Speaker 1: Bloomberg Audio Studios, podcasts, radio news.
Speaker 2: This is the Bloomberg Surveillance Podcast. Catch us live weekdays
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Speaker 3: Richard Claret is here, the vice chairman of the FED,
Speaker 3: a prodigious economists associated with dynamics stochastic general equilibrium theory.
Speaker 3: We're not going there. People drive off the road, but
Speaker 3: we are thrilled at the former vice chairman is with
Speaker 3: us this morning. James Carter, James o'carter has to fill
Speaker 3: Michael Blumenthal's slot. He migrates the FED chare over the
Speaker 3: Treasury Secretary and goes, now what and he picked Paul Voker.
Speaker 3: Where were you when he did that? And it's seventy nine.
Speaker 3: You would at Illinois at the time.
Speaker 4: I was not.
Speaker 5: I had just graduated Illinois and I think I was
Speaker 5: in my car driving out to Boston to start graduate school.
Speaker 3: Did you go Paul who? Oh?
Speaker 5: No, that he was already known at least in macro
Speaker 5: circles then.
Speaker 3: But yeah, it's.
Speaker 6: It's just a big deal.
Speaker 3: It was a big It was a huge deal. Yeah,
Speaker 3: the store the inflation worries we have now, and part
Speaker 3: of that is, OMG, back to the sixties, that we're
Speaker 3: going to get inflation, not like what vulgar faced, but
Speaker 3: a higher inflation. Do you buy it?
Speaker 6: Oh no, No.
Speaker 5: Ultimately we're going to get the rate of inflation the
Speaker 5: FED once and and I think the FED once inflation.
Speaker 6: Around two percent.
Speaker 5: There's always shocks and noise, but but that's where we're
Speaker 5: going to end up.
Speaker 4: How are we going to get there? I mean, are
Speaker 4: they going to have to? I mean it just feels
Speaker 4: like that that inflation is kind of stickier around this level.
Speaker 4: Here's how do you think this is going to play out?
Speaker 6: Well? I agree.
Speaker 5: In fact, if anything, you know, the bumpy road analogy
Speaker 5: has proven to be a good one. Progress continued in
Speaker 5: twenty four but slowed, you know.
Speaker 6: I think we maybe discussed.
Speaker 5: When I was on your show before hearkening back to
Speaker 5: the eighties, and so what we could see is what
Speaker 5: we used to call opportunistic disinflation. That is, you do
Speaker 5: the heavy lift and get inflation close to where you
Speaker 5: want it, so now say two and a half, but
Speaker 5: you basically wait till the next recession to cover that
Speaker 5: last mile, and so that's what we may see inflation
Speaker 5: in the load of mid twos until the next downturn.
Speaker 4: Are you forecasting a downturn anytime?
Speaker 5: Oh no, no, no, no, But remember we haven't repealed
Speaker 5: the business cycle so on. I think the unconditional chance
Speaker 5: of a recession is about one and six.
Speaker 6: So at some point we're going to have a recession.
Speaker 3: April of four years back when the Red Sox had
Speaker 3: a chance, Richard Claire to fed let me quote exactly, folks,
Speaker 3: I mean, I mean, this is just what it's about.
Speaker 3: Get the Sparta gets angry at me when I quote Latin. Okay,
Speaker 3: he's like, you know, time, give it up, Clarita. Inflation
Speaker 3: to average is two percent over time represents an ex
Speaker 3: anti aspiration of the FOMC, but not a time inconsistent
Speaker 3: ex post commitment. Yeah, you lost some of us there,
Speaker 3: all difference equation, guy, What is a time inconsistent ex
Speaker 3: post commitment?
Speaker 5: Well yeah, I think that was probably why share Clarido
Speaker 5: channeling Professor Clarita. The basic point was that price stability
Speaker 5: means that expectations of inflation are anchored at a low number,
Speaker 5: so say two percent, they're always going to be shocks, oil, shocks, whatever.
Speaker 6: But you want people to expect.
Speaker 5: Over five years that inflation is going to be two percent,
Speaker 5: and so really inflation targeting is really about targeting expected inflation.
Speaker 6: And so the basic idea there is, if.
Speaker 5: You want people to expect inflation is going to be
Speaker 5: too you want to try to keep it at two
Speaker 5: on average.
Speaker 3: Okay, I'm going to go to the New School of
Speaker 3: Social research, Kyle Brunner in company. There's something new. It's
Speaker 3: called the debt in the deficit? Are we losing our
Speaker 3: anchored ability with the debt in the deficit where it is?
Speaker 5: Well, it makes the Fed's job a hell of a
Speaker 5: lot harder, There's no doubt about it. And I'm glad
Speaker 5: Tom that you mentioned both debt and deficit because they're
Speaker 5: both relevant. The deficit is how much we're borrowing every
Speaker 5: year going forward. The debt is how much we borrowed
Speaker 5: in the last two hundred and fifty years, and that
Speaker 5: number is now north of one hundred percent of GDP.
Speaker 5: And the last time we saw a number like that
Speaker 5: was in nineteen forty five, at the end of World
Speaker 5: War Too. Indeed, Ryan Hart and Rogueoff wrote a book
Speaker 5: ten years ago that said, you know, usually when debt
Speaker 5: gets one hundred percent of GDP, bad stuff happens, and
Speaker 5: so it will make the Fed's job harder for sure.
Speaker 7: When I've been on Wall Street since nineteen eighty six,
Speaker 7: we've been talking about deficits.
Speaker 4: And the dead since nineteen eighty at least. Then is
Speaker 4: it ever going to come to roosts? What will it be?
Speaker 7: We have an auction for United States treasures and nobody
Speaker 7: shows up.
Speaker 5: Well, it's a great point because I started my career
Speaker 5: around the same time, also in Boston. Yeah, so the
Speaker 5: boy has now cried wolf for forty years, but they're
Speaker 5: back in those days people were angsting about debt and deficits,
Speaker 5: but debt was thirty percent of GDP, not one hundred
Speaker 5: and so as the numbers get bigger, but the US
Speaker 5: can kick this can down the road because we still
Speaker 5: are the global reserve currency.
Speaker 6: So let me take a while.
Speaker 3: We welcome all of you across the nation, and I
Speaker 3: can't say enough about the schedule to they thank you,
Speaker 3: liz In Saunders and Craig Moffatt, the former vice chairman
Speaker 3: the other Federal Reserve System, Richard claireta Columbia and PIMCO
Speaker 3: with us this morning. Richard Claida, let's go back to
Speaker 3: Girtler in Clarida and the theory, the mathematics, the complexities
Speaker 3: of DSGE. You've had the courage to say, I'm thinking
Speaker 3: simpler now, Oh yeah. Do we have an operative theory
Speaker 3: at the Equals Building? If everyone's thinking simpler in the
Speaker 3: new humility, well, I don't think.
Speaker 5: The Eccles building are now the Martin Building can afford
Speaker 5: to be that theoretical. Indeed, my four years at the
Speaker 5: FAD really impressed upon me that there's there's a limit
Speaker 5: to how far theory can take you.
Speaker 6: It's a good place to start, you know.
Speaker 5: I think all central banks, including the FAD, are trying
Speaker 5: to learn lessons about the inflation and the disinflation, and
Speaker 5: I think an appropriate level of humility is probably warranted
Speaker 5: right now.
Speaker 4: The labor market.
Speaker 7: We're going to get some more labor market data today
Speaker 7: with initial jobs claims and then on Friday with the
Speaker 7: non farm payrolls. I don't know, four point two percent.
Speaker 7: That seems like a good labor market.
Speaker 6: It's a great labor market.
Speaker 5: You know. The the unemployment rate right before the pandemic
Speaker 5: was running right around three point nine four percent. The
Speaker 5: unemployment right now is historically low. Wage gains exceed inflation.
Speaker 5: It is a good labor market. The labor market clearly
Speaker 5: was overheating a couple of years ago.
Speaker 6: But it is a good labor You.
Speaker 3: Just said it's a great it's a good labor market.
Speaker 3: I've heard you say it's a solid economy. We had
Speaker 3: eighty two point eight percent of our listeners and viewers
Speaker 3: saying the vice chairman's nuts, okay, and that it's a
Speaker 3: disaggregated economy. Well, and there's people out there, charge card debt, bankruptcies,
Speaker 3: people can't get jobs, et cetera. Rent's coming down out west.
Speaker 3: How does a FED prosecute a barbel America?
Speaker 5: Well, okay, so I'm glad you gave me an entree here.
Speaker 5: So when I said it's a good labor market, you
Speaker 5: would rather be operating with a four percent unemployment than
Speaker 5: a fourteen percent unemployment. But absolutely, Tom, Indeed, if anything,
Speaker 5: I think the last five years have impressed upon me
Speaker 5: how important it is both for macro economists and thinking
Speaker 5: about the political economy of macro to understand that there's
Speaker 5: you know, there are halves and has nuts. And you know,
Speaker 5: if you own your home and if you own stocks,
Speaker 5: you've had a great five years. But forty percent of
Speaker 5: Americans don't own. They rent, and they don't own stocks,
Speaker 5: and for them, all of this talk about a great
Speaker 5: economy just seems like gibberish. So let me acknowledge the
Speaker 5: point thirty seconds here, just finish the thought.
Speaker 3: Can a FED prosecute one monetary policy for two John
Speaker 3: Edwards Americas?
Speaker 5: Well, the Fed only has one, really one tool, which
Speaker 5: is interest rates or job vooning about interest rates.
Speaker 6: And so what the Fed at best can do is
Speaker 6: it can.
Speaker 5: Keep the average rate of unemployment low, and it can
Speaker 5: keep the average rate of inflation low. But the factors
Speaker 5: that we just discussed and even more factors, are really
Speaker 5: beyond what monetary policy can address.
Speaker 3: Paul wants to get to the adult conversation on tariff,
Speaker 3: so I'll be the rude one. Can you serve a
Speaker 3: treasury with mister pissent? Have you made the trip to
Speaker 3: mar A Lago? Are you under any consideration by the
Speaker 3: administration for your value services?
Speaker 5: I love doing what I'm doing, so the answer is no.
Speaker 3: That's your que Paul.
Speaker 6: I was just putting the Clarity Time Out.
Speaker 7: Chair and Lisa Matteo has been reporting on more tariff
Speaker 7: news here coming from this president seems to be an
Speaker 7: economic policy tool that this incoming president really is going
Speaker 7: to rely upon. Can you give us your, I don't
Speaker 7: know your two cents on tariffs and kind of how
Speaker 7: would you think about them?
Speaker 5: Okay, tariffs are complicated because they have multiple effects. One
Speaker 5: is one thing we know for sure they do raise revenue.
Speaker 6: The other thing we.
Speaker 5: Know is they'll put upper pressure on the price of imports.
Speaker 5: How much is hard to estimate, depends on if companies
Speaker 5: absorbed in the margins. They can also invite retaliation, which
Speaker 5: also then influences our ability to.
Speaker 6: Export. And so it's really been a number of.
Speaker 5: Decades since we've had broad based tariffs. I think you'd
Speaker 5: have to go back really to the early nineteen fifties
Speaker 5: to look at levels of tariffs like some are talking
Speaker 5: about now. So pretty complicated, but we know for sure
Speaker 5: they raise revenue and they put upper pressure.
Speaker 4: Do they bene for it? Do they raise revenue for
Speaker 4: the US government?
Speaker 5: Well, mechanically, because if you import something and you have
Speaker 5: to pay a tariff on it, that revenue which is
Speaker 5: now zero roughly zero will go up.
Speaker 3: Okay, I was in the Claire didn't know this, but
Speaker 3: I was in the back of the classroom at Columbia. Okay,
Speaker 3: the curve went down when I showed up. This is
Speaker 3: way more complex than the media discusses. And the answer
Speaker 3: is there's a thing called a dead weight loss in
Speaker 3: our in our tariffs price theory, professor, describe what a
Speaker 3: dead weight loss is for our listeners and viewers.
Speaker 5: Well, boy, that's that's uh, that is econ I'm ask question.
Speaker 3: Paul Kruman caught up and said, asked him about dead weight.
Speaker 5: Essentially, the revenue that the government raises is more than
Speaker 5: offset by the losses to consumers and producers relative to
Speaker 5: their ability to either consume goods or produce goods. And
Speaker 5: so that's that's the dead weight loss.
Speaker 3: My definition, it's a lose game.
Speaker 5: Well, but the important proviso that almost any tax that
Speaker 5: raises revenue generates some sort of a loss, whether or
Speaker 5: not it's the consumption tax or investment tax.
Speaker 3: But the heart of the matter here to go to Krugman,
Speaker 3: is magnitude.
Speaker 6: Oh, sure, you can do.
Speaker 3: It's almost like negative interest rates. You can do. Tariff
Speaker 3: light doesn't matter. Yeah, and what the president elect wants
Speaker 3: is a magnitude of big tariffs. Is there a tip
Speaker 3: point where Trump's right and they work.
Speaker 6: Well? Again, it depends on how long they stay on.
Speaker 8: You know.
Speaker 5: One view is that you put tariffs on countries basically
Speaker 5: then come to the negotiating table and then they come off.
Speaker 6: And so it's very importantly going.
Speaker 5: To depend upon the detail of the tariffs, whether or
Speaker 5: not there's retaliation, and whether or not there is an endgame.
Speaker 5: And really without answering that, it's really hard to make
Speaker 5: an informed assessment.
Speaker 7: One of the economic discussions over the last year or
Speaker 7: two has been US exceptionalism.
Speaker 4: Yeah, vis be some of our large trading partners.
Speaker 7: Let's look at China here, we had some more data
Speaker 7: about the China yields falling here. As a global economic
Speaker 7: advisor at PIMCO, what is your view of China here?
Speaker 7: How concerned should the world's economy be about the Chinese economy?
Speaker 5: Well, I think, look, China is huge in terms of
Speaker 5: the size of the economy now and importantly, there are
Speaker 5: some important and I think ongoing challenges, including the fact,
Speaker 5: you know, they've got the first thing of a big
Speaker 5: real estate bubble they have a high unemployment rate among
Speaker 5: their youth, and of course the rest of the world,
Speaker 5: including the US and Europe, is going to be more
Speaker 5: aggressive in terms of resisting a surge of China exports
Speaker 5: and so near in long term, it's a challenging environment.
Speaker 3: Paul Krugman with US on Friday. Wow, it's great to
Speaker 3: have Clarinon. Krugman's what Luberg says about I have on
Speaker 3: my reading desk. I'm two chapters in Ned phelps fabulous
Speaker 3: book summarizing his work. Explain why people should read Ned Phelps.
Speaker 5: Well, Ned, my colleague and dear friend for thirty five years,
Speaker 5: is literally one of the giants of economics, won the
Speaker 5: Nobel Prize, incredibly creative, along with Milton free Even, essentially
Speaker 5: began to define modern macro and also his work on
Speaker 5: growth and innovation and entrepreneurship just uh, just a treasure
Speaker 5: and brilliant.
Speaker 3: And so brilliant. He had a second career with dynamism
Speaker 3: and the enthusiasm and the economy. You heard it from
Speaker 3: Richard Clarita. Don't take it for me. I'll get Phelps's
Speaker 3: new book out on Twitter and LinkedIn. It's Jewel Even
Speaker 3: mentions Clarida. You know a Dina the party you gotta
Speaker 3: he gave Phelps' parking spot.
Speaker 5: I say, during my four years as chair, we had
Speaker 5: three Nobel laureates so here n yeah, the Barrel and
Speaker 5: then Stiglitz and then Vickory before.
Speaker 3: That, and you were not on speaking terms with any
Speaker 3: of the good. We got to go and took the fire.
Speaker 3: Richard CLAREDA thank you so much with you co.
Speaker 2: You're listening to The Bloomberg ser Valen's podcast. Catch us
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Speaker 3: Lindsay Newman, I really can't say enough about her perspective
Speaker 3: here with G zero media, and you know there are
Speaker 3: their top ten risks and you know it's sort of
Speaker 3: pretty grim about it. It's like a G zero world
Speaker 3: and he's looking at at his jungle here, Lindsey. Sure
Speaker 3: have you been reading in on Greenland and Panama?
Speaker 9: Absolutely?
Speaker 10: Tom who was?
Speaker 8: And I have to say I've been to Panama. I
Speaker 8: have not been to Greenland. Certainly flown over Greenland living
Speaker 8: here in London.
Speaker 10: Look what we heard.
Speaker 8: Yesterday from the President elect Trump is really what strikes
Speaker 8: me most, Tom. And this is not an isolation a story. Right,
Speaker 8: If we think about the first term of President Trump,
Speaker 8: to make America greater, grant America first, it was really
Speaker 8: about bringing jobs and manufacturing back to America. There was
Speaker 8: a concern about the US turning inward. When we see
Speaker 8: him yesterday talking about perhaps annexing Canada, making it the
Speaker 8: fifty first state, taking back the Panama Canal, his ambitions
Speaker 8: for Greenland. This is a very different set of aspirations
Speaker 8: that he has for his second term foreign policy approach.
Speaker 3: You've got in your top ten risk. First of all,
Speaker 3: I had Bremer's doing the hoodie thing. Now I mean
Speaker 3: he's really you know right, he's really cutting a cash
Speaker 3: Look there, I look, Lindsay Newman, the idea of the
Speaker 3: rule of don is one of your risks. Is this
Speaker 3: a different Donald Trump this time around versus eight years ago.
Speaker 8: This is a Donald Trump who is facing down the
Speaker 8: prospects of one more term in office. And what we
Speaker 8: really see from him is he is different. His approach,
Speaker 8: not just his approach, but also his perspective is vastly
Speaker 8: different than what comes from what has come before him.
Speaker 8: If we take the nearest example of that, of course,
Speaker 8: as President Biden, and we know that administration was really
Speaker 8: about consensus building, negotiations almost to a fault. So how
Speaker 8: many envoys do we see if we take the Middle
Speaker 8: East theater, how many envoys do we see fly back
Speaker 8: and forth? Bill Burns back and forth, Anthony B. Lincoln
Speaker 8: back and forth to almost know out, you know, to
Speaker 8: no avail. We're still in the middle of the conflict.
Speaker 8: The hostages are not home.
Speaker 10: And with Trumps, he's taking a very different approach, right.
Speaker 8: The approach is, let me scan the landscape, let me
Speaker 8: look for the points of tension. Let me look and
Speaker 8: see how the US may be disadvantage. What are the
Speaker 8: interests that the US wants to pursue, and what are
Speaker 8: the levers that the administration can pull to create forcing
Speaker 8: functions and advance Trump and Trump's Administration's ambitions. And we
Speaker 8: know we saw yesterday and you Las Guest was just
Speaker 8: talking about this, We know a couple of those already.
Speaker 10: Of course, it's going to be tariffs.
Speaker 8: He sees that as the solution not just for the
Speaker 8: trade discrepancies, but he sees it as a solution for
Speaker 8: how he could perhaps pursue those ambitions with Greenland. And
Speaker 8: it's also what also came through very clearly yesterday was
Speaker 8: about energy policy, the differences in energy policy.
Speaker 10: We're going to He's saying, you know, we're going to.
Speaker 8: Drill day one, and he went on and on about
Speaker 8: those six hundred and twenty five million acres that Biden
Speaker 8: has just recently taken offline that obviously irked President elect
Speaker 8: Trump quite quite clearly. So energy policy is another lever
Speaker 8: that he's going to be pulling.
Speaker 3: Oh, I'm exhausted.
Speaker 7: It's exactly so, lindsay, how do you think our big
Speaker 7: trading partners are going to interact and deal with Trump?
Speaker 4: President elect Trump over the next four years.
Speaker 10: Yeah, it's a great question.
Speaker 8: I mean you're saying, Tom that you're already exhausted, Paul,
Speaker 8: you're asking how the Europe, how Europe is going to
Speaker 8: deal with This is actually the column before the storm,
Speaker 8: I hate to tell you. And you know, it's been
Speaker 8: a stormy week for Europe if you look at what
Speaker 8: Elon Musk has been saying.
Speaker 10: On X on that platform. We know I've been writing
Speaker 10: in my columns for G Zero that you.
Speaker 8: Know, Europe and Trump's allies, the US's historical allies, they're
Speaker 8: already packing their go bags.
Speaker 10: They're thinking about this. How are they going to be prepared?
Speaker 8: You see, for example, defensive spend is now no longer
Speaker 8: two percent is not the is Yeah right, Trump himself
Speaker 8: said yesterday five percent. That's going to raise some eyebrows
Speaker 8: in Europe today. But they're looking to be more flexible
Speaker 8: on defensive spends. Lindsay says he's going to sit He's
Speaker 8: willing to sit down. Pujin has said he's willing to
Speaker 8: sit down. So everybody's looking to be to know what
Speaker 8: it is to be in Trump world.
Speaker 3: Okay, you got the top ten risks out and folks,
Speaker 3: we're gonna, you know, instead of doing this in one interview,
Speaker 3: which I've told Ian I'll never do, We're going to
Speaker 3: spread it out over January. We're thrilled that Lindsay k
Speaker 3: Newman can be with us from Jezero Media. And you know, Lindsay,
Speaker 3: I look what Ian said to CBS. He said, it's
Speaker 3: Trump's way or the highway. What does Secretary of State
Speaker 3: Rubio do whether it's Trump's way or the highway?
Speaker 8: Well, we know that this is Ian is absolutely correct.
Speaker 8: There he's put in place. Trump has put in place
Speaker 8: a cabinet around him, or his ambition is to put
Speaker 8: together this cabinet around him that they all know.
Speaker 10: Rubyo knows that the buck stops with Trump. So Rubio
Speaker 10: has his ambition.
Speaker 8: He has his sort of hardline ways with China, his
Speaker 8: hawkishness on China, which does dovetail nicely with what Trump
Speaker 8: is after, but ultimately it will be Trump's policy, and
Speaker 8: those around him, like Rubio know that.
Speaker 3: Fascinating. I just what's are the top ten risks, Lindsay,
Speaker 3: are you really focused on? Which is the You know,
Speaker 3: I haven't even read the entire document yet, but which
Speaker 3: is the top risk for Lindsay Newman?
Speaker 8: Yeah, well, I will absolutely say that Ian's view of
Speaker 8: the world as and Eurasia groups of the world around
Speaker 8: the G zero winning, which just means that the world
Speaker 8: is in.
Speaker 10: A point of geopolitical recession.
Speaker 8: That is the lens through which Eurasia Group is seeing
Speaker 8: all of those other related risks, and that is sort
Speaker 8: of a thread line of the world in disorder. The
Speaker 8: multilateral institutions no longer having that same level of buying,
Speaker 8: the US sort of retrenching and retreating from its role
Speaker 8: as global guardian.
Speaker 10: That is the top risk for your Asia group.
Speaker 8: And I would also throw my hat and tied to
Speaker 8: Greenland these issues of ungoverned spaces. I mean, why is
Speaker 8: Trump so interested in Greenland? He's now saying because of
Speaker 8: national security, because of its placement in the world.
Speaker 10: It's the bridge to the Arctic.
Speaker 8: And we know these ideas like ungoverned spaces, both in
Speaker 8: sea and in actual space, will be increasing.
Speaker 10: Geopolitical risk for the years and decades ahead.
Speaker 3: This has been brilliant, Lindsey, when you figure out what
Speaker 3: the new Washington consensus has, let me know, Lindsey Newman
Speaker 3: with G zero Media.
Speaker 2: This is the Bloomberg Surveillance Podcast. Listen live each weekday
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Speaker 3: Us now adjusting his schedules. Craig Moffitt Worldwide yesterday put
Speaker 3: a cell rating on Apple guiding down twenty twenty three percent.
Speaker 3: Who's counting. Let's start with a why, Craig Moffitt, Why
Speaker 3: a cell on Apple?
Speaker 9: How are you good to see you again? Look, this
Speaker 9: is really a valuation call.
Speaker 1: And look, the market overall is pretty frothy valuations.
Speaker 9: But Apple, even relative to.
Speaker 1: The MAG seven peer group, is now extremely stretched with
Speaker 1: a PEG ratio of around three, where the rest of
Speaker 1: the MAG seven trades with the PEG ratio of round two.
Speaker 1: So there's this perceived safety in Apple, wonderful franchise, very
Speaker 1: dedicated customers, But there is no safety when you're paying
Speaker 1: thirty three times earnings for a company that's growing organically
Speaker 1: in the very low single digits, and even with the
Speaker 1: even with buybacks, earnings are still growing at sort of
Speaker 1: half the rate of the rest of the MAG seven.
Speaker 3: When I look at it, it's the idea of a
Speaker 3: cell rating, and that means a fractured free cash flow.
Speaker 3: Are you suggesting this will filter down in the mix
Speaker 3: of cash from operations, capex and then finally free cash
Speaker 3: flow where they're going to miss the mark?
Speaker 1: No, No, I want to be clear, we're not saying
Speaker 1: Apple is a broken company. I want to come back
Speaker 1: to some very real risks that we should talk about.
Speaker 9: But Apple is not a broken company.
Speaker 1: It's a broken valuation, and there are, as I said,
Speaker 1: some significant concerns that ought to be reflected in a
Speaker 1: lower multiple, or at least a more sober multiple than
Speaker 1: what you've got right now. You know, there was this
Speaker 1: narrative over the past couple of months, particularly into the
Speaker 1: last couple of weeks of last.
Speaker 9: Year in twenty four.
Speaker 1: Where everyone was talking about the fact that Apple was
Speaker 1: quote unquote melting up in the face of no news.
Speaker 1: In fact, there was actually quite a bit of news,
Speaker 1: and it was bad or at least sobering and concerning news.
Speaker 1: Obviously the risk of italiatory tariffs when we've got a
Speaker 1: Trump administration, but more saliently, over the last couple of months,
Speaker 1: you've had the judge in the Google anti trust case
Speaker 1: say that the payments that Google makes to Apple for search,
Speaker 1: which remember that's twenty five percent of Apple's operating income,
Speaker 1: are patently illegal. Now we don't know how those will change,
Speaker 1: but there's obviously a risk that they do that ought
Speaker 1: to be reflected in the multiple. And then there's real
Speaker 1: deterioration in China, and some obvious concerns that with China.
Speaker 1: The Chinese government is obviously not going to allow Western
Speaker 1: large language models to answer questions in China. So you're
Speaker 1: going to have to have Chinese partners. That's got to
Speaker 1: be contemplated with margins and all that sort of things.
Speaker 1: So again, nothing says that Apple is broken, although one
Speaker 1: more thing, there are real concerns about whether AI is
Speaker 1: going to drive the kind of up grade cycle that
Speaker 1: seems to be discounted in the stock.
Speaker 9: Pretty skeptical, But Apple's not broken. It's the valuation that's broken.
Speaker 7: So Craig, given that the valuation may not reflect some
Speaker 7: of the risk here, I want to go to the
Speaker 7: China risk here because I think one of my concerns,
Speaker 7: I think the concerns from a lot of investors is
Speaker 7: this is a market that was seen as a growth
Speaker 7: growth driver for Apple, and maybe it's not going to
Speaker 7: be going forward given the improved competition, maybe the sense
Speaker 7: of nationalism in that country in terms of you know,
Speaker 7: buying Chinese products. How do you view China as a
Speaker 7: risk factor to the Apple story?
Speaker 9: You know, that's absolutely right.
Speaker 1: Remember, Greater China is the second most important market for Apple,
Speaker 1: and you've had a couple of things happened since the
Speaker 1: Big five G upgrade cycle back in twenty one ish First,
Speaker 1: you had the real growth and empowerment I suppose of
Speaker 1: Huawei in China. Where after the US banned exports to
Speaker 1: China and or chip exports and the like, and tried
Speaker 1: to limit Huawei and banned Huawei equipment in the United States,
Speaker 1: Huawei had to turn internally and actually has done quite well,
Speaker 1: developing quite credible products that are now driving a significant
Speaker 1: amount of Chinese market share. You've also got companies like
Speaker 1: Honor and what have you that have built a much
Speaker 1: more competitive handset market in China than what we've seen
Speaker 1: in the past. So it's simply not realistic to think
Speaker 1: that Apple is going to have the same kind of
Speaker 1: market share that it had in China. And then the
Speaker 1: Chinese economy is soft, and so you've got relatively slow
Speaker 1: growth in China anyway. And then, as I mentioned before,
Speaker 1: you've got limitations on what China is going to or
Speaker 1: what China.
Speaker 9: Is going to allow Apple to do with respect to AI.
Speaker 7: So, Craig, we've seen Tim Cook go to China on
Speaker 7: several occasions, trying his best. Given the importance of China
Speaker 7: to the Apple story, what's the risk to their supply chain?
Speaker 7: Apple supply chain here when we have a Trump administration
Speaker 7: coming in, which might suggest, you know, just higher tensions
Speaker 7: between the two countries.
Speaker 1: You're right, you know, these kinds of risks are really
Speaker 1: hard to map out. Last time, under the Trump administration,
Speaker 1: Apple was exempted. So remember almost all of Apple's key
Speaker 1: components are imported and in large market measure from China.
Speaker 1: Those imports were exempted, and I suspect it probably would
Speaker 1: be again this time. But you also have the risk
Speaker 1: of retaliatory tariffs that could be related too entirely separate products.
Speaker 9: You know, automobiles or something where and in.
Speaker 1: Other countries where you have where Apple as an ambassador
Speaker 1: of the US and with a clear US identity, could
Speaker 1: face real tariffs elsewhere in the world.
Speaker 3: Right, Craig, We've got time for one more question. It's
Speaker 3: so important Comcast. You've got to buy in Comcast. It's
Speaker 3: back to a twenty seventeen pricing. I mean, it's not
Speaker 3: doing a Warner Brothers discovery, but it's moldy. What would
Speaker 3: you suggest to Brian Roberts that he needs to do
Speaker 3: to make a permanent force out of his Comcast.
Speaker 1: Well, you remember, Tom, you started that question by thinking
Speaker 1: about the media side of Comcast. And while the media
Speaker 1: side of Comcast is important, it is still the tail
Speaker 1: and it shouldn't be wagging the dog. Comcast is primarily
Speaker 1: a cable infrastructure company, and they have actually a lot
Speaker 1: of advantages in cable infrastructure, not least that this convergence
Speaker 1: world that we're heading into really favors the cable operators
Speaker 1: because they can offer mobile everywhere that they offer broadband.
Speaker 1: The telephone companies can't come close to doing that. So
Speaker 1: I think the real story of Comcast is actually on
Speaker 1: the cable side, not on the media side.
Speaker 3: All right, one of our interns made up the notes
Speaker 3: Craig for you on short notice, thank you so much
Speaker 3: for joining And they thought we were talking to Nathanson,
Speaker 3: so they said, ask him about the Yankees, Craig Moffas.
Speaker 1: I'm a Jets fan, so if you want to talk misery,
Speaker 1: talk about the Jets with me.
Speaker 3: I mean it's painful to say the least. I mean
Speaker 3: it's been clumsy. The Jets have been clumsy. Craig short
Speaker 3: notice on the way to the airport, Thank you so
Speaker 3: much for joining us today. His cell rating on Apple
Speaker 3: that made a global news yesterday from Moffatt Nathansen as Well.
Speaker 2: This is the Bloomberg Surveillance Podcast. Listen live each weekday
Speaker 2: starting at seven am Eastern on Apple car Play and
Speaker 2: the Android Auto with the Bloomberg Business app. You can
Speaker 2: also watch us live every weekday on YouTube and always
Speaker 2: on the Bloomberg terminal.
Speaker 3: The Lissaber tell you our hugely anticipated We go to
Speaker 3: Lisa Mateo. Now for the newspapers, what do you see?
Speaker 4: All right?
Speaker 11: So last night they kick off to the new High
Speaker 11: Tech Golf League tg L. You've been hearing all about
Speaker 11: it right in the sports. Oh you have to because
Speaker 11: this is the future.
Speaker 4: Okay.
Speaker 11: So Tiger Woods, Roy McElroy, they envisioned it for years, right,
Speaker 11: finally kicked off fifteen hole mac under two hours to complete. Okay,
Speaker 11: So that's the thing. There is there a clock, there's
Speaker 11: you know what, that's a good question if there is
Speaker 11: a clock. But under two hours?
Speaker 3: Are they quivering in Augusta wise?
Speaker 7: No, they actually though in the in the traps and
Speaker 7: the bunkers they used to sand from Augustine extra cool
Speaker 7: that it's a made for TV thing.
Speaker 4: It's to bring in the younger demos, the younger kids.
Speaker 4: I did not see your thoughts. It's fine, it's fine.
Speaker 7: It's just trying to make golf more fun, more accessible
Speaker 7: to more people. Take it out of the stodgy country clubs.
Speaker 7: That's making it a little bit more like a man
Speaker 7: cave of that. A lot of guys, you know.
Speaker 3: Is it top golf?
Speaker 4: It's something like that, Lisa, have you done top Golf?
Speaker 10: I have?
Speaker 11: I love it. It's so much fun because you have
Speaker 11: food and drinks and you.
Speaker 3: Just go crazy, like you're doing the margarite in your head.
Speaker 4: Yeah.
Speaker 11: But in Top Golf, though, you're actually hitting it. So
Speaker 11: this one is more like video screen, like a simulation
Speaker 11: to for this one. So that's the thing behind it.
Speaker 4: But you're like, no, it's not for me.
Speaker 11: But it's DJ Khalid was there.
Speaker 4: They had music.
Speaker 9: DJ.
Speaker 4: Again, it's a big party.
Speaker 11: But you're right, next generation. So ultra processed foods, are
Speaker 11: they really bad for us? Okay, this is a question
Speaker 11: a lot of people are asking. There was a study
Speaker 11: out the Wall Street Journal point to it, and it
Speaker 11: said eating packaged foods doesn't automatically result in over eating
Speaker 11: and waking as long as you stick to foods that
Speaker 11: are low in calories program don't have these certain combinations
Speaker 11: of fat salt, carbs, and sugar. So let me give
Speaker 11: you an example what you can do, Tom. You can
Speaker 11: avoid foods at clock in a two calories program or
Speaker 11: more like frozen meatballs there you go stick to those
Speaker 11: at around one calorie, like low fat flavored yogurt.
Speaker 4: Okay, butch See actually has a smile on her face.
Speaker 3: It's just laughing at us. You should see her breakfast, folks.
Speaker 3: It's like twelve on. It's like, no, it's like two
Speaker 3: hundred calories, isn't it about? Okay, you can cheat on this,
Speaker 3: but you got to if we could small portions.
Speaker 11: Smaller portions, yes, that is key, but moderation, like if
Speaker 11: you do have these ultra protects.
Speaker 4: The Cracker bowel does not believe in small portions.
Speaker 3: No, they do. I'm reading David McCullough on Paris right now.
Speaker 3: In eighteen thirty the Americans were complaining about the small
Speaker 3: portions in Paris. Nothing's changed, right.
Speaker 11: No, yeah, they do have tiny portions.
Speaker 3: Well, so, well, look we watched like it's like goodbye Columbus.
Speaker 3: They're at the dining room table and Jack Cloud's going
Speaker 3: you eat like.
Speaker 6: A bird, leasty, eat like a bird.
Speaker 3: Next?
Speaker 11: Okay, Tom, I have another social media platform to you
Speaker 11: to join.
Speaker 4: Okay, ready it is Blue Sky. Okay.
Speaker 11: So it's not really new. It started like it was
Speaker 11: an extension of an X an internal project, but it
Speaker 11: launched about a year ago. But sources telling Business Insider
Speaker 11: it's in the final stages raising. New funding led by
Speaker 11: Bane Capital Ventures could value the company at around seven
Speaker 11: hundred million dollars so could give X some competition.
Speaker 4: Who knows.
Speaker 11: But it's really been on the rise. It grew from
Speaker 11: twenty five point nine million users in twenty twenty four,
Speaker 11: and it started about a year ago, so went from
Speaker 11: three million to twenty nine million.
Speaker 7: I mean, I mean people are looking for alternatives to X.
Speaker 7: But I mean, yes, we'll see it's still kind of
Speaker 7: it's still out there and nobody really cares if it's
Speaker 7: profitable or anymore.
Speaker 3: Somewhere I said, X has actually picked up breaking news momentum.
Speaker 3: The reality at one am last night is I'm watching
Speaker 3: Los Angeles scanner on Twitter and I'm watching it with
Speaker 3: all the fire people in that and it's some guy
Speaker 3: in his house on Twitter telling you exactly what's going
Speaker 3: on street by street. You become the bad mouth in Twitter.
Speaker 3: I don't get I see everybody using it.
Speaker 11: Next, okay, last one and that big casino complex and
Speaker 11: Manhattan's huts and yards. They were pitching it twelve million dollars.
Speaker 11: Well actually got shot down by Community Board four. So
Speaker 11: that's a big black eye to it. We had this
Speaker 11: eighty story tower, wanted to bring all this casino to
Speaker 11: the Hudson Yards area. Those of members are saying, you
Speaker 11: know what, it's just a nightmare. Is going to bring
Speaker 11: traffic emission problems. But the vote still has to go
Speaker 11: to the city council to sign off.
Speaker 3: So so thank you for not doing congestion pricing today
Speaker 3: you walk it was congestion free. Yes, very good, Lisa Monteo,
Speaker 3: thank you so much the newspapers this morning.
Speaker 2: This is the Bloomberg Surveillance podcast, available on Apple, Spotify
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