Bloomberg Audio Studios, Podcasts, radio News.
This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along with Lisa Bromwitz and Amrie Hordert. Join us each day for insight from the best in markets, economics, and geopolitics from our global headquarters in New York City. We are live on Bloomberg Television weekday mornings from six to nine am Eastern. Subscribe to the podcast on Apple, Spotify or anywhere else you listen, and as always on the Bloomberg
Terminal and the Bloomberg Business app. All eyes on tomorrow's CPI print, the first major day to release in weeks, expected to show inflationary precious mounting on the economy. The former Boston Fed president Eric Rosenngrand has seen it all. He joins us now for more. Eric, welcome back to the program Sir, What are you anticipating to see? What do you expect to see tomorrow morning at eight thirty Easton time.
I'm expecting to see that both the CPI and the core CPI are at three point one percent. So for the overall CPI it was at two point nine percent before. That's a bit of an increase. It partly reflects some of the pressures coming from tariffs continuing to flow through so goods like apparel.
Furniture, sporting goods.
But it's also that we're seeing food prices go up in a variety of areas, and I think that indicates that we're not getting much progress on inflation, that this report actually is going to be a continuation of numbers that are at three percent or higher rather than moving down towards two percent. So that is a challenge for the Fed as it tries to weigh how much emphasis to put on inflation and how much emphasis to put on what's happening in the labor market.
Well, Eric, let's stay on that theme. Are the sources of inflation the this Federal Reserve can ignore.
I don't think it should ignore. The labor market, while it has been softer, is still fairly close to the Fed's estimate of full employment. And in some of the areas, both in food prices, we've seen cost of electricity going up. Some of those trends I think are something we have to keep an eye on. And while there have been some negative pressures, for example, shelters come in a little bit better, natural gas is likely to come in a
little bit better. I think the overall package. I mean, we've been above the two percent inflation target for over four years, so at some point the FED has to start seeing some improvement inflation. So I would not be somebody who would view this as because it's partly coming from tariffs, that it should be ignored.
Eric is a lot of this inflation policy induced, well.
I think it is partly policy induced. It's certainly fiscal policy induced. Tariffs definitely have an impact on what the reported prices are going to be. I would also say that the immigration policy is a policy that probably means that some of the food prices have gone up as labor costs have gone up for people that are trying to harvest crops, and fruits and vegetables have been an area in particular where we've seen rising prices. In terms of monetary policy, I think the question is how much
of the pressures that we're seeing have been accommodated. So the FED thinks it's restrictive, but if you think that the economy is more productive and that AI may contribute to that productivity, then it's a little unclear that we should be going back to the same interest rate that we were at prior to the pandemic. So the summary of economic projections that the Fed puts out is assuming that we'll see something Fed funds rate in the long run closer to three percent, So that would indicate a
lot more room. But the fact that we've seen so little progress on inflation for the last six months indicates that you shouldn't be so confident that you know exactly what the real interest rate ought to be.
Well.
Not only that, the fact of the matter is the FED will be sitting down and they won't have the labor market report. They're just going to have this inflation report. Do you think it's a mistake if the Fed cuts interest rates next week?
I think that given the softness and labor market, I can understand a twenty five basis point cut. I would highlight that while we're getting the CPI report, a lot of government workers left their jobs at the end of September, and a lot of the source data may not be available, So this CPI report probably is going to be using
more estimated results than normal. It will be interesting if the report highlights that this data may not be as reliable, which means it could be noisier, and if it's noisier, it could be a surprise on the side or the downside. But it just says as we continue to have pressures on statistical organizations having enough people to gather the data, that this data may become noisier and harder to rely on.
Eric, forgive the snark, but how reliable was the data when we had it?
As it?
Sorry, how reliable was the data when we had it?
I think the CPI report was a pretty good report. So, I mean, they had significant amount of surveys across the country. They have had to cut back over time on the amount of survey work that they do. They've closed some offices, so I think that over the last few years it has deteriorated a little bit. But I think if we continue to be cutting back on statistical agencies, it'll get more unreliable as we go forward.
Stay with us. More Bloomberg surveillance coming up after this. So here's the latest this morning, the President imposing significant sanctions on Russia, targeting the country's major oil producers. In London off the back of these movest includes Sara Piankie of Evakorasi joined US Now for more Sarah, consequences and objectives. Let's talk about objectives first. Does this get the president, the leader of Russia to the table.
I will see.
You know, obviously Trump has been very frustrated with his inability to you know, kind of make this happen and settle this down. He's obviously looking quite you know, really anxious to make progress on this. Certainly this is a key step. This has always been sort of one thing that folks have thought would bring a Putin more to
the table. But we're gonna have to see how longed holts, how serious it is, how effective it is, and you know, until we see how this plays out, I think we should be judgment Sarah.
How do you think this is going to play into the trade talks the President's going to have with Shijiping in South Korea?
Well, it's interesting.
I think that the United States and China have a lot of other issues to.
Focus on right now.
The anxiety and the escalation has been around something different, much more about rare earths and export controls and trying to keep these tariffs down. So it's a lot to really try to introduce this and to get China to take steps on this. I think If the agenda expands to this in an aggressive way, China will come back with questions about Taiwan, and I think it's.
Not very likely that we'll see a lot of progress here.
The trip administration is weighing export restrictions against China when it comes to critical software. I asked Everett eisenstat this in the last hour, and I love to get your take. Is this tangible policy or is this a new leverage point that the US wants to use just for negotiating tactic.
Well, we've certainly heard that in the government.
Everybody's been asked to sharpen their pencils and to find different aspects of things in the export control space that would really make China anxious. So look, I think if that's where the talks go, we're going to see China push back pretty hard on rare earths. I think they feel very aggressive and confident right now in that space, with good reason. So I think if we're in a space in this talk where we are introducing new things,
that's not a great sign. Perhaps it will help some with leverage, but I think we all have to watch carefully because I think China is feeling quite bullish on this, and the risk is really that we overplay our hands.
Do you think then that China has more leverage going in than the United States does?
I think both of these.
Great economic powers have both have leverage. And I think what's unique is that when the Trump administration negotiated last time with the Chinese, they didn't find that there wasn't this dynamic in the conversation, and so I think it has been a little bit of an on the job learning for some in the administration that China is willing to play as aggressively.
So I don't know.
They used rare earths back in May. Are you talking about when it was just down to agricultural purchases in Trump won?
Yeah, I'm talking about in Trump one point zero.
I think one of the reasons that the Chinese came out so strong with rare earths this time is they found last spring it worked really well for them, and so I think they are I think they were hoping to get more out of the talks than they saw coming, and I think it was pretty explicit strategy. I'm not quite sure they meant to overheat things quite so much, but.
I don't know, you know, I think both sides have.
Something the other team wants, and when you're in that situation and baling out both relationships, there's there's risk for escalation.
Stay with us more Bloomberg Surveillance coming up after this. Another name, of course, is Tesla profit falling rising casts undermining a record quarter of a vehicle sales, the company reporting adjusted earnings down thirty one percent from a year ago.
Dan Ives of Webbush maintaining and outperform rating on the stock with a six hundred dollars price target, saying we continue to believe Tesla could reach a two trillion dollar market camp in early twenty six in a ballcase scenario, and three trillion by the end of twenty six as the golden AI chapter takes hold at Tesla. Dan Ives joins us now for more Dan how relevant is the car making business at Tesla to this stock and how relevant should it be?
Looker means foundational relative to you know, obviously ward are doing in the quarter and of course generating cash in the business. But the reality is the future is around AI, it's around autonomous, it's around robotics.
I think it's the most important chapter in the history.
From musk intest so That's why Musk now wartime CEO and obviously in new paid package.
I think that's what investors are focused on any sell off here.
Look, we view autonomous alone is worth the trillion dollars of the story. This will when with the video, be too the best. You know what I view physical AI plays in the market.
Don I think a lot of people might agree with you. The autonomous could be worth a trilly onto someone. It's about whether it is for Tesla. What can you point to that demonstrates success. What are the metrics you're following that justify evaluation this company currently carries.
Yeah, first off, I mean robotoxin. We've seen it in Austin ourselves. You know, I think that you have eight to ten cities by the end of the year, and we ultimately believe thirty cities in the first half. Then you ultimately will what's happened there, the geofns area, the safety driver getting removed. It's my view this is all heading toward level four right in terms of when you
think about autonomous and what that means. Is no company in the world byd you know, pick any name out there, we'll have the scaling scope to compete with Musk and Tesla. When it comes to autonomous and cybercabs, that's the future. And then optimists, you know, I believe it's going to be you know, a key part of this story. That's how you're going to get to three trillion dollars market next twelve to eighteen months.
But scaling competition is it? This space dan already looking very crowded.
Look I'd say I mean crowded in terms of Waimo being first mover advantage, but they're in what five cities, you know, relative to From a scale perspective, I mean, I think Tesla is going to own eighty percent of the autonomous market and that's why from an investor perspective, Look, if you hate Tesla.
You continue to hate it today, I get it.
But the reality is that this is a golden age for Tesla looking ahead from autonomous to robotics, and that's why you talk about November sixth, what's going to be the most pay package and then they're going to own obviously a big piece of XAI. This is now the AI transformation happening in Tesla. Cars obviously are important, but that just sets the siege for I think it's gonna be historical move.
Let's talk about the pay package.
Elon Musk has a very colorful language yesterday on the call when it comes to the proxy advisors of some of these institutional investors. What does he need to achieve in order to get that headline trillion dollar pay package?
Yeah, and look and go back to like the first pay package, the one that's right now caught up in Delaware, Like he did everything and more, and it just comes down to, like I agree in the fact that the biggest asset for Tessa's Musk Musk is Tesa Tessa's Musk. Look, you look, obviously some of those are very ambitious in terms of where they're ultimately going to hit in terms of the targets. But I think mid to high targets are hit able, and that's why incentivize him. Make him
wartime CEO, that's what he's doing. That's whereas laser focused, you know, versus maybe some of the dark days when he was a TRUA administration. Obviously some of the brand damage. And I just think like betting against Musk has been the wrong move again again, and I think that's why shareholders overwhelming we will.
Approve this let's just stand the pay package. What's the opposition to the pay package. What's your understanding of what it is? Besides the fact that it's subsurdly lines that kind of doesn't matter. What's the opposition to it? What don't people like about it?
Look, I mean, obviously it's just you know, the view from an excess perspective, the actual numbers.
You know, why do they actually have to do this?
But I think to some extent it's investors that don't understand the Tesla story. And I think any of the core believers, any of the core followers, understand that the future of Tesla lies in Musk being CEO. And I think from pay package perspective, given the targets said high bars, that's where you want Musk to You don't want to set warl bars.
And I think that's I think the board stepped up, Robin stepped up.
This is the right pay baggage at the right time for what's going to be what i've us a golden chapter for Tessel.
Stay with us. More Bloomberg surveillance coming up after this. The S and P five hundred achieving thirty three record highs this year, boosting bank profits and pushing the Wall Street bonus pool to new heights. The New York State Controller Tom Dinapolis saying, quote, well, uncertainty remains around interest rates, inflation, and the broader economy. Wall Street looks with another strong year. Tom joins us. Now from more, Tom, welcome to the program, sir.
It's good to get some time with you. Let's just talk about how big those numbers are so far this year and what kind of benefit that provides to the state of New York.
Now, the numbers are big, and we look at this closely.
We monitor it because obviously revenue for New York State and New York City significantly is derived from what's happening on Wall Street. So we always do an annual report this time of year on the securities industry in New York City. What we find for the first half of this year profits of thirty billion dollars. So when you consider last year, for the total years about forty nine billion,
we could be headed for a record. If the current trends continue, we could be talking about profits of sixty billion dollars this year.
Tom, is there a risk that we take that for granted? As you know, and I'm sure you're following. We've got a mayoral race here in New York City, and at the top of the pose is a socialist. Now, Tom, it's amazing that in the beating heart of American capitalism we can have a socialist map. It's not something we've risk taking for granted.
Well, look, New York City, New York State is quite resilient, you know.
So between what.
May happen in New York City what's happening in Washington, New York City is going to stay strong. What I think is key in all of this is that New York must continue to be the global capital for finance.
And what I always say to my friends and neighbors in New York, however you feel about Wall Street, good or band, the reality is the services that we provide to the people of our city in our state significantly rely on the profits of Wall Street, the business taxes, the personal li ink of taxes that are generating the employment that's generated. So whatever is going on in the larger politics, we want these jobs to be continued to
be located in New York. There's still more jobs in securities industry in New York City than any other city in the country. We've seen last year, we saw some growth in jobs in New York. This year it looks like it might be a slight retrenchment. But this is
a win for New York State. And no matter who's going to be the mayor, no matter who's the president, no matter who's the state controller, wall Street, we want this to be the home right here in New York because we all benefit when Wall Street does well.
Wall Street does. But does a future mayor Mundani want it to be? Do you think he's a possible threat to the securities industry's tax revenue if these individuals want to leave New York.
Well, look, we already have an issue of tax payer migration having nothing to do with the current mayor's race, you know.
That.
Being said, when we look at our revenue picture, we do a monthly cash report, we call it revenue coming into the state, we continue to have tax collections, largely because of personal income tax revenue exceeding projections. So I know there's a lot of folks predicting gloom and doom, but so far, actually the money because of strong personal income tax collection coming in higher than projected, and solely to the extent that again we don't.
The election has not happened yet, But if the new.
Mayor has some ambitious goals as far as addressing or affordability more services that need to be paid for, you know, I think whoever the mayor is is going to want to see Wall Street to be profitable and strong and benefit from the taxes that will derive from that.
You also have come out with a statement about Elon Musk's latest trillion dollar paper polls. So you're saying it's excessive, But do you think Tesla would be.
Successful without Musk?
And there's a number of hurdles he needs to jump through to even look at this kind of pay package.
Well, obviously Musk has been a very key ingredient in Tesla. I won't dispute that, but our view has been that the board oversight has not been as independent or as stringent as it should be.
How many billions or trillions does one person need to make?
And you know, my concern is that the compensation package may have some broad milestones in there. There really should be more clear metrics and you know, to really justify this very very generous payout. I mean, how much how much money does one person need? And you know, it's been very clear from my perspective that some of the other activities that mister Musk has been involved in over recent months has taken away from his focus on Tesla. You've seen a lot of volatility in certainly in terms
of the stock price. That's a concern to us as a shareholder. So we really would like to see more independence on the board. We're going to vote against the compensation package, going to vote against the board members who are up.
I think that will make the company.
Stronger if they would take some of our recommendations to heart.
If they take more recommendations to heart, would you vote for it?
Oh?
Sure, if they If they come around to our point of view in terms of independence and more clear metrics in terms of what kind of milestones would have to be achieved for compensation package as generous as are proposing,
we'd certainly reconsider. But you know, I think in terms of the dollar amount at this point, and when you would look at the concentration of stock ownership that mister Musk would have, we'd really continue to diminish any role that any other shareholders would have in say of the company.
You know, I think those are those are concerns.
My guess is they are not going to come around to our point of view between now and November sixth, when they have the meeting.
So I'm going to just press you on the number. Why is the number itself relevant? Surely, if we establish the appropriate metrics and they're achieved, shareholders benefit from that. Why is the number so important?
Well, look, I think we live in a time where people are very concerned about income inequality, and you know, despite the challenging times, I mean, you know, coming out of COVID, still a lot of people in need. When you see the excessive compensation package, I mean, you know, credit to mister Musk, He's already one of the richest men in the world. How much more rich does one
person have to be? And you know, if he is going to continue to be focused on some of these other activities that will divert from Tesla, it seems that we're not rewarding performance. Instead, we're rewarding power personality. I don't think that's the smartest way for Tesla to be managed.
Well, I guess the way some people might count to that Tom is that if he doesn't pay enough attention to the company, he won't hit the metrics anyway, and he won't get the money. And isn't this about addressing that anyway, because ultimately what you want for him to pay more attention to the company.
How do we get that doing that?
Well?
I mean I would question the metrics, you know, I think there needs to be more specificity than we've seen thus far. And this is a board that, you know, from my perspective, is operated more as a captive group rather than a truly independent board in terms of their oversight role.
So I think it's a combination of more clear metrics.
And the compensation package, and I'd like to see more independence on the part of the board in terms of their oversight of the company generally. I mean, obviously he is very key to the company, but the company will hopefully be strong enough to survive one person, right who knows what the future is going to bring. And I think that's where again, appropriate compensation and strong independent board oversight, that's what is needed here.
This is the Bloomberg Surveillance podcast, bringing you the best in markets, economics, and geopolitics. You can watch the show live on Bloomberg TV weekday mornings from six am to nine am Eastern subscribe to the podcast on Apple, Spotify or anywhere else you listen, and as always, on the Bloomberg Terminal and the Bloomberg Business app.