WEBVTT - Roger McNamee: Tech is the Oasis In a Boring Market (Audio)

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<v Speaker 1>Globoo Business News twenty four hours a day. It's Bloomberg

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<v Speaker 1>I'm Charlie Pellett. Stocks are advancing the down now trading higher.

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<v Speaker 1>It is up eight points at eighteen thousand, four hundred

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<v Speaker 1>eighty as spending much of the day in the red.

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<v Speaker 1>The SMP five hundred index up six points now twenty

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<v Speaker 1>one seventy two, up three tenths of one percent. Nes

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<v Speaker 1>stack up nineteen to fifty one fifty nine. Again, there

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<v Speaker 1>are four tens of one percent SMP five hundred index

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<v Speaker 1>close to a record. The record there twenty one seventy five.

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<v Speaker 1>Right now. We have got the tenure down to thirty seconds.

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<v Speaker 1>That yield one point five percent Gold up six dollars

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<v Speaker 1>anounced the thirteen thirty two again, there are five tenths

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<v Speaker 1>of one percent. West Texas Intermediate Crew down two percent,

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<v Speaker 1>forty one eleven of barrel right now on w T

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<v Speaker 1>I I'm Charlie Pallett, and that is a Bloomberg Business Flash.

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<v Speaker 1>Thank you very much, Charlie Pellett. It time now for

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<v Speaker 1>the e T F report. It's brought to you by

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<v Speaker 1>Sector Spider e t F s Why by a single

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<v Speaker 1>stock when you can invest in the entire sector. Visits

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<v Speaker 1>Sector sp drs dot com or call one eight six

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<v Speaker 1>six Sector e t F. Let's go to Catherine Cowdery

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<v Speaker 1>for the Exchange Trade Funds report. A milestone is on

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<v Speaker 1>its way. That's the word from Todd Rosenblooth, director of

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<v Speaker 1>E t F Research at SMP Global Market Intelligence. In

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<v Speaker 1>the middle of September, the S is gonna have a

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<v Speaker 1>new sector. Real Estate, which is currently part of financials

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<v Speaker 1>is being carved out. The real estate industry will become

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<v Speaker 1>the S and P S eleventh sector. Rosenblue said there's

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<v Speaker 1>going to be a massive trade when that happens, involving

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<v Speaker 1>some e t s, including the real Estate Select Sector

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<v Speaker 1>spider fund ticker x l r E that has a

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<v Speaker 1>little money in it right now, twenty million in underlying

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<v Speaker 1>assets and because of a dividend payout from the Financial

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<v Speaker 1>Sector Spider XLF, it's gonna roll it away overnight in

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<v Speaker 1>September get three billion dollars following it. Rosen Blue says

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<v Speaker 1>that soon to be eleventh sector. It's a good place

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<v Speaker 1>to invest when interest rates are low. The reason Rose

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<v Speaker 1>and Blue sites the stable and growing income streams from

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<v Speaker 1>real estate investment trusts. That's your Bloomberg E d F Report.

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<v Speaker 1>I'm Katherine Cowdery. Your listenates are taking start with Kathleen

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<v Speaker 1>Hayes and Kim Fox on Bloomberg Radio. Alphabet, owner of

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<v Speaker 1>Google reports after the bell. Facebook reported yesterday, boy, they

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<v Speaker 1>had quite a quarter. We want to talk tech, We

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<v Speaker 1>want to talk to stock market, and we want to

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<v Speaker 1>talk music now with Roger McNamee, co founder of Elevation

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<v Speaker 1>Partners at in Menlo Park, California. In fact, he was

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<v Speaker 1>one of the very early investors in Facebook years ago.

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<v Speaker 1>He's also on the road again, as he is every

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<v Speaker 1>summer with the Doobie Despel System. It's a band that

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<v Speaker 1>is part of his larger band Moon Alice, and he's

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<v Speaker 1>taking some time out in Buffalo where he's performing tonight

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<v Speaker 1>to talk to us about the market. Roger, welcome, It's

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<v Speaker 1>a pleasure, Kathleen. I'm actually Sarahtoga Springs. Okay, well, well

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<v Speaker 1>the other night. We're just moving our way east right now.

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<v Speaker 1>But it's uh, it's a beautiful day here and it's

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<v Speaker 1>lovely to be chatting with you. It's to chat with

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<v Speaker 1>you two. We're gonna talk to about for a minute

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<v Speaker 1>about your show in Brooklyn tomorrow night if we have

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<v Speaker 1>a minute. But I want to dive right into Google

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<v Speaker 1>slash Alphabet. You like this business model, You've always like

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<v Speaker 1>Google and and this whole structure now with alf alpha

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<v Speaker 1>that you said works very well. I think it's it's

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<v Speaker 1>really important as an adhastor that the Google has made

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<v Speaker 1>the conscious effort to break out its business into the mature, uh,

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<v Speaker 1>traditional search businesses and then all the new ventures. And

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<v Speaker 1>you know, to me, the perfect outcome will come when

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<v Speaker 1>they have a tracking stock for the new business that

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<v Speaker 1>is separate from the more mature ones. But the fact

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<v Speaker 1>that they have chosen to break it out for reporting

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<v Speaker 1>purposes is really helpful to investors. And I think it's

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<v Speaker 1>brought a discipline inside Google that has helped everyone. And

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<v Speaker 1>so I'm I'm super impressed by what the management team

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<v Speaker 1>at Google has been doing. And you know, I don't

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<v Speaker 1>have any more visibility to the numbers than anybody else,

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<v Speaker 1>but I do know that the trends that have been

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<v Speaker 1>benefiting Facebook also benefit Google to a slightly lesser degree,

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<v Speaker 1>but nonetheless the one that will be dramatically, I think,

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<v Speaker 1>better than what we're seeing in terms of earning for

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<v Speaker 1>the markets all. Are you super impressed with the results

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<v Speaker 1>from Apple and the performance of Tim Cook? Well, I am,

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<v Speaker 1>And you know, I think the last time we spoke,

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<v Speaker 1>I was sharing with you my view that the products

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<v Speaker 1>cycle around smart phones in me, I felt, in particular,

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<v Speaker 1>was it, without exaggeration, the mother of all technology product cycles.

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<v Speaker 1>There's never been anything like that. And Apple's announcement is

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<v Speaker 1>now shift a billion iPhones will last whatever it is.

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<v Speaker 1>So here's eight years is uh just truly amazing. And

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<v Speaker 1>I look at the situation now and though we're going

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<v Speaker 1>to have quarters like this everyone so while where you

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<v Speaker 1>get a really nice subside surprise, and the stock had

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<v Speaker 1>been trading as though it was never going to have

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<v Speaker 1>another up quarter, and so people are totally stunned. And

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<v Speaker 1>you know, Apple is a great company, and I think

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<v Speaker 1>him Cook has played the hand very very well. I

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<v Speaker 1>wish they were better at the software. I think almost

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<v Speaker 1>all the software Apple makes is less good today that

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<v Speaker 1>it was a few years ago. And I'm hopeful that

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<v Speaker 1>at some point, uh, they will be able to do

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<v Speaker 1>something about that. But I think as a value stock.

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<v Speaker 1>Apple simply cannot be there's I can't think of a

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<v Speaker 1>scenario where the sp moves up where Apple doesn't do better.

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<v Speaker 1>And I can't imagine a scenario where the sp gets

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<v Speaker 1>hurt where Apple at least does, or Apple fails to

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<v Speaker 1>provide at least relative performance. So I think you're kind

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<v Speaker 1>of leading us now into a big picture question. We

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<v Speaker 1>can dig some more into the details of these tech

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<v Speaker 1>companies in a minute, Roger. But you told me earlier

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<v Speaker 1>today we were talking on the phone ahead of this interview,

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<v Speaker 1>that the tech companies are running against the tide. It

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<v Speaker 1>is a larger concern about the spire. But I I

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<v Speaker 1>look out at at the broad global economy, and the

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<v Speaker 1>thing that is incredibly clear is that China, the blips

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<v Speaker 1>downward that we saw in China last year's appears to

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<v Speaker 1>actually to be more significant than it initially look to me,

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<v Speaker 1>and that we we can't view China as the engine

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<v Speaker 1>of global growth on a consistent basis the way we

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<v Speaker 1>could for the past decade. It's also clear that Europe

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<v Speaker 1>will remain punk and the Brexit UH at least creates

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<v Speaker 1>uncertainty that's not good for earnings from Europe. So the

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<v Speaker 1>while the US economy is actually pretty decent shape. It's

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<v Speaker 1>not great, it's not barnburner anything, but it's it looks

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<v Speaker 1>good round to the rest of the world. Unfortunately, most

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<v Speaker 1>of the SMP five dred is getting more of its

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<v Speaker 1>earnings outside of the US, so the slowdown elsewhere is

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<v Speaker 1>going to be a drag. I think we also because

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<v Speaker 1>of the very small upticking interest rates and a few

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<v Speaker 1>other factors, uh, we're going to make it harder for

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<v Speaker 1>companies to buy stock back. So I think a lot

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<v Speaker 1>of the things that have been driving the S and

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<v Speaker 1>P five hundred look less good today than they did.

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<v Speaker 1>Which just not to say we're gonna have a bear market,

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<v Speaker 1>because I don't see that either, but I think it's

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<v Speaker 1>going to be slow going on the earnings for most

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<v Speaker 1>of the S and P five d and in that context,

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<v Speaker 1>the leaders of the tech market looks fantastic. You know

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<v Speaker 1>Facebook's numbers, those are great growth numbers in any market environed,

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<v Speaker 1>particularly for a company at that scale, and you know,

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<v Speaker 1>with that market liquidity, it's obviously for growth. Innfessors must

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<v Speaker 1>have security and Google is not growing anything like that fast,

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<v Speaker 1>but it's growing a lot faster than the SMP five hundred,

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<v Speaker 1>and it's priced very attractively. Interpress the SMP and Apple,

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<v Speaker 1>which sells for a big, big discount. The SP five

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<v Speaker 1>dred is and growing much but at least it's growing

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<v Speaker 1>and it's so cheap that you know, those three stocks

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<v Speaker 1>really uh offer growth investors, I think an opportunity. I

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<v Speaker 1>think there are other fixed tech like Amazon, where the

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<v Speaker 1>growth numbers are going to be much better than the

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<v Speaker 1>market as a whole. And so in that context, I

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<v Speaker 1>think tech is is an oasis in an otherwise you know,

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<v Speaker 1>boring market farm. We're speaking with Roger McNamee. He is

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<v Speaker 1>the co founder of Elevation Partners. They're based in Menlo Park, California.

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<v Speaker 1>Rogers speaking of broad trends, Oracle paying nine point three

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<v Speaker 1>billion dollars for net Suite to expand their cloud computing business.

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<v Speaker 1>What if you could talk about cloud computing but in

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<v Speaker 1>the context perhaps of your own investment in a company

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<v Speaker 1>called up there, you bet so, what I would tell

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<v Speaker 1>you is that cloud computing is now deeply entrenched the accompany.

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<v Speaker 1>When we when we think about what's happened at smartphones,

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<v Speaker 1>we had this massive adoption phase and now we're about

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<v Speaker 1>to begin the adaptation phase with the economy adjust to

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<v Speaker 1>the fact that every consumer has got a smartphone. Now.

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<v Speaker 1>In order for all these things to work, you have

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<v Speaker 1>to have some way to manage the information that people

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<v Speaker 1>are accessing on the smartphones and putting all the information

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<v Speaker 1>on servers in the cloud, which is to say, making

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<v Speaker 1>them accessible from anywhere as opposed to having them sit

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<v Speaker 1>next to your computer. That notion has been building for

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<v Speaker 1>the last decade, and we saw with Salesforce and a

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<v Speaker 1>few other companies like net Suite early leaders with Amazon's

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<v Speaker 1>web services business, we now see the mature version of it.

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<v Speaker 1>And for net Suite and for Salesforce, their original architectures

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<v Speaker 1>were a big leap forward from or all the things

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<v Speaker 1>that came before, but they are not actually the most

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<v Speaker 1>uh cost effective systems for cloud computing that are out there.

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<v Speaker 1>So it's a very smart sale by net Suite, and

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<v Speaker 1>from Oracle's point of view, all they want to do

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<v Speaker 1>is consolidate the things to customers own, so it may

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<v Speaker 1>actually be a pretty good deal both ways. The one

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<v Speaker 1>observation with with up there, we've got a company, really

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<v Speaker 1>extraordinary team out of Apple building next generation cloud services

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<v Speaker 1>and The whole principle here is that we all have

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<v Speaker 1>data that we need to have access to, and we're

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<v Speaker 1>spending less and less time at a desktop with a computer,

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<v Speaker 1>or more time accessing things off of smartphones and tablets.

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<v Speaker 1>You really wanted your information in the cloud where you

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<v Speaker 1>can find it, and maybe you have Dropbox. Maybe you

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<v Speaker 1>want to use products like up there to do that.

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<v Speaker 1>What we can say without their correction is that enterprises

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<v Speaker 1>are making that move aggrogressively. It's such a cost status

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<v Speaker 1>for corporations that this will be a strategy that investors

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<v Speaker 1>need to understand. We've got to leave it there. Roger mcamee,

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<v Speaker 1>co founder Elevation Partners, has banned a Doby decibel system

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<v Speaker 1>at the Brooklyn Bowl tomorrow night. We take you through

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<v Speaker 1>to the close. This is Bloomberg