1
00:00:02,759 --> 00:00:07,280
Speaker 1: Bloomberg Audio Studios, podcasts, radio news.

2
00:00:08,720 --> 00:00:12,080
Speaker 2: Hey everyone, Max Chaffkin here, just a heads up. You're

3
00:00:12,119 --> 00:00:15,200
Speaker 2: about to hear another episode of Everybody's Business, which is

4
00:00:15,440 --> 00:00:18,279
Speaker 2: the new show that I've been working on with the

5
00:00:18,520 --> 00:00:21,439
Speaker 2: wonderful financial journalist Stacy Vanicksmith. It's going to be here

6
00:00:21,960 --> 00:00:25,079
Speaker 2: in the Eloning feed for the next few weeks, and

7
00:00:25,079 --> 00:00:27,000
Speaker 2: then it's going to move over into its own feed

8
00:00:27,080 --> 00:00:29,319
Speaker 2: in May. We just thought you'd really like it, and

9
00:00:29,360 --> 00:00:31,920
Speaker 2: we really want to get some feedback, so please check

10
00:00:31,960 --> 00:00:32,440
Speaker 2: it out and.

11
00:00:32,400 --> 00:00:37,400
Speaker 3: Let us know what you think. He's Stacy.

12
00:00:37,680 --> 00:00:42,479
Speaker 2: Hello, I've lived like several lifetimes thousand years since we

13
00:00:42,560 --> 00:00:45,640
Speaker 2: last recorded. I've done a lot of reflecting on the

14
00:00:45,720 --> 00:00:47,919
Speaker 2: choices that we made in that episode as we were

15
00:00:47,920 --> 00:00:48,640
Speaker 2: living in a moment.

16
00:00:48,640 --> 00:00:49,360
Speaker 3: We are once.

17
00:00:49,200 --> 00:00:52,920
Speaker 2: Again in the moment, and this tariff madness continues.

18
00:00:57,040 --> 00:01:01,120
Speaker 4: This is Everybody's Business. I'm Stacy Bannicksmith Chafkin. It has

19
00:01:01,240 --> 00:01:05,800
Speaker 4: basically been NonStop drama and action ever since the Trump

20
00:01:05,840 --> 00:01:09,759
Speaker 4: administration unveiled that infamous list of taxes the US would

21
00:01:09,760 --> 00:01:12,120
Speaker 4: be putting on imports from countries all over the world.

22
00:01:12,640 --> 00:01:14,759
Speaker 3: Yeah, and then he unlifted many of them.

23
00:01:14,880 --> 00:01:18,400
Speaker 2: So we're going to talk to Tracy Alloway, co host

24
00:01:18,400 --> 00:01:21,080
Speaker 2: of Odd Lots, really one of the smartest people I

25
00:01:21,080 --> 00:01:23,840
Speaker 2: think either of us knows on the markets. And then

26
00:01:23,880 --> 00:01:27,959
Speaker 2: we're going to zoom in on one company, Apple, that

27
00:01:28,080 --> 00:01:32,000
Speaker 2: has been really affected by these tariffs and including by

28
00:01:32,000 --> 00:01:35,120
Speaker 2: the tariffs that remain by these these massive one hundred

29
00:01:35,120 --> 00:01:38,440
Speaker 2: and twenty five percent tariffs on China, the stakes are

30
00:01:38,920 --> 00:01:41,319
Speaker 2: super high for Apple, and I guess for anyone who's

31
00:01:41,360 --> 00:01:44,039
Speaker 2: buying an iPhone. And we've got a great segment with

32
00:01:44,120 --> 00:01:46,280
Speaker 2: Bloomberg's Mark German on that.

33
00:01:46,720 --> 00:01:49,760
Speaker 4: Yes, and Max, I don't know if you saw Jurassic Park,

34
00:01:49,840 --> 00:01:53,240
Speaker 4: if you remember that movie, Yes, it is happening.

35
00:01:54,000 --> 00:01:56,880
Speaker 5: It is happening. Maybe further proof of end of Days

36
00:01:57,000 --> 00:01:57,240
Speaker 5: is that.

37
00:01:57,320 --> 00:01:59,640
Speaker 3: The underrated story or the overrated story.

38
00:02:00,120 --> 00:02:03,240
Speaker 4: I don't think Jurassic Park coming to life could possibly

39
00:02:03,320 --> 00:02:04,080
Speaker 4: be overrated.

40
00:02:05,440 --> 00:02:06,760
Speaker 5: So Max, with all the.

41
00:02:06,800 --> 00:02:10,240
Speaker 4: Drama this week, the headlines changing every five minutes, like

42
00:02:10,360 --> 00:02:13,560
Speaker 4: market disaster, market triumph, there was this one thing that

43
00:02:13,639 --> 00:02:15,760
Speaker 4: I could not stop thinking about.

44
00:02:16,120 --> 00:02:19,080
Speaker 3: Was it the early season start of the New York Mets.

45
00:02:21,240 --> 00:02:23,600
Speaker 4: I don't even know what any of that means. I

46
00:02:23,639 --> 00:02:26,720
Speaker 4: do know about the Mets, but what I kept thinking

47
00:02:26,760 --> 00:02:29,320
Speaker 4: about was my iPhone?

48
00:02:29,480 --> 00:02:30,120
Speaker 3: Your iPhone?

49
00:02:30,160 --> 00:02:30,840
Speaker 5: My iPhone?

50
00:02:30,880 --> 00:02:32,560
Speaker 3: Because oh no, stare me.

51
00:02:32,840 --> 00:02:35,160
Speaker 2: Did you run to the Apple store to try to

52
00:02:35,200 --> 00:02:38,000
Speaker 2: buy another phone?

53
00:02:38,160 --> 00:02:41,040
Speaker 4: Reading all this tariff news, my phone has been like

54
00:02:41,160 --> 00:02:43,680
Speaker 4: semi dying. I probably could have gotten another four months

55
00:02:43,680 --> 00:02:45,680
Speaker 4: out of it, but I was like, what is going

56
00:02:45,760 --> 00:02:48,040
Speaker 4: to happen to the price of this phone in four months?

57
00:02:48,120 --> 00:02:50,760
Speaker 4: So I ran to the Apple store on a Monday

58
00:02:50,800 --> 00:02:55,239
Speaker 4: afternoon and it was a zoo and the salesperson told

59
00:02:55,320 --> 00:02:59,560
Speaker 4: me that, in fact, he had been hearing about the

60
00:02:59,680 --> 00:03:02,360
Speaker 4: terror issue from a lot of customers.

61
00:03:02,880 --> 00:03:05,079
Speaker 2: When you told me, I think we were slacking or

62
00:03:05,120 --> 00:03:07,040
Speaker 2: something over the weekend, and you said you were at

63
00:03:07,080 --> 00:03:09,680
Speaker 2: the Apple store. Yes, I don't think you said you

64
00:03:09,680 --> 00:03:12,640
Speaker 2: were doing it out of tariff reasons. But I believe

65
00:03:12,760 --> 00:03:15,840
Speaker 2: that Stacey vanock Smith, who has her stuff together, who's

66
00:03:15,919 --> 00:03:17,960
Speaker 2: very prepared, who's from Idaho, would do this. But I

67
00:03:17,960 --> 00:03:21,000
Speaker 2: couldn't believe that anyone else would run to the Apple

68
00:03:21,040 --> 00:03:23,560
Speaker 2: store to try to get ahead of tariffs.

69
00:03:23,800 --> 00:03:27,680
Speaker 4: You underestimate our fellow Americans. In fact, Max, you expressed

70
00:03:27,720 --> 00:03:31,000
Speaker 4: the skepticism, and so I wanted to see for myself.

71
00:03:31,080 --> 00:03:33,640
Speaker 4: So I went back to the Apple Store and talked

72
00:03:33,639 --> 00:03:35,520
Speaker 4: to some people who were coming out.

73
00:03:35,800 --> 00:03:36,600
Speaker 5: What's it like in there?

74
00:03:36,680 --> 00:03:38,560
Speaker 3: It seems busier than normal. I think a lot of

75
00:03:38,600 --> 00:03:39,880
Speaker 3: people don't know what's about to hit.

76
00:03:40,240 --> 00:03:41,600
Speaker 5: What did you purchase today?

77
00:03:42,160 --> 00:03:44,160
Speaker 2: And I bought them too? Pline sales for me and

78
00:03:44,200 --> 00:03:44,880
Speaker 2: my girlfriend?

79
00:03:45,240 --> 00:03:47,640
Speaker 4: Did you buy it today because of tariffs?

80
00:03:47,680 --> 00:03:49,720
Speaker 2: I wasn't gonna buy it anyway, but the taris my

81
00:03:49,840 --> 00:03:50,680
Speaker 2: decision easier.

82
00:03:50,760 --> 00:03:52,160
Speaker 6: What did you purchase today?

83
00:03:52,680 --> 00:03:53,240
Speaker 1: Computer?

84
00:03:53,720 --> 00:03:54,440
Speaker 5: Telephones?

85
00:03:55,040 --> 00:03:55,200
Speaker 3: Oh?

86
00:03:55,200 --> 00:03:55,760
Speaker 1: A lot?

87
00:03:56,000 --> 00:03:56,320
Speaker 7: Yes?

88
00:03:56,720 --> 00:03:58,640
Speaker 4: Are you worried about prices changing?

89
00:03:58,800 --> 00:04:01,760
Speaker 6: I'm sure everything will be in pacted by tariffs, but like,

90
00:04:01,880 --> 00:04:04,280
Speaker 6: what are we gonna do? I've had my laptop for

91
00:04:04,360 --> 00:04:04,840
Speaker 6: ten years.

92
00:04:04,880 --> 00:04:05,840
Speaker 3: I need a new laptop.

93
00:04:06,280 --> 00:04:07,280
Speaker 5: Was it pretty crowded in there?

94
00:04:07,360 --> 00:04:10,320
Speaker 6: I waited like twenty minutes, which is not bad. But

95
00:04:10,520 --> 00:04:12,280
Speaker 6: like New Yorkers are very busy.

96
00:04:13,080 --> 00:04:16,799
Speaker 2: Hearing Matt, I feel like people like you are maybe

97
00:04:17,560 --> 00:04:23,719
Speaker 2: already thinking about buying another device, aware that Apple and

98
00:04:23,800 --> 00:04:27,760
Speaker 2: these consumer electronics manufacturers are vulnerable to tariffs in a

99
00:04:27,760 --> 00:04:30,520
Speaker 2: way that more so probably than almost any other type

100
00:04:30,520 --> 00:04:30,960
Speaker 2: of company.

101
00:04:31,040 --> 00:04:31,400
Speaker 3: Cars.

102
00:04:31,440 --> 00:04:34,279
Speaker 4: Apparently, car dealerships have seen also a big rush of

103
00:04:34,320 --> 00:04:35,200
Speaker 4: people recently.

104
00:04:35,560 --> 00:04:37,400
Speaker 3: Do you feel safe now?

105
00:04:37,480 --> 00:04:39,520
Speaker 2: Do you feel like you're you're ready to ride this

106
00:04:39,600 --> 00:04:41,360
Speaker 2: thing out for the next three and a half years

107
00:04:41,400 --> 00:04:42,480
Speaker 2: amid all this uncertainty.

108
00:04:42,880 --> 00:04:46,520
Speaker 5: That's an interesting question. No, I don't know how.

109
00:04:46,520 --> 00:04:50,440
Speaker 2: I navigating Costco over the weekend, and I was surprised.

110
00:04:50,520 --> 00:04:52,000
Speaker 5: You do spend you do talk.

111
00:04:51,839 --> 00:04:53,880
Speaker 2: To I spend most of my time when I'm not

112
00:04:53,920 --> 00:04:57,279
Speaker 2: in this studio, and I was surprised that it was

113
00:04:57,360 --> 00:04:59,440
Speaker 2: like a lighter day than usual. I saw the same

114
00:04:59,520 --> 00:05:03,400
Speaker 2: number of Jumbo toilet paper packs that I would normally see.

115
00:05:03,480 --> 00:05:06,600
Speaker 4: You know where I bet this was not happening where

116
00:05:06,720 --> 00:05:09,599
Speaker 4: at the Costco and Idaho people know?

117
00:05:09,880 --> 00:05:12,200
Speaker 5: People are prepared in my home state.

118
00:05:12,400 --> 00:05:14,039
Speaker 3: I hy k, why K.

119
00:05:26,880 --> 00:05:31,120
Speaker 4: After basically a full week of markets plunging and surging

120
00:05:31,160 --> 00:05:35,640
Speaker 4: and plunging and surging, President Trump finally blinked. He announced

121
00:05:35,640 --> 00:05:37,719
Speaker 4: a ninety day pause on most of the tariffs he

122
00:05:37,720 --> 00:05:40,960
Speaker 4: put forward last week. That pause does not include China,

123
00:05:41,080 --> 00:05:43,680
Speaker 4: our largest trading partner. Here to talk about this with

124
00:05:43,760 --> 00:05:46,479
Speaker 4: us is the great Tracy Alloway, co host of the

125
00:05:46,520 --> 00:05:47,760
Speaker 4: podcast Odd Lots.

126
00:05:47,800 --> 00:05:50,200
Speaker 6: Welcome, Tracy, Thank you so much for having me in

127
00:05:50,320 --> 00:05:51,760
Speaker 6: for that very kind intro.

128
00:05:52,200 --> 00:05:54,200
Speaker 4: Well, I feel like your time is precious. You've been

129
00:05:54,279 --> 00:05:55,040
Speaker 4: very NonStop.

130
00:05:55,320 --> 00:05:57,440
Speaker 6: It has been busy this week. I'll say that.

131
00:05:57,760 --> 00:06:00,719
Speaker 4: One thing that I saw that you tweet that I

132
00:06:00,760 --> 00:06:02,400
Speaker 4: wanted to ask you about because I think it kind

133
00:06:02,440 --> 00:06:04,680
Speaker 4: of gets at the heart of maybe what's going on

134
00:06:05,120 --> 00:06:09,240
Speaker 4: underneath the blink is you wrote quote. Honestly, at this point,

135
00:06:09,279 --> 00:06:11,520
Speaker 4: it's kind of comforting to see that the bond market

136
00:06:11,600 --> 00:06:13,080
Speaker 4: can still intimidate everybody.

137
00:06:13,320 --> 00:06:16,359
Speaker 6: Yeah, I think this is really like one of the

138
00:06:16,360 --> 00:06:19,040
Speaker 6: big things that happened this week. And that's in reference

139
00:06:19,080 --> 00:06:22,320
Speaker 6: to the old famous Carville quote where he talked about

140
00:06:22,360 --> 00:06:24,760
Speaker 6: if he was going to be reincarnated, he would want

141
00:06:24,800 --> 00:06:26,640
Speaker 6: to come back as the bond market because then he

142
00:06:26,680 --> 00:06:32,040
Speaker 6: could intimidate everyone. And here we are, about three decades

143
00:06:32,279 --> 00:06:35,600
Speaker 6: after he uttered that quote, and it turns out that

144
00:06:35,600 --> 00:06:39,680
Speaker 6: the bond market can still intimidate everyone, including a president

145
00:06:39,720 --> 00:06:43,359
Speaker 6: who looked pretty set on trying to remake the global

146
00:06:43,400 --> 00:06:46,520
Speaker 6: economy and the global financial system. He might still end

147
00:06:46,640 --> 00:06:49,080
Speaker 6: up doing it, but for the moment, the bond market

148
00:06:49,120 --> 00:06:51,919
Speaker 6: really seems to be the big roadblock in some of

149
00:06:51,960 --> 00:06:54,960
Speaker 6: these plans. And in fact, when he did his press

150
00:06:54,960 --> 00:06:58,240
Speaker 6: conference on Wednesday where he announced the ninety day pause,

151
00:06:59,080 --> 00:07:02,880
Speaker 6: he talked about markets getting like yippie queasy but he

152
00:07:02,960 --> 00:07:04,680
Speaker 6: really highlighted the bond market.

153
00:07:04,920 --> 00:07:06,520
Speaker 3: The bond market is very tricky.

154
00:07:06,520 --> 00:07:09,040
Speaker 6: I was watching it, but if you look at it now, it's, uh,

155
00:07:09,800 --> 00:07:11,040
Speaker 6: it's beautiful.

156
00:07:11,240 --> 00:07:13,280
Speaker 3: The bond market right now is beautiful.

157
00:07:13,840 --> 00:07:16,280
Speaker 6: And we know from you know, some other sources of

158
00:07:16,320 --> 00:07:19,520
Speaker 6: reporting that it really looks like it was the move

159
00:07:19,720 --> 00:07:23,360
Speaker 6: in the bond market, bond prices plunging, yields going up,

160
00:07:23,840 --> 00:07:24,840
Speaker 6: that frightened him off.

161
00:07:25,640 --> 00:07:27,760
Speaker 2: Wait didn't he just get frightened because he saw Jamie

162
00:07:27,760 --> 00:07:29,239
Speaker 2: Diamond on Fox News?

163
00:07:29,400 --> 00:07:31,840
Speaker 3: Am? I that is that? Like? Two good question?

164
00:07:32,120 --> 00:07:34,240
Speaker 6: But Jamie Diamond cares about bond yields too.

165
00:07:34,360 --> 00:07:35,480
Speaker 2: Okay.

166
00:07:35,520 --> 00:07:39,160
Speaker 6: The bond market is the most important market in the world.

167
00:07:39,240 --> 00:07:43,400
Speaker 6: The US has like twenty nine trillion dollars outstanding. It's

168
00:07:43,520 --> 00:07:46,600
Speaker 6: much bigger than the stock market. But more importantly, it

169
00:07:46,720 --> 00:07:50,880
Speaker 6: is much more interwoven with the US economy, so it

170
00:07:51,120 --> 00:07:57,000
Speaker 6: informs things like mortgage rates, corporate financing rates. And if

171
00:07:57,080 --> 00:08:00,720
Speaker 6: you're Trump, someone who came in on the pro that

172
00:08:00,840 --> 00:08:03,920
Speaker 6: you were going to lower housing costs, the economy was

173
00:08:03,960 --> 00:08:07,480
Speaker 6: going to boom under your tenre, you really care about

174
00:08:07,520 --> 00:08:09,000
Speaker 6: what happens to those rates.

175
00:08:09,840 --> 00:08:10,560
Speaker 5: Well, I feel like.

176
00:08:10,520 --> 00:08:13,120
Speaker 4: The stock market is so much more visible, and it's

177
00:08:13,120 --> 00:08:15,480
Speaker 4: a simpler market to explain, I think in a lot

178
00:08:15,520 --> 00:08:19,320
Speaker 4: of ways. So what was it about the bond market

179
00:08:19,840 --> 00:08:22,120
Speaker 4: that like rattled people in a way that the stock

180
00:08:22,160 --> 00:08:24,520
Speaker 4: market which was going up and down, I mean nine

181
00:08:24,560 --> 00:08:27,800
Speaker 4: percent down. You know, we haven't seen this since COVID,

182
00:08:28,000 --> 00:08:30,640
Speaker 4: since the housing crisis, and this kind of up and

183
00:08:30,680 --> 00:08:32,160
Speaker 4: down I don't think I've ever seen.

184
00:08:32,440 --> 00:08:36,400
Speaker 6: Yeah, it was pretty intense. It is highly unusual to

185
00:08:36,559 --> 00:08:40,520
Speaker 6: see both bonds and stocks falling at the same time.

186
00:08:41,080 --> 00:08:44,640
Speaker 6: And to be honest, the financial system isn't really built

187
00:08:44,840 --> 00:08:48,200
Speaker 6: to handle that. It can't really handle those two things

188
00:08:48,240 --> 00:08:54,120
Speaker 6: happening simultaneously. When we see both of those asset classes falling.

189
00:08:54,600 --> 00:08:57,960
Speaker 6: What tends to happen is big investors as well as

190
00:08:58,120 --> 00:09:01,839
Speaker 6: banks and broker dealers which nerrisk them have to start

191
00:09:01,880 --> 00:09:06,520
Speaker 6: de risking their portfolios or their balance sheets. And once

192
00:09:06,559 --> 00:09:09,679
Speaker 6: they're de risking, you set in motion, basically a feedback

193
00:09:09,679 --> 00:09:14,160
Speaker 6: loop that really risks, making asset prices even lower, people

194
00:09:14,200 --> 00:09:15,319
Speaker 6: having to sell more.

195
00:09:15,520 --> 00:09:18,719
Speaker 2: De risking you mean selling assets, right, Okay, I just

196
00:09:18,760 --> 00:09:19,679
Speaker 2: want to say two things.

197
00:09:19,760 --> 00:09:22,440
Speaker 3: One is we're recording this Thursday morning. A lot could happen.

198
00:09:22,880 --> 00:09:26,120
Speaker 6: You need to say the exact time, Yes, exactly, it is.

199
00:09:26,720 --> 00:09:29,840
Speaker 5: Yeah, eastern time, Eastern time.

200
00:09:30,120 --> 00:09:32,360
Speaker 2: The other thing, I just think we should take a

201
00:09:32,360 --> 00:09:34,319
Speaker 2: step back and say that what we're talking about, we're

202
00:09:34,320 --> 00:09:36,920
Speaker 2: talking about the bond market. I think tracing is the

203
00:09:37,080 --> 00:09:41,160
Speaker 2: concern that these tariffs are destroying the US economy, right,

204
00:09:41,200 --> 00:09:43,480
Speaker 2: and that is going to lead to some kind of recession,

205
00:09:43,480 --> 00:09:44,680
Speaker 2: maybe even a deep recession.

206
00:09:45,080 --> 00:09:45,840
Speaker 3: Do you have any.

207
00:09:45,679 --> 00:09:50,640
Speaker 2: Sense of why people were so worried about these tariffs?

208
00:09:50,640 --> 00:09:52,280
Speaker 2: And we talked about a little bit last week, but

209
00:09:52,760 --> 00:09:56,600
Speaker 2: Trump telegraphed this and we knew it was coming, and

210
00:09:56,679 --> 00:09:59,680
Speaker 2: yet suddenly we're comparing what happened to you know, the

211
00:09:59,720 --> 00:10:02,360
Speaker 2: great financial crisis of two thousand and eight or COVID

212
00:10:02,440 --> 00:10:05,080
Speaker 2: or something, these incredibly traumatic moments.

213
00:10:05,559 --> 00:10:08,160
Speaker 6: Okay, there's a lot to say here, but I think

214
00:10:08,600 --> 00:10:11,000
Speaker 6: the simple answer is the scale of the tariffs.

215
00:10:11,040 --> 00:10:11,240
Speaker 3: Right.

216
00:10:12,320 --> 00:10:15,319
Speaker 6: You don't get many countries who try to tear iff

217
00:10:15,600 --> 00:10:19,640
Speaker 6: every single trading partner they have all at once. It's

218
00:10:19,760 --> 00:10:24,199
Speaker 6: usually relatively focused. And the fact that it's the US economy,

219
00:10:24,240 --> 00:10:28,480
Speaker 6: the world's biggest economy, actually doing that, it meant most

220
00:10:28,520 --> 00:10:33,040
Speaker 6: people were expecting, you know, a ratcheting down of global growth.

221
00:10:33,440 --> 00:10:36,280
Speaker 6: So if they were expecting global growth to slow, why

222
00:10:36,320 --> 00:10:39,520
Speaker 6: did they sell bonds? So normally, if you expect a recession,

223
00:10:39,559 --> 00:10:42,480
Speaker 6: you would buy bonds rather than stocks. And this gets

224
00:10:42,520 --> 00:10:46,040
Speaker 6: back to the de risking point. People were forced to sell,

225
00:10:46,120 --> 00:10:48,800
Speaker 6: They had to unwind positions because the moves were just

226
00:10:48,880 --> 00:10:52,959
Speaker 6: so extreme. And then the other thing that really spooked

227
00:10:53,000 --> 00:10:55,640
Speaker 6: people about all of this is you have to look

228
00:10:55,640 --> 00:10:58,640
Speaker 6: at what was going on in the financial plumbing, So

229
00:10:58,960 --> 00:11:02,880
Speaker 6: the really big wholesale financing market, the repo market from

230
00:11:02,880 --> 00:11:07,640
Speaker 6: which banks and investors source a lot of their overnight loans,

231
00:11:07,760 --> 00:11:11,120
Speaker 6: a lot of their overnight liquidity. They need to keep

232
00:11:11,160 --> 00:11:14,880
Speaker 6: doing that in order to roll over positions. If they

233
00:11:14,920 --> 00:11:19,680
Speaker 6: can't get that liquidity because their dealer is de risking

234
00:11:19,679 --> 00:11:22,559
Speaker 6: its balance sheet and selling assets and it doesn't want

235
00:11:22,600 --> 00:11:25,959
Speaker 6: to take on any more assets at that time, then

236
00:11:26,000 --> 00:11:28,880
Speaker 6: that becomes a problem and you get that additional selling pressure.

237
00:11:29,440 --> 00:11:31,559
Speaker 6: And the one other thing I would say on that

238
00:11:31,800 --> 00:11:35,840
Speaker 6: is on Wednesday, when things got pretty extreme in the

239
00:11:35,840 --> 00:11:39,120
Speaker 6: bond market, there was a lot of chatter about the

240
00:11:39,160 --> 00:11:43,360
Speaker 6: FED possibly having to come in and bail out that market.

241
00:11:43,920 --> 00:11:47,120
Speaker 6: In a bailout the bond marketing, Yeah, I mean bail out.

242
00:11:47,160 --> 00:11:49,959
Speaker 6: It's it's not a credit risk, although I think there

243
00:11:49,960 --> 00:11:53,840
Speaker 6: are some investors who are potentially worried about the US's

244
00:11:53,920 --> 00:11:57,000
Speaker 6: credit worthiness under this new presidency. It was more of

245
00:11:57,080 --> 00:12:00,480
Speaker 6: a liquidity issue, and so the thinking was maybe they're

246
00:12:00,480 --> 00:12:03,120
Speaker 6: going to do what they did back in twenty twenty.

247
00:12:03,320 --> 00:12:06,280
Speaker 6: And then the last thing I will say on this

248
00:12:06,400 --> 00:12:11,199
Speaker 6: dynamic is you can just imagine if you're Trump, how

249
00:12:11,320 --> 00:12:15,360
Speaker 6: much would you hate that headline that the FED had

250
00:12:15,400 --> 00:12:19,720
Speaker 6: to come in and rescue the world's most important market

251
00:12:20,200 --> 00:12:23,079
Speaker 6: because of your trade policies.

252
00:12:23,559 --> 00:12:25,560
Speaker 4: Well, one thing I wanted to ask about was, like

253
00:12:25,600 --> 00:12:28,079
Speaker 4: you said, the bond market is typically where people go.

254
00:12:28,360 --> 00:12:32,560
Speaker 4: It's like their safe space, and bonds are essentially loans

255
00:12:32,800 --> 00:12:35,400
Speaker 4: that you give the government, and because the US government

256
00:12:35,440 --> 00:12:38,719
Speaker 4: is seen as so safe, interest rates the yield as

257
00:12:38,720 --> 00:12:40,520
Speaker 4: they call it, but the interest rate the government pays

258
00:12:40,640 --> 00:12:45,040
Speaker 4: is really low. This is a super oversimplification, but it

259
00:12:45,040 --> 00:12:47,800
Speaker 4: occurred to me that maybe the price of all this volatility.

260
00:12:48,400 --> 00:12:50,360
Speaker 4: If a stock drops ten percent and goes back up

261
00:12:50,400 --> 00:12:54,240
Speaker 4: ten percent, technically you're fine if you own the stock,

262
00:12:54,640 --> 00:12:57,120
Speaker 4: But maybe the long term price of all this volatility

263
00:12:57,360 --> 00:13:00,720
Speaker 4: is the bond market, because now the interest or the

264
00:13:00,880 --> 00:13:03,520
Speaker 4: yield that the government's having to pay on these bonds

265
00:13:04,000 --> 00:13:07,080
Speaker 4: is really high, which is weird because normally, when so

266
00:13:07,160 --> 00:13:10,400
Speaker 4: many people are looking for a safe space, bonds should

267
00:13:10,440 --> 00:13:13,160
Speaker 4: be where everybody goes. Yeah, but all of a sudden,

268
00:13:13,160 --> 00:13:15,839
Speaker 4: the US doesn't seem so trustworthy because of all the volatility.

269
00:13:15,920 --> 00:13:17,920
Speaker 4: So I was wondering if that might be like a

270
00:13:18,000 --> 00:13:21,080
Speaker 4: long term consequence, even if the market comes back to

271
00:13:21,080 --> 00:13:24,640
Speaker 4: where it was, that there's like long term damage from this.

272
00:13:24,920 --> 00:13:28,120
Speaker 6: Yeah, I think that's exactly right. So one of the

273
00:13:28,240 --> 00:13:32,199
Speaker 6: consequences of all of this volatility, all of this chaos

274
00:13:32,280 --> 00:13:35,240
Speaker 6: is people started talking about the possibility that we could

275
00:13:35,320 --> 00:13:40,600
Speaker 6: see alternative safe havens, so things like German government bonds

276
00:13:40,720 --> 00:13:45,160
Speaker 6: or Japanese government bonds. Europe, as one of our guests

277
00:13:45,200 --> 00:13:50,559
Speaker 6: recently said, is a region of norms and strong conventions

278
00:13:50,600 --> 00:13:53,040
Speaker 6: and rule of law, and maybe the US is a

279
00:13:53,040 --> 00:13:55,760
Speaker 6: little bit less so at the moment, so you could

280
00:13:55,760 --> 00:13:59,800
Speaker 6: see big investors flocking there. The irony in all of

281
00:13:59,800 --> 00:14:05,719
Speaker 6: this is there's already been reduced structural demand for US treasuries,

282
00:14:05,840 --> 00:14:09,160
Speaker 6: and that means you've had big buyers stepping away from

283
00:14:09,240 --> 00:14:13,079
Speaker 6: the market, and so when that happens, you know again

284
00:14:13,200 --> 00:14:16,480
Speaker 6: yields are going to have to go up if this

285
00:14:16,600 --> 00:14:21,880
Speaker 6: results in even less demand for US treasuries. The irony

286
00:14:22,080 --> 00:14:25,800
Speaker 6: is the US's own financing costs are going to go up,

287
00:14:25,960 --> 00:14:28,800
Speaker 6: and we know that Trump has talked about how important

288
00:14:28,920 --> 00:14:31,160
Speaker 6: it is to get those down, how important it is.

289
00:14:31,240 --> 00:14:32,520
Speaker 5: It's like US servicing our debt.

290
00:14:32,640 --> 00:14:36,000
Speaker 6: Yeah, how important it is to reduce America's debt. That

291
00:14:36,120 --> 00:14:39,440
Speaker 6: is much more difficult if you don't have buyers for it.

292
00:14:40,280 --> 00:14:43,480
Speaker 2: I want to say, sort of shift slightly to stocks,

293
00:14:43,960 --> 00:14:46,360
Speaker 2: if you permit. The thing I've been wondering as we've

294
00:14:46,400 --> 00:14:49,160
Speaker 2: watched the stock market sort of go up and down

295
00:14:49,240 --> 00:14:53,080
Speaker 2: in response to where that Trump says, is like is

296
00:14:53,120 --> 00:14:55,120
Speaker 2: this real? And I feel like you could tell two

297
00:14:55,200 --> 00:14:58,440
Speaker 2: different stories. And John Herman at New York Magazine wrote

298
00:14:58,440 --> 00:15:00,840
Speaker 2: a great article about this, basically saying Trump has turned

299
00:15:00,840 --> 00:15:03,080
Speaker 2: the US economy into a meme stock. He's like basically

300
00:15:03,120 --> 00:15:05,520
Speaker 2: managing the United States the way the CEO of Game

301
00:15:05,560 --> 00:15:08,760
Speaker 2: Stop does. So there's no reality, there's just vibes. You

302
00:15:08,840 --> 00:15:11,080
Speaker 2: have traders just like trying to get inside the head

303
00:15:11,640 --> 00:15:15,080
Speaker 2: of the guy running the thing, and you get chaos

304
00:15:15,080 --> 00:15:17,880
Speaker 2: in these wild moves. And then I think there's an

305
00:15:17,960 --> 00:15:22,600
Speaker 2: alternative story, which is like the stock market is asserting itself.

306
00:15:22,640 --> 00:15:25,400
Speaker 2: It's actually serving as a check on Trump. And what

307
00:15:25,440 --> 00:15:27,440
Speaker 2: we are learning now and maybe what we learned even

308
00:15:27,520 --> 00:15:31,640
Speaker 2: yesterday was that you know that Trump can't do this,

309
00:15:31,720 --> 00:15:34,680
Speaker 2: that there are going to be repercussions. Tracy, I'm sure

310
00:15:34,680 --> 00:15:38,080
Speaker 2: you saw this. Like in March, this guy, Michael Symbolist

311
00:15:38,120 --> 00:15:41,200
Speaker 2: of JP morgan to put out this research note saying

312
00:15:41,880 --> 00:15:44,160
Speaker 2: here's the interesting thing about the stock market. It could

313
00:15:44,240 --> 00:15:46,360
Speaker 2: probably apply this to the bond market as well. It

314
00:15:46,360 --> 00:15:49,400
Speaker 2: cannot be indicted, arrested or deported. It cannot be intimidated

315
00:15:49,440 --> 00:15:52,240
Speaker 2: or threatened or billy. It has no gender, ethnicity, or religion.

316
00:15:52,720 --> 00:15:55,120
Speaker 2: When this came out, I was like talking to a

317
00:15:55,160 --> 00:15:58,360
Speaker 2: group of i'd say MAGA aligned finance guys and they

318
00:15:58,400 --> 00:16:01,040
Speaker 2: were laughing about this. They were like, this is like

319
00:16:01,120 --> 00:16:04,000
Speaker 2: some you know, woke nods, you know what I mean.

320
00:16:04,040 --> 00:16:05,880
Speaker 2: And I feel like we are maybe learning in real

321
00:16:05,920 --> 00:16:08,440
Speaker 2: time and will continue to learn whether or not this

322
00:16:08,560 --> 00:16:13,400
Speaker 2: thing that Michael Symbolist wrote that that feels like obviously true.

323
00:16:13,680 --> 00:16:14,840
Speaker 3: It is in fact true.

324
00:16:15,120 --> 00:16:17,960
Speaker 6: I mean, I think we've seen evidence of that this week,

325
00:16:18,080 --> 00:16:20,840
Speaker 6: especially in the bond market. The thing I would say

326
00:16:20,960 --> 00:16:24,040
Speaker 6: that investors are really struggling with at the moment. Kind

327
00:16:24,040 --> 00:16:27,880
Speaker 6: of goes back to your reality point. I think investors

328
00:16:27,920 --> 00:16:31,760
Speaker 6: are pretty good at pricing and weighing some of the

329
00:16:31,800 --> 00:16:35,600
Speaker 6: consequences of these policies. The effects of all of this

330
00:16:36,200 --> 00:16:39,680
Speaker 6: are very real. You know, investors have a pretty decent

331
00:16:40,520 --> 00:16:43,080
Speaker 6: idea of what's going to happen to the global economy

332
00:16:43,120 --> 00:16:46,760
Speaker 6: and markets if all of this were to happen, even

333
00:16:46,800 --> 00:16:50,240
Speaker 6: though you know it's unprecedented in many ways. As we discussed,

334
00:16:50,800 --> 00:16:54,840
Speaker 6: I think the difficulty for them is the unpredictability of

335
00:16:55,000 --> 00:16:58,040
Speaker 6: what Trump actually says, Like that is the sticking point.

336
00:16:58,680 --> 00:17:02,320
Speaker 6: And because the the entire market is so focused on

337
00:17:02,560 --> 00:17:05,920
Speaker 6: this one guy, you don't know what he's going to

338
00:17:06,000 --> 00:17:10,080
Speaker 6: say between one day and the next. And it's funny.

339
00:17:10,119 --> 00:17:12,680
Speaker 6: We wrote a newsletter, i think on Tuesday where we

340
00:17:12,760 --> 00:17:15,439
Speaker 6: basically pointed out, you know, it's all about Trump. He

341
00:17:15,440 --> 00:17:18,920
Speaker 6: could come out and say everything's fine. And that's one

342
00:17:18,960 --> 00:17:22,680
Speaker 6: reason why when we had an erroneous headline on Monday

343
00:17:22,840 --> 00:17:25,920
Speaker 6: saying there was a ninety day pause, stock shot up

344
00:17:26,400 --> 00:17:29,840
Speaker 6: so so much, and then you know, when it happened

345
00:17:29,840 --> 00:17:33,199
Speaker 6: again on Wednesday, like people really rush to move up

346
00:17:33,280 --> 00:17:35,520
Speaker 6: even though they might have been burned on Mondays. So

347
00:17:35,640 --> 00:17:39,919
Speaker 6: that just underscores how important Trump is to the markets

348
00:17:39,960 --> 00:17:40,320
Speaker 6: right now.

349
00:17:41,200 --> 00:17:43,520
Speaker 4: Well, Tracy, thank you so much for joining us. I

350
00:17:43,520 --> 00:17:47,159
Speaker 4: think you have to go tape your own podcasts right now.

351
00:17:47,520 --> 00:17:49,480
Speaker 6: I do, I do, but it's been fun.

352
00:17:49,720 --> 00:17:50,639
Speaker 5: Thank you for joining us.

353
00:17:50,720 --> 00:17:52,000
Speaker 3: Thanks Tracy, thank you.

354
00:17:55,320 --> 00:17:55,560
Speaker 6: Wow.

355
00:18:03,720 --> 00:18:07,840
Speaker 2: Okay, Stacey, we're talking all about, you know, the chaos

356
00:18:07,840 --> 00:18:11,040
Speaker 2: of the markets, these questions of like, okay, what should

357
00:18:11,040 --> 00:18:15,040
Speaker 2: investors do with Trump making all these policy shifts and

358
00:18:15,760 --> 00:18:17,960
Speaker 2: making these erratic statements, and they're sort of like the

359
00:18:18,000 --> 00:18:19,879
Speaker 2: other side of this, which is what do you buy?

360
00:18:20,080 --> 00:18:21,439
Speaker 3: And how do companies price?

361
00:18:21,640 --> 00:18:25,119
Speaker 2: And we have a great guest to talk about this,

362
00:18:25,600 --> 00:18:31,399
Speaker 2: Mark German, Bloomberg's chief correspondent covering consumer technology, author of

363
00:18:31,440 --> 00:18:34,040
Speaker 2: the power On newsletter, which you should all subscribe to.

364
00:18:34,440 --> 00:18:36,560
Speaker 2: I want to talk to Mark because in his newsletter

365
00:18:36,600 --> 00:18:39,919
Speaker 2: the other day he wrote this really great sort of

366
00:18:40,359 --> 00:18:44,240
Speaker 2: primer basically on how Apple prices, and we want to

367
00:18:44,240 --> 00:18:47,240
Speaker 2: talk to him about that because Apple has so affected

368
00:18:47,320 --> 00:18:48,280
Speaker 2: by these tariffs.

369
00:18:48,440 --> 00:18:49,560
Speaker 3: Mark, thanks for being.

370
00:18:49,440 --> 00:18:51,200
Speaker 7: Here, Thanks for having me. Great to be on.

371
00:18:51,480 --> 00:18:54,080
Speaker 2: Okay, Mark, I just said that Apple is really exposed

372
00:18:54,119 --> 00:18:56,320
Speaker 2: to the trade war. Before you joined US, I might

373
00:18:56,320 --> 00:18:58,120
Speaker 2: have even said that they are one of the most

374
00:18:58,119 --> 00:19:01,560
Speaker 2: exposed companies to terrorst First of all, do you do

375
00:19:01,680 --> 00:19:03,040
Speaker 2: buy that number one?

376
00:19:03,280 --> 00:19:06,639
Speaker 3: Number two? Why is Apple so exposed?

377
00:19:06,960 --> 00:19:11,640
Speaker 2: Talk a little bit about this incredibly global company.

378
00:19:12,320 --> 00:19:14,600
Speaker 1: Yeah, So, just to take a step back here for

379
00:19:14,640 --> 00:19:17,199
Speaker 1: a while now, we knew that something was going to

380
00:19:17,280 --> 00:19:22,359
Speaker 1: happen in relation to Apple and tariff specifically related to China, right.

381
00:19:22,480 --> 00:19:25,680
Speaker 1: I think people understood that Apple is in a very

382
00:19:25,720 --> 00:19:30,439
Speaker 1: bad position because they make about eighty five to ninety

383
00:19:30,480 --> 00:19:34,359
Speaker 1: percent of their iPhones in China, right, and they sell

384
00:19:34,440 --> 00:19:38,160
Speaker 1: the majority of them in the United States. So needing

385
00:19:38,200 --> 00:19:41,320
Speaker 1: to build the product there and then needing to ship

386
00:19:41,320 --> 00:19:43,119
Speaker 1: them to the United States, obviously you're going to get

387
00:19:43,119 --> 00:19:47,120
Speaker 1: tariff pretty high. Why the market went crazy is because

388
00:19:47,160 --> 00:19:52,199
Speaker 1: the tariff percentage on China specifically was way higher than

389
00:19:52,240 --> 00:19:55,720
Speaker 1: people had anticipated, not leaving much room for Apple to

390
00:19:55,760 --> 00:19:59,399
Speaker 1: deal with getting better pricing, not leaving much room for

391
00:19:59,440 --> 00:20:02,080
Speaker 1: Apple to eat some of the costs, and not leaving

392
00:20:02,160 --> 00:20:04,720
Speaker 1: much room for minor price increases.

393
00:20:04,880 --> 00:20:05,760
Speaker 7: So that was one thing.

394
00:20:06,240 --> 00:20:09,239
Speaker 1: But what really sent everyone wild was the fact that

395
00:20:09,280 --> 00:20:14,520
Speaker 1: the tariffs were planted across every country there were countries

396
00:20:14,840 --> 00:20:19,200
Speaker 1: that Apple had moved to in order to reduce the

397
00:20:19,240 --> 00:20:23,160
Speaker 1: threat from the China tariffs that they had long anticipated.

398
00:20:23,680 --> 00:20:26,320
Speaker 1: So for the last several years, Apple had been building

399
00:20:26,400 --> 00:20:33,960
Speaker 1: up in places like Malaysia, Thailand, Vietnam, and those places

400
00:20:34,000 --> 00:20:37,960
Speaker 1: too were hit with tariffs. Right, So China you knew

401
00:20:38,000 --> 00:20:41,000
Speaker 1: would be bad, but it was worse. And then everywhere

402
00:20:41,040 --> 00:20:43,320
Speaker 1: else was way worse than anticipated too.

403
00:20:43,840 --> 00:20:46,280
Speaker 2: All that diversification too that you're talking about, a lot

404
00:20:46,320 --> 00:20:49,920
Speaker 2: of it started, unless I'm mistaken, like under the last

405
00:20:50,440 --> 00:20:55,480
Speaker 2: Trump presidency. They've been aware for years that their reliance

406
00:20:55,480 --> 00:21:00,360
Speaker 2: on China creates vulnerabilities, geopolitical vulnerabilities, and they have been

407
00:21:00,440 --> 00:21:02,120
Speaker 2: trying mark to diversify.

408
00:21:03,320 --> 00:21:06,000
Speaker 1: They knew for some time, you know, dating back to

409
00:21:06,040 --> 00:21:09,440
Speaker 1: the first Trump administration, that there would be political and

410
00:21:09,520 --> 00:21:14,840
Speaker 1: geopolitical economic vulnerabilities at some point with their huge reliance

411
00:21:14,880 --> 00:21:18,560
Speaker 1: on China, and that really kicked off the diversification efforts,

412
00:21:18,600 --> 00:21:21,680
Speaker 1: you know, closer to a decade ago. But COVID made

413
00:21:21,760 --> 00:21:26,200
Speaker 1: us all realize that it's not only geopolitical, right, there

414
00:21:26,240 --> 00:21:29,520
Speaker 1: are world related disasters that have little to do with

415
00:21:29,600 --> 00:21:33,120
Speaker 1: the economy. And I think a prime example was actually

416
00:21:33,240 --> 00:21:38,400
Speaker 1: the iPhone fourteen Pro and Promax. Back in twenty twenty two, right,

417
00:21:38,480 --> 00:21:41,679
Speaker 1: things seemed to have been calming down. COVID had been

418
00:21:41,680 --> 00:21:43,480
Speaker 1: going on for a year and a half, things began

419
00:21:43,560 --> 00:21:45,520
Speaker 1: to dissipate, and all of a sudden, there was a

420
00:21:45,600 --> 00:21:48,680
Speaker 1: huge COVID wave in China and they had a lot

421
00:21:48,680 --> 00:21:51,879
Speaker 1: of their fourteen pro production in one facility, right in

422
00:21:51,920 --> 00:21:55,440
Speaker 1: one gigantic facility at Fox Gone in China, And because

423
00:21:55,480 --> 00:21:58,119
Speaker 1: of that new COVID wave, the Chinese government shut everything

424
00:21:58,160 --> 00:22:02,240
Speaker 1: down and that blew up Apples sales projections for that

425
00:22:02,320 --> 00:22:05,280
Speaker 1: device and their overall revenue in that holiday quarter. And

426
00:22:05,320 --> 00:22:08,040
Speaker 1: that was another realization we can't just do everything in

427
00:22:08,080 --> 00:22:10,520
Speaker 1: one place. At some point, if your Apple, you have

428
00:22:10,560 --> 00:22:12,760
Speaker 1: to ask yourself, what can we do with all our

429
00:22:12,800 --> 00:22:16,280
Speaker 1: money to really be able to withstand more issues in

430
00:22:16,320 --> 00:22:19,800
Speaker 1: the future. Because Trump is only going to be here

431
00:22:19,880 --> 00:22:22,920
Speaker 1: another three and a half years in this term, we'll

432
00:22:22,960 --> 00:22:25,600
Speaker 1: see if his policies continue for another four or eight

433
00:22:25,680 --> 00:22:26,520
Speaker 1: years after that.

434
00:22:27,359 --> 00:22:28,680
Speaker 7: But looking down the line.

435
00:22:28,480 --> 00:22:31,720
Speaker 1: Ten fifteen years, twenty years, fifty years, there are going

436
00:22:31,760 --> 00:22:34,439
Speaker 1: to be more politicians, There are going to be more wars,

437
00:22:34,680 --> 00:22:37,840
Speaker 1: There are going to be more natural disasters. There are

438
00:22:37,920 --> 00:22:40,800
Speaker 1: going to be more pandemics right over the arc of time.

439
00:22:40,880 --> 00:22:42,199
Speaker 1: That's just how the world works.

440
00:22:42,600 --> 00:22:46,600
Speaker 2: Mark, Let's talk about the actual pricing of the iPhone.

441
00:22:46,600 --> 00:22:48,800
Speaker 2: You mentioned more than eighty five percent of iPhones are

442
00:22:48,800 --> 00:22:51,359
Speaker 2: made in China. The iPhone, for people who don't know

443
00:22:51,480 --> 00:22:53,240
Speaker 2: or have been living under a rock, is like the

444
00:22:53,240 --> 00:22:56,359
Speaker 2: most successful consumer product of all time. It is also

445
00:22:56,480 --> 00:23:01,600
Speaker 2: still very much the cornerstone of Apple's business. You kind

446
00:23:01,600 --> 00:23:04,000
Speaker 2: of went through in this newsletter that I mentioned at

447
00:23:04,000 --> 00:23:08,440
Speaker 2: the top, basically three options for dealing with a tariff,

448
00:23:08,480 --> 00:23:10,239
Speaker 2: and I think we should just take them one at

449
00:23:10,280 --> 00:23:12,480
Speaker 2: a time. The top of the line iPhone in the

450
00:23:12,560 --> 00:23:17,200
Speaker 2: United States costs basically one thousand dollars. What are their

451
00:23:17,240 --> 00:23:19,360
Speaker 2: options they're hit with this tariff and right now it's

452
00:23:19,400 --> 00:23:22,280
Speaker 2: over one hundred percent. If history is any guide, They're

453
00:23:22,280 --> 00:23:25,840
Speaker 2: going to release another iPhone in the fall, and they're

454
00:23:25,840 --> 00:23:27,159
Speaker 2: gonna have to come up with a price for that.

455
00:23:27,720 --> 00:23:30,080
Speaker 2: Talk through how they're going to deal with these tariffs

456
00:23:30,160 --> 00:23:30,919
Speaker 2: step by step.

457
00:23:31,240 --> 00:23:33,600
Speaker 1: Well, the first thing for the short term, it's getting

458
00:23:33,680 --> 00:23:37,480
Speaker 1: as many phones into the US channel before the tariffs

459
00:23:37,480 --> 00:23:39,640
Speaker 1: from China came into place. So that's something they've done

460
00:23:39,680 --> 00:23:43,320
Speaker 1: over the past several months in the even more recent

461
00:23:43,520 --> 00:23:45,760
Speaker 1: right as the tariffs are coming into place. Obviously they

462
00:23:45,760 --> 00:23:47,600
Speaker 1: sell a lot of phones. You have to replenish that supply.

463
00:23:48,040 --> 00:23:50,159
Speaker 1: It's bringing them in from India where you have a

464
00:23:50,200 --> 00:23:53,760
Speaker 1: tariff hit that's now I don't know, fifteen percent of

465
00:23:53,800 --> 00:23:57,320
Speaker 1: the tariff hit they're talking about from China. So looking forward,

466
00:23:57,640 --> 00:24:00,840
Speaker 1: it's now pushing suppliers to give them better pricing so

467
00:24:00,840 --> 00:24:04,280
Speaker 1: they have fatter margins, so they have more cost opportunity

468
00:24:04,280 --> 00:24:07,720
Speaker 1: to own and less cost to pass on to the customer.

469
00:24:08,160 --> 00:24:10,840
Speaker 1: And the reality is is that the iPhone price hikes

470
00:24:11,240 --> 00:24:13,560
Speaker 1: are probably not going to be more than a few

471
00:24:13,640 --> 00:24:15,760
Speaker 1: hundred dollars per model, because they are going to make

472
00:24:15,800 --> 00:24:20,160
Speaker 1: supply chain changes, and Apple knows that customers are simply

473
00:24:20,200 --> 00:24:23,240
Speaker 1: not going to pay certain dollar amounts when they can

474
00:24:23,320 --> 00:24:26,919
Speaker 1: get refurbished phones for cheaper, they can buy used phones

475
00:24:26,960 --> 00:24:30,200
Speaker 1: for cheaper, they can go elsewhere cheaper. And the other

476
00:24:30,240 --> 00:24:34,000
Speaker 1: thing is installment plans and trading programs to offset the

477
00:24:34,080 --> 00:24:36,760
Speaker 1: higher costs. If new phone prices are going to go up,

478
00:24:37,119 --> 00:24:39,240
Speaker 1: the value of the old phones are going to go

479
00:24:39,320 --> 00:24:41,440
Speaker 1: up as well, and so you're going to be able

480
00:24:41,440 --> 00:24:43,119
Speaker 1: to get more bang for your buck when trading in

481
00:24:43,160 --> 00:24:44,320
Speaker 1: your older products too.

482
00:24:44,480 --> 00:24:46,880
Speaker 2: But mark their costs are going to go up by

483
00:24:46,960 --> 00:24:49,000
Speaker 2: more than a couple hundred bucks.

484
00:24:49,080 --> 00:24:49,280
Speaker 3: Right.

485
00:24:49,680 --> 00:24:54,400
Speaker 1: The idea is by moving to lower tariff places, by

486
00:24:54,800 --> 00:24:58,359
Speaker 1: pushing suppliers to give them better pricing, by eating a

487
00:24:58,400 --> 00:25:01,720
Speaker 1: little bit of their costs, and then having the consumer

488
00:25:01,800 --> 00:25:04,359
Speaker 1: eat a bit of the costs. You're splitting four ways,

489
00:25:04,720 --> 00:25:07,359
Speaker 1: so maybe the price increase would have been one thousand dollars,

490
00:25:07,359 --> 00:25:09,520
Speaker 1: but when you're splitting in four ways, you know you're

491
00:25:09,520 --> 00:25:11,560
Speaker 1: in the two to three hundred dollars range for the customer.

492
00:25:11,960 --> 00:25:12,160
Speaker 3: Right.

493
00:25:12,359 --> 00:25:15,360
Speaker 2: So, like some of these components are also subject to tariffs,

494
00:25:15,400 --> 00:25:18,280
Speaker 2: you sort of force some of your suppliers to take

495
00:25:18,400 --> 00:25:20,600
Speaker 2: take some of that cost. You force, as you said,

496
00:25:20,600 --> 00:25:22,280
Speaker 2: the customers to take some of that cost. And then

497
00:25:22,359 --> 00:25:24,560
Speaker 2: Apple's a very profitable company. I'm not sure what the

498
00:25:24,560 --> 00:25:27,240
Speaker 2: gross margins on these It's like forty five percent or something, but.

499
00:25:27,320 --> 00:25:29,400
Speaker 1: Yeah, forty five percent is their corporate average. I would

500
00:25:29,480 --> 00:25:32,560
Speaker 1: say the phone is above fifty percent in most cases.

501
00:25:32,840 --> 00:25:35,600
Speaker 4: Right, So a lot of room there perhaps, But investors

502
00:25:35,640 --> 00:25:38,040
Speaker 4: might disagree with that. They would be upset if they

503
00:25:38,080 --> 00:25:40,520
Speaker 4: were taking smaller profit margins still, right, I mean that

504
00:25:40,760 --> 00:25:42,359
Speaker 4: would be bad for the company.

505
00:25:42,359 --> 00:25:44,240
Speaker 3: Right Mark, Can I ask you something.

506
00:25:44,680 --> 00:25:47,600
Speaker 2: They basically have not changed the price of an iPhone

507
00:25:47,640 --> 00:25:50,000
Speaker 2: in a very long time, and you brought this up,

508
00:25:50,000 --> 00:25:52,679
Speaker 2: but like there have been these subtle price increases, so

509
00:25:52,800 --> 00:25:54,960
Speaker 2: like a top of the line phone is cost about

510
00:25:54,960 --> 00:25:56,720
Speaker 2: one thousand dollars for a very long time. They've they've

511
00:25:56,760 --> 00:25:58,760
Speaker 2: done things where like you have to pay a little

512
00:25:58,760 --> 00:26:00,159
Speaker 2: more for memory.

513
00:25:59,880 --> 00:26:01,640
Speaker 1: Or like larger screen.

514
00:26:02,160 --> 00:26:04,879
Speaker 2: Right yeah, Apple critics will point out, oh, they're charging

515
00:26:04,880 --> 00:26:07,920
Speaker 2: money on services, you know whatever, but it does seem

516
00:26:08,000 --> 00:26:12,080
Speaker 2: to be some kind of psychological threshold in terms of

517
00:26:12,160 --> 00:26:14,840
Speaker 2: like what a consumer will pay for one of these things.

518
00:26:15,080 --> 00:26:17,480
Speaker 2: Do we have any sense do your sources have any

519
00:26:17,520 --> 00:26:22,320
Speaker 2: sense of how high they could push the prices without

520
00:26:22,440 --> 00:26:25,159
Speaker 2: seeing you know, like consumer pushback.

521
00:26:25,520 --> 00:26:28,360
Speaker 1: A lot happened over the last ten years or so,

522
00:26:29,000 --> 00:26:33,640
Speaker 1: and the iPhone price didn't change inflation. You had COVID,

523
00:26:33,800 --> 00:26:37,840
Speaker 1: which obviously made things more expensive to make. The technology

524
00:26:37,880 --> 00:26:40,200
Speaker 1: got more expensive and more advanced, and they still never

525
00:26:40,280 --> 00:26:43,600
Speaker 1: raise the price. And that just tells you how price

526
00:26:43,720 --> 00:26:46,800
Speaker 1: sensitive it believes consumers are. But they have a unique

527
00:26:46,800 --> 00:26:51,440
Speaker 1: opportunity now for this price increase, because if Apple raises prices.

528
00:26:52,359 --> 00:26:54,480
Speaker 1: Everyone is going to point to one man and it's

529
00:26:54,480 --> 00:26:55,160
Speaker 1: not Tim Cook.

530
00:26:55,880 --> 00:26:57,119
Speaker 5: Oh oh, they have a scapegoat.

531
00:26:57,640 --> 00:26:58,600
Speaker 7: They have a scapegoat.

532
00:26:58,640 --> 00:27:00,920
Speaker 1: Now, I think everyone would know that this has become

533
00:27:02,000 --> 00:27:04,639
Speaker 1: a untenable situation to keep prices the same because of

534
00:27:04,640 --> 00:27:07,480
Speaker 1: the tariffs, and people would blame Trump here. I think

535
00:27:07,520 --> 00:27:09,679
Speaker 1: if they did it because of inflation, I think if

536
00:27:09,680 --> 00:27:11,840
Speaker 1: they did it because of COVID. I think if they

537
00:27:11,840 --> 00:27:15,120
Speaker 1: did it because the technology became more advanced, people would

538
00:27:15,160 --> 00:27:17,679
Speaker 1: be a lot less understanding and say, hey, Apple's just

539
00:27:17,680 --> 00:27:18,720
Speaker 1: trying to make another.

540
00:27:18,440 --> 00:27:19,080
Speaker 7: Buck on us.

541
00:27:19,560 --> 00:27:22,679
Speaker 1: But now this is mainstream. This is not because of Apple.

542
00:27:23,040 --> 00:27:25,439
Speaker 1: Apple would not be raising prices if it weren't for

543
00:27:25,480 --> 00:27:25,960
Speaker 1: these tariffs.

544
00:27:26,040 --> 00:27:26,879
Speaker 7: I can assure you of that.

545
00:27:27,400 --> 00:27:30,679
Speaker 4: So when I ran to the store this week to

546
00:27:31,040 --> 00:27:34,160
Speaker 4: upgrade my iPhone.

547
00:27:33,440 --> 00:27:35,640
Speaker 3: Uh, vindication is this?

548
00:27:36,000 --> 00:27:39,480
Speaker 5: Was that a good move? Did I save myself some money?

549
00:27:39,800 --> 00:27:41,480
Speaker 7: What did you come from and what did you get?

550
00:27:41,680 --> 00:27:43,880
Speaker 5: I came from a twelve, I got a sixteen.

551
00:27:44,080 --> 00:27:46,360
Speaker 3: Oh, Man Mark is like twelve.

552
00:27:46,320 --> 00:27:50,080
Speaker 1: Well, sure, but that's a good upgrade, right Like if

553
00:27:50,119 --> 00:27:52,320
Speaker 1: you were coming from a fourteen or fifteen, I'd be

554
00:27:52,359 --> 00:27:54,040
Speaker 1: more concerned about your decision making.

555
00:27:54,560 --> 00:27:56,119
Speaker 3: Whoo the fact.

556
00:27:56,320 --> 00:27:59,680
Speaker 1: The fact is is that you got a really good

557
00:27:59,720 --> 00:28:03,040
Speaker 1: phone from a really old phone and it was time

558
00:28:03,080 --> 00:28:07,000
Speaker 1: for you to upgrade anyways. So you saved money potentially

559
00:28:07,440 --> 00:28:10,560
Speaker 1: but got something that you needed. And so this is like,

560
00:28:10,800 --> 00:28:12,040
Speaker 1: for you, is the perfect storm.

561
00:28:12,080 --> 00:28:15,119
Speaker 3: And I think that was a complete vindication for Stacey feeling.

562
00:28:15,800 --> 00:28:18,840
Speaker 4: I know that the whole economy is in total turmoil,

563
00:28:18,920 --> 00:28:22,560
Speaker 4: but personally I'm feeling good because of Markney.

564
00:28:23,680 --> 00:28:28,359
Speaker 1: The dye Gleses do while the bossing realm of the

565
00:28:28,840 --> 00:28:30,200
Speaker 1: don't murder me.

566
00:28:31,880 --> 00:28:34,200
Speaker 3: I beg of you don't good?

567
00:28:38,000 --> 00:28:41,040
Speaker 2: All right, it's our underrated segment of the week and Mark,

568
00:28:41,160 --> 00:28:43,960
Speaker 2: you're gonna stick around Stacy Vanick Smith, what do you

569
00:28:44,000 --> 00:28:44,480
Speaker 2: have for us?

570
00:28:45,000 --> 00:28:47,440
Speaker 4: Yes, this is where we take what we feel was

571
00:28:47,480 --> 00:28:50,600
Speaker 4: an underrated piece of news this week and we shine

572
00:28:50,720 --> 00:28:51,480
Speaker 4: a light on it.

573
00:28:52,320 --> 00:28:54,160
Speaker 5: And in this case, it's a pretty exciting story.

574
00:28:54,560 --> 00:28:58,720
Speaker 4: Have you guys seen Jurassic Park, Yes, you know where

575
00:28:58,760 --> 00:29:00,320
Speaker 4: they take the DNA out of the.

576
00:29:00,160 --> 00:29:04,520
Speaker 2: Mecedo amber in that guy's cane. They do them animation

577
00:29:05,000 --> 00:29:07,600
Speaker 2: and they make dinosaurs, they make dynasty, they bring extinct

578
00:29:07,760 --> 00:29:09,040
Speaker 2: species back to life.

579
00:29:09,080 --> 00:29:10,880
Speaker 5: This literally happened.

580
00:29:11,720 --> 00:29:17,400
Speaker 4: So there is this company called Colossal biosciences and they

581
00:29:17,440 --> 00:29:21,480
Speaker 4: have brought back to life something called the dire wolf.

582
00:29:21,520 --> 00:29:26,360
Speaker 4: This is a species of wolf that went extinct twelve

583
00:29:26,720 --> 00:29:27,840
Speaker 4: thousand years ago.

584
00:29:28,040 --> 00:29:29,320
Speaker 3: These are the Game of Thrones wolves.

585
00:29:29,360 --> 00:29:31,640
Speaker 4: They are the Yeah, the Game of Thrones wolves were

586
00:29:31,640 --> 00:29:35,680
Speaker 4: based on the dire wolves. They basically crossed their DNA

587
00:29:35,840 --> 00:29:39,640
Speaker 4: or they used crisper or did the science where they

588
00:29:39,760 --> 00:29:43,680
Speaker 4: put the dire wolf DNA in a gray wolf DNA thing,

589
00:29:44,480 --> 00:29:46,600
Speaker 4: which is I guess, the closest living relative. And we

590
00:29:46,720 --> 00:29:50,400
Speaker 4: have dire wolf pups and right now we can hear

591
00:29:51,000 --> 00:29:54,960
Speaker 4: a wolf howl that has been extinct from this earth

592
00:29:55,160 --> 00:29:58,320
Speaker 4: for twelve thousand years. They have three little pups that

593
00:29:58,400 --> 00:30:00,480
Speaker 4: are so cute the house.

594
00:30:00,480 --> 00:30:01,280
Speaker 5: Okay, let's hear the.

595
00:30:01,200 --> 00:30:07,480
Speaker 1: How it's kind of adorable.

596
00:30:07,480 --> 00:30:08,840
Speaker 7: I'm not gonna lie.

597
00:30:09,560 --> 00:30:13,640
Speaker 5: It's so cute. Isn't that amazing? Like a sound not

598
00:30:13,760 --> 00:30:16,080
Speaker 5: heard for thousands of years?

599
00:30:16,520 --> 00:30:19,080
Speaker 1: I think this is brilliant. And by the way, I

600
00:30:19,120 --> 00:30:21,960
Speaker 1: love the name of that company, Colossal. That's yeah, that's

601
00:30:21,960 --> 00:30:22,440
Speaker 1: a good one.

602
00:30:22,560 --> 00:30:23,160
Speaker 3: Hear me out.

603
00:30:23,320 --> 00:30:26,920
Speaker 2: I think that this is the biggest croc ever, how

604
00:30:27,000 --> 00:30:27,560
Speaker 2: is it a croc?

605
00:30:27,640 --> 00:30:28,440
Speaker 5: You heard the howls?

606
00:30:28,480 --> 00:30:29,640
Speaker 3: The cute This is.

607
00:30:29,640 --> 00:30:32,840
Speaker 2: A wolf doodle. This is not a diar hole. This

608
00:30:33,040 --> 00:30:36,200
Speaker 2: is a pr stunt. Look, I'm not saying it's not cool.

609
00:30:36,480 --> 00:30:40,360
Speaker 2: I'm not saying those subtle hybrid wolves are not adorable.

610
00:30:41,120 --> 00:30:43,320
Speaker 2: I'm not saying like I don't want to go to

611
00:30:43,320 --> 00:30:46,320
Speaker 2: a zoo and see a white gray wolf. But if

612
00:30:46,360 --> 00:30:48,680
Speaker 2: you look at the actual science here, they did not

613
00:30:48,760 --> 00:30:51,800
Speaker 2: bring the dire wolf back. They took like something like

614
00:30:51,840 --> 00:30:56,560
Speaker 2: twenty genetic traits and changed them in a gray wolf

615
00:30:57,000 --> 00:31:00,000
Speaker 2: out of I think millions of traits they would have

616
00:31:00,280 --> 00:31:03,800
Speaker 2: to change to change a actual gray wolf into a

617
00:31:03,840 --> 00:31:06,520
Speaker 2: dire wolf. This is like a wolf doodle. This is

618
00:31:06,680 --> 00:31:10,080
Speaker 2: just like a This is like a total like. I'm

619
00:31:10,120 --> 00:31:12,560
Speaker 2: not saying I'm not saying the science isn't cool, but

620
00:31:12,640 --> 00:31:15,080
Speaker 2: like anyone who thinks we like brought back an extinct

621
00:31:15,080 --> 00:31:16,320
Speaker 2: species is like.

622
00:31:16,360 --> 00:31:18,480
Speaker 4: I'm going to give you a couple of counterpoints which

623
00:31:18,480 --> 00:31:21,320
Speaker 4: are not direct counterpoints, but counterpoint adjacent.

624
00:31:21,680 --> 00:31:23,640
Speaker 5: They got the DNA out of a tooth.

625
00:31:23,440 --> 00:31:26,720
Speaker 4: And a skull, so cool, and they're now working on

626
00:31:26,760 --> 00:31:30,200
Speaker 4: resurrecting the mammoth, the dodo, and the Tasmanian tiger.

627
00:31:30,400 --> 00:31:32,640
Speaker 5: I mean, be skeptical.

628
00:31:33,200 --> 00:31:36,000
Speaker 7: I like Max's point. I think it's a fair point, but.

629
00:31:36,160 --> 00:31:37,640
Speaker 3: I am sticking to my guns.

630
00:31:38,080 --> 00:31:40,560
Speaker 1: I am sticking to my guns. This is underrated and

631
00:31:40,600 --> 00:31:41,600
Speaker 1: this is really cool.

632
00:31:42,360 --> 00:31:45,320
Speaker 7: But I think Max's point is fair.

633
00:31:45,680 --> 00:31:45,920
Speaker 3: I do.

634
00:31:46,040 --> 00:31:48,400
Speaker 2: I was braced for a genuine intervention. I thought Mark

635
00:31:48,560 --> 00:31:51,920
Speaker 2: was gonna be like, Max, you need you need to

636
00:31:51,960 --> 00:31:53,600
Speaker 2: evaluate your life choices.

637
00:31:53,880 --> 00:31:55,720
Speaker 4: I feel like we could we could play the howls

638
00:31:55,760 --> 00:31:57,440
Speaker 4: again and see if you still feel that way.

639
00:31:57,520 --> 00:31:59,080
Speaker 3: They're so cute, they they are cute.

640
00:32:01,200 --> 00:32:03,800
Speaker 7: Oh it sounds great.

641
00:32:04,480 --> 00:32:06,000
Speaker 3: Wolfdoodles, so cute.

642
00:32:07,160 --> 00:32:11,440
Speaker 4: Twelve thousand years of silence, and now this is epic.

643
00:32:11,600 --> 00:32:12,360
Speaker 5: It's epic.

644
00:32:12,960 --> 00:32:15,280
Speaker 3: Mark German, thanks for being here. We really appreciate it.

645
00:32:15,320 --> 00:32:25,960
Speaker 7: Thanks guys.

646
00:32:28,040 --> 00:32:29,600
Speaker 3: This show is produced by Stacey Wong.

647
00:32:29,920 --> 00:32:33,959
Speaker 2: Magnus Hendrickson is our supervising producer, Amy keenar editor, and

648
00:32:34,000 --> 00:32:37,800
Speaker 2: Brendan Francis Newnham is our executive producer. Sage Bauman heads

649
00:32:37,800 --> 00:32:41,400
Speaker 2: Bloomberg Podcasts. If you have a minute, please let us

650
00:32:41,440 --> 00:32:44,120
Speaker 2: know what you think. This show is in development. We're

651
00:32:44,120 --> 00:32:46,640
Speaker 2: still working on it and we really want to hear

652
00:32:46,680 --> 00:32:49,719
Speaker 2: your thoughts. Email us at Everybody's with an S at

653
00:32:49,720 --> 00:32:54,120
Speaker 2: the end at Bloomberg dot net. That's Everybody's at Bloomberg

654
00:32:54,240 --> 00:32:56,520
Speaker 2: dot net. Thank you for listening and we'll see you

655
00:32:56,600 --> 00:32:57,040
Speaker 2: next week.

656
00:33:01,720 --> 00:33:04,680
Speaker 6: He ed to factor and to factor