Greg Jarrett, Conor, Bloomberg discussed on Bloomberg Markets


Quick tape This is a Bloomberg business flash Stocks are retreating as traders struggle to evaluate the risk of geopolitical tension in Ukraine and the impact of mounting inflation pressures on Central Bank policy will hear the meeting minutes a little bit later today right now the S&P is down 7 tenths of a percent down 30 the Dow is also down 7 tenths of a percent down 237 and the NASDAQ is down over 1% down a 146 to ten years up to 30 seconds the yield is over 2% West Texas intermediate crude continues to climb It's up over rose about 2.6% At 94 44 a barrel coming shows up four tenths of a percent at 1863 80 an ounce the dollar Yan one 15 52 the Euro of dollar 1361 the British found that all 35 73 And now I have some serious news for you Take the children out of the room please Shortage of avocados is showing up the supply chain after suspension of imports from Mexico just days ago A source who didn't want to be named because this is serious stuff that involves commercial arrangements told us Mexico which accounts for about 80% of the U.S. market is scrambling to fix the band Meanwhile in the U.S. time is of the essence of supplies run out The market has 57 million pounds of avocados which translates to just a week's worth of inventory I went to Costco yesterday gentlemen to get my guacamole supplies and was stunned It just how much a bag of avocados are going for Delivered $10 89 cents for 5 Hass avocados Luckily I have a stash That's a Bloomberg business flash Bloomberg markets continue Dude Paul sweetie We're seeing these supply chain shortages hit everyone I just went to Chick-fil-A this morning And thank you for the biscuit to pick up some chicken biscuits for me and Paul And yes they're delicious by the way And I saw sign on the counter that said dear customers we're sorry due to supply chain shortages some sauces won't be available Now that's yeah We can't have it A sweet and sour shortage Greg Jarrett thank you very much for that Bloomberg business flash And avocados you know who knew All right let's talk I want to talk electric vehicles Because I want to talk internal combustion vehicles but it's the same discussion Same discussion Conor said economists for Bloomberg opinion joins us Conor you've got a piece out here saying the automakers have an incentive obviously for keeping new car prices high used car prices high because they need the profits to fund this whole pivot towards electric What's going on out there You're basically saying they're purposely holding back production to pad margins They say that they're kind of in a spot that they don't mind where again they have to invest billions of dollars in this EV transition And they also have to show investors near term profitability They're trying to do both And so you see the prices are really high inventories are really low They're saying that their production won't meaningfully impact prices and they expect prices to remain high because that's going to fund the profits that keeps this thing going So in a way your column actually made me feel better about being an old dodgy EV holdout Because I am waiting for General Motors to release a new Sierra the AT four X I need the 6.2 liter naturally aspirated V8 And I felt guilty about that until I read your column call Connor because what I realized is I'm paying a high price for that big inch internal combustion engine And I am subsidizing their electric vehicle investment with that That's a really good way I've never thought of it that way but that's a good point So now anyone who really wants their gas guzzler can say hey look I'm paying to your ED So there's no way that we'd be building these things unless people like they were going out and doing our patriotic duty keeping the old stuff going Connor but the automakers had the chips Wouldn't they crank up production back up to 16 17 million star Yeah this is my main question was is selling fewer vehicles at higher prices more profitable than selling more vehicles at lower prices Right And that gets to the whole discussion about what does demand for gasoline power vehicles look like in 2023 2024 We know that right now we've got a huge shortage And if you just pump out vehicles for 6 months they're all going to sell at high prices But it's an industry with a lot of its capital incentives long lead times and if Stevie's ramped up That's coming out of somewhere And so it's kind of a tricky situation Kind of like oil oil product producers where they kind of need the supply low because they're really worried about a glut on the market as demand falls off over time A buddy of mine runs a bunch of dealerships and he used to say he'd have a couple hundred vehicles and inventory but he says those days are over That's not how they're gonna run the dealerships going forward Is this kind of a new normal where they're gonna have a lower inventories Maybe lower production I'm not sure how that works Yeah it's interesting because we're seeing the same thing in the housing market where home builders are very happy with kind of the low inventory high profit margin situation It's sort of like well we got caught on two of the inventory but we're making it up on price and margin So they're kind of rolling with it for now and investors are sort of not sure valuations are lower because they're not sure if margins are going to mean revert But that's what they're selling in terms of a good thing for investors right now Yeah my wife is looking for a BMW X 5 X drive 45 E which is their new hybrid SUV I messaged my inside guy at BMW and said do you have an insight and BMW Yes can you source one of these for me at a dealership in the states And he said we have one in California There's one in San Luis Obispo Ford actually called out dealers that were selling at inflated prices above MSRP and they sort of those dealers aren't going to get into our going forward So I hope they're true to their word Because if you look for for example a Ford F one 50 raptor Baja racing truck or if you look for the Mustang Shelby Mustang GT 500 which is the supercharged 5.2 liter 760 horsepower monster You can't find them without 10,015 1020 $1000 additions to the price tag They call it like added dealer something profit margin Yeah It's unbelievable I always wonder like if they're doing that why can't these producers have their own dealerships Right and that's probably the whole point with the online sales and the big fight about that So that's probably going to be a contentious fight going forward as dealers as Tesla and rivian can sell online than why can't Ford and GM You make a great point about Tesla and your column as well Elon Musk basically said yeah we're not working on the cheap car for every man right now Because we're making too much money with the expensive cars for rich people There's got to be some outcry there at least Not that the model three is that expensive but they are making huge margins on all their products Right I think right now because semiconductors are in short supply They can incredibly say sorry this is really just a situation where we're put upon it We'll put in But if semiconductor inventory is normalized then maybe there won't be those excuses and there will be more of a legitimate outcry and crackdown on windfall profits or whatever you want to call it.

Coming up next