Elon Musk's U-Turn Move On Bitcoin

and at Bloomberg dot com slash podcast. If you think about all the way back to early February, Tesla announced that the company goes investing one point five billion dollars in bitcoin it's on the balance sheet, and also said it was gonna accept bitcoin is a form of payment for its cars. But last night, in a tweet, Elon Musk made a major U turn, saying that Tesla has suspended vehicle purchases using bitcoin. And it's just three months

after that head scratching move, so really strange. Here, let's get some color on this, return to one of the experts on all things Tesla. That's Dan Ives, Managing director Equity Research at web Bush Securities. Dan, what do you make of Mr musk kind of surprise tweet last night? And it's a head scratch? Sure, I mean the U

turn in the matter of three months. It's it's called crypto investors and testa investors off guard because nothing's changed in terms of the nature of mining crypto in the last three months, right, Like presumably Elon musk knew going into it what the potential environmental effects of crypto mining would be. Right, It's like me going into a pizza place ordering a sway and being surprised or sauce and cheese.

And I think that's the frustration. And also are from one of the biggest proponents of crypto, and that's why you know Tessa. It doesn't really dramatically change the Tessa stories from a transaction perspective, but in terms of crypto, you know, this is it's been a U turner, and I think many investors feel like carpet was sort of pulled out from under them. Yeah, that's kind of you know, if I'm a Tesla investor, I'm used to a certain level of volatility. I'm used with level of Elon musk

risk in my investment. And you know, whether it's an odd tweet here or there, I take that because of the tremendous upside I see and maybe the e V market that's the bargain I've made, but now these stocks are under pressure. Dan, I know you've talked about it with us before. You know, the trade has been the kind of let's let's invest in some of these um you know, rotation names, cyclical names, and that's not certainly

the Amazons are the Teslas of the world. How do you view the as you talked to investors today, how do you view the Tesla story here? I think you hit on a great point because this is not what we were were six months ago, and so you know, investors are frustrated. You're seeing risk off, multiple inflation worries, so right now in that's what they're focusing on, deliveries and fundamental perform So patience is wearing sin, especially when it comes to Tessa investors that don't want to see

the sort of sideshow on off, on off. When it comes to Bitcoin, I think what it's doing is really just adding to the volatility and some of the risk around test that's now been brought in from doing a one e D in three months. We remember, they haven't even had a car that's been transaction in bitcoin yet.

Very Fair just continues to be um. You know, one of the more head scratching moves that I've seen even in covering Musk for all these years, but covering it as an analyst looking at it from a fundamental perspective, in the most recent quarter, Tesla did reap a pretty decent windfall from selling bitcoin, and it also has continually reaped the reward of carbon credits the company profiting from those, and those aren't necessarily going to last forever. What happens

if both of those things go away? Well, from a carbon credit perspective, I mean that that's still a toe and that that's going to last for another eten twenty four months and ultimately in a Biden green tide away back could be more of an accelerate, but but no doubt, I mean there's more and more pressure on them to just make more money selling cars. Remember they saw more you look on their bitcoin profit. It was more than they did in all the EV profits you know, last year.

So you you're starting to see now, especially in China, especially on e V globally, you know, more focused on Tassa even despite chip short is really accelerating on the EV delivery side. And you've seen a stock that's the glass half empty or stock that's up seven a year ago, and and now you know, right now it's a risk

off market. Investors want to see fundamental performance, not noise in terms of what they're seeing with his on off on bitcoin that ultimately just really puts a little bit of an overhang around the store real quickly, Dan, when will it come to be profitable on a per unit basis manufacturing? We're glad that depends on China. I mean China the key you know, as we will out into the next year where they could start to turn more

profitable on just on the standalone basis. And as you talk about from n e V credit that's going to continue to be there, but especially as we're going to next six to a month, more and more believes or focus on profitability when it comes to the standalone EV business.

All right, Dan, thanks very much for joining us. We always appreciate getting your perspective, your thoughts on all things Tesla and Elon must and I've managing director equity research analysts at web Bush Securities, and you know, Dan was just suggesting, you know, investors obviously don't like uncertainty, um, and you get a lot of uncertainty with Elon Muskin. This is just another reminder here for some of the

risk that test investors have to get used to. Kind Well, Paul, just about twenty four hours ago, there was a pretty important meeting going on in the Oval Office at the White House, President Biden having his first face to face meeting with Congressional Republicans trying to bring them around the table on his long term economic plan. And coming out of that meeting, Republicans did say, you know, it was good. There are places where we can find by partisanship on

infrastructure spending. But the red line is going to be the taxes. So let's get more on taxes right now. Kate Barton, Global Vice Chair of tax at e Y joins us now to discuss Kate, I am sure you have poured over every detail of what the President has proposed. What part of it to you could be the most damaging. Well, there's a lot in both of the plans, the American Job Plan in the American's Family Plan, and you're right,

we are looking at them. We would like more information on our clients would and so there's a lot here, I mean, you know, and it's based on the corporate side. Tax rates going from twenty one to twenty eight. But on the individual side, there's also some significant changes, um, not the least of which is the capital gains rate change, which really has a big impact on businesses as well as where where individuals will invest their capitals. And so

those are some of the highlights. All of that is really important in the days ahead, and probably one of the biggest aspects is the relationship that the US um UH Treasury will have with the O e c D efforts and the connection to the global sides UM. So that's a big change in administration, so that we're watching like crazy as well. So, Kate, let's talk about the

capital gains tax specifically. What have we seen historically as maybe rates go up versus rates go down, do we see capital formation or capital investment materially change as capital gains rates are in fact moved up and down. We do see that having a big impact. And so historically rates capital gain rates have been kept lower because it's really thought by most leading economists to encourage more investment

and more efficient investments. So higher capital gains rates increase the cost of capital, and typically what we've seen from economic studies is that it can cause the holder to hold onto the investment for longer, so they'll just wait, you know, waited out, if you will, for the rates to change or for a sunnier day, and so um, you know that can be less efficient quite frankly over

the longer term or even the mid term. Kate, If I'm one of your clients and I'm staring down the barrel of a higher capital gains tax or a higher corporate tax, what do you tell me to do to protect myself against that? Now, well, there's a lot to this, I mean, so you know, the headline rates are not about what it's you know, it's it's actually what you pay. So you know, you really do need to get into

the detail. And we actually do need more details. So what we're really saying is stay calm uh, model it up and so they'll be more coming out. We're waiting for Treasury to release the Green Books, which should come out at the end of May, and so we'll have more details then and then we've got to see how

the legislation takes form. But I think the companies really are modeling um this all out, particularly the multinationals, trying to figure out how the attax rate will go up and what can they do now to UM to plan against that. On the individual side, I think everyone is holding and waiting to see what will happen. Remember, this is legislation that's going to come in to pay for all the infrastructure spending that the President wants to do,

and it's really just the beginning of the negotiations. And so you don't want to act prematurely because there's still a lot of steps that have to happen before this becomes legislation. Okay, a lot of folks that are opposed to raising taxes, UM just say, hey, if the I R S would just collect what's out there and close loopholes, that that would raise a tremendous amount of money. What's your view on just kind of again, some of these I guess, for lack of a better term, loopholes in

the current tax system. Well, from a perspective, enforcement is important. I mean, I don't think there's a country around the world right now that's not focused on making sure that the tax laws they have on the books right now

are actually being enforced and paid. In the US, who certainly heard a lot about that, so so clothe, you know, making sure everybody's paying that taxes is important and and part of the plan too is to beef up this aspect of the I R S so that they would get more resources focused on enforcement focused on corporations or businesses that um or high networks individuals that are not

paying uh their fast share of tax. So so that is, you know, a necessity, and the US isn't the only country that's going to be doing that, so um So that's important, but it's not going to be enough to really if the plan is to pay for uh the spending, than other things are going to have to happen as well. All Right, Kate, thanks so much for joining us. We really appreciate getting your perspective, your global perspective, Kate Barton, Global Vice Chair of tax at Ian y UM. Again,

taxes are on the table. The question is what can get done politically, and uh, you know, as you mentioned, Kaylee, the the Republicans said we are not going to reopen the tax law. So that feels like a redline. It does feel like a red line. And it's not just the Republicans. You have moderate Democrats as well. Joe Mansion, West Virginia is not on board with a corporate tax rate. So President Biden has some work to do on both

sides of the aisle Pas absolutely in Bloomberg News. We will be following that up closely, of course, as it impacts corporations, uh and individuals. Lots going on market, Kayley, snap back in the market today, you know, after the two day sell off, it's kind of I guess it's a good sign. Um. You know, some few people saying, hey, interest rates, maybe inflation not that big of a deal. But all right, let's bring in Shawn O'Hara. He's a president of Pacer et F Sean, thanks so much for

joining us here. Katy and I were just kind of going back and forth with a you know, bull bear scenario as it relates to this market. Is the bull market still very much intact? Or are there some concerns coming in here about inflation about maybe the Fed may need to taper end or tighten. What's your view? Oh, thanks for having me a good morning. Um. I think, you know, I think what's going on right now is the market is you know, is further ahead of its

current earnings then it would normally be. And so we need sort of a perfect reopening in order for earnings to continue to accelerate to justify these equity valuation levels, and any little crack and if you will, in that facade of it's going to be perfect and everything is going to be fine, potentially threatens the markets value valuations in the short run. And so what feeds into that

is the supply chain issues. You know, we have the colonial pipeline thing, You've got the chip shortage, you've got lumber prices skyrocketing, um and it was all sort of you know, I guess highlighted by yesterday's CPI number, which you know the Fed tells us as transitory. I'm not

sure what transitory means are how long transitory lasts. But when you have a market this extent, and particularly on the growth names, where in a rise in inflation and a corresponding rise in interest rates potentially threatens their future earnings, then I think we need to start to discount those levels a little bit. And so I think that's the battle that's going on. It's it's no different than the battle that's been going on all year as it relates

to inflation and interest rate sources, growth stock. So yesterday was just a bit more severe and we're seeing a nice bounce back here. Um, but there are places in this market that you know that are not over valued that you can do well with. You know, we have a strategy at Pacer, for example, it's a hundred large gap stocks. We labeled a value strategy, but it's not traditional value. Don't use price to book. We use free cash flow yield. And in this environment that finds up

like year and a day. It's not the traditional names that everybody knows. We're overweight tech, but we're not overweight The big social media tech names were overweight. Names like Intel and IBM were overweight the consumer. You know, the only real number that's better currently today than it was going into side stock prices which are way ahead of where they were, even though earnings aren't back. There is consumer spending. So this consumer has a lot of money

in their pocket. They do, you know, I never I never bought the argument that they were going to buy stocks in bitcoin. I always thought they just start to spend it on really the stimmies. You didn't think the Stimmies were at play in the whole game stop phenomenon, Yeah, not really. I mean, I think there's probably some of that, but I think you know, people have been locked up and they want to spend the money and go do

things and have some fun. And so you know, we're overweight consumer discretion, which is a great place to be because of that that that underlying if your and of course consumers going out and spending more money feeds back into that inflation conversation. How do you hedge against that? How is that showing up in the et F world? Well, I mean I think the way people traditionally would hedge

against that would be to use come podities. Although commodities are fairly difficult to own um and you know in the traditional et F because you know, like oil for example, you can't own in an e t F because you can't get to you own oil futures as the underlying and that's cut. But how could you maybe play the boom we're seeing in commodities through an E t F? What you know, what's the side play there? I think it's the producers perhaps is the best way to play that.

You know, the miners as an example, if you wanted to you know, move away from gold or oil or just by you know x L E, which is the energy producers, I mean, financials and energy have been on a terra so far this year as well, and so you know, if you're worried about inflation, you know, then the the the the the producer of those commodities as

a way to play it. You're not getting pure exposure, but it's very difficult for people to get pure exposure to commodities outside of gold, which you could buy like via g LD. You actually have physical behind you. What's one of the most some them or one of the more popular ETFs that you're seeing in the market right now. Well, I mean from our perspective, just sort of broad labeling, if you will, high yield. We have a strategy that

you know, moves between high yield and treasuries. It's been a great product for us, not only in performance, but also in terms of inflow and as the investors are looking for yield in this environment where there isn't any um you know, where the tenure treasuries at one sixty ish, you know, bouncing around a little bit, and even corporate bond funds are at like one sixty, which is kind of ironic. Um. You know, anything that has an attractive

yield to it is attractive in this market. You're starting to see flows there. All right, I think you're starting to see flows to lower p higher quality names that okay, start to de risk their portfolio. Hey, Sean, thanks so much for joining us. We really appreciate it. Sean O'Hara, President Pacer et F S giving us his view on the markets and the E t F space. We'll have more coming up. This is Bloomberg, Paul. We've been talking about how people are starting to take their vacation days.

Summertime is coming and I think a lot of people might be spending some time by the pool this summer. And we're going to talk to a guy that knows a lot about that, Kevin Holler, and he is Hayward CEO. It is a leading global manufacturer of both residential and commercial pool and SPA equipment. Kevin, great to talk to you. I am looking forward to summertime, but first I need to get your take on something I've heard a lot

about in the past twenty four hours. Forget about a gasoline shortage, there is a serious chlorine shortage out there. What's going on? Yeah, there's uh. Good to be with you that this morning, Kayley and Paul. Uh, there is uh chlorine shortage out there resulting from Hurricane Laura late last summer. But Heyward, we're actually part of the solution. We have alternatives. We actually make a more natural form of chlorine salt chlorine generation UM, and we have inventory available.

We moved very quickly to what to try and provide solutions. We also have some UV and some ozone product which when paired with any form of chlorine can actually use your need buy up to. So there is a shortage out there, but at Hayward we're trying to be part of the solution and get people in the pools this summertime. Kevin, give us a sense of how your business was impacted by the pandemic. Did people build more pools, did they use their pools more often? Was there increased demand for

your products and services? Gives a sense yes to all three paul Um. You know, I'd say the pandemic really became an advertisement for a trend that was already in existence for five or eight years leading up to to COVID UH people were looking to get in their pools earlier last year people started building pools UH more more frequently.

So what we saw was, you know, the strength of our business really after markets, so we benefit greatly from the new construction that's going on, but that's really just adding to the installed base, which creates this annuity like revenue stream for us as folks you know, used their pools more often. The other thing that we really saw was people were starting to upgrade their pool pad so

the equipment needed. They started bringing in some some more comfort products like salt clorine generation or automation controls or heaters for example, to extend their pool season, open it up sooner and be able to swim later into this season. But Kevin, to what extent was that demand pulled forward by the pandemic? How sticky is that? Do you expect it to continue once we kind of re emerge from this. I absolutely do. I think that again, the trend was

there prior and it's going to continue. People have been investing in outdoor living for for for years. The pool is the centerpiece of that out backyard investment, and this is this is an amenity that we're seeing the boomers invest in. This is an amenity that we see the millennials looking to add to their homes. So again, with the migration out of the city's UH are and into warmer climates. This is gonna be a trend that's going to continue for years to come. All right, fascinating story.

We really appreciate you taking a time there, Kevin, Kevin hollerand president and CEO of Hayward Industries, just with the people using their pools a little bit more. Oh yeah, I wish I was one of them. I really do. Yeah, it's interesting. I think I think is Kevin was suggesting, Um, the pool is you know, people are spending more and more time outdoors and that's likely to be a longer term issue, and more and more people leaving the city for the suburbs, and one of the things they're really

are leaving for is outdoor space and outdoor living. I mean, that's what I lack here in the city and why I do not have a swimming pool that I have access to. 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. Put on false Sweeney I'm on Twitter at pt Sweeney Before podcast. You can always catch us worldwide at Bloomberg Radio m