1 00:00:02,600 --> 00:00:13,800 Speaker 1: Yeah, Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane Jailey. 2 00:00:13,960 --> 00:00:17,560 Speaker 1: We bring you insight from the best in economics, finance, investment, 3 00:00:18,000 --> 00:00:23,480 Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 4 00:00:23,600 --> 00:00:28,160 Speaker 1: Bloomberg dot com, and of course on the Bloomberg Viz 5 00:00:28,240 --> 00:00:31,920 Speaker 1: Rhiner with us and it is a timely conversation because 6 00:00:31,960 --> 00:00:33,879 Speaker 1: so much of what we heard at the World Economic 7 00:00:33,960 --> 00:00:37,920 Speaker 1: Form meetings was about core theory. For years, he led 8 00:00:38,040 --> 00:00:41,199 Speaker 1: the theory study at the Federal Reserve System and was 9 00:00:41,280 --> 00:00:45,440 Speaker 1: way out front with a number of other lead economists 10 00:00:45,520 --> 00:00:50,159 Speaker 1: on driving forward the terms, the words, and the jargon 11 00:00:50,280 --> 00:00:53,080 Speaker 1: of the Fed. He is, of course, Melan chief economist 12 00:00:53,159 --> 00:00:55,800 Speaker 1: and he joins us this morning. Vince. One of the 13 00:00:55,800 --> 00:00:59,800 Speaker 1: words that John and I heard interview after interview was 14 00:00:59,840 --> 00:01:03,000 Speaker 1: he your tool or tool kits as well? What is 15 00:01:03,000 --> 00:01:06,039 Speaker 1: the tool kit the Chairman Powell has at the press 16 00:01:06,120 --> 00:01:10,880 Speaker 1: conference this afternoon. What's available pretty limited in the sense 17 00:01:10,959 --> 00:01:13,960 Speaker 1: that I think they still believe that the funds rates 18 00:01:14,000 --> 00:01:16,000 Speaker 1: in the right place to keep the economy in a 19 00:01:16,040 --> 00:01:20,400 Speaker 1: good place. One thing you'll never hear from a central 20 00:01:20,440 --> 00:01:24,600 Speaker 1: bank or is admitting admitting defeat. You can always do 21 00:01:24,880 --> 00:01:28,119 Speaker 1: a little bit more of what you've done previously, Uh, 22 00:01:28,200 --> 00:01:31,880 Speaker 1: including making your balance sheet bigger and changing composition. John, 23 00:01:31,920 --> 00:01:34,360 Speaker 1: that's that's equivalent. They got that from fans of the 24 00:01:34,360 --> 00:01:37,280 Speaker 1: Boston Red Sox in the nineteen sixties. He did mention 25 00:01:37,280 --> 00:01:39,679 Speaker 1: the Bana sheet. So let's explore that a little bit further, Vince, 26 00:01:39,720 --> 00:01:41,680 Speaker 1: Let's talk about it, the Banashee operation at the FT 27 00:01:41,720 --> 00:01:43,920 Speaker 1: at the moment, building up some big purchases of t 28 00:01:44,080 --> 00:01:46,840 Speaker 1: bills and arguably set to unwind some of that or 29 00:01:46,840 --> 00:01:49,120 Speaker 1: at least stop it later this year. How do they 30 00:01:49,160 --> 00:01:54,840 Speaker 1: got ma communicating that? So I think that, Um, they 31 00:01:54,880 --> 00:01:57,800 Speaker 1: have a problem in terms of the repo market, and 32 00:01:57,960 --> 00:02:01,640 Speaker 1: their solution is brute force. He puts. So, by so 33 00:02:01,760 --> 00:02:05,200 Speaker 1: many assets, you've created an ample amount of reserves, and 34 00:02:05,280 --> 00:02:09,239 Speaker 1: so the repo rate and other overnight rates won't like. 35 00:02:10,000 --> 00:02:12,880 Speaker 1: The problem they have, as you note, is they made 36 00:02:12,880 --> 00:02:16,520 Speaker 1: their balance sheet bigger again by buying treasury bills, and 37 00:02:16,560 --> 00:02:19,320 Speaker 1: those treasury bills are going to be going away, and 38 00:02:19,480 --> 00:02:22,040 Speaker 1: you think you'll get some balance sheet shrinkage later in 39 00:02:22,080 --> 00:02:24,960 Speaker 1: the year. Uh, they don't have to. They are complete 40 00:02:25,000 --> 00:02:27,280 Speaker 1: control of the balance sheet. They can buy longer term 41 00:02:27,280 --> 00:02:30,240 Speaker 1: treasury securities, or they can arrange a rolling book of 42 00:02:30,320 --> 00:02:35,040 Speaker 1: temporary transactions to make sure they keep reserves ample. They 43 00:02:35,040 --> 00:02:38,840 Speaker 1: don't have a permanent fix yet, but they're gonna do 44 00:02:38,880 --> 00:02:41,679 Speaker 1: it the old fashioned way, which is just keep at 45 00:02:41,720 --> 00:02:45,160 Speaker 1: and add in reserves. They're sort of a key question 46 00:02:45,200 --> 00:02:48,160 Speaker 1: for markets about the FED and the potential for them 47 00:02:48,240 --> 00:02:50,760 Speaker 1: to start tapering off some of their T bill purchases. 48 00:02:51,160 --> 00:02:54,480 Speaker 1: Just how much of an effect has their balance sheet 49 00:02:54,480 --> 00:02:56,760 Speaker 1: expansion that we've seen over the past six to eight 50 00:02:56,760 --> 00:03:00,080 Speaker 1: months had on risk assets? And Bill Dudley, former New 51 00:03:00,120 --> 00:03:01,640 Speaker 1: York Fed presit who's going to be coming on the 52 00:03:01,680 --> 00:03:04,760 Speaker 1: show UH later on with with with John and Tom. 53 00:03:05,040 --> 00:03:07,400 Speaker 1: Writing in a in a Bloomberg opinion piece, I am 54 00:03:07,440 --> 00:03:10,120 Speaker 1: skeptical that the Fed's balance sheet expansion is having a 55 00:03:10,160 --> 00:03:13,680 Speaker 1: major effect on US stock prices. Do you agree? I 56 00:03:13,720 --> 00:03:16,040 Speaker 1: was gonna say, go to your Bloomberg terminal and read 57 00:03:16,080 --> 00:03:20,840 Speaker 1: the article by Bill Bill Dudley, I agree. I think 58 00:03:20,960 --> 00:03:25,920 Speaker 1: that mostly the UH asset prices are driven by the 59 00:03:26,000 --> 00:03:29,919 Speaker 1: interest rates the Federal Reserve sets, i e. The overnight 60 00:03:30,040 --> 00:03:34,880 Speaker 1: rate and it's configuration of borrowing deposit rate and such, 61 00:03:35,560 --> 00:03:38,400 Speaker 1: and the composition of the balance sheet, the size of 62 00:03:38,400 --> 00:03:42,240 Speaker 1: the balance sheet has at most a second or third 63 00:03:42,320 --> 00:03:46,440 Speaker 1: order effect. So I think FET officials just won't go there, 64 00:03:46,600 --> 00:03:50,720 Speaker 1: and you will not hear j Pal this afternoon. Uh 65 00:03:50,800 --> 00:03:55,640 Speaker 1: take any responsibility for asset values associated with the size 66 00:03:55,640 --> 00:03:58,880 Speaker 1: of the balance sheet. Where he has to take responsibility, 67 00:03:59,400 --> 00:04:02,120 Speaker 1: uh in terms of asset values is the lowness of 68 00:04:02,160 --> 00:04:04,680 Speaker 1: the overnight rate the problem at the moment of Vince 69 00:04:04,800 --> 00:04:06,840 Speaker 1: and I think you'll appreciate this, and it is a 70 00:04:06,920 --> 00:04:09,480 Speaker 1: clearly well laid out argument from the former New York 71 00:04:09,480 --> 00:04:12,360 Speaker 1: Fed president this morning. He goes through the impact, the 72 00:04:12,400 --> 00:04:16,200 Speaker 1: effect on interest rates, the effect on liquidity, but the 73 00:04:16,279 --> 00:04:20,000 Speaker 1: signaling if enough people think that is what it matters 74 00:04:20,360 --> 00:04:23,160 Speaker 1: for financial assets, isn't that a problem that they've got 75 00:04:23,160 --> 00:04:26,800 Speaker 1: a won? Yes? And we had that if I had 76 00:04:26,839 --> 00:04:30,359 Speaker 1: that problem a year ago December when everybody was talking 77 00:04:30,360 --> 00:04:34,680 Speaker 1: about quantitative tightening associated with the run off the balance sheet. 78 00:04:34,920 --> 00:04:38,279 Speaker 1: There are such things as self fulfilling uh prophecies that 79 00:04:38,400 --> 00:04:42,400 Speaker 1: if enough people in the market convinced themselves it's so, uh, 80 00:04:43,160 --> 00:04:47,400 Speaker 1: then it may wind up so. And what to share 81 00:04:47,520 --> 00:04:50,080 Speaker 1: Pal and his colleagues to push back on that mistake. 82 00:04:51,200 --> 00:04:53,440 Speaker 1: Do you have in your research history at the said 83 00:04:53,560 --> 00:04:56,479 Speaker 1: Vince Ryner. And I think of Dr Orphans and many 84 00:04:56,520 --> 00:04:59,880 Speaker 1: others writing with you and for you. Any essays that 85 00:05:00,080 --> 00:05:04,160 Speaker 1: say a central bank can reflate other than massive issuance 86 00:05:04,200 --> 00:05:11,320 Speaker 1: of money. I mean, is reflation a valid monetary concept? Uh, 87 00:05:11,360 --> 00:05:17,640 Speaker 1: Inflation is always an everywhere a monetary reflation. Reflation just 88 00:05:17,760 --> 00:05:22,560 Speaker 1: the physical ability to reflate an economy. Is it doable? 89 00:05:23,640 --> 00:05:26,960 Speaker 1: I would ask Governor Kuroda about that, because he's having 90 00:05:26,960 --> 00:05:31,400 Speaker 1: an enormously difficult time, even though he's throwing about throwing 91 00:05:31,480 --> 00:05:35,560 Speaker 1: every monetary policy tool at at the problem. I think 92 00:05:35,920 --> 00:05:38,400 Speaker 1: there's two. This is where you have to remember, Tom. 93 00:05:38,640 --> 00:05:43,240 Speaker 1: A central bank does not create extra demand. It borrows it. 94 00:05:43,240 --> 00:05:46,240 Speaker 1: It either borrows it from its trading partner by depreciating 95 00:05:46,240 --> 00:05:49,400 Speaker 1: its currency, or it borrows it in the future by 96 00:05:49,480 --> 00:05:53,000 Speaker 1: keeping short rates lower than the equaler room one. And 97 00:05:53,040 --> 00:05:56,480 Speaker 1: what's the problem post financial crisis. The equal room rate 98 00:05:56,520 --> 00:05:59,039 Speaker 1: is really low, so the fat can't have much of 99 00:05:59,040 --> 00:06:02,839 Speaker 1: a sale on interest rates. You can't get the rate 100 00:06:02,920 --> 00:06:05,920 Speaker 1: that much below the equilibrium, and nobody wants to do. 101 00:06:06,240 --> 00:06:10,720 Speaker 1: Nobody wants to accept appreciation of their currency, resent you 102 00:06:10,920 --> 00:06:14,240 Speaker 1: the dollar, so JPAL can't get the dollar down that 103 00:06:14,279 --> 00:06:17,240 Speaker 1: will be on our podcast this afternoon, folks, And for 104 00:06:17,240 --> 00:06:21,599 Speaker 1: those of you in young academics and economics, Professor Reinhardt 105 00:06:21,720 --> 00:06:25,880 Speaker 1: just nailed it there on the demand illusion involved, and 106 00:06:25,880 --> 00:06:28,040 Speaker 1: he has the experience to back it up with twenty 107 00:06:28,040 --> 00:06:32,479 Speaker 1: four years at the Federal Reserve, particularly as the Division 108 00:06:32,520 --> 00:06:35,480 Speaker 1: of Monetary Affairs and secretary. Uh, the economist in the 109 00:06:35,520 --> 00:06:39,000 Speaker 1: Federal Open Market Committee. I'm curious, giving your experience at 110 00:06:39,000 --> 00:06:42,200 Speaker 1: the Fed, what you think of the increasing focus on 111 00:06:42,360 --> 00:06:48,080 Speaker 1: some sort of coordination between politicians and monetary policymakers. How 112 00:06:48,120 --> 00:06:51,000 Speaker 1: concerning is that to you as sort of the possible 113 00:06:51,080 --> 00:06:55,080 Speaker 1: next step in an effort to reflate the economy. So 114 00:06:55,120 --> 00:06:58,200 Speaker 1: I think that if you erode the independence of the 115 00:06:58,279 --> 00:07:02,479 Speaker 1: central bank, then you you do longer term damage to 116 00:07:02,560 --> 00:07:07,120 Speaker 1: your ability to stabilize the economy. I think the problem 117 00:07:07,320 --> 00:07:10,480 Speaker 1: is not about the Federal Reserve, is that fiscal policy 118 00:07:10,480 --> 00:07:15,240 Speaker 1: has done so poorly. Uh. Congress can't act. Um. We 119 00:07:15,280 --> 00:07:20,800 Speaker 1: don't have automatic, sufficient, automatic stable stabilizers. The biggest lie 120 00:07:20,800 --> 00:07:23,720 Speaker 1: in Washington, d C. Or among the biggest lives, let 121 00:07:23,720 --> 00:07:28,280 Speaker 1: me be clear, is that they're always shovel ready projects. Uh. 122 00:07:28,720 --> 00:07:31,800 Speaker 1: If you want to do discretionary spending. We just don't 123 00:07:31,840 --> 00:07:35,200 Speaker 1: do it right. And because fiscal policy has done so poorly, 124 00:07:35,600 --> 00:07:38,600 Speaker 1: we rely on monetary policy more than we have to. 125 00:07:38,920 --> 00:07:44,640 Speaker 1: So I'd get fiscal policy UH better coordinated and then 126 00:07:44,720 --> 00:07:48,440 Speaker 1: leave monetary policy to do in the gap. Since one 127 00:07:48,480 --> 00:07:51,440 Speaker 1: final question, what are you listen for today? I mean, 128 00:07:51,480 --> 00:07:53,160 Speaker 1: you know, Michael McKee is gonna be there. They're gonna 129 00:07:53,160 --> 00:07:55,400 Speaker 1: ask a lot of questions. Everybody's telling me it's a 130 00:07:55,480 --> 00:07:58,280 Speaker 1: snooze fest. I don't buy it. The press conference is 131 00:07:58,320 --> 00:08:01,840 Speaker 1: never as snooze fest, is it? If I were j PAL, 132 00:08:01,960 --> 00:08:04,440 Speaker 1: I wouldn't call on on Mike McKee because he'll ask 133 00:08:04,440 --> 00:08:08,080 Speaker 1: a hard question. Does usually brings a place to silence. 134 00:08:08,120 --> 00:08:13,040 Speaker 1: It's embarrassing. So I think there are are two things uh. 135 00:08:13,440 --> 00:08:16,280 Speaker 1: The one is is how j Pow walks the fine 136 00:08:16,320 --> 00:08:20,680 Speaker 1: line as reporters ask questions about UH late breaking events. 137 00:08:20,720 --> 00:08:24,160 Speaker 1: What is the coronals? How does it mean? You have 138 00:08:24,280 --> 00:08:27,000 Speaker 1: to be empathetic, but you also don't want to overstate 139 00:08:27,000 --> 00:08:29,640 Speaker 1: what it means for the US economy, so that that 140 00:08:29,640 --> 00:08:32,959 Speaker 1: that will be a test of his diplomatic skills. What 141 00:08:33,400 --> 00:08:37,880 Speaker 1: I listen for is how asymmetric to guard rails around 142 00:08:37,920 --> 00:08:40,320 Speaker 1: the current funds, right, I think they've been much more 143 00:08:40,360 --> 00:08:43,800 Speaker 1: willing to ease than they would be tightened to tighten. Uh. 144 00:08:43,840 --> 00:08:46,840 Speaker 1: We got that in December, and here's his chance to 145 00:08:47,000 --> 00:08:50,920 Speaker 1: explain that again. Wonderful, thank you. So it's just brilliant 146 00:08:50,920 --> 00:08:53,760 Speaker 1: there in the middle talking about demand dynamics that I 147 00:08:53,800 --> 00:08:58,760 Speaker 1: asked her the real economy folding into that though, how 148 00:08:58,800 --> 00:09:01,600 Speaker 1: flexible the guard rails are around the FET funds rate 149 00:09:01,840 --> 00:09:04,520 Speaker 1: right now, how asymmetric they are, which basically goes to 150 00:09:04,600 --> 00:09:07,160 Speaker 1: something really really to make it really simple, the FET 151 00:09:07,240 --> 00:09:09,680 Speaker 1: is basically told pretty much everyone in the last couple 152 00:09:09,679 --> 00:09:11,839 Speaker 1: of months that if things get better, they won't get 153 00:09:11,840 --> 00:09:13,840 Speaker 1: in the way, they won't hike, but if things get worse, 154 00:09:13,920 --> 00:09:15,559 Speaker 1: they'll be ready to cut again. And I think that 155 00:09:15,640 --> 00:09:17,960 Speaker 1: shift in the reaction function of the last twelve months, 156 00:09:18,440 --> 00:09:21,880 Speaker 1: emphasized in the last couple of months, it's really really important. 157 00:09:32,320 --> 00:09:36,280 Speaker 1: This is the interview of the day synthesize again economics 158 00:09:36,280 --> 00:09:38,480 Speaker 1: with financial investment, and I wish you could have been 159 00:09:38,520 --> 00:09:41,160 Speaker 1: with his folks and the commercial barkers. We talked to 160 00:09:41,200 --> 00:09:45,600 Speaker 1: the former presidentcy New York Central Bank, and of course 161 00:09:45,640 --> 00:09:50,880 Speaker 1: William Dudley, associated for years with defining Golden sex economics. Uh, 162 00:09:50,920 --> 00:09:52,800 Speaker 1: and here with an essay. Al but Bill, I have 163 00:09:52,960 --> 00:09:56,199 Speaker 1: to digress. First, you're down at Princeton making me feel 164 00:09:56,200 --> 00:09:59,960 Speaker 1: like a fossil. Which is you're teaching? And is you brilliant? 165 00:10:00,080 --> 00:10:05,400 Speaker 1: He said? These kids in these master programs don't really 166 00:10:05,440 --> 00:10:09,840 Speaker 1: remember the financial crisis remembered as kids, right, and so 167 00:10:10,000 --> 00:10:12,680 Speaker 1: obviously it had effects on their parents and their parents 168 00:10:12,840 --> 00:10:16,199 Speaker 1: jobs and livelihoods, but probably not on them directly. What 169 00:10:16,320 --> 00:10:19,080 Speaker 1: questions do they ask? These are steam kids in the 170 00:10:19,200 --> 00:10:21,959 Speaker 1: at the Griswolds Center at Princeton University. These are the 171 00:10:22,000 --> 00:10:25,000 Speaker 1: best and brightest. What questions do they ask about the 172 00:10:25,040 --> 00:10:28,440 Speaker 1: agony we all lived? Well? I think they're particularly interested in, Okay, 173 00:10:28,440 --> 00:10:30,480 Speaker 1: in the foggle war when everything is starting to break, 174 00:10:30,600 --> 00:10:32,040 Speaker 1: what do you do and why do you do it? 175 00:10:32,080 --> 00:10:33,800 Speaker 1: And what do you know? And what don't you know? 176 00:10:34,280 --> 00:10:37,240 Speaker 1: And how do you make decisions under uncertainty? Do you 177 00:10:37,320 --> 00:10:39,840 Speaker 1: go back to foundational economic theory? I mean, are you 178 00:10:39,920 --> 00:10:42,280 Speaker 1: quoting these bright kids? I s you know, Hicksie and 179 00:10:42,320 --> 00:10:45,040 Speaker 1: I sluh that it's not so much it's not deep 180 00:10:45,080 --> 00:10:48,280 Speaker 1: in economic theory. It's more about how the financial system 181 00:10:48,559 --> 00:10:50,760 Speaker 1: fits together all the pieces. So you talk about the 182 00:10:50,840 --> 00:10:54,280 Speaker 1: roulette wheel. You how did the building send, the growth 183 00:10:54,280 --> 00:10:57,000 Speaker 1: of the investment banking business, the you know, the growth 184 00:10:57,000 --> 00:11:00,360 Speaker 1: of complex securitized products. You know, the bad a prime 185 00:11:00,400 --> 00:11:02,679 Speaker 1: mortgage underwriting. You know all those things that fit together 186 00:11:02,720 --> 00:11:05,520 Speaker 1: that caused us the financial crisis. So, Bill, we were 187 00:11:05,559 --> 00:11:08,920 Speaker 1: just talking in the break. We're still filling the impacts 188 00:11:08,960 --> 00:11:10,920 Speaker 1: of the financial crisis, aren't we. What are some of 189 00:11:10,920 --> 00:11:14,280 Speaker 1: the ways that you think are still whether it's Fed policy, politics, 190 00:11:14,920 --> 00:11:16,720 Speaker 1: you know, what's your take on that? Well, I mean 191 00:11:16,720 --> 00:11:18,880 Speaker 1: there's a lot of impacts with number one, the Fed 192 00:11:18,920 --> 00:11:21,560 Speaker 1: has a different monetary policy framework today than it did 193 00:11:21,640 --> 00:11:24,679 Speaker 1: brought prior to the financial crisis. Well, it's got big 194 00:11:24,679 --> 00:11:27,280 Speaker 1: balance sheet and you know it sets interest rates by 195 00:11:27,360 --> 00:11:30,120 Speaker 1: setting the interest rate, pays on reserves, a totally different regime. 196 00:11:30,400 --> 00:11:33,000 Speaker 1: We have a different regulatory and supervisory regime. We have 197 00:11:33,040 --> 00:11:35,240 Speaker 1: the you know, Financial Stability Oversight Council, We have all 198 00:11:35,280 --> 00:11:37,920 Speaker 1: the things that the Dodd Frank Act did um and 199 00:11:37,960 --> 00:11:40,720 Speaker 1: we have a very different political environment too. I think 200 00:11:40,960 --> 00:11:43,120 Speaker 1: you have an important essay out today. It was an 201 00:11:43,200 --> 00:11:45,240 Speaker 1: essay if it had been released in a happy valley 202 00:11:45,280 --> 00:11:47,319 Speaker 1: called Davos, she would have been thrown in a snow 203 00:11:47,360 --> 00:11:52,880 Speaker 1: bank Dudley against the consensus. There are much better explanations 204 00:11:52,920 --> 00:11:56,960 Speaker 1: for the recent rise in stocks than FED T buill purchases. 205 00:11:57,040 --> 00:12:00,880 Speaker 1: Nobody in a happy valley agrees with that statement. Discussed now, 206 00:12:00,920 --> 00:12:05,400 Speaker 1: why conventional monetary accommodation is really why we've seen the 207 00:12:05,480 --> 00:12:09,160 Speaker 1: lift versus balance sheet dynamics. Well, people have basically made 208 00:12:09,200 --> 00:12:11,640 Speaker 1: this claim that because the Feed is buying sixty billion 209 00:12:11,679 --> 00:12:13,800 Speaker 1: of treasury bills a month, that that's why the stock 210 00:12:13,840 --> 00:12:16,840 Speaker 1: market has gone up. We heard this, and I just 211 00:12:16,920 --> 00:12:19,520 Speaker 1: find that not compelling at all, because there's a much 212 00:12:19,559 --> 00:12:22,760 Speaker 1: better explanation. The better explanation is the FED eas interest 213 00:12:22,840 --> 00:12:25,840 Speaker 1: rate seventy five bases points last year. Second, it said 214 00:12:25,880 --> 00:12:28,440 Speaker 1: that Monterrey policy is on hold until we get inflation 215 00:12:28,520 --> 00:12:31,079 Speaker 1: well above two percent, and so and the and the 216 00:12:31,160 --> 00:12:33,920 Speaker 1: comedy looks fine. So you have a situation where the 217 00:12:33,960 --> 00:12:36,000 Speaker 1: Fed is friendly, the commedy is fine, and the course, 218 00:12:36,040 --> 00:12:38,000 Speaker 1: that's how why equities are going out. And you learned 219 00:12:38,000 --> 00:12:39,800 Speaker 1: it's at Berkeley billion years ago. I mean, I grew 220 00:12:39,880 --> 00:12:42,360 Speaker 1: up in the aerospace game, which the X access matters. 221 00:12:42,360 --> 00:12:44,400 Speaker 1: Everybody's focused on the Y axis, and to me, in 222 00:12:44,440 --> 00:12:48,240 Speaker 1: the last days. The dialogue has been to shift the 223 00:12:48,520 --> 00:12:52,160 Speaker 1: X axis out longer, and even the belief in going 224 00:12:52,200 --> 00:12:54,880 Speaker 1: out the X axis in time has led to accommodation. 225 00:12:55,280 --> 00:12:57,000 Speaker 1: You know, they're not going to move for a while. Well, 226 00:12:57,040 --> 00:13:00,400 Speaker 1: they've they've they've basically changed their regime. Before it was like, 227 00:13:00,440 --> 00:13:02,200 Speaker 1: we need to get to neutral at about the same 228 00:13:02,240 --> 00:13:04,839 Speaker 1: time that the economy gets to full employment. Now now 229 00:13:04,880 --> 00:13:06,880 Speaker 1: they have a different regime, which is we're basically gonna 230 00:13:06,880 --> 00:13:09,800 Speaker 1: stay here until we actually see Oh my word, Duddeley 231 00:13:09,880 --> 00:13:14,079 Speaker 1: channeling James Bullard's Bullard it's a surveillance exclusive. So that 232 00:13:14,320 --> 00:13:17,320 Speaker 1: this you know, the sixty billion dollars of t bow buying, 233 00:13:17,400 --> 00:13:20,040 Speaker 1: is that just you think that's kind of the new normal. 234 00:13:20,160 --> 00:13:22,360 Speaker 1: It's just that kind of Is it reflecting the growth 235 00:13:22,360 --> 00:13:23,720 Speaker 1: in the economy? What do you think is going on? 236 00:13:23,760 --> 00:13:25,680 Speaker 1: They're just trying to catch up and get enough bank 237 00:13:25,720 --> 00:13:27,840 Speaker 1: reserves in the system. They basically found out in September 238 00:13:27,920 --> 00:13:30,040 Speaker 1: last year there weren't enough reserves in the banking system 239 00:13:30,080 --> 00:13:32,679 Speaker 1: and that's what caused that spike in repo rates. And 240 00:13:32,720 --> 00:13:35,200 Speaker 1: the solution to solving that spike in repo rates is 241 00:13:35,240 --> 00:13:37,679 Speaker 1: to add more reserves to the banking system, the permanent 242 00:13:37,720 --> 00:13:40,560 Speaker 1: solution we waiting for. Well, I think this will take 243 00:13:40,600 --> 00:13:42,920 Speaker 1: care of the problem big spikes and repo rates. And 244 00:13:42,960 --> 00:13:44,440 Speaker 1: then the next question is are they going to go 245 00:13:44,480 --> 00:13:47,559 Speaker 1: a little bit further and introduce a standing repo facility 246 00:13:47,600 --> 00:13:50,000 Speaker 1: to put a cap on rates? You know, so if 247 00:13:50,080 --> 00:13:52,440 Speaker 1: upper pressure develops, you go to the FED standing repot 248 00:13:52,480 --> 00:13:55,000 Speaker 1: facility and there's no upper pressure on repo rates. I 249 00:13:55,000 --> 00:13:57,480 Speaker 1: think that's coming. But they have not made a decision 250 00:13:57,520 --> 00:14:00,199 Speaker 1: on So did ne York Fed get caught flat foot? Did? 251 00:14:00,200 --> 00:14:02,560 Speaker 1: Did they miss something? Was that a mistake? Was it? Well? 252 00:14:02,559 --> 00:14:05,160 Speaker 1: I think what happened was nobody knew what the underlying 253 00:14:05,160 --> 00:14:08,160 Speaker 1: demand for bank reserves were was because we changed the 254 00:14:08,200 --> 00:14:11,720 Speaker 1: regulatory regime pretty significantly, and we found out in September 255 00:14:11,760 --> 00:14:14,040 Speaker 1: that the demand for reserves was a bit higher than 256 00:14:14,080 --> 00:14:17,640 Speaker 1: what people anticipated. It was higher than what banks told 257 00:14:17,640 --> 00:14:20,560 Speaker 1: the FED. Their demand for reserves was because banks actually 258 00:14:20,800 --> 00:14:23,920 Speaker 1: had a buffer above the level that they had told 259 00:14:23,960 --> 00:14:26,280 Speaker 1: the FED. So bank might say, look, we we don't 260 00:14:26,320 --> 00:14:29,480 Speaker 1: want to have reserves fall below a hundred billion dollars. Uh, 261 00:14:29,560 --> 00:14:31,800 Speaker 1: That's what they tell the FED, But in fact they 262 00:14:31,840 --> 00:14:35,040 Speaker 1: want to hold a hundred thirty billions of reserves because 263 00:14:35,080 --> 00:14:36,640 Speaker 1: they want to make sure that they stay above a 264 00:14:36,720 --> 00:14:38,720 Speaker 1: hundred billion dollars. And so if every every bank in 265 00:14:38,720 --> 00:14:41,480 Speaker 1: the system does that, the demand for reserves is bigger 266 00:14:41,520 --> 00:14:47,440 Speaker 1: than what people UH anticipated. Anything any action this afternoon 267 00:14:47,600 --> 00:14:52,040 Speaker 1: f OMC two o'clock. It could be the most boring 268 00:14:52,080 --> 00:14:56,360 Speaker 1: me you know very long time. Is it going to 269 00:14:56,480 --> 00:14:59,880 Speaker 1: be a snooze fest? Is where there's a lack of 270 00:15:00,000 --> 00:15:02,280 Speaker 1: I mean, obviously, you know what depends on what the 271 00:15:02,360 --> 00:15:04,480 Speaker 1: chair chair pal says in the press conference. If he 272 00:15:04,720 --> 00:15:06,640 Speaker 1: if he talks about, you know what, some of the 273 00:15:07,240 --> 00:15:11,240 Speaker 1: UH programs that are likely to be undertaken to address 274 00:15:11,280 --> 00:15:12,840 Speaker 1: the repo market over the long term, Like if he 275 00:15:12,880 --> 00:15:15,320 Speaker 1: talks about a standing report, I'll be newsworthy. But in 276 00:15:15,400 --> 00:15:18,720 Speaker 1: terms of actual entrey policy, they're not gonna change rates 277 00:15:19,040 --> 00:15:21,560 Speaker 1: and there and he's gonna basically tell people again we're 278 00:15:21,600 --> 00:15:23,480 Speaker 1: not changing rates for quite a while. I got to 279 00:15:23,560 --> 00:15:26,720 Speaker 1: ask you the question that it was rampant at Davos 280 00:15:26,720 --> 00:15:29,840 Speaker 1: certain parties suggests the business cycle has been removed, the 281 00:15:29,880 --> 00:15:32,560 Speaker 1: boom bus cycles gone. Because as we've dampened down to 282 00:15:32,640 --> 00:15:35,840 Speaker 1: the zero bound, this time is different. It will be 283 00:15:35,880 --> 00:15:39,760 Speaker 1: a leaden feel less volatile field. Do you cyclical economy? 284 00:15:39,800 --> 00:15:42,000 Speaker 1: Do you buy that idea? I buy it to a degree. 285 00:15:42,040 --> 00:15:43,480 Speaker 1: I mean, I do think there are reasons why the 286 00:15:43,480 --> 00:15:46,400 Speaker 1: economy is less cyclical. It's more open economy. We have 287 00:15:46,440 --> 00:15:49,240 Speaker 1: a bigger service sector relative to a smaller good sector. 288 00:15:49,920 --> 00:15:52,880 Speaker 1: Businesses have better information about what's happening to the demand 289 00:15:52,920 --> 00:15:55,960 Speaker 1: into inventories. But the idea that the business cycle has 290 00:15:56,000 --> 00:15:59,040 Speaker 1: been repealed, boyd talking coming back to the financial christ 291 00:15:59,080 --> 00:16:02,680 Speaker 1: Remember all the things that we hurt that could never happen. 292 00:16:04,400 --> 00:16:06,000 Speaker 1: I would not want to subscribe to the idea that 293 00:16:06,040 --> 00:16:09,320 Speaker 1: the business cycle is dead. William Dudley, thank you so much. 294 00:16:09,400 --> 00:16:12,720 Speaker 1: A former president of Federal Reserve System, teaching an interesting 295 00:16:12,760 --> 00:16:16,120 Speaker 1: master's level class at Princeton right now out with an important, 296 00:16:16,120 --> 00:16:29,760 Speaker 1: blooming opinion article. Will do much more with this interview today. 297 00:16:31,680 --> 00:16:35,280 Speaker 1: Now joining us, the former chairman of the President's Council 298 00:16:35,280 --> 00:16:39,120 Speaker 1: of Economic Advisers serving President Obama, Austin Gouldsby of Chicago, 299 00:16:39,560 --> 00:16:43,040 Speaker 1: joined us as well. Austin, I want to dovetail off 300 00:16:43,080 --> 00:16:46,640 Speaker 1: the controversy that Bill Dudley addressed and get your opinion 301 00:16:46,640 --> 00:16:50,040 Speaker 1: and to get shades of it. He alluded in a 302 00:16:50,160 --> 00:16:54,880 Speaker 1: Ballardian fashion, the St. Louis FED President that yes, there's 303 00:16:54,920 --> 00:16:58,200 Speaker 1: been a regime change at this federal reserve. I was 304 00:16:58,240 --> 00:17:01,080 Speaker 1: talking about the salt Ocean is to go out the 305 00:17:01,240 --> 00:17:05,199 Speaker 1: X axis and stretch things out, hoping that will relieve 306 00:17:05,280 --> 00:17:08,800 Speaker 1: tensions in the system in an attempt to reflight the 307 00:17:08,840 --> 00:17:12,439 Speaker 1: American economy. Do you have a sense that there's been 308 00:17:12,440 --> 00:17:17,560 Speaker 1: a regime change at our central bank? You know, I'm 309 00:17:17,600 --> 00:17:20,000 Speaker 1: a big fan of Bill Dudley's and I was on 310 00:17:20,040 --> 00:17:24,159 Speaker 1: the Economic Advisory Panel when he was for the New 311 00:17:24,240 --> 00:17:25,800 Speaker 1: York FED when he was the head of the New 312 00:17:25,880 --> 00:17:29,240 Speaker 1: York FED. I think there has been a regime change. 313 00:17:29,240 --> 00:17:32,320 Speaker 1: And then I think there's been another regime change, which 314 00:17:32,359 --> 00:17:36,600 Speaker 1: is we went for so many years that the Feds 315 00:17:36,760 --> 00:17:40,600 Speaker 1: would say, we predict the economy is going to be 316 00:17:40,680 --> 00:17:44,240 Speaker 1: growing like crazy. The actual data would come in not 317 00:17:44,560 --> 00:17:47,520 Speaker 1: that great, so they predict they were going to be 318 00:17:47,600 --> 00:17:49,520 Speaker 1: able to raise rates a bunch of times, and then 319 00:17:49,560 --> 00:17:52,280 Speaker 1: they wouldn't raise And they just went through that cycle 320 00:17:52,400 --> 00:17:56,520 Speaker 1: year after year, and we felt like we understood the 321 00:17:56,520 --> 00:18:00,160 Speaker 1: Fed's reaction function, even though it was kind of, as 322 00:18:00,200 --> 00:18:03,439 Speaker 1: I say, a sort of a credible non credibility or 323 00:18:03,480 --> 00:18:07,200 Speaker 1: something um. And then we went through this period where 324 00:18:07,200 --> 00:18:11,840 Speaker 1: the FED just started raising rates even though the conditions 325 00:18:11,880 --> 00:18:15,280 Speaker 1: had not had not changed, and I think that was 326 00:18:15,359 --> 00:18:20,119 Speaker 1: a period of confusion. Uh. And then as things started 327 00:18:20,200 --> 00:18:22,560 Speaker 1: us off, and I think the FIT has switched back 328 00:18:22,600 --> 00:18:28,239 Speaker 1: to a regime where that where they're nervous, and I 329 00:18:28,280 --> 00:18:32,080 Speaker 1: think it's a it's an appropriate critique. Maybe it is 330 00:18:32,080 --> 00:18:35,800 Speaker 1: a great deg it's appropriate to say, look, guys, you 331 00:18:35,880 --> 00:18:38,600 Speaker 1: gotta just tell us what is the Fed's reaction function, 332 00:18:38,640 --> 00:18:43,600 Speaker 1: what's happening here, because that does matter. Um. But you know, 333 00:18:43,720 --> 00:18:47,480 Speaker 1: I don't think it's crazy. Despite the unemployment right being low, 334 00:18:48,000 --> 00:18:50,880 Speaker 1: there are also parts of the economy that are quite weak. 335 00:18:50,960 --> 00:18:55,520 Speaker 1: GDP growth is weak, business investment quite weak, manufacturing maybe 336 00:18:55,560 --> 00:18:57,920 Speaker 1: already in recession. So I don't think it's I don't 337 00:18:57,920 --> 00:19:01,320 Speaker 1: think it's wrong to be the regime. James the car 338 00:19:01,400 --> 00:19:04,520 Speaker 1: of the current Dudley theme. And this is very different 339 00:19:04,560 --> 00:19:07,280 Speaker 1: than everybody assembled at Davos. I wish you'd been there 340 00:19:07,320 --> 00:19:09,480 Speaker 1: Austin at least to get the party going at night. 341 00:19:09,960 --> 00:19:13,680 Speaker 1: But but Professor Goulsby, the theme there is quee quee 342 00:19:14,040 --> 00:19:16,880 Speaker 1: the banks. It's all their fault with quie and Dudley 343 00:19:16,960 --> 00:19:23,840 Speaker 1: aggressively pushes against that, suggesting blunt traditional accommodation and a 344 00:19:23,880 --> 00:19:28,000 Speaker 1: few other matters, is actually what is sustained this economy? 345 00:19:28,080 --> 00:19:31,000 Speaker 1: Do you buy the Dudley thesis or it is that 346 00:19:31,119 --> 00:19:34,480 Speaker 1: this is just quee six or whatever it is? Well, 347 00:19:35,280 --> 00:19:38,840 Speaker 1: I guess I mostly by the Dudley thesis that that 348 00:19:39,240 --> 00:19:44,399 Speaker 1: rates are the big driver, and I guess I base 349 00:19:44,600 --> 00:19:49,320 Speaker 1: that partly on the evidence of what QUI actually did 350 00:19:49,720 --> 00:19:53,800 Speaker 1: is modest. We had a huge QUI and on the 351 00:19:53,840 --> 00:19:58,119 Speaker 1: mortgage rate side you see some traction on the treasury 352 00:19:58,240 --> 00:20:02,120 Speaker 1: side mostly any modest traction. And if you go look 353 00:20:02,119 --> 00:20:05,640 Speaker 1: at Japan or if you look at at circumstances where 354 00:20:05,640 --> 00:20:11,440 Speaker 1: the QUEUEI was even bigger, it's it's modestly effective. So 355 00:20:11,480 --> 00:20:14,240 Speaker 1: we don't have a great ideas as you if you 356 00:20:14,359 --> 00:20:18,440 Speaker 1: roll off QUEUEI or you roll onto QUEI, does that 357 00:20:18,800 --> 00:20:22,600 Speaker 1: really where the rubber hits the road and make as 358 00:20:22,640 --> 00:20:28,560 Speaker 1: big a difference as as as actually cutting rates does. So, Austin, 359 00:20:28,600 --> 00:20:31,679 Speaker 1: are you of the opinion that this federal reserve is 360 00:20:31,800 --> 00:20:33,720 Speaker 1: more than likely to stay on the sidelines for the 361 00:20:33,760 --> 00:20:36,520 Speaker 1: foreseeable future. Here we'll certainly hear from them this afternoon 362 00:20:36,560 --> 00:20:41,080 Speaker 1: but is that kind of your expectation for in the 363 00:20:41,080 --> 00:20:47,840 Speaker 1: immediate term. Yes, um, I've actually been a little nervous 364 00:20:48,359 --> 00:20:54,080 Speaker 1: even before the possibilities of of coronavirus freaking people out. 365 00:20:55,160 --> 00:20:58,159 Speaker 1: I think that it's ought to be a more of 366 00:20:58,200 --> 00:21:03,960 Speaker 1: a yellow light to these cyclically sensitive sectors of the 367 00:21:04,000 --> 00:21:09,000 Speaker 1: economy like manufacturing doing as poorly as they are. That 368 00:21:09,119 --> 00:21:12,600 Speaker 1: ought to put a warning light on people's radar screen. 369 00:21:12,920 --> 00:21:17,080 Speaker 1: Not to have a horrible mixed metaphor there, But um, 370 00:21:17,119 --> 00:21:21,080 Speaker 1: I think the FED should be a little I think 371 00:21:21,080 --> 00:21:25,520 Speaker 1: the FED is in the mindset that they're they're looking 372 00:21:25,600 --> 00:21:30,200 Speaker 1: for problems, and that might mean that the FED residents 373 00:21:30,200 --> 00:21:32,880 Speaker 1: sitting on the sidelines. If things got worse, I think 374 00:21:32,880 --> 00:21:37,359 Speaker 1: the FED would get more accommodative and might even cut rates. So, Austin, 375 00:21:37,400 --> 00:21:39,520 Speaker 1: I think you know, certainly the markets appear to be 376 00:21:39,600 --> 00:21:41,439 Speaker 1: saying as it relates to the economy, Yes, we know 377 00:21:41,480 --> 00:21:45,159 Speaker 1: of manufacturing is in a recession. Business investment is weaker 378 00:21:45,200 --> 00:21:49,560 Speaker 1: than most would like, but the consumer is still there, 379 00:21:49,600 --> 00:21:52,080 Speaker 1: still powering this economy. Do you think that's how how 380 00:21:52,080 --> 00:21:54,639 Speaker 1: the FED kind of looks at it. I think so, 381 00:21:55,320 --> 00:21:56,919 Speaker 1: and I don't I don't think that's wrong. You know, 382 00:21:56,960 --> 00:21:59,840 Speaker 1: it's kind of a tale of two economies that could. 383 00:22:00,080 --> 00:22:04,200 Speaker 1: Sumer looks great, the job market very strong. We still 384 00:22:04,240 --> 00:22:07,440 Speaker 1: can't understand why weights aren't growing faster if the unemployment 385 00:22:07,520 --> 00:22:10,679 Speaker 1: rate is like this, But anything on that consumer and 386 00:22:10,800 --> 00:22:16,520 Speaker 1: job side looks quite robust. It's just the overall growth 387 00:22:16,600 --> 00:22:21,840 Speaker 1: isn't high. Productivity growth rate isn't high manufacturing, and and 388 00:22:21,880 --> 00:22:24,360 Speaker 1: for sure anything that has to do with trade has 389 00:22:24,440 --> 00:22:27,720 Speaker 1: been kind of in the dumps. So I do think 390 00:22:27,760 --> 00:22:31,719 Speaker 1: the fit is mostly in this wait and see because 391 00:22:31,760 --> 00:22:35,760 Speaker 1: that's sort of confusing. It's not normal, uh that that 392 00:22:35,880 --> 00:22:39,359 Speaker 1: you would look out at the economy and normally most 393 00:22:39,400 --> 00:22:42,159 Speaker 1: stuff is going the same way. So if we're in 394 00:22:42,200 --> 00:22:45,639 Speaker 1: a boom, then everything is booming. If we're in a recession, 395 00:22:45,720 --> 00:22:48,719 Speaker 1: then almost everything is going down. And we're in this 396 00:22:48,800 --> 00:22:51,320 Speaker 1: kind of split scenario. So to bring you back to 397 00:22:51,359 --> 00:22:53,679 Speaker 1: back today, Bill Dudley on the former president of New 398 00:22:53,760 --> 00:22:56,440 Speaker 1: York fed in, the former chairman the President's Council Economic 399 00:22:56,480 --> 00:23:00,760 Speaker 1: Advisers with us now from Booth School, Chicago, Austin Goulsby. 400 00:23:00,880 --> 00:23:04,639 Speaker 1: Austin Goesby has to slog through the microeconomists in Chicago 401 00:23:05,160 --> 00:23:07,080 Speaker 1: and try to understand what they're doing. One of them 402 00:23:07,119 --> 00:23:09,720 Speaker 1: is AMR. Sufie has done just great, great work in 403 00:23:09,720 --> 00:23:13,040 Speaker 1: the credit markets. He did a panel of Princeton Austin 404 00:23:13,080 --> 00:23:15,000 Speaker 1: a couple of years ago on boom bust, and he 405 00:23:15,040 --> 00:23:18,199 Speaker 1: took it from a more financial side, like a Krasner side. 406 00:23:18,280 --> 00:23:21,280 Speaker 1: One of the big debates of Davos Austin was a 407 00:23:21,280 --> 00:23:24,159 Speaker 1: certain school of thought that boom bust is over cyclicals 408 00:23:24,240 --> 00:23:26,919 Speaker 1: over because we're at the lower bound, and the idea 409 00:23:27,000 --> 00:23:30,240 Speaker 1: that we get a more leaden response, the elasticity, the 410 00:23:30,280 --> 00:23:33,520 Speaker 1: male ability, the economy goes out because we're at the 411 00:23:33,600 --> 00:23:36,639 Speaker 1: zero bound. Do you buy into that? We got huge 412 00:23:36,760 --> 00:23:40,919 Speaker 1: pushback from Carmen Reinhardt and frankly William Dudley on the 413 00:23:41,080 --> 00:23:43,960 Speaker 1: idea that you know, I'm sorry, the boom bust cycle 414 00:23:44,040 --> 00:23:47,720 Speaker 1: is still out there? Is it? Look? I think it is. 415 00:23:48,160 --> 00:23:51,560 Speaker 1: I Am Sufie is one of my best friends. Is 416 00:23:52,119 --> 00:23:56,560 Speaker 1: office two doors down from mine. Um. He's He's done 417 00:23:56,920 --> 00:24:01,199 Speaker 1: amazing work, really pet breaking work about the importance of 418 00:24:01,280 --> 00:24:04,120 Speaker 1: debt in the economy in the ways that it can 419 00:24:04,320 --> 00:24:10,399 Speaker 1: can burden you and any recovery from recession. Uh. That said, 420 00:24:10,560 --> 00:24:14,919 Speaker 1: I don't think he feels as strongly on this question 421 00:24:14,960 --> 00:24:17,280 Speaker 1: of is the boom bus cycle over? I think I 422 00:24:17,320 --> 00:24:21,720 Speaker 1: think Sufi for sure believes there's still booms and bus. 423 00:24:21,760 --> 00:24:25,560 Speaker 1: I have always said, whenever you start seeing people say 424 00:24:25,640 --> 00:24:29,680 Speaker 1: the boom bus cycle is over and the great moderation 425 00:24:29,880 --> 00:24:33,720 Speaker 1: and there we we don't have to worry about recessions anymore. 426 00:24:34,119 --> 00:24:36,040 Speaker 1: That's the time to go and put the money under 427 00:24:36,080 --> 00:24:40,480 Speaker 1: the mattress, because then the cycle will be back. And 428 00:24:41,000 --> 00:24:46,080 Speaker 1: I really, you know, yes, this is the longest expansion 429 00:24:46,160 --> 00:24:51,400 Speaker 1: we have on record. Um to conclude from that that 430 00:24:52,119 --> 00:24:57,200 Speaker 1: the business cycle is over, I think it's a little dangerous. 431 00:24:57,480 --> 00:25:00,960 Speaker 1: We're going to we're going boost school here. We're just 432 00:25:00,960 --> 00:25:05,320 Speaker 1: to keep Boston happy less we do that. Phil Schwegel, 433 00:25:05,400 --> 00:25:07,480 Speaker 1: and this isn't even in the news flow Austin with 434 00:25:07,520 --> 00:25:10,520 Speaker 1: all the serious stuff out there like the virus. Schweigel 435 00:25:10,600 --> 00:25:13,919 Speaker 1: is now holding court at the Congressional Budget Office again, 436 00:25:13,960 --> 00:25:16,800 Speaker 1: another victim of the boost school Chicago. We talked there 437 00:25:17,200 --> 00:25:20,119 Speaker 1: for years. I mean, Phil Schwegel trot it out yesterday. 438 00:25:20,560 --> 00:25:25,280 Speaker 1: Trillion dollar deficits go all Dirk's ananus, Austin Goulsby. Can 439 00:25:25,359 --> 00:25:34,240 Speaker 1: we handle the pernicious tendency of repeat trillion dollar deficits. Well, yes, 440 00:25:34,400 --> 00:25:41,320 Speaker 1: we can handle it. And the thing that Swegel emphasized 441 00:25:41,440 --> 00:25:45,600 Speaker 1: and is the right thing to emphasize, is what's the 442 00:25:45,840 --> 00:25:49,000 Speaker 1: scary part of this is not the repeat trillion dollar 443 00:25:49,119 --> 00:25:53,680 Speaker 1: deficits in the sense that when we've had trillion dollar 444 00:25:53,760 --> 00:25:57,320 Speaker 1: deficits before or comparable as the year of the economy, 445 00:25:58,000 --> 00:26:02,200 Speaker 1: it's always been only two things caused that big recessions 446 00:26:02,359 --> 00:26:06,080 Speaker 1: or large wars. That's it. This is the first time 447 00:26:06,119 --> 00:26:11,920 Speaker 1: ever that you're seeing deficits exploding like this at a 448 00:26:12,040 --> 00:26:16,479 Speaker 1: time of boom, and that is overwhelmingly the Congressional Budget 449 00:26:16,520 --> 00:26:21,480 Speaker 1: Office data shows overwhelmingly that is because the tax cut 450 00:26:21,600 --> 00:26:25,919 Speaker 1: did not pay for itself. It lost literally hundreds of 451 00:26:26,040 --> 00:26:31,199 Speaker 1: billions of dollars per year of revenue, and the CBO showed, 452 00:26:31,320 --> 00:26:33,679 Speaker 1: here's what we were projecting the revenue was going to be, 453 00:26:34,160 --> 00:26:36,679 Speaker 1: and here is the revenue coming in hundreds of billions 454 00:26:36,720 --> 00:26:39,240 Speaker 1: of dollars per year less than that, and that is 455 00:26:39,240 --> 00:26:41,760 Speaker 1: a that is a problem. Yes, we can handle it, 456 00:26:42,000 --> 00:26:44,800 Speaker 1: but as I say, the problem of deficits is not 457 00:26:45,000 --> 00:26:48,119 Speaker 1: that they drive your interest right up and we have 458 00:26:48,200 --> 00:26:50,679 Speaker 1: a fiscal crisis. The problem of deficits is that you 459 00:26:50,760 --> 00:26:54,040 Speaker 1: have to pay back the money, and so in the 460 00:26:54,080 --> 00:26:57,080 Speaker 1: future years we're just gonna be paying more and more 461 00:26:57,119 --> 00:26:59,760 Speaker 1: of our budget in interest and have less and less 462 00:27:00,080 --> 00:27:02,239 Speaker 1: for all of the priorities. We gotta get your back 463 00:27:02,320 --> 00:27:05,000 Speaker 1: on Austin goals. We brilliant, have thrilled de Bill Dudley, 464 00:27:05,040 --> 00:27:16,680 Speaker 1: Austin goals, We back to back. This is an important interview. 465 00:27:16,760 --> 00:27:19,240 Speaker 1: What we're gonna do now is away from the business 466 00:27:19,359 --> 00:27:23,119 Speaker 1: of this terrible virus. We're gonna talk of the medicine. 467 00:27:23,600 --> 00:27:26,840 Speaker 1: She's out of Oberlin and out of the hugely prestigious 468 00:27:26,920 --> 00:27:31,880 Speaker 1: University of Washington combine and microbiology and virology. Jennifer Rone 469 00:27:32,200 --> 00:27:36,120 Speaker 1: joins US now from ucl in London. She's done absolutely 470 00:27:36,160 --> 00:27:39,240 Speaker 1: original work, among other things, on the feline virus scare 471 00:27:39,680 --> 00:27:42,359 Speaker 1: of a number of years ago. Dr Rohn, do you 472 00:27:42,400 --> 00:27:46,040 Speaker 1: know the medicine of this virus this morning? Can you 473 00:27:46,160 --> 00:27:49,879 Speaker 1: identify its virology or does that need to wait for 474 00:27:49,920 --> 00:27:53,960 Speaker 1: a few days or weeks? Do you know what it does? 475 00:27:54,240 --> 00:27:56,720 Speaker 1: We know that it's very much like the SARS virus 476 00:27:56,760 --> 00:27:59,679 Speaker 1: before us. It goes inside your lungs and basically just 477 00:28:00,280 --> 00:28:04,639 Speaker 1: rip them out. It's a really, really harsh attack on 478 00:28:04,720 --> 00:28:07,280 Speaker 1: the lungs. We know that people can recover from this. 479 00:28:07,640 --> 00:28:12,200 Speaker 1: People have recovered, but unfortunately about two to three percent 480 00:28:12,240 --> 00:28:14,919 Speaker 1: of people will die from this. With within this and 481 00:28:15,000 --> 00:28:18,600 Speaker 1: within that narrow percentage, which is still heartbreaking, is that 482 00:28:18,720 --> 00:28:22,840 Speaker 1: the risk of the virus or the knock on bacterium afterwards. 483 00:28:22,960 --> 00:28:26,080 Speaker 1: Is its secondary illnesses that kill people or is it 484 00:28:26,200 --> 00:28:29,880 Speaker 1: actually this virus. I don't think we know for sure, 485 00:28:29,920 --> 00:28:32,800 Speaker 1: but I think the early indications are that it's actually 486 00:28:33,119 --> 00:28:35,480 Speaker 1: directly caused by the virus. This would be the modus 487 00:28:35,520 --> 00:28:39,000 Speaker 1: operandi of of a number of viruses to go in 488 00:28:39,040 --> 00:28:42,200 Speaker 1: and attack the lungs dr own this. It's early days, 489 00:28:42,240 --> 00:28:44,280 Speaker 1: so we haven't done a lot, you know, we're still 490 00:28:44,560 --> 00:28:47,320 Speaker 1: the picture is emerging. Dcor On this morning, I was 491 00:28:47,360 --> 00:28:49,360 Speaker 1: looking exactly what you were saying, that the two to 492 00:28:49,480 --> 00:28:54,440 Speaker 1: three percent fatality mortality rate so far that we have tracked, 493 00:28:54,680 --> 00:28:58,200 Speaker 1: I'm wondering how accurate that is in terms of the 494 00:28:58,560 --> 00:29:01,040 Speaker 1: diagnosed cases, especial really in light of some of the 495 00:29:01,080 --> 00:29:03,400 Speaker 1: news that a lot of people who might contract the 496 00:29:03,480 --> 00:29:08,560 Speaker 1: virus have no symptoms whatsoever. Well, the death rate, you know, 497 00:29:09,360 --> 00:29:12,760 Speaker 1: from what I understand, the hospitals in China are overwhelmed. 498 00:29:13,160 --> 00:29:16,720 Speaker 1: There's been social media reports of corridors full of people, 499 00:29:16,840 --> 00:29:19,280 Speaker 1: some of them look like they're not alive. We don't 500 00:29:19,280 --> 00:29:21,160 Speaker 1: know how up to date the reporting is. It might 501 00:29:21,200 --> 00:29:23,960 Speaker 1: be a lag time and understanding the true death rate. 502 00:29:24,880 --> 00:29:29,920 Speaker 1: And obviously if this virus is contagious when you have 503 00:29:30,000 --> 00:29:32,240 Speaker 1: no symptoms, that would cause more spread. I think the 504 00:29:32,320 --> 00:29:34,080 Speaker 1: jury is still out on that. There are some people 505 00:29:34,080 --> 00:29:37,640 Speaker 1: who have reported this, but these these data have not 506 00:29:37,720 --> 00:29:41,160 Speaker 1: been sort of carefully checked by the community, So I'm 507 00:29:41,200 --> 00:29:45,400 Speaker 1: not sure on that point. But it's the numbers that 508 00:29:45,440 --> 00:29:48,000 Speaker 1: we have could be underestimated simply because there's just a 509 00:29:48,040 --> 00:29:51,280 Speaker 1: backlog and getting people tested and getting getting the numbers up. 510 00:29:51,560 --> 00:29:53,480 Speaker 1: What are you hearing about that? Then let's talk about 511 00:29:53,480 --> 00:29:55,160 Speaker 1: it in a little bit more detail. First of all, 512 00:29:55,160 --> 00:29:59,440 Speaker 1: the incubation period the period between exposure and when you 513 00:29:59,480 --> 00:30:02,400 Speaker 1: first see signs of symptoms. As you mentioned, Jennifer, there 514 00:30:02,480 --> 00:30:05,520 Speaker 1: is some debate as to whether you are contagious during 515 00:30:05,520 --> 00:30:08,720 Speaker 1: the incubation period with a specific virus. Do we know 516 00:30:08,800 --> 00:30:12,920 Speaker 1: how long the incubation period actually is well, this has 517 00:30:13,080 --> 00:30:15,840 Speaker 1: also been a moving target. So the initial estimation was 518 00:30:15,880 --> 00:30:18,920 Speaker 1: the incubation period may have been as long as two weeks, 519 00:30:18,960 --> 00:30:21,800 Speaker 1: but now we're seeing people estimating just from looking at 520 00:30:21,840 --> 00:30:24,120 Speaker 1: patterns of spread that might be closer to five days. 521 00:30:24,160 --> 00:30:28,360 Speaker 1: That's a huge difference while you're if and especially if 522 00:30:28,360 --> 00:30:30,880 Speaker 1: it can spread while you're not showing symptoms, So that 523 00:30:31,000 --> 00:30:33,400 Speaker 1: incubation period is crucial to know. Like if you've been 524 00:30:33,400 --> 00:30:35,640 Speaker 1: wandering around for the last week with no symptoms and 525 00:30:35,680 --> 00:30:39,040 Speaker 1: you're spreading the virus willy nilly, that's a problem. So 526 00:30:39,200 --> 00:30:41,000 Speaker 1: we need to get a handle on these numbers and 527 00:30:41,000 --> 00:30:42,360 Speaker 1: the only way we're going to do that is like 528 00:30:42,520 --> 00:30:46,640 Speaker 1: careful contact tracing, looking at who's such, who, who's been 529 00:30:46,680 --> 00:30:49,080 Speaker 1: around who, and how long it takes for them to 530 00:30:49,160 --> 00:30:51,800 Speaker 1: succumb to the illness. Doctor. On this morning, I was 531 00:30:51,840 --> 00:30:55,040 Speaker 1: looking at the mortality rate for the seasonal flu zero 532 00:30:55,080 --> 00:30:57,760 Speaker 1: point one percent in the United States during a typical season, 533 00:30:57,840 --> 00:31:02,800 Speaker 1: and I'm wondering how much more catastrophic would it be 534 00:31:03,000 --> 00:31:07,360 Speaker 1: for medical professionals if a disease like this, like the coronavirus, 535 00:31:07,360 --> 00:31:09,800 Speaker 1: were to spread the way that the seasonal flu does 536 00:31:09,800 --> 00:31:14,200 Speaker 1: in the United States. Yes, so it's You've mentioned a 537 00:31:14,240 --> 00:31:16,560 Speaker 1: good point, which is that flu is also very deadly, 538 00:31:16,600 --> 00:31:18,840 Speaker 1: and people do tend to forget that. I think that 539 00:31:18,880 --> 00:31:21,400 Speaker 1: flu is a very familiar illness. We know, we know 540 00:31:21,480 --> 00:31:23,680 Speaker 1: about it. We have a vaccine, we have a really 541 00:31:23,960 --> 00:31:27,960 Speaker 1: sort of a almost an assembly line approach to it. 542 00:31:28,040 --> 00:31:30,880 Speaker 1: Every season, we we try, we track and we monitor it, 543 00:31:31,240 --> 00:31:33,440 Speaker 1: and we know, you know how it works. I think 544 00:31:33,480 --> 00:31:36,640 Speaker 1: the danger here is that we don't know anything about 545 00:31:36,640 --> 00:31:38,720 Speaker 1: this new virus. We we only know a very very 546 00:31:38,760 --> 00:31:42,480 Speaker 1: tiny amount. We don't know how it ticks. We don't 547 00:31:42,480 --> 00:31:44,479 Speaker 1: even know if it's seasonal. I mean, some people are 548 00:31:44,520 --> 00:31:46,160 Speaker 1: hoping it is seasonal so that we'll get a little 549 00:31:46,200 --> 00:31:48,720 Speaker 1: bit of a lull in the summer to sort of 550 00:31:48,720 --> 00:31:50,920 Speaker 1: get get on top of the vaccine and the new 551 00:31:51,320 --> 00:31:53,840 Speaker 1: medications coming down the pipeline. But it's really a big 552 00:31:53,920 --> 00:31:58,280 Speaker 1: unknown and I think if it is, Yeah, this is 553 00:31:58,280 --> 00:32:01,880 Speaker 1: not an easy question to answer, but I think coronavirus 554 00:32:01,920 --> 00:32:04,240 Speaker 1: would have the potential to be as bad as FOO 555 00:32:04,640 --> 00:32:07,960 Speaker 1: if it mutates and becomes a worse virus, which can happen. 556 00:32:08,800 --> 00:32:10,680 Speaker 1: Dr Jennifer Ron, thank you so much for being with 557 00:32:10,800 --> 00:32:24,800 Speaker 1: us to provide the true medical perspective. Apple is the 558 00:32:24,800 --> 00:32:27,280 Speaker 1: stealth to watch in any trading time. It's up by 559 00:32:27,280 --> 00:32:30,200 Speaker 1: one point six percent in and around session lives, but 560 00:32:30,280 --> 00:32:33,560 Speaker 1: still firm and own course for all time highs in 561 00:32:33,680 --> 00:32:36,680 Speaker 1: and around the opening bound. The media discussion will be 562 00:32:36,840 --> 00:32:39,800 Speaker 1: fanboys versus the Apple gloom. There has been a more 563 00:32:39,840 --> 00:32:44,320 Speaker 1: intelligent discussion on the cull side around nuance. Mr Ives 564 00:32:44,400 --> 00:32:47,680 Speaker 1: joins us now he has been an Apple bull. He 565 00:32:47,720 --> 00:32:53,560 Speaker 1: has provided intellectual leadership on the path ever higher. Dan, congratulations, 566 00:32:53,640 --> 00:32:57,880 Speaker 1: What was the nuance? What was the thing that reaffirmed 567 00:32:58,040 --> 00:33:03,520 Speaker 1: ives and optimism? Yeah, it's to me, it's really about 568 00:33:03,600 --> 00:33:07,080 Speaker 1: the iPhone or eleven products cycle. It's much stronger than 569 00:33:07,160 --> 00:33:11,200 Speaker 1: anyone could have anticipated, especially in China. That's the fuel 570 00:33:11,200 --> 00:33:13,240 Speaker 1: on the engine. And if you look at numbers and 571 00:33:13,360 --> 00:33:18,160 Speaker 1: guide into is a masterpiece for cooking Coppertino blow out print. 572 00:33:18,200 --> 00:33:21,480 Speaker 1: According to you, Dan, and your price targets four hundreds, 573 00:33:21,480 --> 00:33:24,320 Speaker 1: you're straight high. I just wanted to reflect on what 574 00:33:24,400 --> 00:33:26,040 Speaker 1: some of your peers are doing at the moment. Are 575 00:33:26,040 --> 00:33:28,720 Speaker 1: you uncomfortable just how many of you are chasing with 576 00:33:28,760 --> 00:33:31,880 Speaker 1: this raising your price target morning after morning. It's still 577 00:33:31,920 --> 00:33:35,560 Speaker 1: not keeping in touch. But whether stock is Dan, Yeah, 578 00:33:35,560 --> 00:33:37,400 Speaker 1: it's a good point, and I think that's one of 579 00:33:37,440 --> 00:33:40,360 Speaker 1: the bull bear debates here is just a hype cycle. 580 00:33:40,440 --> 00:33:43,960 Speaker 1: And I think what you saw last night. Is that 581 00:33:44,240 --> 00:33:46,880 Speaker 1: it's real. I mean, you look at the upgrade cycle, 582 00:33:47,000 --> 00:33:50,200 Speaker 1: three fifty million, nine million phones in a window of 583 00:33:50,240 --> 00:33:54,200 Speaker 1: upgrade opportunity going into a transformational five G cycle. I 584 00:33:54,240 --> 00:33:56,720 Speaker 1: could tell you in twenty years of covering tact I 585 00:33:56,720 --> 00:33:59,600 Speaker 1: think it's one of the more transformational cycles I've seen. 586 00:34:00,000 --> 00:34:01,640 Speaker 1: And that's where I think Apple was a foreign in 587 00:34:01,680 --> 00:34:03,320 Speaker 1: front of it a year from there. But then you're 588 00:34:03,320 --> 00:34:05,960 Speaker 1: making a big point. Hey, you're emphasize in the hardware 589 00:34:06,320 --> 00:34:08,560 Speaker 1: and are's a lot of people saw this multiple go 590 00:34:08,719 --> 00:34:11,839 Speaker 1: through the roof. They were emphasizing the shift to surfaces. 591 00:34:12,200 --> 00:34:14,160 Speaker 1: Now I want you to help our audience understand the 592 00:34:14,200 --> 00:34:17,439 Speaker 1: appropriate multiple to put on this company and whether you're 593 00:34:17,520 --> 00:34:21,240 Speaker 1: valuing supercycle on the hardware side or the shift to services, 594 00:34:21,280 --> 00:34:24,160 Speaker 1: which one is it down? Yeah, I think it's really 595 00:34:24,200 --> 00:34:26,040 Speaker 1: some of the parts. I mean, if I go back 596 00:34:26,080 --> 00:34:28,880 Speaker 1: three years ago, the services business when it was thirty 597 00:34:28,920 --> 00:34:33,720 Speaker 1: billion wasn't getting evaluation. Today that's gonna be sixty billion 598 00:34:33,760 --> 00:34:36,880 Speaker 1: dollar revenu seen. We think that's where six billion the 599 00:34:37,040 --> 00:34:40,840 Speaker 1: services piece the actual hardware the rockets are brawl to 600 00:34:40,920 --> 00:34:44,320 Speaker 1: the iPhone one point to trillion. So on the sum 601 00:34:44,320 --> 00:34:47,600 Speaker 1: of the parts, what does it think that's worth um, 602 00:34:47,640 --> 00:34:50,719 Speaker 1: you know, into the foreign gowerry. Okay, so you get 603 00:34:50,719 --> 00:34:52,880 Speaker 1: you out to foreigner dollars, but you've got shared They 604 00:34:52,920 --> 00:34:57,000 Speaker 1: brought back of the stock over five years, folding share buybacks, 605 00:34:57,040 --> 00:34:59,320 Speaker 1: dividend growth into some of the parts and giving you 606 00:34:59,320 --> 00:35:04,880 Speaker 1: a number to and he's fo sixty cents for twelve cents? 607 00:35:04,920 --> 00:35:08,320 Speaker 1: What is it? Yeah? I mean to me right here, 608 00:35:08,800 --> 00:35:11,520 Speaker 1: I think bowl case four fifty in terms of where 609 00:35:11,560 --> 00:35:13,799 Speaker 1: I see this going. What do you think they should think? 610 00:35:15,719 --> 00:35:17,600 Speaker 1: What do you think they should do with the billion 611 00:35:17,600 --> 00:35:20,600 Speaker 1: dollars of cash they've got. Well, I think they'll do 612 00:35:20,640 --> 00:35:23,760 Speaker 1: an accelerated buy back again in the next six months, 613 00:35:23,840 --> 00:35:26,040 Speaker 1: and then I do believe they're going to carve out 614 00:35:26,040 --> 00:35:28,759 Speaker 1: about ten billions for M and A and it's going 615 00:35:28,800 --> 00:35:31,640 Speaker 1: to be continued innovation, but they're gonna be cash neutral. 616 00:35:31,640 --> 00:35:34,120 Speaker 1: And that's why right now Apple is more cash in 617 00:35:34,200 --> 00:35:37,160 Speaker 1: some countries. They're going to continue to do that and 618 00:35:37,200 --> 00:35:39,839 Speaker 1: give it the shareholders, which is why even though it's 619 00:35:39,840 --> 00:35:42,400 Speaker 1: at the meet that that that's going to continue to 620 00:35:42,480 --> 00:35:45,440 Speaker 1: drive stock higher. Excuse me, we're having a surveillance moment here. 621 00:35:45,480 --> 00:35:47,759 Speaker 1: Dana Eyes is killing me with the optimism. It's time 622 00:35:47,800 --> 00:35:52,439 Speaker 1: to get out the HP twelve seat continue. I will say, though, 623 00:35:52,480 --> 00:35:54,920 Speaker 1: you say, M and A, are we talking about buying 624 00:35:55,000 --> 00:35:58,440 Speaker 1: something like Netflix. Are we talking about small suppliers and 625 00:35:58,560 --> 00:36:04,839 Speaker 1: small services coordinators that might be potential opportunities for diversification 626 00:36:04,880 --> 00:36:08,480 Speaker 1: down the line. Yeah. I think from a content perspective, 627 00:36:08,560 --> 00:36:13,880 Speaker 1: I look at the three biggest candidates his lines, Gate, MGM, 628 00:36:14,000 --> 00:36:17,000 Speaker 1: or In in terms of from a studio perspective for 629 00:36:17,040 --> 00:36:20,200 Speaker 1: a content, and I think that's that's the missing piece 630 00:36:20,320 --> 00:36:22,720 Speaker 1: right now, and from a content on the streaming side, 631 00:36:23,080 --> 00:36:25,200 Speaker 1: and to Tom's point, you know, if I look at 632 00:36:25,280 --> 00:36:27,719 Speaker 1: if I look at the services piece right now, I 633 00:36:27,760 --> 00:36:29,799 Speaker 1: think that's going to be the next step because if 634 00:36:29,800 --> 00:36:33,359 Speaker 1: they're successful there, that adds another fifteen hours per share 635 00:36:33,480 --> 00:36:35,520 Speaker 1: based on our map, and then you could drive a 636 00:36:35,520 --> 00:36:38,600 Speaker 1: truck through the estimate range for the next quarter sixty 637 00:36:38,640 --> 00:36:42,719 Speaker 1: three billion to sixty billion. We're into the unknown here 638 00:36:42,719 --> 00:36:44,800 Speaker 1: in China, aren't we. Down. I just wonder what clarity 639 00:36:44,840 --> 00:36:49,480 Speaker 1: you've got from the cool yesterday. Yeah. I mean, obviously coronavirus, 640 00:36:50,120 --> 00:36:54,000 Speaker 1: especially given China, not just demand from a manufacturing perspective, 641 00:36:54,200 --> 00:36:56,880 Speaker 1: extremely important for Apple. I didn't need to did a 642 00:36:56,920 --> 00:37:00,080 Speaker 1: good job hand holding investors. It's a wider ring and 643 00:37:00,080 --> 00:37:02,560 Speaker 1: she just like you talked about. But we've quantified about 644 00:37:02,680 --> 00:37:07,080 Speaker 1: three percent of units worst case could shift from March 645 00:37:07,200 --> 00:37:10,399 Speaker 1: to June. This is just push, just to be clear, 646 00:37:10,560 --> 00:37:13,759 Speaker 1: just pushing demand out to the next quarter. It's a 647 00:37:13,800 --> 00:37:17,760 Speaker 1: pure timing, pushing demand out. I don't view any manufacturing 648 00:37:17,840 --> 00:37:21,200 Speaker 1: restriction in terms of Fox con where we are right now. 649 00:37:21,440 --> 00:37:23,880 Speaker 1: If obviously this continues to get worse and we go 650 00:37:23,920 --> 00:37:26,279 Speaker 1: into March, then it becomes an issue. Okay, we're gonna 651 00:37:26,280 --> 00:37:27,799 Speaker 1: get the camera here. At least it's doing it. I've 652 00:37:27,840 --> 00:37:30,319 Speaker 1: just done the HP twelve c. We gotta help young 653 00:37:30,400 --> 00:37:34,600 Speaker 1: ives here with the help. If you extrapolate two trillion dollars, Dan, 654 00:37:34,680 --> 00:37:37,799 Speaker 1: write this down four hundred sixty two dollars thirty one 655 00:37:37,880 --> 00:37:42,960 Speaker 1: cents per share, four sixty one h thirty two thirty 656 00:37:43,000 --> 00:37:46,279 Speaker 1: one cents per share. That's with no further share buy back, Dan, 657 00:37:46,360 --> 00:37:48,600 Speaker 1: I mean, they're gonna get to two trillion dollars in 658 00:37:48,640 --> 00:37:52,839 Speaker 1: twenty four months given your vector, right, I mean, that's 659 00:37:52,880 --> 00:37:56,000 Speaker 1: why right now. I mean as much as from a 660 00:37:56,080 --> 00:38:01,600 Speaker 1: betting perspective, I look at it like to trillion going 661 00:38:01,640 --> 00:38:05,280 Speaker 1: into two thousand one to meet based on the trajectory, 662 00:38:05,440 --> 00:38:08,879 Speaker 1: it's as confident as I feel as May homes on Sunday. 663 00:38:09,920 --> 00:38:15,399 Speaker 1: I'll say, you know, there there is a question though 664 00:38:15,480 --> 00:38:19,000 Speaker 1: here what is the potential for disruption and and what's 665 00:38:19,000 --> 00:38:22,520 Speaker 1: sort of the competitive pressure at this point for Apple 666 00:38:22,640 --> 00:38:25,560 Speaker 1: to keep innovating in order to keep there You go 667 00:38:25,680 --> 00:38:28,520 Speaker 1: gloomy again. I'm not gloomy. I'm I'm looking at the 668 00:38:28,560 --> 00:38:35,240 Speaker 1: potential pitfall. Help me out here, Danny. Yeah, I think 669 00:38:35,440 --> 00:38:38,239 Speaker 1: I think the biggest thing that they proved not just 670 00:38:38,400 --> 00:38:39,960 Speaker 1: last time but over the last year when you look 671 00:38:40,000 --> 00:38:43,360 Speaker 1: at air pods. Air pod is gonna be five revenue 672 00:38:43,560 --> 00:38:47,360 Speaker 1: this year, million units they're gonna sell, so from an 673 00:38:47,680 --> 00:38:52,600 Speaker 1: killing time by the way, well, and it comes down 674 00:38:52,680 --> 00:38:55,560 Speaker 1: to when you look at air pods, that's that's really 675 00:38:55,640 --> 00:38:58,040 Speaker 1: been a huge part of the innovation. They're going to 676 00:38:58,120 --> 00:39:00,759 Speaker 1: have to continue innovate, but old only right now for 677 00:39:00,800 --> 00:39:03,280 Speaker 1: the next twelve to two months. It's rocket you Gibraltar 678 00:39:03,400 --> 00:39:07,040 Speaker 1: iPhone services. That's how you get to the time King 679 00:39:07,120 --> 00:39:17,799 Speaker 1: force to prest listen docket from no but real realistically 680 00:39:17,920 --> 00:39:20,960 Speaker 1: right now, if you look at the set up right here, yeah, 681 00:39:21,080 --> 00:39:23,080 Speaker 1: I could tell you if I looked at Apple the 682 00:39:23,160 --> 00:39:26,719 Speaker 1: last decade. I've never been more bullish in terms of 683 00:39:26,719 --> 00:39:29,480 Speaker 1: the set up and where it's going. Full disclosure and 684 00:39:29,520 --> 00:39:32,080 Speaker 1: Emily House schedule, just emails, and Emily and I set 685 00:39:32,080 --> 00:39:34,680 Speaker 1: out in Copper Tuna once they flew us out, and 686 00:39:34,719 --> 00:39:39,600 Speaker 1: we're under the platinum record of Gwen Stefani of No Doubt. 687 00:39:39,920 --> 00:39:42,560 Speaker 1: Trying to explain the podcast business, John and you and I. 688 00:39:42,640 --> 00:39:44,640 Speaker 1: We're talking to our book folks. John and I have 689 00:39:44,719 --> 00:39:49,360 Speaker 1: been hugely affected by the success of these podcasts, almost 690 00:39:49,480 --> 00:39:53,319 Speaker 1: almost a million downloads every single month. We'll stop talking 691 00:39:53,360 --> 00:39:55,560 Speaker 1: on book. We gotta jump there at Lesa's kids started 692 00:39:55,560 --> 00:39:58,720 Speaker 1: tuning in. Let's talk about some options out that down ives. 693 00:39:58,920 --> 00:40:01,120 Speaker 1: Some people have mentioned last twenty four hours that I 694 00:40:01,160 --> 00:40:04,120 Speaker 1: can get Facebook at a lower multiple, spinning off much 695 00:40:04,160 --> 00:40:06,680 Speaker 1: higher top line growth. Why do I want to own 696 00:40:06,760 --> 00:40:09,560 Speaker 1: Apple at twenty four times earning? Damn, you don't just 697 00:40:09,600 --> 00:40:11,440 Speaker 1: cover Apple. Look at the other tech films that you 698 00:40:11,520 --> 00:40:13,360 Speaker 1: cover at the moment. Why would Apple be top of 699 00:40:13,440 --> 00:40:17,479 Speaker 1: the pile, top pig. Well, I mean Facebook, we're still 700 00:40:17,960 --> 00:40:21,040 Speaker 1: extremely bush on as well. But but, but, and when 701 00:40:21,040 --> 00:40:24,200 Speaker 1: I continue to believe fang names have another twenty five 702 00:40:24,280 --> 00:40:28,000 Speaker 1: percent higher this year, and I think you have to 703 00:40:28,080 --> 00:40:31,200 Speaker 1: sort of diversify in terms of that Facebook bed as 704 00:40:31,239 --> 00:40:34,080 Speaker 1: well as Amazon. But to me, in terms of a 705 00:40:34,200 --> 00:40:38,719 Speaker 1: transformational cycle, you look where Apple is today, You look 706 00:40:38,760 --> 00:40:42,600 Speaker 1: where it would happened last night. That really now gave 707 00:40:42,760 --> 00:40:46,520 Speaker 1: credence to what I believe is going to be a 708 00:40:46,680 --> 00:40:51,080 Speaker 1: historical bull cycle for Apple. They're only halfway through. Very 709 00:40:51,080 --> 00:40:54,319 Speaker 1: good Dennis, congratulations on your call. Greatly appreciate it. Here's 710 00:40:54,400 --> 00:40:58,840 Speaker 1: with when. Thanks for listening to the Bloomberg Surveillance podcast. 711 00:40:59,280 --> 00:41:04,200 Speaker 1: Subscribe and listen to interviews on Apple Podcasts, SoundCloud, or 712 00:41:04,360 --> 00:41:08,680 Speaker 1: whichever podcast platform you prefer. I'm on Twitter at Tom 713 00:41:08,760 --> 00:41:12,640 Speaker 1: Keene before the podcast. You can always catch us worldwide. 714 00:41:13,080 --> 00:41:14,200 Speaker 1: I'm Bloomberg Radio