WEBVTT - Surveillance: Stock Picking Is Back, Says Kirr 0:00:05.120 --> 0:00:09.200 Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane along 0:00:09.240 --> 0:00:13.200 with Jonathan Ferroll and Lisa Brownwitz Jailey. We bring you 0:00:13.320 --> 0:00:18.600 insight from the best and economics, finance, investment, and international relations. 0:00:18.960 --> 0:00:23.840 Find Bloomberg Surveillance on Apple, podcast, Suncloud, Bloomberg dot Com, 0:00:23.920 --> 0:00:30.360 and of course on the Bloomberg terminal. Let's dive in 0:00:30.440 --> 0:00:34.159 now to the equity markets. Dan Ives will join us 0:00:34.159 --> 0:00:36.400 here on tech. We're gonna try to have him give 0:00:36.479 --> 0:00:39.320 us a two hundred dollar top tick on Apple. We're 0:00:39.360 --> 0:00:40.920 not going to do that with beyond A. Kirschy's co 0:00:41.040 --> 0:00:44.720 head of investment Strategies, Burnsteain Private Wealth, but she is 0:00:44.760 --> 0:00:47.320 in the heart of the earning season as our Gina 0:00:47.400 --> 0:00:50.519 Martin Adams, what is the trajectory of earnings that you 0:00:50.560 --> 0:00:54.840 seem as Kerr Well, what we see as an earning 0:00:54.880 --> 0:00:57.720 season that's likely to be more volatile than the last 0:00:57.880 --> 0:01:01.920 several We're coming off of a substantial rebound and earnings, 0:01:01.920 --> 0:01:05.640 whereas in prior quarters earnings are up forty percent year 0:01:05.640 --> 0:01:09.760 over year, the consensus view for twenty two has really 0:01:09.800 --> 0:01:13.640 moved to a nine percent year over year view. Now 0:01:13.680 --> 0:01:17.440 that's still positive and that's one of the fundamental underpinnings 0:01:17.440 --> 0:01:20.920 that's really driving the equity market forward. But like you 0:01:21.000 --> 0:01:22.920 just said, this is going to be a story of 0:01:23.000 --> 0:01:27.120 figuring out supply and demand. The demand still appears to 0:01:27.120 --> 0:01:29.959 be there. Who's got pricing power is one of the 0:01:30.000 --> 0:01:33.720 fundamental differentiators in this earning season, Bietta. Are you buying 0:01:33.840 --> 0:01:36.600 consumer staples considering how much they've sold off in the 0:01:36.600 --> 0:01:38.640 fact that we have seen them able to pass along 0:01:38.640 --> 0:01:42.199 that pricing, Well, what I would say, at least says 0:01:42.240 --> 0:01:44.440 it's not about a sector, it's not about a style. 0:01:44.640 --> 0:01:48.360 It's about the stock picking. Stock picking is back, and 0:01:48.440 --> 0:01:51.600 even though thirty percent of managers only are beating the 0:01:51.720 --> 0:01:54.640 SMP year to date at Bernstein, we've had great success 0:01:54.680 --> 0:01:57.840 this year with stock selection. So it's not as easy 0:01:57.880 --> 0:02:01.440 as saying by this sector. It's about the company. Do 0:02:01.560 --> 0:02:05.560 they have the ability to pass on price increases? And 0:02:05.720 --> 0:02:09.040 some companies do and some companies don't, So you really 0:02:09.040 --> 0:02:12.079 have to differentiate by the individual company. So told to 0:02:12.080 --> 0:02:14.120 me about the pittas of support into next year for 0:02:14.120 --> 0:02:16.840 this equity market. If you're constructive next year, what are 0:02:16.880 --> 0:02:18.760 the things that you see right now that can persist 0:02:19.120 --> 0:02:22.760 into a new year. Well, what we see is still 0:02:22.880 --> 0:02:26.920 strong economic growth. Obviously, economic growth is fading from the 0:02:27.000 --> 0:02:30.519 incredible rate at which we were growing in this calendar year. 0:02:30.800 --> 0:02:33.640 But we're still looking for close to four percent GDP 0:02:33.840 --> 0:02:37.840 growth in the US and over four percent GDP growth 0:02:38.000 --> 0:02:41.200 globally for twenty two. So you've got that as an 0:02:41.200 --> 0:02:44.480 economic back drup. We don't think the Fed moves rates 0:02:44.680 --> 0:02:48.160 until tree. The taper argument is out there kind of 0:02:48.200 --> 0:02:51.040 well understood by the market, and as you were just discussing, 0:02:51.040 --> 0:02:53.279 it looks like we're still going to get some stimulus, 0:02:53.320 --> 0:02:57.000 even though it is a measure pace. This is really important. 0:02:57.080 --> 0:03:00.760 You have us vision for how along be out of 0:03:02.080 --> 0:03:04.840 that's for two thousand and twenty two. Like you said earlier, 0:03:04.840 --> 0:03:07.880 the visibility is murkier, Tom, So there's a wider range 0:03:07.919 --> 0:03:09.920 around that. Fair okay, But how do you get to 0:03:09.960 --> 0:03:13.040 that optimism we got, We got most people way under 0:03:13.120 --> 0:03:17.120 yond that. What's the Bernstein call that gives you that enthusiasm? 0:03:17.360 --> 0:03:20.560 I would say that the Bernstein bottom of view to 0:03:20.680 --> 0:03:23.640 get to that economic perspective is still that there is 0:03:23.720 --> 0:03:27.600 tremendous support in the overall output. What we're seeing is 0:03:27.600 --> 0:03:30.560 while you see manufacturing plateauing a bit. You still got 0:03:30.680 --> 0:03:34.600 services rebounding. Look at the supply and demand issue. The 0:03:34.680 --> 0:03:37.880 real issue has really been in goods. Services are coming back, 0:03:38.160 --> 0:03:41.200 you just said it earlier. Consumers are coming back, families 0:03:41.240 --> 0:03:43.760 are traveling again. We do have to be careful on 0:03:43.840 --> 0:03:46.920 the lower end of the consumer especially, but what we 0:03:47.000 --> 0:03:51.080 see broadly is still support for that strong economic PETA. 0:03:51.240 --> 0:03:54.720 One debate aspect of debate on this show repeatedly over 0:03:54.760 --> 0:03:57.400 the past few months has been what the investment thesis 0:03:57.520 --> 0:04:00.160 is around what's going on in Washington, d C. We've 0:04:00.200 --> 0:04:03.800 seen mostly dysfunction, but they are working to get something done. 0:04:03.960 --> 0:04:06.640 How do you price in the idea of more fiscal 0:04:06.680 --> 0:04:11.880 stimulus but also the idea of higher corporate taxes. Yeah, 0:04:11.960 --> 0:04:14.320 we think the market is really acknowledging that the corporate 0:04:14.320 --> 0:04:16.000 tax rate is going to move up a couple of 0:04:16.040 --> 0:04:18.680 percentage points, so you're looking at a mid single digit 0:04:18.800 --> 0:04:21.880 hit to earning scrolls. So there is some vulnerability in 0:04:21.880 --> 0:04:24.800 that current consensus number. The market has been a in 0:04:24.839 --> 0:04:27.400 a weight and see mode to see what actually happens. 0:04:27.440 --> 0:04:30.560 But if you look over the last six months, nothing 0:04:30.640 --> 0:04:33.880 close to what was originally proposed is going to happen. 0:04:34.279 --> 0:04:37.039 So while there is some downside pressure from the corporate 0:04:37.080 --> 0:04:40.200 tax right likely to come up, it's far less threatening 0:04:40.480 --> 0:04:43.080 than it was at the outset. And then, like you said, Lisa, 0:04:43.160 --> 0:04:46.400 there's the offset of more stimulus actually coming in to 0:04:46.480 --> 0:04:49.400 support the consumers. So I think the markets, you know, 0:04:49.520 --> 0:04:52.800 saying weed again, it comes back to companies pricing power 0:04:52.880 --> 0:04:55.120 that's supplied. Demand picture is going to be much more 0:04:55.120 --> 0:04:59.040 important for earnings outcomes and ultimately market outcomes. Bieta, we've 0:04:59.040 --> 0:05:01.440 been talking about some of the pessimism out there and 0:05:01.480 --> 0:05:04.680 that markets have rallied despite all of that gloomy talk. 0:05:05.240 --> 0:05:08.040 What is the biggest concern among clients who you speak 0:05:08.080 --> 0:05:11.840 to who have to figure out how to reposition. Well, 0:05:11.839 --> 0:05:14.120 it's not just the biggest concern amongst clients, but it's 0:05:14.120 --> 0:05:16.560 something that we're watching the most closely as a potential 0:05:16.640 --> 0:05:18.720 risk for the market, and it's what we've already brought 0:05:18.800 --> 0:05:23.600 up several times. Is inflation transitory and our house view 0:05:23.960 --> 0:05:27.320 is that it is going to moderate from the extraordinary 0:05:27.400 --> 0:05:30.440 price increases that we've seen over the summer, but that 0:05:30.560 --> 0:05:33.440 the likelihood of it being higher than it was pre 0:05:33.560 --> 0:05:36.640 pandemic is going up. So We're not talking about in 0:05:36.720 --> 0:05:39.720 nineteen seventies type environment, but we are talking about an 0:05:39.800 --> 0:05:42.479 environment that's in the two to three percent range in 0:05:42.560 --> 0:05:45.279 all likelihood compared to the much lower numbers that we 0:05:45.320 --> 0:05:49.000 sought pre pandemics. To thank you Bianno that of Burnstein 0:05:49.040 --> 0:05:57.960 Private Wealth Management on the path forward, rust Coat Street 0:05:58.000 --> 0:06:00.200 joining us now he's not ugly portfolio manager for the 0:06:00.320 --> 0:06:03.240 blank Rock Global Adication Fund. Just around the corner, Russ 0:06:03.240 --> 0:06:05.760 from all time highs walk me through while you're still 0:06:05.839 --> 0:06:09.840 constructive set. Good morning, John. You look, I think it's 0:06:09.880 --> 0:06:14.120 pretty straightforward up. We have a market that's earnings driven. 0:06:14.160 --> 0:06:16.960 You know, last year was all about the multiples. This year, 0:06:17.080 --> 0:06:19.320 multiples have been flat. They've actually been down a little 0:06:19.360 --> 0:06:22.000 bit in many sectors. But is Lisa pointed out a 0:06:22.000 --> 0:06:25.280 moment ago, earnings have been stellar, and yes there are 0:06:25.400 --> 0:06:28.920 reasonable concerns about margins. But when you have an economy 0:06:29.040 --> 0:06:31.599 it is growing this fast where nominal GDP is still 0:06:31.640 --> 0:06:34.440 growing at the best level in years, if not decades, 0:06:34.839 --> 0:06:37.960 you're seeing that manifest on the earning side, and that's 0:06:37.960 --> 0:06:41.320 been powering the market higher really all year. You know, 0:06:41.360 --> 0:06:43.960 I look ross where we are right now, and we're 0:06:43.960 --> 0:06:47.800 all trying to reset. I'm getting some optimism out there. Lisa, 0:06:47.839 --> 0:06:50.640 I think nailed it in her opening comments, and the 0:06:50.760 --> 0:06:54.480 idea that even with some worry about rising raids, steeper 0:06:54.520 --> 0:06:58.720 curves and all that, we see corporations delivering within this 0:06:58.839 --> 0:07:03.440 environment is at what you expect. Yes, I think the 0:07:03.480 --> 0:07:05.320 short answer is yes. And you know, just to be clear, 0:07:05.360 --> 0:07:08.760 I get the rate concern. We've had some volatility coming 0:07:08.800 --> 0:07:11.840 from the bond market that is likely to continue. But again, 0:07:11.880 --> 0:07:15.240 just to put things in perspective, we've got some deceleration, 0:07:15.360 --> 0:07:19.200 economy still very strong numbers. We've got the US household 0:07:19.680 --> 0:07:21.880 arguably in the best shape in decades, whether you look 0:07:21.880 --> 0:07:25.520 at savings, household net work, you look at the growth 0:07:25.520 --> 0:07:28.120 and income, and against all of that, against all of that, 0:07:28.200 --> 0:07:31.120 we've got a ten year at one sixty three that 0:07:31.360 --> 0:07:36.440 is not an exerstential threat to equity markets. When I 0:07:36.520 --> 0:07:40.400 look when I look Russ at the moment and the 0:07:40.520 --> 0:07:44.080 back and forth narratives, we see the gloom narrative is 0:07:44.120 --> 0:07:48.000 evaporated in the last ten or twelve days. What's the 0:07:48.120 --> 0:07:52.000 caution you have in portfolio management? How do you take 0:07:52.040 --> 0:07:57.400 those narratives, take them in and stay optimistic now I 0:07:57.440 --> 0:08:00.400 think one look at what's driving Mark gets to go 0:08:00.440 --> 0:08:02.960 back to earnings. But there are some risks out there, 0:08:03.040 --> 0:08:05.760 up the risk to needs. Not again whether the ten 0:08:05.840 --> 0:08:10.320 years at one sixty. Uh, it's around some of these 0:08:10.320 --> 0:08:13.920 supply issues. One because obviously it feeds into inflation, and 0:08:13.960 --> 0:08:17.960 as we've seen, inflation has been stickier than forecast six 0:08:18.000 --> 0:08:20.760 months ago. But it also can affect growth. But the 0:08:20.880 --> 0:08:24.400 key here is that you know, these supply issues are 0:08:24.960 --> 0:08:28.480 while they're widespread, they're more heterogeneous than I think. A 0:08:28.480 --> 0:08:30.200 lot of the narrative talks about what do I mean 0:08:30.240 --> 0:08:32.840 about that? Just take one segment of the economy. People 0:08:32.840 --> 0:08:36.160 have spoken about commodities. Even there you see all of 0:08:36.200 --> 0:08:42.720 this diversions, copper, iron, ore, lumber, aluminum, They're all doing 0:08:42.800 --> 0:08:46.679 different things. And this is just again within industrial commodity. 0:08:46.840 --> 0:08:50.040 So this notion that we're going to be strangled by 0:08:50.080 --> 0:08:52.480 supply I don't things right. But at the same time, 0:08:52.520 --> 0:08:57.040 whether you're talking about inputs, semiconductors or the most important one, labor, 0:08:57.400 --> 0:09:00.520 there are real supply constraints that we have to watch. Okay, Ross, 0:09:00.520 --> 0:09:02.680 so you talk about nuance, let's talk about nuance. You 0:09:02.720 --> 0:09:06.400 like consumer discretionaries, you're not that fond of financials at 0:09:06.440 --> 0:09:09.240 this point, even as you do expect yields to rise. 0:09:09.280 --> 0:09:12.640 Can you square that for us? Absolutely? I think there 0:09:12.640 --> 0:09:14.280 are a couple of things behind that. The first of 0:09:14.320 --> 0:09:17.560 which is we don't expect yields to rise that much. 0:09:17.640 --> 0:09:20.360 There's still a wall of money looking to invest. You 0:09:20.440 --> 0:09:25.200 still have everyone from pensions to UH endowments looking to 0:09:25.240 --> 0:09:27.520 take advantage of the backup and yields. You've got foreign 0:09:27.600 --> 0:09:31.360 investors looking to take advantage of backup and yields. Second, 0:09:31.440 --> 0:09:33.240 if you actually look at what's been happening on the curve, 0:09:33.280 --> 0:09:37.200 as you know, it's been flattening again, not up. Not 0:09:37.320 --> 0:09:39.240 a huge head wind, but again not a tail wind 0:09:39.280 --> 0:09:42.559 either for for financials. And then finally, I think we 0:09:42.720 --> 0:09:45.680 consider where do we want to be right now. One 0:09:45.679 --> 0:09:49.280 of the key ingredients is pricing power, and this the 0:09:49.360 --> 0:09:52.840 simple answers. We see better examples of pricing power in 0:09:52.920 --> 0:09:57.199 manufacturing UH in parts of materials in the consumer space, 0:09:57.200 --> 0:09:59.960 and we do in the financial space. It's not obvious 0:10:00.080 --> 0:10:04.040 how much pricing power banks and other financial companies have 0:10:04.240 --> 0:10:07.720 right now. I think they're better opportunities elsewhere in the economy. 0:10:08.000 --> 0:10:09.480 All right, and the other side that I thought was 0:10:09.520 --> 0:10:12.760 really interesting about how you are nuancing your portfolio. As 0:10:12.800 --> 0:10:14.800 you don't like gold, you think it's kind of useless 0:10:14.800 --> 0:10:16.679 as a hedge, you think it's kind of useless as 0:10:16.679 --> 0:10:19.120 a potential for profit. Aine why and when did you 0:10:19.120 --> 0:10:22.200 start to actually sour completely on gold as an allocation. 0:10:23.280 --> 0:10:26.920 So we were fairly long gold about fourteen months ago. 0:10:26.960 --> 0:10:28.680 I think, as we've discussed now the shows, we were 0:10:28.679 --> 0:10:31.959 really brought it down starting late last year earlier this year. 0:10:31.960 --> 0:10:34.280 And it's not that gold is always useless. There are 0:10:34.320 --> 0:10:36.880 periods such as last year in gold is an incredibly 0:10:36.920 --> 0:10:40.800 efficient hedge. The problem is gold is very responsive to 0:10:40.840 --> 0:10:44.199 real rates, and we have seen some normalization real rates. 0:10:44.679 --> 0:10:46.880 The other issues you've got to ask what is gold 0:10:46.920 --> 0:10:50.040 hedging against? What is its efficacy as a hedge? And 0:10:50.080 --> 0:10:53.240 there are two areas that people normally quote. One is 0:10:53.400 --> 0:10:55.719 risk unfortunate right, and now if you look at how 0:10:55.720 --> 0:10:59.679 gold is trading, is actually trading with a positive correlation 0:11:00.080 --> 0:11:02.080 with equities, so it's not really doing a great job 0:11:02.120 --> 0:11:05.880 hedge and equity risk. The other argument is gold hedges inflation. 0:11:06.240 --> 0:11:08.720 I think that's partly right, but it's right on a 0:11:08.800 --> 0:11:11.199 timeframe that most of us don't think about whether you're 0:11:11.200 --> 0:11:14.800 talking about literally decades if we're thinking about how do 0:11:14.800 --> 0:11:17.120 we want to hedge inflation in the near term. To 0:11:17.240 --> 0:11:20.360 my mind, the better hedge is focusing on equities with 0:11:20.559 --> 0:11:23.280 pricing power that are gonna keep up with that sticky 0:11:23.320 --> 0:11:26.480 inflation rush. Fantastic to catch up with you, sir, with 0:11:26.559 --> 0:11:28.520 record high it's just around coal and a rust Co strick. 0:11:28.600 --> 0:11:37.120 There a black rock widely anticipated by Global Wall Street. 0:11:37.120 --> 0:11:40.040 We bring a Daniel, I've senior equity research journalists at 0:11:40.040 --> 0:11:42.880 wed Bush, will do Apple here one question on Tesla 0:11:43.000 --> 0:11:47.360 this morning, Dan Ives reaffirm the accounting integrity that gets 0:11:47.400 --> 0:11:50.120 you to a thousand on Tesla and ms Wood to 0:11:50.200 --> 0:11:54.080 three thousand. I think it continues to I never viewed 0:11:54.120 --> 0:11:58.120 house as an automotive comes a disruptive technology player, and 0:11:58.160 --> 0:12:00.720 it comes down to can they do one points three 0:12:00.800 --> 0:12:04.000 to one point four million units next year for coming out? 0:12:04.000 --> 0:12:07.520 It's now start me profitable selling cars. You put that together, 0:12:07.640 --> 0:12:11.160 some of the parts, I think thousand dollars in East case, 0:12:11.240 --> 0:12:14.920 I think bull case. You we've got to reset on Apple. 0:12:15.000 --> 0:12:19.240 The new toys are the new chip is extraordinary by 0:12:19.280 --> 0:12:22.280 twelve course speed for those that don't understand that. All 0:12:22.320 --> 0:12:25.480 you need to know is there technological marvels. Do you 0:12:25.559 --> 0:12:30.199 adjust your bull case not your call of two hundred, 0:12:30.440 --> 0:12:33.320 but to get out to a three trillion dollar Apple 0:12:33.320 --> 0:12:35.680 at a hundred eighty one dollars a share or a 0:12:35.720 --> 0:12:38.240 four trillion dollar Apple a two hundred and forty one 0:12:38.240 --> 0:12:41.800 dollars a year state the bull case, Yeah, in bull 0:12:41.880 --> 0:12:45.760 case now to was two hundred, and I think that 0:12:45.920 --> 0:12:49.559 the part that's really the delta is the innovation from 0:12:49.559 --> 0:12:52.440 a marginal expansion story that you're gonna see a Apple 0:12:52.679 --> 0:12:55.319 on their new chips, as well as what I believe 0:12:55.360 --> 0:12:58.400 forget just the chip shortage for a second, but right 0:12:58.400 --> 0:13:04.400 now demands outstripping supply by about ten to fifteen thousand, 0:13:04.960 --> 0:13:07.760 you know iPhones. You know i'd say per day. You 0:13:07.840 --> 0:13:10.679 sort of put that together. This is something that you know, 0:13:10.760 --> 0:13:13.120 I believe right now we're running into about a five 0:13:13.160 --> 0:13:17.440 percent SHORTAGEES on iPhone going into holiday season. If you've 0:13:17.440 --> 0:13:19.640 got an idea down of what the product mixes like 0:13:19.720 --> 0:13:22.320 around that shortage, is the high marchin goods that can't 0:13:22.320 --> 0:13:24.120 get the chips? What is it? Is it broad based? 0:13:24.200 --> 0:13:25.800 What's you read on that down it's important for the 0:13:25.800 --> 0:13:28.800 Martin story. Yeah, I mean we got a call about 0:13:28.840 --> 0:13:32.120 five ten million shortage that that you could see going 0:13:32.160 --> 0:13:34.280 into holiday when you put all together. But I think 0:13:34.320 --> 0:13:36.720 the one thing too is a SPS continue to trend 0:13:36.800 --> 0:13:39.840 much higher. China the star of the show for Apple. 0:13:39.920 --> 0:13:42.880 That's going to be front and center going into next week. 0:13:43.160 --> 0:13:45.120 I think you put this all together, we think this 0:13:45.240 --> 0:13:47.640 is the three trillion dollar mark APP going to early 0:13:47.720 --> 0:13:51.439 next year. As well as the services you know continues 0:13:51.520 --> 0:13:55.920 to be the accelerant in that Cupertino growth story. Now 0:13:56.360 --> 0:13:59.160 you've got two new products from a hardware perspective in 0:13:59.240 --> 0:14:02.079 terms of the macro time talking about in AirPods. I 0:14:02.080 --> 0:14:04.760 I continue to think this is just a massive growth 0:14:04.800 --> 0:14:07.960 renaissance and Cupertino down hard to gain this out, But 0:14:08.040 --> 0:14:10.640 just for this quarter, given the supply issues, can you 0:14:10.760 --> 0:14:13.200 envision a story where we miss on the top line 0:14:13.480 --> 0:14:15.720 but beats on the bottom line for everything you've described. 0:14:16.679 --> 0:14:19.240 While I see it, it's a beat on September across 0:14:19.280 --> 0:14:22.480 the board. I think Nicked Gardens for December may be 0:14:22.560 --> 0:14:25.280 cut by about two to three percent just on that 0:14:25.480 --> 0:14:29.560 unit shortage, but then ultimately two thousand numbers come up 0:14:29.840 --> 0:14:32.360 and right now the streets looking through any sort of 0:14:32.400 --> 0:14:35.920 timing trans story issues and ship shortage to two thousand 0:14:36.040 --> 0:14:38.880 twenty two growth story. That's why haters will continue to 0:14:38.920 --> 0:14:41.080 hate on Apple. But in my opinion, this is the 0:14:41.080 --> 0:14:43.560 stock that continues to move higher right now. They have 0:14:43.600 --> 0:14:47.120 a supply issue, not demand issue of high class problem. Dan, 0:14:47.320 --> 0:14:50.200 how would you like to see them use their money 0:14:50.960 --> 0:14:53.880 on the outside of buying a country right which is 0:14:53.880 --> 0:14:58.400 always an option which they they have the I think 0:14:58.560 --> 0:15:00.720 I think right now it's going to continue to be 0:15:00.840 --> 0:15:03.480 about to buy back, David, I don't see them. The 0:15:03.480 --> 0:15:05.880 only acquisitions I see them doing is more and more 0:15:06.000 --> 0:15:10.080 we'll call it strategic content acquisitions, you know, as it 0:15:10.120 --> 0:15:13.760 goes to an Apple TV. But this is all the 0:15:13.840 --> 0:15:15.880 drum roll to what's gonna be the next product in 0:15:15.920 --> 0:15:17.960 the nation coming on Apple, the A R v R 0:15:18.000 --> 0:15:20.760 Apple Glass next year and then the Apple Car in 0:15:20.840 --> 0:15:23.240 two thousand twenty four. I think that's what the drum 0:15:23.360 --> 0:15:25.200 roll and Tom talks about. How you get the four 0:15:25.240 --> 0:15:28.160 trillion I think three trillion next year and the next 0:15:28.200 --> 0:15:30.480 two years you're looking at a four trillion dollar mark 0:15:30.560 --> 0:15:33.040 ap for Apple as this all plays out. You said 0:15:33.080 --> 0:15:36.360 that really the accelerant here is the services component. However, 0:15:36.400 --> 0:15:38.800 Apple is still very much a consumer products company, at 0:15:38.880 --> 0:15:42.040 least in terms of the reputation of consumers. We see 0:15:42.080 --> 0:15:45.560 certain pressures with respect to the app store. What services 0:15:45.600 --> 0:15:48.080 do you see really driving the charge as we really 0:15:48.080 --> 0:15:52.920 continue to look for the product side of Apple to innovate. Yeah, 0:15:52.960 --> 0:15:55.080 it's a great question. It's all probably the reratings store 0:15:55.120 --> 0:15:57.560 and you go back eighteen months goes services Street was 0:15:57.600 --> 0:16:00.720 assigning three n jibillion. We think it's worth one point 0:16:00.720 --> 0:16:05.120 four and one point five trillion, So by monization on cloud, 0:16:05.320 --> 0:16:08.160 on app store, you know, really across the ecosystem, and 0:16:08.280 --> 0:16:10.720 just go back to some of the head winds called 0:16:10.840 --> 0:16:14.160 epic trial and regulatory streets, kind of viewing that as 0:16:14.200 --> 0:16:16.440 background noise. And that's why this stock is the one 0:16:16.480 --> 0:16:20.000 that continues to power through that for a mid team grower. 0:16:20.080 --> 0:16:23.160 And what's a seventy billion annual revenue stream? Dan, you 0:16:23.240 --> 0:16:25.400 and I are close. I missed this one. Maybe I 0:16:25.440 --> 0:16:26.960 missed it a long time ago. When did you start 0:16:27.000 --> 0:16:31.720 covering GM? Yes, we look. We started covering GM over 0:16:31.760 --> 0:16:34.720 the last six months because my view in GM is 0:16:34.760 --> 0:16:37.760 that this is gonna be an e v transformation story. 0:16:38.400 --> 0:16:40.640 You know, as as it gets rerated, and I think 0:16:40.680 --> 0:16:43.760 what you're seeing a GM and four renaissance and Detroit 0:16:44.320 --> 0:16:46.360 you start to get more of rerating a year from 0:16:46.360 --> 0:16:49.080 that GM to double very quickly, Dan, are they gonna 0:16:49.120 --> 0:16:52.520 make a cur America once, not some fancy techy thing 0:16:52.600 --> 0:16:55.560 like Tesla, but something you can get the family in. 0:16:56.720 --> 0:16:58.560 I mean, look, two weeks ago, I was out at 0:16:58.880 --> 0:17:01.320 their test driving facility and I test you have a 0:17:01.360 --> 0:17:03.680 bunch of the models. I think it's gonna be a 0:17:03.720 --> 0:17:06.159 game change where they're coming out with a GM. I 0:17:06.200 --> 0:17:09.359 think marrying the team, phenomenal job what they're doing on 0:17:09.400 --> 0:17:12.000 this green tidal way. They're gonna be a big participant. 0:17:12.240 --> 0:17:14.680 Although right now it's Tesla's world. Everyone else is paying 0:17:14.720 --> 0:17:17.280 rent on evs and just quickly though, before you run 0:17:17.560 --> 0:17:21.240 for people who aren't familiar with the stocks you cover, Apple, Microsoft, 0:17:21.320 --> 0:17:24.040 Docu signed. Are you expecting them to get a tech 0:17:24.119 --> 0:17:28.159 like multiple of the time. Well, that's my view. My 0:17:28.240 --> 0:17:31.560 view is GM and four they start to get rerated 0:17:31.600 --> 0:17:35.760 on disruptive technology. As they convert that base. You start 0:17:35.800 --> 0:17:39.280 to do some math. You convert about timber Center GMS 0:17:39.320 --> 0:17:42.480 based by two thousand five I think there's a three 0:17:42.560 --> 0:17:45.400 digit stock and I think that's the key here as 0:17:45.440 --> 0:17:47.760 it starts to get more of a rerating on this 0:17:47.800 --> 0:17:50.840 green tidle. It's a five trillion dollar green tidal way. 0:17:51.240 --> 0:17:53.880 Tesla's the lead about many others are going to benefit 0:17:53.960 --> 0:17:56.600 by what you're seeing. The biggest transformation to the auto 0:17:56.640 --> 0:18:00.800 industry since nineties down amazing, fantastic acoun shops. I spent 0:18:00.840 --> 0:18:02.440 a bit more time on that in the future. Then 0:18:02.440 --> 0:18:04.960 I said that of wet Bush on GM general modes. 0:18:10.920 --> 0:18:14.640 We are advantaged with Julia Carnado of macro policy perspectives. 0:18:14.920 --> 0:18:17.760 She is truly an academic of the FED working in 0:18:17.800 --> 0:18:22.480 market economics with the knowledge of Dr Weidman as well. 0:18:23.000 --> 0:18:26.879 Did he leave Julia, would you suspect because of the 0:18:26.960 --> 0:18:32.080 transition from miracle to something new for the Republic of Germany? 0:18:33.000 --> 0:18:35.760 Oh yes, I mean that was a very important inflection 0:18:35.880 --> 0:18:40.000 point for the Eurozone and UH and and the appointment 0:18:40.040 --> 0:18:43.520 of drag Each as as Jonathan said, it changed everything. 0:18:43.600 --> 0:18:48.359 So I don't I remember very well the existential moment 0:18:48.840 --> 0:18:51.280 that we were in at that time. I was working 0:18:51.320 --> 0:18:54.000 for a European bank B and P Perry BA and 0:18:54.240 --> 0:18:58.520 UH we we actually had a repeated series of existential 0:18:58.680 --> 0:19:02.479 moments uh and Draggy turned out to be the glue 0:19:02.560 --> 0:19:07.160 that held it all together. In addition to Merkel Merkel's actions. Um, 0:19:07.200 --> 0:19:10.040 but I think that that was actually a very important 0:19:10.040 --> 0:19:15.199 transition away from the Bundesbank driven e c B towards 0:19:15.240 --> 0:19:18.359 something more flexible that had a view and a vision 0:19:18.480 --> 0:19:21.360 to holding the euro Zone together. The hallmark of your 0:19:21.359 --> 0:19:25.160 work at BMP paribas you were absolutely right about Tepe 0:19:25.160 --> 0:19:28.399 of g d P within that era. The reality for 0:19:28.520 --> 0:19:33.280 Germany is massive trade surplus two x billion, only China 0:19:33.400 --> 0:19:38.040 ahead of Germany, with a huge foreign common component, and 0:19:38.160 --> 0:19:42.119 yet a domestic economy flat on its back. Does the 0:19:42.200 --> 0:19:46.200 new Bundesbank president have to say let's get this domestic 0:19:46.240 --> 0:19:50.679 economy going or do they not care? I mean, I 0:19:50.680 --> 0:19:53.040 think to some extent they do need to to to 0:19:53.200 --> 0:19:55.400 say that. I mean, we do, we do still need 0:19:55.800 --> 0:20:00.720 UH demand driver in the Eurozone. All though you know, 0:20:00.840 --> 0:20:03.960 I think it's not quite as dire as where we 0:20:04.000 --> 0:20:07.160 were before. I mean, the Eurozone is is has weathered 0:20:07.600 --> 0:20:11.200 the crisis reasonably well as in a pretty decent position. 0:20:12.480 --> 0:20:15.160 But but yeah, I mean Germany is in the same position. 0:20:15.160 --> 0:20:18.320 And it's always been. It is a really key economy 0:20:18.359 --> 0:20:20.920 for the Eurozone and it does need to help drive 0:20:21.000 --> 0:20:24.320 demand for the region. Julia. The idea that one of 0:20:24.320 --> 0:20:26.639 the lone hawks on the e c B is gone 0:20:26.760 --> 0:20:29.399 raises the issue that we see more broadly for central banks, 0:20:29.400 --> 0:20:32.800 which is the pressure really is to not make a move, 0:20:32.880 --> 0:20:35.400 to not make a policy, or to not raise rates 0:20:35.440 --> 0:20:38.000 too soon. And yet the market in the United States 0:20:38.080 --> 0:20:40.600 is pricing in two rate hikes by the end of 0:20:40.680 --> 0:20:43.399 next year. What do you think it will take for 0:20:43.440 --> 0:20:46.000 the FED to actually get to that place given this 0:20:46.119 --> 0:20:50.520 pressure towards easy money policies for a longer time, I 0:20:50.520 --> 0:20:53.720 think the main scenario that has to develop for the 0:20:53.760 --> 0:20:57.959 Fed to move to rate hikes that steadily would be 0:20:58.040 --> 0:21:00.879 that most of this inflation do us turn out to 0:21:00.960 --> 0:21:05.439 be demand driven, that it really is reflective of a 0:21:05.640 --> 0:21:11.080 hot economy, a tight labor market generating strong wage gains, 0:21:11.720 --> 0:21:14.600 that the hawks are right about the labor supply not 0:21:14.760 --> 0:21:19.080 coming back, and that you really have these demand driven, 0:21:19.119 --> 0:21:23.480 incipient inflation pressures that are building and broadening. That is 0:21:23.520 --> 0:21:26.520 the only scenario in which rate hikes makes sense as 0:21:26.560 --> 0:21:30.679 the solution to the problem. If instead most of this inflation, 0:21:30.920 --> 0:21:34.479 or at least a significant portion of it, is tied 0:21:34.560 --> 0:21:39.480 to chip shortages and supply chain bottlenecks that get resolved 0:21:39.480 --> 0:21:43.280 over time. The FED hiking rates wouldn't do anything to 0:21:43.359 --> 0:21:47.400 fix that and would actually harm the broader recovery. So 0:21:47.520 --> 0:21:51.360 it's going to be really difficult to read these tea leaves. Luckily, 0:21:51.400 --> 0:21:54.360 the FED has some time. They've set out a tapering 0:21:54.480 --> 0:21:58.000 schedule that's probably not going to deviate, So we're tapering 0:21:58.040 --> 0:22:01.320 from here to June, and then then we'll see where 0:22:01.359 --> 0:22:05.040 we are by then. I think companies earning reports are 0:22:05.040 --> 0:22:09.119 going to be a really important bell weather indication of 0:22:09.119 --> 0:22:13.600 how companies are navigating this, because let's not forget one 0:22:13.640 --> 0:22:16.600 of the things that's been one of the narratives this 0:22:16.720 --> 0:22:19.520