tv Bloomberg Markets Bloomberg August 27, 2021 1:30pm-2:01pm EDT
months after vaccination. mr. bond was at the white house where he is meeting with israeli prime minister naftali bennett. president biden: we will continue to talk about the issue of booster shots. i see you started your program early with some great results. we will start in september but we are considering the advice that you have given that we could start earlier. mark: he says he has spoken with dr. anthony fauci about the issue. the pentagon is saying despite earlier reports, there was only one explosion that hit the perimeter of kabul airport. 13 service members and 75 afghan citizens died in the attack. army general major william taylor says officials believe there was only one suicide bomber. president biden has vowed to go after the terrorists.
texas governor greg abbott has deployed equipment and medical staff to health care facilities throughout the state. texas had nearly 14,000 hospitalized patients on thursday, a number that is nearing a record set in january. almost half of the states trauma service areas had fewer than five beds available in cancer care units. china has issued its most comprehensive warning yet against the excessive work culture of big corporations. authorities spelled out how the so-called 9-9-6 practice is illegal. that means employees have to work from 9:00 a.m. until 9:00 p.m. six days a week. there has been a growing backlash in china against the punishing demands of the private sector. global news 24 hours a day, on-air, and on bloomberg quicktake, powered by more than 2700 journalists and analysts in over 120 countries. i'm mark crumpton. this is bloomberg. ♪
greg: i'm greg bonnell. welcome to bloomberg markets. matt: i'm matt miller. we welcome our bloomberg and bnn bloomberg audiences. here are the top stories we are following for you from around the world. no rush on rates but tapering focus. we break down the slew of fed commentary out of jackson hole but former fed economist claudia sahm. in my exclusive conversation with german carmaker audi, about its plans to go public. and pellet gun plunging after reporting earnings. what is behind the disappointing sales outlook. greg: let's check in on the markets. jerome powell is the most anticipated investor event of the week, said all the right
things in terms of the investor perspective. look at the rally we have in equities on both sides of the border, touching new highs. i don't think the s&p 500 has ever closed above 4500. we are seeing yields pushed lower. so what were the magic words that we were waiting for all week? we heard chair powell say that the central bank could begin using those asset purchases this year, but he is clear about separating the idea of easing the purchases. there seems to be that delicate spot that investors do not mind being in. earlier, we had a slew of fed presidents on bloomberg discussing their outlook for purchases. >> i would like to start tapering sooner rather than later. i would like to start sooner rather than later and keep it as simple as possible. the old kiss principle, keep it simple stupid. >> we still have a fair amount
of energy and momentum. i think that we can do our tapering faster than we have in previous episodes because of that momentum. my expectations on the economy is that it will continue to operate in a strong way. >> the purchases don't have much value right now. it seemed like the trade-off is just right to me. let's phase out the purchases and give ourselves some breathing room in 2022. >> i do believe we should start the asset purchases adjustment process soon, literally as soon as possible. the extent we get moving on that may actually give us more flexibility down the road on our decisions on the fed funds rate. greg: a slew of speakers, the opening act, of course, chair powell. let's bring in michael mckee. big take away from all of this,
investors seem to be happy. mike: everyone seems to be happy at this point. fed bank president i'll echo it today, all singing from the same hymn sheet. let's taper soon. jay powell at least hummed along if he was not singing the same words. he says he is on board as long as the economy develops as they expect, a standard fed line. if we don't get a surprise from covid, we will see tapering this year. wall street and main street is happy because basically the fed chairman said what everyone expected him to say, that we would get tapering this year. that has been the timetable all along. nothing that surprised anybody. the markets are priced for this. i think that is why we are seeing a positive reaction everywhere. matt: when we hear taper, does that mean going from $120 billion a month or going to
zero? mike: it is a question of how quickly they do that. bank presidents have been saying we should do it relatively quickly, much more quickly than the last time. this is an interesting point because they have gone out of their way, powell did today, to say that tapering is not related to type ring. we are just cutting back the amount of stimulus we have. but they are related on the backend. the fed doesn't start to want to raise interest rates until it has finished with qe. as soon as they can get that done, the more flexibility they have to raise interest rates if they have to respond to inflation. this may be a big topic in september, how fast they think they will do this. greg: it is interesting that they make that key distinction between the taper does not put us on a timeline for rate policy, but at the same time, the feeling is we need to get the taper out of the way first.
trying to speculate as to when the rate hike comes. what kind of timeline does that put us on? mike: the generally accepted consensus is they may do $15 billion a month. 120 billion now. if they cut back on a proportional basis and did 15 billion a month, that would take eight months to put us somewhere in the middle of august, september of next year. some of the folks like jim bullard and robert kaplan today said they thought the first interest rate increase may come in the fourth quarter of next year. that all works with that timeline. powell has not endorsed a timeline but i would imagine the committee -- that he is pretty close to the consensus on committee thinking. matt: bloomberg's michael mckee walking us through jay powell's speech earlier at the virtual jackson hole symposium. joining us now is someone who
used to work for the fed. claudia sahm is the senior fellow at the jain family institute, former federal reserve economist. any surprises from you today from jay powell? claudia: it was exactly the speech we needed, a boring speech. it was very much study as she goes. frankly, markets and analysts thought that this would be the taper unveil, and some had probably priced that in. that was not the speech we got today. he was very clear that we are not due substantial progress on the labor market, and that is key. even though he said we have got it on inflation, but we have a dual mandate. that is what he is sticking with, and that is what the fed should stick with. that is their job from congress. greg: he seemed to go to pains
to really lay out the fact that there is a different agenda for rate policy there and there is for the tapering of bond purchases. was that an extra layer of clarity that we did not have before, that he wanted to hammer that point home? claudia: he said that at the last press conference. it came out loud and clear today. it has been a challenge for the fed, and frankly for markets. this is a new framework, we have a very uncertain time. they put the message out, and it was clear maybe markets and analysts had maybe not heard that. these are distinct decisions that the fed is making. they will be doing them in sequence, but it is not like as soon as we start the taper, slowing down asset purchases, we have to move up the federal funds rate. it is good that he reiterated. but what i take from that is
that they are nowhere near the finish line, and they recognize that. because there are just two tools the fed has to help the recovery along. that is the fed's main goal, not about what purchases we do, what do we do to the fed funds rate. it is about getting the economy back on track. matt: on the bloomberg terminal, if you type in fed_bal, you get a look at the balance sheet. it is amazing, the sheer size of the balance sheet but also the makeup. mbs, agency securities take up trillions of dollars. is that really necessary when we have this type of housing market? claudia: it is important to understand, what the federal reserve is doing is trying to put downward pressure on long-term interest rates. because they are trying to get
activity, trying to get consumers out there, things moving. the fed does not have a fine dial that it can turn exactly -- we have a $21 trillion economy. the fed is working around the edges. frankly, i think it is a misplaced conversation about getting in and engineering exactly what they do. jay powell's press conferences have been pretty clear, the fomc as a whole is pushing against this narrative. the reserve bank presidents, those people that continue to talk about this, they are not a voting block on the fomc. i love the discourse, let's have the debate, but i don't want us to waste time on these details when the bigger picture is, we are far away from maximum employment. matt: does it matter that the balance sheet is $8 trillion? does it matter that the fed has such a big balance sheet and the
support of the economy? will they ever need to unwind it, or will they continue to add to this balance sheet? claudia: they have to focus on the task at hand which is getting the economy out of crisis. these are the tools that we have. this is uncharted territory in the great recession and recovery. the balance sheet grew, starting at a low place, and there were concerns about financial stability, this will cause problems. it didn't. the fed started to run down the balance sheet. it was still really big before we went into this pandemic. that is not to say that they should keep going forever, but if the circumstances warrant, that is the tool they have. they have to use it. matt: of course, they came with a balance sheet that was already huge. it just seems like it barely goes the other way.
audi ceo markus duesmann. i spoke with them exclusively in his first interview since taking the top seats ahead of the iaa munich motor show. markus: we have to work on range and we have to work on our charging infrastructure. both together is always an ideal mix. we do invest in several ways in charging infrastructure, together with partners in the public infrastructure. we are now running into a project where we will offer premium charging infrastructure that will be high-powered charging in cities. our first city is in nuremberg. we will have many cities where we will offer that midterm. charging infrastructure will be key to the success of battery electric vehicles. i fully support that statement. matt: audi is famous for, among
other things, rally cars, the quattro. also its margins, it's fat profit margins. when you are investing so much into electrification, how do you plan to keep your profitability at audi-size levels? markus: we are a part of a big company, volkswagen group. certainly, the company offers two synergies. we do 10 million cars a year. with our new platforms, meb, ppp, and later the consolidation in the ssp platform, we will use our full potential. our answer to this question is looking for synergies. the ssp platform is a synergy pool for the hardware and we
have to carry the software, where we will have the full synergies of the software side. these are the key areas where we have to look for cost. i think we have a better chance that any company in the world to offer high quality and good priced products together with the good margin we can achieve, because of the synergies and the strong desire to sell the cars, even using the same platform on the hardware side and also software. matt: your parent company volkswagen does make some cars in the u.s. i have been to the chattanooga plant, it is impressive. the ceo has said that audi may produce cars in the u.s. for the north american market. is that still a possibility? markus: the american market is
very important to us. we have so many customers there and that is why we always discuss where to build the cars that we so. discussions on a possible production in the u.s. are ongoing but we don't know at the moment what the result will be. but we do have factories where we produce platforms that audi also uses. with the platforms that i said earlier, which we will certainly produce all over the world, there is the potential to put an audi car production wise into the u.s., even higher than now. the u.s. market is super important for us, the customers are super important for us. the likelihood of producing in the u.s. is there. matt: markus duesmann, the new ceo of audi.
greg: this is bloomberg markets. i'm greg bonnell. peloton shares under some pretty significant pressure today, worse than expected quarterly results, and the problems keep mounting. now the company confirming it has been subpoenaed by the u.s. department of justice and homeland security over its reporting of treadmill injuries. earlier today, we spoke with the ceo john foley. >> we will always cooperate with authorities whenever there is an investigation. we are making the right decisions. i will say, another government agency, the consumer product safety commission, also investigated us but we were
working with them to get on the right side of the line of safety forever lower price tread that we announce will be for sale in canada, the u.k., and the u.s. next week for the first time. greg: definitely a turn of events, shift of fortunes for the company, considering where it was during the height of the pandemic. >> we are night and day. everyone was talking about peloton as the golden child a few months ago at the height of the pandemic. these days, no good news appears to be for peloton. yesterday they reported quarterly sales of 800 million, $200 million shy of what wall street was looking for for the fiscal fourth-quarter. in terms of the guidance for full year 2022, guiding at about $5.5 billion, less than the range than the analysts on wall street had.
likewise, next quarter. in addition to that, today, you have this investigation about the revealing of injuries related to treadmills. all around, not good news for peloton today. matt: in terms of the quality of the product, it is famously expensive. is it really that much better than competing products in terms of the hardware, software, the system? >> you are seeing an apple-like model where they are hiking up the price, using premium materials, going after premium content. the problem is they are not apple. they want to be apple. apple has the ability to do that because their products are so elastic, everybody wants it. that is not the case for peloton. they have been in growth mode for the past five to seven years and were still charging these somewhat high prices. they are now cutting the price of the original bike, introduced almost five years ago.
they are cutting by 22%. i think that they should lower the price to under $1000. that is a key price point, gets into the heads of consumers psychologically. because they are already losing a ton of money on this price drop, may as well lose a little more and make up more in terms of consumer relationships, as well as their annual and monthly subscriptions. matt: great to get you on, thank you for joining us. mark gurman talking to us about peloton. it has been in a big slump today in terms of stock, investors supported with the numbers. for greg bonnell, i'm matt miller. this is bloomberg. ♪
of 75 miles per hour and is approaching cuba zaila view. ida could make landfall in louisiana near the war liens on sunday -- near new orleans on sunday. the mayor of that city has called for everyone outside the levy system to evacuate before the system reaches louisiana. the israeli prime minister is aiming to dissuade president biden from returning to the iran nuclear deal, the landmark agreement reached in 2015. president trump withdrew the united states in 2018. the prime minister noted that israel has no closer ally in the world than the united states. >> today, and you have been so generous with your time, we are going to write another chapter in the beautiful story of the french -- of the friendship between our two