This is the Bloomberg Surveillance Podcast. I'm Lisa Abramoids along with Tom Keen and Jonathan Ferrell. Join us each day for insight from the best in economics, geopolitics, finance and investment. Subscribe to Bloomberg Surveillance on demand on Apple, Spotify and anywhere you get your podcasts, and always on Bloomberg dot Com, the Bloomberg Terminal, and the Bloomberg Business.
Apple's Catshat with List Young, head of investment strategy at so Far, Liz, any reason to believe in good morning, It's always great to catch up with you, you know that. Any reason to believe that this bond market stock market correlation continues in the way it has done over the previous month over the next three months, Well.
It's certainly possible.
I mean, I think twenty twenty three has shown us that anything is possible. So it's certainly possible that the correlation remains positive in the sense that we continue to see yields come down. Stocks are celebrating that, particularly growth year stocks, which I think is a rational move, at least initially. So I do think that the correlation could stay positive for a little while. What we're looking at here, especially into twenty twenty four, is that we've been wanting
cooling in a lot of this data. We've been wanting the cooling and inflation. We've been wanting a labor market that gets a little bit more imbalance. So we've seen some of that data, things like continuing claims on a steady move upwards since September. We know that the manufacturing economy is still feeling some pain. We're hearing data out of the consumer that they're pulling back on spending a little bit.
So we've wanted this cooling.
The question into twenty twenty four will be can we stop the cooling before the economy tips into contraction and makes us all nervous If we start to get data that gets too cool too quickly, that's when that correlation between stocks and bonds breaks down. Where I think you see bonds rally, so you see yields continue to fall because people got afraid, but stocks also come down in tandem.
Liz, you work for so far, and you work on the investment wing of it as early on the financial technology aspect that caters to usually younger individuals who are trying to manage their finances in take out credit. I'm wondering, though, what you make from an economic and investment perspective of people who are doing more buy now, pay later, who are increasing their credit card bills, who are increasing on their delinquencies and their defaults.
It's certainly concerning and it's something that I've been watching for the last few months. We've seen delinquencies tick up so far in just the subprime auto loan sector, but you've seen, as we all know, credit card debt get to really high levels. Hasn't broken yet, hasn't been an
issue yet. But the thing about where we are this time of year, we talk a lot about this being a positive time of year for the market, and as we all know, the Santa Claus Rally a possibility later this year, and we've got holiday spending going on, and so far the data from holiday spending has been maybe
a little bit higher than expected. However, what happens in January in February is that if consumers were doing that holiday spending on credit so things that like buy now, pay later or on credit cards, the bill comes due in January and February. Now, this happens every year, but this year could be a time where we're seeing that bill come do and delinquencies tick up because consumers have been using buy now, pay later in larger quantities than they did last year.
How does that affect your vestment strategy? I mean, basically, are you looking to January and February to see those increase in defaults in order to get more bearish and say that maybe the bond market could rally more. But that's going to be a negative when it comes to equities.
Well, so, the Bowl case and a lot of the optimists have been hanging their hat on the strength of the consumer, and the consumer has remained strong. There's obviously appetite to spend, there's appetite to travel. We're seeing the consumers still get out there and spend their money, both in stores and online. But over time, if the labor market cools, or if consumers really are feeling the pain of inflation and recognizing the idea that inflation has stopped
growing as quickly, but it hasn't come down. So for consumers to really get some relief, you would need some deflationary prints and we haven't gotten those yet. So if the data does start to suggest that the consumer has pulled back or the labor market is cooling to a point that's going to cause the consumer to pull back, then that is going to be negative for equities, particularly
from these levels. So watching that on a sector basis, though it may not be a wide swath of a draw down, right So if yields are falling, tech stocks probably still can do okay in that environment. But then you see the pain on things like consumer discretionary stocks. You see the pain on cyclicals because right now I think the market is in this place where we're not sure if we're going to have a cyclical expansion or not.
We haven't confirmed in one direction or another, and we're sort of waiting.
To see super difficult to make cause on this market. You mentioned sectors list, so let's finish there. What are your favorite sectors gone into year enda beyond?
Well, Look, as yields fall, I think for the near term at least tech stocks still can hold up well. This is also a period of time after the last hike and before the first cut that stocks.
Tend to do okay.
So I don't necessarily see a huge draw down unless there's some exogynous shock.
But going into twenty twenty.
Four, I think that we need if the bowl case comes true, we need some broadening out in the equity market. I am still nervous about a draw down. I am worried that we're going to get data that cools it too much, so I would be cautious in cyclicals, so I would still be looking at things like consumer staples. I think the utilities trade is okay if you're looking
for growth, but you don't want that rate sensitivity. I think healthcare is a good place to be, and I do think that we see a resurgence in energy stocks because supply will continue to get cut.
Interesting final point, let's thank you. It's going to catch up with you as always this young there of so fine the sequity market.
Lauren Goodwin joining US now economist, director of portfolio Strategy at New York Life Investments, Director of disinflationary Nirvana narratives.
Do you buy it?
I don't buy it. I think we're sitting there right now, but that it's a stop on the train towards recession. And the reason for that twofold really one is the long and variable lags of monetary policy. We're sort of right on time for an average recession timeline from the
first FED rate hike. But the other is that if we did get a cut in March or May, and inflation wasn't falling precipitously, we weren't heading towards recession, then I think we'd see financial market conditions ease pretty significantly. And chairpal and other FED members have been very insistent that they don't want to see that. That's a recipe for likely a reacceleration of activity and makes the inflationary environment more sticky.
So when we take a look at where you want to play the best returns for sixty forty going back to nineteen ninety one, do you lean in or do you de lean against it and say someone's got to be wrong here.
Whoever it is, I'm going to move against.
Wells as much as inc that we've spilt, I'm a part of it. As much words we put out there about the soft versus hard landing debate, neither side has been the winner for investors all year, and I expect that to be the case for the first part of twenty twenty four as well. What I mean by that is the only thing we're really certain about is that the market is facing uncertainty, and so landing strongly in one camp or the other isn't likely to be the answer.
It's quality, and I think we're seeing that over the course of this year, investors leaning into profitability, to dividend yields, and to areas of the market where investors expect that no matter what happens in the first half of next year, they can build some resilience.
So went in doubt by Microsoft. Is that basically what you're saying. I mean, essentially, that's basically been the market narrative so far, or then not the market narrative. This is what people are saying, we don't know what's going to happen, We'll just buy big tech and sit and wait.
It's a part of the story. One of the things I think will shift over the course of twenty twenty four specific to the tech narrative is that the excitement around productivity and the new technological developments we're getting from the artificial intelligence trend have been centered in the foundational layer of tech, not least because that's also where consumers
spend money. As the consumer experiences the sort of dissonance of high price levels that you've covered so well, I expect that more of the story around tech will actually expand into the digital infrastructure and the application layer that get built on top of the foundational layer of tech.
Which really is sort of a part of the difficulty understanding what's going on because there are these sort of secular overlays like artificial intelligence, like weight loss drugs that are put over a lot of uncertainty and frankly a lot of underperformance of other rank and file companies. We saw, for example, over the past week, pretty big inflows into large cap US stocks. We saw outflows yet again from
the Russell two thousand. What do you make of that that basically small caps are going to be left for dead in a sense and continue to underperform dramatically even with some sort of settling out.
In this narrative, small caps as the economy slows, tend to underperform because they don't have the overhead, the administrative overhead that helps them to digest higher rates, higher cost the way that large caps do. So it's not necessarily a matter of sector, but one of business model, one of truly size. I think there are a couple of exceptions. The tech sector is one of them, where profitability can
exist in mid and small caps as well. But as we move through into Q one, I expect that the preference for frankly defensive allocation plays large caps is one of them defensive sectors. I really like infrastructure equity there. I think they're going to continue to gain ground because we're going to see more evidence that the data is slowing.
Isn't the best defense just cash?
There's there are benefits to cash when you're expecting a major fallout in the market. But the one of the things that I think is so challenging about cash right now is that we see such strong opportunity to harvest yield in sectors of the economy that even if we see recession, which I expect, and even as spreads widen, you can still gain meaningful yield uptick in, for example, the high yield bond market.
Funny that you say that high yield bonds had the biggest four week inflow going back to June twenty twenty. This according to Bank of America Michael's Hartnett. This to me highlights exactly what you're talking about. A lot of people are saying, we don't have certainty about where things are going, We're.
Going to pile into cash.
Seventy five billion dollars going in there in the past week, But we're also going to pile into income because we know we're going to get something. Are you seeing sort of the reversal of the bond stock dynamic over the past two decades or really, bonds are your equity drivers in some ways your income plays and then you can sort of shoot for the moon on the peripheries with some equities.
Yes, that is what we're seeing. But I think what's specifically interesting about high yield is that we see investors and we're doing the same taking equity like risk in high yield because you can harvest a meaningful coupon on these bonds while acknowledging that FED programs early in the pandemic made the credit quality of this sector much more
interesting relative to past economic cycles. So even if you expect spreads to widen prices to fall as the economy stumbles, you can still make up for it with the income that you're able to capture from that sector.
So is that your highest conviction heading into next year? Can you give us a sense of kind of how you're framing at a time where there isn't a lot of conviction.
Yeah, So I want to be clear that even though we have a recessionary call in the first half of the year, I don't think that's particularly pessimistic. I think that's an optimistic scenario for the economy allows a reset. I also think that we're going to see risk assets continue to do well for the next couple of months. We're doing is taking advantage of this sugar rush while we have it to rebalance into themes that we think will work particularly well. We've talked about a few of them.
Defensive sectors are really like infrastructure equity. We like high yield, and I do think that there's room to run in duration as well.
Do you think that the cyber truck is attractive?
I will admit that I just saw it for the first time after hearing John say this morning it looks like a kindergartener drew it, okay, and I could not disagree.
Okay, Well, it's weird.
Have you been hiding under a rock?
I think it's been out there.
Lauren Goodwin, thank you so much for being with us. Wonderful to see you. Lauren Goodwin of New York Life Investments, thank you, and she, of course will say, no, Lisa, you've been hunded hiding under a rock because I haven't seen what movie? Haven't I seen die Hard? Die Hard, which I guess is a bad thing, and that it's.
A Christmas movie.
Said, why is this debated? He agrees, Okay, so look on this on social media and just put in die Hard and you'll see this enormous debate goes on every year.
It's real.
It's a real debate because check out social media. I will check out social media and I will watch the movie. Thank you for being with us at Lauren.
Nadia, Martin wickensjoin just now the director has fell in capital Nadia. Let's start there. This word voluntary. How important is that word voluntary? At opek plus, I.
Think the market finds the word voluntary very problematic because it means that the group did not manage to together agree that this is what we actually have to do, and this is why the oil price has not strengthened since it was announced.
What kind of follow through do you expect off the back of the announcement? Then we know what the market is preoccupied with, a single word. What are you telling clients?
Well, then on the margin we then see that there's around three hundred thousand barrels per day coming less from UAE, coming less from Kuwait, and one hundred thousand barrels per day coming less from Saudi Arabia. So that makes Q one look slightly better and call it a balanced market, right, But it's only a Q one cut and it doesn't really change the picture. And again, you know what it was different about this so pickplus meeting is that it's not a long duration cut.
Right.
Last year they made it a long duration and now they're only looking at three months forward. The expectation for them is of course that we will start to see demand pick up and then we will see draws, especially into the second half next year. But what we saw throughout this quarter is a lack of draws does not make the oil price rally, right, and we're going to see the same in the first quarter.
We believe there's a story Nadia on the Bloomberg talking about how algorithmic traders are confusing all of this so that we can't really get the same kind of signal from oil prices because of this. Do you buy that or do you think that oil prices are sending a very strong signal about growth globally? But also particularly in China.
Well, I think oil prices are okay. You know, it's not a low oil price, it's not a high oil price, it's a healthy oil price. I think what we have to get our heads around is the fact that China has changed as an economy, right, and so we're not going to see the levels of GDP growth that we.
Were used to.
But probably where we are this year, things will continue to go on year over year. Of course, this year we saw one point five million barrels per day year on year growth in oil demand, and our view will see six hundred thousand barrels per day next year. It's probably slightly higher than consensus. But it's not only China, it's also India. It's also non oecd Asia X, China
and India that are really driving things. In contrast to the US that even though the US economy we're firm believers in a soft landing, the problem is the rise in fuel efficiency every year in the US and this is why the driving season disappointed this year and it's probably going to disappoint next year. Add into that tesla and EV purchases that is also a headwind on that demand growth.
If that's really a big driver of why prices, as you call them, healthy but not as elevated as people would exploit it would expect. How much can we see prices continue to decline as ev adoption and some of the other types of non fossil fuel economies build up.
I think the main difference there. I mean on the demand side, yes, we will see slow demand and you know, already for next year demand growth and our view is one point four million barrels per day year on year for the whole world global demand growth, right, but some estimates are already calling for less than one million barrels per day, right. I think the other aspect, though, is
the supply side. Right, is that right now we are in this still shale boom and that will continue for probably another you know, max two million barrels per day, and you know, we'll say peak US production will be
at fifteen point five million barrels per day. So when we think about the balance and prices, we will then still have strong oil prices because these long cycle investments are not happening at the pace that they have in the past given this relatively healthy oil price, So I don't see a long term negative a price path for oil and I expect actually it to strengthen over the coming years. We just have to get through this US shale being growth period.
Nadia, appreciate your view. Nadia martin Wigan there as Feland Capital computer hardware maker HP Enterprise joining the RUSS to artificial intelligence in earnings announced this week HPA, saying it expects softer demand for service and storage, but it's hoping it's new AI venture will offset the slowdown. The plan including a bigger partnership with chip giant Nvidia and Oni and Nery, the CEO of HPE, joining us from Barcelona where he's been speaking to customers. An tell you great
to catch up with you, sir. Let's start with that relationship with Nvidio for our audience who aren't familiar with it. Can you describe it to us and how beneficially it's going to be to both of you.
Yeah, well, good morning, thanks for having me. As you see we are in Barcelona. There's still a show going on. We hosted HB Discovered here with more than three thousand customers, and thanks again for having the opportunity to talk to you. So here a discoverer in Barcelona, we announce an expanded
partnership with Nvidia. Two weeks ago at the Supercomputer event in Denver, we announced a deep solution for what we call model developers for generative AI, using our supercomputing capabilities, plus our intellectual property in the software space, plus Nvidia chipsets and other aspects of what they do to provide a massive capability for motor developers to speed up the training models. And here on Thursday I announced an extension of that partnership for enterprise customers to what we call
fine tune those models. And that's the right time to value using our expertise as well as our services capabilities and the software to be able to deploy on premises and at the edge.
So this is a complete solution for what we call the AI live cycle.
From tree to tune into infancy, and customer has a massive reception because they want to privately fine tune the models with their data in a secure and compliant way.
It's clear your stock is benefiting from the glow of Nvidia. We can see that. I think Raymond James writing that you're getting a seat at the AI table. Can you talk to us about the pace of adoption of this technology. I think many of us. Antonio surprised by some of the guidance we had repeatedly from Nvidia that this wasn't just a hopeful story about the future, it was real and present. Can you talk to us about that.
Yeah, well, I think there's two importants, right, So the story is absolutely real. We see it in the quality of the dialogs with customers, which are now.
Accelerating the mobile training. So you think about this. At the beginning of twenty twenty three, we.
Had less than one hundred million dollars what I call accelerator processing units in our server business. At the end of twenty twenty three, we grew that business to three point six billion overs and nobs, and that was literally in ten months. And the reason why that's happened is because the technology has achieved an inflection point what is ready to be deployed.
However, our story is not just AI.
Just to be clear, Jonathan Lisia, our story is a combination of a hybrid cloud, a cloud native world, in an AI native world.
Think about it this way. Most of our data today sits in the cloud native world.
Whereas in your premise and manufacturing flows and hospitals, and obviously in the public.
Cloud, but AI needs that data.
Is one hungry for that data and therefore now we need an AI native architecture to train and find tune this model with that data and then put it in production, which ultimately is the value.
To change your processes and be able to achieve those outcomes. And we deliver all of that to our hPG platform and that's what we see a tremendous growth in a connectivity business, in a hybrid cloud business, and then obviously now in AI and we have.
A unique portfolio to address all aspects of what customers need.
Antonio. This year, we've been talking to so many people who talk about a winner takes all type of trend in tech, in particular Amazon's Aws, Microsoft's zore taking an increasing part of the market share. How do you compete at a time where people seem to be gravitating toward the biggest players.
Well, there is an interesting opportunity here because obviously the last decade, think about twenty ten to twenty twenty, it was all.
About the cloud decade. You know, the cloud for us is.
An experience, is for accelerate speed and agility across the business. And now we enter what I call the new age of insights and it's all about deriving insights.
From the data and changing the way you do business.
But that inflection point actually requires a different architecture, and therefore customers are not keen to put the public data, you know, the data and the public domain and make sure that they control that because that's the intellectual property.
And that creates a massive opportunity for us, and we think of hpgre like us, the fourth cloud is a design for hybrid, meaning you can take advantage of the public cloud, also take advantage your own premises and more and more at the edge and be able to do everything you need in a unified experience.
And that's the value that we bring to the table.
And ultimately we have every aspect of the solution stack and the partnerships.
Like we did this week with the media to give that unified experience.
We've been hearing all about consolidation in big tech. How much are some of the biggest cloud providers kind of trying to get into that market where it's basically the hybrid trying to have bespoke solutions for companies versus having the market to yourself.
I mean the market is big. I think you know we're talking about over.
A trillion dollar market opportunity from a tea perspective, and I believe the eye opens an incremental one point six trillion dollar opportunity for everyone. So there's plenty of market out there. And you think about us as a company. This year, we grew five and a half percentage revenue. We expand the gross margin very rapidly. It takes to the mix and the value will bring to.
The table, achieve record.
Breaker performance in long gap, the.
Little enity to share and free cash flow, and we believe there's a plenty of runway here.
But ultimately the winner is about all.
Delivering a simple, simple experience where technology is.
Easy to deploy and consume.
And ultimately accelerate business outcomes.
It's not just about thinking about technology and speeds and feeds.
It's about delivering that agility to deliver those of business outcomes. A thick HP is uniquely positioned with the fold cloud.
I call it hpgree lake too much tech. Let's finish on football. Are you happy that Messi is no longer in Barcelona and we have him here in America now? Antonio, Well, I'm.
Happy that missus Argentina and I was born in Argentina and I had the honor and pleasure to.
Meet both of them. In fact, I was able.
To play one time again with you with Maradona, and I.
Have to say, for us is an incredible pride.
But obviously having him in the United States gives me the opportunity to go watching more often.
Amazing. I want to hear that Maradonna story one day, Antonio, Thank you, Antonio near again if you look back at thank you sir on the latest, because four years ago, when I first saw the design for this vehicle, then I might remember this. I described it as an eight year old during the Car of the Future, just these jacket lines and it looked ridiculous. And here we are. The thing looks phenomenal and everyone wants to buy one, at least the people I speak you still.
Think it looks like your whole Druids, So it'scite to you.
But what do I know about car design, because apparently everyone thinks this is the car of the future and they want to buy it.
Well, apparently Danives thinks that you're a great candidate to get in one of those and drive.
Off the while we'll have that conversation right now, just pitching the cyber truck to me and a commercial Breakdan, It's good to see you.
Great to be here.
It's fantastic to catch up this Beast deliveries. Talk to me about how transformational this might be for the company.
It's a historic moment. I mean, it's four years in the making, and I think the reason it's important in terms of this could be another growth vehicle for a musk and Tasla. And it also just shows what's happened three one three area code GM Ford peeling back a little on EVS, Tesla is doubling down, and I think this is an important moment. And you go back over the years, many times been count out, but yet they've come out and reflex the muscles moments.
I want to talk Margins a little bit more with you, but just on the point you made bringing up GM and Ford. Are we finding out that people just want Teslas they don't want EVAs.
Look, I think that's a serious question here, because you know, wanting an EV versus do you actually just want a Tesla? And I think you're starting to see now a moderation in terms of ev demand. Now clearly Tesla has had the price war that we've talked about in China. That's definitely, you know, left a bit of a stand. But I do think from a scale and scope perspective, you look at Fisker reducing guidance again today, no one could match the scalon scope of Musk and Tesla, and I think
that lead continues to further be there. And I think that's what's happened a little humble pie maybe with traditional automakers.
Well, John Lawler was on yesterday a CFO Ford and he was talking about how there was a different audience for the initial Tesla's because it was the first adopters and they were willing to pray a price premium and they were willing to come in and they were Tesla adopters. The ones who are coming in now are looking for price value, quality, et cetera. It is a different pool or that can be pulled away more aggressively in that kind of environment. Does Tesla's margin story start to get eroded?
I think, and John talked about it. I think that's right now, that's the balancing act because if you look from a margin perspective, it's really been volume over margins in the street you know, so far that's been the right strategy. Next two to three quarters you need to see margins trough out level out here. But when you'll get cybertruck look, essentially they'll be losing let's say, thirty thousand, forty thousand per vehicle for the next year and a half.
Then it starts to become profitable. But that is the near term pain for long term gain that they need to do in what continues to be this green tidal wave.
You know, to John's point, when you're saying people just want to Tesla, I wonder how much that's people wanting to ride Elon Musk's wave and how much that was really the feeling a number of years ago. How much some of the recent high profile discussion around Elon Musk, with with his colorful interview and commentary toward advertisers, does that draw people in or push them away?
I think there's still a question there because to some and emboldens them. In terms of Musk what he represents, he's the anti that that's you know, I affiliate, you know, with the Tesla, but then on the other hand, you alienate and the problem for I think Tesla investors when you sell consumer products to the masses. You don't want controversy.
But again, Musk is Musk, goes to be of a different drum, and you see and that's you know, we saw that maybe overshadow a bit in terms of what happened at the New York Times event, the cyber truck unveiling, that's four years in the making. But at the end of the day, Musk will continue to I think, innovate and especially when it comes cyber truck.
At historical moment, what did you think about what happened this week?
I think it's one where the last thing you want to see as a Tesla bull to see something like that come and ultimately overshadow what was going to be cybertruck. But as we all know, Musk is Musk, and it goes back to what we've talked about a lot in the show when he bought Twitter, the forty four billion dollar mistake in my opinion, which now let's say x is worth five to eight billion. This is always the worry.
It just adds that tornado factor because with Musk, if you give him a mic, you never know what's going to happen. And that's part of the problem here and even though many could say, oh it's great, go get them, okay, but there's a business there. It's it's been essentially taken out with debt, so eventually that you're gonna have to you know, have to pay someone. In terms of what's happened with X.
I think you just put a dentive's multiple on X there with that valuation. But we'll come back to that another time. I want to talk about margins just a little bit more. There's a massive opportunity if you didn't have this truck to keep on pushing and squeezing four and GM. GM have come out with numbers this week basically telling us that the papermarket contract, the labor contract would add an additional five to seven five per vehicle
at Ford it's upwards of nine hundred. Does this truck complicate their effort to really put the squeeze on FOD and GM and the way they have done last year.
I think it does a little, because ultimately, when you look at the UAW debacle and the three and three era good, it's put Farley bar, it's put back against the wall, and and that add to the cost I think where they're going to squeeze them continues to really be on that forty to fifty k price points in terms of sedans. That's what they're going after. But that's also why Mary and you've seen them from Farley as well.
They're kind of come back all from the edge, not maybe going full ev where Tesla's actually going the opposite. And that's essentially what's happened right now. This is this is all Gama high steaks poker, and I think everyone's trying to figure out what must next move is in twenty twenty four.
And who it's catered to.
I mean that's another question too, because the audiences a Ford and g much more focused domestically, or as Elon Musk has a big audience in China as well. How much is the cyber truck geared toward American buyers and how much is it geared toward international buyers and.
LEAs That's a great point because look China the hearts and lungs of the Tesla growth story. It is in China forty five percent of demand. And I think what really he's focused on here with cybertruck. It's, first of all, it's showing from an innovation technology perspective, just how far they are, But the opportunity, even though it's starting in the US, it is international, it's Europe, it's China, and
I think that's really the global focus of Tesla. You look at forward, there's many that have kind of customers fought against going toward ev I'm a traditional f one fifty. I'm not going to go there. Dealers have fought against it, and they've heard it loud and clear in Detroit. Do you think it's attractive? Look the mad Max vehicle. And I remember when I remember when you talked about that in twenty nineteen. I think we talked about that together.
I believe I get it. It's on the edge, but I think it's innovative, it's new, and it's something where Tesla is not gonna go down the typical path of our other autumn makers. And that's why, you know, Look when I see you driving this in New York about you know, six nine months now.
And a passenger say, t K in the passenger seat.
It's with cyber truck. It's gonna be the roof come off, but you could be in the back as well, So it's gonna be super interesting.
Am I the only one who drives.
You are, Yeah, Brando's got to drive. T can I don't drive.
I'll get in the back and again, but Belisa could be driving. You got t K shotgun barrows in the back end.
Sleep that could happen. All right, let's get sleep. Thank you version. Because four years ago, when I first saw the design for this vehicle, then I might remember this. I described it as an eight year old drawing the car of the future, just these jacket lines, and it looked ridiculous. And here we are. The thing looks phenomenal and everyone wants to buy one. At least the people I speak to you.
Still think it looks like your old Druids, so insciting to you.
But what do I know about car design? Because apparently everyone thinks this is the card of the future and they want to buy it.
Well, apparently, Dan, I have thinks that you're a great candidate to get in one of those and drive off the lot.
Here we'll have that conversation right now, just pitching the cyber truck to me and a commercial break. Dan, it's going to see you.
Great to be here.
It's fantastic to catch up this beast deliveries. Talk to me about how transformational this might be for the company.
It's a historic moment. I mean, it's four years in the making, and I think the reason it's important in terms of this could be another growth vehicle for Musk and Tesla. And it also just shows what's happened three one three area code, GM Ford peeling back a little on EVS, Tesla is doubling down, and I think this is an important moment. And I know you go back over the years many times been count out, but yet they've come out and reflex the muscles moments.
I want to talk Margins a little bit more with you, but just on the point you might bringing up GM and Ford. Are we finding out that people just want Tesla's they don't want evs.
Look, I think that's a serious question here because you know, wanting an EV versus do you actually just want a Tesla? And I think you're starting to see now a moderation in terms of EV demand. Now, clearly Tesla has had the price war that we've talked about in China. That's definitely, you know, left a bit of a stand. But I do think from a scale and scope perspective, you look at Fisker reducing guidance again today, no one could match the scaling scope of Musk and Tesla, and I think
that lead continues to further be there. And I think that's what's happened a little humble pie maybe with traditional automakers.
Well, John Lawler was on yesterday a CFO Ford and he was talking about how there was a different audience for the initial Tesla's because it was the first adopters and they were willing to pray a price premium and they were willing to come in and they were Tesla adopters. The who are coming in now are looking for price, value, quality, et cetera. It is a different pool or that can be pulled away more aggressively in that kind of environment. Does Tesla's margin story start to get eroded?
I think, and John talked about it. I think that's right now. That's the balancing act because if you look from a margin perspective, it's really been volume over margins in the street. You know, so far that's been the right strategy. Next two to three quarters you need to see margins trof out level out here. But when you'll get cybertruck, look, essentially they'll be losing let's say thirty thousand forty thousand per vehicle for the next year and
a half. Then it starts to become profitable. But that is the near term pain for long term gain that they need to do in what continues to be this green tidal wave.
You know, to John's point when he's saying people just want to Tesla, I wonder how much that's people wanting to ride Elon Musk's wave and how much that was really the feeling a number of years ago. How much some of the recent high profile discussion around Elon Musk with X, with his colorful interview and commentary toward advertisers, does that draw people in or push them away?
I think there's still a question there because to some and emboldens them. In terms of Musk what he represents, he's the anti that that's you know, I affiliate, you know, with the Tesla, but then on the other hand, you alienate. And the problem for I think Tesla investors, when you sell consumer products to the masses, you don't want controversy.
But again Musk is Musk goes to be of a different drum, and you see and that's you know, we saw that maybe overshadow a bit in terms of what happened at the New York Times event, the cyber Truck unveiling. That's four years in the making. But at the end of the day, Musk will continue to I think, innovate and especially when it comes cyber Truck. At historical moment, what.
Did you think about what happened this week?
I think it's one where still last thing you want to see as a Tesla bull to see something like that come and ultimately overshadow what was gonna be Cybertruck. But as we all know, Musk is Musk, and it goes back to what we've talked about a lot in the show when he bought Twitter, the forty four billion dollar mistake in my opinion, which now let's say x is worth five to eight billion. This is always the worry.
It just adds that tornado factor because with Musk, if you give him a mic, you never know what's gonna happen. And that's part of the problem here. And even though many could say, oh, it's great, go get them, okay, but there's a business there. It's it's been essentially taken out with debt, so eventually that you're gonna have to you know, have to pay someone in terms of what's happened with X.
I think you just put a dentives multiple on X there with that valuation. But we'll come back to that another time. I want to talk about margins just a little bit more. There's a massive opportunity if you didn't have this truck to keep on pushing and squeezing four and GM mat with numbers this week basically telling us that the labor market contract, the labor contract would add an additional five to seven five per vehicle at Ford
it's upwards of nine hundred. Does this truck complicate their effort to really put the squeeze on four and GM and the way they have done last year?
I think it does a little because ultimately, when you look at the UAW debacle and the three and three era could it's put Farley bar, it's put back against the wall, and in that add to the cost, I think where they're going to squeeze them continues to really be on that forty to fifty k price points in terms of sedans. That's what they're going after. But that's also why Mary and you've seen them from Farley as well.
They're kind of come back all from the edge, not maybe going full ev where Tesla's actually going the opposite. And that's essentially what's happened right now. This is this is all Gamma high steaks poker, and I think everyone's trying to figure out what must next move is in twenty twenty four and who it's catered to.
I mean that's another question too, because the audience is a Ford and GM much more focused domestically, or as Elon Musk has a big audience in China as well. How much is the cyber truck geared toward American buyers and how much is it geared toward international.
Buyers and LEAs. That's a great point because look China the hearts and lungs of the Tesla growth story. It is in China forty five percent of demand. And I think what really he's focused on here with cybertruck. It's, first of all, it's showing from an innovation technology perspective just how far they are. But the opportunity, even though it's starting in the US, it is international, it's Europe, it's China, and I think that's really the global focus
of Tesla. You look at forward, there's many that have kind of customers fought against going toward EV. I'm a traditional f one fifty. I'm not going to go there. Dealers have fought against it, and they've heard it loud and clear in Detroit. Do you think it's attractive? Look the mad Max vehicle, and I remember when I remember when you talked about that nineteen. I think we talked
about that together. I believe I get it. It's on the edge, but I think it's innovative, it's new, and it's something where Tesla is not gonna go down the typical path of our other automakers. And that's why. You know, Look when I see you driving this in New York about you know six nine months now.
You can a passenger, say TK in the passenger seat.
It's with cyber truck.
It's gonna be the roof come off.
But you could be in the back as well. So it's gonna be super interesting.
Am I the only one who drives?
You are? Yeah, Brando's gotta drive, cannot don't drive, I'll drive.
They get in the back and again, believe belie, it could be driving. You got TK shotgun barrows in the back end.
Sleep that could happen, all right, let's sleep.
Subscribe to The Bloomberg Surveillance Podcast on Apple, Spotify, and anywhere else you get your podcasts. Listen live every weekday, starting at seven am Eastern on Blueberok dot com, the iHeartRadio app, to In, and the Bloomberg Business app. You can watch us live on Bloomberg Television and always on the Bloomberg Terminal. Thanks for listening. I'm Lisa Abramowitz, and this is Bloomberg