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americanexpress.com americanexpress.com Bloomberg

1:01

Audio Studios. Podcasts,

1:03

radio, news. Single

1:13

best idea and off of yesterday's

1:15

program, which was just wonderful, people working,

1:17

Eric and the team working, on

1:20

the geopolitics of the eastern Mediterranean

1:22

and all of that. We tried

1:24

to shift back to the markets

1:26

and to the economy much more

1:28

today, a stellar set of guests.

1:30

Program note, I really want to

1:32

shout out David Gurra's The Big

1:34

Take yesterday. Look for that at

1:36

Bloomberg Podcast. It is a show

1:38

that's gotten rave reviews on Israel,

1:41

on Iran. It was with our Nick

1:43

Wadhams and company, and

1:45

Ethan Bronner, our Tel Aviv bureau

1:47

chief. I really can't say enough

1:50

about the response Mr. Gurra's had

1:52

off of The Big Take yesterday.

1:55

Our response today was to speak about

1:57

the economy. Sree Kumar is

2:00

legendary. He's out of Los Angeles, iconic

2:02

with TCW and others before

2:04

that, closely associated with Mike

2:06

Milken's, Swari the Milken Institute.

2:10

Shree Kumar is adamant

2:12

that we've got to get back to

2:14

foundational theories of another time and place

2:17

and even suggest with this persistent inflation,

2:19

not we will, but we

2:22

could see a rate increase.

2:25

He wants to go back

2:27

to his mentor and PhD

2:29

advisor at Columbia years ago,

2:31

John Taylor, now at Stanford

2:34

University, Shree Kumar on

2:36

the Taylor Rule. You have to

2:38

go back to the pre-pandemic long

2:40

ago, 1990s approach to Taylor

2:44

Rule and it was first

2:46

proposed term in 1993. Janet Yellen, who was then in

2:51

San Francisco, said she hopes that

2:53

it can be adopted soon and

2:56

30 years later there is no progress

2:59

toward it. You need the Taylor Rule

3:01

back. It is a very

3:03

flexible formula taking into account whether your

3:05

growth is above or below target, your

3:08

inflation is above or below target

3:11

and based on that should you be

3:13

increasing or lowering interest rate. You put

3:15

the formula out, you publish it in

3:18

newspapers, speak about it on Bloomberg and

3:20

I will know what is going to

3:23

happen to interest rate. Shree Kumar, with

3:25

one thought there and of course closely

3:27

associated now with Stanford University in

3:29

the Hoover Institution. One of the things

3:31

we really tried to do today was stay on

3:33

the markets and the markets course had a deep

3:35

drawdown, I'm kidding. Vicks got out to a 19

3:37

not 20 level. I guess

3:40

that's some recent angst in the market as you'd

3:42

expect with all this going on

3:44

in politics and yes some real earnings angst

3:46

as well off of JP Morgan Goldman Sachs

3:48

doing well, Morgan Stanley Bank of America. Less

3:51

so thanks to Ken Leon at

3:53

CFRA who was brilliant on Bank of America.

3:56

He made real clear he thought this whole

3:58

thing was subpar but Bank of America. of

4:00

America clearly having the ability to bounce back

4:03

in future corners. Get

4:05

a concise daily market update from

4:07

Charles Schwab including the latest on

4:10

US and global economic news, stock

4:12

updates, monetary policy decisions and key

4:14

results and statistics that may impact

4:17

your trading. Schwab Market Update is

4:19

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4:22

Join host Keith Lansford for this

4:24

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4:26

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4:28

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4:30

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4:33

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4:36

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4:40

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4:47

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4:49

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4:51

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the powerful backing of American

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Express. Terms

5:04

apply. Learn more at

5:06

americanexpress.com americanexpress.com So

5:10

there we are in the earning season

5:12

and of course what everybody's waiting for is

5:14

tech and tech to me is Apple.

5:17

I know Microsoft comes out as well. May

5:19

2nd will be Apple earnings and it's

5:21

good to catch up with Gene Munster

5:24

at Deepwater and I went to

5:26

something conventional. Not China, not

5:28

product, not iPhone, not goggles like

5:31

Andrew Murphy wears working with Gene

5:33

Munster. I went back to use of

5:35

cash. Munster went through the

5:37

math of their free cash flow. They generate

5:40

about $100 billion

5:42

in operating income and

5:44

so this is about a $350-400 billion revenue

5:48

company. They'll probably do about $95 billion

5:50

this year. Free cash flow will be around $55

5:52

billion. So this is still

5:54

a machine when it comes to

5:57

and I want to have, I think I

5:59

buried the relative to that data

6:01

point about their free cash flow is

6:03

revenue growth. If you take what it will

6:06

be in the March quarter, what they're going

6:08

to report in a few weeks here, revenue

6:10

growth over the past eight quarters has been

6:12

down, will be down 0.4% on average. So

6:15

they continue

6:18

to drive that kind of

6:20

50 billion plus

6:22

free cash flow despite revenue being

6:24

flat. I think it speaks to

6:28

the strength of the business model that they have.

6:30

I've been harping on this. This may be

6:32

my theme for the year, which is there's

6:34

a complete growth fixation within

6:37

the financial media. It's about

6:39

growing earnings, growing revenues, growing

6:41

this, growing units. How

6:43

many clicks do they have? How many iPods have

6:45

they sold, etc.?

6:47

And the iPhones, I should

6:49

say. And the reality is a

6:51

lot of companies and CFOs are

6:54

less focused on growth

6:57

at any cost and are looking

6:59

at profit. And the profit model

7:01

of something like Apple,

7:03

just as one example, is just absolutely

7:05

stunning. There's no other way to

7:08

put it. It's one of the focuses

7:10

that we have at Bloomberg Surveillance is

7:12

we're always looking at the Bloomberg FA

7:14

screen, the financial analysis screen, and we're

7:17

saying, okay, growthy, growthy, growthy and all

7:19

that. But what does the

7:21

profit look like? How do they come

7:23

down the income statement? What is free

7:25

cash flow look horizontally? Pro tip, one

7:27

of the great things I'm doing now,

7:29

this is not original, is

7:32

I look at where they were in 2019 and

7:36

now where they are four years out and five years

7:38

out in 2024. Five years out will be, you know,

7:43

in two quarters, three quarters or so.

7:45

And you'd be amazed how you can

7:47

glean out industries such

7:49

as banking where, yeah, there's been a free cash

7:51

flow lift, but not as much as you think.

7:54

And these juggernauts with these high multiples,

7:56

these big tech companies that are putting

7:58

it on. every quarter. We're

8:01

having a lot of fun with this. It's single

8:03

best idea. It's just two ideas. We have a

8:05

committee. You know, we argue. I mean, we at

8:07

one meeting went 45 minutes to

8:09

try to decide which two we would pick to

8:12

put in the single best idea. But today it's

8:14

Shri Kumar and it's Gina Munster.

8:17

Just as simple as that. It's a single

8:19

best idea. Of course, listen to us. Add

8:22

on Apple CarPlay. Download the Bloomberg Business app.

8:24

It's free on YouTube. All

8:26

I can say is you

8:28

search Bloomberg Podcasts and

8:31

you get on the live chat and we never

8:33

know what people are going to talk about. Jess

8:35

Benton's like play Satisfaction. So

8:37

we played the Rolling Stones, Otis

8:39

Redding and Other Worthy's today. Okay,

8:41

fine. And then everybody's all of

8:43

a sudden about the NBA thing.

8:45

God, Danny and Sasar bailed me

8:47

out with chit chat on the

8:49

NBA. So this is Single Best

8:52

Idea from Bloomberg Surveillance. Take

9:10

your business further with the smart

9:12

and flexible American Express Business Gold

9:14

Card. It offers

9:16

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9:18

your business. You can also

9:21

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9:25

at select business merchants. That's

9:29

the powerful backing of American

9:31

Express. Terms

9:33

apply. Learn more at

9:35

americanexpress.com americanexpress.com The

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countdown has begun. From May

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14th to 16th, a thousand

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global leaders will gather in

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