1 00:00:00,680 --> 00:00:13,040 Speaker 1: Yeah, Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane. 2 00:00:13,480 --> 00:00:17,560 Speaker 1: Daily we bring you insight from the best in economics, finance, investment, 3 00:00:18,000 --> 00:00:23,480 Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 4 00:00:23,600 --> 00:00:28,000 Speaker 1: Bloomberg dot Com, and of course on the Bloomberg David 5 00:00:28,000 --> 00:00:30,720 Speaker 1: Blanche for with us, and this is so important. He 6 00:00:30,880 --> 00:00:34,240 Speaker 1: is at Dartmouth College, is well, a former member of 7 00:00:34,400 --> 00:00:36,520 Speaker 1: the Bank of England shop and he joins us now 8 00:00:36,520 --> 00:00:40,040 Speaker 1: with his wonderful work on labor economics. But Danny, what 9 00:00:40,120 --> 00:00:41,599 Speaker 1: I want to you know, I know John's got eight 10 00:00:41,640 --> 00:00:45,040 Speaker 1: ways to go here. You never know why things change, 11 00:00:45,040 --> 00:00:47,800 Speaker 1: You never know what the outside event is, like a virus. 12 00:00:48,200 --> 00:00:52,160 Speaker 1: But all of a sudden, we're framing weaker growth. We're 13 00:00:52,159 --> 00:00:54,360 Speaker 1: framing this, that and the other thing, and your study 14 00:00:54,360 --> 00:00:57,560 Speaker 1: of economics. When this is over, the abounce back or 15 00:00:57,640 --> 00:01:02,920 Speaker 1: is there a lasting weakness to it? Well, normally we 16 00:01:03,280 --> 00:01:06,600 Speaker 1: bounced back, and we bounced back pretty quickly. What's happened 17 00:01:06,640 --> 00:01:10,160 Speaker 1: over the last decade is we bounced back really slowly, 18 00:01:10,600 --> 00:01:12,920 Speaker 1: and on some measures we didn't bounce back at all. 19 00:01:13,240 --> 00:01:15,679 Speaker 1: So that's about the uniqueness of what happened in two 20 00:01:15,760 --> 00:01:18,800 Speaker 1: thousand and eight. The question now is what, as you 21 00:01:18,920 --> 00:01:22,319 Speaker 1: rightly say, what's normal and the and and the evidence 22 00:01:22,319 --> 00:01:24,640 Speaker 1: suggested that things were looking pretty darn good at the 23 00:01:24,680 --> 00:01:26,959 Speaker 1: beginning of the year wage growth in the US and 24 00:01:27,000 --> 00:01:28,920 Speaker 1: the UK picked up the four percent or so on 25 00:01:28,959 --> 00:01:31,319 Speaker 1: it it looked like things were going back to normal. 26 00:01:31,440 --> 00:01:34,880 Speaker 1: And now during two thousand nineteen they turned back the 27 00:01:34,920 --> 00:01:38,720 Speaker 1: other way. So the world has the world clearly changed 28 00:01:38,760 --> 00:01:43,160 Speaker 1: in two thousand, especially the labor markets. Um. And it's 29 00:01:43,200 --> 00:01:45,840 Speaker 1: not clear where we're going in the future. And obviously 30 00:01:45,880 --> 00:01:48,840 Speaker 1: the concern is what weapons do you have if this 31 00:01:49,160 --> 00:01:52,600 Speaker 1: even when this turn turnaround comes. So I think that's 32 00:01:52,680 --> 00:01:55,520 Speaker 1: the that's the thing going forward. How much how much 33 00:01:55,560 --> 00:01:58,080 Speaker 1: monetary room is that to do things? And what are 34 00:01:58,080 --> 00:02:00,560 Speaker 1: the fiscal folks going to do? And in the UK 35 00:02:00,680 --> 00:02:04,480 Speaker 1: it looks like very quickly they've backtracked on fiscal space. 36 00:02:04,480 --> 00:02:07,480 Speaker 1: So I just think watch this space. UM, it's going 37 00:02:07,560 --> 00:02:09,760 Speaker 1: to be a pretty rough road for a few years, 38 00:02:09,880 --> 00:02:12,160 Speaker 1: and that the very best growth is going to be weak, 39 00:02:12,320 --> 00:02:15,399 Speaker 1: and that may be overly optimistic. Danny has been really 40 00:02:15,400 --> 00:02:18,280 Speaker 1: difficult to understand the reaction function of the Bank of 41 00:02:18,320 --> 00:02:20,600 Speaker 1: Wing and over the last couple of months much more 42 00:02:20,600 --> 00:02:23,160 Speaker 1: straightforward to understand the shift of the reaction function over 43 00:02:23,240 --> 00:02:26,400 Speaker 1: the Federal Reserve. A massive change from Chairman Pal in 44 00:02:26,440 --> 00:02:28,480 Speaker 1: the last twelve months. And to make it simple, Danny, 45 00:02:28,480 --> 00:02:31,360 Speaker 1: they're basically telling us, if things get better, we won't 46 00:02:31,360 --> 00:02:33,560 Speaker 1: step in and cap the upside, but if things get worse, 47 00:02:33,760 --> 00:02:35,800 Speaker 1: we're ready to do more. Your thoughts on what we've 48 00:02:35,840 --> 00:02:40,360 Speaker 1: heard from Chairman Pal, Yeah, I mean I've said on 49 00:02:40,400 --> 00:02:42,960 Speaker 1: your program many times and I thought, I thought that 50 00:02:43,000 --> 00:02:46,320 Speaker 1: the rates when rises were all in error and they're 51 00:02:46,360 --> 00:02:50,079 Speaker 1: paying the consequences of that, and the consequences I think 52 00:02:50,400 --> 00:02:54,720 Speaker 1: are really the following um. The feeders realize that their 53 00:02:54,800 --> 00:03:01,519 Speaker 1: forecasts are completely hopeless, and essentially they've given up forecasting inflation, unemployment, 54 00:03:01,639 --> 00:03:05,160 Speaker 1: GDP growth UM and essentially what they're doing is they're 55 00:03:05,160 --> 00:03:07,480 Speaker 1: sitting there waiting for some bad news to come in. 56 00:03:07,919 --> 00:03:10,480 Speaker 1: As you rightly say, if the good news comes in, well, okay, 57 00:03:10,520 --> 00:03:12,680 Speaker 1: that's great. And if the bad news comes in, we're 58 00:03:12,680 --> 00:03:15,119 Speaker 1: going to react to it. But I guess the right 59 00:03:15,160 --> 00:03:18,960 Speaker 1: thing to think is that by that point it's too late. 60 00:03:19,639 --> 00:03:22,239 Speaker 1: So I think that's a really big worry, and that's 61 00:03:22,280 --> 00:03:24,000 Speaker 1: what's being priced into the market. If you take a 62 00:03:24,000 --> 00:03:26,000 Speaker 1: look at the yield curve, which is flattening yet again, 63 00:03:26,040 --> 00:03:28,639 Speaker 1: now the flattest since November. I'm just looking at the 64 00:03:28,680 --> 00:03:30,480 Speaker 1: two tents spread in the US, and I'm trying to 65 00:03:30,520 --> 00:03:32,840 Speaker 1: figure out is the implication here the Fed is going 66 00:03:32,880 --> 00:03:35,880 Speaker 1: to make an error by not moving soon enough, or 67 00:03:36,160 --> 00:03:40,840 Speaker 1: even worse, they don't have the ammunition well both right, 68 00:03:41,680 --> 00:03:44,640 Speaker 1: so they there's there's not that much room to move. 69 00:03:45,480 --> 00:03:47,560 Speaker 1: Um And obviously the question is what what would the 70 00:03:47,600 --> 00:03:51,040 Speaker 1: Congress actually do and what would the what would they 71 00:03:51,080 --> 00:03:54,240 Speaker 1: be able to do if there was some down to UM. 72 00:03:54,840 --> 00:03:57,839 Speaker 1: I think the markets don't really have confidence in how 73 00:03:57,920 --> 00:04:00,800 Speaker 1: they confidence that he knows what he's doing. UM. I 74 00:04:00,880 --> 00:04:03,440 Speaker 1: mean literally we are in this position where they're just 75 00:04:03,560 --> 00:04:06,240 Speaker 1: waiting for a bad shoot drop and the markets will 76 00:04:06,280 --> 00:04:09,120 Speaker 1: obviously react to it. There's some really bad data comes. 77 00:04:09,320 --> 00:04:12,160 Speaker 1: Obviously we'll talk about it on Bloomberg, but the markets 78 00:04:12,160 --> 00:04:16,680 Speaker 1: are going to respond to the downside possibilities that are tough. UM. 79 00:04:16,720 --> 00:04:19,240 Speaker 1: And in some sense, think of the Bank Ofing decision today. 80 00:04:19,839 --> 00:04:23,200 Speaker 1: Essentially they've put off having to make a cut. But 81 00:04:23,240 --> 00:04:25,280 Speaker 1: I think the obvious thing to do was to make 82 00:04:25,320 --> 00:04:28,520 Speaker 1: an insurance cut. It's quite clear they're going to have 83 00:04:28,640 --> 00:04:31,960 Speaker 1: to going forward, but UM seven to two doesn't look 84 00:04:32,000 --> 00:04:33,760 Speaker 1: like they have a clue what they're up to. All 85 00:04:33,800 --> 00:04:36,120 Speaker 1: such a questions here Danny Blanchard with us of course 86 00:04:36,120 --> 00:04:38,520 Speaker 1: on the Dartmouth College and just a lot going on 87 00:04:38,560 --> 00:04:40,520 Speaker 1: in the market's future is a negative twenty four down 88 00:04:40,520 --> 00:04:44,440 Speaker 1: future is now negative to zero eight bond market absolutely fascinating. 89 00:04:44,760 --> 00:04:48,479 Speaker 1: You begin to think John about or bond Here what 90 00:04:48,600 --> 00:04:51,920 Speaker 1: I see as a druggy like headline which Danny, Now 91 00:04:51,920 --> 00:04:55,279 Speaker 1: we have monetary theorists giving us an ex access a 92 00:04:55,320 --> 00:04:59,599 Speaker 1: timeline out within their forecast. I mean BOE cuts growth 93 00:04:59,640 --> 00:05:03,080 Speaker 1: out look see cp I below target until the end 94 00:05:03,120 --> 00:05:06,120 Speaker 1: of two thousand twenty one. What does it signal to 95 00:05:06,240 --> 00:05:10,640 Speaker 1: people older in the room, Danny, that now we have governors, 96 00:05:10,720 --> 00:05:14,840 Speaker 1: President's chairman giving us a date way out. I mean 97 00:05:14,920 --> 00:05:17,960 Speaker 1: that's to me, that's a new thing started by Mario 98 00:05:18,040 --> 00:05:20,880 Speaker 1: dragging a year and a half ago. What it isn't 99 00:05:20,920 --> 00:05:22,880 Speaker 1: new thing, Tom, I mean, it's a it's a it's 100 00:05:22,920 --> 00:05:26,000 Speaker 1: the realization that most of the things that they said 101 00:05:26,080 --> 00:05:28,640 Speaker 1: for several years have turned out to be completely is it? 102 00:05:28,680 --> 00:05:30,480 Speaker 1: Is it a realization? I don't mean to erupt Danny. 103 00:05:30,520 --> 00:05:32,560 Speaker 1: But this is critical. Is it a realization They don't 104 00:05:32,560 --> 00:05:34,880 Speaker 1: have a theory, they don't have a plan. They didn't 105 00:05:34,880 --> 00:05:38,720 Speaker 1: listen to Blanche Flower. I don't know about the law. 106 00:05:39,480 --> 00:05:44,320 Speaker 1: I would have gold agree with that. I think the 107 00:05:44,320 --> 00:05:48,200 Speaker 1: answer absolutely is that they basically have no clue. And 108 00:05:48,320 --> 00:05:50,280 Speaker 1: I often have been on your program and someone says, 109 00:05:50,279 --> 00:05:53,520 Speaker 1: in the last cycle, the FED did eggs. Well, that 110 00:05:53,640 --> 00:05:56,599 Speaker 1: tells us absolutely nothing about where we are. We haven't. 111 00:05:56,600 --> 00:05:59,960 Speaker 1: We haven't experienced this before. So they lost and flowned 112 00:06:00,080 --> 00:06:03,320 Speaker 1: dring Um and that's essentially why they've given up. I 113 00:06:03,320 --> 00:06:06,600 Speaker 1: mean they have literally given up because the the economists 114 00:06:06,640 --> 00:06:10,880 Speaker 1: and the the people in within the Fed and within 115 00:06:10,920 --> 00:06:13,800 Speaker 1: the Bank of England essentially have no idea what they're doing. 116 00:06:13,839 --> 00:06:16,600 Speaker 1: So essentially what they said is, okay, then let's predict 117 00:06:16,600 --> 00:06:18,400 Speaker 1: that where we are will be where we will be 118 00:06:18,480 --> 00:06:21,799 Speaker 1: for a long time going forward until something else changes. 119 00:06:22,160 --> 00:06:25,159 Speaker 1: And that's a dangerous position to be in because you 120 00:06:25,240 --> 00:06:28,320 Speaker 1: don't have much ability to do something about. Danny, let 121 00:06:28,320 --> 00:06:30,760 Speaker 1: me champ in because if there's one thing that they've 122 00:06:30,800 --> 00:06:33,400 Speaker 1: got really wrong, it's something that you've been trying to 123 00:06:33,440 --> 00:06:36,680 Speaker 1: correct them on for years. They believe that as unemployment 124 00:06:36,760 --> 00:06:40,160 Speaker 1: rolled over, went through six percent, went through seven, went 125 00:06:40,160 --> 00:06:42,360 Speaker 1: through five, went through four. They thought white just would 126 00:06:42,360 --> 00:06:45,359 Speaker 1: pick up. They haven't. And finally Chairman Powell, in response 127 00:06:45,400 --> 00:06:48,240 Speaker 1: to that in yesterday's news conference, turned around and said, well, 128 00:06:48,240 --> 00:06:51,320 Speaker 1: maybe the labor market isn't as tight as we thought 129 00:06:51,520 --> 00:06:55,480 Speaker 1: it was. How key is that changed, Danny? Well, that's 130 00:06:55,560 --> 00:06:57,520 Speaker 1: absolutely key. And I think I've been on with you 131 00:06:57,680 --> 00:07:00,440 Speaker 1: for about six years now saying exactly is that my 132 00:07:00,520 --> 00:07:05,880 Speaker 1: new book is all about here? Yeah? That was well done. No, absolutely, 133 00:07:06,000 --> 00:07:08,560 Speaker 1: I mean the reality was they raised rates because of 134 00:07:08,640 --> 00:07:11,600 Speaker 1: their but the Fed raised rates because their belief was 135 00:07:11,720 --> 00:07:14,640 Speaker 1: that wages would start to pick up, as you said 136 00:07:14,680 --> 00:07:19,040 Speaker 1: at seven, and it hasn't done that. I mean, there 137 00:07:19,080 --> 00:07:21,040 Speaker 1: was a sign of it at the beginning of the year. 138 00:07:21,360 --> 00:07:24,040 Speaker 1: If you look at production and nonsupervisory work is weekly 139 00:07:24,040 --> 00:07:27,640 Speaker 1: wages the growth of four percent in January, it's two 140 00:07:27,680 --> 00:07:30,360 Speaker 1: point four percent today. And I was just reading the 141 00:07:30,440 --> 00:07:32,760 Speaker 1: minutes at the Bank of England that's actually it actually 142 00:07:32,840 --> 00:07:36,400 Speaker 1: is now lowered its wage growth forecast and lowered its 143 00:07:37,040 --> 00:07:40,040 Speaker 1: You about what I'm playing has been the rock what 144 00:07:40,080 --> 00:07:42,480 Speaker 1: they got rolled just because the time we've got to go. 145 00:07:42,600 --> 00:07:45,400 Speaker 1: But we'll do an extended conversation David blanche Far with 146 00:07:45,480 --> 00:07:59,000 Speaker 1: us of Dartmouth College. You know we're talking to her 147 00:07:59,480 --> 00:08:01,720 Speaker 1: thousands of a move, but the two year yield comes 148 00:08:01,720 --> 00:08:04,600 Speaker 1: in with a vengeance. On that GDP Price Index statistic 149 00:08:04,960 --> 00:08:10,160 Speaker 1: one and John, it just misses one point four percent. 150 00:08:10,280 --> 00:08:12,680 Speaker 1: You know, you do the nominal GDP add up and 151 00:08:12,680 --> 00:08:15,280 Speaker 1: you're well under four percent. Yeah, yeah, stick in santhat 152 00:08:15,320 --> 00:08:17,440 Speaker 1: WANT forty on two, he's on ten, still in and 153 00:08:17,480 --> 00:08:21,560 Speaker 1: around WANT fifty seven claims I'd just say claims rock solid. 154 00:08:21,600 --> 00:08:24,880 Speaker 1: Still tom to sixteen on initial jobless claims. But the 155 00:08:25,000 --> 00:08:27,800 Speaker 1: ultimately goes to the conundrum, the exact conundrum we've been 156 00:08:27,800 --> 00:08:30,800 Speaker 1: talking about all morning. Where is inflation right the jobless market? 157 00:08:31,280 --> 00:08:34,200 Speaker 1: The job jobs market looks really strong. You're seeing actually 158 00:08:34,280 --> 00:08:38,439 Speaker 1: GDP coming in stronger than expected and still under underwhelming inflation. 159 00:08:38,520 --> 00:08:40,560 Speaker 1: The inflation is out of the tuition of the Booth 160 00:08:40,600 --> 00:08:43,880 Speaker 1: School school in Chicago. That's where the inflation is right now. 161 00:08:43,880 --> 00:08:47,000 Speaker 1: How much does that const higher? What's the year tuition? 162 00:08:47,040 --> 00:08:50,160 Speaker 1: I have no idea school. The answer is it's well 163 00:08:50,240 --> 00:08:52,640 Speaker 1: earned it because you get to speak and go into 164 00:08:52,640 --> 00:08:56,320 Speaker 1: a lecture hall with Randall Cross, former Governor of the Federals, 165 00:08:57,200 --> 00:09:00,600 Speaker 1: of course with booth school as well. Go in a carouser. 166 00:09:00,760 --> 00:09:02,880 Speaker 1: We are thrilled to have you on today because there 167 00:09:02,920 --> 00:09:07,040 Speaker 1: are so many questions about this moment. Is there any 168 00:09:07,200 --> 00:09:11,200 Speaker 1: evidence that a central bank can reflate if there's a 169 00:09:11,240 --> 00:09:16,760 Speaker 1: desire to increase inflation? Is that doable short of wheelbarrows 170 00:09:16,760 --> 00:09:23,560 Speaker 1: of Deutsche marks and uh Germany a century ago. Well, 171 00:09:23,600 --> 00:09:25,960 Speaker 1: we certainly know that there are a few countries around 172 00:09:25,960 --> 00:09:30,400 Speaker 1: the world that are having high inflation Venezuela, Argentina's, Zimbabwe 173 00:09:30,880 --> 00:09:34,120 Speaker 1: and a few others. So the technology to to produce 174 00:09:34,160 --> 00:09:38,720 Speaker 1: inflation has not disappeared. But in most major countries inflation 175 00:09:38,800 --> 00:09:41,440 Speaker 1: is quite subdued, and central banks have had a lot 176 00:09:41,480 --> 00:09:46,319 Speaker 1: of difficulty getting to two percent inflation targets, and the 177 00:09:46,440 --> 00:09:48,959 Speaker 1: scratching their heads a bit about that, because normally, when 178 00:09:49,000 --> 00:09:53,280 Speaker 1: you have such robust labor markets, you'd see more wage pressure, 179 00:09:53,360 --> 00:09:56,040 Speaker 1: more price pressure, and some more inflation. But they haven't 180 00:09:56,040 --> 00:09:59,160 Speaker 1: seen that, and so it's a little bit of a dilemma. 181 00:09:59,640 --> 00:10:03,280 Speaker 1: The new new Randall Krassner is the X axis, and 182 00:10:03,320 --> 00:10:05,800 Speaker 1: that Mario Draggy, I'm going to say eighteen months ago 183 00:10:05,800 --> 00:10:09,559 Speaker 1: and now Governor Kearney this morning, are going out out 184 00:10:09,559 --> 00:10:13,520 Speaker 1: out in their guestimates and their forecasts. Let's start with 185 00:10:13,720 --> 00:10:16,400 Speaker 1: why why are we going out to the end of 186 00:10:16,520 --> 00:10:20,160 Speaker 1: two thousand twenty one? What kind of communication is that? 187 00:10:20,200 --> 00:10:25,280 Speaker 1: What kind of confidence building is that? So? I think 188 00:10:25,280 --> 00:10:28,720 Speaker 1: that's the the attempt to get people to really believe 189 00:10:28,880 --> 00:10:32,840 Speaker 1: that they are truly going to meet their inflation goals. 190 00:10:32,880 --> 00:10:37,160 Speaker 1: That this is something the Bank of Japan introduced relatively recently. 191 00:10:37,559 --> 00:10:39,959 Speaker 1: Um that the US said is actually relatively new to 192 00:10:40,000 --> 00:10:41,679 Speaker 1: the party. It was only two thousand and twelve that 193 00:10:41,760 --> 00:10:45,960 Speaker 1: they introduced they particular inflation goal. One of the challenges 194 00:10:46,000 --> 00:10:49,760 Speaker 1: is almost under these central banks have been meeting those 195 00:10:49,880 --> 00:10:53,640 Speaker 1: those goals, and that raises questions about whether they lose 196 00:10:53,679 --> 00:10:57,680 Speaker 1: credibility with the public, with market participants and others. Can 197 00:10:57,720 --> 00:11:01,280 Speaker 1: they really get there? Professor, I'm struck by this idea 198 00:11:01,320 --> 00:11:03,679 Speaker 1: that we're not seeing inflation in the real economy, We're 199 00:11:03,720 --> 00:11:06,119 Speaker 1: not seeing the wages pick up, but we're seeing incredible 200 00:11:06,160 --> 00:11:09,240 Speaker 1: asset price inflation. At what point is this sort of 201 00:11:09,360 --> 00:11:17,000 Speaker 1: divergence unsustainable? Well, there's no necessary reason why they would 202 00:11:17,160 --> 00:11:19,640 Speaker 1: why it would be unsustainable if the fundamentals are good 203 00:11:19,640 --> 00:11:23,880 Speaker 1: in the for for business um and inflation is low. 204 00:11:24,440 --> 00:11:29,360 Speaker 1: That's actually a wonderful, wonderful combination. Historically that's been quite rare, 205 00:11:30,040 --> 00:11:33,240 Speaker 1: but we seem to be in a reasonably good spot 206 00:11:33,320 --> 00:11:37,240 Speaker 1: of we have growth, not super robust growth, but resonable growth, 207 00:11:37,320 --> 00:11:41,280 Speaker 1: certainly in the US and in many many countries, and 208 00:11:41,960 --> 00:11:45,360 Speaker 1: very little inflation pressure. So that's great for savers, it's 209 00:11:45,400 --> 00:11:48,360 Speaker 1: great for your your average household. They don't have to 210 00:11:48,400 --> 00:11:52,440 Speaker 1: worry about, you know, the dollars or or euros or 211 00:11:52,440 --> 00:11:57,160 Speaker 1: whatever they're holding in their their pocket, indurating in purchasing power. Well, 212 00:11:57,200 --> 00:11:59,520 Speaker 1: I was speaking with Lisa Chalatte, whose chief investment officer 213 00:11:59,800 --> 00:12:02,760 Speaker 1: for Morgan Stanley Wealth Management, and she said, this is 214 00:12:02,800 --> 00:12:04,880 Speaker 1: going to become a problem. And it's sort of bumping 215 00:12:04,920 --> 00:12:07,839 Speaker 1: up against this point because you have companies who are 216 00:12:07,920 --> 00:12:10,720 Speaker 1: using their free cash flow and their money to buy 217 00:12:10,760 --> 00:12:16,160 Speaker 1: back shares, give dividends, not necessarily invest in capital expenditures 218 00:12:16,280 --> 00:12:19,040 Speaker 1: or paying up for employees or training them. And at 219 00:12:19,080 --> 00:12:21,880 Speaker 1: a certain point you're going to see this bleed out 220 00:12:21,920 --> 00:12:23,880 Speaker 1: in the real economy. And we're kind of at that 221 00:12:23,960 --> 00:12:27,000 Speaker 1: tipping point. What's the argument against that? If you think 222 00:12:27,040 --> 00:12:31,720 Speaker 1: that this is sustainable? I think that's a very important point. 223 00:12:31,720 --> 00:12:34,360 Speaker 1: One of the puzzles over the last decade is with 224 00:12:34,679 --> 00:12:37,920 Speaker 1: very low interest rates, both real phenomenal and with a 225 00:12:37,960 --> 00:12:40,439 Speaker 1: promise to keep those interest rates low for a long time, 226 00:12:40,840 --> 00:12:43,840 Speaker 1: why is it that businesses haven't stepped up investment. That's 227 00:12:43,840 --> 00:12:48,160 Speaker 1: true in the US, UK, pretty much globally except except 228 00:12:48,200 --> 00:12:51,080 Speaker 1: for China where they can kind of command that will 229 00:12:51,120 --> 00:12:54,240 Speaker 1: be Yeah, there will be investment. And so that does 230 00:12:54,320 --> 00:12:57,520 Speaker 1: raise questions about the sustainability because without investment you will 231 00:12:57,559 --> 00:13:00,120 Speaker 1: get productivity growth, and it's going to then be hard. 232 00:13:00,160 --> 00:13:03,040 Speaker 1: Did they get sustained wage growth? And without sustained wage 233 00:13:03,040 --> 00:13:05,240 Speaker 1: growth you can't get consumption growth. So I think that's 234 00:13:05,240 --> 00:13:08,600 Speaker 1: exactly the right issue to to focus on um and 235 00:13:08,640 --> 00:13:11,120 Speaker 1: then the key is can we generate the confidence to 236 00:13:11,200 --> 00:13:14,439 Speaker 1: get this is people to invest? Again, Ran, did you 237 00:13:14,480 --> 00:13:19,200 Speaker 1: think the fan has a role in that conundrum? Oh? 238 00:13:19,280 --> 00:13:22,959 Speaker 1: For sure. And so central banks can make a lot 239 00:13:23,000 --> 00:13:26,679 Speaker 1: of mischief. They can make people very uncertain, they can 240 00:13:26,720 --> 00:13:29,199 Speaker 1: make people really pull back from being willing to invest. 241 00:13:29,640 --> 00:13:31,960 Speaker 1: So they've what they've tried to do is be clear 242 00:13:32,160 --> 00:13:34,320 Speaker 1: about what they're doing and what they're going to do 243 00:13:34,440 --> 00:13:37,360 Speaker 1: going forward. That's the so called full with guidance. But 244 00:13:37,480 --> 00:13:39,440 Speaker 1: the thought was that that was going to help to 245 00:13:40,920 --> 00:13:43,120 Speaker 1: by making things more certain, that was going to help 246 00:13:43,200 --> 00:13:46,960 Speaker 1: to provide business with more confidence about what some of 247 00:13:46,960 --> 00:13:49,640 Speaker 1: their borrowing costs would be over time. As I said, 248 00:13:49,679 --> 00:13:53,000 Speaker 1: we we haven't really seen that pick up of of investment, 249 00:13:53,520 --> 00:13:56,000 Speaker 1: and I think that's one of the things that both 250 00:13:56,040 --> 00:13:58,720 Speaker 1: have Central Bank distraction their heads and have them worried, 251 00:13:59,000 --> 00:14:03,360 Speaker 1: because Lisa said, it's it's harder to sustain recoveries, especially 252 00:14:03,400 --> 00:14:06,280 Speaker 1: after a decade, if you're not getting investment. There Bloomer 253 00:14:06,320 --> 00:14:09,160 Speaker 1: surveillance somebody York. John Farrell, Lisa Bramos, and Tom King 254 00:14:09,240 --> 00:14:12,560 Speaker 1: were thrilled to bring you this important dialogue in economics yesterday. 255 00:14:12,800 --> 00:14:15,160 Speaker 1: William Dudley with us, of course, the former president of 256 00:14:15,200 --> 00:14:18,040 Speaker 1: the New York Fed, Austin Goulsby with us, the former 257 00:14:18,120 --> 00:14:22,040 Speaker 1: chairman of the President's Council of Economic Advisors for President Obama, 258 00:14:22,080 --> 00:14:25,760 Speaker 1: and Randall Krossner, Golsby's colleague at Booth School now with 259 00:14:25,880 --> 00:14:28,720 Speaker 1: as the former governor of the Fed. Randy, I want 260 00:14:28,720 --> 00:14:31,040 Speaker 1: to go to the animal spirit of it all, and 261 00:14:31,080 --> 00:14:35,440 Speaker 1: I would suggest anybody of any affiliation would say is 262 00:14:35,520 --> 00:14:41,040 Speaker 1: politically unacceptable when you add inflation to this fancy statistic 263 00:14:41,080 --> 00:14:43,720 Speaker 1: real g d P. I mean, basically, we're all living 264 00:14:43,720 --> 00:14:47,880 Speaker 1: in a nominal world, and nominal GDP current GDP really 265 00:14:47,920 --> 00:14:53,960 Speaker 1: isn't all there, is it? Well, I think certainly when 266 00:14:53,960 --> 00:14:57,080 Speaker 1: you put the two pieces together, the that number is low. 267 00:14:57,280 --> 00:15:01,800 Speaker 1: But if you're getting good, solid real GDP growth, that's 268 00:15:01,840 --> 00:15:05,400 Speaker 1: fundamentally what's important to people, because that's fundamentally what they'll 269 00:15:05,400 --> 00:15:09,600 Speaker 1: be able to afford to buy. UH and will let 270 00:15:09,680 --> 00:15:13,160 Speaker 1: you say, it's fundamentally what the economy is producing and 271 00:15:13,400 --> 00:15:16,600 Speaker 1: UH and their their ability to buy will be based 272 00:15:16,600 --> 00:15:21,200 Speaker 1: on their purchasing power. So after adjusting for after adjusting 273 00:15:21,200 --> 00:15:24,400 Speaker 1: for inflation, and the US has been doing reasonably well 274 00:15:24,440 --> 00:15:27,640 Speaker 1: on that. UM. You know, of course, we'd always love 275 00:15:27,720 --> 00:15:31,280 Speaker 1: to be growing like China, but but no western economy 276 00:15:31,360 --> 00:15:34,200 Speaker 1: is doing that, and there are very few major economies 277 00:15:34,680 --> 00:15:37,520 Speaker 1: are growing anywhere close to two percent as we are 278 00:15:37,560 --> 00:15:40,240 Speaker 1: in the US on a relative basis. Very true, Rand Across, 279 00:15:40,480 --> 00:15:42,640 Speaker 1: thank you so much for joining us. Really appreciate the 280 00:15:42,640 --> 00:15:45,600 Speaker 1: commandment from London today. The former governor of the Federal 281 00:15:45,640 --> 00:15:57,840 Speaker 1: Reserve System at Boot School, Chicago right now in English 282 00:15:57,960 --> 00:16:00,920 Speaker 1: from the French firm BMP Perry Bah Daniel Morris joins 283 00:16:01,000 --> 00:16:06,040 Speaker 1: us here to assist us in a strategic idea. Daniel, 284 00:16:06,040 --> 00:16:10,880 Speaker 1: have it changed anything in your investment view over the 285 00:16:11,000 --> 00:16:17,920 Speaker 1: advent of the Wuhan virus? Uh it raises the prospect 286 00:16:18,000 --> 00:16:20,040 Speaker 1: that in the near term you're more likely than not 287 00:16:20,120 --> 00:16:23,240 Speaker 1: to get an under performance of emerging market equities, whereas 288 00:16:23,360 --> 00:16:26,080 Speaker 1: overall we're expecting in our performance of em SO. I 289 00:16:26,080 --> 00:16:29,520 Speaker 1: think it is potentially hiccup in the road, But of 290 00:16:29,560 --> 00:16:31,320 Speaker 1: course we're early in the year and if you think 291 00:16:31,360 --> 00:16:34,040 Speaker 1: about your allocations for all, it's probably not going to 292 00:16:34,080 --> 00:16:37,040 Speaker 1: be too significant, but anything for the time being, it 293 00:16:37,120 --> 00:16:39,360 Speaker 1: may make you want to reconsider the time you have 294 00:16:39,400 --> 00:16:42,360 Speaker 1: an investment in em especially around them Asia. Do you 295 00:16:42,480 --> 00:16:45,960 Speaker 1: have to change your strategy MBNP? I'm gonna say a 296 00:16:46,080 --> 00:16:48,960 Speaker 1: very collegiately. He has been dead on with a more 297 00:16:49,000 --> 00:16:52,720 Speaker 1: cautious call and economic growth. But when you see yields 298 00:16:52,760 --> 00:16:56,960 Speaker 1: come in and to build Dudley's interview with US yesterday, 299 00:16:57,000 --> 00:17:00,840 Speaker 1: is it about global slowdown? Is a singular early about 300 00:17:00,920 --> 00:17:03,720 Speaker 1: this virus in China? How do you how do you 301 00:17:03,840 --> 00:17:07,520 Speaker 1: balance that again when trying to make and keep the 302 00:17:07,560 --> 00:17:13,119 Speaker 1: correct investment decision? Well, I think you're right and focusing 303 00:17:13,119 --> 00:17:15,200 Speaker 1: on treasury yields, which I think are a lot more 304 00:17:15,400 --> 00:17:18,760 Speaker 1: sensitive to what's going on in Asia than necessarily equities. 305 00:17:18,840 --> 00:17:21,400 Speaker 1: That was certainly the case when you think about any 306 00:17:21,440 --> 00:17:24,040 Speaker 1: parallels that there might be with with the stars crisis 307 00:17:24,119 --> 00:17:26,720 Speaker 1: back in two thousand and three, So I think risk 308 00:17:26,760 --> 00:17:28,960 Speaker 1: cave and assets a bit more sensitive. Equities probably not 309 00:17:29,000 --> 00:17:31,639 Speaker 1: so much. They actually weren't so much then, And then 310 00:17:31,640 --> 00:17:34,639 Speaker 1: when you take into account the positive surprise that we 311 00:17:34,720 --> 00:17:38,199 Speaker 1: got an US gdp UH today would suggest that what 312 00:17:38,200 --> 00:17:40,239 Speaker 1: you're seeing in treasury yields, I think it's hard to 313 00:17:40,280 --> 00:17:43,560 Speaker 1: justify about a concern on growth. You know, all the 314 00:17:43,600 --> 00:17:45,879 Speaker 1: talk that we heard last year about a US recession 315 00:17:46,000 --> 00:17:47,920 Speaker 1: just just stud seem a bit silly now when you 316 00:17:48,000 --> 00:17:49,800 Speaker 1: had a two point one percent growth in the fourth 317 00:17:49,880 --> 00:17:52,880 Speaker 1: quarter following on the third, so I think US growth 318 00:17:52,920 --> 00:17:55,119 Speaker 1: looks quite tallid So I think it is kind of 319 00:17:55,119 --> 00:17:57,320 Speaker 1: markets looking for something to be worried about, or at 320 00:17:57,359 --> 00:17:59,320 Speaker 1: least so some people. I'd like to worry about something, 321 00:17:59,720 --> 00:18:03,600 Speaker 1: and the coronavirus seems to be the best option right now. Daniel, 322 00:18:03,600 --> 00:18:07,480 Speaker 1: we're probably about the way through earning season. Any key 323 00:18:07,520 --> 00:18:11,600 Speaker 1: takeaways from you, well, absolutely, and I think it's not 324 00:18:11,800 --> 00:18:13,880 Speaker 1: so much the numbers that we're going to get this quarter. 325 00:18:14,000 --> 00:18:16,280 Speaker 1: We know they're going to be disappointing. You can essentially 326 00:18:16,359 --> 00:18:19,679 Speaker 1: right off all of you're gonna get about zero earnings 327 00:18:19,720 --> 00:18:21,320 Speaker 1: growth here in the year, even though of course we 328 00:18:21,400 --> 00:18:24,439 Speaker 1: had thirty plus percent returns in the market. So you 329 00:18:24,480 --> 00:18:26,760 Speaker 1: think about what kind of combination are you going to 330 00:18:26,840 --> 00:18:28,920 Speaker 1: need to have for and you're sort of gonna have 331 00:18:28,920 --> 00:18:31,160 Speaker 1: to have much better earnings growth. So what we're really 332 00:18:31,200 --> 00:18:33,760 Speaker 1: focusing on, You know, of course it's important what the 333 00:18:34,040 --> 00:18:37,640 Speaker 1: company's report, but how bigger this surprises and and what's 334 00:18:37,680 --> 00:18:39,679 Speaker 1: the guidance because we want to have at least some 335 00:18:39,800 --> 00:18:43,880 Speaker 1: confidence in the forecast that analysts have currently for they're 336 00:18:43,880 --> 00:18:45,960 Speaker 1: going to be realized. Because we don't see those earnings 337 00:18:46,000 --> 00:18:48,680 Speaker 1: growth numbers. Then you start worrying about the multiples on 338 00:18:48,720 --> 00:18:51,400 Speaker 1: the market because you need some earnings to support those multiples. 339 00:18:51,840 --> 00:18:55,160 Speaker 1: The good news is so far, in terms of earning surprises, 340 00:18:55,200 --> 00:18:58,000 Speaker 1: it's running a bit above average. So that's encouraging. Uh, 341 00:18:58,040 --> 00:19:00,320 Speaker 1: And then that gives you a pause, did it be 342 00:19:00,440 --> 00:19:02,600 Speaker 1: in your growth rate instead of the negatives that had 343 00:19:02,640 --> 00:19:05,000 Speaker 1: been forecasted? Because you've got a big enough surprise to 344 00:19:05,040 --> 00:19:07,600 Speaker 1: kind of push you over that line. So generally speaking, 345 00:19:07,640 --> 00:19:10,000 Speaker 1: it has been encouraging. Again, it's going to look bad 346 00:19:10,040 --> 00:19:12,639 Speaker 1: in absolute terms. For the absolute number, it's still going 347 00:19:12,680 --> 00:19:15,320 Speaker 1: to be low single digits, but I think the indications 348 00:19:15,320 --> 00:19:17,359 Speaker 1: were getting so far as the companies seem to be 349 00:19:17,440 --> 00:19:19,520 Speaker 1: on track to putting up the numbers more or less, 350 00:19:19,520 --> 00:19:21,920 Speaker 1: and analysts are looking for for the whole year, and 351 00:19:22,000 --> 00:19:23,919 Speaker 1: Daniel were starting to get some of the numbers from 352 00:19:23,960 --> 00:19:25,920 Speaker 1: the big tech companies blow out numbers some Apple a 353 00:19:25,920 --> 00:19:28,840 Speaker 1: couple of days ago, Microsoft, last night, Facebook a little 354 00:19:28,880 --> 00:19:31,439 Speaker 1: bit mixed their trading off from pre market. How do 355 00:19:31,440 --> 00:19:34,240 Speaker 1: you view the tech sector? That's certainly been the driver 356 00:19:34,400 --> 00:19:36,240 Speaker 1: of this market for as long as I think we 357 00:19:36,280 --> 00:19:40,600 Speaker 1: can remember well, and I guess what's been a bit 358 00:19:40,600 --> 00:19:42,960 Speaker 1: of a change over the last couple of weeks, even 359 00:19:43,200 --> 00:19:45,639 Speaker 1: a month or so, even though yes, you've had a 360 00:19:45,720 --> 00:19:48,560 Speaker 1: dominance from the tech sector. It really explains all of 361 00:19:48,600 --> 00:19:51,920 Speaker 1: the outperformance of US equities versus European equities last year. 362 00:19:52,359 --> 00:19:54,000 Speaker 1: If you look at the rest of the market, US 363 00:19:54,040 --> 00:19:58,199 Speaker 1: equities performed absolutely in line with Europe, but they've gotten 364 00:19:58,359 --> 00:20:01,040 Speaker 1: really arguably ahead of themselves are the last several weeks, 365 00:20:01,040 --> 00:20:04,760 Speaker 1: you've got multiples getting stretched in the technology sector. So 366 00:20:04,840 --> 00:20:07,200 Speaker 1: even with those good earnings numbers, and that's you know, 367 00:20:07,240 --> 00:20:09,399 Speaker 1: absolutely what you want to see. You know, are you 368 00:20:09,440 --> 00:20:13,920 Speaker 1: willing to pay twenty five times that EPs when historically 369 00:20:13,920 --> 00:20:16,600 Speaker 1: you've had about a ten So we're not actually worried 370 00:20:16,600 --> 00:20:18,639 Speaker 1: about the earnings, it's about the multiple. Then what do 371 00:20:18,680 --> 00:20:21,080 Speaker 1: you do? I mean, what's your cash balance right now? 372 00:20:21,080 --> 00:20:26,280 Speaker 1: If you typical growth portfolio, how much cash am I holding? Well, 373 00:20:26,320 --> 00:20:28,840 Speaker 1: I think there's certainly justification to have a bit above 374 00:20:28,880 --> 00:20:31,040 Speaker 1: average right now because I think we've had, you know, 375 00:20:31,040 --> 00:20:33,720 Speaker 1: obviously a very good start to the year. Uh. And 376 00:20:33,800 --> 00:20:35,720 Speaker 1: if you you know, you just kind of assume something 377 00:20:35,760 --> 00:20:37,560 Speaker 1: will go wrong at some point, There'll be a tweet, 378 00:20:37,560 --> 00:20:39,600 Speaker 1: there will be something. Uh, you know, who knows me 379 00:20:39,720 --> 00:20:41,600 Speaker 1: the catalysts is going to be a coronavirus and you 380 00:20:41,640 --> 00:20:43,840 Speaker 1: look for a better entry point. You may be getting 381 00:20:43,840 --> 00:20:46,000 Speaker 1: that now in treasuries. It doesn't like we're they're quite 382 00:20:46,040 --> 00:20:48,840 Speaker 1: yet for equities. Daniel Morris, thank you so much. Very 383 00:20:48,960 --> 00:21:03,400 Speaker 1: valued with the emp Verry valued thinking Mark Mheney, Managing 384 00:21:03,440 --> 00:21:05,919 Speaker 1: director covering all Things Internet. Really, as Tom said, the 385 00:21:05,920 --> 00:21:08,400 Speaker 1: ax on the street as relates to the Internet. Hey, Mark, 386 00:21:08,440 --> 00:21:11,600 Speaker 1: thanks so much for joining us. Facebook last night, better 387 00:21:11,640 --> 00:21:14,760 Speaker 1: than expected EPs, but I guess some concerns about that 388 00:21:14,880 --> 00:21:18,080 Speaker 1: top line. What are your thoughts? Yeah, well, thanks for 389 00:21:18,119 --> 00:21:20,800 Speaker 1: the instro. Thanks for the kind words. Uh, Facebook, I 390 00:21:20,800 --> 00:21:23,679 Speaker 1: think the real issue wasn't so much that the expenses 391 00:21:23,720 --> 00:21:27,320 Speaker 1: were greater than expected. It's that there was slightly greater 392 00:21:27,320 --> 00:21:31,040 Speaker 1: than expected revenue growth deceleration. So fundamental trends did here, 393 00:21:31,119 --> 00:21:35,000 Speaker 1: get less here, did get less strong, did get softer? Uh? 394 00:21:35,040 --> 00:21:38,360 Speaker 1: And I think that's what caused some concern and uh 395 00:21:38,560 --> 00:21:41,119 Speaker 1: So the trick here is if it turns out that 396 00:21:41,160 --> 00:21:44,320 Speaker 1: revenue growth can stabilize as we go through we think 397 00:21:44,359 --> 00:21:47,720 Speaker 1: that will happen, then the stock can materially outperform from here. 398 00:21:47,800 --> 00:21:50,399 Speaker 1: But investors are gonna want to see the March quarter 399 00:21:50,480 --> 00:21:53,120 Speaker 1: results before they have that at the margin that we've 400 00:21:53,119 --> 00:21:55,440 Speaker 1: got greater doubt. Are they gonna want to bring in 401 00:21:55,520 --> 00:21:59,639 Speaker 1: new management? Mark, You've been doing this new management to 402 00:21:59,680 --> 00:22:03,320 Speaker 1: help to so they don't. No. I Uh. If you 403 00:22:03,400 --> 00:22:07,360 Speaker 1: have good, effective CEO founder types, you stick with them. 404 00:22:07,560 --> 00:22:09,600 Speaker 1: There's a reason that Facebook is where it is today. 405 00:22:09,720 --> 00:22:11,640 Speaker 1: And if you step back this is a business that's 406 00:22:11,680 --> 00:22:17,159 Speaker 1: going to be growing plus UH margins as as a 407 00:22:17,200 --> 00:22:21,480 Speaker 1: business model that is highly attractive, the strongest in the 408 00:22:21,520 --> 00:22:23,720 Speaker 1: space market tanks today? Are you telling me it's a 409 00:22:23,720 --> 00:22:26,360 Speaker 1: strong by this morning when the market opens two minutes ago? 410 00:22:27,960 --> 00:22:30,679 Speaker 1: I think der Trough valuation on this is one nineties, 411 00:22:30,680 --> 00:22:33,320 Speaker 1: so we could still see more downside here. I don't 412 00:22:33,320 --> 00:22:35,159 Speaker 1: think we're going to see a lot of downside. I 413 00:22:35,200 --> 00:22:36,920 Speaker 1: don't think this is a backup the truck price, but 414 00:22:36,960 --> 00:22:39,120 Speaker 1: if you want, I think I would consider this back 415 00:22:39,119 --> 00:22:44,240 Speaker 1: at the minivans. How does that so market? You know, 416 00:22:44,320 --> 00:22:46,960 Speaker 1: we talked about the top line drivers for Facebook, and 417 00:22:47,000 --> 00:22:49,280 Speaker 1: they're multiple that. There's the Facebook dot Com, there's a 418 00:22:49,680 --> 00:22:52,840 Speaker 1: UH Messenger, there's Instagram where I G as the kids 419 00:22:52,880 --> 00:22:55,480 Speaker 1: call it, and UH there's WhatsApp. Talk to us about 420 00:22:55,560 --> 00:22:59,080 Speaker 1: kind of how you view those four growth levers for Facebook. 421 00:23:00,000 --> 00:23:01,640 Speaker 1: I'll give you a data point. If you look at 422 00:23:01,640 --> 00:23:06,520 Speaker 1: the top most popular downloaded apps globally over the last 423 00:23:06,560 --> 00:23:09,600 Speaker 1: four years, four of the five and every year have 424 00:23:09,800 --> 00:23:15,560 Speaker 1: been what you just mentioned, Facebook, Facebook Messenger, WhatsApp and Instagram. 425 00:23:15,600 --> 00:23:18,320 Speaker 1: That's a very powerful portfolio of assets that they have. 426 00:23:18,400 --> 00:23:21,080 Speaker 1: And there's still one or two one that's completely unmonetized. 427 00:23:21,119 --> 00:23:24,119 Speaker 1: That's what's app Over a billion people use it on 428 00:23:24,160 --> 00:23:27,960 Speaker 1: a daily basis. And then Instagram, especially Instagram Checkout, I 429 00:23:27,960 --> 00:23:32,200 Speaker 1: think is still relatively unmonetized, so there are opportunities here. Frankly, 430 00:23:32,240 --> 00:23:34,600 Speaker 1: it's it's actually been a little bit frustrating. We've been 431 00:23:34,640 --> 00:23:37,480 Speaker 1: waiting for monetization of what's happened really for years. I 432 00:23:37,480 --> 00:23:39,040 Speaker 1: don't know when it's gonna happen. I'm not sure the 433 00:23:39,080 --> 00:23:41,040 Speaker 1: company knows when it's going to happen. I just I 434 00:23:41,040 --> 00:23:44,080 Speaker 1: would bet on a company with a billion user app asset, 435 00:23:44,440 --> 00:23:47,639 Speaker 1: they can usually figure out how to monetize despite the trickiness. 436 00:23:47,680 --> 00:23:49,120 Speaker 1: I bet you they figure it out. And you want 437 00:23:49,160 --> 00:23:50,879 Speaker 1: to be long in a company with that kind of 438 00:23:50,920 --> 00:23:54,440 Speaker 1: green field opportunity. Mark, You've been covering this Internet thing 439 00:23:54,560 --> 00:23:57,920 Speaker 1: since the beginning, you know, and I think the Internet 440 00:23:57,960 --> 00:24:00,960 Speaker 1: and tech in general, US tech and generals enjoyed a 441 00:24:01,119 --> 00:24:04,879 Speaker 1: light touch from Washington and the regulators. You sense that 442 00:24:04,880 --> 00:24:08,680 Speaker 1: that's materially about to change, and if so, as Facebook 443 00:24:08,680 --> 00:24:12,720 Speaker 1: perhaps the most at risk. Yeah, Paul, I like to 444 00:24:12,720 --> 00:24:14,399 Speaker 1: set up on the question. Now, you know, we have 445 00:24:14,560 --> 00:24:17,000 Speaker 1: had greater regulation over the last two years. So just 446 00:24:17,040 --> 00:24:19,879 Speaker 1: so we're clear about this. UH Google has been paying 447 00:24:19,920 --> 00:24:21,879 Speaker 1: fines to the EU now three years in a row. 448 00:24:21,960 --> 00:24:24,680 Speaker 1: I think they've spent about nine billion dollars they've sent 449 00:24:24,720 --> 00:24:28,520 Speaker 1: to Brussels, and in last year, UH Facebook agreed to 450 00:24:28,600 --> 00:24:31,040 Speaker 1: send five billion to the to d C, to the 451 00:24:31,080 --> 00:24:34,080 Speaker 1: Federal Trade Commission. So we have had regulation in place, 452 00:24:34,080 --> 00:24:37,920 Speaker 1: and there are large privacy oriented regulations here in California 453 00:24:37,960 --> 00:24:40,199 Speaker 1: and globally that are in that are in there. I 454 00:24:40,240 --> 00:24:42,560 Speaker 1: just think when it comes to the value proposition to consumers, 455 00:24:42,560 --> 00:24:46,280 Speaker 1: it's unchanged and to advertisers too, it's unchanged. Therefore, this 456 00:24:46,480 --> 00:24:49,800 Speaker 1: you can probably count on sustained growth rates similar to 457 00:24:49,800 --> 00:24:53,359 Speaker 1: current levels for the foreseeable future, and valuation remains attractive. 458 00:24:53,520 --> 00:24:56,560 Speaker 1: Mark Mahaney with us RBC Capital Markets. Folks thrill these 459 00:24:56,560 --> 00:24:59,560 Speaker 1: with us and will be on our podcast today. Paul, 460 00:24:59,680 --> 00:25:02,600 Speaker 1: can we trust anyone who calls a presentation a presso 461 00:25:03,760 --> 00:25:07,520 Speaker 1: it's a president as a president. How is the lift 462 00:25:07,560 --> 00:25:11,359 Speaker 1: PRESO going? I mean lifted something yesterday, layoff you know 463 00:25:11,600 --> 00:25:15,320 Speaker 1: X percent of people, but you've got some enthusiasm on 464 00:25:15,320 --> 00:25:19,400 Speaker 1: the lift. Discuss that well. Actually our number one pick 465 00:25:19,400 --> 00:25:22,600 Speaker 1: in the space is Uber. I think these times are 466 00:25:22,640 --> 00:25:25,840 Speaker 1: so much joined at the hip. I think if people 467 00:25:25,840 --> 00:25:27,960 Speaker 1: start wanting to buy ridesharing, you know, I think a 468 00:25:27,960 --> 00:25:31,360 Speaker 1: lot of people will buy both assets. I think Uber 469 00:25:31,600 --> 00:25:34,359 Speaker 1: was in particular, though, was oversold last year. And I 470 00:25:34,400 --> 00:25:35,960 Speaker 1: get that there was a lot of issues around the 471 00:25:36,000 --> 00:25:37,959 Speaker 1: I p O and the losses and the lock up 472 00:25:38,000 --> 00:25:41,560 Speaker 1: expiration and a lot of regulatory issues, etcetera, etcetera. But 473 00:25:41,600 --> 00:25:43,760 Speaker 1: I think that's really set up a nice opportunity and 474 00:25:43,920 --> 00:25:46,640 Speaker 1: entry point on Uber this year. I like Lift too, 475 00:25:46,640 --> 00:25:49,320 Speaker 1: but I prefer Uber In what way in revenue might Lift? 476 00:25:49,359 --> 00:25:51,640 Speaker 1: I mean usually when the belly's Downmark, I gotta take 477 00:25:51,720 --> 00:25:55,040 Speaker 1: Lift into work, and it's cheaper than a taxicab. How 478 00:25:55,080 --> 00:25:59,800 Speaker 1: do they make money? Well, it turns out, based on 479 00:26:00,040 --> 00:26:02,600 Speaker 1: some disclosure, especially from Uber, that this is actually an 480 00:26:02,600 --> 00:26:04,199 Speaker 1: attractive business. I want to All you have to do 481 00:26:04,200 --> 00:26:07,600 Speaker 1: is think about one number twenty. Uber is growing as bookings, 482 00:26:08,240 --> 00:26:11,639 Speaker 1: that's his top line, and they're generating Ebada margins are 483 00:26:11,760 --> 00:26:15,000 Speaker 1: cash flow margins. That's an attractive business. You don't normally 484 00:26:15,080 --> 00:26:18,119 Speaker 1: see that combo there's a pros. Yeah, So Mark, just 485 00:26:18,480 --> 00:26:20,679 Speaker 1: one moral on the ride sharing because you know the 486 00:26:20,720 --> 00:26:23,640 Speaker 1: companies that you've historically followed. Not only they have great 487 00:26:23,680 --> 00:26:26,120 Speaker 1: top line growth, of great profitability. Do you see a 488 00:26:26,119 --> 00:26:30,520 Speaker 1: path of profitability for these ride sharing companies? Oh, they 489 00:26:30,640 --> 00:26:33,119 Speaker 1: better have a path to profitability. They have both committed 490 00:26:33,560 --> 00:26:37,119 Speaker 1: to achieving break even what they called ebitda break even 491 00:26:37,320 --> 00:26:41,240 Speaker 1: in one Uh, so they better deliver on that. That's 492 00:26:41,280 --> 00:26:43,080 Speaker 1: one of the reasons, by the way that Uber stock 493 00:26:43,119 --> 00:26:44,960 Speaker 1: and lift stock has started to kind of move up 494 00:26:45,040 --> 00:26:48,359 Speaker 1: nicely year to date, Uber's up and Lifts up, you know, 495 00:26:48,359 --> 00:26:51,440 Speaker 1: over ten percent, because people are starting to believe them. 496 00:26:51,480 --> 00:26:54,320 Speaker 1: But I think there's still some skepticism about it. But 497 00:26:54,359 --> 00:26:56,920 Speaker 1: if they so, they better deliver on this break even 498 00:26:56,960 --> 00:26:59,159 Speaker 1: I think they can too. And if they also if 499 00:26:59,160 --> 00:27:01,520 Speaker 1: they look to sell some of their lost generating assets. 500 00:27:01,640 --> 00:27:03,680 Speaker 1: Uber just did that last week when they sold Uber 501 00:27:03,720 --> 00:27:06,000 Speaker 1: eats in India, stock was up eight percent. I think 502 00:27:06,000 --> 00:27:07,960 Speaker 1: there are other little things they can or big things 503 00:27:07,960 --> 00:27:10,120 Speaker 1: they can do like that, They've got to manage down 504 00:27:10,119 --> 00:27:12,720 Speaker 1: the losses mark many. Let's turn to the elephant in 505 00:27:12,720 --> 00:27:16,159 Speaker 1: the room, which is not Apple Moonshot, It's it's Amazon. 506 00:27:16,320 --> 00:27:19,720 Speaker 1: Not for the last I'm gonna call it fourteen months, 507 00:27:19,720 --> 00:27:23,720 Speaker 1: it's been flatish, it has having trouble getting through two thousand, 508 00:27:23,800 --> 00:27:26,639 Speaker 1: et cetera. Give us bi hole sell on Amazon and 509 00:27:26,640 --> 00:27:30,760 Speaker 1: in state the next twelve months future for Mr Bezos. Yeah, 510 00:27:30,840 --> 00:27:32,720 Speaker 1: it's not one of our top three picks for the 511 00:27:32,840 --> 00:27:34,920 Speaker 1: year because I think one of the overhangs on the 512 00:27:34,960 --> 00:27:37,640 Speaker 1: stock that's led to this underperformance, especially over the last 513 00:27:37,640 --> 00:27:40,760 Speaker 1: six months, has been concerned that the best days for 514 00:27:40,840 --> 00:27:44,480 Speaker 1: Amazon's cloud computing business what's called AWS Amazon Web Services, 515 00:27:44,520 --> 00:27:46,679 Speaker 1: that the best days of growth for that are behind 516 00:27:46,720 --> 00:27:49,800 Speaker 1: it now that you've got bigger competition for Microsoft, now 517 00:27:49,840 --> 00:27:52,040 Speaker 1: that the competitive field has moved to the enterprise where 518 00:27:52,040 --> 00:27:55,560 Speaker 1: Microsoft is really well entrenched. I think that state, that 519 00:27:55,680 --> 00:27:57,720 Speaker 1: narrative that's what's in the market right now. I think 520 00:27:57,720 --> 00:28:02,080 Speaker 1: it's overstated. I think Amazon and AWS remains a fundamentally 521 00:28:02,080 --> 00:28:05,639 Speaker 1: really impressive asset. There is nothing in software that looks 522 00:28:05,720 --> 00:28:09,840 Speaker 1: like AWS, nothing that's growing year over year with forty 523 00:28:09,880 --> 00:28:12,520 Speaker 1: billion revenue run rate. And it says something about how 524 00:28:12,560 --> 00:28:15,520 Speaker 1: well positioned and Amazon isn't how big that market is it? 525 00:28:15,600 --> 00:28:17,920 Speaker 1: On a conference call, they come out with some statements 526 00:28:17,920 --> 00:28:20,720 Speaker 1: and boom, it goes Apple like or is it Amazon 527 00:28:20,880 --> 00:28:24,439 Speaker 1: slogging along? Which is it? I think near term its 528 00:28:24,440 --> 00:28:26,280 Speaker 1: slogging along. I think in the back half of the 529 00:28:26,359 --> 00:28:29,320 Speaker 1: year there's the chance for a, if you will, an 530 00:28:29,359 --> 00:28:33,600 Speaker 1: Apple moment when AWS growth stabilizes and then you start 531 00:28:33,640 --> 00:28:35,840 Speaker 1: seeing the payoff from some of these investments and things 532 00:28:35,880 --> 00:28:39,719 Speaker 1: like one day so market. Is there ever scenario in 533 00:28:39,720 --> 00:28:44,360 Speaker 1: your mind where they spin off AWS they have to 534 00:28:44,400 --> 00:28:46,600 Speaker 1: be forced to do that the company, I think it's 535 00:28:46,640 --> 00:28:49,680 Speaker 1: been very clear that they have no interest in doing that. 536 00:28:49,720 --> 00:28:51,840 Speaker 1: They see a lot of synergies and having the business together, 537 00:28:52,080 --> 00:28:54,200 Speaker 1: and I don't think that's going to happen. I'm sorry, 538 00:28:54,240 --> 00:28:57,040 Speaker 1: I'm calling peak reg In other words, I think, like 539 00:28:57,080 --> 00:28:59,680 Speaker 1: peak oil, peak dollar, peak reg I look, we've had 540 00:28:59,680 --> 00:29:03,320 Speaker 1: a lot of regulatory pressure already placed against these tech giants. 541 00:29:03,360 --> 00:29:05,080 Speaker 1: I think the next step almost if you want to 542 00:29:05,080 --> 00:29:06,600 Speaker 1: get worse, you have to kind of break them up. 543 00:29:06,600 --> 00:29:09,000 Speaker 1: But I think the grounds, the logic for breaking them up, 544 00:29:09,280 --> 00:29:11,720 Speaker 1: is extremely thin, So I don't I don't think it 545 00:29:11,760 --> 00:29:14,440 Speaker 1: will happen. I think they'll see more regulation, more limitations, 546 00:29:14,480 --> 00:29:17,280 Speaker 1: maybe some more fines, but breaking them up, I I 547 00:29:17,320 --> 00:29:20,120 Speaker 1: think that's highly unlikely to happen. So the core, the 548 00:29:20,200 --> 00:29:23,360 Speaker 1: core e commerce business that's still a great long term 549 00:29:23,360 --> 00:29:27,080 Speaker 1: growth stories at not uh yeah, And the reason is 550 00:29:27,160 --> 00:29:31,120 Speaker 1: that Amazon currently accounts for I don't know, two of 551 00:29:31,520 --> 00:29:34,920 Speaker 1: global retail sales or something like that, and so uh 552 00:29:35,040 --> 00:29:38,040 Speaker 1: that that means that they can continue to grow at 553 00:29:38,160 --> 00:29:41,520 Speaker 1: you know, kind of called three four x overall retail sales. 554 00:29:42,800 --> 00:29:45,000 Speaker 1: They can probably sustain that for the next five years 555 00:29:45,040 --> 00:29:47,240 Speaker 1: premium growth like that as also as they expand into 556 00:29:47,320 --> 00:29:52,240 Speaker 1: more markets, especially they've had some really interesting international investments India, Brazil, 557 00:29:52,520 --> 00:29:55,560 Speaker 1: Mexico or three large markets that they've only really started 558 00:29:55,560 --> 00:29:57,520 Speaker 1: to get aggressive about the last few years. I think 559 00:29:57,520 --> 00:30:00,400 Speaker 1: that means that growth rate sustainable. Marke thank you so 560 00:30:00,520 --> 00:30:04,200 Speaker 1: much with OURBC Copple markets. Thanks for listening to the 561 00:30:04,200 --> 00:30:10,720 Speaker 1: Bloomberg Surveillance podcast. Subscribe and listen to interviews on Apple Podcasts, SoundCloud, 562 00:30:11,080 --> 00:30:15,280 Speaker 1: or whichever podcast platform you prefer. I'm on Twitter at 563 00:30:15,360 --> 00:30:19,600 Speaker 1: Tom Keane before the podcast. You can always catch us worldwide. 564 00:30:20,040 --> 00:30:21,160 Speaker 1: I'm Bloomberg Radio.