Latest / Bloomberg Intelligence / Apple at Risk if iPhones Don't "Sell Like Hotcakes," Ovide Says

Transcript

Apple at Risk if iPhones Don't "Sell Like Hotcakes," Ovide Says · Bloomberg Intelligence

• 0:05
  Speaker 1: Welcome to the Bloomberg p m L Podcast. I'm pim Fox.
• 0:08
  Speaker 1: Along with my co host Lisa Bramowitz. Each day we
• 0:11
  Speaker 1: bring you the most important, noteworthy, and useful interviews for
• 0:15
  Speaker 1: you and your money, whether you're at the grocery store
• 0:17
  Speaker 1: or the trading floor. Find the Bloomberg p m L
• 0:20
  Speaker 1: Podcast on Apple Podcasts, SoundCloud, and Bloomberg dot com. Well.
• 0:32
  Speaker 1: As Greg was saying, Apple shares are down for the
• 0:35
  Speaker 1: worst to day route since April two thousand and sixteen,
• 0:40
  Speaker 1: giving up some of the unbelievable games this year. Just
• 0:43
  Speaker 1: to put into perspective, even with the past two days
• 0:46
  Speaker 1: of losses, Apple shares are up more than twenty six
• 0:49
  Speaker 1: percent year to date share over day. Is a Bloomberg
• 0:52
  Speaker 1: gad Flight columnus and she joins us here in our
• 0:54
  Speaker 1: Bloomberg eleven three oh studios. Shira, Uh, you know, first
• 0:58
  Speaker 1: of all, before we get to sort of whether this
• 1:01
  Speaker 1: route can deepen, while I mean, is this just basically
• 1:04
  Speaker 1: to be expected after such a massive rally earlier in
• 1:07
  Speaker 1: the year. Yeah, there is no particular trigger for the
• 1:11
  Speaker 1: tech stocks, and it's not just Apple right all. A
• 1:13
  Speaker 1: lot of the big tech stocks, including Google and Facebook
• 1:16
  Speaker 1: and Amazon and in video, the chip company that has
• 1:19
  Speaker 1: been one of the better performing tech stocks in the
• 1:21
  Speaker 1: last couple of years, Fang plus others. Uh, they are all,
• 1:25
  Speaker 1: you know, getting punched in the nose basically since Friday.
• 1:28
  Speaker 1: And there's no particularly good reason. But as you pointed out,
• 1:32
  Speaker 1: a lot of those tech stocks have done exceptionally well
• 1:35
  Speaker 1: this year and has helped drive you know, the overall
• 1:39
  Speaker 1: stock market in the US up, and so I think
• 1:42
  Speaker 1: there was a little bit of a realization that, oh, shoot,
• 1:45
  Speaker 1: maybe this has gotten a little bit overdone and we
• 1:47
  Speaker 1: need to sell and move into other sectors of of
• 1:50
  Speaker 1: the industry of technology and beyond. Well, I was just looking,
• 1:53
  Speaker 1: for example, at the NAS deck and you'd have to
• 1:56
  Speaker 1: shed another hundred and ten points let's say, just get
• 2:00
  Speaker 1: back to the fifty day moving average, and you'd have
• 2:03
  Speaker 1: to lose even more to get to the ninety day
• 2:06
  Speaker 1: and the well the even longer the two day moving average.
• 2:11
  Speaker 1: So the technicals are not looking great for the technology stocks. Apple.
• 2:16
  Speaker 1: Let's talk specifically about Apple. The most recent conversation we've
• 2:20
  Speaker 1: had has to do with a qual Con chip and
• 2:23
  Speaker 1: an Intel chip going into their newest iPhone and how
• 2:27
  Speaker 1: they're going to limit the speed in the iPhone to
• 2:30
  Speaker 1: the Intel chip because they do not offer this fast
• 2:34
  Speaker 1: processing power. Has Apple gotten to the point where it
• 2:38
  Speaker 1: is so big that it cannot find enough vendors to
• 2:42
  Speaker 1: offset the potential for picking a vendor that they're going
• 2:45
  Speaker 1: to either be in a lawsuit with or provides technology
• 2:47
  Speaker 1: that doesn't match what Apple wants. So Apple is always
• 2:51
  Speaker 1: very conscious about becoming overly reliant on one or two
• 2:55
  Speaker 1: parts suppliers, particularly of crucial parts like computer chips that
• 2:59
  Speaker 1: go into its phones, right and modem chips, which is
• 3:02
  Speaker 1: the Qualcom Intel issue. Um. The The issue is there
• 3:06
  Speaker 1: are only two companies, Intel and Qualcom that are really
• 3:11
  Speaker 1: at scale suppliers of these kind of crucial modem ships
• 3:15
  Speaker 1: where the phone is basically connecting with cellular networks, and
• 3:20
  Speaker 1: Qualcom is the undisputed leader. But Apple doesn't want to
• 3:24
  Speaker 1: become too reliant on Qualcom, in part because Qualcom and
• 3:28
  Speaker 1: Apple are now engaged in this very messy, angry, high
• 3:33
  Speaker 1: stakes financial litigation over whether Qualcom is kind of overcharging
• 3:37
  Speaker 1: for its chips to Apple and others. Uh And so
• 3:43
  Speaker 1: as a consequence, Apple wants to have a little bit
• 3:45
  Speaker 1: of you know, vendor choices, and it's it's using both
• 3:49
  Speaker 1: Apple and I'm sorry, Intel and Qualcom chips in the phone. Well,
• 3:53
  Speaker 1: you know, we're talking to John Butler about this last
• 3:55
  Speaker 1: week of Limberg Intelligence, and he was saying, Okay, look, yes,
• 3:58
  Speaker 1: Apple may not have the highest speed UH connection available
• 4:02
  Speaker 1: to its a new iPhone, but most people aren't going
• 4:04
  Speaker 1: to care. And frankly, people who are in the iPhone
• 4:07
  Speaker 1: world and our devote devotees to Apple are going to
• 4:10
  Speaker 1: stay devotees to Apple. And I just have to wonder,
• 4:12
  Speaker 1: you know, at this point, is this dip in the
• 4:15
  Speaker 1: share prices does this signify the people have reached their
• 4:20
  Speaker 1: limit in buying on pure faith that something is going
• 4:24
  Speaker 1: to change and a shift into show me mode? And
• 4:28
  Speaker 1: that's going to This is going to really be a
• 4:30
  Speaker 1: shift in sentiment that isn't necessarily going to mean a
• 4:33
  Speaker 1: deep sell off, but will mean more skepticism going forward
• 4:36
  Speaker 1: and a need to see more evidence that they can
• 4:38
  Speaker 1: consustain the growth that they have seen in the past.
• 4:40
  Speaker 1: I think that's very good point. Look, the fact remains
• 4:43
  Speaker 1: that the run up we've seen an Apple's share price
• 4:46
  Speaker 1: this year and starting last late last year is largely
• 4:50
  Speaker 1: because of expectations of a big surgeon iPhone stale sales
• 4:55
  Speaker 1: starting later this year, when Apples expected to introduce a
• 4:58
  Speaker 1: new kind of dramatically overhauled iPhone, and if that thing
• 5:04
  Speaker 1: doesn't sell like hotcakes, I don't know what happens to
• 5:07
  Speaker 1: Apple share price. You saw one of the Mizuho, one
• 5:11
  Speaker 1: of the Apple animals downgrade the stock this morning or
• 5:15
  Speaker 1: overnight on basically saying, look, a lot of the enthusiasm
• 5:19
  Speaker 1: for this new iPhone. It's gonna have, you know, fancier
• 5:21
  Speaker 1: screen and um, all kinds of advanced features. If a
• 5:26
  Speaker 1: lot of that enthusiasm is already baked into the share price,
• 5:29
  Speaker 1: So that's the big risk for Apple. I'm just curious.
• 5:33
  Speaker 1: Do you have any idea what the new iPhone eight
• 5:35
  Speaker 1: might cost? There are some reports that it could be
• 5:37
  Speaker 1: upwards of a thousand dollars. Yes, we don't know. UM.
• 5:41
  Speaker 1: The reporting from Bloomberg and others has said there's going
• 5:44
  Speaker 1: to be three new models of the iPhone, the you know,
• 5:48
  Speaker 1: regular iPhone, the hot larger screen plus model, and then
• 5:52
  Speaker 1: this kind of third probably fancier and even more expensive
• 5:56
  Speaker 1: iPhone model. And yes, some of the reports are it
• 5:59
  Speaker 1: might cost a thousand dollars or more, which is kind
• 6:02
  Speaker 1: of a staggering sum to think about paying for, you know,
• 6:05
  Speaker 1: a slab of glass and circuits. You could use an
• 6:08
  Speaker 1: eyebill on your Apple Watch and maybe through Apple Pay. Sure. Ovida,
• 6:13
  Speaker 1: thank you so much for joining us. Hearra Ovida is
• 6:15
  Speaker 1: a technology columnist with Bloomberg gad Fly and joins us
• 6:18
  Speaker 1: here in our Bloomberg eleven three oh studios. Well, emerging
• 6:34
  Speaker 1: markets debt has absolutely been in a hotspot this year.
• 6:37
  Speaker 1: I'm just looking and that flows to mutual funds, most
• 6:40
  Speaker 1: of which track some kind of broad index inflows total
• 6:45
  Speaker 1: more than forty billion dollars to emerging markets debt uh
• 6:49
  Speaker 1: so far this year. To get some perspective on why
• 6:52
  Speaker 1: the flows have been so intense, at what these people
• 6:55
  Speaker 1: are really investing in, I want to bring in Damien Sassaur.
• 6:57
  Speaker 1: He's a fixing strategist for bloom Intelligence. He joins us
• 7:01
  Speaker 1: here in our Bloomberg eleven three oh studios. Damien, I
• 7:04
  Speaker 1: was looking at the biggest e t F that focuses
• 7:06
  Speaker 1: on emerging markets debt, and last week alone, this e
• 7:09
  Speaker 1: t F had some unprecedented flows almost a billion dollars
• 7:14
  Speaker 1: in a week coming in. And yet you pointed out
• 7:18
  Speaker 1: in recent research that the underlying index is actually getting
• 7:23
  Speaker 1: weaker from a credit perspective. Yeah, no, that's right. So
• 7:27
  Speaker 1: in terms of credit quality, lisa UM, what we're seeing
• 7:30
  Speaker 1: are UM a lot of EM high held sovereigns being
• 7:32
  Speaker 1: added to the index. We're seeing I guess, you know,
• 7:35
  Speaker 1: fundamentally weaker corporate and quasi sovereign credits, specifically in the
• 7:39
  Speaker 1: financial sector coming from some um, some suspect EM economies
• 7:44
  Speaker 1: such as Nigeria, which I pointed out. I mean, just
• 7:46
  Speaker 1: last week we saw the Ivory coast Um issue nearly
• 7:49
  Speaker 1: two billion dollars in HARDCORENCY bonds. Yet only a month
• 7:53
  Speaker 1: ago there's a forty mutiny by soldiers and in twenty eleven,
• 7:57
  Speaker 1: the company a company the country the faulted on its
• 8:00
  Speaker 1: sovereign bonds. So I mean these are not UM you know,
• 8:04
  Speaker 1: these are just not your everyday high quality credits. And
• 8:07
  Speaker 1: you were talking about a Nigerian bank that sold a debt.
• 8:10
  Speaker 1: It was the first benchmark bond offering benchmark eligible bond
• 8:14
  Speaker 1: offering from a Nigerian bank since two thousand fourteen, and
• 8:17
  Speaker 1: Nigerian banks have a history of defaulting. Now that's correct,
• 8:20
  Speaker 1: So I mean access bank issued at the end of
• 8:22
  Speaker 1: last year, but they are not benchmark eligible. They're only
• 8:25
  Speaker 1: three hundred million, although that might make them eligible for
• 8:27
  Speaker 1: the JP Morgan and hence the e M b E
• 8:29
  Speaker 1: t F, But the Bloomberg Barkley's e M Hard Currency
• 8:31
  Speaker 1: agg which is, you know, the broad measure that we
• 8:33
  Speaker 1: follow here. You have to have a minimum five million
• 8:36
  Speaker 1: dollar a new issues in order to be included within
• 8:38
  Speaker 1: that index. So we don't really we didn't really include
• 8:40
  Speaker 1: access in our analysis. But Zennith Bank, who just um
• 8:43
  Speaker 1: issued last week and I'm sorry last month, and then
• 8:46
  Speaker 1: Uba on the heels of that, they're having no problems
• 8:48
  Speaker 1: happing these markets and they're you know, it's it's green
• 8:51
  Speaker 1: light Gopher Nigeria. Four and a half percent. That's the
• 8:55
  Speaker 1: yield at least currently on the Bloomberg Barkley's Emerging Markets
• 8:59
  Speaker 1: US are Aggregate bond index right about that four and
• 9:02
  Speaker 1: a half percent. What kind of duration risk are people
• 9:06
  Speaker 1: taking on to get that whopping four and a half percent?
• 9:09
  Speaker 1: You know, that is a great point, I mean, PIM.
• 9:11
  Speaker 1: You know, on the sovereign side, what you're seeing now
• 9:15
  Speaker 1: is the duration has i think extended out nearly seven years.
• 9:18
  Speaker 1: So you're getting seven year em sovereign debt, you know,
• 9:21
  Speaker 1: and and the way you have to look at buying
• 9:23
  Speaker 1: a car, right, I mean because the car payments right,
• 9:26
  Speaker 1: I mean sixty months. And pim those Ivory Coast bonds
• 9:30
  Speaker 1: have a sixteen year maturity, I mean sixteen years. I
• 9:33
  Speaker 1: mean this again is a country that defaulted last eleven
• 9:36
  Speaker 1: and a month ago. You know that there was a
• 9:39
  Speaker 1: mutiny by by the military. Meanwhile, four and a half
• 9:41
  Speaker 1: percent is not very much relative to history, right, So
• 9:44
  Speaker 1: this isn't exactly a high yield that investors are getting.
• 9:47
  Speaker 1: That said, a lot of investors continue to pour money
• 9:50
  Speaker 1: into this space. And you hear a lot of sophisticated
• 9:52
  Speaker 1: money managers, including PIMCO, say, you know what you do
• 9:56
  Speaker 1: have developing markets? Uh that in some cases hold more
• 9:59
  Speaker 1: promise the developed markets where rates are really low and
• 10:02
  Speaker 1: growth is slowing and the population is aging. So how
• 10:05
  Speaker 1: do you sort of square these ideas well? I think
• 10:07
  Speaker 1: I think, you know, shifting to high grade. And this
• 10:10
  Speaker 1: is an important point that a lot of people also
• 10:11
  Speaker 1: aren't considering um GCC. The Middle East has I mean
• 10:15
  Speaker 1: there have been massive, massive issues from Saudi Arabia, from Aman,
• 10:19
  Speaker 1: from Kuwait, I'm talking eight nine. I mean just last year,
• 10:22
  Speaker 1: we know Saudi issued nineteen billion, but they just did
• 10:24
  Speaker 1: a cook issue this year for nine billion. On top
• 10:26
  Speaker 1: of that, I mean, their leverage at the sovereign level
• 10:29
  Speaker 1: has increased. It's just been huge. So now you know,
• 10:33
  Speaker 1: you look at these countries. These are countries that generate
• 10:37
  Speaker 1: their revenue through oil, and if oil stays weak or
• 10:40
  Speaker 1: continues to week and these are high grade you know,
• 10:42
  Speaker 1: single double A credits that are fundamentally weaker also, but
• 10:46
  Speaker 1: again you know, forgive me, those are high grade credit
• 10:49
  Speaker 1: quality issues, right. But the reason why I ask is
• 10:52
  Speaker 1: because you do have so much money coming in, you
• 10:54
  Speaker 1: do have yields dropping at a faster pace in some cases,
• 10:57
  Speaker 1: and similarly rated US credit it and you have to wonder,
• 11:01
  Speaker 1: are people uh just blind to this risk and going
• 11:05
  Speaker 1: into indexes that have all sorts of things that they're
• 11:08
  Speaker 1: not aware of, or people fully aware, but they still
• 11:11
  Speaker 1: think that there's an attractiveness here. Well, Muhammad al Arean,
• 11:14
  Speaker 1: I mean he said that fundament you know, we've pretty
• 11:16
  Speaker 1: much the coupled from fundamentals, and I have to kind
• 11:18
  Speaker 1: of agree in large respect to that. I mean, if
• 11:20
  Speaker 1: you just look at the three drivers. We just did
• 11:22
  Speaker 1: our mid year outlook at b I on the e
• 11:24
  Speaker 1: M side, and if you just look at China five
• 11:27
  Speaker 1: year CDs UM, the US dollar and oil prices collectively,
• 11:32
  Speaker 1: they mean e M spreads are eighty percent correlated to
• 11:34
  Speaker 1: these three factors. And those three factors alone are responsible
• 11:37
  Speaker 1: for determining six of the movement and EUM credit spreads
• 11:40
  Speaker 1: of the last two years using weekly data. So yeah,
• 11:43
  Speaker 1: it's market it's external factors that are driving spreads. So
• 11:47
  Speaker 1: if they're external factors driving spreads, external factors could also
• 11:51
  Speaker 1: make these investments go south pretty quickly if if if
• 11:55
  Speaker 1: they do go the other way. PIM, That's exactly what.
• 11:57
  Speaker 1: There's nothing underneath it, right, I mean, there there's no
• 12:00
  Speaker 1: bid that is holding this up, or is there. I'm
• 12:02
  Speaker 1: not I am not an oil I am not the
• 12:05
  Speaker 1: right guy to be talking to you about sovereign set
• 12:08
  Speaker 1: for example. I mean it's not as if you're going
• 12:10
  Speaker 1: to find the Bank of Japan buying Nigerian government bonds. Um,
• 12:15
  Speaker 1: You're right, I mean, look, you know, I mean it's
• 12:17
  Speaker 1: it's funny how some of these some of these e
• 12:19
  Speaker 1: M portfolios where you know who's buying them and where
• 12:21
  Speaker 1: they're winding up these days, and how people are you know,
• 12:24
  Speaker 1: looking for incrementally yielding new places. So for all I know,
• 12:28
  Speaker 1: the Bank of Japan could be buying You've been even
• 12:31
  Speaker 1: covering this area for a long time, Damien. And have
• 12:35
  Speaker 1: you seen a shift with investors going more into indexed
• 12:40
  Speaker 1: strategies and could that pose a risk? Yes, now that
• 12:43
  Speaker 1: that is definitely a risk if if flows turn the
• 12:46
  Speaker 1: other way. I mean, I think, you know, and again
• 12:48
  Speaker 1: I'm gonna you know, use my colleague Mike mcgloan who
• 12:51
  Speaker 1: runs commodity, who's the commodity strategy that b I you know,
• 12:54
  Speaker 1: e m takes the escalator up and the elevator down,
• 12:57
  Speaker 1: and you know, when things turn the other way and
• 12:59
  Speaker 1: sentiment shifts, uh negatively, you could really see you know,
• 13:02
  Speaker 1: spreads uh you know, potentially wide and quite quite quite quickly.
• 13:06
  Speaker 1: I wonder if you could use Petro Brass, the Brazilian
• 13:09
  Speaker 1: oil giant, as an example of some of the things
• 13:12
  Speaker 1: that can happen that you don't expect and they're trying
• 13:15
  Speaker 1: to get ahead of the game, but it's challenging. You know.
• 13:18
  Speaker 1: Petro Brass is an interesting one because they they've done
• 13:21
  Speaker 1: a great job. Look they're coming off a low base,
• 13:23
  Speaker 1: and they have effectively been extending their maturities, restructuring their
• 13:26
  Speaker 1: day that they've been selling non core assets, they've actually
• 13:29
  Speaker 1: been cleaning up their balot sheets. So all this negative,
• 13:33
  Speaker 1: you know Michi Goswork talking about with regard to em credit,
• 13:36
  Speaker 1: Petro brass I can't put in that category. They've done
• 13:38
  Speaker 1: a really good job of cleaning things up. And and
• 13:41
  Speaker 1: look there are examples of that, you know where you know,
• 13:43
  Speaker 1: fundamentally the companies are getting better and and so you know,
• 13:47
  Speaker 1: it's a big universe. It's a two trillion dollar universe.
• 13:49
  Speaker 1: You know, at least if you're looking at the Bloomberg Barkleys,
• 13:52
  Speaker 1: you know, kind of aggregate and you know you've got
• 13:55
  Speaker 1: you've got good stories and you've got bad stories. I
• 13:57
  Speaker 1: want to thank you very much forgiving us the story.
• 14:00
  Speaker 1: Are you guys always Damian Sasaur expert when it comes
• 14:02
  Speaker 1: to fixed incomes strategies for Bloomberg Intelligence. In fact, he
• 14:06
  Speaker 1: just knows everything about emerging markets. Much appreciated. I want
• 14:21
  Speaker 1: to bring in Jeffrey Quisena, Chief Investments for a just
• 14:24
  Speaker 1: at Fifth third Bank in Chicago, to talk about an
• 14:27
  Speaker 1: issue that i've been thinking a lot about Recently, after
• 14:30
  Speaker 1: President Trump withdrew from the Paris Accord, we heard executives
• 14:34
  Speaker 1: from Disney, Goldman, Sachs, IBM, Tesla's Elon Musk come out
• 14:38
  Speaker 1: denouncing the decision and saying that this was a big,
• 14:41
  Speaker 1: big mistake. But the mood was very different among small
• 14:45
  Speaker 1: business owners and I want to get a sense of
• 14:48
  Speaker 1: how they responded to this and why. Jeffrey, thank you
• 14:51
  Speaker 1: so much for joining us. Can you just give us
• 14:53
  Speaker 1: a sense and your discussions with businesses in Middle America
• 14:57
  Speaker 1: smaller businesses, Why is it that some of them have
• 15:00
  Speaker 1: embraced this decision for the US to withdraw from the
• 15:03
  Speaker 1: Paris Climate Accord. For the most part, it is not
• 15:06
  Speaker 1: because it directly impacts their business, but it's the symbolism.
• 15:10
  Speaker 1: From their standpoint, this is a president who is still
• 15:14
  Speaker 1: on track with many of the campaign promises towards deregulation.
• 15:18
  Speaker 1: They understand that the Paris Accords would carry some burdens
• 15:22
  Speaker 1: uh with it for for regulation, particularly energy sector. Energy
• 15:27
  Speaker 1: drives a lot of manufacturing, so so they're seeing this
• 15:30
  Speaker 1: as the symbolic value of yet another step that supports deregulation,
• 15:37
  Speaker 1: and that's really important. To small business owners, can you
• 15:40
  Speaker 1: just bring in the debate about healthcare as well, because
• 15:43
  Speaker 1: that also is a focus of small business owners and
• 15:47
  Speaker 1: it is something that will affect their bottom line. Sure.
• 15:50
  Speaker 1: What one of the things that I think is important
• 15:52
  Speaker 1: is the definition. When I speak about small business owners,
• 15:55
  Speaker 1: I often hear from people who are are sold proprietors,
• 15:58
  Speaker 1: or of one or two employees. What I'm really talking
• 16:01
  Speaker 1: about is the economic definition of small business, which is
• 16:04
  Speaker 1: generally five hundred employees or fewer um. When you get
• 16:09
  Speaker 1: My observation is that when you get to the fifty
• 16:12
  Speaker 1: to a couple hundred employees, that's where they feel the
• 16:15
  Speaker 1: burdens the most. So the affordable health care is has
• 16:18
  Speaker 1: been a costly imposition um. And again this is from
• 16:24
  Speaker 1: their viewpoint. This is as citizens, we just can decide
• 16:26
  Speaker 1: whether this is good or bad. But from their standpoint,
• 16:29
  Speaker 1: it's a cost cost. The imposition of new rules and requirements,
• 16:33
  Speaker 1: many of the environmental many of the labor laws, all
• 16:36
  Speaker 1: of these things have been particularly burdened. Some small business
• 16:39
  Speaker 1: owners view this differently. UM. These are generally privately held businesses.
• 16:44
  Speaker 1: Any dollar cost of regulation or our other requirement is
• 16:48
  Speaker 1: essentially a dollar out of their pockets. So they've taken
• 16:51
  Speaker 1: very personally. That doesn't mean it's right or wrong, um,
• 16:54
  Speaker 1: that they should take it this way, but it's certainly understandable.
• 16:56
  Speaker 1: So Jeffrey, UM, I don't have the sense that there
• 17:00
  Speaker 1: have been huge sweeping changes made yet that will materially
• 17:04
  Speaker 1: change their outlook. Am I wrong with that that? No?
• 17:07
  Speaker 1: I I think that's right. But there is a broad understanding, UM,
• 17:12
  Speaker 1: in the in the businesses that I've spoken to, and
• 17:15
  Speaker 1: I speak in front of thousands of small business owners
• 17:17
  Speaker 1: every year and speak directly to hundreds over the course
• 17:20
  Speaker 1: of the year, there is an understanding that much of
• 17:24
  Speaker 1: the deregulation can be accomplished through the executive branch, and
• 17:28
  Speaker 1: so they see that as something that is moving forward. UM.
• 17:33
  Speaker 1: I don't believe they're out over their skis and anticipating
• 17:36
  Speaker 1: too much progress on legislative action, that they're not banking
• 17:40
  Speaker 1: on that. Uh. As it's been explained to me, it's
• 17:44
  Speaker 1: not just deregulation, it's the fact that the constant adding
• 17:49
  Speaker 1: of regulations that was going on has halted, and that
• 17:52
  Speaker 1: I think is fair to say. And and Jeffrey, do
• 17:54
  Speaker 1: you get the sense that among these hundreds of small
• 17:57
  Speaker 1: businesses that you speak with every year. They are pleased
• 18:01
  Speaker 1: with what they're seeing so far, and that they approve
• 18:04
  Speaker 1: of President Trump's performance. I think that's that's generally true.
• 18:08
  Speaker 1: That's that's obviously a very big generalization that is in
• 18:11
  Speaker 1: some ways unfair to make. But I think that the President,
• 18:16
  Speaker 1: for whatever reason, speaks well to that community, UM, and
• 18:21
  Speaker 1: they feel that he, having run businesses himself, UM and
• 18:28
  Speaker 1: essentially being a private business owner, is one of them.
• 18:31
  Speaker 1: So there's a level of sympathy or empathy that they're
• 18:34
  Speaker 1: feeling that they have not felt in some previous administrations. Alright. So,
• 18:39
  Speaker 1: having said all that, though, I'm wondering do they feel
• 18:42
  Speaker 1: any uh, any sort of anxiety over the ability of
• 18:46
  Speaker 1: the United States to do business with international partners like Mexico,
• 18:50
  Speaker 1: like Canada. It's it's not great to do business with
• 18:52
  Speaker 1: people that you've just in many cases disrespected, you know.
• 18:56
  Speaker 1: I think that's a very legitimate point. Again, UM, this
• 19:01
  Speaker 1: is my interpretation, but I've seen it fairly consistently. UM.
• 19:05
  Speaker 1: I think most people UM in that position, small business
• 19:09
  Speaker 1: owners UM, are giving the president the benefit of the
• 19:12
  Speaker 1: doubt and see this as negotiating tactics rather than his
• 19:18
  Speaker 1: views reflecting an end result. All right, we're gonna leave
• 19:21
  Speaker 1: it there, but thanks very much for giving us this.
• 19:23
  Speaker 1: Inside the mid market and focus Jeff Corzeneck. He is
• 19:26
  Speaker 1: an investment strategist for Fifth Third Bank. Speaking about the
• 19:29
  Speaker 1: divide between what big businesses and Lisa, you mentioned some
• 19:33
  Speaker 1: of those chief executives such as Lloyd blank Find and
• 19:36
  Speaker 1: Elon Musk coming out and saying that they proposed that
• 19:40
  Speaker 1: the U s stay in the Paris climate of Bardon
• 19:43
  Speaker 1: Goldman Sacks. Lloyd blank Find joined Twitter precisely for the
• 19:46
  Speaker 1: purpose of coming out against this, and Elon Musk resigned
• 19:49
  Speaker 1: from President Trump's Advisory council. So a lot of anger
• 19:51
  Speaker 1: on that side. We've seen a lot of changes in
• 20:05
  Speaker 1: the advertising business over the past decade, in large part
• 20:09
  Speaker 1: because of the changing way that people consume media. Well,
• 20:12
  Speaker 1: Andrew Esx has had a front row seat on all
• 20:15
  Speaker 1: of these changes. Andrew Esx CEO of Rebeca Enterprises in
• 20:19
  Speaker 1: New York, which of course is the host of Rebeca
• 20:23
  Speaker 1: Film Festival, which is also in New York. But he
• 20:25
  Speaker 1: also was the former chief executive officer of advertising agency
• 20:28
  Speaker 1: Droga five and he wrote a new book called The
• 20:31
  Speaker 1: end of advertising, why it had to die and the
• 20:34
  Speaker 1: creative resurrection to come. Very dramatic. Why are we seeing
• 20:39
  Speaker 1: the death of advertising? What is this death? And uh?
• 20:42
  Speaker 1: And where do we go from here? I really wanted
• 20:44
  Speaker 1: to call it the death of traditional advertising, but that
• 20:46
  Speaker 1: was a little less clickable. Yeah. Now this it's it's
• 20:49
  Speaker 1: much more dramatic, you know. But we're talking about the
• 20:52
  Speaker 1: eventual demise of three traditional forms, which is the thirty
• 20:54
  Speaker 1: second spot, the print insertion, and the classic display at
• 20:58
  Speaker 1: the banner at and that's driven by the rise of
• 21:00
  Speaker 1: ad blocking, the phenomena of over the top television which
• 21:04
  Speaker 1: has no commercial interruption, and general consumer behavior on platforms
• 21:08
  Speaker 1: in which traditional advertising is not native. So the whole
• 21:10
  Speaker 1: world is coming together to conspire against an old way
• 21:13
  Speaker 1: of doing things, and that's called evolution. Will okay, evolution? Andrew,
• 21:20
  Speaker 1: I'm wanting if you could just speak a little bit
• 21:21
  Speaker 1: about your evolution to become the head of Tribeca Enterprises, because,
• 21:26
  Speaker 1: as Lisa just said, many people will know it because
• 21:29
  Speaker 1: of the Tribeca Film Festival and the creation of Jane
• 21:32
  Speaker 1: Rosenthal and Robert de Niro. Maybe just give a little
• 21:36
  Speaker 1: bit of your background in the print industry as well,
• 21:39
  Speaker 1: and how you got to this role. I'm kind of
• 21:41
  Speaker 1: a Darwin in mutation. I started in publishing, then I
• 21:43
  Speaker 1: went to what was called the dark side, which is advertising,
• 21:46
  Speaker 1: and now evolution you could still use exactly. And now
• 21:50
  Speaker 1: I'm at an event, a live event, which is really
• 21:52
  Speaker 1: about storytelling and storytelling on any platform. So though although
• 21:56
  Speaker 1: we do film, we do amazing television, we do amazing talks,
• 21:59
  Speaker 1: we date a using music, amazing VR, amazing gaming, any
• 22:02
  Speaker 1: platform which you can tell a story. And I find
• 22:05
  Speaker 1: it's a natural conclusion of what I've been trying to do,
• 22:07
  Speaker 1: which is just to add value to people's lives through
• 22:09
  Speaker 1: good content. Well, you know, going going back to this
• 22:12
  Speaker 1: idea of moving away from the banner ad or the
• 22:16
  Speaker 1: thirty second spot, I mean, we are seeing native advertising.
• 22:20
  Speaker 1: We're seeing people who are getting paid explain explain what
• 22:23
  Speaker 1: explain what native advertising? Well, I've actually talked with people
• 22:27
  Speaker 1: who are paid to go to UH people's parties in
• 22:31
  Speaker 1: their homes, are paid to go to a bar and
• 22:34
  Speaker 1: consume Gray Goose vodka or whatever it is UH and
• 22:38
  Speaker 1: tell their friends about it. And this is a new
• 22:40
  Speaker 1: form of advertising. So you know, I see you're rolling
• 22:44
  Speaker 1: your eyes, But I mean, are there is there? Is
• 22:47
  Speaker 1: there some other form that we're evolving into or other forms?
• 22:51
  Speaker 1: What are the what are the most popular ones that
• 22:52
  Speaker 1: are going to survive? I think we're seeing this odd
• 22:55
  Speaker 1: rush or flight to quality. The issue really is abundance.
• 22:59
  Speaker 1: There's so much there right now, so many apps, so
• 23:01
  Speaker 1: many platforms, so much content, that there's no room anymore
• 23:04
  Speaker 1: for anything that's secondary. So the old ad model is
• 23:07
  Speaker 1: based on an adjacency, not the thing, the thing that
• 23:10
  Speaker 1: sold the thing, And there's no room there's something, no
• 23:12
  Speaker 1: more room for anything that's in the periphery. So what
• 23:15
  Speaker 1: you need to do is to be good. And the
• 23:17
  Speaker 1: the embodiment of this is the Lego movie, which I
• 23:19
  Speaker 1: think is the greatest ad ever. It's a film that
• 23:22
  Speaker 1: people paid to see that made five million dollars in revenue.
• 23:25
  Speaker 1: It is also a great piece of advertising. So in
• 23:27
  Speaker 1: other words, what you're what you're saying is that the
• 23:30
  Speaker 1: advertising has to that the advertisement has to be something
• 23:34
  Speaker 1: that people seek out. It can't be something that simply
• 23:38
  Speaker 1: catches someone's eye on the subway or on a bus. Well,
• 23:42
  Speaker 1: if it catches someone's eye, it's probably good. I think
• 23:44
  Speaker 1: it just has to be good. So advertising is based
• 23:47
  Speaker 1: on the premise that you could buy people's attention, that
• 23:49
  Speaker 1: you use paid media to get in front of people.
• 23:51
  Speaker 1: But again, because there's so much, it doesn't work anymore.
• 23:54
  Speaker 1: So you have to be entertaining. You have to add value,
• 23:56
  Speaker 1: you have to provide utility, you have to be good.
• 23:59
  Speaker 1: Crap is a immediately discarded. Well, all right, we're gonna
• 24:03
  Speaker 1: we're not gonna disagree with you. There, I'm gonna. I'm
• 24:05
  Speaker 1: gonna I'm gonna push back, not that crap crap. I mean,
• 24:08
  Speaker 1: it's like of the beholder, but I have to push
• 24:12
  Speaker 1: back that this is anything new because I mean, frankly,
• 24:16
  Speaker 1: think about the Super Bowl advertisements. There's like the Super
• 24:19
  Speaker 1: Bowl of advertising, and people focus on those. I mean,
• 24:22
  Speaker 1: for a long time. It's about making sure that the
• 24:24
  Speaker 1: story is important as eye catching. I mean, this is
• 24:27
  Speaker 1: advertising one O one. No, Well, I don't know that
• 24:31
  Speaker 1: I agree with that. I think on Super Bowl it's
• 24:32
  Speaker 1: one day year, but for the rest of the sixty
• 24:35
  Speaker 1: four days of the year, people don't try that hard.
• 24:37
  Speaker 1: To be honest, with all due respect, but I thought
• 24:40
  Speaker 1: you were going to say that we're going back to
• 24:41
  Speaker 1: an old model of the soap Opera of ge Theater
• 24:44
  Speaker 1: of Mutual mahomes a wild I was going to say next,
• 24:47
  Speaker 1: which is really the place that I think we're revolving towards.
• 24:50
  Speaker 1: The brand brings you a piece of content and they
• 24:53
  Speaker 1: are the sponsor, the underwriter, but they're not the person
• 24:57
  Speaker 1: who interrupts the thing you wanted to see. So that
• 24:59
  Speaker 1: my be a future for a revamped Milton Burrow in
• 25:02
  Speaker 1: the Texico Hour. Don't don't don't I feel the future
• 25:06
  Speaker 1: coming on? You know. One of the things I wanted
• 25:08
  Speaker 1: to ask you about is your relationship with lions Gate.
• 25:12
  Speaker 1: Give you about the twenty seconds, how that developed and
• 25:14
  Speaker 1: how that demonstrates some of the changes you're talking about. Sure,
• 25:17
  Speaker 1: that's just really about subscription video on demand, is that
• 25:19
  Speaker 1: you have to take Brian like Tribeca and put it
• 25:21
  Speaker 1: on different platforms. So we need to make the obligatory
• 25:24
  Speaker 1: shift to mobile and that's where we live on the device.
• 25:27
  Speaker 1: Well done, Thank you very much for being with us.
• 25:29
  Speaker 1: And of course I've got to ask you what's your
• 25:31
  Speaker 1: favorite film? My favorite film? I better have Robert de
• 25:35
  Speaker 1: Niro winning. Well, the new HBO already made off thing
• 25:38
  Speaker 1: is pretty spectacular, but you know it's the Golden Age
• 25:40
  Speaker 1: of television. So I'm an episodic TV guy right now.
• 25:42
  Speaker 1: I confess I did actually watch that this weekend, strangely,
• 25:45
  Speaker 1: and the portrayal is stunning. He's not too shabby, No,
• 25:49
  Speaker 1: not at all. I want to thank you very much.
• 25:51
  Speaker 1: Andrew Essex is the chief executive of Tribeca Enterprises. He
• 25:54
  Speaker 1: has a new book. It is entitled The End of Advertising,
• 25:58
  Speaker 1: Why It Had to Die and the Creative Resurrection to Calm.
• 26:02
  Speaker 1: I sense a little perhaps money opportunity there. Thanks for
• 26:08
  Speaker 1: listening to the Bloomberg P and L podcast. You can
• 26:11
  Speaker 1: subscribe and listen to interviews at Apple Podcasts, SoundCloud, or
• 26:15
  Speaker 1: whatever podcast platform you prefer. I'm pim Fox. I'm on
• 26:18
  Speaker 1: Twitter at pim Fox. I'm on Twitter at Lisa abramoids one.
• 26:23
  Speaker 1: Before the podcast, you can always catch us worldwide on
• 26:26
  Speaker 1: Bloomberg Radio.