WEBVTT - Surveillance: Pandemic Revenue Boost With Bailin 0:00:05.120 --> 0:00:09.200 Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene, along 0:00:09.240 --> 0:00:13.080 with Jonathan Ferrell and Lisa Brownwitz Jay Leye. We bring 0:00:13.119 --> 0:00:17.159 you insight from the best and economics, finance, investment, and 0:00:17.280 --> 0:00:23.280 international relations. Find Bloomberg Surveillance on Apple Podcast, Suncloud, Bloomberg 0:00:23.360 --> 0:00:30.080 dot com, and of course on the Bloomberg terminal. We 0:00:30.120 --> 0:00:32.960 are both familiar with the heritage, we are both unfamiliar 0:00:33.080 --> 0:00:35.519 with the products. David Bailin joining US now City Global Wealth, 0:00:35.600 --> 0:00:39.200 Chief Investment Officer and Global head of Investments. David, let's 0:00:39.200 --> 0:00:41.319 just talk about I think the key discussion right now 0:00:41.840 --> 0:00:44.680 the best way, the cleanest way to get exposure, durable 0:00:44.680 --> 0:00:48.960 exposure to a better American economy. Well, you know, first 0:00:48.960 --> 0:00:51.440 of all, I want to be terms repairman. But other 0:00:51.479 --> 0:00:54.440 than that, I want to think this is a pretty 0:00:54.480 --> 0:00:56.600 extraordinary time. And you've actually hit upon a couple of 0:00:56.600 --> 0:00:59.960 those themes. Number one is incredible revenue growth for checking 0:01:00.000 --> 0:01:02.960 allergy companies and the benefit of course, you know, to 0:01:03.000 --> 0:01:06.759 their stocks, but that's what's benefiting the economies. Incredible efficiency 0:01:06.760 --> 0:01:10.880 and incredible flexibility of you know of companies, global companies 0:01:10.920 --> 0:01:13.680 and US companies. Number two is and you use the 0:01:13.720 --> 0:01:16.759 great example of you know of Stanley works, the the 0:01:16.760 --> 0:01:19.840 the idea of of what growth is to come when 0:01:19.840 --> 0:01:22.080 we talk about it economy growing six to eight percent 0:01:22.200 --> 0:01:24.160 after a pandemic. There are two aspects to it. One 0:01:24.200 --> 0:01:27.080 is the actually ability to spend, right, and that ability 0:01:27.120 --> 0:01:29.479 to spend is due to household savings. And that ability 0:01:29.520 --> 0:01:31.039 to spend is actually due to the fact that people 0:01:31.080 --> 0:01:33.319 have not had the opportunity to leave their home to 0:01:33.400 --> 0:01:36.280 do things, to begin doing work for themselves, right. And 0:01:36.520 --> 0:01:39.760 what we're seeing is a pent up demand from the 0:01:39.760 --> 0:01:42.600 consumer as well as right, an enormous amount of stimulus, 0:01:42.760 --> 0:01:45.199 and as well as the fact that people are going 0:01:45.240 --> 0:01:47.200 to begin to act as they did, you know, a 0:01:47.240 --> 0:01:49.279 year and a half ago. All of that is happening 0:01:49.280 --> 0:01:51.840 at the same time. You've asked another question I think 0:01:51.840 --> 0:01:55.240 in your programs you know yesterday, which is what's sustainable 0:01:55.520 --> 0:01:58.080 and that will be very interesting. Lisa talked about this 0:01:58.120 --> 0:02:00.160 in the in the intro just now, which is, you know, 0:02:00.240 --> 0:02:02.520 some companies are gonna be able to keep this boost 0:02:02.600 --> 0:02:07.560 of revenue a company like UPS reporting extraordinary UHR shipments 0:02:07.560 --> 0:02:09.919 and things like that. The to the extent that people 0:02:09.960 --> 0:02:13.000 continue to work from home, that will continue to take place. 0:02:13.240 --> 0:02:15.359 And so this change of behavior that's definitely going to 0:02:15.440 --> 0:02:17.560 be underway for the next couple of years that have 0:02:17.639 --> 0:02:20.280 challenged that's gonna be a big deal. The more people 0:02:20.320 --> 0:02:23.560 are adapting to work in the future based upon what 0:02:23.600 --> 0:02:25.679 they learned in the pandemic, the more we have this 0:02:25.800 --> 0:02:29.400 sustainable revenue growth that you're seeing now, David, the big 0:02:29.440 --> 0:02:31.400 fear out there. I want you to address this. And 0:02:31.440 --> 0:02:33.640 we see this a along the way for different reasons. 0:02:33.639 --> 0:02:38.400 But now front centers, margin compression o MG units price 0:02:38.800 --> 0:02:41.799 revenue down we go and on the income statement, we're 0:02:41.840 --> 0:02:46.280 gonna see some forms of margin compression. I don't see it. Well, 0:02:46.320 --> 0:02:47.919 I do see it, and I think you're gonna see 0:02:47.919 --> 0:02:50.720 it on a temporary basis, as certain things are are 0:02:50.760 --> 0:02:54.079 really in short supply, you know, when the economy reopened. 0:02:54.160 --> 0:02:55.800 The other thing is we're going to have all of 0:02:55.800 --> 0:02:58.359 the inputs except for or except for labor. All of 0:02:58.400 --> 0:03:00.239 the inputs are going to go up a great yield 0:03:00.240 --> 0:03:02.240 in terms of their costs, right, all of the commodities, 0:03:02.280 --> 0:03:05.000 the cost of actually shipping goods and services. The fact 0:03:05.080 --> 0:03:07.880 that there is going to be you know, a way 0:03:07.919 --> 0:03:10.360 I put it sixteen months of inventory needs to be 0:03:10.400 --> 0:03:13.239 produced in twelve months to not only satisfy current demand, 0:03:13.360 --> 0:03:15.840 but to refill the supply pipeline. All of that's going 0:03:15.880 --> 0:03:18.480 to take place now, and that will cause some delays, 0:03:18.680 --> 0:03:20.640 and it also will cause prices to go up. I 0:03:20.680 --> 0:03:23.160 also believe you, however, that this will be passed through 0:03:23.200 --> 0:03:27.519 to the consumer because the leaders are going to compression. Now. 0:03:27.560 --> 0:03:30.600 That brings up the idea of inflation. People talk about it, 0:03:30.639 --> 0:03:33.200 and there will be I think temporary inflation for the 0:03:33.240 --> 0:03:36.040 course of the next twelve to eighteen months. We want 0:03:36.080 --> 0:03:37.920 our clients to own tips right now. And the only 0:03:37.960 --> 0:03:39.760 thing we really love in the fixed income market other 0:03:39.800 --> 0:03:42.440 than high yield our tips because they actually will capture 0:03:42.480 --> 0:03:45.360 this type of consumer inflation. But it will be forever. 0:03:45.480 --> 0:03:47.880 It'll just be for this particular boost of time well. 0:03:47.880 --> 0:03:50.600 And the temporary inflation boost hinges in the idea that 0:03:50.640 --> 0:03:52.760 we're not going to get a material shift in the economy. 0:03:52.800 --> 0:03:55.120 And here you had Google yesterday announcing a fifty dollar 0:03:55.680 --> 0:03:58.880 fifty billion dollars share buy back. Is that good or 0:03:59.000 --> 0:04:01.960 bad for you as investor? After all of these investors 0:04:01.960 --> 0:04:04.840 that they wanted to see investment in the infrastructure of 0:04:04.880 --> 0:04:09.400 companies the investment in actual productivity going forward. Share buybacks 0:04:09.600 --> 0:04:12.880 doesn't get that done. Well, they really don't have much 0:04:12.880 --> 0:04:15.560 of a choice when you're just handed, you know, literally 0:04:15.600 --> 0:04:18.080 boatloads of cash because of the fact that your investment 0:04:18.120 --> 0:04:21.120 is in human capital. If you think about it, that is, 0:04:21.240 --> 0:04:23.200 you know, they have excess cash. They're doing buy backs. 0:04:23.200 --> 0:04:25.480 Who else does it benefit? Well, it benefits all of 0:04:25.520 --> 0:04:28.839 their employees as well. They simply don't have the internal 0:04:29.279 --> 0:04:33.159 research and development costs that are required necessary to sustain 0:04:33.200 --> 0:04:34.560 the growth that they have. It's not going to be 0:04:34.560 --> 0:04:38.640 building new manufacturing plants. It's gonna be hiring new human capital. 0:04:38.640 --> 0:04:40.520 And they will do that, and that's why they're going 0:04:40.560 --> 0:04:43.080 to benefit both their shareholders and their employees by doing so. 0:04:43.440 --> 0:04:45.800 David always gonna catch these quite a catch up on 0:04:45.800 --> 0:04:47.839 this market. So, David By in the City Global webt 0:04:47.880 --> 0:04:57.000 c IO, global head of Investments, we begin with Torsten 0:04:57.080 --> 0:05:00.400 Slack with Apollo Global Management and their chief of animus 0:05:00.560 --> 0:05:02.880 towards then when you see this data in the historic 0:05:02.960 --> 0:05:06.600 moment of trade, are you elevating your g d P 0:05:07.080 --> 0:05:11.919 estimates and lengthening the boom economy? Well, it is certainly 0:05:12.400 --> 0:05:16.359 very revealing for how strong the economy is when imports 0:05:16.760 --> 0:05:20.200 go up so much. It is certainly, as Lisa was saying, 0:05:20.240 --> 0:05:23.800 a very strong sign that the stimulus checks have been 0:05:23.800 --> 0:05:26.600 buying a lot of consumer goods that's been showing up 0:05:26.640 --> 0:05:30.159 in trade. We also have generally speaking that the economy 0:05:30.279 --> 0:05:33.240 is getting a lot of tail wind from excess savings 0:05:33.240 --> 0:05:35.840 at the corporate sector, ex savings to the household sector. 0:05:36.080 --> 0:05:37.919 And on top of that the reopening of course just 0:05:37.960 --> 0:05:41.080 continuous and now with the discussions now just just today 0:05:41.120 --> 0:05:44.560 of the mass mandates changing. So this economy is is 0:05:44.600 --> 0:05:46.680 doing very well. And the numbers this morning on the 0:05:46.680 --> 0:05:50.000 trade bat and just confirms that this is your picture 0:05:50.000 --> 0:05:53.159 of the ball underwater that's coming up is certainly a 0:05:53.160 --> 0:05:55.680 good analogy. We aren't seeing an economy that's coming back 0:05:55.800 --> 0:05:58.640 very strongly. Let's talk about inflation, price pressure. As you 0:05:58.720 --> 0:06:02.159 pointed out, Sosten, this isn't just base effects. It's too 0:06:02.160 --> 0:06:04.159 easy to sit here. It's almost lazy just to say 0:06:04.160 --> 0:06:06.000 it's the base effects. We all know the base effects. 0:06:06.000 --> 0:06:08.719 It's more than that, isn't it. It is? And I 0:06:08.720 --> 0:06:11.119 think this is a very very important discussion for today. 0:06:11.160 --> 0:06:13.640 As Mike was all Mike McKee just was mentioning for 0:06:13.839 --> 0:06:16.440 the press conference and the FIT, I mean, the FAT 0:06:16.520 --> 0:06:20.360 will continue to tell the dobish story about the unemployer 0:06:20.440 --> 0:06:23.440 rate is still six percent. This is just base effects. 0:06:23.480 --> 0:06:25.400 There is nothing really to worry about here in the 0:06:25.400 --> 0:06:27.240 near term. We're still waiting for the economy to come 0:06:27.279 --> 0:06:29.520 back to full capacity or the unemployer rate to come 0:06:29.520 --> 0:06:32.600 back to a lower level, which could be around three 0:06:32.640 --> 0:06:34.880 and a half percent, which we were pre pandemic. But 0:06:35.160 --> 0:06:37.279 as you're saying, John, if you look at the data 0:06:37.640 --> 0:06:41.760 for a number of different indicators, not only UH invasion 0:06:41.800 --> 0:06:45.000 expectations going up for the household sector, you're also seeing 0:06:45.040 --> 0:06:48.440 that it's getting very difficult to find workers. Some companies 0:06:48.480 --> 0:06:51.120 are out paying workers just to show up on an interview. 0:06:51.400 --> 0:06:53.920 You're also seeing in a number of different indicators when 0:06:53.920 --> 0:06:56.760 it comes to the i M the regional FITS surveys 0:06:56.800 --> 0:07:00.880 from the Richmond FED, from the Denver I'm sorry they 0:07:00.920 --> 0:07:03.839 tellas FIT, and then the area in particular, but also 0:07:03.880 --> 0:07:06.760 the Kansas City FIT. They have shown significant pressure in 0:07:06.800 --> 0:07:09.600 particularly the manufacturing sector, and all this is pointing to 0:07:09.920 --> 0:07:13.040 higher input costs and as you just poke about copper prices, 0:07:13.120 --> 0:07:15.160 that makes it more expensive to produce, and the big 0:07:15.240 --> 0:07:17.760 question is what happens if input costs go up. The 0:07:17.840 --> 0:07:20.520 two things can happen. Either margins can get squeezed or 0:07:20.840 --> 0:07:23.400 selling prices meaning inflation can go up. And we are 0:07:23.400 --> 0:07:25.960 seeing more signs of this not just being base effects. 0:07:26.000 --> 0:07:28.840 There is very strong demanding the economy pushing prices higher. 0:07:28.920 --> 0:07:30.800 So how much you around look different to the federals 0:07:30.760 --> 0:07:33.520 serves right now, Tusten. So I think that in the 0:07:33.560 --> 0:07:36.160 near term, and if I type e CFC, go on 0:07:36.160 --> 0:07:38.400 my Bloomberg screen and I do the quarterly profile of 0:07:38.440 --> 0:07:41.320 how does the consensus expect copy CEO over the next 0:07:41.400 --> 0:07:44.680 level quarters, it is quite impressive that the expectation is 0:07:44.720 --> 0:07:46.560 inflation will go up in the next quarter or two 0:07:46.760 --> 0:07:48.640 and then it will come down and be exactly two 0:07:49.080 --> 0:07:50.560 going into the end of this year and into the 0:07:50.600 --> 0:07:53.040 next GM. I think the risks are beginning to rise 0:07:53.040 --> 0:07:55.800 that Larry Summers is right, Oh it's only blank. Shah 0:07:55.920 --> 0:07:58.040 has been saying this is not just overheating. There's a 0:07:58.120 --> 0:08:00.680 risk this is like starting a fire. So there is 0:08:00.680 --> 0:08:03.000 a chance that inflation could be overshooting two percent. And 0:08:03.000 --> 0:08:05.520 if it might continue to say well that's okay, we 0:08:05.600 --> 0:08:08.280 have flexible average inflations are getting we are allowing inflation 0:08:08.360 --> 0:08:10.640 to overshoot. But the big, big question is if long 0:08:10.720 --> 0:08:14.560 breaks also joy going to take a relatively relaxed approach 0:08:14.600 --> 0:08:17.480 to inflation overshooting two percent. So I would say John, 0:08:17.520 --> 0:08:19.680 to your question that the key issue here really is 0:08:19.720 --> 0:08:22.480 that inflation does begin to overshoot two percent for an 0:08:22.480 --> 0:08:25.120 extended period. One does need to look very carefully and 0:08:25.200 --> 0:08:27.800 how long raids. A long race just say okay, that's 0:08:27.840 --> 0:08:30.040 all right, we accept that, or a long race begin 0:08:30.080 --> 0:08:31.600 to say, well, wait a minute. If I'm a bond 0:08:31.680 --> 0:08:34.520 investor and I see higher inflation, that it wrote my 0:08:34.679 --> 0:08:37.360 returns and therefore I need to be compensated for that risk. 0:08:37.600 --> 0:08:40.800 What does an inflation fire look like? Not just burning hot, 0:08:40.920 --> 0:08:43.200 but a fire. I mean, are we heading back to 0:08:43.360 --> 0:08:46.200 nineteen seventies? When we say that, people scream, no way, 0:08:46.240 --> 0:08:48.800 We're no way heading back to that. But purse out 0:08:48.800 --> 0:08:52.079 the new inflation fire. Yeah, that's a very important questions. 0:08:52.120 --> 0:08:54.440 I would say, the new inflation fire, it's very similar 0:08:54.480 --> 0:08:56.880 to what we had in the late sixties, where inflation 0:08:56.960 --> 0:08:59.959 gradually went up and it stayed at a relatively elevated level. 0:09:00.400 --> 0:09:02.840 In this world we live in, today. The levels of inflation, 0:09:02.880 --> 0:09:05.000 of course are different readsiveto we had in the late 0:09:05.040 --> 0:09:08.400 sixties from sixty five to nine seventy, But in my book, 0:09:08.600 --> 0:09:11.319 that would be inflation at all above two and a 0:09:11.400 --> 0:09:13.679 half on core pc, which as you know, is the 0:09:13.720 --> 0:09:16.720 first preferred measure of inflation. If we get to those levels, 0:09:17.000 --> 0:09:19.160 and in particularly we get there just for several months, 0:09:19.360 --> 0:09:21.800 then I do think that bond investors will really start 0:09:21.840 --> 0:09:25.000 to become worried. That's not my baseline scenario. I still 0:09:25.000 --> 0:09:27.360 think that inflation is under control, but we do have 0:09:27.400 --> 0:09:30.280 a few months here where we could risk some turbulence 0:09:30.360 --> 0:09:33.839 in credit, in equities, in risky assets because of this 0:09:33.920 --> 0:09:37.360 issue that rates risks and inflation risks are more elevated. 0:09:37.360 --> 0:09:38.839 And the final point of this is, I have a 0:09:38.880 --> 0:09:41.800 look at your Blueberg screen on rates. Vall implied vault 0:09:41.920 --> 0:09:45.280 in rates is very very elevated. So the moving decks, 0:09:45.280 --> 0:09:47.920 for example, is very elevated. Ready to say BIGGS, which 0:09:47.960 --> 0:09:50.160 has just come down. So what is the shock that 0:09:50.200 --> 0:09:52.760 people are so worried about in rates markets that people 0:09:52.760 --> 0:09:54.800 in equity markets don't seem to care too much about 0:09:54.800 --> 0:09:57.040 saying things with creditble it's also very low, so there 0:09:57.120 --> 0:10:00.800 is a disconnect between polativity implied BA in braids market 0:10:01.080 --> 0:10:04.440 is very high rereative to how do imply ball actually 0:10:04.480 --> 0:10:06.800 is in almost all risky assets. I think that's telling 0:10:06.880 --> 0:10:10.080 us something about how investors are thinking about the inflation 0:10:10.200 --> 0:10:13.079 risks for the next several months. It Tolsten really really 0:10:13.080 --> 0:10:16.800 ready smart Toustin's look that Apollo Global Management chief economist 0:10:21.559 --> 0:10:23.840 right now in Washington, Isaac Boltanski with us with a 0:10:23.840 --> 0:10:26.760 compass point, with a very sharp note, and he really 0:10:26.800 --> 0:10:30.520 I love the phrase, Isaac, from rhetoric to reality, the 0:10:30.600 --> 0:10:33.640 idea that we're loaded with rhetoric tonight. When does the 0:10:33.760 --> 0:10:36.880 reality click in eleven PM tonight or do we have 0:10:36.920 --> 0:10:40.520 to wait eleven weeks? I would argue it's already starting 0:10:40.559 --> 0:10:43.320 to click in at least that's my takeaway from from 0:10:43.520 --> 0:10:46.600 investor calls. You know what we're gonna get tonight, Tom 0:10:46.720 --> 0:10:51.880 is an incredibly ambitious and expansive proposal that would you know, 0:10:52.040 --> 0:10:55.160 intended to remake our economy in a way that we 0:10:55.200 --> 0:10:59.440 haven't seen since since a Great Society and their lb J. 0:11:00.040 --> 0:11:02.880 The reality is it's not going to happen. And one 0:11:02.920 --> 0:11:04.880 of my favorite lines and the one that I think 0:11:04.880 --> 0:11:07.080 we should keep in mind as we listen to the 0:11:07.080 --> 0:11:12.880 president's speak is the President proposes, the Congress disposes, and 0:11:12.920 --> 0:11:17.080 really the question for investors remains what will Congress agree to? 0:11:17.360 --> 0:11:21.000 And the subtext there is what will the centrist Democrats 0:11:21.040 --> 0:11:23.640 in the Senate allow? Okay, but I want to go 0:11:23.679 --> 0:11:26.640 out to your climb of Ohio Wesleyan University. I mean, 0:11:26.679 --> 0:11:29.240 they've got to sell this thing out where maybe the 0:11:29.280 --> 0:11:32.400 election is actually pretty close as well. How do the 0:11:32.480 --> 0:11:37.599 moderate Democrats were around the acreage of Ohio Wesleyan adapt 0:11:38.000 --> 0:11:41.560 to their president and to their liberal wing. I think 0:11:41.600 --> 0:11:44.120 that the main point there is that, and this is 0:11:44.160 --> 0:11:46.839 I think an important timing point to highlight is that 0:11:46.960 --> 0:11:50.280 Infrastructure Week is going to last another five months or 0:11:50.280 --> 0:11:52.880 so tom It's going to be iterative, it's going to 0:11:52.920 --> 0:11:57.360 be time consuming, it will include myriad bruising fights over 0:11:57.480 --> 0:12:02.560 really detailed and nuanced see issues from like tid exchanges 0:12:03.080 --> 0:12:06.679 all the way to that basis. It's going to take 0:12:06.720 --> 0:12:10.040 another I think five months, most likely until September or 0:12:10.040 --> 0:12:13.320 October to get something done. But my view is that 0:12:13.360 --> 0:12:16.559 there is a window of both political and legislative opportunity 0:12:16.840 --> 0:12:19.600 that Democrats will seize on and that we will get something. 0:12:19.640 --> 0:12:21.880 We're not going to get what the President calls for tonight, 0:12:22.160 --> 0:12:24.920 but we will get something of significant. Isaac, giving your 0:12:24.920 --> 0:12:28.360 experience in Washington, d C. What is likely between the 0:12:28.400 --> 0:12:31.280 two point three trillion dollar infrastructure spending the one point 0:12:31.280 --> 0:12:35.840 a trillion doll our American Families plan, what's realistic? Look, 0:12:35.880 --> 0:12:40.199 I think that right now we should focus on physical infrastructure. 0:12:40.240 --> 0:12:43.680 I think that that clearly has a considerable amount of 0:12:43.679 --> 0:12:47.840 support on Capitol Hill. Uh. I think there's actually bipartisan 0:12:47.840 --> 0:12:50.600 negotiation now, even though I wouldn't bet on that, I 0:12:50.640 --> 0:12:53.120 still think that we have to go through reconcstiliation. So 0:12:53.360 --> 0:12:56.040 I think we should focus on physical infrastructure, and then 0:12:56.080 --> 0:13:00.880 on the tax side. Here's my framework. Any thing that's 0:13:00.920 --> 0:13:06.240 seen is narrowing the gap between wealth and work has 0:13:06.280 --> 0:13:10.000 a highlihood of being included in the final package because 0:13:10.240 --> 0:13:14.120 it dove tails with the Democratic economic fairness agenda. So 0:13:14.200 --> 0:13:17.320 here I'm talking about the higher tax bracket. I'm talking 0:13:17.360 --> 0:13:20.640 about the increase in capital gains. I'm talking about the 0:13:20.840 --> 0:13:23.440 end of stepped up basis. Well, let's put some numbers 0:13:23.440 --> 0:13:26.720 on that, equalizing the treatment of earnings and capital gains. 0:13:27.200 --> 0:13:29.080 The band is quite wide the spread is quite wide 0:13:29.200 --> 0:13:32.040 right now, Isaac, how narrow do you expect the spreads together? 0:13:32.120 --> 0:13:35.240 What kind of numbers are you thinking about? Yeah, Look, 0:13:35.280 --> 0:13:38.200 I think that anything that we here tonight should always 0:13:38.240 --> 0:13:43.920 be viewed as a negotiating um marker, not a red line, 0:13:44.000 --> 0:13:45.760 and I think the White House has been clear about that. 0:13:45.800 --> 0:13:48.960 So we will not see a capital gains rate of 0:13:48.960 --> 0:13:52.520 of for I think that ultimately that will be negotiated 0:13:52.559 --> 0:13:57.640 down um to something closer to range. I think there 0:13:57.640 --> 0:13:59.360 are a number of reasons for that. We have the 0:13:59.480 --> 0:14:02.800 same interest democrats, but also I think there's an awareness 0:14:02.800 --> 0:14:06.520 that we want to incentivize long term investment. Furthermore, there's 0:14:06.520 --> 0:14:08.880 an equilibrium where if you raise it too high, no 0:14:08.920 --> 0:14:11.079 one wants to sell, and so I really think it's 0:14:11.080 --> 0:14:14.840 fair to assume percent on that end again for the 0:14:14.960 --> 0:14:17.520 highest earner. Well, let me just add an additional question 0:14:17.559 --> 0:14:19.760 and then, Isaac, because what they're trying to achieve is 0:14:19.760 --> 0:14:22.640 to close that carried interest loophole as well. And from 0:14:22.640 --> 0:14:24.200 what I can tell, and you tell me if your 0:14:24.240 --> 0:14:26.840 interpretation is different, that they're trying to do that by 0:14:26.960 --> 0:14:29.600 equalizing the treatment of capital gangt in wages and the 0:14:29.680 --> 0:14:31.920 end outcome would be closing that loophole. Now, if they 0:14:31.960 --> 0:14:35.000 can't equalize that, can they just close the loophole by 0:14:35.000 --> 0:14:38.320 doing something else? And do you think they should do that? Yeah, 0:14:38.320 --> 0:14:40.120 I think you have a nail on the head and 0:14:40.200 --> 0:14:43.280 it's highlighted in the fact sheet here. Their focus is 0:14:43.320 --> 0:14:46.560 really on capital income broadly, and so capital gains and 0:14:46.640 --> 0:14:49.520 dividends by the way, we're included. And if we just 0:14:49.600 --> 0:14:53.920 talked about increasing that threshold and ending stepped up basis, 0:14:54.080 --> 0:14:57.640 he really handled the carried interest issue in its own 0:14:57.760 --> 0:14:59.800 right now. I'm telling you I don't think that they 0:15:00.000 --> 0:15:03.840 all the way to treating his ordinary income. So there 0:15:03.840 --> 0:15:06.640 will be a focus on a more narrow fix to 0:15:06.720 --> 0:15:09.920 carry interests as well. I think this time Democrats are 0:15:09.960 --> 0:15:14.240 finally prepared to close that, especially with the overarching changes 0:15:14.360 --> 0:15:17.440 to the rate for capital gains. And again I can't 0:15:17.480 --> 0:15:20.880 underscore how important it is the end of stepped up basis. 0:15:21.240 --> 0:15:23.680 Isaac got to catch up. Go ahead from you. I 0:15:23.760 --> 0:15:27.080 was about Tansky taking the realist approach to the situation 0:15:27.160 --> 0:15:36.000 down in Washington, d C. Will Power joins now from 0:15:36.000 --> 0:15:39.000 Beard really been looking forward to this. With this outperform 0:15:39.040 --> 0:15:42.200 on Apple, Will I want to note the privatization of Apple. 0:15:42.400 --> 0:15:46.560 Since two thousand and twelve, they've eliminated a very large 0:15:46.600 --> 0:15:50.440 percentage of their shares are down to seventeen jillion right now. 0:15:50.800 --> 0:15:53.840 Share buybacks are part of the fabric there. Do you 0:15:53.920 --> 0:15:59.239 just assume that continues in this boom economy. It's Tom's 0:15:59.280 --> 0:16:01.960 great to be here, thanks again for having me. I 0:16:02.000 --> 0:16:04.320 think the answer to the sort of answer is yes. 0:16:04.560 --> 0:16:07.440 I think it has become a key piece of the 0:16:07.440 --> 0:16:11.120 fabric of the company, and the reality is become a 0:16:11.120 --> 0:16:14.240 good way to try to help reward shareholders with the 0:16:14.240 --> 0:16:17.000 prodigious cash really that they continued to produce. And this 0:16:17.080 --> 0:16:19.400 is a company that we forecast produced free cash flow 0:16:19.400 --> 0:16:24.280 approaching eighty billion dollars, and despite spending a lot on 0:16:24.520 --> 0:16:27.840 R and D and other growth initiatives, they continue to 0:16:27.840 --> 0:16:30.000 produce excess cash. And I think, as you know, they've 0:16:30.000 --> 0:16:33.680 had a policy to try to turn that net cash 0:16:33.720 --> 0:16:37.960 position to neutral or effectively zero, and that suggests we're 0:16:37.960 --> 0:16:41.280 going to continue to see aggressive buybacks. They've approached called, 0:16:41.320 --> 0:16:43.320 you know, thirty billion dollars a quarter. We expect that 0:16:43.400 --> 0:16:46.000 to continue going forward. Are they going to announce a 0:16:46.040 --> 0:16:49.160 dividend increase today? I've seen that out in the zeitgeist. 0:16:49.200 --> 0:16:52.000 And if they do that, do they reaffirm their position 0:16:52.560 --> 0:16:57.920 by making it a near double digit dividend increase. That's 0:16:57.920 --> 0:16:59.640 a good question. It's not gonna surprise me if we 0:16:59.680 --> 0:17:02.880 see it did a dividend increase, whether it's double digit 0:17:02.960 --> 0:17:06.080 or not, I don't know what my suspicion is. We'll see, 0:17:06.960 --> 0:17:09.920 uh an additional kind of double data, if you will, 0:17:10.040 --> 0:17:12.960 on commitment both buy back and dividend increase, and I 0:17:13.000 --> 0:17:14.960 think it's likely we'll get that as part of their owning. 0:17:15.600 --> 0:17:18.679 Theres no official announcement of respect. Well, what did you 0:17:18.720 --> 0:17:21.440 make of the announcement yesterday or earlier this week from 0:17:21.440 --> 0:17:23.800 Apple that they were going to invest four hundred thirty 0:17:24.400 --> 0:17:27.000 billion dollars. I can't even say it's that much in 0:17:27.119 --> 0:17:31.960 US infrastructure. Well, look, it's a commitment to the United 0:17:31.960 --> 0:17:35.560 States and investment generally, right, because certainly making investments outside 0:17:35.560 --> 0:17:38.000 of the United you know States as well. I'm sure 0:17:38.040 --> 0:17:40.440 there's a political angle to that as well. I think 0:17:40.480 --> 0:17:42.320 they like to emphasize the fact that they are a 0:17:42.440 --> 0:17:46.280 significant taxpayer already give it all the tacks that they're 0:17:46.280 --> 0:17:50.440 taking on the regulatory front. But I think it also 0:17:50.480 --> 0:17:52.640 just speaks to the compidence they have in the business 0:17:52.720 --> 0:17:55.040 going forward, right, and investments they want to make to 0:17:55.200 --> 0:17:59.760 ensure they have the production capabilities, the skill sets UH 0:17:59.800 --> 0:18:02.240 in R and D investment they need to continue to 0:18:02.560 --> 0:18:05.320 remain in a leadership position. Well, and Tom accused me 0:18:05.400 --> 0:18:07.520 perhaps of being a little bit cynical yesterday because my 0:18:07.560 --> 0:18:11.200 immediate reaction was, this is entirely a PR move ahead 0:18:11.240 --> 0:18:14.479 of different antitrust regulations potentially coming down the pike, as 0:18:14.480 --> 0:18:17.000 well as higher taxes. And yet how much does this 0:18:17.080 --> 0:18:20.479 sort of underscore the supply chain pressures that we expect 0:18:20.480 --> 0:18:24.240 to hear about in today's earnings release. Well, I think 0:18:24.280 --> 0:18:26.600 that's certainly an element of the two Right, and Apple's 0:18:26.600 --> 0:18:28.920 a company that's been a master of supply chain over 0:18:28.960 --> 0:18:30.960 the years and has continued to look for ways to 0:18:31.000 --> 0:18:33.919 diversify of supply chain. And I think you're right. I 0:18:33.920 --> 0:18:36.160 think there is an element of PR. We've we've seen 0:18:36.640 --> 0:18:39.960 similar announcements to the batter three hundred fifty billion dollars 0:18:39.960 --> 0:18:41.679 and the like over the past, you know, couple of 0:18:41.760 --> 0:18:46.040 years respective commitment. So I think it continues down that 0:18:46.080 --> 0:18:48.920 path you know they've been on in terms of laying 0:18:48.920 --> 0:18:52.280 out a longer term vision. And again I think also 0:18:52.440 --> 0:18:54.159 as I said, you know, I think speaks to the 0:18:54.160 --> 0:18:58.120 competence of the business and the opportunity opportunities they still 0:18:58.119 --> 0:19:00.600 see ahead. Real part of the last him around the 0:19:00.680 --> 0:19:03.399 Joy was it rebuild in Asia, not just China and 0:19:03.520 --> 0:19:07.280 Asia in general. Do you look for a further recovery 0:19:07.480 --> 0:19:11.720 of their Asian growth? Well, I think they've continued to 0:19:11.760 --> 0:19:14.359 see success across the globe. I mean, I when you 0:19:14.400 --> 0:19:16.919 look at the uh, you know, the terrible situation in 0:19:16.920 --> 0:19:19.359 India and Brazil and some of these other geographies, and 0:19:19.560 --> 0:19:21.760 you know, it's unclear to what degree they get impacted 0:19:22.200 --> 0:19:24.920 short term, um, you know from COVID, So that's still 0:19:24.920 --> 0:19:29.000 a wild card geography, uh, you know, by geography, but 0:19:29.240 --> 0:19:32.359 it is best we can tell demand remains robust across 0:19:32.400 --> 0:19:36.120 product lines and across geographies. You know, we're get expecting 0:19:37.200 --> 0:19:39.800 twenty percent plus growth across you know, really all the 0:19:39.880 --> 0:19:43.440 product lines move into this quarter, and I think solid 0:19:43.440 --> 0:19:45.880 growth across pos as well. I gotta make some news 0:19:45.960 --> 0:19:48.440 here will power your targets to one fifty five. But 0:19:48.560 --> 0:19:51.400 what's your some of the parts valuation when you break 0:19:51.440 --> 0:19:53.760 this down and your value services and all the rest 0:19:53.840 --> 0:19:55.960 of it and all the products and that what's your 0:19:56.040 --> 0:20:00.639 some of the parts statistic? Yeah, well top a good question. 0:20:00.720 --> 0:20:02.960 You know. Look, I mean I think one of the 0:20:03.040 --> 0:20:04.679 things to call out here is if you look at 0:20:04.760 --> 0:20:08.159 wearables and services on a combined basis, that's almost a 0:20:08.280 --> 0:20:12.480 hundred billion dollar business. How much is that share wearables 0:20:12.520 --> 0:20:15.080 and in the stuff Lisa Bce, how much does that 0:20:15.240 --> 0:20:18.760 for share? Yeah, well, I'd have to go back and 0:20:18.840 --> 0:20:20.960 do that math and come back to come on, you know, 0:20:21.920 --> 0:20:24.040 on a first air basis, but I can tell you 0:20:24.119 --> 0:20:26.400 a revenue basis, it's almost a third of the business 0:20:26.480 --> 0:20:29.640 and on a combined basis doing no right and that's 0:20:29.680 --> 0:20:34.720 what's helping ding ship. Yeah, talk like an economist. We're 0:20:34.720 --> 0:20:36.440 not going to get a straight answer out of wheel 0:20:36.480 --> 0:20:38.080