Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene Jay Lee.
Speaker 1: We bring you insight from the best in economics, finance, investment,
Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud,
Speaker 1: Bloomberg dot Com, and of course on the Bloomberg Lisa,
Speaker 1: you and I've had the discussion about what is happening
Speaker 1: in fixed income. The risky of parts of credit that
Speaker 1: lank last year started to pick up in December and
Speaker 1: a follow through has been really positive. And there's a
Speaker 1: simple question. I think a lot of people are asking,
Speaker 1: is it a sign of durability that the rally is
Speaker 1: broadening out, or a sign of excess right or a
Speaker 1: sign of the Perhaps this is not the leading indicator
Speaker 1: that used to be. And I think that's been my
Speaker 1: big question this morning. As you see junk bond yields
Speaker 1: within sixteen basis points of their all time low, we're
Speaker 1: talking about sub five percent high yield. It's not high
Speaker 1: yield anymore, and we're back to that level and it's
Speaker 1: rallying much more than investment grade debt. Just wonder going forward,
Speaker 1: I mean, is this appropriate given where we are in
Speaker 1: the credit cycles to bring up Channel News. Credit Sweet
Speaker 1: head of FX Macro trading Strategy, Good Mornity s up.
Speaker 1: What's the message for clients this morning. Well, we think
Speaker 1: although these concerns that you just mentioned a real concerns
Speaker 1: for now, we think markets continue pushing forward. The bottom
Speaker 1: line is that from a macro perspective, we have a
Speaker 1: situation where the Fed and other central banks indicating that
Speaker 1: they're not looking to raise rates anytime soon. In fact,
Speaker 1: there could be monetary policy framework shifts that bring forward
Speaker 1: ideas like looking at inflation on average over a cycle
Speaker 1: and waiting on its Inflation is above target for a while,
Speaker 1: so there's no macro risk at this point that the
Speaker 1: market can see on the monetary policy side, and I
Speaker 1: think that's one of the issues that's driving markets. There
Speaker 1: was a headline out show up this morning on Spanish bonds,
Speaker 1: and all our listeners need to know, particularly coast to
Speaker 1: coast across America, is the number was g enormous. The
Speaker 1: demand for paper is exceptional. Jeffrey, you with ubs one
Speaker 1: with this earlier. This is one of his great themes.
Speaker 1: Do you see that from where you are in foreign
Speaker 1: exchange that there's just simply a wall of money out
Speaker 1: there absolutely. For example, one of the themes at the
Speaker 1: moment is the large amounts of reverse Yankee bond issuance.
Speaker 1: So US companies issuing a reverse Yankee, that's where they're
Speaker 1: in last place, right. No, you can say, well, you know,
Speaker 1: there's essentially smiled I am familiar with. So you can
Speaker 1: have a situation where a US company would would want
Speaker 1: to issue debt in in Europe uh and then take
Speaker 1: that money and invested in other parts of the world,
Speaker 1: for example in the US itself. And this kind of
Speaker 1: issuance is frequent when there's a belief that rates are
Speaker 1: going to be lower in Europe for a long time
Speaker 1: and that funding costs are going to be lower if
Speaker 1: you raise money in Europe uh. And in essence, the
Speaker 1: idea that negative yields are going to sustain in Europe
Speaker 1: is one of the factors of striving this. So there
Speaker 1: is in that sense of wall of money clearly because
Speaker 1: companies feel that they can go to Europe and easily
Speaker 1: fund themselves and get money. I do have to wonder, John,
Speaker 1: you raised the issue of durability, and I think that
Speaker 1: that's a really important one, and I think that I
Speaker 1: don't want to be Debbie Downer. But I guess that's
Speaker 1: where I've been pigeonholed. Oh, tomm you don't have to
Speaker 1: give me that look he's raising his eyebrows at me.
Speaker 1: But I will say, there's a question do you get
Speaker 1: in now at a time when we are later and
Speaker 1: there is a question about liquidity, uh, the ability to
Speaker 1: get out when you actually see a problem. Do you
Speaker 1: continue to take that risk given the fact that you're
Speaker 1: rewarded for it, or do you back off? It's difficult
Speaker 1: to back off simply because every day that you've backed off,
Speaker 1: you you're losing money in effect um and because at
Speaker 1: the end of the day there's a relative component to
Speaker 1: this as well. So uh, like I said, you've got
Speaker 1: negative rates in Europe. There's no sign that that's going
Speaker 1: to change. And the US, the market still pricing in
Speaker 1: another FED cut over the course of this year. And
Speaker 1: it's not just the US and the rest of G ten.
Speaker 1: The UK could cut again, Australia could cut very difficult
Speaker 1: macro backdrop to try to fade. When I I'm glad
Speaker 1: you're bringing this up shot up John the hockey stick
Speaker 1: on British rate code expectations absolutely extraordinary driven by the
Speaker 1: policymakers more than the data. A little about turn from
Speaker 1: Governor Carney and others as well. I find it absolutely fascinating.
Speaker 1: Where did it come from on what three months ago?
Speaker 1: It's obviously and it speaks for all of credit sweet research.
Speaker 1: Are you guys glass half full or glass half empty
Speaker 1: right now? Is a general investment statement. We're definitely glass
Speaker 1: half full still as as overall we're less how full? Maybe? Well,
Speaker 1: can you be less half full? We're more optimistic three
Speaker 1: months ago, just because valuations were better three months ago,
Speaker 1: right when risky assets were still pricing in uncertainty around
Speaker 1: things like the US China trade deals. Some of that
Speaker 1: has gone away. So obviously as you as you mentioned,
Speaker 1: it's not as attractive as it was. Have you said
Speaker 1: that there's no obvious signal yet to back up and
Speaker 1: in fact price action still tells us that too. For example,
Speaker 1: the Iran risks that came through at the beginning of
Speaker 1: the year. If markets really were as overwhelmingly long risk
Speaker 1: as everybody suspects it talks about, there should have been
Speaker 1: a more dramatic reaction to that, and there really wasn't.
Speaker 1: Thank you so much, up John, us with us with
Speaker 1: Credit Suite. Looking at JP Morgan, I think we've got
Speaker 1: a better idea. With a number of thirty six point
Speaker 1: four billion dollars for annual earnings, that's quite something for
Speaker 1: a US bank on a yearly, sir, that many people
Speaker 1: thought perhaps we'd go into recession on a year when
Speaker 1: we had three interest rate cuts. We've had record profit
Speaker 1: numbers out of Jack P. Mulkin. How does this correlate
Speaker 1: with the idea that banks are in a downward slump?
Speaker 1: Just throwing that out there, Well, the stop price of
Speaker 1: performance last year doesn't correct with that absolutely, because people
Speaker 1: are saying that the sort of years of incredible profitability
Speaker 1: are over. This doesn't. He's next to us. Now tell
Speaker 1: me show k B w C E. Oh, Tom, you've
Speaker 1: retroly the numbers you thoughts place. Yes, I think it's impressive.
Speaker 1: You mentioned the revenue growth, and you would combine that
Speaker 1: with only three point nine percent operating expense growth and
Speaker 1: share repurchase of about four percent year over year. You
Speaker 1: put it together, it's it's dynamite. Now that I think
Speaker 1: it's all about the operating leverage now that revenue growth.
Speaker 1: Remember last fourth quarter was a terrible fixed income trading quarter.
Speaker 1: So I know it's an ad plus percent improvement year
Speaker 1: over year, but that's not really normalized. That's more a
Speaker 1: story of how bad last year's fourth quarter was. But
Speaker 1: still it's really pretty good and it's more dollars than
Speaker 1: we thought it was going to be, so so it
Speaker 1: was good performance. But but this type of operating leverage
Speaker 1: is really impressive. Well, what I find amazing about this
Speaker 1: is we're gonna hit us again and again through the
Speaker 1: next twenty four hours. That we knew this was going
Speaker 1: to be a big bait because we knew Q four
Speaker 1: ANDEN was bad, but so did the whole analyst community,
Speaker 1: and there were still a billion dollars shy fixed income
Speaker 1: trading revenue LEASA. Yeah, that's been the issue here, is
Speaker 1: that they managed to beat and then some Do we
Speaker 1: have a sense time of exactly where they benefited. Yes,
Speaker 1: it's a matter of fact, so relative to expectations, and
Speaker 1: our firm was a little bit more aggressive than than
Speaker 1: the average firm in terms of our estimate. But they
Speaker 1: had sixteen cents of share of revenue beat, and they
Speaker 1: had eight cents of share of mortgage banking miss. Because
Speaker 1: that's one of the themes we haven't talked about. Is
Speaker 1: that rate? Is that mortgage banking. We've been expecting there
Speaker 1: to be a little bit of a of a week
Speaker 1: or mortgage banking quarter. So that happened, and when you
Speaker 1: look at that um you'll see that it was really
Speaker 1: a very big quarter in terms of trading fixed income.
Speaker 1: Was were other big twenty plus cent per share beats
Speaker 1: relatively Bloomberg gap on on your cell phone, or I
Speaker 1: have a Bloomberg gap on my cell phone, but I
Speaker 1: happen to be reading the direct delivery of research well
Speaker 1: on my phone. But this is really compelling. In other words,
Speaker 1: it wasn't all bright spots right the mortgage decline they
Speaker 1: had to offset somewhere. I'm wondering they did what was better?
Speaker 1: What was so amazing that actually delivered this beat that
Speaker 1: exceeded even the most aggressive of my senses at the
Speaker 1: market for fick trading and for equities was probably a
Speaker 1: little bit more generous than people thought. And I'm going
Speaker 1: to guess they picked up market share. So I think
Speaker 1: it's it's it's something well, the bigger, the biggest banks
Speaker 1: have been picking up market share from European banks. Is
Speaker 1: the data is what our research has shown and Also
Speaker 1: the smaller players, UH, continue to see pressure. So what's
Speaker 1: the sweat emerge right now? I'm sorry, what's the sweat
Speaker 1: to merge right now? January? Everybody's back from the holidays,
Speaker 1: what is the sweat and small bank and regional banks
Speaker 1: to merge? Merge, merger. I think you're going to see
Speaker 1: more consolidation because there's an understanding of how you got
Speaker 1: to take more costs. So we've got some long term
Speaker 1: trends on efficiency ratios. Even the talk. You look at
Speaker 1: some of these banks, they're in the fifties, mid to
Speaker 1: high fifties efficiency ratio. Wells far Ago is above that,
Speaker 1: and hence their profitability is lower. So there's a little
Speaker 1: bit of a competitive competition war on efficiency. And then
Speaker 1: while they're doing that, they're spend at least the big
Speaker 1: banks are spending billions of dollars on innovation. So the
Speaker 1: other banks in the industry are seeing that. And it's
Speaker 1: not game over for the regional banks. They just need
Speaker 1: to play to their strengths, play to their strength year
Speaker 1: last year. Some of these numbers valitate some of the
Speaker 1: year this bank had. Show me the year ahead, reasons
Speaker 1: to be constructive? What not? I tell them. Okay, the
Speaker 1: industry is very profitable. The balance sheets the strongest it's
Speaker 1: been an eighty year. Is the some of the Dodd
Speaker 1: Frank reforms of capital and liquidity reforms have made these
Speaker 1: banks safer. The American banks, the gap between their performance
Speaker 1: in Europe is widening. Of the big global banks, they
Speaker 1: will pick up more share globally, the and then the
Speaker 1: operating But remember all this is being said, but the
Speaker 1: regular banks and the typical banks are gonna have very
Speaker 1: little growth this year, if any, and it's because the
Speaker 1: cuts and interest rates have hit the margin. What we
Speaker 1: didn't talk about is that their net interest margin was
Speaker 1: down a lot. The rest of the at JP Morgan,
Speaker 1: the rest of the industry's margin is going to be
Speaker 1: down a lot year over year. You have to let
Speaker 1: that season and get behind you. And once that happens
Speaker 1: in the back half of the year, we think you'll
Speaker 1: start to see a pick up in operating leverage again
Speaker 1: for the banks we got I've got ten more questions,
Speaker 1: Thomas Short, Thank you so much company, k W as well, Lisa,
Speaker 1: A good time to speak to Jeffrey you of UBS
Speaker 1: with one of the great insights last year of a
Speaker 1: walla cash out there. It's inside baseball, Jeff. You but
Speaker 1: the Spain had a ten year offering today and everybody
Speaker 1: lined up. It was way way oversubscribe. What's its signal?
Speaker 1: The desperation that people need to buy full faith and
Speaker 1: credit paper. I'm saying it right now that yield environment
Speaker 1: is still very very much in place. Are we're saying
Speaker 1: in a disregarding credit risks or things like that? You know, perhaps,
Speaker 1: and but you know people are willing to pay a
Speaker 1: premium of that, and that's purely reflecting you know that
Speaker 1: the view central banks, they're going to stay where they are,
Speaker 1: if not low us, for a very long time to come.
Speaker 1: Is it like oh, five oh six, oh seven, the
Speaker 1: memory of people trying to squeeze out ten more basis
Speaker 1: points somewhere? Are we back there? So on the market side,
Speaker 1: and you can see some comparisons, I guess I'll remember
Speaker 1: back then when the carry trade was putting euro en
Speaker 1: to one seventy and KeyWe dollar is giving you you know,
Speaker 1: seven percent or the eight percent things like that. So
Speaker 1: so those trades are still there. But on the other hand,
Speaker 1: you know, if you look at balance sheet, if you
Speaker 1: look at the assets side, and they're clearly households. They're
Speaker 1: not taking up leverage, debt to income ratios very stable.
Speaker 1: If anything, they're a bit more healthy. So I think
Speaker 1: that's why a lot of investors want to take on risk,
Speaker 1: because they know that on the financial side, you're not
Speaker 1: going to see similarities to ten years ago. In trade
Speaker 1: tensions with China in the US, we're really sort of
Speaker 1: hanging over the market and depressing gains that people said
Speaker 1: otherwise would have been there. Now we have the EU
Speaker 1: delegation coming to Washington, d C. This week heating up
Speaker 1: over there with respect to the trade tensions. How much
Speaker 1: is that going to weigh things down, if at all.
Speaker 1: So I think that's going to be one of the
Speaker 1: key risks from that Europe in particular is going to
Speaker 1: look at and I think you're holding back a lot
Speaker 1: of investors from going for the risk on in Europe.
Speaker 1: At Robert Lheiser, you know, talked about rebalancing the trade
Speaker 1: relationship between the US and the European Union. So the rhetoric,
Speaker 1: you know, it hasn't been great. There are areas of
Speaker 1: corporations say against China and the like um, but clearly
Speaker 1: your wants to multilateral approach. They're not used to this
Speaker 1: kind of bilateral um, you know, bargaining. So now that
Speaker 1: is going to be a source of war, especially for
Speaker 1: the auto industry in Europe for quite some time. Yeah.
Speaker 1: So are we you expecting sort of an unto performance
Speaker 1: in the auto sector and industrials or do you think
Speaker 1: that this is just going to be sort of a
Speaker 1: general overhang? Um? So, actually on the industrial side, if
Speaker 1: you strip out autos, I think the outlook is not
Speaker 1: as in a negative data stabilized and that's what the
Speaker 1: German Treasury curve is theda Gentman bund curvisum telling you
Speaker 1: as well. But I think these are tactical shifts at
Speaker 1: the time being. Are we calling for reflation in Europe?
Speaker 1: You know, are we going to see um the UCB
Speaker 1: starter change this language? You know? Probably not, But again
Speaker 1: you let's see how these talks go. Jeff, you, how
Speaker 1: do you measure effervescence? I mean, if we're up here,
Speaker 1: we're up are in a good and positive way across
Speaker 1: asset classes. What's the Jeff you measurement for exuberance? For
Speaker 1: exuberance volve again, I go back to being an ex guy. Um,
Speaker 1: and if you look at how euro dollar implied VOWL month.
Speaker 1: I think we're trading on the four handle right, so
Speaker 1: you know, those were just levels where we where you
Speaker 1: would think unthinkable form. Yes, it is the most liquid
Speaker 1: f FX pair you know, but for that to essentially
Speaker 1: you know, become a a low carry or a negative
Speaker 1: carry near cash asset. You know that those are levels
Speaker 1: where ten fifteen years ago you would tell someone from
Speaker 1: SX that you're a dog trade on four let's say
Speaker 1: no chance, But that is happening again, going back to
Speaker 1: West Central branksa if we are in no chance And
Speaker 1: it was one of my headlines last year was the
Speaker 1: London annuity at four point one percent. I believe it
Speaker 1: was in the f T that was published. Are we
Speaker 1: going to see the actual rate of return for some
Speaker 1: of these annuity products actually go under four percent? To me,
Speaker 1: that's a little lead back to the nineteen thirties um
Speaker 1: that that would not be a surprise. And I think
Speaker 1: this underscores and and and a bigger theme of again
Speaker 1: the cash you know, for these old I managers, for example,
Speaker 1: do they really need to be more like the Norwegians
Speaker 1: and go go towards risk, you know, be or be
Speaker 1: like the Canadians, you know, go back into I will
Speaker 1: go into a p framework and otherwise those rates are
Speaker 1: going to come down. How do you boost returns? And
Speaker 1: they're going to need to be a change or in
Speaker 1: mindset on the regulatory side. But again, if that cash
Speaker 1: goes out of six income, where they're going to go
Speaker 1: most likely equities? Lisa Bramo, it's Ian Lincoln just publishing
Speaker 1: moments ago at the More Capital Markets CPI universally disciplined universally.
Speaker 1: He was watched on the street there. Yeah, Well to me,
Speaker 1: I mean I think that this raise a question how
Speaker 1: can you keep piling into risk at a time when
Speaker 1: you have a global economy that's deadily slowing. I mean,
Speaker 1: the fundamentals just don't matter anymore? Is that it? Now?
Speaker 1: It's certainly not. It's not that it doesn't matter anymore.
Speaker 1: And I think people are going to focus on quality.
Speaker 1: You know, that's a message that we are sending to klients.
Speaker 1: So um, you go to a company a level fundamentals
Speaker 1: and be clear about stock picking, but also be clear
Speaker 1: what you want to own. So we don't want to
Speaker 1: own so in a corporate investment expose sectors Right now,
Speaker 1: one's own consumer exposed and sectors and besides something that's
Speaker 1: been well flagged again credit in the US and the
Speaker 1: senior loans, things like that. But the moment that credit
Speaker 1: begins to crack, the moment you know where we'd really
Speaker 1: start to do default rates and you go up where
Speaker 1: better fundamentals on the household side is no longer enough,
Speaker 1: you know, to sustain the credit evaluations we see right now,
Speaker 1: that's when we need to reassess. Jeffrey, you thank you
Speaker 1: so much. With us and their wealth management division, just
Speaker 1: wonderful and set analysis right now my face for its
Speaker 1: strategists here she's head of strategy for B and Y
Speaker 1: Melon and Alicia Levine is my favorite strategist because Paul,
Speaker 1: she has so much Wall Street experience that she puts
Speaker 1: it on one page. Noticed that there's no seven page memos,
Speaker 1: there's no twenty page you know. It's remember Sanford Bernstein
Speaker 1: in the Black Books. You'd walk around with the Sanford
Speaker 1: bursting Black Book just to be cool, you know, just
Speaker 1: to show you a cool not dead. For Alicia Levine,
Speaker 1: she writes a terse one page mom, Alicia, I want
Speaker 1: to go right to the risks that are out there
Speaker 1: because we're risk free right now, we're massively risk on.
Speaker 1: And I want to go to just a simple one.
Speaker 1: Are we grabbing like eight months of performance in two weeks?
Speaker 1: I mean, is that that's not valid? Right? Well, let's
Speaker 1: let's say that maybe we're grabbing eight months of performance
Speaker 1: in the previous quarter. Right, So October represented the first
Speaker 1: time that we surpassed the previous high. So for like
Speaker 1: you know, twelve fifteen months, we slashed around to the
Speaker 1: same levels more or less, even though the if you
Speaker 1: looked at it an annual basis and looked pretty good.
Speaker 1: So the fourth quarter was extraordinary. The earnings estimates, to
Speaker 1: my surprise, have not come down for they're still hanging
Speaker 1: out there at and that's actually kind of unusual because
Speaker 1: normally body December thirty one, you have some softness and
Speaker 1: the estimates for the following year. Okay, JP Morgan one
Speaker 1: single headline, your revenues up nine It's stunning. Both City
Speaker 1: and JP Morrigan did it on on the fixed side,
Speaker 1: on the fixing and wheel used to spin the wheel. No,
Speaker 1: I mean, look, the banks have shown us they've gotten
Speaker 1: through the compression in yields, they got through the inverted
Speaker 1: yeel curve pretty good. If they can get through that,
Speaker 1: I think they're set up for a really nice year
Speaker 1: this year. They're still trading inexpensively relative to their business lines. So, Alicia,
Speaker 1: I don't know if you know, but Tom's dollar cost
Speaker 1: averaging to the equity markets this year exactly after being
Speaker 1: in a triple leverage cash fund for should he be
Speaker 1: chasing the Fang stocks, the tech names, the leaders of
Speaker 1: this market, or getting a little bit more conservative utilities
Speaker 1: some of the more defensive sectors. Look, you're talking to
Speaker 1: somebody who was around in so like, I get queasy
Speaker 1: when I get asked that question. On the other hand,
Speaker 1: you know, if this is a liquidity driven market, and
Speaker 1: if we're going back to the kind of the high
Speaker 1: growth stocks pushing it, we see a positive year, you
Speaker 1: have to own some of it. You have to own
Speaker 1: some of it. So look, Google based for eighteen months,
Speaker 1: Facebook based for almost two years. Those are kind of interesting. Also,
Speaker 1: Amazon has never surpassed it's old high also kind of interesting.
Speaker 1: So you have to own some of those large cap
Speaker 1: tech stocks. But I just wouldn't overdo it. Nine looms
Speaker 1: large in my mind. And by the way, everybody's talking
Speaker 1: about how great, they're far oh one K did last year.
Speaker 1: That makes me nervous. It makes me really nervous. I
Speaker 1: don't want to hear that right because it means everyone's
Speaker 1: piling in. So how about you know the other I
Speaker 1: would say kind of a I'm not sure if it's
Speaker 1: a consensus trade, but the trade I hear a lot
Speaker 1: about as people think about where there could be some
Speaker 1: opportunities in the Great twenty nineteen is maybe like emerging markets, uh,
Speaker 1: small caps, things like that I need to think a
Speaker 1: little bit outside the box. So we like actually overseas
Speaker 1: markets compared to the US. This year, we still think
Speaker 1: the US is positive. We're still the best house in
Speaker 1: like a mediocre neighborhood. But the issue is that signing
Speaker 1: the trade deal and separately from that and an uptick
Speaker 1: and growth is going to be felt most noticeably in
Speaker 1: the European markets and an emerging markets simply because they've
Speaker 1: underperformed for so long. I mean emerging markets underperformed for
Speaker 1: ten years. Europe under has really underperformed since two thousand
Speaker 1: and twelve. So this is an interesting place to put
Speaker 1: some capital. Most US investors are not allocated overseas, and
Speaker 1: they should be by Melon. What are you seeing your
Speaker 1: clients do? What is the action plan you're in review?
Speaker 1: Maybe tax punning, But what's the mood up there? There
Speaker 1: is there is fear. There's fear not about the red
Speaker 1: sox about markets. So there's rebalancing. There's rebalancing. So fixed
Speaker 1: income had a great year last year, but also equity
Speaker 1: markets had a great year. So we are advising our
Speaker 1: clients that diversification is the name of the game. It's
Speaker 1: the only closest thing that's a free lunch out there,
Speaker 1: and you should definitely rebalance so you get some sort
Speaker 1: of protection out there. We still think duration is playable
Speaker 1: for risk off markets. There is still that negative correlation
Speaker 1: out there between fixed income and equities. So when I
Speaker 1: think about the markets performance the equity markets in nineteen,
Speaker 1: it was pretty much all multiple expansion. We have to
Speaker 1: have some earnings growth this year to drive this market.
Speaker 1: And as you mentioned, are you concerned that earnings maybe
Speaker 1: too high out there on the street right now, because
Speaker 1: it's just seems like we're set up for just the
Speaker 1: quarter by quarter taking down of earnings estimates on the street.
Speaker 1: So as long as so right now we're between nine
Speaker 1: and ten percent for earnings growth in If earnings growth
Speaker 1: comes in around six percent, which is more or less
Speaker 1: historical averages, you can sustain the market at this level.
Speaker 1: The real risk is if you go sub five. We
Speaker 1: see the first quarter sort of being an air pocket
Speaker 1: in terms of growth, and we see the the U
Speaker 1: S economy doing better actually over the summer. That's really
Speaker 1: where you're going to get the full benefit of those
Speaker 1: three rate cuts and the global liquidity coming. And so
Speaker 1: you have to play. You have to play because you
Speaker 1: have to get performance, but you should also just realize
Speaker 1: your your earnings estimates are coming down. I'm afraid to
Speaker 1: ask this question, but I'm gonna go. If you don't
Speaker 1: know the answer, that's okay. Is Apple over owned? Is
Speaker 1: Apple under owned? So my contract says I can't answer
Speaker 1: that question because about the individual stock right. Tell me
Speaker 1: about sure by back see always secuite out of that
Speaker 1: right to something pretty good. I mean tell you, I
Speaker 1: mean maybe if the market goes up and multiples get stupid.
Speaker 1: NBA one of ones is don't affect share buy backs
Speaker 1: or at least at the margin increased share buy backs.
Speaker 1: Are you hearing that out there? I'm not hearing that
Speaker 1: I'll tell you what happened in two thousand and nineteen.
Speaker 1: Though your share buy backs gave you a two percent
Speaker 1: difference in your net income growth versus your EPs growth,
Speaker 1: So your EPs growth was marginally positive versus your net
Speaker 1: income which was negative because you had a smaller share
Speaker 1: account across the SMP huge buybacks last year as a
Speaker 1: result of the repatriation, hard to buy stocks at this level.
Speaker 1: I would think if you are you observing that we're
Speaker 1: CEO s go, No, we're not going to do that.
Speaker 1: That's a way to make friends and family. No, not yet,
Speaker 1: not yet. I think if you still see this year,
Speaker 1: you can still buy the market. Alicia, I think they're
Speaker 1: signing a trade deal tomorrow. Do we care? We definitely care.
Speaker 1: I don't think it's nothing, Okay, I don't think it's
Speaker 1: nothing because look, if I'm reading the head lines correctly,
Speaker 1: China has agreed to purchase up to two million in
Speaker 1: US egg products. That's very important for the farm states
Speaker 1: and very important for the Midwest. Separately, there is an
Speaker 1: agreement and we'll see if this is enforceable that there
Speaker 1: will be no forced technology transfer. And as you know,
Speaker 1: those were one of the structural issues that the US
Speaker 1: really wanted to get for this. So this is something.
Speaker 1: And don't forget some of the tariffs are coming off.
Speaker 1: We should see an uptick in CEO confidence and if
Speaker 1: we get an uptick in CAPEX, we're off to the races.
Speaker 1: See and then I guess then the question becomes not
Speaker 1: to get greedy phase surveillance. Phase two? Is that something
Speaker 1: the market even cares about or is it just taking
Speaker 1: off That uncertainty of President Trump and the trade issues
Speaker 1: is enough for the market. So right now, the phase
Speaker 1: one really is about getting rid of the uncertainty and
Speaker 1: not escalation of tariffs. If there's any phase two, it
Speaker 1: will start in the next administration, of which whoever is
Speaker 1: sitting in the White House. This is not easy. This
Speaker 1: is about changing the Chinese economy. I don't think that's
Speaker 1: going to happen. Alicia Lavie, thank you so much to
Speaker 1: being White Mellow. Thanks for listening to the Bloomberg Surveillance podcast.
Speaker 1: Subscribe and listen to interviews on Apple Podcasts, SoundCloud, or
Speaker 1: whichever podcast platform you prefer. I'm on Twitter at Tom Keane.
Speaker 1: Before the podcast, you can always catch us worldwide. I'm
Speaker 1: Bloomberg Radio