WEBVTT - Next Wave of Tech Will Shift From FAANG to Payments, Autos 0:00:05.800 --> 0:00:08.320 Welcome to the Bloomberg p m L Podcast. I'm Pim 0:00:08.400 --> 0:00:11.440 Fox along with my co host Lisa Bramowitz. Each day 0:00:11.440 --> 0:00:15.000 we bring you the most important, noteworthy, and useful interviews 0:00:15.040 --> 0:00:17.520 for you and your money, whether you're at the grocery 0:00:17.520 --> 0:00:20.560 store or the trading floor. Find the Bloomberg p m 0:00:20.680 --> 0:00:27.920 L Podcast on Apple Podcasts, SoundCloud, and Bloomberg dot com. 0:00:27.920 --> 0:00:32.280 We are broadcasting live from PJAM headquarters in Newark, New Jersey, 0:00:32.640 --> 0:00:37.240 a lovely glass lead certified building in the heart of Newark. 0:00:37.600 --> 0:00:40.040 And right now we want to turn our focus to 0:00:40.440 --> 0:00:43.640 technology and the ways that it's disrupting a whole host 0:00:43.680 --> 0:00:47.400 of different industries, as well as how people can invest 0:00:47.440 --> 0:00:49.519 in it. And we're joined, I'm happy to say, with 0:00:49.600 --> 0:00:52.199 time or Hyatt, he has chief strategy officer for p 0:00:52.440 --> 0:00:55.760 jim Um. I came in and I saw this beautiful 0:00:55.760 --> 0:00:59.440 glossy magazine, The Technology Frontier. What is the point of 0:00:59.640 --> 0:01:01.400 what it it? Sort of do you want to convey 0:01:01.440 --> 0:01:04.120 to people by giving a sense that we are on 0:01:04.280 --> 0:01:07.920 the cusp of a technology frontier? You know, I think 0:01:07.959 --> 0:01:10.200 at least at the moment, technology is sort of at 0:01:10.240 --> 0:01:13.120 peak hype, but it's really around a narrow set of stocks. 0:01:13.160 --> 0:01:14.560 You know, we've talked a lot about them over the 0:01:14.680 --> 0:01:17.240 last two weeks with the volatility, but what we wanted 0:01:17.280 --> 0:01:19.720 to convey was that for long term investors, the technology 0:01:19.720 --> 0:01:23.200 opportunity has actually moved beyond just the fangs and silicon 0:01:23.280 --> 0:01:26.800 value venture capital opportunities, and it's really about the technology 0:01:26.920 --> 0:01:29.760 uses now where the next wave of investment opportunities will 0:01:29.800 --> 0:01:32.720 be created. How will companies and everything from the media 0:01:32.800 --> 0:01:38.360 sector to payments to transportation, how will they use technology 0:01:38.400 --> 0:01:41.240 and how will they embed technology in their in their processes, 0:01:41.560 --> 0:01:43.559 And that's where the next wave of winners and losers 0:01:43.600 --> 0:01:48.400 will be created. Now. This Technology Frontier white paper is 0:01:48.640 --> 0:01:52.880 part of a series of white papers talking about megatrends 0:01:53.400 --> 0:01:55.440 and they're going to be winners and they're going to 0:01:55.480 --> 0:01:59.240 be losers. And you outline some of those and I'm 0:01:59.240 --> 0:02:01.480 wondering if you could just go through them, particularly when 0:02:01.480 --> 0:02:06.360 it comes to the losers, because it gets pretty specific. 0:02:06.440 --> 0:02:11.040 I was surprised that, for example, transit hubs are perhaps 0:02:11.040 --> 0:02:14.280 going to be losers in the technology revolution. Well, then 0:02:14.360 --> 0:02:16.240 one of the key things we point out is don't 0:02:16.280 --> 0:02:17.799 just go after the winners, and we should talk a 0:02:17.840 --> 0:02:19.320 little bit about how you sort of see who the 0:02:19.320 --> 0:02:23.399 technology winners are, but there's also real obsolescence risk in portfolios. 0:02:23.440 --> 0:02:26.320 And the pace at which technology is changing is unprecedented, 0:02:26.840 --> 0:02:29.920 which means that those risks are happening really quickly. So 0:02:29.960 --> 0:02:32.000 one good example is in New York, where the price 0:02:32.000 --> 0:02:34.240 of a taxi medallion has gone down from what one 0:02:34.240 --> 0:02:37.280 point two million at the peak to kind of thousand now, 0:02:37.760 --> 0:02:41.919 really rapid disruption. And one example we have that's coming 0:02:41.960 --> 0:02:44.720 around the corner is in the automobile industry. So you 0:02:44.760 --> 0:02:48.040 have electrification at the one hand, and on the second, 0:02:48.080 --> 0:02:50.640 you have automation kind of vehicles that will kind of 0:02:50.639 --> 0:02:53.399 be autonomous, and we think that will be pretty disruptive. 0:02:53.440 --> 0:02:55.160 I mean, one example, in addition to the one you 0:02:55.200 --> 0:02:59.520 mentioned was parking spaces. We have hundreds of thousands of 0:02:59.600 --> 0:03:03.959 prime real estate that is devoted to parking spaces and garages. 0:03:04.360 --> 0:03:07.200 And in a world where you will have autonomous vehicles 0:03:07.240 --> 0:03:11.160 and you'll have people sharing rides much more, there's just 0:03:11.240 --> 0:03:13.800 a massive opportunity for how that will be repurposed and 0:03:13.800 --> 0:03:17.440 how flexible our garages to be repurposed for new realistic users. 0:03:17.480 --> 0:03:22.400 So how does one invest in that? Uh, you work 0:03:22.480 --> 0:03:25.600 with your real estate asset managers and really understand that 0:03:25.639 --> 0:03:28.320 technology again is not just about equities. It's not just 0:03:28.440 --> 0:03:32.359 about Silicon Valley venture capitalists. But you can access technology 0:03:32.440 --> 0:03:36.880 through real estate, through infrastructure, through fixed income. It really 0:03:36.960 --> 0:03:39.119 is pervasive. So it's really working with the entire team 0:03:39.160 --> 0:03:41.880 of asset managers, your in house experts, and making investment 0:03:41.880 --> 0:03:45.280 decisions that straddled the entire portfolio. I just limited to 0:03:45.360 --> 0:03:48.640 this tiny niche of just the formal technology sector. You 0:03:48.680 --> 0:03:54.360 also make a point of contrasting the digital adoption rate 0:03:54.680 --> 0:03:58.760 of various countries and say that it is not necessarily 0:03:58.800 --> 0:04:02.400 geared towards g d P per capita. Explain that a 0:04:02.440 --> 0:04:05.040 little bit. So one of the things we see is 0:04:05.080 --> 0:04:08.400 in the productivity data. You don't see rapid increases in productivity, 0:04:08.440 --> 0:04:10.560 even the many of our personal lives are improved by 0:04:10.600 --> 0:04:12.960 all the apps we now have. And we think the 0:04:13.000 --> 0:04:16.240 real secret to that mystery is a lag technology in 0:04:16.240 --> 0:04:18.760 the ninety nineties when you have the PC revolution and 0:04:18.800 --> 0:04:22.400 now again will lack the obvious near term gains that 0:04:22.440 --> 0:04:24.520 we see in our daily lives by ten years in 0:04:24.640 --> 0:04:27.400 terms of when it's reflected in the GDP and productivity data. 0:04:27.920 --> 0:04:29.880 So you add a point, which is what we try 0:04:29.920 --> 0:04:32.920 to show with the Digital Adoption Index, where six of 0:04:32.960 --> 0:04:36.080 the world is still offline. When the rest of the world, 0:04:36.160 --> 0:04:39.120 when the broadest set of emerging markets also adopts kind 0:04:39.120 --> 0:04:42.640 of wireless and internet technologies, you'll see another rise in 0:04:42.680 --> 0:04:45.120 productivity that still hasn't been captured. And we talk a 0:04:45.120 --> 0:04:48.200 lot in the report about that wave of opportunities that's 0:04:48.240 --> 0:04:50.800 yet to come, and it goes way beyond China into 0:04:51.160 --> 0:04:54.400 many other emerging markets that are less well traversed by investors. 0:04:54.680 --> 0:04:57.480 I have to wonder where the developed world versus the 0:04:57.520 --> 0:05:00.520 developing world will stack up with the sort of race 0:05:00.640 --> 0:05:04.720 to technological improvement, because there's sort of a belief that 0:05:04.720 --> 0:05:07.479 when they're already is infrastructure in place, it's harder to 0:05:07.800 --> 0:05:10.400 refurbish it and bring it up to the modern standard. 0:05:10.720 --> 0:05:13.520 So in some less developed areas, you're seeing the increase 0:05:13.560 --> 0:05:16.520 in technology come up much faster, and they're actually much 0:05:16.520 --> 0:05:20.160 more capable of adopting to some of the newer concepts 0:05:20.160 --> 0:05:23.120 and technologies out there. Do you think that the developed 0:05:23.200 --> 0:05:26.440 world will lag behind in a way that perhaps people 0:05:26.480 --> 0:05:29.440 are not expecting. It's a great question. I think one 0:05:29.440 --> 0:05:32.080 of the features of this current wave of technological changes 0:05:32.120 --> 0:05:35.159 has really gone global, so you've had already because of 0:05:35.160 --> 0:05:38.560 global supply chains, this reverse innovation where ideas are coming 0:05:38.600 --> 0:05:40.880 from India. Okay, and yeah, back to the US and 0:05:40.920 --> 0:05:44.680 Europe where you have China, for example, now being a 0:05:44.760 --> 0:05:48.800 leader in certain parts of AI and facial technology, and 0:05:48.839 --> 0:05:51.160 the speed at which code travels, the speed in which 0:05:51.200 --> 0:05:53.640 you can innovate in another country is very different from 0:05:53.680 --> 0:05:56.599 old fashioned foreign direct investment where you had to move 0:05:56.600 --> 0:05:58.880 a bunch of people to an emerging market. So we 0:05:58.920 --> 0:06:02.400 absolutely see techno oology innovations coming from more places, more 0:06:02.480 --> 0:06:05.960 quickly than in any previous wave of technological change. Absolutely. 0:06:06.560 --> 0:06:10.360 Do you see that the way companies are organized financially 0:06:10.720 --> 0:06:13.080 is old fashioned? And the reason I asked it is 0:06:13.120 --> 0:06:16.000 because you say in the report that companies that invest 0:06:16.080 --> 0:06:18.840 in research and development, those are the wants to pay 0:06:18.880 --> 0:06:23.280 attention to. But research and development is not considered an 0:06:23.320 --> 0:06:27.479 asset on the balance sheet, it's a cost. Is there 0:06:27.480 --> 0:06:30.520 going to be some way to change that? I think 0:06:30.520 --> 0:06:33.040 it will be quite critical for winning companies. So we 0:06:33.080 --> 0:06:35.359 talked about obsolescen stress. But the other side of this 0:06:35.400 --> 0:06:38.400 way investors is what are the alpha seeking opportunities by 0:06:38.440 --> 0:06:41.640 gliding to the winners. The winner takes all companies that 0:06:41.680 --> 0:06:45.720 already achieve scale. And I think having a chief financial 0:06:45.720 --> 0:06:49.719 officer who sees how the investments in technology R and 0:06:49.800 --> 0:06:52.919 D and development rather than just sort of maintaining what's 0:06:52.960 --> 0:06:56.560 there is key. Having a senior chief technology officer who's 0:06:56.600 --> 0:07:00.200 part of the senior leadership team investing in technology R 0:07:00.279 --> 0:07:02.839 and D, doing technology driven M and A. That'll what 0:07:03.040 --> 0:07:05.960 will drive future winners in this sector. Are there specific 0:07:06.000 --> 0:07:07.560 companies that you think are going to be winners that 0:07:07.600 --> 0:07:11.480 are not recognized widely as the future winners? I think 0:07:11.920 --> 0:07:14.920 beyond the big obvious names, it will really be about 0:07:14.960 --> 0:07:17.360 looking at the next sectors. And I think the sectors 0:07:17.400 --> 0:07:20.360 that we focused on as the next wave is the 0:07:20.360 --> 0:07:25.160 payment sector, uh, and then definitely the automobile sector. I 0:07:25.200 --> 0:07:27.480 think much further down the path would be sectors at 0:07:27.520 --> 0:07:31.440 construction and healthcare where there's a huge room for technology improvement, 0:07:31.440 --> 0:07:35.560 but it's still ways off. And when you mentioned technology 0:07:35.600 --> 0:07:38.800 and that healthcare sector, do you think that the government 0:07:38.920 --> 0:07:42.119 is going to spur that or is it currently making 0:07:42.160 --> 0:07:44.800 it more difficult give you that thirty seconds. I think 0:07:44.800 --> 0:07:46.760 it's both the public and private sector. We've all gone 0:07:46.800 --> 0:07:48.320 to a doctor and seeing that they don't have their 0:07:48.320 --> 0:07:51.000 records from our last visit to another doctor. There's just 0:07:51.120 --> 0:07:54.760 huge opportunities for technology across both the public and private sectors. 0:07:55.640 --> 0:07:57.760 Time are higher. Thank you very much for being with us. 0:07:57.800 --> 0:08:04.360 The chief Strategy officer for JIM. We are broadcasting live 0:08:04.400 --> 0:08:07.360 from the PJYM headquarters in Newark and New Jersey. PIJIM 0:08:07.520 --> 0:08:12.360 is the global investment management business of Prudential Financial and Lisa, 0:08:12.400 --> 0:08:15.040 I know one topic that's always exciting to talk about 0:08:15.440 --> 0:08:18.960 real estate, real estate, and Kathy Marcus joins us now. 0:08:19.040 --> 0:08:22.240 Kathy Marcus is the global chief operating Officer and the 0:08:22.280 --> 0:08:26.440 head of US business for PJYM. Real Estate nearly seventy 0:08:26.480 --> 0:08:30.200 billion dollars in assets under management. Thank you very much 0:08:30.240 --> 0:08:32.520 for being with us, and thank you for having us here. 0:08:33.040 --> 0:08:35.360 Thank you and thank you for saying that real estate 0:08:35.440 --> 0:08:38.320 is exciting. It is it is. Everybody wants to talk 0:08:38.360 --> 0:08:43.200 about real estate, especially well, that's why we have you here. Um. 0:08:43.240 --> 0:08:46.200 I know that you know p JIM has a global outlook. 0:08:46.200 --> 0:08:48.960 You have properties all over the world, but let's start 0:08:49.040 --> 0:08:52.079 in the United States and maybe just to find pie 0:08:52.160 --> 0:08:56.800 Jim's strategy because you offer finance, you do financing for 0:08:56.840 --> 0:09:00.840 real estate, and you also own properties out it just 0:09:00.880 --> 0:09:03.440 give us a little hint of what your remit is. 0:09:03.920 --> 0:09:08.280 Sure UM well within PEDUM real estate UM specifically, as 0:09:08.320 --> 0:09:11.559 you mentioned, we have seventy billion dollars of assets under management, 0:09:12.040 --> 0:09:15.160 and that is primarily in the equity space, and it's 0:09:15.200 --> 0:09:19.120 all around the globe. We operate in US and Latin America, 0:09:19.280 --> 0:09:22.520 in Europe and an Asia. We invest in all the 0:09:22.559 --> 0:09:27.640 major property types office, apartment, retail, industrial, and then in 0:09:27.720 --> 0:09:30.880 others that might be considered a bit more niche, including 0:09:31.320 --> 0:09:34.480 senior housing, hotel, and self storage. So I want to 0:09:34.520 --> 0:09:37.000 talk about one of the biggest issues of this year, 0:09:37.040 --> 0:09:39.120 which is the concern that all of the money coming 0:09:39.160 --> 0:09:41.880 into the US and into the real estate market from 0:09:42.000 --> 0:09:46.640 China is slowing down because of the trade tensions, and 0:09:46.840 --> 0:09:50.760 that basically there's going to be a sort of deflation 0:09:50.800 --> 0:09:53.200 and valuations because of this exodus of foreign money. What 0:09:53.240 --> 0:09:55.640 have you seen on that front, So that is very 0:09:55.640 --> 0:09:59.560 true that about UM, the amount of Chinese investment in 0:09:59.720 --> 0:10:04.160 US real estate markets is down by about other investors, 0:10:04.160 --> 0:10:06.920 non US investors have UM come in to sort of 0:10:06.920 --> 0:10:13.600 fill that gap. And among those investors are investors from Singapore, Australia, UM, 0:10:13.679 --> 0:10:17.840 and Canada in particular. And in terms of you know, 0:10:17.880 --> 0:10:21.240 sort of the overall picture of investment in US real 0:10:21.360 --> 0:10:24.520 estate UM on behalf of non US investors UM. You know, 0:10:24.600 --> 0:10:27.600 there's a long term average that about nine percent investment 0:10:27.640 --> 0:10:29.840 in US real estate markets. It's coming from non US 0:10:29.920 --> 0:10:33.200 investors UM. And we're twelve so we're still you know, 0:10:33.320 --> 0:10:37.680 above the long term average. But UM. You know, investors 0:10:37.720 --> 0:10:40.800 from one particular country of China, clearly that has gone down. 0:10:40.800 --> 0:10:43.760 I think that that has UM that has manifest itself 0:10:44.160 --> 0:10:47.160 more in some markets than others. The Chinese favored certain 0:10:47.160 --> 0:10:50.360 markets New York, San Francisco, those types of what we 0:10:50.400 --> 0:10:53.160 would call a gateway market. UM. But there's still lots 0:10:53.160 --> 0:10:56.680 of other non US interest in in US real estate. 0:10:56.920 --> 0:10:59.440 One head win that some non US investors have been 0:10:59.480 --> 0:11:02.720 facing in US real estate is that the cost of 0:11:02.760 --> 0:11:05.840 hedging the US dollar has gone up, and that you 0:11:05.920 --> 0:11:09.320 have seen some evidence of UM. You know, certain investors 0:11:09.360 --> 0:11:12.680 who are more likely to hedge, German investors in particular, 0:11:12.800 --> 0:11:15.240 sometimes you've seen a little bit less activity from them. 0:11:15.920 --> 0:11:19.120 I wonder if you could speak to the issue of 0:11:19.160 --> 0:11:25.319 the value of real estate located near, expansion of infrastructure projects, 0:11:25.320 --> 0:11:29.920 expansion of public parks, public venues such as the high 0:11:29.920 --> 0:11:34.760 Line in New York, and redevelopment areas. Because PJAM has 0:11:34.800 --> 0:11:39.360 been very active in almost twinning its investment thesis with 0:11:39.400 --> 0:11:42.600 those kinds of general improvements. Yes, that's been a real 0:11:42.640 --> 0:11:47.120 strategy of ours, and in particular around transit and transit 0:11:47.160 --> 0:11:51.600 oriented development, particularly in the multi family space in the US, 0:11:51.640 --> 0:11:54.160 has been something that we've been very focused on. And 0:11:54.200 --> 0:11:56.160 part of that has to do with who the renters 0:11:56.200 --> 0:12:00.480 are for those types of projects. And interestingly, if we 0:12:00.520 --> 0:12:02.680 had been talking about this ten or fifteen years ago, 0:12:03.080 --> 0:12:06.520 our prime renter for urban type apartments would have been 0:12:06.600 --> 0:12:09.160 all young people, and now you're really seeing much more 0:12:09.160 --> 0:12:11.839 of a barbell. There's lots of empty nesters and baby 0:12:11.840 --> 0:12:14.880 boomers who are renting in those types of projects too, 0:12:14.920 --> 0:12:18.440 And both of those populations they like transit. They like 0:12:18.520 --> 0:12:20.880 to be able to walk to their local coffee shop 0:12:20.960 --> 0:12:23.520 or walk to a movie, or walk to lots of restaurants, 0:12:23.600 --> 0:12:27.679 and they also both like a lot of amenities. They want, um, 0:12:27.720 --> 0:12:30.520 you know, a golf simulator, they might want a saltwater pool, 0:12:30.559 --> 0:12:33.440 and so a lot of the development which we've been 0:12:33.480 --> 0:12:36.120 involved with and others have as well, is really in 0:12:36.200 --> 0:12:39.959 this class A space and and that's really worked out 0:12:40.040 --> 0:12:42.840 quite well because of the demand in that space. But 0:12:42.880 --> 0:12:45.640 I think we all know that there's really almost a 0:12:45.679 --> 0:12:49.520 crisis of affordable housing in the US, and so you know, 0:12:49.559 --> 0:12:51.600 the fact that so much development has been in this 0:12:51.640 --> 0:12:54.440 class A space really means that there is an entire 0:12:54.480 --> 0:12:58.599 part of the population that is underserved in terms of apartments, 0:12:58.600 --> 0:13:01.200 and that's really something that we've been focusing on lately. 0:13:01.760 --> 0:13:04.520 That's interesting. Um, I want to I want to go there, 0:13:04.520 --> 0:13:06.160 actually because I was going to move to senior housing, 0:13:06.200 --> 0:13:08.360 but I want to hear how you're planning to serve 0:13:08.640 --> 0:13:12.400 that population given the fact that the actual material costs 0:13:12.400 --> 0:13:14.840 are increasing and labor costs are increasing, and it's just 0:13:14.920 --> 0:13:17.320 not that profitable to build housing that you can't sell 0:13:17.400 --> 0:13:21.199 for for higher prices. You are correct there, and and um, 0:13:21.240 --> 0:13:23.920 you know, construction costs have gone up precipitously in the 0:13:23.920 --> 0:13:27.520 past year in particular, So our strategy has really been 0:13:27.679 --> 0:13:31.400 um that we've been acquiring existing assets. In the past year, 0:13:31.440 --> 0:13:35.640 we've acquired about units of what we're calling workforce housing, 0:13:36.040 --> 0:13:39.400 and the strategy there is to acquire existing assets, but 0:13:39.480 --> 0:13:41.240 to do a little bit of upgrading and a little 0:13:41.240 --> 0:13:45.280 bit of renovating there. But the key to that strategy 0:13:45.480 --> 0:13:48.480 is to have the discipline not to over improve, because 0:13:48.559 --> 0:13:50.400 if you go in there and you spend so much 0:13:50.440 --> 0:13:54.120 money upgrading and you go into the granite countertops and 0:13:54.160 --> 0:13:56.720 all of the amenities, you've just defeated the whole purpose 0:13:56.760 --> 0:13:59.880 because now your target renters can no longer afford the project. 0:14:00.040 --> 0:14:03.280 So it's a fine balance between keeping it competitive within 0:14:03.360 --> 0:14:07.200 that workforce housing UM space. So what is workforce housing? 0:14:07.240 --> 0:14:10.840 We consider that to be essentially Class B type assets. 0:14:11.080 --> 0:14:14.640 They tend to be UM constructed in a garden style project, 0:14:15.400 --> 0:14:17.880 and they tend to be located in the southeast and southwest, 0:14:18.200 --> 0:14:22.000 where you have really sort of um uh, the phenomenon 0:14:22.040 --> 0:14:24.480 of it being affordable because of where it is and 0:14:24.840 --> 0:14:29.240 because of its age. The cycle in real estate has 0:14:29.240 --> 0:14:32.600 it been repealed, and our investors nervous about where they 0:14:32.640 --> 0:14:36.240 are in the cycle. We're clearly late in the cycle, 0:14:36.480 --> 0:14:39.320 and that's something that UM everyone is thinking about and 0:14:39.360 --> 0:14:42.400 talking about. And therefore some of the strategies that we've 0:14:42.400 --> 0:14:44.840 been focused on are really tailored to where we think 0:14:44.840 --> 0:14:47.440 we are in the cycle. And you know, we just 0:14:47.480 --> 0:14:51.760 talked about Class B apartments workforce housing. Senior housing is 0:14:51.800 --> 0:14:56.040 another example. And really the themes here are our strategies 0:14:56.080 --> 0:14:59.320 that are underscored by demographic or societal trends and things 0:14:59.400 --> 0:15:02.360 that we see coming that are not as um tied 0:15:02.400 --> 0:15:04.240 to the economic cycle. Although there's been a lot of 0:15:04.280 --> 0:15:06.080 investment in senior housing, and there was just a front 0:15:06.120 --> 0:15:09.080 page article in the Wall Street Journal talking about how, uh, 0:15:09.800 --> 0:15:11.920 a lot of seniors aren't going to senior housing so 0:15:12.000 --> 0:15:15.160 quickly because they're actually staying healthier for longer and being independent. 0:15:15.160 --> 0:15:17.280 How do you address that? It's true in terms of 0:15:17.320 --> 0:15:20.040 the um what we see in our in our properties 0:15:20.160 --> 0:15:22.840 is that the average age of the senior housing resident 0:15:22.920 --> 0:15:26.760 has gone up tremendously. UM. But there's still a demand 0:15:26.880 --> 0:15:29.200 and there's you know, what people refer to as a 0:15:29.240 --> 0:15:32.840 silver tsunami that's coming right and um, you know, the 0:15:32.840 --> 0:15:37.440 demographics show us that in the coming decade, three times 0:15:37.480 --> 0:15:39.800 as many people are going to turn seventy five as 0:15:39.800 --> 0:15:42.960 have in the prior decade. And so, you know, the 0:15:43.000 --> 0:15:46.880 current stock of senior housing in the US, two thirds 0:15:46.920 --> 0:15:49.880 of it is over fifteen years old, and so you 0:15:49.920 --> 0:15:52.760 can see that there is a need for more development there. 0:15:52.760 --> 0:15:54.440 I would agree with you. There are some markets that 0:15:54.480 --> 0:15:58.760 maybe got ahead of that um, you know, supply demand dynamic, 0:15:59.080 --> 0:16:02.640 but overall a very very compelling thesis. And peach and 0:16:02.720 --> 0:16:04.960 Real Estate has invested in senior housing for the past 0:16:05.000 --> 0:16:07.800 twenty years. It's something we've always liked, but the dynamic 0:16:07.880 --> 0:16:10.400 is more compelling now than ever. Kathy Marcus, thank you 0:16:10.400 --> 0:16:12.720 so much for being with us and talking about this 0:16:12.760 --> 0:16:15.640 issue that both PIM and I find fascinating, and that 0:16:15.800 --> 0:16:18.360 is real estate. Kathey Marcus, Global chief operating Officer and 0:16:18.440 --> 0:16:21.200 head of the US business at Peachim Real Estate. And 0:16:21.360 --> 0:16:23.520 Lisa Bram what's along with PIM Fox and this is 0:16:23.560 --> 0:16:30.280 Bloomberg Markets, Lisa, after the close of trading today, we 0:16:30.360 --> 0:16:33.840 will get the results from Apple, and who other than 0:16:33.960 --> 0:16:37.480 John Butler, our senior Telecom services and Equipment analysts for 0:16:37.560 --> 0:16:40.640 Bloomberg Intelligence. Who other than John Butler? Would we have 0:16:40.800 --> 0:16:44.920 to comment on it? Absolutely? Nobody? Exactly, all right, John Butler? 0:16:45.320 --> 0:16:49.880 What should investors look for in the commentary when Apple 0:16:49.920 --> 0:16:53.680 reports results? The first thing I would look for PIM 0:16:53.720 --> 0:16:58.280 is any commentary on the latest phones. So to me, 0:16:58.520 --> 0:17:02.720 this latest jen ration of phones or they're all based 0:17:02.760 --> 0:17:05.159 on the iPhone ten design. They're a bit of a 0:17:05.240 --> 0:17:09.639 feature upgrade. There's a lower, lower cost version of the 0:17:09.640 --> 0:17:13.440 iPhone tent out there, called the iPhone ten R x 0:17:13.680 --> 0:17:17.640 R as some people call it, and in my view, 0:17:18.080 --> 0:17:21.560 this sort of sets the stage for iPhone growth over 0:17:21.640 --> 0:17:24.679 the coming three to five years. So I want to 0:17:24.720 --> 0:17:28.560 hear how well those new devices are resonating with consumers. 0:17:28.720 --> 0:17:31.359 And you know, if you wind the clock back at 0:17:31.440 --> 0:17:34.160 your Tim Cook gave us some good color on how 0:17:34.400 --> 0:17:37.959 iPhone ten was doing. He made comments that it was 0:17:38.000 --> 0:17:40.840 the best selling phone in every week since it had 0:17:40.880 --> 0:17:44.600 been launched. I'd love to hear similar commentary like that 0:17:45.280 --> 0:17:49.359 this year. The other thing I'm focused on is services 0:17:49.560 --> 0:17:53.640 and what the growth outlook looks like for the services business. 0:17:54.040 --> 0:17:56.360 That's actually where I wanted to go because once upon 0:17:56.400 --> 0:17:59.040 a time, a long, long couple of months ago, uh 0:17:59.119 --> 0:18:03.080 and we were discussed saying how the supercycle in smartphones 0:18:03.400 --> 0:18:06.320 is definitely plateau ng if not declining. People who have 0:18:06.359 --> 0:18:09.440 a smartphone who want one, have one. Uh So the 0:18:09.480 --> 0:18:12.720 saturation point is pretty high. I'm just wondering, I mean, 0:18:13.080 --> 0:18:16.119 are people not focused on that anymore, or I do 0:18:16.160 --> 0:18:18.840 think that Apple is going to try to emphasize services 0:18:18.880 --> 0:18:21.000 and the revenue that they get from that over the 0:18:21.040 --> 0:18:25.080 iPhone sales. So Apple is doing two things. Number One, 0:18:25.160 --> 0:18:28.960 the iPhone has grown to really dominate the sales mix, 0:18:29.080 --> 0:18:32.680 so in a very good quarter at sixty percent of sales, 0:18:32.960 --> 0:18:37.000 in sort of the slower quarters, it's a little less 0:18:37.000 --> 0:18:40.760 than sixty percent, but it's a higher percentage revenue. They've 0:18:40.800 --> 0:18:44.960 been trying to grow that services business to diversify their 0:18:45.080 --> 0:18:49.960 overall mix and lessen the reliance on iPhone growth quarter 0:18:50.040 --> 0:18:53.639 and in quarter out, and it's been working well. My 0:18:53.800 --> 0:18:57.760 concern is that services don't continue to grow at thirty 0:18:57.800 --> 0:19:00.720 percent quarter and in quarter out either, and so I'll 0:19:00.720 --> 0:19:05.080 be looking very closely to see how services growth is doing, 0:19:05.440 --> 0:19:08.480 what's new, what might be on the drawing board there. 0:19:09.400 --> 0:19:12.040 And then on the iPhone side, I like what they're doing, 0:19:12.119 --> 0:19:16.920 which is they're shifting a reliance on driving high unit 0:19:17.119 --> 0:19:22.040 sales of iPhone to driving higher priced iPhone sales. So 0:19:22.800 --> 0:19:25.400 you know, revenue is a function of units and price. 0:19:25.560 --> 0:19:29.880 They're now focused on price night units. Two years ago, 0:19:30.000 --> 0:19:32.600 three years ago, it was all about unit sales and 0:19:32.800 --> 0:19:37.000 less about price. John Butler, is Apple on track to 0:19:37.119 --> 0:19:39.960 do a hundred billion and gross profit for the year. 0:19:41.400 --> 0:19:45.920 I can't comment on the specific numbers. The regulators would 0:19:45.920 --> 0:19:48.680 hang me for that, but um, they're doing well him 0:19:48.800 --> 0:19:53.680 you know him. Well, well, you can't tell me that 0:19:53.680 --> 0:19:57.280 that Apple revenue on an annual basis is over two 0:19:57.400 --> 0:20:03.280 hundred and fifty billion. Yes, they are, is a staggering number. 0:20:03.480 --> 0:20:07.760 It's incredible. This really is a very special company in 0:20:07.800 --> 0:20:11.800 many ways, and the iPhone really was an iconic device 0:20:12.560 --> 0:20:16.280 and it continues to sell well for them. Um, And 0:20:16.880 --> 0:20:18.879 you know the beauty of it is, you now have 0:20:19.040 --> 0:20:22.640 this huge installed base out there, and that's why they're 0:20:22.640 --> 0:20:26.560 focused on services. They want to monetize that installed base 0:20:27.359 --> 0:20:30.720 now that the overall category really has matured. We just 0:20:30.800 --> 0:20:33.440 got the latest numbers from I d C on Global 0:20:34.000 --> 0:20:38.040 on the global uh smartphone market, pardon me. And it 0:20:38.080 --> 0:20:42.000 really is a low single digit growth market overall, and 0:20:42.080 --> 0:20:45.919 so that affects Apple and every other vendor in the market. 0:20:46.840 --> 0:20:48.960 So I also remember once in upon a time we 0:20:48.960 --> 0:20:51.960 were talking about innovation out of Apple and the fear 0:20:52.000 --> 0:20:55.000 that Tim Cook couldn't replicate anything in the Steve Jobs 0:20:55.080 --> 0:20:57.560 era where it was constant innovation and disruption of the 0:20:57.720 --> 0:21:01.400 entire industry. If that's really the case, which it seems 0:21:01.440 --> 0:21:04.000 to be, if the iPhone really is going to be 0:21:04.040 --> 0:21:07.320 the main product of the company going forward, then is 0:21:07.359 --> 0:21:10.280 it overpriced given the fact that it might not be 0:21:10.320 --> 0:21:13.480 the growth story that it has been in the past. Well, again, 0:21:13.520 --> 0:21:16.960 it's morphing into more of a services and even a 0:21:17.040 --> 0:21:21.679 subscription story, if you is it valued as one again, Lisa, 0:21:21.760 --> 0:21:26.200 I hesitate to comment on valuation, um, but I think 0:21:26.240 --> 0:21:32.160 it reflects Apples still robust growth outlook. You know, the 0:21:32.160 --> 0:21:34.800 the iPhone this year, as old as the iPhone is, 0:21:34.840 --> 0:21:39.520 it's ten years old. iPhone revenue grew double digits last quarter. 0:21:40.080 --> 0:21:44.439 So you know they're finding you new and unique ways 0:21:44.760 --> 0:21:47.800 of growing that product line, which is buying them a 0:21:47.840 --> 0:21:51.800 lot of time to transition into other categories. And you 0:21:51.840 --> 0:21:54.480 know you alluded to other products, and they really have 0:21:54.640 --> 0:21:57.399 not had that. They haven't pulled the rabbit out of 0:21:57.400 --> 0:22:00.400 a hat again, as as I like to say, they 0:22:00.440 --> 0:22:03.040 did it with the iPad, they did it with the iPod, 0:22:03.160 --> 0:22:06.440 and they certainly did it with the iPhone. I'm not 0:22:06.520 --> 0:22:09.600 sure they have anything left there per se, But again, 0:22:09.640 --> 0:22:15.160 diversification is their friend there. So the iPods have done well, Uh, 0:22:15.200 --> 0:22:18.560 the home home pods will maybe do well there. So 0:22:18.560 --> 0:22:21.080 so we'll have to see what we'll have to say exactly, 0:22:21.119 --> 0:22:22.960 John Butler, we're gonna have to leave there. Thank you 0:22:23.000 --> 0:22:24.879 so much for being with us. John Butler, senior Telecom 0:22:24.960 --> 0:22:28.080 Services and Equipment analyst at Bloomberg Intelligence telling me and 0:22:28.160 --> 0:22:29.679 him how much we're gonna have to spend on our 0:22:29.720 --> 0:22:37.400 family iPhone budget. It is our pleasure to introduce Nathan Sheets, 0:22:37.520 --> 0:22:40.680 the chief economist for PEACH and Fixed Income. But he's 0:22:40.720 --> 0:22:45.640