WEBVTT - Single Best Idea with Tom Keene: Ian Lyngen & Robert Schiffman

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<v Speaker 1>Bloomberg Audio Studios, podcasts, radio news.

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<v Speaker 2>Single best idea on an odd Monday. There's no other

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<v Speaker 2>way to put it. Odd for the newsflow, odd, for

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<v Speaker 2>the immediacy of the newsflow, which is through the weekend

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<v Speaker 2>news and then overnight Tokyo opening, the Asian markets news,

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<v Speaker 2>Taiwan dollar explodes in strength and beyond much more than that,

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<v Speaker 2>just other news. So it's such a clumsy, clumsy Monday.

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<v Speaker 2>We demanded clarity. Thank you, Dana Telsey. Really appreciate her

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<v Speaker 2>coming in in the state of retail in America, very

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<v Speaker 2>very informative and fluid and uncertain is the future for

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<v Speaker 2>retail America. Ian Lingoln was in with our question our

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<v Speaker 2>Global Wall Street Interview of the Day. Ian lingn here

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<v Speaker 2>on the bar market, he looks for the ten year

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<v Speaker 2>yield out there to move from the four point three

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<v Speaker 2>zero level down to three point six percent. Let's listen.

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<v Speaker 1>I do think tariffs complicate the calculus for lower rates,

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<v Speaker 1>but I do think that the Fed is ultimately going

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<v Speaker 1>to start the process of normalization again, but not until

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<v Speaker 1>we've got greater clarity on what the trade war really means.

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<v Speaker 1>And I do think tenure yields in this year at

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<v Speaker 1>three sixty five. Implicitly, because the President keeps changing the

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<v Speaker 1>rules or changing the trade dynamics, it's very difficult to

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<v Speaker 1>estimate what this all means for core PCE and therefore

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<v Speaker 1>the FED and the trajectory of the economy. I think

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<v Speaker 1>the one clear takeaway is that there has been a

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<v Speaker 1>concern raised about the dollars status as a reserve currency

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<v Speaker 1>and whether treasuries are still flight to quality assets, and

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<v Speaker 1>the recent price action suggests that those two still hold

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<v Speaker 1>for the time being. But that's going to be the

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<v Speaker 1>major question for the next several months.

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<v Speaker 2>Ian Lincoln with us there from BMO Capital Market. Sometimes

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<v Speaker 2>news comes out you expect it, you've been waiting for it.

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<v Speaker 2>That's the case with an Apple debt offering. I've been

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<v Speaker 2>waiting for it about nine months, two years since they

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<v Speaker 2>did their last offering. It's a triage of four if

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<v Speaker 2>this taping, unknown what those levels will be, and I'm

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<v Speaker 2>sure it'll be price up, yield lower, and very near

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<v Speaker 2>a treasury yield. We are so advantaged at Bloomberg Intelligence

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<v Speaker 2>to have Robert Shiftman with us and his team looking

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<v Speaker 2>at corporate at paper he published immediately on the known

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<v Speaker 2>and the unknown of the Apple transaction here, Robert Shiftman

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<v Speaker 2>of Bloomberg Intelligence.

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<v Speaker 3>It sort of goes back to my early days at

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<v Speaker 3>math Camp. Their weighted average cost of capital is dominated

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<v Speaker 3>by their cost of equity, which is about nine and

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<v Speaker 3>a quarter percent, and their weighted average cost of debt

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<v Speaker 3>is effectively zero. When you have a three trillion dollar

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<v Speaker 3>equity market cap, that the cost of debt is nothing,

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<v Speaker 3>and that's why they keep one hundred billion dollars of

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<v Speaker 3>debt on the book. So it makes math sense to

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<v Speaker 3>borrow money and buy back more shares or give it

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<v Speaker 3>away and dividends, and that's what they do. The real

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<v Speaker 3>issue with Apple is they have a problem, and their

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<v Speaker 3>problem is they make too much money. They have one

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<v Speaker 3>hundred billion dollars of annual free cash flow, so it

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<v Speaker 3>keeps flowing in. So what do they eventually do with it? Well,

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<v Speaker 3>they give it away, But you know, you borrow a

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<v Speaker 3>little bit at a time, and for Apple, that's five

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<v Speaker 3>or ten billion dollar chunks.

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<v Speaker 2>Robert Schiffman on short notice there and the Apple transaction.

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<v Speaker 2>Look to our Bloomberg Intelligence team and also to Bloomberg

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<v Speaker 2>News for the publication of that transaction, always anticipated on

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<v Speaker 2>Wall Street. Thank you for your listening on commute. Particular

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<v Speaker 2>thank you to those in serious XEM Channel one twenty

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<v Speaker 2>one greatly appreciate that. On YouTube, building every day subscribe

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<v Speaker 2>to Bloomberg Podcasts. Just can't say enough about that. And

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<v Speaker 2>on YouTube podcasts, this is single best idea.