Speaker 1: Welcome to the Bloomberg P and L Podcast. I'm Pim Fox.
Speaker 1: Along with my co host Lisa Abramowitz. Each day we
Speaker 1: bring you the most important, noteworthy, and useful interviews for
Speaker 1: you and your money, whether at the grocery store or
Speaker 1: the trading floor. Find the Bloomberg P L Podcast on iTunes,
Speaker 1: SoundCloud and at Bloomberg dot com. Now we want to
Speaker 1: prepare for what's to come in the world with Fica Sebzma.
Speaker 1: We are very pleased to have you here, CEO of
Speaker 1: Royal ds M with more than twenty employees, a company
Speaker 1: with more than ten billion dollars of market capitalization. Uh faca.
Speaker 1: You have outlets all across the world, and I want
Speaker 1: to ask you about one place in particular, that's China.
Speaker 1: Can you give us a sense, given that you oversee
Speaker 1: operations on the ground in one of the most uh
Speaker 1: uh questionable areas, people don't have a sense of what's
Speaker 1: actually going on with the economy. What's your perspective? I
Speaker 1: just wanted to tell what what is world s M.
Speaker 1: Thank you for having me here. I indeed factor superman,
Speaker 1: CEO of Royal ds M, founded in an alands, operating worldwide.
Speaker 1: More than two and fifty locations and all continents in
Speaker 1: the world, being the biggest in nutritional ingredients in the world.
Speaker 1: So people who eat sometimes and many people do, half
Speaker 1: a chance that they eat our ingredients every single day.
Speaker 1: Please continue to do so, including our ingredients, but also materials,
Speaker 1: materials for solar panels, for second generation bio fields, new energies,
Speaker 1: so sustainability. So sustainability and nutrition are two core areas
Speaker 1: which we deliver to our customers globally. Okay, So now
Speaker 1: now China and China, I think there's many elements in China,
Speaker 1: second largest economy of the world, still smaller than the US,
Speaker 1: but running up more than five six annual growth? Is
Speaker 1: that bad? Should we be concerned? I don't think at all.
Speaker 1: The fundamentals I will come back on that. There is
Speaker 1: a there is a point. I agree with you. I
Speaker 1: agree with you. P please interrupret me as much as possible.
Speaker 1: But it is not only positive, but the fundamentals are
Speaker 1: not bad. I mean, there's a middle class, there is urbanization.
Speaker 1: There's new people every single day coming on the markets
Speaker 1: who would never purchase before, and once they move from
Speaker 1: the rural area to the domestic area, they do purchase.
Speaker 1: So the fundamentals in China is not bad. Two million
Speaker 1: people from from universities, a big need, six percent grows.
Speaker 1: But ask me your question about the concerns, because you
Speaker 1: seem to be concerned or not well. I mean just
Speaker 1: the fact that they're financing at all with the fastest
Speaker 1: pace of debt creation that know everybody is seen in
Speaker 1: the world. I mean, this is a tremendous concern for
Speaker 1: people in my world and focus. Yes, I know, state
Speaker 1: that deficit pretty low, still one of the lowest in
Speaker 1: the world. But I agree with you. The deficits on
Speaker 1: companies is you and many companies are state owned and
Speaker 1: it's not counted the state deficits, So there you have
Speaker 1: a point. But also deficits in provinces and lower government
Speaker 1: levels is pretty huge. And even the big thing is
Speaker 1: unclear to everybody how big the deficit is. For me,
Speaker 1: a bigger underlying issue is where is the gross coming
Speaker 1: from in China? And the gross is coming from investments,
Speaker 1: the growth is coming less and less from exports, and
Speaker 1: the growth is not coming yet enough from domestic consumption.
Speaker 1: And there are three very clear reasons why the people
Speaker 1: save money in China and do not consume, and that
Speaker 1: is because their concerns about education, their concerns about the
Speaker 1: health care, their concerns about pensions. Later on, it sounds
Speaker 1: just like Americans. No, not at all. You know are Americans.
Speaker 1: They're concerned about their pensions, they're concerned about their health care,
Speaker 1: and they're concerned about education. You are totally right. However,
Speaker 1: having said so, you know, the afforage spent of the
Speaker 1: dollar earned of the average American, it's a little bit
Speaker 1: over the dollar. And the average spent of the dollar
Speaker 1: earned in China is around sixty cents. The average spent
Speaker 1: in Europe is around eighty cents of the dollar earned.
Speaker 1: So the Chinese are one of the biggest safest in
Speaker 1: the world. So maybe they're concerned about the same issues
Speaker 1: as the Europeans or the Americans, but they saved much
Speaker 1: more money for those occasions in pension, healthcare, and education. Well,
Speaker 1: I have to also because there is no safety net
Speaker 1: that has really been in place like the one that
Speaker 1: exists in many European countries and also uh in the
Speaker 1: United States. And I want to turn if you can
Speaker 1: to Europe and tell us you think that there's going
Speaker 1: to be another country that will vote on leaving the
Speaker 1: European Union. Obviously we had Brexit in during Yes, baby Italy,
Speaker 1: they have a reference coming up in December. What's your
Speaker 1: thought and what do you think will Europe look like
Speaker 1: a year from now? Please? No, please, we need to
Speaker 1: have a strong Europe. It's the only way. I mean,
Speaker 1: a strong Belgium. Maybe get them to get their government together, right, yeah,
Speaker 1: United Belgium would already be a great step forward now
Speaker 1: breaking up even the European Treaty with Canada almost as
Speaker 1: a part of Belgium. But I think what we need
Speaker 1: in Europe is not a split of Europe in twenty
Speaker 1: seven pieces. That's the way we started. That's not the
Speaker 1: direction we should go to. So we need to be
Speaker 1: united to form an economic power block um compared with
Speaker 1: the US, compared with China, compared within the compared to
Speaker 1: what it looked like tim Brazil um. So that is
Speaker 1: what what we need. But my big concern is if
Speaker 1: I look to maybe also the elections here in the country,
Speaker 1: if I look to the elections and the Brexit in
Speaker 1: European countries, is are our leaders and maybe not only
Speaker 1: the political leaders, but also leaders of businesses or institutions,
Speaker 1: are our leaders still trusted by the voters? Are the
Speaker 1: leaders still trusted by the people they represent? Um? And
Speaker 1: that is I think a concern. And the British people
Speaker 1: were just angry and they voted, and I think maybe
Speaker 1: they did not voted so much for stepping out to
Speaker 1: you being a union, but they voted for being very
Speaker 1: angry and felt to be left alone. And that is
Speaker 1: a concern and broader than in Europe or the United States. Well,
Speaker 1: and to that question you're saying, you know, do the
Speaker 1: voters trust the politicians and the corporate leaders? I think
Speaker 1: that in a lot of corners the answer is no.
Speaker 1: Uh So what do the politicians and the corporate leaders
Speaker 1: such as yourself do too? And gender more trust to
Speaker 1: do what you stand for and to define where you
Speaker 1: stand for. As a company. Should I only make money?
Speaker 1: Should I take care my shareholder has become as rich
Speaker 1: as possible, as fast as possible? Is that the only
Speaker 1: thing I stand for? Please know I ever brought a
Speaker 1: purpose to serve. I of course should take care of
Speaker 1: my shoulders, but it should take care of my own people.
Speaker 1: I should take take care of my customers. I should
Speaker 1: take care of society as a whole. We have a
Speaker 1: big influence in the world in terms of nutrition or
Speaker 1: in terms of climate change. And I see that as
Speaker 1: a priority, as a goal for our company, and I
Speaker 1: hope that our companies do it too, because that's the
Speaker 1: concern of the people, like you said, about their pensions,
Speaker 1: about the future, about the climate, and a few yields
Speaker 1: more on your investments, and a few percentage more and
Speaker 1: investing in the wrong things which kills our climate later
Speaker 1: on will cost our citizens later on much much more money.
Speaker 1: So that's the way we should run our countries, our companies,
Speaker 1: and that's the way I try to do with them.
Speaker 1: I want to thank you very much for spending time
Speaker 1: with us. Figures the best money is the chief Exam Kitti,
Speaker 1: Chairman of Royal d s M. This is Bloomberg. I
Speaker 1: want to talk with someone about what the implications are
Speaker 1: about this latest election season. I really don't have a
Speaker 1: sense of that, but you know who does, Pim Michael Jesus.
Speaker 1: I was going to say, Michael Jesus, he knows everything
Speaker 1: about this Chief municipal ready for you, and he's here
Speaker 1: with us. Michael, thank you for joining us. Hey, thanks
Speaker 1: for having me on. Very flattering. So I was reading
Speaker 1: your your latest note, and uh, you seem to believe
Speaker 1: that they will not get some kind of definitive results,
Speaker 1: such as a president that's a Democrat as well as
Speaker 1: Congress that's Democratic, but the sort of split the difference,
Speaker 1: and that there'll only be incremental changes. But even so,
Speaker 1: you said that even that would create a risk to
Speaker 1: tax policies pro sectors like financials and commercial real estate.
Speaker 1: Can you explain that, Yeah, well, to the extent that
Speaker 1: there's overlap between um, what Hillary Clinton would like to
Speaker 1: do in her policy proposals and House Republicans, and we
Speaker 1: think the House is very likely to stay Republican. There
Speaker 1: is some overlap on the tax reform side, particularly on
Speaker 1: the corporate reform side around repatriation, and in particular around
Speaker 1: the idea of using some of that money to fund
Speaker 1: infrastructure spending. So in the devil's really in the details
Speaker 1: as to how you execute that, of course, but just
Speaker 1: from a political standpoint, Um, if there is a path
Speaker 1: of lease resistance for any policy proposal on either side
Speaker 1: at this point, that's probably This is probably the area
Speaker 1: where there's maximum overlap. Michaelm wondering if we could just
Speaker 1: kind of ground ourselves in a little, uh, sort of
Speaker 1: yield so that we understand, you know, what you're actually
Speaker 1: getting as an investor if you're let's say, buying triple
Speaker 1: tax free munis State of California one point nine seven percent,
Speaker 1: New York one point eight oh percent, Florida flaridest different
Speaker 1: one point eight four Just give us a little idea
Speaker 1: of of what the landscape looks like right now. Yeah, Well,
Speaker 1: yields are are obviously near all time lows at this point, uh,
Speaker 1: and that seems to be the story every subsequent year.
Speaker 1: I think that story is sort of divorced from what
Speaker 1: you get out of fixed income as a as a
Speaker 1: sort of mix of your entire asset allocation. And we
Speaker 1: we've been arguing anyway that the macro economic environment is
Speaker 1: such that lower for longer yield, that the yield level
Speaker 1: itself isn't necessarily what you're supposed to be pointing to.
Speaker 1: By the macro economic environment of low inflation and slow
Speaker 1: growth is pretty good for owning fixed income, pretty good
Speaker 1: for owning US dollars and fixed income in particular, and
Speaker 1: because of the tax advantages of munies. Uh, that's still
Speaker 1: a core part of your asset allocation and Uh, not
Speaker 1: just owning short munies, but kind of owning longer duration
Speaker 1: munies paired with short meunis to have a relatively even
Speaker 1: barbell across the curve to take advantage of that macroeconomic environment.
Speaker 1: And so uh, you know how this pertains to the election,
Speaker 1: obviously is to the extent that major tax reform comes in. Um.
Speaker 1: Is there something in the cards that either lowers the
Speaker 1: value of tax exempt income because tax brackets are going
Speaker 1: lower like under Donald Trump's plan? Uh, and from either
Speaker 1: side the idea that they might eliminate or at least
Speaker 1: reduce uh tax exclusions and preference items like the fact
Speaker 1: that you don't have to pay interest on your muni debt. Uh.
Speaker 1: That is implicitly a feature of both plans the way
Speaker 1: we judge it at this point, though, because the divided
Speaker 1: government scenario that we talked about earlier, we argue the
Speaker 1: odds are still against that. Well, given that, but given that,
Speaker 1: it seems like, I mean, I'm trying to imagine what
Speaker 1: you're saying. In other words, Uh, if there is some
Speaker 1: sort of reduced taxes, then it will actually reduce the
Speaker 1: allure of tax exempt bonds because you can get income uh.
Speaker 1: And from other places that won't be taxed as much. Um,
Speaker 1: Is that correct? Yeah, Okay, that's that's the right way
Speaker 1: to think about it. So I think about if you
Speaker 1: want to hopefully I get too specific on it, but
Speaker 1: if you have a thousand dollars of tax exempt income
Speaker 1: right now you're in and you're in the thirty tax bracket,
Speaker 1: you're basically shielded from three d fifty of tax. If
Speaker 1: you if tax rates were to go down and you
Speaker 1: found the percent bracket, you're only shielded from two eighty
Speaker 1: dollars of tax. So the value of that tax shield
Speaker 1: goes down, and therefore the value of the bond on
Speaker 1: one thing, you know, you seem rather unfazed about the
Speaker 1: sort of political season and and the hysteria that some
Speaker 1: people have worked themselves up into. But one thing that
Speaker 1: perhaps is more realistic, certainly for these municipalities, is the
Speaker 1: pension burden. How much do you look at the fact
Speaker 1: that pensions are climbing and the pension deficits are climbing
Speaker 1: as income goes down in this yield, low yield environment.
Speaker 1: I mean, this is a this is a really important
Speaker 1: part of our investment philosophy around Muni's UH state and
Speaker 1: local governments. We think have historically been kind of a
Speaker 1: less cyclical part of the muni market and have become
Speaker 1: since the financial crisis, the more cyclical part of the
Speaker 1: muni market. Uh. In no small way do the pension
Speaker 1: issue that you're talking about. State revenue growth is really
Speaker 1: kind of flat at this point, and the claims on
Speaker 1: those incoming dollars are just getting bigger from the capital side,
Speaker 1: whether it be physical capital with h deferred spending on
Speaker 1: roads and bridges and schools, or the underfunded liabilities that
Speaker 1: you're talking about. And UH, it's a situation where there
Speaker 1: aren't any easy legal um uh fixes to this and
Speaker 1: where you know, over the long term, UH, you're likely
Speaker 1: to hit a crisis point and frankly, the market is
Speaker 1: not really compensating you and most areas to uh to
Speaker 1: deal with this. So we think it's a very easy
Speaker 1: sector uh to underweight and um uh. And we really
Speaker 1: would prefer being in enterprise sectors as a consequence, transportation
Speaker 1: and water, sewer utilities and the like. Hey, Michael, I
Speaker 1: wonder if you could just tell us a question that
Speaker 1: you would like answered from a top economic advisor to
Speaker 1: the Trump campaign, because coming up we're gonna be speaking
Speaker 1: with Anthony Scaramucci, who has been advising the Trump campaign
Speaker 1: on economic policy. Yeah, um, you know that. I'd say
Speaker 1: the question that we get the most from clients on
Speaker 1: the Trump tax policy is how do they how do
Speaker 1: they lower the business tax rates but also eliminate the
Speaker 1: carried interest loophole um. And the reason we get that
Speaker 1: question a lot is because for asset managers, the question
Speaker 1: is are they going to be worse off or better
Speaker 1: off under that? Because obviously they enjoy carried interest, but
Speaker 1: if he's also offering a corporate rate, or they actually
Speaker 1: somehow better off under that scenario, even though he's been
Speaker 1: touting the idea that that eliminating carried interest is a
Speaker 1: is something that would hurt the asset management crowd. Good question,
Speaker 1: all right, thank you. Yeah, because we're gonna be speaking with,
Speaker 1: as I said, Anthony Scaramucci. But he also is, of course,
Speaker 1: the founder of a Skybridge Capital, and he's got a
Speaker 1: new book out called I Think It's What Hopping Over
Speaker 1: the rabbit Hole. Now let's turn our attention to the
Speaker 1: world of politics and money. Our guest is Anthony Scaramucci.
Speaker 1: He is the founder of Skybridge Capital, helping to manage
Speaker 1: more than twelve billion dollars of customer assets. He is
Speaker 1: also the author of his This is his third book.
Speaker 1: It is entitled Hopping Over the rabbit Hole. How Entrepreneurs
Speaker 1: Turn Failure into Success. Anthony, thank you very much for
Speaker 1: coming in and spending time with him. It's a pleasure
Speaker 1: to be here. Thank you. Let's begin by talking just
Speaker 1: a second about hopping over the rabbit hole. Do you
Speaker 1: feel like you kind of hopped over the rabbit hole
Speaker 1: during the selection season and the New kind together. I
Speaker 1: can't speak for the election until after it's over. If
Speaker 1: if the outcome comes out the way I think it's
Speaker 1: going to come out, then I've hopped over it. But
Speaker 1: I think all of us, in some ways, and the
Speaker 1: American electorate in general, has fallen into the rabbit hole
Speaker 1: a little bit because at the end of the day,
Speaker 1: our politics is becoming too personal, it's becoming too emotionally
Speaker 1: charged in an ad hominum way, and we've got to
Speaker 1: discuss the policies and the issues a way more than
Speaker 1: we're currently doing, and that's going to be way more
Speaker 1: beneficial to the American people. So, um, just to stick
Speaker 1: with your book for for one second, what's been your
Speaker 1: biggest failure? Well, I got so many of them. I
Speaker 1: I think, Adam of the biggest failure was my near
Speaker 1: death experience with Skybridge, which is the whole genesis of
Speaker 1: the book. We went from a four d and fifty
Speaker 1: million dollars of assets under management to two hundred million,
Speaker 1: and we were on our way out of business, and
Speaker 1: so we had to literally adapt and pivot and redesign
Speaker 1: the business. And frankly, if I wasn't successful or we
Speaker 1: weren't successful in buying City Banks alternative investment management company,
Speaker 1: I'm not sure if Skybridge could have survived. So that
Speaker 1: would be failure big time. Number one. I did fail
Speaker 1: the bar exam twice. I know my mom is listening,
Speaker 1: so I took it the third time to eventually pass
Speaker 1: it here in New York State. That was due to
Speaker 1: intellectual arrogance. I wasn't studying enough for the exam. As
Speaker 1: a younger man, I got fired from Goldman Sachs h
Speaker 1: We could blame it on structural layoffs, but the truth
Speaker 1: of the matter is I stunk at the job of
Speaker 1: being an investment banker. Um. So those are a few
Speaker 1: big failures, but I've got a ton more. Well, you know,
Speaker 1: I just want to quickly ask, how does it affect
Speaker 1: you to hear when people like Jamie Diamond or Warren
Speaker 1: Buffett come out against Donald Trump, including his economic plans. Listen.
Speaker 1: I mean, these guys look at an enormous amount of
Speaker 1: respect for them in business, but I think they're missing
Speaker 1: something about what's going on in the American public right now.
Speaker 1: And so what has happened, And we have to all
Speaker 1: be very careful of this because of where we live
Speaker 1: and who we interact with. We've gotta it's a very
Speaker 1: dangerous circle of elitism. We've got to be super careful
Speaker 1: because the working class that used to be an aspirational
Speaker 1: working class is now becoming the working poor, and the
Speaker 1: middle class is shrinking while the rest of us are
Speaker 1: sitting in salons talking to each other about how great
Speaker 1: everything is. And so I think that's a real big fallacy.
Speaker 1: And you can see that in the Bernie Sanders supporters,
Speaker 1: and you can see that in the Donald J. Trump supporters.
Speaker 1: And so I love Jamie Diamond. I have an enormous
Speaker 1: amount of respect for him. Uh, The big corporate CEOs
Speaker 1: like the status quo. They like to predictability of that.
Speaker 1: But if we're not careful in our society and we
Speaker 1: don't figure out a way to solve the problems for
Speaker 1: the working poor and for the middle class, you're gonna
Speaker 1: see a massive disruption in the society. This is a
Speaker 1: minor tremor what's gone on in the two thousand and
Speaker 1: sixteen election. The biggest risk, and Frank, I'll speak very candidly,
Speaker 1: you don't mind being a little bit political here, is
Speaker 1: that you end up with a charismatic, good looking socialist
Speaker 1: that comes in and totally subverts and disrupts the American society.
Speaker 1: And so for me, I think that I respect Warren Buffett,
Speaker 1: I respect Jamie Diamond. They also have boards that they
Speaker 1: represent and their publicly traded companies, and I understand where
Speaker 1: they're coming from. But I do think that neither of
Speaker 1: them have been to with Donald Trump rally, and my
Speaker 1: guess is neither of them have been to a Bernie
Speaker 1: Sanders rally. And if you go there, you can feel
Speaker 1: the quiet desperation that's in the United States that we
Speaker 1: have to fix. I want to turn your attention to investments,
Speaker 1: because it's not often that I get to talk to
Speaker 1: you about where the money really is going, and you've
Speaker 1: got to follow the money. Someone comes to you, let's
Speaker 1: say they want to open a new account, maybe they
Speaker 1: got attended. They tell you that they have a tenure
Speaker 1: horizon and the uh, they don't want run of the
Speaker 1: mill plane vanilla, because I can get that anywhere else.
Speaker 1: Tell tell people a little bit about strategy and about
Speaker 1: where you'd be looking right now. Well, the number one
Speaker 1: thing that we have to do in our business is
Speaker 1: mental conditioning, because everybody is a long term investor until
Speaker 1: they have short term losses, and that's typically what happens.
Speaker 1: So the losses come in short term, they set their
Speaker 1: hair on fire and they want to change their strategy.
Speaker 1: And so what I tell people about Skybridge, You should
Speaker 1: have a stock and bond portfolio pretty much plain vanilla,
Speaker 1: but five to fifteen cents of your portfolio should be
Speaker 1: in products like what we offer. Now, what is that
Speaker 1: we have a hedge fund business where we're actually taking
Speaker 1: your money and we're allocating it to a group of
Speaker 1: hedge funds and our portfolio now it's about thirty funds.
Speaker 1: The funds are designed to give you a non correlated
Speaker 1: absolute return over a market cycle. That is above bonds,
Speaker 1: and so I don't even know if I'm allowed to
Speaker 1: talk about my performance or not, so I won't, but
Speaker 1: somebody can go look it up. The performance has been
Speaker 1: very good, and the reason it has been very good
Speaker 1: is that we're we're we're targeting a certain lower risk
Speaker 1: targeted to return, and so I tell people you're trying
Speaker 1: to reach an actually our real goal. The market is
Speaker 1: going to become more volatile as the feed is normalizing rates.
Speaker 1: Passive indexes which have worked and so have e t s,
Speaker 1: they may not necessarily work with the same success over
Speaker 1: the next five years. So diversify a little bit into
Speaker 1: products like ours. Real quick to Donald Trump, give you
Speaker 1: autonomy to come up with your own economic plans as
Speaker 1: you weigh in. There's no question he weighs in. I mean,
Speaker 1: you see, this is the thing that I think that
Speaker 1: has been distorted through the media prism and probably also
Speaker 1: from his stump campaigning. He is a very thoughtful, very
Speaker 1: methodical guy. He is a doer with a big long
Speaker 1: list on a on a yellow pit. Anthony Scaramucci, thank
Speaker 1: you so much for being with us. Anthony Scaramuchie, founder
Speaker 1: of Skybridge Capital and author of his third book Hopping
Speaker 1: over the rabbit Hole. Thanks for being with us. This
Speaker 1: is Bluebird and to learn more about Apple, we have
Speaker 1: brought in none other than the expert Shira O Vida
Speaker 1: columnists covering technology a Bloomberg gad fly, which just means
Speaker 1: that fast commentary section. Boy, you know, it's great to
Speaker 1: have you here. My pleasure, Thank you, and I just
Speaker 1: want to point out that you're followable on Twitter at
Speaker 1: Shira O v Day. Yes O v I D Thank you.
Speaker 1: Um Apple, you got this column out fast. What's been
Speaker 1: going on? You're fast? Oh no no. But the reason
Speaker 1: I say that is is because you got it out fast.
Speaker 1: But you make a long term point in the piece,
Speaker 1: maybe just to describe that, expand on that. So it's
Speaker 1: really two points. The basic message is, look, the party's
Speaker 1: over for Apple. So on the one hand, you have
Speaker 1: a company that was this incredible growth story for basically
Speaker 1: fifteen years. Revenue increased annually for fifteen years, and this
Speaker 1: was the first time since two thousand one that fiscal
Speaker 1: year revenue declined for Apple, and looking ahead, it doesn't
Speaker 1: look that much better. We have a company that, I
Speaker 1: mean generates incredible profits, by far the most profitable company
Speaker 1: in the world. But the basis of Apple has been
Speaker 1: this is a company with incredible profits and incredible growth,
Speaker 1: and incredible growth is no longer on the horizon. So
Speaker 1: the big question is what's next for Apple, and they
Speaker 1: don't have an immediate answer. At the iPhone is now
Speaker 1: their annual sales or so, and there really isn't a
Speaker 1: product again on the near term horizon to replace the
Speaker 1: incredible sales and profit growth that the iPhone is generated.
Speaker 1: So let's say that this is the end of the
Speaker 1: Party's Sorry, Apple, it's over. You've gotten to your peak size.
Speaker 1: What does that mean for investors in the stock? I
Speaker 1: mean there's still throwing off so much cash. I mean
Speaker 1: they still have this fortress of money on their balance sheet, right,
Speaker 1: and that's always been the bowl case on Apple, that
Speaker 1: been during its most heady growth period. It still looks
Speaker 1: like an incredibly cheap stock. I believe it's trading right now,
Speaker 1: or at least before today, it's something like thirteen times
Speaker 1: next twelve month revenue, and for a tech stock compared
Speaker 1: to something like Google or Facebook, that's incredibly inexpensive. So
Speaker 1: if you believe that this profit machine at least continues
Speaker 1: for the foreseeable future, and I do, then that's a
Speaker 1: reason to back the stock. But again, if you are
Speaker 1: an investor in Apple and you want incredible growth and
Speaker 1: incredible profits, um, the growth picture is probably not part
Speaker 1: of the story anymore. But how many people really predicted
Speaker 1: that Apple would reach to these heights, let's say, twenty
Speaker 1: years ago. It's a good point. I I don't think
Speaker 1: anyone did. I mean, this was a company that almost died,
Speaker 1: right and has been on this incredible march, the likes
Speaker 1: of which we've probably never seen in the corporate world. Well,
Speaker 1: and the reason I say that is because I know
Speaker 1: that the new iPhone seven does not have let's say
Speaker 1: an extension a plug for earphones. It does not have
Speaker 1: an earphone plug that right, So that may change. You
Speaker 1: don't know what the third and fourth iteration is, specifically,
Speaker 1: since they have the Beats acquisition, you don't know what
Speaker 1: the technology is going to evolve into in order to
Speaker 1: best the competition. And right now, the competition is all
Speaker 1: outside the United States. So if you want a US
Speaker 1: company and you believe that cell phones are going to
Speaker 1: continue to be in demand, what else is there? Yeah,
Speaker 1: that's that's fair. It's you're right. It's not as though
Speaker 1: Apple's smartphone competitors are in much better shape, particularly Samsung
Speaker 1: with this um problem with their exploding smartphones. The issue
Speaker 1: is that the smartphone industry is not growing anymore worldwide
Speaker 1: and um, Apple can't change that, probably on its own.
Speaker 1: So to me, the most telling moment on the earnings
Speaker 1: call the Apple earnings call last night was one of
Speaker 1: the veteran Apple analysts asked him Cook, what's the next
Speaker 1: big thing for Apple beyond the iPhone? The Apple Watch
Speaker 1: is not a blockbuster it quite yet. Apple music is
Speaker 1: not a blockbuster hit quite yet. You're not generating a
Speaker 1: lot of money from Apple pay. There's nothing on the
Speaker 1: current product lineup that is the next growth driver. So
Speaker 1: do you have a vision of what that growth driver
Speaker 1: is for the next generation of Apple? And Tim Cook answered,
Speaker 1: I think rather grumpily that they have the best product
Speaker 1: pipeline they've ever had, which is what Apple CEOs always
Speaker 1: say from the beginning of time. And he also said,
Speaker 1: we're not going to tell you what it is. Basically,
Speaker 1: it's the sort of trust us message from Tim Cook.
Speaker 1: The problem is the trust us message from Apple doesn't
Speaker 1: work anymore. Just real quick, did they mentioned Samsung and
Speaker 1: how much market share they could end up getting. They
Speaker 1: got asked that question and they punted it. I think
Speaker 1: it's clear they're not going to pick up huge sales
Speaker 1: from Samsung. Shara over Day, thank you so much for
Speaker 1: being with us. Thanks for listening to the Bloomberg P
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