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Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene with

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Speaker 1: David Gura. Daily we bring you insight from the best

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Speaker 1: of economics, finance, investment, and international relations. Find Bloomberg Surveillance

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Speaker 1: on Apple Podcasts, SoundCloud, Bloomberg dot Com, and of course,

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Speaker 1: on the Bloomberg Bloomberg Surveillance Worldwide Nationwide thrill draw with

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Speaker 1: us right now, and David, I'm gonna let you leave

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Speaker 1: this off because you were far above Cayuga's waters, and

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Speaker 1: I guess the lead here is far above the East

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Speaker 1: Rivers waters is where we're going, right, Yeah, So I

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Speaker 1: have two connections here, one of which, yes, I did

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Speaker 1: go to Cornell. I was also a student Columbia Journalism School,

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Speaker 1: and you're assigned a neighborhood to cover while you're a

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Speaker 1: student there. Roosevelt Island was the neighborhood that I had,

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Speaker 1: and it was an interesting peculiar I say that in

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Speaker 1: a positive white place back when I was covering it,

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Speaker 1: because it was a point of transformation. New buildings were

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Speaker 1: going to be constructed when you were covering it. When

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Speaker 1: they had a psychiatric theraf in a smallpox hospital, in

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Speaker 1: a prison. It's been a lot of things. Let me

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Speaker 1: ask you, Mike about that, because when I would say

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Speaker 1: there was a very quirky issue of governance, Albany had

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Speaker 1: a lot of control over roseland for a number of years.

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Speaker 1: How did you get this idea to do something with it?

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Speaker 1: This was six years ago, you were thinking. The idea

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Speaker 1: came from a guy named Bob Steele, who was our

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Speaker 1: deputy Economic Development, and Seth Pinsky, who ran the Economic

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Speaker 1: Development a d c UM and they came up with

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Speaker 1: the idea. I when they told me, I said that's

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Speaker 1: never gonna work. And they said, well, it might not work,

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Speaker 1: but you're due to speak this evening to universities who

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Speaker 1: have already signed up to a try to win the competition,

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Speaker 1: and that's where that's the genesis of it. But but

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Speaker 1: the whole idea here is that businesses are created where

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Speaker 1: the creators go to school. That's why Silicon Valley has

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Speaker 1: so many companies. It's a great place, but it's kind

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Speaker 1: of rural and not anything else there other than a

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Speaker 1: great university in Stanford, and New York has great universities.

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Speaker 1: But we want to have more engineering school students because

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Speaker 1: those are the ones that are going to create the

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Speaker 1: businesses that will create the jobs this country needs. You

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Speaker 1: recognize the voice through the three time Mayor of New

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Speaker 1: York City, Mike Bloomberg, majority owner of Bloomberg LP, of

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Speaker 1: course the parent company of Bloombergradi and Bloomberg Media, joined

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Speaker 1: by him and Daniel Hutton Lockery as well. He's the

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Speaker 1: founding dean and provost of Cornell Tech, which is going

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Speaker 1: to be dedicated today on Roosevelt Island. Cornell found in

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Speaker 1: eighteen sixty five, part of this land Grant project. There's

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Speaker 1: a continuity here between that and what we're seeing here today.

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Speaker 1: There is this is very much like a modern day

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Speaker 1: land grant uh in fact, down to the fact that

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Speaker 1: our mission at Cornell Tech is both academic excellence but

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Speaker 1: also economic and societal impact in New York City. Very

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Speaker 1: much HARKing back to the original Land Grant Act, which

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Speaker 1: was around agriculture and engineering, the sort of practical sides

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Speaker 1: of academia, every kind of school on some of a

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Speaker 1: different character. A guiding Bloomberg was at Johns Hopkins a

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Speaker 1: few years ago with a slide rule in hand. I

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Speaker 1: was in a slide room Boulder, Colorado, and in Rochester.

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Speaker 1: What kind of student do you want at Cornell Roosevelt Island.

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Speaker 1: So the students that we both want and that we're

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Speaker 1: attracting at Cornell Tech our students who both have the

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Speaker 1: academic excellence that you would normally expect at Cornell, but

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Speaker 1: also have a real passion about doing something that's outside

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Speaker 1: of the classroom. So our students are all engaged with

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Speaker 1: local companies, with uh city agencies, with local nonprofits, taking

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Speaker 1: their fundamental knowledge that they're learning in the classroom and

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Speaker 1: putting it into prison. So this is critical and it

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Speaker 1: might jump in here, You're gonna jump in whether I

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Speaker 1: say too or not. But Dean, very importantly, what is

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Speaker 1: the distinction of what you're doing versus Silicon Valley. So

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Speaker 1: for example, just to pick an example of a student

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Speaker 1: project from last year, a group of our students worked

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Speaker 1: with the Mayor's office on domestic violence on how do

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Speaker 1: you use digital apps that you know so many people

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Speaker 1: have phone today, how do you really use those digital

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Speaker 1: l apps on your smartphone for some of the worst

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Speaker 1: situations that can happen in the household? Limit One of

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Speaker 1: the great advantage New York has over almost every other place,

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Speaker 1: maybe not London or a couple of places like that.

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Speaker 1: If you want to build products for the world, it

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Speaker 1: helps to be where the world is New York City.

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Speaker 1: When you walk down the streets, forty odd percent of

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Speaker 1: everybody you see on the street who lives here were

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Speaker 1: born outside of America. This is an entry point into America,

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Speaker 1: and this is where you can find out what will

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Speaker 1: sell elsewhere. Is man. It's something that a lot of

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Speaker 1: people don't know about you, Mike, as you did the

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Speaker 1: electrical engineering grind, which is a real tough grind. Let's

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Speaker 1: bring any of my professors were alive today. But but

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Speaker 1: this is seriously, the distance from Roosevelt Island the JFK.

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Speaker 1: You know, tattoo, do your brain how many blocks it is?

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Speaker 1: It's xt a number of miles. Why can't Jeff Bezos

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Speaker 1: put the new Amazon platform between Cornell Tech and JFK. Well,

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Speaker 1: I wish he would. I don't know what it's up

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Speaker 1: to New York Cities government to go and make cases

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Speaker 1: like that. I'm out of government and I want to leave.

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Speaker 1: They don't need me meddling in it. It would be

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Speaker 1: great if Amazon came here. I think one of the

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Speaker 1: problems that we have in terms of competing is both

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Speaker 1: of our airports three if you include Newark, are over

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Speaker 1: capacity already, and Amazon needs to have airports where you

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Speaker 1: can fly in and out to move enormous quantities of product.

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Speaker 1: We are going to pay the price for generations of

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Speaker 1: not fixing that problem of not having the infrastructure that this,

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Speaker 1: uh the city needs. We don't have great It's not

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Speaker 1: it's not easy to get from Lagadier or Newark, or

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Speaker 1: from JFK into the central city. Of the cities have

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Speaker 1: built modern railroads that go out there, and we've had

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Speaker 1: generation after generation of elected officials at the city and

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Speaker 1: the state level who have just not made those kinds

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Speaker 1: of investments. You have a lot of described the place

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Speaker 1: for us if you this is a Tom Main building.

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Speaker 1: I've been up to HCA recently and seeing Gates Hall.

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Speaker 1: He designed that as well, beautiful new building. When you

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Speaker 1: were thinking about that facility and what it would be

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Speaker 1: like and what it would do, what was most important

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Speaker 1: to you, how's this place going to look and feel

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Speaker 1: different than than other tech campuses around the world, you know?

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Speaker 1: So that I think the thing we were trying to

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Speaker 1: do both with the Bloomberg Center building and the Tom

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Speaker 1: Main Design Building at Cornell Tech, but also at the

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Speaker 1: whole campus. It was really uh build an environment where

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Speaker 1: we would have what we call creative collisions where people

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Speaker 1: because we bring together engineers, computer scientists, business and law

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Speaker 1: students in our master's programs. So these very disparate disciplines

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Speaker 1: that are all important for developing digital aged technology. And

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Speaker 1: so we created a very open environment where those people

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Speaker 1: who you know, birds of a feather flocked together, so

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Speaker 1: you know, tend to have the students together from the

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Speaker 1: same program. This was a way to get people, students

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Speaker 1: and faculty to work at the design of the building

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Speaker 1: is all open. You familiar with that. Here you and

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Speaker 1: I have the same size desks in the same room,

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Speaker 1: basically um and that's what Tom did to encourage cooperation.

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Speaker 1: And in this day and age, you don't do anything

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Speaker 1: on your own. You do it as a group. I'm

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Speaker 1: waiting for when Mike's gonna have another desk over the

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Speaker 1: tech I can see it coming. Daniel Hut I would

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Speaker 1: never get in with Cornell Teck. And of course Michael

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Speaker 1: BLOOMBERGUNY is the principal owner of Bloomberg LP and this

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Speaker 1: radio station I should say, is well, I want to

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Speaker 1: go to another current news item one of the most

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Speaker 1: important cocktails I've ever heard. This was on your m

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Speaker 1: X Mike. Was that Davos with a gentleman who was

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Speaker 1: thrown out of this country after graduating from Carnegie Melton.

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Speaker 1: Maybe he was thrown out of this country because he

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Speaker 1: didn't have the right passport, et cetera. This new immigration

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Speaker 1: tone directly affects Cornell Tech, not only faculty in visas,

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Speaker 1: but also the students. Is what way of doing this?

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Speaker 1: And uh, the UK is doing exactly the same thing

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Speaker 1: with Brexit. I was over there two weeks ago and

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Speaker 1: I had a lunch for twenty eighteen. I think it

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Speaker 1: was of our best and the brightest and one little areas.

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Speaker 1: The eighteen people represented seventeen different countries. That's the real world.

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Speaker 1: You just have to have people from around the world

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Speaker 1: who understand all the cultures if you're going to sell

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Speaker 1: to them, give us a story. The visa issues you

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Speaker 1: deal with the faculty. You're already into that at Cornell Tech.

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Speaker 1: So it's mainly with students who want to stay in

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Speaker 1: the country after they graduate today um and not so

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Speaker 1: much with faculty, especially around a technical sort of campus

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Speaker 1: like we have. But I think this issue you know,

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Speaker 1: these students come here, they create company, they want to

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Speaker 1: create companies here. Instead we're sending them either back to

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Speaker 1: their home country or Frankly, China now has a lot

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Speaker 1: of foreign nationals. They are developing tech companies. They're becoming

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Speaker 1: a world leader in AI. So we're we in the

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Speaker 1: UK are doing the best thing in the world, even

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Speaker 1: close to home Canada. In Vancouver, there's all sorts of branches,

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Speaker 1: branches of all sorts of companies. Why because they can't

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Speaker 1: get those employees into this country, but they need those employees.

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Speaker 1: So Canada's benefiting from all of this stuff. In America's

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Speaker 1: sitting here going down. I'd point out, David that members

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Speaker 1: of our surveillance staff I had to deal with this,

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Speaker 1: with the services of Bloomberg LP, dealing with pieces. Well,

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Speaker 1: so what we're very quickly or Dean, what happens the

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Speaker 1: rest of the days. So the rest of the day

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Speaker 1: today we're gonna have the formal dedication ceremony, a bunch

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Speaker 1: of the likeed officials. Mike, you get thrown in the river.

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Speaker 1: H I like that. The troubles with in the East River.

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Speaker 1: He'd be in New Jersey or out in Southampton. Very quickly, gentlemen,

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Speaker 1: thank you so much, Tuck, and of course m are

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Speaker 1: Bloomberg with as well this morning. Okay, what if I

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Speaker 1: said to you, let's go out and with people that

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Speaker 1: have a certain amount of gazillion billion dollars under their belt,

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Speaker 1: who's the best? How about this year to eight percentile,

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Speaker 1: one year, twelve months trailing percentile, three years trailing percentile,

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Speaker 1: five years, trailing percentile. It's like Vince. It's like Vince

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Speaker 1: Lombardi and the Green Bay Packers extraordinary extraordinary performance. Joining

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Speaker 1: us now from Chicago Bleeding Packers, Yellow and Green. David

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Speaker 1: Harrold joins us on our phone lines. David, have you

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Speaker 1: at Oakmark if you ever had a run like you've

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Speaker 1: had over the last one three and five years. Well,

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Speaker 1: we're about to celebrate the Oakmark International Funds anniversary. It

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Speaker 1: started it when you were twelve. I was in my thirties. Yes,

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Speaker 1: I was in my very very early thirties. Intact, I

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Speaker 1: was thirty one years old when I started it, and

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Speaker 1: so I guess you could do the arithmetic to guess

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Speaker 1: my age. But um, you know, our objective as always

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Speaker 1: been over the medium and long term to outperform the market.

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Speaker 1: By measurable amount a hundred, two hundred basis points. And

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Speaker 1: so these you know, one and two year periods to

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Speaker 1: me aren't as important as the three, five, fifteen, twenty,

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Speaker 1: and and we've been able to consistently over these meetium

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Speaker 1: and long term periods, I'll performed by close to three

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Speaker 1: or four hundred basis points per year. So this is

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Speaker 1: what we aim to do, and so far we've been

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Speaker 1: able to achieve it over the last quarter century. The

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Speaker 1: international pot that we've seen after a quiescent international period.

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Speaker 1: Let's use the Packers analogy. Are we in the halftime?

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Speaker 1: Are we into the third quarter? Or is it you know,

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Speaker 1: two minute drill at the end of the game here

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Speaker 1: for Internet, I think, yeah, that's a very good question.

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Speaker 1: I think we are certainly past the first quarter. We're

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Speaker 1: probably getting towards the end of the second quarter, so

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Speaker 1: I think we're approaching halftime. Um, there's been a good

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Speaker 1: little run in the last you know, fifteen sixteen months.

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Speaker 1: But it gives me confidence that this is nowhere near

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Speaker 1: the end of the game. Is that earnings are accelerating,

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Speaker 1: valuations are subdued, so we're kind of still just bouncing

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Speaker 1: off the bottom of the earning cycle. And meanwhile you

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Speaker 1: still see relatively attract evaluations of European equities, especially the

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Speaker 1: financials and some of the industrials. David, help us, Yeah,

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Speaker 1: And I was just going to just thrown a little

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Speaker 1: thing that time would really be interested in this. And

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Speaker 1: if you saw that packer game on Sunday, even though

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Speaker 1: they started off down free z zip, they handily beat

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Speaker 1: the Seattle handily. The handling twelfth Man was nowhere to

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Speaker 1: be about. Uh, David, let me ask you to help

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Speaker 1: us with with the comments that Jamie Diamond of JP

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Speaker 1: Morgan made yesterday at this Barkley's conference in New York.

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Speaker 1: We were talking about his remarks on bitcoin a little

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Speaker 1: a little while ago. Let me ask you about some

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Speaker 1: comments he made about trading revenue at JP Morgan on

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Speaker 1: pace to drop about in the third quarter from from

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Speaker 1: a year earlier. He's he's outlining there in broad terms,

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Speaker 1: that out challenging environment, that this is how worried are

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Speaker 1: you about that? When when you look at banks here

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Speaker 1: in the US in particular, well, it depends how important

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Speaker 1: that equity and fixtion income trading revenue is to the

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Speaker 1: overall profitability. I mean, I think clearly. Even though you're

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Speaker 1: gonna see volumes going up just because of technology and

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Speaker 1: pricing pressure, you're gonna see revenues under pressure, I think

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Speaker 1: forever almost um now, you can only get so close

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Speaker 1: to zero before you hit zero. And I mean, I mean,

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Speaker 1: just think of what it used to cost the trade.

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Speaker 1: I mean back to my have been here at Harris

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Speaker 1: for twenty five years, and it was seven eight cents

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Speaker 1: of share. Uh. And you know this is just for

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Speaker 1: you know, the average institutional trader, and today it's you know,

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Speaker 1: somewhere around a penny. And yes, volumes have picked up,

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Speaker 1: so the big trading houses have been able to make

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Speaker 1: up for some of this decline in the cost by

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Speaker 1: significantly higher volumes brought up on by electronic and program

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Speaker 1: and whatever trading. But the fees and the cost of

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Speaker 1: doing these trades is a lot lower, so you know,

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Speaker 1: it's almost you could you could move without almost paying anything.

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Speaker 1: So it's a lot different than it used to be.

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Speaker 1: And I think this is how the world will be.

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Speaker 1: They're going to have to find other ways to make money.

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Speaker 1: When you look at all of the pressures on banks

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Speaker 1: right now, how big is the regulatory pressure we hear

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Speaker 1: so much about the need for regulatory reform from certainly bankers,

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Speaker 1: many politicians as well. How much pressure is that exerting

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Speaker 1: right now on the major banks. I think what you're seeing,

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Speaker 1: if anything, I think of the pendulum swinging back and forth,

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Speaker 1: back and forth, and and if you look at certain

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Speaker 1: periods of time when this pendulum swung aggressively towards more

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Speaker 1: and perhaps over regulation, I think the pendulum is slowly

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Speaker 1: and I don't think it's going to be at a

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Speaker 1: rapid speed, but it's going to go back more towards

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Speaker 1: more realistic regulation. You know. One of the problems with

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Speaker 1: dot frank, for example, is you can't have such complex

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Speaker 1: regulation and have it be effective. It's just so hard

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Speaker 1: to follow. I mean, you want to believe that things

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Speaker 1: even small investment advisors have to do. It's just too complex.

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Speaker 1: It's too stagnating and stifling. And so I think there

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Speaker 1: needs to be reformed. And I think there is a realization,

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Speaker 1: you know, in the Western world, that maybe the regulatory

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Speaker 1: feel has gone too far. We do need regulation, but

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Speaker 1: in order for regulation to be effective and needs to

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Speaker 1: be clear, transparent and simple within your client meetings and

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Speaker 1: within the pulse of what you see in Chicago. Are

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Speaker 1: you really seeing the job shortage that the Jolts survey indicates.

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Speaker 1: Which America do you see out there, David Harrow? Is

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Speaker 1: it two Americas with a struggling in America or are

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Speaker 1: we really getting towards three g d P where there's

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Speaker 1: a lot of healing going on. I mean, well, it

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Speaker 1: is tough and you know, tough to find work, tough

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Speaker 1: to find skilled work, and so the problem isn't necessarily

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Speaker 1: if the bodies aren't there. It's just that the bodies

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Speaker 1: that are there are or not. Do you not encompass

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Speaker 1: the proper skills? And you know, Arthur Brooks in the

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Speaker 1: American Enterprise Institute has done some really good work, you

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Speaker 1: know on this army of twenty to thirty million people,

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Speaker 1: and they kind of neatly break it down eight or

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Speaker 1: nine million of them are ex cons and you know

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Speaker 1: eight or nine million might have some addiction problem, etcetera, etcetera.

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Speaker 1: But I mean, we're not matching bodies with open vacancies,

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Speaker 1: and this is what we need to do a better job.

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Speaker 1: There are there is surplus labor, but it's surplus unskilled

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Speaker 1: labor that needs somehow to get skilled. And this is

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Speaker 1: where policymakers should be focusing is how to get these

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Speaker 1: people skilled? Can you buy US equities as an international play?

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Speaker 1: Now we work together with you know, our domestic side

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Speaker 1: of the firm to manage global accounts, and so my

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Speaker 1: group kind of analyze and managers of the international portion.

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Speaker 1: What's your dollar dynamics mean right now? I mean, everybody

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Speaker 1: got it wrong. The dollar world is gonna end, you know,

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Speaker 1: I mean the strong dollar world is gonna end. And

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Speaker 1: we got a week dollar? Is that good for you? What? Uh?

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Speaker 1: Generally speaking to the environment is somewhat benign? You know.

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Speaker 1: It is so funny how you know when the dollars weakening,

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Speaker 1: people just think so adaptively and they just you know,

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Speaker 1: take the last three months or three years ago. Now

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Speaker 1: it's gonna be always weaken. And when the dollar starts

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Speaker 1: to strengthen, oh, you know, the euro's going one to one.

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Speaker 1: And what we just like to do is kind of

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Speaker 1: look at fundamental price level differences in purchasing power parity.

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Speaker 1: It's not by any means of perfect measurement, but it

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Speaker 1: does seem to be kind of a point of uh,

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Speaker 1: you know, released resistance on either side of that. The

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Speaker 1: currency pendulum and right now you know that the year

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Speaker 1: is still a little bit undervalued, the ends a little

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Speaker 1: bit undervalued. Swiss francs will overvalued. But you don't see

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Speaker 1: these huge over and under which we've seen in the past.

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Speaker 1: The magnitude isn't there of the imbalance. Let's come back

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Speaker 1: with David Harrow Mark all lots of talk about Yes,

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Speaker 1: we will have you had a couple of emails. We

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Speaker 1: will speak about the banking business as well. Mr Harrows

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Speaker 1: are are squared off. The Bloomberg is a point seven three.

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Speaker 1: All you need to know is he's running a portfolio

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Speaker 1: that is very, very different from the underlying in disease.

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Speaker 1: That's something that the pros look at where it's not

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Speaker 1: at all like a quote unquote index fund. As well, David,

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Speaker 1: we always need to have a conversation with you about

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Speaker 1: banking and particularly European banking. Do you see any consolidation

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Speaker 1: to occur um. There might be a few things on

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Speaker 1: the horizon, but I don't. I don't think anything major yet,

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Speaker 1: given they are still just kind of the finishing mode

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Speaker 1: of cleaning up balance sheets and getting their capital positions

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Speaker 1: in good ship. Are they becoming more Anglo American um,

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Speaker 1: an Anglo American. I wouldn't say quite that, because you

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Speaker 1: know it is a little different there. Um. You know,

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Speaker 1: the banks, for instance, hold a great deal of sovereign

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Speaker 1: debt because you know, it's just it's just a little different, um,

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Speaker 1: little angle American. Yes, in terms of a better focus

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Speaker 1: on profitability compared to five, ten, fifteen years ago, I

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Speaker 1: mean all of Europe has become is becoming better as

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Speaker 1: far as focusing on profitability and shareholder value. Still, of course,

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Speaker 1: all companies need work on this. We are constantly pushing

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Speaker 1: for more of a focus on building value and shareholder value.

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Speaker 1: But you know, Europe is getting better and the banking

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Speaker 1: sector is getting better. Um, I think you see the

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Speaker 1: managements of similar larger institutions much better. I mean, just

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Speaker 1: looking at what's going on in Italian banking sector, much

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Speaker 1: much better position today than a few years ago. Spanish

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Speaker 1: banking sector much better. Why be as they've consolidated, they've

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Speaker 1: cleaned up these local and co op banks. You know,

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Speaker 1: they did all the right things. Now. Germany, by the way,

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Speaker 1: still needs to clean up their local banking sector given

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Speaker 1: the non economic viability the landa spontet and what it's

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Speaker 1: doing to that banking market, but the periphery markets have

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Speaker 1: done this, and I think people don't quite realize how

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Speaker 1: vastly different the banking sector is in places like Spain, Portugal,

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Speaker 1: Italy than where it was ten years ago. How about India, David,

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Speaker 1: I know you've you've gotten into access banking in Mumbai.

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Speaker 1: Tell us a bit about that and and sort of

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Speaker 1: where you see opportunity in that part of the world

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Speaker 1: right now. Yeah, India has had a few bumps along

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Speaker 1: the way as a result of some fairly aggressive reforms.

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Speaker 1: I mean you've heard about the currency exchange and the

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Speaker 1: new tax plan. These are things that will ultimately be good,

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Speaker 1: but caused a few economic hickups. The other thing that

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Speaker 1: defined of the kind of the India financial sector is

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Speaker 1: the heavy presence again of the state banking sector. And

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Speaker 1: you know, as you would imagine, the state banks are

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Speaker 1: a lot less profitable, a lot more poorly run, a

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Speaker 1: lot less shareholder focused, occupy over half the banking market.

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Speaker 1: And I think the government realizes this and wants the

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Speaker 1: private banking sector to absorb, you know, a greater market share.

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Speaker 1: And Access Bank is one of these banks. We think

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Speaker 1: it's very well run and it's good exposure to grow

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Speaker 1: in India UM. And you know the only thing for

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Speaker 1: us to worry about is that for some reason, the

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Speaker 1: government would want to tip the scales the other way

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Speaker 1: favor the big, inefficient state banking sector. And at this

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Speaker 1: stage it looks like the government is tipping the scales

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Speaker 1: the other way. So India still has UM a lot

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Speaker 1: of potential. It's growth rate has been substantially lower than

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Speaker 1: that of China, and I think it's mostly a function

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Speaker 1: of their inability to push infrastructure projects through UM. If

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Speaker 1: they ever do employ the necessary reforms to allow more infrastructure,

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Speaker 1: there is no reason why India couldn't grow five six

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Speaker 1: consistently over the next decade. David, you mentioned the decades

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Speaker 1: at work you've done for Mark. This is a question

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Speaker 1: that's been running through our investment discussions this week. Are

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Speaker 1: you as diversified as you used to be? You know,

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00:22:05,440 --> 00:22:09,159
Speaker 1: I remember, for you know, John Mercenel and Fidelity fifty

400
00:22:09,240 --> 00:22:12,480
Speaker 1: in the Sequoia, people in the whole uproar about owning

401
00:22:12,520 --> 00:22:14,560
Speaker 1: two hundred and fifty stocks down to a hundred and

402
00:22:14,640 --> 00:22:17,400
Speaker 1: fifty stocks down to twelve or whatever. I making a joke,

403
00:22:17,520 --> 00:22:19,640
Speaker 1: but you know, you get the idea. Are you Are

404
00:22:19,680 --> 00:22:23,560
Speaker 1: you less diversified than you used to be? No, we

405
00:22:23,680 --> 00:22:26,600
Speaker 1: may be a little bit more. I'm just somewhere on

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Speaker 1: my desk the perspectus of the first off marketing. You

407
00:22:30,320 --> 00:22:33,520
Speaker 1: pick up the pick up the Green Bay Packers, you know,

408
00:22:33,680 --> 00:22:36,400
Speaker 1: press guide, it's under there, here, it is right here.

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00:22:36,760 --> 00:22:40,960
Speaker 1: Annual Report, October thirty one. Now, we at all of

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Speaker 1: Harris Associates in mark we are believers in concentration. So

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Speaker 1: what you will often see is the top ten names

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00:22:47,640 --> 00:22:52,280
Speaker 1: represent somewhere around or above of the portfolio. And I'm

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Speaker 1: looking at this very first portfolio. It was two, it

414
00:22:55,880 --> 00:22:57,919
Speaker 1: was one month old, and I think they're just a

415
00:22:57,920 --> 00:23:01,879
Speaker 1: couple of million dollars in assets, and there were probably

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00:23:02,000 --> 00:23:04,639
Speaker 1: less names than what we have today. But you know,

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00:23:04,640 --> 00:23:06,480
Speaker 1: it was a much much. You know, I'm talking about

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Speaker 1: three of whis five. That was million dollars. That was

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00:23:09,400 --> 00:23:13,679
Speaker 1: back when the Packers are good, right, the Packers, Tom,

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Speaker 1: you are you know what, I'm gonna invite you to

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Speaker 1: Minnesota this year and for the Super Bowl. When you

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Speaker 1: see the Packers, I don't know who they're going to play.

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Speaker 1: Everyone thinks it's going to be the Patriots. It's possible

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Speaker 1: but I don't know. We're just wondering who that opponent's

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Speaker 1: going to be in the a S c Up in Minnesota.

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Speaker 1: Thank you so much. Congratulations David seriously on when international

427
00:23:36,560 --> 00:23:40,719
Speaker 1: was underperforming, real persistence and stick tuitousness and then just

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Speaker 1: the excellence of track record of VAK market and national

429
00:23:44,040 --> 00:23:46,879
Speaker 1: something ble those of you on a Bloomberg terminal, Oh

430
00:23:46,880 --> 00:23:50,760
Speaker 1: a k i X Equity will migrate you there, oh

431
00:23:50,800 --> 00:23:53,960
Speaker 1: a k i X mr Harrow out of Chicago and

432
00:23:54,080 --> 00:24:10,000
Speaker 1: Green but joining us now from Loop Ventures, Gene Munster.

433
00:24:10,160 --> 00:24:14,240
Speaker 1: Someone would like to speak to uh on Apple and

434
00:24:14,520 --> 00:24:16,800
Speaker 1: I was working Piper Jeoffrey for the US Jane, just

435
00:24:16,840 --> 00:24:19,000
Speaker 1: to get started. What is Loop Ventures? I think a

436
00:24:19,000 --> 00:24:21,800
Speaker 1: lot of our loyal Wall Street listeners want to know

437
00:24:21,840 --> 00:24:25,280
Speaker 1: what Gene Monsters doing now after decades at Piper Jeffrey,

438
00:24:26,800 --> 00:24:32,199
Speaker 1: we are a venture capital firm that's focused on artificial intelligence,

439
00:24:32,400 --> 00:24:37,240
Speaker 1: robotics and augmented reality, and so we're continuing to write research.

440
00:24:37,280 --> 00:24:39,119
Speaker 1: So we got a team of analysts, a lot of

441
00:24:39,080 --> 00:24:41,080
Speaker 1: them the same guys people that I worked with in

442
00:24:41,119 --> 00:24:42,800
Speaker 1: the past. So that's what we're doing. Why do I

443
00:24:42,920 --> 00:24:46,800
Speaker 1: need augmented reality? I seem to be glued to my iPhone?

444
00:24:47,640 --> 00:24:50,240
Speaker 1: What is it? What is a R and what's it

445
00:24:50,280 --> 00:24:53,280
Speaker 1: mean for me? Particularly when I see the failure of

446
00:24:53,440 --> 00:24:58,240
Speaker 1: VR to get any kind of demand going a R

447
00:24:58,400 --> 00:25:02,879
Speaker 1: is a seamless way to interact with computer or a machine.

448
00:25:02,880 --> 00:25:05,080
Speaker 1: And so think of your smartphone today. The way you

449
00:25:05,119 --> 00:25:08,080
Speaker 1: interact with a smartphone is a touch screen, and in

450
00:25:08,119 --> 00:25:11,720
Speaker 1: the future with a R just by having either picking

451
00:25:11,800 --> 00:25:14,800
Speaker 1: up your phone or by some form of a wearable,

452
00:25:15,000 --> 00:25:19,280
Speaker 1: it will make it just seamless for you to access information.

453
00:25:19,359 --> 00:25:22,199
Speaker 1: So it'll just get easier. Are we standing at some

454
00:25:22,240 --> 00:25:24,800
Speaker 1: sort of press pressipice here? We watched yesterday? Is that

455
00:25:24,880 --> 00:25:28,199
Speaker 1: we saw the fits and starts of the face recognition

456
00:25:28,200 --> 00:25:31,520
Speaker 1: on the iPhone at the event and Cupertino yesterday. Where

457
00:25:31,560 --> 00:25:34,120
Speaker 1: are we in terms of this being more widely accepted,

458
00:25:34,200 --> 00:25:39,399
Speaker 1: the more widely adopted. It's the next ten years we're

459
00:25:39,440 --> 00:25:41,560
Speaker 1: going to see a shift. And what we'll see over

460
00:25:41,560 --> 00:25:45,119
Speaker 1: the next five years is more of the iPhones and

461
00:25:45,200 --> 00:25:47,720
Speaker 1: more phones in general. Google just came out with a

462
00:25:47,760 --> 00:25:51,119
Speaker 1: platform called a R Core, and so that's doing the

463
00:25:51,160 --> 00:25:53,119
Speaker 1: same thing as Apple's are Kid. But the answer your

464
00:25:53,240 --> 00:25:55,560
Speaker 1: question is that we're going to see more of these

465
00:25:55,600 --> 00:25:58,800
Speaker 1: are features get built into phones, and that's going to

466
00:25:58,920 --> 00:26:02,439
Speaker 1: make it more appeal for developers to build applications that

467
00:26:02,520 --> 00:26:04,600
Speaker 1: we can't live without. They are applications that we can't

468
00:26:04,640 --> 00:26:09,000
Speaker 1: live without. Eventually that's gonna slowly transform to some form

469
00:26:09,040 --> 00:26:11,719
Speaker 1: of a wearable, some form of glasses, think of Google

470
00:26:11,760 --> 00:26:15,439
Speaker 1: glasses that actually have some value. You're killing me, you know,

471
00:26:15,520 --> 00:26:19,240
Speaker 1: you leave Piper, Jeffrey, and it's like you've drunk that, Like,

472
00:26:19,400 --> 00:26:22,119
Speaker 1: come on, Jean, what's it mean for margins. You're one

473
00:26:22,160 --> 00:26:25,520
Speaker 1: of the people who have kept people in the Apple

474
00:26:25,640 --> 00:26:27,920
Speaker 1: story when they go it can't go on, it can't

475
00:26:27,960 --> 00:26:29,560
Speaker 1: go on, and you had the courage to say, yeah,

476
00:26:29,560 --> 00:26:31,600
Speaker 1: it is gonna go on. Do you have that same

477
00:26:31,720 --> 00:26:36,479
Speaker 1: enthusiasm right now? I do, And I was just looking

478
00:26:36,520 --> 00:26:39,399
Speaker 1: back at the One of the themes today is this

479
00:26:39,520 --> 00:26:41,480
Speaker 1: higher price phone, for example, And it's going to be

480
00:26:41,520 --> 00:26:43,439
Speaker 1: the story over the next year or two years, is

481
00:26:43,440 --> 00:26:46,280
Speaker 1: how the adoption that's going to be in the general

482
00:26:46,320 --> 00:26:48,240
Speaker 1: sense is no one's going to pay a thousand dollars.

483
00:26:49,000 --> 00:26:51,119
Speaker 1: But looking back ten years ago, the first year of

484
00:26:51,119 --> 00:26:55,040
Speaker 1: the iPhone, the sps are five sixty dollars. Last year

485
00:26:55,080 --> 00:26:57,800
Speaker 1: it was six and fifty dollars, so it went up.

486
00:26:57,840 --> 00:27:02,080
Speaker 1: Call it over period where tech prices go down. This

487
00:27:02,200 --> 00:27:05,680
Speaker 1: is defined the laws of physics of pricing. And so

488
00:27:05,840 --> 00:27:09,040
Speaker 1: when we think about the ability for a company to

489
00:27:09,280 --> 00:27:14,280
Speaker 1: extract more value, higher SPS, higher margins from consumers, Apple

490
00:27:14,359 --> 00:27:17,159
Speaker 1: wrote the book, and so I'm confident that in fact,

491
00:27:17,800 --> 00:27:20,160
Speaker 1: as far as the story is going to do concerned,

492
00:27:20,240 --> 00:27:22,679
Speaker 1: it will continue. There may be some sell off in

493
00:27:22,720 --> 00:27:25,719
Speaker 1: the near term as people trade around the product cycle

494
00:27:25,800 --> 00:27:28,640
Speaker 1: and some of the delays, but I think more holistically,

495
00:27:28,640 --> 00:27:30,680
Speaker 1: the company is in a good position. It's your sense,

496
00:27:30,720 --> 00:27:32,960
Speaker 1: I have the margins change with this this new phone.

497
00:27:32,960 --> 00:27:34,639
Speaker 1: So much has been made of that price tag, a

498
00:27:34,680 --> 00:27:36,720
Speaker 1: phone costing more than a thousand dollars, as Tom and

499
00:27:36,760 --> 00:27:39,040
Speaker 1: I've discussed on the show. Here a lot of people

500
00:27:39,080 --> 00:27:41,480
Speaker 1: paying that out in installments, not really having to reckon

501
00:27:41,600 --> 00:27:44,560
Speaker 1: with that that thousand dollar plus price tag. Here, what

502
00:27:44,560 --> 00:27:48,119
Speaker 1: does it mean for Apple's margins? So it means that

503
00:27:48,160 --> 00:27:50,480
Speaker 1: they're gonna dip for this quarter. They always dip in

504
00:27:50,480 --> 00:27:52,399
Speaker 1: the quarter where they launch a product, so you can

505
00:27:52,440 --> 00:27:56,400
Speaker 1: kind of that's more or less as expected, But overall

506
00:27:56,440 --> 00:27:59,240
Speaker 1: we expect the margins to increase. So for the March quarter,

507
00:27:59,520 --> 00:28:03,320
Speaker 1: of next year, we kind of have forty percent growth

508
00:28:03,359 --> 00:28:06,359
Speaker 1: margins are and that's up from thirty eight percent. So

509
00:28:06,440 --> 00:28:10,480
Speaker 1: we see a movement higher in the growth margins. I

510
00:28:10,480 --> 00:28:14,959
Speaker 1: mean with within this gene is the brilliance of getting

511
00:28:14,960 --> 00:28:17,679
Speaker 1: on almost a fee basis of forty five or fifty

512
00:28:17,720 --> 00:28:20,720
Speaker 1: two dollars a month, whatever it's going to be. Walt

513
00:28:20,720 --> 00:28:23,960
Speaker 1: pis Sex said the other day of the phones are

514
00:28:23,960 --> 00:28:26,560
Speaker 1: going to be bought in. This is Apple becoming almost

515
00:28:26,600 --> 00:28:30,840
Speaker 1: an annuity company? Is it becoming a completely different cash

516
00:28:30,920 --> 00:28:33,680
Speaker 1: flow beast than it was five or ten years ago?

517
00:28:35,640 --> 00:28:39,640
Speaker 1: It is, And it takes time to educate investors about that,

518
00:28:40,240 --> 00:28:43,840
Speaker 1: but that's exactly right. The price is the price doing

519
00:28:43,880 --> 00:28:48,680
Speaker 1: the education. I think what's doing the education is investors

520
00:28:48,680 --> 00:28:50,880
Speaker 1: just see a year and year out that margins are

521
00:28:50,880 --> 00:28:53,600
Speaker 1: holding in there, that a sps are holding in there

522
00:28:53,600 --> 00:28:56,920
Speaker 1: are going up, and they see that demand, even though

523
00:28:56,920 --> 00:29:00,480
Speaker 1: it has some fluctuations, is relatively stable. So I think

524
00:29:00,520 --> 00:29:05,320
Speaker 1: that stability equates higher multiples that investors are willing to pay.

525
00:29:05,640 --> 00:29:09,440
Speaker 1: And investors are slowly recognizing that Apple's hardware is acting

526
00:29:09,440 --> 00:29:11,960
Speaker 1: more like a services business. We're gonna come back here

527
00:29:11,960 --> 00:29:13,840
Speaker 1: with Geen Munster of loop ventures. I want to point

528
00:29:13,840 --> 00:29:15,800
Speaker 1: you want to get you more with Gene Munster, get

529
00:29:15,840 --> 00:29:18,440
Speaker 1: your get your pencils out. Because gen Munster has made

530
00:29:18,480 --> 00:29:21,959
Speaker 1: his Apple model available to Bloomberg users. You can access

531
00:29:22,000 --> 00:29:24,440
Speaker 1: that by doing a A P L equity m O

532
00:29:24,560 --> 00:29:27,600
Speaker 1: d L go on the Bloomberg A p L equity

533
00:29:27,840 --> 00:29:31,160
Speaker 1: m O d L go on the Bloomberg. We showcased

534
00:29:31,200 --> 00:29:33,880
Speaker 1: this during the especial yesterday on Bloomberg Television. It was

535
00:29:33,880 --> 00:29:37,280
Speaker 1: available on Bloomberg Radio as well. Incredibly useful, I think,

536
00:29:37,280 --> 00:29:38,760
Speaker 1: both for the biside and the cell side. Put in

537
00:29:38,760 --> 00:29:42,280
Speaker 1: your own make your modifications there to this itemized model.

538
00:29:42,320 --> 00:29:44,400
Speaker 1: But thanks very much to Gene Monster for making that

539
00:29:44,440 --> 00:29:47,200
Speaker 1: available to us. Did you watch the event yesterdaytime you

540
00:29:47,360 --> 00:29:49,640
Speaker 1: sort of you're not under the fano. I'm not a

541
00:29:49,680 --> 00:29:52,720
Speaker 1: fan boy. I mean, I just what I'm into is

542
00:29:52,720 --> 00:29:54,680
Speaker 1: the engineering. And you know, we could talk to Gene

543
00:29:54,680 --> 00:29:56,200
Speaker 1: about it if you want. This m O d L

544
00:29:56,280 --> 00:30:00,240
Speaker 1: thing is way cool. But but it's it's just it's

545
00:30:00,320 --> 00:30:05,040
Speaker 1: just the whole it's been for like twenty years. Stop it.

546
00:30:05,040 --> 00:30:07,560
Speaker 1: It's an incredible toy and it's made a ton of money.

547
00:30:07,840 --> 00:30:21,760
Speaker 1: Everybody uses who doesn't the Death of the Apple Thanks

548
00:30:21,840 --> 00:30:26,000
Speaker 1: for listening to the Bloomberg Surveillance podcast. Subscribe and listen

549
00:30:26,040 --> 00:30:31,680
Speaker 1: to interviews on Apple Podcasts, SoundCloud, or whichever podcast platform

550
00:30:31,720 --> 00:30:35,240
Speaker 1: you prefer. I'm on Twitter at Tom Keene, David Gura

551
00:30:35,600 --> 00:30:39,280
Speaker 1: is at David Gura. Before the podcast, you can always

552
00:30:39,320 --> 00:30:42,040
Speaker 1: catch us worldwide. I'm Bloomberg Radio