WEBVTT - Up To 40% Of NYC Restaurants May Not Come Back 0:00:01.400 --> 0:00:04.120 Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney. Along 0:00:04.160 --> 0:00:06.240 with my co host of Bonnie Quinn. Every business day 0:00:06.240 --> 0:00:10.400 we bring you interviews from CEO, market pros, and Bloomberg experts, 0:00:10.440 --> 0:00:13.640 along with essential market moving news. Find the Bloomberg Markets 0:00:13.640 --> 0:00:16.960 Podcast on Apple Podcasts or wherever you listen to podcasts, 0:00:17.000 --> 0:00:21.560 and on Bloomberg dot com. Yesterday mark the day Phase 0:00:21.680 --> 0:00:25.240 two reopening for New York City. One of the areas 0:00:25.280 --> 0:00:28.440 that got a little bit of relief was the restaurant business. 0:00:28.520 --> 0:00:33.200 Outdoor dinning now allowed uh as the restaurant industry tries 0:00:33.240 --> 0:00:34.680 to get back on its feet. To get a sense 0:00:34.720 --> 0:00:37.760 of how that went and how the restaurant industry globally 0:00:37.960 --> 0:00:40.960 is faring here in this pandemic world, we welcome Kate, 0:00:41.000 --> 0:00:44.239 a creator food editor for Bloomberg Pursuits. Kate, thanks so 0:00:44.320 --> 0:00:46.680 much for joining us. Give us a sense of how 0:00:47.159 --> 0:00:51.120 you think the reopening of the restaurant business in New 0:00:51.200 --> 0:00:53.280 York City is gonna go. We're all gonna be sitting 0:00:53.320 --> 0:00:55.240 on sidewalks and in the middle of the street, I guess, 0:00:55.800 --> 0:00:57.640 But what did you what did you see yesterday and 0:00:57.640 --> 0:01:00.160 what are some of the restaurant tours thinking as as 0:01:00.400 --> 0:01:04.520 they reopen. Um, that's a really good question. Um. And 0:01:04.560 --> 0:01:06.959 I think, um, I think how it went and how 0:01:06.959 --> 0:01:09.319 it's gonna go, it depends on who you ask. Because 0:01:09.800 --> 0:01:12.720 for some people, so that's what terms. I think a 0:01:12.720 --> 0:01:15.360 lot of them are just delighted that they get to 0:01:15.400 --> 0:01:18.480 be back in business and serving people. And you know, 0:01:18.560 --> 0:01:21.759 they've been setting up table six ft apart and you know, 0:01:22.360 --> 0:01:24.840 all of a sudden like activating their parking lots and 0:01:24.840 --> 0:01:28.479 turning them into dining rooms. Um. But for then for 0:01:28.520 --> 0:01:31.360 some other people, it's not a one size fits all situation. 0:01:31.760 --> 0:01:33.880 And so for some people they realized that selling a 0:01:33.920 --> 0:01:38.800 ten dollar full of soup is not financially viable when 0:01:38.920 --> 0:01:41.480 you can only do fifty percent capacity and have people 0:01:41.560 --> 0:01:45.000 six feet apart. So it's different, it's different throughout. But 0:01:45.040 --> 0:01:48.960 I think there's a costive optimism, that's what I would say. Overall. Yeah, Okay, 0:01:48.960 --> 0:01:51.640 there are twenty seven thousand restaurants in New York City. 0:01:51.720 --> 0:01:55.880 Surely all of them don't have outside room, do they? No? 0:01:56.040 --> 0:01:59.400 They they go not in New York City. I mean 0:01:59.600 --> 0:02:02.040 they're has clothes. I think, like forty three miles of 0:02:02.200 --> 0:02:06.400 streets and that some of that can live the alleviate. 0:02:06.520 --> 0:02:09.639 A lot of restaurants were able to apply for outdoor 0:02:09.680 --> 0:02:12.800 seating permits in a place like Peter Luger and Brooklyn 0:02:12.800 --> 0:02:16.280 that has never ever served stake outside their doors. Um 0:02:16.520 --> 0:02:19.680 got the permit, got the permit, and as of Thursday, 0:02:19.919 --> 0:02:23.000 is going to have tables outside their restaurant and it's 0:02:23.040 --> 0:02:25.720 putting the parking lot into a sort of picnic area. 0:02:26.280 --> 0:02:29.680 So um, So a lot of restaurants can take advantage 0:02:29.680 --> 0:02:32.480 of it, but certainly you're right, not all of them can, 0:02:32.919 --> 0:02:35.560 and not all of them want to just to follow there. 0:02:35.639 --> 0:02:38.239 I wasn't sure if you needed a permit. How does 0:02:38.280 --> 0:02:41.760 the permitting system work and how much does it cost? Um, 0:02:41.800 --> 0:02:44.440 that's a good question that I haven't applied to a permit, 0:02:44.480 --> 0:02:47.360 and I'm not sure I know that. I know that 0:02:47.480 --> 0:02:51.000 the permitting um went live on I think it was 0:02:51.040 --> 0:02:53.120 it was either Thursday or Friday. So it's just like 0:02:53.400 --> 0:02:56.840 four or five days ago to have a permit for Monday. 0:02:56.919 --> 0:02:59.200 So there's been a lot of There hasn't always been 0:02:59.200 --> 0:03:02.120 great messaging from the government, you know. I think that 0:03:02.200 --> 0:03:05.360 a lot of restaurants and restaurateurs continue to have a 0:03:05.360 --> 0:03:08.239 lot of questions about what to do. For instance, you're 0:03:08.240 --> 0:03:10.200 eating outdoors, but what happens if you have to go 0:03:10.240 --> 0:03:14.080 to the bathroom because there's all these rules about distance 0:03:14.200 --> 0:03:16.280 and how many people can use the bathroom and all 0:03:16.320 --> 0:03:19.160 of it. So there's still a ton of questions. Um, 0:03:19.160 --> 0:03:21.800 But the permitting process, I think it went really quickly 0:03:22.040 --> 0:03:25.320 once people could apply, but the applications went up very late. 0:03:25.360 --> 0:03:29.120 As I understand it. It's okay. I know Leslie Patton 0:03:29.240 --> 0:03:31.840 and you wrote a story for Today on the Bloomberg 0:03:32.120 --> 0:03:34.720 and that the headline really grabbed me. Two point two 0:03:34.720 --> 0:03:40.040 million restaurants worldwide teeter on the brink of collapse? Can 0:03:40.040 --> 0:03:44.200 this restaurant industry? Is this gonna be permanently scarred here? Yeah? 0:03:44.280 --> 0:03:46.680 Oh my gosh, we're never gonna you know, if you 0:03:46.880 --> 0:03:48.400 think we're gonna get back to what it was like 0:03:48.440 --> 0:03:52.800 in February and we're not, you know, I think, Um, 0:03:52.840 --> 0:03:58.080 there's there's no way, there's no there's no going back. 0:03:58.160 --> 0:04:01.440 Everybody has to move forward on the successful people, the 0:04:01.520 --> 0:04:04.760 most successful restfuls were going to be the one realize 0:04:04.800 --> 0:04:09.119 that figure out see new new ways, new way forward, 0:04:09.400 --> 0:04:12.960 an opportunity. But um, there was reports from the National 0:04:13.000 --> 0:04:17.159 Restaurant Association that the industry has already lost twenty billion 0:04:17.480 --> 0:04:19.680 and they don't think they can be profitable for at 0:04:19.720 --> 0:04:23.839 least six months, and I think six months is optimistic, actually, yeah, 0:04:23.880 --> 0:04:26.440 And I mean for restaurants, you have to be profitable 0:04:26.440 --> 0:04:29.000 on a weekly basis in order to keep the running cade. 0:04:29.200 --> 0:04:32.920 How will the restaurants that have low occupancy to begin with, 0:04:33.320 --> 0:04:36.560 I mean several on My Street alone can only fit 0:04:36.680 --> 0:04:38.920 a certain amount of people. How do they manage week 0:04:38.920 --> 0:04:41.200 to week if they just don't get those extra ten 0:04:41.320 --> 0:04:44.880 customers that they need to make that profit margin. Yeah, Vanny, 0:04:44.960 --> 0:04:47.120 that's such a good question. And I think, especially right 0:04:47.120 --> 0:04:50.640 now in days two works all outdoor season. Um this 0:04:51.000 --> 0:04:53.719 um chef my Price at the Clam in New York 0:04:53.800 --> 0:04:56.720 was saying, you could have a slow Monday day, but 0:04:56.760 --> 0:05:01.360 you're Saturday Saturday would cover your cost. And now there's 0:05:01.360 --> 0:05:04.640 so many variables. And also outdoor seating is depending on weather. 0:05:04.720 --> 0:05:06.920 So if you have a rainy Saturday and you thought 0:05:07.120 --> 0:05:09.680 you had sold that, you know sort of sold out 0:05:10.040 --> 0:05:12.880 and then you can't get everybody in, that's a disaster. 0:05:13.080 --> 0:05:15.000 I mean a lot of them, A lot of restaurants 0:05:15.040 --> 0:05:18.840 have been enterprising and turned themselves into like grocery stores 0:05:18.880 --> 0:05:23.640 and selling cocktails, and that's done a surprisingly good job 0:05:23.680 --> 0:05:28.960 of helping, um, helping create income. But I think exactly 0:05:28.960 --> 0:05:31.120 as you said, it's still like the margins are so 0:05:31.279 --> 0:05:36.160 slim anyway. So, um, it's a real uh, it's it's 0:05:36.279 --> 0:05:39.919 a very challenging future. So just real quick, Um, in 0:05:39.960 --> 0:05:42.960 New York City, how many restaurants are expected that boy 0:05:43.040 --> 0:05:46.560 just go out of business? I guess, um, that's it's 0:05:46.600 --> 0:05:50.080 a good and scary question. Um. Open table to the survey, 0:05:50.200 --> 0:05:54.479 and they thought nathma of restaurants wouldn't make get I 0:05:54.560 --> 0:05:57.560 think in New York that number might be higher. I'm sure. 0:05:57.600 --> 0:06:00.080 I mean, I think that's a conservative estimate. Anyway, it 0:06:00.160 --> 0:06:03.520 in New York, as you guys were saying, space is 0:06:03.600 --> 0:06:07.279 much tighter, soft occupancy is is a big difference, like 0:06:07.320 --> 0:06:10.560 ten people, like Bonnie said, So I think that numbers 0:06:10.560 --> 0:06:12.599 can be higher. I would not be surprised if it's 0:06:12.600 --> 0:06:16.960 like at least it's a very scary number. Yeah, it's terrifying. Kate, 0:06:16.960 --> 0:06:19.320 there's some great details in your story. I would urge 0:06:19.320 --> 0:06:21.880 everyone to read a two point two million restaurants worldwide 0:06:21.880 --> 0:06:25.600 teeter on brink of collapse. That's Kate Crater. They're joining us. 0:06:25.640 --> 0:06:29.280 And one of those paragraphs, Paul lays out just how 0:06:29.320 --> 0:06:32.560 much it costs to change to contact less takeout orders 0:06:32.560 --> 0:06:36.480 and delivery, of course, and this equipment walkie talkies, masks, thermometers, 0:06:36.640 --> 0:06:40.240 but five thousand dollars a month for the average restaurant apparently, Yeah, 0:06:40.279 --> 0:06:42.720 that's the economics on delivery business not nearly as good 0:06:42.720 --> 0:06:49.000 as in store dining. Daty check Research produces a morning 0:06:49.080 --> 0:06:52.720 note that is always, always thought provoking, five days a week. 0:06:53.440 --> 0:06:57.080 Something just sparks the thought process when you take a 0:06:57.080 --> 0:07:00.240 look at the email. And in recent days the under 0:07:00.320 --> 0:07:03.440 Nicholas has been looking at everything from yield curve control 0:07:03.520 --> 0:07:07.120 to the impact of the upcoming elections on stocks and 0:07:07.160 --> 0:07:11.320 on markets, and how this do nothing market is just 0:07:11.440 --> 0:07:14.720 a little bit baffling, and some ideas for what to 0:07:14.720 --> 0:07:16.480 do in this do nothing market. Let's bring him in now, 0:07:16.600 --> 0:07:20.200 Nikola's co founder of data check or Research. Nick. Let's 0:07:20.200 --> 0:07:23.120 start with yield curve control, only because you pointed out 0:07:23.160 --> 0:07:26.040 today the New York Fed blog out which explains why 0:07:26.320 --> 0:07:30.160 yield curve control is more efficient than quantitative easing and 0:07:30.200 --> 0:07:33.000 at the same time in a different region, the St. 0:07:33.040 --> 0:07:35.720 Louisfide President Jim Bullard is saying, no, we're not going 0:07:35.760 --> 0:07:39.760 to have yield curve control. It's it's unnecessary. Yes, it 0:07:39.840 --> 0:07:42.320 was fascinating to see the New York Fed actually put 0:07:42.320 --> 0:07:46.440 out a blog analyzing the Japanese experience with yold curve 0:07:46.520 --> 0:07:49.880 control and pointed out very clearly the yield curve control 0:07:49.960 --> 0:07:52.960 has the advantage of not requiring as much capital from 0:07:53.000 --> 0:07:56.160 a central bank to execute a given rate target for 0:07:56.240 --> 0:07:59.000 say the long end of the curve. Instead of spending 0:07:59.360 --> 0:08:02.040 tents and tens and tens of billions of dollars to 0:08:02.120 --> 0:08:05.200 hold rates at a certain level, simply telling the market 0:08:05.240 --> 0:08:07.360 we're going to peg it at X means you have 0:08:07.440 --> 0:08:10.080 to spend much less money to make it stay at X. 0:08:10.200 --> 0:08:12.280 So it's fascinating to see the New York Feds saying 0:08:12.440 --> 0:08:14.800 there is some merit to yield of control in terms 0:08:14.840 --> 0:08:18.880 of efficiency in central bank balance sheets. Hey, Nick, I 0:08:18.880 --> 0:08:21.320 mean so when you think about this market here, are 0:08:21.320 --> 0:08:24.400 you concerned about what I'm going to term or the 0:08:24.520 --> 0:08:28.520 lack of breath if you will in this market? You know, 0:08:28.520 --> 0:08:31.640 this move off the bottom, it's you know, centered on 0:08:31.680 --> 0:08:33.960 a handful of names, the Amazons on the apples of 0:08:33.960 --> 0:08:37.000 the world. How much of a concern is that for you? Yeah, 0:08:37.000 --> 0:08:39.400 it's a fascinating point. I mean, if you look at 0:08:39.400 --> 0:08:42.200 the two thousand nine rallied, for example, which there are 0:08:42.240 --> 0:08:45.200 many analogs to the current rally, in that one, the 0:08:45.240 --> 0:08:47.880 two thousand nine rally was all about the banks. The 0:08:47.960 --> 0:08:52.080 banks doubled in value from March nine, two thousand nine, 0:08:52.480 --> 0:08:55.160 through the next sixty days, ninety days rather you know, 0:08:55.240 --> 0:08:57.920 basically the same days today, So it was led by 0:08:58.040 --> 0:09:01.120 banks even more than this has been led by tech. 0:09:01.240 --> 0:09:04.880 So it does feel that big snapback rallies off the 0:09:04.880 --> 0:09:08.000 bottom are always led by something. In OH nine, it 0:09:08.120 --> 0:09:10.720 was banks for all the obvious reasons. This time around, 0:09:10.720 --> 0:09:12.880 it's been tech because of all the stay at home, 0:09:12.960 --> 0:09:16.079 work at home phenomena that we're seeing still play out 0:09:16.120 --> 0:09:19.200 to this day, and that seems so caught investors attention. 0:09:19.320 --> 0:09:22.080 So I'd say, as unusual as it is, it does 0:09:22.120 --> 0:09:24.840 fit a paradigm for snap back rallies like OH nine 0:09:24.920 --> 0:09:29.400 and Nick Robin Hood has been a huge source of 0:09:29.440 --> 0:09:31.319 interest to you know, so many people all over the 0:09:31.360 --> 0:09:35.040 country in the recent days and weeks. Retail platform for 0:09:35.120 --> 0:09:38.720 retail traders. How much of an impact are these people 0:09:38.840 --> 0:09:41.480 that maybe have an average account size that you say, 0:09:41.600 --> 0:09:43.600 less than five thou dollars. How much of an impact 0:09:43.600 --> 0:09:46.800 are they really having on the market, you know, as 0:09:46.840 --> 0:09:49.480 a market impact, I'd say not that much. They do 0:09:49.559 --> 0:09:51.720 get a lot of press because of things like hurts 0:09:51.800 --> 0:09:53.640 and the U. S O E. T F before that, 0:09:54.240 --> 0:09:56.679 So they are making some rookie mistakes because that's what 0:09:56.800 --> 0:09:59.480 rookies do, and that's fine. But as you said, the 0:09:59.480 --> 0:10:02.960 account anances are relatively small. Robin Hood doesn't even have 0:10:03.000 --> 0:10:06.200 an I Rara product. This is all kind of discretionary 0:10:06.280 --> 0:10:09.440 retail money, taxable money, people putting in a couple of 0:10:09.440 --> 0:10:12.440 thousand dollars to play the market while sports betting is closed. 0:10:12.679 --> 0:10:14.480 So I think it's interesting, but I don't think it's 0:10:14.480 --> 0:10:16.600 had a big effect in terms of money flows. But 0:10:16.920 --> 0:10:19.600 I tell you, I mean, having looked at markets for 0:10:19.600 --> 0:10:22.000 thirty years, it is fascinating to see, you know, a 0:10:22.000 --> 0:10:24.560 couple of million people decided they want to trade stocks 0:10:24.559 --> 0:10:26.760 in the course of ninety days, because that hasn't happened 0:10:26.760 --> 0:10:29.560 in twenty years. So it's it's interesting to see. But 0:10:29.679 --> 0:10:33.120 from a money flow perspective, not all that relevant. Well, Nick, 0:10:33.160 --> 0:10:35.520 you are no rookies, you say thirty years, you're a 0:10:35.520 --> 0:10:38.400 grizzled veteran here. So you've been through a lot of 0:10:38.440 --> 0:10:43.640 presidential elections here, and somebody told me is an election year. 0:10:44.200 --> 0:10:47.000 How are you kind of nobody's really focusing on it 0:10:47.080 --> 0:10:49.880 right now because obviously there are bigger issues, more immediate 0:10:49.920 --> 0:10:53.520 issues for folks and investors. How are you thinking about 0:10:53.559 --> 0:10:57.559 the presidential election coming up here in the fall. You know, 0:10:57.640 --> 0:10:59.640 the way we're thinking about it is not just the 0:10:59.679 --> 0:11:02.320 president in the election, but the congressional ones as well. 0:11:02.760 --> 0:11:05.240 And we did some work for clients last night that 0:11:05.320 --> 0:11:08.400 looked at Okay, sit back in the nine. How does 0:11:08.440 --> 0:11:11.520 the market do when one party controls both the White 0:11:11.559 --> 0:11:15.160 House and Congress both chambers. It's only happened in thirty 0:11:15.200 --> 0:11:18.360 years over the last seventy five, so less than half 0:11:18.440 --> 0:11:21.560 the time. But when it does happen, if Republicans hold 0:11:21.559 --> 0:11:23.319 both White House and Congress, the S and P s 0:11:23.400 --> 0:11:26.920 up an average of six and when Democrats hold both 0:11:26.960 --> 0:11:30.480 houses both chambers and the White House, it's a fourteen 0:11:30.559 --> 0:11:33.120 point three percent on average, And the drawdowns are never 0:11:33.200 --> 0:11:36.240 really bad. Those are both better than the average sup 0:11:36.400 --> 0:11:38.959 returns in World War two, which is eleven. So the 0:11:39.080 --> 0:11:42.800 really important thing is somebody, either party, somebody has to 0:11:42.880 --> 0:11:46.119 own the economy, own the problems, and find the solutions. 0:11:46.160 --> 0:11:49.360 And as long as that happens, markets tend to do okay. 0:11:49.440 --> 0:11:52.400 So we're not as worried or focused on whether it's 0:11:52.480 --> 0:11:55.600 Mr Trump or Mr Biden as much as someone's got 0:11:55.600 --> 0:11:58.760 to own it, because particularly in the economy is still 0:11:58.760 --> 0:12:00.480 gonna need to need a lot of help, and if 0:12:00.480 --> 0:12:03.600 one party owns it, one party has to fix it. Yeah. 0:12:03.640 --> 0:12:05.920 We actually heard the black men say that yesterday as well, 0:12:06.040 --> 0:12:10.679 that he's not making any predictions or any trades based 0:12:10.679 --> 0:12:12.160 on who might be the next president. And at the 0:12:12.200 --> 0:12:15.679 same time, Nick, we're going to have such different policies 0:12:15.800 --> 0:12:22.120 under a Joe Biden than under a second term President Trump. Right, absolutely, 0:12:22.160 --> 0:12:24.360 I mean that the biggest worry I think for markets 0:12:24.440 --> 0:12:27.959 is okay. Corporate taxes obviously came down in two thousands 0:12:27.960 --> 0:12:31.400 seventeen will almost certainly go back up if Democrats control 0:12:31.480 --> 0:12:34.720 both chambers and the White House. But we might also 0:12:34.760 --> 0:12:40.680 see continuations of fiscal stimulus programs if unemployment continues to 0:12:40.720 --> 0:12:44.319 be high, and if one party owns the economy next year, 0:12:44.400 --> 0:12:46.800 they will have to figure out a way to make 0:12:46.840 --> 0:12:49.959 growth happen, even if it means more fiscal stimulus. So 0:12:50.320 --> 0:12:53.040 to me, it's TwixT and tween between the two problems. Yes, 0:12:53.080 --> 0:12:56.360 probably higher corporate taxes, but if we can we escape 0:12:56.400 --> 0:12:59.679 velocity and achieve a better economy through fiscal stimulus, that's 0:12:59.679 --> 0:13:02.960 a stive, So I think it balances out. So Nick, 0:13:03.000 --> 0:13:05.200 it seems like I'm just looking at the chart just 0:13:05.400 --> 0:13:08.640 on and showing kind of the COVID cases in the 0:13:08.679 --> 0:13:10.840 US and the you know, it's re recently, it's kind 0:13:10.840 --> 0:13:13.680 of turned the other way the wrong way here. Yet 0:13:13.679 --> 0:13:16.880 the market seems to be kind of discounting that so much. 0:13:16.880 --> 0:13:19.040 Whereas if this if we'd seen the spike up in 0:13:19.440 --> 0:13:23.360 big states like you know, Texas or Florida, we see 0:13:23.559 --> 0:13:25.800 I think a pretty negative reaction the markets back in 0:13:25.840 --> 0:13:29.080 February and early March and early April. What is your 0:13:29.120 --> 0:13:31.280 sense of kind of how the markets thinking about the 0:13:31.360 --> 0:13:36.720 virus per se, Yeah, very very important point. I think 0:13:36.760 --> 0:13:39.839 two things. The first is this is why tech is 0:13:39.880 --> 0:13:43.280 still rallying. You know, tech was the playoff to bottom 0:13:43.400 --> 0:13:45.800 because of work at home and all the other things 0:13:45.840 --> 0:13:48.920 we know, and tech continues to lead. That's one way 0:13:48.920 --> 0:13:51.640 of knowing that the market is saying, we're not going 0:13:51.679 --> 0:13:54.480 to play the rebound. The classic rebound trades were playing 0:13:54.559 --> 0:13:57.960 tech because those things work regardless of what happens with 0:13:58.040 --> 0:14:01.559 the virus and infection rates and how states managed lockdowns 0:14:01.559 --> 0:14:04.280 and so forth. The second point I think the market 0:14:04.320 --> 0:14:07.680 is saying is America is basically going to try to 0:14:07.679 --> 0:14:10.600 power through this. Infection rates are going up, but it 0:14:10.600 --> 0:14:13.800 seems to be among younger people with at least historically 0:14:13.840 --> 0:14:17.360 lower mortality rates, and so this will be a problem, 0:14:17.480 --> 0:14:19.720 but it won't be the existential problem that it was 0:14:19.720 --> 0:14:21.720 when we locked down the entire country for the better 0:14:21.720 --> 0:14:24.560 part of a month. So the market is saying profits 0:14:24.600 --> 0:14:26.440 going to recover, but we still want to be in 0:14:26.440 --> 0:14:28.960 the more defensive names for this environment, which is tech 0:14:29.160 --> 0:14:31.720 and technically it's the market higher and Nick, thanks so 0:14:31.800 --> 0:14:34.120 much for joining us once again. As always, we learn 0:14:34.280 --> 0:14:36.440 a thing or two when we talk with you. Nicholas, 0:14:36.760 --> 0:14:40.880 co founder, Data Trek Research. I recommend you read his stuff. 0:14:40.960 --> 0:14:45.520 It's just really, really insightful, really gives you some food 0:14:45.560 --> 0:14:48.640 for thought as we think about navigating these markets here 0:14:48.640 --> 0:14:53.560 in these uncertain times. But we learned a lot about 0:14:53.600 --> 0:14:57.720 Apple's strategy yesterday from him Cove at the Worldwide Developers Conference, 0:14:57.720 --> 0:15:01.360 which supplies virtually it can news. Let's bring in somebody 0:15:01.360 --> 0:15:03.120 who knows all about Apple and who can tell us 0:15:03.160 --> 0:15:05.080 what exactly we need to be watching out for. David 0:15:05.080 --> 0:15:08.360 Garrity as chief market strategist at laid Law and Company. 0:15:08.680 --> 0:15:11.400 So we got the big announcement yesterday, David that Apple 0:15:11.480 --> 0:15:14.920 is going to replace chips with its own chips, So 0:15:15.320 --> 0:15:19.480 Intel no longer needed, Intel no longer inside Apple inside 0:15:19.600 --> 0:15:23.000 these days, what else can we anticipate will emanate from 0:15:23.000 --> 0:15:28.960 the week that would be of useful interest to investors? Yeah, no, certainly, Vonnie. 0:15:29.840 --> 0:15:31.920 What's been coming into the conference, apart from the fact 0:15:31.920 --> 0:15:34.680 that they move away from Intel to their own design chips, 0:15:35.120 --> 0:15:37.400 is the fact that with regards to chip designs, they're 0:15:37.400 --> 0:15:40.400 going to use a r M designed chips as a 0:15:40.440 --> 0:15:44.960 platform across their entire range of hardware products, with the 0:15:45.040 --> 0:15:47.680 idea that this can not only provide benefits in terms 0:15:47.720 --> 0:15:51.800 of reduced power consumption, but also provide a standardized platform 0:15:51.840 --> 0:15:55.880 that their developers can write programs to across all of 0:15:55.920 --> 0:15:59.680 their products. So, David, give us a sense it seems 0:15:59.760 --> 0:16:01.440 like a have a big deal to me to moving 0:16:01.480 --> 0:16:04.800 away from you know, the tried and true chip maker 0:16:04.960 --> 0:16:07.960 that is Intel that they've used for many years, to 0:16:08.160 --> 0:16:10.360 their own chip. Why are they doing it? Why are 0:16:10.360 --> 0:16:14.600 they doing it now? What's kind of the rationale? Well, 0:16:14.640 --> 0:16:17.920 I mean Apple certainly has gotten to a scale where 0:16:17.920 --> 0:16:20.280 it's possible for them to consider investments, so they may 0:16:20.280 --> 0:16:23.560 not have done previously. Note, however, that you know, Apple 0:16:23.720 --> 0:16:27.080 historically has had a business in which they've been involved 0:16:27.080 --> 0:16:31.720 in designing semiconductors. Now they've had this in cooperation with 0:16:31.840 --> 0:16:35.960 IBM in terms of IBM was running the semiconductor fabrication 0:16:36.040 --> 0:16:39.320 plant where Apple design chips were made. So this is 0:16:39.360 --> 0:16:42.640 not entirely a new business for Apple and also speaks 0:16:42.640 --> 0:16:45.880 to the scale and also arguably speaks to what their 0:16:45.920 --> 0:16:49.400 own intentions are for their technology that perhaps Intel was 0:16:49.440 --> 0:16:53.040 not able to support as readily now in terms of 0:16:53.080 --> 0:16:56.480 supporting its developer community. Uh, Tim Coke has been trying 0:16:56.520 --> 0:16:59.440 to do a good job. But the US and Europe 0:16:59.600 --> 0:17:03.760 isn't astigating Apple over antitrust allegations. How much it takes 0:17:03.760 --> 0:17:06.840 from developers in the app store and so on. What happens? 0:17:07.040 --> 0:17:11.520 How does the story end. Well, you know, it's certainly 0:17:11.840 --> 0:17:14.359 this has gotten to be the services business for Apple 0:17:14.400 --> 0:17:17.360 has gotten to be a fairly significant portion of their 0:17:17.440 --> 0:17:22.040 overall revenue. High last year about forty six billion dollars 0:17:22.119 --> 0:17:25.200 of what Apple made was coming out of services. These 0:17:25.240 --> 0:17:29.679 are fueled by third party developers. Now, as we've read, 0:17:29.720 --> 0:17:34.720 and no Apple charges its third party developers of their 0:17:34.760 --> 0:17:38.520 revenues to actually have their products listed in the app store. Uh, 0:17:38.560 --> 0:17:41.600 you know, from the standpoint of business development, is a 0:17:41.600 --> 0:17:45.040 pretty big cut. One would argue that Apple perhaps could 0:17:45.040 --> 0:17:48.119 get by with something half or less of that and 0:17:48.280 --> 0:17:51.760 still provide a very encouraging signal to its third party 0:17:51.840 --> 0:17:55.240 developer community and at the same time themselves grow a 0:17:55.359 --> 0:17:59.439 very substantial business. So clearly the argument here around the 0:17:59.440 --> 0:18:03.520 economic in terms of this business model. Certainly Apple is 0:18:03.560 --> 0:18:06.760 in a position potentially to give more in order to 0:18:06.800 --> 0:18:11.399 maintain a vibrant third party developer community. David, A big 0:18:11.560 --> 0:18:15.720 part of the bull case for Apple stock is five 0:18:15.880 --> 0:18:20.000 G and the arrival of five G presumably will spark 0:18:20.119 --> 0:18:23.639 a super cycle in phone replacements. Of course Apple will 0:18:23.680 --> 0:18:26.480 benefit from that. What do you expect to hear what 0:18:26.560 --> 0:18:29.919 have we heard at this conference about five G and 0:18:29.960 --> 0:18:35.560 what it means for Apple, Uh, nothing in particular as 0:18:35.600 --> 0:18:38.160 of yet, but I would expect that the company should 0:18:38.160 --> 0:18:41.520 be making some indications that will get people excited about 0:18:41.520 --> 0:18:44.760 the upcoming launch in late September of the five G 0:18:44.920 --> 0:18:47.600 I phone. UM, you know, certainly the five G I phone. 0:18:47.640 --> 0:18:50.679 Apple in this regardless following other competitors as Apple as 0:18:50.760 --> 0:18:53.919 want to do in terms of adopting new technologies, but 0:18:54.359 --> 0:18:57.879 having an Apple product able of using five G networks 0:18:57.960 --> 0:19:01.080 and the greater speeds in data k of abilities those 0:19:01.119 --> 0:19:04.879 networks have, we do believe very much will prompt and 0:19:05.040 --> 0:19:07.959 upgrade in terms of the user base for the Apple 0:19:08.000 --> 0:19:12.640 iPhone something clearly. I think that given the scale of Apple, uh, 0:19:12.720 --> 0:19:14.600 you know, should be an important development for them in 0:19:14.680 --> 0:19:17.840 terms of not only their smartphone business but that of 0:19:17.920 --> 0:19:22.879 the overall smartphone market. Tim Cook was very vocal today 0:19:23.000 --> 0:19:27.320 about the President's decision to suspend the giving out of 0:19:27.440 --> 0:19:29.120 H one B visas through the end of the year 0:19:29.280 --> 0:19:32.520 new ones at least, and I'm curious, David, will this 0:19:32.640 --> 0:19:38.239 have an immediate impact on Apple? UM. I think if 0:19:38.280 --> 0:19:41.560 there's anything that we've learned, not specifically from Apple, but 0:19:41.720 --> 0:19:45.400 more from dealing with the COVID nineteen pandemic is that 0:19:45.520 --> 0:19:48.320 companies are more and more capable of operating on a 0:19:48.400 --> 0:19:52.080 distributed basis. We don't necessarily need to have workers co 0:19:52.200 --> 0:19:54.919 located now. It's obviously the intent of the H one 0:19:55.000 --> 0:19:58.600 B VISA program was to be bringing workers physically into 0:19:58.600 --> 0:20:01.960 a location here the United States in order to operate. 0:20:02.320 --> 0:20:04.560 I don't think that, you know, not having an H 0:20:04.600 --> 0:20:07.440 one B VISA program is going to be detrimental to 0:20:07.520 --> 0:20:10.520 Apple in the near term. The bigger implication, I think, 0:20:10.560 --> 0:20:13.159 not for Apple, but more for the US economy, is 0:20:13.200 --> 0:20:17.800 that by potentially denying five thousand high paid workers UH 0:20:18.080 --> 0:20:22.120 presence in the United States economy, the Trump administration has 0:20:22.160 --> 0:20:25.680 deprived the US economy of the spending that those five 0:20:26.680 --> 0:20:29.560 thousand well paid workers would bring with them. And so 0:20:29.680 --> 0:20:32.439 from this standpoint, it seems to our view sort of 0:20:32.480 --> 0:20:35.639 a cut the nose off, despite your face, kind of 0:20:35.680 --> 0:20:39.840 moved by the Trump administration, not very well informed and 0:20:39.920 --> 0:20:44.520 certainly misguided. David just got about a minute left. Is 0:20:44.560 --> 0:20:48.479 the overhang from regulatory risk that was building for the 0:20:48.480 --> 0:20:51.479 tech industry last year and going into this year, has 0:20:51.480 --> 0:20:53.080 that kind of abated given all that's going on in 0:20:53.119 --> 0:20:57.439 the world. Now. UM, I would say that, you know, 0:20:57.880 --> 0:21:01.160 there are a matter of prior news or triage, if 0:21:01.160 --> 0:21:03.359 you will, in terms of dealing with the things that 0:21:03.560 --> 0:21:08.160 confronts society COVID nineteen being first and foremost. But when 0:21:08.200 --> 0:21:11.080 things do settle down, once we get past the November election, 0:21:11.520 --> 0:21:14.280 I certainly do expect that there will continue to be 0:21:14.720 --> 0:21:18.560 demands for greater oversight with respect of the technology community, 0:21:19.000 --> 0:21:22.119 focus on data privacy. Um. You know, the extent to 0:21:22.119 --> 0:21:24.879 which media continues to be used, uh and to be 0:21:24.920 --> 0:21:29.639 manipulated with regards to the upcoming election remains a vital concern. 0:21:29.760 --> 0:21:31.960 So you know, there's a great deal that still remains 0:21:31.960 --> 0:21:34.919 to be done. Jack Dorsey, the CEO of Twitter, you know, 0:21:35.080 --> 0:21:38.440 certainly has broken ranks with others such as Zuckerberg and 0:21:38.520 --> 0:21:40.760 saying that they would take down political content or be 0:21:40.760 --> 0:21:44.359 more aggressive in policing this content. Um. But no, we're 0:21:44.359 --> 0:21:46.119 not out of the woods by any stretch of the 0:21:46.119 --> 0:21:51.040 imagination as far as greater oversight of the technology community. Hey, David, 0:21:51.040 --> 0:21:53.200 thanks so much for joining us. As always, A good 0:21:53.440 --> 0:21:55.240