Daybreak Weekend: US Home Sales, Europe Stocks, Softbank Investment

Bloomberg Audio Studios, Podcasts, radio News. This is Bloomberg day 0:00:11.920 --> 0:00:14.240 Break Weekend, our global look at the top stories in 0:00:14.280 --> 0:00:16.560 the coming week from our day Break anchors all around 0:00:16.560 --> 0:00:19.120 the world. Straight ahead on the program, and look ahead 0:00:19.120 --> 0:00:22.520 to some fresh new home sales data and what the 0:00:22.640 --> 0:00:26.120 US housing sector has insored with twenty twenty five. Also 0:00:26.520 --> 0:00:29.320 what to expect next year in the US retail market. 0:00:29.560 --> 0:00:31.160 I'm Tom Busby in New York. 0:00:31.240 --> 0:00:34.200 I'm Stephen Carolyn London. We're asking what's on the horizon 0:00:34.280 --> 0:00:37.000 for Europe's stock markets in twenty twenty five. 0:00:37.280 --> 0:00:40.400 I'm Derek Prisoner, looking at SoftBank's announcement of a major 0:00:40.520 --> 0:00:44.000 investment in the US, as well as a potential merger 0:00:44.120 --> 0:00:45.360 of Honda and Nissan. 0:00:46.600 --> 0:00:50.840 That's all straight ahead on Bloomberg Daybreak Weekend on Bloomberg 0:00:50.880 --> 0:00:54.760 eleven three on New York, bloombergon ninety nine to one, Washington, DC, 0:00:55.200 --> 0:01:01.280 Bloomberg ninety two nine Boston, DAB, Digital Radio, London one, 0:01:01.640 --> 0:01:04.400 and around the world on Bloomberg Radio, dot Com and 0:01:04.520 --> 0:01:05.759 the Bloomberg Business App. 0:01:10.440 --> 0:01:12.440 Good day to you. I'm Tom Busby, and we begin 0:01:12.480 --> 0:01:15.880 today's program with a fifty trillion dollar US housing sector 0:01:16.319 --> 0:01:19.560 twenty twenty four a dismal year for housing because of 0:01:19.640 --> 0:01:22.399 sky high home prices, stubbornly high lending rates, and so 0:01:22.520 --> 0:01:24.880 few homes on the market. This year on track to 0:01:24.959 --> 0:01:27.680 be one of the slowest in decades for home sales, 0:01:27.720 --> 0:01:30.080 but there have been some bright spots. We could see 0:01:30.120 --> 0:01:33.160 another on Tuesday with November new home sales data, and 0:01:33.240 --> 0:01:35.480 there's hope for the year ahead. For more on what 0:01:35.520 --> 0:01:37.800 to expect along with his outlook for home building and 0:01:37.880 --> 0:01:40.679 sales in twenty twenty five, we're joined by Drew Redding, 0:01:41.000 --> 0:01:44.480 Bloomberg Intelligence, US home building analyst. Drew, thank you so 0:01:44.560 --> 0:01:45.400 much for being here. 0:01:45.520 --> 0:01:47.000 Thanks for having me well. 0:01:46.800 --> 0:01:49.440 After we saw last week existing home sales for November 0:01:49.520 --> 0:01:52.600 rose nearly five percent, what do you expect to see 0:01:52.640 --> 0:01:55.960 this Tuesday in that November new home sales report? 0:01:56.520 --> 0:01:58.800 So for the new home market, we do expect to 0:01:58.840 --> 0:02:01.960 see a pretty ch sequential bump, just like we saw 0:02:02.040 --> 0:02:05.760 with housing starts. You're probably going to see a snapback 0:02:05.920 --> 0:02:07.960 in the South, which was down in with thirty percent 0:02:08.000 --> 0:02:11.320 sequentially last month due to the disruption from the hurricanes. 0:02:12.080 --> 0:02:15.000 So we should see a nice pickup with that being said, though, 0:02:15.080 --> 0:02:17.760 you know, while the new home market has outperformed. The 0:02:17.800 --> 0:02:20.480 recent rise in rates to more than seven percent has 0:02:20.480 --> 0:02:24.200 definitely slowed activity in the market. We recently heard results 0:02:24.200 --> 0:02:26.640 from Lenar, who's the second largest builder in the country 0:02:26.680 --> 0:02:30.400 and one who's focused on driving higher volumes, and basically 0:02:30.440 --> 0:02:33.200 their orders were more than ten percent below the low 0:02:33.320 --> 0:02:35.720 end of their guidance. So, you know, while the new 0:02:35.720 --> 0:02:39.080 home market has outperformed with affordability as bad as it 0:02:39.120 --> 0:02:41.200 is in rates actually creeping up, we are seeing a 0:02:41.240 --> 0:02:42.240 slow down there as well. 0:02:42.760 --> 0:02:45.440 Now are you seeing that slow down nationwide or is 0:02:45.480 --> 0:02:48.320 it in the south where you know where Lenaar is 0:02:48.840 --> 0:02:51.680 or you also heard from Toll Brothers recently too, saying 0:02:51.880 --> 0:02:53.600 they see a bit of a slow down, right that's 0:02:53.639 --> 0:02:55.560 a East Coast high end builder. 0:02:56.560 --> 0:02:58.800 Yeah, that's a good question because when we look into 0:02:58.800 --> 0:03:02.880 twenty twenty five, we see regional dynamics taking more of 0:03:02.919 --> 0:03:05.520 a front seat to how the builders actually perform. Now, 0:03:05.840 --> 0:03:08.440 the challenges we're seeing on the affordability side, and you 0:03:08.440 --> 0:03:11.200 know with higher rates and how that's compacting demand that's 0:03:11.240 --> 0:03:14.480 across the nation. Everybody's experiencing that. But when you look 0:03:14.480 --> 0:03:16.880 at local markets, are some issues that you have with 0:03:17.080 --> 0:03:20.160 supply and a lot of that is in the South. 0:03:20.240 --> 0:03:23.880 So inventory levels have been a big part of the discussion. 0:03:24.240 --> 0:03:25.920 You know, over the last couple of years, not a 0:03:25.919 --> 0:03:29.440 lot of resale supply, so builders have benefited. But now 0:03:29.440 --> 0:03:33.240 we're starting to see existing home supply meet or even 0:03:33.280 --> 0:03:36.080 exceed twenty nineteen levels. And where we're seeing that the 0:03:36.120 --> 0:03:39.320 most is in markets in Florida and Texas, which are 0:03:39.360 --> 0:03:41.880 among the most important markets for the builders. So that's 0:03:41.880 --> 0:03:44.120 something that we have to keep our eye on as 0:03:44.160 --> 0:03:45.200 we look out the next year. 0:03:45.400 --> 0:03:48.560 So inventory is going up in the hottest housing market 0:03:48.640 --> 0:03:52.400 since the COVID nineteen hit, is that mean they've matured 0:03:52.520 --> 0:03:53.720 or saturated the market? 0:03:54.640 --> 0:03:57.240 So there's been a lot of construction there. You know, 0:03:57.480 --> 0:03:59.800 in Florida, one of the problems you have is with 0:03:59.840 --> 0:04:02.720 all the storm related activity, you have more homes coming 0:04:02.720 --> 0:04:05.360 on the market. The condom market has really slowed down. 0:04:05.920 --> 0:04:09.160 I think you probably have some people who invest it 0:04:09.200 --> 0:04:12.760 in rental properties perhaps putting their homes back on the market. So, 0:04:13.200 --> 0:04:15.560 you know, those were two of the strongest markets certainly 0:04:15.640 --> 0:04:18.840 since COVID, we saw a lot of migration into Florida 0:04:18.920 --> 0:04:21.080 and Texas, which is starting to slow down as well. 0:04:21.160 --> 0:04:24.280 So I think part of it is, you know, market saturation, 0:04:25.440 --> 0:04:27.520 which is leading to those higher mentories, and what we 0:04:27.560 --> 0:04:30.560 think you could see is a shift in the competitive dynamic. 0:04:31.160 --> 0:04:33.920 So as I mentioned, builders have benefited from a lack 0:04:33.960 --> 0:04:36.080 of resale supply, so as more of that comes on, 0:04:36.600 --> 0:04:38.240 we think they're going to have to continue to get 0:04:38.279 --> 0:04:42.240 more aggressive, aggressive on pricing and incentives which could put 0:04:42.320 --> 0:04:44.279 pressure on prices in those local markets. 0:04:44.520 --> 0:04:47.960 And some of those incentives not just financing, but also 0:04:48.120 --> 0:04:53.920 upgrades on appliances, courts, cabinets, you know that type of thing. 0:04:54.000 --> 0:04:54.640 Is that what you mean? 0:04:55.440 --> 0:04:57.680 Yeah, that's right. I think you know, for the most part, 0:04:58.000 --> 0:05:01.200 you'll see the financing incentives used by the lower end 0:05:01.240 --> 0:05:03.200 of the market, so entry level buyers and maybe the 0:05:03.200 --> 0:05:05.840 first time move a buyer. But when you start to 0:05:05.920 --> 0:05:09.680 kind of get up the income spectrum, think of a 0:05:09.720 --> 0:05:12.479 Toll Brothers home buyer, typically you're seeing them use any 0:05:12.480 --> 0:05:15.000 incentive dollars to make upgrades to the house. So it's 0:05:15.000 --> 0:05:17.080 a little different depending on what part of the market 0:05:17.120 --> 0:05:17.920 you're talking about. 0:05:18.440 --> 0:05:20.960 You would think with the Federal Reserve lowering rates for 0:05:21.000 --> 0:05:23.520 a third time to end this year, that you know, 0:05:23.640 --> 0:05:25.760 happy days are here. We're going to see lower rates, 0:05:25.760 --> 0:05:29.159 but there's no indication of that in the mortgage lending market, 0:05:29.200 --> 0:05:30.200 is there not yet? 0:05:30.720 --> 0:05:32.760 No, there's not. And you know, as I mentioned earlier, 0:05:32.760 --> 0:05:35.720 we're actually above seven percent now. I think last time 0:05:35.760 --> 0:05:39.800 I checked her about seven on the thirty year, So 0:05:39.880 --> 0:05:42.520 we're up about one hundred basis points since the Fed 0:05:42.600 --> 0:05:46.000 started cutting rates, which isn't what a lot of people 0:05:46.040 --> 0:05:48.039 were expecting. You know, A lot of that has to 0:05:48.040 --> 0:05:50.240 do with the fact that you still got a solid economy, 0:05:50.720 --> 0:05:53.320 and I think some of the policies put forth by 0:05:53.320 --> 0:05:57.719 the new administration are expected to perhaps be inflationary, which 0:05:57.760 --> 0:05:59.920 is why the market is reacting the way it has. 0:06:00.360 --> 0:06:02.799 Wow, a lot of challenges in twenty twenty four looks 0:06:02.800 --> 0:06:05.440 like a lot ahead well our thanks to Drew Redding, 0:06:05.480 --> 0:06:09.719 Bloomberg Intelligence US home Building Analyst. We move now to 0:06:09.760 --> 0:06:12.720 the US retail sector, how it's faring during this make 0:06:12.800 --> 0:06:15.479 or break Christmas holiday season, and what to look for 0:06:15.640 --> 0:06:18.560 in twenty twenty five and for more. We're joined by 0:06:18.640 --> 0:06:24.120 Mary Ross Gilbert Bloomberg Intelligence, senior equity analyst covering retail Well, 0:06:24.160 --> 0:06:27.320 no doubt, Mary, Americans continued to spend a ton of 0:06:27.360 --> 0:06:32.120 money at stores restaurants, auto dealerships, travel and more, despite 0:06:32.160 --> 0:06:35.240 stubbornly high inflation affecting them along with a lot of 0:06:35.279 --> 0:06:39.800 economic uncertainty. How has the retail sector fared this year, 0:06:39.960 --> 0:06:42.600 especially the last few weeks leading up to Christmas. 0:06:43.680 --> 0:06:47.440 Yeah, so the retail sector has actually been doing quite well, 0:06:47.520 --> 0:06:49.600 and we got that with data that came out this 0:06:49.680 --> 0:06:53.560 past week with GDP coming in at three point two percent, 0:06:54.040 --> 0:06:56.680 ahead of estimates of two point eight and that's really 0:06:56.800 --> 0:07:00.320 driven by consumer spending. So when you look at the 0:07:00.320 --> 0:07:03.680 retail sector, we think that some of the retailers that 0:07:03.720 --> 0:07:07.000 could outperform. Two that really come to mind on the 0:07:07.040 --> 0:07:12.360 specialty apparel side would be Aritzia, an Abercrombie and Fitch, 0:07:12.400 --> 0:07:15.320 and we were looking at consumer transaction data during this 0:07:15.400 --> 0:07:20.680 holiday season and they're tracking well ahead of estimates right now. 0:07:21.320 --> 0:07:24.640 In the department store space, if you look at the 0:07:24.680 --> 0:07:28.400 players there, you've got Nordstrom, and Nordstrom also has an 0:07:28.400 --> 0:07:33.480 off price concept which also caters to consumers looking for values. 0:07:33.520 --> 0:07:37.640 Speaking to high inflation that we're experiencing right now, we 0:07:37.720 --> 0:07:42.480 think Nordstrom could be a leader in terms of outperforming 0:07:42.600 --> 0:07:46.320 estimates out there. And then it looks like Macy's is 0:07:46.360 --> 0:07:50.239 tracking a little bit ahead. Cole's is kind of close, 0:07:50.480 --> 0:07:52.880 but they could be at a greater risk of missing 0:07:53.320 --> 0:07:56.440 and that's mainly due to merchandise issues that they've had. 0:07:56.560 --> 0:07:59.400 So the estimates for them is for comp sales to 0:07:59.440 --> 0:08:03.239 decline seven percent in the quarter. In the off price sector, 0:08:03.800 --> 0:08:07.360 we think they're going to benefit from strong sales during 0:08:07.400 --> 0:08:10.080 the holiday season. They tend to be a big draw, 0:08:10.360 --> 0:08:14.400 especially as we get closer to Christmas. Right now, according 0:08:14.400 --> 0:08:17.960 to consumer Transaction data, their sales are tracking in line 0:08:17.960 --> 0:08:21.760 with estimates, so we think they could be an outperformer 0:08:21.800 --> 0:08:23.440 as well in the space. 0:08:23.880 --> 0:08:24.040 Now. 0:08:24.040 --> 0:08:27.480 The off price center is obviously attracting a lot of 0:08:27.760 --> 0:08:32.360 lower wage earners other consumers, but some consumers have changed 0:08:32.360 --> 0:08:36.120 their shopping routines because of high inflation, higher wage earners 0:08:36.360 --> 0:08:39.640 shopping where they've never shopped before. Is that right, That's 0:08:39.679 --> 0:08:40.480 absolutely right. 0:08:41.000 --> 0:08:44.160 It's happening at off Price, and it's also happening at Walmart, 0:08:44.760 --> 0:08:49.120 and so Walmart is able to capture additional share in 0:08:49.559 --> 0:08:53.920 other categories such as apparel in general merchandise when they 0:08:53.960 --> 0:08:57.240 have those higher end consumers in their shopping groceries for 0:08:57.280 --> 0:09:01.400 the lower prices an off price. They're also these higher 0:09:01.480 --> 0:09:05.479 end consumers are able to get even the designer brands. 0:09:05.800 --> 0:09:10.120 They're able to get Gucci Praduct. 0:09:10.440 --> 0:09:11.280 You know, all of. 0:09:11.200 --> 0:09:14.760 These brands will also have some of their products in 0:09:14.800 --> 0:09:17.640 the stores. So it does have the higher end, it 0:09:17.679 --> 0:09:19.880 also has the middle end and the low end in 0:09:19.960 --> 0:09:24.800 terms of brand breadth across off price, and so that's 0:09:24.840 --> 0:09:25.600 been a big draw. 0:09:26.520 --> 0:09:31.320 Now Walmart, what have they done right? Walmart stock is 0:09:31.320 --> 0:09:33.520 of eighty percent this year. They have hit it out 0:09:33.520 --> 0:09:36.520 of the park. What is it that they've really latched 0:09:36.520 --> 0:09:37.080 onto here? 0:09:38.040 --> 0:09:40.720 Walmart has really done a good job in a number 0:09:40.760 --> 0:09:45.760 of ways. One is with their delivery, and they have 0:09:45.960 --> 0:09:51.160 this Walmart Plus program where you get free delivery usually 0:09:51.280 --> 0:09:55.160 same day. Frankly, even without using that you can get delivery, 0:09:55.200 --> 0:09:57.560 so you can buy all your household goods that way. 0:09:57.840 --> 0:10:02.840 But most consumers really like to shop up weekly in store, 0:10:03.400 --> 0:10:07.439 and so while they're there, they're able to capture other merchandise. 0:10:07.559 --> 0:10:11.240 So they're just doing a really good job executing and 0:10:11.320 --> 0:10:13.679 really delivering what the consumer wants. 0:10:13.520 --> 0:10:16.560 So groceries, necessities and everything else as well. 0:10:16.640 --> 0:10:17.719 Huh exactly. 0:10:18.160 --> 0:10:18.400 Wow. 0:10:18.480 --> 0:10:20.680 Now, we have seen though a lot of store closures 0:10:20.679 --> 0:10:25.280 over the past year, Family Dollar, CVS, Macy's also dozens 0:10:25.320 --> 0:10:28.400 of bankruptcy filings, big lots Rout, twenty one, Express, the 0:10:28.400 --> 0:10:31.120 Body Shop. Do you expect to see even more? I mean, 0:10:31.240 --> 0:10:36.680 is the retail environment that cutthroat that tough and with 0:10:36.960 --> 0:10:40.360 the e commerce you know that factored in? Is it 0:10:40.360 --> 0:10:43.480 getting tougher for smaller retailers if you're not Walmart, Target, 0:10:43.520 --> 0:10:44.960 Coals or some of the others. 0:10:45.640 --> 0:10:49.559 It really comes down to a retailer by retailer basis, 0:10:49.600 --> 0:10:52.200 and it also depends on how levered they are. So 0:10:52.400 --> 0:10:54.920 usually it's the ones that have a lot of debt 0:10:55.400 --> 0:10:57.319 and where they're mis executing. 0:10:57.880 --> 0:10:59.000 So for example, if you. 0:10:58.960 --> 0:11:02.440 Look at Cole's, holes piled on extra debt when they 0:11:02.800 --> 0:11:05.800 ended up doing a stock repurchase a few years ago, 0:11:05.800 --> 0:11:08.800 it was about a seven hundred million cash that they 0:11:08.960 --> 0:11:13.760 spent on repurchasing their The business is underperformed, and even 0:11:13.800 --> 0:11:16.640 this year when they were supposed to be showing traction 0:11:16.760 --> 0:11:20.160 with a turnaround, and they have so fora so they 0:11:20.200 --> 0:11:23.880 are getting consumers in and the sofora business is up 0:11:24.000 --> 0:11:27.960 nine percent on a comp basis, but the overall comp 0:11:28.080 --> 0:11:32.240 sales are down six to eight percent. In the latest quarter, 0:11:32.440 --> 0:11:36.120 and part of it was just mis executing. They took 0:11:36.840 --> 0:11:40.160 some of their private brands and shrunk it in the store, 0:11:40.360 --> 0:11:43.280 and that those private brands were a great draw to 0:11:43.320 --> 0:11:46.160 the lower end consumer and that's where they got hurt. 0:11:46.440 --> 0:11:49.720 So now they're having to backtrack and bring back in 0:11:49.880 --> 0:11:53.240 those brands. They also took out jewelry when they brought 0:11:53.240 --> 0:11:57.200 in sofa and jewelry was really important, especially when you 0:11:57.240 --> 0:12:00.800 think about the holidays. So it's going to take some 0:12:00.920 --> 0:12:05.240 time for them to turn around. So they're struggling right now. 0:12:05.280 --> 0:12:08.360 But some of the other companies Nordstrom. Nordstrom is really 0:12:09.160 --> 0:12:12.000 up their game with their full line business and that's 0:12:12.200 --> 0:12:15.400 now comping positive. And then of course they also benefit 0:12:15.440 --> 0:12:18.760 from having the off price it's a fast growing off 0:12:18.840 --> 0:12:22.720 price business, so that's helping Nordstrom sort of lead I 0:12:22.760 --> 0:12:25.640 think in the department store space. And you spoke about 0:12:25.679 --> 0:12:29.080 Macy's closing stores. Yes, they will be closing about one 0:12:29.160 --> 0:12:31.720 hundred and fifty stores. They haven't happened yet. They always 0:12:31.760 --> 0:12:34.880 wait until after the holiday. Solvill is shutting sixty five 0:12:34.960 --> 0:12:38.680 stores when their quarter ends at the end of January, 0:12:39.080 --> 0:12:41.240 and then of course they'll close the other eighty five 0:12:41.320 --> 0:12:43.640 over the next two years, and maybe they'll be able 0:12:43.640 --> 0:12:45.640 to accelerate it and get it done next year. 0:12:46.120 --> 0:12:48.079 Loom Boy, Well, a lot to look forward to. Our 0:12:48.120 --> 0:12:52.160 thanks to Mary Ross, Gilbert Bloomberg Intelligence senior equity analysts 0:12:52.400 --> 0:12:55.360 covering retail and coming up on Bloomberg day Break weekend, 0:12:55.679 --> 0:13:00.000 we'll look at what's on the horizon for Europe's stock markets. 0:13:00.040 --> 0:13:13.360 Tom Busby and this is Bloomberg. This is Bloomberg day 0:13:13.400 --> 0:13:15.640 Break weekend, our global look ahead at the top stories 0:13:15.679 --> 0:13:18.319 for investors in the coming week. I'm Tom Busby in 0:13:18.400 --> 0:13:21.360 New York. Up later in our program, we'll discuss soft 0:13:21.360 --> 0:13:24.559 Bank announcing a major investment in the US, as well 0:13:24.559 --> 0:13:27.680 as a potential merger of Honda and Nissan. But first, 0:13:28.080 --> 0:13:32.680 in twenty twenty four, Europe's political situation has been decidedly rocky. 0:13:32.760 --> 0:13:36.120 The Block's two largest economies, France and Germany, both facing 0:13:36.160 --> 0:13:41.280 tumultuous governmental shifts, sending shockwaves reverberating around the continent and 0:13:41.520 --> 0:13:45.160 in its economies. Will twenty twenty five bring better fortunes 0:13:45.200 --> 0:13:47.880 for European investors? For more, let's go to London and 0:13:47.880 --> 0:13:51.040 bring in Bloomberg Daybreak Europe banker Stephen Carroll. 0:13:51.200 --> 0:13:55.200 Tom European equities this year have underperformed their American peers, 0:13:55.320 --> 0:13:58.640 which have benefited from a high concentration of technology stocks. 0:13:58.760 --> 0:14:01.720 According to Bloomberg Sarah of twenty strategists, the stock six 0:14:01.880 --> 0:14:05.040 hundred index will end twenty twenty five at five hundred 0:14:05.080 --> 0:14:08.960 and thirty five points, indicating gains of less than three percent. 0:14:09.360 --> 0:14:11.400 Compare that with the forecast for the S and P 0:14:11.480 --> 0:14:14.760 five hundred to rise seven and a half percent on average, 0:14:14.840 --> 0:14:18.120 and as much as seventeen percent under the most bullish outlook. 0:14:18.640 --> 0:14:20.520 This year, the European Index is heading for one of 0:14:20.560 --> 0:14:24.920 its worst annual performances against the SMP on record. Despite 0:14:24.960 --> 0:14:27.960 the gap, the index has managed to rally towards the 0:14:28.040 --> 0:14:31.000 year end. The benchmarks up almost one percent in December 0:14:31.040 --> 0:14:35.040 as optimism over potential Chinese stimulus measures boosted sectors most 0:14:35.080 --> 0:14:38.000 exposed to the Eightian nation's economy, such as makers of 0:14:38.080 --> 0:14:41.080 luxury goods and autos. But could there be more trouble 0:14:41.080 --> 0:14:43.720 on the horizon. Twenty twenty five will bring elections in 0:14:43.840 --> 0:14:47.920 Germany also looming. President elect Donald Trump's touted trade tariffs. 0:14:48.240 --> 0:14:51.040 Uncertainty looks to be on the cards during the coming year. 0:14:51.080 --> 0:14:54.680 But some investors are still optimistic. Lucy Baldwin, global head 0:14:54.680 --> 0:14:57.680 of research at City Group Global Markets, says European equities 0:14:57.840 --> 0:15:00.120 will still serve a purpose in her portfolio. 0:15:00.720 --> 0:15:03.560 Clearly, the consensus out there is that you've got a 0:15:03.600 --> 0:15:08.239 set of policies coming through across trade, across fiscal, across immigration, 0:15:08.440 --> 0:15:12.360 and obviously across the regulatory reset that net netter probably 0:15:12.400 --> 0:15:15.280 going to boost US growth, maybe a little bit inflationary. 0:15:15.560 --> 0:15:17.360 Hence this view that you're going to see now less 0:15:17.400 --> 0:15:19.680 rate cuts. You've seen obviously the back ends deepening as 0:15:19.680 --> 0:15:21.920 people are a bit nervous about the fiscal impact on 0:15:22.000 --> 0:15:25.640 of course the overall debt burn that the US is carrying. 0:15:25.720 --> 0:15:27.840 All of those things together I think have obviously given 0:15:27.920 --> 0:15:31.600 rise to this view of US exceptionalism as a trade continuing. 0:15:31.920 --> 0:15:34.040 I think, to be honest, it's really hard to bet 0:15:34.080 --> 0:15:36.760 against it. We'd still be overweight US equities. We're still 0:15:36.760 --> 0:15:40.680 expecting double digit returns just about next year. But what 0:15:40.760 --> 0:15:43.320 we are saying is to barbell it with some other 0:15:43.440 --> 0:15:46.040 exposure around the world. Don't have all of your eggs 0:15:46.040 --> 0:15:48.720 in one basket, so we would barbel it with actually 0:15:48.760 --> 0:15:50.040 some European exposure. 0:15:50.160 --> 0:15:52.240 What is in the US part of that barbell on 0:15:52.280 --> 0:15:55.280 that end. And secondly, what is giving you conviction? Is 0:15:55.320 --> 0:15:57.680 it a valuation story in Europe now or is it 0:15:57.720 --> 0:15:59.720 the ECB is essentially going to be the backstop for 0:15:59.760 --> 0:16:00.840 your Yeah. 0:16:00.680 --> 0:16:02.320 I think you're right. I think there's a range of 0:16:02.360 --> 0:16:05.640 factors for Europe that are potential catalysts. I definitely think 0:16:05.640 --> 0:16:07.720 the path of the ECB to cut is a more 0:16:07.800 --> 0:16:09.520 clear cut one than the US debate. 0:16:09.640 --> 0:16:09.760 Right. 0:16:09.800 --> 0:16:12.240 I think we can see a scenario where you get 0:16:12.280 --> 0:16:15.200 really substantial cutting from the ECB all the way through 0:16:15.200 --> 0:16:17.240 next year, a little bit like the Bank of England story. 0:16:17.280 --> 0:16:20.760 So that's definitely one support slash catalyst. I think another 0:16:20.800 --> 0:16:25.040 could be potential ceasefires resolutions of various conflicts around the globe. 0:16:25.320 --> 0:16:27.920 I think another could clearly be China. So although I 0:16:27.960 --> 0:16:31.080 think the caution on China is that it may well 0:16:31.120 --> 0:16:33.760 be a sort of shorter term fix, we would expect 0:16:33.800 --> 0:16:36.360 to see some fairly substantial fiscal coming through. I think 0:16:36.400 --> 0:16:39.000 that's increasingly becoming the consensus that you're going to see 0:16:39.040 --> 0:16:41.760 that as we go into next year, that China will 0:16:42.320 --> 0:16:44.760 do what is required there to support that market, and 0:16:44.800 --> 0:16:46.960 obviously to try and get the households out there, the 0:16:47.040 --> 0:16:50.440 consumers out there spending, feeling confident. But obviously they've got 0:16:50.480 --> 0:16:54.200 to do that without further jeopardizing the housing market. 0:16:54.280 --> 0:16:56.600 A big bazooka call from China. Is it more marginal 0:16:56.720 --> 0:16:57.480 and incremental? 0:16:58.400 --> 0:17:00.920 I think it could well turn into more of a 0:17:00.920 --> 0:17:03.760 big bazooka call depending on where things go. It's a 0:17:03.840 --> 0:17:06.280 really delicate balance for them, I think, because you've got 0:17:06.280 --> 0:17:09.280 to let that housing market clear somehow. You know, at 0:17:09.320 --> 0:17:11.080 the end of the day, you've got too many properties 0:17:11.119 --> 0:17:14.680 relative to the declining population in big chunks of the country. 0:17:14.760 --> 0:17:18.320 So it's a very difficult thing for them to manage 0:17:18.320 --> 0:17:21.600 that transition away from a very property investment led economy 0:17:21.640 --> 0:17:24.639 into one that is hopefully going to be increasingly about 0:17:24.840 --> 0:17:28.080 GDP being consumption driven. But to make that happen, you've 0:17:28.080 --> 0:17:29.879 got to do it very carefully and thoughtfully. It's going 0:17:29.920 --> 0:17:32.200 to take some time, but we would be surprised if 0:17:32.200 --> 0:17:35.400 you don't see some fairly concerted focus on the fiscal 0:17:35.440 --> 0:17:37.120 side in China as we go into next year, which 0:17:37.160 --> 0:17:40.200 should help Europe and certainly a lot of sectors. Hence, 0:17:40.200 --> 0:17:41.920 for example, our recent upgrade in. 0:17:41.960 --> 0:17:44.560 Luxury talk to US about where else. You're seeing strength 0:17:44.680 --> 0:17:46.640 in European equities as well. So it looks read into 0:17:46.680 --> 0:17:48.879 the Chinese picture too. But is there anything that's a 0:17:48.880 --> 0:17:52.600 bit more domestically focused that actually might look better next year. 0:17:53.200 --> 0:17:53.400 Yeah. 0:17:53.440 --> 0:17:56.600 I think there's going to be some interesting areas where, 0:17:56.600 --> 0:18:00.119 for example, we've had interest and demand from clients to 0:18:00.119 --> 0:18:02.960 look at you names that are exposed to potentially you know, 0:18:03.520 --> 0:18:07.680 a Ukraine rebuild, areas that are exposed to the US story. Right, 0:18:07.720 --> 0:18:10.320 maybe more positively, there's a view, I think forming that 0:18:11.480 --> 0:18:16.040 the tariff trade war risk increasingly morphs into more of 0:18:16.080 --> 0:18:19.920 a negotiating set of tactics, and maybe therefore Europe can 0:18:20.600 --> 0:18:22.840 play some of that to its advantage next year. I 0:18:22.880 --> 0:18:26.520 mean we saw in Trump one point, Oh, the reality 0:18:26.680 --> 0:18:28.720 was that the carmakers, if you want to get access 0:18:28.840 --> 0:18:31.879 European carmakers to the US consumer, you've got to go build, 0:18:32.240 --> 0:18:35.280 invest put your factories up in the United States, employ 0:18:35.400 --> 0:18:38.040 some American workers, and that's how you get your access 0:18:38.080 --> 0:18:40.120 to that market. I think that's likely to be part 0:18:40.119 --> 0:18:41.720 of what we see again this time. So I think 0:18:41.760 --> 0:18:43.520 there's going to be stocks in Europe they're going to 0:18:43.560 --> 0:18:47.679 be positively exposed to a fairly constructive domestic backdrop in 0:18:47.720 --> 0:18:50.760 the US if that is to continue. Clearly that is 0:18:50.800 --> 0:18:53.000 a big, big if, and there are some risks around that, 0:18:53.080 --> 0:18:54.639 but that would be how we think about it. 0:18:54.680 --> 0:18:55.000 Actually. 0:18:55.040 --> 0:18:57.360 Weirdly, in many ways, we think that the biggest wildcard 0:18:57.400 --> 0:18:59.160 next year is actually the US economy. 0:19:00.160 --> 0:19:02.800 Baldwin from City Group there speaking to me on Bloomberg Radio. 0:19:03.000 --> 0:19:03.119 Now. 0:19:03.119 --> 0:19:07.240 Bloomberg's research also offers comfort for investors in that relatively 0:19:07.280 --> 0:19:10.800 few strategists predict major declines for the stocks six hundred 0:19:10.880 --> 0:19:13.159 eighty five percent of them actually see the index closing 0:19:13.160 --> 0:19:17.280 out next year at above five hundred and thirty points. 0:19:17.800 --> 0:19:21.159 In fact, earnings growth expectations for next year spooking some 0:19:21.280 --> 0:19:24.800 market participants. So called bottom up estimates for twenty twenty 0:19:24.840 --> 0:19:28.359 five from analysts studying individual companies see earnings per share 0:19:28.359 --> 0:19:30.920 growth of eight percent for Europe. That's only slightly shy 0:19:30.960 --> 0:19:34.800 of the projections for the US. So guaranteed instability and 0:19:34.840 --> 0:19:37.359 potential profits. What else is in store for Europe's equity 0:19:37.359 --> 0:19:39.960 markets in twenty twenty five. I've been discussing this with 0:19:40.000 --> 0:19:42.320 our senior equities reporter, Michael Masika. 0:19:42.720 --> 0:19:46.639 Let's say nothing went really wrong, but I guess it 0:19:46.720 --> 0:19:50.639 didn't go as right as for the US. Europe is 0:19:51.240 --> 0:19:57.320 you know, kind of have problems with the politics, and 0:19:57.400 --> 0:20:00.000 that has had a big impact on market this year. 0:20:00.520 --> 0:20:03.640 Since the European elections, the stock six hundred has done 0:20:03.640 --> 0:20:08.720 pretty much nothing. And the following French election, the political 0:20:08.720 --> 0:20:13.960 instability that we're seeing in the core European markets now 0:20:13.960 --> 0:20:18.000 we have election in Germany as well coming in next February, 0:20:18.960 --> 0:20:22.840 have been you know, kind of deterring investors from being 0:20:22.880 --> 0:20:24.879 in the European equity market. 0:20:26.080 --> 0:20:30.440 Is that continuing into twenty twenty five, then it will 0:20:30.440 --> 0:20:33.840 political turmoil be the dominant theme of the coming months 0:20:33.840 --> 0:20:34.359 as well. 0:20:35.080 --> 0:20:35.320 Well. 0:20:35.720 --> 0:20:40.520 What's funny this year is normally political instability is kind 0:20:40.520 --> 0:20:43.399 of a temporary thing, and you have a market reacting 0:20:43.480 --> 0:20:46.480 quite strongly at first and then things quite down. And 0:20:46.520 --> 0:20:48.640 you can see that on the bond market, things tend 0:20:48.720 --> 0:20:53.119 to quiet down. But at the same time Europe has 0:20:53.160 --> 0:20:57.240 like a habit of messing things up like that, and 0:20:58.760 --> 0:21:01.880 so yes, I think we can have an overhang that's 0:21:01.920 --> 0:21:06.320 going to remain, especially in France and in Germany, because 0:21:06.480 --> 0:21:09.600 people want to know, investors want to know where things 0:21:09.640 --> 0:21:12.800 are going, how money is going to be spent. Is 0:21:13.320 --> 0:21:15.679 there going to be stimulus in Europe? Those are the 0:21:15.680 --> 0:21:19.800 big questions. It's a sluggish there's a sluggish growth economic 0:21:19.800 --> 0:21:23.639 growth on the continent, and that needs to be addressed. 0:21:23.800 --> 0:21:26.960 And it can't be solely addressed by the ECV, which 0:21:27.000 --> 0:21:30.440 is expected to catch rates quite a few times next year. 0:21:30.520 --> 0:21:33.399 I mean at least four times by the summer, I guess, 0:21:34.800 --> 0:21:38.960 and you know, there's more needed to spur that economic growth. 0:21:39.000 --> 0:21:41.320 And that's the only way that you will have an 0:21:41.320 --> 0:21:46.159 equity market performing strongly, and especially compared to the US. 0:21:46.320 --> 0:21:48.920 What is the comparison. The key issue here is that 0:21:49.080 --> 0:21:52.720 essentially the performance of stocks in the US, and particularly 0:21:52.760 --> 0:21:55.760 some of those AI length stocks, have been so spectacular 0:21:56.000 --> 0:22:00.000 that it's just drawing investor interest, and Europe looks relatively unshre, 0:22:00.040 --> 0:22:01.840 shiny and a bit dull by comparison. 0:22:02.520 --> 0:22:08.479 Yes, exactly. And you have also the impact from passive flows. 0:22:08.720 --> 0:22:10.920 I mean, you got to realize that today seventy five 0:22:10.960 --> 0:22:15.880 percent of the MSCI world is US equities. So when 0:22:16.160 --> 0:22:19.639 you put money into a global fund, it's going to 0:22:19.680 --> 0:22:23.000 be like driven to to the to the US. A 0:22:23.040 --> 0:22:24.280 lot of it is going to be driven to the 0:22:24.320 --> 0:22:27.760 US and so that's that's a that's a problem for Europe. 0:22:27.840 --> 0:22:31.480 So on that side, it makes things much more complicated. 0:22:31.600 --> 0:22:34.840 Having said that, you have a region, which is the US, 0:22:34.840 --> 0:22:40.119 which is price for perfection, I mean, super high earning growth, 0:22:40.440 --> 0:22:45.960 good economic growth, very very high valuations. And on the 0:22:46.000 --> 0:22:49.040 other hand, you have another region which has great companies 0:22:49.080 --> 0:22:52.639 that are heavily discounted to their US peers, that are 0:22:52.720 --> 0:22:56.560 priced to fail. And you know, the symmetrial return is 0:22:56.600 --> 0:22:59.399 a kind of a positive for the for the for 0:22:59.440 --> 0:23:01.800 the continentity should look at that on a relative basis. 0:23:01.840 --> 0:23:05.520 So uh, you know, investors have to be diversified. 0:23:05.680 --> 0:23:07.879 I mean, is that is that the Polish case for 0:23:07.920 --> 0:23:08.879 European equities. 0:23:08.880 --> 0:23:13.640 They're cheap now, well they've been cheap for a while, 0:23:13.720 --> 0:23:17.320 especially compared to the US, and the evaluation gap has 0:23:17.359 --> 0:23:22.040 been widening over the years. But you know, there's a 0:23:22.119 --> 0:23:26.119 point when things can't be ignored and that that's usually 0:23:26.200 --> 0:23:30.160 when when there's a when there's a turning points. So yeah, 0:23:30.160 --> 0:23:34.000 we need a catalyst to to to narrow that gap. 0:23:35.240 --> 0:23:37.560 It won't it won't go back to zero. That's pretty 0:23:37.600 --> 0:23:41.240 much impossible, just given the split in terms of sector 0:23:41.320 --> 0:23:46.200 exposure from the European markets. Uh, we're not as tech 0:23:47.080 --> 0:23:49.720 heavy as the US and valuation in tech a much higher. 0:23:49.760 --> 0:23:54.000 So just on that basis, it's impossible. But there is 0:23:54.160 --> 0:23:57.920 narrowing possible, especially in some sectors like you know, oil 0:23:58.480 --> 0:24:03.639 or mining or industry as where some discounts are still visible. 0:24:04.160 --> 0:24:06.480 What about the sectors that have been leading lights in 0:24:06.480 --> 0:24:09.320 Europe in recent years. I'm thinking about luxury and I'm 0:24:09.320 --> 0:24:12.359 thinking about pharmaceuticals, some of the you know, Novanordous and 0:24:12.400 --> 0:24:14.760 Denmark being one example as well. I mean, what does 0:24:14.920 --> 0:24:17.360 just twenty twenty five look like for those sectors. 0:24:18.160 --> 0:24:19.399 So for the. 0:24:19.440 --> 0:24:24.800 Luxury it's a very specific case because the industry has 0:24:24.840 --> 0:24:30.520 been driven by the Chinese consumer most of mostly during 0:24:30.520 --> 0:24:32.800 the past ten years. And the way the way that 0:24:33.080 --> 0:24:38.160 the sector has been working was eight percent price increase 0:24:38.359 --> 0:24:40.919 and two percent growth a year, and that's how you 0:24:41.000 --> 0:24:45.880 managed to grow your revenues over the years. That might 0:24:45.960 --> 0:24:48.680 not be possible in the year to come. In the 0:24:48.760 --> 0:24:51.680 years to come because the consumer might not be ready 0:24:51.720 --> 0:24:56.240 to pay as much for luxury items. And having said that, 0:24:56.560 --> 0:24:59.920 they are nowt trading on much lower multiple than the 0:25:00.160 --> 0:25:05.440 used to. China has pledged like a lot of stimulus 0:25:05.480 --> 0:25:08.160 and keeps pledging stimulus. They're now focusing on the consumer, 0:25:09.320 --> 0:25:12.880 so you know, we can we can find some growth 0:25:13.920 --> 0:25:16.680 in in within the Chinese consumer that would that would 0:25:16.680 --> 0:25:19.920 be positive for the sector. But that's that's the key 0:25:20.240 --> 0:25:23.600 for the sector to perform next year. As for the 0:25:23.600 --> 0:25:28.520 pharmaceutical industry, I think it's gonna be about the US 0:25:28.520 --> 0:25:32.320 policy and we'll need a bit more clues after the 0:25:35.040 --> 0:25:38.359 after the notes Trump text office to have a clear picture. 0:25:38.840 --> 0:25:41.920 My thanks to Bloomberg, Michael Masika, I'm Stephen Carolyn London. 0:25:41.960 --> 0:25:44.280 You can catch us every weekday morning here for Bloomberg 0:25:44.320 --> 0:25:46.600 day Break Europe, getting at six am in London and 0:25:46.760 --> 0:25:48.080 one am on Wall Streets. 0:25:48.200 --> 0:25:51.679 Tom, thanks Steven, and coming up on Bloomberg day Break weekend, 0:25:51.680 --> 0:25:54.760 we'll discuss what comes next after soft Bank announced as 0:25:54.800 --> 0:25:58.639 a major investment in the US. I'm Tom Busby and 0:25:58.720 --> 0:26:11.600 this is Bloomberg. This is Bloomberg day Break Weekend, our 0:26:11.640 --> 0:26:13.840 global look ahead at the top stories for investors in 0:26:13.880 --> 0:26:16.880 the coming week. I'm Tom Busby in New York. This 0:26:16.920 --> 0:26:20.159 past week, the founder of Japan's second largest publicly traded 0:26:20.160 --> 0:26:23.719 company pledged to invest one hundred billion dollars in the 0:26:23.840 --> 0:26:27.080 US over the next four years. For more, let's get 0:26:27.080 --> 0:26:29.760 to Doug Christner, a host of the Daybreak Asia podcast, 0:26:29.960 --> 0:26:30.840 for a closer look. 0:26:31.240 --> 0:26:34.679 Tom It's an eye popping pledge in making it, The 0:26:34.720 --> 0:26:39.160 CEO of SoftBank, Masayoshi's son, appeared alongside President elect Trump 0:26:39.400 --> 0:26:40.200 at mar A Lago. 0:26:40.920 --> 0:26:46.919 My confidence level to the economy of the United States 0:26:47.000 --> 0:26:52.000 has tremendously increased with his victory. So because of that, 0:26:52.600 --> 0:26:58.680 I'm now excited to commit this one hundred billion dollars 0:26:58.680 --> 0:27:02.159 and one hundred thousand jobs into the United States. This 0:27:02.359 --> 0:27:07.800 is double of last time. As President Crump said. 0:27:07.720 --> 0:27:11.880 That is Masayoshi's son, the CEO of SoftBank. Now, the 0:27:11.920 --> 0:27:15.480 one hundred thousand jobs that he is pledging focused primarily 0:27:15.520 --> 0:27:20.000 on artificial intelligence and some related infrastructure that would include 0:27:20.040 --> 0:27:24.040 things like data centers, semiconductors, even energy. But there is 0:27:24.080 --> 0:27:28.119 one major question looming, where will this money come from? 0:27:28.520 --> 0:27:32.440 To help us answer that, let's bring in Bloomberg's Katherine Thorbeck, 0:27:32.480 --> 0:27:35.160 who covers tech for Bloomberg Opinion. She joins us from 0:27:35.160 --> 0:27:38.040 our studios in Tokyo. Thanks for taking time to chat 0:27:38.080 --> 0:27:40.960 with us. I'm going to ask you that, point blank, 0:27:41.200 --> 0:27:44.399 where is one hundred billion dollars going to come from. 0:27:44.760 --> 0:27:46.840 Where is Masa Yoshi San going to get this? 0:27:47.840 --> 0:27:50.679 So that's a very good question, Doug. And right now, 0:27:51.080 --> 0:27:53.560 soft Bank on the balance sheet has about twenty five 0:27:53.600 --> 0:27:57.240 billion dollars in cash, so it's not immediately clear where 0:27:57.240 --> 0:27:58.959 this money will come from. It seems like he's going 0:27:59.000 --> 0:28:01.879 to have to go out there and raise it. And 0:28:01.920 --> 0:28:04.160 I also think, you know, a lot of tech reporters 0:28:04.160 --> 0:28:06.320 were sort of getting deja vu when we heard this 0:28:06.359 --> 0:28:10.360 announcement because flashback eight years ago in twenty sixteen, when 0:28:10.400 --> 0:28:14.400 Trump was first selected, Masayoshisson came out and he pledged 0:28:14.440 --> 0:28:16.960 fifty billion dollars, a fifty billion dollar investment in the 0:28:17.040 --> 0:28:20.439 US tech ecosystem and said he'd create fifty thousand jobs. 0:28:20.880 --> 0:28:24.840 And it does seem like SoftBank came through on that investment, 0:28:25.040 --> 0:28:27.920 that fifty billion dollar figure, and mostly from its Vision Fund. 0:28:28.480 --> 0:28:30.880 But one thing that's not totally clear is if those 0:28:30.880 --> 0:28:33.760 fifty thousand jobs were actually created. A lot of the 0:28:33.760 --> 0:28:37.199 investments went into startups and you know, private companies that 0:28:37.320 --> 0:28:39.840 don't disclose sort of their hiring figures, and you know, 0:28:39.880 --> 0:28:42.320 some of it went to sort of rework and Uber 0:28:42.520 --> 0:28:45.080 and door Dash, which some of those companies actually had 0:28:45.120 --> 0:28:48.400 layoffs and we work obviously you know, went bankrupt. So 0:28:48.520 --> 0:28:50.920 I think we should really be keeping a close eye 0:28:50.960 --> 0:28:53.080 and sort of demanding a little bit more accountability this 0:28:53.160 --> 0:28:56.040 time on the jobs figure, specifically this one hundred thousand 0:28:56.080 --> 0:28:59.960 jobs figure. And that's said, I mean, I am curious 0:29:00.080 --> 0:29:02.440 how much of this hundred billion dollar investment was sort 0:29:02.440 --> 0:29:06.480 of pre planned versus sort of timed to Trump's win 0:29:06.800 --> 0:29:09.720 in his victory, and how much of it, Like I said, 0:29:10.040 --> 0:29:11.680 he doesn't seem to have the cash on hand, so 0:29:12.160 --> 0:29:13.720 we'll have to see how it all plays out. But 0:29:13.840 --> 0:29:14.880 there's a lot of questions. 0:29:14.960 --> 0:29:17.280 Can you conceive of a situation where he has to 0:29:17.360 --> 0:29:20.800 actually sell assets in the portfolio in order to raise 0:29:20.840 --> 0:29:21.360 these funds. 0:29:21.920 --> 0:29:24.400 So I think it was kind of a wise, sort 0:29:24.400 --> 0:29:27.520 of suave move on Masa's part to sort of go 0:29:27.560 --> 0:29:29.320 out there with Trump and show that he has Trump 0:29:29.400 --> 0:29:32.080 support and his backing, and I think that in some 0:29:32.120 --> 0:29:34.040 ways will sort of raise his profile as he goes 0:29:34.040 --> 0:29:37.360 out there and tries to raise more funds. And it's 0:29:37.400 --> 0:29:39.800 been a little hit or miss with Massa's investments over 0:29:39.840 --> 0:29:42.080 the years. There's been some big wins and obviously some 0:29:42.160 --> 0:29:45.840 very high profile losses, but he has recently been doing better. 0:29:45.880 --> 0:29:48.400 I mean, arm was a very good investment, especially ahead 0:29:48.400 --> 0:29:50.880 of this AI wave, and you know, more recently, Masa 0:29:50.880 --> 0:29:53.280 has been coming out at events in Tokyo and speaking 0:29:53.360 --> 0:29:55.680 very passionately about how he wants to go all in 0:29:55.760 --> 0:29:58.160 on AI and how this is the future. And you know, 0:29:58.200 --> 0:30:00.960 he's made comments at investor saying that this is what 0:30:01.000 --> 0:30:03.280 he was born to do. So he does seem to 0:30:03.880 --> 0:30:06.280 have a lot of enthusiasm for AI, and it does 0:30:06.320 --> 0:30:08.719 seem like he was planning to invest in it heavily, 0:30:08.760 --> 0:30:10.760 and the US sort of makes sense because of its 0:30:10.760 --> 0:30:15.200 AI ecosystem. So yeah, I'm curious how he will exactly 0:30:15.200 --> 0:30:17.720 get this money and where it will go, but it 0:30:17.760 --> 0:30:19.320 does seem like this this was sort of on his 0:30:19.440 --> 0:30:20.240 radar for a while. 0:30:20.360 --> 0:30:22.680 The title of one of your recent columns, as I recall, 0:30:22.880 --> 0:30:25.880 was Masa tries to make up for past mistakes. And 0:30:25.920 --> 0:30:28.040 one of the things you point out is that some 0:30:28.080 --> 0:30:32.080 of his investments have really been aimed at reinvigorating Japan's 0:30:32.560 --> 0:30:35.640 technology arena, and I'm wondering whether or not this move 0:30:35.680 --> 0:30:39.440 into the US would come at the expense of putting 0:30:39.440 --> 0:30:40.640 more money to work in Japan. 0:30:41.200 --> 0:30:43.200 That's a good question. And you know, I have a 0:30:43.200 --> 0:30:45.960 lot of respect for Masa. I think sometimes he sort 0:30:45.960 --> 0:30:49.280 of gets a bad reputation in Western media. But I 0:30:49.320 --> 0:30:51.959 recently read a biography about him which which kind of 0:30:52.120 --> 0:30:54.520 explains a lot about where his sort of appetite for 0:30:54.640 --> 0:30:57.120 risk comes from. And you know, he really has one 0:30:57.120 --> 0:31:01.600 of those like stranger than fiction sort of stories. I mean, 0:31:01.600 --> 0:31:05.240 he was born to Korean immigrants in post or Japan, 0:31:05.320 --> 0:31:07.720 faced a lot of discrimination, was essentially born in a 0:31:07.760 --> 0:31:11.000 slum in southern Japan, and then he became the biggest 0:31:11.040 --> 0:31:14.160 single foreign investor in both communist China and the US. 0:31:14.920 --> 0:31:17.200 So he has quite a rise. And I think when 0:31:17.240 --> 0:31:20.720 you sort of come from nothing, you're losing it all 0:31:20.800 --> 0:31:23.000 as sort of relative, if that makes sense. And some 0:31:23.080 --> 0:31:25.920 of this is from a recent biography that came out 0:31:25.920 --> 0:31:29.760 from a Financial Times editor, Lionel Barber. But I think 0:31:29.920 --> 0:31:32.400 he's had a really interesting sort of run of it, 0:31:32.840 --> 0:31:35.840 and I think, you know, not all of his bold 0:31:35.880 --> 0:31:39.640 proclamations actually play out, but I think he's not afraid 0:31:39.640 --> 0:31:42.040 to sort of go all in and make these big 0:31:42.080 --> 0:31:45.240 bets and then sort of see how it all sort 0:31:45.280 --> 0:31:46.240 of falls together. 0:31:46.520 --> 0:31:48.360 Yeah, he was a big backer of Wei Work. We 0:31:48.440 --> 0:31:51.480 know how that ended. But as I kind of mentioned earlier, 0:31:51.560 --> 0:31:53.640 a lot of the focus on this one hundred billion 0:31:53.680 --> 0:31:57.480 dollar investment will be on artificial intelligence. And one of 0:31:57.480 --> 0:32:00.840 the things that we know of mas Yoshi Son's big 0:32:00.880 --> 0:32:03.720 bets has been on what is being referred to as 0:32:03.800 --> 0:32:06.680 super artificial intelligence. Can you help me understand that? 0:32:07.080 --> 0:32:07.400 Sure? 0:32:07.520 --> 0:32:10.200 So he has said super artificial intelligence is what he 0:32:10.280 --> 0:32:14.320 was born to do. He speaks very boldly about that 0:32:14.400 --> 0:32:17.840 in his sort of true Massa fashion, and that's basically 0:32:17.920 --> 0:32:21.920 artificial intelligence that's hundreds or thousands of times smarter than humans. 0:32:22.440 --> 0:32:24.400 And you know, there's there's a big debate going around 0:32:24.400 --> 0:32:26.360 in the tech sector of whether we'll see this in 0:32:26.400 --> 0:32:28.680 our lifetimes, whether we'll see this at all, whether it's 0:32:28.760 --> 0:32:31.320 you know, just more hype, and it's very possible that 0:32:31.440 --> 0:32:34.920 you know, Masa's sort of feeding into this AI hype cycle, 0:32:35.400 --> 0:32:38.560 you know, and inflating a lot of sort of AI companies. 0:32:38.960 --> 0:32:41.080 But at the same time, you know, he was sort 0:32:41.080 --> 0:32:42.720 of humbled by We Work, I think, and he was 0:32:42.760 --> 0:32:44.520 sort of humbled by by some of his more high 0:32:44.520 --> 0:32:47.080 profile losses and sort of you know, going back to 0:32:47.160 --> 0:32:49.800 his his initial fifty billion dollar investment in the US, 0:32:49.840 --> 0:32:52.640 it was very wide. It was like sort of any startup, 0:32:52.680 --> 0:32:55.960 any tech company, you know, robots that make pizza, we 0:32:56.080 --> 0:32:58.920 work was sort of the high profile one. I think 0:32:58.960 --> 0:33:02.120 this time around he is very focused on Okay, does 0:33:02.120 --> 0:33:04.440 this have an AI element? Will this help build you know, 0:33:04.880 --> 0:33:08.240 AI infrastructure? Will this you know help how does this 0:33:08.280 --> 0:33:11.280 sort of tie into creating super artificial intelligence? So I 0:33:11.600 --> 0:33:13.480 do think we'll see a little bit more sort of 0:33:13.520 --> 0:33:16.600 discipline in that sense. But at the same time, A, 0:33:17.040 --> 0:33:19.960 so many tech companies right now are all touching AI, 0:33:20.080 --> 0:33:21.680 so it's you know, a little bit less harder to 0:33:22.480 --> 0:33:25.720 miss in that sense. And b you know, we just 0:33:25.800 --> 0:33:29.560 sort of never know with Masa I mean yeah, I think, 0:33:29.600 --> 0:33:32.080 well there's there's just really more questions and answers at 0:33:32.080 --> 0:33:33.920 this point. But I do think we should try to, 0:33:34.200 --> 0:33:37.000 you know, hold them too account, especially with this job's figure, 0:33:37.200 --> 0:33:38.280 the one hundred thousand jobs. 0:33:38.440 --> 0:33:40.120 So what do we know about the way in which 0:33:40.400 --> 0:33:44.920 the investors in soft bank have been reacting to this news? 0:33:45.040 --> 0:33:49.520 Are there? Are they giving confidence their confidence in Masayoshi 0:33:49.600 --> 0:33:50.040 Son or not? 0:33:50.640 --> 0:33:54.520 So I think initially after and I'd have to check 0:33:54.520 --> 0:33:56.840 the latest figures, but there was initially a sort of 0:33:57.160 --> 0:34:00.440 small jump in soft bank in the US after Masa 0:34:00.440 --> 0:34:02.320 appeared with Trump, And I think some of that is, 0:34:02.520 --> 0:34:04.640 like I said, he's I think he was sort of 0:34:04.680 --> 0:34:07.080 wise to go out, step out with Trump and you know, 0:34:07.400 --> 0:34:10.680 take advantage of this moment and show that, you know, 0:34:10.719 --> 0:34:13.879 he has Trump's blessing, and you know, show that they're 0:34:13.880 --> 0:34:16.240 sort of side by side and get all those eyes 0:34:16.280 --> 0:34:18.120 on him. So I think that was sort of a 0:34:18.120 --> 0:34:21.799 wise move. But going off that, you know, I don't 0:34:21.840 --> 0:34:25.760 think it's clear that this investment announcement was necessarily timed 0:34:25.760 --> 0:34:28.799 to Trump's win, or if it was sort of there 0:34:28.840 --> 0:34:31.080 was a series of pre planned, set in motion events 0:34:31.719 --> 0:34:33.400 to invest in AI in the US. 0:34:33.719 --> 0:34:36.000 Catherine, thank you so much for your time. She is 0:34:36.080 --> 0:34:40.440 Catherine Thorbeck, Asia tech columnist for Bloomberg Opinion. Joining us 0:34:40.440 --> 0:34:43.640 from Tokyo, we move next to the Japanese auto industry, 0:34:43.760 --> 0:34:47.839 where Honda and Nissan are reportedly exploring a merger. Now, 0:34:47.960 --> 0:34:51.480 these negotiations hold the potential to create the world's third 0:34:51.600 --> 0:34:54.800 largest car maker, giving it a better position to compete 0:34:54.800 --> 0:34:58.960 against industry leader Toyota, and we hear the transaction could 0:34:58.960 --> 0:35:02.600 be expanded to an include Mitsubishi Motors. The NIKA is 0:35:02.680 --> 0:35:06.600 reporting official talks and possibly a public announcement could come 0:35:06.640 --> 0:35:09.359 as soon as December twenty third. For more, we are 0:35:09.440 --> 0:35:13.920 joined by Tatsuo Yoshida, senior auto analyst at Bloomberg Intelligence, 0:35:14.200 --> 0:35:16.799 joining us from the Japanese capital. Thank you for making 0:35:16.840 --> 0:35:19.520 time to chat with us. So obviously this is one 0:35:19.560 --> 0:35:24.160 way of dealing with competition globally in the market for automobiles. 0:35:24.200 --> 0:35:27.080 But can you help me understand the degree to which 0:35:27.120 --> 0:35:32.080 there is perhaps excess capacity and auto manufacturing in Japan. 0:35:32.760 --> 0:35:37.000 Yes, there's an excess capacity, and all the manufacturers are 0:35:37.040 --> 0:35:41.600 now consolidating the production lines or closing the factory, so 0:35:41.880 --> 0:35:44.560 they have to deal with it. The reason behind that 0:35:44.640 --> 0:35:47.840 these two things. One is diminishing population in Japan domestic 0:35:48.200 --> 0:35:52.040 cassers is declining over time, and then also extension of 0:35:52.080 --> 0:35:55.600 the overseas production. Make the vehicle where the demand is. 0:35:55.719 --> 0:35:57.000 That's the Japanese policy. 0:35:57.280 --> 0:35:59.759 One of the things that's very interesting, especially when it 0:35:59.760 --> 0:36:04.399 comes to electric vehicles, Tatsuho, as you know, China has 0:36:04.440 --> 0:36:08.239 really been dominating this space. How much of this consolidation 0:36:08.360 --> 0:36:12.200 in Japan is related to competition from China. 0:36:13.120 --> 0:36:17.279 It's a big threat. As far as right now, the 0:36:17.640 --> 0:36:21.680 big EV market is limited to the China, more or 0:36:21.719 --> 0:36:25.600 less Europe and then California and then other states following 0:36:25.680 --> 0:36:31.160 California regulations. But from long term perspective, EV is the 0:36:31.200 --> 0:36:34.759 way to go. So the EV moved to the EV 0:36:35.200 --> 0:36:39.160 is flowed a little bit. But Japanese car companies should 0:36:39.200 --> 0:36:44.280 not stop the EV development. And then EV development requires money, 0:36:44.680 --> 0:36:50.520 people and then technology. So getting together joining forces for 0:36:50.560 --> 0:36:55.480 example Honda, Nissan, Mitsubishi, that will help those three entities. 0:36:55.840 --> 0:36:58.120 Yeah, earlier in the year, I think Honda and Nissan 0:36:58.200 --> 0:37:02.600 decided to work together on electric vehicle batteries and software. 0:37:03.000 --> 0:37:05.640 Is it fair to say that Toyota is a little 0:37:05.640 --> 0:37:08.520 bit behind the game when it comes to evs. The 0:37:08.600 --> 0:37:11.759 company made a bet maybe that hybrid vehicles would be 0:37:11.800 --> 0:37:14.120 the path forward. Maybe they were caught a little bit 0:37:14.480 --> 0:37:16.520 flat footed with electric vehicles. 0:37:17.040 --> 0:37:20.279 Actually it looks further is behind, but it's kind of 0:37:20.320 --> 0:37:25.880 purposely though. Thurda strategy is three hundred and sixty degree strategy. 0:37:26.080 --> 0:37:29.359 They have money, they have people, they have a lot 0:37:29.360 --> 0:37:32.040 of resources, they can do everything. Of course, Toda is 0:37:32.080 --> 0:37:36.200 developing EV for China, Europe and then California. 0:37:36.440 --> 0:37:41.520 Help me understand how Honda and Nissan use mechanized manufacturing 0:37:41.560 --> 0:37:45.280 processes robotics as a part of their production process. 0:37:45.600 --> 0:37:49.120 When it comes to the conventional vehicles like internal combustion 0:37:49.200 --> 0:37:52.440 engine vehicles, their production system is kind of state over 0:37:52.480 --> 0:37:56.640 the art. Actually they are not behind the others. Actually 0:37:56.719 --> 0:38:02.319 they're leading the global mobile but when it comes to 0:38:02.440 --> 0:38:08.719 the ED manufacturing, they tend to use the existing system. So, 0:38:08.760 --> 0:38:11.480 in other words, it's different from the newcomers like a 0:38:11.600 --> 0:38:16.719 Tesla or Bid. They can start from the scratch dedicated 0:38:17.160 --> 0:38:20.040 production system for the ED they can do that, but 0:38:20.400 --> 0:38:21.440 Japanese cannot do that. 0:38:21.760 --> 0:38:24.600 Tatsuo, thank you so much for joining us. Tatsuo Yoshida 0:38:24.840 --> 0:38:28.720 is senior autos analyst for Bloomberg Intelligence. I'm Doug Krisner. 0:38:28.760 --> 0:38:31.880 You can catch us weekdays for the Daybreak Asia podcast. 0:38:32.160 --> 0:38:37.000 It's available on Apples, Spotify or wherever you get your podcast. Tom. 0:38:37.480 --> 0:38:39.759 Thanks Doug, and that does it for this edition of 0:38:39.760 --> 0:38:42.560 Bloomberg day Break Weekend. Join us again Monday morning at 0:38:42.560 --> 0:38:44.800 five am Wall Street Time for the latest on markets 0:38:44.800 --> 0:38:47.160 overseas and the news you need to start your day. 0:38:47.640 --> 0:38:50.760 I'm Tom Busby. Stay with US. Top stories and global 0:38:50.800 --> 0:38:52.880 business headlines are coming up right now. 0:39:00.960 --> 0:39:01.000 S