WEBVTT - Jobs, Markets, And A Look At Tesla 0:00:00.800 --> 0:00:04.040 Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney alongside 0:00:04.040 --> 0:00:06.920 my co host Matt Miller. Every business day, we bring 0:00:06.960 --> 0:00:11.520 you interviews from CEOs, market pros, and Bloomberg experts, along 0:00:11.560 --> 0:00:15.520 with essential market moving news. Find the Bloomberg Markets Podcast 0:00:15.600 --> 0:00:18.479 on Apple Podcasts or wherever you listen to podcasts, and 0:00:18.480 --> 0:00:23.320 at Bloomberg dot com slash podcast. Again, jobs day came 0:00:23.360 --> 0:00:27.440 in well below expectations. Is this something we need to 0:00:27.440 --> 0:00:29.840 be concerned about? Is this something the FED really needs 0:00:29.840 --> 0:00:31.840 to be concerned about as they think about the beginning 0:00:31.880 --> 0:00:34.880 tapering perhaps next month. Let's check in with Lindsay Pegs 0:00:34.920 --> 0:00:37.559 as she's at chief econrass for Stifle Financial, joining us 0:00:37.600 --> 0:00:40.120 on the phone from Minneapolis. H Lindsay, thanks so much 0:00:40.159 --> 0:00:43.200 for joining us here again, another big miss here, second 0:00:43.280 --> 0:00:45.920 straight month. Here. Do we have a theme here? Do 0:00:45.960 --> 0:00:48.879 we have something to worry about? Well, we do know 0:00:48.960 --> 0:00:52.199 that the data and the labor market has been increasingly volatile, 0:00:52.360 --> 0:00:54.600 and it's not to say that this wasn't expected in 0:00:54.600 --> 0:00:57.200 the aftermath of a crisis. It will take time for 0:00:57.480 --> 0:01:01.200 balance to be restored to the marketplace. Obviously, this morning's 0:01:01.280 --> 0:01:05.319 number very disappointing. On the heels of last numbers last 0:01:05.440 --> 0:01:09.080 month there to the last month's number coming in under expectations. 0:01:09.360 --> 0:01:12.000 But remember this follows the July number, which was well 0:01:12.040 --> 0:01:15.840 over a million, surging past expectations. So when we smoothed 0:01:15.880 --> 0:01:19.120 this out, we're still talking about adding about half a 0:01:19.160 --> 0:01:22.880 million jobs each month, and we have been since March. 0:01:23.080 --> 0:01:26.559 So there's still is a very clear underlying positive trends 0:01:26.680 --> 0:01:31.440 in hiring, but there's now more volatility month to month. Yeah. Well, lindsay, 0:01:31.440 --> 0:01:33.720 we knew this recovery was going to happen in fits 0:01:33.720 --> 0:01:36.760 and starts, right, but September wasn't theory supposed to be 0:01:36.880 --> 0:01:39.520 a start month because kids were back at school, those 0:01:39.600 --> 0:01:43.920 extra unemployment benefits rolled off. If that didn't happen in September, 0:01:44.000 --> 0:01:47.120 how can we have any confidence that that effect is 0:01:47.160 --> 0:01:50.360 indeed going to happen. Well, there are a number of 0:01:50.400 --> 0:01:53.559 variables that should have helped pull workers into the labor market. 0:01:53.640 --> 0:01:56.000 As you mentioned, kids are going back to school, the 0:01:56.080 --> 0:02:01.400 unemployment benefits ended September six. We also have growing confidence 0:02:01.480 --> 0:02:04.560 in the vaccine initiative, which is well underway, but there's 0:02:04.560 --> 0:02:07.720 still variables pushing in the opposite direction. We still see 0:02:07.720 --> 0:02:12.320 working families struggling with daycare or elder care issues. We 0:02:12.440 --> 0:02:16.200 still see millions of Americans reporting that they're concerned about 0:02:16.200 --> 0:02:19.200 the virus spreading or contracting the virus. So it's not 0:02:19.280 --> 0:02:22.400 a flip to switch scenario. This will take time even 0:02:22.400 --> 0:02:25.639 in the case of benefits. Benefits this time around were 0:02:25.720 --> 0:02:30.680 arguably so overly generous, plus the moratorium on rents or evictions, 0:02:30.720 --> 0:02:34.080 plus the additional checks landing in people's mailboxes. So for 0:02:34.160 --> 0:02:37.519 many Americans, they've actually been able to accumulate a sizable 0:02:37.520 --> 0:02:40.680 amount of wealth which won't carry them indefinitely, but it 0:02:40.720 --> 0:02:43.760 could carry them for several months even now after the 0:02:43.840 --> 0:02:47.880 expiration of those enhanced unemployment benefits. So it's more likely 0:02:47.919 --> 0:02:51.440 that we see a slow trickle into the labor market 0:02:51.720 --> 0:02:54.880 as opposed to and open the floodgates and everyone jumps 0:02:54.919 --> 0:02:57.680 back in. So one of the things that jumped out 0:02:57.680 --> 0:02:59.040 of me is this the as we looked at the 0:02:59.040 --> 0:03:04.760 participation rate was um, women women leaving the job market. Um, 0:03:04.880 --> 0:03:06.920 how concerning is that to you? And is it is 0:03:06.919 --> 0:03:09.160 it primarily a function of we're in that kind of 0:03:09.160 --> 0:03:11.160 that weird period. Kids going back to school, but maybe 0:03:11.160 --> 0:03:13.960 they're not going back to school and that kind of thing. Now, 0:03:14.080 --> 0:03:16.840 this is a very big concern. We have seen women 0:03:17.240 --> 0:03:20.200 under an extreme amount of pressure from an employment standpoint. 0:03:20.600 --> 0:03:23.040 One in four women reporting that they've either have been 0:03:23.080 --> 0:03:26.040 forced to downshift their career or leave the labor force 0:03:26.240 --> 0:03:30.200 entirely as a result of the virus and the associated policies. 0:03:30.240 --> 0:03:33.600 So this essentially translates into millions of women leaving the 0:03:33.680 --> 0:03:38.880 labor force undoing years, if not decades in terms of 0:03:39.040 --> 0:03:42.360 enticing women and developing women in the labor market. So, 0:03:42.720 --> 0:03:46.640 if we're not able to re establish a trend of 0:03:46.680 --> 0:03:50.320 pulling workers, and in particular women, female workers back into 0:03:50.320 --> 0:03:55.400 the labor market, this has significant long run implications. Yeah. Well, 0:03:55.400 --> 0:03:57.480 and it's not just women leaving the labor force as well. 0:03:57.520 --> 0:04:00.320 We talk a lot about how the pandemic accelerated, you know, 0:04:00.360 --> 0:04:02.800 early retirement, and a lot of those people of a 0:04:02.800 --> 0:04:05.560 certain age may not be returning ever to the labor force. 0:04:05.600 --> 0:04:07.600 They may have just called it quits right then and there. 0:04:08.280 --> 0:04:11.200 So when you think about some of those dynamics, does 0:04:11.240 --> 0:04:15.480 the FED need to redefine what maximum employment is when 0:04:15.480 --> 0:04:20.120 it's thinking about achieving its dual mandate. It's a good 0:04:20.200 --> 0:04:22.479 question and It's something that the FED certainly has been 0:04:22.520 --> 0:04:26.040 considering when they talk about the dynamic metrics of the 0:04:26.120 --> 0:04:30.279 labor market, not only adjusting the threshold, but also looking 0:04:30.320 --> 0:04:33.200 at the different cohorts of the labor market that may 0:04:33.240 --> 0:04:38.880 have been disproportionately impacted, making sure that most groups or 0:04:39.000 --> 0:04:42.320 or the majority of groups have been including in the recovery, 0:04:42.400 --> 0:04:44.880 and if not, the FED has said that they're willing 0:04:44.920 --> 0:04:47.080 to err on the side of caution. Now that being said, 0:04:47.120 --> 0:04:50.440 we have been a dramatic improvement in the unemployment rate 0:04:50.480 --> 0:04:53.719 across the board, and this does seem to be enough 0:04:53.960 --> 0:04:56.640 for the FED to move forward at least with the 0:04:56.720 --> 0:05:00.000 first step of removing accommodative policy. So at least from 0:05:00.000 --> 0:05:02.640 the chairman's perspective, as he told us that the latest 0:05:02.640 --> 0:05:05.960 effle MC meeting that box in terms of inflation and 0:05:06.000 --> 0:05:09.560 the labor market, both of those have been checked. All Right, 0:05:09.640 --> 0:05:11.760 let's switch a litle it off the labor front and 0:05:11.839 --> 0:05:14.760 just take a look at supply chain issues. I'm wondering, 0:05:14.960 --> 0:05:16.599 you know, we're hearing from more and more companies and 0:05:16.640 --> 0:05:20.760 what that supply chain is an ongoing and significant issue 0:05:20.839 --> 0:05:24.440 on their operations. Is it enough to materially impact, say 0:05:24.600 --> 0:05:27.120 your GDP forecast for the remainder of this year, maybe 0:05:27.160 --> 0:05:28.960 going into next year. How are you trying to capture 0:05:29.400 --> 0:05:33.360 um that issue? Well, producers at this point are still 0:05:33.360 --> 0:05:36.880 putting forth a very great effort to try to ramp 0:05:37.000 --> 0:05:39.920 up output to meet a still heightened level of demand 0:05:40.000 --> 0:05:42.760 in the marketplace. But even if they are able to 0:05:42.760 --> 0:05:45.159 find workers, which as we just talked about, is still 0:05:45.640 --> 0:05:50.120 a big challenge with a sizeable labor supply gap, bottlenecks, 0:05:50.560 --> 0:05:55.120 disruptions in the international supply chain are continuing to restrict 0:05:55.160 --> 0:05:57.800 that flow of goods out to the marketplace. And I 0:05:57.800 --> 0:05:59.640 do think it's important to remember that we're very much 0:05:59.680 --> 0:06:04.560 a global, globally integrated production line. If we're a US 0:06:04.640 --> 0:06:08.160 producer trying to make goods for our domestic base, well, 0:06:08.160 --> 0:06:12.159 if there's a particular component or part that comes from 0:06:12.200 --> 0:06:15.560 Sri Lanka or Vietnam, but with much of the developing 0:06:15.600 --> 0:06:18.719 world one, two or three steps behind us in terms 0:06:18.760 --> 0:06:23.039 of controlling the virus and re establishing normalcy, this is 0:06:23.040 --> 0:06:27.159 going to have significant negative implications for US producers. And 0:06:27.240 --> 0:06:29.800 as a result, absolutely we have to look at the 0:06:29.839 --> 0:06:33.400 supply constraints and the capacity restraints when we're talking about 0:06:33.400 --> 0:06:39.440 our overall great forecast between that and still a very 0:06:39.600 --> 0:06:43.200 tepid labor market, are very moderate labor market. I do 0:06:43.320 --> 0:06:46.839 think growth is going to remain positive, but slow to 0:06:46.880 --> 0:06:48.719 a three to four percent range in the back half 0:06:48.720 --> 0:06:51.000 of the year. Well, let's talk about the consumer's role 0:06:51.080 --> 0:06:53.640 within that growth, because the Americans consumer is what powers 0:06:53.640 --> 0:06:55.760 this economy. And as we talk about these supply chain 0:06:55.839 --> 0:07:00.360 issues resulting in higher input costs for companies, companies by 0:07:00.400 --> 0:07:02.720 and large have been able to pass those on through 0:07:02.880 --> 0:07:06.120 just higher prices for their customers. With the kind of 0:07:06.160 --> 0:07:09.760 wage growth we are seeing exing out inflation, how long 0:07:09.800 --> 0:07:12.160 are consumers going to be able to be tolerant of 0:07:12.160 --> 0:07:15.880 those price increases. It's a good question, and I would 0:07:15.880 --> 0:07:18.320 imagine that we have at least enough cushion for the 0:07:18.320 --> 0:07:21.160 next several months, again against the backdrop of not only 0:07:22.240 --> 0:07:26.520 rising wages, additional bonuses, incentive packages that has been offered 0:07:26.560 --> 0:07:29.840 by employers, but also the one point seven trillion and 0:07:29.920 --> 0:07:34.680 accumulated wealth that consumers have as a backstop to these 0:07:34.800 --> 0:07:38.400 rising prices. But it's certainly not an indefinite fix, and 0:07:38.440 --> 0:07:41.760 if in fact, transitory price pressures do prove to be 0:07:42.160 --> 0:07:44.280 longer lasting. As we look out to the end of 0:07:44.280 --> 0:07:48.560 the year and into two, at some point consumers are 0:07:48.600 --> 0:07:50.360 going to be priced out of the market and they're 0:07:50.360 --> 0:07:53.000 going to have to pull back on demand for both 0:07:53.000 --> 0:07:56.440 goods and services. Lindsay. One of the issues right now 0:07:56.480 --> 0:07:58.640 as we think about how the you know, the business 0:07:58.920 --> 0:08:02.360 or economic response to this pandemic is one of the 0:08:02.400 --> 0:08:05.080 decisions for companies and for employee employees is do I 0:08:05.120 --> 0:08:07.480 come back to work? And how many days do I 0:08:07.520 --> 0:08:09.840 come back to work? Because the argument can certainly made 0:08:09.880 --> 0:08:14.120 that the US economy was pretty darn efficient and productive 0:08:14.240 --> 0:08:17.000 during the lockdown and during these past eighteen months. As 0:08:17.040 --> 0:08:20.200 an economist looking at the macro picture, do you have 0:08:20.240 --> 0:08:23.600 an opinion about what's best for the U s economy 0:08:23.680 --> 0:08:26.080 or what could contribute the most to the US economy 0:08:26.480 --> 0:08:28.800 kind of a hybrid model, back to work model like 0:08:28.840 --> 0:08:32.760 the old days, or or just strictly working from home. Well, 0:08:32.800 --> 0:08:34.840 I think all of the above. I don't think there's 0:08:34.880 --> 0:08:38.880 a one size fits all answer for individuals or sectors 0:08:38.880 --> 0:08:41.760 of the economy. For some sectors that it simply does 0:08:41.800 --> 0:08:44.000 not make sense for workers to be at home. They 0:08:44.040 --> 0:08:47.120 can't efficiently do their job, and so when the economy 0:08:47.160 --> 0:08:50.720 eventually returns to normalcy, we would expect those sectors to 0:08:50.800 --> 0:08:53.720 welcome back those employees full time. But for some it 0:08:53.800 --> 0:08:56.560 does make sense to have the flexibility of a hybrid model. 0:08:56.640 --> 0:09:01.960 Perhaps they're losing production or productivity time in commute times. 0:09:02.280 --> 0:09:05.920 Many individuals drive forty five minutes or an hour to 0:09:06.040 --> 0:09:08.360 the office at that valuable time that they could have 0:09:08.400 --> 0:09:13.120 otherwise been using to execute activities at their full time position. 0:09:13.200 --> 0:09:15.880 So it's really going to depend on the individual. It's 0:09:15.920 --> 0:09:18.880 going to depend on the business and what fits one 0:09:18.960 --> 0:09:22.760 business may not be best for the next. Lindsay, just 0:09:22.840 --> 0:09:25.960 quickly after this kind of disappointing headline number, at least 0:09:26.000 --> 0:09:29.319 on the payrolls report, you've seen some lawmakers, including Nancy Pelosi, 0:09:29.360 --> 0:09:32.439 putting out statements saying this just underscores the need for 0:09:32.440 --> 0:09:36.160 further fiscal stimulus and investment in the longer term in 0:09:36.160 --> 0:09:38.679 the economy here in the United States. How are you 0:09:38.760 --> 0:09:43.080 thinking about the fiscal equation and the ultimate size of 0:09:43.120 --> 0:09:47.720 those packages out in the in the works on Capitol Hill. Well, 0:09:47.760 --> 0:09:50.240 I think anytime there's on evenness in the data or 0:09:50.400 --> 0:09:54.080 uncertainty in the outlook, officials in Washington will use that 0:09:54.160 --> 0:09:57.920 as an opportunity to push fiscal and initiatives in the 0:09:58.000 --> 0:10:01.400 name of economic growth and job creation. But we do 0:10:01.520 --> 0:10:04.840 have to be careful as we're talking about further stimulus 0:10:04.840 --> 0:10:09.160 dollars being spent. Looking in hindsight at the Enhanced Unemployment 0:10:09.160 --> 0:10:12.800 Benefits program, we do know that in some cases this 0:10:12.960 --> 0:10:16.760 actually created an incentive for workers to remain outside of 0:10:16.760 --> 0:10:20.719 the labor market by essentially compensating them equal to or 0:10:20.760 --> 0:10:24.120 even above what they would otherwise earn in the private sector. 0:10:24.240 --> 0:10:26.920 So we do have to reach that delicate balance providing 0:10:26.920 --> 0:10:31.360 a safety net but certainly not encouraging individuals to remain 0:10:31.440 --> 0:10:34.839 outside of the productive capacity position. Lindsay, thank you so 0:10:34.920 --> 0:10:37.400 much for joining us. Yet again, we always appreciate getting 0:10:37.440 --> 0:10:41.720 your thoughts and insight. Lindsay PEGSA, chief economists for Stiple Financial. 0:10:42.080 --> 0:10:47.600 This is Bloomberg. All right, Let's talk with a big 0:10:47.720 --> 0:10:51.000 Penn State alum. Dan Ives is the Penn State nitt 0:10:51.040 --> 0:10:54.960 Allan's head to Iowa to play number three Iowa this weekend. Dan, 0:10:54.960 --> 0:10:56.560 thanks so much for joining us here. Dan ives as 0:10:56.559 --> 0:10:59.320 a managing director equity research for web Bush. Dan. Let's 0:10:59.320 --> 0:11:04.240 talk test of here, Ellen moving. I guess the headquarters 0:11:04.320 --> 0:11:07.200 to Austin, Texas, joining a long list of companies moving 0:11:07.480 --> 0:11:10.400 to Texas and Florida and thin things like that. Should 0:11:10.440 --> 0:11:12.800 I care about that or should I just focus on 0:11:13.200 --> 0:11:15.640 when that plant in Austin is gonna be built, When 0:11:15.640 --> 0:11:17.240 the plant in Berlin is gonna be ready to go 0:11:17.320 --> 0:11:20.600 to crank out some more cars. What's important thing here? Yeah, 0:11:20.679 --> 0:11:23.160 it's a great question. I think right now it's about 0:11:23.160 --> 0:11:26.360 capacity build out for Wind is going to be keen Europe. 0:11:26.640 --> 0:11:28.400 Austin is going to be the hub and part of 0:11:28.400 --> 0:11:32.360 why they're moving the headquarters there. It's important because this 0:11:32.440 --> 0:11:35.079 is going to give them about it anywhere from five 0:11:34.840 --> 0:11:40.600 seven improvements potentially just from a margin perspective, given the 0:11:40.720 --> 0:11:44.240 robotic nature and how scalable Austin is going to be. 0:11:44.520 --> 0:11:49.040 The headquarter move obviously passes as well just lower costs 0:11:49.040 --> 0:11:51.679 of living. This is a no brainer strategic move from 0:11:51.760 --> 0:11:55.040 Musk and PASSA right move at the right time. Well, 0:11:55.040 --> 0:11:57.839 it's great to have in theory the production capacity down. 0:11:57.920 --> 0:12:00.720 But also yesterday Elon Musk was talking about some of 0:12:00.720 --> 0:12:03.320 the supply side challenges Tesla is facing. It's not just 0:12:03.400 --> 0:12:07.199 even the chip shortage, but ships, you know, all the ips. 0:12:07.400 --> 0:12:10.320 How much downside risk is there on the production side 0:12:10.360 --> 0:12:13.280 due to some of those supply chain challenges. Yeah, that's 0:12:13.280 --> 0:12:15.679 a near term headwind, of course, Tessa and and the 0:12:15.720 --> 0:12:18.040 rest of the automotive and tech supply chains you know, 0:12:18.080 --> 0:12:20.440 with but they've been able to navigate it a lot 0:12:20.520 --> 0:12:22.840 better than other automakers. I think you saw that with 0:12:22.920 --> 0:12:25.880 the three Q numbers. It's still about a forty tho 0:12:26.320 --> 0:12:29.280 unit headwind. But as began to twenty two, which starts 0:12:29.320 --> 0:12:33.120 to moderate and this green tidal wave starts to take cold, 0:12:33.559 --> 0:12:36.840 I believe Passa, you know, lead this charge here, but 0:12:36.880 --> 0:12:40.480 you're gonna see GM four another's benefit. But no doubt 0:12:40.480 --> 0:12:43.520 so why chain a near term hit? But you look 0:12:43.640 --> 0:12:46.280 through that and I think capacity we're starting to see 0:12:46.720 --> 0:12:48.840 right lights as we go in two thousand and twenty two. 0:12:49.679 --> 0:12:52.559 So as this business continues to evolved in it and 0:12:52.679 --> 0:12:55.280 we get some of the major automakers on a global 0:12:55.280 --> 0:12:59.600 scale committing obviously significant resources to this, how do you 0:12:59.640 --> 0:13:04.040 think Tesla will position itself? Is it trying to be hey, 0:13:04.200 --> 0:13:07.520 we're the best, were the first, were the best, were 0:13:08.080 --> 0:13:11.280 the most unique? Or are they gonna say we're gonna 0:13:11.280 --> 0:13:14.400 be the biggest? How do you think they're gonna position themselves. Yeah, 0:13:14.440 --> 0:13:16.920 well I have it's brand. It's a unique brand they 0:13:17.000 --> 0:13:20.120 feel globally and that's part of the cashe that Tessa 0:13:20.160 --> 0:13:22.520 was built. But ultimately come down to battery technology and 0:13:22.559 --> 0:13:26.080 the innovation coming out of Tessa. We think battery technology 0:13:26.120 --> 0:13:28.760 costs could be reduced by fifty of next two to 0:13:28.840 --> 0:13:31.880 three years. That's enable him to go after the Matches 0:13:31.960 --> 0:13:35.719 forty fifty cars and that's really where you start to 0:13:35.800 --> 0:13:38.600 keep demand significantly ramp. And that's how Tess to go 0:13:38.679 --> 0:13:41.800 to nine hundred thousand units potentially this year to what 0:13:41.840 --> 0:13:43.880 I've used two million units when we look out the 0:13:43.960 --> 0:13:47.520 next two years. Wow. Okay, So how is Tesla gonna 0:13:47.520 --> 0:13:50.720 be able to withstand competition from the likes of GM 0:13:50.760 --> 0:13:54.080 and others who are legacy automakers who have had you know, 0:13:54.200 --> 0:13:58.120 much greater scale who are getting into the e V space. Yeah, 0:13:58.120 --> 0:13:59.920 and we don't be this is a zero or some game. 0:14:00.040 --> 0:14:03.880 I think GM. There's a massive renaissance of growth happened Detroy, 0:14:03.880 --> 0:14:06.160 which just came back from the analyst day, and that's 0:14:06.200 --> 0:14:09.559 the rerating stock is they benefit and go after this 0:14:09.720 --> 0:14:13.720 green tide away. But today it's two percent of autos 0:14:13.800 --> 0:14:17.319 or evs in the US weren't good about two thou 0:14:18.280 --> 0:14:23.040 me massive beneficiary GM for Tessa and others as part 0:14:23.120 --> 0:14:26.480 of this, you know, moved to evs, which we view 0:14:26.600 --> 0:14:30.120 is the biggest transformation to the auto industreets in nineteen fifties. 0:14:30.520 --> 0:14:34.080 So I continue to view it as it's not just Tessa, 0:14:34.520 --> 0:14:38.200 but Tessa is going to be a disproportionate beneficiary, I 0:14:38.320 --> 0:14:41.840 think even as we're seeing this quarter. So, Dan, I 0:14:41.960 --> 0:14:46.000 did see your Bloomberg television uh hit from I guess 0:14:46.160 --> 0:14:48.560 yesterday or something. It looks like you're broadcasting from the 0:14:48.640 --> 0:14:53.600 back of a car story there. Yeah, that was from 0:14:53.640 --> 0:14:57.880 the GM analyst day, you know. And and specifically you 0:14:57.960 --> 0:15:00.440 know that they released some of these Hummers E d 0:15:00.720 --> 0:15:04.280 s and super cruise technology, which you know, Paul, I mean, 0:15:04.360 --> 0:15:08.760 it's really what they're coming out with is something that's special. 0:15:08.840 --> 0:15:11.120 And I think we're gonna look back and look at 0:15:11.200 --> 0:15:14.200 this is really a pivotal turnaround for GM. We have 0:15:14.200 --> 0:15:16.200 an eighty five dollar stock price, so I think this 0:15:16.280 --> 0:15:18.320 could be one that moves a lot higher from here. 0:15:20.520 --> 0:15:22.080 All right, talk to us a little bit more. Let's 0:15:22.080 --> 0:15:24.480 just broaden it out a little bit, uh Dan, Just 0:15:24.560 --> 0:15:26.760 in terms of tech here, you know, I think we've 0:15:26.800 --> 0:15:29.880 seen rotations in and out of tech, in and out 0:15:29.960 --> 0:15:34.240 of cyclicals. Um, how do you think about your space? 0:15:34.320 --> 0:15:36.720 I mean you follow the tech space across the board. 0:15:37.000 --> 0:15:38.760 What's your call here? As you talk to maybe some 0:15:38.840 --> 0:15:40.960 of your clients and you're saying, you know, in a 0:15:41.080 --> 0:15:43.120 rising interest rate environment, I might not want to be 0:15:43.280 --> 0:15:46.120 as overweight technical about go buy some more energy your banks. 0:15:46.440 --> 0:15:49.440 How do you kind of respond to that? Yeah? I mean, look, 0:15:49.440 --> 0:15:52.120 a lot of handholding the last few weeks, but ultimately 0:15:52.560 --> 0:15:56.040 a ten twenty bit move in the tenure doesn't change 0:15:56.080 --> 0:15:59.920 our decades long pool thesis in tech, which we expected 0:16:00.000 --> 0:16:02.760 own well in two thousand twenty two. It's it's a 0:16:02.800 --> 0:16:05.680 basically fourth in Dushia revolution playing out in terms of 0:16:05.720 --> 0:16:10.000 the digital transformation to trillion of spending. We want to 0:16:10.040 --> 0:16:14.760 continue to play names like Apple on five G, Microsoft, Uncloud, 0:16:15.120 --> 0:16:18.000 cyber security, which we kind of view as a golden age, 0:16:18.080 --> 0:16:22.000 names like cyber r G, Scour and others. So to us, 0:16:22.040 --> 0:16:24.440 it's a green light to own tech despite some of 0:16:24.480 --> 0:16:27.040 the white knuckles. We have a sixteen thousand target for 0:16:27.120 --> 0:16:29.760 Nadzach year end and I think this is one week 0:16:29.800 --> 0:16:32.840 to a timber send move into year end, especially on 0:16:32.960 --> 0:16:35.760 three to earnings that we expect to be Well, let's 0:16:35.760 --> 0:16:38.280 talk about those earnings stand because it seems every single 0:16:38.360 --> 0:16:42.440 quarter when we come in, expectations are impossibly high for 0:16:42.600 --> 0:16:45.920 some of these big tech names, and often they are 0:16:45.960 --> 0:16:49.120 actually able to exceed them, but you don't necessarily see 0:16:49.520 --> 0:16:52.720 the share reward because valuations are so rich are already 0:16:52.840 --> 0:16:56.880 so why would earnings be a catalyst this time around? Yeah, 0:16:57.200 --> 0:17:00.240 it's a great point. I think ultimately the street has 0:17:00.840 --> 0:17:03.680 has sold really closed earnings. I think this is gonna 0:17:03.680 --> 0:17:06.560 be a little different because as we go not just 0:17:06.680 --> 0:17:08.919 some three que but into qute four and the streets 0:17:08.960 --> 0:17:13.040 massively underestimating the growth stories that we're seeing across pack 0:17:13.320 --> 0:17:15.720 and as much as we could talk about ratings potentially 0:17:15.800 --> 0:17:18.720 being compressed because of what's happened the tenure, I think 0:17:18.760 --> 0:17:23.480 streets underestimating growth across tax by anywhere from ten over 0:17:23.480 --> 0:17:25.719 the next year. And that's why I view this as 0:17:25.800 --> 0:17:29.600 a seminal earning season to really you know, turn the 0:17:29.680 --> 0:17:34.119 tide there from a sentiment perspective, can they do that? 0:17:34.280 --> 0:17:36.280 I mean, you know, in terms of we were just 0:17:36.280 --> 0:17:38.600 talking a little bit earlier, Kayley asked about that supply chain. 0:17:38.640 --> 0:17:41.840 I'm I'm just an observer who thinks that that's gonna 0:17:41.840 --> 0:17:44.000 be a bigger issue this earning season than I think. 0:17:44.040 --> 0:17:47.040 Maybe the market's discounting. In one of the areas where 0:17:47.080 --> 0:17:51.320 it may be more pronounced, is technology. Do you think 0:17:51.359 --> 0:17:54.480 the streets taking in for your tech names, you know, 0:17:54.560 --> 0:17:56.200 kind of what we're seeing across the bord in terms 0:17:56.240 --> 0:18:00.159 of supply chain issues. Yeah, I think the street as 0:18:00.359 --> 0:18:04.000 to something say, it's almost overly discounted for the supply chain. 0:18:04.080 --> 0:18:06.640 I mean, we're starting to see throughout our Asia check 0:18:06.720 --> 0:18:11.040 that's actually moderating going into early next year. So we're 0:18:11.080 --> 0:18:12.920 going to continue out of that head wind. This quarter, 0:18:13.040 --> 0:18:16.000 streets took and past that, and that's the important thing. 0:18:16.080 --> 0:18:18.679 You'll have those headwinds, but as you look into two 0:18:18.720 --> 0:18:21.800 thousand twenty two, it starts to moderate and it's gonna 0:18:21.800 --> 0:18:24.320 be a massive lift in terms of seeing in terms 0:18:24.359 --> 0:18:27.000 of overall growth for tech. That's why I view this 0:18:27.119 --> 0:18:28.840 is not time to throw in the white towel, but 0:18:28.880 --> 0:18:33.000 actually double down. Chech so Dan to these supply chain issues. 0:18:33.200 --> 0:18:35.399 I had a little bit of an episode about a 0:18:35.440 --> 0:18:37.240 month and a half ago, I was on the TV 0:18:37.400 --> 0:18:39.400 set and I was trying to put my Apple Watch 0:18:39.480 --> 0:18:41.359 back on, and I dropped it on its face and 0:18:41.440 --> 0:18:43.480 it just totally shattered to the point where you could 0:18:43.480 --> 0:18:46.120 see the chips inside. And everybody said, wait, wait, wait 0:18:46.200 --> 0:18:47.359 for the new one to come out if you're going 0:18:47.400 --> 0:18:49.520 to buy a new one, But I had no faith 0:18:49.560 --> 0:18:51.880 I would get one on my wrist in the near terment. 0:18:51.920 --> 0:18:54.399 I'm glad I just bought a replacement that day because Apple, 0:18:54.920 --> 0:18:57.080 you know, those watches, even though the event was last month, 0:18:57.080 --> 0:19:00.679 aren't coming out until a week from now. As Apple 0:19:00.800 --> 0:19:03.679 moves forward, how do they need to diversify their supply 0:19:03.800 --> 0:19:08.480 chain so they don't risk those kind of delays again? Yeah, 0:19:08.520 --> 0:19:11.960 I mean they're really married to the as of supply 0:19:12.119 --> 0:19:15.160 chain and that's not really going to change. To some extent. 0:19:15.200 --> 0:19:17.680 They'll diverse ty a bit in terms of more factories. 0:19:18.280 --> 0:19:21.119 But but right now, Apples handled the supply chain and 0:19:21.200 --> 0:19:25.320 a lot better than anyone that had anticipated. And you'll 0:19:25.359 --> 0:19:27.760 continue to have some delays in some products. When we 0:19:27.840 --> 0:19:30.760 look at this as on third team and what we're seeing, 0:19:31.160 --> 0:19:33.960 I mean, this continues to really be smoothed, you know, 0:19:34.119 --> 0:19:37.520 smooth sound. You have some shortages into year end and 0:19:37.800 --> 0:19:40.920 especially on Apple Watch and some other areas like Mac, 0:19:41.000 --> 0:19:44.920 but overallpartsmen a lot worse than the bite because Cook 0:19:45.000 --> 0:19:48.560 and Cupertino continue to to navigate this and almost have 0:19:48.720 --> 0:19:54.480 pap On like ability, unlike litther competitors. Dan Less question 0:19:54.520 --> 0:19:59.080 here on Apple um services, is that still a good 0:19:59.280 --> 0:20:02.840 growth driver for this name? Oh? I think it's massive, 0:20:03.000 --> 0:20:05.600 I mean services A big part of the reading that 0:20:05.720 --> 0:20:09.159 we've seen. If I go back, I mean to in 0:20:09.200 --> 0:20:11.440 the street was assigning today it's we think it's worth 0:20:11.520 --> 0:20:14.760 one point five trillions, and despite epic and some of 0:20:14.840 --> 0:20:18.320 the regulatory worries, I think that's something that continues to 0:20:18.359 --> 0:20:21.160 be mid teen growth. I think that's another upside supplies 0:20:21.280 --> 0:20:23.600 this quarter. It's a big part of the reading in 0:20:23.680 --> 0:20:25.639 the stock and how we get to a three trillion 0:20:25.680 --> 0:20:29.879 dollar valuation going into two thousand twenty two. Hey, Dan, 0:20:29.920 --> 0:20:32.000 thanks so much for joining us. We always love chatting 0:20:32.040 --> 0:20:34.600 with you because we can go many different directions. Lots 0:20:34.640 --> 0:20:37.560 of great names you cover, The stories are working, certainly, 0:20:38.040 --> 0:20:41.399 we always appreciate getting your perspective. Dan Ives, Managing Director 0:20:41.440 --> 0:20:46.640 Equity Research for web Bush Securities, work Bill SMEE, Chief 0:20:46.680 --> 0:20:49.919 Investment Officer, smeet to Capital Management, Phil, thanks so much 0:20:49.920 --> 0:20:52.440 for joining us here again. We got a jobs number 0:20:52.520 --> 0:20:57.040 today disappointing. Um, yet we still have and combined with 0:20:57.119 --> 0:20:59.440 that as a lot of inflation out there that some 0:20:59.560 --> 0:21:02.800 folks are concerned that it may not be the transitory type. 0:21:02.800 --> 0:21:05.240 And one of the areas is right out there and energy. 0:21:05.800 --> 0:21:09.120 So Bill gives the thoughts on the energy space. Where 0:21:09.160 --> 0:21:11.480 are you guys there where do you think they're opportunities 0:21:11.720 --> 0:21:15.760 or has it already been priced in? Well, thanks for 0:21:15.840 --> 0:21:19.040 having us, and it is not even vaguely close to 0:21:19.119 --> 0:21:24.600 being priced in. Uh, you've got uh teacup of market 0:21:24.680 --> 0:21:29.840 capitalization in the energy sector and oil specifically oil and gas. 0:21:30.680 --> 0:21:33.640 Uh three of the S and P. So you're gonna 0:21:33.680 --> 0:21:36.320 have a three percent position in the SMP be far 0:21:36.400 --> 0:21:40.320 and away the best performing sector. Because energy is just 0:21:40.440 --> 0:21:43.720 as important as it was five years ago and ten 0:21:43.800 --> 0:21:47.000 years ago. And like Warren Buffett likes to say, the 0:21:47.119 --> 0:21:50.120 people that think that will make a fast transition away 0:21:50.160 --> 0:21:53.160 from carbon fuels and the people that think will never 0:21:53.800 --> 0:21:58.600 transition are both crazy. So so the thing to understand 0:21:58.800 --> 0:22:02.800