Speaker 1: Bloomberg Audio Studios, Podcasts, radio news.
Speaker 2: This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along
Speaker 2: with Lisa Bromwitz and Ameri Hordernt. Join us each day
Speaker 2: for insight from the best in markets, economics, and geopolitics
Speaker 2: from our global headquarters in New York City. We are
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Speaker 2: Terminal and the Bloomberg Business app at Denny. Have you
Speaker 2: had any research writing this? Our concern is that lowering
Speaker 2: interest rates will lead to financial instability, solid productivity, lad
Speaker 2: growth in real GDP implies that current interest rates are
Speaker 2: just fine where they are at. Joined us now for
Speaker 2: more at good Morning, sir. Is this a prankt then
Speaker 2: that you want to lean into?
Speaker 3: Absolutely, It's a bullmarket. It's been actually a bullmark since
Speaker 3: the last recession. The last recession was a two month
Speaker 3: recession back in twenty twenty, remember with the lockdowns. We
Speaker 3: made a low on March twenty third, twenty twenty, and
Speaker 3: it's been the market's basically one hundred percent since then,
Speaker 3: and almost all of that can be accounted for by earnings.
Speaker 3: I mean, once the market recovered from the pandemic sell
Speaker 3: off and we went back to where we were in
Speaker 3: February of twenty twenty, we're up one hundred percent since then,
Speaker 3: and forward earnings are up one hundred percent since then.
Speaker 3: So it's been actually an earnings led market with a
Speaker 3: multiple of around twenty two.
Speaker 2: At your line, our concern is that a lowering interest
Speaker 2: rates will lead to financial instability. What might that instability
Speaker 2: look like?
Speaker 3: Then, well, we're just talking about a plain old vanilla Malta,
Speaker 3: you know. I mean, twenty twenty two is a very
Speaker 3: elevated evaluation multiple. It can be justified the fact that
Speaker 3: the economy is growing. It can be justified by the
Speaker 3: fact that the Magnificent seven account for thirty percent of
Speaker 3: the S and P five hundred and they have a
Speaker 3: multiple of what about thirty right now, and the rest
Speaker 3: of the market's got evaluation multiple of nineteen. Not cheap,
Speaker 3: but you know that it's the impress of four hundred
Speaker 3: and ninety three. They're doing pretty well. It's just by
Speaker 3: comparison to the Magnificent seven, they look a little punky,
Speaker 3: But all in all, I think we're still looking at
Speaker 3: a at a bull market that continues to maybe sixty
Speaker 3: six hundred and sixty eight hundred by the end of
Speaker 3: the year and seventy seven hundred or higher by the
Speaker 3: end of next year.
Speaker 1: A melta doesn't sound so scary. In fact, Max Cutner
Speaker 1: would absolutely embrace it and say, let's go. Just like
Speaker 1: you said, you actually see bigger returns. Where is the
Speaker 1: pain then? Where is the negative consequence of if it
Speaker 1: doesn't need to cut, does it come with higher long
Speaker 1: end yields that we just aren't seeing?
Speaker 4: Well?
Speaker 3: I think the as I said in the quote you
Speaker 3: picked up, we don't really need a rate cut here,
Speaker 3: and if we get a rate cut, that increases the
Speaker 3: odds of a melt up. So whatever targets I gave you,
Speaker 3: we'd surpassed them sooner rather than later. And then the
Speaker 3: evaluation multiple suddenly at twenty five twenty five is where
Speaker 3: the tech bubble bursts back in the late nineteen nineties
Speaker 3: early two thousand. We don't want to go there. And
Speaker 3: I think that what really is important to understand here
Speaker 3: is it cutting interest rates isn't necessarily all that liquidity
Speaker 3: is not necessarily going to go and create more jobs.
Speaker 3: I think, you know, we've lost one point five million
Speaker 3: people in the labor force who are foreign born since
Speaker 3: I think that since March of this year. So obviously
Speaker 3: the shutting off of the border and the elevated deportations
Speaker 3: have reduced the supply of labor and that's not going
Speaker 3: to change if the FED cuts interest rates. And by
Speaker 3: the way, the job openings have been declining in areas
Speaker 3: that benefited from the inflow of migrants, and that was
Speaker 3: state and local government. Job openings really have declined sharply
Speaker 3: because we don't need as many teachers, we don't need
Speaker 3: as much as many social workers, and that's where some
Speaker 3: of the job losses have been. And that's not going
Speaker 3: to change just because of the FED lowers interest rates.
Speaker 3: But we could get more inflation out of it in
Speaker 3: terms of consumer prices, and we could get higher asset prices,
Speaker 3: which is fine unless it's a melt up.
Speaker 1: So what do you think when you take a look
Speaker 1: at some of these consumer surveys that show that individuals
Speaker 1: in the United States think that it's the hardest time
Speaker 1: to get a new job, going back to at least
Speaker 1: twenty thirteen. This idea that you do see a real
Speaker 1: sense of deterioration in consumer confidence about the labor market.
Speaker 1: Does that raise alarm bells or are you saying that
Speaker 1: this is a structural sea change that cannot be affected
Speaker 1: by monetary policy.
Speaker 3: Well, if we kind of drill down and look at
Speaker 3: the labor market report that came out recently, what we
Speaker 3: know is that where it is very hard to getting
Speaker 3: harder and harder to get a job is for teenagers
Speaker 3: and would be workers who are twenty to twenty four,
Speaker 3: mostly people who are coming out of college, so entry
Speaker 3: level jobs have become more difficult to obtain. Some of
Speaker 3: that may be related to productivity some of those younger people,
Speaker 3: you know, you have you know a lot of people
Speaker 3: across the border, and they weren't old people. They were
Speaker 3: mostly young people and they're going back. So I think
Speaker 3: that's an issue. But for anybody above twenty five, not anybody,
Speaker 3: but for people in that category about twenty five, the
Speaker 3: unemployment rates are below four percent. They've been there for
Speaker 3: a while. That hasn't really changed. So very bifurcated labor
Speaker 3: market ed.
Speaker 5: When it comes to what's going on in the stock market, though,
Speaker 5: you have all these tech companies spending a ton on
Speaker 5: cap backs, it doesn't mean when it comes to these
Speaker 5: data centers that it's actually creating new jobs. So can
Speaker 5: we see a melt up in the stock market but
Speaker 5: a recession in the real economy.
Speaker 3: Well, I think the economy is evolving very rapidly into
Speaker 3: something different than we're used to. I think we're still
Speaker 3: kind of looking at the old fashioned business cycle model
Speaker 3: where manufacturing of goods is important. Le's the case that
Speaker 3: everybody recognizes as services have become bigger, But I think
Speaker 3: people still don't haven't wrapped their arms around the fact
Speaker 3: that we've been in a digital revolution that actually started
Speaker 3: in the mid nineteen sixties with the IBM mainframes, and
Speaker 3: here we are now with artificial intelligence. And this revolution
Speaker 3: is all about processing more more data, faster and faster,
Speaker 3: more cheaply. And that's what AI is doing, that's what
Speaker 3: the cloud is doing, and that's a whole new economy
Speaker 3: and it has tremendous implications for the future. I've called
Speaker 3: this the Roaring twenty twenties, and I think it could
Speaker 3: go into the Roaring twenty thirties because of this digital
Speaker 3: revolution that we're in. This seems to be actually accelerating.
Speaker 2: So Agie went there, I'm worried about the thirties, so
Speaker 2: you help me. This is a situation at the moment,
Speaker 2: a lot of the gains are concentrated in asset price appreciation,
Speaker 2: the labor markets. Weeknic, you've got the far left waiting
Speaker 2: in the wings making a pitch to this country that
Speaker 2: they should be running things. And if we see gain
Speaker 2: to the stock market but not gain to the real economy,
Speaker 2: I think capital gains is going to be a big
Speaker 2: story in the next ten years. And why should we
Speaker 2: be optimistic and constructive for capital market to the twenty
Speaker 2: thirties given the dynamics that are starting to build already.
Speaker 3: In a word, productivity. So, for example, today we may
Speaker 3: very well see that the beer of labor statistics slowers
Speaker 3: the level of employment over the past year or so,
Speaker 3: at least on a preliminary basis, by four hundred and
Speaker 3: fifty thousand to seven hundred and fifty thousand jobs, and
Speaker 3: everybody's going to interpret that as being a sign that
Speaker 3: labor market was actually weaker than we thought. Actually, I
Speaker 3: think it indicates that productivity is increasing. So what do
Speaker 3: we we sort of lose on the head count side,
Speaker 3: we gain on the productivity side. And if that's the case,
Speaker 3: then real wages go up. So all the workers that
Speaker 3: are out there are going to on balance, on average
Speaker 3: get an increase in their inflation adjusted wages. And that's
Speaker 3: where the growth and real incomes are going to be,
Speaker 3: and that's where the growth in consumption is going to
Speaker 3: be fueled. And then we've got capital spending, particularly in technology.
Speaker 3: It counts for over fifty per Technology account for over
Speaker 3: fifty percent of capital spending. Now is that's only going
Speaker 3: to go higher? And so again I think the economy's
Speaker 3: nature has changed pretty dramatically. I think the stock market
Speaker 3: has figured it out, and I think it's all good.
Speaker 3: If I'm writing about the productivity story.
Speaker 2: Stay with US multil imperg surveillance coming up after this,
Speaker 2: I want to bring in Henrit to trace a da
Speaker 2: Palmas Henritt. So I just want to stick on these
Speaker 2: pictures and I want your perspective on how these kind
Speaker 2: of pitches play out in places like South Korea when
Speaker 2: that government is getting together in negotiating with Washington to
Speaker 2: come up with three hundred and fifty billion dollar investment deals,
Speaker 2: what do the people these countries think well, I think.
Speaker 4: The first question that it always needs to be is
Speaker 4: one of the political ramifications of continuing to side with
Speaker 4: the United States when they're, you know, trying to forcefully
Speaker 4: kick out three hundred skilled laborers.
Speaker 6: And that's what it is.
Speaker 4: So South Korea is doing exactly what President Trump is
Speaker 4: asked for, investing three hundred and fifty billion dollars in
Speaker 4: the United States across these Hyundai plants, electric vehicle plants,
Speaker 4: et cetera.
Speaker 6: And then you're simultaneously.
Speaker 4: Kicking out the very employees that they need to run
Speaker 4: said plant. So it's a thumb in the eye across
Speaker 4: the board. I think it really gets to the heart
Speaker 4: of the matter that these trade deals the President has
Speaker 4: announced with various nations, including the EU, Japan, South Korea,
Speaker 4: none of them have legal text, none of them are finalized,
Speaker 4: and pending the Supreme Court ruling on AIPA, I anticipate
Speaker 4: that most of them are going to get up ended
Speaker 4: in the next couple of weeks anyway, So basically, we
Speaker 4: do not have a deal with South Korea, we do
Speaker 4: not have a free trade agreement.
Speaker 6: Taris are exponentially higher than they were when Trump.
Speaker 4: Took office, and we had a congressionally passed zero percent
Speaker 4: tariff rate on like ninety five percent of goods coming
Speaker 4: in from South Korea before this administration took office.
Speaker 6: So I don't see any material good news here.
Speaker 5: And local present South Korea. At the same time, the
Speaker 5: US and South Korea are holding working level talks when
Speaker 5: it comes to the trade deal. But how can what's
Speaker 5: happening at Hyundai and this plant impact those negotiations.
Speaker 4: Well, I think the issue, as we're seeing in countries
Speaker 4: across the world now, is that their political leaders cannot
Speaker 4: enter into binding agreements with the United States for their
Speaker 4: own domestic political purposes.
Speaker 6: So it really just.
Speaker 4: Is that, you know, thumb in the eye situation that
Speaker 4: creates an impossible, intractable path for the United States and
Speaker 4: these nations to come to an agreement, and their political
Speaker 4: leaders can't have it, just like Trump can't have it.
Speaker 5: Does it mean that potentially the United States won't get
Speaker 5: this two hundred and fifty billion dollars worth of investments.
Speaker 6: From Soul, Absolutely, no question.
Speaker 5: So where does this leave the trading relationship?
Speaker 4: I don't think that there is a trade deal, and
Speaker 4: we've already undermined the free trade agreement and overridden it with.
Speaker 6: The IEPA terris.
Speaker 4: So we have these tacit commitments on things like sectoral
Speaker 4: tiras for two thirty twos, on pharma on Semi's critical
Speaker 4: one for South Korea is one that hasn't emerged yet.
Speaker 4: That's the lumber and timber tires, which President Trump tweeted
Speaker 4: about being the furniture tires a few weeks back. Those
Speaker 4: are directly targeted at South Korea and Canada. So I
Speaker 4: don't see an opportunity for this trade deal that they
Speaker 4: have that allows South Korea to commit to the SAEPA
Speaker 4: rate holding water and certainly that three hundred and fifty
Speaker 4: billion dollars in investment materializing. When South Korea can't put
Speaker 4: its own skilled laborers that the United States does not
Speaker 4: have in plants in purple states like Georgia, it's unsustainable.
Speaker 1: Any Does this Georgia situation tell us anything about what
Speaker 1: a bigger priority is for Trump domestically, whether it's limiting
Speaker 1: immigration or whether it's getting these trade deals done.
Speaker 6: Yeah, I think that's fair.
Speaker 4: Immigration is one where we can say, you know, objectively,
Speaker 4: the president has succeeded beyond all of his measures, even
Speaker 4: so much to say that he did it too fast,
Speaker 4: and now they're targeting these areas where it's job creation
Speaker 4: and hitting the trade agenda and the investment that you
Speaker 4: said he wants to see in the United States. But
Speaker 4: as I mentioned at the outset, these trade deals that
Speaker 4: we have reached with the EU, with Japan, with South Korea, Vietnam,
Speaker 4: the Philippines, Indonesia, they do not exist in legal text,
Speaker 4: and the fundamental underpinning is the fifteen to sixty percent
Speaker 4: IEPA tyruffs that are in effect across these deals that
Speaker 4: the President indicates he got these nations to agree with.
Speaker 4: When the Supreme Court rules that they're unconstitutional, which is
Speaker 4: something that is entirely possible, we'll get an announcement about
Speaker 4: when they're going to take up the case as early
Speaker 4: as today or tomorrow. Then you really have the question
Speaker 4: of what matters more the immigration stuff that we've delivered
Speaker 4: on or the trade deals that don't exist.
Speaker 1: And one thing that we were talking about yesterday is
Speaker 1: it seems like these goals are in conflict, the idea
Speaker 1: of limiting immigration while also getting certain investments and getting
Speaker 1: certain trade deals across and wondering if this really speaks
Speaker 1: to how this is being perceived politically. Whether trade deals
Speaker 1: are complicated politically, but limiting immigration caters to a certain
Speaker 1: base of isident Trump that he will continue to dobble
Speaker 1: down on and will come at the behest of whatever
Speaker 1: trade deals might get through. I'm just speculating. I'm wondering
Speaker 1: if that's a message or if this is a little
Speaker 1: bit mess here, then it's then being stated.
Speaker 4: I would say, let's go straight to the numbers, because
Speaker 4: I totally agree with you. You know, where is the American
Speaker 4: public on this. The stock market is reacting in one
Speaker 4: way to all these tariffs, but the American public, and
Speaker 4: I've said this to you all for a while, and
Speaker 4: the polling continues to support it. This is a sixty
Speaker 4: to forty issue, a seventy thirty issue that the President
Speaker 4: is on the wrong side of. Seventy seven percent of
Speaker 4: Americans believe inflation is the number one problem as an
Speaker 4: overall scale of what their most important issue is. All voters, Democrats, Republicans,
Speaker 4: and independents, Predominantly independents, believe that inflation and high prices
Speaker 4: are the problem, and they think the President has gone
Speaker 4: too far.
Speaker 6: That's the exact economists you got.
Speaker 4: Wording of their polling on tariffs, and that's a fifty
Speaker 4: four percent number.
Speaker 6: As of the latest data.
Speaker 4: So American voters are incredibly aware of the fact that
Speaker 4: tariff's are taxes, prices are higher at grocery stores and
Speaker 4: at big box retailers, and they do not like it.
Speaker 4: And that's why you're seeing the president's approval readings so
Speaker 4: far underwater, so you can get distracted with some of
Speaker 4: the other components. And of course there's a healthy population
Speaker 4: of Americans who very much support the President's immigration agenda,
Speaker 4: but the economy wins all day every day, and inflation
Speaker 4: and prices continue to be their number one issue and
Speaker 4: they don't like the tariffs.
Speaker 2: Stay with us more Bloomberg surveillance coming up after this.
Speaker 2: Auxana are'n off, the head of market strategy at JP
Speaker 2: Morgan Asset Management, raising concerns writing if the Fed thinks
Speaker 2: the economy should be churning down over one hundred and
Speaker 2: fifty p a month, that's going to guide them into
Speaker 2: cumming short term rates, which is stimulatory for the higher
Speaker 2: inflation environment we're in. Auxana has made it into the
Speaker 2: studio navigating sinkholes of our own from Westchester it's going
Speaker 2: to see you.
Speaker 7: Waxana literal and figurative ones.
Speaker 2: Thank you for making it. Let's start with this Feder reserve.
Speaker 2: What are you actually expecting? So let's make a divide,
Speaker 2: a big distinction between what you think the FED will
Speaker 2: do versus what you think the FED should do good do.
Speaker 7: There's that has been a divide for over a year now.
Speaker 7: We did not believe they should have been cutting last year.
Speaker 7: When they did, we saw the long end react in
Speaker 7: a way that I don't think anyone anticipated. We anticipated
Speaker 7: it because of course, the long end was reacting to
Speaker 7: realities around technical you know, supply of treasuries and long
Speaker 7: term inflation expectations, and that is the reality. I think
Speaker 7: that the FED will continue to grapple with this time around.
Speaker 7: Nothing is likely going to stop them from this cut
Speaker 7: that's coming up this month, even a higher than expected
Speaker 7: inflation print. And that's unfortunate because I think they would
Speaker 7: probably benefit from standing still here looking at what's actually
Speaker 7: happening in the economy, looking at you know, variables like
Speaker 7: what's happening with population growth, for example, Not sure given
Speaker 7: that you know the border is tighter, there are deportations, right,
Speaker 7: population growth is a tremendous driver to jobs, and that
Speaker 7: is changing and we're not entirely sure how that's changing.
Speaker 7: And to the comments you quoted earlier, for me, you know,
Speaker 7: if the FED is still being guided by the economy
Speaker 7: needs to be churning out one hundred hundred and fifty
Speaker 7: two two hundred thousand jobs a month, then that's going
Speaker 7: to guide them in a direction that's going to be
Speaker 7: pro inflationary.
Speaker 1: It might not be one hundred and fifty thousand jobs
Speaker 1: a month, but it's not a contraction like what we
Speaker 1: saw in June for the first time since December twenty twenty.
Speaker 1: It's not these surveys indicating that people don't feel good
Speaker 1: about getting jobs. Why won't that curtail inflation on its own?
Speaker 1: Why doesn't that suggest maybe the FED has some room
Speaker 1: to normalize policy from what might be considered restrictive.
Speaker 7: Well, this is really the issue, is that the FED
Speaker 7: keeps calling this level of rate it's mildly restrictive or
Speaker 7: restrictive is continuing to be part of their rhetoric, and
Speaker 7: it's hard to see where is it restrictive because financial
Speaker 7: conditions continue to loosen, their looser now than when the
Speaker 7: Feds started, they're hiking cycle, you know, three four years ago,
Speaker 7: and so yes, the jobs backdrop is moderating, but the
Speaker 7: unemployment rate is still you know, four point three percent
Speaker 7: versus four point two percent a year ago. Is there
Speaker 7: some slowing? Without a doubt, that is a natural kind
Speaker 7: of ebb and flow off the markets and the economy.
Speaker 7: I don't think this calls for the kind of sort
Speaker 7: of fever pitch around. Cut. Let's cut, And I'm not
Speaker 7: sure what cutting is going to ultimately do because when
Speaker 7: we cut rates, what are we trying to do. We're
Speaker 7: trying to improve borrowing costs for small businesses. We're trying
Speaker 7: to improve borrowing costs for mortgage borrowers. And that's just
Speaker 7: not really been the case. I mean, mortgages are still
Speaker 7: kind of stuck in the mid six high six level,
Speaker 7: which is not really unlocking tremendous amount of activity. And frankly,
Speaker 7: even if we give the benefit of the doubt to
Speaker 7: this policy and say, you know what, it's going to
Speaker 7: improve the mortgage rate, is that really going to yield
Speaker 7: better home affordability? What is your average homeowner going to
Speaker 7: do if they know money's cheaper, They're going to raise
Speaker 7: their home price. Further, we saw some of the lowest
Speaker 7: mortgage rates over the last decade, bottom, you know, rock
Speaker 7: bottom lower mortgage rates, and all we saw was tremendous
Speaker 7: price appreciation.
Speaker 1: Are you saying that rate cuts here, even if there
Speaker 1: is some degree of weakness in the labor market, would
Speaker 1: only inflate acid prices, create long term inflation, and do
Speaker 1: nothing essentially for any of those underlying issues.
Speaker 7: Unfortunately, I think there's a very significant risk of that happening.
Speaker 7: It is going to probably stoke asset price appreciation, which
Speaker 7: is already at a very rich level. You know, we
Speaker 7: know that credit and I've talked about this before here
Speaker 7: credit has never been more expensive. If credit has been
Speaker 7: more expensive, you know, one percent of the time historically
Speaker 7: ninety nine percent of readings and credit over the last
Speaker 7: number of decades have been less expensive than where it
Speaker 7: is today. So price appreciation, although I will say if
Speaker 7: the FED is aggressive round price cuts, that may actually
Speaker 7: spook markets where markets may be like, well, what do
Speaker 7: they know that we don't know, and that can actually
Speaker 7: spark as selloff in in credit or in risk assets,
Speaker 7: which look risk assets are definitely pushing some boundaries there,
Speaker 7: and a correction is not outside the realm of reasonable
Speaker 7: reasonableness or possibility. But I just don't think the FED
Speaker 7: has enough here to really be as aggressive as everyone
Speaker 7: is asking it to be. However, the FED has done
Speaker 7: no favorites in itself right over the last eighteen months
Speaker 7: or so. They looked political, whether they wanted to or
Speaker 7: not when they for the first time ever changed policy
Speaker 7: within a couple of months of an election last year,
Speaker 7: and that made them look politicized, whether they were or
Speaker 7: were not. And so that's why I think the market
Speaker 7: is generally sanguine around this question of you know, FED independence.
Speaker 7: We're seeing markets kind of look through that. Yes, maybe
Speaker 7: it's a red flag, but until we see, you know,
Speaker 7: the White House sexually set monetary policy, I think the
Speaker 7: markets are going to continue looking through that.
Speaker 2: In the sety seconds we have left, how would you
Speaker 2: deploy capital? Why would you like to put it in
Speaker 2: fixed income?
Speaker 7: At the moment, so this is the most important question
Speaker 7: because everyone kind of sits here and talks about what's
Speaker 7: going to happen with the economy, what's going to happen
Speaker 7: with fat policy. But at the end of the day,
Speaker 7: fixed income specifically, which is the world I live in,
Speaker 7: is meant to be a balanced in your portfolio. And
Speaker 7: the problem that investors continue to have, whether they realize
Speaker 7: it or not, is that bonds and stocks have become
Speaker 7: highly positively correlated. And so what I think investors need
Speaker 7: to do is look at their fixed income portfolio and
Speaker 7: think about, Okay, well, rates foul. Maybe I did well,
Speaker 7: but when raised road arose, did I do just as well?
Speaker 6: Just as well?
Speaker 7: Or was my portfolio positive? And I think they need
Speaker 7: to really think about that kind of diversification with investors
Speaker 7: that can generate returns regardless of whether the environment is
Speaker 7: a good one for bonds or not.
Speaker 2: Stay with us more Bloomberg Surveillance coming up after this,
Speaker 2: telling us out for the big unveil later on this afternoon,
Speaker 2: Joining us now to discuss this world PI sick of
Speaker 2: lightshed partners, Well, welcome to the program, sir. In the
Speaker 2: bottom market, for a long long time, they used to
Speaker 2: call a certain trade the widow maker. It was shorting
Speaker 2: jgb's and ultimately at some point things do change. Well,
Speaker 2: it was the same story for technology for a long
Speaker 2: long time. People betting against Apple were wrong. Are they
Speaker 2: right to bet against this company? Now?
Speaker 8: I mean I also heard in your earlier segment talking
Speaker 8: about these top ten stocks being dominant, and I remember
Speaker 8: people telling me that, like, you can't bet against Apple
Speaker 8: because the money flows into the top ten stocks are
Speaker 8: always going to keep it up, And that obviously didn't work.
Speaker 8: And to your point, you know, there are leaders, historical
Speaker 8: leaders like Ge that for a variety of reasons, are
Speaker 8: no longer leaders. Obviously not putting Apple in the scene
Speaker 8: camp there. But the bottom line is they're trading in
Speaker 8: an above market multiple thirty times, not the highest they've
Speaker 8: ever traded at, but above market, and growth has slowed down,
Speaker 8: and there has been obviously a lack of innovation. You know,
Speaker 8: you were just talking about thinner phones and longer batteries.
Speaker 8: Is that really innovation in twenty twenty five, when when
Speaker 8: Google obviously is pushing forward with AI and agentic AI
Speaker 8: and a lot of their products.
Speaker 1: Yeah, so Heroin, she phone does have phones. Don't get
Speaker 1: it done for you. I just wonder going forward, what
Speaker 1: could get it done for you for them to announce.
Speaker 8: I mean, this is not really an event that matters
Speaker 8: as much for Apple anymore, as crazy as that sounds.
Speaker 8: And frankly, if you look at the stock performance around
Speaker 8: product announcements the day after the month. It's the day
Speaker 8: of day after month after. It doesn't really move when
Speaker 8: it moves is WWDC. Remember the last time the stock
Speaker 8: really moved was when they promised all these AI features
Speaker 8: a year or two ago. Obviously, none of those AI
Speaker 8: features actually materialize, But that's what people care about the
Speaker 8: services side of the business and what the progress is
Speaker 8: on AI, because in the meantime, unless they announce an
Speaker 8: autonomous car or some new product category they can give
Speaker 8: them ten twenty thirty billion dollars of revenue opportunity. Giving
Speaker 8: us a thinner phone or something with longer battery probably
Speaker 8: is not enough to have an impact in the market
Speaker 8: in the near term.
Speaker 1: Well, you've come on the show before and said you
Speaker 1: think that there needs to be a change in leadership,
Speaker 1: something that is significant to really show some sort of
Speaker 1: different pathway ahead.
Speaker 6: What's your outlook? How do you see this developing?
Speaker 1: Since they are losing some of their AI personnel to
Speaker 1: the likes of Meta, they have been lagging behind the
Speaker 1: likes of Google when it comes to some of these
Speaker 1: agentic features. What do you think the evolution is going
Speaker 1: to be for the likes of Apple.
Speaker 8: I mean and this is, by the way, this is
Speaker 8: not a new topic, and this is certainly not I've
Speaker 8: covered the stock for a long time, and it's not
Speaker 8: something that I've been harping on from the beginning. I've
Speaker 8: been a Tim Cook fan over the years. I think
Speaker 8: there's a Wall Street General reporter that wrote a book
Speaker 8: about the pressure that the come but he even felt
Speaker 8: internally about the lack of excuse me, innovation, you know.
Speaker 8: So what they the problem is now is you have
Speaker 8: this massive transition to AI, so the ability for others
Speaker 8: to disrupt, whether it's in this product category of phones
Speaker 8: or a product category that disrupts phones altogether, in terms
Speaker 8: of how we interact with our data. There's obviously real risk.
Speaker 8: And at the same time, there is not just innovation
Speaker 8: coming out of the company in terms of new products,
Speaker 8: and there's no no one can suggest evidence otherwise. In
Speaker 8: recent years the last great products obviously Watch and even
Speaker 8: the car project, where with Johnny Eyes, who's ironically now
Speaker 8: working on what possibly could be a competing product with
Speaker 8: open AI.
Speaker 6: So what do you think they need to do Weld?
Speaker 8: I mean, if they're in a tough spot, probably not
Speaker 8: allowing or enabling their AI engineers to be poached by
Speaker 8: Facebook and others would be a good start.
Speaker 1: You know.
Speaker 8: Positions can obviously be a way to jumpstart your you know,
Speaker 8: yourself in the area. But again, you started this segment
Speaker 8: or this portion asking about management change. Sometimes you just
Speaker 8: need a senior leader that is more product focused, that
Speaker 8: can drive you to new products that might be less
Speaker 8: focused on you know, maximizing taxes right keeping cash in hireland,
Speaker 8: or maximizing gross margin by you know, all the manufacturing
Speaker 8: stuff that they've done in China, and someone that can
Speaker 8: take those chances and push forward and invest the money
Speaker 8: to get yourself into new products. This is a mega company.
Speaker 8: I mentioned autonomous cars as an opportunity. There's plenty of
Speaker 8: other product categories out there that a company with Apple's brand,
Speaker 8: you know, staff of expertise, right, great people within the
Speaker 8: company of Apple, and the balance sheet that they can
Speaker 8: I think, you know, get into some new markets.
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