For September, we’re also guiding about flat sequentially at the midpoint. As you know, we typically have what we call product transition costs during the September quarter, and this year we also have about 30 bps of headwind from foreign exchange again because the dollar has appreciated recently. We expect those two factors to be offset by positive leverage, because you’ve seen the revenue guidance that we provided and the mix to services that you’ve actually mentioned during your question. So we feel pretty good about also the guidance for the fourth quarter.
Looking forward, you know we don’t provide guidance beyond the current quarter, but I think we have a pretty good record over the last several years to make good business decisions, balancing units, revenue and margins. As you know, foreign exchange has been a very significant headwind over the last three-plus years, but we’ve been able to manage that.
Trump has the perfect transparency so he is not a wildcard. I think the wild card is the emerging economies.
Turkey is going to tank. China is at risk. China’s any problem will be highly contagious and a emerging economy crisis can force interest rate cut.
US economy is in a great shape. I think US may intentionally weaken foreign economy to benefit itself. Japan was put into a multi decade recession by US, I think China needs to take a lot of care of itself
I think china and turkey have been bad for a while - this is just by looking at their stock markets & governments, even before trump i might say. argentina is already kaput as far as i can tell. How is brazil doing? Russia is also bad.
I am also curious about korea, germany, england, etc. THey re much more stable, so maybe that’s why we don’t read about them.
He wants to, but world economy is really complex, and many things can have unintended consequences. Trump himself said he doesn’t want strong dollars. What’s the point of raising tariffs only to have RMB weakens and thus make Chinese goods cheaper in US?
The only obvious thing Trump can do is pressure the Fed chief against raising rates. But that’s really taboo and may have the opposite effect of spooking the market and forcing the Fed to be more hawkish to show its independence.
Goldman research notes, stolen from Calculated Risk:
Company commentary and business surveys increasingly highlight bottlenecks and price pressures, as well as a growing shortage of workers in the trucking, healthcare, and construction industries. Yet despite tight labor markets and rising input costs, core PCE inflation has yet to exceed 2 percent on a sustained basis. To paraphrase Robert Solow, price pressures seem to be everywhere except the inflation statistics.
…
Barring a sizeable rebound in capital formation or labor-force participation, capacity constraints are likely to become increasingly binding as the expansion continues. While the Fed may view further declines in the unemployment rate with some ambivalence, the implications of broadening labor shortages and product-market bottlenecks are more clear-cut, representing a textbook form of overheating that the Committee has historically taken great pains to avoid.
It’s super expensive to hedge that much foreign revenue. The cost is usually beyond what you gain from protecting. Most companies do little FX hedging.
FAANG does hedge but only for a normal fluctuation. Current fluctuation arising from tariff could be higher than normal. Any1 working in the CFO office of FAANG? One of the reasons for having debt in different FX currencies is hedging
My mentor at a prior company ran the FX hedging. He said even 3 months out was too expensive to be worth hedging. Their approach was to try to work some language into major contracts to protect the company if the FX rate varied above a certain percent.
Turkey will go to shit. Big question is how bad is the contagion risks. Paul Krugman:
The result is that foreign debt explodes as a share of GDP. Indonesia came into the ’90s financial crisis with foreign debt less than 60 percent of GDP, roughly comparable to Turkey early this year. By 1998 a plunging rupiah had sent that debt to almost 170 percent of GDP.
Qatar, a country bordering Saudi Arabia, had reportedly pledged to invest $15 billion in Turkey following a meeting between Turkish President Recep Tayyip Erodgan and Qatar’s Sheikh Temim bin Hamed Al Sani, Turkish news site NTV said. The news helped the lira TRYUSD, +5.3501% extend gains against the U.S. dollar, with the Turkish currency up more than 5%. The U.S. dollar index DXY, +0.09% traded mostly flat in recent action.
The Arabs are saving the world. First Tesla now Turkey.
The fear is the debt/currency crisis spreads beyond Turkey. It’s the same fear as the PIGS crisis except that one was only debt, since they they were all on the Euro.
of FAANG? One of the reasons for having debt in different FX currencies is hedging 
