WEBVTT - Central Banks Must Communicate, Schoenholtz Says 0:00:00.080 --> 0:00:12.960 Yeah, Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene 0:00:13.480 --> 0:00:17.560 Jay Leye. We bring you insight from the best in economics, finance, investment, 0:00:18.000 --> 0:00:23.520 and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 0:00:23.600 --> 0:00:33.600 Bloomberg dot Com, and of course on the Bloomberg. Yeah. So, 0:00:33.680 --> 0:00:35.199 the main event as we wake up here in New 0:00:35.280 --> 0:00:38.240 York the Bank of Japan, the Governor Harahiko Corona pushing 0:00:38.280 --> 0:00:41.280 through changes to his radical monetary stimulus program as the 0:00:41.360 --> 0:00:45.040 central bank repairs for a longer struggle to stoke inflation. 0:00:45.280 --> 0:00:49.240 DANAA joining us now JP Morgan Asset Management, fixed income 0:00:49.280 --> 0:00:52.360 portfolio manager joins us to discuss Dana. Great to have 0:00:52.400 --> 0:00:54.080 you with us on the program to get your thoughts 0:00:54.080 --> 0:00:56.560 on the b o J several tweaks to policy. What 0:00:56.640 --> 0:01:00.200 was the one that stood out for you? Um, I 0:01:00.240 --> 0:01:03.880 think without a doubt it's um the widening of the 0:01:04.040 --> 0:01:07.240 range um that they're willing to allow the tenure um 0:01:07.400 --> 0:01:11.640 JGUB fluctuate. So they kept the rate um the target 0:01:11.680 --> 0:01:14.800 for the tenure zero, but they moved the range from 0:01:14.880 --> 0:01:18.280 zero point one to zero point two, so allowing the 0:01:18.400 --> 0:01:22.800 possibility that if conditions allowed ten orbs could trade up 0:01:22.840 --> 0:01:25.959 to zero point two percent. I think that's quite significant 0:01:26.560 --> 0:01:28.720 in the grand scheme of things. Why is that significant 0:01:29.000 --> 0:01:34.600 zero point on a tenure Japanese government bond. Well, of first, 0:01:34.640 --> 0:01:38.520 it's a couple of things. Um. You know the message 0:01:38.560 --> 0:01:41.840 itself that came out of the Central Bank, wasn't that 0:01:43.360 --> 0:01:46.840 a bita message for the Japanese economy? Right? Um they 0:01:46.880 --> 0:01:51.320 talked about they reduced their inflation expectations for this year 0:01:51.400 --> 0:01:53.720 from one point three to one point one, but actually 0:01:53.880 --> 0:01:56.960 for their focus to urizon, they also lowered inflation expectations 0:01:57.360 --> 0:01:59.640 from one point eight to one point six, keeping in 0:01:59.680 --> 0:02:04.400 mind their target is too Um. It actually does raise 0:02:04.480 --> 0:02:06.520 the question of why do they feel they need to 0:02:06.560 --> 0:02:09.720 move this rate higher going forward? And the reason for 0:02:09.840 --> 0:02:12.800 that is because the local banks have been struggling with 0:02:12.880 --> 0:02:16.360 this low rate environment. It's been denting their profitability. So 0:02:16.400 --> 0:02:19.560 we're getting to a point now where quantitative easing and 0:02:19.600 --> 0:02:22.360 the cost of quantitative evening are coming home to roost 0:02:23.000 --> 0:02:26.560 um and that has implications for policymakers, especially a policymaker 0:02:26.639 --> 0:02:29.040 such of the Bunk of Japan where they have a 0:02:29.040 --> 0:02:32.200 price stability Monday, but they also have a financial stability Monday, 0:02:32.440 --> 0:02:34.680 So the Bank of Japan today also introduced this forward 0:02:34.680 --> 0:02:38.000 guidance added to the policy tweaks with a commitment to 0:02:38.080 --> 0:02:41.720 keep the current extremely low levels for short term interest 0:02:41.840 --> 0:02:43.880 right to makes low for an extended period of time. 0:02:43.919 --> 0:02:46.000 And I just wanted Diana whether that was cover. There's 0:02:46.000 --> 0:02:48.520 some people out there this morning questioning whether this is 0:02:48.560 --> 0:02:53.240 just a stealth beginning of a normalization of policy at 0:02:53.240 --> 0:02:55.720 the Bank of Japan. Do you subscribe to their theory 0:02:55.720 --> 0:03:01.160 A's or Diana. They the forward guidance UM mixic clear, 0:03:01.280 --> 0:03:04.280 especially linking it to the v E T hikes that 0:03:04.280 --> 0:03:08.000 are expected in October nine. So we still have a 0:03:08.080 --> 0:03:10.280 long period of time before we're talking at least for 0:03:10.320 --> 0:03:14.160 the next all months before we're discussing hikes, so it's 0:03:14.280 --> 0:03:18.960 not quite UM a hike in that extent um. I 0:03:19.000 --> 0:03:21.120 think they are committed because there are nowhere near the 0:03:21.160 --> 0:03:25.560 inflation target. I think what what this braises is the 0:03:25.639 --> 0:03:29.000 issue of if we're going to be having this slow 0:03:29.040 --> 0:03:31.760 glide higher in the tenure g g B, so if 0:03:31.840 --> 0:03:36.080 as conditions improved, it warrants them to let the tenure 0:03:36.120 --> 0:03:38.840 go higher, or if pressure on these banks remain, what 0:03:38.880 --> 0:03:40.920 are the implications for the rest of the world. I 0:03:40.920 --> 0:03:43.960 think that's the bigger question, right, um, what happens to 0:03:44.200 --> 0:03:46.640 US rates um? And we saw a bit of that 0:03:46.800 --> 0:03:50.240 a mini preview this week on and last week when 0:03:50.240 --> 0:03:53.560 the headlines first came out. Diana, more than anyone we 0:03:53.640 --> 0:03:58.480 speak to, you blend in portfolio management along with your 0:03:58.520 --> 0:04:02.160 wonderful trading experience reents. How what do you see in 0:04:02.200 --> 0:04:06.840 the trading market of foreign exchange that gives you any 0:04:07.040 --> 0:04:13.040 signal that we move from idiosyncratic stories like Turkey Argentina 0:04:13.720 --> 0:04:18.400 over to a more correlated currency e M issue. What 0:04:18.480 --> 0:04:21.520 do you look for from a trading desk that begins 0:04:21.560 --> 0:04:24.400 to show that things are going to coalesce into some 0:04:24.560 --> 0:04:30.640 form of fear um. So there are few things that 0:04:30.680 --> 0:04:34.320 we keep an eye on. Well, look at volatility implied 0:04:34.400 --> 0:04:38.480 volves UM. I think one thing that's been quite um 0:04:38.520 --> 0:04:42.279 interesting in the in the resent period of witness in 0:04:42.320 --> 0:04:45.880 particularly in the margin markets, is just how low volatilting 0:04:45.920 --> 0:04:51.159 other assets have been. So while that remains true, and 0:04:51.200 --> 0:04:55.080 while you know pop markets are able to treat idiosyncratic 0:04:55.120 --> 0:04:58.800 stories as that and volatiles doesn't pick up correlations, remain 0:04:59.080 --> 0:05:02.800 um quite stable. I think we remain in a situation 0:05:02.920 --> 0:05:05.560 where when you do see those sorts of wobbles, you 0:05:05.560 --> 0:05:08.200 should try and look for where the value is and buy. 0:05:08.240 --> 0:05:11.440 I think, you know, the bunk of Japan today was 0:05:11.480 --> 0:05:14.360 important because if we do start to get a sense 0:05:14.360 --> 0:05:17.880 that you're getting more synchronized normalization and that's not what 0:05:17.920 --> 0:05:20.360 we've seen at all. Um. If it's not just the 0:05:20.440 --> 0:05:23.159 FED doing all the work, If the bug is now 0:05:23.200 --> 0:05:26.240 coming out and saying we are looking at normalizing and 0:05:26.320 --> 0:05:30.440 the ECB likewise, um, then I think that could become 0:05:30.480 --> 0:05:33.760 a much bigger, bigger problem forst But you and I 0:05:33.800 --> 0:05:36.440 have studied the chapter and econ four oh two. It's 0:05:36.480 --> 0:05:40.640 called hope and it's still from President Obama, Hope and audacity. 0:05:41.080 --> 0:05:43.280 I'm looking at the chart I put out on Twitter 0:05:43.320 --> 0:05:47.040 for Bloomberg Radio Diana and its nominal g d P 0:05:47.520 --> 0:05:50.880 in Japan, and it is irrefutably in the last two 0:05:50.960 --> 0:05:54.280 and a half years rolled over. They can job bon 0:05:54.360 --> 0:05:58.520 it all they want. Do they see and escape from 0:05:58.560 --> 0:06:02.240 deflation and particular kill early? Do they see an escape 0:06:02.240 --> 0:06:07.960 from disinflation where they turn the vector around? Um? I think, 0:06:07.960 --> 0:06:09.960 and that's why I say the message from the bog 0:06:10.080 --> 0:06:12.960 to day was not a positive economic message. I think 0:06:13.040 --> 0:06:15.560 there is a lot of hope that goes in some 0:06:15.640 --> 0:06:18.560 of these projections, and the inflation numbers today that they 0:06:18.600 --> 0:06:22.480 put out still look extremely unrealistic in our view. Um. 0:06:22.520 --> 0:06:26.039 They released some paper on the inflation and what they're 0:06:26.040 --> 0:06:29.200 saying is UM this was on a separate paper saying 0:06:29.240 --> 0:06:33.800 inflation is low because of the usual suspect global competition. UM. 0:06:34.200 --> 0:06:38.719 You know, low inflation expectations from an aging population, preferring 0:06:38.760 --> 0:06:42.119 low inflation risk covers employees, etcetera. Some of these things 0:06:42.120 --> 0:06:45.159 are structural issues. They're not going to go away. UM. 0:06:45.240 --> 0:06:47.200 So I do agree with you. I think you know, 0:06:47.279 --> 0:06:51.599 Japan's issues are very very entrenched. Or is Europe's issues 0:06:51.640 --> 0:06:53.359 in trench? I mean, I get the idea. You know, 0:06:53.400 --> 0:06:56.120 we can all look at the charts inside Japan's its 0:06:56.160 --> 0:07:00.679 own unique experiment. But I'm taken by the idea on Pharaoh, 0:07:01.000 --> 0:07:03.040 the g d P came in a little light. In 0:07:03.120 --> 0:07:06.359 Europe and core inflation there is all of one point 0:07:06.440 --> 0:07:09.960 one percent. I mean Diana and helped John and I 0:07:10.240 --> 0:07:12.520 is this on the edge of Japan? I mean Europe 0:07:12.880 --> 0:07:16.440 basically on the edge of the challenges that Japan has. 0:07:18.280 --> 0:07:21.360 I don't think Europe is quite where Japan is. Um. 0:07:21.400 --> 0:07:23.000 I think you know, when you look at the ALCU 0:07:23.040 --> 0:07:25.400 cups in Europe, we still have a long way to come, 0:07:25.760 --> 0:07:28.800 um liabor market dynamics, There's still a lot of room 0:07:28.840 --> 0:07:32.720 for improvement there. Um. So I think the European story 0:07:32.800 --> 0:07:36.640 is slightly better in that respect, in terms of the 0:07:36.720 --> 0:07:40.080 long term prospects than what Japan faces. This has been 0:07:40.120 --> 0:07:42.720 wonderful Diana moment, thank you so much with JP. Morgan 0:07:42.840 --> 0:07:59.600 just thrilled to have her with us. Kim shown holds 0:07:59.600 --> 0:08:01.680 with us, then why you New York University? And of 0:08:01.720 --> 0:08:04.240 course he knows of dead meeting when he sees how 0:08:04.280 --> 0:08:06.400 did we get into this or we have dead in 0:08:06.520 --> 0:08:11.360 life meetings? Is this your fault? My fault? I hope not. Um. Look, 0:08:11.400 --> 0:08:13.920 I think that they've they developed this habit of only 0:08:13.960 --> 0:08:17.880 making policy changes when they have press conferences. The good 0:08:17.920 --> 0:08:19.800 news is that they're going to have a press conference 0:08:19.840 --> 0:08:22.320 with every meeting next year. So this this happened to 0:08:22.320 --> 0:08:24.240 get away from the stupidity. I think we're going to 0:08:24.320 --> 0:08:26.800 get away from it pretty quickly. They didn't used to 0:08:26.880 --> 0:08:30.000 have press conferences to begin with. Kim, that's right, So 0:08:30.160 --> 0:08:32.920 that gives you an idea of how much things have changed. Yeah, well, 0:08:32.960 --> 0:08:36.079 they also didn't used to provide their quarterly forecast or 0:08:36.080 --> 0:08:39.439 their quarterly projections. They've become far more transparent. That's all 0:08:39.480 --> 0:08:43.160 good news general. How does the Carne press conference vary 0:08:43.240 --> 0:08:45.760 from a druggy press conference. It's kind of the same. 0:08:46.200 --> 0:08:48.160 It's kind of the same. I don't think it's too different. 0:08:48.240 --> 0:08:50.600 It's quite orchestrated in the same way. They open up 0:08:50.600 --> 0:08:52.960 with a statement. They sort of reveal their forecast, but 0:08:53.640 --> 0:08:55.559 their bank aving that puts everything out all at once, 0:08:55.559 --> 0:08:57.720 so everyone's already got this stuff, so they're laguely repeating 0:08:57.760 --> 0:08:59.880 what we already know. And then the Q and A starts, 0:08:59.880 --> 0:09:02.199 and Q and A is often the interesting bit, kam. 0:09:02.240 --> 0:09:04.199 It does raise a question though they used to be 0:09:04.280 --> 0:09:06.480 able to do stuff without a news conference. They used 0:09:06.480 --> 0:09:08.320 to be able to do stuff without telling the market. 0:09:08.360 --> 0:09:10.839 They've done stuff, um and now in a needle of 0:09:10.920 --> 0:09:14.080 radical transparency, they seem to have a problem. Step in 0:09:14.080 --> 0:09:16.440 a way, How much of a problem is it. Well, 0:09:16.440 --> 0:09:19.120 I think it's pretty small. I think the transparency is 0:09:19.120 --> 0:09:21.200 a big plus. I mean, think of it this way. 0:09:21.320 --> 0:09:26.079 By being transparent, they condition us to anticipate their behavior. Um, 0:09:26.320 --> 0:09:28.600 we know sort of know the things that drive them, 0:09:28.640 --> 0:09:32.120 whether it's strong growth or rising inflation. We know what 0:09:32.280 --> 0:09:35.080 changes their policy. We know that when they're running a 0:09:35.160 --> 0:09:38.120 very accommodative policy, they're going to be uncomfortable with it. 0:09:38.400 --> 0:09:40.280 If the economy is already doing well, that they're going 0:09:40.320 --> 0:09:43.120 to want to get back to something like normal. Because 0:09:43.200 --> 0:09:45.400 we know that we can anticipate it and it shows 0:09:45.440 --> 0:09:48.200 up in market prices long before they act. Well, that's 0:09:48.240 --> 0:09:50.960 the problem when you are tightening, when you're easing, that's 0:09:50.960 --> 0:09:53.520 not a problem. That just amplifies the accommodation you're trying 0:09:53.520 --> 0:09:56.160 to offer to the markets. When you're tightening, the market 0:09:56.200 --> 0:09:58.199 can often run ahead of itself before the Bank of 0:09:58.280 --> 0:09:59.800 Japan has even done it a thin Can we actually 0:10:00.000 --> 0:10:03.120 all that to some extent with this mating? Is it 0:10:03.160 --> 0:10:04.600 not a problem at all? Do you think when they're 0:10:04.600 --> 0:10:07.560 tightening and they're trying to remove accommodation and the market 0:10:07.600 --> 0:10:09.840 just keeps running ahead of it. I think the problem 0:10:09.880 --> 0:10:12.760 is when they're not communicating clearly, and I think what 0:10:12.880 --> 0:10:15.520 you observe the central Bank in Japan is running this 0:10:15.600 --> 0:10:19.000 extraordinary policy of capping the long term bond yield. We 0:10:19.040 --> 0:10:21.800 haven't seen a central bank do that since the FED 0:10:22.080 --> 0:10:26.240 stopped doing it in so there's a reason why that's 0:10:26.240 --> 0:10:30.400 a that's a rare policy. It's extremely aggressive and it's 0:10:30.440 --> 0:10:33.679 difficult to escape. It creates lots of disturbance in markets, 0:10:33.720 --> 0:10:36.240 and you're seeing that. So I don't think it's such 0:10:36.280 --> 0:10:38.880 a bad thing. I think the problem is they need 0:10:38.960 --> 0:10:41.600 to communicate clearly. Would you be willing to say that 0:10:41.640 --> 0:10:45.400 the j GB market is no longer a market? I 0:10:45.400 --> 0:10:48.880 think it's it's heavily influenced by the behavior of the 0:10:48.920 --> 0:10:51.720 central bank. So if you're asking me, would but would 0:10:51.760 --> 0:10:54.720 yields rise if it weren't for central bank behavior? Of yes, 0:10:54.800 --> 0:10:57.240 they would, But I would say and what I mean this, 0:10:57.400 --> 0:11:00.760 I think your question is brilliant. Anybody with a memory 0:11:00.800 --> 0:11:04.840 of July in August has got to ask that question 0:11:05.400 --> 0:11:08.760 about the artificiality of the of the bond market, the 0:11:08.800 --> 0:11:11.520 note in the bill market in Japan. It's a huge deal, 0:11:11.600 --> 0:11:14.920 joone huge deal the way I mean, come on, there's 0:11:14.920 --> 0:11:16.560 no liquid in he there. Let me ask you a 0:11:16.600 --> 0:11:21.120 different question. When the Swiss Center interview the Swiss Central 0:11:21.160 --> 0:11:24.960 Bank captain the exchange rate against the Euro, would you 0:11:24.960 --> 0:11:27.760 say there was no longer a market for for Swiss frames. 0:11:27.800 --> 0:11:30.440 I never said that, but in sense that would be true, 0:11:30.600 --> 0:11:33.760 in the same sense that it's true because they're the 0:11:33.800 --> 0:11:36.320 center gang is fixing an exchange rate in that world, John, 0:11:36.360 --> 0:11:38.559 why do we feel like we're in a class and right, Well, no, 0:11:38.640 --> 0:11:40.520 I'm happy to be in a class. I'm happy to 0:11:40.559 --> 0:11:43.920 be in. But folks, this is what what Professor Showolds 0:11:43.960 --> 0:11:46.959 has done is moved from a class from Here's the 0:11:47.000 --> 0:11:50.040 interesting thing about the euro Swiss example. For a long 0:11:50.120 --> 0:11:53.240 long time people thought that could not be broken, and 0:11:53.280 --> 0:11:55.360 then it was broken, and a tally of the SMB 0:11:55.400 --> 0:11:57.520 try to bring back a euro Swiss floor. That have 0:11:57.679 --> 0:12:00.000 great difficulty doing so because the market wouldn't be can 0:12:00.040 --> 0:12:02.120 vins that it would be kept. Now I do wander 0:12:02.160 --> 0:12:04.520 with j g B S as they've shown that they 0:12:04.600 --> 0:12:08.679 can shift where they cap the yield on a Japanese tenure. 0:12:09.080 --> 0:12:11.040 I do wonder whether the market is going to test 0:12:11.080 --> 0:12:12.920 the Bank of Japan at some point, Kim, I think 0:12:12.920 --> 0:12:15.839 you're absolutely right, they will test, in fact, the whole 0:12:15.920 --> 0:12:18.440 One of the big problems with this approach fixing an 0:12:18.440 --> 0:12:21.640 exchange rate or fixing a bond yield is that once 0:12:22.000 --> 0:12:25.360 anybody suspects that you're going to change the policy, um, 0:12:25.400 --> 0:12:28.440 there will be lots of sales, and so the central 0:12:28.440 --> 0:12:30.440 bank would have to come in and buy. Look at 0:12:30.480 --> 0:12:32.240 the b o J last week, they had to come 0:12:32.280 --> 0:12:35.760 in and buy aggressively just because people feared they might 0:12:35.840 --> 0:12:38.840 change policy. Well, this has been way interesting. We're gonna 0:12:38.880 --> 0:12:41.600 do this on podcast Kim Schoen holds and this will 0:12:41.600 --> 0:12:44.640 go out on Apple Podcasts also added Spotify as well. 0:12:44.679 --> 0:12:50.240 Professor shown holds of course with New York at University. 0:13:00.040 --> 0:13:01.960 But it's been the story of the equity market here 0:13:01.960 --> 0:13:03.800 in the United States over the last three days. Then 0:13:03.840 --> 0:13:06.120 that's that Thursday, down one percent, down almost one and 0:13:06.160 --> 0:13:08.000 a half percent Friday, and close to more of the 0:13:08.080 --> 0:13:10.760 same in the yesterday's session, down by one point three 0:13:10.880 --> 0:13:14.319 nine percent. Your next trading queue comes from Apple. Can 0:13:14.360 --> 0:13:19.040 Apple lift some battered sentiment for technology stocks? Will Power 0:13:19.080 --> 0:13:22.440 joining us now? Bad? Senior research analyst Will as always, 0:13:22.480 --> 0:13:24.560 how many iPhones have you sold? Seems to be the 0:13:24.559 --> 0:13:29.360 first question we ask, what's your base case for later on? Well, look, 0:13:29.400 --> 0:13:31.600 we're looking for a solid quarter and good morning, thanks 0:13:31.600 --> 0:13:34.720 for having me. We're expecting a company to ship forty 0:13:34.720 --> 0:13:37.360 two million iPhones and the quarter in your right, that'll 0:13:37.400 --> 0:13:41.080 be the headline number as always. But I think you know, 0:13:41.080 --> 0:13:44.280 if even greater focus perhaps could be the services revenue 0:13:44.320 --> 0:13:46.320 than of course, you know, the next quarter guidance dos 0:13:46.360 --> 0:13:48.960 we head into this this next dollar fort iPhone cycle. 0:13:49.120 --> 0:13:50.880 I think that's going to be really important because many 0:13:50.880 --> 0:13:52.400 people are going to be looking for where the growth 0:13:52.440 --> 0:13:56.240 comes from. And I noticed that Loop Capital Luke Ventures 0:13:56.240 --> 0:13:58.440 were pointing out that the growth phase of the iPhone 0:13:58.480 --> 0:14:00.200 could well be coming to an end. Will do do 0:14:00.240 --> 0:14:03.719 you see that too? Well, look, there's no question that 0:14:03.920 --> 0:14:07.760 smartphone sales globally, you know, have half ended a week 0:14:07.800 --> 0:14:09.720 spot right, We're just not seeing much growth year of 0:14:09.760 --> 0:14:12.520 the year, um, you know, from a broader market perspective. 0:14:12.559 --> 0:14:15.320 But where apples don't generate growth, of course, was what 0:14:15.440 --> 0:14:18.600 that average selling price, which has been very impressive, particularly 0:14:18.679 --> 0:14:22.680 within you know, consumer electronics generally. So we're working for 0:14:22.680 --> 0:14:24.680 a close to a seven hundred dollar a SP which 0:14:24.720 --> 0:14:27.000 is up pretty snifficently year the years to candily, that 0:14:27.400 --> 0:14:31.160 is the bigger growth driver in terms of driving revenue. 0:14:31.160 --> 0:14:32.720 So I think it's these astute of the fact that 0:14:32.800 --> 0:14:36.480 while iPhone units are growing very slowly the new every years, 0:14:36.480 --> 0:14:39.080 the actual revenue growth is still growing double digits because 0:14:39.120 --> 0:14:41.400 of that SP. Well, let's be clear, head, the s 0:14:41.520 --> 0:14:43.920 P in the quarter a year ago the same quarter 0:14:44.040 --> 0:14:46.160 was six hundred and six dollars. Are you seriously saying 0:14:46.160 --> 0:14:48.080 we could get a one hundred dollar jump in average 0:14:48.080 --> 0:14:51.960 selling prices because that's phenomenal? Well, well, that's right, I 0:14:52.000 --> 0:14:54.280 mean I will just if you look back this past quarter, 0:14:54.600 --> 0:14:57.760 I think you are seven eight, So we're expecting that, 0:14:58.520 --> 0:15:00.480 you know, to drop you know, sequential ways we get 0:15:00.560 --> 0:15:02.520 you know, later into the cycle. But yes, we are 0:15:02.600 --> 0:15:05.120 looking for you know, significant you know, your your growth 0:15:05.200 --> 0:15:07.480 of that metric. Well, let's do a reverse some of 0:15:07.560 --> 0:15:09.920 the parts. Hundred eighty nine dollars per share, hundred and 0:15:10.000 --> 0:15:12.520 nine dollars per share rounded up, let's make it two 0:15:12.560 --> 0:15:18.000 hundred dollars a share. How much per share is cash? Uh, 0:15:18.120 --> 0:15:21.720 well today you've got close to thirty dollars, so two 0:15:21.800 --> 0:15:25.600 hundred down to one seventy. How much is services? What's 0:15:25.640 --> 0:15:31.000 the plug in value per share of services? Well, yeah, 0:15:31.480 --> 0:15:33.440 that's a good question. I mean, you know, what are 0:15:33.480 --> 0:15:36.400 your COPID against? Do you look at you know, the Facebook, 0:15:36.520 --> 0:15:39.120 the Netflix, is I mean, this is a business that 0:15:39.320 --> 0:15:42.880 you know, per perspective, this year will generate thirty five 0:15:43.400 --> 0:15:47.480 forty billion dollars of revenue. So you put up multiple 0:15:47.600 --> 0:15:50.640 matt uh, you know you you get to you know, 0:15:51.040 --> 0:15:54.680 the least perhaps a couple hundred billion dollars. Okay, a 0:15:54.680 --> 0:15:56.840 couple hundred billion dollars. I can't do the math. Plus 0:15:56.880 --> 0:15:59.160 it's radio. We don't do math on radio. What I 0:15:59.320 --> 0:16:03.000 can say, Will, is, if you ex cash and X services, 0:16:03.440 --> 0:16:05.680 you're basically buying the rest of the company for what 0:16:06.320 --> 0:16:11.080 Nothing's not the right phrase, but pretty close to nothing. Right, Well, yeah, 0:16:11.120 --> 0:16:13.160 you're not. You're not saying you know much over you know, 0:16:13.280 --> 0:16:15.880 doublity multiple for what's still is a very strong, you know, 0:16:16.240 --> 0:16:21.400 cast cerative. My point John in this exercise is we're 0:16:21.400 --> 0:16:24.080 all gonna die. Apple's gonna end, and we're all gonna die. 0:16:24.200 --> 0:16:27.600 Apparently not, you know, we're like and I think John, 0:16:27.880 --> 0:16:30.360 you and Full Disclosure UBS does some great work on 0:16:30.480 --> 0:16:32.920 this as well as Will Powers great work a baired 0:16:33.280 --> 0:16:36.280 The answer is the average selling prices lights out stunning 0:16:36.920 --> 0:16:40.320 could be guest, all all the gloom people relative to 0:16:40.360 --> 0:16:42.960 where we were a year ago. Well, the the services business. 0:16:43.320 --> 0:16:46.360 Are you saying essentially we're already there at target? Because 0:16:46.400 --> 0:16:49.120 the company wants services to be a fifty billion dollar business, 0:16:49.640 --> 0:16:51.680 and based on your estimates, will it sounds like we're 0:16:51.680 --> 0:16:55.920 already there. Well, we're heading the right direction certainly, right, So, 0:16:55.960 --> 0:16:57.840 I mean just to be to put a point on that, 0:16:58.040 --> 0:17:00.960 you know, for this year we'll be at seven billion 0:17:01.360 --> 0:17:04.000 uh in our forecast, you know, going to kind of 0:17:04.080 --> 0:17:07.680 mid forties and nineteens. Yes, we think we are tracking properly, 0:17:08.200 --> 0:17:10.080 you know. I do think there are other opportunities and 0:17:10.160 --> 0:17:12.520 services that they've fairly tapped into. I think one of 0:17:12.560 --> 0:17:15.320 those content we of course know they haven't rolled out, 0:17:15.720 --> 0:17:18.119 you know, a traditional live streaming service, and it's not 0:17:18.240 --> 0:17:20.360 it's less clear they're gonna do that. Do you think 0:17:20.400 --> 0:17:24.679 there's some opportunities for a Netflix like service perhaps wider 0:17:25.160 --> 0:17:26.919 to help supplement that as well? As you're move into 0:17:27.000 --> 0:17:30.720 nineteen and twenty, when you're on the conference call, what's 0:17:30.840 --> 0:17:35.840 like the McKenzie Boston consulting strategy of these guys. I mean, 0:17:35.920 --> 0:17:39.000 I get the we've gone through the financials. We all 0:17:39.119 --> 0:17:41.480 understand their minting money. They're gonna be a trillion dollars 0:17:41.560 --> 0:17:44.320 this it's them in Amazon and and the New York 0:17:44.400 --> 0:17:48.960 Stock Exchange Fang Index. John, It's it's Amazon, Apple, and 0:17:49.520 --> 0:17:51.800 Kitten the other one. Thirty three percent of the index 0:17:52.119 --> 0:17:55.680 is three stocks out of ten stocks. And that's great. 0:17:55.760 --> 0:17:59.159 But when you're on the conference call, what's they're McKenzie 0:17:59.280 --> 0:18:03.240 like big strategy? What's the big strategy of Mr Cook 0:18:03.320 --> 0:18:07.240 and his team? Well, I think it's increasingly and has been, 0:18:07.440 --> 0:18:10.280 you know, about the broader ecosystem, right, So it's solidifying 0:18:10.320 --> 0:18:13.840 your position and ensuring that you don't fall into the 0:18:14.040 --> 0:18:17.520 traditional consumer electronics trap. And I think they've you know, 0:18:17.640 --> 0:18:20.680 successfully navigated that today. But but it's on them to 0:18:20.760 --> 0:18:24.680 continue to you know, push that envelope, you know, further, 0:18:24.840 --> 0:18:28.879 to drive new ways to keep customers happy, to you know, 0:18:28.960 --> 0:18:32.320 to maintain that industry leading retention. And so I think 0:18:32.359 --> 0:18:36.640 it's really capitalizing on that installed base that you have. Well, 0:18:37.000 --> 0:18:40.080 you also cover Netflix, and Netflix took an absolute beating 0:18:40.200 --> 0:18:43.600 yesterday un seemingly no news. Well, what do you make 0:18:43.640 --> 0:18:45.560 of these moves and a magnitude of the moves we're 0:18:45.560 --> 0:18:49.960 seeing in technology stocks at the moment. Well, it's it's 0:18:50.040 --> 0:18:52.520 obviously part of a broader you know, down draft for 0:18:52.920 --> 0:18:55.359 you know, high growth momentum names and when you're seeing 0:18:55.359 --> 0:18:57.399 that across you know, the fast space two. As you 0:18:57.440 --> 0:19:00.840 look at some of our software, uh coverage, I think 0:19:00.880 --> 0:19:03.160 any of the you know the high single they double 0:19:03.200 --> 0:19:06.199 digit revenue, multiple names. You know we're under pressure. There 0:19:06.280 --> 0:19:08.360 was there was a high correlation there. But I guess 0:19:08.359 --> 0:19:10.919 the other thing fundamentally is, yeah, Netflix does have more 0:19:11.240 --> 0:19:13.520 competition coming. That's not new. But of course you had 0:19:13.560 --> 0:19:15.439 some rumors here the last couple of days on Walmart 0:19:15.560 --> 0:19:17.720 rowing outstore for a dreaming service. Tucks know if that 0:19:17.800 --> 0:19:20.320 had much of an impact or not, but you know 0:19:20.359 --> 0:19:22.440 those those could be contributors as well. John, you want 0:19:22.480 --> 0:19:24.920 the real life Netflix. The last three times I've gone 0:19:25.000 --> 0:19:27.399 to it, they haven't had the movie I want. Now. Granted, 0:19:27.400 --> 0:19:31.600 I'm looking for secure, stupid bow tie stuff, but but John, 0:19:31.800 --> 0:19:38.639 the history of It's the face of America exactly. I 0:19:38.800 --> 0:19:41.600 go to Amazon and often they have the movie. I 0:19:41.720 --> 0:19:45.359 go with history the audience. What was the movie? It 0:19:45.520 --> 0:19:51.199 was like a Lawrence of Arabia thing with camels. Okay, no, seriously, 0:19:51.200 --> 0:19:54.040 it was something there was some totally obscure thing about. 0:19:55.960 --> 0:19:57.639 Usually when I go to Netflix, they don't have the 0:19:57.720 --> 0:19:59.639 damn movie. I mean, you know that's lots of my 0:20:01.560 --> 0:20:06.479 You're right, am I right? What you mean, put an 0:20:06.520 --> 0:20:11.600 increasing focus on its original content quickly shows right, that's 0:20:11.640 --> 0:20:14.880 that's really worth leading in and what's drivings craping day? 0:20:14.880 --> 0:20:17.280 I'd agree that you know the movie some respects are lacking. 0:20:17.320 --> 0:20:22.480 Although you know, well that was a surveillance breaks it 0:20:22.640 --> 0:20:26.160 was with a serious please go ahead. If I asked 0:20:26.200 --> 0:20:28.359 the analyst what's happening with tech, they'll give me a 0:20:28.480 --> 0:20:31.359 very different answer to what I get from say a 0:20:31.440 --> 0:20:34.960 cross asset portfolio manager. At the moment where I think 0:20:35.040 --> 0:20:37.800 people are looking at the potential for a rotation again 0:20:38.119 --> 0:20:41.119 out of some of these growthy names and perhaps into value. 0:20:41.480 --> 0:20:43.439 What is that a rotation that you can see happening? 0:20:43.560 --> 0:20:46.560 Is it's something you have to think about. Well, look, 0:20:46.640 --> 0:20:48.800 I mean, Candy, yeah, I'm you know, I'm I'm more 0:20:48.920 --> 0:20:51.040 focused on the names I've been recoverage writer than a 0:20:51.119 --> 0:20:53.239 broader market call. And it certainly feels like for at 0:20:53.280 --> 0:20:55.280 least the last couple of days, you've perhaps seen some 0:20:55.400 --> 0:20:57.800 of that. But I guess I'm not in a position 0:20:57.960 --> 0:21:02.159 to make a broader uh you know you Marcus It 0:21:02.200 --> 0:21:04.199 feels like a one of the fundmentals actually for many 0:21:04.200 --> 0:21:05.919 of these names were still in place. To beat your 0:21:06.000 --> 0:21:09.600 valuation is another part of that discussion. Well Power, great 0:21:09.600 --> 0:21:11.280 to catch up with you as wonderful. Can you take 0:21:11.320 --> 0:21:14.400 it back just say Tom's wrong. We don't please will 0:21:15.200 --> 0:21:17.080 until we don't have to deal with this for another hour. 0:21:20.160 --> 0:21:22.120 Good luck to dealing with that. Thanks a lot, will 0:21:22.240 --> 0:21:40.000 Well Power bets tomorrow. Would you please bring in Mr 0:21:40.119 --> 0:21:43.280 Dunovan sure, the UBS Wealth Management Global Chief Economist joining 0:21:43.359 --> 0:21:45.200 us right here right now, Paul. It's greing to catch 0:21:45.280 --> 0:21:46.920 up with you as always to get your thoughts. We 0:21:47.000 --> 0:21:49.600 had some policy twigs from the Bank of Japan. Which 0:21:49.640 --> 0:21:53.240 one stood out most for you? Well, to be honest, 0:21:53.280 --> 0:21:55.160 something what stood out as the Bank of Japan has 0:21:55.160 --> 0:21:57.560 done what it always does, which is basically nothing of 0:21:57.840 --> 0:22:01.399