1 00:00:00,080 --> 00:00:12,960 Speaker 1: Yeah, Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane. 2 00:00:13,480 --> 00:00:17,560 Speaker 1: Daily we bring you insight from the best in economics, finance, investment, 3 00:00:18,000 --> 00:00:23,480 Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 4 00:00:23,600 --> 00:00:28,160 Speaker 1: Bloomberg dot Com, and of course on the Bloomberg Gabriella 5 00:00:28,240 --> 00:00:30,920 Speaker 1: Scientists with us to get us started here this morning, 6 00:00:30,920 --> 00:00:33,120 Speaker 1: We've got a lot of different voices for you. First 7 00:00:33,120 --> 00:00:34,920 Speaker 1: of all, you know, I know what Bloomberg is doing 8 00:00:34,960 --> 00:00:37,960 Speaker 1: with our entire Asia continued, I know JP Morgan the 9 00:00:38,000 --> 00:00:41,080 Speaker 1: same thing. What are you doing in terms of investment 10 00:00:41,200 --> 00:00:46,000 Speaker 1: to adapt to Asia in crisis. So coming into the year, 11 00:00:46,479 --> 00:00:50,720 Speaker 1: we were having a pretty optimistic view around global growth stability, 12 00:00:50,840 --> 00:00:53,720 Speaker 1: feeling a little bit more optimistic about especially a region 13 00:00:53,800 --> 00:00:57,200 Speaker 1: like emerging markets. With that said, we were also coming 14 00:00:57,200 --> 00:01:00,800 Speaker 1: into the year with protection, right, We weren't fully all 15 00:01:00,920 --> 00:01:04,040 Speaker 1: in on risk assets. So I think that's exactly for 16 00:01:04,200 --> 00:01:07,959 Speaker 1: moments like these, right, we weren't exactly expecting this particular risk. 17 00:01:08,200 --> 00:01:10,560 Speaker 1: There were a whole other list of risks, so thinking 18 00:01:10,560 --> 00:01:14,679 Speaker 1: of things like treasuries, gold, safe haven currencies, real assets, 19 00:01:14,760 --> 00:01:17,160 Speaker 1: that's what they were there for. There's a question here 20 00:01:17,200 --> 00:01:20,160 Speaker 1: at JP Morgan coming out and saying time to start 21 00:01:20,160 --> 00:01:22,960 Speaker 1: looking at buying the dip, talking to other investors saying, 22 00:01:23,360 --> 00:01:25,920 Speaker 1: by the dip, when do you do the same. I 23 00:01:25,920 --> 00:01:28,479 Speaker 1: think it's a it's a crucial point. What you were 24 00:01:28,520 --> 00:01:31,280 Speaker 1: mentioning earlier were not doctors. We have no idea how 25 00:01:31,319 --> 00:01:34,920 Speaker 1: the virus evolves. But what we have seen historically is 26 00:01:34,959 --> 00:01:40,160 Speaker 1: the market will bottom once the actual number of infection 27 00:01:40,280 --> 00:01:43,280 Speaker 1: starts to stabilize, right, and then the economy does a 28 00:01:43,360 --> 00:01:46,160 Speaker 1: V shape recovery and the market does more than a 29 00:01:46,240 --> 00:01:49,360 Speaker 1: V shape recovery as well. So, especially for our clients 30 00:01:49,360 --> 00:01:52,240 Speaker 1: that are very underweight e. M Asia, it could be 31 00:01:52,280 --> 00:01:55,000 Speaker 1: a buying opportunity to actually build up a neutral positions. 32 00:01:55,240 --> 00:01:57,400 Speaker 1: Things I wanted to define the dip were negative two 33 00:01:57,400 --> 00:02:00,680 Speaker 1: point six on sp X. That's a I mean, it's 34 00:02:00,720 --> 00:02:04,960 Speaker 1: like plunge different. And the other is the New York 35 00:02:04,960 --> 00:02:09,280 Speaker 1: Times quote John today that the cases of the virus 36 00:02:09,320 --> 00:02:15,160 Speaker 1: on a percentage basis have increased six six zero overnight. 37 00:02:15,360 --> 00:02:18,480 Speaker 1: I want to make clear that the unit count is 38 00:02:18,520 --> 00:02:21,000 Speaker 1: not as big as the percent changed to prose. You 39 00:02:21,000 --> 00:02:22,600 Speaker 1: mentioned a move in the equity market. I just they 40 00:02:22,600 --> 00:02:24,480 Speaker 1: have look at credit. We've had some real credit spread 41 00:02:24,520 --> 00:02:27,040 Speaker 1: widening seventy basis points in a round about two weeks. 42 00:02:27,120 --> 00:02:30,280 Speaker 1: I'm glad you mentioned explain that's not insignificant. You know 43 00:02:30,320 --> 00:02:33,040 Speaker 1: exactly what that means. That means the price of credit 44 00:02:33,240 --> 00:02:36,839 Speaker 1: has gone down, Spreads over treasuries have got wider. That's 45 00:02:36,840 --> 00:02:44,640 Speaker 1: a real move Friday. But I'm ill day too. Back off, 46 00:02:44,760 --> 00:02:47,720 Speaker 1: otherwise I'm going to get in a real mood. All right, Seriously, 47 00:02:48,880 --> 00:02:52,760 Speaker 1: carry on, Well, we have the spread markets coming there. Seriously, 48 00:02:53,040 --> 00:02:55,560 Speaker 1: I've got into ject again because people listening we think, oh, 49 00:02:55,560 --> 00:02:59,040 Speaker 1: it's really serious. Just then I'm not. We're still friends. 50 00:02:59,120 --> 00:03:03,520 Speaker 1: Carry on, Maybe we're Gabriel of Scientos with us here. 51 00:03:03,560 --> 00:03:06,120 Speaker 1: How do you link in the different trenches of credit? 52 00:03:06,200 --> 00:03:08,919 Speaker 1: I mean, everybody can dash the full faith and credit, 53 00:03:08,919 --> 00:03:11,000 Speaker 1: and we note the two year yield of four digits 54 00:03:11,040 --> 00:03:14,680 Speaker 1: one point four two to seven nine print, But how 55 00:03:14,720 --> 00:03:17,720 Speaker 1: do you take out credit and particularly the e M 56 00:03:17,840 --> 00:03:21,720 Speaker 1: debt to be opportunistic here? So when we think about protection, 57 00:03:21,800 --> 00:03:25,239 Speaker 1: we absolutely think about things like treasuries, mortgage backed securities, 58 00:03:25,320 --> 00:03:29,320 Speaker 1: municipal bonds. And I think it's been a very interesting 59 00:03:29,360 --> 00:03:32,000 Speaker 1: experience to come into the year with yield already so low, 60 00:03:32,080 --> 00:03:34,720 Speaker 1: but to see that they can go lower during moments 61 00:03:34,720 --> 00:03:37,920 Speaker 1: of risk aversion, so that protection still works. When we 62 00:03:37,960 --> 00:03:41,280 Speaker 1: think more about income, though, then we think balancing some 63 00:03:41,320 --> 00:03:43,680 Speaker 1: of that protection out with things like US high yield 64 00:03:44,040 --> 00:03:47,360 Speaker 1: local emerging market debt still makes sense. But we used 65 00:03:47,400 --> 00:03:50,440 Speaker 1: to be much more positive on those sectors before. Now 66 00:03:50,440 --> 00:03:53,960 Speaker 1: we think having a balance between credit and protection makes 67 00:03:53,960 --> 00:03:56,000 Speaker 1: a lot more sense here. What are the consensus trades 68 00:03:56,000 --> 00:03:58,520 Speaker 1: heading into the year was emerging markets credit would out 69 00:03:58,560 --> 00:04:02,240 Speaker 1: perform in particular local currents credit. Right now we're seeing 70 00:04:02,360 --> 00:04:05,320 Speaker 1: outflows finally, Actually, I'm surprised it took this long from 71 00:04:05,320 --> 00:04:08,040 Speaker 1: e t f s the track emerging markets credit and 72 00:04:08,080 --> 00:04:11,840 Speaker 1: you're seeing emerging market currencies fall to their weakest since December. 73 00:04:12,200 --> 00:04:14,680 Speaker 1: At what point do you just concede that perhaps this 74 00:04:14,720 --> 00:04:16,960 Speaker 1: isn't as could have a trade as people expected it 75 00:04:17,000 --> 00:04:19,719 Speaker 1: to be. So the thesis for that we share for 76 00:04:20,000 --> 00:04:23,039 Speaker 1: e M local currency is you still have scope for 77 00:04:23,120 --> 00:04:26,000 Speaker 1: local central banks to cut interest rates. Right, that's not 78 00:04:26,080 --> 00:04:29,560 Speaker 1: completely done in emerging markets quite yet, So I think Brazil, 79 00:04:29,760 --> 00:04:32,960 Speaker 1: Mexico a couple in Asia as well, and then with 80 00:04:33,040 --> 00:04:36,400 Speaker 1: better economic stability also comes stronger e M currency. So 81 00:04:36,440 --> 00:04:40,760 Speaker 1: that's the thesis that's coming into question um at this point, 82 00:04:40,800 --> 00:04:43,919 Speaker 1: given some of this risk aversion around the coronavirus. But 83 00:04:43,960 --> 00:04:46,560 Speaker 1: I don't know that we can completely postpone that story 84 00:04:46,640 --> 00:04:49,200 Speaker 1: for the second, third, fourth quarter. Right. It's a similar 85 00:04:49,200 --> 00:04:51,719 Speaker 1: story to what we were discussing with the equity market. 86 00:04:51,760 --> 00:04:54,600 Speaker 1: It's a blip. It doesn't change the ultimate destination, you know, 87 00:04:54,720 --> 00:04:56,919 Speaker 1: story we come back to again and again, a theme 88 00:04:56,960 --> 00:05:00,000 Speaker 1: on this program that we revisit often. We're always focused 89 00:05:00,080 --> 00:05:02,320 Speaker 1: on the shark closest to the boat and not the 90 00:05:02,360 --> 00:05:04,680 Speaker 1: storm clouds gathering on the horizon. And I just wonder 91 00:05:04,760 --> 00:05:06,920 Speaker 1: once we get past this, how focused we will be 92 00:05:07,320 --> 00:05:10,120 Speaker 1: on Bernie Sanders searching up in the polls. And I 93 00:05:10,160 --> 00:05:12,080 Speaker 1: just wonder how many questions you've had on that in 94 00:05:12,080 --> 00:05:14,120 Speaker 1: the last week your side, Gabby. We have a lot 95 00:05:14,160 --> 00:05:17,400 Speaker 1: of questions on the election, certainly from our clients around 96 00:05:17,400 --> 00:05:19,839 Speaker 1: the world and in the US as well. And we 97 00:05:19,960 --> 00:05:23,240 Speaker 1: have seen the impact of Bernie Sanders moving higher in 98 00:05:23,320 --> 00:05:26,120 Speaker 1: the polls on Friday and yesterday we did see a 99 00:05:26,120 --> 00:05:28,320 Speaker 1: bit of a hit in the health care sector, so 100 00:05:28,360 --> 00:05:32,720 Speaker 1: it's not being completely ignored. Um. Ultimately, we think the 101 00:05:32,760 --> 00:05:35,960 Speaker 1: field is still very divided on the Democratic side, and 102 00:05:36,000 --> 00:05:37,960 Speaker 1: it might take us up all the way to the 103 00:05:38,040 --> 00:05:41,720 Speaker 1: July Democratic Convention until we actually know who the Democratic 104 00:05:41,760 --> 00:05:44,719 Speaker 1: candidate is. So that could be a source of holatility 105 00:05:44,800 --> 00:05:47,280 Speaker 1: here for the second quarter, for the middle of the year, 106 00:05:47,560 --> 00:05:50,400 Speaker 1: once we get past the coronavirus and we start getting 107 00:05:50,440 --> 00:05:53,279 Speaker 1: a bigger focus on who the Democratic candidate could be. 108 00:05:53,320 --> 00:05:55,640 Speaker 1: And I'm looking year to date and essentially we've given 109 00:05:55,720 --> 00:05:58,240 Speaker 1: up the gains. SPX is up less than one percent 110 00:05:59,040 --> 00:06:02,359 Speaker 1: year to date. Is well, it's almost with this horrific 111 00:06:02,680 --> 00:06:07,880 Speaker 1: illness in China, we're gonna need to recalibrate once we 112 00:06:07,960 --> 00:06:10,600 Speaker 1: get past the initial shock and the growth rates of 113 00:06:10,640 --> 00:06:14,720 Speaker 1: those as well. When you recalibrate, what do you look at? 114 00:06:14,760 --> 00:06:18,680 Speaker 1: Do you recalibrate bonds? Do you recalibrate central bank policy? 115 00:06:19,000 --> 00:06:21,599 Speaker 1: Do you recalibrate equities? How do you do that? So 116 00:06:21,680 --> 00:06:25,279 Speaker 1: it's it's interesting that it's interesting that we have had 117 00:06:25,360 --> 00:06:28,520 Speaker 1: this correction, But we came into the year with pe 118 00:06:28,680 --> 00:06:31,480 Speaker 1: multiples at eighteen and a half times in the US, 119 00:06:31,560 --> 00:06:34,880 Speaker 1: it was really priced quite fully, shall we say. So 120 00:06:34,920 --> 00:06:37,960 Speaker 1: anything that shook the boat, that didn't exactly confirm the 121 00:06:37,960 --> 00:06:42,040 Speaker 1: consensus was bound to cause some sort of pullback or 122 00:06:42,080 --> 00:06:46,159 Speaker 1: correction in the market. So for now we're really uh 123 00:06:46,800 --> 00:06:49,039 Speaker 1: sticking to our story here that it should be a 124 00:06:49,080 --> 00:06:52,240 Speaker 1: positive year for stocks uh and for credit, but with 125 00:06:52,320 --> 00:06:55,800 Speaker 1: a pocket of volatility here. Gabriela Santo's greatly appreciated. Thank 126 00:06:55,839 --> 00:06:58,400 Speaker 1: you so much. Why have you been wandering away to 127 00:06:58,440 --> 00:07:01,160 Speaker 1: do a photo shooting? Does shoot? You know? That's just 128 00:07:01,200 --> 00:07:03,720 Speaker 1: trying to break We have a wonder for those who's 129 00:07:04,360 --> 00:07:12,960 Speaker 1: trying to find me up. It's like John looking at you, honestly, 130 00:07:13,120 --> 00:07:15,640 Speaker 1: the fact that you kept your cool very cool, Gabriela 131 00:07:15,680 --> 00:07:18,600 Speaker 1: Santos for this from JP Moore, Thank you very much, Gaby, 132 00:07:18,680 --> 00:07:32,040 Speaker 1: good to see you. Let's bring in Walter Pisk with 133 00:07:32,200 --> 00:07:34,360 Speaker 1: Light Shed, because John, I would suggest, it's not just 134 00:07:34,400 --> 00:07:37,320 Speaker 1: about Apple, but it's about five G what you and 135 00:07:37,360 --> 00:07:39,440 Speaker 1: I heard in Davo Son five G and all that 136 00:07:39,680 --> 00:07:44,080 Speaker 1: you know broader a bigger conversation this year. He probably 137 00:07:44,080 --> 00:07:46,560 Speaker 1: doesn't deserve a conversation. It's large, but let's give it 138 00:07:46,600 --> 00:07:50,120 Speaker 1: to him right now. Walter, good morning. What's your target 139 00:07:50,160 --> 00:07:53,040 Speaker 1: on Apple? Tom? First of all, I definitely deserve a 140 00:07:53,400 --> 00:07:57,000 Speaker 1: top a discussion an hour or two large. But since 141 00:07:57,040 --> 00:07:59,640 Speaker 1: we have launched light Shed, we have not come out 142 00:07:59,680 --> 00:08:03,000 Speaker 1: with our evaluation UM on Apple as of Yeah, we're 143 00:08:03,040 --> 00:08:05,920 Speaker 1: definitely looking at some of the value drivers of the 144 00:08:06,000 --> 00:08:09,280 Speaker 1: service business UM, but clearly the valuation of Apple is 145 00:08:09,280 --> 00:08:11,000 Speaker 1: in a new realm now, right, I mean the the 146 00:08:11,200 --> 00:08:13,200 Speaker 1: pe multiple and this thing is it a premium? And 147 00:08:13,520 --> 00:08:15,840 Speaker 1: how many times have we come on and talked about 148 00:08:15,840 --> 00:08:17,480 Speaker 1: the fact that this thing is still traded as a 149 00:08:17,560 --> 00:08:20,480 Speaker 1: discounts to the market multiple. Now you've got a very 150 00:08:20,480 --> 00:08:22,560 Speaker 1: healthy premium to the market multiple in terms of the 151 00:08:22,640 --> 00:08:24,720 Speaker 1: valuation and where it's gone in the last year. What 152 00:08:24,840 --> 00:08:26,520 Speaker 1: was the question? We keep coming back to you and 153 00:08:26,600 --> 00:08:29,760 Speaker 1: I've discussed this so many times, the appropriate multiple for 154 00:08:29,800 --> 00:08:34,080 Speaker 1: this company? What is it? I mean, it's a lot 155 00:08:34,160 --> 00:08:35,680 Speaker 1: of these A lot of times you look at this 156 00:08:35,720 --> 00:08:38,240 Speaker 1: and say what is the historical norm? Now we're into 157 00:08:38,280 --> 00:08:40,600 Speaker 1: what's the right one? And John, again, what you and 158 00:08:40,640 --> 00:08:43,520 Speaker 1: I have talked about before is if you established that 159 00:08:43,600 --> 00:08:45,960 Speaker 1: this is a recurring revenue business and now people are 160 00:08:45,960 --> 00:08:48,680 Speaker 1: getting excited about the services side of the business, the 161 00:08:48,720 --> 00:08:52,240 Speaker 1: Apple TV, the E clouds of subscription things, that's why 162 00:08:52,240 --> 00:08:55,040 Speaker 1: it's taking the multiple. But really in the past you 163 00:08:55,040 --> 00:08:57,240 Speaker 1: could have made the same argument about the iPhone business. 164 00:08:57,320 --> 00:08:59,880 Speaker 1: If you have an iPhone. The customer retention on that 165 00:09:00,160 --> 00:09:03,719 Speaker 1: so high that you're coming back to Apple whenever you're 166 00:09:03,760 --> 00:09:07,000 Speaker 1: ready to upgrade your phone. Now, those upgrades were lengthening 167 00:09:07,000 --> 00:09:10,199 Speaker 1: and happening slower than anticipated, but it really was already 168 00:09:10,240 --> 00:09:13,560 Speaker 1: a recurring revenue business in many ways. So I think 169 00:09:13,800 --> 00:09:16,320 Speaker 1: the market is now catching up to the reality of 170 00:09:16,360 --> 00:09:19,840 Speaker 1: this being a recurring revenue business. And John, like recurring 171 00:09:19,880 --> 00:09:23,960 Speaker 1: revenue businesses do get premium valuations to wherever the market 172 00:09:24,040 --> 00:09:26,840 Speaker 1: multiple is. I will say that the air pod business 173 00:09:26,880 --> 00:09:30,440 Speaker 1: is getting recurring income from the keen household. We hear 174 00:09:30,480 --> 00:09:36,000 Speaker 1: about it every time. We basically damn dogs any subscriptions 175 00:09:36,000 --> 00:09:42,120 Speaker 1: to Apples. Ever, not everyone is a racket called AirPods, 176 00:09:42,200 --> 00:09:46,360 Speaker 1: all right. Apple market capitalization right now is one point 177 00:09:46,360 --> 00:09:50,600 Speaker 1: three five trillion dollars. Dan dan Ives over at Wedbush 178 00:09:50,880 --> 00:09:54,320 Speaker 1: expects that Apple will be the first two trillion dollar 179 00:09:54,400 --> 00:09:59,360 Speaker 1: valuation company by the end of one Do you agree, well. 180 00:09:59,400 --> 00:10:02,120 Speaker 1: I think he also has mentioned a five G supercycle 181 00:10:02,160 --> 00:10:04,040 Speaker 1: as part of that call, or is it is one 182 00:10:04,080 --> 00:10:06,880 Speaker 1: of the potentials, And I really don't agree with that. 183 00:10:06,960 --> 00:10:09,520 Speaker 1: I mean five G and and we cover the operators. 184 00:10:09,920 --> 00:10:12,440 Speaker 1: We know that the networks where they are today, the 185 00:10:12,520 --> 00:10:15,360 Speaker 1: spectrum that they're using, and where the networks will be 186 00:10:15,480 --> 00:10:18,240 Speaker 1: when this new iPhone launches, so to so to believe 187 00:10:18,280 --> 00:10:22,160 Speaker 1: that this is somehow going to drive fifteen or unit growth, 188 00:10:22,559 --> 00:10:24,480 Speaker 1: I think it's a really difficult region. I think that 189 00:10:24,520 --> 00:10:26,840 Speaker 1: could be a risk in this stock going forward. I'm 190 00:10:26,840 --> 00:10:31,120 Speaker 1: not sure the consensus view is the same um as 191 00:10:31,160 --> 00:10:32,719 Speaker 1: what he's looking at in terms of this company. And 192 00:10:32,800 --> 00:10:36,080 Speaker 1: if you look at consensus revenue growth it exits the year, 193 00:10:36,080 --> 00:10:39,599 Speaker 1: it's six or seven percent. Six or seven percent implies 194 00:10:39,640 --> 00:10:42,760 Speaker 1: for the iPhone business like two percent. I wouldn't say 195 00:10:42,760 --> 00:10:46,280 Speaker 1: two percent top line revenue growth is supercycle. So while 196 00:10:46,280 --> 00:10:49,160 Speaker 1: there are some analysts that may be pitching very high 197 00:10:49,200 --> 00:10:53,559 Speaker 1: valuations based on a hope for a supercycle, the reality 198 00:10:53,640 --> 00:10:56,320 Speaker 1: is that Apple doesn't really have to have a supercycle 199 00:10:56,400 --> 00:10:59,400 Speaker 1: to to deliver upside to the current consensus estimates that 200 00:10:59,400 --> 00:11:01,160 Speaker 1: are out there. Want to take me inside the analyst 201 00:11:01,200 --> 00:11:03,680 Speaker 1: community right now, just lean on your experience. We've had 202 00:11:03,679 --> 00:11:07,960 Speaker 1: at least fifteen firms so far in raise price targets 203 00:11:08,000 --> 00:11:10,440 Speaker 1: as far as you see things, as critical as you like. 204 00:11:10,960 --> 00:11:13,720 Speaker 1: Is that that the analyst community marking to market here 205 00:11:14,120 --> 00:11:15,960 Speaker 1: or they all coming around to this big idea that 206 00:11:16,040 --> 00:11:20,200 Speaker 1: something's changed and they missed it. John, you hit it 207 00:11:20,240 --> 00:11:22,720 Speaker 1: on the head. It's marked to market. And actually, this 208 00:11:22,800 --> 00:11:24,960 Speaker 1: is if you think about it, if you're an Apple shareholder, 209 00:11:25,480 --> 00:11:28,280 Speaker 1: your little relief that what analysts are effectively do is 210 00:11:28,400 --> 00:11:31,000 Speaker 1: is jacking the multiple. There are phases that analysts go 211 00:11:31,080 --> 00:11:32,720 Speaker 1: through where they're saying, Okay, I want to have the 212 00:11:32,800 --> 00:11:35,760 Speaker 1: highest target out there, or I want to move this 213 00:11:36,200 --> 00:11:38,440 Speaker 1: to a new level so I can maintain my buy rating, 214 00:11:38,440 --> 00:11:41,680 Speaker 1: because they're getting calls from their compliance department saying like, okay, 215 00:11:41,840 --> 00:11:44,560 Speaker 1: the stock has moved past your price target. You need 216 00:11:44,640 --> 00:11:46,840 Speaker 1: to either downgrade the stock or move it to fifteen 217 00:11:46,880 --> 00:11:49,880 Speaker 1: or higher than the current level. So they're just moving 218 00:11:49,920 --> 00:11:52,840 Speaker 1: the multiples. What can happen sometimes, though, is analysts start 219 00:11:52,840 --> 00:11:55,680 Speaker 1: to jack their estimates up and take their revenue up 220 00:11:56,000 --> 00:11:59,079 Speaker 1: in order to get higher estimates to drive a higher multiple. 221 00:11:59,320 --> 00:12:02,120 Speaker 1: I haven't quite seen that yet to me. If those 222 00:12:02,160 --> 00:12:05,920 Speaker 1: types of things happen and people again start pitching supercycle 223 00:12:05,960 --> 00:12:10,520 Speaker 1: and putting out expectations of fifteen or revenue growth, then 224 00:12:10,559 --> 00:12:13,400 Speaker 1: that's probably an opportunity to take profits off the table 225 00:12:13,480 --> 00:12:15,280 Speaker 1: and look even on the short side of this but 226 00:12:15,400 --> 00:12:18,680 Speaker 1: right now, the consensus number has not moved up dramatically, 227 00:12:18,720 --> 00:12:21,920 Speaker 1: So those estimate revisions, to your point, are basically just 228 00:12:22,040 --> 00:12:26,040 Speaker 1: jacking the multiple up, as opposed to UM moving up 229 00:12:26,080 --> 00:12:29,000 Speaker 1: based on higher earnings estimate. John also embedded in your 230 00:12:29,080 --> 00:12:31,720 Speaker 1: question was a really interesting point. What has changed? And 231 00:12:31,800 --> 00:12:34,440 Speaker 1: back a year ago people were still worried about slowing 232 00:12:34,480 --> 00:12:37,040 Speaker 1: growth in China for Apple, and this comes even at 233 00:12:37,040 --> 00:12:39,640 Speaker 1: a time of the coronavirus and potential disruptions to the 234 00:12:39,679 --> 00:12:43,480 Speaker 1: economy further in that region. Why is that not a 235 00:12:43,559 --> 00:12:47,640 Speaker 1: concern now for Apple's outlook, it's certainly a concern. But 236 00:12:47,640 --> 00:12:49,720 Speaker 1: I mean, this thing is happening real time, right, this 237 00:12:49,760 --> 00:12:52,160 Speaker 1: is a day by day change. Yesterday we're you know, 238 00:12:52,200 --> 00:12:54,800 Speaker 1: we're talking about one or two of the plants that 239 00:12:54,840 --> 00:12:57,680 Speaker 1: are within the province that's impacted. I mean, who knows 240 00:12:57,760 --> 00:13:00,200 Speaker 1: what the spread of that's going to be tomorrow, morrow 241 00:13:00,559 --> 00:13:02,920 Speaker 1: or the day after that. So I think it is, 242 00:13:03,240 --> 00:13:06,000 Speaker 1: you know something, but it's happened very recently. So if 243 00:13:06,040 --> 00:13:08,160 Speaker 1: this continues to spread, this is certainly going to be 244 00:13:08,160 --> 00:13:11,200 Speaker 1: a question on tonight's earning his calls for as you know, 245 00:13:11,280 --> 00:13:13,680 Speaker 1: what have you moved already? How quickly can you move 246 00:13:13,720 --> 00:13:16,400 Speaker 1: and I and look, Tim Cook, this is his expertise, 247 00:13:16,440 --> 00:13:18,160 Speaker 1: he should know how to do this, but it's certainly 248 00:13:18,160 --> 00:13:19,599 Speaker 1: going to be an overhang on the stock in the 249 00:13:19,640 --> 00:13:21,200 Speaker 1: New York term. Well, but Tom and may just have 250 00:13:21,280 --> 00:13:23,440 Speaker 1: one question just to wrap it up. Do you have 251 00:13:23,520 --> 00:13:26,280 Speaker 1: a TV and LIGHTSHD for Liverpool or have you just 252 00:13:26,320 --> 00:13:29,080 Speaker 1: decided not to watch anymore because the season's over and 253 00:13:29,120 --> 00:13:32,320 Speaker 1: you've won the league. Now that we have two large 254 00:13:32,320 --> 00:13:34,959 Speaker 1: stream televisions, we can watch two games of once and 255 00:13:34,960 --> 00:13:38,120 Speaker 1: when they're running simultaneous Premier League games in the afternoon, 256 00:13:38,160 --> 00:13:40,200 Speaker 1: we got we gotta covered on two different games and 257 00:13:40,240 --> 00:13:44,080 Speaker 1: Liverpool will always get the primary spot to spread being 258 00:13:44,120 --> 00:13:46,760 Speaker 1: so far ahead? Was I rude to ask the Dutch 259 00:13:46,840 --> 00:13:49,800 Speaker 1: Prime Minister about Virgil van Dyke? Pharaoll thought it was 260 00:13:49,840 --> 00:13:53,440 Speaker 1: a folks pad, but you know I found it quiet 261 00:13:54,679 --> 00:13:58,640 Speaker 1: folks pass come on? Happy did that? What would be happy? 262 00:13:58,679 --> 00:14:00,760 Speaker 1: You did that? Honestly, I just want to say you 263 00:14:00,800 --> 00:14:02,959 Speaker 1: said you know for a time and John my question, 264 00:14:03,080 --> 00:14:04,920 Speaker 1: but also, how do you know I'm not following Liverpool? 265 00:14:04,920 --> 00:14:06,680 Speaker 1: You've made it very clear over the last few months 266 00:14:06,679 --> 00:14:12,839 Speaker 1: that you hate this discussion. If we've got clearance that 267 00:14:12,920 --> 00:14:15,559 Speaker 1: you like it now, No, not quite yet. Well we'll 268 00:14:15,600 --> 00:14:19,680 Speaker 1: continue Walter Prize, thank you so much, seeing you Raizer 269 00:14:19,840 --> 00:14:33,120 Speaker 1: Apple Target A two at some point. The focus on 270 00:14:33,160 --> 00:14:37,040 Speaker 1: Sunday on an absolute tragedy, the death of Kirby Bryant, 271 00:14:37,240 --> 00:14:39,840 Speaker 1: shaking the sporting world, jolt in the whole world from 272 00:14:39,840 --> 00:14:43,640 Speaker 1: a helicopter crash in California, the world reflecting on how 273 00:14:43,680 --> 00:14:46,760 Speaker 1: to mark his passing. His beloved ac Milan will play 274 00:14:46,840 --> 00:14:50,640 Speaker 1: Torino later this evening in Italy. I understand that ac 275 00:14:50,760 --> 00:14:54,200 Speaker 1: Milan will be about wearing black arm bands and observing 276 00:14:54,200 --> 00:14:56,480 Speaker 1: a minute silence as well. Tom and I think that's 277 00:14:56,480 --> 00:14:58,480 Speaker 1: something the basketball world has got to deal with us well, 278 00:14:58,560 --> 00:15:01,360 Speaker 1: how to reflect on his legacy and how to market 279 00:15:01,720 --> 00:15:04,600 Speaker 1: in the years to come. Joining us, I'm pleased to say, 280 00:15:04,840 --> 00:15:08,640 Speaker 1: is Stephen Palauka Bank Capital co chairman and Boston Celtics 281 00:15:08,920 --> 00:15:11,280 Speaker 1: co owner. Steve and I were talking about the legends 282 00:15:11,280 --> 00:15:14,880 Speaker 1: of basketball with Tom Kaine just last week. No one 283 00:15:14,920 --> 00:15:19,440 Speaker 1: expected this, Stephen, your thoughts, please, your reaction, well, a 284 00:15:19,480 --> 00:15:22,400 Speaker 1: real tragedy. Um. I got to know Kobe a little bit. 285 00:15:23,800 --> 00:15:25,360 Speaker 1: We played them in the in the two thousand and 286 00:15:25,400 --> 00:15:28,640 Speaker 1: eight finals, and he was incredible. But lost, but he 287 00:15:28,720 --> 00:15:31,840 Speaker 1: was really classy when they lost. And right after that 288 00:15:31,880 --> 00:15:34,840 Speaker 1: we went to the Olympics in August and I had 289 00:15:34,840 --> 00:15:39,080 Speaker 1: several breakfasts with him and he was incredibly gracious. He 290 00:15:39,200 --> 00:15:42,960 Speaker 1: later returned to the Garden and actually played his last 291 00:15:42,960 --> 00:15:44,760 Speaker 1: game here in the Garden. We gave him a plaque 292 00:15:44,800 --> 00:15:47,840 Speaker 1: at Peace of Parquet. And he was a great champion, 293 00:15:47,880 --> 00:15:51,320 Speaker 1: and he really believed in the NBA history of the NBA, 294 00:15:52,400 --> 00:15:54,840 Speaker 1: charismatic and did lots of things for lots of great people. 295 00:15:54,880 --> 00:15:57,640 Speaker 1: So he's a he's gonna be missed. It's just as shocking, 296 00:15:57,640 --> 00:16:00,440 Speaker 1: it seems surreal. His daughter Gigi Cuppa in the game, 297 00:16:00,440 --> 00:16:02,360 Speaker 1: he made very clear he wanted to walk away, and 298 00:16:02,440 --> 00:16:04,960 Speaker 1: there she was keeping the game. Steve explained to our 299 00:16:05,000 --> 00:16:11,480 Speaker 1: global audience the magic of June twelfth, ninety four Lakers Celtics, 300 00:16:11,520 --> 00:16:15,480 Speaker 1: and it was a reaffirmation of what's been a hugely 301 00:16:15,560 --> 00:16:20,000 Speaker 1: wonderful rivalry within all of sports. It was kindled in 302 00:16:20,080 --> 00:16:24,000 Speaker 1: Game seven in nineteen eighty four. And explain how that's 303 00:16:24,000 --> 00:16:27,600 Speaker 1: moved on and how Mr Bryant helped drive forward this 304 00:16:27,680 --> 00:16:32,080 Speaker 1: ancient rivalry. Well, the river get reunited back in in 305 00:16:32,240 --> 00:16:34,960 Speaker 1: in two thousand, you know, seven two eight with the 306 00:16:35,040 --> 00:16:38,320 Speaker 1: Kevin Garnett Celtics team. But many of us have been 307 00:16:38,360 --> 00:16:40,880 Speaker 1: to all those games in eighty four and eighty six 308 00:16:41,080 --> 00:16:43,800 Speaker 1: with Larry Bird against Magic Johnson. And now it was 309 00:16:43,880 --> 00:16:47,480 Speaker 1: Kobe against Paul Pierce, and Paul Pierce, ironical enough, was 310 00:16:47,520 --> 00:16:50,400 Speaker 1: in l a legend as well. And uh and they 311 00:16:50,440 --> 00:16:52,600 Speaker 1: really went out into that finals and Paul Pierce ended 312 00:16:52,680 --> 00:16:56,240 Speaker 1: up finally getting a championship, which was well deserved. But 313 00:16:56,320 --> 00:16:59,800 Speaker 1: again Kobe was extremely gracious and defeating. I remember at 314 00:16:59,800 --> 00:17:04,680 Speaker 1: the Olympics two coach k told me that the interesting 315 00:17:04,720 --> 00:17:07,359 Speaker 1: thing about Kobe was that of all the guys on 316 00:17:07,400 --> 00:17:09,920 Speaker 1: the team, he was actually the hardest worker. He was 317 00:17:09,960 --> 00:17:12,440 Speaker 1: a superstar, but he was the hardest worker and that 318 00:17:12,600 --> 00:17:15,280 Speaker 1: set the tone for the for the American team. He 319 00:17:15,280 --> 00:17:18,240 Speaker 1: would go to practice for the Olympics and then spent 320 00:17:18,280 --> 00:17:20,560 Speaker 1: another hour himself with a trainer, running up and down 321 00:17:20,560 --> 00:17:23,560 Speaker 1: and shooting. And that's an incredible example already a superstar 322 00:17:23,560 --> 00:17:26,040 Speaker 1: and still working hard, respecting the game and being a 323 00:17:26,040 --> 00:17:30,240 Speaker 1: great leader. Uh So it the Celtics, right, we will 324 00:17:30,280 --> 00:17:33,399 Speaker 1: live on. You will remember Kobe and always remember that 325 00:17:33,480 --> 00:17:35,960 Speaker 1: last game he played in the garden and the excitement 326 00:17:37,119 --> 00:17:39,840 Speaker 1: that he brought it. It's just a pity with all 327 00:17:39,880 --> 00:17:42,119 Speaker 1: those people who died in that tragic accident. Steve, the 328 00:17:42,160 --> 00:17:44,159 Speaker 1: work ethic that you mentioned, I think everyone's got their 329 00:17:44,160 --> 00:17:47,520 Speaker 1: own story or we've heard stories about Kobe Bryant's worth ethic, 330 00:17:47,560 --> 00:17:51,359 Speaker 1: and that's really how he transcended beyond just basketball and 331 00:17:51,480 --> 00:17:55,080 Speaker 1: motivated people that had never met him. Stephen, we started 332 00:17:55,080 --> 00:17:58,280 Speaker 1: this conversation about how to mark his legacy, what the 333 00:17:58,400 --> 00:18:03,560 Speaker 1: NBA should do. Any thoughts on that at the moment, Steve, Well, 334 00:18:03,720 --> 00:18:06,160 Speaker 1: I think Adam Silver, as you know, it's an incredible 335 00:18:06,160 --> 00:18:09,960 Speaker 1: commissioner and he's working on on that. And uh, I 336 00:18:10,000 --> 00:18:12,480 Speaker 1: know deeply from all the owners in the NBA, you 337 00:18:12,520 --> 00:18:14,480 Speaker 1: know the depost that will feel for Kobe. So so 338 00:18:14,520 --> 00:18:16,840 Speaker 1: I think Adam is working on that right now and 339 00:18:17,119 --> 00:18:21,040 Speaker 1: they'll be they'll be tributes and an appropriate handling of that. 340 00:18:21,359 --> 00:18:23,679 Speaker 1: Is this great legend that we're gonna miss every day 341 00:18:23,680 --> 00:18:25,600 Speaker 1: and I still again it's hard to hard to believe 342 00:18:25,600 --> 00:18:27,680 Speaker 1: that he's gone. Steve Peller could thank you so much. 343 00:18:27,720 --> 00:18:30,840 Speaker 1: We greatly appreciate your attendance here. After speaking to you 344 00:18:30,880 --> 00:18:33,960 Speaker 1: and Damos as well, A gentleman of the parquet floor 345 00:18:34,480 --> 00:18:46,600 Speaker 1: in Boston. Let's tend to some commentary from Mohammed al Arian, 346 00:18:46,640 --> 00:18:50,440 Speaker 1: now Alliance chief economic advisor and Bloomberg opinion columnists, who 347 00:18:50,440 --> 00:18:52,760 Speaker 1: writes the following. Because it's too early to know about 348 00:18:52,760 --> 00:18:55,920 Speaker 1: the financial contagion of the coronavirus. It is too early 349 00:18:56,000 --> 00:18:58,679 Speaker 1: to say whether and when this combination of by the 350 00:18:58,760 --> 00:19:02,600 Speaker 1: dip and fear of me singing out tendencies will prevail. 351 00:19:02,920 --> 00:19:06,320 Speaker 1: And this is not the only uncertainty in play. Please 352 00:19:06,400 --> 00:19:08,520 Speaker 1: to say the giving us some of its precious time 353 00:19:08,600 --> 00:19:13,159 Speaker 1: in transit, I understand, Mohammed al Harry and joint us. Now, Mohammed, 354 00:19:13,160 --> 00:19:14,760 Speaker 1: it's great to have you with us. Just explore those 355 00:19:14,800 --> 00:19:18,280 Speaker 1: thoughts further, just a little bit more, please, Yeah. I mean, 356 00:19:18,320 --> 00:19:20,880 Speaker 1: for the last few years, there's been a tug of war. 357 00:19:21,520 --> 00:19:25,719 Speaker 1: On the one hand, very positive market technicals, people feeling 358 00:19:25,760 --> 00:19:29,040 Speaker 1: that every dip was a buying opportunity. The fear of 359 00:19:29,080 --> 00:19:31,760 Speaker 1: missing out the former was very strong. On the other hand, 360 00:19:31,880 --> 00:19:37,360 Speaker 1: fundamentals have been weakening. What we have now is increasingly 361 00:19:37,400 --> 00:19:41,159 Speaker 1: a sudden stop to the second largest economy in the world, 362 00:19:42,040 --> 00:19:45,439 Speaker 1: and we're going to test the resilience of the market 363 00:19:45,440 --> 00:19:48,280 Speaker 1: technical as we go forward or where do you hear 364 00:19:48,280 --> 00:19:50,919 Speaker 1: a lot of commentary saying this is a transitory shock, 365 00:19:51,400 --> 00:19:54,760 Speaker 1: it's reversible by now, but you know this one is 366 00:19:54,800 --> 00:19:57,800 Speaker 1: more uncertain than what works in the past. Mohmmed I 367 00:19:57,880 --> 00:20:01,000 Speaker 1: got up in front of me and claim debt piece 368 00:20:01,280 --> 00:20:03,639 Speaker 1: that no doubt one of the institutions you managed for 369 00:20:03,720 --> 00:20:08,480 Speaker 1: years would own, which is the Apple computer piece out 370 00:20:08,560 --> 00:20:13,720 Speaker 1: ten years now paying point seven five in Swiss franc 371 00:20:14,480 --> 00:20:18,439 Speaker 1: yielding a negative statistic and just this year it's up 372 00:20:18,480 --> 00:20:22,160 Speaker 1: twelve percent from one to one twelve. It's a peak 373 00:20:22,240 --> 00:20:26,560 Speaker 1: before the virus. This is the most odd messed up 374 00:20:27,040 --> 00:20:31,359 Speaker 1: set of valuations we have. What's a mortal person to 375 00:20:31,440 --> 00:20:35,320 Speaker 1: do a mere normal person to do? Given the oddities 376 00:20:35,400 --> 00:20:40,919 Speaker 1: you perceive every day, the persons would understand that we 377 00:20:40,960 --> 00:20:45,880 Speaker 1: are living in an exceptional era of massive central bank 378 00:20:45,960 --> 00:20:51,360 Speaker 1: liquidity intersection. What the FED has done a loan in September, 379 00:20:51,359 --> 00:20:53,959 Speaker 1: it's absolutely remarkable in terms of how much it has 380 00:20:54,000 --> 00:20:58,680 Speaker 1: expanded function and that has rippled through the financial markets. 381 00:20:58,720 --> 00:21:01,840 Speaker 1: So we have been right in this wonderful liquidity wave 382 00:21:02,280 --> 00:21:04,919 Speaker 1: that results in three things. I call it, you know, 383 00:21:06,160 --> 00:21:10,479 Speaker 1: the dream team for investors. One is high returns. Two 384 00:21:10,640 --> 00:21:14,359 Speaker 1: is no volatility, and three is you make money even 385 00:21:14,480 --> 00:21:17,240 Speaker 1: on your with mitigating strategy to even even make money 386 00:21:17,320 --> 00:21:20,160 Speaker 1: on government bond and high quality bonds like you just cited. 387 00:21:20,560 --> 00:21:23,760 Speaker 1: So this is an exceptional period and the question has 388 00:21:23,800 --> 00:21:27,760 Speaker 1: always been how long would it last? Well, Mohammed, it 389 00:21:27,800 --> 00:21:30,399 Speaker 1: seems to have lasted a very long time, and central 390 00:21:30,400 --> 00:21:32,720 Speaker 1: banks have made it clear that they're willing to support 391 00:21:32,760 --> 00:21:36,399 Speaker 1: this with the addition of stimulus, whether it's expecting the 392 00:21:36,400 --> 00:21:39,280 Speaker 1: balance heet or cutting rates. So why not by the Dept? 393 00:21:40,800 --> 00:21:43,960 Speaker 1: Because it's not an issue of willingness, Lisa. The willingness 394 00:21:43,960 --> 00:21:47,520 Speaker 1: of central banks to continue on this path, I think 395 00:21:47,840 --> 00:21:52,439 Speaker 1: is very clear. It's an ability progression. So look at 396 00:21:52,520 --> 00:21:56,879 Speaker 1: the ECB. Depending on on how you feel, the e 397 00:21:57,040 --> 00:22:01,240 Speaker 1: c B is somewhere between being in effective to being 398 00:22:01,359 --> 00:22:04,159 Speaker 1: counter productive. And even within the e c read just 399 00:22:04,320 --> 00:22:07,480 Speaker 1: talk about collaterals down they dropped negative interustrates. So we 400 00:22:07,520 --> 00:22:11,879 Speaker 1: are getting to the towards the end of this remarkable period. 401 00:22:12,160 --> 00:22:16,520 Speaker 1: But I agree it is very difficult to call um 402 00:22:16,720 --> 00:22:18,679 Speaker 1: the end. That's why I have been saying over and 403 00:22:18,720 --> 00:22:22,240 Speaker 1: over again keep a claim on the upside, but increasingly 404 00:22:22,359 --> 00:22:25,080 Speaker 1: do so in a defensive manner. That's been my strategy 405 00:22:25,119 --> 00:22:27,119 Speaker 1: for the last six months. Mohammed, Let's talk about the 406 00:22:27,119 --> 00:22:29,600 Speaker 1: economics of this. You mentioned something quite important that we 407 00:22:29,600 --> 00:22:33,280 Speaker 1: shouldn't disregard a sudden stuff in the world second large economy. 408 00:22:33,359 --> 00:22:35,280 Speaker 1: It certainly seems that way for several of the biggest 409 00:22:35,280 --> 00:22:38,399 Speaker 1: cities in China at the moment. I'm wondering how that 410 00:22:38,480 --> 00:22:40,879 Speaker 1: spills over to the rest of the world. At the moment, 411 00:22:41,040 --> 00:22:43,280 Speaker 1: I believe the consensus, if I could get my hands 412 00:22:43,280 --> 00:22:45,920 Speaker 1: around the consensus right now, might sound a little something 413 00:22:46,000 --> 00:22:48,119 Speaker 1: like we'll get through this in a month or so, 414 00:22:48,520 --> 00:22:51,480 Speaker 1: we'll bounce back. You've been making the point for a 415 00:22:51,520 --> 00:22:54,760 Speaker 1: long time that in places like Europe, restore speed, and 416 00:22:54,840 --> 00:22:59,159 Speaker 1: it wouldn't take much to shake a vulnerable recovery and 417 00:22:59,200 --> 00:23:01,440 Speaker 1: see cracks in it real quickly. Is that something you're 418 00:23:01,440 --> 00:23:06,040 Speaker 1: concerned about the moment, Yes, John, My two flashing yellow 419 00:23:06,119 --> 00:23:11,000 Speaker 1: lights are China and Europe. China is an emerging economy 420 00:23:11,520 --> 00:23:15,760 Speaker 1: subject to increasingly sudden stop dynamics. As I mentioned. Now, 421 00:23:15,920 --> 00:23:19,119 Speaker 1: those of us who have lived in emerging markets UM 422 00:23:19,200 --> 00:23:22,840 Speaker 1: investing know what a sudden stop looks like. UM. It accelerates, 423 00:23:22,920 --> 00:23:27,240 Speaker 1: it cascades, it brings things to a halt, and then 424 00:23:27,280 --> 00:23:31,520 Speaker 1: you expose all sorts of fragilities. And one of the 425 00:23:31,560 --> 00:23:36,040 Speaker 1: fragilities here is China's historic development process. It is navigating 426 00:23:36,040 --> 00:23:39,399 Speaker 1: the middle intoan transition, and this makes the probability of 427 00:23:39,400 --> 00:23:43,680 Speaker 1: the middle income trap much higher. Then go to Europe, 428 00:23:44,560 --> 00:23:49,440 Speaker 1: where the hope was that it would get some transformation 429 00:23:49,440 --> 00:23:52,560 Speaker 1: of its cyclical bounds into something most secular and structural. 430 00:23:52,600 --> 00:23:57,359 Speaker 1: That's not happening. Policy is not stepping up. Global headwinds 431 00:23:57,480 --> 00:24:00,320 Speaker 1: are getting stronger. So so I worry about these two areas. 432 00:24:00,320 --> 00:24:03,160 Speaker 1: I worry less about the US, but China and Europe. Yes. 433 00:24:03,400 --> 00:24:06,240 Speaker 1: And now John fare and I continue our discussion in Davos. 434 00:24:06,280 --> 00:24:08,679 Speaker 1: We do this with Muhammad l Area of Alliance and 435 00:24:08,720 --> 00:24:11,520 Speaker 1: of course writing for Bloomberg Opinion. I don't know if 436 00:24:11,560 --> 00:24:13,240 Speaker 1: you're caught up with a doctor Lary, and I know 437 00:24:13,320 --> 00:24:16,879 Speaker 1: you're fixated on the Super Bowl forty Niners and Chiefs. 438 00:24:16,920 --> 00:24:21,240 Speaker 1: But Mr Prince of a Bridgewater decided boom bust is over. 439 00:24:21,280 --> 00:24:25,520 Speaker 1: We had a huge response, huge response saying wrong. But 440 00:24:25,600 --> 00:24:28,600 Speaker 1: let's walk through the theory. Boom bust is a cycle. 441 00:24:29,400 --> 00:24:32,440 Speaker 1: The cycle is not as efficient because we've come down 442 00:24:32,440 --> 00:24:35,760 Speaker 1: to the lower bound lower interest rates, and maybe that's 443 00:24:35,840 --> 00:24:38,800 Speaker 1: generated less of a boom bust and more weighted towards 444 00:24:38,880 --> 00:24:45,840 Speaker 1: a leaden economy forward, Have we abandoned the traditional business cycle? No? 445 00:24:46,440 --> 00:24:49,240 Speaker 1: If the boom bus was only a function of central 446 00:24:49,280 --> 00:24:53,040 Speaker 1: bank actions, then Mr Prince would have an important point. 447 00:24:53,680 --> 00:24:57,280 Speaker 1: But the boom bus is also a function of private 448 00:24:57,320 --> 00:25:01,280 Speaker 1: sector behavior. Um think of mince key. What does a 449 00:25:01,359 --> 00:25:04,000 Speaker 1: period of calm do? It encourages people to take a risk, 450 00:25:04,080 --> 00:25:06,639 Speaker 1: to take too much risk. And part of the boom 451 00:25:06,640 --> 00:25:11,560 Speaker 1: bus comes from private sector behavior. So I buy the 452 00:25:11,640 --> 00:25:14,240 Speaker 1: notion that we're not going to get massive central bank 453 00:25:14,800 --> 00:25:17,320 Speaker 1: hikes in interest rates, But I do not buy the 454 00:25:17,359 --> 00:25:21,960 Speaker 1: notion that the private sector has has an inherent great moderation. 455 00:25:22,359 --> 00:25:24,359 Speaker 1: The private sector, as far as I can see, is 456 00:25:24,359 --> 00:25:28,640 Speaker 1: still subject to poom bus financial cycles. What's so important, 457 00:25:28,680 --> 00:25:30,280 Speaker 1: your folks? And I'm not going to get into the 458 00:25:30,320 --> 00:25:34,800 Speaker 1: geometry right now. Geometry and radio lease is tough. But Mohammed, 459 00:25:35,119 --> 00:25:38,600 Speaker 1: if we drop any kind of function down towards a 460 00:25:38,680 --> 00:25:43,080 Speaker 1: given Paul Krugman zero bound, or even go to negative rates, 461 00:25:43,520 --> 00:25:48,560 Speaker 1: there's a presumption of recovery. Do you presume a cover 462 00:25:48,760 --> 00:25:52,320 Speaker 1: or recovery of stability over the next two or five 463 00:25:52,920 --> 00:25:56,040 Speaker 1: or even ten years. Are we setting ourselves up from 464 00:25:56,119 --> 00:26:00,040 Speaker 1: massive instabilities? So it depends on the part of the 465 00:26:00,240 --> 00:26:02,920 Speaker 1: reaction function. If we are going to continue to rely 466 00:26:03,000 --> 00:26:06,440 Speaker 1: on central banks, then think of the image of pushing 467 00:26:06,480 --> 00:26:09,840 Speaker 1: on the string. We cannot rely on central banks to 468 00:26:10,000 --> 00:26:13,760 Speaker 1: keep the whole game going. If we can see the 469 00:26:13,840 --> 00:26:17,680 Speaker 1: pivot doing more comprehensive pro growth policies, yes, I can 470 00:26:17,680 --> 00:26:21,080 Speaker 1: see a rebound. That's why I increasingly think that we 471 00:26:21,200 --> 00:26:24,480 Speaker 1: can be coming to the neck of this junction where 472 00:26:24,520 --> 00:26:28,280 Speaker 1: the pathway are on becomes totally unsustainable, and that's a 473 00:26:28,359 --> 00:26:30,920 Speaker 1: decision to be made, and where we end up will 474 00:26:30,960 --> 00:26:34,080 Speaker 1: be mainly a function of the policy response. Mohammed, you 475 00:26:34,080 --> 00:26:37,440 Speaker 1: are saying about the Minsky moment that typically during these 476 00:26:37,440 --> 00:26:41,000 Speaker 1: periods of low volatility and central bank stimulus, there's a 477 00:26:41,040 --> 00:26:44,359 Speaker 1: build up in risk that can be truly catastrophic, at 478 00:26:44,440 --> 00:26:46,639 Speaker 1: least from a market's perspective. Are you seeing that in 479 00:26:46,800 --> 00:26:50,720 Speaker 1: any place in markets now? So it's importantly said to 480 00:26:50,760 --> 00:26:53,880 Speaker 1: distinguish between the Minsky moment, which is when you get 481 00:26:54,480 --> 00:26:59,800 Speaker 1: a sudden financial stomp, and the Minsky instability hypothesis, which 482 00:27:00,000 --> 00:27:04,440 Speaker 1: addressed at that the private sector takes too much risk. Um. 483 00:27:04,480 --> 00:27:06,560 Speaker 1: It's important to make that distinction. I was talking about 484 00:27:06,560 --> 00:27:09,800 Speaker 1: the mentioned stability hypothesis, and yes, I see it. I 485 00:27:09,920 --> 00:27:14,119 Speaker 1: see it in the issue whence by high yield companies. 486 00:27:14,280 --> 00:27:17,479 Speaker 1: I see it in where spreads are. I see it 487 00:27:17,640 --> 00:27:21,240 Speaker 1: in the thinking only in terms of relative yield. Very 488 00:27:21,240 --> 00:27:25,920 Speaker 1: few people talk about absolute yield. Mohammed such a behind 489 00:27:25,960 --> 00:27:28,800 Speaker 1: the San Francisco forty niners. His bill called you up 490 00:27:28,840 --> 00:27:35,359 Speaker 1: at nineteen one dollars a ticket. He has not, UM, 491 00:27:35,400 --> 00:27:38,400 Speaker 1: but I must say that I am supporting the forty niners. 492 00:27:38,160 --> 00:27:42,399 Speaker 1: It goes back to the days of Montana Um beyond me. 493 00:27:42,480 --> 00:27:44,760 Speaker 1: They just captured my hat ten. So as much as 494 00:27:44,760 --> 00:27:48,200 Speaker 1: I respect the chiefs and especially the coach, I will 495 00:27:48,240 --> 00:27:56,880 Speaker 1: be polightly inclined in favor is Yeah, dollars for fancy 496 00:27:56,880 --> 00:28:01,359 Speaker 1: sea Mumma Hilarian, thank you so much, Thank you greatly appreciated. 497 00:28:12,480 --> 00:28:15,000 Speaker 1: Right now, Andrew Holland horstel Saves. He's a city group, 498 00:28:15,000 --> 00:28:17,760 Speaker 1: and what's terming about and not only the PhD from 499 00:28:17,880 --> 00:28:21,639 Speaker 1: us U c l A and economics, but also serious 500 00:28:21,800 --> 00:28:25,240 Speaker 1: fixed income effort. Andrew, I'm putting out on Twitter and 501 00:28:25,240 --> 00:28:28,400 Speaker 1: LinkedIn right now the log two year yield, and we're 502 00:28:28,400 --> 00:28:32,000 Speaker 1: a key junction right now for the two year yield, 503 00:28:32,040 --> 00:28:35,360 Speaker 1: it's sort of where it's been through late two thousand nineteen. 504 00:28:35,920 --> 00:28:38,920 Speaker 1: If the two year yield breaks down to where it 505 00:28:39,080 --> 00:28:41,960 Speaker 1: was early two thousand seventeen, what does that signal to 506 00:28:42,040 --> 00:28:45,080 Speaker 1: Chairman Paul? Yeah, isn't this interesting? And in a way, 507 00:28:45,080 --> 00:28:48,360 Speaker 1: it's so much like two thousand nineteen again to your 508 00:28:48,440 --> 00:28:51,400 Speaker 1: yields that are already below a hundred fifty basis points 509 00:28:51,400 --> 00:28:54,200 Speaker 1: and that's the bottom of the sense policy range. So 510 00:28:54,560 --> 00:28:57,480 Speaker 1: if you're the said looking at this, you're seeing that, 511 00:28:57,640 --> 00:29:01,080 Speaker 1: you know, very very front end inversion. And I don't 512 00:29:01,120 --> 00:29:03,040 Speaker 1: think we're there yet, but this is the kind of 513 00:29:03,080 --> 00:29:05,600 Speaker 1: scenario where you start to get the questions you're pricing 514 00:29:05,640 --> 00:29:08,040 Speaker 1: FED cuts, doesn't it become hard for the FED not 515 00:29:08,200 --> 00:29:10,000 Speaker 1: to cut? So I don't think we're there on that 516 00:29:10,120 --> 00:29:12,880 Speaker 1: narrative yet, but we're getting there. Andrew, I was struck 517 00:29:12,880 --> 00:29:16,080 Speaker 1: by yesterday we saw definitely a risk off feel of 518 00:29:16,120 --> 00:29:21,200 Speaker 1: flight to quality bonds, rallying, yield curve flattening and flattening 519 00:29:21,240 --> 00:29:24,600 Speaker 1: the most since August by a couple of measures. How 520 00:29:24,640 --> 00:29:27,520 Speaker 1: concerning is this? The suggestion being that the FED make 521 00:29:27,600 --> 00:29:30,400 Speaker 1: cut rates in response to some sort of exogenous threat 522 00:29:30,520 --> 00:29:33,280 Speaker 1: or anything, but it's not going to stimulate growth in 523 00:29:33,320 --> 00:29:36,480 Speaker 1: the longer term. Yes, So I think that's again that's 524 00:29:36,560 --> 00:29:38,720 Speaker 1: a lot of what we were looking at in twenty nineteen, 525 00:29:38,920 --> 00:29:41,480 Speaker 1: and that is really a reflection of where we are 526 00:29:41,600 --> 00:29:44,520 Speaker 1: with the global economy and the U S economy right now, 527 00:29:44,520 --> 00:29:48,680 Speaker 1: when you're operating at a decent but pretty low level 528 00:29:48,680 --> 00:29:50,880 Speaker 1: of trend growth. So we think we're growing around two 529 00:29:50,880 --> 00:29:53,400 Speaker 1: percent in the US. If you have any kind of 530 00:29:53,400 --> 00:29:56,440 Speaker 1: downside shock to that, then you're looking at a pretty 531 00:29:56,520 --> 00:29:59,680 Speaker 1: low growth rate, maybe even a recession um. And that's 532 00:29:59,720 --> 00:30:01,680 Speaker 1: I think the set has been quite clever and kind 533 00:30:01,680 --> 00:30:04,280 Speaker 1: of saying, well, if there's a material reassessment, we can 534 00:30:04,280 --> 00:30:07,280 Speaker 1: always provide more accommodation. And that's why the market keeps 535 00:30:07,320 --> 00:30:09,920 Speaker 1: pricing that. So in a sense that the market is 536 00:30:09,960 --> 00:30:14,160 Speaker 1: kind of putting that set accommodation back into yields and 537 00:30:14,200 --> 00:30:16,760 Speaker 1: that's why you see the yield curve inverting um. But 538 00:30:16,840 --> 00:30:18,400 Speaker 1: it is it's a it's a sign of that kind 539 00:30:18,400 --> 00:30:22,000 Speaker 1: of moderation and global growth. Andrew, I'm struck also, you 540 00:30:22,040 --> 00:30:25,080 Speaker 1: say FED accommodation more of it is it rate cuts 541 00:30:25,200 --> 00:30:27,840 Speaker 1: or we're seeing this balance sheet expansion that is at 542 00:30:27,880 --> 00:30:32,000 Speaker 1: the fastest pace since the early tens. Is that going 543 00:30:32,040 --> 00:30:35,160 Speaker 1: to continue? Yeah? Great question. And we've had this back 544 00:30:35,200 --> 00:30:36,840 Speaker 1: and forth in markets, and Tom and I have had 545 00:30:36,880 --> 00:30:39,320 Speaker 1: this back and forth. Is it quey is it not quey? 546 00:30:39,600 --> 00:30:41,720 Speaker 1: And feed officials have been pretty adamant that this down 547 00:30:41,720 --> 00:30:43,600 Speaker 1: sheet expansion is not quee, and I think there's a 548 00:30:43,600 --> 00:30:47,160 Speaker 1: good economic argument for that. But I think we're also 549 00:30:47,200 --> 00:30:49,440 Speaker 1: all aware that many in the market are seeing this 550 00:30:49,520 --> 00:30:52,960 Speaker 1: balance sheet expansion is something that's supporting markets. So does 551 00:30:52,960 --> 00:30:54,640 Speaker 1: that have some time here? I think they can take 552 00:30:54,640 --> 00:30:56,840 Speaker 1: their time. They don't need to ratchet down the pace 553 00:30:56,880 --> 00:31:00,680 Speaker 1: of purchases um probably at least until cute too could 554 00:31:00,680 --> 00:31:03,160 Speaker 1: push that out even further. And to the extent we 555 00:31:03,200 --> 00:31:06,720 Speaker 1: get concerned about downside risk, that would be reason to 556 00:31:07,040 --> 00:31:09,080 Speaker 1: maybe push it out a bit. What's your run rate 557 00:31:09,120 --> 00:31:12,080 Speaker 1: on GDP twelve months forward? What's your real GDP? Call? 558 00:31:13,160 --> 00:31:16,840 Speaker 1: Exactly two percent? So going from an economy is slightly 559 00:31:16,880 --> 00:31:20,920 Speaker 1: above two percent down to city group is at two 560 00:31:20,920 --> 00:31:25,239 Speaker 1: point zero percent. That's right. Wow. Do you see this 561 00:31:25,280 --> 00:31:28,040 Speaker 1: came up in Davos meeting. After meeting do you see 562 00:31:28,200 --> 00:31:34,640 Speaker 1: any history that a central bank can overtly reflate an economy. 563 00:31:35,600 --> 00:31:38,880 Speaker 1: You know, we have not seen this kind of major reflation. 564 00:31:39,000 --> 00:31:41,880 Speaker 1: I think we get excited about it at the beginning 565 00:31:41,920 --> 00:31:43,760 Speaker 1: of most years for the past few years, and was 566 00:31:43,840 --> 00:31:46,240 Speaker 1: interesting here in the conversation the comments coming out of 567 00:31:46,280 --> 00:31:50,000 Speaker 1: Davos and a lot of positive sentiment. Um very hard 568 00:31:50,000 --> 00:31:53,160 Speaker 1: to engineer that kind of reflation, especially where we are now, Andrew. 569 00:31:53,520 --> 00:31:56,200 Speaker 1: We are looking at a coronavirus spreading and a lot 570 00:31:56,240 --> 00:31:59,040 Speaker 1: of people are trying to figure out the potential ramifications 571 00:31:59,080 --> 00:32:01,560 Speaker 1: to the global economy me as well as the United States. 572 00:32:01,960 --> 00:32:04,560 Speaker 1: Can you just map out just a rough sort of 573 00:32:04,600 --> 00:32:08,480 Speaker 1: ballpark of the potential impact here or lack thereof that 574 00:32:08,560 --> 00:32:12,200 Speaker 1: could potentially affect people's views and where they go ass 575 00:32:12,240 --> 00:32:15,240 Speaker 1: it wise, there's just so much uncertainty right now, and 576 00:32:15,280 --> 00:32:17,240 Speaker 1: I think that's really what markets are pricing. That's why 577 00:32:17,240 --> 00:32:20,640 Speaker 1: you're seeing this kind of generalized risk off flight into treasuries, 578 00:32:20,680 --> 00:32:24,240 Speaker 1: flight into US dollar exactly what you would expect. I 579 00:32:24,280 --> 00:32:26,280 Speaker 1: think we already know there's going to be an economic 580 00:32:26,320 --> 00:32:30,360 Speaker 1: impact in China. We know that travel has been curtailed 581 00:32:30,560 --> 00:32:33,520 Speaker 1: during the important lunar New year period, So that's definitely 582 00:32:33,520 --> 00:32:36,880 Speaker 1: gonna impact China GDP. UM not clear that there's any 583 00:32:36,880 --> 00:32:39,880 Speaker 1: direct impact on US GDP. But remember we were all 584 00:32:39,920 --> 00:32:42,160 Speaker 1: looking at the global p m I those we're turning up, 585 00:32:42,240 --> 00:32:44,240 Speaker 1: China t m I was turning up. So if that 586 00:32:44,320 --> 00:32:47,520 Speaker 1: global story gets called into question and you start to 587 00:32:47,520 --> 00:32:50,160 Speaker 1: worry a little bit more about the US by extension Andrews, 588 00:32:50,160 --> 00:32:53,080 Speaker 1: thank you so much. Enterhollowners's with a City group as well. 589 00:32:53,360 --> 00:32:57,560 Speaker 1: Thanks for listening to the Bloomberg Surveillance podcast. Subscribe and 590 00:32:57,640 --> 00:33:02,960 Speaker 1: listen to interviews on Apple podcast, SoundCloud, or whichever podcast 591 00:33:03,000 --> 00:33:07,240 Speaker 1: platform you prefer. I'm on Twitter at Tom Keane before 592 00:33:07,240 --> 00:33:11,080 Speaker 1: the podcast. You can always catch us worldwide. I'm Bloomberg 593 00:33:11,200 --> 00:33:11,480 Speaker 1: Radio