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tv   Bloomberg Markets Americas  Bloomberg  June 22, 2020 1:00pm-2:00pm EDT

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in london. i'm vonnie quinn. here are the stories we are following. apple plus development -- apple's conference. the you and u.s. investigating how the company makes money. we will hear from steve anotheran and from person. all of the apple headlines as they cross that conference just beginning. a look at where we are into the trading day. broadly higher start -- after starting the morning on a little bit of a down footing. the dow up .5%. s&p up .6%. the nasdaq up .9%. crude oil is above $40 a barrel.
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let's go to kailey leinz. what ist to talk about leading today's session. it is big tech names like apple. of course, they are heavy, seen insulated from any kind of virus resurgence. what is second to tech come underneath the surface of the s&p, is utilities. usually we see utilities getting a boost from lower yields that are kind of high dividend stocks. more the story is that it is summertime and things are starting to get hot. we are expecting temperatures over 100 and some parts of the american west. that is good for electricity companies, the likes of dominion higher between 2% and 5%. stay-at-home
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companies like wayfair, a big beneficiary over the course of the pandemic. other big beneficiaries have been range resources and of course oil companies. wey are up around 200% as have seen oil recover from the negative pricings we saw a few months ago. moderna as well. really big news we have seen. we have also seen dramatic moves in the bond market. we have the fed coming in with unprecedented asset purchases. that has left a steeper curve. are seeing the trade earlier in the session where yields were lower reverse a little bit. sitting at around 37 basis points right now. vonnie: kailey leinz, thank you. holding its worldwide
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conference virtually, preparing to announce it is replacing intel chips with its own processors in met commuters -- mac computers. someone taking the stage addressing racism in front of a community of developers. for more of what we can anticipate, let's get to emily chang. emily, beyond the obvious, what else from this week? >> this is the first wholly virtual wwdc. we are watching tim cook streaming and an empty auditorium. normally it would be filled with developers. we would be there, but today it is all remote. he opened talking about racism. we know that tim cook has been fairly out friends on social issues. entire a memo to the company about apple's position
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on this. thatderstand and believe apple will announce a full shift from intel chips to apple designed and apple made chips. they need developers to be on board with this. for the hardware to work, developers will have to refresh their apps. facing pushback from developers for that 15% to 30% cut the apple takes from the app store. , to antitrustnion -- two antitrust investigations into apple pay. complainingvelopers about a popular email address -- apple was removed from the app store. i am eager to hear about tim cook addresses this pushback because they need developers to be on board with the changes.
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vonnie: it has always been a hypo event. hype event.-- it has been a carnivalesque atmosphere. this year, probably different. are lyingaying people on apple products amid the pandemic. there are the two biggest social forces he has addressed, the george floyd killing and the pandemic. and of course, that is good news to apple developers that tim cook sees a bright future for apple in terms of services revenue. services, and these developers are what drive those. it is a huge business for apple. tens of millions going into services. it is what they needed when you are looking at a potential slump as people buy less devices, we are in the middle of our recession.
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apple under fire from u.s. lawmakers as well. we spoke with representative cipollini, chairman of the antitrust committee, which is looking into not just apple but big tech in general. thusook is the only ceo far that has not committed to testifying. cipollini told us he would subpoena tim cook and all these ceos if they did not participate. he did not mince words about what he believed to be the "duopoly" that is google and apple. >> this is very concerning. the use of the app store, developers are basically being forced to pay a ransom of 30% or they are denied access to that market place. appledentally, google and arrive at the same thing, 30%. that market power is disturbing. in a competitive
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market, he might have a percentage as low as 2%, like credit cards. even the credit card market is not competitive, but it is still 2%. robbery30%, its highway -- it is highway robbery. emily: pretty strong words there. i would add that apple just in 14, whichunveiled ios will work across all the mobile devices. we will be looking for some other software updates there. certainly an important moment for apple, so critical keeping people connected as we all work from home but also facing the scrutiny of lawmakers at home and abroad. is sayings, ian king that tim cook is more animated than he normally is. at live events i guess he has to.
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all this strain with these antitrust investigations taking place. he is moving quicker than he has in the past. he has already addressed covid-19 and also the topic of racism, inequality, and injustice, which is something he says he recognizes. thanks to emily chang for the rundown. make sure to tune into bloomberg technology this evening for more updates. we will go live to the bloomberg global summit. will have steve schwartz talking to us. this is bloomberg. ♪
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vonnie: this is bloomberg markets. let's get a quake -- let's get a check of the markets. we started off a little bit indecisive. we have definitely taken a direction higher. up .6% and the other two indices higher. apple,daq up 1% held by which is having its developers' conference. crude helping as well. it is up 1%, above $40 a barrel. no move for the 10 year yield. apple moves higher and higher.
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stage. he says the u.s. has to do better on racism. he says it is not living up to the ideals it was founded on. he also talked about the pandemic. he said that apple has helped by the pandemic -- with the pandemic. he says it is the first time apple has held a worldwide developers conference virtually. moved onto products, talking about the ios, the home screen. of ios will bets improved and an updated home screen to go with that. library is apple going to automatically organize the apps come of the first time that that has happened. it will help suggest what apps might be needed. this is where we get into controversy because the u.s. and the eu are investigating apple when it comes to revenue subscriptions for the apps. we will continue to follow the
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wwd conference. let's go to the bloomberg invest global summit. sitting down with steve schwarzman, blackstone chairman. >> we are talking to each other, not wearing ties. now and the same place. tell me about the investment environment. how has this been for you? >> this has been a pretty remarkable environment. know, around a last year in, if somebody told you we would have the voluntary closing of the world's economy, with certain exceptions to just keep food moving, and other things, you would say something like that could not happened, and if it did, it would result in a
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global depression. it just was- and not on the page. directionsct, those to almost every country to stop your economy did occur and unemployment has gone of massively -- has gone up massively, but we have not had depression. we reason for that is that have learned from the past and you have had massive government ofervention, trillions dollars of moneys to people who need it, to in effect replace the lost revenue from shutting down our economies. that first big stimulus bill in the united states, followed by, really, a very, very large follow-up, the central bank of the united states, the fed, is
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pumping unprecedented peace time moneys into economies. and in fact, the amount of deposits in banks because money was transferred to people, has exploded. we are awash with liquidity that was necessary to give you some idea. around $21 billion -- excuse me, trillion dollars a year. we are sort of missing $6 trillion coming in. somebody has to fill that hole. that is what all these stimulus bills and the fed are, in effect government -- in effect, doing in a simple way. the stock market is down. and now it has bounced as if nothing had occurred because of the liquidity and support from
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the fed. >> let me ask you about that. that, if i may, specific point is one i went to understand from your perspective, which is this apparent disconnect with every headline we are reading every day related to virus cases going ,p come of this medical crisis and the stock market, if i look at my own 401(k), has rebounded. thet just, basically, liquidity that has been pumped into the system? help me understand this gap. >> it is mostly liquidity and the system andn also some elements of confidence. you have vaccines in the process of development. 04 130t that we will go 130 seemste -- 0 for
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remote. i think people are much more optimistic that that is going to occur on a timeframe that is way different than the development of vaccines was in the past where the fastest one was like 4.5 years and people have optimism that, within the next nine months, we will have enough positive -- could be a year -- outcomes from trials that we will get there within the year to start really producing large-scale vaccines. there are other therapeutic breakthroughs that are occurring if you get the virus. the second thing i would say about these cases going up -- how could one believe that they would not? i do not find that surprising. people have been locked up in their homes for two to three months.
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when you let them out, they will be more socialization -- there will be more socialization and people not understand, truly, that this can get them sick. that, in the appropriate government response -- and the appropriate government response will be to, first, warm people. democracies, they apparently would like to see bad things happen before democracies respond. i expected this to happen. i think the markets did. that will be put under better control because there is no option. nobody really wants to get sick, so you will have change in behavior as the number of cases goes up. and eventually, that will be beaten down. see a big v in
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terms of the economy going up for the next few months because it has been closed. and as people are allowed to go back, the economy will really respond a lot, but there is only so much the economy -- which is highly complex -- can respond just because not all things go up equally and it will take quite a while before we sync up and get back to 2019 levels. >> so steve, when i think about your experience, i know that blackstone is a place where you are always looking at opportunities and new opportunities in many ways. i think back to the turn of this century and the big bet and a lot of investments you made in real estate. i think about the last financial crisis and how heavily you
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invested into credit. what is something you are doing now? take us inside blackstone that might help us understand opportunities that exist in this crisis. >> this one is different. they are always different. the easy things to have been doing was, you know, when you hit that bottom because he did not know it was the bottom, to be banking significant -- to be making significant investments. invested in securities and that has had a happy outcome. that, more in addition to and that is the first stage. each of ourt -- businesses are seeing interesting opportunities, and,
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you know, as technology is changing things and people are staying home more, the areas where you would want to invest, whether it is technology or health care, are being modified. certain older economies that are bound to be disrupted, those types of companies are places where, unless you have a really remarkable management, you would be wanting to stay away from. we can see different parts of the economy opening faster. some things were closed completely. interestingly, in the hotel , one hotel in las vegas is completely closed. the first weekend it opened, it was 45% filled. that is an astonishing thing because las vegas is barely open.
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there will be some surprises. not all hotels. but as you look at the gradation of places where you can drive will recover much faster. places where you have to fly will recover much slower. if you have to fly over oceans, those will be the slowest recovery types of investments. each of our businesses is starting to really put out money. -- ouriness lines business lines. and there is a much better tone. to do private investing, there has to be confidence on both sides. the people investing think they are getting fair value and the people who are buying think they are getting their value, so there is an overlap.
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if you are doing private investing, sellers do not like to sell at bottoms. ,ou can buy liquid securities cmbs and other things that are stacks where you can find the security where you think it has the most upside, even if you think it is going up halfway from where it started. some of these will continue to go up. others have already returned to par. outs an issue of figuring which of the underlying businesses are going to return to health. thate taking a basic view it is not particularly interesting to buy, you know, securities in challenged businesses, challenged business models. those things trade it very deep discounts, and at those companies make it, that is a good thing, the chance that some of these will recover as nicely as you want is perhaps
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compromised in this cycle because of the impact of technology and changed behavior of people. we have made a huge amount of money continuing to build our warehouse platform. we are either the largest or the second-largest in the world. we bought about one billion square feet of warehouses. why did we do that over the last 10 years? we saw the online business exploding and we saw that regular retail was going to get really hurt as consumers changed. the pandemic has accelerated trends that might have taken five years and made it happen in three months. we are very mindful of these ares of changes and investing around those types of
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changes. so, steve, when you think about how wall street may change out of this, it clearly changed after the financial crisis and, candidly, blackstone was a big beneficiary of that. your business grew at an enormous rate. how does wall street change on the back of this particular crisis in your estimation? >> if you take the different parts of wall street, the banking community, i think the banking community went into this crisis very strong and they are going to come out strong. that is a big change from the last financial crisis. area, ioney-management think the index fund business will continue to gain share because it has not been battered all to ben bad at along in equities.
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by the same token, the alternative class will also continue to attract a lot of money. managers in the middle were sort of disadvantage. i think their performance will end up being better than people thought. so there will be a little more stability, but basic trends -- there, steve schwarzman blackstone founder and ceo. if you want to follow on, go to the bloomberg terminal. annualup, apple's developer conference underway. we will discuss. this is bloomberg. ♪
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>> welcome to bloomberg markets. vonnie: i am vonnie quinn. we are joined by our audience. here is what we are following. apple's worldwide developer conference underway. the retail event already making some headlines on social issues and iphone development. the bloomberg invest global summit. we are hearing from the president of the world's largest exclusive shortselling investment firm. that is coming up in a few minutes. amanda. >> a check on the markets. we are seeing positive action. s. are watching the tech waiting to see if there is any
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reaction from the apple conference. we are seeing positive action. the s&p still broadly higher. at 2% move higher for apple computers as people focus on some of the new features they are talking about. i want to welcome kailey leinz for a check on the overall markets. obviously, there has been plenty for these markets to chew on in terms of reopening and fears of second waves and some news on the tech front. open higher even though futures on the s&p 500 pointed to a positive open. that is because on friday, futures fell after the close. that level of resistance is really 3115. at this moment, we are just below that level. we will meet that resistance once again. we are trading around 3113 on the s&p at this moment. investors seem to be not worried
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about the fact that covid cases in the u.s. are rising. when you look at the equity market, what is outperforming is really big tech, microsoft and of course apple ahead of that conference. they are seen as more of a hand insulatedmic haven from any kind of negative impact a resurgence could have. you or seen the likes of utilities outperform as temperatures are rising throughout the u.s., boosting demand for electricity. retail and apparel leading the economies move towards reopening. here in new york, phase two. retail can reopen its doors. i want to focus on the tech rally. apple, microsoft, amazon keep climbing higher. if we see a second wave of the virus, they are seen as more insulated, perhaps even in higher demand if they have to --
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if people have to stay home. they can better whether a worse -- they can better weather a worse economic outlook. microsoft and amazon for their 1.5.each worth more than vonnie: halfway into the session. --nda: we are keeping an eye vonnie: i was going to bring in david. let's get to it. he has been following what has been happening on the worldwide developers stage. david, thank you for joining. we have had it tim cook address the social issues. iphoned on to some of updates, giving us a drip by drip news flow from apple.
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take -- what do you make of what you heard? it was striking, the serious way in which tim cook opened the conference by directly addressing the black lives matter movement, talking about a donation apple has made two related issues, and a program for developers, black developers and minority developers. they also explicitly mentioned the covid crisis. they rapidly transitioned to iphone. i have to say, i think the number of little changes in iphone os they have already unveiled are likely to be quite well received by the iphone users. they are addressing some of the areas people have had difficulty with, particularly finding apps, managing the apps they have, figuring out who they are talking to and a text string,
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which is always a problem. they have simplified that. there is a a lot of interesting things they have announced. in terms of the big things we think they might announce. what are some of the biggest you might be most excited about? beid: most significant would if they played up the move they will definitely make in the near getre on the mac itself to rid of chips from intel and start shipping max with their own chips -- start shipping macs with their own chips. i will be interesting to hear -- it will be interesting to hear what they say about macintosh. apple has incredible design resources when it comes to semiconductors. now they have developed their own chips, which they will soon be making.
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interestingly, they will be making those at a higher technology level than intel is capable of, which is one of the reasons they made that switch. i am watching to see what they do with apple watch. another significant thing predicted is they could come up with a bundle of services offering to take apple tv plus, apple music, and other services, and put them all together in an offering that would allow people to get them at a reduced. . price. there is a lot of things they could do. vonnie: we are getting a lot of updates. announcements, but nothing major. the ipad 14 will have optimized databases. much will tim cook be hoping to expand revenue from services here, given that we are looking at an apple facing heat from
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both the e.u. and the u.s. on this? david: certainly services are where apple needs to grow the most in terms of the long-term margin expansion. in some of their markets, it begins to feel like they are reaching saturation, although certainly they can sell more iphones, a lot more watches. but services are a great way for them to grow their businesses at a profitable rate. certainly with apple tv plus and other services, storage services ofthe cloud, they have a lot things they can expand, grow, and i think a lot of it depends on how they market it and price it. it will be interesting to see how that evolves in the next in this conference, although probably that will come out in the next couple hours if
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they are going to announce it. amanda: one thing that is notable about this conference is that it is virtual, a pandemic era conference. apple is one of the companies that stands to benefit from the changing trends here. what is the significance, and is it good or bad for apple that this is a virtual conference? david: they had a statistic early on that messaging is up 40% recently. they did not put the exact timeframe on that, but the use of imessage has dramatically increased and you have to believe a lot of that is because of the changing lives we are all of ing as we are sort sequestration, confinement, quarantine. so it is a big deal. app, workinged with new data for apple maps coming to the u.k., ireland, and canada. working with some
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carmakers, bmw and ford, on electric charging. these are really incremental changes. they will make the experiments -- experience nicer for users. the question is, during the pandemic, tim cook made it sound like apple has been getting everyone through lockdown and quarantine. onl people spend more money updating their devices posed quarantine given that times are tight at the moment and a lot of people are unemployed, and yet they are, ironically, may be depending on their devices? david: people, all of us, or more dependent on devices than ever. even if money is tight, i think after we feeda and clothe ourselves, that is increasingly central to the lives we lead. that is very significant. i go back to the issue of this
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being a virtual conference. has thei think apple potential to expand their market place by making this a virtual conference. to suchly, the tickets conferences cost $1500. watchyone is able to this, which means developers all over the world are going to be able to come up with new capabilities that can build on top of apple's products. so that is all positive. i think apple has a lot to gain despite the crisis the world is in. mention thisid understanding they will move away from the intel chips. i was just looking at intel to see if there is any market reaction. do you think that is priced in? david: they have not formally announced it yet. we will see what happens. but probably to some extent, it
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is priced and. -- to appleto intel are less than 5% of intel's sales, it will not have a short-term profit impact that will be significant to investors. however, it does underscore something significant. has come for the on theime, fall behind state-of-the-art manufacturing for semiconductors. -- intel ismeasured building chips at 14. . nanometers. are expectedhips to be a five nanometers. that is a more efficient and high-tech way of building chips. too butdibly impressive this is something intel should have been able to get to earlier than it has and it is one of the main reasons it is losing apple's business.
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david: if you are tim cook, are you already looking at november? david: there are so many ways the election could change things for apple. apple is so closely involved with china both in manufacturing and as a market. u.s.-china relations are critical to apple. tim cook has done a better job of maintaining a relationship with donald trump than almost any ceo. he has played his cards well in the trump era. probably he will be hoping quietly that we have a much healthier relationship with china regardless of who takes over next january. even if it is trump again, you may be thinking he could be hoping to talk trump into a milder approach. one could reasonably expect that biden would handle china a lot
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apple's scale, its global business presence is so vast that everything affects them. so yes, the election will change the mood, change the nature of global geopolitics, which affects them tremendously. vonnie: wonderful to have you on, particularly on apple days. that is david kirkpatrick. apple up about 2%. apple is adding automatic switching for earphones between devices. we go to karina mitchell. >> let's get to the first word news. north and south america account for almost two thirds of new coronavirus cases. the death toll in brazil has surpassed 50000 and cases across the u.s. surge.
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florida reported more than 4000 cases on saturday, a record. a victory for trump in court. justices rejected an industry challenge to the president's tariff on fuel products. place and muchin of the world. -- in much of the world. defense lawyers for a man charged with the downing of malaysian flight are rejecting claims that the plane was shot down by a missile. three russians and ukrainian are charged with murdering all 298 people on board the flight. global news 24 hours a day on air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in over 120 countries. i am karina mitchell. this is bloomberg. at the coming up, back
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bloomberg invest global summit. jim.ll speak to ♪
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vonnie: this is bloomberg markets. i am vonnie quinn alongside amanda laying. scarlet fu is sitting down with jim chanos. let's listen in. speculative fever kicked up a few notches in the
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first quarter of 2019, the first couple months of 2020. the covid selloff in march punctured that for about three weeks. it has come back with a vengeance in many cases. in many cases, stocks are trading meaningfully above where they were in january and february in our corner of the world. so i think that the massive central bank liquidity injections have certainly emboldened investors to feel the fed has their back if you will. >> i like that term emboldened investors. -- a short opportunity [no audio] >> i am losing you.
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>> you're saying? would -- could you repeat the question? it is aels like national embarrassment for germany because a quarter of its balance sheet has gone missing. is there a corporate fraud going on or is this something more mundane like an overleveraged balance sheet, a flawed business model? >> we think the evidence has been piling up. ins was our largest position global sure accounts and hedged accounts. we think the evidence was almost irrefutable by late last year that something was very wrong here. management statements about the delayed audits increasingly seemed to be at odds with what
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we were actually hearing and seeing. the $2.1 billion, 1.9 billion euros went missing and now appears to have never beliefere was always our that this company was probably never profitable. the senior executives may need some questioning, shall we say, on that account. this is an amazing story. this company had all kinds of signs reported by media going back a year or two now with evidence, evidence presented. and people still gave the company the benefit of the doubt over and over again until they could hide it no longer with the delay of the audit. study, ifmazing case you will. i think i will be teaching it in my history of financial fraud
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class. whether wirecard or any of those companies you're keeping an eye on where using -- were using pro forma metrics. i know that is something you have seen with a lot of companies you're skeptical on. perhaps things in silicon valley having to do with the gig economy. jim: wirecard did not really abuse the pro forma metrics we talked about over the past couple years. it appears to be something much more basic than that. oneng said that, i do think of the real abuses going on right now is the use by companies of their own devised metrics to tell investors, well, we are not really musing -- not really losing money. we are actually profitable. it is one thing to add back depreciation for some companies
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-- although that is a really extends -- expense for most and we couldll -- go right down the list. there is all kinds of things i suspect will be added this year because. . , someid increasingly companies are devising their own metrics. it is one place where the regulators could do a better job adhereing companies to to not there own made-up numbers -- not their own made-up numbers. tesla.nt to talk about you have been publicly short. the problematic behavior of elon musk is well-known. the stock has quadrupled in the past year. it keeps trading like a growth
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y tech startup. are you still short and is there anything that would make you consider throwing the towel in on this short? jim: we are still short. you put your finger on it. the market is still saying this is a tech company. i put out a spread should -- spreadsheet every quarter. it looks like every other auto oem. it is a tough business. will be, withes this quarter, will be flat for the last six quarters. -- i knowrowth story people are counting on all kinds of growth going forward, but the fact of the matter is the company's rate of growth has slowed dramatically. in north america, we think they peaked out in terms of auto
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shipments last year. in europe, this year. china is the growth area for them. this company is trading at $200 billion total enterprise value, eight times revenue. most automakers trade between one quarter and one half of revenues. this is totally a perception by the market that there is some cutting-edge technology here. the problem is that what everybody is excited about, whether it is batteries or autonomy, tesla is not a market leader. audi head level three autonomy while tesla is still at level two. has everyone seen the videos of a family in a tesla slamming into semi trucks? it is something.
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this company is a wonderful barometer of where people's becausee on companies people see it how they want to see it. the product of tesla has always been first rate has been the narrative. >> you do not necessarily see fraud going on. there might be some accounting irregularities, perhaps? that is something david einhorn has pointed out. he talks about the accounts receivable at the end of the first quarter. do you think there is fraud going on it tesla? jim: we have plenty of questions about the numbers, plenty of questions about management veracity. is gou have to go to do to the solarcity acquisition and what went on after. i could go on and on. it is a company where we have
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seen a revolving door of executives. chief councils come and go quickly. let's say that i think the accounting side of the story is important, but the extreme, extreme valuation relative to its reality is much more important. case, why is the didn't the risk off in march do further damage to tesla? if the crash did not take them out -- tonda: we are listening scarlet fu and jim chanos at our bloomberg global summit. we will take a break here. and for bloomberg viewers, we will take you back to scarlet. >> it is the rebound that has been just as strong, but the stock went down much more than the market. it?ou are still short on jim: yes. >> let's talk about electric
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truck maker nickela. there are hopes there -- they would be a tesla disruptor in the future. do you have a position? and if not, what would make you consider making -- taking a position? >> i am amused it has taken this long given that tesla has been so successful selling a narrative. i am shocked it took someone else this long to figure that out and try to sell a narrative. let's leave it at that. >> the narrative is always key here. another transport name your sure on is a company that is called hertz of brazil. you see a lot of parallels between the companies. explain your thesis. jim: we have been short hertz for the last few years.
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i publicly said i did not think they would survive the next recession, and they did not. atng our work and looking rental car companies around the world, we were struck by one in particular that seems to be going down the same road hertz went down, no pun intended, from a couple years ago. what got hurt in trouble was that despite -- what got hertz and trouble was that despite its meager profitability, it was expanding its balance sheet. every incremental car was bringing them less in terms of profits. ultimately, we figured that would catch up to them. one of the largest rental car companies in brazil is doing the same thing. it is basically growing its balance sheet and its capital multiples more than its revenue and cash flow. it is borrowing to do it. despite that, the company is trading at 40 times next year's
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earnings, 17 times another car-rental company. more importantly, it's marginal return on capital is going through the floor. on top of that, huge chunk of their customers or their uber drivers -- are their uber drivers. you know, the car-rental business is not a lot different around the globe. it is a pretty similar business model. inyou look at this company their attempt to take market share, they are growing their balance sheet so fast relative to cash flow we think it will be a problem down the road. >> scarlet: let's go from brazil to your favorite country, china. u.s.-china relations are only worsening, no matter who is in
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the white house in november. explain how this plays out when beijing will be the backstop for the financial system the same way the federal reserve the backstop for u.s. cities. >> china is interesting. it has come off the financial pages with covid and the trade war issues. i heard steve schwarzman discussing it as well. what is constant about china is ath situation. this is put a damper on chinese equity returns over the past 10 years. when we got bearish on china, the large-cap china etf was about $40, and i think it is around their now. it has gone nowhere in 10 years. part of the problem is that in terms of the large-cap chinese


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