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J Powell, as you know up on Capitol Hill today, remarks before the House Financial Services Committee, saying it's too early to know the economic impact of the tensions in the Middle East, saying the Fed would look at the overall situations if oil price is surge. Also, the economy is slowing this year and immigration is one reason. And of course he talked about tariffs, Tariffs and inflation, and inflation.
Policy changes continue to evolve and their effects on the economy remain uncertain. The effects of tariffs will depend, among other things, on their ultimate level. Expectations of that level and thus of the related economic effects reached a peak in April and have since declined. Even so, increases in tariffs this year are likely to push up price prices and way on economic activity.
The FED chair, saying he expects meaningful tariff effects in June, July, and August. He also said that he doesn't think the FED needs to rush to interest rates with the economy strong. So a lot of ground covered, and we wanted to cover it all as well with two of Bloomberg's finest down in our Washington DC bureau Michael McKee, Bloomberg News International Economics and Policy correspondent. In here in our Bloomberg
Business Week studio, we've got Alex Steele. She's going to talk oil in the energy markets and tie it into the macro environment. Mike, First question, do you, I think a lot of people remember just less than a week ago hearing from FED Chair j Powell in the press conference. How would you characterize any differences or distinctions between what we heard today versus what we heard from him last week.
Oh? I think Tim, that basically what you were hearing is an echo chain. Today his prepared remarks were almost word for word the same as the statement he gave at the beginning of the press conference last week. It's the sort of hippocratic oath of the FED. First, do no harm to the markets, don't move anything, and that was his goal.
Today.
He just underlined what the FED has been saying all along, that they're going to have to wait for more information on the impact of tariffs and the impact of other fiscal policies from the administration before they know what they will have to do. He did say that if we see inflation go down continue to go down, and if we see unemployment go up, those could be two reasons to cut interest rates, but he didn't put a time frame on it and sort of leaned against the idea
that they could do anything in July. So we walk away from this with pretty much the same view that we had going into it, that the FED is not in any hurry.
All right, So let's talk about oil because p certainly asked about oil. Alex We've seen oil plunging what for a second straight day on what seems to be easing tensions in the Middle East. We just had a guest on not really guessed. She's family dina Esfandieri, and she said, you know, there's not a lot different that there is still a lot of risk out there in the Middle East. Why are oil markets just kind of backing off what you read on it?
Yeah, Also, oil prices are now lower than they were before Israel's attack on Iran on the thirteenth of June. It just means that there's more supply than demand. I mean, that's the thing, is that the oil markets can be very different than the broader geopolitical risk market because it's pure supply and demand. In order to have a kind of supply shock, you also need strong demand. And if you don't have that kind of increasing rising demand, you're not going to have the same kind of supply shock.
And two parts of that one is that China was stockpiling before this, so they got a lot of oil anyway, and China is the one that buys Moran, by the way, so they would feel the shock. Apparently this is riis Dad was reporting this earlier today that there are ships that with Iranian oil is waiting off of Chinese ports, So it's there product market maybe a little different. Supplies there are a little bit lower, but they have refineries if they can run, and it'll be okay.
That's why.
So Alex does the conversation now shift about the way that oil is an economic indicator in terms of how demand for it around the world is kind of indicating the health of the economy asking me.
A macroarconomic question.
Key, then, but it's about oil, So I go to alex oil.
Does it reflect macroeconomics?
Yeah, because you know, we when we think about the narrative with oil over the last week or twelve days, it's been about okay, tensions in the Middle East. This is why we've seen prices go up in more peaceful times. When we look at oil prices, we look at it for clues about demand outside of the United States, demand inside of the United States, and what that says about the macroeconomic environment.
I'm laughing because when we're looking at demand concerns and lower oil prices, then we hibit and talk about the supply picture.
So it's like you.
Can't get one for one.
So then if you're taking a look at the macroeconomic environment, I would also say, oh, but take a look at supply.
We're still pretty well supplied OPAC plus.
Really Saudi Arabia is trying to add oil back into the market. You could make an argument that are run any supply outage you may see would provide space for Saudi Arabia to do that. So if you have forty dollars oil is at telling you that the global economy is falling off a cliff. Not necessarily. There are other factors that are a play that are supplying.
All right, So Mike, the volley goes to you.
As Alex said, all right, macroeconomic when it comes to oil prices, pitch your Jpal definitely asked about it in terms of concerns if we've got higher oil prices, how that feeds into higher inflation, woes and worries. Jpeal seemed to be like, unless this sticks around for a while, it's not really an issue.
Yeah, that's the way the FED looks at it now.
They went through the original sin of Arthur Burns cutting interest rates when oil prices went up during the original oil crisis in nineteen seventy three, and at that time what ended up happening, of course, is the great inflation that we saw, and the FED doesn't want to do that again. They've learned that you don't cut rates to deal with a supply problem like that. Instead, they would wait and see what the impact on the overall economy is. And for it to have an impact on the overall economy,
it would take some time. It would have to get into other things besides just the gasoline in your tank, get into petrochemicals, get into paint, get into pharmaceuticals, all the things that at some point use petroleum. So right now there doesn't seem to be any reason to worry about it, particularly now that prices are going down. But the FED chair made it clear that that's not something
that's a major concern for them. And also, over the years, petroleum prices have become a much smaller impact on what the US spends because we've gotten so much more energy efficient, so it would even take low longer for to have some sort of effect than it did back in the seventies.
I love that you went there because that was going to be my follow up, Alex come back in in terms of oil, are we going to ever see? Could we see one hundred dollars a barrel oil?
Like?
The way the.
World is moving And even though we maybe have an administration that isn't so embracing evs and alternative energy like, has that kind of horse left the stable internally?
Think?
So?
I mean, I think what the read through is that you're going to see more oil volatility, not necessarily oil price spikes that we may have seen in the last save fifteen twenty years, and a big part of that has to do with US shale. So we look at that as the reserve. Right, we had so much oil, it's all good. The problem though, is that a lot
of the really good stuff has already been drilled. So the stuff you're getting is a little gas year, So less oil, more gas, and it's getting harder, maybe more expensive to drill.
It doesn't mean that like shales toast.
It just means that might not have the same kind of growth rate that we're used to. So you take, you know, you change the world for shale. You have says on Russian oil, ven A soil and oil TVD. What happens with iron? Yeah, sure, you could definitely get that. The question is do we stay there? And that, I think is the question that may not happen.
So what are what are the economics of exploration here in the US right now? In an environment where the President wants to have so called energy independence in the United States and also wants to see companies drill, baby, drill.
So I love that he tweeted to Secretary Right because when I have interviewed Secretary Right about oil, he's like dude, I'm not an oil guy and the energy guy. And then he's like not taking that mantle. Well, Mike McKee and I did a piece on this for Wall Street Week. It was a two fur and it was just about this very issue.
What was the question?
The economic I love it, the economics for oil exploration in an environment such as this. If oil prices aren't necessarily out one hundred dollars a barrow like Carrol's asking, then is the incentive actually there for American companies to do this expensive process?
Forty they're definitely loose some money. They're shutting stuff in fifty. They're recalculating what they're spending, how they're spending it. Maybe on the margins, maybe they're drilling, but they're not completing their wealth. They're keeping that oil on the ground. Sixties they're fine. They can cover everything. Seventies their goal, and they're going going going.
Get her a role on land man. That's what I'm going to say.
You can forget the question. She can forget the question.
Anytime she responds like that, I'm on back in because as we do talk about inflation, I mean, what's the bigger concerns when it comes to inflation remaining sticky here in the United States, What is it that we really have to worry about at this point If it's not really maybe higher oil prices or energy prices, what is it.
Well, it's been changing, actually, Caro.
All Over the time, we were watching housing as a very sticky point of inflation, but house prices are starting to come down now. We saw a decline in the case Shiller numbers today. Overall, the housing market weakening, in large part because Fed interest rates are keeping people from
taking out mortgages. So we look beyond that, and what you're really going to be looking at is the kind of things that the President is talking about tariffing consumer goods like clothing, which actually fell in price the last couple of months. So we're still looking for the things that are going to be sticky in inflation, but they seem to be changing even as we speak.
So that's another reason for the.
Fed to step back and try to figure out which categories and why prices are staying up or going up.
Mike Any addressing from the Federal Reserve Chair about the potential for a rate cut in July. Given since he spoke last week, we've heard a couple different FED officials come out and say that's a possibility.
No, he stayed away from that.
He was asked about it, and he said, when we get the right information about what we need, we can consider cutting rates.
Did not put a time frame on it.
And I might point out that we heard from Atlanta's raphae Al Bostik this morning in a Reuter's interview. We heard from Beth Hammock of Cleveland today, we heard from John Williams, the New York FED president, and all of them have said no to July, that they think rates are going to stay higher for a little bit longer, maybe September, but July doesn't seem to be the majorities view.
Those FED creatures are such shy individuals.
We never we never hear from them. It's a quiet rate environment on the energy world. Does it make a difference the cost of money for them like it does for a lot of.
Business Thinking about that a little bit less it did back in like twenty fourteen, because you had a lot of companies that had negative cash flow and had to borrow a lot, and those rates were high and that's why you got to wash out. But there's been so much consolidation that maybe not in the same kind of way.
One last question because it plays into the geopolitics. I mean, you see Saudi Arabia and the Middle East really kind of looking to diversify in terms of their exposure. I mean, they certainly see the energy markets as not going to be you know, the money machine that it's been, you know, for such a long time. Are they right to like, well, this will oil ultimately change maybe geo politics going forward.
Just kind of about thirty seconds.
Yeah, it's going to be oil and everything else at the same time, and that will be a different kind of fight than when it comes to energy. It's going to be energy security and energy nationalization. But it's not necessarily going to mean oil. It can mean other forms as well.
All Right, I got ten seconds twenty.
I don't know, Mike, you did so great that we get ten seconds more from Mike Jay Powell tomorrow. Any indication that the senators could ask different questions than the members of the House or.
Is it rinse repeat, wash rints repeat.
Probably wash rints repeat. Although we might get a little more on banking. There was very little talk of banking regulations today.
All right, Like we said, truly, truly.
Two of Bloomberg's finest are Michael McKee out there in DC, international Economics and Policy correspondent, and of course our Alex Steele, anchor for Bloomberg Television Radio.
We love you both. This is Bloomberg Business Weekdaily.
You're listening to the Bloomberg Business Week Daily Podcast. Catch us live weekday afternoons from two to five East during this listen on Applecarplay and Android Auto with the Bloomberg Business app, or watch.
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Certainly, the conflict between Israel Iran, that Middle East conflict is top of mind among NATO allies, and this is happening as Israel and Iran appeared to be honoring that ceasefire agreement unexpectedly announced by President Donald Trump overnight after earlier this morning, on his way to that NATO summit, he reacted rather angrily to early breaches of the deal by both sides.
I'm really unhappy if Israel is going out this morning because the one rocket that didn't land, that was shot perhaps by mistake, that didn't land, I'm not happy about that. You know what we have, We basically have twoth countries that have been fighting so long. And so hard that they don't know what the they're doing. You understand that, all right?
Pretty?
He did President Trump earlier this morning in DC on his way to that NATO summit. He of course is there on the ground, as you heard from our Anne Marie. Let's head to Geneva, Switzerland and to Bloomberg News Middle East JUNI Economics reporter Dina as Fondiari. She has worked at the International Crisis Group, the Harvard Kennedy School at King's College, London, and the International Institute for Strategic Studies.
We have been dying to talk to you, Diana, and I know it's been a busy couple of weeks for you. We had a headline a little more than an hour ago Iran's president, the Saudi Crown Prince discussing the US and Israel in a call.
It feels like.
New relationships maybe being for maybe new alliances.
You are the author of new order in the golf.
The rise of the UAE is the order of the golf being rewritten as we speak.
I don't know if it's being rewritten, but it's certainly changing. A lot of things are changing at the moment. I think the Gulf Arab States were quite confident of their position in the region, of their relationship with Trump, of their new relationship with Iran a few weeks ago when Trump was visiting the region, and now things really do seem to be up in the air. They're absolutely terrified by what happens last night when Iran targeted US bases in Qatar in a first. I think it caught them
off guards. It is one of their biggest fears to be caught in the middle of an escalation between the US and Iran, and it happened, And so I think everybody is just trying to grapple with what just happened and where we go from here.
Well, it certainly seems like markets here in the US are sending the signal that they're confident that this crisis has been de escalated, and perhaps it appears that this truce between the two countries may actually hold. Is that view in your opinion? Is that shortsighted?
No, I do think that the truce will hold, But I think we're going to find ourselves in a new normal. I don't think things are going to escalate like they have over the course of the last twelve days. I'm hopeful that that has been put behind us, because I do think that President Trump is now going to wield the hammer and try to make sure that both Israel and Iran stick to this ceasefire. And also Israel and Iran don't want this war to extend beyond these twelve days.
I think both have been badly hit and so they are more than willing to move on. But that doesn't mean the tensions between Israel and Iran are going to dissipate overnight. These two countries are long standing rivals that will continue. So I anticipate that we find ourselves in a situation where we were a few months ago, or even before October seventh, where the two sides are trading blows, but at a lower level, at a more manageable level.
Will the tensions exist between Israel and Iran until there is, or unless there is regime change in Iran?
You know, it's the regime change question is the million dollar question. At the moment. What is for sure is that regime change isn't going to happen at the hands of Israelian American bombs. There is discontent in Iran, but the more Iran faces external attacks, the more you have a bit of a rally around the flag effect and a sense of nationalism that infuses the country, which we're kind of in the middle of right now, and so people put aside their discontent and come together in the
face of this external enemy. The enmity with Israel is really from government's official to government official. It doesn't really trickle down to the people. But what happens is when you have these cycles of escalation, then that's when it trickles down to the people. That's when they start to feel it personally. So the faster these wars are dealt with, the better it is.
Hey, you know on that.
And I'm curious in terms of tensions continuing certainly between Iran and Israel. Let me just go back to something that came out former US Secretary of State under President Biden, Anthony Blincoln, in an op ed in The New York Times critical of President Trump's strikes in Iran, he does hope it works, though he noted that Iran will essentially build back their nuclear enrichment capabilities, and he said, finally, well, there's no doubt the Americans strikes set back Iran's nuclear ambitions.
Iran could rebuild quickly in locations and adepts virtually immune to airstrikes while pursuing weaponization at the same time. So he goes on to say, while their program has been significantly disrupted and buying time is a good thing, it underscores that sticking with the JCPOA was the better option. It bought US at least fifteen years ago instead of just a few, or bought US at least fifteen years
instead of just a few. And that was, of course the Joint Comprehensive Plan of Action, that twenty fifteen agreement between Iran and several world powers.
So is he right that?
I mean, will these tensions continue because Iran will continue to want to have those nuclear enrichment capabilities or do you think there is a truce where they say I'm out, I'm done.
Realistically, Look, I think it's really hard to imagine that Iran is going to put its hands up after facing twelve days of attacks plus a round of US attacks, and say, you know what, that program that we in all that money, all that energy, all that time into, We're going to give it up just because of twelve days of air stripes. I just don't foresee that happening.
I do foresee, however, that Iran will be willing to talk, will be willing to negotiate, But it was already willing to do that, and it was already at the negotiating table before this escalation round began twelve days ago, so I don't think that will have changed that much. But Iran does have one red line, and that red line is the ability to continue enriching on its soil. I think Iran is going to be wetted to keeping that.
It will be willing to lower the enrichment level or the amounts of stockpiles that it keeps, but I do think that symbolically it has to keep some enrichment on its soil.
There's still that question now of where that enriched uranium went, and there are also questions about the battle assessment report of what exactly those bunker busting bombs accomplished over the weekend. Unknown still here, and I'm wondering what your view is given the unknowns here and just the view of the based on the folks you've talked to, the reporting out of the region, if folks feel like that region is safer than it was twelve days ago now, as a result of what's happened.
If you're asking me if we're better off now than we were twelve days ago, then I think my answer is going to have to be no. What we've achieved with these air strikes, I think is very little. Satellite imagery appears to indicate that the only thing that really has been affected is the entrances to some of Iran's nuclear facilities, the three that were targeted, but not much more. Prior to that, as you mentioned, Iran had already moved some of that highly enriched uranium out of the facilities.
And what you've effectively done is bolstered that Iranian desire that had been kept under a lid for a long time to really make a dash for the bomb, And on top of that, you will have driven the program further underground, further hidden behind closed doors, buried further underground, especially now that we know that the bunker busters don't appear to be that effective, and so to me it
looks frightening. We find ourselves in a situation where perhaps you've gained a couple of months or maybe a year, but ultimately you've reinjected Iran with a desire to go for a nuclear weapon, something which it hadn't done up until now.
Dina, What about Iran's proxy militant groups Hesblah and Hamas they were refusing, are unable to enter the fight in support of Iran and its golf neighbors are were urging restraint. Will they continue to be present in whatever is the next chapter of Iran?
So?
I think Iran's partnerships with these groups in the region, those partnerships will endure, but the groups themselves have been weakened. It's undeniable. After over eighteen months of war with Israel. Has Bolah has been decapitated, much of its capabilities has been affected. Even though who these and the fighting facing
US strikes were weakened. Now all of these groups will retain some of their capabilities, but they're going through a bit of a reckoning right now and figuring out what it is that they want, what that relationship with Iran will look like in the future, how they're going.
To work together.
And that's part of the reason why you've seen them be so quiet in response to this direct war between Israel and Iran. They haven't offered themselves up to help, and Iran hasn't asked them to help because I think both sides are trying to figure out where we go from here after being weakened.
One thing I'm going to ask you.
China also, in a very sucsc statement, criticize the US strike in Iran and the nuclear facilities, reiterated that's willing to join international efforts to restore peace in the Middle East. You've co authored the book Triple Access, Iron's relations with Russia and China. Where is China and Russia on all of this and where will they be in the future.
Well, I think that relationship between Iran, Russia, and China is going to endure, it's going to continue to grow. But they have a really weird sense of what working together as partners is like. It's very different to the way that in the West we would view alliances. Their relationship is very compartmentalized. They're distrustful of each other. They only work together when they see ida eye and they ignore issues that they don't see ida eye on, and
that's likely to continue. It also makes Russia and China unreliable partners in times like this, because while they will step up and condemn the attacks and pretend to side with Iran and maybe even help Iran in the UN, for example, they won't really take more concrete steps to assist Iran in a space off with Israel in the US.
My last question for you is the status of the relationship between the US and the Gulf States, specifically the ones that the President visited in recent weeks and touted the business and economic ties between the countries. Is that are those relationships intact?
Well, I think from the perspective of those Golf are of states, they saw President Trump's visit as a big moment for them. It was kind of their reacceptance amongst the rest of the international community and especially in the US's arms. So it was a very important moment for them, and they felt as though they had the President's ear and they could talk to him about issues, whether bilateral
or regional. And I think today they're a little bit disappointed because during that visit they had set some red lines, they had expressed their support for the US Iran negotiations, and they had really impressed upon President Trump how critical it was that this doesn't escalate into a regional war, and that's exactly what happened.
So appreciate it.
I can't tell you, we know you're busy and this was super helpful to us, and we know the Bloomberg audience.
Diina, thank you so much. Dina Sfondieri.
She's Bloomberg News Middle East Geoeconomics reporter, joining us there from Geneva, Switzerland.
This is the Bloomberg Business Week Daily 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.
Hey, we really wanted to do a deep dive on driver list cars, and we've got the perfect deal. The reason why we wanted to talk about this is because Uber shares among the best performing in the S and P five hundred right now, fourth best performer, up eight percent. The company said in a press release that it'll be partnering with Waimo to offer ride sharing through autonomous vehicles
in Atlanta. On the other side, you've got a company like Tesla on a points basis, the worst performing stock in the S and P five hundred, Carol down one point seven percent, kind of giving back some of the gains that it got yesterday right on the successful or what was purported to be sick successful demonstration of its driverless car tech in Austin.
Yeah.
Now, there are concerns that regulators are looking into incidents where the self driving robotaxes appeared to violate traffic laws during that day offering paid rides in Austin.
Yeah, I mean there's some concerns, some questions. We've got the perfect duo to talk about all of this. Max Chaptain is Bloomberg Business we communist, co host of the elon Ink podcast. Craig Trudell is Bloomberg News Global Autos Editor and the editor of the Hyperdrive newsletter. Max right here in our Bloomberg Interactive Broker studio, Craig out there in London. Craig, let's start with you. All right, So
there's a lot going on in this sector. What do we know about how things have been going down in Atlanta in Austin, Like, how it's all progressing and full disclosure, Tim and I both have done Waymos on the West Coast. I've also done them in Arizona and we kind.
Of love them. So how's it all going down?
Because all of a sudden, it feels like everybody's all in on these driverless cars.
Yeah, I have to say, I mean, just to start your experience of Waymos, you know, being sort of surprised and delighted from the sounds of it is consistent with you know, basically everything I hear at this point. You occasionally do hear people sort of to the extent that they denigrate you know, Waymos at all. It's just oh gosh, you know, I would be too scared to get into one of those. But you know, almost universally when you talk with people who experience it, you know, they get
a kick out of it. You don't see you know, a ton of sort of negative takes on sort of how they performed. They've held up quite well. The company's been forthcoming about its safety record and is pretty transparent
about if and when it does have issues. I think things are sort of night and day in terms of how you know, the company has approached things with you know, in comparison to Tesla, where you have Musk you know, for years sort of hyping up what is driver assistance, you know, software that that he offers as something more than that and calling it full self driving. You know, not delivering it and until you know, this past weekend and once he has taken people out from behind the wheel.
You know, on day one, we see these incidents that are that are pretty troubling and getting the attention of the National Highway Traffic Safety Administration.
Okay, we're going to talk more about those in a second. I want to bring in Max Chafkin, who's been following the industry closely. In Max, you've been when we've spoken to you in the past about the driver list car technology, specifically WEIMO, you've been You've been a little skeptical about it.
I think everything Craig is saying, everything you're saying is true. The questions around Waimo are business questions. Essentially, is this.
More than a very very.
Expensive, money losing attraction for tourists in a handful of cities, which it definitely is compelling in that sense, there are questions and these are questions that you know, even WEIMO has acknowledged, like they need to figure out they need to turn this into a money making business. They feel like they've gotten the technology to a point that's pretty pretty good, and now they're working on the business stuff and this uber deal of course is part of that.
That's part of why you're seeing the stock go up. And then you know when you when you compare it to Tesla, the Uber stock go up when you compare it to Tesla. Tesla is I think technically, like a good way to think about this is they are years behind where Weimo is. Like Weaimo was doing some of the stuff that Tesla is doing, you know, years ago, like five years ago. There are ways in which Tesla, yes,
is is impressive and ahead. There are a lot of Tesla is a lot of miles logged using its driver assistance technology, which it also confusingly calls full self driving. But Tesla is really at the beginning of this and like when we're like they have not even even this pilot program we're talking about very modest, it doesn't include members of the public, just a handful of influencers in a very small in a very small part of.
Austin, so just very early.
And everything that Weimo is doing, both in terms of customers and then in terms of on the business side kind of makes that point just shows you how wide the gap is and how far Tesla is, at least at this moment from actually operating you know, a money making.
Robotexis all right, So it's came up with the news.
We show that there's no So some folks in some emerging market country that aren't sitting.
With a joystock joystick like actually driving the way most there are monitors.
There are people monitoring the winows.
I think the question they're not using joysticks, coordinate.
Steering wheels, they're not using little steering wheels, but they are there watching the Waymo.
That that's like part of the that's like part of the business problem for both of these companies, Like you potentially have like this very expensive piece of hardware and then a bunch of expensive engineers, engineers who cost more money than uber drivers, who are having to oversee these autonomous systems. So that's still a question with Waymo. It's a bigger question with Tesla.
Hey, Greig, come on back in here, because you've covered the you cover more than just the tow companies and also more than just the sort of driverless element here. But a question that I have is where this where does this technology leave the traditional automakers Because there was
this promise from Elon Musk years ago. I mean, I've lost count of how many years ago this was, but he basically said, your tesla will become more valuable because you will be able to essentially set this thing free as a ROBOTAXI when you're not riding around in it, and you'll be able to charge for that. Where Where does all of this lead to more traditional automakers?
I mean, I think to your point, you know, there was a real sort of freak out in Detroit and Wolfsburg and in you know, Toyota City almost a decade ago now, because Musk started making these you know, pronouncements along along the lines of what you're describing, and everyone kind of panicked, right, and we saw, you know, sort of everybody you know, come put together plans to sort of answer what Tesla was up to. You saw GM
acquire Cruise. You saw Ford, uh, you know invest in this company called Argo, and Volkswagen invested.
In them as well.
You saw Toyota stand up its own sort of self driving you know, outfit and you know, higher sort of top notch talent for it. And you know, here we are, you know, roughly a decade later, you know, Argos gone bust. Cruise has has been a sort of put out of
its put out of business by GM. I think a lot of the established manufacturers are saying, you know what, we're going to try and make money off of these driver assistance systems that you know, kind of make the human driving safer or at least we hope, you know, can offer that benefit and this sort of safety and convenience.
But you know, this is just not going to.
Happen in in sort of a major way for quite some time, and we can't we may not be able to afford to invest in it to the extent that a company like Google can.
Yeah, and waimo Google.
You know, even there we're talking, I don't think we know the exact numbers because of the way that they report, report.
Revenue and so on.
But they they've they've dumped tens of billions of dollars into this. This has been an incredibly expensive endeavor, the kind of endeavor that really only a company like Google, a really handful of other companies can do. We even saw Apple Craig. Craig didn't mention Apple, but they also got to try to get into this business and gotten out of it for some of the same reasons.
Having super deep pockets and.
The challenge here for Tesla. Is that a lot of the investors who are betting on this thing, and even to some extent Elon Musk have sort of decided that this is the future that that you know, Musk has said this over and over. You shouldn't think of Tesla as a as a regular car maker. You should think of it as an AI company.
And now here it is.
We're seeing the AI and and you know, it's just a long way from being you know, a fully fleshed out uh, you know, robo taxi service and and that's and whether or not they can somehow get there in this like in the crazy timelines that Elon has offered, he said they're going to have something like one hundred thousand cars on the roadbt end of this year. You know, just huge numbers, numbers that would blow Weimo out of the water if they delivered.
I mean, he's created a huge challenge for himself.
Well, I do also wonder about the value and Craig come on back in here, in terms of having whether it's Weimo for Alphabet and obviously the self driving for Tesla, the amount of data that they get and what they learn in terms of technologically creating these We've talked with our Steve Mann of Bloomberg Intelligence, who's talked about the robotics and the manufacturing that has been going on in
China and what technological capabilities that has given them. So I do wonder by these companies doing these kinds of things, what they ultimately get out of it. Is it's still a plus?
Yeah, I mean I think that's been the sort of go to messaging on Musk's part, right, is that you know my approach, you know, my being elon Musk is you know, to put this hardware on every vehicle I sell. Uh it's a much cheaper and less robust uh you know, hardware set than Weymo puts on its car. Sure, but people can afford to actually buy it. I can ingest all of this data and uh, you know, I can put more cars out on the road, bring in more data.
Therefore I will eventually win. I think that stood to reason to a lot of people. And yet we we've it is all sort of theoretical, right, we don't know whether, uh you know, that data advantage will mean anything in the long run. And we've also sort of you know, heard from Musk, you know, sort of conflicting messaging in the years since he was you know, making that argument of uh, well, we're we're you know, not going to
sort of hardcode our cars. Uh, you know, based on all of the data that we bring in, We're going to just you know, sort of build a robust system that can sort of make decisions on the fly, and we're not going to try and you know, hode into
our cars what they should or shouldn't do. And so you know, there's sort of speaking out of both sides of his mouth and a lot of you know, sort of theoretical messaging on his part that makes you sort of question whether or not, you know, he actually has the advantage that was sort of believed, you know, half a decade ago.
Max just want to bring you in for the last thirty seconds, had given Elon Musks recently tumultuous relationship with President Trump. Does that put the regulatory elements around self driving technology for his company?
Does that put it at risk?
I mean, I think they're real regulatory questions also some maybe some securities questions like people have made claims about Musks sort of seeming to exaggerate at times that said, I don't think the challenge.
Here is a regulatory challenge.
It's a technical challenge. It's on one hand, Elon Musk saying, these cars can operate totally autonomously, and you watch in the videos and they have somebody in the passenger seat with an emergency break, probably somebody sitting in a control center, and they're still struggling, you know, And so that's the question, how to make the tech work?
All right, Gotta leave it. They are a great discussion. Max Chafkin, of course, and our Craig Truell.
You're listening to the Bloomberg Business Week Daily Podcast. Catch us live weekday afternoons from two to five eas during Listen on Applecarplay and Android Auto with the Bloomberg Business app, or watch us live on YouTube.
In the meantime we continue, of course, just coming off of Fetch your J. Powell a bunch of testimony this morning up on Capitol Hill, talking about everything, including the need for affordable housing. That comes to against a backdrop of National Gauge of US home prices moving up two point seven percent from a year earlier in April. That's the smallest gain since the summer of twenty twenty three.
The housing market as we know tim such an important indicator, certainly when it comes to the US economy.
Guest is all over it. She watches all aspects of the housing market. It's great to have back with us. Katie Hubbard. She's executive vice president of Capital Markets at Walton Global. It's the privately owned asset and real estate investment company. It's got close to four point five billion dollars of land owner management nearly eighty thousand acres under management in the US. They operate in the retail, industrial,
and commercial sectors. Katie joins us from Chicago on this Tuesday. Katie, I want to remind everybody Walton Global serves as this middle entity between the land owners and then the developers of that land, the folks who go out and build housing across the United States and indeed now other parts of the world. So you have a good idea of the supplied demand environment right now. We check in with
you every few months. How would you describe the demand environment, or rather the supply environment when it comes to housing, and how that's shifted just in a couple months.
Yeah, So it's great to be here, Thanks for having me, And it's definitely a buyer's market. Right now, we're seeing sellers or out numbering buyers by thirty four percent across existing inventory, and main members came in for existing home sales and they were the lowest we've seen in sixteen years. So you're starting to see inventory increase on existing home sales. Sitting at one point five million homes for sale. That's a twenty percent increase this time over last year on
existing home sales. So I mean it's definitely a buyer's market. And then on new home sales, the builders are really just they're doing a great job of being resilient in spite of the uncertainty tariff that they're paying right now with just people on the sidelines. So they're continuing to just build through the cycle and they're dipping into their margins to keep the home the home sold and to keep the volume going.
Yeah, I think you know in the US, a lot of people are concerned about affordability when it comes to homes. I mean, Carol, we're going to be talking about the mayor role, yes, race right here in New York. It's a New York centric story, but certainly housing affordability front center there. And it's not just in New York issue. A big question that a lot of people have is, Okay, how do you solve this? The federal government is working
on it. There have been proposals in Congress to actually sell off certain federal lands in order to build housing on them. Their critics save, that's not necessarily the right thing to do because that doesn't increase density in areas where people want to live.
Plus, then you lose some of that federal land, right of.
Course, and you and I talk about this. It's not just about building affordable housing. It's building affordable housing where it's needed. Katie, tell us what's going on in terms of development work around the nation.
You guys see that front and center.
Yeah, so the builders are really adjusting to who can purchase the homes because affordability is such a critical factor right now. So they're really focusing on that fifty five plus. We've got twelve million people turning fifty five plus over the next eight years, and that group that demographic controls
the wealth. They have eighty four trillion dollars of networth versus twenty five to thirty four year olds, who are those entry level home buyers, they only have eight trillion of networth so homebolders are really building communities that are having amenities that are going to attract those fifty five that fifty five plus cohort because they're not only wealthy, but they're also healthy. They want community, they want walkability,
new urbanism within the communities that they're moving to. They want to own homes, but they want smaller homes that they don't really have to take care of as much. So homebolders are able to adjust build smaller homes, putting in wellness centers, things like Blue Zone, Colincier services, and just really adapting to the demographic who can purchase homes right now.
Yeah, we've talked a lot about kind of that mature market in terms of housing or their needs, whether it's for health or living, that it seems to be when it comes to real estate. People are certainly willing to build to meet that demand because the demand is there. Having said that, though, I listened to you, Katie, and you know where I'm going to probably go and Jay Powell got a lot of questions about this today. You know,
what about affordable housing? What do we need to kind of rack that nut because we've been.
Wanting to be about it forever.
The builders, they're doing what they can. They're you know, they're trying to build cheaper, smaller homes to to be able to get people into homes. But I mean, really it's interest rates. People are locked into their home, into their low mortgages, and then you know, you're close to a seven percent rate. It's now, for the first time, actually more affordable to buy a new home than it is an existing home. So the builders are adjusting and bringing down prices where they can.
What about when it comes to the actual cost of building these things relative to how much it used to cost for an entry level home for a family. I think that's a big concern that a lot of Americans have, is that this stuff has just gotten so expensive compared to the wages and the money that people make out there. Right now, what's the measurement that we look at to sort of understand housing affordability in that context.
Yeah, I mean, it's actually twice as expensive to own a home as it is to rent. And what is surprising though, is Lenar reported their public they're on their earnings called that they're they're cost of construction materials is actually the lowest it's been since twenty twenty one.
So why do you see that even with tariffs?
Why is that and they're reporting no impact on tariffs. It's because the public, the large public builders, they have just such an ability to secure capitals, scale operations, walk in the land and keep driving down prices where if you're Bob the builder and you're competing with lenaar you can't. You're not able to purchase at the at the scale that they are, You're not able to offer incentives buy
down mortgage rates. And so those are the ones where home builder sentiment is really hitting rock bottom, and some of those homebolders are probably looking at turning in the keys. If you're competing across the street from a builder like a Lenaro, d R Horton.
Wait, so did you say, wait, cheaper to buy than rent or rent to buy?
It's cheap. It's cheaper to rent. It's twice is expensive to own as it is to rent. So it's and I'm sorry if I flip that around, but yes, twice as expensive to own a home as it is to rent. And that's why people are just it's not attainable right now. The demand is there, but it's unrealized demand that we have in the market because of the lack of affordability with interest rates.
But we keep saying too though mortgage rates are much more normal. What was abnormal was when they were so low. So do you think this continues or do people adjust and get comfortable and things change And just got about twenty seconds here.
Yeah, they are moderating. I mean that's why builders are targeting people that are moving down and they're selling houses in paying cash. They're not as affected, but it is becoming more normal that mid six range. But people are now uncertain with you the job market and just what's happening politically, so they're on the sidelines, but they're going to come back next year.
You always are a great read on a very important market, certainly to our world, the economy here in the United States and more.
Katie, Thanks so much.
Katie Hobard, Executive EP of Capital Markets at Walton Global.
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