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#FinanceDaily: Jobs Report Live | Apple’s HUGE Announcement
Recorded: June 2, 2023 Duration: 1:28:51Space Recording
Short Summary
Apple is set to launch a new VR headset, marking its first major product line since the Apple Watch. The headset will feature both VR and AR capabilities, showcasing significant technological advancements and innovations in mixed reality. This launch is part of Apple's strategy to enter the market with premium products, potentially integrating AI models into its ecosystem, which could redefine user experiences and drive future adoption.
Full Transcription
I'm kind of excited about Apple's announcement on Monday.
I'm going to hold back and let you guys know, but I mean, you can Google it.
Also, I'm super exhausted from yesterday, too.
Levik Ramoswami was up here.
Said all kinds of crazy shit.
Is Apple finally removing lightning?
Is that it?
No, no.
No, never.
I like lightning now.
It kind of sucked at the time, but.
I mean, it works with it.
The iPad Pro has USBC and the iPhone still has lightning.
That's true.
USBC would be nice.
Yeah.
Super frustrating.
Yeah, USBC would be nice.
But no, that is not the announcement.
It's much bigger.
Interestingly, I was watching, I want to see something.
I want to try something.
All right, I'm going to keep my audio on and I want to see if this plays, if you guys can hear it.
Is there any of that?
I didn't know.
Oh, man, that kind of sucks.
So I can't play something from my phone and have you hear it on this.
Oh, man, that kind of sucks.
No, you'll have to have a mixing board to do that, probably.
Fucking swear.
Are you getting you some walk-up music?
No, no.
It was a conversation that somebody was having with the Amica robot.
And it was very interesting because the words that were chosen were so...
Are you guys familiar with the amical robot?
Mickle, I'm assuming you are.
But Matt and Justin, everybody else,
the amical robot is a robot that not only has AI as part of its speech.
So it's using large language models to respond,
but it's a physical robot that also can...
provide
you know
accompanies that
with facial expressions
it's actually fascinating
and does a pretty good job
awesome
didn't the UAE
give it like
citizenship or something
I don't know about that, maybe.
Only the UAE would do something weird like that.
But, you know, what was interesting about the Amico robot is that they were talking to it about the dangers of AI.
And I thought the response was very interesting.
It wasn't that robots will get so strong that they'll take over humanity.
That was an interesting, you know, aspect of it.
But...
the answer and what like really surprised me was that it said robots will become so strong that it'll take over humanity without humanity even knowing and i was like huh
That does seem like a nightmare scenario that, you know, we as humans will be so distracted by all this abundance that we will have no idea that we're actually under the control of AI.
I can see that.
It makes a lot of sense given what's been happening in this country, but it was.
In some ways, you could argue a lot of major corporations have done that already, and no one knows.
You know what I mean?
Exactly, exactly. And so very fascinating. That was very interesting in terms of, and way too nuanced of a take from a freaking AI already. I think people think that AI's are stupid. But once you start actually diving deep, they're just a reflection of the sinister nature of human beings. And so, but yeah, anyways. I always call them like a super glorified copy paste.
Uh, that's not what I meant, but yes, uh, they're, they're a reflection, not a copy paste.
And that's worse.
I know.
I mean, copy paste obviously is not accurate.
I get that.
No, no, no, no.
But it's harder to describe it.
They have, they have, they will have autonomy at some point.
Uh, and I copy paste assumes no autonomy.
Uh, but, uh, but yes.
I don't, okay, yeah.
Wow.
I don't know if I go that far.
Well, uh, since I study it, I do.
Uh, so, uh,
What I was going to say was that, you know, ultimately, it has been a crazy few weeks in the AI world.
And so I know Michael has a background in this as well.
So I'll let Michael sort of respond if you want.
But what?
I think it'll be better if we just get started. So everybody, thank you so much for joining.
Michael, do you want to say something before we get started? Yeah, I was just going to say something
on the point you were making before about how it could take over and we wouldn't even notice.
I mean, you already see some interesting things, especially with Palantir's work in Ukraine specifically.
I mean, you have AI driving decisions on the back end and,
you really don't know who's making the majority of the calls.
Is it Palantir software or is it the people operating the software?
So I think we're actually a lot closer than that than a lot of people believe.
And Palantir has commercial companies too and works for the government.
So this has likely been going on for a while making decisions.
And even if it's not making the ultimate call, it's heavily influential.
And we know we look at this stuff like it's always right.
So I think we're a lot closer than many people now.
yeah absolutely uh all right uh let's get to let's get to brass stacks i know everybody wants to
talk about uh the jobs report and you know i've i've definitely hinted on apple's huge announcement
uh but uh you know we'll get started with the debt deal i know everybody's tired of the debt deal
but it did get done uh last night and it is having some impact on the market um
you know, Caleb, Mish, any, and David, any initial thoughts on the debt deal?
You know, was there any, there were no surprises, no amendments.
They went right through any comments on the debt deal and why the market is even moving.
I thought the market has already, had already priced in the debt deal.
Then why are we seeing a slight rise?
The market's almost certainly not responding to that news in my opinion.
It's a non-factor, I think, for most people's perception of market activity at this point.
Yeah, Mish, anybody else?
Was there a long tail effect here?
Was there, you know, like, was there any, I mean, the market, pre-market, you know,
we're seeing Dow up 164, which is not super significant.
S&P is up 20.
NASDAQ is up 81 in futures.
Mish, are you seeing any impact of this debt deal on the markets?
I think that the impact came...
during the week in that, I mean, as the end of last week and in the beginning of this week,
as it was obvious, it was going to be signed, so it prevented perhaps any kind of collapse.
But at this point, yeah, I think that's probably not really having much of an impact.
I think the bigger impact that we're going to have right now is going to be whether or not
these levels in some of the weaker areas can sustain.
And we're still going back to, you know, the next big focus will be what's going to happen with the Fed.
Obviously, jobs reports coming out today, but I don't think that's going to have any long-lasting effect.
People read too deeply into these things.
But to me, there was a couple of things that I'm really going to be watching very carefully here.
I mean, one thing is we did talk about some of those basic materials like Chemore.
Remember we talked about that?
The Teflon coding to the chips.
That's rarely $4 off the lows this week.
Those are the kinds of things that will interest me is these basic materials,
some of the real underpinning of what's going to make a potential economy actually continue to at least stop contracting,
let alone stagnate and then grow.
So I would be looking at some of those areas, you know, like copper, some of the classic things.
But I'm really focused now on what happens with the consumer sector.
We had some horrible earnings and some big reactions to that.
But nonetheless, if we look at what happened with the consumer sector through that XRT that I always like to look at, my grandma retail.
Right now, it actually held that key 80-month, that six-to-eight-year business cycle,
showing that it's got a pass on a potential recessionary play.
However, how much will it bounce?
Will it hold?
That's really where I'm going to be looking at.
Hold on.
Hold on.
You don't think a recession is coming, or it's indicating that there may not be
a major recession because I feel like we've heard conflicting information.
So, Mish, this is helpful now.
Not from you, but just in general.
In general, I think that at this point, unless inflation starts to really creep up again for a myriad of reasons that it could.
I think that we may not get that deep recession that people feared.
I'm still going with stagflation.
That's not recession.
That is the economy.
I thought one half of stagflation was recession.
Is that not true?
Well, it's more like stagnation.
And yes, you're supposed to see a weaker labor market.
So it will be a little bit what happens today with the jobs.
Technically, the definition is a higher unemployment and an economy that doesn't grow.
So we already have the economy that doesn't grow, but we don't have necessarily a nagging
unemployment situation yet.
And I think things are a little bit different than the classic definitions, and that's why
it's been so difficult for people to pinpoint it.
Where are we?
That's the big question, and people can sit there and talk about it to their blue in the face.
The point is that right now, with everything that's happened,
Maybe the debt deal helped a little bit, but really basically, everything that's happened, the market is still anticipating that the rate may have actually peaked, if not peaked close to peaking, that there could be some kind of a pass in terms of getting into a deep recession.
And right now, that's a very different situation than an actual problem.
growth pattern and we're seeing it in the small caps and we're seeing in the retail now i'm
i'm going to jumping ahead i got we're going to get to what the fed does in a little bit sorry i just
just want to i don't want to get ahead of ourselves but i i
Let me just finish.
But the thought is if you really want to understand what the next big move in the market,
you've got to look at the retail sector and you've got to look at the small caps.
We all know about the AI and the tech, and the spy is peaking its head over 4,200.
But it's no one's going to go very far if we can't build Russell 2000s over 1,800.
That's really the bottom line.
Break seven.
Awesome.
Have a difference.
Yeah.
Yeah. And for people that are listening, you know, the jobs report will be reporting it here live.
I just updated the – it's coming out in about 18 minutes. And so we have our resident economists, Neely and others.
So as soon as that jobs report does come up, please let us know. You know, so Neely, what will you be looking for today?
For the monthly –
revisions report.
That's actually the big story right now is yesterday,
the Bureau of Labor Statistics,
which houses a lot of our government statistics,
particularly around labor.
Yesterday, they actually did their revision to the fourth quarter
and,
2022 real hourly compensation.
And it was a banger of a release.
So I think heading into even today's report,
there's a lot of people who are like,
is this data even good data?
I'll give you just a quick.
There's a gazillion numbers on yesterday's revision release
on labor productivity.
But the one that everyone's talking about
is the non-farm business,
which is like the highest...
you know,
largest,
widest set of the labor data,
the real hourly compensation, they revised it from being up 0.7%.
That's where it was published before for Q4.
It actually came in revised down 4.7%.
So it is a huge revision to the downward.
And I think a lot of people are like, hey, if wages weren't really increasing inflation, dot, dot, dot, what is?
Right.
So it's an interesting question.
I think it's going to put a little bit of...
like a little bit of shade, even on today's release, whatever it is.
But just keep in mind the ADP, which is another, it's a private sector view of not just a
government data set, but private sector view.
They reported earlier this week.
They reported yesterday.
They were at 278,000 significantly higher than the expectations for 180,000 on new hires,
new employed.
The estimate for today is 190,000.
We and others expect that number to probably be bested,
looking at some of the ADP numbers and seeing how claims data remains fairly low.
And so we'll see.
We'll report them what it is, but I would say yesterday's revision on productivity is what a lot of people are a buzz about.
Yeah, it seems like they can't get it right.
But it's also, I'm assuming it's also driven by other factors.
David, what are you looking at today?
Same thing.
Same thing to see.
The focus is back now on the Fed and whether we're skipping or pausing for good
or if they're actually going to raise rates again in June.
I'm actually still in the camp that they will raise rates one more time before.
before they're finally done.
And so I want to see if the jobs report actually leads in that direction.
I think everybody expects the CPI to drop.
So that shouldn't be a surprise anyway that it's falling.
But it's the jobs number.
I mean, if we keep getting like historically low unemployment rate,
then I think we might have one more left before they're finally done.
Yeah, Mish, so going back to the now the Fed, Mish, I wanted to get your thoughts on it, because David just said that he thinks that they're going to hike one more time, likely a 25 basis point hike.
based on this jobs report,
Mish, you said that you think that they're going to skip potentially.
We'd love to get your details there.
Well, of course, this is just conjecture, right?
What do we really know?
But my conjecture based on what I'm seeing is,
unless this jobs report is so much stronger
than what everybody anticipated,
I actually, my gut, and this is just gut,
so let's call it what it is,
is that they might skip.
And I think that it would be somewhat of an intelligent move on their part based on the lack of credibility.
I saw a statistic a few weeks ago that the credibility of the Fed has gone down to like 34 or 36 percent.
So people don't even really believe that the Fed knows what they're doing.
If I were sitting there in the Fed going,
well, is it really going to make a difference if we raise or just pause or skip
right this month and let's not even get in the news until we have more information?
That's what I would do.
So I'm just basing it on my way of logic.
But then again, my way of logic, I would have been raising way long before they started
because it was so obvious that inflation was going to get out of control.
So if they're hearing me,
out there somewhere if my little vibe is getting through the universe.
I'm going to go with Skip right now,
but I wouldn't be shocked if they actually raised another quarter percent
because the PCE numbers are still alarmingly high,
especially they adjusted it, right, this week?
And if you look at the chart,
on the PCE, it's right below the peaks that it started at between 1980 and 84.
We're right there.
So if we can't get a downturn in inflation, even if they skip this time, they may have to come back.
Remember, and then raise.
Remember, they are reactive.
They are not proactive.
Right.
Yeah, no, I agree with that. Caleb, do you have a response?
Yeah, the last thing the Fed's going to do is skip, guys.
You know, they've been very clear on their intention not to make the mistakes of Arthur
Burns in the mid-70s and not have clear guidance about what the Fed is likely to do, so on and so forth.
And so if the Fed...
essentially pauses on one meeting, the market is immediately going to be expecting no more rate
hikes. And the Fed can't betray that trust that it's already been developing with the market.
So in my opinion, they're either pausing or hiking. I'm 100% in the camp that they're going to
hike just based simply on what the three month and the six month treasury yields are telling us.
Both are basically right at 5.4. The six month is a little bit higher at 5.45. And
And so with the effective federal funds rate right now at 5.08% the bomb market is giving
the Fed the green light to hike at least one more time.
So they're almost pricing in two full rate hikes at this point on a six month forward
looking basis.
So that's what we should all be pricing in.
That's what we should all be expecting.
This has been the relationship I've been pounding the table on since December telling everyone disregard what the two years telling us the two year is no longer effective.
This lay into the credit cycle.
This late into the tightening cycle.
And we need to be focused specifically on the three month and the six month treasury yields.
Those are the arbiters of truth.
And they've guided me perfectly navigating monetary policy over the course of last year and a half.
Yeah, Mish, did your response to that before we go to David?
But the Fed Puds rate and the inflation rate are somewhat matched, which they are right now, that also can give a reason for the Fed to say, well, we can wait.
And that's kind of why I'm feeling that way, that they may wait.
And...
And listen, you could be totally right what you just said.
I wouldn't be surprised by anything, but I will be more surprised if they raise at this point than if they pause.
And that's why I'm thinking they may just say, the heck of it with it.
We're not going to do anything right now.
We're not even going to meet.
We're just going to wait.
It would be unusual.
I can't remember the last time the Fed skipped a meeting.
That doesn't mean that it hasn't happened recently.
It's not in my brain right now.
And in terms of the relation...
The last time they did something like that, just to be clear, because they have,
is in the rate hike cycle from 2015 to 2018.
But what they did is they started that hiking cycle telling the markets,
we are going to hike 0.25% every other meeting for the foreseeable future.
And that was the communication and forward guidance that they gave.
I see. Okay.
Yeah, they were doing it every quarterly meeting at that.
They were doing it only March, September, June, December.
Right.
Every other meeting accounts for basically every quarter.
Right. But okay, so at the end of that cycle, at the end of 2018, that was the whole tantrum that the market had when they said that we're going to start tightening. So you're saying they were tightening up until that point?
Yeah, the Fed was raising rates starting in 2015 every other meeting through 2018.
And what they started to do in 2018, which really put the markets over the edge, is they
officially started reducing their balance sheet.
So they were raising rates while keeping their balance sheet basically flat.
But then they actually went out and started conducting outright, basically QT or balance sheet runoff what we have right now in 2018.
And that's what put the markets over the edge because they really started withdrawing liquidity as they started reducing the size of their balance sheet in 2018.
But they started raising rates in 2015.
Okay. Well, again, let's just look at where we are right now.
We're going into an election year.
The market really just got a pass because of all these different reasons that we just talked about.
You know, there's still a sort of a risk on which would support the reasons for the potential raise.
But I just, like I said, this is just the gut feeling.
You know, use it for what you, however it means.
My gut feeling right now, and it's been pretty accurate, you know, just like a few weeks ago, the debt ceiling.
I was like, I'm not worried about it, is just...
they're going to take a breath right here.
And then they may come back or they may have to.
Because a lot of the pricing of the commodities have come down a lot.
And they may just look at that and say, oh, we're okay.
We've already beat inflation.
I've heard Fed members say that.
So I'd be prepared for everything and anything.
That's why I keep focusing on the areas that I've talked about before, which is basically the small caps and the retail sector.
They've got a pass right now, but they're certainly not impressing me.
And any kind of rate hike here, I think, would really, really be detrimental to those two sectors in particular.
Right.
Yeah, David, wanted to also understand how you're playing China right now.
There's been a lot of news recently around China struggling out the gate and it continues to struggle.
There's now some talk around access to capital and people pulling their capital out of China.
What are your thoughts, David, on that?
And as I asked that question, I do want to highlight our...
I don't want to call it stupid because there are no stupid comments, but stupid comment of the day.
You, quote unquote, experts need to wake up that America is screwed.
Bricks will destroy the petro dollar.
The whole world can see it.
All right.
I had to say that because it was so ridiculous that I had to respond to it.
David, go ahead.
Do you think that time is rising still?
What's interesting is there's a little bit of a divergence between what's going on in China, what's going on in South Korea.
Usually those two are linked together, and South Korea is actually doing really well a lot closer to its 52-week highs if you look at like an EWY-E-TF than China is.
And so that is a little interesting divergence that you wonder which direction will that divergence return?
repair itself. From a broader risk appetite standpoint, I think South Korea is a pretty decent
proxy for kind of global growth expectations. You know, if that is a price, if that's kind of
showing us where, you know, where global economic growth is starting to pick back up again,
then yeah, I think, I mean, China had a really good day yesterday. I think,
I think it would rebound from being as oversold as it is already.
See, I mean, that's the, it continues to be the difference between China and, say, like, U.S. equities.
Is China is dramatically more oversold already than any U.S. equity market is, except for maybe the Russell, which has been more different.
more than the large-cap indexes, of course.
So I think China would be a decent play if we continue to be bullish.
I just am not in that camp, though, of the markets.
Of us, avoiding recession in global economics rallying back up again.
Yeah.
Going back one more comment on the Fed issue, the Fed's M-O has always been to tighten too much.
They've always, except for the 70s, which was a failure, an admitted failure, even by Burns himself, which is why Volker ramped it up to 20%.
The feds' MO has always been to ramp up too much.
Their MO is not to stop and wait and see how the data comes in.
They go too far.
That's just what they do.
That's how you beat demand, which is what they're trying to do is lower demand.
You have, you know, again, unemployment at historic multi-decade lows and housing still pretty
pretty darn strong and then sCP 500 near 52 week highs you haven't really done very much damage
to you know aggregate demand so to speak yeah it seems like job market's still hot inflation is still
warmer than we want uh and it seems like the markets are doing well so as anything that the fed
has done has anything worked
I mean, the question really is, is there something that, yeah, Caleb, go ahead.
You know, is something the Fed can do to actually break the spirit a little bit so that we can get over this period?
As far as I'm concerned, first of all, monetary policy operates with a long and variable lag, right?
That's a classic quote from Milton Freeman.
So we really need to contextualize where we are right now within the tightening cycle.
We are 15 months into a tightening cycle, which is largely considered the fastest and largest rate hike.
cycle in modern U.S. history, right, excluding what took place under Paul Volcker.
And in a lot of ways, the rate of change of monetary policy in 2022 was significantly
faster and stronger than what happened in the late 70s and the early 80s.
So that's first and foremost.
And so I think, you know, the Fed's policy decisions have worked up until this point, even
though, you know, I'd agree with what Mish said earlier that the Fed was too late.
But it's easy to call that with hindsight being 2020.
Right. And so we can look at that today and say, oh, well, the Fed was too late to raise rates. I mean, 100% right. But in the moment, it's hard to call. Like, think back to where we were in June of last year, getting a 9.1% print on headline inflation on a year over year basis. Just seeing this thing rocket ship higher and higher over the course of the previous several months.
And so at that point, with momentum at inflation's back, everyone thought inflation was going to keep going higher.
And so I think we need to contextualize the progress that we've made, considering that the headline inflation rate, what is it, 4.8% on a year-over-year basis down from 4.9 the prior month or somewhere around there, right?
And so...
We need to contextualize where that number is given the lag effects of shelter, right?
So if we swap out the shelter component of inflation, you can look at what the guys, my friends over at Wisdomtree have done.
They basically have an alternative metric of headline CPI that takes out the shelter component and swaps in some private market data,
whether it's the Zillow home price index, the apartments list, whatever it is.
I'm not quite sure.
But that number right now for headline inflation based on their model is at 2.8%.
that's excuse my language, but that's fucking great, right?
That's way better than 9.1 from last year.
And so this is very vital to understand.
And so I think, you know, four to six months from now, we're going to be talking seriously about the threat of deflation because of what the Fed has already done, right?
Look at M2 on a year-over-year basis.
Look at deposits on a year-over-year basis.
Both are contracting for the first time in the history of the data series
or at all-time low levels of contraction.
And then look at reserves, also doing the same thing.
This is the classic definition of inflation,
which is a growth of the money supply,
which therefore ripples into consumer prices, services, the whole nine yards, right?
And so if we look at the baseline metrics of what drives inflation,
All of these figures are already pointing towards deflation.
And so we just need to see that ripple through based on the lag effects that we just discussed.
And so I think the Fed, their policy has worked.
And we also need to be cognizant of the fact that it hasn't even had its full effect yet.
Right?
Because we're not even one year removed from the very first 0.75% rate hike, right?
Because the first rate rate...
One pushback is the stickier parts of the inflation picture, right?
Like we've seen that rents have been sticky and even risen slightly.
We've seen that wages, I mean, Neely made a really good point,
which is they keep adjusting them down.
But, you know, wages still have at least maintained, if not risen slightly.
You know, we continue to see jobs and employment remain sticky.
Caleb, couldn't you say that it's not going to be a broad-based difference on inflation.
And in fact, it'll be specific to specific components.
And some components will remain sticky and we'll move the whole thing up.
So I'd keep it up.
I'd still push back on this, right?
Because if we look at headline CPI and we look at services excluding rent of shelter, right?
This is already basically at 5%.
And that's down from over 8% this time last year, not even, right?
In July and August of last year.
So this has already come down considerably looking at services X shelter.
So if we're already not considering what's happening in housing, sure, there are some aspects that
have been a little bit stickier, but services is the economy in a lot of ways.
Look at energy prices year over year down 30%.
Look at what's happening in the used and, uh,
new car markets, those are outright in deflation. Food is decelerating massively, apparel,
decelerating, maybe even in outright deflate, right? So all of these core components of consumer
behavior are already trending perfectly in the right direction, and they're falling at an extremely
fast pace, right? So this is the key thing that keep in mind. So sure, core PCE, like, I understand
that that's the Fed's preferred way.
to measure inflation dynamics because it does kind of give a broad general trend of things.
But I'll push back on that even more, right?
Like, look at trimmed mean CPI.
This is another great metric to measure broad-based inflationary pressures.
That's been coming down very quickly.
I will acknowledge, however, that something like median CPI has been very sticky.
So I, however, I expect that to come down very considerably over the next three reports.
So I'll cap my thoughts off there.
Let's do it.
All right.
It looks like...
The headline number is 339, so 39,000.
That is up from 253,000 in April.
And it is significantly higher.
than 180,000. So, you know, higher for longer is what it's feeling like.
Yeah, 180,000 was it? Yeah. So 339,000 versus 380,000 or 180,000 expectations. So this is,
this is two months in a row we've had where ADP is signaled and they've signaled correctly.
They have not always been in sync, but we now have two consecutive months where ADPs actually
looks like it's grooving and moving. Let's look at some of the other key headline numbers.
On the unemployment rate,
It looks like 3.7%.
Our theory is coming true.
Donish, this feels good.
Okay, so 3.7% last month it was 3.4.
The estimate was 3.5.
So you've had a significant increase over there on the unemployment rate,
even though we have more people employed.
We'll get to that in a minute.
And then some other key headline numbers that folks will look at
will be the average hourly earnings for all employees.
average hourly earnings for all employees was estimated to be up 0.3%.
That's a month-over-month sort of number.
It looks like it's consistent at 0.3%.
Last month it was 0.5.
So it's in line with estimate on average hourly earnings overall.
If you look at that on a year-of-year basis, last month it was up 4.4.
The estimate was 4.5.
It's 4.3.
So I'm wondering if they've revised because of the revisions.
So those are some of the headline numbers.
I can pause there and I'll be digging for another couple cool anecdotes.
Yeah, no, that's super helpful.
Caleb.
Bad timing on your comment, I guess.
I'm just kidding.
Sorry.
What do you think about these numbers?
I mean, way overshooting.
339 versus 180.
I know that they're likely going to get it.
These ones don't get adjusted.
That's my understanding.
I never, I didn't make any comments about the labor market this morning.
So, um.
No, I know that.
But, but kind of going back to the point around what does the Fed actually use to serve
policy, right?
They do take this into account, don't they?
It's one of their, half of their mandate.
Yeah, of course, but I would say with respect to inflation, I mean, look how resilient, I mean, the words that I've been using to describe the labor market are resilient and dynamic.
This report continues to echo that. The Joltz report from earlier this week echoes that. The ADP report from yesterday continues to echo that.
And so despite the resilient and dynamic nature of the labor market,
which has been much stronger for way longer than anyone expected, we've still seen inflation come down considerably.
And so at the same time, I need to dive into the data.
Neely, maybe you could tell me what the average nominal wage growth was on a year-over-year basis.
But that figure has been coming down very steadily and consistently as well.
So, you know, I...
I guess just from a position of conjecture,
I would say that that's probably come down again as well.
And now we're seeing the unemployment rate go up.
So this is all fitting perfectly within the Fed's model.
We're seeing normalization of wages.
We're seeing the unemployment rate tick up a little bit higher, but we're seeing still good health.
The Fed has no intention of destroying the labor market.
They've never come out and said that.
Have they wanted to see it becoming softer?
Yes, for sure.
But softer from historically tight and strong standards does not mean a destruction of the labor market.
That is by far not what they're trying to do.
Agreed.
I think that's a great point.
Actually, technically.
It's one of the two mandates that they care about.
So, no, you're absolutely right.
The one thing I will say is,
while they're not trying to do that,
if inflation data comes in,
hot, hotter. And I would say it is resilient and dynamic, but some would say that it is
more resilient and more dynamic potentially than what was expected, given all, like, as you
said, a historic series of rate hikes. And maybe it just has to flush out. You might be
completely right. That's the freaking problem, is that it takes so long. Mikkel, you are saying?
Yeah, no, I think that's a great point. I mean, it seems like everyone is just thinking that the Federal Reserve has to jack unemployment up to 10% because that's what's happened in the past to kill inflation. But based on what Caleb was saying before, and I think it's so funny, the Federal Reserve was saying as soon as inflation started going up, that it was transitory. And I think looking back in five to 10 years from now, we're going to look at this inflation.
period and it's really just going to be a spike on the charts and we're going to look back and say, oh, wait, they were right. It was transitory. So I think it's kind of funny that they called it transitory. Halfway through, they pivoted and saying now it's more sticky. But then when we look back on it, I mean, at the end of the day, it rocketed up and now it's spiking back down and
I don't really know how much quicker we could have had inflation go up to, what,
8, 9%, and then come all the way back down to 4.
I mean, relatively compared to how fast these cycles move, it has moved pretty quickly.
That's because they raised rates so much, so fast,
that it's going to bring it back down pretty rapidly when you raise rates that much that fast.
Yeah, it's just going to have a lack.
We all are so much.
Yeah.
Go ahead, get it.
Just really quick, I didn't mean to interrupt.
I just wanted to confirm something that I had said,
which is that the average hourly earnings,
this is a nominal figure, came in at 4.3% on a year-over-year basis.
That's down from 4.4% in the prior month.
And so, again, we are seeing a normalization rate
of average hourly earnings.
And so if you kind of buy into the whole wage price spiral dynamic,
I've done a lot of research on the impact of the quits rate,
all of this stuff is good for disinflation, right?
So expect lower inflationary pressures going forward.
You know, there's a part of me that I know that you guys are thinking about deflation as being a major risk.
I think, again, who the hell knows, right?
Like the market, it clearly hasn't flushed out yet.
But I wonder if there is a world in which there could be a soft landing.
For people that are listening, you know, before I go to Mish, you know, where do you sit in the...
inflation conversation.
Is the lag really showing its ugly face right now?
Or is there something else going on?
You know, as people know, we appreciate comments.
And often, if the comments are compelling,
we'll put them up in the nest and we'll bring you up.
But, you know, this is a...
crowdsourced. This is what makes this incredible. So please go in the bottom right, put in some comments, and we will bring you up. And I always talk about Mikkel being like the best example ever of that. Mish, go ahead.
Well, to me, I mean, I don't mean to be stubborn about it, but these job report. You stubborn?
I'm not, actually. I'm extremely open-minded. I just have a certain ability sometimes to be able to see ahead. And then if I start to waver from that, then I screw up with my own trading. And that's, you know, that's the dilemma of thinking one thing and having an opinion and then being able to apply it to actually making money, right? I mean, that's really the bottom line of why we're all here, I'm assuming.
So based on that, what we just saw, actually to me, only makes me feel stronger about them skipping
because the job market being strong like that, if they sit back, they can, and I just tweeted this,
they could high five each other and say, hey, dudes, you know, we raise, we raise, we've cut back
inflation a lot. Look at the jobs market. We didn't kill the economy. Soft landing. Hey, yo, what's up?
You know, and I think that's kind of.
where they're going to go right now.
But that doesn't mean that's where it's going to stay.
Because in this, any kind of complacency here, as you just pointed out,
Inflation doesn't necessarily mean it's gone.
And there's one other factor in inflation.
First of all, we heard little rumblings of Russia today about cutting back again any exports on grain from the Ukraine.
They're exporting cheap oil, but you got OPEC plus meeting this weekend.
And they may really want to cut back the supply.
So we could have a little bit more of an oil shock.
In terms of China, I heard you ask about China.
China, I thought,
was so overdone in terms of how much those stocks and the ETF, the country ETF, has fallen.
It was such a great buy opportunity, and now it's up another close to 3% today.
I think people underestimate that China doesn't think day by day.
They think decade by decade.
And they have a long-range plan, and I don't believe that they're going away anytime soon,
which means in the short term, they're going to be consuming more.
And all these reasons...
of why anything could spark another new round of inflation,
well, then the Fed will be back and, you know,
with their tails between their legs.
That's kind of what I'm seeing.
That's what the whole...
escalation environment that keeps
jumping into my brain really means.
And so that's why I think...
Yeah, it's interesting.
It's, you know, we have two very different
worldviews being presented here.
You know, I want to hear from people.
People go into the comments and tell me,
do you agree with the potential...
you know, the lag actually affecting and we haven't seen it flushed out yet?
Or do you think that inflation is going to rear its ugly head?
Patrick, thank you for joining us.
I put your tweets up in the nest.
I wanted you to help Michelle here.
Make this with data.
Go ahead.
How do you do the nest?
Is that something?
Oh, you can do it directly, by the way.
But is it on my phone or I could do it through my desktop PC?
Yeah, through your phone, my friend.
But go ahead.
Tell us why we're going to see inflation because I saw, I read your tweets.
And again, I'll, just so you know, as soon as you explain it, I will go to Caleb and David for the other side of the conversation.
So go ahead, Patrick.
Okay.
It's super clear.
Just look at the yields, 10-year yields, 30-year yields.
They have broken out of a 40-year, 50-year downtrend.
They've broken out.
So now we've had the violent false breakdown to the downside in yields back in March,
whenever oil went negative.
It shot up through straight.
straight through that 40-year channel to the other side.
And now it's bull flagging above important resistance turn support.
Now this is a classic TA halfway flag.
It could take months.
And this is where people are looking too close to the steering wheel.
They're looking at CPI.
The numbers going down.
But that stuff's lagging.
Just look at the yields.
Look at the oil chart doing a classic pullback to its critical 10, 20 year breakout line.
And until that really falls down, if that support holds, then people have to hold on because that thing is going to rocket upwards, man.
We're not a – people have to zoom out to 1960s.
Like, we're back in 2000.
a bowl run for yields.
Yields have been destroying everything.
If you divide anything by yields,
we've been outperforming everything for a long time.
And until that changes,
then that's the cycle we're in, guys.
So short term, yes, sideways move.
People get confused.
But as soon as you zoom out,
it's clear that we're going upwards.
yeah caleb you know historical historical data does provide some context but what are your thoughts
on patrick's analysis yeah so it's important to contextualize nominal treasury yields are more so indicative
of economic growth and inflation and monetary policy for sure however if you're going to make
that point i think it's more appropriate to be looking at break even inflation rates and
and so on and so forth.
And those are basically at year-to-date lows.
They continue to come in lower and lower.
And so, you know, the market is not necessarily pricing in an inflationary decade or anything like this.
The market is simply pricing in stronger economic activity and more fed tightness, which is intended to break the back of inflation.
And so if you want to talk commodities, the Goldman Sachs Commodity Index is down 25% year over year.
If you look at the average price of crude oil for the month of May on a year over year basis, it was down 34.5%.
From this perspective, the things that you had just referenced in my view and in my model are continuing to show significant disinflationary pressures in the months ahead.
Yes, on that timeframe, short term.
Look back in 2001, when the U.S. equities broke down versus a producer price index, there was a, it's like a tsunami.
They break down, and after that crude oil prices in all those recession fears.
There was the same, same type of analog back test back in 2001 in crude oil, where after bottoming, and I think in 98, 99, rocketed upwards.
classic back test of a huge 20-year breakout line.
And it's happening all over again.
And after that, crude oil went on a run from 2001 all the way to 2008.
And then after that, after it broke down back in 2011-12.
But what's more important, it's inflation, but it's also the US dollar.
And I put just another chart.
Look at this chart, man.
I know if you can nest it for me.
It's my purchasing power chart.
Let me see if I could have it right here.
It's the U.S. purchasing power.
I have a chart that's from the 1918, 1980, guys.
Over a building it up.
The purchasing power, everybody knows it's a running gag, right?
It starts top left, goes all the way bottom right.
We know the US dollar, it cannot purchase as much as it can.
That's fine.
But the market, what it reacts to is changes in momentum, accelerations or decelerations in the destruction of purchasing power.
And essentially, destruction of purchasing power is the US dollar strength or weakness versus other currencies.
um price adjusted for inflation that's your purchasing power and look at that we have have a 10 year
rate of change huge topping pattern since the 1990s the purchasing power has trying to be
reflate always negative the 10 year rate of change and purchasing power always still negative but it
a clear, clear, clear breakdown in rate of change for the purchasing power.
And when these cycles happen, when the purchasing power takes a lump,
then growth stocks, they go sideways, commodities outperform, oil outperforms.
But this, again, it's look at my time frame, guys.
I can't argue if somebody says oil went down 20, 30%, but when I zoom out, for me, that's
Oil did not go down sufficiently enough to override the bullish breakout it had.
It has to go down way more for way longer to override the bullish technical setups that are unfolding.
So talking about bullish...
We are bullish on AI, and we're bullish on Web 3, which is why IBC incubates and accelerates
AI and Web 3 companies.
That's one of our sponsors, partners with VCs and funds to work with their portfolio companies
in return for equity and zero cash.
They've interested via Mario, they're also doing Shark Tank style pitches.
All right, we're done with this today.
How did people like that?
All right, we're going to keep going.
I mean, just to your point, Donish, isn't AI long-term deflationary and
You know, I don't know anyone who can look at, you know, a hundred year chart and figure out, okay, you know, this is what the trend is going to be going forward.
You know, in the situation we have now, you have a supercontango in copper.
What supercontango means is that we have a huge oversupply relative to what the construction expectations were in China.
And the China reopening has been completely lackluster.
In the U.S., you know, the consumption, you know, globally the consumption of oil hasn't accelerated as much as anyone thought it would.
And, you know, when you look at goods inflation, you track everything on true inflation, you know, even outside of services, everything has been heading downwards.
Whether it's, you know, commodities or, you know, in the U.K.
Look at their most recent...
agriculture related inflation or in the U.S.
You look at rents and you look at housing prices.
You know, it is, I don't know how anyone could say like the next 10 years
are going to be more inflationary than this than the last 10 years,
especially as household formation is slowing down.
We're having fewer consumers and the birth rates are at like all time lows.
So, I mean, just, I'm just thinking about it.
I mean, everyone has biases.
So if you're.
Bitcoin bowl or a gold bull, you know, you're going to have a specific view.
But, you know, there are a lot of deflationary forces right now in the economy that I think people are not really thinking about.
Even in the U.S., all the things people are talking about last year, eggs, lumber, you know, all those idiosyncratic things.
And, I mean, looking at the container ship rate for a 20-foot container from Guangdong, China to the port of L.A.
That container price was driving up prices.
It was literally $14,000 a container.
And today, it's $1,800 a container.
The price of transportation is down 90%.
Hey, Jay, real quick on that point, do you track the Fed's global supply chain pressures index?
Because the last I looked, I think it was maybe three or four weeks ago, it was negative one standard deviation below the average, meaning that it's extremely easy in terms of supply chain pressures.
I was wondering if you could add any commentary to that.
Absolutely. I do look at that. I don't follow it closely, but what I do follow more closely is container ship rates. And I have not seen container ship rates this low since 2019. And I think that they're headed to the 2015-16 lows when there's an excess supply of containers.
I want to make sure to get this in there. Because what on earth is driving that? Because we hear about how the supply chain's tightening. It hasn't cut up yet. It's a mess. Less trade.
Less trade. We've gone from an excess goods market during COVID. There's an excess demand for goods because everyone is at home. They're all buying things from Amazon. And today, people have...
don't have the same savings in budgets.
And also, they're spending more on services than goods.
So the amount that people are buying, and I mean, you saw that in a lot of e-commerce sales, look at Wayfarer and in other examples, overstock, even Amazon, there's just less demand for goods.
So on top of this, this is really, really interesting, because on top of this, we have, like we talked about a couple weeks ago, all the manufacturers starting to onshore things.
So things are going to, these containers are going to get even cheaper, basically, over the long term.
I have heard, like on earnings calls, you see it in almost every single importer of goods that the container ship rates are actually beneficial to gross margins.
It's one of the reasons why earnings have been more stable because gross margins have benefited from transportation rates.
You know, going forward, that benefit, you know, two quarters from now, well, people will have realized it.
But it's actually been good for corporate earnings.
That's how much, you know, that's how much transportation rates have fallen.
Yeah, I mean, Patrick, I'll let you respond to that.
And then I did want to jump into Apple since that's going to be moving the markets like crazy next week.
Go ahead, Patrick.
Yeah, well, I just want to add that this is the trap of trying to find a reason why something moved because, oh, the market forgot about this.
Oh, I covered that.
But then this happened.
Guys, this is the beauty of price charts.
Your thesis, his thesis, everybody's thesis is in the actual price chart.
So remember, I'll just bring back 2019, June, gold was breaking out of a huge base.
Inflation was actually breaking down.
I'll tell you this, gold actually breaks out when inflation breaks down after run-up five times or six times out of 10.
So if you're not looking at the charts and you're always looking at the narrative, well, gold can't go up.
It's a false breakdown.
It's a false breakout.
When when you look at the charts, the aggregate, the big money or whoever, the aggregate of all market participants, they're placing their bets in a direction before the news comes out.
They're discounting the probabilities of future events happening.
So when people say, oh, well, all these fundamental metrics are rock bottom, it's terrible.
Well, the market's already looking at the recovery.
It's already looking.
Like silver or some type of commodities usually...
They usually bottom in the abyss of a recession.
When everybody thinks, oh, it's the worst.
It's going down, down, down.
It bottoms.
Same thing for markets.
When the U.S. initial claims sky rockets, everybody thinks it's the end of the world.
Everybody's bearish.
It's the end.
The lockdowns, guess what?
The markets bottom and they rock it upwards.
Patrick, the markets know that COVID was coming?
Yes, well, of course.
Well, it was, they were already slowing down.
Gold was breaking out.
Look, COVID didn't.
Come on, man. Patrick.
Hey, look, the market.
This is a good example of, like, I know this is the, this is like your, your, your, your
raison d'etra, but, you know, the markets often miss really major events.
The point that's being made is that people believe that not only is AI going to be inflationary,
that a lot of the things that are happening are not being priced in.
But Patrick, I'll let you respond.
Sorry.
It's okay.
Look, if you zoom out to the monthly chart, you can't even, COVID, the gold was already
an up trend.
You cannot even see it's whatever, how many percentage drops it did.
in the in its uptrend.
You can't even see it on the gold chart.
It started breaking out and moved up.
COVID was there.
Whatever happened, it continued.
You could have had a COVID in a,
the embryonic, let's say SPX was just breaking out
versus produce price index.
Let's say we're back in 2012.
We could have COVID and
SPX might not even go down that much because the capital flows,
they're already pricing long-term movement and expansion of PEs and all that stuff.
So it's all about the timing.
And you got these short-term events, you have to zoom out.
And usually they, you won't even see them on a yearly chart.
So also, poor what Patrick said, just to play devil's advocate, I will say that I was trading in 2019 and we were estimating we are already entering a recession.
So it, prior to COVID happening.
you know, there was an outlook that the Fed, you know, after the whole market crash of, you know, of 20 in 2018 because of, I mean, look at what happened during QT. Look at what happened like Chinese tech stocks were down like 40 percent. U.S. tech stocks were getting clobbered.
the Fed all the market already had a view that the Fed had tightened a lot and that it would be cutting prior to COVID even happening.
So I would say that might have been reflected in gold already, but I don't know if gold at that time.
Nobody in the gold was predicting COVID.
Yeah.
exactly that was actually going to be my point which was there were some changes but they
may not have been related to COVID unless Patrick you're telling me that some some people had
access to some people that own gold had access to information about Wuhan go ahead no no no you're
right okay I misunderstood yes I'm not saying it predicted I'm saying it's a nice news narrative
to fit in why the price action dropped on a whole bunch of stuff but when you zoom out that that drop it
it didn't override the capital flows that were already getting priced in by the big money over long periods of time.
Yes.
So COVID is just a nice clickbait story.
The markets go down.
There's COVID and people attribute that.
But when you zoom out, you see that it practically had no impact.
And the trend was the trend on the longer timeframes.
Can I jump in here?
Yeah, really quickly, Mish, because I was trying to get everybody to move on to Apple.
But I'm sorry, I do want to hear them.
Go ahead, Mish.
Okay.
Just one point. In December 2019, I was interviewed by Stocks and Commodies magazine, and so it's in print. And in it, I said that the ratio between stocks and commodities were at a hundred year low, which was not sustainable, and that
something was, some crisis was going to happen that was going to bring that ratio in,
particularly since producers had been underproducing for so long because of the cheap
costs of goods. And then two months later was COVID. Does that mean that I predicted COVID?
Absolutely not. I wouldn't even suggest that. But it was obvious based on the charts and based on
this historical ratios. And that's exactly what Patrick Point is, is often you don't know
necessarily what's going to happen, but you can see that things are either awry or in the
opposite case, that things have actually bottomed out, just like we saw coming into this week,
based on all those risk factors.
And that's the beauty of having a broad spectrum or a hybrid approach of understanding what's going on in the world, but not getting too focused on it and being able to see what price charts are telling you.
That's all I want to.
For all of our listeners who wear tinfoil hats every morning.
This does not mean that China was doing anything in the markets.
This does not mean, I have to say this, Mish, because you don't even know.
This is Twitter, okay?
And alongside all of these comments around China, I just want to be very clear for people.
You know, feel free to go into comments and tell us your tinfoil hat ideas.
But I'm telling you, this does not mean that there was...
movement from China in advance of some sort of release.
Please, God, please do not believe this.
Or if you do, please find some evidence so that we can all talk about it.
It will make our mornings much more entertaining.
All right, Mish, we're going to move on.
Thank you so much, everybody, for weighing in on these points.
I did want to move on to probably the most Apple-type announcement ever.
Okay.
I'm starting to think this is sarcasm now that Apple is like announcing something lame.
No, they're not.
They're not announcing anything lame at all, actually.
I would say it's the complete opposite.
What I meant by the Apple-type announcement is that Apple has a very interesting approach.
And the reason why it's so important for our finance shows, and it's not just for a tech show,
the reason why it's important is because Apple represents such a big part of the index.
And so...
for for people that are listening you know just like we saw nvydia raise everybody you're
going to see apple potentially raise or drop everybody depending on how the market reacts to this news
Again, it's not just some rumor.
This has been pretty well established,
not only from people at Apple,
but also from other news sources who have, you know, weighed in on this.
And what I was going to say was Apple had this really interesting approach.
What Apple does more than anybody else is that, you know,
when you think of the hype cycle,
Apple always waits for a very specific...
position specific moment in the hype cycle.
They never come in super early.
you know, they never get to the peak.
They always come in at the trough of disillusionment.
That is their move.
That's how they do it.
It is always incredibly interesting the way they go about it.
And so, you know, the trough of disillusionment is when Apple comes in.
And often their release has a specific component to it that allows you to be able to really, you know,
enjoy something, an experience that you haven't been able to enjoy
or the average consumer hasn't.
A good example of that is the iPhone, right?
Quote unquote, smartphones had been taking off.
They got to the top.
And then we saw them kind of revert,
especially with things like the Razor and other flip phones.
And then suddenly Apple comes in and completely annihilates all of these quirky keyboards.
We saw it with the Apple Watch.
We had wearables.
Yeah.
that had taken off.
They got to the peak.
They came down.
And then Apple Watch came.
And everybody talks shit about Apple Watch.
But now, I bet you if we did a poll, about 50% to 60% of people here actually have Apple Watches.
And so with VR...
And, you know, with VR, we have seen that the peak, the crazy days of VR are behind us.
We have seen that the hype is now gone.
But the true believers are still using it.
As an example, I use VR every single day.
And I've been a believer in VR.
I still think that there needs to be better hardware.
So the announcement is coming this Monday.
Apple is expected to announce his first new major product line since the Apple Watch in 2014.
It is launching a new VR headset and, you know, no other company...
in the world has a better track record than Apple
at taking a technology from just being something that,
you know, a few enthusiasts use to the broader audience.
And, you know, the, the announcement is supposed to happen in WWDC.
The Apple has already made vague references to it.
So the headset itself, according to reports...
This is why we're going to be watching the WWDC on Monday.
We'll feature high-deaf screens in front of the user's eyes like everybody else.
There will be the most important part about it, and I want to bring this up, is it's not just VR.
It is a AR VR headset.
Similar to what Meta has done,
and Meta Quest 3 was just released last week,
so very interesting.
But it's both a VR headset and an AR headset.
You can interact with the real world
through high-powered cams,
mounted on the device.
No details about the cameras,
about the pancake lenses,
I'm assuming it's pancake lenses.
No information specifics there.
We do have somebody that works with Apple,
but he has refused to come up.
because I'm sure he is on, you know, he's under NDA.
I'd love to have him come up because, you know,
how is a $3,000 price going to compare to it to $299 for Quest 2 and $499 for Quest 3?
Who outside of, you know, wealthy tech and finance people, entrepreneurs, doctors
are going to be able to afford a $3,000 DRA.
But sorry, I keep going, I apologize.
I think they're starting to get,
You know, I know it's a first product.
It's not meant for mass adoption, but I think they're completely out of touch with what's going on right now.
$3,000 headset compared to, you know, two headsets.
What was the original price of the iPhone?
I mean, the price of the iPhone is also completely out of touch.
If they want to expand in India and China, right?
The average price, the average price of an iPhone is going to fall pretty dramatically, right?
Yeah, but they didn't start that, right?
Otherwise, this is just a marketing gimmick to distract us.
I have to push back a little bit, depending on payment plans.
I mean, Apple.
No, no way. Have you been to India?
They're not getting full subsidies from Verizon.
Just to be clear.
With these new hardware, often Apple does come out and everybody always complains about the price point.
And then only Verizon does the full subsidy.
If you go to T-Mobile or if you go to, you know, any, you know, people who are not wealthy don't, you know, don't use Verizon.
You're not getting full subsidies anymore for these phones.
They're so expensive.
But it's going beyond the expense, I think.
It's going to be the Tesla P100D.
And the, like, people that are, you know, have time or really see the value are going to buy it.
But I don't see it going general market.
I just, you know, to be so interesting.
I'm so interested.
I mean, of course, it's an easy.
So, by the way, we have Cal Patel up.
He was a former CEO Best Buy Asia.
Cal, if you can give us a sense of what you're hearing about,
Apple and about this release.
And are you excited?
And do you share some concerns
that were being brought up here?
Yeah, yeah.
So no, no, I just wanted to come in.
Like I wanted to back you
and what you're saying, that, Donish,
because here's the thing, Apple's, this is...
The price point today means nothing, really, frankly, in terms of where it's going to be three years, five years from now.
It's just not going to – it's not a meaningful number to project out.
What's meaningful to understand is they will – because of the install base that they have already –
in terms of customers and in terms of channels, right?
So they're going to get this out at Best Buy and other places eventually.
People will start using this.
People will start playing with it.
It'll get out there.
They have such, such a global footprint.
And so there'll be, you know, and when you look at the big markets,
I know somebody said earlier that the price points are not, you know,
valid for India or China.
Listen.
You don't need to have that many people buy that higher percentage of people buying it for this to be out there in the marketplace, people using it and giving feedback on it and starting to kind of get the software and the app developers and just getting it out into the ecosystem.
You don't need large percentages of people to use it in India or China.
That's just, I know that's like a basic fact, but you don't.
But eventually people start using it.
Gal, I hear there are a lot of people there.
And they're rich, right?
I mean, they're not poor.
They use a lot of money and they've hired just higher percentage of a disposable income goes into these kind of products because it's an aspirational community.
Right.
And, and I don't, I don't mean, like people don't understand that until you've actually lived in these countries and and try to do business there.
It's, it's.
And that's why people get excited.
That's why China's whining and dining the U.S. companies back into China right now,
and they're all going because they get excited by that, right?
I think there'd be a dumb move for most large U.S. companies to do that right now.
I think Elon's playing a very smart game.
He'll figure out how he de-risks himself over a period of time.
But I think Apple's already de-risking.
But that's a different point.
But in terms of this product, you know what?
I don't bet against Apple launching a new product.
Fine, it may not be perfect.
It'll play around with it.
And if they're launching it today, and you're more onto the real-time news done,
you're like breaking stuff more than anyone else nowadays.
So I can't get more on consumer electronics.
But I think you're on the right track.
This is going to get launched.
But it's.
And another point, I think somebody else made it, just I'll add to it.
It's the cost of use, right?
So all the operators are going to subsidize it.
They're going to figure out ways to do that.
And it's just eventually, you know, what's your monthly cost of using it, right?
That plus the connection and whatever connection you buy.
I wouldn't be surprised if these products get given away with some amazing products,
Cal, you just brought up a big, big thing.
Maybe it's health.
Cal, one big, big point that you brought up that I don't think people are talking about
is I wonder if there's going to be a cellular chip on these.
Do you have any thoughts on whether there's going to be the ability to walk around outside of the house with this?
I mean, because you can see through it.
I would be, look, Apple is like, this is no information, but why would they not?
Right.
And all the ability to get it put in or for it to be some kind of digital, you know, upload you can do a software piece.
But, you know, you have to make this thing.
you know, wireless, you'd be able to walk around with it.
And I'm sure that they'll put that in or very quickly in the next version.
So, but I do think that that, and I don't want to go into health with you here
because we'll go into a different track and we should do that offline.
But I do think that the killer app on this is going to be health.
you know, just some kind of app that basically allows a lot of people to use it
and feel like they're getting a core service in their life fulfilled.
And I think people are going to be surprised because even Best Buy it into healthcare.
You know, it's an important, like consumer electronics and health are where this is going.
And Apple is a health company, as you know.
So interesting.
And it's very, very interesting because.
So many people already have AirPods.
So many people already have Apple Watches.
So many people already have MacBook Pros.
And on the other side, so many companies have already built iOS apps.
I wonder if it's going to be easy to upgrade some of those apps into this.
Because remember, nobody builds Facebook apps just for people's knowledge.
That's not like a thing, right?
But if you have an existing, you know, infrastructure.
It used to be.
It used to be a thing.
And they kind of shut that whole thing down and screwed over all their creators.
Yeah, exactly.
Like they kind of screwed every Zinga.
I mean, if people remember.
So, you know, they literally...
sort of hurt their community in some senses, whereas Apple, their app store is incredibly vibrant.
So it would be very interesting to see if some of the games come on faster.
You know, the value that Cal was talking about in terms of the community is not just the
community's aspirate, you know, communities love for Apple products, but it's the fact that
Apple products could easily get upgraded, especially depending on how, what the, what the
actual back end looks like. Brian,
would love to hear from you as well. Thanks, Cal.
And please do stay up if you can. I'm sure people
have questions. Go ahead, Brian.
Yeah, so you asked about the original price of the iPhone first generation in 2007.
It was $59.99.
But also something you consider is look at the Apple Watch.
Like they had high expectations for that out of the gate.
They thought they were going to sell, I think, $40 million in the first year.
And they ended up selling only $10 million.
But now look at where it is.
It's like...
pretty much half the people with an iPhone have have an Apple watch now.
But I think what Callan you said, I think that the fact that Apple has this thriving ecosystem
is going to really play its part in, I think, propagating this new device.
to the public. I've heard that the apps that are already out for the iPhone and the iPad, they will
actually all work with this new device. Of course, they're not going to be 3D, but they're going to
be playable. So instantly, they're going to get millions of apps that are going to be functioning
with this device. So you can't compare it to Facebook and meta with their headset because
They came out of nowhere. They didn't have this ecosystem. They didn't have this user base that was already using Apple products. I think that the price, if it's 3,000, I think it's certainly high. I don't think Apple thinks they're going to sell more than a million devices probably within the first year. But I think that two to three, four years out, I think there's huge potential here. And the price will definitely come down.
I think I'm fair to be like...
I just want to play devil's advocate with this because I think everyone's going to be bullish on it.
But Apple has several launches that have completely failed.
I don't know if you guys remember the home pods, which was only a couple years ago.
It was like this smart speaker.
You know, they've had, you know, mobile me, right?
That was a complete failure.
They had the iTunes tank.
Don't forget the little boombox before the home pod.
The boombox.
The boombox, yep.
Yep. It's not like everything they touch, you know. And also, I think that this AR, VR thing, you know, might be the first generation. Maybe they succeed at it in the second or second or third round. But I, you know, I really think that this whole...
you know even with health right i mean there's so many health trackers this view this a rvr
you know selling it with software or selling it who's going to subsidize this off the bat right
that whole subsidization trade you know even if it does happen is going to be three four years
down the line right verizon it you know t mobile they're not they're not subsidizing this
you know this year or next year so
I'm skeptical of Apple because I think that Tim Cook is doing things that I see people doing when their companies are struggling.
MacBook sales are down 40% this year.
iPhone sales are down while they don't actually give you the numbers anymore for this reason, because it's all driven by price.
iPhone sales are down in the high single digits.
And going into this consumer recession, especially as we know people are going to be suffering in the second half of this year with student loans, I don't think that...
that I think that their next quarter sales are going to be worse than the first quarter.
And I think that their unit sales are going to continue to fall because there's not much difference between a new generation phone and a prior generation phone.
And you can just extend the life.
If you have a family of four, why pay six grand to upgrade your family when you could just extend the life of your product instead of replacing it every two years, replace it every three years?
So, like, if it wasn't for the $90 billion buyback that they announced, I actually think that the stock would be lower today.
And by the way, I really appreciate you pushing back because it may compel the person that has insider knowledge of Apple to come in and defend.
So keep pushing. Keep pushing.
I think it's okay to be bullish on the technology and bearish on the adoption, right?
I think the technology is going to be completely mind-blowing within the AR-V-R space.
Just...
You know, that would be my gut.
Maybe, like, to Jay's point, they're certainly have, even in recent history,
their fair share of a lot of flops, right?
I think that, like, pro machine they had, the little tin can or whatever that was, that flopped.
So that was actually very recent.
What I see is a human behavior problem.
You know, adoption of something on the face worn all the time.
Apple likes to get into areas and disrupt current product forms.
Hold on. I'm sorry.
Yeah, they like to disrupt current product forms and solve a physical problem.
So, like, when the iPhone came out, I remember that image that Steve Jobs talked about, like, here's your phone, here's your camera, here's all this crap that people carrying around with them.
Now it's all in this slim wafer of a design.
Or with the watch, people are used to wearing watches for a thousand, well, maybe more years.
Spectacles date back to the 1800s.
and even headphones, which is probably the most disruptive tech, Apple came in with AirPods that are, you know, no wires, really small form factor.
But this, like the VR-A-R thing actually adds physical problems for people.
Current people wearing glasses are going to have to swap out to a uniform design, or people not wearing glasses are going to have to wear glasses.
And I'm picturing, I'm giving Apple like the...
Benefit of the doubt that they're going to make very thin
ultra light glasses that don't even look like a VR AR headset even in that case. I
people are going to have to clean the lenses.
You have all these ads running on the radio nonstop about,
isn't it annoying putting on your glasses?
How are you going to resell them?
You're going to drop and break them.
You know, glasses, the reason glasses got into the market
is because they have a unique sense of style
for each individual person.
The French are the ones who did that in the 1900s.
They invented, and then injection molding happened, and that, you know, so like, is Apple going to be able to make a couple thousand different styles?
And then are they going to be able to get penetration into the market of people who don't wear glasses?
So those are, I have a lot of concerns about it.
So the pushback I will give is I both wear contact lenses on a daily basis and then also wear glasses quite a lot at home.
And I use the VR headset from meta.
which is not even, in my opinion.
And I have the quest, too, so it's like the older version and it's perfectly fine.
I think, I think, you know, people that actively use these realize that it's actually not as much of a barriers, people think.
Also, you know, more than a third of humanity wears glasses.
And so, Mickle, go ahead.
Yeah, so I actually do a decent amount with this right now at my current job.
And I will say, I think there's a lot more industrial uses, especially in engineering and graphic designing and 3D modeling than a lot of people know.
I will say one thing about Apple's strategy.
I don't think anyone can argue that right now, everything involving it is pretty niche.
But I do think one thing Apple could be trying to do here is obviously, like some speaker said, just release it into the market so they can start iterating on it and experimenting with it.
But then ultimately start with a higher price point.
So in the future...
the future when it has more capabilities and in the future when there's more things going on
in this realm of artificial intelligence and AR and VR, we're going to see a scenario where
people are going to be willing to pay up for that product and Facebook might be in a place
where they have to start bringing up prices. I think Facebook is playing a little more to where
it is now and Apple is playing a little more to where they want this product to be in four to five
years from now.
Yeah, that's the best.
I think niche use case, because people like, well, don't you see how amazing this technology?
Because I've given this speech before to friends, obviously.
But people like, well, don't you see how amazing it is?
And I'm like, yeah, 100%.
Like I see every policeman in the country wearing one, right, to give them
a threat assessment. I see firemen wearing this going into a building to have a heads-up display.
I see all the use cases. I see the safety use cases. What I don't see is like every American
wanting to have it in their pocket like they do an iPhone, Apple, watch, or AirPods. That's where
I'm like, oh, no, that's a good point. Justin say it may just be a different product that
you can't imagine right now. Right.
these analogs are useful, right?
But they're not, they sometimes kind of,
I just say the hard lessons being in like
selling consumer electronics products, right?
In the old days, like just,
analogs are good, but they don't always follow the same pattern.
So this, you know, what we're doing here is projecting
which is a natural thing to do, right?
We're projecting the product launch of an iPhone
and kind of going,
oh, you're going to have it in your pocket.
Maybe it's just a very, very different product
and a different way that we all use it, right?
We use it for an hour for something very productive
that we're doing.
Like, you know, if we're, like you said, some of the...
industrial use cases or design or something creative to doing.
You use it for an hour and you put it away, fine.
And maybe that's how we'll use it.
But we won't know until it's out there.
Sorry, this is the thing that Apple does.
Gets it out there, gets us working on it.
Anyway, sorry, Danish.
No, no, I was going to say that we don't even know what the interface looks like.
We don't know what the frame rate's going to look like.
We don't know what AR looks like.
So I do want, as Cal, you said initially, you know, we don't know that much about it yet.
And I will say...
that, you know, there's a lot of, you know,
there's been a lot of commentary around,
around, you know, Apple flopping,
but HomePod did leave to HomeKit Awareness,
which then was a success.
And they never actually-
I'm not-
I'm going to finish real quick.
So I was gonna say that, you know, beyond that,
you know, there was, they've never actually flopped on a premium price product in terms of the long range.
Like we've been talking about Apple Watch.
Remember how many people hated on the iPad?
You remember how many people thought that the iPhone wouldn't work when they first came out?
So it is very interesting.
I mean, I would never bet on Apple and what clearly...
now has tons, millions of users worldwide.
They are going to be curious.
And, you know, with there being this explosion in AI
and the ability for ARVR to be brought into daily life,
we have no clue right now what is coming.
And I would not bet against Apple.
But Shakar, I brought you up.
Shakar is...
You know, is that copy AI and someone that we listen to often.
Chigar, thanks for joining us.
Give me the bullish case on Apple right now.
Thanks.
A little out of breath.
I literally pulled over us in the middle of a bike ride.
Hopefully I can hear me all right.
I don't know if not.
Yeah, we can hear you.
Go ahead.
A little background noise, but go ahead.
Cool.
So here's the thing. Apple, sure, has flopped a handful of product launches, but I would say typically when they enter the market with a premium price product that is so far different from their competitors pricing, it's kind of hard to imagine that there's not something that they're going to provide that is significantly better than anyone from the market.
Now, to everyone's point, this is not something that is going to be, you know, affordable for a typical consumer.
But that doesn't really matter, right?
If their goal is to iterate, their goal is to get, you know, content out and be able to actually produce the product that ultimately turns into, you know, the iPhone SE, then this is absolutely the first move.
Now, coming back to the AI front, this is actually something that I don't think we're actually thinking about enough.
And so far...
you know, there's been a lot of rumors about this idea that Apple is going to have a, you know, pretty incredible model that is going to run on everyone's iPhones.
Now, granted, these are rumors. They haven't been confirmed yet, but, you know, Siri needs a refresh. It hasn't happened yet.
could be a whole lot better.
Now, take these trends together, right?
Apple is typically someone that is years ahead of their own product strategy.
What would a world in which the ARVR headset driving adoption
for, you know, an effective new form factor,
an iterated product that actually allows people to, you know,
do some pretty incredible things with it,
and then followed up by a release that, you know,
effectively allows everyone to have AI models in their pocket that are private.
That would make Apple incredibly positioned in a world where AI is effectively limited to just a digital domain, right?
Doesn't that give them a leg up to be able to effectively use the iPhone as a pocket phone that will effectively power the AI experience that they want to create in the physical world without actually conquering a lot of the problems that we discussed yesterday, for example, that make physical AI hard?
Incredible. And this is an example of we have no freaking clue what's coming. Thanks, Shakar. Really, really. That was super helpful because again, it gives a different perspective of how, and this is the difference on the technology side. The question isn't whether this will drive value. The question is what value will it drive? Mickle, go ahead.
Yeah, I think a big thing they probably wanted to try to avoid here was another Apple car scenario where they have all this designing and planning going on in the backgrounds and ultimately get beat to market by some product.
So I think the real strategy here is not to lose another major platform that they easily could have had in their grips.
I think we can all sit here and agree that there's going to be in the future in the future.
massive potential and massive amounts of information moving into this AR VR world.
And I think Apple just can't afford to do another thing where they just sit in the background
and claim they have some product coming out 10 to 15 years from now.
And then ultimately you see other competitors in the market iterating, building applications,
having developers build software on these platforms and ultimately get beat out in something they should have easily won.
Right.
So even if the price points high, even if it takes them a while to get this right, ultimately, I think it's something they just have to go out there and try and see how it works.
Was there any official, and I don't actually know the answer to this, and not a leading question, but was there any confirmation on the Apple Car Project?
Because I thought that team was just for Apple CarPlay. I thought that's what that team was.
I believe there's been some confirmation that Apple has been working on one.
I don't know if they've actually talked about any releases or any dates yet.
But, you know, kind of going back to this...
Their main guy field left the Apple Car team a couple years ago, right?
Yeah, that is...
They were hiring engineers for an automotive engineer.
I think it was kind of, like I was saying,
just something they always had ambitions of doing, but never fully committed.
Yeah, so, you know...
There is some talk about 4K, which I don't know even though.
You know, this is the funny part.
This is the funniest part about Apple, that everybody's worried about the specs.
And Apple is thinking about the 1.56 billion people that already use iOS.
right like it's the way that apple thinks about these problems it is not about building the most
technologically advanced headset that is actually the mistake that i mean cal you can kind of
refer to this that was the mistake that dell was making that's the mistake that everybody was doing
in the pc world apple walks in with a macbook that's just incredibly useful and thinking
through the person centered approach
human-centered approach.
And then we saw the same thing with the iPhone.
You know, people were talking about, well, I wonder what the specs are going to be.
And they were like, nah, dude, it's going to be a complete screen.
Yeah, no, I think that, I mean, we're all just going to project, right?
We're going to project our assumptions.
And that's what we do.
And consumer electronics, this is a brilliant way to make money.
Like, you, if you just, you know, got rid of your daily orthodoxy and you were able to present.
But I'm not sure that Apple can always succeed on that right now because they're growing up just like anyone else.
But I agree with you.
In the early days, it was like they just came at it very differently.
They came from a customer perspective.
Everyone else in that industry went to CES and hung out with all the suppliers and the big retailers.
Best Buy had the best parties.
And, you know, we did all, it was an industry orthodoxy, right?
And they just came, they just come at it from another angle.
And that's the one thing I always loved about it.
And that was jobs and that was, you know, that's just how it was.
And we assume that they'll do that again.
I like to assume that they'll do that.
Other people will do that.
They've got the resources to do that.
which is very interesting because some of these new platforms and products and the point around integration with AI is so,
AI is so strong that, you know, like it's going to take a lot of resources, right?
And you've got a lot of integration.
So people like, I mean, Apple is going to be able to produce these physical, digital, intelligent technology.
you know, solutions, right, if you like.
But again, I'm making the assumption
that they're going to challenge the assumptions
that we can't even see that we have.
And that's the beauty of it. That's what innovation is.
And I'm hoping they do that.
They didn't, they, they, they've never done it with the, with the, I guess they did it with the television, right?
So I have to tell you, like even at Best Buy, people are always, the, the buyers and everyone were always holding a spot open for the Apple TV every season.
Right?
They'll be going, well, they're going to come out with something, right?
So, you know, they'll think about it in terms of the layout of the store.
And well, that's where the Apple TV will go, right?
When they present it.
It was just a joke, right?
They never came out with a physical Apple TV.
The same with, you know, by the way, they would never...
And I can't imagine it's changed today, so I'm not giving you insight.
It's until like the day of the product, you will understand how many products you're going to get.
And sometimes they would not release the clues as to how you would set it up in the store
so that, you know, you wouldn't give away what the product was or what the accessories were.
But now they have their own store, so they'll do it there first.
I mean, it's fascinating because they've been so tight-lipped that after all of the hate that we've been giving Apple on stage, I still can't get anything out of my contact.
He's listening, but no information.
Your contact values his job, his career.
Yeah, and also, you know, to be honest, nobody wants material non-public information on here.
But we do want just general information.
But, but, yeah.
Yeah, that little recording icon in the top left corner is probably not helping your case.
It's okay.
I'm not worried about it.
We break news all the time.
And if you want us to break news every day, please do join us.
Tomorrow, or not tomorrow, tomorrow's the weekend.
Okay, here's a challenge.
When Apple breaks news with you, you've made it.
That's right.
That's the goal.
That's going to be about a year from now, I think, Donish.
Oh, my God.
That would be incredible.
But yes, Monday will be here.
8 a.m. Eastern.
We will be covering WWDC, and we will be covering other topics.
Who knows what happens this weekend.
But, Cal, thank you for joining us on stage.
Everybody, thank you so much for joining us.
I can't believe we have so many people listening to us every day, but it's still exciting.
Another great week.
See you on Monday, everybody.
