1 00:00:00,120 --> 00:00:13,760 Speaker 1: Ye, Welcome to the Bloomberg Surveillance podcast named Tom keene Jarly. 2 00:00:13,960 --> 00:00:17,560 Speaker 1: We bring you insight from the best in economics, finance, investment, 3 00:00:18,000 --> 00:00:23,520 Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 4 00:00:23,600 --> 00:00:27,520 Speaker 1: Bloomberg dot Com, and of course, on the Bloomberg James 5 00:00:27,520 --> 00:00:31,600 Speaker 1: Anthony joining us now Aberty Standard Investment Senior investment Manager. James. 6 00:00:31,640 --> 00:00:34,920 Speaker 1: Let's start there. The lack of treasury market action on 7 00:00:35,000 --> 00:00:39,680 Speaker 1: a really whippy twenty four hours into this morning. Yeah, 8 00:00:40,040 --> 00:00:42,720 Speaker 1: bit frustrating for us actually, as as duration balls. At 9 00:00:42,800 --> 00:00:46,200 Speaker 1: least in part, we've been bullish because we we thought 10 00:00:46,240 --> 00:00:50,159 Speaker 1: risky assets were being incredibly complacent with respect to the 11 00:00:50,159 --> 00:00:54,440 Speaker 1: outlook across a broad a broad range of factors. We've 12 00:00:54,480 --> 00:00:56,800 Speaker 1: been thinking about this and then trying to piece together 13 00:00:56,880 --> 00:00:59,240 Speaker 1: some sort of understanding of why that might be the case. 14 00:00:59,440 --> 00:01:01,520 Speaker 1: I think the story we've settled on really is that 15 00:01:01,560 --> 00:01:03,880 Speaker 1: this is a position unwind. So what you had was 16 00:01:03,960 --> 00:01:07,039 Speaker 1: the market was positioning for fiscal stimulus and a and 17 00:01:07,080 --> 00:01:10,119 Speaker 1: a blue sweep. Let's let's be somewhat glib, and that 18 00:01:10,120 --> 00:01:14,200 Speaker 1: meant being short dollars, being long risky assets, and being 19 00:01:14,200 --> 00:01:18,679 Speaker 1: in treasury curve steepeners, possibly not necessarily shut outright duration, 20 00:01:18,720 --> 00:01:20,760 Speaker 1: but in treasury curve steepness. So what we've seen is 21 00:01:20,800 --> 00:01:23,600 Speaker 1: even though yields have gone up, the curve is actually flattened. 22 00:01:24,120 --> 00:01:26,520 Speaker 1: And we've seen equities being unwound, and and and the 23 00:01:26,560 --> 00:01:29,600 Speaker 1: dollar and the yen rallying, which were probably currencies where 24 00:01:29,640 --> 00:01:31,800 Speaker 1: you had short positions. Certainly the dollar is definitely one 25 00:01:31,800 --> 00:01:34,200 Speaker 1: way they've been short positions. So we kind of think 26 00:01:34,240 --> 00:01:36,679 Speaker 1: this looks more like just a clear out of some 27 00:01:36,720 --> 00:01:39,920 Speaker 1: of those positions, mainly because the virus stat has got worse. 28 00:01:39,959 --> 00:01:43,240 Speaker 1: Also because I think some concerns a bit more latterly ever, 29 00:01:43,319 --> 00:01:46,000 Speaker 1: have arisen that the election result might be closer, might 30 00:01:46,040 --> 00:01:49,400 Speaker 1: be contested. Future is right now negative ectinas. Joe and 31 00:01:49,440 --> 00:01:52,840 Speaker 1: Ferrel mentioned recovering James A. Thy Okay, so you have 32 00:01:52,920 --> 00:01:56,440 Speaker 1: ownership of equities, you have no money to put to work. 33 00:01:57,040 --> 00:01:59,960 Speaker 1: You have to have a framework, a view out there. 34 00:02:00,040 --> 00:02:03,600 Speaker 1: Where is they're out there? Is it two twenty one 35 00:02:03,720 --> 00:02:09,200 Speaker 1: or is it November four? Yeah? I mean, ideally we'd 36 00:02:09,200 --> 00:02:11,000 Speaker 1: like to be long term investors, and we would like 37 00:02:11,040 --> 00:02:13,280 Speaker 1: to take the long view. I think certainly, if you 38 00:02:13,320 --> 00:02:16,480 Speaker 1: are an equity investor, if you're you know, my equity colleagues. 39 00:02:16,520 --> 00:02:18,440 Speaker 1: These guys look at the quality of the firm, the 40 00:02:18,520 --> 00:02:21,240 Speaker 1: quality of the balance sheet. They're not making an economic 41 00:02:21,360 --> 00:02:23,760 Speaker 1: call um, and they will definitely be able to look 42 00:02:23,800 --> 00:02:26,320 Speaker 1: through political events like this because they will be comfortable 43 00:02:26,320 --> 00:02:28,480 Speaker 1: that the company they're buying is a good company at 44 00:02:28,480 --> 00:02:31,400 Speaker 1: the right price. That's not the case for all types 45 00:02:31,400 --> 00:02:33,320 Speaker 1: of investment, and that's certainly not the case for all 46 00:02:33,360 --> 00:02:36,160 Speaker 1: types of investor. So in our asset classes a bit 47 00:02:36,160 --> 00:02:39,280 Speaker 1: more difficult because that the prices themselves are very much 48 00:02:39,320 --> 00:02:42,000 Speaker 1: going to be a function of the result itself and 49 00:02:42,040 --> 00:02:45,120 Speaker 1: what that means for policy going forward. So depending on 50 00:02:45,160 --> 00:02:46,919 Speaker 1: the type of investor, you will be able to look 51 00:02:47,000 --> 00:02:49,440 Speaker 1: through this event to a greater degree. We would find 52 00:02:49,480 --> 00:02:51,560 Speaker 1: it a bit more difficult to completely ignore. So we 53 00:02:51,600 --> 00:02:55,680 Speaker 1: will be managing our risk levels and exposures accordingly. Alright, 54 00:02:55,720 --> 00:02:57,760 Speaker 1: so managing risk levels. And yet you said that it's 55 00:02:57,800 --> 00:03:00,399 Speaker 1: been a frustrating week for you as a dereach ball. 56 00:03:00,480 --> 00:03:04,640 Speaker 1: What's the head here? Well again I would have said that, 57 00:03:04,720 --> 00:03:07,280 Speaker 1: you know the curves direction and so aituation ball. We've 58 00:03:07,320 --> 00:03:10,160 Speaker 1: been running you know, bullish duation positions and we've got 59 00:03:10,160 --> 00:03:12,120 Speaker 1: some long end steatness on in the US, we're kind 60 00:03:12,120 --> 00:03:14,200 Speaker 1: of both of those have gone against us this week. Now. 61 00:03:14,200 --> 00:03:17,240 Speaker 1: Our FX positioning has very much been favorable to the 62 00:03:17,280 --> 00:03:19,840 Speaker 1: moves this week because we've been positioned along the dollar 63 00:03:19,919 --> 00:03:21,880 Speaker 1: and along the yen, and along the Swiss franc and 64 00:03:22,160 --> 00:03:24,919 Speaker 1: short some of the risky currencies, and so FX has 65 00:03:24,919 --> 00:03:27,040 Speaker 1: definitely been a good diverse far and a good hedge 66 00:03:27,080 --> 00:03:30,720 Speaker 1: for us. But again, going into the event itself, I 67 00:03:30,760 --> 00:03:34,120 Speaker 1: think the outcome is a lot closer than than you know. 68 00:03:34,200 --> 00:03:36,960 Speaker 1: Nate Silver, for example, is calling it, and so I 69 00:03:37,000 --> 00:03:39,520 Speaker 1: find it difficult to build a portfolio that I think 70 00:03:39,520 --> 00:03:42,840 Speaker 1: will be truly robust to every possible outcome. So if 71 00:03:42,880 --> 00:03:45,360 Speaker 1: that's the situation, I'm going to be happy running some 72 00:03:45,520 --> 00:03:48,880 Speaker 1: risk in there, some short duration positions in Europe, for example, 73 00:03:48,920 --> 00:03:51,400 Speaker 1: if if yields do go really high, I think, you know, 74 00:03:51,440 --> 00:03:53,880 Speaker 1: European yields will get dragged to some degree we've seen 75 00:03:54,080 --> 00:03:55,840 Speaker 1: it's not a huge amount, but they will get dragged 76 00:03:55,880 --> 00:03:58,000 Speaker 1: a bit higher. So I can go in kind of 77 00:03:58,000 --> 00:04:00,760 Speaker 1: still having a bit of a small long ration bias, 78 00:04:00,760 --> 00:04:04,000 Speaker 1: some shorts in Europe, some defensive positions in effex but 79 00:04:04,120 --> 00:04:06,200 Speaker 1: just taking the gross level of risk down so that 80 00:04:06,320 --> 00:04:10,320 Speaker 1: it's you know, we're not seeing huge P and L songs, James, 81 00:04:10,320 --> 00:04:11,960 Speaker 1: How why do you think this market is priced in 82 00:04:12,360 --> 00:04:14,840 Speaker 1: the head winds to the recovery that we're seeing develop 83 00:04:14,880 --> 00:04:16,839 Speaker 1: in Europe and our sware at the moment, I'm looking 84 00:04:16,839 --> 00:04:21,240 Speaker 1: back across asset crewed the dollar dollar bottomed out end 85 00:04:21,240 --> 00:04:24,559 Speaker 1: of August, start of September Ozzy and topped out around 86 00:04:24,560 --> 00:04:27,159 Speaker 1: a similar time. Crew topped out around a similar time. 87 00:04:27,240 --> 00:04:31,000 Speaker 1: Equities peaked around a similar time. That was two months ago, James, 88 00:04:31,240 --> 00:04:33,359 Speaker 1: I'd argue this market was probably ahead of some of 89 00:04:33,400 --> 00:04:36,719 Speaker 1: these risks. What do you say to that? Yeah, Again, 90 00:04:37,600 --> 00:04:40,880 Speaker 1: broadly speaking, I think we'd gone too far, too fast 91 00:04:40,960 --> 00:04:44,200 Speaker 1: quite some time ago, and it really didn't need the 92 00:04:44,279 --> 00:04:46,719 Speaker 1: recurrence of the virus spread that we had seen for 93 00:04:46,760 --> 00:04:48,560 Speaker 1: the market to take some of the air out of that, 94 00:04:48,680 --> 00:04:51,880 Speaker 1: because again, we were just priced at the extreme of 95 00:04:51,920 --> 00:04:55,200 Speaker 1: the probability distribution. We were pricing a utopian future where 96 00:04:55,320 --> 00:04:58,479 Speaker 1: earnings would almost instantly recover. Policy was going to be 97 00:04:58,560 --> 00:05:01,080 Speaker 1: sustainable and effective a it's the piece. Everything was going 98 00:05:01,120 --> 00:05:04,200 Speaker 1: to be hunky dorry, and you know the certainty around 99 00:05:04,240 --> 00:05:06,359 Speaker 1: that is somewhere close to zero. So that was that 100 00:05:06,440 --> 00:05:09,640 Speaker 1: was really quite ridiculous market pricing, and we've we've seen 101 00:05:09,720 --> 00:05:12,040 Speaker 1: that that you know, we've seen some pushback against that. 102 00:05:12,279 --> 00:05:14,320 Speaker 1: To go to your original question, how well is the 103 00:05:14,360 --> 00:05:17,359 Speaker 1: market price in the outlook, I would still say, broadly speaking, terribly. 104 00:05:18,160 --> 00:05:20,480 Speaker 1: Looking at US equities doesn't give you a good picture 105 00:05:20,480 --> 00:05:24,120 Speaker 1: for global equities. European equities is viewed, as you've described, 106 00:05:24,160 --> 00:05:26,920 Speaker 1: have had a terrible time at horrid time. Valuations there 107 00:05:26,920 --> 00:05:30,480 Speaker 1: are you look incredibly low relative to the US. There 108 00:05:30,520 --> 00:05:32,599 Speaker 1: are good reasons for that. That still doesn't mean that 109 00:05:32,600 --> 00:05:35,200 Speaker 1: they're cheap even at these levels. But you know a 110 00:05:35,240 --> 00:05:39,039 Speaker 1: lot of assets, certainly in U S equity space, really 111 00:05:39,080 --> 00:05:43,480 Speaker 1: have not taken account of the probability distribution of how 112 00:05:43,480 --> 00:05:45,200 Speaker 1: this will play out, but also taken account of the 113 00:05:45,279 --> 00:05:47,600 Speaker 1: damage that has been done and will continue to be 114 00:05:47,600 --> 00:05:50,800 Speaker 1: done to economies and business models. James, they just looked 115 00:05:50,880 --> 00:05:52,800 Speaker 1: and you can do this, folks in the Bloomberg, which 116 00:05:52,839 --> 00:05:56,200 Speaker 1: is magical. You know, a large shirt of the value 117 00:05:56,240 --> 00:05:59,279 Speaker 1: line geometric index, which is an old war horse, and 118 00:05:59,279 --> 00:06:02,760 Speaker 1: there's some really interesting mathematics and takes out a lot 119 00:06:02,800 --> 00:06:05,440 Speaker 1: of the emotion, a lot of the dynamics of the 120 00:06:05,520 --> 00:06:09,200 Speaker 1: movable feast of all these big capped stacks. It is 121 00:06:09,240 --> 00:06:13,159 Speaker 1: extremely well contained and it is, as you said earlier, 122 00:06:13,440 --> 00:06:17,279 Speaker 1: basically a pullback. How do you know when a ballmarket ends? 123 00:06:17,320 --> 00:06:20,240 Speaker 1: How do you know, as a fundamental guy, when a 124 00:06:20,279 --> 00:06:24,480 Speaker 1: ballmarket ends? You absolutely don't, Tom, there is the answer, 125 00:06:24,520 --> 00:06:28,040 Speaker 1: you know in the rear view mirror, I thought, I noted. 126 00:06:28,080 --> 00:06:30,159 Speaker 1: I can't quite remember who one of the cell side 127 00:06:30,400 --> 00:06:33,800 Speaker 1: analysts was drawing comparisons to this earning season in the 128 00:06:33,920 --> 00:06:36,719 Speaker 1: US with the q on two thousand earning season where 129 00:06:36,720 --> 00:06:40,800 Speaker 1: you've got actually solid looking earnings, lots of beats versus expectations, 130 00:06:40,839 --> 00:06:43,479 Speaker 1: and yet equity performance on a single name and across 131 00:06:43,520 --> 00:06:47,240 Speaker 1: the index basis was was absolutely diabolical. Nobody in March 132 00:06:47,320 --> 00:06:49,520 Speaker 1: two thousand or April two thousand was saying that was 133 00:06:49,560 --> 00:06:51,960 Speaker 1: the top of the NASDAC and it was over. It 134 00:06:52,080 --> 00:06:54,320 Speaker 1: was only probably the end of the year when you 135 00:06:54,320 --> 00:06:56,240 Speaker 1: could look back and go, yet that we're kind of 136 00:06:56,279 --> 00:06:59,080 Speaker 1: done here. That's that's the highs that we've seen, and 137 00:06:59,320 --> 00:07:01,120 Speaker 1: it takes a long time to get back to those 138 00:07:01,200 --> 00:07:05,440 Speaker 1: highs when the overvaluation is so extreme, so absolutely impossible 139 00:07:05,560 --> 00:07:08,360 Speaker 1: to know when it's the top, especially when you live 140 00:07:08,400 --> 00:07:12,440 Speaker 1: in a world of post hoc justification for extreme valuation, 141 00:07:12,800 --> 00:07:15,200 Speaker 1: just using rather glib narratives which don't stand up to 142 00:07:15,200 --> 00:07:16,960 Speaker 1: a lot of scrutiny, and and that that's been the 143 00:07:17,000 --> 00:07:19,320 Speaker 1: case for a lot of stock valuations in this period. 144 00:07:19,360 --> 00:07:21,200 Speaker 1: So I think we will only know in the rear 145 00:07:21,280 --> 00:07:24,320 Speaker 1: view mirror when it was that, when it was the top. Hey, 146 00:07:24,400 --> 00:07:27,920 Speaker 1: James Grazer, catch ump as always, James Anthony. There of 147 00:07:28,000 --> 00:07:35,160 Speaker 1: amity standard investments, Thank you, sir. Apples Yes Falling After 148 00:07:35,200 --> 00:07:38,280 Speaker 1: the company reported iPhone sales the missed estimates, the CEO 149 00:07:38,480 --> 00:07:42,240 Speaker 1: Tim Kirk cautioning that the latest iPhones who have has 150 00:07:42,280 --> 00:07:45,040 Speaker 1: been well received, but the company is facing some strains 151 00:07:45,280 --> 00:07:49,760 Speaker 1: due to the coronavirus. If you look at iPhone, we 152 00:07:49,800 --> 00:07:53,880 Speaker 1: are constrained today. How long we will be supply constrained, 153 00:07:54,280 --> 00:07:57,480 Speaker 1: it's hard to predict. We're supply constrained on Mark, we're 154 00:07:57,640 --> 00:08:02,720 Speaker 1: supplied constrained on and we're supply constrained on some Apple 155 00:08:02,760 --> 00:08:07,000 Speaker 1: watches as well. We're working really really hard, uh to 156 00:08:08,000 --> 00:08:10,560 Speaker 1: remedy those as quickly as we can, but at this 157 00:08:10,760 --> 00:08:14,360 Speaker 1: point I can't estimate when when we'll be out of that. 158 00:08:15,920 --> 00:08:17,679 Speaker 1: And that was the problem, and not just for Apple 159 00:08:17,800 --> 00:08:19,560 Speaker 1: but for many other companies that we put it after 160 00:08:19,600 --> 00:08:23,440 Speaker 1: the close. Tom it was about the outlook, the lack 161 00:08:23,480 --> 00:08:25,600 Speaker 1: of his ability that so many of these companies have. 162 00:08:25,840 --> 00:08:28,680 Speaker 1: I just call it all American uncertainty here around very 163 00:08:28,680 --> 00:08:31,440 Speaker 1: good financials as well. Danielize as an uber bull and 164 00:08:31,520 --> 00:08:35,160 Speaker 1: all this he has been across all of media talking 165 00:08:35,240 --> 00:08:38,160 Speaker 1: up out one year out, two years out, five years 166 00:08:38,480 --> 00:08:41,319 Speaker 1: Daniel lives. Can you write today for wed Bush with 167 00:08:41,480 --> 00:08:44,600 Speaker 1: a two and five year model or is the uncertainty 168 00:08:44,720 --> 00:08:48,760 Speaker 1: so great you've got to pull in your timeline? The 169 00:08:48,800 --> 00:08:51,120 Speaker 1: answer a great question me. I continue to sort of 170 00:08:51,200 --> 00:08:53,439 Speaker 1: view it as near term uncertainty. But let's say, in 171 00:08:53,480 --> 00:08:57,720 Speaker 1: the case of Apple, install base hasn't upgrade their phone 172 00:08:57,800 --> 00:09:00,160 Speaker 1: three and a half years, so I think the hand 173 00:09:00,240 --> 00:09:02,800 Speaker 1: up demand when I look out, I even think over 174 00:09:02,840 --> 00:09:05,680 Speaker 1: the next twelve, eighteen, twenty four months, there's a would 175 00:09:05,720 --> 00:09:08,360 Speaker 1: have more visibility when you look at Apple from an 176 00:09:08,400 --> 00:09:11,280 Speaker 1: install based perspective. But no doubt I mean that you 177 00:09:11,360 --> 00:09:13,960 Speaker 1: guys see farest through the trees here. Intact, we continue 178 00:09:13,960 --> 00:09:16,400 Speaker 1: to be bullish. You know, I looked down at the 179 00:09:16,480 --> 00:09:19,760 Speaker 1: people looking at ninety days out or even a year 180 00:09:19,800 --> 00:09:22,200 Speaker 1: out and if you take any of these juggernauts and 181 00:09:22,280 --> 00:09:27,280 Speaker 1: model them two years or particularly five years, it's shocking 182 00:09:27,360 --> 00:09:32,480 Speaker 1: the growth. Is that growthiness still there represented by revenue growth, 183 00:09:32,720 --> 00:09:36,160 Speaker 1: But can it come down the income statement and persist 184 00:09:36,400 --> 00:09:39,680 Speaker 1: out five years. Yeah. I think it's a golden age 185 00:09:39,720 --> 00:09:42,160 Speaker 1: for technology, which speaks to our bullish it's over the 186 00:09:42,240 --> 00:09:44,200 Speaker 1: last few years. I think we're only the middle innings. 187 00:09:44,679 --> 00:09:47,840 Speaker 1: You look at some of these names, the profitability profile 188 00:09:48,520 --> 00:09:51,479 Speaker 1: is dramatically higher. Look at Apple in terms of services, 189 00:09:51,520 --> 00:09:55,040 Speaker 1: I mean that gross margins about double the hardware business, 190 00:09:55,120 --> 00:09:57,240 Speaker 1: And I think what you're seeing is it's very easy, 191 00:09:57,440 --> 00:10:00,480 Speaker 1: especially in the jittery tape, to get my open and 192 00:10:00,559 --> 00:10:03,720 Speaker 1: nervous on some of these prints and guides. But for Apple, 193 00:10:03,760 --> 00:10:06,600 Speaker 1: the supercycle hasn't even started. And in terms of our 194 00:10:06,640 --> 00:10:10,040 Speaker 1: Asia checks, we think pre order activity is more than 195 00:10:10,120 --> 00:10:12,760 Speaker 1: two xs iPhone eleven. So I think that's why I 196 00:10:12,800 --> 00:10:15,720 Speaker 1: when I look at Apple and sort a knee jerk reaction. 197 00:10:15,760 --> 00:10:17,920 Speaker 1: You look at them next year or two and I 198 00:10:17,960 --> 00:10:20,679 Speaker 1: think this is ultimate A hundred fifty stock six and 199 00:10:20,760 --> 00:10:23,520 Speaker 1: nine months from now. So down what you think of 200 00:10:23,520 --> 00:10:28,080 Speaker 1: stocks down about from the September Hind, I think part 201 00:10:28,120 --> 00:10:32,160 Speaker 1: of it is just general nervousness going into the supercycle. 202 00:10:32,440 --> 00:10:34,880 Speaker 1: China obviously is the key, that's the hearts and lungs 203 00:10:34,920 --> 00:10:38,079 Speaker 1: of the overall cycle. And if you look, you know, 204 00:10:38,120 --> 00:10:40,840 Speaker 1: and you saw this quarter, I think there's just general 205 00:10:40,960 --> 00:10:44,640 Speaker 1: nervousness that you're not going to see that demand valuations 206 00:10:44,640 --> 00:10:47,640 Speaker 1: had a huge re rating and you start see perfection 207 00:10:47,800 --> 00:10:50,319 Speaker 1: built in, and I think you're seeing a risk off 208 00:10:50,559 --> 00:10:53,960 Speaker 1: overall intech just going into the next week. But I 209 00:10:54,040 --> 00:10:56,400 Speaker 1: believe it short lived. That That's why I still think 210 00:10:56,440 --> 00:10:58,680 Speaker 1: it's green light to own tech. And I think I 211 00:10:58,720 --> 00:11:01,480 Speaker 1: look out over next year and I think tech stocks 212 00:11:01,520 --> 00:11:05,760 Speaker 1: are up another twenty plus. That's been your code through 213 00:11:05,800 --> 00:11:07,480 Speaker 1: much of this year. Say, it feels like a rolling 214 00:11:08,160 --> 00:11:10,280 Speaker 1: cold down, and for much of this year it's been 215 00:11:10,320 --> 00:11:13,760 Speaker 1: dead on. But something happened in already September. Then some 216 00:11:13,800 --> 00:11:16,280 Speaker 1: people are asking whether we've already seen the pull forward 217 00:11:16,559 --> 00:11:19,280 Speaker 1: for Apple through the shutdown, and this is not about 218 00:11:19,320 --> 00:11:22,640 Speaker 1: waiting for the iPhone twolve. This is the payback for 219 00:11:22,679 --> 00:11:25,120 Speaker 1: a really decent quarter when the world was shut down. 220 00:11:25,360 --> 00:11:28,199 Speaker 1: What's your response to that? Then, Yeah, I've seen you've 221 00:11:28,240 --> 00:11:31,640 Speaker 1: seen the pull forward on Max and obviously on iPads. 222 00:11:32,000 --> 00:11:34,560 Speaker 1: You've not seen the pull forward and iPhones, and I 223 00:11:34,559 --> 00:11:37,400 Speaker 1: think that's really the key here. You're going into what 224 00:11:37,480 --> 00:11:41,280 Speaker 1: I've used once in a decade supercycle for Apple. So 225 00:11:41,440 --> 00:11:44,600 Speaker 1: that is still on the horizon, especial when it comes 226 00:11:44,600 --> 00:11:47,640 Speaker 1: to China, because you got the installments, it has an 227 00:11:47,720 --> 00:11:51,280 Speaker 1: upgrade their phone and the stack that gets read on services, 228 00:11:51,320 --> 00:11:54,200 Speaker 1: which next year that's going to be north of sixty billion. 229 00:11:54,800 --> 00:11:57,280 Speaker 1: And that continues to be the crux of the thesis 230 00:11:57,360 --> 00:11:59,920 Speaker 1: here in terms of that's playing out in this quarter 231 00:12:00,080 --> 00:12:04,280 Speaker 1: or doesn't change that whatsoever For me, Dan, One aspect 232 00:12:04,280 --> 00:12:06,959 Speaker 1: of the big tech earnings that strikes me as odd 233 00:12:07,120 --> 00:12:09,559 Speaker 1: is that they continue to trade as a monolith by 234 00:12:09,600 --> 00:12:12,320 Speaker 1: large In large part people talk about big tech in 235 00:12:12,400 --> 00:12:15,520 Speaker 1: tandem as though their fates are intertwined, and yet their 236 00:12:15,520 --> 00:12:18,520 Speaker 1: actual business models are vastly different, whether it's an AD 237 00:12:18,559 --> 00:12:21,920 Speaker 1: driven model, whether it's a Google search model, whatever it 238 00:12:21,960 --> 00:12:24,079 Speaker 1: may be. And then you have Amazon, which knocked it 239 00:12:24,080 --> 00:12:26,120 Speaker 1: out of the park in terms of projections, and people 240 00:12:26,120 --> 00:12:29,400 Speaker 1: still are punishing them. Do you expect divergence in the 241 00:12:29,400 --> 00:12:31,840 Speaker 1: fates of these shares and who will be the loser 242 00:12:32,120 --> 00:12:34,800 Speaker 1: in the next year? Yeah, I think maybe you saw 243 00:12:34,840 --> 00:12:37,480 Speaker 1: a little of that divergence with Google, especially over the 244 00:12:37,559 --> 00:12:40,199 Speaker 1: last three or six months, and obviously they knocked it 245 00:12:40,280 --> 00:12:43,440 Speaker 1: at the park last night. From an advertising perspective, now, 246 00:12:43,559 --> 00:12:46,280 Speaker 1: I do think a lot of that could be on 247 00:12:46,320 --> 00:12:49,400 Speaker 1: the antitrust as you start seeing more and more pressure 248 00:12:49,440 --> 00:12:52,520 Speaker 1: from antrusts going to next year. Specifically, if you see 249 00:12:52,520 --> 00:12:54,920 Speaker 1: a blue wave, the Googles and the facebooks, you know, 250 00:12:54,960 --> 00:12:58,199 Speaker 1: could potentially trade a little different than the Apples and 251 00:12:58,240 --> 00:13:00,920 Speaker 1: the Amazons and the platform play in terms of those 252 00:13:00,920 --> 00:13:04,000 Speaker 1: secular trends. But for now, you know, we do view 253 00:13:04,120 --> 00:13:06,040 Speaker 1: them as a group in terms of things that I 254 00:13:06,160 --> 00:13:09,559 Speaker 1: also put Microsoft in there. The platform play isn't the 255 00:13:09,640 --> 00:13:13,040 Speaker 1: stronger getting stronger, and I think you're seeing that in 256 00:13:13,080 --> 00:13:16,840 Speaker 1: this environment. COVID's accelerated the growth rates and the consumer 257 00:13:16,840 --> 00:13:19,920 Speaker 1: and the enterprise by one to two years, and I 258 00:13:19,960 --> 00:13:22,360 Speaker 1: think that's playing out here. Even though you'll see some 259 00:13:22,400 --> 00:13:25,959 Speaker 1: of the knee jerk reactions on well called Sandbad Guide 260 00:13:26,000 --> 00:13:29,199 Speaker 1: and from the likes of Amazon well Dan, they're increasingly 261 00:13:29,200 --> 00:13:31,320 Speaker 1: being treated as the haven investments because of what you 262 00:13:31,320 --> 00:13:34,160 Speaker 1: talk about the stronger getting stronger, and yet the valuations, 263 00:13:34,440 --> 00:13:37,560 Speaker 1: the multiples are getting higher and higher, and people are saying, well, 264 00:13:37,559 --> 00:13:40,320 Speaker 1: it makes sense with such low yields. How much would 265 00:13:40,360 --> 00:13:42,679 Speaker 1: you change your call if benchmark rates in the US 266 00:13:42,720 --> 00:13:45,840 Speaker 1: went up. Yeah, I think that could change things. But 267 00:13:46,280 --> 00:13:49,120 Speaker 1: I also think what's starting to happen is investors of 268 00:13:49,200 --> 00:13:51,720 Speaker 1: you in them some of the parts you look at Amazon, 269 00:13:51,800 --> 00:13:54,839 Speaker 1: e WUS, e commerce, you look at you know, an 270 00:13:54,880 --> 00:13:58,560 Speaker 1: Apple from those services and from a hardware perspective. So 271 00:13:58,800 --> 00:14:00,800 Speaker 1: I do think we'll start to happen is in terms 272 00:14:00,880 --> 00:14:03,600 Speaker 1: of the breakup, talk to some of the parts, the 273 00:14:03,679 --> 00:14:06,559 Speaker 1: reratings that you've seen. I think that's the key, and 274 00:14:06,600 --> 00:14:09,200 Speaker 1: also they are their safety blank and names in the 275 00:14:09,400 --> 00:14:12,640 Speaker 1: category five storm. But there on the other side you 276 00:14:12,679 --> 00:14:14,439 Speaker 1: start to see I just start seeing more of a 277 00:14:14,559 --> 00:14:17,719 Speaker 1: risk on trade. Tech continues to lead the market high 278 00:14:17,800 --> 00:14:20,560 Speaker 1: and I don't see that changing here in terms of 279 00:14:20,600 --> 00:14:22,960 Speaker 1: just the shifts that we're seeing, and I think it's 280 00:14:22,960 --> 00:14:26,080 Speaker 1: having through earning season. Dan one of the great questions 281 00:14:26,200 --> 00:14:29,560 Speaker 1: here and I just did a quick Pharaoh interpolation of 282 00:14:29,640 --> 00:14:33,720 Speaker 1: the share buyback program of Apple, and folks basically out 283 00:14:33,720 --> 00:14:37,040 Speaker 1: ten years, they go back to where they were in 284 00:14:37,040 --> 00:14:41,200 Speaker 1: in terms of share, number of shares outstanding. Dana's other 285 00:14:41,240 --> 00:14:44,320 Speaker 1: companies have tried that, Intel IBM and that story didn't 286 00:14:44,360 --> 00:14:47,720 Speaker 1: work out. So good. Is Apple correct to be so 287 00:14:47,760 --> 00:14:51,760 Speaker 1: aggressive of buying back shares. It's hard to argue with 288 00:14:51,800 --> 00:14:55,200 Speaker 1: the strategy in terms of what you've seen on the 289 00:14:55,280 --> 00:14:59,880 Speaker 1: net neutral cash policy, they're not acquisitive and the body 290 00:15:00,040 --> 00:15:02,560 Speaker 1: back combined with and again the reason I think it 291 00:15:02,600 --> 00:15:05,040 Speaker 1: hasn't worked for some of those companies they didn't have 292 00:15:05,080 --> 00:15:09,280 Speaker 1: a golden installed base and and anything close to what 293 00:15:09,400 --> 00:15:13,120 Speaker 1: the iPhone is within nineties nine embercent renewal rate. And 294 00:15:13,120 --> 00:15:16,040 Speaker 1: I think just given they have more cash in some countries, 295 00:15:16,120 --> 00:15:19,080 Speaker 1: they're not going to acquire Well, that's from an investor perspective, 296 00:15:19,120 --> 00:15:21,080 Speaker 1: I think the right thing to do. I happen to 297 00:15:21,120 --> 00:15:24,320 Speaker 1: agree with you. But what I find stunning is the 298 00:15:24,360 --> 00:15:29,040 Speaker 1: margins of the growing service sector. Do they sustain those 299 00:15:29,160 --> 00:15:34,400 Speaker 1: forty fifty even margins in service? Well? I do, and 300 00:15:34,440 --> 00:15:37,800 Speaker 1: that's why I think the services business, which just take 301 00:15:37,960 --> 00:15:39,640 Speaker 1: and we said some of the parts, I think that 302 00:15:39,760 --> 00:15:44,280 Speaker 1: services business is worth nine to nine billion, and that's 303 00:15:44,280 --> 00:15:45,920 Speaker 1: been a key part of the re rating in the 304 00:15:45,960 --> 00:15:48,560 Speaker 1: stock over the last six and nine months as it's 305 00:15:48,560 --> 00:15:51,680 Speaker 1: held up like Rocket Gibraltar. If you've looked at the 306 00:15:51,760 --> 00:15:55,520 Speaker 1: services business and I think those margins teflon like and 307 00:15:55,640 --> 00:15:58,960 Speaker 1: continue to I think stay where they are or potentially 308 00:15:58,960 --> 00:16:01,400 Speaker 1: go higher. And that's the key part of the bull thesis. 309 00:16:02,160 --> 00:16:04,200 Speaker 1: What do you make down of the fact that China 310 00:16:04,280 --> 00:16:08,400 Speaker 1: sales of the iPhone and just in general dropped revenue 311 00:16:08,400 --> 00:16:11,040 Speaker 1: for Apple? The idea that perhaps this has to do 312 00:16:11,120 --> 00:16:12,920 Speaker 1: with the new phone coming out, but even more so 313 00:16:13,040 --> 00:16:16,440 Speaker 1: perhaps the tensions that are growing between China and the 314 00:16:16,520 --> 00:16:19,360 Speaker 1: US when it comes to tech. Yeah, I think tensions 315 00:16:19,400 --> 00:16:22,800 Speaker 1: that's been there posed a child for US China trade war, 316 00:16:23,040 --> 00:16:26,120 Speaker 1: just overall cold tech war. But I think this quarter 317 00:16:26,200 --> 00:16:29,080 Speaker 1: is a throwing quarter for China because it all comes 318 00:16:29,120 --> 00:16:32,920 Speaker 1: down to you see a pause ahead of iPhone twelve. 319 00:16:33,360 --> 00:16:35,840 Speaker 1: I mean, we believe you could see growth in China 320 00:16:35,920 --> 00:16:38,440 Speaker 1: double digits start in the summer quarter. That's why I 321 00:16:38,440 --> 00:16:42,000 Speaker 1: wouldn't read into this. In other words, it's a scary headline. 322 00:16:42,360 --> 00:16:45,120 Speaker 1: Stock will be down. Nietzscherk. I think three months from 323 00:16:45,120 --> 00:16:48,240 Speaker 1: now we sit here, we're talking about how is China 324 00:16:48,360 --> 00:16:51,120 Speaker 1: that strong in terms of iPhone twelve. That's based on 325 00:16:51,160 --> 00:16:53,800 Speaker 1: what we see in terms of checks and pent up demand, 326 00:16:55,160 --> 00:16:56,960 Speaker 1: and we'll see you in three months. The bull is 327 00:16:57,000 --> 00:16:59,960 Speaker 1: still a bull. I have wet bush on the site, 328 00:17:00,080 --> 00:17:06,320 Speaker 1: the blanket in a cap five storm right now, Lindsay 329 00:17:06,320 --> 00:17:08,520 Speaker 1: pigs that joins us right now from Stapleward thrill that 330 00:17:08,560 --> 00:17:11,000 Speaker 1: she could join this morning, Lindsay, I want to go 331 00:17:11,119 --> 00:17:13,879 Speaker 1: right to that. Michael McKee showed the oddities of the moment. 332 00:17:14,240 --> 00:17:17,240 Speaker 1: A savings rate that is double digit, that's not normal 333 00:17:17,359 --> 00:17:22,080 Speaker 1: for America. What are the ramifications of that high savings rate. No, 334 00:17:22,240 --> 00:17:25,160 Speaker 1: it's certainly not normal. And when we see American squirreling 335 00:17:25,160 --> 00:17:28,399 Speaker 1: away that type of cash, that that amount of wealth, 336 00:17:28,760 --> 00:17:31,680 Speaker 1: it really speaks to the uncertainty that the average American 337 00:17:31,760 --> 00:17:35,040 Speaker 1: is feeling about their financial footing going forward. A fourteen 338 00:17:35,080 --> 00:17:39,560 Speaker 1: percent savings rate translates into over two trillion in accumulated 339 00:17:39,560 --> 00:17:42,960 Speaker 1: wealth and accumulated savings that can be deployed out into 340 00:17:43,000 --> 00:17:46,120 Speaker 1: the marketplace. But right now, consumers are looking out at 341 00:17:46,160 --> 00:17:48,639 Speaker 1: the recovery, they're looking out at the prospect of a 342 00:17:48,680 --> 00:17:53,280 Speaker 1: resurgence of the virus and potential further restrictions or shutdowns, 343 00:17:53,520 --> 00:17:55,920 Speaker 1: and the consumer is very nervous, and in fact, rather 344 00:17:55,960 --> 00:17:59,800 Speaker 1: than immediately spending that wealth, they're deploying that to their 345 00:17:59,800 --> 00:18:05,400 Speaker 1: savings account and sitting on that additional savings. Lizzie just quickly, 346 00:18:05,480 --> 00:18:08,760 Speaker 1: of course, the distribution for those savings not equal. Where 347 00:18:08,760 --> 00:18:10,760 Speaker 1: in society is that money sitting right now and how 348 00:18:10,840 --> 00:18:14,320 Speaker 1: likely is it that it will be spent? Well, I 349 00:18:14,320 --> 00:18:16,560 Speaker 1: do think there's a disproportionate amount of the savings that 350 00:18:16,720 --> 00:18:20,320 Speaker 1: is being held at the top wrong of the income ladder, 351 00:18:20,359 --> 00:18:24,879 Speaker 1: But with forbearance, with generous unemployment benefits, there is a 352 00:18:24,960 --> 00:18:28,080 Speaker 1: sizeable amount of wealth that has been captured even in 353 00:18:28,119 --> 00:18:31,080 Speaker 1: the middle or bottom wrongs of the income ladder. So yes, 354 00:18:31,119 --> 00:18:33,240 Speaker 1: there is a little bit of a skew towards the top. 355 00:18:33,520 --> 00:18:35,600 Speaker 1: But I do think that when we look at overall, 356 00:18:35,640 --> 00:18:38,600 Speaker 1: the average American may be better off than they were 357 00:18:38,720 --> 00:18:42,800 Speaker 1: pre pandemic, or at least on somewhat stronger financial footing. So, 358 00:18:42,840 --> 00:18:45,000 Speaker 1: going back to a point you made earlier, I do 359 00:18:45,080 --> 00:18:48,040 Speaker 1: think that this looming fiscal cliff that many are concerned 360 00:18:48,040 --> 00:18:51,960 Speaker 1: about may not be quite as ominous as previously assessed 361 00:18:52,040 --> 00:18:55,280 Speaker 1: because of that additional savings or that additional wealth that 362 00:18:55,320 --> 00:18:57,560 Speaker 1: the average American is facing right now. That's where I 363 00:18:57,560 --> 00:18:59,920 Speaker 1: wanted to go if we could game out how long 364 00:19:00,000 --> 00:19:03,320 Speaker 1: long households have to maintain spending or even just reduce 365 00:19:03,400 --> 00:19:07,640 Speaker 1: it a little bit, perhaps to edify these these forecasts 366 00:19:07,680 --> 00:19:11,280 Speaker 1: for a blockbuster holiday season, how long do we have 367 00:19:11,760 --> 00:19:14,120 Speaker 1: before we sort of hit the wall where we either 368 00:19:14,200 --> 00:19:16,800 Speaker 1: need more fiscal support or we actually see the slowdown 369 00:19:16,840 --> 00:19:19,240 Speaker 1: that so many people have predicted would already have happened 370 00:19:19,320 --> 00:19:22,640 Speaker 1: and yet hasn't. Well, if we assume that the economy 371 00:19:22,640 --> 00:19:26,240 Speaker 1: continues at this pace, the consumer does have several months 372 00:19:26,240 --> 00:19:28,919 Speaker 1: to eat through that accumulated wealth that should carry us 373 00:19:29,240 --> 00:19:32,000 Speaker 1: well into the first quarter, even independent of a fifth 374 00:19:32,080 --> 00:19:35,919 Speaker 1: round stimulus package. But we also have to recognize that 375 00:19:35,960 --> 00:19:38,520 Speaker 1: the virus is far from contained and that remains the 376 00:19:38,600 --> 00:19:41,160 Speaker 1: number one risk of the economy, or should I say, 377 00:19:41,160 --> 00:19:43,880 Speaker 1: the policies aimed at stemming the spread of the virus 378 00:19:43,920 --> 00:19:46,359 Speaker 1: remain the number one risk. And if in fact, we 379 00:19:46,440 --> 00:19:48,720 Speaker 1: do see a resurgence towards the end of the year 380 00:19:48,840 --> 00:19:53,440 Speaker 1: leading to further restrictions, further lockdowns, resulting in further business closures, 381 00:19:53,520 --> 00:19:57,840 Speaker 1: job losses, lost income, revenue opportunities, well, we could see 382 00:19:57,840 --> 00:20:01,560 Speaker 1: growth regardless of the savings or that wealth accumulation. We 383 00:20:01,640 --> 00:20:05,920 Speaker 1: could see growth slow significantly or even fall into net 384 00:20:05,960 --> 00:20:09,720 Speaker 1: negative territory depending on the depth and duration of that 385 00:20:09,840 --> 00:20:13,760 Speaker 1: rebound or that resurgence of the virus. Lizzie find a 386 00:20:13,840 --> 00:20:15,919 Speaker 1: question for me. I think it's the biggest question for 387 00:20:15,960 --> 00:20:18,520 Speaker 1: any economist in the United Stace right now. Does this 388 00:20:18,640 --> 00:20:21,000 Speaker 1: U S economy in this recovery go the way of 389 00:20:21,119 --> 00:20:24,800 Speaker 1: China or go the way Europe? By your end, I 390 00:20:25,160 --> 00:20:27,119 Speaker 1: think right now, the risk is that we see a 391 00:20:27,160 --> 00:20:30,359 Speaker 1: similar scenario that was playing out in Europe right now again, 392 00:20:30,400 --> 00:20:33,840 Speaker 1: that second round resurgence of the virus really undermining the 393 00:20:33,920 --> 00:20:36,680 Speaker 1: improvement that we've seen July the September, that was a 394 00:20:36,720 --> 00:20:40,639 Speaker 1: welcome step in the right direction, a record bounds, but 395 00:20:40,680 --> 00:20:44,359 Speaker 1: again reflecting the fact that we're simply reopening the economy, 396 00:20:44,400 --> 00:20:48,440 Speaker 1: so really emphasizing the power of reopening the economy bouncing 397 00:20:48,440 --> 00:20:50,359 Speaker 1: off of those low, low levels that we saw in 398 00:20:50,400 --> 00:20:53,320 Speaker 1: the second quarter when businesses were forced to close and 399 00:20:53,400 --> 00:20:57,280 Speaker 1: individuals were forced to to stay within the confines of 400 00:20:57,320 --> 00:21:01,120 Speaker 1: their home, and it really highlights the ongoing detrimental impact 401 00:21:01,160 --> 00:21:05,080 Speaker 1: of keeping the economy closed. Should we see new policies 402 00:21:05,520 --> 00:21:08,359 Speaker 1: forced the same scenario as we head towards the end 403 00:21:08,359 --> 00:21:11,560 Speaker 1: of the year, And that's the issue right there, Lindsay 404 00:21:11,760 --> 00:21:13,800 Speaker 1: right to catch out with you, gets ahead from you Lindsay. 405 00:21:13,840 --> 00:21:20,720 Speaker 1: P Exada State Fold chief economist Rod Felson with us 406 00:21:20,760 --> 00:21:22,679 Speaker 1: with Prudential. I want to get right into this because 407 00:21:22,960 --> 00:21:25,119 Speaker 1: this is the topic and one of the topics of 408 00:21:25,240 --> 00:21:28,480 Speaker 1: thinking into the weekend around all the crowded news. He 409 00:21:28,600 --> 00:21:32,359 Speaker 1: is Vice chair Prudential Financial Lisa and Rob Fells and 410 00:21:32,480 --> 00:21:37,280 Speaker 1: really simply is considering getting people back to the office 411 00:21:37,640 --> 00:21:41,680 Speaker 1: or is it a a permanence to this work from home? Rob, 412 00:21:41,760 --> 00:21:45,080 Speaker 1: Lisa and I have heard forty two different opinions on this. 413 00:21:45,720 --> 00:21:49,359 Speaker 1: What is the learning curve right now of people thinking 414 00:21:49,400 --> 00:21:53,560 Speaker 1: about this? What's the thinking now versus what the thinking 415 00:21:53,720 --> 00:21:59,720 Speaker 1: was in May? Yeah, so Tom, I think the thinking 416 00:21:59,800 --> 00:22:01,280 Speaker 1: is that we're not at a spread and we're in 417 00:22:01,320 --> 00:22:04,640 Speaker 1: a marathon. And with particularly the most recent data coming out, 418 00:22:04,720 --> 00:22:07,520 Speaker 1: it looks that many companies, most I would say, are 419 00:22:07,680 --> 00:22:10,160 Speaker 1: actually extending out even further the time that they think 420 00:22:10,160 --> 00:22:13,240 Speaker 1: they're going to be in this remote environment. We've done 421 00:22:13,280 --> 00:22:16,440 Speaker 1: that recently. We told our employees that will be in 422 00:22:16,560 --> 00:22:18,600 Speaker 1: earlier than July of the next year that we're looking 423 00:22:18,640 --> 00:22:21,119 Speaker 1: to have them come back in any kind of material way. 424 00:22:21,600 --> 00:22:24,200 Speaker 1: And I think that's a reflection of a couple of things. 425 00:22:24,320 --> 00:22:26,680 Speaker 1: One is, in a survey that we did recently, it 426 00:22:26,960 --> 00:22:31,320 Speaker 1: indicates that actually remote work is working. Um. It's relieving 427 00:22:31,359 --> 00:22:33,640 Speaker 1: the stress that a lot of these individuals are experiencing 428 00:22:33,720 --> 00:22:38,440 Speaker 1: from the pandemic of child care. But you know, helping care, 429 00:22:38,440 --> 00:22:41,560 Speaker 1: balancing work life, UH and doing it doing it in 430 00:22:41,600 --> 00:22:43,720 Speaker 1: a remote environment has actually helped to ease some of 431 00:22:43,720 --> 00:22:46,520 Speaker 1: the pressure associated with that. UH. And the second thing 432 00:22:46,560 --> 00:22:48,720 Speaker 1: is that productivity is actually held up quite well in 433 00:22:48,800 --> 00:22:53,119 Speaker 1: a remote environment. UM. Sixty percent of our survey indicated 434 00:22:53,160 --> 00:22:55,840 Speaker 1: that their productivity is actually at or above where it 435 00:22:55,960 --> 00:22:59,359 Speaker 1: was you at the office. What I'm hearing in folks, 436 00:22:59,400 --> 00:23:02,560 Speaker 1: this goes to a great team of Bloomberg surveillance worldwide. 437 00:23:02,560 --> 00:23:05,359 Speaker 1: I really can't say enough about you know, you see 438 00:23:05,359 --> 00:23:07,400 Speaker 1: the three of the four of us on arrowhere, there's 439 00:23:08,200 --> 00:23:11,440 Speaker 1: people behind us trying to make the sausage every day. 440 00:23:11,480 --> 00:23:16,240 Speaker 1: And Rob, what I'm hearing is the the employees actually 441 00:23:16,359 --> 00:23:20,680 Speaker 1: feel they're working more hours at home than they were 442 00:23:20,720 --> 00:23:25,840 Speaker 1: in the office excommute. Is that what your research shows absolutely, 443 00:23:25,880 --> 00:23:28,840 Speaker 1: Tom h to two things on that. One is there's 444 00:23:29,080 --> 00:23:31,879 Speaker 1: three Actually there's been a blurring of the of the 445 00:23:31,920 --> 00:23:33,879 Speaker 1: start in the end of the work day. Uh. And 446 00:23:33,920 --> 00:23:35,600 Speaker 1: it's tending to start a little earlier and end a 447 00:23:35,600 --> 00:23:41,679 Speaker 1: little later to to to um. In the survey, sixty 448 00:23:41,680 --> 00:23:46,880 Speaker 1: five individuals have taken sixty less vacation year to date 449 00:23:46,960 --> 00:23:50,520 Speaker 1: than they did than they did uh last year uh 450 00:23:50,560 --> 00:23:55,320 Speaker 1: and three on average, they're commuting an hour less every day, 451 00:23:55,359 --> 00:23:58,840 Speaker 1: but that they're reinvesting back into work, so it's not 452 00:23:58,960 --> 00:24:01,280 Speaker 1: more leisure time, it's actually more work time. Yeah, I 453 00:24:01,280 --> 00:24:02,720 Speaker 1: will say Rob. There was a story in the Wall 454 00:24:02,720 --> 00:24:05,640 Speaker 1: Street Journal today, the lead of which was what would 455 00:24:05,680 --> 00:24:07,600 Speaker 1: you do with an extra hour each day? And the 456 00:24:07,600 --> 00:24:10,760 Speaker 1: answer is for many people work more. Basically, this is 457 00:24:10,800 --> 00:24:13,200 Speaker 1: unsustainable going forward. A lot of people, if you talk 458 00:24:13,280 --> 00:24:16,040 Speaker 1: to them, they are medicating with alcohol in the evenings. 459 00:24:16,080 --> 00:24:18,080 Speaker 1: They're wondering what they're going to do with their children. 460 00:24:18,320 --> 00:24:22,439 Speaker 1: They're not necessarily feeling the satisfaction that comes from working 461 00:24:22,520 --> 00:24:24,960 Speaker 1: from home. When it comes to this beautiful image of 462 00:24:25,000 --> 00:24:27,639 Speaker 1: not having to commute, do you see this as the 463 00:24:27,720 --> 00:24:30,240 Speaker 1: new reality or do you see this as people hanging 464 00:24:30,280 --> 00:24:32,520 Speaker 1: on with all that they can given the fact that 465 00:24:32,560 --> 00:24:35,400 Speaker 1: they don't have options to go on vacation anyway, And 466 00:24:35,440 --> 00:24:37,040 Speaker 1: it is okay for now but then they're going to 467 00:24:37,119 --> 00:24:39,479 Speaker 1: go back to the office. Yeah, listen, it's a grind. 468 00:24:39,640 --> 00:24:42,159 Speaker 1: There's absolutely no argument about that. And that comes through 469 00:24:42,160 --> 00:24:44,719 Speaker 1: our survey as well. And you know, well remote has 470 00:24:44,760 --> 00:24:48,240 Speaker 1: helped with the stress associated with the pandemic, the reality 471 00:24:48,320 --> 00:24:50,760 Speaker 1: is that there's still very stressful for individuals. You know. 472 00:24:50,840 --> 00:24:52,919 Speaker 1: I think a couple of thoughts on that. One is 473 00:24:53,680 --> 00:24:56,720 Speaker 1: if I think about the productivity gains that we're getting, uh, 474 00:24:56,760 --> 00:24:58,439 Speaker 1: you know, and how much of that can be retained 475 00:24:58,480 --> 00:25:01,320 Speaker 1: long term. I actually think there is a real productivity 476 00:25:01,359 --> 00:25:03,439 Speaker 1: enhancement here. There is an acceleration and you know, what 477 00:25:03,480 --> 00:25:05,680 Speaker 1: we call the future work the adoption of technology and 478 00:25:05,760 --> 00:25:09,840 Speaker 1: digitization processes out of necessity, and that's going to be sustainable. 479 00:25:09,880 --> 00:25:12,480 Speaker 1: But the remote and and and then secondly the remote 480 00:25:12,520 --> 00:25:15,440 Speaker 1: piece of it. You know, our surveys indicate that to 481 00:25:16,119 --> 00:25:18,560 Speaker 1: three quarters of the individuals that were survey indicated that 482 00:25:18,640 --> 00:25:22,400 Speaker 1: they would like to continue to to have some element 483 00:25:22,520 --> 00:25:24,520 Speaker 1: of remote work on a go forward basis. Now, I 484 00:25:24,520 --> 00:25:26,520 Speaker 1: don't think anyone wants to be fully remote on to 485 00:25:26,560 --> 00:25:28,119 Speaker 1: go forward is a most people don't want to be 486 00:25:28,119 --> 00:25:31,200 Speaker 1: fully remote on to go forward basis. But both our 487 00:25:31,240 --> 00:25:34,639 Speaker 1: internal company surveys and the external survey indicate that people 488 00:25:34,680 --> 00:25:36,840 Speaker 1: have gotten used to this remote and think it's actually 489 00:25:37,200 --> 00:25:41,840 Speaker 1: uh a an enhancement to work life balance uh and 490 00:25:41,880 --> 00:25:44,080 Speaker 1: they'd like some element of that. But going forward, and 491 00:25:44,080 --> 00:25:46,320 Speaker 1: I think that when we return to the workplace, therefore, 492 00:25:46,359 --> 00:25:48,720 Speaker 1: it's gonna be a very different experience in a very 493 00:25:48,760 --> 00:25:52,879 Speaker 1: different place for individuals because it will I think having 494 00:25:53,040 --> 00:25:55,480 Speaker 1: hybrid models of remote on a go forward basis that 495 00:25:55,520 --> 00:25:58,159 Speaker 1: look very different than what we have predependemic. A lot 496 00:25:58,200 --> 00:26:00,480 Speaker 1: of people would agree with you, But I want to 497 00:26:00,520 --> 00:26:02,439 Speaker 1: go back to something that Bruce Flatt, who is the 498 00:26:02,480 --> 00:26:05,320 Speaker 1: CEO of Brookfield as Management, said, and it was what 499 00:26:05,440 --> 00:26:08,000 Speaker 1: we heard earlier in this segment where he said that 500 00:26:08,000 --> 00:26:09,560 Speaker 1: if you go on the street, ask nine out of 501 00:26:09,600 --> 00:26:12,119 Speaker 1: ten people, they want to go back to the office. 502 00:26:12,160 --> 00:26:15,320 Speaker 1: They want to have some sort of communication face to 503 00:26:15,400 --> 00:26:19,320 Speaker 1: face with colleagues. Do you feel like from your conversations 504 00:26:19,320 --> 00:26:22,080 Speaker 1: in your research, people want to be in urban centers, 505 00:26:22,080 --> 00:26:23,800 Speaker 1: even if they're not going to be necessarily going to 506 00:26:23,840 --> 00:26:26,879 Speaker 1: work every day. They want to be able to see 507 00:26:27,000 --> 00:26:30,399 Speaker 1: and physically experience one another and the world at large. 508 00:26:30,480 --> 00:26:33,080 Speaker 1: Or do you think that perhaps this is wishful thinking 509 00:26:33,119 --> 00:26:35,600 Speaker 1: by a real estate investor, Well, it is a real 510 00:26:35,760 --> 00:26:38,920 Speaker 1: estate in faster. So a good note on that to 511 00:26:38,920 --> 00:26:42,360 Speaker 1: to two points one is uh, right now in the pandemic, 512 00:26:42,359 --> 00:26:44,600 Speaker 1: our surveys are not indicating that people want to get 513 00:26:44,640 --> 00:26:47,320 Speaker 1: back into the office place. Actually, our own internal survey 514 00:26:47,359 --> 00:26:49,439 Speaker 1: eighty seven percent of our employee said we do not 515 00:26:49,640 --> 00:26:52,600 Speaker 1: want to go back. Uh. And it's similarly high percentage 516 00:26:52,680 --> 00:26:55,640 Speaker 1: individuals and our external surveys have indicated that they at 517 00:26:55,640 --> 00:26:57,320 Speaker 1: this point in time don't want to go back. Now 518 00:26:57,680 --> 00:26:59,600 Speaker 1: post the pandemic, do they want to go back into 519 00:26:59,600 --> 00:27:03,840 Speaker 1: the work is absolutely, but again in a modified fashion. UM. 520 00:27:04,080 --> 00:27:06,800 Speaker 1: I'll refer to our own internal survey we have before 521 00:27:06,880 --> 00:27:11,520 Speaker 1: the pandemic, about one of our people worked on either 522 00:27:11,560 --> 00:27:14,840 Speaker 1: in three or more days a week remote UM. When 523 00:27:14,840 --> 00:27:17,480 Speaker 1: we did a survey uh during just you know, more 524 00:27:17,480 --> 00:27:21,800 Speaker 1: recently post a pandemic, UM, three quarters of our employees 525 00:27:21,840 --> 00:27:24,240 Speaker 1: indicated that they want to be remote three or more 526 00:27:24,320 --> 00:27:27,320 Speaker 1: days a week. I be two percent of our employees 527 00:27:27,320 --> 00:27:29,680 Speaker 1: said they want to be remote to or more days 528 00:27:29,680 --> 00:27:32,240 Speaker 1: a week. Now there was a small percentage that wanted 529 00:27:32,240 --> 00:27:34,479 Speaker 1: to be fully remote. So I think people missed the 530 00:27:34,560 --> 00:27:38,399 Speaker 1: human interaction associated with being at the workplace. Absolutely, that 531 00:27:38,440 --> 00:27:40,400 Speaker 1: doesn't mean they want to return to a five days. 532 00:27:41,840 --> 00:27:43,639 Speaker 1: This issue is not going to go away. Rob. We 533 00:27:43,640 --> 00:27:45,840 Speaker 1: would love to have you on again. Rob Fails and 534 00:27:45,920 --> 00:27:49,679 Speaker 1: with decades of experience in real estate, working of course 535 00:27:49,720 --> 00:27:52,760 Speaker 1: with Prudential Financial their commitment to Newark, New Jersey. He 536 00:27:53,000 --> 00:27:56,680 Speaker 1: is their vice chair. Thanks for listening to the Bloomberg 537 00:27:56,680 --> 00:28:02,640 Speaker 1: Surveillance podcast. Subscribe and listen to interviews on Apple Podcasts, SoundCloud, 538 00:28:03,000 --> 00:28:07,240 Speaker 1: or whichever podcast platform you prefer. I'm on Twitter at 539 00:28:07,280 --> 00:28:11,520 Speaker 1: Tom Keene before the podcast. You can always catch us worldwide. 540 00:28:12,000 --> 00:28:13,080 Speaker 1: I'm Bloomberg Radio