1 00:00:05,120 --> 00:00:08,480 Speaker 1: This is the Bloomberg Surveillance Podcast. I'm Tom Keene, along 2 00:00:08,520 --> 00:00:12,360 Speaker 1: with Jonathan Farrow and Lisa Abramowitz. Join us each day 3 00:00:12,400 --> 00:00:16,840 Speaker 1: for insight from the best and economics, geopolitics, finance and investment. 4 00:00:17,280 --> 00:00:22,119 Speaker 1: Subscribe to Bloomberg Surveillance on demand on Apple, Spotify and 5 00:00:22,320 --> 00:00:26,600 Speaker 1: anywhere you get your podcasts, and always on Bloomberg dot Com, 6 00:00:26,640 --> 00:00:30,440 Speaker 1: the Bloomberg Terminal and the Bloomberg Business App. What a 7 00:00:30,520 --> 00:00:33,200 Speaker 1: joy to see her in London. Sree Kachigovin and joins 8 00:00:33,240 --> 00:00:37,800 Speaker 1: us right now, senior research economists at Aberdeen three. I'm 9 00:00:37,840 --> 00:00:43,120 Speaker 1: absolutely fascinated by how the US stands alone, how Jerome 10 00:00:43,200 --> 00:00:49,599 Speaker 1: Powell yesterday stood alone with massive stimulus leading into massive 11 00:00:49,680 --> 00:00:55,520 Speaker 1: real GDP. Does the United Kingdom, where Governor Bailey stands now, 12 00:00:55,920 --> 00:00:58,160 Speaker 1: do they need stimulus to keep it going? 13 00:01:00,120 --> 00:01:03,520 Speaker 2: I think stimulus would probably not be a good idea 14 00:01:03,640 --> 00:01:07,000 Speaker 2: at this point. Really, what we want to tackle is inflation. 15 00:01:07,200 --> 00:01:07,360 Speaker 3: Now. 16 00:01:07,360 --> 00:01:10,440 Speaker 2: The Bank of England have a very challenging backdrop. Growth 17 00:01:10,480 --> 00:01:15,120 Speaker 2: outlook is weakening, but we still have very elevated inflation pressures. 18 00:01:15,480 --> 00:01:21,200 Speaker 2: Now inflation is past the peak, it has started to decelerate. However, 19 00:01:22,240 --> 00:01:26,200 Speaker 2: energy costs are still quite elevated. The headline inflation is 20 00:01:26,200 --> 00:01:29,880 Speaker 2: still very high. And also we have even though those 21 00:01:30,280 --> 00:01:33,440 Speaker 2: multi price based effects will start to unwind over time, 22 00:01:34,000 --> 00:01:38,039 Speaker 2: we still have very sticky core services and wage pressures 23 00:01:38,040 --> 00:01:41,319 Speaker 2: in place. So stimulus right now would not be a 24 00:01:41,319 --> 00:01:45,000 Speaker 2: good idea for the UK. Now it's not restrictive fiscal 25 00:01:45,600 --> 00:01:49,200 Speaker 2: background at the moment, but further stimulus would actually not be. 26 00:01:49,160 --> 00:01:52,880 Speaker 4: Helpful with the Here's a fun fact from the Bloomberg 27 00:01:52,920 --> 00:01:55,800 Speaker 4: News story that Lucy White wrote for US. Ben Bernanke 28 00:01:55,920 --> 00:01:58,280 Speaker 4: actually attended the Bank of England's meeting as an observer. 29 00:01:58,320 --> 00:02:01,160 Speaker 4: It's part of his review into the UK central banks 30 00:02:01,160 --> 00:02:05,120 Speaker 4: forecasting communications. And of course this comes as Bailey has 31 00:02:05,160 --> 00:02:08,680 Speaker 4: faced some criticism that they didn't move quickly enough to 32 00:02:09,040 --> 00:02:11,880 Speaker 4: respond to inflation. Sree, can you compare and contrast the 33 00:02:11,919 --> 00:02:15,040 Speaker 4: efficacy of communication at the BAIE versus the FED. 34 00:02:16,760 --> 00:02:19,079 Speaker 2: I think, as we mentioned earlier, there was a conversation 35 00:02:19,120 --> 00:02:23,240 Speaker 2: about group think. There is a split within the within 36 00:02:23,280 --> 00:02:25,280 Speaker 2: the Bank of England, and I think the communication has 37 00:02:25,320 --> 00:02:28,480 Speaker 2: been quite clear from the various members. We've had the 38 00:02:28,600 --> 00:02:33,880 Speaker 2: arguments for staying on hold, the arguments for perhaps another 39 00:02:34,080 --> 00:02:37,200 Speaker 2: an additional hike, and all of those are quite consistent 40 00:02:37,320 --> 00:02:40,640 Speaker 2: actually with the data that we're seeing. But it seems 41 00:02:40,680 --> 00:02:44,640 Speaker 2: that on the whole we are witnessing switch towards a 42 00:02:44,639 --> 00:02:47,600 Speaker 2: focus on growth and the weaker activity data and some 43 00:02:47,720 --> 00:02:51,320 Speaker 2: greater faith in terms of inflation actually passed the peak 44 00:02:51,600 --> 00:02:55,640 Speaker 2: and decelerating from here. So we're also seeing there. So 45 00:02:55,800 --> 00:02:58,560 Speaker 2: we have a signal from the split in the vote, 46 00:02:58,760 --> 00:03:01,320 Speaker 2: and we also have that signal well, very very clear 47 00:03:01,360 --> 00:03:03,720 Speaker 2: in terms of rates are going to be on hold 48 00:03:03,760 --> 00:03:07,760 Speaker 2: for a meaningful period of time, even if, as we expect, 49 00:03:08,320 --> 00:03:11,040 Speaker 2: the economy enters a recession, rates are going to remain 50 00:03:11,120 --> 00:03:14,639 Speaker 2: quite elevated. And that's quite a burden for small companies 51 00:03:14,639 --> 00:03:18,200 Speaker 2: in particular who are much more sensitive to the rate cycle. 52 00:03:18,520 --> 00:03:21,520 Speaker 2: They are facing a profit squeeze. There is a bit 53 00:03:21,560 --> 00:03:24,079 Speaker 2: of an issue there in terms of future business investment 54 00:03:24,720 --> 00:03:27,240 Speaker 2: and so there are a number of challenges there, particularly 55 00:03:27,280 --> 00:03:29,959 Speaker 2: for the smaller, smaller firms. So that's something that the 56 00:03:30,000 --> 00:03:32,040 Speaker 2: Bank of England are going to have to really be 57 00:03:32,160 --> 00:03:32,640 Speaker 2: wary of. 58 00:03:33,000 --> 00:03:35,880 Speaker 4: Yeah, credit availability for small firm is always an issue, 59 00:03:35,920 --> 00:03:39,880 Speaker 4: whether it's stateside or across the pond street. When it 60 00:03:39,960 --> 00:03:43,240 Speaker 4: comes to the stimulus versus austerity debate, that time was 61 00:03:43,280 --> 00:03:46,240 Speaker 4: referencing how does the Bank of England's decision to keep 62 00:03:46,320 --> 00:03:48,920 Speaker 4: rates on hold for a second straight meeting and warn 63 00:03:48,960 --> 00:03:51,760 Speaker 4: about a possible recession, warn about the need to perhaps 64 00:03:51,840 --> 00:03:54,760 Speaker 4: raise rates in the future of inflation reaccelerates. How does 65 00:03:54,800 --> 00:03:58,360 Speaker 4: that restrain or limit the government's options when it comes 66 00:03:58,440 --> 00:04:00,400 Speaker 4: to supporting the economy. 67 00:04:01,000 --> 00:04:03,080 Speaker 2: I think the government is also very aware, and we 68 00:04:03,120 --> 00:04:06,080 Speaker 2: have heard from Sunak p at the Prime Minister. We 69 00:04:06,120 --> 00:04:09,560 Speaker 2: have heard that there is a focus on inflation even 70 00:04:09,600 --> 00:04:12,600 Speaker 2: within the government. Yes, they do have an election coming up, 71 00:04:12,760 --> 00:04:16,320 Speaker 2: but they're worried about stimulus too soon and too much 72 00:04:16,320 --> 00:04:18,559 Speaker 2: stimulus too soon. So I think they're going to pair 73 00:04:18,600 --> 00:04:23,159 Speaker 2: back on any measures that are going to fuel inflation. Further, 74 00:04:23,240 --> 00:04:25,960 Speaker 2: I think that's also concerned from them, get every challenging 75 00:04:25,960 --> 00:04:28,320 Speaker 2: decision for them, given that there is an election on 76 00:04:28,360 --> 00:04:28,960 Speaker 2: the horizon. 77 00:04:29,920 --> 00:04:32,960 Speaker 1: Are all the gains in the United Kingdom focused on London? 78 00:04:33,360 --> 00:04:35,120 Speaker 1: I mean, I mean, is it like, you know, the 79 00:04:35,120 --> 00:04:39,320 Speaker 1: dominance of Paris and France. Are all the economic gains 80 00:04:39,400 --> 00:04:42,520 Speaker 1: which you have been tangible here have they been focused 81 00:04:42,600 --> 00:04:43,719 Speaker 1: on the south of England? 82 00:04:45,000 --> 00:04:47,120 Speaker 2: Well, there has been a big debate for a number 83 00:04:47,160 --> 00:04:51,400 Speaker 2: of years with regards to the regional disparities, and that 84 00:04:51,560 --> 00:04:53,920 Speaker 2: was something that for a few years there have been 85 00:04:54,040 --> 00:04:56,600 Speaker 2: some focus on what are the policies that can help 86 00:04:57,240 --> 00:05:03,200 Speaker 2: level up the economic outlook. However, it has been quite 87 00:05:03,279 --> 00:05:05,760 Speaker 2: challenging in order to do that with the pandemic recovery 88 00:05:05,760 --> 00:05:10,080 Speaker 2: from the pandemic. And I think the leveling up policies 89 00:05:10,120 --> 00:05:13,479 Speaker 2: may be, you know, they're on the horizon in the future, 90 00:05:13,720 --> 00:05:17,280 Speaker 2: but right now, really the focus is quite narrow. That 91 00:05:17,440 --> 00:05:21,960 Speaker 2: regional disparity, unfortunately, is still very much there. 92 00:05:22,360 --> 00:05:25,000 Speaker 1: Christrie, thank you so much. Cut your govid in with 93 00:05:25,080 --> 00:05:31,800 Speaker 1: us with Aberdeen joining us now. On the other points 94 00:05:31,800 --> 00:05:35,680 Speaker 1: in the Wars of Washington, Gregory Vellier, he's chief US 95 00:05:35,880 --> 00:05:40,560 Speaker 1: Policy Strategistic AGF Investments. Greg I believe it is November, 96 00:05:41,440 --> 00:05:45,400 Speaker 1: that's twelve months away from an election. Take the drama 97 00:05:45,600 --> 00:05:49,880 Speaker 1: of October in our many wars and fold it into 98 00:05:49,880 --> 00:05:53,599 Speaker 1: how things change twelve months before an election. How does 99 00:05:53,720 --> 00:05:58,200 Speaker 1: your world change given the pending one year out election. 100 00:05:59,040 --> 00:06:01,880 Speaker 5: Well, good morning time. So many unknowns. I'd say one 101 00:06:01,960 --> 00:06:06,880 Speaker 5: big one is Benjamin Netanaihu. If you saw the extraordinary 102 00:06:06,920 --> 00:06:09,719 Speaker 5: story in the New York Times on Monday talking about 103 00:06:09,720 --> 00:06:13,880 Speaker 5: how Israel and Netanaihu were blindsided by Hamas they got 104 00:06:13,960 --> 00:06:17,719 Speaker 5: totally caught off guard. There's going to be recriminations. I 105 00:06:17,720 --> 00:06:21,640 Speaker 5: think that has to be looked at very carefully. There's 106 00:06:22,040 --> 00:06:26,120 Speaker 5: the FED and there's this continuing fight in the House 107 00:06:26,200 --> 00:06:30,520 Speaker 5: between fairly moderate Republicans and the right wing. That fight 108 00:06:30,600 --> 00:06:32,919 Speaker 5: is about to resume within days. 109 00:06:33,520 --> 00:06:36,320 Speaker 4: Right, But you've got a right wing Speaker of the House. Now, 110 00:06:36,400 --> 00:06:38,680 Speaker 4: shouldn't that restore some order in the House. 111 00:06:39,680 --> 00:06:42,240 Speaker 5: One would think Scarlet wouldn't one, But I'm not quite 112 00:06:42,320 --> 00:06:46,119 Speaker 5: sure about that. I think that even a handful four 113 00:06:46,279 --> 00:06:50,480 Speaker 5: or five House Republicans could block this next spending bill. 114 00:06:50,920 --> 00:06:53,080 Speaker 5: And there are Republicans in the House who don't want 115 00:06:53,120 --> 00:06:55,880 Speaker 5: to spend money on Ukraine, as you guys know, and 116 00:06:56,120 --> 00:07:00,240 Speaker 5: some lukewarm attitudes toward Israel. But the big fights still 117 00:07:00,320 --> 00:07:03,039 Speaker 5: is a budget. We have a budget deadline in about 118 00:07:03,040 --> 00:07:05,120 Speaker 5: two weeks and they're not close to being done. 119 00:07:05,360 --> 00:07:09,200 Speaker 4: Yeah, and so we're watching that November seventeenth deadline very carefully. 120 00:07:09,400 --> 00:07:12,040 Speaker 4: I want to get your take also on what the 121 00:07:12,120 --> 00:07:15,480 Speaker 4: economy means for the presidential election tries. It might The 122 00:07:15,480 --> 00:07:18,800 Speaker 4: White House has been selling Bidenomics, but it's not doing 123 00:07:19,160 --> 00:07:22,520 Speaker 4: very well. When consumers are feeling pretty sour. What does 124 00:07:22,520 --> 00:07:25,680 Speaker 4: the current FED policy mean for the economy in twenty 125 00:07:25,720 --> 00:07:26,280 Speaker 4: twenty four. 126 00:07:27,400 --> 00:07:30,280 Speaker 5: Well, I think there's maybe some relief among consumers that 127 00:07:30,600 --> 00:07:33,240 Speaker 5: the FED didn't raise race. But I thought you and 128 00:07:33,280 --> 00:07:36,640 Speaker 5: Tom a few minutes ago hit it perfectly talking about 129 00:07:36,680 --> 00:07:39,280 Speaker 5: food prices. I mean, food prices are up. What did 130 00:07:39,320 --> 00:07:41,480 Speaker 5: you guys say, nineteen percent cumulative? 131 00:07:41,560 --> 00:07:43,360 Speaker 1: Yeah, over three years. 132 00:07:43,520 --> 00:07:47,040 Speaker 5: Over three years, But that leaves an awful lot of people, 133 00:07:47,080 --> 00:07:50,480 Speaker 5: maybe not us, but leaves an awful lot of people 134 00:07:50,560 --> 00:07:52,960 Speaker 5: discouraged that this is not improving. 135 00:07:53,480 --> 00:07:56,600 Speaker 1: Yeah. What's important there, Scarlett, is the USDA with this 136 00:07:56,640 --> 00:07:59,680 Speaker 1: is really good data from the US Department of Agriculture. 137 00:08:00,080 --> 00:08:03,160 Speaker 1: They say that for the have nots of America, it's 138 00:08:03,160 --> 00:08:07,320 Speaker 1: not third world, but thirty percent of their compensation is 139 00:08:07,400 --> 00:08:08,440 Speaker 1: going to food. 140 00:08:08,400 --> 00:08:10,600 Speaker 4: Which means thirty percent of their conversation is not going 141 00:08:10,600 --> 00:08:14,440 Speaker 4: to discretionary spending or anything else that usually supports the economy. Greg, 142 00:08:14,480 --> 00:08:16,720 Speaker 4: I want to bring it back once again to FED 143 00:08:16,760 --> 00:08:19,280 Speaker 4: policy in the economy in twenty twenty four because J. 144 00:08:19,440 --> 00:08:22,960 Speaker 4: Powell's term expires as FED chaer in early twenty twenty six. 145 00:08:23,040 --> 00:08:26,200 Speaker 4: So whoever wins the twenty four to four election, would 146 00:08:26,200 --> 00:08:29,200 Speaker 4: get to pick the next FED chair. What does that 147 00:08:29,280 --> 00:08:32,520 Speaker 4: mean to you? And I bring this up because if 148 00:08:32,559 --> 00:08:36,880 Speaker 4: Donald Trump wins the nomination, yes he nominated Powell as fedchair, 149 00:08:36,960 --> 00:08:39,559 Speaker 4: but he also nominated Judy Shelton as a FED governor. 150 00:08:40,280 --> 00:08:40,480 Speaker 3: Yeah. 151 00:08:41,120 --> 00:08:44,080 Speaker 5: I think if Biden wins, obviously he'll try to keep 152 00:08:44,760 --> 00:08:48,000 Speaker 5: at Jerome Powell. If Trump wins, he will fire and 153 00:08:48,000 --> 00:08:50,599 Speaker 5: get rid of Powell as quickly as possible, and that 154 00:08:50,720 --> 00:08:53,560 Speaker 5: will I think cost some anxiety for the markets. You know, 155 00:08:53,640 --> 00:08:56,000 Speaker 5: one other quick point I would make about what we 156 00:08:56,040 --> 00:08:58,199 Speaker 5: could see in the next year or so that maybe 157 00:08:58,240 --> 00:09:00,640 Speaker 5: is outside of the box. I go to piece this 158 00:09:00,720 --> 00:09:05,360 Speaker 5: morning on Robert F. Kennedy Junior. There's a new poll 159 00:09:05,400 --> 00:09:09,760 Speaker 5: out overnight from Quinnipiac showing him a twenty two percent 160 00:09:10,240 --> 00:09:12,439 Speaker 5: that I was surprised. I think a lot of people 161 00:09:12,480 --> 00:09:14,800 Speaker 5: were surprised to see that. And I do think that 162 00:09:15,120 --> 00:09:19,679 Speaker 5: he will take away from Joe Biden, young people, independence, 163 00:09:19,800 --> 00:09:21,960 Speaker 5: African Americans, environmentalists. 164 00:09:22,640 --> 00:09:23,040 Speaker 1: Robert F. 165 00:09:23,120 --> 00:09:25,520 Speaker 5: Kennedy Jr. Is not going to be the next president, 166 00:09:25,760 --> 00:09:27,320 Speaker 5: but he may determine who will be. 167 00:09:28,080 --> 00:09:41,720 Speaker 1: Craig Villie, thank you so much. With AGF investments, we 168 00:09:41,760 --> 00:09:43,720 Speaker 1: can rip up the script with a gentleman that worked 169 00:09:43,720 --> 00:09:47,319 Speaker 1: in the macroeconomic section at the FED. Jonathan Pingle joins 170 00:09:47,320 --> 00:09:51,000 Speaker 1: the course with UBS, their chief US economists, John I'm sorry, 171 00:09:51,080 --> 00:09:53,839 Speaker 1: I got to go here, and Julia Cornado XBMB Perry 172 00:09:53,880 --> 00:09:56,240 Speaker 1: by Macro turns his way out in front of this. 173 00:09:56,640 --> 00:10:03,080 Speaker 1: Are we completely misguessing the efficiency, the productivity, the technological 174 00:10:03,160 --> 00:10:07,120 Speaker 1: advancement of America? Are we just flat out to pessimistic? 175 00:10:09,720 --> 00:10:12,480 Speaker 6: Well, I mean it's hard to know what the expectations are, 176 00:10:12,559 --> 00:10:15,760 Speaker 6: right there aren't that many people as in the weeds 177 00:10:15,960 --> 00:10:20,760 Speaker 6: on productivity, you know, on the immigration rebound as Julia, 178 00:10:20,800 --> 00:10:22,440 Speaker 6: and you know, give Julia a lot of props since 179 00:10:22,440 --> 00:10:26,280 Speaker 6: we were at the board together a year long time ago. 180 00:10:27,440 --> 00:10:29,160 Speaker 6: But I would say two things, and Sheer Powell touched 181 00:10:29,160 --> 00:10:32,199 Speaker 6: on this yesterday. One is, you know, we have been 182 00:10:32,440 --> 00:10:36,120 Speaker 6: seeing a pretty impressive rebound and labor supply and that's 183 00:10:36,160 --> 00:10:40,199 Speaker 6: been both the combination of you know, a significant improvement 184 00:10:40,240 --> 00:10:42,600 Speaker 6: and net international migration coming. 185 00:10:42,360 --> 00:10:43,959 Speaker 3: Out of the pandemic. 186 00:10:44,760 --> 00:10:48,160 Speaker 6: In addition to you know, some groups like prime age 187 00:10:48,160 --> 00:10:51,240 Speaker 6: women punching out new all time highs and their labor 188 00:10:51,240 --> 00:10:54,600 Speaker 6: force participation rates. And you know, we've certainly been writing 189 00:10:54,640 --> 00:10:56,880 Speaker 6: about that, and Julia's done a good job as well 190 00:10:57,280 --> 00:10:59,560 Speaker 6: on the productivity stuff. Though we do have to remember 191 00:10:59,600 --> 00:11:04,520 Speaker 6: that productivity was incredibly weak as we went through the 192 00:11:04,520 --> 00:11:07,240 Speaker 6: pandemic and immediately coming out, so we did have a 193 00:11:07,240 --> 00:11:10,560 Speaker 6: fair amount of catch up to do. And when we 194 00:11:10,600 --> 00:11:13,920 Speaker 6: look at sort of the longer run trends after today's data, 195 00:11:14,120 --> 00:11:16,319 Speaker 6: just mathematically you are going to be a little bit 196 00:11:16,320 --> 00:11:18,720 Speaker 6: above the longer run trends. So it is good news, 197 00:11:19,440 --> 00:11:22,800 Speaker 6: but you're actually really still not that far from what 198 00:11:22,880 --> 00:11:26,199 Speaker 6: we were seeing pre COVID. But I will say together, 199 00:11:26,400 --> 00:11:30,920 Speaker 6: I think it's right. We're seeing nominal wage gains slow, 200 00:11:31,200 --> 00:11:34,080 Speaker 6: and some of that is these supply side improvements and 201 00:11:34,200 --> 00:11:36,640 Speaker 6: unit labor costs dropping. You know, we were forecasting a 202 00:11:36,679 --> 00:11:39,040 Speaker 6: seven to ten drop. You know that is the result 203 00:11:39,120 --> 00:11:42,760 Speaker 6: of the slowness we saw in average hourly earnings combined 204 00:11:42,800 --> 00:11:46,480 Speaker 6: with basically five percent GDP growth in the third quarter. 205 00:11:46,520 --> 00:11:48,040 Speaker 3: So that's a good supply side story. 206 00:11:48,280 --> 00:11:51,240 Speaker 1: Tell me about course services. The chairman didn't talk about 207 00:11:51,280 --> 00:11:53,920 Speaker 1: it much yesterday, but are we seeing a service sector 208 00:11:54,120 --> 00:11:59,040 Speaker 1: disinflation to give confidence to an outright goods deflation? 209 00:12:00,720 --> 00:12:01,079 Speaker 3: We are? 210 00:12:01,160 --> 00:12:04,240 Speaker 6: I mean, we've had We've had some positive news on 211 00:12:04,320 --> 00:12:07,080 Speaker 6: the core services over the last several months, but I 212 00:12:07,080 --> 00:12:10,640 Speaker 6: would say we're sort of not out of the woods yet, 213 00:12:10,720 --> 00:12:12,559 Speaker 6: right Like, you know, I think that's one of the 214 00:12:12,600 --> 00:12:15,880 Speaker 6: reasons Chair Powell yesterday, you know, and Mike McKee did 215 00:12:15,880 --> 00:12:17,640 Speaker 6: a great job with his you know, trying to pin 216 00:12:17,760 --> 00:12:21,160 Speaker 6: the chair down on the objective versus subjective decision. But 217 00:12:21,520 --> 00:12:24,040 Speaker 6: what we want to see is a little bit more 218 00:12:24,080 --> 00:12:27,600 Speaker 6: slowing in the labor market in order to see more 219 00:12:27,640 --> 00:12:31,199 Speaker 6: slowing in those components of inflation, because if we look 220 00:12:31,200 --> 00:12:33,920 Speaker 6: at the ECI, it does look like wage gains are 221 00:12:34,040 --> 00:12:38,040 Speaker 6: still a little too risk to be consistent with sustainable 222 00:12:38,080 --> 00:12:40,640 Speaker 6: two percent inflation. So I do think the Chair and 223 00:12:40,679 --> 00:12:42,520 Speaker 6: Mike was just saying this, they do need to get 224 00:12:42,520 --> 00:12:45,760 Speaker 6: the labor market to slow here if they are going 225 00:12:45,800 --> 00:12:48,960 Speaker 6: to achieve their mandate and restore price stability. 226 00:12:49,240 --> 00:12:51,320 Speaker 4: All right, this is clearly a big, big week for 227 00:12:51,480 --> 00:12:55,160 Speaker 4: labor market data. You had ADP employment change jolts and 228 00:12:55,200 --> 00:12:58,240 Speaker 4: of course jobless claims this morning. Unit labor costs as 229 00:12:58,280 --> 00:13:01,440 Speaker 4: well in productivity. We know that the UAW has come 230 00:13:01,480 --> 00:13:03,600 Speaker 4: to agreements with the automakers, but if you are an 231 00:13:03,760 --> 00:13:06,960 Speaker 4: union organizer and I'm thinking of the Actors Guild, for instance, 232 00:13:06,960 --> 00:13:09,240 Speaker 4: that is still on strike. What is your takeaway from 233 00:13:09,240 --> 00:13:11,480 Speaker 4: the flood of data that we've gotten on the labor 234 00:13:11,520 --> 00:13:12,240 Speaker 4: market right now? 235 00:13:13,520 --> 00:13:15,960 Speaker 6: Well, land market's still tight, right so you know, so 236 00:13:16,240 --> 00:13:17,760 Speaker 6: you know, even I mean, and I don't really think 237 00:13:17,800 --> 00:13:19,960 Speaker 6: you need to look much beyond the unemployment rate at 238 00:13:19,960 --> 00:13:22,160 Speaker 6: three point eight percent to say, you know, the nation's 239 00:13:22,200 --> 00:13:24,840 Speaker 6: at full employment and markets are tight, and you know 240 00:13:24,880 --> 00:13:26,960 Speaker 6: you've got a point here where there might be some 241 00:13:27,040 --> 00:13:31,480 Speaker 6: bargaining power for workers. The other interesting thing about a 242 00:13:31,600 --> 00:13:34,840 Speaker 6: number of these strikes is there are a lot of 243 00:13:35,000 --> 00:13:38,840 Speaker 6: non wage issues at stake. You know, you're talking about, 244 00:13:38,960 --> 00:13:41,080 Speaker 6: you know, the use of AI for the actors, you're 245 00:13:41,120 --> 00:13:43,960 Speaker 6: talking about, you know, the shift to electric vehicles amongst 246 00:13:43,960 --> 00:13:46,840 Speaker 6: the UAW. And that's actually been sort of an interesting 247 00:13:46,960 --> 00:13:50,240 Speaker 6: aspect where, you know, a lot of these labor negotiations 248 00:13:50,280 --> 00:13:53,760 Speaker 6: it's not just about the wages, you know, it's really 249 00:13:53,760 --> 00:13:57,920 Speaker 6: also about sort of these changing industry dynamics that they 250 00:13:57,920 --> 00:13:59,400 Speaker 6: want to protect their workers from. 251 00:13:59,760 --> 00:14:01,559 Speaker 4: So how does that show up in the data, How 252 00:14:01,559 --> 00:14:04,840 Speaker 4: does that show up in the economy in what's measurable. 253 00:14:05,480 --> 00:14:07,800 Speaker 6: Well, we should definitely see the impact of the UAW 254 00:14:07,960 --> 00:14:12,920 Speaker 6: strike tomorrow. In tomorrow's data, you know, the BLS released 255 00:14:12,920 --> 00:14:15,680 Speaker 6: their strike report. You know, between the strikes the Big 256 00:14:15,720 --> 00:14:18,360 Speaker 6: Three and Mac Trucks, that should be about a thirty 257 00:14:18,480 --> 00:14:22,720 Speaker 6: thousand job reduction in motor vehicle and parts assemblies employment. 258 00:14:22,760 --> 00:14:24,840 Speaker 6: You'll see it in Table B and B one of 259 00:14:24,880 --> 00:14:28,120 Speaker 6: the employment situation release. So we should definitely see that 260 00:14:28,240 --> 00:14:33,320 Speaker 6: way on the employer report tomorrow, but that'll rebound in 261 00:14:33,400 --> 00:14:36,200 Speaker 6: the subsequent in the subsequent report. And I think the 262 00:14:36,200 --> 00:14:39,360 Speaker 6: bigger picture is that you have put in place for 263 00:14:39,440 --> 00:14:42,360 Speaker 6: some of these contracts, you know, a return to things 264 00:14:42,520 --> 00:14:46,280 Speaker 6: like you know, cost of living adjustments, et cetera. So 265 00:14:46,360 --> 00:14:49,600 Speaker 6: this should generally mean for these workers somewhat firmer wage 266 00:14:49,640 --> 00:14:51,880 Speaker 6: gains over the next few years than would have otherwise 267 00:14:51,920 --> 00:14:52,440 Speaker 6: been the case. 268 00:14:52,600 --> 00:14:55,760 Speaker 1: Jonathan Tingle, thank you for the brief, particularly there quickly 269 00:14:55,800 --> 00:15:00,040 Speaker 1: on advancing productivity is with UBS. I love saying this 270 00:15:00,160 --> 00:15:07,760 Speaker 1: the Union Bank of Switzerland. We're going to get complicated 271 00:15:07,800 --> 00:15:11,120 Speaker 1: here and straighten this out. Hulu being taken out by Disney. 272 00:15:11,560 --> 00:15:17,040 Speaker 1: Brian robertson Comcast unloading the Dogkeetha Ranganathen of Bloomberg Intelligence 273 00:15:17,120 --> 00:15:22,720 Speaker 1: is truly encyclopedic on this near nine billion dollar that transaction. Getha, 274 00:15:22,800 --> 00:15:27,119 Speaker 1: I'm lost here. Is Comcast happy today that they unloaded 275 00:15:27,120 --> 00:15:29,960 Speaker 1: the stock or is this the deal of a lifetime 276 00:15:30,000 --> 00:15:30,840 Speaker 1: for mister Eiger? 277 00:15:31,920 --> 00:15:33,840 Speaker 7: So this is this is, as you just pointed out 278 00:15:33,880 --> 00:15:36,480 Speaker 7: on this is a pretty complicated transaction. All that we 279 00:15:36,600 --> 00:15:41,080 Speaker 7: got yesterday was that Disney is definitely buying out comcast 280 00:15:41,240 --> 00:15:44,760 Speaker 7: thirty three percent stake. So Disney already owns two thirds 281 00:15:44,800 --> 00:15:48,320 Speaker 7: of Hulu, so we know for certain that Comcast is 282 00:15:48,360 --> 00:15:52,120 Speaker 7: offloading it who Disney is buying it? Now the biggest 283 00:15:52,200 --> 00:15:54,880 Speaker 7: question here is going to be price. So we know 284 00:15:55,000 --> 00:15:59,200 Speaker 7: the floor value was set at twenty seven billion. Disney 285 00:15:59,200 --> 00:16:01,560 Speaker 7: actually came out yes, they're saying that they do expect 286 00:16:01,560 --> 00:16:05,240 Speaker 7: to make that initial payment of you know, eight it's 287 00:16:05,240 --> 00:16:08,720 Speaker 7: actually nine billion minus some capital calls, which which is 288 00:16:08,720 --> 00:16:11,760 Speaker 7: why you get the eight point six billion. But really 289 00:16:11,320 --> 00:16:13,840 Speaker 7: the point is going to be how much greater than 290 00:16:13,880 --> 00:16:16,000 Speaker 7: twenty seven billion is the valuation going to be? And 291 00:16:16,040 --> 00:16:17,880 Speaker 7: that is where all of the complexity is going to 292 00:16:17,920 --> 00:16:19,160 Speaker 7: arise over the next few months. 293 00:16:19,200 --> 00:16:21,720 Speaker 1: I mean, John Pharaoh is addicted to Hulu. He's just 294 00:16:22,000 --> 00:16:25,400 Speaker 1: you know, he like binge watches Love Island USA and 295 00:16:25,440 --> 00:16:28,880 Speaker 1: the rest of it. GITHA doesn't matter who watches this 296 00:16:29,000 --> 00:16:32,840 Speaker 1: stuff in this transaction or is this just people distant 297 00:16:32,840 --> 00:16:34,240 Speaker 1: from what we watch every day? 298 00:16:35,200 --> 00:16:38,480 Speaker 7: I mean, Hulu has forty eight million subscribers some so 299 00:16:38,600 --> 00:16:42,360 Speaker 7: it is a very very successful streaming service. You're absolutely right. 300 00:16:42,360 --> 00:16:44,400 Speaker 7: It has a very deep catalog of classics. 301 00:16:44,760 --> 00:16:47,720 Speaker 1: It has all of us Keith, You're not going to 302 00:16:47,800 --> 00:16:51,600 Speaker 1: sell surveillances audience. The Love Island USA is a classic. 303 00:16:51,960 --> 00:16:55,920 Speaker 7: Continue well, it has you know, it has a lot 304 00:16:55,960 --> 00:16:57,840 Speaker 7: of the must watch shows, right you brought up the 305 00:16:57,840 --> 00:17:01,120 Speaker 7: Bear Only Murders in the Building is show. It has 306 00:17:01,160 --> 00:17:03,760 Speaker 7: a lot of shows that come up from broadcast TV, 307 00:17:03,880 --> 00:17:07,200 Speaker 7: so it's a great catch up service. And it also 308 00:17:07,320 --> 00:17:11,120 Speaker 7: has kind of this live Hulu Plus live option as well. 309 00:17:11,160 --> 00:17:13,320 Speaker 7: So there are a lot of different flavors that it offers. 310 00:17:13,600 --> 00:17:16,000 Speaker 7: But I think the biggest thing for Disney is really 311 00:17:16,040 --> 00:17:18,520 Speaker 7: the ad component of it. If there is any streaming 312 00:17:18,560 --> 00:17:22,480 Speaker 7: service out there that has got advertising right, it is Hulu. 313 00:17:22,520 --> 00:17:24,560 Speaker 7: We know that Netflix is struggling with that right now, 314 00:17:24,640 --> 00:17:26,480 Speaker 7: so is Disney Plus. So are a lot of the 315 00:17:26,600 --> 00:17:29,840 Speaker 7: established services. Amazon is looking to bring an advertising service. 316 00:17:29,920 --> 00:17:33,440 Speaker 7: Hulu is the one established brand already bringing in about 317 00:17:33,480 --> 00:17:36,000 Speaker 7: three three and a half billion dollars in AD revenue. 318 00:17:36,280 --> 00:17:39,840 Speaker 7: So that infrastructure is a gold mine and is super 319 00:17:39,920 --> 00:17:41,359 Speaker 7: valuable to Disney. 320 00:17:41,280 --> 00:17:43,280 Speaker 4: And for that reason, Hulu is one of the few 321 00:17:43,320 --> 00:17:46,800 Speaker 4: profitable streamers. Netflix of course another profitable streamer here. But 322 00:17:47,359 --> 00:17:51,080 Speaker 4: what is it about the ad packaging that Hulu has 323 00:17:51,080 --> 00:17:54,119 Speaker 4: figured out. As a consumer of Hulu, it's really frustrating 324 00:17:54,160 --> 00:17:56,679 Speaker 4: to see the same Tom Brady hurts commercial over and 325 00:17:56,720 --> 00:17:57,240 Speaker 4: over again. 326 00:17:58,000 --> 00:18:00,600 Speaker 7: No, you're absolutely right, But at the same time, I mean, 327 00:18:00,720 --> 00:18:03,959 Speaker 7: this is a company, you know, obviously they have They 328 00:18:04,000 --> 00:18:06,720 Speaker 7: are the ones that have ads, that have had ads 329 00:18:06,720 --> 00:18:09,480 Speaker 7: on now for the longest period of time. They've built 330 00:18:09,520 --> 00:18:12,840 Speaker 7: all these different they've built very a very very robust 331 00:18:12,920 --> 00:18:15,440 Speaker 7: AD stack, and they've also kind of made all these 332 00:18:15,600 --> 00:18:19,119 Speaker 7: different you know, relationships with advertisers. Of course, you have 333 00:18:19,200 --> 00:18:22,320 Speaker 7: the larger Disney brand as well at work there, but 334 00:18:22,400 --> 00:18:24,080 Speaker 7: that is something where they've really been able to crack 335 00:18:24,119 --> 00:18:25,919 Speaker 7: the code. I mean, Hulu is one service where you 336 00:18:26,000 --> 00:18:28,800 Speaker 7: have majority of you know, the consumers on the on 337 00:18:28,880 --> 00:18:31,680 Speaker 7: the ads supported option, which is what has made it such, 338 00:18:32,200 --> 00:18:35,080 Speaker 7: you know, so successful in what it's set out to do. 339 00:18:35,840 --> 00:18:39,000 Speaker 4: Disney says it has enough cash and credit to buy Hulu, 340 00:18:39,040 --> 00:18:41,640 Speaker 4: whereas Comcasts will be using the proceeds to boost its 341 00:18:42,000 --> 00:18:47,399 Speaker 4: accelerate its stock repurchase program. When this financial transaction is completed, 342 00:18:47,880 --> 00:18:50,000 Speaker 4: does it move the needle at all for either Disney 343 00:18:50,040 --> 00:18:50,919 Speaker 4: or Comcast stock. 344 00:18:51,600 --> 00:18:54,000 Speaker 7: I think it definitely moves the needle for Disney because 345 00:18:54,040 --> 00:18:57,080 Speaker 7: this removes a key overhang. Remember, there are so many 346 00:18:57,080 --> 00:19:01,520 Speaker 7: strategic questions that are still kind of pending for Barb Biger, 347 00:19:01,600 --> 00:19:04,720 Speaker 7: whether it's the future of ESPN, whether it's the sale 348 00:19:04,760 --> 00:19:07,479 Speaker 7: of the ABC network, and so, you know, kind of 349 00:19:07,560 --> 00:19:10,320 Speaker 7: just closing this deal with Hulu and then integrating it 350 00:19:10,359 --> 00:19:13,840 Speaker 7: with Disney Plus, I think just removes a key overhang 351 00:19:13,880 --> 00:19:14,280 Speaker 7: for the stock. 352 00:19:14,520 --> 00:19:17,080 Speaker 1: Five years out, do they mate. Do you see Hulu 353 00:19:17,119 --> 00:19:20,040 Speaker 1: combined with Disney Plus to really take on Netflix as 354 00:19:20,040 --> 00:19:22,320 Speaker 1: a combined adult in kids' entity. 355 00:19:22,880 --> 00:19:26,320 Speaker 7: Absolutely, I think that is what the plan is. I mean, 356 00:19:26,400 --> 00:19:27,919 Speaker 7: at the end of the day, they are looking to 357 00:19:28,000 --> 00:19:31,240 Speaker 7: get synergies across the board in their streaming product because 358 00:19:31,240 --> 00:19:33,440 Speaker 7: Disney Plus is still losing money. It is still going 359 00:19:33,480 --> 00:19:35,240 Speaker 7: to lose about two and a half three billion dollars 360 00:19:35,280 --> 00:19:37,520 Speaker 7: this year. But I think when you combine this we're 361 00:19:37,520 --> 00:19:39,480 Speaker 7: looking at savings of at least one one and a 362 00:19:39,520 --> 00:19:42,800 Speaker 7: half billion dollars. I think it's definitely going to accelerate 363 00:19:42,880 --> 00:19:44,320 Speaker 7: streaming crafitability for Disney. 364 00:19:44,600 --> 00:19:47,639 Speaker 4: Synergy to me means rebundling, So you're going to have 365 00:19:47,720 --> 00:19:50,560 Speaker 4: to pay some big, heftier price to get all these 366 00:19:50,600 --> 00:19:52,879 Speaker 4: different channels or streamers into twenty. 367 00:19:52,920 --> 00:19:55,800 Speaker 1: That's what Paul Sweeney would say as well. What I'm 368 00:19:55,840 --> 00:19:59,640 Speaker 1: fascinated by is when we're all said and done with this. 369 00:20:00,320 --> 00:20:03,200 Speaker 1: I mean, there's Hulu and there's Disney Plus, and they're 370 00:20:03,240 --> 00:20:06,119 Speaker 1: going to merge and they're gonna take on Netflix. Keitha, 371 00:20:06,240 --> 00:20:09,000 Speaker 1: do you see a true duopoly out there? Is that 372 00:20:09,040 --> 00:20:10,240 Speaker 1: where streaming is heading? 373 00:20:10,760 --> 00:20:13,239 Speaker 7: It definitely is heading there, Tom, There's no doubt about it. 374 00:20:13,240 --> 00:20:15,639 Speaker 7: I mean Netflix is far ahead of the competition. They 375 00:20:15,680 --> 00:20:18,159 Speaker 7: have almost two hundred and fifty million subscribers. We do 376 00:20:18,240 --> 00:20:20,119 Speaker 7: see them getting to three hundred million over you know, 377 00:20:20,160 --> 00:20:21,960 Speaker 7: maybe the next few years. But yes, this is kind 378 00:20:22,000 --> 00:20:25,840 Speaker 7: of very much turning into you know, Netflix versus Disney 379 00:20:25,880 --> 00:20:32,360 Speaker 7: versus most probably Amazon. So yeah, maybe a tryal Max HBO. Yeah, 380 00:20:32,480 --> 00:20:36,920 Speaker 7: that's a tough one, you know, Hbo Max. You know, 381 00:20:37,320 --> 00:20:39,240 Speaker 7: she's got to be a second tier. 382 00:20:39,080 --> 00:20:40,840 Speaker 4: Service, second tier look at it. 383 00:20:40,920 --> 00:20:44,040 Speaker 1: She's just like, Wow, you know what's so bad about that? 384 00:20:44,119 --> 00:20:47,280 Speaker 1: And this goes, this goes with Discovery Plus and Max 385 00:20:47,320 --> 00:20:48,600 Speaker 1: and all that is. You know where am I going 386 00:20:48,640 --> 00:20:50,840 Speaker 1: to see ninety day fiance? 387 00:20:51,040 --> 00:20:52,160 Speaker 4: I know you're addicted to it. 388 00:20:52,240 --> 00:20:55,000 Speaker 1: If it doesn't work, O Githa ruganof and thank you 389 00:20:55,080 --> 00:21:08,440 Speaker 1: so much. I think I learned something there. Pierre Farragu 390 00:21:08,520 --> 00:21:12,920 Speaker 1: wrote the Black Books for Bernstein and Technology for years. Yes, 391 00:21:13,040 --> 00:21:17,240 Speaker 1: he's got a fancy title Global Technology Infrastructure at New Street, 392 00:21:17,240 --> 00:21:19,720 Speaker 1: but the answer is once and forever he will always 393 00:21:19,800 --> 00:21:24,320 Speaker 1: own the Black Books over at Alliance Bernstein Peer. Thank you, Pierre, 394 00:21:24,400 --> 00:21:26,960 Speaker 1: Thank you so much for joining us. And you have 395 00:21:27,080 --> 00:21:31,040 Speaker 1: been cautious on Apple. Is now a time to buy 396 00:21:31,080 --> 00:21:34,520 Speaker 1: the shares? After the lassitude that we've seen over the 397 00:21:34,600 --> 00:21:35,520 Speaker 1: last twelve months. 398 00:21:38,000 --> 00:21:42,280 Speaker 8: I would have liked to say yes, but unfortunately, and 399 00:21:42,320 --> 00:21:43,920 Speaker 8: the reason why I would have liked to say yes 400 00:21:44,040 --> 00:21:47,120 Speaker 8: is because sentiment is very very low on the name. 401 00:21:47,160 --> 00:21:50,160 Speaker 8: You know, sixty percent by ratings and forty percent sale 402 00:21:50,200 --> 00:21:53,560 Speaker 8: and a neutral rating for that name. It's very very 403 00:21:54,400 --> 00:21:57,119 Speaker 8: It's as low as can be, I would say. So 404 00:21:57,160 --> 00:21:59,760 Speaker 8: we've had like a very slow yeer. You know, three 405 00:22:00,040 --> 00:22:03,760 Speaker 8: after in a row in negative growth, we're getting back 406 00:22:03,800 --> 00:22:05,959 Speaker 8: to politive growth probably on the guide, but it's just 407 00:22:05,960 --> 00:22:10,199 Speaker 8: because we're hitting like the the easier compare now and 408 00:22:10,280 --> 00:22:13,240 Speaker 8: so that slowdown, like the stock reacted relatively well to 409 00:22:13,280 --> 00:22:15,720 Speaker 8: that slowdown. If you look at the Apple stock, it 410 00:22:16,080 --> 00:22:22,879 Speaker 8: roughly tracked the NASDAK. So not much happened on the stock. 411 00:22:23,560 --> 00:22:26,320 Speaker 8: And the reason why you know I wouldn't jump on 412 00:22:26,400 --> 00:22:31,000 Speaker 8: board now is first not a significant pullback so valuation. 413 00:22:31,280 --> 00:22:34,840 Speaker 8: You're still paying like a hefty premium for our early 414 00:22:33,720 --> 00:22:37,800 Speaker 8: It's partly justified, of course, for the quality of the franchise. 415 00:22:38,440 --> 00:22:41,240 Speaker 8: But you know what happens next that really creates a 416 00:22:41,320 --> 00:22:43,879 Speaker 8: surprise and gets the stock to work. From here, the 417 00:22:43,960 --> 00:22:46,119 Speaker 8: high kinmentalist. 418 00:22:45,600 --> 00:22:48,840 Speaker 1: The harder matter pere single digit revenue growth. So I 419 00:22:48,840 --> 00:22:51,520 Speaker 1: went back to the pandemic and basically sales are up 420 00:22:51,600 --> 00:22:55,920 Speaker 1: forty seven percent from twenty nineteen, but the free cares 421 00:22:55,960 --> 00:23:01,360 Speaker 1: flow generation after that is up seventy one percent. In 422 00:23:01,400 --> 00:23:05,600 Speaker 1: your caution, are you suggesting that that formula they have 423 00:23:05,960 --> 00:23:11,000 Speaker 1: of operating leverage, of generating ebit, of generating free cash 424 00:23:11,000 --> 00:23:14,760 Speaker 1: flow is now broken? Given single digit revenue growth. 425 00:23:16,160 --> 00:23:17,560 Speaker 3: No, I think it still works. 426 00:23:17,600 --> 00:23:21,359 Speaker 8: But you know, of five percent revenue growth, you don't 427 00:23:21,640 --> 00:23:24,199 Speaker 8: you don't generate as much free castural growth. So the 428 00:23:24,200 --> 00:23:26,280 Speaker 8: way I like to think about it is out of 429 00:23:26,400 --> 00:23:29,879 Speaker 8: like you know, between three and five percent revenue growth 430 00:23:29,920 --> 00:23:34,320 Speaker 8: apper it can generate you know, you know, above five percent, 431 00:23:34,400 --> 00:23:38,160 Speaker 8: like six seven percent earnings DIVIDI and free casual growth 432 00:23:38,280 --> 00:23:42,920 Speaker 8: on a sustainable basis through like systematic buyback, through operating 433 00:23:43,000 --> 00:23:46,399 Speaker 8: leverages that there are. So there is definitely a huge 434 00:23:46,840 --> 00:23:49,119 Speaker 8: amount of quality there and a very strong benitry as 435 00:23:49,119 --> 00:23:49,920 Speaker 8: you just mentioned. 436 00:23:50,440 --> 00:23:52,000 Speaker 3: So all that is worth su premium. 437 00:23:52,040 --> 00:23:55,560 Speaker 8: When you look at Apple today, it's straight on twenty 438 00:23:55,640 --> 00:24:01,119 Speaker 8: seven times, you know, for for our earnings status and 439 00:24:01,200 --> 00:24:05,439 Speaker 8: plus names who grow between five and ten percent anum, 440 00:24:06,080 --> 00:24:09,639 Speaker 8: the overall economics are treading on like twenty two times, 441 00:24:09,680 --> 00:24:12,840 Speaker 8: So you have a significant premium. So you won't have 442 00:24:12,920 --> 00:24:16,480 Speaker 8: like a evaluation surprise out of this very healthy, very 443 00:24:16,520 --> 00:24:18,040 Speaker 8: high quality model. 444 00:24:18,440 --> 00:24:22,960 Speaker 3: And so when you own the Stoke today, you have to. 445 00:24:22,320 --> 00:24:24,879 Speaker 8: To believe this premium is going to remain, which I 446 00:24:24,960 --> 00:24:29,159 Speaker 8: think is fine, but you can't expect like a sudden 447 00:24:29,240 --> 00:24:33,320 Speaker 8: jump and a sudden increase in valuation multiple unless you 448 00:24:33,400 --> 00:24:36,680 Speaker 8: have a new growth story, and that's where it's kind 449 00:24:36,680 --> 00:24:38,760 Speaker 8: of difficult to expect that. 450 00:24:38,680 --> 00:24:39,359 Speaker 3: To cor right. 451 00:24:39,720 --> 00:24:41,760 Speaker 4: The China part of the equation is not a growth 452 00:24:41,760 --> 00:24:44,280 Speaker 4: story for Apple right now. How is May sixty pro 453 00:24:45,200 --> 00:24:47,520 Speaker 4: getting a lot of attention kind of stealing the thunder 454 00:24:47,560 --> 00:24:50,199 Speaker 4: in many ways? And Apple bears will always point to 455 00:24:50,240 --> 00:24:53,520 Speaker 4: the China demand for iPhone fifteen as a reason to 456 00:24:53,920 --> 00:24:58,119 Speaker 4: not be optimistic. How does Tim Cook frame the negative 457 00:24:58,160 --> 00:25:00,720 Speaker 4: headlines that are hitting Apple out of China, whether it's 458 00:25:00,720 --> 00:25:04,680 Speaker 4: the sixty pro or whether it's Beijing's ban of using 459 00:25:04,720 --> 00:25:07,359 Speaker 4: foreign phones for government workers or stayed owned enterprises. 460 00:25:09,000 --> 00:25:12,000 Speaker 3: Yeah, so I think it's a very good question. It's 461 00:25:12,040 --> 00:25:12,960 Speaker 3: a source of concern. 462 00:25:13,520 --> 00:25:16,320 Speaker 8: Interestingly, I don't think it's going to materialize that quickly 463 00:25:17,480 --> 00:25:20,840 Speaker 8: because like the new Qua Way phone is really like 464 00:25:20,880 --> 00:25:25,000 Speaker 8: in early innings, you know, they probably don't have a 465 00:25:25,000 --> 00:25:28,160 Speaker 8: strong case to be that competitive against the iPhone. 466 00:25:28,640 --> 00:25:29,520 Speaker 3: But it's true that. 467 00:25:29,440 --> 00:25:32,560 Speaker 8: You know, in this junk you mentioned since twoenty and 468 00:25:32,800 --> 00:25:38,600 Speaker 8: twenty term, a lot of that was like what we're 469 00:25:38,640 --> 00:25:42,640 Speaker 8: getting out of the picture in China and Apple really 470 00:25:42,800 --> 00:25:46,920 Speaker 8: like gaining about twenty million XI units iPhone units combined 471 00:25:46,960 --> 00:25:50,000 Speaker 8: with an increase in a spit and so that part 472 00:25:50,040 --> 00:25:52,119 Speaker 8: of the business I think is true is kind of 473 00:25:52,160 --> 00:25:55,800 Speaker 8: a trick over the next couple of years. Because China, 474 00:25:56,280 --> 00:25:59,920 Speaker 8: China might be able to put together alternative to the AFO, 475 00:26:00,560 --> 00:26:03,119 Speaker 8: the aphone remained like an exceptional product. You know, this 476 00:26:03,240 --> 00:26:06,640 Speaker 8: is the only phone at a string animeter manufacturing a 477 00:26:06,680 --> 00:26:11,800 Speaker 8: note for the main shift exceptional quality, exceptional like integrated. 478 00:26:11,280 --> 00:26:13,280 Speaker 3: Software and hardware that there are. 479 00:26:13,359 --> 00:26:16,800 Speaker 8: So I wouldn't say the Chinese are going to create 480 00:26:16,840 --> 00:26:18,679 Speaker 8: the fund that can compete with the iPhone, but we 481 00:26:18,760 --> 00:26:22,639 Speaker 8: know that in the past about twenty million funds we 482 00:26:22,720 --> 00:26:26,280 Speaker 8: are selling at Huawei, and when Huawei dies appeared that 483 00:26:26,400 --> 00:26:30,360 Speaker 8: market seem to have moved straight into Apple's hands. I see, 484 00:26:30,840 --> 00:26:33,280 Speaker 8: and that's that's a concern of course. 485 00:26:33,800 --> 00:26:36,040 Speaker 4: So how about Apple and AI? I mean, Apple was 486 00:26:36,119 --> 00:26:38,800 Speaker 4: kind of left behind when Chat, GPT and all the 487 00:26:38,840 --> 00:26:42,639 Speaker 4: other AI tools you know, took over the zeitgeist. I 488 00:26:42,680 --> 00:26:45,960 Speaker 4: know Apple's working on things with relaated relative to Siri, 489 00:26:46,119 --> 00:26:49,040 Speaker 4: and how can incorporate more generative AI into its products? 490 00:26:49,400 --> 00:26:52,159 Speaker 4: Is this something that has reached a point where investors 491 00:26:52,200 --> 00:26:53,760 Speaker 4: can can model it? 492 00:26:55,520 --> 00:26:59,320 Speaker 8: No, So I think on the business model of Apple, 493 00:26:59,640 --> 00:27:04,400 Speaker 8: you know, with making all its profits from selling hardware 494 00:27:04,480 --> 00:27:10,600 Speaker 8: and then selling like mostly subscription services over this hardware, 495 00:27:11,800 --> 00:27:17,119 Speaker 8: Like you know, the kind of like magical one trick 496 00:27:17,200 --> 00:27:19,520 Speaker 8: where you can chart like thirty dollars a months for 497 00:27:20,040 --> 00:27:22,919 Speaker 8: a generative AI based services that does doesn't really exist. 498 00:27:23,560 --> 00:27:25,680 Speaker 8: The way I see it is that for Apple, generative 499 00:27:25,680 --> 00:27:27,680 Speaker 8: are is going to be more of a defensive move. 500 00:27:28,680 --> 00:27:33,320 Speaker 8: Siria has never been exceptionally impressive in terms of what 501 00:27:33,440 --> 00:27:38,080 Speaker 8: it can achieve in terms of voice recognition and user 502 00:27:38,720 --> 00:27:42,640 Speaker 8: user service. Apoba is going to continue to do their 503 00:27:42,680 --> 00:27:46,760 Speaker 8: best to enhance the overall user experience with generative AI, 504 00:27:47,520 --> 00:27:50,320 Speaker 8: But I don't see that as like as a revenue 505 00:27:50,400 --> 00:27:52,199 Speaker 8: enhancement for them as it could be for like a 506 00:27:52,240 --> 00:27:55,840 Speaker 8: Microsoft or Google and metal and advertising and things like that. 507 00:27:55,920 --> 00:27:59,720 Speaker 1: Heard you just to finish here, is the Apple such 508 00:27:59,720 --> 00:28:02,000 Speaker 1: a animal like you were mugged by your kids to 509 00:28:02,040 --> 00:28:04,199 Speaker 1: go out and buy more toys like bram or like 510 00:28:04,280 --> 00:28:06,200 Speaker 1: food like King. I mean you're on the same game. 511 00:28:06,840 --> 00:28:09,280 Speaker 1: Are you suggesting that this is a stock that treads 512 00:28:09,320 --> 00:28:13,080 Speaker 1: water for five years or are you actually looking for 513 00:28:13,160 --> 00:28:14,600 Speaker 1: a diminished share price? 514 00:28:16,359 --> 00:28:21,560 Speaker 8: So that's I think from from here over the next 515 00:28:21,560 --> 00:28:24,040 Speaker 8: five years, I think that's a stock that can compound 516 00:28:24,160 --> 00:28:27,399 Speaker 8: with its earnings power or its dividend power, so you know, 517 00:28:27,440 --> 00:28:30,520 Speaker 8: it can compound like in single digits, maybe high single digits, 518 00:28:30,520 --> 00:28:32,280 Speaker 8: so it's not it's not too bad for a very 519 00:28:32,359 --> 00:28:35,800 Speaker 8: high quality name. And then I would look at buying 520 00:28:35,840 --> 00:28:37,919 Speaker 8: it only if there is a bit of a dislocation 521 00:28:38,040 --> 00:28:40,840 Speaker 8: at some point, like a loss in confidence if this 522 00:28:40,960 --> 00:28:44,520 Speaker 8: quality I see that Apple wasn't there all the time. 523 00:28:44,800 --> 00:28:48,640 Speaker 8: And so if you see like a weakness coming out 524 00:28:48,640 --> 00:28:50,600 Speaker 8: of China or things like that, and if the stock 525 00:28:50,720 --> 00:28:53,120 Speaker 8: is hurt by that, I think I would be I 526 00:28:53,120 --> 00:28:56,120 Speaker 8: would be baking to revisit and look at, you know, 527 00:28:56,200 --> 00:29:00,000 Speaker 8: getting into the name at a more attractive evaluation because 528 00:29:00,040 --> 00:29:03,120 Speaker 8: when you're talking, companding and valuation is almost everything, because 529 00:29:03,160 --> 00:29:05,240 Speaker 8: that's that's what drives, you know, your ability to buy 530 00:29:05,280 --> 00:29:08,120 Speaker 8: back your stock more efficiently and things like that. So 531 00:29:08,480 --> 00:29:10,800 Speaker 8: I really think you need a lower melteaper to make 532 00:29:10,840 --> 00:29:16,800 Speaker 8: Apple compelling, like you know, single legy companding opportunity, and 533 00:29:16,840 --> 00:29:19,200 Speaker 8: then a kind of like a breakthrough opportunity, you know, 534 00:29:19,200 --> 00:29:22,360 Speaker 8: an opportunity to increase prices, to increase in clevolume, to 535 00:29:22,440 --> 00:29:23,360 Speaker 8: launch a new products. 536 00:29:24,160 --> 00:29:25,680 Speaker 3: Difficult to see that on the horizon. 537 00:29:25,800 --> 00:29:27,960 Speaker 1: To be honest, Pierre, thank you for the brief peer 538 00:29:28,240 --> 00:29:31,160 Speaker 1: fargu for some real Apple caution. They're different than the 539 00:29:31,160 --> 00:29:35,960 Speaker 1: fanboys that so many people speak of. Subscribe to the 540 00:29:35,960 --> 00:29:40,239 Speaker 1: Bloomberg Surveillance podcast on Apple, Spotify, and anywhere else you 541 00:29:40,280 --> 00:29:44,520 Speaker 1: get your podcasts. Listen live every weekday starting at seven 542 00:29:44,560 --> 00:29:49,400 Speaker 1: am Eastern Bloomberg dot com, the iHeartRadio app tune In, 543 00:29:49,720 --> 00:29:53,120 Speaker 1: and the Bloomberg Business app. You can watch us live 544 00:29:53,320 --> 00:29:57,560 Speaker 1: on Bloomberg Television and always on the Bloomberg terminal. Thanks 545 00:29:57,600 --> 00:30:01,400 Speaker 1: for listening. I'm Tim Keane and this is Blumber 546 00:30:12,160 --> 00:30:12,280 Speaker 3: Hm