Speaker 1: Yeah, Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene
Speaker 1: Jay Lee. We bring you insight from the best in economics, finance, investment,
Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud,
Speaker 1: Bloomberg dot Com, and of course on the Bloomberg We're
Speaker 1: gonna be talking about the markets through the day. Of course,
Speaker 1: a lift to this ecrety market this morning off the
Speaker 1: back of some comments from a Chinese official who said,
Speaker 1: we're gonna ask Matt Kender in just a moment. Let
Speaker 1: me let me just get to the quote of the morning,
Speaker 1: shall we from a Chinese official saying the following. In
Speaker 1: the past two weeks, Top Nego shared has had serious
Speaker 1: constructive discussions and agree to remove additional tariffs in phrases
Speaker 1: as progress is made on the agreement. If China US
Speaker 1: reach a Phase one deal, both sides should roll back
Speaker 1: existing additional tariffs. I should emphasize here any agreement on
Speaker 1: tariff rollback it's ultimately still conditional on a Phase one
Speaker 1: deal being reached. And Tom, a phase one deal still
Speaker 1: hasn't been agreed exactly, and what is so critically and
Speaker 1: I read carefully the comments again, These comments. Folks are
Speaker 1: not manager massage. They're really out of Beijing and straightforward.
Speaker 1: The Chinese are looking sequential. They're looking at this not
Speaker 1: as a one off tariff rollback, but they've verbage a
Speaker 1: sequential rollback, and I would suggest the Americans gonna be
Speaker 1: a long way from that. No comment from the President yet,
Speaker 1: no comment from this administration here in the United States.
Speaker 1: I did mention Max Caton's name, so let's bring him
Speaker 1: in show we as species multi assets strategist. He joins
Speaker 1: us here in New York City. Good morning to Max.
Speaker 1: Good morning. Gonna get to your underweight equity care, which
Speaker 1: I think should be the focus of this conversation in
Speaker 1: just a moment. But first of all, your interpretation of
Speaker 1: what's happening here with the negotiations between the US and China.
Speaker 1: We still have a negotiated a Phase one agreement, yet
Speaker 1: this market is behaving as if we have here we go.
Speaker 1: I mean, you just mentioned it, you say, good morning.
Speaker 1: There's three people doing the happy talk. I'm guessing I
Speaker 1: was invited to do the sort of opposite, and I
Speaker 1: don't think you're gonna invited German strategists to hear some
Speaker 1: happy talk. Really, Um, so there we go. I'm gonna
Speaker 1: be a bit bit more dismal in the next next
Speaker 1: couple of minutes. Um, Look, the only thing really I
Speaker 1: understood from what you were reading out loud is about
Speaker 1: twenties seven subjunctives and ifs and ifs and ifs right.
Speaker 1: So the problem for me is, I mean, there's so
Speaker 1: many things that really have to happen and that have
Speaker 1: to go seamlessly, really really smoothly until I can say,
Speaker 1: okay now that that price level where we are right
Speaker 1: now is justified. And bear in mind that means okay,
Speaker 1: that price level now is justified. That doesn't mean okay,
Speaker 1: now if I got hundred dollars in cash that means
Speaker 1: I need to put more money into equities. It just means, okay, fine,
Speaker 1: this price level is justified. It's not new news, right,
Speaker 1: It's not. It's just confirming news. I'm not like, I'm
Speaker 1: not sort of advocating and utterly bearish stance. I think
Speaker 1: pretty much in six months time, we're probably gonna sit
Speaker 1: around this beautiful table here and and probably going to
Speaker 1: be plus minors zero in equity. It's probably pretty range band.
Speaker 1: But this is an environment where you're saying, look, either
Speaker 1: tales are probably too extreme and you have to continue
Speaker 1: to sell the rally, you have to continue buying the dip.
Speaker 1: Your message so fast sounds like the conditions needed for
Speaker 1: a short squeeze are very different to the conditions needed
Speaker 1: for a sustainable rally. Into you went underweight equities, I
Speaker 1: believe on Monday. Yes, what's the pushback been so far? Um?
Speaker 1: I think so far one of our clients has has
Speaker 1: agreed with me, which kind of you know it's is
Speaker 1: first pretty fun um and and second um, that's the
Speaker 1: one really where you see, oh, this is this is
Speaker 1: getting quite worrisome because you know, if if you think
Speaker 1: about twenty nineteen, if we use the sort of twenty
Speaker 1: nineteen narrative to look into effectively, twenty can be summed
Speaker 1: up in one sentence, you can say, like, fundamentally we
Speaker 1: all want to be much more bearish. The problem is
Speaker 1: the guy left and right of me thinks the same right,
Speaker 1: So positioning is pretty light. It's if anything, if you
Speaker 1: look at equities, if you look at high eild and
Speaker 1: risk assets in general, if you look at some of
Speaker 1: our metrics, we look at beaters, it's it's an unloved relly.
Speaker 1: It's it's unloved, but it's supported by the low interest
Speaker 1: rate environment there. And if there is no trade deal,
Speaker 1: you'll see yields go back down there. We won't that
Speaker 1: be supportive eventually, Liza, But that that is exactly the point.
Speaker 1: And that's why I'm so skeptical about the rally right now,
Speaker 1: because so there's a lot of talk now and there
Speaker 1: has been a lot of talk in the last couple
Speaker 1: of weeks. Oh, this is now rotation into value. This
Speaker 1: is rotation out of duration into cyclical sectors and equities
Speaker 1: for example. The problem, and then much of the Hidgen
Speaker 1: hinges on the sort of narrative that you're saying, financial
Speaker 1: conditions over the last twelve months have loosen so much
Speaker 1: and have become so much easier because of this shift
Speaker 1: in monetary policy really worldwide. The problem, however, is, just
Speaker 1: like you said, if that continues, obviously yields will continue
Speaker 1: to spike, and that means financial conditions will tightened. So
Speaker 1: so if you know what I mean, right, your initial
Speaker 1: your initial argument why you were bullish is at some
Speaker 1: point you're you're hitting a cap, right, You'll you'll inevitably
Speaker 1: we'll be heading your cap got interrupt John, why don't
Speaker 1: you lead us with a real move that we've see
Speaker 1: in Sterling? That GDP forecast out of the Bank of
Speaker 1: England is just cable rolling go over, so Sterling a
Speaker 1: little bit self to hear down two tensive one percent
Speaker 1: at seven Max Canner of HSBC just talking about monetary policy. Easy.
Speaker 1: I believe we have Guy Johnson with us over in
Speaker 1: London because Guy, a Bank of England decision that was
Speaker 1: set to be an absolute snooze just got a little
Speaker 1: bit more interesting with two policymakers. Did they just vote
Speaker 1: for a rate cut? Yeah? I think Saunders, Michael Saunders
Speaker 1: was was largely expected by the market. There's been a
Speaker 1: lot of chat about the fact that he has completely
Speaker 1: turned out from being a hawk to being a dove
Speaker 1: and as a result of which he has voted for
Speaker 1: a cut. The surprise, really, I think is is Haskell
Speaker 1: and I think that is where the market has been
Speaker 1: called on the hop here. So we have two members
Speaker 1: of the MPC voting for a cut this time around.
Speaker 1: We've also seen the Bank John significantly downgrade it's GDP
Speaker 1: forecast one point two versus one point three this year
Speaker 1: twenty twenty one one point eight versus two point three
Speaker 1: um that there is talk of the fact that the
Speaker 1: global risks are a big path of this. Actually what
Speaker 1: they're basing this down grade on is what is happening
Speaker 1: outside the UK. Largely some of it is inside the UK,
Speaker 1: but a lot of it is outside the UK, and
Speaker 1: they are now saying that basically they're looking at a
Speaker 1: situation where they are antisipating that it's going to get
Speaker 1: more difficult from here. Tom, Guy Johnson, what is the
Speaker 1: importance of Jonathan Haskell and Michael Sanders saying let's get going,
Speaker 1: let's cut the rates now define that significance, particularly going
Speaker 1: to the December to election. What you think about it, Tom,
Speaker 1: Given the uncertainty that exists currently in the United Kingdom,
Speaker 1: to make this call pre the election and pre the
Speaker 1: Brexit story actually turning out to be a reality, I
Speaker 1: think is quite a big call. And as I say,
Speaker 1: I think this is largely based on what is happening
Speaker 1: externally to the UK. The UK is a small, open economy.
Speaker 1: You guys are just talking about what was happening with
Speaker 1: the trade story with Max. The UK is being affected
Speaker 1: by this and that is why the data are are
Speaker 1: starting to slow, they believe, and that is why the
Speaker 1: forecasts have been cut. So this is this is in
Speaker 1: relation to what is happening, not with Brexit and not
Speaker 1: with the election, but what's happening with the global macro economy.
Speaker 1: Tom a guy, always great to catch up with you
Speaker 1: to get your thoughts for anyone. Just tuning again the
Speaker 1: Bank of eng Than leaving interest rates unchanged, but two
Speaker 1: policymakers out of the nine actually voting for a rate cut.
Speaker 1: The vote seven to two. Max Kantner, your for you
Speaker 1: one that I think most people just assumed no change
Speaker 1: vote nine zero going into an election next month. Yeah.
Speaker 1: Look I if I put it into an investment contact
Speaker 1: in two, okay, what's what's the trade here? Um? The
Speaker 1: problem is for me, obviously, if I have a sort
Speaker 1: of three to six month view and in our contact
Speaker 1: it's really about guilt, it's about UK equities. The problem
Speaker 1: is I don't want to speculate only on politics, so
Speaker 1: I'm sort of being the maximum carrot and shying away
Speaker 1: from any taking any active stance there really because you know,
Speaker 1: I might be horribly wrong or this might be a
Speaker 1: career breaker. What's interesting to me is that every central
Speaker 1: bank saying that they're doing in action or considering because
Speaker 1: of what's happening globally. There we go, So who are
Speaker 1: you blaming that? That basically tells you central banks as
Speaker 1: are now reacting to something that they actually don't have
Speaker 1: under control. Right, So they're they're reacting to sort of
Speaker 1: global growth, to global phenomena. If we're talking about let's say,
Speaker 1: old school stereotyped textbook monetary policy, Philip's curve and all
Speaker 1: that juwberish, right you you basically then say that we're
Speaker 1: calling the guberish. No, I mean, yeah, you can still
Speaker 1: believe in that. But there we go. The thing the
Speaker 1: thing for me is, look um, the problem there is
Speaker 1: you see a lot of central banks, including the FIT,
Speaker 1: responding to financial conditions now to something that is out
Speaker 1: of their control. Maxicat, now I gotta leave it. They're
Speaker 1: always greater care HSBC assets trying togist. Joining us here
Speaker 1: in New York City, Tel John CIBC bank is out
Speaker 1: of Toronto. It is the old Canadian Imperial Bank of
Speaker 1: Commerce and very quietly over the decades they put together
Speaker 1: absolutely first rate team, including Benjamin tal who is the
Speaker 1: number one guy on the self employed in America. He
Speaker 1: is encyclopedic on this part time, full time debate, and
Speaker 1: it's wonderful when someone from Toronto darkens the door here
Speaker 1: so we can crowbar leafs tickets out of him. Is
Speaker 1: that what he's he That's the only reason these years
Speaker 1: to hand me the leaf stick is that the basketball
Speaker 1: team ins are on. So that is very good. The
Speaker 1: Canadians would be what we're asking for. John right joining
Speaker 1: us now c IBC Capital Market CIA macro Strategist. Good
Speaker 1: morning to Ff and good morning. Should we begin with
Speaker 1: that bank havingdom right decision? Personally, I thought this was
Speaker 1: going to be a total snooze going into the election
Speaker 1: next month. I guess we were wrong. Two people on
Speaker 1: the NPC voting for a rate cut, they didn't get it.
Speaker 1: The vote was seven to two. Your reaction, Yeah, I
Speaker 1: mean I wasn't surprised by the two dissenters, because again,
Speaker 1: if you pay attention to what Saunders and and really
Speaker 1: you've been saying for there the less several months, it's
Speaker 1: certainly seemed like they were more more sympathetic towards Rica
Speaker 1: going forward. Do you think that kind of surprised me
Speaker 1: was the fact that they kept in the language of
Speaker 1: outlimited and gradual rate hikes going forward. I guess they
Speaker 1: didn't want to tip the boat too much during an
Speaker 1: election campaign. I'm trying to understand where the global risks
Speaker 1: are that everyone keeps talking about. If it's not necessarily
Speaker 1: in Europe, which seems to be getting better, if it's
Speaker 1: not coming from the US, not coming from the UK
Speaker 1: with Brexit, right, where is it coming from the trade talks?
Speaker 1: I mean, it's between the US and China, and what
Speaker 1: I think is underappreciated between the US and the EU.
Speaker 1: And nobody ever talks about the U S and the EU.
Speaker 1: But we just had tariffs launched on an airbus last
Speaker 1: a couple of weeks ago, I should say. And we've
Speaker 1: also got the big decision coming on autos. Nobody talks
Speaker 1: about that, but that's a significant macro risk, so we
Speaker 1: need to pay attention. What are your thoughts on that
Speaker 1: at the moment. I caught up with Larry Cardlog, the
Speaker 1: National Economic Council Director, last Friday, and he always points
Speaker 1: to the weakness coming out of Europe weighing on the
Speaker 1: U S economy. Do you think there's an acknowledgement from
Speaker 1: the U S side that actually going after Europe at
Speaker 1: this point might not be a great decision. I think
Speaker 1: there is some sympathy to to, you know, potentially open
Speaker 1: the door towards talks with the EU. I mean, at
Speaker 1: the same time, you don't want to see a trade
Speaker 1: a new front opened on the trade war between the
Speaker 1: U S and the EU. And certainly, you know, taking
Speaker 1: the competence that we heard from World for US last week,
Speaker 1: it certainly seems like they they're willing to push out
Speaker 1: the deadlines for for company to do decision on tariffs.
Speaker 1: The Chinese Ministry of Commerce speaking overnight, saying that the
Speaker 1: Chinese in the United States have agreed on tariff rollback
Speaker 1: with a massive asterisks. They've agreed on it if there's
Speaker 1: a phase one deal that they can agree to, and
Speaker 1: right now there isn't a phase one deal to agree to.
Speaker 1: I have a question for you that I think it's
Speaker 1: going to be increasingly an important one. If we do
Speaker 1: get tariff rollback, it's the boost to economic activity from
Speaker 1: tariff's coming off proportional to the damage dumb from tariff's
Speaker 1: going gone. How should we be thinking about that at
Speaker 1: the moment right I mean, if we're talking about the
Speaker 1: real economy. I don't think so. I think there are
Speaker 1: other structural headwinds towards business investment coming online. I mean,
Speaker 1: we are in a new trade regime. We didn't have
Speaker 1: to deal with a terra far between two largest economies
Speaker 1: UH in the past. This is a new regime the
Speaker 1: business has to have to become accustomed to. And certainly
Speaker 1: if we do see some TERRAF rollbacks, you might see
Speaker 1: some beneficiaries being you know, more so of the U
Speaker 1: S consumer as opposed to US businesses. I think it's
Speaker 1: a new path for them to to wait through the
Speaker 1: Pippen with this with c IBC World Markets, Pippen yen
Speaker 1: is always a proxy for global Wall Street of correlation
Speaker 1: in a safe haven. Well does that math work right
Speaker 1: now and right now one O nine fifteen grinding, But
Speaker 1: it has been a weaker yen. Is that a healthy
Speaker 1: signal of all clear for the time being? I would
Speaker 1: say yes. It's probably conducive towards risk appetite being on
Speaker 1: the rebound. And again it's it's much more of a
Speaker 1: global liquidity story and a positive sentiment story potentially from
Speaker 1: the US. But it's a well behave time series. It's grinding.
Speaker 1: I'll get that, but there's a persistency to this yen weakness.
Speaker 1: What does that signal? It signals to me that again,
Speaker 1: great divergence between the U S and Japan is pretty
Speaker 1: much minimal right now compared to we've seen in the past.
Speaker 1: I mean we're talking about Dad. We have to talk
Speaker 1: about where the policy settings are in the United States, hichus,
Speaker 1: where they are in Japan. And again, if you do
Speaker 1: see a meaning called divergence, then that's when you get
Speaker 1: the direction directional break out. This is this is critical.
Speaker 1: What what Pippan just said, John, we were talking about
Speaker 1: this in the break policy divergence. It doesn't seem to
Speaker 1: be any They're all reacting to what I am f
Speaker 1: flood on, which is lower GDP growth. This has been
Speaker 1: a big question though for effects markets over the last
Speaker 1: couple of years. Bipan as the whether right right differentials
Speaker 1: mats are into what degree right differentials matter for foreign exchange?
Speaker 1: Absolutely in a world or central bankers center banks are
Speaker 1: increasing asset purchasing or balance sheets are exorbitantly large, and
Speaker 1: when they're dominant in the market, rate emergencies will at
Speaker 1: least This was John Lipsky's question to Charles Evans yesterday
Speaker 1: on the correlation of all these central bank messages that
Speaker 1: we're getting well, and there's a question the low inflation environment.
Speaker 1: Have we underestivated how persistent and a long lasting It'll
Speaker 1: be in European Commission today cutting its hero Area growth
Speaker 1: and inflation at look despite some of the better than
Speaker 1: expected data we've gotten out of Germany out with the
Speaker 1: p m s. Do you think they're right? Yeah? I
Speaker 1: do think so, and I don't think central bankers have
Speaker 1: been held accountable for the fact they've been missing their
Speaker 1: inflation targets for the last decade. I do think there's
Speaker 1: a there's a problem with inflation targeting. What's behind that?
Speaker 1: I mean, it might be that the policy is outdated,
Speaker 1: might be that the mandate needs to be updated to
Speaker 1: reflect a different inflation mandate, or maybe they should be
Speaker 1: targeting something else. Central bankers have become very very good
Speaker 1: over the past couple of decades at targeting two percent inflation,
Speaker 1: almost too good to the point where inflation volatilities minimal now, right,
Speaker 1: So maybe there's something else that center bankers should be
Speaker 1: looking at it go forward. Well, when you talk about
Speaker 1: the European outlook right now, they're saying that the worst
Speaker 1: is to come. Do you agree with that too, that
Speaker 1: the worst for the European economy is to come perhaps
Speaker 1: next year. It's a distinct possibility because we haven't seen
Speaker 1: any sort of fiscal movement towards fiscal stimulus from some
Speaker 1: of the larger economies that have the space. How that
Speaker 1: translate in markets at this point, you know, from in
Speaker 1: my space, we still see your dollar range bound, and
Speaker 1: that's predominantly because again US manufacturing it's is somewhat on
Speaker 1: the on the decline as well, and there is some
Speaker 1: risk that could percolate in with the consumer and labor sectors.
Speaker 1: Germany on the brink of recession. Arkably, for some people
Speaker 1: already in one dax is through. How do you reconcile
Speaker 1: some of these things right now? Again, it's a liquidity story.
Speaker 1: I mean, if you have this massive amount of liquidity
Speaker 1: in the system, if you have all this cash in
Speaker 1: the system, it's got to go somewhere. For some people,
Speaker 1: even if there is a slow end of global economy,
Speaker 1: I want to put my cash into something that's yielding
Speaker 1: something positive at least. But isn't it the X axis
Speaker 1: not only the observation of the wall of money out there,
Speaker 1: but lower for longer has a new definition right going
Speaker 1: into the new year. Am I right on that? Yeah? Absolutely,
Speaker 1: I mean there's there's very little. I mean, when you
Speaker 1: talk about monetary policy, you're effectively pushing on a string
Speaker 1: right now. I mean, there's only so much that the
Speaker 1: ECB can do. It's not a story of credit supply.
Speaker 1: It's a story of credit demand. And right now there's
Speaker 1: no credit demand in the Herozone, and that's driven by
Speaker 1: by fiscal growth that there are fiscal stimulus. We had
Speaker 1: Max Kettner of HSPC on the program around about fifty
Speaker 1: five minutes ago, who was pushing back quite strongly against
Speaker 1: some of this enthusiasm for risk assets at the moment.
Speaker 1: Would you do the same thing at this point? Though
Speaker 1: I'm still playing the liquidity story. I still do think that,
Speaker 1: you know, even if you have you're in a global
Speaker 1: environment where the economy is not doing so well, you've
Speaker 1: got enough liquidity out there. It seems like this lower
Speaker 1: for longer environment is gonna last. I'm not so concerned
Speaker 1: about an equity meltdown at this point. So right now
Speaker 1: we are seeing a sell off in bonds, in particular
Speaker 1: in U s ten your treasuries? Would you be a
Speaker 1: buyer here at this point? I mean I'd have to
Speaker 1: look at the technical level, but yeah, i'd look at
Speaker 1: potentially by US months ready, one nine on a tenure
Speaker 1: gets it done? Does that bring the bond back? Were
Speaker 1: in a new regime now? I do think, I do
Speaker 1: think that the risks are skewed towards the FED potentially
Speaker 1: easing again, although that's not our house to our house
Speaker 1: view is potentially that they're going to stay on hold
Speaker 1: for the next a little while. But again, I am
Speaker 1: watching employment numbers, I'm watching the consumer sector in the US,
Speaker 1: and again, if that manufacturing weakness does percolate into that,
Speaker 1: that's a new regime for the FED to navigator, So
Speaker 1: one nine could be the ceiling and what's the what's
Speaker 1: the floor for taking? You're going to make me call that?
Speaker 1: In the US? You call on that and not at
Speaker 1: this point. Now, now we need to be in a
Speaker 1: recession and we need to see some some some other factors.
Speaker 1: We found the outside of recessionary conditions through the cycle
Speaker 1: life below one fifty ten years and really quite tough
Speaker 1: bit pan Yeah you agree, Yeah, I mean again, it
Speaker 1: has to be a deeper, meaning follower recession. I think
Speaker 1: to really to move below that one. But look at
Speaker 1: yields elsewhere. I mean, look at the ten ure yield
Speaker 1: in Japan, look at the ten ure yield. And in
Speaker 1: German boons, I mean where it's very expensively short to U. S. Dollar.
Speaker 1: For a reason, I can get you a positive yield
Speaker 1: in France this morning on a ten year Just your
Speaker 1: yield now zero point zero zero five. There real move
Speaker 1: this morning, Solf. But one final question very quickly here
Speaker 1: on Canadian dollar. Is it a commodity play or is
Speaker 1: it just trading off US and US dollar? It's it's
Speaker 1: a U. S. Dollar play at this point. I mean
Speaker 1: the commodity play, I think that story is. But I
Speaker 1: mean we're barish on the Canadian dollar. We do think
Speaker 1: the Canadian dollar dollar catch you go to one forty
Speaker 1: by the end of next year. Well, the tickets are
Speaker 1: want are only original six? You know, I'll take the St.
Speaker 1: Louis Blues, but just you know, originally not the Ranger.
Speaker 1: The Rangers are so the Rangers are so puny. I
Speaker 1: don't want to see Rangers leaves in Toronto. You yeah,
Speaker 1: thank you. What about the raptors that's oh you're killing
Speaker 1: and joining us now, folks here as we look at ahead,
Speaker 1: you're ahead. Yeah, we'll get to Uber and all that.
Speaker 1: As a woman who writes with a still a stiletto
Speaker 1: knife dipped in ink when she writes every day, that
Speaker 1: would be sure over day. Of course, on technology, we
Speaker 1: want to get to Uber. We could get to we
Speaker 1: work with that lex art. I'm still struggling with that healing.
Speaker 1: Could we could pointy knife like a wicked point, you know,
Speaker 1: like Sarah Jessica Parker's feels and gentlemen in can you
Speaker 1: write a Maren sare over date with us? Right now?
Speaker 1: Miss Sandberg will make an appearance today in our year ahead.
Speaker 1: There will be smiles and giggles and then not what's
Speaker 1: your number one question to the woman running Fortress Zuckerberg?
Speaker 1: Oh boy, that's a really hard question, you know. I
Speaker 1: I think, Um, there was an interview that Kato Kerrik
Speaker 1: did with Sheryl Sandberg novels, which I think was really
Speaker 1: exceptionally well done. Was it well done? Well? She didn't
Speaker 1: let Sheryl Sandberg kind of stick to her car. Yeah,
Speaker 1: put her right off, but just sort of came back
Speaker 1: at her with repeated questions. But one of the things
Speaker 1: she asked Sandberg and I thought was a good question
Speaker 1: is basically, how does a are you sort of embarrassed
Speaker 1: to work at Facebook? Was sort of the question like,
Speaker 1: how has this impacted your um public perception and your
Speaker 1: your personal perception, which I think is an interesting question
Speaker 1: assertily a company that's under well. Another personal perception issue
Speaker 1: is for Travis Clinic and Uber and what's been going
Speaker 1: on the shares there? Uh, you know, I'm just wondering
Speaker 1: the road forward. Yesterday another blood bath after the terrible results.
Speaker 1: Moving forward, we are seeing a little bit more stable
Speaker 1: stability today. What do people need to see? What do
Speaker 1: you need to see to feel more confident about its prospects?
Speaker 1: I think more of the same. You're right. I was
Speaker 1: surprised yesterday and that there was this big lock up
Speaker 1: that lifted that basically hundreds of millions of shares were
Speaker 1: available to sell, and I thought it was just going
Speaker 1: to be an utter stock splat the whole day, and
Speaker 1: it wasn't as bad as I thought. But going forward,
Speaker 1: the issue is this company has set a target for
Speaker 1: itself of you know, pretty significant for around in kind
Speaker 1: of adjusted wildly adjusted profits and I'm not sure how
Speaker 1: they get there in two years. Yeah, you know, talking
Speaker 1: about Travis Clinic and reputational risk. I thought it was
Speaker 1: really interesting in the Wall Street Journal this morning, Saudi
Speaker 1: Arabia Sovereign Wealth Fund invested four million dollars into a
Speaker 1: new company called Cloud Kitchens, founded by Travis Clanic. And
Speaker 1: I'm wondering whether the failures at uber that are being
Speaker 1: reflected in markets are not being reflected in sentiment of
Speaker 1: sort of startup investors, venture capitalists. No, it's interesting. I mean,
Speaker 1: the the rehabilitation of Travis Kalenik is an interesting story
Speaker 1: to see that he got pushed out of uber Um
Speaker 1: in this very public way. He kind of quietly left,
Speaker 1: as you said, started his own company, and by all accounts,
Speaker 1: has had a very easy time raising money for what's
Speaker 1: It's basically a ghost kitchen concept. It's sort of restaurant
Speaker 1: delivery without the restaurants um and it's an idea that
Speaker 1: many other investors are pursuing. And apparently his backers believe
Speaker 1: that he has enough magic to kind of build another
Speaker 1: company first. This is this is an important point because
Speaker 1: I wonder if the narrative of investors demanding profit at
Speaker 1: this point more than the growth they once prioritize. If
Speaker 1: that narrative has gone too far and it's not really
Speaker 1: accurately reflecting the mood adventure capitalists firms, at least not
Speaker 1: by their actions, it's a good question. I don't know
Speaker 1: enough about what's happening at the very early stages of
Speaker 1: company building and investing in those young companies. Look, the
Speaker 1: fact is that if you're getting a company off the ground,
Speaker 1: it's probably not going to be profitable. And I think
Speaker 1: that's the model of venture capital from you know, day
Speaker 1: one of that industry. So the question for all of
Speaker 1: those companies, though, is is there kind of a an
Speaker 1: eventually sustainable business not will build it and see how
Speaker 1: it goes. You've been brilliant not only linking all the soft,
Speaker 1: touchy feely stuff, but into the financials as well. You
Speaker 1: mentioned earlier the hope and prayer of Uber out two
Speaker 1: years maybe two and a half years, which in today's
Speaker 1: age is somewhat foolish. But here's the vector the mindset
Speaker 1: of all these tech these nonprofitable technology companies. Is it
Speaker 1: really a five year plan that they won't admit to.
Speaker 1: I mean, I've just been surprised by the change and
Speaker 1: attitude just in I don't know, six months basically since
Speaker 1: the springs, probably since Lift and then Uber went public,
Speaker 1: that these companies now know or now believe that it's
Speaker 1: no longer enough to say our our market opportunity is huge.
Speaker 1: All we need to do is capture you know, two
Speaker 1: percent of this capture profits. Look, and I grabbed dot com.
Speaker 1: I mean the illusion of profits at the operating income
Speaker 1: EBIT dline. So these companies are uper Lift both have
Speaker 1: said that in two years, two years they're going to
Speaker 1: have adjusted EBIT of community. I mean, are you cynical? Now?
Speaker 1: I literally this morning was look at that you have,
Speaker 1: Katie Curret to me, I was actually looking this morning
Speaker 1: before I came on set at Uber's nine pages of
Speaker 1: adjustments to their gap earnings. And you know, I'm not
Speaker 1: new to this, and I couldn't exactly figure out what
Speaker 1: was actually happening in some of their segments, and that
Speaker 1: worries me. I sort of feel like maybe they should
Speaker 1: just disclose cash in cash out well, because that would
Speaker 1: be simpler. Okay, there's the accounting issue, there's the opportunity
Speaker 1: and how big is it. There's also this idea of
Speaker 1: winner takes all that in the dot com era there
Speaker 1: were the companies that survived and those that didn't. It
Speaker 1: wasn't tier one, and then Tier two, which is valued
Speaker 1: a little bit below that top tier. So that's a
Speaker 1: question here, you know, is there going to be a
Speaker 1: winner take all or say Lift? If they win, they
Speaker 1: will go on and survive and Uber will die. I
Speaker 1: definitely think that in some of these categories there can't
Speaker 1: be a thousand winners um. Now, whether that means two
Speaker 1: or three or ten, I'm not sure. My issue about
Speaker 1: the category that Uber and Lift occupy, and particularly this
Speaker 1: kind of transport on demand transportation, is I just wonder
Speaker 1: about is the eventual both size and economics of that
Speaker 1: market as good as the optimists thing. I sort of
Speaker 1: wonder that it's gonna look not that dissimilar from the
Speaker 1: taxi business. Um when all is said and done, Sure,
Speaker 1: over they thank you so much, greatly appreciate that. When
Speaker 1: Lisa alludes to their folks. As a classic research of
Speaker 1: Michael Mabusi and years ago at Credit sweez on the
Speaker 1: winner takes All, the concept translated everyone wants to be Amazon.
Speaker 1: Ye Bloomberg every year trots out a year ahead view,
Speaker 1: and it always has interesting conversation from people. It's all,
Speaker 1: you know, very ted and very thoughtful, except PAULS Wheney.
Speaker 1: This year, there's a certain tension to the morning keynote.
Speaker 1: There is Cheryl Sandbury, the chief operating officer from Facebook,
Speaker 1: sat down earlier this morning with Bloomberg's Caroline Hyde. Uh.
Speaker 1: Let's listen in your work on Capital Hill, the ongoing
Speaker 1: dialogue that is happening between not only you and political ads,
Speaker 1: but those that are buying the political ads and politicians themselves.
Speaker 1: The scrutiny upon you in terms of antitrust, in terms
Speaker 1: of competition. How do you feel you've thus far been
Speaker 1: able to relate your story, being able to be fully
Speaker 1: transparent and and offer up answers as quickly as politicians
Speaker 1: would like them. We're deaftly working on offering up those answers.
Speaker 1: And I think you're right that the anti competite if
Speaker 1: narrative and the competitive narrative is one people are really
Speaker 1: focused on. And that's because there's real concern about the
Speaker 1: size and power of tech companies of Us, of Google,
Speaker 1: of the others, of Apple, of Amazon. There's real concern
Speaker 1: there antitrust, legal policy has been really important in the
Speaker 1: history of America to protect consumers from price gouging, from
Speaker 1: no choice. I just think it's hard if you look
Speaker 1: at our industry to argue or prove that there's anything
Speaker 1: but a very very robust choice. That was Cheryl Sandberg,
Speaker 1: Facebook chief operating officers sitting with Caroline Hyde at the
Speaker 1: Bloomberg Year Ahead conference here in New York. They're still
Speaker 1: shotting exactly. Let's bringing our good friend Max Chafkin from
Speaker 1: Bloomberg News to get a sense of this Facebook story.
Speaker 1: It's not necessarily about their profits and losses of Facebook
Speaker 1: right now. The issue really seems to be in the
Speaker 1: discussion seems to be around the role of Facebook within
Speaker 1: our society, particularly as it relates to uh the elections.
Speaker 1: For example, are they a media company? Should they be
Speaker 1: held to the same standards. So, Max, it's a it's
Speaker 1: an issue at Facebook and their executives, and we heard
Speaker 1: from Cheryl Sandberg just now are really grappling with what
Speaker 1: do you how do you think that plays out? So
Speaker 1: I mean backing up, I mean Facebook financially doing great.
Speaker 1: I mean it's kind of amazing how we have sort
Speaker 1: of one negative headline after the other for the last
Speaker 1: couple of years, and the company has performed UM exceedingly well. UM.
Speaker 1: That said, they've really been on the defensive on these
Speaker 1: questions of their power. And I think you saw that
Speaker 1: in in the the answer that Cheryl Sandberg just gave
Speaker 1: where where it's a little bit fuzzy and and and
Speaker 1: the you know, uh, we're asking, you know, what, what
Speaker 1: are you gonna do about this antitrust conversation, and she's saying,
Speaker 1: never mind. UM. I think I think the UM their
Speaker 1: strategy is kind of twofold. Number One, our services free,
Speaker 1: therefore we're helping people. Number Two, we don't have a
Speaker 1: monopoly because there are these Chinese companies and we saw
Speaker 1: this in Mark Zuckerberg's testimony the other day. There are
Speaker 1: these big Chinese companies. They are really scary and they
Speaker 1: are competitors. You don't want to regulate us because you're
Speaker 1: just going to create an opportunity for this company TikTok,
Speaker 1: which is owned by Bye Dance, which is based in Beijing,
Speaker 1: which is censoring you know, some content. So so that's
Speaker 1: the strategy. It's sort of partly you know, we're really great,
Speaker 1: Partly you know, watch that's all we get from Miss Sandberg.
Speaker 1: I mean we just heard it there with Caroline High
Speaker 1: to Zo Max, You're out of Yale. I believe somewhere
Speaker 1: in the vicinity of year two Yale they beat into
Speaker 1: you critical thinking skills. What kind of chief operating officer
Speaker 1: manager to Miss Sandberg and Mr Zuckerberg need to selvage
Speaker 1: this linkage of fabulous financials with a cacophony of issues
Speaker 1: they've some would say created. So I don't know that
Speaker 1: you can reconcile that. I think that Facebook's um Facebook's
Speaker 1: financials are have accrued from its power. And what what
Speaker 1: its critics are gonna say is that the reason Facebook
Speaker 1: is performing is as well as it's done, is it
Speaker 1: basically has a monopoly on um on on certain kinds
Speaker 1: of display advertising that is the sort of non search
Speaker 1: ads that you see your monopolies. No one I know
Speaker 1: uses Facebook anymore. They've all left in droves. Granted they've
Speaker 1: gone Instagram and Works and a bunch of which is
Speaker 1: of course owned by Facebook. And and they've been you know,
Speaker 1: working very hard over there, uh in California to you know,
Speaker 1: came to the sixth more for sensitive you know, Chris
Speaker 1: don and Candles interview. So Max, I think one of
Speaker 1: the issues that they're probably gonna have to address pretty soon.
Speaker 1: It's like, right now is kind of this upcoming election.
Speaker 1: What kind of role are they gonna play? How are
Speaker 1: these political ads? It was really really a problem in
Speaker 1: what do you think they're going to do lead this year? Well,
Speaker 1: you know, they came out and said it's a big
Speaker 1: controversy over over political ads that contain say, misinformation or
Speaker 1: misleading statements. Uh. Mark Zuckerberg gave a big speech two
Speaker 1: weeks ago saying, uh, we believe in free speech. We
Speaker 1: are not going to fact check political ads. Um. Everyone
Speaker 1: sort of seemed to kind of go along with that,
Speaker 1: maybe except for Elizabeth Warren. Uh and then and then
Speaker 1: we but we've seen a bit of a drumbeat of criticism,
Speaker 1: first from Jack Dorsey, who kind of came out with
Speaker 1: a bit of a troll, I would say, saying, you know,
Speaker 1: we are we are rejecting all political ads. We're constitutionally legal.
Speaker 1: I mean, well, how did you, as a technology guru
Speaker 1: Bloomberg business Week, could media companies say we won't accept
Speaker 1: political ads. So the regulatory regime is there is a
Speaker 1: there's a you know, regulatory regime for for television stations
Speaker 1: and stuff. Uh, that that does not apply to uh Facebook. Um.
Speaker 1: Now Facebook is sort of saying, well, you know, because uh,
Speaker 1: you know television radio, that they're not fact checking ads,
Speaker 1: we shouldn't have to either. Um. But but but that
Speaker 1: those rules don't exist. You know, Max hasn't watched TV
Speaker 1: in eight years. He streams, he streams. We got just
Speaker 1: a little bit of time of how is this going
Speaker 1: to play out? Who's right? Political ads with these companies
Speaker 1: are not political ads with these companies. I think the uh,
Speaker 1: the point that that that people are uncomfortable with political
Speaker 1: ads and so the media will make is that they're
Speaker 1: fundamentally different from television ads because television ads are are
Speaker 1: sort of a mass medium and and and social media
Speaker 1: ads are targeted specific to people. So if so, if
Speaker 1: you put out a misleading television ad, then it's very
Speaker 1: easy for the media to fact check it. If you
Speaker 1: put out a social media and only show it to
Speaker 1: a very specific Unfortunately, we have to continue this next
Speaker 1: shape and that's where this Business Week. Thanks for listening
Speaker 1: to the Bloomberg Surveillance podcast. Subscribe and listen to interviews
Speaker 1: on Apple podcasts, SoundCloud or whichever podcast platform you prefer.
Speaker 1: I'm on Twitter at Tom Keane Before the podcast. You
Speaker 1: can always catch us worldwide. I'm Bloomberg Radio