WEBVTT - Gilead Virus Treatment Is Promising But No Silver Bullet Yet 0:00:02.640 --> 0:00:05.360 Welcome to the Bloomberg Penel podcast. I'm Paul swing you, 0:00:05.360 --> 0:00:07.680 along with my co host Lisa Brahma wits. Each day 0:00:07.720 --> 0:00:10.280 we bring you the most noteworthy and useful interviews for 0:00:10.320 --> 0:00:12.520 you and your money. Whether at the grocery store or 0:00:12.560 --> 0:00:15.480 the trading floor. Find a Bloomberg penl podcast on Apple 0:00:15.520 --> 0:00:17.959 podcast or wherever you listen to podcasts, as well as 0:00:17.960 --> 0:00:21.600 at Bloomberg dot com. Well. One of the things that 0:00:21.840 --> 0:00:24.320 investors are looking for when they think about this pandemic 0:00:24.360 --> 0:00:27.880 and the coronavirus is what is going to be the 0:00:28.000 --> 0:00:30.639 role of biotech and big farm in coming up with 0:00:30.680 --> 0:00:34.559 some treatments, ultimately a vaccine. There's some decent news out 0:00:34.560 --> 0:00:37.919 of Gilead Sciences today. They may have on they may 0:00:37.960 --> 0:00:40.199 be on to something to give us a sense of 0:00:40.280 --> 0:00:43.040 kind of where we are with the healthcare system and 0:00:43.080 --> 0:00:45.519 the biotech companies and the farmer companies. Who welcome our 0:00:45.560 --> 0:00:48.080 good friends, San Fazelli. San Fazeli is a director research 0:00:48.080 --> 0:00:51.040 for Bloomberg Intelligence, but more importantly his day job, he 0:00:51.240 --> 0:00:55.080 is one of the top healthcare analysts. He's based in London. 0:00:55.560 --> 0:00:58.279 Uh So, Sam, thanks so much for joining us. Give 0:00:58.360 --> 0:01:01.320 us a little sense of what news was out of Guilliad. 0:01:01.640 --> 0:01:05.839 How important is it, pipaul, I hope you're all well, 0:01:05.959 --> 0:01:08.760 and so obviously we've got two bits of news that 0:01:08.800 --> 0:01:11.760 have just come out. What Gillyad itself put out was 0:01:12.080 --> 0:01:15.600 a try test that they're done to try and see 0:01:15.640 --> 0:01:17.720 where they are. Five days of the of the drug 0:01:18.520 --> 0:01:20.880 is as good as ten days of their drug. Obviously, 0:01:20.880 --> 0:01:24.360 nobody wants to be going in for a daily infusion 0:01:24.360 --> 0:01:27.280 of a drug more than they have to. So in 0:01:27.400 --> 0:01:31.240 that study that they reported, which was in very severe patients, 0:01:31.319 --> 0:01:33.960 apparently five days was just as good as ten days. 0:01:34.400 --> 0:01:36.880 A lot of people are now trying to read between 0:01:36.880 --> 0:01:39.560 the lines, look at the number of patients who recovered 0:01:39.640 --> 0:01:42.880 or didn't recover, and trying to understand whether the drug 0:01:42.920 --> 0:01:45.880 works from that trial. But of course it wasn't controlled, 0:01:45.959 --> 0:01:48.480 and you know what what our motto is, if it's 0:01:48.480 --> 0:01:51.440 not controlled, if it's not randomized, you really have to 0:01:51.480 --> 0:01:55.160 wait until you see that data. The other bit of 0:01:55.200 --> 0:01:57.280 news is this headline thing that we've seen now I 0:01:57.320 --> 0:02:00.200 think Max talked about earlier on the radio to that 0:02:00.440 --> 0:02:04.360 was that the National Institute for Allergy and Infectious Diseases 0:02:04.440 --> 0:02:08.240 has got this trial that is randomized as apparently worked 0:02:09.200 --> 0:02:11.000 in four hundred patients, and there's going to be some 0:02:11.120 --> 0:02:14.200 data on that. Now that's a proper trial that's testing 0:02:14.600 --> 0:02:17.880 ten days worth of treatment with this drug ram deservie. 0:02:18.040 --> 0:02:20.000 So the problem is we just don't know what the 0:02:20.080 --> 0:02:23.600 data is. Sam. Just taking a step back, I want 0:02:23.600 --> 0:02:28.560 to understand the importance of desivier being successful. In other words, 0:02:28.919 --> 0:02:32.080 how broadly can this be used if it's something that 0:02:32.160 --> 0:02:35.560 has to be administered in a hospital like setting for 0:02:35.639 --> 0:02:38.440 only the most severe patients. Is it a game changer 0:02:38.520 --> 0:02:42.160 when it comes to the pandemic. What a great question. 0:02:42.360 --> 0:02:45.120 At the end of the day, I think we would 0:02:45.160 --> 0:02:49.639 all love to have a single game changer. I would 0:02:49.680 --> 0:02:52.079 be very happy to see this drug be that single 0:02:52.160 --> 0:02:55.360 game changer. But it's not going to help you and 0:02:55.400 --> 0:02:59.119 I sitting at home feel secure to go out. All 0:02:59.200 --> 0:03:01.040 we know is that any of these drugs that are 0:03:01.040 --> 0:03:03.520 being tested or drugs that are going to help us 0:03:04.240 --> 0:03:09.400 hopefully get better faster without suffering too much once we've 0:03:09.440 --> 0:03:12.880 got the disease, if we get the disease. So that's 0:03:12.880 --> 0:03:15.200 what they're all being tested for. The rush drug, the 0:03:15.280 --> 0:03:18.480 fier drugs, the astro drug, the regeneral and Santa fe 0:03:18.600 --> 0:03:22.360 drugs to make us feel really good in game change everything. 0:03:22.440 --> 0:03:25.919 You still need that vaccine that gives you protection. So 0:03:26.000 --> 0:03:28.400 let's go there, Sam. I think you know a lot 0:03:28.440 --> 0:03:30.359 of the officials that we all hear about, whether the 0:03:30.480 --> 0:03:33.840 government officials or health care officials, they seem to have 0:03:33.960 --> 0:03:37.120 kind of coalesced around this twelve the eighteen months time 0:03:37.160 --> 0:03:41.200 frame for coming up with a vaccine. To me, you know, 0:03:41.360 --> 0:03:45.040 just having you know a little bit of experience that 0:03:45.160 --> 0:03:49.120 seems very short, that seems like I'm more used to 0:03:49.200 --> 0:03:51.160 a number of years give us a sense of kind 0:03:51.160 --> 0:03:53.840 of how you think the timing of a vaccine might 0:03:53.920 --> 0:03:57.240 play out. Right, So I have to continue to be 0:03:57.320 --> 0:04:00.160 humble here in that I haven't been in allow but 0:04:00.200 --> 0:04:04.160 with a prepetting my hand for twenty years. But there, 0:04:04.640 --> 0:04:06.680 and you listen to a lot of scientists, a lot 0:04:06.720 --> 0:04:11.000 of top scientists from the Script's Institute, from Oxford University, 0:04:11.040 --> 0:04:13.720 and they all are very optimistic given what they know 0:04:13.800 --> 0:04:18.440 about the virus. Not all viruses, thank god, are created equally. 0:04:19.160 --> 0:04:22.400 And what I heard one virologist say, you know, if 0:04:22.440 --> 0:04:25.800 this was on the scale of HIV being a genius, 0:04:25.880 --> 0:04:31.039 this is one of flunked high school. IM glad to 0:04:31.080 --> 0:04:34.440 hear that with the immune system. I love that comment. 0:04:34.920 --> 0:04:38.480 So if that is true and our technologies will work, 0:04:38.640 --> 0:04:41.919 you know, with the with the everything that's been thrown 0:04:41.920 --> 0:04:45.479 at developing a vaccine, with all these companies ranging from 0:04:45.480 --> 0:04:49.919 biotechs to the big shots in vaccine business visor Glaxo, 0:04:50.279 --> 0:04:54.920 Santa Fe and merk Um, I hope that they are right. 0:04:55.000 --> 0:04:57.440 But you still have to get everything has to work 0:04:57.480 --> 0:04:59.640 out for this to be to be a successful at 0:04:59.640 --> 0:05:02.159 that top sort of time frame. Sam, there's also a 0:05:02.240 --> 0:05:06.400 question of the pipeline of production here and how quickly 0:05:06.839 --> 0:05:09.520 once there is a vaccine it can get mass produced 0:05:09.520 --> 0:05:12.400 and distribute it to enough people to get some sort 0:05:12.400 --> 0:05:15.120 of herd immunity. What do we know on that front 0:05:15.200 --> 0:05:19.880 in terms of the cooperation internationally with say what's going 0:05:19.920 --> 0:05:24.120 on in Oxford where they're starting human trials. So Oxford 0:05:24.160 --> 0:05:27.000 seems to be doing some interesting stuff here and that 0:05:27.040 --> 0:05:30.880 they're they're not really necessarily interested in being a vaccine 0:05:30.880 --> 0:05:34.719 company themselves, you know, just an announcement today that the 0:05:34.720 --> 0:05:38.200 Serium Institute of India is going to produce their vaccine 0:05:38.560 --> 0:05:40.359 and they're thinking of, well, if we're gonna do that, 0:05:40.400 --> 0:05:43.400 we're gonna keep it for India. I'm assuming that vaccine, 0:05:43.560 --> 0:05:46.200 if it's successful, would be available to whoever wants to 0:05:46.200 --> 0:05:50.200 take it on and manufacture it. So I wouldn't be 0:05:50.240 --> 0:05:54.240 surprised to see more countries or more companies from different 0:05:54.279 --> 0:05:56.719 countries coming up and saying, right, we'll have a go 0:05:56.800 --> 0:05:59.400 at that. But at the end of the day, with 0:05:59.480 --> 0:06:06.599 regards to national politics versus um vaccines and who manufactures, 0:06:06.600 --> 0:06:08.400 what I think what we should have to do is 0:06:08.440 --> 0:06:10.960 just wait and see who can actually get that stuff 0:06:11.000 --> 0:06:13.800 done and then worry about how it's going to get 0:06:13.839 --> 0:06:16.760 spread out during If you think about the volumes that 0:06:16.800 --> 0:06:20.120 these companies are talking about, we'll have like two billion 0:06:20.200 --> 0:06:22.640 doses of vaccine next year if you add Johnson and 0:06:22.720 --> 0:06:24.720 Johnson to collect so to stand off for you to 0:06:25.120 --> 0:06:28.039 fighter is a big numbers. So I don't think there 0:06:28.040 --> 0:06:33.599 would be a shortage really, So, Sam, what are some 0:06:33.640 --> 0:06:36.599 of the next milestones we should be on the lookout for. 0:06:36.720 --> 0:06:40.080 Is it just company by company putting out kind of 0:06:40.120 --> 0:06:43.679 their tests or is there anything more I guess maybe 0:06:43.720 --> 0:06:47.320 centralized that we should be looking for. No. So, from 0:06:47.360 --> 0:06:51.039 the treatment of vaccine side of things that we're talking about, 0:06:51.200 --> 0:06:53.039 we have In the next two to three months, there 0:06:53.040 --> 0:06:56.600 will be lots of data boys coming out starting hopefully 0:06:56.640 --> 0:07:01.320 with the data, the actual data safety and efficacy and 0:07:01.480 --> 0:07:04.680 safety against safety. Remember, these are a lot of these 0:07:04.760 --> 0:07:06.520 vaccines are going to have to go into people who 0:07:06.520 --> 0:07:09.680 are not sick. He can't give them the risk of 0:07:09.680 --> 0:07:13.240 an ailment um for Within the next two to three months, 0:07:13.280 --> 0:07:16.160 we'll hear a lot of proof of concept is the 0:07:16.240 --> 0:07:19.840 best phrase to call it for vaccines. Fires are very 0:07:19.840 --> 0:07:22.800 cleanly described some of the methods that are going to 0:07:22.960 --> 0:07:26.280 use to figure out whether they think something that they've 0:07:26.320 --> 0:07:30.680 got is UM protective potentially UM. And then you've got 0:07:30.720 --> 0:07:32.960 the drugs that will read that. Rush will have read 0:07:33.000 --> 0:07:36.280 that in early summer June time for their Actemra drug. 0:07:36.400 --> 0:07:38.960 You've got that severe that will have some data maybe 0:07:39.080 --> 0:07:41.840 later today or certainly in the next few weeks. Then 0:07:41.880 --> 0:07:43.960 you've got asked to Zeneca with cal Quin's. Then you've 0:07:44.000 --> 0:07:47.120 got Friday with this antivirals. So there's quite a lot 0:07:47.160 --> 0:07:48.840 of news that I think we'll be sitting here on 0:07:48.880 --> 0:07:53.200 a weekly basis, hopefully talking to each other about successes. Well, 0:07:53.200 --> 0:07:55.080 hopefully we will get a chance to speak with you 0:07:55.120 --> 0:07:58.040 again soon. Sam Fazli Had of the E M E. 0:07:58.320 --> 0:08:02.520 A Bloomberg intelligence effort, as well as a senior pharmaceutical analyst, 0:08:03.040 --> 0:08:07.040 really helpful insights to understand the progress being made looking 0:08:07.080 --> 0:08:11.200 for that silver bullet to allow life to return to normal. 0:08:14.240 --> 0:08:18.000 There's a huge discrepancy between the economic data that we're 0:08:18.000 --> 0:08:21.120 getting and the market action that we're seeing, with stocks 0:08:21.160 --> 0:08:24.560 posting one of its biggest twenty five day rallies in history. 0:08:24.920 --> 0:08:26.480 I want to bring this to you from City Groups 0:08:26.480 --> 0:08:28.760 Matt King. The gap between markets and data is the 0:08:28.840 --> 0:08:33.280 largest on record. With limitless liquidity meets spiraling insolvency, there's 0:08:33.320 --> 0:08:35.760 bound to be a long term price. Joining us now 0:08:36.160 --> 0:08:39.120 to weigh in on what we can expect going forward. 0:08:39.280 --> 0:08:42.240 Lisa shall It joins us now fantastic name, chief investment 0:08:42.280 --> 0:08:45.720 Officer of Wealth Management from Morgan Stanley with two and 0:08:45.720 --> 0:08:49.120 a half trillion dollars of assets under management. Lisa I 0:08:49.720 --> 0:08:51.960 wanted to start there because a lot of people say 0:08:52.000 --> 0:08:55.000 the only reason that markets are gaining is because the 0:08:55.080 --> 0:08:59.520 FED is printing money. Do you agree? Well, certainly, you 0:08:59.559 --> 0:09:03.280 know FED liquidity has been absolutely key to these markets 0:09:03.320 --> 0:09:06.800 really over the last quite frankly eleven years um since 0:09:06.920 --> 0:09:10.240 you know, the financial crisis. UH and and liquidity was 0:09:10.400 --> 0:09:14.800 operative in in the search that we saw in January 0:09:14.880 --> 0:09:18.280 to the February nineteenth high UH and it's probably you know, 0:09:18.320 --> 0:09:21.760 playing a key part in in building confidence in supporting 0:09:22.440 --> 0:09:27.400 virtually every corner of the global fixed income market. UH 0:09:27.440 --> 0:09:31.640 and that obviously helps stocks. But really from our perspective, 0:09:31.840 --> 0:09:35.160 what we've seen over the last four or five days 0:09:35.320 --> 0:09:40.920 is really a reaction um to what markets always positively 0:09:40.960 --> 0:09:43.840 react to, and that is upside surprise. And the upside 0:09:43.880 --> 0:09:48.480 surprise yere appears to be the pace at which UH, 0:09:48.559 --> 0:09:52.120 the US is going to reopen on most of the 0:09:52.160 --> 0:09:55.439 base case scenarios. UM. You know that we had seen 0:09:55.880 --> 0:09:58.800 when this crisis first hit and we locked down in March, 0:09:59.559 --> 0:10:03.400 where that the entire second quarter would be really decimated. 0:10:04.120 --> 0:10:06.480 I know here at Morgan Stanley we were looking for 0:10:06.640 --> 0:10:11.200 you know, second quarter GDP to annualize it down, you know, 0:10:11.320 --> 0:10:15.280 just horrific numbers. But I think, um, you know, and 0:10:15.400 --> 0:10:18.480 and not really have have worked at people coming back 0:10:18.520 --> 0:10:21.719 to work until the June you know and July timeframes. 0:10:21.960 --> 0:10:25.680 The fact that we're now having folks even like Clomo 0:10:25.920 --> 0:10:29.600 talking about potential reopening even in parts of New York 0:10:29.640 --> 0:10:32.160 State by May fis Keith. I do believe it is 0:10:32.160 --> 0:10:34.280 an upside surprise of the market, and that's part of 0:10:34.320 --> 0:10:38.080 what you're seeing. And as a result, you're seeing sector 0:10:38.240 --> 0:10:42.360 rotation underneath the surface, meaning the stocks that are leading 0:10:42.600 --> 0:10:47.920 are not simply those safe, defensive, secular growth stocks, but 0:10:48.040 --> 0:10:51.520 we are seeing some recovery in some of those you know, 0:10:51.640 --> 0:10:56.200 really damaged cyclical names, uh and small caps um that 0:10:56.320 --> 0:10:59.160 perhaps um, you know, we haven't seen much action in 0:10:59.240 --> 0:11:01.960 for quite a while, so at least I know the uh, 0:11:02.200 --> 0:11:04.240 we're in the midst of earning season here, are there 0:11:04.280 --> 0:11:07.599 any valid takeaways here or assist as a quarter and 0:11:07.640 --> 0:11:10.360 maybe even next quarter you just kind of you know, 0:11:10.640 --> 0:11:12.920 flushed down the toilet and really try to look towards 0:11:12.960 --> 0:11:17.480 the back end of this year. And so, you know, 0:11:17.600 --> 0:11:21.280 in terms of what the market is looking through, I 0:11:21.320 --> 0:11:25.400 think the market is absolutely positively looking through the macro 0:11:25.559 --> 0:11:30.240 economic data. But these earnings data, I think is being 0:11:30.520 --> 0:11:34.760 really scrubbed and scrutinized by analysts. Not so much for 0:11:34.840 --> 0:11:38.160 our people making or missing the numbers, uh, you know, 0:11:38.320 --> 0:11:41.360 on on the margin by pennies, right, But what people 0:11:41.360 --> 0:11:47.040 are really looking for is what how resilient are the margins, 0:11:47.040 --> 0:11:50.120 are the profit margin structures, and so what might we 0:11:50.240 --> 0:11:53.400 expect and how are we going to pound our calculators. 0:11:53.640 --> 0:11:57.680 While it's great, the sentiment is driving you know, enthusiasm 0:11:57.720 --> 0:11:59.880 at the minute, uh, and we've had, you know, the 0:12:00.160 --> 0:12:03.360 upside surprises that maybe we will in fact reopen sooner 0:12:03.360 --> 0:12:06.360 than people thought. Um, we're gonna have to at some 0:12:06.520 --> 0:12:11.160 point reconcile. Uh, you know the level of the market 0:12:11.400 --> 0:12:14.760 meaning you know, hundred or even three thousand on the 0:12:14.840 --> 0:12:18.640 s SP five hundred with where earnings are going, uh, 0:12:18.640 --> 0:12:22.559 and that price earnings ratio. So it's very fascinating because 0:12:22.600 --> 0:12:27.839 we've seen prices rebound from the March three low by 0:12:27.840 --> 0:12:32.240 about thirty percent, but we've seen earnings estimate to drop 0:12:33.120 --> 0:12:37.360 right from expectations of potential growth of ten percent year 0:12:37.400 --> 0:12:40.760 over year back in January UM two profits that that 0:12:40.880 --> 0:12:43.680 now look like they're going to drop by tent So 0:12:43.800 --> 0:12:47.920 that means huge multiple expansion. So I think analysts are 0:12:47.920 --> 0:12:52.720 scrutinizing UM the the earnings this quarter quite closely and 0:12:52.840 --> 0:12:57.360 trying to nail down what is the SMP fire profit 0:12:57.440 --> 0:13:00.320 outlook for this year? Is it one four? Is it 0:13:00.400 --> 0:13:03.160 one thirty, is it one fifty? You know what is it? 0:13:03.320 --> 0:13:05.000 So that we can get a sense of you know, 0:13:05.080 --> 0:13:07.440 what is the valuation in this market? What is that 0:13:07.480 --> 0:13:10.480 to the ratio? So, Lisa, just about a minute here, 0:13:10.520 --> 0:13:13.320 I'm wondering what you're advising clients to do to sort 0:13:13.320 --> 0:13:16.680 of hold a sixty forty type portfolio. Get more defensive, 0:13:16.720 --> 0:13:21.720 get more aggressive. UM. So our advice in this in 0:13:21.800 --> 0:13:26.080 this UM time has been very clear. UM. We want 0:13:26.120 --> 0:13:30.240 our clients out of indicase like the SMP fire, which 0:13:30.280 --> 0:13:34.240 are passive, which we think are too concentrated in in 0:13:34.480 --> 0:13:38.199 the largest megacap five TEX stocks. We want them to 0:13:38.240 --> 0:13:41.000 be active stock pickers, and we want that stock picking 0:13:41.040 --> 0:13:45.560 to be concentrated in cyclical value and small cap sectors 0:13:45.600 --> 0:13:50.640 like financials, like industrials like material um and and even 0:13:50.960 --> 0:13:55.480 UH energy. UM, it's time for stock picking, and it 0:13:55.559 --> 0:13:57.920 is time to go where you're getting paid to take 0:13:58.240 --> 0:14:02.920 these risks because the stocks are very cheap. Lisa Charatte, 0:14:02.920 --> 0:14:04.960 thank you so much for joining us. As always, we 0:14:05.000 --> 0:14:08.839 appreciate your thoughts and commentary. Lisa Chalotte, chief Investment Officer, 0:14:08.920 --> 0:14:12.160 Wealth Management at Morgan Stanley joining us on the phone. Uh, 0:14:12.200 --> 0:14:16.280 and you know interesting Lisa talking about analysts really are 0:14:16.400 --> 0:14:18.720 looking at these earnings and trying to get a sense 0:14:18.720 --> 0:14:23.080 of what this market can earn uh in one because 0:14:23.200 --> 0:14:24.840 you know, you could really make the argument that the 0:14:25.200 --> 0:14:28.560 market is expensive or cheap. So it's uh. Investors are 0:14:28.560 --> 0:14:30.200 really trying to dig down and get a sense of 0:14:30.240 --> 0:14:33.880 whether the earnings growth rate year over year is that flat, 0:14:33.960 --> 0:14:35.920 is a minus ten percent kind of where the market is, 0:14:36.280 --> 0:14:38.080 where the SMP earnings all right now or is it 0:14:38.120 --> 0:14:42.160 maybe even uh something worse, And so trying evaluation uh 0:14:42.320 --> 0:14:49.200 does matter uh, certainly for this market. Well, this is 0:14:49.200 --> 0:14:51.720 the week that many of the tech bell Weather names 0:14:51.800 --> 0:14:55.120 report their quarterly numbers. We had some better than expected 0:14:55.160 --> 0:14:58.360 results from Google last night, stock trading up about eight 0:14:58.400 --> 0:15:00.800 percent today, so to had a sense of what's going 0:15:00.800 --> 0:15:03.000 on in the world a big tech we welcome David Garrity, 0:15:03.120 --> 0:15:05.800 chief market strategist for Laibol and Company, also a partner 0:15:05.840 --> 0:15:09.280 at bt block joining us. David, thanks so much for 0:15:09.360 --> 0:15:13.720 joining us. Let's start with Google last night, some decent numbers, 0:15:14.000 --> 0:15:17.520 but Ruth Poor at the CFL warned that March was 0:15:17.560 --> 0:15:20.240 an ugly quarter for ad revenue in in April as well, 0:15:20.320 --> 0:15:22.240 so are you a little surprised by the performance of 0:15:22.280 --> 0:15:26.560 the stock today. Um, to the extent of the revenue 0:15:26.600 --> 0:15:29.840 numbers actually came in better than what the street has 0:15:29.880 --> 0:15:33.760 been expecting, and the fact that they're good indications that 0:15:33.960 --> 0:15:37.640 non search ad related segments we're putting up solid growth. 0:15:37.720 --> 0:15:41.080 I mean, you're looking at YouTube up in revenue terms 0:15:41.480 --> 0:15:45.560 year over year, Google's cloud operations up. You know, this 0:15:45.600 --> 0:15:50.040 says that there's growth for Google for alphabet despite the 0:15:50.080 --> 0:15:52.760 fact that you know, in March, search and display at 0:15:52.800 --> 0:15:56.800 revenue dropped more than and obviously April doesn't look to 0:15:56.800 --> 0:16:01.920 be much better, if at all. Okay, so things are 0:16:01.960 --> 0:16:04.120 really rough for Google on the AD side, they were 0:16:04.160 --> 0:16:08.280 able to compensate with their cloud spending their YouTube traffic. 0:16:08.480 --> 0:16:11.360 I'm struggling to understand the lift that that has given, 0:16:11.560 --> 0:16:14.520 apparently to Facebook shares, which report after the bell there 0:16:14.560 --> 0:16:17.480 shares up five point nine percent. Where's their cloud that 0:16:17.560 --> 0:16:22.440 can offset the decline and ad ever revenue? Yeah, no, no, no, 0:16:22.520 --> 0:16:26.520 Obviously Facebook is not involved in the cloud computing market, 0:16:26.880 --> 0:16:30.000 um to the extent that a Google or an Amazon 0:16:30.360 --> 0:16:34.240 or Microsoft are, So you know, to that extent, Facebook 0:16:34.280 --> 0:16:36.880 really is going to have to live or die. Um, 0:16:36.960 --> 0:16:41.560 in large part based upon its advertising revenues, which you 0:16:41.560 --> 0:16:45.720 know certainly they're involved in the same market as alphabet 0:16:46.160 --> 0:16:49.880 Google's operations. And if we look at sort of how 0:16:50.040 --> 0:16:55.720 pricing on ad inventory on Facebook properties, Facebook and Instagram 0:16:56.640 --> 0:17:00.280 we're developing over the course of um you know, in 0:17:00.320 --> 0:17:04.399 the year to date, you've seen numbers breakdown appreciably and 0:17:04.560 --> 0:17:07.840 we're looking in a situation here where April pricing levels 0:17:07.880 --> 0:17:11.280 are worse than March. Okay, so what does that mean? 0:17:11.320 --> 0:17:14.159 I mean, how long can these tech giants continue to 0:17:14.240 --> 0:17:17.360 gain in an environment where their main source of revenue 0:17:17.400 --> 0:17:20.920 is plummeting? Now? I mean, I would argue it's it's 0:17:20.960 --> 0:17:22.560 going to be that investors are going to have to 0:17:22.600 --> 0:17:25.000 be stock pickers when it comes to looking at tech, 0:17:25.040 --> 0:17:27.160 and they're going to have to look at the companies 0:17:27.160 --> 0:17:29.919 that have diversified operations and a range of markets, not 0:17:30.040 --> 0:17:33.560 so much companies that are more pure plays in specific markets, 0:17:33.600 --> 0:17:37.600 such as Facebook is with respect to consumer um advertising. 0:17:37.680 --> 0:17:40.640 You know clearly where the situation here where in Facebook 0:17:40.680 --> 0:17:42.919 is probably gonna try and your up investors by pointing 0:17:42.920 --> 0:17:46.200 to its recent investment in geo platforms, the five point 0:17:46.240 --> 0:17:49.480 seven billion dollars they spent last week. Um, you know, 0:17:49.560 --> 0:17:51.840 this is going to build on Facebook's already big position 0:17:51.880 --> 0:17:55.160 in the world's second biggest internet market in India. But 0:17:55.240 --> 0:17:57.040 you know, really, we think it's gonna be hard for 0:17:57.040 --> 0:18:00.960 Facebook to get people's attention, investors, tension to move away 0:18:00.960 --> 0:18:03.800 from the fact that they're going to have weak revenue. Um, 0:18:03.840 --> 0:18:06.440 you know, it's expected that it's possible that Facebook may 0:18:06.440 --> 0:18:12.600 show their first quarterly year on your revenue decline. So, David, So, 0:18:12.760 --> 0:18:16.000 as we think about Facebook and Google on in terms 0:18:16.040 --> 0:18:19.480 of advertising perspective, there's a school thought out there that says, yeah, 0:18:19.560 --> 0:18:22.720 we know that digital media has been taken share from 0:18:22.760 --> 0:18:26.119 traditional media, whether it's broadcast or cable television. Uh, do 0:18:26.160 --> 0:18:30.080 you think that trend may accelerate here during this unusual 0:18:30.119 --> 0:18:34.680 time we're seeing here. No, I would certainly indicate that 0:18:34.680 --> 0:18:37.760 that's likely the case. And looking away from the tech sector, 0:18:37.840 --> 0:18:41.399 looking at uh, you know, the global leading advertising company 0:18:41.480 --> 0:18:45.040 or advertising agency, you know, WPP Group, I mean there 0:18:45.040 --> 0:18:47.360 came up with their results and certainly you know, they 0:18:47.400 --> 0:18:51.040 were showing the same evaporation in terms of the end 0:18:51.040 --> 0:18:55.000 markets and their customers inclination to spend that Certainly, you know, 0:18:55.040 --> 0:18:57.959 Google was picking up. So you know, from that standpoint, 0:18:58.000 --> 0:19:02.240 we think that those means that show the best ability 0:19:02.280 --> 0:19:07.240 to target individual consumers at scale, in which certainly is 0:19:07.280 --> 0:19:10.760 what digital does, are going to be prospering in this environment. 0:19:10.800 --> 0:19:13.600 So when we look at Google and let me look 0:19:13.640 --> 0:19:16.399 at Facebook act to close today, you know we're seeing, 0:19:16.480 --> 0:19:19.560 you know, the best houses in a bad neighborhood, all right, 0:19:19.600 --> 0:19:24.040 So you see the potential for Facebook to have a 0:19:24.080 --> 0:19:27.560 serious hit and Google to face worse times ahead. I 0:19:27.600 --> 0:19:30.280 want to shift gears a little bit to the ones 0:19:30.320 --> 0:19:32.639 that are doing really well. And I'm thinking of Amazon 0:19:33.119 --> 0:19:35.399 and Microsoft. We just look at the tech giants and 0:19:35.400 --> 0:19:38.480 I'm trying to understand how big they will be allowed 0:19:38.520 --> 0:19:41.159 to get. I'm wondering, as we're expecting a wave of 0:19:41.200 --> 0:19:45.639 consolidation in this era of the haves and the have nots, 0:19:46.200 --> 0:19:49.200 do you expect a wave of of sort of tie 0:19:49.280 --> 0:19:52.080 ups and mergers and acquisitions that perhaps wouldn't have been 0:19:52.119 --> 0:19:56.320 allowed before this had all happened. I think to the 0:19:56.400 --> 0:20:00.399 extent that you know, regulators, in this environment you become 0:20:00.440 --> 0:20:03.479 more concerned about trying and other authorities within the government 0:20:03.880 --> 0:20:08.520 more concerned about trying to maintain employment levels that yeah, 0:20:08.560 --> 0:20:11.159 the pace of consolidation across the range of sectors is 0:20:11.320 --> 0:20:16.440 entirely possible. When we look at Amazon's share of retail 0:20:16.520 --> 0:20:19.320 spending in the US, you know, it's still at a 0:20:19.440 --> 0:20:24.359 level where it's so low that it wouldn't necessarily represents 0:20:24.400 --> 0:20:29.200 an issue from an antitrust perspective. Now that said, there 0:20:29.240 --> 0:20:32.880 have been investigations have been opened, um in a number 0:20:32.880 --> 0:20:37.520 of different areas looking at Amazon's anti competitive practices where 0:20:37.520 --> 0:20:40.560 you have third party vendors who are selling products off 0:20:40.560 --> 0:20:44.040 the Amazon platforms, and yet Amazon is being accused of 0:20:44.080 --> 0:20:47.840 taking that consumer data and using it to develop or 0:20:47.880 --> 0:20:50.359 their customer data and using that to develop through and 0:20:50.400 --> 0:20:55.680 competing Amazon product. So it's interesting here. I mean, we're 0:20:55.680 --> 0:21:00.480 gonna get Amazon after the close later this week. Boy, 0:21:00.520 --> 0:21:02.240 this is a stock that's out or near it's all 0:21:02.359 --> 0:21:06.160 time high. Seems like, uh, the silver lining this pandemic 0:21:06.240 --> 0:21:09.879 is playing right into the hands of Amazon. What do 0:21:09.880 --> 0:21:12.639 you expect to hear from Amazon when they do report, David, 0:21:13.920 --> 0:21:16.840 I think Amazon, Um, you know, certainly they've been talking 0:21:16.840 --> 0:21:19.399 about what they've been doing to expand their footprint, talking 0:21:19.400 --> 0:21:23.000 about how they've been hiring people within their warehouse operations. 0:21:23.040 --> 0:21:25.679 I mean I would hope from a labor perspective that 0:21:25.760 --> 0:21:28.760 Amazon would be talking more significantly about what they're doing 0:21:28.800 --> 0:21:33.040 to provide, you know, substantial protection for these workers health. 0:21:33.640 --> 0:21:35.560 Although I would probably say that, you know, when we 0:21:35.560 --> 0:21:39.040 look at Amazon versus meat packing plants, you know, Amazon 0:21:39.200 --> 0:21:42.680 is coming out as a stellar performer, whereas obviously people 0:21:42.720 --> 0:21:45.040 in the beat packing plants are getting seriously ill. But 0:21:45.080 --> 0:21:47.040 away from that, I think that you know, Amazon has 0:21:47.080 --> 0:21:49.320 a chance maybe to talk about some of the areas 0:21:49.320 --> 0:21:52.000 where they want to expand, potentially in terms of looking 0:21:52.000 --> 0:21:55.440 at healthcare, new markets. Um. So you know, there's certainly 0:21:55.680 --> 0:21:59.280 an environment here where Amazon as one of the leading 0:21:59.320 --> 0:22:02.720 technology but he has the opportunity to accelerate its advance 0:22:02.880 --> 0:22:05.800 in this downturn in the new markets and gain share 0:22:05.840 --> 0:22:09.080 in its existing businesses. David Garritty, thank you so much 0:22:09.119 --> 0:22:11.480 for being with us. David Garritty, chief market strategist at 0:22:11.520 --> 0:22:15.280 laid Law and Company, also a partner at bt block, 0:22:15.880 --> 0:22:18.480 joining us to talk big tech in this pivotal week 0:22:18.560 --> 0:22:21.000 for big tech, and Paul just following up on the 0:22:21.000 --> 0:22:23.840 antitrust point. I think that this is something a growing 0:22:23.920 --> 0:22:26.360 number of people are talking about, the wave of consolidation, 0:22:26.359 --> 0:22:28.959 and there was a story on Bloomberg Law yesterday UH 0:22:29.040 --> 0:22:32.960 speaking to antitrust attorneys who expect the government to relax 0:22:33.040 --> 0:22:36.680 some of the regulations in order to preserve the jobs. Basically, 0:22:36.720 --> 0:22:39.600 if a bigger, better capitalized company wants to buy up 0:22:39.600 --> 0:22:42.400 a smaller one, they will be more amenable to that 0:22:42.520 --> 0:22:44.720 idea based on the idea that it will be better 0:22:44.760 --> 0:22:48.119 for the economy. I just wonder, especially with these tech behemoths, 0:22:48.640 --> 0:22:51.359 I wonder what that means for the landscape going forward 0:22:51.440 --> 0:22:55.000 in terms of how much more dominance the biggest players 0:22:55.000 --> 0:22:57.600 will have. I read something I can remember which analyst 0:22:57.720 --> 0:22:59.800