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Speaker 2: I don't know if you checked out shares a Fannie
Speaker 2: May and Freddie mac.
Speaker 3: I mean just say, soaring, soaring off the charts.
Speaker 4: It's incredible too, and just given the where they've come
Speaker 4: and gone and being in that consumership since the height
Speaker 4: of the global financial crisis.
Speaker 3: Yeah, it's a really good point.
Speaker 2: And it feels like we need a little bit of
Speaker 2: a history lesson the news that's got the movie, We've got.
Speaker 2: We've got Fanny May. It's up about twenty percent. I'm
Speaker 2: looking at Freddie Mack up about twenty two percent. And
Speaker 2: this is after the administration is said to be preparing
Speaker 2: to sell shares in an offering that could start as
Speaker 2: early as this year. Again according to that senior administration
Speaker 2: official with the latest on that, and kind of as
Speaker 2: I said, A history lesson blue Er TV and Radio,
Speaker 2: International Economics and Policy correspondent Michael.
Speaker 5: M bringing the old guys for thea.
Speaker 3: The old guy.
Speaker 2: Like a fine line, Mike, you just get better and better.
Speaker 2: But no, like there is history behind these two in
Speaker 2: a big way.
Speaker 6: Especially you look at Fanny May was chartered in nineteen
Speaker 6: thirty eight. It's been around for a long time. Freddy
Speaker 6: Mack came along in nineteen seventy. Stepping back for just
Speaker 6: a second, here's what they do. They basically buy mortgages
Speaker 6: from banks and mortgage lenders and package them into securities
Speaker 6: and sell them to investors. And that way the banks
Speaker 6: have more space on their balance sheets to make loans.
Speaker 6: And because Fannie Mae and Freddie Mack have sold these
Speaker 6: off to investors who are anxious to get the yield
Speaker 6: on them, they can predict essentially what they're mortgage costs
Speaker 6: are going to be, and so they can keep mortgage
Speaker 6: rates generally fairly stable. Along the way, from the time
Speaker 6: Fanny May was created, they created the thirty year mortgage,
Speaker 6: which is we're the only country that has something like that.
Speaker 6: But then of course they bought a lot of really
Speaker 6: bad mortgages and the run up to the Great Financial
Speaker 6: Crisis and basically went bankrupt and the government had to
Speaker 6: bail them out, and they did and have put them
Speaker 6: into conservatorship is what they did. But the way they
Speaker 6: did it was they still left shares outstanding, and so
Speaker 6: a lot of people who a lot of hedge funds
Speaker 6: got into the business of buying up Fanny and Freddy
Speaker 6: shares at pennies on the dollar and have been sitting
Speaker 6: on them for seventeen years now. And the Biden administration
Speaker 6: and the Obama administration had no desire to bring them
Speaker 6: out of conservatorship. But the Trump administration seems bound and
Speaker 6: determined to do that. They've been talking about it since
Speaker 6: he came back to office. It's complicated, it will be difficult.
Speaker 6: But boy, if you were Bill Ackman or John Paulson
Speaker 6: pretty happy today, you're pretty happy today.
Speaker 5: Yeah.
Speaker 7: Well.
Speaker 4: Trump also met with the CEOs of Bank of America
Speaker 4: City Group earlier this week, and then last week Bloomberg
Speaker 4: News had a reported that he met with Jamie Diamond
Speaker 4: and David Salman over at Goldman Sachs Group. So I'm
Speaker 4: wondering how difficult will it be to pull off a
Speaker 4: potential feet here when we're talking about an IPO.
Speaker 6: Well, it's not so much the selling the shares, although
Speaker 6: it has to be designed in a sort of specific way,
Speaker 6: because the government owns eighty percent of the shares right now.
Speaker 6: And one of the big questions is are you going
Speaker 6: to put the companies into receivership and basically bankrupt all
Speaker 6: the existing shareholders, which is what you normally do with
Speaker 6: a company that's going to come out of bankruptcy, or
Speaker 6: do you leave them with equity in the new company
Speaker 6: and then they make a huge profit. But the biggest
Speaker 6: problem is that because they have been owned by the government,
Speaker 6: and before that there was an implicit guarantee by the government,
Speaker 6: rates were low. You didn't demand an extra premium because
Speaker 6: you knew that they were insured and they were gonna
Speaker 6: get paid. You were going to get paid either way
Speaker 6: because the government would step in. And so if the
Speaker 6: government steps out and lets this be a private company,
Speaker 6: then maybe mortgage rates are going to go up, and
Speaker 6: things like the mortgage rate lock when you lock in
Speaker 6: a mortgage that could go away. So there are a
Speaker 6: lot of questions about how this would be handled, and
Speaker 6: that's one of the reasons it's very complex. Jesse we're
Speaker 6: talking about the bank's meeting with the president. They're looking
Speaker 6: apparently for a lead underwriter. Now, this is going to
Speaker 6: be a huge sale, so they would, I'm sure, have
Speaker 6: a consort, but somebody's got to be the lead, and
Speaker 6: you know, not pauls and act and are going to make.
Speaker 2: Mike I feel like so many things this year we
Speaker 2: are saying are complicated. But I do wonder that it
Speaker 2: would be a very different entity. Both of them would
Speaker 2: be different entities if they are publicly held and it's
Speaker 2: not that quasi public private that we've seen.
Speaker 3: Correct.
Speaker 6: Yeah, and nobody quite knows how this will play out
Speaker 6: because you you would worry that rates will go up
Speaker 6: if they don't have a government guarantee. But does the
Speaker 6: government want to stay in the guarantee business if it's
Speaker 6: a private company and we're basically subsidizing their low rates
Speaker 6: and their profits. So it's a tough call the administration.
Speaker 6: This administration is very much a free market, you know,
Speaker 6: get the government out of business stuff. So they're in
Speaker 6: favor of this, as are some of Donald Trump's biggest
Speaker 6: campaign downers. But it's not going to be easy to
Speaker 6: put it all together, and a lot of people in
Speaker 6: the mortgage industries have been concerned about it. I don't
Speaker 6: wan say they're worried, but they are concerned because, as
Speaker 6: they know, it's a complex issue.
Speaker 2: Complex and so not a given that this ultimately plays out.
Speaker 2: Mike McKee, thank you, thank you, and not all just smart.
Speaker 3: That's what we love to have them on.
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Speaker 2: All right, we're going to continue on the geopolitical because
Speaker 2: it really seems to be a major theme when we
Speaker 2: look at what's going on today.
Speaker 3: Joining us now is Wendy.
Speaker 2: Cutler, vice president of Asia Society Policy Institute. She joins
Speaker 2: us from San Diego. Wendy, is so good to have
Speaker 2: you here. We just did kind of a rundown from
Speaker 2: our genda LOOI in terms of all the stuff that
Speaker 2: is going on. You know, I want that whiteboard US, China, India,
Speaker 2: Russia around. Talk to us a little bit about the
Speaker 2: news coming out of the news flow, about geopolitics and
Speaker 2: the US role and what they're trying to do. So,
Speaker 2: maybe we start with Russia because it is curious whether
Speaker 2: or not something will ultimately get done to end this war,
Speaker 2: because it does seem like President Putin is going to
Speaker 2: stand pretty pat when it comes to his demands.
Speaker 3: Look, it's unclear how this is all going to.
Speaker 8: Develop, but it's clear that the President is very determined
Speaker 8: to use his office to try and broker a cease fire.
Speaker 8: What I'm watching on the trade front, however, is how
Speaker 8: this may impact our relations with India right now, because
Speaker 8: we are in a twenty one day period where the
Speaker 8: President has threatened to increase India's tariffs by an additional
Speaker 8: twenty five percent, taking them to fifty percent, due to
Speaker 8: their purchases of Russian oil. But perhaps if indeed there's
Speaker 8: some progress made with Russia that will provide an opening
Speaker 8: to remove this threat and impending terrif hike.
Speaker 4: Talk to us more about this would mean for say
Speaker 4: India's relationship with Russia, or maybe even China's relationship when
Speaker 4: it comes to Russia as well.
Speaker 8: Yeah, so for India in particular. Look, we've spent twenty
Speaker 8: odd years trying to strengthen our relations with India. The
Speaker 8: past two weeks. The relationship has been spiraling downward and
Speaker 8: it's going to be hard to rebuild. And I think
Speaker 8: in many respects India is going to gravitate, you know,
Speaker 8: not in a major way, but gradually more towards China
Speaker 8: and Russia, viewing US as an unreliable partner.
Speaker 3: So that's what I want to ask you.
Speaker 2: I mean, I like to remind or have someone remind
Speaker 2: us about why it is so important that the US
Speaker 2: continue to have positive relations in a positive relationship with India.
Speaker 2: Remind us about that and what be at risk if
Speaker 2: India is much more aligned.
Speaker 3: With China rather than the United States.
Speaker 8: Well, we have looked to India as the counterweight to China,
Speaker 8: both on the strategic front but also on the economic front.
Speaker 8: On the economic front, we have been encouraging our companies to,
Speaker 8: you know, to leave China, and one of the destinations
Speaker 8: they've been gravitating towards is India. So many US companies
Speaker 8: now are expanding their operations in India. And you know,
Speaker 8: if relations start going south, this is all kind of
Speaker 8: you know, throws things up in the air. And the
Speaker 8: last thing the US business community needs right now is
Speaker 8: more uncertainty. There's enough uncertainty with all of these tariff
Speaker 8: announcements coming out on a daily basis.
Speaker 4: Do you think there's been long term damage with that
Speaker 4: bilateral relationship?
Speaker 3: Absolutely?
Speaker 8: Again, you know, you could you spend years and years
Speaker 8: building a relationship, building trust, but it can take just
Speaker 8: a matter of hours or days.
Speaker 3: To to break.
Speaker 8: That trust and so rebuilding it is not going to
Speaker 8: happen in a matter of hours or days. And we're
Speaker 8: not just seeing this with India. I'm just back from
Speaker 8: Japan and I'm kind of hearing the same thing that
Speaker 8: you know, the Japanese have been a very strong ally
Speaker 8: or looking at the past couple of months and how
Speaker 8: they've been, in their view, kind of jerked around in
Speaker 8: these trade negotiations and are also talking about like developing
Speaker 8: some kind of Plan B where they become less reliant
Speaker 8: on the United States. So this is long term implications
Speaker 8: and again hard to rebuild trust, you know, in a
Speaker 8: short period of time.
Speaker 2: You know what has happened here because when the President
Speaker 2: came back to the White House earlier this year, he
Speaker 2: did look set to build upon kind of the warm
Speaker 2: ties he had with Prime Minister Mody during his first term.
Speaker 2: He had called the relationship the best it's ever been
Speaker 2: between two leaders of the two countries, and the Prime
Speaker 2: Minister called President Trump my dear friend. Is this just
Speaker 2: I don't know, gamesmanship. I try to kind of understand,
Speaker 2: and you know, what we hear, what we see sometimes
Speaker 2: and then what's you know, a new set of headlines
Speaker 2: that show something very different. So should we take this
Speaker 2: at face value that the relationship really is breaking down
Speaker 2: or is it just the negotiating process between leaders of
Speaker 2: two really important countries.
Speaker 3: Well, look, a few.
Speaker 8: Weeks ago everyone was saying we were on the verge
Speaker 8: of an early trade deal with India, and there was
Speaker 8: a lot of optimism about that, and somehow the trade
Speaker 8: deal got derailed. It could be that the US was
Speaker 8: asking for more but a combination of India couldn't make
Speaker 8: those couldn't meet our last few requests, particularly in the
Speaker 8: agriculture sector, which is very sensitive for them. But I
Speaker 8: don't think that's the whole picture. Obviously something happened that
Speaker 8: made the President extremely frustrated. Maybe he got the numbers
Speaker 8: of how much oil India continues to buy from Russia
Speaker 8: and that you know, somehow rubbed him wrong way. But again,
Speaker 8: the words he's been using towards India. I don't think
Speaker 8: this is something that you just turn around overnight. It's
Speaker 8: pretty deep right now, and if you talk to the
Speaker 8: Indian officials or the Indian public, I think that there
Speaker 8: is a lot of deep seated anger and frankly, you know,
Speaker 8: they don't really understand how this spiral down so quickly either.
Speaker 4: What are your eyes on next? When it comes to
Speaker 4: a timetable, I know August twelfth, that's that deadline for
Speaker 4: the decision on Chinese tariffs coming up soon.
Speaker 8: Exactly next Tuesday is key, I would I'm counting on
Speaker 8: that we will roll over the tariff truce that we
Speaker 8: achieved with China ninety days ago, and then I think
Speaker 8: we are going to see a continuation of negotiations with
Speaker 8: China to try and see if we can do some
Speaker 8: kind of deal with them in the lead up to
Speaker 8: a possible meeting or visit by the President to China
Speaker 8: around the Korea APEC meeting in late October.
Speaker 2: What I wanted to ask you is just to kind
Speaker 2: of wrap up here, Wendy, and again devils in the details.
Speaker 2: We'll see what ultimately happens and whether or not they
Speaker 2: come back to the table and they become friends again.
Speaker 2: But I guess if there is a broken relationship, which
Speaker 2: is how it seems right now, and that lasts longer term,
Speaker 2: what's the cost to the United States with India.
Speaker 8: Yeah, yeah, look, the cost is, you know, we we
Speaker 8: have damaged a relationship with an extremely important partner that
Speaker 8: is only becoming more important on the global stage, and
Speaker 8: particularly at a time when we want to diversify away
Speaker 8: from China.
Speaker 3: This does present serious concerns. How much is China watching
Speaker 3: this in your view?
Speaker 8: Oh, very very closely, And I would expect that China
Speaker 8: is going to make overtures to India right now in
Speaker 8: an effort to bring India more in their camp. Now
Speaker 8: let's form Let's keep in mind though China India relations
Speaker 8: historically have never been good, and so I don't expect
Speaker 8: India to move to the China camp. But again, I
Speaker 8: think they're going to hedge their bets and view the
Speaker 8: US as less reliable and gravitate both towards Russia and China.
Speaker 2: Franklin, and even that they could possibly talk, or that
Speaker 2: we're even talking about them possibly talking, is just shows
Speaker 2: that things could possibly be shifting.
Speaker 3: Wendy so Glad we could get.
Speaker 2: Some time with you on this Friday, a very very
Speaker 2: busy friday, certainly when it comes to geopolitics. Wendy Cutler
Speaker 2: back with us. She is vice president of Asia Society
Speaker 2: Policy Institute.
Speaker 3: Joining us from San Diego. Wendy, thank you again.
Speaker 1: This is the Bloomberg Business Week Daily Podcast. Listen live
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Speaker 2: We're going to go back to geopolitics, although this really
Speaker 2: plays into geopolitics as well. We're going to get to
Speaker 2: Israel saying it will take control of Gaza City. It's
Speaker 2: a move that could displace one million Palestinians leaving there.
Speaker 2: Let's get to the latest on what we are seeing,
Speaker 2: what we are hearing. Bloomberg News Jerusalem journalist Dan Williams
Speaker 2: is in Jerusalem. So Dan, what are you hearing about
Speaker 2: new moves to take control of Gaza? What are you
Speaker 2: seeing in and around?
Speaker 7: Also right now, it's declarative, as you will have read
Speaker 7: on Bloomberg and elsewhere the Israeli security Cabinet that's really
Speaker 7: the top decision making form of the country, the war Cabinet,
Speaker 7: if you like, decided, after a night long debate ten
Speaker 7: hours behind closed doors a four am resolution that they
Speaker 7: would order the storming of Gaza City as part of
Speaker 7: Israel's efforts to end this war with what it would
Speaker 7: define as a victory against Hamas. Now, Gaza City is
Speaker 7: part of the twenty five percent of the Gaza Strip
Speaker 7: yet to be overrun by Israeli tanks and troops, yet
Speaker 7: to be under full control of the Israeli army, and
Speaker 7: moving against it would be a long process, weeks or
Speaker 7: months in the making. It would involve the evacuation, the
Speaker 7: forcible evacuation potentially hundreds of thousand civilians, and then presumably
Speaker 7: laying siege to the Hamas holdouts who are there in
Speaker 7: the thousands. We're told of Hamas fighters, and also potentially
Speaker 7: hostages which they're holding. It's worth remembering Hamas still has
Speaker 7: fifty hostages, most of them from the October seventh attack
Speaker 7: in twenty twenty three that sparked this war. Twenty of
Speaker 7: them are believed to be alive. Previously, these ralies avoided
Speaker 7: entering these areas of the Gaza Strip for fear of
Speaker 7: endangering those hostages. It appears now the gloves are off.
Speaker 7: But with that said, this will not happen immediately on
Speaker 7: the ground. It will require apparently a doubling of these
Speaker 7: RAREI forces deployed that will take potentially a week or
Speaker 7: two to muster in terms of reinforcements, call ups of reservists,
Speaker 7: and that does actually leave a window for Hamas to
Speaker 7: think again about whether its tack in negotiated efforts to
Speaker 7: achieve a ceasefire, perhaps negotiated enter this war needs to change.
Speaker 5: So we will see.
Speaker 7: There are indications that Hamas is sending out feelers that
Speaker 7: it wants to renegotiate or review those negotiations. So until
Speaker 7: we see the tanks and troops moving, all bets are off.
Speaker 4: Hey Dan, how's that Trump administration responded?
Speaker 7: The Trump administration has been openly, openly supportive. We interview
Speaker 7: the US ambassador to Israel just a few days ago,
Speaker 7: and the ambassador made clear that Trump, as he put it,
Speaker 7: is fed up. He actually said, has run out of
Speaker 7: patients with Hamas. With Hamas stonewalling, as Israel and the
Speaker 7: US have described it, in those negotiations, and the US
Speaker 7: wants to see Israel end this war. Now, for the
Speaker 7: Nittanel government in Israel, ending the war means winning it
Speaker 7: through force and the absence of negotiations. However, many Israelis,
Speaker 7: to judge by Poles, would prefer to see this will
Speaker 7: ended by a review of Israel's objectives, basically abandoning the
Speaker 7: objective destroying mass of returning all those hostages in a
Speaker 7: negotiated deal that would keep Amass in power. And basically
Speaker 7: what we have now is a government that's out of
Speaker 7: sync with its people, to judge by the polls, but
Speaker 7: insists that this is what the country needs to guarantee
Speaker 7: its long term security.
Speaker 2: Is it also a government that's out of sync with
Speaker 2: the region and I just think about that, and also
Speaker 2: out of sync with the Abraham Accords right, which we
Speaker 2: know set a series of diplomatic agreements normalizing relations between
Speaker 2: Israel and several Arab nations broken by the US the first.
Speaker 3: Trump administration the first term.
Speaker 2: So are they out of touch to with their partners
Speaker 2: and other Arab nations in terms of what they want
Speaker 2: to see done with Gaza?
Speaker 7: Well, to judge by open statements, absolutely the Palestinian civilian
Speaker 7: suffering in the Gaza strip has become intolerable to many viewers,
Speaker 7: certainly in this part of the world, where it's become
Speaker 7: especially combustible in terms of public opinion. However, oftentimes what's
Speaker 7: said behind the scenes isn't the same and it's the
Speaker 7: same as what's said in public. I'd remind you that
Speaker 7: some ten twelve years ago, WikiLeaks revealed that what was
Speaker 7: being said between US aligned Arab powers and Israel behind
Speaker 7: the scenes to US diplomats was very different to what
Speaker 7: was being said in public. In public, there was talk
Speaker 7: of Palestinians behind the scenes, behind closed doors, the real
Speaker 7: focus of the discussions was Iran. It's also worth remembering that,
Speaker 7: to most assessments, Hamas triggered this war in part because
Speaker 7: it wanted to scuttle those Abram accords Israel and Saudi
Speaker 7: Arabia on the verge of establishing a peace deal. So
Speaker 7: there is that worth remembering. I think everyone would like
Speaker 7: to put this in their rearview mirror. The argument of
Speaker 7: the Hawks in this equation is that the best way
Speaker 7: to do that is to defeat ha mass militarily, even
Speaker 7: if that requires weeks or a few months of intense
Speaker 7: pain all around in the very near future.
Speaker 2: You know, sometimes we forget, you know, war. But as
Speaker 2: you said, there are still hostages Israelis who are held
Speaker 2: hostages hostage by Hamas. There's also Palestinians who don't have
Speaker 2: any homes anymore.
Speaker 3: I mean, where are the residents of Gaza City supposed
Speaker 3: to go?
Speaker 7: They will be evacuated, to judge by the previous course
Speaker 7: of action taken by the Israelis, over several rounds of
Speaker 7: these moves into population centers. They'll be evacuated to an
Speaker 7: air called Al Muwassi that's on the southwestern coast of
Speaker 7: the Gaza Strip. It's a large area of sand dudes
Speaker 7: where the Israelis are convinced Hamas was not able to
Speaker 7: establish bunkers underground tunnel systems and therefore there's no direct
Speaker 7: military threat to concentrating people there. Effectively a very large
Speaker 7: tense city at DP camp if you like. Conditions there
Speaker 7: are not easy at all. It's worth remembering that the
Speaker 7: Americans are now saying that they to quadruple in the
Speaker 7: coming two months, and I think in the coming two
Speaker 7: months that's a timeframe that's meant to work in tandem
Speaker 7: with the Israeli the new is raeally move against Garza City.
Speaker 7: They intend to quadruple the GHF, the Gazi Humanitarian Foundation that,
Speaker 7: as you'll be aware, is a substitute a distribution system
Speaker 7: set up by the Americans and the Israelis in hope
Speaker 7: of sidelining UN agencies, the traditional humanitarian network that their
Speaker 7: accused of being too close to Hamas, effectively propping up
Speaker 7: a mass rules going back, rule going back are years.
Speaker 7: So if the Americans managed to quadruple that GHF operating volume,
Speaker 7: it will go quite a long way to dealing with
Speaker 7: the immediate needs.
Speaker 5: Of those displaced people.
Speaker 7: But obviously, living indefinitely in a camps, in a camp
Speaker 7: that's composed of tents, knowing your house has been destroyed
Speaker 7: not a pleasant prospect for anyone.
Speaker 4: Dan. What's next and what's the window for her ma
Speaker 4: ask to achieve cease fire?
Speaker 7: A ceasefire talks stalled a month ago, and I think
Speaker 7: these rallies and the Americans have made clear that if
Speaker 7: they resume, the terms would be very different what we
Speaker 7: had previously. And they've already been two ceasefires in this
Speaker 7: war with partial hostage releases by Hamas in exchange for
Speaker 7: prisoner releases by Israel increased to aid. That's no longer
Speaker 7: the case. Those were largely instrumental. A ceasefire now would
Speaker 7: be existential. In fact, rather than referring to them as
Speaker 7: ceasefire talks or hostage talks, they'd actually be harmass talks,
Speaker 7: because what's at the essence of the negotiations now is
Speaker 7: whether Hamas gets to stick around. What it tried to
Speaker 7: do is parley another truce of sixty days that was
Speaker 7: proposed into an Israeli guarantee of an enter the war,
Speaker 7: a full withdrawal of Israeli forces. Israel refused that it
Speaker 7: will not withdraw forces. It will not end the war
Speaker 7: until it's objective of seeing Hamas gone is achieved. Ha
Speaker 7: Mass being gone means a total dismantling of the Hamas
Speaker 7: power structure, a removal of the Hamas arsenal, the exiling
Speaker 7: of Hamas leaders abroad. So what these Raelies in Americans
Speaker 7: have been saying is you want more ceasefire talks, Fine,
Speaker 7: but it's an all or nothing deal now, meaning a
Speaker 7: full return.
Speaker 5: Of all of the hostages.
Speaker 7: There's fifty hostages and a full har Mass capitulation, meaning
Speaker 7: you agree consentually to give up your weapons, to give
Speaker 7: up power, and to leave quietly. It's basically the difference
Speaker 7: between forced out or killed in the course of battle
Speaker 7: or captured and leaving consensually in abandoning power. Kind of
Speaker 7: a stark choice for Hamas. It's worth remembering this is
Speaker 7: a group that's shunned by much of the West as
Speaker 7: a terrorist group, and it's accused, including by the way
Speaker 7: in the Middle East, given a resolution passed by the
Speaker 7: Arab League just last week, of having needlessly started this
Speaker 7: war with a very significant attack on Israeli civilians on
Speaker 7: October seventh, twenty twenty three. I'm not sure there's much
Speaker 7: sympathy for them in the region and beyond. There's certainly
Speaker 7: a sympathy for suffering Palestine in civilians, but I think
Speaker 7: a resolution like that where Hamas to surrender would be
Speaker 7: welcomed all around.
Speaker 2: All Right, Thank you so much, Dan, We know it's
Speaker 2: later there in Jerusalem. Thank you so much. Bloomberg News
Speaker 2: Jerusalem journalist Dan Williams.
Speaker 1: In Jerusalem, you're listening to the Bloomberg Business Weekdaily podcast.
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Speaker 2: Man, it's been a busy week when it comes to
Speaker 2: earnings Pinterest, Trede Desk, Expedia, Zillow, Lift, uber geor Dash,
Speaker 2: Jose Alingo, Mountain, Spotify, and then the week before we
Speaker 2: had Booking, Amazon Meta in Alphabet. The next guest covers
Speaker 2: all of these companies. He is someone that is a
Speaker 2: must read on Wall Street, closely followed certainly by our
Speaker 2: Bloomberg community. Mark Mahaney is Senior Managing director and head
Speaker 2: of Internet Research at Evercore ISI from San Francisco. He's
Speaker 2: also the author of Nothing but Net ten, timeless stock
Speaker 2: picking lessons from one of Wall Street's top tech analysts.
Speaker 5: Mark.
Speaker 3: Really great to have you with justin myself.
Speaker 5: How are you, hey, Carol. Nice to hear your voice,
Speaker 5: Nice to see you.
Speaker 3: Yeah, same here. I mean, it's been quite a week.
Speaker 2: I want to ask you just kind of big broad
Speaker 2: macro because it seems like so much of our world
Speaker 2: is being upended, or at least there's some uncertainties, certainly
Speaker 2: when it comes to various policies tech companies, sectors overall
Speaker 2: definitely called out by the Trump administration. We've seen apples
Speaker 2: Tim Cook at the White House. We've had the Intel
Speaker 2: CEO just this week being called out in a negative
Speaker 2: way by the President this administration. How do you think
Speaker 2: about it broadly in terms of policies and acts and
Speaker 2: actions that are impacting could impact the technology industry and
Speaker 2: the investment potential.
Speaker 9: Well, shoot, I can think of a lot of different
Speaker 9: answers to that question. I think the facts are this
Speaker 9: is the most activist administration when it comes to business,
Speaker 9: maybe since FDR. I don't know, I'm a history of you,
Speaker 9: I'm a student of US history.
Speaker 5: But you're stretching me there.
Speaker 9: But yeah, this is an extraordinarily activist administration. And anyway,
Speaker 9: so I guess that's one. And maybe the most obvious
Speaker 9: factor is tariffs, which are at the end of the day,
Speaker 9: a tax, and so somebody's going to pay that tax,
Speaker 9: and it's either American businesses or it's American consumers. So yeah,
Speaker 9: that's out there. And then yeah, there's a lot of
Speaker 9: pressure or attempts to influence these companies, So that's out
Speaker 9: there too. Look, all of that's part of the backdrop
Speaker 9: that all these CEOs and these executives have to deal
Speaker 9: with they're paid to deal with this, these kind of challenges.
Speaker 9: It's just unusually high, you know, in this administration. The
Speaker 9: backdrop to the tech sector. However, there's some other things
Speaker 9: that are well within their control that are really lifting.
Speaker 9: You know, what's a three year bull market now in
Speaker 9: tech stocks, and that's it's Jenny I and what we're
Speaker 9: seeing in terms of reduced costs and improved processes and
Speaker 9: improve products and solutions and offerings, it's really you know,
Speaker 9: we're going through a major supercycle here when it comes
Speaker 9: to Jenny I. I know it's been over hyped at times,
Speaker 9: but there's a lot of reality behind it. And there's
Speaker 9: some companies that have had really good stock price performance
Speaker 9: decisely because they're perceived as JENNII winners.
Speaker 4: That's right. And of course, when you're talking about AI
Speaker 4: have to bring up a semiconductor and chip maker's stocks.
Speaker 4: When you think about the juxtaposition between former President Biden's
Speaker 4: types of policies versus Presidents Trump's call just recently for
Speaker 4: one hundred percent tariffs on chips coming into the US,
Speaker 4: will all this make for more robust domestically located semiconductor industry,
Speaker 4: or is that really possible break that down for US.
Speaker 9: I'm not sure I've got a really thoughtful, educated answer
Speaker 9: to that question. You're asking a you're asking whether if
Speaker 9: you want to promote US manufacturing, particularly in what are
Speaker 9: considered to be highly strategic industries, whether it's better to
Speaker 9: use incentives and subsidies. I think that crudely explains the
Speaker 9: Biden administration policy, or whether it's better to use tariffs
Speaker 9: and broadby companies to come back into the US.
Speaker 5: And I'm not sure.
Speaker 9: I mean, they're both active government policies into businesses, and
Speaker 9: so I'm not sure. It is just an interesting step up.
Speaker 9: I mean, we had a laissez faire economy. Generally government
Speaker 9: stays out of the way of a business, and you know,
Speaker 9: we've had a lot of what I look, I'm out
Speaker 9: here in tech Land. Most of these companies are out
Speaker 9: here and they've been very successful, run by entrepreneurs.
Speaker 5: They come from different parts of the world.
Speaker 9: They come to California area and other parts of the US,
Speaker 9: and they create these extraordinary businesses and they've.
Speaker 5: Done it on their own.
Speaker 9: I mean, there's always some help there, but they've pretty
Speaker 9: much done it on their own and I think that's
Speaker 9: actually created a really good situation for people in this country.
Speaker 5: I hope we don't I hope we don't spoil that.
Speaker 2: Well, let's get to some of the numbers that we
Speaker 2: got this week and certainly the week before. I caught
Speaker 2: some of your calls following the updates Zillo was out
Speaker 2: this week. You raised your price target on it uber
Speaker 2: to you raised your price target on that one to
Speaker 2: one fifty. Door Dash you uped it to three sixty
Speaker 2: the price target. What companies results show to you kind
Speaker 2: of a more interesting investment thesis as a result, either
Speaker 2: this week or last week, when we got some of
Speaker 2: the big major tech names.
Speaker 5: Well, I like to set up on a question.
Speaker 9: So where I thought we had some just really surprisingly
Speaker 9: constructive positive results.
Speaker 5: I thought door Dash was in that list.
Speaker 9: We had some record high operating margins out of that company.
Speaker 9: Meta was definitely in that list, and most of the
Speaker 9: other names.
Speaker 5: I thought those are kind of two standout companies. Maybe
Speaker 5: Booking dot Com was in that list too.
Speaker 9: The other names, uh, you know, we had some good
Speaker 9: prints out of names like Google. We had some good
Speaker 9: prints out of names like uh, you know, Amazon, But
Speaker 9: but but the really strongest, kind of cleanest prints there were,
Speaker 9: there were a few in there, and.
Speaker 5: I would put uh, I'd put booking in.
Speaker 9: There, door dash and yeah, those would probably be at
Speaker 9: the top of the list. And and if you just
Speaker 9: step back, because you've asked you we started off talking
Speaker 9: about some of these macro concerns, and these companies give
Speaker 9: you a very broad read into the economy they do,
Speaker 9: into consumer demand, into some enterprise demand. And if I'd
Speaker 9: use one single word to describe the results of this
Speaker 9: earning season.
Speaker 5: It's resilience.
Speaker 9: It's not like we had a positive inflection, though there
Speaker 9: are a few cases where that happened, but generally, the
Speaker 9: overall view is that spend has been relatively resilient and
Speaker 9: it's at a relatively robust level for these companies.
Speaker 5: It's this may change in the back half of the year,
Speaker 5: but so far, so far, so good.
Speaker 3: Mark, You're comfortable with Meta in particular.
Speaker 2: I mean, we had some news today too that they
Speaker 2: have selected Pimco on Blue Owl Capital to lead a
Speaker 2: twenty nine billion dollar financing for their data center expansion
Speaker 2: in rural Louisiana. It's all about the race for AI infrastructure.
Speaker 2: We know that this is according to people familiar that
Speaker 2: major mega spend and the talent grab and what they're
Speaker 2: spending for AI talent meta, you're comfortable with all of it.
Speaker 5: Well, I guess if they.
Speaker 9: Keep putting up prints that we keep putting up a
Speaker 9: fundamental result like they are doing where they're using AI
Speaker 9: to improve their cost structure but also to improve their products,
Speaker 9: like you're getting an ROAI, you know, return on ROI,
Speaker 9: return on investment ROAI return on all that AI capex
Speaker 9: spend and op x spend. They took their revenue growth
Speaker 9: and they reaccelerated it despite being at the scale that
Speaker 9: they're at, you know, one hundred and fifty billion ROUGHLYET
Speaker 9: revenue run rate. They took they took their revenue growth
Speaker 9: and accelerated to twenty percent.
Speaker 5: They didn't come out of nowhere.
Speaker 9: They were using AI to better target ad campaigns and
Speaker 9: so marketers are getting a better return on their meta
Speaker 9: ad spend and in consumers are finding the service better.
Speaker 9: I mean, the evidence is that they're spending more time
Speaker 9: with META, they're spending more time with Instagram. There's nothing
Speaker 9: more objective than just time spent. So they've been able
Speaker 9: to Meta has been able to use all that AI
Speaker 9: investment to improve their product, to improve their service. And yeah,
Speaker 9: so if you keep doing that, you absolutely you earned
Speaker 9: the right to spend more, to invest more.
Speaker 3: All Right, We've got to run unfortunately.
Speaker 2: Thank you so much, and I really appreciate you going
Speaker 2: macro with us and then also drilling down a little
Speaker 2: bit on some of the companies.
Speaker 3: So appreciate it. Mark Mahaney.
Speaker 2: He's Senior Managing Director, head of Internet Research over at
Speaker 2: Evercore ISI, author of Nothing but Net ten timeless stock
Speaker 2: picking lessons from one of Wall Street's top tech analysts.
Speaker 2: Joining us out there out West.
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