WEBVTT - Argentina Has ’Passed The EM Test’ While Turkey Fails 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 Bramowitz. 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 --> 0:00:33.520 Podcast on Apple Podcasts, SoundCloud, and Bloomberg dot com. When 0:00:33.720 --> 0:00:37.599 will the pain in developing markets stop? Right now, we're 0:00:37.600 --> 0:00:41.440 looking at the ms c I Emerging Markets Currency Index 0:00:41.560 --> 0:00:46.520 dropping to a new low since two thousand seventeen in May, 0:00:47.040 --> 0:00:50.400 as people start to think what's next. We've got India, 0:00:50.440 --> 0:00:54.240 We've got Indonesia. Well, China go joining us now? Eric Fine, 0:00:54.440 --> 0:00:58.880 very pleased to say portfolio manager focusing on emerging markets, 0:00:59.280 --> 0:01:02.040 particularly fixed didn't come dear to my heart at Vaneck 0:01:02.200 --> 0:01:05.320 Global here with us in our eleven three oh studios. Eric, 0:01:05.440 --> 0:01:08.160 thank you so much for being here in your quarter 0:01:08.319 --> 0:01:12.679 century of experience with developing markets from Morgan Stanley and 0:01:12.680 --> 0:01:16.840 at Vanak. What period are we in right now? What 0:01:16.959 --> 0:01:19.680 period is analogous to it in history? Sure? Well, first 0:01:19.680 --> 0:01:22.319 of all, we're in an experimental period, right so quantitative 0:01:22.319 --> 0:01:26.119 easing is an experiment UM and so uh. Referring back 0:01:26.160 --> 0:01:28.440 to history is tricky, but UM my short answer is 0:01:28.480 --> 0:01:32.320 it feels like a lot like UM that there was 0:01:32.360 --> 0:01:36.360 a period of leverage that um um an unwanted or 0:01:36.360 --> 0:01:38.920 a tightening and policy began with the FED. It began 0:01:38.959 --> 0:01:41.399 to have repercussions around the world. Some of them didn't 0:01:41.440 --> 0:01:45.200 seem major, didn't seem that important at the time, Mexico 0:01:45.520 --> 0:01:49.280 or UH. In the case of ninety seven Thailand, Thailand's 0:01:49.360 --> 0:01:52.520 really not that important a place, and yet it cascaded 0:01:52.600 --> 0:01:55.560 and didn't stop until the FED back down. So if 0:01:55.560 --> 0:01:58.800 you see a cascading pain, I mean, are we a 0:01:58.920 --> 0:02:01.920 quarter of the way through here? Or are we three 0:02:01.960 --> 0:02:03.640 quarters of the way through? What do you think? Yeah? 0:02:03.720 --> 0:02:06.040 Quarters are not? You know, I think right now is 0:02:07.040 --> 0:02:09.320 observing and storytelling time, right. I mean, I was a 0:02:09.360 --> 0:02:11.080 south side economist, so I can get into numbers if 0:02:11.120 --> 0:02:13.000 you want to. So I'm more comfortable saying we're still 0:02:13.000 --> 0:02:16.000 in the first half of this UM. And So, for example, 0:02:16.040 --> 0:02:19.080 in Turkey, UM after the big it was about a 0:02:19.080 --> 0:02:21.480 month ago, the big eight percent ten percent sell off 0:02:21.520 --> 0:02:26.200 in the lira. Positioning into that was unchanged, right, so 0:02:26.240 --> 0:02:29.000 people hadn't really reacted to that and there and still 0:02:29.040 --> 0:02:30.440 to this day, I don't think a lot of volume 0:02:30.480 --> 0:02:32.480 has gone through the numbers on the screen on a 0:02:32.560 --> 0:02:35.480 name like Turkey. Maybe spot effects, but there's a lot 0:02:35.520 --> 0:02:37.320 of those interest rate levels you see, not a lot 0:02:37.320 --> 0:02:40.399 of transacting, so it looks like a thing, but um, 0:02:40.440 --> 0:02:42.880 it's a we're in a we're in a different world. 0:02:42.960 --> 0:02:45.519 So not a lot of people sold despite this, which 0:02:45.560 --> 0:02:47.280 is why I think the pressures are still there. You 0:02:47.400 --> 0:02:51.600 owned no Turkey, correct we You know, I'm an old 0:02:51.600 --> 0:02:54.400 style guy. If I don't if we don't like something, 0:02:54.440 --> 0:02:56.760 if our process tells us not to own it, we don't. 0:02:56.800 --> 0:02:59.760 We don't own it um because we think the losses 0:02:59.800 --> 0:03:04.600 can be significantly around research more Sandy Argentina was of 0:03:04.600 --> 0:03:07.359 the hard Currency Index, and that sounds crazy from today's perspective, 0:03:07.360 --> 0:03:08.519 but that was a fact. That's what you know. The 0:03:08.560 --> 0:03:11.560 industries were small, ast and new. We we thought that 0:03:11.600 --> 0:03:14.120 they were default. That was interesting, but not a really 0:03:14.200 --> 0:03:16.360 unique view. A few other people thought, but we zero 0:03:16.400 --> 0:03:18.600 weighted it. That was very formative to me. If you 0:03:18.639 --> 0:03:21.200 think if we if we don't like something, and there 0:03:21.240 --> 0:03:23.399 you're really faced with capital losses. We think the buyer 0:03:23.440 --> 0:03:25.400 should be to really avoid it and not worry that 0:03:25.440 --> 0:03:27.919 it's a big part of an index. Okay, so if 0:03:28.000 --> 0:03:29.600 that is the case, I mean the way you're talking 0:03:29.600 --> 0:03:33.280 about I'm old school that way. The one reason perhaps 0:03:33.320 --> 0:03:36.840 that you're saying that is because indexing has absolutely exploded 0:03:37.080 --> 0:03:39.040 and a lot of people have gotten into emerging markets, 0:03:39.040 --> 0:03:41.800 have done so through E t F and other index strategies, 0:03:42.120 --> 0:03:44.120 and they own a lot of things that they may 0:03:44.120 --> 0:03:47.240 not believe in. How will that change the dynamic in 0:03:47.320 --> 0:03:51.000 this emerging markets sell off? Yes, well, indexing his First 0:03:51.000 --> 0:03:54.600 of all, it's given investors access to things two products 0:03:54.640 --> 0:03:56.880 that they haven't had, and in general average US pension 0:03:56.920 --> 0:03:59.560 fund has three percent allocating emerging markets bonds. If you 0:03:59.560 --> 0:04:02.160 look back where it's just the dollar index, you're supposed 0:04:02.200 --> 0:04:05.160 to have a lot more. So it's served a real purpose. 0:04:05.480 --> 0:04:07.360 But I think in terms of market structure, what it 0:04:07.400 --> 0:04:11.760 will mean for specific countries like a Turkey, is when 0:04:11.800 --> 0:04:14.920 things seem as if they've gone bad, but you look 0:04:14.920 --> 0:04:17.680 on the screen and it doesn't look that bad, don't 0:04:17.720 --> 0:04:20.240 think it's over. That's my main message. It's not that 0:04:20.279 --> 0:04:23.039 they're bad, it's just that for specific countries it can 0:04:23.080 --> 0:04:26.880 create an appearance that things have stabilized when they really haven't. 0:04:27.040 --> 0:04:28.680 And so in a country like Turkey, I think there's 0:04:28.720 --> 0:04:31.160 a real chance that we get to capital controls. If 0:04:31.200 --> 0:04:33.640 you get to capital controls, the numbers on the screens 0:04:33.760 --> 0:04:37.680 right now, which I'm saying should be a doubted um um, 0:04:37.720 --> 0:04:40.760 all of a sudden become undoubted because there's essentially nothing 0:04:40.839 --> 0:04:43.120 on there and you have to So that's the real concern. 0:04:43.160 --> 0:04:46.520 It's not an overall process. They're providing real opportunities for 0:04:46.560 --> 0:04:49.560 people wouldn't access great things like in general emerging market 0:04:49.560 --> 0:04:52.520 bonds have done well. Um, it's that for specific countries 0:04:52.520 --> 0:04:56.880 that can create complacency, uh when when it's unwarranted. I 0:04:56.920 --> 0:04:59.400 think it's very much the case in Turkey. Interesting, so 0:05:00.040 --> 0:05:02.480 do invest in emerging markets? So it sounds like you 0:05:02.600 --> 0:05:06.159 do have a somewhat negative view of the asset class 0:05:06.240 --> 0:05:09.520 that you focus on. Where are you positive? Sure? Well, 0:05:09.600 --> 0:05:12.440 So when I say that it's well for a big 0:05:12.440 --> 0:05:14.440 part of the reason why I'm cautious right now is 0:05:14.480 --> 0:05:17.800 the names that I see adversity where I'm expecting adversity 0:05:17.800 --> 0:05:19.920 happen to be big names. So when people ask about 0:05:19.960 --> 0:05:22.840 quote unquote emerging markets, they're not asking me about my 0:05:22.920 --> 0:05:25.280 view of Mongolia or Armenia or b l a Ruse 0:05:25.720 --> 0:05:28.760 or Argentina, and sometimes on Argentina, they're asking me about 0:05:28.920 --> 0:05:31.560 big names like Mexico. Well they had an election. We 0:05:31.600 --> 0:05:34.479 think Omlo needs to be tested as new president. Um 0:05:34.720 --> 0:05:38.560 uh does that mean you're I don't have a lot 0:05:38.600 --> 0:05:40.760 of explosion and I'm looking to get exposure there um 0:05:41.040 --> 0:05:43.920 Um Russia economic policy is great, but sanctions risk is there? 0:05:44.520 --> 0:05:47.080 Um A Turkey. I've already explained our view on Turkey. 0:05:47.279 --> 0:05:50.520 Those are big names, so to be. So that's once 0:05:50.680 --> 0:05:52.520 the spirit in which I'm answering it. So what are 0:05:52.560 --> 0:05:57.800 we what are we excited about? Um? Argentina, Argentina government, Argentina. 0:05:58.160 --> 0:06:01.239 You could describe what's happening to merging markets as a test. 0:06:01.680 --> 0:06:04.760 Some countries are passing, some countries are failing. Now the 0:06:04.800 --> 0:06:06.480 test is not just one test. You take a few 0:06:06.480 --> 0:06:08.400 of them, but every single test, in my opinion, that 0:06:08.440 --> 0:06:11.480 Turkey has taken in this they failed. They are not 0:06:11.560 --> 0:06:14.520 looking like their their prospects are not looking good. Argentina, 0:06:14.520 --> 0:06:17.240 in our opinion, has passed all these tests. They floated 0:06:17.279 --> 0:06:19.200 the exchange right, not enough, But you know what, I 0:06:19.320 --> 0:06:21.120 just don't invest too much in the exchange rate if 0:06:21.160 --> 0:06:22.880 that's your concern, if you think it needs to go more. 0:06:23.000 --> 0:06:26.039 But they've tried to quasi float the exchange. They've hiked 0:06:26.080 --> 0:06:29.480 interest rates to double the inflation rate, Turkeys contemplating hiking 0:06:29.760 --> 0:06:33.360 interest rates to the inflation rate. Um. And they've invited 0:06:33.360 --> 0:06:36.160 the i m F, which means dollar funding is really 0:06:36.200 --> 0:06:37.760 just not the risk. So I'm not at I'm not 0:06:37.800 --> 0:06:40.640 saying Argentina currency is out of the woods. And but 0:06:40.720 --> 0:06:42.320 when you're under an i m F program and you're 0:06:42.320 --> 0:06:45.960 committed and you're reacting the right way, yields for government 0:06:45.960 --> 0:06:49.320 bonds and dollars is too high, and higher for provinces 0:06:49.360 --> 0:06:51.480 that haven't had a head track record of defaulting is 0:06:51.480 --> 0:06:54.240 too high. So Argentina, we're very excited about year Argentina 0:06:54.320 --> 0:06:57.760 and funds too much spread duration. You're not trading Argentina 0:06:57.800 --> 0:06:59.560 there So as bullish as I am on Argentina, when 0:06:59.560 --> 0:07:01.560 you get into spread duration, you're trading a whole bunch 0:07:01.600 --> 0:07:04.680 of other things that are not the original thing. Um um. 0:07:04.720 --> 0:07:07.400 I'd also say Chinese property right people are worried. You know, 0:07:07.400 --> 0:07:09.600 it's not this general e m thing we have been 0:07:09.840 --> 0:07:12.320 We have not avoided China because we thought there was 0:07:12.320 --> 0:07:14.080 going to be a disaster that we avoided China. We 0:07:14.080 --> 0:07:16.520 didn't see value there Now due to these pressures, some 0:07:16.560 --> 0:07:20.520 of their property names corporates have are very yielding now 0:07:20.560 --> 0:07:22.040 and a lot of them have high cash to short 0:07:22.120 --> 0:07:24.960 term liabilities. So that's an attractive sector where you might 0:07:25.000 --> 0:07:29.000 see negative news about, but we're excited by because they're 0:07:29.040 --> 0:07:32.200 responding positively, the government's responding positively, and the companies have 0:07:32.240 --> 0:07:34.640 buffers these high cash So we're not afraid of risk. 0:07:34.680 --> 0:07:37.000 We're we're We're just saying that a lot of things 0:07:37.080 --> 0:07:41.000 that get associated with quote unquote emerging markets UM happen 0:07:41.040 --> 0:07:44.280 to be vulnerable. And the fact that in the old 0:07:44.400 --> 0:07:47.240 days under not liking something meant not owning. In these 0:07:47.280 --> 0:07:49.080 days not liking it ment, well, I have to have 0:07:49.160 --> 0:07:52.120 some because it's yield. We're in a quee environment UM 0:07:52.240 --> 0:07:55.240 means that there can be some complacency in certain names. 0:07:55.280 --> 0:07:57.880 So don't get comforted by O. G. Turkey look stable. 0:07:57.880 --> 0:08:00.440 I wouldn't get comforted by that. Eric Fine, you'll have 0:08:00.480 --> 0:08:03.480 to come back a pleasure speaking with you. Eric Fine, 0:08:03.560 --> 0:08:06.880 portfolio manager focusing on emerging markets fixed income strategy for 0:08:07.200 --> 0:08:10.520 Van Eck Global here in our eleven three oh studios, 0:08:10.760 --> 0:08:13.040 fantastic inside at a time when a lot of people 0:08:13.120 --> 0:08:15.440 are trying to figure out just where we are in 0:08:15.480 --> 0:08:18.640 this emerging markets sell off, how pervasive will be? How 0:08:18.680 --> 0:08:37.880 tied is it to the Federal Reserve. CBS shares down 0:08:37.920 --> 0:08:42.079 more than three percent today after less Moonvest, the longtime 0:08:42.160 --> 0:08:46.000 chief executive officer and kingpin of the media industry, was 0:08:46.080 --> 0:08:50.320 ousted after sexual harassment claims. What will be the future 0:08:50.360 --> 0:08:53.120 of this company? Who will be the leader to really 0:08:53.160 --> 0:08:55.640 take the place of less Moon Vest? Joining us now? 0:08:55.800 --> 0:08:59.200 Porter bib managing partner at Media Tech Capital Partners, also 0:08:59.520 --> 0:09:03.520 the first publisher of Rolling Stone magazine in New York. Porter, 0:09:03.760 --> 0:09:06.760 thank you so much for being with us. So how 0:09:06.800 --> 0:09:10.480 big of a blow is this to CBS. Well, it's 0:09:11.120 --> 0:09:13.960 a very big blow to less Moon Viz. But it's 0:09:14.360 --> 0:09:17.959 very little to CBS in the bigger picture of things, 0:09:18.000 --> 0:09:23.400 because Uh National Amusement and the Redstone Interest control both 0:09:23.520 --> 0:09:27.480 Vehicom and CBS and have indicated for several years that 0:09:27.920 --> 0:09:32.480 they want to sell both companies. Sherry Rhodes Spreadstone obviously 0:09:32.600 --> 0:09:35.320 tried to put them together. Less Moon Viz fought that 0:09:35.440 --> 0:09:38.480 because she would not commit to have him run the 0:09:38.520 --> 0:09:44.920 combined companies, which interestingly as as a single entity put 0:09:44.920 --> 0:09:48.800 back together the way they were before Sumner Redstone split 0:09:48.840 --> 0:09:52.160 them up eight years ago. Um, they would be worth 0:09:52.160 --> 0:09:57.400 twenty to more than they are worth individually a standalone. 0:09:57.480 --> 0:10:00.120 So really he was on the right trail. Becau is 0:10:00.160 --> 0:10:04.720 there's so much redundancy, duplication of efforts and initiatives and 0:10:04.880 --> 0:10:11.040 organizational structures. And what the CBS doesn't have Vehacom does, 0:10:11.160 --> 0:10:16.400 what Vehcom doesn't have CBS does. CBS has no real 0:10:16.520 --> 0:10:21.640 international presence, It has no real movie studio or very 0:10:21.720 --> 0:10:28.000 significant motion picture library that Paramount Pictures of in Vehcom offers. UH. 0:10:28.559 --> 0:10:33.160 CBS has the broadcast networks, the broadcast content and archives 0:10:33.240 --> 0:10:36.960 and less moons has been very effective. Moving the company 0:10:37.000 --> 0:10:42.040 into over the top and streaming and CBS All Access 0:10:42.080 --> 0:10:46.839 CBS News UH has been quite successful. Well, what I 0:10:46.880 --> 0:10:49.600 guess that that I'm wondering. I'm looking at Viacom shares 0:10:49.640 --> 0:10:51.680 and they're little change today after being down for the 0:10:51.720 --> 0:10:55.360 two sessions prior, and CBS shares, as we said, are 0:10:55.400 --> 0:10:58.640 down more than three What is the market missing that 0:10:58.679 --> 0:11:01.680 you're seeing with respect to the added value that these 0:11:01.720 --> 0:11:05.440 combined companies will have. Well, I I think what what 0:11:05.920 --> 0:11:09.319 is happening today in the market is shareholders are are saying, 0:11:09.720 --> 0:11:13.000 we're losing one of the best, uh and most effective 0:11:13.960 --> 0:11:18.040 managers in the media business. Ever, less Moonvous has done 0:11:18.040 --> 0:11:20.800 an incredible job in the fifteen years since he's been 0:11:21.280 --> 0:11:26.520 the senior executive at at CBS. He's really uh fought 0:11:26.559 --> 0:11:31.560 the transition and landscape earthquakes that have been going on 0:11:31.679 --> 0:11:35.199 in legacy media companies. He's kept CBS on top of 0:11:36.240 --> 0:11:40.200 all the broadcast networks for a long time. And they're 0:11:40.240 --> 0:11:44.160 saying without less Uh, they don't know Joe Ianello, who's 0:11:44.440 --> 0:11:48.680 been less his right hand man for almost a decade. UM, 0:11:48.760 --> 0:11:50.600 they don't know what's going to happen to the company, 0:11:50.600 --> 0:11:54.720 and they're they're not looking at it as a takeover target. 0:11:55.320 --> 0:11:58.720 That's what Sherry Redstone has had that in her mind 0:11:58.760 --> 0:12:02.000 for the last several years, cleaned house at AT with 0:12:02.080 --> 0:12:07.160 Phil Domont and others who left UM, put Bob Pacissions 0:12:07.360 --> 0:12:12.000 in charge, and prepared for a takeover of the combined companies. 0:12:12.559 --> 0:12:17.040 Nobody's focusing on that right now because curiously, one of 0:12:17.120 --> 0:12:20.520 the board decisions that came out last night when they 0:12:21.320 --> 0:12:26.320 decided made the announcement about less Moon Voo's departure. They 0:12:26.320 --> 0:12:29.760 announced that Sherry Redstone has agreed to a two year 0:12:29.960 --> 0:12:34.960 hiatus and won't push combining vih Com and CBS. I 0:12:34.960 --> 0:12:39.319 don't know if that's enforceable. The bottom line, the asterisk 0:12:39.440 --> 0:12:43.480 on that whole announcement was, but if anybody else wants 0:12:43.520 --> 0:12:47.600 to promote a combine vehicle CBS, you do, there will 0:12:47.640 --> 0:12:51.000 need still be no objection by the board. Um almost 0:12:51.000 --> 0:12:53.040 trying to say, please come in here and rescue me 0:12:53.080 --> 0:12:54.640 so that I can stay out of it, right, instead 0:12:54.640 --> 0:12:57.480 of avoid the political fallout, I guess that I'm wondering 0:12:57.480 --> 0:13:00.200 when you talk about the vision of lesser moonvest is 0:13:00.200 --> 0:13:04.120 the vision that is required from your perspective for CBS 0:13:04.120 --> 0:13:08.719 over the upcoming decade or so during a nearly unprecedented 0:13:09.360 --> 0:13:13.079 shift transformation of the entire media industry. Right. Well, there's 0:13:13.120 --> 0:13:17.760 one word that answers your question. It's called scale. CBS 0:13:17.880 --> 0:13:23.320 and Viacom, neither of them, individually or collectively combined, has 0:13:23.440 --> 0:13:27.480 the scale to compete with the the tech giants, with Amazon, 0:13:27.640 --> 0:13:31.800 with Google, with Facebook, with Microsoft, um or or with 0:13:31.960 --> 0:13:35.839 Disney now, which is with with their acquisition of twenty 0:13:35.920 --> 0:13:40.520 one century Foxes entertainment assets, They're they're going after Sky 0:13:40.559 --> 0:13:43.120 and they will end up getting Sky in the UK. 0:13:43.800 --> 0:13:48.160 UM they're going to be a major streaming factor along 0:13:48.160 --> 0:13:51.600 with the tech giants, and CBS and Viacom individually or 0:13:51.600 --> 0:13:54.559 collectively cannot compete in that market. Who is going to 0:13:54.600 --> 0:13:57.119 be in a position to take up Sherry Redstone's suggestion 0:13:57.360 --> 0:14:00.400 and try to push for this merger sooner than later. Well, 0:14:00.400 --> 0:14:06.960 it's curious Verizon has already articulated an interest in CBS. 0:14:07.720 --> 0:14:10.360 One of the board members right now, Bruce Gordon, is 0:14:10.400 --> 0:14:13.760 a former senior Verizon executive, and I'm sure they are. 0:14:14.160 --> 0:14:19.720 He's talking to Verizon assiduously and figuring out whether or 0:14:19.760 --> 0:14:23.600 not this is the right time. Verizon claims that they're 0:14:23.640 --> 0:14:28.600 focused on developing five G, the new um streaming service 0:14:28.680 --> 0:14:33.280 that's going to revolutionize wireless communications and the Internet, but 0:14:33.520 --> 0:14:37.280 they don't have any content, and their competition at over 0:14:37.320 --> 0:14:40.160 at A T and T bought Time Warner and does 0:14:40.240 --> 0:14:43.520 have content. So I think that Verizon is in first 0:14:43.560 --> 0:14:48.200 position to combine with CBS and or Vehicom Porter BIB, 0:14:48.200 --> 0:14:50.560 thank you so much for being with us today, definitely 0:14:50.960 --> 0:14:54.280 important to follow what's happening with this media saga that 0:14:54.320 --> 0:15:14.200 has entered a new phase without Blessed Moon. Vest Apple 0:15:14.240 --> 0:15:17.600 shares down today for a fourth straight day, the biggest 0:15:17.760 --> 0:15:21.480 four day slump since April. This comes after the company 0:15:21.520 --> 0:15:24.080 said that it would have to raise prices on certain 0:15:24.120 --> 0:15:28.360 products in response to the additional tariffs at President Trump 0:15:28.440 --> 0:15:31.960 has proposed on Chinese goods joining us now. David Garty, 0:15:32.080 --> 0:15:34.520 I'm very pleased to say, Chief executive officer of g 0:15:34.640 --> 0:15:38.080 v A Research, David, what do you take away from 0:15:38.120 --> 0:15:42.760 Apple's announcement about having to raise prices on certain products? 0:15:42.800 --> 0:15:46.040 Most is that Apple did not in those list of 0:15:46.040 --> 0:15:49.160 products include the iPhone, which says, I mean, here's the company, 0:15:49.560 --> 0:15:52.280 the product the iPhone provides the bulk of the company's 0:15:52.320 --> 0:15:54.600 revenues and profits. They said it wasn't going to be 0:15:54.680 --> 0:15:57.240 impacted by tariffs, which to me, I read that as 0:15:57.280 --> 0:15:59.640 saying that they're going to eat the higher costs that 0:15:59.760 --> 0:16:02.960 the tariffs would impact. The tariff effect would have on 0:16:03.120 --> 0:16:06.560 Apple in terms of its manufacturing. As you know, Apples, 0:16:06.560 --> 0:16:10.240 a global company, has substantial operations in China. The Trump 0:16:10.280 --> 0:16:14.160 administration coming out and levying tariffs on almost all the 0:16:14.200 --> 0:16:17.720 imports that are coming into the US from China. This 0:16:17.800 --> 0:16:20.720 is an effect that you know, manufacturers that use global 0:16:20.720 --> 0:16:25.160 supply chains like Apple can't offset overnight. And as a result, 0:16:25.200 --> 0:16:27.320 Apple is saying that with respect to the iPhone and 0:16:27.360 --> 0:16:30.160 the higher tariffs, they're going to eat the costs, which 0:16:30.200 --> 0:16:34.880 means that they won't pass through these costs to their consumers. However, 0:16:35.320 --> 0:16:37.160 in other cases where the company is said in the 0:16:37.200 --> 0:16:41.040 case of iPods, in the case of accessories, prices will 0:16:41.080 --> 0:16:44.200 be going up. So but here's what I'm struggling with. 0:16:44.280 --> 0:16:46.800 I mean iPods. Who has an iPod these days? Right? 0:16:46.800 --> 0:16:49.320 These are all sort of the peripheral products of Apples. 0:16:49.760 --> 0:16:54.240 What does it say about their confidence levels that they 0:16:55.080 --> 0:16:56.800 is it perhaps that they don't have the pricing power 0:16:57.000 --> 0:16:59.400 to to do that with the iPhone, or that that they, 0:17:00.120 --> 0:17:03.400 uh say, are feeling more vulnerable in a time of 0:17:03.560 --> 0:17:07.320 increasing competition with smartphones that they don't want to touch that. Well, 0:17:07.359 --> 0:17:09.520 you are in a situation where in the smartphone market 0:17:09.520 --> 0:17:12.680 growth has essentially plateaued. Uh, there is a battle for 0:17:12.760 --> 0:17:16.040 market share. Don't forget Samsung is out there. Uh, Samsung 0:17:16.080 --> 0:17:19.480 itself with very large operations in Korea, not necessarily in China. 0:17:20.080 --> 0:17:24.000 Apple has to consider what's its competitive positioning, and obviously 0:17:24.040 --> 0:17:28.760 iPhone sales drive the sales of many other products for Apple. 0:17:28.880 --> 0:17:31.520 So for Apple to say essentially, look, we're going to 0:17:31.600 --> 0:17:33.920 eat the costs on this so we can hold onto 0:17:33.920 --> 0:17:36.640 our market share, this is what they're doing. I think 0:17:36.640 --> 0:17:39.000 the bigger picture, though, that we have to take away 0:17:39.000 --> 0:17:41.560 from looking at what Apple is saying and what Ford 0:17:41.600 --> 0:17:45.000 Motor Company are saying, is that they have optimized their 0:17:45.040 --> 0:17:50.720 operations to operate in a global market. Imposing tariffs um 0:17:50.920 --> 0:17:53.800 requires changes in supply chains that can't be made overnight. 0:17:53.840 --> 0:17:57.439 These require substantial capital investments, which are done over years. 0:17:57.800 --> 0:17:59.320 What it really means at the end of the day 0:17:59.400 --> 0:18:02.000 is that if probably are going up so much, these 0:18:02.040 --> 0:18:04.800 companies are going to limit what consumer choices. Look at 0:18:04.840 --> 0:18:07.040 what Ford Motor Company did in terms of saying, we're 0:18:07.080 --> 0:18:10.160 not selling passenger cars in the US anymore. The costs 0:18:10.160 --> 0:18:13.040 are too high. Tariffs are making it worse Oracle and 0:18:13.160 --> 0:18:17.040 Hewlett Packard enterprises in the common period. President Trump about 0:18:17.080 --> 0:18:20.719 some of these tariffs, said that if they go through, 0:18:21.000 --> 0:18:25.280 it would impede America's leadership when it comes to creating 0:18:25.320 --> 0:18:28.359 a five GEN network. Do you think that's true. I 0:18:28.359 --> 0:18:31.760 would argue that again, global supply chains matter, and in 0:18:31.800 --> 0:18:34.040 this case, we have components that are important for the 0:18:34.080 --> 0:18:37.800 adoption of things like five G. Five G as a 0:18:37.880 --> 0:18:41.719 wireless broadband protocol arguably is going to usher in a 0:18:41.760 --> 0:18:45.080 new generation of services. If the US wishes to fall 0:18:45.160 --> 0:18:49.879 further behind in terms of being technologically competitive, fine go ahead. 0:18:50.080 --> 0:18:53.200 Delay the implementation of five G will only all suffer 0:18:53.240 --> 0:18:54.960 as a result. So you don't think this is just 0:18:55.160 --> 0:18:58.280 an issue of the company is throwing threats out there 0:18:58.280 --> 0:19:00.800 in order to get their wish, which is to get 0:19:00.800 --> 0:19:03.240 these tariffs taken off the table. I don't believe the 0:19:03.280 --> 0:19:06.160 companies make idle threats. I mean, companies are talking about 0:19:06.240 --> 0:19:11.439 capital planning processes that again take years to implement, and 0:19:11.560 --> 0:19:14.840 for an administration to come out and expect that companies 0:19:14.960 --> 0:19:17.679 at the not the drop of a hat, are going 0:19:17.720 --> 0:19:21.359 to be able to turn around and reconfigure themselves. That's 0:19:21.400 --> 0:19:24.399 just blatantly unrealistic. So how much do you think that 0:19:24.480 --> 0:19:26.440 big tech in the U s would sell off if 0:19:26.440 --> 0:19:29.159 these tariffs go through as promised? Well, I mean we're 0:19:29.160 --> 0:19:31.359 already looking in a situation where people are saying that 0:19:31.440 --> 0:19:34.560 Apple probably from about two seventeen a share right now 0:19:34.640 --> 0:19:38.200 probably pulls back maybe below two hundred dollars a share. UM, 0:19:38.359 --> 0:19:40.280 so you're probably looking at something in the order of 0:19:40.320 --> 0:19:44.400 maybe about a ten to fifteen percent correction, potentially depending 0:19:44.440 --> 0:19:46.719 upon the company and depending upon how exposed they are 0:19:46.760 --> 0:19:48.960 relative to their supply chains in China. I have to 0:19:48.960 --> 0:19:51.080 wonder how people are gonna start talking about peak tech, 0:19:51.200 --> 0:19:53.359 especially now. If you look at for example, Snap, one 0:19:53.400 --> 0:19:55.560 of the hottest I p O s of last year, 0:19:56.280 --> 0:19:59.040 declining shares reaching a low. You smile a little bit 0:19:59.080 --> 0:20:01.119 because putting Apple ins Snap in the same sentence as 0:20:01.200 --> 0:20:03.960 sort of a little bit ridiculous. But their chief strategy 0:20:03.960 --> 0:20:08.719 officers leaving, who really helped, you know, create this company. 0:20:09.640 --> 0:20:11.199 Do you think that's significant or do you think this 0:20:11.280 --> 0:20:13.000 is just a company that's sort of out there? And 0:20:13.359 --> 0:20:15.920 I mean Snap is a company that obviously Facebook wanted 0:20:15.960 --> 0:20:18.440 to emulate all their features, uh, and I would argue 0:20:18.480 --> 0:20:20.639 that there is greater competition taking place there. But in 0:20:20.720 --> 0:20:23.240 terms of talking about peak tech, I mean the fact 0:20:23.320 --> 0:20:25.760 that the stock market, now ten years after the collapse 0:20:25.760 --> 0:20:29.000 of Lehman Brothers, is up off it's two thousand seven highs. 0:20:29.280 --> 0:20:31.480 A big portion of that has been due to tech. 0:20:31.960 --> 0:20:34.280 And to the extent if we're calling peak tech, are 0:20:34.280 --> 0:20:38.720 we really calling peak stock market? Well, what's the answer. 0:20:38.800 --> 0:20:40.719 It's something that we're going to have to contend with. 0:20:40.880 --> 0:20:43.840 And the extent that the administration decides to take on 0:20:43.960 --> 0:20:47.120 China and put the tech industry in the crosshairs certainly 0:20:47.119 --> 0:20:49.919 puts the stock market at risk. And lord knows, the 0:20:49.960 --> 0:20:53.000 President is someone who likes to trumpet the fact that 0:20:53.040 --> 0:20:56.040 there are a new stock market high intended as your 0:20:56.119 --> 0:20:58.880 eyes told me so. In other words, you do think 0:20:58.960 --> 0:21:00.920 that should these tariffs go through, if I'm reading through 0:21:00.920 --> 0:21:03.440 the through the lines, if these tariffs go through, there's 0:21:03.440 --> 0:21:06.119 a good chance that tech will sell off in a 0:21:06.400 --> 0:21:09.040 meaningful way and lead to sort the end of this 0:21:09.200 --> 0:21:11.600 equity rally. I mean, there are other data data points 0:21:11.600 --> 0:21:13.640 that are out there. Golden Sacks last week come out 0:21:13.640 --> 0:21:16.439 and said that their bear market warning indicator is at 0:21:16.440 --> 0:21:19.399 the highest level we've seen since nineteen. They said it 0:21:19.440 --> 0:21:21.960 may not necessarily lead to an immediate crash, but expect 0:21:21.960 --> 0:21:25.600 a flattening of returns from equities. Certainly, these tariffs are 0:21:25.600 --> 0:21:28.800 going to contribute to that, David Garretty, always a pleasure 0:21:28.800 --> 0:21:30.359 having you on. Thank you so much for being with me. 0:21:30.480 --> 0:21:34.240 Thank you, David Garretty, chief executive of g v A Research. 0:21:50.040 --> 0:21:54.119 Depending on how you measure the world of cryptocurrencies, they 0:21:54.160 --> 0:21:57.960 have lost hundreds of billions of dollars of market value 0:21:58.359 --> 0:22:02.280 over the past six seven eight months. Joining us now 0:22:02.280 --> 0:22:05.719 to talk about this is Aaron Brown, columnist with Bloomberg Opinion, 0:22:05.760 --> 0:22:08.760 also former managing director and head of Financial market Research 0:22:09.040 --> 0:22:12.800 at a q R Capital Management. Aaron, I'm so pleased 0:22:12.800 --> 0:22:15.080 you could join us today. I would love to get 0:22:15.080 --> 0:22:17.080 your take on the sell off that we've been seeing 0:22:17.400 --> 0:22:20.800 in cryptocurrencies. Do you think that this is sort of 0:22:21.359 --> 0:22:24.520 marking the end of the fad of bitcoin and other 0:22:24.560 --> 0:22:28.360 cryptocurrencies or it's just another hiccup that it will that 0:22:28.359 --> 0:22:30.399 that will see in the rear view mirror in a 0:22:30.400 --> 0:22:34.160 couple of years. Um. What's really puzzling about this sell 0:22:34.200 --> 0:22:36.640 off is why it's a big news story, why we're 0:22:36.640 --> 0:22:40.160 even having this interview. UH crypto fail from an intra 0:22:40.280 --> 0:22:43.520 day high to an inter day low six last week, 0:22:44.160 --> 0:22:46.240 and the average it does in an average week is 0:22:46.240 --> 0:22:49.399