WEBVTT - Housing Market, Apple Downgrade, Recession Impact on Minorities 0:00:00.800 --> 0:00:04.040 Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney alongside 0:00:04.040 --> 0:00:06.920 my co host Matt Miller. Every business day we bring 0:00:06.960 --> 0:00:11.520 you interviews from CEOs, market pros, and Bloomberg experts, along 0:00:11.520 --> 0:00:15.560 with essential market moving news. Find the Bloomberg Markets podcast 0:00:15.560 --> 0:00:18.439 called Apple Podcasts or wherever you listen to podcasts, and 0:00:18.480 --> 0:00:20.920 at Bloomberg dot com slash podcast. All right, let's bring 0:00:20.960 --> 0:00:22.960 a Nika Group that she's a director of macro economic 0:00:23.000 --> 0:00:26.400 research at Wisdom Tree, and Nika loved it. You start, 0:00:26.680 --> 0:00:28.480 we can talk about your economic call here, but how 0:00:28.480 --> 0:00:30.240 do you think about the housing market? Here? Matt and 0:00:30.200 --> 0:00:32.440 I are just talking about the you know, the mortgage 0:00:32.520 --> 0:00:34.599 rate surging. What do you think what do you think 0:00:34.600 --> 0:00:37.320 the impact is on housing and housing market on the economy. 0:00:37.479 --> 0:00:41.200 Thanks for having me. Yes, you know, you're you're hitting 0:00:41.560 --> 0:00:44.520 what you're you're you're really targeting one of the most 0:00:44.560 --> 0:00:48.080 important sectors that showing signs of pain at this point 0:00:48.120 --> 0:00:52.200 in time. You know, higher rates have clearly been reflected 0:00:52.200 --> 0:00:55.080 in the higher mortgage trades in the US, UH you know, 0:00:55.080 --> 0:00:58.279 which is at an extremely high rate right now and 0:00:58.320 --> 0:01:03.120 it's clearly impacting you know, the US average household UM 0:01:03.160 --> 0:01:06.440 you know, we've already seen signed the slowdown in Canada, 0:01:06.600 --> 0:01:10.280 in the Australian housing market, UM, and it's it's slowly 0:01:10.280 --> 0:01:14.080 trickling down into United Kingdom as well. UM. You know, 0:01:14.200 --> 0:01:18.840 and we and obviously you we've seen UM record stimulus 0:01:18.920 --> 0:01:23.360 package that he's been UM unleashed in in UK and 0:01:23.520 --> 0:01:26.080 at the same time you've got bank in England, you know, 0:01:27.080 --> 0:01:31.240 trying to figure out how they're supposed to health the economy. UM. 0:01:31.280 --> 0:01:34.160 Through this phase is you know, we've seen a big 0:01:34.280 --> 0:01:37.880 a clash with the sterling in response to the moves 0:01:37.920 --> 0:01:41.080 that we've seen from the government and UM, you know 0:01:41.840 --> 0:01:44.800 clearly Andrew Bailey's hands it tied. So far, all we've 0:01:44.800 --> 0:01:48.280 seen is an intervention UM. And that's really the save 0:01:48.360 --> 0:01:53.320 the pension market. So I think broadly with rising weights, uh, 0:01:53.400 --> 0:01:55.880 you know, the first pain is being felt by the 0:01:55.920 --> 0:02:00.400 housing market, and I think it's really a squeezeably cudity 0:02:00.520 --> 0:02:05.560 that is impactingly invested globally. Well, what about Anika. Your 0:02:06.400 --> 0:02:08.480 sounds like you're based in London. I know you studied 0:02:08.520 --> 0:02:13.239 at Oxford for example. UM. How much of the U 0:02:13.320 --> 0:02:17.320 sort of self inflicted pain out of the UK is 0:02:18.000 --> 0:02:20.840 spreading around the world. Are are we seeing even in 0:02:21.040 --> 0:02:26.960 US treasury markets contagion um from what's being viewed as 0:02:27.000 --> 0:02:30.120 like the biggest policy policy mistake in a generation from 0:02:30.120 --> 0:02:34.160 your government. Well, it's very much. Uh, you know, it's 0:02:34.400 --> 0:02:37.080 I think if we didn't see that intervention by the 0:02:37.080 --> 0:02:40.919 Bank of England yesterday, um, we could we could have seen, 0:02:41.440 --> 0:02:45.760 you know, some widespread impact across financial markets. So I 0:02:45.800 --> 0:02:50.160 think they did just about managed to save uh, you know, 0:02:50.240 --> 0:02:54.000 the pension system here in the UK, uh, you know, 0:02:54.080 --> 0:02:56.320 and and try to arrest those margin goals that the 0:02:56.320 --> 0:03:00.200 pension sector was was being faced with. Uh. But you know, 0:03:00.240 --> 0:03:04.160 they're they're very very There was a very high likelihood 0:03:04.240 --> 0:03:07.160 that this could have spread, uh you know, spread across 0:03:07.240 --> 0:03:11.240 to the US and globally. Um, if those margin calls 0:03:11.280 --> 0:03:14.560 were not arrested, and if uh, you know, it's the 0:03:14.600 --> 0:03:17.519 extension sounds just hit a hit a scenario where the 0:03:17.639 --> 0:03:19.720 it was, you know, sell whatever you can to get 0:03:19.720 --> 0:03:22.320 that liquidity back back on board. But doesn't it look 0:03:22.360 --> 0:03:25.280 like we did see some margin calls. I mean, doesn't 0:03:25.280 --> 0:03:27.520 it look like we are seeing some just liquidation in 0:03:27.560 --> 0:03:31.160 these markets. I see on the S and P five hundred, 0:03:31.280 --> 0:03:37.800 for example, only five stocks are rising, so fourde or down. Um. 0:03:37.920 --> 0:03:42.040 We saw you know, US rates to ten US tenure 0:03:42.200 --> 0:03:45.120 one above four percent. So it wasn't just the guilt 0:03:45.360 --> 0:03:48.880 market that went haywire. It was treasuries as well, I 0:03:48.880 --> 0:03:53.560 guess because of low liquidity, but also surely um, British 0:03:53.840 --> 0:03:57.960 pension companies had to sell treasuries to meet margins. Uh, 0:03:58.080 --> 0:04:01.040 that's absolutely right. I think you know, the psychology on 0:04:01.080 --> 0:04:05.480 the market right now is of extreme anxiousness um. And 0:04:05.480 --> 0:04:07.440 and that is that is why we we've been seeing 0:04:07.440 --> 0:04:11.080 this sharp sell off this week. But that that set 0:04:11.120 --> 0:04:13.840 off really was triggered when the market started to take 0:04:13.880 --> 0:04:15.720 the send a lot more seriously for what they were 0:04:15.760 --> 0:04:19.640 actually saying. You know, until this, until this, until the 0:04:19.720 --> 0:04:22.560 Said meeting took place, I think the market was expecting 0:04:22.560 --> 0:04:25.400 the SAID to pivot. We saw that mid rally take place, 0:04:25.600 --> 0:04:28.320 and especially essentially we were you know, what we were 0:04:28.360 --> 0:04:35.040 seeing um across equili markets was this brief turnaround of um, 0:04:35.120 --> 0:04:38.120 you know, hope that the SAID would pivot. Uh, you know, 0:04:38.200 --> 0:04:41.760 growth would come back into limelight and um, everything would 0:04:41.800 --> 0:04:45.119 would be okay. But the Fed you know, has drawn 0:04:45.160 --> 0:04:47.799 the line and said we are going to quite fixed 0:04:48.160 --> 0:04:51.560 on raising great until uh, you know, we have the 0:04:51.560 --> 0:04:56.240 Insotian story under control and and I think with that 0:04:56.360 --> 0:05:00.560 in the background, in addition with Q three earning, UH 0:05:00.640 --> 0:05:03.719 for us to look forward to UM, you know that 0:05:03.960 --> 0:05:06.599 that I think that's that's opening up a lot of concerns, 0:05:06.760 --> 0:05:10.360 especially in the US because uh, you know everyone if 0:05:10.440 --> 0:05:12.280 everyone is now coming to terms with the fact that 0:05:12.800 --> 0:05:15.599 you know, you have this extremely strong dollar that is 0:05:15.680 --> 0:05:19.320 reading have a cross risk asset. UM. If you look 0:05:19.360 --> 0:05:22.719 at concerned to learning expectations for earnings, they you know, 0:05:22.760 --> 0:05:25.560 they're still quite high. They are correcting, but they still 0:05:25.600 --> 0:05:29.400 remain quite high. UM. And you know, the strong dollar 0:05:29.720 --> 0:05:33.679 certainly puts a lot of pressure for UH international US 0:05:33.720 --> 0:05:36.640 companies that are now not going to be that competitive. 0:05:37.320 --> 0:05:42.560 So UM I think invested essentially bracing for a bit 0:05:42.560 --> 0:05:45.920 of bad news that that could be triggered in uh 0:05:45.960 --> 0:05:47.920 you know the Q three earning scenario where you could 0:05:47.920 --> 0:05:50.560 see a lot more companies being FedEx Right, all right, 0:05:50.600 --> 0:05:53.480 A great stuff. Really appreciate you taking the time out 0:05:53.480 --> 0:05:55.120 of your busines schedule to check in with us. A. 0:05:55.200 --> 0:05:59.520 Nika Gupta, director of macroeconomic research at Wisdom Tree, journey 0:05:59.560 --> 0:06:03.200 US from London, where it has been a tumultuous week, 0:06:03.760 --> 0:06:07.560 particularly in that uh English bond market there, the guilt 0:06:07.600 --> 0:06:10.320 market there, just a crazy week there as they try 0:06:10.400 --> 0:06:13.160 to kind of prevent uh you know, a real contagient 0:06:13.200 --> 0:06:16.160 in that market, and apparently fairly successful in some of 0:06:16.240 --> 0:06:21.520 the interventions this week. Dave Harden joins us. He's a 0:06:21.560 --> 0:06:24.520 founder president of Summit Global Advisors. And initially I thought 0:06:24.560 --> 0:06:26.880 it was in Summit, New Jersey. You were hoping. I 0:06:26.960 --> 0:06:31.640 was hoping, but I wasn't even close. Bountiful, Utah. Dave, 0:06:31.720 --> 0:06:35.160 where is Bountiful Utah? Well, it's on the It's in 0:06:35.200 --> 0:06:38.200 the most beautiful place on earth. We're setten here in Utah, 0:06:38.560 --> 0:06:41.640 right next to Salt Lake City just north and uh, 0:06:41.760 --> 0:06:43.760 you know, the fall is amazing. You guys need to 0:06:43.760 --> 0:06:47.159 come out here and experience it. Good stuff. I'm out there. 0:06:47.279 --> 0:06:48.760 You know this. This is what happens with me and 0:06:48.800 --> 0:06:50.719 my ski buddies in New Jersey. We all talk a 0:06:50.720 --> 0:06:53.400 big game in like around September. Let's go to tell 0:06:53.440 --> 0:06:55.720 you ride. Let's go to like Montana, and then when 0:06:55.760 --> 0:06:57.760 push comes to show, we say, a screw it, Let's 0:06:57.760 --> 0:06:59.080 go out to Salt Lake and we'll ski all the 0:06:59.080 --> 0:07:02.360 great places out there. That's what always happens. Well, that's right, 0:07:02.520 --> 0:07:06.039 that's a bounty of them right there is also you 0:07:06.080 --> 0:07:08.760 could go to Park City and all that good stuff. 0:07:08.760 --> 0:07:10.200 Like the canyon. You just have to pick your You 0:07:10.280 --> 0:07:11.560 just have to pick your canyon you want to go 0:07:11.640 --> 0:07:14.640 up to. All right, Dave, are we are we capitulating? 0:07:14.640 --> 0:07:16.840 I'm not sure if I used that correctly. Are we 0:07:16.880 --> 0:07:21.440 seen a capitulation here? Or it's just just another day? 0:07:21.680 --> 0:07:24.440 Well so far in just another day, but we'd like 0:07:24.520 --> 0:07:26.880 to get it better. At the VIX up ten percent today, 0:07:27.000 --> 0:07:29.600 we're getting closer thirty three. We want to see that 0:07:29.720 --> 0:07:33.800 VIX about forty. That's real, true capitulation capitulation. So if 0:07:33.840 --> 0:07:36.200 you if you look back at the past corrections when 0:07:36.240 --> 0:07:39.280 those bottoms hit, we gotta get that bickx up to forty. 0:07:39.320 --> 0:07:43.440 So not quite there. We're getting closer, but I'm afraid 0:07:43.440 --> 0:07:46.480 there's still some more downside ahead. So why aren't we 0:07:46.560 --> 0:07:51.120 pricing in a deeper, darker recession? Are people still sticking 0:07:51.160 --> 0:07:55.320 with the forecast for um short and shallow one? Well, 0:07:55.360 --> 0:07:57.240 I think I think there's still some hope out there. Right, 0:07:57.240 --> 0:07:59.520 We've been through COVID where the government build US out. 0:07:59.560 --> 0:08:01.760 We've been through COVID where the FED beld is out, 0:08:01.800 --> 0:08:05.400 We've been through pivot changes constantly throughout the year where 0:08:05.400 --> 0:08:08.440 the Fed's beild is out. So why can't they do 0:08:08.520 --> 0:08:12.040 it one more time? Dave, I'd noticed on some of 0:08:12.040 --> 0:08:15.240 the names that you guys are buying Lockheed Martin, simple 0:08:15.360 --> 0:08:18.560 L M T. Is that just simply you know there's 0:08:18.600 --> 0:08:21.520 a big war on over in Europe and they need stuff. 0:08:21.640 --> 0:08:24.760 Is that kind of the play there? Well, for certainly 0:08:24.840 --> 0:08:27.640 that's that's that's a defensive nature. We absolutely know that 0:08:27.720 --> 0:08:30.760 in the down markets, defensive plays tend to play better, 0:08:31.080 --> 0:08:33.240 and so you want to be defensive here in this 0:08:33.400 --> 0:08:37.360 in this situation. So it's also diversification. I think Blackey 0:08:37.360 --> 0:08:39.560 Martin is a great option that goes with a lot 0:08:39.559 --> 0:08:41.280 of people's tech stocks, It goes with a lot of 0:08:41.280 --> 0:08:45.520 people's utilities, whatever they're buying, banks, financials, et cetera. But 0:08:45.720 --> 0:08:48.440 let's face it, locked themselves have solid rings, they have 0:08:48.480 --> 0:08:51.160 a low p they're cheap, and the war is not 0:08:51.200 --> 0:08:53.600 going away anytime soon. It seems like as the US 0:08:53.679 --> 0:08:56.560 just told everybody to get out of Russia. So what 0:08:56.640 --> 0:08:59.200 else do you like? Are your other plays? Defensive. I see, 0:08:59.240 --> 0:09:01.000 for example, kind of o phillips here, is that a 0:09:01.000 --> 0:09:04.680 defensive play? Well, Conics a little bit of a defense 0:09:04.679 --> 0:09:07.480 in the sense that it could be diversification. But I 0:09:07.480 --> 0:09:10.160 think energy stocks have pulled back throughout the summer. You 0:09:10.160 --> 0:09:13.000 saw crude oil fall tremendously, and so I think a 0:09:13.040 --> 0:09:15.480 lot was taken off the table there. But Conical has 0:09:15.520 --> 0:09:18.880 a pretty good exposure to supplies, natural gas, et cetera. 0:09:19.160 --> 0:09:23.240 You know, those supplies issues create higher demand. We got 0:09:23.240 --> 0:09:28.079 Winner coming on. They have a great dividend yesterday, so 0:09:29.520 --> 0:09:32.800 yesterday and they were up more than four So you 0:09:32.880 --> 0:09:35.480 love that. You love to get paid to have a dividend. Yeah. 0:09:36.400 --> 0:09:40.079 So in this studio, Dave, we are a meta and 0:09:40.400 --> 0:09:44.000 alphabet free studio. So Facebook is one of the names 0:09:44.120 --> 0:09:48.520 or Meta that's the ticker. But Facebook's a name that 0:09:48.600 --> 0:09:53.040 you're avoiding. Why still, Well, I think I think, let's 0:09:53.080 --> 0:09:55.600 face it, Facebook is going through a business model change 0:09:55.800 --> 0:09:58.240 they started a while back. They changed their ticker now 0:09:58.280 --> 0:10:00.720 from you know, Facebook to Meta. They're trying to go 0:10:00.800 --> 0:10:03.640 away from this social media and the negativeness. When Mark 0:10:03.679 --> 0:10:05.880 would come before Congress, it just didn't work out very 0:10:05.880 --> 0:10:09.000 good for him. So they've been trying to transition their 0:10:09.000 --> 0:10:12.400 revenues from Instagram and Facebook to this metaverse, and it's 0:10:12.400 --> 0:10:16.000 gonna take some time. And over the last four consecutive quarters, 0:10:16.000 --> 0:10:18.920 they've missed journeys, they've missed estimates. Analysts aren't really getting 0:10:18.960 --> 0:10:21.360 their arms around kind of where the money is coming 0:10:21.400 --> 0:10:23.400 from and how this business model is going to pan out. 0:10:23.720 --> 0:10:26.080 I think long term, if you've got twenty years, great, 0:10:26.160 --> 0:10:28.880 maybe that's a great business model to be into and 0:10:28.880 --> 0:10:31.199 and the and the future, so to speak. But until 0:10:31.240 --> 0:10:34.800 they get there and create that space right now, I 0:10:34.840 --> 0:10:36.960 would just say you need to avoid that until their 0:10:37.000 --> 0:10:39.920 business model completely changes. Isn't there a certain point? I mean, 0:10:39.920 --> 0:10:42.800 they're trading for eleven times earnings. Isn't there a certain 0:10:42.840 --> 0:10:45.680 point when it gets cheap enough? Well? I think so 0:10:45.800 --> 0:10:48.680 we've gotta be careful of those cheap traps, right in 0:10:48.720 --> 0:10:50.920 the sense that you think, wow, look how cheap this is, 0:10:51.120 --> 0:10:53.400 but you've got it continues to miss earnings, So how 0:10:53.520 --> 0:10:56.440 cheap can it go? And so I think it can 0:10:56.480 --> 0:10:59.600 go a little bit cheaper. And with volatility in the market, 0:10:59.760 --> 0:11:02.120 I think there's just some better things you can purchase 0:11:02.160 --> 0:11:04.440 for right now. Maybe maybe look at them in six 0:11:04.480 --> 0:11:06.320 months or maybe look at them in about a year. 0:11:07.000 --> 0:11:09.160 Dave talked to us about the Salt Lake. How's the 0:11:09.320 --> 0:11:12.440 economy there? How, how are folks doing there? How how 0:11:12.520 --> 0:11:15.520 is it on the other end of this pandemic here. Well, 0:11:15.520 --> 0:11:19.040 it's interesting. Utah has a lot of small business. It's 0:11:19.080 --> 0:11:21.280 had a lot of big players come in with silicon slopes. 0:11:21.320 --> 0:11:24.000 We're talking the Apples and the Googles and the technologies 0:11:24.040 --> 0:11:27.160 of the world. And Adobe very big in Utah, so 0:11:27.360 --> 0:11:30.360 a lot of you know, it's Golden Sacks second biggest 0:11:31.080 --> 0:11:34.120 employer area. So from an economy standpoint, I think we're 0:11:34.120 --> 0:11:36.880 doing very very well. Housing is starting to soffer though 0:11:36.920 --> 0:11:39.440 at the six point you know whatever, it feels like 0:11:39.520 --> 0:11:42.640 ten percent interest rates on mortgages, and so I think 0:11:42.640 --> 0:11:44.959 you're seeing some of those investors kind of get nervous, 0:11:45.080 --> 0:11:48.400 and that's making some people a little bit nervous. Definitely, 0:11:48.800 --> 0:11:52.120 recession is on the mind, even in the small towns. Yea, 0:11:52.240 --> 0:11:54.600 all right, Dave, good stuff. Well we'll think snow certainly 0:11:54.600 --> 0:11:56.679 at this time of year. For our good friends out West, 0:11:56.760 --> 0:11:59.240 Dave Harden found their president in Summit Global Investments. I 0:11:59.240 --> 0:12:01.920 mean he got his under grad from like, where is 0:12:01.960 --> 0:12:04.800 it Boston College? And then gets his masters from Boston 0:12:04.920 --> 0:12:07.880 University and then he says, I'm not heck with this stuff. 0:12:08.480 --> 0:12:11.080 I'm heading out west. You Yeah, I mean why not. 0:12:11.120 --> 0:12:12.640 You can manage money any We can do a lot 0:12:12.640 --> 0:12:14.720 of things anywhere that We've proven that with the pandemic. 0:12:16.960 --> 0:12:19.040 So we're bringing on a rock Rana. He covers all 0:12:19.080 --> 0:12:24.640 things technology for Bloomberg Intelligence. Just give us your updated 0:12:24.720 --> 0:12:27.880 view of Apple. Where are we here? Is this? How 0:12:28.000 --> 0:12:30.320 is the story holding up here? Because I know there 0:12:30.360 --> 0:12:32.960 was some concerns about the new iPhone and maybe the 0:12:33.000 --> 0:12:36.120 demand wasn't there. What's what's your call right here? Yeah, So, Paul, 0:12:36.120 --> 0:12:38.920 we talked about over a month ago when we basically 0:12:38.920 --> 0:12:41.200 said that iPhone putein is not going to move the 0:12:41.240 --> 0:12:44.280 needle just because of two reasons. And the first is 0:12:44.360 --> 0:12:47.680 the economic backdrop of the global economy is fared worse 0:12:47.960 --> 0:12:52.040 than it was a year ago. Second is that Europe 0:12:52.040 --> 0:12:56.520 in China makes up for total revenue for Apple, and 0:12:56.600 --> 0:12:59.760 that those two geographies up pretty much, you know, in 0:13:00.040 --> 0:13:02.240 really bad shape right now. And I would say the 0:13:02.280 --> 0:13:04.920 third element would be that the iPhone puotein is not 0:13:05.040 --> 0:13:07.720 the hardware upgrade that you normally see on a three 0:13:07.800 --> 0:13:10.120 year cycle. That's going to be next year. So we 0:13:10.200 --> 0:13:13.040 have been a lot more cautious than most people, I 0:13:13.080 --> 0:13:15.320 would say, for some time, and I think I would 0:13:15.360 --> 0:13:17.040 say the rest of the street is catching up at 0:13:17.040 --> 0:13:20.480 this point. What more can an iPhone do? I mean, 0:13:21.400 --> 0:13:23.560 if it doesn't make me breakfast, like, I don't see 0:13:23.600 --> 0:13:26.240 how it can get any more advanced than it already is. 0:13:27.320 --> 0:13:30.000 So I mean, I said this last time. Also it does. 0:13:30.240 --> 0:13:32.760 They don't need to find new users. They have an 0:13:32.760 --> 0:13:35.959 installed bait of installed base of over eight hundred million users. 0:13:36.520 --> 0:13:39.240 Every year they're gonna sell two twenty million bits, no 0:13:39.280 --> 0:13:42.320 matter what that is plus a minus one to two. 0:13:43.080 --> 0:13:45.000 In good years they're going to sell a few more, 0:13:45.080 --> 0:13:47.080 and bad years they're going to sell a few less. 0:13:47.120 --> 0:13:49.400 So next if you didn't upgrade this year, you may 0:13:49.520 --> 0:13:52.600 upgrade the year after all the year after, but eventually 0:13:52.600 --> 0:13:55.280 you will upgrade. And the reason you're gonna upgrade is 0:13:55.320 --> 0:13:58.080 battery life. When the battery life starts to bother you, 0:13:57.960 --> 0:13:59.720 you're gonna say, you know what, I'm going to go 0:13:59.760 --> 0:14:01.920 out and get another phone, keep it for three years 0:14:02.120 --> 0:14:05.160 and then go out and um, you know, upgrade at 0:14:05.160 --> 0:14:07.720 that time. Do they do They engineer them so that 0:14:07.760 --> 0:14:09.680 the battery starts to die right at the end of 0:14:09.679 --> 0:14:13.640 your two year contract. It's not two years. It's usually 0:14:13.679 --> 0:14:15.800 a little more around three and a half to four years. 0:14:16.120 --> 0:14:18.320 So I mean a lot of people upgrade two years. 0:14:18.360 --> 0:14:21.120 I upgrade about two years. A lot of people upgrade 0:14:21.120 --> 0:14:23.320 five years. But you take the average of it, it's 0:14:23.320 --> 0:14:25.680 about three point seven, you know, three point six years 0:14:25.720 --> 0:14:27.880 or so. And that's all Apple cares about at any 0:14:27.920 --> 0:14:31.240 given time. The reason why this company is so stable 0:14:31.560 --> 0:14:34.240 in terms of free cash flow is because that installed 0:14:34.240 --> 0:14:37.640 base is sacred. People do not it doesn't matter economies 0:14:37.720 --> 0:14:39.080 go to bad. They're not going to get rid of 0:14:39.160 --> 0:14:41.560 their iPhone and go buy a Nokia. But so what, 0:14:41.760 --> 0:14:45.040 So what do we read into this bloomberg um scoop 0:14:45.160 --> 0:14:47.040 that you know they were going to upgrade. They were 0:14:47.040 --> 0:14:49.120 at least thinking about upgrading. They were telling their suppliers 0:14:49.120 --> 0:14:51.640 like an upgrade in terms of you know, producing more, 0:14:52.200 --> 0:14:55.400 selling more, and now they're not and they're gonna do 0:14:55.480 --> 0:14:58.960 flat flat is very good, Matt. Flat flat revenues from 0:14:58.960 --> 0:15:01.240 this year the next year for Apple would be very good. 0:15:01.240 --> 0:15:04.600 They're going to generate in three cash flow. If they 0:15:04.600 --> 0:15:07.120 go flat, that's not bad for me. Yeah, but the 0:15:07.120 --> 0:15:09.120 stock is down four and a half percent today, so 0:15:09.160 --> 0:15:12.960 it's bad for somebody. It's bad for praatos. That's I mean, 0:15:13.000 --> 0:15:15.240 this is again depending on who's the buyer of the stock, 0:15:15.280 --> 0:15:18.800 if you have long term holders versus short term traados. Alright, 0:15:18.840 --> 0:15:22.440 So when I hear you know, smart people like you 0:15:22.480 --> 0:15:25.040 who analyze Apple on a day to day basis and 0:15:25.040 --> 0:15:27.680 you speak to institutional investors on a day to day basis, 0:15:28.000 --> 0:15:29.880 it seems to me that the story for here that 0:15:30.200 --> 0:15:34.600 I guess the delta for the Apple income statement and 0:15:34.640 --> 0:15:37.880 it's stock is the services business? Is that is that 0:15:37.960 --> 0:15:41.160 still something people focus on? Yeah, and again you know, 0:15:41.240 --> 0:15:43.520 services has been very strong over the last two and 0:15:43.520 --> 0:15:45.840 a half years, and that's another area we think, you know, 0:15:45.920 --> 0:15:48.600 it's going to be probably the first time next year 0:15:48.720 --> 0:15:51.000 that it's not going to be in double digits, and 0:15:51.200 --> 0:15:53.840 that is not something that people are used to. People 0:15:53.880 --> 0:15:56.520 started reading Apple like a growth stock over the last 0:15:56.600 --> 0:15:58.720 I would say three years or so, and I think 0:15:58.720 --> 0:16:01.240 a lot of people are not coming to realization that 0:16:01.320 --> 0:16:03.800 this company is going to have a made too high 0:16:03.800 --> 0:16:06.320 single digit growth rate. And I think that's a lot 0:16:06.360 --> 0:16:08.880 of the market is digesting it. You know, we published 0:16:08.920 --> 0:16:11.720 another note last week which says the delta that we 0:16:11.800 --> 0:16:15.160 see between evaluation delta between Microsoft and Apple is not 0:16:15.600 --> 0:16:18.040 fair enough of you. We think Microsoft is a far 0:16:18.120 --> 0:16:21.840 more diversified business model than Apple, and yet Apple trades 0:16:21.920 --> 0:16:24.280 is a much higher multiple. What we are seeing over 0:16:24.320 --> 0:16:26.640 the last seven eight days is kind of a rerating 0:16:26.680 --> 0:16:29.840 of that. All right, So is there anything in the 0:16:29.880 --> 0:16:31.960 Apple story? And I think I already know the answer here, 0:16:31.960 --> 0:16:33.800 But you look at all the cash on the bounty, 0:16:33.880 --> 0:16:36.720 look at all the free cash flow. Is there anything 0:16:36.960 --> 0:16:40.640 I'm not gonna say transformative, but something that would move 0:16:40.680 --> 0:16:42.880 the needle for this company. I don't know whether it's 0:16:42.880 --> 0:16:45.680 an acquisition, whether it's a change in, maybe a return 0:16:45.760 --> 0:16:53.080 neck of capital shareholders a car. Is there anything out there? Yeah? 0:16:53.200 --> 0:16:55.520 So from a transformative fine, I don't think it is 0:16:55.520 --> 0:16:58.000 going to be anything. From a product point, I would 0:16:58.080 --> 0:17:00.000 hope that the company is going to be far more 0:17:00.040 --> 0:17:02.920 aggressive of their buy backs. I mean, exactly speaking, they 0:17:02.960 --> 0:17:07.160 can they can spend billion dollars a year on buy back. 0:17:07.280 --> 0:17:10.280 If they do that, our calculations say that EPs is 0:17:10.320 --> 0:17:13.000 going to go up anywhere from four to five, that's 0:17:13.040 --> 0:17:16.000 not bad. If you get flat earning the PLATFOM revenue growth, 0:17:16.240 --> 0:17:19.400 or let's say even a high single digit, a low 0:17:19.440 --> 0:17:22.399 single digit revenue growth you add some buy backs to it, 0:17:22.560 --> 0:17:25.840 that's ten percent EPs growth. That's not bad in a recession. 0:17:25.880 --> 0:17:28.159 That's actually very impressive in our you all right, So 0:17:28.240 --> 0:17:31.440 what's the across your universe? You got? You see everything 0:17:31.480 --> 0:17:33.960 across the tech space where you know, given that the 0:17:33.960 --> 0:17:36.320 economic backdrop we're in, when you as you talk to 0:17:36.359 --> 0:17:39.320 institutional investors, where are they putting their money these days 0:17:39.320 --> 0:17:42.359 in tech? I think they're all running away from tech 0:17:42.600 --> 0:17:45.159 arctually because of inflation. And I think that is um 0:17:45.400 --> 0:17:48.199 that is going to remain the same trend unless we 0:17:48.240 --> 0:17:51.960 see a Regerson inflation. And I said this yesterday on 0:17:52.080 --> 0:17:55.720 the TV also that the delta over here is what's 0:17:55.760 --> 0:17:58.240 the discount rate. If the two year and the ten 0:17:58.320 --> 0:18:01.600 year remain at these levels and we find out that 0:18:01.680 --> 0:18:04.199 inflation is going down, then the Pick universe is going 0:18:04.240 --> 0:18:05.919 to have a blast. You're going to see a massive 0:18:05.960 --> 0:18:09.440 reversal of trends here. But the problem is people don't 0:18:09.440 --> 0:18:11.840 know which way inflation is going to go. If inflation 0:18:12.000 --> 0:18:14.600 keeps the way it is, and we keep on raising grades, 0:18:14.920 --> 0:18:18.040 then the discount rate for growth sox gets hammered and 0:18:18.080 --> 0:18:21.360 the valuations remain where it is or even down. Let 0:18:21.359 --> 0:18:22.960 me just ask quickly. We only have a minute left 0:18:22.960 --> 0:18:25.159 about the car um It seems like you're kind of 0:18:25.160 --> 0:18:27.520 poop pooing it, and in fact, nobody seems that pumped 0:18:27.520 --> 0:18:30.040 about it. But they do keep hiring people to work 0:18:30.080 --> 0:18:33.040 on it. So what's the deal. Yeah, it's our Our 0:18:33.119 --> 0:18:35.400 thesis on that is it's going to really help their 0:18:35.400 --> 0:18:38.800 market cap. Frankly speaking, just because tess Like is such 0:18:38.840 --> 0:18:42.160 a hot s it is coming. They're making their own car. Yeah, 0:18:42.160 --> 0:18:43.920 but I do not know whether it's coming this year 0:18:44.040 --> 0:18:45.760 or next year or the year after. I have no 0:18:45.840 --> 0:18:47.960 way of figuring out when that's going to come. But 0:18:48.160 --> 0:18:50.359 something is going to happen there there. You're right, they 0:18:50.440 --> 0:18:52.680 hide a lot of people in that area. They're talking 0:18:52.720 --> 0:18:55.320 to portion about something. So something's gonna come, but I 0:18:55.440 --> 0:18:57.520 have no way of figuring out when it is. In 0:18:57.560 --> 0:18:59.639 my view, it's going to once again not be that 0:18:59.800 --> 0:19:02.399 in her mental to the sales and bottom line, but 0:19:02.520 --> 0:19:04.720 it's going to really help their market cap. All right, 0:19:04.800 --> 0:19:06.840 on a rock, ran I thank you appreciate it as 0:19:06.880 --> 0:19:11.360 always phoning it in from some remote location, which I note, 0:19:11.400 --> 0:19:13.399 but he does come in, you know, regularly. But he 0:19:13.480 --> 0:19:17.000 I think he absconded from the metro New York region. 0:19:17.040 --> 0:19:19.920 But during the pandemic, he's one of those smart guys. Rana. 0:19:20.000 --> 0:19:26.600 He covers all things technology. Vince Wignarella. He does all 0:19:26.600 --> 0:19:30.239 the trading stuff for Bloomberg News and he has just 0:19:30.359 --> 0:19:33.720 made working from home a science and art. But something 0:19:33.720 --> 0:19:35.399 got him into the city today, so we we we 0:19:35.520 --> 0:19:37.360 grabbed him and Vince, what a great day, I mean, 0:19:37.480 --> 0:19:40.280 another rough day out in the markets here. I'd love 0:19:40.320 --> 0:19:41.760 for you to put in what we're seeing over the 0:19:41.840 --> 0:19:44.800 last six seven weeks. Put it in the context here. Yeah, 0:19:44.960 --> 0:19:48.080 like like you said, tough, tough playing in the sandbox today, 0:19:48.560 --> 0:19:51.080 traders getting a little bit confused and spank. Today we 0:19:51.119 --> 0:19:52.720 saw a little bit of a bit in sterling, a 0:19:52.720 --> 0:19:55.400 little bit of a bid for UK gilts. That usually 0:19:55.440 --> 0:19:58.000 spells positive for risk. And there was a hope that 0:19:58.400 --> 0:20:01.920 the downside we about today, which came from the data 0:20:01.960 --> 0:20:05.400 you mentioned earlier, um would turn a bit and and 0:20:05.800 --> 0:20:08.880 markets would pick pack up. And that really hasn't happened. 0:20:09.240 --> 0:20:11.080 And so the traders that I'm talking to are feeling 0:20:11.119 --> 0:20:13.320 a little bit more pain than normal because I think 0:20:13.320 --> 0:20:16.080 they feel like they got sucked in by the moves 0:20:16.080 --> 0:20:17.720 in the UK and that was supposed to lead to 0:20:17.720 --> 0:20:20.439 something which it hasn't. So what do you think about 0:20:20.520 --> 0:20:23.840 the moves in the UK that we saw. It seemed 0:20:24.000 --> 0:20:27.399 really dramatic, thirty year guilds moving, swinging a hundred basis 0:20:27.480 --> 0:20:32.240