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Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, along

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Speaker 1: with my co host of Bonnie Quinn. Every business day

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Speaker 1: we bring you interviews from CEO, market pros, and Bloomberg experts,

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Speaker 1: along with essential market moving news. Find the Bloomberg Markets

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Speaker 1: Podcast on Apple Podcasts or wherever you listen to podcasts,

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Speaker 1: and on Bloomberg dot com. I love this quote I

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Speaker 1: read just recently. Quote right now it's big text world

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Speaker 1: and everyone else is paying rent. That was wed Best

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Speaker 1: Securities analyst Dan Ives and Dan joins us here. Dan,

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Speaker 1: thanks so much for joining us here. I love that

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Speaker 1: quote you had, and the numbers we saw last night

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Speaker 1: really bear that out. So let's step back, you know,

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Speaker 1: thirty feet, and we have those big four tech companies

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Speaker 1: last night report strong to extraordinarily strong results. How should

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Speaker 1: we put all this in context? Yeah, I mean these

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Speaker 1: stocks have had massive moves and really it's what's led

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Speaker 1: the market to touch the all time highs that we're seeing.

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Speaker 1: And but there was a lot of pressure, especially what

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Speaker 1: we saw last week with Microsoft and TESSAs, and the

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Speaker 1: momentum came off last night was a fork in the

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Speaker 1: road situation for tech and they needed to not just

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Speaker 1: talk to talk, but walk to walk. And this is

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Speaker 1: a tech freight train right now that I is showing

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Speaker 1: no sign to slowing down across the board as the

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Speaker 1: COVID environment has really ACCELERI these growth stories by eighteen

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Speaker 1: to twenty four months with Apple front and center. So

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Speaker 1: what kind of stock gains are we looking at and

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Speaker 1: what will these text dooks trade us in say a

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Speaker 1: year's time. Well, I also think there's a rerating going on,

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Speaker 1: and you know the haters will hate, but but I

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Speaker 1: don't see that now. I think there's a middle innings

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Speaker 1: of a re rating intact because there's a lack of

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Speaker 1: security growth stories. And if you look more and more,

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Speaker 1: you've seen that consolidation. I still think fang names going

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Speaker 1: to the higher over the next nine months. And I

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Speaker 1: think what you saw from these numbers, it reflects the

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Speaker 1: fundamental cases. And now you're going to continue to see

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Speaker 1: investors with a green light to by tax this morning,

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Speaker 1: and I think over the coming weeks and months. Let's

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Speaker 1: talk about alphabet the parent of Google. Uh, Tom Kin

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Speaker 1: doesn't even it's it's an alphabet free studio with Tom Keane,

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Speaker 1: but we'll go with it a little bit here stocks

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Speaker 1: all four and a half percent here, just a sense

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Speaker 1: of kind of the advertising and the business model for

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Speaker 1: Google here in a pandemic world. Yeah, definitely digital advertising

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Speaker 1: and seeing headwinds and that's what alphabets being and I

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Speaker 1: think you've seen the stock reflecting that. But but I

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Speaker 1: do think that this is more of a call one

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Speaker 1: to three quarter issue radding something that's going to be sustainable.

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Speaker 1: But you're seeing a knee jerk negative reaction as this

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Speaker 1: clearly is a headwind and they're seeing that front and center,

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Speaker 1: and some of those other areas like Google Cloud still small,

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Speaker 1: that continues to be the core business and unlike their

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Speaker 1: fang brethren, definitely not the results investors wanted to see,

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Speaker 1: even though anticipation it was going to be weak. Numbers

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Speaker 1: even weaker than the whisper. Let me ask you, if

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Speaker 1: we don't get some kind of new stimulus that gives

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Speaker 1: people a few little extra dollars in their pocket, If this,

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Speaker 1: you know, next round, is going to make people really

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Speaker 1: cut back, do we see them coming back on things

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Speaker 1: like tech spending or you know, streaming services spending. I

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Speaker 1: think most consumers view all of these fang games is

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Speaker 1: almost utilities. It's bread. You know, it's really food, water,

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Speaker 1: and a lot of these fangs in terms of from

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Speaker 1: Facebook to Apple and Amazon to others in terms of

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Speaker 1: interaction and really consumer uteries. And I think that's what's

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Speaker 1: really happened here, is is that these stocks really become

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Speaker 1: tech utilities, and of course the consumer environment, especially a

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Speaker 1: thousand hour Apples and some other purchases should definitely get hit.

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Speaker 1: I think what you're seeing is for Apple to beat

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Speaker 1: iPhones by four billions in the middle of a once

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Speaker 1: in a hundred year pandemic. That's a jaw dropper. I

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Speaker 1: mean I almost fell off my chair when I saw

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Speaker 1: those numbers. Head Dan on Wednesday, again, the CEOs of

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Speaker 1: some of these companies are right in front of Congress

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Speaker 1: talking about antitrust ostensibly. Um, any takeaways there, what's the

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Speaker 1: risk factors it relates to? Just regulatory risk? Give us

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Speaker 1: an update there? Well, the one takeaway it's better they

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Speaker 1: did it the day before earnings than the day after,

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Speaker 1: just given the the types of profits they showed in uh,

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Speaker 1: you know, Monster Quarters book. I think it's a it's

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Speaker 1: a risk. I think it's viewed at in terms of

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Speaker 1: it was still a little more grandstanding and more of

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Speaker 1: a circus atmosphere, and I think investors came away feeling

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Speaker 1: like nothing's going to happen in near term in terms

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Speaker 1: of breakup. But I do believe momentum building in the

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Speaker 1: Beltway as well as in the EU against these tech giants.

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Speaker 1: The stronger getting stronger in this environment. A lot of

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Speaker 1: it really hinges on any type of legislative fix and

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Speaker 1: or what happens in terms of blue or red as

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Speaker 1: we go into the election, because I think if you

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Speaker 1: get blue across the board, that's viewed is much more

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Speaker 1: negative in terms of antitrust toward attack. Briefly done your

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Speaker 1: thoughts on fourth one stock split a smart move. I

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Speaker 1: think other tech giants are going to follow the same

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Speaker 1: pattern because I think Cook and the board they want

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Speaker 1: more broader ownership of Apple, and by having a quarnuicoard

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Speaker 1: cheaper stock in a four for one, it's something that

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Speaker 1: I think it was a smart move. I think others

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Speaker 1: are gonna follow and it just shows right now they

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Speaker 1: are in it just a massive position of strength and

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Speaker 1: to be in a position to do a fourth one

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Speaker 1: stock split with a stock in all time high in

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Speaker 1: the middle of a pandemic. Yeah, I mean, it's pretty

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Speaker 1: phenomenal listeners. Don Ives, Equity analyst at Wedbush Security, is

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Speaker 1: always such a pleasure to speak with you, and boy,

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Speaker 1: was there a lot to speak with Don about today, Paul.

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Speaker 1: I mean, we were to a certain extent anticipating this,

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Speaker 1: but I think in the era that's in it, I'm

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Speaker 1: not sure we were even expecting the amount of you know,

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Speaker 1: beats and good news and lack of uncertainty and so

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Speaker 1: on that we saw from the Big Four. Yeah, it's

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Speaker 1: just extraordinary in this environment. Is Dan was mentioning to

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Speaker 1: see how well these companies do and how it was

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Speaker 1: a big, big pivot for the technology Industrys relates to

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Speaker 1: Wall Street, it is time for Bloomberg Opinion. Welcome to

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Speaker 1: have a Gary Shilling, president of a Gary Shilling and Company,

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Speaker 1: in a Bloomberg Opinion columnists joining us, Gary, your most

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Speaker 1: recent comment or your column here. Bonds are sending the

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Speaker 1: right signals. Now what do you mean by that, Well,

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Speaker 1: bon bons typically leads stocks and that was certainly true

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Speaker 1: earlier this year. UH Treasury bond started a rally rache

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Speaker 1: decline literally the first trading day, the second of of January, UH,

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Speaker 1: anticipating that the Corona crisis, and of course it was

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Speaker 1: barely known, but it wasn't until seven weeks later, on

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Speaker 1: February nine, the stocks peaked out. I think we've got

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Speaker 1: the same pattern now. In the last month we've seen

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Speaker 1: a again a significant rally in treasuries, and I rather

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Speaker 1: suspect that it is leading a sell off in stocks

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Speaker 1: because we are getting the second wave of the virus um.

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Speaker 1: Maybe we'll get a vaccine, but that's hard to know.

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Speaker 1: When restarting the economy is difficult. Washington is struggling over

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Speaker 1: the next fiscal stimulus bill. So I think there are

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Speaker 1: a lot of reasons to suggest that the economy is

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Speaker 1: going into a second down leg and that stocks will

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Speaker 1: be in fact reflecting that. How will it manifest in

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Speaker 1: the data? I mean, we're already seeing GDP both you know, down,

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Speaker 1: no growth at all, down by contraction. I mean, are

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Speaker 1: we going to see more quarters like that? Gary, Yeah, Well,

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Speaker 1: we won't see more quarters like that. We'll be at

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Speaker 1: zero the economy. I mean, you know, this is a

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Speaker 1: if you annualize this, this is something like a annual

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Speaker 1: rate uh, that will work for very long. But I

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Speaker 1: do think that rather than the v recovery that many

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Speaker 1: people thought, and you don't hear much talk about the

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Speaker 1: V anymore. UM. I think it's more an l a

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Speaker 1: big decline initially and then a downwards sloping lower leg

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Speaker 1: which will extend into next year. So when we start

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Speaker 1: to see a concrete evidence on the third quarter, UM,

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Speaker 1: I think that's when people are gonna be forced to say, hey,

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Speaker 1: wait a minute, this is an extended recession. And that's

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Speaker 1: what I think stocks would probably sell off and and

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Speaker 1: follow bonds which have already rallied prices up, rate interest

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Speaker 1: rates down. So Gary, we're a waiting word from White House, uh,

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Speaker 1: Chief of Staff Mark Meadows and just moments about potentially

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Speaker 1: some progress that may be mean on the um stimulus spill,

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Speaker 1: How important is that? Uh? I don't think it is

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Speaker 1: it it's it's it's best is stabilizing the situation. I

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Speaker 1: don't think it's really reviving. If you look at the

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Speaker 1: second quarter numbers, you had a huge jump in the

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Speaker 1: saving rate I have, the personal saving rate I think

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Speaker 1: was in other words, people have this money, but they're

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Speaker 1: not they're not spending it, and a lot of people

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Speaker 1: are scared to go out, so putting money in their

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Speaker 1: pockets and spending and stimulating the economy, creating jobs and

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Speaker 1: so on are really two different issues. Gary, what do

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Speaker 1: we need to hear from the administration and basically from Congress.

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Speaker 1: We're awaiting Mark Meadows come out and make some kind

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Speaker 1: of commentary. We don't know what it will be. Maybe

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Speaker 1: it will be some progress on on what they're trying

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Speaker 1: to talk about. But apparently the Senate went home and

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Speaker 1: we didn't get an agreement on the next round of stimulus.

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Speaker 1: What do we need, Well, you probably need at least

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Speaker 1: enough to continue in some some of what was going

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Speaker 1: on now. There's a big hang up of course in

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Speaker 1: the unemployment insurance because the federal program on top of

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Speaker 1: the state programs, of the six dollars federal program with

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Speaker 1: the state programs, you know, there are many many people.

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Speaker 1: I think roughly half of the half of the workforce

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Speaker 1: was making more staying home than working, and that the

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Speaker 1: Republicans are saying no way to that. So whatever whatever

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Speaker 1: comes out of this, I think it's gonna be less

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Speaker 1: generous turn it was before. So Gary, I mean, give

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Speaker 1: it a sense that this may be longer for lower Um,

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Speaker 1: what do you think the Fed is doing a We

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Speaker 1: heard from the FED Chairman pal Or earlier this week,

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Speaker 1: seems like the FETE is there to support and to

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Speaker 1: do quote whatever is needed. Is that enough? Well, they've

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Speaker 1: done pretty much everything you can do. They brought everything

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Speaker 1: in sight. They've even brought fallen angels, h bonds that

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Speaker 1: are now rado junk that previously we're we're investment grade

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Speaker 1: before the before the crisis, and you know, buying corporates

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Speaker 1: are supporting statan local governments. They've got two hundred billion

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Speaker 1: dollar line of the treasury to cover their losses. The

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Speaker 1: FETE is already deep into fisical policy and polin effect

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Speaker 1: of saying that, he's really saying, uh, the next step

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Speaker 1: has to be in terms of fiscal policy. Now, whether

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Speaker 1: fiscal policy is going to work as they say is

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Speaker 1: another issue. But you know, it's it's started as saying, hey,

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Speaker 1: we've done everything we can. Somebody else has got to

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Speaker 1: carry the ball from here on. Gary, when you talk

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Speaker 1: to all the people that you talk to, your clients

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Speaker 1: and everybody who calls you, well, what are they saying

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Speaker 1: about the election? Are they sort of anticipating at this

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Speaker 1: point that there won't to be a second term from

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Speaker 1: the president's or is that not at all a done

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Speaker 1: deal yet. And for those that are talking about a

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Speaker 1: Biden presidency, you know, what do they think that will bring? Well? Uh,

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Speaker 1: I think people are very much up in the air

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Speaker 1: on this. That nobody wants to underestimate Trump because you know,

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Speaker 1: it looked like Hillary was going to win hands down

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Speaker 1: in twenty sixteen and Loan the whole It was quite

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Speaker 1: the other way. Uh. The reality is that it's very

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Speaker 1: difficult for any income at president to get re elected

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Speaker 1: in a economic recession. And of course, uh, Trump has

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Speaker 1: been trying to get the economy restarted. Now he's realized

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Speaker 1: that isn't going to happen by the election day. So

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Speaker 1: now he's saying he's delay the election. I mean, he

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Speaker 1: realizes he's in a hotspot as far as Biden is concerned. Um,

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Speaker 1: you know, I don't I don't think there's I don't

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Speaker 1: think there's a lawful lot that people are looking for

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Speaker 1: in Biden. He so he's tough on China, or he

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Speaker 1: says he is like like crump Um, he's for more

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Speaker 1: um more income retribution. Uh, short of the classic Democratic program.

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Speaker 1: But there isn't an awful lot of new initiative. And

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Speaker 1: I think the election is more, um, it's more a

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Speaker 1: referendum on Trump than it is a vote for Biden. Garret.

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Speaker 1: What happens if the you know, again, in the election.

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Speaker 1: We're focusing obviously, as we should, on the presidential election,

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Speaker 1: but also the a lot of big issues as it

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Speaker 1: relates to the Senate and potential for the Senate to

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Speaker 1: go from Republican control to Democratic control. So you might

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Speaker 1: have a scenario with uh, you know, a democratic sweep

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Speaker 1: of both Houses of Congress and the White House. Yeah,

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Speaker 1: is that a concern? Is that possibility? And of course

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Speaker 1: the Democrats already control the House and and the Republican

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Speaker 1: majority in the Senate is pretty thin. Um. If you

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Speaker 1: had that, UM, I think the initial reaction of of

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Speaker 1: the shock market would be a big shell off, because

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Speaker 1: it would be assumed that the Democrats would make good

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Speaker 1: on their pledge to redistribute income. They would increase taxes

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Speaker 1: on higher income people, they would resame the corporate tax cuts, UM.

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Speaker 1: They would an attempt to redistribute income to basically their

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Speaker 1: constituents lower income people, UM, minority groups and so on

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Speaker 1: and so forth. And I don't think that that would

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Speaker 1: be at all well received on Wall streets. So, um,

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Speaker 1: if you have that, I'd say, you know, look out below.

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Speaker 1: I have to ask about bees in a moment. Gary

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Speaker 1: always have to ask you about what kind of season

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Speaker 1: it is for those creatures. But I do also want

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Speaker 1: to ask you, do we need to be hard on China?

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Speaker 1: I mean there's so much talk it's become sort of

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Speaker 1: almost during gery now talk about a new Cold War,

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Speaker 1: But is that really what we're about to be in

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Speaker 1: the middle of. Well, we're in a it isn't a

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Speaker 1: Cold war in essentially is military, but as certainly as

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Speaker 1: the Cold War in terms of the economy. The Chinese

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Speaker 1: want to be the top dogs in the world. Um.

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Speaker 1: And they really feel that that's their destiny. Um that

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Speaker 1: they they had that traditionally nineteenth century, Uh, the the

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Speaker 1: Europeans basically took over China partitioned it. Uh. They call

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Speaker 1: that the century of Shame. They think they want they

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Speaker 1: want to get back on top. This is the way

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Speaker 1: they see it. And what's interesting the way they the

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Speaker 1: way they need to do that. Yeah, They've got all

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Speaker 1: the military exploit and that's how China. See. They've got

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Speaker 1: the Belton Road Program, which is spreading a lot of

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Speaker 1: money around although a lot of it is is at losses.

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Speaker 1: But I think the primary battle is going to be

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Speaker 1: over technology because China, as a result of the one

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Speaker 1: one child per couple UH birth policy, is going to

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Speaker 1: have a declining labor force for the next thirty years,

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Speaker 1: regardless of what happens now. Those people that aren't going

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Speaker 1: to go into labor force already not born. So they

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Speaker 1: need productivity to have economic growth. And how do you

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Speaker 1: get that. You get that true technology. Now. They've already,

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Speaker 1: of course been invading the West, stealing technology, demanding tech

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Speaker 1: transfer and so on, and now they're trying to develop technology.

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Speaker 1: They're way behind the West, but they're doing their best

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Speaker 1: to catch up. And I think that's where the battleground

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Speaker 1: it's going to be. It isn't going to be a

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Speaker 1: military It isn't gonna be rattling arms and and you know,

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Speaker 1: praise of tanks and guns and red square the technology. Yeah, Gary,

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Speaker 1: I do have to ask you about the bees because obviously,

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Speaker 1: you know, humans are facing coronavirus, and you are a

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Speaker 1: beekeeper and you make honey every single year from from

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Speaker 1: your bees. How are you managing in this time of

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Speaker 1: coronavirus to take care of the bees and what kind

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Speaker 1: of a season is it for bees? Well, a good question, monny. Um.

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Speaker 1: It started off very very mixed because it was a

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Speaker 1: very warm back in March, and the bees got going

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Speaker 1: and they muliplied and then they swarmed. And that's what

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Speaker 1: happens when there are too many bees, and the old

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Speaker 1: queen the old queen, and half the bees take off

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Speaker 1: and they make a new queen. But even if he

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Speaker 1: catched the swarm, and I caught six swarms this year,

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Speaker 1: I've got about a hundred colonies and at all time

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Speaker 1: high record, and you don't get any honey out of

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Speaker 1: either the old colony or the the new one. Now,

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Speaker 1: the one thing about this is that there's always a

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Speaker 1: snap back, and that's what it is. And as a

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Speaker 1: matter of fact, in two weeks we're going to be

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Speaker 1: taking the honey off. And it looks like we're gonna

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Speaker 1: have a we're gonna have a great harvest. I was,

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Speaker 1: I was amazed, but you know, this is agriculture, and

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Speaker 1: and you never know what's going to happen, the vicissitudes

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Speaker 1: of nature, and sometimes you're lucky and sometimes you aren't.

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Speaker 1: But it looks like we're looks like we're lucky this year.

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Speaker 1: That's phenomenal. And I have to tell all of our listeners. Gary,

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Speaker 1: you know, makes these wonderful jars of honey, but he

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Speaker 1: also comes up with the fantastic names for them every year. Gary,

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Speaker 1: I just can't remember what the one last year was,

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Speaker 1: but I'm sure this year will have to be something

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Speaker 1: the pandemic related. Yeah, I think it was. I think

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Speaker 1: it was regardless of the party. Our honey is de electable, yes,

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Speaker 1: because it was a lot to talk about impeachment last year. Anywhere.

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Speaker 1: Any of our listeners haven't got any great slogans. We

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Speaker 1: always like to have a topical, usually usually with a

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Speaker 1: political economic twist. But the issue is that we you know,

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Speaker 1: we send out the honey to you and all our

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Speaker 1: friends and clients right before Christmas, and we need a

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Speaker 1: we need a label that's going to be current into

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Speaker 1: the next year, and those it can't be ephemeral with

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Speaker 1: appoint at by the time January one, rules were all, well,

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Speaker 1: I think you're fairly secure with things. I think you're

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Speaker 1: fairly secure with things like pandemic, vaccine, faucci. All of

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Speaker 1: these things might provide some fodder for the title, what

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Speaker 1: do you think, Paul, Yes, just the suggestion of it,

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Speaker 1: because because I don't think that issue is going to

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Speaker 1: go away, and maybe we can get some variation that

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Speaker 1: our you know, our our bees, our corona, our corviate

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Speaker 1: nineteen free. You may not want to go that direct,

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Speaker 1: but they get plenty of diseases and validies, but they

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Speaker 1: don't get the carved nineteen. That's great. Gary Shilling, thanks

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Speaker 1: so much for joining us. Gary Shilling, president of a

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Speaker 1: Gary Shilling in Company and a Bloomberg opinion columnists. You know,

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Speaker 1: as we take a look at the economy, we really

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Speaker 1: start to really have to focus on the consumer with

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Speaker 1: all those terrible unemployment numbers and the impact on some

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Speaker 1: personal spending. Personal income. We had some numbers out today.

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Speaker 1: Let's dig into those. We can do that with Read Pickart,

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Speaker 1: she covers US economy for Bloomberg News. Read thanks so

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Speaker 1: much for joining us here. Personal income. What's the data

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Speaker 1: showing us? Yeah, thanks for having me so today we

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Speaker 1: got the income and spending data for June, and it

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Speaker 1: showed us two mean things. It showed us that, you know,

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Speaker 1: spending continued its rebound in June um but remains below

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Speaker 1: it's pre pandemic level. UM, and two, it showed us

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Speaker 1: that incomes declined for another month as the initial boost

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Speaker 1: from the one time stimulus checks those checks UM that

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Speaker 1: were largely distributed in April have continued to wind down UM.

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Speaker 1: But a very interesting part of it, at least that

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Speaker 1: I thought, was, at the same time, we saw that

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Speaker 1: payments for unemployment insurance from the previous month, especially pay

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Speaker 1: out for that weekly six and unemployment benefits that expire

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Speaker 1: today UM, you know, increase. So you know, we're seeing

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Speaker 1: that households are more reliant on those unemployment benefits as

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Speaker 1: a portion of their income than they have ever before.

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Speaker 1: Read what does it mean for you know, consumer companies

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Speaker 1: going forwards had this amazing quarter a couple quarters for

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Speaker 1: profiting gamble for example. I mean, will that be in

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Speaker 1: jeopardy of people literally can't buy what they need to

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Speaker 1: eat and clean themselves and and do all of the

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Speaker 1: you know, human functions necessary. So the six hundred dollar,

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Speaker 1: the extra six hundred dollars in weekly unemployment benefits UM

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Speaker 1: has really been a crucial lifeline for the economy in

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Speaker 1: this pandemic because it is broadly buoyed incomes UM and spending.

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Speaker 1: In recent months, even as the economy um, you know,

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Speaker 1: has has has spaced this pandemic um and and it's

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Speaker 1: it's hard to you know, see exactly what the impact

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Speaker 1: will be. But when you have these six hundred dollar payments,

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Speaker 1: you know, keeping these incomes up and allowing people to

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Speaker 1: pay their bills, allowing them to you know, keep spending

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Speaker 1: at those businesses. UM, it is concerning in terms of

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Speaker 1: what this means for the economic recovery and the coming months. Um.

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Speaker 1: You know, especially at a time like now when UM,

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Speaker 1: some of the data that we're seeing is showing that

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Speaker 1: that economic recovery is is stalling and and has been

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Speaker 1: you know for the for the month of July. So

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Speaker 1: read us a sense of kind of spending versus saving

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Speaker 1: over the last four or five months. Again, there's been

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Speaker 1: a crazy time here. The government's responded with that six

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Speaker 1: hundred dollars per month. What's the data showing us about

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Speaker 1: what people are spending versus what they're saving? M hm.

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Speaker 1: So the satings rate searched to a record in in April,

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Speaker 1: and that was mainly because of those stimulus checks, UM.

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Speaker 1: And we've seen the statings rate come down each month since,

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Speaker 1: but still remains quite high. So so the hope is

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Speaker 1: that you know, the stimulus checks plus those six hundred

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Speaker 1: dollars an extra weekly benefits that people are patting their

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Speaker 1: bank accounts UM. You know, as as we're moving into

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Speaker 1: this period of uncertainty in terms of you know, when

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Speaker 1: people will you know when and if people will get

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Speaker 1: an extra federal supplement to their unemployment insurance UM. But

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Speaker 1: as far as spending, I mean, we've seen spending you know,

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Speaker 1: rebound in a lot of ways. You know, retail sales,

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Speaker 1: for instance, UM are almost almost in line with their

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Speaker 1: pre pandemic levels. UM. But as far as the actual

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Speaker 1: amount of consumer spending, we're still below what we were

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Speaker 1: at before the pandemic. And it will be interesting to

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Speaker 1: see on in terms of whether we're put whether it's

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Speaker 1: possible to get you know, back to that pre pandemic

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Speaker 1: level of spending. You know, a while we have this

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Speaker 1: level the amount of joblessness that we have b if

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Speaker 1: you have these you know, extra benefits expire UM and

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Speaker 1: see just while the pandemic is you know, impacting the economy,

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Speaker 1: I mean, if if people are if people don't want

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Speaker 1: to eat out in a restaurant when they normally eat

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Speaker 1: out in a restaurant on the Friday on a Friday

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Speaker 1: and Saturday night. You you fundamentally have those people spending

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Speaker 1: last in the economy. Then then they were, you know,

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Speaker 1: back in February. Read thank you for joining. Always a

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Speaker 1: pleasure to speak with you. Read Pickerts. It covers the U. S.

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Speaker 1: Economy from Washington, d C. For Bloomberg News. And of

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Speaker 1: course she's on today because personal income was down one

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Speaker 1: point one percent for June, which missed the economist estimate

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Speaker 1: for it being down point six percent, and then the

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Speaker 1: previous month was revised lower two down four point four percent.

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Speaker 1: So obviously we might have anticipated personal income really suffering,

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Speaker 1: but personal spending was higher than forecast five point six percent.

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Speaker 1: This is Bloomberg Markets with Paul Sweeney and Vanny Quinn

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Speaker 1: on Bloomberg Radio. All right, it is time now to

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Speaker 1: talk to somebody who knows a lot about Facebook, but

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Speaker 1: also about all of the other advertising companies and the

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Speaker 1: tech companies in general. Mark Douglas is CEO of steel House.

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Speaker 1: Now that's a company that specializes in targeted ads. They're

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Speaker 1: the leader in highly targeted ads on connected TV as well.

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Speaker 1: So Mark knows pretty much everything about you already. You

429
00:24:42,760 --> 00:24:45,320
Speaker 1: really don't need to and do him at all. Market

430
00:24:45,359 --> 00:24:49,280
Speaker 1: just kidding. What did you make of the testimony this

431
00:24:49,320 --> 00:24:53,239
Speaker 1: week from the Big four? Was there any danger for

432
00:24:53,280 --> 00:24:55,679
Speaker 1: any of them that they might stray into territory that

433
00:24:55,760 --> 00:24:59,200
Speaker 1: was you know a little gray? Yeah, well, I thought

434
00:24:59,320 --> 00:25:02,040
Speaker 1: Apple out off the hoof, they have an absolute monopoly

435
00:25:02,080 --> 00:25:05,240
Speaker 1: on the app Store, and it was mentioned, and but

436
00:25:05,640 --> 00:25:09,679
Speaker 1: they kept talking about how you know, it's only thirty

437
00:25:09,760 --> 00:25:12,280
Speaker 1: percent and we've never raised it up. I think they

438
00:25:12,720 --> 00:25:14,960
Speaker 1: they were given kind of a free path in the hearing,

439
00:25:14,960 --> 00:25:17,440
Speaker 1: and I felt like Google kind of um, their CEO

440
00:25:17,640 --> 00:25:21,080
Speaker 1: did a pretty bad job in the testimony. He sound,

441
00:25:21,400 --> 00:25:23,640
Speaker 1: I mean, it was just kind of shocking how bad

442
00:25:23,640 --> 00:25:27,160
Speaker 1: things went. But Amazon steared really well. I think Jeff Bezos,

443
00:25:27,240 --> 00:25:29,000
Speaker 1: you know, said I'm running a company here, I want

444
00:25:29,000 --> 00:25:32,600
Speaker 1: to win and I try my best to do things fairly, so,

445
00:25:32,880 --> 00:25:35,840
Speaker 1: you know, overall, and Mark Nutderberg literally has done it before,

446
00:25:35,960 --> 00:25:39,359
Speaker 1: and he he looked so much better in this hearing

447
00:25:39,400 --> 00:25:42,120
Speaker 1: than he had had like two or three years ago

448
00:25:42,160 --> 00:25:44,240
Speaker 1: when he did his first hearing before Congress. So I

449
00:25:44,240 --> 00:25:48,560
Speaker 1: think overall, Facebook, Mark Nunderberg was probably a big winner.

450
00:25:48,680 --> 00:25:51,480
Speaker 1: And Google, um, you know, I just didn't do well,

451
00:25:51,520 --> 00:25:55,200
Speaker 1: in terms of that testimony, let's let's focus on Google

452
00:25:55,240 --> 00:25:57,199
Speaker 1: a little bit. Marked the big tech companies. They had

453
00:25:57,240 --> 00:26:01,240
Speaker 1: their earnings last night, generally very very strong numbers, particularly

454
00:26:01,240 --> 00:26:06,000
Speaker 1: Apple and Amazon. Google disappointing. The revenue, you know, came

455
00:26:06,040 --> 00:26:11,560
Speaker 1: in below expectations, down ten per What's going on to Google, Yeah,

456
00:26:11,600 --> 00:26:14,480
Speaker 1: I mean, I think that indicates a pretty big problem.

457
00:26:14,600 --> 00:26:16,920
Speaker 1: So when you have as much revenue, just as someone

458
00:26:16,920 --> 00:26:19,679
Speaker 1: who runs the company and has been involved in a

459
00:26:19,680 --> 00:26:22,680
Speaker 1: lot of tech companies, when you have as much revenue

460
00:26:22,680 --> 00:26:25,160
Speaker 1: as Google has, and you have as much data as

461
00:26:25,200 --> 00:26:27,960
Speaker 1: they have, you have a lot of levers to pull

462
00:26:28,080 --> 00:26:31,560
Speaker 1: to kind of hit your targets. And if they missed,

463
00:26:31,800 --> 00:26:35,440
Speaker 1: you know, kind of underperformed against last year by ten percent,

464
00:26:36,000 --> 00:26:38,160
Speaker 1: that means they were on track to do a lot

465
00:26:38,200 --> 00:26:41,840
Speaker 1: worse than that. So they pulled out all stops inside

466
00:26:41,880 --> 00:26:45,359
Speaker 1: the company, you would assume, and still missed by ten percent.

467
00:26:45,480 --> 00:26:49,320
Speaker 1: So that's a pretty big indicator that there's something more

468
00:26:49,400 --> 00:26:53,119
Speaker 1: seriously wrong at the core. UM. In terms of the

469
00:26:53,160 --> 00:26:56,520
Speaker 1: advertising business, the YouTube business I think is under a

470
00:26:56,640 --> 00:27:00,919
Speaker 1: lot of pressure from connected tv. UM. All of the

471
00:27:00,960 --> 00:27:04,480
Speaker 1: growth of that supported connected TV which is happening now,

472
00:27:04,720 --> 00:27:07,880
Speaker 1: is going to take money away from YouTube. So that's

473
00:27:07,920 --> 00:27:10,960
Speaker 1: a big threat that's already kind of impacting them, and

474
00:27:11,000 --> 00:27:13,360
Speaker 1: it's going to kind of continue to have an impact

475
00:27:13,680 --> 00:27:17,200
Speaker 1: in future quarters. And there their um cloud hosting business

476
00:27:17,200 --> 00:27:20,480
Speaker 1: to really well, but it just is nowhere near where

477
00:27:20,520 --> 00:27:24,840
Speaker 1: Amazon Aws is basically inbedded the market. So I think

478
00:27:24,840 --> 00:27:27,879
Speaker 1: there's a lot wrong with Google right now when you

479
00:27:27,960 --> 00:27:32,400
Speaker 1: see that big a mysth um and and with that

480
00:27:32,600 --> 00:27:35,600
Speaker 1: much revenue and leverage to pull to make sure they

481
00:27:35,640 --> 00:27:38,200
Speaker 1: don't miss Yeah, I mean it would benefit you, right

482
00:27:38,240 --> 00:27:41,399
Speaker 1: if if if YouTube did sort of lose out a

483
00:27:41,440 --> 00:27:44,920
Speaker 1: connected TV. On which note, can I ask you about

484
00:27:44,960 --> 00:27:49,200
Speaker 1: your partnership with with Facebook? Obviously is is well known

485
00:27:49,240 --> 00:27:51,920
Speaker 1: and I'm sure your partner with most of the companies.

486
00:27:52,040 --> 00:27:56,919
Speaker 1: What are they anticipating? What are you anticipating for election season? Um?

487
00:27:56,960 --> 00:28:01,520
Speaker 1: In terms of well, you know, it's I honestly can't

488
00:28:01,720 --> 00:28:04,760
Speaker 1: can't recall whether they're gonna election ads or not, because

489
00:28:04,760 --> 00:28:07,359
Speaker 1: I think they kind of keep going back and forth

490
00:28:07,600 --> 00:28:11,960
Speaker 1: on that, I mean without even without kind of paid ads. Obviously,

491
00:28:12,000 --> 00:28:14,800
Speaker 1: Facebook is going to be used as a platform to

492
00:28:14,960 --> 00:28:19,280
Speaker 1: promote each candidates you know, perspective and each party's perspective.

493
00:28:19,359 --> 00:28:22,080
Speaker 1: Facebook is generally taking the approach that they're going to

494
00:28:22,160 --> 00:28:25,960
Speaker 1: allow content and not gonna censor content unless it's like

495
00:28:26,119 --> 00:28:28,760
Speaker 1: harmful to the user. Um. I think they're in a

496
00:28:28,840 --> 00:28:32,080
Speaker 1: kind of no win situation on that topic. If they try,

497
00:28:32,119 --> 00:28:35,480
Speaker 1: if they censor its censorship. If they don't censor, people

498
00:28:35,560 --> 00:28:39,200
Speaker 1: have pissed off. And so you know, that's another thing

499
00:28:39,240 --> 00:28:42,680
Speaker 1: related to the testimony. I think that that thing come

500
00:28:42,800 --> 00:28:46,320
Speaker 1: up in the congressional testimony as much as you would expect,

501
00:28:46,400 --> 00:28:48,800
Speaker 1: and I think wide didn't come up is because Facebook

502
00:28:48,840 --> 00:28:51,720
Speaker 1: has taken a position Mark Zuckerberg in particular, that they're

503
00:28:51,760 --> 00:28:55,520
Speaker 1: not going to, um, they're gonna avoid as much as possible,

504
00:28:55,640 --> 00:28:59,920
Speaker 1: engaging in censorship and kind of just allowing their community

505
00:29:00,080 --> 00:29:04,840
Speaker 1: be more informed except where it's harmful. Um, specifically harmful

506
00:29:04,880 --> 00:29:07,280
Speaker 1: to the people. And let's just say that censorship is

507
00:29:07,640 --> 00:29:10,040
Speaker 1: a particular word in itself. That's that that that has

508
00:29:10,040 --> 00:29:12,360
Speaker 1: a particular bias built in, So you can call a

509
00:29:12,360 --> 00:29:14,640
Speaker 1: censorship or you could just call it you know, not

510
00:29:14,680 --> 00:29:19,200
Speaker 1: allowing you know, things that aren't fact checked online to

511
00:29:19,200 --> 00:29:22,840
Speaker 1: be published. Yeah. I mean the thing about Facebook, a

512
00:29:22,960 --> 00:29:24,920
Speaker 1: topic that also didn't come up that much in a

513
00:29:25,040 --> 00:29:28,840
Speaker 1: testimony is if I want to come in advertise, let's

514
00:29:28,840 --> 00:29:32,640
Speaker 1: stay on Bloomberg. There's standards in place, this checking of

515
00:29:32,680 --> 00:29:36,840
Speaker 1: the credibility advertising, all these things that happen, and Facebook

516
00:29:36,920 --> 00:29:39,880
Speaker 1: doesn't do those things. And I think that's really, for

517
00:29:40,040 --> 00:29:42,960
Speaker 1: years now been the big crust to the issue. Where

518
00:29:42,960 --> 00:29:46,520
Speaker 1: can you go You'll put in a credit card and say, hey,

519
00:29:46,520 --> 00:29:48,920
Speaker 1: can I deliver this message to two million people? And

520
00:29:48,960 --> 00:29:51,480
Speaker 1: you have no idea who I am or what I'm

521
00:29:51,480 --> 00:29:53,720
Speaker 1: gonna say, or care what I'm gonna say. And I

522
00:29:53,760 --> 00:29:57,080
Speaker 1: think that at the core is the real issue there

523
00:29:57,280 --> 00:30:00,360
Speaker 1: with Facebook. Are they going to actually operate like a

524
00:30:00,400 --> 00:30:03,480
Speaker 1: media company or and or they're going to continue to

525
00:30:03,520 --> 00:30:05,840
Speaker 1: pretend that they're not a media company even though they

526
00:30:05,840 --> 00:30:09,880
Speaker 1: take media dollars. And I think that's, you know, really

527
00:30:09,960 --> 00:30:12,360
Speaker 1: the issue that everyone That is kind of the core

528
00:30:12,800 --> 00:30:15,200
Speaker 1: of what you can almost call the Facebook question or

529
00:30:15,200 --> 00:30:18,240
Speaker 1: the Facebook issue. So, Mark, we you mentioned some of

530
00:30:18,240 --> 00:30:22,280
Speaker 1: those challenges facing Google's advertising business, but it doesn't appear

531
00:30:22,320 --> 00:30:24,479
Speaker 1: to be impacting Facebook as much. The stock is up

532
00:30:24,520 --> 00:30:28,560
Speaker 1: eight percent today, it's at an all time high. How

533
00:30:28,560 --> 00:30:31,600
Speaker 1: does Facebook and their advertising business, how do they avoid

534
00:30:31,640 --> 00:30:33,160
Speaker 1: some of the issues that are plaguing maybe some of

535
00:30:33,200 --> 00:30:36,720
Speaker 1: the other digital advertising companies during this pandemic. Yeah, so

536
00:30:36,840 --> 00:30:41,160
Speaker 1: Facebook does predominantly what's called direct response to advertising. The

537
00:30:41,240 --> 00:30:43,600
Speaker 1: easiest way to think about it is they sell revenue.

538
00:30:44,200 --> 00:30:47,800
Speaker 1: So you want to basically reach a consumer, Facebook has

539
00:30:47,880 --> 00:30:50,640
Speaker 1: access that access to that consumer, and they have a

540
00:30:50,640 --> 00:30:54,120
Speaker 1: lot of information about that consumer. And so they're essentially

541
00:30:54,240 --> 00:30:56,320
Speaker 1: selling your revenue in the sense that we can reach

542
00:30:56,360 --> 00:30:59,160
Speaker 1: the people you are looking for, and we can deliver

543
00:30:59,280 --> 00:31:02,240
Speaker 1: them to your website or to your or to your

544
00:31:02,280 --> 00:31:06,560
Speaker 1: mobile app. And that is just that value proposition. Um.

545
00:31:06,600 --> 00:31:10,000
Speaker 1: They have some competition from Google when the person knows

546
00:31:10,080 --> 00:31:11,960
Speaker 1: what they're looking for, but most of the things you

547
00:31:12,040 --> 00:31:15,640
Speaker 1: see advertising on Facebook or things you're discovering, and so

548
00:31:15,760 --> 00:31:19,640
Speaker 1: for discovering new products, there's really Facebook has no competition.

549
00:31:20,120 --> 00:31:22,440
Speaker 1: And when you're selling revenue, that's not going to go

550
00:31:22,520 --> 00:31:25,560
Speaker 1: out of style. That's gonna survive, you know, pandemics, that's

551
00:31:25,560 --> 00:31:30,720
Speaker 1: gonna survive boycotts and and the the and the even

552
00:31:30,720 --> 00:31:33,520
Speaker 1: advertisers that have boycotted some of them has come back

553
00:31:33,840 --> 00:31:37,520
Speaker 1: because you just literally can't afford to not use Facebook

554
00:31:37,840 --> 00:31:40,920
Speaker 1: if you need to buy revenue to fuel your own business.

555
00:31:40,920 --> 00:31:44,920
Speaker 1: And so I think Facebook's advertising business is not under

556
00:31:45,040 --> 00:31:48,400
Speaker 1: any immediate threat right now. The long term threat is

557
00:31:48,600 --> 00:31:53,040
Speaker 1: if their data declined, if there were a massive data boycotts,

558
00:31:53,080 --> 00:31:58,240
Speaker 1: then Facebook would have some missus Mark, but then they're not. Yeah, Mark,

559
00:31:58,240 --> 00:32:00,120
Speaker 1: thanks so much for joining us. We really appreciate that

560
00:32:00,200 --> 00:32:02,200
Speaker 1: getting your thoughts, and I like that buying revenue. That's

561
00:32:02,200 --> 00:32:03,760
Speaker 1: a great term. I'm going to use that. Mark Douglas,

562
00:32:03,760 --> 00:32:06,320
Speaker 1: CEO of Steelhouse, giving us his thoughts of some of

563
00:32:06,320 --> 00:32:08,880
Speaker 1: his big tech media companies. Funny great numbers last night

564
00:32:08,920 --> 00:32:11,120
Speaker 1: out of most of those tech companies, and really kind

565
00:32:11,120 --> 00:32:13,720
Speaker 1: of giving a lift to the NASDAC for Ronnie Quinn.

566
00:32:13,920 --> 00:32:18,560
Speaker 1: I'm Paul Sweeney. You're listening to Bloomberg Radio. Thanks for

567
00:32:18,600 --> 00:32:21,720
Speaker 1: listening to the Bloomberg Markets podcast. You can subscribe and

568
00:32:21,840 --> 00:32:25,600
Speaker 1: listen to interviews at Apple Podcasts or whatever podcast platform

569
00:32:25,640 --> 00:32:29,080
Speaker 1: you prefer. I'm Bonnie Quinn. I'm on Twitter at Bonnie Quinn,

570
00:32:29,280 --> 00:32:31,640
Speaker 1: and I'm Paul Sweeney. I'm on Twitter at pt Sweeney.

571
00:32:31,680 --> 00:32:34,320
Speaker 1: Before the podcast, you can always catch us worldwide at

572
00:32:34,360 --> 00:32:35,160
Speaker 1: Bloomberg Radio