Latest / Bloomberg Intelligence / Up To 40% Of NYC Restaurants May Not Come Back

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Up To 40% Of NYC Restaurants May Not Come Back · Bloomberg Intelligence

• 0:01
  Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney. Along
• 0:04
  Speaker 1: with my co host of Bonnie Quinn. Every business day
• 0:06
  Speaker 1: we bring you interviews from CEO, market pros, and Bloomberg experts,
• 0:10
  Speaker 1: along with essential market moving news. Find the Bloomberg Markets
• 0:13
  Speaker 1: Podcast on Apple Podcasts or wherever you listen to podcasts,
• 0:17
  Speaker 1: and on Bloomberg dot com. Yesterday mark the day Phase
• 0:21
  Speaker 1: two reopening for New York City. One of the areas
• 0:25
  Speaker 1: that got a little bit of relief was the restaurant business.
• 0:28
  Speaker 1: Outdoor dinning now allowed uh as the restaurant industry tries
• 0:33
  Speaker 1: to get back on its feet. To get a sense
• 0:34
  Speaker 1: of how that went and how the restaurant industry globally
• 0:37
  Speaker 1: is faring here in this pandemic world, we welcome Kate,
• 0:41
  Speaker 1: a creator food editor for Bloomberg Pursuits. Kate, thanks so
• 0:44
  Speaker 1: much for joining us. Give us a sense of how
• 0:47
  Speaker 1: you think the reopening of the restaurant business in New
• 0:51
  Speaker 1: York City is gonna go. We're all gonna be sitting
• 0:53
  Speaker 1: on sidewalks and in the middle of the street, I guess,
• 0:55
  Speaker 1: But what did you what did you see yesterday and
• 0:57
  Speaker 1: what are some of the restaurant tours thinking as as
• 1:00
  Speaker 1: they reopen. Um, that's a really good question. Um. And
• 1:04
  Speaker 1: I think, um, I think how it went and how
• 1:06
  Speaker 1: it's gonna go, it depends on who you ask. Because
• 1:09
  Speaker 1: for some people, so that's what terms. I think a
• 1:12
  Speaker 1: lot of them are just delighted that they get to
• 1:15
  Speaker 1: be back in business and serving people. And you know,
• 1:18
  Speaker 1: they've been setting up table six ft apart and you know,
• 1:22
  Speaker 1: all of a sudden like activating their parking lots and
• 1:24
  Speaker 1: turning them into dining rooms. Um. But for then for
• 1:28
  Speaker 1: some other people, it's not a one size fits all situation.
• 1:31
  Speaker 1: And so for some people they realized that selling a
• 1:33
  Speaker 1: ten dollar full of soup is not financially viable when
• 1:38
  Speaker 1: you can only do fifty percent capacity and have people
• 1:41
  Speaker 1: six feet apart. So it's different, it's different throughout. But
• 1:45
  Speaker 1: I think there's a costive optimism, that's what I would say. Overall. Yeah, Okay,
• 1:48
  Speaker 1: there are twenty seven thousand restaurants in New York City.
• 1:51
  Speaker 1: Surely all of them don't have outside room, do they? No?
• 1:56
  Speaker 1: They they go not in New York City. I mean
• 1:59
  Speaker 1: they're has clothes. I think, like forty three miles of
• 2:02
  Speaker 1: streets and that some of that can live the alleviate.
• 2:06
  Speaker 1: A lot of restaurants were able to apply for outdoor
• 2:09
  Speaker 1: seating permits in a place like Peter Luger and Brooklyn
• 2:12
  Speaker 1: that has never ever served stake outside their doors. Um
• 2:16
  Speaker 1: got the permit, got the permit, and as of Thursday,
• 2:19
  Speaker 1: is going to have tables outside their restaurant and it's
• 2:23
  Speaker 1: putting the parking lot into a sort of picnic area.
• 2:26
  Speaker 1: So um, So a lot of restaurants can take advantage
• 2:29
  Speaker 1: of it, but certainly you're right, not all of them can,
• 2:32
  Speaker 1: and not all of them want to just to follow there.
• 2:35
  Speaker 1: I wasn't sure if you needed a permit. How does
• 2:38
  Speaker 1: the permitting system work and how much does it cost? Um,
• 2:41
  Speaker 1: that's a good question that I haven't applied to a permit,
• 2:44
  Speaker 1: and I'm not sure I know that. I know that
• 2:47
  Speaker 1: the permitting um went live on I think it was
• 2:51
  Speaker 1: it was either Thursday or Friday. So it's just like
• 2:53
  Speaker 1: four or five days ago to have a permit for Monday.
• 2:56
  Speaker 1: So there's been a lot of There hasn't always been
• 2:59
  Speaker 1: great messaging from the government, you know. I think that
• 3:02
  Speaker 1: a lot of restaurants and restaurateurs continue to have a
• 3:05
  Speaker 1: lot of questions about what to do. For instance, you're
• 3:08
  Speaker 1: eating outdoors, but what happens if you have to go
• 3:10
  Speaker 1: to the bathroom because there's all these rules about distance
• 3:14
  Speaker 1: and how many people can use the bathroom and all
• 3:16
  Speaker 1: of it. So there's still a ton of questions. Um,
• 3:19
  Speaker 1: But the permitting process, I think it went really quickly
• 3:22
  Speaker 1: once people could apply, but the applications went up very late.
• 3:25
  Speaker 1: As I understand it. It's okay. I know Leslie Patton
• 3:29
  Speaker 1: and you wrote a story for Today on the Bloomberg
• 3:32
  Speaker 1: and that the headline really grabbed me. Two point two
• 3:34
  Speaker 1: million restaurants worldwide teeter on the brink of collapse? Can
• 3:40
  Speaker 1: this restaurant industry? Is this gonna be permanently scarred here? Yeah?
• 3:44
  Speaker 1: Oh my gosh, we're never gonna you know, if you
• 3:46
  Speaker 1: think we're gonna get back to what it was like
• 3:48
  Speaker 1: in February and we're not, you know, I think, Um,
• 3:52
  Speaker 1: there's there's no way, there's no there's no going back.
• 3:58
  Speaker 1: Everybody has to move forward on the successful people, the
• 4:01
  Speaker 1: most successful restfuls were going to be the one realize
• 4:04
  Speaker 1: that figure out see new new ways, new way forward,
• 4:09
  Speaker 1: an opportunity. But um, there was reports from the National
• 4:13
  Speaker 1: Restaurant Association that the industry has already lost twenty billion
• 4:17
  Speaker 1: and they don't think they can be profitable for at
• 4:19
  Speaker 1: least six months, and I think six months is optimistic, actually, yeah,
• 4:23
  Speaker 1: And I mean for restaurants, you have to be profitable
• 4:26
  Speaker 1: on a weekly basis in order to keep the running cade.
• 4:29
  Speaker 1: How will the restaurants that have low occupancy to begin with,
• 4:33
  Speaker 1: I mean several on My Street alone can only fit
• 4:36
  Speaker 1: a certain amount of people. How do they manage week
• 4:38
  Speaker 1: to week if they just don't get those extra ten
• 4:41
  Speaker 1: customers that they need to make that profit margin. Yeah, Vanny,
• 4:44
  Speaker 1: that's such a good question. And I think, especially right
• 4:47
  Speaker 1: now in days two works all outdoor season. Um this
• 4:51
  Speaker 1: um chef my Price at the Clam in New York
• 4:53
  Speaker 1: was saying, you could have a slow Monday day, but
• 4:56
  Speaker 1: you're Saturday Saturday would cover your cost. And now there's
• 5:01
  Speaker 1: so many variables. And also outdoor seating is depending on weather.
• 5:04
  Speaker 1: So if you have a rainy Saturday and you thought
• 5:07
  Speaker 1: you had sold that, you know sort of sold out
• 5:10
  Speaker 1: and then you can't get everybody in, that's a disaster.
• 5:13
  Speaker 1: I mean a lot of them, A lot of restaurants
• 5:15
  Speaker 1: have been enterprising and turned themselves into like grocery stores
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  Speaker 1: and selling cocktails, and that's done a surprisingly good job
• 5:23
  Speaker 1: of helping, um, helping create income. But I think exactly
• 5:28
  Speaker 1: as you said, it's still like the margins are so
• 5:31
  Speaker 1: slim anyway. So, um, it's a real uh, it's it's
• 5:36
  Speaker 1: a very challenging future. So just real quick, Um, in
• 5:39
  Speaker 1: New York City, how many restaurants are expected that boy
• 5:43
  Speaker 1: just go out of business? I guess, um, that's it's
• 5:46
  Speaker 1: a good and scary question. Um. Open table to the survey,
• 5:50
  Speaker 1: and they thought nathma of restaurants wouldn't make get I
• 5:54
  Speaker 1: think in New York that number might be higher. I'm sure.
• 5:57
  Speaker 1: I mean, I think that's a conservative estimate. Anyway, it
• 6:00
  Speaker 1: in New York, as you guys were saying, space is
• 6:03
  Speaker 1: much tighter, soft occupancy is is a big difference, like
• 6:07
  Speaker 1: ten people, like Bonnie said, So I think that numbers
• 6:10
  Speaker 1: can be higher. I would not be surprised if it's
• 6:12
  Speaker 1: like at least it's a very scary number. Yeah, it's terrifying. Kate,
• 6:16
  Speaker 1: there's some great details in your story. I would urge
• 6:19
  Speaker 1: everyone to read a two point two million restaurants worldwide
• 6:21
  Speaker 1: teeter on brink of collapse. That's Kate Crater. They're joining us.
• 6:25
  Speaker 1: And one of those paragraphs, Paul lays out just how
• 6:29
  Speaker 1: much it costs to change to contact less takeout orders
• 6:32
  Speaker 1: and delivery, of course, and this equipment walkie talkies, masks, thermometers,
• 6:36
  Speaker 1: but five thousand dollars a month for the average restaurant apparently, Yeah,
• 6:40
  Speaker 1: that's the economics on delivery business not nearly as good
• 6:42
  Speaker 1: as in store dining. Daty check Research produces a morning
• 6:49
  Speaker 1: note that is always, always thought provoking, five days a week.
• 6:53
  Speaker 1: Something just sparks the thought process when you take a
• 6:57
  Speaker 1: look at the email. And in recent days the under
• 7:00
  Speaker 1: Nicholas has been looking at everything from yield curve control
• 7:03
  Speaker 1: to the impact of the upcoming elections on stocks and
• 7:07
  Speaker 1: on markets, and how this do nothing market is just
• 7:11
  Speaker 1: a little bit baffling, and some ideas for what to
• 7:14
  Speaker 1: do in this do nothing market. Let's bring him in now,
• 7:16
  Speaker 1: Nikola's co founder of data check or Research. Nick. Let's
• 7:20
  Speaker 1: start with yield curve control, only because you pointed out
• 7:23
  Speaker 1: today the New York Fed blog out which explains why
• 7:26
  Speaker 1: yield curve control is more efficient than quantitative easing and
• 7:30
  Speaker 1: at the same time in a different region, the St.
• 7:33
  Speaker 1: Louisfide President Jim Bullard is saying, no, we're not going
• 7:35
  Speaker 1: to have yield curve control. It's it's unnecessary. Yes, it
• 7:39
  Speaker 1: was fascinating to see the New York Fed actually put
• 7:42
  Speaker 1: out a blog analyzing the Japanese experience with yold curve
• 7:46
  Speaker 1: control and pointed out very clearly the yield curve control
• 7:49
  Speaker 1: has the advantage of not requiring as much capital from
• 7:53
  Speaker 1: a central bank to execute a given rate target for
• 7:56
  Speaker 1: say the long end of the curve. Instead of spending
• 7:59
  Speaker 1: tents and tens and tens of billions of dollars to
• 8:02
  Speaker 1: hold rates at a certain level, simply telling the market
• 8:05
  Speaker 1: we're going to peg it at X means you have
• 8:07
  Speaker 1: to spend much less money to make it stay at X.
• 8:10
  Speaker 1: So it's fascinating to see the New York Feds saying
• 8:12
  Speaker 1: there is some merit to yield of control in terms
• 8:14
  Speaker 1: of efficiency in central bank balance sheets. Hey, Nick, I
• 8:18
  Speaker 1: mean so when you think about this market here, are
• 8:21
  Speaker 1: you concerned about what I'm going to term or the
• 8:24
  Speaker 1: lack of breath if you will in this market? You know,
• 8:28
  Speaker 1: this move off the bottom, it's you know, centered on
• 8:31
  Speaker 1: a handful of names, the Amazons on the apples of
• 8:33
  Speaker 1: the world. How much of a concern is that for you? Yeah,
• 8:37
  Speaker 1: it's a fascinating point. I mean, if you look at
• 8:39
  Speaker 1: the two thousand nine rallied, for example, which there are
• 8:42
  Speaker 1: many analogs to the current rally, in that one, the
• 8:45
  Speaker 1: two thousand nine rally was all about the banks. The
• 8:47
  Speaker 1: banks doubled in value from March nine, two thousand nine,
• 8:52
  Speaker 1: through the next sixty days, ninety days rather you know,
• 8:55
  Speaker 1: basically the same days today, So it was led by
• 8:58
  Speaker 1: banks even more than this has been led by tech.
• 9:01
  Speaker 1: So it does feel that big snapback rallies off the
• 9:04
  Speaker 1: bottom are always led by something. In OH nine, it
• 9:08
  Speaker 1: was banks for all the obvious reasons. This time around,
• 9:10
  Speaker 1: it's been tech because of all the stay at home,
• 9:12
  Speaker 1: work at home phenomena that we're seeing still play out
• 9:16
  Speaker 1: to this day, and that seems so caught investors attention.
• 9:19
  Speaker 1: So I'd say, as unusual as it is, it does
• 9:22
  Speaker 1: fit a paradigm for snap back rallies like OH nine
• 9:24
  Speaker 1: and Nick Robin Hood has been a huge source of
• 9:29
  Speaker 1: interest to you know, so many people all over the
• 9:31
  Speaker 1: country in the recent days and weeks. Retail platform for
• 9:35
  Speaker 1: retail traders. How much of an impact are these people
• 9:38
  Speaker 1: that maybe have an average account size that you say,
• 9:41
  Speaker 1: less than five thou dollars. How much of an impact
• 9:43
  Speaker 1: are they really having on the market, you know, as
• 9:46
  Speaker 1: a market impact, I'd say not that much. They do
• 9:49
  Speaker 1: get a lot of press because of things like hurts
• 9:51
  Speaker 1: and the U. S O E. T F before that,
• 9:54
  Speaker 1: So they are making some rookie mistakes because that's what
• 9:56
  Speaker 1: rookies do, and that's fine. But as you said, the
• 9:59
  Speaker 1: account anances are relatively small. Robin Hood doesn't even have
• 10:03
  Speaker 1: an I Rara product. This is all kind of discretionary
• 10:06
  Speaker 1: retail money, taxable money, people putting in a couple of
• 10:09
  Speaker 1: thousand dollars to play the market while sports betting is closed.
• 10:12
  Speaker 1: So I think it's interesting, but I don't think it's
• 10:14
  Speaker 1: had a big effect in terms of money flows. But
• 10:16
  Speaker 1: I tell you, I mean, having looked at markets for
• 10:19
  Speaker 1: thirty years, it is fascinating to see, you know, a
• 10:22
  Speaker 1: couple of million people decided they want to trade stocks
• 10:24
  Speaker 1: in the course of ninety days, because that hasn't happened
• 10:26
  Speaker 1: in twenty years. So it's it's interesting to see. But
• 10:29
  Speaker 1: from a money flow perspective, not all that relevant. Well, Nick,
• 10:33
  Speaker 1: you are no rookies, you say thirty years, you're a
• 10:35
  Speaker 1: grizzled veteran here. So you've been through a lot of
• 10:38
  Speaker 1: presidential elections here, and somebody told me is an election year.
• 10:44
  Speaker 1: How are you kind of nobody's really focusing on it
• 10:47
  Speaker 1: right now because obviously there are bigger issues, more immediate
• 10:49
  Speaker 1: issues for folks and investors. How are you thinking about
• 10:53
  Speaker 1: the presidential election coming up here in the fall. You know,
• 10:57
  Speaker 1: the way we're thinking about it is not just the
• 10:59
  Speaker 1: president in the election, but the congressional ones as well.
• 11:02
  Speaker 1: And we did some work for clients last night that
• 11:05
  Speaker 1: looked at Okay, sit back in the nine. How does
• 11:08
  Speaker 1: the market do when one party controls both the White
• 11:11
  Speaker 1: House and Congress both chambers. It's only happened in thirty
• 11:15
  Speaker 1: years over the last seventy five, so less than half
• 11:18
  Speaker 1: the time. But when it does happen, if Republicans hold
• 11:21
  Speaker 1: both White House and Congress, the S and P s
• 11:23
  Speaker 1: up an average of six and when Democrats hold both
• 11:26
  Speaker 1: houses both chambers and the White House, it's a fourteen
• 11:30
  Speaker 1: point three percent on average, And the drawdowns are never
• 11:33
  Speaker 1: really bad. Those are both better than the average sup
• 11:36
  Speaker 1: returns in World War two, which is eleven. So the
• 11:39
  Speaker 1: really important thing is somebody, either party, somebody has to
• 11:42
  Speaker 1: own the economy, own the problems, and find the solutions.
• 11:46
  Speaker 1: And as long as that happens, markets tend to do okay.
• 11:49
  Speaker 1: So we're not as worried or focused on whether it's
• 11:52
  Speaker 1: Mr Trump or Mr Biden as much as someone's got
• 11:55
  Speaker 1: to own it, because particularly in the economy is still
• 11:58
  Speaker 1: gonna need to need a lot of help, and if
• 12:00
  Speaker 1: one party owns it, one party has to fix it. Yeah.
• 12:03
  Speaker 1: We actually heard the black men say that yesterday as well,
• 12:06
  Speaker 1: that he's not making any predictions or any trades based
• 12:10
  Speaker 1: on who might be the next president. And at the
• 12:12
  Speaker 1: same time, Nick, we're going to have such different policies
• 12:15
  Speaker 1: under a Joe Biden than under a second term President Trump. Right, absolutely,
• 12:22
  Speaker 1: I mean that the biggest worry I think for markets
• 12:24
  Speaker 1: is okay. Corporate taxes obviously came down in two thousands
• 12:27
  Speaker 1: seventeen will almost certainly go back up if Democrats control
• 12:31
  Speaker 1: both chambers and the White House. But we might also
• 12:34
  Speaker 1: see continuations of fiscal stimulus programs if unemployment continues to
• 12:40
  Speaker 1: be high, and if one party owns the economy next year,
• 12:44
  Speaker 1: they will have to figure out a way to make
• 12:46
  Speaker 1: growth happen, even if it means more fiscal stimulus. So
• 12:50
  Speaker 1: to me, it's TwixT and tween between the two problems. Yes,
• 12:53
  Speaker 1: probably higher corporate taxes, but if we can we escape
• 12:56
  Speaker 1: velocity and achieve a better economy through fiscal stimulus, that's
• 12:59
  Speaker 1: a stive, So I think it balances out. So Nick,
• 13:03
  Speaker 1: it seems like I'm just looking at the chart just
• 13:05
  Speaker 1: on and showing kind of the COVID cases in the
• 13:08
  Speaker 1: US and the you know, it's re recently, it's kind
• 13:10
  Speaker 1: of turned the other way the wrong way here. Yet
• 13:13
  Speaker 1: the market seems to be kind of discounting that so much.
• 13:16
  Speaker 1: Whereas if this if we'd seen the spike up in
• 13:19
  Speaker 1: big states like you know, Texas or Florida, we see
• 13:23
  Speaker 1: I think a pretty negative reaction the markets back in
• 13:25
  Speaker 1: February and early March and early April. What is your
• 13:29
  Speaker 1: sense of kind of how the markets thinking about the
• 13:31
  Speaker 1: virus per se, Yeah, very very important point. I think
• 13:36
  Speaker 1: two things. The first is this is why tech is
• 13:39
  Speaker 1: still rallying. You know, tech was the playoff to bottom
• 13:43
  Speaker 1: because of work at home and all the other things
• 13:45
  Speaker 1: we know, and tech continues to lead. That's one way
• 13:48
  Speaker 1: of knowing that the market is saying, we're not going
• 13:51
  Speaker 1: to play the rebound. The classic rebound trades were playing
• 13:54
  Speaker 1: tech because those things work regardless of what happens with
• 13:58
  Speaker 1: the virus and infection rates and how states managed lockdowns
• 14:01
  Speaker 1: and so forth. The second point I think the market
• 14:04
  Speaker 1: is saying is America is basically going to try to
• 14:07
  Speaker 1: power through this. Infection rates are going up, but it
• 14:10
  Speaker 1: seems to be among younger people with at least historically
• 14:13
  Speaker 1: lower mortality rates, and so this will be a problem,
• 14:17
  Speaker 1: but it won't be the existential problem that it was
• 14:19
  Speaker 1: when we locked down the entire country for the better
• 14:21
  Speaker 1: part of a month. So the market is saying profits
• 14:24
  Speaker 1: going to recover, but we still want to be in
• 14:26
  Speaker 1: the more defensive names for this environment, which is tech
• 14:29
  Speaker 1: and technically it's the market higher and Nick, thanks so
• 14:31
  Speaker 1: much for joining us once again. As always, we learn
• 14:34
  Speaker 1: a thing or two when we talk with you. Nicholas,
• 14:36
  Speaker 1: co founder, Data Trek Research. I recommend you read his stuff.
• 14:40
  Speaker 1: It's just really, really insightful, really gives you some food
• 14:45
  Speaker 1: for thought as we think about navigating these markets here
• 14:48
  Speaker 1: in these uncertain times. But we learned a lot about
• 14:53
  Speaker 1: Apple's strategy yesterday from him Cove at the Worldwide Developers Conference,
• 14:57
  Speaker 1: which supplies virtually it can news. Let's bring in somebody
• 15:01
  Speaker 1: who knows all about Apple and who can tell us
• 15:03
  Speaker 1: what exactly we need to be watching out for. David
• 15:05
  Speaker 1: Garrity as chief market strategist at laid Law and Company.
• 15:08
  Speaker 1: So we got the big announcement yesterday, David that Apple
• 15:11
  Speaker 1: is going to replace chips with its own chips, So
• 15:15
  Speaker 1: Intel no longer needed, Intel no longer inside Apple inside
• 15:19
  Speaker 1: these days, what else can we anticipate will emanate from
• 15:23
  Speaker 1: the week that would be of useful interest to investors? Yeah, no, certainly, Vonnie.
• 15:29
  Speaker 1: What's been coming into the conference, apart from the fact
• 15:31
  Speaker 1: that they move away from Intel to their own design chips,
• 15:35
  Speaker 1: is the fact that with regards to chip designs, they're
• 15:37
  Speaker 1: going to use a r M designed chips as a
• 15:40
  Speaker 1: platform across their entire range of hardware products, with the
• 15:45
  Speaker 1: idea that this can not only provide benefits in terms
• 15:47
  Speaker 1: of reduced power consumption, but also provide a standardized platform
• 15:51
  Speaker 1: that their developers can write programs to across all of
• 15:55
  Speaker 1: their products. So, David, give us a sense it seems
• 15:59
  Speaker 1: like a have a big deal to me to moving
• 16:01
  Speaker 1: away from you know, the tried and true chip maker
• 16:04
  Speaker 1: that is Intel that they've used for many years, to
• 16:08
  Speaker 1: their own chip. Why are they doing it? Why are
• 16:10
  Speaker 1: they doing it now? What's kind of the rationale? Well,
• 16:14
  Speaker 1: I mean Apple certainly has gotten to a scale where
• 16:17
  Speaker 1: it's possible for them to consider investments, so they may
• 16:20
  Speaker 1: not have done previously. Note, however, that you know, Apple
• 16:23
  Speaker 1: historically has had a business in which they've been involved
• 16:27
  Speaker 1: in designing semiconductors. Now they've had this in cooperation with
• 16:31
  Speaker 1: IBM in terms of IBM was running the semiconductor fabrication
• 16:36
  Speaker 1: plant where Apple design chips were made. So this is
• 16:39
  Speaker 1: not entirely a new business for Apple and also speaks
• 16:42
  Speaker 1: to the scale and also arguably speaks to what their
• 16:45
  Speaker 1: own intentions are for their technology that perhaps Intel was
• 16:49
  Speaker 1: not able to support as readily now in terms of
• 16:53
  Speaker 1: supporting its developer community. Uh, Tim Coke has been trying
• 16:56
  Speaker 1: to do a good job. But the US and Europe
• 16:59
  Speaker 1: isn't astigating Apple over antitrust allegations. How much it takes
• 17:03
  Speaker 1: from developers in the app store and so on. What happens?
• 17:07
  Speaker 1: How does the story end. Well, you know, it's certainly
• 17:11
  Speaker 1: this has gotten to be the services business for Apple
• 17:14
  Speaker 1: has gotten to be a fairly significant portion of their
• 17:17
  Speaker 1: overall revenue. High last year about forty six billion dollars
• 17:22
  Speaker 1: of what Apple made was coming out of services. These
• 17:25
  Speaker 1: are fueled by third party developers. Now, as we've read,
• 17:29
  Speaker 1: and no Apple charges its third party developers of their
• 17:34
  Speaker 1: revenues to actually have their products listed in the app store. Uh,
• 17:38
  Speaker 1: you know, from the standpoint of business development, is a
• 17:41
  Speaker 1: pretty big cut. One would argue that Apple perhaps could
• 17:45
  Speaker 1: get by with something half or less of that and
• 17:48
  Speaker 1: still provide a very encouraging signal to its third party
• 17:51
  Speaker 1: developer community and at the same time themselves grow a
• 17:55
  Speaker 1: very substantial business. So clearly the argument here around the
• 17:59
  Speaker 1: economic in terms of this business model. Certainly Apple is
• 18:03
  Speaker 1: in a position potentially to give more in order to
• 18:06
  Speaker 1: maintain a vibrant third party developer community. David, A big
• 18:11
  Speaker 1: part of the bull case for Apple stock is five
• 18:15
  Speaker 1: G and the arrival of five G presumably will spark
• 18:20
  Speaker 1: a super cycle in phone replacements. Of course Apple will
• 18:23
  Speaker 1: benefit from that. What do you expect to hear what
• 18:26
  Speaker 1: have we heard at this conference about five G and
• 18:29
  Speaker 1: what it means for Apple, Uh, nothing in particular as
• 18:35
  Speaker 1: of yet, but I would expect that the company should
• 18:38
  Speaker 1: be making some indications that will get people excited about
• 18:41
  Speaker 1: the upcoming launch in late September of the five G
• 18:44
  Speaker 1: I phone. UM, you know, certainly the five G I phone.
• 18:47
  Speaker 1: Apple in this regardless following other competitors as Apple as
• 18:50
  Speaker 1: want to do in terms of adopting new technologies, but
• 18:54
  Speaker 1: having an Apple product able of using five G networks
• 18:57
  Speaker 1: and the greater speeds in data k of abilities those
• 19:01
  Speaker 1: networks have, we do believe very much will prompt and
• 19:05
  Speaker 1: upgrade in terms of the user base for the Apple
• 19:08
  Speaker 1: iPhone something clearly. I think that given the scale of Apple, uh,
• 19:12
  Speaker 1: you know, should be an important development for them in
• 19:14
  Speaker 1: terms of not only their smartphone business but that of
• 19:17
  Speaker 1: the overall smartphone market. Tim Cook was very vocal today
• 19:23
  Speaker 1: about the President's decision to suspend the giving out of
• 19:27
  Speaker 1: H one B visas through the end of the year
• 19:29
  Speaker 1: new ones at least, and I'm curious, David, will this
• 19:32
  Speaker 1: have an immediate impact on Apple? UM. I think if
• 19:38
  Speaker 1: there's anything that we've learned, not specifically from Apple, but
• 19:41
  Speaker 1: more from dealing with the COVID nineteen pandemic is that
• 19:45
  Speaker 1: companies are more and more capable of operating on a
• 19:48
  Speaker 1: distributed basis. We don't necessarily need to have workers co
• 19:52
  Speaker 1: located now. It's obviously the intent of the H one
• 19:55
  Speaker 1: B VISA program was to be bringing workers physically into
• 19:58
  Speaker 1: a location here the United States in order to operate.
• 20:02
  Speaker 1: I don't think that, you know, not having an H
• 20:04
  Speaker 1: one B VISA program is going to be detrimental to
• 20:07
  Speaker 1: Apple in the near term. The bigger implication, I think,
• 20:10
  Speaker 1: not for Apple, but more for the US economy, is
• 20:13
  Speaker 1: that by potentially denying five thousand high paid workers UH
• 20:18
  Speaker 1: presence in the United States economy, the Trump administration has
• 20:22
  Speaker 1: deprived the US economy of the spending that those five
• 20:26
  Speaker 1: thousand well paid workers would bring with them. And so
• 20:29
  Speaker 1: from this standpoint, it seems to our view sort of
• 20:32
  Speaker 1: a cut the nose off, despite your face, kind of
• 20:35
  Speaker 1: moved by the Trump administration, not very well informed and
• 20:39
  Speaker 1: certainly misguided. David just got about a minute left. Is
• 20:44
  Speaker 1: the overhang from regulatory risk that was building for the
• 20:48
  Speaker 1: tech industry last year and going into this year, has
• 20:51
  Speaker 1: that kind of abated given all that's going on in
• 20:53
  Speaker 1: the world. Now. UM, I would say that, you know,
• 20:57
  Speaker 1: there are a matter of prior news or triage, if
• 21:01
  Speaker 1: you will, in terms of dealing with the things that
• 21:03
  Speaker 1: confronts society COVID nineteen being first and foremost. But when
• 21:08
  Speaker 1: things do settle down, once we get past the November election,
• 21:11
  Speaker 1: I certainly do expect that there will continue to be
• 21:14
  Speaker 1: demands for greater oversight with respect of the technology community,
• 21:19
  Speaker 1: focus on data privacy. Um. You know, the extent to
• 21:22
  Speaker 1: which media continues to be used, uh and to be
• 21:24
  Speaker 1: manipulated with regards to the upcoming election remains a vital concern.
• 21:29
  Speaker 1: So you know, there's a great deal that still remains
• 21:31
  Speaker 1: to be done. Jack Dorsey, the CEO of Twitter, you know,
• 21:35
  Speaker 1: certainly has broken ranks with others such as Zuckerberg and
• 21:38
  Speaker 1: saying that they would take down political content or be
• 21:40
  Speaker 1: more aggressive in policing this content. Um. But no, we're
• 21:44
  Speaker 1: not out of the woods by any stretch of the
• 21:46
  Speaker 1: imagination as far as greater oversight of the technology community. Hey, David,
• 21:51
  Speaker 1: thanks so much for joining us. As always, A good
• 21:53
  Speaker 1: wrap up a kind of what's going on at Apple
• 21:55
  Speaker 1: their event this week, as well as all things technology.
• 21:58
  Speaker 1: David Garretty chief mark strategist at laid Law and also
• 22:02
  Speaker 1: a partner at bt Block, giving us his overview of
• 22:05
  Speaker 1: the market. Alsy, remember when trade headlines used to quit
• 22:09
  Speaker 1: the markets? Exactly right. We had a little reminder of
• 22:12
  Speaker 1: that yesterday and into this morning when Peter Novarro, the
• 22:14
  Speaker 1: White House advisor, who of course has been appointed to
• 22:17
  Speaker 1: help the president on US trade with China, sold confusion
• 22:22
  Speaker 1: in a Fox interview. He said basically that the US
• 22:24
  Speaker 1: China trade agreement was over. Well, you might think that
• 22:27
  Speaker 1: that would have snuck by markets, but no, we got
• 22:29
  Speaker 1: a big change in markets, and US President Donald Trump
• 22:33
  Speaker 1: actually had to come out and clarify and say no, actually,
• 22:36
  Speaker 1: the deal with China is fully intact. For more on
• 22:39
  Speaker 1: what went on behind the scenes and what we should
• 22:41
  Speaker 1: expect trade wise over the next six months, let's bring
• 22:43
  Speaker 1: in Bloomberg Trades. Are Brendan Murray joining us from London? Brendan,
• 22:48
  Speaker 1: what was this all about? Was Peter Navarro trying to
• 22:50
  Speaker 1: sew some mischief for the Chinese? Well he sounded like uh.
• 22:55
  Speaker 1: In an answer to a question on a TV interview
• 22:59
  Speaker 1: that the that the that the that the China US
• 23:02
  Speaker 1: trade deal, this Phase one deal that they signed in
• 23:05
  Speaker 1: January was over. Uh, and so that's that obviously is
• 23:08
  Speaker 1: underpinning a lot of agricultural purchases and uh and other
• 23:13
  Speaker 1: things that you know, the Trump administration negotiated. Uh and
• 23:16
  Speaker 1: they you know, put the American companies under a lot
• 23:19
  Speaker 1: of stress with tariffs over the past few years. So
• 23:22
  Speaker 1: the news that or the apparent news that that that
• 23:26
  Speaker 1: that deal had come undone, uh, you know, was really
• 23:29
  Speaker 1: what's investors now. It turns out that President Trump tweeted
• 23:33
  Speaker 1: just a little while later that that that the deal
• 23:35
  Speaker 1: was still intact. That uh, you know Peter Navarro, you know,
• 23:39
  Speaker 1: who wrote a book called Death by China incidentally, uh,
• 23:42
  Speaker 1: you know, was was misunderstood. So you know, he's obviously
• 23:46
  Speaker 1: one of the you know, one of the most one
• 23:48
  Speaker 1: of the most hawkish um members of the Trump economic
• 23:51
  Speaker 1: team on China. So it's no surprising that you know,
• 23:54
  Speaker 1: he you know, he thinks that you know, the trust
• 23:58
  Speaker 1: has gone. But uh, yeah, it's definitely it goes to
• 24:01
  Speaker 1: show you that, you know, markets are you know, kind
• 24:03
  Speaker 1: of on edge, and and if that trade deal disintegrates,
• 24:07
  Speaker 1: then you know, we might see you know, even more selling.
• 24:11
  Speaker 1: So Brendan, what is the status of the Phase one deal. Ever,
• 24:14
  Speaker 1: it's some reports where maybe China's only bought maybe or
• 24:18
  Speaker 1: so or of what they were committed to in terms
• 24:21
  Speaker 1: of agricultural products and and other other products. Where are
• 24:23
  Speaker 1: we with phase one? So the person to listen to
• 24:26
  Speaker 1: on Phase one is Robert Lightheiser, the U S trade representatives,
• 24:30
  Speaker 1: the deal he negotiated. He you know, seems to be
• 24:33
  Speaker 1: the point person on at not to Barrow. So if
• 24:36
  Speaker 1: you if you listen to Lightheiser, he thinks that basically China, uh,
• 24:40
  Speaker 1: and he testified in Congress last week that China really
• 24:43
  Speaker 1: didn't get started buying uh, you know, the agricultural commodities
• 24:48
  Speaker 1: that they promised to until maybe March or April kind
• 24:52
  Speaker 1: of once they got through the worst of the coronavirus
• 24:55
  Speaker 1: outbreaks there. So he he sounds a bit sympathetic, and
• 25:00
  Speaker 1: you know, it's giving them the benefit of the doubt,
• 25:02
  Speaker 1: and you know it's and has seen some purchases in
• 25:05
  Speaker 1: recent weeks. Uh. You know, whether that continues is anybody's guess.
• 25:10
  Speaker 1: But Lightheizer, for his part, at least, you know, seems
• 25:13
  Speaker 1: to be still still confident that that it's gonna that
• 25:17
  Speaker 1: purchase are going to pick up in the second half
• 25:19
  Speaker 1: of the year in China will keep you know, keep
• 25:21
  Speaker 1: those commitments well. And there was always the question mark
• 25:24
  Speaker 1: over whether China could actually fulfill all the purchases that
• 25:27
  Speaker 1: I had promised. But separately from that, Brendan, was there
• 25:31
  Speaker 1: any impact on the deal from the John Bolton allegations
• 25:36
  Speaker 1: that the president sort of asked China too. You know,
• 25:40
  Speaker 1: it's not something we didn't know or didn't suspect, but
• 25:43
  Speaker 1: the sort of very black and white the idea that
• 25:45
  Speaker 1: the National Security Advisor was saying that President Trump straight
• 25:49
  Speaker 1: out asked China to buy agricultural goods in states where
• 25:53
  Speaker 1: he might be you know, on the balance between getting
• 25:57
  Speaker 1: reelected and not reelected. Will that have any impact on
• 25:59
  Speaker 1: the talks? It doesn't seem to have had an impact on,
• 26:03
  Speaker 1: you know, the actual deal that they signed itself. But
• 26:06
  Speaker 1: it just throws it just throws the whole relationship, you know,
• 26:10
  Speaker 1: into more into into more turmoil. And you know, if
• 26:13
  Speaker 1: you doubted, uh, you know, if you doubted whether there
• 26:17
  Speaker 1: were political motivations behind um, you know that that that
• 26:21
  Speaker 1: deal that Trump was pushing, you know, you might you might,
• 26:24
  Speaker 1: you might think twice now, but but it's it's it's
• 26:28
  Speaker 1: definitely added a layer of intrigue and UH and and
• 26:31
  Speaker 1: a lot to talk about in Washington. In Washington at
• 26:34
  Speaker 1: least so Brendan, you say, Robert, Robert Laheiser's is one
• 26:39
  Speaker 1: of the folks in Washington we should be listening to.
• 26:41
  Speaker 1: And he recently said in Bloomberg News was reporting that
• 26:44
  Speaker 1: UH tariffs, maybe even higher tariffs on medical supplies and
• 26:48
  Speaker 1: PPE would be a good thing. I'm just not sure
• 26:50
  Speaker 1: how that would be to the extent we are seeing
• 26:53
  Speaker 1: some spikes in cases and we may have a you know,
• 26:56
  Speaker 1: kind of another wave of the virus in the all.
• 27:00
  Speaker 1: What do you think his logic is there? Well, his
• 27:03
  Speaker 1: logic is that if we put tariffs on on imports,
• 27:07
  Speaker 1: then then producers will have an incentive to make them domestically.
• 27:13
  Speaker 1: So his his you know, tariffs drive you know, the
• 27:16
  Speaker 1: return of manufacturing jobs to to the U S in uh. Uh.
• 27:21
  Speaker 1: Ambassador Lightheiser's, um, you know world, And you know that's
• 27:26
  Speaker 1: debatable obviously, but um, you know, it's it's it's it
• 27:30
  Speaker 1: gives you a sense of of all that we've been
• 27:33
  Speaker 1: through two years of the trade war with China, three
• 27:35
  Speaker 1: hundred and seventy billion dollars worth of of teariffs, of
• 27:40
  Speaker 1: of products that have tariffs on them. You know that
• 27:43
  Speaker 1: he still finds UH and some problems with the you know,
• 27:46
  Speaker 1: the medical supplies, the personal prospective equipment coming to the
• 27:50
  Speaker 1: US during the during the worst of the pandemic. You
• 27:53
  Speaker 1: know that that tariffs still UH, you know, are the
• 27:56
  Speaker 1: answer for him and UM. You know it kind of
• 27:58
  Speaker 1: it could give you a sense to of where where
• 28:00
  Speaker 1: we might be headed with UH, with Europe in the
• 28:03
  Speaker 1: trade relationship. That's that's not getting better either, UM and UH,
• 28:08
  Speaker 1: and you know sets up sets us up for an
• 28:10
  Speaker 1: interesting second half of the year. Brendan Murray with the
• 28:13
  Speaker 1: understatement of the day, perhaps Brendan Murray trades are for
• 28:16
  Speaker 1: Bloomberg News. We always appreciate getting your perspective on trade
• 28:20
  Speaker 1: and his bonny. As you mentioned, it's kind of a
• 28:22
  Speaker 1: topic we haven't spent too much time on over the
• 28:24
  Speaker 1: past couple of months as we've been dealing with the pandemic.
• 28:27
  Speaker 1: But as you suggested earlier, Vannie, that that it is
• 28:29
  Speaker 1: still you know, right front and center for the markets
• 28:33
  Speaker 1: here because it really impacts the economic trajector duty if
• 28:37
  Speaker 1: not only the United States, but also our trading partners
• 28:40
  Speaker 1: around the world so it bears watching, and folks like
• 28:42
  Speaker 1: Brenda Murray help us do that. Thanks for listening to
• 28:45
  Speaker 1: the Bloomberg Markets podcast. You can subscribe and listen to
• 28:49
  Speaker 1: interviews at Apple Podcasts or whatever podcast platform you prefer.
• 28:53
  Speaker 1: I'm Bonnie Quinn, I'm on Twitter at Bonnie Quinn. And
• 28:56
  Speaker 1: Paul Sweeney I'm on Twitter at pt Sweeney. Before the podcast,
• 28:59
  Speaker 1: you can always is catch us worldwide at Bloomberg Radio