WEBVTT - Single Best Idea with Tom Keene: Sri Kumar and Gene Munster

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<v Speaker 1>Bloomberg Audio Studios, Podcasts, Radio News. Single best idea and

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<v Speaker 1>off of yesterday's program, which was just wonderful of people working,

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<v Speaker 1>Eric and the team working on the geopolitics of the

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<v Speaker 1>Eastern Mediterranean and all of that. We tried to shift

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<v Speaker 1>back to the markets into the economy much more today.

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<v Speaker 1>Just a stellar set of guests program. Note. I really

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<v Speaker 1>want to shout out David Gurris the Big Take yesterday.

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<v Speaker 1>Look for that at Bloomberg Podcasts. It is a show

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<v Speaker 1>that's gotten rave reviews on Israel, on Iran. It was

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<v Speaker 1>with our Nick Wattams and Company and Ethan Brown are

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<v Speaker 1>our Tel Aviv bureau chief. I really can't say enough

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<v Speaker 1>about the response mister Gurrs had off of The Big

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<v Speaker 1>Take yesterday. Our response today was to speak about the

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<v Speaker 1>Shreek Kamar is legendary. He's out of Los Angeles, iconic

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<v Speaker 1>with TCW and others before that, closely associated with Mike

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<v Speaker 1>Milkin's say the Milkan Institute. Shriek Kamar is adamant that

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<v Speaker 1>we've got to get back to foundational theories of another

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<v Speaker 1>time and place and even suggests with this persistent inflation,

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<v Speaker 1>not we will, but we could see a rate increase

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<v Speaker 1>he wants to go back to his mentor and PhD

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<v Speaker 1>advisor at Columbia years ago, John Taylor, now at Stanford University.

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<v Speaker 1>Shrek Kamar on the Taylor rule, You have.

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<v Speaker 2>To go back to the pre pandemic long ago nineteen

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<v Speaker 2>ninety's approach to Taylor rule, and it was first proposed

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<v Speaker 2>Tom in nineteen ninety three. Janet Yellen, who was then

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<v Speaker 2>in San Francisco, said she hopes that it can be

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<v Speaker 2>adopted soon and thirty years later, there is no problem

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<v Speaker 2>Chris toward it. It you need the tailored rule back. It

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<v Speaker 2>is a very flexible formula taking into account whether your

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<v Speaker 2>growth is above or below target, your inflation is above

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<v Speaker 2>or below target, and based on that, should you be

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<v Speaker 2>increasing a lowering interest rate. You put the formula out,

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<v Speaker 2>you publish it in newspapers, speak about it on Bloomberg,

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<v Speaker 2>and I will know what's going to happen to interest rate.

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<v Speaker 1>Shi Kamara with one thought there and of course closely

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<v Speaker 1>associated now with Stanford University in the Hoover Institution, one

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<v Speaker 1>of the things we really tried to do today was

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<v Speaker 1>stay on the markets. In the markets be course had

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<v Speaker 1>a deep draw down. I'm kidding. Vis got out to

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<v Speaker 1>a nineteen not twenty level. I guess that's some recent

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<v Speaker 1>angst in the market, as you'd expect with all this

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<v Speaker 1>going on in politics, and yes, some real earnings angst

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<v Speaker 1>as well off of JP Morgan, Coben, Sachs, old Morgan Stanley,

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<v Speaker 1>Bank of America less so thanks to Kennlean, CFRA was

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<v Speaker 1>brilliant on Bank of America. He made real clear he

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<v Speaker 1>thought this whole thing with subpar but Bank of America

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<v Speaker 1>clearly having the ability to bounce back in future quarters.

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<v Speaker 1>But so there we are into earning season, and of

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<v Speaker 1>course what everybody's waiting for is tech, and tech to

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<v Speaker 1>me is Apple. I know Microsoft comes out as well.

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<v Speaker 1>May second will be Apple earnings. And it's good to

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<v Speaker 1>catch up Gene Monster deep Water, and I went to

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<v Speaker 1>you know something conventional, not China, not product, not iPhone,

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<v Speaker 1>not goggles like Andrew Murphy, War's working with gene Mounster.

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<v Speaker 1>I went back to use of cash. Munster went through

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<v Speaker 1>the math of their free cash flow.

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<v Speaker 3>They generate about one hundred billion in operating income, and

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<v Speaker 3>so this is about a three hundred and fifty four

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<v Speaker 3>hundred billion dollar revenue company. They'll probably do about ninety

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<v Speaker 3>five billion. This year free cash flow will be around

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<v Speaker 3>fifty five billion, So this is still a machine. When

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<v Speaker 3>it comes to and I want to I think I

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<v Speaker 3>bury the lead relative to that data point about their

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<v Speaker 3>free cash flow is revenue growth. If you take what

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<v Speaker 3>it will be in the March quarter, what they're going

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<v Speaker 3>to report in a few weeks here, revenue growth over

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<v Speaker 3>the past eight quarters has been down, will be down

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<v Speaker 3>zero point four percent on average. So they continue to

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<v Speaker 3>drive that kind of fifty billion plus free cash flow

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<v Speaker 3>despite revenue being flat. I think it speaks to the

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<v Speaker 3>strength of the business model that they have.

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<v Speaker 1>I've been harping on this. It's maybe my theme for

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<v Speaker 1>the year, which is there's a complete growth fixation within

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<v Speaker 1>the financial media. It's about growing earnings, growing revenues, growing this,

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<v Speaker 1>growing units, how many clicks do they have, how many

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<v Speaker 1>iPods are they sold? Etc. And the iPhones, I should say.

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<v Speaker 1>And the reality is a lot of companies and CFOs

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<v Speaker 1>are less focused on growth at any cost and are

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<v Speaker 1>looking at profit. In the profit model of something like Apple,

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<v Speaker 1>just as one example, is just absolutely stunning. There's no

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<v Speaker 1>other way to put it. It's one of the focuses

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<v Speaker 1>that we have at Bloomberg surveillance is that we're always

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<v Speaker 1>looking at the Bloomberg FA screen, the financial analysis screen,

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<v Speaker 1>and we're saying, okay, growthy, growthy, growthy and all that,

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<v Speaker 1>but what does the profit look like? How do they

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<v Speaker 1>come down the income statement? What is free cash flow

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<v Speaker 1>look horizontally? Pro tip. One of the great things I'm

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<v Speaker 1>doing now this is not original, is I look at

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<v Speaker 1>where they were in twenty nineteen and now where they

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<v Speaker 1>are four years out, in five years out, in two

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<v Speaker 1>thousand and twenty four, five years out will be you know,

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<v Speaker 1>in two quarters, three quarters or so, and you'd be

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<v Speaker 1>amazed how you can glean out industries such as banking

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<v Speaker 1>or Yeah, there's been a free cashal lift, but not

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<v Speaker 1>as much as you think. In these juggernauts with these

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<v Speaker 1>high multiples, these big tech companies that are putting it

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<v Speaker 1>on every quarter. We're having a lot of fun with this.

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<v Speaker 1>It's single best idea, It's just two ideas. We have

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<v Speaker 1>a committee, you know, we argue. I mean we at

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<v Speaker 1>one meeting went forty five minutes to try to decide

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<v Speaker 1>which two we would pick to put in the single

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<v Speaker 1>best idea. But today it's Shree Komar and it's Gina Munster.

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<v Speaker 1>Just as simple as that. It's a single best idea.

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<v Speaker 1>Of course, listen to us out on Apple car Play,

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<v Speaker 1>download the Bloomberg Business app, It's free on YouTube. All

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<v Speaker 1>I can say is you search Bloomberg podcasts and you

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<v Speaker 1>get on the live chat, and we never know what

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<v Speaker 1>people are going to talk about. Jess Menton's like play satisfaction.

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<v Speaker 1>So we played the Rolling Stones, Otis Redding and other

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<v Speaker 1>worthies today. Okay, fine, and then everybody's all of a

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<v Speaker 1>sudden about the NBA. Think I'd Damien Sassauer bailed me

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<v Speaker 1>out with chick chat on the NBA. So this is

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<v Speaker 1>single best idea from Bloomberg. Surveillance would remain with the

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<v Speaker 1>Mason