Speaker 1: This is the Bloomberg Surveillance Podcast. I'm Tom Keane, along
Speaker 1: with Jonathan Farrow and Lisa Abramowitz. Join us each day
Speaker 1: for insight from the best and economics, geopolitics, finance and investment.
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Speaker 1: need on Jobs Day more Newtonian calculus. We'll do that
Speaker 1: with Randall Krosner of the Bus School, Chicago, of course,
Speaker 1: the former Fed governor, one of our great and giant
Speaker 1: financial economists in America. What's the second derivative of the
Speaker 1: jobs market look like?
Speaker 2: Randy? When it moves?
Speaker 3: Does it move?
Speaker 4: Ah? And that's the key question exactly what you were
Speaker 4: talking about. What does this pretend for the trajectory going forward?
Speaker 4: Certainly we're seeing a slowing pace over the last few
Speaker 4: months downward revisions. And then the question is will this
Speaker 4: be nice and smooth or will this pretend something that
Speaker 4: is going to be As at LISTA mentioned before, nonlinear,
Speaker 4: very difficult to predict any nonlinear moves and things. But
Speaker 4: I do think it's consistent with a somewhat softening labor market.
Speaker 4: I think the FED will certainly be heartened by the
Speaker 4: wage growth coming down a bit over time. I think
Speaker 4: this takes the wind of the sales of those who
Speaker 4: wanted to go further. I think it makes it much
Speaker 4: more likely that we will just hold where we are
Speaker 4: for a while. But so far, there's nothing in this
Speaker 4: to suggest that the FED is going to be eager
Speaker 4: to cut or be even talking about cutting anytime soon.
Speaker 5: Do you think, Randy is some people are pointing to
Speaker 5: manufacturing as a point of weakness, that that is a
Speaker 5: leading indicator in the way it has been in previous times,
Speaker 5: just because of how many people were hired during the
Speaker 5: peak of the pandemic.
Speaker 4: It is certainly one area that there was a lot
Speaker 4: of bounce back, because of course people want to things,
Speaker 4: but now people want services, and so the services part
Speaker 4: is still extremely important. I wouldn't put too much emphasis
Speaker 4: on any one particular sector. I think you have to
Speaker 4: look over overall, and as Mike had said, you know,
Speaker 4: we're seeing a little bit of slow down broadly, but
Speaker 4: not enormous amount of slow down. But I do think
Speaker 4: that is consistent with in somestance where the FED wants
Speaker 4: to go. They want to see the uneployment rate go
Speaker 4: up a little bit, not too much. They want to
Speaker 4: see wage growth come down a little bit, but not
Speaker 4: too much. And I think it's just going to be
Speaker 4: tougher to be hiring people going forward. Until just a
Speaker 4: few months ago, real wages were not growing, they were
Speaker 4: actually negative. Real wage growth was negative. Now real wage
Speaker 4: growth is positive, so it gives less of an incentive
Speaker 4: for firms to hire. Real interest rates are now positive.
Speaker 4: They had been negative for a very long time. That
Speaker 4: combination is probably going to lead firms to be less
Speaker 4: eager to hire, less eager to invest, and I think
Speaker 4: that's going to be leading to what I think is
Speaker 4: potentially a hard ish but not hard landing.
Speaker 2: This is an important jobs report.
Speaker 1: This November report of the October data just absolutely extraordinary.
Speaker 1: Randy Krasner, thank you so much, Professor Krasner with the
Speaker 1: Boost School the University of Chicago. If you're not part
Speaker 1: of the global Wall Street gang, you've got to understand
Speaker 1: it's hard to look at the Bloomberg screen and frame
Speaker 1: it out from where we were two weeks ago, which
Speaker 1: gets us to canes and when the facts change, I change.
Speaker 1: Jeffrey Rosenberg studied as Maynard Keynes at Carnegie Mellon. He's
Speaker 1: a black Rock portfolio manager systematic multi strategy fund.
Speaker 2: For all of us. Jeff Rosenberg, are the facts changing?
Speaker 3: Great question, Tom.
Speaker 6: You know, the narrative is changing and the facts are
Speaker 6: driving that. And so Lisa asked the kind of the
Speaker 6: key question, You know, how do you rally in front
Speaker 6: of a slowing labor picture?
Speaker 3: And that's because it's where we are.
Speaker 6: Equity markets were weaker while the economy was strengthening, and
Speaker 6: that was really about the rise in the denominator, in
Speaker 6: the discount rate and the interest rates. So as you
Speaker 6: ease off the pressure in terms of the interest rates,
Speaker 6: there's a little window here where the narrative changes and
Speaker 6: there's relief because the discount raid is expected to be
Speaker 6: a bit lower, and you see it in the bond market.
Speaker 6: But that's about horizon and so the near term horizon
Speaker 6: narrative will shift, but the longer term horizon about that
Speaker 6: hardish landing that Randy just mentioned.
Speaker 3: That'll be for future conversations.
Speaker 6: Right now, the market's pretty excited about lower discount.
Speaker 1: Way, Jeff Rosenberg, people would say, Blackrock is part of
Speaker 1: that wall of money that's out there. Okay, we got
Speaker 1: a short cover here, a short cover there, I got
Speaker 1: futures up eighteen. Rosenberg knows the numbers better than me.
Speaker 1: Are we underestimating Jeff Rosenberg? How many people here are
Speaker 1: off sides and need to get in and play?
Speaker 2: Now?
Speaker 3: Yeah, you know we talked about this after the FMC.
Speaker 6: You know, the near term volatility is all about technicals
Speaker 6: and positioning, and so you're going to have that and
Speaker 6: you're going to see you're going to see those moves.
Speaker 6: The longer term positioning is going to be about trajectory
Speaker 6: and fundamentals. But certainly, you know, after a report that
Speaker 6: you know pretty much convincingly across the board, as you
Speaker 6: highlighted earlier, you know, this is a report that helps
Speaker 6: to support the narrative of slowing in the labor markets,
Speaker 6: slowing in wage inflation, even though that's a mixed shift
Speaker 6: probably in the AH number, but across the board, especially
Speaker 6: with the revisions, you know, it just looks like this
Speaker 6: is coming in slower, and so that helps to feed
Speaker 6: the near term narrative that you get to the soft landing.
Speaker 6: You know, as Randy said, whether it's soft landing or
Speaker 6: hardish landing or hard landing will remain to be seen.
Speaker 5: When do you go with groupthink and when do you
Speaker 5: push back?
Speaker 1: Right?
Speaker 5: I mean, when do you go with the crowd if
Speaker 5: sentiment is shifting and you're seeing people go into risk,
Speaker 5: if you believe that essentially bad news will be bad
Speaker 5: news for risk acts.
Speaker 6: Yeah, you know, it's a lot about kind of what's
Speaker 6: in the looking at what's in the price, and how
Speaker 6: much cushion you have against the consensus move and where
Speaker 6: the asymmetries lie. So I think right now the momentum
Speaker 6: and the sentiment around soft landing is going to be
Speaker 6: pretty hard to push back against. But you know, as
Speaker 6: we see successive waves of data, we got a couple
Speaker 6: more here in terms of before we get to the
Speaker 6: December FOMC, there's going to be a little bit of
Speaker 6: momentum here around the easing off of financial conditions, the
Speaker 6: easing off of tightening from the FED, and I think
Speaker 6: that's going to provide a little bit of a tailwind
Speaker 6: for a short horizon trap.
Speaker 5: And definitely the momentum tends to overshoot, and there is
Speaker 5: this feeling that this does set the market up for
Speaker 5: more fragility heading into a print that could be a
Speaker 5: big surprise on the downside. Jeff, how much is that
Speaker 5: sort of the play right now is to lean into
Speaker 5: the momentum, go at the flow, soft landing. Sure you
Speaker 5: can celebrate, but the music will stop eventually, and each
Speaker 5: one of these economics prints are going to have that
Speaker 5: much more heft and importance in markets.
Speaker 6: Yeah, and you know, the main issue here is really
Speaker 6: about long and variable lags. And Tom, I know you
Speaker 6: hate when every time I say that, but it is
Speaker 6: where do you see that pressure coming in? Randy talked
Speaker 6: about the pressure in terms of easing off of hiring
Speaker 6: because real wages are no longer negative, it's more expensive.
Speaker 3: You talked about funding costs, and maybe there's.
Speaker 6: A little bit of an opening up in terms of
Speaker 6: the bond market, but I think you got to remember here,
Speaker 6: these are much more expensive funding costs. And so if
Speaker 6: you don't have to issue that debt because you've termed
Speaker 6: it out, you don't want to issue that debt. And
Speaker 6: so even though the market may be open, it's at
Speaker 6: a much higher cost. And that lagged effect of tightening
Speaker 6: in terms of interest expenses something you know, the market
Speaker 6: is still going to have to figure out where are
Speaker 6: the vulnerabilities, and there are vulnerabilities to that impact on.
Speaker 2: Bloomberg Television and radio.
Speaker 1: Jeffrey Rosenberg with us is Blackrack really timely, and of
Speaker 1: course we thank him forst fed work as well well.
Speaker 1: He's going to stay with us at right now, I
Speaker 1: can't do it to complete data check because Jeff Rosenberg
Speaker 1: is too important.
Speaker 2: But Lisa, there's some real nuances here.
Speaker 1: Futures up nineteen continue to advance down, futures up one
Speaker 1: thirty nine. Can I get to a VIXA fourteen, I'm
Speaker 1: not there yet fifteen point two six.
Speaker 2: As Bramba mentioned.
Speaker 1: Folks a two year yield in thirteen basis points, we
Speaker 1: continue to see lower yields and a higher prices ten
Speaker 1: year in his stunning eleven basis points.
Speaker 2: And just you know, outside the.
Speaker 1: Box here, I got weaker dollar, I got euros through.
Speaker 2: One oh seven. I've got yen dynamics, but euro yen.
Speaker 2: What does the Japanese institutions do this weekend? Off what
Speaker 2: Jeff Rosenberg says? Because I got euro yin one sixty
Speaker 2: point zero one.
Speaker 1: If they're not going to act now, Lisa, when are
Speaker 1: they going to act.
Speaker 5: That does raise a good question and Jeff to that point,
Speaker 5: does the move that we're seeing in the US a
Speaker 5: sigh of relief open up possible monetary disruption elsewhere hint
Speaker 5: hind Bank of Japan that could be disruptive on the
Speaker 5: other side.
Speaker 6: Yeah, I mean that's a big global story and one
Speaker 6: we've been talking about for a while waiting for. We
Speaker 6: got a little bit of it in terms of changing
Speaker 6: the definition of yield curve control.
Speaker 3: And there's an expectation that there's going to be more.
Speaker 6: And there's an incredible amount of fiscal stimulus coming out
Speaker 6: of Japan that is really going to push the BOJ
Speaker 6: even further.
Speaker 3: And so that's been a global impact.
Speaker 6: It's dampening term premium It's part of the term premium
Speaker 6: steepening story. You know, the refunding you know, certainly is
Speaker 6: pushed back on that and positioning you know, a bit
Speaker 6: off sides for that surprise somewhat surprise refunding. But really
Speaker 6: the big story there is going to be global term
Speaker 6: premium steepening and that's I think long term going to
Speaker 6: come back to the US. But near term this is
Speaker 6: going to be about softish landing and slowing of the Fed,
Speaker 6: and the market is going to run with that.
Speaker 5: We're looking right now at two year yields just tanking.
Speaker 5: I mean, honestly, this is quite a move fifteen bas
Speaker 5: points nearly from top to bottom in this trading session
Speaker 5: as people parse through this, Jeff just want to finish
Speaker 5: up with the Fed's reaction function, this concept of what
Speaker 5: it takes for the Federal Reserve to cut rates. Right now,
Speaker 5: there is base into the markets in real time, a
Speaker 5: sense that they will be cutting rates in much sooner
Speaker 5: than they're saying. Do you think that's accurate that the
Speaker 5: bar to cut rates has somehow come in as a
Speaker 5: result of just the general feeling and the public and
Speaker 5: the lack of willingness to tolerate much higher on employment rates.
Speaker 3: Well, it's tricky, Lisa.
Speaker 6: I mean, I think the reaction you're getting right now
Speaker 6: pricing out the kind of probabilities, the limited probabilities of
Speaker 6: the last hike.
Speaker 3: Right.
Speaker 6: So, you know, you go back to Wednesday, and you
Speaker 6: know you remember the question, and you know you talked
Speaker 6: about we're not even you know, talking about cutting rate now.
Speaker 6: Obviously the market is because the market is looking forward here.
Speaker 6: I think you got to see a lot more development
Speaker 6: on the inflation side before you get there. And then
Speaker 6: the other the problem we're going to talk about, I
Speaker 6: think is the reflexivity. I think you mentioned it is
Speaker 6: that you know, well, we the FED could do less
Speaker 6: because the market's doing more. But the more the market
Speaker 6: does more in terms of using financial conditions.
Speaker 3: The more then the Fed has to do.
Speaker 6: So you kind of get yourself chasing your own tail
Speaker 6: around that story in terms of whether they can cut.
Speaker 6: So it will come back to does the inflation really
Speaker 6: fall fast enough to that two percent level that gets
Speaker 6: real interest rates high enough that gets them concerned that
Speaker 6: they're too tight where they really need to deliver those cuts,
Speaker 6: and that I think is still way out into the future.
Speaker 1: And Lisa, where do you get to show where jeff
Speaker 1: Rosenberg channels George Soros on reflexivity. I mean, there's nowhere
Speaker 1: else in the world you can have this much fun.
Speaker 1: Jeffrey Rosenberg, thank you so much for joining us.
Speaker 2: That's the way it works, folks.
Speaker 1: The street only focuses on revenue dynamics, and if they're brave,
Speaker 1: they go down the income statement and they'll find that
Speaker 1: and then it's what I.
Speaker 2: Call concept concept concept.
Speaker 1: China, worry, worry, worry, yep iPhone worry where iPads omg
Speaker 1: and thank god. Gen Monster, with all of his work
Speaker 1: on Apple and technology, says, you know, maybe they're rock solid.
Speaker 1: Maybe they're running this thing for profit.
Speaker 2: Gene.
Speaker 1: I saw a record third quarter gross margin. I saw
Speaker 1: the persistency of services maintained, and critically, I saw cash
Speaker 1: generation in the gloom of Apple this morning. The second guessing,
Speaker 1: is there free cash flow growth going to EBB.
Speaker 7: No, Tom, I think it's just going to flow and
Speaker 7: flow higher. And ultimately they showed, as you said, some
Speaker 7: of the most impressive margins, most impressive gross margins that
Speaker 7: they've ever printed a mikeed environment where component costs are rising,
Speaker 7: of labor costs, shipping costs, all of that, and they've
Speaker 7: been maintaining price that shows operation efficiency. That's what drives
Speaker 7: free cash flow. And you said it right. One big
Speaker 7: X factor around free cash flow that we've observed with
Speaker 7: big tech over the last nine months is they all
Speaker 7: say we're going to be investing more into AI. Tim
Speaker 7: Cook talks about that but says he wants to do
Speaker 7: it responsibly, which means he wants to protect margins and
Speaker 7: do that that is a unique perspective.
Speaker 1: John from his house, looking down on the Helix and
Speaker 1: New Jersey emails in and says, is it a time
Speaker 1: to buy Apple? If there's all this worry about legitimate
Speaker 1: things like China, is gene monster saying load the boat.
Speaker 7: So this is not investment advice, but I do think
Speaker 7: that this is a time to own Apple. And ultimately
Speaker 7: is you have to play this picture forward for one,
Speaker 7: two and five years. And what we've seen in the
Speaker 7: near term is that the importance of their devices in
Speaker 7: our lives are central and that shows up and effectively.
Speaker 7: The guidance I think it's misunderstood is for seven percent growth,
Speaker 7: up from one percent last quarter. So that's the baseline.
Speaker 7: The second is just the opportunity that they have to
Speaker 7: continue to sell that engage base more products. And third
Speaker 7: is that they have opportunities to go into new markets,
Speaker 7: whether it be spatial computing or what potentially could come
Speaker 7: out of automotive. And so I think when you put
Speaker 7: all this together, this is a unique dynamic and I
Speaker 7: think that this will power shares higher in the years
Speaker 7: to come.
Speaker 2: Paul, you know this.
Speaker 1: I mean you've lived this where you're like, is it
Speaker 1: a twelve week quarter, thirteen.
Speaker 2: Week quarter of fourteen week quarter.
Speaker 3: I mean it's like death exactly.
Speaker 8: Hey, Gene, you know, going into the quarter, the pundits
Speaker 8: were saying, you know, the primary focus is going to
Speaker 8: be China. So let's approach that from the perspective of competition.
Speaker 8: Talk to us about the Huawei phone. How much of
Speaker 8: a competitor is that. How much is a concern about
Speaker 8: nationalism weighing on potentially future demand for Apple products.
Speaker 7: So the first is the Huawei phone that's picked up
Speaker 7: a lot of traction during the quarter, a lot of
Speaker 7: speculation this was going to weigh on the China numbers,
Speaker 7: and China was down two percent year over year, at
Speaker 7: a similar rate that it was down back in March
Speaker 7: when before the new Wuahwei phones came out. It was
Speaker 7: down seven percent December of twenty twenty two, and so
Speaker 7: it fluctuates as the bottom line, China's up and down,
Speaker 7: and I don't think that the Huawei phone is having
Speaker 7: an impact. Apple gained share in China in the September quarter,
Speaker 7: and Huawei may have gained share too, But Apple is
Speaker 7: gaining share, and so I think that it is not
Speaker 7: having an impact on their business. And if you look
Speaker 7: at their China business, and I look at this on
Speaker 7: excluding the FX on a constant currency basis, it was
Speaker 7: up four percent. I'm reluctant to do that because I
Speaker 7: want to give but it's worth noting that China's doing
Speaker 7: okay for Apple.
Speaker 1: Yeah, Paul, Code of the day, Aniograna genius. Apple has
Speaker 1: eighteen percent one eight eighteen percent of the unit installed base.
Speaker 2: And yet you just heard g monsters say they're gaining
Speaker 2: share in the training share.
Speaker 8: All right, let's go to the other side of the
Speaker 8: income statement. There a gene on the cost side here.
Speaker 8: I guess you know, when I look at the operations
Speaker 8: of Apple, I just don't see any scenarre where the
Speaker 8: d couple from China. Now, they can, I guess, reduce
Speaker 8: to some extent their dependency on sourcing and manufacturing in China,
Speaker 8: but they really can't decouple. So did how do investors,
Speaker 8: long term investors like you get comfortable with that side
Speaker 8: of the equation.
Speaker 7: I don't think you do. And I think that I
Speaker 7: mentioned everything is good in China. I was talking about
Speaker 7: on the consumer side. I think on the production manufacturing side,
Speaker 7: it's a different story. And the story is that Apple
Speaker 7: needs to get out of China or at least reduce
Speaker 7: its exposure. Right now, we estimate that about forty to
Speaker 7: forty five percent of their revenue is manufactured in China.
Speaker 7: Now it's down from sixty percent a few years ago,
Speaker 7: so they've been reducing their exposure there. But the bottom
Speaker 7: line is that I don't think investors until that number
Speaker 7: gets down to twenty percent, I don't think investors are
Speaker 7: going to rest easy because this is as a geopolitical
Speaker 7: element to it and is a wild card when it
Speaker 7: comes to some of the confidence that investor have in
Speaker 7: the company's ability to produce products to meet this sensational demand.
Speaker 8: And gene does a company have a strategy or are
Speaker 8: they articulating any confidence that they can in fact get
Speaker 8: down to that twenty or twenty five percent exposure.
Speaker 7: They do, it's predominantly India. India's right now about two
Speaker 7: percent of their production, and they've talked about ramping production
Speaker 7: there and so it'll go tell a lot of other areas,
Speaker 7: even like you probably will see something in Mexico in
Speaker 7: the next five years too.
Speaker 1: Jane, quickly here services up sixteen percent. It's a persistent vector.
Speaker 1: Do you have a terminal rate on services or does
Speaker 1: it just grow out, you know, until Frozen eight comes
Speaker 1: out for Disney.
Speaker 2: I mean, you know, does it just go out forever.
Speaker 7: It's gonna keep going out forever because they have pricing leverage.
Speaker 7: It's not just in what they've raised the pricing with
Speaker 7: Apple TV Plus, but they raise pricing with the storage.
Speaker 7: You get those notifications. They raise it at buck a month.
Speaker 7: You don't think much about it, but that's a fifteen
Speaker 7: percent increase. And so I think that this business is
Speaker 7: generally a ten percent growing business for the foreseeable future,
Speaker 7: which can put three to five years ten seconds.
Speaker 1: Gene Monster, what's your terminal some of the parts on
Speaker 1: Apple right now?
Speaker 2: Some of the parts some of.
Speaker 7: The parts is two forty And I think that's based
Speaker 7: on as we think about just ultimately what they can
Speaker 7: earn in twenty twenty.
Speaker 2: Five, Gene Munster.
Speaker 7: Not investment advice, but that's where we're at.
Speaker 2: It's not investment advice. But Tucker's got his by order
Speaker 2: out right now. G Muster, thank you so much. Luke Vencha. Well,
Speaker 2: let's say the show now. You can always do that
Speaker 2: with anarog Rana.
Speaker 1: He is truly expert on the cloud and has a
Speaker 1: partial interest in an Apple computer as well, Anna Regan,
Speaker 1: why you to explain to the audience how a tech
Speaker 1: company runs their company for profit versus running.
Speaker 2: It just at the top line.
Speaker 1: To me, Apple is a profit cast generating juggernaut.
Speaker 2: Why is that so odd, so strange?
Speaker 9: Yeah, I think that goes back to the foundation of
Speaker 9: the company. It really believes in having high margin products.
Speaker 9: It does not believe in gaining market share. You know,
Speaker 9: even after all these years, it has only eighteen percent
Speaker 9: of the unit market share of smartphones around the world.
Speaker 9: It can completely change that overnight if they drop the
Speaker 9: price of the phone, but they will never do that
Speaker 9: because they believe in gross margins more than anything else.
Speaker 9: Over time, they will gain enough market share in every market.
Speaker 9: But this is not something that they do is try
Speaker 9: to gain market share just.
Speaker 10: For the same It's the journey on a rag. As
Speaker 10: you know. Before we start talking about lower prices, can
Speaker 10: we talk about the absence of higher prices? Have they
Speaker 10: lost pricing power?
Speaker 9: No? No, I don't think so. The problem over here
Speaker 9: is people are keeping their phones for a longer period
Speaker 9: of time. If you are keeping it, let's say for
Speaker 9: an average three point six years before, you're probably keeping
Speaker 9: closer to four years. So what that does is it
Speaker 9: just elongates the time it takes for you to refresh
Speaker 9: your phones or for that bat at any other product.
Speaker 9: So I don't think it has nothing to do with
Speaker 9: the pricing power. The Promax is unbelievably expensive compared to
Speaker 9: the older models, and it's doing very well.
Speaker 10: Clearly the revenue mixed growth shift is moving towards services
Speaker 10: and IRAQ. How does that change your approach to value
Speaker 10: in this company?
Speaker 9: Yeah, I mean it has been a true surprise to
Speaker 9: see that number grow still in double digits. I expected
Speaker 9: that to be back into the high single digits by now.
Speaker 9: It has a high gross margin. It has a seventy
Speaker 9: percent plus gross margin compared to products, which is in
Speaker 9: the thirties. So over time, when you see the revenue
Speaker 9: mix shift towards services, you can expect the overall company
Speaker 9: gross margins to trend up inch, you know, inch by
Speaker 9: inch growing up, and we have seen that already in
Speaker 9: the last few years.
Speaker 5: Anor do you think that analysts are overplaying or underplaying
Speaker 5: the declines that we saw in China?
Speaker 9: I think you have to sit down and think what
Speaker 9: kind of company this is and I think this is
Speaker 9: really evident, and you know, I've discussed this with Tom
Speaker 9: and Paul many times, that this is not a company
Speaker 9: that's going to grow sales in double digits. This is
Speaker 9: at best, at this point, you know, mid to high
Speaker 9: single digit company. And I think people are getting used
Speaker 9: to that fact. Yesterday when they guide it for December quarter,
Speaker 9: which the estimate was it's going to grow about five percent,
Speaker 9: they said about flatish sales, and that's when the stock drop.
Speaker 9: I think people need to come to that point that
Speaker 9: you know, refresch cycles are going up and it's going
Speaker 9: to be a time before things are going to grow
Speaker 9: at that same pace, which.
Speaker 5: Then leads to a question of how much growth, how
Speaker 5: much future growth is baked into the valuation of the
Speaker 5: company that's seen a thirty seven percent rally.
Speaker 9: You're todate, Yeah, I think valuation is something that we
Speaker 9: talk about a lot with investors, and you know, sometimes
Speaker 9: you have to really ask yourself is this a technology
Speaker 9: company or this is a consumer stables company, Because if
Speaker 9: you take the heart of a consumer stables company, you know,
Speaker 9: something like a Coca Cola or a Costco, then you
Speaker 9: see things with a very different lens because those companies
Speaker 9: also are not growing, you know, eight to ten percent
Speaker 9: top line.
Speaker 1: Ana, I want to look at something beneath the radar.
Speaker 1: This week, it's a Friday, and in the world of
Speaker 1: Microsoft is a different Friday.
Speaker 2: It's a copilot Friday.
Speaker 1: What is the importance of this announcement that Microsoft's making
Speaker 1: where we actually do AI with a modeled marketed program
Speaker 1: for global corporations.
Speaker 2: What does co pilot mean to Microsoft?
Speaker 9: So, copilots is basically an AI tool that goes with
Speaker 9: your original software package. In the case of Microsoft, it's
Speaker 9: launched that with their Office Suite, which started setting yesterday.
Speaker 9: It's about thirty dollars per user per month, and they're
Speaker 9: hoping that, you know, the serious worker in the office
Speaker 9: that's probably somewhere in one hundred and fifteen million to
Speaker 9: two hundred million people around the world that currently use
Speaker 9: the Office Suite will opt some portion of that will
Speaker 9: opt for this particular feature to help gain productivity. Copilot
Speaker 9: can also be used in writing software. So it is
Speaker 9: just a tool that everybody has.
Speaker 3: They are the.
Speaker 9: First ones to come out with it at such aggressive face.
Speaker 1: What's your prediction on this? I mean, come on, you've
Speaker 1: nailed the cloud. You got a cloud view out three
Speaker 1: years or five years, which is just absolutely remarkable. What
Speaker 1: is your prediction on how copilot will will do?
Speaker 9: I think, and I argue it's going to be very
Speaker 9: slow and steady because the thirty dollars per user, you know,
Speaker 9: per month is a very steep price. We think, you know,
Speaker 9: adoption rate is not going to be more than three
Speaker 9: to five percent in the first year of coming out,
Speaker 9: so you know, perhaps at two to three billion dollar
Speaker 9: upside on that. On the on the software coding side
Speaker 9: of it, which is getthub co Pilot, we think the
Speaker 9: adoption rate is going to be very high, you know,
Speaker 9: close to seventy five percent, because I don't see any
Speaker 9: developer out there that can afford to right code without
Speaker 9: this tool right next to them.
Speaker 10: And Rex, thank you, sir.
Speaker 1: In Washington, Terry Haynes joins US now founder of pengea
Speaker 1: policy Terry with great cheer for the exhaustion of our
Speaker 1: secretary straight. Does Shuttle diplomacy for Blincoln work like Shuttle
Speaker 1: diplomacy worked for Kissinger?
Speaker 11: I think it's very different for a couple of reasons,
Speaker 11: one of one of which is kind of bubbling under here.
Speaker 11: You know, Blincoln's mission this time, as opposed to the
Speaker 11: last few times, is designed to try to get to
Speaker 11: try to convince the Israeli government of some kind of
Speaker 11: pause or humanitarian something like that. And it calls into
Speaker 11: question a couple of things. It calls into question the
Speaker 11: degree to which the United States continues to support the
Speaker 11: current Israeli government. The Biden aids are running around Washington
Speaker 11: briefing against net Nyau right now. And Secondly, it calls
Speaker 11: into question whether or not and to what extent the
Speaker 11: US still supports the Israel's war aims in Gaza, and
Speaker 11: that's a concern. All this also complicates the Israel the
Speaker 11: Israeli aid package, because Congress is not going to pass
Speaker 11: the Israel package if they don't clearly understand what administration
Speaker 11: policy is. So we've got a lot of a lot
Speaker 11: of problems here that complicate Lincoln's mission.
Speaker 1: Terry, unfair question, but I got to go there. It
Speaker 1: isn't the zeitgeist end of the weekend as well. Then
Speaker 1: you were there with Lord Kitchener and Mark Sykes when
Speaker 1: they divided up the Middle East after World War One.
Speaker 1: I understand that all of a sudden we're talking about
Speaker 1: a partition of God, we saw a partition of Vietnam,
Speaker 1: a partition of Korea. Is that the easy way out
Speaker 1: here is whatever this word means, A partition of the
Speaker 1: Gaza strip.
Speaker 11: Yeah, there's a partition, and you know, it's kind of
Speaker 11: international administration or all the phrases that go together. These
Speaker 11: are phrases that go back, as you quite quite rightly
Speaker 11: point out to post World War One League of Nations
Speaker 11: mandate style governance, and and they tend to bury the
Speaker 11: harder realities, which are then the nature of the terrorist organizations,
Speaker 11: the nature of their funding, and you know what sorts
Speaker 11: of proxies they are, and they tend to bury, you know,
Speaker 11: kind of kind of regional responsibility for the problem. And
Speaker 11: all those are going to have to be dealt with,
Speaker 11: and you know, we haven't even started to deal with
Speaker 11: any of those yet.
Speaker 5: Terry, what do you make about the strife within the
Speaker 5: Republican Party stemming from Senator Tuberville of Alabama, this idea
Speaker 5: that he will stall with the affirmation the confirmation of
Speaker 5: some of the military promotions at a time of expanding
Speaker 5: conflict overseas well.
Speaker 11: You know, I'd give you two points about that. One
Speaker 11: is that it is obviously providing some strife within the military.
Speaker 11: And at the same time, the Senator says directly, and
Speaker 11: to my knowledge, has never been countermanded, that he wants
Speaker 11: to have a dialogue with the Department of Defense about
Speaker 11: all this stuff and come to some sort of resolution,
Speaker 11: and that he's not got it. What I think is
Speaker 11: going to end up happening is this gets resolved somehow
Speaker 11: in the defense spending legislation that comes up by about
Speaker 11: the end of the year. One way or another, this
Speaker 11: is going to get dealt with in the next two months.
Speaker 5: There was a resolution that passed the House offering support
Speaker 5: to Israel, but also tying it to cuts to the IRS,
Speaker 5: which some have suggested would actually cause a bigger deficit
Speaker 5: because it would reduce tax revenues that the US government gets.
Speaker 5: Does this progress the issue or actually push it back
Speaker 5: in terms of the debate.
Speaker 11: Well, two things. One is that the you know, only
Speaker 11: in Washington, would the I R S get beyond being
Speaker 11: rough here, would get eighty billion more dollars and then
Speaker 11: have it cut by fourteen and have that considered by
Speaker 11: anybody to be a cut in IRS spending. You know,
Speaker 11: But there you are Secondly, I think the funding is
Speaker 11: the help is really is funded is almost beside the point.
Speaker 11: The bigger problem that we have right now really is this.
Speaker 11: You know, you ran Admiral Kirby and your lead in
Speaker 11: Admiral Kirby says that the administration has four priorities and
Speaker 11: they all need to get dealt with together. Well, these
Speaker 11: are Biden's priorities. These are Biden's foreign policy. Biden's going
Speaker 11: to have to get all this stuff done and in
Speaker 11: a way that funded properly, and right now, whatever else
Speaker 11: Secretary Blincoln's doing. The apparent change in Biden policy towards
Speaker 11: Israel is making that more difficult because now Congress doesn't
Speaker 11: understand exactly what Biden's foreign policy is.
Speaker 10: Hey, Terry, great to get your input as always, Terry
Speaker 10: Hanks there of Panchaea policy.
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