Apple Ditches IPhone Production

You can also listen to our radio show at two pm Eastern Time on Bloomberg Radio or watch us on YouTube search Bloomberg Global News. We are certainly seeing stocks really across the board trade hired today in a significant way. Not participating as much though in that rally is shares

of Apple. They were down as much as four point six percent at their lows today, still off those lows, but still down about one point four And this has to do with the Bloomberg exclusive, a story about Apple backing off plans to increase production of its new iPhones UH this year. This is according to folks in the nose. So let's get to it with our Bloomberg News West Coast correspondent Ludlow normally on the West coast, like for us, he's on the East coast and is here in our

sto here's another one. I don't think we'll let go back your stack, baby, what a treat. So what's going on here? What do we know? And it's complicated in nuance, but you know, sources tell us that just before the iPhone four teen was announced, they went to supplies and said, let's boost production by around six million units. We were thinking it would be ninety million this year for the iPhone,

which was in line with last year. They requested the supplies braced for an additional six million, and according to our reporting, overnight they walked that back. And the concern is that that great demand for this new handset that they thought would be there actually didn't materialize. And we've already had some evidence of that in the pre ordered numbers. Two So when I look at Apple shares, they fell as much as four point six percent, but they've been

steadily pairing their losses. And this doesn't sound like a good story for Apple right, less demand for its highest priced iPhones or for those super expensive high marking phones. Yet it's not as bad as you might think either. So the Cell side in particular is sanguine because most of them were modeling for ninety million units anyway, So they look at this report and they go, well, it hasn't really changed anything for us. It's still ninety million.

There there are some specific pieces of reporting that's so important that there's evidence that the consumer, particularly in China, is going for that higher end model that the fourteen pro Okay, So while there might be concerned about overall volume, they are selling the more expensive hand set, and so if they stick to that original ninety million goal, which was modeled by the Street, then maybe those higher A sps can boost the top line, even if just a little,

because they're selling more of them are more expensive. What I thought was interesting, and I bet you picked up on this our Bloomberg intelligence team, Ana Grana, you know, reminding us um because this was about, oh, I guess the belief that there was, as you said, China demand, European demand weak. And he reminded us that those two regions are about Apple's total sales eat. I mean that's massive, right, So we need to think about macro stories here, right, Yeah,

this is the why do we care about this? And it's the rich people buy iPhones, and even in a recession, they still buy iPhones. What we're looking for is the kind of bigger picture effect. We know that the smartphone market is soft, particularly in China. The preorder data report from Jeffreys this Monday showed wasn't great in China, but good for the higher price models. We need some lens with We know what the FED is doing, we know about the outlook for recessions around the world and inflation.

What we do is we look to the company movement and action to try and get another kind of read on the consumer. And I think a lot of what this story did would say things are pretty bad and key key markets still they're going to sell a lot. I always feel like, I know when you tempered back the Apple numbers, but they still kind of blow me away. Yes, even the expectations. If if it's a lower number, it's still a lot of stuff. I like what Global Equities

Research said. They called Apple the first casualty of recession and said that the collapse demand for these iPhones is just a tip of the iceberg. You could see a lot of layoffs across and through the Apple supply chain. In the months to come yes and take this is one part of a whole. The next piece of evidence we looked to his Micron earnings Thursday. Why biggest maker of memory chips d RAM also a huge supply to Apple If their earnings are soft, more evidence that the

broader market for electronics slowing down. The one thing then also intrigued by two when it comes to Apple is that they have the ability to just call it. Their suppliers say we want six million more and then a couple of days or months later say you know what, no scrap that we're not doing that anymore. And the suppliers just have no not going to say, you're not going to say that's fine. Whatever we plan to all those people were going to bring in, we're not bring

them in now. And the equity pain was felt in Asia, for those suppliers in Europe, for st micro in here in the United States, and they all scrambled. We heard from sources one supply completely shifted production to just the pro the higher end. Well, what if that doesn't stick

and people end up wanting the cheaper models. Well, as we reach out to Apple and look for some commentary or some clarity on this, I mean, what is it, you know, top of mind for you, if you're sitting down with the CEO of Apple, what would you want to be asking them right now other than to confirm pla is this true? An Apple spokesperson declined to comment for the story. You know, Apple is a company that's had tremendous growth, and what we're talking about here is

flat unit growth ninety million last year this year. That's a lot of iPhones. But at the top line, I think that the consensus is for two revenue growth. That's not what Apple does. You know, we've been through the pandemic era cycle, we've been through the five G supercycle. What's going to lift them up into that next phase of growth? And there's a lot resting on people buying the expensive Pro hand set. And that's why there's a lot of questions about Tim Cook as well, because he's

not the visionary that Steve Jobs was. He's an incrementalist, right. He makes the iPhones better and improves the guts, but maybe not the actual aesthetic of the phone that people get excited about. So the iPhone fourteen and the Pro, the Pro had fancy camera features, very high speck but what was the update. It was satellite enabled capabilities. If you're stuck up a mountain or you're in the ocean, you can connect via your iPhone. Very rich people. Right,

there's the thing. Who's that helping? Like? Is that going to hiking up? It doesn't matter whether I will I will say, like I'm looking to upgrade my phone again, but I keep looking for something that's an incremental or bigger boost a change. Um, and that that better camera in the satellite capability doesn't do it for you. Camera that does dishes is a laundry like that kind of thing. No, but it's like it's an important stock to watch. But I do think you guys are right. You pointed out

it was down four point six percent. It's lows. It's come off of that with the overall rally. But um, Redmont gun and stuff. He has all the details very early. So yeah, yeah, to see him like a big scoop by Bloomberg News, does seem a bit at the company or something like he has lots of friends at Apple. Oh my god, alright, folks, we gotta run low. Bloomberg News West Coast correspondent. He is here on the East Coast for a bit, joining us here in our interactive

broker studio. This is Bloomberg. This is Bloomberg Business Week with Carol Masser and Bloomberg Quick Takes Tim Stinovic on Bloomberg Radio. It's a story we covered big time yesterday about what was up with using what's app that led to surveillance failures across Wall Street. More than two billion in fines already levied to a roster of firms including b of A City, Goldman, Morgan Stanley, eleven Wall Street banks in total prevailing to stop staff from using unauthorized

messaging platforms. Scarlett, this is one of our most read stories on the Bloomberg today. I'm just looking at some of the bank's named. It's hard to find a bank that we know that's not included in this list. Hannah Lovett has been following this story from the beginning and she joins us. Now, Hannah, there's been more than two billion dollars and finds levied so far, as Carol was just saying, but the banks are now taking action in a different way as well. They just opened the vault

to let her in and welcome um. What kind of compliance steps of regulatory measures? Regulatory solutions are these banks coming up with. Yeah, So beyond the fines that came out in the orders yesterday, they agreed to um hire compliance consultants to make sure that they're you know, monitoring and preserving these messages lay, Yeah, to the extent that they're supposed to be. And you know that the these

firms are required by law to do this. And that was already um you know, becoming an issue just because of the proliferation of these messaging apps UM you know what's up signal you name it UM. So that was already a thing pre COVID. And then if you think about, you know, what happened in early when everyone was working from home and like you know, you you went from saying something to your colleague next to you to maybe like tapping out a message. So that wasn't what started this,

but that definitely made it a bigger deal. I do feel like it's part of our world, right, we were talking before we got going. I mean, how often do I like send myself to my Gmail or something something I want to do for work or just a memory. It's kind of what's fun about We're not fun? What's interesting about the stories? We get more and more details. Is we're finding out about the worst offenders. So what do we know about them and what level and what

kinds of things they were doing? And do we know names totally? Um, well, we don't know names. We don't know names. Why not because they did not name them in the orders. Okay. My suspicion is if they start to name people, you'd get people the high at the highest level, as you get all kinds of people like who would not be ensnared in this right? I mean, I think, you know, as demonstrated by like you said,

it was like virtually every major bank yesterday. And you know, they said that the investigations on going, so there could be more, but like you know, it was everywhere. I think that was a general conclusion, um, And they did this whole thing. You know, we had a story earlier this year about how the US was mandating this look this like strategic look across the board into you know, thirty thirty five phones at each firm, um, and that was mandated to kind of get a sense of the

magnitude of this and how much was happening. And clearly, you know, they all ended up getting fined around the same thing, like that's it's like, oh, you're all doing it drilled down though, Like there's like tell us about be of A and what we found out for you because because the specifics to me are kind of interesting, so we have an idea. Right. Also, they disclosed to

most and penalties as well. Right, they definitely the most um they did, but they did by the CFCC, so they their sec fine was the same everyone else and the gosh a little more CFCC. But there's so so basically the way that these things were structured was that it was in order for each firm and there was an area of like a couple of paragraphs where it was the specifics for each firm. So be avail I'll

just look at it. Um a managing director at the investment bank with the US wide role sent and received thousands of messages including the colleagues, clients and personnelity other firms, and then the head of an equity's trading desk texted with more than fifty colleagues and numerous people outside the

firm and like so that was what be eviated. You can go down the list and truly it was like you know, this m D and this part of the bank did you know send this many thousand messages to these people and and it really was just every Yeah,

it was like copy and paste, you know. And you guys reporting because you say when you're talking about be and forgive me for singling it out, because if you could pick a Scarlett said, uh Stanley, no, mora Ubs City credit suite, it covers No, She's right, she covers all ahead of a trading desk told brokers at others to delete message they messages they had exchanged on personal devices and to switch to signal, which, as we know,

is encrypted according to the CFTC. So is it just a case of we were just kind of talking to each other, we weren't trying to hide anything, or is it something deeper? And that's why it's worries. I think that's one of the things that TVD about this whole investigation is like, you know, at this stage they're not calling out wrongdoing, they're like found within the messages. They're calling out the wrongdoing that is that these messages were

happening in the first place. But you know, when the JPM order came out in December and again yesterday when these came out, like it clearly states that the investigation is ongoing, So I think that will be you know, something that I will certainly be paying attention to going forward is is what else might come out of this?

So when we say that the investigation is ongoing, do we think do we suspect that there will be more fines levied or will it be a case of the banks will say yeah, yeah, yeah, we get that there's a lot of wrongdoing. Let us figure out what we need to do and come up with our own solutions. That's a good question. You feel like what else? That is a good question. I mean, I wouldn't necessarily rule

out any of that. I think that you know, a lot of banks were named yesterday, some weren't, So we could, you know, if if it's indeed ubiquitous a quad across the industry as it as it seems, we might be able to look there um and then beyond that. Yet anything in the underlying messages that they would find, uh, that would be a case of wrongdoing. But we haven't

gotten there that. I have a quick question, how can you communicate with clients or colleagues then if you need to use your device and just kind of about twenty seconds, Yeah, um, I mean email. I think they have like an app installed now that does the tracking so they can use that, or like a company issued phone. Yes, so much just put in place after the financial crisis. Will people be fired?

Do you think after this they were at drap Morgan TBD or to come kind of levet you and the team and the reporting has been really great on this and we really appreciate getting an update. Or Hannah Levit, she is financial reporter at Bloomberg News, joining us in our interactive Broker studio. You're listening to Bloomberg Business Week with Carol mass Her and Bloomberg Quick Takes Tim Stinovic

on Bloomberg Radio. Well, on a day where we are focusing so much on Biogen and the very promising results of that company's Alzheimer's drug, we are reminded once again about those big biotech and big farmer names that continue to work on better treatments, are new ones to tap some of our major medical ailments. So that brings us to a story in the upcoming a new issue of

Bloomberg Business Week. That's story already online at Bloomberg dot com Slash business Week, and of course on the Bloomberg Terminal. So let's get to it. It's about how big Pharma is chasing a fifty five billion dollar prize of safer blood thinners. The story from Bloomberg News healthcare reporter Angelica Angelica Peebles. She's on the phone in San Diego. Hey, Angelica, nice to have you here with Scarlet Food and myself. So tell us about your story and what you set

out to do. Big Pharma is really searching for new treatments for blood clots, and that's because we have some really good treatments right now, namely Eloquence and z Arelto. They are some of the best selling drugs in the world, but they also carry some pretty big risks um namely bleeding. It can take a variety of forms, whether that's just bruising a little bit more easily, or in rare cases, turning into brain bleeding, which can of course be lethal.

So it's just a really big prize out there for these companies to create something that's just as effective as the treatments we have now, but safer. And that's how the companies landed on a different enzyme. It's called factor eleven A, and basically there's this whole chain plotting system in your body. We won't have We don't get into all the details. But right now the main drugs target one enzyme and now they're going after another, and it's

still relatively early. We just have um more recent data and the companies still have to do these really big trials to prove that they work. But if they do UM it could mean a lot of companies and of course for patients. So when we say big farmah, which companies are doing the chasing hair, Which ones are investing

a lot of time and money into this. There are a lot of companies in this game, but the biggest ones that we're focusing on right now are Bristol Myers, squib Johnson and Johnson and those two of our partners. And then there which is of course the German company behind Asprin, and those are the ones that are going into these big trials UM and are. They're both working

on pills that you can take. There's another company called Antos and they are spin out from nov Artists and they are using UM biologic drugs, so it would be

infused or injected. I mean some of these names A Delica are already bringing in some money for these big farmer names, aren't they yeah, eloquence and are relative or huge money makers, And they will lose their patent exclusivity um within the next few years, and that means that generic treatments will be able to come onto the market, presumably undercutting the price, and that poses a big question for those companies on how they'll replace that money, and

so they see these new drugs as a way to fill that whole. Of course, um they'll have to compete against the now the cheaper drugs that are already on the market. But that's why it's so important to show that these drugs are much safer, because if that's the case, then they can treat far more patients people who right now either can't or don't want to take a drug

that might um cause them to bleed out. God's a bit if they cut themselves, cut themselves shaving, or something along those lines, so it could expand the market for them. It's interesting that big farms chasing this because we know that in a lot of ailments UM it's often the smaller biotech companies that are doing a lot of the investing in some kind of new medical solution or some

kind of farmers pharmacist pharmacological solution to ems. Yeah, but the fact that big farmers in here shows that the potential to make money here is massive. Are there smaller companies that are perhaps making headway doing anything interesting in this space? There are smaller companies, Anthos being one of them. Of course they came from a big barma company, but

they're doing it alone now, and there are more. But really this is a perfect um perfect disease, a perfect indication if you will, for big pharma because so many

people um experience blood clots. In fact, blood clots are responsible um for an estimated one in four deaths worldwide, which I was shocked to hear, And so that really suits itself well for a big company to go after running these trials will take thousands, if not you know, many more patients around the world, and it will take a lot of money to actually prove that these works.

That this is a perfect opportunity for big farma to play. Hey, Angelica, is this part of kind of where finally reaping the benefits of that huge mapping of the genome and really just getting to understand on a much greater, deeper, smarter level genetics in terms of creating methodologies or pharma or treatments that really can target different individuals who maybe didn't respond so well to a previous treatment. Good question, Thank you.

The way that UM scientists decided to factor or focus on factor eleven a, which is that enzyme, is because of genetic data, So that is UM. You know, this is one example of how genetics are marrying drug development and how we're using UM the information that our genetics provide to create better drugs. And the scientists found was that there were certain people who maybe they've led a little bit more than your average person, say if they were getting their teeth cleaned, but they didn't bleed as

much as people with other forms of hemophilia. And at the same time, they appeared to be at less risk of stroke than the normal population. And so that gave scientists a clue that going after this particular enzyme and actually blocking it could give you the benefit of, you know, preventing blood without this unnecessary this added burden of potentially unwanted bleeding. And so that was really how this all came about, and we're just going to see more and

more of this going forward. So Angelica big picture, when we talk about treatments for Alzheimer's, for instance, it very much feels like one step for two steps for one step back. What's the trajectory like for a new safer blood than or is it similarly staggered and frustrating? Drug development is never perfect, and companies will remind you oftentimes

that they fail more than they succeed. And what's interesting about the Phase two data that Bear, as well as the Silmyer, squib and Johnson and Johnson presented last month, is that the drugs actually failed in their trial, and that caused a lot of concern that maybe these don't work as well as these thought they do. The company said, look, these studies weren't powered to show just how well the

drugs work. It was more about finding the right dose and making sure that they live up to their promise of being safer. Um right now, there's a lot more skepticism that they might not be everything that we thought they would be. So if their Phase three trials are not guaranteed to succeed by any means, and they could

very well fail, we'll have to see. Yeah, my brother who worked in the pharmaceuticals for a long time and we had debate about the cost of pharmaceuticals and treatments is like, keep in mind that this takes a long time to develop stuff, and a lot of stuff doesn't pan out, so we'd always go kind of round and round. It's like a lottery. Yeah. Bloomberg News healthcare reporter Angelica Peoples judging us on the phone from San Diego. That story in the upcoming new issue of Bloomberg Business Week

on newsstands tomorrow. Already online a Bloomberg dot com slash Business weekend, of course, on the Bloomberg terminal brom Journal. Yeah, but you let me drive? Oh no, no, no Ah night please album Bobart Rivals. I want to drive. It's

a good question. This is good ride to the clothes well radio, all right, everybody, just about ten minutes left in today's trading session, and man, we are seeing some buying here in the last few minutes of trading, as Dug mansioned those equity averages well above two percent, two point three percent higher on the SNP NAZDAC hired by almost two and a half percent. We're pretty much at our best levels of the session. This is we've seen

yields back off, so Let's get to it. Let's get to the drive to the close with Doug Cioca, CEO and partner at Cavar Capital Partners over a billion in assets under management. He joins us on the phone in Leewood, Kansas, uh and joins us on the phone from there. How are you, Doug. I'm doing very well. How are you doing? I'm doing okay, I'm doing okay. But I gotta ask you something really important to happened here in New York City.

I don't know if everybody saw it, but our New York City Mayor Eric Adams actually making some amends about New York versus Kansas. Here's what he had to say. New York has a brand and when people see it, it means something. You know when we go there. It's not Kansas doesn't have a brand when you go there. Okay, you from Kansas out New York City Mayor Eric Adams um having some fun about branding. But come on, Doug,

you know you are from Kansas. One of the reasons I love talking to people around the country, especially when it comes to markets in the economy, is we get a different perspective. So come on in. Yeah, we were shocked to learn that we were the land of no brand the last night. Imagine it made its way around our local media circuit, and so it's actually kind of kicked up a lot of sort of spontaneous contributions to

define the brand of Kansas. And I don't know if you want to invoke the national basketball champion Kansas Jayhawks from this year, our agricultural contribution in the world, grade schools, low crime, and lest us never forget the birthplace of American treasure had left. So, oh my gosh, Oh that's a good point. You know, I got thought of that. You make a good point, good, a really good point. Um.

I gotta say I love the heartland. And like I said, I love talking to people, especially when it comes to financial markets and trying to get a grasp of what's going on in terms of sentiment across the country. And when we go to you, Doug, we get that. Tell us, how does it feel in Kansas right now? Are you guys have freaked out as much as we all are about recession, fed moves, higher rates, what's going on overseas?

Give us give us some perspective here. Yeah, I think all of that, I mean, and it is we know I mean, being in the Midwest is wonderful and we love sort of the set of values in the Midwestern mentality and friendliness, but you know that the market is global, and we feel as plugged in here is I think I probably would if I was sitting in Chicago, New

York and London. So I think the way information makes its way around the universe these days, and we don't certainly don't feel disconnected, and the psyche of certainly our clients is fragile. I think just the crossed asset class correlation that has defined the first nine months of this

year has been really pronounced. And I think that unfortunately, when when you have to go through some um expectation resetting, when you get these resets and valuations, and you just try to frame perspective on what that can mean well into the future, and we're very optimistic, and I think, unfortunately you have to plow through this um. It sounds silly to be optimistic in the face of perspective recession in a bare market, but we can't help but be so you have to plow through this. And I wonder

there's this word disorder that comes up a lot these days. Uh, Jenny Yellen says there's no disorder in the markets at least stateside. Larry Summer says, yes, there was in the UK bond market. Uh, but he sees risks of breakdowns to come. How do investors prepare for that possibility of breakdowns to come? Do you just sit in cash? You move to cash? Do you uh sit tighten, not do anything. Look at my four oh one kid, I kind of wish I had moved to cash. I'm just gonna put

that out there. Yeah, I think we we could have used an expression for a while and just talking about managing for the short term and investing for the long term and keeping a certain amount of capital out of the path. That's insanity, I think is just prudent um asset management. But I think more than anything, And and you know, the feed seems to think that um, their

experimentation is not live. Right. This is not like a randomized control trial or only one group of constituents is impacted by their actions, right, their direct implications and many indirect implications. Where right, no area of a globally intertwined economy is going to be immune from some of the things they're doing. And I heard an interview with Lizzianne Saunders the other day, and she made a really good point about the SET trying to differentiate between financial market

volatility and financial system instability. And I do think the FED seems at best apesthetic to the former, but hopefully you know not to the ladder, and with taking place within the UK is a pretty good example of the ladder. Yeah, financial market uh, movement volatility is certainly what we're seeing right now. If you were to take a step back, what is the what is the tail? What is the dog here? What's driving what here? Yeah, it's a great question,

you know. I think what's interesting when you do take the step back, right is if you if you are kind of understanding accountability, which for the exercise is beneficial, so you can ask your tave a pathway forward and then you understand the accountability. Why we have inflation. We had a lot on the demand side because coming out of the pandemic, we had a bunch of stimulus that justifiably came to the economy the bestically and globally and

likely overstayed uh the necessary point of being retained. And then you have some of the externalities, right that have taken place because of supply mind disruptions in Russia, Ukraine and over in China, and I think what you try to do is then find the combination of steps with extraction of liquidity, being mindful of the things that are out of your control, and then use a term that Powell used in his press conference four times but it

is not actually incorporated into practice, understand that the implementation is going to be long and variable, and that would require a set of patients to understand the direct impact of some of these military policy initiatives. If you had that opportunity, I think you take a little the volatility out of the system, but you restore much more needed stability to this. Hey, Doug, what's a smart metric to

keep an eye on for investors? Where I feel like the metrics is a lot of volatility in them, and I'm not quite sure what we should be focusing on at this point. You know what's been fascinating curls this week?

Despite the hawkersh tone of the FED meeting, follow through at that FED Lessons event on Friday, and then reinforce through harsh language of Mester Cash Carrian Bullard, the terminal rate projection has dropped every day this week and now from the four point four for March and next year because the market thinks this said we'll see the fruits of its labor comes through in better cp I PC or job reads or the realization of these global ramifications

courtesy what took place in the UK, and that may cause the said to pause, right, maybe a little bit ahead of at SCP projections, right. I think that would be a really good thanks for them to deliberate about doing. That's interesting, which also I keep thinking about what Charlie Evans told CNBC in terms of maybe uh FED rate

moves potentially topping out come March. Doug Cioca, we love you, We love Kansas, chief executive officer partner at of Our Capital Partners, joining us on the phone from Leewood, Kansas. He's got about a billion dollars more than that under management at his firm. Thanks for listening to Bloomberg Business Week.

Download the podcast on iTunes, SoundCloud, or Bloomberg dot com, and you can also listen to our radio show at two pm Eastern on Bloomberg Radio or watch us on YouTube search Bloomberg Global News