Speaker 1: Ye, Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene
Speaker 1: Jay Lee. We bring you insight from the best in economics, finance, investment,
Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud,
Speaker 1: Bloomberg dot com, and of course on the Bloomberg You've
Speaker 1: seen in the reports this morning. I'm sure many of
Speaker 1: you have let me read it to you. If you haven't.
Speaker 1: According to people with knowledge of the talks, executives of
Speaker 1: we Work and it's launches investor Self Bank discussing whether
Speaker 1: to shelve the I p O plans. They're not discussing
Speaker 1: the Golden sax or JP Morgan Chase right discussing it
Speaker 1: between themselves. Reportedly, let's bring in David Kirkpatrick show we
Speaker 1: founder and CEO of to Economy, and I'm sure many
Speaker 1: of you have read his book, The Facebook perspect David
Speaker 1: is great to have you with us. Just put into
Speaker 1: context what is happening. It's some perspective around this company
Speaker 1: and the controversy surrounding it as they try and go public.
Speaker 1: I would say the biggest picture context is that the
Speaker 1: WEE Company or we Work is not a tech company,
Speaker 1: but partly because of it's backing from soft Bank, which
Speaker 1: is basically trying to turn everything into tech and profit
Speaker 1: massively with their hundred plus billion dollar funds they keep raising. Uh,
Speaker 1: they've they've somewhat deluded the world into thinking that pretty
Speaker 1: much any company that's using an app or or some
Speaker 1: kind of tech in order to transform an industry deserves
Speaker 1: the same kind of evaluation as Facebook. And that's ridiculous.
Speaker 1: So they came to the market last time in the
Speaker 1: private funding round, the last funding round, and got two
Speaker 1: billion dollars of investment from self bank and evaluation of
Speaker 1: forty seven billion. Are we saying that self bank is
Speaker 1: completely distorted private markets? I would say yes, it has.
Speaker 1: I think that's a very good general statement. I mean,
Speaker 1: I think Uber is another consequence of this, and I
Speaker 1: look at what's happened since Suber's I p oh, It's
Speaker 1: it's very related. So what happens next with this as
Speaker 1: far as you see things, well, the interest think about
Speaker 1: the I p O. Is this thing the contingent loan
Speaker 1: if they have to raise three billion or else, they
Speaker 1: don't get all this other billions from Wall Street banks.
Speaker 1: So it's six billion dollars aligned contingent on rice and three.
Speaker 1: So it could be that they will just lower the
Speaker 1: valuation as far as they can, so they still can
Speaker 1: raise three billion because they basically have to have more
Speaker 1: cash to keep expanding, because it's a shell game in
Speaker 1: a way. Chapter six of the Facebook Effect page becoming
Speaker 1: becoming a company? Is this any way to becoming a company? No,
Speaker 1: it isn't. But I will say since you mentioned my
Speaker 1: book about Facebook, Facebook did some degree set in motion
Speaker 1: the forces that we are seeing today. Well, primarily because
Speaker 1: of the absolute control that Zuckerberg obtained and the idea
Speaker 1: after that that every single tech quote unquote tech founder
Speaker 1: ought to have complete and total control, which Adam Newman
Speaker 1: took to an absurd Okay, but in the last week
Speaker 1: or Mr Newman's one, well, who wanted to do the
Speaker 1: tabloids sociable whole thing. You know, he's like Pharaoh. He's
Speaker 1: out there doing the you know, society thing. Yeah, John Farrell,
Speaker 1: He's doing the society. He's like Pharaoh in the Egyptian.
Speaker 1: So it's like Pharaoh here, not rowing Pharaoh, John Pharaoh.
Speaker 1: I meant Pharaoh in Cairo, and stay with me. Okay,
Speaker 1: Adam Newman has been invisible the last ten days. That's blowny.
Speaker 1: I mean, wouldn't if you were a basically a scam artist,
Speaker 1: wouldn't you hide when people have discovered you? I mean,
Speaker 1: you know, I mean, I'm afraid he's he's a variety
Speaker 1: of things that he has done at that company. It's
Speaker 1: almost too many to list. Does this break the arrogance
Speaker 1: of Silicon Valley is a general statement. The arrogance of
Speaker 1: Silicon Valley is being broken in real time already, and
Speaker 1: I think Facebook contributed again to that. They've made so
Speaker 1: many near criminal errors. Public markets will forgive governance issues
Speaker 1: if the business model is good. So let's talk about
Speaker 1: the business model, long term lease obligations, short term agreements
Speaker 1: with customers. You used the word scam. Just put some
Speaker 1: meat on those bots. I mean, it's you know, scam
Speaker 1: is a strong word. I don't want to get to
Speaker 1: a strong but basically, I think it's amazing that j
Speaker 1: the JP, Morgan Chase, and Golden Sachs would back this company.
Speaker 1: I think it makes them really culpable and is suspect
Speaker 1: they should be shamed for this. But I come at
Speaker 1: a time when we're possibly about to go into a
Speaker 1: downturn which is the absolute worst time for real estate.
Speaker 1: And all these little companies that occupy we works, they
Speaker 1: are going to basically be, you know, many of them
Speaker 1: out of funding, and that's exactly the wrong time to
Speaker 1: go puvid. When you say culpable, do you mean reputationally. Yes. Look,
Speaker 1: we're in a time when the smallest foible and somebody's
Speaker 1: reputation behavior causes them to lose their job, you know,
Speaker 1: be shamed. These are companies that are doing something I
Speaker 1: think that is unconscionable. They should not have backed this
Speaker 1: company at this kind of valuation. They shouldn't be trying
Speaker 1: to convince investors to throw their money away. That is,
Speaker 1: that's immoral. Well, self Bank is going for vision to
Speaker 1: the vision to fund the Vision fund too. I'm not
Speaker 1: saying I think they're just opportunistic. I think it's Wall Street.
Speaker 1: Is there accounting transparent? Do we know SoftBank's true accounting?
Speaker 1: I doubt it. I mean I'm not an expert at
Speaker 1: SoftBank's accounting, but I doubt it. We're out of time.
Speaker 1: You've coined something new here nearly emails and this says
Speaker 1: I have to call him Pharaoh John from now on?
Speaker 1: Is that my New Night. It's like King Todd, except
Speaker 1: it's King tart spout very differently. Oh yes, really there's
Speaker 1: a pH on that. How did you not realize? David,
Speaker 1: Great to see you, Great to be here at some
Speaker 1: controversial comments that David really look forward to coming along
Speaker 1: the way on this as well. Potentially the most interesting
Speaker 1: negative zero point zero one percent move I've ever seen
Speaker 1: on the SMP five hundred, the worst performing names with
Speaker 1: some of the best performing names on the day. The
Speaker 1: best performing names was some of the worst and it's
Speaker 1: left some people asking whether this is the beginning of
Speaker 1: a rotation, not just inequities, but in the bond market
Speaker 1: to one big question for bonds right now. Is it
Speaker 1: the beginning of the reflation trade, the beginning of a
Speaker 1: new trend, or just the correction after a monster move
Speaker 1: through Derek Hampenny dropping by the studio m u f
Speaker 1: G head are European at Global Markets Research. He joined
Speaker 1: us here in New York. Good morning to Derek. Good morning.
Speaker 1: Let's start with the question, shall we It is very
Speaker 1: early days, It has been a couple of weeks, but
Speaker 1: please weigh in on that big debate right now. It
Speaker 1: is early days and I would still be leaning towards
Speaker 1: a degree of caution in how this pans out. You know,
Speaker 1: the scale of the move makes it understandable that we've
Speaker 1: had some degree of correction. But you know the US
Speaker 1: China story. You know, even if we go back into negotiations,
Speaker 1: even if they start to kind of make progress, the
Speaker 1: kind of big picture on certainty around trade is not
Speaker 1: going to go away. Secondly, we believe a no deal
Speaker 1: braggsit is on the way. Boris Johnson has had a
Speaker 1: bad period of time, but ultimately we still think as
Speaker 1: big picture strategies in play um. So you know, all
Speaker 1: of that, coupled with just the fact that this was
Speaker 1: more about positioning than anything, I think you'd have to
Speaker 1: see some real fundamental shifts before you could get confident
Speaker 1: about this being a longer term trend. The US thirty
Speaker 1: year yield bottomed out at the end of August. We
Speaker 1: were as lower as around about one ninety city group.
Speaker 1: Since we have bottomed out is up around about ten
Speaker 1: percent since the end of August. Off the back of
Speaker 1: this pickup and yields. This rotation in the equity market
Speaker 1: is getting a lot of attention, but when you talk
Speaker 1: you highlight the same themes the same problems that took
Speaker 1: yields down to one ninety on the US thirty year
Speaker 1: and I assume from what you're saying, Derek, we've got
Speaker 1: more to come through the rest of Yeah, and you know,
Speaker 1: I look at central banks. We're going to get deeper
Speaker 1: negative cuts from the u CB on Thursday. We think
Speaker 1: ali and is having lower so we think Japanese strength,
Speaker 1: Japanese end strength is ultimately going to pressure in the
Speaker 1: b O J to potentially cutting rates. Are certainly trying
Speaker 1: to implement some form of easing under a no deal brexit.
Speaker 1: Are expecting two more rate cuts from the Bank of England.
Speaker 1: So you know, all of this, it's not a particularly
Speaker 1: positive backdrop for suggesting we've seen a turn in yields.
Speaker 1: We've got a lot to strip out there. Let's start
Speaker 1: with the c P and the decision on Thursday. Are
Speaker 1: you expecting what has been described as the full package,
Speaker 1: the right cut, the tearing, the QUI, the whole lot.
Speaker 1: Well again, yes, but I think this comes into why
Speaker 1: we're seeing the correction in yields because quite clearly there's
Speaker 1: been a very concerted effort amongst e c B Council
Speaker 1: members to shift the expectations in terms of the scale
Speaker 1: of that package, and in particular, perhaps the quantitative easing
Speaker 1: is where there is some division in relation to the
Speaker 1: scale of that. So perhaps that's going to come out
Speaker 1: at the low end of the scale twenty billion per
Speaker 1: month something like, but no indication of a change in
Speaker 1: the issuance limits that would kind of curtail the scale
Speaker 1: of the program. So you know, some potential disappointment perhaps
Speaker 1: on that, but you know, ultimately it's not going to
Speaker 1: make a huge difference beyond the short term momentum. Do
Speaker 1: they have a partition in the United States? Here as
Speaker 1: the US talks about trade war, manufacturing goods, disinflation, deflation,
Speaker 1: and then there's a buoyant service sector that Vice Chairman
Speaker 1: Clarator would say is solid. Great, I get that, Maybe
Speaker 1: the aggregate solid as well. That's a debate. Is the
Speaker 1: EU structure that way as well or is it just
Speaker 1: some no recession environment forget about the service sector goods
Speaker 1: trade war partition? Well, you know, the one positive that
Speaker 1: is still more or less evident in Europe is that
Speaker 1: outside of the external related economic indicators, there has been
Speaker 1: U positive data. And by that I mean and we
Speaker 1: mentioned it earlier in terms of the German labor market,
Speaker 1: but if you look at some of the domestic demand
Speaker 1: elements across Europe, the labor market is still supporting domestic
Speaker 1: demand to a degree. The problem is though, that of course,
Speaker 1: the longer the external certainties last, the greater the risk
Speaker 1: is filtering ECB delay. I mean, Farrell spend to Frankfurt
Speaker 1: like forty two times. He's he's never had a lunch.
Speaker 1: They're shorter than three hours. Well, I struggle to find
Speaker 1: a restaurant in Frankfurt's have lunch in because people having
Speaker 1: lunches for three hours. But John, I mean, I mean,
Speaker 1: why don't they just delay? I mean, there's no debate
Speaker 1: here about the ECB delaying. The whole debate has been
Speaker 1: hijacked by the counter effect. You're not just at the ECB.
Speaker 1: But the problems have to remember inflation, Like, they have
Speaker 1: one single mandate and they are missing it pretty badly.
Speaker 1: They are, and if they don't move. I think the
Speaker 1: fear that they have is the fit the FED shares
Speaker 1: is that financial conditions titan, the idea being ultimately that
Speaker 1: if you move again, you're not going to loosen them
Speaker 1: a whole lot more given that where spreads are at
Speaker 1: the moment, given where credit is trading, But if you
Speaker 1: don't move, you could have the opposite reaction, and then
Speaker 1: you've got a much bigger problem. I guess is that
Speaker 1: the logic is that the thinking do you think on
Speaker 1: the Governing Council at the moment, yes, to a degree.
Speaker 1: You know, again there their hands are tied to an
Speaker 1: extent in terms that they have a legal mandate, and
Speaker 1: if they continue to show forecasts that are moving in
Speaker 1: the opposite direction, and of course the five year five
Speaker 1: year inflation is showing, you know, record low levels, so
Speaker 1: you know that's that's where they're and is forced. But ultimately,
Speaker 1: you know, we all know we're reaching the end of
Speaker 1: the kind of scale of monetaries and that can be implemented.
Speaker 1: And as I said earlier to Tom, the pressure on
Speaker 1: a new course of action is going to increase considerably.
Speaker 1: And we have a new political landscape emerging in Europe
Speaker 1: and the Mercal is leaving, we have new commission in
Speaker 1: the U, a new ECB president. There's got to be
Speaker 1: a change in direction towards fiscal stimulus on a concerted
Speaker 1: and I've been so busy this morning, John I I
Speaker 1: just brought this chart up. I saw it and the
Speaker 1: bloomberg on the Great Jay screen they have. The plunge
Speaker 1: in Swedish inflation is jaw dropping, I mean plunge. There's
Speaker 1: almost no equivalent going back ten years, despite the fact
Speaker 1: that ricks Bank has been pretty aggressive as well. Derek,
Speaker 1: what's interesting from a foreign exchange perspective, and I'd love
Speaker 1: your insight just around out the conversation, is that we
Speaker 1: have seen spreads, the rate differentials between say the United
Speaker 1: States and Europe narrow at the same time we've seen
Speaker 1: a weaker euro. We've seen euro dollar break down a
Speaker 1: little bit. That's not what some people would expect just
Speaker 1: with f X one oh one, look at rate differentials,
Speaker 1: look at currencies. That's not really worked for a while,
Speaker 1: has it with a single currency? Why not? Derek? Well,
Speaker 1: I think we've we've we've reached extremes, and you know,
Speaker 1: the markets are I think to a degree acknowledging that
Speaker 1: we've reached the zero bound. And while yeah, okay, we
Speaker 1: can get tann basis points to any basis points, the
Speaker 1: what's being priced in is the quantitative easing component of that,
Speaker 1: which doesn't filter through into the right spreads to the
Speaker 1: same degree because of course we're at the lower band
Speaker 1: and you're getting less traction. But it doesn't then tie
Speaker 1: with euro because of those curtailments in relation to what
Speaker 1: the ECP can do. Uh you know. But again you
Speaker 1: can go back to euro euro rallied to one and
Speaker 1: it had nothing to do with spreads. So when you
Speaker 1: reach extremes you can have you can have moves and
Speaker 1: with intert the FED and focus as well, their reluctance
Speaker 1: to act more aggressively is helping to keep the dollar support.
Speaker 1: This has been a wonderful conversation, Derek. Help on you
Speaker 1: visiting in New York ahead of Global Research. I don't
Speaker 1: know what's your title. This week had a Global Research
Speaker 1: in charge of Premier League nails. Are you over your
Speaker 1: interviewing for NBC Sports for Premier A happy to be
Speaker 1: here and not if it's talking about Arsenal, I would
Speaker 1: I would happily do that. They look good against the Tots.
Speaker 1: They deserve to beat the top that he called spurs
Speaker 1: the Tarts. He said, but I watched were you at
Speaker 1: the game? The game with my two boys? I thought
Speaker 1: I saw you. You know, we can't afford his seats.
Speaker 1: I mean they're like and they're close. You know, we
Speaker 1: need to get you to a game this season. Yeah,
Speaker 1: they catch when when? When when the election? When they
Speaker 1: finally call it gets Arsenal, it's a derby. It's not
Speaker 1: a derby. It's a derby derby. Arsenal looked really good.
Speaker 1: And I got the idea where the experts are saying
Speaker 1: they got three guys up front there they're so good
Speaker 1: that it changes everyone that got three thirty seconds blow
Speaker 1: the brake rich football. They've got three good upfronts. The
Speaker 1: defenses the problem uh in the league. See how he
Speaker 1: gets gage. He doesn't talk about you're all yeng like
Speaker 1: this John. I know he can totally engage about his gunners,
Speaker 1: his gunners. I didn't know that Arsenal gunners. You like that?
Speaker 1: So we bringing George sara Velos, bringing George serious research
Speaker 1: of Deutsche Bank Global head of Foreign Exchange Research, going
Speaker 1: into a really interesting way tomorrow, pp I data from
Speaker 1: the United States Thursday, CPI retail sales Friday, and an
Speaker 1: ECP rate decision TOMPs somewhere in between. Coming up on
Speaker 1: Thursday with a news conference with President Runkie. It is
Speaker 1: a really sizeable week ahead, sizable week ahead in the
Speaker 1: George in your research note, you've got all in trade
Speaker 1: weighted price adjusted dollar. Why do you have price adjusted
Speaker 1: dollar in your note? With the news slow that's coming up? Well,
Speaker 1: as you say, Thursday is a really big day for
Speaker 1: the markets in terms of the ECB, So all the
Speaker 1: focus will be on the euro, but at least as
Speaker 1: far as the US administration goes, I think they're focused
Speaker 1: on broader measures and what dollar China has been doing,
Speaker 1: and on that front, obviously they move through seven over
Speaker 1: the summer has picked up attention. What was interesting in
Speaker 1: August is that we saw a new bill submitted in
Speaker 1: the Senate that was bipartisan talking about the FED now
Speaker 1: given a mandate to weaken the dollar and to start
Speaker 1: taxing capital inflows. So m Thursday will be all about Europe,
Speaker 1: but I think as we go into the end of
Speaker 1: the year and inter next the focus back into the
Speaker 1: US and the presidential election. In John, your your summary
Speaker 1: of the news events of partial differentials, is it about
Speaker 1: euros stronger weaker or is it about something else stronger weaker?
Speaker 1: Compared to you, Well, the elephant in the room right
Speaker 1: now is China and the Chinese currency. I think kit
Speaker 1: Juice of Solf John has done a great job of
Speaker 1: banging the drum on this, hammering home the idea that
Speaker 1: the biggest waiting in the trade weighted X basket of
Speaker 1: the e C B is the Chinese currency, and the
Speaker 1: second biggest waiting in the trade weighted fex basket of
Speaker 1: the FED is the Chinese currency. George, just how important
Speaker 1: is that currency move in the Chinese currency for the
Speaker 1: majors like the Euro, like the Dollar, for the FED
Speaker 1: and the e C big Well, it's absolutely critical. And
Speaker 1: for me, the biggest events of the summer has actually
Speaker 1: been just how successful the Chinese have been in managing
Speaker 1: this move through seven. So there was a large fear
Speaker 1: in the market that could be disorderly. You could see
Speaker 1: reserve depletion, large capital outflows, and none of this have materialized.
Speaker 1: That the Chinese have been very, very successful in achieving
Speaker 1: a weaker currency, but not by more than what they want.
Speaker 1: So in that sense, that's been a major positive for
Speaker 1: the market, the fact that we were able to move
Speaker 1: through that seven level over the summer, and I think
Speaker 1: we come in September and the market is potentially looking
Speaker 1: a bit more optimistic, and I do think that control
Speaker 1: the Chinese have over the currency makes the light of
Speaker 1: the ECB and the FED just a little bit easier
Speaker 1: or surveillance. Let's use Euro just as one benchmark to
Speaker 1: begin a set of calls. What is your call on
Speaker 1: Euro twelve months out? Given the cacophony, have we come
Speaker 1: out of this summer? Well, we think it will move
Speaker 1: back above one twenties, So we think we will see
Speaker 1: the low in Q four. And there's two sides to
Speaker 1: that coin. The first one is European. The ECB at
Speaker 1: the moment, I think is losing relevant. The meeting this week,
Speaker 1: I think we'll be remembered as the last meeting where
Speaker 1: they can really deliver anything. And we're at a point
Speaker 1: for the ECB where less is more. So if they
Speaker 1: over deliver, the rook is financial conditions, Titan Bank stock
Speaker 1: drop and be precided because the CB can't deliver that much.
Speaker 1: The Euro, I think we'll struggle to weaken and then
Speaker 1: we go onto the U S story, which is the
Speaker 1: other side of the coin um. First, of course, the
Speaker 1: FED can cut a lot more. We say, if the
Speaker 1: FED cuts through one percent, that's going to be a
Speaker 1: big turn to the dollar. And secondly, the US presidential
Speaker 1: election next year, you have all sorts of policies being
Speaker 1: flown around which may potentially have a negative impact on
Speaker 1: confidence on capex, and I think that would be a
Speaker 1: negative driver dollar as well. John, What does Germany do
Speaker 1: with a one tw euro? What does it do to
Speaker 1: their automobile indust Given where autos are right now, it
Speaker 1: certainly doesn't help. George, looking at the euro and looking
Speaker 1: at the e c B, I sense you can gauge
Speaker 1: some kind of disappointment coming on Thursday. What does disappointment
Speaker 1: look like? What does that look like this Thursday with
Speaker 1: President drag Well, that's a great question, John, in terms
Speaker 1: of what disappointment means, because I would argue that, for instance,
Speaker 1: if they over deliver on QUI, if they push fun
Speaker 1: yields even lower. While that might be delivering on the
Speaker 1: rate side, it might not be so good for bank
Speaker 1: stocks and equities precisely because we're at the so called
Speaker 1: rever petal rate. So yes, I do think there may
Speaker 1: be a disappointment as far as q egos yields may
Speaker 1: move higher, but I don't think it will be disappointment
Speaker 1: in the conventional sense. In that you might actually see
Speaker 1: the market like such a reaction. So the key metric
Speaker 1: for me is really how inflation break evens behave and
Speaker 1: how bank stocks behave, and if you end up moving higher,
Speaker 1: I wouldn't call that an ECP disappointment, even if when
Speaker 1: yields move up. George, let's just talk about afraid to
Speaker 1: use their the reversal rate. It's something that's getting a
Speaker 1: whole lot more debate and discussion over the last few
Speaker 1: weeks coming into the CCP rate decision. Just walk us
Speaker 1: through that concept and why it's so important for the
Speaker 1: likes of the e CP and the likes of the
Speaker 1: b J to consider. Well, it's absolutely critical. And the
Speaker 1: reversal rate is the level at which beyond which if
Speaker 1: you start easing policy ends up having the opposite effect
Speaker 1: of what you need. So we saw that with the
Speaker 1: back of Japan when the ease policy a couple of
Speaker 1: years ago they went through negative banks had a very
Speaker 1: negative reaction. We're seeing it in Europe. The correlation between
Speaker 1: banks and yields used to be a negative one, so
Speaker 1: yields lower. Banks used to like that, but now that
Speaker 1: switched and yields going on, banks don't like that. Anymore.
Speaker 1: And I think we've reached this moment of truth for
Speaker 1: the ECB where they can't really do much. And it's
Speaker 1: something that looks acknowledged a few days ago as well.
Speaker 1: Are we going to have an e c B or
Speaker 1: anybody else buying Apple shares or Amazon shares or Semen
Speaker 1: shares or you know, name the German company. I mean,
Speaker 1: do they have to get really creative here? All know
Speaker 1: what the Japanese did. I think that is a possibility
Speaker 1: and drag you may talk up these options potentially including
Speaker 1: purchasing senior bank um senior bank bonds as well. These
Speaker 1: are quasi fiscal type policies which involved greater redistribution. However,
Speaker 1: it's quite a dangerous route to go down in that
Speaker 1: once the ECB starts, for instance, buying starting to push
Speaker 1: push as a values of wealthy people, um, it creates
Speaker 1: very negative redistribution effect. And then want to ask the question,
Speaker 1: why not do helicopter money? Why not give money to
Speaker 1: poor people directly rather than buying equities. And that's a
Speaker 1: fiscal debate, and I really think it's the fiscal side
Speaker 1: that will resolve the growth outlook over the next couple
Speaker 1: of years as well. As where bun Yield go and
Speaker 1: the europe Thank you so much. Global Wall Thanks. I'm
Speaker 1: sure we'll get that out on podcast. Is well, Tim,
Speaker 1: you'll be relieved to know that Congress is back in sessions.
Speaker 1: All is right with the world, and the Congress certainly
Speaker 1: has plenty on its place. You get a sense of
Speaker 1: kind of what Congress will be focusing on here in September.
Speaker 1: We welcome my next guest, Nancy oh Nonovitch Agnovitch Bloomberg,
Speaker 1: Government Congressional Leadership reporter. So, Nancy, thanks so much for
Speaker 1: joining us. So give us a sense of kind of
Speaker 1: what's on the to do list for Congress as it
Speaker 1: comes back into session here, Well, play that music from
Speaker 1: forty eight hours. The boys are back in town and
Speaker 1: they've got just like twelve working days before they leave
Speaker 1: town again for a break. Yeah, And so they have
Speaker 1: to do the main thing they always do in September,
Speaker 1: which is make sure we don't have a shutdown and
Speaker 1: passed something to cover the government spending. And they're going
Speaker 1: to be starting to move that next week. And that's
Speaker 1: the main thing, because the Senate hasn't passed a single
Speaker 1: appropriations bill. They're going to start this morning working on
Speaker 1: a defense bill about seven billion, and then go from there.
Speaker 1: They're all do at the White House at four o'clock
Speaker 1: and the Senate Republicans that is, to talk to Trump
Speaker 1: about this agenda, and the key thing is avoiding a shutdown.
Speaker 1: And then if they can do that and they can
Speaker 1: come back around the fifteenth of October, then maybe they
Speaker 1: can work on that trade deal, maybe a high a bill,
Speaker 1: a few other things, and then December is right upon them,
Speaker 1: and then that's when they do a massive omnibus and
Speaker 1: try to stuff as much as they can in that
Speaker 1: package and leave town and get ready in earnest for
Speaker 1: the election next year. So, Nancy, what are the odds
Speaker 1: that we will have a government shutdown? I mean, this
Speaker 1: is continued resolution presumably is a is something that will
Speaker 1: be on number one on the on the agenda. Can
Speaker 1: they get that passing? I think they can get that passed, because, uh,
Speaker 1: Mitch McConnell really knows how bad these things hurt his
Speaker 1: party when they're facing an election, and I think that's
Speaker 1: one of the reasons or one of the messages that
Speaker 1: they'll deliver to the president today that the thirty five
Speaker 1: days shutdown that they had last year was very, very
Speaker 1: bad for the party. But people can't forget these things,
Speaker 1: but not when they're only a year away from the
Speaker 1: presidential election. And so I think there'll be a lot
Speaker 1: of pressure. And although Tom doesn't really like some of
Speaker 1: these percentages and so on, I'd say, right now we're
Speaker 1: looking at a thirty percent chance of a shutdown, but
Speaker 1: that could grow depending on Trump. Nancy, It's called President Trump. Nancy.
Speaker 1: Come on, you sound like you've had on a Capitol
Speaker 1: hill for years. Nancy looked out to the chase. What matters?
Speaker 1: Are the Redskins past their sell by date in Washington?
Speaker 1: I mean they used to sell out. Al Hunt would
Speaker 1: board me. I not off asleep. Al Hunt would be
Speaker 1: beating me up on how important the Redskins are. Is
Speaker 1: Congress still in love with the Redskins? I can't believe
Speaker 1: that you brought up sports. Actually, you know, I was
Speaker 1: looking at their standings today. The Redskins. It's not so good. Baltimore,
Speaker 1: the Ravens. They are the ones that have the you know,
Speaker 1: the momentum right now. What's a buzz on the hill?
Speaker 1: I mean, I mean they lose to the Eagles, they
Speaker 1: get crowned, surreally had to be medicated. They're playing the
Speaker 1: Cowboys this week. But this used to be like, you know,
Speaker 1: on my first days in Washington for Bloomberg, the whole
Speaker 1: town is fixated by the Redskins. Is it done? Oh,
Speaker 1: you're absolutely right right that Joe's eisman, all of that
Speaker 1: is huge. Everybody wanted to go to the the Redskins games.
Speaker 1: Nobody even talks about them these days, are they I mean,
Speaker 1: you're the only one that would know this, Nancy Igdanovich.
Speaker 1: Are are they going to get an appropriations built done
Speaker 1: to build up a new stadium? Oh? No, nobody seems
Speaker 1: to get anything built anymore. Look at the FBI. The
Speaker 1: FBI is in that ancient brutalist building on the Ylvania
Speaker 1: Avenue for as long as you can imagine. Now that
Speaker 1: was Jedger Hoover's fault. Nancy Adganovitch, thank you so much
Speaker 1: for the architectural lesson. Nancy Igdanovitch really a jewel for us.
Speaker 1: You watch it. She has encyclopedic knowledge, yeah, of the past. Yeah,
Speaker 1: and you know, have that insider knowledge the sources is
Speaker 1: just extraordinary. Brings you that the color that you don't
Speaker 1: get most other places. This is a joy and we
Speaker 1: do this with Scott Galloway, author of The Foreign His
Speaker 1: Paul Sweeney mentioned just a terrific Twitter follow for any
Speaker 1: of you interested in this dovetail of our modern capitalism
Speaker 1: with all the things that we do and buy in
Speaker 1: technology and that we're thrilled at. Scott Galloway can continue
Speaker 1: with us from New York University. Scott Douglas Cass is
Speaker 1: an investor. He's visible, he's long, he's short, he trades,
Speaker 1: He's a pinata for the Doom and Gloom Crew, etcetera, etcetera.
Speaker 1: He is not only long Amazon, but here's a guy
Speaker 1: that's taken to heaven forbid a long term view five years,
Speaker 1: six years, seven year view, and Doug Cass puts a
Speaker 1: big dollar amount on the share out the road. Can
Speaker 1: you extrapolate forward any of this technology? Can you extrapolate
Speaker 1: forward the future of the four? Sure? So if I
Speaker 1: was going to write a sequel would be called The One.
Speaker 1: And people often ask me what would be the first
Speaker 1: trillion dollar company? And I would respond that I don't know,
Speaker 1: but the first two trillion dollar company will be Amazon.
Speaker 1: We've never had a company firing on twelve thousand cylinders
Speaker 1: the way we have at firing on Amazon. I believe
Speaker 1: the most valuable company in the world in two thousand
Speaker 1: and twenty two or twenty three will be AWS, which
Speaker 1: will be spun by Jeff Bezos prophylactically to stave off regulation.
Speaker 1: In my view, so what will be the most valuable
Speaker 1: company in the world aws and by virtue of at Amazon,
Speaker 1: It's hard to imagine anyone threatening Amazon right now. So, Scott,
Speaker 1: I'm glad you brought up kind of you know, expending
Speaker 1: off AWS to fend up, potentially fend off regulators. That's
Speaker 1: something new, I e. Regulatory oversight by US Congress, US
Speaker 1: regulators of big tech. Historically, the US has taken a
Speaker 1: generally a light touch to Silicon Valley. Do you think
Speaker 1: that's fundamentally changing? If so, is that a real risk
Speaker 1: for big tech? Oh, it's absolutely changing. Just yesterday, forty
Speaker 1: eight states attorney general is basically everyone with forty with
Speaker 1: Puerto Rico and California announced that they were going to
Speaker 1: pursue any trust against Google. So the breakup a big
Speaker 1: tech has in fact begun with the markets. I think
Speaker 1: it wrong, Paul, is that these companies will be worth
Speaker 1: more broken up. If you look at all the company's
Speaker 1: post breakup, whether it was a T and T or
Speaker 1: the e Bay spin from excuse me, the PayPal to
Speaker 1: spin from eBay, the companies tend to unlock tremendous value.
Speaker 1: So yes, the breakup of big tech has begun, and
Speaker 1: also it will be good for shareholders. Okay, well you're
Speaker 1: right at tar Bill. Do you get out front? I mean,
Speaker 1: if you're gonna break up big tech and you you
Speaker 1: you believe that, Professor Galloway, what is there you mentioned?
Speaker 1: You know the cloud is going to be spun off
Speaker 1: of Amazon. What does Apple do on the breakup of
Speaker 1: big tech? I mean, do they really spin this stuff off?
Speaker 1: You know? It's that's the correct question time. I think
Speaker 1: Apple was probably the one that doesn't get broken up,
Speaker 1: it gets regulated. I think their app store is somewhat
Speaker 1: predatory in terms of their pricing, where you have a
Speaker 1: company like Spotify that has a superior service, but its
Speaker 1: growth is hamstrung by Apple, who is now growing their
Speaker 1: music offering faster with an inferior service because they own
Speaker 1: they have a billion pre installed devices. I don't think
Speaker 1: Apple gets broken up because elegant anti trust not only
Speaker 1: oxygenates the marketplace, with more competitors, but it doesn't hamstring
Speaker 1: the company you're breaking up. And it would be difficult
Speaker 1: to break up Apple because the question is who gets
Speaker 1: domain over the core asset, which is the brand. So
Speaker 1: I think Apple is probably the one that survives the breakup. So, Professor,
Speaker 1: one of the names that is really interesting right now
Speaker 1: is a T and T. I mean you talk about
Speaker 1: the convergence of telecommunications media telecom, that's a T and
Speaker 1: T with the acquisition of Direct TV and then Time Warner.
Speaker 1: Now we've got an activist investor in there saying, wait
Speaker 1: a minute, I don't think you guys are going down
Speaker 1: the right road here. What do you make of kind
Speaker 1: of the strategy? Uh that a T and T is suing?
Speaker 1: I think it makes sense on a whiteboard, but it
Speaker 1: doesn't look to be playing out as a consumer, and
Speaker 1: I'm a consumer with a T and T. I don't
Speaker 1: see how they're leveraging the content of Time Warner and
Speaker 1: also just anytime the Jeff Bucas or Ruper Murdoch, who
Speaker 1: I think are kind of two of the rider blue
Speaker 1: flame thinkers sell assets at the same time, it means
Speaker 1: you don't want to be along those assets and just
Speaker 1: as Verizon wrote down it's purchased of Yahoo. I think
Speaker 1: you're probably gonna see over time, A T and T
Speaker 1: right down the assets of Time Warner, not because they're
Speaker 1: not great assets. I just think they overpaid for him.
Speaker 1: And it's not entirely clear from a consumer standpoint what
Speaker 1: benefit a subscriber to their data, their data and cell
Speaker 1: plans is getting from the same company owning HBO right now.
Speaker 1: And that I guess that's the A T. T story
Speaker 1: is kind of what we're emblematic of what we're seeing
Speaker 1: in the media space, which is this pivot towards streaming,
Speaker 1: getting a direct relationship with your consumer made so famous
Speaker 1: by Netflix. We saw in the Walt Disney Company spend
Speaker 1: seventy billion dollars somebody on Third Avenue sell on cell phones.
Speaker 1: Is gonna tell Scott Gallaway the creative energy needed to
Speaker 1: do stream exactly? I don't think so, But so, professor,
Speaker 1: what do you think about kind of it's like the
Speaker 1: Walt Disney Company making this major pivot towards streaming. Is
Speaker 1: this something big media can do successfully? Or is kind
Speaker 1: of the horse kind of left the barn already? There
Speaker 1: are really only two companies that have a that have
Speaker 1: landed effective counter blows against big tech. The first is
Speaker 1: Walmart that has shown that it still has some mojo
Speaker 1: and as landed counterpunches against Amazon, specifically with with the
Speaker 1: curbside pick up and grocery. And the second, Paul, to
Speaker 1: your point, is Disney and the set of assets that
Speaker 1: Disney has with Star Wars, with Hulu, with Pixar, with Kids, Content,
Speaker 1: with the parks, even with their Crua ships. I think
Speaker 1: Disney is Disney is in a position to offer a
Speaker 1: grand bargain that does in fact rival Netflix. So you're
Speaker 1: and you also have a leader that has the credibility
Speaker 1: to tell its board hold on everyone. We're taking profits
Speaker 1: down because as when we say a platform or streaming
Speaker 1: that's Latin massive investments, it's got about eight more questions,
Speaker 1: and we're gonna do one and I'll stay here on
Speaker 1: what all our listeners are gonna live. Paul Sweeney says,
Speaker 1: in November and into next year, what do you see
Speaker 1: is the outcome of streaming? Are we going to have
Speaker 1: three streaming sources or are we going to see a
Speaker 1: price war where we enjoy five or six streaming sources?
Speaker 1: What's Galaway's outcome of what happens in my living room. Well, unfortunately,
Speaker 1: it'll probably two or three big players, and there'll be
Speaker 1: several niche players. But the unfortunate thing about tech and
Speaker 1: where the d o J and FTC need to step
Speaker 1: in it. Across all markets, or almost all major markets,
Speaker 1: we're seeing a consolidation of influence and power where there's
Speaker 1: only two or three players, and that's bad. That's bad
Speaker 1: to the economy. I would argue the government and the
Speaker 1: regulatory agencies have become a co conspirator and not a
Speaker 1: countervailing force of private power. That we need to see
Speaker 1: more affirmative d J and FTC action to ensure the
Speaker 1: consumers still have choice in the marketplace. Get tox and toxicative.
Speaker 1: Scott Kellaway, thank you so much, greatly appreciated on we
Speaker 1: Company and a host of other issues, including Amazon and
Speaker 1: the view for Thanks for listening to the Bloomberg Surveillance podcast.
Speaker 1: Subscribe and listen to interviews on Apple Podcasts, SoundCloud, or
Speaker 1: whichever podcast platform you prefer. I'm on Twitter at Tom
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Speaker 1: I'm Bloomberg Radio