Apple Tells Suppliers IPhone Demand Slowing

Bloomberg Business Weekend iTunes, SoundCloud, or Bloomberg dot Com. You can also listen to our radio show at two pm Eastern Time on the Bloomberg Radio or watch us on YouTube search Bloomberg Global News. So we just heard from the President detailing the latest upbeat on what the US wants to do in terms of really combating this latest variant when it comes to COVID nineteen. In the meantime, we do have our second reporter case in the US fires are expecting its vaccine to hold up against the

omicron variant uh and executive coming out with that. Germany imposing stringent nationwide restrictions on people who are not vaccinated. So that's a little bit of our world snapshot. We're also seeing that even though Amy Cron is stealing a lot of the attention. The delta variant is still pressuring the U S health care system. So it comes to

the time where hospitalizations are rising in at thirty nine states. Carol, all right, so let's get to our guest, Dr Emily Gurley, Associate scientist at Johns Hopkins University, Bloomberg School of Public Health, which is of course supported by Michael R. Bloomberg, Founder, Bloomberg LP and Bloomberg Philanthropies. She joins us on the phone from Baltimore. Great to have you here with us, Dr Gurley. The latest amicron variant. What are some of

the conversations you guys are having at John's Hopkins about this? Well, Um, there are conversations about the scientific UH questions around where the this variant came from, UM and what the mutations that that we observe in this variant might mean. And then there are conversations about the public health impact which are related to the scientific questions but but are a

bit different. And and in in terms of public health impact, we're really in a way and see mode because um, we we don't know UH answers to key questions like is this virus more transmissible? Is it able to evade our our immune responses. Um, could it lead to more severe disease? And it may be weeks actually before we have good answers to this question. Let's ask the question

a different way. What do we know? Well, we know that, uh, the omicron variant has many more mutations then we would expect to see from a virus that evolved from one of the existing more common variants. So, UM, we expect viruses to change over time. That's that's normal. UM. But this virus has many more mutations. So it's it looks a lot different than the other variants that are currently circulating. UM. And so we don't we don't know how it came to be, but we do know that it looks different.

So many more mutations? Is that worries some like? Give us some idea for those of us who are not as smart as you. Oh, well, I mean but that but that's I mean, that's the question. What does it mean? I don't think we fully understand what it means from a public health perspective. We generally are not smart enough to be able to look at genetic mutations and say, uh, if a virus has this, this, and this, it is going to do this we know, UH, we can't say

because of where the mutations are on the virus. There there are many around the spike protein, and the spike is what connects to our UH cells, so the virus can replicate, and the spike is what are antibodies target, right, So if we have antibodies two to a spike protein of previous variants, they may not bind as well to this virus because it has some mutations there. It looks a little bit different to our immune systems. Yeah, I think for our audience, a question that I've been talking

about with friends is what should we be doing? How should we change your behavior? If at all? I think that. I mean, first of all the variants that the variant that's transmitted most commonly in the US right now and that's causing all these hospitalizations and deaths is the Delta variant. So don't forget about delta. UM. We expect that all of our interventions UH that we use now for UM for delta are the same. They're the still the best tools that will have for O macron as well. So

get vaccinated, get a booster UH. If you're eligi a bowl UM, be aware of what's happening around you. So if there's a lot of transmission happening in your community, you know, get the mask out. Um Uh, you've got to be aware of what's happening around you. If you've been exposed, test yourself. Um, even if you've been vaccinated, because we know that if you are infected, even after vaccination, you can transmit to other people. Well, I have a question for you. So, um, sure Tim got his booster.

I hope I can say that I'm a vast get my booster. I'm about to get my booster. So what if then all of a sudden they come out in a couple of weeks and they're like, Okay, that booster is gonna do nothing for you, And then I don't know what does that mean for our safety and our health. Again, I guess it depends on how lethal it is, right and how contagious is it it is. I guess we

have to answer those questions. But then if they come out with another booster in three months that does deal with this new variant, we'll be safe to go ahead and get that again. Like we can just continue to keep getting boosters and the stuff being you know, basically being shot again. UM. So there are a lot there's a lot of speculation there, questions. But you know what I'm getting at, Like this idea of getting multiple vaccines over and over and maybe getting them closer and closer

to one another. Um, do we need to be concerned about that? I really doubt it. I UM and so and but let's be clear about what the vaccines really are meant to do. UM And I think because I think this message does get confused. What we're trying to do is prevent hospitalizations and death. That's the primary goal for COVID control, UM and to end the pandemic because you know, imagine, imagine we were having a pandemic that

only caused mild disease. Right do you get an infection, you don't feel well for a few days, but then you recover and your fine. Uh, no rush to the hospital, no increase in risk of death. We would not offend our world for a pandemic like that, right. So what we have to try to do as much as we can is get COVID to look like that, right. So, so then we're reducing at every stage. Uh, you know, risk of hospitalization, risk of death. Vaccines are the very

best way to do that. Even in studies that show, um, you know that vaccines can wane over time and their ability to prevent infection. Um, they still are retain their ability to prevent hospitalization and death. And that's really what we have to keep our eyes on here, I think. UM. So, so those vaccines are the are the best way to do that. Um. There's no reason to believe that, Oh,

macron Is is going to change that calculation. Um. And we also have to you know, think about um, you know, treatment. If you're at high risk, you need to be you know, you need to be watching yourself. UM. Get some home rapid tests. Yes, Okay, that's what I want to talk about with you. I want to talk about the home rapid test because we just heard from President Biden that he wants private insurers to pay for these at home rapid tests. These are antigen tests. They're not PCR test. Correct,

That's correct. Okay. What is the accuracy of an at home rapid test versus a PCR test? Um? So they can't be less accurate, But it depends on the situation, right. UM. So Let's imagine that you know you've been exposed, and you have symptoms and your rapid test is positive, you probably have COVID. The chances that you don't have COVID are very low. Okay, Um, Let's imagine that you haven't been exposed, you don't have symptoms, and you get a

positive test. Well maybe yes, maybe no, right, maybe you take a second test to to to figure that out or to get in, you know, to get another data point. Right. Um So, I think when we say these tests aren't is accurate, we're selling them short because there are many situations where they are definitely accurate enough to take action.

My question is because as we get closer and closer to the holidays, and I saw this certainly with friends and family before the Thanksgiving holiday, people go and they get a bunch of bay Nacks now tests from the drug store. They all take them, they are all negative, and they go and have Thanksgiving or Christmas or Hanukah with one another. Is that okay to do? Because these tests are are accurate enough to tell us if we don't have symptoms, and we we that we don't have COVID,

they are great for that reason. Um so yeah, so we we we should be using them. We should be using them all the time. The test result, that's difficult to figure out. If you don't have symptoms and it's positive, it may be a false positive. That's possible. But you know, if you're gonna air on the conservative side, maybe you just set that, you know, don't go into that party until you can get a PCR test and get it confirmed.

But if you're symptomatic and it's positive, you should stay away. Um. So so you know, I again, I think these these tests gets get a bad rap um for for no good reason. Remember what they're trying to do. So a PCR test is better in the sense that it can pick up the virus sooner in your system. So so that's an advantage. But the anagen tests are much better at telling us whether or not you're infectious, whether or not you have a lot of virus in your nose

and are likely to infect someone else. So um, from a from a public health perspective, from a transmission perspective, those anagin tests are great because that's really what you want to know. If I go somewhere, is there a chance that I can inspect somebody else? Right? And the antigine tests are great for that. Um, they're in they're fast, right, that's we we speed means so much in terms of transmission.

So just for an example, UM, if you've got a swap collected today and you've got your PCR results back tomorrow, that's very quick. But that PCR result tells you about your infection status yesterday, not today. And to be able to act on data you need you know you need rapid tests and the aningine tests are great for for helping you determine whether or not you're infectious. Covered a lot of ground, good stuff. Uh, Dr Emily Gurley, thank

you so much. Epidemiologist over at Johns Hopkins University, Bloomberg School of Public House, supported by Michael R. Bloomberg, founder of Bloomberg ALP and Bloomberg Philanthropy. She's joining us on the phone from Baltimore. Really good questions. I know you've been thinking a lot about the testing. Really helpful clarification with these tests because there's so a lot of people have a lot of confusion around how accurate they are.

This is Bloomberg Business Week with Carol Messer and Bloomberg Quick Takes. Tim Stinovic on Bloomberg Radio. We have been watching shares of Apple, seeing some selling earlier on definitely bouncing off their lows, but still a bit lower. What the concern seems to be is we know that there's been supply chain issues, but now we're looking at maybe some demand issues. To him, yeah, well, fortunately Mark German is the guy to talk to when it comes to

all things Apple. He's technology reporter for Bloomberg News. He joins us right now from the Los Angeles bureau, so you folks on YouTube who are watching and listening right now can see him as well. Mark, What is what

is going on with the demand story here? Because this is part of a much larger narrative that um, we've heard about over the last few weeks thanks to your reporting in our colleagues as well as you know, the iPhone thirteen is really a modest upgrade over the iPhone twelve, and that was ignored for the first several weeks of this product's launch because there was such supply chain problems with this device alongside every thing else because of the

chip shot, which we saw one month delays, right and those one month delays sort of indicated really strong demand. But we know that that is starting to sort of ease, and we know that people are not looking to buy the iPhone thirteen in quantities that they were wanting to buy the iPhone thirteen weeks ago, probably because it's a modest upgrade. The other thing I should know is that the carrier is an Apple head. Extraordinarily aggressive rebate offers

for the iPhone teen out of the gate. The amount of how lucrative those deals are have now subsided now that the phone has been out for several months as well. Now right, so that all indicates why would be weakening? People are waiting for the iPhone fourteen. They're waiting for bigger changes next year, and I'd be waiting for a

new iPhone I seen next year. Can I just tell you? Alright, alright, I'm not gonna say who it is, but there's been a carrier, my carrier sorry, has been bombarding me saying like, if you get a new phone. I just bought a new phone in the last year, Like, if you buy a new phone, we're gonna give you this an amount of money. I mean, it has been NonStop. Mark. Well, they're doing that because they need They know that they need rebates and discounts in these special deals in order

to move these devices. Right, if you bought an iPhone twelve last year. There's basically no reason to upgrade to the iPhone thirteen, So why did I do it? Right? I have the iPhone third Team Promax here, I had the twelve Promacs lost year white. I got it for free. Really, I swear I got it for free. That's how aggressive the deals were at the early off thing of these new iPhones. They gave yous basically for a twelve Promax

last year. Other devices got big discounts too, right, That's why these phones were flying off the shelves because of those carrier deals. There are some cool nifty features, the new camera technology, the portrait mode, cinema mode for video, the new Cerra blue color, which I think is kind of cool. But other than that, yeah, that's the one. But other than that, these are not significant upgrades. But

there's also people with older phones. Markets is already because one great thing about working with Markerrman is you can email him and say, hey, Mark, what phone should I get? And he'll email you back. And I'm so grateful he because there's nobody else who knows more about phones than Mark. Day Uh Mark. So here's the thing. I upgraded from an iPhone tad. So there was a huge reason for me to buy this, this thirteen pro that I just got. And it's so it's a it's night and day, especially

with with the apps that I use. Um, isn't that who this phone is geared toward, not necessarily to people who have the twelve like Carol? That's right. Apple doesn't design and develop new products to be released on an annual basis to get the people from last year to upgrade. Right. It's about people new to the ecosystem. It's about people new, uh to the iPhone. It's about people who are all upgrading from older phones like yourself. Right. But at the

same time, we've seen consumer spending, right, decreases. Consumer prices have gone up, gas prices are going up. People are concerned about you know, food prices and potential food shortages. There are some concerns obviously on the Crowning and COVID as well, right, And those are reasons why demand could could be weakening. The one thing I'll note is I think this is, you know, a blit, not a trend for Apple. I think you'll see stronger sales next year.

I think the iPhone fourteen is going to be obviously a smash hit. And the one thing I will say is that Apple has said that it's quarter revenue for Q one is going to be a grand slam. Basically, they're going to top a hundred and twelve billion, which was with a you know, reported last year in the

first quarter. So regardless of this demand weekending, it's going to be an extraordinarily strong quarter, perhaps just not as strong as some had been anticipating or Apple would have liked, because not only because of supplied but a combination of supplying demand. I mean, I always feel like when we're talking Apple, it's like the law of large numbers. I mean, it's just it blows my mind. Hey, Mark German, thank

you so much. Mark is technology reporter join in us and you can have seen him on YouTube from our l A bureau. I love talking with Mike. You to get him back again. What color is your phone? I got the C blue one that market. That's cool, I'll show it's here. You're listening to Bloomberg Business Week with Carol Messer and Bloomberg Quick Takes Tim Stinovic on Bloomberg Radio.

All Right. At one time, Enron was a prominent energy supplier, a rating powerhouse named financial vehicles after Star Wars characters and themes. We all followed it. We wanted to talk to its top executives, and it had a stock that went from a high of ninety in August of two thousands to below a buck in November of two thousand one as it all unraveled in a massive fraud. Today, Tim is the twenty year anniversary of the end Ron bankruptcy.

Greg Farrell is an investigative reporter for a legal enforcement team here at Bloomberg News. He's with us in the Bloomberg Interactive Broker's Studio. Greg story is featured in the new issue of Bloomberg Business Week Magazines. It's available on newsstands and at Bloomberg dot com slash of Business Week. So take us back twenty years ago where you were, Greg Um, you were a reporter at USA today, just

following it right. Yes, I was at USA today, and in fact, because of nine eleven, I had been over in Europe for a while spelling some of our foreign correspondence, just in Germany and in England. So I remember the day to the bankruptcy, having a drink in a bar in Frankfort with an ex Golden Sax guy who was just starting his own fund and like, I wasn't following anyone because I was over there for something else, the Afghan pea stocks or something. But this guy was like,

you know, I can't believe this happened. This was just such a stunning event that Enron, which was such a high flyer for so many years and like crashed and burned and like record time. So as soon as I got back, you know, I was put on this and uh, you know, it started with congressional hearings and then of course the almost you know, the very quick charge criminal

charge that the Justice Department leveled against Arthur Anderson. Um. Well, speaking of crashing and burning, right, these were the the accounting firms and Arthur Anderson in particular. What came what came to be known as a result of the investigations, Well, first of all, it came out very quickly that Anderson

had engaged in like a frenzy of paper shredding. You know, when at the time in October of two thousand one, that it was clear that a massive loss was going to be reported, and it was clear that there was going to be at least an sec investigation, if not worse. Um. So, you know that was a very bad fact than Joe Berardino, the current the CEO at the time and the last CEO of Arthur Anderson Um, he testified Congress in December that he thought that they've been you know, our Arthur

had been lied to. At least that was the defense he put forward, right and ron Um that Enron had lied to Arthur and he was trying to protect the auditing firm. Um. Well, that's what's interesting about the stories. It really gets to the relationship between a firm and it's accounting firm, and you you really get into, you know, what are the responsibilities or the relationships because those accounting firms, which seems so dry and boring, they'd also become consultants, right,

so they're really woven in with these companies. Yes, would potential that was a big problem at that time. Was such a big deal that the then chairman of the sec Arthur Levitt Um had proposed rule in the believe yes absolutely, and he had proposed rule in the year two thousand that auditing firms should keep there, you know, should should not serve also as business consultants to their clients because that could you know, basically expose them to leverage.

And this is what we saw, you know, classically with Enron and Arthur Anderson. Uh, Anderson, like it was, it was the most profitable client. They got fifty more than fifty million dollars a year in two thousands, and they passed the fifty million mark just to October of two thousand one, before you know, Enron went down and it was clear that that amount of money had clouded, you know, and basically they had co opted the Houston office of

Arthur Anderson. Okay, but you and you do. Right in the wake of this, three of the big four accounting from sold off their consulting units. But that was then. This is now in over the last decade, firms have reverse course acquiring consulting firms to expand their revenue sources, once again building conflicts of interest into the system a short term, right, yes, exactly. And that's that's one of the problems is that, you know, the passage of time

went by. I think there was a real feeling after the conviction of Arthur Anderson was overturned by the Supreme Court unanimously that uh, you know, and we went from the you know, the Fabulous five or whatever you call them, to the Big four, the final four that you know,

you can't put another accounting fir amount of business. Um. So, once the rest of the four sort of understood that it's not that they felt they had a license to do wrong as much as they didn't have that you know, fear of God that they had for a year or two after Anderson was put out of business, that we've

got to watch our step. It kind of reminds me like coming off of the financial crisis or not the financial crisis, excuse me, the tech boom, right, and and you're having the analysts and the underwriters and it's just like it feels like things got obviously very messy. We know it did right in terms of conflicts of interest. I guess the question is, at this point, so memories are short, could we are investors better protected? Because I mean, investors lost the money a lot of money on and

Ron and even more I think I'm world calm. A few months later, good point Sarbanes Oxley would not have been passed was starting to bog down in the summer of two thousand one two thousand two. But then when World Calm came and that was like, you know, isist a size? Is that the golden umbrellas? Is that that? Do you remember like the decorating Well, I'll look the

World Calm, um was much bigger than that. Really created the momentum to pass a controversial law like Sarbanes Oxley because the you know, the c p A firms, you know they have they have a lot of strength, a lot of juice in Washington. So could could Enron happen again? So we haven't seen it. We haven't seen anything on the scale of Enron or World Calm. And that's for a number of reasons. Um. So there's a certain point you can you know, the auditing firms can be congratulated

for that and the work of their overseas. The p c a o B, you know, the Public Company Accounting Oversight Board, which was set up by Sarbanes Oxley. However, um one of the biggest factors and then I didn't have the room to go into this. That has helped investors is a component of Sarbanes Oxley that was strengthened

in Dodd Frank that basically protects whistleblowers. So there's been a shift in the last twenty years in the attitude towards whistleblowers, who I think used to be can it are traded traders, rats, you know, in grades whatever, um. In general, it was not something you wanted to be identified as twenty years ago. It's not like people want to now. However, look at the way Francis Haggan of

Facebook has been celebrated in sixty minutes. It's it's very much you know, and and you know, the SEC's program, the whistleblower reward program, I think past the billion dollar

mark last year. In fact, this current year is like the best year they've had that even more so, that's probably done a better job than the big four auditing firms at alerting the SEC to accounting problems, which is so interesting, right, like you know, basically reaching out to the people like to be responsible and really you know, oversight into our governance. Yes, yes, exactly, And so they're protected and it's been a phenomenally successful program for the SEC.

I think it's really helped um prevent frauds from mushrooming. I spoke to Sharon Watkins, the mud whistleblower, just yesterday. Other piece that we did today, and as we were chatting, and I told her about this piece about Arthur Anderson because she was an accounting expert and warned that Enron would go down in a wave of accounting scandals, which

in fact it did. Um But she also pointed out, you know, as she wasn't technically a whistleblower, but she sort of adopted that profile, that it is different today, and that whistle blowers have played a tremendous role probably in preventing you know, a lot of the SEC busts, a lot of frauds at small to MidCap companies, and you know, if it weren't the whistleblowers, these things could have mushroomed into something much bigger. That's what happened with

Enron and World Colom. It's amazing great reporting. As always, Thank you so much, Greig Farrell. He's investigative reporter for Legal Enforcement Team here at Bloomberg News. And that story in the current issue of Bloomberg Business Week magazine. It's on newstands, online and on the Bloomberg This is Bloomberg Business Week with Carol Masser and Bloomberg Quick Takes. Tim

Stinovic on Bloomberg Radio well. According to the American Christmas Tree Association, last year, ninety four million US households celebrated Christmas by displaying a Christmas tree in their home. Of those trees were artificial, were alive, tim and similar. Consumer demand is pretty much excited. I didn't either official trees, although it's interesting. I look in my family because of travel and some and things that we were mostly are

a real Christmas tree family. And I have a brother's like you know what, because we go travel and we eat the tree. You know, they bought it like artificial tree last year. So I was, well, let's talk about it with Marcia Gray, executive director of the Christmas Tree Promotion Board, joins us on the phone from Howell, Michigan. Great to have you on the show of Marcia. Thanks for joining us. How are you. I'm doing great, and thanks for letting me join you, because we definitely want

to talk about those real Christmas trees. And I love it real because I actually have two real Christmas. There's nothing like the smell home. You know what's great about about New York City And you don't realize this until you till you live here. Come here during the holidays, but the way they sell Christmas trees here is on

the sidewalk. Sweet, isn't it. It's very sweet. So you're walking down the sidewalk and you have to walk through these you know, cell like Christmas tree sales, so you're just getting that great pine smell when you're walking through it is it's one of my favorite things. So tell us how things are going Marsha this year and what are your expectations and and you know what we're gonna ask you about are there going to be enough trees

for everybody? Well, I'm really glad we have a chance to talk because the Christmas Tree Promotion Board, like the National Christmas Tree Association, we represent the real Christmas tree growers in the US. We don't we don't work with artificial That would be the American Christmas Tree Association. So a few different, two different groups at work here. Um, we're expecting a really strong season. Last year was a very good year for real Christmas trees, and it's it's

kind of interesting. This question has been popping up about availability and shortage, and I definitely want to get to that. But I'm glad we're asking the question, and I think it's happening because we are seeing more interest in the real thing, in the real Christmas tree, and consumers want to make sure that they can get one. In fact, last year, we we always do consumer testing. We talked to people last year who had purchased a real tree for the first time during the pandemic. In those said

they wish they'd started sooner. So we know we're going to have strong sales this year. Wow. Hey, So what about when it comes to costs of Christmas trees? Again? My you know, idea of a prices is changed by living in New York City where they're incredibly expensive. But how have you seen prices fluctuated at a time where we are talking a lot about rising prices for consumers. Sure, Christmas trees will probably be the same as almost every other thing that we're seeing. The cost of the tree

production goes up just simply because labor, fuel, fertilizer. Our growers have some increased costs. But again, the wholesale price the tree is not you know, it does not encompass you know, the entire retail price. Retail prices are said individually, and you're right, you will see something very different, for example in New York City. Then you might see and

let's say de Moine, Iowa. But those retail prices are impacted again by that selling area, so their overhead, their their costs that they have to hire people to run that tree lot or to um the real estate that they're paying for. We expect that the prices for the trees are up slightly this year, but I don't think anyone should be expecting some You know, we've heard some crazy reports about doubling of prices and and that's just

simply not going to be happening. What about the logistics and in terms of transportation, I think it's just such a big cost are a big part of the cost equation when it comes to Christmas trees. Um, what are we knowing about that? We all know filling up at the at the pump, that those prices have gone up. It's got to be the same obviously for some of those truckers. What do we know about that front? And

also do they have enough labor on truckers. We did a story earlier about now teenagers eighteen year olds being allowed to maybe become truck is because of the shortage of demand. Um, so what are we seeing on that front? Yeah? So trucking obviously was one of our biggest worries. Um, the cost is up from the trucking. The exciting thing is worth talking here. On December two, most of the Christmas trees have been delivered. It's done, it's over and done.

They are in market. They're not sitting waiting. You know. The interesting thing, real Christmas trees, all real Christmas trees sold in the US are growing here in the United States or with our partner Canada. So we're not worrying about things being stuck in a cargo ship somewhere. We are really talking about that domestic shipping or trucking issue. Um, but we have the trees are there, they're in market.

Took a little bit longer maybe for some locations to get all of the trees delivered, but pretty much the job has been done. Okay, I gotta ask, because this is very controversial. After Christmas, when is the right time to dispose of the Christmas tree? Well, Number one, we do encourage you to if your tree is drying out, we who want you to get it out of the house because it's it can be messy, and you're you're kind of done with it. Whenever you like to take

it is fine. What's really interesting when you dispose of a real Christmas tree, it is biodegradable. Most trees are picked up your your local municipalities will announce dates that they're going to be picking up the trees. Most of those trees go to get chipped into mulch. Uh. So you really want to make sure you have your tree out there for that pickup program. So the trees are going to the right place and it disposed it properly at the end. Hey, real quick question, just got about

twenty seconds. Here. Are we doing enough to to replenish and make sure we have trees for the environment, which we know we need so much? H You know this is really important. Real Christmas trees are a farm grown product. We do not take them out of force, so farmers are constantly replanting. You can feel really good about that choice. Alright,

Happy holidays, Merry Christmas, have a great holiday season. Great to catch up with Marcia Gray, executive director at the Christmas Tree Promotion Board, joining us via zoom from how long can I'm yeah, I bet you let me drive? Oh no, no, no, no, this is not a toy. All right, please, I'll do the l I want to try. It's good question. This is the drive to the close up on Bluebird Radio. All right, is just about ten

minutes away from the closing bell on this Thursday. We are definitely getting ready to wrap up the trading session, and as Charlie mentioned, we definitely have seen a rally today. We're covering near our best levels of the session on the SMP, Dow and the NAZAC. Let's get to it with Brian Jacobson. This. Brian Jacobson is senior investment strategist at all Spring Global Investments. They have seven billion dollars in assets under management. Brian, how are you. It's good

to have you back. Yeah, thank you so much for having me here. It's a beautiful day here in Wisconsin, fifty and sunny. Well, what do you make of today's trade? I should say, put it in the context of what we've seen this week, which is a lot of volatility. In fact, the last few days or the worst back to back days that we've seen since October, and today the we're seeing this rally. So, so what do you make of the dip Buyers continue to come back in

after big declines. Yeah, it just seems like people can't make up their minds is this good or is it bad? Uh? And I think that it's actually just emblematic of the type of uncertainty that people are really trying to wrestle with here, right. I Mean a lot of people like to say markets don't like uncertainty, but the fact is, we deal with uncertainty all the time, right, we have

to manage it. It actually creates opportunities. I mean, the last year and a half has been all about uncertainty, one day after another, right, and we we see the different swings. I am curious, Brian, that are you able to start thinking about, all right, what is especially for uh, your clients and your investors. You know, what is the longer term strategy that makes sense? And I'm gonna say six to twelve months, which really is a long term.

But do you feel like you have some confidence to kind of have a feel of what the environment will be in the next year? We think we do, uh.

And that's the thing that I think that where there's the disagreement where we viewed the opportunity to say, on Friday with the sell off, and then you had the Monday rally, but then the Tuesday sell off those sell offs we viewed as an opportunity to load up a little bit more on those areas that we like the most, like for example, we do like say energy, We like more cyclical areas, so smaller cap, more value names, uh, emerging markets, credit on the fixed income side as opposed

to the super safe treasury securities. And it's mainly because over the six to twelve month horizon here, we think that a lot of these problems that are plaguing the markets right now are really supply chain driven. Will probably see that improve in accelerating the way. Wait are you saying it's transitory anymore? Did you not list this week? Yeah, apparently he told us that we shouldn't use that term any well, but I think the problem is is that

they didn't operationally define that term when they first loved it. Well, you know, isn't that the point? Like we really don't like six months, right, we don't really know what transitory meant. And that was the problem. And I think I am I almost took from what he did this week, is like, let's just stop talking about it, because here's our predicament. We're dealing with it. We don't know how long it's gonna last, but I would it's safe to say doesn't

think that this is going to go on forever. But let's just get rid of the word because it's just messing everybody out, that's right. Yeah, it was kind of distracting, I think, from the fact that they were stuck between a rock and a hard place, right, I mean, you had, and that's what happens when there's a supply chain shock. Monetary policy really can't do much about that because they can't create more growth in the short term, and then

you have the higher inflation that's supply chain driven. They can deal with more demand side issues, but not supply side issues. And for us, we actually put out a note back in March of last year saying transitory you should think of it as being twelve to sixteen months.

And I think that's kind of playing out here because if it is supply chain driven, we'll likely see some improvements at an accelerating pace, in which case we could get stronger growth in the fourth quarter, stronger growth in the first quarter of two thousand twenty two, and also decline in this inflation impulse. And so that actually creates a bit of a sweet spot for the FED because they can taper the asset purchases, maybe wind that up

because the crisis is effectively over. But then they don't have to be in a hurry to hike, right, so you can actually have they've been stuck in a predicament, but then they can be stuck in a sweet spot for two two when it shifts towards stronger growth and lower inflation prosures. Okay, so help us understand, because we did hear from from j. Powell several days this week, what do you expect from the Federal Reserve in THEO

when it comes to UH monetary policy. Yeah, well, our base case scenario is that they'll probably ramp up the tapering program in March. Right, so at the meeting on December fifteenth, they can announce an acceleration of that taper,

and then it puts. It gives them optionality, It gives them the ability that if inflation is falling, as we think that it will, going from you know, these high single digits towards something closer to we think the run rate by the end of the two thousand two is going to be closer to two point five or three percent. If that's the trajectory. That means that they can wrap up the taper sooner, but that doesn't mean that they have to hike earlier, right. It means that they could

still probably wait until June. It gives them the flexibility that if prices aren't coming towards closer to their target uh comes say May, that they are able to hike then. But our base cases they're still going to likely wait until June or July and then try it again in December. And hiking into strength isn't a bad way to be hiking. It's the same thing that happened in two thousand, fifteen to eighteen. The market did pretty darned well during that

period of time. Brian, your team there at all Spring, you know, they do their Monday meeting. They're like, all right, Brian, what do we really have to be worried about? Because man is last week was wacko, especially as we got freaked out once again about a new variant. We're still trying to assess it. Everybody says it's going to take maybe two to four weeks before we really understand maybe the significance of it. Um, what do you say to them? Yeah,

I think that's the biggest risk. The one that we talked about is that we tend to reduce, reuse and recycle fears of the past, right, So we try to reduce everything, so one main thing, one main topic, and then we reuse and recycle the previous fears. And I think the one for two two is going to be a big debate about whether or not the FETE is

going to be making a mistake. Are they going to start hiking a little bit too aggressively, And so as a result of the way that we're positioning portfolios, it's still wipen up on the duration of the fixed income portion of the portfolios, just in case, not that we get a taper tantrum or hiking hissy fits or something like that, but that we could see those longer term yields kind of swing a little bit more wildly than what people are accustomed to with their fixed in comeportion

of their portfolio. But it's all too then be biased towards equities, all right, Gonna leave it on that note, Brian, Thank you so much. Brian Jacobsen, Senior investment Strategies at all Spring Global Investments. 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 to Bloomberg Global News