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Tesla facing some challenges in Europe. I think it's fair to say globally, but just check out what our team reported last week. Sales fell for the tenth time in the last twelve months in Europe. That was where Elon Musk's politicking and a changer of the carmaker's most important product had been major hindrances. The company registered six and eighty eight new cars in the month of February. We don't have the March numbers yet, that's some of the February.
It's down forty percent from a year ago. This is according to the European Automobile Manufacturers Associate. Tesla's sales plunged forty three percent of the first two months of the year, while the Regent saw a thirty one percent rise in ev registration. So more people are buying evs, but fewer people are buying Tesla's.
That's amazing. That's a huge, huge drop.
So maybe it's a surprise to people listening who don't look at this market every single day, or maybe not surprising given what's happening with Tesla's stock price. Sean Tucker is probably not surprised about this. He's editor of Kelly blue Book. It's the vehicle valuation and automotive research company. He argues that Tesla's quote high water mark as an automaker, maybe in the past, that's a hot take. Sean Sean joins us from Washington, DC. So Sean back up the
claim there. Why in your view, could Tesla's best days be behind it?
Because its peak in terms of auto sales was in February of twenty twenty three. We weren't able to call the peak at the time because we weren't sure that the decline would last.
But what we see now is if you look.
At Tesla's as a percentage of the new cars sold in twenty twenty three, they hit four point two nine percent, and that's their peak, and in twenty twenty four they were back down to three.
Point ninety five, so it was already falling before this political controversy began.
What is the issue?
Is it political controversy or is it the fact that this is a space that a lot of competitors have gotten involved in and I think Americans this is not on Americans radar, but byd and show me those vehicles blow away anybody who gets behind the wheel.
How big of an issue is that?
It's absolutely huge for Tesla. But for a moment, if you could imagine if we could take elon Musk out of consideration for this, what you would have is a company with an aging lineup, you know, the Modelesque, the Model X. The platform underneath those was introduced in twenty twelve. That is ancient by auto industry standards. There's nothing new in the pipeline, at least nothing particularly high volume new in the pipeline, and sales peaked back in twenty twenty three.
Then you add in the fact that they've got all of this new competition and they're not innovating any I don't know that they would be doing well without.
The political controversy.
Stack the political controversy on top of that, and you just you have what you see today.
So and I have to counter just because earlier in our last hour, we talked with a member of our Bloomberg Intelligence team are Tim Craighead, and we've got a story out in Bloomberg BusinessWeek about the ten companies to watch for good or bad reasons for better for worse, and Tesla was a company that was singled out for better. And basically what they talked about is that several positives to look forward to. Orders for Tesla's newly revamped Model
Wire accelerating notably even in China. Production rates are poised to increase quickly. Meantime, the company's battery sales to utilities, which generate higher margins than autos, appear underappreciated as a profit driver.
So that's more of a corporate overview.
But I am curious about the Model Why, and I think there's also a subcompact right that could start in June widening, you know, kind of Tesla's reach and appeal.
So what would you say to that.
The Model Why refresh is essentially a visual refresh. It's basically the same car underneath that it's been since about twenty seventeen, So we kind of question whether that's really going to generate much of a sales spike.
Absolutely, it's their best selling model. I believe it was one of the top five best selling models in the United States last year. But I don't think there's a lot of opportunity for growth with that.
And then you pile.
Musk's troubles on top of it, and I'd be very surprised if you see sales actually increase anywhere outside of China, And then in China you've got BYD to contend with. As for battery sales, that's a little bit outside of our scope, is Kelly Bluebook.
But I wouldn't know that the musk.
Musk is fond of saying these days that Tesla's not a car company, And if he's right, and he's got significant plans outside of cars, then that changes the equation. But he needs to be right because as a car company, it really sales really peaked a little over two years ago.
Yeah, maybe he's betting it all on the humanoid robot and the robo taxi. Where does the robotaxi come into your analysis?
Many of the Tesla's rivals have attempted to make a sort of robotaxi project work. Several of them have gotten out of the business when in the last few years, it's possible that Tesla has secret sauce that nobody else has and will make this profitable, but it's proven to be a very difficult business to profit in.
You're in Washington, d C. I believe you're going to start getting weaymos soon in Washington DC. Have you been able to ride in one outside of DC?
I have written in a Zooks, but not a Weymo.
How what was your experience, just as somebody who is in this world day in and day out with a driver on the radar, what was your experience without a driver?
You know? I drive fifty two different cars a year.
As Kelly get a new car wants a week to test drive, and I have really come around on the concept of self driving cars over time. They may be nervous to begin with, but the truth is now I look around me in traffic and I see so many people tapping on their phones that I would rather driving world where at least the car was paying attention.
I love, I completely agree with you.
I Carol knows my trip to San Francisco a few months ago, my life was like turned upside down with this just my first experience in a WEEIMO, I think it's fantastic. I wish this stuff was all over because these things follow the rules and they're not texting and driving. But realistically, in your view, do you see that world existing?
It's going to take a lot longer to get there than some of these technology companies what have you believe there are significant regulatory challenges.
Because right now this is regulated by the states. So even if you can make.
The technology work, you'd have to work through fifty sets of liability laws and fifty different legislatures.
Maybe start maybe, but not if Elon Musk has his way in terms of regulations with Sean Duffy at the helm of the Department of Transportation.
Which is one of the more interesting proposals he put He's put out there. The other thing I'll put out is that when we start to masterself driving cars and actually get them functional, you open a whole new questions we've never run into before. Mercedes has the most advanced
system for sale in the United States. It's a legal law right now only in Nevada, California, and they have proposed, just to give you one example, that the industry adopts teal exterior lights as a signal that the self driving system is on, because how are police supposed to know whether the driver's distracted if it's okay for the driver to be distracted.
Wait, what was the signal? You said?
And exterior lights and colored and.
Teal does that work? Does that exist now?
Only in testing? And again that would be a legal issue. You'd have to get fifty states to agree to that. The point is just to say that even once the technology works, we've got a whole public policy system that we'd have to work through it a lot of new questions.
But that's none of that has to do with the Actually a lot of what you're talking about has to do with policy and with sort of the way that law enforcement looks at this stuff. In your view is the tech is the tech there.
It's getting there.
But Tesla has more significant challenges than most of its rivals in that way. Elon Musk is very insistent on doing self driving with nothing but cameras, and the systems that have surpassed Tesla, like that Mercedes system that's the only Level three approved anywhere in America, uses radar cameras and leadar If Tesla can't adopt additional technologies like that, it's going to take them longer to get an effective self triding car, all.
Right, Sean, I just was like, wait a minute, I gotta ask you something.
Are you saying.
Mercedes is better than Tesla when it comes to self driving.
The automotive industry uses a system of five levels to describe self driving cars, from level one just your basic smart cruise control, up to level five being a car with no steering wheel. Almost every automaker has a level two system right now, including Tesla, and Mercedes has the only Level three system that's approved anywhere in the United States. What that means is that legally you can look away from the roadway while it's working. Some Mercedes has that.
It's only in Nevada and parts of California right now, but there is currently a Mercedes system you can buy that will let you settle back and read a book in a car, and Tesla doesn't have anything like that.
I have to say, I am a little bit familiar with Mercedes, and just their safety systems are like blown away where you can take your hands off the wheel, and especially like on a highway.
Not even a brand new car that you're talking about, Yeah, experience with right.
Yeah, I have one and it's old, it's over ten years old. But the safety systems are unbelievable in terms of what you can do and how it just tracks and just keeps you safe. And what I also do wonder Sean that if we're not kind of quite ready to just look away and let the car drive, do we just continue to see the safety systems get better and better on these cars, because I almost feel like Cinems amount of highway you know, you put on basically
cruise control, and these cars are tracking. It almost feels like with one another. And in that regard, I feel so much safer where my car. If I get distracted, it's going to stop the car if I miss the car stopping in front of me, And that's pretty amazing.
And those are essentially the same technologies. Yeah, the technologies that will ultimately result in so driving cars. The first thing they do is give us those safety systems, and when all of those safety systems can work together and talk to each other, you end up with a self driving car. That's also how the industry is going to have to get people comfortable with it. Triple A did a study, I believe, just a month ago in which sixteen percent of Americans said they would get into a
self driving car. That's the public challenge that they face in terms of approval, sixteen percent.
I don't, so I don't buy that number. And here's why.
The only reason I got into it in San Francisco wasn't even on my radar. And then I met up with a friend who was like, Hey, did you go in the Waimo yet? And I was like no, and She's like, Oh, it's so awesome. Just download the app and do it. And I did it. And I'm a true believer. I'm converted. And I think it's just like word of mouth, and just because people haven't been around this technology means they're going to answer that question a certain way.
Well maybe right, but I think that as people get more accustomed to the safety systems, they get more comfortable and more comfortable with the car making certain decisions like that. That's how we eventually get to a world where most of us are willing to get in.
I was even talking to your point, John, I was even talking to the Uber and Lyft drivers about this in the San Francisco Bay area because as you know, in San Francisco, you can only do it in San Francisco City proper. It's like a very strict border where you can do this. And they prefer driving with these on the roads because they follow the rules and they make good choices. I mean, it's pretty remarkable to see.
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We've been talking about tariffs and we're already seeing companies react ahead of this announcement tomorrow. Mercedes Benz considering withdrawing its least expensive car from the US. Cocoa and coffee futures climbed on heightened supply fears as attention shifts potential impacts of a trade war on ag markets. Just a couple of headlines. I deleted some because we want time to get to them all. But there's a lot around.
This, Yeah, and we have a great guest to talk all about it, Brad Carson. He does think about tariffs on high tech, specifically data centers and other infrastructure use that are used in AI tools. He is the co founder and president of Americans for Responsible Innovation and their mission is to quote help you as policymakers develop a thoughtful governance framework for rapidly advancing technologies that protects the public from harm while continuing to foster innovation.
He's also a former.
Congressman, serve two terms in the House as a Democrat in Oklahoma second District. He's a veteran worked in the Obama administration, General Counsel of the Army and Undersecretary of the Army, among other roles.
In other words, we're out of time, Brad. Sorry, you come at.
Things from different perspectives, which is what we always like to talk to.
Brad.
Talk to us about tariffs and how you're thinking about them as we get ready for what's to come in less than twenty four hours.
Well, great to be with you.
And as you said in our mission statement at ARI, we want to be thoughtful and tariffs have trade offs, and when it comes to AI, there are some real negative effects possibly of our race to build giant data centers necessary for the next generations of AI, because Chinese parts as well as parts from Mexico and Canada are
really essential to that. It's really exponential growth in building these kind of massive data centers, so it's going to increase the cost probably slow down the progress, and that is one of the trade offs that policy makers should be thinking about.
Mexico and Canada not usually on our radar when we think about the high tech it's usually China, it's usually overseas.
What is it?
Well we get Actually we import more IT equipment from Mexico at forty three billion dollars a year than we do from China or Canada each which are about thirty billion dollars a year, and so there's a lot of kind of IT equipment coming through all of those nations. Certainly on the high tech end, you do think of China or South Korea, Japan. One of the equipment instruction equipment, the racks, servers like that could come from China, but
also from Mexico and Canada. So all of those countries will be affected by the tariffs and will certainly affect what will be you know, we're talking data center construction call us that are fifty sixty billion dollars aspirationally from the big companies like Google and Amazon. So these are very expensive projects, and the costs could go up three to five maybe even more than that.
Is I'm curious how you look at the US and versus China when it comes to this technology. How would you characterize the race, the AI race between these two countries.
Who's winning right now?
I think the US is winning and we're likely to win. And I think the gap between the US and China, which today might be six to twelve months, is likely to grow over time as the various export restrictions which we'll keep China from accessing at scale the chips necessary to produce the so called frontier models, they begin to have more teeth, and so the US is in the lead.
The big labs in the US are where all these products are being developed, and we need to make sure we keep that lead, and if it's not stolen to espionage, cybersecurity protections are critical to US labs so we can maintain the technological lead that we will develop in the United States.
Wait, what makes you so confident that the US is going to hold that's lead here?
Well, the big input into it are, of course chips, and the chips are where the export controls will restrict China's access to them. And so over time, again there's a lot of cheating and kind of subterfuge on those but the US is going to dominate that chip market, so that's part of it. We have the best engineers in the world here, the big labs open AI, Anthropic, Google, Meta by our US companies, and they're likely to continue
to be at the very frontier of that. So we have the best chips, we have the best engineers, we have the best culture in which to develop these kinds of things, and so I think unless we really mess it up, you should maintain a lead, a lead to steal perhaps to match we're unlikely to kind of natively develop on their own.
Brad, you've spent four years in the House serving your constituents. You also spent quite a bit of time in Washington during the Obama administration. Are you in touch at all with your former colleagues in the House, And if you are, do they get this.
I am in touch with my former colleagues a lot. I go up there, you know, a couple times a month off and to talk to them about AI issues, and they're not really I think aware of the effect of the tariffs on AI and AI itself is just becoming an issue on the Hill. Most congressmen are not technically literate. They're not engineers. They're more likely businessmen or lawyers,
teachers perhaps, and so these are very complicated issues. And while tariffs I think probably have a lot of people agitated on Capitol Hill, the effect of tariffs on AI data centers is probably not something that most people are yet paying attention to, but they should.
You know, it's really kind of interesting because we've talked so much about like this tech war between the United States and China, and like, listening to your conversation, it just feels like you sound like we really don't have anything to be worried about.
Is that fair? Am I misreading you?
Now?
I think we have something to be worried about because we know that they's we'll try to steal our best tech techniques.
Right, so unless our.
Labs have exquisite cybersecurity, the idea that other nations wouldn't steal our best models. We know, for example, that Chinese espionage in the defense sector is pervasive.
Righttimes, espionage that goes both ways. Right.
To be fair, absolutely, we have more to lose when you when you have the exquisite technology you have a lot more to lose by people stealing it, right, they're trying to get it from you.
So then do you think something like deep seek in your view, I mean from all assessments so far, it just sounds like Shohn is figuring this out and maybe they can do you know, AI models in a much more productive energy efficient, you know, less expensive way. So it does sound like there's expertise there as well.
Oh, there's incredible expertise.
You know, universities like ching Wa or Peaking or among the best world. Chinese engineering culture is extraordinary. They're turning out many more STEM graduates per year than we are. So I don't underestimate what the Chinese can do. But I think most people believe that there would have been no Deep Seek without say a chat GPT. They used American models to so called distill. You know, they're probably hearing things in San Francisco dinner parties that get back
to China about how to do things techniques. So I think America is still the leader, but again we have to safeguard it by building data centers, by turning out engineers, by securing our models that we do develop here, and making sure that these export controls, you really do take effect so that the Chinese can't import the top Nvidia chips. They're so essential to making frontier models, so we have
to be wary. But except I think we need to realize that the US has a lead and that our job is to secure it and make sure that nobody could catch us.
Hey, Brad, I want to take a hard turn here, just because we have you on the program. I want to tap into your expertise, not just on AI and tariffs, but also on politics. Curious what you you know, because you're still in touch with your former colleague in the House, the Democratic Party. According to many polls, I'm going to just cite one here, but this is the March NBC News national poll, the Democratic Party reaching all time low and popularity That was in the middle of last month.
What are Democrats supposed to do right now? What do you think they should do well?
I think we need to reorient.
I've been advocating for that for some years now that we've lost our way, that kind of the progressive message no longer resonates with most people, doesn't seem to address their most important concerns, and so we do have to get back in touch.
With our roots, which is a party of the working.
Class, and realize that people are struggling to raise their families not only economically, but in a culture that many of them seem they think is quite poisonous to them. That there's a massive gap between the elites of this country and the rest of the nation, and that the Democrats are too.
Often the party of the elite class.
Who could dominate the commanding heights of media sometimes or politics, are not enough to win elections. And so those are all things we have to do.
Who's the one person who you think can do that.
I'm hoping that Keen Jeffries can do that, right who's the leader in the House, and that he seems to be very confident, very able. I hope as he can do it, you know, like Pete Buda judge, There'll be some interesting people run for president in the next election who I think realize the need for.
A new message and hopefully they can offer that.
Hey, just because your background is so cool and interesting and you were General Counsel of the Army during the Obama administration under Secretary of the Army too, just got about thirty forty seconds the alleged or what seemed to be was the use of signal and to have a chat what seemed to be a breach of security by the Trump administration. Any your level of understanding on how this all works, What's how bad was that?
I guess I want to ask you, and I think it was bad.
You can understand it's very easy right to use signal as opposed to secure lines. You have to be in a skiff or in some other kind of places like that. It's totally unacceptable. When I was at the highest ranks of d D under Secretary of the Defense, even working with Ash Carter, there the idea that you would use private email or signal. I mean, it was so forbidden right that you would certainly have an investigation and likely be fired. So it's it was folly for them to do that.
All right, listen, run out of time.
Hopefully we can come back to you because we feel like we could really talk.
They let us go along with you, Brad, They let us go along, like can we go more? Can we get more?
Bred?
Carson, thank you so much, co founder and president of Americans for Responsible Innovation, joining us from Tulsa, Oklahoma.
Former Congressman too, former Congressman.
Yeah, this is the Bloomberg Business Week Podcast. Listen live each weekday starting at two pm Eastern on Applecarplay 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 Play Bloomberg eleven thirty.
We turn out to the healthcare world.
First up, the US Department of Health and Human Services started dismissing workers early this morning, carrying out Secretary Robert F.
Kennedy Junior's goal to shrink the agency.
New The layoffs align with a plan to eliminate ten thousand employees from the agency's workforce, which will reduce the agency staff from eighty two thousand employees to about sixty two thousand workers tim.
So that's quite a haircut.
Meantime, as we continue our focus on tariffs, the President is planning to impose tariffs on pharmaceuticals, which could raise prices, lead to shortages, and strain healthcare providers. The tariffs, Carol would particularly affect generics.
Yeah, so there's a lot that we are thinking about watching, and so too is our team. We're going to bring in two members of our healthcare team Bloomberg News health reporter Madison Muller excuse me, along with Bloomberg senior pharmaceutical Alisam Fazzelli, both here in studio. So Medisine, let me start with you. We are thinking about what's happening in Washington and what this all means. How are you guys
and what Sam to weigh into. But let me start with you, Medisine, like, how are you thinking about what's happening in Washington and how it impacts the space that you report on day in and day out.
Yeah, I mean these changes are huge and sweeping, and I think we're still grappling with the impacts and who's affected and how this is going to affect the industry is and the industry is grappling with that right now too. I mean we are still like information is trickling in still as we're trying to figure out which divisions are being cut, who's being laid off, exactly what it is being impacted, and so that's something that's like the information is still actively coming in.
What's the relationship, Madison, with the government, public health people who work in the government and then the private sector and the development of drugs that ultimately get put into the pipeline and approved years later. What do we know about that relationship and how one affects the other.
I mean their critical they work together in research, in drug approvals, drug development, like the government is so important in.
All of that.
Obviously, the FDA, the US Food and Drug Administration, is viewed as sort of the gold standard regulatory agency for approving medications in the world, and a lot of other countries look to the FDA.
The FDA is usually the first to approve drugs.
Americans are typically the first to get access to new innovative medications. It happens more quickly here, and so I think, you know, other countries, other regulators are also looking at what's happening in the FDA, you know, in the US and at the FDA and thinking how does this impact US as well?
Companies.
We have companies this week that are you know, have PADUA dates, that are expecting drug approvals, and that's that is a sort of an expected drug approval window. And Sam could probably speak to this more, but we we sort of use that to to gauge when drug approvals are going to happen. We'll see, We'll see what happens with those it's kind of all up in the area.
Now.
It's just this stuff that we just take for granted, right, that it's just going to work, because it's just the world that we've lived in, grown up in, and seen for multiple generations.
Sam.
I thought about when we were going to have this conversation with the two of you. How many times throughout COVID we reached out to you and I would listen to you early in the morning, you know, with either our surveillance team or other teams. But like, how are you thinking about what you're seeing happen in government and what it might mean for us in terms of healthcare in the United States?
Oh, how long do you have?
We got a little bit of time we can hang but thinking like, right, these things that we take for granted.
HHS the Health and Human Services which is run by RFK Junior. It runs quite a lot of these important institutions, or at least decides a budget, et cetera. So the CMS centers for Medica services, so that includes Medicaid, Medicare, and medicine stepping in any time you fancy, right y, Yeah, you've got the FDA, which we've just been talking about,
and you've also got the CDC et cetera. So pretty much the health of the nation is in the hands of this institution and they have to decide whether they want to continue to support vaccinations and be, for example, very positive about saying you got to go and get your vaccines and not say but it's a personal choice because vaccines.
Don't save lives.
I've said that this morning also, vaccinations saved lives.
You've got to get it in the arms.
If only eighty percent of people take you do you remember her immunity.
And yeah, yeah, termally for measles.
That's critical, which is why you see these pockets.
Sam.
You spend you're here visiting us in New York, which we love. You're usually in London, you spend a lot of time in France. You have this global view, as Madison said, the FDA is the gold standard for approvals. Does the world have to look somewhere else? Does it have to look to the NHS? Does it have to look to another regulatory body?
Now I think I'll come back to you with the word uncertainty.
I don't know. I don't think so much.
Is there an institution out there that is akin to.
The European Medicines Agency, the MHRA in the UK, they are all great. MHR is one that does its own assessments, and the Europeans tend to or at least and maybe the UK also tend to rely on the depth of work that the FDA does. The FDA gets literally rolls up its sleeves and looks at raw data and makes its own analysis.
Then the companies present.
That is so interesting, So come on back.
In medicine, like I do think about like collaboration right on a global scale, what typically happens. I mean, again, these are things that I don't think anybody ever thinks about, but I'm assuming that there is data sharing.
Especially when it comes to important medications and so on.
Yeah, and I mean even with vaccines like you were talking about there, we've seen some back and forth of there are global regulators and health experts that meet to decide on what the flu vaccines will be for the season.
And we saw some pullback with the US whether or not to attend this meeting, which has happened you know, every season for I don't know how many years, A long time and so yeah, decades, and so it's there is so much collaboration that goes into it, and you know whether or not the US is going to be participating in that going forward is a question right now because we don't even know who's left at the agency is quite frankly at this point.
So we did have that uncertainty. Yeah, and at least a little silver lining is that they did decide. They did for line with what the who said. They looked at their view and so we now know what we're all hopefully going to get for our flu vaccine this coming winter. So things do happen, and the FDA, let's face it, it's causing major uncertainty. You look at the share prices for biotech companies, farmer companies, they're all fully farmer. On top of it, we've got this Terry Fisher, which
I'm sure we'll talk about. The interesting thing, of course, is that the FDA isn't infallible. They have done things that we've all both questioned in the past five to ten years. However, it causes uncertainty. We don't know what shape this FDA is going to be when it comes back to life.
And this is what's just one thing I wanted to bring up to be fair, I think there are some that would say, with certain drug approvals or certainly for testing for people who maybe have no other choices, Like, there are things that could be better, and I just I'm assuming that you both would agree that there are some improvements that you could make in this department. It just feels like things are being done in an uncertain way, in an uncomfortable way, that it's not necessarily helpful.
Right, And I think the part of the problem is, I mean, RFK has said and this administration has said that obviously these cuts and sort of restructuring is a priority, and RFK has laid out restructuring for HHS, but the bigger picture of what exactly they're trying to do here is not clear, and I don't think that that has been communicated to the public, not to us, not to people, you know, staffers at these agencies.
So people are just kind of like, what's going on.
We're going to talk about the tariff issue in just a minute, but I want to get one more question into both of you before that.
Madison, you forgot what we're supposed to talk about.
Yeah, I know you did, And we're going to get back there because I teased it. So we have to Madison. You went to the JP Morgan Healthcare conference in San Francisco middle of January. You came back here and you told us there was this optimism about M and A. There was optimism despite the fact that URFK was coming in. Fast forward to yesterday, Canter Fitzgerald biotech analysts slammed the leadership of RFK, calling on the Trump administration to reevaluate
his role after this top vaccine official stepped down. This is Canter Fitzgerald, this is Howard Lutnix Firm that we're talking about the Commerce secretary. Is that optimism still there?
I mean that was a really striking comment, and I think departure from what we've seen in sort of these more like soft commons soft criticism. I think people are being really careful with what they're saying publicly, and they're
not saying that they're not optimistic anymore. But there are concerns about what the greater plan is and what's happening obviously at HHS, what's happening with tariffs, and I think that some of the power and influence that these companies and trade organizations and I'm talking about pharmaceutical companies have had in the past is being tested, and you know
they are. They thought that they were going to you know, be talking about the Inflation Reduction Act and IRA and drug pricing with the administration, and that has not been the priority so far. And you know, I think this this administration is moving fast and.
The companies and are sort of scrambling to keep up. Grow.
No, I'm curious what you're hearing from my global companies.
The problem with biotech is is more than just this recent issue. Every it's been what four years, every JP organ I felt just a little bit of a twinge of up to MusM and you come back and things fall apart. The reality here is that this is this is the peak of uncertainty at the minute. Maybe maybe it's the peak of uncertainty. Let's let's see.
Okay, let's get to tariffs in a couple of minutes that we have left Madison. You wrote about it, Sam, you were quoted in the piece you've done research, Sam on this. Excuse me different, Sam, That's okay, but you still study.
I'm like getting Sam's tomorrow four o'clock. What do we have to know about the way generics could be affected with this?
Yeah? So the reason generics are particularly at risk is that they have their little margin. They price low, like big farmer companies have got a lot of profit, the prices are high, they can usually eat the tariffs and
not put the prices up, where as generics. You know, the whole point of a generic is that you end up getting some of these drugs eventually for cents on the dollar per pill, and once you get hit by twenty five an increase in your basic cost of goods so to you know, your rwal material or your active ingredient that goes into it, then it eats your margin, so you can't help but pass that price increase on, Whereas in the world of large farma, with more expensive,
more highly valued branded drugs, you can absorb some of that. It does get your EPs hit, but nowhere near a BMW or a Mercedes bent with having a EPs potential forecasts maybe two or three percent, depending on how they're calculating their transfer pricing, et cetera. And then something gets manufactured in Ireland gets transferred here, so they're exposed, but not nowhere near as much as the generics.
I am curious.
Just one last final question that you know you guys are talking to companies, people in the industry, and I just think about the stuff that's coming from government.
Let me ask you first, Sam, I.
Mean, are people able to even companies able to access the White House, get to the administration find out what going on? Are they getting I know there's a lot of uncertainty. Are they getting any information?
What's coming down?
Trips to golf courses and I think they've been a good few dinners. I think there is communication. The problem is you can be communicated, but the direction changes the next day, or there is a YF No there isn't that if some will be exempted, no, they won't be. You know, it's very hard to plan. However, all the companies are really taking it in this right. Yeah.
I do get a little nervous about We've talked about companies cutting back on like Capex, but you wonder how much that might potentially slow down some R and D of just not wondering how the system is going to work or not work.
God, this is I think my favorite moment of the day. Thank you say that to everyone. I will, I don't know, I will a problem.
No, no, oh, I don't say that to everyone, but I will tell everyone, you guys, thank you so much. I really appreciate the important story, important to the country. Bloomberg News health reporter Madison Muller, along with Bloomberg News senior pharmaceutical Analystsam Fazzelli, don't go back to your.
How long are you staying with us until Thursday?
Okay, we'll get you back.
Thank god, we're here for tariffs.
Rock stars, truly, truly, so appreciate it.
Mac.
I'll bet you let me drive. Oh no, no, no no, this is not a twenty who's.
Going to drug alay?
Please, I'll do travel great, I want to drive.
It's a good question.
This is the drive to the clothes now plunks for music, we'll drive down on Bloomberg Radio.
All right, everybody just got about eighteen minutes to go until we wrap up the trading day on this Tuesday, April Fool's Day. First, is it Carols first trading day of the second quarter April Fools?
No, it really is. We're often running.
Listen as long as it's not the Friday the thirteenth, and you make me say that word just decophobia. Yeah, then I think we're all good.
You know Friday, you know, March theteenth, was a Friday of twenty twenty.
That was like the last time we had Guess in studio. Yeah, well more than five years ago at this point. Lots of amazing. Well what.
I'm trying to make a segue to, like the markets, but I just can't do.
It, So I don't even know. Sometimes you just got to go.
All right, Let's bring in Ross Mayfield, Investment Strategy analyst. I had the barred private wealth management. He joins us from Louisville, Kentucky, the S and P five hundred today kind of searching for direction, Ross, I want to get your take on not just today's trade, but kind of how things look in the near future, given the uncertainty out of Washington, d C.
What's on your radar?
Yeah, I mean you're right, like, if we're looking for a catalyst today, you're out of luck because of the potential that tomorrow could could be. You know, we don't know if we'll get the kind of certainty of clarity that investors, business owners, consumers are hoping for, but it leaves kind of today in the wind a little bit. The thing that I'm thinking about mostly is that this sell off looks viable to me. Presuming we don't enter a recession. I don't think any of the fundamentals suggests
around the precipice of a recession. But if this uncertainty persists, you know, businesses and consumers can only hold out for so long, so we could well enter a recession. But I don't think any of the fundamentals are suggesting it.
Now, what are those fundamentals that you're citing here, Because you know, for every Ross Mayfield, I could go out and find somebody who says I'm pulling back Right now, I'm really cautious about what's going on. The consumer sentiment data has me concerned.
Yeah, I mean it's a good point.
I wouldn't argue that we're in boom times or anything like that, but I think the hard data and the soft data are diverging a bit. So you have stuff like initial claims for unemployment insurance still hyper low. I mean, we're still adding jobs month on month month. You know, real income is up, industrial production is up. You know, even something like manufacturing PMI today, which wasn't a blowout number anything to get overly excited about, also is in
signaling recession. The soft data, the sentiment data, the CEO survey data is miserable.
But we've seen post COVID that that hard and.
Soft have diverged at times, and particularly in twenty three and twenty four, the hard data went out, the consumer sentiment data was not a useful indicator. So I don't think that it's nothing. But I want to keep on the hard data as well, and if that starts to confirm how miserable everyone is, then we can we can start to talk about a recession or a real downturn.
How hard is it to put money to work in this environment, especially if it's new money?
Which do you wait? Do you put it in.
Cash or cash like investments at this point and just kind of wait for some more clarity or what do you do?
No?
I think I think this is a great time to invest.
I mean, if you wait for clarity or certainty in the market, you know more often than not you're going to be left behind.
So we know that.
Investing in these big spikes embarishedness, whether you look at the II or the AII survey have been very good indicators. Sentiment is totally flushed here if you look at investing at spikes and policy uncertainty, great forward returns from there? Could it be choppy? Could it be you know, the next couple of weeks or next couple of quarters, even.
Look look ugly.
Absolutely, we have a lot to work through on the policy front. But if you look at year plus out, I think this is a great time to put money to work, and you know, stocks are on sale.
All of this wait on whold evaluation can hold on?
How can you say stocks are on sale when pe ratios for a lot of people are still you know, the in the S and P five hundred pee ratios for a lot of the companies in there are above historical norms.
Well, if you look at like the S and P equal weight, right, so that's like the good representation of the average stock. It's pretty much at its ten twelve year average. Obviously, some of the big tech companies and growth year companies, you know, they have extended valuations, but they've had extended valuations for ten, fifteen years, twenty years, and it hasn't been a reliable indicator on those types of stocks. So you're right, valuations are certainly not the
things screaming by here. It's more about to me about sentiment and uncertainty. But I think relative to the last six months. You're obviously look at stocks on sale, and presumably if we get the earnings growth that's being forecast right now, I think it'll look like a deal a year from now.
All right, So you did say this is a good time to invest. How much can you drill down and tell us kind of where you would put new money or just put any money to work.
Yeah, it's a great question.
I mean, I think you look at what kind of sector or asset class leadership has been. I mean, I know most of our clients just anecdotally are underweight Europe and International at this point. I think that that trade has plenty of room to run. I think there are some real structural catalyst there. I'm not willing to go all in, but I think that US investors are probably way underweight international at this point after fifteen years of disappointment.
So I think leaning into that, particularly in Europe is a good idea. And then leadership in the US. I mean, again, this is partially why I'm not inclined to think we're on the precipice of a recession. When you see things like financials and industrials and energy acting so well. So I would lean high quality, and I would stick large cap over small cap given the rate backdrop. But I would still look to good values in kind of pro
cyclical sectors that are acting well here. And I think those financials are a place where I think really look good, not super terrif exposed, still have a regulatory or a deregulation tailwind behind them, and then are just doing good business right now.
So that's the kind of stuff.
I would look for.
I would lean away from getting too defensive at this point in time.
What doesn't look good, well, tech still.
Doesn't look very good. I mean it depends on your time rise. And this is how we talk to our clients about it. It's like, if you have a five plus your time rise, and then I would be scooping up big tech and AI adjacent names and just riding out these these soft patches.
But if you have a.
Three to six month time frame, okay, they look broken.
I just want to make sure.
So Ross, I think, how do you know that those big tech companies are going to stay dominant for the next three to five years? For me, just the deep Seek news earlier this year I think made a lot of people reconsider the sustainability there.
Definitely.
It definitely calls into question the hundreds of billions that are being spent on AI infrastructure. But I do think that these companies are largely very fundamentally sound.
One.
So, if you're looking at like the dot com bubble comp most of these companies are really.
Cash rich, low debt, not all the mag seven.
It's not a monolith by any means. But you have these huge companies, You have these wide motes around their core businesses, and then they just have so much capital to play with, and when there's small starts, they tend to just buy them up. So I think that they're pretty defensible here. And I you know, again, if I had a three to five year plus time horizon, I would be grabbing most of these names and not thinking twice about it.
All Right, we're gonna leave it on that note here, Ross, Thank you so much. Ross Mayfield. He is investment strategy and Alystoffert Baird Private Wealth Management.
Joining us from Louisville, Louisville, Louisville, Louisville. Come on, Carol, Kentucky, Louisville.
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