Powell Reiterates Desire to Hold Rates
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This is Bloomberg Businessweek Daily, reporting from the magazine that helps global leaders stay ahead with insight on the people, companies, and trends shaping today's complex economy. Plus, global business, finance, and tech news as it happens. The Bloomberg Businessweek Daily podcast with Carol Masser and Tim Stenevek.

on Bloomberg Radio. Well, Fed Chair Jay Powell, as you know, up on Capitol Hill today, remarks before the House Financial Services Committee, saying it's too early to know the economic impact of the tensions in the Middle East, saying the Fed would look at the overall situations if oil prices surge. Also, the economy is slowing this year and immigration is one reason. And of course, he talked about tariffs, tariffs and inflation and inflation.

Policy changes continue to evolve and their effects on the economy remain uncertain. The effects of tariffs will depend, among other things, on their ultimate level. Expectations of that level, and thus of the related economic effects, reached a peak in April and have since declined. Even so, increases in tariffs this year are likely to push up prices and weigh on economic activity.

The Fed chair saying he expects meaningful tariff effects in June, July and August. He also said that he doesn't think the Fed needs to rush to interest rates with the economy strong. So a lot of ground.

And we wanted to cover it all as well with two of Bloomberg's finest. Out in our Washington, D.C. bureau, Michael McKee, Bloomberg News International Economics and Policy Correspondent. And here in our Bloomberg Businessweek studio, we've got Alex Steele. She's going to talk oil in the energy markets and tie it into the macro environment. Mike, first question to you. I think a lot of people remember just less than a week ago hearing from Fed Chair Jay Powell in the press conference. How would you characterize energy?

Any differences or distinctions between what we heard today versus what we heard from him last week? Oh, I think, Tim, that basically what you were hearing is an echo chamber today. So his his prepared remarks were almost word for word, the same as the statement he gave at the beginning of the press conference last week. It's the sort of Hippocratic oath of the Fed. First, do no harm to the markets.

Don't move anything. And that was his goal today. He just underlined what the Fed has been saying all along, that they're going to have to wait for more information on the impact of tariffs and the impact of other fiscal policies from the administration before they know what they will have to do.

He did say that if we see inflation go down, continue to go down, and if we see unemployment go up, those could be two reasons to cut interest rates. But he didn't put a time frame on it and sort of leaned against the idea that they could do anything in July. So we walk away from this with pretty much the same view that we had going into it, that the Fed is not in any hurry.

All right. So let's talk about oil because Fed Chair Jay Powell was certainly asked about oil, Alex. We've seen oil plunging, what, for a second straight day on what seems to be easing tensions in the Middle East. We just had a guest on, not really guest, she's family, Dina Esfandiari. And she said, you know,

there's not a lot different, that there is still a lot of risk out there in the Middle East. Why are oil markets just kind of backing off? What's your read on it? Yeah, also, oil prices are now lower than they were before Israel's attack on Iran on the 13th of June. So what does that mean? It just means that there's more supply than demand. I mean, that's the thing, is that the oil markets can be very different

than the broader geopolitical risk market because it's pure supply and demand. In order to have a kind of supply shock, you also need strong demand. And if you don't have that kind of increasing rising demand, you're not going to have the same kind of supply shock. And two parts of that. One is that China was stockpiling before this. So they got a lot of oil anyway.

China's the one that buys from Iran, by the way. So they would feel the shock. Apparently, this is, Reistad was reporting this earlier today, that there are ships that with Iranian oil just waiting off of Chinese ports. So it's there. Product market may be a little different. Supplies there are a little bit lower, but they have refineries that they can run and it'll be okay. That's why. So Alex, does the conversation now shift about the way that oil is an economic indicator in terms of

how demand for it around the world is kind of indicating the health of the economy. You're asking me a macroeconomic question? When you got my key in D.C.? Then we're going to go, then we're going to get Mike to weigh in. But it's about oil, so I go to Alex for oil. Does it reflect macroeconomic conditions? Because, you know, when we think about the narrative with oil over the last week or 12 days, it's been about, okay, tensions in the Middle East. This is why we've seen prices go up.

In more peaceful times, when we look at oil prices, we look at it for clues about demand-- - True, true. - Outside of the United States, demand inside of the United States, and what that says.

about the macroeconomic environment. I'm laughing because when we're looking at demand concerns and lower oil prices, then we pivot and talk about the supply picture. So it's like you can't get one for one. So then if you're taking a look at the macroeconomic environment, I would also say, oh, but take a look at supply. We're still pretty well supplied. OPEC Plus, really Saudi Arabia, is trying to

add oil back into the market, you could make an argument that Iran, any supply outage you may see would provide space for Saudi Arabia to do that. So if you have $40 oil, is that telling you that the global economy is falling off a cliff? Not necessarily. There are other factors that are at play that are supply. All right. So Mike,

The volley goes to you, as Alex said. All right, macroeconomic. When it comes to oil prices, Fed Chair Jay Powell definitely asked about it in terms of concerns if we've got higher oil prices, how that feeds into higher inflation woes and worries. Jay Powell seemed to be like, unless this sticks around for a while, it's not really an issue.

Yeah, that's the way the Fed looks at it now. They went through the original sin of Arthur Burns cutting interest rates when oil prices went up during the original oil crisis in 1973. And at that time, what ended up happening, of course, is the great inflation that we saw.

And the Fed doesn't want to do that again. They've learned that you don't cut rates to deal with a supply problem like that. Instead, they would wait and see what the impact on the overall economy is. And for it to have an impact on the overall economy, it would take some time. It would have to get into other things besides just the gasoline in your tank, get into petrochemicals, get into petrol.

paint, get into pharmaceuticals, all the things that at some point use petroleum. So right now, there doesn't seem to be any reason to worry about it, particularly now that prices are going down. But the Fed chair made it clear that that's not something that's a major concern for them. And also over the years,

Petroleum prices have become a much smaller impact on what the U.S. spends because we've gotten so much more energy efficient. So it would even take longer to have some sort of effect than it did back in the 70s. I love that you went there because that was going to be my follow-up. Alex, come back in. In terms of oil, are we going to ever see, could we see $100 a barrel oil?

The way the world is moving and even though we maybe have an administration that isn't so embracing EVs and alternative energy, has that kind of horse left the stable? No, I don't think so. I think what the read through is that you're going to see more oil volatility, not necessarily oil price spikes that we may have seen in the last, say, 15, 20 years. And a big part of that has to do with U.S. shale. So we look at that as the reserve, right? We got so much oil, it's all good. The problem is,

The problem, though, is that a lot of the really good stuff has already been drilled. So the stuff you're getting is a little gassier, so less oil, more gas. And it's getting harder, maybe more expensive to drill. It doesn't mean that shale's toast. It just means it might not have the same kind of growth rate that we're used to. So you change the world for shale. You have sanctions on Russian oil, Venezuelan oil, TBD, what happens with Iran. Yeah, sure, you could definitely get that.

The question is, do we stay there? And that, I think, is the question that may not happen. So what are the economics of exploration here in the US right now in an environment where the president wants to have so-called energy independence in the United States and also wants to see companies

Drill, baby, drill. So I love that he tweeted to Secretary Wright, because when I have interviewed Secretary Wright about oil, he's like, dude, I'm not an oil guy. I'm the energy guy. And then he's like, not taking that mantle. Well, Mike McKee and I did a piece on this for Wall Street Week. It was a twofer, and it was just about this very issue. What was the question? The economics.

I love it. The economics for oil exploration in an environment such as this, if oil prices aren't necessarily at $100 a barrel, like Carol's asking, then is the incentive actually there for American companies to do this expensive process? $40, they're definitely losing money. They're shutting stuff in. $50, they're recalculating what they're spending, how they're spending it, maybe on the margins. Maybe they're drilling, but they're not completing their wells. They're keeping that oil in the ground. $60, they're fine. They can cover everything. $70, they're golden. They're going, going, going.

Get her a role on Landman. That's what I'm going to say. She can forget the question. She can forget the question any time she responds like that. Mike, come on back in. Because as we do talk about inflation, I mean, what's the bigger concerns when it comes to inflation remaining sticky here in the United States? What is it that we really have to worry about at this point? If it's not really maybe higher oil prices or energy prices, what is it?

Well, it's been changing, actually, Carol, over time. We were watching housing as a very sticky point of inflation, but house prices are starting to come down now. We saw a decline in the Case-Shiller numbers today. Overall, the housing market weakening.

in large part because fed interest rates are keeping people from taking out mortgages so we look beyond that and what you're really going to be looking at is the kind of things that the president is talking about tariffing consumer goods like clothing which actually fell in price the last couple of months so uh we're still looking for the things that are going to to uh

be sticky in inflation, but they seem to be changing even as we speak. So that's another reason for the Fed to step back and try to figure out which categories and why prices are staying up or going up. Mike, any addressing from the Federal Reserve chair about the potential for a rate cut in July, given since he spoke last week, we've heard a couple of different Fed officials come out and say that's a possibility.

No, he stayed away from that. He was asked about it and he said when we get the right information about what we need, we can consider cutting rates. Did not put a time frame on it. And I might point out that we heard from Atlanta's Raphael Bostic this morning in a Reuters interview. We heard from Beth Hammock of Cleveland today. We heard from John Williams, the New York Fed president and

All of them have said no to July, that they think rates are going to stay higher for a little bit longer. Maybe September, but July doesn't seem to be the majority's view. Those Fed creatures are such shy individuals. We never hear from them. They're shy when it's a quiet period. Rate environment on the energy world, does it make a difference, the cost of money for them, like it does for a lot of businesses? No, I'm just thinking about that.

Um, a little bit less. It did back in like 2014, uh, because you had a lot of companies that had negative cashflow and had to borrow a lot and those rates were high and that's why you got to wash out. But there's been so much consolidation, uh, that maybe not in the same kind of way. One last question, um, because it plays into the geopolitics. I mean, you see Saudi Arabia and the Middle East really kind of looking to diversify in terms of their exposure. I mean, they certainly see the energy markets as not going to be, you know, the money machine that it's been at, you know, for such a long time. Um,

Are they right to? Will oil ultimately change maybe geopolitics going forward? Just got about 30 seconds. Yeah, it's going to be oil and everything else at the same time. And that will be a different kind of fight then when it comes to energy. It's going to be energy security and energy nationalization, but it's not necessarily going to mean oil. It can mean other forms as well. All right. I got 10 seconds for Mike. That was like 20. I don't know. You did great. You did so great that we got 10 seconds more for Mike. Jay Powell tomorrow. Any indication that...

The senators could ask different questions than the members of the House. Or is it rinse, repeat, wash, rinse, repeat? Probably wash, rinse, repeat, although we might get a little more on banking. There was very little talk of banking regulation today. All right. Like we said, truly, truly two of Bloomberg's finest are Michael McKee out there in D.C., international economics and policy correspondent, and of course, our Alex Steele.

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Certainly the conflict between Israel, Iran, the Middle East conflict is top of mind among NATO allies. And this is happening as Israel and Iran appear to be honoring that ceasefire agreement unexpectedly announced by President Donald Trump overnight after earlier this morning on his way to that NATO summit, he reacted rather angrily to early breaches of the deal by both sides.

I'm really unhappy if Israel is going out this morning because the one rocket that didn't land, that was shot, perhaps by mistake, that didn't land. I'm not happy about that. You know what? We basically have two countries that have been fighting so long and so hard that they don't know what the f*** they're doing. Do you understand that?

All right. Pretty heated. President Trump earlier this morning in D.C. on his way to that NATO summit. He, of course, is there on the ground, as you heard from our Anne-Marie. Let's head to Geneva, Switzerland and to Bloomberg News Middle East geoeconomics reporter Dina Esfandiari. She has worked at the International Crisis Group, the Harvard Kennedy School at King's College, London and the International Institute.

for strategic studies. We have been dying to talk to you, Dina, and I know it's been a busy couple of weeks for you. We had a headline a little more than an hour ago, Iran's president, the Saudi crown prince discussing the U.S. and Israel in a call. It feels like new relationships may be being formed, maybe new alliances. You are the author of New Order in the Gulf, The Rise of the UAE. Is the order of the Gulf being rewritten as we speak?

I don't know if it's being rewritten, but it's certainly changing. A lot of things are changing at the moment. I think the Gulf Arab states were quite confident of their position in the region, of their relationship with Trump, of their new relationship with Iran a few weeks ago when Trump was visiting the region. And now things really do seem to be up in the air. They're absolutely terrified by what happened last night when Iran targeted U.S. bases in Qatar in a first.

I think it caught them off guard. It is one of their biggest fears to be caught in the middle of an escalation between the U.S. and Iran, and it happened. And so I think everybody is just...

just trying to grapple with what just happened and where we go from here. Well, it certainly seems like markets here in the U.S. are sending the signal that they're confident that this crisis has been de-escalated. And perhaps it appears that this truce between the two countries may actually hold. Is that view, in your opinion, is that short-sighted?

No, I do think that the truce will hold, but I think we're going to find ourselves in a new normal. I don't think things are going to escalate like they have over the course of the last 12 days. I'm hopeful that that has been put behind us, because I do think that President Trump is now going to wield the hammer and try to make sure that both Israel and Iran stick to this ceasefire. And also, Israel and Iran don't want this war to extend beyond these 12 days. I think

Both have been badly hit, and so they are more than willing to move on. But that doesn't mean the tensions between Israel and Iran are going to dissipate overnight. These two countries are longstanding rivals. That will continue. So I anticipate that we find ourselves in a situation where we were a few months ago or even before October 7th,

where the two sides are trading blows, but at a lower level, at a more manageable level. Will the tensions exist between Israel and Iran until there is, or unless there is, regime change in Iran?

You know, the regime change question is the million-dollar question at the moment. What is for sure is that regime change isn't going to happen at the hands of Israeli and American bombs. There is discontent in Iran, but the more Iran faces external attacks, the more you have a bit of a rally around the flag effect.

and a sense of nationalism that infuses the country, which we're kind of in the middle of right now. And so people put aside their discontent and come together in the face of this external enemy. The enmity with Israel is really from...

government official to government official. It doesn't really trickle down to the people. But what happens is when you have these cycles of escalation, then that's when it trickles down to the people. That's when they start to feel it personally. So the faster these wars are dealt with, the better it is. Hey, you know, on that, and I'm curious in terms of tensions continuing, certainly between Iran and Israel, let me just—

Go back to something that came out. Former U.S. Secretary of State under President Biden, Antony Blinken, in an op-ed in The New York Times, critical of President Trump's strikes on Iran. He does hope it works, though. He noted that Iran will essentially build back their nuclear enrichment capabilities. And he said, finally, while there's no doubt the American strike set back Iran's nuclear ambitions, Iran could rebuild quickly in locations and at depth

virtually immune to airstrikes while pursuing weaponization at the same time. So he goes on to say, while their program has been significantly disrupted and buying time is a good thing, it underscores that sticking with the JCPOA was the better option. It bought us at least 15 years ago instead of just a few years.

or bought us at least 15 years instead of just a few. And that was, of course, the Joint Comprehensive Plan of Action, that 2015 agreement between Iran and several world powers. So is he right that, I mean, will these tensions continue because Iran will continue to want to have those nuclear enrichment capabilities? Or do you think there is a truce where they say, I'm out, I'm done, realistically?

Look, I think it's really hard to imagine that Iran is going to put its hands up after facing 12 days of attacks plus a round of U.S. attacks and say, you know what, that program that we invested all that money, all that energy, all that time into, we're going to give it up just because of, you know, 12 days of airstrikes. I just don't foresee that happening. I do foresee, however, that Iran will be willing to talk, will be willing to negotiate, but it was already

willing to do that. And it was already at the negotiating table before this escalation round began 12 days ago. So I don't think that will have changed that much. But Iran does have one red line, and that red line is the ability to continue enriching on its soil. I think Iran is going to be wedded to keeping that

that, it will be willing to lower the enrichment level or the amounts of stockpiles that it keeps. But I do think that symbolically it has to keep some enrichment on its soil. There's still that question now of where that enriched uranium went.

And there are also questions about the battle assessment report of what exactly those bunker busting bombs accomplished over the weekend. A lot of unknowns still here. And I'm wondering what your view is, given the unknowns here and just the view of the based on the folks you've talked to, the reporting out of the region.

If folks feel like that region is safer than it was 12 days ago now as a result of what's happened. If you're asking me if we're better off now than we were 12 days ago, then I think my answer is going to have to be no. What?

What we've achieved with these airstrikes, I think, is very little. Satellite imagery appears to indicate that the only thing that really has been affected is the entrances to some of Iran's nuclear facilities, the three that were targeted, but not much more. Prior to that, as you mentioned, Iran had already moved some of that highly enriched uranium out of the facilities. And what you've effectively done is bolstered that Iranian desire that had been kept

under a lid for a long time to really make a dash for the bomb. And

On top of that, you will have driven the program further underground, further hidden behind closed doors, buried further underground, especially now that we know that the bunker busters don't appear to be that effective. And so to me, it looks frightening. We find ourselves in a situation where perhaps you've gained a couple of months or maybe a year, but ultimately you've re-injected Iran with a desire to go for a nuclear weapon, something which it hadn't done up until now.

Dina, what about Iran's proxy militant groups, Hezbollah and Hamas? They were refusing or unable to enter the fight in support of Iran and its Gulf neighbors were urging restraint. Will they continue to be present in whatever is the next chapter of Iran?

So I think Iran's partnerships with these groups in the region, those partnerships will endure, but the groups themselves have been weakened. It's undeniable. After over 18 months of war with Israel, Hezbollah has been decapitated. Much of its capabilities has been affected. Even the Houthis and the fighting...

facing U.S. strikes were weakened. Now, all of these groups will retain some of their capabilities, but they're going through a bit of a reckoning right now and figuring out what it is that they want, what that relationship with Iran will look like in the future, how they're going to work together. And that's

And that's part of the reason why you've seen them be so quiet in response to this direct war between Israel and Iran. They haven't offered themselves up to help, and Iran hasn't asked them to help. Because I think both sides are trying to figure out where we go from here after being weakened.

One thing I want to ask you, China also, in a very succinct statement, criticized the U.S. strike on Iran and the nuclear facilities, reiterated that it's willing to join international efforts to restore peace in the Middle East. You've co-authored the book, Triple Axis, Iran's Relations with Russia and China. Where is China and Russia on all of this and where will they be in the future?

I think that relationship between Iran, Russia and China is going to endure. It's going to continue to grow. But they have a really weird sense of what working together as partners is like. It's very different to the way that in the West we would view alliances. Their relationship is very compartmentalized. They're distrustful of each other. They only work together when they see eye to eye and they ignore issues that they don't see eye to eye on. And that's likely to continue. It also makes Russia and China more

unreliable partners in times like this, because while they will step up and condemn the attacks and pretend to side with Iran and maybe even help Iran in the UN, for example, they won't really take more concrete steps to assist Iran in its face-off with Israel and the U.S.

My last question for you is the status of the relationship between the U.S. and the Gulf states, specifically the ones that the president visited in recent weeks and touted the business and economic ties between the countries. Is that are those relationships intact?

Well, I think from the perspective of those Gulf Arab states, they saw President Trump's visit as a big moment for them. It was kind of their re-acceptance amongst the rest of the international community and especially in the U.S.'s arms.

So it was a very important moment for them. And they felt as though they had the president's ear and they could talk to him about issues, whether bilateral or regional. And I think today they're a little bit disappointed because during that visit, they had set some red lines. They had expressed their support for the U.S.-Iran negotiations, and they had really impressed upon President Trump how critical it was that this doesn't escalate into a regional war. And that's exactly what happened.

So appreciate it. Can't tell you. We know you're busy and this was super helpful to us and we know the Bloomberg audience. Dina, thank you so much. Dina Esfandieri, she's Bloomberg News Middle East Geoeconomics Reporter joining us there from Geneva, Switzerland.

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Hey, we really wanted to do a deep dive on driverless cars, and we've got the perfect duo. The reason why we wanted to talk about this is because Uber shares, among the best performing in the S&P 500 right now, fourth best performer, up 8%. The company said in a press release that it'll be partnering with Waymo to offer ride sharing through autonomous vehicles in Atlanta. On the other side, you've got a company like Tesla, on a points basis, the worst performing stock in the S&P 500, Carol, down 1.7%.

kind of giving back some of the gains that it got yesterday on the successful or what was purported to be successful demonstration of its driverless car tech in Austin. Now there are concerns that regulators are looking into incidents where the self-driving robo-taxis appeared to violate traffic laws during

that day offering paid rides in Austin. Yeah. I mean, there's some concerns, some questions. We've got the perfect duo to talk about all of this. Max Chapkin is Bloomberg Business Week columnist, co-host of the Elon Inc. podcast. Craig Trudell is Bloomberg News Global Autos editor and the editor of the Hyperdrive newsletter. Max right here in our Bloomberg Interactive Broker Studio. Craig out there in London. Craig, let's start with you. All

All right, so there's a lot going on in this sector. What do we know about how things have been going down in Atlanta, in Austin, like how it's all progressing? And full disclosure, Tim and I both have done Waymos on the West Coast. I've also done them in Arizona, and we kind of love them.

So how's it all going down? Because all of a sudden it feels like everybody's all in on these driverless cars. Yeah, I have to say, I mean, just to start, you know, your experience of Waymo's, you know, being sort of surprised and delighted from the sounds of it is consistent with, you know, basically everything I hear at this point. You occasionally do hear people sort of to the extent that they denigrate, you know, Waymo's at all. It's just, oh, gosh, you know, I would be too scared to get into one of those. But, you know, I'll

almost universally when you talk with people who experience it, they get a kick out of it. You don't see a ton of sort of negative takes on sort of how they perform. They've held up quite well. The company's been forthcoming about its safety record and is pretty transparent about

uh if and when it does have issues uh I think things are sort of night and day in terms of how uh you know the company has approached things with with uh you know in comparison to Tesla where you have uh Musk you know for years uh sort of piping up uh what is driver assistance uh you know software that that he offers as something more than that and calling it full self-driving

not delivering it until this past weekend. And once he has taken people out from behind the wheel, on day one, we see these incidents that are pretty troubling in getting the attention of the National Highway Traffic Safety Administration. Okay, we're going to talk more about those in a second. I want to bring in Max Chafkin, who's been following the industry closely. And Max, when we've spoken to you in the past about the driverless car technology, specifically Waymo, you've been

You've been a little skeptical about it. I think everything Craig is saying, everything you're saying is true. The questions around Waymo are business questions. Essentially...

Is this more than a very, very expensive, money-losing attraction for tourists in a handful of cities? Which it definitely is compelling in that sense. There are questions, and these are questions that even Waymo has acknowledged. They need to figure out, they need to turn this into a money-making business. They feel like they've gotten the...

to a point that's pretty good, and now they're working on the business stuff. And this Uber deal, of course, is part of that. That's part of why you're seeing the stock go up. And then, you know, when you compare it to Tesla, the Uber stock go up, when you compare it to Tesla,

Tesla is, I think technically, like a good way to think about this is they are years behind where Waymo is. Like Waymo was doing some of the stuff that Tesla is doing, you know, years ago, like five years ago. There are ways in which Tesla, yes, is impressive and ahead. There are a lot of, Tesla has a lot of miles logged using its driver assistance technology, which it also confusingly calls full self-driving. But Tesla is really at the,

beginning of this and like when we're like they have not even even this pilot program we're talking about very modest it doesn't include members of the public just a handful of influencers in a very small in a very small part of Austin so just just very early and everything that Waymo is doing both in terms of

customers and then in terms on the business side kind of makes that point just shows you how wide the gap is and how far Tesla is at least at this moment from actually operating you know a money making robotaxi. All right so this came up in the news and are we sure that there's no so some folks in some emerging market country that aren't sitting with a joystick like actually driving the way most? There are

- There are monitors, there are people monitoring the Waymos. I think the question, they're not using joysticks, according to Waymo. - Little steering wheels? - They're not using little steering wheels, but they are there watching the Waymo, and that's like part of the business problem for both of these companies. Like you potentially have

like this very expensive piece of hardware and then a bunch of expensive engineers, engineers who cost more money than Uber drivers who are having to oversee these autonomous systems. So that's still a question with Waymo. It's a bigger question with Tesla. - Hey Craig, come on back in here because you've covered the, you cover more than just these two companies and also more than just the sort of driverless element here. But a question that I have is where this, where does this technology leave

the traditional automakers. Because there was this promise from Elon Musk years ago. I mean, I've lost count of how many years ago this was, but he basically said, your Tesla will become more valuable because you will be able to

to essentially set this thing free as a robo taxi when you're not riding around in it and you'll be able to charge for that. Where does all of this lead to more traditional automakers? I mean, I think to your point, you know, there was a real sort of freak out in Detroit and Wolfsburg and, you know, Toyota City.

almost a decade ago now, because Musk started making these pronouncements along the lines of what you're describing, and everyone kind of panicked, right? And we saw sort of everybody put together plans to sort of answer what Tesla was up to. You saw GM acquire Cruise. You saw Ford invest in this company called Argo.

and Volkswagen invested in them as well. You saw Toyota stand up its own sort of self-driving outfit and hire sort of top-notch talent for it. And here we are roughly a decade later, Argo's gone bust.

Cruise has been sort of put out of business by GM. I think a lot of the established manufacturers are saying, you know what, we're going to try and make money off of these driver assistance systems that kind of make the human driving safer, or at least we hope can offer that benefit and this sort of safety and convenience benefit.

But, you know, this is just not going to happen in sort of a major way for quite some time. And we can't, we may not be able to afford to invest in it to the extent that a company like Google can. Yeah. And Waymo, Google, you know, even there we're talking, I don't think we know the exact numbers because of the way that they report revenue and so on. But they've dumped tens of billions of dollars into this. This has been an incredibly expensive endeavor, the kind of endeavor that

really only a company like Google or really a handful of other companies can do. We even saw Apple, Craig didn't mention Apple, but they also tried to get into this business and got out of it. They threw in the towel. For some of the same reasons. Despite having super deep pockets. And the challenge here for Tesla is that a lot of...

the investors who are betting on this thing and even to some extent elon musk have sort of decided that this is the future that that you know musk has said this over and over you shouldn't think of tesla as a as a regular car maker you should think of it as an ai company and now here it is we're seeing the ai and and you know it's just a long way from being you know a fully fleshed out

robo-taxi service, and whether or not they can somehow get there in the crazy timelines that Elon has offered. He said they're going to have something like 100,000 cars on the road by the end of this year. Just huge numbers, numbers that would blow Waymo out of the water if they delivered.

I mean, he's created a huge challenge for himself. Well, I do also wonder about the value. And Craig, come on back in here in terms of having, whether it's Waymo for Alphabet and obviously the self-driving for Tesla, the amount of data that they get and what they learn in terms of technologically creating these. We've talked with our Steve Mann of Bloomberg Intelligence who's

who's talked about the robotics and the manufacturing that has been going on in China and what technological capabilities that has given them. So I do wonder, by these companies doing these kinds of things, what they ultimately get out of it. Is it still a plus?

Yeah, I mean, I think that's been the sort of go-to messaging on Musk's part, right, is that my approach, my being Elon Musk, is to put this hardware on every vehicle I sell. It's a much cheaper and less robust hardware set than Waymo puts on its cars, sure, but people can afford to actually buy it.

I can ingest all of this data and I can put more cars out on the road, bring in more data, therefore I will eventually win. I think that stood to reason to a lot of people and yet it is all sort of theoretical, right? We don't know whether that data advantage will mean anything in the long run. And we've also sort of,

heard from Musk, you know, sort of conflicting messaging in the years since he was, you know, making that argument of, well, we're, you know, not going to sort of hard code our cars, you know,

based on all of the data that we bring in, we're going to just sort of build a robust system that can sort of make decisions on the fly and we're not going to try and, you know, hold into our cars what they should or shouldn't do. And so, you know, there's sort of speaking out of both sides of his mouth and a lot of,

sort of theoretical messaging on his part that makes you sort of question whether or not he actually has the advantage that was sort of believed half a decade ago. - Max, just wanna bring you in for the last 30 seconds. Given Elon Musk's recently tumultuous relationship with President Trump, does that put the regulatory elements around self-driving technology for his company, does that put it at risk?

I mean, I think there are real regulatory questions, also maybe some securities questions. People have made claims about Musk sort of seeming to exaggerate at times. That said, I don't think the challenge here is a regulatory challenge, it's a technical challenge.

It's on one hand, Elon Musk saying these cars can operate totally autonomously. And you watch in the videos and they have somebody in the passenger seat with an emergency brake, probably somebody sitting in a control center and they're still struggling, you know? And so that's the question, how to make the tech work. All right, got to leave it there. Great discussion. Max Chafkin, of course, and our Craig Trudell.

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In the meantime, we continue, of course, just coming off of Fetcher J. Powell, a bunch of testimony this morning up on Capitol Hill talking about everything.

including the need for affordable housing. That comes, too, against a backdrop of a national gauge of U.S. home prices moving up 2.7 percent from a year earlier in April. That's the smallest gain since the summer of 2023. The housing market, as we know, Tim, such an important indicator, certainly when it comes to the U.S. economy. And our next guest is all over it. She watches all aspects of the housing market. It's great to have back with us Katie Hubbard. She's executive vice president of capital markets at Walton Global. It's the

privately owned asset and real estate investment company. It's got close to $4.5 billion of land under management, nearly 80,000 acres under management in the U.S. They operate in the retail, industrial, and commercial sectors. Katie joins us from Chicago on this Tuesday. Katie, I want to remind everybody, Walton Global serves as this middle entity between the land owners and then the developers of

that land, the folks who go out and build housing across the United States and indeed now other parts of the world. So you have a good idea of the supply demand environment right now. We check in with you every few months. How would you describe the demand environment or rather the supply environment when it comes to housing and how that shifted just in a couple of months?

Yeah, so it's great to be here. Thanks for having me. And it's definitely a buyer's market right now. We're seeing sellers are outnumbering buyers by 34% across existing inventory. And May numbers came in for existing home sales, and they were the lowest we've seen in 16 years. So you're starting to see inventory increase on existing home sales sitting at 1.5 million homes for sale. That's a 20% increase this time over last year on existing home sales.

So, I mean, it's definitely a buyer's market. And then on new home sales, the builders are really just they're doing a great job of being resilient in spite of the uncertainty tariff that they're paying right now with just people on the sidelines. So they're continuing to just build through the cycle and they're dipping into their margins to keep the home sold and to keep the volume going.

Yeah, I think, you know, in the U.S., a lot of people are concerned about affordability when it comes to homes. I mean, Carol, we're going to be talking about the mayoral race here in New York. It's a New York-centric story, but certainly a housing affordability front and center there. And it's not just a New York issue.

A big question that a lot of people have is, okay, how do you solve this? The federal government is working on it. There have been proposals in Congress to actually sell off certain federal lands in order to build housing on them. Their critics say that's not necessarily the right thing to do because that doesn't increase density in areas where people want to live. Plus, then you lose some of that federal land. Right, of course. And you and I talk about this. It's not just about building affordable housing. It's building affordable housing where it's needed. Katie...

Tell us what's going on in terms of development work around the nation. You guys see that front and center.

Yeah, so the builders are really adjusting to who can purchase the homes because affordability is such a critical factor right now. So they're really focusing on that 55 plus. We've got 12 million people turning 55 plus over the next eight years. And that group, that demographic controls the wealth. They have $84 trillion of net worth versus 25 to 34 year olds who are those entry level home buyers. They only have $8 trillion of net worth. So home builders are really building communities that are

having amenities that are going to attract those 55, that 55 plus cohort, because they're not only wealthy, but they're also healthy. They want community. They want walkability, new urbanism within the communities that they're moving to. They want to own homes, but they want smaller homes that they don't really have to take care of as much. So home builders are able to adjust, build smaller homes.

putting in wellness centers, things like Blue Zone, concierge services, and just really adapting to the demographic who can purchase homes right now. Yeah, we've talked a lot about kind of that mature market in terms of housing or their needs, whether it's for health or living.

that it seems to be when it comes to real estate, people are certainly willing to build to meet that demand because the demand is there. Having said that though, I listened to you, Katie, and you know where I'm going to probably go. And Jay Powell got a lot of questions about this today. You know, what about affordable housing? What do we need to kind of crack that nut? Cause we've been talking about it forever. Yeah.

The builders, they're doing what they can. They're trying to build cheaper, smaller homes to be able to get people into homes. But I mean, really, it's interest rates. People are locked into their low mortgages and then you're close to a 7% rate. It's now for the first time actually more affordable to buy a new home than it is an existing home. So the builders are adjusting and bringing down prices where they can. Right.

What about when it comes to the actual cost of building these things relative to how much it used to cost for an entry-level home for a family? I think that's a big concern that a lot of Americans have is that this stuff has just gotten so expensive compared to the wages and the money that people make out there right now. What's the measurement that we look at to sort of understand housing affordability in that context?

Yeah, I mean, it's actually twice as expensive to own a home as it is to rent. And what is surprising, though, is Lenar reported their public there on their earnings call that their their cost of construction materials is actually the lowest it's been since 2021. Why is that? Even with tariffs? Why is that?

And they're reporting no impact on tariffs. It's because the large public builders, they have just such an ability to secure capital, scale operations, walk in the land and keep driving down prices, where if you're Bob the Builder and you're competing with Lennar, you can't, you're not able to purchase at the scale that they are. You're not able to offer incentives, buy down mortgage rates.

And so those are the ones where home builder sentiment is really hitting rock bottom. And some of those home builders are probably looking at turning in the keys if you're competing across the street from a builder like a Lenora, DR Horton. Wait, so did you say, wait, cheaper to buy than rent or rent to buy?

It's cheap. It's cheaper to to rent. It's twice as expensive to own as it is to rent. So it's and I'm sorry if I flip that around, but it's twice as expensive to own a home as it is to rent. And that's why people are just it's not attainable right now. The demand is there, but it's unrealized demand that we're that we have in the market because of the lack of affordability with interest rates. But we you know, we keep saying to the mortgage rates are much more normal than

What was abnormal was when they were so low. So do you think this continues or do people adjust and get comfortable and things change? And just got about 20 seconds here.

Yeah, they are moderating. I mean, that's why builders are targeting people that are moving down and they're selling houses and paying cash. They're not as affected. But it is becoming more normal, that mid-six range. But people are now uncertain with the job market and just what's happening politically. So they're on the sidelines, but they're going to come back next year. You always are a great read on a very important market, certainly to our world, the economy here in the United States and more. Katie, thanks so much. Katie Hubbard, Executive VP of Capital Markets at Walton Global.

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