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Speaker 1: Welcome to the Bloomberg P and L Podcast. I'm Pim Fox.

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Speaker 1: Along with my co host Lisa A. Brahmowitz. Each day

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Speaker 1: we bring you the most important, noteworthy, and useful interviews

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Speaker 1: for you and your money, whether you're at the grocery

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Speaker 1: store or the trading floor. Find the Bloomberg P M

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Speaker 1: L Podcast on Apple Podcasts, SoundCloud, and Bloomberg dot Com.

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Speaker 1: Let's bring in our own Peter core. He is our

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Speaker 1: economics editor for Bloomberg business Week. Peter Coy always a pleasure,

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Speaker 1: Thanks for joining us here in studio. Tell us about

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Speaker 1: the renaming of a trade agreement, that this is now

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Speaker 1: a bilateral. This is just breaking now, so we're still

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Speaker 1: digesting it that I think Trump is speaking any moment now,

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Speaker 1: he's going to start elaborating on this. But that would

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Speaker 1: be huge. I would assume that then Trump would also

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Speaker 1: want to have a separate bilateral agreement with Canada, and

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Speaker 1: then maybe Cannon would have one with Mexico, so it

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Speaker 1: would really break down the trial. Yeah, well, I mean,

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Speaker 1: can you take a step back, what is the argument

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Speaker 1: for bilateral agreements versus multilateral agreements? And you know why

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Speaker 1: has NAFTA and some of the other has been multilateral

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Speaker 1: in the past. Trump's argument for the bilateral approaches the

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Speaker 1: US is a very strong country, very open markets, and

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Speaker 1: everybody wants access to the US market, So why not

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Speaker 1: leverage that to the hilt. Thinking like a business person,

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Speaker 1: that's what you do when you're in a negotiation. You

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Speaker 1: use whatever you have to try to get the best

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Speaker 1: deal possible. What other people say is that a multilateral deal,

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Speaker 1: ideally a global deals sort of like the World Trade

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Speaker 1: Organization you know, tries to promote, actually can be better

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Speaker 1: for everyone because it allows for finer tune trade offs

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Speaker 1: and it sort of worth the temperature because you no

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Speaker 1: longer have heads of state butting up against each other.

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Speaker 1: On principle, you can sort of slide something in. You

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Speaker 1: can argue, well, we're doing this for the greater good,

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Speaker 1: will be better on net And I think that happens

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Speaker 1: even with tri lateral like the three countries versus bilateral.

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Speaker 1: So there's no way to sort of describe it as

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Speaker 1: being positive or negative. It just is different. Yeah, certainly different.

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Speaker 1: But so far Trump's bi letter poach has not borne

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Speaker 1: a lot of fruit. You see what's happening with China. Um,

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Speaker 1: it all does is it gets the backup of the Chinese,

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Speaker 1: and we maybe we get less out of them than

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Speaker 1: we would have if we had tried to pursue the

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Speaker 1: Not that not that the multi letter poach was hugely

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Speaker 1: successful either, is not That's my point. In other words,

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Speaker 1: it's not as if the approach that was taken, maybe

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Speaker 1: if you take a case to the World Trade Organization,

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Speaker 1: is going to get you the result that you're looking for. True. Well,

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Speaker 1: I guess then let's talk about the the aspects of

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Speaker 1: NAFTA as they wore, versus what an agreement would look like.

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Speaker 1: I mean, what are the issues we should be paying

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Speaker 1: attention to here that could get rejiggered as Mexico and

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Speaker 1: the US and Canada come up with bilateral agreements potentially. Well,

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Speaker 1: all I can say is what the sticking points have

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Speaker 1: been and the couple of ones that where the U. S.

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Speaker 1: And Canada are most coming into conflict. One of them

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Speaker 1: is this fairly wonky issue of how to deal with disputes,

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Speaker 1: and the Canadians have insisted for a long time that

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Speaker 1: there be a b national sort of impartial mechanism. They

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Speaker 1: don't want it to be handled in the U. S.

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Speaker 1: Court system, and that was a prerequisite for the free

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Speaker 1: trade agreement, the proceded NAFTA, and Trump wants to get

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Speaker 1: rid of it. Canada says that's a deal breaker for US,

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Speaker 1: so that that'll be huge. That we have other issues

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Speaker 1: like uh dairy of course, which I think that's much

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Speaker 1: more easily resolved. You know, Canada will roll back teariffs

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Speaker 1: here and there. The U s has a trade surplus

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Speaker 1: with handad on dairy, so it's hard to believe that's

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Speaker 1: a deal break at the same with dispute resolution mechanisms.

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Speaker 1: But the automobile industry may be another story. Well, the

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Speaker 1: Canadian and US auto industries are very tightly integrated, products

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Speaker 1: going back and forth across the border at all times.

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Speaker 1: So I think that the autos is more of an

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Speaker 1: issue between US and Mexico, where of course it's also

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Speaker 1: a complicated supply chain. The US and Mexico seemed to

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Speaker 1: have resolved their issues over autos the ideas to try

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Speaker 1: to have more production done. This is Trump's goal in

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Speaker 1: North America. So here's what I'm really confused about. Don't

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Speaker 1: we have a trade surplus with Canada pretty much across

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Speaker 1: the board. Yeah, so it's should be doable. To create

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Speaker 1: an agreement here. So why have there not been talks?

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Speaker 1: Why has it been Why has the focus been solely

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Speaker 1: on Mexico and Canada is kind of an afterthought even

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Speaker 1: though the rhetoric has been raised between the two nations,

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Speaker 1: and there doesn't seem to be a sort of meeting

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Speaker 1: of the ma is there. That's a hard question to answer.

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Speaker 1: I mean, I think part of it is just personality.

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Speaker 1: You know. Trump has started going after Trudeau after the

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Speaker 1: June G seven summit in Canada. He called him very

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Speaker 1: weak and dishonest. That's kind of a blow. It's kind

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Speaker 1: of hard to deal with. So they don't like each

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Speaker 1: other at this point. It's hard hard to argue there's

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Speaker 1: a lot of leve laws between those two guys. Peter,

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Speaker 1: I've been mentioning energy as a big issue between the

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Speaker 1: United States and Mexico all morning, and Mexico is really

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Speaker 1: the big recipient for US natural gas. We've got a

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Speaker 1: lot of natural gas we're looking for export markets, and

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Speaker 1: Mexico is it. We've got four major pipelines that are

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Speaker 1: scheduled open by the end of the year. Uh, this

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Speaker 1: is a very important topic, particularly in Texas. Is Mexico

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Speaker 1: going to be substituting their own supplies of natural gas

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Speaker 1: and oil with pam X or US supplies because pe

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Speaker 1: X needs a lot of foreign investments. One of the

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Speaker 1: answers the Omblo, the incoming president of Mexico's much more

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Speaker 1: of a nationalist than Pinion Yeto, and he is was

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Speaker 1: never happy with the two thousand thirteen opening of the

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Speaker 1: energy sector in Mexico. So uh. But on the other hand,

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Speaker 1: one of his representatives is part of the troika that

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Speaker 1: Mexico has been sending up to these negotiations, so he's

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Speaker 1: apparently signed off on this deal. It's a very that's

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Speaker 1: a very positive sign. That's why there's been such a

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Speaker 1: positive response to this tentative agreement between the US of Mexico. Alright,

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Speaker 1: so what is the US likely to get? Do we

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Speaker 1: have any sense you mean, say, with Canada, well with Mexico,

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Speaker 1: in particularly with Mexico. Oh well, um, they do say,

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Speaker 1: We're going to find out momentarily and stay tuned to

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Speaker 1: Bloomberg Radio on this one. But it's they do seem

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Speaker 1: like this deal is on autos and energy tightening rules

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Speaker 1: to increase auto production in North America and somehow working

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Speaker 1: out a deal that Omlos Okay with on energy production

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Speaker 1: between the two countries. Well, let me just give you

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Speaker 1: this headline. We're talking about Canada in the United States.

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Speaker 1: President Trump says that he will call Canadian Prime Minister

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Speaker 1: Trudeau soon and quote will see if Canada is separate

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Speaker 1: or part of the Mexico deal. Interesting that they haven't

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Speaker 1: been part of this, and Uh, the question is is

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Speaker 1: it going to be kind of a strong arming of

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Speaker 1: Canada to sign onto something that's already been hashed between

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Speaker 1: Mexico and the US versus having Canada in the room.

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Speaker 1: I don't know. It's just it's going to be really

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Speaker 1: interesting to see how this plays out. I guess one

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Speaker 1: question that I have is how much does Mexico rely

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Speaker 1: on the United States for its GDP. Do you have

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Speaker 1: a sense of just how crucial the US is to Mexico, Uh,

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Speaker 1: and vice versa. Well, far more Mexico depending on the

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Speaker 1: US and vice versa. In Mexico can't can't get along

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Speaker 1: without open trade with the US. UM and that's Trump's theory, like, hey, look,

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Speaker 1: we can push them around, but but national pride enters

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Speaker 1: in here. For both both Mexico and Canada have national

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Speaker 1: pride that gets wounded when they feel like the big

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Speaker 1: brother is trying to roll them. And so that's why

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Speaker 1: this is a potential problem. Well, Elon must decided he

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Speaker 1: was just kidding or perhaps just a little bit of

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Speaker 1: premature in his bid to take Tesla private. He says

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Speaker 1: it will remain a public company and it is due

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Speaker 1: to pressure from shareholders who said this is really what

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Speaker 1: they wanted here to give us. His take is Liam Denning,

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Speaker 1: Energy Minding and Commodities calumnist with Bloomberg opinion in uh, Liam,

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Speaker 1: wonderful to have you here. So when you take a

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Speaker 1: step back with this back and forth with Elon Musk,

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Speaker 1: this round trip, where does it leave Tesla as a

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Speaker 1: company better or worse off than it was? I think yeah,

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Speaker 1: I mean, I think the key issue here is credibility.

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Speaker 1: So you know, if we look at this whole episode

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Speaker 1: last seventeen days, where supposedly the company really completely seriously

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Speaker 1: looked at what was likely to be the biggest, most

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Speaker 1: complex take out transaction ever attempted, all in seventeen days,

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Speaker 1: what we've seen really is this tweet that went out

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Speaker 1: on August seven. It's still not clear to me why

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Speaker 1: that went out in the first place, and since then

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Speaker 1: we've seen a series of blog posts and other tweets which,

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Speaker 1: when you look at them, really look like attempts to

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Speaker 1: create a narrative backing up that tweet. You know. One

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Speaker 1: of the things that struck me about the releases that

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Speaker 1: went out UM late Friday night, very late fridnight, almost

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Speaker 1: early Saturday morning. In fact, UM one of the things

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Speaker 1: that struck me about those was the board statement that

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Speaker 1: it had, you know, looked at this proposal over the

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Speaker 1: course of several weeks. It actually only set up a

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Speaker 1: special committee ten days before that announcement went out on Friday.

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Speaker 1: There was no UM formal proposal, as it acknowledged in

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Speaker 1: the statement it put out when it set up that

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Speaker 1: special committee. So I think the issue here is credibility.

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Speaker 1: I don't think anyone, you know, it doesn't seem to

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Speaker 1: be really moving the stop that much this morning. I

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Speaker 1: think where it could be an issue is if anything

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Speaker 1: is attempted further down the line, say there really is

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Speaker 1: a serious buy out proposal further down the line, or

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Speaker 1: attempts to bring in an outside investor, or attempts to

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Speaker 1: raise money, which despite the company saying it doesn't need to.

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Speaker 1: I and I know a lot of people on the street.

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Speaker 1: I think it will have to. Tesla shares are currently

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Speaker 1: down about two and a half percent. They traded three

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Speaker 1: hundred and fourteen dollars a share. That's nowhere near four

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Speaker 1: and twenty dollars to shares. It no. And you know,

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Speaker 1: one of the things that struck me about Elon Musk's

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Speaker 1: statement late Friday night, you know, in there, as he

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Speaker 1: was walking a lot of this back, he still felt

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Speaker 1: the need to put in this point saying that his

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Speaker 1: his belief that there were investors ready to um to

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Speaker 1: to take the company private had only been strengthened. What

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Speaker 1: was interesting about that was one that he felt the

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Speaker 1: need to put it in there at all. Two, of course,

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Speaker 1: he left out the key part of the whole thing,

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Speaker 1: which was that for twenty figure that he put in

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Speaker 1: on August seven. Presumably there are plenty of people who

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Speaker 1: would put him money to a take private transaction. There

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Speaker 1: were just yeah, well there was a lot of interesting,

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Speaker 1: uh sort of speculation, and there was an interesting piece

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Speaker 1: in the Wall Street Journal is taking a look at

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Speaker 1: what sort of went into Elon Musk's decision to walk

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Speaker 1: back his going private statement. Among the potential investors Volksweigen,

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Speaker 1: which I thought was interesting. In this TikTok sort sort

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Speaker 1: of piece, they were saying that one reason why Elon

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Speaker 1: Musk balked was because he didn't want to have any

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Speaker 1: strings attached to this money going private, and he sort

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Speaker 1: of liked the image of mom and pop shareholders having

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Speaker 1: a piece of tesla. He didn't like the image of

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Speaker 1: big corporations getting access to his, uh, to his magnetism

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Speaker 1: and his his momentum. And it just sort of raises

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Speaker 1: this question about his views on investment, whether he really

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Speaker 1: does have the right mindset in order to kind of

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Speaker 1: raise the capital that he may need in any circumstance. Yeah.

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Speaker 1: I was struck by that as well. I mean there

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Speaker 1: were two things. One is, um, the idea that you're

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Speaker 1: going to get billions of laws of funding with no

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Speaker 1: strings attached is just a bit ludicrous. Uh. Two Um,

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Speaker 1: I I saw those stories again, It's not clear to

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Speaker 1: me really how real any of this is. These are

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Speaker 1: anonymously sourced stories that came out, you know, after a

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Speaker 1: very late Friday night, uh walk back of everything. It's

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Speaker 1: not clear to me how real any of this is.

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Speaker 1: One question that I have also where does the securities

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Speaker 1: an Exchange Commission come in here? So I don't think

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Speaker 1: this walk back is necessarily going to end Uh the

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Speaker 1: SECS probes of what happened here. You know, it's very

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Speaker 1: hard to say whether the SEC, how far the SEC

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Speaker 1: will push this M that's really in their hands. I think, um,

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Speaker 1: given the way this has been handled, you know, with

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Speaker 1: a with a tweet put out during market hours, uh,

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Speaker 1: and then this, you know, this very late walk back

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Speaker 1: on a Friday night. Uh. If I was the SEC,

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Speaker 1: I would feel like, clearly I would have to do something.

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Speaker 1: I mean you, it's I think it's just very dangerous

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Speaker 1: to create a precedent where CEO feels empowered to throw

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Speaker 1: out that kind of information with not much backing it

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Speaker 1: up and move the stop price quite a lot. I

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Speaker 1: want to thank you very much. Liam Denning, our energy,

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Speaker 1: mining and commodities columnist for Bloomberg Opinion. After Jackson Hole,

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Speaker 1: people are reassessing how frequently the Federal Reserve and tends

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Speaker 1: to hike interest rates both this year and next, joining

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Speaker 1: us now as someone who has been arguing for a

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Speaker 1: long time that long term treasury yields will not rise

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Speaker 1: that much. In response, his fund has performed better than

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Speaker 1: seven percent of its peers over the past five years.

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Speaker 1: Lacy Hunt joining us now. He is executive vice president,

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Speaker 1: chief economist at Hoysington's Investment Management. At Hoysington is the

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Speaker 1: subadvisor for the wasa Hoysington's US Treasury Fund that when

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Speaker 1: I was just talking about uh and at the firm

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Speaker 1: that he where he works overseas about three billion dollars.

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Speaker 1: Dr Hunt, thank you so much for joining us. I

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Speaker 1: want to just start with the yield curve. We're near

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Speaker 1: the narrowist at this point since the crisis hit, and

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Speaker 1: I'm wondering the Photo Reserve does not seem that concerned.

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Speaker 1: Do you think they should be more concerned? Well, the

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Speaker 1: yield curve is a very significant development. It's it's not

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Speaker 1: the only monetary indicator. And one must never assume that

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Speaker 1: there's a silver bullet or or a magical LICKXIR. But um,

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Speaker 1: the yield curve is flattening very significantly, as you said,

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Speaker 1: and then in our opinion, it reflects the fact that

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Speaker 1: there is a very substantial monetary deceleration underway. The Fall

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Speaker 1: Reserve has hiked the short term rate seven times. They're

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Speaker 1: going to raise again and in September there's been a

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Speaker 1: very material contraction and all of the reserve aggregates and

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Speaker 1: this has followed through to the rate of growth in

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Speaker 1: the monetary and credit Adreas we're seeing both sides of

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Speaker 1: the bank balance sheet, we can very substantially and in

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Speaker 1: this context, the yield curve is a significant development. When

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Speaker 1: when the yield curve flattening, flattens in an environment of

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Speaker 1: monetary restraint, Um, that is first of all a symptom

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Speaker 1: that the monetary restraint is starting to bite, and it

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Speaker 1: also reinforces the restraint of the monetary change. The flattening

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Speaker 1: and the yield curve reduces the profitability to everyone that's

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Speaker 1: borrowing short and lending long and and so therefore it's

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Speaker 1: important in its own right, and it's part of a

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Speaker 1: of a monetary deceleration which is clearly underway. Lacy Hunt,

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Speaker 1: can you talk about the concept of liquidity and what

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Speaker 1: what that means for investors maybe make those connections because

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Speaker 1: they may not be apparent on the surface. No, they

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Speaker 1: are not only parent apparent on the surface, Pam. And

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Speaker 1: that's an excellent question. Um. The I think it's well

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Speaker 1: understood that when when the Fed UM raises the Federal

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Speaker 1: funds rate, that they have control over the short rate.

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Speaker 1: The short rate has an influence out the curve, but

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Speaker 1: that that influence diminishes rather quickly as we move to

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Speaker 1: longer and longer rates. And the most complete theory of

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Speaker 1: interest rates ever developed was was the one developed by

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Speaker 1: the late Nobel laureate Milton Friedman, and and Freedman gave

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Speaker 1: us the rather ironical statement he said that monetary decelerations

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Speaker 1: lead not to higher interest rates, but to lower interest rates.

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Speaker 1: And what he meant is that when the FED raises

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Speaker 1: the Fed funds rate, reduces the reserve, voluntary and credit aggregates,

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Speaker 1: they put upward pressure on the short term rates. But

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Speaker 1: as this process goes along, the right of growth in

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Speaker 1: the economy begins to weaken, so will the rate of inflation,

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Speaker 1: and ultimately monetary decelerations lead to lower, not higher interest rates.

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Speaker 1: Do you believe that if you okay, well, if you

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Speaker 1: and I want to just connect that with you, you

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Speaker 1: also maybe have alluded to, which is the repatriation of

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Speaker 1: dollar assets by US corporations. At the same time, yes,

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Speaker 1: I think that I think that one of the other

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Speaker 1: symptoms monetary policy is biting. Monetary policy is very insidious.

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Speaker 1: It has extremely long lags. The lags are variable um

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Speaker 1: and so you you look for symptoms that monetary policy

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Speaker 1: is biting, and one of them is the flattening and

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Speaker 1: the Yelk curve. Another symptom of the fact that the

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Speaker 1: monetary restraint is biting is that the dollar is at

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Speaker 1: a very high level relative to where it's been over

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Speaker 1: the last twenty five years. It's a you know, six

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Speaker 1: or seven percent so far this year. And so the

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Speaker 1: fellow reserve um is not only central bank to the US,

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Speaker 1: but the factough not not legally, but the facto, the

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Speaker 1: FED is central bank to the rest of the world.

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Speaker 1: And so when the fellow reserve tightens monetary conditions in

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Speaker 1: the US, they drain liquidity from the rest of the world,

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Speaker 1: and this tends to cause the value of dollar to rise,

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Speaker 1: and it puts downward pressure on monetary growth and other

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Speaker 1: parts of the world. In fact, we're seeing that in

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Speaker 1: all of the major economies China, Europe, Japan, and and

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Speaker 1: so the U s monetary restraint is transferred to the

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Speaker 1: rest of the world. Another symptom of the monetary deceleration

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Speaker 1: is that is that the commodity prices can to move lower,

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Speaker 1: which they've been doing this year. So the the overall

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Speaker 1: economy seems to be very strongly at a growth rate

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Speaker 1: in the in the second quarter. But but given the

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Speaker 1: way in which monetary policy works, that was probably the

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Speaker 1: peak rter growth for the economy. Inflation rate also, we

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Speaker 1: believe peaked in the second quarter, and we'll move significantly

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Speaker 1: lower as we moved through the balance of this year

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Speaker 1: and into so given that backdrop, and given the fact

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Speaker 1: that the market is currently pricing in about two interest

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Speaker 1: rate hikes through the remainder of where do you see

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Speaker 1: the tenure yield ending the year, given the fact that

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Speaker 1: we're at two point eight give or take well, our

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Speaker 1: expertise is really in the long end. But right so

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Speaker 1: in the long end, in the thirty year, which is

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Speaker 1: to the thirty year, will will be lower than it

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Speaker 1: is today. The just to give you a point of

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Speaker 1: of reference, when the Fed started raising the short rates

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Speaker 1: in December of UM the federal funds rate was under

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Speaker 1: twenty five basis points and the long bond was around three.

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Speaker 1: We had seven hikes in the federal funds rate. We've

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Speaker 1: had a substantial fiscal package, not just the tax cuts,

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Speaker 1: but also big increase in federal spending and a number

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Speaker 1: of other things, the shortfall and energy production and difficulties

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Speaker 1: with medical care pricing and so forth. But in spite

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Speaker 1: of all those things, the thirty year bond is still three.

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Speaker 1: And that that illustrates that the long end of the

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Speaker 1: bond market is determined by a different set of parameters

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Speaker 1: than the short term. And so although the Fed will

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Speaker 1: be pushing the short rates higher as the market expects,

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Speaker 1: the long end of the market is not likely to rise.

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Speaker 1: They may rise intermittently over very short periods of time,

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Speaker 1: but the long end is being hancher anchored by these

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Speaker 1: fundamental factors which point to weaker economic growth and lower inflation.

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Speaker 1: Over to thank you very much for being with us.

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Speaker 1: Lacy Hunt is executive vice president and chief economist for

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Speaker 1: Hoisington's Investment Management. They're based in Austin, Texas. Hoisington is

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Speaker 1: the subadvisor for the WASA Hoisington U S Treasury Fund.

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Speaker 1: The symbol there is w h O SX. A little

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Speaker 1: bit of a sell off in the bond market today,

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Speaker 1: the thirty year yield there's two point nine. This is Bloomberg.

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Speaker 1: In other News today, some of the biggest US banks

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Speaker 1: have continued to slash their exposure to state and city

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Speaker 1: dead since the federal government cut corporate tax rate. This

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Speaker 1: includes JP Morgan, State Street Walls, Fargo City Group, and

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Speaker 1: Bank of America. This is Bloomberg right now, Let's turn

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Speaker 1: our focus to Apple. They are tripling down on the

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Speaker 1: iPhone and ten. They are going to be rolling out

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Speaker 1: new phones that have that computer chip that allows the

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Speaker 1: photographs that him was just waxing, waxing. Yeah, the portrait mode,

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Speaker 1: it's and and and the size of the of the

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Speaker 1: device and you know, okay, it doesn't have a button

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Speaker 1: for the home screen, but it's you know, you get

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Speaker 1: used to it. John Butler, you you are you gonna

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Speaker 1: line up overnight to to get a new Apple phone? Uh?

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Speaker 1: This year? I am him, I'm a buyer. Say um why? Well,

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Speaker 1: first of all, it's not the first model year anymore. Right,

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Speaker 1: So they're going to be building on the design of

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Speaker 1: the iPhone ten. As Lisa alluded to a moment ago,

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Speaker 1: there's going to be really three new devices built off

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Speaker 1: that basic design. One of them will call it the

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Speaker 1: iPhone nine is going to be a lower cost and

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Speaker 1: six point one in screen that's a you know, it's

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Speaker 1: a it's a it'll be lower cost with made with

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Speaker 1: lower cost materials, but still a very solid device. And

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Speaker 1: then the at the higher end, we're going to get

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Speaker 1: the five point eight inch screen with a feature update

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Speaker 1: to the iPhone current iPhone ten which has the same

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Speaker 1: size screen, and then a larger six point five inch

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Speaker 1: uh call it an iPhone X two plus. And as

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Speaker 1: Pim said a moment ago, people people really love those

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Speaker 1: larger screens. There's even a rumor that it may work

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Speaker 1: with a new Apple pencil. So, um, we'll see what

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Speaker 1: they have in store. But excitement is building, John, aside

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Speaker 1: from just it's a shiny new thing that does cool things.

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Speaker 1: I mean, how how big of a deal is this

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Speaker 1: for Apple given the fact that it's not a huge

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Speaker 1: departure from the iPhone tan, it doesn't necessarily turn out

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Speaker 1: a new path or new products. You know, can we

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Speaker 1: put this in a perspective, Well, here's Here's what's important

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Speaker 1: to me, Lisa, is they keep expanding the iPhone product line,

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Speaker 1: the number of skews, if you will. So there is

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Speaker 1: a thought out there that the highest, the high end

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Speaker 1: of the memory is going to go from two fifty

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Speaker 1: six to twelve gigabits while keeping two fifty six and

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Speaker 1: sixty four, so you'll get a broader product line out there.

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Speaker 1: Twenty skews this year versus next year versus sixteen this

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Speaker 1: uh so, presumably that will help sales a bit. But

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Speaker 1: what's most important here is they're they're working to drive

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Speaker 1: up that average selling price in the phone, and now

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Speaker 1: that we can all finance our phones, that's the whole point.

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Speaker 1: They want to thell like dynamic of all of their phones.

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Speaker 1: They want to have the average price point be closer

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Speaker 1: to a thousand dollars than two hundred dollars. Sure they do,

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Speaker 1: because average unit shipments year in and year out for

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Speaker 1: the iPhone have been slowing there now in the low

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Speaker 1: single digits. So to get that call at ten to

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Speaker 1: fiftcent growth in the iPhone category, which is still sixty

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Speaker 1: cent of sales or so at Apple, you've got to

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Speaker 1: drive up the average price. And you do that by

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Speaker 1: expanding the high end options, which is what I was

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Speaker 1: just talking about a moment ago, with more memory. Um

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Speaker 1: So I think they'll get there, and I like this

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Speaker 1: the strategy. We'll see what's coming this year it's it's

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Speaker 1: what's known as a soft upgrade year. Right, So last

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Speaker 1: year we got a significant redesign of the iPhone. The

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Speaker 1: year following that kind of significant upgrade, you to call

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Speaker 1: the talk here, you typically get feature updates. In this case,

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Speaker 1: we're getting feature updates and more models, and then next

431
00:26:54,359 --> 00:27:00,840
Speaker 1: year we'll hopefully see more significant, significant redesign. Butler, is

432
00:27:00,880 --> 00:27:06,120
Speaker 1: it worth noting that the simcard that customers use in there,

433
00:27:06,320 --> 00:27:11,200
Speaker 1: let's say non iPhone X or iPhone ten model, will

434
00:27:11,280 --> 00:27:15,679
Speaker 1: not work because the size is just different than that

435
00:27:15,840 --> 00:27:18,359
Speaker 1: found on the newer iPhones, and that you're going to

436
00:27:18,480 --> 00:27:21,159
Speaker 1: have to go in and get a new simcard. Is

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00:27:21,160 --> 00:27:22,640
Speaker 1: it worth noting that when you go in and get

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00:27:22,640 --> 00:27:25,119
Speaker 1: a new simcard, chances are you might buy an accessory

439
00:27:25,240 --> 00:27:29,520
Speaker 1: or two. I had not heard that, pim actually, but

440
00:27:29,680 --> 00:27:32,880
Speaker 1: I will say that, yes that. Could you know anything

441
00:27:32,920 --> 00:27:36,359
Speaker 1: that sparks a visit to your carrier? Where you're walking in,

442
00:27:36,440 --> 00:27:39,919
Speaker 1: you're talking about your phone what you can do with it?

443
00:27:40,000 --> 00:27:42,439
Speaker 1: Do I need a screen saver? Do I need a case?

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00:27:42,480 --> 00:27:46,560
Speaker 1: Do I need new headphones? For example? Yes? Wow? Should

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00:27:46,560 --> 00:27:49,359
Speaker 1: I buy a watch to pair with this phone? You know?

446
00:27:50,440 --> 00:27:53,280
Speaker 1: That's uh, that's retail one oh one is get the

447
00:27:53,320 --> 00:27:57,960
Speaker 1: customer in the store and shopping and talking to salesperson. Son.

448
00:27:58,280 --> 00:28:00,480
Speaker 1: Is there any sense that Apple is going to phase

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00:28:00,520 --> 00:28:04,280
Speaker 1: out some of the more inexpensive models that they have

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00:28:04,400 --> 00:28:09,560
Speaker 1: currently on market. No. In fact, that the latest I heard,

451
00:28:09,640 --> 00:28:12,800
Speaker 1: which I thought was an encouraging development, is they may

452
00:28:13,040 --> 00:28:18,359
Speaker 1: upgrade the iPhone se which is their low range UH

453
00:28:18,440 --> 00:28:22,800
Speaker 1: phone price to three and that really is due for

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00:28:22,880 --> 00:28:26,440
Speaker 1: a facelift. You know, it's really gone through I think

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00:28:26,560 --> 00:28:30,480
Speaker 1: three years now without an upgrade. UM, so they really

456
00:28:31,000 --> 00:28:35,600
Speaker 1: need to put a better processor in that phone. UM.

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00:28:35,640 --> 00:28:39,120
Speaker 1: What I was reading suggested that the small version of

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00:28:39,160 --> 00:28:42,880
Speaker 1: the iPhone seven now will become the new s e uh.

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00:28:43,120 --> 00:28:45,720
Speaker 1: We'll see what's in store there, but I don't think

460
00:28:45,760 --> 00:28:48,120
Speaker 1: they're going to do away with a low end. If anything,

461
00:28:48,800 --> 00:28:51,080
Speaker 1: they should expand their a bit because they're trying to

462
00:28:51,120 --> 00:28:55,320
Speaker 1: grow in India, which where the average selling price of

463
00:28:55,360 --> 00:28:58,400
Speaker 1: iPhones is well below the US, so to compete there

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00:28:58,440 --> 00:29:01,440
Speaker 1: they need a low end. Any Thanks John Butler, our

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00:29:01,560 --> 00:29:06,760
Speaker 1: senior Telecom services and Equipment analysts for Bloomberg Intelligence. I

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00:29:06,760 --> 00:29:10,080
Speaker 1: guess he's getting his portable seat ready because he'll be

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00:29:10,120 --> 00:29:13,000
Speaker 1: waiting for those new iPhones. Does your entire family have

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00:29:13,080 --> 00:29:19,680
Speaker 1: iPhone Tense? No? Do you know your daughter? No? Your wife? Yes?

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00:29:20,440 --> 00:29:23,080
Speaker 1: Ding Nick ing ing ing Nick ding, I got one.

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00:29:23,640 --> 00:29:26,360
Speaker 1: I got my son the s He loves it. Of

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00:29:26,400 --> 00:29:31,640
Speaker 1: course they do. It's an addiction. Thanks for listening to

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00:29:31,640 --> 00:29:34,520
Speaker 1: the Bloomberg P and L podcast. You can subscribe and

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00:29:34,600 --> 00:29:38,520
Speaker 1: listen to interviews at Apple Podcasts, SoundCloud, or whatever podcast

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00:29:38,600 --> 00:29:42,080
Speaker 1: platform you prefer. I'm Pim Fox. I'm on Twitter at

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00:29:42,240 --> 00:29:45,640
Speaker 1: pim Fox. I'm on Twitter at Lisa Abramo. It's one

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00:29:45,840 --> 00:29:48,560
Speaker 1: before the podcast. You can always catch us worldwide on

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00:29:48,600 --> 00:29:49,440
Speaker 1: Bloomberg Radio