WEBVTT - The 10-Year at 4 or 5% is Rational, Gartman Says 0:00:06.320 --> 0:00:12.960 Yeah, Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene 0:00:13.480 --> 0:00:17.560 Jay Lee. We bring you insight from the best in economics, finance, investment, 0:00:18.000 --> 0:00:23.520 and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 0:00:23.600 --> 0:00:33.479 Bloomberg dot Com, and of course on the Bloomberg. So 0:00:33.520 --> 0:00:36.240 it's Federal Reserve decision day without a news conference, which 0:00:36.240 --> 0:00:38.760 typically means got to lunch and don't expect much. But 0:00:38.840 --> 0:00:42.120 officials have a tricky problem to navigate at this week's meeting. 0:00:42.360 --> 0:00:45.280 How to describe inflation that has just bounced back to 0:00:45.360 --> 0:00:48.800 their elusive two percent target, which joined now by Alan Ruskin, 0:00:48.840 --> 0:00:52.320 Deutsche Bank Global co head of G ten effect Strategy, 0:00:52.440 --> 0:00:53.920 and I always great to catch up with you, sir, 0:00:54.000 --> 0:00:56.240 So thank you for coming on the program. Oh my pleasure. 0:00:56.360 --> 0:00:58.800 Help me understand how they're going to navigate that problem. 0:00:58.840 --> 0:01:01.080 How do they describe inflate? Should now it's back target 0:01:01.080 --> 0:01:04.280 pretty much? I think, you know, it's a relatively easy 0:01:04.400 --> 0:01:08.080 job to describe the past as distinct from predict the future, 0:01:08.200 --> 0:01:10.560 and in this instance, as you rightly point out, they're 0:01:10.800 --> 0:01:13.280 really going to be focused on really describing the past 0:01:13.319 --> 0:01:16.759 and this slow edging up an inflation towards two percent, 0:01:16.959 --> 0:01:19.600 so they can effectively just say that close to close 0:01:19.600 --> 0:01:21.240 to target as it were. Is this in line with 0:01:21.280 --> 0:01:24.960 your expectations for how inflation is going to involve this year? Well, 0:01:24.959 --> 0:01:27.600 I think there's some danger that, you know, not just 0:01:27.720 --> 0:01:29.720 over this year, and one has to look a little 0:01:29.720 --> 0:01:32.720 bit further than that. Over the next couple of years. 0:01:32.760 --> 0:01:35.600 Inflation is just going to continue to drift higher. And 0:01:35.760 --> 0:01:38.560 one of the more interesting aspects of inflation. You know, 0:01:38.560 --> 0:01:41.440 we focus a lot on the cost side, but in general, 0:01:41.480 --> 0:01:44.839 the demand side is slowly going to place upper pressure inflation. 0:01:44.959 --> 0:01:50.120 So we see inflation indicators LAG G D p UM. 0:01:50.280 --> 0:01:54.200 We see that effectively LAG is M. You know, these 0:01:54.240 --> 0:01:58.000 coincident indicators by roughly about eighteen months to twenty four months, 0:01:58.320 --> 0:02:01.240 so we've already got in the work really some acceleration 0:02:01.280 --> 0:02:03.640 inflation that's going to occur. And do you see capacity 0:02:03.680 --> 0:02:05.920 constraints in the in the data, the survey data that's 0:02:05.920 --> 0:02:08.200 been out in the last twenty four hours allan, I'm 0:02:08.200 --> 0:02:11.839 not too worried about domestic capacity. It used to be 0:02:12.080 --> 0:02:14.639 back in the early nineties one of my favorite indicators 0:02:14.639 --> 0:02:18.520 in terms of predicting inflation going forward that fell by 0:02:18.520 --> 0:02:21.760 the waistide when I think global capacity really became the 0:02:21.800 --> 0:02:24.920 big feature. Global capacities in something very hard to prove 0:02:25.040 --> 0:02:28.440 econometrically as being a key driver of inflation. But believe me, 0:02:28.800 --> 0:02:30.560 you know it's it's there in the background. And pal 0:02:30.600 --> 0:02:33.080 has taken the same line on that. Give us the 0:02:33.120 --> 0:02:40.280 Alan Ruskin on real rate versus capital flows amid rising inflation? 0:02:41.840 --> 0:02:44.760 Do you just default the capital flows studies because you 0:02:44.840 --> 0:02:48.000 really don't know where the real rates going to be? Well, 0:02:48.000 --> 0:02:52.000 I think the inflation expectations and the knock on effect 0:02:52.000 --> 0:02:55.600 in terms of real rates really matters in environments like 0:02:55.680 --> 0:02:58.400 the e M countries where inflation might be real. It 0:02:58.480 --> 0:03:01.200 turns out the pair and the study. So if you're 0:03:01.200 --> 0:03:04.760 looking exactly at something like dollar Brazil, extremely relevant to 0:03:04.760 --> 0:03:07.880 look at real real rates. If you're looking at countries 0:03:07.919 --> 0:03:11.359 where you're comparing it's a country A with an inflation 0:03:11.440 --> 0:03:14.280 rate of one percent and another country with a inflation 0:03:14.320 --> 0:03:16.400 rate of caulled a one and a half or two percent, 0:03:16.880 --> 0:03:19.959 kind of different exactly. I think those kind of differentials 0:03:20.000 --> 0:03:22.680 don't really matter. And in the end, I think nominal 0:03:22.800 --> 0:03:25.399 rates or what the investors will focus on. So from 0:03:25.400 --> 0:03:27.720 a capital flow standpoint, I think we really kind of 0:03:28.080 --> 0:03:30.720 keep keep to nominal rates in that in that set 0:03:30.720 --> 0:03:33.040 of circumstances. So well, and big story in FX over 0:03:33.040 --> 0:03:34.680 the last couple of weeks is this re certain U 0:03:34.760 --> 0:03:37.360 S dollar. What's the view for you right now? Yeah, 0:03:37.400 --> 0:03:39.600 I think there's a lot of momentum here. I think 0:03:39.640 --> 0:03:42.720 the catalyst for it has really been the tenure he'll 0:03:42.840 --> 0:03:45.080 sort of backing up above three percent. I think that's 0:03:45.160 --> 0:03:47.920 that's been absolutely crucial. There'd been other background factors that 0:03:47.960 --> 0:03:50.440 are been maybe helpful. The euro economy seemed to be 0:03:50.480 --> 0:03:55.200 slowing down a little bit, maybe the I Passe, the 0:03:55.680 --> 0:03:59.160 you know, the malay you see in terms of Italian politics, 0:03:59.200 --> 0:04:02.200 maybe that's a fact to as well. But I think 0:04:02.400 --> 0:04:05.080 at the end of the day, it's really helds catching 0:04:05.200 --> 0:04:07.400 up now and us reaching what I think is a 0:04:07.400 --> 0:04:10.560 little bit of a tipping point in terms of healeds 0:04:11.240 --> 0:04:14.560 hitting levels where they're relevant again for the currency, where 0:04:14.560 --> 0:04:17.960 great differential start to matter. What's the catalyst for that change? Yeah, 0:04:18.000 --> 0:04:21.320 I think you know, to some extent it's uh, it's 0:04:21.480 --> 0:04:25.400 just literally the pace of the change that matters. So 0:04:25.480 --> 0:04:28.520 when you see accelerations in heels, particularly back end of 0:04:28.520 --> 0:04:30.680 the curve that sets in train more of a sort 0:04:30.720 --> 0:04:33.120 of risk off moving The dollar looks pretty good against 0:04:33.120 --> 0:04:36.520 all the e M currencies, the commodity currency complex, but 0:04:37.080 --> 0:04:39.279 you know, I think it's now reached the point where 0:04:39.320 --> 0:04:41.560 it's not just the radar change. I think the level 0:04:41.600 --> 0:04:43.760 actually matters as well. So there's three percent level on 0:04:43.800 --> 0:04:45.919 the tenures big if you go through three oh five, 0:04:46.040 --> 0:04:48.440 I think people see this as a shift in regime really, 0:04:48.640 --> 0:04:51.720 and that opens the door tore on the tenure and 0:04:51.720 --> 0:04:53.520 that I think would give the dollar another boost. And 0:04:53.520 --> 0:04:55.400 I think a lot of people now starting to rethink 0:04:55.520 --> 0:04:59.839 where they believed previously where the federal reserve rate would peak. 0:05:00.320 --> 0:05:02.320 Do you think there's a little bit more uncertainty doubt 0:05:02.400 --> 0:05:04.960 injected into that story. There was some comfort over the 0:05:05.000 --> 0:05:07.120 last couple of years that that was one way, it 0:05:07.160 --> 0:05:09.919 was just going to drift lower over time. Do you 0:05:09.960 --> 0:05:12.200 have that same comfort now? No. I think that's been 0:05:12.400 --> 0:05:14.640 an evolving story, And I think the Federal reserve is 0:05:14.640 --> 0:05:17.799 also signaled the fact that the peak in the interest 0:05:17.880 --> 0:05:21.280 rates is not ultimately where our star is where the 0:05:21.320 --> 0:05:24.520 equilibrium rate will ultimately settle. There's actually a cycle in 0:05:24.560 --> 0:05:26.400 the Fed funds rate, believe it or not. Now we 0:05:26.480 --> 0:05:28.760 know that as as you know, more or less a 0:05:28.839 --> 0:05:31.359 fact really in terms of what we've ever seen in 0:05:31.400 --> 0:05:34.040 the past than in fact, the peak and the Fed 0:05:34.120 --> 0:05:37.680 funds rate is way above the equilibrium rate. So there's 0:05:37.680 --> 0:05:39.760 not going to be some sort of miracle sort of 0:05:39.839 --> 0:05:44.160 landing on some small aircraft carrier where somehow rates you know, 0:05:44.279 --> 0:05:48.560 sort of just gently land at the equilibrium rate joint 0:05:48.839 --> 0:05:52.320 stay so that at some point rates that the Federal 0:05:52.360 --> 0:05:56.960 Reserve become restrictive. Right now, real rates are incredibly accommodative 0:05:57.000 --> 0:06:00.440 at the Federal Reserve. When did they become restrictive? Allen, Well, 0:06:00.480 --> 0:06:02.359 the first port of call I would say is, you know, 0:06:02.400 --> 0:06:05.520 really take real rates up to something like, uh, you know, 0:06:05.640 --> 0:06:08.560 one percent. I mean the equilibrium the our star rate 0:06:08.600 --> 0:06:11.480 made me slightly below that, maybe between point five and 0:06:11.839 --> 0:06:14.360 one percent, but that means a nominal rate of it, 0:06:14.480 --> 0:06:17.279 say at least two and a half to three percent, 0:06:17.320 --> 0:06:19.760 and Fed funds. That's a starting point. But I think 0:06:20.000 --> 0:06:21.920 you don't want to get too obsessed with the Fed 0:06:21.960 --> 0:06:24.359 Funds rate. I think what happens at the back end 0:06:24.400 --> 0:06:26.880 of the curve is absolutely crucial. This is the stuff 0:06:26.920 --> 0:06:30.360 that you know drives a lot of credit, A certainly 0:06:30.480 --> 0:06:34.320 drives mortgage credit. But the back end of the curve 0:06:34.640 --> 0:06:38.560 is not a linear path. It's very quadratic, and you 0:06:38.640 --> 0:06:42.640 get these tipping points, almost kinks in the movement where 0:06:42.640 --> 0:06:45.640 you get jump conditions. Where do you is three and 0:06:45.720 --> 0:06:50.920 a quarter percent tenure the first test of a jump condition? Well, 0:06:50.920 --> 0:06:53.400 I think we've been jumping really, you know, pretty much 0:06:53.400 --> 0:06:55.320 from two and a half to three, So maybe you've 0:06:55.320 --> 0:07:00.920 already gone through what would amount to Yeah, thereafter you 0:07:01.040 --> 0:07:03.400 presume it might get a little slower going really, so 0:07:03.640 --> 0:07:06.680 you know, three oh five becomes three twenty five, five 0:07:06.760 --> 0:07:11.840 becomes three fifty. I think, uh, you know, at this 0:07:11.920 --> 0:07:16.440 point in time, those jumps are assumed to become smaller. Now, 0:07:16.560 --> 0:07:20.960 if that's not the case, what's the history of that squeeze, 0:07:21.840 --> 0:07:24.920 the change there from three and a quarter three, what's 0:07:24.920 --> 0:07:26.480 the history? Do we end up with a lot of 0:07:26.480 --> 0:07:31.480 market volt Well, if you're looking at market volatility, I 0:07:31.480 --> 0:07:34.560 would say the best place to look at certainly bond volatility. 0:07:34.720 --> 0:07:37.800 So I think that's really the epicenter of all vowel. 0:07:37.840 --> 0:07:41.840 As such, Look, we are still likely to end up 0:07:42.160 --> 0:07:47.160 with a tenure healed well below past cycle loads. Now, 0:07:47.280 --> 0:07:51.080 if we saw a broader normalization, say, for example, tenure 0:07:51.080 --> 0:07:54.160 healed up at five percent, Okay, that is certainly going 0:07:54.200 --> 0:07:57.720 to breed an enormous amount of volatility. Three and a 0:07:57.800 --> 0:07:59.520 quarter percent, three and a half percent we can just 0:07:59.560 --> 0:08:02.120 about with. But I think we're seeing a little bit 0:08:02.160 --> 0:08:06.080 in the emerging market countries and emerging flows that it's start. 0:08:06.120 --> 0:08:08.040 You know, the u s heells, the actual level of 0:08:08.080 --> 0:08:10.520 hills is now taking a bit of at all. Ellen Ruskin, 0:08:10.600 --> 0:08:27.040 thank you so much. Don't you bank this morning? Why 0:08:27.080 --> 0:08:30.240 don't you bring in um an important Apple guests and 0:08:30.280 --> 0:08:32.960 the financials of a Yeah, the stock up in a 0:08:32.960 --> 0:08:35.280 pre market by four point seven percent. You know how 0:08:35.320 --> 0:08:38.920 this works. Time we go into the earnings, nervous, pessimistic 0:08:39.000 --> 0:08:41.600 will be this be the quarter where Apple fails. And 0:08:41.679 --> 0:08:44.520 let me tell you it was not service revenue searching, 0:08:44.760 --> 0:08:48.079 a one hundred billion dollars stuck repurchased program and a 0:08:48.200 --> 0:08:51.800 higher dividend also helping lift the sentiment as we come 0:08:51.800 --> 0:08:54.719 out of results day for Apple joining us now is 0:08:54.760 --> 0:08:58.120 Angelo Zeno cfire a analyst and he joins us on 0:08:58.160 --> 0:09:00.440 the phone. Angelo, great to get your perspective. Give me 0:09:00.480 --> 0:09:04.760 some perspective on that monster stock buy back program. Yeah, 0:09:04.800 --> 0:09:06.920 I mean, if we're talking about the start stock by 0:09:06.960 --> 0:09:10.520 back here, a hundred billion UM is an enormous number UM, 0:09:10.559 --> 0:09:14.000 which an interesting is any given actual timetable of when 0:09:14.040 --> 0:09:16.480 they plan on on you know, buying back the shares. 0:09:16.800 --> 0:09:18.920 We actually believe they're going to be very aggressive with 0:09:19.040 --> 0:09:23.120 this and potentially um look to reduce their share account 0:09:23.120 --> 0:09:25.680 by as much as ten percent here over the next 0:09:25.720 --> 0:09:28.600 year UM. Given um, you know, our belief that they 0:09:28.640 --> 0:09:31.320 think that the shares are extremely attractive to currently. I mean, Angela, 0:09:31.360 --> 0:09:32.839 when you just think about it, reducing the share a 0:09:32.960 --> 0:09:36.480 count by ten percent is a phenomenal task. And the 0:09:36.559 --> 0:09:39.160 view of Apple and management at the moment is we'd 0:09:39.160 --> 0:09:41.160 prefer to do the buy backs then really boost the 0:09:41.160 --> 0:09:43.920 dividend because we think the stock is undervalued. Angelo, in 0:09:43.920 --> 0:09:46.160 your mind, to what extent is this stock still undervalued? 0:09:47.840 --> 0:09:50.640 So um, you know it's interesting first with the buy backs. 0:09:50.679 --> 0:09:52.560 I mean you look at how much they've brought back. 0:09:52.559 --> 0:09:55.839 It's but they've got back about the shares um since 0:09:55.960 --> 0:09:59.600 you know, you know, back in which is absolutely enormous UM. 0:09:59.679 --> 0:10:01.880 You know, our belief is, you know, the twelve month 0:10:01.920 --> 0:10:06.360 taget price on the shares um of represents um some 0:10:06.520 --> 0:10:09.480 nice upside um and as a result, you know, we 0:10:09.559 --> 0:10:11.360 do think this is a good time to be buying 0:10:11.400 --> 0:10:14.640 back shares. Angelo, you know with us in Angelo, you 0:10:14.720 --> 0:10:17.080 just gave the statistic I've been looking for all morning, 0:10:17.080 --> 0:10:20.720 which is they brought back of their shares. Is you know, 0:10:20.840 --> 0:10:23.719 good morning, William Priest over an epic. There's a thing 0:10:23.760 --> 0:10:27.440 called shareholder yield, which can be defined different ways, but 0:10:27.600 --> 0:10:32.280 basically it's the dividend and the share buy back percent 0:10:33.559 --> 0:10:39.160 is a yield, isn't it double digit for Apple? Well 0:10:39.160 --> 0:10:42.880 that's interesting. Um, you know they've brought back about three 0:10:43.080 --> 0:10:45.840 dred billion or you know they've returned let's say about 0:10:47.320 --> 0:10:51.840 um since so you know that being said, I mean yeah, 0:10:51.960 --> 0:10:55.160 I mean at this point our view is that you 0:10:55.160 --> 0:11:00.640 will see that double percentage yield here at least, I mean, 0:11:00.679 --> 0:11:05.080 this is profound. You know, that's just double digit sheer 0:11:05.120 --> 0:11:09.240 oalder yield means January one, you start the day in 0:11:09.240 --> 0:11:12.520 a pretty good pole position. They are stunning numbers. And Angelo, 0:11:12.720 --> 0:11:15.160 I think we go back to the basic question around Apple, 0:11:15.559 --> 0:11:19.080 how do I value this company? What multiple should I 0:11:19.120 --> 0:11:21.680 apply to it? Is it a value stock, is it 0:11:21.720 --> 0:11:23.640 a growth stock? What is it? And what do you 0:11:23.679 --> 0:11:26.280 tell clients when they ask you that, Angelo, Yeah, well 0:11:26.280 --> 0:11:28.960 that's interesting, right, so you know, and that's I guess 0:11:29.040 --> 0:11:32.560 the important question here with Apple. So when we look 0:11:32.600 --> 0:11:34.920 at Apple historically, the way it's been valued, it has 0:11:34.960 --> 0:11:37.640 been valued as a hardware company. When you look at 0:11:37.640 --> 0:11:40.719 the multiple we've put on the company, essentially, is UM 0:11:40.880 --> 0:11:43.320 one that we value as a hardware company, that being 0:11:43.400 --> 0:11:46.800 just under fifteen times earnings UM based on our next 0:11:46.840 --> 0:11:50.040 year's estimate. But that being said, UM, you know, the 0:11:50.080 --> 0:11:55.160 company is transitioning towards their service based business, which is 0:11:55.200 --> 0:11:58.240 more recurring in nature. And you know our view is 0:11:58.280 --> 0:12:01.320 by two thousand and twenty about thirty about thirty five 0:12:02.040 --> 0:12:05.559 of their profits will come between services and what's called 0:12:05.640 --> 0:12:09.280 other hardware UM. And because of that UM, we do 0:12:09.360 --> 0:12:12.320 think over time you've got the potential for that multiple 0:12:12.400 --> 0:12:15.240 to expand, but it probably will continue to take some 0:12:15.280 --> 0:12:17.680 time before the street recognizes that. What are you looking 0:12:17.720 --> 0:12:20.160 for from the revenue in the services business? Angelo? And 0:12:20.280 --> 0:12:22.280 how profitable is it? I mean I heard numbers at 0:12:22.320 --> 0:12:25.560 thirty something billion last night and forecast of getting up 0:12:25.600 --> 0:12:27.960 to fifty billion, which in and of itself is another 0:12:27.960 --> 0:12:32.559 company in a big company as well. Yeah, No, absolutely so. Um, 0:12:32.559 --> 0:12:34.679 when you look at what we're looking at, you know, 0:12:34.880 --> 0:12:38.040 this year, you're looking at let's say thirty six thirty 0:12:38.040 --> 0:12:41.440 eight billion in twenty and fiscal eighteen UM, we think 0:12:41.480 --> 0:12:44.760 by you could start getting close to that that fifty 0:12:44.760 --> 0:12:47.800 billion level UM. And then when you take into account, 0:12:47.800 --> 0:12:51.000 like we said, other hardware offerings, you could potentially be 0:12:51.040 --> 0:12:54.240 even looking at another twenty billion there. So Um, you 0:12:54.280 --> 0:12:56.640 know that kind of tells you the story here is 0:12:56.679 --> 0:13:00.320 no longer iPhones for Apple. Anyone that thinks that really 0:13:00.360 --> 0:13:02.280 missing the picture when it comes to Apple. If you've 0:13:02.280 --> 0:13:04.160 done as some of the parts I mean, if you 0:13:04.240 --> 0:13:07.600 really I mean, gee, Monster legendarily did this folks like 0:13:07.640 --> 0:13:09.320 three or four years ago when he was up at 0:13:09.920 --> 0:13:14.760 Piper Jaffrey in in in um in Minneapolis. But Angelo, 0:13:14.800 --> 0:13:17.200 if you've done a real some of the parts of Apple, 0:13:18.679 --> 0:13:20.559 you know, we we haven't looked at it in a while. 0:13:20.679 --> 0:13:23.040 It's something that we've done in the past. Um, but 0:13:23.120 --> 0:13:25.880 you know, currently break some news here. Make it up. 0:13:25.880 --> 0:13:28.600 It's okay, it's BLUEBIRG surveillance. You can make up the number. 0:13:28.679 --> 0:13:32.000 What is it? Yeah, that's that's something we'd rather not do. UM. 0:13:32.120 --> 0:13:34.600 But you know, when when you when you kind of 0:13:34.640 --> 0:13:36.400 look at the company here, when you look at their 0:13:36.440 --> 0:13:40.079 neckcast position still at a hundred forty five billion UM 0:13:40.200 --> 0:13:43.679 that alone, um, you know, plus the services business as 0:13:43.679 --> 0:13:46.720 well as kind of the keeping you know, we we 0:13:46.840 --> 0:13:49.840 think the combination of those three gives you, you know, 0:13:49.920 --> 0:13:52.440 about six or so of the total value of the 0:13:52.480 --> 0:13:55.079 company at least UM. So it's like I said, it's 0:13:55.120 --> 0:13:57.880 no longer um iPhones that are really kind of the 0:13:58.200 --> 0:14:02.880 story or the valuation of this company. And how folks, 0:14:03.360 --> 0:14:06.600 this is plug and chug to get Zeno over the 0:14:06.720 --> 0:14:08.880 edge with the General Council of ce f r A. 0:14:09.559 --> 0:14:12.559 You take what you just heard, folks, six of vail 0:14:12.600 --> 0:14:15.680 you and then you extrap light out three to five 0:14:15.760 --> 0:14:20.160 years some form of trend John, and then you come 0:14:20.200 --> 0:14:26.440 back and you fill in the X. How do I do? Angelo? Angela? 0:14:26.480 --> 0:14:34.640 Are you there ningwa compliances? You know? Thank you so much. 0:14:34.840 --> 0:14:37.600 I hope you have you're trying to if it comes back. 0:14:38.240 --> 0:14:43.280 All that was classic Angels, you know, thank you so much. 0:14:43.560 --> 0:14:46.320 It's see if our folks, what's going on there is 0:14:46.880 --> 0:14:50.360 when you publish in the investment business. It's really important, 0:14:50.880 --> 0:14:56.680 and this is critical. What analysts right is more important 0:14:56.720 --> 0:15:01.400 than what they say, because the paper trail is everything. 0:15:01.920 --> 0:15:04.560 And so what you heard. There was a running joke 0:15:05.040 --> 0:15:09.400 which is he can't talk about it, John until he 0:15:09.440 --> 0:15:13.360 writes it. But can we get to those statistics? What 0:15:13.400 --> 0:15:15.760 did he say? The the overall stock of Apple since 0:15:16.800 --> 0:15:21.880 has been cut by twenty something because of these buy backs, 0:15:22.280 --> 0:15:25.960 which is phenomenal. It's phenomenal the amount of support Insequity 0:15:26.040 --> 0:15:28.960 has had from the Yeah, there's some ways of doing this, 0:15:29.000 --> 0:15:31.760 but one thing, you know, and Taylor rigs awesome on this. 0:15:32.360 --> 0:15:36.120 You take the harmonic rate. So if they're they're buying back, 0:15:37.720 --> 0:15:40.040 then the next block of time they buy back twelve percent, 0:15:40.800 --> 0:15:42.520 and the next block of time they buy back six 0:15:42.600 --> 0:15:46.360 and the July saying we're taking it by But if 0:15:46.360 --> 0:15:50.240 you do harmonic, you go two twelve six three. And 0:15:50.280 --> 0:15:53.480 the key thing is to add up, add up twelve 0:15:53.560 --> 0:15:57.800 six three, which is eight teens twenty one. So plus 0:15:57.840 --> 0:16:00.800 twenty one is how much John Tucker remember when Dylan 0:16:00.840 --> 0:16:07.080 went harmonic. Oh, I got to confuse nobody harmonic. He 0:16:07.760 --> 0:16:10.160 just gets it. Honestly, I just want to know how 0:16:10.160 --> 0:16:12.280 the stock is the stocks up by over four percent 0:16:12.320 --> 0:16:14.600 in the premarket. And there's two big stories here, Tom 0:16:14.600 --> 0:16:17.160 that painted very bullish pitcher for Apple. One is this 0:16:17.240 --> 0:16:20.040 huge biback program that's going to give that fundamental support 0:16:20.360 --> 0:16:22.600 demand to the equity. And the other is this huge 0:16:22.680 --> 0:16:25.960 surging services business which many people think deserved to hire 0:16:26.040 --> 0:16:30.480 multiple on. The overall company percent was twenty one, so 0:16:30.520 --> 0:16:34.960 they'd retire fort over your time estimate, and that's that's study. 0:16:35.080 --> 0:16:38.840 We've never seen this, Joan. Now, the bibacks are phenomena 0:16:39.120 --> 0:16:42.200 Intel and the the you know, the Heyday. Maybe it's 0:16:42.200 --> 0:16:44.920 the only equivalent in Microsoft. You wonder what they'll do 0:16:44.920 --> 0:16:48.640 with other cash. Maybe they'll do the same. I don't 0:16:48.680 --> 0:16:53.200 know either, but that this was really this was the 0:16:53.200 --> 0:16:55.520 first time we've really got our hands in the last 0:16:55.560 --> 0:16:57.760 twenty four hours around what they were going to do 0:16:57.760 --> 0:17:00.400 with this cash after the tax bill came through. Ut 0:17:01.160 --> 0:17:03.360 For those of you that are pro Angelo Zeno out 0:17:03.400 --> 0:17:05.840 on our podcast, will be sure that he gets on 0:17:05.920 --> 0:17:08.840 the podcast today so you can run through that math. 0:17:09.400 --> 0:17:27.440 Uh in you know, pause repeat. Lindsay Piegsa at Stiffle 0:17:27.720 --> 0:17:32.680 is known for incredibly important charts. Just as one example, 0:17:33.280 --> 0:17:36.679 in our latest report is a differential of labor force 0:17:37.440 --> 0:17:41.280 participation of the real working world versus kids, and it's 0:17:41.320 --> 0:17:45.840 really something is one social aspect. As Chairman Powell uh 0:17:46.119 --> 0:17:48.840 reports today with the Fed again our full coverage this 0:17:48.960 --> 0:17:52.280 afterno Dr Piegs, wonderful to have you with us. I 0:17:52.320 --> 0:17:56.080 really want to dive into fed arcadia right now. What 0:17:56.160 --> 0:18:00.560 are the distinctions of debate at the table of the Fed. 0:18:01.080 --> 0:18:06.400 How big is the descent from a very new chairman, Oh, 0:18:06.440 --> 0:18:08.439 it's it's going to have a very big impact, and 0:18:08.480 --> 0:18:11.480 it's really going to highlight the ongoing discussion that's going 0:18:11.600 --> 0:18:14.960 on at the Federal Reserve among officials. Now, the statement 0:18:15.119 --> 0:18:18.400 seems to give a sense that there there's a united 0:18:18.480 --> 0:18:21.919 front among policy officials, but if we do see a descent, 0:18:22.359 --> 0:18:24.680 that's really going to indicate that that's not the case. 0:18:24.840 --> 0:18:29.520 There is a growing diversions of opinions. State the divergence inflation, 0:18:29.880 --> 0:18:33.200 I'm sorry, state the divergence. What's the what's the distinction 0:18:33.640 --> 0:18:36.600 that allows for this argument is people are being polite 0:18:36.680 --> 0:18:40.879 with Chairman Paul Well. The biggest question surrounds inflation. Is 0:18:40.920 --> 0:18:44.119 inflation going to continue to rise? As the committee seems 0:18:44.160 --> 0:18:47.760 to expect or is inflation simply reflecting some one off 0:18:47.800 --> 0:18:51.080 price reversals that we saw this time last year, and 0:18:51.119 --> 0:18:54.119 then prices will continue to lose momentum away from that 0:18:54.160 --> 0:18:57.680 two percent target, And that really is the question. Inflation 0:18:57.760 --> 0:19:01.200 has not shown strong upward moment intem and some SET 0:19:01.240 --> 0:19:04.199 officials are saying, looking at the data, there's really no 0:19:04.280 --> 0:19:07.720 indication that we should be concerned about reining in out 0:19:07.720 --> 0:19:10.240 of control prices at this point and accelerate the pace 0:19:10.359 --> 0:19:13.440 of rate increases. Instead, we should air on the side 0:19:13.440 --> 0:19:17.639 of caution and wait until inflation is clearly stabilized above 0:19:17.800 --> 0:19:21.119 two percent before proceeding with additional rate height And then, so, 0:19:21.160 --> 0:19:25.800 are you confident that inflation is stabilizing above Oh? Absolutely not, 0:19:26.000 --> 0:19:27.879 absolutely not not. Certainly, the c p I and the 0:19:27.920 --> 0:19:31.680 pp I show indications of rising price pressures. But when 0:19:31.680 --> 0:19:34.040 we look at the broader measure, the PC which is 0:19:34.040 --> 0:19:36.520 what the FED looks at, and we exclude food and 0:19:36.640 --> 0:19:39.639 energy costs, what we see is that inflation has failed 0:19:39.680 --> 0:19:42.679 to meet that two percent target for the past one 0:19:42.720 --> 0:19:45.479 of the past twenty five years. So there really is 0:19:45.520 --> 0:19:49.800 no historical precedent for inflation gaining momentum and pushing higher, 0:19:50.119 --> 0:19:52.600 and with the the outlook for the U. S economy 0:19:52.720 --> 0:19:57.040 really to the downside at this point, meaning now guard 0:19:57.119 --> 0:19:59.560 lends you place. Well, I was just gonna say, our 0:19:59.600 --> 0:20:01.800 thesis is looking at the U. S economy, the risk 0:20:01.880 --> 0:20:04.000 is not that we go from two percent GDP to 0:20:04.160 --> 0:20:06.640 three percent. The risk is that we go from two 0:20:06.640 --> 0:20:10.040 percent down to one percent, again putting downward pressure potentially 0:20:10.080 --> 0:20:13.040 on inflation. John, that that that fact towards this year's 0:20:13.119 --> 0:20:17.600 incredibly important that twenty x years we haven't made the 0:20:17.600 --> 0:20:21.560 two percent. You know, it's really really important. What inflation 0:20:21.560 --> 0:20:24.280 has been trending lower? And is that a structural story? 0:20:24.400 --> 0:20:25.920 I guess is that the question we should be asking 0:20:26.000 --> 0:20:28.760 Vincy Well, I think in part of it is a 0:20:28.800 --> 0:20:31.520 structural story. Remember, we're no longer isolated. This is a 0:20:31.520 --> 0:20:35.919 global economy, and as we continue to import deflation from abroad, 0:20:36.040 --> 0:20:39.240 meaning cheap goods from abroad, that will essentially put a 0:20:39.359 --> 0:20:43.000 ceiling on domestic price levels. Now, certainly we could see 0:20:43.000 --> 0:20:46.640 that reverse if trade tensions lead to an outright trade wall, 0:20:46.800 --> 0:20:50.960 then we put up barriers to the inflow of capital, labor, goods. 0:20:51.480 --> 0:20:54.920 But barring that dire scenario, I do think from a 0:20:54.920 --> 0:20:58.280 structural standpoint, maybe we have lowered this ceiling to what 0:20:58.440 --> 0:21:01.359 equation we can reach in the domestic economy. So to 0:21:01.440 --> 0:21:04.040 line up, and I've been making jokes about this, Lindsay's 0:21:04.080 --> 0:21:06.760 you know I do. There's a there's a live meeting, folks, 0:21:07.440 --> 0:21:10.159 and then there's a dead meeting. Lindsay, I want you 0:21:10.200 --> 0:21:14.240 to explain why our global audience are Tom Keene John 0:21:14.280 --> 0:21:17.879 Farrell audience should listen to my bladder at two pm 0:21:17.920 --> 0:21:21.639 this afternoon of a dead meeting. And the answer is 0:21:21.640 --> 0:21:24.720 there's a lot to talk about, isn't there? Well, there 0:21:24.760 --> 0:21:27.280 there potentially is a lot to talk about, particularly when 0:21:27.280 --> 0:21:29.840 we look at the language within the statement. If the 0:21:29.880 --> 0:21:34.480 FED maintains a very gradual assessment of the rate pathway, 0:21:34.600 --> 0:21:37.320 or if there's some sort of hint to not only 0:21:37.320 --> 0:21:40.560 a June rate increase, but an accelerated rate path that 0:21:40.720 --> 0:21:44.280 certainly could spook the market into concerns that the FED 0:21:44.359 --> 0:21:47.520 is willing to tighten too soon, too fast, and maybe 0:21:47.520 --> 0:21:50.840 derail the recovery in the U S economy. So there's 0:21:50.880 --> 0:21:54.000 a lot of details, the devils and the details when 0:21:54.040 --> 0:21:56.800 it comes to the statement later this afternoon. I thank 0:21:56.840 --> 0:22:00.480 you so much with stephil Nicholas today through sure that 0:22:00.520 --> 0:22:16.520 she could be with us, with us for a good 0:22:16.520 --> 0:22:19.399 bit here, Dennis Gartment, the garment letter, Dennis, is a 0:22:19.440 --> 0:22:21.480 lot to talk about today. I want to get the 0:22:21.520 --> 0:22:23.639 gold call out of the way because people are always 0:22:23.680 --> 0:22:26.560 interested on gold. Is gold linked to dollar strength? Now? 0:22:26.680 --> 0:22:31.359 Is gold linked to fundamentals that are traditional? It's lost, 0:22:31.400 --> 0:22:33.600 it's it's linked to fundamentals that I think are traditionally. 0:22:33.640 --> 0:22:36.560 It is linked for the last several months directly tick 0:22:36.640 --> 0:22:39.280 for tick, pip for pip to what the euro is doing, 0:22:39.320 --> 0:22:41.359 not particularly what the dollar is doing, but what the 0:22:41.359 --> 0:22:43.520 euro is doing. Take a chart of the euro, take 0:22:43.520 --> 0:22:46.960