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

giving up some of the unbelievable games this year. Just to put into perspective, even with the past two days of losses, Apple shares are up more than twenty six percent year to date share over day. Is a Bloomberg gad Flight columnus and she joins us here in our Bloomberg eleven three oh studios. Shira, Uh, you know, first of all, before we get to sort of whether this route can deepen, while I mean, is this just basically to be expected after such a massive rally earlier in

the year. Yeah, there is no particular trigger for the tech stocks, and it's not just Apple right all. A lot of the big tech stocks, including Google and Facebook and Amazon and in video, the chip company that has been one of the better performing tech stocks in the last couple of years, Fang plus others. Uh, they are all, you know, getting punched in the nose basically since Friday.

And there's no particularly good reason. But as you pointed out, a lot of those tech stocks have done exceptionally well this year and has helped drive you know, the overall stock market in the US up, and so I think there was a little bit of a realization that, oh, shoot, maybe this has gotten a little bit overdone and we need to sell and move into other sectors of of

the industry of technology and beyond. Well, I was just looking, for example, at the NAS deck and you'd have to shed another hundred and ten points let's say, just get back to the fifty day moving average, and you'd have to lose even more to get to the ninety day and the well the even longer the two day moving average. So the technicals are not looking great for the technology stocks. Apple.

Let's talk specifically about Apple. The most recent conversation we've had has to do with a qual Con chip and an Intel chip going into their newest iPhone and how they're going to limit the speed in the iPhone to the Intel chip because they do not offer this fast processing power. Has Apple gotten to the point where it is so big that it cannot find enough vendors to offset the potential for picking a vendor that they're going to either be in a lawsuit with or provides technology

that doesn't match what Apple wants. So Apple is always very conscious about becoming overly reliant on one or two parts suppliers, particularly of crucial parts like computer chips that go into its phones, right and modem chips, which is the Qualcom Intel issue. Um. The The issue is there are only two companies, Intel and Qualcom that are really at scale suppliers of these kind of crucial modem ships where the phone is basically connecting with cellular networks, and

Qualcom is the undisputed leader. But Apple doesn't want to become too reliant on Qualcom, in part because Qualcom and Apple are now engaged in this very messy, angry, high stakes financial litigation over whether Qualcom is kind of overcharging for its chips to Apple and others. Uh And so as a consequence, Apple wants to have a little bit of you know, vendor choices, and it's it's using both

Apple and I'm sorry, Intel and Qualcom chips in the phone. Well, you know, we're talking to John Butler about this last week of Limberg Intelligence, and he was saying, Okay, look, yes, Apple may not have the highest speed UH connection available to its a new iPhone, but most people aren't going to care. And frankly, people who are in the iPhone world and our devote devotees to Apple are going to

stay devotees to Apple. And I just have to wonder, you know, at this point, is this dip in the share prices does this signify the people have reached their limit in buying on pure faith that something is going

to change and a shift into show me mode? And that's going to This is going to really be a shift in sentiment that isn't necessarily going to mean a deep sell off, but will mean more skepticism going forward and a need to see more evidence that they can consustain the growth that they have seen in the past.

I think that's very good point. Look, the fact remains that the run up we've seen an Apple's share price this year and starting last late last year is largely because of expectations of a big surgeon iPhone stale sales starting later this year, when Apples expected to introduce a new kind of dramatically overhauled iPhone, and if that thing doesn't sell like hotcakes, I don't know what happens to

Apple share price. You saw one of the Mizuho, one of the Apple animals downgrade the stock this morning or overnight on basically saying, look, a lot of the enthusiasm for this new iPhone. It's gonna have, you know, fancier screen and um, all kinds of advanced features. If a lot of that enthusiasm is already baked into the share price, So that's the big risk for Apple. I'm just curious. Do you have any idea what the new iPhone eight might cost? There are some reports that it could be

upwards of a thousand dollars. Yes, we don't know. UM. The reporting from Bloomberg and others has said there's going to be three new models of the iPhone, the you know, regular iPhone, the hot larger screen plus model, and then this kind of third probably fancier and even more expensive iPhone model. And yes, some of the reports are it might cost a thousand dollars or more, which is kind of a staggering sum to think about paying for, you know, a slab of glass and circuits. You could use an

eyebill on your Apple Watch and maybe through Apple Pay. Sure. Ovida, thank you so much for joining us. Hearra Ovida is a technology columnist with Bloomberg gad Fly and joins us here in our Bloomberg eleven three oh studios. Well, emerging markets debt has absolutely been in a hotspot this year. I'm just looking and that flows to mutual funds, most of which track some kind of broad index inflows total more than forty billion dollars to emerging markets debt uh

so far this year. To get some perspective on why the flows have been so intense, at what these people are really investing in, I want to bring in Damien Sassaur. He's a fixing strategist for bloom Intelligence. He joins us here in our Bloomberg eleven three oh studios. Damien, I was looking at the biggest e t F that focuses on emerging markets debt, and last week alone, this e t F had some unprecedented flows almost a billion dollars

in a week coming in. And yet you pointed out in recent research that the underlying index is actually getting weaker from a credit perspective. Yeah, no, that's right. So in terms of credit quality, lisa UM, what we're seeing are UM a lot of EM high held sovereigns being added to the index. We're seeing I guess, you know, fundamentally weaker corporate and quasi sovereign credits, specifically in the financial sector coming from some um, some suspect EM economies

such as Nigeria, which I pointed out. I mean, just last week we saw the Ivory coast Um issue nearly two billion dollars in HARDCORENCY bonds. Yet only a month ago there's a forty mutiny by soldiers and in twenty eleven, the company a company the country the faulted on its sovereign bonds. So I mean these are not UM you know, these are just not your everyday high quality credits. And you were talking about a Nigerian bank that sold a debt.

It was the first benchmark bond offering benchmark eligible bond offering from a Nigerian bank since two thousand fourteen, and Nigerian banks have a history of defaulting. Now that's correct, So I mean access bank issued at the end of last year, but they are not benchmark eligible. They're only three hundred million, although that might make them eligible for the JP Morgan and hence the e M b E t F, But the Bloomberg Barkley's e M Hard Currency agg which is, you know, the broad measure that we

follow here. You have to have a minimum five million dollar a new issues in order to be included within that index. So we don't really we didn't really include access in our analysis. But Zennith Bank, who just um issued last week and I'm sorry last month, and then Uba on the heels of that, they're having no problems happing these markets and they're you know, it's it's green

light Gopher Nigeria. Four and a half percent. That's the yield at least currently on the Bloomberg Barkley's Emerging Markets US are Aggregate bond index right about that four and a half percent. What kind of duration risk are people taking on to get that whopping four and a half percent? You know, that is a great point, I mean, PIM. You know, on the sovereign side, what you're seeing now is the duration has i think extended out nearly seven years.

So you're getting seven year em sovereign debt, you know, and and the way you have to look at buying a car, right, I mean because the car payments right, I mean sixty months. And pim those Ivory Coast bonds have a sixteen year maturity, I mean sixteen years. I mean this again is a country that defaulted last eleven and a month ago. You know that there was a

mutiny by by the military. Meanwhile, four and a half percent is not very much relative to history, right, So this isn't exactly a high yield that investors are getting. That said, a lot of investors continue to pour money into this space. And you hear a lot of sophisticated money managers, including PIMCO, say, you know what you do have developing markets? Uh that in some cases hold more promise the developed markets where rates are really low and

growth is slowing and the population is aging. So how do you sort of square these ideas well? I think I think, you know, shifting to high grade. And this is an important point that a lot of people also aren't considering um GCC. The Middle East has I mean there have been massive, massive issues from Saudi Arabia, from Aman, from Kuwait, I'm talking eight nine. I mean just last year, we know Saudi issued nineteen billion, but they just did

a cook issue this year for nine billion. On top of that, I mean, their leverage at the sovereign level has increased. It's just been huge. So now you know, you look at these countries. These are countries that generate their revenue through oil, and if oil stays weak or continues to week and these are high grade you know, single double A credits that are fundamentally weaker also, but again you know, forgive me, those are high grade credit

quality issues, right. But the reason why I ask is because you do have so much money coming in, you do have yields dropping at a faster pace in some cases, and similarly rated US credit it and you have to wonder, are people uh just blind to this risk and going into indexes that have all sorts of things that they're not aware of, or people fully aware, but they still

think that there's an attractiveness here. Well, Muhammad al Arean, I mean he said that fundament you know, we've pretty much the coupled from fundamentals, and I have to kind of agree in large respect to that. I mean, if you just look at the three drivers. We just did our mid year outlook at b I on the e M side, and if you just look at China five year CDs UM, the US dollar and oil prices collectively, they mean e M spreads are eighty percent correlated to

these three factors. And those three factors alone are responsible for determining six of the movement and EUM credit spreads of the last two years using weekly data. So yeah, it's market it's external factors that are driving spreads. So if they're external factors driving spreads, external factors could also make these investments go south pretty quickly if if if they do go the other way. PIM, That's exactly what. There's nothing underneath it, right, I mean, there there's no

bid that is holding this up, or is there. I'm not I am not an oil I am not the right guy to be talking to you about sovereign set for example. I mean it's not as if you're going to find the Bank of Japan buying Nigerian government bonds. Um, You're right, I mean, look, you know, I mean it's it's funny how some of these some of these e M portfolios where you know who's buying them and where they're winding up these days, and how people are you know,

looking for incrementally yielding new places. So for all I know, the Bank of Japan could be buying You've been even covering this area for a long time, Damien. And have you seen a shift with investors going more into indexed strategies and could that pose a risk? Yes, now that that is definitely a risk if if flows turn the

other way. I mean, I think, you know, and again I'm gonna you know, use my colleague Mike mcgloan who runs commodity, who's the commodity strategy that b I you know, e m takes the escalator up and the elevator down, and you know, when things turn the other way and sentiment shifts, uh negatively, you could really see you know, spreads uh you know, potentially wide and quite quite quite quickly.

I wonder if you could use Petro Brass, the Brazilian oil giant, as an example of some of the things that can happen that you don't expect and they're trying to get ahead of the game, but it's challenging. You know. Petro Brass is an interesting one because they they've done a great job. Look they're coming off a low base, and they have effectively been extending their maturities, restructuring their day that they've been selling non core assets, they've actually

been cleaning up their balot sheets. So all this negative, you know Michi Goswork talking about with regard to em credit, Petro brass I can't put in that category. They've done a really good job of cleaning things up. And and look there are examples of that, you know where you know, fundamentally the companies are getting better and and so you know, it's a big universe. It's a two trillion dollar universe.

You know, at least if you're looking at the Bloomberg Barkleys, you know, kind of aggregate and you know you've got you've got good stories and you've got bad stories. I want to thank you very much forgiving us the story. Are you guys always Damian Sasaur expert when it comes to fixed incomes strategies for Bloomberg Intelligence. In fact, he

just knows everything about emerging markets. Much appreciated. I want to bring in Jeffrey Quisena, Chief Investments for a just at Fifth third Bank in Chicago, to talk about an issue that i've been thinking a lot about Recently, after President Trump withdrew from the Paris Accord, we heard executives from Disney, Goldman, Sachs, IBM, Tesla's Elon Musk come out denouncing the decision and saying that this was a big,

big mistake. But the mood was very different among small business owners and I want to get a sense of how they responded to this and why. Jeffrey, thank you so much for joining us. Can you just give us a sense and your discussions with businesses in Middle America smaller businesses, Why is it that some of them have embraced this decision for the US to withdraw from the Paris Climate Accord. For the most part, it is not because it directly impacts their business, but it's the symbolism.

From their standpoint, this is a president who is still on track with many of the campaign promises towards deregulation. They understand that the Paris Accords would carry some burdens uh with it for for regulation, particularly energy sector. Energy drives a lot of manufacturing, so so they're seeing this as the symbolic value of yet another step that supports deregulation,

and that's really important. To small business owners, can you just bring in the debate about healthcare as well, because that also is a focus of small business owners and it is something that will affect their bottom line. Sure. What one of the things that I think is important is the definition. When I speak about small business owners, I often hear from people who are are sold proprietors,

or of one or two employees. What I'm really talking about is the economic definition of small business, which is generally five hundred employees or fewer um. When you get My observation is that when you get to the fifty to a couple hundred employees, that's where they feel the burdens the most. So the affordable health care is has been a costly imposition um. And again this is from their viewpoint. This is as citizens, we just can decide whether this is good or bad. But from their standpoint,

it's a cost cost. The imposition of new rules and requirements, many of the environmental many of the labor laws, all of these things have been particularly burdened. Some small business owners view this differently. UM. These are generally privately held businesses. Any dollar cost of regulation or our other requirement is essentially a dollar out of their pockets. So they've taken

very personally. That doesn't mean it's right or wrong, um, that they should take it this way, but it's certainly understandable. So Jeffrey, UM, I don't have the sense that there have been huge sweeping changes made yet that will materially change their outlook. Am I wrong with that that? No?

I I think that's right. But there is a broad understanding, UM, in the in the businesses that I've spoken to, and I speak in front of thousands of small business owners every year and speak directly to hundreds over the course of the year, there is an understanding that much of the deregulation can be accomplished through the executive branch, and

so they see that as something that is moving forward. UM. I don't believe they're out over their skis and anticipating too much progress on legislative action, that they're not banking on that. Uh. As it's been explained to me, it's not just deregulation, it's the fact that the constant adding of regulations that was going on has halted, and that I think is fair to say. And and Jeffrey, do you get the sense that among these hundreds of small

businesses that you speak with every year. They are pleased with what they're seeing so far, and that they approve of President Trump's performance. I think that's that's generally true. That's that's obviously a very big generalization that is in some ways unfair to make. But I think that the President, for whatever reason, speaks well to that community, UM, and they feel that he, having run businesses himself, UM and essentially being a private business owner, is one of them.

So there's a level of sympathy or empathy that they're feeling that they have not felt in some previous administrations. Alright. So, having said all that, though, I'm wondering do they feel any uh, any sort of anxiety over the ability of the United States to do business with international partners like Mexico, like Canada. It's it's not great to do business with people that you've just in many cases disrespected, you know. I think that's a very legitimate point. Again, UM, this

is my interpretation, but I've seen it fairly consistently. UM. I think most people UM in that position, small business owners UM, are giving the president the benefit of the doubt and see this as negotiating tactics rather than his views reflecting an end result. All right, we're gonna leave it there, but thanks very much for giving us this. Inside the mid market and focus Jeff Corzeneck. He is

an investment strategist for Fifth Third Bank. Speaking about the divide between what big businesses and Lisa, you mentioned some of those chief executives such as Lloyd blank Find and Elon Musk coming out and saying that they proposed that the U s stay in the Paris climate of Bardon Goldman Sacks. Lloyd blank Find joined Twitter precisely for the purpose of coming out against this, and Elon Musk resigned from President Trump's Advisory council. So a lot of anger

on that side. We've seen a lot of changes in the advertising business over the past decade, in large part because of the changing way that people consume media. Well, Andrew Esx has had a front row seat on all of these changes. Andrew Esx CEO of Rebeca Enterprises in New York, which of course is the host of Rebeca

Film Festival, which is also in New York. But he also was the former chief executive officer of advertising agency Droga five and he wrote a new book called The end of advertising, why it had to die and the creative resurrection to come. Very dramatic. Why are we seeing the death of advertising? What is this death? And uh? And where do we go from here? I really wanted to call it the death of traditional advertising, but that was a little less clickable. Yeah. Now this it's it's

much more dramatic, you know. But we're talking about the eventual demise of three traditional forms, which is the thirty second spot, the print insertion, and the classic display at the banner at and that's driven by the rise of ad blocking, the phenomena of over the top television which has no commercial interruption, and general consumer behavior on platforms in which traditional advertising is not native. So the whole world is coming together to conspire against an old way

of doing things, and that's called evolution. Will okay, evolution? Andrew, I'm wanting if you could just speak a little bit about your evolution to become the head of Tribeca Enterprises, because, as Lisa just said, many people will know it because of the Tribeca Film Festival and the creation of Jane Rosenthal and Robert de Niro. Maybe just give a little bit of your background in the print industry as well, and how you got to this role. I'm kind of

a Darwin in mutation. I started in publishing, then I went to what was called the dark side, which is advertising, and now evolution you could still use exactly. And now I'm at an event, a live event, which is really about storytelling and storytelling on any platform. So though although we do film, we do amazing television, we do amazing talks, we date a using music, amazing VR, amazing gaming, any

platform which you can tell a story. And I find it's a natural conclusion of what I've been trying to do, which is just to add value to people's lives through good content. Well, you know, going going back to this idea of moving away from the banner ad or the thirty second spot, I mean, we are seeing native advertising. We're seeing people who are getting paid explain explain what

explain what native advertising? Well, I've actually talked with people who are paid to go to UH people's parties in their homes, are paid to go to a bar and consume Gray Goose vodka or whatever it is UH and tell their friends about it. And this is a new form of advertising. So you know, I see you're rolling your eyes, But I mean, are there is there? Is there some other form that we're evolving into or other forms? What are the what are the most popular ones that

are going to survive? I think we're seeing this odd rush or flight to quality. The issue really is abundance. There's so much there right now, so many apps, so many platforms, so much content, that there's no room anymore for anything that's secondary. So the old ad model is based on an adjacency, not the thing, the thing that sold the thing, And there's no room there's something, no more room for anything that's in the periphery. So what

you need to do is to be good. And the the embodiment of this is the Lego movie, which I think is the greatest ad ever. It's a film that people paid to see that made five million dollars in revenue. It is also a great piece of advertising. So in other words, what you're what you're saying is that the advertising has to that the advertisement has to be something that people seek out. It can't be something that simply catches someone's eye on the subway or on a bus. Well,

if it catches someone's eye, it's probably good. I think it just has to be good. So advertising is based on the premise that you could buy people's attention, that you use paid media to get in front of people. But again, because there's so much, it doesn't work anymore. So you have to be entertaining. You have to add value, you have to provide utility, you have to be good. Crap is a immediately discarded. Well, all right, we're gonna we're not gonna disagree with you. There, I'm gonna. I'm

gonna I'm gonna push back, not that crap crap. I mean, it's like of the beholder, but I have to push back that this is anything new because I mean, frankly, think about the Super Bowl advertisements. There's like the Super Bowl of advertising, and people focus on those. I mean, for a long time. It's about making sure that the story is important as eye catching. I mean, this is advertising one O one. No, Well, I don't know that

I agree with that. I think on Super Bowl it's one day year, but for the rest of the sixty four days of the year, people don't try that hard. To be honest, with all due respect, but I thought you were going to say that we're going back to an old model of the soap Opera of ge Theater of Mutual mahomes a wild I was going to say next, which is really the place that I think we're revolving towards.

The brand brings you a piece of content and they are the sponsor, the underwriter, but they're not the person who interrupts the thing you wanted to see. So that my be a future for a revamped Milton Burrow in the Texico Hour. Don't don't don't I feel the future coming on? You know. One of the things I wanted to ask you about is your relationship with lions Gate. Give you about the twenty seconds, how that developed and

how that demonstrates some of the changes you're talking about. Sure, that's just really about subscription video on demand, is that you have to take Brian like Tribeca and put it on different platforms. So we need to make the obligatory shift to mobile and that's where we live on the device. Well done, Thank you very much for being with us. And of course I've got to ask you what's your favorite film? My favorite film? I better have Robert de

Niro winning. Well, the new HBO already made off thing is pretty spectacular, but you know it's the Golden Age of television. So I'm an episodic TV guy right now. I confess I did actually watch that this weekend, strangely, and the portrayal is stunning. He's not too shabby, No, not at all. I want to thank you very much. Andrew Essex is the chief executive of Tribeca Enterprises. He has a new book. It is entitled The End of Advertising, Why It Had to Die and the Creative Resurrection to Calm.

I sense a little perhaps money opportunity there. Thanks for listening to the Bloomberg P and L podcast. You can subscribe and listen to interviews at Apple Podcasts, SoundCloud, or whatever podcast platform you prefer. I'm pim Fox. I'm on Twitter at pim Fox. I'm on Twitter at Lisa abramoids one. Before the podcast, you can always catch us worldwide on Bloomberg Radio.