A Closer Look At Tesla And The Housing Market

loss last week Matt, Penn State lost to Illinois. At saw that and I thought of Dan when I saw it nine overtimes? I mean, who plays nine overtimes? Anyway? All right, Dan, thanks so much for joining us here. We got Microsoft after the close. I want to get your thoughts as we go into that, But first let's

start with Tesla. I mean, Elon Musk is worth more than you know, pretty much the rest of the stock market at this point here, this stock to me is showing really no signs of concern about rising competence from the existing O E M. How do you view that? Look, I think we're seeing the biggest transformation to the auto industry since nanteen fifties, and Tesla's leading the way on ev s and it's really been the one to punch in terms of what we saw on deliveries last week.

Profitability and it hurts is a tipping point. I think it's an inflection point overall on evs. There's a five trillion dollar market and I think this is just sort of the middle innings of the street. Further appreciating this Tesla and ev story, Yeah, I mean, what an amazing story. Ordering a hundred thousand Model three Dan As close as I can figure, this is basically list price that they're paying. Well,

that's really what sticks out. You know, normally you'll see discount tenss price because right now Tesla, it's Tesla's world. Everyone else paying rent and evs because demands out strip

being supplied by about ten per cent. Now you start the trajectory out where this could go along with supply coming on with Berlin in Austin million today, this could be two million a year, and I think that's what you're started seeing the stock even look, the heaters will heat continue here, but right now, as you're seeing this, it's hard for investors to dismiss this green tide away playing out, And Dan, how do you think this EV

market will shake out in ten years time? Well, when assuming everybody who's in anybody will have a full complement, a full lineup of electric vehicles, where do you think Tesla's position will be? Would they kind of be the Porsche of the auto industry? Can I just can I just point out, speaking of Porsche, the owner of Porsche and Lamborghini, Ducatti, Bentley, Bugatti, um Folkswagen and Audi, they have a market cap of a hundred fifty million dollars.

Tesla's billion dollars. Tesla's worth more than a trillion. How does that make any sense? Well, look, it's a great point. I I've never viewed, and I know we've talked about the last decade Tessa as an automotive company. View them is the disruptive technology player. But I do think to Paul's question, v W for GM and and others is part of this five trillion dollar e V transformation. It's it's not a zero or some game. They're all going

to benefit. I mean, you put on perspective, you have three million evs in the road globally, have a hundred million cars. I believe that's fifty million the end of the decade, and Tessa is going to have a significant market share of that. But but others are going to benefit as well. And that's why this is something you look at the rerating that's going to start to happen so or what happened GM forward VW because more and more investors are going to value that disruptive e VPS

like a technology ps, not traditional automotive. All right, let's switch gears here to our good friends from Seattle, Washington. UM Microsoft all time hyphe poy put up that max chart on your Bloomberg terminal GP go just extraordinary. What do you expect after the close from Microsoft? In I think another world series performance by by Nidel and Microsoft, I mean continues out the golden touch on cloud cloud Armor is playing out, but Microsoft is gaining more and

more share. This is just the growth story still underestimated by the street. So we have a three seventy five price target. I think it's just another sort of beaten raised special coming out of Redmond. And you see that

for the other tech companies as well. For Alphabet, Oh yeah, I think this is gonna be just a headline week for tech across the board Social Media week link because what we're seeing on the Apple privacy, I think Apple, you're gonna see robust coming out despite chip short just right now, demand now stripped and supply by about ten million iPhones. Alphabet as well in digital advertising. I believe this is sort of the fuel in the tank now to get Nazac to our Yarine target of sixteen thousand.

You know, it's funny day when I look at Microsoft, I look at the stock and you know, I'm I've been in this market long enough to really kind of follow the Microsoft story from day one. When there's a you know, I lost decade or so for this company, and I feel like such an Adela it doesn't get the do that he has deserved, you know, even like maybe not an Elon Musk but a Tim Cook or some of the other guys from Silicon Valley. The job he's done in repositioning this company, I think it's just

an extraordinary story. How do you think about it? Nadela is in the Hall of Fames. I mean, for any company what you see in the last fifteen years play out what he's done in Microsoft, transforming them into a cloud behemus go back to when he took over stocks thirty and forty, Mini thought that was really just gonna be another mature company playing out. I believe he is up there with the likes of Besos Cooking others in

terms of what he's done. Nonetheless, when you look at the I mean I look at cop charts all the time, UM, which is automatically a five year chart on the Bloomberg terminal. And although Microsoft has done better than almost all of the mega tech peers. In fact, Microsoft for the last five years done better than Google, Apple, Netflix, Amazon, UM, but it just pales in comparison to Tesla. Like this

chart is unbelievable to look at. Look it is. I mean, we're seeing, you know what what what's really some of the most transformational growth they're really ever been witnessed in the last thirty years. And I think you put these stories on a pedestal Tessa, Amazon, Netflix, of course, Apple and others, and I think what you're seeing there is that more investors are starting to recognize the transformation that's happening, and you're seeing the stock continue to reread as this

all takes place. All right, It's it's a pretty incredible story, to say the least. And Dan has been at the forefront of this without performs. Yeah, it's it's been amazing and I'm sorry about Penn State. I really was thinking of Dan. Now. We have to go to Columbus this weekend. Hope boy, oh, the Ohio State University University. Dan ives there from web Bush Morgan. Always great to get a little bit of time with him. This is Bloomberg, all right, Let's bring in David Harden right now. He's the CEO

and chief investment officer at Summit Global Investments. They have one point eight billion dollars in assets under management. And uh, Dave, I'll just ask you what I've been asking everybody today. Um, we're at an all time high on the S and P five, even though we face so many headwinds and there are so many question marks out there as well, Um,

what do you make of the SMP. It's pretty amazing and the markets always had to climb a wall of worry and so definitely, I continue to think this is going to be choppy, but I do think it's higher ahead. And hey, thanks for having me on your should today. But that's what I'm that's what I see all right, David. You know, as Matt was just suggesting here, you know, with this market at the all time high, a lot of valuation concerns in there. That's a big part of

that wall of worry. But we've had really good earnings this third quarter period. Do you think earnings are strong enough to support the valuation here? Well, clearly, and and the earnings have been crushing it. And I think that the earnings revisions will continue. I think that the earnings will continue to do well. Yes, growth is slowing, and that absolutely inflation is out there, and I think that's flattening the yield curve, and I see the tenure going

to two percent. But I don't see the bubble bursting until the FED becomes negative towards the market. I think this thing continues and so choppy trading, but you know, for me, it's still equities ahead and and cautiously optimistic here, but equities still it's the place to play. What what

is the FED gonna do? I mean, especially now that so many people are talking about the possibility of Chinese growth slowing maybe less than five percent next year, it seems to me difficult for the FED raise rates in that kind of situation. Um, and it is and it's going to be difficult, and I think that there's gonna you know, it doesn't mean that we're going to be straight up forever. The market has cycles and people have

to understand. I think that risk management needs to become more central in their investing mindset, and that's one of the things we do at s c I is that, you know, we focus on managing risk and providing the protection that the clients deserve when they're in those situations in the future. Because let's face it, the more risk management you put in your portfolio, the more that it

will perform how you designed it to do. So you know, there is gonna be a time a time of reckoning, and it's gonna and it's gonna be very important to investors that their positioned correctly. Many times we just talked about the next trade and not about the investment long term, and those are two different conversations. David, you've got to sell on Southwest Airlines. Is that a call on the sector or a call on the fact that Southwest Council's

flights every day? It's more well the latter, right, I think that if you're in this sector UM and and there's still business travels still extremely weak. We know that right and we know that UM with the pandemic with Delta, even though maybe the numbers look better than they did last week, so to speak, are we coming out of this? We get scarce all the time, but people are getting their third shot now. So I think the sector. I'm not negative on the sector. But Southwest has continue to

have problems. It's had problems in their c suite. We've seen that this year. We can CEO changes and different things. They've had problems now with their computer systems. And what you want to understand what those thousands of cancelations is the next time people go to book a flight, do they think in their minds, I don't. I don't know, maybe Southwest is going to cancel me. Once that happens,

they booked somewhere else, you lose revenue. So the seventy five million one time charge great, but what about the next flight? That's what I'm worried about with Southwest. I see a lot of downside volatility here or risk, and so from my standpoint, short term struggles. If you're going to be in this sector, avoid Southwest. You do like x On Mobile, and this is a company that I think a lot of people with E s G concerns would have void what draws you to the big oil?

You know, it's interesting we've been doing E s G before e SU was sexting that and and before it was even called that, And so sometimes E s G is not always about not uh, it's it's more about doing what you do really well and avoiding damage. Right. So, if Exon was responsible for the oil spill that was off the hunt it'son beach coach coast last two or three weeks ago, that'd be really bad. But they're not, and they're doing really well and you're getting a really

well paid yield here. Um, you're getting very manageable risk, really good management team. And our call is that oil stays above where it's at, or stays where it's at right now for a longer period of time. And let's face it, at this price of crude, excellent is a really good opportunity and it's a good value play too. So from my standpoint, energy right now is a really good play and I would be increasing my energy exposure

if I was a client. Dave, you're salt Lake cities at right correct, we're out of Salt Lake with offices in Boise, San Francisco, and Tampa. Let's getting the important stuff. How's the snow going to be in Utah this year? Well, after a foot of snow last night, nice continued going this morning, and a storm every about three days. Our resorts are opening up sooner than they've ever done before, and so I think it's gonna be a fantastic ski season.

But I love the skis um book. I've already booked two trips out there, so it you know, better keep dumping after missing skiing for a couple of years, it's gonna be great to get back. Boy. We always make plans to do something different, crazy Montana or this or that. Then again, he screw it. It's flying to Salt Lake. We got world class resorts, you know, minutes away. It's just Park City, much easier. Yeah, I know. Awesome, awesome,

all right. Dave Harden, CEO and Chief investment officer Summit Global Investments and our Utah ski man on the ground. We appreciate that. Markets again trading higher again. Good earnings, we had some good earnings. We have more big tech after the close today, but as Dave said, earnings doing their part here for this market. Let's bring in Fiona Sencata right now, senior financial markets analyst at City Index, and Fiona as a journalist. We have to try and

be skeptical. It's not hard right now. Uh, supply chain, I don't think crisis is a is a too strong a word to use. Labor shortages, inflation scares, and yet we're trading at basically forty six hundred right now on the SMP. That's got to be a game of like twenty year to day what's going on, that's right. I mean, it does feel that very much, this sort of optionism that's coming out of earnings at the moment, which is

actually just lifting the stocks. There's very much the shadowing the concerns that we saw heading into earning seasons that the inflation confirms, just to surroundings of the labor market, the sort of energy crisis and supply chain bottlenecks, all that seems to be just being overshadowed right now by some some nice strong earnings that we've seen, and I think we're not seeing sort of the reflection yet of those sort of concerns thing really shown through in the

earnings from that's something that's helping sort of investors optimism. UM. Just for example, the as far as supply chain bottlenecks were concern, I think that's very much to see that sort of starting to come through in the following quarter. And I think that's just what we're seeing at the moment, is the market or at that sort of happy point where things although we know there are a lot of headwinds coming and there are problems surrounding, the numbers just

aren't quite showing that yet. And also we've got sort of consumer confidence data came through today much better than expected as well, and so that really helps lift up the mood. Adding to that upb we were expecting to meet consumer confidence to come in much lower and to fall for a fourth straight months. It's actually had a surprise jump. So that does bode well in fact for the the the economic pick up picture for the start

of the fourth quarter. UM. If you know, we have some big techno names reporting earnings after the closed Microsoft alphabet and which I prefer to as Google on old school, how are you thinking about the text base right here? Yes, so we've had some good numbers, haven't we I mean, I think we've had as far as the Facebook was concerned, that was as far as I'm concerned, that came better than we were expecting in the sense that we saw

that beat on the earning pressure. Revenue was a little bit on the disappointing side, but that perhaps isn't so surprising given what we know about what's happening with Apple and the the privacy policy change there, and as far as what we're expecting from from Microsoft to Alphabet, I mean, if we think about how these have rallied over the past six months, I mean Microsoft are up thirty over the past six months, Alphabets up year today, So there

are pretty high expectations for these stocks. But I mean with Alphabet, for example, not only Google proved to be resilient as far as sort of advertising revenue concern, we do see it sort of picking up as well from that gain in the pickup in travel sector and travel searches, which is going to help it along as well. Microsoft very much been involved with that remote working companies sort of increasingly spend on cloud and on digital transformations because

of that remote working. This is all very supportive of the tech sector. I think we've still got you know, we've seen these stocks trading out record highs and they have eased off some of them. I think they could potentially push higher if we get some more solid numbers in terms of the in terms of next year, what are you expecting, because the consumer confidence numbers, although they were good just now, have been lacking of late, and I've heard more and more people use the word recession.

I think recession is quite a strong word sense still, I think we we will see a sort of very much a change as we're going into next year. Obviously, let's not forget this year has been very much about recovery, rebounding. We've had the support from the fiscal support. We've also had military policy support. And those taps are going to be turned off, we know, sort of as far as the Fed is concerned, will be looking for that for

the taping in them. Those bond purchases to start happening, you know, potentially as soon as November December, and then as far as interest rates being heiked, that's something that could really start to flow the growth that we're seeing.

I do think recessions a very strong word. I think there are concerns about as far as growth is trying to flow, particularly as we see those these supply chain bottom x the energy crisis sort of moves through the market and the markets come to terms with those and

moved past them. But I think the as Sara's actually greatest concern, and do you think we'll continue to see growth, but just as a much slower pace, And obviously any rising interest rates that bring sort of inslation back under control will just sort of stem that groat a little bit more. You mentioned energy just real quickly, I'm seeing w t I just about eighty five dollars a barrel. Have I missed the energy stock trade or the energy

commodity trade. No, I think there is more here. I mean, I get energy, and as far as oil is concerned, it's had a very impressive run I mean we know sort of coal prices and gas prices have absolutely surge, and w t I has also had a very good run up. Was just in the the gas and the coal prices starting to edge down after we've had that

intervention from China, particularly in the coal market. But I think as far as oil in this concern, we know that demand is still very strong, particularly in the US, and then we've also got to very tight supplies from Ope, they're not looking to sort of move so far beyond those four D extra barrels they agreed back into life, So so I think there is further to run that all right, Fiana, thank you so much for joining us.

As always, Fiona and card A, senior financial markets analysts for City in next giving her her thoughts on these markets again earnings after the close, Big Tech, this is Bloomberg. Now we got us new home sales numbers um UH sales of new homes in America increase in September to the highest level in six months, underscoring what we already knew was pretty solid underlying demand. Brad Dillman joins us right now, chief economists at Courtland out of Atlanta, And Brad,

what do you think I mean? We knew it was going to be hot, but I'm not sure everybody knew that purchases of single family homes would grow fourteen percent to an annualized eight hundred thousand. It's definitely higher than expectations. The figure I had had in front of me for the expectations figure with seven twenty thousand on a seasonally does at annualized basis so it's certainly be what most

models have been predicting. You know, one of the things as we think about the housing market bread it's been so consistently strong through this entire economic tumult from the pandemic, But when we think about the supply of housing in the US, it hasn't been necessarily where it's needed. I'm thinking the entry level home. We haven't seen new home construction really address that market. Uh, Is that changing at all? No, Unfortunately, it's not that. If we look at the price movement

in what's happened on the new home sales side. For example, the median price came in it fo UM. That's up from about eight thousand pre COVID and US. To put it an a broader reference, twenty years ago, the price for a new home would have been about a hundred and sixty eight thousand, So that's a two and a half times increase. So we are definitely seeing those prices

continue to take up. Now. I would make the argument that that's in part due to financial conditions, and I think part of the reason that housing has been so strong since the onset of the pandemic has been what's gone on and with mortgage rates, which is that they've come down so much and remain quite low. Um. I've talked in the past about the tenure tregury rate being negative in real terms once week factor and inflation and an aspect of this passing through the mortgage rates with

they're being really low as well. But when we look to new homesale too, you know, we had this huge rebound in the wake of the pandemic that it's then cooled a bit. And now I'd say when I look at this figure, I'd say it's it's really resuming its pre COVID trend. So maybe we'll see a continuation of that going for what is I mean, it's a very regional market, right The United States is gigantic and um, you know I realized that even more having lived in

Europe for for years. Now, where do you see the strongest growth and where do you see a little bit more normalcy? So month to months, the big games have been in the Northeast and the south. Um, I wouldn't really say that we're you know, the other parts of the country and again we're talking large regions, you know, are in a bad spot. We gotta remember when we look at the new home sales figure. While it was strong,

it actually is still down year to year. And so I mentioned earlier, you know, in the latter half of we really saw some strong figures that cooled off a lot in the first part of this year, and we're now seeing them swing back up again and resume that pre COVID trend. Brad, you know, I'm still at a loss. I'm gonna follow on my prior question. Why isn't the market, the housing market more efficient? I e. There's demand at the low end, and there's where's the supply to meet

that demand. I mean, I know the margins on the McMansion are better for builders, but at some point the pricing dynamic has to drive supply of lower end housing. Yeah, and I argue to a degree. We have seen, of course, over the last ten years, we've seen supply pick up. It just hasn't kept pace with our population growth. So there's estimates out there related to our total deficit of housing. The The estimate that I have is one point one

million housing units. That's to say that we would need to build one point one million housing units instantaneously just to satisfy what we would need right now. That's nothing to do with sort of a go forward basis, just to clean things right now. And so when I look at the last ten years, I see the difficulty for home builders really being in what I would call artificial home price appreciation that came about from the kind of policies that we've set about on to stimulate housing coming

out of the Great Recession. If you raise home prices to the point that people can't afford them, there's really not a big market into which home builders can build and deliver supply. And that's precisely what's happened at the low end. Even though this situation has to a degree uh been solved over the last ten years, as as our total amount of housing completions has in increased, we haven't have we seen UM rentals keep up then with

the demand for housing. I mean, do people who can afford to buy houses, do they end up renting places instead? Has it working out? Yes? So there's been some huge strength in the multifamily space and in the single family rental space, and in fact q Tree annual rent growth in multi family came in much stronger than expectations UM

and the occupancy rates and multi family remained very tight. Now, what's interesting is during the pandemic, when we saw lots of people move out to buy homes, we did see that these vacant rental units were back silled by something that we've covered in surveys as first time renters. So that's something we can see with call it your younger millennials at this point or older gen zers who are able to move out and form their own household as as those units become vacant um. But where that's going

to be heading going forward. You know, if we if we do see mortgage rates take up in the wake of a taper, and we see activity in the floor purchase space start to slow down a little bit, maybe in some ae month's time, we may see higher renewal rates again in multi family, something that's already been relatively consistent over the last call it six months or so. That's the same increase in renewal rates in Reynolds. Interesting stuff. You can always talk real estate lots going on out there.

Brad Dillman, chief economist for Courtland, joining us on the phone there, and again, the real estate market remains very, very strong. We saw that in the in the ECO numbers today coming out of d c UM. So good time to be a seller of a house. Not so sure enough already a buyer. But Matt's going to give us some on the ground, real world feedback starting next week. Thanks for listening to the Bloomberg Markets podcast. You can subscribe and listen to interviews with Apple Podcasts or whatever

podcast platform you prefer. I'm Matt Miller. I'm on Twitter at Matt Miller three pt on Ball Sweeney I'm on Twitter at pt Sweeney. Before the podcast, you can always catch us worldwide at Bloomberg Radio