WEBVTT - Tech Poised For 5-7% Year-End Rally: Wedbush's Ives 0:00:02.640 --> 0:00:05.320 Welcome to the Bloomberg Penl Podcast. I'm Paul swing you 0:00:05.360 --> 0:00:07.680 along with my co host Lisa Brahma Waits. Each day 0:00:07.720 --> 0:00:10.240 we bring you the most noteworthy and useful interviews for 0:00:10.280 --> 0:00:12.520 you and your money. Whether at the grocery store or 0:00:12.560 --> 0:00:15.480 the trading floor. Find a Bloomberg Penl podcast on Apple 0:00:15.520 --> 0:00:17.959 podcast or wherever you listen to podcasts, as well as 0:00:17.960 --> 0:00:21.920 at Bloomberg dot com. We got a deal. Maybe we're 0:00:21.920 --> 0:00:25.080 getting all the details as they trickle out. There aren't 0:00:25.160 --> 0:00:28.240 that many of them. We're talking about the US and China. 0:00:28.400 --> 0:00:31.240 The focus now is on all of the iterations of 0:00:31.280 --> 0:00:33.199 phase one, how it's going to be rolled out, and 0:00:33.240 --> 0:00:37.720 people talk about the persisting uncertainty. However, there is some 0:00:38.120 --> 0:00:41.080 detail that has become more concrete, at least for Dan Ives. 0:00:41.080 --> 0:00:44.559 He's Banging director for equity research at web Bush Securities, 0:00:44.640 --> 0:00:47.360 joining us here. Uh. Nice to say in our interactive 0:00:47.479 --> 0:00:50.120 broker studios, thank you for being here. You're saying that 0:00:50.200 --> 0:00:52.960 you do think that the trade deal removes a dark 0:00:53.000 --> 0:00:56.280 cloud over tech stocks. Can you explain why all that 0:00:56.320 --> 0:01:01.000 mattered for tech investors was the December fifteen team percent tariff. 0:01:01.320 --> 0:01:03.120 If that happened, that would have been a gut punch, 0:01:03.200 --> 0:01:05.600 notch Us for Apple, Semis and really across the whole 0:01:05.600 --> 0:01:08.160 supply chain could have taken off about two bits of 0:01:08.240 --> 0:01:13.160 growth once that tariff got removed and no December fifteen, 0:01:13.480 --> 0:01:15.959 that would have been the issue. Right now green light 0:01:16.000 --> 0:01:18.399 for tech stocks. I can tell you from an investor perspective, 0:01:18.680 --> 0:01:20.800 I think we have five December cent rally in the 0:01:20.920 --> 0:01:24.640 year and because now despite all the noise, that was 0:01:24.760 --> 0:01:28.000 remaining risk for names like Apple and Semis to go higher. Alright, 0:01:28.040 --> 0:01:29.840 so you mentioned Apple that's kind of been held out 0:01:29.880 --> 0:01:32.840 as the poster child for the way to play or 0:01:32.920 --> 0:01:35.679 go a long, go short, depending upon your view of 0:01:35.840 --> 0:01:37.559 how this trade will play out. How do you think 0:01:37.920 --> 0:01:41.840 Apple is gonna you know behavior, you know, thriving in 0:01:41.880 --> 0:01:44.720 the world where maybe trade tensions are a little bit lower. Yeah, 0:01:44.720 --> 0:01:47.640 I mean that was in our opinion twenty overhang on 0:01:47.680 --> 0:01:49.600 Apple stock. I think now that's the stock that's going 0:01:49.640 --> 0:01:51.520 to have a three in front of it either by 0:01:51.640 --> 0:01:54.160 year in or into early next year. But it speaks 0:01:54.160 --> 0:01:57.360 to why Cook was such a tactician, a pseudo ambassador 0:01:57.560 --> 0:02:00.400 between US and China, and why he's broken some spred 0:02:00.440 --> 0:02:02.960 with Trump because it came down to. For Apple, they 0:02:03.000 --> 0:02:05.440 bet the farm in China. I think right now they're 0:02:05.480 --> 0:02:08.560 in a sort of goldilocks scenario. I don't think they 0:02:08.680 --> 0:02:11.400 take anything out of China. This was sort of the 0:02:11.440 --> 0:02:14.639 worry for them. You'll see some US manufacturing like Austin 0:02:14.639 --> 0:02:18.080 and others right now. For Apple, it's an early Christmas present. 0:02:18.280 --> 0:02:21.920 I'm trying. I'm just struggling to understand beyond just the 0:02:21.960 --> 0:02:26.040 December fifteen tariffs being lifted or the prospect of them 0:02:26.639 --> 0:02:29.000 being removed from the table. Is there anything else that 0:02:29.040 --> 0:02:31.799 we know concrete, concretely out of this deal? No, I 0:02:31.840 --> 0:02:34.520 mean right now in terms of I P protection, any 0:02:34.520 --> 0:02:38.359 sort of five G specifics that many tax CEOs are 0:02:38.360 --> 0:02:41.560 focused on. Nothing in terms of those specifics. But that's why, 0:02:41.639 --> 0:02:43.679 going back to Friday, you know that there was a 0:02:43.680 --> 0:02:45.960 why noise was that we don't know the specifics of 0:02:45.960 --> 0:02:49.200 the trade deal from an investor perspective in terms of tech, 0:02:49.680 --> 0:02:51.880 all focused on if it was going to happen or 0:02:51.880 --> 0:02:54.079 if not it didn't. Right now that that's what we'll 0:02:54.080 --> 0:02:56.640 see a five sambers and rally attach Apple shares right 0:02:56.639 --> 0:02:59.519 now at about two and eighty dollars per share, up 0:03:00.080 --> 0:03:03.280 one point eight percent today following one point four percent 0:03:03.360 --> 0:03:07.080 gain on Friday. Why aren't the gains bigger If what 0:03:07.160 --> 0:03:10.160 you're saying is the case, It's just like what happened 0:03:10.200 --> 0:03:13.280 a few months ago. It took time that if you 0:03:13.400 --> 0:03:16.720 go back before earning stocks to fifteen to twenty and 0:03:16.720 --> 0:03:18.720 we're trying to pound on the tables. We came away 0:03:18.720 --> 0:03:21.440 from China, it was clear iPhone eleven is much better 0:03:21.440 --> 0:03:24.320 than expected. It took time for that to show up 0:03:24.320 --> 0:03:26.200 in the stock. I think it's the same thing. That's 0:03:26.200 --> 0:03:28.919 why I go into next year. This is a stock. 0:03:28.960 --> 0:03:30.919 I think it starts with three hundred. You can now 0:03:30.960 --> 0:03:35.320 see three fifty, potentially four hundred into what I believe 0:03:35.400 --> 0:03:38.520 is a five g supercycle. So I think for Apple 0:03:38.600 --> 0:03:40.720 right now, it's not gonna happen overnight. But that's why 0:03:40.760 --> 0:03:42.680 that's a stock. It continues to be your favorite tech 0:03:42.800 --> 0:03:45.040 name into next year. You mentioned five gene. That's one 0:03:45.080 --> 0:03:47.320 of the areas that we hear probably most often when 0:03:47.360 --> 0:03:50.000 people talk about a bullish call for tech throughout the 0:03:50.040 --> 0:03:53.800 tech stack. How does how are you suggesting investors play 0:03:53.800 --> 0:03:57.280 five g other than the handset I e. Apple? Then 0:03:57.280 --> 0:03:59.280 there's so there's three ways to play if there's Apple, 0:03:59.280 --> 0:04:01.600 and then I think on the semi side, you look 0:04:01.640 --> 0:04:04.320 at qual Calm in terms of my opinion, probably the 0:04:04.320 --> 0:04:07.360 best way to play five G, as well as Intel 0:04:07.560 --> 0:04:11.280 in terms of where their position. And then even on cybersecurity, 0:04:11.400 --> 0:04:14.000 there's gonna be a security piece around five G. That's 0:04:14.000 --> 0:04:17.120 the name like Ford net ftn T, which plays its 0:04:17.360 --> 0:04:19.880 early days today. But I think as we go into 0:04:19.880 --> 0:04:21.960 the next six twelve months, that's gonna be a bigger 0:04:22.000 --> 0:04:26.040 focus into what I believe five G transformational technology of 0:04:26.080 --> 0:04:29.440 the next decade. I remember old enough to remember six 0:04:29.440 --> 0:04:32.800 months ago when we were talking about suppliers to Apple 0:04:33.000 --> 0:04:35.840 getting really whipped around on the heels of tariff news. 0:04:35.839 --> 0:04:38.440 I'm wondering which you expect to do the best with 0:04:38.480 --> 0:04:41.160 the removal of the prospects of the December fift tariffs. Yeah, 0:04:41.160 --> 0:04:43.159 I mean we just came away from China, you know, 0:04:43.200 --> 0:04:45.320 over the last few weeks in terms of our checks 0:04:45.360 --> 0:04:48.320 there on the ground, and I from a supplier perspective, 0:04:48.800 --> 0:04:51.160 it's really playing the chip names, you know. I think 0:04:51.240 --> 0:04:53.520 names that are going to be most beneficial or qual 0:04:53.640 --> 0:04:57.240 Calm in telling semis. There's some smaller suppliers that are 0:04:57.240 --> 0:04:59.760 going to benefit in terms of Apple, but I think 0:05:00.160 --> 0:05:03.840 here it's really playing the chip plaise for Apple as 0:05:03.880 --> 0:05:06.039 well as some of the distributors. Is there any chance 0:05:06.080 --> 0:05:08.279 at five g's not gonna live up to what's hype. 0:05:09.200 --> 0:05:12.440 I'd say it's the same view of Lamar Jackson not 0:05:12.640 --> 0:05:15.279 living up to his hype. I don't. I don't see 0:05:15.279 --> 0:05:19.760 it possible, just because it's right now. It's more of 0:05:19.800 --> 0:05:23.400 the most transformational trends and you're seeing whether it's on 0:05:23.440 --> 0:05:25.839 the handset side and Verizon AT and T and others, 0:05:26.040 --> 0:05:28.040 and it's really gonna affect enterprise. So I can tell 0:05:28.040 --> 0:05:30.160 you in terms of five G, I think it's really 0:05:30.200 --> 0:05:33.880 gonna be a seminal movement, similar as cloud in terms 0:05:33.920 --> 0:05:36.280 of how we view tech. Dan, I have thanks so 0:05:36.400 --> 0:05:38.560 much for joining us. Dan, I was equity analyst web 0:05:38.600 --> 0:05:41.119 Bush Security, joining us here in Bloomberg and actor brokerst 0:05:41.240 --> 0:05:43.040 to given us the update on tech. He's bullish. I 0:05:43.160 --> 0:05:44.720 like his calls into the end of the year, as 0:05:44.760 --> 0:05:47.240 like his calls on Apple bullish and on five G 0:05:47.680 --> 0:05:49.479 we're hearing a lot of five GS relates to tech. 0:06:02.880 --> 0:06:05.800 The analysis of the UK election continues, the one that 0:06:06.120 --> 0:06:10.280 led boris Johnson to victory. Also notable though, was the 0:06:10.360 --> 0:06:13.479 incredible majority and the number of seats at the Conservative Party. 0:06:13.560 --> 0:06:17.320 One joining us now Marian Harkin, former European Union of 0:06:17.400 --> 0:06:22.279 Parliament member representing Ireland UH and she joins us by phone. Marian, 0:06:22.320 --> 0:06:25.560 I want to start there is there a broader takeaway 0:06:25.720 --> 0:06:29.440 from the UK election given the fact that some of 0:06:29.560 --> 0:06:35.640 the most liberal neighborhoods that always went for for that 0:06:35.920 --> 0:06:42.080 party voted Conservative. Well, I think it's a generalization to 0:06:42.200 --> 0:06:44.880 say at Lisa, but you know a lot of people 0:06:45.360 --> 0:06:49.600 disliked Johnson, but they couldn't tolerate Corbon. And if you 0:06:49.720 --> 0:06:52.279 look at what happened to the collapse of the labor 0:06:52.400 --> 0:06:56.599 vote in the north of England, in particular the Midlands, 0:06:56.680 --> 0:06:59.320 what they're called the red walls, I mean that bought 0:06:59.440 --> 0:07:04.800 just Upston one after another. Labor supporters were saying they 0:07:04.920 --> 0:07:08.760 just couldn't bring themselves to vote for Corbin. I think 0:07:08.800 --> 0:07:10.520 that was one part of that. I think the other 0:07:10.680 --> 0:07:17.120 part was the simple message get Brexit done, three words. 0:07:17.840 --> 0:07:22.000 It resonated with people after three years people want to 0:07:22.160 --> 0:07:26.280 see progress of some kind and I think put those 0:07:26.360 --> 0:07:31.200 two things together and that really for me gives you 0:07:31.920 --> 0:07:35.320 the bare bones, if you like, of of what happened 0:07:35.720 --> 0:07:39.240 in this election. So Marian, now that it appears that 0:07:39.600 --> 0:07:43.120 the Brexit deal will go through, UM, give us a sense. 0:07:43.200 --> 0:07:47.280 One of the stumbling big stumbling blocks was Ireland Northern Ireland. Um, 0:07:47.840 --> 0:07:50.880 you know the boundaries. Where is zach? How's that going 0:07:50.920 --> 0:07:54.360 to play out? Do you think? Well? The agreements that 0:07:54.560 --> 0:07:58.960 was reached between Boris Johnson and our own Prime Minister 0:07:59.560 --> 0:08:06.160 Ratkar the Withdrawl Agreement and has three main items, citizens rights, 0:08:06.600 --> 0:08:09.800 the divorce settlement, but the real one was the Irish 0:08:09.880 --> 0:08:12.680 border and force was agreed. They got rid of what 0:08:12.960 --> 0:08:17.280 was called the backstop, which was an insurance policy in 0:08:17.440 --> 0:08:23.120 case there was divergence in standards between the Republic and 0:08:23.680 --> 0:08:27.320 Northern Ireland. But what they haven't placed now is a 0:08:27.400 --> 0:08:32.040 guarantee from the UK that there will be no checks 0:08:32.400 --> 0:08:37.600 at the border between the Republic of Ireland and Northern Ireland, 0:08:38.080 --> 0:08:41.680 but there will be some checks in the Irish Sea 0:08:42.080 --> 0:08:48.360 between goods traveling from the UK to Northern Ireland. So 0:08:48.480 --> 0:08:52.200 in many ways this is a perfect scenario for Northern 0:08:52.240 --> 0:08:57.439 Ireland because they have access to the UK market and 0:08:57.559 --> 0:09:02.160 they have access to the EU market. But because obviously 0:09:02.559 --> 0:09:06.880 the UK wouldn't have the same access. That's why there 0:09:06.920 --> 0:09:10.160 has to be checks in the Irish Sea. And you'll 0:09:10.280 --> 0:09:14.160 be well aware that the DUP, which is the Democratic 0:09:14.320 --> 0:09:21.199 Unionist Party, were fiercely opposed to this. Boris Johnson promised 0:09:21.280 --> 0:09:25.480 them it wouldn't happen, but subsequently he agreed to that. 0:09:25.960 --> 0:09:29.320 There still remain fiercely opposed. But that's where we are 0:09:29.440 --> 0:09:32.400 now and if the deal is signed by the thirty 0:09:32.480 --> 0:09:37.319 one of January, we move on from there. Let's talk 0:09:37.360 --> 0:09:40.160 about moving on from there, Marian. You know, given your 0:09:40.200 --> 0:09:43.840 experience with the European Union as a member of the Parliament, 0:09:44.120 --> 0:09:46.079 can you give us a sense of their approach and 0:09:46.160 --> 0:09:48.920 dealing with Boris Johnson, given the fact that not only 0:09:48.960 --> 0:09:51.400 did he win, but that he has such a big 0:09:51.440 --> 0:09:56.719 Conservative majority behind him. Well, actually it matures that he 0:09:56.800 --> 0:10:00.280 has such a big majority because that means he does 0:10:00.360 --> 0:10:03.679 not need to be looking over his shoulder. There's a 0:10:03.800 --> 0:10:07.280 small group in the Tories called the e r G 0:10:07.720 --> 0:10:11.520 European Reform Group who are all in favor of a 0:10:11.720 --> 0:10:17.360 heart Brexit, and they are smallish number. They will not 0:10:17.800 --> 0:10:21.040 bother him the way they is too. Nigel for Age 0:10:21.480 --> 0:10:25.440 didn't have any MP selected. To be fair, he did 0:10:25.559 --> 0:10:28.959 stand back in most constituencies are his his party did. 0:10:29.360 --> 0:10:33.960 So Boris now is in charge. Basically, he's a man 0:10:34.080 --> 0:10:38.120 at the helm and that makes a big difference when 0:10:38.200 --> 0:10:42.439 it comes to negotiating and the sense, I think in 0:10:42.559 --> 0:10:47.880 many European capitals and the fact that he won the 0:10:47.960 --> 0:10:52.319 election and wanted well was a positive rather than a 0:10:52.400 --> 0:10:55.719 negative because it means he's in charge and he can 0:10:55.840 --> 0:11:00.200 now negotiate and move forward because just like the UK, 0:11:00.679 --> 0:11:04.640 the truth is many European citizens as well, while many 0:11:04.720 --> 0:11:09.199 of them had wished at Brexit wouldn't happen, now that 0:11:09.360 --> 0:11:12.040 it's going to happen, they want to get on with 0:11:12.480 --> 0:11:16.360 looking at the trade deal talks and seeing what kind 0:11:16.760 --> 0:11:20.480 of a future relationship we can manage. So Maryan, one 0:11:20.520 --> 0:11:24.079 of the items arguments that the Brexiteers made is as 0:11:24.160 --> 0:11:27.240 in outside of the Union, the UK can make h 0:11:27.720 --> 0:11:30.719 bilateral deals with the U S and the EU. What 0:11:30.920 --> 0:11:33.480 is the expectation that of what they can get done 0:11:33.480 --> 0:11:35.000 with the US Because we're seeing here with the U 0:11:35.080 --> 0:11:38.440 S and China it's no easy, you know task negotiating 0:11:38.440 --> 0:11:42.400 with the US. At this point, well, you know, there's 0:11:42.440 --> 0:11:45.520 a couple of things here. First of all, Charles Michelle, 0:11:45.640 --> 0:11:48.839 who is the President of the European Council, he's the 0:11:48.920 --> 0:11:52.800 former Prime Minister of Belgium, said immediately after the election 0:11:52.920 --> 0:11:58.599 results that he's looking forward to open negotiations on the 0:11:58.720 --> 0:12:01.400 trade deal, but he ad about a level playing pitch, 0:12:01.480 --> 0:12:05.720 and what he means is he's talking about environmental standards, 0:12:05.840 --> 0:12:11.839 social legislation, workers rights, data rules, etcetera. And that's where 0:12:11.920 --> 0:12:15.600 we start from. It's an unusual trade agreement. We're starting 0:12:15.760 --> 0:12:21.040 from complete regulatory alignment and seeing where we go from there. 0:12:21.800 --> 0:12:24.760 It's it's always the other way around in any trade deal. 0:12:25.240 --> 0:12:30.040 So the question then becomes if the UK and when not. 0:12:30.320 --> 0:12:35.720 It's when the UK negotiates trade deals with other countries 0:12:36.320 --> 0:12:41.320 and what kind of standard regulatory alignment will be involved. 0:12:41.800 --> 0:12:46.040 And it's the divergence from those standards that are in 0:12:46.160 --> 0:12:49.720 the you that's what will cause the problems, if there 0:12:49.760 --> 0:12:54.040 are problems. So it's it's hugely complicated and I think 0:12:54.200 --> 0:12:58.199 what most people want and hopefully Bars Johnson will follow 0:12:58.240 --> 0:13:00.920 this line as well. It could be some kind of 0:13:01.040 --> 0:13:06.360 prioritizing sequencing to deal with some of the most important 0:13:06.600 --> 0:13:10.080 issues first that we can put some sort of framework 0:13:10.720 --> 0:13:13.600 in place because there are so many issues, I mean 0:13:13.760 --> 0:13:20.000 fishing rights for example, that is fraught with difficulty, absolutely fraught. 0:13:20.360 --> 0:13:23.520 So we need to put some sort of framework in 0:13:23.640 --> 0:13:27.600 place and work from there. Twelve months is too short, 0:13:27.840 --> 0:13:29.880 but we have to do the best we can within 0:13:30.040 --> 0:13:32.719 that period of time. Marian Harkin thanks so much for 0:13:33.000 --> 0:13:35.040 joining us. Marian is a former member of the European 0:13:35.160 --> 0:13:37.760 Parliament and of the Irish Parliament as well, giving us 0:13:37.800 --> 0:13:42.079 her thoughts on the election win by bar Johnson what 0:13:42.160 --> 0:13:44.280 it means for the Brexit process. We now go on 0:13:44.400 --> 0:13:47.559 to actually getting this deal done for the folks in 0:13:47.640 --> 0:14:05.240 the UK. They will be moving forward on that. We've 0:14:05.280 --> 0:14:08.640 got a bunch of manufacturing data around the world coming 0:14:08.679 --> 0:14:14.200 out this morning Europe disappointed in the US manufacturing also 0:14:14.840 --> 0:14:18.920 slightly underwhelmed, but interestingly services p m I came in 0:14:19.280 --> 0:14:21.520 a little bit of head of expectations joining us now. 0:14:21.600 --> 0:14:25.480 Lindsay piigsa chief economist at Siful Financial, joining us on 0:14:25.600 --> 0:14:29.400 the phone from Chicago. Lindsay, before we get into sort 0:14:29.440 --> 0:14:32.520 of the nitty gritty, how important is it to watch 0:14:32.680 --> 0:14:35.400 the data that we're getting over the next few weeks. 0:14:35.560 --> 0:14:38.440 Is this so messy and so noisy that it's hard 0:14:38.480 --> 0:14:41.640 to count, or is this is this significant data? Well, 0:14:41.760 --> 0:14:44.480 Dad has always done messy and difficult to count. But 0:14:44.560 --> 0:14:46.360 I do think it takes a very important picture of 0:14:46.440 --> 0:14:49.480 what we're experiencing here at the US as well as 0:14:49.520 --> 0:14:51.560 overseas as we head into the end of the year, 0:14:51.600 --> 0:14:54.120 and it sets the tone for what we can expect 0:14:54.240 --> 0:14:57.800 then looking out to the new year. Of all right, 0:14:57.840 --> 0:15:00.720 so lindsay, it looks like just first like us on trade, 0:15:00.840 --> 0:15:03.080 we look like we have a phase one deal. Of course, 0:15:03.160 --> 0:15:06.360 we've seen nothing on paper yet, which is kind of 0:15:06.480 --> 0:15:08.800 a part of the course, it seems. But assuming that 0:15:08.960 --> 0:15:11.400 what's been reported is actually in a phase one deal, 0:15:11.480 --> 0:15:16.080 does that change or impact your outlook in any way? Well, 0:15:16.320 --> 0:15:18.480 it's difficult to say, because, like you said, we haven't 0:15:18.560 --> 0:15:21.720 seen anything put to paper as of yet, and we've 0:15:21.840 --> 0:15:25.880 obviously seen the evans flow of trade negotiations before, and 0:15:25.960 --> 0:15:28.520 while a phase one deal has been agreed to in principle, 0:15:28.960 --> 0:15:32.560 those principles have not yet been signed into text that 0:15:32.640 --> 0:15:35.000 we won't see that for at least another month, so 0:15:35.120 --> 0:15:37.800 there still is plenty of time for further disruptions as 0:15:37.840 --> 0:15:41.480 further tweaks to negotiations to occur between now and then. 0:15:42.160 --> 0:15:45.760 There's also a question of enforceability aside from adhering to 0:15:46.040 --> 0:15:49.040 a specific level of purchases. China did say that it 0:15:49.080 --> 0:15:53.080 would quote crack down on intellectual property, staff of force, 0:15:53.160 --> 0:15:56.240 technology transfers, et cetera. Some of the key issues that 0:15:56.280 --> 0:15:59.320 the Trumble administration has been focused on for the past 0:15:59.360 --> 0:16:02.840 twelve to eight seen months, but there's few specifics that 0:16:02.920 --> 0:16:06.880 have really been hammered out. So there is some skepticism 0:16:07.040 --> 0:16:11.280 regarding the country's willingness to actually follow through when it 0:16:11.360 --> 0:16:14.320 comes to these ladder issues, or or really how the 0:16:14.440 --> 0:16:17.760 US can even enforce such efforts, because we have heard 0:16:17.800 --> 0:16:21.920 from China many times before saying they would address these issues. 0:16:22.000 --> 0:16:24.880 So I don't know if I'm necessarily convinced that this 0:16:25.080 --> 0:16:28.440 time really will be different. So, given that we do 0:16:28.680 --> 0:16:32.040 have a trade truce of sorts, but one that keeps 0:16:32.040 --> 0:16:35.000 a lot of the uncertainty for the C suite, and 0:16:35.080 --> 0:16:37.040 given the fact that we're getting a bunch of economic 0:16:37.160 --> 0:16:41.080 data that shows ongoing strength in the US economy, albeit 0:16:41.560 --> 0:16:45.600 UH an ongoing concern about manufacturing, how are we setting 0:16:45.680 --> 0:16:50.760 up heading into well? I think that is going to 0:16:50.840 --> 0:16:54.240 bring a lot of continued uncertainty and volatility. I do 0:16:54.400 --> 0:16:57.680 think the market right now is looking at the positive. 0:16:57.720 --> 0:17:00.240 They're looking at the economy through a glass half full ends. 0:17:00.280 --> 0:17:03.600 They're focused on train negotiations taking a step in the 0:17:03.680 --> 0:17:05.800 right direction. But I do think that the market is 0:17:05.880 --> 0:17:08.800 really disregarding a lot of the red flags that we're 0:17:08.840 --> 0:17:13.600 still seeing in fundamentals. We're still seeing business investment trend negatives. 0:17:13.640 --> 0:17:17.919 We're still seeing manufacturing deep into contractionary territory. We're now 0:17:18.040 --> 0:17:22.480 beginning to see signs of unevenness in part of the consumer, 0:17:22.560 --> 0:17:24.639 which has been and we need to. We need the 0:17:24.680 --> 0:17:29.800 consumer to continue to be the primary support to growth 0:17:30.000 --> 0:17:32.840 going forward. So even if we do see this phase 0:17:32.880 --> 0:17:36.639 of one trade deal signed into a certainty within a 0:17:36.760 --> 0:17:39.480 month's time, there still is a lot of pain that 0:17:39.560 --> 0:17:42.160 the U. S economy has experience that will take time 0:17:42.440 --> 0:17:47.399 to unwind going into So given that backdrop, lindsay, do 0:17:47.480 --> 0:17:51.480 you expect the FED too maybe cut rates once in 0:17:52.520 --> 0:17:55.000 or prefer to stay on the sidelines, assuming the data 0:17:55.040 --> 0:17:57.800 can support that. Well, I think both. I think the 0:17:57.880 --> 0:18:00.640 FED does prefer to move to the sidelawe and stay 0:18:00.680 --> 0:18:03.720 there indefinitely, but the FETE has also set the bar 0:18:03.880 --> 0:18:07.240 relatively high. The FETE has essentially committed the U. S 0:18:07.320 --> 0:18:11.200 economy to a perpetual two percent growth rate and a 0:18:11.359 --> 0:18:14.720 return to two percent inflation in the near to medium term. 0:18:15.200 --> 0:18:17.520 So if the U. S. Economy fails to meet the 0:18:17.720 --> 0:18:21.879 feds set expectations, I do think the Committee has painted 0:18:21.920 --> 0:18:24.359 themselves into a corner where they will have to act. 0:18:24.880 --> 0:18:27.520 And because the trajectory of the data suggests we will 0:18:27.640 --> 0:18:31.560 not meet the feds optimistic expectations, I do see the 0:18:31.600 --> 0:18:35.240 Committee cutting once twice, if not three times next year. 0:18:35.440 --> 0:18:38.760 Lindsay in in a recent research piece, you seem to 0:18:38.920 --> 0:18:42.800 agree with Minneapolis Fed President Neil cush Kari that the 0:18:43.200 --> 0:18:47.840 civilian unemployment rate is basically meaningless. How do you interpret 0:18:48.080 --> 0:18:50.760 what we're seeing in the labor market in terms of 0:18:51.160 --> 0:18:54.440 how strong or not strong? Uh? The U. S. Employment 0:18:54.520 --> 0:18:57.560 market is? Well, I will say those are his words, um, 0:18:57.640 --> 0:18:59.760 but I do echo his sentiment that the civilian on 0:18:59.840 --> 0:19:01.960 his with it rates does a disservice to the average 0:19:02.000 --> 0:19:05.000 American looking at those numbers, as it doesn't tell the 0:19:05.040 --> 0:19:08.840 whole story. The civilian unemployment rate fails to capture all 0:19:08.880 --> 0:19:11.879 of the millions of Americans that have been sidelined, pushed 0:19:11.880 --> 0:19:15.400 out of the labor market that are no longer actively participating. 0:19:15.760 --> 0:19:17.359 And what I mean by that is, in order to 0:19:17.440 --> 0:19:20.080 be included in the unemployment rate, you have to be 0:19:20.200 --> 0:19:23.639 actively seeking a job. So if you're not looking, if 0:19:23.720 --> 0:19:27.400 you're taking a break from from seeking gainful employment, even 0:19:27.440 --> 0:19:31.720 if you're not employed, you're not technically counted as unemployed. 0:19:32.200 --> 0:19:35.359 So it really does a poor job of giving us 0:19:35.440 --> 0:19:39.439 a true sense of the jobless level in the United States, 0:19:39.480 --> 0:19:42.600 again with those millions Americans sitting on the sideline, not 0:19:42.760 --> 0:19:46.560 actively participating in the labor market. Hey, Lindsay, just real quickly, 0:19:46.640 --> 0:19:49.440 do you have a recession US recession in your model 0:19:49.560 --> 0:19:53.560 in your forecast? I don't have a technical recession priced 0:19:53.600 --> 0:19:56.360 into the model. My bigger concern is a longer run, 0:19:56.600 --> 0:20:00.680 non accelerating economic scenario for the US a otomy falls 0:20:00.720 --> 0:20:02.959 to a top line GDP rate of less than one 0:20:03.080 --> 0:20:06.120 percent for an extended period of time. To me, that's 0:20:06.160 --> 0:20:09.520 the scarier forecast than an outright you're special, Lindsay, thanks 0:20:09.520 --> 0:20:12.159 so much for joining us. Lindsay Piega, chief economist for 0:20:12.240 --> 0:20:15.160 Stipo Financial, joining us on the phone from Chicago, getting 0:20:15.600 --> 0:20:19.520 her thoughts on the economic outlook. Generally, the economy remains 0:20:19.600 --> 0:20:23.000 a quite strong slower growth, certainly relative to the prior 0:20:23.080 --> 0:20:26.159 two years, but most forecasters looking for a two percent 0:20:26.440 --> 0:20:30.840 ish type of growth in led by the consumer. We 0:20:30.920 --> 0:20:34.760 are maybe seeing some stabilization in manufacturing business investment, but 0:20:34.840 --> 0:20:37.560 still the weaker of the two. The consumer continues to 0:20:37.680 --> 0:20:55.200 drive the US economy PG and E. That has been 0:20:55.359 --> 0:20:58.439 a huge question for a lot of BEAT people as 0:20:58.520 --> 0:21:01.600 they look to the biggest utility in California and wonder 0:21:01.720 --> 0:21:07.320 what is the future facing bankruptcy, facing a bankruptcy restructuring. Luckily, 0:21:07.400 --> 0:21:11.720 at Kit Conteledge has been monitoring all of the iterations 0:21:12.000 --> 0:21:16.080 of this dragged out deal. Kit Contoledge is senior Industrials 0:21:16.080 --> 0:21:19.480 and Utilities analyst for Bloomberg Intelligence. Just to sort of 0:21:19.840 --> 0:21:22.639 give a sense of the latest pg N he shares 0:21:22.720 --> 0:21:27.720 are sinking today after California rejected their restructuring proposal, Kit, 0:21:28.040 --> 0:21:32.159 bring us up to speed. Why did California reject this um? I? 0:21:32.600 --> 0:21:37.800 You know, it's it's such a detailed letter that the 0:21:37.880 --> 0:21:40.800 governor sent to pg NY that there's there's a lot 0:21:40.880 --> 0:21:42.760 of reasons. Let's put it that way. It sounds like 0:21:42.880 --> 0:21:48.320 the governor wants uh kind of new corporate governance. Uh. 0:21:48.400 --> 0:21:53.719 He wants uh stronger sounds like much stronger, uh financial 0:21:53.920 --> 0:21:58.040 structure to the company. Uh. He wants guarantees that if 0:21:58.080 --> 0:22:00.960 things go wrong, the state can take it over. I 0:22:01.040 --> 0:22:03.440 think there's a lot of things there that it's hard 0:22:03.520 --> 0:22:07.880 to say how they would be structured. And so where 0:22:07.960 --> 0:22:09.880 we go from here. So he's put out a lot 0:22:10.000 --> 0:22:15.040 of of markers and targets, but exactly how it gets 0:22:15.160 --> 0:22:17.600 resolved in a way that the company can run in 0:22:17.640 --> 0:22:21.239 the future is is very puzzling to me. So, Kate, 0:22:21.320 --> 0:22:24.720 you've color covered the utility utility industry for many many years. 0:22:25.080 --> 0:22:27.520 Give us a sense of how long can a utility 0:22:27.600 --> 0:22:31.240 continue to operate under bankruptcy? Like can they just kind 0:22:31.240 --> 0:22:33.360 of do this in perpetunity as long as I'm still 0:22:33.400 --> 0:22:35.440 paying my bill and the other folks in californiare paying 0:22:35.440 --> 0:22:38.360 their bill. Boy, That's that's a tough one. Uh. I mean, 0:22:38.640 --> 0:22:42.639 I think clearly, Uh, nobody has an interest in a 0:22:42.760 --> 0:22:47.639 utility just go and belly up and you know, not running. 0:22:47.840 --> 0:22:51.080 Somebody's got to run the operation. And I think when 0:22:51.160 --> 0:22:53.960 push comes to shove, the governor knows that PG and 0:22:54.040 --> 0:22:58.400 he knows that, the financial people know that and so on. So, uh, 0:22:58.840 --> 0:23:01.040 you know, it's not going to go on forever, but 0:23:01.359 --> 0:23:04.800 I think there's a lot of game playing that can 0:23:05.000 --> 0:23:07.760 go on here. And the governor wants to establish how 0:23:08.119 --> 0:23:10.360 tough he is on the utility. The utility does don't 0:23:10.359 --> 0:23:13.120 want to give away the store so that the shareholders 0:23:13.160 --> 0:23:16.280 have have nothing left. And then you have the bond 0:23:16.359 --> 0:23:20.760 holder position, which would basically wipe out the equity in 0:23:20.840 --> 0:23:24.119 the utility and they'd take it over. But whether the 0:23:24.160 --> 0:23:28.400 governor wants out of state hedge funds running the utility 0:23:28.520 --> 0:23:31.600 is also a question. So you know, it's a question 0:23:31.680 --> 0:23:35.480 of what's the least bad outcome. Maybe here kit just 0:23:35.600 --> 0:23:38.159 to sort of paint the picture here, we see p 0:23:38.640 --> 0:23:42.520 g N shares down today more than thirtent. Obviously, it's 0:23:42.560 --> 0:23:45.119 been a terrible year for pg NY and the stems 0:23:45.200 --> 0:23:48.720 from the wildfires and the liability that potentially will stem 0:23:49.040 --> 0:23:54.080 from that. So that's the sort of company side of things. 0:23:54.359 --> 0:23:57.239 There's also the investor side of things, and this has 0:23:57.280 --> 0:24:00.520