WEBVTT - Surveillance: Hawkish Cut a Mistake, says Crescenzi 0:00:09.840 --> 0:00:13.880 Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene Jay Leye. 0:00:13.960 --> 0:00:17.560 We bring you insight from the best in economics, finance, investment, 0:00:18.000 --> 0:00:23.520 and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 0:00:23.600 --> 0:00:27.600 Bloomberg dot Com, and of course on the Bloomberg two 0:00:27.680 --> 0:00:30.920 pm Eastern. That's your main event. The Federal Reserve decides, 0:00:31.000 --> 0:00:34.880 Chairman Powell delivers a news conference. Shortly thereafter, Johnny, Tom 0:00:34.880 --> 0:00:36.560 and I in the studio. I'm pleased to say here 0:00:36.560 --> 0:00:40.960 in New York, Tony Kriscenzi, Pimco market strategist and portfolio 0:00:41.400 --> 0:00:44.159 manage a good morning to your Tony chant. Thanks for 0:00:44.200 --> 0:00:46.560 having me here. Will they all? Won't they cut interest 0:00:46.640 --> 0:00:49.919 rates in a couple of hours time. Yes, we think 0:00:49.960 --> 0:00:53.120 it's highly probable the Federal Deserved did nothing to dissuade 0:00:53.159 --> 0:00:56.160 the markets from thinking they'll be a move. And we 0:00:56.240 --> 0:00:58.800 know from our conversations that we have regularly with Ben 0:00:58.840 --> 0:01:02.480 Berninki that when the pocket has a very high probability 0:01:02.560 --> 0:01:06.600 of a certain action, that the Federal Reserve need follow 0:01:06.680 --> 0:01:08.559 through with it. And what could be called the hall 0:01:08.600 --> 0:01:11.679 of mirrors effect, where the markets looking at the Fed 0:01:11.720 --> 0:01:13.640 and the Feds looking back at the markets, and they 0:01:13.680 --> 0:01:16.120 have to mirror what the markets are doing. So the 0:01:16.120 --> 0:01:18.560 probability of what the markets have in for a hike 0:01:18.800 --> 0:01:22.520 is that's too high for the Fed to say no today. 0:01:22.640 --> 0:01:27.320 What's a Harkers cut a mistake? Uh? In this climate, 0:01:27.760 --> 0:01:31.000 hawker Ish cut would be where the FED cuts and 0:01:31.040 --> 0:01:33.679 then it does something like it's done in the past, 0:01:33.680 --> 0:01:36.120 where it looks back and says, well, with these three 0:01:36.200 --> 0:01:40.000 cuts now we think things will be fine. So if 0:01:40.040 --> 0:01:42.560 they look back at the cuts and speak to what 0:01:42.680 --> 0:01:46.319 they've done, and that would be a Harkets cut to 0:01:46.360 --> 0:01:48.400 the day Chairman Paul is going to be in the 0:01:48.440 --> 0:01:51.160 crucible of the press conference. Let's be honest. The furd 0:01:51.200 --> 0:01:54.600 of the question makes sense the rest of what's the 0:01:54.760 --> 0:01:58.800 question you want to ask? So he can define this 0:01:58.880 --> 0:02:03.480 new phrase, Hawkers cut the press. I'm going after the 0:02:03.520 --> 0:02:06.640 press today. Hawkers cut open for Jethro Tall about twenty 0:02:06.920 --> 0:02:10.080 years ago, they were great Hawkers cut. How do you 0:02:10.200 --> 0:02:14.120 phrase that to the chairman in a constructive way one can? 0:02:14.200 --> 0:02:17.240 Michael McKee will be one of the best works. Michael 0:02:17.280 --> 0:02:20.960 McKee will asked the question, but you would expect that 0:02:21.080 --> 0:02:24.680 power will be evasive on the idea that the federal 0:02:24.720 --> 0:02:28.120 reserve is finished and that this potentially is simply a 0:02:28.120 --> 0:02:32.400 mid cycle insurance like adjustment. He will do everything he 0:02:32.520 --> 0:02:37.080 can to leave his options open. And so those in 0:02:37.120 --> 0:02:40.519 the room asking him questions to try to push and say, 0:02:40.639 --> 0:02:44.000 do you really mean to tell us that you are 0:02:44.080 --> 0:02:47.160 open to another cut in December on the eleventh when 0:02:47.160 --> 0:02:50.359 you meet again, or or you're just trying to have 0:02:50.440 --> 0:02:54.720 us think, uh, there'll be more cuts? Most likely UM 0:02:54.760 --> 0:02:58.160 to be straight. Um that FED in this optionality in 0:02:58.200 --> 0:03:00.519 the statement will probably say something that what has said 0:03:00.600 --> 0:03:03.720 last time in its policy meeting, that will continue to 0:03:03.760 --> 0:03:07.840 monitor the implications of incoming data and act as appropriate. 0:03:07.919 --> 0:03:11.639 That still could mean doing nothing. And so it's it's 0:03:11.680 --> 0:03:13.800 okay to say we are open to another cut and 0:03:13.840 --> 0:03:16.359 not actually file through with it. And markets importantly only 0:03:16.360 --> 0:03:19.160 price for thirty basis points more and cuts between now 0:03:19.200 --> 0:03:21.359 and the end of next year. So you said, there's 0:03:21.360 --> 0:03:24.040 not that much tension between the market basis and FED 0:03:24.080 --> 0:03:27.320 forecasts right now, and he so Powell has been put 0:03:27.320 --> 0:03:30.600 in a very good position by the rising market interest 0:03:30.680 --> 0:03:34.160 rates recently and the re steepening of the yield curve. 0:03:34.200 --> 0:03:36.440 I want to John three months terms. I did a 0:03:36.520 --> 0:03:39.200 very careful study of it today and we are now 0:03:39.280 --> 0:03:41.960 out with the question. As I said to Mr Consensi earlier, 0:03:42.120 --> 0:03:45.160 have we broken the curve flattening cycle got to be 0:03:45.280 --> 0:03:48.280 really careful though, now, because the FED is buying tabills. 0:03:49.080 --> 0:03:51.640 Antonio just wonder if we can't take signal from when 0:03:51.800 --> 0:03:54.320 the curve was inverting, whether we can take any signal 0:03:54.960 --> 0:03:58.080 now The curve is stepening from a three month table 0:03:58.760 --> 0:04:01.440 at the longer end of an extent, but the purchases 0:04:01.480 --> 0:04:04.920 haven't happened in any meaningful size yet, and when the 0:04:05.160 --> 0:04:08.680 problems will become acute more in January or so, when 0:04:08.720 --> 0:04:11.920 the amount of bills available to be bought will be low, 0:04:12.000 --> 0:04:14.520 and so when the FED is out there buying, yes, 0:04:14.560 --> 0:04:16.680 it will have an impact on the curve for three 0:04:16.680 --> 0:04:18.880 months TA bill, one month a bill especially two months 0:04:19.560 --> 0:04:23.240 can't possibly be impacted by future FED purchases because these 0:04:23.480 --> 0:04:25.560 bills will have matured. And so we would say that 0:04:25.640 --> 0:04:29.200 the steepening relates more to confidence in the FED, confidence 0:04:29.240 --> 0:04:34.039 in democracy and capitalism to extent that this faith that 0:04:35.240 --> 0:04:37.920 companies people will wake up each and every day and 0:04:37.920 --> 0:04:40.839 try to make a better living for themselves and produce 0:04:40.920 --> 0:04:45.920 a better economic outcome. How with policy uncertainty down a little, 0:04:46.520 --> 0:04:49.400 and I emphasize a little on Breaxit and China, let's 0:04:49.440 --> 0:04:51.640 talk about that. Since the end of August, the beginning 0:04:51.640 --> 0:04:55.960 of September, when the tenure treasury bottomed out, for risks 0:04:55.960 --> 0:05:01.320 have receded, So repricing markets makes sense now. Whether risks 0:05:01.320 --> 0:05:04.080 have diminished to the degree that you think that everything 0:05:04.240 --> 0:05:06.159 is behind us, that the worst is behind us, and 0:05:06.200 --> 0:05:08.120 that things are going to gradually get better from here 0:05:08.160 --> 0:05:10.719 on out, I guess it's a very different judgment. Cold 0:05:10.720 --> 0:05:12.480 where do you come down on that, Tony at the Mongment, 0:05:12.520 --> 0:05:14.760 As you know, John in your home country in the UK, 0:05:14.920 --> 0:05:18.320 even if breggsit, if the election goes as Boris Johnson 0:05:18.400 --> 0:05:21.360 wants on December twelve, Frank Sinatra's birthday, by the way, 0:05:22.080 --> 0:05:28.080 Amber to say that as an Italian um, if it 0:05:28.080 --> 0:05:31.280 goes as expected, and it goes well, and bregsit and 0:05:31.279 --> 0:05:34.720 and the UK does leave the European Union, as you know, 0:05:34.760 --> 0:05:36.840 there's a transition period and there'll be a lot of 0:05:36.880 --> 0:05:39.720 squabbles about that and a lot of uncertainties that could 0:05:39.720 --> 0:05:42.120 cause businesses to say, well, I'm not so sure about 0:05:42.120 --> 0:05:46.320 the future because trade agreements between the UK and the 0:05:46.320 --> 0:05:48.160 rest of Europe will have to be rewritten. A lot 0:05:48.200 --> 0:05:50.000 of things will have to be rewritten, and no one 0:05:50.040 --> 0:05:52.080 will know what the writing will be, and so there 0:05:52.080 --> 0:05:54.919 will be uncertainties there. And also with China because it 0:05:55.040 --> 0:05:56.880 is an election year in the United States and there 0:05:56.880 --> 0:05:59.480 will be it is a bipartisan issue and so it 0:05:59.560 --> 0:06:02.599 will be there will be tensions and the remaining through 0:06:02.640 --> 0:06:05.520 the election. And in the meantime, tony people are starting 0:06:05.560 --> 0:06:08.560 to load upon risk just a little bit incrementally once again, 0:06:09.320 --> 0:06:11.960 how yield spreads the tightest of the year in and 0:06:12.000 --> 0:06:14.159 around those kind of levels now through engine A fifty 0:06:14.160 --> 0:06:16.839 basis points. Good friend of yours, Mr Rivason and the 0:06:16.920 --> 0:06:19.839 ft this week saying we don't like corporate credit risk. 0:06:20.480 --> 0:06:24.080 Why doesn't PIMCO like corporate credit risk? Right now? Daran 0:06:24.080 --> 0:06:26.760 iverson our group c IO is identified and as we 0:06:26.800 --> 0:06:29.560 all have that the corporate credit markets, the risk is 0:06:29.640 --> 0:06:32.440 part of the fixed income market. It has to do 0:06:32.520 --> 0:06:36.560 with something that happened in the that's endemic to the 0:06:36.640 --> 0:06:39.359 markets in general. That happened in the money market, that 0:06:39.480 --> 0:06:42.760 the intermediaries, those who get between the buyer and the 0:06:42.800 --> 0:06:46.920 seller aren't playing the traditional role. And in other words, 0:06:47.200 --> 0:06:49.280 you saw in the money market when interest rates on 0:06:49.320 --> 0:06:52.200 the short term part of the bond market moved up 0:06:52.240 --> 0:06:56.520 towards ten percent, that was because intermediaries decided, well, we're 0:06:56.520 --> 0:06:58.720 not going to participate in the way we used to. 0:06:58.839 --> 0:07:01.359 This could happen in the corporate on market at a 0:07:01.440 --> 0:07:04.680 time when there's a large amount of risk transfer. In 0:07:04.760 --> 0:07:07.480 other words, when investors go to sell corporate bonds someday 0:07:07.560 --> 0:07:09.600 when they have a reason to do so, and typically 0:07:09.640 --> 0:07:12.840 this is a recession risk. Who is it that will 0:07:12.880 --> 0:07:16.880 be wanting taking these hot potatoes each primary deal? Are 0:07:16.920 --> 0:07:21.120 those who uh do a lot of this intermediary intermediation 0:07:21.520 --> 0:07:23.840 will say I don't want it, you have it, you 0:07:23.920 --> 0:07:27.400 take it risk in the corporate credit market in the 0:07:27.440 --> 0:07:31.320 United States, there's the problems in the in the money market, 0:07:31.400 --> 0:07:35.880 or endemic to the financial markets in general, because intermediaries are, 0:07:36.120 --> 0:07:40.440 due to regulatory changes, are unwilling to house inventry. And 0:07:40.680 --> 0:07:42.800 think of it this way. There no longer in the 0:07:42.960 --> 0:07:46.160 storage business. There in the moving business. They will not 0:07:46.320 --> 0:07:49.080 hold inventories, they will not hold the securities of the 0:07:49.120 --> 0:07:51.720 world wants to sell to them. And so that's what 0:07:51.480 --> 0:07:54.360 the warrior is real quickly here, then you're saying that 0:07:54.440 --> 0:07:57.200 the repo uproar and the raging debate over this can 0:07:57.280 --> 0:08:01.240 fold over into longer duration fixing cumb assets to all 0:08:01.840 --> 0:08:04.560 all types of fixed income securities because of the lack 0:08:04.640 --> 0:08:07.320 of liquidity in these other areas. If it happened in 0:08:07.360 --> 0:08:09.679 the treasury market, can happen in the corporate bond market, 0:08:09.720 --> 0:08:15.240 where many securities trade by appointment. Frank Sinatra December twelve, 0:08:15.360 --> 0:08:20.320 the same day as the UK election, and so he 0:08:20.440 --> 0:08:23.680 sings the song is famously uh old man river keeps 0:08:23.760 --> 0:08:26.080 rolling along, so you could uh the best version of 0:08:26.080 --> 0:08:29.640 ever in my opinion, and one of these emotional song. 0:08:30.120 --> 0:08:33.760 But the ideas of capitalism, etcetera keeps rolling along the 0:08:33.800 --> 0:08:36.000 UK and democracy will keep rolling along on that day. 0:08:36.120 --> 0:08:38.680 SD you get back to two pm this afternoon, is 0:08:38.720 --> 0:08:40.880 this going to be market moving? When they start defining 0:08:40.920 --> 0:08:43.440 whatever in God's name of Hawker is cut, is Powell 0:08:44.320 --> 0:08:47.319 meets what is likely to be his objective, there will 0:08:47.320 --> 0:08:50.199 be no movement in the financial markets because it's already 0:08:50.200 --> 0:08:53.520 priced for the idea that there could be a hawkish cut, 0:08:53.640 --> 0:08:56.760 or that the federal reserves three cuts might be enough 0:08:56.840 --> 0:08:59.800 with only about it one more cut price in between. 0:08:59.800 --> 0:09:01.880 Now in the end of next year, it should be 0:09:02.080 --> 0:09:05.920 a stable market. Yeah, well we'll see you. Thank you 0:09:06.000 --> 0:09:24.640 so much. Appreciate that as well. So one place to say, 0:09:24.679 --> 0:09:27.640 we can bring in David Kirkpatrick of Teconomy, the CEO 0:09:27.920 --> 0:09:30.240 and founder and the author of that book You Love 0:09:30.400 --> 0:09:33.440 The Facebook Effect. It ends with Zuckerberg at the end 0:09:33.480 --> 0:09:37.520 of a driveway in California where his life is changing. 0:09:37.880 --> 0:09:40.200 David Kirkpatrick. I thought of that moment as you end 0:09:40.200 --> 0:09:43.160 your book illegiately and and just to cut to the 0:09:43.280 --> 0:09:46.160 chase out bunch of a train wreck on a Kirkpatrick 0:09:46.280 --> 0:09:49.839 meter was his testimony to Congress. I think it was 0:09:49.880 --> 0:09:53.600 a big train wreck. I mean weirdly people said, um, 0:09:54.240 --> 0:09:56.560 you know, he performed well, and some people liked it. 0:09:56.600 --> 0:09:59.040 But I think he doesn't know what to say in 0:09:59.080 --> 0:10:03.880 public because he's really unwilling to actually compromise in any 0:10:03.880 --> 0:10:06.880 fundament where he's a genius. Come on, he got where 0:10:06.880 --> 0:10:08.920 he got, as you show in the Facebook. In fact, 0:10:08.960 --> 0:10:13.280 folks see it in theaters coming up. David, He's supposed 0:10:13.320 --> 0:10:17.760 to hand off the business stuff to other people. Has 0:10:17.800 --> 0:10:23.160 he done that? Well, yes, he has hand. I mean, basically, 0:10:23.200 --> 0:10:28.320 all he cares about is the product and growth and growth, growth, growth. 0:10:28.360 --> 0:10:31.000 That's the mantra that Facebook has always had and it 0:10:31.080 --> 0:10:34.400 continues to have, and that's his obsession. Um. You know, 0:10:34.720 --> 0:10:38.040 some people said, listening to his testimony that he didn't 0:10:38.040 --> 0:10:40.240 even seem to understand what Liever was supposed to be 0:10:40.360 --> 0:10:42.840 or how it was actually supposed to work. Um. You know, 0:10:42.880 --> 0:10:46.400 he didn't answer many of the toughest questions. Um. But 0:10:46.400 --> 0:10:49.480 but I think it's you know, what he goes to Washington, 0:10:49.559 --> 0:10:52.840 what he really wants is just people to understand that 0:10:52.880 --> 0:10:55.440 he's really doing a good thing. That's in his mind 0:10:55.760 --> 0:10:59.760 what it's all about. He believes he is a a 0:11:00.000 --> 0:11:01.960 gifts to the world. Facebook is a gift to the 0:11:02.000 --> 0:11:06.920 world that we just don't understand. And if he believes 0:11:07.160 --> 0:11:09.560 truly that if we just understood it, we wouldn't be 0:11:09.600 --> 0:11:11.720 so critical of him. That's what we say every day 0:11:11.760 --> 0:11:15.120 about John Farrell. David, It's always great to have you 0:11:15.160 --> 0:11:16.760 with us on the program. Tom and I have thought 0:11:16.800 --> 0:11:20.079 and talked about Inside Bill's Brain, which is this great 0:11:20.080 --> 0:11:24.280 documentary about Bill Gates on Netflix, and within that documentary, 0:11:24.760 --> 0:11:27.920 Bill Gates has asked about his performance down in Washington, 0:11:28.040 --> 0:11:31.520 d C in the nineties and through the early two thousands, 0:11:32.080 --> 0:11:34.559 and he uses one word to reflect on the younger 0:11:34.600 --> 0:11:39.080 Bill Gates naive. Do you think Marks Zuckerberg is repeating 0:11:39.080 --> 0:11:41.000 the errors that Bill Gates made when he had to 0:11:41.040 --> 0:11:44.199 go to d C in the same way. Absolutely, I mean, 0:11:44.280 --> 0:11:47.120 it's funny how much Gates has changed. And yes, I 0:11:47.160 --> 0:11:50.560 absolutely think that analogy is completely apt, and the age 0:11:50.600 --> 0:11:53.079 is not too dissimilar. Gates was a little older at 0:11:53.080 --> 0:11:58.319 that time, so Zuckerberg. Actually, Zuckerberg's probably five to ten 0:11:58.400 --> 0:12:00.040 years younger now that I think of it than it 0:12:00.320 --> 0:12:02.880 was then. So you know, his age, he's just so young. 0:12:03.240 --> 0:12:06.400 Let's face it, the guy worth billion dollars at age 0:12:06.440 --> 0:12:09.960 thirty five or thirty six. And um, I think that also, 0:12:10.080 --> 0:12:12.680 in his own mind, is a legitimizer of his behavior. 0:12:13.040 --> 0:12:16.120 How could I be wrong if I'm so rich? I mean, really, so, 0:12:16.440 --> 0:12:19.600 you know, I think there's a tragedy unfolding with this 0:12:19.640 --> 0:12:23.760 company that is of monumental and historic scale. David Kirkpatrick, 0:12:24.000 --> 0:12:26.680 it's a Facebook effect. David. There was a point in 0:12:26.760 --> 0:12:30.280 the dorms of AMers College a few years ago were 0:12:30.320 --> 0:12:32.800 you walked in some rich kid's room, and they had 0:12:32.840 --> 0:12:36.160 the Apple you know, the mac, the little cub thing 0:12:36.240 --> 0:12:40.080 now in the Smithsonian. Since that's time, Apple has been 0:12:40.160 --> 0:12:43.840 rumored to die what fifteen times every time as a 0:12:43.880 --> 0:12:46.920 product cycle. This is it. They're done, They're over. They're 0:12:46.920 --> 0:12:49.599 really once again proving the resiliency here based on the 0:12:49.679 --> 0:12:53.040 rumors on this new phone. Right, well, they are an 0:12:53.080 --> 0:12:56.640 astonishingly resilient company. You joked before I came on that 0:12:56.679 --> 0:12:58.560 you might have to run down to the Apple store 0:12:58.559 --> 0:13:02.640 again later today. I actually I saw their new AirPod, 0:13:02.760 --> 0:13:04.439 and I was thinking, you know, I have a perfectly 0:13:04.440 --> 0:13:07.000 good AirPod, but I'm so reliant on it, and if 0:13:07.040 --> 0:13:09.880 it worked even slightly better, you like, it would probably 0:13:09.920 --> 0:13:12.880 be better. Therefore, it's worth it to spend twifty bucks 0:13:13.240 --> 0:13:16.040 for a marginal increase of efficiency in my life. Yeah, 0:13:16.240 --> 0:13:19.199 I mean face Apple's products, Like you almost said, Facebook, 0:13:19.320 --> 0:13:23.280 Apple's products are the source of digital efficiency in my life. 0:13:23.760 --> 0:13:26.320 And really, I mean I might think I'm addicted, I 0:13:26.400 --> 0:13:28.679 might think that I'm overstressed because of all the things 0:13:28.760 --> 0:13:31.400 I do, but I need it might work. Life depends 0:13:31.440 --> 0:13:33.880 on it, and Apple facilitates it, and they do it 0:13:33.920 --> 0:13:38.840 with enormous skill and capability. I mean, David, my entire 0:13:38.920 --> 0:13:41.160 team wears AirPods so they don't have to talk to me. 0:13:41.320 --> 0:13:43.920 You know, they in their ear all day, so you know, 0:13:43.960 --> 0:13:46.000 I think they're busy. Okay, over there, I'm okay. Are 0:13:46.040 --> 0:13:50.600 you okay? At Maria's on right now on Fox Biz 0:13:50.720 --> 0:13:56.840 with zet Bill. It's my dog Bill with a superman. 0:13:56.880 --> 0:14:00.360 How much you invoice in? I don't know, I'm not 0:14:00.520 --> 0:14:02.120 you know, you know that Bill is free to do 0:14:02.160 --> 0:14:04.440 what he wants. He can't get back to the conversation. 0:14:06.840 --> 0:14:09.000 I want to talk about Facebook earnings as well after 0:14:09.040 --> 0:14:11.760 the close. Any evidence so far, David, that the political 0:14:12.000 --> 0:14:16.840 spotlight on Mark Zuckerberg is damaging the bottom line? Not really. 0:14:17.320 --> 0:14:19.680 I mean, we've got to keep our ears closely attuned 0:14:19.720 --> 0:14:23.000 to that because obviously their costs of remediating the many 0:14:23.040 --> 0:14:27.080 harms they cause society are raising their their costs generally 0:14:27.160 --> 0:14:30.520 a lot, but not so much that it's really had 0:14:30.560 --> 0:14:33.800 a significant effect on a company whose profits are so monumental. 0:14:34.360 --> 0:14:38.200 So so I don't think we'll see significant harm in 0:14:38.240 --> 0:14:42.840 today's earnings. I think, you know, uh, growth revenues are 0:14:42.880 --> 0:14:46.760 just powering forward. Although you see a massive shift over 0:14:46.840 --> 0:14:50.880 time from the developed countries to the developing countries. I mean, really, 0:14:51.120 --> 0:14:54.200 Americans are not using Facebook as much as they used to, 0:14:54.320 --> 0:14:56.440 the same as true in Europe, and that is a 0:14:56.480 --> 0:14:58.960 significant long term problem for them. On the other hand, 0:14:59.000 --> 0:15:02.400 even to the degree we use it, we remain perfect 0:15:02.560 --> 0:15:06.360 targets for advertising on Facebook because the advertisers don't have 0:15:06.800 --> 0:15:09.240 a better place to go, and that continues to be 0:15:09.280 --> 0:15:11.200 their ace in the whole. Well, David, let's explore the 0:15:11.240 --> 0:15:14.160 analogy and the parallels with Microsoft a little bit further. 0:15:14.400 --> 0:15:16.400 I forget the precise words you use, but it sounded 0:15:16.440 --> 0:15:18.800 like something like tragedy and what was about to happen 0:15:18.800 --> 0:15:21.480 with Facebook wasn't going to end very well. With Microsoft, 0:15:21.520 --> 0:15:24.720 things have ended really, really well. In fact, arguably they've 0:15:24.760 --> 0:15:29.960 got even better. Why does the movie end differently with Facebook? Well, 0:15:30.000 --> 0:15:32.600 I'm not sure that it does. I'm not saying Facebook 0:15:32.760 --> 0:15:37.040 inevitably will cannot respond to these social concerns and revive 0:15:37.080 --> 0:15:41.120 itself somehow, But I think the key would be for 0:15:41.400 --> 0:15:45.480 Zuckerberg to have some kind of fundamental revelation that he 0:15:45.640 --> 0:15:49.640 thus far has not had about his need to change course. 0:15:50.200 --> 0:15:54.000 And you know, a changing course probably would also entail 0:15:54.120 --> 0:15:57.720 a significant hit to earnings over time. But then I 0:15:57.760 --> 0:16:00.280 think they could possibly rebuild from their Look. They have 0:16:00.320 --> 0:16:03.160 a service people want to use, and it's growing in 0:16:03.400 --> 0:16:05.800 in the largest sense, you know, on a planetary level. 0:16:06.200 --> 0:16:09.040 So I think they could revive. But I just don't 0:16:09.080 --> 0:16:11.640 think yet they have the humility or, as we said earlier, 0:16:11.680 --> 0:16:13.800 maybe the maturity to see what they need to do. 0:16:13.920 --> 0:16:17.800 In February two thousand and fourteen, John Ferrell mentions Microsoft 0:16:17.800 --> 0:16:21.440 folks David Kirkpatrick, one of the best practices that Mr 0:16:21.520 --> 0:16:27.000 Nodela did is he revolutionized modern Microsoft. Wow. Uh gee, 0:16:27.000 --> 0:16:29.040 I didn't know you were gonna ask about that. Well, 0:16:29.080 --> 0:16:32.920 you know, I think interview i got Maria's dog into 0:16:32.920 --> 0:16:36.200 the interview I'm doing. Okay. There's a humility at Microsoft 0:16:36.320 --> 0:16:40.480 that is, you know. I recently was interviewing Brad Smith, 0:16:40.520 --> 0:16:43.640 who's the number two of Microsoft stage about his new book, 0:16:43.640 --> 0:16:46.320 which is really really excellent by the way. Uh, and 0:16:46.360 --> 0:16:49.800 it's if there's enormous humility to his book, Microsoft has, 0:16:50.120 --> 0:16:52.400 you know, I think you had to get rid of Bomber. 0:16:52.960 --> 0:16:55.480 Bomber was a great leader in some ways, but he 0:16:55.520 --> 0:16:59.840 had no humility. Uh. Satia recognizes that they are in 0:16:59.840 --> 0:17:04.440 a position that requires a bigger picture view. And somehow 0:17:04.480 --> 0:17:07.000 they had been a bomber, had positioned them in relation 0:17:07.040 --> 0:17:09.520 to the cloud, that the raw material was there and 0:17:09.600 --> 0:17:11.399 thought you had been a big part of it before 0:17:11.400 --> 0:17:14.600 he became CEO. And you know they are now becoming 0:17:14.680 --> 0:17:17.280 I think they're a genuine threat to Amazon as the 0:17:17.320 --> 0:17:20.960 dominant cloud player. I wouldn't wouldn't rule out the possibility 0:17:21.280 --> 0:17:24.720 that over the next few years, Microsoft could grow equally 0:17:24.760 --> 0:17:27.360 strong and maybe even longer than Amazon. For a lot 0:17:27.359 --> 0:17:30.120 of reasons. If Amazon gets very quickly, if Amazon gets 0:17:30.160 --> 0:17:32.280 to a million employees, is out of signal for the 0:17:32.320 --> 0:17:35.960 government to break up Amazon, breakup Microsoft, break up Bloomberg. 0:17:36.000 --> 0:17:41.880 Surveillance were shot. A huge government pressure to break these 0:17:41.920 --> 0:17:45.320 companies up is going to grow. I'm not a strong 0:17:45.359 --> 0:17:49.240 believer that it's the right answer, but the pressure is real. 0:17:49.359 --> 0:17:51.960 I mean. But the problem with Amazon and really some 0:17:52.080 --> 0:17:54.840 expend all these companies is even though everybody loves to 0:17:54.880 --> 0:17:58.160 complain about them and people in Washington hate their scale, 0:17:58.720 --> 0:18:02.040 the average American wants to use their services, and that's 0:18:02.080 --> 0:18:06.440 particularly true with Amazon. So politicians who start messing with Amazon, 0:18:06.680 --> 0:18:09.520 you have to be very careful because customers, which are 0:18:09.600 --> 0:18:12.600 voters are not gonna want too much change. This has 0:18:12.640 --> 0:18:15.199 been wonderful. David. Thanks for a wide ranging fing here 0:18:15.240 --> 0:18:17.879 this morning. Really good. I'm glad you mentioned Facebook. Seriously, 0:18:17.880 --> 0:18:21.760 I would interview it was wide raging. I mean when 0:18:21.800 --> 0:18:25.280 you do that, Patrick. I had Paul Kadrowski and David 0:18:25.359 --> 0:18:28.399 Kirkpatrick on the day of the Facebook I p O 0:18:28.640 --> 0:18:32.600 and they were both brilliant, and Kirkpatrick nailed it. Facebook 0:18:32.680 --> 0:18:35.560 was going down in flames and he said there is 0:18:35.640 --> 0:18:53.960 tangible growth, revenue and profit. This is a really important interview. 0:18:54.040 --> 0:18:56.480 John's got a million questions for IRA Jersey at fixed 0:18:56.520 --> 0:18:59.919 income IRA three months ten years spread, it's a pro spread. 0:19:00.000 --> 0:19:04.399 Everybody looks at it. Inverted, inverted terribly. World's coming to 0:19:04.440 --> 0:19:08.280 an end, summer into autumn, etcetera. It's come back out. 0:19:08.600 --> 0:19:11.480 The tenure yield is higher than the three month Treasury 0:19:11.520 --> 0:19:15.719 bill out to standard deviations off the president's election trend. 0:19:16.080 --> 0:19:19.560 Can you say there's a breakout now away from inversion 0:19:19.640 --> 0:19:23.159 and all that bloom? Well, I think yeah, the answer 0:19:23.200 --> 0:19:26.160 is yes, absolutely. Now part of this has been engineered 0:19:26.200 --> 0:19:28.800 by the Federal Reserve, because remember, the Federal Reserve is 0:19:28.800 --> 0:19:31.960 going to be buying you know, sixty billion dollars of 0:19:32.000 --> 0:19:34.480 tea bills a month over the next couple of months, 0:19:34.560 --> 0:19:36.840 and in doing so, what they've done is that three 0:19:36.840 --> 0:19:40.439 months TA bill yield has this dropped a ton so 0:19:40.560 --> 0:19:42.440 actually on that day that they announced it to drop 0:19:42.560 --> 0:19:46.159 ten basis points, so it uninverted and it kept on uninverting, 0:19:46.480 --> 0:19:50.399 you know, primarily because of the Federal Reserve doing. You know, 0:19:50.680 --> 0:19:51.800 I don't know what you want to call it, but 0:19:51.960 --> 0:19:54.840 you know, not que is what what Jay pallis Ira 0:19:55.000 --> 0:19:56.800 Jersey with us fixing him. And the reason I was 0:19:56.880 --> 0:19:58.760 rattled John is because the only question I want to 0:19:58.800 --> 0:20:00.879 ask him is when John and I go over to 0:20:00.880 --> 0:20:03.159 do the election in Britain, We've got a delay and 0:20:03.240 --> 0:20:06.880 see arsenal Man City, Oh that weekend. Yeah, yeah, that'll 0:20:07.040 --> 0:20:09.440 that would be a fun match. I'm sending laughing because 0:20:09.440 --> 0:20:11.879 our produced has got crazy at you for not introducing 0:20:11.880 --> 0:20:16.159 our guest properly. I Jersey, the FED decides will be 0:20:16.960 --> 0:20:21.120 I'm a Jersey of Blimberg Intelligence. Here's our chief US 0:20:21.200 --> 0:20:23.560 right strategist and it's great to have you with a 0:20:23.600 --> 0:20:27.600 Syrah good morning, good morning to talk about the FED 0:20:27.680 --> 0:20:32.000 decision A whole Kish cut. Is that what you're looking for. Well, yeah, 0:20:32.000 --> 0:20:34.720 so it would only be considered hawkish in that like 0:20:35.040 --> 0:20:37.080 not hawkish, and that the Fed's next move is going 0:20:37.119 --> 0:20:40.640 to be hiking, right, So it's hawkish relative to not easing. Um, 0:20:40.720 --> 0:20:42.359 so I would say it's more like, like, does the 0:20:42.400 --> 0:20:45.720 Fed turn to neutral instead of being in an easing mode? 0:20:45.800 --> 0:20:47.760 And I think that the markets set up for that. 0:20:47.840 --> 0:20:50.360 So when you look at what the market is currently pricing, 0:20:50.440 --> 0:20:53.600 we're pricing a cut today and then not another cut 0:20:53.680 --> 0:20:56.080 until May or June of next year. So basically the 0:20:56.080 --> 0:20:58.639 markets priced for a long pause, and I think some 0:20:58.680 --> 0:21:00.840 of the details around whether or not that's a realistic 0:21:00.920 --> 0:21:03.359 outcome is something that the market's going to listen to, 0:21:03.480 --> 0:21:07.119 particularly in the in the press conference afterwards. This is 0:21:07.119 --> 0:21:09.280 really important because typically we go into these kind of 0:21:09.320 --> 0:21:11.800 meetings with a little bit of tension between the market 0:21:11.840 --> 0:21:14.240 and the Fed. We're saying there's not much tension relative 0:21:14.320 --> 0:21:17.399 to previous matings this time around, Well, it doesn't seem 0:21:17.400 --> 0:21:19.800 that way, you know. That. Being said, it also is 0:21:19.840 --> 0:21:22.399 not it's not out of the question that the Federal 0:21:22.440 --> 0:21:25.359 Reserve could wind up saying and sounding a little bit 0:21:25.359 --> 0:21:29.320 more dubbish maybe than the market currently expects because you 0:21:29.359 --> 0:21:31.320 could point to a lot of data, like even the 0:21:31.320 --> 0:21:34.440 ADP data came out. Last month's data came out a 0:21:34.480 --> 0:21:36.879 little bit better than expected, but the prior month was 0:21:36.920 --> 0:21:39.520 revised down, so it actually winds up being closer to 0:21:39.560 --> 0:21:43.000 a hundred thousand print instead of a hundred print. So 0:21:43.119 --> 0:21:45.720 that means, you know, if if you're worried about the consumer, 0:21:45.840 --> 0:21:47.480 you know, jobs is a thing that you could point 0:21:47.520 --> 0:21:49.520 to that says, you know, it's still some fragility in 0:21:49.560 --> 0:21:52.400 the market. Do we have an information vacuum today at 0:21:52.400 --> 0:21:55.280 two because we're not getting all the other stuff we 0:21:55.359 --> 0:21:58.800 typically get it a FED meeting. I don't think so, 0:21:58.840 --> 0:22:01.000 maybe from two to two thirds, but you'll wind up 0:22:01.000 --> 0:22:06.080 having enough information information after j PAL Now don't no forecast. 0:22:06.160 --> 0:22:08.280 We know there's a ton of division on the fo 0:22:08.400 --> 0:22:12.439