WEBVTT - Surveillance: U.S. Seeing Real Wage Growth, CEA's Hassett Says 0:00:00.080 --> 0:00:12.960 Yeah, Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane. 0:00:13.480 --> 0:00:17.560 Daily we bring you inside from the best in economics, finance, investment, 0:00:18.000 --> 0:00:23.480 and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 0:00:23.600 --> 0:00:33.680 Bloomberg dot Com, and of course on the Bloomberg You 0:00:33.760 --> 0:00:36.040 make your luck. And that's when Jeffrey Curry walks in 0:00:36.120 --> 0:00:39.839 the studio from Golden Sacks with a bigger, larger macro 0:00:40.040 --> 0:00:44.040 view on oil. And yet he knows there is a bank, 0:00:44.680 --> 0:00:48.159 a financial arm of the oil business that happens to 0:00:48.200 --> 0:00:50.880 look for oil called Xson as well. So we're gonna 0:00:50.960 --> 0:00:54.040 fold some cell side here on x on Mobile earnings up, 0:00:54.040 --> 0:00:57.040 the stock moves up three and jeff Curry here to 0:00:57.120 --> 0:00:59.920 rip up the script on Big Oil. How is amery 0:01:00.080 --> 0:01:02.800 can Big Oil doing right now? Not so much sell 0:01:02.880 --> 0:01:06.560 side analysis, but from your purview, well, I think when 0:01:06.600 --> 0:01:09.200 you look at their ability to tract capital, one of 0:01:09.240 --> 0:01:11.040 the biggest issues right now is the E S G 0:01:11.200 --> 0:01:14.560 issue and how do they restructure themselves such that they 0:01:14.680 --> 0:01:18.640 be able to become more relevant in the de carbonized world. 0:01:18.680 --> 0:01:20.840 And we think big oil is going to turn into 0:01:20.840 --> 0:01:23.480 big energy, and they're gonna do that by buying gas 0:01:23.560 --> 0:01:26.840 sst assets from l n G um gas here in 0:01:26.880 --> 0:01:31.360 the US power assets. I just did a fabulous seminar 0:01:31.720 --> 0:01:35.560 with Robert Litterman of great financial guides like Black Shoals. 0:01:35.720 --> 0:01:37.560 He did a huge amount of work with Fisher Black 0:01:37.640 --> 0:01:40.600 years ago, and he has led the study of climate 0:01:40.720 --> 0:01:44.240 change and all that, and he led our session of 0:01:44.360 --> 0:01:50.000 Sustained Bloomberg Sustainable Summit on XX on finally catching up. 0:01:50.160 --> 0:01:53.280 Is big oil gonna go green? I'm not gonna say 0:01:53.320 --> 0:01:56.120 they're gonna go go go green, but they're gonna put 0:01:56.120 --> 0:02:00.680 a greater emphasis on green type assets. So they basically, 0:02:00.720 --> 0:02:04.320 instead of um letting go of their dirty assets, they'll 0:02:04.360 --> 0:02:07.320 add on more clean assets to balance out the overall 0:02:07.360 --> 0:02:10.720 carbon footprint and so they become big energy. Does natural 0:02:10.760 --> 0:02:13.960 gas factor into that as well? Oh, it's critical to it. 0:02:14.480 --> 0:02:16.960 L n G is a really important part of that 0:02:17.120 --> 0:02:19.520 overall strategy. The reason I bring this up is because 0:02:19.600 --> 0:02:21.440 we've had a big deal, but it was three years 0:02:21.440 --> 0:02:22.880 ago and I haven't seen one since, and it was 0:02:22.880 --> 0:02:24.919 shall p G Right, So when is this stuff really 0:02:24.960 --> 0:02:27.600 gonna stop happening? You're seeing the the f I D 0:02:27.760 --> 0:02:29.919 beginning to happen that they're going to go out and 0:02:29.960 --> 0:02:33.120 build these capacity. Interesting because in terms of looking at 0:02:33.120 --> 0:02:36.000 where the marginal growth globally comes for energy, it's on 0:02:36.040 --> 0:02:38.239 the gas side, So you need to build these assets. 0:02:38.280 --> 0:02:39.960 So what does that mean for crude supply? Jeff? If 0:02:39.960 --> 0:02:41.160 they're going to go out and spend a lot of 0:02:41.200 --> 0:02:43.200 money doing these other things, what does it mean for 0:02:43.240 --> 0:02:46.080 crude supply? It means that the supply crude is going 0:02:46.160 --> 0:02:49.400 to come from USC and p Saudi and Russia, you know, 0:02:49.560 --> 0:02:52.320 so it's a big OPEC plus plus the shale guys 0:02:52.400 --> 0:02:54.320 is going to be the ones that delivered crude at 0:02:54.320 --> 0:02:57.080 the marginal Jeff Curry, Golden Sex with so much of 0:02:57.080 --> 0:02:59.880 what you do in industry is what you don't do. 0:03:01.040 --> 0:03:05.359 Did the Canadians get it right with the sands? In hindsight? 0:03:06.120 --> 0:03:10.080 Was that like smart investment? And was maybe excellents smart 0:03:10.120 --> 0:03:13.240 because they didn't do Canadian sands well. If you go 0:03:13.320 --> 0:03:16.040 back to two thousand and five, everybody thought it was 0:03:16.200 --> 0:03:18.160 the future, and part of that because we did not 0:03:18.280 --> 0:03:20.919 know what shale was. And then we shifted around two 0:03:20.919 --> 0:03:23.480 thousand and ninth thought Brazil was the future and we 0:03:23.480 --> 0:03:25.720 still didn't know what shale was, and by two thousand 0:03:25.680 --> 0:03:28.400 and eleven, two thousand twelve, we realized, hey, shale is 0:03:28.480 --> 0:03:31.000 the future. So I don't think it was a mistake 0:03:31.320 --> 0:03:33.960 in the hind sighting it is, but at the back 0:03:33.960 --> 0:03:36.080 in two thousand and five it sure wasn't a mistake. 0:03:36.160 --> 0:03:40.920 Are the Saudis astute at those technological shifts or they 0:03:40.960 --> 0:03:44.760 blind to them because everything is so perfect for their hydrocars. Well, again, 0:03:44.800 --> 0:03:47.720 there at the bottom of the cost curve, there there 0:03:47.760 --> 0:03:50.560 is intra marginal as one can possibly get. And so 0:03:50.640 --> 0:03:53.200 in terms of thinking about what how this impacts them, 0:03:53.200 --> 0:03:54.960 it just tells them where their support is going to be. 0:03:55.320 --> 0:03:57.880 So if you go back to two thousand and five, 0:03:57.920 --> 0:04:00.000 two thousand and six, we thought shale was a hundred 0:04:00.920 --> 0:04:03.760 barrel propositions why we didn't think it was doable. We 0:04:03.920 --> 0:04:08.720 thought um oil sands was um So in terms of 0:04:08.840 --> 0:04:11.520 you know, thinking about how does that impact Saudi, it 0:04:11.600 --> 0:04:13.440 impacts where the price level is going to be. Now 0:04:13.480 --> 0:04:16.080 we think that that marginal barrel is a deep water 0:04:16.160 --> 0:04:19.920 offshore um platform, which is somewhere around seventy dollars a barrel, 0:04:19.960 --> 0:04:22.080 and that's where back in Brent is right now today, 0:04:22.279 --> 0:04:25.200 let's talk about the oil story of the morning. Iran. 0:04:25.839 --> 0:04:28.800 Now the message to anyone buying oil from Iran was 0:04:28.839 --> 0:04:31.240 stopped buying gold from Iran. And then as it got 0:04:31.279 --> 0:04:33.440 to the deadline, was starting to find out from a 0:04:33.520 --> 0:04:37.520 senior Administration official. UM. According to the reporting Cabra Bloomberg, 0:04:37.520 --> 0:04:40.599 the United States about to let eight countries, including Japan, India, 0:04:40.600 --> 0:04:43.960 and South Korea to keep buying Irani and crude. What 0:04:44.160 --> 0:04:46.960 is going on? Well, I think a question is you 0:04:47.000 --> 0:04:49.479 alluded to is what was the market pricing it. I 0:04:49.520 --> 0:04:53.600 don't think the market was pricing in zero Iranian exports. UM. 0:04:53.600 --> 0:04:55.760 I think it was probably closer to around eight hundred 0:04:55.760 --> 0:04:58.960 thousand a day. Our expectations were one point two to 0:04:59.040 --> 0:05:01.560 one point for you take if you go take that, 0:05:01.640 --> 0:05:05.440 you got those eight countries dropping by about going into 0:05:06.080 --> 0:05:08.920 uh the hundred and eighty day mark, then you would 0:05:08.960 --> 0:05:11.640 be talking to number around one point to That still 0:05:11.680 --> 0:05:14.239 gives you a deficit in fourth quarters. So it's still 0:05:14.320 --> 0:05:16.719 a bullish outcome in terms of thinking about the price, 0:05:16.880 --> 0:05:19.080 which is why we think the market's oversold. Here, let's 0:05:19.080 --> 0:05:21.440 talk about how much Crewed has ruled out rolled out 0:05:21.480 --> 0:05:23.200 to what degree do you think it is? I've assault 0:05:23.520 --> 0:05:26.479 um looking at Brenton's WC this morning, going to hundred 0:05:26.480 --> 0:05:29.480 dollars barrel. It's gonna happen. D's there. That was two 0:05:29.520 --> 0:05:32.120 weeks ago. Two weeks ago, it was Jeff Carry two 0:05:32.160 --> 0:05:35.080 weeks ago, not us. We were eighty two weeks ago 0:05:35.120 --> 0:05:38.559 and we're eighty today. I think that the key point 0:05:38.640 --> 0:05:43.000 there is really that with you you have relatively strong demand. 0:05:43.279 --> 0:05:45.080 And I think a lot of that sell off was 0:05:45.160 --> 0:05:47.800 demand driven because you saw it in the equity market. 0:05:47.839 --> 0:05:50.440 In fact, we when we do a decomposition of the 0:05:50.520 --> 0:05:52.320 run up, it was I ran and the sell off 0:05:52.600 --> 0:05:55.440 was demand until yesterday it became a run. But I 0:05:55.480 --> 0:05:57.400 think the key point is you've got three reasons why 0:05:57.440 --> 0:06:00.320 you want to be long long oil positioning. Um the market, 0:06:00.320 --> 0:06:02.160 all the length has gone out of the market to 0:06:02.520 --> 0:06:05.760 inventories are finally beginning to draw, so that the impact 0:06:05.839 --> 0:06:09.279 of the decline in the Iranian exports is now greater 0:06:09.360 --> 0:06:11.640 than what that increase in production has been out of 0:06:11.640 --> 0:06:14.080 the US, Russia and China. And then the third reason 0:06:14.120 --> 0:06:16.880 we're seeing it in copper today, the e M environment 0:06:16.920 --> 0:06:19.280 is probably not as bad as people think. The downside 0:06:19.400 --> 0:06:21.960 risk is that the Saudis need to buy some foreign 0:06:21.960 --> 0:06:25.680 policy favors some diplomacy um and that they need to 0:06:25.760 --> 0:06:27.520 keep the President of the United States on this side. 0:06:27.520 --> 0:06:30.760 Following the foreign policy crisis, the diploma diplomatic crisis of 0:06:30.760 --> 0:06:32.760 the last couple of weeks, what do you think of that? 0:06:32.960 --> 0:06:35.599 I think that they have delivered on that promise. You know, 0:06:35.839 --> 0:06:38.200 you see if you look again the numbers that came 0:06:38.200 --> 0:06:41.600 out and in the last um several days, Russia, Saudi 0:06:41.640 --> 0:06:46.440 and the United States all massively increased production in anticipation 0:06:46.480 --> 0:06:49.040 of this Iranian decline. Now, I agree with you that 0:06:49.040 --> 0:06:51.479 that means they're more likely than not to be more 0:06:51.520 --> 0:06:54.840 cooperative with the US, But I think they'll also try 0:06:54.880 --> 0:06:58.240 to defend the seventy downside. I want to go back 0:06:58.279 --> 0:06:59.760 to the circle back here in the time we've got 0:06:59.839 --> 0:07:03.400 left Jeff Curry again, someone to the cell side. I'm 0:07:03.440 --> 0:07:06.800 sorry for that. What did big oil learn from a 0:07:06.880 --> 0:07:09.640 hundred down to twenty nine dollars? Brent and one are 0:07:09.680 --> 0:07:13.400 the best practices of excellent right now? Or Chevron or 0:07:13.480 --> 0:07:16.200 BP Maybe there's a laggards, you know that I don't know, 0:07:16.640 --> 0:07:20.360 But what were the lessons learned enjoyed from a hundred 0:07:20.400 --> 0:07:22.840 down to twenty nine dollars a barrel. Well, I I'd 0:07:22.880 --> 0:07:25.400 say one of the big the big lessons is that 0:07:25.520 --> 0:07:27.960 cost support isn't cost support, and that you have many 0:07:28.080 --> 0:07:30.760 macro variables that that are at play here. In fact, 0:07:30.800 --> 0:07:32.640 I like to give an example that that I learned 0:07:32.680 --> 0:07:35.000 on that is that if you took the cost bases 0:07:35.000 --> 0:07:37.360 of Canadian oils undred and twenty dollars a barrel in 0:07:37.440 --> 0:07:41.640 two thousand and fourteen, with an applied return of somewhere around, 0:07:42.800 --> 0:07:44.800 guess what they were when oil was at forty five 0:07:44.800 --> 0:07:47.440 dollars around? What were the return on those assets north 0:07:48.760 --> 0:07:51.400 the whole world be priced? And so that where they 0:07:51.440 --> 0:07:54.040 were on the cost curve continue to shift as you 0:07:54.120 --> 0:07:57.920 move down. So when you have those big re pricings five, 0:07:58.280 --> 0:08:02.240 it's a macro price. Is that cross curve shifted up 0:08:02.480 --> 0:08:05.560 with the recovery in oil? Yes, it has. We've we've 0:08:05.600 --> 0:08:09.400 seen inflationary Why is that inflationary? Presstionary pressure? Labor a 0:08:09.520 --> 0:08:11.840 lot of it because yours now stressing the system at 0:08:11.880 --> 0:08:13.720 a rate we haven't seen it stressed since, you know, 0:08:13.800 --> 0:08:15.760 the the early part of this decade. So they go 0:08:15.880 --> 0:08:18.720 in tandem, there's symmetric they go down the same way 0:08:18.760 --> 0:08:21.640 they go up. You know, that's always But people like 0:08:21.760 --> 0:08:23.160 to say, is that you know which one is a 0:08:23.240 --> 0:08:24.560 chicken and which one is the egg? Is that the 0:08:24.640 --> 0:08:27.200 cost or the We do that in surveillance every day 0:08:27.240 --> 0:08:30.880 it's Friday. Do we do chicken? Okay, we can't. But 0:08:31.240 --> 0:08:34.120 but I think that the broader issue here is it's 0:08:34.120 --> 0:08:37.720 strong global demand for oil increasing the demand for service 0:08:37.760 --> 0:08:40.760 activities that can creates the inflationary pressures like we're seeing 0:08:40.760 --> 0:08:43.559 across the broader economy. Never enough time. Jeff Curry, thank 0:08:43.559 --> 0:08:45.480 you so much with his work in London over the years. 0:08:45.880 --> 0:08:48.200 So he's probably a page tips T. He's had pag 0:08:48.320 --> 0:08:51.720 tips T that needs a big fan of the city London. 0:08:52.160 --> 0:09:08.680 Jeff is going to catch up to see Jeff. Eric 0:09:09.080 --> 0:09:15.920 Ross is with us with great acuity, great granularity on Apple, Eric, 0:09:16.000 --> 0:09:19.199 I just looked at the fancy Bloomberg chart on Apple, 0:09:19.840 --> 0:09:23.719 and we're down something in the vicinity. Eric, we're down 0:09:23.840 --> 0:09:27.320 something in the vicinity of three standard deviations. Three standard 0:09:27.360 --> 0:09:30.880 deviations on Apple. You know to TWI and you know 0:09:31.040 --> 0:09:33.720 you go down and two oh seven two o eight. 0:09:34.520 --> 0:09:37.120 Right now, it's been an abrupt move. Is it an 0:09:37.240 --> 0:09:41.480 opportunity to buy shares today. But we see it that 0:09:42.200 --> 0:09:46.280 Apple clearly missed what the guidance was being expected by 0:09:46.400 --> 0:09:49.080 analysts out there. So they do to get actors, they 0:09:49.160 --> 0:09:51.640 have to get condished a small bit. But when you 0:09:51.720 --> 0:09:56.480 start looking at what's actually happening in in in their 0:09:56.559 --> 0:10:00.720 business overall, and the smartphones are a s owing growth 0:10:00.880 --> 0:10:03.400 type of business. But Apple continues to take more and 0:10:03.520 --> 0:10:05.360 more share there. But if you look at everybody else 0:10:05.400 --> 0:10:08.240 in the smartphone business, all the Android players, Sampson Hua 0:10:09.000 --> 0:10:12.640 show me they're barely making a profit. They're seeing their 0:10:12.760 --> 0:10:15.679 units continue to get ground down. It's it's a terrible market. 0:10:15.800 --> 0:10:18.720 Apple is figured out the formula to make a tremendous 0:10:18.720 --> 0:10:21.320 amount of six years ago. I mean, they've always been 0:10:21.360 --> 0:10:24.040 the premium product, that's a fact they have. But they 0:10:24.160 --> 0:10:28.559 know more. They're they're pricing dramatically last year and that 0:10:28.679 --> 0:10:30.840 made a huge difference in the amount of money they 0:10:30.880 --> 0:10:33.720 were able to pull out of the the smartphone supply. 0:10:33.760 --> 0:10:35.679 If you don't some of the parts analysis, I know 0:10:35.800 --> 0:10:38.600 your targets to fifty, it's an opportunity for you folks. 0:10:38.679 --> 0:10:42.040 Earlier this morning, Morgan Stanley cut their price target on Apple, 0:10:42.080 --> 0:10:44.760 and there's other dynamics out there as well, But has 0:10:44.760 --> 0:10:47.679 anybody done legit some of the parts, like what is 0:10:47.880 --> 0:10:54.440 services actually worth? Uh? As far as services being worth 0:10:55.160 --> 0:10:58.920 uh separately from itself, I mean it's trund It's it's 0:10:59.280 --> 0:11:04.360 basically about ten billion in revenues a quarter slap on 0:11:04.640 --> 0:11:09.640 something that's got Yeah, I mean a company that would 0:11:09.679 --> 0:11:12.160 be separate by it's equivalent to that. What would be 0:11:12.400 --> 0:11:14.439 the name you would come up with that would be 0:11:14.559 --> 0:11:17.200 an equivalence to Apple Services? You can look at something 0:11:17.320 --> 0:11:19.560 like it's a little bit different, but something like a salesforce. 0:11:20.880 --> 0:11:24.160 You know, So you're talking about a multiple that's definitely 0:11:24.240 --> 0:11:26.720 north of twenty and that's probably north of thirty right now. 0:11:26.760 --> 0:11:29.440 We don't cover how does Apple price it right now? Again? 0:11:29.559 --> 0:11:33.400 Compare that so you know, Apple you're talking about you know, 0:11:34.000 --> 0:11:37.120 earnings are probably on the order of five billion a 0:11:37.200 --> 0:11:39.640 quarter right now, so you're talking about roughly twenty billion 0:11:39.720 --> 0:11:44.360 a year times call it times. So you're talking about 0:11:44.720 --> 0:11:48.000 if I'm doing this right, you got a price target. 0:11:48.080 --> 0:11:50.400 It's way up. It's way way up, way way up there. 0:11:50.440 --> 0:11:52.439 And we'll let you write that out before can you 0:11:52.520 --> 0:11:54.120 do with some of the parts force and get back 0:11:54.120 --> 0:11:57.280 to Monday by ten, and that's what they do in 0:11:57.320 --> 0:11:59.920 the real world, is absolutely that's what clients tell them. 0:12:00.080 --> 0:12:01.840 What did you learn in a conference call last night? 0:12:01.880 --> 0:12:04.559 There's nuances of media reports that I think the media 0:12:04.600 --> 0:12:06.959 does a much better job than they used to. But 0:12:07.080 --> 0:12:09.840 what was the distinction you heard, Well, that the media 0:12:09.880 --> 0:12:12.800 actually does do a very very good job at pulling 0:12:12.840 --> 0:12:15.080 apart what's going on in the Apple report, even before 0:12:15.080 --> 0:12:17.199 the analysts get to to to do it. There's a 0:12:17.200 --> 0:12:20.040 lot more people covering it real time that what weren't 0:12:20.040 --> 0:12:22.640 doing it five ten years ago. But the thing that 0:12:22.960 --> 0:12:25.880 we noticed most about the call are two things. One, 0:12:26.000 --> 0:12:29.280 Apple is moving very heavily into what they're calling the ecosystem, 0:12:29.360 --> 0:12:32.360 let's say, which is essentially they have a huge install 0:12:32.440 --> 0:12:34.320 base of their products, not just the products they are 0:12:34.320 --> 0:12:36.760 sold this quarter, but products they sold two years ago, 0:12:36.800 --> 0:12:39.640 and people are using it. There's still buying services, they're 0:12:39.640 --> 0:12:43.840 buying other things like Apple Watch, air buds, et cetera, wearables, 0:12:43.920 --> 0:12:47.840 the home uh products, etcetera. And they're they're they're continuing 0:12:47.880 --> 0:12:49.720 to layer on more and more products there at Apple 0:12:49.840 --> 0:12:54.800 is becoming a sales channel into that huge install base. 0:12:55.000 --> 0:12:58.679 And because it's a very protected walled garden type of ecosystem. 0:12:58.720 --> 0:13:00.480 You can only get in with an Apple product. You 0:13:00.520 --> 0:13:03.400 can't go in by by logging on from an Android product. 0:13:04.080 --> 0:13:08.040 It becomes an incentive to buy Apple products and incentive 0:13:08.080 --> 0:13:10.200 to stay. It's kind of like the Bloomberg terminal. Actually, 0:13:10.280 --> 0:13:13.440 I actually talk about this to clients. Bloomberg is built 0:13:13.440 --> 0:13:16.079 an incredible walled garden where if you're not in it, 0:13:16.440 --> 0:13:19.880 you don't have the ecosystem to be able to communicate 0:13:19.920 --> 0:13:21.840 back and forth with clients. And if you're not there 0:13:22.600 --> 0:13:25.600 then people notice then with That is what I call 0:13:25.880 --> 0:13:29.719 and I've written memos on this, folks. Annuity pricing. My 0:13:29.920 --> 0:13:34.280 great criticism of the last twenty four hours is the 0:13:34.440 --> 0:13:39.600 outrage and at times moral outrage of thousand dollar toys, 0:13:40.360 --> 0:13:44.160 except they're not. They're perceived as fifty two dollar a 0:13:44.320 --> 0:13:49.599 month toys. Do you value a company differently if the 0:13:50.280 --> 0:13:55.480 linkages to the customer are monthly fees versus a one 0:13:55.559 --> 0:14:00.360 time cash payment. Yes, Again, moving more towards what I 0:14:00.400 --> 0:14:02.559 would call the ecosystem play, which is much more of 0:14:02.600 --> 0:14:05.959 an annuity type of payment system. How do you value 0:14:06.080 --> 0:14:09.800 terminal value differently with an annuity type payment system? Well, 0:14:10.320 --> 0:14:12.760 I'm more looking at examples of what's been gone on 0:14:13.080 --> 0:14:16.559 in major tech companies before, as we look at Microsoft 0:14:16.640 --> 0:14:18.560 as being a great example of this. So right now 0:14:18.640 --> 0:14:21.800 Apple is looked at as seller of iPhones, but they're 0:14:21.840 --> 0:14:25.040 not necessarily as seller iPhones. They're now looked at as 0:14:25.480 --> 0:14:27.680 they're not trying to move into although I don't think 0:14:27.680 --> 0:14:30.920 analysts believe with them quite yet, into being an ecosystem 0:14:31.080 --> 0:14:34.520 sale into their huge install base. Microsoft has made this 0:14:34.680 --> 0:14:38.000 transition in a very meaningful way where they're not just 0:14:38.160 --> 0:14:42.560 selling office products. They're now selling an annuity software as 0:14:42.600 --> 0:14:45.760 a service office products plus of all kinds of other 0:14:45.840 --> 0:14:49.040 products like that, and the stock has has really rocketed 0:14:49.320 --> 0:14:51.240 in the last three years since they made that transition. 0:14:51.280 --> 0:14:53.880 I've got a forward p on Apple off the bloomberg 0:14:53.920 --> 0:14:57.120 of sixteen is seventeen ish, you know, folks, this is 0:14:57.200 --> 0:14:59.840 Friday chit chat, so don't hold me to that sixteen 0:14:59.920 --> 0:15:05.320 or seventeen. And I've got Microsoft with an equivalent twenty four. Yes, 0:15:05.440 --> 0:15:07.640 so basically that's a four. I'm off the top of 0:15:07.720 --> 0:15:12.640 my head, a fort lift of Apple valuation up to 0:15:12.800 --> 0:15:17.200 Microsoft valuation. If the street figures out the annuity benefits 0:15:17.480 --> 0:15:19.720 of that cashul right, absolutely, and if you look at it, 0:15:19.800 --> 0:15:23.120 the commarison is actually very good because I do three 0:15:23.240 --> 0:15:26.640 three years ago Microsoft is doing very well. But you know, 0:15:26.760 --> 0:15:30.720 three years ago PC was considered a dead, dying platform. 0:15:31.000 --> 0:15:35.000 Microsoft was selling office products and operating systems into that platform, 0:15:35.080 --> 0:15:37.720 plus some other growth areas, but those are very small 0:15:37.760 --> 0:15:40.600 pieces of the business. Nobody really believed that that could happen. 0:15:40.800 --> 0:15:42.680 But they knew that if they could sell that again 0:15:42.680 --> 0:15:44.640 as an annuity, as a software as a service type 0:15:44.680 --> 0:15:46.880 of product to be pushing the cloud, that they could 0:15:46.880 --> 0:15:49.880 get a better multiple, better understanding apples At the beginning 0:15:49.920 --> 0:15:52.600 of this process, I think longer term it's gonna be 0:15:52.600 --> 0:15:54.560 a bumpy ride. It's a bumpy ride for any company 0:15:54.600 --> 0:15:56.480 that's trying to change the way that Street values it. 0:15:56.880 --> 0:15:59.080 But I think that as we look forward, this is 0:15:59.120 --> 0:16:03.440 gonna be a much more uh predictable type of earning stream, 0:16:04.120 --> 0:16:07.720 steady earning stream. What's the cash drama to come? Is 0:16:07.760 --> 0:16:11.080 there now a calendar date where they do massive share 0:16:11.120 --> 0:16:13.800 buy back or reaffirmed share buy back, or they do 0:16:13.880 --> 0:16:16.680 a real dividend lift. Is there, like we got through 0:16:16.720 --> 0:16:20.480 the holidays February March April kind of calendar date, where 0:16:20.640 --> 0:16:22.400 Eric Ross says, this is where we'll know what they'll 0:16:22.440 --> 0:16:26.360 do with that cash. This is unfortunately beyond the pure 0:16:26.480 --> 0:16:28.640 view of the type of research that we do. We're 0:16:28.680 --> 0:16:31.280 not really very tight with the management team as far 0:16:31.320 --> 0:16:35.400 as their plans, not on speaking terms of really we're 0:16:35.440 --> 0:16:37.720 really pulling a lot of data from the supply chain 0:16:37.760 --> 0:16:39.960 of what's going on where the components. What do you 0:16:40.040 --> 0:16:43.120 see there right now, particularly China Dynamics. Well, actually, things 0:16:43.200 --> 0:16:45.440 look very good in the supply chain. So last year 0:16:45.480 --> 0:16:47.680 when we were looking at it this time, the supply 0:16:47.800 --> 0:16:49.520 chain was barely growing at all. They were having a 0:16:49.600 --> 0:16:51.200 lot of problems get the product that and we could 0:16:51.240 --> 0:16:53.840 tell that there were problems with the display, problems with 0:16:54.160 --> 0:16:59.440 the sensing, problems with the fingerprinting, fingerprint measurements. And this 0:16:59.640 --> 0:17:02.520 year it's complete opposite. They had a nice steady ramp 0:17:02.640 --> 0:17:05.320 over the summer to release the excess and excess math 0:17:05.440 --> 0:17:09.240 or the tennis. Have you seen that. I haven't seen 0:17:09.280 --> 0:17:11.159 it in person. I've only seen the specs. Have you 0:17:11.280 --> 0:17:13.760 had two children have their laptops break in the last 0:17:13.800 --> 0:17:17.800 seventy two hours? That would be me, Eric Ross, Thank 0:17:17.880 --> 0:17:34.879 you so much. We now turned far more towards the 0:17:34.960 --> 0:17:38.280 policy of all this and a better America with Betsy 0:17:38.359 --> 0:17:42.080 Stevenson of course at the University of Michigan and her 0:17:42.119 --> 0:17:45.000 work for the Department of Labor Ages Ago, Betsy, there 0:17:45.160 --> 0:17:48.399 is no other issue in America on this Friday, and 0:17:48.520 --> 0:17:51.960 towards the selection that immigration. If you were standing with 0:17:52.200 --> 0:17:55.760 undergraduates in ann Arbor, what would you state to them 0:17:55.840 --> 0:18:02.400 in a class on our immigration dynamics right now? Well, 0:18:02.480 --> 0:18:05.600 I think what's going on with immigration has a lot 0:18:05.680 --> 0:18:08.800 more to do with, uh, you know, the sort of 0:18:08.920 --> 0:18:11.399 politics and how people feel about it than the labor market. 0:18:11.480 --> 0:18:14.359 And we have a very tight labor market um, and 0:18:14.560 --> 0:18:18.360 certainly you know we've seen over um the last year, 0:18:18.440 --> 0:18:22.960 they're they're certainly areas where um the red duction and 0:18:23.680 --> 0:18:28.879 immigrants has left some businesses scrambling um. And that's you know, 0:18:29.160 --> 0:18:31.119 one of the big puzzles this whole year has been 0:18:31.400 --> 0:18:34.200 if we don't have enough workers, or if the labor 0:18:34.240 --> 0:18:37.359 markets tight, why aren't we seeing wage growth? So you know, 0:18:37.440 --> 0:18:40.760 we take strong rates wage growth in this report, so 0:18:40.960 --> 0:18:43.239 we're starting to see that some of us picking up. 0:18:43.640 --> 0:18:46.200 But I think you know that was you know, the 0:18:46.600 --> 0:18:50.200 real puzzle, and you know, last summer, I saw a 0:18:50.359 --> 0:18:55.760 report of a landscaper who couldn't get enough low cost 0:18:55.840 --> 0:19:00.760 immigrant labor to do his landscaping services, so he canceled 0:19:00.800 --> 0:19:03.960 his contracts and shut down. And the real questions for 0:19:04.080 --> 0:19:07.639 economists is why not offer higher wages and try to 0:19:07.720 --> 0:19:11.199 hire that American labor? And that's the real puzzle's going 0:19:11.280 --> 0:19:15.760 to take to get businesses to pay the higher wages UM. 0:19:16.840 --> 0:19:22.800 Which boat Betsy. We've got listeners out there saying, Professor, 0:19:23.000 --> 0:19:27.760 that's great, but that immigrant landscaper could be an American 0:19:27.960 --> 0:19:32.480 adult or a college or high school kid instead of 0:19:32.720 --> 0:19:36.480 that immigrant landscaper. How do you respond to that in 0:19:36.600 --> 0:19:41.120 the reality of the modern American economy. Well, I think 0:19:41.200 --> 0:19:43.760 the reality is that they aren't applying for jobs, right, 0:19:43.760 --> 0:19:47.760 That's why we saw people shutting down UM. And I 0:19:47.840 --> 0:19:49.719 think that's what I was trying to say, is the question, 0:19:50.080 --> 0:19:52.760 you know, yes, we could pay much higher wages and 0:19:52.840 --> 0:19:56.119 try to try for Americans to those jobs, but that 0:19:56.320 --> 0:19:59.760 is going to push prices up UM. And the question 0:19:59.880 --> 0:20:01.639 is other people want to pay to have someone to 0:20:01.800 --> 0:20:05.240 their law and at those higher costs UM. Otherwise, the 0:20:05.840 --> 0:20:08.200 you know, people might say, I'm not gonna I'm not 0:20:08.320 --> 0:20:10.359 it's not worth it. The purchasing services, so it was 0:20:10.440 --> 0:20:14.159 worth it when you know I could get them done cheaper, 0:20:14.320 --> 0:20:17.720 but these higher costs, I'm not gonna do it. Should we? 0:20:18.160 --> 0:20:21.159 It is you know the you know, when you think 0:20:21.160 --> 0:20:24.479 about the reality of the labor market, No Americans are 0:20:24.480 --> 0:20:27.000 going to college in droves because they want to get 0:20:27.040 --> 0:20:29.480 the kind of skills that generate higher wages. We've never 0:20:29.640 --> 0:20:33.920 seen a higher gap between the wages that college graduates 0:20:33.960 --> 0:20:36.560 GIP and those that UH and those that people who 0:20:36.640 --> 0:20:39.439 don't have a college degree or getting. In the United States, 0:20:39.560 --> 0:20:42.399 it's a terrific time to get a college degree, and 0:20:42.640 --> 0:20:45.720 we're seeing students who do respond to those incentives and 0:20:45.760 --> 0:20:49.200 our increasing our educational payment, and that's going to leave 0:20:49.280 --> 0:20:51.560 us with a gap and these kind of jobs that 0:20:51.640 --> 0:20:54.600 immigrants scifically done. That's Stevenson with us of course, with 0:20:54.720 --> 0:20:58.320 Afford School, University of Michigan UH, and with their Department 0:20:58.359 --> 0:21:01.399 of Economics as well. Professor. When we look at the 0:21:01.480 --> 0:21:04.919 debate of this election, as we engage the debate very 0:21:05.040 --> 0:21:09.720 presidential election, I guess it's a fully employed America. And 0:21:09.880 --> 0:21:14.680 yet I get more mail from listeners on professors and 0:21:14.840 --> 0:21:19.320 fancy pants Wall Street economists saying it's fully employed, and 0:21:19.359 --> 0:21:21.680 the people out there that I hear get letters from 0:21:21.720 --> 0:21:25.600 every day say you are out of your minds. How 0:21:25.680 --> 0:21:30.000 did that divide come about? I think, you know, it 0:21:30.119 --> 0:21:33.560 really comes to not just can you get a job, 0:21:34.080 --> 0:21:36.560 but are you able to get a job to pay 0:21:36.680 --> 0:21:40.560 you a wage that you feel allowing you to earn, 0:21:41.320 --> 0:21:44.480 you know, to have the living standard that you're expecting 0:21:44.600 --> 0:21:47.600 given the investments you made in your skills. Uh, do 0:21:47.720 --> 0:21:51.040 you have a job that provide you a career path 0:21:51.240 --> 0:21:53.200 that you think you're going to be able to grow? 0:21:53.760 --> 0:21:57.719 I think Americans to feel like the labor market UM 0:21:58.720 --> 0:22:02.800 is in a difficult play for them. It's not necessarily 0:22:02.880 --> 0:22:07.119 giving all workers access to those career career paths, and 0:22:07.200 --> 0:22:09.600