WEBVTT - Smead Sees Fed, Markets 'Dichotomy' 0:00:01.800 --> 0:00:04.440 This is Bloomberg Business Week. I'm Carol Masser and I'm 0:00:04.480 --> 0:00:07.280 Bloomberg Quick Takes Tim Stanovk. We're here every day bringing 0:00:07.320 --> 0:00:09.840 you the latest news from the world to business and finance, 0:00:09.840 --> 0:00:13.680 plus technology, politics, economics, all purtnising the power of Business 0:00:13.680 --> 0:00:17.159 Week reporters and editors, not to mention our journalists and 0:00:17.120 --> 0:00:20.000 analysts in more than one twenty countries. You can download 0:00:20.040 --> 0:00:23.239 Bloomberg Business Week on iTunes, SoundCloud, or Bloomberg dot Com. 0:00:23.440 --> 0:00:25.200 You can also listen to our radio show at two 0:00:25.200 --> 0:00:28.360 pm Eastern Time on Bloomberg Radio or watch us on YouTube. 0:00:28.400 --> 0:00:32.159 Search Bloomberg Global News. You're listening to Bloomberg Business We've 0:00:32.200 --> 0:00:35.000 We've just got about eleven minutes, a little bit under 0:00:35.040 --> 0:00:37.600 eleven mids left in today's trading session. We've bounced around, 0:00:37.600 --> 0:00:40.000 but we definitely have Charlie mentioned him. We firmed up 0:00:40.040 --> 0:00:42.680 when it comes to the equity trade post that fed 0:00:42.760 --> 0:00:46.120 announcement and j Pal presser yields. They went up a 0:00:46.120 --> 0:00:48.839 little bit, they're back down and they're just down as 0:00:48.840 --> 0:00:51.239 smidge as we look along the yel curve. Let's get 0:00:51.360 --> 0:00:53.880 right into all that and more with Cole Smed, President 0:00:53.920 --> 0:00:56.720 and Portfolio manager at Smead Capital Management. He joins us 0:00:56.720 --> 0:01:00.520 now on the phone from Phoenix, Arizona, Cole your reaction 0:01:00.640 --> 0:01:02.360 to what we heard from the f O m C 0:01:02.720 --> 0:01:07.920 and Fedhare Palace press conference just now? I J. Powell 0:01:08.040 --> 0:01:11.360 reminds me of Kevin Bacon and Animal House. While he's 0:01:11.480 --> 0:01:14.720 yelling at everyone, all is well, all as well as 0:01:14.840 --> 0:01:18.720 chaos has ensuing on main Street, and eventually Kevin Bacon 0:01:18.800 --> 0:01:21.800 they show later in the scene that he's completely trampled, 0:01:21.840 --> 0:01:24.839 still saying all as well. And I think, Um, that's 0:01:24.920 --> 0:01:30.120 really the the you're saying. You don't think, I don't know. 0:01:30.280 --> 0:01:33.040 You go ask businesses, is all well, they would tell you, no, 0:01:33.280 --> 0:01:37.399 prices are up. Um, businesses are notably concerned about inflation 0:01:37.440 --> 0:01:40.360 in the set, isn't. It's really strange. And there's people 0:01:40.360 --> 0:01:43.119 that are taking risk with their personal income and their 0:01:43.160 --> 0:01:46.480 their personal capital. Um think that's a massive risk, and 0:01:46.520 --> 0:01:49.440 the people that aren't taking risk with their personal capital don't. Well, 0:01:50.680 --> 0:01:53.120 that's quite a dichotomy. One thing that really stuck out 0:01:53.160 --> 0:01:57.800 to me was was what Powell actually thinks transitory means 0:01:58.120 --> 0:02:00.840 and the definition of transitory. He's said that it doesn't 0:02:00.920 --> 0:02:03.840 it means not, it means it's something that doesn't leave 0:02:03.880 --> 0:02:07.120 a permanent mark, so not necessarily the prices will go 0:02:07.240 --> 0:02:09.880 back down, which is what I think a lot of 0:02:09.880 --> 0:02:13.480 people perhaps had in mind lumber. There's been a lot 0:02:13.520 --> 0:02:16.560 of commodities that have gotten has made that point that 0:02:17.240 --> 0:02:22.440 perhaps lumber notwithstanding, but you know, corect lumber, lumber has 0:02:22.480 --> 0:02:26.120 gone down. However, we're at the highest sustained falloff in 0:02:26.200 --> 0:02:29.400 lumber ever. I mean, it's just we're off the charts 0:02:29.880 --> 0:02:32.040 in terms of where we are in lumber prices relative 0:02:32.080 --> 0:02:34.800 to the last thirty years. So, um, you know, we 0:02:34.800 --> 0:02:37.080 we this was the high back in eight teen on 0:02:37.160 --> 0:02:40.720 lumber prices, roughly speaking, Um, this was the high and 0:02:40.720 --> 0:02:42.760 that was the highest point we've ever seen really since 0:02:42.840 --> 0:02:45.680 ninety four. Inflation adjusted nine to four is bigger. But 0:02:45.720 --> 0:02:48.639 I just say that because you know, yes, lumber fall 0:02:48.720 --> 0:02:50.560 has fallen off. We're just at the highest heights we've 0:02:50.560 --> 0:02:53.480 ever been on that commodity. So I think housing, by 0:02:53.520 --> 0:02:56.280 the way, is the poster child of inflation. Um, go 0:02:56.360 --> 0:02:59.480 back to deflation eight oh nine. What was the lead story? 0:02:59.560 --> 0:03:02.040 It was, how using deflation that's why we had deflation 0:03:02.040 --> 0:03:04.799 the US economy. Go back to the nineteen seventies new 0:03:04.840 --> 0:03:09.079 home builds, existing homebuilds. They did, they had more pricing 0:03:09.080 --> 0:03:12.120 power than cp I did. No words. My theory is 0:03:12.120 --> 0:03:14.960 that housing actually tells us more about the future than 0:03:15.000 --> 0:03:16.960 cp I does. And by the way, just so everyone's 0:03:16.960 --> 0:03:20.600 on the same page, thirty of CPI is housing related 0:03:20.960 --> 0:03:25.280 and over that is tied to owner ownership of houses. 0:03:25.639 --> 0:03:27.720 And I think that's really where the CPI data is wrong. 0:03:27.760 --> 0:03:32.160 It's understating the pricing increases of housing because the SET 0:03:32.200 --> 0:03:35.000 is using or the the BLS is using surveys, they're 0:03:35.040 --> 0:03:40.200 not using transaction based data. We could go on and 0:03:40.240 --> 0:03:42.160 on about this spot whether or not inflation is real, 0:03:42.200 --> 0:03:43.920 and I guess time will tell whether or not it 0:03:44.040 --> 0:03:46.640 is transitory if we start to see I don't know. 0:03:47.040 --> 0:03:49.600 I feel like Cole, it's safe to say that we 0:03:49.640 --> 0:03:52.280 don't have a true transparent picture quite yet. Because we 0:03:52.320 --> 0:03:55.360 have unprecedented stimulus thanks to the FED, thanks to the 0:03:55.440 --> 0:03:58.400 US government, thanks to a lot of things. Right now, 0:03:58.600 --> 0:04:01.280 we don't have people all completely back in the workforce. 0:04:01.320 --> 0:04:03.720 We heard j p Will talk about that. I feel 0:04:03.720 --> 0:04:06.080 like it's very hard to really understand what's going on 0:04:06.120 --> 0:04:10.960 in the economy and the inflationary story until things start 0:04:11.000 --> 0:04:15.400 to settle down without all these uh kind of extra 0:04:15.880 --> 0:04:19.880 factors that are distorting some of the data points. And 0:04:19.920 --> 0:04:21.599 don't just I mean, don't you know, we're not going 0:04:21.640 --> 0:04:24.360 to know how bad or good things are until the future. 0:04:24.760 --> 0:04:27.440 That's a great part, it's all unknowable. UM. The beautiful 0:04:27.520 --> 0:04:30.880 part to your guys life in the media realms as 0:04:30.920 --> 0:04:33.600 well as ours in the professional realm is UM. Security 0:04:33.600 --> 0:04:36.320 prices are a great, great way to arbitrate an unknown future. 0:04:36.839 --> 0:04:39.080 And so we just look at and and look at 0:04:39.080 --> 0:04:42.720 the opportunities we get in more asset intensive businesses like UM, 0:04:42.760 --> 0:04:46.760 home building, like the energy business, like mall rates where 0:04:46.920 --> 0:04:50.480 we think the benefits of the unknown future are greatly 0:04:50.560 --> 0:04:54.000 underpriced UM. And that's that's you know, I could be 0:04:54.040 --> 0:04:56.479 completely wrong on interest rates and we can make great 0:04:56.520 --> 0:04:58.880 money and common stocks UM at a time that we 0:04:58.920 --> 0:05:00.360 just don't think that's going to be brought the true 0:05:00.360 --> 0:05:02.520 for most investors. So it's at to your point, Carol, 0:05:03.080 --> 0:05:05.200 this is such a fun industry in business to be 0:05:05.279 --> 0:05:09.279 in because the future is always unknown, right, and very entertaining. 0:05:09.360 --> 0:05:11.599 I just think of take, you know, the last twenty 0:05:11.680 --> 0:05:13.440 years or some some of the different cycles we've seen 0:05:13.480 --> 0:05:16.080 in terms of booms and busts, right where something can 0:05:16.160 --> 0:05:19.839 go up to extraordinary levels and then of course either 0:05:19.880 --> 0:05:23.000 because of froth and too much money chasing too few assets. 0:05:23.000 --> 0:05:24.960 Of course, the you know, the bubble bursts, and we've 0:05:25.000 --> 0:05:27.720 seen that. I guess I just don't know yet, having 0:05:27.760 --> 0:05:31.240 seen lots of market cycles like you guys have, I'm 0:05:31.279 --> 0:05:33.280 just waiting to see how this this one pans out. 0:05:33.320 --> 0:05:36.400 I'm not quite sure yet. Well, And I think one 0:05:36.400 --> 0:05:38.240 of the things that I don't think that you're you're 0:05:38.240 --> 0:05:40.239 not hearing the said talk about this at all because 0:05:40.240 --> 0:05:43.120 it's it's just it's hard to model. But what are 0:05:43.160 --> 0:05:46.200 demographics doing in our economy? For example, there have been 0:05:46.200 --> 0:05:48.960 some big changes in last year, just without talking prices. 0:05:49.320 --> 0:05:51.680 You've had a group of millennials wake up and decide 0:05:51.720 --> 0:05:54.640 that houses are actually pretty awesome in the suburbs and 0:05:54.800 --> 0:05:58.440 use cars are pretty awesome as well, right after years 0:05:58.440 --> 0:06:01.320 of people saying huge leennials are never going to buy homes, 0:06:01.480 --> 0:06:03.599 they're never going to buy cars, and guess what I mean, 0:06:04.640 --> 0:06:07.440 they do? They did. And by the way, it just 0:06:07.520 --> 0:06:10.839 happens to be the biggest demographic going through the consumption 0:06:10.920 --> 0:06:14.480 years of the U s economy since the late sixties 0:06:14.480 --> 0:06:18.159 and early seventies. It kind of sounds odd, right, but 0:06:18.720 --> 0:06:20.800 and that was the opposite of peril to your point. 0:06:20.800 --> 0:06:23.000 I mean, oh, five, we're building houses for no one. 0:06:23.400 --> 0:06:27.120 We had less gen xers, and what we're gonna do 0:06:27.160 --> 0:06:29.520 is build houses for no one that was there. Um, 0:06:29.560 --> 0:06:32.160 that was the opposite. That was the dull drums of demographics, 0:06:32.200 --> 0:06:34.359 and therefore the economy was greatly affected by it. All right, 0:06:34.560 --> 0:06:38.200 So where are you committing money? Your value? Guy? You're 0:06:38.200 --> 0:06:41.120 gonna like the value like is are you finding opportunities? 0:06:41.160 --> 0:06:46.080 Finally we are? And and uh, that's just it's probably 0:06:46.120 --> 0:06:49.400 the most contentious thing that that we've been buying his energy, 0:06:49.440 --> 0:06:51.479 and we've been buying it the last year we went 0:06:51.520 --> 0:06:54.640 from we went from very few names. We continue to 0:06:54.640 --> 0:06:56.840 add more. We have a fourth name that we haven't 0:06:56.880 --> 0:07:00.600 disclosed yet in our thirteen f but that'll come up soon. Um. 0:07:00.640 --> 0:07:02.400 So the three that that you can see in our 0:07:02.400 --> 0:07:05.159 whole things would be Conico, Philips, Chevron, and Continental Resources. 0:07:06.080 --> 0:07:09.039 The oil business is being left for dead. It's incredible 0:07:09.040 --> 0:07:12.679 economics on the CPI front. Everyone's looking through pricing pressures 0:07:12.720 --> 0:07:16.120 in it. Why shouldn't it be left because the industry 0:07:16.240 --> 0:07:20.000 is acting really rational. They're returning capital, they're not wasting it. 0:07:20.080 --> 0:07:22.840 That's so different. It's like oil people are not being 0:07:22.840 --> 0:07:24.960 oil people. But look at what's happening long term. In 0:07:25.000 --> 0:07:28.000 the auto industry, for example, Look what's happening. Every company 0:07:28.240 --> 0:07:30.560 is committing to net zero right now by you know, 0:07:31.320 --> 0:07:34.440 decades away. But you know you had Mercedes Bends last week. 0:07:35.080 --> 0:07:39.800 Tens of billions of dollars committed this decade to electrification. Um, 0:07:40.480 --> 0:07:45.040 how come you're still optimistic on oil? Where is the energy? Uh? 0:07:45.440 --> 0:07:47.280 Where is the energy needs going to be filled? And 0:07:47.320 --> 0:07:49.120 I say that because we don't do nuclear in the 0:07:49.200 --> 0:07:51.400 United States. Are really in the developed world, Um, we 0:07:51.440 --> 0:07:54.920 don't do hydro power. We're getting rid of marginal hydropower, which, 0:07:54.960 --> 0:07:57.800 by the way, those two are the most green friendly 0:07:58.480 --> 0:08:02.040 things that are present and saw already. Um, from there 0:08:02.040 --> 0:08:04.920 you go to much higher cost projects. So what we 0:08:05.000 --> 0:08:08.800 do know is we are going to higher cost energy forms. Surely, 0:08:09.240 --> 0:08:13.400 the question is how high? And if if green alternatives 0:08:13.440 --> 0:08:17.040 are adopted sooner, what it does It makes oil and 0:08:17.040 --> 0:08:20.080 gas more expensive because the market is effectively moving prices 0:08:20.160 --> 0:08:23.080 higher for energy needs. And that's just pure energy then 0:08:23.160 --> 0:08:25.680 from there you could arbitrate how much of that's combustion, 0:08:25.760 --> 0:08:28.840 how much of that's electricity. But the policies that are 0:08:28.840 --> 0:08:32.040 being laid out is limiting supply of new investment for energy, 0:08:32.480 --> 0:08:34.920 and that is taking prices higher. No one thought we'd 0:08:34.920 --> 0:08:38.280 be at seventy plus w T I R. Brandt right now. 0:08:38.640 --> 0:08:41.880 And guess what we think we're going to hundred? Okay, alright, 0:08:42.000 --> 0:08:43.720 So give us a name, Give us a name that 0:08:43.800 --> 0:08:47.760 you that you'd be putting money to. Continental Resources with 0:08:47.840 --> 0:08:51.320 the stewardship of Harold Ham is one of the most 0:08:51.320 --> 0:08:55.120 incredible risk word relationships we've ever seen. Um, we get 0:08:55.120 --> 0:09:00.000 like four barrels of oil per share and you know what, Uh, 0:09:00.360 --> 0:09:02.439 we love that business and and we're one of the 0:09:02.480 --> 0:09:05.320 large shareholders there and we couldn't be more pleased by 0:09:05.360 --> 0:09:08.280 the stewardship. Like I said earlier, what they're doing with 0:09:08.559 --> 0:09:12.040 their projects, what they're doing to invest um. There there 0:09:12.200 --> 0:09:14.240 is some people that are doing good things and there 0:09:14.280 --> 0:09:16.400 are some people that are stuck in a hole from 0:09:16.440 --> 0:09:19.000 the problems the last few years. There will be consolidation. 0:09:19.080 --> 0:09:23.000 But Continental Resources in an ideal position right now. Uh. 0:09:23.040 --> 0:09:25.760 And is there just quickly five seconds ten seconds. A 0:09:25.760 --> 0:09:29.680 housing name that you like, uh d r Horden. I 0:09:29.679 --> 0:09:32.959 mean watching people worry about what's going on in Texas 0:09:32.960 --> 0:09:36.280 with their business. We're just we're just absolutely excited about 0:09:36.280 --> 0:09:39.080 the future in their business. But also the housing business. 0:09:39.200 --> 0:09:41.760 Land is a game. Land is a game. Who's got land? 0:09:41.760 --> 0:09:44.840 Who can build houses? Good? Check, close, speed, present protfolio Maager, 0:09:44.840 --> 0:09:47.640 It's me Capital Management. They're fun beating just about all 0:09:47.640 --> 0:09:50.480 of its peers year to date as well as over 0:09:50.480 --> 0:09:54.800 the past five years. This is Bloomberg Business Week with 0:09:54.880 --> 0:09:59.240 Carol Masser and Bloomberg Quick Takes Tim Stinovic from Bloomberg 0:09:59.320 --> 0:10:03.360 Radio Well a slew of earnings crossing the Bloomberg have 0:10:03.440 --> 0:10:06.199 nothing going on. We have Facebook, we have four we 0:10:06.240 --> 0:10:08.280 have Qualcom, we have LAMB Research. But what we want 0:10:08.280 --> 0:10:11.040 to focus on now is Facebook. John Orlickman is anchor 0:10:11.080 --> 0:10:13.840 at BNN Bloomberg's The Open, also a correspondent for CTV 0:10:14.080 --> 0:10:16.600 National News. He joins us now on the phone from Toronto. 0:10:16.679 --> 0:10:20.079 Shares in the after hours, John Elickman down more than 0:10:20.400 --> 0:10:22.360 while look close to four percent, they were down as 0:10:22.360 --> 0:10:25.960 low as five percent. What has investors concerned is the 0:10:25.960 --> 0:10:28.600 outlook quote in the third and fourth quarters of one, 0:10:28.600 --> 0:10:31.199 we expect year over year total revenue growth rates to 0:10:31.240 --> 0:10:34.600 decelerate significantly on a sequential basis, as we lacked periods 0:10:34.600 --> 0:10:37.760 of increasingly strong growth. Is that what you think is 0:10:37.840 --> 0:10:40.920 investors concerned right now? Yeah? Tim, I think you hit 0:10:40.920 --> 0:10:43.400 the nail on the head there, because as we came 0:10:43.440 --> 0:10:46.280 into earning season, it felt like we were expecting big 0:10:46.360 --> 0:10:48.920 numbers and we'll talk about just how big they were 0:10:49.000 --> 0:10:53.280 for Facebook during the second quarter. But immediately the company 0:10:53.320 --> 0:10:55.880 comes out and discloses a couple of things. I mean, 0:10:55.960 --> 0:10:58.560 first of all, that they have seen a real surge 0:10:58.600 --> 0:11:02.880 in the business and the possibility that they can't necessarily 0:11:02.920 --> 0:11:05.080 have that same kind of growth as you go into 0:11:05.120 --> 0:11:08.880 the third and fourth quarter, coupled with them really making 0:11:08.880 --> 0:11:12.720 a point of highlighting changes in how the advertising world 0:11:12.760 --> 0:11:15.720 online is working. On Facebook, quite frankly, has been at 0:11:15.720 --> 0:11:19.480 the center of the storm of a push by governments 0:11:19.480 --> 0:11:22.640 and regulators around the world to get away from those 0:11:22.760 --> 0:11:27.160 pefky trackers that have tracked you and me around the 0:11:27.200 --> 0:11:31.600 internet for years, um ad targeting tools that really have 0:11:31.640 --> 0:11:36.320 benefited the Facebook business. So they were up front about that. 0:11:36.880 --> 0:11:40.240 Investors immediately see that, and it takes their attention. I 0:11:40.240 --> 0:11:43.120 think Carol and Tim away from from the headline number, 0:11:43.160 --> 0:11:45.880 which I think is still mind blowing. I know, Carroll, 0:11:46.160 --> 0:11:48.640 I'm found in like this broken record as they look 0:11:48.640 --> 0:11:51.720 at these numbers. Right, I always think maybe we just 0:11:51.840 --> 0:11:55.240 expect a little too much. I mean a little perspective, 0:11:55.280 --> 0:11:58.199 and I understand, but at some point, I mean, it's 0:11:58.240 --> 0:12:02.240 a huge company and then a lot of money. Well, 0:12:02.280 --> 0:12:04.719 this is the challenge. Now. We could have a conversation 0:12:04.800 --> 0:12:08.920 around the business of Facebook, some of the ethical lines 0:12:08.960 --> 0:12:11.239 here that I think a lot of governments and regulators 0:12:11.240 --> 0:12:15.199 want to talk about. But for investors, the problem with 0:12:15.280 --> 0:12:18.880 all of that is if you really honed in on that, 0:12:19.600 --> 0:12:22.320 the reality is you would have left money on the table. 0:12:22.520 --> 0:12:25.600 I mean, we're now talking about revenue in this quarter 0:12:26.080 --> 0:12:29.600 over the last decade growing more than three thousand percent. 0:12:29.920 --> 0:12:31.360 And you know, I was thinking, like I love my 0:12:31.440 --> 0:12:34.480 historical bates and history, and it was it was literally 0:12:34.520 --> 0:12:38.600 around this time two years ago that we were spinning 0:12:38.600 --> 0:12:42.360 in the Cambridge Analytica scandal. To so many people thought 0:12:42.360 --> 0:12:44.560 that would be the end of Facebook, right, John, You're 0:12:44.600 --> 0:12:46.520 so right to him, you know, we were really we 0:12:46.600 --> 0:12:49.400 started having a big conversation around the bust up, the 0:12:49.480 --> 0:12:52.400 break up, all the antitrust concerns. They came out with 0:12:52.520 --> 0:12:55.160 quarterly results. UM I want to say there was a 0:12:55.240 --> 0:12:59.880 similar sort of reaction to what was in front of 0:13:00.040 --> 0:13:03.360 us with the earnings, and stock ended up losing of 0:13:03.400 --> 0:13:06.680 its value. And if you had sold and just walked away, 0:13:07.440 --> 0:13:11.360 you would have missed ultimately more than doubling in the shares. 0:13:11.440 --> 0:13:12.840 I mean, we came in and this is the problem 0:13:12.880 --> 0:13:16.040 with earning season so far this cycle, which is a 0:13:16.080 --> 0:13:18.400 lot of these stocks have been up up in a way, 0:13:18.440 --> 0:13:22.120 they've been trading around all time highs. Facebook is in 0:13:22.160 --> 0:13:24.840 that boat. So even though they're down in the in 0:13:24.880 --> 0:13:28.680 the aftermarket for these legitimate reasons, let's not forget that 0:13:28.760 --> 0:13:32.120 this stock had been rocking and rolling in recent trading sessions, 0:13:32.200 --> 0:13:34.160 right down three and a quarter percent. Now it's up 0:13:34.240 --> 0:13:36.320 thirty six percent. That was at the end of the 0:13:36.320 --> 0:13:38.679 close today a year to date. UM, I do want 0:13:38.679 --> 0:13:41.800 to mention just some earnings crossing PayPal down about four 0:13:42.080 --> 0:13:46.440 point one percent here in the after hours. Uh, and 0:13:46.559 --> 0:13:49.079 they're seeing third quarter revenue six point one five to 0:13:49.160 --> 0:13:51.439 six and a quarter billion dollars. The estimate out there 0:13:51.520 --> 0:13:54.560 is above that at about six point four five billion. Uh, 0:13:54.640 --> 0:13:56.920 the company saying second quarter net revenue was six and 0:13:56.960 --> 0:13:59.920 a quarter that was a little light. The estimate was 0:14:00.000 --> 0:14:02.600 six point to seven billion a just ADPs at buck fifteen. 0:14:02.640 --> 0:14:04.920 That's three cents better than what Wall Street was forecasting. 0:14:05.240 --> 0:14:09.120 It did reaffirm its full year revenue outlook and total 0:14:09.160 --> 0:14:12.760 payment volume for the second quarter three ten point nine 0:14:12.840 --> 0:14:15.400 nine billion. That's above the estimate of two D ninety 0:14:15.440 --> 0:14:17.440 seven point zero eight billion. So I just wanted to 0:14:17.440 --> 0:14:20.080 put that out there and again that stock seeing some 0:14:20.200 --> 0:14:23.520 selling now down about four point seven percent the after hours. Hey, John, 0:14:23.520 --> 0:14:25.920 I wanted to get your thoughts on the metaverse. This 0:14:25.960 --> 0:14:29.480 is something that we know Mark Zuckerberg's obsessed. I'm obsessed. 0:14:29.560 --> 0:14:31.880 I think he's a member, a secret member of the metaverse, 0:14:31.880 --> 0:14:33.720 because he won't exactly tell me what it's all about. 0:14:33.720 --> 0:14:35.040 But I think you know, but if we think about 0:14:35.040 --> 0:14:38.880 what Facebook has acquired in the past, right, it's acquired Instagram, 0:14:39.080 --> 0:14:42.560 it's acquired WhatsApp, it's acquired Oculus, and where it really 0:14:42.560 --> 0:14:46.360 hasn't performed is Oculus. And we know that one area 0:14:46.440 --> 0:14:49.080 that Mark Zuckerberg is really interested in is blending these 0:14:49.080 --> 0:14:51.280 digital and physical worlds and there are hundreds of job 0:14:51.280 --> 0:14:54.520 postings right now for metaverse related jobs. Is this the 0:14:54.560 --> 0:14:57.640 growth area for Facebook? If if growth declines or if 0:14:57.640 --> 0:15:01.800 growth slow, as I should say on the family of Apps. Well, 0:15:01.840 --> 0:15:04.600 I think it's a great question, tim, And one thing 0:15:04.640 --> 0:15:08.440 this company has never done is sit around and wait 0:15:08.520 --> 0:15:12.480 for its bread and butter business too slow. And you know, 0:15:12.520 --> 0:15:15.000 I even think back to when the company went public. 0:15:15.040 --> 0:15:18.720 I mean, let's face it, they have not seen the 0:15:18.840 --> 0:15:23.960 kind of growth in the core Facebook platform that they want, 0:15:23.360 --> 0:15:26.400 and by Instagram is like the best thing they ever 0:15:26.400 --> 0:15:29.800 did exactly. And um, you know, I don't want to 0:15:29.800 --> 0:15:31.960 get too far into the weeds for the audience here, 0:15:32.000 --> 0:15:35.320 but this week when Alphabet, the parent company Google, reported 0:15:35.720 --> 0:15:38.840 they're now breaking out the YouTube numbers, because at a 0:15:38.920 --> 0:15:42.560 certain point you kind of have to. I mean, YouTube 0:15:42.640 --> 0:15:45.960 generated seven billion in revenue in the last three months. 0:15:45.960 --> 0:15:47.800 On its own, it would be one of the largest 0:15:47.840 --> 0:15:52.400 companies in tech. Same story for Instagram, it's still um 0:15:52.520 --> 0:15:55.320 under the bed, right, it's part of the overall Spacebook's 0:15:55.360 --> 0:15:58.840 not telling us exactly how much of the business is Instagram, 0:15:58.920 --> 0:16:01.840 but I think uneducated guests will tell you that a 0:16:01.920 --> 0:16:05.720 lot of the advertising growth is coming from the Instagram platform, 0:16:05.720 --> 0:16:07.400 and then we get to what Tim's talking about, which 0:16:07.440 --> 0:16:11.440 is looked at these other avenues. I would make the argument, 0:16:11.480 --> 0:16:14.960 you know, I don't know if anyone listening has family 0:16:15.040 --> 0:16:18.360 or friends that that is UM toying around with VR 0:16:18.560 --> 0:16:22.120 doing anything with oculus. Slowly but surely, I mean, I 0:16:22.160 --> 0:16:24.400 don't think it had the impact that they might have 0:16:24.480 --> 0:16:29.280 thought initially, but slowly but surely more hardware is making 0:16:29.280 --> 0:16:32.640 its way into people's homes more more often than not. 0:16:32.880 --> 0:16:36.080 I mean, we're we're likely moving in that direction, and 0:16:36.120 --> 0:16:40.480 I think Facebook has a certain amount of patients to 0:16:40.600 --> 0:16:43.200 wait to see how that plays out. I think the 0:16:43.240 --> 0:16:45.360 same you know, you guys just talked about PayPal, Like, 0:16:45.480 --> 0:16:48.400 let's not forget that. Um. Facebook is thinking a lot 0:16:48.440 --> 0:16:53.480 about that digital money cryptocurrency world. They've had starts and 0:16:53.520 --> 0:16:56.480 stops there too, but they're not going to sit around 0:16:56.560 --> 0:16:59.160 and they don't have to. They've got lots of resources 0:16:59.240 --> 0:17:02.000 and lots of money. But until we see a lot 0:17:02.040 --> 0:17:05.600 more developing in terms of you know, what Wall Street 0:17:05.600 --> 0:17:08.560 looks at as material parts of the business, they're really 0:17:08.600 --> 0:17:11.800 just going to look at this as a digital advertising jugger. 0:17:11.800 --> 0:17:14.520 And I don't have direct comparisons to what's happening with Google, 0:17:14.560 --> 0:17:17.760 and I have to say, if you look at the 0:17:17.760 --> 0:17:21.359 Wall Street views coming into this year, they were pretty 0:17:21.400 --> 0:17:24.159 favorable on alphabet and and that that paid off in 0:17:24.200 --> 0:17:27.479 a big way. Facebook also has been, you know, gaining 0:17:27.480 --> 0:17:30.080 ground in the stock market. But this might be a 0:17:30.080 --> 0:17:32.960 bit of a moment for pause that the company's straight out, 0:17:32.960 --> 0:17:35.639 coming out and talking about some of the challenges they 0:17:35.720 --> 0:17:38.240 might have short term and coming up with the same 0:17:38.320 --> 0:17:40.360 kind of numbers they saw. Well, I think you're come last. 0:17:40.400 --> 0:17:42.080 You guys are right to you know, you talked about 0:17:42.080 --> 0:17:44.199 earlier about all this tracking and what the impact is 0:17:44.240 --> 0:17:47.680 on all of that. Facebook anticipating increasing ad targeting headwinds, 0:17:48.240 --> 0:17:50.440 saying growth to slow this year, So that's some of 0:17:50.480 --> 0:17:53.160 the reason why we're seeing some selling a Kurt Wagner saying, 0:17:53.160 --> 0:17:55.200 what's also unclear from the releases why the year of 0:17:55.240 --> 0:17:58.280 a year two year growth rate will be down in 0:17:58.320 --> 0:18:01.200 the second half. Is it's just iOS related or something deeper? 0:18:01.200 --> 0:18:04.280 He says, questions I will be hoping that will be 0:18:04.320 --> 0:18:06.399 answered on the call, John, what would you be asking 0:18:06.400 --> 0:18:09.280 on the call? What do you want to know? Well, 0:18:09.320 --> 0:18:11.240 I think if they could answer some of those questions, 0:18:11.320 --> 0:18:14.160 it would be super helpful. UM. I still would really 0:18:14.200 --> 0:18:18.240 like if they could um share more details on Instagram. 0:18:18.320 --> 0:18:20.080 It would really be helpful for us to get a 0:18:20.119 --> 0:18:23.480 sense on how that platform is doing. UM. We were 0:18:23.560 --> 0:18:26.000 kind of at a a point now where we've got 0:18:26.000 --> 0:18:29.520 a healthy number of publicly traded social media stocks between 0:18:29.680 --> 0:18:34.560 Facebook and Twitter, Pinterest, a Snapchat's parent company, and a 0:18:34.600 --> 0:18:37.879 lot of those companies have seen really strong digital ad growth. 0:18:37.920 --> 0:18:40.199 We saw that with Twitter, we saw it with Snapchat, 0:18:40.600 --> 0:18:44.679 and the biggest download um player on the planet for 0:18:44.800 --> 0:18:49.240 basically a year plus has been Byte Dance owned TikTok. 0:18:49.560 --> 0:18:52.200 And you know, at some point we'll probably talk more 0:18:52.240 --> 0:18:56.399 about their move towards public market. Undoubtedly that is a 0:18:56.520 --> 0:19:00.520 threat to Facebook, and I'm really curious to watch that 0:19:00.600 --> 0:19:04.320 head on battle between call it Instagram and TikTok. They 0:19:04.359 --> 0:19:07.280 likely won't say too much about that, but I think 0:19:07.560 --> 0:19:10.840 anything they say about those factors that they are watching 0:19:10.880 --> 0:19:14.359 as possible headwinds is always just helpful for whether you're 0:19:14.400 --> 0:19:16.480 thinking about where the stock is going or even where 0:19:16.480 --> 0:19:18.480 the business is going. Yeah, if you think Instagram is 0:19:18.480 --> 0:19:21.240 a time stuck, you haven't tried to TikTok. That algorithm. 0:19:21.720 --> 0:19:24.480 That algorithm is unbelievable. I call that a rabbit hole. 0:19:24.520 --> 0:19:30.080 You call nicely, it's it's you gotta h's something. Hey, John, 0:19:30.160 --> 0:19:31.560 I want to go back to something that you were 0:19:31.560 --> 0:19:35.080 talking about a little earlier, the idea of the tracking 0:19:35.080 --> 0:19:37.600 and the ad tracking and what Apple did in its 0:19:37.680 --> 0:19:40.320 latest version of its mobile operating system, the latest version 0:19:40.359 --> 0:19:43.520 of iOS. Is that an issue that investors should be 0:19:43.520 --> 0:19:47.919 more worried about. Is Facebook warning enough about the implications 0:19:47.960 --> 0:19:52.120 of not being able to track users across different apps? Well, 0:19:52.160 --> 0:19:55.359 I think they'll have to focus on their messaging because 0:19:55.440 --> 0:19:58.240 to your point about Apple, Apple has seen an opportunity 0:19:58.280 --> 0:20:02.600 in the marketplace to market that very fact um, and 0:20:02.880 --> 0:20:06.480 you know that's that's a pretty worthy adversary. So I 0:20:06.480 --> 0:20:09.159 would I would say if you were Facebook, you you 0:20:09.200 --> 0:20:12.040 want to be ready on the messaging around that. Um. 0:20:12.200 --> 0:20:14.720 We have now gotten used to Mark zucker We're being 0:20:14.760 --> 0:20:17.760 on Capitol Hill and facing a lot of questions around this. 0:20:18.320 --> 0:20:20.440 I think in terms of you know what you talked 0:20:20.440 --> 0:20:23.480 about earlier, Tim, when we were wondering about literally the 0:20:23.520 --> 0:20:26.320 future of the business, whether Facebook would be busted up, 0:20:26.359 --> 0:20:30.040 it just does not seem like there are enough teeth 0:20:30.320 --> 0:20:32.520 for that to happen right now, So you can make 0:20:32.560 --> 0:20:35.600 the argument that they have done their job there. But 0:20:35.680 --> 0:20:38.600 at the end of the day, the end consumer is important. 0:20:38.640 --> 0:20:42.480 How they feel about the platform is very important too. Um. 0:20:42.520 --> 0:20:44.159 But you know it's as soon as we try to 0:20:44.280 --> 0:20:47.960 start talking about privacy and um, you know a lot 0:20:47.960 --> 0:20:50.280 of complicated issues. You know, a lot of people would 0:20:50.320 --> 0:20:52.919 fire right back at Apple as a company. Look at 0:20:52.960 --> 0:20:56.000 what's been happening in China these last weeks, and how 0:20:56.119 --> 0:20:58.520