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This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along with Lisa Bromwitz and Amrie Hordern. Join us each day for insight from the best in markets, economics, and geopolitics from our global headquarters in New York City. We are live on Bloomberg Television weekday mornings from six to nine am Eastern. Subscribe to the podcast on Apple, Spotify or anywhere else you listen, and as always on the Bloomberg Terminal and the Bloomberg Business app.
All right, we're going to turn to tech now.
Dan Ives of webbush raising his Apple price target from three hundred dollars to three hundred and twenty five, writing quote, we believe Apples heading into a multi year AI driven iPhone upgrade cycle that is still being underestimated by the street. Apple's on pace to reach the four trillion dollar market cap threshold and be the first member of this exclusive club. I'm so excited that Dan Ives joins us. Now, Dan, thank you so much for spending part of your holiday
shortened week with us here at Bloomberg. So why now, why are rifting the price target now? This awkward week between Christmas and New Year's and you said, I have a call to make Google.
Because the Bears they're in hibernation mood because they can't find AI in the spreadsheets.
And look, we're doing the work.
What we see across the age of supply chain. I mean, we're seeing strength, not just in the December. What I believe is going to be ultimately a record year for Apple two hundred and forty million iPhone units. And that's why, Look, this is going to be an AI driven supercycle that's multi year, and.
That's why I look, the hater they hated.
Two trillion, despised at three trillion, A four trillion can be yelling from the.
Top of the mountains.
You write your note that you estimate roughly three hundred million iPhones globally have not upgraded.
Over four years.
So do you think this upgrade cycle is going to be let out of necessity because people are just desperate for a new phone, or it is it that AI capability that Apple is starting to introduce.
I think about sixty seventy percent of it is that is that you've gotten to the point now where that's a pin up upgrade cycle that's really unprescedent in for Apple prost Remember the install base that's increased two hundred million even over the last few years. So the install base continues to be the golden goose of Cupertino. But
the AI driven piece, it's just starting. That's why it's to get out the popcorn moment because in our opinion, the consumer AI revolution gooz through Cooper Tino and I think, look, that's why the bears will talk about valuation like they have for years in Apple, it's about some of the parts about what AI adds to the story.
We think it's thirty to four hours per share.
How hard would it be though for the next upgrade cycle, especially if so much is driven now by software updates, the hardware hasn't really changed.
Well, I think that's an iPhone seventeen again, that will be you know what we'll be seeing later this year, you know, into twenty twenty five, that's actually gonna be a hardware driven a new form factor that's really going to be AI driven. So that's why this is almost it's a one two punch. It's sixteen into seventeen, and that's why what makes this unique. It's it's about the increased services, and ultimately you have hundreds of apps right now in development that are going to be on top
of Apple intelligence. And that's why the enterprise AI revolutions the godfather of AI Jensen, a vidiot.
The consumer AI revolution goes to Coupertino.
And I think that's why we could see four trillion potentially you know today or Monday.
One potential difficult spot or is it potential? Is a difficult spot is China. How are you thinking about China, especially with the fact that Apple needs to partner with a local company to introduce.
All of this.
Look Cook ten percent politician, ninety percent CEO, right, and no one.
Understand might actually have to be more of a diplomat in twenty twenty five ten percent and.
Maybe thirty percent seventy percent.
But the point is, look, it's what him and Mosk have had to navigate in terms of success in China. But what I love about the cycle that probably gets announced from the Chinese partner early in twenty twenty five, it gets rolled down in April. So the China upgrade cycle in terms of AI coming to China, that's when that happens in April. And this is just the beginning of a multi year AI cycle that plays out from Apple.
You also talk about Pollenteer and salesforce in your note. I recently spoke to Mark Benioff about agent Force and this new iteration they introduced of agent force, and he said it's the most exciting thing he's worked on in his entire career. Is that why you're so excited as well?
And for context, I mean Bennioff, mount Rush Moore of Tech right, but it speaks to our view. It's ten pm in this AI party that goes to four am, and behind the velvet roops, Bennioff want to see his names on the list. Now, all of a sudden he's on the dance force. Software is let in now already on the dance for From a use case perspective, is the messy of AI Pollenteer and look that's one As I say, the Bears can see AI in the spreadsheets. That's how you know they hated pound Teer as a
teenager earlier this year. Despises a senior Cisten live in Derry Beach at eighty three. But it's just the beginning now of what I've viewsed the software age in AI. Salesforce, pound tier, and I think others like Mango.
dB What name do you think we're gonna be talking about next year that we're very quiet during twenty twenty four.
You know, twenty twenty.
Four really was about Nvidia Tesla.
What do you think will be the names of twenty twenty Yeah, I think there was continued to be.
In terms of my view for large cap tech, I think up twenty five percent two that twenty five I think what hasn't been on the radar, it's gonna be M and A software cybersecurity because with con done at the FTC, that nightmare, whether it's Ninemare and albm Street five thirteen, that's done for tech Now, I think you can see a lot of accelerated M and A when it comes to software, when it comes to cybersecurity, and I think that that is is what's going to weed this AI cycle.
And I think.
Specifically cybersecurity is an area that I believe could ultimately be one of the biggest outperformers when it comes.
To Another tech analyst joined me this week and said the same thing. Twenty twenty five is all going to be about cybersecurity. I want to end on Tesla overnight, Elon Musk was clashing with a far right activist who has been close to President elect Trump, Laura Lumer, and the crux of the argument was out h one b visus. But this individual is also saying that Musk really isn't maga and yet he's so close to President elect Trump.
Do you think there's a risk there actually that he will lose that proximity to power, which you said was one of the best bets of the Ages.
Look, it's a bet for the Ages.
That's I think that bromance actually gets stronger between Musk and Trump because my view is that Trump needs Musk must needs Trump, and whether it's Ai, whether it's China, whether it's some of the policy in terms of Dage, we're going to have these continued dust up. So this is gonna be a soap opera I think from Musk and Trump that continues to play out. But that is going to actually strengthen and it continues to be from Musk. It's the best bet he ever made on Trump.
Okay, So this is just a flare up in an episode, not the season finale exactly.
This is just one episode in a ten to twelve partter on Netflix.
All right, Dan, i'ves have webbush.
Thank you so much for joining us this Friday. Thank you so much, Rob for joining us this Friday morning, alongside of course Dan Greenhouse. Okay, so you say this is going to be challenging, but that was already on display. I think last week we had basically three iterations of potentially how they could avoid a government shutdown, and they did in the end. But what did the whole saga tell you about how Trump is going to govern even with these majorities he has in the House in the Senate.
Yeah, first of all, with you both, happy holidays. It showed us.
I think that when you burn institutions down, when you're running on an anti institution campaign, then when you come into office you can't then rely on those institutions to do your bidding.
Right.
It's the Republican House majority is a slim majority, and it's a disunified majority. It's going to be really hard for Trump and especially for Speaker Mike Johnson if he gets the gavel on January third, to really ensure that they always have a majority vote. This isn't the days of Nancy Pelosi where every Democrat stayed in line all the time. It's going to be hard to wrangle these folks.
Right.
Thirty eight Republicans voted against what Donald Trump wanted to see actually enacted all that whole episode, though kind of got brushed under the rug. What it said to me was that Speaker Johnson didn't have Trump's buying when he went to the floor with that deal that was negotiated with Democrats. Do you think he's able to keep the gavel?
I think he probably is, mostly because I'm not quite sure if there's anybody else who could win a majority vote on January third for Speaker, I would think that the next most obvious pick would be Jim Jordan, who is even further right than Speaker Johnson, even closer to Trump than Speaker Johnson is.
But Speaker john Johnson has.
Done a very good job, and by and large he really has had Donald Trump's support. Now you know Donald Trump is his agenda is going to be difficult to enact. He's certainly swinging for the fences. I think for Mike Johnson as Speaker, it really is it's about.
The art of the possible right.
It's not he can't get everything down that Trump wants to get done, or at least he can't get done as quickly as Trump would like. So what can he do and what can he have Trump's buy and for if he has negotiator or cooperate a little bit.
I agree with a lot of what you're saying, and I think the average investor isn't aware. We know it's a raise within the majority right now, a couple of seats. Obviously some people are departing to leave to be in the administration, and obviously Matt Gates is leaving Congress in general.
But I don't think people are.
Aware when the TCGA passed, Republic's at two hundred and forty or so seats, much larger majority, and so forget even the ideological differences that the chip Roy group, if you will, exhibits, just mathematically, it's going to be really difficult when you can have one or two or three Republicans banding together to not pass no tax on tips or whatever it is that the administration wants to do. Has Republican leadership talked about how to overcome that hurdle?
Well, I think first of all, they're writing on a few more seats to be filled. It's your point to have a slightly larger majority after some of these special elections are run and seats are filled. But you know, I really think it's going to be a question of muddling through, right, And this is kind of the issue generally speaking. Congress is not built for, you know, big fast change, and it's especially try definition, but by definition exactly,
I mean, that's the whole point. And with Republicans having such a small majority not only in the House but also in the Senate, and certainly not having the sixty boat majority in the sense that they would need to unilaterally pass legislation, I mean, it's going to be really challenging. And I think that that's one of the reasons why we're not seeing TCJ extension talked about in Q one. Right, it's going to take a while conversation and negotiation within the Republican caucus to get that done.
Over you Q three, Q.
Four, every Congressman and every congressman basically becomes king or Queen of the Hill in essence. I think of one person in particular, Congressman Lawler of New York, who basically is saying, I'm not going to vote for anything unless salts included because he also wants to run for governor of New York. I think, wink wink. I think he
pretty much said that in his Christmas Hanukkah message. So, when you have individuals that are so tethered to specific issues, is there in your mind five issues that must be included in TCJA in order for it to meet the demands of all these different vying factions.
Well, I think when push comes to shove, the worst case for Republicans is we will see a clean TCJA extension. So if we get to Q four and there hasn't been an agreement reach in base case, base case, we
get TCJA extension, clean skinny. I mean that's essentially what just happened with that the budget negotiations end, you know last week, is that there was all of this discussion of you know, riders and add ons and this kind of major Christmas tree bill with a bunch of stuff, you know, individuals, preferences and priorities.
None of that was in the final bill.
There was some farm et cetera extension of the Farm bill, but mostly it's like the lowest common denominator is the clean skinny package. And given that TCJA for individuals ends end of twenty twenty five. I think that the absolute necessity in our base cases, the Republicans will pass an extension. Now the question is what in addition do they pass. Is that no tax on tips, no tax on overtime,
the salt you know, extension or relief. I think all of that will be part of the broader negotiation, but much harder to get done.
With the same commerce for the same reason as we just discussed. I don't know how you do any of the other things. There's no built in constituency in Congress. It's not as if we've spent years building up an argument for no tax on tips or whatever it might be. So to your point about the TCGA clean extension being the base case, I think that's almost your only outcome.
It's your bear, it's your base, and you it's your bull outcome, because I just don't see how when you have two Republicans that want one thing and four Republicans that are against that but for something else. I just don't know how you come to any sort of an agreement on anything, especially if you're going to try to get two reconciliation bills in this year. So I think that's your base, your bull and your bare outcome. I don't think there's any conversation at all.
Yeah, I totally agree. Congressman Lawler and others will certainly be talking about salt, and I think that there's a small chance we could see a doubling of the saltcat from ten.
To twenty thousand.
Sure, the marriage penalty, but other.
Than that, I think it is fair to say that is the skinny bill. You know, this simple answer is probably going to be the most likely answer throughout this next Congress, because the bottom line.
Is I totally agree. Once you, you know, try and bring a few folks.
On one side, you're going to lose folks on the other side, and so it winds up just being again the art of the possible. What can Mike Johnson convince President Elect Donald Trump is good enough, is enough of his agenda to get through? And what can he convinces caucus to vote for.
Okay, I want to talk to you about the fight that was looming yesterday on Twitter. I'm not sure if you saw it.
It was between Laura.
Lumers, actually a ton of other people. I know Dan you also saw it. So basically Mosk and the far right at the end of the day are arguing over immigration and H one B VISs. Where do you think Trump comes down on this issue?
Well, I think Trump his focus first and foremost is on the border. So it's not say he hasn't thought about the H one B question that you know, skilled immigrants coming question. It is not his first priority, right he wants to secure the southern border if he.
Wants, not his but the priority of many people he's putting in the administration.
Yeah, exactly, I totally agree, and frankly the priority of you know, his base that got him elected not once but twice. And so you know, I don't think he has on the H one B question.
It's not going to be his priority.
It's clear that it's you know, Ramaswamian and Musk want to talk about it. And it is again another example of a rift we're seeing in this kind of bigger tent Republican party.
So for the viewers that made be as online as we are, just to clarify, there is this debate going on among what we call the right right that wants to restrict immigration in a broad sense, and what has been known now is the tech right, the elon Musk world that agrees in general with the idea of restricting immigration large but also wants to increase the availability of these h one bvss that provide for the quote unquote skilled immigration, and those two worlds are clashing. For some reason,
it happened over the weekend. I guess the vek Ramaswami got involved. I would agree that I don't know that the President Electroump has spent too much time thinking about the nuances of this, but he has spoken in the past about the need for skilled immigration. He wants to make it possible for those people to come here. I think while this is a fun online conversation, I think the skilled immigration argument is going to win out because you do have Musk sitting in such an important position
next to the president. You have had the President discussing the need for skilled immigration, and it does provide for the masses something of a buifer case. So you don't look as restrictive by saying, listen, we just want to close the border to your point, but we also want the skilled people to come here. Is that not where this settles out?
Well.
I think it is probably the hope for Donald Trump and an Elon muskets that's right, that's kind of your perfect miss, it's your best. We're going to close the border, but we're also going to allow the best and the brightest into the country to propel our economy forward. The issue is that's just not how the far right sees it, right, and so I actually think that changes to the H and B programmer are going to be harder or I
should say, easier said than done. Right, it makes sense to many of us, it makes sense in the context of the economy as it sits today. Certainly you can have both, right, you can close the border, you can also allow that the most skilled in that there's no sort of internal disagreement there. But the issue is, I think MAGA Republicans it's not what they want, right. And while Trump doesn't have to get re elected in four years, you can't get re elected in four years. House Republicans
have to get relected in two years. Center replt have to get relected two, four and six years from now, so they have to answer to the MAGA device.
And you made a great point. Musk is definitely not in this far right Laura Lumer camp. He's battling them for those that maybe are just kicking up online on exactly what happened overnight. So let's talk about January. We have sixty seconds sequencing immigration, tax policy, tariffs one two three.
I think, so we'll get the first reconcilation package will be immigration and energy. I think the second sort of big conversational that we're already having it now here is tariffs.
It's probably Europe.
Early, China, I mean early, but most importantly backloaded and very high on and targeted on specific sectors. And then the tax question is going to be two h And the bottom line is it's because that Republicans don't have the package around which they can form a majority.
Today, Bobcasey, thank you so much for joining us this morning, and happy holidays and happy twenty twenty five. Rob Casey of Signum Global Advisors. Chuck Lieberman of Advisor's Capital Management, writing this, the economic environment should be slightly positive for socks and slightly negative for long term bonds. Inflation prospects could easily worsen between tariffs and immigration policy, which would freeze monetary policy for some period, but longer term rates
would increase. We're hearing a lot of this, Chuck, and he joins us. Now, Chuck, thank you for spending your Friday morning with you. Happy holidays and New Year to you. So how are you thinking about the start of twenty twenty five, especially when policy things like tariffs immigration are going to be so important to how the bond market trades.
Absolutely right, Emory, I agree with you. Happy holidays to you as well. In my judgment, there are things to be nervous about. The possibility of tariffs will obviously increase prices for domestic consumers, potentially a really big negative when the Fed is trying very hard to bring inflation back to two percent. We also have concerns about the labor market.
Job growth has been pretty good, but if immigration policy changes and President Trump actually removes people from the US who came in illegally but nonetheless are working, that's going to reduce our labor supply, which will drive up labor costs and also inflation. So there are reasons to be concerned about the prospects for inflation when it.
Comes to inflation and tariffs. Do you think this is a one off hit or could this be more pervasive?
Well, it initially is largely one off, but it then tends to spread through the system. When you have a single autocontract, for example, that's negotiated between the UAW and the auto companies, it's a one off thing and it pertains just to that industry, but nonetheless everyone else is watching. Everyone else is looking, and many other workers labor unions get ideas that they can also push for ten percent
increases for four years in a row. That's a large increase, and so it does tend to transmit through the system.
So what do you make in terms of FED policy with this kind of fiscal environment.
Well, I think the FED wanted to get rates down while they could, and so they sort of rushed. They did fifty and then twenty five and then twenty five, so they reduced rates by four hundred basis points. But the market is looking at the economy, and the market is seeing that the economy is not weak. If you recall a year ago, a lot of people were forecasting recession.
Obviously that didn't happen. In fact, growth is well above potential, and it becomes even further above potential if we have fewer workers because we are getting illegal immigrants to leave the country. So no matter how you slice it, I think we've got inflation risk out there, the economy will probably grow more slowly. If you can't hire, you can't expand the economy as quickly, So we could have a very unusual combination of moderation and growth, yet upward pressure on inflation.
Doing the set at the moment is restrictive.
No, very Simply what I look at is not overnight money, because if you look at overnight money relative to inflation, you can make a case that the funds rate is roughly on average where it belongs historically. You have a much much tougher case when you look at the ten year at a four to sixty yield, with inflation in the ballpark of let's say two sixty. I'm being a little bit generous here. You have the two hundred basis points over inflation. Historically it's been more like two point fifty.
So in my judgment, interest rates are not a bar to investment to spending, and we see very strong corporate issuance of debt in the marketplace because corporations see prevailing interest rates is attractive.
So when you put all of this together, potentially inflationary policies, you don't think the FED is restrictive. Do you think we could see a twenty twenty five when the Fed is actually not just on pause but maybe raising interest rates.
Yes, but not in the early part of the year. In the early part of the year, the Fed is going to wait to see what happens with policy, with tariffs, with immigration policy. They'll look at the growth rate of the economy, and they will wait. They can afford to wait. There's no reason for them to rush ahead to lower rates anymore, and they have good reason to regret, shall we say, having lowered rates as much as they have.
But I expect them to be on pause for a while, and then it depends very much on how things play out.
Chuck, thank you so much for your time this morning. Happy and healthy twenty twenty five to you, Chuck Lieberman of Advisor's Capital Management.
This is the Bloomberg Surveillance podcast, bringing you the best in markets, economics, and geopolitics. You can watch the show live on Bloomberg TV weekday mornings from six am to nine am Eastern. Subscribe to the podcast on Apple, Spotify or anywhere else you listen, and as always on the Bloomberg Terminal and the Bloomberg Business app.