKinley, unprompted,
the twenty fifth President, And as we were leaving the interview,
me and my college kind of looked at each other
and thought, you know, that was a lodd I haven't
heard Trump bring up.
Speaker 5 (02:39):
William McKinley before.
Speaker 8 (02:41):
And I thought about it that on Liberation Day April second,
when Trump instituted this global regime of tariffs that temporarily
crashed the stock market, have a lot of banks and
analysts worry about recession calls, and so in the new
issue of Business Week, I kind of went back over
that interview because I think, in hindsight, it offered a
(03:02):
lot of insight into kind of the way Trump's mind works,
especially around tariffs, and kind of what he might be
thinking and what might be driving the obsession that you
guys so ably illustrated there on the intro that has
Trump so keyed on ratcheting up tariffs even as starf
markets are falling around the world and a lot of
people are worrying more and more about recessions.
Speaker 1 (03:23):
I mean, you can go back and read that story
the cover of BusinessWeek. It was the August issue, and
a lot has certainly changed since then. I mean, even
back then he was running against Joe Biden, but Josh
I still think tariff's caught a lot of people off guard.
Even if you go back, as you write to members
of his inner circle his administration, even back then, they
(03:45):
didn't necessarily think that he would do what he did
on April. Second, why did it catch everyone off guard?
Speaker 8 (03:51):
I think caught everybody off guard for a couple of reasons.
Number One, obviously, Trump cared and instituted tariffs during his
first term, but he did it at a level that
wasn't so extreme that markets sort of plunged right away.
A lot of people thought that, of course Trump is
going to do something on tariffs. He'll probably do something
on tariffs in China, you know, maybe some other sectoral
(04:12):
tariffs around the margins, but he's not going to do
anything extreme. I think that was the belief because most
economists on the right hand, the left agree that tariffs
are inflationary, including his own Treasury Secretary Scott Besson, who
I mentioned in the piece. I think the other reason, though,
is that a lot of folks believe that Trump's rhetoric
around tariffs was really a negotiating ploy, and there was
(04:34):
a kind of comfort, I think, in hindsight, false comfort
in the conventional wisdom that while Trump talked a big
game on tariffs, what he really cared about was the
stock market, and he views that as kind of like
an imprimature of his own success. At the stock market's high,
Trump gets on social media and brags about it. I
think the belief was that it dropped too low, Trump
(04:56):
would stop whatever he was doing to drive it down
and do whatever he could to talk it back up,
and that really hasn't happened much this time around. He
did relent on some of the tariffs, but you know,
we're now in this sort of ninety day holding period
where he may reinstitute them, and he's ratcheted up other
tariffs on China. So I think people just misread and misunderstood,
and I would certainly include myself in this camp. The
degree to which Trump was intent upon raising up these
(05:19):
tariffs and some My piece explores why that might be
and what we might have missed the first time around.
Speaker 3 (05:24):
Yeah, I got to tell you, you know this idea
and you say this that to take the president at
least the first time around, you know, take them seriously,
but not literally. And now we realize wait, no, no, no,
he really wants us to take them literally.
Speaker 4 (05:35):
That was all wrong.
Speaker 3 (05:35):
And so since our read on President Trump was not
necessarily on the money or the guardrails were there during
the first term, and it's different this time around.
Speaker 4 (05:45):
We don't really know, Josh, whata comes next?
Speaker 2 (05:47):
Do we?
Speaker 5 (05:48):
No?
Speaker 8 (05:49):
And when I say we, that includes Trump's inner circle,
because you know, we talked to a lot of them,
and a lot of them were blindsided. I actually moderated
a panel discussion on Liberation Day with one of his
former top advisors, Steve Bannon, and I asked Bannon on stage,
do you know what's coming? What countries are going to
get hit? And he said, well, this is all still
up in the air. It's still being litigated. So even
(06:10):
Trump's closest allies didn't really know what was coming then,
and I'm pretty confident don't know what's coming next. Because
Trump is an impulsive guy. He reacts to what other
countries do, and so really anything could happen looking forward.
So what I tried to do was kind of go
back to what I think of his first principles when
it comes to Trump and tariff and explore a little
(06:30):
bit what his motivation might be and what he might
be thinking.
Speaker 1 (06:33):
So let's talk a little bit about that and kind
of go more with what Bannon told you then and
what you've learned from Steve Bann. And we should know
you're also the author of Devil's Bargain, a book that
really goes deep on Steve Bannon, among other books that
you've written, Josh, So you've spent many years reporting on him,
writing about him, you know him really, Well, what did
we learn about his goals President Trump's goals through Steve Bannon? Well,
(06:56):
you know, I think I've spent the last couple of
weeks going around to people and Trump's or people on
Wall Street, people on politics and saying, what do you
think is what do you think is driving Trump's obsession
with tariffs?
Speaker 8 (07:07):
How does he view them? And why is he moving
in a direction that seems to run counter to the
economic interests of the United States in his own administration,
or at least that's the argument that a lot of
people had been making. I thought one of the best
answers came from Steve Bannon. Bannon said that Trump looks
at the United States much in the same way that
he looks like mar A Lagos private club as this
(07:29):
prime piece of real estate, and that foreign countries should
have to pay more, essentially a VIP rate, to have
access to America's market. And that made me recall like
an odd thing that had happened during this Business Week
Trump interview last July. In the middle of the interview,
(07:49):
the club manager for mar A Lago wandered in, and
Trump stopped the interview, called him over and had him
sort of boast to us, the Bloomberg reporters about how
Trump was raising club dues at mar Lago from seven
hundred thousand dollars to a million dollars. And you know,
in hindsight, I really do think that that shed some
(08:12):
light on the way that Trump's mind works when it
comes to tariffs.
Speaker 5 (08:16):
He was making clear to us at the time.
Speaker 8 (08:17):
You know, Trump felt vindicated he'd been ostracized from politics.
Briefly after January sixth, but he'd managed to kind of
return and climb back and win the GOP nomination in
a route people now wanted to be close to him,
important people, business leaders, and so he was raising the
price of admissions to his club. And I think the
same view kind of prevails for Trump when it comes
(08:39):
to the United States trading with foreign countries. That Trump
views the US market as a prime piece of real estate.
He's gotten into office, and now what he's going to
do is sort of raise the membership fees for countries
who want to do business with the United States. That's
really what these tariffs are, you know, never mind the
economic effects, the side effects, and the ripple effects that
this has had on international trade patterns, on equities markets
(09:02):
around the world, on the uncertainty it's caused for US
and foreign businesses, that's what seems to be driving Trump.
And I found that a pretty compelling answer from Bannon
and a pretty compelling insight into the way that Trump's
mind works when he thinks about these big issues.
Speaker 3 (09:16):
I think it's safe to say that I think both
Tim and I felt like when we read it, were like,
oh my gosh, like a light bulb like it just
makes sense, and you know, it's interesting, Josh, Like everybody
keeps talking about the marral Lago accord, but I think
this kind of maral Lago connection makes so much and
explains what he's doing. You know, some of the concerns
you just kind of laid out some of the things
that is it kind of shortsighted, like his ability to
(09:37):
use his power here as president and the US economy
and all its might in terms of negotiating better trade deals.
But it might be short sighted in that there are
longer term implications, certainly for the US economy and the
US's position in the world.
Speaker 5 (09:54):
Absolutely.
Speaker 8 (09:55):
I mean, within what a week, you know, we were
on the cusp of a bear market. Now have rebounded
since when Trump relented a little bit, but all the
messaging we get from the White House is more tariffs
are coming. He's going to ratchet it up, and look,
it's difficult to go as his treasure Secretary Scott Bessett
now intends to do and negotiate individual trade deals with
I think seventy seventy odd countries in the next ninety days.
(10:19):
So this has caused an awful lot of chaos. We've
seen business sentiment, consumer sentiment plunging in the wake of
Liberation Day, and so, you know, seemingly he's created a
kind of macroeconomic problem for himself, for the United States,
for his position in the world, that seems to be
largely self inflicted.
Speaker 5 (10:37):
And so I think there's still a.
Speaker 8 (10:38):
Lot of puzzlement and a lot of fear, including among
Trump supporters and some of whom I talked to for
the piece, about what exactly the plan and the intention
is here and what kind of damage may come as
a result of that. I think that's the thing we're
going to see play out over the rest of the year.
Does it seem like to you that the president is
less concerned about the bond market and the equity market
this time around than he was during my first term.
(11:01):
Much less concern, much less concern. Yeah, it's not exactly
clear to me why it is. I think part of
it is that Trump is more insulated from bad news
in this administration that he was in previous administrations. I've
seen some reporting. I've talked to some people who tell
me that Trump is being told by a lot of
his pro tariff advisors at Hey, the working class really
(11:22):
loves these tariffs.
Speaker 5 (11:23):
They're popular.
Speaker 8 (11:24):
You're doing a good thing here when most public opinion
would indicate the opposite. I talk in my BusinessWeek piece
about just how singularly unpopular Trump's tariffs are with a
lot of voters, across partisan groups, across age groups, across
income groups. So he may be getting bad information about this.
I do think that reality sort of pierced that inner
(11:45):
circle a little bit. You saw this when the bond
market began to fall apart a week or so ago,
and Scott Besson, among others, jumped in and convinced Trump
to relent temporarily.
Speaker 5 (11:54):
But we really don't know.
Speaker 8 (11:55):
Whether they've changed his views and whether they've curbed his
appetite to keep imposing these terrors on allies and enemies alike.
Speaker 3 (12:02):
Josh, I'm curious and all your reporting. And I mean
this with no disrespect in terms of the president, not you.
Speaker 5 (12:09):
But I mean thanks, Carol.
Speaker 4 (12:11):
No no, no, no, you door, you know our door. But
I mean sorry that came out wrong. That's one of
those days.
Speaker 3 (12:18):
What I mean is, you know, I was thinking about
his fascination with McKinley, right, And if you really go
back and read history books and so on, and so forth,
you realize how that just turned out so badly.
Speaker 4 (12:28):
Does the president read history? Does he read? You know?
I am curious.
Speaker 3 (12:34):
I know there's a lot that probably crosses his desks,
and he relies on advisors, as a lot of presidents
do right for some reason, so on and so forth.
But a lot of past presidents have also been incredible readers,
right and trying to understand situations.
Speaker 4 (12:45):
What do we know about President Trump in terms of
how he assesses a situation?
Speaker 8 (12:50):
You know, I have wondered this myself. Trump definitely does read,
but what he tends to read are paper printouts of
like computer screens.
Speaker 5 (12:58):
Like I was in his office once.
Speaker 8 (12:59):
Interview him, and he had a folder of like paper
printouts from the Drudge Report. So I don't think he's
reading history books about the McKinley era yet. At the
same time, and you can go back and actually read
the unredacted transcript of our interview with Trump from July,
he makes several specific citations to things like the McKinley
Tariff Act of eighteen ninety, So clearly he had been
(13:20):
either reading or well briefed on a lot of what
he was talking about. This kind of late nineteenth century
American history and McKinley and tariffs. So it's kind of
a mystery to me, and one I've wondered a lot about,
you know, who exactly imparted this information to him, how
he absorbed it.
Speaker 5 (13:37):
But clearly it's something.
Speaker 8 (13:38):
That he's really keyed on and continues to key on.
It shaped and affected his worldview, and it's obviously affecting
US policy like right now in the moment. So it's
something I hope to keep kind of doing more reporting on.
But I have to be honest, it's a little baffling
to me to understand quite how he became so obsessed
with McKinley. I suspect it was somebody around him, an advisor,
whether Peter Navarro or a Steve Bannon someone like that
(14:00):
who really is pro tariffs, had kind of filled his
head with this stuff. But Trump was pretty bought in
then and still seems pretty bought in now.
Speaker 1 (14:08):
So, Josh, based on the reporting that you've done, the
time you've spent with the president in recent years, the
time you've spent with Steve benn and other close advisors
to the president, what do you think our audience needs
to understand about the longevity of tariffs and how they
will be present in our lives during this administration.
Speaker 8 (14:28):
I think the main thing is is like tariffs are
a core Donald Trump belief going back as long as
he has commented on public policy. So I think he
means this. He isn't doing these things or taking these
positions opportunistically. This is core to his being and how
he sees the world.
Speaker 5 (14:46):
As I right in the Business Week.
Speaker 8 (14:47):
You know, generally when presidents have a big idea, all presidents,
they tend to cling to it come hell or high water,
whether things are going well or whether they're not going well.
And so I would expect Trump, you know, while he
may relent on the margin, well, he may adjust things
on the tariff front, to.
Speaker 5 (15:02):
Stick with these is a key policy tool throughout his administration.
Speaker 8 (15:06):
So I think it's something people are going to have
to watch and continue to grapple with.
Speaker 3 (15:09):
So basically TBD and time will tell, right if he
does stick to his guns, how it all plays out
for all of us, or whether there could be some
really serious consequences for individuals in this country as well
as the US economy, as many economists predict.
Speaker 5 (15:21):
Josh, I think that's exactly right.
Speaker 8 (15:23):
And the only thing I feel any confidence about if
somebody who's done a lot of reporting on him and
the people around him, is the tariffs are not something
that he's going to suddenly lose interest in and disappear
and go away the way a lot of folks would
like to. I think they're going to be here for
the duration.
Speaker 3 (15:37):
So appreciate it and see I do. I totally respect
everything you do. Josh, Thank you so much. Incredible piece
of reporting Bloomberg BusinessWeek National Course by it, Josh Green.
Speaker 4 (15:48):
Out there in DC, all right. Coming up next.
Speaker 3 (15:50):
Amid the tire off kerfuffle, I'm kind of liking that
word that Jamie Dimond recently used.
Speaker 4 (15:56):
Other people have said it too, I know, I do.
I just kind of like it. It's in my mind.
Speaker 1 (16:00):
Wow, he does speak. It kind of like leaves us
with things to keep repeating for a few weeks. I know, right, Yeah,
really basically it does.
Speaker 5 (16:08):
It stays with us for sure.
Speaker 4 (16:09):
So amid the tower kerfuffle, we're going to stay with that.
Speaker 3 (16:11):
Understanding American power in the age of economic warfare. Columbia's
Edward Fishman back with us to talk choke points. That's
coming up on Bloomberg Business Week Daily.
Speaker 4 (16:19):
Stay with us.
Speaker 2 (16:21):
You're listening to the Bloomberg Business Week Podcast. Catch us
live weekday afternoons from two to five pm Eastern. Listen
on Apple CarPlay and Android Auto with the Bloomberg Business app,
or watch us live on YouTube. Hey, the last of
the big banks have reported.
Speaker 1 (16:37):
Bank of America shares moving higher after stock traders there
posted a record quarter over its City Group. The bank
inch closer to a key forroppitability target in the first quarter,
as the firm's traders surpassed expectations and the banke drew
a record hall from its wealth and retail businesses. From
where we bring in Katherine Dougherty and Sally bake Well.
Kati is Bloomberg News finance reporter. Sally is a Bloomberg
(16:58):
News America's Finance team leader. They both join us here
in the Bloomberg Interactive Brokers Studio. Sally, We're going to
start with you. We're going to talk City. It was
these two are the last of the big banks to report.
Speaker 4 (17:09):
I think the big.
Speaker 1 (17:10):
Headline here is that the bank is getting closer and
closer to this key profitability target that the CEO set out.
Speaker 9 (17:17):
That is correct, And I think what was interesting with
this earnings quarter from City is that beyond the numbers
which were good, there were records for retail and wealth,
as you said, and the traders surpassed expectations thanks to
this volatility, and they had a good performance from its
services business. But what was also notable was how much
the executives kind of exuded a lot of confidence and
(17:38):
self assurance about cities ability to maintain a strong position
and also to navigate the economic uncertainty that is approaching.
And indeed Fraser was particularly forceful about that and voiced
a lot of support Jane Lewis, Jane Fraser, the CEO,
She voiced a lot of support for the US, said
(17:59):
that one you know, when all is said and done,
when we've got through this these structural issues and the
trade inbalances, the US will emerge victorious as the sort
of world leader, world economic leader, and the dollar will
remain the reserve currency.
Speaker 3 (18:12):
I'm what she's having. Where does she get that from? Sorry,
where does she get that from?
Speaker 4 (18:19):
Well, because you.
Speaker 3 (18:21):
Know what some of the other CEOs, the big banks,
Jamie Diamond and others right have said.
Speaker 4 (18:26):
David Solomon of Gonemin I feel like have been a
bit more cautious.
Speaker 9 (18:30):
Well, she did also echo that cautiousness, and you know,
she kept their sort of same line, which is to
say that things are impossible to predict right now. But
she probably was buoyed by some of the numbers and
the fact that they do.
Speaker 4 (18:43):
It's such a slag for her, right, it's been.
Speaker 9 (18:45):
Such a slog. They've had to cut nearly twenty thousand
members of staff, they've brought in new leaders, they've undertaken
this dramatic modernization of infrastructure, and you can probably see
in the numbers that they are starting to see progress
and they are getting close to this profitability metric. But
it is important to note that they do sort of
front load that profitability metric. They often post a sort
(19:08):
of more positive one and then it kind of cycles
down through the quarters. Why is that It might just
be a sort of cyclical thing generally. But all that
said and done, there were other positive signs. The consumer
remains resilient, they said, so you know, the impacts of
the sort of economic downturn aren't necessary. Potential economic downturn
(19:30):
aren't necessarily filtering through there yet either. And they also
said even on the deal front, that their pipeline remains strong, robust,
and healthy despite the fact that there is a sort
of chilling effect of a lot of Trump's tariffy.
Speaker 1 (19:44):
It's so interesting to hear this because if we were
sitting here a week ago, we'd be talking about we'd
be going through the list of the companies that have
pulled their IPOs. We'd be talking about risks to capital
markets businesses at these big international banks because of a
pullback in m and a pullback in IPOs. And that's
just not the impression that we got Friday, Monday, and today, right.
Speaker 9 (20:02):
I mean, they did acknowledge, and they have acknowledged for
a little while that a lot of their corporate clients
are pausing. Pausing is the word that they're using as
they assess and wait for more clarity. But they did
seem to emphasize that they do have these pipelines and
that they are expecting activity once there is a bit
more clarity. But again they fell back on this sort
(20:22):
of message of not really being able to predict the
future at this stage.
Speaker 4 (20:25):
Yeah, kind of interesting.
Speaker 3 (20:26):
I am feeling like there's a little momentum maybe potentially
among the financials that if we get the go ahead sign.
There is a lot of stuff in the pipeline, whether
it's M and A, whether it's IPOs, just kind of
waiting for that sign that things have calmed down. Sally,
thank you so much, so appreciate it. Shares A City,
by the way, are up about three percent. Sally, of course,
is Bloomberg News America's finance team leader.
Speaker 4 (20:45):
All right, from.
Speaker 3 (20:45):
City to BFA, we go BAA also rallying Kat, come
on in on what we got from BAA.
Speaker 10 (20:51):
So BFVA is also exuding that same confidence that we
heard from City. Brian moynihan and his statement today, he's saying,
our business clients have been performing well and consumers have
shown resilience, they're continuing to spend, and they're maintaining healthy
credit quality. So it was quite a positive note. But
he does then go into the uncertainty that is hard
(21:14):
to predict, so there is a note of caution. But
I would say that the confidence was louder than the
caution this morning.
Speaker 1 (21:21):
What's his note of caution, specifically.
Speaker 4 (21:23):
The level to which you cannot predict the future.
Speaker 1 (21:26):
So it's all about uncertainty, yes, and not necessarily about
anything that he's seeing yes.
Speaker 10 (21:32):
But they believe that the strength of specifically for BAA
and for City BFA, being the second largest US bank
by assets, they have this window into the consumer. A
lot of today's call was putting an emphasis on here's
where the bank was in two thousand and nine during
the financial crisis, and here's where we are today, And
they really spent a lot of time comparing the strength
(21:56):
that they said they've been working towards over fifteen years,
and how even if you go into the FICO scores
of their consumers, the types of clients and the write
offs or the potential soured loans that they might see
from both consumers and from corporates, they say that based
on the quality of the actual customers they have, they
(22:18):
don't expect to have the same downfall as they once
experienced fifteen years ago.
Speaker 1 (22:23):
So the message is we are more prepared now than
we were fifteen years ago.
Speaker 10 (22:27):
Absolutely, and they are emphasizing that that didn't just happen overnight,
that they made steps along the way, and.
Speaker 3 (22:35):
A case that we're choosier about our clients we make
sure we work with, whether it's corporate, whether it's retail,
right that they're a better level of clients. I think
it's they're economically secure, they're more.
Speaker 10 (22:49):
Cautious, and they've changed their metrics over time of the
level to which they're able to engage and do business.
And I mean, well, if we're talking about FICO scores, yes,
they're saying that the concentration of their customer base has
changed over time. But when you're talking about the Wall
(23:09):
Street businesses, trading, investment, banking, those kind of businesses are
less about well, they do do due diligence to pick
who their customers are and who they're doing business with.
But what they're saying is that the strength and the
pipeline what they see coming down the road, that they
believe that that will continue the strong momentum that they're
(23:32):
reporting for this quarter.
Speaker 3 (23:33):
So how are you guys thinking about now that we're
kind of done right the big banks?
Speaker 4 (23:36):
Right, there's nobody else.
Speaker 10 (23:37):
Today was the last of the six banks, thanks big
US Bank.
Speaker 3 (23:40):
So earning season off and running, we've been like counting
down to this, especially so it gave us something else
to talk about in terms of terrorists, but also to
get a window into the economy. Sally, is there a
message a narrative from all of them that you felt
like was a takeaway because it seems like we had
a big buyback. Was it at a Goldman like you know,
it seemed like they're doing really well. Did it tell
(24:01):
us something very significant or is it just a case
the big banks really know how to do their business?
Speaker 5 (24:04):
Now?
Speaker 9 (24:05):
I think that the line was actually what we wrote
about in our earnings our broader earning story today is
that whatever they said about uncertainty in the economy, it
wasn't necessarily reflected in their actions because they didn't quite
put their money where their mouth is. In terms of
things like share buybacks. They continued those at a pace
(24:27):
and provisions for loan losses they actually didn't set aside
as much as necessarily we potentially expected, which is a
sort of a window into their view on the economy.
If they don't believe there will be so many soured loans,
they don't need to put so much money. So those
two things that we saw in the first quarter are
unquite necessarily reflective of what they the sort of uncertain
(24:49):
message that they got about that they echoed about the future.
Speaker 10 (24:52):
But I do think that's appropriate given that the first
quarter is the activity for the first three months of
the year, and the volatility that we saw in April
is not captured in so it's two different tales. I
think that the tail significantly changed, the world changed since
April second, or really the beginning of April, which is
again not going to be captured until he starts seeing
(25:15):
the numbers for the second quarter for next quarter.
Speaker 1 (25:19):
I think that's fair to say. And look, we got
the consumer suentiment numbers last Friday that were pretty dismal,
and that really went across party lines, it went across
different income lines. But Carol, I keep thinking, you know,
when you're you know, we talked to Mike McKee and
other folks who follow the consumer. Follow what consumers are doing,
not what they're saying. Necessarily, if these banks are saying
(25:41):
they're spending money and they're confident, then or not the consumers,
but the banks are confident, then that's certainly a good takeaway.
Speaker 5 (25:47):
I guess I'm a.
Speaker 3 (25:47):
Little confused because I feel like there's been some other
data points to talk about rising consumer debt and some
other issues.
Speaker 10 (25:53):
So it's like interesting, Bank of America said that their
charge offs were roughly flat compared to the fourth quarter. Yeah,
but I was thinking about, well, what's happening right now
if you're if have you seen a change in behavior
even since the first quarter ended of this year, right
And they're actually projecting that based on the metrics they
saw for the first three months of the year, that
(26:15):
the next three months, which we will get very relatively soon,
that they're actually expecting it to be either flat or
maybe even down, which was exactly.
Speaker 4 (26:25):
The opposite of what you might think interesting times to
say the least.
Speaker 3 (26:28):
Cat Dougherty and Sally bakewell, guys, thank you so much,
so appreciate it.
Speaker 4 (26:31):
This is Bloomberg.
Speaker 2 (26:34):
This is the Bloomberg Business Week podcast. Listen live each
weekday starting at two pm Eastern on Apple car Play
and Android Auto with the Bloomberg Business App. You can
also listen live on Amazon Alexa from our flagship New
York station, Just Say Alexa played Bloomberg eleven thirty. So.
Speaker 3 (26:52):
President Trump said he was considering tariff exemptions on imported
vehicles and auto parts.
Speaker 4 (26:56):
That would be a big deal, big big deal for.
Speaker 3 (26:59):
You as auto makers, who, as you know, are facing
numerous challenges. Take GM, who currently finds itself up against tariffs.
An oil loving president and Elon Musk in the White House.
That's a trifecta that can make it really tough. The
story that we're going to talk about among the most
read on the Bloomberg terminal. It is the Bloomberg Big Take,
which means our Bloomberg editorial team says it's a must read.
(27:19):
The story two featured in the upcoming new issue of
Bloomberg Business Week, soon out on newsstands, already on the
Bloomberg terminal and at Bloomberg dot com. Let's get to
it with Bloomberg News Detroit bureau chief David Welchi is
in our Detroit bureau.
Speaker 4 (27:31):
David, let's jump right in.
Speaker 3 (27:32):
I mean GM, it has been on a mission when
it comes to EV's, and now it finds itself in
a tricky place laid out for us.
Speaker 7 (27:39):
The tariff's alone. That's not exclusive to EV's obviously, but
GM's two most affordable EV's Chevy Equinox and Chevy Blazer.
They're assembled in Mexico. They would be USMCA compliance. They
wouldn't get hit with a full twenty five percent, but
they would be They would face tariffs on the non
US parts content in them, so they would face some
pressure some sort of cost hike on them, and whether
(28:01):
GM has to eat that try to pass it on
to consumers. That's something companies are working out with any
vehicle they bring into the US from another market, it
just adds more pressure for them. The bigger thing, though,
really is Trump's pledge to get rid of EV tax
credits up to seventy five hundred dollars for every consumer
who buys one. And that's a way of bringing the
(28:23):
higher prices, higher costs of evs in line with internal
combustion vehicles to make them more desirable. Help automakers get
sales up. Therefore, they get economies of scale going, and
they can reduce battery costs and just make this technology
more affordable. So these are two things that don't help
anyone who's any company that's trying to sell evs. But
(28:43):
GM's got a dozen models on the market, they've got
a lot of investment tied up in this. They haven't
backed off nearly as much as other car companies have.
So it puts pressure on them for this big push
that they've had going on eight years now.
Speaker 1 (28:55):
So does it mean that GM will have to push
back on this investment, back on this investment, as we've
seen from other companies such as Ford, for example.
Speaker 7 (29:05):
They could and in some ways they have. Right there's
a pick up electric pickup truck plant outside Detroit. They've
delayed the opening of that until next year. They're waiting
to see, you know, what electric pickup truck volume is.
And that's been the slowest segment in the market for
EV growth. And they did they sold out of a
joint venture with LG to build a third battery plant
(29:27):
in Michigan, but they do have They've broken ground on
another battery plant in Indiana that will make a different
kind of battery sell it's the one they want to
use going forward. So while they have backed off, they
haven't done like say Ford has. Where Ford was going
to make an electric vehicle on Ontario, They've instead decided
to make pickup trucks in that plant. That's a big
pullback there, and some others have slowed down some new
(29:49):
vehicle launches and some investments, but overall, GM's got a
pretty big push here and you can see why they're
gaining market share with evs. Their market share in the
EV market itself doubledlast year from six to twelve percent,
and they do better with people who've never bought GM
brands before, about sixty percent of buyers or new to
General motors. So they see this as a way to
find a new buyer. And if they could cost down
(30:11):
and they can get prices down, they'll continue to gain.
So for them, it's it's an opportunity for growth and
a new kind of buyer. And they also think it's
the future. BYD of China is there. They're gaining market
share in Mexico and South America and in Europe, and
so GA wants to keep pushing this technology and they
want to be in that game, and that just give
up on it because of near term market pressure or
(30:31):
near term changes in the political wins out of Washington.
Speaker 1 (30:35):
You mentioned, BYD, so I got to go there. We
were just speaking with Edward Fishman over at Columbia. He's
got the new book Choke points Out. We just wrapped
up that conversation. It's going to go in our weekend
show if you missed it. But he mentioned that China
vehicles and the fact that Biden put these one hundred
percent tariffs on Chinese evs. So we're not going to
see you know, BYD or Shami vehicles here in the US.
(30:57):
Why are the Chinese able to do these vehicles so
much cheaper? And I think some would argue better than
American companies. What is it exactly?
Speaker 7 (31:06):
Yeah, they've been at it for a longer amount of
time here, which means they've got more sales volume. I
think thirty to forty percent of the Chinese market is
now evs, so that means you have better scales, you
can get your battery costs down. They have a supply
chain that's built up there and has been just developing
getting its cost down for a long time now. They
do some really good technology over there in terms of
(31:26):
infotainment and that sort of thing, which makes the vehicles
very appealing. But also look that Chinese government is pushing
this pretty hard. In some cities, you can't even get
a registration for your vehicle unless it's what they call
a new energy vehicle which is either a plug in
hybrid or an electric vehicle. So that's the stick side
of it. And they've also they've given the companies themselves
(31:47):
over the last ten or fifteen years. We've got the
number in my story, two hundred and thirty billion dollars
in different subsidies. So part of it's the subsidies. Part
of it is policy, and we haven't had, nor is
Europe that kind of push for evs the way the
Chinese have. That's not to say they don't have good technology.
Bid and Shell made and some of these companies have
(32:08):
really great technology, but they've had it's been a policy
with the CCP to make this happen in China and
become the dominant forest and electric drive.
Speaker 3 (32:19):
One thing I'm curious to though, David, is you writing
your story. GM loses money on every EV that it sells.
Is this just a matter of you know, it needs
to sell large numbers and then the cost of each
comes down, or is it that they've got to kind
of retool or rethink how they are currently manufacturing.
Speaker 5 (32:39):
It's really all of it.
Speaker 7 (32:40):
So there's a lot of this in the story. So
GM's doing everything from you know, going through the factories
and just ringing you know, a couple hours here out
of the assembly process and finding more efficient ways to
do things. And remember these are for these vehicles are
GM's first time evs with the Aultium platform and with
these model so you always get efficiencies in subsequent model
(33:02):
years but they have that on the fast track. They're
working hard really to get those costs down, and that's
just basic carmaking. And then they're looking at ways to
get their battery costs down, which they got sixty hours
per kill a lot hour out of their battery last year.
They're looking for another thirty this year, which would get
them down to about one hundred dollars per kill a
wide hour, and that's roughly according to one analyst I
(33:24):
talked to, where Tesla is. And if they keep pushing that,
you start to get blow one hundred hours per kill
a white hour. For example, that Chevy Economics has one
hundred kill a white hour battery, right, so if it's
one hundred bucks at one hundred kill a whit hours,
that's a ten thousand dollars battery. You start to get that.
You know, if you can cut that in half, you
get closer to what an internal combustion vehicle would cost.
(33:44):
So now there's still a cost penalty there, but if
you get efficiencies in other places, you work toward getting
the program profitable. They think they're going to cut the
Dragon earnings from EVS in half this year and take
two billion dollars out of it, and they they told
me when I was working on the story, they're not
that far off from being able to break even on these.
(34:04):
And by the way, some of the vehicles are pretty expensive.
So with higher sticker prices lower costs, you can make
money on Electrica, school aides and hummers that sell for
big amounts of money, and if you keep getting the
cost down, you can make money on the others.
Speaker 6 (34:16):
Well.
Speaker 3 (34:16):
It's a deep dive into what GM has been working
on for the past eight years and what's at stake here. David,
Thank you so much. Bloomberg News Detroit bureau chief David
Welch out there in Detroit. Check out his Bloomberg Business
Week's story. It's in the upcoming new issue soon out
on newsstands and also at Bloomberg dot com and on
the Bloomberg and you can also check out other coverage.
(34:36):
There's a great new issue coming up and it's all
about trade, so look for some more stories on that.
Speaker 2 (34:41):
You're listening to the Bloomberg Business Week podcast. Catch us
live weekday afternoons from two to five pm Eastern. Listen
on Applecarplay and Android Auto with the Bloomberg Business app,
or watch us live on YouTube.
Speaker 3 (34:55):
All right, everybody, we are coming up on just about
seventeen and a half minutes to go until we wrap
up the t on this Tuesday, and we're definitely off
the best levels of the session, just a little bit
lower on the S and P five hundred down about
one tenth of a percent, the down Jones Industrial Average
down one hundred and thirty two points, a decline of
one third of one percentage point, and the Nasdaq one
hundred just up one tenth of one percent. That's good
(35:17):
for a gain of about eighteen points. Dig into the
S and P five hundred, and folks, you do see
a little bit more to the downside risk off two
hundred and ninety four names lower in today's session.
Speaker 4 (35:29):
Two hundred and eight to the upside. One unchanged him.
Speaker 1 (35:31):
The S and P five hundred has not recovered everything
from the shock that had experienced the day after April second,
That was the day that Trump referred to a liberation day.
So I'm wondering what Alan Zafran has to say about
the mild recovery that we've seen, and if he's changing
investor portfolios, making new investments, changing acid allocations. Alan's founding
(35:54):
partner and co CEO at IEQ Capital.
Speaker 5 (35:56):
He joins us from the Bay Area.
Speaker 1 (35:58):
Alan, good as always to have you with us. I
think a lot of investors and certainly no question the
market was caught off guard earlier this month. Are you
changing asset allocations as a result of Trump's tariff policies?
Speaker 11 (36:15):
Tim Carrol, thanks for again having me on your show.
The quick answer to your question is no, We're sticking
with people's long term asset allocations. However, for those individuals
that either have a greater degree of risk tolerance with
a long term time horizon, or are aiming to be
modestly opportunistic if and as prices fall enough, we're beginning
(36:36):
to encourage people think about dollar cost averaging into equity
prices as they fall, or where you get unique situations
like in the municipal bond market where we've see in
such a dramatic drop and price, we're actually encouraging people
to take a look now at investment grade, high quality
municipal bonds is part of a well diversified portfolio. So
(36:56):
the answer is the big picture, don't change your long
term objective?
Speaker 3 (37:00):
Yes, well, and that's what I want to ask you,
Alan what gives you the confidence to think about that
going forward. I can't tell you how many guests come
in and we talk and on air or sometimes off air,
are saying we could be at a moment in time
where the US economy and the role of the United
States in the global financial system is being changed forever
(37:23):
and the biggest change in our lifetimes.
Speaker 4 (37:25):
And so if that's the case, if dollar.
Speaker 3 (37:29):
Denominated assets aren't so important going forward, if the US
dollar doesn't rain supreme, that could change things dramatically.
Speaker 4 (37:39):
So if that's the case, and.
Speaker 3 (37:41):
If our global trading partners look elsewhere and the world
looks different for other assets other than US based assets,
that would be a very dramatic change. And I'm not
you know, So if that's the case, why is it
going to be okay in the long term in your view?
Speaker 4 (37:58):
Or maybe you don't buy that case.
Speaker 11 (38:01):
Well, I don't buy that take in case entirely. I
think US exceptionalism is still a valid claim, albeit on
the margin. You can argue that other countries companies may
become relatively greater beneficiaries from a change in the currency
relationship that transposes. What we're arguing is you should have
(38:22):
holdings that serve well in a variety of economic outcomes.
That would include the notion of potentially owning non US
denominated assets or simply owning non US stocks as part
of well diversified portfolio. The reality is the vast preponderance
of our clients are US centric clients. They spend and
living in US dollars, albeit they have a modest amount
(38:44):
of non dollar exposure in the purchases when you buy
foreign goods and services, that's actually earned by owning companies
that are multi national companies that generate the profits that
come back to you by operating in foreign countries. And
there's not a problem with having a well diversified portfolio
that on the margin will add those other assets. But
to claim that the suddenly the US capitalist system is
(39:07):
completely broken and will fall apart seems to be very
extremist in our opinion.
Speaker 5 (39:12):
And really the aim of.
Speaker 11 (39:13):
A well diversified portfolio is to grow at our moderate
pace and excess of inflation with respect to your risk tolerance.
So when an asset class like tax exempt bonds trade
at the highest level of the trade at in fifteen years,
because the client base of municipal bonds retail investors are
selling their bonds to create liquidity in a panic from
the stock market, you're getting very attractive risk adjuster return.
(39:36):
So just to pick on investment grade bond municipal bonds.
Depending on what state of residence you're in, you're in
anywhere from three and a half to four and a
quarter percent state and federal tax free, which is equivalent
if you're in the high stax bracket of seven to
eight and a half percent, has a diversifier against some
of the other riskier assets you're now going to look
(39:58):
and step into. So can debate the merits of having
non US assets, but also if you're a US centric
investor spending most of your capital and US dollars, you
need to make sure that you're taking advantage of price dislocations.
When there's an excessive level of panic, which we are
still amidst today, with the vix elevated, its level of
consumer confidence down at a very low rating we haven't
(40:18):
seen since the nineteen fifties. It feels as if the
panic is a little bit greater than the fundamental changes
that are swirling in the global economy.
Speaker 1 (40:27):
Why are you so confident that we won't see a
fundamental reorganization of the global economic order.
Speaker 11 (40:35):
I think you are witnessing the beginnings of a reorganization
to a degree. But let's put it in context. A
world in which you have ten percent baseline tariffs and
maybe the average teriff rate with Chara China is fourteen
percent puts the US in a slower growing environment with
moderately higher inflation. But it doesn't put the US in
(40:56):
a recession. It misallocates resources they might otherwise go a bit,
but it still allows for global trade. And so there's
a world in which stocks can still grow earnings. Technology
companies that are not as economically sensitive to some of
these political and economic gyrations will still flourish, and as
(41:17):
a relative benefit, those that are sitting with the highest
quality businesses that are continue to generate positive cash flows
despite whatever the terrific rules might be, are still going
to be perfectly fine as part of a well diversified portfolio.
So our view is, don't throw away basic asset allocation
and fundamentals for the sake of headlines. There's still a
(41:39):
large degree of uncertainty, but there isn't a lot of
certainty yet that the world's going to completely change. So
oftentimes when challenge we face challenging times, the best thing
to do is stay with your long term course or
further diversify to mitigate their likelihood. They have too much
in anyone thinking that if things go wrong, you'll obliterate
(42:00):
a good portion of your capital.
Speaker 5 (42:01):
That's what we're aiming to avoid.
Speaker 3 (42:03):
All right, interesting stuff, Alan, Thank you so much, Alan Zachron.
He's founding partner co CEO at i EQ Capital, joining
us from the Bay Area on this Tuesday afternoon.
Speaker 2 (42:14):
This is the Bloomberg Business Week 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,
the iHeartRadio app, tune In, and the Bloomberg Business App.
You can also watch us live every weekday on YouTube
and always on the Bloomberg terminal.
Hosts And Creators
Tim Stenovec
Carol Massar
Popular Podcasts
Amy Robach & T.J. Holmes present: Aubrey O’Day, Covering the Diddy Trial
Introducing… Aubrey O’Day Diddy’s former protege, television personality, platinum selling music artist, Danity Kane alum Aubrey O’Day joins veteran journalists Amy Robach and TJ Holmes to provide a unique perspective on the trial that has captivated the attention of the nation. Join them throughout the trial as they discuss, debate, and dissect every detail, every aspect of the proceedings. Aubrey will offer her opinions and expertise, as only she is qualified to do given her first-hand knowledge. From her days on Making the Band, as she emerged as the breakout star, the truth of the situation would be the opposite of the glitz and glamour. Listen throughout every minute of the trial, for this exclusive coverage. Amy Robach and TJ Holmes present Aubrey O’Day, Covering the Diddy Trial, an iHeartRadio podcast.
Dateline NBC
Current and classic episodes, featuring compelling true-crime mysteries, powerful documentaries and in-depth investigations. Follow now to get the latest episodes of Dateline NBC completely free, or subscribe to Dateline Premium for ad-free listening and exclusive bonus content: DatelinePremium.com
The Breakfast Club
The World's Most Dangerous Morning Show, The Breakfast Club, With DJ Envy And Charlamagne Tha God!