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Speaker 1: Yeah, Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene

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Speaker 1: Jay Lee. We bring you insight from the best in economics, finance, investment,

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Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud,

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Speaker 1: Bloomberg dot Com, and of course on the Bloomberg We're

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Speaker 1: gonna be talking about the markets through the day. Of course,

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Speaker 1: a lift to this ecrety market this morning off the

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Speaker 1: back of some comments from a Chinese official who said,

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Speaker 1: we're gonna ask Matt Kender in just a moment. Let

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Speaker 1: me let me just get to the quote of the morning,

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Speaker 1: shall we from a Chinese official saying the following. In

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Speaker 1: the past two weeks, Top Nego shared has had serious

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Speaker 1: constructive discussions and agree to remove additional tariffs in phrases

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Speaker 1: as progress is made on the agreement. If China US

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Speaker 1: reach a Phase one deal, both sides should roll back

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Speaker 1: existing additional tariffs. I should emphasize here any agreement on

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Speaker 1: tariff rollback it's ultimately still conditional on a Phase one

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Speaker 1: deal being reached. And Tom, a phase one deal still

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Speaker 1: hasn't been agreed exactly, and what is so critically and

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Speaker 1: I read carefully the comments again, These comments. Folks are

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Speaker 1: not manager massage. They're really out of Beijing and straightforward.

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Speaker 1: The Chinese are looking sequential. They're looking at this not

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Speaker 1: as a one off tariff rollback, but they've verbage a

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Speaker 1: sequential rollback, and I would suggest the Americans gonna be

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Speaker 1: a long way from that. No comment from the President yet,

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Speaker 1: no comment from this administration here in the United States.

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Speaker 1: I did mention Max Caton's name, so let's bring him

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Speaker 1: in show we as species multi assets strategist. He joins

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Speaker 1: us here in New York City. Good morning to Max.

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Speaker 1: Good morning. Gonna get to your underweight equity care, which

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Speaker 1: I think should be the focus of this conversation in

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Speaker 1: just a moment. But first of all, your interpretation of

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Speaker 1: what's happening here with the negotiations between the US and China.

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Speaker 1: We still have a negotiated a Phase one agreement, yet

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Speaker 1: this market is behaving as if we have here we go.

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Speaker 1: I mean, you just mentioned it, you say, good morning.

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Speaker 1: There's three people doing the happy talk. I'm guessing I

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Speaker 1: was invited to do the sort of opposite, and I

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Speaker 1: don't think you're gonna invited German strategists to hear some

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Speaker 1: happy talk. Really, Um, so there we go. I'm gonna

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Speaker 1: be a bit bit more dismal in the next next

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Speaker 1: couple of minutes. Um, Look, the only thing really I

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Speaker 1: understood from what you were reading out loud is about

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Speaker 1: twenties seven subjunctives and ifs and ifs and ifs right.

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Speaker 1: So the problem for me is, I mean, there's so

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Speaker 1: many things that really have to happen and that have

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Speaker 1: to go seamlessly, really really smoothly until I can say,

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Speaker 1: okay now that that price level where we are right

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Speaker 1: now is justified. And bear in mind that means okay,

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Speaker 1: that price level now is justified. That doesn't mean okay,

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Speaker 1: now if I got hundred dollars in cash that means

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Speaker 1: I need to put more money into equities. It just means, okay, fine,

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Speaker 1: this price level is justified. It's not new news, right,

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Speaker 1: It's not. It's just confirming news. I'm not like, I'm

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Speaker 1: not sort of advocating and utterly bearish stance. I think

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Speaker 1: pretty much in six months time, we're probably gonna sit

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Speaker 1: around this beautiful table here and and probably going to

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Speaker 1: be plus minors zero in equity. It's probably pretty range band.

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Speaker 1: But this is an environment where you're saying, look, either

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Speaker 1: tales are probably too extreme and you have to continue

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Speaker 1: to sell the rally, you have to continue buying the dip.

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Speaker 1: Your message so fast sounds like the conditions needed for

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Speaker 1: a short squeeze are very different to the conditions needed

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Speaker 1: for a sustainable rally. Into you went underweight equities, I

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Speaker 1: believe on Monday. Yes, what's the pushback been so far? Um?

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Speaker 1: I think so far one of our clients has has

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Speaker 1: agreed with me, which kind of you know it's is

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Speaker 1: first pretty fun um and and second um, that's the

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Speaker 1: one really where you see, oh, this is this is

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Speaker 1: getting quite worrisome because you know, if if you think

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Speaker 1: about twenty nineteen, if we use the sort of twenty

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Speaker 1: nineteen narrative to look into effectively, twenty can be summed

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Speaker 1: up in one sentence, you can say, like, fundamentally we

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Speaker 1: all want to be much more bearish. The problem is

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Speaker 1: the guy left and right of me thinks the same right,

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Speaker 1: So positioning is pretty light. It's if anything, if you

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Speaker 1: look at equities, if you look at high eild and

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Speaker 1: risk assets in general, if you look at some of

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Speaker 1: our metrics, we look at beaters, it's it's an unloved relly.

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Speaker 1: It's it's unloved, but it's supported by the low interest

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Speaker 1: rate environment there. And if there is no trade deal,

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Speaker 1: you'll see yields go back down there. We won't that

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Speaker 1: be supportive eventually, Liza, But that that is exactly the point.

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Speaker 1: And that's why I'm so skeptical about the rally right now,

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Speaker 1: because so there's a lot of talk now and there

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Speaker 1: has been a lot of talk in the last couple

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Speaker 1: of weeks. Oh, this is now rotation into value. This

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Speaker 1: is rotation out of duration into cyclical sectors and equities

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Speaker 1: for example. The problem, and then much of the Hidgen

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Speaker 1: hinges on the sort of narrative that you're saying, financial

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Speaker 1: conditions over the last twelve months have loosen so much

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Speaker 1: and have become so much easier because of this shift

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Speaker 1: in monetary policy really worldwide. The problem, however, is, just

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Speaker 1: like you said, if that continues, obviously yields will continue

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Speaker 1: to spike, and that means financial conditions will tightened. So

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Speaker 1: so if you know what I mean, right, your initial

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Speaker 1: your initial argument why you were bullish is at some

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Speaker 1: point you're you're hitting a cap, right, You'll you'll inevitably

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Speaker 1: we'll be heading your cap got interrupt John, why don't

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Speaker 1: you lead us with a real move that we've see

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Speaker 1: in Sterling? That GDP forecast out of the Bank of

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Speaker 1: England is just cable rolling go over, so Sterling a

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Speaker 1: little bit self to hear down two tensive one percent

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Speaker 1: at seven Max Canner of HSBC just talking about monetary policy. Easy.

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Speaker 1: I believe we have Guy Johnson with us over in

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Speaker 1: London because Guy, a Bank of England decision that was

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Speaker 1: set to be an absolute snooze just got a little

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Speaker 1: bit more interesting with two policymakers. Did they just vote

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Speaker 1: for a rate cut? Yeah? I think Saunders, Michael Saunders

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Speaker 1: was was largely expected by the market. There's been a

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Speaker 1: lot of chat about the fact that he has completely

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Speaker 1: turned out from being a hawk to being a dove

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Speaker 1: and as a result of which he has voted for

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Speaker 1: a cut. The surprise, really, I think is is Haskell

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Speaker 1: and I think that is where the market has been

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Speaker 1: called on the hop here. So we have two members

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Speaker 1: of the MPC voting for a cut this time around.

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Speaker 1: We've also seen the Bank John significantly downgrade it's GDP

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Speaker 1: forecast one point two versus one point three this year

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Speaker 1: twenty twenty one one point eight versus two point three

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Speaker 1: um that there is talk of the fact that the

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Speaker 1: global risks are a big path of this. Actually what

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Speaker 1: they're basing this down grade on is what is happening

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Speaker 1: outside the UK. Largely some of it is inside the UK,

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Speaker 1: but a lot of it is outside the UK, and

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Speaker 1: they are now saying that basically they're looking at a

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Speaker 1: situation where they are antisipating that it's going to get

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Speaker 1: more difficult from here. Tom, Guy Johnson, what is the

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Speaker 1: importance of Jonathan Haskell and Michael Sanders saying let's get going,

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Speaker 1: let's cut the rates now define that significance, particularly going

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Speaker 1: to the December to election. What you think about it, Tom,

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Speaker 1: Given the uncertainty that exists currently in the United Kingdom,

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Speaker 1: to make this call pre the election and pre the

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Speaker 1: Brexit story actually turning out to be a reality, I

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Speaker 1: think is quite a big call. And as I say,

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Speaker 1: I think this is largely based on what is happening

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Speaker 1: externally to the UK. The UK is a small, open economy.

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Speaker 1: You guys are just talking about what was happening with

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Speaker 1: the trade story with Max. The UK is being affected

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Speaker 1: by this and that is why the data are are

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Speaker 1: starting to slow, they believe, and that is why the

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Speaker 1: forecasts have been cut. So this is this is in

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Speaker 1: relation to what is happening, not with Brexit and not

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Speaker 1: with the election, but what's happening with the global macro economy.

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Speaker 1: Tom a guy, always great to catch up with you

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Speaker 1: to get your thoughts for anyone. Just tuning again the

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Speaker 1: Bank of eng Than leaving interest rates unchanged, but two

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Speaker 1: policymakers out of the nine actually voting for a rate cut.

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Speaker 1: The vote seven to two. Max Kantner, your for you

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Speaker 1: one that I think most people just assumed no change

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Speaker 1: vote nine zero going into an election next month. Yeah.

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Speaker 1: Look I if I put it into an investment contact

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Speaker 1: in two, okay, what's what's the trade here? Um? The

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Speaker 1: problem is for me, obviously, if I have a sort

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Speaker 1: of three to six month view and in our contact

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Speaker 1: it's really about guilt, it's about UK equities. The problem

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Speaker 1: is I don't want to speculate only on politics, so

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Speaker 1: I'm sort of being the maximum carrot and shying away

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Speaker 1: from any taking any active stance there really because you know,

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Speaker 1: I might be horribly wrong or this might be a

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Speaker 1: career breaker. What's interesting to me is that every central

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Speaker 1: bank saying that they're doing in action or considering because

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Speaker 1: of what's happening globally. There we go, So who are

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Speaker 1: you blaming that? That basically tells you central banks as

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Speaker 1: are now reacting to something that they actually don't have

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Speaker 1: under control. Right, So they're they're reacting to sort of

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Speaker 1: global growth, to global phenomena. If we're talking about let's say,

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Speaker 1: old school stereotyped textbook monetary policy, Philip's curve and all

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Speaker 1: that juwberish, right you you basically then say that we're

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Speaker 1: calling the guberish. No, I mean, yeah, you can still

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Speaker 1: believe in that. But there we go. The thing the

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Speaker 1: thing for me is, look um, the problem there is

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Speaker 1: you see a lot of central banks, including the FIT,

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Speaker 1: responding to financial conditions now to something that is out

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Speaker 1: of their control. Maxicat, now I gotta leave it. They're

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Speaker 1: always greater care HSBC assets trying togist. Joining us here

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Speaker 1: in New York City, Tel John CIBC bank is out

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Speaker 1: of Toronto. It is the old Canadian Imperial Bank of

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Speaker 1: Commerce and very quietly over the decades they put together

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Speaker 1: absolutely first rate team, including Benjamin tal who is the

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Speaker 1: number one guy on the self employed in America. He

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Speaker 1: is encyclopedic on this part time, full time debate, and

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Speaker 1: it's wonderful when someone from Toronto darkens the door here

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Speaker 1: so we can crowbar leafs tickets out of him. Is

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Speaker 1: that what he's he That's the only reason these years

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Speaker 1: to hand me the leaf stick is that the basketball

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Speaker 1: team ins are on. So that is very good. The

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Speaker 1: Canadians would be what we're asking for. John right joining

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Speaker 1: us now c IBC Capital Market CIA macro Strategist. Good

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Speaker 1: morning to Ff and good morning. Should we begin with

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Speaker 1: that bank havingdom right decision? Personally, I thought this was

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Speaker 1: going to be a total snooze going into the election

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Speaker 1: next month. I guess we were wrong. Two people on

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Speaker 1: the NPC voting for a rate cut, they didn't get it.

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Speaker 1: The vote was seven to two. Your reaction, Yeah, I

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Speaker 1: mean I wasn't surprised by the two dissenters, because again,

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Speaker 1: if you pay attention to what Saunders and and really

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Speaker 1: you've been saying for there the less several months, it's

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Speaker 1: certainly seemed like they were more more sympathetic towards Rica

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Speaker 1: going forward. Do you think that kind of surprised me

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Speaker 1: was the fact that they kept in the language of

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Speaker 1: outlimited and gradual rate hikes going forward. I guess they

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Speaker 1: didn't want to tip the boat too much during an

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Speaker 1: election campaign. I'm trying to understand where the global risks

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Speaker 1: are that everyone keeps talking about. If it's not necessarily

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Speaker 1: in Europe, which seems to be getting better, if it's

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Speaker 1: not coming from the US, not coming from the UK

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Speaker 1: with Brexit, right, where is it coming from the trade talks?

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Speaker 1: I mean, it's between the US and China, and what

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Speaker 1: I think is underappreciated between the US and the EU.

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Speaker 1: And nobody ever talks about the U S and the EU.

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Speaker 1: But we just had tariffs launched on an airbus last

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Speaker 1: a couple of weeks ago, I should say. And we've

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Speaker 1: also got the big decision coming on autos. Nobody talks

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Speaker 1: about that, but that's a significant macro risk, so we

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Speaker 1: need to pay attention. What are your thoughts on that

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Speaker 1: at the moment. I caught up with Larry Cardlog, the

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Speaker 1: National Economic Council Director, last Friday, and he always points

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Speaker 1: to the weakness coming out of Europe weighing on the

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Speaker 1: U S economy. Do you think there's an acknowledgement from

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Speaker 1: the U S side that actually going after Europe at

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Speaker 1: this point might not be a great decision. I think

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Speaker 1: there is some sympathy to to, you know, potentially open

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Speaker 1: the door towards talks with the EU. I mean, at

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Speaker 1: the same time, you don't want to see a trade

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Speaker 1: a new front opened on the trade war between the

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Speaker 1: U S and the EU. And certainly, you know, taking

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Speaker 1: the competence that we heard from World for US last week,

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Speaker 1: it certainly seems like they they're willing to push out

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Speaker 1: the deadlines for for company to do decision on tariffs.

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Speaker 1: The Chinese Ministry of Commerce speaking overnight, saying that the

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Speaker 1: Chinese in the United States have agreed on tariff rollback

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Speaker 1: with a massive asterisks. They've agreed on it if there's

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Speaker 1: a phase one deal that they can agree to, and

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Speaker 1: right now there isn't a phase one deal to agree to.

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Speaker 1: I have a question for you that I think it's

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Speaker 1: going to be increasingly an important one. If we do

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Speaker 1: get tariff rollback, it's the boost to economic activity from

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Speaker 1: tariff's coming off proportional to the damage dumb from tariff's

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Speaker 1: going gone. How should we be thinking about that at

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Speaker 1: the moment right I mean, if we're talking about the

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Speaker 1: real economy. I don't think so. I think there are

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Speaker 1: other structural headwinds towards business investment coming online. I mean,

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Speaker 1: we are in a new trade regime. We didn't have

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Speaker 1: to deal with a terra far between two largest economies

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Speaker 1: UH in the past. This is a new regime the

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Speaker 1: business has to have to become accustomed to. And certainly

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Speaker 1: if we do see some TERRAF rollbacks, you might see

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Speaker 1: some beneficiaries being you know, more so of the U

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Speaker 1: S consumer as opposed to US businesses. I think it's

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Speaker 1: a new path for them to to wait through the

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Speaker 1: Pippen with this with c IBC World Markets, Pippen yen

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Speaker 1: is always a proxy for global Wall Street of correlation

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Speaker 1: in a safe haven. Well does that math work right

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Speaker 1: now and right now one O nine fifteen grinding, But

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Speaker 1: it has been a weaker yen. Is that a healthy

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Speaker 1: signal of all clear for the time being? I would

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Speaker 1: say yes. It's probably conducive towards risk appetite being on

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Speaker 1: the rebound. And again it's it's much more of a

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Speaker 1: global liquidity story and a positive sentiment story potentially from

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Speaker 1: the US. But it's a well behave time series. It's grinding.

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Speaker 1: I'll get that, but there's a persistency to this yen weakness.

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Speaker 1: What does that signal? It signals to me that again,

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Speaker 1: great divergence between the U S and Japan is pretty

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Speaker 1: much minimal right now compared to we've seen in the past.

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Speaker 1: I mean we're talking about Dad. We have to talk

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Speaker 1: about where the policy settings are in the United States, hichus,

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Speaker 1: where they are in Japan. And again, if you do

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Speaker 1: see a meaning called divergence, then that's when you get

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Speaker 1: the direction directional break out. This is this is critical.

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Speaker 1: What what Pippan just said, John, we were talking about

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Speaker 1: this in the break policy divergence. It doesn't seem to

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Speaker 1: be any They're all reacting to what I am f

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Speaker 1: flood on, which is lower GDP growth. This has been

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Speaker 1: a big question though for effects markets over the last

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Speaker 1: couple of years. Bipan as the whether right right differentials

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Speaker 1: mats are into what degree right differentials matter for foreign exchange?

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Speaker 1: Absolutely in a world or central bankers center banks are

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Speaker 1: increasing asset purchasing or balance sheets are exorbitantly large, and

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Speaker 1: when they're dominant in the market, rate emergencies will at

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Speaker 1: least This was John Lipsky's question to Charles Evans yesterday

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Speaker 1: on the correlation of all these central bank messages that

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Speaker 1: we're getting well, and there's a question the low inflation environment.

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Speaker 1: Have we underestivated how persistent and a long lasting It'll

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Speaker 1: be in European Commission today cutting its hero Area growth

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Speaker 1: and inflation at look despite some of the better than

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Speaker 1: expected data we've gotten out of Germany out with the

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Speaker 1: p m s. Do you think they're right? Yeah? I

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Speaker 1: do think so, and I don't think central bankers have

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Speaker 1: been held accountable for the fact they've been missing their

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Speaker 1: inflation targets for the last decade. I do think there's

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Speaker 1: a there's a problem with inflation targeting. What's behind that?

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Speaker 1: I mean, it might be that the policy is outdated,

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Speaker 1: might be that the mandate needs to be updated to

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Speaker 1: reflect a different inflation mandate, or maybe they should be

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Speaker 1: targeting something else. Central bankers have become very very good

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Speaker 1: over the past couple of decades at targeting two percent inflation,

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Speaker 1: almost too good to the point where inflation volatilities minimal now, right,

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Speaker 1: So maybe there's something else that center bankers should be

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Speaker 1: looking at it go forward. Well, when you talk about

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Speaker 1: the European outlook right now, they're saying that the worst

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Speaker 1: is to come. Do you agree with that too, that

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Speaker 1: the worst for the European economy is to come perhaps

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Speaker 1: next year. It's a distinct possibility because we haven't seen

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Speaker 1: any sort of fiscal movement towards fiscal stimulus from some

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Speaker 1: of the larger economies that have the space. How that

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Speaker 1: translate in markets at this point, you know, from in

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Speaker 1: my space, we still see your dollar range bound, and

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Speaker 1: that's predominantly because again US manufacturing it's is somewhat on

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Speaker 1: the on the decline as well, and there is some

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Speaker 1: risk that could percolate in with the consumer and labor sectors.

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Speaker 1: Germany on the brink of recession. Arkably, for some people

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Speaker 1: already in one dax is through. How do you reconcile

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Speaker 1: some of these things right now? Again, it's a liquidity story.

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Speaker 1: I mean, if you have this massive amount of liquidity

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Speaker 1: in the system, if you have all this cash in

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Speaker 1: the system, it's got to go somewhere. For some people,

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Speaker 1: even if there is a slow end of global economy,

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Speaker 1: I want to put my cash into something that's yielding

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Speaker 1: something positive at least. But isn't it the X axis

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Speaker 1: not only the observation of the wall of money out there,

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Speaker 1: but lower for longer has a new definition right going

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Speaker 1: into the new year. Am I right on that? Yeah? Absolutely,

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Speaker 1: I mean there's there's very little. I mean, when you

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Speaker 1: talk about monetary policy, you're effectively pushing on a string

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Speaker 1: right now. I mean, there's only so much that the

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Speaker 1: ECB can do. It's not a story of credit supply.

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Speaker 1: It's a story of credit demand. And right now there's

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Speaker 1: no credit demand in the Herozone, and that's driven by

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Speaker 1: by fiscal growth that there are fiscal stimulus. We had

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Speaker 1: Max Kettner of HSPC on the program around about fifty

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Speaker 1: five minutes ago, who was pushing back quite strongly against

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Speaker 1: some of this enthusiasm for risk assets at the moment.

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Speaker 1: Would you do the same thing at this point? Though

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Speaker 1: I'm still playing the liquidity story. I still do think that,

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Speaker 1: you know, even if you have you're in a global

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Speaker 1: environment where the economy is not doing so well, you've

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Speaker 1: got enough liquidity out there. It seems like this lower

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Speaker 1: for longer environment is gonna last. I'm not so concerned

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Speaker 1: about an equity meltdown at this point. So right now

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Speaker 1: we are seeing a sell off in bonds, in particular

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Speaker 1: in U s ten your treasuries? Would you be a

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Speaker 1: buyer here at this point? I mean I'd have to

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Speaker 1: look at the technical level, but yeah, i'd look at

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Speaker 1: potentially by US months ready, one nine on a tenure

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Speaker 1: gets it done? Does that bring the bond back? Were

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Speaker 1: in a new regime now? I do think, I do

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Speaker 1: think that the risks are skewed towards the FED potentially

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Speaker 1: easing again, although that's not our house to our house

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Speaker 1: view is potentially that they're going to stay on hold

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Speaker 1: for the next a little while. But again, I am

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Speaker 1: watching employment numbers, I'm watching the consumer sector in the US,

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Speaker 1: and again, if that manufacturing weakness does percolate into that,

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Speaker 1: that's a new regime for the FED to navigator, So

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Speaker 1: one nine could be the ceiling and what's the what's

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Speaker 1: the floor for taking? You're going to make me call that?

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Speaker 1: In the US? You call on that and not at

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Speaker 1: this point. Now, now we need to be in a

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Speaker 1: recession and we need to see some some some other factors.

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Speaker 1: We found the outside of recessionary conditions through the cycle

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Speaker 1: life below one fifty ten years and really quite tough

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Speaker 1: bit pan Yeah you agree, Yeah, I mean again, it

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Speaker 1: has to be a deeper, meaning follower recession. I think

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Speaker 1: to really to move below that one. But look at

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Speaker 1: yields elsewhere. I mean, look at the ten ure yield

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Speaker 1: in Japan, look at the ten ure yield. And in

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Speaker 1: German boons, I mean where it's very expensively short to U. S. Dollar.

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Speaker 1: For a reason, I can get you a positive yield

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Speaker 1: in France this morning on a ten year Just your

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Speaker 1: yield now zero point zero zero five. There real move

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Speaker 1: this morning, Solf. But one final question very quickly here

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Speaker 1: on Canadian dollar. Is it a commodity play or is

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Speaker 1: it just trading off US and US dollar? It's it's

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Speaker 1: a U. S. Dollar play at this point. I mean

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Speaker 1: the commodity play, I think that story is. But I

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Speaker 1: mean we're barish on the Canadian dollar. We do think

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Speaker 1: the Canadian dollar dollar catch you go to one forty

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Speaker 1: by the end of next year. Well, the tickets are

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Speaker 1: want are only original six? You know, I'll take the St.

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Speaker 1: Louis Blues, but just you know, originally not the Ranger.

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Speaker 1: The Rangers are so the Rangers are so puny. I

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Speaker 1: don't want to see Rangers leaves in Toronto. You yeah,

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Speaker 1: thank you. What about the raptors that's oh you're killing

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Speaker 1: and joining us now, folks here as we look at ahead,

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Speaker 1: you're ahead. Yeah, we'll get to Uber and all that.

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Speaker 1: As a woman who writes with a still a stiletto

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Speaker 1: knife dipped in ink when she writes every day, that

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Speaker 1: would be sure over day. Of course, on technology, we

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Speaker 1: want to get to Uber. We could get to we

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Speaker 1: work with that lex art. I'm still struggling with that healing.

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Speaker 1: Could we could pointy knife like a wicked point, you know,

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Speaker 1: like Sarah Jessica Parker's feels and gentlemen in can you

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Speaker 1: write a Maren sare over date with us? Right now?

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Speaker 1: Miss Sandberg will make an appearance today in our year ahead.

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Speaker 1: There will be smiles and giggles and then not what's

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Speaker 1: your number one question to the woman running Fortress Zuckerberg?

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Speaker 1: Oh boy, that's a really hard question, you know. I

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Speaker 1: I think, Um, there was an interview that Kato Kerrik

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Speaker 1: did with Sheryl Sandberg novels, which I think was really

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Speaker 1: exceptionally well done. Was it well done? Well? She didn't

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Speaker 1: let Sheryl Sandberg kind of stick to her car. Yeah,

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Speaker 1: put her right off, but just sort of came back

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Speaker 1: at her with repeated questions. But one of the things

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Speaker 1: she asked Sandberg and I thought was a good question

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Speaker 1: is basically, how does a are you sort of embarrassed

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Speaker 1: to work at Facebook? Was sort of the question like,

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Speaker 1: how has this impacted your um public perception and your

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Speaker 1: your personal perception, which I think is an interesting question

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Speaker 1: assertily a company that's under well. Another personal perception issue

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Speaker 1: is for Travis Clinic and Uber and what's been going

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Speaker 1: on the shares there? Uh, you know, I'm just wondering

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Speaker 1: the road forward. Yesterday another blood bath after the terrible results.

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Speaker 1: Moving forward, we are seeing a little bit more stable

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Speaker 1: stability today. What do people need to see? What do

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Speaker 1: you need to see to feel more confident about its prospects?

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Speaker 1: I think more of the same. You're right. I was

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Speaker 1: surprised yesterday and that there was this big lock up

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Speaker 1: that lifted that basically hundreds of millions of shares were

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Speaker 1: available to sell, and I thought it was just going

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Speaker 1: to be an utter stock splat the whole day, and

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Speaker 1: it wasn't as bad as I thought. But going forward,

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Speaker 1: the issue is this company has set a target for

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Speaker 1: itself of you know, pretty significant for around in kind

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Speaker 1: of adjusted wildly adjusted profits and I'm not sure how

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Speaker 1: they get there in two years. Yeah, you know, talking

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Speaker 1: about Travis Clinic and reputational risk. I thought it was

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Speaker 1: really interesting in the Wall Street Journal this morning, Saudi

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Speaker 1: Arabia Sovereign Wealth Fund invested four million dollars into a

428
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Speaker 1: new company called Cloud Kitchens, founded by Travis Clanic. And

429
00:21:06,520 --> 00:21:10,120
Speaker 1: I'm wondering whether the failures at uber that are being

430
00:21:10,119 --> 00:21:13,239
Speaker 1: reflected in markets are not being reflected in sentiment of

431
00:21:13,680 --> 00:21:16,760
Speaker 1: sort of startup investors, venture capitalists. No, it's interesting. I mean,

432
00:21:16,840 --> 00:21:20,879
Speaker 1: the the rehabilitation of Travis Kalenik is an interesting story

433
00:21:21,000 --> 00:21:25,760
Speaker 1: to see that he got pushed out of uber Um

434
00:21:26,040 --> 00:21:31,120
Speaker 1: in this very public way. He kind of quietly left,

435
00:21:31,160 --> 00:21:34,600
Speaker 1: as you said, started his own company, and by all accounts,

436
00:21:34,640 --> 00:21:37,920
Speaker 1: has had a very easy time raising money for what's

437
00:21:38,119 --> 00:21:41,600
Speaker 1: It's basically a ghost kitchen concept. It's sort of restaurant

438
00:21:41,640 --> 00:21:45,280
Speaker 1: delivery without the restaurants um and it's an idea that

439
00:21:45,359 --> 00:21:50,480
Speaker 1: many other investors are pursuing. And apparently his backers believe

440
00:21:50,560 --> 00:21:53,960
Speaker 1: that he has enough magic to kind of build another

441
00:21:54,000 --> 00:21:56,240
Speaker 1: company first. This is this is an important point because

442
00:21:56,240 --> 00:22:00,200
Speaker 1: I wonder if the narrative of investors demanding profit at

443
00:22:00,200 --> 00:22:03,080
Speaker 1: this point more than the growth they once prioritize. If

444
00:22:03,080 --> 00:22:05,679
Speaker 1: that narrative has gone too far and it's not really

445
00:22:05,720 --> 00:22:10,000
Speaker 1: accurately reflecting the mood adventure capitalists firms, at least not

446
00:22:10,040 --> 00:22:13,880
Speaker 1: by their actions, it's a good question. I don't know

447
00:22:14,040 --> 00:22:17,480
Speaker 1: enough about what's happening at the very early stages of

448
00:22:17,560 --> 00:22:20,879
Speaker 1: company building and investing in those young companies. Look, the

449
00:22:20,960 --> 00:22:23,760
Speaker 1: fact is that if you're getting a company off the ground,

450
00:22:24,040 --> 00:22:26,800
Speaker 1: it's probably not going to be profitable. And I think

451
00:22:26,840 --> 00:22:30,240
Speaker 1: that's the model of venture capital from you know, day

452
00:22:30,280 --> 00:22:34,520
Speaker 1: one of that industry. So the question for all of

453
00:22:34,520 --> 00:22:38,320
Speaker 1: those companies, though, is is there kind of a an

454
00:22:38,320 --> 00:22:42,239
Speaker 1: eventually sustainable business not will build it and see how

455
00:22:42,280 --> 00:22:47,040
Speaker 1: it goes. You've been brilliant not only linking all the soft,

456
00:22:47,080 --> 00:22:50,520
Speaker 1: touchy feely stuff, but into the financials as well. You

457
00:22:50,600 --> 00:22:54,680
Speaker 1: mentioned earlier the hope and prayer of Uber out two

458
00:22:54,760 --> 00:22:58,000
Speaker 1: years maybe two and a half years, which in today's

459
00:22:58,000 --> 00:23:01,600
Speaker 1: age is somewhat foolish. But here's the vector the mindset

460
00:23:01,640 --> 00:23:05,560
Speaker 1: of all these tech these nonprofitable technology companies. Is it

461
00:23:05,600 --> 00:23:08,199
Speaker 1: really a five year plan that they won't admit to.

462
00:23:09,680 --> 00:23:15,159
Speaker 1: I mean, I've just been surprised by the change and

463
00:23:15,200 --> 00:23:19,320
Speaker 1: attitude just in I don't know, six months basically since

464
00:23:19,359 --> 00:23:22,359
Speaker 1: the springs, probably since Lift and then Uber went public,

465
00:23:22,760 --> 00:23:27,440
Speaker 1: that these companies now know or now believe that it's

466
00:23:27,480 --> 00:23:33,920
Speaker 1: no longer enough to say our our market opportunity is huge.

467
00:23:34,119 --> 00:23:36,800
Speaker 1: All we need to do is capture you know, two

468
00:23:36,840 --> 00:23:44,520
Speaker 1: percent of this capture profits. Look, and I grabbed dot com.

469
00:23:44,800 --> 00:23:47,840
Speaker 1: I mean the illusion of profits at the operating income

470
00:23:47,880 --> 00:23:52,760
Speaker 1: EBIT dline. So these companies are uper Lift both have

471
00:23:52,840 --> 00:23:55,600
Speaker 1: said that in two years, two years they're going to

472
00:23:55,720 --> 00:24:02,959
Speaker 1: have adjusted EBIT of community. I mean, are you cynical? Now?

473
00:24:03,080 --> 00:24:10,359
Speaker 1: I literally this morning was look at that you have,

474
00:24:10,440 --> 00:24:13,359
Speaker 1: Katie Curret to me, I was actually looking this morning

475
00:24:13,359 --> 00:24:17,959
Speaker 1: before I came on set at Uber's nine pages of

476
00:24:19,000 --> 00:24:22,720
Speaker 1: adjustments to their gap earnings. And you know, I'm not

477
00:24:23,240 --> 00:24:26,480
Speaker 1: new to this, and I couldn't exactly figure out what

478
00:24:26,960 --> 00:24:30,560
Speaker 1: was actually happening in some of their segments, and that

479
00:24:30,600 --> 00:24:32,760
Speaker 1: worries me. I sort of feel like maybe they should

480
00:24:32,800 --> 00:24:36,400
Speaker 1: just disclose cash in cash out well, because that would

481
00:24:36,400 --> 00:24:40,680
Speaker 1: be simpler. Okay, there's the accounting issue, there's the opportunity

482
00:24:40,760 --> 00:24:43,719
Speaker 1: and how big is it. There's also this idea of

483
00:24:43,880 --> 00:24:48,160
Speaker 1: winner takes all that in the dot com era there

484
00:24:48,160 --> 00:24:51,080
Speaker 1: were the companies that survived and those that didn't. It

485
00:24:51,119 --> 00:24:53,960
Speaker 1: wasn't tier one, and then Tier two, which is valued

486
00:24:54,000 --> 00:24:56,359
Speaker 1: a little bit below that top tier. So that's a

487
00:24:56,440 --> 00:24:58,320
Speaker 1: question here, you know, is there going to be a

488
00:24:58,359 --> 00:25:01,359
Speaker 1: winner take all or say Lift? If they win, they

489
00:25:01,359 --> 00:25:04,480
Speaker 1: will go on and survive and Uber will die. I

490
00:25:04,560 --> 00:25:07,760
Speaker 1: definitely think that in some of these categories there can't

491
00:25:07,800 --> 00:25:11,440
Speaker 1: be a thousand winners um. Now, whether that means two

492
00:25:11,560 --> 00:25:16,000
Speaker 1: or three or ten, I'm not sure. My issue about

493
00:25:16,600 --> 00:25:19,720
Speaker 1: the category that Uber and Lift occupy, and particularly this

494
00:25:19,840 --> 00:25:23,639
Speaker 1: kind of transport on demand transportation, is I just wonder

495
00:25:23,760 --> 00:25:28,400
Speaker 1: about is the eventual both size and economics of that

496
00:25:28,440 --> 00:25:31,560
Speaker 1: market as good as the optimists thing. I sort of

497
00:25:31,640 --> 00:25:35,600
Speaker 1: wonder that it's gonna look not that dissimilar from the

498
00:25:35,680 --> 00:25:38,560
Speaker 1: taxi business. Um when all is said and done, Sure,

499
00:25:38,600 --> 00:25:40,560
Speaker 1: over they thank you so much, greatly appreciate that. When

500
00:25:40,640 --> 00:25:43,480
Speaker 1: Lisa alludes to their folks. As a classic research of

501
00:25:43,560 --> 00:25:46,919
Speaker 1: Michael Mabusi and years ago at Credit sweez on the

502
00:25:46,920 --> 00:25:50,320
Speaker 1: winner takes All, the concept translated everyone wants to be Amazon.

503
00:25:50,640 --> 00:26:08,200
Speaker 1: Ye Bloomberg every year trots out a year ahead view,

504
00:26:08,760 --> 00:26:12,560
Speaker 1: and it always has interesting conversation from people. It's all,

505
00:26:12,880 --> 00:26:16,600
Speaker 1: you know, very ted and very thoughtful, except PAULS Wheney.

506
00:26:16,720 --> 00:26:20,360
Speaker 1: This year, there's a certain tension to the morning keynote.

507
00:26:20,640 --> 00:26:24,280
Speaker 1: There is Cheryl Sandbury, the chief operating officer from Facebook,

508
00:26:24,480 --> 00:26:28,719
Speaker 1: sat down earlier this morning with Bloomberg's Caroline Hyde. Uh.

509
00:26:29,000 --> 00:26:32,200
Speaker 1: Let's listen in your work on Capital Hill, the ongoing

510
00:26:32,240 --> 00:26:35,560
Speaker 1: dialogue that is happening between not only you and political ads,

511
00:26:35,760 --> 00:26:38,359
Speaker 1: but those that are buying the political ads and politicians themselves.

512
00:26:39,480 --> 00:26:42,200
Speaker 1: The scrutiny upon you in terms of antitrust, in terms

513
00:26:42,240 --> 00:26:45,360
Speaker 1: of competition. How do you feel you've thus far been

514
00:26:45,400 --> 00:26:47,879
Speaker 1: able to relate your story, being able to be fully

515
00:26:47,920 --> 00:26:53,200
Speaker 1: transparent and and offer up answers as quickly as politicians

516
00:26:53,200 --> 00:26:57,280
Speaker 1: would like them. We're deaftly working on offering up those answers.

517
00:26:57,280 --> 00:27:00,199
Speaker 1: And I think you're right that the anti competite if

518
00:27:00,280 --> 00:27:02,920
Speaker 1: narrative and the competitive narrative is one people are really

519
00:27:02,920 --> 00:27:06,600
Speaker 1: focused on. And that's because there's real concern about the

520
00:27:06,640 --> 00:27:09,720
Speaker 1: size and power of tech companies of Us, of Google,

521
00:27:09,800 --> 00:27:12,000
Speaker 1: of the others, of Apple, of Amazon. There's real concern

522
00:27:12,040 --> 00:27:16,000
Speaker 1: there antitrust, legal policy has been really important in the

523
00:27:16,040 --> 00:27:19,680
Speaker 1: history of America to protect consumers from price gouging, from

524
00:27:19,680 --> 00:27:22,120
Speaker 1: no choice. I just think it's hard if you look

525
00:27:22,119 --> 00:27:24,880
Speaker 1: at our industry to argue or prove that there's anything

526
00:27:24,920 --> 00:27:28,840
Speaker 1: but a very very robust choice. That was Cheryl Sandberg,

527
00:27:29,000 --> 00:27:32,720
Speaker 1: Facebook chief operating officers sitting with Caroline Hyde at the

528
00:27:32,720 --> 00:27:35,600
Speaker 1: Bloomberg Year Ahead conference here in New York. They're still

529
00:27:36,000 --> 00:27:40,280
Speaker 1: shotting exactly. Let's bringing our good friend Max Chafkin from

530
00:27:40,280 --> 00:27:43,320
Speaker 1: Bloomberg News to get a sense of this Facebook story.

531
00:27:43,359 --> 00:27:46,240
Speaker 1: It's not necessarily about their profits and losses of Facebook

532
00:27:46,280 --> 00:27:48,240
Speaker 1: right now. The issue really seems to be in the

533
00:27:48,280 --> 00:27:51,840
Speaker 1: discussion seems to be around the role of Facebook within

534
00:27:51,880 --> 00:27:55,080
Speaker 1: our society, particularly as it relates to uh the elections.

535
00:27:55,080 --> 00:27:57,080
Speaker 1: For example, are they a media company? Should they be

536
00:27:57,119 --> 00:27:59,440
Speaker 1: held to the same standards. So, Max, it's a it's

537
00:27:59,440 --> 00:28:01,720
Speaker 1: an issue at Facebook and their executives, and we heard

538
00:28:01,720 --> 00:28:04,119
Speaker 1: from Cheryl Sandberg just now are really grappling with what

539
00:28:04,160 --> 00:28:05,960
Speaker 1: do you how do you think that plays out? So

540
00:28:06,680 --> 00:28:10,639
Speaker 1: I mean backing up, I mean Facebook financially doing great.

541
00:28:10,760 --> 00:28:12,800
Speaker 1: I mean it's kind of amazing how we have sort

542
00:28:12,800 --> 00:28:15,040
Speaker 1: of one negative headline after the other for the last

543
00:28:15,080 --> 00:28:19,160
Speaker 1: couple of years, and the company has performed UM exceedingly well. UM.

544
00:28:19,200 --> 00:28:21,480
Speaker 1: That said, they've really been on the defensive on these

545
00:28:21,560 --> 00:28:24,480
Speaker 1: questions of their power. And I think you saw that

546
00:28:24,600 --> 00:28:27,400
Speaker 1: in in the the answer that Cheryl Sandberg just gave

547
00:28:27,520 --> 00:28:30,640
Speaker 1: where where it's a little bit fuzzy and and and

548
00:28:30,800 --> 00:28:34,439
Speaker 1: the you know, uh, we're asking, you know, what, what

549
00:28:34,480 --> 00:28:37,520
Speaker 1: are you gonna do about this antitrust conversation, and she's saying,

550
00:28:38,280 --> 00:28:41,160
Speaker 1: never mind. UM. I think I think the UM their

551
00:28:41,240 --> 00:28:45,120
Speaker 1: strategy is kind of twofold. Number One, our services free,

552
00:28:45,360 --> 00:28:48,320
Speaker 1: therefore we're helping people. Number Two, we don't have a

553
00:28:48,360 --> 00:28:50,880
Speaker 1: monopoly because there are these Chinese companies and we saw

554
00:28:50,880 --> 00:28:53,600
Speaker 1: this in Mark Zuckerberg's testimony the other day. There are

555
00:28:53,600 --> 00:28:56,520
Speaker 1: these big Chinese companies. They are really scary and they

556
00:28:56,560 --> 00:28:58,760
Speaker 1: are competitors. You don't want to regulate us because you're

557
00:28:58,800 --> 00:29:01,480
Speaker 1: just going to create an opportunity for this company TikTok,

558
00:29:01,520 --> 00:29:03,640
Speaker 1: which is owned by Bye Dance, which is based in Beijing,

559
00:29:03,640 --> 00:29:06,560
Speaker 1: which is censoring you know, some content. So so that's

560
00:29:06,600 --> 00:29:09,400
Speaker 1: the strategy. It's sort of partly you know, we're really great,

561
00:29:09,480 --> 00:29:12,440
Speaker 1: Partly you know, watch that's all we get from Miss Sandberg.

562
00:29:12,480 --> 00:29:15,000
Speaker 1: I mean we just heard it there with Caroline High

563
00:29:15,040 --> 00:29:17,880
Speaker 1: to Zo Max, You're out of Yale. I believe somewhere

564
00:29:17,920 --> 00:29:20,400
Speaker 1: in the vicinity of year two Yale they beat into

565
00:29:20,480 --> 00:29:25,120
Speaker 1: you critical thinking skills. What kind of chief operating officer

566
00:29:25,280 --> 00:29:29,800
Speaker 1: manager to Miss Sandberg and Mr Zuckerberg need to selvage

567
00:29:29,800 --> 00:29:34,280
Speaker 1: this linkage of fabulous financials with a cacophony of issues

568
00:29:34,360 --> 00:29:38,000
Speaker 1: they've some would say created. So I don't know that

569
00:29:38,240 --> 00:29:41,920
Speaker 1: you can reconcile that. I think that Facebook's um Facebook's

570
00:29:41,920 --> 00:29:44,600
Speaker 1: financials are have accrued from its power. And what what

571
00:29:44,680 --> 00:29:47,840
Speaker 1: its critics are gonna say is that the reason Facebook

572
00:29:48,120 --> 00:29:49,920
Speaker 1: is performing is as well as it's done, is it

573
00:29:49,960 --> 00:29:53,840
Speaker 1: basically has a monopoly on um on on certain kinds

574
00:29:53,840 --> 00:29:56,720
Speaker 1: of display advertising that is the sort of non search

575
00:29:56,760 --> 00:29:58,960
Speaker 1: ads that you see your monopolies. No one I know

576
00:29:59,120 --> 00:30:02,280
Speaker 1: uses Facebook anymore. They've all left in droves. Granted they've

577
00:30:02,360 --> 00:30:05,440
Speaker 1: gone Instagram and Works and a bunch of which is

578
00:30:05,480 --> 00:30:08,200
Speaker 1: of course owned by Facebook. And and they've been you know,

579
00:30:08,400 --> 00:30:13,200
Speaker 1: working very hard over there, uh in California to you know,

580
00:30:17,240 --> 00:30:19,960
Speaker 1: came to the sixth more for sensitive you know, Chris

581
00:30:20,040 --> 00:30:24,120
Speaker 1: don and Candles interview. So Max, I think one of

582
00:30:24,120 --> 00:30:26,440
Speaker 1: the issues that they're probably gonna have to address pretty soon.

583
00:30:26,600 --> 00:30:29,200
Speaker 1: It's like, right now is kind of this upcoming election.

584
00:30:29,840 --> 00:30:31,520
Speaker 1: What kind of role are they gonna play? How are

585
00:30:31,520 --> 00:30:35,080
Speaker 1: these political ads? It was really really a problem in

586
00:30:36,200 --> 00:30:37,880
Speaker 1: what do you think they're going to do lead this year? Well,

587
00:30:38,040 --> 00:30:40,400
Speaker 1: you know, they came out and said it's a big

588
00:30:40,400 --> 00:30:44,240
Speaker 1: controversy over over political ads that contain say, misinformation or

589
00:30:44,240 --> 00:30:47,440
Speaker 1: misleading statements. Uh. Mark Zuckerberg gave a big speech two

590
00:30:47,440 --> 00:30:50,320
Speaker 1: weeks ago saying, uh, we believe in free speech. We

591
00:30:50,360 --> 00:30:54,040
Speaker 1: are not going to fact check political ads. Um. Everyone

592
00:30:54,160 --> 00:30:56,320
Speaker 1: sort of seemed to kind of go along with that,

593
00:30:56,360 --> 00:30:58,720
Speaker 1: maybe except for Elizabeth Warren. Uh and then and then

594
00:30:58,720 --> 00:31:01,240
Speaker 1: we but we've seen a bit of a drumbeat of criticism,

595
00:31:01,240 --> 00:31:03,720
Speaker 1: first from Jack Dorsey, who kind of came out with

596
00:31:03,720 --> 00:31:06,920
Speaker 1: a bit of a troll, I would say, saying, you know,

597
00:31:07,280 --> 00:31:11,080
Speaker 1: we are we are rejecting all political ads. We're constitutionally legal.

598
00:31:11,360 --> 00:31:13,640
Speaker 1: I mean, well, how did you, as a technology guru

599
00:31:13,760 --> 00:31:18,240
Speaker 1: Bloomberg business Week, could media companies say we won't accept

600
00:31:18,280 --> 00:31:22,600
Speaker 1: political ads. So the regulatory regime is there is a

601
00:31:22,680 --> 00:31:25,920
Speaker 1: there's a you know, regulatory regime for for television stations

602
00:31:25,920 --> 00:31:30,960
Speaker 1: and stuff. Uh, that that does not apply to uh Facebook. Um.

603
00:31:31,080 --> 00:31:35,040
Speaker 1: Now Facebook is sort of saying, well, you know, because uh,

604
00:31:35,080 --> 00:31:37,720
Speaker 1: you know television radio, that they're not fact checking ads,

605
00:31:37,840 --> 00:31:40,240
Speaker 1: we shouldn't have to either. Um. But but but that

606
00:31:40,240 --> 00:31:43,520
Speaker 1: those rules don't exist. You know, Max hasn't watched TV

607
00:31:43,560 --> 00:31:46,760
Speaker 1: in eight years. He streams, he streams. We got just

608
00:31:46,840 --> 00:31:48,640
Speaker 1: a little bit of time of how is this going

609
00:31:48,680 --> 00:31:52,200
Speaker 1: to play out? Who's right? Political ads with these companies

610
00:31:52,240 --> 00:31:56,520
Speaker 1: are not political ads with these companies. I think the uh,

611
00:31:56,720 --> 00:31:59,160
Speaker 1: the point that that that people are uncomfortable with political

612
00:31:59,200 --> 00:32:01,440
Speaker 1: ads and so the media will make is that they're

613
00:32:01,480 --> 00:32:05,240
Speaker 1: fundamentally different from television ads because television ads are are

614
00:32:05,240 --> 00:32:08,640
Speaker 1: sort of a mass medium and and and social media

615
00:32:08,640 --> 00:32:11,520
Speaker 1: ads are targeted specific to people. So if so, if

616
00:32:11,560 --> 00:32:14,520
Speaker 1: you put out a misleading television ad, then it's very

617
00:32:14,560 --> 00:32:16,920
Speaker 1: easy for the media to fact check it. If you

618
00:32:16,960 --> 00:32:19,920
Speaker 1: put out a social media and only show it to

619
00:32:19,960 --> 00:32:24,280
Speaker 1: a very specific Unfortunately, we have to continue this next

620
00:32:24,280 --> 00:32:28,160
Speaker 1: shape and that's where this Business Week. Thanks for listening

621
00:32:28,240 --> 00:32:32,800
Speaker 1: to the Bloomberg Surveillance podcast. Subscribe and listen to interviews

622
00:32:32,800 --> 00:32:38,040
Speaker 1: on Apple podcasts, SoundCloud or whichever podcast platform you prefer.

623
00:32:38,600 --> 00:32:41,960
Speaker 1: I'm on Twitter at Tom Keane Before the podcast. You

624
00:32:41,960 --> 00:32:45,360
Speaker 1: can always catch us worldwide. I'm Bloomberg Radio