April 23, 2025 • 24 mins
Watch Alix and Paul LIVE every day on YouTube: http://bit.ly/3vTiACF.
Bloomberg Intelligence hosted by Paul Sweeney and Isabelle Lee
Today’s Podcast Features are:
- Stuart Paul, US Economist with Bloomberg Economics, discusses comments from Scott Bessent, U.S treasury Secretary at the Institute of International Finance. Bessent said that the Trump administration is looking at multiple factors with regard to China beyond just tariffs — including non-tariff barriers and government subsidies. He also said that the strongest relationship between Washington and Beijing is at the top, and that there was no timeframe for engagement.
-Craig Trudell, Bloomberg Global Autos Editor, recaps Tesla earnings. Tesla shares rose after CEO Elon Musk pledged to retreat “significantly” from his US government work to concentrate on the electric-vehicle company as his work with DOGE is “mostly done.” This comes after Tesla trimmed its spending plan after its stingiest quarter since 2021.
-George Ferguson, Bloomberg Intelligence Senior Aerospace, Defense, & Airlines Analyst, discusses Boeing earnings. Boeing Co. reported first-quarter results that exceeded Wall Street’s estimates, giving the embattled planemaker a greater degree of stability to navigate dislocations in global trade that have complicated exports. The planemaker used $2.3 billion in free cash in the three months ended March 31 as it ramped up jet production, Boeing said in a statement Wednesday
-Shelby McFaddin, Investment Analyst at Motley Fool Asset Management, discusses her outlook for the markets. The latest equity gyrations signal there’s no let up in Wall Street’s trade war obsession, with volatility-inducing policy pronouncements rocking investors big and small.
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. You're listening to the
Bloomberg Intelligence Podcast. Catch us live weekdays at ten am
Eastern on Applecarplay and Android Auto with the Bloomberg Business app.
Listen on demand wherever you get your podcasts, or watch
US live on YouTube.
Speaker 2 (00:23):
US Treasury Secretary Scott Bessont participating in a Q and
A session with the Institute of International Finance. The President
there and CEO Tim Adams having a little conversation about
the economy, about trade policy, and we want to you know,
get a sense of kind of where we go from here.
Let's bring our next guest, Stewart Paul, us economist with
Bloomberg Economic Stewary. It seems like Secretary Bessant and even
(00:46):
the President in his most recent tweets and social media posts,
I guess, seemingly pulling back from some of the most
you know, stringent tariff requirements. How are you guys reading that?
From an economic perspective, is a US trying to to
be I guess less confrontational.
Speaker 3 (01:02):
From a trade perspective, I think the US is less confrontation,
is trying to be a little bit less confrontational, especially
when it comes to dealing with our global trading partners,
that we need to offset what we typically would get
from China, and I think that that's an important thing
to keep in mind. When we have, let's say, a
universal tariff of twenty five percent, or an average effect
(01:23):
of tarifrate of twenty five percent, net's relatively evenly spread
across all of our trading partners. That gives us a
relatively limited ability to substitute across sources and across suppliers.
When we ramp up our efforts to combat China with
tariffs with trade barriers, and we lower our trade barriers
(01:46):
everywhere else, we are becoming less confrontational globally. We're directing
more of our efforts specifically towards China, and in doing so,
we open up other sources for inputs to production that
we might need, so probably less confrontational, and we're just
becoming more specifically targeted towards China. That's probably a good
(02:06):
thing in terms of maintaining the global commercial order, but
it also will make it an especially difficult list when
it comes to negotiating some sort of a trade deal
with China, who's responsible for eleven twelve percent of our imports.
Speaker 4 (02:19):
He did say that the goal isn't too decoupled. But
then as each day passes with no resolution or no
dramatic lowering of tariffs, the viability of businesses and other
things remain at risk. What can we expect, like how
long can this keep on going? I guess is the question?
Speaker 3 (02:33):
Yeah, it's going to be a slow de escalation. I
think that that's the direction that we're going to be going.
So you could talk about both the level and the direction.
Right the level is, things are bad. We are at
an all time a difficult moment when it comes to
our relationship with China and especially our economic relationship with China.
But in terms of the direction of travel, things are
(02:55):
moving slowly in the right direction, and it can take years.
It can last well beyond the Trump administration. As we
saw in the first Trump administration, he imposed Section three
zero one tariffs that lasted through the Biden administration with
no material change. Now there's been a ramp up. We're
starting to change direction, and the de escalation process can
take years.
Speaker 2 (03:14):
So I guess, is Bloomberg Economics forecasting every recession.
Speaker 3 (03:19):
We are not forecasting a recession at this point. We
have very modest growth of just over half a percent
for twenty twenty five. The contour of growth is going
to be determined in large part by what segments of
GDP are driving quarter to quarter dynamics. So we know
that in the first quarter we should see slow growth
because we've front loaded our imports of inputs to production
(03:42):
ahead of tariff implementation. Then when uncertainty really hits, When
in certain uncertainty really hits in Q two and into
Q three, we should see slower fixed investment growth That
should hollow out GDP growth in the middle of the year,
but probably not enough to offer set the rebound that
we'll get in that export in the middle of the year.
(04:04):
So the contour of GDP and the dynamics for the
different components of GDP are probably going to be enough
to just keep modest positive growth throughout the year.
Speaker 4 (04:12):
We think President Trump said that the US was doing
just fine quote unquote with Beijing and did not anticipate
a quote hardball negotiation. What was your team's reaction. Did
you anticipate that it's.
Speaker 3 (04:25):
Going to be hardball? I mean, the President's going to
be able to do The President could say whatever he wants,
but The reality is that the metals, let's say that
we need for just base metals, inputs of production, raw
materials for building buildings, electure for the electric grade for
battery production, they come from China. China needs a lot
of food from US. They're going to try to replace
(04:47):
US food, but let's say food from Brazil. So this
is just a massive geopolitical upset that's going on right out.
You do have to play hardball. You do have to
manage your trading partners. You have to you have to
prohibit let's say, geopolitical and economic promiscuity between trading partners
who stand between the US and China. And so it
(05:08):
is going to be hardball for a while. Trump likes
to say that he holds all the cards to use
a different analogy, but it doesn't entirely seem to be
the case. Yes, China does need food imports from the US,
and they've shown they're not going to retaliate one for one,
(05:29):
because they've only imposed you know, low double digitarifs on
US corn for example. But it is going to have
the opportunity to source food elsewhere, and so over the
long run, it's going to be a difficult a difficult negotiation.
Speaker 2 (05:42):
All right, we will stay on top of it, of course.
Stuart Paul, us economists for Bloomberg Economics, joining us slid
here in our Bloomberg Interactive Broker studio.
Speaker 1 (05:50):
You're listening to the Bloomberg Intelligence Podcast. Catch us live
weekdays at ten am Eastern on Apple Coarclay and Android
Auto with the Bloomberg Business Apps and demand wherever you
get your podcasts, or watch us live on YouTube.
Speaker 2 (06:04):
Tesla stocks up just under eight percent today. It came
out with numbers last week that last night, which were
really bad, will blow expectations the worst we've seen in
years yet to stock trading out because Elon Musk says
that he will devote quote far more of his time
to Tesla starting next month, and that's clearly what investors
wanted to hear. Craig Trudell joins us Global autos editor
(06:27):
for Bloomberg News, joining us from London via that Zoom thing. So, Craig,
is just as simple as Elon's coming back. Let's buy
the stock.
Speaker 5 (06:37):
Yeah, you know, I think as as our colleague Liam
Denning put it. You know, the cure for musks missteps
is more Musk apparently, so, you know, I do think
that there were a lot of investors who wanted to
see him, you know, sort of come come back and
you know, devote more of his time. You know, I
think you can find people who can say that, you know,
(06:59):
that will necessarily fix all that that ails the company.
And you do have to wonder when he was saying
in the same breath last night that you know he'll
still you know, one or two days a week. Uh,
you know, advise for the administration. Just how much he's
he's really going to step back here. I would be
surprised to see him. He's he's not much of a
(07:21):
sort of backseat driver. He likes to be in control.
Speaker 4 (07:24):
And Tesla sales started to really slow even before Musks
through his waight around politics, and they also go through
guidance for the year ahead. What are you going to
look at now that he's back and we're getting more
elon Musk?
Speaker 5 (07:38):
Yeah, I mean I think, you know, the first thing
that comes to mind for me is is, uh, you know,
given all of all of the challenge challenges they're having
with growing sales, you know, around this time last year
is when we saw the company make these really dramatic
uh you know, changes to to uh you know, headcount
(07:58):
and and you know, restructure in this really aggressive way.
I think Tesla cut quite a lot of employees last year.
And do we see Musk in his words, you know,
come back and be hardcore and sort of uh you know,
throw throw his weight around. Because I think that the
challenge that we're going to find this company have until
(08:18):
and unless they follow through on these promises for you know,
more affordable vehicles in the offering, uh you know, and
and also I think vehicles that sort of are differentiated
from just what they already have, uh, they're they're going
to have trouble you know, continuing to grow and and
so there's I think real concern about you know, if
they're just offering a you know, de contented version of
(08:40):
the Model Y and or the Model three, is that
really going to be enough to sort of move the
needle and sort of you know, tie them over until
they make some headway on on other efforts that are
sort of going to take them more time, like say
autonomous driving or robots.
Speaker 2 (08:58):
So just with the core auto business, I know mister
Musk would like to people look to other parts of
his company, but the core auto business, one can argue
it's never been a tougher time to compete for them.
I mean, you just think it just feels like China
by D specifically just kind of taken over the global
EV market. What's the competitive landscape book for TESTA these days.
Speaker 5 (09:21):
Yeah, I think that's a great point. You know, the
Chinese market is incredibly competitive. We're seeing you know, just
this week, uh, you know, fresh indication of just how
tough the sledding is there at the Shanghai Auto Show,
where you know, Jaomi is turning lots of heads. You know,
it's it's sort of the Apple car that that Apple
(09:42):
decided they couldn't pull off making their su seven that
that really has done well there. You know, b y
D continues to just go from sort of strength to
strength and really dominate in that market, and Tesla hasn't
really had answers. You know, they they play in higher
priced you know brackets. It's not that they are are
(10:05):
you know, falling apart there, but in terms of of
you know, being able to sort of hang on to
the position that they have, it's becoming more difficult when
you have you know, a fairly stale lineup and your
competitors are of peppering the market with fresh product and
innovating in a way that we used to you know,
(10:27):
kind of find Tesla was able to. The Chinese industry
has really sort of taken up the mantle in this regard.
Speaker 4 (10:35):
Can you talk to us more about how much of
the tire of discussion was in the call, which took
longer than usual. We have must sing it's pretty expensive
to bring in things from China right now, and that
he'll continue to advocate for lower tireff so we know
that this has hurt his business, which does a lot
of production and manufacturing in China.
Speaker 5 (10:53):
Yeah, it was. It was a long call. It was
a late night for those of us tuning in from London,
so you know, it was I was a little bit surprised,
I would say to hear Musk, you know, be as
frank as he was about tariffs. He's of course a
very frank person, but he has tended to be very
careful about, you know how and when he speaks about
(11:14):
having any daylight between him and President Trump. But he
was he was very you know, uh, sort of honest
and open about this idea that he does not think
that you know, tariffs are the best approach to prosperity,
as he put it. And you know, while Tesla is
somewhat insulated and that they make the vehicles they stell
(11:34):
in the US, you know, in the US, and they
have a plant in Shanghai that is is massive and
and you know a huge source of their exports for
places other than the US. UH, the company is still
affected and and particularly on the side of their energy business,
(11:54):
which has been a bright spot, the fact that they
import battery cells from China for that business. You know,
there's a big concern.
Speaker 2 (12:02):
There, Craig, excellent reporting. Thank you very much, appreciate it.
Craig Trudelle, Global autos editor for Bloomberg News, joining us
from London on Tesla.
Speaker 1 (12:11):
You're listening to the Bloomberg Intelligence Podcast. Catch us live
weekdays at ten am Eastern on Applecarplay and Android Auto
with the Bloomberg Business app. Listen on demand wherever you
get your podcasts, or watch us live on YouTube.
Speaker 2 (12:25):
We're talking about Boeing putting up some results that were
a little bit better and expected, and I've learned from
George Ferguson that I need to focus on the cash
situation of this company, particularly their free cash flow, because
they need to get the free cash flow positive sooner
rather than the later. And they made some progress there
is what is what my read is. So let's check
in with the extra George Ferguson. He covers airspace, he
(12:46):
covers the airlines and all that kind of stuff for
Bloomberg Intelligence. George talk to us about Boeing stocks up
seven percent here today? What at the company? What did
your takeaways from their earnings?
Speaker 6 (12:56):
Yeah, I mean, I think the biggest issue there was
a cash general came in a billion dollars better than expectations.
Speaker 7 (13:04):
I mean, I kind of get the sense that Boeing
management has sort of.
Speaker 6 (13:08):
Give us some pretty conservative estimates for cash generation for
the year. I think they showed it in the first quarter,
coming up, coming out pretty strong. I think there's a
real good potential that Boeing could be sort of cash flat,
meaning no usage for the year, or maybe even a
bit of generation.
Speaker 7 (13:28):
And I think as we've.
Speaker 6 (13:29):
Gotten into the earnings call what we've heard ish the
tariff effects are pretty manageable outside of China.
Speaker 7 (13:37):
China's a bit of a challenge.
Speaker 6 (13:39):
They know that, but again, a lot of the backlog
is is not Chinese airplanes. A lot of that's been
the Chinese haven't placed many orders, and you know, Boeing
has been sort of busy getting deliveries out to them
to get some of those airplanes they've already built for
them off the balance sheet. So China the major issue
again not not not big though. And the rest of
(14:00):
tariff world sounds like where there's occasions that they have
to pay, they're paying. They can claw back some of
those costs from the administration. So it sounds like I
would say things are continued to be on track for recovery,
for a strong recovery.
Speaker 7 (14:17):
Hopefully it's here.
Speaker 4 (14:18):
Yes, And Boeing last earned a profit in mid twenty
twenty one, and it's definitely coming off. It's worse there
and it's century long history. We have the CEO okay
or break saying at twenty twenty five is the turnaround here?
What ising going to do differently?
Speaker 6 (14:33):
Well, I mean I think they're going to deliver airplanes, right,
So that's the biggest challenge. When you're an aircraft manufacturer
and you stop delivering airplanes and you have quality problems,
that's why they stop delivering. You're just not going to
generate cash. They've really been trying to keep the supply
chain I would say warm, by buying components from the
(14:56):
supply chain, and that's why they've seen inventories balloon to
like eighty seven billion dollars. I got to check and
see what it was on today's balance sheet, but last
balance sheet eighty seven billion dollars. So, I mean a
lot of the turnaround is build those airplanes with existing inventory.
Means the cash generation for the airplanes they build and
deliver ought to.
Speaker 7 (15:16):
Be higher than historically.
Speaker 6 (15:19):
Use that money to pay it, do on debt, keep
the balance sheet, or heal the balance sheet.
Speaker 7 (15:25):
That's the recovery plan, George.
Speaker 2 (15:27):
I know, if I'm talking to you and reading your research,
the cash story hinges in large part on getting those
seven three sevens out the door. Talk to us about
where production is today and where do you think it's
going to go in the future.
Speaker 6 (15:40):
Yeah, So they said that they were the factory was
building at thirty low thirties number of aircraft per month.
You know, we had kind of been tracking and I
think we saw high twenty. So probably Kelly's got maybe
just a more current number on that. I think that
they'll they'll get up to the thirty eight limits. This
(16:00):
is all on the seven thirty seven that the FAA
is put in place for them this year and go
past that.
Speaker 7 (16:06):
I think they'll get an.
Speaker 6 (16:08):
FA approval for that, and probably at the back half
of the year, we're kind of looking for them to
be forty ish. And so again that you know, the
more you use the factory, the more overhead gets absorbed
over a larger number of airplanes. The more profitable you are,
the more cash you're going to generate.
Speaker 7 (16:26):
Part of that story.
Speaker 4 (16:27):
Can you talk to us a bit more about how
much the tariff headwind will affect the company's top line
or bottom line, especially with this really heated tit for
tat it seems with China, well.
Speaker 6 (16:39):
So again, China has really become much less of an
issue for Boeing. The Chinese have placed sixteen orders this
decade for airplanes. There's some four hundred orders on the
Boeing books. Still that's of a backlog, that's six thousand large.
Kelly Orberg is just talking on the call that you
(17:00):
know he's prepared to He was planning and delivering forty
to fifty into China this year, So not a lot
of airplanes that would be mostly seven thirty sevens and
that's out of an expected build of maybe four hundred
and seven thirty sevens or so this year.
Speaker 7 (17:14):
So you can already see the sizes and that large.
Speaker 6 (17:16):
And he's ready to go out and he's going to
talk to the customers, see what they want to do,
and he's ready to go out and remarket those airplanes.
I think we've already seen Air India raise their hand
say hey, we'd take some airplanes. And there's other folks
around the world that just haven't gotten the deliveries they wanted.
They're ready to take airplanes too. So on the top line,
I just don't see China impacting things that much.
Speaker 7 (17:37):
The bottom line again.
Speaker 6 (17:39):
Boeing said eighty percent of their supplier base is US based.
Speaker 7 (17:43):
A lot more a lot of the other stuff is
Canada and Mexico, which you're under.
Speaker 6 (17:48):
You know, the agreement between those countries that allows things
to flow without a tariff. And then there's cases where
when airplanes would be sold overseas, they can call those
tariffs back.
Speaker 2 (17:59):
Excell and George, we got go to some breaking news.
George ferguson covering the airlines and aerospace companies.
Speaker 1 (18:05):
You're listening to the Bloomberg Intelligence Podcast. Catch us live
weekdays at ten am Eastern on Applecarclay, and Android Auto
with the Bloomberg Business App. Listen on demand wherever you
get your podcasts, or watch us live on YouTube.
Speaker 2 (18:19):
Markets are moving. Let's see what the professionals are doing.
I mean, you can get whipsawed around here. I don't
care who you are. Shelby McFadden joins US investment analyst
for Motley Full Asset Management, located down in Arlington, Virginia. Shelby,
how are you guys kind of day to day dealing
with the volatility of this market? Again, We've got a
VIX that's come in today but still up near thirty.
(18:41):
How do you guys deal with the volatility?
Speaker 8 (18:44):
At this point, we've really just buckled ourselves in, you know,
that sort of overhead harness that you pull down when
you're on a roller coaster. That's been our tool of choice,
and it's mainly because the swings that we've seen in
the market, they're usually the up and down swing tend
to be about the same magnitude down nine hundred, up
thousand next day or within thirty six to forty eight hours.
And the other thing too, is that the swings have
(19:05):
been pretty broad, right, We're not seeing any major changes
in sort of like relative valuations up until today, with
you know, consumer discretionary outperforming. It tends to just be
a really big, sort of congealed swing in the market,
which doesn't leave too too much room for the sort
of relative valuation opportunity. So we are watching the headlines
a little bit more closely, not because we want to
(19:26):
trade on them, but we're trying to be able to
see where the dust is going to settle. And so
I think today what we're seeing in the market is
a reaction to the prospect that the dust will be
settling soon. And I don't really expect there to be
too much of an overreaction to Secretary buston sort of
follow up headline. So yeah, I think as active investors
we have sat tight so that we can really get
(19:50):
a better lay of the land and waited for the
real opportunity to show up and not necessarily just move
at every sort of down opportunity. Really trying to say
discipline and what we believe to be fair.
Speaker 4 (20:01):
Value, Sitting tight seems to be the consensus these days.
But how are you allocating your funds? Have you shifted
anything recently, cut something to overweight or boosted something to overweight.
Speaker 8 (20:13):
Yeah, that's a great question. In terms of allocation, what
we have looked at is, I would say, in terms
of at the top, we've taken a look at what
is our cyclical exposure, so whether that's going to be
industrials or consumer cyclical. That was one of the first
things that we had to look at really after inauguration.
So at election we pretty much had to sit down
and said, Okay, what are the main sort of like
(20:34):
tax policies that we think are going to be the
most impactful. But right now it's more so been okay,
what is going to be the most sensitive to any
sort of slowdown because we've been back and forth right
on whether or not we're going to be able to
hold on to this soft landing that was so they
worked so hard for or is it going to sort
(20:54):
of fall through our fingers. So allocation has been a
lot more focused on, Okay, the company is doing very well.
We know that they're going to probably perform ahead of
their peers, but we may want to pull back just
a little bit because the growth is not going to
be a little bit more deferred into the future.
Speaker 2 (21:12):
So Shelby, you know, there's with all the tariff talk,
it's created a level of uncertainty and you here which
is sapped corporate confidence. We're seeing companies pull back on
some of their cappecs guidance and so on, and some
of their earnings guide and so it's even impacted consumer confidence.
We see that in the survey data, like the University
of Michigan data. Yet a name on your list is
American Express. That seems to be a play on the consumer.
(21:34):
How do you think about American Express in this world?
Speaker 8 (21:37):
Well, there's a couple of things I really like about
American Express. The first is they are in that sort
of premium part of the spectrum, so it's a little
bit stickier in terms of being able to maintain those revenues,
being able to maintain that spend, so they're just you know,
on the higher end of the credit spectrum. The second
thing is more recent and it came from their most
recent earnings call where management has basically said, hey, we're
(21:59):
not going to be just full stop cutting our allocation
of spend to things like product refreshes and reinvesting in
the business just to pad earnings. Right, They're going to
continue to try and serve the customer and serve the
business for the long term at a time when management
of different companies, and rightfully so, are a lot more cautious.
(22:20):
So it's not to say that they are sort of
in the wild wild West and thinking that they're completely
sort of insulated from any sort of macro issue, but
also saying we've got the balance sheet, we've got the
financial health to keep investing in this business, and we're
going to do so. And as active managers, that's something
that we really like to see, is a commitment to
continuing to make the business better and serve customers up
(22:42):
into a point where you say, okay, now we need
to go ahead and pull things back, but not doing
so prematurely is what keeps me excited about that business.
Speaker 4 (22:49):
What about TransUnion, that's another company that you like. We
know that definitely Americans are relying more and more on
credit when it comes to consumer spending.
Speaker 8 (22:59):
Absolutely, and so there's another dual sided story to TransUnion
as well. So one is again the increasing reliance on
credit and debt and also the need for identity verification
goes along with that as well, and that is something
that one of their peers actually did a lot more of,
which is sort of what made the valuation a bit
more attractive for TransUnion. Whether or not that sort of
(23:20):
federal identity valuation market sort of starts to shrink is
something that could very well serve Transunion's valuation in the future.
But the fact is they've been pretty robust up against
this environment where we're not quite sure how consumers are
going to behave but increasingly people are using more credit,
not just because they need to stretch out the financing,
(23:40):
but because of the rewards. So if you're looking at
a situation where in the past maybe you'd use credit
because you had to, but now the younger generations are
getting into credit early, they're using multiple different cards for
multiple different purposes, and that's going to require credit check
every time, and Transunions does it most affordably.
Speaker 2 (23:59):
Shelby, thank you so much for joining us, Shelby McFadden
Investment and also Motley Full Asset Management joining us from Arlington, Virginia.
Speaker 1 (24:06):
This is the Bloomberg Intelligence Podcast, available on Apple, Spotify,
and anywhere else you get your podcasts. Listen live each
weekday ten am to noon 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. You're listening to the
Bloomberg Intelligence Podcast. Catch us live weekdays at ten am
Eastern on Applecarplay and Android Auto with the Bloomberg Business app.
Listen on demand wherever you get your podcasts, or watch
US live on YouTube.
Speaker 2 (00:23):
US Treasury Secretary Scott Bessont participating in a Q and
A session with the Institute of International Finance. The President
there and CEO Tim Adams having a little conversation about
the economy, about trade policy, and we want to you know,
get a sense of kind of where we go from here.
Let's bring our next guest, Stewart Paul, us economist with
Bloomberg Economic Stewary. It seems like Secretary Bessant and even
(00:46):
the President in his most recent tweets and social media posts,
I guess, seemingly pulling back from some of the most
you know, stringent tariff requirements. How are you guys reading that?
From an economic perspective, is a US trying to to
be I guess less confrontational.
Speaker 3 (01:02):
From a trade perspective, I think the US is less confrontation,
is trying to be a little bit less confrontational, especially
when it comes to dealing with our global trading partners,
that we need to offset what we typically would get
from China, and I think that that's an important thing
to keep in mind. When we have, let's say, a
universal tariff of twenty five percent, or an average effect
(01:23):
of tarifrate of twenty five percent, net's relatively evenly spread
across all of our trading partners. That gives us a
relatively limited ability to substitute across sources and across suppliers.
When we ramp up our efforts to combat China with
tariffs with trade barriers, and we lower our trade barriers
(01:46):
everywhere else, we are becoming less confrontational globally. We're directing
more of our efforts specifically towards China, and in doing so,
we open up other sources for inputs to production that
we might need, so probably less confrontational, and we're just
becoming more specifically targeted towards China. That's probably a good
(02:06):
thing in terms of maintaining the global commercial order, but
it also will make it an especially difficult list when
it comes to negotiating some sort of a trade deal
with China, who's responsible for eleven twelve percent of our imports.
Speaker 4 (02:19):
He did say that the goal isn't too decoupled. But
then as each day passes with no resolution or no
dramatic lowering of tariffs, the viability of businesses and other
things remain at risk. What can we expect, like how
long can this keep on going? I guess is the question?
Speaker 3 (02:33):
Yeah, it's going to be a slow de escalation. I
think that that's the direction that we're going to be going.
So you could talk about both the level and the direction.
Right the level is, things are bad. We are at
an all time a difficult moment when it comes to
our relationship with China and especially our economic relationship with China.
But in terms of the direction of travel, things are
(02:55):
moving slowly in the right direction, and it can take years.
It can last well beyond the Trump administration. As we
saw in the first Trump administration, he imposed Section three
zero one tariffs that lasted through the Biden administration with
no material change. Now there's been a ramp up. We're
starting to change direction, and the de escalation process can
take years.
Speaker 2 (03:14):
So I guess, is Bloomberg Economics forecasting every recession.
Speaker 3 (03:19):
We are not forecasting a recession at this point. We
have very modest growth of just over half a percent
for twenty twenty five. The contour of growth is going
to be determined in large part by what segments of
GDP are driving quarter to quarter dynamics. So we know
that in the first quarter we should see slow growth
because we've front loaded our imports of inputs to production
(03:42):
ahead of tariff implementation. Then when uncertainty really hits, When
in certain uncertainty really hits in Q two and into
Q three, we should see slower fixed investment growth That
should hollow out GDP growth in the middle of the year,
but probably not enough to offer set the rebound that
we'll get in that export in the middle of the year.
(04:04):
So the contour of GDP and the dynamics for the
different components of GDP are probably going to be enough
to just keep modest positive growth throughout the year.
Speaker 4 (04:12):
We think President Trump said that the US was doing
just fine quote unquote with Beijing and did not anticipate
a quote hardball negotiation. What was your team's reaction. Did
you anticipate that it's.
Speaker 3 (04:25):
Going to be hardball? I mean, the President's going to
be able to do The President could say whatever he wants,
but The reality is that the metals, let's say that
we need for just base metals, inputs of production, raw
materials for building buildings, electure for the electric grade for
battery production, they come from China. China needs a lot
of food from US. They're going to try to replace
(04:47):
US food, but let's say food from Brazil. So this
is just a massive geopolitical upset that's going on right out.
You do have to play hardball. You do have to
manage your trading partners. You have to you have to
prohibit let's say, geopolitical and economic promiscuity between trading partners
who stand between the US and China. And so it
(05:08):
is going to be hardball for a while. Trump likes
to say that he holds all the cards to use
a different analogy, but it doesn't entirely seem to be
the case. Yes, China does need food imports from the US,
and they've shown they're not going to retaliate one for one,
(05:29):
because they've only imposed you know, low double digitarifs on
US corn for example. But it is going to have
the opportunity to source food elsewhere, and so over the
long run, it's going to be a difficult a difficult negotiation.
Speaker 2 (05:42):
All right, we will stay on top of it, of course.
Stuart Paul, us economists for Bloomberg Economics, joining us slid
here in our Bloomberg Interactive Broker studio.
Speaker 1 (05:50):
You're listening to the Bloomberg Intelligence Podcast. Catch us live
weekdays at ten am Eastern on Apple Coarclay and Android
Auto with the Bloomberg Business Apps and demand wherever you
get your podcasts, or watch us live on YouTube.
Speaker 2 (06:04):
Tesla stocks up just under eight percent today. It came
out with numbers last week that last night, which were
really bad, will blow expectations the worst we've seen in
years yet to stock trading out because Elon Musk says
that he will devote quote far more of his time
to Tesla starting next month, and that's clearly what investors
wanted to hear. Craig Trudell joins us Global autos editor
(06:27):
for Bloomberg News, joining us from London via that Zoom thing. So, Craig,
is just as simple as Elon's coming back. Let's buy
the stock.
Speaker 5 (06:37):
Yeah, you know, I think as as our colleague Liam
Denning put it. You know, the cure for musks missteps
is more Musk apparently, so, you know, I do think
that there were a lot of investors who wanted to
see him, you know, sort of come come back and
you know, devote more of his time. You know, I
think you can find people who can say that, you know,
(06:59):
that will necessarily fix all that that ails the company.
And you do have to wonder when he was saying
in the same breath last night that you know he'll
still you know, one or two days a week. Uh,
you know, advise for the administration. Just how much he's
he's really going to step back here. I would be
surprised to see him. He's he's not much of a
(07:21):
sort of backseat driver. He likes to be in control.
Speaker 4 (07:24):
And Tesla sales started to really slow even before Musks
through his waight around politics, and they also go through
guidance for the year ahead. What are you going to
look at now that he's back and we're getting more
elon Musk?
Speaker 5 (07:38):
Yeah, I mean I think, you know, the first thing
that comes to mind for me is is, uh, you know,
given all of all of the challenge challenges they're having
with growing sales, you know, around this time last year
is when we saw the company make these really dramatic
uh you know, changes to to uh you know, headcount
(07:58):
and and you know, restructure in this really aggressive way.
I think Tesla cut quite a lot of employees last year.
And do we see Musk in his words, you know,
come back and be hardcore and sort of uh you know,
throw throw his weight around. Because I think that the
challenge that we're going to find this company have until
(08:18):
and unless they follow through on these promises for you know,
more affordable vehicles in the offering, uh you know, and
and also I think vehicles that sort of are differentiated
from just what they already have, uh, they're they're going
to have trouble you know, continuing to grow and and
so there's I think real concern about you know, if
they're just offering a you know, de contented version of
(08:40):
the Model Y and or the Model three, is that
really going to be enough to sort of move the
needle and sort of you know, tie them over until
they make some headway on on other efforts that are
sort of going to take them more time, like say
autonomous driving or robots.
Speaker 2 (08:58):
So just with the core auto business, I know mister
Musk would like to people look to other parts of
his company, but the core auto business, one can argue
it's never been a tougher time to compete for them.
I mean, you just think it just feels like China
by D specifically just kind of taken over the global
EV market. What's the competitive landscape book for TESTA these days.
Speaker 5 (09:21):
Yeah, I think that's a great point. You know, the
Chinese market is incredibly competitive. We're seeing you know, just
this week, uh, you know, fresh indication of just how
tough the sledding is there at the Shanghai Auto Show,
where you know, Jaomi is turning lots of heads. You know,
it's it's sort of the Apple car that that Apple
(09:42):
decided they couldn't pull off making their su seven that
that really has done well there. You know, b y
D continues to just go from sort of strength to
strength and really dominate in that market, and Tesla hasn't
really had answers. You know, they they play in higher
priced you know brackets. It's not that they are are
(10:05):
you know, falling apart there, but in terms of of
you know, being able to sort of hang on to
the position that they have, it's becoming more difficult when
you have you know, a fairly stale lineup and your
competitors are of peppering the market with fresh product and
innovating in a way that we used to you know,
(10:27):
kind of find Tesla was able to. The Chinese industry
has really sort of taken up the mantle in this regard.
Speaker 4 (10:35):
Can you talk to us more about how much of
the tire of discussion was in the call, which took
longer than usual. We have must sing it's pretty expensive
to bring in things from China right now, and that
he'll continue to advocate for lower tireff so we know
that this has hurt his business, which does a lot
of production and manufacturing in China.
Speaker 5 (10:53):
Yeah, it was. It was a long call. It was
a late night for those of us tuning in from London,
so you know, it was I was a little bit surprised,
I would say to hear Musk, you know, be as
frank as he was about tariffs. He's of course a
very frank person, but he has tended to be very
careful about, you know how and when he speaks about
(11:14):
having any daylight between him and President Trump. But he
was he was very you know, uh, sort of honest
and open about this idea that he does not think
that you know, tariffs are the best approach to prosperity,
as he put it. And you know, while Tesla is
somewhat insulated and that they make the vehicles they stell
(11:34):
in the US, you know, in the US, and they
have a plant in Shanghai that is is massive and
and you know a huge source of their exports for
places other than the US. UH, the company is still
affected and and particularly on the side of their energy business,
(11:54):
which has been a bright spot, the fact that they
import battery cells from China for that business. You know,
there's a big concern.
Speaker 2 (12:02):
There, Craig, excellent reporting. Thank you very much, appreciate it.
Craig Trudelle, Global autos editor for Bloomberg News, joining us
from London on Tesla.
Speaker 1 (12:11):
You're listening to the Bloomberg Intelligence Podcast. Catch us live
weekdays at ten am Eastern on Applecarplay and Android Auto
with the Bloomberg Business app. Listen on demand wherever you
get your podcasts, or watch us live on YouTube.
Speaker 2 (12:25):
We're talking about Boeing putting up some results that were
a little bit better and expected, and I've learned from
George Ferguson that I need to focus on the cash
situation of this company, particularly their free cash flow, because
they need to get the free cash flow positive sooner
rather than the later. And they made some progress there
is what is what my read is. So let's check
in with the extra George Ferguson. He covers airspace, he
(12:46):
covers the airlines and all that kind of stuff for
Bloomberg Intelligence. George talk to us about Boeing stocks up
seven percent here today? What at the company? What did
your takeaways from their earnings?
Speaker 6 (12:56):
Yeah, I mean, I think the biggest issue there was
a cash general came in a billion dollars better than expectations.
Speaker 7 (13:04):
I mean, I kind of get the sense that Boeing
management has sort of.
Speaker 6 (13:08):
Give us some pretty conservative estimates for cash generation for
the year. I think they showed it in the first quarter,
coming up, coming out pretty strong. I think there's a
real good potential that Boeing could be sort of cash flat,
meaning no usage for the year, or maybe even a
bit of generation.
Speaker 7 (13:28):
And I think as we've.
Speaker 6 (13:29):
Gotten into the earnings call what we've heard ish the
tariff effects are pretty manageable outside of China.
Speaker 7 (13:37):
China's a bit of a challenge.
Speaker 6 (13:39):
They know that, but again, a lot of the backlog
is is not Chinese airplanes. A lot of that's been
the Chinese haven't placed many orders, and you know, Boeing
has been sort of busy getting deliveries out to them
to get some of those airplanes they've already built for
them off the balance sheet. So China the major issue
again not not not big though. And the rest of
(14:00):
tariff world sounds like where there's occasions that they have
to pay, they're paying. They can claw back some of
those costs from the administration. So it sounds like I
would say things are continued to be on track for recovery,
for a strong recovery.
Speaker 7 (14:17):
Hopefully it's here.
Speaker 4 (14:18):
Yes, And Boeing last earned a profit in mid twenty
twenty one, and it's definitely coming off. It's worse there
and it's century long history. We have the CEO okay
or break saying at twenty twenty five is the turnaround here?
What ising going to do differently?
Speaker 6 (14:33):
Well, I mean I think they're going to deliver airplanes, right,
So that's the biggest challenge. When you're an aircraft manufacturer
and you stop delivering airplanes and you have quality problems,
that's why they stop delivering. You're just not going to
generate cash. They've really been trying to keep the supply
chain I would say warm, by buying components from the
(14:56):
supply chain, and that's why they've seen inventories balloon to
like eighty seven billion dollars. I got to check and
see what it was on today's balance sheet, but last
balance sheet eighty seven billion dollars. So, I mean a
lot of the turnaround is build those airplanes with existing inventory.
Means the cash generation for the airplanes they build and
deliver ought to.
Speaker 7 (15:16):
Be higher than historically.
Speaker 6 (15:19):
Use that money to pay it, do on debt, keep
the balance sheet, or heal the balance sheet.
Speaker 7 (15:25):
That's the recovery plan, George.
Speaker 2 (15:27):
I know, if I'm talking to you and reading your research,
the cash story hinges in large part on getting those
seven three sevens out the door. Talk to us about
where production is today and where do you think it's
going to go in the future.
Speaker 6 (15:40):
Yeah, So they said that they were the factory was
building at thirty low thirties number of aircraft per month.
You know, we had kind of been tracking and I
think we saw high twenty. So probably Kelly's got maybe
just a more current number on that. I think that
they'll they'll get up to the thirty eight limits. This
(16:00):
is all on the seven thirty seven that the FAA
is put in place for them this year and go
past that.
Speaker 7 (16:06):
I think they'll get an.
Speaker 6 (16:08):
FA approval for that, and probably at the back half
of the year, we're kind of looking for them to
be forty ish. And so again that you know, the
more you use the factory, the more overhead gets absorbed
over a larger number of airplanes. The more profitable you are,
the more cash you're going to generate.
Speaker 7 (16:26):
Part of that story.
Speaker 4 (16:27):
Can you talk to us a bit more about how
much the tariff headwind will affect the company's top line
or bottom line, especially with this really heated tit for
tat it seems with China, well.
Speaker 6 (16:39):
So again, China has really become much less of an
issue for Boeing. The Chinese have placed sixteen orders this
decade for airplanes. There's some four hundred orders on the
Boeing books. Still that's of a backlog, that's six thousand large.
Kelly Orberg is just talking on the call that you
(17:00):
know he's prepared to He was planning and delivering forty
to fifty into China this year, So not a lot
of airplanes that would be mostly seven thirty sevens and
that's out of an expected build of maybe four hundred
and seven thirty sevens or so this year.
Speaker 7 (17:14):
So you can already see the sizes and that large.
Speaker 6 (17:16):
And he's ready to go out and he's going to
talk to the customers, see what they want to do,
and he's ready to go out and remarket those airplanes.
I think we've already seen Air India raise their hand
say hey, we'd take some airplanes. And there's other folks
around the world that just haven't gotten the deliveries they wanted.
They're ready to take airplanes too. So on the top line,
I just don't see China impacting things that much.
Speaker 7 (17:37):
The bottom line again.
Speaker 6 (17:39):
Boeing said eighty percent of their supplier base is US based.
Speaker 7 (17:43):
A lot more a lot of the other stuff is
Canada and Mexico, which you're under.
Speaker 6 (17:48):
You know, the agreement between those countries that allows things
to flow without a tariff. And then there's cases where
when airplanes would be sold overseas, they can call those
tariffs back.
Speaker 2 (17:59):
Excell and George, we got go to some breaking news.
George ferguson covering the airlines and aerospace companies.
Speaker 1 (18:05):
You're listening to the Bloomberg Intelligence Podcast. Catch us live
weekdays at ten am Eastern on Applecarclay, and Android Auto
with the Bloomberg Business App. Listen on demand wherever you
get your podcasts, or watch us live on YouTube.
Speaker 2 (18:19):
Markets are moving. Let's see what the professionals are doing.
I mean, you can get whipsawed around here. I don't
care who you are. Shelby McFadden joins US investment analyst
for Motley Full Asset Management, located down in Arlington, Virginia. Shelby,
how are you guys kind of day to day dealing
with the volatility of this market? Again, We've got a
VIX that's come in today but still up near thirty.
(18:41):
How do you guys deal with the volatility?
Speaker 8 (18:44):
At this point, we've really just buckled ourselves in, you know,
that sort of overhead harness that you pull down when
you're on a roller coaster. That's been our tool of choice,
and it's mainly because the swings that we've seen in
the market, they're usually the up and down swing tend
to be about the same magnitude down nine hundred, up
thousand next day or within thirty six to forty eight hours.
And the other thing too, is that the swings have
(19:05):
been pretty broad, right, We're not seeing any major changes
in sort of like relative valuations up until today, with
you know, consumer discretionary outperforming. It tends to just be
a really big, sort of congealed swing in the market,
which doesn't leave too too much room for the sort
of relative valuation opportunity. So we are watching the headlines
a little bit more closely, not because we want to
(19:26):
trade on them, but we're trying to be able to
see where the dust is going to settle. And so
I think today what we're seeing in the market is
a reaction to the prospect that the dust will be
settling soon. And I don't really expect there to be
too much of an overreaction to Secretary buston sort of
follow up headline. So yeah, I think as active investors
we have sat tight so that we can really get
(19:50):
a better lay of the land and waited for the
real opportunity to show up and not necessarily just move
at every sort of down opportunity. Really trying to say
discipline and what we believe to be fair.
Speaker 4 (20:01):
Value, Sitting tight seems to be the consensus these days.
But how are you allocating your funds? Have you shifted
anything recently, cut something to overweight or boosted something to overweight.
Speaker 8 (20:13):
Yeah, that's a great question. In terms of allocation, what
we have looked at is, I would say, in terms
of at the top, we've taken a look at what
is our cyclical exposure, so whether that's going to be
industrials or consumer cyclical. That was one of the first
things that we had to look at really after inauguration.
So at election we pretty much had to sit down
and said, Okay, what are the main sort of like
(20:34):
tax policies that we think are going to be the
most impactful. But right now it's more so been okay,
what is going to be the most sensitive to any
sort of slowdown because we've been back and forth right
on whether or not we're going to be able to
hold on to this soft landing that was so they
worked so hard for or is it going to sort
(20:54):
of fall through our fingers. So allocation has been a
lot more focused on, Okay, the company is doing very well.
We know that they're going to probably perform ahead of
their peers, but we may want to pull back just
a little bit because the growth is not going to
be a little bit more deferred into the future.
Speaker 2 (21:12):
So Shelby, you know, there's with all the tariff talk,
it's created a level of uncertainty and you here which
is sapped corporate confidence. We're seeing companies pull back on
some of their cappecs guidance and so on, and some
of their earnings guide and so it's even impacted consumer confidence.
We see that in the survey data, like the University
of Michigan data. Yet a name on your list is
American Express. That seems to be a play on the consumer.
(21:34):
How do you think about American Express in this world?
Speaker 8 (21:37):
Well, there's a couple of things I really like about
American Express. The first is they are in that sort
of premium part of the spectrum, so it's a little
bit stickier in terms of being able to maintain those revenues,
being able to maintain that spend, so they're just you know,
on the higher end of the credit spectrum. The second
thing is more recent and it came from their most
recent earnings call where management has basically said, hey, we're
(21:59):
not going to be just full stop cutting our allocation
of spend to things like product refreshes and reinvesting in
the business just to pad earnings. Right, They're going to
continue to try and serve the customer and serve the
business for the long term at a time when management
of different companies, and rightfully so, are a lot more cautious.
(22:20):
So it's not to say that they are sort of
in the wild wild West and thinking that they're completely
sort of insulated from any sort of macro issue, but
also saying we've got the balance sheet, we've got the
financial health to keep investing in this business, and we're
going to do so. And as active managers, that's something
that we really like to see, is a commitment to
continuing to make the business better and serve customers up
(22:42):
into a point where you say, okay, now we need
to go ahead and pull things back, but not doing
so prematurely is what keeps me excited about that business.
Speaker 4 (22:49):
What about TransUnion, that's another company that you like. We
know that definitely Americans are relying more and more on
credit when it comes to consumer spending.
Speaker 8 (22:59):
Absolutely, and so there's another dual sided story to TransUnion
as well. So one is again the increasing reliance on
credit and debt and also the need for identity verification
goes along with that as well, and that is something
that one of their peers actually did a lot more of,
which is sort of what made the valuation a bit
more attractive for TransUnion. Whether or not that sort of
(23:20):
federal identity valuation market sort of starts to shrink is
something that could very well serve Transunion's valuation in the future.
But the fact is they've been pretty robust up against
this environment where we're not quite sure how consumers are
going to behave but increasingly people are using more credit,
not just because they need to stretch out the financing,
(23:40):
but because of the rewards. So if you're looking at
a situation where in the past maybe you'd use credit
because you had to, but now the younger generations are
getting into credit early, they're using multiple different cards for
multiple different purposes, and that's going to require credit check
every time, and Transunions does it most affordably.
Speaker 2 (23:59):
Shelby, thank you so much for joining us, Shelby McFadden
Investment and also Motley Full Asset Management joining us from Arlington, Virginia.
Speaker 1 (24:06):
This is the Bloomberg Intelligence Podcast, available on Apple, Spotify,
and anywhere else you get your podcasts. Listen live each
weekday ten am to noon 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
Popular Podcasts
Stuff You Should Know
If you've ever wanted to know about champagne, satanism, the Stonewall Uprising, chaos theory, LSD, El Nino, true crime and Rosa Parks, then look no further. Josh and Chuck have you covered.
Dateline NBC
Current and classic episodes, featuring compelling true-crime mysteries, powerful documentaries and in-depth investigations. Special Summer Offer: Exclusively on Apple Podcasts, try our Dateline Premium subscription completely free for one month! With Dateline Premium, you get every episode ad-free plus exclusive bonus content.
On Purpose with Jay Shetty
I’m Jay Shetty host of On Purpose the worlds #1 Mental Health podcast and I’m so grateful you found us. I started this podcast 5 years ago to invite you into conversations and workshops that are designed to help make you happier, healthier and more healed. I believe that when you (yes you) feel seen, heard and understood you’re able to deal with relationship struggles, work challenges and life’s ups and downs with more ease and grace. I interview experts, celebrities, thought leaders and athletes so that we can grow our mindset, build better habits and uncover a side of them we’ve never seen before. New episodes every Monday and Friday. Your support means the world to me and I don’t take it for granted — click the follow button and leave a review to help us spread the love with On Purpose. I can’t wait for you to listen to your first or 500th episode!