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Speaker 2: Mark Zuckerberg taking the stand in federal court today as
Speaker 2: the first witness in the us FTC's antitrustriuse seeking to
Speaker 2: break up Meta platforms. He's the company's founder and CEO.
Speaker 2: Of course, he set to face questions about Meta's acquisitions
Speaker 2: of Instagram and WhatsApp. The FTC is seeking to force
Speaker 2: Meta to divest those platforms, alleging the acquisitions gave Meta
Speaker 2: an illegal monopoly on portions of the social networking industry.
Speaker 2: To that, here's FTC Chair Andrew Ferguson earlier on Fox
Speaker 2: outlining the case.
Speaker 3: Here, we have actual evidence that the transactions turned out
Speaker 3: to be anti competitive and have given Facebook and Met
Speaker 3: a tremendous amount of power. We certainly think it's a monopoly,
Speaker 3: and we think that the evidence that we're going to
Speaker 3: put on a trial, is going to show that it's
Speaker 3: a monopoly. And look, we all saw full on in
Speaker 3: twenty twenty how much power these social media platforms have
Speaker 3: over every aspect of our daily life, of our politics,
Speaker 3: our elections, our social lives, our economic lives. And that's
Speaker 3: what this case is about, is about addressing that sort
Speaker 3: of power and making sure that twenty twenty can never
Speaker 3: happen again.
Speaker 2: That was FDC Chair Andrew Ferguson on Fox earlier today
Speaker 2: outlining the case from where we bring in Jenery Bloomberg Intelligence,
Speaker 2: senior analyst for Anti Trust. She joins us here in
Speaker 2: the Bloomberg Interactive Brokers studio. I wanted to play that
Speaker 2: clip for you because it sounds like the case is
Speaker 2: about a couple different things, at least to the FTC chair.
Speaker 2: What is the case actually about, because it sounded very political,
Speaker 2: and this is a case that has been a long
Speaker 2: time in the making, that has spanned administrations.
Speaker 4: Right, Well, it really is just about Facebook's acquisitions of
Speaker 4: Instagram and WhatsApp. Now long time ago. There were other
Speaker 4: allegations in the suit, they've all been thrown out. They're gone,
Speaker 4: having to do with not working with competitors. It's just
Speaker 4: these acquisitions. And the allegation is that for both of
Speaker 4: those companies, Facebook at the time called Facebook and not
Speaker 4: Meta was concerned that they would grow or be bought
Speaker 4: by a Google or somebody like some other big tech
Speaker 4: platform and become a real competitor to Facebook and give
Speaker 4: them a tough time in social networking, and so they
Speaker 4: bought them instead. It's sort of what they call a
Speaker 4: buy and bury, although they didn't bury strategy, and they're
Speaker 4: saying that just those acquisitions that itself was anti competitive contents.
Speaker 2: So hold on, is that is that not allowed?
Speaker 5: Like, you know, there's a business strategy to me, you know.
Speaker 2: If you think about it, Like, let's just think about
Speaker 2: it from the consumer package goods business. A large soda
Speaker 2: manufacturer going and buying a fast rising upstart that is
Speaker 2: making some sort of drink that a lot of people
Speaker 2: are seeming to enjoy.
Speaker 6: Is that anti competitive? So it is an anti competitive
Speaker 6: on its face.
Speaker 4: No, And first of all, it has I'm not a
Speaker 4: lawyer with a monopoly position. Do you have a monopoly
Speaker 4: and have you done this to maintain your monopoly? That's
Speaker 4: the allegation here. So a company that isn't considered a monopolist.
Speaker 4: They can do something like that. The other thing is
Speaker 4: we're talking about buying Barry, So sometimes these things look
Speaker 4: anti competitive where a dominant company buys up and upstart
Speaker 4: and then kills it it's gone, which didn't happen here.
Speaker 6: See that.
Speaker 5: Yes, I'm not going to say who, but when we've
Speaker 5: definitely seen that with various big.
Speaker 6: Tech companies, exactly happens, right, We've seen it.
Speaker 4: But that isn't the case here, which I think makes
Speaker 4: this case a little bit difficult for the Federal Trade
Speaker 4: Commission because they didn't. Facebook didn't just buy Instagram and
Speaker 4: WhatsApp and kill them off. They put resources in and
Speaker 4: they improved companies that were really very nascent at the
Speaker 4: time that they were acquired.
Speaker 5: The issue is in boy, this makes them even a
Speaker 5: bigger monopoly when it comes to the social world or
Speaker 5: is that part of it as well?
Speaker 7: Well?
Speaker 6: That is part of adding it.
Speaker 4: That is part of it that they basically just maintained
Speaker 4: this monopoly they had in personal social networking and what
Speaker 4: it's and by just buying up everybody, they own them all.
Speaker 4: They keep Facebook blue, they call it the original and
Speaker 4: Instagram separate they're two different products even though they're both
Speaker 4: owned by Meta, and that they maintain this monopoly over
Speaker 4: personal social networking. And what that results in is lack
Speaker 4: of choice for consumers, lack of quality.
Speaker 6: Maybe there's less privacy protections.
Speaker 4: There are more ads. Maybe if you had some competitor,
Speaker 4: you'd have better options as consumers. That's the allegation here.
Speaker 4: Is it TikTok calling good point?
Speaker 6: Very good point? So what's at stake? Because Mark Zuckerberg.
Speaker 5: Already taking the stand in federal court today, what did
Speaker 5: we learn from any of that? I know it's all
Speaker 5: kind of happening in real time.
Speaker 4: It is right, He's really important here because they're two
Speaker 4: sides to this case. That makes it very strange. There
Speaker 4: are a lot of documents, mostly Iszuckerberg authored by him
Speaker 4: or he contributed to in an email chain from twenty twelve.
Speaker 4: In twenty fourteen, when these companies were bought saying it's
Speaker 4: better to buy than compete. Right, this is bad. It
Speaker 4: looks like the intention is we don't want to compete.
Speaker 4: We just want to buy them up so that they
Speaker 4: won't be competing with us. But on the other hand,
Speaker 4: you have the situation where they put the money in
Speaker 4: they built these companies up. And also you have to
Speaker 4: prove as a plaintiff that it caused consumer harm. Maybe
Speaker 4: the intention was bad, and Mark Zuckerberg's going to have
Speaker 4: to explain away those documents and what he meant at
Speaker 4: the time. But even if they proved that the intention
Speaker 4: was bad at that time, they also have to approve
Speaker 4: they also have to prove that consumers were harmed.
Speaker 6: That is very difficult.
Speaker 4: Think about it. Many years ago. Technology advances and changes
Speaker 4: very quickly. We have TikTok. Now we didn't have TikTok.
Speaker 4: Then YouTube has expanded since then. So would we be
Speaker 4: in a better position had they right now, had they
Speaker 4: not bought the companies, those companies could be gone for
Speaker 4: all we know, or they could exist in some weakened
Speaker 4: form than they exist today. And how do you prove
Speaker 4: the consumers would be better off?
Speaker 5: And I think that's a big problem here, One last
Speaker 5: question real quickly, like twenty seconds.
Speaker 6: Might they potentially have to.
Speaker 4: Get rid of these That's what the FTC is seeking,
Speaker 4: And that's a big deal because about fifty percent of
Speaker 4: the ad revenue for Meta comes from Instagram.
Speaker 5: That changes the business dynamics. Jen Thank you so much, Jenniferree.
Speaker 5: She's senior anti trust litigation analyst here at Bloomberg Intelligence.
Speaker 1: You're listening to the Bloomberg Business Week podcast. Catch US
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Speaker 5: Focus on news out of Washington, DC and the President,
Speaker 5: especially when it comes to tariff's The explosion and changing
Speaker 5: of tariff terms have led to a lot of volatility
Speaker 5: and global financial markets and a lot of questions about
Speaker 5: what's ahead in terms of the global macro outlook. It
Speaker 5: also risks adding to the inflation concerns here in the
Speaker 5: United States. Bottom line, it's a tough environment. As we
Speaker 5: heard this morning from Goldman Sachs CEO David Solomon on
Speaker 5: his earnings call with analysts.
Speaker 8: This uncertainty around the past forward and fears over the
Speaker 8: potentially escalating effects of the trade war have created material
Speaker 8: risks to the US and global economy. We are encouraged
Speaker 8: by the administration's recent actions to pursue a more gradual
Speaker 8: policy process that allows for considered negotiations with many countries,
Speaker 8: but how policies will evolve is still unknown.
Speaker 5: Of course, that was Goldman's CEO David Solomon earlier this
Speaker 5: morning on that earnings call. Unknown's uncertainties not easy, any
Speaker 5: of it for the Fed to determine monetary policy going forward.
Speaker 5: And as Bloomberg's Christine Harper writes in a Bloomberg opinion
Speaker 5: piece looking back at former Fetchair, Paul Volker's career could
Speaker 5: provide lessons for President Trump and his in his administration. Christine,
Speaker 5: by the way, is Bloomberg News editorial board member co
Speaker 5: author with Paul Volker of the book about his life.
Speaker 5: It's entitled Keeping at It, The Quest for Sound Money
Speaker 5: and Good Government. Christine joins us here in studio, I said,
Speaker 5: when you walked in, we've been thinking about you a lot,
Speaker 5: because we've talked about Paul Volker before with you in
Speaker 5: kind of stressful times and certainly these higher inflationary times.
Speaker 5: Paul Volker, you write about two episodes during his life
Speaker 5: that are important. One takes us back to the administration
Speaker 5: of Richard Nixon in nineteen seventy one.
Speaker 9: Go there with us.
Speaker 10: Yeah, So he was part of he was a younger
Speaker 10: member of the Nixon administration. He was under Secretary of
Speaker 10: Monetary Affairs, which he actually remembers as being one of
Speaker 10: the greatest job in the world.
Speaker 9: He loved it.
Speaker 10: But at that time, the US had this unsustainable requirement
Speaker 10: that it honored this thirty five dollars per ounce price
Speaker 10: for gold. And at that point, after decades of overseas
Speaker 10: spending of dollars on the Marshall Plan and various investments overseas,
Speaker 10: countries abroad had so many dollars that everybody kind of
Speaker 10: knew there wasn't really enough gold to back at all.
Speaker 9: And so it was up.
Speaker 10: To the Nixon administration to sort of admit that and
Speaker 10: come out with an announcement and it was a unilateral
Speaker 10: declaration on a Sunday night in August in nineteen seventy one.
Speaker 10: Vulger was very involved in a whole weekend of talks
Speaker 10: about it at Camp David. In the lead up, everybody
Speaker 10: was surprised. It was known as the Nixon Shock, and
Speaker 10: they recognized that suddenly taking the value of gold off
Speaker 10: of any kind of anchor meant that there could be
Speaker 10: just chaos and the value of the dollar could plummet.
Speaker 10: So they put on all these wage and price controls
Speaker 10: at the same time they created tariffs. They tried to
Speaker 10: do all these things to manage the fallout, and also
Speaker 10: Vulker was immediately sent overseas to start talking to the
Speaker 10: financial leaders of every country major country, an extensive there
Speaker 10: was an extensive plan to be sure.
Speaker 9: They weren't perfect.
Speaker 10: They did some crazy things, and they had this Treasury
Speaker 10: secretary at the time, John Connolly, who only lasted for
Speaker 10: eighteen months under Nixon, who it's a sort of Texas,
Speaker 10: you know character, and he was a little nuts. But
Speaker 10: then George Schultz came along and they had a much
Speaker 10: more focused sort of way of dealing with it. So
Speaker 10: it wasn't perfect, but it was compared to what we're
Speaker 10: seeing with Trump and these tariffs. It was there was
Speaker 10: a rationale to it that everybody could understand. There was
Speaker 10: real economic thinking behind it.
Speaker 2: So that was nineteen seventy one. Fast forward to nineteen
Speaker 2: seventy nine when Vulker becomes Jimmy Carter's fed chair.
Speaker 6: Fed chair.
Speaker 10: Yeah, because the result of having no anchor to the
Speaker 10: dollar was that there was inflation. I mean, there were
Speaker 10: other reasons for the inflation, for the problems, but you know,
Speaker 10: the value of the dollar was thinking inflation was incredibly high.
Speaker 10: It was it was destroying the American economy, and so
Speaker 10: Jimmy Carter brought in Paul Vulker, even though Vulker told
Speaker 10: him before he when he sort of was talked to
Speaker 10: for the job, I'm going to do whatever it takes
Speaker 10: to kill inflation. That might mean to higher interest rates,
Speaker 10: it could be really bad for the economy, and Jimmy
Speaker 10: Carter chose him anyway. So it pretty much was one
Speaker 10: of the factors that sank Jimmy Carter's reelection because the
Speaker 10: economy got really it was really tough, but it was
Speaker 10: successful bringing down inflation, and the sort of vulgar commitment
Speaker 10: to price stability right was so powerful, and so you know,
Speaker 10: the integrity he had in pursuing that aim was so
Speaker 10: completely believable that from then on, instead of the gold standard,
Speaker 10: the dollar was known as being on the vulgar standard.
Speaker 6: It's pretty wild.
Speaker 5: I mean, are we in the process of kind of
Speaker 5: losing that concept and idea.
Speaker 10: So that was sort of the point I was making
Speaker 10: in my piece was that you know, really what the
Speaker 10: vulgar standard amounts to is this belief that there are
Speaker 10: public servants in America, whether they're you know, appointed or
Speaker 10: political or civil servants, but who are going to do
Speaker 10: what's right for America and make sure there's price stability
Speaker 10: and make sure there's sort of economic rationale behind things.
Speaker 9: Of course, it's not always been perfect.
Speaker 10: There have been mistakes, but when there are crises, you
Speaker 10: see over and over again these political figures will sort
Speaker 10: of retreat to the background and let experts like you know,
Speaker 10: when George Bush was dealing with the financial crisis, it
Speaker 10: was really Hank Paulson and BERNANKI who were handling it
Speaker 10: for America. But Butch wasn't kind of you know, back
Speaker 10: then there wasn't so much tweeting, but he wasn't like
Speaker 10: getting in the middle of it so much. And and
Speaker 10: you know, even when Bill Clinton was dealing with you know,
Speaker 10: the bond market turmoil at the beginning of his you know,
Speaker 10: he recognized that Bob Rubin had more expertise. And so
Speaker 10: we've had presidents that listened to economic experts. This feels
Speaker 10: different because really a lot of anybody who looks at
Speaker 10: what the administration put out has immediately mocked the you know.
Speaker 6: The confidence certainly in the United States, right.
Speaker 10: And the yeah, and I mean when they saw the
Speaker 10: the formula that was used to justify the tariffs.
Speaker 9: I mean, none of it makes sense.
Speaker 10: The various explanations coming out from thedministrations.
Speaker 9: Contradict each other.
Speaker 10: So even if you think that the general idea of
Speaker 10: being presenting a new trade order in the world makes sense,
Speaker 10: the way they're going about it is so haphazard that,
Speaker 10: you know, as David Solomon was saying, like nobody knows
Speaker 10: what's happening, and it's very hard to make any sort
Speaker 10: of forward planning.
Speaker 2: As Carol mentioned, we're seeing this hit consumer confidence. Yeah,
Speaker 2: you know, going into this term. A question that we
Speaker 2: asked a lot of our guests, Christine, was do we
Speaker 2: see maybe the markets, the bond market or the equity
Speaker 2: market or both become checks to what the president is doing,
Speaker 2: at least when it comes to his economic agenda. In
Speaker 2: your view, did we see that happen last week?
Speaker 10: Well, I'm not an expert on what's making the administration
Speaker 10: do anything, but I don't.
Speaker 2: Think anybody is except for the president.
Speaker 10: I've just seen the reporting saying that Trump said, you
Speaker 10: know that the bond market was getting a little queasy
Speaker 10: or whatever.
Speaker 2: Words he used about guardrails here.
Speaker 10: Yeah, I mean, the borrowing costs of the United States
Speaker 10: government is a huge guardrail. I mean, no, none of
Speaker 10: the administration's policies are going to succeed if suddenly we're
Speaker 10: paying a huge amount more in interest every year. So
Speaker 10: you know, you can cut as many federal jobs as
Speaker 10: you want, you can cut all the services from the
Speaker 10: federal government.
Speaker 9: But if we're if all that you.
Speaker 10: Know, savings is you know, overtaken by having to pay
Speaker 10: more on interest on our debt, I don't know where
Speaker 10: where that's getting us.
Speaker 5: What do you think the president could do in terms
Speaker 5: of you know, or he and his key economic advisors
Speaker 5: to maintain the confidence in the US by citizens of
Speaker 5: the US and also the global world.
Speaker 6: Well, based on what well I.
Speaker 10: Think, you know, it does seem that a more consistent
Speaker 10: approach would be helpful. That's what you hear from business leaders,
Speaker 10: That's what you hear from foreign leaders. They want to
Speaker 10: understand what the aims are here. They want to clear
Speaker 10: path forward and you know, not a daily change in
Speaker 10: the in the tariff regime and plans, and you know,
Speaker 10: not sort of terriffs by tweet.
Speaker 5: That doesn't whether I want to ask you what if
Speaker 5: you think what if that's his aim, is to just
Speaker 5: constantly upset people and keep them kind of on edge,
Speaker 5: whether it's global leaders, whether he definitely has shown a
Speaker 5: difference to the equity market, it's certainly the bond market
Speaker 5: that caught his attention.
Speaker 6: But what if that is his strategy?
Speaker 5: What could be as you think about you've covered so
Speaker 5: much in terms of crises and just made off crypto
Speaker 5: like just so many things of your purview. How do
Speaker 5: you like how how are we thinking about kind of
Speaker 5: the US as an economic and financial might.
Speaker 10: Yeah, I mean the US is sort of based on
Speaker 10: this idea that you can your money is safe lending
Speaker 10: to the US government. And if we have a policy
Speaker 10: that nobody understands or trusts and seems all to be
Speaker 10: designed to satisfy the whims of one person, it's going
Speaker 10: to be harder and harder for us to maintain that,
Speaker 10: and that would be really damaging for Americans. So ideally,
Speaker 10: what would be good to see you to say back
Speaker 10: to your question, is for you know, the president to
Speaker 10: start listening to some of his I mean it does
Speaker 10: sound like Treasury Secretary Scott Persens taking sort of the
Speaker 10: front the lead on this. The markets certainly trust him
Speaker 10: a bit more. He's talked a lot more about it,
Speaker 10: kind of a gradual approach, and so, you know, I
Speaker 10: think there's hope. That's why markets seem to be a
Speaker 10: little quieter today that you know, maybe some reason will prevail.
Speaker 10: It's but I mean, the president is very impulsive, and
Speaker 10: so it's it's very hard to know what.
Speaker 9: Will really happen.
Speaker 2: Yeah, what are potential long term risks in your view
Speaker 2: if during this administration the US moves away from this
Speaker 2: vulgar standard, right, does that have ramifications beyond selection?
Speaker 11: Well?
Speaker 10: Sure, I mean I think what you see is that
Speaker 10: the borrowing costs of the US go up because you know,
Speaker 10: people whether it's American citizens or people overseas, just start
Speaker 10: putting their money, the money that they want to make
Speaker 10: sure is there no matter what. They're not necessarily going
Speaker 10: to put it in treasuries or or all of it
Speaker 10: in treasuries. They might start finding other places. That's good
Speaker 10: for you know, other countries and their debt or other markets,
Speaker 10: but it's.
Speaker 9: Bad for the US borrowing.
Speaker 10: And you know, you just see inflation cause because you'll
Speaker 10: have higher costs for Americans having to try to buy
Speaker 10: things overseas. I think there's just all these privileges Americans
Speaker 10: have gotten used to knowing that the dollar was sort
Speaker 10: of needed by everybody in the world and sought sought after,
Speaker 10: and the same with you know, US treasuries is at risk,
Speaker 10: I think, I mean, it's not going to go away immediately,
Speaker 10: but we've taken it for granted for a long time.
Speaker 6: Philiy J.
Speaker 5: Powell could find himself in a really complicated right in
Speaker 5: terms of if Tavis make things more expensive and there's
Speaker 5: more inflation pressures in what could be potentially a slow
Speaker 5: in growth environment.
Speaker 6: Yeah, that's tricky.
Speaker 10: Yeah, I mean you saw that in the seventies after
Speaker 10: the Nixon chaka you so basically these bouts of stagflation,
Speaker 10: and it was really hard. I mean, the FED at
Speaker 10: the time wasn't able to deal with the inflation. They
Speaker 10: were too concerned about the h the slow growth and they,
Speaker 10: you know, basically Arthur Burns, that fed Cherman at the time,
Speaker 10: was a close political ally of Richard Dixon, and many
Speaker 10: people believe he just let inflation, you know, happen because
Speaker 10: he wanted to make sure Nixon could get re elected.
Speaker 10: And that turned out to be a really big problem
Speaker 10: for the US economy twenty five seconds.
Speaker 5: If Paul Volker was here, what would you want to
Speaker 5: ask him about this environment?
Speaker 9: Just quickly? Well, I know he would.
Speaker 10: I mean, at the big point he wanted to make
Speaker 10: in the book was the importance of competent government.
Speaker 5: You know, it's a true public servant, right, Yeah.
Speaker 10: And so he realized sort of like the big takeaway
Speaker 10: at the end of his life was we need to
Speaker 10: have good, well trained people staffing the US government. So
Speaker 10: I think he would be really upset at all the
Speaker 10: ways we're treating federal workers.
Speaker 5: All right, great stuff, Thank you so much, so appreciate it.
Speaker 5: Christine Harper, Bloomberg News editorial board member, co author with
Speaker 5: Paul Voker on the book Keeping at It, The Quest
Speaker 5: for Sound Money and Good Government.
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Speaker 5: We're talking Apple. Yeah.
Speaker 2: I mean, this, after all, is the company that's most
Speaker 2: exposed to a tariffs or a tit for chat chat
Speaker 2: with China when it comes to the mag seven shares rallying.
Speaker 11: Though.
Speaker 2: On that reprieve, we talk about the company's massive global
Speaker 2: supply chain a lot with our Mark Kerman, who's Bloomberg
Speaker 2: News Managing editor for Global Tech. He joins us here
Speaker 2: in the Bloomberg BusinessWeek studio. You had a busy weekend always, yes,
Speaker 2: I mean, but this is easier than usual. And I
Speaker 2: was struck by one of the pieces that I read
Speaker 2: that you wrote, which said Apple basically was able to
Speaker 2: avoid its biggest crisis since the pandemic back in twenty twenty.
Speaker 12: That's right, And you know I didn't listen to your
Speaker 12: full conversation with the with the prior guest. He's great,
Speaker 12: But if we're talking about Apple, I don't believe that
Speaker 12: they're going to be moving their supply change to the Yes,
Speaker 12: maybe it'll happen in our lifetime, but I don't think
Speaker 12: it's going to happen in the next ten years.
Speaker 2: What happens if tariffs on China continue to exist, there's
Speaker 2: no exemption for Apple. Can Apple satisfy US customers through India?
Speaker 2: It seems by the way, it would seem to defeat
Speaker 2: the purpose of the tariffs.
Speaker 12: But well, today no, but I would say within a
Speaker 12: year two yes, Right now they can probably fulfill maybe
Speaker 12: seventy five percent of the US demand that they need
Speaker 12: in India. If they ramped up and burn the midnight
Speaker 12: oil for the next few months, they'd probably be able.
Speaker 7: To do it.
Speaker 11: But they would be able to do.
Speaker 12: It pretty cleanly. I would think in a year or
Speaker 12: two from now, they're already thirty forty maybe a little
Speaker 12: bit more than that million units. The US represents probably
Speaker 12: one hundred million units per year, maybe a little bit less,
Speaker 12: so less than the rest of world, So you know,
Speaker 12: you're quickly, you're quickly getting there.
Speaker 5: What does it do to the relationship though, between Apple
Speaker 5: and China ultimately is what it does.
Speaker 12: Yeah, that's the elephant in the room, because China can't
Speaker 12: be too happy here. And I think the argument that
Speaker 12: Apple is trying to make is how important China is.
Speaker 11: To the rest of the world.
Speaker 12: Right still needing to produce one hundred to million iPhones,
Speaker 12: You're still producing all of those phones for the rest
Speaker 12: of the world. So basically the idea is splitting the
Speaker 12: supply chain INTWO and again Apple supply chain goes well
Speaker 12: beyond the iPhone. But let's face it, what we really
Speaker 12: care about is the iPhone. The other stuff's cool, but
Speaker 12: this is where we're at. India's for US, China's for
Speaker 12: the rest of the world, including China. It's pretty it's
Speaker 12: pretty important.
Speaker 2: Still, but again, it would defeat the purpose of the
Speaker 2: tariffs on China if you were in a move whole point.
Speaker 6: That's but that's the challenge.
Speaker 2: That's the challenge I think Apple might face when it
Speaker 2: comes to dealing with the Trump administration.
Speaker 12: Well, is it possible that Trump says, well, Apple is
Speaker 12: using India as sort of a lever here to get
Speaker 12: out of the tariffs, I'm going to put this huge
Speaker 12: new tariff on India. Also, that's a real question, right,
Speaker 12: And so I think that is what's making this so
Speaker 12: challenging for Apple is that it kind of feels like
Speaker 12: whack a mole to some extent. If we're not going
Speaker 12: to just manufacture stuff in the US, we're going to
Speaker 12: have policies that are shifting, right almost every day. We
Speaker 12: can have a president here who can, to your point,
Speaker 12: add an India tariff to a significant degree overnight, so
Speaker 12: they can put all their eggs in the India basket
Speaker 12: and then oh my god, we're gonna have to move
Speaker 12: somewhere else. Now we're actually gonna have to move to
Speaker 12: the US. And so they've got a lot of cash.
Speaker 12: Maybe they're needing to start dipping into those cash reserves,
Speaker 12: whether it means to offset price hikes or to move something.
Speaker 12: But I just don't see the feasibility of moving to
Speaker 12: the US. It's just so unlikely. Let me just drop
Speaker 12: you a scenario here. I feel like, short of lying
Speaker 12: to Trump, if I'm Tim Cook and telling him we're
Speaker 12: gonna move to the US, just give us a few
Speaker 12: years and betting that Trump won't be back for a
Speaker 12: third term, right, which obviously is not legal, but obviously
Speaker 12: they've been talking about it. I don't think it's going to happen.
Speaker 9: But anyways, the.
Speaker 12: Bet is that Trump's gone three and a half years.
Speaker 12: They could tell Trump is going to take us four years,
Speaker 12: but we're going to get there because of you. So
Speaker 12: they can announce all this stuff, say they're going to
Speaker 12: do it, but never actually do it knowing he's gone.
Speaker 12: That's one lever Tim Cook could pull. I don't know
Speaker 12: if the act well, because maybe you get advance after
Speaker 12: Trump and you know who knows what he does. But
Speaker 12: I think most people would understand these things take time
Speaker 12: and there's no way you can move to the US.
Speaker 12: But I guess if I'm Apple, I could say we're
Speaker 12: going to do this and just not do it and
Speaker 12: then come up with the reason four years why it
Speaker 12: didn't work out. One other thing, you could say we're
Speaker 12: going to move one component or one thing, or packaging.
Speaker 6: Talking about packaging with us packaging.
Speaker 12: Yeah, just come up with something.
Speaker 6: Mar we have to You talked.
Speaker 5: About all their cash on the balance you we always do.
Speaker 5: Can they survive three and a half years of higher
Speaker 5: prices and deal with it and just write it out?
Speaker 8: Yes?
Speaker 5: Okay?
Speaker 12: Are they going to know?
Speaker 11: Maybe? Do they want to?
Speaker 12: I think is what I was meaning to say.
Speaker 11: Absolutely not.
Speaker 12: But there's no scenario in which they're going to start
Speaker 12: charging two grand for these phones.
Speaker 11: They're going to eat some of it.
Speaker 12: Like I said, Apple, if this is again, if it
Speaker 12: needs to happen, there's a I would say it's a
Speaker 12: coin flip at this point if they're going to need
Speaker 12: to do this, But you're gonna split it a few ways.
Speaker 12: You're gonna split it between Apple eating it. You're gonna
Speaker 12: split it consumer eating it. You're gonna split it as
Speaker 12: the supplier eating it, right, and so we'll see what happens.
Speaker 5: Fun times right, not really, no, I know sarcasm.
Speaker 9: Mark German, thank you so much.
Speaker 5: Good to have you here in studio, Bloomberg News, Managing
Speaker 5: editor for Global Consumer Tech. Hey, when we come back
Speaker 5: past as prologue, why the chump administration? May you want
Speaker 5: to check out one former FED chair's handling of matters
Speaker 5: that's coming up on Bloomberg Business Weekdaily.
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Speaker 5: All right, everybody, we've got about eighteen minutes to go
Speaker 5: until we wrap up the trade on this Monday, April fourth,
Speaker 5: Carl Master Tim Stanevik live in our Bloomberg Interactive Broker
Speaker 5: studio and bouncing around here. In terms of the equity trade,
Speaker 5: I just heard the team breaking down the numbers. We're
Speaker 5: definitely off our loads of the session, back up certainly
Speaker 5: on the S and P and the down near our
Speaker 5: highs of the session. That means up about one point
Speaker 5: four percent on the S and P five hundred, Dow
Speaker 5: Jones Industrial Average and the Nasdaq one hundred both tim
Speaker 5: up about one and a quarter percent.
Speaker 2: So we're back.
Speaker 6: So we're back.
Speaker 5: Yeah, I mean, it's it's it's an interesting kind of
Speaker 5: mellow day. And yeah, it's interesting to see green across
Speaker 5: the screen, which was highly expected.
Speaker 2: Last night at what we saw over the weekend, well
Speaker 2: because of.
Speaker 5: Right, what we saw over the weekend and stuff, and
Speaker 5: we definitely saw I think Asia overnight saw some rallies.
Speaker 2: But I'm still very confused by it, and I'm hoping
Speaker 2: Andrew Sliman can help help me see the light.
Speaker 5: Lets see what he has to say.
Speaker 2: The senior portfolio manager and head of the Applied equity
Speaker 2: Advisor's team at Morgan Stanley Investment Management. He joins us
Speaker 2: from Chicago. Andrew, good to have you back on with us.
Speaker 2: The reason I say I'm surprised is because I think
Speaker 2: there's it's fair to say a lot of folks out
Speaker 2: there would say it after this weekend. Yes there's this pause,
Speaker 2: but we still don't have clarity on what exactly is
Speaker 2: going to happen when it comes to trade in tariffs.
Speaker 6: Fair.
Speaker 7: Absolutely, thanks for having me on. But look, I think
Speaker 7: last Wednesday was a pivotal day because you can get
Speaker 7: growth scares where the market's down fifteen up to almost twenty.
Speaker 11: Percent, and that's a growth scare.
Speaker 7: But once the market gets past twenty percent down, the
Speaker 7: likelihood of recession is very high, and that's when the
Speaker 7: credit markets start to quake. And basically Trump came out.
Speaker 7: President Trump came out and said, I don't like to
Speaker 7: see what I saw on the bond market, so I'm
Speaker 7: putting a delay on. So I think in effect what
Speaker 7: he did was he put a you know, he put
Speaker 7: a floor on equities. You know, he didn't want him
Speaker 7: to go down more than twenty percent, and so you
Speaker 7: know that's what growth scare. You know, you can have
Speaker 7: a v bottom like we had in twenty eighteen and
Speaker 7: twenty twenty, or you can have a retest like we
Speaker 7: saw in nineteen ninety eight, twenty eleven, twenty twenty two.
Speaker 7: You just don't know. But the point is sometimes you
Speaker 7: don't have retests, and maybe this is one of those times.
Speaker 6: Sometimes you do, sometimes you don't.
Speaker 5: I mean, isn't it safe to say, Andrew that investors
Speaker 5: are still kind of struggle to game out what the
Speaker 5: scenario is and the economic spillovers of a trade war,
Speaker 5: even if it's maybe not at one hundred and forty
Speaker 5: five or one hundred and twenty five percent, many folks
Speaker 5: were saying even a ten percent across the board trade
Speaker 5: tariff or tariff I should say, from the United States
Speaker 5: against trading partners.
Speaker 6: It's a big deal.
Speaker 5: It changes the dynamics of certainly how you think about companies,
Speaker 5: how do you think about their earnings, and how you
Speaker 5: think about investments one hundred.
Speaker 7: Percent, but a lot of stocks are down a lot
Speaker 7: more than ten percent. I mean, you know, whatever the
Speaker 7: tariff and packed stocks are down. You've got some of
Speaker 7: these big mag seven stocks that were down over thirty percent,
Speaker 7: so a lot of bad news was priced into them.
Speaker 7: And I'm a big believer in watching kind of earnings
Speaker 7: and earnings revisions, but at times like this, I mean
Speaker 7: I chucked that playbook because I don't think anyone knows.
Speaker 7: I read a research piece where someone, you know, an
Speaker 7: analysts brought down their Apple estimates by thirty percent, and
Speaker 7: then they reduced that to only down seven percent. No
Speaker 7: one knows, So the question becomes what is embedded in
Speaker 7: stock prices? And there was a lot of bad news,
Speaker 7: so I think the market is rallying on the expectation.
Speaker 7: Maybe it's not the worst scenario. I'm not pounding the table.
Speaker 7: I'm just saying the answered. Tim's first question is why
Speaker 7: is the market going up? I think you know that
Speaker 7: the news is slightly not as bad as it was,
Speaker 7: you know, before last Wednesday, and the markets respond to
Speaker 7: positive ready to change.
Speaker 2: Are you concerned about I don't know a good word
Speaker 2: for this, but it's it's It's like the idea that
Speaker 2: if you're an executive at a firm that's trying to
Speaker 2: make decisions about CAPEX, trying to make decisions about hiring,
Speaker 2: and you really don't really know how much you're going
Speaker 2: to have to pay due to tariffs, there's this like
Speaker 2: paralysis that happens, I imagine.
Speaker 11: Do you think that's happening? Correct?
Speaker 7: My next question to you is how much is the
Speaker 7: stock down? You know, because if a stock isn't down
Speaker 7: much and that heck comes out, then I'm worried. If
Speaker 7: the stock's down a lot because the market anticipates paralysis,
Speaker 7: then I'm not as worried. So yeah, I think there'll
Speaker 7: be a lot of that. But then the question is
Speaker 7: what's the setup going into that, you know, earning something.
Speaker 7: I think the market anticipated that there will be this paralysis.
Speaker 2: So is the market fairly pricing in the risk in
Speaker 2: your view?
Speaker 7: Well, I mean last Wednesday was uh, but you know,
Speaker 7: we've had a heck of a rally here off the
Speaker 7: low and uh, you know, the more you get a
Speaker 7: few more days and I'm going to turn a little
Speaker 7: bit more cautious that I was. You know, I wrote
Speaker 7: a piece in that last Tuesday that just said you
Speaker 7: got the playbook says down to fifteen percent?
Speaker 2: What in your view changed? What in your view change
Speaker 2: on Wednesday? Because Carolyn, I've been talking about this for
Speaker 2: the past few days. What changed on Wednesday? Yes, it's
Speaker 2: a ninety day reprieve, but still means that you know,
Speaker 2: eighty five days from now, we're going to be talking
Speaker 2: about this again.
Speaker 8: Yeah.
Speaker 7: Yeah, My view changed because of what the President said.
Speaker 11: Very important. He didn't say, hey.
Speaker 7: We're putting a ninety day you know, reprieve on because
Speaker 7: you know all these company countries are coming forward. He
Speaker 7: said he's putting a reprieve on because he heard Jamie
Speaker 7: Diamond said chance of recession. He said he's putting a
Speaker 7: reprieve on because he didn't like what he saw on
Speaker 7: the bond market. That tells me he's watching the financial markets, right,
Speaker 7: He is watching it. So to me, that's what's changed.
Speaker 7: That's the key is that he's not just hey, we're
Speaker 7: just going to push forward and it's going to be
Speaker 7: pain out there, but it's all for the good.
Speaker 11: No, right, keep pivoted, Andrew.
Speaker 5: Have you ever been in like an uber or a
Speaker 5: cab and they're like, you know, foot on the guest stop,
Speaker 5: foot of the guest on the guest Stop's agreed. Yeah, Well,
Speaker 5: so my point is so he backs off, but we
Speaker 5: know he likes tariffs. The President has been very clear
Speaker 5: for years and years and years in.
Speaker 2: The English language is what he said to.
Speaker 11: What that means.
Speaker 7: Carol is the more the market goes up in this
Speaker 7: little bounce, the more he emboldens himself to not care
Speaker 7: about the market. So I think it goes back to
Speaker 7: this point of how do you invest in that environment?
Speaker 5: Though, where he might be like Tariff's on, No, okay,
Speaker 5: market sells off, bond market gets crazy, Tariff's off, you know, like,
Speaker 5: how how do you CEOs are saying, I don't know
Speaker 5: how I make decisions. I don't know how I do
Speaker 5: things going forward? Like how do you do stuff? Sorry,
Speaker 5: about forty five seconds left.
Speaker 7: I think you invest when the market is down, and
Speaker 7: you get a little bit more bearish. When the market's up,
Speaker 7: you have to tack against the you know, conventional wisdom.
Speaker 7: People were screaming scared after the market it drops seventeen percent.
Speaker 7: That's ridiculous. Likewise, to think it's all fine now, that's
Speaker 7: naive also, So my my base view on the year is, look,
Speaker 7: it's a pause year. We've had two great years in
Speaker 7: a row for equities where the multiple got a little high.
Speaker 7: We're due for a pause here, but they'll be trading opportunities.
Speaker 7: I don't think this is the last time the market's
Speaker 7: going to drop like this. I just wouldn't chase it.
Speaker 7: Assuming everything's fine.
Speaker 6: Now we're still up forty we're still backing again.
Speaker 5: We're still up forty one percent on the S and
Speaker 5: P five hundred twenty end of twenty twenty two.
Speaker 11: It's great, that's not so bad. Well, that's why we
Speaker 11: need a pause here.
Speaker 5: Just don't look at for one can right nowful. It's
Speaker 5: a painful not doing it. Not doing it, Andrew, thank
Speaker 5: you so much. Andrew Slimmon. He is senior portfolio man
Speaker 5: Morgan's Daily Investment Management, joining us from Chicago.
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