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Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, alongside

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Speaker 1: my co host Matt Miller.

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Speaker 2: Every business day we bring you interviews from CEOs, market pros,

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Speaker 2: and Bloomberg experts, along with essential market moving news.

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Speaker 1: Find the Bloomberg Markets podcast called Apple Podcasts or wherever

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Speaker 1: you listen to podcasts, and at Bloomberg dot com Slash podcast.

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Speaker 1: Let's turn to economics because we've got a lot of

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Speaker 1: eco data this week. We've got a lot of central

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Speaker 1: banks meeting around the globe. I think the Bank of Japan,

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Speaker 1: the ECB coming this week, along with the US Bank

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Speaker 1: of England next week. So a lot to chew on

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Speaker 1: there from the central bank perspective. Let's break it down

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Speaker 1: with Liz McCormick, chief correspondent of Global macro Markets at

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Speaker 1: Bloomberg News, and Michael McKee, international Economics and Policy correspondent

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Speaker 1: with Bloomberg News, who joins us here in studio. Mike,

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Speaker 1: just want to start with you. We had the the

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Speaker 1: PMIS come out. I don't they didn't look that good

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Speaker 1: to me.

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Speaker 3: I mean, what do you.

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Speaker 1: Know, I'm manufacturing service. The composite PMI slowed from last month.

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Speaker 1: What do you reading to these types of numbers.

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Speaker 4: Well, the economy is slowing, which we expected. The question

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Speaker 4: is how fast does it slow. The Bloomberg most recent

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Speaker 4: Bloomberg Economic survey that just came out last Friday, suggests

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Speaker 4: that economists think that the US economy is going to

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Speaker 4: fall off cliff starting in this quarter, but that includes July,

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Speaker 4: and that's not kind of what the story the data

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Speaker 4: are telling at this point. Now you look at a

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Speaker 4: number that's forty nine for manufacturing, the PMI is not

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Speaker 4: a great number. It's below the level in theory that

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Speaker 4: is break even. But we still see services above healthily

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Speaker 4: above fifty, and composite above fifty. So things have slowed down,

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Speaker 4: but they don't seem to match up with what people

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Speaker 4: are expecting to happen.

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Speaker 3: Okay, so you're a glass half full type of person.

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Speaker 4: I'm wait until the waitress comes around.

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Speaker 5: Fill it up again.

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Speaker 4: We got GDP numbers on Thursday, and we get the

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Speaker 4: latest spending numbers on Friday, so we'll have a much

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Speaker 4: better view by Friday of where the economy is. Unfortunately,

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Speaker 4: for the Fed, they're meeting Wednesday.

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Speaker 3: Yeah.

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Speaker 6: Well, speaking of that optimism, I wonder Liz, if you

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Speaker 6: can talk us through this Nirvana scenario that we're hearing about, and.

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Speaker 7: Is that what we're gonna see?

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Speaker 8: Well, you know I love ed Yar Denny, but Nirvana

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Speaker 8: we all wanted show.

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Speaker 3: That's great.

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Speaker 8: But yeah, well, I mean clearly there is some like

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Speaker 8: Mike just said, some of the dire predictions many thought

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Speaker 8: we might be in a recession already haven't panned out.

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Speaker 8: So the market is kind of kind of more so

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Speaker 8: saying hey, there's a possibility we could get through this.

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Speaker 8: I mean, we've got five hundred basis points of tightening already.

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Speaker 8: FED says they're going to do some more markets pricing

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Speaker 8: in a little that could we have this you know,

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Speaker 8: I call it the nebulous soft landing on that possibly

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Speaker 8: the market is pricing in some easy next year, but

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Speaker 8: the FED could ease a bit even if we're not

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Speaker 8: in a recession, just to get things better in line

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Speaker 8: to normalize policy. So I would say there's still kind

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Speaker 8: of a camps out there hard landing policy mistake from

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Speaker 8: the FED is coming. They should have stopped to the

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Speaker 8: h Maybe they'll pull this off kind of thing, and

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Speaker 8: you know, we'll have to talk in maybe six months

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Speaker 8: in a year.

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Speaker 3: See it was right right.

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Speaker 1: All right, So Michael, you're the international guy here. Bank

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Speaker 1: of Japan this week, ECB this week, Bank of England

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Speaker 1: next week. How does a market look at some of

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Speaker 1: these other international national banks visa v what kind of

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Speaker 1: what the FED does?

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Speaker 4: Don't forget the Bank of Ghana which raised rates today.

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Speaker 3: Oh good to know to thirty percent.

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Speaker 4: Inflation is running at forty two and a half percent

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Speaker 4: a year there, so they're a little bit above that

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Speaker 4: two percent target. Yeah, But the FED is driving everything

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Speaker 4: in the sense that we are the by far biggest economy,

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Speaker 4: and it's the most influential central bank, and it is

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Speaker 4: where the US rate settles, is what drives currency trading.

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Speaker 4: So everybody's watching that, and then they'll be perhaps more

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Speaker 4: eyes on. At this point the ECB, they're in the

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Speaker 4: sort of same situation as the Fed. Christine and the

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Speaker 4: Guard has to and company have to decide whether they're

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Speaker 4: one and done. They're going to do one more and

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Speaker 4: then they will hold and wait and see what happens,

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Speaker 4: or do they promise to do a series of rate

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Speaker 4: hikes still because they're still concerned about where inflation is

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Speaker 4: the Bank of Japan, the consensus is that a huge

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Speaker 4: change is coming the end of yield curve control, but

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Speaker 4: not now, so it's a question of when do they

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Speaker 4: get there. What'll be interesting with the Bank of Japan

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Speaker 4: is to see what their economic forecasts are, because the

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Speaker 4: reporting from Bloomberg is that what we're going to see

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Speaker 4: is a big increase in the Bank of Japan's inflation outlook.

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Speaker 4: They're going to raise their inflation view, which is kind

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Speaker 4: of the opposite of what the other central banks want

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Speaker 4: to do, but it's what the Bank of Japan wants

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Speaker 4: to see happen.

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Speaker 6: So as we head into this kind of triple header

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Speaker 6: of central banks, which do you think we'll learn the

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Speaker 6: most from in terms of where we're heading.

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Speaker 4: Well, it depends, And this is a good question for

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Speaker 4: Liz because it's a it's a matter of interpretation. What

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Speaker 4: everybody wants to know from the FED and the ECB

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Speaker 4: is what next and how specific are they going to

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Speaker 4: be about what next? Whereas the Bank of Japan is

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Speaker 4: not going to really do anything and probably won't say

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Speaker 4: a whole lot, but if they do raise their inflation

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Speaker 4: forecasts a lot, that's going to set up a lot

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Speaker 4: to talk about what do they do next, how much closer.

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Speaker 4: Are we to the end of your curve control?

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Speaker 1: So, Liz, again, what's kind of the market. Does the

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Speaker 1: market feel like this Federal Reserve is still behind the curve?

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Speaker 1: I mean when you look at the trading week, the week, month,

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Speaker 1: the month here, it's felt like for a long time

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Speaker 1: the market wasn't listening to the Fed.

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Speaker 8: Yeah, I think, well, I think the market has kind

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Speaker 8: of thought the Fed was behind a curve on both ends.

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Speaker 8: Obviously late to the party to realize inflation wasn't transitory,

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Speaker 8: so they were slow to tight and slow to stop

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Speaker 8: their quantitative easing. And then there are some who feel

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Speaker 8: like Fed is going too far, like the market is

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Speaker 8: only priced for one more quarter point hike. We know

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Speaker 8: the Fed's dots have said two. It'd be interesting to

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Speaker 8: see if Chairman Powell, which he's been really you know,

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Speaker 8: kind of doubling down and saying to whoever he talks

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Speaker 8: to Congress, whomever, there's two more hikes coming. That's what

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Speaker 8: a lot of our officials are signaling.

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Speaker 7: Does he tone that down a little.

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Speaker 8: I think he clearly doesn't want to, just like Christine Legard,

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Speaker 8: like Mike was saying, they don't want to kind of

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Speaker 8: gin up animal spirits too much to say we were done,

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Speaker 8: we've won the battle, because they're pivotal, you know, at

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Speaker 8: not a key inflection point, but getting there.

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Speaker 5: But inflation is above both.

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Speaker 8: Their targets, right, So maybe somebody called it endgame communication, like,

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Speaker 8: you know, how far are we How do we kind

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Speaker 8: of gingerly get us into even if it's higher for

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Speaker 8: longer that they get to wherever and they stay there

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Speaker 8: for a while. That's the next thing. But I think

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Speaker 8: that's what they're trying to say. We're getting closer, maybe

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Speaker 8: more work to do, but we're not for sure done.

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Speaker 9: You know.

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Speaker 8: They don't want to signal that, and I think that's

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Speaker 8: why the market is in price for two hikes.

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Speaker 4: When you said does the market think the FED is

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Speaker 4: still behind the curve? I was thinking, well, it depends

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Speaker 4: on what day of the week it.

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Speaker 6: Is, right exactly. Well, and it's such a great point

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Speaker 6: that they were too late to the party and now

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Speaker 6: people think they're too late to leave. It sounds like, Liz,

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Speaker 6: based on what we were saying with Mike earlier about

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Speaker 6: this triple header this week, what are you going to

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Speaker 6: be looking at the most?

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Speaker 8: Well, I probably since I live here, have to say

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Speaker 8: the Fed, because I mean like they do move all boats.

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Speaker 8: I mean for a while, like Edna Current and I

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Speaker 8: were talking the other day, for a while we all

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Speaker 8: thought maybe boj is right the most exciting this week,

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Speaker 8: and then we had that great reporting from our folks

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Speaker 8: saying not this time. Like Mike said, that's like a

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Speaker 8: waiting on GOODO. We keep thinking that you'll curve control, change,

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Speaker 8: tweak whatever is coming. So I really think it's the Fed.

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Speaker 8: You know, how do they signal? Does is there a

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Speaker 8: way they can you know, get the market to price

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Speaker 8: up a little bit? I think, you know, Pow wants

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Speaker 8: as much optionality, but this bond market really kind of

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Speaker 8: wants to rally.

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Speaker 3: So we'll see how.

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Speaker 7: He does with that.

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Speaker 1: And Michael, just for our friends who maybe don't have

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Speaker 1: a good understanding of kind of inflation in Europe, why

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Speaker 1: is it so much worse there? It seems like even

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Speaker 1: though everybody's over there traveling, you know, that's.

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Speaker 3: Well, it's based on a few different things.

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Speaker 4: Especially energy has been an issue there, and their indexes

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Speaker 4: are constructed a little bit differently from ours, so they're

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Speaker 4: not directly comparable, but they do show the problems that

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Speaker 4: we've had and they have had much bigger rate increases

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Speaker 4: with some of the pattern barketing they have that people

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Speaker 4: are worried about. But can it come down fast? Well,

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Speaker 4: inflation's coming, I mean energy prices are coming down. So

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Speaker 4: as long as that happens, inflation should come down. And

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Speaker 4: when you look at the PMI to take us back

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Speaker 4: to where we started for Germany thirty eighty for manufacturing,

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Speaker 4: that suggests you're going to see some price pressures.

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Speaker 9: Ease.

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Speaker 1: Okay, great stuff, great having you both in here. I

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Speaker 1: looked up and Liz was right there. I was expecting zoom,

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Speaker 1: but Liz was right there. LIZI McCormick, chief correspondent of

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Speaker 1: Global macro Markets with Bloomberg News, and Michael McKee, International

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Speaker 1: Economics and Policy correspondent, both the Bloomberg News, joining us

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Speaker 1: both here in our Bloomberg Interactive Broker studio. And on Monday,

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Speaker 1: by the way, I mean usual on a Monday, you

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Speaker 1: get the Bloomberg salespeople because they have their big morning

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Speaker 1: media on Monday, so all the kids are and you

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Speaker 1: get us and we get some of the economists.

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Speaker 3: And that's how it works.

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Speaker 6: Like Liz is doing an incredible Q and A session.

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Speaker 6: I think tomorrow today I'm.

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Speaker 3: Going to be front row.

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Speaker 6: I can't wait for all internally, ask me anything.

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Speaker 3: Liz McCormick and the benefit of her experience.

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Speaker 10: You're listening to the team.

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Speaker 9: Ken's are lying Bloomberg Markets weekdays at ten am Eastern

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Speaker 9: on Bloomberg dot com, the iHeartRadio app and the Bloomberg

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Speaker 9: Business App, or listen on demand wherever you get your podcasts.

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Speaker 1: Madison Mills, Paul Sweeney here in our Bloomberg Interactive Broker Studio.

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Speaker 1: Big big earnings week, technology coming in to focus. I'm

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Speaker 1: talking Microsoft, Alphabet, Meta, a bunch of others, and I

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Speaker 1: tell you what these com be is better delivered. Nastac

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Speaker 1: is up about thirty four percent just a year to date.

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Speaker 1: So anticipation in the market for really strong performance. It's

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Speaker 1: see if they can deliver. Dan Ives.

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Speaker 3: He always delivers.

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Speaker 1: Dan Ives as managing director and senior equities analysts for

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Speaker 1: web Bush Security.

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Speaker 3: So Dan, a big week for tech. What do you expect.

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Speaker 11: I think it's get out the popcorn. I mean, in

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Speaker 11: my opinion, we're going to see an uptick and it spend.

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Speaker 11: I think Cloud's going to be strong from the likes

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Speaker 11: of the behemoths Microsoft as well as Alphabet and I

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Speaker 11: think it's all about AI spend. We're starting to see

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Speaker 11: monizations sooner arrive than later. I mean, Paul in my opinion,

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Speaker 11: Bright green Light, Dome and Tech I think up twelve

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Speaker 11: to fifteen percent second half of the year.

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Speaker 6: Wow, Dan, how much are you going to be looking

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Speaker 6: at capital allocation when it comes to overall it spend

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Speaker 6: companies that are portioning off a larger chunk of that pie,

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Speaker 6: specifically to AI. And are there any companies that could

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Speaker 6: be hurt or dinged because of that allocation?

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Speaker 11: Yeah, it's a great question. That's why right now the

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Speaker 11: trophy case at the top of the mountain is in Redmond.

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Speaker 11: I mean, if you look with Nadella and the team

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Speaker 11: have done, I mean they are in pole position to

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Speaker 11: gain more and more share budget. We believe next year

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Speaker 11: we're hearing eight to ten percent a budget to AI

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Speaker 11: driven this year less than one percent. And that's that's

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Speaker 11: the drum roll, that's the super Bowl what everyone's waiting for.

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Speaker 11: The actual quarters are almost the backstory to really the

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Speaker 11: forecast and the outlook going into next year.

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Speaker 1: How about the companies that rely upon digital advertising, Dan,

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Speaker 1: that's kind of been, you know, a wobbly business even

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Speaker 1: you know, even amongst all the other key growth drivers

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Speaker 1: in technology. So we're talking about Meta and you know

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Speaker 1: Alphabet that really rely up on digital advertising.

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Speaker 3: How is that's looking right now?

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Speaker 11: I mean we're seeing upticks. I think stabilization is going

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Speaker 11: to be the sort of word that we hear from Meta,

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Speaker 11: from Alphabet, and you combine it all, we're starting to

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Speaker 11: now see a less cautious spending environment. They'll be you know,

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Speaker 11: probably toned in terms of how they talk about things

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Speaker 11: over the coming quarters. But I think digital advertising we're

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Speaker 11: seeing stabilization, cloud and uptick and overall it spint I

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Speaker 11: think you saw that from Arvin and IBM. I view

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Speaker 11: this as sort of a table pounder of view into

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Speaker 11: tech this week. I do not view the reactions of

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Speaker 11: Netflix and Tassa as a brahma for what we're going

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Speaker 11: to see this week. That's why, in my opinion, getting

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Speaker 11: the popcorn ready, and I believe it will be a

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Speaker 11: strong week for tech.

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Speaker 6: Okay, so if it's not Netflix and Tesla, Dan, what

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Speaker 6: is the bell weather that you've looked into to indicate

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Speaker 6: how happy you're gonna be able to be this week.

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Speaker 11: It's tomorrow night. When you look at Alphabet, you look

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Speaker 11: at Microsoft. That's that's the key. That's that's the messy

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Speaker 11: moment for earnings for tech because of what we ultimately

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Speaker 11: see in cloud, in digital advertising, and if you look

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Speaker 11: going back to the Nvidio guidance heard around the world

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Speaker 11: the last quarter, Now we start to see the optics

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Speaker 11: in spend in terms of the forecast, no better. Everyone

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Speaker 11: will be listening to Nadella and Microsoft's called that is

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Speaker 11: going to be the one that they not just tech,

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Speaker 11: but all the street's going to be focused on to

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Speaker 11: see what we're seeing monization of cloud. We think a

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Speaker 11: trillion dollars incremental spend next decade.

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Speaker 3: Hey, Dan, you know the Nvidia results.

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Speaker 1: I think it was the last quarter that just really

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Speaker 1: shook the market, reset the market, woke up people like

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Speaker 1: me who really wasn't paying attention to this AI thing.

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Speaker 1: How much of the AI budget over the next several

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Speaker 1: years do you think it's going to be incremental tech

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Speaker 1: spending or maybe just taken it from all the parts

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Speaker 1: of the stack.

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Speaker 11: Why we think about thirty to forty percent incremental. The

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Speaker 11: rest will be taking from the stack. That's why the ciscos.

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Speaker 11: You could argue the intels, maybe the hp is obviously

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Speaker 11: will back in so on the hardware side. But I

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Speaker 11: think it's incremental because in our opinion, it's a nineteen

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Speaker 11: ninety five moment. It's an Internet moment. Companies are actually

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Speaker 11: changing their view of spend and two letters have all

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Speaker 11: changed in terms of AI and that's why, unless you

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Speaker 11: have a telescope, you're not seeing a recession out there.

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Speaker 11: And I think that's gonna be innarratable here in the

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Speaker 11: next week or two.

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Speaker 6: So if it is ninety five all over again, how

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Speaker 6: are you not worried about a bubble?

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Speaker 12: Dan?

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Speaker 11: Well, first off, I think if you look at the

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Speaker 11: actual evaluations, it's we're not talking pets dot com movement.

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Speaker 11: In other words, these are now the star wards that

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Speaker 11: ultimately I view. When I look at Microsoft, I could

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Speaker 11: argue this is a three and a half four trillion

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Speaker 11: dollar company in next two to three years. I think

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Speaker 11: the difference when you go back to the bubble ninety

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Speaker 11: nine two thousand, I mean a lot of that was hype.

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Speaker 11: This is different because the fundamental and the real business

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Speaker 11: cases are there. I'm not saying, oh, there's not gonna

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Speaker 11: be fraud from losers that fall by the wayside. But

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Speaker 11: I believe this is an AI gold rush. It's real.

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Speaker 11: And then's why this week I think the Bears go

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Speaker 11: back into their hibernation mode after how little win last

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Speaker 11: week to what's been a brutal six months for him.

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Speaker 1: Hey Dan, in the context of this AI discussion, it's

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Speaker 1: going to accelerate once again this week with these earnings.

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Speaker 1: How does Apple fit into an AI discussion.

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Speaker 11: I mean, they're not gonna be on the outside looking in,

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Speaker 11: and we've talked about them. I mean, they're spending almost

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Speaker 11: the equivalent of what Microsoft did with Open Ai in

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Speaker 11: turn on on AI. This is all the drum all

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Speaker 11: to what I believe. I'm in German's hand, had a

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Speaker 11: bit to their They're gonna roll out AI within their ecosystem.

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Speaker 11: I ultimately believe it's an AI app store for Apple,

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Speaker 11: which I believe could add thirty to forty dollars per share.

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Speaker 11: And again Cook continues to play chess while others are

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Speaker 11: at the kids table playing checkers.

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Speaker 6: Wait, say more about the AI app store.

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Speaker 11: What are you anticipating a separate app store that's gonna

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Speaker 11: be AI driven developers? I believe it started off with

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Speaker 11: Vision pro in terms of, you know, actually building a

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Speaker 11: separate almost app store. It's gonna be AI driven health, fitness,

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Speaker 11: AI apps will be in that app store, and that

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Speaker 11: for Apple, that's just gonna be a whole nother opportunity

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Speaker 11: to further penetrate the base that has an unparalleled install base.

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Speaker 11: And I believe right now the valuation is not reflecting

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Speaker 11: what I'll call AI multiple and that's why I believe

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Speaker 11: this is a four trillion dollars markap by twenty twenty five.

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Speaker 6: Dan, you mentioned the headset, and this earnings call is

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Speaker 6: gonna be the first time folks have the opportunity to

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Speaker 6: ask Apple about that headset. Do you think they're gonna

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Speaker 6: get killed for invent staying in a headset when people

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Speaker 6: have moved on to focusing on AI.

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Speaker 11: Because ultimately is not about the headset. Because my view

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Speaker 11: is that this is really just the start ar v

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Speaker 11: R to what ultimately is going to be the next

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Speaker 11: vision around AI, and that's going to be integrated more

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Speaker 11: and more within that ecosystem for Apple, and I think

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Speaker 11: ultimately investors who are focused more on iPhone fifteen, we

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Speaker 11: think ultimately units are going to be higher and this

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Speaker 11: is a mini super cycle. That's the long game right now.

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Speaker 11: It's all about developers build out for what I view

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Speaker 11: is sort of the next evolution of the Coupertino ecosystem.

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Speaker 1: Hey, Dan, I just want to talk Tesla for just

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Speaker 1: a moment because Bloomberg News Stephan and Nicola is out

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Speaker 1: with a great story saying Tesla is lapping Germany's automakers

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Speaker 1: in the global ev race. And so you know, we

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Speaker 1: heard from all the big German manufacturers over the last

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Speaker 1: several years how they're going all in on EI. But

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Speaker 1: Tesla delivered almost eight hundred and ninety thousand cars in

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Speaker 1: the first half of the year. That's more electric vehicles

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Speaker 1: the Volkswagen, BMW, Mercedes or Porsche combined.

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Speaker 3: So how do you think.

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Speaker 1: About Tesla and just kind of their competitive position as

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Speaker 1: everybody else tries to ramp up.

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Speaker 11: I mean, it's Tesla's world, everyone else paying rent. If

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Speaker 11: you look at electric vehicles and from a scaling scope perspective,

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Speaker 11: battery technology, super charger, and I ultimately believe the FSDAI.

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Speaker 11: That's why I think last week you got the knee

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Speaker 11: jerk sell off after just a parabolic move this year.

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Speaker 11: I think this is still early to middle innings of

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Speaker 11: the broader Tesla story build out and this ev green title,

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Speaker 11: the five trillion dollars green title. There's been many winners.

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Speaker 11: The three win three are Code GM four, the European

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Speaker 11: players at the China players. But ultimately, if you look

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Speaker 11: the biggest beneficiary is gonna be muscling us really quickly.

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Speaker 6: Dan, are you team Twitter formerly or now x formerly

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Speaker 6: to Twitter? Or team threads?

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Speaker 10: Oh?

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Speaker 11: I stayed Twitter, and again I go back to thread?

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Speaker 11: Did rathery broccoli from the full data the trench?

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Speaker 3: Very good?

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Speaker 1: There you go, Dan, conviction of nothing else. Dan I

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Speaker 1: was managing director and senior equity analyst at Webbush Securities.

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Speaker 1: Appreciate getting that roundup on Tech is again a big,

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Speaker 1: big earnings week here for a lot of industries and

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Speaker 1: most notably tech and is the biggest sector in the SMP.

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Speaker 9: You're listening to the tape cats are live program Bloomberg

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Speaker 9: Markets weekdays at ten am Eastern on Bloomberg Radio, the

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Speaker 9: tune in app, Bloomberg dot Com.

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Speaker 10: And the Bloomberg Business App.

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Speaker 9: flagship New York station. Just say Alexa Play Bloomberg eleven thirty.

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Speaker 13: Let's talk about some of the industrial companies and because

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Speaker 13: they're reporting numbers today, but you know, I looked at

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Speaker 13: the PMIS today for the manufacturing PMI came in at

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Speaker 13: forty six point two.

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Speaker 1: That's not good on the number fronts. A. It's below fifty,

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Speaker 1: suggesting contraction, and it was blowed the concent of forty

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Speaker 1: nine and it was below just kind of in line

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Speaker 1: with last.

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Speaker 3: Month forty six point three.

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Speaker 1: But I want to start there and then we'll branch

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Speaker 1: out to some of the manufacturing companies that are reporting

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Speaker 1: later this week. Brook Sutherland joins us. She covers all

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Speaker 1: of that industrial stuff for Bloomberg Opinion, and she joins

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Speaker 1: us here on our Bloomberg.

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Speaker 3: Interactive Broker Studio. So, Brooke, what did you think when you.

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Speaker 1: Saw the manufacturing PMI today. I mean, it's a it's

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Speaker 1: a manufacturing recession. Is that kind of what we're dealing with?

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Speaker 12: I mean, this is a continuation of a trend where

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Speaker 12: we have seen numbers from the PMI that have been

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Speaker 12: indicating a contraction in manufacturing activity. I think the question

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Speaker 12: is there's a bit of a diversience between those numbers

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Speaker 12: and what we're hearing from the industrial companies which are

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Speaker 12: still very bullish on the demand that they're seeing. They,

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Speaker 12: you know, are talking a lot about sort of structural

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Speaker 12: tailwinds that will keep people buying industrial equipment for the

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Speaker 12: foreseeable future. Those include electrification of everything, the sort of

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Speaker 12: wave of factory investments that we've seen in semiconductors, electric

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Speaker 12: vehicle and other types of manufacturing. And I think the

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Speaker 12: question for investors is, you know, whether this slowdown that

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Speaker 12: we're seeing just reflects a normalization of supply chains because

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Speaker 12: you had a lot of people that were over ordering

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Speaker 12: just to get their place in line and to make

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Speaker 12: sure that they could get some kind of components coming

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Speaker 12: in the door, and whether we may be just seeing

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Speaker 12: the other end of that or if we're seeing a

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Speaker 12: real demand slow down. And I don't think investors have

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Speaker 12: made up their minds, And I think it depends on

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Speaker 12: which company is reporting. Honestly, the way in which people

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Speaker 12: view their order numbers.

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Speaker 6: It feels like three M is the name to watch

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Speaker 6: this week. Is that what you would say?

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Speaker 9: Sure?

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Speaker 12: I mean, it depends on what you're looking for. We've

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Speaker 12: got just about every industrial company reporting earnings this week,

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Speaker 12: so three m is interesting. You know, I don't really

439
00:21:44,160 --> 00:21:46,480
Speaker 12: view them that they used to be an industrial bell Weather.

440
00:21:46,520 --> 00:21:48,480
Speaker 12: I don't really think of them as that anymore, just

441
00:21:48,520 --> 00:21:53,240
Speaker 12: because they have so many idiosyncratic problems, including pfast liabilities.

442
00:21:53,280 --> 00:21:58,560
Speaker 12: They have an ongoing legal issue with combat earplugs that

443
00:21:58,560 --> 00:22:00,959
Speaker 12: they sold to the US military that veterans are claiming

444
00:22:01,000 --> 00:22:04,920
Speaker 12: we're defective, and so, you know, they have a variety

445
00:22:04,920 --> 00:22:07,080
Speaker 12: of issues that you know, investors will be looking for

446
00:22:07,200 --> 00:22:09,960
Speaker 12: updates on. But they do still have their industrial businesses

447
00:22:10,440 --> 00:22:12,280
Speaker 12: and it will be interesting to see what's happening there.

448
00:22:12,320 --> 00:22:14,760
Speaker 12: These tend to be early cycle businesses and so they

449
00:22:14,880 --> 00:22:16,920
Speaker 12: tend to be on the front lines of economic swing.

450
00:22:17,000 --> 00:22:18,640
Speaker 12: So if we are seeing a slowdown, you would see

451
00:22:18,640 --> 00:22:21,480
Speaker 12: it hit there first before some of the longer cycle

452
00:22:21,520 --> 00:22:25,240
Speaker 12: businesses like aircraft engines or wind turbines or things like that.

453
00:22:25,400 --> 00:22:27,760
Speaker 3: This is a Tom Keane kind of trivia question. What

454
00:22:27,840 --> 00:22:30,560
Speaker 3: does three AM stand for? You know, I don't know

455
00:22:30,600 --> 00:22:33,720
Speaker 3: that Minnesota Mining and Manufacturing. John Tucker knows that.

456
00:22:34,560 --> 00:22:35,320
Speaker 10: Well, it used to be.

457
00:22:35,440 --> 00:22:37,960
Speaker 5: They officially changed the name the three AM two to

458
00:22:37,960 --> 00:22:38,400
Speaker 5: three AM.

459
00:22:38,520 --> 00:22:41,399
Speaker 1: Yeah, but based in Saint Paul, Minnesota. Saint Paul is

460
00:22:41,400 --> 00:22:43,000
Speaker 1: a great Town by the way. I love Saint Paul,

461
00:22:43,240 --> 00:22:44,720
Speaker 1: a great hotel that I can't think of the name.

462
00:22:44,840 --> 00:22:47,320
Speaker 1: But the stock has been brutal trailing, you know, over

463
00:22:47,359 --> 00:22:50,680
Speaker 1: the last five years, compounded annual decline of about nine

464
00:22:50,680 --> 00:22:52,840
Speaker 1: percent versus the S and P five rounded up up

465
00:22:52,840 --> 00:22:53,720
Speaker 1: almost twelve percent.

466
00:22:53,920 --> 00:22:55,520
Speaker 3: So that's just a brutal name.

467
00:22:55,640 --> 00:22:57,480
Speaker 1: And what's just I mean, it's a fifty eight billion

468
00:22:57,520 --> 00:22:58,640
Speaker 1: dollar market cap company.

469
00:22:58,920 --> 00:23:01,119
Speaker 3: What's the problem with those guys? What's the story?

470
00:23:01,640 --> 00:23:04,600
Speaker 12: You know? And it's you have to somewhat feel bad

471
00:23:04,640 --> 00:23:08,159
Speaker 12: for the current management team because the issues largely do

472
00:23:08,280 --> 00:23:10,879
Speaker 12: not have to do with decisions that they made. They

473
00:23:10,920 --> 00:23:13,159
Speaker 12: have to do with the way in which three M

474
00:23:13,320 --> 00:23:16,720
Speaker 12: was managed, you know, decades ago. So the company is

475
00:23:16,760 --> 00:23:19,560
Speaker 12: a legacy manufacturer of p fasts, which are known as

476
00:23:19,600 --> 00:23:23,240
Speaker 12: forever chemicals because they linger in the environment and in

477
00:23:23,280 --> 00:23:27,200
Speaker 12: the body. They've faced numerous legal challenges over p fast

478
00:23:27,320 --> 00:23:30,159
Speaker 12: and the uncertainty of what happens there has been a

479
00:23:30,160 --> 00:23:31,960
Speaker 12: big drag on the stock. And then, as I mentioned,

480
00:23:32,000 --> 00:23:37,240
Speaker 12: there's also the military plugs issue, which was the last

481
00:23:37,280 --> 00:23:41,080
Speaker 12: thing that the company needed but remains unresolved. And you know,

482
00:23:41,359 --> 00:23:44,639
Speaker 12: we're talking about estimates in the range of several billion

483
00:23:44,640 --> 00:23:47,640
Speaker 12: dollars to try to settle that alone, before you even

484
00:23:47,680 --> 00:23:48,840
Speaker 12: start talking about p fasts.

485
00:23:48,880 --> 00:23:52,119
Speaker 1: All right, three m Minnesota Mining Manufacturing went public. Just

486
00:23:52,200 --> 00:23:53,920
Speaker 1: some trivia and get on the Bloomberg terminal with the

487
00:23:54,000 --> 00:23:56,680
Speaker 1: dees function October first, nineteen seventy eight.

488
00:23:57,119 --> 00:23:58,000
Speaker 3: Who took them public?

489
00:23:58,160 --> 00:24:01,399
Speaker 1: Kid Or Peabody, which was an awesome firm back in

490
00:24:01,400 --> 00:24:04,680
Speaker 1: the day, some of the best bankers, best analyst, great

491
00:24:04,800 --> 00:24:08,000
Speaker 1: m and a practice, really good stuff. All right, ge,

492
00:24:09,040 --> 00:24:11,120
Speaker 1: I kind of still consider them a belt, whether I don't.

493
00:24:11,200 --> 00:24:12,600
Speaker 1: They're not the belt, whether they used to be.

494
00:24:12,960 --> 00:24:14,639
Speaker 3: What are you looking for here? From ge? What's the

495
00:24:14,680 --> 00:24:16,200
Speaker 3: What are investors going to be looking for?

496
00:24:16,200 --> 00:24:19,679
Speaker 12: Sure? I mean, well, they're a significantly simpler company they

497
00:24:19,760 --> 00:24:22,680
Speaker 12: used to be from back in the Kidder Peabody days.

498
00:24:22,760 --> 00:24:25,879
Speaker 12: But they so they've already spent off their healthcare business,

499
00:24:26,000 --> 00:24:30,040
Speaker 12: and then they are speeding toward eventually spinning off their

500
00:24:30,760 --> 00:24:33,760
Speaker 12: energy businesses, and so that includes their gas turbines but

501
00:24:33,800 --> 00:24:37,200
Speaker 12: also their wind turbine business and some other myriad assets

502
00:24:37,240 --> 00:24:38,800
Speaker 12: that get kind of grouped with that. And once they're

503
00:24:38,840 --> 00:24:41,880
Speaker 12: done with that, they will essentially be an aviation company,

504
00:24:42,600 --> 00:24:45,119
Speaker 12: and investors are already treating the stock as if you

505
00:24:45,160 --> 00:24:48,800
Speaker 12: know that spin off is a good done deal, and

506
00:24:48,880 --> 00:24:50,919
Speaker 12: I think it's just a simpler story and people are

507
00:24:50,960 --> 00:24:54,280
Speaker 12: better able to focus on that core aerospace business and

508
00:24:54,400 --> 00:24:56,320
Speaker 12: the growth opportunities there.

509
00:24:56,840 --> 00:24:57,119
Speaker 3: Broke.

510
00:24:57,160 --> 00:24:59,399
Speaker 6: One of the fantastic stories that you have for us

511
00:24:59,400 --> 00:25:03,359
Speaker 6: on Bloomberger Opinion recently is about ties to China for

512
00:25:03,560 --> 00:25:06,680
Speaker 6: some of these names, and you specifically talk about Chinese

513
00:25:06,680 --> 00:25:10,040
Speaker 6: ownership of Sirrus Aircraft. I believe can you talk to

514
00:25:10,080 --> 00:25:12,800
Speaker 6: me about how the China story is impacting some of

515
00:25:12,840 --> 00:25:13,920
Speaker 6: the names that you cover.

516
00:25:14,119 --> 00:25:16,440
Speaker 12: Sure, I mean, I think it is a big issue,

517
00:25:16,480 --> 00:25:20,879
Speaker 12: and I think the current environment is a minefield for CEOs,

518
00:25:20,960 --> 00:25:25,640
Speaker 12: even those who have had long standing relationships with Chinese entities.

519
00:25:26,040 --> 00:25:29,879
Speaker 12: And so Sirus makes private planes. These are more like

520
00:25:29,960 --> 00:25:33,600
Speaker 12: hobby aircraft or used for charter flights, that sort of thing.

521
00:25:33,680 --> 00:25:36,639
Speaker 12: And they were acquired by a subsidiary of a Chinese

522
00:25:36,640 --> 00:25:39,240
Speaker 12: company in twenty eleven. Before that, they were owned by

523
00:25:39,280 --> 00:25:43,800
Speaker 12: a Bahrain investment arm of a bank there, and so

524
00:25:44,040 --> 00:25:46,080
Speaker 12: they've been under foreign control for a very long time.

525
00:25:46,119 --> 00:25:48,639
Speaker 12: But the company is getting more scrutiny. I filed to

526
00:25:48,640 --> 00:25:52,159
Speaker 12: go public in Hong Kong in June, and that's just

527
00:25:52,280 --> 00:25:54,200
Speaker 12: drawing attention to the fact that it is in fact

528
00:25:54,240 --> 00:25:56,520
Speaker 12: owned by a subsidiary of a Chinese entity that is

529
00:25:56,560 --> 00:26:00,440
Speaker 12: subject to sanctions. And you're seeing this happen in all

530
00:26:00,520 --> 00:26:04,520
Speaker 12: types of industrial businesses where long standing relationships are coming

531
00:26:04,600 --> 00:26:06,639
Speaker 12: under fresh scrutiny. There was also a report in the

532
00:26:06,640 --> 00:26:09,240
Speaker 12: Wall Street Journal earlier this year about a Rockwell Automation

533
00:26:09,480 --> 00:26:13,000
Speaker 12: software development center in China and whether that might pose

534
00:26:13,000 --> 00:26:15,200
Speaker 12: some sort of national security risk. And I really think

535
00:26:15,640 --> 00:26:18,719
Speaker 12: to operate in China, if you are an industrial company,

536
00:26:18,760 --> 00:26:22,560
Speaker 12: you need to have a siloed enterprise there, and a

537
00:26:22,600 --> 00:26:25,960
Speaker 12: number of companies have already taken efforts to set this up.

538
00:26:26,320 --> 00:26:30,399
Speaker 12: Emerson sources ninety six percent but its components for its

539
00:26:30,480 --> 00:26:33,040
Speaker 12: Chinese products within that region that with the rest coming

540
00:26:33,040 --> 00:26:36,440
Speaker 12: from other East Asian countries. It doesn't run that business

541
00:26:36,440 --> 00:26:41,679
Speaker 12: with expaths. It uses all local employees primarily, and I

542
00:26:41,680 --> 00:26:43,280
Speaker 12: think you're just going to see more and more of that.

543
00:26:43,800 --> 00:26:46,520
Speaker 1: So when we talk to the industrial companies that you

544
00:26:46,520 --> 00:26:49,679
Speaker 1: do all the time about China, is it central to

545
00:26:49,720 --> 00:26:53,240
Speaker 1: their future as either a source of raw materials or

546
00:26:53,680 --> 00:26:55,960
Speaker 1: an end market for consumers? How do they view China

547
00:26:55,960 --> 00:26:57,320
Speaker 1: over the next five to ten years.

548
00:26:57,720 --> 00:27:00,480
Speaker 12: Sure, I mean I think they're carefully Yeah, that's given

549
00:27:00,600 --> 00:27:03,280
Speaker 12: what a political issue it is. But it's a very

550
00:27:03,320 --> 00:27:05,560
Speaker 12: important market for these companies. It's the reason why they're

551
00:27:05,560 --> 00:27:07,919
Speaker 12: there in the first place. And so, you know, one

552
00:27:07,960 --> 00:27:11,160
Speaker 12: of the interesting things about Cyrus, the private aircraft maker,

553
00:27:11,600 --> 00:27:14,400
Speaker 12: is that, you know, the entity that owns it has

554
00:27:14,480 --> 00:27:18,760
Speaker 12: joint ventures with just about every aerospace company under the sun,

555
00:27:18,800 --> 00:27:20,959
Speaker 12: and most of them are focused on the development of

556
00:27:21,040 --> 00:27:23,879
Speaker 12: the C nine one nine, which is the Comac challenger

557
00:27:23,960 --> 00:27:26,000
Speaker 12: to the Boeing seven thirty seven max in the Airbus

558
00:27:26,080 --> 00:27:28,760
Speaker 12: A three twenty. And the reason why those US companies

559
00:27:28,800 --> 00:27:31,159
Speaker 12: have those ventures is because they want to compete for

560
00:27:31,200 --> 00:27:33,159
Speaker 12: this business that you know, if this is sort of

561
00:27:33,160 --> 00:27:35,800
Speaker 12: the future of China aviation, it's an important place for

562
00:27:35,840 --> 00:27:36,680
Speaker 12: these companies to be.

563
00:27:36,960 --> 00:27:39,000
Speaker 1: All right, Brooke great stuff has always Brooke Suther then

564
00:27:39,080 --> 00:27:42,720
Speaker 1: she's a columnist covering industrials and deals for Bloomberg Opinion.

565
00:27:42,720 --> 00:27:44,080
Speaker 3: Appreciate gatting a few minutes of your time.

566
00:27:45,040 --> 00:27:48,920
Speaker 9: You're listening to the Team Can't Live program Bloomberg Markets

567
00:27:48,960 --> 00:27:50,800
Speaker 9: weekdays at ten am Eastern.

568
00:27:50,600 --> 00:27:51,879
Speaker 10: On Bloomberg dot Com.

569
00:27:51,960 --> 00:27:55,120
Speaker 9: The iHeartRadio app and the Bloomberg Business app or listen

570
00:27:55,160 --> 00:27:57,280
Speaker 9: on demand wherever you get your podcast.

571
00:28:00,000 --> 00:28:02,320
Speaker 1: All right, let's check in with somebody who really does

572
00:28:02,359 --> 00:28:04,800
Speaker 1: this stock stuff for a living. She's been doing it

573
00:28:04,840 --> 00:28:07,639
Speaker 1: for a while now, she's got some experience. And Maletti,

574
00:28:07,680 --> 00:28:11,080
Speaker 1: head of Active Equity at all Spring Global Investments in

575
00:28:11,160 --> 00:28:17,800
Speaker 1: what town here and thanks so much for joining us here.

576
00:28:17,840 --> 00:28:20,920
Speaker 1: We're getting into the teeth of the earning cycle here.

577
00:28:21,359 --> 00:28:23,600
Speaker 1: What have you seen and heard so far and what

578
00:28:23,640 --> 00:28:25,560
Speaker 1: are you looking forward to going forward to a big

579
00:28:25,600 --> 00:28:26,480
Speaker 1: tech week of earnings.

580
00:28:27,960 --> 00:28:30,320
Speaker 14: It has been a big tech week. Nice and nice

581
00:28:30,320 --> 00:28:33,960
Speaker 14: to talk to you again, Paul. Look, so far, earning

582
00:28:34,200 --> 00:28:37,760
Speaker 14: for the most part have been pretty strong. But I

583
00:28:37,800 --> 00:28:40,840
Speaker 14: think what our teams are looking at is what does

584
00:28:40,880 --> 00:28:44,160
Speaker 14: the tail and the burning season look like? And I

585
00:28:44,160 --> 00:28:47,200
Speaker 14: think we'll see some volatility this earning season. I think

586
00:28:47,200 --> 00:28:52,080
Speaker 14: that was somewhat expected by most investors. You do generally

587
00:28:52,160 --> 00:28:55,680
Speaker 14: see some softness this quarter, and that's what we're expecting

588
00:28:55,720 --> 00:29:00,120
Speaker 14: to see. But you know, from what we expect it

589
00:29:00,240 --> 00:29:04,160
Speaker 14: all year. There will be differences from the bottom up

590
00:29:04,280 --> 00:29:08,120
Speaker 14: company by company, and that's why we think it's a

591
00:29:08,160 --> 00:29:13,080
Speaker 14: great environment to look at companies specifically and not just

592
00:29:13,320 --> 00:29:16,120
Speaker 14: you know, pick a sector, pick an industry, pick growth,

593
00:29:16,160 --> 00:29:20,160
Speaker 14: pick value. It's time for individual company selection right now.

594
00:29:20,400 --> 00:29:22,160
Speaker 6: So and what is the market going to move on

595
00:29:22,200 --> 00:29:24,760
Speaker 6: more this week? The FED decision or some of these

596
00:29:24,840 --> 00:29:26,640
Speaker 6: check earnings.

597
00:29:26,800 --> 00:29:30,720
Speaker 14: That is a great that's a great question. I do

598
00:29:30,880 --> 00:29:33,960
Speaker 14: think it's not going to be on the side decision itself.

599
00:29:34,000 --> 00:29:36,239
Speaker 14: I think we all really do believe. And there's kind

600
00:29:36,240 --> 00:29:38,640
Speaker 14: of because Hass's opinion that we're going to get that

601
00:29:38,640 --> 00:29:42,840
Speaker 14: twenty five basis point increase. But I do think what,

602
00:29:43,240 --> 00:29:46,840
Speaker 14: you know, what we don't know is if we're going

603
00:29:46,880 --> 00:29:50,640
Speaker 14: to get the interpretation of a hawkish tone or a

604
00:29:50,680 --> 00:29:55,000
Speaker 14: dubvish tone from Chairman Powell. And that is the million

605
00:29:55,000 --> 00:29:58,080
Speaker 14: dollar question out there. You know, I guess I'm in

606
00:29:58,120 --> 00:30:01,200
Speaker 14: the camp that he's still going to continue to be

607
00:30:01,440 --> 00:30:05,200
Speaker 14: a little bit more hawkish. And you know, even though

608
00:30:05,200 --> 00:30:08,240
Speaker 14: we have seen some signs of weakness in the economy,

609
00:30:08,560 --> 00:30:11,880
Speaker 14: the jobs data and the employment data continues to be

610
00:30:11,960 --> 00:30:14,680
Speaker 14: pretty strong. And that's going to continue to make can

611
00:30:14,880 --> 00:30:18,280
Speaker 14: fairly cautious and want to give them optionality that we

612
00:30:18,440 --> 00:30:20,520
Speaker 14: may not be done or that the FED may not

613
00:30:20,600 --> 00:30:24,360
Speaker 14: be done raising rates. And so I think the market's

614
00:30:24,360 --> 00:30:26,760
Speaker 14: going to move a little bit more on that than

615
00:30:26,760 --> 00:30:27,160
Speaker 14: on tech.

616
00:30:27,280 --> 00:30:30,120
Speaker 1: Brames, he and you and I have known each other

617
00:30:30,120 --> 00:30:32,160
Speaker 1: for a while, so will not surprise you to know

618
00:30:32,280 --> 00:30:36,080
Speaker 1: that I missed out on owning those big seven magnificent

619
00:30:36,120 --> 00:30:38,400
Speaker 1: seven names. So now I got some work to do

620
00:30:38,440 --> 00:30:39,280
Speaker 1: for the remainder of the year.

621
00:30:39,320 --> 00:30:40,920
Speaker 3: Do I look it?

622
00:30:40,960 --> 00:30:43,960
Speaker 1: Maybe some smaller MidCap names. I mean that acquires a

623
00:30:44,000 --> 00:30:45,840
Speaker 1: little bit more homework on my part. But is that

624
00:30:45,880 --> 00:30:47,400
Speaker 1: where you think some opportunities might be.

625
00:30:48,720 --> 00:30:51,760
Speaker 14: I'm Paul, you know probably put me in the same camp.

626
00:30:53,320 --> 00:30:56,480
Speaker 14: I do think there is a really good opportunity for

627
00:30:56,600 --> 00:30:59,560
Speaker 14: investors out there, and you know, I think this is

628
00:30:59,720 --> 00:31:02,120
Speaker 14: this is something that we've been focused on a lot,

629
00:31:02,320 --> 00:31:07,400
Speaker 14: because for investors who want to invest more broadly, who

630
00:31:07,480 --> 00:31:10,640
Speaker 14: want to stay in the market regardless of what the

631
00:31:10,680 --> 00:31:13,320
Speaker 14: economy is doing, and by the way, history would suggest

632
00:31:13,440 --> 00:31:16,960
Speaker 14: that is the right thing to do. If the market

633
00:31:17,000 --> 00:31:22,680
Speaker 14: broadens out, and it should, there are real opportunities downcaps.

634
00:31:22,720 --> 00:31:26,680
Speaker 14: And if you just look at the fundamentals, what Paul,

635
00:31:26,840 --> 00:31:29,280
Speaker 14: you spent a lot of time doing, and I spent

636
00:31:29,360 --> 00:31:33,080
Speaker 14: a lot of my career doing. Free cash flow is

637
00:31:33,120 --> 00:31:36,400
Speaker 14: a really good metric of qualities. And if you look

638
00:31:36,400 --> 00:31:39,040
Speaker 14: at the free cash flow margins and the highest quintile

639
00:31:39,040 --> 00:31:42,880
Speaker 14: of free cash Dolow margins in those smaller cap names,

640
00:31:43,120 --> 00:31:46,440
Speaker 14: they're trading at a twenty percent discount to the counter

641
00:31:46,480 --> 00:31:51,400
Speaker 14: parties and large caps, and that's a historic discount by

642
00:31:51,440 --> 00:31:55,520
Speaker 14: any measure. And you know, if you can buy quality

643
00:31:55,640 --> 00:31:59,480
Speaker 14: at that big of a discount, and even at a

644
00:31:59,560 --> 00:32:04,960
Speaker 14: discount relative to their smaller cap piers, that's the area

645
00:32:04,960 --> 00:32:07,840
Speaker 14: of the market that our investment teams are finding some

646
00:32:08,040 --> 00:32:11,920
Speaker 14: real value in today. And I think where investors can

647
00:32:11,960 --> 00:32:15,600
Speaker 14: be rewarded. There's strong balance sheets there. You know that

648
00:32:15,680 --> 00:32:19,360
Speaker 14: pre cast slow will give them protection even if things

649
00:32:19,560 --> 00:32:22,400
Speaker 14: get a little bit more challenging in the economy, even

650
00:32:22,440 --> 00:32:23,800
Speaker 14: if we head into a recession.

651
00:32:24,000 --> 00:32:26,200
Speaker 6: So and how much of the boat needs to be

652
00:32:26,320 --> 00:32:29,320
Speaker 6: filled with small caps at this point given what you're

653
00:32:29,360 --> 00:32:31,440
Speaker 6: saying about some of the opportunities there.

654
00:32:32,600 --> 00:32:35,360
Speaker 14: You know, the allocation decision is really a personal one,

655
00:32:35,400 --> 00:32:37,760
Speaker 14: and that's where it's a little bit more challenging for

656
00:32:37,880 --> 00:32:41,720
Speaker 14: me to have a personal opinion. I certainly do have

657
00:32:41,760 --> 00:32:44,320
Speaker 14: an opinion on my own, but I think for investors

658
00:32:44,760 --> 00:32:48,080
Speaker 14: it's you know, small cap can be a little bit riskier.

659
00:32:48,600 --> 00:32:52,320
Speaker 14: But again, it's the area. It's just where you want

660
00:32:52,360 --> 00:32:55,040
Speaker 14: to invest within small cap. I don't think it's an

661
00:32:55,080 --> 00:32:59,080
Speaker 14: area that should be ignored. Growth can continue to be

662
00:32:59,280 --> 00:33:02,920
Speaker 14: really good block cap companies even when growth pulls back

663
00:33:03,280 --> 00:33:06,560
Speaker 14: within the economy. So it's it's an area that investors

664
00:33:06,560 --> 00:33:09,640
Speaker 14: should not ignore. The lead the allocation decision up to

665
00:33:11,120 --> 00:33:14,680
Speaker 14: investors themselves. The tactical decision is I would just say,

666
00:33:14,760 --> 00:33:16,320
Speaker 14: don't ignore the area at all.

667
00:33:16,720 --> 00:33:19,400
Speaker 1: Hey, and do you folks at all Spring have you

668
00:33:19,720 --> 00:33:21,800
Speaker 1: are you still talking recession? Is that still in your

669
00:33:21,840 --> 00:33:24,000
Speaker 1: outlook or have you kind of tabled that a little bit?

670
00:33:25,160 --> 00:33:27,960
Speaker 14: Yeah, you know, I think we're still in the camp

671
00:33:28,040 --> 00:33:31,360
Speaker 14: that the recession risks still do linger. And you know

672
00:33:31,680 --> 00:33:35,360
Speaker 14: the reason for it is six months ago, you know,

673
00:33:35,880 --> 00:33:39,680
Speaker 14: we were only at three percent interest rate, and there's

674
00:33:39,720 --> 00:33:42,600
Speaker 14: a lot of great increases that have happened since then,

675
00:33:43,360 --> 00:33:47,960
Speaker 14: and there's a big like effect to the impact of

676
00:33:48,120 --> 00:33:52,040
Speaker 14: increasing rates. We have yet to see the full impact,

677
00:33:52,560 --> 00:33:55,480
Speaker 14: whether that takes six or nine months to fully feel that,

678
00:33:55,920 --> 00:33:59,200
Speaker 14: you know, we haven't seen it, and so we're still

679
00:33:59,240 --> 00:34:04,320
Speaker 14: cautious about how bad the total impact will be. We

680
00:34:04,400 --> 00:34:07,680
Speaker 14: already know we saw some breakage in the system with

681
00:34:07,720 --> 00:34:12,319
Speaker 14: what happened with the regional banks earlier. I don't completely

682
00:34:12,400 --> 00:34:16,040
Speaker 14: think that is over. And again we're not done with

683
00:34:16,120 --> 00:34:18,759
Speaker 14: rate increases. We have one coming this week and then

684
00:34:19,360 --> 00:34:23,080
Speaker 14: still a question about what happens after that. So it's

685
00:34:23,080 --> 00:34:27,080
Speaker 14: not off the table for us. That being said, you

686
00:34:27,160 --> 00:34:31,239
Speaker 14: don't want to be out of the market completely. We

687
00:34:31,280 --> 00:34:34,319
Speaker 14: already saw the ramifications of what could happen with that,

688
00:34:34,920 --> 00:34:38,480
Speaker 14: and so you know, the economy and the market are

689
00:34:38,480 --> 00:34:42,160
Speaker 14: two different things, and investors just have to keep that

690
00:34:42,200 --> 00:34:43,040
Speaker 14: in mind.

691
00:34:43,160 --> 00:34:45,200
Speaker 1: All right, and thanks once again for joining us and

692
00:34:45,280 --> 00:34:49,680
Speaker 1: the Letty, head of active equity at all Spring Global Investments.

693
00:34:50,640 --> 00:34:51,920
Speaker 10: You're listening to the tape.

694
00:34:52,040 --> 00:34:55,120
Speaker 9: Can to our live program Bloomberg Markets weekdays at ten

695
00:34:55,160 --> 00:34:59,240
Speaker 9: am Eastern on Bloomberg Radio, Tune it up, Bloomberg dot Com,

696
00:34:59,280 --> 00:35:02,000
Speaker 9: and the Bloomberg Business App. You can also listen live

697
00:35:02,120 --> 00:35:05,279
Speaker 9: on Amazon Alexa from our flagship New York station. Just

698
00:35:05,320 --> 00:35:08,600
Speaker 9: say Alexa play Bloomberg eleven thirty.

699
00:35:09,120 --> 00:35:11,600
Speaker 1: All right, let's go to Mattel here. This is a beneficiary.

700
00:35:11,600 --> 00:35:16,000
Speaker 1: They own the whole Barbie thing. Mittel stock is up

701
00:35:16,040 --> 00:35:17,480
Speaker 1: one point six percent today.

702
00:35:17,640 --> 00:35:20,080
Speaker 3: Nice move. It's up twenty percent year to date. That's nice.

703
00:35:20,120 --> 00:35:22,240
Speaker 1: It's got a market cap is seven point six billion.

704
00:35:22,960 --> 00:35:25,200
Speaker 1: Let's break it down with the analyst at Bloomberg Intelligence

705
00:35:25,200 --> 00:35:28,360
Speaker 1: who covers Mattel, the company, the stock, Lindsay Dutch. She

706
00:35:28,560 --> 00:35:31,200
Speaker 1: is an analyst at Bloomberg Intelligence. So, Lindsay, give us

707
00:35:31,239 --> 00:35:35,080
Speaker 1: a sense of kind of what this means for Mattel. Here,

708
00:35:35,120 --> 00:35:38,839
Speaker 1: it's obviously a great day, a great weekend for the

709
00:35:38,880 --> 00:35:40,160
Speaker 1: movie and what it means.

710
00:35:39,920 --> 00:35:41,320
Speaker 3: For but what's it really mean for the company.

711
00:35:42,440 --> 00:35:46,080
Speaker 15: Yeah, thanks Paul for having me. So this movie is

712
00:35:46,120 --> 00:35:49,839
Speaker 15: a big deal for Mattel. Barbie is one of their

713
00:35:49,880 --> 00:35:53,360
Speaker 15: biggest brands. It peaked at one point seven billion and

714
00:35:53,440 --> 00:35:57,840
Speaker 15: twenty twenty one, it was off about eleven percent last year.

715
00:35:58,320 --> 00:36:01,760
Speaker 15: There was sort of weak demand for Arbi, so coming

716
00:36:01,840 --> 00:36:05,880
Speaker 15: into this movie, there was a lot of uncertainty, you know,

717
00:36:05,920 --> 00:36:09,319
Speaker 15: and concerns about demand for the dolls. But I think

718
00:36:09,360 --> 00:36:12,200
Speaker 15: Mattel did a really great job in terms of hyping

719
00:36:12,280 --> 00:36:15,319
Speaker 15: up the movie, and I think that could be a

720
00:36:15,360 --> 00:36:18,960
Speaker 15: catalyst for the second half and really a rebound for

721
00:36:19,040 --> 00:36:23,279
Speaker 15: the company in terms of toy sales, but also the

722
00:36:23,360 --> 00:36:25,560
Speaker 15: royalties that they're going to get from the movie and

723
00:36:25,920 --> 00:36:28,640
Speaker 15: related merchandise and things like that. So there's a real

724
00:36:29,160 --> 00:36:32,279
Speaker 15: possibility of strength in the second half, you know, with

725
00:36:32,440 --> 00:36:34,000
Speaker 15: this big movie debut.

726
00:36:34,360 --> 00:36:36,399
Speaker 6: Lindsay I'm curious about and I know you haven't seen

727
00:36:36,440 --> 00:36:39,920
Speaker 6: the movie, but there's definitely a sense of Mattel calling

728
00:36:39,960 --> 00:36:42,440
Speaker 6: themselves out a little bit when it comes to some

729
00:36:42,520 --> 00:36:45,960
Speaker 6: of the potential what someone view as mistakes they've made

730
00:36:46,080 --> 00:36:49,600
Speaker 6: in terms of Barbie's impact on how young women and

731
00:36:49,640 --> 00:36:52,520
Speaker 6: girls are viewing themselves, et cetera. I wonder is there

732
00:36:52,640 --> 00:36:56,920
Speaker 6: any potential negative impact for Mattel because of some of

733
00:36:56,960 --> 00:37:01,040
Speaker 6: those messages, or is the extra dream success of the

734
00:37:01,040 --> 00:37:03,759
Speaker 6: Barbie movie just going to be a boom for them?

735
00:37:04,160 --> 00:37:04,760
Speaker 7: So I agree.

736
00:37:04,760 --> 00:37:06,919
Speaker 15: I mean, I think that the brand has had ups

737
00:37:06,960 --> 00:37:09,760
Speaker 15: and downs, you know, throughout its sort of life and

738
00:37:09,760 --> 00:37:14,080
Speaker 15: and creation. I think Mattel was going into this movie

739
00:37:14,840 --> 00:37:19,359
Speaker 15: they knew it was critical to you know, reinvent the

740
00:37:19,360 --> 00:37:22,400
Speaker 15: brand a little bit and and sort of ease some

741
00:37:22,480 --> 00:37:24,280
Speaker 15: of those concerns that we've had.

742
00:37:26,160 --> 00:37:27,719
Speaker 7: So I think that was you know, it.

743
00:37:27,719 --> 00:37:32,000
Speaker 15: Is a pivotalle, a pivotal moment for the company and

744
00:37:32,080 --> 00:37:36,280
Speaker 15: whether they can really you know, change the attitude around Barbie.

745
00:37:36,360 --> 00:37:39,560
Speaker 15: But there are also so many people who are nostalgic

746
00:37:39,600 --> 00:37:43,560
Speaker 15: about the toy, about the brand, and that adult collector's

747
00:37:43,600 --> 00:37:45,360
Speaker 15: market is huge and it's growing.

748
00:37:45,440 --> 00:37:47,640
Speaker 7: It's a big piece of the toy market.

749
00:37:48,840 --> 00:37:51,840
Speaker 15: And so I think that there's a lot more opportunity

750
00:37:52,080 --> 00:37:56,160
Speaker 15: than than risk, especially like seeing the numbers coming out

751
00:37:56,200 --> 00:37:59,799
Speaker 15: of this weekend and this debut to.

752
00:38:00,200 --> 00:38:03,800
Speaker 3: In general, how big is it the toy market in general?

753
00:38:03,800 --> 00:38:04,400
Speaker 3: How big is it?

754
00:38:04,960 --> 00:38:07,280
Speaker 1: What's the growth characteristics of kind of the toy business,

755
00:38:07,280 --> 00:38:09,399
Speaker 1: because now it seems like every kid's got a phone

756
00:38:09,400 --> 00:38:10,040
Speaker 1: in their hand.

757
00:38:10,840 --> 00:38:11,120
Speaker 7: I know.

758
00:38:12,640 --> 00:38:16,400
Speaker 15: So, you know, the toy market in terms of dolls,

759
00:38:16,400 --> 00:38:18,680
Speaker 15: if you think about dolls, that's more like a three

760
00:38:18,719 --> 00:38:20,560
Speaker 15: to four billion dollar category.

761
00:38:20,600 --> 00:38:21,920
Speaker 7: Mattel is a clear leader.

762
00:38:22,000 --> 00:38:25,760
Speaker 15: They've always been a dominator in that doll category because

763
00:38:25,760 --> 00:38:26,440
Speaker 15: of Barbie.

764
00:38:26,480 --> 00:38:28,040
Speaker 7: They also own American Girl.

765
00:38:28,840 --> 00:38:33,760
Speaker 15: When we think about dolls, you know, growth was astronomical,

766
00:38:34,160 --> 00:38:38,399
Speaker 15: astronomical in the pandemic, and it really started to come

767
00:38:38,480 --> 00:38:39,959
Speaker 15: off in twenty twenty two.

768
00:38:41,239 --> 00:38:42,400
Speaker 7: You know, there was weak demand.

769
00:38:42,520 --> 00:38:45,560
Speaker 15: We had over inventory issues, you know for a lot

770
00:38:45,560 --> 00:38:48,400
Speaker 15: of their key suppliers if you think about Target and Walmart.

771
00:38:48,440 --> 00:38:50,560
Speaker 15: So there was a huge pullback in the fourth quarter

772
00:38:50,680 --> 00:38:54,399
Speaker 15: last year. Really hurt results for Mattel and as well

773
00:38:54,400 --> 00:38:57,920
Speaker 15: as other peers, and the beginning of this year, you

774
00:38:57,920 --> 00:38:59,240
Speaker 15: know it is going to be challenging.

775
00:38:59,280 --> 00:39:01,000
Speaker 7: Their sales were in the first quarter.

776
00:39:01,400 --> 00:39:04,560
Speaker 15: I'm expecting sales to be down again when they report

777
00:39:04,560 --> 00:39:05,359
Speaker 15: their results for.

778
00:39:05,320 --> 00:39:06,080
Speaker 7: The second quarter.

779
00:39:06,880 --> 00:39:08,880
Speaker 15: But like I said, this is really a second half

780
00:39:08,920 --> 00:39:13,480
Speaker 15: story for the company, and really what can happen with

781
00:39:13,600 --> 00:39:16,399
Speaker 15: this growth going into the back half. So in terms

782
00:39:16,440 --> 00:39:19,359
Speaker 15: of the category as a whole, you're talking about sort

783
00:39:19,400 --> 00:39:22,880
Speaker 15: of like low to mid single digits growth. You know

784
00:39:22,960 --> 00:39:26,480
Speaker 15: in this next couple of years, Mattel is typically a

785
00:39:26,480 --> 00:39:29,640
Speaker 15: market share gainer, so you know, we would typically expect

786
00:39:29,680 --> 00:39:31,920
Speaker 15: a little bit faster growth coming out of Mattel.

787
00:39:32,640 --> 00:39:35,439
Speaker 6: Well, and you mentioned American Girl. They've also got Hot

788
00:39:35,440 --> 00:39:39,200
Speaker 6: Wheels under the Mattel brand, which has increasingly been taken

789
00:39:39,280 --> 00:39:41,880
Speaker 6: up a bigger piece of the revenue pie. Do you

790
00:39:41,960 --> 00:39:47,440
Speaker 6: anticipate that allocation changing this coming earning season or earnings

791
00:39:47,520 --> 00:39:50,240
Speaker 6: results because of the Barbie movie?

792
00:39:51,160 --> 00:39:55,920
Speaker 15: So I think so Barbie has always dominated in terms

793
00:39:55,920 --> 00:39:59,680
Speaker 15: of Mattel's revenue mix. You're right, hot Wheels is gaining.

794
00:40:00,280 --> 00:40:02,760
Speaker 15: They were about a one point two five billion dollar

795
00:40:02,800 --> 00:40:06,919
Speaker 15: business last year compared to Barbie's one point five. I

796
00:40:06,960 --> 00:40:09,880
Speaker 15: think that, you know, heading into second half, you know,

797
00:40:09,960 --> 00:40:13,280
Speaker 15: success of the movie could really put Barbie.

798
00:40:12,880 --> 00:40:14,640
Speaker 7: Back, you know, sort of on top.

799
00:40:14,760 --> 00:40:17,240
Speaker 15: I think Hot Wheels is sort of closing that gap

800
00:40:17,280 --> 00:40:18,839
Speaker 15: here in the first half.

801
00:40:20,440 --> 00:40:20,680
Speaker 12: There.

802
00:40:21,280 --> 00:40:24,040
Speaker 15: I think Mattel's history does sort of, you know, skew

803
00:40:24,160 --> 00:40:28,160
Speaker 15: towards that doll category. But the vehicles has just had

804
00:40:28,200 --> 00:40:30,359
Speaker 15: a couple of really great years and when we saw

805
00:40:30,480 --> 00:40:34,640
Speaker 15: growth slow in dolls, vehicles picked up. Also, action figures

806
00:40:34,640 --> 00:40:38,239
Speaker 15: has been a really big growth driver for them. It's

807
00:40:38,320 --> 00:40:40,920
Speaker 15: much a smaller business, but where we are seeing growth

808
00:40:40,920 --> 00:40:43,960
Speaker 15: in that category. But I do think coming into the

809
00:40:44,120 --> 00:40:47,520
Speaker 15: end of this year, you know, we'll see Barbie be

810
00:40:48,280 --> 00:40:51,120
Speaker 15: still be a bigger business for matel than Hot Wheels,

811
00:40:51,160 --> 00:40:53,440
Speaker 15: but that gap is definitely a lot tighter than it

812
00:40:53,520 --> 00:40:54,480
Speaker 15: was historically.

813
00:40:55,000 --> 00:40:57,600
Speaker 1: All Right, Lindsaya, as a former media analyst myself, I

814
00:40:57,640 --> 00:40:59,600
Speaker 1: have to ask this question, is there going to be

815
00:40:59,680 --> 00:41:00,920
Speaker 1: a bar Be Seql?

816
00:41:02,760 --> 00:41:04,760
Speaker 3: What have we heard from the company? Have they said anything?

817
00:41:06,000 --> 00:41:08,840
Speaker 15: They have not said anything, but you know, their CEO

818
00:41:09,320 --> 00:41:12,919
Speaker 15: has a background in TV and entertainment, and I think,

819
00:41:13,000 --> 00:41:17,000
Speaker 15: you know, he truly believes in sort of that halo effect,

820
00:41:17,680 --> 00:41:22,120
Speaker 15: you know, linking entertainment and movies and everything that we

821
00:41:22,239 --> 00:41:25,080
Speaker 15: stream today, you know, to physical toys.

822
00:41:25,160 --> 00:41:26,360
Speaker 7: So I wouldn't be shocked.

823
00:41:26,880 --> 00:41:30,319
Speaker 6: And the return on the investment in the Barbie movie

824
00:41:30,400 --> 00:41:32,560
Speaker 6: is going to be considered a positive for them when

825
00:41:32,640 --> 00:41:34,800
Speaker 6: history looks back on this moment, right.

826
00:41:36,120 --> 00:41:36,359
Speaker 7: Yeah.

827
00:41:36,400 --> 00:41:40,560
Speaker 15: So I think there's you know, some element of the

828
00:41:40,600 --> 00:41:43,840
Speaker 15: movie baked into guidance which is pretty bleak for the

829
00:41:43,920 --> 00:41:46,200
Speaker 15: year when we think about Mattel, But I think a

830
00:41:46,200 --> 00:41:49,480
Speaker 15: lot of it is not baked in. I think, you know,

831
00:41:49,600 --> 00:41:54,080
Speaker 15: the profitability, the margin on you know, when they license

832
00:41:54,200 --> 00:41:54,920
Speaker 15: out that.

833
00:41:54,880 --> 00:41:57,480
Speaker 7: Barbie brand, the Bee, the Pink Bee.

834
00:41:57,800 --> 00:42:00,840
Speaker 15: You know they had, you know, a partnership with Gap

835
00:42:01,320 --> 00:42:04,480
Speaker 15: that they did, you know, all that merchandise sales, all

836
00:42:04,520 --> 00:42:07,400
Speaker 15: the licensing out of things like that. It is huge

837
00:42:07,440 --> 00:42:10,120
Speaker 15: on the margin and I think that a lot of

838
00:42:10,120 --> 00:42:12,879
Speaker 15: that stuff can come in better than expected this year.

839
00:42:13,320 --> 00:42:17,040
Speaker 15: But again sort of just rebuilding that love of Barbie

840
00:42:17,120 --> 00:42:18,840
Speaker 15: and the brand going forward.

841
00:42:19,080 --> 00:42:21,600
Speaker 1: All right, Lindsay, thanks so much for joining us. Lindsay Dutch.

842
00:42:21,880 --> 00:42:24,759
Speaker 1: She's an analyst Bloomberg Intelligence. She covers some of the

843
00:42:24,760 --> 00:42:27,320
Speaker 1: consumer space, retail as well as the reachs.

844
00:42:27,320 --> 00:42:28,839
Speaker 3: But today it is all.

845
00:42:28,760 --> 00:42:32,200
Speaker 1: About her coverage of the company. Mattel again is stock

846
00:42:32,280 --> 00:42:35,080
Speaker 1: up nice today on the news up twenty percent year

847
00:42:35,080 --> 00:42:38,160
Speaker 1: to date. See if they can monetize this Barbie mania

848
00:42:38,280 --> 00:42:38,799
Speaker 1: going forward.

849
00:42:39,160 --> 00:42:42,280
Speaker 9: You're listening to the tape Cat's are live program Bloomberg

850
00:42:42,360 --> 00:42:45,960
Speaker 9: Markets weekdays at ten am Eastern on Bloomberg Radio, the

851
00:42:46,000 --> 00:42:47,960
Speaker 9: tune in app, Bloomberg dot Com, and.

852
00:42:47,920 --> 00:42:49,239
Speaker 10: The Bloomberg Business app.

853
00:42:49,280 --> 00:42:52,080
Speaker 9: You can also listen live on Amazon Alexa from our

854
00:42:52,120 --> 00:42:57,120
Speaker 9: flagship New York station, Just say Alexa play Bloomberg eleven thirty.

855
00:42:58,239 --> 00:43:01,359
Speaker 1: One of the names that's actually driving performance this year,

856
00:43:01,360 --> 00:43:03,880
Speaker 1: as it typically does, is our good friends Adding Cooper

857
00:43:03,920 --> 00:43:08,279
Speaker 1: Tino Apple. Mark German joins us, I don't know why,

858
00:43:08,280 --> 00:43:11,680
Speaker 1: because he's a chief technology off and corresponding something like that,

859
00:43:12,200 --> 00:43:13,080
Speaker 1: I liked CTO.

860
00:43:13,320 --> 00:43:14,440
Speaker 7: He's basically the CTO.

861
00:43:14,560 --> 00:43:16,440
Speaker 1: Okay, we'll go with yeah, and he covers all the

862
00:43:16,480 --> 00:43:20,160
Speaker 1: tech stuff out there in Silicon Valley. Mark, I haven't

863
00:43:20,200 --> 00:43:22,600
Speaker 1: replaced my phone and I don't know how long man,

864
00:43:23,960 --> 00:43:25,839
Speaker 1: How does Apple think about me? I've had this phone

865
00:43:25,880 --> 00:43:28,160
Speaker 1: for I don't know, three or four years. What do

866
00:43:28,239 --> 00:43:29,680
Speaker 1: they have to do to get me to kind of

867
00:43:30,200 --> 00:43:30,920
Speaker 1: buy a new phone?

868
00:43:32,760 --> 00:43:35,080
Speaker 5: Yeah? So I think your first question is what do

869
00:43:35,120 --> 00:43:35,680
Speaker 5: they think of you?

870
00:43:36,680 --> 00:43:40,360
Speaker 16: They okay, so they like you a little bit because

871
00:43:40,400 --> 00:43:42,600
Speaker 16: you have an iPhone. They like you a little bit

872
00:43:42,600 --> 00:43:45,279
Speaker 16: more if you're buying apps and subscribing to things. But

873
00:43:45,320 --> 00:43:46,960
Speaker 16: they're not in love with you because you don't have

874
00:43:47,000 --> 00:43:49,040
Speaker 16: a new one and you haven't bought for the last three.

875
00:43:48,960 --> 00:43:49,600
Speaker 5: Or four years.

876
00:43:50,160 --> 00:43:52,440
Speaker 16: What they would prefer is if you were upgrading annually.

877
00:43:52,800 --> 00:43:54,319
Speaker 5: What do they have to get you? What do they

878
00:43:54,360 --> 00:43:55,280
Speaker 5: have to do to get you upgrade?

879
00:43:55,320 --> 00:43:57,239
Speaker 16: Well, I'll just be completely honest with you because I've

880
00:43:57,239 --> 00:43:59,799
Speaker 16: had similar thoughts as well. So the iPhone ten came

881
00:43:59,800 --> 00:44:04,640
Speaker 16: out in twenty seventeen, that's six years ago. So this

882
00:44:04,719 --> 00:44:06,400
Speaker 16: is going to be the iPhone fifteen is going to

883
00:44:06,400 --> 00:44:10,000
Speaker 16: be the sixth generation phone since the iPhone ten. God, honestly,

884
00:44:10,120 --> 00:44:15,359
Speaker 16: it's not too different. The phone doesn't operate that differently, right.

885
00:44:15,400 --> 00:44:18,360
Speaker 16: The big difference would be the overall performance in the speed.

886
00:44:18,760 --> 00:44:20,359
Speaker 16: And the reason you would want to upgrade at this

887
00:44:20,400 --> 00:44:22,640
Speaker 16: point is because the phone at this point, if you

888
00:44:22,640 --> 00:44:25,080
Speaker 16: have an iPhone tent, probably feels really sluggish and it

889
00:44:25,080 --> 00:44:28,760
Speaker 16: feels really behind, particularly on the camera, or you've dropped

890
00:44:28,760 --> 00:44:31,160
Speaker 16: the phone enough times or you have dents in the

891
00:44:31,200 --> 00:44:33,799
Speaker 16: steel band around the phone, you have a crack in

892
00:44:33,840 --> 00:44:36,440
Speaker 16: your screen, or maybe you have a big glass crack

893
00:44:36,560 --> 00:44:37,279
Speaker 16: or shattering on.

894
00:44:37,239 --> 00:44:39,320
Speaker 5: The back of the phone. Right, So that's really.

895
00:44:39,160 --> 00:44:41,040
Speaker 16: How they get you to upgrade over time as the

896
00:44:41,040 --> 00:44:44,640
Speaker 16: phone feels sluggish and damaged and such. This year is

897
00:44:44,680 --> 00:44:46,640
Speaker 16: going to be an interesting year. This is going to

898
00:44:46,680 --> 00:44:48,600
Speaker 16: be the first time in maybe three years where they're

899
00:44:48,640 --> 00:44:50,879
Speaker 16: doing anything of significance.

900
00:44:51,000 --> 00:44:52,200
Speaker 5: Okay, right in my opinion.

901
00:44:52,360 --> 00:44:55,080
Speaker 16: So the iPhone fifteen Pro is going to be quite

902
00:44:55,080 --> 00:44:57,600
Speaker 16: an upgrade this year. It's going to have a titanium

903
00:44:58,440 --> 00:45:02,239
Speaker 16: case around the edges instead of stayingless steel on the

904
00:45:02,280 --> 00:45:04,879
Speaker 16: biggest and most expensive phone, the fifteen Pro Macs. It's

905
00:45:04,920 --> 00:45:07,880
Speaker 16: going to have something called a periscope camera that allows

906
00:45:07,920 --> 00:45:11,840
Speaker 16: for much deeper zoom using hardware. That means the camera

907
00:45:11,920 --> 00:45:15,120
Speaker 16: lens can actually move within the phone to get closer

908
00:45:15,160 --> 00:45:18,280
Speaker 16: to the image in order to provide better zoom versus

909
00:45:18,360 --> 00:45:21,080
Speaker 16: the digital zoom we have today, which you can zoom

910
00:45:21,120 --> 00:45:22,960
Speaker 16: in but you get a bit of a blurry picture.

911
00:45:23,400 --> 00:45:26,240
Speaker 16: They're also changing the charger to more of an industry standard,

912
00:45:26,360 --> 00:45:30,000
Speaker 16: going from the current lightning charger to what's called USBC,

913
00:45:30,400 --> 00:45:32,200
Speaker 16: And there's also going to be a much faster process

914
00:45:32,280 --> 00:45:34,360
Speaker 16: or in better battery life on the top end phones.

915
00:45:34,640 --> 00:45:36,600
Speaker 16: The low end phones will get some of the iPhone

916
00:45:36,640 --> 00:45:39,959
Speaker 16: fourteen pro features like the dynamic island, that new area

917
00:45:40,040 --> 00:45:42,080
Speaker 16: at the top of the phone, as well as a

918
00:45:42,120 --> 00:45:43,080
Speaker 16: better camera on the back.

919
00:45:43,719 --> 00:45:46,239
Speaker 6: So how much of everything you're talking about played into

920
00:45:46,320 --> 00:45:51,239
Speaker 6: Apple's decision to ask suppliers to keep the production of

921
00:45:51,320 --> 00:45:54,600
Speaker 6: iPhone units in line with last year at eighty five

922
00:45:54,680 --> 00:45:57,720
Speaker 6: million units, which I found just a little bit confusing

923
00:45:57,760 --> 00:46:01,600
Speaker 6: because phone sales have been declining over the past eight quarters.

924
00:46:01,640 --> 00:46:03,280
Speaker 6: So what did you make of that decision?

925
00:46:04,200 --> 00:46:07,120
Speaker 16: Yeah, so eighty five million would mean flat for the

926
00:46:07,120 --> 00:46:09,279
Speaker 16: thirty year in a row. The thirteen was a very

927
00:46:09,280 --> 00:46:13,440
Speaker 16: small upgrade. The fourteen was a small modus upgrade. I

928
00:46:13,440 --> 00:46:18,720
Speaker 16: would say the fifteen is not a generational upgrade, right,

929
00:46:18,760 --> 00:46:21,600
Speaker 16: but it is significant, And so I think if let's

930
00:46:21,600 --> 00:46:23,319
Speaker 16: look at it this way, right, if it was a

931
00:46:23,360 --> 00:46:26,560
Speaker 16: minor update this year, I think units would actually be

932
00:46:26,680 --> 00:46:29,800
Speaker 16: declining given the overall economy and the overall smartphone market

933
00:46:29,880 --> 00:46:32,880
Speaker 16: and the tech market in terms of sales and buying

934
00:46:32,920 --> 00:46:36,880
Speaker 16: power and such, not the stock market. I think the

935
00:46:36,920 --> 00:46:39,319
Speaker 16: fact that it is a significant upgrade across the four

936
00:46:39,360 --> 00:46:41,440
Speaker 16: models this year is why they're.

937
00:46:41,239 --> 00:46:42,280
Speaker 5: Able to keep it flat.

938
00:46:42,440 --> 00:46:45,799
Speaker 16: You know how sometimes Apple says that, you know, the

939
00:46:45,880 --> 00:46:50,440
Speaker 16: revenue has gone down, but in a all things current environment,

940
00:46:50,560 --> 00:46:53,360
Speaker 16: it actually would have been up. Right, So something similar

941
00:46:53,400 --> 00:46:56,640
Speaker 16: to that, where given everything going on, they're able to

942
00:46:56,640 --> 00:46:58,640
Speaker 16: stay flat because the upgrade is so significant.

943
00:46:59,280 --> 00:47:01,719
Speaker 1: Mark Toktos, I guess the latest thinking coming out of

944
00:47:01,760 --> 00:47:05,879
Speaker 1: Kopertino on China. I can't think of a company that

945
00:47:05,920 --> 00:47:09,400
Speaker 1: has any more ties both in the supply chain and

946
00:47:09,680 --> 00:47:12,200
Speaker 1: source of raw materials as well as an en market

947
00:47:12,719 --> 00:47:16,600
Speaker 1: than Apple does with China. What's their latest thinking about

948
00:47:16,600 --> 00:47:18,480
Speaker 1: how they're approaching this over the next several years.

949
00:47:19,280 --> 00:47:21,880
Speaker 16: Well, I'll tell you one thing and that'll answer your question.

950
00:47:21,920 --> 00:47:24,640
Speaker 16: It feels like the rhetoric around China and Apple working

951
00:47:24,680 --> 00:47:28,200
Speaker 16: with China and the US China relations, while that's still there,

952
00:47:28,320 --> 00:47:31,200
Speaker 16: it feels like it's an idea or a reality.

953
00:47:31,239 --> 00:47:32,000
Speaker 5: I guess that has.

954
00:47:31,880 --> 00:47:36,200
Speaker 16: Calmed down in recent months. Right, things were really teetering

955
00:47:36,880 --> 00:47:39,960
Speaker 16: a year ago, six months ago even, and people were

956
00:47:39,960 --> 00:47:42,799
Speaker 16: really pushing for Apple to get out of there. That

957
00:47:42,960 --> 00:47:45,320
Speaker 16: is no longer the case now. To answer your question,

958
00:47:45,640 --> 00:47:47,080
Speaker 16: nothing has changed.

959
00:47:46,719 --> 00:47:47,759
Speaker 5: Over the last year or so.

960
00:47:48,600 --> 00:47:52,920
Speaker 16: The idea or the plan is still to diversify production

961
00:47:52,960 --> 00:47:56,440
Speaker 16: as much as possible outside of China. They're building up

962
00:47:56,480 --> 00:48:00,279
Speaker 16: more lines for the iPhone in places like India. They're

963
00:48:00,320 --> 00:48:04,319
Speaker 16: expanding the iPad to places like Vietnam. A lot of

964
00:48:04,320 --> 00:48:08,480
Speaker 16: Mac production has moved to Vietnam and Malaysia, right, So

965
00:48:08,520 --> 00:48:11,720
Speaker 16: they're doing what they can to move out of China

966
00:48:11,760 --> 00:48:14,719
Speaker 16: except for one product. It's the iPhone, the one we

967
00:48:14,719 --> 00:48:17,799
Speaker 16: were just talking about. And in order to get the

968
00:48:17,800 --> 00:48:21,920
Speaker 16: iPhones in those eighty five million quantity that you need

969
00:48:22,160 --> 00:48:24,880
Speaker 16: to ramp up and be built in two months time

970
00:48:25,400 --> 00:48:28,800
Speaker 16: and to be deployed globally over a three month period,

971
00:48:29,200 --> 00:48:31,120
Speaker 16: you just can't and by the way, at the quality

972
00:48:31,200 --> 00:48:32,880
Speaker 16: they need to do so, you just can't do that

973
00:48:32,920 --> 00:48:35,960
Speaker 16: outside of Fox Coon in China at this point. So

974
00:48:36,040 --> 00:48:37,439
Speaker 16: that's really what's keeping them there.

975
00:48:37,800 --> 00:48:40,400
Speaker 6: So Mark, we don't get Apple earnings until next week,

976
00:48:40,480 --> 00:48:44,600
Speaker 6: but slew of tech names reporting this week, making up

977
00:48:44,600 --> 00:48:46,839
Speaker 6: about forty percent of the market cap of the S ANDP.

978
00:48:47,000 --> 00:48:49,040
Speaker 6: In terms of the names we're going to hear from

979
00:48:49,320 --> 00:48:52,640
Speaker 6: which name are you going to be listening into to

980
00:48:52,880 --> 00:48:57,040
Speaker 6: indicate how the Apple story may evolve or are the

981
00:48:57,080 --> 00:48:59,640
Speaker 6: tech names we're hearing from this week completely separate from

982
00:48:59,640 --> 00:49:00,520
Speaker 6: the Apple story.

983
00:49:01,320 --> 00:49:02,600
Speaker 16: I mean, I know this week we have Meta, we

984
00:49:02,640 --> 00:49:05,080
Speaker 16: have Alphabet, we have Microsoft, right, any other big ones

985
00:49:05,120 --> 00:49:06,640
Speaker 16: that I'm missing, some of.

986
00:49:06,600 --> 00:49:08,920
Speaker 6: The social ones like we've got to snap this week,

987
00:49:09,040 --> 00:49:11,480
Speaker 6: some of that stuff, but not necessarily about weather for

988
00:49:11,719 --> 00:49:12,280
Speaker 6: no Apple.

989
00:49:12,560 --> 00:49:16,359
Speaker 16: I would definitely not include Apple in that group. They

990
00:49:16,400 --> 00:49:19,759
Speaker 16: have a way of either outperforming or underperforming that group, right,

991
00:49:19,800 --> 00:49:21,600
Speaker 16: So I think they're a bit of an outlier there

992
00:49:22,200 --> 00:49:24,680
Speaker 16: in terms of, you know, earning calls that I'll be

993
00:49:24,719 --> 00:49:28,520
Speaker 16: paying attention to definitely will be meta, right. I would

994
00:49:28,520 --> 00:49:31,680
Speaker 16: like to see how their you know, metaverse play as

995
00:49:31,680 --> 00:49:33,400
Speaker 16: they call it, is continuing to go. I want to

996
00:49:33,440 --> 00:49:35,960
Speaker 16: see what the losses are like. I want to see

997
00:49:36,000 --> 00:49:37,840
Speaker 16: what they have to say about the Apple product. I

998
00:49:37,840 --> 00:49:41,279
Speaker 16: want to see if they have any more commentary on that.

999
00:49:41,560 --> 00:49:44,160
Speaker 16: I want to see what's coming out of Alphabet in

1000
00:49:44,239 --> 00:49:46,520
Speaker 16: terms of their hardware sales. I want to see anything

1001
00:49:46,520 --> 00:49:49,160
Speaker 16: they have to say so far on their new pixel fold.

1002
00:49:49,440 --> 00:49:49,640
Speaker 10: Right.

1003
00:49:49,760 --> 00:49:52,160
Speaker 16: That thing is eighteen hundred dollars. I have had one

1004
00:49:52,160 --> 00:49:55,120
Speaker 16: for several weeks. I don't think it's particularly great. I

1005
00:49:55,120 --> 00:49:57,400
Speaker 16: also don't think people are particularly buying them up, so

1006
00:49:57,440 --> 00:49:59,400
Speaker 16: I want to pay attention to see what's going on there.

1007
00:50:00,080 --> 00:50:02,279
Speaker 16: One other interesting news item for this week is going

1008
00:50:02,280 --> 00:50:04,640
Speaker 16: to be Samsung Unpacked. That's going to be their new

1009
00:50:04,640 --> 00:50:08,160
Speaker 16: phone launch event that's happening in Korea and they're going

1010
00:50:08,200 --> 00:50:11,200
Speaker 16: to be announcing their latest phones there, which obviously we'll

1011
00:50:11,200 --> 00:50:13,160
Speaker 16: be going up against Apple's new devices in the fall,

1012
00:50:13,239 --> 00:50:15,040
Speaker 16: so I'll be interested to see how those all compare.

1013
00:50:15,440 --> 00:50:17,239
Speaker 16: So it's actually going to be quite a busy week

1014
00:50:17,600 --> 00:50:19,080
Speaker 16: and a lot to pay attention to.

1015
00:50:19,480 --> 00:50:22,920
Speaker 1: Hey Mark, just real quick twenty seconds. Apple recently completed

1016
00:50:22,920 --> 00:50:26,320
Speaker 1: their just amazing new headquarters in Koopertino. What percentage of

1017
00:50:26,320 --> 00:50:28,040
Speaker 1: their employees show up there on a given day?

1018
00:50:29,280 --> 00:50:29,520
Speaker 12: Ooh?

1019
00:50:29,560 --> 00:50:31,440
Speaker 5: What percentage show up on a given day? You know?

1020
00:50:32,160 --> 00:50:35,960
Speaker 16: The headquarters seats about twelve thousand to fifteen thousand people,

1021
00:50:36,000 --> 00:50:38,600
Speaker 16: and then there was a bunch of peripheral buildings around

1022
00:50:38,640 --> 00:50:41,640
Speaker 16: there in the Coopertino Sunny Vale its larger Santa Claire

1023
00:50:41,719 --> 00:50:44,920
Speaker 16: Valley Silicon Valley area. I would say the majority of

1024
00:50:44,960 --> 00:50:48,240
Speaker 16: employees are coming in three times a week, that's typical.

1025
00:50:48,239 --> 00:50:49,400
Speaker 16: Most employees are there.

1026
00:50:49,560 --> 00:50:51,160
Speaker 3: Two They better be happy employees.

1027
00:50:51,200 --> 00:50:53,280
Speaker 1: The stocks of fifty percent this year on a compound

1028
00:50:53,280 --> 00:50:55,600
Speaker 1: of basis, up over thirty percent over the last five years.

1029
00:50:56,560 --> 00:50:58,520
Speaker 3: They got to be happy. I mean, I say, get

1030
00:50:58,560 --> 00:51:01,279
Speaker 3: your wealthy keister back. That's just me, all right.

1031
00:51:01,320 --> 00:51:05,200
Speaker 1: Mark German, Chief correspondent Technology for Bloomberg News. He's based

1032
00:51:05,200 --> 00:51:07,719
Speaker 1: out there in Silicon Valley. He's drinking the cool lad

1033
00:51:08,000 --> 00:51:10,400
Speaker 1: Why not? I mean, Applestock has just been a just

1034
00:51:10,480 --> 00:51:13,040
Speaker 1: a tank, just been amazing and it continues.

1035
00:51:16,120 --> 00:51:19,239
Speaker 2: Thanks for listening to the Bloomberg Markets podcasts. You can

1036
00:51:19,239 --> 00:51:23,040
Speaker 2: subscribe and listen to interviews at Apple Podcasts or whatever

1037
00:51:23,120 --> 00:51:26,840
Speaker 2: podcast platform you prefer. I'm Matt Miller. I'm on Twitter

1038
00:51:27,040 --> 00:51:28,959
Speaker 2: at Matt Miller nineteen seventy three.

1039
00:51:29,400 --> 00:51:30,280
Speaker 1: And I'm Faull Sweeney.

1040
00:51:30,320 --> 00:51:31,800
Speaker 3: I'm on Twitter at pt Sweeney.

1041
00:51:31,920 --> 00:51:34,600
Speaker 1: Before the podcast, you can always catch us worldwide at

1042
00:51:34,600 --> 00:51:35,520
Speaker 1: Bloomberg Radio.