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Speaker 1: Bloomberg Audio Studios, Podcasts, radio news. Welcome to the Bloomberg

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Speaker 1: Daybreak Asia podcast. I'm Doug Chrisner. So the public feud

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Speaker 1: between Elon Musk and President Trump erupt it today and

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Speaker 1: it cost Musk thirty four billion dollars in net worth.

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Speaker 1: Also today, President Trump and Chinese President Chi chen Ping

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Speaker 1: agreed to further trade talks after a ninety minute phone

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Speaker 1: call and a big question, will Apple be able to

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Speaker 1: successfully relocate its supply chain outside of China. We'll check

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Speaker 1: in with Bloomberg opinion columnist Katherine Thorbeck, but we begin

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Speaker 1: this morning with a look at market action. Joining me

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Speaker 1: now is Robert Shine. He is the chief investment officer

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Speaker 1: at Blanky Shine Wealth Management. Robert is on the line

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Speaker 1: from Palm Desert, California. Good of you to make time

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Speaker 1: to chat with us. I want to begin with this

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Speaker 1: public feud between Elon Musk and President Trump. It seemed

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Speaker 1: to just explode today into threats and recriminations. It began

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Speaker 1: when Trump accused Musk of trying to tank the tax

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Speaker 1: bill because, in Trump's words, it eliminates electric vehicle credits

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Speaker 1: and that in turn is going to hurt Tesla's bottom line,

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Speaker 1: the stock was down quite a bit today. Tesla I

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Speaker 1: think was off about fourteen percent, but later in the

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Speaker 1: day the damage may have been greater because Trump proposed

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Speaker 1: ending Musk's government contracts and subsidies, and that's when Musk

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Speaker 1: shot back and said he was going to immediately decommission

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Speaker 1: the SpaceX Dragon spacecraft. So Robert, first question, is this

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Speaker 1: simply a distraction or do you believe this is a

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Speaker 1: worrisome sign.

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Speaker 2: Well, quite honestly, at first I didn't think it would

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Speaker 2: escalate as quickly as it certainly did in real time.

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Speaker 2: That was I think shocking to everybody, and you know,

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Speaker 2: just watching and following along today's public and very you know,

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Speaker 2: very public political circus. My advice is, you know, the

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Speaker 2: Trump versus Musk. I believe there's only one person who

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Speaker 2: will able to be able to settle this right now,

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Speaker 2: and that, in my mind is the great Joe Rogan.

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Speaker 2: Joe's going to have to either sit them down in

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Speaker 2: a three hour face off in a podcast or put

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Speaker 2: them in a rink together because this this got escalated

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Speaker 2: very quickly and very you know, quite personal, and it

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Speaker 2: was sad to see. So hopefully we're going to turn

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Speaker 2: the corner on this.

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Speaker 1: Do you believe this is going to have any impact

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Speaker 1: on what the Senate is doing right now with respect

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Speaker 1: to the tax bill the charge that Musk is making

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Speaker 1: that this simply blows out the deficit in a very

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Speaker 1: very harmful way.

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Speaker 2: If you actually take a step back from what they're

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Speaker 2: saying and take out their personal jabs, they're both on

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Speaker 2: the same side. They both agree, I think this Senate. Also,

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Speaker 2: if you look at top senators, they were asked about

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Speaker 2: it later this afternoon, they are in a gree too.

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Speaker 2: There's a lot of spending, too much spending that needs

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Speaker 2: to be addressed. And let's quite frankly, this is sort

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Speaker 2: of the first round, the first week of what the

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Speaker 2: Senate is looking at. And everyone, and you know this,

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Speaker 2: everyone in Washington puts in their you know, their favorite

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Speaker 2: pet project and see if they could pass with nobody

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Speaker 2: being able to have time to read it and just

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Speaker 2: push the pass button. This shines a light squarely on

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Speaker 2: sort of a sobering moment and gets everyone attention to saying, hey, guys,

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Speaker 2: time out. We're all on the same page. There's too

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Speaker 2: much spending.

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Speaker 1: Very interesting in terms of the way in which the

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Speaker 1: day began because President Trump on truth social discussed the

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Speaker 1: fact that he and President She had a phone call

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Speaker 1: and they agreed to further trade talks. Do you think

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Speaker 1: that's a positive sign or maybe there's a little bit

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Speaker 1: too much optimism being expressed by the President and we've

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Speaker 1: got a long, long road ahead in terms of this

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Speaker 1: trade war.

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Speaker 2: Yeah, let's not over react based upon the distraction today

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Speaker 2: on social media between Trump and Elon Musk, simply because

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Speaker 2: we did inch closer to at least sitting down at

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Speaker 2: the table and a trade deal with China. I think

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Speaker 2: that would be extremely bullish for the market and healthy

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Speaker 2: to have a more normal relationship with China going forward

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Speaker 2: and with every partner around the world. I do believe

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Speaker 2: we're going to see a positive outcome and a measured

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Speaker 2: progress as a result. And I think this is a

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Speaker 2: great step forward, even though it's incremental.

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Speaker 1: I'm wondering whether we have reached, not just from the

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Speaker 1: US side, but from the China side as well, a

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Speaker 1: threshold for pain that can no longer be ignored by

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Speaker 1: both sides, and it's in both parties' best interest to

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Speaker 1: find a resolution as quickly as possible.

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Speaker 2: Yeah, both sides can self induce a recession to their economies.

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Speaker 2: And I don't think either one of them politically speak,

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Speaker 2: it's the smart thing to do or it's the right

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Speaker 2: thing to do. They just have to both put aside

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Speaker 2: their differences and sit down and start making some progress

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Speaker 2: for the people they all represent.

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Speaker 1: So we've talked about two things that essentially put the

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Speaker 1: FED into a box. We've got the budget situation and

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Speaker 1: we've got the trade war. Talk to me about what

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Speaker 1: your expectations are for FED policy in the next couple

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Speaker 1: of months.

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Speaker 2: I think it's going to be the next couple of

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Speaker 2: days and weeks, you know. The Federal Reserve, we do

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Speaker 2: believe they have the window of opportunity to start another

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Speaker 2: round of rate cuts, simply because I believe that the

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Speaker 2: macro data that we're going to see in the weeks

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Speaker 2: and months ahead will be showing a slower and a

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Speaker 2: cooling economy. Again, we see labor market in play, and

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Speaker 2: you know, jobs and wages are kind of, you know,

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Speaker 2: trending in the direction that the Federal Reserve needs. Obviously,

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Speaker 2: they're going to have to choose between inflation and jobs.

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Speaker 2: But at this moment, with all the uncertainty that we've seen,

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Speaker 2: and a lot of what the small business owners have

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Speaker 2: been doing, which is sitting on their hands. Everyone's waiting

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Speaker 2: for the tax bill, everyone's waiting to see the tariffs

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Speaker 2: and the shakeout from that. So I think there's going

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Speaker 2: to be some slowing in the economy that's going to

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Speaker 2: surface in the eco data that could give the Federal

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Speaker 2: Reserve in the next couple of months sort of the

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Speaker 2: opportunity to make a move.

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Speaker 1: So we've sketched out some of the issues that markets

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Speaker 1: are grappling with right now. I'm curious, Robert, to get

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Speaker 1: your strategy of how to kind of play the terrain,

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Speaker 1: so to speak.

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Speaker 2: Well, most important for anybody, stay focused and valuation and

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Speaker 2: discipline matter in markets like these. And let's be honest,

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Speaker 2: the earnings why markets are close to all time high

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Speaker 2: since April are the earnings are coming back and bouncing back,

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Speaker 2: if you will, and holding in there. In fact, we're

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Speaker 2: just seeing, you know, obviously, the concerns the markets about

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Speaker 2: inflation and tarras, and that has translated translated into the

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Speaker 2: analysts lowering their estimates for the second quarter this year

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Speaker 2: for US companies by way of four percent. Historically speaking,

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Speaker 2: we haven't seen something that large in the last five,

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Speaker 2: ten and fifteen years on average, they would lower estimates,

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Speaker 2: especially in the second quarter, by two point six percent.

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Speaker 2: That being said, earnings are hanging in there. The only

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Speaker 2: sector that didn't last quarter have a year over year

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Speaker 2: increase was industrials. Every other sector is improving by double

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Speaker 2: digit earnings, and even if we take out the mag seven,

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Speaker 2: we have growth in the US companies, So that could

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Speaker 2: be a positive for the markets. That's one of the

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Speaker 2: reasons why the markets are still hanging in there with

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Speaker 2: all of these distractions. So instead of the word of

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Speaker 2: the year uncertainty, I think the word of the year

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Speaker 2: is going to be resilslliency of the markets as well

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Speaker 2: as the economy. And if investors stay focused and keep

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Speaker 2: some cash on the sidelines, jump on some opportunities that

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Speaker 2: come their way. And trust me, we've already had plenty

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Speaker 2: of opportunity and for our clients, we put some money

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Speaker 2: to work and we're in great spot, so we're ready

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Speaker 2: to jump on that once again if there's more volatility.

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Speaker 1: Well, to your point about valuations, we had Broadcom going

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Speaker 1: into the day to day trading at around thirty five

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Speaker 1: times projected earnings over the next twelve months. Then we

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Speaker 1: heard from the company after the bell and Broadcom gave

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Speaker 1: somewhat of a lackluster forecast for revenue in the current

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Speaker 1: quarter fifteen point eight billion. That's only about one hundred

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Speaker 1: million above expectation, but the stock got hit about four

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Speaker 1: and a half percent in late trading. So, especially when

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Speaker 1: you deal with some of these companies that trade in

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Speaker 1: the tech space semiconductors. Here, in the case of Broadcom,

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Speaker 1: valuation perhaps the most important criteria.

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Speaker 2: Right, yeah, but Broadcom today closed out an all time high,

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Speaker 2: so they're you know, having them sell off based upon

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Speaker 2: you know, some a weak guide, and every management team,

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Speaker 2: whether you're in the chip sector or across the sp

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Speaker 2: five hundred, you're going to use this opportunity in your

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Speaker 2: conference call to use the word uncertainty ahead because that

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Speaker 2: gives you cover given if the economy starts, you know,

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Speaker 2: continuing to slow down and accelerate. But let's not forget

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Speaker 2: the AI spent for twenty twenty five, just in the

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Speaker 2: mag seven is two hundred and forty billion dollars. And

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Speaker 2: at this end of the day, Broadcom and Navidia are

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Speaker 2: in the chips, storage and power space, so they're squarely

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Speaker 2: focused on just executing. You know, I obviously the valuation

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Speaker 2: on Broadcom is a little bit rich right now, but

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Speaker 2: that was the anticipation of earnings. But if you just

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Speaker 2: be patient on some of these companies, let the market

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Speaker 2: bring you to a better valuation. Uh, there's still a

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Speaker 2: long term growth strategy and good companies to be investing in.

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Speaker 1: Robert, we'll leave it there, Thank you so much. Enjoy

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Speaker 1: the weekend. Robert Chaine, chief investment officer at Blankie Shine

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Speaker 1: Wealth Management, joining on the line from Palm Desert, California

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Speaker 1: here on the Daybreak Asia Podcast. Welcome back to the

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Speaker 1: Daybreak Asia Podcast. I'm Doug Chrisner. So, last month, President

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Speaker 1: Trump threatened to slap tariffs on Apple over its reluctance

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Speaker 1: to bring manufacturing back to the US, and at the

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Speaker 1: same time, Trump was very critical of Apple's move to

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Speaker 1: create more iPhone production in India. Now we know the

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Speaker 1: President has placed smartphone production in the spotlight as part

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Speaker 1: of his global trade war and his vision to re

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Speaker 1: shore manufacturing back to the United States. But in the

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Speaker 1: case of Apple, is this really feasible, especially when you

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Speaker 1: consider the company's relationship with China. Let's take a close

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Speaker 1: to look with Bloomberg's Catherine Thorbeck, Bloomberg opinion columnist who

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Speaker 1: joins from Tokyo. The history of making iPhones in China,

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Speaker 1: I think goes back to around two thousand and nine,

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Speaker 1: and over that period, I would think that the relationship

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Speaker 1: between China and Apple has been tightly forged, and it's

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Speaker 1: not going to be easy for Apple to extricate itself

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Speaker 1: from this situation.

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Speaker 3: Right, That's absolutely right, Doug. And we actually got even

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Speaker 3: more bad news for Apple and China this week. The

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Speaker 3: Financial Times actually reported that the rollout of Apple Intelligence,

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Speaker 3: these AI features for the iPhone was delayed even further

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Speaker 3: by regulators in Beijing. And that's this long awaited partnership

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Speaker 3: between Apple and Ali Baba and China to bring AI

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Speaker 3: features to the iPhone in that massive market for Apple,

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Speaker 3: and apparently regulators in Beijing are halting their approval of

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Speaker 3: this even further due to the trade war. And I think,

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Speaker 3: taking a step back, what's interesting here is that it's

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Speaker 3: not the US that's using this sort of crown jewel

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Speaker 3: of Silicon Valley as a chip in the trade war.

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Speaker 3: It's China. I think the reality is China has immense

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Speaker 3: leverage over Apple right now. And I actually wrote about

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Speaker 3: this new book called Apple and China by Patrick McGee

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Speaker 3: that very convincingly argues that Apple's biggest existential threat right

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Speaker 3: now is not Trump and is constant nagging about tariffs,

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Speaker 3: but Beijing and the hold and the sway that Beijing

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Speaker 3: has over Apple. And really, over the course of decades,

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Speaker 3: it's been Apple's been chasing sort of short term profits

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Speaker 3: by making really small decisions that have led to where

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Speaker 3: it is now, which is pretty much entirely relying on

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Speaker 3: China to produce its products.

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Speaker 1: So when I read your column and you referred to

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Speaker 1: Apple and China, the Patrick McGee book, I thought of

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Speaker 1: Chipwar by Chris Miller and his history of the semiconductor industry,

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Speaker 1: first design and built in Silicon Valley, and then very

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Speaker 1: quickly moving production to Asia, first Hong Kong. I believe

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Speaker 1: Japan was involved there, along with South Korea and eventually Taiwan.

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Speaker 1: So what you begin to understand is the intricacy of

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Speaker 1: the supply chain, and I would imagine that Apple is

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Speaker 1: very very reliant.

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Speaker 3: On that absolutely. I mean, at this point, Apple's you know,

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Speaker 3: all of its marquee products are pretty much entirely reliant

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Speaker 3: on suppliers in China, and I think, you know, with

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Speaker 3: Trump now, he's been very insistent on threatening all these

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Speaker 3: tariffs on Apple and asking them to move production back

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Speaker 3: to the US. I just don't think that's possible. And

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Speaker 3: for a number of reasons. You know, I think this

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Speaker 3: the supply chain ecosystem in China was built up sort

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Speaker 3: of as Beijing was playing the long game, So it

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Speaker 3: was built up over decades, and that's going to be very,

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Speaker 3: very hard to replicate in the US. But I also

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Speaker 3: think at this point, you know, Apple can't really move

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Speaker 3: away from China without irking and upsetting Beijing. So it

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Speaker 3: has to do so sort of very slowly so as

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Speaker 3: not to upset regulators in China. But also it can't

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Speaker 3: go too slow because then it, you know, will be

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Speaker 3: harder to inevitably get it done. So this book, which

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Speaker 3: is you know, a very gripping read on how we

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Speaker 3: sort of got here, but it sort of argues that

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Speaker 3: it basically argues that this technology transfer that was facilitated

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Speaker 3: by Apple through you know, setting up its supply chain

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Speaker 3: in China, actually made Apple one of the biggest corporate

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Speaker 3: the biggest corporate backer of President Chijin Pings Made in

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Speaker 3: China twenty twenty five plan, which was this really ambitious

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Speaker 3: goal to sever reliance on foreign technology, and Apple's upscilling

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Speaker 3: of workers in high tech manufacturing over the years have

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Speaker 3: actually given birth to these homegrown tech companies like Huawei.

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Speaker 1: Here you right about how in the early days it

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Speaker 1: was Apple engineers from the United States that were going

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Speaker 1: to China to help train Chinese workers, and how that's

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Speaker 1: kind of turned around.

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Speaker 3: Right, So I remember, I think we all remember during

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Speaker 3: President Trump's first term, he famously toured that Texas factory

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Speaker 3: and he claimed credit for bringing Apple production back to America.

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Speaker 3: Except some workers that were quoted in this book actually

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Speaker 3: called that plant an unmitigated fiasco, and they say that

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Speaker 3: workers in China had to be flown in to fi

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Speaker 3: all of the manufacturing issues that were really encountered in

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Speaker 3: the US heartland. And I thought that was a really

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Speaker 3: interesting anecdote sort of at the end of this book,

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Speaker 3: because up until then, the entire book was about how

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Speaker 3: Apple flew engineers from Coupertino to China to sort of

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Speaker 3: work with suppliers in Asia and build out these high

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Speaker 3: tech manufacturing ecosystems, and now the tables have it seems

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Speaker 3: like irreversibly turned.

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Speaker 1: Yeah. The other thing that's very interesting. During the first

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Speaker 1: Trump trade war, I think Apple was put on notice

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Speaker 1: that it needed to diversify its supply chains, and the

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Speaker 1: company began to deepen its relationship with India. How does

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Speaker 1: that enter into this story, right?

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Speaker 3: So, I think even more recently we've seen Apple try

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Speaker 3: to sort of move towards India and set up its

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Speaker 3: supply chain over there. But I think now that's going

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Speaker 3: to be very, very difficult for a number of reasons.

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Speaker 3: And one issue is that China does a really good

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Speaker 3: job of sort of suppressing labor issues. So, you know,

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Speaker 3: I think Apple suppliers in China were able to sort

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Speaker 3: of suppress any labor unrest and Beijing was able to

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Speaker 3: sort of quell any media reports of it. And there

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Speaker 3: was a Samsung plant that was set up in India

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Speaker 3: a couple of years ago, and I believe last year

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Speaker 3: there was a very big strike and that made international headlines,

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Speaker 3: and that kind of thing doesn't really happen in China.

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Speaker 3: You know, we saw during the COVID lockdowns at the

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Speaker 3: iPhone factory there that the protests were very very quickly

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Speaker 3: quashed in China, and so I think that that's going

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Speaker 3: to be hard to set up in India. And on

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Speaker 3: top of that, I mean, just like I said, they

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Speaker 3: built the supply chain ecosystem in China over the course

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Speaker 3: of decades, and so recreating that in India is going

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Speaker 3: to take about the same amount of time, if it's

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Speaker 3: even possible, and it's going to be very very expensive.

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Speaker 3: But at this point, you know, it's not just sort

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Speaker 3: of the first tier suppliers, but it's the second tier

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Speaker 3: suppliers and all the engineers, and just recreating that somewhere

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Speaker 3: else right now is a very very tall task for Apple,

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Speaker 3: and I think it's pretty much impossible in America.

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Speaker 1: We know that Apple's manufacturing partner in China is Fox Cohn,

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Speaker 1: and the company that is known in China as han Hi,

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Speaker 1: its founder Terry Guo, is really to be credited with

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Speaker 1: building this organization into quite the powerhouse, and I would

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Speaker 1: imagine that's another thing that would be very very difficult

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Speaker 1: for Apple to walk away from.

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Speaker 3: That's right, And so I think you know, we've all

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Speaker 3: heard of the sort of legendary partnership between Johnny Ive

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Speaker 3: the designer, and Steve Jobs, who really made the iPhone

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Speaker 3: such a unique product. But I think perhaps a more

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Speaker 3: revolutionary partnership was between Tim Cook and Terry Go who

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Speaker 3: really brought the iPhone to the masses and made it

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Speaker 3: so that it could be you know, manufactured at scale.

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Speaker 1: And Terry Go.

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Speaker 3: Was very very wise. You know, he was obsessed with

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Speaker 3: cutting costs.

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Speaker 1: You know.

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Speaker 3: One source in this book described him as worth two

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Speaker 3: billion dollars in nickels and dimes, and he would always

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Speaker 3: sort of dilute the hand soapen factories with water. So

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Speaker 3: he was very very frugal. But at the same time,

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Speaker 3: he recognized that working with Apple wasn't just about making profits.

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Speaker 3: It was sort of the tacit knowledge and the learning

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Speaker 3: that his team would would receive from the Apple engineers

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Speaker 3: that were flown over. So he understood that sort of

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Speaker 3: even losing money if it meant getting these Apple orders

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Speaker 3: was very very valuable, and I think sort of as

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Speaker 3: a result of that, he's sort of trained up this

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Speaker 3: whole army of engineers, these Fox cont engineers that really

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Speaker 3: have this sort of tacit knowledge that they can use

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Speaker 3: to make the iPhones, and now in China are sort

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Speaker 3: of being used to sort of launch some homegrown competitors

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Speaker 3: that are actually really a concern for Apple right now.

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Speaker 1: So maybe Apple is making a small step because recently

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Speaker 1: Bloomberg News reported that the company is planning to source

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Speaker 1: more than nineteen billion chips from the US this year

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Speaker 1: as part of a plan to diversify its global supply chain,

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Speaker 1: maybe reduce its reliance on China a little bit and

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Speaker 1: give the Trump administration something that it's looking for. We'll

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Speaker 1: see whether that develops into a bigger story. Catherine, Thank

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Speaker 1: you so much. Bloomberg Opinion columnist Katherine Thorbeck joining from

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Speaker 1: Tokyo here on the Daybreak Asia podcast. Thanks for listening

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Speaker 1: to today's episode of the Bloomberg Daybreak Asia Edition podcast.

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Speaker 1: Each weekday, we look at the story shaping markets, finance,

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Speaker 1: and geopolitics in the Asia Pacific. You can find us

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Speaker 1: on Apple, Spotify, the Bloomberg Podcast YouTube channel, or anywhere

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Speaker 1: else you listen. Join us again tomorrow for insight on

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Speaker 1: the market moves from Hong Kong to Singapore and Australia.

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Speaker 1: I'm Doug Chrisner, and this is Bloomberg