Stocks Trade Near Record Highs

north of twenty fantastic performance. What is driving this? In fact even more risk? People seem to be more willing to take on more risk just over the last several weeks. To get a sense of what is driving this, we welcome our next guest, Jeff you Ubs, Wealth manager's head of the UK Investment Office. Jeff, thanks so much for joining us. Give us your sense of kind of what is driving this embracing of risk we've seen really just over the last four or five weeks that's taken this

market even a leg higher. Well, I think she thinks, firstly in a context is quite important. I think as we approach her and you know, people are going to ride up until so Christmas Eve, people are going to see quite strong divergences between their year on year numbers versus their year to date numbers, right, And you know that does tell you we started the year on a relatively risk offfitting positioning was soft and the things I'm just going to turn out, you know, not quite as

bad as expected, helped by doses of monastery policy. Of course, while the trade issue continue to linger throughout, there are some signs, or world more than some signs that this might just get to a point where we don't have to worry as much about further escalation from here. So I think you know that there's a plus, a combination of you know, okay numbers, you know, both in the

macro micro level just kept people in risk. How much can you focus on what's going on around the rest of the world given everything that's going on right where you are, with the election coming up in less than a months, right, So I mean now that we heard the Prime Minister speak today in front of businesses, and clearly people on the ground who have been a sad certain by the uncertainty from Brexit of last three years or so, they would like to see some clarity up ahead,

So of course you know all parties offering out, you know their campaign and policies, and right now I think most companies and individuals will take up with a grain of salt and that again the hope is that cloud of uncertainty from Brexit and the life will be lifted. But then, of course, and for an open economy like the UK, the global environment matters just as much, um so with anie on the elections here, but also hoping that the international economy picks up as well, not least

helped by by any upcoming face one trade deal. I'm struggling to sort of put into perspective the plan proposed by the liberals, by by Labor, the idea for a big fiscal spending plan that is being viewed by at least Sterling as a negative but potentially is being viewed as a way to jump start the economy as what do you think of it? Well, there are two sides

of this, you know. Certinly, um I would acknowledge it's very hard to sell a currency and index or in a economy into a fiscal similar right, um So those who are positioned negatively and towards the end of two thousand and seventeen will have strong memories of that. Say, now, that could be a tailwin, you know, for the UK economy.

But on the other hand, it's some of the other issues in which you could be considered you know, quite a novel, right, you know, such those near share ownership plans, you know, such as the nationalization of certain sectors, those things with which have been branded around and which over the medium to longer term on a structural basis and

may be interpreted as no less some positive. So I think that put together is I'm taking a bit of a gloss off any potential of fiscal stimulusum But again I think in general, heading into an election right now, people will take any promises with the grain of salt. But both parties do have expansionary policies on the spending side, that has to be clear, and I think, you know that there's a hope that could jumps out the economy on top of them some sort of finalization with the

relationship with Europe. Jeff, one of the data points that we've received only is that it maybe we're getting some stabilization in some of the key European economies. We kind of saw some data in October that was you know, not worse kind of less bad? Is that the beginning of a trend, do you think or not? We are not ready to jump on that yet, right, So you know two things there. Firstly, it's stabilization on an absolute

but also relative basis as well. So if you look at most expectations in the still world, the most surprising disease, I think expectations have been very very weak, you know, throughout the last and a few courses or so in Europe. You know, as a result, it becomes less hard to you know, surprise you know, to the upside, or at least it becomes harder to surprise at the downside. By one, expectations and positioning is solo. Secondly, you know there is

a clear difference between no more downside versus upside. Right. So there again we need to see a fiscal pickup, we need to see a demand pick up. And given our China growth forecast that you know, five five point some percent also um which is very important to the Euros in economy, and our US growth forecast is not

that strong either. So I think put together with a cyclical with an export external demand exposed to economy, such as the eurozones, the global environment next year is just not let's just say hot enough a comfort yet Eurozone policymakers and UM also the government officials looking at fiscal I think they still have a lot of work to do. Not hard enough for comfort, certainly for President Trump. Just putting out a tweet about this meeting that we've been

reporting that he had with FED Chair J. Powell. Just finished a very good and cordial meeting at the White House with J. Powell the Federal Reserve. Everything was discussed, including interest rates, negative interest low inflation, easing, dollar strength and its effect on manufacturing, trade with China, EU and others, etcetera.

Do you have any thoughts on that? Um, Well, it's interesting, UM so, I haven't seen the tweet myself that it's interesting that the negative interest rates have popped into the conversation. So um. Clearly the President will have a view on this, um looking at how it's being implemented around the world, but the Fed might still want to push back against it. I dea being so just not hot enough. That seems

to be the theme from central banks. How much can an ultra accommodative and sort of re upping of another easing cycle. How much cannot boost markets from here? Well, um, I think the would. I wouldn't say that there's a consensus on this right now that there's a strong body for opinion. If you even look at the divergence in the UCB the viewers, Um, you need demand from the fiscal side, so drugs, you know, parting um um uh shot if you want to call it. That was actually

to the establishment. So monetary policy can achieve its objectives, you know, can get closer to inflation, you know, maybe funemployment in the U S context, once fiscal starts to do its job right, So monetary policy creative conditions for I would say, structure reform and fiscal policies to actually jumpstart demand. So thinking that that's where it's you know, I'll be interesting. I don't believe Chairman Powell will want to in your tweet in as many words that would

stressing them. Maybe some changes in the government spending side that could be very very helpful towards effect achieving its objectives as well. So I think you know, need to have some given take it. But of course we're only hearing what can monetary policy give Where a central bankers would say, well, what can the politicians provide as well? That part of the equation is always missing somewhat. Thank you so much for being with us and for commenting on the tweet that I sprung upon you that we

were all sprung up a President Trump. Jeff You at UBS Wealth Management, head of UK Investment Office joining us from London. Steve Judash has joining us for his season of Prediction. I HT Wealth Chief executive Officer, Steve. I'm watching the capitulation of Morgan Stanley and other bears saying, you know, next year might not be so bad in markets? Do you agree? Do you think something substantial has shifted to make you more optimistic about what we should see

tomorrow next year? I think the only difference, maybe say from nine months ago, is how many interest rate hikes or um cuts that we've actually seen, because no one was predicting that a year ago. But aside from that, we've got to help the economy. That has changed a whole lot. Fundamentally. The big unknown has been the trade war, but I think just about everyone is predicting that that and has been predicting that that would work out eventually.

You've got the two biggest economies. They have to work out terms at some point. It's not gonna happen overnight. But I don't think anything is fundamentally changed to say, oh my, oh my, I think next year is gonna be wonderful. I think we should start expecting a little bit more stability and a little bit more leveling out of market returns. We're not going to see another tax cut, and we're not going to see three more raid cuts next year, So I don't see anything fundamentally that's massively

different for next year. What I find interesting is we've actually seen maybe over the last four or five weeks, people rotating out of defensive sectors and maybe take on a little a bit more risk was some cyclicals, and I found that interesting. And given how late we are in the economic cycle, what do you how do you view that? The only thing that I would argue on that is how late we are in the economic cycle, because we've had a lot of false stimulus that's pushed

us through this. So it's not like we've had a ten year run of just normal, stable growth or anything like that. We've had lots of brake cuts, we've had a lot of tax changes over the years, We've had a lot of FED helping out the situation a lot. So this isn't your run of the mill, you know, three to five year cycle that it goes up and down.

Our economy right now, the world economy right now is in a good place, and so sustaining that for a number of years in the future, barring massive events, isn't out of It isn't unreasonable to believe that. I think again, I think it's unreasonably believe we're gonna see a twenty percent return again next year. I think that's just silly. Do we even predict something like that? But but we're in a nice place here, So getting out of the defensive side and going more on the aggressive is something

that we've actually been preaching about a year now. So what's your highest conviction trade heading into Okay, I'm not gonna harder percent tell you this is my highest conviction, but I think it's the most interesting trade, and that's the streaming wars that are going on. It's the biggest shake up in the entertainment industry that maybe since cable

tv um. It used to be Netflix and nobody. Now it's Netflix and virtually everyone, and so there's going to massive winners and there's gonna be some massive losers in there, and that's what we've been focusing a lot of our time, g Ion. You've got companies like Netflix, who you know, frankly, when we're looking at companies, we look at them, do you make money today? Are you going to make more money tomorrow? Netflix is losing money today when they had

no competition. Now everyone's in the game. There's only so many eyeballs, there's only so many hours people can stream. It's hard to see how they're going to continue to be a winner in that sector. Whereas you've got other companies like Disney um who have tons of content and have the ability to absorb losses that they're all going to lose money and streaming in the next five years.

Anyone who says otherwise is lying to you. They're going to lose money, but it's gonna be who can sustain those losses with other parts of their companies and then be the ultimate big winner at the end. That's where

it's been fun and that's where we've been focusing a lot. So, you know, one of the big questions, and we talk about these streaming wars, is to get a sense of how this is all going to shake out over the next you know, five plus years, how many operators will actually be in the market, How much can this market support? How many players do you think ultimately will be left making money in this business? That's the key point. He

disnailed it. They're making money because you've got companies like Amazon and Apple that can float their streaming forever essentially because they make so much money on other parts. How long are they willing to sustain those losses? I think this is where you see a normal new sector or new part of an industry develop. Everyone jumps in. You'll start seeing the shaking out, and then you'll start seeing consolidating like we saw in network TV and things along

those lines when cable came out. Um, three four players at most right now, what are we projected for next? You're nine players that are going to be in the game. That's not sustainable. So are you a Netflix bear? Is that what this is? I'm not. I'm not gonna sit here and tell you I think Netflix is bad. I'm gonna tell you that I have a real problem problem getting into a company that loses money and it doesn't show me a clear path on how they're going to

make money in the future. Netflix, to me, is a very dangerous play. They need to hit some massive home runs, massive massive, and I don't like the gamble. So in that situation, I think Netflix is a gamble right now. If they hit a bunch of home runs, that they get some massively popular content that everyone jumps on board with, they could sustain this. They can make it through. But but you're betting. You're betting on the home run, and

that's a tough bat right now. It's a very tough But Steve, how do you think Apple is going to play this business? Do you expect them to? Kind of? I think they said they're gonna invest six billion dollars in programming, and that's a big number, but it's quick. Frankly, one could argue it's not big enough. Do you think they need to go out and make a big acquisition in the entertainment space? I do. I completely agree with what you said. It's a big number, but I don't

know if that it's necessarily big enough. I mean, how much money is Disney put into it, not just right now, but over the last ten years buying content. Apple doesn't really have any content well, I mean, they've got some, but they don't have enough content right now what could be interesting? This is way speculation because you were saying in the beginning you're looking for the season of speculation.

What happens when Netflix is losing money for a couple of years and Apple has a bunch of cash sitting on the sidelines and they need content. Well, that's this is what people are expecting. That it's some or putting out there postulating that what happens if Apple buys Netflix? Short of that, though, I'm wondering if you on the flip side are a Disney bull I am. I like companies that make money and that show me how they're going to make more money in the future. Right now,

they have more content than just about anybody. They've got so many different paths to make money on that content that even if right now no one really talks about this enough, I don't think right now everyone's okay with buying a whole bunch of different streaming products, you know, five, six, seven, whatever different areas and you're paying thirty bucks a month

for this and forty for that whatever. Um, what happens when the economy isn't doing so well, what happened when unemployment isn't at record lows and people have to start cutting back a little bit? You know, your your rank and file. People are going to have seven eight streaming things anymore, They're gonna have three, maybe two, And so that is where I want to be positioned for the

companies that can sustain that. So yes, to answer your question, Um, Disney is an attractive company because even if they lose money on streaming, they make so much more money on everything else that it doesn't really matter. And they can write out that storm because right now we're in goldilocks situation. What happens when we're not in the goldilocks situation anymore? Steve, thanks so much for joining us giving us your thoughts on kind of what you're looking for out to twenty

as we start thinking about rolling over the calendar. Here Steve doodash I HT Wealth Management, Chief executive Officer, joining us on the phone once again. This year in technology stocks are leading the market. We have the nastack up eight percent this year. Let's talk tech. Let's and we do that. We do with Dan Ives from web Best we web Bush Securities. Dan thanks so much for joining us Technology again has been the big, big driver of this move up in equity markets this year. Let's start

with Apple. You know, it's just a fantastic story up six year to date. It's just amazing. The big issue I have is this company, as you we've talked about before, is really making a big pivot from a phone reliant company to a services company. But that's a lot of risk in that story there, But it seems like the markets giving Apple more than the benefit of the doubt. Yeah, and you're not alone. And I think when I look

at Apple, it's the one to punch the rocket. Gibraltar continues to be iPhone, and I think what you're seeing here at iPhone eleven tracking head expectations. It all about the install base and now it's about monetizing that through services. And that's part of the rereading that we're seeing with Apple. And that's why right now the bears continue to be

in hibernation mode and termed to what's happened with stock. Okay, so you see more positivity ahead, Yet whenever we see a trade headline that's negative, the tech socks are the ones that sell off. First. What if we do not get a trade truce what how much does that affect your outlook? Yeah, that's fifteen dollars per share in terms of right now what I view as the overall overhang from trade on Apple. It's the poster child in terms of the US trying to trade war, but it's about

a fifteen overhang right now. So I think if we do not get any sort of deal, that's sort of how I've used sort of a risk speak into the stock. So Dan, let's go back to the old, you know, trying to true phone business for Apple. Give us a sense of how big five G could be two Apple. We hear so much now across so many different technology verticals about five G and how it's gonna be the next big thing in tech. What does it mean for

the likes of Apple? In my opinion, the best five G play is Apple because when you look at five G and how their position going to think about nine million consumers right now. In terms of the install based we think about four million of those are gonna upgrade over the next twelve day tea months. The first part's gonna be out from eleven, But five G I believe it's really gonna be a super cycle for for Apple. That's why I still view this is a stock. I think it's gonna have a three in front of it

going into next year. Can you walk through that a little bit more. How five G will sort of supercharge Apple shares? Yeah, A lot of it is really the applications in the infrastructure. It's gonna be five G related. And for the average consumer, especially within the install base, to get access to that five G, you're gonna need to be in a five G phone. We think next year, based on our checks throughout China and Taiwan, there's gonna

be four or five G footes. So for a consumer, they're gonna upgrade on five get Apple and that what that's really doing giving them a renaissance of growth. That's the highway. The highway to five G is a smart phone. I'm struggling to understand five G applications as being so incredibly different. I mean, basically, it's a robot gonna get beamed into my home and make me breakfast. I mean, or how how different is this going to be from four and three G. It's I think it's a paradigm

change in terms of five gene. I think the best way of thing about is more smart cities, autonomous capabilities. I'm talking about a lot of technologies that today are more on the white board. Over the next five ten years, it's really gonna be five G n E. But then that's why when you look at the leader and that at the Apple. Obviously Samsung continues to be there as

well as the Chinese consumers. But that's why I thought is so important in terms of where Apple sits in the stock Well, Dan, one part of the services story for Apple that's less clear to me is their video strategy, their TV strategy. I know they have Apple tv Plus and there's some shows there, but to me, that's not it. I mean, that's not gonna cause me to switch or to add to my Netflix and to my Disney Plus. What do you really think is the play for Apple

in the video business? Yeah, I think the first part of the play is distribution. They want to be the distribution platform for screaming. That's the first step. And then I think if you look at it right now, that's why the bundling is so important in terms of the new iPhone. In terms of the video side, right now,

they lack content. But I do not believe that that would be like that in a year from now, I think they're going to dedicate six billion per year and I still think they acquire more of a content play an MGM, A Sony, a mind Gate over the next year. Who's the big loser from five G who's not going to keep up? Look, I think in terms of the big loser right now, in terms of five G, this

is really going to be an Apple verse Samsung. I think if you look so far, I think Samsung has fumbled it a bit in terms of where they were versus Apple, and I think it's not going to be a winner take all. But I think right now Samsung has been a bit disappointing on the five G side, and when you look at five G, I think right now it's gonna be a lot of winners. The question is verizing a T and T which benefits from five

G more. And I think that's why the next six or twelve months are really going to determine from strategically who's best position. But right now, I continue to think Apple is furnt of the reas in terms when it comes to five G. Dan, I've thank you so much for being with us. Dan, i'ves director of Equity Research at Wedbush Securities. Thanks for listening to the Bloomberg PL podcast. You can see scribe and listened to interviews at Apple

Podcasts or whatever podcast platform you prefer. I'm Paul Sweeney. I'm on Twitter at pt Sweeney. I'm Lisa Abram Wohits. I'm on Twitter at Lisa Abram Woits One. Before the podcast, you can always catch us worldwide. I'm Bloomberg Radio