WEBVTT - Surveillance: Weak US GDP with Pingle (Podcast) 0:00:05.080 --> 0:00:09.200 Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane. Along 0:00:09.200 --> 0:00:13.200 with Jonathan Ferrell and Lisa Abramowitz. Daily we bring you 0:00:13.280 --> 0:00:18.600 insight from the best and economics, finance, investment, and international relations. 0:00:18.840 --> 0:00:23.799 To find Bloomberg Surveillance on Apple podcast, SoundCloud, Bloomberg dot Com, 0:00:23.920 --> 0:00:30.480 and of course, on the Bloomberg terminal. Jonathan Pinkel joins 0:00:30.520 --> 0:00:33.400 us out chief US economist at UBS with a really 0:00:33.440 --> 0:00:36.240 concise note on all of this. Jonathan, do you look 0:00:36.240 --> 0:00:38.920 at this as gospel or do you believe it will 0:00:38.960 --> 0:00:42.040 be amended in a second and third Look, well, I 0:00:42.560 --> 0:00:45.720 so gospel is a little strong. Um. You know, these 0:00:45.800 --> 0:00:49.280 numbers do revise. Um. I think the key takeaway though, is, 0:00:49.600 --> 0:00:51.400 you know, I mean chere Powell tried to downplay this 0:00:51.400 --> 0:00:54.280 a little bit yesterday in his you know, post meeting 0:00:54.320 --> 0:00:56.880 press conference, but I mean, you know, going back to 0:00:56.880 --> 0:00:59.160 what Mike said, I mean, and we've been pointing out, 0:00:59.160 --> 0:01:01.160 I mean for Q two, you you know, the guts 0:01:01.160 --> 0:01:03.279 of the report, you know, just just look weak. I mean, 0:01:03.280 --> 0:01:08.520 real personal consumption expenditures rising one per cent um is soft. Um. 0:01:08.560 --> 0:01:10.480 You know, coming into this year, we all thought the 0:01:10.560 --> 0:01:14.000 abundant household savings, pent up demand hail winds would be 0:01:14.520 --> 0:01:17.480 more of a support. Um and and and and to 0:01:17.520 --> 0:01:20.880 your point earlier Tom with with you know, prices eroding 0:01:20.959 --> 0:01:24.120 real incomes. Um, you know, the consumers just shaped up 0:01:24.200 --> 0:01:27.640 much more sluggishly than expected. And I and that I 0:01:27.640 --> 0:01:30.200 think is sort of the main takeaway from from the 0:01:30.360 --> 0:01:33.559 Q two GDP report, Jonathan mrs DI Inflation all over, 0:01:33.720 --> 0:01:36.800 Basically the idea that we're seeing inflation remaining high and 0:01:36.880 --> 0:01:40.560 going higher, with that GDP price component coming in at 0:01:40.600 --> 0:01:43.440 the hottest going back to one, at the same time 0:01:43.440 --> 0:01:46.040 that you're getting what some would call a technical recession 0:01:46.080 --> 0:01:49.240 of two straight quarters of negative growth. How much can 0:01:49.240 --> 0:01:51.680 the Fed really back away from their rate hiking as 0:01:51.720 --> 0:01:54.360 the market has been believing as what you're seeing in 0:01:54.360 --> 0:01:56.720 that to year yield coming in at a time when 0:01:56.760 --> 0:01:59.760 inflation is not stowing signs of coming down all that 0:01:59.800 --> 0:02:02.480 quick play. Yeah, No, I think it's I think it's 0:02:02.520 --> 0:02:04.200 very hard for the Fed to walk away. I mean, 0:02:04.280 --> 0:02:06.760 I you know, yesterday was a really interesting meeting. You know, 0:02:06.880 --> 0:02:09.880 cheer Powell came out swinging with tough talk against inflation 0:02:10.080 --> 0:02:12.679 right off the top, and as prepared remarks left the 0:02:12.720 --> 0:02:15.520 door open for another seventy five basis point rate hike, 0:02:15.840 --> 0:02:17.760 But the broader message that seemed to get sent was 0:02:17.800 --> 0:02:20.280 that they were transitioning to a slower pace of rate hikes, 0:02:20.440 --> 0:02:22.120 you know, which which is fair? And this goes back 0:02:22.160 --> 0:02:24.000 and I caught the clip with Dennis Lockhart. They are 0:02:24.080 --> 0:02:26.680 moving on to this second stage now that they've brought 0:02:26.720 --> 0:02:30.280 policy to a kind of more neutral level, but inflation 0:02:30.280 --> 0:02:32.160 just remains too hot for them to think you're gonna 0:02:32.280 --> 0:02:34.600 they're gonna stop. I mean, we're expecting a fifty basis 0:02:34.600 --> 0:02:36.840 point rate hike at the September meeting and have been 0:02:36.919 --> 0:02:40.359 for for some time. But you know, there's just there's 0:02:40.400 --> 0:02:42.680 just too much inflation in the pipeline for them really 0:02:42.720 --> 0:02:45.280 to relent yet. And Jonathan, with the greatest of respect 0:02:45.360 --> 0:02:48.639 for economic historians, does it matter from your perspective whether 0:02:48.720 --> 0:02:51.560 the nb UH caused this a recession or not. Shouldn't 0:02:51.560 --> 0:02:54.360 market participants just be treading on the data in front 0:02:54.360 --> 0:02:56.640 of us, And if it's waker, it's waker. Into lasist 0:02:56.639 --> 0:03:01.480 point that with nine percent inflation, it's problematic, isn't it. Yeah, No, 0:03:01.600 --> 0:03:03.359 I think that's right. I mean, the n b R 0:03:03.480 --> 0:03:06.200 isn't isn't gospel either. But but the NBR does set 0:03:06.200 --> 0:03:09.760 a threshold for sort of how broad the weaknesses. It 0:03:09.840 --> 0:03:12.960 hasn't shown up in payroll employment yet. Um and also 0:03:13.000 --> 0:03:15.240 a certain amount of the severity. I mean right now, 0:03:15.560 --> 0:03:17.520 you know, as much as consumer spending has been weak, 0:03:17.960 --> 0:03:19.880 I mean it is positive. I mean, we're just chugging 0:03:19.880 --> 0:03:23.080 along at at at pretty weak growth Q one, and 0:03:23.120 --> 0:03:24.880 the report was held down by a lot of the 0:03:24.919 --> 0:03:28.639 noisy components coming off the very strong Q four. So yeah, 0:03:28.639 --> 0:03:30.720 I would downplay a little bit these sort of the 0:03:30.720 --> 0:03:34.800 technical recession signal. But you know, going back to what 0:03:34.800 --> 0:03:36.280 Mike said, I mean, the fact of the matter is, 0:03:36.360 --> 0:03:37.880 and we've been sort of writing about this is the 0:03:37.880 --> 0:03:40.440 problem with the Q two report. The Q two reports 0:03:40.480 --> 0:03:43.040 weak for domestic demand. I mean, it's it's the US 0:03:43.160 --> 0:03:46.680 stuff that looks weak in Q two, and that doesn't 0:03:46.720 --> 0:03:49.560 really bode well looking ahead, Jonathan, do you see the 0:03:49.600 --> 0:03:52.560 spreading to the labor market and how quickly? Because one 0:03:52.600 --> 0:03:55.320 thing I think we'll hear from the administration later is 0:03:55.360 --> 0:03:57.320 that the consumer is holding up. They'll say things like 0:03:57.360 --> 0:03:59.680 the labor market is still strong. Do you see it 0:03:59.720 --> 0:04:03.320 remain that way through the next quarter? Uh, we have. 0:04:03.400 --> 0:04:07.120 We have a pretty meaningful slowdown in payroll employment. We 0:04:07.160 --> 0:04:09.280 actually would make a case that it has been sort 0:04:09.280 --> 0:04:12.800 of artificially supported somewhat um in recent months. You've seen 0:04:12.840 --> 0:04:17.440 substantially more weakening and initial claims continuing claims the household 0:04:17.480 --> 0:04:20.840 survey data, and given the severity of the slowdown and 0:04:20.920 --> 0:04:23.880 aggregate demand, we would certainly expect the labor market to follow. 0:04:24.240 --> 0:04:26.479 You know, we're looking for payrolls to UH at some 0:04:26.560 --> 0:04:28.880 point in the third quarter, you know, run under two 0:04:28.960 --> 0:04:31.400 hundred k a month as part of that slowing on 0:04:31.440 --> 0:04:34.320 the way to further slowing in Q four. Do you 0:04:34.360 --> 0:04:37.360 wish you hadn't adjusted your your forecast yesterday? Kevin that 0:04:37.360 --> 0:04:44.160 it's pretty much money for the optics of getting these 0:04:44.200 --> 0:04:47.600 inventory deflators correct and everything. We were pretty close and 0:04:47.680 --> 0:04:50.000 getting the decline so and the and and and and 0:04:50.080 --> 0:04:53.839 altogether the components were sort of structured the way we expected. 0:04:53.880 --> 0:04:57.400 So I'm pretty happy because the original estimate was basically 0:04:57.480 --> 0:05:00.000 on the money. Chung anyway, Jonathan is good to catch up, 0:05:00.040 --> 0:05:06.920 Jonathan thing of that of ups. Francis Donald with US 0:05:06.920 --> 0:05:11.560 now Global Chief Economist strategist manual life very good at 0:05:11.560 --> 0:05:14.200 the workings of our g d P. What are we 0:05:14.440 --> 0:05:19.200 not analyzing in today's g d P? First look, francis, 0:05:19.200 --> 0:05:24.400 what's the big mystery? The big mystery is not today's 0:05:24.440 --> 0:05:26.840 g d P at all. Today's GDP will tell us 0:05:26.839 --> 0:05:29.040 what we already know, which is that this economy has 0:05:29.160 --> 0:05:33.000 materially slowed down. We are not in the roaring twenties. 0:05:33.040 --> 0:05:34.839 We are not in the reflation trade. And if you 0:05:34.880 --> 0:05:37.279 told most people that last year, they would not have 0:05:37.320 --> 0:05:39.800 believed you. The big mystery is what is the next 0:05:39.800 --> 0:05:42.400 four to six quarters look like? And this is really 0:05:42.400 --> 0:05:46.160 what concerns me. Is not recession or no recession this 0:05:46.240 --> 0:05:49.320 year or even three, it's what do we do if 0:05:49.360 --> 0:05:52.880 we're stuck in one percent growth for four to six quarters. 0:05:52.960 --> 0:05:55.960 That's much harder to trade, much harder for central banks 0:05:55.960 --> 0:05:58.560 to respond to. And francis, what's so important? I mean, 0:05:58.600 --> 0:06:01.679 I featured this earlier in Austin Fox of Bloomberg Opinion 0:06:01.680 --> 0:06:05.400 has done great work on it. Powell really scirted yesterday 0:06:05.480 --> 0:06:08.960 the housing plug in to j d P, which is, 0:06:09.000 --> 0:06:13.960 if we get yields up, mortgages are slammed, house ownership 0:06:14.160 --> 0:06:18.159 is slammed, and that means rent sustaining go higher. How 0:06:18.200 --> 0:06:22.479 does that work into the g d P of the nation. Well, 0:06:22.560 --> 0:06:25.719 comments like to say housing leads the market. Nail housing, 0:06:25.760 --> 0:06:28.560 you're gonna get the economy outlook pretty good. In fact, 0:06:28.680 --> 0:06:30.640 one of my favorite charts is one that shows that 0:06:30.720 --> 0:06:34.640 housing leads retail sales. So you know, really focusing on 0:06:34.680 --> 0:06:36.839 the housing side of the story is going to be critical. 0:06:36.880 --> 0:06:39.599 It is going to bring down inflation to a certain respect, 0:06:40.160 --> 0:06:43.000 and it's also very very bad. Every data point we 0:06:43.040 --> 0:06:46.640 have on housing is trending downwards. Frankly, Tom, Every data 0:06:46.640 --> 0:06:49.719 point we have across the gamut of major primary data 0:06:49.760 --> 0:06:52.600 points is pointing downwards. Right now, There's not a lot 0:06:52.640 --> 0:06:55.159 of places you can look for for optimism unless you 0:06:55.200 --> 0:06:57.440 do what Powell did yesterday, which is to call initial 0:06:57.520 --> 0:07:01.160 jobless claims rise not real, or to question the validity 0:07:01.200 --> 0:07:03.800 of the GDP number. Three weeks of it now and 0:07:03.839 --> 0:07:06.120 we might have a fourth week if it lights to Francis. 0:07:06.200 --> 0:07:08.520 Tell me why the market's been rallying then over the 0:07:08.560 --> 0:07:11.160 last month, why credit spreads have been tightening, and what 0:07:11.280 --> 0:07:13.640 you make if that using of financial conditions we've seen, 0:07:14.520 --> 0:07:17.360 oh bear market rallies, they get bigger the deeper you 0:07:17.400 --> 0:07:20.040 get into that bear market. I do not believe what 0:07:20.080 --> 0:07:23.520 we saw yesterday from Chair Powell was a pivot, although 0:07:23.520 --> 0:07:25.800 it certainly was the path towards the pivot, and markets 0:07:25.840 --> 0:07:28.640 care about second derivatives. But what Chair Powell told us 0:07:28.760 --> 0:07:32.160 is well, he's data dependent. Unfortunately. I don't think that 0:07:32.200 --> 0:07:34.800 inflation number is gonna come down fast enough in the 0:07:34.840 --> 0:07:37.360 next two to three months to take out too much 0:07:37.400 --> 0:07:40.360 of the pricing for two. But what this market is 0:07:40.360 --> 0:07:43.920 gonna do, in my opinion, is pricing more cuts for three. 0:07:44.160 --> 0:07:46.680 And gosh, that makes the fens job harder. Just like 0:07:46.720 --> 0:07:49.920 we saw yesterday. The weaker the outlook, the more we 0:07:49.960 --> 0:07:53.000 see those financial conditions fall, the more offsets what the 0:07:53.040 --> 0:07:55.000 Feds really trying to do, which is tightened. Look at 0:07:55.000 --> 0:07:58.320 the break even yesterday, the rallying that shouldn't be happening. 0:07:58.320 --> 0:08:00.760 When the Fed's tightening sending five bases points, they're probably 0:08:00.800 --> 0:08:03.040 not happy. That's actually funny that you mentioned next. I 0:08:03.120 --> 0:08:04.800 was just looking at the five year five year forward 0:08:04.800 --> 0:08:07.680 break evens, and they've been steadily rising. The more people 0:08:07.720 --> 0:08:10.920 believe in this FED pivot. So what do you expect 0:08:10.920 --> 0:08:13.440 in terms of pushing back against this? How does the 0:08:13.480 --> 0:08:16.960 FED react to a market that's not cooperating and getting 0:08:16.960 --> 0:08:20.040 ahead of itself, well, I wouldn't be surprised. And in 0:08:20.120 --> 0:08:22.040 the next few days, the next few weeks, we do 0:08:22.080 --> 0:08:25.000 see beneficials who come out and really try to walk back. 0:08:25.080 --> 0:08:27.400 Some of that speak to some of the hawkish risks 0:08:27.440 --> 0:08:29.720 that exists in this market. And that's why I think 0:08:29.720 --> 0:08:31.720 it's dangerous to make too big of a change in 0:08:31.720 --> 0:08:34.600 your fedue afriter a single meeting. And as we've seen 0:08:34.640 --> 0:08:36.280 this year, and a little bit of laughter, you could 0:08:36.280 --> 0:08:38.679 have these big rallies on FED day that are then 0:08:38.720 --> 0:08:41.640 reverse course the very next day. So fed Er Powell 0:08:41.679 --> 0:08:43.719 told us they wanted to be nimble. I think now 0:08:43.840 --> 0:08:46.120 is the time for economists and strategies to be nimble 0:08:46.160 --> 0:08:48.160 as well. Some people who are watching the show Francs 0:08:48.160 --> 0:08:50.440 are probably saying, oh my goodness, here she goes again 0:08:50.480 --> 0:08:52.880 being bearish. Thomas saying, we're sick of talking about recession. 0:08:52.920 --> 0:08:55.959 Company is adapt and we are hearing around the margin 0:08:56.160 --> 0:08:58.439 signs that the rally that we've been seeing is a 0:08:58.520 --> 0:09:01.320 signal that we've priced in so much bad news that 0:09:01.360 --> 0:09:06.199 people are beginning to find value. What's your argument against that, Well, 0:09:06.200 --> 0:09:07.760 I'm not sure if the she is you or me, 0:09:07.920 --> 0:09:10.800 but Parish has been effectively the right way to do this. 0:09:10.880 --> 0:09:12.800 And if you look at the economy, it is still 0:09:12.840 --> 0:09:16.160 trending downwards. Historically, what we would see is that when 0:09:16.240 --> 0:09:18.520 the economy is about two thirds of the way through 0:09:18.520 --> 0:09:21.720 its downturn, you can start to look for opportunities. And 0:09:21.760 --> 0:09:23.720 I will be the first to say that macro does 0:09:23.760 --> 0:09:26.720 not rule all. There will be pockets of advantage here. 0:09:27.080 --> 0:09:28.760 I think we should watch. I think the curb will 0:09:28.800 --> 0:09:30.720 still flatten, but we will reach a point in the 0:09:30.720 --> 0:09:32.480 next few months where you want that steep in our 0:09:32.520 --> 0:09:34.920 back on and there are always bottom up trades to 0:09:34.960 --> 0:09:37.720 be had. So the cool relation on macro, it does 0:09:37.880 --> 0:09:40.160 change over time. It's not the be all end all, 0:09:40.240 --> 0:09:42.520 but the macro does not look good. What it does 0:09:42.720 --> 0:09:45.840 I'll be bullish again, francis. What do our listeners in 0:09:45.920 --> 0:09:50.679 our viewers do is they jump from forward guidance and 0:09:50.760 --> 0:09:54.559 the comedy that it was to actually just looking at 0:09:54.600 --> 0:09:57.960 the data. How do you actually get through a week, 0:09:58.120 --> 0:10:01.240 get through a month, get through a core or where 0:10:01.280 --> 0:10:05.960 you are data dependent? The great question, Tom, because we 0:10:06.000 --> 0:10:08.920 don't know exactly what data the FET is looking at. 0:10:08.920 --> 0:10:11.120 And sure we asked him, and he said, well, we're 0:10:11.120 --> 0:10:14.199 looking at inflation. We want to see compelling evidence. What's 0:10:14.200 --> 0:10:18.000 compelling evidence probably a few months of month over month 0:10:18.120 --> 0:10:21.640 improvements in inflation that is heading downwards. They're looking at 0:10:21.679 --> 0:10:24.680 labor supply and demand, but not all data, apparently, because 0:10:24.720 --> 0:10:28.120 there's plenty of data that says jobless claims and unemployment 0:10:28.200 --> 0:10:30.679 is moving in the wrong direction. So we don't know 0:10:30.800 --> 0:10:34.480 the Fed's reaction function as much today as we did 0:10:34.559 --> 0:10:37.400 even forty hours ago. And that's going to make a 0:10:37.440 --> 0:10:40.880 lot more market volatility, a lot more two sided conversations. 0:10:41.320 --> 0:10:42.719 One of my fears is that we're gonna have a 0:10:42.720 --> 0:10:45.160 lot of beneficials speaking to both sides of the argument. 0:10:45.240 --> 0:10:48.199 So the clarity on what happens next has been reduced 0:10:48.320 --> 0:10:50.640 very significantly. And if you're at home and you're thinking, 0:10:50.640 --> 0:10:52.520 what do I look at, well, I'm in the same boat. 0:10:52.720 --> 0:10:56.880 Francis can sense the frustration, so let's address it. What 0:10:56.960 --> 0:11:00.839 do they need to do better? I'm not it's frustration 0:11:00.920 --> 0:11:03.120 so much And how much harder are you making the 0:11:03.679 --> 0:11:05.840 job of knowing what you're gonna do next? And the 0:11:05.840 --> 0:11:08.760 fence job isn't to make my job easier. The fence 0:11:08.840 --> 0:11:11.640 job is to contain inflation and and really improve the 0:11:11.679 --> 0:11:14.440 employment outlook. But what would be helpful is if the 0:11:14.440 --> 0:11:17.440 FED had more clarity on what elements of inflation they're 0:11:17.480 --> 0:11:20.200 looking at now. Two meetings ago we heard from share 0:11:20.240 --> 0:11:22.800 Powell that he was very focused on the headline inflation. 0:11:22.840 --> 0:11:25.760 But yesterday and he said core is the best leading indicator. 0:11:25.840 --> 0:11:28.520 So I'd love to hear more about what really are 0:11:28.559 --> 0:11:31.880 you targeting because we know that, for example, inflation expectations 0:11:31.920 --> 0:11:35.280 for consumers are driven much more by gasoline prices than 0:11:35.400 --> 0:11:38.160 they are by FED policy. So which elements of this 0:11:38.240 --> 0:11:41.000 are you really trying to control? And do you fundamentally 0:11:41.000 --> 0:11:44.120 believe that it's your job only only your job to 0:11:44.160 --> 0:11:47.000 contain inflation because inflation came from a lot of places. 0:11:47.080 --> 0:11:48.959 It's going to take a lot of places to fix. 0:11:49.120 --> 0:11:50.800 I'd love it if he could make count job Easia. 0:11:50.880 --> 0:11:53.440 I'll say I've been incredibly frustrikes it by the last 0:11:53.440 --> 0:11:57.720 few news conferences. Francis don'tald the of manual Life Investment Management. 0:12:03.400 --> 0:12:05.120 This is important and what you need to know is 0:12:05.200 --> 0:12:08.679 you need to hear the conversations while we're on commercial break. 0:12:08.760 --> 0:12:13.080 John Farrell and Walter pisk of light. Jed on the 0:12:13.240 --> 0:12:16.440 absolute tensions of the front line of Liverpool. This is 0:12:16.480 --> 0:12:21.120 Sala and Monte Walter, Liverpool their front end. They're not 0:12:21.160 --> 0:12:23.080 on the same page. I mean there's some real tension. 0:12:23.120 --> 0:12:26.080 There is Apple on the same page or is it 0:12:26.120 --> 0:12:29.280 a Salomon a metaphor? First of all, Tom for not 0:12:29.360 --> 0:12:32.160 being on the same page. Liverpool almost pulled off four 0:12:32.160 --> 0:12:34.520 trophies last year. Was it was tight at the end, 0:12:34.600 --> 0:12:38.360 but that's and I guess Apple being on the same 0:12:38.360 --> 0:12:42.240 page with earnings this quarter probably, but as you know, 0:12:42.559 --> 0:12:46.600 with the kind of concern over inflation and the economy, 0:12:47.360 --> 0:12:48.839 a lot of the a lot of the focus is 0:12:48.840 --> 0:12:50.880 gonna be on the elect for next quarter. I want 0:12:50.920 --> 0:12:55.720 you to discuss the pricing power Apple has to manage 0:12:55.760 --> 0:12:59.880 down the income statement. I never hear a discussion of 0:13:00.080 --> 0:13:03.120 if they go margins are under threat at whatever line 0:13:03.120 --> 0:13:08.960 on the income statement. Do they have pricing power? I 0:13:08.960 --> 0:13:12.080 mean they have pricing power for the quality of the products. 0:13:12.080 --> 0:13:14.720 But I mean Apple has been known to reduce the 0:13:14.760 --> 0:13:16.840 price of their product in certain markets, and I think 0:13:16.880 --> 0:13:19.760 there was some reports even last week in China Um 0:13:19.760 --> 0:13:21.800 there was some reduction in the price of iPhones. Have 0:13:21.880 --> 0:13:24.760 done this in other markets throughout the world. Why you 0:13:24.760 --> 0:13:27.319 don't necessarily see it crush their margins as you've had 0:13:27.320 --> 0:13:30.280 this mix shift over the years in terms of services, 0:13:30.320 --> 0:13:32.240 which has been a higher margin business for them, so 0:13:32.320 --> 0:13:35.360 they've been able to to generate a very strong margin. 0:13:35.800 --> 0:13:37.920 Currencies are a hard thing to fight, though, right this 0:13:38.000 --> 0:13:40.440 is a this is a global company, so I think 0:13:40.679 --> 0:13:43.240 you know, currencies are certainly something they're gonna They're gonna 0:13:43.280 --> 0:13:45.439 have an impact also in terms of the guidance, and 0:13:45.480 --> 0:13:47.760 they can't do much about that well to the top 0:13:47.800 --> 0:13:51.120 tier iPhone though going on sale, that seems pretty read 0:13:51.160 --> 0:13:53.200 to me. Are you saying that's not a big deal 0:13:53.200 --> 0:13:55.800 as some people are making it. I think it's a 0:13:55.800 --> 0:13:58.560 big deal because it's China, and China has been such 0:13:58.600 --> 0:14:00.880 a big part of the growth gen you've seen in 0:14:01.080 --> 0:14:03.920 other emerging markets in the past, which I think it 0:14:04.000 --> 0:14:06.200 may be more understandable, but China has been able to 0:14:06.240 --> 0:14:08.679 grow without seeing these types of price cuts. So I 0:14:08.679 --> 0:14:11.560 think when we're all looking for kind of tea leaves 0:14:11.559 --> 0:14:15.600 on what's the impact of economic weakness, you can't ignore 0:14:15.679 --> 0:14:18.079 that as as one of those things to watch, and 0:14:18.120 --> 0:14:21.080 maybe that's going to be indicative of how they look 0:14:21.160 --> 0:14:23.640 for growth or what their outlook is for growth for 0:14:23.720 --> 0:14:26.560 next quarter and the following quarter. So they're all these nodes, right. 0:14:26.600 --> 0:14:29.119 We've heard from Qualcom, We've heard from other chip providers 0:14:29.120 --> 0:14:32.800 that there has been diminishing demand for smartphones for a 0:14:32.880 --> 0:14:36.440 number of other personal computing devices. How much is baked 0:14:36.480 --> 0:14:40.560 in in terms of disappointment versus the unknown unknown right 0:14:40.880 --> 0:14:43.640 of an even bigger slowdown than expected. I think a 0:14:43.640 --> 0:14:45.720 lot of that is baked in. But remember the iPhone 0:14:45.760 --> 0:14:48.160 is of the revenue and even a greater percent of 0:14:48.200 --> 0:14:49.960 the profit of the company. And you have to look 0:14:50.000 --> 0:14:52.720 at what's going on in Telco Land right now, where 0:14:52.720 --> 0:14:55.400 they had a surge of growth during the pandemic in 0:14:55.480 --> 0:14:58.240 terms of number of customers signing up uh, and then 0:14:58.280 --> 0:14:59.880 there was a lull. And if they want to fight 0:15:00.040 --> 0:15:04.200 each other to grab customers, their willingness to subsidize I 0:15:04.240 --> 0:15:07.960 think could increase or sustain. Like Verizon as an example, 0:15:08.320 --> 0:15:10.520 which is struggling to try to generate any type of 0:15:10.560 --> 0:15:13.160 subscriber growth, doesn't seem like they're going to give up 0:15:13.200 --> 0:15:15.480 in trying to give you eight hundred dollars or nine 0:15:15.840 --> 0:15:19.040 dollars to get a new iPhone, and I think that's 0:15:19.080 --> 0:15:20.800 the data that we're seeing. So I think that's one 0:15:20.840 --> 0:15:24.800 of the offsets to a weaker customer and their ability 0:15:24.800 --> 0:15:27.840 to buy a very expensive iPhone is the willingness of 0:15:27.880 --> 0:15:31.040 wireless operators around the world, but particularly in these markets 0:15:31.040 --> 0:15:33.520 that are still huge for Apple and these you know, 0:15:33.560 --> 0:15:36.680 these high high paying markets to subsidize that customer to 0:15:36.760 --> 0:15:39.400 upgrade their phone. Which raises the question of how much 0:15:39.440 --> 0:15:42.360 the behemoths have an advantage in this environment, how much 0:15:42.440 --> 0:15:45.560 are used to seeing a distinguishing a factor of the 0:15:45.600 --> 0:15:48.080 haves and the have nots within big tech as this 0:15:48.160 --> 0:15:50.880 earning season grinds on. I mean, that's a great point 0:15:50.880 --> 0:15:54.240 in terms of you know, the people in society, they're 0:15:54.240 --> 0:15:56.560 getting impacted. It's it's you know, those that are buying 0:15:56.560 --> 0:15:59.600 iPhones might have a different impact than you know, some 0:15:59.640 --> 0:16:01.840 of the off that you're seeing me getting announced by 0:16:01.840 --> 0:16:04.720 some of these major companies. But again, like if you 0:16:04.760 --> 0:16:07.480 have economic weakness globally and you're trying to sell a 0:16:07.520 --> 0:16:11.000 twelve product, you can't just ignore that that's going to 0:16:11.120 --> 0:16:14.400 have some impact. There. There will be some mitigating factors 0:16:14.440 --> 0:16:17.320 like again an operator willing to pay you um to 0:16:17.320 --> 0:16:19.480 to stay on their network or to switch over to 0:16:19.520 --> 0:16:22.440 your network. But that's still a pretty big headwind depending 0:16:22.440 --> 0:16:25.760 on how long this lasts. And we've got delayed bills 0:16:25.800 --> 0:16:28.000 in the mix. Well to T Mobile talked about the 0:16:28.040 --> 0:16:29.200 same thing as well, what do you make of that? 0:16:29.240 --> 0:16:32.120 What's the connection there? I mean, first of all, I 0:16:32.120 --> 0:16:34.080 think a T T was a couple of days, so 0:16:34.440 --> 0:16:37.640 to me, that was more frankly an excuse because they 0:16:37.720 --> 0:16:40.320 gave very bad free cash flow guidance earlier in the year. 0:16:40.320 --> 0:16:43.119 But you're right. G Mobile tried to spin this yesterday. 0:16:43.160 --> 0:16:45.880 But the bottom line is if you read through what 0:16:46.280 --> 0:16:50.280 this CEO Mike Seaver said, they're buildings. The payments there 0:16:50.320 --> 0:16:52.320 were also getting delayed. So yeah, I mean you're you're 0:16:52.320 --> 0:16:56.200 seeing in Walmart, obviously you've seen evidence of, you know, 0:16:56.240 --> 0:17:00.200 a weakening consumer um. Again, it's just if you're week 0:17:00.560 --> 0:17:03.160 and someone's willing to pay for your phone, maybe you're 0:17:03.160 --> 0:17:05.439 more willing to do it. The challenge here is what 0:17:05.520 --> 0:17:07.760 the operators want to get out of this is if 0:17:07.800 --> 0:17:09.479 they give you that free phone, they're not they're not, 0:17:09.680 --> 0:17:12.359 you know, they're not. They're They're expecting something back and 0:17:12.400 --> 0:17:14.560 they want you to upgrade to a higher end rape 0:17:14.560 --> 0:17:17.719 plan and at some point the consumers not that they 0:17:18.040 --> 0:17:20.440 recognize what's happening and say, look, I don't want to 0:17:20.440 --> 0:17:22.840 pay an extra ten twenty bucks a month on my 0:17:23.000 --> 0:17:25.080 rape plan. So even if you're gonna give me eight 0:17:25.400 --> 0:17:27.320 dollars for her phone, it doesn't resonate. And I think 0:17:27.359 --> 0:17:29.359 we saw that with with Veries in this quarter. They 0:17:29.359 --> 0:17:32.600 were willing to pay customers, you know, for these phones, 0:17:33.000 --> 0:17:35.119 and they still didn't get people switching to their network. 0:17:35.160 --> 0:17:38.439 It's I don't understand why the company continues to do that, 0:17:38.480 --> 0:17:41.080 but at the moment, this is why. This is what 0:17:41.119 --> 0:17:43.199 these operators are saying, that they're willing to continue to 0:17:43.240 --> 0:17:46.280 try and subsidize and keep these customers. Well, it's just awesome. 0:17:46.320 --> 0:17:53.159 As always what as there of light shed This is 0:17:53.160 --> 0:17:57.040 a lot of fun because she comes with bulletproof academics. 0:17:57.119 --> 0:18:01.439 Berkeley was known for decades for chemistry, and part of that, 0:18:01.520 --> 0:18:05.080 of course, is chemical engineering. She's a chemy out of Berkeley. 0:18:05.119 --> 0:18:08.920 Gennine Way joins us right now with Barclayser, senior US 0:18:09.000 --> 0:18:12.359 Oil and Gas Exploration and production analyst, Jenny, and I'm 0:18:12.359 --> 0:18:15.600 gonna cut to the chase. The airlines needed one to 0:18:15.960 --> 0:18:20.560 three crises before they got capital discipline, before they got 0:18:20.560 --> 0:18:25.240 the religion of operations. How is oil doing in this 0:18:25.359 --> 0:18:29.080 boom at capital discipline? Are they going to go off 0:18:29.119 --> 0:18:33.720 to the New Siberia and wasted all the way? Oh? 0:18:33.760 --> 0:18:36.400 Good morning, Thanks for having Barclay's I love it. Let's 0:18:36.440 --> 0:18:39.120 just get right at it. Um. You know, I think 0:18:39.160 --> 0:18:43.200 you're hitting at the crux of the issue. It's capital discipline. 0:18:43.320 --> 0:18:45.359 Whether it's going to hold is the number one question 0:18:45.359 --> 0:18:48.760 from investors. There's a ton of skepticism on that in 0:18:48.760 --> 0:18:52.040 the bucket, and that's kept people away. We just checked 0:18:52.040 --> 0:18:54.119 in with all of our companies ahead of the quarter, 0:18:54.680 --> 0:18:57.960 and every single conversation the companies were still on the 0:18:58.040 --> 0:19:01.280 right narrative, which was low growth, backstree cash flow. Okay, 0:19:01.280 --> 0:19:03.359 well let's go, let's go right to the chase Juning. 0:19:03.400 --> 0:19:06.960 Just because of time, Chevron has always been the wild card. 0:19:07.000 --> 0:19:12.320 They're the Arco of the modern world, explained Chevron's capital discipline. 0:19:12.600 --> 0:19:17.760 Who is keeping them in line? Investors are keeping Chevron 0:19:17.880 --> 0:19:20.240 in line, just like how they're keeping every other company 0:19:20.240 --> 0:19:24.040 in line. Energy was the worst performing sector for a 0:19:24.119 --> 0:19:27.480 number of years. Then that's because they were destroying value. 0:19:28.040 --> 0:19:31.200 No returns. Nothing was getting returned to shareholders that was 0:19:31.240 --> 0:19:34.639 anything meaningful, and the shareholders are spoken. And what Chevron 0:19:34.760 --> 0:19:38.040 did was a reducer capolics budget by five billion dollars 0:19:38.040 --> 0:19:40.520 a year for the next five years, which is huge, 0:19:41.080 --> 0:19:43.600 and they've embarked on a big buyback program. You know, 0:19:43.640 --> 0:19:46.720 the buyback right now is five to ten billion, and 0:19:46.760 --> 0:19:48.840 we think that they're going to raise the low end 0:19:48.840 --> 0:19:51.160 of that. We're already at ten billion for the year 0:19:51.160 --> 0:19:54.000 and we think our investors are also at ten billions. 0:19:54.040 --> 0:19:57.520 So the market has really instilled capital discipline on the 0:19:57.520 --> 0:20:01.960 whole sector. Janine earlier this morning, she'll posted a record 0:20:02.080 --> 0:20:05.520 profit for the second straight quarter and they also accelerated 0:20:05.520 --> 0:20:07.520 by backs. Tomorrow we get the likes of XA and 0:20:07.560 --> 0:20:09.840 other oil majors that are reporting in the US. What's 0:20:09.880 --> 0:20:13.040 the political risk as they start to report these blockbuster 0:20:13.119 --> 0:20:15.879