WEBVTT - Surveillance: Apple's Future Should Be in Content, Ward Says 0:00:00.040 --> 0:00:02.600 Who you put your trust in matters. Investors have put 0:00:02.680 --> 0:00:07.040 their trust and independent registered investment advisors to the two 0:00:07.040 --> 0:00:10.680 and four trillion dollars. Why Learn more at find your 0:00:10.760 --> 0:00:26.320 Independent Advisor dot com. Welcome to the Bloomberg Surveillance Podcast. 0:00:26.720 --> 0:00:30.440 I'm Tom Keene with David Gura. Daily we bring you 0:00:30.480 --> 0:00:35.520 insight from the best in economics, finance, investment and international relations. 0:00:35.920 --> 0:00:40.519 Find Bloomberg Surveillance on iTunes, SoundCloud, Bloomberg dot com, and 0:00:40.600 --> 0:00:48.040 of course on the Bloomberg Now. Ryanair has cut its 0:00:48.040 --> 0:00:51.080 fully your profit guidance today than the frills Carrier blames 0:00:51.120 --> 0:00:52.920 the impact of the slump in the pound following the 0:00:52.920 --> 0:00:55.840 brigs of vote. Let's get more from John Strickland's j 0:00:56.000 --> 0:00:59.000 LS Consulting, aviation analyst with US Paris On and head 0:00:59.000 --> 0:01:03.440 of European Equities Fidelity International. This would probably be very 0:01:03.440 --> 0:01:06.440 painful for Michael Leary because he had campaigned first of 0:01:06.440 --> 0:01:08.560 all for the UK to stay within the EU, and 0:01:08.560 --> 0:01:12.640 then he's held off right trying to not cut profit guidance, 0:01:12.640 --> 0:01:15.000 and then finally today was too much because of course 0:01:15.440 --> 0:01:19.479 a weaker pound ways on fairs that also has quite 0:01:19.480 --> 0:01:22.120 a big impact on yields. Yeah, well, pound Sterling is 0:01:22.160 --> 0:01:24.559 such an important currency for Ryan Air, with around about 0:01:24.560 --> 0:01:27.960 a quarter of their revenues being earned in GDP, their 0:01:27.959 --> 0:01:31.200 biggest flying activities out of the UK stands is by 0:01:31.200 --> 0:01:35.440 far their biggest base airport, even bigger their home market Dublin. 0:01:35.959 --> 0:01:38.200 And they're indicating they're going to work against this in 0:01:38.280 --> 0:01:43.040 terms of further pressuring cost reductions by driving volumes that 0:01:43.120 --> 0:01:45.759 they have a pretty stunning performance in filling their seats, 0:01:45.800 --> 0:01:48.760 they feel aboutcent of seats. But of course the fact 0:01:48.800 --> 0:01:50.880 they have to remit Sterling into Euros as a euro 0:01:50.920 --> 0:01:55.480 denominated company is a fundamental problem. Can they head They 0:01:55.600 --> 0:01:57.680 could have hedged already, but I guess at the present 0:01:57.680 --> 0:02:00.920 time difficult to say. I mean, because there's so much 0:02:00.920 --> 0:02:02.720 of volatility. We just can't tell how this thing is 0:02:02.760 --> 0:02:04.680 going to play out in terms of the next few 0:02:04.680 --> 0:02:07.320 weeks and months, all right, But there's nothing fundamentally wrongs, right, 0:02:07.320 --> 0:02:08.799 I mean, this is it's a currency play and we're 0:02:08.800 --> 0:02:10.560 going to see a lot of I mean, Ryan is 0:02:10.720 --> 0:02:13.240 wrong with how many people actually fly their planes paciety. 0:02:13.240 --> 0:02:14.880 I mean Ryan is the strongest of a lot. As 0:02:15.160 --> 0:02:17.240 you said, they were really once really who had until 0:02:17.280 --> 0:02:20.160 today maintained their guidance. We've seen other players like I 0:02:20.320 --> 0:02:22.760 A G and Easy yet already issue profit warning. So 0:02:23.040 --> 0:02:25.240 I'm sure it's with great reluctance that Ryan I did 0:02:25.240 --> 0:02:27.680 so today. But it's still in a very healthy position 0:02:28.160 --> 0:02:29.840 when you look at the airlines, right, So this is 0:02:29.880 --> 0:02:33.360 a play on okay, pound and currency for for certain 0:02:33.400 --> 0:02:35.720 of the non frill hairlines, but then it's also a 0:02:35.720 --> 0:02:38.920 commodity play in oil. A lot of them were hedged 0:02:38.960 --> 0:02:42.919 wrongly overall. Can they recover? Yeah? I mean, I think 0:02:42.919 --> 0:02:45.480 I think it really comes back to looking at the 0:02:45.520 --> 0:02:48.760 attributes of the business models long term. And we know 0:02:48.880 --> 0:02:54.720 that Ryan there, for example, have a cost advantage versus 0:02:54.840 --> 0:02:57.600 you know, lots of their peers. They're also expanding the 0:02:57.639 --> 0:03:00.400 roots of which they fly. I don't think that Brexit 0:03:00.520 --> 0:03:03.720 changes people's appetite for sort of traveling abroad. So you know, 0:03:03.880 --> 0:03:06.520 I think is is John was saying, you know, you 0:03:06.560 --> 0:03:08.360 have to sort of take a step back from looking 0:03:08.360 --> 0:03:10.639 at the very short term volatility and try and look 0:03:10.639 --> 0:03:13.640 at the longer term attributes of the business models. John, 0:03:13.800 --> 0:03:16.320 help me out your Anthony, bring up the chart if 0:03:16.320 --> 0:03:18.360 you would. Here. Now this is British air I A 0:03:18.480 --> 0:03:21.840 g that Mr Strickland just noted the circle is Brexit 0:03:21.960 --> 0:03:24.960 down we go and to be honest, that's an ugly chart. 0:03:25.120 --> 0:03:28.120 Or John, is this the mother of all buying opportunities? 0:03:28.320 --> 0:03:30.960 The excellence of what British air has done at terminal 0:03:31.040 --> 0:03:34.880 five and worldwide full disclosure folks, I'm a fan, but 0:03:35.000 --> 0:03:37.840 then down we go? So do you pause here or 0:03:37.880 --> 0:03:41.920 is it the mother of all Heathrow buying opportunities? Well? 0:03:41.960 --> 0:03:44.080 I a g that the parents are British Airways is 0:03:44.440 --> 0:03:46.680 still a tho strong performer. As I mentioned, they've also 0:03:46.720 --> 0:03:50.280 issued a profit warning. But he is sending their powerhouse 0:03:50.320 --> 0:03:53.320 in the powerhouse, as you said, a British Airways they are. 0:03:53.360 --> 0:03:55.960 They are also touched by Brexit that they have a 0:03:56.040 --> 0:03:59.800 very diverse exposure, of course to global markets. If you 0:04:00.080 --> 0:04:02.280 to come to the UK, and particularly a business travel 0:04:02.320 --> 0:04:04.280 that heat throws the airport you're going to come into, 0:04:04.520 --> 0:04:06.920 it's already very constrained, which is precisety why we've got 0:04:07.000 --> 0:04:10.520 this big debate now about new runway capacity. I literally 0:04:10.640 --> 0:04:14.040 said this that evening after Brexit, when in all of 0:04:14.160 --> 0:04:18.000 London was nunb isn't the first order condition for any 0:04:18.040 --> 0:04:21.760 new prime minister to say we're open for business, we're 0:04:21.800 --> 0:04:26.040 building Heathrow. I think it's absolutely imperative. It's it's the 0:04:26.160 --> 0:04:29.120 clearest signal that we want to be a global player 0:04:29.400 --> 0:04:32.240 of an increasing nature. If we're going to move away 0:04:32.279 --> 0:04:36.120 from the focus on EU markets and really truly want 0:04:36.160 --> 0:04:39.680 to develop further trading relationships for example, China, then we 0:04:39.760 --> 0:04:42.159 have to have a gateway which he is open for 0:04:42.200 --> 0:04:44.880 business and where where airlines can get in. We've seen 0:04:44.920 --> 0:04:47.159 airlines in recent years either struck me to get into 0:04:47.200 --> 0:04:49.200 London or if they've got in a to all, they've 0:04:49.200 --> 0:04:51.200 perhaps got slots of Gatwick and as soon as they've 0:04:51.240 --> 0:04:53.440 had a chance, they've up sticks and moved up the 0:04:53.520 --> 0:04:57.520 road to Heathrow Airport. Does Heathrow make money for the 0:04:57.600 --> 0:05:01.760 people of the United Kingdom. It's a massive contributor to 0:05:01.800 --> 0:05:04.800 the economy because of course it facilitates trade. It's it's 0:05:04.800 --> 0:05:07.479 an access point for tourism. Many people may not know 0:05:07.560 --> 0:05:10.280 it's one of the biggest sources of cargo and freight 0:05:10.320 --> 0:05:12.800 traffic too, because if we think of the belly hold 0:05:12.800 --> 0:05:15.800 capacity of these large wide bodied aircraft, it's not just 0:05:16.000 --> 0:05:19.600 freight aircraft fly cargo and it's Visa aircraft, two vis 0:05:19.600 --> 0:05:22.240 aircraft of the ones which are using Heathrow, so it's 0:05:22.240 --> 0:05:26.240 a massive net contributor to UK economic performance. Yeah, and 0:05:26.440 --> 0:05:29.520 this has been usually controversial because first of all, most 0:05:29.520 --> 0:05:31.800 of the Greens, a lot of the environmentalists were against this. 0:05:31.880 --> 0:05:34.359 A lot of people living underneath this flight path, that 0:05:34.480 --> 0:05:37.960 which is actually one fourth of London, also have been 0:05:38.040 --> 0:05:40.720 arguing against this. I think no London mayor so far 0:05:40.760 --> 0:05:42.800 in the least fifteen years, has been for Heathrow. What 0:05:42.839 --> 0:05:45.280 I don't really understand, and I understand it's a great 0:05:45.320 --> 0:05:47.599 message to say we're open for business, is that the 0:05:47.600 --> 0:05:50.599 government seems to say, well, look we don't mind losing passporting, 0:05:50.600 --> 0:05:53.200 so we don't mind really hurting the city of London, 0:05:53.520 --> 0:05:55.600 but we'll give you Heathrow to make a little bit better. 0:05:55.640 --> 0:05:58.960 It doesn't match up, Yes, I think. I mean when 0:05:59.040 --> 0:06:00.920 you talk about sort of instructure places, I mean these 0:06:00.920 --> 0:06:03.440 are these are sort of very long term investments. I 0:06:03.440 --> 0:06:07.080 mean countries and economies reap the benefits of investment in 0:06:07.080 --> 0:06:10.200 infrastructure over decades, and so I think that this is 0:06:10.480 --> 0:06:14.360 as much a strong long term political message about the 0:06:14.480 --> 0:06:17.599 role of the UK in in the global economy, and 0:06:17.720 --> 0:06:20.360 I think that actually what it touches on is the 0:06:20.400 --> 0:06:23.400 fact that, you know, we could be in an environment 0:06:23.440 --> 0:06:27.839 where the investment in infrastructure more broadly actually starts to 0:06:28.120 --> 0:06:29.640 sort of move in a certain you know, in a 0:06:29.680 --> 0:06:33.360 more positive direction. Right. But but again, does the city 0:06:33.440 --> 0:06:35.360 not need pass But I mean you need to protect 0:06:35.400 --> 0:06:37.760 the city before building a new runway, to make sure 0:06:37.800 --> 0:06:41.080 that that people feel good about the fact that we 0:06:41.120 --> 0:06:43.440 have access to international business gen and I think I 0:06:43.480 --> 0:06:45.839 think the two go together. Obviously, a city and financial 0:06:45.880 --> 0:06:49.159 sector are are key users of Heathrow Airport, and we 0:06:49.240 --> 0:06:51.599 need to be able to access other key financial markets 0:06:51.920 --> 0:06:54.880 within Europe, around the globe and of course all other 0:06:54.920 --> 0:06:58.080 business sectors too. And we have airport capacity elsewhere, and 0:06:58.160 --> 0:07:00.760 it's been quite clear that airlines and not to use it, 0:07:00.839 --> 0:07:03.320 or they've moved out. Some airlines have decided not even 0:07:03.360 --> 0:07:05.200 come to the UK because of a lack of access 0:07:05.200 --> 0:07:08.040 to Heathrow. I got a killer question, you're John. Maybe 0:07:08.080 --> 0:07:10.480 you can help, Francing, you can help Why did they 0:07:10.520 --> 0:07:14.200 move the champagne and salmon bar that was right outside 0:07:14.360 --> 0:07:17.520 Terminal five British air It's such a long walk down. 0:07:17.560 --> 0:07:20.440 Francing helped me here you're starving. You get to the 0:07:20.480 --> 0:07:25.680 airport and there's just great little champagne samon. I'm you know, 0:07:25.720 --> 0:07:28.000 I'm a prep kind of girl. I mean they moved, 0:07:28.200 --> 0:07:31.720 they moved the bar, the restaurant. It was terrible. That's 0:07:31.760 --> 0:07:34.200 a that's a question probably have to put two British 0:07:34.200 --> 0:07:38.560 areways directly to a serious point. I'm trying to save 0:07:38.640 --> 0:07:41.920 Tom Keene out of you know, the champagne and solvent question, 0:07:42.280 --> 0:07:46.280 henceforth known as the pressing Keen question. But actually, how 0:07:46.400 --> 0:07:48.480 how do these terminals get built? I mean you kind 0:07:48.520 --> 0:07:51.040 of think, right, well, we're putting the perfumes after lipstick, 0:07:51.240 --> 0:07:53.440 after the champagne bar, so people drink and then buy 0:07:53.480 --> 0:07:55.720 more lip In an airport like Heathrow, I mean they can, 0:07:56.000 --> 0:07:58.000 they can literally have the pop up shops. The airport 0:07:58.080 --> 0:07:59.840 is a such a large scale and has such a 0:08:00.000 --> 0:08:03.360 I verse cly Ntell. There's an element by which the 0:08:03.520 --> 0:08:06.400 retail and then bevera jeoff has to vary almost by 0:08:06.440 --> 0:08:08.040 the hour, and that can be done in quite a 0:08:08.040 --> 0:08:13.720 sophisticated way. What outbound Japanese travelers might buy, or business 0:08:13.720 --> 0:08:16.080 executives to the US like Tom could be quite different 0:08:16.120 --> 0:08:18.240 to what the holiday brigade who are going to a 0:08:18.280 --> 0:08:21.200 Mediterranean would buy now. That cannot be done at small airports. 0:08:21.240 --> 0:08:24.720 But retail again is important in airports keeping their charges 0:08:24.760 --> 0:08:27.280 down to the airlines. That's a key driver to Salmon 0:08:27.320 --> 0:08:30.720 and champagne. John, do something about JFK. That's all I 0:08:30.760 --> 0:08:33.720 ask for, John Strangling, Thank you so much. The different 0:08:33.760 --> 0:08:38.080 spots between you throw and JFK is absolutely sharky. Heathrow 0:08:38.120 --> 0:08:53.880 has got a totally together. I wouldn't bring in Howard Ward. 0:08:53.960 --> 0:08:57.400 He is Gamecas chief investment officer of Growth Equities. It's 0:08:57.400 --> 0:08:59.480 great to have you here, Howard, and let me just 0:08:59.480 --> 0:09:01.480 start by me. I was looking at your most recent 0:09:01.480 --> 0:09:03.760 note and said, you're more concerned about the economic outlook 0:09:03.760 --> 0:09:07.160 and more cautious on the stock markets prospects than usual. 0:09:07.200 --> 0:09:09.400 Give us the lay of the land as you see 0:09:09.400 --> 0:09:12.240 it here. And the reason for for the caution, well, 0:09:12.280 --> 0:09:14.840 a lot of it UH has to do with the 0:09:14.960 --> 0:09:21.280 lack of significant GDP growth. Nominal growth is UH trendlining 0:09:21.320 --> 0:09:26.199 and you know three real growth two UH. My view 0:09:26.360 --> 0:09:29.160 is that higher labor costs are going to continue to 0:09:29.200 --> 0:09:32.920 pinch profit margins which peaked two years ago, and that 0:09:33.040 --> 0:09:37.240 the earnings expectations for next year are probably too high. 0:09:37.679 --> 0:09:41.080 There's even a risk that we end up resetting earnings 0:09:41.120 --> 0:09:45.680 expectations for next year at flat, possibly even negative. I 0:09:45.720 --> 0:09:48.240 think that if that were to happen, it would be 0:09:48.400 --> 0:09:51.199 very likely that the stock market would would go down. 0:09:51.679 --> 0:09:56.000 I think that globally things are weakening, and that while 0:09:56.440 --> 0:09:59.160 the base case expectation at this point is not a 0:09:59.160 --> 0:10:02.880 recession for next year, the risk of a recession has risen. 0:10:03.200 --> 0:10:05.559 I think it has to be in your conversation at 0:10:05.559 --> 0:10:08.520 this point, how concerned are you about business investment? I 0:10:08.720 --> 0:10:10.560 was listening to the vice chair the FEDS re Board, 0:10:10.920 --> 0:10:13.760 stand Fishery, speaking yesterday, something that that he talked about 0:10:13.800 --> 0:10:15.680 the need for for more of it. When you when 0:10:15.679 --> 0:10:18.240 you look at the prospects for earnings, when you look 0:10:18.240 --> 0:10:20.920 at the climate more generally, how big a concern is 0:10:20.960 --> 0:10:23.920 that for you? Well, business investment comes out of profits, 0:10:23.960 --> 0:10:26.160 and profits have been flat for a year, and as 0:10:26.200 --> 0:10:29.000 I just mentioned, I think the expectations for next year 0:10:29.040 --> 0:10:34.680 are too high. Uh. Another factor that's weighing on investment 0:10:35.000 --> 0:10:39.240 is business confidence, and business confidence has turned down. Uh, 0:10:39.280 --> 0:10:42.120 no surprise, I think given this election season that we're 0:10:42.120 --> 0:10:46.760 facing and policy uncertainty going forward, not just in terms 0:10:46.760 --> 0:10:49.400 of the election, but also in terms of FED policy. 0:10:50.120 --> 0:10:53.640 UM So, I think that right now the prospects for 0:10:53.679 --> 0:10:57.599 business investment growing are not great. It's been weak. I 0:10:57.600 --> 0:11:01.080 think it's gonna stay weak and until you get some 0:11:01.720 --> 0:11:06.000 better growth, which may take UH working with corporate tax code. 0:11:06.040 --> 0:11:09.000 I think that would be the first thing I would attack. UH. 0:11:09.120 --> 0:11:11.240 We need to free up business a bit from a 0:11:11.280 --> 0:11:16.319 regulatory standpoint as well, things that will result in higher profits, 0:11:16.760 --> 0:11:19.840 and that's how you're going to get businesses to invest. 0:11:20.000 --> 0:11:22.640 Have we been ignoring business confidency? Bring it up here. 0:11:22.679 --> 0:11:24.679 We talk a lot about consumer confidence. We look at 0:11:24.679 --> 0:11:26.240 the state of the consumer in the in the U. S. 0:11:26.240 --> 0:11:28.719 Economy and the global economy. Are we not paying enough 0:11:28.760 --> 0:11:33.360 attention to business confidence? Probably not. I think that. UM. 0:11:33.440 --> 0:11:38.360 When we've had some of the big headline risks over 0:11:38.400 --> 0:11:41.880 the macro headline risk over the last several years, you know, 0:11:41.920 --> 0:11:45.720 what we've seen is that the the CEO suite has 0:11:45.760 --> 0:11:50.199 paid much more attention to headline global headline risk than 0:11:50.280 --> 0:11:53.640 has the U. S. Consumer. And so we've had situations 0:11:53.640 --> 0:11:56.400 where the U. S consumer has gone about his business 0:11:56.440 --> 0:11:58.960 as usual for the most part, but the CEOs have 0:11:59.040 --> 0:12:02.000 pulled back because of their fears or their lack of 0:12:02.040 --> 0:12:05.520 confidence in the future, and I think that situation remains 0:12:05.559 --> 0:12:08.240 with us today, and it is worth paying attention to 0:12:08.880 --> 0:12:11.600 more attention to how are we were talking helpha, beta, 0:12:11.640 --> 0:12:15.520 gamma earlier in the basic idea of being more defensive. 0:12:15.760 --> 0:12:18.800 When you're defensive, do you go to cash or do 0:12:18.840 --> 0:12:21.920 you buy something different? Tom, I buy something different. And 0:12:22.000 --> 0:12:25.479 that's because in my forty years in this business, I 0:12:25.520 --> 0:12:28.920 have grown to believe with a lot of conviction that 0:12:29.040 --> 0:12:33.880 market timing is essentially a loser's game. And so when 0:12:33.920 --> 0:12:36.960 I become more concerned and more cautious about the outlook, 0:12:37.280 --> 0:12:40.160 the idea would be to reduce the so called beta 0:12:40.280 --> 0:12:44.880 or volatility of my returns relative to the market, and 0:12:44.920 --> 0:12:49.480 to do that by stock selection, focusing more on uh 0:12:49.559 --> 0:12:53.400 the less mostly the less economically sensitive parts of the 0:12:53.440 --> 0:12:58.160 market consumer staples, healthcare, utilities, telecom. Those areas are more 0:12:58.320 --> 0:13:00.920 likely to hold up well and market the client if 0:13:00.960 --> 0:13:04.199 it happens. And there are many occasions where people much 0:13:04.240 --> 0:13:07.199 smarter than I have expected the market to go down 0:13:07.240 --> 0:13:09.480 for all sorts of good reasons and it doesn't happen. 0:13:09.480 --> 0:13:12.800 And that's the danger in marketing? Is Jamie Diamond high 0:13:12.840 --> 0:13:17.000 beta or low beta? Well, Jamie Diamond as a CEO 0:13:17.200 --> 0:13:20.360 is low beta. JP Morgan as a bank within the 0:13:20.400 --> 0:13:24.079 banking sector is probably one of the lower beta names. However, 0:13:24.160 --> 0:13:29.280 financial services can be a dangerous place to be uh 0:13:29.320 --> 0:13:32.800 in a declining market. So I that's an area that 0:13:32.880 --> 0:13:35.120 I am underweight and would recommend that. I just did 0:13:35.120 --> 0:13:38.480 this because David girls looking at us like greek letters beta. 0:13:38.559 --> 0:13:41.079 What are we talking to? Your define BEATABTA is the 0:13:41.200 --> 0:13:44.440 price movement relative to the underlying index right right, So 0:13:44.520 --> 0:13:47.160 you can you can pick your index. For most investors, 0:13:47.240 --> 0:13:49.480 that would be the S and P five hundred and 0:13:49.520 --> 0:13:51.160 so it's you know, how much of the return of 0:13:51.200 --> 0:13:53.640 your stock can be explained by the enterlying volatility in 0:13:53.640 --> 0:13:58.199 that index? I you know, I know that politics is happening. 0:13:58.200 --> 0:14:00.520 Obviously we're gearing up for this debate to tomorrow night. 0:14:00.559 --> 0:14:03.040 And a number of people we've spoken to recently, strategists 0:14:03.040 --> 0:14:05.719 and investors, have said, uh, either the elections priced in 0:14:05.800 --> 0:14:07.880 or they're not that worried about the risk? Are you 0:14:07.920 --> 0:14:11.800 worried about it? And and if you're not, UH is 0:14:11.840 --> 0:14:13.760 a proxy for it? That being what's going to happen 0:14:13.760 --> 0:14:16.320 with trade something of greater concern to you. Well, I 0:14:16.360 --> 0:14:19.120 haven't been worried about the debate because I've had the 0:14:19.160 --> 0:14:21.800 mindset that we're going to end I mean about the election, 0:14:21.840 --> 0:14:24.400 because I've had the mindset that we're we're going to 0:14:24.440 --> 0:14:27.880 have a divided government. I have seen, however, with some concern. 0:14:28.440 --> 0:14:31.960 The price action in the health care sector the last 0:14:31.960 --> 0:14:35.160 several days, however, has been decidedly negative. And it's been 0:14:35.200 --> 0:14:38.240 that way primarily because of the growing concern of a 0:14:38.280 --> 0:14:42.200 Democratic sweep, which would of course be more difficult for 0:14:42.280 --> 0:14:48.800 healthcare the healthcare industry given the the the Democrat Democratic 0:14:48.840 --> 0:14:53.160 parties designs to have greater control over pricing in that area. 0:14:53.560 --> 0:14:57.280 So there is some election risk, the risk being a 0:14:57.320 --> 0:15:00.280 Democratic sweep. However, I still don't think that is the 0:15:00.320 --> 0:15:05.880 most likely and most likely outcome. Are you worried about trade? 0:15:06.320 --> 0:15:11.160 Trade is of global GDP. Trade is slowing. Trade I 0:15:11.160 --> 0:15:14.120 think is going to slow further. Uh. If I'm right 0:15:14.200 --> 0:15:17.640 that the U. S economy is going to slow over 0:15:17.680 --> 0:15:22.080 the next several quarters, that's going to have a multiplier effect. 0:15:22.080 --> 0:15:25.200 Through ripple trade. We are through real trade, we are 0:15:25.360 --> 0:15:31.120 the world's largest importer. So if we sneeze, the exporters 0:15:31.120 --> 0:15:33.520 of the world are gonna feeling. Just to bring this up, David, 0:15:33.640 --> 0:15:37.720 predict wise, is this great summary of all the polls, 0:15:37.720 --> 0:15:40.440 somewhat like real clear politics. I think it has been 0:15:40.480 --> 0:15:46.160 widely reported Secretary Clinton, Mr trumpet ten percent is the 0:15:46.280 --> 0:15:50.720 likelihood of investing. David over predict was put out a 0:15:50.760 --> 0:15:54.600 note yesterday making clear ten percent is still a chance 0:15:54.640 --> 0:16:02.640 to win for Mr Trump. The Senate se uh, but 0:16:02.720 --> 0:16:04.720 the House has come in a little bit. It's not 0:16:04.760 --> 0:16:07.160 as grim as it was three or four days ago. 0:16:07.480 --> 0:16:09.680 But Howard, I still don't see it, you know, looking 0:16:09.680 --> 0:16:14.000 at predict Wise, I'd call it less than likely or 0:16:14.040 --> 0:16:17.120 even remote, that the Democrats would take the House. David, Yeah, 0:16:17.440 --> 0:16:19.400 it reminds me of what Stan Collinser from Corvius was 0:16:19.400 --> 0:16:21.400 signed to us last week. He was not exactly the 0:16:21.400 --> 0:16:24.040 most bright out optimist about what's going to happen in 0:16:24.120 --> 0:16:26.920 d C. In the prospects for any sort of change 0:16:26.960 --> 0:16:30.040 to taxes for infrastructure spending seems pretty bleak. Yeah, Tom, 0:16:30.040 --> 0:16:33.240 I would say that if the market truly believed in 0:16:33.280 --> 0:16:37.320 a Democratic sweep, the entire market would be getting hurt, 0:16:37.520 --> 0:16:39.680 not just the healthcare sector. I think you're getting some 0:16:39.720 --> 0:16:43.040 precautionary selling in healthcare. It may already be overdone at 0:16:43.040 --> 0:16:48.000 this point. Apple update, well, how do you spell relief? 0:16:50.080 --> 0:16:52.480 Apple seems to have decided that maybe they don't want 0:16:52.480 --> 0:16:55.480 to get into the business of building cars, and this 0:16:55.560 --> 0:16:58.400 is great news. The last thing the world needs is 0:16:58.440 --> 0:17:04.640 another automobile manufact extra, a business of tremendous capital intensity, global, 0:17:05.160 --> 0:17:08.840 globally competitive like no other, and it would have been, 0:17:08.880 --> 0:17:12.040 I think, just been an an abyss of throwing profits 0:17:12.040 --> 0:17:15.959 into a hole. Uh. And so I'm very, very hopeful 0:17:16.000 --> 0:17:20.040 now that Apple is going to restrain itself and focus 0:17:20.320 --> 0:17:24.480 on the software from automobiles created by Twitter software standards. 0:17:25.040 --> 0:17:27.640 I'm not an owner of Twitter. Um, I don't think 0:17:27.760 --> 0:17:31.479 the Twitter economic model is has is working yet they 0:17:31.480 --> 0:17:33.920 don't make any money time, So even as a bolt 0:17:34.000 --> 0:17:37.320 on Apple, I don't think that Apple and Twitter make 0:17:37.359 --> 0:17:40.560 a lot of sense. Personally, I'd rather see Apple go 0:17:40.600 --> 0:17:44.479 out and buy, uh something like a Time Warner and 0:17:44.520 --> 0:17:48.840 now folks a clinic. Howard Ward of gem COO knows 0:17:48.960 --> 0:17:53.960 as many others do, that scale is everything. The note 0:17:54.040 --> 0:17:58.840 Kochla Coasla rather of all sorts of entrepreneurial issues of 0:17:59.400 --> 0:18:02.040 two decades to go has maybe been the leader on this. 0:18:02.680 --> 0:18:06.520 Let me put things in scale. Time Warner is one 0:18:06.640 --> 0:18:12.159 tenth as big as Apple. Time Warners eb DA is 0:18:12.400 --> 0:18:17.399 less than a tenth of Apple. Their net income is 0:18:17.520 --> 0:18:22.080 less than a tenth of Apple, and on and on. Howard, 0:18:22.119 --> 0:18:25.280 if we lined up a hundred people who are smart, smart, smart, 0:18:25.320 --> 0:18:28.160 they wouldn't know that they know the Time Warners smaller, 0:18:28.600 --> 0:18:33.040 but we forget the scope and scale that allows for 0:18:33.200 --> 0:18:37.760 mergers and next acquisitions transactions to work. Well, Time, You've 0:18:37.800 --> 0:18:42.480 just told everybody, really what Apple's problem is. They're so big. 0:18:42.920 --> 0:18:48.080 The iPhone, which generates about their profit, is so such 0:18:48.080 --> 0:18:52.520 a mammoth product that even if you were to buy, 0:18:52.640 --> 0:18:56.200 as I've suggested, a company like Time Warner, it's not 0:18:56.280 --> 0:19:00.960 going to have a material uh packed on the bottom 0:19:00.960 --> 0:19:04.520 line right away. It may over time, but right away 0:19:04.840 --> 0:19:07.000 the impact would not do that great. That's actually not 0:19:07.040 --> 0:19:09.800 so bad because that means the risk of that kind 0:19:09.840 --> 0:19:13.359 of investment would not be right. How do you suggest 0:19:13.520 --> 0:19:17.920 a set of boltons something? I think I think that 0:19:18.000 --> 0:19:21.320 it's there. Their only choice is to go after and 0:19:21.400 --> 0:19:23.840 you know, you know, they have the luxury of considering 0:19:23.880 --> 0:19:26.720 companies of the the size of Time Warner as a bolton. 0:19:27.440 --> 0:19:30.040 But that's what the numbers would suggest, and I think 0:19:30.080 --> 0:19:31.840 that that is the route you need to go. I 0:19:31.880 --> 0:19:34.679 think content is king. I think Apple is going to 0:19:34.760 --> 0:19:39.000 want to have their own content, uh, to differentiate some 0:19:39.040 --> 0:19:41.720 of their products. So I do think that's the direction 0:19:41.760 --> 0:19:44.159 they should be going in. And if you want to 0:19:44.160 --> 0:19:47.480 innovate with software on the aunomobile side, find But otherwise 0:19:47.600 --> 0:19:50.800 let's go back to more of the the t MT 0:19:51.000 --> 0:19:53.600 kind of business that we would associate Apple with. David 0:19:53.640 --> 0:20:00.199 Guru Time owners cash is approximately one eight zero of 0:20:00.280 --> 0:20:06.399 Time Warner. It's not you say that the Apple should 0:20:06.400 --> 0:20:09.879 be getting into content. What explains the delay in doing that? 0:20:09.920 --> 0:20:11.920 We were talking about the car falling falling to the 0:20:11.920 --> 0:20:16.639 wayside here perhaps wisely. Why has as Apple seemingly lost 0:20:16.680 --> 0:20:18.280 sight of that? You look at the problems they've been 0:20:18.280 --> 0:20:20.919 having with their services just generally over these last few years. 0:20:21.240 --> 0:20:22.960 How worrisome is that to you? Well, I don't think 0:20:23.000 --> 0:20:25.600 that they probably haven't lost sight of it. I think 0:20:25.640 --> 0:20:27.919 that they you know, it's been reported in the media 0:20:27.960 --> 0:20:33.200 previously that they've had conversations with Time Warner and others. Uh, 0:20:33.280 --> 0:20:35.600 you know, who knows where those stand or where what 0:20:35.680 --> 0:20:38.840 happened to them. I do think that maybe they have 0:20:38.920 --> 0:20:43.040 decided to wait and see how this whole evolution of 0:20:43.040 --> 0:20:50.480 the skinny bundle plays out versus versus today's big bundle. Uh. 0:20:50.600 --> 0:20:53.840 For for for cable programming. I think that in the 0:20:53.880 --> 0:20:56.600 case of Time Warner, the Time Warner wins under any scenario, 0:20:56.640 --> 0:20:58.359 whether it's all a card or bundle. They're going to 0:20:58.440 --> 0:21:01.000 win because of the channels they have and they're not 0:21:01.119 --> 0:21:05.600 burdened with the ESPN problem where they're getting where where 0:21:05.640 --> 0:21:08.600 Disney is getting about seven dollars a subscriber for ESPN, 0:21:08.640 --> 0:21:10.560 and if you go to the skinny bundle, it would 0:21:10.600 --> 0:21:14.200 be hard to perhaps replicate that, So uh, Time One, 0:21:14.320 --> 0:21:17.600 I think wins under either condition. Uh. And there may 0:21:17.640 --> 0:21:20.480 be other media companies that Apple could be interested in, 0:21:21.040 --> 0:21:25.600 but I clearly think that the future for Apple, given 0:21:25.720 --> 0:21:30.040 their primary devices are used for viewing content and listening 0:21:30.040 --> 0:21:34.240 to content, that media would would have some synergy. And 0:21:34.480 --> 0:21:37.440 as Time said earlier, scale is important. So I think 0:21:37.440 --> 0:21:40.760 moving in that direction is the logical scenario for them, 0:21:40.800 --> 0:21:42.879 and I wouldn't be surprised if that were to happen. 0:21:42.920 --> 0:21:44.399 What we're in this space I just want to get 0:21:44.480 --> 0:21:46.520 your sense of what's been going on with Viacom and 0:21:46.600 --> 0:21:50.960 CBS and that whole empire looking against the non passive observers. 0:21:50.960 --> 0:21:52.600 You are of that space, what do you make of 0:21:52.720 --> 0:21:58.000 of what's been happening there. Well, that's a drama. That's 0:21:58.000 --> 0:22:01.160 hard for me to talk about, uh in any real 0:22:01.200 --> 0:22:04.560 sophisticated way. I don't own Viacom. I do own CBS. 0:22:04.680 --> 0:22:07.440 You probably know Mario and the values side of our firm, 0:22:07.800 --> 0:22:12.280 our big holders of Viacom. Mario is one of the 0:22:12.359 --> 0:22:15.080 largest in our firm, is one of the largest holders 0:22:15.119 --> 0:22:18.399 of the voting stock of Viacom. So there's a drama 0:22:18.440 --> 0:22:20.800 they're playing out that I'm I'm not part of it, 0:22:20.880 --> 0:22:23.520 and I'm hesitant to comment about that too much or enough. 0:22:24.840 --> 0:22:30.560 You did well, their days tried. However, before we let 0:22:30.600 --> 0:22:34.200 you go, there's a caution on the market you mentioned earlier. 0:22:34.200 --> 0:22:37.280