WEBVTT - Bloomberg Surveillance: CPI Hotter Than Expected 0:00:05.040 --> 0:00:08.639 This is a Bloomberg surveillance podcast. I'm Tim Keene along 0:00:08.680 --> 0:00:12.040 with Paul Sweeney. Join us each day for insight from 0:00:12.039 --> 0:00:16.240 the best in economics, finance, investment, and international relations. You 0:00:16.239 --> 0:00:19.599 can also watch the show live on YouTube. Visit the 0:00:19.600 --> 0:00:24.360 Bloomberg Podcast channel on YouTube to see the show weekday 0:00:24.360 --> 0:00:27.400 mornings from seven to ten am Eastern from our global 0:00:27.440 --> 0:00:32.080 headquarters in New York City. Subscribe to the podcast on Apple, Spotify, 0:00:32.440 --> 0:00:36.000 or anywhere else you listen, and always on Bloomberg Radio, 0:00:36.200 --> 0:00:40.480 the Bloomberg Terminal, and the Bloomberg Business app. Dodia level. 0:00:40.640 --> 0:00:43.000 What's great about Nadia is her water bottle, which you 0:00:43.000 --> 0:00:46.559 can see on YouTube Bloomberg Podcast. Nadia, hold up the 0:00:46.600 --> 0:00:49.479 water bottle. You're a hydrating. We's going in there. You 0:00:49.520 --> 0:00:53.159 see how it's look at that. It's matchie matching with 0:00:53.240 --> 0:00:56.000 what she's wearing. It's great. She switches every day to 0:00:56.120 --> 0:00:59.800 the proper bottle. Nautia level is fabulous. Not having the. 0:01:01.800 --> 0:01:04.319 Tomorrow that's yes, very good, perfect, We'll go there. 0:01:04.360 --> 0:01:05.360 I forgot Nadia. 0:01:05.400 --> 0:01:06.640 Thank you, Bend and you love. 0:01:07.200 --> 0:01:09.759 It's crazy here about Natia level. She sends us love 0:01:09.840 --> 0:01:12.240 on the courage Paul to be in the market. 0:01:12.080 --> 0:01:15.840 Absolutely, Natia level, senior US equity strategist, Global Wealth Management 0:01:15.840 --> 0:01:18.640 at UBS so Nadi. We got this inflation print here 0:01:18.720 --> 0:01:21.399 this morning, a little bit hotter than expected, the market 0:01:21.520 --> 0:01:23.080 selling off here, the S and P off about one 0:01:23.120 --> 0:01:25.440 point two percent. What did you take away from this? 0:01:25.520 --> 0:01:27.520 And I guess more importantly, what do you think FED 0:01:27.560 --> 0:01:28.959 Chairman J Pal's going to take away? 0:01:30.280 --> 0:01:32.319 You know, yes, inflation did come in a little bit 0:01:32.360 --> 0:01:34.600 hotter than we expected. We were looking for two nine 0:01:34.680 --> 0:01:37.800 on headline and three seven on core. 0:01:38.360 --> 0:01:40.600 But I don't think that this one data point changed 0:01:40.600 --> 0:01:42.640 an out if the FAT has been hinted for some 0:01:42.760 --> 0:01:45.440 time that March rate HEIGHTE was off the table. We 0:01:45.600 --> 0:01:47.800 have been saying for a few months now that we 0:01:47.880 --> 0:01:50.280 had expected the first height to start excuse me, the 0:01:50.280 --> 0:01:53.840 first cut to start in May. And you know, I 0:01:53.880 --> 0:01:57.240 would say that this does put a make cut at risk, 0:01:57.720 --> 0:01:59.000 just given the strenth that we're seeing in. 0:01:59.000 --> 0:01:59.720 The economic data. 0:01:59.800 --> 0:02:02.200 But I do think that what it does say, though, 0:02:02.240 --> 0:02:05.160 that the equity market can take some comfort right in 0:02:05.200 --> 0:02:08.440 the fact that you are seeing strong economic growth and 0:02:08.520 --> 0:02:11.760 that's what's probably going to cost delay in the rate cuts. 0:02:12.040 --> 0:02:15.000 And the FED is on standby at the end of 0:02:15.000 --> 0:02:15.600 the day with. 0:02:15.639 --> 0:02:18.240 Great latitude that if we see any sort of meaningful. 0:02:17.880 --> 0:02:20.639 Deterioration in the macrodata, which there are no signs of that, 0:02:20.639 --> 0:02:23.200 that the FAT can adjust policy very quickly. 0:02:23.280 --> 0:02:24.840 I don't think at the end of the day, when we. 0:02:24.880 --> 0:02:28.720 Have a soft landed insight that anyone wants this to 0:02:28.720 --> 0:02:30.640 dip in a recession. So we think that the FAT 0:02:30.800 --> 0:02:34.040 will do what's needed to adjust putuntary policy accordingly, but 0:02:34.120 --> 0:02:36.360 it probably does push out, you know. 0:02:36.400 --> 0:02:39.280 The sort of a parent cycle or just a little bit. 0:02:39.480 --> 0:02:42.000 Paul Ian Lingott, being on Capital Markets a get friend 0:02:42.000 --> 0:02:45.639 of the show he publishes, he says, of CPI super core, 0:02:45.960 --> 0:02:48.440 super high, and that's what Michael McKee does. When you 0:02:48.440 --> 0:02:52.480 get the different service sector inflations, they indicated a higher level. 0:02:52.480 --> 0:02:55.120 And let's get where you get to futures from negative 0:02:55.120 --> 0:02:59.040 twenty to negative sixty three. NASTAC futures down one point 0:02:59.080 --> 0:03:00.360 eight percent, So. 0:03:00.360 --> 0:03:03.800 We're seeing a market move here and yields higher NADIA. 0:03:03.840 --> 0:03:06.480 So you know, we're about seventy percent way through this 0:03:06.600 --> 0:03:10.639 earnings period right here. How are you what's your takeaway here? 0:03:10.680 --> 0:03:11.880 How's corporate America doing? 0:03:13.360 --> 0:03:15.079 I think corporate America is doing well. 0:03:15.080 --> 0:03:17.959 When you look at the earning season for the fourth quarter, 0:03:18.080 --> 0:03:21.880 I mean companies are beaten. We're seeing earnings trending towards 0:03:21.919 --> 0:03:24.520 seven percent growth for the quarter, which is a little 0:03:24.560 --> 0:03:27.080 bit better than we had expected. You also see some 0:03:27.160 --> 0:03:31.080 confirmation from the commentary from companies of what we're seeing 0:03:31.120 --> 0:03:33.680 in the macro data sort of some green shoots in 0:03:33.919 --> 0:03:37.200 the manufacturing areas of the economy. You're seeing a pickup 0:03:37.240 --> 0:03:40.200 an M and A activity and capital markets activity. So 0:03:40.280 --> 0:03:42.839 that's quite tourising and I think what's more important, though 0:03:42.880 --> 0:03:46.960 the full year numbers remain in tach with the consensus 0:03:46.960 --> 0:03:50.680 looking for double digit earned its growth, we're looking for 0:03:50.720 --> 0:03:52.840 something roughly in line with that, and I think you're 0:03:52.880 --> 0:03:56.360 also seeing confirmation of the strength and technology. We know 0:03:56.440 --> 0:03:59.320 that tech has been a crowded trade, but these companies 0:03:59.320 --> 0:04:01.360 are really starting to grow into their evaluation. 0:04:01.800 --> 0:04:03.320 So that's quite encouraging as well. 0:04:03.480 --> 0:04:08.400 On the equity front, do you we feel restrictive? One 0:04:08.440 --> 0:04:10.320 of the great debates here with the real yield, the 0:04:10.360 --> 0:04:13.080 ten year real yield out of two point two point 0:04:13.200 --> 0:04:16.279 zero one percent, it's now pulled back it's one point 0:04:16.360 --> 0:04:21.320 nine eight percent. Not here does the inflation adjusted oil 0:04:21.560 --> 0:04:24.720 in the engine. Does it begin to gum up and 0:04:24.800 --> 0:04:27.479 restrict the system? 0:04:28.279 --> 0:04:28.919 I don't think so. 0:04:29.000 --> 0:04:30.360 I mean, the consumer. 0:04:29.960 --> 0:04:32.520 Still has a lot of excess savings and corporate balance 0:04:32.520 --> 0:04:36.960 sheets are remaining strong. And ultimately, I mean the reality is, 0:04:36.960 --> 0:04:38.520 we do think that the FED is going to cut 0:04:38.520 --> 0:04:41.320 this year by lease one hundred bases points or so, 0:04:41.440 --> 0:04:45.480 and that should help bring down our bondios. We're looking 0:04:45.480 --> 0:04:47.440 for the ten year to end the year at three 0:04:47.480 --> 0:04:49.720 and a half percent. Yes, in your term, we're looking 0:04:49.720 --> 0:04:51.719 for more of a trade and range of three seventy 0:04:51.720 --> 0:04:54.680 five to four and a quarter. But we think as 0:04:54.680 --> 0:04:56.000 you get in the back half of the year that 0:04:56.080 --> 0:04:59.600 yields will start to normalize and we still expect inflation 0:04:59.720 --> 0:05:03.719 to main on that disinflationary trend over the next six months. 0:05:03.720 --> 0:05:06.320 I mean, we think that you're starting to see the 0:05:06.360 --> 0:05:11.880 slowdown and rents. Continued pull back in vehicle prices should 0:05:11.920 --> 0:05:15.000 also help, and improvement in supply chain should help. 0:05:15.040 --> 0:05:16.440 So when we get into the backup. 0:05:16.200 --> 0:05:18.680 Of year, we're looking for, you know, inflation to come 0:05:18.720 --> 0:05:20.840 down to about two and a half percent. 0:05:21.440 --> 0:05:24.120 All right, giving that backdrop here, what do I do 0:05:24.200 --> 0:05:25.839 with my tech trade? You know, I've been long the 0:05:25.880 --> 0:05:31.039 magnificent seven leverage long position and like Nvidia up another 0:05:31.120 --> 0:05:33.320 forty five percent this year. Do I just kind of 0:05:33.400 --> 0:05:34.920 ride this tech wave here? 0:05:36.640 --> 0:05:39.160 We think that you do. I mean, we remain positive 0:05:39.320 --> 0:05:40.760 on it. I mean I would. 0:05:40.600 --> 0:05:47.760 Say to Tom, who might be still the triple leverage hash, 0:05:47.839 --> 0:05:50.640 you know, to take up opportunities and take advantages of 0:05:50.680 --> 0:05:53.479 the pullback that you might see Tag. It would be 0:05:53.480 --> 0:05:56.160 surprised to see a little bit of consolidation. But when 0:05:56.200 --> 0:05:58.200 we look out six months tour youar from now, we 0:05:58.240 --> 0:05:59.800 think that this is the sect that there's going to 0:05:59.839 --> 0:06:02.960 be higher h We are looking for, you know, Ernie's 0:06:02.960 --> 0:06:04.960 growth with an executive to be in the high teas 0:06:05.000 --> 0:06:07.719 and it could even trend into the twenty percent range. 0:06:07.760 --> 0:06:11.120 And you're also see in reality is recovery in some 0:06:11.240 --> 0:06:13.720 of the more core areas of SEMI. We know that 0:06:13.960 --> 0:06:16.520 AI is you know, the innovation story, but you're seeing 0:06:16.560 --> 0:06:18.640 some recovering some other areas, and so we do think 0:06:18.640 --> 0:06:20.560 that there's some more upset to tech. 0:06:20.800 --> 0:06:23.680 Nadia, thank you now your level hydrated it you'd be 0:06:23.680 --> 0:06:36.480 a sweet appreciate your effort this morning. Like Gwynn joins 0:06:36.520 --> 0:06:39.840 now RBC Capital Markets on Apple car Play and on 0:06:39.920 --> 0:06:43.240 YouTube Bloomberg podcast Plake. Let me go right there, the 0:06:43.360 --> 0:06:47.880 real yield out to two percent, What does that signify 0:06:48.040 --> 0:06:49.080 to the Federal Reserve. 0:06:51.120 --> 0:06:53.279 Well, I mean, I think, you know, this is part 0:06:53.279 --> 0:06:55.160 of why we had been talking about custody begin with, 0:06:55.320 --> 0:06:57.360 is really that they're looking at these real yields. They 0:06:57.360 --> 0:07:02.000 don't want a passive tightening real yields. As inflation continues 0:07:02.040 --> 0:07:04.279 to fall, you know, even if they kind of stay 0:07:04.279 --> 0:07:06.360 at that same rate, it just keeps getting tighter and tighter. 0:07:06.400 --> 0:07:08.600 So I think part of the reason we've at least 0:07:08.640 --> 0:07:10.880 we've been calling for cuts for quite some time is 0:07:11.680 --> 0:07:13.520 you know, not that we needed We felt the FEN 0:07:13.640 --> 0:07:16.160 needed to get easier, more commodated, just because those real 0:07:16.200 --> 0:07:18.880 yields that they do nothing to the nominal target are 0:07:18.920 --> 0:07:20.119 just going to be getting tighter and tighter. 0:07:20.160 --> 0:07:21.840 So certainly something I think. 0:07:21.680 --> 0:07:24.480 That that's focused on those real yields, and that's part 0:07:24.520 --> 0:07:27.960 of the wins which they're looking at to to deliver 0:07:28.000 --> 0:07:28.400 these cuts. 0:07:28.440 --> 0:07:29.960 Well, I got to go to theater and Paul wants 0:07:30.000 --> 0:07:32.920 to jump in some with some market moving questions. S 0:07:32.920 --> 0:07:36.440 and B futures plunging negative fifty eight, the down futures 0:07:36.480 --> 0:07:40.440 down three hundred and twenty points in Nasdaq on a 0:07:40.480 --> 0:07:44.200 percentage basis, down one point five percent the markets move. 0:07:44.320 --> 0:07:49.320 You mentioned a passive restriction. Are we now restrictive because 0:07:49.360 --> 0:07:52.800 the market's saying so? Are we now restrictive because the 0:07:52.840 --> 0:07:54.720 Fed's dawdling around? 0:07:55.640 --> 0:07:58.040 Well? Well, this is a real question about what's restricted here, 0:07:58.080 --> 0:07:58.480 because I. 0:07:58.400 --> 0:08:00.560 Mean, I think part of what you're seeing over the 0:08:00.600 --> 0:08:03.480 last month is a little bit of doubt creeping into 0:08:03.480 --> 0:08:05.240 the you know, to the Fed, that that they are 0:08:05.280 --> 0:08:06.720 actually as restrictive as they thought. 0:08:06.800 --> 0:08:09.360 I mean, how can you argue, you know, we've. 0:08:09.240 --> 0:08:11.720 Been above what most people would have ex anti considered 0:08:11.720 --> 0:08:13.800 a neutral rate. We've been above that for a year now, 0:08:13.800 --> 0:08:16.840 and we're still seeing data as strong. You know, it 0:08:16.840 --> 0:08:19.320 gets harder and harder to argue that you're well into 0:08:19.360 --> 0:08:22.600 restrictive if you know, the economic conditions just aren't necessarily 0:08:22.600 --> 0:08:23.240 suggesting that. 0:08:24.000 --> 0:08:27.720 So, Blake, are you in the camp that says May 0:08:28.000 --> 0:08:30.840 is a period where the FED should cut rates? And 0:08:30.920 --> 0:08:32.079 if so, do you think they will? 0:08:33.320 --> 0:08:36.600 No? We we've actually very for for a very long time. 0:08:36.640 --> 0:08:38.120 We've been in the June camp. 0:08:38.200 --> 0:08:40.480 So this goes back to this goes back to June 0:08:40.480 --> 0:08:42.679 and July last year, we have the same FED call. 0:08:42.679 --> 0:08:44.679 We've kept it all the way through. We've been very steady. 0:08:45.280 --> 0:08:48.400 We see a June first cut, we have four cuts 0:08:48.400 --> 0:08:51.679 after that, so it a cumulative five cuts for twenty 0:08:51.720 --> 0:08:52.240 twenty four. 0:08:52.880 --> 0:08:55.480 I'll tell you this data today NFP on Friday. 0:08:55.840 --> 0:08:58.440 It makes me feel more confident about the June part 0:08:58.440 --> 0:09:00.880 of that equation. I think this really brings in a 0:09:00.960 --> 0:09:02.600 question whether they're going to have to do anything in 0:09:02.600 --> 0:09:04.280 May or whether they are going to do anything in May. 0:09:05.000 --> 0:09:06.960 You know, those are two separate questions, what they will 0:09:06.960 --> 0:09:09.559 do and what they should do. You know, I think 0:09:09.679 --> 0:09:11.959 June certainly looks like the starting point where I'm starting 0:09:12.000 --> 0:09:13.600 to get a little bit worried about that call. 0:09:14.000 --> 0:09:15.560 Like I said, we've had it for a very long time. 0:09:15.600 --> 0:09:18.080 But you know, the five cuts is where I'm starting 0:09:18.120 --> 0:09:20.000 to get a little bit more concerned because I think, 0:09:20.280 --> 0:09:23.160 you know, the inflation data alone, in this kind of 0:09:23.240 --> 0:09:25.760 passive tightening we're talking about in real rates, I think 0:09:25.800 --> 0:09:28.880 that's enough on its own for the feed to start cutting, 0:09:29.240 --> 0:09:32.080 but without any kind of signs of weakness or slowing 0:09:32.280 --> 0:09:34.360 on the growth or the labor side of the mandate. 0:09:35.240 --> 0:09:36.280 You know, where's the urgency. 0:09:36.320 --> 0:09:38.320 I think, you know, now you start talking about a 0:09:38.320 --> 0:09:40.400 scenario where yeah, sure you start cutting in June, but 0:09:41.400 --> 0:09:42.719 you know, are they going to go five times or 0:09:42.720 --> 0:09:44.480 are they going to take rates all the way back 0:09:44.520 --> 0:09:46.160 to you know, we have them going to three point 0:09:46.120 --> 0:09:49.480 fifty in twenty twenty five. That's the piece of it 0:09:49.520 --> 0:09:51.240 that I think starts to really get called in a 0:09:51.360 --> 0:09:54.160 question here is how aggressively they go and where do 0:09:54.240 --> 0:09:55.079 they end up stopping. 0:09:55.480 --> 0:09:56.880 So like, there are a lot of folks out there, 0:09:56.880 --> 0:09:59.559 both on the academic front and in the markets a 0:09:59.640 --> 0:10:02.800 practice miitioners that say the FEDS already behind look at 0:10:02.840 --> 0:10:05.280 the data they should be cutting. Now, what do you 0:10:05.280 --> 0:10:05.920 say to those. 0:10:05.760 --> 0:10:09.360 Folks, what data are they? I mean, you know, we 0:10:09.440 --> 0:10:13.840 had a great NFP report. You know, we had a 0:10:13.840 --> 0:10:16.880 pretty solid CPI report. You know. 0:10:16.920 --> 0:10:20.679 I just think that you know, this idea that things 0:10:20.800 --> 0:10:22.800 that cracks are showing that we're, you know, we're. 0:10:22.640 --> 0:10:23.680 In problematic territory. 0:10:23.720 --> 0:10:25.800 I think a lot of times people tend to look 0:10:25.880 --> 0:10:28.920 at the delta, they look at the changes of how 0:10:29.160 --> 0:10:30.439 the day is changing. But when you look at the 0:10:30.480 --> 0:10:33.920 level of where we're actually at, I mean, across most metrics. 0:10:33.960 --> 0:10:36.920 We're still in a very healthy economic scenario. 0:10:37.120 --> 0:10:40.840 So I think going more slowly making sure, you know, 0:10:40.880 --> 0:10:42.920 the FED just really wants to make sure that inflation 0:10:43.000 --> 0:10:44.200 dragon is really slayed. 0:10:44.320 --> 0:10:49.480 So Blake, when expand on problematic territory, what in God's 0:10:49.559 --> 0:10:51.959 name does it? Was that in Fibosi? I don't remember 0:10:52.000 --> 0:10:56.199 that Blake expand on what problematic territory means? 0:10:56.760 --> 0:11:00.000 Well in what respects for the data? 0:11:00.360 --> 0:11:04.200 Or I'm asking? I got an inflation report, yuh? I 0:11:04.200 --> 0:11:06.040 mean it's been up up in a way. I know, 0:11:06.240 --> 0:11:09.560 this is what's called a mini correction. Futures down fifty seven. 0:11:09.600 --> 0:11:11.880 I get at the vics fourteen point before I forget 0:11:11.920 --> 0:11:16.000 about the stock market chit chat. Is this inflation report 0:11:16.080 --> 0:11:18.040 problematic for Jerome Powell? 0:11:19.559 --> 0:11:19.760 Oh? 0:11:19.800 --> 0:11:22.200 I I you know, I really don't think so. I mean, 0:11:22.240 --> 0:11:24.240 I think it certainly raises an eyebrow. I think the 0:11:24.280 --> 0:11:26.360 overall trend, you know, you guys were saying before you 0:11:26.480 --> 0:11:27.720 came over to me. I mean, I think the overall 0:11:27.720 --> 0:11:28.720 trend is still positive. 0:11:29.760 --> 0:11:31.040 You know, I don't. I don't think there's. 0:11:30.840 --> 0:11:33.920 Anything necessarily here that they're worried about a reacceleration. I think, 0:11:34.120 --> 0:11:36.680 you know, we've gotten some decent proof, you know, over 0:11:36.679 --> 0:11:38.720 the last six months a year that a lot of 0:11:38.720 --> 0:11:40.680 the inflationary pressure we were seeing, you know, whether it 0:11:40.720 --> 0:11:42.920 was supply side, whether it was demand side, that I 0:11:43.000 --> 0:11:45.640 care a little bit less about those specifics, But looking 0:11:45.640 --> 0:11:47.600 at as a hole, I think we can say that 0:11:47.679 --> 0:11:50.360 a lot of it was absolutely pandemic related. You know, 0:11:50.800 --> 0:11:53.240 like I said, that could be supply side, you know, 0:11:53.280 --> 0:11:55.720 with with supply chain shutting down, it could be demand side, 0:11:55.760 --> 0:11:57.920 with you know, changes in the way people are consuming 0:11:57.960 --> 0:11:58.440 service is. 0:11:58.440 --> 0:11:59.080 Good, et cetera. 0:11:59.200 --> 0:12:01.400 But either way, a lot of that seems to be 0:12:01.440 --> 0:12:04.040 pandemic related, seems to be an idiosyncratic and it has 0:12:04.080 --> 0:12:05.920 come off. So I think this kind of, you know, 0:12:05.960 --> 0:12:07.679 the idea that we would kick off some kind of 0:12:07.720 --> 0:12:10.120 waste price viral or that we were in some kind 0:12:10.120 --> 0:12:13.720 of new inflationary process, I think that window has mostly closed. 0:12:13.720 --> 0:12:16.960 I mean, certainly the FED doesn't want inflation taking back up, 0:12:16.960 --> 0:12:18.839 but I think you know, they're not looking at each 0:12:18.920 --> 0:12:22.600 individual prints and you know, overreacting too much. And I 0:12:22.600 --> 0:12:25.120 think the overall trend, the overall trend here is still 0:12:25.200 --> 0:12:26.679 positive for the BED. I mean, they're not going to 0:12:26.720 --> 0:12:29.320 look at a minor beat today and start you know, 0:12:29.400 --> 0:12:31.960 raising alarm bells. I mean, I think you know, overall, 0:12:31.960 --> 0:12:34.000 they're very happy with where we're where we've gone. 0:12:34.160 --> 0:12:36.280 So Blake, we've got to ten year treasury up ten 0:12:36.320 --> 0:12:38.760 basis points here four point two eight percent. Where do 0:12:38.800 --> 0:12:39.959 you think this is? Ten years is going to be 0:12:40.000 --> 0:12:40.480 a year end? 0:12:42.080 --> 0:12:45.160 So right now we have it a three eighty, you know, 0:12:45.240 --> 0:12:48.120 so we do have that moving lower. I think you know, 0:12:48.160 --> 0:12:50.040 again that was premised on this idea that they start 0:12:50.080 --> 0:12:52.959 cutting in June. They you know, cut it a i'd 0:12:53.000 --> 0:12:56.400 say a relatively you know, moderate pace going once per meeting. 0:12:57.960 --> 0:13:00.480 But you know that that is that is part where 0:13:00.480 --> 0:13:02.000 I feel a little bit less comfortable about. 0:13:02.040 --> 0:13:03.360 And now I'm sorry to wonder. 0:13:03.640 --> 0:13:05.480 You know, we have twos that uh you know, we 0:13:05.520 --> 0:13:08.120 have twos at three ninety five. So we've taken out 0:13:08.559 --> 0:13:10.800 of our forecast. Just last week we took out some 0:13:10.880 --> 0:13:13.200 of the kind of steepening that we had, that that 0:13:13.320 --> 0:13:15.440 bull steepening that you tend to get on the start 0:13:15.440 --> 0:13:18.559 of a cutting cycle, right you know, if the data 0:13:18.600 --> 0:13:20.880 is this strong and the FED goes on, you know, 0:13:21.080 --> 0:13:23.199 if the markets are thinking about the possibility of in 0:13:23.280 --> 0:13:25.600 every other meeting type of pace, or they're thinking about 0:13:25.920 --> 0:13:28.320 the FED cutting to a terminal rate of you know, 0:13:28.840 --> 0:13:29.760 three seventy five or. 0:13:29.720 --> 0:13:32.360 Four percent, so three fifty you know, those front end 0:13:32.440 --> 0:13:34.319 yields are are are not going to rally in the 0:13:34.360 --> 0:13:35.520 way that that we've been calling for. 0:13:35.600 --> 0:13:37.640 So we we kind of have taken out some of 0:13:37.640 --> 0:13:40.120 that curve lattening, and two's not rallying as much. 0:13:40.160 --> 0:13:41.120 So that's really where we're seeing. 0:13:41.120 --> 0:13:43.160 Someone got to leave it there, Blakequin, thank you so much. 0:13:47.480 --> 0:13:49.920 Dan I's promised me the market would never go down again. 0:13:50.280 --> 0:13:53.079 He was wrong, joining us down from webbush of course, 0:13:53.200 --> 0:13:55.839 ubiquitous with a bullsh call on technology. We're going to 0:13:55.880 --> 0:14:00.559 focus this entire next eight minutes six minutes with Dana 0:14:00.559 --> 0:14:07.480 Ives on Apple. Dan ives, why has Apple lagged the others. 0:14:07.440 --> 0:14:12.200 Because iPhone growth has lack right, I mean this is 0:14:12.240 --> 0:14:15.959 something we've seen in China. The upgrade cycles happen, I 0:14:16.000 --> 0:14:19.720 think been better than many a feared, but it's not 0:14:19.840 --> 0:14:24.120 been iPod and I think this is the start we've 0:14:24.240 --> 0:14:27.440 talked about of the renaissance of growth that's going to 0:14:27.520 --> 0:14:29.840 happen over the next twelve to eight months. Or we 0:14:29.920 --> 0:14:33.080 believe Apple significantly outperforms even the rest of tech. 0:14:33.480 --> 0:14:36.840 Is your reporting? Dan Eves that the new iPhone that 0:14:36.920 --> 0:14:39.640 Paul Sweeney asked to buy what for Paul for your family? 0:14:39.840 --> 0:14:40.040 Yeah? 0:14:40.400 --> 0:14:43.160 Is a new iPhone an up upgrade? Or is it 0:14:43.240 --> 0:14:46.160 just another iteration of the one I got in my hands? 0:14:47.400 --> 0:14:50.880 Look, I think in terms of iPhone fifteen, that's obviously 0:14:51.040 --> 0:14:54.400 just been an upgrade that's been strong from a technology 0:14:54.400 --> 0:14:58.440 around camera and speed. But the big one's iPhone sixteen. 0:14:58.480 --> 0:15:01.000 I mean we've talked about it. Yes, today our checks 0:15:01.040 --> 0:15:03.920 are shown. From a memory perspective, this is going to 0:15:04.000 --> 0:15:08.280 have AI technology built into the phone. I think, what 0:15:08.440 --> 0:15:10.800 is the start of the dance stuff? 0:15:11.160 --> 0:15:13.400 What in God's name did you just say? What is 0:15:13.520 --> 0:15:16.760 AI technology in Paul Sweeney's phone? 0:15:17.920 --> 0:15:21.040 So they're gonna have essentially their own lms, their own 0:15:21.120 --> 0:15:25.720 language models built into the actual iPhone, So that that's 0:15:25.760 --> 0:15:29.200 going to be for consumers to do all types of 0:15:29.280 --> 0:15:34.760 apps that they could actually launch, technology around animation what 0:15:34.920 --> 0:15:40.000 I from a fitness perspective, it's gonna ease you know, 0:15:40.240 --> 0:15:44.360 it's going to create a whole another ecosystem for Apple, 0:15:44.840 --> 0:15:47.560 which we believe starts with the AI app stores that 0:15:47.640 --> 0:15:50.360 they're going to talk about at WWDC in June. 0:15:50.640 --> 0:15:53.080 Is an example, Paul, you can type in on your 0:15:53.120 --> 0:15:56.680 iPhone sixteen. Should I spend thirty nine hundred dollars to 0:15:56.680 --> 0:15:58.160 see Louisville lose to do. 0:15:58.400 --> 0:16:02.280 Exactly and you'll get a screen pro by the vision Pro. Hey, Dan, 0:16:02.360 --> 0:16:04.800 we've got you know. Apple obviously a two point nine 0:16:04.840 --> 0:16:07.640 trillion dollar market cap stock. It's do about three percent 0:16:07.720 --> 0:16:09.760 year to date, and I would argue that I guess 0:16:09.800 --> 0:16:12.520 the investor concerns out there. If you could just underline one, 0:16:12.600 --> 0:16:15.240 it would be China. Give us your latest sense of 0:16:15.600 --> 0:16:18.840 China in terms of an end market ultimate demand for 0:16:18.880 --> 0:16:20.520 Apple products going forward. What's your view? 0:16:21.720 --> 0:16:24.600 Yeah, Look, I'm not saying it's roses and champagne, but 0:16:24.720 --> 0:16:27.800 from a lunar New year perspective, we believe it's up 0:16:28.200 --> 0:16:30.160 year of a year, and I think they're going to 0:16:30.240 --> 0:16:33.360 be able to actually return to growth in China despite 0:16:33.440 --> 0:16:37.160 the Huawei, despite geopolitical because you have two hundred and 0:16:37.160 --> 0:16:40.360 ten million iPhones in China and there've been share gained. 0:16:40.360 --> 0:16:43.360 So so my view here is right now, the New 0:16:43.440 --> 0:16:45.560 York City cab driver, it could be bearish in Apple, 0:16:45.680 --> 0:16:49.480 it's the relative to broader tech as we expect tech 0:16:49.560 --> 0:16:53.040 continue to move higher. But when we look at Apple 0:16:53.240 --> 0:16:57.360 two point two billion, that's the active devices. Now AI 0:16:57.520 --> 0:17:00.280 is coming to the party in Cooper Tino, and we 0:17:00.400 --> 0:17:02.920 think a year from now we're to four trillion dollar market. 0:17:03.560 --> 0:17:05.959 Hey, Dan the I'm just looking at the FA functional 0:17:05.960 --> 0:17:08.520 in the Bloomberg terminal, which has consensus revenue estimates for 0:17:08.560 --> 0:17:10.159 Apple over the next seven years. Kind of let's just 0:17:10.160 --> 0:17:13.440 call it mid single digits. Yet I'm paying a twenty 0:17:13.480 --> 0:17:16.840 eight multiple for those for that type of revenue growth. 0:17:18.160 --> 0:17:19.800 How do you kind of square that? Is that something 0:17:19.880 --> 0:17:23.679 you have to convince your investor clients to kind of 0:17:23.680 --> 0:17:24.040 deal with. 0:17:25.119 --> 0:17:28.520 Yeah, I mean it's very similar to how what we 0:17:28.600 --> 0:17:33.199 do with Microsoft or Nvidia. For Amazon, it's really showing 0:17:33.240 --> 0:17:37.240 that the services piece that high growth the multiple for 0:17:37.280 --> 0:17:39.200 that Key and I talked about this a lot. I 0:17:39.240 --> 0:17:41.760 mean one point five to one point six trillion, and 0:17:41.800 --> 0:17:46.560 that's that's the modization. Why Cook and company, whether there's 0:17:46.600 --> 0:17:51.200 a mount rushmore with Tim Cook and the Della but Microsoft, if. 0:17:51.040 --> 0:17:53.600 These guys are you know, fanboys, I mean, if if 0:17:54.160 --> 0:17:57.040 the CFO and the CEO of fanboys like Dan Ives 0:17:57.359 --> 0:17:59.760 and they're looking at Apple behind over X number of 0:17:59.760 --> 0:18:03.119 months or whatever. Do you see them doing strategic decisions 0:18:03.160 --> 0:18:06.560 like a new bond offering and enhanced share buyback. Sweeney 0:18:06.560 --> 0:18:09.240 wants a dividend increase. What are they going to do 0:18:09.280 --> 0:18:12.359 with the use of the mother of all cash they've got, 0:18:12.560 --> 0:18:14.360 Given that Apple's lagged. 0:18:15.320 --> 0:18:17.040 Well, I think it's getting to a point they're going 0:18:17.119 --> 0:18:21.119 to have to do potentially some accelerated buy back, or 0:18:21.800 --> 0:18:24.400 if they don't do M and A, which has never 0:18:24.480 --> 0:18:27.439 been the sort of the DNA obviously Kubertina, they're going 0:18:27.520 --> 0:18:32.760 to have to do some capital allocation changes and look, 0:18:32.800 --> 0:18:34.400 and that's why it goes back to when I look 0:18:34.400 --> 0:18:37.000 at Apple from some of the parts, there's so much 0:18:37.040 --> 0:18:40.680 more that could go right than wrong, especially what's factored 0:18:40.720 --> 0:18:44.280 into the stock. And I think AI starts with the 0:18:44.320 --> 0:18:48.280 godfather of Ai Jensen Nvidian Microsoft, but it doesn't end there. 0:18:48.760 --> 0:18:50.879 The consumer piece is going to be twenty four and 0:18:51.000 --> 0:18:53.280 twenty five, and Apple's in your front and center. 0:18:53.880 --> 0:18:57.320 Dan, you mentioned the Developer conference in June for Apple, 0:18:57.359 --> 0:18:59.800 and oftentimes in the past that's been a big, big 0:19:00.000 --> 0:19:03.480 analyst for the company for the stock. Give us a 0:19:03.520 --> 0:19:06.680