See Tesla At $88 By End of 2019: Vertical's Johnson

cigar on a comedy podcast that he was on. That's not although also to senior executives both stepping down, including the head of HR as well as the chief accounting officer. Not great shares down more than six percent, They've been down all ten percent or more than ten percent at one point. Let's bring in Gordon Johnson, Managing director and Alternative Energy Metals, Mining and Equipment Analystic Vertical Group in

New York. Gordon, is this the end or is this just sort of another chapter in the ongoing saga of a very non traditional chief executive officer? But yeah, I mean, we don't know if it's the end um, but you know, we have a very uh draconium view on Tesla's outwork from a fundamental perspective, but we think lately it's more important to a lot of the investors um and the stock the perception of Elon Musk. And what's interesting is the chief accounting officer who we know left is leaving

the company. They actually found this out on the fourth um so that was released in the eight k. So when Elon Musk went on the podcast yesterday, he knew um that his chief accounting officer was leaving um um and uh, you know, decided to to as you as you know, to take a puff um. So I think that um, you know, as his credibility comes under more scrutinty, we think that's actually more important. We think it's wrong, but nonetheless we think that's actually more important UM to

the stock near term. Gorton Johnson. Is it possible to imagine Tesla without Elon Musk? Uh? Yes, I think it's possible. But I think if Elon Musk leaves, I think a lot of the enthusiasm comes out of this stock. I mean, think about this, Tim, you you know this well, you've seen this, you know in your years of uh you know, coverage. I mean, the chief accounting officer was there that lest one month. He's seen the books, He's seen things we

haven't seen. Look, we highlighted on your show him that we questioned Tesla's accounting and specifically um you twenty seventeen and their Services and other segment. The revenue was essentially fat flat, but the cost of good soul um in that segment was up two hundred and sixty six million seventeen up only sixty six million. And the point is, we believe Tesla maybe shifting cost a good soult out of the automotive segment into the services another segment that's

artificially boosting their their automotive margins. But this guy seens stuff we aren't seen, right, the stuff that's not disclosed, and he leaves less than a month with a ten million dollar grant package on the table that he walked away from. Question did he see well? And to be clear, he did point out that this was not because of some major accounting problem that he was leaving, so he was specific about that. But you do raise a good point, which is he did see a lot of things that

we have not seen, and he chose to leave. Right now, we're looking at shares that are about two hundred and sixty two dollars, where do you think they ought to be given this backdrop? Our price target at the end of eighty eight dollars, and we think that's where the

shares are headed. Keep in mind, Elon Musk has roughly thirteen point eight million shares treads against debt that Tesla has, and we don't know the strike price of when he has to effectively sell those shares, but when he does, we will see those those corn fours and that'll be yet another uh negative data point. Real quick though, I'd love to get your sense of whether today's news lowers that target further or it's just more noise confirming your thesis.

We can't. We can't lower our target on Bloomberg Radio. But what I will say is, um, you know, you look at the competition that's coming, right the Mercedes car that was unveiled. I think it's the e q R that's unveiled. We're going to the Audi unveil later this month in September. And people keep asking the question, have you driven the Model three, and no, we haven't. We've

driven a Model lesque um. But when you look at the guys who have driven the Model three and then they go and drive the Jaguar I pace are the Audi tron Um. They're saying that the newer cars um are much better. Um. And we're gonna we're gonna go drive a Model three this weekend. Uh. There's you can drive a jag warre I taste. There's one in Manhattan jag War where you can drive. We're going to do that. So we're gonna we're gonna experience it ourselves. But I

think that this company has major problems, major issues. Uh, and it's all out there in the open. And I think that, you know, some of the things the CEO is doing um UM, you know, are certainly denting further his credibility. And as we stated, I think that's more important. We think that's more important to the stock than even

the fundamentals. We don't think that's right. We think people should look at the fundamentals, but we think people are investing this for Elon and Elon UM you know, is doing some questionable things, and I think that's going to weigh all the stock further. Just give you about the twenty seconds here, Gordon. If you're a fund manager and you are a long testleas stock. Do you think you're

exposing yourself to potential lawsuits by your investors? Absolutely. You have a CEO who said funding secured, more importantly, said all that we need now is a shareholder vote that clearly was not true. You have a CEO who's smoking marijuana on tv UM, where the company policy is if the employee smoke marijuana, you're supposed to report them um. You have guys like me and others out there highlighting

clearly things in the public eye that you know. I think people are just ignoring and just saying, hey, we believe in Ellen. Uh if this stock collapses, I do think that there's some risk to guys who are ignoring all these red flags. I think that's a great question and I agree with that. Pim many thanks. Gordon Johnson

is analyst and managing director at The Vertical Group. You're speaking about Tesla, Well, takeing a look at the US dollar right now, and while the emerging market currencies have gained a little bit of strength, that's not the case with the euro at one seventies seven, the pounds sterling at sixty, the Japanese yen one eleven fourteen, and strength continues despite news from Canada that the Canadian Central Banking

considered raising interest rates Canadian dollar at one. Here to tell us more is Dr win Thin, Global head of Emerging Markets FX for Brown Brothers Harriman win Thin. The relationship between the US dollar and emerging market currencies? What are the links and how do they work? First are thankfully thanks for having me. It's always a pleasure. Um. The outside performance of the US dollars this year has

really been driven by two major factors. There's to be the main one right now is still remains interest rate differentials. That is, the Fed is hiking rates, everyone else is not. Basically, of course, you have some outliers, as you mentioned Canada tightening, but for the most part developed world is pretty much in the steady state of near zero rates. Today's data from the Commas Department was I'm sorry from BLS was

it was certainly eye opener. Um. The average alley earnings is what people are keying on two point ye over a year cycle high the HYA stins June two thousand nine, So that to me tells I think tells the market the Fed is going to remain comfortable hiking rates. Um. Into next year. UM Septembers done deal December December is gonna probably close getting close to be priced as a done deal, and that's continuing to help fuel this dollar rally.

When you know, it's really interesting. We were speaking with David and Sassa of Bloomberg Intelligence earlier and he said, there is a misconception right now in the emerging markets universe that the sell off stems from FED tightening, where it really stems much more from a tightening and financial conditions in China. Would you agree, Uh? No, I do. I would disagree. You know, as big as the Chinese economy is, the World Central Bank is still the said UM.

The dollar rates really are a center as US of the benchmark for for all sorts of investments. That's out to say China doesn't have an impact, but I think the major impact is still coming from the US UM. I think the other I mentioned there's several factors hurting e M. To me, the other thing that's hurting emerging markets is the continue heightened trade tensions. It looks like the US is teeing up two more terraffs on Chinese goods.

I think has threatened China's retaliating. Um, you know, despite some good news at the marginal NAFTA, which also still seems up in the air with Canada. I think trade the trade tension story is not going away anytime soon. So the really we're seeing libering repounds to EM but I remain negative into next year. Can you explain what countries that we have not been talking about our next on your list for per apps raising interest rates in order to show up the value of their currency. Oh sure,

let's see. Well we in the emerging markets world, we already have had several UM. Argentina is obviously the biggest example. Uh. Turkey is hiking continue to hike. Brazil to me, Brazil sound to Africa, Russia. Those the three, uh, sort of in the next three in the fragile five that we're seeing Russia, South African, Brazil, Turkey, Argentina. I would say, a Russia's meeting next week. They're talking about a possible hike. UM.

Brazilian rail at the Central Bank. Um. Uh, it's been dubblished, but I think to me, you know that with the rail remains on the pressure, it's gonna have to consider a rate hike to Analysts are saying no rate hikes three year end, but the cd I market, that's the fixed income market in Brazil is pricing in rate hike as soon as this month. So the market split on that,

but I think Brazil will have to hike. South Africa, to me, is the puzzled um they've they've rarely hiped rates to defend the rand in past episodes, and we had a shocker contraction gdp Q two earlier this week make it more reluctant to high rates. So you know, I think South Africa gonna it can be the outliers as the one that's standing doublished even though the Rand

is under pressure. Do you think, just talking about this from a liquidity standpoint, a technical standpoint, do you think that we've seen the bulk of forced selling or has the weakness that we've seen so far just been the beginning and not really including that much in the way of outflows. Oh well, I'll think I think the people of economists answer and say, I think right in the middle. I think, you know, very different. I think we've gone

through a lot of selling. I think you know, I wouldn't say we're early on, but I don't think it's we're by any means over So I think we're still sort of navigating. I hear talk about how all evaluations are great, but you know, facing you know, e M assets, we're really inflated by the zero rate policy that we've had after financial crisis, and we're still repricing um those assets. As I mentioned that the ECB hasn't hiped yet, you know,

they're they're starting normalizing probably next year. UM, So there's still a lot of sort of repricing and liquid is gonna be taken away in the coming quarters. So I would say let's let's remain cautious on em. Thank you so much for being with us. Dr Winton. Dr Winton, Global head of Emerging Markets f X four Brown Brothers Harriman.

Supreme Court nominee Brett Kavanaugh has been very much in the news as he speaks with senators in hearings on Capitol Hell this week, talking about his past views, previous letters he's written, and how he would view a president in terms of potential criminal charges joining us now. Kimberly Robinson, Supreme Court reporter for Bloomberg Law. Kimberly, let's just start off with this idea that it seems very unlikely at this point that Supreme Court nominee Brett Kavanaugh will be

derailed in his ascension to the court. Is that true? Well, that is true, and that's because Democrats just don't have

the votes really to block his confirmation. Their best hope seems to be to pro choice Republicans, but so far they seem to be leaning towards supporting him, and it's likely that they have to pick up a few more Republicans because, uh, several Democrats are likely to vote for him, given that they're facing really tough reelection battles, uh in the midterm elections in states that went for Donald Trump

in the last presidential election. Well, Kimberly, so why are they doing this, because it's not as if, I mean, based on what you just described, they're not convincing anybody that was unconvinced. And are they basically preaching to their own choir? And why do that? Because it certainly seems to have ignited a lot of criticism from those areas of the political spectrum that may not have been paying

attention to this in the first place. Well, we are seeing really unprecedented levels of protests, not only from senators themselves, but also from audience members. I suspect that Democrats are doing this not in order to trip up this confirmation battle, although I'm sure they'd like to do that, but to

fire up their base for midterm elections. You know, traditionally Republicans has cared more about the Supreme Court, and this is the way to highlight for Democratic voters that you have to vote in these midterm elections if you want to have to say, and who is going to be the next Supreme Court justice. So let's talk about who Brett Kavanaugh is. What are the views that people must object to here? Well, I think people, uh we've seen are really pressing on his views on abortion, on gay rights,

and on affirmative action. And these are all issues were just as Kennedy, whom Kavanaugh would be replacing, actually crossed over and voted with their liberals. And so people are watching these because they suspect that when Kavanaugh is confirmed to the Supreme Court that these areas will switch shift quite a bit. Is there any information that you believe that exists about Brett Kavanaugh, either his opinions or his time in the Bush White House that our earth shaking

and that we have not been privy to in any way. Well, there's probably not a lot of information that we don't know. We've seen over the last couple of days a few documents come out that have been sort of described as bombshells, but they described views the Brett kavanol that many people suspect that he has, although these these documents seem to prove it um. So we're not learning anything new about Brett Kavanaugh. There are really no new concerns. It's just

raising these concerns. The voters are aware of them, all right, So Kimberally, let's take a step back and just talk about conservative ideology versus liberal ideology within Supreme Court law. For example, antonin Scalia, who is deceased but who is a long time very traditional Supreme Court or conservative Supreme Court justice, was very good friends with Ruth Ruth Betty Ginzberg, who was a very liberal Supreme Court justice. They disagreed

in a lot of things. What are some of the fundamental differences in their ideology And does Brett Kavanaugh fit in just the conservative classification or does he depart from that? Well, I think one of the major differences that impacts Americans most significantly is how liberal versus conservative justices view constitutional

interpretation and the constitutional rights that Americans have. And we see, uh, conservatives really home close to the text of the Constitution, seeming to grant fewer constitutional rights to individuals, and on the opposite side, liberals, uh, having a more expansive view of the rights that individuals have. Brett Cavanan does fit

that bill. He's called himself an originalist, and that is the kind of person who you know, looks at the past and what the public meaning was of the rights that we have when the Constitution was passed, not what we might want them to be today. Kimberly, the American Bar Association committee that takes a look at nominees for the Supreme Court says that Judge cab and A has the highest rating and that he's well qualified. Is that go ahead, I beg your pardon the American Bar Association. Uh,

they do this for every judicial nominee. Uh. They gave him their highest qualification of well qualified. But when testifying today, A B. A representatives wanted to emphasize that they don't look at his political ideology. It's really just a peer review of individuals who have worked with a judge and who have argued before the judge. All right, so that

he is qualified. That's right, they said he was qualified. Um. But it's important to note that you know, every Supreme Court justice and modern history to come before the justices, um, and who have gotten on the court have been marked qualified by the A B. A. So it isn't a signal of how they will vote once on the Supreme Court. Right, Okay, very good. Thanks for clearing that up and being on watch for us as always. Kimberly Robinson our Supreme Court

reporter for a Bloomberg Law. And you can of course, uh follow Kimberly on Twitter at Kimberly Robinson that's without the O at the end. And also you can follow Bloomberg Law on Twitter at a Bloomberg Law. Wages in the United States increased two point nine percent. The economy adds over two hundred thousand new jobs. Here to tell us more about the economy is Chris Lowe, chief economist at FTN Financial. Chris, always a pleasure to have you with us. Uh, maybe you could just do something for me.

Let's just pretend for a moment that you were born after the financial crisis, of two thousand eight, and you were to take a look at the state histics that describe the current state of the US economy. If you were to do that and then take a look at the level of interest rates for US treasuries, would you say that it makes sense or would you say that

there's something that doesn't that doesn't shibe. Well, it's certainly if you think about it in terms of four percent job four percent employment growth, four percent unemployment rate, historical norms. Uh yeah, interest rates at these levels are just remarkably low. But if if you as you said, we're born after oh eight and and that's the world you know, then

then they make perfect sense. And in fact, John Williams just yesterday talking about no sign of of financial excesses, credit growth actually is tame by historical standards, is extremely low, and in that sense, I think interest rates are perfectly reasonable at these levels. The differences that Americans are just much more reluctant to borrow than they have been in

the past. So given that backdrop, John Williams also said some other things, particularly about the yield curve, saying that they're going to continue to hike rates as they see fit, even if that means inverting the yield curve, because it doesn't seem to bother him. So do you expect more rate hikes to go, especially after this pretty good jobs report? I think so. I think September and December we're pretty much in the cards anyway. That the issue was whether

they were going to pause in early. With faster wage growth, the hawks are going to be emboldened. Even Williams who had some doubts yesterday about the wage growth mystery, this report should answer some of those doubts and and maybe settled the mystery for him. Uh. It wasn't just that wages rose in August. They were revised up in June and July as well. Job wage growth over the summer was terrific. Average weekly earnings, which reflect both the the

hourly rate of wages but also the work week. We're up at a three point to six pace over the summer, which is the fastest in the cycle. Uh, you know, wages are heating up. But a little perspective is probably a good idea to given the age of the expansion, wage growth at this point. Back in in the two thousand's expansion was four In the late ninety it was running at three and a half to four percent, and actually UH was in that range for about five years

with no significant inflation. So, yeah, wages are picking up, but that they're still tamed by historical standards. Nevertheless, we better see some productivity gains in the next six months or that the FED is going to have to continue to tighten. Chris Lowe, do you believe that the Federal Reserve will taken to account any of the havoc that has been wrecked upon the emerging markets as a result of the strength of the US dollar. Absolutely, I do,

but not until it spills over into the US. I think they should give a bigger weight, frankly, to what's happening in the emerging markets because it's it's pretty clearly a result, at least partially of their dependence on US dollar financing, on you know, the difficulty of raising cash in dollars now that the FED is draining liquidity UH. And really, if you think about inflation, it's a global phenomenon. Um I. As the FED tightens, their goal is to

free up some capacity. I suspect it'll be pretty clear by the end of the year they have freed up capacity. It just isn't necessarily in the US. Uh, They'll there'll be plenty of spare capacity around the world, and that should keep inflation in check. Do you think that right now, people including FED officials, are too sanguente about trade tensions because right now it seems like we could get announced any day an additional tariff on two d billion dollars

of additional goods from China heading into the US. President Trump has said that he wants to do this. I am struggling to understand what the implication is for the market and whether everyone's just discounting this to their fault. I think there's a couple of things there. First, the FED is alert to this that they listed trade tensions and tariffs particularly as one of the top four risks to the US economy, so they're they're not at all asleep at the switch. I think what makes this so

difficult is that predicting the outcome is extraordinarily tough. Uh. You know, just days before we reached a trade agreement with Mexico, for example, the papers were reporting that an agreement was unlikely. Uh, things can change quickly. As for the trade fight with China, I I do think that's only going to get uglier, and UH I suspect it to real threat to put some additional perspective on that.

Looking at the employment report this morning, the diffusion index for manufacturing has declined sharply in the last three months. UH that they were broad based losses in manufacturing UM industries in August and it's it's not clear, but it likely has to do with a slowdown in car sales. So manufacturing is looking a little more vulnerable now than it was just a few months ago. And obviously if we have big increases in tariffs here and in China,

that's going to further way on on their prospects. Chris low thank you so much for being with us on this Job's Friday. Chris Lowe, chief economist at f t N Financial in New York. 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 abramowits one before the podcast. You can always catch us worldwide on Bloomberg Radio.