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Speaker 1: Bloomberg Audio Studios, Podcasts, radio news.

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Speaker 2: This is Bloomberg Business Week Insight from the reporters and

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Speaker 2: editors that bring you America's most trusted business magazine, plus

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Speaker 2: global business, finance and tech news. The Bloomberg Business Week

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Speaker 2: Podcast with Carol Masser and Tim Stenoveek on Bloomberg Radio.

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Speaker 3: It is the first full day of Donald Trump in

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Speaker 3: the White House. We are expecting an announcement later on

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Speaker 3: coming from mister Trump, specifically to announce open Ai SoftBank,

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Speaker 3: Oracle and an Ai investment. This was initially reported by

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Speaker 3: CBS News. We have seen Oracle shares jump on it.

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Speaker 3: But again this is why we are watching very much

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Speaker 3: the first few days, the first few weeks, the first

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Speaker 3: one hundred days in terms of things that may come

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Speaker 3: down that will impact the trade and also impact businesses.

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Speaker 4: And that includes the tariff Watch.

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Speaker 5: Yeah, things that may or may not come down. What's expected,

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Speaker 5: what's not expected. The President's signal plans to impost previously

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Speaker 5: threatened tariffs of as much as twenty five percent on

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Speaker 5: Mexico and Canada by February first, reiterating his contention that

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Speaker 5: America's closest neighbors and largest trading partners, Carol are letting

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Speaker 5: undocumented migrants in drugs flood into the US.

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Speaker 3: All right, So what might all of this mean for

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Speaker 3: US companies? Bloomberg Intelligence Director of Equity Strategy and chief

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Speaker 3: equity strategist Gina Martin Adams writes about that she.

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Speaker 4: Joins US from New Jersey.

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Speaker 3: All Right, Gina, So should investors be more concerned perhaps

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Speaker 3: with this round of tariffs than first than compared to

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Speaker 3: what we saw in the first Trump White House in

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Speaker 3: terms of how it impacts specifically US stocks.

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Speaker 6: Yeah, I think that's a really great question and something

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Speaker 6: that we're going to have to grapple with probably most

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Speaker 6: of this year. Unfortunately, as the tariffs unfolds. Right now,

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Speaker 6: it's still relatively speculative. But the one thing we can

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Speaker 6: hang our hat on is the fact that the dollar

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Speaker 6: has been rallying since late September, in fits and starts,

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Speaker 6: of course, but at its peak just a week or

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Speaker 6: so ago, the dollar was up ten percent from its

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Speaker 6: low in late September.

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Speaker 4: The dollar is a.

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Speaker 6: Signal for portions of the US market, especially the S

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Speaker 6: and P five hundred's most multinational stocks, which tend to

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Speaker 6: experience ripple effects of currency in their earnings outlook. Now,

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Speaker 6: these happened to be also the stocks that were largely

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Speaker 6: leading the S and P five hundred earnings recovery in

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Speaker 6: twenty twenty three and twenty twenty four. They now face

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Speaker 6: the most difficult comparisons and the highest earnings expectations going

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Speaker 6: into twenty twenty five. So I would anticipate that at

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Speaker 6: the very least, you have some currency concerns start to

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Speaker 6: eat away a little bit at multinational stocks earnings outlook,

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Speaker 6: which could create another bout of volatility or indigestion in

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Speaker 6: stocks as those emerge.

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Speaker 5: Gin We have sort of a playbook here in recent history.

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Speaker 5: We saw what happened in the first Trump administration, We

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Speaker 5: saw certain tariffs continue in the Biden administration. How were

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Speaker 5: the stocks that were affected, the sectors that were affected,

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Speaker 5: how were they hit, and how does that play into

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Speaker 5: your analysis over at Bloomberg Intelligence.

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Speaker 6: Yeah, I think it's a great point. There is a precedent,

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Speaker 6: but pass is not necessarily a perfect precedent for what

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Speaker 6: to expect in that. In twenty eighteen, the tariffs were

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Speaker 6: pretty targeted at China. This time around, it looks like

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Speaker 6: the tariffs could be considerably more widespread wrapped up with

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Speaker 6: as you mentioned, at the onset and immigration issues targeted

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Speaker 6: at least in the short run at Mexico and Canada predominantly,

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Speaker 6: China seems to be kind of put on the back burner,

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Speaker 6: or at least temporarily on the back burner. Let's see

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Speaker 6: where that goes over time. Nonetheless, there's one indicator that

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Speaker 6: I think is really the most important for investors to

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Speaker 6: follow regarding the potential market implications, and that is the

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Speaker 6: operating margin forecast from analysts. This is one of the

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Speaker 6: single best indicators of coming performance in the equity market.

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Speaker 6: Operating margins obviously have been expanding for the better part

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Speaker 6: of the last two years. In twenty eighteen, we saw

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Speaker 6: operating margin forecasts turnover very quickly, not only because of

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Speaker 6: ten tariffs, but also because the FED was tightening interest

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Speaker 6: rates and we had some operating issues at the largest

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Speaker 6: tech companies emerge. And so I think you want to

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Speaker 6: watch this operating margin forecast pretty carefully. If analysts start

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Speaker 6: to lose face the faith that companies can pass through

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Speaker 6: prices onto their ultimate consumers, that they can maintain pricing power,

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Speaker 6: that is usually pretty problematic for stocks going forward. We

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Speaker 6: saw that in twenty eighteen. We may say that again

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Speaker 6: now now on the products and areas that could experience

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Speaker 6: the greatest operating margin pressure, it could be quite different.

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Speaker 6: But the important thing to know for the markets at

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Speaker 6: large is that operating margins are the key.

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Speaker 3: Also fair to say, and I was thinking about a

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Speaker 3: conversation Tim and I and David Gora had yesterday following

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Speaker 3: the inauguration, and this was with Stefan Seelig. He was

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Speaker 3: Under Secretary of Commerce for International Trade at Commerce during

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Speaker 3: the Obama administration. He was also head of the International

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Speaker 3: Trade Administration. And he said, when we talked about tiras,

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Speaker 3: he said, they're complicated. They are not all one thing.

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Speaker 3: And as you made that distinction between twenty eighteen and

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Speaker 3: the teriffs were very targeted at China versus maybe something

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Speaker 3: here that's more like a blanket tariff, it does become

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Speaker 3: a different issue. So we have to be smart about

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Speaker 3: kind of the devil and the details we do.

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Speaker 6: And I think the other thing to consider is that

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Speaker 6: tariffs target at economies often impact markets through companies, and

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Speaker 6: economies and markets are not the same thing. Economies companies

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Speaker 6: are really a microcosm of economies are certainly related to

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Speaker 6: the economies, but the companies are the ones that oftentimes

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Speaker 6: pay the tariffs. A good example is, you know, these

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Speaker 6: tariffs targeted at Canada. How much of that is actually

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Speaker 6: going to impact US auto manufacturers, who are some of

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Speaker 6: the biggest exporters of products from Canada into the US

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Speaker 6: is a huge question, and I think we have to

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Speaker 6: consider that companies are very multinational in nature. Many of

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Speaker 6: the US companies that are multinational will ultimately be the

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Speaker 6: payers of these tariffs. So we want to be really

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Speaker 6: careful and conscientious in not suggesting that tariffs that are

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Speaker 6: targeted at economy are paid by those economies exclusively. They're

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Speaker 6: generally paid by companies, and companies are often multinational in

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Speaker 6: nature and can sit on various exchanges across the world,

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Speaker 6: don't necessarily represent those economies.

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Speaker 5: Gina, in your analysis, does any of the transformation that

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Speaker 5: the president is hoping actually happen? The idea that maybe

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Speaker 5: because of tariffs, companies based here in the US will

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Speaker 5: manufacture goods closer to home in the US, employ more Americans,

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Speaker 5: and make it work as the whole idea behind these

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Speaker 5: being implemented is well.

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Speaker 6: I think there have to be a lot of other

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Speaker 6: changes that happen to get US companies to relocate into

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Speaker 6: the United States beyond simply an acceleration and cost. Companies

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Speaker 6: tend to find lowest cost labor around the world. They

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Speaker 6: will not necessarily relocate to the US. They may relocate

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Speaker 6: to other nations. They may find other ways to path

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Speaker 6: through costs. There are a lot of different ads by

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Speaker 6: which companies can flexibly approach a sanctions or a tariff's environment,

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Speaker 6: such as the one that we're likely to go into.

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Speaker 6: I think you can see some relocations to the degree

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Speaker 6: that's in the best interest of profitability of the company.

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Speaker 6: But that profitability is most important for public companies to

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Speaker 6: keep an eye on, obviously, and if it's not in

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Speaker 6: the best interest of their shareholders, if it's not in

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Speaker 6: the best interest of seeking profits, then why would they

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Speaker 6: relocate to the United States. There has to be a

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Speaker 6: pretty compelling reason beyond tariffs. One of the biggest reasons

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Speaker 6: companies locate outside of the United States is it's just

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Speaker 6: more efficient, more effective, and better for their cost structure.

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Speaker 6: Will tariffs ultimately overwhelm that decision. It seems unlikely, given

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Speaker 6: that labor is such a huge portion ultimately of company costs,

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Speaker 6: but we'll see you can also see efficiencies gained in

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Speaker 6: other ways, another by relocating into other regions of the world,

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Speaker 6: particularly when we're selling into other regions of the world

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Speaker 6: as a corporation. So I think think it is very complicated.

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Speaker 6: I think that a blund instrument of tariffs can be

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Speaker 6: effective in certain instances, particularly at protecting domestic industries, but

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Speaker 6: it's not one big broad brush that we can paint

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Speaker 6: and I think that each company decision will be made

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Speaker 6: on a profitability perspective of that independent company.

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Speaker 3: Hey, you know one thing I want to ask you,

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Speaker 3: and one of the things that we've talked about over

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Speaker 3: the last couple of years is some of the spending

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Speaker 3: plant programs that Congress passed a Biden initiated that Congress

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Speaker 3: ultimately passed and put investment dollars certainly into the US economy,

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Speaker 3: spending on infrastructure, green initiatives, and so on.

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Speaker 4: Chips.

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Speaker 3: Donald Trump is expected to announce an open AI SoftBank

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Speaker 3: Oracle AI investment. We've been talking about this news out

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Speaker 3: of CBS reports, and I just wonder how you were

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Speaker 3: thinking about or watching the Trump administration for other things

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Speaker 3: that you think could potentially increase kind of the liquidity

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Speaker 3: and cashets out there to put to work that would

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Speaker 3: impact the markets, the equity market as well.

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Speaker 6: Yeah, I think federal spending programs have become a really

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Speaker 6: big bogie to watch for companies. Over the course of

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Speaker 6: the last several years. The Chips Act was very consequential.

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Speaker 6: The Inflation Reduction Act was also pretty consequential to certain

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Speaker 6: industries profitability trends. So any sort of fiscal spending package

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Speaker 6: or public private partnership dedicated to elevating investment into certain

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Speaker 6: sectors can be very meaningful. I think we have to

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Speaker 6: watch rather than speculate as to what may happen. I

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Speaker 6: think we want to watch for the details of each

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Speaker 6: of these packages to assess the viability and certainly the

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Speaker 6: market impact. But nonetheless, we are in an era where

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Speaker 6: federal spending and targeted federal spending is having real economic

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Speaker 6: and market consequences.

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Speaker 3: Hey, speaking of market consequences, just thirty seconds, real quickly,

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Speaker 3: we've got Netflix after the earnings.

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Speaker 4: We are an earning season. This is a big one

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Speaker 4: to watch.

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Speaker 3: It's been on a tear the last couple of years,

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Speaker 3: but it's down about seven percent since early December. How

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Speaker 3: might a name light Netflix kind of help or hurt

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Speaker 3: sentiment in the markets just quickly.

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Speaker 6: Yeah, it's a great question because Netflix is sort of

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Speaker 6: one of those representative examples of the media segment within

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Speaker 6: a tech telecom and media. It's pretty important for driving

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Speaker 6: sentiment with respect to content producers. I think that it's

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Speaker 6: less important than say the Mag seven. Yeah, but we

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Speaker 6: do want to watch for persistence of profitability. I think

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Speaker 6: Netflix could give us some pretty good indications as to

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Speaker 6: sustainability of spending, but also what's happening with margins. Margins

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Speaker 6: are really key right now for that entire space. To

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Speaker 6: the degree that this company is navigating the margin outlook

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Speaker 6: relatively with a relative strength, I think that could be

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Speaker 6: fairly supportive for the broad sector. But ultimately we want

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Speaker 6: to watch for the Mag seven, which are obviously have

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Speaker 6: potentially profound impacts.

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Speaker 3: I feel like I'm going to make up t shirts

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Speaker 3: watch operating margins because I feel like that's my big

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Speaker 3: message from you right now.

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Speaker 6: Overall, it is the big message this year.

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Speaker 2: You're listening to the Bloomberg Business Week podcast. Catch us

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Speaker 2: live weekday afternoons from two to five pm Eastern. Listen

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Speaker 2: on Applecarplay and the Android Auto with the Bloomberg Business

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Speaker 2: ap or watch us live on YouTube.

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Speaker 4: The thiny twa billion.

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Speaker 3: Dollar cannabis industry in the United States is watching perhaps

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Speaker 3: what a Trump administration in Republican Congress may mean for

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Speaker 3: their world. Bloomberg Intelligence Nathan Dean writing last month that quote,

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Speaker 3: while legislation to let US banks service cannabis based businesses

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Speaker 3: will face similar policy hurdles in twenty twenty five as

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Speaker 3: in the past, Donald Trump's election victory raised the odds

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Speaker 3: at a long awaited goal of the cannabis sector can

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Speaker 3: make it to the President's desk this year. Let's see

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Speaker 3: what Erwin Simon has to say. He's chairman, president and

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Speaker 3: CEO of the one point one billion dollar market cap

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Speaker 3: cannabis company Tillray Brands.

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Speaker 4: He joins us from New York City.

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Speaker 3: Tillery, by the way, is one of the world's largest

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Speaker 3: licensed cannabis companies.

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Speaker 4: Erwin, nice to have you back here on Bloomberg.

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Speaker 3: We are curious about your thoughts regarding the Trump administration

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Speaker 3: and their stance his stance toward federal legalization of marijuana.

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Speaker 4: What do you think the outlook is.

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Speaker 7: So Number one, thank you very much for having me

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Speaker 7: listen It was great to see President Trump, you know,

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Speaker 7: inauguration yesterday and ultimately see him come back to office.

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Speaker 7: You know, Trump is about business. You hear him talk

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Speaker 7: about terrorts. You hear him talk about you know, free trade.

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Speaker 7: And if you come back and look at cannabis and

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Speaker 7: the opportunities there to legalize that and the excise tax

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Speaker 7: that can be brought into the US coppers, I think

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Speaker 7: he looks at as a business and I think, as

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Speaker 7: I said before, I think medical cannabis in the US legalizes,

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Speaker 7: and that enacts safe bank ultimately from a decriminalization, and

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Speaker 7: that takes the illicted market off the street.

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Speaker 8: And I think absolutely Trump will absolutely look at that.

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Speaker 7: And I think you know, he has already looked at that.

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Speaker 7: When it came to the election in November, he was

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Speaker 7: in favor of cannabis, you know, legalizing from a recreational standpoint.

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Speaker 7: In Florida. It didn't pass that has needed sixty percent,

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Speaker 7: and I think it was around fifty three fifty four percent.

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Speaker 5: Why are you optimistic that he'll do this stuff during

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Speaker 5: this term when during his first term there was a

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Speaker 5: lot of optimism and a lot of hope from folks

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Speaker 5: in the cannabis industry. I know you weren't at Tilray

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Speaker 5: at that time, but there was a lot of optimism

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Speaker 5: coming from the industry and that ultimately did not come

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Speaker 5: to pass.

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Speaker 7: So listen again, I think from a business standpoint, and

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Speaker 7: he looks at it from two things. He looks at

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Speaker 7: it from the tax dollars and the excise tax that

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Speaker 7: come into place. And he looks at an illicted market

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Speaker 7: that he takes off the street, and he gets real

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Speaker 7: regulation in here, and he ultimately brings safe baking in here,

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Speaker 7: which allows money that's going through going through the banks.

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Speaker 7: From a regulatory standpoint, Listen, you come back and look

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Speaker 7: at Canada today, and Canada is a tenth of the

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Speaker 7: size of the US, and there's over a billion and

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Speaker 7: a half dollars in excise tax that comes into Canada

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Speaker 7: each year. If you multiply that by ten, you look

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Speaker 7: at the fifteen billion dollars opportunity here in the US.

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Speaker 7: So I come back and absolutely if you look at

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Speaker 7: Europe today, there's twenty different countries that allow medical cannabis

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Speaker 7: in Europe today, And come back and look at recreational cannabis.

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Speaker 7: Recreational cannabis day is legal in twenty seven states in

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Speaker 7: the US and medical cannabis is in thirty five states,

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Speaker 7: so a big part of the US population wants cannabis legalized.

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Speaker 7: But I'll tell you this here, till Ray is in

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Speaker 7: a good spot. You know, we can't sell cannabis in

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Speaker 7: the US because we're a NaSTA eclistic company. We're the

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Speaker 7: largest cannabis company in Canada today. We have a good

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Speaker 7: sized beverage business in the US today with our craft beers,

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Speaker 7: our spirits with Breckinridge, and our hemp business of Manitoba Harvest.

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Speaker 7: We also have a good sized business in Europe today

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Speaker 7: with our medical cannabis business, where there we only can

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Speaker 7: sell cannabis through prescriptions from doctors. So we're a well

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Speaker 7: diversified company. And I got to tell you it would

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Speaker 7: be very helpful to tell Ray if cannabis did legalize

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Speaker 7: in the US from a medical standpoint, and I think, hey,

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Speaker 7: it's a two three hundred million dollar business for US

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Speaker 7: right away at a three percent size of the market.

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Speaker 7: As you just said, you know, it's a ten billion

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Speaker 7: dollar market here in the US. I'm a medical standpoint.

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Speaker 5: What about what about tariffs and the comments that the

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Speaker 5: President has made about Canada the possibility that there could

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Speaker 5: be twenty five percent on good twenty five percent tariffs

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Speaker 5: on goods coming from Canada by February first, and also

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Speaker 5: the jokes that he made over the last month about

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Speaker 5: essentially Canada becoming the fifty first state. How do you

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Speaker 5: look at all that.

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Speaker 7: Well, I don't think that's going to happen, number one,

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Speaker 7: But number two, I think you got Canada's attention.

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Speaker 8: You know.

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Speaker 7: The good news is, you know, the only thing we

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Speaker 7: bring in from Canada today is we bring some hented

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Speaker 7: for our hemp business. You know, none of our beer,

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Speaker 7: and of course none of our cannabis does sell within

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Speaker 7: you know, the US. None of the cannabis we make

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Speaker 7: today and growing Canada is sold in the US. Listen,

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Speaker 7: the Canadian dollar, you know, has quite a bit of value.

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Speaker 7: So if there was a tariff, I think ultimately it

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Speaker 7: gets passed on to the consumer. I don't think it's

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Speaker 7: going to be twenty five percent. I think there could

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Speaker 7: be tariffs. We have five million square feet to grow

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Speaker 7: in Canada today, and if we could produce there, which

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Speaker 7: would be about sixty metric tons, and be able to

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Speaker 7: sell them in the US, it would be very, very beneficial.

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Speaker 8: To till errate.

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Speaker 3: Where's the growth in your business? Right, there's cannabis, there's

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Speaker 3: the beverage business. You guys are also moving increasingly into

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Speaker 3: vape and infused pre role categories. So tell us a

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Speaker 3: little bit about where the biggest opportunities are for you.

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Speaker 7: So the growth in Canada today is in pre rolls.

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Speaker 7: The growth in Canada today is cannabis and tu streets

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Speaker 7: and the fake business. And that's where the growth is

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Speaker 7: in Canada today. And as the market continues to mature

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Speaker 7: and more and more consumers are buying, you know, from

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Speaker 7: the legalized market, not buying the illicit market. And being

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Speaker 7: one of the largest growers today in Canada, that's a

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Speaker 7: big opportunity for the Canadian market. But you know, Canada's

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Speaker 7: forty million people in size, and ultimately the market is

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Speaker 7: going to continue to mature. In the US, we're the

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Speaker 7: fifth largest craft brewer in the US today and we

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Speaker 7: became a beverage company. So big opportunities that we come

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Speaker 7: out with a treat called Liquid Love are not out

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Speaker 7: drinks or energy drinks. So the beverage business for us,

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Speaker 7: big opportunity for us. And listen, as people walk around,

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Speaker 7: they always have something in their hand, whether it's a coffee,

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Speaker 7: whether it's a drink, whether it's a water. And listen,

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Speaker 7: beer business is not going away. And ultimately the beverage

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Speaker 7: business is one of the biggest categories out there, and

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Speaker 7: today we have ten breweries out there, We have seven

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Speaker 7: hundred distributors, We have an infrastructure of sales.

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Speaker 8: And marketing people in Europe.

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Speaker 7: Medical cannabis big opportunity for US, as doctors are prescribing

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Speaker 7: cannabis today as medicines for paying for anxiety, for sleep, etc.

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Speaker 7: So we're really in some good businesses. We're a five

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Speaker 7: year old company. As I put this together, we're investing

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Speaker 7: in these business We're investing in these brands. We have

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Speaker 7: over forty brands today with three diversified business So I

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Speaker 7: like the cannabis business. I love the beverage business, and

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Speaker 7: the wellness business is another big opportunity for US.

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Speaker 4: Erinde. Your beverage portfolio.

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Speaker 3: You guys have done some streamlining, and you know, the

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Speaker 3: recently announced portfolio rationalization of beer brands in the US

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Speaker 3: is really kind of consistent across the overall slowdown that

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Speaker 3: we've seen with other alcoholic producers. Tim and I talk

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Speaker 3: about it all the time with folks in the alcohol industry.

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Speaker 3: Is cannabis use among young adults at the expense of alcohol.

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Speaker 4: The reason why.

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Speaker 7: So, Number one is, you know, we've done multiple acquisitions

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Speaker 7: within the beer business in the US. We bought eight

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Speaker 7: businesses from Anheuser Busch. We just bought four from Mulson's.

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Speaker 7: We bought Montak Brewer. We we got Sweetwater. With that,

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Speaker 7: we're doing a couple of things. We're doing a skew

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Speaker 7: rationalization as we had way too many skews out there.

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Speaker 7: We're coming up with a lot of new innovation. We

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Speaker 7: have over one hundred and forty new products.

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Speaker 8: And the other thing what we're.

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Speaker 7: Doing is they're skeewing our brands to such regional brands

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Speaker 7: and we're before we are selling them in multi states.

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Speaker 8: Now we're only going to sell it in two or

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Speaker 8: three different states.

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Speaker 7: But shot Talk will become, you know, a national brand

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Speaker 7: for US, and Sweetwater will be expelled and with half

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Speaker 7: the US. So that's one of the big reasons. And

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Speaker 7: the other thing is is we bring all these businesses

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Speaker 7: together taken out costs. Is taking ours all these SKUs So.

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Speaker 3: Yes or no, it's not because young adults are doing

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Speaker 3: more cannabis versus drinking.

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Speaker 7: So I think the young adults absolutely are doing more

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Speaker 7: cannabis and absolutely that is you know, a rationalization, and

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Speaker 7: that is affecting the drinking business.

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Speaker 3: Absolutely great to get some time with you, Ern Simon,

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Speaker 3: He's CEO of Tillry Brands.

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Speaker 4: This is Business Week.

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Speaker 1: This is the Bloomberg Business Week Podcast. Listen live each

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Speaker 1: weekday starting at two pm Eastern on Applecarcklay, and Android

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Speaker 1: Auto with the Bloomberg Business App. You can also listen

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Speaker 1: live on Amazon Alexa from our flagship New York station.

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Speaker 1: Just say Alexa Play Bloomberg eleven thirty.

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Speaker 5: I said we were going to start with Apple, but

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Speaker 5: that was before I learned about this bloom A News

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Speaker 5: story from our next guest, Mark German, Bloomberg News Chief

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Speaker 5: Technology correspondent, joining us from our San Francisco bureau. That's

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Speaker 5: exactly where I want to start off.

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Speaker 9: Mark.

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Speaker 5: We'll get to Apple in just a minute. But you've

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Speaker 5: got this story out about Meta working on upgrades too.

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Speaker 5: It's smart glasses exploring new wearable devices. We're talking watches,

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Speaker 5: camera equipped earbuds, looking to embed AI into more of

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Speaker 5: its products. What did you learn?

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Speaker 10: Yeah, so Meta that's the hot story this morning. Obviously,

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Speaker 10: they've got their hardware division, Reality Labs, and they're cooking

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Speaker 10: up a lot of stuff. They're cooking up some ideas

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Speaker 10: that Apple has tried and Apple has been working on,

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Speaker 10: and they're also cooking up some new ideas to take

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Speaker 10: their smart glasses business to new heights. So let me

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Speaker 10: start with this year. So right now, you have ray

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Speaker 10: Ban Meta glasses. Right, those don't have AR displays, but

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Speaker 10: they have cameras, microphones, you can take calls, control music,

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Speaker 10: do all sort of sorts of stuff with them using

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Speaker 10: Meta AI. Those are getting a big upgrade this year. Right,

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Speaker 10: they're going to launch a new version that uses Oakley glasses. Right,

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Speaker 10: this is meant for bikers, meant for athletes and such,

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Speaker 10: so a little bit of a higher end pair. Then

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Speaker 10: they're going to launch a super top end pair that's

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Speaker 10: probably gonna cost around one thousand dollars. This is going

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Speaker 10: to have a display in the right lens. It's not

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Speaker 10: an AR display, but just a display so you can

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Speaker 10: run some light applications, see photos that you took, get notifications.

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Speaker 10: It's going to be pretty nifty. They're testing using risk

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Speaker 10: based control. That's the same control mechanism that they've used

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Speaker 10: for their AR glasses prototype Orion looking Ahead Orion, that's

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Speaker 10: the big AR glasses splash they made last fall. That's

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Speaker 10: actually never going to launch as a consumer product. Instead,

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Speaker 10: they're going to start trying to sell it to developers

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Speaker 10: next year in twenty twenty six, as a testing ground

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Speaker 10: to develop applications for it. A year later they'll launch

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Speaker 10: a follow up. The first one aim to consumers with

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Speaker 10: AR functionality. That's called Artemis. That's a more modernized version

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Speaker 10: some display trade offs, better hardware, better software, more modern

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Speaker 10: the other things they're looking at, and this comes back

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Speaker 10: to the Apple portion is again launching a smart watch.

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Speaker 10: They've considered it for about half a decade, maybe even

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Speaker 10: longer than that. They're working on it again, talking about

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Speaker 10: launching it sometime this year or next year. And then lastly,

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Speaker 10: they're exploring earbuds. These would be AirPods competitors in house

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Speaker 10: headphones from Meta, and they would include cameras and you'd

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Speaker 10: basically be able to look around and use AI to

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Speaker 10: understand the surrounding environment. So the functionality would be very

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Speaker 10: similar to what you're getting from the ray bands right

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Speaker 10: now or the other Meta smart glasses, but they would

439
00:22:30,160 --> 00:22:32,199
Speaker 10: be in a more familiar form factor. Right, There's some

440
00:22:32,240 --> 00:22:34,320
Speaker 10: people who don't want to wear glasses, and so the

441
00:22:34,320 --> 00:22:37,280
Speaker 10: alternative to get those same AI features would be tucking

442
00:22:37,280 --> 00:22:40,639
Speaker 10: in those technologies and cameras and other elements into the earbuds.

443
00:22:41,280 --> 00:22:43,320
Speaker 10: It's interesting because this is a type of product that

444
00:22:43,359 --> 00:22:46,359
Speaker 10: both Apple and Samsung are exploring as well. So it

445
00:22:46,400 --> 00:22:48,680
Speaker 10: seems like all the tech companies are looking how they

446
00:22:48,720 --> 00:22:51,560
Speaker 10: can really beef up the earbuds businesses.

447
00:22:51,280 --> 00:22:54,400
Speaker 3: Mark It feels like a really big step by Meta

448
00:22:54,440 --> 00:22:56,000
Speaker 3: even further into hardware.

449
00:22:56,119 --> 00:22:57,120
Speaker 4: Why are they doing it?

450
00:22:58,200 --> 00:22:58,440
Speaker 2: Yeah?

451
00:22:58,480 --> 00:23:01,560
Speaker 10: For for Meta all in on AI right now, and

452
00:23:01,600 --> 00:23:04,480
Speaker 10: the best expression of AI is how it's integrated into

453
00:23:04,480 --> 00:23:07,600
Speaker 10: hardware products. Obviously, if you're not the device maker, you're

454
00:23:07,640 --> 00:23:09,600
Speaker 10: not going to be able to integrate AI. You see

455
00:23:09,600 --> 00:23:12,280
Speaker 10: that Apple has its own AI tucked into its devices.

456
00:23:12,520 --> 00:23:14,679
Speaker 10: Google has its own AI and its device is Samsung

457
00:23:14,760 --> 00:23:17,200
Speaker 10: has its own AI and its devices. So for Meta

458
00:23:17,320 --> 00:23:20,520
Speaker 10: really to be able to be a leader in artificial intelligence,

459
00:23:20,560 --> 00:23:22,639
Speaker 10: they're going to need to push it not only to

460
00:23:22,680 --> 00:23:25,960
Speaker 10: their applications on various platforms, but build their own platforms

461
00:23:25,960 --> 00:23:29,560
Speaker 10: to run it on. And obviously glasses and different wearables

462
00:23:29,560 --> 00:23:32,360
Speaker 10: like earbuds and smart watches. Those are the ultimate expressions

463
00:23:32,359 --> 00:23:35,040
Speaker 10: of AI in making that technology actually useful. So I

464
00:23:35,040 --> 00:23:37,600
Speaker 10: would say at this point, based on what we've seen publicly,

465
00:23:38,200 --> 00:23:40,480
Speaker 10: it's fair to say that Meta is the leader in

466
00:23:40,600 --> 00:23:44,080
Speaker 10: AI wearables, in AI devices right in terms of next

467
00:23:44,080 --> 00:23:47,360
Speaker 10: generation types of platforms things be on the smartphone, We'll

468
00:23:47,400 --> 00:23:49,920
Speaker 10: have to see if Google and Apple and Samsung others

469
00:23:49,920 --> 00:23:52,399
Speaker 10: will catch up in the coming years. I do expect

470
00:23:52,400 --> 00:23:55,160
Speaker 10: them to, at least on the hardware side in Apple's case,

471
00:23:55,160 --> 00:23:57,119
Speaker 10: maybe not on the II side, but for now they

472
00:23:57,119 --> 00:23:58,399
Speaker 10: have a first mover advantage.

473
00:23:58,800 --> 00:23:59,040
Speaker 8: Mark.

474
00:23:59,080 --> 00:24:01,760
Speaker 5: You try all this stuff out when it does come out,

475
00:24:01,800 --> 00:24:04,160
Speaker 5: not when it's being worked on. What have you tried

476
00:24:04,200 --> 00:24:06,280
Speaker 5: from META platforms And how has it been Because I

477
00:24:06,320 --> 00:24:08,000
Speaker 5: haven't actually tried these smart glasses yet.

478
00:24:08,720 --> 00:24:12,200
Speaker 10: Yeah, I've been wearing the Meta smart glasses actually recently.

479
00:24:12,520 --> 00:24:15,040
Speaker 10: I love the form factor. The phone call quality is great.

480
00:24:15,840 --> 00:24:19,520
Speaker 10: It's basically, you know, air pods and a glasses form factor,

481
00:24:20,080 --> 00:24:22,720
Speaker 10: and you really get no benefit for that, right unless

482
00:24:22,760 --> 00:24:27,200
Speaker 10: you have lenses that take advantage, lenses that take advantage

483
00:24:27,240 --> 00:24:29,880
Speaker 10: of the surrounding environment by using augmented reality there's really

484
00:24:29,920 --> 00:24:32,479
Speaker 10: no advantage to having that form factor. I guess the

485
00:24:32,480 --> 00:24:35,639
Speaker 10: only thing you could say is usability, right getting that

486
00:24:35,680 --> 00:24:38,000
Speaker 10: full temple area to do gestures, But Apple's done a

487
00:24:38,000 --> 00:24:40,440
Speaker 10: pretty good job in the small space allocated on the

488
00:24:40,960 --> 00:24:43,040
Speaker 10: miniature size of the air pods. The other thing is

489
00:24:43,080 --> 00:24:45,960
Speaker 10: battery life, but those things will be overcome. So until

490
00:24:46,000 --> 00:24:49,440
Speaker 10: you get these AR displays into these smart glasses, they're

491
00:24:49,480 --> 00:24:53,280
Speaker 10: really no more useful from a technology standpoint in comparison

492
00:24:53,320 --> 00:24:56,080
Speaker 10: to earbuds with cameras. But of course we're still waiting

493
00:24:56,080 --> 00:24:58,320
Speaker 10: for that evolution to happen. So I think at some

494
00:24:58,400 --> 00:25:02,320
Speaker 10: point you'll see smart glasses without displays morph into these

495
00:25:02,359 --> 00:25:05,240
Speaker 10: earbudds with cameras, and the smart glasses market is going

496
00:25:05,280 --> 00:25:07,080
Speaker 10: to become this AR device's market.

497
00:25:07,080 --> 00:25:09,240
Speaker 5: But that's going to take a while, Okay, part perfect

498
00:25:09,240 --> 00:25:11,440
Speaker 5: segue to move on to another big tech name. Shares

499
00:25:11,440 --> 00:25:13,480
Speaker 5: of meta platforms, by the way, hired by about seven

500
00:25:13,480 --> 00:25:16,800
Speaker 5: tens of one percent. Apple shares down three point eight percent.

501
00:25:16,800 --> 00:25:19,000
Speaker 5: They were down as much as four point six percent,

502
00:25:19,080 --> 00:25:22,080
Speaker 5: weighing on the S and P five hundred and the Nasdaq.

503
00:25:22,480 --> 00:25:26,120
Speaker 5: iPhone sales fell eighteen point two percent in China, according

504
00:25:26,119 --> 00:25:28,560
Speaker 5: to Counterpoint Research. That was during the December quarter. The

505
00:25:28,600 --> 00:25:32,280
Speaker 5: company also getting this pair of analyst downgrades market It

506
00:25:32,480 --> 00:25:34,720
Speaker 5: makes me think of what happened a year ago. We'd

507
00:25:34,720 --> 00:25:37,760
Speaker 5: be talking to you throughout the month of January, Apple

508
00:25:37,800 --> 00:25:40,119
Speaker 5: getting two down grades. In the first week of twenty

509
00:25:40,119 --> 00:25:42,119
Speaker 5: twenty four, there was news of a discount on the

510
00:25:42,119 --> 00:25:44,760
Speaker 5: iPhone fifteen in China. Everybody was freaking out about iPhones.

511
00:25:44,920 --> 00:25:47,280
Speaker 5: Then Apple closes out the year hire by thirty five percent.

512
00:25:47,680 --> 00:25:48,760
Speaker 5: What's going on here?

513
00:25:49,520 --> 00:25:52,480
Speaker 10: Yeah, every year, I think for the last five six years.

514
00:25:52,560 --> 00:25:56,000
Speaker 10: I think since around late twenty eighteen early twenty nineteen,

515
00:25:56,200 --> 00:25:59,120
Speaker 10: there have been concerns about iPhone performance in China, particularly

516
00:25:59,160 --> 00:25:59,960
Speaker 10: in the holiday quarter.

517
00:26:00,600 --> 00:26:01,320
Speaker 9: You know China.

518
00:26:01,520 --> 00:26:04,720
Speaker 10: The China iPhone sixteen launch misses out completely. On Apple

519
00:26:04,760 --> 00:26:08,639
Speaker 10: intelligence and artificial intelligence, I don't think Apple intelligence is

520
00:26:10,000 --> 00:26:11,600
Speaker 10: I don't think it's even fair to talk about it

521
00:26:11,600 --> 00:26:13,960
Speaker 10: in the same breath as what you're seeing from METAAI

522
00:26:14,119 --> 00:26:16,000
Speaker 10: and Google AI and some of the features you're gonna

523
00:26:16,000 --> 00:26:18,800
Speaker 10: see from Samsung Leader this week on THEIRS twenty five line.

524
00:26:18,840 --> 00:26:21,960
Speaker 10: But still it's a marketing point. It's important for consumers

525
00:26:22,000 --> 00:26:24,200
Speaker 10: to know that AI for apples there too, and they've

526
00:26:24,200 --> 00:26:26,000
Speaker 10: completely missed the boat on China, and I think that's

527
00:26:26,080 --> 00:26:29,200
Speaker 10: dragged down iPhone sales there a little bit, combined with

528
00:26:29,240 --> 00:26:32,840
Speaker 10: the fact that there's no new design or major new

529
00:26:32,840 --> 00:26:35,720
Speaker 10: features in the iPhone sixteen hardware. Later this year, they're

530
00:26:35,720 --> 00:26:38,440
Speaker 10: gonna come out with an air version of the iPhone seventeen,

531
00:26:38,480 --> 00:26:40,919
Speaker 10: and from everything I've heard, that's probably not going to

532
00:26:40,960 --> 00:26:45,040
Speaker 10: have a physical simcard slot. That's something that you need

533
00:26:45,119 --> 00:26:47,960
Speaker 10: to use most carriers and most plans in China, So

534
00:26:48,480 --> 00:26:50,600
Speaker 10: the sales of that device probably won't be as strong

535
00:26:50,640 --> 00:26:53,119
Speaker 10: as they would have liked in China. But once they

536
00:26:53,160 --> 00:26:55,239
Speaker 10: come out with a new design phone, I think some

537
00:26:55,280 --> 00:26:57,800
Speaker 10: things will start to slightly turn around. But certainly the

538
00:26:57,840 --> 00:26:59,720
Speaker 10: tide is continuing to shift for Apple and China in

539
00:26:59,720 --> 00:27:00,439
Speaker 10: the wrong direction.

540
00:27:00,600 --> 00:27:01,879
Speaker 3: Yeah, that's what I was going to ask you, Like,

541
00:27:01,920 --> 00:27:03,680
Speaker 3: if they miss you know, if they have a quarter

542
00:27:03,840 --> 00:27:06,480
Speaker 3: or there's you know, a product cycle a quarter or two,

543
00:27:06,760 --> 00:27:09,080
Speaker 3: you know, does that just kind of build on itself

544
00:27:09,400 --> 00:27:12,600
Speaker 3: to the downside. I'm just curious, you know, or do

545
00:27:13,160 --> 00:27:16,160
Speaker 3: if consumers in China get excited, do they come back

546
00:27:16,200 --> 00:27:16,760
Speaker 3: to Apple?

547
00:27:17,800 --> 00:27:18,000
Speaker 2: Yeah?

548
00:27:18,040 --> 00:27:20,960
Speaker 10: I don't think Apple's ever going to disappear the Chinese

549
00:27:20,960 --> 00:27:24,240
Speaker 10: market loves these luxury items, these luxury goods, and you

550
00:27:24,280 --> 00:27:26,320
Speaker 10: know Apple's going to keep coming out with more expensive

551
00:27:26,320 --> 00:27:29,520
Speaker 10: devices and higher end devices. I certainly think once Apple

552
00:27:29,640 --> 00:27:31,560
Speaker 10: is able to bring a foldable to market, I think

553
00:27:31,560 --> 00:27:34,000
Speaker 10: that's going to do extraordinarily well in China if they

554
00:27:34,040 --> 00:27:36,080
Speaker 10: can get the SIM card and the e SIM situation

555
00:27:36,160 --> 00:27:40,120
Speaker 10: worked out there, because China is very prominently using physical

556
00:27:40,119 --> 00:27:42,480
Speaker 10: SIM cards and when you move to these foldable devices,

557
00:27:42,520 --> 00:27:44,800
Speaker 10: it's more of a digital SIM system because of the

558
00:27:44,840 --> 00:27:46,800
Speaker 10: smaller space. But I'm sure they have plans to figure

559
00:27:46,840 --> 00:27:48,920
Speaker 10: that out. But once Apple gets into foldables, I think

560
00:27:48,920 --> 00:27:50,080
Speaker 10: that'll be slightly helpful there.

561
00:27:50,240 --> 00:27:52,280
Speaker 5: Okay, Mark, we've said the last minute and a half

562
00:27:52,280 --> 00:27:55,680
Speaker 5: to talk about Sonos because your Power On column over

563
00:27:55,720 --> 00:28:00,000
Speaker 5: the weekend talked about the question would Apple buy Sonos?

564
00:28:00,720 --> 00:28:02,000
Speaker 9: So they won't.

565
00:28:03,720 --> 00:28:05,520
Speaker 5: Yeah, he wrote a whole column about it, and the

566
00:28:05,560 --> 00:28:06,160
Speaker 5: answer is just.

567
00:28:06,200 --> 00:28:08,560
Speaker 2: No, Yeah, I don't.

568
00:28:08,720 --> 00:28:11,600
Speaker 10: Well, the column said that Apple's not gonna buy them, right,

569
00:28:11,640 --> 00:28:14,600
Speaker 10: I don't see any benefit certainly on the software side.

570
00:28:14,680 --> 00:28:17,000
Speaker 10: Apple's not gonna buy them. The software is the whole

571
00:28:17,000 --> 00:28:19,840
Speaker 10: reason the CEO was just fired. Right on the hardware side,

572
00:28:20,040 --> 00:28:23,119
Speaker 10: much of it is commoditized, and Apple has the chops

573
00:28:23,160 --> 00:28:25,560
Speaker 10: internally to do speakers if they wanted to. So you're

574
00:28:25,600 --> 00:28:28,160
Speaker 10: not really buying anything but a relatively small user base.

575
00:28:28,240 --> 00:28:30,119
Speaker 10: So this is a better fit for a company like

576
00:28:30,160 --> 00:28:31,160
Speaker 10: Spotify or Amazon.

577
00:28:31,280 --> 00:28:33,520
Speaker 5: I'm Mark, I'm part of that small user base, and

578
00:28:33,600 --> 00:28:35,919
Speaker 5: our Sono system at home is basically bricked. It's kind

579
00:28:35,960 --> 00:28:38,920
Speaker 5: of unbelievable. We had this great system. It just doesn't

580
00:28:38,920 --> 00:28:42,640
Speaker 5: work anymore. Is Tom Conrad gonna fix this or am

581
00:28:42,680 --> 00:28:43,440
Speaker 5: I just out of luck?

582
00:28:44,360 --> 00:28:48,000
Speaker 10: He's going to fix it enough, in my opinion, to

583
00:28:48,200 --> 00:28:52,120
Speaker 10: make Sono's an interesting acquisition target. And I think at

584
00:28:52,160 --> 00:28:55,560
Speaker 10: its sub two billion dollar market cap, which is in

585
00:28:56,080 --> 00:28:59,560
Speaker 10: one one four thousandth of what Apple's probably going to

586
00:28:59,640 --> 00:29:01,680
Speaker 10: be worth, and you know about before the end of

587
00:29:01,720 --> 00:29:06,160
Speaker 10: the year, right uh, I think they're extremely attractive. We'll

588
00:29:06,160 --> 00:29:09,360
Speaker 10: have to see what the new Justice Department is going

589
00:29:09,440 --> 00:29:12,120
Speaker 10: to allow in terms of acquisitions, but it would fit

590
00:29:12,200 --> 00:29:14,640
Speaker 10: quite nicely into Amazon, and it would also fit quite

591
00:29:14,680 --> 00:29:17,719
Speaker 10: nicely into a company like Spotify that's tried and failed

592
00:29:17,720 --> 00:29:19,360
Speaker 10: to develop its own hardware in the past.

593
00:29:19,440 --> 00:29:21,880
Speaker 5: I just want speakers that work, Carol, He just wants

594
00:29:21,880 --> 00:29:24,400
Speaker 5: it to work. I'm using my phone.

595
00:29:24,640 --> 00:29:25,280
Speaker 4: About it a lot.

596
00:29:25,600 --> 00:29:27,240
Speaker 5: I'm just going to tell you, yeah, I'm not the

597
00:29:27,280 --> 00:29:27,800
Speaker 5: only one.

598
00:29:27,920 --> 00:29:29,959
Speaker 3: All right, Mark Urman, thank you so much. Bloomberg News

599
00:29:30,040 --> 00:29:32,719
Speaker 3: Chief Technology correspondent. Be sure to check out his weekly

600
00:29:32,880 --> 00:29:36,960
Speaker 3: column and his Power on newsletter.

601
00:29:39,160 --> 00:29:39,560
Speaker 8: Mac.

602
00:29:40,160 --> 00:29:41,160
Speaker 7: I bet you let me drive.

603
00:29:41,400 --> 00:29:43,560
Speaker 9: Oh no, no, no no, this is not a twin.

604
00:29:46,360 --> 00:29:46,880
Speaker 8: Please, I.

605
00:29:49,520 --> 00:29:50,040
Speaker 3: Want to drive.

606
00:29:52,320 --> 00:29:53,200
Speaker 6: It's a good question.

607
00:29:57,080 --> 00:29:59,080
Speaker 2: This is the drive to the clothes.

608
00:29:59,160 --> 00:29:59,960
Speaker 9: Now, plum for me.

609
00:30:00,360 --> 00:30:04,080
Speaker 2: Well then on Bloomberg Radio, all right.

610
00:30:03,920 --> 00:30:06,840
Speaker 3: Everybody, just about eighteen minutes left in today's trading session.

611
00:30:06,880 --> 00:30:08,480
Speaker 4: You heard from Charlie and Bill Maloney.

612
00:30:08,920 --> 00:30:11,040
Speaker 3: We've got stocks pretty much hovering near their best levels

613
00:30:11,040 --> 00:30:12,680
Speaker 3: of the session, so up about eight tens of a

614
00:30:12,720 --> 00:30:15,200
Speaker 3: percent on the S and P five hundred again, of

615
00:30:15,240 --> 00:30:18,080
Speaker 3: about two thirds of one percent on the Nasdaq one hundred,

616
00:30:18,160 --> 00:30:20,280
Speaker 3: and the Dowie, if you're interested, is up more than

617
00:30:20,320 --> 00:30:22,600
Speaker 3: one percent, So we're talking about a five hundred point gain.

618
00:30:23,200 --> 00:30:26,080
Speaker 3: And we've seen pretty much some broad based buying into

619
00:30:26,280 --> 00:30:26,920
Speaker 3: the trade.

620
00:30:27,000 --> 00:30:30,200
Speaker 5: Hey, it's everybody's favorite parlor game, Carol Masser. How many

621
00:30:30,200 --> 00:30:32,480
Speaker 5: times is the Fed going to cut rates this year?

622
00:30:32,760 --> 00:30:33,920
Speaker 4: It's going to do what it's going to do.

623
00:30:34,120 --> 00:30:36,440
Speaker 5: Well, traders, right now, pricing in about one and a

624
00:30:36,480 --> 00:30:38,160
Speaker 5: half rate cuts by the end of the year. Yet

625
00:30:38,200 --> 00:30:42,680
Speaker 5: our next guest says he's expecting four rate cuts. We're

626
00:30:42,680 --> 00:30:44,960
Speaker 5: going to drive the clothes now with Chris McMahon, CEO

627
00:30:45,000 --> 00:30:48,040
Speaker 5: of Aquinas Wealth Advisors and MFA Wealth. Chris joins us

628
00:30:48,040 --> 00:30:50,240
Speaker 5: here in the Bloomberg Interactive Brokers Studio. He's also the

629
00:30:50,280 --> 00:30:53,320
Speaker 5: author of a new book, Faithful Finances, Six Steps to

630
00:30:53,440 --> 00:30:57,320
Speaker 5: Establishing a Catholic Financial Life. Chris, good to see you again.

631
00:30:57,840 --> 00:31:01,160
Speaker 5: Look at that one and a half rate cuts by

632
00:31:01,160 --> 00:31:03,479
Speaker 5: the end of the year. That's what sure the folks

633
00:31:04,000 --> 00:31:06,600
Speaker 5: the options market is looking at right here, you're saying

634
00:31:06,640 --> 00:31:07,480
Speaker 5: four though, why.

635
00:31:07,400 --> 00:31:09,400
Speaker 9: A couple of reasons. I think it's funny, Tim, isn't it?

636
00:31:09,440 --> 00:31:10,520
Speaker 9: What just last week?

637
00:31:10,640 --> 00:31:10,760
Speaker 3: Was it?

638
00:31:10,840 --> 00:31:13,800
Speaker 9: Vava said no rate cuts? They said, look, we're in trouble.

639
00:31:14,200 --> 00:31:18,000
Speaker 9: The inflation's not rained in. We're gonna have no cuts

640
00:31:18,000 --> 00:31:20,320
Speaker 9: next year. Then we saw what happened. PPI was cool.

641
00:31:20,400 --> 00:31:21,720
Speaker 9: CPI was cool last week.

642
00:31:21,800 --> 00:31:22,000
Speaker 6: Right.

643
00:31:22,120 --> 00:31:24,320
Speaker 9: Then. Of course, Goldman came out just the other day

644
00:31:24,320 --> 00:31:25,840
Speaker 9: and said, look, we're I think what did they called.

645
00:31:25,880 --> 00:31:27,800
Speaker 9: I think they called it the sweet spot of the

646
00:31:27,800 --> 00:31:30,840
Speaker 9: economy where inflation's under control yet and also at the

647
00:31:30,880 --> 00:31:33,680
Speaker 9: same time, the economy is growing, and I think they

648
00:31:33,720 --> 00:31:35,640
Speaker 9: called for two if them research so they called for two,

649
00:31:35,840 --> 00:31:37,520
Speaker 9: and we're swinging for the fences. We think there's gonna

650
00:31:37,520 --> 00:31:38,840
Speaker 9: be four. And one of the big reasons for this,

651
00:31:38,920 --> 00:31:40,720
Speaker 9: which I don't think we're talking about enough, is kind

652
00:31:40,720 --> 00:31:42,600
Speaker 9: of all this commercial real estate that's out there cooking

653
00:31:42,640 --> 00:31:45,080
Speaker 9: the refinanceays. There's still a trillion dollars of commercial real

654
00:31:45,160 --> 00:31:47,560
Speaker 9: estate leases are gonna have to be refinanced in twenty

655
00:31:47,600 --> 00:31:50,200
Speaker 9: twenty five. That means that those interest rates have an

656
00:31:50,400 --> 00:31:53,000
Speaker 9: enormous impact on this are you know, I certainly the

657
00:31:53,400 --> 00:31:55,760
Speaker 9: FED might be you know, smidge political from time to time.

658
00:31:55,840 --> 00:31:58,040
Speaker 3: Right, you're saying the Fed is going to do four

659
00:31:58,120 --> 00:31:59,960
Speaker 3: rate cuts to tell about the commercial real estate?

660
00:32:00,080 --> 00:32:00,360
Speaker 6: I do.

661
00:32:00,480 --> 00:32:02,160
Speaker 9: I think that's going to have to We're I think

662
00:32:02,160 --> 00:32:04,200
Speaker 9: we have a I think, Carol, I think at the

663
00:32:04,280 --> 00:32:06,240
Speaker 9: end of the day, it will be a catastrophe. It'll

664
00:32:06,240 --> 00:32:08,240
Speaker 9: slow down so much of this mojo we have going now,

665
00:32:08,360 --> 00:32:10,280
Speaker 9: we'll push up against new highs in the Dow if

666
00:32:10,280 --> 00:32:13,600
Speaker 9: we see, if we see some of this really problematic

667
00:32:13,640 --> 00:32:16,000
Speaker 9: real estate not being refinanced at reasonable rates, I think

668
00:32:16,040 --> 00:32:17,520
Speaker 9: it's gonna be a problem. And I think that's all.

669
00:32:17,520 --> 00:32:21,840
Speaker 4: Why should sorry, why should the Fed do that? What

670
00:32:21,880 --> 00:32:23,440
Speaker 4: are the implicator I mean.

671
00:32:23,680 --> 00:32:24,520
Speaker 9: Lots of implications.

672
00:32:24,600 --> 00:32:27,320
Speaker 3: That's a great question, But I mean, why once again

673
00:32:27,400 --> 00:32:29,360
Speaker 3: should there be kind of a bailout.

674
00:32:30,920 --> 00:32:33,560
Speaker 4: Well, that's a great question or a very helpful move.

675
00:32:34,120 --> 00:32:35,920
Speaker 9: I think they would do it absolutely as a bail

676
00:32:35,920 --> 00:32:37,280
Speaker 9: They wouldn't call it a ballot, but I think it's

677
00:32:37,360 --> 00:32:39,400
Speaker 9: a move to a the commercial real list to industry.

678
00:32:39,600 --> 00:32:42,080
Speaker 9: I think the consequences of not doing it or could

679
00:32:42,120 --> 00:32:45,480
Speaker 9: be potentially could derail this entire market. We could see

680
00:32:45,640 --> 00:32:48,840
Speaker 9: markets push down twenty you know, twenty percent easily. And

681
00:32:48,880 --> 00:32:50,640
Speaker 9: some of these games we've made, and we've made them today.

682
00:32:50,880 --> 00:32:52,880
Speaker 3: So take a step back, Chris, So you're saying, I mean,

683
00:32:52,920 --> 00:32:55,840
Speaker 3: we've been talking about concerns about office property commercial, right,

684
00:32:55,880 --> 00:32:57,880
Speaker 3: it's the office property, and it's not the top tier.

685
00:32:57,880 --> 00:32:59,920
Speaker 3: We're talking about the lower tiers.

686
00:33:00,640 --> 00:33:03,240
Speaker 4: And is this just because of pandemic people not going

687
00:33:03,280 --> 00:33:05,680
Speaker 4: back to the office. It's just as simple as that is.

688
00:33:05,720 --> 00:33:09,200
Speaker 3: It's vacant office properties that you really can't repurpose, and

689
00:33:09,240 --> 00:33:10,680
Speaker 3: so something's got to happen.

690
00:33:10,800 --> 00:33:13,640
Speaker 9: Absolutely. Carol from Pittsburgh. We've a tower there be and

691
00:33:13,720 --> 00:33:15,720
Speaker 9: y has a huge tower in Pittsburgh. They're saying it's

692
00:33:15,720 --> 00:33:17,680
Speaker 9: gonna be thirty percent occupied by the end of the year.

693
00:33:17,800 --> 00:33:21,160
Speaker 9: Thirty percent, right, And that's just one little city. Cleveland.

694
00:33:21,160 --> 00:33:23,720
Speaker 9: You saw what happened the skyscrapers that were sold. That's

695
00:33:23,760 --> 00:33:26,000
Speaker 9: a huge issue. We see it. And then factor the

696
00:33:26,000 --> 00:33:28,200
Speaker 9: fact that europe Central Bank said they were going to

697
00:33:28,280 --> 00:33:30,960
Speaker 9: do four cuts. We don't mimic what Europe does, but

698
00:33:31,000 --> 00:33:32,800
Speaker 9: I think we're going to be in an environment of reduce,

699
00:33:33,120 --> 00:33:37,320
Speaker 9: of decreasing interest rates, and I think inflation has at

700
00:33:37,440 --> 00:33:39,400
Speaker 9: least taken a pause. It gives them an opportunity to

701
00:33:39,480 --> 00:33:41,480
Speaker 9: at least do too, you know, in the first in

702
00:33:41,520 --> 00:33:43,320
Speaker 9: the beginning of the year, in the first quarter for sure.

703
00:33:43,600 --> 00:33:45,520
Speaker 5: Okay, let's take a step back from rapcuts and talk

704
00:33:45,520 --> 00:33:48,240
Speaker 5: about the incoming administration. I guess it's not well.

705
00:33:48,280 --> 00:33:51,280
Speaker 4: It's kind of like linked it totally is.

706
00:33:51,360 --> 00:33:54,480
Speaker 5: I mean, but they only have so much power. You said,

707
00:33:54,480 --> 00:33:56,080
Speaker 5: the FED sometimes gets political.

708
00:33:56,200 --> 00:33:57,560
Speaker 9: Every now and then they do get a little.

709
00:33:57,600 --> 00:33:58,640
Speaker 5: What are some examples of that?

710
00:33:58,880 --> 00:34:00,720
Speaker 9: Well, I mean, I think I think we've seen the

711
00:34:00,760 --> 00:34:03,880
Speaker 9: interest rates go be cut probably at times last year

712
00:34:03,920 --> 00:34:07,080
Speaker 9: when we had a big seventy five bit basis cut,

713
00:34:07,240 --> 00:34:08,880
Speaker 9: people say, what's going on right now? We're still in

714
00:34:08,880 --> 00:34:11,239
Speaker 9: an inflationary period. Clearly that was a sign to get

715
00:34:11,280 --> 00:34:14,520
Speaker 9: in front of him, to sorry, set aside inflation and

716
00:34:14,600 --> 00:34:16,239
Speaker 9: make consumers confident.

717
00:34:16,320 --> 00:34:16,400
Speaker 8: Right.

718
00:34:16,440 --> 00:34:18,040
Speaker 9: We see that all the time, and I think we're

719
00:34:18,040 --> 00:34:19,880
Speaker 9: going to see it more. Consumer debt is still at

720
00:34:19,920 --> 00:34:22,320
Speaker 9: all time highs. It's really a problem, right, But I

721
00:34:22,320 --> 00:34:24,279
Speaker 9: don't worry about the consumer debt nearly as much they

722
00:34:24,280 --> 00:34:26,480
Speaker 9: do the commercial real estate. I think that debt could

723
00:34:26,520 --> 00:34:29,280
Speaker 9: be catastrophic to the economy, and I think, wait.

724
00:34:29,120 --> 00:34:30,520
Speaker 4: Is that because the bank exposure.

725
00:34:30,640 --> 00:34:31,960
Speaker 9: Yes, I think particularly regions.

726
00:34:31,960 --> 00:34:32,200
Speaker 6: So then we.

727
00:34:32,160 --> 00:34:34,520
Speaker 4: Shouldn't bring down the capital reserve ratio, should we?

728
00:34:34,680 --> 00:34:35,160
Speaker 9: No, we should not.

729
00:34:35,239 --> 00:34:36,399
Speaker 4: We should maybe even increase them.

730
00:34:36,480 --> 00:34:38,520
Speaker 9: We're worried about regional banks. We think the big banks

731
00:34:38,560 --> 00:34:40,000
Speaker 9: are going to be okay, the regional banks and whole

732
00:34:40,000 --> 00:34:42,279
Speaker 9: commercial real estate, we're very worried about what that would

733
00:34:42,280 --> 00:34:43,799
Speaker 9: do to them. And that's why we see the interest

734
00:34:43,840 --> 00:34:47,320
Speaker 9: rates coming down. It'll save, it'll save, in our opinion

735
00:34:47,320 --> 00:34:49,040
Speaker 9: of the regional banks, a great deal of pain, a

736
00:34:49,040 --> 00:34:49,640
Speaker 9: lot of stress.

737
00:34:50,040 --> 00:34:50,239
Speaker 10: Right.

738
00:34:50,360 --> 00:34:54,440
Speaker 3: Well, well, so it's kind of interesting.

739
00:34:54,480 --> 00:34:55,760
Speaker 4: So I'm thinking about people who are listening.

740
00:34:55,760 --> 00:34:57,480
Speaker 3: I mean, we've what I wanted to go back to

741
00:34:57,560 --> 00:35:00,399
Speaker 3: is that we've been thinking about talking about concer, about

742
00:35:00,400 --> 00:35:03,880
Speaker 3: office properties, and you're saying, because today this year is

743
00:35:03,920 --> 00:35:06,719
Speaker 3: when they've got to start making the payments and they've

744
00:35:06,719 --> 00:35:11,400
Speaker 3: got to either restructure. Huh Okay. If we don't get that,

745
00:35:11,440 --> 00:35:14,960
Speaker 3: then what happens? Is it a financial crisis akin to

746
00:35:15,160 --> 00:35:16,760
Speaker 3: the GFC the Great Financial Crisis?

747
00:35:16,800 --> 00:35:18,000
Speaker 9: I don't think so. I think it's going to be

748
00:35:18,040 --> 00:35:19,799
Speaker 9: nothing like, it's not going to be compared, but it's

749
00:35:19,800 --> 00:35:22,080
Speaker 9: going to be one. Maybe it'll be it'll be you know,

750
00:35:22,120 --> 00:35:24,000
Speaker 9: forty percent of it could be dramatic. I think we

751
00:35:24,080 --> 00:35:26,880
Speaker 9: can have twenty I even potentially twenty five percent rundown

752
00:35:26,920 --> 00:35:29,279
Speaker 9: on all the all the capital markets, which would be

753
00:35:29,360 --> 00:35:32,279
Speaker 9: catastrophic and all that wealth that was created would be

754
00:35:32,719 --> 00:35:33,799
Speaker 9: wiped out. I think.

755
00:35:33,920 --> 00:35:36,399
Speaker 3: But your real concern is the regional bank exposure. They're

756
00:35:36,400 --> 00:35:37,680
Speaker 3: the ones that are going to feel it.

757
00:35:38,960 --> 00:35:40,560
Speaker 5: Go ahead, I want to talk a little bit about

758
00:35:40,600 --> 00:35:42,879
Speaker 5: like step back, big picture and hear more about what

759
00:35:42,960 --> 00:35:45,879
Speaker 5: you do at aquinas Wealth Advisors in MFA Wealth, because

760
00:35:45,880 --> 00:35:48,480
Speaker 5: you're a CEO of both of these organizations. I want

761
00:35:48,520 --> 00:35:50,560
Speaker 5: to focus on aquinas a little bit because you write

762
00:35:50,560 --> 00:35:53,319
Speaker 5: that you believe that good returns and good values are

763
00:35:53,360 --> 00:35:56,000
Speaker 5: not mutually exclusive. You also have this new book coming

764
00:35:56,040 --> 00:35:59,000
Speaker 5: out about faith and investing. Talk to us a little

765
00:35:59,040 --> 00:36:01,280
Speaker 5: bit about how you make investments based on your face.

766
00:36:01,320 --> 00:36:03,440
Speaker 9: It's interesting to him. For years, we never did it,

767
00:36:03,480 --> 00:36:06,200
Speaker 9: They said, separate it, don't ever discuss politics and religion.

768
00:36:06,440 --> 00:36:10,000
Speaker 9: But what happened was it became so polarized in the boardrooms.

769
00:36:10,040 --> 00:36:14,320
Speaker 9: Boards became so socially active, much like college boardrooms did previously.

770
00:36:14,480 --> 00:36:16,319
Speaker 9: And what we found as many of our investors were

771
00:36:16,320 --> 00:36:18,800
Speaker 9: saying that had more traditional values. They're said, my goodness,

772
00:36:19,520 --> 00:36:22,840
Speaker 9: the companies I'm investing in are radically out of alignment

773
00:36:22,880 --> 00:36:25,239
Speaker 9: with the things I'm concerned about. Our main goal be

774
00:36:25,239 --> 00:36:27,400
Speaker 9: to pull these companies back to neutral. That would be

775
00:36:27,440 --> 00:36:29,560
Speaker 9: our main goal, right, get back to the old days.

776
00:36:29,680 --> 00:36:32,040
Speaker 9: Companies make profits, They give the shareholders of the former

777
00:36:32,080 --> 00:36:36,600
Speaker 9: dividends instead of having chairmans of companies. They've become really overvalued.

778
00:36:36,600 --> 00:36:38,319
Speaker 9: They think their opinions are so important to us, which

779
00:36:38,320 --> 00:36:38,640
Speaker 9: they're not.

780
00:36:38,680 --> 00:36:39,840
Speaker 5: But did that hurt returns?

781
00:36:40,480 --> 00:36:40,600
Speaker 6: Oh?

782
00:36:40,600 --> 00:36:41,680
Speaker 9: Absolutely I think it did. Certainly.

783
00:36:41,880 --> 00:36:43,839
Speaker 5: What are some examples of companies that went all in

784
00:36:43,880 --> 00:36:46,640
Speaker 5: on these policies that then didn't have returns as good

785
00:36:46,680 --> 00:36:47,480
Speaker 5: as you think they could have.

786
00:36:47,560 --> 00:36:50,080
Speaker 9: That's a good question. I think there's an issue around

787
00:36:50,719 --> 00:36:57,200
Speaker 9: investors bailing out on securities that hurt those companies ultimately.

788
00:36:57,400 --> 00:36:59,520
Speaker 9: And I think when I think about that, there's some

789
00:36:59,560 --> 00:37:03,000
Speaker 9: companies have done poorly. And also there's been a little

790
00:37:03,000 --> 00:37:04,800
Speaker 9: bit of impunity if you're a call correctly some of

791
00:37:04,840 --> 00:37:06,600
Speaker 9: the corporations where they saying, look, we don't care, this

792
00:37:06,680 --> 00:37:08,840
Speaker 9: is who we are. For example, you know that corporate

793
00:37:09,080 --> 00:37:11,680
Speaker 9: Equity Index scoring and you familiar with that scoring system,

794
00:37:11,880 --> 00:37:14,799
Speaker 9: which really think about that for a second. Just two

795
00:37:14,880 --> 00:37:16,960
Speaker 9: years ago, they were saying, unless you adopt our mandates

796
00:37:16,960 --> 00:37:19,759
Speaker 9: around you know, DEI and these other types of concerns,

797
00:37:20,200 --> 00:37:22,960
Speaker 9: even if your company is profitable, we're gonna if your

798
00:37:23,120 --> 00:37:25,640
Speaker 9: corporate Equity Index score is not high enough, we're going

799
00:37:25,719 --> 00:37:27,600
Speaker 9: to displace you as the chairman of the company. We're

800
00:37:27,600 --> 00:37:29,719
Speaker 9: going to change the makeup of your board. That these

801
00:37:29,719 --> 00:37:31,880
Speaker 9: companies are being held hostage by these mandates, and I

802
00:37:31,960 --> 00:37:35,840
Speaker 9: think that really is changing dramatically and very very quickly

803
00:37:35,840 --> 00:37:36,360
Speaker 9: as we see it.

804
00:37:36,480 --> 00:37:38,120
Speaker 3: I think there's two sides too, because we also have

805
00:37:38,160 --> 00:37:40,879
Speaker 3: a story about how a group of about thirty shareholders

806
00:37:40,920 --> 00:37:43,000
Speaker 3: representing about two hundred and sixty six billion in funds

807
00:37:43,000 --> 00:37:46,360
Speaker 3: as asked Walmart to explain its decision to retreat on diversity,

808
00:37:46,440 --> 00:37:50,160
Speaker 3: equity and inclusion initiatives, especially after years of having consultants

809
00:37:50,239 --> 00:37:53,880
Speaker 3: McKenzie and others saying, listen, diversity improves performance.

810
00:37:54,640 --> 00:37:56,400
Speaker 9: Yeah, it's a great quick thing. You go right to

811
00:37:56,400 --> 00:37:58,439
Speaker 9: the point, Carroll, here's the problem you're going. No one's

812
00:37:58,480 --> 00:38:00,279
Speaker 9: ever going to be satisfied. We shouldn't get out of

813
00:38:00,280 --> 00:38:04,279
Speaker 9: this business altogether. And reverse discrimination is discrimination, always discrimination.

814
00:38:04,520 --> 00:38:06,399
Speaker 4: Chris, we got to run. Happy New Year.

815
00:38:07,600 --> 00:38:12,400
Speaker 2: This is the Bloomberg Business Week podcast, available on Apple, Spotify,

816
00:38:12,520 --> 00:38:16,240
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817
00:38:16,280 --> 00:38:20,280
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818
00:38:20,320 --> 00:38:24,240
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819
00:38:24,480 --> 00:38:27,280
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820
00:38:27,440 --> 00:38:29,600
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