Populism is Resentment of Elites, Schneider Says

Pleasure to be here, Thanks for having me on. It's the trade war on hold and for how long will it be on hold? It is on hold, it will be on hold until it's not on hold. There's no reason to suspect that it's going to go either well or badly. The scorecard is this. I think China is having its way with the United States in this conversation,

and this was a backdown by the United States. It avoids a conflict, the tariff war that would have been to everybody's disadvantage, and it gives people a time to cool off. So I'm all in favor of it, and I hope it less and I hope that China and the United States can learn to work together rather than knock each other's heads. Well, we can discuss how long last thing it might be. Finalists explore the vague commitments the Chinese pledging to to rebalance the disparity between Chinese

and the United States trade surplus. Um, how firm is that commitment to rebalance that? And what are you expecting to see? Car We've send commitments to boost imports of energy, agriculture. Are they good things? Yeah, well, they'd be good things if they would happen. I don't know exactly how you make them happen. I remember John Maynard. I remember reading about John Maynard Keynes talking to bertel Lean about why

Germany doesn't export more? You know, why doesn't Germany export were And his idea was that Germany had to impoverage its workers to make all of its stuff cheaper. Um. I think at the end of the day, you know, the United States has to produce more stuff that China wants. We have stuff that China wants on the technology side, and we're not selling it to them, and that would be one way to reduce all of this. And that's the Chinese point. And as I said, I think the

Chinese are really having their way in this conversation. What I talk about to what extent the Chinese, the commitments of the weekend, how much of that is just an organic, natural consequence of more growth in China that they will need more foreign agricultural goods, they will need more foreign energy sources as well. Undoubtedly that's going to growth, is going to help move this conversation forward. They've agreed to buy things like energy. All right, we make energy, we

export energy now in the United States, that's new. We have a comparative advantage and if you will over China, and so therefore we're going to sell some more of it. So I think that's kind of a natural evolution. I really do believe that a lot of the substance of what we've seen this weekend is really just a face saving way for both sides to down from the cliff any real commitment to do anything. It just gives everybody a way to say, okay, just kidding ha ha, to

move on with the conversation. I strongly agree. And then within the face saving Dr Weinberg is the timeline and the Chinese have every advantage, don't they don't They just wait, well, they're growing at in a bad year at just under seven percent, and the United States and the good year

is growing at two and a half percent. So you do the math on that, and you start off with China slightly larger than the U. S economy in terms of converting looking at its economy in terms of the purchasing power of the money rather than the exchange right the way the World Bank looks at it. So they're already the largest economy on Earth, and they're just going to pull farther and farther ahead with their silk root. Their exports are going to grow faster and faster than

the United States. They have already become the largest economy on Earth, and they're on track to become the dominant economy. But it was going to pay the the trade hawks. What they really wanted was not just to rebounance the trade surplus. It was to go after made and shine, to go after the protected industries that they want to dominate on a worldwide basis. Have we seen a big loss for Navarro, Wilbur Ross, and Mr Your good question, Greg Villier posits in his Morning Note that Mr Leightheiser

and Mr Navarro may resign. Yeah, I actually saw the same thing in his morning you did, and yeah, you were read in and that's very read in. Um, cow cow To what extent is it a loss for them over the weekend? And also I should add to what extent is this actually about a foreign policy goal that could come about next month when the United States sits

down with North Korea? Yeah? So, um, there's a lot of questions in the question that you raised, right, I mean Navarro, Uh, In my view, all right, his point of view has always been wrong. So to have him excluded from the administration because what he's doing is not working on what he wants to do is not going to work, all right, that's a logical extension. It's an evolutionary sort of thing. It's not a revolutionary sort of thing.

But I think that his Mercanti listen approach to U S trade is just is just off as far as North Korea is concerned. I think the Chinese have a very clear upper hand here. The Chinese are saying to the North Koreans, you know, we'll give you what you want, do what we want you to do, which is to make friends with South Korea, and then to annex yourself to what we're doing, and that moves South Korea out

of the US fold. Carl, I want to rip up the script, and I know we can do this with you because you're prodigious in your your history and ability. We have a merger this morning which is pretty cut and dry, and it's all these alphabets ge to my web co for what is it, John eleven billion dollars something like that after tax benefits ten billion dollars. But

this barely describes the G Transportation flat out. Its back is going to be taken out where g E owns fifte of the Westinghouse break Company of eighteen sixty nine in Pittsburgh, Pennsylvania. Outside of Pittsburgh as well. And the fact is these are multi national companies. There are perfect manufacturing example of a true multinational vision, which I would suggest the President looks at as a discreet, uh domestic

company outside Pittsburgh. They're not just another break company outside Pittsburgh, are they. They're truly multinational. Yeah. I think what you're hitting on, Tom is the education that this administration is getting, which is that trade is not a domestic issue, all right, but most American business is multinational. I mean even my little business does two thirds of its revenues come from overseas.

Production chains are linked. You know, you go after NAFTA, for example, as the current administration has, and suddenly they allotmobile manufacturers, a core industry in the United States, are saying, WHOA, this affects us. We have to to rope it back in so that our core businesses aren't affected and the

whole economy isn't affected. So I think there's an educational process going on within the administration, which is why the Navarros maybe stepping to this being pushed to the side, and bigger, more adults are coming into the and John, what's so important about this is I'm going to assume within transportation and trains and breaks it's wildly competitive, there's got to be like five but from bidding on the next train, away from the specifics of one particular industry,

this was always about whether you want to maintain the status quote, not maintain free trade because we don't have free trade. Was about whether you maintain the status quo. And multinationals in the United States quite clearly benefit from the status quot and the view in the C suite is don't take the risk with the status quote to open up Chinese markets aggressively. They will over time. We can wait. We make enough money as it is. This

administration took a very different stance. This administration looked at the Chinese, a very protectionist regime that has leached on global trade for over a decade now and more, and said, we need to do something aggressively. Now, Carl, as you sit there is a business owner that benefits from the status quo. Are you basically saying that you're not happy with this administration taking the risk aggressively opening up Chinese markets when the downside is the status quot could become

something much much worse. Yeah, well, I think that uh ripping up the script, as Tom likes to say, without having a new script in its place, is a risky business right, And Tom can get away with it because he's Tom. But the US economic policy can't get away with it because there are many more complicated moving parts.

And to my mind, the fault in this area of the Trump administration has been that they've been willing to take things off the table and to break things up, to remove elements from pieces from the puzzle without having replacement pieces ready to go. And that's been true of the China policy. It's been true of NAFTA, where we're

now seeing them reel that back in as well. All right, it was true of Transpacific Partnership where suddenly we want to get back in and again it's it's true of so many things, because you can't leave a vacuum, because if you leave a void, someone like China will step into it and fill it for you. Fantastic to have you with this this this morning, and really appreciate your time. High Frequency Economics Chief Economists and Managing Directory. The book

is standoff How America became ungovernable, governable. But what matters is the author is Bill Schneider. He has definitively put history first in our review of America are politics and of course the chaos that we're in right now. I love the blurb at the beginning. In a little more than fifty years, America policies have gone from Camelot to Game of Thrones. I guess that really says it all, Bill Schneider. Game of Thrones, which character is President Trump playing?

I haven't seen the game of you're the only one who has it, but the but the answer is the chaos that's out there. We've seen before. How do you get beyond whether someone's a Republican, Democrat, whatever, How do we get beyond where we are out to something bordering on civility and stability? Normally, the answer is a crisis. We're a system that's very difficult to govern. We were designed not to be easy to govern. When there's a crisis, everything comes into place. You know. For one year after

nine eleven, Democrats supported President Bush and the country. It looked like a consensus was being built because there was a crisis in the world and in the United States. It didn't last very long because a year after nine eleven, President Bush started the rollout for the Iraq War and all the old division surfaced once again. I look at where we are and helped John Farrell here, the young man from the United Kingdom, and that there's this populism

mood that's out there. We see it everywhere. What is the flavor of populism that is the standoff of American politics. The flavor of populism is resentment of elites, that's very deep, resentments of big word here is and resentment. Yeah, there's a lot of resentment. Uh. And in the United States. You know, the constituency that Trump mobilized are basically people who feel disrespected. They went into a rage over President Obama.

They called it the Ray the reign of political correctness, because political correctness is the belief in diversity and inclusion, and a lot of these working class white men think inclusion does not include them. That's a really interesting point. And so your point, Bill. We've had full presidents two Democrats to Republicans that have promised to unite and to heal and totally not only failed. Why it's so different this time around. We have a president who is governing

by dividing. Uh. President Trump is doing something no other president has done. He ran as a divider by mobilizing this angry constituency that feels disrespected. Remember Hillary Clinton called them a basket of deplorables. Well, they erupted then in that campaign. Uh. And they feel as if no one is paying attention to them. The economy that affects them is fail ing. Uh. And these people have no place in a world of political correctness. Can't he deliver for them?

We don't know yet. Uh. He the economy is moving along nicely, and if that happens and it helps them get ahead. Uh, then they'll be very appreciative. But the fact is there's very little evidence that the economic growth that the country is now enjoying is helping people much at the bottom. Where were you were you on the CNN set in Yes, the Republican I sat there, remember sitting on the coach. The only major network that covered it was Dan Rather on CBLS. And there was this

revolution in absolutely stunning. Is that what we're faced here in November? We could be that would be they're talking about a blue wave instead of a red wave. That was the first time in forty years in that the Republicans took over the House of Representatives over Congress. It was a revolution. Did anybody see it coming? My recollection is pretty much no, no, not really. And we know

what happened that year. Historically what happened is gun owners and there were it just right came out in huge, unprecedented numbers, nine million new mid The Blue crew come out this time around. That's what we don't know. It would include Bill Snyder. You know what's going to happen here? Well, you know there's an old rule never make predictions, especially about the future. Well, the down right. That was Yogie Barrett. I megan right down in the wedding register. How long

has that taken you? Twenty three minutes to bring up the roll away John a question from Bill Snyder. Police, they'll just to complete this conversation. The risk for many people listening in our audience, investments, business leaders, is that if the president can't address the problems that the minorities that you've brought up that believe they haven't been listened to over the last several decades, if he can't address those problems, that this country swings aggressively to the left.

How big is that risk? Well, I think there is a risk that will happen. It very much depends on whom the Democrats. Who who catches fire among Democrats? Will it be a strong progressive candidate like Elizabeth Warren? They could be Joe Biden. He would be the logical next person. The problem is he's well into his seventies and he's part of the past. We don't know. That's what primaries are all about, and they're inherently unpredictable, but some of

them will always catch fire. The old rule is Democrats fall in love and Republicans fall in line. That didn't happen in twenty Republicans fell in love with Donald Trump and Democrats fell in line behind Hillary Clinton. So even those rules aren't necessarily the case. Bill Snyder, thank you

so much in congratulations. The book is standoff, How America became ungovernable, with a fabulous tapestry history to drive forward to the mid term elections and then to two thousand Tory of course, Bill Schneider at George Mason and for years associated and inventing our political coverage and CNN soaring prices, widespread hunger, rampant crime, failing health system, and a large

scale exodus of its citizens. And yet President Nicolas Maduro has won a second term as the president of Venezuela. Here to tell us more about it is Patricia La our Venezuela Bureau chief, joining us now on the phone. Patricia, thank you very much for being with us. Uh Do people in Venezuela regard the results of the election as

uh legal? Um? Well, be hard for me to speak on behalf of Venezuela, but we did visit a lot of voting centers yesterday, and many of them were in the western side of Calacas, which is the more popular areas, and they were practically empty, many of them. I was the only person even there apart from the people that

were working at the voting center. So clearly you have a very disillusioned and uninterested electorate who UM already fighting a daily plight to do about just anything, finding food, being able to afford food once you can find it. Public services are completely collapsed, as running water has become a luxury. In Kalaas and most of Venezuela, you have power out of just happening for hours. Public transportation is becoming more and more difficult, a spare parts are hard

to find, an important to the country. So of course a large large percentage of Venezuelans were completely uninterested in yesterday's event. So before we get into smooth the economic implications of the continued reign of Maduro, I'm wondering almost of the population did vote? Who are his supporters? So, um, those are the numbers according to the national like the UM authority, but well, you know, it's hard to know.

Some people do cust out on them UM. But of course they do have UM a large government shame that encourages people to vote by offering um bonuses or certain prices. That there were hundreds of thousands of points outside of electoral UH centers yesterday that if you prove that you voted, UM, they'll give you, you know, a certain price. They don't tell you what it is outwardly, right, but you assume

that it's just a deposit into your accounts. At some of the centers, I even saw people handing out bread and water to voters. Um. So yeah, there's this, there's

a machine that's encouraging people to come out and vote. Okay, so let's talk about the implications because I am looking at PASA bands that is, the state owned oil company that are falling, and the ie that the International Energy Agency has been coming out and saying they expect Venezuela oil output to decline to an innex basically a negligible amount. What's the prospects? Why are you? Why are things so bleak and getting bleaker for Venezuela at this point? Yeah?

So oil production is already at a thirty or forty year low. Um, you have many of the oil workers just walking out, not only because they're so poorly paid, but because they're too hungry and weak to operate heavy machinery. Um, you have conical philips uh on a global assault. I guess Thataday sat trying to take some of his two

billion arbitration award that it was granted last month. And you, on top of all of that, you have the Venezuela under active review for oil sanctions on behalf of the US, which would be sort of the deadly blow to an economy that's already in crisis. So the outlook is for everything to just continue to words them from now on.

Does the president recognize that your description, and indeed the description of most media outlets about what the majority of people in Venezuela deal with on a daily basis, does he recognize that that is true? No, he does not. I don't think he has ever even uttered the word hyper influ asan or anything of the stort um everything Um that he does sort of agree or admit he

characterizes it as the war waged from the US against Venezuela. Um, he blames everything as a Venezuela being under economic attack from other nations across the globe. Okay, but if he just sort of move a little further on that, if you're under it, let's say, let's say that is, let's just take that as his version. Does he admit or recognize that there are people who are going hungry, that there is no running water, that electricity is intermittent, and

that no one can afford to buy food? No, I mean he'll admitted to a certain extent, but nothing even closed. He he will mention some of these, um issues are in press conferences and things like that. And the funny thing is that he kept repeating that, you know, after he was elected, Um, he was going to solve you know, a majority these issues. What we're wondering is how have those options alluded him so far as to how we can continue? The economy is expected to contract nine percent. Uh,

this dear inflation is said to hit percent. The currency has lost more than his value. Right, Um, there are a lot of things that he needs to get on the right path. Patricia Lah, thank you so much for being with us. Good luck to you, and UH it sounds pretty hopeless. I'm hoping that there is something else, uh that will perhaps help mitigate the situation and perhaps cause a change to the at least policies of the leadership. Patricia la Venezuela Bureau chief talking to us about those

Venezuelan elections and chairs of Tesla. They are up right now a little bit more than three percent. This comes after Elon Muska, the founder and the chief executive of Tesla, announces details about two variants of the model of three. Indeed, one of those variants is estimated to cost about seventy eight thousand dollars. That's twice the price of a base Model three. And it reminds me of an old National Airlines commercial entitled is this any way to run an airline?

Is this any way to run a car company? Here to help us answer that question, Kevin Tynan, Bloomberg Intelligence Senior analyst for Everything's Automotive Kevin always a pleasure. Um. I know I'm dating myself by talking about National Airlines, but we all know what happened to National Airlines, So I'm curious, is this any way to run an automobile company? By having the chief executive tweet out, I mean, I get you know, it gets you tons of free public listening.

You never have to do an ad in your life, But is this the way to run a company that's trying to produce mass automobiles? Well? I look I guess that goes all the way up to the President communicates via tweet now too, So, um, I think Elon Musk is that sort of new generation of CEO tweeting out plans, uh, you know, calling analyst bone heads on the call, so you know, until until the shareholders react, he'll he'll continue

to push the envelope in that way. I'm sure. So what is your thought about this announcement and the new loaded versions of the Tesla Model three. Aren't they just having challenges getting the regular model three out there? Well? I don't. I'm not sure they want to get the regular model three out there when you look at you know, the quarterly reports and and you know, running at at an operating loss, and you know, the idea is is to still be up market until you know they can

get production. I'm not sure you're ever going to see the thirty five thousand dollar vehicle. Um. You know, so in that in that way, this makes sense to be selling, you know, the premium vehicles. I think two things happen though. One is at seventy eight thousand dollars before autopilot even um that that's not even included in that seventy eight thousand dollar price egg, but at seventy eight thousand dollars, you worry about cannibalization of the Model S, which is

priced a little bit higher. But you know, if you look at revenue per unit over the past couple of quarters, it's in that eighty you know, eighty to ninety dollar range, So you're pushing up against models. The other thing is how many of those five hundred thousand deposits we hear about all the time. We're people expecting to be able to actually get a thirty five thousand dollar vehicle, which probably won't be at least until some point of if ever.

And doesn't this also bring into question the competition models from bm W as well as lower price models from Toyota, Nissan, etcetera. Right, Yeah, And and I still believe that those manufacturers are only halfheartedly involved in the battery electric vehicle market. Um. You know, there's announcements and you see this long lead time till those get to market, and I think that's just simply because the business economics of the drive train uh drivetrain

technology just don't make sense yet. And basically Tesla proves that with every quarterly report. Right, And I think you saw General Motors with Chevrolet Bolt, and we were constantly hearing how Tesla out sells Bold, and I keep arguing, well, they're not trying to sell Chevrolet Bolt. It was an experiment of finance experience to see what the economics of the technology look like. Knowing it's not profit is profitable is why you don't see Chevally Bolt be marketed or

aggressively sold, because you're losing money on everyone. You you that that you do put in customers hands. So the idea is is that we can do this. We have the technology, it's up on the shelf. If this ever looks like it's profitable, we'll put it in a good looking vehicle or a compact crossover, which is the best selling segment in the US, and we'll sell them like

we want to sell them. Well, I just also want to mention getting this a news item from Greg Jared and the Bloomberg news Room that at least one person is dead after a Tesla Model S was found in a pond on a property in Alameda County on Sunday night. This according to the California Highway Patrol. UH this in you know Castro, in your Castro Valley um our Tesla automobiles getting a pass in terms of what they can do versus other electrified or what you might call hybrid

technology cars can do well. I think, Um, I I don't know that that's totally Testla's fault. I think autopilot and I don't know if this incident was the autopilot was involved. I'm just you know, going over some of the ens recently, UM, you know, I think there's certainly

misinterpretation of what that system can do. And I think when you look at even the um most recent crash where or the one before the one you just mentioned, where it hits a parked fire truck and you're wondering, why why does it not see a stopped object and and you know stop driving towards it. UM, it just tells me that people don't understand autopilot in the way it's supposed to work. And you just don't see that

from from Cadillac and super Cruise. I think for some reason, the consumer understands, UH that those are driver aids and not expected to be the full control of the vehicle given over to the to the driver or to the vehicle from the driver. UM. You know, and perhaps that's way back in the day when you had Elon Musk's wife of the time, you know, dancing in the driver's seat with no hands on the wheel. Why that misconception is out there, but it certainly seems to be real.

Is there a misconception of what the consumer wants when you have Ford getting rid of pretty much their entire sedan lineup going to SUVs and pickups except for the Mustang, I believe, uh, where Tesla doesn't have an suv really or a pick up right and I and I think in in Ford's defense there and I think this is industry wide. What you're seeing is certainly the death of the coupe in the sedan UM, but also a sort of a change in the shape. So we're still going

to have small vehicles, We're gonna have fuel efficient vehicles. Uh, they're just gonna be shaped differently. So rather than what we know in for tourists UM or Ford focus, that just gets lifted up a little bit, looks a little bit more like a like a compact crossover where you have the higher ride height that people like a little bit more utility and usable space. Um, you know, and maybe use a car name or maybe you don't, but it's essentially filling that gap of utility that people need.

It's just not shaped with what we know conventionally to be a car. What's what else should we know about Tesla that we don't focus on? Is it battery technology? Is it the drive range? Is it you know, weather conditions, when it gets cold. We note that the range on an electric vehicle can change dramatically, you know. I think that the product itself, for the most part, other than you know, those issues with autopilot dry, I think the consumer is is educated and aware or at least comfortable

with what the vehicles can do. Um. I think the biggest misconception is that you know and and in our space, it winds up being more about the financials when you when you dive into the numbers of the company, and that's everything from the volume numbers down to the gross margin numbers that everybody talks about, and then the profitability

of the company going forward. I think this is a firm that's really valued like it's of of global volume automaker, and it's really not or it's not yet at least um you know, in terms of market capped comparing it to Ford and in terms of uh, you know, volume, comparing it to whoever BMW or General Motors, and it's just not in that ballpark yet, um, you know, and it's going to take some doing and get there. I

was just looking at gross margins. Somebody up their target price because they are expecting better than what was forecast gross margins on Model three and and that's entirely possible. But at the end of the day, I keep saying, this is an automaker, and you know, gross margins are

going to be somewhere in that twenty percent range. And and I don't see Tesla doing anything production wise, manufacturing wise that gets them to that when companies like Toyota, BMW, Volkswagen are a Thanks very much, Kevin Tynan, Bloomberg Intelligence Senior analysts for all Things Automotive. Thanks for listening to the Bloomberg Surveillance podcast. Subscribe and listen to interviews on Apple Podcasts, SoundCloud, or whichever podcast platform you prefer. I'm

on Twitter at Tom Keene before the podcast. You can always catch us worldwide. I'm Bloomberg Radio