WEBVTT - Bitcoin Sell-Off Reflects Volatility--Not A Bursting Bubble 0:00:05.800 --> 0:00:08.720 Welcome to the Bloomberg p m L Podcast. I'm pim Fox. 0:00:08.760 --> 0:00:11.520 Along with my co host Lisa Abramowitz. Each day we 0:00:11.640 --> 0:00:15.120 bring you the most important, noteworthy, and useful interviews for 0:00:15.200 --> 0:00:17.840 you and your money, whether you're at the grocery store 0:00:17.960 --> 0:00:20.720 or the trading floor. Find the Bloomberg p m L 0:00:20.840 --> 0:00:28.080 Podcast on Apple Podcasts, SoundCloud, and Bloomberg dot com. Bitcoin 0:00:28.160 --> 0:00:32.920 has declined seventy five percent since its peak. Danny Masters 0:00:33.000 --> 0:00:35.960 joining us down chair of coin Shares Group, which oversees 0:00:36.159 --> 0:00:39.880 more than a billion dollars in crypto assets from London. Danny, 0:00:39.880 --> 0:00:41.720 thank you so much for being with us. Are we 0:00:41.880 --> 0:00:44.479 watching the bitcoin bubble burst right now? And is this 0:00:44.640 --> 0:00:48.640 just a fad that has ended? Hi? Lisa, great to 0:00:48.680 --> 0:00:52.159 be with you again. UM. It's certainly been a challenging 0:00:52.200 --> 0:00:56.120 week in the bitcoin space and market that's had an 0:00:56.240 --> 0:00:59.440 enormous excursion over the last few years from very low 0:00:59.520 --> 0:01:02.680 numb as to very high numbers. UM certainly has been 0:01:02.680 --> 0:01:06.800 taking um some heat in the in the last a 0:01:06.880 --> 0:01:11.000 few sessions, and ironically, when sort of global markets started 0:01:11.040 --> 0:01:13.920 to become more volatile a month or so ago, Bitcoin 0:01:14.480 --> 0:01:19.160 remained stable for a period of time and then seems 0:01:19.200 --> 0:01:22.920 to have succumbed to UM, not just it's unique internal 0:01:22.959 --> 0:01:28.240 but also you know, a more global macro sense of pressure. UM. 0:01:28.319 --> 0:01:32.560 The bears in bitcoins have definitely scored a win in 0:01:32.560 --> 0:01:36.080 this phase. UM. There is a lot of seems to 0:01:36.080 --> 0:01:37.760 be a lot of celebration amongst the sort of new 0:01:37.800 --> 0:01:40.840 real Roubini's and dan Crumbs of the world that finally 0:01:40.880 --> 0:01:43.800 their price predictions seemed to be coming right after a 0:01:43.880 --> 0:01:46.240 number of years. UM. But when you really put it 0:01:46.240 --> 0:01:48.720 in perspective, I mean this this last couple of weeks alone, 0:01:48.800 --> 0:01:52.760 and we've seen oil go from seventy five to fifty 0:01:52.800 --> 0:01:55.480 three dollars, and we've seen bitcoin go from sixty seven, 0:01:55.600 --> 0:02:00.400 sixty eight to forty forty dollars. You know, there are 0:02:00.440 --> 0:02:03.400 some big moves out there in other commodities to UM. 0:02:03.480 --> 0:02:06.320 For some reason, the moods seems to be a little 0:02:06.320 --> 0:02:09.040 bit more negative in bitcoin as you sort of correctly 0:02:09.120 --> 0:02:12.160 stay say, you know, with some sort of bubble bursting 0:02:12.160 --> 0:02:14.679 phenomena rather than the sort of inherent volatility we have 0:02:14.760 --> 0:02:17.680 in the market. As a bitcoin practitioner, and like many 0:02:17.720 --> 0:02:19.880 others who've been around for a while, one tries not 0:02:19.919 --> 0:02:22.560 to get too excited when it goes up or too 0:02:22.560 --> 0:02:25.000 disappointed when it goes down. So you know, I'm calling 0:02:25.000 --> 0:02:28.040 this just a very bolatle period, not a bursting Danny, 0:02:28.040 --> 0:02:30.880 can you just give people a little background on coin 0:02:31.000 --> 0:02:34.520 shares because there are a couple of different pieces to 0:02:34.800 --> 0:02:38.520 the coin shares story and on. For example, you own 0:02:38.720 --> 0:02:43.840 x BT. This is the exchange traded product in Europe 0:02:44.280 --> 0:02:48.920 that tracks the value of bitcoin. That's correct. Yeah, We're 0:02:48.760 --> 0:02:53.079 an asset management company in the cryptocurrency space. Um. So 0:02:53.120 --> 0:02:57.720 we provide active products like XPT, provider private strategies like 0:02:57.760 --> 0:03:00.920 coin sches from one and even third parties, ruages like 0:03:01.000 --> 0:03:03.359 a fund of funds that we that we market for 0:03:03.400 --> 0:03:09.679 other people. We provide research, we provide execution custody, and 0:03:09.760 --> 0:03:11.880 you know, we hold ourselves out to be an emerging 0:03:12.120 --> 0:03:16.120 black rock type of organization where customers can come for 0:03:16.280 --> 0:03:22.240 portfolio structuring, performance measurement, execution, custody and so on. All right, So, Danny, 0:03:22.440 --> 0:03:25.960 given that sort of bird's eye view on the market 0:03:26.040 --> 0:03:30.240 and the interest from institutions and others for bitcoin and cryptocurrencies, 0:03:30.440 --> 0:03:33.800 are you seeing a material decline in interest as the 0:03:33.840 --> 0:03:38.960 price goes down? Um? I think that the tip of 0:03:39.000 --> 0:03:41.320 the iceberg. When it comes to crypto assets. You know, 0:03:41.480 --> 0:03:46.320 our prices and these prices gonner by far the largest 0:03:46.320 --> 0:03:49.200 amount of attention. UM. Last time, you know, we all 0:03:49.320 --> 0:03:51.880 sat together in New York, we talked about the emergence 0:03:51.920 --> 0:03:55.160 of the security token regime. You know that continues to 0:03:55.400 --> 0:03:58.280 build a pace and you know, more security tokens are 0:03:58.320 --> 0:04:00.800 coming to market. Those security to is the beginning to 0:04:01.960 --> 0:04:05.440 gather their sort of smart contracting ability and will see 0:04:05.840 --> 0:04:07.520 the end of this year or the first quarter of 0:04:07.640 --> 0:04:11.120 next year, UM, some new use cases for crypto and 0:04:11.200 --> 0:04:16.440 using these security tokens broadly for private assets and hard assets. 0:04:16.720 --> 0:04:19.960 So you know, the the infrastructure development that's going on 0:04:20.000 --> 0:04:23.599 in crypto assets goes on regardless, and I think you know, 0:04:23.680 --> 0:04:26.720 prices tend to be up and down. When I look 0:04:26.760 --> 0:04:29.479 at the names of companies coming into the crypto space. 0:04:30.040 --> 0:04:32.440 You're familiar with Fidelities Investment we talked last time, or 0:04:32.480 --> 0:04:35.760 activity with the mura UM, the ice market coming on 0:04:35.800 --> 0:04:37.640 stream now towards the end of the year early next 0:04:37.680 --> 0:04:40.800 year with their Bitcoin futures contract IBM and now in 0:04:40.839 --> 0:04:43.440 the mix as well. UM. You know, you're seeing a 0:04:43.520 --> 0:04:46.359 number of large companies coming to the market that weren't 0:04:46.400 --> 0:04:49.320 there before. You know, is this price decline, you know, 0:04:49.440 --> 0:04:53.159 switching off those plans not that I can see. Do 0:04:53.240 --> 0:04:58.080 you have a view towards pegging digital tokens to the 0:04:58.240 --> 0:05:02.200 value of the U s starle are because some cryptocurrency 0:05:02.240 --> 0:05:08.040 trading platforms like coin base, they've joined this consortium that 0:05:08.400 --> 0:05:12.039 is designed to peg the digital tokens to the to 0:05:12.120 --> 0:05:18.000 the green back. It's an interesting development. Um. Certainly there 0:05:18.120 --> 0:05:24.560 is demand for that digital dollar. We've seen Packsos developed, 0:05:24.640 --> 0:05:28.320 Gemini developed, and there are some other earlier adopters with 0:05:28.360 --> 0:05:31.240 perhaps lower brand names, lesser brand names in the space. 0:05:31.960 --> 0:05:35.800 The primary use for these so called stable coins is 0:05:35.839 --> 0:05:40.760 to switch from volatile crypto assets into stable dollars while 0:05:40.800 --> 0:05:46.560 remaining within this electronic environment, digital environment, So that's quite appealing. 0:05:47.000 --> 0:05:49.599 What has come before is the tether coin, which is 0:05:49.800 --> 0:05:54.200 sort of unregulated outside the banking system m dollar that 0:05:54.279 --> 0:05:57.240 has been widely adopted, probably the tune of two or 0:05:57.279 --> 0:06:00.800 three billion dollars as a placeholder for digital assets in 0:06:00.800 --> 0:06:04.560 a way to exchange value amongst them between different venues 0:06:04.800 --> 0:06:07.760 electronically without going through the banking system. But ted has 0:06:07.800 --> 0:06:11.240 been plagued by lack of transparency and some of the 0:06:11.480 --> 0:06:14.480 some of the participants not being of the highest caliber. 0:06:14.600 --> 0:06:16.400 So the new coins that have come in a much 0:06:16.440 --> 0:06:19.000 higher caliber. They're fully in light of New York Department 0:06:19.000 --> 0:06:22.960 of Financial Services UM. The exchanges on which they're trading 0:06:22.960 --> 0:06:28.520 are typically now sort of fairly widely regulated and based 0:06:28.560 --> 0:06:31.360 in the United States, and therefore they're more legitimate that 0:06:31.520 --> 0:06:35.360 The trouble with the new dollar coins is they're open 0:06:35.440 --> 0:06:39.359 to interdiction by any regulator that i'd believe chooses to 0:06:39.360 --> 0:06:42.280 do so. So you've got you've got more more certainty, 0:06:42.320 --> 0:06:45.080 but more interdiction. Thanks very much for being with us. 0:06:45.160 --> 0:06:49.600 Very illuminating. Danny Masters, chairman of coin Shares Group. It's 0:06:49.640 --> 0:06:54.480 got over a billion dollars worth of crypto assets under management, 0:06:54.600 --> 0:06:59.359 joining us from London. Bitcoin up about four percent today. 0:06:59.560 --> 0:07:04.719 This is Bloomberg. We have been talking a lot this 0:07:04.760 --> 0:07:06.960 week about the weakness that we've seen in the credit markets. 0:07:07.120 --> 0:07:09.560 High old bonds just suffered their worst months since late 0:07:09.560 --> 0:07:13.360 two thousand and fifteen, yield climbing to the highest similar 0:07:13.520 --> 0:07:17.200 for investment grade credit. But is this a buying opportunity? 0:07:17.200 --> 0:07:19.920 And joining us down to discuss. Ken Monahan, a Moody 0:07:19.960 --> 0:07:22.320 pioneer co director of High Yield, joining us here in 0:07:22.360 --> 0:07:25.440 our eleven three old studios can wonderful to see you. 0:07:25.560 --> 0:07:27.760 So are you out there buying or do you think 0:07:27.760 --> 0:07:30.640 that this is the beginning of a more protracted sell off? Um? 0:07:30.640 --> 0:07:32.480 I'd say at this stage, Lisa, we're nibbling at the 0:07:32.560 --> 0:07:35.760 edges rather than buying in a big way. UM. It's 0:07:35.800 --> 0:07:39.320 clear that the high yeld marketplace has widened out significantly 0:07:39.320 --> 0:07:41.840 in terms of spreads and in terms of returns. We've 0:07:41.840 --> 0:07:45.280 been flirting with zero percent all year long, so we're 0:07:45.280 --> 0:07:47.760 now a little underwater. Go back thirty days ago, we 0:07:47.760 --> 0:07:50.200 were a little above water. Uh, who knows where all 0:07:50.320 --> 0:07:52.080 in the year. But it's not going to be a 0:07:52.080 --> 0:07:54.440 big year in terms of returns, that's for sure. We are, 0:07:54.480 --> 0:07:57.520 I think, though, having uh said that, setting ourselves up 0:07:57.520 --> 0:08:00.560 for a potential for an attractive two thousand and nineteen. 0:08:01.520 --> 0:08:04.000 Do you buy for capital gains or do you buy 0:08:04.040 --> 0:08:07.360 for the coupon? You know you gotta buy for total return. 0:08:07.440 --> 0:08:10.640 If you buy for coupon alone, I think you're setting 0:08:10.680 --> 0:08:13.360 yourself up for for trouble. I always tell my analysts 0:08:13.400 --> 0:08:15.520 that the worst way to achieve a seven percent return 0:08:15.640 --> 0:08:18.040 is to buy a seven percent coupon bond, you gotta 0:08:18.080 --> 0:08:20.480 buy either something that's going to move up in credit quality, 0:08:20.760 --> 0:08:22.360 or you can even buy something that's gonna move down 0:08:22.400 --> 0:08:24.280 in credit quality or down in price, but where you're 0:08:24.280 --> 0:08:27.080 gonna be very your self assured of what your coupon 0:08:27.160 --> 0:08:30.320 income is. So, having said that, when you take a look, 0:08:30.360 --> 0:08:32.440 just as an example at the e t F that 0:08:32.520 --> 0:08:36.200 many people track, to look at high yield performance h 0:08:36.400 --> 0:08:40.560 y G, the I shares eyebox. It's down, as you said, 0:08:40.600 --> 0:08:43.640 three tents of a percent so far this year. So 0:08:43.840 --> 0:08:46.680 is that the incentive to buy it because it's down 0:08:47.200 --> 0:08:51.160 or do you wait until credit quality gets really bad 0:08:51.559 --> 0:08:54.320 and then go looking. Well, they're clearly your investors that 0:08:54.360 --> 0:08:56.360 want to buy at the bottom in a hig yield marketplace. 0:08:56.400 --> 0:08:59.280 So they bought in two thousand and nine, they brought 0:08:59.280 --> 0:09:01.800 in two thousands three coming out of a recession. Having 0:09:01.800 --> 0:09:03.320 said that, I don't think that's what you need to 0:09:03.320 --> 0:09:06.200 do to be successful in high yield. Interestingly, if you 0:09:06.280 --> 0:09:09.440 look at the risk adjusted return, and so you plot 0:09:09.760 --> 0:09:11.719 risk on one side and return on the other, and 0:09:11.800 --> 0:09:14.480 you use volatility as a proxy for risk, and you 0:09:14.559 --> 0:09:19.480 look at the high yield market returns over three, five, ten, fifteen, 0:09:19.600 --> 0:09:23.280 twenty twenty five years, you consistently see the same thing 0:09:23.559 --> 0:09:27.440 that the high yeld marketplace achieves an above average risk 0:09:27.440 --> 0:09:30.520 adjusted return, meaning it's above the plot line that you 0:09:30.559 --> 0:09:32.960 would run through all the other asset classes. And I 0:09:32.960 --> 0:09:35.800 think that's really what makes it attractive. It does generate 0:09:35.840 --> 0:09:38.560 an attractive returning over a long period of time, and 0:09:38.600 --> 0:09:40.720 I think if you think of the high yielded investing 0:09:41.080 --> 0:09:43.200 kind of on a three to five year horizon rather 0:09:43.240 --> 0:09:45.720 than a one to two that's the better way of 0:09:45.720 --> 0:09:47.760 of approaching it. Okay, So can you said that you're 0:09:47.800 --> 0:09:50.320 nibbling at the edges. What are you nibbling on? Well, 0:09:50.360 --> 0:09:52.800 we're selectively looking at some things, for example, in Europe 0:09:52.800 --> 0:09:55.400 because Europe has badly beaten up as the United States 0:09:55.400 --> 0:09:58.400 has been, Europe's even been worse. Uh, And we're beginning 0:09:58.400 --> 0:10:00.400 to look at some things in a margin market as well, 0:10:00.400 --> 0:10:03.040 because some emerging market corporate debt has been hit hard. 0:10:03.120 --> 0:10:06.760 Also countries. Oh, well, you know, there's some attractive things 0:10:06.760 --> 0:10:09.120 going on in some of the Latin American countries where 0:10:09.120 --> 0:10:12.280 that clearly under some pressure. Argentina would be a very 0:10:12.320 --> 0:10:14.120 good example. Of that, but we think that there's some 0:10:14.160 --> 0:10:18.360 companies that are there that have longer term possibilities of success. 0:10:19.360 --> 0:10:21.440 I just want to go back to the comparison because 0:10:21.440 --> 0:10:23.920 I want to try to understand this. For example, I 0:10:24.000 --> 0:10:26.840 looked at the performance of h y G just to 0:10:26.960 --> 0:10:33.880 use that um from all of year to day today. 0:10:34.520 --> 0:10:38.199 Up right, Okay, if I look at the SMP five 0:10:38.400 --> 0:10:44.440 D we're up right. So I'm trying to understand the contradiction. Well, 0:10:44.480 --> 0:10:46.559 I think one thing you need to keep in mind 0:10:46.840 --> 0:10:49.280 is that if you look at the high yield market 0:10:49.320 --> 0:10:51.439 place and you look at the e t f s 0:10:51.480 --> 0:10:55.880 in particular, they have not had a great return over 0:10:55.880 --> 0:10:59.400 a long period of time. They have underperformed the broader 0:10:59.760 --> 0:11:01.480 in a season the high yield market you want more 0:11:01.520 --> 0:11:04.120 active man, I think you do need active management. And 0:11:04.160 --> 0:11:07.640 not only have the e t f s underperformed the 0:11:07.679 --> 0:11:11.040 major indicase, they've actually underperformed the media and high yield 0:11:11.040 --> 0:11:13.160 manager as well. If you're looking at what their performance 0:11:13.160 --> 0:11:14.960 has been, you said that we're setting up for a 0:11:15.000 --> 0:11:18.800 strong what kind of returns are you expecting? Well, you know, 0:11:18.840 --> 0:11:21.720 a strong nineteen Let's recognize you know we're we're talking 0:11:21.720 --> 0:11:23.960 about that in the context of what will still be 0:11:24.000 --> 0:11:26.760 a marketplace where we're gonna have headwinds from the FED. 0:11:27.120 --> 0:11:31.240 So I think the expectations for a December right rise 0:11:31.280 --> 0:11:33.280 from the FED is pretty much locked in, and I 0:11:33.280 --> 0:11:35.640 think the markets are already adjusted for that. I still 0:11:35.679 --> 0:11:37.640 think there will be several whether it's three or four 0:11:37.679 --> 0:11:40.160 in two thousand and nineteen, we'll have to see. I 0:11:40.160 --> 0:11:42.120 think that the comments that are coming out today that 0:11:42.400 --> 0:11:44.440 the FED may be slowing down in the spring or 0:11:44.480 --> 0:11:48.760 pulling back maybe a little too optimistic. But I think 0:11:48.840 --> 0:11:50.880 if we look at high yield, it can certainly have 0:11:50.960 --> 0:11:54.720 a mid single digit return, and if and if we 0:11:54.760 --> 0:11:57.120 have headwinds from the FED, that means investment grade is 0:11:57.120 --> 0:12:00.640 probably gonna lose money. Thanks very much trip being with 0:12:00.720 --> 0:12:04.680 us pleasure. Ken Monahan, director of a global high yield 0:12:04.720 --> 0:12:07.920 for a MUNDI pioneer helping to manage more than ninety 0:12:08.200 --> 0:12:11.960 billion dollars, based in Durham, North Carolina, but joining us 0:12:11.960 --> 0:12:14.640 here on our Bloomberg Interactor Broker Studios. Thanks very much 0:12:14.679 --> 0:12:16.320 for being here. I will just say him that today 0:12:16.360 --> 0:12:18.600 it does look like other people seem to agree with Ken, 0:12:18.640 --> 0:12:21.559 because if you look at credit to fault swaps that 0:12:21.800 --> 0:12:23.760 there is clearly a bid here. In other words, the 0:12:23.840 --> 0:12:28.400 perceived risk in high yield credit is declining today in 0:12:28.480 --> 0:12:31.319 tandem with the games that we're seeing in stock market. 0:12:31.400 --> 0:12:32.880 So it does seem to be a little bit of 0:12:32.880 --> 0:12:35.160 a reprieve from the super risk off feeling that we 0:12:35.200 --> 0:12:37.800 had yesterday. It'll be interesting to see whether that continues though. 0:12:38.000 --> 0:12:47.000 Right Indeed, Apple's largest iPhone assembly partner, Fox con plans 0:12:47.040 --> 0:12:51.840 to reduce expenses by nearly three billion dollars in as 0:12:51.880 --> 0:12:57.720 it faces quote a very difficult and competitive year. Here 0:12:57.760 --> 0:13:01.120 to tell us more about apple It's supply chain and 0:13:01.200 --> 0:13:04.240 the future is none other than John Butler, our senior 0:13:04.280 --> 0:13:09.920 Telecom services and Equipment analyst for Bloomberg Intelligence. John Butler, 0:13:10.280 --> 0:13:15.920 what's happening to the new iPhone supply chain? Morning, Pim. Well, 0:13:15.960 --> 0:13:20.800 I think what's happening is these suppliers are adjusting to 0:13:20.920 --> 0:13:24.720 the new reality for Apple, which is they are going 0:13:24.760 --> 0:13:29.319 to keep driving hopefully revenue gains and revenue growth through 0:13:29.440 --> 0:13:34.319 price not volume. In fact, it was interesting because I 0:13:34.440 --> 0:13:37.960 d C, which gives us great data on the whole market, 0:13:38.880 --> 0:13:42.760 came out with Q three numbers and globally the smartphone 0:13:42.800 --> 0:13:47.040 market shipments, We're down almost six percent year on year, 0:13:47.240 --> 0:13:50.400 So that's sort of the new reality for the supply 0:13:50.520 --> 0:13:54.439 chain for not just Apple suppliers. I know Samsung, for example, 0:13:54.520 --> 0:13:57.920 has been struggling for unit growth as well. So I 0:13:57.960 --> 0:14:00.760 think that's what we're seeing. John. If this is something 0:14:00.800 --> 0:14:03.440 that everyone has known that Apple plans to generate the 0:14:03.520 --> 0:14:07.680 increase in growth in revenues from higher prices, why have 0:14:07.840 --> 0:14:11.520 Apple shares responded so badly to the ongoing bits of 0:14:11.559 --> 0:14:16.200 information that its suppliers are kind of struggling right now. Well, 0:14:16.240 --> 0:14:19.840 it sort of begs the question, you know, did Apple 0:14:20.080 --> 0:14:24.760 expect stronger sales of the new phones, particularly the ten are, 0:14:24.760 --> 0:14:28.720 which released in late October. It's a low it's a 0:14:28.880 --> 0:14:31.720 great phone. It is a low cost version of the 0:14:31.760 --> 0:14:36.120 iPhone ten. It has an LCD screen, so if you 0:14:36.160 --> 0:14:38.520 can live with that, you're getting all the other features 0:14:38.560 --> 0:14:41.880 of the ten and I think that Apple and everyone 0:14:41.960 --> 0:14:45.720 had high hopes for that. The early reports are it's 0:14:45.800 --> 0:14:49.440 not selling. Well, they're just anecdotal reports. It's it's tough 0:14:49.480 --> 0:14:52.800 to really tell whether that's true or not. I personally 0:14:52.800 --> 0:14:57.040 think the game begins on Black Friday, UM because the 0:14:57.080 --> 0:15:00.520 holiday selling season is so big for smart phones. But 0:15:01.600 --> 0:15:04.200 you know it's tough to say. I mean the supply chain, 0:15:04.600 --> 0:15:10.840 our semiconductor manufacturers, they tend to be very cyclical, right. 0:15:10.920 --> 0:15:15.400 They expand capacity until suddenly the market turns down and 0:15:15.440 --> 0:15:19.200 then there's over capacity, pressure on pricing and they need 0:15:19.240 --> 0:15:23.200 to cut back on personnel and facility. So I think 0:15:23.240 --> 0:15:26.840 we're seeing that right now. But I'll say this Lasia, 0:15:26.960 --> 0:15:30.560 Apple does come up against very tough comps beginning next 0:15:30.640 --> 0:15:34.120 year too, So they're going to hit what I'll call 0:15:34.200 --> 0:15:37.640 a transitional period with iPhone growth, or at least that's 0:15:37.720 --> 0:15:41.880 my expectation. John Butler, I'm sure you've read the reports 0:15:41.920 --> 0:15:47.960 about Apple working on electronic medical records for US veterans. 0:15:48.480 --> 0:15:52.640 What does that tell you about Apple's future strategy. So 0:15:52.960 --> 0:15:56.800 that speaks to the strategy of growing services to a 0:15:56.880 --> 0:15:59.479 point where it can pick up any slack and iPhone 0:15:59.560 --> 0:16:03.920 sales and services has been a great area for them. 0:16:03.960 --> 0:16:08.600 Everyone knows about Apple Care and and Apple Music. Those 0:16:08.600 --> 0:16:11.840 are well known consumer services. But they're also doing a 0:16:11.920 --> 0:16:16.640 very good job in healthcare. They're pushing on fitness very hard. Uh, 0:16:16.680 --> 0:16:19.760 They're doing a lot in medical records. I'll believe it 0:16:19.800 --> 0:16:23.520 when I see it pim By the way, medical records 0:16:23.520 --> 0:16:26.560 are one of those areas. You know that privacy is 0:16:26.600 --> 0:16:29.440 such a big issue. It's been very difficult for the 0:16:29.480 --> 0:16:33.160 world to get to a common platform and frankly for 0:16:33.320 --> 0:16:36.200 you and I to access their own medical records. So 0:16:36.320 --> 0:16:41.040 hopefully Apple can push through that all the regulatory mess 0:16:41.080 --> 0:16:44.240 to get there. But that's the endgame, and I think 0:16:44.280 --> 0:16:46.880 it'll be a big market when they get there. John, 0:16:46.960 --> 0:16:48.480 just real quick here, do you think that the sell 0:16:48.480 --> 0:16:50.720 off and Apple shares over the past few weeks has 0:16:50.760 --> 0:16:57.520 been overblown? I think people are looking ahead and seeing 0:16:57.560 --> 0:17:01.840 a slower growth environment. What the right number is is 0:17:01.920 --> 0:17:04.320 tough to say, but I think that's what you're seeing 0:17:04.440 --> 0:17:09.240 is a response a growing realization that iPhone really is 0:17:09.320 --> 0:17:13.560 coming up against tough comps, and we don't have any 0:17:13.600 --> 0:17:17.560 new hardware innovations yet. I think five G phones and 0:17:17.680 --> 0:17:21.040 flexible smartphone screens are going to drive that next cycle, 0:17:21.800 --> 0:17:25.320 but it's not coming next quarter. John Butler, thank you 0:17:25.400 --> 0:17:27.439 so much for being with us. Happy Thanksgiving, Have a 0:17:27.440 --> 0:17:30.399 wonderful Turkey day. John Butler has senior Telecom services and 0:17:30.440 --> 0:17:34.720 Equipment analysts for Bloomberg Intelligence. Apple shares rebounding a little 0:17:34.720 --> 0:17:38.320 bit today, after a bunch of brutal days, the NAZZAC 0:17:38.720 --> 0:17:41.720 down quite a bit, Apple shares up at this point 0:17:41.760 --> 0:17:48.080 about nine tenths of one. It's been a rough couple 0:17:48.080 --> 0:17:51.440 of months for equity treagers and frankly for anyone who 0:17:51.600 --> 0:17:54.640 deals in risk. And the big question is why does 0:17:54.640 --> 0:17:57.520 this have to do with expectations for slowing growth and 0:17:57.600 --> 0:18:00.360 a possible recession in the near term. John us sound 0:18:00.359 --> 0:18:03.600 to discuss Marvin Lowe, global macro strategist at State Street 0:18:03.840 --> 0:18:07.239 in Boston. Marvin, thank you so much for being with us. 0:18:07.280 --> 0:18:09.080 So what's your view? I mean, do you think that 0:18:09.119 --> 0:18:11.399 all of a sudden traders are suddenly waking up to 0:18:11.440 --> 0:18:14.240 the realization that there could potentially be a downturn in 0:18:14.280 --> 0:18:17.440 the near future. Yeah, yeah, I think that's definitely. Um 0:18:17.520 --> 0:18:20.520 certainly made its way into the narrative, and data kind 0:18:20.520 --> 0:18:23.119 of supports people being a bit more concerned. You know. 0:18:23.160 --> 0:18:27.080 Certainly the rebound in some of the global economic data 0:18:27.200 --> 0:18:30.720 that we expected after the summer hasn't really come our way. 0:18:30.760 --> 0:18:33.480 And then most recently there has been a slowing of 0:18:33.600 --> 0:18:36.520 um U S data, which, while expected, is still you know, 0:18:36.640 --> 0:18:40.359 something that people might not have anticipated given how strong 0:18:40.680 --> 0:18:45.280 data had been um going into the fall. Marvin, it's 0:18:45.320 --> 0:18:48.679 the federal reserves still going to raise interest rates in 0:18:48.800 --> 0:18:53.680 December and then four times in Yeah, December's December is 0:18:53.720 --> 0:18:55.439 the easy part of the equation. Yeah, I think that 0:18:55.480 --> 0:18:58.560 they will. I think that there's a very high threshold 0:18:58.560 --> 0:19:00.560 for them to change their mind done that, and I 0:19:00.600 --> 0:19:03.600 really don't see that happening going forward. I do think 0:19:03.600 --> 0:19:05.960 that they're committed for at least one or two more. 0:19:06.320 --> 0:19:08.399 I know there's been a little bit of back and 0:19:08.440 --> 0:19:10.840 forth in terms of how committed they are in nineteen, 0:19:11.280 --> 0:19:13.800 but the data is still there for them to continue 0:19:13.800 --> 0:19:16.000 along the path, you know, whether we get to the 0:19:16.040 --> 0:19:18.320 four or five that they're talking about, you know, late 0:19:18.400 --> 0:19:22.439 nineteen early, I think that's really where the question starts 0:19:22.480 --> 0:19:24.240 to emerge. So, Marvin, what do you think that that 0:19:24.359 --> 0:19:26.879 would have to see to slow down? You know what, 0:19:26.960 --> 0:19:29.720 I think that we would need to really see data 0:19:29.920 --> 0:19:31.440 kind of come in. I think that we would need 0:19:31.480 --> 0:19:35.480 to see the jobs market really start start to um 0:19:36.320 --> 0:19:38.879 peek if you will, um uh, you know, decreases in 0:19:38.880 --> 0:19:41.000 the unemployment rate would have to uh would have to 0:19:41.080 --> 0:19:43.440 slow up. Um. But you know, short of that, they 0:19:43.480 --> 0:19:46.359 are they are looking at an economy which is still 0:19:46.840 --> 0:19:50.560 at or you know, slightly above trend going into next year. Marvin. 0:19:50.640 --> 0:19:54.880 Earlier today we had a discussion about high yield debt. 0:19:54.960 --> 0:19:57.919 We were speaking to Ken Monahan of a Mundy pioneer. 0:19:58.240 --> 0:20:01.320 He was bullish on high yield. Do you see any 0:20:01.440 --> 0:20:06.080 problems with investing in high yield debt given that we 0:20:06.160 --> 0:20:10.400 may be turning in the interest right cycle. Yeah, I'm 0:20:10.440 --> 0:20:13.919 not anywhere near as optimistic unhigh yield in particular. I 0:20:13.920 --> 0:20:17.120 think that, you know, certainly we are talking about a recession. 0:20:17.160 --> 0:20:20.080 I think the way you see as a classes behave 0:20:20.119 --> 0:20:22.760 they're starting to show concern about when that recession is 0:20:22.800 --> 0:20:25.480 going to occur. I think that there are, you know, 0:20:25.600 --> 0:20:28.120 certain aspects of high yield that are very different now 0:20:28.160 --> 0:20:30.520 than they were before the crisis. Also that give me 0:20:30.560 --> 0:20:32.560 a concern, some of it coming from the investment grade 0:20:32.600 --> 0:20:34.640 space in terms of how large the triple be part 0:20:34.640 --> 0:20:36.879 of the market is, but also how a liquid and 0:20:36.920 --> 0:20:40.640 how um we've kind of changed, uh, the way high 0:20:40.680 --> 0:20:43.520 yield is traded. It kind of will make for volatility 0:20:43.520 --> 0:20:45.320 and will make for a challenge once we do get 0:20:45.320 --> 0:20:47.359 to that turn. So in this period of time, what 0:20:47.400 --> 0:20:49.600 do you think is the riskiest asked as a class 0:20:50.760 --> 0:20:52.879 UM you know what I'm gonna say, I'm gonna say that, 0:20:52.960 --> 0:20:55.399 you know, some of the corporate UM credit parts of 0:20:55.440 --> 0:20:58.600 the market do do frighten me a bit? You know, 0:20:58.640 --> 0:21:01.760 they have not certainly sold off as much as a 0:21:01.840 --> 0:21:03.439 lot of the other asset classes, so there is a 0:21:03.480 --> 0:21:05.400 bit of catching up to do. Are you talking about 0:21:05.480 --> 0:21:08.080 high yields or investment grade? You know, probably more probably 0:21:08.080 --> 0:21:10.240 more high yield at the moment, but you know, certainly 0:21:10.240 --> 0:21:13.680 investment grade, and you know, blindly just buying the index 0:21:13.920 --> 0:21:15.680 is UM is wrought with a lot of triple bs 0:21:15.720 --> 0:21:18.720 these days, so you know, really understanding those market dynamics 0:21:18.720 --> 0:21:22.320 are very important. How do you understand the market dynamics 0:21:22.359 --> 0:21:25.480 of what is going on in the European Union, specifically 0:21:25.720 --> 0:21:28.359 in Italy and will that affect interest rates in the 0:21:28.440 --> 0:21:31.400 United States? You know what, at the moment, I think 0:21:31.440 --> 0:21:34.800 that UM it would have a minimal effect that at 0:21:34.800 --> 0:21:37.439 this point. You know, certainly longer term, there are a 0:21:37.440 --> 0:21:39.760 lot of questions as to how the EU is going 0:21:39.800 --> 0:21:41.600 to deal with Italy. You know, certainly all of the 0:21:41.640 --> 0:21:44.840 problems with regard to the amount of debt remains, but 0:21:44.920 --> 0:21:49.600 in terms of it producing volatilely and a catalyst for 0:21:50.040 --> 0:21:52.960 increased volatility. I think I think the markets and investors 0:21:52.960 --> 0:21:56.360 are correctly looking beyond maybe the certain headlines that we're 0:21:56.359 --> 0:21:59.240 seeing over the last couple of weeks. Alright, So, given 0:21:59.280 --> 0:22:02.040 the fact that works probably going to see increased volatility, 0:22:02.040 --> 0:22:03.680 and you think that there is still a lot of 0:22:03.760 --> 0:22:07.320 risk in the lowest rated credit, what do you expect? 0:22:07.359 --> 0:22:10.000 What do you expect we're actually going to get a downturn. 0:22:10.080 --> 0:22:12.439 I mean, right now, very few people are saying it's 0:22:12.440 --> 0:22:15.080 going to be the next six or twelve months. Yeah, 0:22:15.080 --> 0:22:18.200 you know, um, certainly, certainly the next six months looks 0:22:18.240 --> 0:22:20.800 like it's going to be okay, you know, and you know, 0:22:20.840 --> 0:22:23.359 put that in the perspective of certainly where we were. 0:22:23.520 --> 0:22:24.920 You know, if we're talking about two two and a 0:22:24.920 --> 0:22:27.440