1 00:00:05,120 --> 00:00:08,480 Speaker 1: This is the Bloomberg Surveillance Podcast. I'm Tom Keane, along 2 00:00:08,520 --> 00:00:12,360 Speaker 1: with Jonathan Farroll and Lisa Abramowitz. Join us each day 3 00:00:12,400 --> 00:00:16,880 Speaker 1: for insight from the best an economics, geopolitics, finance and investment. 4 00:00:17,280 --> 00:00:22,119 Speaker 1: Subscribe to Bloomberg Surveillance on demand on Apple, Spotify and 5 00:00:22,320 --> 00:00:26,600 Speaker 1: anywhere you get your podcasts, and always on Bloomberg dot Com, 6 00:00:26,640 --> 00:00:30,640 Speaker 1: the Bloomberg Terminal, and the Bloomberg Business app. Joining us 7 00:00:30,640 --> 00:00:33,720 Speaker 1: with twenty two V Research. Twenty two V Research is 8 00:00:33,760 --> 00:00:37,520 Speaker 1: Michael Herson, head of their China research. This morning, Michael, 9 00:00:37,520 --> 00:00:40,800 Speaker 1: were you surprised by the NBC report of a discussion 10 00:00:40,840 --> 00:00:44,159 Speaker 1: between the two world leaders over the future of Taiwan. 11 00:00:44,960 --> 00:00:48,680 Speaker 2: No, not particularly surprised. It was consistent with what I 12 00:00:48,840 --> 00:00:51,960 Speaker 2: heard from the meeting. I obviously wasn't there, so I 13 00:00:52,000 --> 00:00:55,200 Speaker 2: can't speak to the details, but I think the notion 14 00:00:55,320 --> 00:00:59,360 Speaker 2: that she didn Ping is determined to pursue reunification with 15 00:00:59,440 --> 00:01:02,600 Speaker 2: Taiwan is not new. I think in some ways it 16 00:01:02,640 --> 00:01:05,960 Speaker 2: was equally as interesting that he told US officials, according 17 00:01:06,000 --> 00:01:09,480 Speaker 2: to this report, that there is no set timeline for 18 00:01:09,640 --> 00:01:11,800 Speaker 2: China to do so, and I think that is consistent 19 00:01:11,840 --> 00:01:16,200 Speaker 2: with the view that while this is a really important issue. 20 00:01:16,840 --> 00:01:20,840 Speaker 2: Beijing continues to exercise what you could call strategic patients 21 00:01:20,840 --> 00:01:23,280 Speaker 2: on this issue, and that's important because if that changes, 22 00:01:23,920 --> 00:01:26,240 Speaker 2: it does I think, you know, increase the near term 23 00:01:26,319 --> 00:01:29,039 Speaker 2: risks around Taiwan. For now, I think those near term 24 00:01:29,160 --> 00:01:30,200 Speaker 2: risks are manageable. 25 00:01:30,440 --> 00:01:33,119 Speaker 3: There is this question around whether China is going to 26 00:01:33,240 --> 00:01:35,319 Speaker 3: take an opportunity at a time where the US is 27 00:01:35,360 --> 00:01:38,559 Speaker 3: involved in a two front proxy war with both Russia 28 00:01:38,680 --> 00:01:43,000 Speaker 3: and Iran, to try to engage in this more aggressively 29 00:01:43,440 --> 00:01:46,840 Speaker 3: since it's already difficult for the US to commit exactly 30 00:01:47,000 --> 00:01:49,720 Speaker 3: how much they're going to weigh on these other conflicts. 31 00:01:50,840 --> 00:01:53,760 Speaker 2: I don't think we should dismiss those kinds of concerns. 32 00:01:53,760 --> 00:01:56,680 Speaker 2: I mean, we need to be realistic about, you know, 33 00:01:56,720 --> 00:01:59,200 Speaker 2: not mirror imaging in terms of how China thinks that 34 00:01:59,200 --> 00:02:00,920 Speaker 2: they're going to think about this the same way that 35 00:02:00,960 --> 00:02:03,520 Speaker 2: we do. At the same time, I think we need 36 00:02:03,560 --> 00:02:06,080 Speaker 2: to keep in mind there's a fundamental calculus that work 37 00:02:06,120 --> 00:02:10,080 Speaker 2: for Beijing, which is right now, it would be extremely risky, 38 00:02:10,280 --> 00:02:12,960 Speaker 2: even with the US tied down, so to speak, with 39 00:02:13,000 --> 00:02:18,880 Speaker 2: other conflicts, to pursue reunification through military means. And I 40 00:02:18,919 --> 00:02:21,960 Speaker 2: don't think that the urgency is there for China. I 41 00:02:21,960 --> 00:02:25,839 Speaker 2: think Beijing continues to feel that time is on their 42 00:02:25,880 --> 00:02:30,359 Speaker 2: side now that timeline is not infinite, as according to 43 00:02:30,400 --> 00:02:32,920 Speaker 2: the report she Dian paying stress to President Biden. But 44 00:02:32,960 --> 00:02:35,320 Speaker 2: I think the notion that Beijing would take this kind 45 00:02:35,360 --> 00:02:38,480 Speaker 2: of gamble in the near term seems to me probably 46 00:02:38,520 --> 00:02:40,760 Speaker 2: not worth it from the standpoint of China's leadership. 47 00:02:40,880 --> 00:02:44,240 Speaker 3: What is the motivation to try to take Taiwan at 48 00:02:44,280 --> 00:02:46,280 Speaker 3: a time where there are some real clouds over the 49 00:02:46,320 --> 00:02:49,160 Speaker 3: economic outlook for China, where they're trying to woo back 50 00:02:49,360 --> 00:02:53,880 Speaker 3: US and other international businesses, and where Xijinping is dealing 51 00:02:53,880 --> 00:02:56,120 Speaker 3: with a host of issues around the housing market that 52 00:02:56,160 --> 00:02:57,000 Speaker 3: are also challenging. 53 00:02:58,080 --> 00:03:00,359 Speaker 2: I think that's exactly right. I think if they made 54 00:03:00,440 --> 00:03:04,040 Speaker 2: this kind of move now, it would basically be trading 55 00:03:04,080 --> 00:03:07,640 Speaker 2: off all of Sheet and Pang's broader ambitions for China 56 00:03:07,800 --> 00:03:12,359 Speaker 2: in terms of economic development and its place in global leadership. 57 00:03:12,440 --> 00:03:14,600 Speaker 2: So I don't think that the calculus is worth it 58 00:03:14,639 --> 00:03:18,239 Speaker 2: for Beijing. I think the risk is that this could 59 00:03:18,320 --> 00:03:21,600 Speaker 2: change over time. Beijing could decide that it's less risky 60 00:03:21,880 --> 00:03:24,480 Speaker 2: and we're urgent for them as time goes on. But 61 00:03:24,560 --> 00:03:27,079 Speaker 2: I don't think that that calculus is going to shift 62 00:03:27,400 --> 00:03:30,960 Speaker 2: such as to arguing for in our conflict over Taiwan 63 00:03:31,000 --> 00:03:33,400 Speaker 2: anytime to it. We should add, though, we have a 64 00:03:33,480 --> 00:03:36,440 Speaker 2: very important election coming up in Taiwan January thirteenth, the 65 00:03:36,440 --> 00:03:39,320 Speaker 2: presidential election, which is going to have an important bearing 66 00:03:39,360 --> 00:03:39,880 Speaker 2: on these issues. 67 00:03:39,880 --> 00:03:41,440 Speaker 1: This is right where I wanted to go, michae Elson. 68 00:03:41,480 --> 00:03:43,480 Speaker 1: One final question. We've got to march on here with 69 00:03:43,560 --> 00:03:45,800 Speaker 1: our day and thank you so much for joining, but 70 00:03:45,920 --> 00:03:50,440 Speaker 1: abruptly here our stereotype is the KMT in the Pan 71 00:03:50,560 --> 00:03:55,800 Speaker 1: Blue coalition they lost in twenty sixteen. The domestic politics 72 00:03:55,800 --> 00:04:01,200 Speaker 1: of Taiwan, are they uniformly for America and four independencers? 73 00:04:01,200 --> 00:04:04,480 Speaker 1: There are a nuance there that Beijing can play off of. 74 00:04:05,320 --> 00:04:09,160 Speaker 2: There's a nuance. I do think fundamentally voters in Taiwan 75 00:04:09,520 --> 00:04:12,320 Speaker 2: want to maintain the status quo, and the difference between 76 00:04:12,360 --> 00:04:15,680 Speaker 2: the two camps really is what is the best way 77 00:04:15,680 --> 00:04:18,600 Speaker 2: to maintain that status quo? Keeping China aut in arm's 78 00:04:18,640 --> 00:04:22,080 Speaker 2: length or engaging with China in a more close, you know, 79 00:04:22,120 --> 00:04:23,800 Speaker 2: political economic relationship. 80 00:04:24,080 --> 00:04:27,080 Speaker 1: A terrific brief Michael Hurston, thank you so much, sirill 81 00:04:27,120 --> 00:04:27,880 Speaker 1: that you could join. 82 00:04:27,839 --> 00:04:33,960 Speaker 4: Us, super excited that Francis Donald's with us in the 83 00:04:34,000 --> 00:04:38,120 Speaker 4: studio Global Chief Economist, strategist a manual Life morte Francis, 84 00:04:38,160 --> 00:04:40,800 Speaker 4: good morning. You've taken all that beautiful fed speak of 85 00:04:40,880 --> 00:04:42,359 Speaker 4: the last week, any Cleara. 86 00:04:43,000 --> 00:04:45,680 Speaker 5: I think it's all semantics. We are in a global 87 00:04:45,920 --> 00:04:49,120 Speaker 5: easing cycle. They can tell us they're not talking about it, 88 00:04:49,160 --> 00:04:51,960 Speaker 5: but then we're talking about how they're not talking about it. 89 00:04:52,320 --> 00:04:55,640 Speaker 5: Emerging markets are cutting. Every single day I get a 90 00:04:55,720 --> 00:04:58,279 Speaker 5: new emerging market that's cutting. They led the cycle on 91 00:04:58,360 --> 00:05:00,520 Speaker 5: the way up in rates, they are leading on the 92 00:05:00,600 --> 00:05:03,720 Speaker 5: way down. Every morning I wake up to inflation prints 93 00:05:03,720 --> 00:05:07,839 Speaker 5: that are surprising to the downside. Macro is most valuable 94 00:05:07,880 --> 00:05:11,640 Speaker 5: at inflection points. The toothpaste is out of the tube. 95 00:05:11,720 --> 00:05:15,640 Speaker 5: We have already effectively eased. We will see it very 96 00:05:15,680 --> 00:05:19,960 Speaker 5: soon in some areas, like housing that has very strong reactivity. 97 00:05:20,320 --> 00:05:23,960 Speaker 5: It doesn't change that. I still technically have two quarters 98 00:05:24,000 --> 00:05:27,960 Speaker 5: of negative GDP in my forecast, so that's technically a recession. 99 00:05:28,240 --> 00:05:32,240 Speaker 5: But if we do get this earlier easing via financial markets, 100 00:05:32,360 --> 00:05:34,520 Speaker 5: it will help us come out faster, and it will 101 00:05:34,560 --> 00:05:37,680 Speaker 5: reduce the odds of financial accidents, which has been a 102 00:05:37,720 --> 00:05:39,479 Speaker 5: concern for some economists on the show with. 103 00:05:39,480 --> 00:05:42,040 Speaker 1: Apple with thirty times forward earnings, right, excuse me on 104 00:05:42,120 --> 00:05:45,040 Speaker 1: present earnings thirty two times pe multiple. They need to 105 00:05:45,080 --> 00:05:47,599 Speaker 1: make earnings, they need to make revenues, which means they 106 00:05:47,680 --> 00:05:50,800 Speaker 1: need to live within decent nominal GDP. Are we going 107 00:05:50,839 --> 00:05:55,279 Speaker 1: to see enough on nominal GDP to keep the earnings 108 00:05:55,279 --> 00:05:56,360 Speaker 1: in revenue boat going? 109 00:05:56,920 --> 00:05:58,760 Speaker 5: I don't know where it's going to come from. Tom. 110 00:05:58,880 --> 00:06:02,120 Speaker 5: It's not coming from CAP which is declining sharply. There's 111 00:06:02,160 --> 00:06:04,480 Speaker 5: not a lot of fiscal room. We talk about the 112 00:06:05,240 --> 00:06:08,480 Speaker 5: soft lining hard landing. That's only a US conversation because 113 00:06:08,520 --> 00:06:11,680 Speaker 5: anywhere else I go in the world, we're not discussing 114 00:06:11,720 --> 00:06:14,640 Speaker 5: soft landing or hardlining because we're already in hard landing. 115 00:06:14,880 --> 00:06:18,520 Speaker 5: Germany is most probably in a recession. A whole range 116 00:06:18,520 --> 00:06:22,919 Speaker 5: of dms are already in recession. Asia is slowing very prominently, 117 00:06:23,000 --> 00:06:25,480 Speaker 5: so we don't have the global impulse that comes through, 118 00:06:25,760 --> 00:06:28,320 Speaker 5: and the consumer is declining and slow. We don't need 119 00:06:28,360 --> 00:06:30,400 Speaker 5: the consumer to be in a recession for the US 120 00:06:30,440 --> 00:06:33,040 Speaker 5: economy to be in a recession. So two things can 121 00:06:33,040 --> 00:06:35,200 Speaker 5: be true at the same time. We can be celebrating 122 00:06:35,279 --> 00:06:38,520 Speaker 5: the pivot party, which we are, and recognize that it's 123 00:06:38,560 --> 00:06:40,680 Speaker 5: not going to be a straight line up for equities 124 00:06:40,760 --> 00:06:42,960 Speaker 5: and a straight line down for bonds. In fact, I 125 00:06:43,320 --> 00:06:45,080 Speaker 5: my ask of you actually at this table is every 126 00:06:45,120 --> 00:06:46,360 Speaker 5: time you have a guest, come on, ask them what 127 00:06:46,400 --> 00:06:49,880 Speaker 5: their investment horizon is, because your investment horizon for the 128 00:06:49,960 --> 00:06:52,320 Speaker 5: next three months is very different than your nine month 129 00:06:52,360 --> 00:06:54,479 Speaker 5: to twelvemonth horizon, and you have to be able to 130 00:06:54,520 --> 00:06:57,440 Speaker 5: reconcile the two when they are different perspectives, and in 131 00:06:57,480 --> 00:06:59,239 Speaker 5: this environment they are different perspective. 132 00:06:59,279 --> 00:07:01,200 Speaker 4: We already know it's happ and yes that I extrap 133 00:07:01,279 --> 00:07:03,480 Speaker 4: light that out five minutes and say if it changes, 134 00:07:03,600 --> 00:07:05,800 Speaker 4: isn't that it brama the last two months? 135 00:07:05,920 --> 00:07:07,640 Speaker 3: I mean, this is a reason why people are saying 136 00:07:07,640 --> 00:07:10,360 Speaker 3: we're bullish. There might be some volatility, but by it 137 00:07:10,480 --> 00:07:12,560 Speaker 3: and so at what point is this just basically being 138 00:07:12,640 --> 00:07:14,480 Speaker 3: bullish into next year and trying to have a unique 139 00:07:14,480 --> 00:07:17,000 Speaker 3: take on it. Here's my question to you, is there 140 00:07:17,040 --> 00:07:19,280 Speaker 3: a risk of us not getting a landing if you 141 00:07:19,360 --> 00:07:21,880 Speaker 3: have a longer term horizon, does it have to include 142 00:07:21,880 --> 00:07:23,480 Speaker 3: a greater risk of reinflation? 143 00:07:24,040 --> 00:07:26,040 Speaker 5: You know, if you have a five to tenure horizon, 144 00:07:26,040 --> 00:07:29,320 Speaker 5: which a lot of sticky institutional money does. They are 145 00:07:29,360 --> 00:07:31,440 Speaker 5: not asking me, do you have a recession call? They 146 00:07:31,440 --> 00:07:33,680 Speaker 5: want to know what the five to ten year inflation 147 00:07:33,760 --> 00:07:35,720 Speaker 5: outlook is. They want to know where interest rates are 148 00:07:35,720 --> 00:07:37,920 Speaker 5: going to be. They want to know our central Bank's 149 00:07:37,960 --> 00:07:41,440 Speaker 5: going to be changing inflation targets because if so, then 150 00:07:41,480 --> 00:07:44,200 Speaker 5: our relationship between inflation and interest rate changes, and that 151 00:07:44,280 --> 00:07:47,800 Speaker 5: changes our long term asset allocation models. So no, there 152 00:07:47,840 --> 00:07:50,960 Speaker 5: are certain investors who do not care about recession risk 153 00:07:51,000 --> 00:07:54,160 Speaker 5: for twenty twenty four, and that's important. They are asking larger, 154 00:07:54,240 --> 00:07:57,360 Speaker 5: more important questions about the framework within our front with 155 00:07:57,400 --> 00:07:59,840 Speaker 5: which our financial markets change. And that's why I think 156 00:07:59,840 --> 00:08:02,760 Speaker 5: the Powell pivot is so critical and interesting to this 157 00:08:02,960 --> 00:08:06,240 Speaker 5: large sticky money because it basically said this concept of 158 00:08:06,440 --> 00:08:08,560 Speaker 5: you know what, we need two percent inflation in order 159 00:08:08,600 --> 00:08:10,640 Speaker 5: to cut We need to see the evidence. We're focused 160 00:08:10,680 --> 00:08:15,120 Speaker 5: on services, ex rents, all of this discussion around financial conditions. 161 00:08:15,320 --> 00:08:17,520 Speaker 5: Now I've heard you over the past few days question 162 00:08:17,680 --> 00:08:21,160 Speaker 5: what was it that led to the pivot? That question, 163 00:08:21,280 --> 00:08:24,000 Speaker 5: to me is far more important than how many rate 164 00:08:24,040 --> 00:08:25,800 Speaker 5: cuts do we have next year? Or is it one 165 00:08:25,880 --> 00:08:27,960 Speaker 5: quarter or two quarters of negative GDPs? 166 00:08:28,000 --> 00:08:29,680 Speaker 4: So let's go to the labor market and talk about 167 00:08:29,680 --> 00:08:32,680 Speaker 4: some of the forces underpinning maybe this pivot. There's a 168 00:08:32,679 --> 00:08:34,600 Speaker 4: belief on the street from a lot of people, I think, 169 00:08:34,679 --> 00:08:36,480 Speaker 4: led by Neil data earlier on this year, that this 170 00:08:36,559 --> 00:08:39,359 Speaker 4: labor market is no longer a reason to be hawkish. 171 00:08:39,559 --> 00:08:42,280 Speaker 4: What America has benefited from is this supply side led 172 00:08:42,320 --> 00:08:46,360 Speaker 4: rebalancing in the labor market, increased participation. Do you see 173 00:08:46,400 --> 00:08:49,960 Speaker 4: reason to believe that continues into next year? Is that 174 00:08:50,040 --> 00:08:51,200 Speaker 4: something we're taking for granted. 175 00:08:51,520 --> 00:08:54,040 Speaker 5: Yeah, any sort of leading indicator you have of the 176 00:08:54,120 --> 00:08:55,840 Speaker 5: job market right now is going to tell you that 177 00:08:55,920 --> 00:08:58,760 Speaker 5: things are deteriorating and going in the wrong direction. Now, 178 00:08:58,840 --> 00:09:02,440 Speaker 5: markets are second rerivative creatures. They're going to care more 179 00:09:02,440 --> 00:09:05,160 Speaker 5: about the rise and the unemployment rate than how far 180 00:09:05,240 --> 00:09:08,040 Speaker 5: it necessarily goes up until a breaking point. So the 181 00:09:08,120 --> 00:09:11,640 Speaker 5: unemployment rate is going to rise. It takes two years 182 00:09:11,679 --> 00:09:14,959 Speaker 5: for the first FED rate hike to impact the labor market. 183 00:09:15,200 --> 00:09:18,400 Speaker 5: That's q one. The mistaken calling for that to happen 184 00:09:18,640 --> 00:09:21,240 Speaker 5: last year was thinking that that lag would be shorter 185 00:09:21,679 --> 00:09:24,719 Speaker 5: because the Fed moved faster. But until we get through 186 00:09:24,760 --> 00:09:26,800 Speaker 5: the next three to six months, we won't be able 187 00:09:26,840 --> 00:09:29,040 Speaker 5: to say that the relationship between rates and the labor 188 00:09:29,080 --> 00:09:32,439 Speaker 5: market is truly broken because we haven't even passed the 189 00:09:32,480 --> 00:09:35,720 Speaker 5: first starting post of when that's going to impact things. 190 00:09:35,720 --> 00:09:37,920 Speaker 5: So I can't throw out the argument that the labor 191 00:09:37,960 --> 00:09:41,360 Speaker 5: market interest rate conversation is totally different than it has 192 00:09:41,400 --> 00:09:43,440 Speaker 5: been in the past because we're not even there yet. 193 00:09:43,679 --> 00:09:48,080 Speaker 1: So what do you watch to see if wage disinflation begins? 194 00:09:48,800 --> 00:09:51,920 Speaker 5: Well, real time data. Probably we need surveys, We need 195 00:09:51,960 --> 00:09:54,080 Speaker 5: to be keeping a close eye on that, But maybe 196 00:09:54,120 --> 00:09:56,200 Speaker 5: tom we also need to be asking how much is 197 00:09:56,200 --> 00:09:58,520 Speaker 5: it going to matter to the inflation story. We went 198 00:09:58,559 --> 00:10:00,800 Speaker 5: from nine percent down to three per and change on 199 00:10:00,840 --> 00:10:05,680 Speaker 5: inflation largely off of the disinflation from supply chain dynamics. 200 00:10:05,800 --> 00:10:07,920 Speaker 5: Are we allowed to say that that was transitory? 201 00:10:08,040 --> 00:10:08,280 Speaker 6: Yet? 202 00:10:08,400 --> 00:10:10,360 Speaker 5: Like, is my head going to be on a stick 203 00:10:10,400 --> 00:10:10,800 Speaker 5: for that? 204 00:10:10,800 --> 00:10:12,520 Speaker 4: Would you like to I'll just floated. 205 00:10:12,559 --> 00:10:14,320 Speaker 5: I'm going to throw up the balloon and see what 206 00:10:14,400 --> 00:10:17,720 Speaker 5: kind of push back again on Twitter. The next phase 207 00:10:17,880 --> 00:10:21,040 Speaker 5: is when you say, you know, the next phase of 208 00:10:21,160 --> 00:10:24,120 Speaker 5: disinflation is what they call the painful part, not because 209 00:10:24,160 --> 00:10:26,240 Speaker 5: it's hard to go from three percent to two percent, 210 00:10:26,360 --> 00:10:29,920 Speaker 5: but because consumers and wages carry the brunt of that. 211 00:10:30,360 --> 00:10:32,959 Speaker 5: So we would posit that the disinflation we've seen so far, 212 00:10:33,160 --> 00:10:35,360 Speaker 5: we don't get to actually say thank you Fed for that. 213 00:10:35,760 --> 00:10:38,360 Speaker 5: It's the next part that comes. And so what I 214 00:10:38,440 --> 00:10:41,400 Speaker 5: want to know is this wage inflation story, how critical 215 00:10:41,559 --> 00:10:44,079 Speaker 5: is it to actually the inflation that we're monitoring? And 216 00:10:44,240 --> 00:10:46,280 Speaker 5: what inflation does the FED need to see. Is it 217 00:10:46,400 --> 00:10:48,920 Speaker 5: just a headline number or core number around two or 218 00:10:48,960 --> 00:10:51,240 Speaker 5: does it matter where it's coming from, because my sense 219 00:10:51,360 --> 00:10:53,600 Speaker 5: is we got told a lot in the past year. 220 00:10:53,720 --> 00:10:55,839 Speaker 5: It mattered where it was coming from. I think it 221 00:10:55,960 --> 00:10:57,480 Speaker 5: just matters that we're closer to Targe. 222 00:10:57,559 --> 00:10:59,440 Speaker 4: I'm so pleased that you brought some of these issues 223 00:10:59,520 --> 00:11:01,840 Speaker 4: up because think it's so important. Lisa, just how much 224 00:11:01,880 --> 00:11:04,400 Speaker 4: of the disinflation that we've seen so far is actually 225 00:11:04,440 --> 00:11:05,959 Speaker 4: off the back of the feder reserve tightening in the 226 00:11:06,040 --> 00:11:08,760 Speaker 4: last eighteen months. Speak to people like Francis, the answer 227 00:11:08,840 --> 00:11:09,360 Speaker 4: is not much of it. 228 00:11:09,800 --> 00:11:12,040 Speaker 3: When you talk to a lot of economists, they've been 229 00:11:12,120 --> 00:11:14,320 Speaker 3: using the tea word all along. They just are being 230 00:11:14,360 --> 00:11:16,760 Speaker 3: a little bit louder about it and basically saying maybe 231 00:11:16,800 --> 00:11:19,480 Speaker 3: the FED was right and it was transitory, and that's 232 00:11:19,520 --> 00:11:21,559 Speaker 3: the reason why the Fed's getting nervous, because if the 233 00:11:21,640 --> 00:11:24,520 Speaker 3: Fed's actual raid hike start to kick in, then it 234 00:11:24,600 --> 00:11:27,600 Speaker 3: starts to become something else in a downward cycle. That said, 235 00:11:27,640 --> 00:11:30,199 Speaker 3: the jury is still out and services sector inflation is 236 00:11:30,240 --> 00:11:32,640 Speaker 3: still going up. So this is a huge question mark. 237 00:11:32,720 --> 00:11:33,080 Speaker 4: Not too much. 238 00:11:33,160 --> 00:11:34,200 Speaker 3: We still have supply tain. 239 00:11:34,080 --> 00:11:38,480 Speaker 4: Issues recycling the tea words shameless, just shameless. Yeah, are 240 00:11:38,520 --> 00:11:42,640 Speaker 4: you talking to me, Francis Donald head on a state Francis, 241 00:11:42,720 --> 00:11:44,360 Speaker 4: thank you. You one of the best to appreciate it. 242 00:11:55,120 --> 00:11:57,880 Speaker 1: The inflation adjusted yield, which is what I look at 243 00:11:58,000 --> 00:12:00,319 Speaker 1: and our next guest looks at, is one point six 244 00:12:00,520 --> 00:12:03,800 Speaker 1: nine percent. It was a two and there was sweat 245 00:12:03,880 --> 00:12:06,640 Speaker 1: on effect hired a two point two zero or even 246 00:12:07,000 --> 00:12:11,360 Speaker 1: unimaginately high. In this melt up, the inflation adjusted yield, 247 00:12:11,440 --> 00:12:14,720 Speaker 1: one measurement of our good feeling, has really come down. 248 00:12:15,280 --> 00:12:18,760 Speaker 1: Jim Caron is expert at the CIO of Portfolio Solutions 249 00:12:18,800 --> 00:12:22,040 Speaker 1: Group at Morgan Stanley. You take the Christmas field, Jim, 250 00:12:22,440 --> 00:12:25,280 Speaker 1: you talk about naughty or nice in the real yield. 251 00:12:25,720 --> 00:12:29,160 Speaker 1: What is a level of the real yield that keeps 252 00:12:29,360 --> 00:12:31,160 Speaker 1: asset inflation going? 253 00:12:33,040 --> 00:12:35,920 Speaker 7: So I think where the Fed wants to go with this, 254 00:12:36,040 --> 00:12:38,440 Speaker 7: because what really matters is what they think. And I'm 255 00:12:38,480 --> 00:12:41,280 Speaker 7: gonna talk about the policy the real policy yield. So 256 00:12:41,400 --> 00:12:44,599 Speaker 7: this is a nominal FED funds rate minus inflation. I 257 00:12:44,720 --> 00:12:47,720 Speaker 7: think that number is around one and a half percent, 258 00:12:47,880 --> 00:12:50,040 Speaker 7: so it's lower than what it is today. So if 259 00:12:50,080 --> 00:12:52,320 Speaker 7: we look at nominal If we look at nominal FED 260 00:12:52,400 --> 00:12:54,400 Speaker 7: funds today at five and a half percent, and let's 261 00:12:54,400 --> 00:12:58,440 Speaker 7: say US inflation is at three, that means real policy 262 00:12:58,559 --> 00:13:01,000 Speaker 7: rates are at two and a half percent, which means 263 00:13:01,040 --> 00:13:03,760 Speaker 7: that the Fed could cut one hundred basis points just 264 00:13:03,880 --> 00:13:05,360 Speaker 7: to get to their neutral level. 265 00:13:05,679 --> 00:13:06,640 Speaker 8: So I know we've been talking. 266 00:13:06,880 --> 00:13:09,480 Speaker 7: I've listened on the show that yes, there's like six 267 00:13:09,640 --> 00:13:12,400 Speaker 7: rate cuts priced in, but remember one hundred basis points 268 00:13:12,440 --> 00:13:15,520 Speaker 7: of those rate cuts is really just getting to neutral, right, 269 00:13:16,360 --> 00:13:18,600 Speaker 7: and they don't start really easing until they start doing 270 00:13:18,640 --> 00:13:19,360 Speaker 7: more than one hundred. 271 00:13:19,520 --> 00:13:21,520 Speaker 1: I did some fancy math, Jim, in honor of your 272 00:13:21,559 --> 00:13:24,640 Speaker 1: attending today, on the standard deviation move of the Bloomberg 273 00:13:24,760 --> 00:13:28,800 Speaker 1: Financial Conditions Index. We've gone from a commodative and this 274 00:13:28,960 --> 00:13:31,720 Speaker 1: is not Stan Fisher one oh one, it's Tom Keene 275 00:13:31,720 --> 00:13:36,120 Speaker 1: one on one. We're grossly accommodative. Well, how does it fed? 276 00:13:36,760 --> 00:13:40,200 Speaker 1: Their degrees of freedom just seem to have shrunk because 277 00:13:40,240 --> 00:13:42,719 Speaker 1: of the market statement on accommodation. 278 00:13:44,240 --> 00:13:47,520 Speaker 7: Right, So when we look at financial conditions, this is 279 00:13:47,640 --> 00:13:50,079 Speaker 7: really a way for the FED to gauge how their 280 00:13:50,120 --> 00:13:54,240 Speaker 7: monetary policy is impacting the broader markets, and there should 281 00:13:54,240 --> 00:13:56,880 Speaker 7: be some feedback mechanism from markets to what their policy 282 00:13:56,960 --> 00:14:00,439 Speaker 7: is actually saying. So the way that I think about 283 00:14:00,480 --> 00:14:04,680 Speaker 7: this is that if the market's are rallying, that's okay 284 00:14:04,760 --> 00:14:06,800 Speaker 7: with the FED. The FED doesn't have to push back 285 00:14:06,880 --> 00:14:09,120 Speaker 7: on a rally because they don't like a rally. 286 00:14:09,200 --> 00:14:10,080 Speaker 8: That's not their job. 287 00:14:10,559 --> 00:14:14,440 Speaker 7: Effectively, what they're saying is can we get this rally 288 00:14:15,120 --> 00:14:19,080 Speaker 7: and can inflation also stay low? And if the answer 289 00:14:19,160 --> 00:14:21,600 Speaker 7: is yes to both, then they don't care. If the 290 00:14:21,640 --> 00:14:23,440 Speaker 7: market continues the rally, they don't feel so they have 291 00:14:23,520 --> 00:14:26,040 Speaker 7: to push back on that. And right now, the look 292 00:14:26,160 --> 00:14:29,080 Speaker 7: through to inflation going forward. As you mentioned in the UK, 293 00:14:29,640 --> 00:14:32,680 Speaker 7: we had a downside surprise in inflation. Inflation is coming 294 00:14:32,760 --> 00:14:35,240 Speaker 7: down in the US. As long as it does, then 295 00:14:35,280 --> 00:14:39,640 Speaker 7: the FED is okay with higher equity prices, tighter credit spreads, 296 00:14:39,680 --> 00:14:43,640 Speaker 7: and even easier financial conditions, as long as we don't 297 00:14:43,680 --> 00:14:46,440 Speaker 7: get inflation starting to move higher. 298 00:14:47,040 --> 00:14:49,640 Speaker 3: Which is let's park that for a second. This idea 299 00:14:49,840 --> 00:14:53,640 Speaker 3: that disinflation goldilocks this idea of the FED just simply 300 00:14:53,680 --> 00:14:56,760 Speaker 3: cutting rate surgically in order to keep in tandem with 301 00:14:56,880 --> 00:14:59,720 Speaker 3: where inflation is going and go to actually the fundamental 302 00:15:00,360 --> 00:15:02,840 Speaker 3: and earnings. And I wonder how much that is the 303 00:15:02,920 --> 00:15:05,440 Speaker 3: real risk that people are not talking about right now, 304 00:15:05,760 --> 00:15:08,720 Speaker 3: Given the fact that FedEx disappointed shares lower by some 305 00:15:08,880 --> 00:15:12,080 Speaker 3: twelve percent in early and pre market trading, general mills 306 00:15:12,520 --> 00:15:15,640 Speaker 3: retracting some of their full year forecast, downgrading it in 307 00:15:15,720 --> 00:15:19,720 Speaker 3: response to lower sales, those shares falling even after an 308 00:15:19,800 --> 00:15:23,600 Speaker 3: underwhel underwhelming performance, is this the theme of January that 309 00:15:23,680 --> 00:15:24,400 Speaker 3: people are missing. 310 00:15:25,520 --> 00:15:28,800 Speaker 7: So that's a really good question, Lisa, because effectively we 311 00:15:28,920 --> 00:15:30,440 Speaker 7: have to we have to think about the look through 312 00:15:30,480 --> 00:15:33,520 Speaker 7: to this if the unemployment rate starts to rise, because 313 00:15:33,520 --> 00:15:35,560 Speaker 7: that's what we're talking about when we're talking about earnings 314 00:15:35,640 --> 00:15:38,760 Speaker 7: and missing earnings and things like this. What we're really saying, 315 00:15:38,840 --> 00:15:41,720 Speaker 7: what an economist is really saying, is at what point 316 00:15:41,840 --> 00:15:44,840 Speaker 7: do these companies start laying workers off and at what 317 00:15:45,000 --> 00:15:48,280 Speaker 7: point does that boost the unemployment rate. So what we're 318 00:15:48,320 --> 00:15:50,400 Speaker 7: seeing at this point, at least the last data point 319 00:15:50,640 --> 00:15:53,840 Speaker 7: in the unemployment rate, the unemployment rate has come down 320 00:15:53,920 --> 00:15:58,000 Speaker 7: the labor market still remains relatively tight, and it's relatively strong. 321 00:15:58,440 --> 00:16:01,120 Speaker 7: Yes it's softening, Yes we are seeing signs of softening, 322 00:16:01,400 --> 00:16:04,400 Speaker 7: but we're not seeing signs of a collapse. So ultimately, 323 00:16:04,520 --> 00:16:06,680 Speaker 7: some of these things are going to be somewhat cyclical. 324 00:16:06,840 --> 00:16:09,480 Speaker 7: Some companies are going to post worse earning, some companies 325 00:16:09,520 --> 00:16:11,280 Speaker 7: is going to post better earnings. But if we look 326 00:16:11,280 --> 00:16:15,360 Speaker 7: at the broad market, the story for December is actually 327 00:16:15,560 --> 00:16:19,120 Speaker 7: not that these supercharged seven stocks are doing really well 328 00:16:19,160 --> 00:16:22,520 Speaker 7: in tech. The story for December is that the market's 329 00:16:22,640 --> 00:16:26,600 Speaker 7: actually broadening out, is that the other sectors, the other 330 00:16:26,680 --> 00:16:29,640 Speaker 7: four hundred and ninety three stocks out of the S 331 00:16:29,680 --> 00:16:34,000 Speaker 7: and P five hundred excluding those seven, are actually participating 332 00:16:34,160 --> 00:16:36,560 Speaker 7: in the upside. So yes, it's not going to be 333 00:16:36,560 --> 00:16:39,080 Speaker 7: a straight line. It's going to be volatile. But the 334 00:16:39,200 --> 00:16:41,760 Speaker 7: point here is that missing earnings is one thing, and 335 00:16:41,840 --> 00:16:44,680 Speaker 7: that could be cyclical, and I get that sector by sector, 336 00:16:45,000 --> 00:16:49,000 Speaker 7: But as long as it doesn't affect hiring and wages 337 00:16:49,360 --> 00:16:52,320 Speaker 7: and things like that to the degree that it creates 338 00:16:52,360 --> 00:16:56,560 Speaker 7: a deeper downturn and loss of consumption, then that's just markets. 339 00:16:56,800 --> 00:16:57,200 Speaker 8: Markets. 340 00:16:57,360 --> 00:16:59,280 Speaker 3: It sounds like you're pretty bullish, are you just telling 341 00:16:59,320 --> 00:17:01,720 Speaker 3: clients to go all in that basically their biggest risk 342 00:17:01,840 --> 00:17:03,400 Speaker 3: is missing out in the upside next year. 343 00:17:04,280 --> 00:17:05,240 Speaker 8: No, I'm not saying that. 344 00:17:05,520 --> 00:17:07,159 Speaker 7: Actually, you know, one of the things that we you know, 345 00:17:07,440 --> 00:17:10,560 Speaker 7: we've been bullish, we've been positive, we've been overweight inequities 346 00:17:10,600 --> 00:17:14,360 Speaker 7: all year, and right now, towards the end of this year, 347 00:17:14,480 --> 00:17:17,840 Speaker 7: we're starting to think about reducing that and moving towards neutral. 348 00:17:18,119 --> 00:17:20,320 Speaker 7: We haven't done it yet, but that's but that's probably 349 00:17:20,400 --> 00:17:24,000 Speaker 7: our next step. And why that is is because everything 350 00:17:24,040 --> 00:17:28,439 Speaker 7: that we thought about in late October November is actually 351 00:17:28,680 --> 00:17:31,600 Speaker 7: already come through by the end of the year. So 352 00:17:31,720 --> 00:17:35,159 Speaker 7: we've got this like fifteen percent rally across the board inequities. 353 00:17:35,200 --> 00:17:38,080 Speaker 7: We've got credit spreads a lot tighter, bond yels ten 354 00:17:38,160 --> 00:17:40,359 Speaker 7: year yeelds are below four percent. I mean, my gosh, 355 00:17:40,440 --> 00:17:42,159 Speaker 7: my year end forecast with a ten yure note not 356 00:17:42,240 --> 00:17:43,520 Speaker 7: that I make a forecast, but it. 357 00:17:43,560 --> 00:17:45,920 Speaker 8: Was around four percent and we're already We're already there. 358 00:17:46,400 --> 00:17:48,119 Speaker 7: So I think a lot of that good news has 359 00:17:48,160 --> 00:17:51,520 Speaker 7: been pulled forward, so we need another catalyst to get higher, 360 00:17:51,880 --> 00:17:53,959 Speaker 7: and I'm I'd rather go to neutral, and I think 361 00:17:54,040 --> 00:17:57,080 Speaker 7: neutral is the new defensive. So we can be tactical 362 00:17:57,160 --> 00:17:59,240 Speaker 7: of the new year ahead because there will be dislocations. 363 00:17:59,400 --> 00:18:02,359 Speaker 1: Jim mccarr, that's a question for those trying to recover 364 00:18:02,480 --> 00:18:06,359 Speaker 1: from the bond tobaccle use negative ten degrees at Boden. 365 00:18:06,400 --> 00:18:09,399 Speaker 1: You were studying physics, you go, oh, kel Tech, that 366 00:18:09,520 --> 00:18:11,440 Speaker 1: may be warm, so you go out to kel Tech 367 00:18:11,800 --> 00:18:15,879 Speaker 1: to get some decent weather and aeronautical engineering. Okay, great, 368 00:18:16,400 --> 00:18:21,239 Speaker 1: are these gl glide pass of stability and do they 369 00:18:21,400 --> 00:18:26,040 Speaker 1: indicate the dividend growth is a proxy for yield forward? 370 00:18:27,000 --> 00:18:30,920 Speaker 1: That back and forth between your world of bonds inequities 371 00:18:31,040 --> 00:18:33,760 Speaker 1: is a yield alternative? Can that be possible? 372 00:18:35,520 --> 00:18:38,840 Speaker 7: So I think it can be possible. I don't see 373 00:18:38,880 --> 00:18:42,880 Speaker 7: it as highly probable. And the thing that I'm concerned 374 00:18:42,880 --> 00:18:44,920 Speaker 7: about the most is that I do think that twenty 375 00:18:44,960 --> 00:18:47,960 Speaker 7: twenty four will be a very rocky year. So I 376 00:18:48,040 --> 00:18:52,600 Speaker 7: know we're talking about these glidepaths and soft landings. We 377 00:18:52,760 --> 00:18:56,600 Speaker 7: may ultimately get a mild slow down or a mild recession, 378 00:18:56,640 --> 00:18:59,800 Speaker 7: which would be characterized as a soft landing. But I 379 00:19:00,440 --> 00:19:03,399 Speaker 7: I think it's a really dangerous landing at this point, 380 00:19:04,480 --> 00:19:06,960 Speaker 7: and it's one of the reasons why I think that 381 00:19:07,119 --> 00:19:08,600 Speaker 7: we need to engage in more of. 382 00:19:08,640 --> 00:19:10,159 Speaker 8: A balanced portfolio approach. 383 00:19:10,240 --> 00:19:13,200 Speaker 7: So have some fixing income, have some equity, have some growth, 384 00:19:13,320 --> 00:19:15,840 Speaker 7: have some value, and just real quick. 385 00:19:15,760 --> 00:19:17,639 Speaker 3: Jare before we run out of time, what do you 386 00:19:17,720 --> 00:19:18,879 Speaker 3: mean by dangerous landing? 387 00:19:20,640 --> 00:19:23,880 Speaker 7: So I think there's more geopolitical tensions and more geopolitical 388 00:19:23,960 --> 00:19:25,840 Speaker 7: risks that are out there to start this year. 389 00:19:25,720 --> 00:19:26,360 Speaker 8: Than last year. 390 00:19:27,000 --> 00:19:30,159 Speaker 7: We have obviously, you know, China, Taiwan, we have Taiwan elections, 391 00:19:30,200 --> 00:19:32,760 Speaker 7: we have a US presidential election. I think that's going 392 00:19:32,800 --> 00:19:34,920 Speaker 7: to create a lot of volatility, and I think the 393 00:19:35,000 --> 00:19:36,840 Speaker 7: markets are and don't forget, we have the twenty twenty 394 00:19:36,880 --> 00:19:39,119 Speaker 7: five you know, the Trump tax cuts come come due 395 00:19:39,160 --> 00:19:42,120 Speaker 7: in twenty twenty five. At some point in twenty twenty four, 396 00:19:42,520 --> 00:19:44,960 Speaker 7: we're going to start to price the outcome of that 397 00:19:45,200 --> 00:19:48,160 Speaker 7: in and that can swing the markets from an earning 398 00:19:48,320 --> 00:19:51,040 Speaker 7: perspective quite a bit and from a multiple perspective. So 399 00:19:51,400 --> 00:19:54,200 Speaker 7: I think let's just enjoy this calumn right now, because 400 00:19:54,240 --> 00:19:55,879 Speaker 7: I think it's going to get a lot rockier and 401 00:19:55,960 --> 00:19:58,879 Speaker 7: a lot less, a lot more uncertain into the future. 402 00:19:59,119 --> 00:20:02,200 Speaker 1: Jim Karen, thank you. With Morgan Stanley there on your 403 00:20:02,359 --> 00:20:05,080 Speaker 1: total return and ability to clip a coupon. 404 00:20:09,400 --> 00:20:12,000 Speaker 4: With a growing iPhone business into next year on the 405 00:20:12,080 --> 00:20:15,479 Speaker 4: heels of what we view as a new tech bullmarket beginning, 406 00:20:15,880 --> 00:20:18,960 Speaker 4: Apple is poised to have a strong year ahead. 407 00:20:19,000 --> 00:20:22,200 Speaker 1: Teak interesting and of course he's been all over the media, 408 00:20:22,280 --> 00:20:24,480 Speaker 1: but also he's been right right right, As I mentioned, 409 00:20:24,560 --> 00:20:26,960 Speaker 1: Neil duddis maybe my economist of the year on the 410 00:20:27,080 --> 00:20:30,719 Speaker 1: cell side, get into magnificent seven, right, nobody's been as 411 00:20:30,840 --> 00:20:35,080 Speaker 1: visible and articulate as mister ives he holds court at Wedbush. 412 00:20:35,119 --> 00:20:37,399 Speaker 1: I want to go to the morning's valuation where you 413 00:20:37,520 --> 00:20:39,440 Speaker 1: give me a half assed sum of the parts. You've 414 00:20:39,480 --> 00:20:42,720 Speaker 1: got the service sector at the one point five trillion 415 00:20:42,800 --> 00:20:45,280 Speaker 1: of four trillion, which is two hundred and fifty seven 416 00:20:45,359 --> 00:20:48,879 Speaker 1: dollars per share. What's the total some of the parts? 417 00:20:49,240 --> 00:20:51,760 Speaker 1: Is it above two fifty seven twelve months out? 418 00:20:51,920 --> 00:20:54,439 Speaker 6: Yeah, it's closer to three hundred some of the party. 419 00:20:54,520 --> 00:20:56,320 Speaker 1: I just can't go to five trillion because you don't 420 00:20:56,320 --> 00:20:58,000 Speaker 1: want to, you know, be inflammatory. 421 00:20:58,119 --> 00:21:00,520 Speaker 6: Well, the big thing is really the services is going 422 00:21:00,560 --> 00:21:03,480 Speaker 6: to be the key over the next year. The rerating 423 00:21:03,520 --> 00:21:05,200 Speaker 6: that we're going to see an Apple, I think numbers 424 00:21:05,320 --> 00:21:08,160 Speaker 6: moving higher is gonna be services driven. I think that's 425 00:21:08,200 --> 00:21:10,639 Speaker 6: where the one point five to one point six trillion 426 00:21:10,720 --> 00:21:13,440 Speaker 6: comes in. But I do think what's starting to happen now, 427 00:21:13,960 --> 00:21:15,879 Speaker 6: you know, despite what John in terms of like some 428 00:21:16,000 --> 00:21:19,879 Speaker 6: of the China issues, you're now seeing unit growth come up. 429 00:21:20,119 --> 00:21:23,879 Speaker 6: ASP's going up to me right now in Cooper Tino, 430 00:21:23,960 --> 00:21:26,960 Speaker 6: they're popping the champagne, getting ready for a phenomenal year ahead. 431 00:21:27,040 --> 00:21:30,480 Speaker 1: Buried in the CFA is a is a Barbelle, and 432 00:21:30,720 --> 00:21:35,080 Speaker 1: one is are you running is a revenue growth story? 433 00:21:35,440 --> 00:21:38,800 Speaker 1: Or are you running as a profit making story? To me, 434 00:21:38,920 --> 00:21:41,280 Speaker 1: Apple is almost out of Graham, Dot and Coddle. They're 435 00:21:41,320 --> 00:21:42,080 Speaker 1: running this thing for. 436 00:21:42,119 --> 00:21:45,280 Speaker 6: Profit right, and that's how. That's how cook is what 437 00:21:45,480 --> 00:21:47,760 Speaker 6: jobs did, It's how they've done it. But I think 438 00:21:47,840 --> 00:21:51,719 Speaker 6: the difference to your point, it's the monization. The install 439 00:21:51,840 --> 00:21:54,360 Speaker 6: bas is on parallel two billion iOS devices. 440 00:21:54,760 --> 00:21:58,040 Speaker 1: So now if them are in my house, continue exactly. 441 00:21:57,720 --> 00:21:59,960 Speaker 6: And look and you're one of the cross selling opportunity 442 00:22:00,280 --> 00:22:00,840 Speaker 6: for Cooking. 443 00:22:01,359 --> 00:22:05,119 Speaker 9: And the thing is is that now what's starting to 444 00:22:05,240 --> 00:22:08,560 Speaker 9: happen is that if you look at the services piece 445 00:22:08,600 --> 00:22:11,920 Speaker 9: and you look at the penetration, the average Apple customer 446 00:22:12,040 --> 00:22:14,840 Speaker 9: is still twenty to twenty five percent penetrate from a 447 00:22:14,920 --> 00:22:16,520 Speaker 9: services perspective. 448 00:22:16,480 --> 00:22:18,720 Speaker 6: That's going to continue to up. And then I believe 449 00:22:18,800 --> 00:22:21,520 Speaker 6: the big thing here is the AI app store that 450 00:22:21,600 --> 00:22:23,800 Speaker 6: I think they introduced over the next year. That's going 451 00:22:23,920 --> 00:22:25,320 Speaker 6: to be the new shiny object. 452 00:22:25,359 --> 00:22:27,280 Speaker 4: Okay, before we get to the new shiny object, let's 453 00:22:27,280 --> 00:22:30,359 Speaker 4: talk about the old shiny object, the iPhone. If I 454 00:22:30,520 --> 00:22:33,080 Speaker 4: told you where revenue was and where it would be 455 00:22:33,440 --> 00:22:34,760 Speaker 4: at the start of the year for the end of 456 00:22:34,800 --> 00:22:36,600 Speaker 4: the year, would you have said the stock was up 457 00:22:36,640 --> 00:22:37,840 Speaker 4: fifty two percent year today? 458 00:22:38,240 --> 00:22:38,400 Speaker 8: Yeah? 459 00:22:38,520 --> 00:22:41,520 Speaker 6: So okay, So what I'd say is that part has 460 00:22:41,680 --> 00:22:44,440 Speaker 6: definitely been an upside surprise in terms of where the 461 00:22:44,520 --> 00:22:48,359 Speaker 6: stock I think the difference it really rests on the 462 00:22:48,480 --> 00:22:52,000 Speaker 6: services business and what I believe is the margin story. 463 00:22:52,320 --> 00:22:55,679 Speaker 6: So even though from a unit perspective there have been 464 00:22:55,760 --> 00:22:58,760 Speaker 6: some choppiness over the last quarter or two, if you 465 00:22:58,840 --> 00:23:01,400 Speaker 6: look at the margins, I mean, so they've been able 466 00:23:01,480 --> 00:23:05,600 Speaker 6: to expand grew as margins in this environment, which I 467 00:23:05,640 --> 00:23:07,080 Speaker 6: know we've talked about a lot of this on the show, 468 00:23:07,160 --> 00:23:10,560 Speaker 6: but that just shows that they have control over their ecosystem. 469 00:23:10,600 --> 00:23:12,520 Speaker 6: From a chip perspective, that's been a key. 470 00:23:12,400 --> 00:23:14,240 Speaker 4: To the bull You think they can go ex growth 471 00:23:14,280 --> 00:23:15,720 Speaker 4: but still Retina growth multiple. 472 00:23:16,200 --> 00:23:18,800 Speaker 6: I think they this past year they were able to 473 00:23:18,880 --> 00:23:21,560 Speaker 6: go ex growth and get the growth multiple. This next year, 474 00:23:21,960 --> 00:23:26,280 Speaker 6: the renaissance of growth happens in Cooper Tino on services 475 00:23:26,320 --> 00:23:30,600 Speaker 6: back double digits unit from an iPhone unit perspective continues 476 00:23:30,640 --> 00:23:34,600 Speaker 6: to i'll say single digits. And the China story, despite 477 00:23:34,720 --> 00:23:38,000 Speaker 6: all the worries, despite many yelling fire in a crowded theater, 478 00:23:38,200 --> 00:23:39,640 Speaker 6: We're going to see China growth. 479 00:23:39,800 --> 00:23:42,399 Speaker 3: So exactly, fire and a crowded theater. Whatever keeps piling in. 480 00:23:42,520 --> 00:23:45,720 Speaker 3: But I am wondering if you see growth coming mostly 481 00:23:45,800 --> 00:23:49,000 Speaker 3: from the United States, or if that's international growth, where 482 00:23:49,040 --> 00:23:51,680 Speaker 3: does it come from in a pretty competitive landscape. 483 00:23:51,400 --> 00:23:54,960 Speaker 6: I think seventy percent of its US and Europe thirty 484 00:23:55,000 --> 00:23:57,639 Speaker 6: percent of the growth. The incremental growth is in China 485 00:23:57,800 --> 00:23:59,320 Speaker 6: because at least if you look at it today, one 486 00:23:59,400 --> 00:24:03,240 Speaker 6: hundred million iPhones in China have not been upgraded three years. 487 00:24:03,640 --> 00:24:06,720 Speaker 6: So even with Huawei and what even in Huawei and 488 00:24:06,800 --> 00:24:11,600 Speaker 6: what we're seeing the actual penetration the upgrade opportunity, I'll 489 00:24:11,640 --> 00:24:14,560 Speaker 6: call it essentially a mini supercycle that's playing out. Look 490 00:24:14,640 --> 00:24:18,000 Speaker 6: as of twenty four hours ago, are Asia checks showing 491 00:24:18,160 --> 00:24:21,200 Speaker 6: no cuts and I think that's very important. 492 00:24:21,880 --> 00:24:24,200 Speaker 4: Because you said exactly the same thing twelve months ago 493 00:24:24,680 --> 00:24:27,440 Speaker 4: and it didn't happen. Where is this upgrade supercycle? 494 00:24:28,119 --> 00:24:33,440 Speaker 6: Okay, so now to that point, the upgrade cycle has 495 00:24:33,800 --> 00:24:35,320 Speaker 6: under the radar been happening. 496 00:24:35,400 --> 00:24:37,040 Speaker 4: But at some point that you sit there and say 497 00:24:37,160 --> 00:24:39,440 Speaker 4: that these phones haven't been upgraded for a reason, and 498 00:24:39,520 --> 00:24:41,000 Speaker 4: then maybe they're not going to be upgraded. 499 00:24:41,520 --> 00:24:44,040 Speaker 6: But the look, and I know it's a great point 500 00:24:44,080 --> 00:24:46,120 Speaker 6: that you've brought up from an upgrade cycle. I think 501 00:24:46,640 --> 00:24:50,000 Speaker 6: the difference is is that the last eighteen months, maybe 502 00:24:50,040 --> 00:24:53,480 Speaker 6: the upgrades have been in a slower piece, but they've 503 00:24:53,560 --> 00:24:57,080 Speaker 6: gained one hundred million new iPhones in the last eighteen months, 504 00:24:57,280 --> 00:24:59,840 Speaker 6: So I think if maybe we've been right for the 505 00:25:00,000 --> 00:25:01,800 Speaker 6: wrong reasons wherever you want to call it, is like 506 00:25:02,400 --> 00:25:07,399 Speaker 6: the upgrade opportunity, we admit has definitely been a little 507 00:25:07,440 --> 00:25:10,280 Speaker 6: more subdued this year than we would have expected. But 508 00:25:10,480 --> 00:25:12,879 Speaker 6: on the upside, what we didn't expect is that the 509 00:25:13,800 --> 00:25:17,520 Speaker 6: Android market share games they've gotten have been a fox 510 00:25:17,600 --> 00:25:18,360 Speaker 6: to muscles moment. 511 00:25:18,400 --> 00:25:19,760 Speaker 4: There's no doubt you've been right. I just want to 512 00:25:19,760 --> 00:25:21,600 Speaker 4: get into the reasoning. Suret it you know that, but 513 00:25:21,680 --> 00:25:23,440 Speaker 4: you have been right. The stock is up fifty two 514 00:25:23,440 --> 00:25:25,560 Speaker 4: percent year today. I can't argue with that. We talk 515 00:25:25,600 --> 00:25:29,080 Speaker 4: about the watch just briefly, telling Father Christmas he can't 516 00:25:29,080 --> 00:25:31,560 Speaker 4: deliver presence on December twenty sixth. It's not a big deal. 517 00:25:32,119 --> 00:25:34,639 Speaker 4: I just wonder the gift from the regulator from your 518 00:25:34,680 --> 00:25:36,400 Speaker 4: point of view, to turn around to Apple and say 519 00:25:36,760 --> 00:25:39,119 Speaker 4: can't sell the eyewatch from December twenty fifth, I mean, 520 00:25:39,160 --> 00:25:39,960 Speaker 4: what does that actually do? 521 00:25:40,080 --> 00:25:42,800 Speaker 6: What does that achieve when the red phone rings and 522 00:25:42,920 --> 00:25:44,720 Speaker 6: it's Cook and Cooper Tino. 523 00:25:45,359 --> 00:25:47,560 Speaker 4: That's what you think that made a difference, The fact 524 00:25:47,560 --> 00:25:49,679 Speaker 4: this was Apple. You think that's actually made a difference 525 00:25:49,720 --> 00:25:50,720 Speaker 4: that it regulates. 526 00:25:50,480 --> 00:25:53,960 Speaker 6: When I think Apple just brings the different prier and 527 00:25:54,040 --> 00:25:56,400 Speaker 6: we see it in terms of big tech, and it's 528 00:25:56,520 --> 00:25:59,440 Speaker 6: one where the even within Europe and when we see 529 00:25:59,440 --> 00:26:03,119 Speaker 6: continue map Brussels and even in the US, there's a 530 00:26:03,280 --> 00:26:07,280 Speaker 6: recognition where you don't want to poke the bear like 531 00:26:07,320 --> 00:26:09,440 Speaker 6: in other words, like to actually do this in a 532 00:26:09,520 --> 00:26:13,320 Speaker 6: holiday season, to go let's say December fifteenth would have 533 00:26:13,400 --> 00:26:16,720 Speaker 6: been much more drastic than obviously going Christmas Eve. But 534 00:26:16,880 --> 00:26:18,720 Speaker 6: this is Look, this is not ending. They're going to 535 00:26:18,760 --> 00:26:21,680 Speaker 6: continue to have patent issues and battles on the healthcare's front. 536 00:26:21,760 --> 00:26:24,119 Speaker 3: Are they really a proletariat issue though? When they're charging 537 00:26:24,200 --> 00:26:26,399 Speaker 3: fourteen hundred dollars for an iPhone? I mean, is this 538 00:26:26,480 --> 00:26:28,960 Speaker 3: is sort of going to become an issue if margins 539 00:26:28,960 --> 00:26:31,160 Speaker 3: are too big and they do get the nods from 540 00:26:31,160 --> 00:26:34,439 Speaker 3: the regulators at a time of souring economic backdrop, does 541 00:26:34,480 --> 00:26:36,600 Speaker 3: that become a real pressure point of just how much 542 00:26:36,640 --> 00:26:38,000 Speaker 3: those margins could keep expanding. 543 00:26:38,280 --> 00:26:40,680 Speaker 6: Look, I think margins continue to expand because from a 544 00:26:40,840 --> 00:26:43,680 Speaker 6: chip perspective, they own their own ecosystem, and that's really 545 00:26:43,720 --> 00:26:46,520 Speaker 6: been the That's and Key's talk about. That's a huge 546 00:26:46,600 --> 00:26:49,040 Speaker 6: part of the opportunity in terms of just gaining more 547 00:26:49,040 --> 00:26:52,280 Speaker 6: and more margins. But from a regulator perspective, they're like, look, 548 00:26:52,320 --> 00:26:56,160 Speaker 6: I'm more focused on the cappuccino this morning than regulators 549 00:26:56,359 --> 00:27:01,480 Speaker 6: in Europe because that continues to just be noise, not real. 550 00:27:01,640 --> 00:27:04,040 Speaker 4: You sound like a man who's got stocks up fifty 551 00:27:04,440 --> 00:27:04,760 Speaker 4: this year. 552 00:27:04,840 --> 00:27:08,480 Speaker 1: Yes, clearly for radio You're not getting the full joys 553 00:27:08,520 --> 00:27:11,359 Speaker 1: this because Dan Eyes is dressed like a pinata this morning. 554 00:27:11,680 --> 00:27:14,960 Speaker 1: You are the bear market pinata that's out there. They 555 00:27:15,080 --> 00:27:16,879 Speaker 1: love going after you, and to me, the heart of 556 00:27:16,920 --> 00:27:19,160 Speaker 1: the matter and I'm gonna go back to Graham, Dodd 557 00:27:19,200 --> 00:27:24,200 Speaker 1: and Coddle. Ibada twenty nineteen, twenty nine percent margin, Ibata 558 00:27:24,400 --> 00:27:28,240 Speaker 1: right now thirty three percent margin. Where's that ibadad margin? 559 00:27:28,320 --> 00:27:29,080 Speaker 1: In four years? 560 00:27:29,480 --> 00:27:31,280 Speaker 6: That's getting toward forty percent? 561 00:27:31,359 --> 00:27:33,520 Speaker 1: And I think that you're gonna give me an Ebatha 562 00:27:33,760 --> 00:27:34,359 Speaker 1: forty percent. 563 00:27:34,560 --> 00:27:38,520 Speaker 6: I believe because as services becomes a bigger piece the 564 00:27:38,680 --> 00:27:41,439 Speaker 6: margins on that's double the hardware business. So is they 565 00:27:41,560 --> 00:27:43,720 Speaker 6: further out? If you're a bull right now, you're not 566 00:27:43,840 --> 00:27:46,200 Speaker 6: looking next year, you look in next two to three years. 567 00:27:46,560 --> 00:27:52,600 Speaker 6: It's a cash flow machine margin When you look toward 568 00:27:52,680 --> 00:27:56,280 Speaker 6: twenty twenty five, twenty twenty six, this is one where 569 00:27:56,440 --> 00:27:58,160 Speaker 6: it's gonna continue moving that direction. 570 00:27:58,240 --> 00:28:00,239 Speaker 4: Okay, you've got thirty seconds. You're gonna tell me now, 571 00:28:00,359 --> 00:28:02,160 Speaker 4: what on earth is an AI app store? 572 00:28:02,840 --> 00:28:03,280 Speaker 8: What is that? 573 00:28:03,640 --> 00:28:06,600 Speaker 6: There's gonna be a separate app store in Apple. That's 574 00:28:06,600 --> 00:28:09,639 Speaker 6: gonna be health. It's gonna be health fitness. AI apps. 575 00:28:09,720 --> 00:28:13,480 Speaker 6: Developers are gonna build that Apple will have it's gonna 576 00:28:13,480 --> 00:28:16,040 Speaker 6: be an offshoot of the app store, an AI app store. 577 00:28:16,280 --> 00:28:18,800 Speaker 6: And right now it's all about developers. That's the hearts 578 00:28:18,840 --> 00:28:20,320 Speaker 6: and lungs of Cooper Tina, the. 579 00:28:20,359 --> 00:28:22,720 Speaker 1: Hearts and lungs. Here's radio is not taking all this in. 580 00:28:23,160 --> 00:28:26,240 Speaker 1: You got the day glot, pink sneakers, the lime green 581 00:28:26,800 --> 00:28:30,440 Speaker 1: lime sorbete pants. You got the lavender thing going up top. 582 00:28:30,640 --> 00:28:32,440 Speaker 1: He looks like a pigon shuit punch back. 583 00:28:32,480 --> 00:28:34,800 Speaker 4: He was wearing leopard print dog mountains the other day. 584 00:28:34,880 --> 00:28:40,160 Speaker 6: Well, that's but I respected Doc mart It's aggressive, but 585 00:28:40,320 --> 00:28:41,000 Speaker 6: he could pull it off. 586 00:28:41,000 --> 00:28:48,480 Speaker 4: It's aggressive, it's aggressives. Congratulations, Thanks, you were right to be, Thanks. 587 00:28:49,880 --> 00:28:50,360 Speaker 7: Went Bush. 588 00:29:00,800 --> 00:29:03,960 Speaker 1: One of the great doers in our international relations is 589 00:29:04,120 --> 00:29:07,800 Speaker 1: Aaron David Miller's thesis was searched for security centering on 590 00:29:07,920 --> 00:29:12,520 Speaker 1: Saudi Arabia's senior fellow at the Carnegian Endowment for International Peace. Aaron, 591 00:29:12,560 --> 00:29:15,800 Speaker 1: you have written about the stretch of sea which to 592 00:29:15,960 --> 00:29:18,960 Speaker 1: us is romantic, indeed biblical, the Red Sea. What is 593 00:29:19,040 --> 00:29:22,560 Speaker 1: distinctive about the Red Sea and Yemen? 594 00:29:24,960 --> 00:29:29,840 Speaker 8: It's turned into a choke point frankly, and you refer 595 00:29:30,000 --> 00:29:33,920 Speaker 8: to the region's centrality in both the fifty six Wars 596 00:29:34,000 --> 00:29:38,560 Speaker 8: sixty seven. You now have a situation in which an extremist, 597 00:29:41,560 --> 00:29:47,920 Speaker 8: once ragtag militia driven by ideology, the huthis now run 598 00:29:48,000 --> 00:29:51,720 Speaker 8: by one of the founder sons, up Del Malakuthi, has 599 00:29:51,800 --> 00:29:56,800 Speaker 8: turned this organization into a significant threat proto state which 600 00:29:56,920 --> 00:30:01,280 Speaker 8: controls one air capital in Sanna, who is now control 601 00:30:02,560 --> 00:30:05,160 Speaker 8: a part of the country which contains Yemen, which contains 602 00:30:05,200 --> 00:30:08,520 Speaker 8: a third of the population of the entire nation. And 603 00:30:08,920 --> 00:30:12,400 Speaker 8: rather than being sort of wholly owned subsidiaries by Iran, 604 00:30:12,480 --> 00:30:17,440 Speaker 8: they are willing participants, driven by theology common affinity. They're 605 00:30:17,440 --> 00:30:21,040 Speaker 8: both twelve ver Shia, just like the Iranians, inspired by 606 00:30:21,040 --> 00:30:25,840 Speaker 8: the Iranian Revolution. They now thanks to technology now drones 607 00:30:25,880 --> 00:30:31,800 Speaker 8: are being manufactured by the Houthis. They now have presented 608 00:30:31,840 --> 00:30:35,520 Speaker 8: themselves as an actor certainly now in the regional stage. 609 00:30:35,880 --> 00:30:37,840 Speaker 8: And given Kirby's comment. 610 00:30:39,520 --> 00:30:44,320 Speaker 1: The relation doctor Miller the relationship of Saudia Arabia with 611 00:30:44,480 --> 00:30:47,280 Speaker 1: some form of recent peace agreement with the Hoosies, but 612 00:30:47,360 --> 00:30:51,080 Speaker 1: I don't buy it for a minute. Triangulate our interests 613 00:30:52,000 --> 00:30:55,520 Speaker 1: with these rebels, with Saudi Arabia and Riyod. 614 00:30:56,680 --> 00:31:00,800 Speaker 8: Well, the Saudi's right now do not want an escalation, 615 00:31:01,720 --> 00:31:04,760 Speaker 8: given the fact that Mohammed bin Selman's plans for twenty 616 00:31:04,880 --> 00:31:10,720 Speaker 8: thirty have now been in some respect undermined by regional 617 00:31:10,800 --> 00:31:15,240 Speaker 8: instability caused by the Israel Hamas war. Sadis are trying 618 00:31:15,280 --> 00:31:18,640 Speaker 8: to find a way to extricate themselves from Yemen. They 619 00:31:18,760 --> 00:31:22,320 Speaker 8: fought the Huthis unsuccessfully. They may actually energized a Huthi 620 00:31:22,440 --> 00:31:26,680 Speaker 8: caused by any number of Arrant air strikes which killed 621 00:31:26,800 --> 00:31:30,800 Speaker 8: the hundreds, if not thousands, of Yemeni's. So I think 622 00:31:30,880 --> 00:31:34,479 Speaker 8: the Saudis don't want a US escalation with the Houthis 623 00:31:34,680 --> 00:31:36,920 Speaker 8: either do the Omanis, who are serving as a sort 624 00:31:36,960 --> 00:31:40,640 Speaker 8: of bridge. Look you look and see the maritime task 625 00:31:40,760 --> 00:31:45,960 Speaker 8: force that Secretary Austin tried to assemble. You've got seven nations. 626 00:31:46,040 --> 00:31:50,080 Speaker 8: The only regional nation that agreed to participate is Bahrain, 627 00:31:50,640 --> 00:31:54,240 Speaker 8: and that's considered a sort of consolation prize given their 628 00:31:54,280 --> 00:31:58,320 Speaker 8: relationship with Saudi Arabia. So the Arab States seemed very 629 00:31:58,400 --> 00:32:00,440 Speaker 8: reluctant as long as the Israeli go as a war 630 00:32:00,560 --> 00:32:04,240 Speaker 8: goes on to join in in an American effort to 631 00:32:04,440 --> 00:32:08,920 Speaker 8: suppress a group that is actually even more than his 632 00:32:09,120 --> 00:32:14,880 Speaker 8: volah launching an actual short range ballistic missile in Israel's direction. 633 00:32:15,080 --> 00:32:16,760 Speaker 8: This is a This is going to be a huge 634 00:32:16,800 --> 00:32:20,760 Speaker 8: problem because our options here are not great. We can 635 00:32:20,800 --> 00:32:24,080 Speaker 8: go through them, if you want, But in terms of deterrence, 636 00:32:24,120 --> 00:32:26,680 Speaker 8: we're already past that. But who the these don't seem 637 00:32:26,720 --> 00:32:28,440 Speaker 8: to be able to be deterred right now. 638 00:32:28,840 --> 00:32:31,880 Speaker 3: Ered what you just said there was fascinating that the 639 00:32:32,200 --> 00:32:35,520 Speaker 3: Middle Eastern allies traditionally with the United States are not 640 00:32:35,600 --> 00:32:40,040 Speaker 3: getting involved because of the war between Israel and Hamas. 641 00:32:40,560 --> 00:32:44,000 Speaker 3: Is this sort of Aran taking this opportunity to direct 642 00:32:44,040 --> 00:32:46,880 Speaker 3: the Huthis to do this to exploit the weakness, the 643 00:32:47,040 --> 00:32:49,840 Speaker 3: lack of ties right now between Riad and Washington DC. 644 00:32:51,200 --> 00:32:54,680 Speaker 8: I think that, yeah, I mean some of argued that 645 00:32:54,800 --> 00:32:57,600 Speaker 8: the one of the key motivators of the Hamas Terra 646 00:32:57,720 --> 00:33:01,560 Speaker 8: surge on October seven as a sort of pro Irani 647 00:33:01,880 --> 00:33:08,320 Speaker 8: and pro Hamas effort to undermine a relationship Israel Saudi 648 00:33:08,480 --> 00:33:11,760 Speaker 8: US that could have created a whole new security architecture 649 00:33:11,800 --> 00:33:15,000 Speaker 8: in the region. I mean, we're prepared, apparently, and don't 650 00:33:15,000 --> 00:33:18,320 Speaker 8: get me started on this to basically conclude a mutual 651 00:33:18,480 --> 00:33:23,080 Speaker 8: defense pact with Saudi Arabia in an effort to facilitate 652 00:33:23,160 --> 00:33:26,840 Speaker 8: this normalization process. We haven't done that since we amended 653 00:33:27,120 --> 00:33:31,000 Speaker 8: the US Japan Security Treaty in nineteen sixty. So yeah, 654 00:33:31,120 --> 00:33:35,040 Speaker 8: this was I think a part of Iran's calculation to 655 00:33:35,320 --> 00:33:42,480 Speaker 8: chill that relationship that was emerging and ultimately undermine it. 656 00:33:42,600 --> 00:33:46,040 Speaker 8: And who these have the same motivation. 657 00:33:45,880 --> 00:33:48,520 Speaker 3: Which to me really raises this question, Okay, how much 658 00:33:48,600 --> 00:33:51,320 Speaker 3: does this add to the urgency of getting some resolution 659 00:33:51,680 --> 00:33:55,880 Speaker 3: to the war between Israel and Hamas that seems to 660 00:33:55,960 --> 00:33:58,640 Speaker 3: maybe be entering a new phase but doesn't seem close 661 00:33:58,720 --> 00:33:59,400 Speaker 3: to a resolution. 662 00:34:00,680 --> 00:34:03,640 Speaker 8: It's important point. You know, it's now global trade, it's 663 00:34:03,680 --> 00:34:06,720 Speaker 8: now supply chain, it's now Christmas. I mean ten to 664 00:34:06,760 --> 00:34:09,759 Speaker 8: fifteen percent of global trade through the Red Sea in 665 00:34:09,800 --> 00:34:13,960 Speaker 8: Suice Canal three week delay and BP has already pulled 666 00:34:14,000 --> 00:34:17,920 Speaker 8: their red sea operational trade from that region. You have 667 00:34:17,960 --> 00:34:19,560 Speaker 8: to go around the Cape of Good Hope. That adds 668 00:34:19,600 --> 00:34:22,359 Speaker 8: another three weeks to a month. I mean, this could 669 00:34:23,200 --> 00:34:28,880 Speaker 8: if it truly began to cause other private companies basically 670 00:34:30,320 --> 00:34:34,120 Speaker 8: to pull out of the red sea trade, have a 671 00:34:34,200 --> 00:34:36,440 Speaker 8: big impact. I just don't think it's going to affect 672 00:34:36,520 --> 00:34:40,880 Speaker 8: either Israel's or Hamas's calculator. That's being driven by a 673 00:34:40,920 --> 00:34:43,160 Speaker 8: whole new, whole different set of dynamics. 674 00:34:43,320 --> 00:34:47,080 Speaker 1: And David Miller. If we decide to become more offensive 675 00:34:47,520 --> 00:34:50,560 Speaker 1: against these whatever they are, terroristies, who's these whatever you 676 00:34:50,600 --> 00:34:53,600 Speaker 1: want to call them. Is that a decision of defense? 677 00:34:54,600 --> 00:34:57,440 Speaker 1: Is that a decision of state and defense? State? Is 678 00:34:57,480 --> 00:35:01,040 Speaker 1: it decided at sixteen under Pennsylvania? How do we change 679 00:35:01,120 --> 00:35:03,800 Speaker 1: us thrust politically in Washington. 680 00:35:03,960 --> 00:35:07,720 Speaker 8: Sixteen hundred Pennsylvania? I mean the options I'm totally already 681 00:35:07,800 --> 00:35:10,840 Speaker 8: on the table. You could have armed escorts, but we 682 00:35:10,920 --> 00:35:14,120 Speaker 8: don't have enough warships. You could create a corridor with 683 00:35:14,239 --> 00:35:17,920 Speaker 8: a sort of a anti drone anti missile bubble above them. 684 00:35:18,600 --> 00:35:21,800 Speaker 8: But remember every time the Huthis launch a two thousand 685 00:35:22,000 --> 00:35:27,360 Speaker 8: dollars drone, we respond with interceptors that cost two million dollars. 686 00:35:27,880 --> 00:35:31,200 Speaker 8: And the Pentagon is already concerned about the expense of 687 00:35:31,320 --> 00:35:34,960 Speaker 8: waging war. I think the only real deterrence would be 688 00:35:35,120 --> 00:35:39,640 Speaker 8: strikes against hoothy assets in Yemen. Yeah, and quite the 689 00:35:39,719 --> 00:35:42,640 Speaker 8: fact that they've launched thirty eight drones and any number 690 00:35:42,680 --> 00:35:46,520 Speaker 8: of missiles we've just intercepted. I don't think there's a 691 00:35:46,600 --> 00:35:50,920 Speaker 8: real drive on the part of the administration to go there, although. 692 00:35:53,000 --> 00:35:55,120 Speaker 1: You good to leave it there. Aaron David Miller, thank 693 00:35:55,160 --> 00:35:57,200 Speaker 1: you so much for the briefing with the Carnigian DOMA 694 00:35:57,280 --> 00:36:01,240 Speaker 1: can't say enough about his writings over the recess decades 695 00:36:01,760 --> 00:36:05,880 Speaker 1: as well. Subscribe to the Bloomberg Surveillance podcast on Apple, Spotify, 696 00:36:06,000 --> 00:36:09,839 Speaker 1: and anywhere else you get your podcasts. Listen live every 697 00:36:09,920 --> 00:36:13,920 Speaker 1: weekday starting at seven am Eastern on Bloomberg dot com, 698 00:36:14,080 --> 00:36:18,200 Speaker 1: the iHeartRadio app tune In, and the Bloomberg Business app. 699 00:36:18,719 --> 00:36:22,360 Speaker 1: You can watch us live on Bloomberg Television and always 700 00:36:22,760 --> 00:36:26,600 Speaker 1: on the Bloomberg Terminal. Thanks for listening. I'm Tom Keen, 701 00:36:26,840 --> 00:36:28,560 Speaker 1: and this is Bloomberg