Latest / Bloomberg Intelligence / NFL Advertisers Will Have an 'Ebullient' Year, Porter Bibb Says

Transcript

NFL Advertisers Will Have an 'Ebullient' Year, Porter Bibb Says · Bloomberg Intelligence

• 0:05
  Speaker 1: Welcome to the Bloomberg P and L Podcast. I'm Pim
• 0:08
  Speaker 1: Fox along with my co host Lisa Bramowitz. Each day
• 0:11
  Speaker 1: we bring you the most important, noteworthy, and useful interviews
• 0:15
  Speaker 1: for you and your money, whether you're at the grocery
• 0:17
  Speaker 1: store or the trading floor. Find the Bloomberg P M
• 0:20
  Speaker 1: L Podcast on Apple Podcasts, SoundCloud, and Bloomberg dot Com.
• 0:31
  Speaker 1: I want to bring in Oliver Redneck. He has our
• 0:33
  Speaker 1: Bloomberg Stocks Reporter, and he joins us right now. I
• 0:36
  Speaker 1: want to just get a lay of the land. There
• 0:38
  Speaker 1: are a bunch of deals that came out. What's catching
• 0:40
  Speaker 1: your eye today. I think that today, at least from
• 0:43
  Speaker 1: the market's perspective, is just it's it's quiet still, it's
• 0:46
  Speaker 1: low volume, it is a sort of stand still that
• 0:49
  Speaker 1: it's kind of gripped equity markets at least when we
• 0:51
  Speaker 1: look at risk assets, I think it's probably a little
• 0:54
  Speaker 1: bit more interesting, sort of your neck in the woods.
• 0:56
  Speaker 1: It's just what's happening with bonds, what's happening with yields?
• 0:58
  Speaker 1: And I think that also spells a story for stocks
• 1:01
  Speaker 1: as well, because in the past week there's a little
• 1:03
  Speaker 1: bit of reversals. Our story that our team put out
• 1:05
  Speaker 1: on Friday that kind of took the week in recap
• 1:08
  Speaker 1: and that I think says the stage for this week
• 1:10
  Speaker 1: is large about some of the rotations that have occurred
• 1:12
  Speaker 1: within the market. This is largely been a story of
• 1:14
  Speaker 1: the past year, which is changing perspectives on what's going
• 1:17
  Speaker 1: to work, what's going to work based on Washington, what's
• 1:20
  Speaker 1: going to work based on economic growth? Um, right now,
• 1:23
  Speaker 1: I've got a few interesting notes in my inbox that
• 1:24
  Speaker 1: our story of homing in on the idea of a
• 1:27
  Speaker 1: potential value stock rebound based on higher rates and what
• 1:31
  Speaker 1: happens when the rest of the market starts to view
• 1:34
  Speaker 1: higher rates and the likelihood of that beginning to happen.
• 1:37
  Speaker 1: What kind of companies do go in? And there are
• 1:38
  Speaker 1: a little bit of different types of companies well, and
• 1:40
  Speaker 1: I think that a lot of the muted volatility that
• 1:43
  Speaker 1: we're seeing in markets is partly because we're just getting
• 1:46
  Speaker 1: so much noise from Washington, d c UH and the
• 1:48
  Speaker 1: latest I want to uh have some insight from Porter Bibb,
• 1:52
  Speaker 1: who's managing partner at Media Tech Capital Partners, which is
• 1:56
  Speaker 1: based in New York and and Porter bib is known
• 1:59
  Speaker 1: as being the first publisher of Rolling Stone Magazine reporter
• 2:03
  Speaker 1: Um we Over the weekend, President Trump diverted attention away
• 2:08
  Speaker 1: from his tax plan and put it toward whether or
• 2:11
  Speaker 1: not NFL players stand for the national anthem. He absolutely
• 2:16
  Speaker 1: limbasted some for kneeling in protest of the pervasive racial
• 2:21
  Speaker 1: discrimination in the country. He was saying that that's disgraceful.
• 2:25
  Speaker 1: As a result, the team's kneeled even more. What's your
• 2:28
  Speaker 1: take on this and at what point our advertisers going
• 2:30
  Speaker 1: to have to weigh in on this? Uh sort of
• 2:34
  Speaker 1: odd controversy on. On top of criticizing the activists who
• 2:40
  Speaker 1: were kneeling, he also criticized the referee referees for taming
• 2:44
  Speaker 1: down the game and taking away some of the violent
• 2:47
  Speaker 1: hits that he demonstrated by banging his fist together in
• 2:51
  Speaker 1: a typical Trumpian manner. But the reality is, after he said,
• 2:56
  Speaker 1: the ratings of the NFL are way way down. Last
• 3:00
  Speaker 1: year was the highest NFL rating in for the season
• 3:05
  Speaker 1: in history, and except for the two hurricane weekends of
• 3:08
  Speaker 1: Harvey and Irma, they're running ahead right now of last year.
• 3:12
  Speaker 1: So it looks like NFL ratings and viewership is going
• 3:15
  Speaker 1: to be very very strong and not way way down.
• 3:18
  Speaker 1: Advertisers are sitting tight because two thirds are more of
• 3:22
  Speaker 1: the NFL most advocate uh strongest fans are basically in
• 3:29
  Speaker 1: the Trump camp in terms of activism, mixing with with
• 3:34
  Speaker 1: their their sports, and advertisers are going to stay very silent,
• 3:38
  Speaker 1: but pay attention to the ratings, and the ratings, as
• 3:41
  Speaker 1: I suggested, are holding. So NFL advertising is going to
• 3:45
  Speaker 1: be very bulliant this year. Is your sense that viewership
• 3:49
  Speaker 1: will go down? I don't think so. I think it's likely.
• 3:53
  Speaker 1: Yesterday they had an all time record rating viewership because
• 3:58
  Speaker 1: everybody wanted to see what was going to happen with
• 4:00
  Speaker 1: the with the kneelings. It started with the Jaguars and
• 4:03
  Speaker 1: Ravens in London and Saturday Sunday morning and continued um
• 4:08
  Speaker 1: right through the evening. Um ratings are are holding, and
• 4:11
  Speaker 1: advertisers respect the ratings more than they respect politics. You know.
• 4:15
  Speaker 1: One thing that has struck me is that a number
• 4:19
  Speaker 1: of billionaire donors to President Trump who are also owners
• 4:23
  Speaker 1: of these teams have come out against him, albeit not
• 4:27
  Speaker 1: necessarily in some cases as strongly as someone would hope.
• 4:30
  Speaker 1: I mean, at what point will they have to take
• 4:33
  Speaker 1: more aggressive stances? Will they will sort of widen the
• 4:37
  Speaker 1: divide between some of his base, at least the wealthier
• 4:40
  Speaker 1: part of his base. Well, the NFL is a business,
• 4:42
  Speaker 1: and and these owners, even the ones who are very
• 4:46
  Speaker 1: very close to Trump, and some of them who have
• 4:48
  Speaker 1: given millions of dollars to Trump, really are protecting their
• 4:52
  Speaker 1: business more than anything else. And they they have said
• 4:55
  Speaker 1: their pieces. Um. Only one, Mike Brown, the Cincinnati Bengal owner,
• 5:00
  Speaker 1: was the only one among all of the NFL owners
• 5:03
  Speaker 1: who came out in support of the comments that Trump
• 5:05
  Speaker 1: had made on Friday and then again on Saturday and Sunday.
• 5:08
  Speaker 1: So I think that they want to respect the value
• 5:13
  Speaker 1: of their team and the profitability that that the team
• 5:17
  Speaker 1: can engender. And it's a team sport. They have to
• 5:20
  Speaker 1: hold everybody together or else the whole business falls apart.
• 5:24
  Speaker 1: And it's not likely to happen anytime soon. What's the
• 5:26
  Speaker 1: history of advertisers actually getting political. They really have stayed away.
• 5:32
  Speaker 1: I mean, you had just a week ago to my
• 5:35
  Speaker 1: hill at ESPN, UM was sanctioned by by Trump's UH
• 5:41
  Speaker 1: communications director and said she should be fired. UH. Advertisers
• 5:46
  Speaker 1: did not flinch, They didn't budge from ESPN, and ESPN
• 5:51
  Speaker 1: just moved on. Well, the reason why I asked that
• 5:54
  Speaker 1: is because I remember during the Super Bowl there were
• 5:56
  Speaker 1: there were a couple of controversial advertisements that actually lead
• 6:00
  Speaker 1: did get political and make messages, uh that that you know,
• 6:05
  Speaker 1: took a stand. It's it's more difficult for the advertiser
• 6:09
  Speaker 1: to cross over the line than it is for team
• 6:11
  Speaker 1: owners or players or even the NFL. Roger Goodell came
• 6:15
  Speaker 1: out very strongly against the comments and the and the
• 6:19
  Speaker 1: substance of what the President said about the activists kneeling um.
• 6:25
  Speaker 1: But it's still a business, and both sides, the advertisers,
• 6:29
  Speaker 1: the NFL and the team owners have to make a
• 6:31
  Speaker 1: profit or else the whole system falls apart. It's just amazing.
• 6:35
  Speaker 1: As I was seeing on Twitter, it's sort of the
• 6:37
  Speaker 1: rival teams we're coming together, the fans were coming together
• 6:41
  Speaker 1: with this united cause. So it's sort of amazing what
• 6:46
  Speaker 1: what President Trump can do to bring unity up. Port
• 6:48
  Speaker 1: Bit thank you so much for joining us part of
• 6:50
  Speaker 1: BIT managing partner at Media Tech Capital Partners in New York.
• 6:53
  Speaker 1: And of course our thanks to Oliver Rennick Bloomberg Stocks reporter.
• 6:57
  Speaker 1: And as we were saying, a lot of this controversy
• 7:00
  Speaker 1: took attention away from the tax plan that Republicans are
• 7:03
  Speaker 1: pulling together. Over the weekend, GOP Congressman announced a draft
• 7:20
  Speaker 1: of a tax plan that has a pretty aggressive schedule
• 7:23
  Speaker 1: to get through Congress and get into practice. I want
• 7:27
  Speaker 1: to bring in Laura Davison, Capital Hill, reporter for Bloomberg
• 7:31
  Speaker 1: B and A. And Laura, can you just give us
• 7:33
  Speaker 1: an overview of what the main tenants are that are
• 7:36
  Speaker 1: being proposed. Yes, So this plan is expected to be
• 7:40
  Speaker 1: officially released later this week, and sort of the headline
• 7:43
  Speaker 1: numbers are that the corporate rate would drop to you know,
• 7:46
  Speaker 1: it's now, and there would be a special rate for
• 7:49
  Speaker 1: pass through entities. So that's everything from you know, doctor's practices,
• 7:52
  Speaker 1: law firms, private equity funds that would have a special rate.
• 7:55
  Speaker 1: Of those taxes are almost at now. So these are
• 7:59
  Speaker 1: the big numbers, and the whole point of this is
• 8:01
  Speaker 1: to get support from Republicans and Congress to buy onto
• 8:04
  Speaker 1: this plan. What it won't have, however, is sort of
• 8:08
  Speaker 1: what how it's going to be paid for. You know,
• 8:09
  Speaker 1: what are the deductions, the credits, the other tax breaks
• 8:12
  Speaker 1: that they're going to get rid of, uh, in order
• 8:14
  Speaker 1: to make those those deep rate cuts. So, in other words,
• 8:16
  Speaker 1: this is really a corporate tax cut rather than a
• 8:20
  Speaker 1: tax reform plan. Correct. You know, that's still to be
• 8:24
  Speaker 1: seen a little bit. And they're also playing around with
• 8:26
  Speaker 1: whether these changes will be temporary or be be permanent. Um.
• 8:30
  Speaker 1: You know, there's some rules in the Senate that they
• 8:32
  Speaker 1: have to to work with to make sure all the
• 8:34
  Speaker 1: numbers add up. Um. But right now, the emphasis is
• 8:37
  Speaker 1: on sort of what are the rate reduction is going
• 8:39
  Speaker 1: to be, and then on the tax cut side of it.
• 8:41
  Speaker 1: If they're able to get a lot of buy in
• 8:43
  Speaker 1: and they're able to kind of move the process quickly,
• 8:45
  Speaker 1: they may they may be able to do some simplification
• 8:47
  Speaker 1: type reforms and overall cleaning up the tax code, but
• 8:51
  Speaker 1: they're on a really time tight schedule to do that,
• 8:53
  Speaker 1: and if there's any hiccups in the process, more of
• 8:55
  Speaker 1: the emphasis will shift to the tax cut side versus
• 8:58
  Speaker 1: the reform side. So just how tight is the schedule
• 9:01
  Speaker 1: going forward? Um? Basically every single card needs to fall
• 9:05
  Speaker 1: exactly where it needs to for this to to move
• 9:08
  Speaker 1: by the end of the year. Uh. You know, they
• 9:10
  Speaker 1: they have to get this to the House, get it
• 9:12
  Speaker 1: through committee. The plan is to go through regular orders,
• 9:15
  Speaker 1: So unlike the health care bill, UM on both sides,
• 9:18
  Speaker 1: it will go through committee, get approved, go to the
• 9:20
  Speaker 1: House floor, get approved, and then the same side over
• 9:22
  Speaker 1: on the Senate. UM. And we're already seeing some divisions
• 9:25
  Speaker 1: between the House and the Senate. Or In Hatch, who's
• 9:27
  Speaker 1: the chairman of the Senate Finance Committee, had said, Look,
• 9:29
  Speaker 1: we're just not going to rubber stamp anything that the
• 9:31
  Speaker 1: House does. We want to have our own input shape
• 9:34
  Speaker 1: the plan ourselves, and that can really slow down the process. Laura,
• 9:37
  Speaker 1: how much will President Trump himself pose an obstacle simply
• 9:40
  Speaker 1: because he's come out, uh and sort of cast a
• 9:43
  Speaker 1: little bit of shade on the proposal for not getting
• 9:46
  Speaker 1: down to the rate that he was hoping for. That's
• 9:49
  Speaker 1: that's the big question, right because the President has been
• 9:51
  Speaker 1: a little bit unpredictable in some of these policy discussions.
• 9:54
  Speaker 1: You know, he's really pushed for a fifteen percent rate. UM.
• 9:57
  Speaker 1: That looks like that's not going to happen, and there's
• 9:58
  Speaker 1: been a lot of recognition among law makers that that
• 10:00
  Speaker 1: was probably unrealistic. Um. You know, but as the close
• 10:03
  Speaker 1: at the end of the year, especially if healthcare falls through,
• 10:06
  Speaker 1: especially if some of these other um priorities appear to
• 10:09
  Speaker 1: be allusive to Republicans, there will be a push to
• 10:12
  Speaker 1: get this done sort of no matter what that rate is.
• 10:15
  Speaker 1: What about the Democrats? Do you expect there to be
• 10:18
  Speaker 1: any support for the plan in its current incarnation at
• 10:22
  Speaker 1: least uh the rough sense that we've gotten, will ever
• 10:25
  Speaker 1: be any support from the Democrats? Um, that is on
• 10:28
  Speaker 1: the House side. There will probably be very limited House
• 10:31
  Speaker 1: support from for Democrats. On the Senate side though, you know,
• 10:33
  Speaker 1: Trump is courting UM some some Democrats who are from
• 10:38
  Speaker 1: states where he wants the Heidi Height camp in North Dakota,
• 10:41
  Speaker 1: Joe Donnally and Indiana, UM, Joe Manson uh from from
• 10:45
  Speaker 1: West Virginia. You know, he's been taking them out with
• 10:47
  Speaker 1: as he's going to give speeches in their states, and
• 10:49
  Speaker 1: you know, we'll we'll see. But they've sort of left
• 10:52
  Speaker 1: the door open to UM to be available uh potentially
• 10:55
  Speaker 1: to vote for this, especially if the bill gets moderated
• 10:57
  Speaker 1: in the Senate, which it which it typically does. That's
• 10:59
  Speaker 1: the kids for pretty mu any sort of legislation. UM.
• 11:01
  Speaker 1: You know, you could see some pressure on them to
• 11:03
  Speaker 1: vote yes, and Republicans maybe really heavily relying on their
• 11:06
  Speaker 1: vote especially if you know, they only have two members
• 11:08
  Speaker 1: on their side that they can lose in the Senate
• 11:10
  Speaker 1: for this bill the past. So what's the likelihood that
• 11:13
  Speaker 1: this proposal will end up bleeding into household tax rates
• 11:18
  Speaker 1: as well? So there there is much talk about also
• 11:22
  Speaker 1: reducing rates on me on the individual side as well.
• 11:24
  Speaker 1: You know, the top rate for individuals may be going
• 11:26
  Speaker 1: down to about thirty percent. You know, that's from about
• 11:28
  Speaker 1: thirty nine percent where it is now. Um, though, what
• 11:32
  Speaker 1: they're looking at is really doing big reductions on the
• 11:35
  Speaker 1: mid to lower income side of the scale, because there's
• 11:37
  Speaker 1: been some criticisms that, look, this is just a tax
• 11:39
  Speaker 1: cut for the wealthy. So they're looking at, you know,
• 11:41
  Speaker 1: doubling the standard deduction so fewer people would have to
• 11:44
  Speaker 1: itemize would be simpler for them. Um. You know, they
• 11:46
  Speaker 1: could also you know, lower that bottom rate to about
• 11:48
  Speaker 1: ten percent and have that include more people, and that
• 11:51
  Speaker 1: would be very helpful for um, especially sort of this
• 11:54
  Speaker 1: populous message of uh, you know how actually for for
• 11:57
  Speaker 1: middle and lower income people, although it could potentially affect
• 12:01
  Speaker 1: the wealthier people in New York and New Jersey particularly hard,
• 12:05
  Speaker 1: right exactly, Well, so the one pay for that they
• 12:08
  Speaker 1: seem to have sort of agreed on is that they're
• 12:10
  Speaker 1: going to get rid of that state and local tax deduction.
• 12:12
  Speaker 1: So in states where there are low taxes, you like
• 12:15
  Speaker 1: think Tennessee, that's not as big of a deal. But
• 12:17
  Speaker 1: in New York, New Jersey, where you have state and
• 12:18
  Speaker 1: local tax rates that exceed you know, ten percent in
• 12:21
  Speaker 1: some cases, that would be a huge tax increase. And
• 12:23
  Speaker 1: you know that's not only people in New York City,
• 12:25
  Speaker 1: that's people in upstate New York to that also says
• 12:27
  Speaker 1: high taxes. So uh and what about business leaders? Are
• 12:29
  Speaker 1: they excited about this so far? They're could of holding
• 12:32
  Speaker 1: their judgment until more details roll out. There's a lot
• 12:35
  Speaker 1: of sort of um, you know, sort of hoping for
• 12:38
  Speaker 1: the best, but anticipating that it might not be as
• 12:40
  Speaker 1: much as they've wanted. You know, I think after seeing
• 12:43
  Speaker 1: lu Way Healthcare went, and you know, they're they're really
• 12:45
  Speaker 1: pushing for for rates to go as low as possible,
• 12:48
  Speaker 1: But no one's really making any strategic decisions based on
• 12:51
  Speaker 1: what this plan could. Everyone's sort of in a wait
• 12:53
  Speaker 1: and see mode at the moment. Laura Davison, thank you
• 12:55
  Speaker 1: so much for this great insight. Laura Davison, as Capital
• 12:58
  Speaker 1: Hell reporter for bloom b n A talking about the
• 13:02
  Speaker 1: tax plan that is expected to be unveiled later this week. Well,
• 13:18
  Speaker 1: we are starting to talk a little bit more concretely
• 13:21
  Speaker 1: about a possible tax plan coming out of Congress. Here
• 13:25
  Speaker 1: to give us a sense of just too much optimism
• 13:27
  Speaker 1: there is that there will be something passed and it
• 13:29
  Speaker 1: will give a boost to stock markets beyond where they
• 13:32
  Speaker 1: are now. Is John Augustine He chief investment officer of
• 13:35
  Speaker 1: Huntington National Bank, which overseas about seventeen and a half
• 13:38
  Speaker 1: billion dollars in Columbus, Ohio. John, always a pleasure to
• 13:41
  Speaker 1: speak with you. Um, thanks for coming in. What's your impression.
• 13:44
  Speaker 1: Does the plan that was unveiled over the weekend by
• 13:46
  Speaker 1: GOP Congressman give you hope that there will be some
• 13:50
  Speaker 1: sort of plan past in the near term that will
• 13:53
  Speaker 1: be a boon to stocks. Yeah, good morning, Lisa. And
• 13:57
  Speaker 1: the tax package is represented, we would say fifty fifty
• 14:02
  Speaker 1: odds of some implementation. It will likely be in our view,
• 14:07
  Speaker 1: targeted implementation around corporate tax rates. We would say, if
• 14:12
  Speaker 1: we're looking at the end of this year into the
• 14:15
  Speaker 1: fourth quarter. It seems like that was the emphasis of
• 14:18
  Speaker 1: the administration. It seems like whatever comes out will likely
• 14:23
  Speaker 1: be targeted versus broad based reform. Well, how much of
• 14:26
  Speaker 1: that is already baked into valuations? Right? I mean some
• 14:29
  Speaker 1: people will would say, well, if we do get tax
• 14:31
  Speaker 1: reform or tax changes, uh, then you will expect bond
• 14:34
  Speaker 1: yields to go up just because growth expectations would go
• 14:37
  Speaker 1: up and stock prices would also go up. But what
• 14:40
  Speaker 1: they or is it all baked in? The interesting thing
• 14:43
  Speaker 1: to us is we thought this would play out the
• 14:45
  Speaker 1: entire second half of this year and the FED would
• 14:47
  Speaker 1: actually be more aggressive in the face of economic agenda
• 14:50
  Speaker 1: coming at it. Now the Fed seems to have kind
• 14:53
  Speaker 1: of played its hand. We do wonder about pemotibles around that. However,
• 14:59
  Speaker 1: what we would say is maybe it's worth five dollars
• 15:02
  Speaker 1: to share to the SMP next year, which could have
• 15:05
  Speaker 1: an appreciable impact on stocks next year as this earnings
• 15:09
  Speaker 1: recovery continues. You know, we were talking before the segment
• 15:14
  Speaker 1: and you were saying that you still do like stocks
• 15:16
  Speaker 1: of re bonds, but you really did not sound particularly bullish.
• 15:19
  Speaker 1: You were saying that our earnings expectations for next year
• 15:21
  Speaker 1: seemed like they're probably too high. Um, what are your
• 15:26
  Speaker 1: what are your highest convictions right now amid such a
• 15:28
  Speaker 1: dearth of information and ongoing uncertainty out of Washington. Yeah,
• 15:32
  Speaker 1: so October is going to be a very interesting month.
• 15:35
  Speaker 1: You know, our equity teams are going to be looking
• 15:36
  Speaker 1: at looking at those earnings because they're low expectations now
• 15:40
  Speaker 1: and getting lower expectations because their earnings in the third quarter. Yeah,
• 15:44
  Speaker 1: in general, and who all is that going to affect?
• 15:47
  Speaker 1: And who all might not in effect, but says it
• 15:50
  Speaker 1: affected them. That's something our equity teams are going to
• 15:52
  Speaker 1: be looking at now. Evaluation perspective. You know, the pe
• 15:57
  Speaker 1: of the SMPS about times trailing. We had thought that
• 16:04
  Speaker 1: would come down to the eighteen or nineteen range by
• 16:07
  Speaker 1: year end with a more aggressive FED. Now we're starting
• 16:11
  Speaker 1: to question that. So our point here is maybe there's
• 16:15
  Speaker 1: a little bit more support for stocks going into the
• 16:20
  Speaker 1: end of this year that we stay at the undred level. However,
• 16:26
  Speaker 1: we don't see what our equity team and Randy Hair
• 16:29
  Speaker 1: do not see is multiple expansion. So now it's more
• 16:33
  Speaker 1: about earnings. So that's where when when we discussed it,
• 16:37
  Speaker 1: that's where some hesitancy came. We're probably done with multiple expansion.
• 16:41
  Speaker 1: In this cycle, but maybe we get to keep the
• 16:44
  Speaker 1: multiple we thought they would pull back. It's something on
• 16:47
  Speaker 1: our mind. So that sort of speaks to some of
• 16:49
  Speaker 1: the stocks that you're looking at in particular as high conviction, Microsoft,
• 16:52
  Speaker 1: Crowncastle International, x On Mobile. These aren't exactly undervalued, but
• 16:56
  Speaker 1: they're sort of mainstays that will keep their value. Yeah,
• 17:00
  Speaker 1: they're consistence, you know, they're kind of ruler stocks, and
• 17:03
  Speaker 1: and those stocks represent their represented and all three of
• 17:07
  Speaker 1: our internal portfolios that we do for clients. That's what
• 17:09
  Speaker 1: caught our attention. Um, there's conviction around those from a
• 17:13
  Speaker 1: growth team, a core team, and in a dividend income team.
• 17:17
  Speaker 1: And so when we see that consistency, we like it,
• 17:20
  Speaker 1: and we obviously like that for our customers. So one
• 17:22
  Speaker 1: other thing that you were talking about is that you
• 17:25
  Speaker 1: cannot recommend your clients to invest in treasuries right now
• 17:29
  Speaker 1: with a ten year yield at about two and a quarter,
• 17:32
  Speaker 1: given the fact that inflation rates and growth rates are
• 17:34
  Speaker 1: about one point nine? What how I would yield have
• 17:38
  Speaker 1: to go for you to say, you know what, take
• 17:42
  Speaker 1: some profits off the table going back into bonds. Our
• 17:46
  Speaker 1: fixed income team at Huntington the numbers about two six
• 17:49
  Speaker 1: right now, So that much the ten years been in
• 17:52
  Speaker 1: a to one percent to to six percent range really
• 17:57
  Speaker 1: since the election, and it's had trouble obviously holding over
• 18:00
  Speaker 1: to two point six percent. So without some big adjustments
• 18:05
  Speaker 1: to inflation or economic expectations, to six, you know, as
• 18:10
  Speaker 1: unbelievable as that may be, to six seems to be
• 18:13
  Speaker 1: a place of demarcation for the bond market right now.
• 18:16
  Speaker 1: So this is interesting because there was actually a jp
• 18:18
  Speaker 1: More Morgan UH analyst note out this morning saying that
• 18:22
  Speaker 1: they didn't expect that there was room for benchmark yields
• 18:25
  Speaker 1: to rise before it really affected equities. They said there
• 18:28
  Speaker 1: was room about UH for for yields to rise about
• 18:30
  Speaker 1: a hundred hundred and fifty basis points one percent to
• 18:33
  Speaker 1: one percentage points. This seems like it's much less than
• 18:37
  Speaker 1: that before it starts affecting equities. Well, you asked about
• 18:40
  Speaker 1: valuations so to speak, or wanting to go into bonds.
• 18:43
  Speaker 1: It's when they get out of the range that's when
• 18:44
  Speaker 1: we start to look at them now, equity valuations. Yeah,
• 18:48
  Speaker 1: maybe maybe it's the next round number at three percent.
• 18:51
  Speaker 1: That's what we all thought would be this year, and
• 18:53
  Speaker 1: we were trying to base the future on three percent.
• 18:56
  Speaker 1: It looks like the bondmark is going to be foiled
• 18:58
  Speaker 1: once again this year to get to three. So two
• 19:01
  Speaker 1: six is an area we're watching to see if he
• 19:04
  Speaker 1: can get above. The expectations are it only goes to
• 19:07
  Speaker 1: two four this year. Three. Maybe that affects stock market valuations.
• 19:13
  Speaker 1: So we're operating in these ranges because we're on such
• 19:16
  Speaker 1: low numbers in the bond market. Is now the FEDS
• 19:19
  Speaker 1: trying to normalize, and inflation is trying to come back up.
• 19:25
  Speaker 1: You know, I have to wonder on the macroeconomic sphere.
• 19:27
  Speaker 1: I mean, we just see so many alarming headlines about
• 19:31
  Speaker 1: nuking each other and whatever else. I mean, at what
• 19:34
  Speaker 1: point do you care about this stuff? If we would
• 19:38
  Speaker 1: have invested on those over the past, let's stay starting
• 19:40
  Speaker 1: with Brexit, we'd be about oh for four for our
• 19:42
  Speaker 1: customers trying to handicap political events and other headline events.
• 19:46
  Speaker 1: So what we mean by that is the global economy
• 19:50
  Speaker 1: has picked up some speed in the summer. The U
• 19:53
  Speaker 1: S seems to be staying around two. Profit growth is recovered,
• 19:57
  Speaker 1: inflation stay and calm, and each changes to that environment
• 20:01
  Speaker 1: would make us reconsider allocations. We're just not seeing any
• 20:06
  Speaker 1: changes to that environment right now, right so you have
• 20:08
  Speaker 1: to look at the actual data. You have to look
• 20:10
  Speaker 1: at the actual numbers. But as far as Twitter wars
• 20:13
  Speaker 1: or even ongoing you know, military threats, no headlines haven't
• 20:18
  Speaker 1: affected any of those as as much as they catch
• 20:22
  Speaker 1: our attention, as bad as they could be, they just
• 20:25
  Speaker 1: haven't caught the market's attention because they don't seem to
• 20:28
  Speaker 1: affect the global economy. Thank you so much for joining us,
• 20:31
  Speaker 1: Thanks for having me. John Augustine is chief investment officer
• 20:34
  Speaker 1: of Huntington National Bank, which oversees about seventeen and a
• 20:37
  Speaker 1: half billion dollars and it's based in Columbus, Ohio, and
• 20:40
  Speaker 1: he was talking about how a lot of his clients
• 20:42
  Speaker 1: still have a lot of cash and that you just
• 20:45
  Speaker 1: can't justify pouring that cash into something that has a
• 20:47
  Speaker 1: real yield of nearly nothing at a time of relatively
• 20:52
  Speaker 1: good economic expansion. Definitely an interesting conversation. I want to
• 21:07
  Speaker 1: pick up and what John was talking about with respect
• 21:09
  Speaker 1: to Apples shares being among the most actively traded today
• 21:12
  Speaker 1: and being down for a fourth day. This comes as
• 21:16
  Speaker 1: reports are coming in pretty much everywhere from everywhere that
• 21:20
  Speaker 1: new orders and new purchases of the latest iPhone addition
• 21:25
  Speaker 1: are below expectations. Alex web joins us now. He's a
• 21:28
  Speaker 1: tech reporter for Bloomberg News and joins us from our
• 21:30
  Speaker 1: Bloomberg nine sixties studio in San Francisco. So Alex, can
• 21:34
  Speaker 1: we talk a little bit about just the color that
• 21:37
  Speaker 1: we've been hearing about the disappointing orders. How significant is
• 21:41
  Speaker 1: this and why is there some kind of uh decline
• 21:45
  Speaker 1: in the desire for this phone? So you gotta taken
• 21:48
  Speaker 1: into account here that there are two phones coming out.
• 21:50
  Speaker 1: We've got the iPhone eight, which is already on sale,
• 21:52
  Speaker 1: and then the iPhone tan is coming in about six
• 21:53
  Speaker 1: weeks time, and that suggests that a lot of people
• 21:57
  Speaker 1: might be waiting for the second phone. The wrinkle that
• 21:59
  Speaker 1: we've heard this morning is that Apple has told suppliers,
• 22:02
  Speaker 1: um this is a report from Digit Times in Asia,
• 22:05
  Speaker 1: that it's told suppliers to reduce their the components they're
• 22:09
  Speaker 1: going to deliver for the iPhone ten. That could just
• 22:12
  Speaker 1: be inventory management. Apple doesn't want to have millions of
• 22:14
  Speaker 1: phones sitting around and not be able to get them
• 22:16
  Speaker 1: to market quickly enough. But it could also suggest they're
• 22:19
  Speaker 1: wary about the levels of demand for the iPhone ten um.
• 22:23
  Speaker 1: But I don't think we want to read too much
• 22:25
  Speaker 1: into the iPhone eight because it could just be it
• 22:28
  Speaker 1: could actually in some way to be good news for Apple.
• 22:29
  Speaker 1: People are going to go for the later, more expensive
• 22:31
  Speaker 1: phone instead. Well, Alex, can you give a little bit
• 22:34
  Speaker 1: more color about the suppliers that you were talking about
• 22:37
  Speaker 1: that have been asked to dial back the production of
• 22:39
  Speaker 1: the components. Who are they and how much do they
• 22:42
  Speaker 1: rely on Apple for their business? So the support didn't
• 22:45
  Speaker 1: name suppliers. I think it's probably on their on their part,
• 22:47
  Speaker 1: it's an effort to protect their sources, I would imagine.
• 22:51
  Speaker 1: But you see the big names and like hon High,
• 22:54
  Speaker 1: peg Atron, these guys are the contract manufacturers who actually
• 22:57
  Speaker 1: make the iPhone. Then going deeper into the supply chain,
• 23:00
  Speaker 1: there are hundreds of companies who have little widgets in
• 23:03
  Speaker 1: the iPhone. Everything from companies in Germany like like Osraum
• 23:06
  Speaker 1: actually Osram does like LEDs for the Apple Watch, and
• 23:09
  Speaker 1: then um in you have Phillips doing perhaps the light
• 23:13
  Speaker 1: on the back of your phone. Then you have Bosch
• 23:15
  Speaker 1: doing your sensors which detect whether phone's moving. It's vastly
• 23:19
  Speaker 1: varsity complex supply chain. There are some smaller companies who
• 23:23
  Speaker 1: get you know, about half their revenue from Apple. They
• 23:26
  Speaker 1: are trying very hard to diversify. Companies UM like Dialogue Semiconductor,
• 23:31
  Speaker 1: for instance, they have a huge exposure to Apple and
• 23:35
  Speaker 1: the the extent to which they're able to stay in
• 23:38
  Speaker 1: each subsequent generation the phone is therefore very important for them.
• 23:41
  Speaker 1: You know, there was a good story written by Alex Webb.
• 23:44
  Speaker 1: I think you've heard of him about this one company
• 23:47
  Speaker 1: in particular, Universal Display Corps, that really focuses on this
• 23:53
  Speaker 1: high definition screen that will be used to the new iPhone.
• 23:58
  Speaker 1: How much it's benefiting. Can you tell us a little
• 23:59
  Speaker 1: bit of at the yes. So, Universal Display is actually
• 24:02
  Speaker 1: a company which owns almost all of the intellectual property
• 24:04
  Speaker 1: or a lot of the significant intellectual property related to
• 24:07
  Speaker 1: organic light emitting diodes. This is the new display which
• 24:10
  Speaker 1: is going to be in the iPhone ten UM. They've
• 24:12
  Speaker 1: been toiling away on this stuff for almost twenty about
• 24:16
  Speaker 1: twenty years, and finally, um it's set for a big
• 24:18
  Speaker 1: pay day. They've really seen a spike in the stock
• 24:21
  Speaker 1: over the past year as the reporting gradually seats out
• 24:24
  Speaker 1: that Apple's likely to have or was like to have
• 24:26
  Speaker 1: led in the news in the new phone. Um and
• 24:29
  Speaker 1: there are a number of other companies as well who
• 24:31
  Speaker 1: have been betting on technology for years. Think about the
• 24:34
  Speaker 1: three D censor in the next iPhone. There are companies
• 24:36
  Speaker 1: who they used to make three D sensors for bombs,
• 24:39
  Speaker 1: for tracking, um, you know, bombs for Iraqa or Afghanistan,
• 24:43
  Speaker 1: wherever it might be. And now that technology, the three
• 24:46
  Speaker 1: D sensing technology is going into into phones. So that's
• 24:49
  Speaker 1: a huge potentially growth driver for them, Alex I wonder
• 24:53
  Speaker 1: how much the innovation in an iPhone comes from the
• 24:56
  Speaker 1: company dreaming up what it potentially could look like, versus
• 25:00
  Speaker 1: suppliers coming up to them and saying, look at this
• 25:03
  Speaker 1: incredible feature of this new technology that we have. Maybe
• 25:06
  Speaker 1: if you incorporate it into your phone, it will be
• 25:08
  Speaker 1: more appealing and we could provide we could provide it all. Two.
• 25:11
  Speaker 1: Of course, I think it is very much. It is
• 25:14
  Speaker 1: that way around. Yes, the Apple is very very good
• 25:17
  Speaker 1: at taking technologies and fine tuning them and making them
• 25:20
  Speaker 1: perhaps work better than some of the other competitors. But
• 25:22
  Speaker 1: my predecessor on the Apple beat, Adam Satriano, wrote a
• 25:24
  Speaker 1: really great story perhaps eighteen months ago where he looked
• 25:27
  Speaker 1: at the relative R and D spend of Apple versus
• 25:31
  Speaker 1: IT suppliers. Now, while Apple's R and D spend has
• 25:33
  Speaker 1: increased significantly, it's more than doubled over the past five years.
• 25:36
  Speaker 1: They're proportionately they spend a lot less than than their
• 25:39
  Speaker 1: biggest suppliers, and that's because the spend is done by
• 25:42
  Speaker 1: the suspires to fight to get into the phone, and
• 25:45
  Speaker 1: that then delivers them a big payday. That's not to
• 25:48
  Speaker 1: say that Apple doesn't suggest tweaks and particular direction and
• 25:52
  Speaker 1: work with suppliers. We we've heard that they may be
• 25:54
  Speaker 1: working with a company that works on some three D
• 25:56
  Speaker 1: and sorry, some inductive charging and wireless charging, but um,
• 26:01
  Speaker 1: that's coming out of that company and Apple substance. We
• 26:04
  Speaker 1: approaches them, not the other way around. It's like winning
• 26:06
  Speaker 1: the jackpot when Apple says, you know what, we're going
• 26:08
  Speaker 1: to use your next next technology on our phone, and
• 26:10
  Speaker 1: all of a sudden someone's been made a billionaire. Alex Web,
• 26:13
  Speaker 1: thank you so much for joining us alex Web as
• 26:15
  Speaker 1: a tech reporter for Bloomberg News, coming to us from
• 26:17
  Speaker 1: our Bloomberg nine sixties studio. Thanks for listening to the
• 26:23
  Speaker 1: Bloomberg p and l podcast. You can subscribe and listen
• 26:26
  Speaker 1: to interviews at Apple Podcasts, SoundCloud, or whatever podcast platform
• 26:31
  Speaker 1: you prefer. I'm pim Fox. I'm on Twitter at pim Fox.
• 26:35
  Speaker 1: I'm on Twitter at Lisa Abramoids One Before the podcast,
• 26:38
  Speaker 1: you can always catch us worldwide on Bloomberg Radio