WEBVTT - Bloomberg Surveillance: A Stellar Year for Equities 0:00:05.519 --> 0:00:08.640 This is the Bloomberg Surveillance Podcast. I'm Carol Masser, along 0:00:08.640 --> 0:00:11.559 with Manis Crowning and Katie Greifeld. Join us each day 0:00:11.560 --> 0:00:15.680 for insight from the best in economics, geopolitics, finance and investment. 0:00:16.040 --> 0:00:19.479 Subscribe to Bloomberg Surveillance on demand at Apple, Spotify and 0:00:19.560 --> 0:00:23.200 anywhere you get your podcasts, and always on Bloomberg dot Com, 0:00:23.320 --> 0:00:26.120 the Bloomberg Terminal, and of course, on the Bloomberg Business App. 0:00:26.400 --> 0:00:28.720 Let's See how Much Sleep byby Sam Stowell got He's 0:00:28.800 --> 0:00:32.519 chief investment strategist at CFIA, joining us on this Friday. 0:00:33.040 --> 0:00:34.839 There is so much to talk about, Sam, as we 0:00:34.880 --> 0:00:37.720 get ready to wrap up a wild year one for 0:00:37.760 --> 0:00:40.760 the textbooks. I feel like in so many ways, as 0:00:40.760 --> 0:00:44.000 you sit here on this December, as we get ready 0:00:44.040 --> 0:00:45.919 for the last trading day here in the United States, 0:00:46.080 --> 0:00:47.880 how are you thinking about the year that was? In 0:00:47.920 --> 0:00:48.960 the year that might. 0:00:48.840 --> 0:00:53.600 Be, Well, good morning, Carol, and good morning everybody. I'm 0:00:53.600 --> 0:00:58.000 basically thinking that looking forward to twenty twenty four also 0:00:58.120 --> 0:01:01.960 being a good year. History tells us that great years 0:01:02.040 --> 0:01:06.319 traditionally are followed by good years that gains in excess 0:01:06.319 --> 0:01:09.839 of twenty percent in one calendar year. Lead to double 0:01:09.880 --> 0:01:13.279 digit gains in the second year, basically a three hundred 0:01:13.319 --> 0:01:16.920 basis point improvement over the long term average with a 0:01:17.000 --> 0:01:20.800 ten percentage point increase in the frequency of advance. So 0:01:21.319 --> 0:01:24.480 basically you letting your winners ride from one year to 0:01:24.520 --> 0:01:25.000 the next. 0:01:25.600 --> 0:01:26.959 So every day we've got to come up with a 0:01:27.000 --> 0:01:29.000 new way to ask you whether you want to belong 0:01:29.160 --> 0:01:31.360 the MAC seven relative to the breadth of the There 0:01:31.360 --> 0:01:34.000 are four hundred and ninety three other stocks, so find. 0:01:33.840 --> 0:01:34.520 Another version of it. 0:01:34.560 --> 0:01:37.120 If you think you're going to get a double digit return, 0:01:37.200 --> 0:01:40.400 The question is then within MAC seven they are expected 0:01:40.400 --> 0:01:42.920 to see their earnings growth rise by twenty two percent 0:01:43.040 --> 0:01:45.679 next year. That's twice the S and P five hundred advance. 0:01:45.840 --> 0:01:48.640 I mean there's an airrevocability of having to have MAC 0:01:48.760 --> 0:01:51.880 seven as a portion of your equity exposure. So is 0:01:51.880 --> 0:01:54.560 it still over exposed to MAC seven or do you 0:01:54.560 --> 0:01:55.200 go for breadth? 0:01:56.200 --> 0:01:57.440 I think you go for breath. 0:01:57.560 --> 0:02:00.320 But what you do is you broaden out and then 0:02:00.400 --> 0:02:03.920 those sectors that have done so well. Again, going back 0:02:03.920 --> 0:02:06.920 to nineteen ninety, if you were to be holding onto 0:02:07.000 --> 0:02:10.440 the three best performing sectors from an up year into 0:02:10.480 --> 0:02:13.240 the new year, you ended up beating the market seventy 0:02:13.280 --> 0:02:16.280 percent of the time, and the focus being that now 0:02:16.360 --> 0:02:19.960 you drift down into the second maybe third tier level. 0:02:20.080 --> 0:02:24.560 So semiconductors having one hundred and five percent improvement on 0:02:24.680 --> 0:02:27.800 a sub industry level within the S and P fifteen hundred, 0:02:28.120 --> 0:02:30.720 you would stick with that group. But you might instead 0:02:30.760 --> 0:02:34.240 of looking at Nvidia, you might be looking at Broadcom, 0:02:34.280 --> 0:02:37.400 you might be looking at Marvel Technology, et cetera. So 0:02:37.880 --> 0:02:40.720 you stick with the winning sectors, but you might broaden 0:02:40.760 --> 0:02:43.720 out to the second and third tier companies. 0:02:43.800 --> 0:02:46.320 Can I ask you, though, Sam, why not stay with Nvidia? 0:02:46.360 --> 0:02:47.760 I feel like you know what manis if we talk 0:02:47.800 --> 0:02:50.760 about AI chips, that is still the company that everybody 0:02:50.760 --> 0:02:52.320 says has to beat. I was listening to something from 0:02:52.360 --> 0:02:55.280 Ian King overnight. You know we're waiting for their you know, 0:02:55.360 --> 0:02:58.000 accelerator chips that are about to come. I mean, why 0:02:58.040 --> 0:02:59.120 not go with the leader? 0:03:00.120 --> 0:03:04.200 Oh, we still recommend In video, Angelo Zeno, ar tech 0:03:04.480 --> 0:03:07.160 specialist is saying that this is a company that is 0:03:07.280 --> 0:03:10.520 likely to be a leader for quite some time. I 0:03:10.600 --> 0:03:13.359 think that what I was saying is that we're also 0:03:13.440 --> 0:03:15.840 going to see others. Maybe we turn it into the 0:03:15.840 --> 0:03:20.320 Magnificent fourteen or so. But we basically broaden out those 0:03:20.360 --> 0:03:21.840 groups that are likely to benefit. 0:03:23.040 --> 0:03:25.160 And it's interesting that you say tier three, tier three 0:03:25.240 --> 0:03:27.080 going from in Vidia two hundred and thirty eight percent 0:03:27.360 --> 0:03:29.720 performance to broadcoalm at one hundred percent. But I get 0:03:29.760 --> 0:03:32.959 your point. How much exceptional breath would you take? We 0:03:33.000 --> 0:03:36.480 caught up with not Alliance Bernstein yesterday and they talked 0:03:36.480 --> 0:03:39.000 about a sweet spot for junk at sweet spot for 0:03:39.120 --> 0:03:42.920 many of these slightly riskier markets. How much risk do 0:03:42.960 --> 0:03:46.080 you want to put into portfolios next year? How much breath? 0:03:46.080 --> 0:03:48.240 I mean they talk about jump being in a sweet spot. 0:03:48.320 --> 0:03:50.760 What's the equivalent for you in the equity world. 0:03:52.320 --> 0:03:55.400 Well, when you deal with risk, I guess it depends 0:03:55.440 --> 0:03:58.080 on the individual. I like to say I'm so conservative, 0:03:58.120 --> 0:04:01.320 I wear a belt and suspenders, But I think when 0:04:01.360 --> 0:04:04.800 you look to historical precedent and you see that we 0:04:04.880 --> 0:04:08.120 are in an election year for a first term administration, 0:04:08.560 --> 0:04:10.800 the market has gained one hundred percent of the time 0:04:10.840 --> 0:04:13.760 since World War Two, with an average total return of 0:04:13.760 --> 0:04:16.400 fifteen and a half percent. We're in the second year 0:04:16.440 --> 0:04:19.120 of a bull market, typically up twelve and a half percent, 0:04:19.440 --> 0:04:22.599 rising eighty five percent of the time. And as I 0:04:22.720 --> 0:04:26.240 just mentioned whenever we're in a year following a twenty 0:04:26.279 --> 0:04:30.599 plus percent advance, the market has done exceptionally well in 0:04:30.920 --> 0:04:33.839 that second year. So I would tend to say that 0:04:34.680 --> 0:04:37.839 if you have added to the risk in this fourth quarter, 0:04:38.960 --> 0:04:42.320 stick with that higher risk, And if you do believe 0:04:42.360 --> 0:04:45.640 that there is more risk potential for twenty twenty four, 0:04:46.480 --> 0:04:49.120 I think we're a bit overbought right now, and once 0:04:49.160 --> 0:04:51.680 we get into the new calendar year, when people can 0:04:51.760 --> 0:04:55.560 take their profits and then defer taxes for another year, 0:04:56.240 --> 0:04:58.840 then I would say look to buy on those dips. 0:04:59.200 --> 0:05:01.599 Well, let's talk about this from a sector perspective, Because 0:05:01.600 --> 0:05:04.159 you write in your notes that following up years, it's 0:05:04.200 --> 0:05:06.720 best to let your winners ride. I want to talk 0:05:06.720 --> 0:05:09.120 about the other side of that. Do you let your 0:05:09.200 --> 0:05:12.039 losers continue to lose? You take a look at utilities, 0:05:12.200 --> 0:05:15.679 energy staples leading losses this year. Do you just stay 0:05:15.680 --> 0:05:17.200 away from them in twenty twenty four. 0:05:18.240 --> 0:05:21.200 Well, obviously we do have recommendations in all three of 0:05:21.200 --> 0:05:25.920 those sectors, but from a waiting perspective, we would continue 0:05:25.920 --> 0:05:29.640 to recommend underweighting these groups, mainly because there's an awful 0:05:29.640 --> 0:05:34.080 lot of overhead resistance and if there is the emphasis 0:05:34.120 --> 0:05:38.320 toward growth, toward risk, etc. Investors are going to continue 0:05:38.360 --> 0:05:41.560 to focus on those growth leaders. So I would tend 0:05:41.560 --> 0:05:44.880 to say that while you could see a drifting hire 0:05:45.040 --> 0:05:48.400 of some of these groups, from a relative strength perspective, 0:05:48.440 --> 0:05:50.440 they're likely to be underperformers yet. 0:05:50.880 --> 0:05:53.360 And I want to get specific here and run through 0:05:53.360 --> 0:05:55.480 some names because I'm taking a look at the socks 0:05:55.520 --> 0:05:57.960 that you've specified in financials. 0:05:58.320 --> 0:05:59.239 Charles Schwab. 0:05:59.320 --> 0:06:01.480 Schwab is a really interesting name to me because obviously 0:06:01.560 --> 0:06:03.800 it was one of the babies perhaps thrown out with 0:06:03.839 --> 0:06:06.320 the bathwater, and what we saw with margin, it really 0:06:06.400 --> 0:06:09.279 hasn't recovered. You take a look at shares down about 0:06:09.320 --> 0:06:12.880 sixteen percent for twenty twenty three. What's the thinking around 0:06:12.960 --> 0:06:14.440 Charles Schwab at this juncture. 0:06:15.480 --> 0:06:18.279 Well, I like to say that fundamentals tell you what, 0:06:18.560 --> 0:06:22.279 but technicals tell you when and how far. So I 0:06:22.440 --> 0:06:27.680 like to combine CFIA equity analyst recommendations along with our 0:06:27.960 --> 0:06:32.920 lowry research technical assistance area, so you know, seeing where 0:06:32.920 --> 0:06:36.400 the momentum relative strength happens to be. So Charles Schwab, 0:06:36.520 --> 0:06:41.279 basically it's an extreme undervaluation situation. It's almost trading at 0:06:41.320 --> 0:06:44.920 about half of what it normally trades. Also, we're looking 0:06:45.000 --> 0:06:48.680 at an environment in which the concern I think is 0:06:48.800 --> 0:06:52.279 just totally overblown. So with the prospect of another good 0:06:52.320 --> 0:06:56.120 year in the marketplace benefiting the investment banks and brokers, 0:06:56.760 --> 0:06:59.760 one that is over sold and really has not reached 0:06:59.760 --> 0:07:00.960 its potential is. 0:07:00.920 --> 0:07:03.920 Schwab Hey sam our most read story in the Bloomberg. 0:07:04.080 --> 0:07:06.960 It's a story put together by a bunch of our reporters, 0:07:06.960 --> 0:07:09.480 and it says Wall Street's best and bright is flopped 0:07:09.480 --> 0:07:11.760 once again in twenty twenty three, basically saying that at 0:07:11.760 --> 0:07:14.360 the end of twenty twenty two, everyone, it seem was 0:07:14.400 --> 0:07:17.040 game planning for the recession they were convinced was coming. 0:07:17.080 --> 0:07:20.000 There's a lot of things that came out seemingly from nowhere. 0:07:20.200 --> 0:07:24.400 Regional banking, the concerns there Russia Ukraine, that war continuing, 0:07:24.440 --> 0:07:27.720 then of course the Middle East conflict. As you look 0:07:27.760 --> 0:07:31.360 ahead and you obviously have laid out your scenario, you know, 0:07:31.440 --> 0:07:33.560 what are the things though, that we must keep on 0:07:33.640 --> 0:07:35.720 our radar that maybe could just kind of come out 0:07:35.720 --> 0:07:36.239 of nowhere. 0:07:37.280 --> 0:07:39.880 Well, as Mannis was saying early on in the program, 0:07:40.080 --> 0:07:42.760 is when will the FED start to cut and by 0:07:42.800 --> 0:07:45.360 how much our belief is that they're going to cut 0:07:45.400 --> 0:07:48.920 three times in twenty twenty four, starting in the second quarter, 0:07:49.640 --> 0:07:52.200 mainly because the FED doesn't want to make the mistakes 0:07:52.200 --> 0:07:54.600 that they did in the late seventies. They want to 0:07:54.920 --> 0:07:59.520 ensure that inflation, like a campfire, is fully doused before 0:07:59.520 --> 0:08:04.200 they start to cut interest rates. So our belief is 0:08:04.240 --> 0:08:06.800 that only if we end up with a hard landing 0:08:07.160 --> 0:08:09.520 rather than a soft landing will the FED be more 0:08:09.520 --> 0:08:15.240 aggressive from a rate cutting perspective. Also, adding geopolitical issues, 0:08:15.760 --> 0:08:19.119 should we find that there's a broadening of the Middle 0:08:19.120 --> 0:08:23.200 East tensions and conflict and the total shutdown of the 0:08:23.240 --> 0:08:26.480 Red Sea, we still are having some shipping firms that 0:08:26.520 --> 0:08:29.840 are willing to venture in there, but a total shutdown, 0:08:30.120 --> 0:08:34.880 a jump in oil prices, those could obviously upend the 0:08:35.040 --> 0:08:36.000 year ahead forecast. 0:08:36.080 --> 0:08:37.880 Yeah, already a full play, it feels like for the 0:08:37.920 --> 0:08:40.320 new year. Hey, Sam, thank you so much. Happy New Year. 0:08:40.520 --> 0:08:42.480 I always appreciate all the time you give us here 0:08:42.480 --> 0:08:49.960 at Bloomberg Sam Stovell over at CFRA a lot to 0:08:49.960 --> 0:08:51.839 talk about. I mean, Apple's had a very good year. 0:08:51.880 --> 0:08:53.440 The stock is up to I think just shy a 0:08:53.520 --> 0:08:57.199 fifty percent here in twenty twenty three, so and a 0:08:57.280 --> 0:08:58.960 lot of stories and a lot of concerns this week 0:08:59.000 --> 0:09:02.520 in terms of litigations stopping sales of the Apple Wash 0:09:02.600 --> 0:09:05.040 but coming back on board. So no offense. Guys, I'd 0:09:05.040 --> 0:09:06.319 love to talk to you, but I really want to 0:09:06.320 --> 0:09:09.520 talk to Mark German about it. Is Bloomberg Chief correspondent 0:09:09.600 --> 0:09:12.440 Apple Expert has written a bunch about Apple always, but 0:09:12.480 --> 0:09:14.880 also this week. Mark, good to have you here. We 0:09:14.920 --> 0:09:17.160 know it's early. I think you're on the West coast, 0:09:17.559 --> 0:09:20.400 so it is kind of early. Talk to us about 0:09:20.440 --> 0:09:24.000 the watch, specifically in terms of the back and forth 0:09:24.120 --> 0:09:26.760 pulling it off the market, putting it back on the market, 0:09:27.080 --> 0:09:30.079 patent litigation. I feel like when it comes to technology companies, 0:09:30.800 --> 0:09:32.920 it's kind of a given. But how should we be 0:09:33.000 --> 0:09:34.960 thinking about it, at least for the investment side and 0:09:34.960 --> 0:09:36.000 the investor audience. 0:09:37.360 --> 0:09:39.040 Sure, thank you so much for having me. So I'll 0:09:39.080 --> 0:09:41.719 start off by saying that the Apple Watch, one of 0:09:41.760 --> 0:09:45.679 Apple's most premiere products being pulled from sale in the US. 0:09:46.720 --> 0:09:50.840 That's unprecedented. That just doesn't happen. When the ITC said 0:09:50.840 --> 0:09:53.120 in October that Apple would have to pull the watch 0:09:53.120 --> 0:09:56.600 from store shelves after a sixty day review period, That's 0:09:56.600 --> 0:09:59.440 how we ended up with this happening during the week 0:09:59.480 --> 0:10:02.120 between Smiths and New Year's. I think a lot of 0:10:02.120 --> 0:10:05.360 people believe that there would be no way Apple would 0:10:05.360 --> 0:10:07.800 get to this point. Either Apple would figure out some 0:10:07.840 --> 0:10:11.240 sort of settlement, either they would issue a software update, 0:10:11.280 --> 0:10:14.840 they would convince the Biden administration to veto the order 0:10:14.880 --> 0:10:17.640 from the Trade Commission. I think it was very surprising, 0:10:17.679 --> 0:10:20.199 including to myself, when these things actually got pulled from 0:10:20.200 --> 0:10:23.880 store shelves. Now the Van, for all intentsive purposes, really 0:10:23.880 --> 0:10:26.760 only lasted a few days because Apple just a couple 0:10:26.800 --> 0:10:29.760 of days ago got an emergency order through an appeals 0:10:29.800 --> 0:10:32.680 court in DC that got them to put the Watch 0:10:32.800 --> 0:10:35.920 back on the market. Now this is temporary, right. Apple 0:10:36.040 --> 0:10:39.400 still has to put a software fix in place or 0:10:39.440 --> 0:10:42.040 another type of fix, and that fix is being reviewed 0:10:42.080 --> 0:10:45.400 by the US Customs Agency. There was actually a hearing 0:10:45.600 --> 0:10:48.640 yesterday on Thursday. We don't know how the hearing went 0:10:48.679 --> 0:10:51.600 at this point because it's all closed door stuff, but 0:10:51.640 --> 0:10:54.040 by mid January we should have some sort of answer 0:10:54.040 --> 0:10:56.800 from the Customs Agency whether or not the fix via 0:10:56.880 --> 0:10:59.800 software that Apple has proposed for the Watch is sufficient 0:10:59.840 --> 0:11:03.160 and to no longer in their view violate the patents 0:11:03.200 --> 0:11:06.679 from a company called Massimo, a medical device company that 0:11:06.880 --> 0:11:09.560 say Apple and fringed and got the ITC to pull 0:11:09.600 --> 0:11:11.240 the watch from Apple stores in the US. 0:11:11.360 --> 0:11:13.680 Hey, Mark, are we naive to just assume that Apple's 0:11:13.679 --> 0:11:15.319 going to figure this one out and they'll be able 0:11:15.360 --> 0:11:17.880 to keep their watches on shelves in the future. 0:11:20.040 --> 0:11:23.240 I think we were naive to believe that this wouldn't happen. 0:11:23.600 --> 0:11:25.920 I think we're less naive to believe that Apple is 0:11:25.920 --> 0:11:28.200 on the verge of figuring this out. There's going to 0:11:28.200 --> 0:11:31.800 be a resolution here sometime in January. I believe if 0:11:31.800 --> 0:11:35.920 the US Customers Agency accepts Apple's software fix, it's game 0:11:35.960 --> 0:11:40.360 over right. This watch is back on sale. Masno will 0:11:40.360 --> 0:11:43.959 go after Apple again. The two companies have been in court. 0:11:44.200 --> 0:11:47.640 They have a round two of their trial related to 0:11:47.679 --> 0:11:51.080 patents and trade secret theft that's kicking off in late 0:11:51.120 --> 0:11:55.040 October of twenty twenty four. For those unfamiliar, Massimo sued 0:11:55.080 --> 0:11:58.680 Apple in twenty twenty over patent infringement. There was actually 0:11:58.679 --> 0:12:01.319 a trial this year ended in a mistrial due to 0:12:01.360 --> 0:12:04.640 a hung jury. For this type of trial, you needed 0:12:05.520 --> 0:12:08.200 all the jurors to be in agreement. One way or another, 0:12:08.400 --> 0:12:10.360 but it was actually six to one in Apple's favor. 0:12:10.920 --> 0:12:12.840 So both Apple and Moss of a loss. 0:12:12.840 --> 0:12:15.719 So they've got history and they've got form, they've got 0:12:15.800 --> 0:12:18.959 form on that. Can we just sort of because those 0:12:19.040 --> 0:12:21.160 legal rankers are going to continue If you look at 0:12:21.160 --> 0:12:22.560 the wearable as part of the business, I know there's 0:12:22.559 --> 0:12:23.880 a number of the kdes keeping an eye and the 0:12:23.880 --> 0:12:27.160 wearables is ten percent of the revenue. We had Dan 0:12:27.280 --> 0:12:29.319 ives with us a little bit earlier in the week. 0:12:29.360 --> 0:12:32.200 Can he evangelize had a four trillion dollar valuation on 0:12:32.360 --> 0:12:34.840 Apple A. How quickly do you think it could make 0:12:34.920 --> 0:12:38.120 that valuation? But more importantly, how important is China too 0:12:38.160 --> 0:12:41.800 that because again there's regulatory sniping from the Chinese on 0:12:41.840 --> 0:12:45.480 the ownership of iPhones, and iPhones are seventy seven percent 0:12:45.800 --> 0:12:49.319 of the of the revenue lineup for Apple. 0:12:51.960 --> 0:12:54.160 Yeah, I'll tell you this. You can be quite successful 0:12:54.240 --> 0:12:57.559 by constantly betting that Apple's going to be okay long 0:12:57.679 --> 0:12:59.920 term and their market cap is going to keep growing. 0:13:00.840 --> 0:13:03.440 So you know, I see every scenario in the book 0:13:03.480 --> 0:13:06.360 that Apple gets the four trillion. I'm not sure it'll 0:13:06.400 --> 0:13:09.040 be in twenty twenty four, but it will happen. Eventually, 0:13:09.480 --> 0:13:12.440 and it's typically a bad bet to go against Apple. 0:13:12.760 --> 0:13:12.920 Right. 0:13:13.520 --> 0:13:16.480 In terms of China, there have been these reports from 0:13:16.600 --> 0:13:21.160 US and others about the government banning the iPhone and 0:13:21.200 --> 0:13:25.600 other non Chinese made devices in certain offices, in certain 0:13:25.679 --> 0:13:29.240 organizations within the country. I think it's really going to 0:13:29.320 --> 0:13:32.840 take until Apple reveals its first quarter results at the 0:13:32.880 --> 0:13:36.200 tail end of January or early February to see what 0:13:36.280 --> 0:13:38.360 revenue is like in China to get a full scope 0:13:38.360 --> 0:13:41.720 of that impact. The last revenue results that we got 0:13:41.800 --> 0:13:44.720 for Apple, that was the fourth quarter, they did okay 0:13:44.960 --> 0:13:48.840 in China. They really didn't decline much. It was pretty 0:13:48.880 --> 0:13:52.280 solid overall. That The issue for us in terms of 0:13:52.320 --> 0:13:54.680 trying to determine what that means is that it only 0:13:54.720 --> 0:13:59.640 incorporated very few days of iPhone fifteen sales in the 0:13:59.679 --> 0:14:02.200 overall Q four earnings. So it's really difficult to know 0:14:02.320 --> 0:14:05.720 until Apple actually puts those numbers out because otherwise we're 0:14:05.760 --> 0:14:06.280 just guessing. 0:14:06.720 --> 0:14:09.079 So a lot of the time, the detractors of Apple 0:14:09.120 --> 0:14:13.800 would say the scale and the speed of radical innovation, 0:14:14.000 --> 0:14:18.040 radical product product development has perhaps slowed down. Where do 0:14:18.080 --> 0:14:20.600 they what does Apple need as where to get to 0:14:20.640 --> 0:14:23.880 four trillion? Does it need multiple refreshes which we get 0:14:24.440 --> 0:14:27.720 or does it need something perhaps more damascene esque. 0:14:29.320 --> 0:14:33.520 That's undoubtedly true that the pace of device redesigns has 0:14:33.600 --> 0:14:36.960 slowed down to an incredible degree. If you look at 0:14:36.960 --> 0:14:42.000 the iPhone fifteen Pro, sure it has pretty great new materials, 0:14:42.040 --> 0:14:45.080 It has a very advanced processor, the first three and 0:14:45.120 --> 0:14:49.240 animeter chip to ship in volume in a smartphone. But 0:14:49.320 --> 0:14:51.520 if you put that thing in a case, or even 0:14:51.560 --> 0:14:53.200 if you don't put it in a case, it's going to, 0:14:53.360 --> 0:14:56.200 for the most part, look and feel almost the same 0:14:56.200 --> 0:14:58.280 as an iPhone you bought three or four years ago. 0:14:58.960 --> 0:15:02.240 But that doesn't necessarily matter. It's the ecosystem, it's the 0:15:02.280 --> 0:15:05.680 lock in, it's the services, it's the attached products like 0:15:05.760 --> 0:15:08.360 the AirPods, the Apple Watch, the Apple TV and others, 0:15:08.560 --> 0:15:10.800 which has really created this mode for the company that's 0:15:10.880 --> 0:15:13.880 going to help it continue to grow. And I think 0:15:13.960 --> 0:15:16.640 for twenty twenty four you have some pretty cool products 0:15:16.680 --> 0:15:19.400 on the roadmap. The Apple Vision Pro, their first mixed 0:15:19.400 --> 0:15:21.960 reality headset that's going to go on sale in about 0:15:21.960 --> 0:15:23.960 one month from now. That's not going to drive a 0:15:23.960 --> 0:15:26.800 lot of revenue for Apple, but it's probably going to 0:15:26.840 --> 0:15:29.760 add for the next two years. Probably between two and 0:15:29.880 --> 0:15:33.600 five billion an annual revenue, and on a quarterly basis, 0:15:33.600 --> 0:15:36.760 that could be the difference between a couple percent growth 0:15:36.840 --> 0:15:40.400 or a couple percent decline. So that could be important 0:15:40.440 --> 0:15:42.680 in the short term, but critical in the long term. 0:15:42.960 --> 0:15:46.080 You're going to see larger iPhones in the fall. They're 0:15:46.080 --> 0:15:48.160 moving from a six point one inch to a six 0:15:48.160 --> 0:15:51.360 point three inch on the smaller phone, and from six 0:15:51.360 --> 0:15:53.400 point seven inches to six point nine inches on the 0:15:53.400 --> 0:15:56.520 bigger phone. Now to your questions about China, that's very 0:15:56.560 --> 0:15:59.680 important because in China, lots of consumers are shifting to 0:15:59.720 --> 0:16:03.800 one instead of having an iPad, iPhone, mac, i'll watch, 0:16:03.840 --> 0:16:05.880 et cetera. A lot of people are just buying phones 0:16:05.920 --> 0:16:07.560 and they want the biggest ones that they can get 0:16:07.600 --> 0:16:09.880 their hands on, and so that six point nine inch 0:16:09.960 --> 0:16:12.640 iPhone sixteen Promax, that's going to be pretty important for 0:16:12.720 --> 0:16:13.240 that market. 0:16:13.400 --> 0:16:17.120 I really don't understand the desire for a larger phone, 0:16:17.120 --> 0:16:19.000 but I want to talk about the Vision Pro a 0:16:19.000 --> 0:16:21.800 little bit. I'm sure you remember the video of when 0:16:21.800 --> 0:16:24.360 they unveiled the Prison Pro and they read out the 0:16:24.360 --> 0:16:27.040 price of it and the audience gasped. It was a 0:16:27.120 --> 0:16:27.680 viral moment. 0:16:27.680 --> 0:16:28.480 It was pretty funny. 0:16:28.680 --> 0:16:31.520 Who's going to buy these? Is this just people who 0:16:31.960 --> 0:16:34.840 love Apple? Apple enthusiasts, and are we going to see 0:16:34.880 --> 0:16:40.320 the price tag come down from several thousands of dollars. 0:16:40.560 --> 0:16:43.040 Yeah, you're going to see software developers who want to 0:16:43.080 --> 0:16:47.480 develop for the platform. You're going to see mixed reality enthusiasts. 0:16:47.520 --> 0:16:50.400 You're going to see not the early adopters. I think 0:16:50.400 --> 0:16:52.880 the early adopters are the people who buy the new 0:16:52.920 --> 0:16:55.640 iPhones the first day or week they come out. But 0:16:55.760 --> 0:16:59.480 I think you're going to see the early, early early adopters. Right, 0:16:59.600 --> 0:17:03.000 that is an even more niche audience. I'm not expecting 0:17:03.120 --> 0:17:07.000 lines outside of Apple stores. You know, they believe over 0:17:07.040 --> 0:17:09.320 the course of a year they're only going to sell 0:17:09.400 --> 0:17:11.840 a couple of these at most a day in each 0:17:11.880 --> 0:17:15.120 of its retail stores. Right, So this is a niche product, 0:17:15.200 --> 0:17:18.280 probably in the same spectrum as people who would buy 0:17:18.280 --> 0:17:21.040 a Mac prow or high end Mac Studio. Those are 0:17:21.080 --> 0:17:24.080 the company's most expensive max right, you're talking thirty five 0:17:24.119 --> 0:17:27.639 hundred dollars plus five hundred dollars in task in the US. 0:17:27.840 --> 0:17:32.560 Yeah. Not for the lighthearted or the small pocketbooks. Mark 0:17:32.600 --> 0:17:34.520 always appreciate it. Mark is always my go to. Is 0:17:34.520 --> 0:17:36.720 it time for me to upgrade a watch a phone? 0:17:36.800 --> 0:17:38.920 That's who I talk to, Mark German, Thank you so much, 0:17:38.920 --> 0:17:41.919 Happy New Year, Bloomberg's own Markerman. When it comes to Apple, 0:17:42.000 --> 0:17:43.280 I must read here at Bomber. 0:17:53.920 --> 0:17:57.439 Let's take these discussions too. On next guests, Terry Haynes, 0:17:57.800 --> 0:18:00.680 is they find at off Pangaea policy? Very good morning 0:18:00.680 --> 0:18:03.359 to you. I mean you lay it out very punchally, 0:18:03.480 --> 0:18:05.360 so well done to you. This is what you say 0:18:05.400 --> 0:18:10.040 about Washington. Let's just start with the geopolitical situation there, 0:18:10.040 --> 0:18:14.320 because they haven't funded Ukraine and they're reluctant to fund Israel. 0:18:14.320 --> 0:18:17.040 They've got two hot wars. But you say this, Washington's 0:18:17.119 --> 0:18:21.359 lazy burn minimum approach on everything, whether it's border security, 0:18:21.400 --> 0:18:25.720 foreign aid, or building fiscal crisis of great concern to 0:18:25.800 --> 0:18:29.560 markets won't cut it in twenty twenty four, Not for markets, 0:18:29.640 --> 0:18:34.480 not for the US national and international interests. We've ignored 0:18:34.760 --> 0:18:39.639 markets have essentially ignored these faux pas, these grand faux pas. 0:18:39.960 --> 0:18:42.600 We've ignored them. Is that our folly to ignore these 0:18:42.640 --> 0:18:43.960 and which is the biggest tail risk? 0:18:45.240 --> 0:18:47.320 Well, I think what you've got, manis here is a 0:18:47.359 --> 0:18:50.640 situation where you haven't seen in fifty years, where you've 0:18:50.640 --> 0:18:55.159 got a combination of probably the highest geopolitical risk and 0:18:55.200 --> 0:18:59.879 probably the highest domestistical risk as well, those things combine. 0:19:00.119 --> 0:19:03.720 I think what markets ignore is that going into twenty 0:19:03.760 --> 0:19:07.760 twenty four with that combination very simply is you know, 0:19:08.200 --> 0:19:12.000 they tend to see political issues by and large as 0:19:12.680 --> 0:19:16.280 spices one way or the other. You know, things that 0:19:16.320 --> 0:19:20.199 the things that are fundamental to the markets but provide 0:19:20.240 --> 0:19:24.200 some some minor upper down action, when what they should 0:19:24.240 --> 0:19:29.840 consider is that lower geopolitical risk and lower domestic political 0:19:29.920 --> 0:19:33.080 risk in the United States are both foundational to the markets. 0:19:33.600 --> 0:19:37.400 And and you know, we haven't really had a main 0:19:37.480 --> 0:19:41.080 conflict in the United States the shook markets since the 0:19:41.119 --> 0:19:44.399 Second World War. But when it did, you know, the 0:19:44.440 --> 0:19:47.600 markets went down by twenty percent in the first six 0:19:47.600 --> 0:19:51.720 months after Pearl Harbor. And you know, I'm talking about 0:19:51.720 --> 0:19:54.240 a conflict that happened almost eighty years ago, in a 0:19:54.280 --> 0:19:59.119 conflict in which you know not as today more than 0:19:59.200 --> 0:20:02.520 half of the United State citizens are invested in the markets. 0:20:02.880 --> 0:20:06.320 So the foundational risks here, I think generally are in 0:20:06.359 --> 0:20:07.600 the volatility. 0:20:07.720 --> 0:20:10.320 Terry. Let's get more specific, though, play it out. If 0:20:10.359 --> 0:20:15.960 markets are ignoring geopolitical risks, what what might likely happen 0:20:16.080 --> 0:20:18.600 in twenty twenty four. When it comes to the geopolitical risks, 0:20:18.600 --> 0:20:21.800 and we've kind of laid them out all throughout the week, 0:20:21.920 --> 0:20:24.200 Obviously we continue to watch what's going on in the 0:20:24.200 --> 0:20:26.879 Middle East and concerns about escalation. You still have Russia 0:20:26.880 --> 0:20:30.840 and Ukraine, We're looking at China and Taiwan, and then 0:20:31.080 --> 0:20:33.600 you know you've got an election coming up. I think 0:20:33.600 --> 0:20:36.040 there's some concerns nervousness to here, so play it out 0:20:36.080 --> 0:20:39.280 specifically what you think likely could happen that investors have 0:20:39.359 --> 0:20:40.439 to be wary of. 0:20:42.000 --> 0:20:45.080 I think fundamentally, there will be a temptation to think 0:20:45.119 --> 0:20:50.560 that the three major conflict areas geopolitically that you just 0:20:50.640 --> 0:20:57.000 pointed out Ukraine, Israel, Taiwan are going to be somehow handled, 0:20:57.440 --> 0:21:00.560 when in fact they're going to continue on for months. 0:21:00.640 --> 0:21:03.440 I mean, there's no easy end to the Ukraine War. 0:21:04.119 --> 0:21:06.600 The Israelis say that the Moss War will go on 0:21:06.760 --> 0:21:09.760