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Big Big Week four Tech earnings here. The Apple numbers came out last night. I thought they were like, really good. So what does the stock market do? Down one percent in the stock here today. I've been doing this stock market thing for forty years. No idea how it works. Dan Ives does the globalhead of Technology Research Weber Securities Joints. It's live here in our Bloomberg Interactive Broker studio. Dan, what did you make of the quarter last night?
For I mean now is a staggering quarter in terms of what you saw on iPhone, specifically in terms of China, I mean chininga massive towwind services strong.
I don't miss say best case.
Scenario that you could have seen the stock performance today, I'd say it's a massive head scratcher. I mean this is look, this is one where I think this stock should be up five to eight percent relative you know to what they perform and the guidance.
But I think it also just comes down to the we've talked.
About so much in the show, right, is that, what's the AI strategy, what's the monization? Show us the playbook. That's not Cooper Tino, that's not their DNA. And I think that's why the stock's kind of to little Larry David in terms of the reaction.
So, how has it been their AI push because they have face concerns and they've really lagged behind their megacap tech peers.
Look, I mean they they've watched AI from the stands, and I think that's been disappointing to many, including us, because you have the biggest install based in the world, you have one point five million iPhones. But now it comes down to the Google Gemini partnership is the first big step. They're bringing an outside talent, which is I think unique to what we've seen there. And then this is what I believe is going to build into a subscription service. I mean that is not being factored into
the stock. And just I just go back to like a year ago, look at Google New York City cab drivers parish on it. Now today they're doing you know, tick er Tate parades for it. You go back to Meta a quarter ago. Now look at in this court. So we're just going to go through this just very sensitive time for tech investors.
Looking at the Mark German Bloomberg News his reporting today, maybe some concerns he's calling out about gross margins in the current period due to rising memory prices, also some supply chain constraints with the iPhones three nanometer processor. Are all those things kind of suggesting to investors maybe we're going to have great sales, but maybe not the margins were looking forth, Yeah, I.
Think that's I mean, I think that's in telegraph. But I do believe you have pricing increases when it comes to iPhone eighteen called one hundred hundred and fifty dollars. But Paul, I think, like what ultimately is going to move the stock, Like when investors are focusing on how do you get to three twenty five, three to fifty, how do you have a stock with.
A three in front of it? It's not going to be sales margins.
It comes down to lay out the AI strategy, show us the playbook, and that's why like Cook's gonna stay CEO. In my opinion, till that baton's handed because this is so important, I think to his legacy.
And what about how it's coping with tariffs. The company said that it created a one point for billion dollar headwind.
Have we reached the worst?
Yeah?
I think worst is probably in the rearview mirror network. That's why I also play nice in the sandbox in DC, which Trump has been huge positive but it goes back to cook ten percent politician ninety percent CEO. So he's been able to navigate that extremely well. Now investors are okay, it's good time. What should the growth catalyst? It was a huge step in the right direction last night, but you see, like investors and this is going to be
a narrow in this tech earning season. Any blemish anything investors don't like, they're going to take these stocks down.
And we saw that with Microsoft and others.
Talks about trying to hear because that's been a big and overhang for this company for the last couple of years, if not more. What do you think the status is right there about China and Apple?
Well, I think it's a lot more positive today.
I mean, go back, they were kind of in the middle of a sort of old Western fight between US and China now is those tensions have come down. That's how that's been a huge positive for Apple. That's why Apple and Tasla are the two tech companies are always caught in there. I think you've seen those talents. Look, it's so important twenty percent iPhone sales. You need that to be a market that's showing growth. And that's why you're seeing it. They're delivering everything you want to see.
But the one thing that's.
Missing, it's the AI strategy.
And that ultimately, that's that's really the hearts and lungs of what's gonna Haven't.
They articulated a strategy and maybe.
That strategy is we're just gonna wait and we're gonna partner with whoever we need to partner with, and that is our strategy.
Have they said that or is that not enough?
Look, they've been it's essentially the last few wwdcs.
It's been about to the future. Michael J. Fox moment right.
The point is like they've really been on a treadmill at two point five speed. I think part of it was like they were hoping it was going to be internally developed that wasn't going to happen. They've probably been I think slow and culturally it's actually hurt them. That's why you start to see changes. And ultimately they needed Google win the DOJ suit for this to happen. If Google don't win dojsuit, this can this partnership can happen.
Should they have bought Perplexity, should they have done others? Of course, But that's why this is go time for Apple, and that's what the stocks reflecting investors like, should give me something?
And do you say that they have a chance in overtaking their peers.
Look, I think when you have the biggest install based in the world and you have a Hall of Fame Mount Rushmore CEO like Cook, you could be late to the game, but twenty twenty six, they can't fumble the football. This this has to sort of be their moment. I think it's off to a strong start, but as we're seeing in tech, this is gonna be much more highly screwtinized. You're not going to get be given the sort of maybe latitude.
Just give them this market thirty seconds left before we let you go. Can you give us your call on Tesla right here?
I mean, I think it's going to be a historical year for Tesla. It's the autonomous and robotics error that's now taking place, plus thing about SpaceX and XAI. What that's doing the musk ecosystem, Muscu's wartime CEO, and it comes down that's why six hundred spase case, eight hundreds bowl case, and this now starts the AI revolution at Tesla.
SpaceX that I feel happens that that's gonna lift just the whole feeling about Elon in general.
I would think, Look, it goes back to like he's playing you know, he's playing like chess, others playing checkers when it comes to what he's navigating here, and that's what haters will hate. But when SpaceX comes out, I mean, you know you're talking about we're basically make some amost a trillion.
Biggest listing every I mean one and a half trillion dollar evaluation. That would be just extraordinary to see with us more from Bloomberg Intelligence coming up after this.
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We've spoken to I don't know many many voices on this pick of mister Walsh for the FED chair. We've had people like Neil Dudda very negative. We've had people like Terry Haynes a Pangaea quite positive. Yes, so there seems to be a wide range of views out there. A about mister Walsh as a nominee number one and number two just kind of about you know, policies in general. So we'll have to see how that plays out. One voice we absolutely wanted to get to hear from is
Danielle di Martino Boo. She's the CEO and chief strategistic QI Research and she spent a good stretch at the Dallas Fed, so she knows how all this stuff works. Danielle, love to get your opinion on the nomination of mister Kevin Walsh.
Well, I'm I'm cautiously hopeful.
UH President Richard Fisher served when worsh was on the board, and they were two large deterrens of quantitative easing UH worse famously called QE reverse Robin Hood. He and I said on a panel when he was at Stanford a few years ago, and we share the same views that going as far out on the easing spectrum as QE was not good for the financial markets, was not good
for the for the overall US public. And I'm hoping that he doesn't go in that direction, that he's not tempted to go to zero interest rate policy again, and that we steer clear of QE and continue to shrink the size of the Fed's balance sheet. These are all things that worsh has indicated that he would advocate for doing, and I hope that he follows through with that.
After the nomination there will be the confirmation, and we've had some of the sources telling us that it may not be as smooth. What is your projection for that?
Well, you know, I listened live when Senator Tom Tillis.
Was interviewed earlier this morning on Bloomberg and he has a very good point. And it's not that he's philosophically misaligned with Kevin Walsh. In fact, I think he thinks he's a great candidate, But he was He used the word frivolous as it pertained to the lawsuit that he was waiting until the Department of Justice's frivolous lawsuit was.
Frivolous.
Charges were dropped against Chair Powell before proceeding with any nominee. I think Senator Thune, Senator Majority Leader Thune has backed that this will not be possible. You will not be able to progress Worsh through the nomination process, unt build the Department of Justice releases Durrum Pale from these criminal charges.
Danielle, how do you think mister wash will move as it relates to interest rate policy? There are you know a lot of folks have pointed out that he's become maybe even more dubvish, less hawkish with time in most recent times, and that may or may not have some political ramifications.
How do you think he'll try to proceed with this FED? So you know, of.
Course that is going to be the perception. I've seen a lot of the comments that he's made, but.
I would I would just say this.
I think that coming in that Worsh will be more aligned with Christopher Waller and that he will recognize that the FED is failing on its employment mandate and use research and data and alternative data sets to justify continuing to bring the FED funds rate down. And I think
that that's entirely appropriate. But again I'm hoping that that he aligns back with his original thinking that zero interest rate policy is not the way to go, and that he finds a more reasonable FED funds floor somewhere around two percent.
So if Worsh does become the FED chair, what changes first for markets? Policy direction, communication, or maybe reaction function.
I think reaction function becomes critical.
We have to remember that Worsh was he was a critical player during the global financial crisis. He has deep understandings of financial markets. We've seen some movement and leverage loans this week, We've seen a lot.
Of activity in private credit.
The good news is we need somebody who has a deep understanding of the banking system and the financial system, their linkages, and I think he'll be able to be a good steward at the FED given the extended valuations we've seen in some of the kind of risks and threats of financial instability that are percolating out there.
Danielle, he has a remit or he's talking about a remit to narrow the focus of the FED here. Do you think that's widely shared at the FED?
Well, I wish it was more widely shared.
I've long said that we need to go back to having just the inflation mandate, and that the inflation and labor mandates are inherently in conflict with one another. He's also advocated to continue shrinking the Fed's balance sheet even if he brings interest rates down, and I hope he
goes forward with that as well. But you're right he would have an uphill battle with a lot of the more dubbish members of the board, but he would certainly be more aligned with individuals who are Federal Reserve district presidents who do not advocate for a larger balance sheet.
What do you think FED Chairman j Powell will do when he steps down from his leadership position. Do you think he'll stay on the board or who just sail off into the sunset?
I think it was very I think was very telling two markets, and it was very telling to the current administration that he refused to answer the question at the press conference. And I would encourage Jerome Powell to stay on through January of twenty twenty eight. Philosophically, at least we know that the two are aligned.
The two do not like, or at least I.
Should say, Jerome Palell back when he was first appointed to the FED came very close to dissenting against QE three. So I would hope that the two would be able to work together and that Jay Powell would stick around until his term ends.
And if Warsh really is committed to the wearing rates very quickly, how much influence does the chair really have in persuading other governors Because it's not just his one vote, as everyone has repeatedly said.
That is absolutely the case. He could be looking at a number.
Of descents on day one. However, I think with the messages coming out, with just the clear data that we're seeing, whether it's Conference Board or University of Michigan, or the fact that so many Americans are not filing for unemployment insurance and yet Google Trends shows you that we've got an almost record level of American searching for file unemployment, I think that data will speak for itself and that
many will be on board with lowering rates. If we have to wait to do so until June, I certainly hope that is not the case.
Stay with us more from Bloomberg Intelligence coming up after this.
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Here's another group of stocks I totally missed. You're to date. These big energy oil companies are just ripping here.
Excellent up sixteen percent year to date, Chevron up fourteen percent.
Nice moves there.
The company's reported earnings and some pretty good numbers, I thought, But what do I know?
Vince Piazza, he's the expert senior equity research channels.
He covers all the oil and guests stuff for Bloomberg Intelligence. Joining us live here in our Bloomberg Interactive Broker studio. This may be the one, two, maybe three days he spends in the Big Apple we got him.
Folks in studio.
Talk to us about what you heard, what you learned from Exon Mobile, from Chevron, from the most recent earnings.
Yeah, well, well, I think for the most part what you've seen the last couple of days is really the after effects of the storm, right, especially helping natural gas and really the the underlying benchmarks for oil. But for the for the four q sherm on Exxon, you know, down sequentially on earnings, pretty much as expected though, right, because of the realization's quarter over quarter on the lower on lower oil prices.
You know, going forward, it's steady, it's steady as she goes.
Really, it's really about disciplined investing in the business, allowing the Permian and also Guyana uh uh to provide that upside. And really it's about the upstream side of the business, because the downstream is in a secular decline, a structural decline with the headwinds. But it's really about the upstream. It's really about the Permian. And you know about the
Permian why because we watch Landman, that's right. So, but what we're going to see in twenty twenty six, really not only from the big integrates, but also from the other companies are going to reporting, is what do you think about natural gas.
Here at these levels?
And are they going to turn off the spig and on production, which we really don't view it as such. We think the capital discipline will be maintained. We don't think there'll be a great deal of production growth coming in twenty twenty six. And what you're going to get is a return of excess cash.
So both Chevron and Exon beat earnings expectations this quarter. But Exon managed to grow profit and Chevron's profit declined despite the beat. What did Exon do correctly from an operational and strategic standpoint that maybe Chevron didn't.
Yeah, so you know, Exon has a pioneer and that's Permian. So the Permian and the Guiana has worked out quite well.
The usually the driver for Exxon.
What's interesting though, when you think about the free cash flow that both Exon and Chevron generate. Exon somewhere around five and a half billion dollars, yet they paid out almost ten billion in distributions via share buybacks and dividends, and you know that can be done because of because because of Exon's financial flexibility, big cash hoard, so they
can support those distributions and their shareholder engagement. Similar for Chevron, but Chevron a little bit lagging because of you know, they just acquired Hess. They're integrating Hess, so they're a little bit further behind the process. But also for them, they also have Guyana via HES and they also have the Permian as well, So somewhat smaller, some a little bit behind where Exon is, but they're catching up as well.
Chevron's in Venezuela has been in Venezuela for a long time.
Yes, lieperally the only ones. Everybody else said, the heck with this, what do you think is going to happen going forward with the change in regime?
Change in Venezuela very slow, It'll be a very slow uptick in output. They're roughly around two hundred and fifty thousand barrels per day right now. You could see that doubling in about two years. But this is about sourcing in country, don't see. We don't see the backdrop for incremental higher investment in country to grow that output. We just see them reallocating within the country to get that
output going. And two hundred and fifty thousand barrels over the next call twenty four months isn't really that big of a production boost. When you think about the global franchise and roughly four million barrels a day of output.
It does seem like international opportunities are the way to go, at least for them. But in your view, which companies portfolio and growth investments, maybe our better position to deliver growth in the longer term for the price of oil.
Oh.
In my view, and we've said this in a lot of what we've published in the last year or so.
Exon definitely because of the franchise in the Permian. Because of Guyana, Chevron will get there.
They're lagging somewhat only because of the length the delayed arbitration over Hess, but now they have the Guyana piece as well, the participation with Exon in Guyana. They also have the Permian as well, So both of these enterprises have those key pillars for growth. For twenty twenty six, even out to twenty thirty, both have provided very reasonable growth expectations.
A lot of those expectations a lot.
Of that that the theme is really on the upstream side of the business. That's what we're going to drive the business for Exon. The downstream investments and the energy products that will also be a positive for them. But at this point Exon does seem to have the upper hand and in terms of the scale in the Permian and also Guyana as well, I will say that I wouldn't be surprised if more is done on the upstream side because this is a maturing industry, right and so
consolidation is the key. What we have said in what we've published over the last several years is this industry needs to consolidate. We will have fewer but much larger players in the upstream business here in the lower forty eight that gas. But I'm just going over the last couple of months. We went from four dollars down to almost two and a half dollars. Now we're above four dollars for nat gas. It's been all over the place.
How are investors playing that gas these days? So in our twenty twenty six outlook, we focused on NAC gas over WTI oil.
There are structural.
Advantages that natural gas has number one, not only on the LNG side, but also in the build out for the tech data centers. These are structural growth opportunities for natural gas that crude oil does not enjoy. And natural gas remains in the process of consolidation as well, whether it's in Appalachia or in the Hainesville. So once again
you will have fewer operators, but larger operators. Stronger operators molecules in the hands of much larger operators with better balance sheets able to manage these businesses going forward.
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