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Speaker 1: Welcome to the Bloomberg p m L Podcast. I'm Pim Fox.

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Speaker 1: Along with my co host Lisa Abramowitz. Each day we

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Speaker 1: bring you the most important, noteworthy, and useful interviews for

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Speaker 1: you and your money, whether you're at the grocery store

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Speaker 1: or the trading floor. Find the Bloomberg p m L

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Speaker 1: Podcast on Apple Podcasts, SoundCloud, and Bloomberg dot com. President

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Speaker 1: Trump has made no secret of his desire to unrule

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Speaker 1: UH some of the policies of former President Barack Obama,

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Speaker 1: and among those are clean car standards that are enforced

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Speaker 1: by the Environments Protection Agency. And here to talk about

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Speaker 1: that is Carol Browner, chair of the board UH for

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Speaker 1: and for the League of Conservative of Conservation Voters as

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Speaker 1: well as a former e p A administrator from to

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Speaker 1: two thousand and one, the longest serving administrator on record. Carol,

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Speaker 1: thank you so much for joining us. I just want

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Speaker 1: to get a sense first of all of what currently

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Speaker 1: UH Scott Prue at the current ep A head is

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Speaker 1: looking to do with respect to clean car standards and

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Speaker 1: how quickly it could really move well. Well, thank you

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Speaker 1: and thank you for having me. UM. What Mr Prude

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Speaker 1: is up to is basically trying to looking at rolling

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Speaker 1: back standards that were agreed to with the car companies.

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Speaker 1: I had the opportunity to work with President Obama at

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Speaker 1: the beginning of his term, and we sat down with

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Speaker 1: the car manufacturers. E p A has authority to make

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Speaker 1: cars cleaner department transportation to make them more efficient, and

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Speaker 1: so we all worked together to craft a program that

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Speaker 1: would give car company sort of what they needed, rather

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Speaker 1: than two different agencies regulating them one set of sort

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Speaker 1: of requirements. And they actually stood with President Obama and

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Speaker 1: the Rose Garden announced this framework agreement and then it's

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Speaker 1: been you know, implemented over the years, and now suddenly

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Speaker 1: the new head of the e p A, Mr. Pruitt,

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Speaker 1: is talking about, you know, rolling it back, and it's

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Speaker 1: just it's it's it's mind boggling, right because last week

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Speaker 1: alone you had Ford in GM announcing they're going to

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Speaker 1: make more electric cars. Uh, you know, you have a

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Speaker 1: resurgence in the car industry. They're selling more cars last

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Speaker 1: year than they sold I think in any year. So

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Speaker 1: it's hard to understand, you know, why they're doing this.

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Speaker 1: The consumer wants a cleaner car. They want a car

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Speaker 1: that pollutes less. They want a car that goes further

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Speaker 1: on a tank I gas. They want to save money

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Speaker 1: at the pump. They want their kids to drink a

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Speaker 1: breeze clean air. Excuse me, Carol, I don't know. Let

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Speaker 1: me just focus on a slightly different area involving Scott

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Speaker 1: Prude in the e p A. I don't know whether

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Speaker 1: you're familiar with Michael Dorson. He is a professor at

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Speaker 1: the University of Cincinnati, and he is under consideration under

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Speaker 1: potential nomination and vote in the Senate for a position

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Speaker 1: in the e p A. And while the Democrats have

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Speaker 1: blocked his appointment, Scott Prude has appointed him as an advisor.

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Speaker 1: And it turns out that Mr Dowson, who operated a

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Speaker 1: nonprofit research foundation, was called a Toxicology Excellence for risk assessment.

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Speaker 1: Contributors to that organization include DuPont, Monsanto, American Chemistry Council.

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Speaker 1: Is this part and parcel of the way the agency

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Speaker 1: works on a regular basis? Or is this something unusual? Um?

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Speaker 1: It strikes me based on you know what you're telling

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Speaker 1: me as unusual. Look, you know Congress created the agency

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Speaker 1: Congress past law saying certain people who run parts of

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Speaker 1: the agency, Mr Prude and people who run other parts

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Speaker 1: should be subject to a review by the Senate, should

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Speaker 1: be you know, called up to testify on why they

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Speaker 1: are qualified, and then should be voted on by the Senate.

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Speaker 1: You can't actually give someone one of these jobs without

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Speaker 1: going through their process. It's just the way the system

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Speaker 1: works is a part of the accountability. And you know, it's, uh,

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Speaker 1: I think deeply troubling if this is an effort to

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Speaker 1: simply get around that kind of transparency and that kind

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Speaker 1: of accountability. But you know, I will tell you, as

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Speaker 1: a former administrator watching Mr Pruett, in some ways, I'm

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Speaker 1: just no longer surprised. I mean, this is a man

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Speaker 1: who sued the agency fourteen times. He doesn't apparently believe

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Speaker 1: in science, He doesn't appear to be committed to sort

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Speaker 1: of the transparency and accountability that are really important to how,

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Speaker 1: you know, the government does its work on behalf of

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Speaker 1: the American people. And just to present sort of why

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Speaker 1: President Trump and EPA administrators Scott Pruett are trying to

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Speaker 1: roll back some of these clean car standards. President Trump

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Speaker 1: during his campaign was talking about giving all sources of

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Speaker 1: energy a fair shake, in other words, trying to cater

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Speaker 1: to particularly to the coal miners saying that they should

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Speaker 1: be able to continue with their production without getting penalized

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Speaker 1: by these caps. Carol, I have to wonder, as somebody

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Speaker 1: who has vast experience as the head of the e

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Speaker 1: p A, how much power does this agency you really

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Speaker 1: have to unilaterally enforce or roll back regulations. In other words,

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Speaker 1: could they another roll back the entire clean car standards

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Speaker 1: without sign off by a majority of Congress. Um. Yes,

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Speaker 1: they can roll things back without the the the approval

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Speaker 1: of Congress. Because what happens if Congress passes a law

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Speaker 1: tells e p A, go do the detail work. You know,

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Speaker 1: we've given you broad guidance. We want cars more fuel efficient,

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Speaker 1: we want it over a certain period of time. And

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Speaker 1: in this case, there's also a Supreme Court decision that's

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Speaker 1: as e p A, you should be regulating dangerous carbon

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Speaker 1: pollution from cars and so um. The e p A

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Speaker 1: then sort of goes through a process, and it's an

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Speaker 1: important process. They tell the public, here's what we're thinking.

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Speaker 1: They write it all down. Here's why we're thinking it,

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Speaker 1: here's the law, here's the science. Tell us what you think.

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Speaker 1: Car companies tell us what you think. Unions tell us

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Speaker 1: what you think, et cetera. Then the agency takes all

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Speaker 1: those comments, makes a decision based on those comments, and

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Speaker 1: issues a final regulation or rule, which then becomes enforceable.

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Speaker 1: This is how it has been done since e p

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Speaker 1: A was created. And there's a reason it's done this way.

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Speaker 1: It's fair, it's transparent, it engages the you know, all

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Speaker 1: of the parties that have an interest. If Mr Food

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Speaker 1: wants to undo a rule that's gone through that process,

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Speaker 1: he will have to go through the process himself. Um. Now,

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Speaker 1: Congress can always step in and just vacate the law

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Speaker 1: to say, but we're changing that law. Uh, no more

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Speaker 1: more law. But Mr Food is not free to do

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Speaker 1: whatever he wants. He must follow the laws, and he

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Speaker 1: must follow the science. And in this case, you even

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Speaker 1: have a Supreme Court decision saying e p A should

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Speaker 1: regulate carbon pollution. You have a fuel efficiency law fined

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Speaker 1: by bush To saying e p A Department Transportation put

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Speaker 1: together the rules to make cars more efficient. So he's

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Speaker 1: not free to do just anything. But what's very concerning

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Speaker 1: here is, as you guys know, industry needs predictability and surgery.

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Speaker 1: They need to know what's expected of them or a

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Speaker 1: period of time so they can make investments, so they

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Speaker 1: can find the sort of common sense, cost effective solutions.

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Speaker 1: And so when you pull the rug out midstream, you're

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Speaker 1: getting rid of all that predictability and uncertainty. It is

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Speaker 1: unfair to everyone, Carol, I just want to get your

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Speaker 1: thoughts onthing specific having to do with biofuels UM possible

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Speaker 1: reduction in bio diesel requirements and a proposal to allow

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Speaker 1: exported renewable fuel to count towards that domestic quota that

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Speaker 1: affects the biofuel industry and also affects politics in Iowa.

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Speaker 1: What are your thoughts on this? Well, I mean, this

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Speaker 1: is another good example of where they just appear to

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Speaker 1: be all over the map and you know, again, uh,

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Speaker 1: not giving industry the kind of certainty and predictability, right

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Speaker 1: you have Apparently, you know, the the Mr Pruett said

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Speaker 1: one thing, and the White House is saying another, saying, uh,

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Speaker 1: you know, these guys, you know, they should at least

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Speaker 1: get on the same page. They won't be free to

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Speaker 1: just do either of these things. They have to you know, again,

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Speaker 1: follow the process, follows um the law. Um. You know,

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Speaker 1: bio fuels have played a role in lessening air pollution. Uh.

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Speaker 1: You know, the good news is today we do a

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Speaker 1: lot of other things that helped to lessen pollution. But

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Speaker 1: you know, they got to stop just thinking out loud.

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Speaker 1: We've got to leave it there, but I thank you

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Speaker 1: very much. Carol Browner is a former e p A

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Speaker 1: administrator joining us to tell us more about the e

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Speaker 1: p A how it works, and Uh is from the

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Speaker 1: League of Conservation Voters based in Washington, d C. All right,

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Speaker 1: let's turn our attention now to fees and also talk

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Speaker 1: a little bit about value of funds. David Winters is

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Speaker 1: the chief executive of Winter Green Advisors, helping to manage

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Speaker 1: more than half a billion dollars. They're based in Mountain Lakes,

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Speaker 1: New Jersey, and David joins us in our eleven three

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Speaker 1: oh studios. David, always a pleasure. Thank you for being here.

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Speaker 1: Very interesting comments and analysis that you've done. I wonder

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Speaker 1: if you could just take us through this having to

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Speaker 1: do with what you describe as being kind of the

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Speaker 1: gloss on a lot of these index products is that

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Speaker 1: they are low fee products, and you've come out with

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Speaker 1: slightly different uh, well, a different review. Well, PIM, we've

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Speaker 1: done a lot of fundamental research because you've had this

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Speaker 1: boom in passive investing and it's attracted huge amounts of capital.

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Speaker 1: And what's attracted people is this idea that it's a

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Speaker 1: low fee and that you know, therefore it's also diversified

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Speaker 1: in low risk. And what we've done is is delved

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Speaker 1: in beyond the fee to look at the fact that

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Speaker 1: there's a lot of delution behind uh these index funds

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Speaker 1: because they vote of the time in favor of corporate

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Speaker 1: compensation plans, and that's about two point six percent a year.

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Speaker 1: And then if you take the buy backs, which actually

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Speaker 1: fifty four percent of the time offset the delution, that's

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Speaker 1: another one point seven So the actual cost of an

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Speaker 1: index fund is about four point three Wait just just

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Speaker 1: back up for a second. So you're basically saying that

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Speaker 1: because a lot of these index funds just vote along

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Speaker 1: with whatever the corporate leadership wants to do, there are

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Speaker 1: sort of costs inherent to that. The essentially the index funds,

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Speaker 1: which started as a good idea, Lisa, have become enablers

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Speaker 1: for higher costs because the delution is a hidden fee

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Speaker 1: that people don't see and it actually comes out of

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Speaker 1: investors pockets. So index investing has become expensive and a

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Speaker 1: lot of the returns have come from fang in France. Okay, so,

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Speaker 1: but but just backing up and taking a bigger picture view. Uh.

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Speaker 1: You know, David, you have to wonder how much previous

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Speaker 1: mutual fund investors or four one K fund managers really

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Speaker 1: took an active approach prior to the UH surge in

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Speaker 1: e t F involvement, or they really such governors of costs.

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Speaker 1: Were they so much more active in the past, or

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Speaker 1: were they basically uh, sort of passive investors in hiding. Well,

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Speaker 1: in fact, if you do the numbers and they're on Bloomberg,

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Speaker 1: they are squared of a lot of mutual funds. Is

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Speaker 1: very close to an index fund, and there is a

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Speaker 1: lot of of voting in favor. But active investors like

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Speaker 1: ourselves have the choice not to go for big delution.

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Speaker 1: So you know, one of our big positions has a

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Speaker 1: thirty basis point level of delutions. So therefore, when you

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Speaker 1: look at it on a like for like basis, it's

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Speaker 1: much less expensive what we're doing at winter Green because

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Speaker 1: there's not as much delution in the companies in which

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Speaker 1: we invest in. Delution over time is a mugging of

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Speaker 1: the shareholders. I gotta understand dilution and maybe you can

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Speaker 1: just give me the quick definition for because I understand.

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Speaker 1: You know, you can dilute someone's value by issuing more

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Speaker 1: shares for example, is that what you're talking about exactly?

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Speaker 1: Pim In other words, every year the boss wants to

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Speaker 1: raise and we're all for management getting paid well if

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Speaker 1: they do a good job. But essentially it comes if

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Speaker 1: it's two point six percent, and over time it's grown

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Speaker 1: and the buy backs are also used to offset this delustion.

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Speaker 1: It comes out of investors pockets and it's it's a

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Speaker 1: lot of money. It's if you add it all up,

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Speaker 1: it's almost nine billion dollars in two thousand sixteen that

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Speaker 1: investors aren't getting basically going into the pockets of of

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Speaker 1: the corporate executives who are granted these stock options or

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Speaker 1: compensated right, And there's ways of doing it, you know,

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Speaker 1: where you wouldn't have such delution, and still executives can

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Speaker 1: make money. But it means that in a in an

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Speaker 1: expensive market, these uh, these companies you know, the uh,

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Speaker 1: the passive have become amentum monsters and then you know

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Speaker 1: the market weight you buy more of what goes up

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Speaker 1: and unlike value investing, where we think the real where

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Speaker 1: people should be focused today, UM, where there's a lot

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Speaker 1: for what you pay for, the index investors are essentially

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Speaker 1: buying what's expensive, what's risky, and essentially enable higher higher costs.

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Speaker 1: So I'm trying to figure out if this is just

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Speaker 1: a symptom of a lot of money going into markets

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Speaker 1: and what would normally happen with inflows versus e t

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Speaker 1: f s and passive investments, because I think that there's

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Speaker 1: a conflation often of the two. And I think that

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Speaker 1: you could argue that with a lot of money slashing

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Speaker 1: about and that enables the company is not necessarily the

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Speaker 1: trend into passive How would you how would you negate that? Well?

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Speaker 1: I think that you know, investors really ultimately um should

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Speaker 1: you know, get a lot for what they pay for.

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Speaker 1: And the the e t f s which have been

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Speaker 1: the you know, the big movement of late and the

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Speaker 1: index funds again, they vote of the time UM for

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Speaker 1: these plans, and I think there are other The key

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Speaker 1: thing is that active managers can use the vote, which

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Speaker 1: is what Arissa you know says you're supposed to do

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Speaker 1: for the benefit of shareholders. And you've had these two

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Speaker 1: things happen, which is over time hurting in susters. This

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Speaker 1: is fascinating to me because it also highlights how we're

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Speaker 1: probably going to see an increasing amount of activism among

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Speaker 1: the investors who truly are active, who want to uh

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Speaker 1: clamp down on this, especially as valuations get so high

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Speaker 1: that people start wondering whether we actually have that much

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Speaker 1: more room to run. David Winters, thank you so much

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Speaker 1: for joining us. A pleasure to speak with you. David

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Speaker 1: Winters is chief executive officer of Winter Green Advisors, which

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Speaker 1: is based in Mountain Lakes, New Jersey. Definitely, the active

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Speaker 1: versus passive debate will not go away, but I do

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Speaker 1: like to just sort of get a question of is

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Speaker 1: this really passive we're talking about or just mob think

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Speaker 1: which has been prevalent over the past few years. We

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Speaker 1: hear a lot about the opioid epidemic in more rural

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Speaker 1: areas among working class people. We've been hearing about the

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Speaker 1: thousands and thousands of people uh that are dying of

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Speaker 1: drug overdoses. UH. But there is also an opioid epidemic

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Speaker 1: on Wall Street, and here to talk about that is

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Speaker 1: Max Abelson, a finance reporter for Bloomberg News who wrote

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Speaker 1: a phenomenal story really ought to read it. Opioids hit

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Speaker 1: Wall Street, begging pain and opportunity to profit. Max, thanks

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Speaker 1: so much for joining us. Can you just give us

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Speaker 1: a sense of how pervasive the opioid crisis on Wall

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Speaker 1: Street is? Lisa, thank you for those wonderful words. Well,

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Speaker 1: you know, Gina smile like my co writer and I, um,

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Speaker 1: you know, there's there's bad news and good news when

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Speaker 1: it comes to figure out how pervasive this is. The

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Speaker 1: bad news is when people die of opiate overdoses. There

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Speaker 1: there isn't data on what their professions were, so that's

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Speaker 1: a bad news. We can't tell you. You know, there

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Speaker 1: were there were x overdoses on Wall Street because of

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Speaker 1: opioids and and why this year. The good news when

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Speaker 1: it comes to understanding what's going on here, is that

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Speaker 1: Gina and I set out to find find out if

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Speaker 1: you know, the if the opioid epidemic that's absolutely you know,

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Speaker 1: spreading like a virus through rural communities, working class and

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Speaker 1: poor communities as as your listeners know, you know, to

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Speaker 1: find out if it was touching Wall Street, and and

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Speaker 1: you know, all we did is the normal stuff. We

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Speaker 1: just got on the phone. We got on the phone

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Speaker 1: with people in New Canaan and Darien and New York City,

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Speaker 1: and what we found out is we spoke more than

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Speaker 1: half a dozen current and former traders, bankers, private equity people,

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Speaker 1: and they told us these like agonizing stories of what

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Speaker 1: happens when you become addicted to oxyconton and other opioids,

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Speaker 1: and these people's lives you know, hit near ruin um

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Speaker 1: and it and it's not out of the ordinary experience.

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Speaker 1: This is something that's that's coming to Wall Street. So Max,

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Speaker 1: I wondering if you could offer up some of the

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Speaker 1: examples in this story, and they really are quite moving,

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Speaker 1: and then maybe tie that into the profit that drives

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Speaker 1: a lot of the opioid manufacturing industry. And what a

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Speaker 1: good question. Well, the one that hits me really hard,

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Speaker 1: like hit me on the gut when I heard it,

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Speaker 1: to answer both of your questions at once, was this guy.

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Speaker 1: He was like in his thirties, He's working for one

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Speaker 1: of the biggest banks at the time. At the time,

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Speaker 1: he was working for one of the biggest banks in

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Speaker 1: the world on a trading floor and he was put

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Speaker 1: on a deal for it was like a pharma deal

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Speaker 1: connected to opioid dependency. And he smiled to himself. And

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Speaker 1: the reason he smiled is that he was at the

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Speaker 1: height of his addiction to viking in and he was

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Speaker 1: also using percocet and and these are these are really

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Speaker 1: strong painkillers. He started using them because he wanted to

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Speaker 1: take that edge off of hangovers when he was at work,

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Speaker 1: and he got dependent on um. You know, he would

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Speaker 1: use dozens of pills a day. And you know, he

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Speaker 1: he so on the one hand, he was like working

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Speaker 1: on this deal, and which goes to show that Wall

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Speaker 1: Street is profiting from both the um sales of of pharmaceuticals,

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Speaker 1: but also profiting from that from the industry. That's that's

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Speaker 1: being brought about in order to deal with it. Um,

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Speaker 1: you know, and and and this guy was working on

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Speaker 1: the training floor on that deal at the same time

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Speaker 1: that he was at the peak of his addiction. He's

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Speaker 1: now clean. You've got a lot of big time investors

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Speaker 1: in this too, don't you. Oh yeah, I mean look

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Speaker 1: just this month, I mean this month alone, were a

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Speaker 1: couple of weeks in October. Um, you know, let's see, Um,

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Speaker 1: there was a UM Instant Therapeutics. Okay, Instant Therapeutics sells.

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Speaker 1: You guys, listeners know about fentanyl. It's a pill, It's

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Speaker 1: a fentanyl based pill. It's called subsiss. New Jersey Attorney

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Speaker 1: General accused Incests of selling this fentinyl drug to more

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Speaker 1: people than it should have been selling it to and

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Speaker 1: it much higher doses. And you look at Incesses investors.

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Speaker 1: You know, Orbamed, a really big private equity firm, Folder Hill,

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Speaker 1: a hedge fund that your listeners probably know about. Um.

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Speaker 1: You know, these are things that are going on now. Incidentally,

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Speaker 1: just a couple of months ago, Endo International, which John Paulson,

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Speaker 1: Steve Cohen, Goldman Sachs TPG their investors. They sell opioids

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Speaker 1: open e er and the the f d A had

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Speaker 1: to ask him to stop doing it. Um because I think,

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Speaker 1: if I remember him correctly, because of viruses that we're

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Speaker 1: breaking out among intravenous drug users. Although I'm not positive

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Speaker 1: about that that I think that's the reason they had

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Speaker 1: to stop selling it. Max. You know, I'm struck. There

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Speaker 1: have been stories. Certainly in the nineteen eighties, you think

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Speaker 1: of Wall Street, think of cocaine and and and lots

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Speaker 1: of hard drug use and hard partying. Uh, that's calmed

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Speaker 1: down a bit. No, I mean, where does where does

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Speaker 1: where does oxycodone? And and and some of these prescription

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Speaker 1: jugs fall into that whole story question. Well, for one thing, cocaine,

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Speaker 1: it's not disappeared from from Wall Street. You know. Here,

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Speaker 1: here's here's a good way of of dealing with that.

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Speaker 1: So the main character in the story is a really

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Speaker 1: um interesting, likable guy named Chay Layard Connecticut. Fancy Um,

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Speaker 1: you know, joke to me that he was wearing head

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Speaker 1: to dove vineyard vines when he went to rehab. And honestly,

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Speaker 1: you know, at least I do not think he was kidding.

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Speaker 1: I think he really was wearing all vineyard vines. He's

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Speaker 1: just that kind of guy. But look, um, you know

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Speaker 1: Trey was using cocaine. Um, you know, he was also

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Speaker 1: drinking alone at the height of his addiction. But you know,

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Speaker 1: the cocaine, which is sort of socially acceptable, was sort

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Speaker 1: of known, um, you know, entertaining clients that kind of thing.

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Speaker 1: I think, Um, you know, that's sort of just a

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Speaker 1: reality that um has stayed with wallsheet. But you know,

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Speaker 1: he was using so much oxycon that it was a

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Speaker 1: hundred and sixty milligrams every day and you're supposed to

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Speaker 1: start with ten for every twelve hours. Um. And you

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Speaker 1: know it took over his life and he was really

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Speaker 1: brutally honest with me. Um. You know, you want to

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Speaker 1: rehab in New Canaan. And Trey is now one of

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Speaker 1: the proprietors of the Lighthouse, and we wrote about the Lighthouse.

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Speaker 1: You know it will cost you if you want to

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Speaker 1: room by yourself in New Canan, fifteen thousand dollars for

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Speaker 1: the month. Hundred dollars actually. And look, I mean we

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Speaker 1: visited and there are bankers there and executives and these

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Speaker 1: are people who are you know, some of them are alcoholics,

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Speaker 1: but some of them are addicted to pain pills. And Trey,

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Speaker 1: what Trey said to us is that, look, you know

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Speaker 1: this is this is coming. You know this is going

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Speaker 1: to invade every single industry. And you know he might

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Speaker 1: be right. It's a very sobering story and one that

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Speaker 1: I encourage everyone. I know, we all encourage everyone to

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Speaker 1: read it. Opioids hit Wall Street, Bringing pain and the

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Speaker 1: opportunity to profit. Thanks very much, Max Abelson and also

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Speaker 1: Jinna smile welcome. I gotta say, you know, we see

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Speaker 1: these images all the time of people who overdosed some

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Speaker 1: cars throughout the country and their children in the back seats,

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Speaker 1: and uh, you know, it's just it's it's very difficult,

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Speaker 1: but it's something that needs to be addressed, that's for sure. Yeah. Well,

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Speaker 1: I'm glad you were able to bring some of this

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Speaker 1: to light for us. Thanks very much. Max Abelson, Finance

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Speaker 1: reporter for a Bloomberg News time to check on what's

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Speaker 1: going on in markets and also just to sort of

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Speaker 1: focus a little bit first on on Apple, and I

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Speaker 1: want to bring in John Butler. John is our senior

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Speaker 1: tell Calm Services and Equipment analyst for Bloomberg Intelligence. Also

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Speaker 1: joining us, of course Dave Wilson, Bloomberg Stocks Commist and

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Speaker 1: Bloggert m Live go on the Bloomberg Go ahead, send

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Speaker 1: Dave an email at d Wilson at Bloomberg dot net.

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Speaker 1: And John Butler, let's begin with you and an Apple.

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Speaker 1: Are we supposed to read through any of the remarks

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Speaker 1: or details or speculation about the suppliers to Apple about

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Speaker 1: the popularity and the sell through of the iPhone eight.

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Speaker 1: So let's start with there's reports at a China from

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Speaker 1: the Economic Daily News that suppliers have seen up to

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Speaker 1: fifty UH cuts in UH supply cuts. You know, there's

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Speaker 1: ordering parts orders, thank you for the iPhone eight. One

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Speaker 1: little tidbit I picked up this morning that I thought

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Speaker 1: was really interesting is Rogers, which is Canada's largest wireless operator,

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Speaker 1: characterized demand for the iPhone eight as anemic and said

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Speaker 1: everyone is waiting for the iPhone ten, which is sort

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Speaker 1: of consistent with I think what everyone was feeling going

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Speaker 1: into the announcement in September. It really is the first

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Speaker 1: I mean experts, people who are like watch Apple day

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Speaker 1: and night, they thought that was going to happen, right,

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Speaker 1: because it's really the first time that Apple has launched

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Speaker 1: two separate devices with different launch dates. But they're only

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Speaker 1: six weeks apart. Right. But here's my question, Okay, if if,

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Speaker 1: if Apple has such demand for the iPhone ten, how

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Speaker 1: are they going to manufacture enough to meet demand? And

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Speaker 1: then won't people be pushed into the iPhone eight anyway,

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Speaker 1: Well that's in the mix, right. That's one of the

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Speaker 1: big questions is are they going to have enough supply

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Speaker 1: to meet demand for the iPhone ten, which, judging from

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Speaker 1: the order flow and audo activity for iPhone eight parts,

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Speaker 1: might suggest that it's stronger than they expected for the holidays.

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Speaker 1: So the question is, or the answer is, we don't

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Speaker 1: really know yet whether they're going to meet holiday demand

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Speaker 1: or not. Over time. I think that ultimately supply catches

429
00:24:05,600 --> 00:24:08,000
Speaker 1: up with demand. It stalks down two and a half

430
00:24:08,040 --> 00:24:09,880
Speaker 1: percent right now. I was just gonna say it's it's

431
00:24:09,920 --> 00:24:13,160
Speaker 1: down exactly two point six percent. It's the biggest drop

432
00:24:13,240 --> 00:24:16,320
Speaker 1: since August ten. And Dave Wilson, how much is this

433
00:24:16,440 --> 00:24:21,120
Speaker 1: really driving the declines across broader US equity indexes, which

434
00:24:21,160 --> 00:24:24,640
Speaker 1: are also having their worst morning since August. It's one

435
00:24:24,760 --> 00:24:27,960
Speaker 1: piece of a bigger puzzle, no question. I mean, when

436
00:24:28,000 --> 00:24:30,240
Speaker 1: you consider Apple has been up as much as forty

437
00:24:31,000 --> 00:24:33,360
Speaker 1: this year, you can sort of understand why you would

438
00:24:33,400 --> 00:24:36,040
Speaker 1: get a pullback. But beyond that, you really have to

439
00:24:36,080 --> 00:24:39,440
Speaker 1: look at the response to the third quarter earnings reports

440
00:24:39,480 --> 00:24:41,760
Speaker 1: as they come in. I just put together a post

441
00:24:41,800 --> 00:24:45,199
Speaker 1: for the Markets Live blog. You have fifteen companies in

442
00:24:45,200 --> 00:24:48,399
Speaker 1: the S and P five hundred that reported today before

443
00:24:48,440 --> 00:24:52,800
Speaker 1: the opening bell. Ten of them have fallen in early

444
00:24:52,840 --> 00:24:55,960
Speaker 1: trading in response to those results. And that doesn't count

445
00:24:56,040 --> 00:24:59,760
Speaker 1: the legs of eBay and American Express, which had numbers

446
00:24:59,760 --> 00:25:03,640
Speaker 1: out late yesterday and they're down as well. And think

447
00:25:03,680 --> 00:25:05,919
Speaker 1: about it. One of the arguments that's been made for

448
00:25:06,040 --> 00:25:11,280
Speaker 1: stock valuations where they are is that companies are increasing

449
00:25:11,359 --> 00:25:16,000
Speaker 1: their sales and they're earning, so that's going to justify

450
00:25:16,080 --> 00:25:19,320
Speaker 1: the higher prices that investors have been paying. And then

451
00:25:19,359 --> 00:25:21,640
Speaker 1: you get the results on a day like today, and

452
00:25:21,680 --> 00:25:25,360
Speaker 1: you wonder whether that thesis at least has some holes

453
00:25:25,440 --> 00:25:29,119
Speaker 1: poked in the argument. Well, I want to get a

454
00:25:29,160 --> 00:25:32,960
Speaker 1: sense John from you, because if there is such incredible

455
00:25:33,160 --> 00:25:36,679
Speaker 1: demand for these higher priced phones, right because the iPhone

456
00:25:36,720 --> 00:25:38,399
Speaker 1: ten is supposed to be a higher price point than

457
00:25:38,440 --> 00:25:41,600
Speaker 1: iPhone eight, doesn't that suggest that the economy is actually

458
00:25:41,840 --> 00:25:45,959
Speaker 1: doing wonderfully. I'm not sure what it says about the

459
00:25:46,000 --> 00:25:50,080
Speaker 1: economy per se, because the iPhone is high priced and

460
00:25:50,160 --> 00:25:53,560
Speaker 1: it plays in that premium category. So I think a

461
00:25:53,560 --> 00:25:56,080
Speaker 1: lot of the people that are buying the iPhone are

462
00:25:56,160 --> 00:26:00,000
Speaker 1: somewhat immune to economic trends. That would be my guess.

463
00:26:00,040 --> 00:26:02,680
Speaker 1: Can I just throwing things like natural disasters here? I mean,

464
00:26:02,720 --> 00:26:04,600
Speaker 1: because you know this is we've been talking about a

465
00:26:04,600 --> 00:26:06,879
Speaker 1: lot of the larger economic news and how they have

466
00:26:06,920 --> 00:26:10,760
Speaker 1: been affected by hurricanes and now of course wildfires in

467
00:26:10,880 --> 00:26:13,639
Speaker 1: northern California, and that's got to put some kind of

468
00:26:13,680 --> 00:26:16,600
Speaker 1: damper on you know, retail sales. You're not gonna worry

469
00:26:16,600 --> 00:26:18,480
Speaker 1: about getting your new phone when you know you see

470
00:26:18,480 --> 00:26:20,680
Speaker 1: your house floating down the streets. So I mean it

471
00:26:20,840 --> 00:26:23,720
Speaker 1: just I don't know whether this is necessarily something you

472
00:26:23,720 --> 00:26:25,919
Speaker 1: have to read large into and you know, maybe that

473
00:26:25,960 --> 00:26:27,719
Speaker 1: we're just getting a little bit of profit taking. I mean,

474
00:26:27,720 --> 00:26:29,879
Speaker 1: you've got companies in addition to set Apple up what

475
00:26:30,040 --> 00:26:33,679
Speaker 1: forty something percent? Okay, yeah, but if you take a

476
00:26:33,680 --> 00:26:36,080
Speaker 1: look at you know, companies like Boeing, which I don't

477
00:26:36,080 --> 00:26:38,440
Speaker 1: think anyone calls, you know, a big fast growth stock

478
00:26:38,720 --> 00:26:42,479
Speaker 1: stocks up sixty this year, so I mean that beats

479
00:26:42,600 --> 00:26:45,600
Speaker 1: Apple by a handy margin. So you know, you've got

480
00:26:45,600 --> 00:26:47,080
Speaker 1: to kind of take it all with a grain of salt.

481
00:26:47,240 --> 00:26:50,639
Speaker 1: On r there, there's definitely a lot at play here, Pim.

482
00:26:50,800 --> 00:26:53,639
Speaker 1: And the one thing I'd say is, you know, I

483
00:26:53,680 --> 00:26:57,600
Speaker 1: think even if Apple has had launches before where they

484
00:26:57,680 --> 00:27:00,359
Speaker 1: can't meet demand out of the blocks and yet they

485
00:27:00,440 --> 00:27:03,160
Speaker 1: don't lose users. I mean, these are people that are

486
00:27:03,200 --> 00:27:06,560
Speaker 1: really committed to buying the phone. So if you look

487
00:27:06,600 --> 00:27:10,760
Speaker 1: at street estimates, really it's interesting from a revenue growth

488
00:27:10,760 --> 00:27:13,840
Speaker 1: perspective in this cycle. I think we're going to see

489
00:27:13,840 --> 00:27:18,200
Speaker 1: the strongest growth in the March quarter, so it's post holiday,

490
00:27:18,240 --> 00:27:21,680
Speaker 1: and I think expectations are already there in terms of

491
00:27:22,240 --> 00:27:24,359
Speaker 1: when the supply is really going to be able to

492
00:27:24,400 --> 00:27:27,400
Speaker 1: meet strong demand. Dave, I want to broaden out because

493
00:27:27,440 --> 00:27:29,959
Speaker 1: we were talking about the broader market and the jitters

494
00:27:30,000 --> 00:27:33,720
Speaker 1: that are kind of spreading throughout the SMP five hundred

495
00:27:33,880 --> 00:27:36,880
Speaker 1: and other broad indexes, and I'm just wondering, I mean,

496
00:27:37,400 --> 00:27:41,680
Speaker 1: isn't this a buying opportunity because nothing really is creating

497
00:27:41,960 --> 00:27:48,239
Speaker 1: the fundamental insecurity that would prompt me longer, longer sell off. Well,

498
00:27:48,280 --> 00:27:51,359
Speaker 1: at least you can understand why investors would think of

499
00:27:50,960 --> 00:27:54,240
Speaker 1: that possibility there. There are two bits of detail that

500
00:27:54,320 --> 00:27:57,240
Speaker 1: come into play here. One is that we've just gone

501
00:27:57,280 --> 00:28:00,400
Speaker 1: through half a dozen trading days where the SMP five

502
00:28:00,480 --> 00:28:03,159
Speaker 1: hundred had a range of less than three tents of

503
00:28:03,200 --> 00:28:06,120
Speaker 1: a percentage point from high too low on the day,

504
00:28:06,200 --> 00:28:09,000
Speaker 1: and that's a record according to the folks at LPL Financial.

505
00:28:09,080 --> 00:28:13,480
Speaker 1: So therefore no volatility. We've gone to some volatility today.

506
00:28:13,600 --> 00:28:16,800
Speaker 1: Beyond that, you know, we're still looking at the potential

507
00:28:16,880 --> 00:28:19,960
Speaker 1: for a record in terms of the amount of time

508
00:28:20,040 --> 00:28:22,760
Speaker 1: that the SMP five hundred has gone without pulling back

509
00:28:23,040 --> 00:28:26,480
Speaker 1: three from a high. We haven't seen that happen since

510
00:28:26,520 --> 00:28:30,119
Speaker 1: early November, just before the presidential election. So you know

511
00:28:30,200 --> 00:28:33,119
Speaker 1: the question is whether that by the dip approach that

512
00:28:33,240 --> 00:28:36,480
Speaker 1: has been working in markets for the last several months

513
00:28:36,760 --> 00:28:39,440
Speaker 1: rears its head as today's trading goes on. Well, no

514
00:28:39,640 --> 00:28:42,600
Speaker 1: dip today in the shares of Verizon, And a lot

515
00:28:42,640 --> 00:28:44,560
Speaker 1: of that has to do with the new data plan,

516
00:28:44,640 --> 00:28:47,480
Speaker 1: the unlimited data plan that they have put forth, which

517
00:28:47,600 --> 00:28:50,240
Speaker 1: I believe similar to the T Mobile plan, although there

518
00:28:50,240 --> 00:28:52,320
Speaker 1: are some differences. I don't think you get Netflix or

519
00:28:52,360 --> 00:28:57,000
Speaker 1: so on. But you know, forty four lines unlimited data stocks,

520
00:28:57,040 --> 00:28:58,960
Speaker 1: you know, the stocks moving higher, the stocks up more

521
00:28:58,960 --> 00:29:02,640
Speaker 1: than three, that's a big move for Verizon. That is

522
00:29:02,680 --> 00:29:04,840
Speaker 1: a big move for them. They had a decent quarter.

523
00:29:04,960 --> 00:29:08,400
Speaker 1: I was really sort of braced for the potential for

524
00:29:08,520 --> 00:29:12,719
Speaker 1: weakness here and instead, really you measure the health of

525
00:29:12,920 --> 00:29:16,000
Speaker 1: a business on wireless net editions, and they had very

526
00:29:16,000 --> 00:29:19,400
Speaker 1: good net editions. So I think, uh, you know, people

527
00:29:19,400 --> 00:29:22,280
Speaker 1: are responding to that. It really was so kind of

528
00:29:22,320 --> 00:29:25,680
Speaker 1: a relief, certainly for me. John Butler, thank you so much.

529
00:29:25,680 --> 00:29:28,560
Speaker 1: For joining us. Gun Boler is Senior Telecom Services and

530
00:29:28,600 --> 00:29:32,240
Speaker 1: Equipment Analyst for Bloomberg Intelligence and of course, our thanks

531
00:29:32,280 --> 00:29:35,560
Speaker 1: to Dave Wilson, Bloomberg Sox editor, columnist and blogger at

532
00:29:35,760 --> 00:29:42,240
Speaker 1: M Live go on the Bloomberg. Thanks for listening to

533
00:29:42,240 --> 00:29:45,160
Speaker 1: the Bloomberg P and L podcast. You can subscribe and

534
00:29:45,200 --> 00:29:49,200
Speaker 1: listen to interviews at Apple Podcasts, SoundCloud, or whatever podcast

535
00:29:49,200 --> 00:29:52,680
Speaker 1: platform you prefer. I'm pim Fox, I'm on Twitter at

536
00:29:52,840 --> 00:29:56,240
Speaker 1: pim Fox. I'm on Twitter at Lisa Abramo wits one.

537
00:29:56,480 --> 00:29:59,120
Speaker 1: Before the podcast, you can always catch us worldwide on

538
00:29:59,200 --> 00:30:04,200
Speaker 1: Bloomberg Radio it TA