WEBVTT - Admiral Stavridis: U.S. Is Entering A Period of Vulnerability 0:00:01.400 --> 0:00:04.120 Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, along 0:00:04.120 --> 0:00:06.200 with my co host of Bonnie Quinn. Every business day 0:00:06.240 --> 0:00:10.360 we bring you interviews from CEOs, market pros, and Bloomberg experts, 0:00:10.400 --> 0:00:13.600 along with essential market moving news. Find the Bloomberg Markets 0:00:13.600 --> 0:00:17.000 Podcast on Apple podcast or wherever you listen to podcasts, 0:00:17.000 --> 0:00:22.400 and on Bloomberg dot Com. It is time for Bloomberg Opinion, 0:00:22.520 --> 0:00:25.680 and I'm excited now to welcome our next guest, Admiral 0:00:25.880 --> 0:00:29.600 James Stabrita's retired Navy admiral, former military commando of NATO 0:00:29.720 --> 0:00:35.040 and of course Bloomberg Opinion columnist. Admiral what is the 0:00:35.040 --> 0:00:37.200 thing that most keeps you up at night right now? 0:00:37.240 --> 0:00:40.360 I mean there's a plethora smore gas board if you like, 0:00:40.600 --> 0:00:44.000 things that I'm sure bother you and questions that you're 0:00:44.000 --> 0:00:46.800 trying to answer. But the particular one right now as 0:00:46.960 --> 0:00:51.280 we are, what three weeks out from the election, First 0:00:51.320 --> 0:00:56.560 and foremost, it's the distinct possibility of real turbulence domestically 0:00:56.600 --> 0:01:00.280 here in the United States after the election, and let's 0:01:00.280 --> 0:01:04.480 hope for a clean win on election eve, but I 0:01:04.560 --> 0:01:08.440 think that's unlikely and therefore there'll be court challenges and 0:01:08.480 --> 0:01:11.120 so what worries me, Vonnie and keeps me awake at 0:01:11.200 --> 0:01:13.440 night at the moment, and the things I worry about 0:01:13.440 --> 0:01:16.959 in the international sphere is that an opponent might take 0:01:17.000 --> 0:01:22.520 advantage of this period of weeks or even months of turbulence. 0:01:22.720 --> 0:01:26.319 I think it will resolve by inauguration day one where 0:01:26.360 --> 0:01:28.680 or the other. But you could see China making a 0:01:28.760 --> 0:01:31.880 move on Taiwan. You could see Iran doing something in 0:01:31.920 --> 0:01:35.480 the Arabian Gulf. You could see North Korea rattle a 0:01:35.600 --> 0:01:37.759 saber as they did just a couple of days ago, 0:01:37.880 --> 0:01:41.720 rolling out a new I CBM. So that sense of 0:01:42.160 --> 0:01:45.640 potential turbulence in the near term is the first thing 0:01:45.640 --> 0:01:48.760 I worry about, and the second one, less obvious, is 0:01:48.840 --> 0:01:51.880 cyber um. We have moved so many things into the 0:01:51.920 --> 0:01:55.880 cyber world, Vanni. I am concerned that our opponents might 0:01:56.280 --> 0:01:59.520 take advantage of that. And if you merge those two 0:01:59.600 --> 0:02:04.320 things together, concern about cyber and that turbulence after the election, 0:02:04.640 --> 0:02:07.400 I think we're headed into a period of vulnerability. That's 0:02:07.400 --> 0:02:11.119 what keeps me awake at night right now. Why wouldn't 0:02:11.280 --> 0:02:14.680 those opponents take advantage, Admiral, Can you give us reasons 0:02:14.720 --> 0:02:16.919 why it would not be in their interest to do thus, 0:02:18.400 --> 0:02:22.239 because long term, uh, the United States will come out 0:02:22.240 --> 0:02:27.360 of this period capable, ready to respond. We have the 0:02:27.400 --> 0:02:31.160 most capable military in the world, so we have military deterres. 0:02:31.240 --> 0:02:34.400 We still have the strongest economy in the world. It 0:02:34.440 --> 0:02:36.960 will come out somewhat battered, as I don't need to 0:02:36.960 --> 0:02:40.280 tell a blue Berg columnist, and China is having a 0:02:40.400 --> 0:02:44.040 better swifter recovery. But I wouldn't bet against the United 0:02:44.080 --> 0:02:47.079 States in the long term. So I think our opponents 0:02:47.160 --> 0:02:50.560 are smart enough. I hope to realize that we have 0:02:50.639 --> 0:02:54.440 the military capability, we have the economic kept and lastly, 0:02:54.480 --> 0:02:57.560 we have that network of allies, partners and friends around 0:02:57.560 --> 0:03:01.400 the world. I think it would be foolish for China 0:03:01.480 --> 0:03:03.000 to make a move. I think it would be a 0:03:03.040 --> 0:03:06.800 mistake for Iran to do so, or Russia. But you 0:03:06.960 --> 0:03:11.480 still have to account for and pay attention to that possibility. 0:03:12.120 --> 0:03:17.040 What's the apparatus that's already up and running that these 0:03:17.040 --> 0:03:19.560 countries would have to tamp down in order to sort 0:03:19.600 --> 0:03:24.040 of comply with international accepted practices. Pre election, I mean, 0:03:24.080 --> 0:03:27.960 we already know that China and Russia have huge troll farms, 0:03:28.000 --> 0:03:31.359 and you know, a huge apporatus basically designed to interfere 0:03:31.360 --> 0:03:33.720 in any election all over the world should they wish to. 0:03:35.280 --> 0:03:37.400 Is there any evidence to suggest that they might tamp 0:03:37.480 --> 0:03:41.960 that down. I don't think so, because at the end 0:03:42.000 --> 0:03:44.920 of the day, there's this sort of sense that, oh, 0:03:45.040 --> 0:03:49.240 the Russians and the Chinese are working to reelect Donald Trump. 0:03:49.320 --> 0:03:51.800 I don't think that's quite right. I think what the 0:03:51.880 --> 0:03:54.240 Russians in the Chinese are doing is to try and 0:03:54.320 --> 0:03:58.680 create real divisions in American society, and they will do 0:03:58.760 --> 0:04:03.840 that as you a, using social media, primarily, but also 0:04:04.080 --> 0:04:07.760 using actual incidents. I think as we get closer to 0:04:07.960 --> 0:04:11.800 the election, I could foresee, for example, a false flag 0:04:11.880 --> 0:04:17.760 operation where hundreds of ballots are suddenly discovered in a dumpster. 0:04:18.279 --> 0:04:21.279 It's entirely possible a physical act like that could be 0:04:21.360 --> 0:04:24.640 undertaken by our opponents, as well as all the social 0:04:24.720 --> 0:04:28.039 network problems that you've just addressed, and no, there are 0:04:28.120 --> 0:04:33.240 no international sanctions that can be applied uniformly. That's why 0:04:33.279 --> 0:04:36.880 it's important that the United States and clear signals to 0:04:37.040 --> 0:04:41.000 these nations that we will respond in the moment, will 0:04:41.080 --> 0:04:44.359 defend better, and we will also respond potentially after the 0:04:44.400 --> 0:04:48.479 election when we sort out what has happened, and then 0:04:48.560 --> 0:04:51.680 take action in the cyber world against those who have 0:04:51.760 --> 0:04:54.760 attacked US. Now, Admiral Cebidas, you have a great column 0:04:54.800 --> 0:04:57.640 out on the Boomberg today. COVID commission is crucial for 0:04:57.720 --> 0:04:59.840 a US recovery. You say, an investigation of the p 0:05:00.040 --> 0:05:04.039 that makes it into scientists, doctors, and gasp, a big 0:05:04.080 --> 0:05:08.479 pharma executive explained to us, you know who might put 0:05:08.520 --> 0:05:10.800 this together given that we're not quite sure who will 0:05:10.800 --> 0:05:13.679 be leading the country. There's a lane doc session at 0:05:13.720 --> 0:05:16.800 some point, and then there'll be, you know, either another 0:05:16.839 --> 0:05:20.480 four years with President Trump or four years with President Biden. 0:05:20.760 --> 0:05:25.560 So what how would this work? Well, let's look at history. 0:05:25.680 --> 0:05:30.960 Um After Pearl Harbor, where hundred Americans shockingly died on 0:05:31.040 --> 0:05:35.200 December seven, there was a national commission set up by 0:05:35.240 --> 0:05:39.160 the Congress. After the nine eleven events where three thousand 0:05:39.240 --> 0:05:43.120 Americans died, there was a national commission set up by 0:05:43.160 --> 0:05:45.760 the Congress. I think we're going to see the same thing. 0:05:45.800 --> 0:05:50.080 We're now at two hundred fifteen thousand Americans dead, probably 0:05:50.120 --> 0:05:54.080 by inauguration will be north of three hundred thousand. Most 0:05:54.120 --> 0:05:58.120 observers think, so there has to be accountability. We have 0:05:58.200 --> 0:06:01.040 to look back and see how did this happen, just 0:06:01.080 --> 0:06:02.960 like we did at Pearl Harbor, just like we did 0:06:02.960 --> 0:06:05.120 at kind of eleven. And more importantly, we've got to 0:06:05.120 --> 0:06:08.480 look forward so that it never happens again. What are 0:06:08.520 --> 0:06:12.360 the practical things we need to do to prepare ourselves 0:06:12.360 --> 0:06:15.400 for this so how it would happen? And I think 0:06:15.440 --> 0:06:21.599 this will happen. Whoever is in office after January will 0:06:21.640 --> 0:06:25.159 be a congressional push because all of us, all of 0:06:25.279 --> 0:06:28.960 us who are American citizens, are to demand that our 0:06:29.080 --> 0:06:33.760 national government focus on this. And the Congress is very 0:06:33.800 --> 0:06:36.760 well equipped with the tools to do this. They could 0:06:36.839 --> 0:06:40.279 appoint to leaders to set it up. You pick about 0:06:40.320 --> 0:06:43.480 a dozen commissioners I lay out in the article, uh 0:06:43.560 --> 0:06:45.719 some ideas for what it would look like, and you 0:06:45.760 --> 0:06:48.080 give them. You know this won't be instant work. You 0:06:48.120 --> 0:06:51.520 give them about two years to put this together. The 0:06:51.560 --> 0:06:55.880 Pearl Harbor Commission took five, Eleven took three. I think 0:06:55.920 --> 0:06:58.520 we can do this in two years. It will be 0:06:59.240 --> 0:07:03.640 perhaps the significant such commission American history. You've got to 0:07:03.680 --> 0:07:07.200 do it all right, well, I imagine it's coming at 0:07:07.240 --> 0:07:09.440 some point and our thanks to you, it's a mustery 0:07:09.560 --> 0:07:13.880 today COVID commission crucial for US recovery. Retired Admiral James 0:07:13.920 --> 0:07:19.440 Stabida's former NATO military commander, it is time now to 0:07:19.480 --> 0:07:21.240 have a look at a big tech. Of course, big 0:07:21.280 --> 0:07:23.880 tech has been dominating markets basically, even if it hasn't 0:07:23.920 --> 0:07:28.960 been dominating casual conversation outside of markets. But certainly that 0:07:29.040 --> 0:07:32.160 might start to change once we start to get Congress 0:07:32.160 --> 0:07:35.280 looking into the regulation of big tech. Let's bring in 0:07:35.320 --> 0:07:39.760 Mark Douglas, who CEO of Steel House. He is currently 0:07:39.760 --> 0:07:42.680 in Istanbul, but he is based generally in s in 0:07:43.120 --> 0:07:45.960 l A. So Mark, thank you so much for joining. 0:07:46.000 --> 0:07:48.400 First of all, talked to us about Istanbul. What's it 0:07:48.440 --> 0:07:53.440 like at the moment um. It's bustling, So it's the 0:07:53.480 --> 0:07:56.920 weather is great and there are a ton of people 0:07:56.920 --> 0:08:01.160 on the street. Everyone's wearing masks and the feels great. 0:08:01.160 --> 0:08:03.720 I've been traveling all over the world during COVID, so 0:08:03.760 --> 0:08:06.440 that I got here two days ago. Yeah, it's pretty 0:08:06.440 --> 0:08:09.720 amazing how the Eastern European countries are treating this slightly 0:08:09.760 --> 0:08:12.000 differently from some of the rest of the countries in 0:08:12.040 --> 0:08:14.920 the world. And uh, you know, Turkey would be sort 0:08:14.960 --> 0:08:17.040 of a little bit in that group. So talk to 0:08:17.160 --> 0:08:21.040 us about regulating big tech and what you anticipate will 0:08:21.080 --> 0:08:23.320 see over the next few days two weeks in Congress. 0:08:23.360 --> 0:08:25.480 I mean, we're in a sort of strange period where 0:08:25.760 --> 0:08:28.680 you know, senators are up for re election, we're obviously 0:08:28.720 --> 0:08:32.160 re electing a president or electing a president, and there's 0:08:32.160 --> 0:08:33.800 a lot of uncertainty. Is it the best time to 0:08:33.800 --> 0:08:39.079 be doing this? Well, I think the reasons they're doing 0:08:39.120 --> 0:08:44.800 it are legitimate. I mean, these large companies Apple, Amazon, Google, 0:08:44.880 --> 0:08:49.000 and Facebook and maybe even a few others, they legitimately 0:08:49.040 --> 0:08:51.880 do have monopoly power. I think Apple is kind of 0:08:51.880 --> 0:08:54.800 trying to fly a bit under the radar, but um, 0:08:54.840 --> 0:08:57.720 they have probably the biggest monopoly, which is the app 0:08:57.800 --> 0:09:01.040 store and the thirty percent fee that they charge, and 0:09:01.080 --> 0:09:05.840 a complete monopoly on getting apps on into your iOS devices. 0:09:05.840 --> 0:09:08.199 But I think all these companies are vulnerable, and I 0:09:08.280 --> 0:09:12.000 think it's it's legitimate to kind of investigate them and 0:09:12.080 --> 0:09:15.640 try to find solutions that ultimately create more competition and 0:09:16.480 --> 0:09:19.840 are better for consumers in the long term. Who's most 0:09:19.880 --> 0:09:23.720 at risk of having to change what they're doing? So 0:09:23.920 --> 0:09:26.840 maybe you know, breaking off the piece or you know, 0:09:27.120 --> 0:09:31.440 spinning off a piece. Yeah, I think Apple is. So 0:09:31.559 --> 0:09:34.560 when you look at someone like Amazon and Google, I 0:09:34.600 --> 0:09:38.319 think the big complaints are mainly about their search results. 0:09:38.480 --> 0:09:41.960 Amazon when you go shopping, and Google obviously with Google Search. 0:09:42.440 --> 0:09:46.120 But Apple's entire business model that them breaking the two 0:09:46.120 --> 0:09:49.960 trillion dollar mark in market gap is essentially based on 0:09:50.240 --> 0:09:54.360 them having a complete monopoly on um what gets on 0:09:54.400 --> 0:09:57.120 your onto your iPhone and the and the things they charge. 0:09:57.160 --> 0:10:00.600 And if if the US kind of the as government 0:10:00.679 --> 0:10:02.920 kind of interferes with them, it's gonna take some time. 0:10:03.360 --> 0:10:05.920 I think that kind of really starts at disrupted the 0:10:06.360 --> 0:10:09.080 heart of their business model, which was has been driving 0:10:09.120 --> 0:10:12.280 their market cap. They'll obviously survive, they may have to 0:10:12.360 --> 0:10:15.120 charge lower fees, but that and you look at bundles 0:10:15.120 --> 0:10:18.280 they're introducing, like Apple One, the Apple one bundle, which 0:10:18.320 --> 0:10:20.760 is basically you know whether you watch it, read it, 0:10:21.320 --> 0:10:25.760 listen to it, yet they them or or now Apple 0:10:25.840 --> 0:10:29.240 Fitness is part of that bundle like that could potentially 0:10:29.280 --> 0:10:32.120 get attacked also by the US government, So so they 0:10:32.200 --> 0:10:36.640 are I think the most vulnerable. What's for the senator is, 0:10:36.720 --> 0:10:39.120 I mean, don't all senators want to keep big tech 0:10:39.200 --> 0:10:43.520 on site in some way? Well, I mean the it's 0:10:43.520 --> 0:10:45.719 a big driver for the US economy. So on the 0:10:45.800 --> 0:10:49.320 one hand, you want to keep um, these big companies 0:10:49.400 --> 0:10:52.880 who are create a lot of jobs and generate UM 0:10:53.080 --> 0:10:55.960 a lot you wanna Essentially you don't want to really 0:10:56.040 --> 0:11:00.280 harm them and allow competition from outside of the United States. Um, 0:11:00.400 --> 0:11:04.040 if you're kind of like a pro America first type 0:11:04.120 --> 0:11:08.640 type senator. But I mean it's it's legitimate concerns. I 0:11:08.760 --> 0:11:12.679 think ultimately tech is an easy target everyone. It's a 0:11:12.760 --> 0:11:15.880 like do nothing right type environment right now, especially with 0:11:16.080 --> 0:11:18.839 the topic of censorship and what should be allowed on 0:11:18.960 --> 0:11:22.800 social media, talking about Facebook and Instagram and what shouldn't 0:11:22.800 --> 0:11:25.240 be allowed. So you know, with that bigger talk topic, 0:11:25.360 --> 0:11:27.920 that bigger target and a lot of people being kind 0:11:27.960 --> 0:11:30.599 of angry at social media, I mean, it's easy to 0:11:31.240 --> 0:11:33.800 join their bandwagon and and try to leverage it to 0:11:33.920 --> 0:11:38.320 create a kind of populist sentiment towards your candidacy. I mean, 0:11:38.360 --> 0:11:41.320 you sort of got the impression that no matter what happens, 0:11:41.400 --> 0:11:43.880 these talks are going to keep going higher anyway. Um, 0:11:44.800 --> 0:11:48.160 nothing has dented them up to now. What's your sense 0:11:48.200 --> 0:11:50.960 of where they go on I'm talking about basically Apple 0:11:51.080 --> 0:11:55.079 and Alphabet I guess yeah, I think well, I think 0:11:55.200 --> 0:11:58.839 Amazon is by far the biggest. Apple used to be 0:11:58.920 --> 0:12:02.880 the biggest innovator. Um. I think people think of Apple 0:12:02.920 --> 0:12:05.720 as an innovator now, but the last real product they 0:12:05.800 --> 0:12:09.079 introduced that had any level of success with the Apple 0:12:09.160 --> 0:12:12.640 Watching two thousand fourteen. Now it's just cycles of evolution 0:12:12.880 --> 0:12:16.600 rather than you know, something really innovative. But um, Amazon 0:12:16.840 --> 0:12:21.400 continues to be the big innovator with the success they've 0:12:21.440 --> 0:12:24.400 had with the Echo and a lot of the acquisitions 0:12:24.440 --> 0:12:27.839 that they've done. So I think, UM, I I think 0:12:27.920 --> 0:12:32.000 ultimately Amazon is you know, kind of retakes the top 0:12:32.040 --> 0:12:35.679 spot as the most valuable company, and the others are 0:12:35.679 --> 0:12:39.120 playing catch up. Google is kind of being attacked from 0:12:39.160 --> 0:12:43.280 all sides, um again by Amazon. In terms of Amazon's 0:12:43.280 --> 0:12:47.800 app business, Um, that search business is obviously like they 0:12:48.320 --> 0:12:51.880 have no competition basically worldwide except for China with the 0:12:51.960 --> 0:12:55.839 search business. So I think, UM, I don't think they will. 0:12:56.400 --> 0:12:59.520 They're not as vulnerable as as someone like Apple is, 0:12:59.600 --> 0:13:02.920 and may be to a lesser extent Amazon. Speaking of Apple, 0:13:03.000 --> 0:13:06.400 we have, of course a big event tomorrow. There's a 0:13:06.440 --> 0:13:10.320 lot going on tomorrow, including some enemy Cony Barrett hearings 0:13:10.360 --> 0:13:13.040 on the Hill. But at the same time, and a 0:13:13.120 --> 0:13:14.959 lot of people will be looking at Apple's launch and 0:13:15.160 --> 0:13:17.400 we're meant to get some more phones. What do you 0:13:17.440 --> 0:13:19.600 think is going to happen? Mark? What have you heard? 0:13:19.800 --> 0:13:24.920 And will people upgrade? Yeah? So the Apple twelve is 0:13:24.960 --> 0:13:27.280 the big announcement. I think there's no secret on that. 0:13:27.640 --> 0:13:31.439 The probably the most innovative thing coming out of the 0:13:31.640 --> 0:13:34.440 Apple twelve announcement is the strong rumors that there's going 0:13:34.480 --> 0:13:37.600 to be a new Apple Mini and which will bring 0:13:37.720 --> 0:13:42.400 the price point down to essentially half. Remember when Apple 0:13:42.640 --> 0:13:46.200 introduced the Apple X, everyone was complaining about how expensive 0:13:46.240 --> 0:13:48.480 it was. I mean, the phone costs more than like 0:13:48.800 --> 0:13:53.240 Apple's lowering computer. And so now they're introducing a phone 0:13:53.280 --> 0:13:55.680 at half the price point. And what's really interesting about 0:13:55.760 --> 0:13:59.880 that think really key to watch is Apple is a 0:14:00.120 --> 0:14:03.120 lot of their profit is increasingly coming from the services, 0:14:03.720 --> 0:14:06.400 and so the Apple One bundle on an Apple Mini, 0:14:06.520 --> 0:14:10.120 I think the Apple wants a subscription from every household 0:14:10.600 --> 0:14:13.920 essentially in the world, and so they are bringing down 0:14:14.000 --> 0:14:16.720 the price point to their products in order to get 0:14:16.960 --> 0:14:21.440 to encourage more people to get an Apple one subscription. 0:14:21.480 --> 0:14:25.120 And also with Apple Fitness Plus, which hasn't been launched yet, 0:14:25.200 --> 0:14:29.200 I mean, they're now going after Peloton and other fitness companies. 0:14:29.320 --> 0:14:32.560 So it's all about that kind of ongoing revenue stream 0:14:32.640 --> 0:14:35.360 after you buy the device. So it's a really smart 0:14:35.440 --> 0:14:38.760 move to bring low, low priced iPhone, current model, low 0:14:38.840 --> 0:14:43.120 price iPhone and then essentially make hundreds of dollars a 0:14:43.240 --> 0:14:46.640 year more in the monthly subscription fees that you're gonna 0:14:46.680 --> 0:14:49.320 pay for for all forms of entertainment and business that 0:14:49.680 --> 0:14:52.320 that they want you to beg Mark, we're out of time. 0:14:52.400 --> 0:14:55.000 But is it a wild success even in pandemic times? 0:14:57.160 --> 0:14:59.040 Say that question one of my time. I comminue people 0:14:59.080 --> 0:15:03.520 buy it even when cash is low in pandemic times. Um, 0:15:03.720 --> 0:15:06.120 I don't think the I think the example twelves are 0:15:06.120 --> 0:15:08.000 a bit of a diet. I mean, they were introducing 0:15:08.080 --> 0:15:10.920 five G but essentially a lot of people seem to 0:15:11.000 --> 0:15:14.480 be the pole. The polling is saying that people want 0:15:14.480 --> 0:15:16.359 to buy them, So I guess they're going to be successful. 0:15:16.680 --> 0:15:19.480 All right, thank you so much for joining us. Mark 0:15:19.560 --> 0:15:23.280 Douglas is a CEO of Steel House. Let's see tomorrow 0:15:23.400 --> 0:15:26.960 what actually emerges from that Apple event. We appreciate Mark's 0:15:27.280 --> 0:15:32.280 time today. All right, it is time now to get 0:15:32.400 --> 0:15:35.600 to one of our old chestnuts. Bill Smeade, always love 0:15:35.640 --> 0:15:37.840 having you on the program. Bill Smide is CEO and 0:15:37.920 --> 0:15:41.640 CIO of Smade Capital Management, and Bill, I'm sure you 0:15:41.720 --> 0:15:44.920 have varying opinions on everything that's happening this week. Having 0:15:44.960 --> 0:15:47.120 been in the market so long, what is the one 0:15:47.320 --> 0:15:51.680 thing that markets will concentrate on this week? Well, thanks 0:15:51.720 --> 0:15:57.720 for having us, Monny. The the markets are concentrating on 0:15:58.760 --> 0:16:04.480 um what I call COVID misery investments, and they are 0:16:05.160 --> 0:16:12.520 exacerbating a trend of concentrating capital in the vast monopoly 0:16:13.280 --> 0:16:17.400 UH companies, and they just doesn't seem to be any 0:16:17.680 --> 0:16:21.400 end to the urge on the part of investors to 0:16:22.320 --> 0:16:26.880 uh extrapolate what is going on far out into the future. 0:16:28.600 --> 0:16:31.560 So Bill, I mean, I know that you invest slightly 0:16:31.800 --> 0:16:33.760 differently to sort of watching the day to day news 0:16:33.800 --> 0:16:37.400 headlines anyway, as do the same you know, most investors 0:16:37.440 --> 0:16:39.320 for the long haul. But at the same time, you 0:16:39.440 --> 0:16:42.640 have to wonder which of these macro events could really 0:16:43.120 --> 0:16:48.320 change the dynamic in the market. Is there one out there? Well, Actually, 0:16:48.400 --> 0:16:53.720 what happens is below the surface economics actually do change. 0:16:54.360 --> 0:16:58.560 So for example, you would expect stock prices to peak 0:16:59.040 --> 0:17:02.800 at the point where the prospects for the industry appear 0:17:02.880 --> 0:17:06.960 to people to be the most favorable. And with all 0:17:07.040 --> 0:17:10.800 of people being afraid of catching COVID and kind of 0:17:11.320 --> 0:17:16.000 self quarantining, the reliance on the large tech companies will 0:17:16.080 --> 0:17:19.040 probably never be higher, I would guess, than at this 0:17:19.200 --> 0:17:21.280 moment in time. So it only makes sense that those 0:17:21.280 --> 0:17:25.520 stocks are very high right now because the prospects for 0:17:25.760 --> 0:17:29.399 their profits due to the current circumstances. But at the 0:17:29.440 --> 0:17:33.640 same time that's going on, it also lays the groundwork 0:17:33.720 --> 0:17:37.520 for superior economics in other areas where the stock prices 0:17:37.560 --> 0:17:40.560 are extremely low. And that's our job is to to 0:17:40.640 --> 0:17:43.679 figure out where economics are very favorable and then uh 0:17:43.960 --> 0:17:49.840 and then adjust appropriately. Have you making any adjustments? We are, 0:17:50.080 --> 0:17:54.960 and it's just painful, Vinnie. We are tacking away from 0:17:55.119 --> 0:17:57.400 investments that we've made in the last three to ten 0:17:57.520 --> 0:18:01.240 years that are becoming too popular because of how popular 0:18:01.320 --> 0:18:04.920 growth stocks are. We're taking money from there and applying 0:18:05.000 --> 0:18:09.560 it to favorable economics in places like energy, in places 0:18:09.720 --> 0:18:13.560 like uh real estate and and by the way, that's 0:18:13.560 --> 0:18:17.240 the two worst performing sectors today, so you know and 0:18:17.640 --> 0:18:20.960 and uh so I'll give you one example. It was 0:18:21.000 --> 0:18:25.919 announced that Warren Buffett's lieutenant Ted Wessler now owns almost 0:18:25.960 --> 0:18:29.440 six percent of Dillard's department stores, and the stock has 0:18:29.480 --> 0:18:35.520 soared today thirty. Uh. Well, we own two companies that 0:18:35.960 --> 0:18:40.600 are landlords to Dillard's. So if he if he likes Dillard's, 0:18:40.600 --> 0:18:43.399 he'd probably like the landlords, and that would be Simon 0:18:43.480 --> 0:18:46.560 Properties and mace Rich. Just in the Phoenix Valley where 0:18:46.560 --> 0:18:50.840 I am, there are seven dillard stores at seven separate 0:18:50.920 --> 0:18:54.560 mace Rich properties, and uh I counted, I think Simon 0:18:54.640 --> 0:18:59.360 has seventeen dillard stores. So while they're really excited about Dillard's, 0:18:59.680 --> 0:19:03.159 they aspies their landlords, and I would suggest that the 0:19:03.240 --> 0:19:07.359 two should go in tandem. Well, explain that to me, 0:19:07.480 --> 0:19:09.600 because I've just been looking at mass Ridge and Simon 0:19:09.680 --> 0:19:12.000 Poverty Group and obviously the stocks you know, plummeted and 0:19:12.080 --> 0:19:14.920 march and they haven't really recovered since. And I think 0:19:15.200 --> 0:19:18.320 the question is okay. So Dillard's might be okay, and 0:19:18.359 --> 0:19:19.840 Dillards might be able to pay his rent, but what 0:19:19.920 --> 0:19:22.320 about all of the other tenants. Why are you still 0:19:22.440 --> 0:19:27.240 bullish on these real estate companies? Well, first of all, 0:19:27.880 --> 0:19:33.720 they are very close to uh most American population, and 0:19:34.560 --> 0:19:38.280 so there's two possibilities here. One is that two or 0:19:38.320 --> 0:19:44.000 three years from now, the virus is gone, vaccinations are enforced, 0:19:44.240 --> 0:19:47.520 and cures or whoever had it have come to pass, 0:19:48.040 --> 0:19:52.040 and then people go back to something that's a new normal, 0:19:52.240 --> 0:19:55.520 but but closer to the way we used to live. 0:19:56.080 --> 0:20:00.600 And under that environment, these people own very attractive property 0:20:00.760 --> 0:20:08.639 in some of the most attractive places in the United States, uh, Florida, Texas, California, Arizona. 0:20:08.800 --> 0:20:11.600 That that's where people are moving, uh to the sun 0:20:11.720 --> 0:20:14.320 Belt and and that's that's where they own a lot 0:20:14.400 --> 0:20:20.440 of properties. And uh So the answer is, um, this 0:20:20.720 --> 0:20:22.719 idea that we're all just going to huddle in our 0:20:22.800 --> 0:20:26.000 house and do nothing for the next five years and 0:20:26.160 --> 0:20:28.680 spend all of our money and never leave the house, 0:20:29.080 --> 0:20:33.040 and spend all of our time on on electronic devices 0:20:33.560 --> 0:20:36.480 and be anti social. I just think it's it's it's 0:20:36.520 --> 0:20:40.520 highly unlikely it's worth making some investments with a very 0:20:40.680 --> 0:20:44.080 high reward potential that the risk has been taken out 0:20:44.119 --> 0:20:48.160 by depressed prices. All right, Bill, thank you so much. 0:20:48.320 --> 0:20:52.800 Bill Smead is CEO and c IO of Sneed Capital Management. 0:20:52.920 --> 0:20:55.400 Until they're talking about some of the real estate companies 0:20:55.440 --> 0:20:58.480 and It's really interesting to hear the different opinions on 0:20:58.880 --> 0:21:00.880 on this, because of course you get those that same 0:21:00.960 --> 0:21:03.200 malls are dead, and you get those that say no, 0:21:03.480 --> 0:21:04.840 I mean, they might be in a little bit of 0:21:04.920 --> 0:21:07.320 a lull period, but at some point we'll have to 0:21:07.359 --> 0:21:09.680 get back to something akin to the life that we 0:21:09.840 --> 0:21:16.040 had been living. All right, and this portion of Bloomberg 0:21:16.119 --> 0:21:19.720 markets now concentrating on big tech and break up potentially 0:21:19.880 --> 0:21:23.080 in the future. Let's bring in Steven Strauss, who joins 0:21:23.200 --> 0:21:26.840 US from Princeton University's Woodrow Wilson School of Public and 0:21:26.920 --> 0:21:30.520 International Affairs, where he is a visiting professor. Stephen, you know, 0:21:31.080 --> 0:21:32.840 you're a sort of ahead of the game on this, 0:21:33.280 --> 0:21:38.040 but the US is a little more let's say, wide reaching. 0:21:38.160 --> 0:21:40.800 I mean, the US could actually mandate for these companies 0:21:40.880 --> 0:21:43.800 to start breaking themselves apart. Do you see that even 0:21:43.960 --> 0:21:48.639 potentially happening. It's going to be a long where um 0:21:48.800 --> 0:21:51.960 if if history is any guy, I looked up some 0:21:52.040 --> 0:21:55.879 of the numbers. Breaking up Stairard Oil was about corny 0:21:55.960 --> 0:22:00.320 year process. The IBM anti trust litigation like years. The 0:22:00.359 --> 0:22:03.720 A T and T anti trust litigation went about ten years, 0:22:03.840 --> 0:22:07.560 and Microsoft anti trust went about ten years, and particularly 0:22:07.600 --> 0:22:10.800 in the technology sector, it's not standing still. I mean 0:22:11.400 --> 0:22:13.520 there have been some rueful jokes at by the time, 0:22:13.680 --> 0:22:18.439 particularly the Microsoft IBM cases were settled, the original basis 0:22:18.520 --> 0:22:24.840 for the cases were essentially irrelevant. That's actually quite stunning. 0:22:25.080 --> 0:22:27.320 I mean, that's really really stunning. Is that a testament 0:22:27.480 --> 0:22:29.959 to the ability of these companies to put up a defense, 0:22:30.040 --> 0:22:31.880 an argument for how they should be how they are? 0:22:32.400 --> 0:22:36.480 And if that's the case, are we looking at something similar? Um, 0:22:37.200 --> 0:22:39.800 it's certainly a comment on you know, these companies can 0:22:39.840 --> 0:22:43.639 afford the best lawyers in the world. Um. You know, 0:22:43.720 --> 0:22:46.760 the American legal system has many virtue speed is not 0:22:46.960 --> 0:22:50.280 necessarily among them. So I mean think about the process. 0:22:50.480 --> 0:22:53.920 First there's the trial and the court. Whoever loses will 0:22:53.960 --> 0:22:56.840 appeal it. Then there's another round of appeals. I mean, 0:22:56.880 --> 0:23:00.600 it just it can go on for a very long time. Again, 0:23:00.680 --> 0:23:04.160 past performance is not a necessarily a predictor of future results, 0:23:05.400 --> 0:23:09.359 but looking at the historical record, and it was a 0:23:09.480 --> 0:23:11.720 side point, there's a general feeling that to really take 0:23:11.760 --> 0:23:15.080 on these companies there may need some changes to the legislation. 0:23:15.520 --> 0:23:17.959 So that's going to have to get through Congress. Okay, 0:23:18.200 --> 0:23:21.119 when you say the legislation of what legislation exactly are 0:23:21.160 --> 0:23:25.560 we talking about. Well, the antitrust legislation we currently have 0:23:25.760 --> 0:23:29.720 on the books, you know, originally dates the nineteenth century. 0:23:29.800 --> 0:23:33.879 It was last updated during the nineteen seventies. Uh So, 0:23:34.000 --> 0:23:37.200 for example, one of the things that the House is suggesting, 0:23:37.760 --> 0:23:41.840 he's rewriting the antitrust laws so that if they're unfairly 0:23:41.920 --> 0:23:45.320 treating their suppliers, they're kind of crushing their suppliers, it 0:23:45.359 --> 0:23:47.959 will easier, it'll be easier to take action against them. 0:23:48.680 --> 0:23:52.200 Most of antitrust at this point is oriented towards are 0:23:52.280 --> 0:23:55.280 consumers being heard. Whereas the issue with Amazon, for example, 0:23:55.440 --> 0:23:58.320 is there's a strong argument that what it's doing is 0:23:58.359 --> 0:24:03.000 harming its suppliers. Um, you did so for a lot 0:24:03.080 --> 0:24:06.720 of different reasons. Um, you know, they'd like to change 0:24:06.760 --> 0:24:11.720 the laws on Facebook. Other companies can't buy without proving 0:24:11.760 --> 0:24:15.920 that doing so well enhanced competition and health consumers. Yeah, 0:24:16.000 --> 0:24:21.119 so there's certainly possibility of action under interesting law. I mean, 0:24:21.200 --> 0:24:25.840