Surveillance: Tesla Deserves Apple-Like Valuation, Munster Says

what's going on with this virus. We have to see if it's spreading and importantly whether it's spreading outside the Whan area, whether it's like is it an international issue or is it a regional issue? And the data swings from day to day, and the data has distortions in it as well, so like they forget to report for a couple of days and then it's spikes because they catch up for a couple of days. So we really

have to weed out those things. And then we have to look at what is the stimulus that's being put in place to counter the effect. So like Chinese interest rates didn't move at all last year, and now there's suddenly shifting down a gear because the stimulant is expected to be very significant, right, so we have to weigh

those stimulus effects into the equation too. There's just a belief ends i think, helped by a lot of people, that any risk as a social stability in China is viewed as some kind of existential risk to the whole system the leadership. The message coming from the leadership urging officials Monday to quote achieve the targets of economic and social development this year, promote stable consumer spending? Is that

a cue for this market? The more stimulus is coming, and do you think it can be effective in the environment with a situation like we have right now? Well, I think there's no doubt that Stimilus is coming. So we have liquidity injections, we have interest rates cuts. I'm sure there'll be all kinds of fiscal steps to make sure that whatever discontent is generated by this is counted by money in some forms. So there's no doubt that

this is happening. But on the other hand, we have major cities in China in total shutdown, Like, how's that gonna last? It's gonna be a couple of days. You're gonna be a couple of weeks, a couple of months. That I think is the key parameter, right, because if we project into global growth, a couple of days is clearly not gonna matter. But it's a couple of months from major regions, it's a big deal. You have some

great math in your research note this morning. It was folks, literally half a page where you just go to the first derivative of the various virus ratios and at least we can say they seem to be moving in a constructive direction. Yeah. I think the key thing we're looking at is how is it's spreading outside the Wuhan area right and there the growth rates have been coming down, So if we get confirmation that that's the trend, that's

the important signal. I think it's too early to say that they've come down to a level where we can be more comfortable. I think if you look at the literature from the health specialist, twelve percent is what they sort of expect is the natural progression of this thing. We get below that, that will show that the polishing measures have worked. And we're close to close to that point, but not quite there yet. And let's get to the nuts and bolts of what you do every single day.

You how clients understand where positioning is at the moment, where the flows are going. You've got together with ep F R EPFR data. Talk to me about that partnership and what you're seeing together with them at the moment, just in terms of the flows, in terms of the positioning at the moment. Yes, So we we build as new data set together with ep FIRE up in Boston, and the idea is that we want to know what the real money community, which is really the biggest player

in the currency market, is up to. So we go and measure in a very precise way what their positions are, including their derivatives, and that can give a sense of okay, where the crowded positions and where are are there some unloved places in the market that could potentially have some medium term bullish trends. So those are things we look at.

So this is talking about the price action in security is a lot of people are looking at the fundamental effect that the shutdowns from the coronavirus will have on the economy. I was looking at a number of reports, Barclays coming out downgrading their first quarter estimate for China's growth by two point two percentage points, and this coming out that China's car sales are likely to slump the most on record in the first two months, with sales set to fall by twenty five tot in the January

to February period. Is this being priced in? So we had one day that looked nasty in the equity market last week, and now we're recovering very dramatically today. So I think a lot of people are assuming that this shock is over, which I think is premature. But the for example, I think that the effect that we've been the most focused on is tourism. Like Chinese tourists around the world play a huge role in many different markets,

especially in Thailand and so forth. If they don't come for several months, it's gonna be major, major hits to those economies, like several percentages of of of GDP, And this, I think is an effect where even if the factories up and up and running quite quickly, people are going to be afraid, there's gonna be essentially quarantines and so forth. So I think these effects are going to be multi month effects, and I don't think they approbably. Let's put

some of these issues together. Then you talked about identifying the positions that were crowded at the moment. Where do you see the crowded positioning, what do you think is vulnerable like? So, one thing we've seen in this data set is that at the end of last year there was more optimism about global growth. You saw equity investors actually trying to put on bets of a sort of global recovery, and they did that bet in Europe as well.

And we can see that the equity investors were some of the ones that actually put on long Euro bets. And I think one of the reasons why the Euro has traded so poorly this year was that we came into the year with that overhang of long Euro positions and then we've had all the negative shock come out and they've had to take that risk down. So these are the sort of tools we use to identify crowd

of decisions. Take that one step further than are you're looking for more downside and euro dollar So I think everything is driven by the global growth sentiment. It comes back to Lesa's question, Okay, is this shock really fully priced? So I will be much more comfortable saying okay, we're about to have recovered if we had a proper correction the equity market. But we just never got a proper correction right because we had one day down and now

we're sort of recovering already. So we're in a very gray song here where risk acids have have really not priced very much. There's some very very intimate side and improvement fundamentally, but they're not convincing yet. Give me a currency pair, because I've been short Tesla and that's worked out. Give me, give me a pair Noel with its opportunistic over the next ninety days. So I'm very worried about Thailand because they have the biggest tourist sector and and

and em space. I think Mexico is still the most constructive story or that I see out there. So that's a very we're gonna do that chart. You're going to have a triple leverage cash fund with an overlay. I don't know. Leslie Vinja Murray John Shadow Mouse, She's expert on American politics out of her shop in London. Leslie absolutely extraordinary. The major message from Kevin Surilli and Des Moines was people are genuinely shocked over this mess. In Iowa,

summarize it from the distant climbs of London. Well, you know, waking up here in London, I think we were all shocked because we expected to see, you know, what has been a very tight race among with multiple candidates sort of coming out at the top, whether it would be Biden or Sanders, but it was, you know, unclear, it could have been Bude. And we woke up, of course

to the news that there is no result. We still didn't have a result, and and all of this down to difficulties you know, with the local with the local caucuses and they the Democratic Party, So I think very distressing for many people. And of course then there's also the news that multiple people seem to have been declaring their success, multiple candidates, which is humorous for a lot of people, Leslie, because they're declaring success without any results.

Ready to go on, Leslie. I'm just wondering, once we get the results, how much value will there be in those results. Well, you know, I think there's there's inevitably the narrative surrounding this will be of a botched and and and somewhat scale caucus. So regardless of the result, I think it's going to cast a bit of a shadow over those results, and the delay is very significant. People are moving off and going into the State of the Union address and New Hampshire is you know, is

very soon. Lisa Homeland Security offered to test Iowa caucus app that was in an interview on Fox moments ago. This is actually key. They made a point to come out and say that there was no interference, has had nothing to do with any sort of major glitch, that this didn't have to actually affect anything having to do with the underlying vote count. Talking about all of that, but still raising questions about the lack of technological sufficiency

heading into the elections. How concerned are you about that at this point given what we saw in the questions still surrounding that. Yeah, I mean there's there's clearly you know,

there are a couple of things here. One is that even though that disappears to have a very distinct reason behind the behind the debacle, it nonetheless sort of comes together with with previous elections where there's been interference or where things haven't come come together smoothly, and at a time when there's just tremendous uncertainties surrounding the Democratic Party of the candidates and and a lot of instability. I

would say politically in the country. Let's lee, you're in the UK right now, and I'm just drawing on my experience of the British election this past December. If we get a progressive candidate that comes out of the caucuses the primaries over the next several months, can they win on a national basis and the same way Jeremy Corbyn struggled with a national electorate but was really worth supported by the party. Do you see any parallels here whatsoever?

I mean, you know, a very different set of politics. People love to draw the U s UK comparison. Sometimes that shed some light, but I think the big question that un it often doesn't. The big question for the US is whether or not those that part of the party that doesn't get the candidate they want, if it's a progressive candidate, do the moderates turn up, do they

unite behind that candidate? Do they support the Democratic candidate as a mechanism of of moving away from the person that they don't want in the office, which is which is President Trump? And this is you know, this is something we simply can't know. Some of the stories coming out of Iowa were interesting though, right that people who didn't um with their candidate and didn't make the initial

bar a few people just went home, you know. Not a good sign, very hard to read broader results off that, but not a good sign that you wouldn't then turn to turn over your vote to another candidate. So I think this is, you know, this is the big question. Will there be unity around a candidate when when one is finally selected. There's also a question of what trade

uh policies will result from the different Democratic candidates. When it comes to China, certainly people have this feeling that it really won't be necessarily better for China with a Democratic candidate, whoever he or she may be. There's a question with Europe now that that's the front center with some of the trade discussions, of which democratic candidate seems to be the best one to deal with Do you

have a sense of that? Well, I think there is a concern not only in Europe but certainly in China that a Democratic candidate could take a much stronger line on China actually call for those deeper reforms that President Trump has has paid lip service too, but really hasn't moved the needle substantially on So a progressive candidate, I

think uh is more likely to take a much harder line. Uh, you know, it's sort of anti free trade position is one that has deeper roots in the progressive part of the Democratic Party certainly than the Republican Party prior to this president. So those are very real, very legitimate concerns.

But at the same time, you know, we're not seeing a very serious articulation of what the strategy would be um on China coming out of coming out of the progressive I just translate from the English that progressive is another word for liberals. We've just changed it a couple of years ago. Well, I think it's aggressively liberal when you're looking at the likes of Bernie Sanders, and let's talk about let's talk about the elephant in the room,

showy Leslie, Let's talk about Bernie Sanders. Can he unify his own party? Never mind the country? You know, it is another one of those one million dollar questions that nobody actually which is where test is going to be a lot of skepticism, you know, I when when we moved forward towards Super Tuesday, we'll have a lot, We'll have a lot more answer them. But I guess I am. I am let us know when you get eye words results.

Let's say, Benjaburi, thank you so much with Chadow Mouse children with us for an incredibly important discussion now on the state of what we do all day, which is the media we're plugged into. Michael Nathanson is with MafA Nathanson. Michael, I've got to go first year colleague, Craig manfat on Comcast hugely interesting this morning. You go to a buy on Comcast, and am I right to say that the part of Comcast that's Nathanson like, which is the valuation

of their news and entertainment assets, is worth zero? Is NBCUniversal barely valued within the valuation of Comcast? Right, good morning time. That that's our call. Craig has been rightly negative on the media side of NBC Comcast, but at some point you just got ridiculous and at this level rethink. Given the value of cable cable assets, the entertainment assets are literally trading for free. So we switched, We switched

courses and upgraded it to a buy. After a couple of years of really being negative on them posts, you know, post a bunch of deals that we didn't like forty two dollars a share, forty three dollars a share on Comcast. I'm sure you'll lift the stock. What's the value of NBC Universal and the all in price target? Moffett Nathan Snaz, Well, you know, if you look at where you know, it's not Disney, because Disney Disney, we'll talk about fit has

really changed their narrative. But if you said, you know, seven, eight, nine times eba doll you probably have another, you know, ten a box of value at Comcast just by getting NBCU at a fair value. So it's if you look at where Charters traded two, which is a pretty good proxy for cable, you do you have a free pass for NBC And it's a very I think it's very straightforward, makes a ton of sense. And people are looking for things to buy, as you all know, and this is

a pretty good name for Michael. We talk about price just quickly at an email from Hulu a couple of months back, hike in the price of my monthly Hulu power. Here we go quite aggressively. Always got to make it about Megan early and at what point, at what point do we meet meet an inflection point where I just sit there and think, you know what, I'm just going back to cable. What's this about? Yeah, John, you know what that this past year, that inflection point has come.

I always said, you and Tom had asked me this for years. What's the what's the tudor of court cutting? We'd say it's a drip drip drip, negative one of two percent court cutting rates. This year it's going to negative four, negative five because people are now seeing their bill rise and on the margin, they're either kind of chord or they're they're going back to their traditional ways to watch the TV. But the mistake the industry is made is that they've just taken pricing up on bundles

to the level that's just too high. So, you know, we're saying that you're we're worried play out, We're brawled across the ecosystem. With court cunning really accelerating into twenty Michael, there's then a question sort of implicit in that is the model going to continue to be purely on subscription fees or will there be a shift to an advertising supported model. And I'm thinking on the heels of the Super Bowl with a record five point six million dollars

commanded for a thirty second spot. At what point will streaming command similar types of prices uh to sort of support these Okay, so so there's a ton in that answer you. So what I would say to you to John's first question, We're gonna have a lot a lot of your people subscribing to pay TV. The PayTV core user is going to be a sports and news fan who you know, will be a bit indifferent to pricing. Then there's going to be a layer of people who

buy things on demand. And that's your question about advertising support video. That's a growing field. It's called a VOD and seeing more companies pushing advertising video on demand supported business model. You won't for many years. There's no way you'll ever built the reach that you have in TV, but it's a way to a buying consumers to add back that that decline of line your viewing in a new model called a VOD. Where's your value, Michael Nathanson

Right now? I mean Disney has had the IGOR run off their streaming pricing and Disney Plus, But which is the security that's an uncommon value now other than off it's Comcast call today. Well, you know Tom. I mean it's last week I spoke to John about that. Facebook. I'll say the same with Google. I think those fang stocks have reached level. It's really hard to have a table on the fang stocks. You know, we have Disney with another fifteen fifteen bucks or so, and so you'd

say you're running out a room there. The problem we have when we look at my sector is that there's there's a lot of value means b M, CBS, which you pull up the chart has been decimated, Discovery UM. But the problem we see is that those businesses are under so much structural pressure that feels like a value trap. So we're having a really hard time finding great value in businesses that we think are sustainable. That's why Comcast

makes so much sense for investors. There's so so few places you can point to the sustainable growth and evaluation and evaluation that's attractive. Michael, just to turn to the issue at the moment, just to wrap this conversation up quickly. If I made the Walt Disney Company the theme park in China, what is happening right now and how material is it for the company. It's not fair material. You know, they already warned on Hong Kong when the year started

because of the rioting. You know, Shanghai as a new park is not it's not a meaningful contributor to the company. Um, it's it's it's not a major issue. If they had a better box office late this year, you'd be concerned about their inability to have people attend Chinese cinema. At this point, this is not a major issue because the parks are so small. The broader question though, is US parks and will there'll be a slowdown to US parks so we're spending Yeah, that's that's something that we we

haven't put into our molley yet. But that doesn't concerned with Disney. Is just the cycle and how many more dollars will people spending us theme parks. Michael Nathanson this morning, is he and Craig Moffatt put a buy on Comcast on some of the parts, uh model, get that researcher of course from Moffatt Nathanson. We now try to drive forward an intelligent conversation on this virus with Dr Faucci.

Anthony Fauci is out of Brooklyn. He's out of the College of the Holy Cross in Worcester and Cornell, and he is definitive on immunology and definitive on how the body reacts to these bad things called viruses. Were thrilled he could join us right now, Dr Frauci, What is your knowledge of how people get sick from this terrible virus?

What does it actually do to people? Well, it's a respiratory born virus, you know, in some respects similar to other respiratory born viruses, but it's of a different broad family. It's called a coronavirus. And what it does it has the capability of binding to a receptor on cells that are in your lung and your lower airway. And that's the reason why the disease is primarily a disease of pneumonia.

So the people that you're hearing about who are getting seriously ill in China fundamentally a people who are winding up with pneumonia, very very serious. Yes, so that's the mechanism. Do you do you have any optimism? Dr Fauci's antibiotics against the bacterium pneumonia can help staunch the deaths. Are we fighting just virology? Are we fighting also the bacteriology that follows on from it? That's a good question, and talking to our Chinese colleagues and seeing the case reports,

it looks like this is primary viral pneumonia. I'm sure that every once in a while you're gonna see people who are seriously ill in the hospital who get a secondary complicating bacterial pneumonia. But the driving force of this outbreak is virus and viral pneumonia and not bacterial pneumonia. The CDC came out yesterday awarding saying that they were

preparing for a pandemic. It's not there yet, but saying as if it will come to the United States, what's the tipping point in terms of people, in terms of countries that qualifies it as pandemic. Yeah. One of the things that I think it's the easiest to understand is what we call persistent or sustained transmilty, transmissibility from one

person to another to another. Like, for example, in the United States, we have eleven total cases, nine of which are travel related coming in from Muhan, but two were individuals who were close contacts of these individuals who came in. But it isn't sustained. In other words, it went from a person who was infected to another, but didn't go beyond that. In the second, third, and fourth generation, we're

seeing that in China. So China clearly has an epidemic, but the countries to which have received people from China with travel related cases, we don't yet have widespread multi country sustained transmission. When that occurs, then you're going to see the official declaration of this being a pandemic, since we don't have that yet, Doctor, I just wandered to what degree travel curbs and the kind of travel bands that we're seeing coming from various countries at the moment

can be effect What do you think of them? You know, it's really controversial. In the past, it has been clear that if you do those kinds of things, there is the possibility that there may be deleterious, unintended consequences. However, this is such an unprecedented situation that it really is too early to call. But I can tell you that if you have a conversation with health officials, there'll be

people on either side of that. Dr Fraucci, When you joined nig nineteen, uh, I guess in the eighties, I want to see, okay, so that was the time of the home I forgot how aged you are. You're well preserved for your age, Dr Faucci. When you go back to the Hong Kong flu of nineteen sixty eight, are we reacting to this influenza this virus because of our modern newsflow communication transfer of information totally different than we did in nineteen sixty eight when it was a quieter

news time. You know, there is some validity to that uh statement that you made, but it isn't completely explained by that. I think it's better to explain to the listeners that when you're dealing with influenza, influenza is something we have some familiarity with, whether it's a severe influenza year,

a light year, or what have you. But when you're dealing with the virus to which you have absolutely no precedent to figure out what this coronavirus might do, then you have the added uh, you know, fear and anxiety of the unknown. I mean, a question that I get asked more often than the nineteen pandemic, which you're right, was truly a pandemic, and there was clearly much less of the kind of global concern that's expressed in the media. I mean, there was concern on the part of public

health officials. But it wasn't the kind of daily twenty four hour news cycle that we saw. But people ask, you know, we're in the middle of a flu season right now. They're about ten thousand people who have died this year from flu, which was a plain old flu, about a hundred thousand hospitalization. So why are we paying so much attention to this coronavirus? And the reason is

most people have a greater fear of the unknown. And the fact is we know that in March and April of this year the flu will go down dramatically and there'll be very few cases. We don't have any guarantee of where this coronavirus is going to go, and that's the thing that's frightening people, the unknown. Here's valuable Anthony Focci, thank you so much. That FACCI, of course, with the National Institute of Allergy and Infectious Diseases fall Scoeny came

in and threw me the gene Monster research report. He said, Tom, read this one sentence, So I'm going to read this with full punctuation to get everybody going. We see the logical tech comp is apple. We believe there's merit to that view. And the company's valuation should be viewed in that context. Period Apple period. Why is Tesla like Apple, O Wise one Gene Munster with Loop ventures with us Gene. Why is it the next Apple? Because it's a combination

of hardware, software, and services. If you think about the large tech companies, Apple is the only one that offers those three long time for the last decade has been largely penalized for that hardware piece, and the last year Apples multiple has moved up as investors have gotten more confident that doing those three pieces hardware, software and services together creates a sustainability and that Tesla it's the same business model. It's not just building cars, it's a computer

on wheels. That's the hardware piece. Then of course that there is the there's the the software piece around for example of full self driving and just advanced autopilots that you pay seven thousand dollars for. And then there's a services element that they're building into anything from insurance to their charging network. And so I think that there is a similar piece to it, and I think what it

really represents that view is a shift. And you know, we can talk about what's happened with the stock and where it's going. But this general shift of thinking about this is a car company and using comps of Ford and GM to a complex apple. So, Gene, let's go to spend a minute or two just on kind of the recent price action. Stocks up, you know, almost double just in the month of January yesterday indicating another strong

surge this morning. How much of this do you think is kind of technical short interest covering versus people just kind of opening their eyes and saying, this is a tech company. I think it's seventy of the ladder of this is a tech company and short short covering. There is uh still about fourteen percent of the float that's short that those numbers actually understate the percentage slightly. It's probably like sevent because Ellen owens of the company and

he doesn't offer those shares for borrow. So uh it's but that short interest really hasn't gone down much over the past few months, and so I think it's more about the fundamental piece. I would think about this when you look at uh, this view that the fundamental pieces the biggest driver of the stock is in some ways this is historical what's happened with the stock in the last few months. Um, I've been doing this for a

while and I can't remember a story like it. In other ways, the presence the lead up to this over the last few years was also historical, the the amount of um of batter banter between the bulls and the bears. I think there was a lot of positive advancement that Tesla had made that was really not being reflected in

the stock. And so in some ways, the move that we've had up to where it is going to open today, this is just kind of catching up for I think probably what should have happened over the past few years, and then there's a question where do we go from here. But in some ways this parabolic move is somewhat understandable. Hey, Geane, I'm looking at the a n R function on the Bloomberg terminal that tracks analyst recommendations eight buys eleven holds

eighteen cells. Is this a case where the tech analysts are on board with the story, but the auto analysts just can't get couple of evaluation. I think it's the auto analysts that are opening up to this view that it's a tech company. I think it's still largely covered by auto analysts. You don't see Apple analysts for example, Well, there's a few of them, but for the most parts

aren't covering Tesla. But I think that that I think that the traditional analysts that cover it will have to make a decision here whether they want to continue to cover it or generally think about this as a tech company. Jane, Okay, you're selling me on a tech company. But the fact is it's automobiles driving down the road on a ninety day conference called Basis. Is a number of units sold of their cars still the demonstrable statistic. Yes, that's critical,

that would be the critical piece. But uh, you have to look at it not just in the context of a quarter. I'm not trying to build some uh some cushion for them in any given quarter. But you need to think about these trends. Uh. There, these are massive trends. We're talking about the car. The automotive industry really hasn't changed largely for the last hundred years, and we're talking

about a total shift out to autonomous vehicles. Is where we're ultimately going, but that it takes time to get there. Do you have a model of what unit sales are going to be in the next eight days or if you don't what happens if they stumble, Well, if they stumble, Uh, let's maybe just focusing on the March quarter. A as far as the model for the full year, they've talked

about doing greater than five hundred thousand. Previously they had said greater than four hundred sixties five thousand, So they had kind of inched that target up when they reported their quarter last week, but the they didn't give a ton of context to how to think about this quarter to quarter, and so, uh, the analysts could be ahead of themselves. The numbers are still kind of figuring themselves

out shaking out for the March quarter. But let's take the case where the company misses the March quarter and then talks about still confidence in that five hundred thousand number. That miss would be a negative. The stock even what

it's done, would be down. But conversely, if you they you come back to the June quarter and then they beat on that number, uh, then the stock would would regain that So I think what we're we're getting into is, uh, it's still going to be a controversial story, and I would I think that a miss would still be viewed negative, but I think it misses the bigger ark of what's going on. So Gene, just real quickly, what's the competitive landscape for them? Is that Apple or is it General Motors?

On neither probably probably more Apple than General Motors. Unclear what Apple's ambitions are in cars, and just for a long time prophesied that Apple would do a TV that never happened. I want to be careful about what they're going to do in automotive. I think they will have some playing automotive, but General Motors is structurally uh in

a in a tight spot. And another thing I would add is I think if you think of the automotive industry over the next ten twenty years, there are large companies that have been around for a long time that will be on their way on a clear path to not being around, if even around at all. Hey, Gene, thanks so much for joining us. We really appreciate your thoughts. Jean Munster Luke Ventures managing partner analyst giving us his

very informed thoughts. Thanks for listening to the Bloomberg Surveillance podcast. Subscribe and listen to interviews on Apple Podcasts, SoundCloud, or whichever pod cast platform you prefer. I'm on Twitter at Tom Keene before the podcast. You can always catch us worldwide. I'm Bloomberg Radio.