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Speaker 1: CME Group US DOCK Index futures higher, with equities poised

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Speaker 1: on growth. To check the markets every fifteen minutes throughout

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Speaker 1: the trading day on bloomberg S and p EVENI futures

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Speaker 1: up three points, Dow e Many futures up thirty five,

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Speaker 1: NASA documny futures up seven and a half, The acts

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Speaker 1: in Germany's up six tenths per cent, ten Your treasury

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Speaker 1: up three thirty seconds, the yield one point eight five percent.

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Speaker 1: That yield on the two year point eight nine percent.

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Speaker 1: Non mex scrude oil off one per cent or forty

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Speaker 1: nine cents to fifty dollars five cents of barrel comes

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Speaker 1: gold ups the extents per cent or seven dollars to

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Speaker 1: twelve thirty three sixty. Announced the euro a dollar at

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Speaker 1: twelve eleven again one oh nine point seven five and

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Speaker 1: in the headline crossing the Bloomberg banks and Saudi Arabia

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Speaker 1: are coming at our fresh pressure over products that allows

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Speaker 1: speculators to bet against the kingdom's currency peg. That's according

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Speaker 1: to people in knowledge of the matter, that's a Bloomberg

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Speaker 1: business flash. Tom and Mike Karen, thank you so much.

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Speaker 1: You get lucky. And we are this morning with the

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Speaker 1: news on Apple, Time Warner, not news but speculation. Gene

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Speaker 1: Munster is with Piper Jeffrey and has helped us so

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Speaker 1: much with perspective on Apple computer Gene. There are sixteen

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Speaker 1: years ago January two thousand, there is that timeless photograph

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Speaker 1: of Mr Levin of Time Warner and Mr Case of

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Speaker 1: America Online. Is Tim Cook heading into a nightmare? I

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Speaker 1: fee even begins to think about this transaction. I think so,

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Speaker 1: and I think the reason is that what Apple is

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Speaker 1: trying to accomplish in content won't necessarily to be solved

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Speaker 1: by getting Time Warner potentially Netflix, And the reason is

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Speaker 1: they want a solution that has everything they want to

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Speaker 1: kind of all in one product, and by buying some

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Speaker 1: content doesn't solve that. And so I think that their

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Speaker 1: money will be better spent going after things around self

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Speaker 1: driving cars or mixed reality versus content. The scope and

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Speaker 1: scale we forget Time Warner so iconic, Bugs, Bunny and

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Speaker 1: everything else. We know of billion of cash from operations

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Speaker 1: versus four billion. It's amazing on every ratio how much

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Speaker 1: smaller Time Warner is an Apple computer. Yeah it is.

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Speaker 1: And I think that's kind of feed some of this

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Speaker 1: belief that it can happen is because Apple has so

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Speaker 1: much leverage and you know, sixty billion plus a year

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Speaker 1: and free cash flow, and so it makes it easy

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Speaker 1: for them to consider these. But I think if they

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Speaker 1: go down this road and do Time Warner, that doesn't

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Speaker 1: solve the problem. If they go and buy more than

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Speaker 1: Time Warner and the content, then it starts to make

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Speaker 1: more sense if they've got a broader, uh content acquisition strategy.

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Speaker 1: The challenge they'll have with that, though, is there's anti

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Speaker 1: trust issues that will kick in. If they really want

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Speaker 1: their money is better spent at paying up for licensing

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Speaker 1: a broad range of content. In our opinion, Yeah, you

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Speaker 1: think that folks are making too much of this. I mean,

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Speaker 1: the story was that they met a year ago, and

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Speaker 1: it does appear that neither side moved forward with it. Yeah,

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Speaker 1: I think that I think they're making too much out

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Speaker 1: of it. I think that Apple is intensely interested at

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Speaker 1: fixing the content problem, and I think they're meeting with

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Speaker 1: all the content players, and so it's understandable that these

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Speaker 1: stories are coming out, but it doesn't solve I think

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Speaker 1: they're bigger picture challenge. What Apple is really going for

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Speaker 1: is that if you have an Apple TV, you're going

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Speaker 1: to have thirty different or fifty different channels that you

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Speaker 1: can choose from and pay a few dollars per month.

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Speaker 1: And the idea is that you get the package that

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Speaker 1: you really want for sixty dollars in total versus spending today.

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Speaker 1: That's what they're going after, and they get that. They

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Speaker 1: got to meet with pretty much everybody in the content world. Uh.

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Speaker 1: Story about Apple was one of two companies that met

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Speaker 1: and did not proceed. Uh, we've got another story about

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Speaker 1: two companies that said they weren't going to proceed and

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Speaker 1: maybe they are A T and T, reported yesterday by

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Speaker 1: our Alex Sherman, is actually bidding for you who after

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Speaker 1: saying they wouldn't do that. Yeah, yeah, Who has been

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Speaker 1: obviously shopping themselves. And I think that a lot of

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Speaker 1: companies say that they won't do this because they don't

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Speaker 1: want to tip their hand and these negotiations, the best

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Speaker 1: thing to say is we're not interested in hope that

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Speaker 1: the price comes down. I think what we've seen with

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Speaker 1: other content with A O L getting acquired by Verizon

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Speaker 1: kind of opened up. I think some of the historical

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Speaker 1: windows that the companies, like the carriers have thought about

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Speaker 1: these content players. In other words, I think that this

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Speaker 1: is something that kind of fall within the reason. And again,

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Speaker 1: everybody knows that Yahoo's for sale and A T and

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Speaker 1: T is a potential acquir and probably towards the top

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Speaker 1: of the list. Help me here with what Tim Cook

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Speaker 1: has learned from whenever they paid for Beats iTunes, of

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Speaker 1: which full disclosure, folks, I bought a fair amount of

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Speaker 1: stuff his vapored in the last year off of Apple

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Speaker 1: music and streaming. That's got to be sobering. Even if

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Speaker 1: you're making any one billion cash from operations well, if

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Speaker 1: you look at their services business, it's ten percent of revenue.

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Speaker 1: It grew at in the March quarter at in the

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Speaker 1: December quarter. This doesn't get to your point about iTunes

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Speaker 1: that they're broader strategy around services which include apps. I

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Speaker 1: think that's going very well. That's all combined together, it's

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Speaker 1: an extremely profitable form and as a six gross margin

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Speaker 1: versus on the content side. To your point, they have struggled,

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Speaker 1: and I think that struggled as a relative term. I

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Speaker 1: think that that, uh, the Beats acquisition really didn't play out,

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Speaker 1: and ultimately the hardware, the headphone hardware is kind of okay.

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Speaker 1: So what did they learn from that? What do they

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Speaker 1: learn from you know, Jimmy and all the press conferences,

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Speaker 1: in the hand holding like Levin in case a million

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Speaker 1: years ago, gene Muster. What was the lesson learned? The

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Speaker 1: biggest lesson is that when they need to make bets,

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Speaker 1: and these have been relatively small bets so far, but

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Speaker 1: they need to get themselves in high growth markets. Don't

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Speaker 1: get yourself into a headset the Beats headphones market, which

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Speaker 1: ended up rolling over. You want to spend money in

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Speaker 1: markets that have huge growth opportunity scale Mike means Volde

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Speaker 1: Coastal one on one, you gotta have skilly well that

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Speaker 1: they have it and they don't. Where where are you

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Speaker 1: by by hold Cell right now in this bear market dog,

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Speaker 1: I love telling Gene Munster that where are you? Gene?

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Speaker 1: We're gonna come back with you, but where are you

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Speaker 1: by hold Cell? Were believers in this. We have a

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Speaker 1: by rating based on as the numbers start to turn

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Speaker 1: positive in the December quarter, the multiple is going to

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Speaker 1: go up. Very good. We're gonna come back with Gene Muster.

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Speaker 1: Interesting technological discussion on Apple, Uh computer. I've got a

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Speaker 1: target here one fifty three on Apple, which is modestly

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Speaker 1: higher from where it is right now. Mike, It's amazing

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Speaker 1: how we get lucky of our guests. Gene was booked

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Speaker 1: like six months ago, and then you get this is Mike,

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Speaker 1: you correctly said rumor from a year ago. Is that

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Speaker 1: the right way to put it seems to be when

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Speaker 1: it came down to ok, well, Gene Muster, Piper Jeffrey

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Speaker 1: with us. We're thrilled to keep this conversation going. We

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Speaker 1: speak to you on economics for dance, investment and international relations.

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Speaker 1: Bloomberg surveillance kind of down to the opening veil, brought

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Speaker 1: to you by the Jeep Grand Cherokee, the most awarded

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Speaker 1: suv ever. The Grand Cherokee continues to raise the bar

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Speaker 1: where it's the luxurious interior and legendary four by four

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Speaker 1: capability drive. Wanted your local jeep dealer today, broadcasting live

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Speaker 1: to New York Cloomberg eleventh oh to Washington, d C.

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Speaker 1: Bloomber to Boston, Bloomberg twelve one, to San Francisco, Bloomberg

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Speaker 1: nine sixteen, to the Country Series Exam Channel one nineteen

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Speaker 1: and around the globe the Bloomberg Radio Plus Appen Bloomberg

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Speaker 1: dot com. This is Bloomberg Surveillance and good morning. I'm

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Speaker 1: Karen Moscow along with Tom Keene and Michael McKee. The

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Speaker 1: opening galve roto you buy SEI. Today's competitive market place

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Speaker 1: requires asset managers to become more operationally adept. Imagine transforming

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Speaker 1: your business with SEIS Global Platform at se sc dot com.

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Speaker 1: Slash I m s and stocks are a little changed

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Speaker 1: to hire at the open. The SNP five hundred up

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Speaker 1: a point to one down. Johnes Industrial Average up twelve

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Speaker 1: points to seventeen thousand, eight hundred sixty six. That's about

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Speaker 1: a tenth of upper sent the NASDAC up almost a

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Speaker 1: tenth of upper cent up three points to forty ten

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Speaker 1: your treasury of four thirty secon gainst the yield one

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Speaker 1: point eight five percent, the yield on the two year

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Speaker 1: point eight eight percent. Non Mike Screwed oil up nine

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Speaker 1: ten percent or forty four cents to fifty dollars a barrel.

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Speaker 1: Comics gold is up six ten percent or seven dollars

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Speaker 1: to twelve thirty three sixty announced the euro a dollar

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Speaker 1: twelve twelve y and one oh nine point seven five.

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Speaker 1: Tom and Mike Cara Mascott, thank you very much. We're

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Speaker 1: talking with Gene Monster of Piper Jaffrey about the latest

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Speaker 1: in the technology UH corporate space, and we were talking

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Speaker 1: about how great it is to have him on on

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Speaker 1: this day when there's some breaking news. Um, there is

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Speaker 1: some other breaking news this morning, Gene that is fascinating

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Speaker 1: to me. Amazon, Bloomberg Reporting is expanding its cloud service

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Speaker 1: for artificial intelligence software. I know, when you make a

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Speaker 1: super computer, they don't just build one computer, they tie

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Speaker 1: out basically a whole bunch of computers together. And this

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Speaker 1: says that Amazon is working on basically doing that, you

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Speaker 1: can create a supercomputer essentially, Uh, if their technology works,

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Speaker 1: and run your artificial intelligence software on it and do

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Speaker 1: amazing things. Uh. This has nothing to do with delivering

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Speaker 1: diapers to your door. It doesn't. It's a totally separate business.

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Speaker 1: There's a kind of a long, uncorrect story that they

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Speaker 1: they birth this business out of kind of extra capacity

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Speaker 1: they had from their retail commerce. But it's actually just

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Speaker 1: a totally separate business. And they think they have huge

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Speaker 1: ambitions that every business eventually is going to be run

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Speaker 1: off the cloud. And what you're talking about today makes

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Speaker 1: it for even bigger companies to be able to scale

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Speaker 1: all these computers together and to build one massive machine

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Speaker 1: that's a really smart machine. And so how what what

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Speaker 1: kind of company is Amazon going to be? Does this

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Speaker 1: lead at some point to Amazon splitting into pieces? I

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Speaker 1: think eventually that they that that's we don't know, is

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Speaker 1: the answer. But but conceptually there are two different businesses.

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Speaker 1: And so if you think about eBay and PayPal and

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Speaker 1: the fact that they had some working together but they

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Speaker 1: eventually able to split, there's no expectation that that's going

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Speaker 1: to happen, but conceptually that could happen. When do I

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Speaker 1: get to buy Amazon? How do you deal Gene Munster

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Speaker 1: with the stock that will never pull back. You look

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Speaker 1: at the big long term themes and ask how well

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Speaker 1: they positioned, and you don't worry as much about the

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Speaker 1: valuation piece. And I know that's a hard thing to do,

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Speaker 1: and that can be a trap in the past. But

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Speaker 1: in this case, they have infrastructure that's almost impossible to

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Speaker 1: be And I'll give you one example of something that's

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Speaker 1: just emerging. It's it's automated commerce. And they're starting to

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Speaker 1: work with different product manufacturers like washing machines and dishwashers,

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Speaker 1: and and and locks on your home that require batteries

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Speaker 1: and light bulbs and all these things that you spent

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Speaker 1: endless time trying to refill. Amazon is getting smarter and

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Speaker 1: building smart machines, helping manufacturers like road Pool build smart

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Speaker 1: machines that will automate that. That's the kind of stuff

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Speaker 1: that makes investors feel comfortable that even though the valuation

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Speaker 1: is high, that they can continue to gain wallet share

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Speaker 1: over the next decade. Again, you come down to the

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Speaker 1: question of when you get paid. I mean not just

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Speaker 1: when you buy it, when you get paid for it.

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Speaker 1: Um are they getting the point where they're gonna be

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Speaker 1: getting Apple like where they're going to have so much

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Speaker 1: um overdue to the investors that the pressure on Jeff

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Speaker 1: Bezos gets so enormous he's got to change his business strategy.

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Speaker 1: I don't think so. I think he tends to look

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Speaker 1: at things as a private company and operates as a

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Speaker 1: private company. He's making decisions for the next five and

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Speaker 1: ten years, and so I think that the mindset has

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Speaker 1: been historically more open to trying tofferent things. Where Apple

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Speaker 1: spend laser focused at making a few products really well,

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Speaker 1: Amazon takes this really broad approach of trying a lot

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Speaker 1: of different things and seeing what actually works. I look

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Speaker 1: at this and I look at the technology here. How

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Speaker 1: do you discern the digital landscape? Gene? I mean, I

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Speaker 1: know you're very focused on trying to find value, what

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Speaker 1: not to buy, what to buy in your iconic work

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Speaker 1: on Apple. How do you see the digital mill you?

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Speaker 1: Right now? What you want to do is take the

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Speaker 1: companies and see which one are growing users. And of

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Speaker 1: all the major internet companies and the major hardware companies,

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Speaker 1: you can you can take them and break them into

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Speaker 1: two groups. And then ultimately is that you have to

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Speaker 1: look at potentially what they have coming in the future.

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Speaker 1: I think Microsoft to a good example is a company

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Speaker 1: that has struggled to try to figure out what's next.

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Speaker 1: They've unlocked some value in their balance sheet, but they've

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Speaker 1: struggled to find out what's next. And so one of

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Speaker 1: our jobs is to try to look inside these companies

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Speaker 1: and things that aren't as a parent about areas that

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Speaker 1: they're investing in that can allow the user growth to

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Speaker 1: continue to grow. A company like Yeah who is struggling

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Speaker 1: because as we think about their product roadmap, it's just

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Speaker 1: harder to get excited about, you know, where where they're

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Speaker 1: going to drive user growth down the road. Well, of

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Speaker 1: the people who are trying to buy you, who has

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Speaker 1: the best plan or best capability of coming up with something?

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Speaker 1: I just kind of a quick side note is well

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Speaker 1: fair bonnya who stocked because they're Ali Baba share, which

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Speaker 1: is a whole different animal here. But in terms of

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Speaker 1: who would be interested in this, I think that you know,

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Speaker 1: we talked earlier about potentially a T and T and

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Speaker 1: that's been been rumored. Um. I struggle with who would

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Speaker 1: want to own Yahoo Core just because they've been trying

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Speaker 1: for so long to fix it. And I think the

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Speaker 1: simple answer is at the right price. There's a lot

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Speaker 1: of people who are interested in it, and it's got

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Speaker 1: to be at the price that compensates the acquire for

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Speaker 1: all the gene In the final minutes that we've got

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Speaker 1: left with, you bring it back to Apple and the

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Speaker 1: hysteria about iPhone seven translate for us the four hundred

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Speaker 1: seventy articles that have told us that Mr Cook's franchise

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Speaker 1: is dead. We've seen this before, yes, the pendulum and

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Speaker 1: what happens is when the expectations are low about the iPhone,

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Speaker 1: people get concerned and at the end of the day,

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Speaker 1: people are going to stay with their iPhones. The reby

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Speaker 1: rates are going to remain above. They're going to be

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Speaker 1: more aggressive in emerging markets, and ultimately that's going to

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Speaker 1: return iPhone to growth. I predict in six and twelve

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Speaker 1: months people are gonna think Tim Cook's a genius again

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Speaker 1: in very quickly. If they reduce price to compete on iPhone,

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Speaker 1: can they maintain margins? They can at the level that

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Speaker 1: they're doing it, and they reduce price on one of

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Speaker 1: their phones, the s E, by eleven percent, and they

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Speaker 1: will be able to maintain margins in that scenario. If

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Speaker 1: they get more aggressive, which we don't really see them doing,

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Speaker 1: that may be a different story, but we don't see that.

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Speaker 1: Happy Tim Cook. Maybe down the roads of genius, Gene Mustard,

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Speaker 1: right now, you're a genius. Thank you so much with

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Speaker 1: Piper Jeffrey with perspective. Mike, those questions on Amazon, you

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Speaker 1: add were brilliant. I mean it's like, I don't know

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Speaker 1: how many companies. Amazon is three four and I don't

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Speaker 1: even know where to put it. They got a movie company,

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Speaker 1: you know, I'm seeing more and more movies that are

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Speaker 1: Amazon produced or whatever that is. They got a cloud company.

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Speaker 1: I don't even understand what you were talking about, some

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Speaker 1: kind of new cloud company, new cloud strategy, additional cloud strategy.

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Speaker 1: But I mean they are They're conglomerate, but sort of

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Speaker 1: built from the ground up. They're not going out and buying.

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Speaker 1: I count the boxes of Amazon in the long hallway

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Speaker 1: in the eight thousand square feet that we have, you know,

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Speaker 1: and you look down the long hallway of the other units,

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Speaker 1: and I think, my red it's fifteen Amazon bucks in

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Speaker 1: the hallway. Unbelievable. Michael mcke and Tom King, we are

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Speaker 1: thrilled you're with us Green on the screen, the Deal

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Speaker 1: Up six, the vix point nine three. This morning, this

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Speaker 1: BMW mount Kisco dot com. Here's Michael bar with news

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Speaker 1: headlines night time. Thank you very much. President Obama says

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Speaker 1: foreign leaders are surprised by Donald Trump being the presumptive

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Speaker 1: Republican presidential nominee, or how seriously to take uh some

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Speaker 1: of his pronouncements. But the President Obama, who's attending a

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Speaker 1: G seven seven in Japan, says a lot of the

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Speaker 1: proposals Trump has made display either ignorance of world affairs

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Speaker 1: or a cavalier attitude, or an interest in getting tweets

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Speaker 1: and headlines. Hillary Clinton says the email controversy will not

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Speaker 1: affect her campaign. The State Departments Inspector General released a

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Speaker 1: report that was critical of Clinton's use of a private

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Speaker 1: email server while she was Secretary of State. Clinton says

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Speaker 1: the report also shows other secretaries of state used private

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Speaker 1: emails too. Hillary Clinton is a head of Donald Trump

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Speaker 1: and a new poll when it comes to mid income

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Speaker 1: Rust Belt voters, According to a Bloomberg pole, likely voters

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Speaker 1: with annual family incomes of thirty thousand to seventy five

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Speaker 1: thousand dollars at Michigan, Ohio, Pennsylvania and Wisconsin. Back Clinton

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Speaker 1: over Trump to the Solar Impulse has arrived in Pennsylvania.

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Speaker 1: The solar powered plane landed near Allentown yesterday after a

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Speaker 1: seventeen hour flight from Dayton, Ohio. Global News twenty four

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Speaker 1: hours a day. Michael Barck, Michael, thanks so much. Appreciate

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Speaker 1: that green on the screening Gale thousand eight seventy one

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