Auto Icon Carlos Ghosn Could Be Facing A Catastrophic Ending

Podcast on Apple Podcasts, SoundCloud, and Bloomberg dot Com. One of the biggest stories of the day is that Nissan is removing Carlos Gone as chairman after he was arrested in Tokyo for violations of financial impropriety uh and this, of course has sent the a d r s down

by more than five percent. Of Nissan Johnny us down to talk a little bit more about this is David Welch, Detroit bureau trief for Bloomberg News as well as her own Matthew Miller of Bloomberg Television and Bloomberg Radio, who is in New York in our eleven three oh studios. I want to get to Matt, but David, let's start with you. Can you lay out what the most important details are that have come out so far about the

financial improprieties and what it means for Nissan going forward? Sure, so what they've accused him of, actually, there hasn't been an official accusation by Japanese authorities, but what they're saying is basically, he understated how much income he was making by about forty four million dollars. And then in a very old, say damning but also a vague press conference, uh Nissan uh CEO psychois said that he has also

misappropriated company resources. And from there you have to think he was, you know, could this be overusing the company plane? Is it uh abusing expense accounts and drafting cash resources out of the company. I mean it sort of couldn't encompass all of those things, and they were moving him immediately. Mitsubishi Motors, which is also part of the three way alliance with these three car companies, have done the same thing.

And when I was last looking at that, there were no board was reviewing the whole situation and figuring out what they're going to do. This is huge because going is the guy who saved Nissan back in the late nineties when Renault bought a big chunk of the company for six billion dollars, Nissan was really kind of teetering on bankruptcy and with six billion from Renault and Carlos Goings,

cost cutting and product plan and factory turnaround. They came roaring back and he has run these three companies as an icon for almost two decades and for it to end this way is uh catastrophic for him and it's going to bring about massive change for the for all three companies involved. Matt Miller, I want to bring you into the conversation. You've met Carlos Going on a number of times. Tell us a little bit about him, his background and what you take away from your personal meetings

with him. Well, I mean, David points out that he is an iconic figure. He is known as the rock star of auto CEO and that title sometimes is used for other people. It has been for Alan Moullally in the past. It should have been for Sergio um Marcion as well, but Going is the longest standing, you know,

rock in the auto industry. As far as those three kind of biggest turnaround CEOs go um cut his teeth in Australia, I believe, yeah, absolutely, and he's he's one of these just like Sergio was the sort of multinational citizens as well. I mean, I think the biggest problem right now. UM of the three is Renault. You know, their shares fell the furthest in France, and he's still the CEO over No. Remember, he was kind of stepping back from the alliance. He gave up his title as

CEO of Nissan UH. He was chairman of the alliance, but was making UH making arrangements to make it permanent. So a lot of investors UM were expecting. I think it's fair to say that all investors were expecting this was headed towards a merger, if not an official UM tie up, at least something more official than it is now. And that's what's up in the air. I think that's

the biggest concern for shareholders right now. Although it's important to mention, as David's said, Japanese prosecutors haven't UM filed official charges yet and he's not considered guilty. Although he has been arrested, he has gone with the prosecutors. It's not clear where he is right now, but he is, let's say, being detained. Yeah, he also was removed his chairman, so there's not changing that. Thank you so much both of you for joining us. Matthew Miller, wonderful to see

you in person Happy Thanksgiving. Thanksgiving Bloomberg television and radio host as well. Also thanks to David Welt, Detroit bureau chief, Thank you so much. Afford joining us well, you know, Lisa. Just earlier we got to listen to Ray Daio of Bridgewater give his thoughts about the business cycle, about the

money management business. He was speaking with Barry Dholts of Bloomberg Opinion, but on the cover of Bloomberg Markets magazine, I dare say is an interview that is of equal weight, and this is an interview with Abby Johnson of Fidelity, and it also includes Kathleen Murphy, who leads their personal investing unit. One of the quotes out of the story is that we're in the midst of quote a twenty two trillion dollars shift in assets to women. And I

thought that was fascinating. And here to tell us more about it and how the company is reacting and dealing with this change is Peggy Collins, our expert when it comes to all things investing, our investing team leader for Bloomberg News, and you can follow Peggy at m k M Collins on Twitter and she joins us here in the Bloomberg Interactive broker's studio. Peggy, a pleasure to have you tell us about this interview and particularly about this

shift in assets to women. And it coincides also with Fidelity's effort to make sure that a lot of their new hires, particularly at their branch level, are women's right. So essentially, Abby Johnson is the top woman in fund man management in the US. She runs Fidelity. She's the third generation of the Johnson family to run it, and she looked ahead with Kathleen Murphy, who runs personal investing

at Fidelity, a giant business unit for them. And basically what they're seeing is this transfer of money into women's hands for one of the first times in our history for several reasons, one of them being the fact that women are just living longer than men. So a lot of women are finding themselves in a position in their life where maybe they didn't run the money earlier in their lives, but they are getting transferred assets later in their life. You're also seeing more women um stay married,

not get married. You're also seeing more women get divorced and have to deal with assets at some point in their life as well. So they're just really seeing the whole demographics of who's investing in controlling the pocketbook change.

So I have to think that this is a person who has been at the forefront of the move to index funds and two cheaper funds, And when you talk about expertise, I just wonder how did she sort of reconcile the tention right now between active and passive management, especially given their zero fee UH funds that they just recently launched. It's such a great point, Lisa, because Fidelity under her grandfather and father's leadership, was essentially known for

its stock pickers active management. You had people like Peter Lynch, one of the most famous investors of all time, who really draw drew a lot of investors to Fidelity. But what Abby's overseeing the company at a time where millions and billions of dollars are going into passive, low fee index one So she really talked about how they've been somewhat late to the index investing game. She admitted that, but she also says she feels like the company is

caught up. One of the things that they did is you said, this summer was decided, you know what, We're going to be the first to offer a free index fund to Actually they came out with in August. They now have four, and Abby Johnson was saying, you know what, she's not really a fan so much anymore of traditional advertising, and she thinks in order to get more people to give Fidelity a chance, they have to do things that

are even more surprising and splashy. And essentially they did surprise a lot of their competitors when they came out when they were the ones, given that they're known for active management to come out with the first free index fund. One of the other areas that she spoke about, also

Kathleen Murphy speaking about is robot advisors. That's right. Fidelity has a robo advisor called Fidelity Go, and we've seen a lot of the asset managers incorporate robots into their investing process, particularly for people who are of middle wealth. You know, the billionaires are still getting the high time, their wealth is not excessive, and they can't make great fees out of those clients, so this might be the way to get them to that very money. Managed it

Fidelity right and get it managed earlier. So back in the day, you would wait until you had maybe tens of thousands of dollars to go to some wealth advisor, but Fidelities now saying, look, we can offer you a six multiple choice questionnaire that you can fill out all online, and then we can help you get in invested. One of the interesting things they also said was their designing products and user user interfaces now for millennials, and then

they calibrated up to two older people. So that's who they have in mind nowadays when they're thinking about how do we put this product out there. It's really interesting. You know, you're talking about how traditional advertising ones to certainly be the way to attract investors, it also may not be the way to make money. And I just have to wonder. I mean again, when you start talking about, oh,

it's a good gimmick to get people to to like Fidelity. Yeah, but they're making nothing on these fun so how do they plan to make money? Well, they essentially are saying, you know what we need to get get people in the door, and once we get them in the door, we can offer them a lot of different things. Fidelity was talking about it's brokerage platform, for example, in terms

of more trading. As you get older and potentially have more money, maybe you're not only using the robo advisor maybe you're not only using Fidelity through your four own K plant, but maybe you're going to open up a broker account. Maybe you're going to offer as you get older, a managed that you're going to be offered a managed to count offering where for people with more money, they may have more high touch a wealth advisor involved. So they essentially see it as a way to get people

in the door and then offer them different things. Well, it also is a way to beef up the asset management business, which is the most profitable division of Fidelity. That's right. I did ask Abby about whether or not she thought the asset management industry, the mass asset management part of the business would still be the most profitable five years from now, and she said, you know what, A lot of it is dependent on the markets, but

it still is their most profitable business line. You know, they have workplace benefits like I mentioned four in case, they have the brokerage unit. They have a number of different business lines of Fidelity, but stock picking, mutual funds, those are still the big engine for them. Peggy Abby Johnson is not known for being a publicity hound in any way. She performed This is a rare interview. Do you get the sense just lastly here that she's changing

her approach. Here, it was interesting she acknowledged that she has been speaking out more. The company had issues with a sexual harassment claim last year, and she was out in front very quickly after that talking about zero tolerance in the workplace. She did acknowledge that it doesn't seem like it's her the thing she wants to do. First, she's not a total fan of being out there in public speaking, in part because it takes up a lot

of time and travel. But she did acknowledge that investors want to see their leaders out there and talking more. She did also acknowledge that she's not one to make calls on the market. You know, we see a lot of leaders of investing firms who actually do that a lot, and she said, I'm a leader of this company that has to do well whether the markets are doing well or not, and so she feels like making calls in the market is not something that she wants to do.

Petty Collins, thank you so much and great story. Thank you for being with us. A topic now are global rates and a foreign exchange strategy, and here to help us understand what's going on in the World is and Matthias Global Rates FX strategist for Vanguard and Matthias, can you tell us whether you believe there is any fallout from the Apack summit, or should we say the a peck of pick of peppers summit where they could not actually put together a common communicate between the United States

and a variety of Asian countries. What does this mean for global currencies? Well, I I to keep going with your analogy. I think they picked a peck of pickled peppers, but they didn't know how many pickled peppers they picked. I love it. You get ten points. Good good. Um. You know as an interest rate strategist here at Vanguard, that is, trade is the top um topic for our teams and for um, you know, all of the people

that we talked to in the markets right now. The US Treasury gets pushed around by a lot of different factors at different times, but I would say just for the last few weeks for both equities and fix income, the number one mover has been talk on trade. And it's just too early to say. You know, trade is one of those um topics that takes forever. For those

of us whore old enough to remember NAFTA. That seems like it took absolutely forever to move from a concept to an actual trade agreement, So any new trade deals just take forever. So it's hard not to react to headlines, but people should try to keep the big picture in view. Well, and I wanted to say our markets responding to the headlines that we got, because they were pretty negative. I mean, Mike Pats came out with a pretty harsh tone and Margaret's are Yeah, they're risk off a little bit, but

you're not really seeing a major move today. You're right, You are absolutely right. It's quite interesting. It seems like just just today UM, and maybe even just in the last couple of maybe week or so, you see more potty market reaction to the trade talk UM, and a little bit less fixed income market, a little less treasury reaction UM treasuries maybe taking a little bit more in stride. Maybe maybe those of us in that part of the

market have a little bit longer term perspective. Uh, it's definitely rocking the equity markets and and interestingly rocking UM the growth components of those markets. Then does that mean that there's an opportunity here or should you stay away until the dust clears. You know, it's we're in that point of the economic cycle where we're close to uh, sort of close to the end or you know, are we at the beginning of the end or at the

end of the beginning? Um. But I think that we are getting to sort of a late stage in the economic cycle. You know, we can almost see over the hump with the Fed to see when they will probably finish hiking rates, which are economics team here at Vanguard thinks is probably middle of next year, the second half of next year. So you're seeing a bit more diffusion in terms of what people think is going to happen.

I think that there are some growth undercurrents that are you know, starting to be a little bit more concerning. And if you have growthy parts of the market uh not doing well with trade concerns, it may not be the perfect time to buy the dip. It's you know, probably better to be a little bit more circumspect. And I want to pick up on what you were saying, which is you expect the FED to stop raising rates

somewhere around the middle of next year. Recently, we've seen a lot of traders sort of ratcheting back their expectations for just how much the FED will hike rates. Do you think that they are sort of late to the game that's sort of been the play all along, or do you think that something materially has changed that will now slow the FED down more than than than the previous as you thought. I think they're a little bit

late to the game. Um. And I think there probably has been a little bit of an overreaction too far the other direction, you know, underpricing the amount that the FED will raise rates over the next year. You know, we see near certainty of a hike in December and then two and probably perhaps three hikes next year. Um. And not enough has changed in the fundamental economic picture to throw us off that track. I think the market has moved swung a little bit too far toward a

dovish tilt. Uh. And we could see probably a bit of a reflattening of the yield curve as the shorter dated treasury um sector starts to kind of get a little bit more realistic about what what's likely to happen next year. We haven't seen enough deterioration in economic data to really I think throw the FED that far off well and Matthias, let's be let's sort of conclude a little bit where we began having to do with that APEC meeting and the disagreement over trade between the United

States and China. Do you believe the Chinese government will work to reflate their economy and do you believe that they will also try to lower the value of their currency? You know, I think the currency piece is something that just tends to happen when you have a lot of terrorf activity, because the exported items just have to be

repriced to remain competitive. But I do think that there was a bit of probably a bit of positioning going on right now because you have the upcoming meeting between the President uh and and She of China coming up, and I think it's you know, it's too early to say that that was, you know, a truly meaningful change in the trade dialogue. We're positioning for the for the real negotiation between the two principles. A Mathias, thank you so much for being with us. A Mathias is a

global rates and f X strategist for Vanguard. Thanks for listening to the Bloomberg p m L podcast. You can subscribe and listen to interviews at Apple Podcasts, SoundCloud, or whatever podcast platform you prefer. I'm pim Fox. I'm on Twitter at pim Fox. I'm on Twitter at Lisa Abramo. It's One before the Podcast. You can always catch us worldwide on Bloomberg Radio