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Speaker 1: Yeah, Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene

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Speaker 1: Jay Ley. We bring you insight from the best in economics, finance,

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Speaker 1: investment and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud,

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Speaker 1: Bloomberg dot Com, and of course on the Bloomberg A

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Speaker 1: rate hike from the Bank of England as expected, coming

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Speaker 1: through at zero point seven five from zero point five

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Speaker 1: percent previously, So a twenty five basis point hike from

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Speaker 1: Governor Carney in the MPC. Let's cross over to just

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Speaker 1: outside of thread Needles Street and around the corner where

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Speaker 1: near a church is standing by Bloomberg's very own Nara

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Speaker 1: go through the headlines for us and get us up

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Speaker 1: to speed on what we're learning this morning from the

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Speaker 1: Bank of England. Yes, thanks so much, Sean. This is

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Speaker 1: a unanimous vote for that rate rise. Of course, the

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Speaker 1: rate rise was highly expected, but economists were perhaps expecting

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Speaker 1: a seven to vote. We've got nine zero on the MPC,

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Speaker 1: so perhaps that might send a little bit of a

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Speaker 1: hawkish signal to the markets. More than that as well,

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Speaker 1: what we've got is the long term trend equilibrium rate

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Speaker 1: the bo ecs that at about two to three percent.

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Speaker 1: This is interesting because remember this is the first time

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Speaker 1: we're getting that our star from the BOE might give

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Speaker 1: some signal to wear rates settle in the future and

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Speaker 1: perhaps effect that forward curve somewhat. Now, some economists, many

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Speaker 1: of them, were saying we could get a range of

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Speaker 1: one point five to two point five per cent, So this,

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Speaker 1: of course is slightly higher at two to three percent.

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Speaker 1: Is that also a little bit of a hawkish signal here?

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Speaker 1: Other things that we've had in terms of comments from

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Speaker 1: the BOE, there are tentative signs that protection is um

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Speaker 1: is affecting global growth, so that's a little bit of

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Speaker 1: a sign of some of the risks. No mentions yet

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Speaker 1: of Brexit, but no doubt Mark Carney will get a

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Speaker 1: lot of questions out of that in the news conference,

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Speaker 1: because of course, one of the questions here that a

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Speaker 1: lot of people were asking is why the Bank of

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Speaker 1: England would hike into a potential down to turn ahead

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Speaker 1: of all that uncertainty around Brexit. But nonetheless that highly

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Speaker 1: anticipated hike has come. We do still have the comment

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Speaker 1: though of limited and gradual the boecing interest rate increases

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Speaker 1: from here being limited and gradual, and of course in

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Speaker 1: the news conference, there will be a lot of questions

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Speaker 1: around the guidance of the forward curve and when or

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Speaker 1: how rate hikes might come from here. Is it going

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Speaker 1: to be a one and done? What sort of signals

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Speaker 1: will we get on that John now a chair. It

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Speaker 1: is great to cat show with you much more from there.

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Speaker 1: Through the afternoon and morning right here on Bloomberg Radio

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Speaker 1: saw a great height from the Bank of England. Guilt

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Speaker 1: yields just jump a little bit higher off the back

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Speaker 1: of this decision to unchanged on the down a ten

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Speaker 1: year and at the front end the communication for the

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Speaker 1: Bank of England policymakers agreeing that more rate hikes will

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Speaker 1: be needed. Off the back of this, a little bit

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Speaker 1: of a bounce on sterling, a stronger dollar story today,

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Speaker 1: so that kind of sort of warp in the move

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Speaker 1: here cable now almost unchanged on a session down by

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Speaker 1: just a tenth of one percent now at one dollar

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Speaker 1: thirty one. Tom Keane expected, it was expected, but the

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Speaker 1: street wondering whether this has wanted done in the bank

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Speaker 1: having the communicating that more could be coming, and then

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Speaker 1: just as remarkable is the complete opposite of what we

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Speaker 1: saw yesterday afternoon with a fed. This is some real

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Speaker 1: substance to our US listeners. There's real substance here. And

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Speaker 1: I would suggest John knock on effect to the American economy.

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Speaker 1: This is not discreetly about the United Kingdom and whether

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Speaker 1: the guy from Arsenal will leave Racy Milan. We can

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Speaker 1: get that to that a little bit. We can do that.

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Speaker 1: But we have got some really good guests coming up.

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Speaker 1: And we got two individuals that used to serve on

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Speaker 1: the Bank aving the Monekey Policy Committee, and we can

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Speaker 1: begin with Adam Poston, Peterson Institute for International Economics President,

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Speaker 1: and he joins us on the phone. Now, Adam, it's

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Speaker 1: great to have you with us. Let's just begin with

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Speaker 1: the decision itself. If you were back on the MPC,

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Speaker 1: would this have been nine zero? No, I would have

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Speaker 1: I would have voted against it. I know Danny by

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Speaker 1: char you're having on later, would vote against it. And

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Speaker 1: I would presume that a couple of the members currently

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Speaker 1: more importantly, like the speech John Kunloft gave month out

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Speaker 1: and a half ago, would vote against it. It's very

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Speaker 1: hard to justify this decision in my view. How are

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Speaker 1: they justifying it, Adam? They seem to have two things

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Speaker 1: going on as as time put up on the TV

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Speaker 1: bloom A TV surveillance um that they think that their

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Speaker 1: output gap is closing, so inflations around the corner, and

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Speaker 1: they believe their wage forecasts that there's going to be

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Speaker 1: rising wages, even though, as Blanche Flower and others have

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Speaker 1: pointed out, those forecasts going back to the time I

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Speaker 1: was on the NBC years ago, have repeatedly been wrong.

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Speaker 1: We can bring in Danny now, Danny Blanchelind Datmouth professor

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Speaker 1: and former bankinging the Monetary Policy Committee member. Danny have

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Speaker 1: got no doubt where your vote would have gone last night.

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Speaker 1: Your thoughts on the decision, well, I I completely agree

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Speaker 1: with Adam. Um. I think what's really interesting is now

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Speaker 1: we're in the world if we still thinking and guessing. Um.

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Speaker 1: I'm actually trying to read the last four paragraphs of

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Speaker 1: the decision and there's actually no day to whatsoever that

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Speaker 1: sustains they can't come up with any data. Adams right,

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Speaker 1: They seem to think the output gap has actually has

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Speaker 1: closed a lot, and the only word is based upon

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Speaker 1: is I would sencely Caclaric summarize what they've written as

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Speaker 1: the data is absolutely horrible. There's no data to support it,

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Speaker 1: but we think it's temporary and wage growth is about

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Speaker 1: to explode. Um, I think it's I think, I know.

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Speaker 1: How is it right? This is a classic Red mistake

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Speaker 1: that will be reversed. Can I just tell you what

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Speaker 1: the data looks like. There's no inflation, no wage growth.

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Speaker 1: The people are borrowing like crazy, raised uncertainty, potential trade

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Speaker 1: wars and Brexit. Commercial property values and house prices are falling.

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Speaker 1: Business confidence is low, household debts through the roof insolvent

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Speaker 1: is a rising GDP. Growth is weak, and there's no

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Speaker 1: data whatsoever. Sounds like more rate hikes on Adam Poston,

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Speaker 1: because that's the communication coming from the Bank of England today,

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Speaker 1: not just one hike, but agreeing that more is to come. Yeah.

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Speaker 1: And again, often not always, but often I agree with Danny,

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Speaker 1: and in this case, especially on wages. I always agree

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Speaker 1: with Danny because he gets right. But I mean, it

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Speaker 1: is interesting, I've said on the show before and elsewhere.

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Speaker 1: You know, I could imagine the bank aving and filling

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Speaker 1: hamstrung visa vi bregsit Because they politically have to play

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Speaker 1: it straight and just be reacting. They can't argue against it,

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Speaker 1: and because the currency could move in crazy ways, but

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Speaker 1: that's not where we are right now, and so I

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Speaker 1: do not understand. I honestly don't get it. Dr Pos

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Speaker 1: And I've I've had the privilege of attending a packed

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Speaker 1: lecture of David blanche Flower and having the privilege of

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Speaker 1: opining to the young Turks of Dartmouth. David blanche Flower,

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Speaker 1: if you were in your lecture hall right now, and

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Speaker 1: you and Pose it are having a love fest over

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Speaker 1: no rate rise. Others disagree. So if I think of

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Speaker 1: Charles Plash or the Fresh Freshwater School or others. But

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Speaker 1: Professor Blanchflower state the case of those who feel Curney's

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Speaker 1: got to raise rates to get some room for the

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Speaker 1: next slowdown, Well, the case for those folks is that

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Speaker 1: you have to ignore the data. You go and look

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Speaker 1: at the forecast that you've got wrong the last twenty

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Speaker 1: meetings in a row, and you say we need to

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Speaker 1: raise rates in case the economy slows um and pretend

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Speaker 1: that the fact that you raise rate won't cause the

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Speaker 1: economy to flow. And you're don't going to ignore the

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Speaker 1: fact that, um, there's a potential Brexit disaster coming and

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Speaker 1: there's trade wars coming. So you have to take a

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Speaker 1: huge leap of faith and stay to yourself. Um. Now

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Speaker 1: is the moment something is fundamentally changed. Um, And you've

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Speaker 1: gotta have to persuade Blanchdown Post them that you know

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Speaker 1: what it is, but you can't tell us because there's

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Speaker 1: nothing in the data that actually tells you that this

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Speaker 1: is fundamentally altered. So the risk are to the downside.

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Speaker 1: And you've been saying for the last five years that

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Speaker 1: inflation is going to take off and wage growth is

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Speaker 1: going to take off, and you're going to say that

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Speaker 1: it's really going to happen now. Um. And I'm afraid

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Speaker 1: my class is gonna get to vote Adam Post And

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Speaker 1: I want to get a final thought from you. Typically,

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Speaker 1: when a central bank hikes, especially a developed one, the

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Speaker 1: some optimism around it. It sounds like growth is going

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Speaker 1: to improve, and that's why we're normalizing. This is a

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Speaker 1: thoroughly depressing interest rate hike. Even the Bank of England

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Speaker 1: might admit that themselves, because they're talking about lower potential

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Speaker 1: for the economy and bumping up against limitations, which means

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Speaker 1: inflation pressures around the corner. How do they convince people

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Speaker 1: in the news conference that there's some optimism out there.

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Speaker 1: I don't think they do. I do want to say

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Speaker 1: that you've hit your you put your finger on the point.

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Speaker 1: The most legitimate argument they can make, and they started

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Speaker 1: making this some months ago, was an argument that potential

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Speaker 1: had fallen. And when you your estimate of potential, meaning

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Speaker 1: the trend rate of growth, is off, you are more

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Speaker 1: prone to mistakes. But central bankers, they said in a

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Speaker 1: Bloomberg list of mistakes economists are making, are two caught

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Speaker 1: up in the nineteen seventies mistake. The classic nineteen seventies

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Speaker 1: mistake Arthur Burns us fed was potential was going down.

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Speaker 1: They thought it was rising. Therefore inflation took off. In

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Speaker 1: this case, they're probably going the wrong way. They're overestimating

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Speaker 1: how much potential is down. So they're going to make

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Speaker 1: a mistake in the wrong direction and impose. And it's

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Speaker 1: great to have you with us. He's gonna stay with

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Speaker 1: us alongside Danny blanch Flower'll get their thoughts or not.

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Speaker 1: But on central banks worldwide, great starts at the morning.

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Speaker 1: Tom It was plenty to talk about with this h

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Speaker 1: Danny blanch Flower, who's got us six thousand square foot man,

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Speaker 1: it's just north to Hanover, New Hampshire with Dartmouth at College.

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Speaker 1: Danny within the good comments of the governor is truly

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Speaker 1: he makes history raising rates into a huge political debate

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Speaker 1: called Brexit. He said policy and this is very Matthew Danny.

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Speaker 1: This is something you'd say, policy needs to walk and

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Speaker 1: not run for us to stand still. Boy, are there

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Speaker 1: a lot of dynamics. Is policy needs to walk in

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Speaker 1: that run? You and Adam pose and say policy needs

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Speaker 1: to stand still in that walk in that run. Why

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Speaker 1: why can't we get a little bit of normalization in here? Well,

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Speaker 1: times are not normal? Um? I mean so that the

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Speaker 1: UK economy prior to the Brexit boat was really doing

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Speaker 1: very well. Um. And now we essentially see the forecast

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Speaker 1: showing in many senses to come the sick man of Europe.

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Speaker 1: So you see very low growth. Um. You see lots

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Speaker 1: of pieces of data flashing amber if not read. And

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Speaker 1: the MPC's answer is that the capacity of the economy

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Speaker 1: has permanently gone downwards and now we have to start

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Speaker 1: to raise rates to make things is worse. So, I mean,

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Speaker 1: I've been since we since this all started at seven,

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Speaker 1: I've desperately been trying to read the inflation reports in

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Speaker 1: the minute, and it's really completely incoherent is to actually

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Speaker 1: why they raised rates. I mean, the one thing that

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Speaker 1: really gets me is if you look at one of

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Speaker 1: the charts they have, they see, if we don't raise

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Speaker 1: rates to inflation is going to be two percent m

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Speaker 1: So you raise rates because of inflation, but the forecast

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Speaker 1: says there isn't any and you say, well, we think

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Speaker 1: it's because the economy is at full and point, but

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Speaker 1: we have no evidence to support that. So I'm afraid

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Speaker 1: that this is a sort of utter incoherence. People to

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Speaker 1: look at it and say, why the heck did they

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Speaker 1: do this when the economy is under space, is huge

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Speaker 1: uncertainty and Brexit presume it is a major downside risk.

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Speaker 1: So I think this is the most incoherent decision I've

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Speaker 1: ever seen from the banks, because they don't if you

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Speaker 1: read the thing through, you can't really work out why

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Speaker 1: they raise rates. Well, there is this concern that the

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Speaker 1: economic potential of the United Kingdom has been diminished by

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Speaker 1: the exit conversation and that the UK is about to

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Speaker 1: bump up against supply constraints. You're just flat out saying

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Speaker 1: that's not going to happen. Danny I'm flat out are

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Speaker 1: I mean, I mean, you're you're right, that's what they say,

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Speaker 1: But what's the evidence consistent with that? I mean, I'm

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Speaker 1: allowed to respond by saying, show me something that's consistent

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Speaker 1: with that. Um. And I think the big thing that

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Speaker 1: they've said that the big basis of this is that

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Speaker 1: they think that means that wage growth is going to

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Speaker 1: take off. And I've tweeted a chart from the paper

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Speaker 1: this morning. They said that the last nineteen forecast in

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Speaker 1: a road said exactly the same thing, so over nineteen,

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Speaker 1: but now they think it really, really really is going

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Speaker 1: to happen now, So essentially this forecast is based on

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Speaker 1: which we're thinking and guessing because the forecasts have been

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Speaker 1: completely worthless. So now so, I mean, you're right, I

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Speaker 1: mean I agree with you. But what what the public

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Speaker 1: and the markets have to think is well, why should

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Speaker 1: we believe them that today things fundamentally have changed. So

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Speaker 1: Danny leap of faith? What's going to come next? I

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Speaker 1: know what you think the Bank in England should do?

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Speaker 1: I want to ask you what you think the Bank

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Speaker 1: of England will do? It's the next move really going

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Speaker 1: to be a hike or do you think it could

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Speaker 1: actually be a cut. Well, I think the answer is

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Speaker 1: obviously what would at imposing a Denny branch. First, they'd say, well,

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Speaker 1: let's see what the data looks like. Let's see how

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Speaker 1: things look going forward. Um, I think the expectation. I mean,

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Speaker 1: I think what we'll see will be the data and

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Speaker 1: not really going to improve. There won't be any rising inflation,

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Speaker 1: there won't be much wage growth, and we'll start to

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Speaker 1: see some bad numbers coming and so that will mean

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Speaker 1: the pressure will be on to reverse the cart and

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Speaker 1: start to think about putting more stimulus in. I think

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Speaker 1: that's probably where we got. But I would sit and

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Speaker 1: look at the data and I would say, well, let's

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Speaker 1: see if things have things proceed. But I would be

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Speaker 1: trying to make a decision based upon the data from

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Speaker 1: the real world, rather than guessing about the world that

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Speaker 1: they're dreaming about. And I think Adam has pretty much

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Speaker 1: said the same thing. So I'd be a data guy,

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Speaker 1: and I think the mark get some people listening should

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Speaker 1: say let's look at the data. So we just had

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Speaker 1: in the last twenty minutes the construction t m I

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Speaker 1: came in quite strong. So I would be looking at

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Speaker 1: the data, and I think I think the chances are

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Speaker 1: the data is going to come in bad. If you

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Speaker 1: ever seen a divergence like we've seen in the last

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Speaker 1: eighteen hours between an American monetary forecast in a UK forecast,

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Speaker 1: well I haven't, but think about tom. Actually, let's expand

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Speaker 1: it a little further. Let's expand it to Japan. I mean,

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Speaker 1: so we saw a couple of days before that we

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Speaker 1: saw and talking about extending quee, further, buying, further, e

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Speaker 1: t s, keeping rates negative. I mean, obviously the fair

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Speaker 1: has been raising rates and put things on hold, and

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Speaker 1: I've been critical of the US, but obviously you you

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Speaker 1: would be hard to argue against the four point one

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Speaker 1: GDP growth for the first quarter. I mean that there

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Speaker 1: is some evidence that there is strength in the US economy.

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Speaker 1: I mean that that's the d That number is a

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Speaker 1: big deal. So the data for the UK, we're talking

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Speaker 1: about some probably some GDP growth for the whole year

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Speaker 1: of about what we caught for the US for one quarter.

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Speaker 1: So if you have data like that, how does a

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Speaker 1: member of the MPC vote and say we should raise weights.

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Speaker 1: The only thing they can say is, oh, it's temporary,

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Speaker 1: and I guess I'm hopeful and I guess that this

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Speaker 1: is temporary and it's all gonna be okay. So I

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Speaker 1: think the answer is the divergence, perhaps if you focus

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Speaker 1: on is driven by the data. I mean, it's hard

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Speaker 1: to say that you should be rooting for a rate

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Speaker 1: cut in the US with a four point one when

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Speaker 1: you've got a point three in Britain. Okay, Danny, thank

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Speaker 1: you so much. David blanche Flower where us? So we

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Speaker 1: greatly appreciate dr proposing of Peterson Institute being with us

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Speaker 1: as well. Professor blanch Flower holds court at Dartmouth. Colin,

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Speaker 1: why don't you bring in? I guess you do. You

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Speaker 1: you don't have a tesla because I don't have a tesla. Note,

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Speaker 1: but I can tell you I'm not church rating in

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Speaker 1: the national some some rare positive price action in a

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Speaker 1: risk aversion session. We're up by almost nine percent in

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Speaker 1: the pre market. I want to bring in Brian Johnson,

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Speaker 1: Barclay's Capital senior order analyst, to get his thoughts on

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Speaker 1: the earnings. The headline from the Barclays research this morning

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Speaker 1: boring with a touch of tech row. Brian walked me

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Speaker 1: through what that means boring, because what we had on

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Speaker 1: the phone calls compared to last quarter. Was a Mr

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Speaker 1: Musk who sounded like he's stuck to a script prepared

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Speaker 1: by professional touch of check brow because they Philipbuster to

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Speaker 1: ran down the clock with an extensive discussion of the

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Speaker 1: progress over on the Autopilot team, including three members of

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Speaker 1: the AUTOPILOTUE team, Geeky out like a podcast about neural

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Speaker 1: nets and co operates on fast chips. So what have

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Speaker 1: we learn about the capital position? Uh? You know, cash

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Speaker 1: deteriorated for the quarter, bid less than we were looking

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Speaker 1: for UM with UM and we'll wait for the kid

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Speaker 1: to see some of the pathetics on cash. But what

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Speaker 1: we learned is that they are guys we expected, continuing

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Speaker 1: to target profitability for next quarter. Capex is being potentially

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Speaker 1: produced for the second time UM and by not selling

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Speaker 1: ZEP credits, that makes it clear that they're going to

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Speaker 1: sell some next quarter to help them get there. Portia

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Speaker 1: as revenues of I'm gonna call it, I guess Tesla

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Speaker 1: is on its way to Does Elon Musk want to

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Speaker 1: be Portia? Does he want to be Forward in a

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Speaker 1: hundred and fifty seven billion or does he want to

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Speaker 1: be something? What's the scale? What's the scale dream here

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Speaker 1: for Tesla. You know that that is I think the

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Speaker 1: great um the question that this gets to, we've actually,

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Speaker 1: you know, with a two dollar price target. Well, we

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Speaker 1: think it's over valued. We're certainly not out there predicting bankruptcy.

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Speaker 1: But the Tesla could make a fine niche manufacturer along

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Speaker 1: the lines supports selling a premium brand to products globally

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Speaker 1: that yet is an expensive way well with competition getting

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Speaker 1: free to be, but brings other attributes. Um, you know,

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Speaker 1: if to compare a Porch to Toyota in terms of

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Speaker 1: practicality and economy, obviously the Toyota will win, But instead

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Speaker 1: the Aspirations seemed to be to be the next Toyota.

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Speaker 1: And I think the most interesting thing about the quarter

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Speaker 1: and the new guide is, and part of my headline

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Speaker 1: around Boring, is they're at least willing temporarily to pull

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Speaker 1: back some of their aspiration ships. China is not likely

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Speaker 1: to be in production until um you know. And I

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Speaker 1: think there's actually the YouTuber run at the end and saying,

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Speaker 1: wait a second, what about all these brand growth plans?

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Speaker 1: Still after trucks pickup trucks, dude, So we'd actually be

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Speaker 1: very happy and probably more supportive of Tesla shares if

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Speaker 1: it reigned in its growth aspirations. However, I wonder if

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Speaker 1: the tech world, which is temporarily entranced by revenue growth,

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Speaker 1: they will get supporter We actually want that. Okay, Well,

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Speaker 1: what's and I want to broaden this out with US

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Speaker 1: Brian Johnston Johnson running all of autos for Barclays. If

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Speaker 1: we broaden this out to the greater US economy, have

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Speaker 1: you done the tariff math yet? I mean John Farrell

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Speaker 1: has been great about saying BMW's in the Carolinas, and

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Speaker 1: you got the whole Detroit complex and you're making cars

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Speaker 1: out in a tent in California. What's the Barclays tariff

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Speaker 1: math for the American no industry? Yeah. Really three fronts

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Speaker 1: to the terrorist trade wars with different implications across the board. Uh.

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Speaker 1: First of all, China, which is probably the most heated,

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Speaker 1: definitely affects Tesla because it's an exporter there, as well

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Speaker 1: as BMW and Daimler because of their plants in South

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Speaker 1: Carolina and Alabama. But for the most of my US

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Speaker 1: auto parts and autos coverage, it's built in China, stay

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Speaker 1: in China. So let's there's some sort of retaliation against

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Speaker 1: General Motors and other joint ventures. They're not a major

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Speaker 1: worry U S e U not a whole lot of

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Speaker 1: either parts or trade flow for the American based automakers

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Speaker 1: and auto parts suppliers. B Chrysler is the one exception.

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Speaker 1: Watually see light at the end of the tunnel there

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Speaker 1: after last week's meeting. It's frankly in the German automaker's interest,

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Speaker 1: you know, to have low sheriffs between the US and

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Speaker 1: Europe a LA. Then take those TVs that aren't going

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Speaker 1: to China into your more prost efectively question is though

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Speaker 1: connect get through the EU bureaucracy. Third is NAFTA, which

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Speaker 1: is absolutely essential to mind US auto and out of

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Speaker 1: FIRS thage companies like General Motors are can actual top

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Speaker 1: pick um. We see some light at the end of

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Speaker 1: the tunnel there around the local content high wage um

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Speaker 1: requirements in that US and Mexico and christ Canada's high

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Speaker 1: wage and will go along. I could see an agreement

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Speaker 1: there that would be inflationary somewhat to the cost space

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Speaker 1: of the O E M S, but frankly less than

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Speaker 1: the swing we've had a year to data around stealing

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Speaker 1: Brian really appreciated, particularly early this morning as well. Brian Johnson,

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Speaker 1: Barclays and Tessa Johnfer. What are you out over there

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Speaker 1: listening to the the MPC decision and the consequences of it?

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Speaker 1: Governor Khani? In the news conference after the right Hike,

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Speaker 1: someone of the audience asked him about Danny blanche flat

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Speaker 1: and one thought about whether Danny blanch was was right

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Speaker 1: or wrong? Take a listen to this, it just took place.

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Speaker 1: A former member of this committee, Professor blanch Flower says

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Speaker 1: that the natural rate is actually a lot lower than

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Speaker 1: that could be as low as three. And given that

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Speaker 1: Professor blanch flowers predictions for labor market and particularly earn

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Speaker 1: his growth have been yeah, recently a lot more accurate

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Speaker 1: in the banks, why is he wrong? And you're right? Yeah,

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Speaker 1: where do I begin? Um um? Great respect for a

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Speaker 1: Professor blanch Flower, but his time in the MPC has passed,

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Speaker 1: and this is the judgment of this MPC. I think

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Speaker 1: I think the last glacier just smelled in the Green

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Speaker 1: and White mouse. We've got to get Danny back on,

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Speaker 1: haven't we see what's what's going on? This is really important.

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Speaker 1: Thank you, I missed completely Joan. Thanks for finding that

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Speaker 1: this is what we try to do with surveillance. And

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Speaker 1: I'm not saying they were listening to Posing Blanche Flower

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Speaker 1: or fifteen minutes ago, but we're trying to engage a

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Speaker 1: debate John that affects everybody's life. Is a lot of

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Speaker 1: people have responded to the former MPC policy maker Danny

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Speaker 1: Blanche Fly and the comments he made on this show

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Speaker 1: in the last forty minutes or so, and clearly someone's

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Speaker 1: picked it up and brought it up in the Q

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Speaker 1: and A. And I think it's fascinating and Governor Karney

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Speaker 1: clearly taking a different tack than he's got to justify

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Speaker 1: the right highs. But I think it is a different

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Speaker 1: cast and theory and not so much the mathiness of

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Speaker 1: economics as in Blanche Flowers classic book, but it's on

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Speaker 1: the behavior of people and the mystery between Carney and

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Speaker 1: Blanche Flower. Are the times we live in in the

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Speaker 1: technology that's there as well. Can we listen in more

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Speaker 1: to Bank of England. Maybe they'll bring up Adam Posing.

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Speaker 1: It's been tech, this tech that all of us, all

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Speaker 1: of our listeners, me and Pim, we're all checked out

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Speaker 1: by tex So. Well, we need more here's share over

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Speaker 1: day with us, and I want to go to what no,

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Speaker 1: you know, I've said this for years. You've heard me

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Speaker 1: blathering about it. It's about the engineering and the aesthetic,

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00:24:29,800 --> 00:24:33,480
Speaker 1: and part of that is the A six, the A seven, ten,

430
00:24:33,960 --> 00:24:37,280
Speaker 1: and the A eleven bionic chip. So let's get out

431
00:24:37,359 --> 00:24:40,239
Speaker 1: front of this silly tech debate. What is Apple going

432
00:24:40,280 --> 00:24:43,280
Speaker 1: to show in September or in March of next year?

433
00:24:43,720 --> 00:24:46,399
Speaker 1: Is there like an A twelve chip coming that all

434
00:24:46,440 --> 00:24:50,560
Speaker 1: the nerds like you are like, O MG. I don't

435
00:24:50,600 --> 00:24:53,960
Speaker 1: know how many people are excited about Apples self designed

436
00:24:54,040 --> 00:24:59,359
Speaker 1: computer chips, because this is what makes it go totally.

437
00:24:59,400 --> 00:25:03,280
Speaker 1: It is only one of the um untold or or

438
00:25:03,600 --> 00:25:08,440
Speaker 1: I think not widely understood certainly by the consumer tech

439
00:25:08,480 --> 00:25:12,119
Speaker 1: buyers that you know. Apple's own self design chips are

440
00:25:12,160 --> 00:25:14,399
Speaker 1: a big reason the company is where it is. That

441
00:25:14,440 --> 00:25:19,760
Speaker 1: it's helped the company advance. It's um I mean the

442
00:25:19,840 --> 00:25:25,720
Speaker 1: last time around they increased part of the speed seven zero. Yeah,

443
00:25:25,720 --> 00:25:29,240
Speaker 1: and I think, look, it's not really about speeds and feeds,

444
00:25:29,280 --> 00:25:31,040
Speaker 1: which is I think the things that the tech nerds

445
00:25:31,119 --> 00:25:33,399
Speaker 1: care about. But if you look at something like the

446
00:25:33,440 --> 00:25:36,680
Speaker 1: air pods, for example, that's something that's not possible without

447
00:25:36,920 --> 00:25:41,040
Speaker 1: Apple zone. Uh work, right, And and so I don't

448
00:25:41,080 --> 00:25:45,920
Speaker 1: know what's next with you, at least in terms of you. Yeah,

449
00:25:45,960 --> 00:25:49,000
Speaker 1: it's it is that secret. And obviously there are going

450
00:25:49,040 --> 00:25:53,720
Speaker 1: to be more Apple iPhones unveiled next month. September is

451
00:25:53,800 --> 00:25:56,439
Speaker 1: the period when Apple releases its newest models of phones.

452
00:25:56,520 --> 00:26:00,600
Speaker 1: We're expecting you know, three this time. Are gonna go

453
00:26:00,760 --> 00:26:04,320
Speaker 1: we need an Apple X. I. Well, they'll at least

454
00:26:04,320 --> 00:26:06,840
Speaker 1: get you to pay for an Apple X an Apple ten,

455
00:26:07,400 --> 00:26:11,320
Speaker 1: which a racket, of course it is. That's the way

456
00:26:11,359 --> 00:26:14,199
Speaker 1: it works, right between. The two of us are monthly

457
00:26:14,320 --> 00:26:16,359
Speaker 1: fee on this gimmick they have you and I are

458
00:26:16,440 --> 00:26:19,720
Speaker 1: paying a mortgage. Well I was going to say a

459
00:26:19,760 --> 00:26:22,440
Speaker 1: mortgage jet an education. Yeah, I mean the funny thing

460
00:26:22,480 --> 00:26:26,040
Speaker 1: is that, you know, cell phone smartphones have become essentially

461
00:26:26,160 --> 00:26:30,399
Speaker 1: a commodity product except for iPhones, right, And that's really

462
00:26:30,800 --> 00:26:33,000
Speaker 1: I mean give Apple credit for doing that. That they

463
00:26:33,000 --> 00:26:36,159
Speaker 1: have convinced people to pay a lot of money for

464
00:26:36,200 --> 00:26:39,080
Speaker 1: what is essentially a product that they could buy for

465
00:26:39,280 --> 00:26:41,760
Speaker 1: less from many other vendors. Yeah, but you don't get

466
00:26:41,800 --> 00:26:44,080
Speaker 1: the you don't get an Apple operating system, but you

467
00:26:44,119 --> 00:26:48,400
Speaker 1: don't get iOS. You get Android, which is not necessarily

468
00:26:48,440 --> 00:26:56,440
Speaker 1: better or worse. It's just different. It's different. But sure,

469
00:26:56,480 --> 00:26:58,639
Speaker 1: can I just ask something about it? You've seen an

470
00:26:58,680 --> 00:27:01,720
Speaker 1: old led screen phone? Sure, yeah, I don't own one,

471
00:27:01,800 --> 00:27:05,520
Speaker 1: but I have an old, older iPhone. But okay, screens.

472
00:27:06,080 --> 00:27:08,399
Speaker 1: When you see the difference between an old ed screen,

473
00:27:08,400 --> 00:27:09,919
Speaker 1: this is like going back to people who said, oh,

474
00:27:09,960 --> 00:27:12,000
Speaker 1: I would never need a forty whatever it is inch

475
00:27:12,080 --> 00:27:14,720
Speaker 1: television flat panel, and then all of a sudden they

476
00:27:14,720 --> 00:27:17,040
Speaker 1: looked at the fifty two inch and they went, oh,

477
00:27:17,160 --> 00:27:20,639
Speaker 1: oh I that Oh no, I'm not going to get

478
00:27:20,720 --> 00:27:24,399
Speaker 1: this other thing. Yeah. Although I mean again, this is

479
00:27:24,600 --> 00:27:27,360
Speaker 1: a person. You watch a lot of video. The old

480
00:27:27,440 --> 00:27:31,560
Speaker 1: screens are amazing. Okay, I I haven't been that thrilled

481
00:27:31,720 --> 00:27:34,760
Speaker 1: by the screens, but that's just me. Maybe sim Cook?

482
00:27:36,040 --> 00:27:38,159
Speaker 1: Is Tim Cook scrilled by this? Next? I mean my

483
00:27:38,240 --> 00:27:41,119
Speaker 1: whole thing. You're we usually talk math numbers, cash flow?

484
00:27:41,440 --> 00:27:43,880
Speaker 1: What do they do in seven under twenty four dollars? Blowney?

485
00:27:44,280 --> 00:27:47,440
Speaker 1: Tim Cook's worried about popping the next toy. I mean

486
00:27:47,480 --> 00:27:50,520
Speaker 1: it's not here, it doesn't even have an I Watch.

487
00:27:50,840 --> 00:27:56,800
Speaker 1: Yeah exactly, yes, we all have watched Watch. I mean

488
00:27:56,880 --> 00:28:00,160
Speaker 1: they need to keep the beast going with a technological want.

489
00:28:00,240 --> 00:28:02,240
Speaker 1: Come on, I mean most people you walk around, you

490
00:28:02,320 --> 00:28:06,240
Speaker 1: see people with the air buds right, the airpots. You

491
00:28:06,280 --> 00:28:10,919
Speaker 1: see people with their Apple watches. This is we're like

492
00:28:11,080 --> 00:28:12,919
Speaker 1: arguing over you know, angels on the head of a

493
00:28:12,960 --> 00:28:15,680
Speaker 1: pin here, right, people are gonna want this stuff. As

494
00:28:15,720 --> 00:28:18,520
Speaker 1: far as the new phones go, all the we're gonna

495
00:28:18,520 --> 00:28:22,639
Speaker 1: have facial recognition technology. I believe that's correct. Altho, I've

496
00:28:22,680 --> 00:28:26,720
Speaker 1: now forgotten the reported specs on the new phone. Second

497
00:28:26,920 --> 00:28:29,800
Speaker 1: day I got rid of that. Why because it took

498
00:28:29,840 --> 00:28:31,760
Speaker 1: me two days to figure out how to get rid

499
00:28:31,760 --> 00:28:35,800
Speaker 1: of it. You didn't think it was it wasn't personal, No,

500
00:28:35,840 --> 00:28:37,639
Speaker 1: I just think I don't have time to screw up

501
00:28:37,640 --> 00:28:41,440
Speaker 1: with the reason I mentioned the facial recognition technology is

502
00:28:41,480 --> 00:28:44,200
Speaker 1: now you start to talk about twinning that with health

503
00:28:44,240 --> 00:28:49,520
Speaker 1: records or sensitive information that can then make your life

504
00:28:49,520 --> 00:28:53,320
Speaker 1: supposedly easier, right, Yes, I mean, look, that's that. That

505
00:28:53,400 --> 00:28:56,920
Speaker 1: is a game. The initiative that all the technology companies

506
00:28:56,960 --> 00:29:01,520
Speaker 1: are doing that they want to get deeper and deeper

507
00:29:01,600 --> 00:29:06,520
Speaker 1: into our lives. Um, you know, for reasons of helping people.

508
00:29:07,000 --> 00:29:11,560
Speaker 1: It's definitely true that, uh, if we had better access

509
00:29:11,600 --> 00:29:14,440
Speaker 1: to our electronic health records, and it was more digitized

510
00:29:14,480 --> 00:29:17,760
Speaker 1: and we had access to it without jumping through digital

511
00:29:17,920 --> 00:29:20,560
Speaker 1: gymnastics or faxing things to the doctor having to remember

512
00:29:20,600 --> 00:29:22,800
Speaker 1: your password, having to remember your password. That would certainly

513
00:29:22,840 --> 00:29:26,680
Speaker 1: be helpful. But yeah, everything in technology now involves tradeoffs

514
00:29:26,720 --> 00:29:29,080
Speaker 1: in terms of creepiness. Shore over there with us who

515
00:29:29,120 --> 00:29:32,280
Speaker 1: writes brilliantly on Apple for all of Bloomberg and Bloomberg opinion.

516
00:29:32,560 --> 00:29:34,760
Speaker 1: I thought the gimmick here was we'd share in and

517
00:29:34,800 --> 00:29:38,200
Speaker 1: it becomes a trillion dollar company? Does it happen? Agree?

518
00:29:38,280 --> 00:29:43,000
Speaker 1: But his steady, the markets down at points and apples

519
00:29:43,000 --> 00:29:45,000
Speaker 1: like a rock with green on the screen. We keep

520
00:29:45,040 --> 00:29:49,080
Speaker 1: talking also about the Apple services business, right we do,

521
00:29:49,240 --> 00:29:52,640
Speaker 1: although I think I'm a little bit more skeptical about

522
00:29:52,680 --> 00:29:57,840
Speaker 1: the services. Yeah. Maybe. Look, the thing that Apple does

523
00:29:57,880 --> 00:30:00,320
Speaker 1: not talk about but it does the school thos and

524
00:30:00,320 --> 00:30:04,760
Speaker 1: its financial reports, is that this year the biggest driver

525
00:30:04,920 --> 00:30:07,959
Speaker 1: of growth in that services business is not Apple Music.

526
00:30:08,200 --> 00:30:11,840
Speaker 1: It's not app store sales, it's not iCloud, it's not

527
00:30:11,960 --> 00:30:17,960
Speaker 1: Apple Care. It's licensing, quote unquote, which includes things like

528
00:30:18,080 --> 00:30:21,880
Speaker 1: the payments that Google makes to Apple for making Google

529
00:30:21,920 --> 00:30:25,640
Speaker 1: Search the default on its Safari web browsers, So that

530
00:30:25,680 --> 00:30:29,800
Speaker 1: has little to do directly with demand or interest for

531
00:30:29,840 --> 00:30:35,360
Speaker 1: Apple's Internet services. That's about business arrangements that Apple makes.

532
00:30:36,080 --> 00:30:40,520
Speaker 1: UM that when you use Safari, So if you use

533
00:30:40,520 --> 00:30:43,760
Speaker 1: Safari on your iPhone, which people probably do, or if

534
00:30:43,760 --> 00:30:46,840
Speaker 1: you use Safari on your on your Mac computer, um,

535
00:30:46,880 --> 00:30:50,600
Speaker 1: and you searches, the built in option to do those

536
00:30:50,600 --> 00:30:54,400
Speaker 1: searches is you can change it. Most people don't, and

537
00:30:55,400 --> 00:30:59,400
Speaker 1: Google makes payments to Apple for for making it the

538
00:30:59,480 --> 00:31:02,680
Speaker 1: default option. Four beds, three bass two thousand two and

539
00:31:02,720 --> 00:31:08,400
Speaker 1: at square feet Lebanon, driving Kupertino zero one four clocking

540
00:31:08,480 --> 00:31:12,920
Speaker 1: in at a cool two point one million dollars. A

541
00:31:13,000 --> 00:31:15,440
Speaker 1: thing looks like it could be bulldozed tomorrow. Yeah, boy,

542
00:31:15,520 --> 00:31:18,360
Speaker 1: you're looking at real estate. How do kids like you,

543
00:31:18,440 --> 00:31:21,360
Speaker 1: even if there's some fancy pants engineer live out in

544
00:31:21,720 --> 00:31:24,560
Speaker 1: San Francisco and Cupertino. I mean, look, Tom, you you

545
00:31:24,600 --> 00:31:26,560
Speaker 1: spend time in the Bay Area. You know as well

546
00:31:26,600 --> 00:31:29,400
Speaker 1: as I know that the number one topic of discussion

547
00:31:29,400 --> 00:31:32,960
Speaker 1: in the Bay Area anywhere is housing priceses. So what's

548
00:31:33,080 --> 00:31:35,720
Speaker 1: what Tim Cook could it do for the mere mortals

549
00:31:35,720 --> 00:31:38,360
Speaker 1: at Apple only making four a year? Well, I mean

550
00:31:38,400 --> 00:31:40,760
Speaker 1: I think Tim Cook would argue that he pays his

551
00:31:40,880 --> 00:31:43,480
Speaker 1: people well enough that they can afford to buy homes.

552
00:31:43,560 --> 00:31:45,920
Speaker 1: It's just the rest of the the rest of the

553
00:31:45,920 --> 00:31:50,040
Speaker 1: population to bearer that that maybe can't. Twenty seconds, do

554
00:31:50,080 --> 00:31:52,200
Speaker 1: you know the square footage at an Apple store? Is

555
00:31:52,240 --> 00:31:55,640
Speaker 1: it like cosmetics at Bloomingdale's. I have no I can

556
00:31:55,680 --> 00:31:58,280
Speaker 1: you figure this out? I don't know. You can only

557
00:31:58,320 --> 00:32:00,160
Speaker 1: come back on two accounts. You gotta figure out we're

558
00:32:00,200 --> 00:32:02,720
Speaker 1: footage at a retail store because we think it's like

559
00:32:02,760 --> 00:32:05,880
Speaker 1: cosmetics burg Do or for Bloomingdale's. And you can't come

560
00:32:05,880 --> 00:32:08,280
Speaker 1: back to it's a trillion dollar company. Okay, fair enough,

561
00:32:08,320 --> 00:32:10,520
Speaker 1: I'll take my tape measure down to fifth that okay, sure?

562
00:32:10,560 --> 00:32:19,400
Speaker 1: Over day where this with brilliance on Apple. Thanks for

563
00:32:19,480 --> 00:32:23,880
Speaker 1: listening to the Bloomberg Surveillance podcast. Subscribe and listen to

564
00:32:24,040 --> 00:32:29,800
Speaker 1: interviews on Apple Podcasts, SoundCloud, or whichever podcast platform you prefer.

565
00:32:30,320 --> 00:32:33,680
Speaker 1: I'm on Twitter at Tom Keane before the podcast, you

566
00:32:33,680 --> 00:32:37,120
Speaker 1: can always catch us worldwide. I'm Bloomberg Radio