WEBVTT - Markets, Apple, Washington, And ETFs (Podcast) 0:00:00.800 --> 0:00:04.040 Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, alongside 0:00:04.040 --> 0:00:06.920 my co host Matt Miller. Every business day, we bring 0:00:06.960 --> 0:00:11.520 you interviews from CEOs, market pros, and Bloomberg experts, along 0:00:11.520 --> 0:00:15.600 with essential market moving news. Find the Bloomberg Markets Podcast 0:00:15.600 --> 0:00:18.439 on Apple Podcasts or wherever you listen to podcasts, and 0:00:18.480 --> 0:00:21.960 at Bloomberg dot com slash podcast. Let's check in with 0:00:22.000 --> 0:00:24.440 a professional who does this stock stuff for a living, 0:00:24.440 --> 0:00:27.360 Phil Orlando, chief equity market strategist and a head of 0:00:27.360 --> 0:00:30.640 client portfolio management and federator at Herme's Phil, I'm looking 0:00:30.640 --> 0:00:33.320 at the markets here, you know, bouncing off the bottom here. 0:00:33.640 --> 0:00:35.920 I guess we're just throwing around the question here in 0:00:35.960 --> 0:00:39.120 the studio. Did we see the bottom of this market? 0:00:39.200 --> 0:00:41.280 Is this real? This? Or is this just kind of 0:00:41.320 --> 0:00:43.239 a little bit of a headcake in the context of 0:00:43.240 --> 0:00:47.520 a greater bear market head cake? Or head fake? Head fake? 0:00:47.640 --> 0:00:51.520 Is that was the Monday version of head fake? Yes, Look, 0:00:51.600 --> 0:00:54.320 we've had a really good six weeks. I mean the 0:00:54.320 --> 0:00:57.960 month of July the SMP was up about ten. I 0:00:58.000 --> 0:00:59.840 think that was the best month we've seen in a 0:01:00.040 --> 0:01:03.840 up the years since the middle of June. Market went 0:01:04.040 --> 0:01:08.640 from an oversold readings rallied about I think we're a 0:01:08.680 --> 0:01:12.520 little overbought here. Um, but you know, I was listening 0:01:12.560 --> 0:01:15.480 to your conversation earlier. This is kind of a bad 0:01:15.520 --> 0:01:19.000 news is good news kind of a scenario that you know, 0:01:19.040 --> 0:01:21.959 the inflation is sitting at a forty one year high. 0:01:22.160 --> 0:01:26.680 The GDP report last week not particularly good. You know, 0:01:26.880 --> 0:01:29.800 everyone's on recession watch right now. And and the way 0:01:29.840 --> 0:01:33.959 the market has perceived all of this is that the 0:01:34.080 --> 0:01:37.840 data is so bad that that must mean that there's 0:01:37.840 --> 0:01:41.119 going to be an immaculate Fed pivot. You know, by 0:01:41.120 --> 0:01:44.520 the middle of next year that the Fed will we'll 0:01:44.560 --> 0:01:47.720 be able to stop hiking interest rates this year, and 0:01:47.720 --> 0:01:50.200 we're gonna start to see a deceleration of that pace, 0:01:50.640 --> 0:01:52.040 and then the Fed is going to turn around and 0:01:52.040 --> 0:01:56.400 start actually cutting interest rates by the middle of next year. Um. 0:01:57.200 --> 0:02:00.600 We think that that is a little too optimistic. And 0:02:00.600 --> 0:02:05.920 and UH inflation, in our view, is stubborn. It's it's 0:02:06.000 --> 0:02:10.280 deep seated. It's UH sitting at a forty one year high. 0:02:10.360 --> 0:02:12.280 We're not going to be able to wave a magic 0:02:12.400 --> 0:02:16.120 wand and in a couple of months take a nominal 0:02:16.200 --> 0:02:19.000 CPI from nine point one percent back to two or 0:02:19.040 --> 0:02:22.160 three percent. We're going to measure that decline we think 0:02:22.280 --> 0:02:24.280 over the course of a couple of years, not a 0:02:24.280 --> 0:02:28.520 couple of months. So for for all those reasons, Uh, 0:02:28.560 --> 0:02:33.240 this very impressive rally over the next six over the 0:02:33.280 --> 0:02:36.480 last six weeks could could very well result in some 0:02:36.560 --> 0:02:40.239 proper taking over you know, the next couple of months, 0:02:40.240 --> 0:02:44.800 as you know we get some some some more difficult data. Yeah, 0:02:44.800 --> 0:02:47.320 I think that makes a lot of sense. Feel Um. 0:02:47.480 --> 0:02:51.960 One thing I noticed or I read from Cameron Christ 0:02:52.000 --> 0:02:54.760 We've got to get this guy in here, he screamed. 0:02:54.960 --> 0:02:58.400 For Uh, he probably works from home. He screened for 0:02:58.520 --> 0:03:01.560 every drop monthly drop of more than seven and a 0:03:01.600 --> 0:03:05.720 half percent that was followed by a month that you 0:03:05.720 --> 0:03:08.120 know more than made up for that, which is what 0:03:08.160 --> 0:03:11.920 we just saw. And the results are pretty shocking. If 0:03:11.960 --> 0:03:15.600 you look post war, it's only happened um a few 0:03:15.639 --> 0:03:21.680 times in October of nine, in October of two thousand two, 0:03:22.480 --> 0:03:26.839 in March of two thousand nine, uh, January of two 0:03:26.840 --> 0:03:31.239 thousand nineteen, and April of two thousand twenty. So it's 0:03:31.240 --> 0:03:34.240 only been these big bottoms that we know. I mean, 0:03:34.280 --> 0:03:37.440 March of two thousand nine is like uh, imprinted on 0:03:37.520 --> 0:03:41.680 my brain as a massive bottom. Um, it looks good 0:03:41.800 --> 0:03:44.280 at least, but I take your point that people are 0:03:44.320 --> 0:03:47.320 going to be wanting to take profits and those who 0:03:47.920 --> 0:03:50.840 stayed with it and are just to have too much oddit. 0:03:50.920 --> 0:03:53.800 I want to get out, But maybe we don't have 0:03:53.880 --> 0:03:56.440 to fall another twenty is what I'm thinking, because that's 0:03:56.520 --> 0:03:59.560 kind of what was the bad news consensus right before 0:03:59.560 --> 0:04:02.200 this month, is that we went halfway. We have another 0:04:02.240 --> 0:04:05.520 halfway to go. Well to some degree that's going to 0:04:05.560 --> 0:04:09.400 be a function of economic growth and corporate earnings growth. Um. 0:04:09.720 --> 0:04:13.920 If we were having this conversation a week ago, Uh, 0:04:14.040 --> 0:04:17.239 the earnings for the S and P five we're probably 0:04:17.320 --> 0:04:21.000 down about five or six percent into the quarter now, 0:04:21.040 --> 0:04:23.839 but a lot of the energy companies have started to report, 0:04:23.960 --> 0:04:27.039 God bless them. So we're about two thirds of the 0:04:27.080 --> 0:04:30.320 way through the earning season and earnings have gone from 0:04:30.320 --> 0:04:33.520 being down six or seven percent, they're now up seven percent, 0:04:34.200 --> 0:04:37.240 largely on the strength of how good the earnings reports 0:04:37.240 --> 0:04:41.640 have been. Discretionary financials technologies, those numbers are all negative, 0:04:42.240 --> 0:04:47.920 and to a significant degree, companies are providing cautious guidance. 0:04:48.000 --> 0:04:51.400 Strategists and analysts may start to cut their numbers uh 0:04:51.440 --> 0:04:53.719 and and multiples have just moved up a couple of 0:04:53.760 --> 0:04:57.440 turns based upon this third percent rally we've seen over 0:04:57.480 --> 0:04:59.360 the last couple of months. So I think that as 0:04:59.400 --> 0:05:02.359 we get into to the August September, you know, early 0:05:02.400 --> 0:05:06.039 October period, there may be a little bit of rationalization 0:05:06.200 --> 0:05:11.400 in terms of valuations. Lower earnings estimates, lower GDP growth estimates, 0:05:11.560 --> 0:05:16.840 UH more UM comfortable pe multiples i E. Lower and 0:05:16.839 --> 0:05:19.400 and I just think that that given this big rally 0:05:19.440 --> 0:05:22.560 we've seen, uh, it would be prudent to expect a 0:05:22.600 --> 0:05:24.760 little bit of a pullback here. All right, good stuff 0:05:24.800 --> 0:05:28.560 as always. Phil Orlando, chief equity market strategist and head 0:05:28.560 --> 0:05:32.159 of client portfolio management at Federator Hermy's that got over 0:05:32.200 --> 0:05:36.520 six billion and assets under management. That's some sway right there. 0:05:40.240 --> 0:05:43.000 Let's bring in our next guest, Robert Stimpson, c I 0:05:43.160 --> 0:05:48.479 O and portfolio manager Oak Associates Funds. Robert, some folks 0:05:48.520 --> 0:05:50.440 have been telling me here is I look at this 0:05:50.760 --> 0:05:53.839 bounce off the bottom, that we can buy it here, 0:05:53.880 --> 0:05:57.200 but you've gotta be selective. What is it? What does 0:05:57.200 --> 0:06:00.200 this selective mean to you in a market move we're 0:06:00.200 --> 0:06:02.039 experiencing right now? Is it is this kind of a 0:06:02.080 --> 0:06:05.560 bear cat bounce or is this something I can really wait? 0:06:05.600 --> 0:06:08.360 A bear market rally or dead cat dead cat bounce? Yeah, 0:06:08.360 --> 0:06:11.160 I use a barcat market bearcat bounce. I like that. 0:06:12.000 --> 0:06:15.080 How do you think about that stock selection? Robert, Well, 0:06:15.120 --> 0:06:16.880 good morning guys. You no, I agree, you have to 0:06:16.920 --> 0:06:20.320 be pretty selective in this market, simply because you know 0:06:20.400 --> 0:06:24.920 the forward new slow UH is still very questionable. Um. 0:06:24.960 --> 0:06:27.400 We're about to head into some earnings reports and I 0:06:27.440 --> 0:06:29.560 think they're going to be mixed, and that's going to 0:06:29.680 --> 0:06:32.599 affect sentiment. And we know the overall trends in the 0:06:32.640 --> 0:06:37.080 market are are pretty strong. The status raising rates inflation 0:06:37.160 --> 0:06:42.560 is still persistent, and that affects different areas differently. So, UM, 0:06:42.640 --> 0:06:46.560 you know a lot of consumer focused businesses are going 0:06:46.600 --> 0:06:50.000 to struggle because the consumer is pinched pinch by inflation 0:06:50.080 --> 0:06:54.400 and pinched by higher interest rates. Whereas industries that have 0:06:54.760 --> 0:07:00.240 more long tail UH spending cycles, whether it's UH bule 0:07:00.240 --> 0:07:03.720 expenditure with intech UH, you know, those are probably gonna 0:07:04.839 --> 0:07:08.240 fair better in this sort of environment. Is this you know? 0:07:08.360 --> 0:07:12.160 For years, um, people have talked about active versus passive 0:07:12.280 --> 0:07:15.560 and the kind of Jack Bogel passivity of Vanguard one out. 0:07:16.120 --> 0:07:20.040 But is that over now? I mean, is buying an 0:07:20.040 --> 0:07:22.480 index tracking fund just not going to do as well 0:07:22.520 --> 0:07:26.640 as getting an active manager? You know, that's uh, you 0:07:26.680 --> 0:07:29.520 know the million dollar question. Um. You know, I do 0:07:29.600 --> 0:07:31.880 think there is value and active management, and I do 0:07:31.960 --> 0:07:34.560 think a lot of the industry does not realize the 0:07:34.720 --> 0:07:37.840 risk that come with index funds. I mean, the top 0:07:37.920 --> 0:07:42.400 five and ten positions and an index fund um tend 0:07:42.440 --> 0:07:44.160 to be the names that are up a lot. They 0:07:44.200 --> 0:07:47.360 tend to be um, you know, big movers of the 0:07:47.400 --> 0:07:50.280 market in the index. UM. So there's a risk profile 0:07:50.320 --> 0:07:52.960 there that a lot of people, uh may not fully 0:07:53.040 --> 0:07:56.560 understand or they're betting on Tesla essentially in a sense. 0:07:56.760 --> 0:07:59.680 I mean, I can't believe it's I think the fourth 0:08:00.000 --> 0:08:04.480 biggest weight or the fifth biggest weight in the SMP. Yeah. 0:08:04.680 --> 0:08:06.880 Robert talked us about healthcare down the pass that scen area. 0:08:06.960 --> 0:08:10.280 You guys have been looking at what's your healthcare sector 0:08:10.320 --> 0:08:13.560 call right now? So coming out of the pandemic, we 0:08:13.600 --> 0:08:16.880 feel like a lot of industries out there rebounded strongly 0:08:17.840 --> 0:08:20.800 as the world returned to normal, but healthcare was one 0:08:20.840 --> 0:08:22.960 that lagged, and it, you know, kind of makes sense 0:08:22.960 --> 0:08:25.160 people were reluctant to head back to the doctor to 0:08:25.200 --> 0:08:28.280 get those knees, replace those hips, or seek the care. 0:08:28.720 --> 0:08:30.760 They were more apt to go on vacation or on 0:08:30.800 --> 0:08:34.480 a cruise or back to concerts. So we think the 0:08:34.520 --> 0:08:38.040 return to normal for a lot of traditional consumer healthcare 0:08:38.080 --> 0:08:40.520 is still in front of the index, and when you 0:08:40.559 --> 0:08:44.199 look at its relative valuation compared to other industries, it's 0:08:44.200 --> 0:08:48.760 still very attractive. So it's more defensive. The valuation is attractive, 0:08:48.760 --> 0:08:51.080 it has business in front of it, and it's also 0:08:51.160 --> 0:08:54.720 an industry that is used to operating, uh in a 0:08:54.800 --> 0:08:57.520 high inflation environment. I mean, healthcare costs been going up, 0:08:57.840 --> 0:09:00.800 you know, mid single digits for years. UH, so this 0:09:00.880 --> 0:09:04.240 is business as usual with a tailwind. And of course 0:09:04.280 --> 0:09:07.800 the long term demographic So um, it's an area we like, 0:09:09.400 --> 0:09:12.120 uh and there's nothing that can turn that around. I 0:09:12.120 --> 0:09:15.560 mean you'd think that, especially the Democrats, would like to 0:09:15.760 --> 0:09:19.760 slow it down, but they can't and maybe um, their 0:09:19.840 --> 0:09:23.400 lobbyists are the same as Republican lobbyists, so they won't. Um. 0:09:23.440 --> 0:09:26.400 You're not concerned about anything in the future that stops that, 0:09:26.400 --> 0:09:28.440 because it does seem like such an easy such as 0:09:28.440 --> 0:09:33.880 slam dunk. You know, the risk of regulatory oversight and 0:09:33.920 --> 0:09:37.600 pricing pressures. Uh. You know, I'm not gonna belittle it, 0:09:37.640 --> 0:09:41.400 but it has been around for twenty plus years. Uh, 0:09:41.440 --> 0:09:43.320 and at the end of the day, it has very 0:09:43.520 --> 0:09:49.560 little UM impact beyond sentiment over the group. So UM, 0:09:49.920 --> 0:09:53.400 it's a risk, absolutely, but it's not a risk you 0:09:53.440 --> 0:09:56.800 should embrace and avoid the sector entirely because of it, 0:09:57.040 --> 0:09:59.480 because that would have been a losing proposition over the 0:09:59.520 --> 0:10:02.600 last twenty years. Certainly though it's popular trade, right. I mean, 0:10:03.080 --> 0:10:06.880 we all see and feel the rising costs of healthcare 0:10:06.920 --> 0:10:09.560 and then make that decision for an investment. Where do 0:10:09.640 --> 0:10:13.880 you see value what's unloved right now that that you think, um, 0:10:14.120 --> 0:10:18.000 people have overlooked well. I do think the two sectors 0:10:18.000 --> 0:10:20.800 within healthcare that are somewhat ever loved now, the managed 0:10:20.840 --> 0:10:23.880 care groups have been performing well, but I think the 0:10:24.400 --> 0:10:29.000 pricing trends are underappreciated there. With higher healthcare costs and 0:10:29.040 --> 0:10:31.680 the cost of insurance. I mean, these prices kind of 0:10:31.720 --> 0:10:35.480 get booked into the managed care groups, UM, and it 0:10:35.520 --> 0:10:38.760 tends to be very profitable by locking in at higher 0:10:38.800 --> 0:10:41.320 prices for them. So we think that's a powerful factor 0:10:41.360 --> 0:10:44.160 for that group and the other issue is the drug 0:10:44.200 --> 0:10:48.440 distributors UM. They have been probably the main target of 0:10:48.440 --> 0:10:54.319 of pricing pressure regulatory concerns from Washington. But the again, 0:10:54.360 --> 0:10:56.960 those concerns are often overblown when it comes down to 0:10:56.960 --> 0:11:00.760 actually implementing legislation to change things. And the group was 0:11:00.800 --> 0:11:03.280 also suppressed for a long time due to concerns over 0:11:03.320 --> 0:11:07.160 the opioid legislation. And now that most of those concerns 0:11:07.160 --> 0:11:09.640 have either been settled or on route to being settled, 0:11:09.960 --> 0:11:13.880 that is a huge overhang from the group. UM that 0:11:14.000 --> 0:11:16.600 you know, relieves a lot of the risks. So as 0:11:16.640 --> 0:11:18.960 a result, we think those groups are attractive as well. 0:11:19.480 --> 0:11:21.480 All right, Robert, thank you so much for taking the 0:11:21.480 --> 0:11:23.680 time to join us and share your thoughts here on 0:11:23.840 --> 0:11:27.320 these markets. Robert Stimpson, he's the c I O and 0:11:27.400 --> 0:11:34.080 portfolio manager at Oak Associates Funds. All right, I'm looking 0:11:34.080 --> 0:11:37.800 at Apple's balance sheet here D eighty billion in cash, 0:11:38.480 --> 0:11:40.600 total debts, so that's sixty net cash. I'm looking at 0:11:40.600 --> 0:11:42.720 the f A function on the Bloomberg terminal. I gotta 0:11:42.760 --> 0:11:44.800 say it's one of my favorite functions. It's so basic, 0:11:44.960 --> 0:11:47.760 but it's got everything you need, I mean everything. Whoever 0:11:48.080 --> 0:11:51.840 thought that function up did did did good? Uh so, 0:11:51.840 --> 0:11:53.480 all right, So sixty billion in net cash on the 0:11:53.520 --> 0:11:55.840 balance sheet, a hundred ten billion of projected free cash 0:11:55.840 --> 0:11:57.839 flow in each of the next couple of years. Why 0:11:57.880 --> 0:12:00.920 are these Why is this company going to the bond market? Well, 0:12:00.920 --> 0:12:03.840 on a rock runner, he covers all this stuff, Senior 0:12:03.840 --> 0:12:07.439 Soccer and I T services animals from Bloomberg Intelligence on 0:12:07.600 --> 0:12:09.720 a rug. Why are they going to the bond market? 0:12:09.760 --> 0:12:14.400 Why does Apple borrow money? Just I mean that the 0:12:14.520 --> 0:12:17.480 cost of money is so cheap it does make sense 0:12:17.480 --> 0:12:19.760 to bottle it and keep it. Because, as you said, 0:12:19.800 --> 0:12:22.880 the net cash is about sixty billion, and they spend 0:12:22.880 --> 0:12:26.080 about eighty five to nine billion in buying back stock, 0:12:26.480 --> 0:12:28.760 so they do have to botrow that money to buy 0:12:28.800 --> 0:12:32.360 back that that ships that you mentioned just not that's crazy. 0:12:32.400 --> 0:12:35.840 They borrow money to buy back shares. So and the 0:12:35.880 --> 0:12:39.280 bond analysts and the bond investors don't care. Usually that 0:12:39.440 --> 0:12:42.160 is a huge no. No. Can you lend us money 0:12:42.240 --> 0:12:45.880 so we can pay our stockholders? Yeah? Yeah, But but 0:12:45.960 --> 0:12:48.480 they're going to generator a hundred billion in free cash, 0:12:48.640 --> 0:12:50.679 So it's not a big deal. It's just a matter 0:12:50.720 --> 0:12:54.200 of what's most optimized for that capital structure. So if 0:12:54.240 --> 0:12:56.679 you know, if they can bottle let's say a few 0:12:56.840 --> 0:12:59.360 hundred let's say even a hundred bases point on hundred 0:12:59.360 --> 0:13:02.680 a fifty basis points about tragedies, that's really cheap capital. 0:13:02.760 --> 0:13:04.400 That's just you know, you're not gonna be able to 0:13:04.440 --> 0:13:07.199 buy it let's say a few years from now, Um 0:13:07.240 --> 0:13:10.680 that much cash at that that low prices. Alright, So 0:13:10.760 --> 0:13:13.760 given that free cash low profile, given that balance sheet profile, 0:13:14.040 --> 0:13:17.560 I then go to another great Bloomberg function that is 0:13:17.600 --> 0:13:20.880 the most used function d e s to get a 0:13:20.960 --> 0:13:23.520 sense of what their dividend yield is. It's less than 0:13:23.600 --> 0:13:27.360 one percent. Why don't smart equity analysts like you on 0:13:27.480 --> 0:13:30.080 a rock get in the ear the CFO and say 0:13:30.280 --> 0:13:32.800 raise that to a respectable to two and a half 0:13:33.000 --> 0:13:38.320 three percent. That would be really good to attract retail shareholders. So, Paul, 0:13:38.320 --> 0:13:41.000 I've been writing that I think they should increase their 0:13:41.040 --> 0:13:44.000 buy backs rather than the dividends, because you know, in 0:13:44.360 --> 0:13:47.520 FY twenty, which their fiscal twenty, they reduced share counts 0:13:47.520 --> 0:13:51.000 by about six percent five point seven and they brought 0:13:51.080 --> 0:13:54.880 back seventy two billion entree cash flow and stop in 0:13:55.000 --> 0:13:58.200 f one, they reduced the share gun by three point 0:13:58.280 --> 0:14:01.760 eight percent on and but used about eighty six billion 0:14:02.160 --> 0:14:05.760 this year twenty two. They're gonna reduce the share account 0:14:05.840 --> 0:14:11.920 by somewhere around three so that inherent EPs growth is 0:14:12.040 --> 0:14:14.319 just coming down a little. I would love for them 0:14:14.360 --> 0:14:17.080 to buy back more shares rather than increase the divident. 0:14:17.240 --> 0:14:20.680 But just as my personal choice, I mean, isn't one 0:14:20.760 --> 0:14:25.560 better for dividends is probably better for the shareholder, whereas 0:14:25.640 --> 0:14:29.360 buy backs is better for the corporation because once you 0:14:29.440 --> 0:14:33.240 start a dividend, you can't reduce it or cut it 0:14:33.280 --> 0:14:36.040 off without taking a lot of heat in markets, right, 0:14:36.080 --> 0:14:38.480 whereas a buy back plan there's a beginning in an 0:14:38.560 --> 0:14:41.760 end exactly. So no, I mean the buyback you know 0:14:41.800 --> 0:14:44.520 once also it is it is it's a cultural thing. 0:14:44.760 --> 0:14:47.520 If you have a company like Apple, where the free task, 0:14:47.600 --> 0:14:50.720 though is predictable, you can't say that the buyback is 0:14:50.800 --> 0:14:54.200 going to be predictable as well. The thing is again, 0:14:54.320 --> 0:14:56.280 you know, there there's a lot of discussions about the 0:14:56.360 --> 0:14:59.280 value of buybacks versus dimenon in my view, and it 0:14:59.320 --> 0:15:01.920 has changed a of the years. If the if the 0:15:01.960 --> 0:15:07.080 intrinsic value of the company is still below the current 0:15:07.080 --> 0:15:10.800 share price, they should be using that cash to buy 0:15:10.840 --> 0:15:14.120 back most here is because hendically, as a shareholder, my 0:15:14.840 --> 0:15:17.960 you know, piece of the pie becomes growth grows every 0:15:18.040 --> 0:15:22.120 year by that four or five percent without even putting 0:15:22.120 --> 0:15:24.720 a new dime in. So I think from that point, 0:15:24.880 --> 0:15:28.000 if it's a value company, and Bilkshire just started doing 0:15:28.040 --> 0:15:30.920 this after many years of not buying back any shares, 0:15:31.200 --> 0:15:32.640 if you can't, if you don't know what to do 0:15:32.680 --> 0:15:35.720 with that cash, you should be buying back heres, assuming 0:15:35.800 --> 0:15:38.800 they are trading flow the intrinsic value of the company. 0:15:38.880 --> 0:15:41.600 By the way, um does it keep growing at that 0:15:41.720 --> 0:15:44.360 level on a rack because you know, I bought an 0:15:44.880 --> 0:15:48.760 I bought a desktop Apple computer back and I think 0:15:48.800 --> 0:15:52.960 two thousand twelve, and I still don't need a new 0:15:53.000 --> 0:15:55.480 one ten years later. It still does way more than 0:15:55.480 --> 0:15:59.359 I could ever do with it. Um My my iPhone 0:16:00.240 --> 0:16:03.040 eleven or twelve, even though it's got a little break 0:16:03.040 --> 0:16:05.160 in the corner of the screen, I can't imagine what 0:16:05.200 --> 0:16:09.320 an upgrade would really get me. Um And my Apple Watch. 0:16:09.640 --> 0:16:13.120 Also it does everything I needed to, Like, I don't 0:16:13.120 --> 0:16:14.920 need a new one? What what what are they gonna 0:16:15.080 --> 0:16:18.080 come out with it? I have to buy? No, it's 0:16:18.080 --> 0:16:19.720 just doesn't have to be you know, it's going to 0:16:19.800 --> 0:16:22.320 be the replacement cycle for your iPhone as the single 0:16:22.320 --> 0:16:26.480 biggest driver. Because what happens is the average lifetime of 0:16:26.600 --> 0:16:30.200 they're about eight million units of iPhones out there, the 0:16:30.240 --> 0:16:32.800 average life let's say, is somewhere between tea and a 0:16:32.840 --> 0:16:34.960 half and four years. You may not want to upgrade 0:16:35.040 --> 0:16:36.960 right now, but within the next four years you will. 0:16:37.200 --> 0:16:39.800 It's just a matter of in slow down. So every 0:16:39.880 --> 0:16:43.440 year they're selling two million iPhones, even without finding a 0:16:43.440 --> 0:16:46.040 new buyer. This is just a replacement cycle. And then 0:16:46.080 --> 0:16:48.160 what happens is and we saw this this time in 0:16:48.200 --> 0:16:51.520 the quarter. They saw really good growth in emerging market 0:16:52.000 --> 0:16:56.080 countries like Brazil and India and China and Indonesia where 0:16:56.320 --> 0:16:58.760 the middle class as it starts to become a little 0:16:58.760 --> 0:17:01.240 bit richer, Apple the brand they're going to go through. 0:17:01.280 --> 0:17:04.880 They get rid of the Android phone load and Android 0:17:04.920 --> 0:17:07.680 phone and they go for an iPhone. That's the growth market. 0:17:07.720 --> 0:17:09.560 It's not going to come from you, Mark Miller. It 0:17:09.680 --> 0:17:11.920 is you are just a replacement for every three to 0:17:12.000 --> 0:17:14.120 four years. But it is going to come from those 0:17:14.119 --> 0:17:17.360 emerging markets. That is not a growth market. That wasn't 0:17:17.480 --> 0:17:21.400 very nice to say, fair fair enough, by the way, 0:17:21.440 --> 0:17:25.119 can you settle something for our listeners? Uh, once and 0:17:25.119 --> 0:17:29.600 for all? Does Apple have a secret self destruct mechanism 0:17:29.680 --> 0:17:32.280 built into the phone? Like it at the time when 0:17:32.320 --> 0:17:36.639 you're ready to renew, does your battery just automatically die? No? 0:17:36.840 --> 0:17:39.439 I don't think so. About what happens is you really 0:17:39.520 --> 0:17:41.639 need to take those you know you you want to 0:17:41.640 --> 0:17:44.440 take those high end videos. You want to be able 0:17:44.480 --> 0:17:47.280 to run the games at a much faster pace. So 0:17:47.320 --> 0:17:50.400 over time, when these new applications are built with new 0:17:50.520 --> 0:17:53.399 videos come out, when and you know Netflix videos at 0:17:53.400 --> 0:17:55.920 a very high pace, your system may not be able 0:17:55.920 --> 0:17:58.040 to handle it because the equipment is four or five 0:17:58.080 --> 0:18:00.800 six years old. Then you will replace should at that time? 0:18:01.200 --> 0:18:03.000 All right, Anna rock Rana, thanks so much for joining 0:18:03.080 --> 0:18:04.600 us on a rock ran a senior software and I 0:18:04.680 --> 0:18:09.400 T Services analyst, phoning it in from Bloomberg Intelligence. I'd 0:18:09.400 --> 0:18:14.080 like to point it out. All right, let's switch gears, 0:18:14.119 --> 0:18:16.560 go a little political. Let's go Watchington d C Emily Wilkins, 0:18:16.640 --> 0:18:19.960 Congressional reporter for Bloomberg Government. So, Emily, the news coming 0:18:19.960 --> 0:18:24.760 out today that Speaker Nancy Pelosi will in fact visit Taiwan. 0:18:24.840 --> 0:18:28.399 What's the feeling within the nation's capital about that news. 0:18:29.040 --> 0:18:31.320 So we've known about this trip for a while. Of course, 0:18:31.440 --> 0:18:35.240 Speaker Pelosi's office wouldn't confirm it for security and safety reasons, 0:18:35.280 --> 0:18:37.320 but Bloomberg has been reporting on this for a while 0:18:37.720 --> 0:18:40.119 and we know that even though the Department of Defense 0:18:40.160 --> 0:18:42.679 and the Pentagon have raised some concerns about it strictly 0:18:42.720 --> 0:18:45.359 from a security standpoint, there is really a lot of 0:18:45.400 --> 0:18:48.280 support for the Speaker to be making this trip at 0:18:48.320 --> 0:18:51.719 this time. Um, you heard both from Democrats as well 0:18:51.720 --> 0:18:55.320 as Republicans, and thinking about Senate Minority Leader Mitch McConnell 0:18:55.640 --> 0:18:57.800 saying that if Pelosi was too back out of this 0:18:57.880 --> 0:19:00.399 trip now that she'd be handing a gift to China, 0:19:00.720 --> 0:19:03.520 and that there are supportive of her going. It's certainly 0:19:03.560 --> 0:19:05.800 a significant trip. This is, you know, the number three 0:19:05.880 --> 0:19:09.240 top leader in the entire United States making an official 0:19:09.359 --> 0:19:12.880 visit from Taiwan, the first since how Speaker knew Gingrich 0:19:12.960 --> 0:19:17.000 traveled to the island back in So another speaker has 0:19:17.000 --> 0:19:19.600 done this and I feel like, um, Speaker is kind 0:19:19.600 --> 0:19:21.560 of the highest level we could do this without starting 0:19:22.240 --> 0:19:27.879 actual war. But are people still gonna possibly die because 0:19:27.880 --> 0:19:30.920 of this trip? I mean, is she risking real military action. 0:19:32.040 --> 0:19:34.840 I mean, certainly the military is always cognizant. Right when 0:19:34.840 --> 0:19:37.680 a congressional leader or so someone you know, the president 0:19:37.760 --> 0:19:41.320 goes abroad, they are security measures in place. Heck, even 0:19:41.320 --> 0:19:44.679 when they go domestic, their security measures in place. This 0:19:44.760 --> 0:19:47.320 is just a little bit more of of a larger situation, 0:19:47.440 --> 0:19:51.840 a tens or situation, I think, and this is a 0:19:51.880 --> 0:19:53.840 bit of guesswork here, but I think if the Speaker 0:19:53.880 --> 0:19:56.200 seriously thought that someone was going to die, she would 0:19:56.200 --> 0:19:58.760 not be going on this trip. Same with Department of Defense. 0:19:59.119 --> 0:20:01.200 And to be clear or at this point, we still 0:20:01.280 --> 0:20:04.120 don't have confirmation from the Speaker's office that she will 0:20:04.160 --> 0:20:07.040 be going to Taiwan. She's in Singapore today. We know 0:20:07.119 --> 0:20:08.960 her schedule is going to bring her to Malaysia, to 0:20:09.000 --> 0:20:12.879 South Korea, to Japan, but her schedule isn't completely finalized. 0:20:12.920 --> 0:20:15.439 We don't know the exact dates for all of those things, 0:20:15.760 --> 0:20:17.800 and so there could be a potential that she could 0:20:17.840 --> 0:20:20.400 go to Taiwan and not be announced ahead of time, 0:20:20.440 --> 0:20:23.800 potentially for security reasons. Uh, Emily, we've got about thirty 0:20:23.800 --> 0:20:25.879 seconds left or so, do we have any sense of 0:20:25.920 --> 0:20:30.000 what her agenda might be with a visit to Taiwan. Well. 0:20:30.080 --> 0:20:33.360 President Biden did tell Chinese President shi Jin paying on 0:20:33.400 --> 0:20:35.800 the phone last week that the U S policy on 0:20:35.880 --> 0:20:38.880 Taiwan has not changed. So I don't think we're expecting 0:20:38.920 --> 0:20:41.679 any sort of major announcements, but perhaps to sort of 0:20:41.720 --> 0:20:45.280 reaffirmed Taiwan, especially after we saw everything with Ukraine and 0:20:45.359 --> 0:20:49.080 Russia in the past year. Just it seems like a 0:20:49.200 --> 0:20:52.879 very highly highly visible trips. So we see if it's 0:20:52.920 --> 0:20:56.080 anything more than just a photoop, I guess. I mean, 0:20:56.280 --> 0:20:58.280 I think it'll be very interesting to see what is 0:20:58.359 --> 0:21:00.679 done and what is said. It does seemed on a 0:21:00.720 --> 0:21:04.680 way of reaffirming that the US does have support for Taiwan. Yeah, 0:21:04.880 --> 0:21:08.679 cross this line. Okay, we're crossing. We're crossing exactly, all right. 0:21:08.680 --> 0:21:13.159 Emily Wilkins, Congressional reporter joining us from Bloomberg Government in Washington, 0:21:13.320 --> 0:21:20.240 d C. Stephanie Pierces in our Bloomberg Interactive Broker studio. 0:21:20.280 --> 0:21:22.080 That's big news for us. She's the CEO at dry 0:21:22.119 --> 0:21:25.040 Fust Melon does all the exchange traded funds there at 0:21:25.040 --> 0:21:29.359 BNY Melon. So, Stephanie, crazy year, brutal, brutal first half 0:21:29.359 --> 0:21:33.080 of the year. You could make money anywhere in that portfolio. 0:21:33.440 --> 0:21:35.919 Now we've had a little bit of a bounce. What's 0:21:35.960 --> 0:21:37.879 been like in the E t F world? Is that 0:21:38.119 --> 0:21:41.600 still the hot thing out there? Well, here's what I 0:21:41.600 --> 0:21:43.960 would say. E t F s continued to be in 0:21:44.000 --> 0:21:46.800 any market environment, the vehicle of choice for investors. We've 0:21:46.840 --> 0:21:49.439 seen over a three hundred billion dollars of flows here 0:21:49.480 --> 0:21:51.880 today on a net basis in a tf SO which 0:21:51.880 --> 0:21:54.560 just doesn't stop. But here's what's interesting. There's been a 0:21:54.600 --> 0:21:58.400 lot of talk about the divergence between taxable fixed income 0:21:58.480 --> 0:22:01.520 mutual fund flows which have been NETTI, and e t 0:22:01.640 --> 0:22:03.560 F flows in the same category, which have been positive. 0:22:03.600 --> 0:22:05.600