Macri Frittered Away His Time To Make Reforms: Rhodes (Podcast)

financial markets. To get the latest on some of the key global issues, we turn once again to Bill Rhodes. Bill as President CEO of William R. Rhodes Global Advisors. He's also author of the book Banker to the World, Leadership Lessons from the front Lines of Global Global Finance. Bill joins us live here in the Bloomberg and Ractor Broker Studio. So Bill, let's turn our attention to Latin America.

Argentina in the news. This you know, kind of blew up yesterday with yields on government bonds rising to the highest level since the country was last in the fall stocks and the pay so we're in free fall. What's the latest from Argentina? Length. The problem in in Argentina, as we were discussing in the break, is that when Macari came in, everyone had great expectations. I actually did a piece for Bloomberg the first week he was in office.

What happened, though, is he fritted away his time. So instead of implementing tough economic reforms up front, like Fernando and Rick Carloso did with the Real Plan and Uh, Belsarovitch did UH with Poland when Poland broke away from the Soviet Union. He fritted it away and he called it gradualismo, the Spanish term for do it gradually. UH. And the reason he did that was because he thought it would help him politically. But if you don't take

the tough measures up front, it blows up in your face. UH. And last year when I was there, they had just they were just firing ahead of the Central Bank, blaming him for it. Uh. They put in the Minister of Finance UH, and he lasted two or three months Caputo, and then he resigned or was fired because they did

not want to take the tough steps. Now the I m F has got their next out there, just like they did on Greece, because they've given him the largest program efforts over fifty billion dollars, and they can't be very happy now because inflation is over fifty the country's deep into recession. Elections are in October and all of the polls show believe it or not. Uh. Christina Kirshner, who people thought would be in jail by now, says

she's gonna run, and she's running ahead of Macari. And and now he slapped on price controls and having restarted that country more than anybody else in history five times. Every time they get into price controls, it doesn't work. Uh. And you remember you had a bad ending of Alfonsin, you had a bad ending of day lar Ua. The

press in Argentina is full of that. I hope it doesn't happen because I think Macari has the right intentions, but uh, time may have run out, and so he's got to use the rest of his time to implement these reforms, and maybe too late. So I remember all the way back, maybe two years ago, when Argentina was selling hundred year bonds and investors were piling in and the biggest institutions were saying Argentina is a recovery story. Never mind the fact that it's defaulted five some odd

times in the past hundred years. Here we are the chances of potential to faull to being priced into the market of Argentinian debt over six currently up from a year ago. In your perspective, what are the chances that we see yet another Argentinian default? Well, I certainly hope we will not, but there's still time to take some of these tough measures. But it's not like putting on

price controls. And the economic team down there was very slow to recognize the problems, and those who did recognize it, unfortunately Mauricio got rid of UH. And so it's like my father taught me when I was a young man, said, Bill, the road to Hell is paved with good intentions, and Macary has all the good intentions, but if you don't take the proper steps, you could have more problems. And so the markets are now fixated on Argentina. How people

people would have bought a hundred year bonds? And when you asked me that earlier, UH in the break, I said, because there's too much liquidity. UH still slashing around with with all UH, the emphasis on central banks providing liquidity, the reach ree yield and people are desperate for that, so they went into all sorts of things, including those bonds. Uh. But you know it's not just Argentina. Let's take a look at what's going on in Turkey. Look at the

inflation rate in Turkey. They're in recession. UH. And I don't see the economic reforms happening there. So I think there's a lot of problems the emerging markets. Korea just came out uh and surprised people with their negative growth. Uh. There's a lot of weakness in Asia. Europe is very weak. Uh. When you look at Germany, the industrial figures, you look

at Italy uh, and of course brexits unsettled. So the one part of the world which is booming for the moment is US, the US, But you know, we can't be the locomotive for the rest of the world forever. How about going back to Latin America Venezuela. What's your current view there? That was is such a difficult situation. What's your current view there? Well, I lived there thirteen years, my daughter was born there, so I have a very strong feeling for what's going on there. The three things

have got to happen to turn that country around. First has to be some sort of political change that uh, that the Trump administration thought would happen a month ago, six weeks ago. They were too optimistic when they put on sanctions. So far, the sanctions haven't worked very well. Um. So that is one point. And of course Maduro is being backed up not only by the Cubans but also by the Russians. The Chinese, I think, are more realistic. They will deal with who's ever in because they have

too much of an investment there. Uh. And I think the second point, which is what disturbs me so much and I'm spending a lot of time on, is to try and help on the humanitarian situation. Here's a country. When I lived there, which is the wealthiest country in Latin America, had the best medical system. Malaria didn't exist, it had been stamped out years before. Now you have

a malaria outbreaking parts of the country. Uh. You have uh what the u N says a three and a half million out of third thirty million population refugees, but it's more like four or four and a half million, and it's growing all the time because there's no plasma in the hospitals. Uh, there's no antibiotics in the in

the hospitals, people are dying. Uh. And you see some of these people that go across the border to Brazil uh in Roraima state, or go across the go across to Columbia or elsewhere, and it's tragic because the malnutrition. I just talked to a friend of mine from Argentina before the show, and here Argentina, so far away from Venezuela,

they already have five hundred thousand refugees there. I'll be going down and talking with the President of Ecuador about, uh, what can be done with the Venezuelan refugees in Ecuador. So I'm working with a very well trained, experienced epidemologist who's a standout person in this field, to see if we can do something. Uh. We're talking to the American Development Bank to see if we can do something for the refugees outside. But what's really needed in the country.

They've got to allow in aid, humanitarian aid, and they now say they'll allow in some Red Cross aide, but really not clear. And of course the last thing before you asked me is what's going to happen with the economy and the debt, Because this is going to be the mother of all debt restructions. We've never seen it quite like it, because you have paids of the oil company has all this money out as well as a sovereign and they're tied together. And the Russians have half

of Sitko, the oil refiner and the West coast. So this is a country that I think is a disaster case and the question is what's the outcome going to be. Bill Rhodes, thank you so much. You're involved in so many incredible things and have been throughout your life. Bill Rhodes, President and CEO of William R. Rhodes Global Advisor, is author of Banker to the World, Leadership Lessons from the front Lines of Global Finance and when you talk about

all of the concern for humanitarian issues. Bill Rhodes also just established the new Road Center for Globlastoma at New York Presbyterian Hospital. His wife passed away from glioblastoma, which is actually the fastest growing at cancer, particularly among younger people. So if you want to check out more, just google the Roads Center for gleob Blastoma. Intel reports after the close today on a Shrinivasan uh covers all things on the tech chip side for us. He's a senior semiconductor

and hardware analyst for Bloomberg Intelligence. He joins us here in a Bloomberg Interactor broker studio. So on it and get a big rally in chip stocks. What's driving it? Semi Connectors are certainly the tip of the speer. We tend to be or the chip stocks tend to be incredibly forward looking, and they are prognosticating an incredible, incredible second half. Now, if you listen to what t I said on the call, that is likely slower to materialize,

potentially lower in magnitude. But if you look at Skienix, which reported earnings last night, They're optimism is actually magnifying. So they're starting to see strength potentially as early a second to second quarter and in the second half. My problem with the chip rally that we have seen so far from December to day is the magnitude of the

rally and how quickly it's come by. Right, So if you look at the earnings per share growth for the next two months in the socks um the Philadelphia Semi Connector Index, it's projected to be about seven percent um. And if you look at the price earning stratio of that same index over the using the EPs of the

denominator there, it's eighteen times my my problem. And when you break down the components of that right, So, if you look at in Video, for example, which has had some um structural issues in the last three months, earnings for twenty nineteen or its fiscal twenty twenty have come down. If you look at m D one of the better ones, it's earnings have only gone up eight percent. If you look at n XP three three month earnings for down

eleven percent. So you've had a whole host of these companies where the shares have rallied dramatically, so thirty at least, and the earnings for caunty or nineteen has gone down somewhere in the vicinity of five to so. So this is exactly this is fascinating, fantastic numbers to put to this. Basically, the performance is not matching the optimism. So what could the chips sector be looking at? Fundamentals better catch up. That's the bottom line. Fundamental is better catch up, and

if they don't, we're going to see some adjustment. It's sort of you know, blow the blow the bottom out from under them and just watch them, watch them fall or I mean, the big part that has been missing in semiconductor demand is one is the handset cycle is waning a little bit. We all know that the magnitude of the handset cycle weakness is something to be considered in the second half. Offsetting this is the impending strength from Amazon, Google, Facebook, Microsoft, where the CEO went to

my alma mater engineering school. But that's a separate issue. Um, So this cloud company's server strength, that these cloud companies server strength is the has been the missing piece of the demand puzzle. Everybody's expecting that to come back in the second half. It's a substantial portion of CPU consumption,

memory consumption, um, solid state drive consumption. It better come back, and better come back in space, right, So, Dave, I think what I'm hearing from on it is maybe these semiconductor stocks may have gotten a little bit ahead of themselves, but the tech earnings so far have been pretty darn good. Well they have, and you have an interesting contrast within the group today. I mean, I mentioned Zylenks, the way

the shares are taken a beating. On the other hand, you had numbers out late yesterday from LAMB Research which is in the chip equipment business. They went over well, the stocks up almost six percent. It's going back and forth with Facebook for the biggest game on the day in the S and P five hundreds. So you know, it's an interesting kind of contrast that's showing up within the group on and on twenty seconds here, we didn't really hit on Intel. How important is Intel with respect

of their earnings? You know, Intel's is a little bit of a sleeper here between Intel, aim Ding and Video. We like all three companies, but for completely different reasons. I think Intel expectations are relatively low. Um we actually think they could really do well with PCs and the

data center in the second half of the year. And on Street of Us and Senior Analystic covering the semi conductors in tech hardware space for Bloomberg Intelligence, Staviles and Bloomberg Stox editor joining us all here in our Bloomberg eleven three oh studios. The question is in how good were Tesla's reported earnings yesterday? It was how terrible were they? And to answer that question is David Coodlag CEO and Chief Investment strategistic Mainstake Capital Management, overseeing about two and

a half billion dollars from Michigan. David, thank you so much for being with us. Tesla reported earnings that were below already very low expectations and talked about raising capital even after Ellen Musk has said that he wouldn't need to raise capital. Shares down two point and that's it. What was your take on these earnings, Poles? Yeah, I was surprised even at at how big a loss it was going to be. We had consensus estiments at about sixty nine cents a share for share, and uh facts

that had a little bit of a dollar. But when it came in, it, uh, here's three dollars per share loss, even more than we thought it would be. Worse than consensus estimates. It was really a miserable quarter all the way around. When you consider the news we got on deliveries earlier in the um, earlier in the month, and now what we thought would would adversely impact earnings. Uh we this is this is definitely a very bad quarter

for Tesla. So, David, it seems like Elon Musk is kind of on the earnings call opened the door just a bit as it relates to an equity capital raise. What do you think is the outlook that does this company need to raise money? How much did they need to raise when did they need to raise it? Well, they do need to uh to raise capital. And they talk about having about two point two billion cash on hand, but if you take away customer deposits, that falls below

a billion and a half dollars. Uh, they are burning cash. You know, they went from cash generation in the latter half of the year, the latter part of the year back to a burn rate near a billion dollars in this first quarter. And uh, you know, they thought they would have cash coming in from uh this you know, increasing sales of the Model three along with the stained sales of models and Model X. That hasn't happened. He's calling for uh eighty or nine to a hundred thousand

deliveries in the next quarter. I think he's dreaming when you look at what the deliveries were in the first quarter. So the cash isn't going to come from sales. They're going to have to raise cash. It's an inevitability. So here's my question. One analyst and I have over what Bush said that Tesla's quarter was a top debacle, one of the top debacles ever seen in its two twenty

years covering tech stocks on the street. I'm just wondering, given how scathing people have been in their assessment of these quarterly reports, why are the shares down only two? Um there? I mean there are some there's a following for Tesla that I think some real believers in the stock. There is a you know, we've seen this floor around that two from a technician standpoint, quintuple bottom, whatever it may be. Uh, we've seen of Florence Florence stock price

around this level. But you know that was uh in after market trading yesterday. Today we're seeing the shares down a little bit further. You know, we also didn't see the shares change much on Tesla autonomy day earlier this week, our share price change much. So I think we've got some things unfold here. He did come out, you know, in the earnings call with some guidance that was very positive. And remember how this goes, and this is how we

play the stock. You know, when whether we're whether we're buying puts or outright shorting the stock and then covering later, Elon can bid up the stock on these claims and these promises of what he's gonna do he made some bold claims in this earnings announcement about that all the hardware is on the cars today for full autonomy, uh in a year from now, but for level five autonomy. He's made bold claims about the deliveries that they're going

to make for the remainder of the year. UH, that they're going to be a small loss in Q two and then profitable in Q three and Q four. I don't think they'll have a profitable quarter this year, but if you believe the claims that he's making, there's hope. You know, there's hope in the in the stock price, and it is trading near its low. So there are those that think it it might have a chance to rally from here, uh, if not right away, later in the year, so they Let's switch gears a little bit

to Ford Motor Company. The reporting coming up, and I know you've mentioned in the past, I think this first quarter announcement and guidance are arguably the most important in the past five years. Why is that, Well, you know, let's compare and contrast. Now we switched to you know, a company that's really doing a lot of UH has

had a very good first quarter. UH. You know, Ford has their their suv and truck sales really did the best among their competition when you look at Toyota, GM, Ford, Uh, they really trounce the competition in terms of those sales,

which are the high margin vehicles. The other thing that that Ford suffered from over the past year really since Jim Hackett has been there in leadership position, is is that messaging, that communication, that articulation of the vision of you know, there was the restructuring plan there, multibillion dollar restructuring plan. What is the detail. We've seen some of that more recently with what they're doing globally, what they're doing domestically, also their vision for Auto two point out

or what we call the future of mobility. And you know we now know the flat Rock plant where they're investing eight hundred million for autonomous vehicles, and the hiring of Tim Stone as the CFO, who comes from the digital community, that signed that they're moving to a new age company. There's just a lot of things, you know, very good performance and what we refer to as the legacy business trucks and SUVs that the high margin vehicles.

They're the best stock performance among the Detroit three. If you will in the first quarter in and beating the S and P five hundreds performance as good as it was. And then you look at the detail we want to see on their restructuring plan and the detail on the future mobility that's coming together. We're seeing what we want to see. Wall Street investors seeing what they want to

see out of Board. Now. If they maintain the momentum, it's gonna be a very good year for Ford in a in a real turnaround compared to kind of a tough and past couple of years. Got it, David Couldla thank you so much for joining us. David's the CEO and chief investment strategists for Mainstay Capital, joining us on the phone from Michigan. Well, right now, traders are pricing in the high increasing likelihood of a FED rate cut

in the near future, perhaps even later this year. And as they do so, our Bloomberg opinion called noists are trying to figure out what the FED should do in the next downturn because they don't really have that much ammunition. One proposal by municipal bonds, and that comes from Brian Chapatta, who is a Bloomberg Opinion calumnists. So, Brian, why was that the solution that you see is something that is potentially attractive for the Federal Reserve. Yeah, so, I guess

I got a lot of feedback on this. So at first of all, the caveat is that if it's another recession and the and the FED uses all of its ammunition as it has in the past, it's done the rate cuts, it's done the typical kiwi and there's still issues, what do you do? And my idea was turned to the muni market, because you know, states don't have the ability to print money. You know, they have to implement austerity measures during recessions, and that can really slow down

economic growth. You don't fund infrastructure, you miss payroll, you underfund your pensions. Those are all really bad things that affect main street. And so potentially using the FED as a tool to extend a lifeline to these states, give them a little influx of cash that they'll eventually pay back when times are better, could be a reasonable way to jump start the economy, uh, during a recession. So historically, just give us some history here, the federal government generally

has not done this. Correct. Yeah, well, that's part of the problem is that the Federal Reserve Act prohibits purchasing communies that are longer than six months, so they could in theory do some real short term uh purchases immunis.

But if you wanted to actually do something that would be a little bit more sustainable and do a little bit more than just you know, a really brief thing, they'd have to unbend the Federal reserve at This would be somewhat challenging though also from a who's your favorite child kind of point of view, right, I mean it basically ahead of the decide which municipal bonds to buy,

which projects to finance. Given the fact that there are thousands of que SIPs, this is a very a using credit market, uh, you know a lot of small issuances, and you basically have an active portfolio manager buying munis at the federal reserve. Yeah. Well, my idea was sort of,

you know, keep it at the state level. And as far as precedent goes, you do have the European Central Bank going out and purchasing debt of various sovereign countries within everything and anything, yeah, right within it, with it within its purview. So I mean there is precedent for you know, effectively you know, setting ah, you know, a standard and going out and doing it across variety of credit ratings, uh and sort of credit worthiness. So uh,

that was the idea. And obviously, um, you know, the muni markets on fire right now, so there's no reason to to do it yet. But this is again sort of talking about hypothetical down the road if we face some sort of uh, you know, problematic recession that that typical Kiwi buying treasuries won't get us out of. So is there any support in Washington or the other any folks in Washington or at the FED thinking about this

kind of move? You know, you hear about this every once in a while, because I did go back and see if this was proposed before, if I was, if I was the very first person, and sure enough, you know, you go back to you know, things like that. You know, there was the Build America bonds program, which was more of a of a federal stimulus um. But I think the question is sort of is there a political appetite?

You know, the joke about Infrastructure Week is that you know it never comes because there's never this push to actually fund infrastructure, even though presumably it's a bipartisan issue, so uh means to be seen exactly what the appetite is in Washington. You mentioned real quick that muni's were on fire. We have seen record inflows into many funds. Why.

I mean, I think it's pretty clear that right now the cap on state and local tax deductions is really making people realize that if you want to lower your state income tax rate, there's a really easy way to

do it, and it's buying muni bonds within your state. Uh. This has always been an option to everyone, but before if you had a large state and local tax bill, you could deduct it obviously from your your federal taxes, which means that you know, it wasn't so onerous, um, but now you're effectively, uh, you know, getting getting penalized for that. And so munis are an easy way to

to reap some income. And I mean the rates are so low, especially relative to treasuries on munis, it's it's a real question of how long this can keep going on. And but so far, so good, right, very good. Branch of Petta from Debt Markets Commas for Bloomberg Opinion. He joins us here in Bloomberg. Gonnactor Broker Studio Brian Thanks so much for that not whole idea. 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. Paul Sweeney, I'm on Twitter at pt Sweeney. I'm Lisa abram Woyit's I'm on Twitter at Lisa abram woits one before the podcast. You can always catch us worldwide on'm Bloomberg Radio