Brexit, U.S-China Trade, AutoNation CEO

joining us now. Are very glad to say, as Terrace Raphael Bloomberg Opinion edited away in on the latest on Brexit, and I think that probably the most interesting story of the day are certainly one of them to me, Teres was the relationship between Joe Johnson and Boris Johnson, two brothers. Joe quitting parliament because he couldn't reconcile his relationship with his family Boris and his view that the UK should remain part of the European Union. What's the relationship like

between these two? Well, I think the bigger surprise was that Johnson actually joined his brother's cabinet to begin with. Um Joe Johnson resigned uh from when when he was part of UH Theresa May's government over his UH, his preference for his second referendum. So he is a remainder, but he wants a second referendum rather than you know, his position isn't that just simply that that Britain should stay in the He would like to have a referendum

on it. Now obviously that puts him into direct conflict with h with his brother, the Prime Minister, and it was quite a surprise when he announced that he would be that that Joe Johnson would be part of the cabinet. The timing of Joe's resignation is of course very pointed. Boris Johnson has just suffered major defeats in Parliament. His prorogration strategy, the decision to suspend parliament for five weeks,

is hugely controversial. He is now uh potentially unable to get the election that he wants on October fifteenth, after parliament was he was not able to get the two thirds majority for that, and then on top of that, to have his brother say, you know, I'm out seems to be a sign that this purge of the of the Conservative Party, um, you know, has provoked a backlash, and you know he now has that to deal with on top of everything else. So Tos, I almost hate to put you on the spot here, but you know,

because I'm sure nobody really has a good sense. But what are the next steps here? What do you how do you think this is going to play out in your term? I guess I heard someone say if you know what's going to happen, you haven't been paying attention. I think that's that's pretty accurate. So the next step is that Johnson will try one more time to get the October fifteenth election date, and he'll try to do

that by a different parliamentary mechanism. You can't bring the same motion before in a parliamentary session twice, so he's going to use a different mechanism. Nowth that fails, and it may well fail. Parliament is suspended parode now until um the middle of October, and the no further attempt to get that election, and therefore it becomes impossible to imagine how he would get an election before October thirty one.

And that puts us into slightly different territory because remember Johnson promised he would pull Britain out do or die by October thirty one. An election into November means he's broken that promise. Now, some polls are showing that Leave supporters would not blame him, they'd blame parliament or they blame the EU. But I think the longer this drags out before an election, the harder it will be for Johnson to just come in and sweep up that parliamentary majority.

That is the key to him, um, to him delivering the Brexit that he's promising. What political leader in the United Kingdom could potentially get the support necessary to push this process forward, Well, depends on what process I mean that. You know, the problem for those that oppose Johnson's plan is that they don't have a single leader they can rally behind. Jeremy Corbyn, the Labor leader, is very unpopular

even with many of his own MPs. The other opposition parties refused to have Corbin become a sort of national unity candidate. Uh And the Conservatives also don't have a leader other than Johnson that they would rally behind now and that party is utterly split between its two wings. So um, you know, the answer is an election could throw up any number of options from a Conservative majority, which is what Johnson is betting onto a hung parliament.

It doesn't really solve the problem. So what is the sense of timing here? I mean, is there is there some drop dead date where something really has to happen. Well, October thirty one, something has to happen. Either Britain has to UH receive an extension from the EU. And now you know, let's let's uh remind listeners that that has to be unanimously approved by all of the EU's members.

So even if one of them, say Emmanuel Macon in France or Victor Orbon of Hungary, some have suggested say no, we don't approve an extension that can happen in Britain crashes out on October thirty one. There is the other key date is the European Council summit in October seventeenth, and that is the UH the summit in which Johnson was promising to bring back a deal. Finally, closer date

that we should all watch is Monday, UH. Next week Boris Johnson meets with the Irish T shirt Leah um Leo Vodka and that will be very interesting because Johnson has been promising that he will bring um solutions to this impass over the Irish backstop. He'll bring alternative ideas, so we shall hopefully see next week what he has in mind and whether there is any possibility that ire that Ireland or the E would take it seriously. Tres Rafael, thank you so much for bringing some clarity to an

absolutely chaotic situation. Tres Rafael, Bloomberg opinion editor covering European politics, UH and economics for Bloomberg, calling this UH in from our London bureau. You can read more on this and other stories from Bloomberg Opinion at Bloomberg dot com, slash Opinion and on the terminal by typing O, P, I and go. Let's talk about trade because that seems to be one of the presiding factors when it comes to what direction the markets are going to be in any

given day. There seems to be a little bit more optimism right now because there are talks about talks about talks about talks about getting maybe together to talk about trade. So let's have talk to Sean Donna, who's Bloomberg new senior trade reporter coming to us from our Washington d C studios. Sean, what actually do we know that has happened in order with respect to moving closer to some sort of trade resolution. Well, I think you nailed it there.

We've got more talks about talks about talks coming, and we are expecting at some point in uh coming weaker ten days or so UH to see the Chinese send a delegation over here to Washington. Will be a working level delegation to try and hash out where they resumed these negotiations. And that's really the point to stress here. UH. When we when these talks broke down in May, UH,

they had a hundred and fifty pages of text. UH. They were close to uh something meaningful on both sides and h then the Chinese walked away from that, in part because President Trump wasn't willing to withdraw tariffs or commit to that at that point. And what we've seen since is an escalation in tariffs, is a lot more tariffs in place. Now, the mistrust on both sides has grown over the summer, UH, and they're getting back to the table, but again they're they're trying to figure out

how to start having substantive negotiations. Again, that doesn't mean that they are having substantive negotiations, and that doesn't mean that we're any closer to a deal today than we were before this call happened last night and the announced he's talked last night. So Sean, what does it mean typically historically when a country like China or the United States sends over a relatively high level negotiating team, does

it is it? You know, does that typically mean oh boy, work close to something or serious or can it just be it for show one In First of all, we're not in a normal situation in terms, so if you know, the history is a tough guide here in terms of trade negotiations, just because the President Trump's approach to these things. We've seen that with his approach to dealing with Japan,

for example. We have a great story up on on Bloomberg today from my colleague Jennie Lenard talking about how they're racing to try and work out some really important stuff in a deal that President Trump announced as being all all done at the G seven just a week or ten days ago, and and they're still negotiating some really substitutive stuff and they're hoping to sign that deal or or get an announce a final deal at the

end of septem When you look at what's happening with China. Uh. It is not unusual for ministers to shuttle around the world as part of trade negotiations. That's what they do. That's what trade ministers do, That's what US trade representatives have done for years. So in some ways that's not meaningful and in itself. But that's where this is different, right because over the summer, these negotiations broke down and we are kind of seizing and markets certainly are seizing

on any news of the two sides. Even talking is is something meaningful, So you know, I think we need to be really careful, uh, in terms of managing our own expectations with these things. This does not mean that a deal is nigh. Uh. It just means that they're back to talk. I think that a lot of investors right now, and you'll talk to people and they'll say, you know, we're trying to understand President Trump's motivations, the psychology, which you know, good luck. But I think that there

is a question here of President Trump. Does he kind of have a put on the market? People are counting on him to, at some point close to elections try to make some sort of deal with China in order to give a boost to market. Uh, and and sort of have have sort of some momentum heading into the election. Is your sense from the people that you talked to that that belief is legitimate. Look, there's no doubt that President Trump has wanted to make a deal. That's that's

in his nature. Uh. And the question is whether something has changed over the summer. And that's where what we're really trying to figure out. I've had people close to this administration say to me as recently as yesterday that they thought that they were seeing a new hard line from President Trump in his tweets, and that they thought that he had moved from wanting a deal to to wanting uh, to just sort of embracing this idea of the need for a standoff with China, for someone to

take on China. We saw that in his comments yesterday about where he literally said, you know, I don't care about the economy. This is bigger than the economy, when he was talking to reporters about the China talx. So. I mean, the swings in sentiment here are are remarkable, and it makes it really really hard to try and uh, you know, discern the signal from the noise, you know,

that's what we try to do every day. We talked to people inside administration, around the administration, and it's, you know, it's it's hard to know on a day to day basis where the President wants to take this, and it changes on a day to basis. Socialan just thirty seconds,

any sense of where China is? Has anything changed for China over the summer from your perspective, Yeah, I think what we hear from Beijing, and what we hear from from people who meet with Chinese officials regularly, is that there's been a change in Beijing and in their approach of this, they now believe that they are involved in a longer term fight with the Chinese. They have a higher level of suspicion of Donald Trump and his ability

to deliver a deal. Uh and UH. They are approaching this much more warily than they were even six months ago. Sean Donna, thank you so much. I feel like we're gonna be talking to you a lot more going forward. There's still much more to go on this story, obviously, Sean don and senior trade reporter for Bloomberg News. Uh, talking to us from our d C of bureau crewed very much getting a bid today on the heels of some softening and trade talks between at the US and China,

perhaps talks about talks about talks. We're saying crewed up about one percent today following a two point three percent gain yesterday. But really, what is going to be the longer term driver of crude prices? Joining us now, Stephen Short, president of the Short Group Group and editor of the Short Report, joining us on the phone. So Stephen, let's just get started. Um crude prices they've been bouncing around pretty much in sandem with the feeling from trade. How

long is this sustainable? Uh? Well, for the foreseeable future. We're going into Lisa now, a very volatile time in the market. Uh To your point, oil is rallying hard. We got some good numbers a DP employment. We have some bullish support numbers from today's weekly update on petroleum stocks. But first and foremost, the driver currently now is the market's taken another hit of hopium, that is to say, hope that we might actually get some sort of resolution

with the China trade riff. So at this point, this is where these speculators are pouring their hearts and souls into. Uh so going forward, now when we talk about volatility, it is September. So over the next two months, oil refineries here in North America in northern Europe are going to go into their maintenance season, so they're going to be buying fewer barrels as they shut in operations to

get ready for the winter demand season. So when you take that fundamental out of the market, when you take that fundamental um driver, that buyer out of the market, it creates a void. And when you have that void, you have the chance for volatility. So once again we're gonna be looking at markets that can can continue over the next two three months to trade off of headlines. Today we happen to have a bullish headline and so

the market is finding good support here. So it's interesting when you know, when we talked to you, um Stephen about the you know, the energy markets, we always have discussions about the you know, the demand side of the equation and the supply side of the equation. But it seems like what's really driving oil prices, energy prices in general is really the demand side, and again tied very much to trade. Is that kind of how the traders

are positioning themselves. Yes, and absolutely and in fact, we we had some numbers that came out the surveys before. And keep in mind demand is still strong. The the the economy is still finding support. It's just this this overhang of this trade riff, and and everyone's talking about potential recession, and we're starting to see the pull back on the manufacturing side. And the manufacturing side tends to be a bell weather. So even though it is only ten to twelve of the U S economy, it's still

a significant driver. And and that is really where the concern is um so on the supply side. Look, we're starting to degluct the market here in the United States. Over the past month, we've had two major pipelines that have started shipping crude oil out of the West Texas Permian Basin to the export markets near in Corpus Christie. By the end of the year, we'll have another pipeline that comes online. So our takeaway capacity with all that oil being produced in West Texas is going to increase

by by two thirds. So we're starting to deglute and we're starting to balance the market at this point. So, yes, it is the demand, and keep in mind the underlying economic demand story is still firm at this point. But it's all about the future. It's all about perception, and right now people are are very cautious and that is

certainly a concern that is overhanging the commodity markets. Stephen, I remember when people cared about what was going on with respect to Iran, what was happening with with respect to Libya, Venezuela, Argentina. I mean, they're all of these issues that used to matter and that don't seem to anymore. Yep. And again right, and to your point's an excellent point, And it's all about perception. I mean, OPEC, when's the last time headline of OPEC actually moved this market? Uh,

this is a US centric story. United States is the nine pound gerrilla in the oil market. At this point. We are burgeoning export, uh powerhouse with all this production coming out out and and that kind of masks you know, the concerns here to your point, Iran, Venezuela, Right, Venezuela used to be our fourth largest supplier of crudel and now their production has has fallen off significantly, and so that is the concern that potentially that will start to

see a pullback in demand. Uh. You know that is being masked right now by the loss of supply, and all it's going to take is what one good good disruption and uh, you know, all of this goes to not Stephen, what are your thoughts on the natural gas market as we look ahead to kind of the colder months coming up. It's pathetic, I mean the natural gas market. And yeah, exactly. Now, natural gas market is getting a

nice rally right now. If and I've been telling all my hedging hedging clients in the short report that over the past month, if you have not been buying every single molecule of natural gas at these levels for your winter needs, you're really being foolish because the market is really gifting you this opportunity. Uh. To that point, we have so much gas. There is the pullback on the

industrial side, so that is overhang. Supplies are plentiful, but the market has rallied about twenty cents at Decca therm over the past month, and that is because Wall Street speculators have never been more barished this market. So this is a market that is extremely over sold. So we're getting kind of a counter uh intuitive rise in price right now, which probably has a lot of speculatives scratch

in their head because the fundamentals are so barrashed. So that's to say that we tend to see in the natural gas market, we get this rally before the winter, before the heat heating season kicks in, and I think we're in the midst of that. How high can we go? Our quant models right now are looking at potentially this month we could see natural gas prices rally about another forty cents higher, which would really be more of a

short covering rally, not fundamentally driven. But we're looking going into the winter and market that if you're hedging, you should have been buying. You'll still have opportunities. We're in the midst of a counter shortcovering rally, but the overall is still barish. Stephen Short, thanks so much for that overview. Excellent overview as always on the energy markets looking accrued and nanny guess at the moment. Right Stephen Shark's President

Short Group of phoning in from Pennsylvania. Right now, we have the honor of speaking with Auto Nations new chief executive officer, Cheryl Miller. She came in about forty five days ago to head Auto Nation, which she's normally based in Fort Lauderdale in Florida, but she's here in Ourlubritter Active Broker Studios. Sharyl, congratulations. The shares of the company

up more than thirty six percent year to date. I want to start with the transition in your first forty five days, taking over after a very brief stint uh for the previous CEO, Carl Liebert. So what what's it been like, given the fact that it's been a little bit tumultuous over the past couple of months. Yes, it's great to be here today with you, Lisa, with you, Paul, and it's been great. The last forty five days have

been fantastic. And coming in, my core focus was execution, right, so we're an operating business execution of our existing play and then also I'm making sure we're working on this automation brand extension strategy. So when I stepped into the role, I met immediately with our leadership team I've known for many years, our operational leadership team. I met with them personally, we talked about the strategy, had their full confidence, and

I also met with the corporate team. I reminded the corporate team, as we always do, that our focuses on servicing our customers and really pulled together that leadership team to focus on the core. I've had some initial O E M discussions, but certainly I've known many of them, having been in the industry for years as well. So I'm just looking at the stock stocks done well, up thirty seven percent this year, there's only one analysts recommending it in nine have a hold, and there's a couple

of cells. What are what's the bear case out there? What are analysts not seeing having missed kind of this run up in the stock? Yes, and Paul, I think it's a great observation. I think what people are missing is really the thought out there has been. Are we

at peak auto? And if you think about that, years ago, we knew we would have a gradual climb out of those lower star levels, and we always said we thought we would level off somewhere between sixteen and seventeen million units of sales, and and that is where we have leveled off. But keep in mind that we're not just about new vehicle sales. We also do a lot of nearly new, and you've seen the customer preference shifts somewhat towards nearly new and we also have the service aspects

of the business. And so I think the analyst thesis has been around sort of peak auto, and I think we've got a lot more than that. And you've been with automation for years, so you have a sense of the sort of h the breakdown between used and new cars and car sales. Can you speak a little bit more about the shift that you've seen recently in preference

for almost new vehicles by the US consumer. Yeah, absolutely, So I've certainly been in the industry for a while, and my one of my fun facts is the fact that I actually was an automation the first time before Mike so I was was there back in ninety eight, and I saw the early days of the company through the evolution today. But as I think about the consumer, um, I think about most of the customers coming back into our show rooms are coming online to interact with us.

The last time they may have purchased a vehicle could have been when interest rates are basically at zero. So now they're coming back in and although rates fortunately we're not going to have the hikes we originally anticipated this year, but but rates are a little higher than zero certainly, and customer affordabilities a little bit tougher. So the average

new vehicle payment monthly it's five dollars a month. So for some customers there's a little bit of a sticker shock as they come into the stores, and therefore they look over to the side and say, hey, that's that's a nearly new vehicle. It's got great technology, it maybe two to three four years old, and they'll opt in for that. So we're actually seeing very strong pre owned sales this year, and you've seen us with two record quarters and part of that was supported by great pre

owned sales. So I'm just looking at the consensus estimates out on the on the Bloomberg terminal. Not much revenue growth, but some very strong margins here. So it give us a sense of kind of the business mix for you guys, between kind of the the sales of cars and maybe the services for your business and kind of which is really driving the growth for you. Yes, they think about the growth drivers within the business. The service or we call customer care side of the business has great margins.

So those margins are in the forty five percent range plus or minus compared to new and used vehicle sales that are in the case of used vehicles sub eight percent new vehicle sales certainly much lower on a percentage basis. So as we continue to shift and focus on growth in the customer care side of the business, you're seeing

some margin improvement but also flow through. So if you think about our bottom line improvement, we've made some good steps with respect to s g n A. So so the nice thing of having said in the CFO roll

previously is that continued focus on cost optimization. So going forward, you know, you talked a little bit about how people analysts perhaps are thinking more about are we hitting peak auto than they are your specific business model, but that you can't lose sight of that either, right, the whole idea that cars, that the cost of cars is getting a lot more expensive as companies try to offset the

fact that people are buying fewer of them. So what is sort of the key price level that you're seeing is the sweet spot where sales are continuing and sort of what's the sort of tipping point at which point

sales drop off. Well, one of the great things about that question relative to price for the con zoom or is we're going to have a little bit of a tail win with interest rates, So coming into the year thinking we might have three hikes versus now having one cut so far, and hopefully with the next month here you may see a second cut with respect to rates. That actually improves affordability. So as I think about that, that provides some more balance for the customers, so it

provides them a little bit more running room. But at the same time, if people aren't buying new, maybe they're buying nearly new. If they're not buying nearly new, they're holding their vehicles. And we saw this play out in the recession back in two thousand and eight, two thousand nine. It's a countercyclical part of our business parts and service because if you're not buying, you need to service and maintain your existing vehicle. So that's the way I think

about the composition of the business. But I'm also excited to have one ft into the future and thinking about relationships, strategic partnerships like Weymo, where we're thinking about forward looking consumer mobility, which may look a little bit different than it has in the past. One of the things you mentioned just peak auto, are you concerned that uber and lift and those types of things are going to result in fewer people driving. It's a really interesting question, Paul.

And so the way I think about it is when you look at what Uber and Lift have replaced to date, they've really replaced a lot of the shared use. So think taxi cabs where we are here today in New York City, UH, think about rental car companies. That's really a lot of what it is replaced today. What we are hearing from customers is they'll occasionally take an Uber lift if they're going out to dinner, if they're going

into this city somewhere it's expensive to park. We have not really seen it replacing traditional ownership at this stage, but we'll continue to to watch the market as it evolves, and as we look at our core capabilities. We've got great retail locations, we've got a ton of experience selling twelve million vehicles, servicing forty five million vehicles, and so we've got great experience to meet the customer where they are.

But at this point, the customer isn't dropping off their car and droves and UH and opting exclusively for Uber Lift. So let's talk a little bit about the Weymo partnership because you did mention it and Auto Nation does have UH some partnership with them. Can you describe a little bit more about that. Weymo, of course is the self driving project formerly of Google, now an alphabet company. Yeah. Absolutely.

So I had the great opportunity in two thousand seventeen to be at the starting point of that relationship, So being out in Phoenix where that was started, as well as in discussions out in California, And as we looked at this potential relationship, I had to say, what is Auto Nation really good at? What core compencies does AutoNation bring to the table that may or may not be things that Weymo is interested as a company and doing directly.

And that really came down to service. So if you think about the quality of our technicians the technical complexity of vehicles, were really good at the hard stuff. And so if you think about hybrids and electrics, we've serviced

a ton of hybrid and a tricks already. We were ready to think about how do we service autonomous This is this is fascinating because there there's been a big discussion about self driving vehicles and who would be the maintainer of those, right would be okay, well, this is really interesting, right and it's sort of at the intersection over A lot of people think is this sort of

see change in the way people get around. The question is are we really getting the kind of traction in the self driving space that a lot of people have thought that we would At this point, it's really early days. It's a great point. So the great thing is we want to have a foot in the future. We want to be learning today and we want to be assisting today. So the way I think about it is we bring these great technicians and now they're they're they're used to

working on complex vehicles. So if you think about a DAS and all that technology that's already in the cars, lane assists, they're working on things with sensors and computers today already. This is an expansion of that great technician base where we have existing technicians that are now learning how to work around and autonomous vehicles. So it's something that's really within our sweet spot. We also have great retail locations. If you think about it, where do customers

live and work? Automation is located near where customers live and work, not in a remote area, So we're already around that daily traffic flow of where customers live and work. And that's where they where they want their vehicles to be traveling. So you're obviously with all your locations and the sales and service, you can have a great feel for the consumer. We know, despite slowing manufacturing data and whatever, we see it pretty strong consumer. What are your what

are you seeing on the ground in your business? Just is it relates to kind of the health of the consumer. So what we're seeing an automation is is pretty good health at the consumer. Right. People have jobs and that's the great thing. When I contrast that to how it felt back in two thousand and eight, two thousand nine when jobs were tough, it feels decidedly different. That being said, we've talked about affordability, so I think a little bit of relief on the interest rates will help with that.

But fundamentally, I'm seeing a pretty strong consumer showing up in our in our stores and online. This has been fascinating. Cheryl Miller Miller, thank you so much for being with us in congratulations on your first forty five days. Cheryl Miller is chief executive officer and President of Auto Nation,

joining us here in our Bloomberg Interactive Broker's studio. She came into the company about forty five days ago after it's long term leader and now the company's chairman, Mike Jackson, stepped down in a brief tenure by another temporary executive. Thanks for listening to the Bloomberg P and L podcast. You can subscribe and listen to interviews at Apple Podcasts or whatever podcast platform you prefer. I'm Paul Sweeney, I'm on Twitter at pt Sweeney. I'm Lisa A. Bram Woods.

I'm on Twitter at Lisa A. Bram Woods. One before the podcast, you can always catch us worldwide on Bloomberg Radio.