WEBVTT - Why Poland Is Talking About $1 Trillion in German Reparations 0:00:05.800 --> 0:00:08.720 Welcome to the Bloomberg p m L Podcast. I'm pim Fox. 0:00:08.760 --> 0:00:11.520 Along with my co host Lisa Abramowitz. Each day we 0:00:11.640 --> 0:00:15.120 bring you the most important, noteworthy, and useful interviews for 0:00:15.200 --> 0:00:17.840 you and your money, whether you're at the grocery store 0:00:17.960 --> 0:00:20.720 or the trading floor. Find the Bloomberg p m L 0:00:20.840 --> 0:00:31.280 Podcast on Apple Podcasts, SoundCloud, and Bloomberg dot Com. I 0:00:31.320 --> 0:00:34.080 am honored to bring in if you told vash Chikovsky. 0:00:34.159 --> 0:00:36.960 He is Minister of Foreign Affairs for the Republic of 0:00:37.000 --> 0:00:40.240 Poland and he comes to us from our Washington, d C. Office. 0:00:40.400 --> 0:00:42.800 Have you told? Thank you so much for joining us. 0:00:42.920 --> 0:00:45.320 I would love to start with a number of news 0:00:45.479 --> 0:00:47.839 news articles that have been running in the US. There 0:00:47.840 --> 0:00:51.920 seems to be a perception that laws that ultimately were rejected, 0:00:52.080 --> 0:00:55.480 that were brought up in Poland to possibly remove the 0:00:55.520 --> 0:00:58.800 independence of the judicial area were broadly slammed by the 0:00:58.840 --> 0:01:02.240 European Union and if so, exacerbated the tensions. Do you 0:01:02.280 --> 0:01:05.080 think that the tensions between Poland and the European Union 0:01:05.080 --> 0:01:07.920 have been overblown? Do you think that they're getting worse? Uh? 0:01:08.080 --> 0:01:10.959 And what was sort of the endgame here? Yes, good morning, 0:01:11.000 --> 0:01:14.280 Thank you for for inviting me for this for this program. 0:01:15.080 --> 0:01:18.679 These are rumors, of course, sounds very scary, but not 0:01:18.680 --> 0:01:23.679 not true. We are trying to to finish on our transformation. 0:01:24.040 --> 0:01:27.920 Transformation we started twenty seven eight years ago after the 0:01:27.959 --> 0:01:31.240 collapse of the Soviet Union, the Soviet Block and the 0:01:31.360 --> 0:01:36.360 last area which was not transformed, which was not modernized. 0:01:36.800 --> 0:01:41.040 It is a judicial system, legal system UH. And that 0:01:41.480 --> 0:01:43.760 was the demand of how people when two years ago 0:01:43.880 --> 0:01:49.000 we we were we won the election, so generally there 0:01:49.080 --> 0:01:53.160 was appeal of a population to to change, to modernize 0:01:53.160 --> 0:01:56.560 this system. We are not inventing anything new. We are 0:01:56.600 --> 0:02:00.000 just importing the solution, existing solution which are existing already 0:02:00.120 --> 0:02:04.560 in the other members of the European Union. The problem 0:02:04.640 --> 0:02:07.960 is that we are engaged in a in a dialogue. 0:02:07.960 --> 0:02:10.560 There are no tensions. There is a dialogue with the 0:02:10.440 --> 0:02:12.720 with the Commission because there are some of our standards 0:02:12.720 --> 0:02:16.720 in the Commission and Commission things that what is acceptable 0:02:16.800 --> 0:02:22.040 for other countries, especially the Western UH friends in the 0:02:22.080 --> 0:02:25.440 European Union, is not acceptable for the young democracy like Poland, 0:02:25.760 --> 0:02:30.400 is not acceptable for the country which has UH allegedly 0:02:31.120 --> 0:02:35.440 a different legal culture in our parts of Europe. This 0:02:35.520 --> 0:02:38.160 is unacceptable for for us. We are as. I said, 0:02:38.200 --> 0:02:41.560 we are not inventing anything new, We are not breaking 0:02:41.600 --> 0:02:45.720 the tradition. We are not imposing any restriction on the 0:02:45.800 --> 0:02:49.600 judicial system. We just want to modernize the system, make 0:02:49.639 --> 0:02:52.520 it more efficient. Well, but what's what's at stake here? 0:02:52.560 --> 0:02:55.360 Because there is the potential for the European Union to 0:02:55.440 --> 0:03:00.160 even reduce the funding that it gives you, or to 0:03:00.200 --> 0:03:02.920 reduce voting rights. Do you think that that's at stake, 0:03:02.960 --> 0:03:06.040 because that's just some of the things that have been positive. No, 0:03:06.280 --> 0:03:09.880 this is not at stake because they cannot reduce funding 0:03:09.960 --> 0:03:13.840 because the fundings are not for the good behavior or 0:03:13.960 --> 0:03:19.280 for certain pattern of behavior. The structural funds we are 0:03:19.280 --> 0:03:23.360 getting from from Brussels a part of the deal we 0:03:23.400 --> 0:03:26.280 signed when we join European Union. They are part of 0:03:26.320 --> 0:03:30.480 the European Treatise and this is a compensation for the 0:03:30.560 --> 0:03:35.520 opening of the market. We join European Union two thousand four, 0:03:35.920 --> 0:03:39.200 but we open our markets at the beginning of ninety nineties, 0:03:39.240 --> 0:03:43.360 so more than twenty about twenty five years ago. So 0:03:43.360 --> 0:03:45.640 so this is the deal in your opinion, that the 0:03:45.720 --> 0:03:50.640 weaker economies can be can compensate the opening of the 0:03:50.680 --> 0:03:54.160 markets to the bigger and sow economy said, so this 0:03:54.280 --> 0:03:58.640 is nothing to do with status of democracy or or 0:03:59.480 --> 0:04:03.800 legal system. The other problem, of course is the voting 0:04:04.160 --> 0:04:10.600 procedure Article seven of a treaty. But it requires the 0:04:10.680 --> 0:04:16.160 consensus in your opinion too to prevent us from participating voting. 0:04:16.200 --> 0:04:18.400 There is no such a consensus because there are a 0:04:18.440 --> 0:04:21.799 number of countries members of the opinion. They believe that 0:04:22.040 --> 0:04:25.839 there is nothing wrong going on in Poland. Um One other, 0:04:26.000 --> 0:04:29.080 one other article that has definitely one other idea that 0:04:29.120 --> 0:04:32.360 has called the attention of the media in the United 0:04:32.400 --> 0:04:36.840 States is this request by Poland that Germany owes it 0:04:37.000 --> 0:04:40.279 at least one trillion dollars in reparations for World War 0:04:40.360 --> 0:04:44.680 two damages. Has a Poland discussed how to pursue this 0:04:44.800 --> 0:04:49.039 money and how this will impact relations between Warsaw and Berlin. 0:04:49.800 --> 0:04:52.279 This is there is no official decision of the government. 0:04:52.320 --> 0:04:57.719 This is just ongoing discussion, discussion among her politicians in 0:04:57.760 --> 0:05:01.680 the media. Of course, the problem is that after the 0:05:01.720 --> 0:05:05.680 Second World War there was no peace treaty with Germany, 0:05:05.880 --> 0:05:11.240 and neither Poland nor many other countries which were devastated 0:05:11.279 --> 0:05:15.960 by the German occupation. German Nazi occupation never got any 0:05:16.560 --> 0:05:20.200 any money any compensation for the for the lost. Let 0:05:20.279 --> 0:05:23.400 me remind you that during the Second World War, Poland 0:05:23.480 --> 0:05:28.880 lost six million people. Uh. They after the Second World 0:05:28.880 --> 0:05:33.920 War they moved the foreign countries, they moved our borders, 0:05:34.920 --> 0:05:39.680 and of course the number we lost in a material way. 0:05:40.440 --> 0:05:45.200 For instance, the capital of Poland, Warsaw, was devastated that 0:05:45.720 --> 0:05:49.000 more than eighty percent, maybe nine of the of the 0:05:49.040 --> 0:05:52.159 buildings were totally destroyed in the ninety five it was 0:05:52.200 --> 0:05:57.160 a stone desert. So uh, this is a discussion right 0:05:57.200 --> 0:06:00.240 now which is going on in Poland. Uh why we 0:06:00.320 --> 0:06:04.080 haven't got any conversation for the sort the tragic loss 0:06:04.440 --> 0:06:07.800 during the Second World War. But decision is not taken 0:06:07.839 --> 0:06:10.520 by the by the government. So those figures who are 0:06:10.560 --> 0:06:14.839 just mentioned just figures which are existing in the media only. 0:06:15.360 --> 0:06:18.919 And just real quick with Poland, consider a similar request 0:06:19.080 --> 0:06:23.760 from Russia. Some have suggested that's another problem, of course, 0:06:23.800 --> 0:06:30.760 because uh we were partitioned, uh due to the UH 0:06:30.960 --> 0:06:36.960 from the German Soviet Pact. Uh. And Uh, that's the 0:06:37.000 --> 0:06:41.200 war started the nine thirty nine and Poland was occupied 0:06:41.680 --> 0:06:45.840 parsonally by Nazi chairman, but party by by Soviets. And 0:06:45.880 --> 0:06:48.960 then of course we had forty five years or domination 0:06:49.040 --> 0:06:53.520 over over Poland. So all these things are considered right 0:06:53.520 --> 0:06:56.760 now and discussed in Poland. But as I said, there 0:06:56.880 --> 0:06:59.520 is no decision taking the government yet. Thank you so 0:06:59.600 --> 0:07:01.919 much for joining us. Truly a pleasure to speak with 0:07:01.920 --> 0:07:05.679 you and for setting the stage from a point of honesty, 0:07:05.800 --> 0:07:10.120 the told Vashtchikovsky, Minister of Foreign Affairs for the Republic 0:07:10.160 --> 0:07:13.800 of Poland. Uh coming to us from our Washington d 0:07:13.920 --> 0:07:19.480 C Bureau. Definitely interesting as the Polish government forms and 0:07:19.720 --> 0:07:34.080 negotiates with the European Union for its place. Well, the 0:07:34.120 --> 0:07:37.440 dollar is pretty much a flat today after I guess 0:07:37.440 --> 0:07:39.880 surging yesterday, but I guess it's just a surge compared 0:07:39.920 --> 0:07:44.160 to the incredible weakening that we've seen throughout of the 0:07:44.200 --> 0:07:47.440 dollar versus it's peers. I want to be in Doug Barthwick, 0:07:47.440 --> 0:07:50.160 he's managing director and head of f X at Chapter 0:07:50.240 --> 0:07:52.880 Lane and Company. And Doug, you know, this really is 0:07:53.240 --> 0:07:57.080 one of the key questions in financial markets of the year, 0:07:57.480 --> 0:08:00.080 which is the week dollar and how long it and 0:08:00.200 --> 0:08:04.400 keep weakening in light of the FEDS likely December rate hike. 0:08:04.760 --> 0:08:06.680 Why do you think the dollar has a good chance 0:08:06.720 --> 0:08:10.840 of continuing to weaken going forward well, rate hikes and 0:08:10.920 --> 0:08:13.400 you haven't been happening since the start of the year, 0:08:13.440 --> 0:08:16.400 and the dollars continue to weaken because as the US 0:08:16.560 --> 0:08:19.760 hikes rates other countries that the dollar trades against. They 0:08:19.760 --> 0:08:21.800 also turned around their center banks to say, you know what, 0:08:21.840 --> 0:08:24.280 we're thinking about getting out of quantity of using as well. 0:08:24.760 --> 0:08:26.960 If you actually look at the numbers that were talked 0:08:27.000 --> 0:08:29.440 about yesterday on the quantity of using and the pullback 0:08:29.480 --> 0:08:31.640 for the balance sheet, it's going to be up until 0:08:31.680 --> 0:08:34.440 it it's gonna take until April of next year for 0:08:34.480 --> 0:08:37.120 the balance she'd actually start getting reduced. Because really what 0:08:37.120 --> 0:08:39.959 they're doing is they're tapering the current quei or reinvestment 0:08:39.960 --> 0:08:42.959 that's happening right now. So if they turned around and 0:08:42.960 --> 0:08:45.760 said we're gonna stop reinvesting, that's one thing. But instead 0:08:45.800 --> 0:08:47.640 they said, you know what, we're gonna keep on doing. 0:08:47.840 --> 0:08:50.480 We're just gonna reduced to reinvestment by maybe six billion 0:08:50.640 --> 0:08:52.640 on the treasuries for the next three months, then after 0:08:52.679 --> 0:08:55.800 that twelve and after that eighteen. So it's gonna take 0:08:55.880 --> 0:08:58.320 quite some time for them to get to a point 0:08:58.320 --> 0:09:00.800 where they're not still reinvesting. That's gonna be April of 0:09:00.880 --> 0:09:03.080 next year, at which time fatsy l and may not 0:09:03.120 --> 0:09:05.880 even be in her position now. The week the week 0:09:05.920 --> 0:09:08.240 dollar is something that's been going on for quite some time. 0:09:08.320 --> 0:09:11.440 It's a stated fact that the president right now once 0:09:11.480 --> 0:09:13.439 a week or dollar to make the US more competitive. 0:09:13.880 --> 0:09:16.760 Secretary Treasury Nutans also pushed that point and said, it's 0:09:16.760 --> 0:09:18.920 not that the dollars we could set other there's other 0:09:18.960 --> 0:09:21.000 The dollar has been strongly as to the other countries 0:09:21.000 --> 0:09:23.359 have been way too weak. So he wants other currencies 0:09:23.400 --> 0:09:26.720 to strengthen their their currencies, and we see a continuation 0:09:26.760 --> 0:09:28.960 of that. We see yesterday's move as being a pullback 0:09:29.280 --> 0:09:32.760 based upon stop losses because folks were very much looking 0:09:32.840 --> 0:09:35.679 for the fet to step back because of hurricanes that 0:09:35.720 --> 0:09:37.800 didn't happen, So you saw a pullback based on the 0:09:37.800 --> 0:09:40.800 stop losses. Today the year is up about forty points 0:09:40.840 --> 0:09:43.640 because you know from yesterday's lows because of that, as 0:09:43.679 --> 0:09:46.520 folks read through the numbers, all right, but you know, 0:09:46.720 --> 0:09:51.079 the dollars weakening has been the biggest decline against its 0:09:51.120 --> 0:09:54.720 peers in about a decade. We're seeing a number of 0:09:55.040 --> 0:09:58.319 big investment managers starting to tiptoe back into the dollar. 0:09:58.559 --> 0:10:02.680 Implicit in your marks is the idea that European and 0:10:02.800 --> 0:10:07.040 other economies are accelerating faster than the U S is. 0:10:07.080 --> 0:10:09.480 Do you think that perhaps traders are discounting the strength 0:10:09.480 --> 0:10:12.040 that we're seeing in the economy in the US. Oh, 0:10:12.160 --> 0:10:14.600 for for sure. I don't think traders really believe that 0:10:14.640 --> 0:10:16.600 their strength in the US economy quite as much as 0:10:16.600 --> 0:10:18.600 the FETE does. And remember what the FETE did yesterday 0:10:18.640 --> 0:10:21.319 is they stated an intention, they didn't actually move the rates. 0:10:21.880 --> 0:10:24.160 And I think that's important to understand is that since 0:10:24.320 --> 0:10:27.040 the start of the year, the fedsman aggressively talking about 0:10:27.080 --> 0:10:29.480 how they're going to start raising rates, and raised rates, 0:10:29.559 --> 0:10:32.280 you know, quickly, and what's happened is the Fed step back, 0:10:32.320 --> 0:10:36.120 step back, step back. So certainly they've talked about having 0:10:36.120 --> 0:10:37.959 a rate rise at the end of this year in December, 0:10:38.000 --> 0:10:40.520 but it's still only six prices in the futures market, 0:10:40.600 --> 0:10:44.760 so folks aren't really buying into what the Feds thing. So, Doug, 0:10:45.080 --> 0:10:47.719 which is the most important cross to really watch. I'm 0:10:47.720 --> 0:10:50.160 looking at the US dollar versus the euro and it's 0:10:50.200 --> 0:10:54.160 currently at a zero point about zero point eight for 0:10:54.880 --> 0:10:59.560 euros uh per dollar. I'm wondering, where do you see 0:10:59.559 --> 0:11:01.920 that go I mean, how low can it go. But 0:11:02.080 --> 0:11:03.920 we look at the euro against the dollars, so that's 0:11:03.920 --> 0:11:07.120 a one twenty right now. We believe in the fair 0:11:07.160 --> 0:11:09.800 point right now, it's probably around one. Remember we were 0:11:09.800 --> 0:11:13.600 trading one to one thirty before Greece came into the 0:11:13.640 --> 0:11:15.559 issue and we saw the move down to one four 0:11:15.640 --> 0:11:18.480 one oh five in the euro. Grease no longer has 0:11:18.480 --> 0:11:20.880 talked about in the markets. Nobody is concerned about what's 0:11:20.880 --> 0:11:23.000 happening in greases, so there should be a natural bounce 0:11:23.040 --> 0:11:27.200 back to that level playing field of the level which 0:11:27.240 --> 0:11:29.960 we believe should happen. I think we see probably one 0:11:30.040 --> 0:11:32.160 twenty five by the end of next month, and we'll 0:11:32.160 --> 0:11:34.120 probably see one thirty by the end of the year. 0:11:34.520 --> 0:11:36.840 I think that this dollar weakness is something that isn't 0:11:36.840 --> 0:11:39.880 even talked about in Germany at all. You know, when 0:11:39.960 --> 0:11:41.960 the ECB was when drag he was asked what do 0:11:41.960 --> 0:11:45.360 you think of the Euro? In his statement, he discussed 0:11:45.360 --> 0:11:48.160 about the volatility, but he didn't discuss the specific level. 0:11:48.480 --> 0:11:51.160 The Zoo index, talked about how German industry isn't thinking 0:11:51.160 --> 0:11:54.320 about the euro whatsoever. And marqual As she's gone around, 0:11:54.440 --> 0:11:56.440 you know, trying to push to get the votes so 0:11:56.480 --> 0:11:59.360 she can run and get re elected, hasn't taught, hasn't 0:11:59.360 --> 0:12:00.680 brought up the euro at all in any of her 0:12:00.720 --> 0:12:03.439 campaign speeches. So I don't think there's a concern right 0:12:03.440 --> 0:12:05.480 now about the level of the europe by Germany. But 0:12:05.559 --> 0:12:07.440 certainly there's a concerned about the level of the dollar 0:12:07.480 --> 0:12:10.920 in the United States and the US administration certainly once 0:12:10.920 --> 0:12:13.160 a week or dollar going forward, Doug, what does this 0:12:13.200 --> 0:12:16.000 mean for emerging markets currencies which have had an incredible 0:12:16.040 --> 0:12:18.839 rally this year, do you expect them to continue going 0:12:18.880 --> 0:12:22.240 that direction as the dollar weekends do Yeah, and there's 0:12:22.240 --> 0:12:25.360 a direct correlation here. As the dollar weekends against the yen, 0:12:25.440 --> 0:12:27.840 and there's a dollar weekends against the euro, emerging markets 0:12:27.840 --> 0:12:31.120 do well. If the dollar strengthens, the emerging markets don't 0:12:31.120 --> 0:12:33.560 have a problem because emerging markets have a considerable amount 0:12:33.559 --> 0:12:36.760 of external debt that's denominating US dollars. So if the 0:12:36.800 --> 0:12:38.920 dollars should weaken, let's say dollar Mexico is to jump 0:12:38.920 --> 0:12:42.880 from up to twenty again, Mexican companies would have a 0:12:42.920 --> 0:12:44.880 bit of an issue in paying back their external debt. 0:12:45.320 --> 0:12:47.840 And so emerging markets are very sensitive to the strength 0:12:47.840 --> 0:12:49.439 of the dollar, but they do very well as the 0:12:49.480 --> 0:12:52.560 dollar weakens. Doug Borthwick, thank you so much. This is 0:12:52.640 --> 0:12:55.120 a crucial topic because even as the as a dollar, 0:12:55.200 --> 0:12:57.760 if the dollar does keep weakening, that will also provide 0:12:57.760 --> 0:13:01.200 a support to commodity prices and as Doug was saying, 0:13:01.240 --> 0:13:05.000 will also to provide ongoing support for emerging markets nations. 0:13:05.040 --> 0:13:07.720 Doug Borthwick, Managing Director and head of f X at 0:13:07.800 --> 0:13:10.960 Chatelin and Company. This is certainly something that we will 0:13:11.000 --> 0:13:13.560 be watching. There are some pretty big money managers who 0:13:13.559 --> 0:13:16.439 recently have been talking about how they're actually going back 0:13:16.520 --> 0:13:20.040 and buying the dollar, including Melon Capital Management and State 0:13:20.160 --> 0:13:35.439 Street Global Advisors. There was a fantastic story in this 0:13:35.520 --> 0:13:38.679 week's edition of Bloomberg Business Week looking at Mark Zuckerberg, 0:13:38.760 --> 0:13:42.439 the head of Facebook, and looking at his political awakening. 0:13:42.480 --> 0:13:45.760 The author of this wonderful article joins me now, Max Chafkin, 0:13:46.000 --> 0:13:50.520 technology reporter for Bloomberg Business Week, And you know, Max, 0:13:50.559 --> 0:13:55.520 I love that Mark Zuckerberg went on paternity leave almost 0:13:55.559 --> 0:13:57.240 to make a statement saying that men need to go 0:13:57.280 --> 0:14:00.160 and plut a paternity leave in order to take of 0:14:00.160 --> 0:14:02.480 their children and their families. At the end of August. 0:14:02.520 --> 0:14:07.640 But it's not exactly been in this peaceful period of absence. 0:14:07.920 --> 0:14:10.920 Has not been the most relaxing paternity leave I imagined. 0:14:10.960 --> 0:14:13.640 Not not that any paternity leave would be not that relaxing, 0:14:13.679 --> 0:14:17.920 but uh, he you know, even before uh this this 0:14:18.040 --> 0:14:22.600 story that uh, the Robert Miller's special counsel is looking 0:14:22.640 --> 0:14:25.280 into stuff that happened on Facebook. He was getting involved 0:14:25.320 --> 0:14:29.960 in the DOCCA advocacy, He was raising money for the 0:14:30.080 --> 0:14:33.720 hurricane victims. He was sort of, you know, basically present 0:14:33.760 --> 0:14:35.640 on Facebook like he had never gone away. And I 0:14:35.640 --> 0:14:37.560 think and that speaks to the fact that, you know, 0:14:37.920 --> 0:14:40.800 over the last eight months or so, Mark Zuckerberg has 0:14:40.840 --> 0:14:43.960 become a political figure. He's gone on this listening tour. 0:14:44.480 --> 0:14:48.360 He's putting himself out there in a way that you know, 0:14:48.720 --> 0:14:51.960 basically people who are running for president do. Now, that 0:14:51.960 --> 0:14:54.320 doesn't necessarily mean he's running for president, and I think 0:14:54.360 --> 0:14:57.840 that's pretty unlikely, but it is a shift for him, 0:14:57.880 --> 0:15:00.320 and it it speaks both to his influence and and 0:15:00.520 --> 0:15:04.480 power and also Facebook's um, you know, influence and power 0:15:04.640 --> 0:15:06.280 and and the fact that this company is worth like 0:15:06.480 --> 0:15:08.800 a half a trillion dollars. Well, so when you talk 0:15:08.840 --> 0:15:12.920 about his politicking, we're talking about a national tour where 0:15:12.960 --> 0:15:16.800 he went to factories, where he went to churches, a 0:15:16.960 --> 0:15:22.240 very classic kind of, uh campaign run sort of affair. 0:15:22.880 --> 0:15:25.800 If it's not to set the stage for a possible 0:15:25.840 --> 0:15:29.400 political career, why is he doing it? So? I think 0:15:29.720 --> 0:15:32.120 it's it is possible that he's setting the stage for 0:15:32.120 --> 0:15:34.640 a political career if he's not UM and he says 0:15:34.680 --> 0:15:37.480 he's not running for president. He told me and my 0:15:37.520 --> 0:15:39.840 co writer Sarah Fraar he's not running for president. I 0:15:39.880 --> 0:15:43.240 think what he's doing is basically playing a little bit 0:15:43.240 --> 0:15:46.320 of defense. I mean, I think the uh, the events 0:15:46.320 --> 0:15:49.520 over the last uh a few months, really pretty much 0:15:49.560 --> 0:15:53.080 since the election, UM have raised questions about how Facebook 0:15:53.160 --> 0:15:56.360 is affecting our discourse. Mark Zuckerberg kind of in the 0:15:56.560 --> 0:15:59.920 immediate aftermath at election said he didn't think that fake news, 0:16:00.400 --> 0:16:01.920 you know, was much of a thing and kind of 0:16:02.000 --> 0:16:04.960 laughed it off. And as we've learned more both about 0:16:05.160 --> 0:16:08.280 you know, kind of what happened during the presidential campaign 0:16:08.280 --> 0:16:11.240 and how important social media was, and now these new 0:16:11.440 --> 0:16:14.440 revelations that maybe it wasn't just that um, you know, 0:16:14.560 --> 0:16:18.080 that Clinton and Trump used social media in the campaign, 0:16:18.120 --> 0:16:20.200 which we kind of knew, but that the you know, 0:16:20.320 --> 0:16:22.640 the Russian government or people connect to the Russian government, 0:16:22.640 --> 0:16:24.960 we're also trying to use this thing. Um, it really 0:16:25.000 --> 0:16:28.200 cuts against the sort of brand promise of Facebook, and 0:16:28.240 --> 0:16:31.080 I think could lead to, you know, additional regulation. We're 0:16:31.120 --> 0:16:33.840 we're seeing, um, you know a lot of scrutiny in 0:16:33.880 --> 0:16:37.760 Europe right now. You know that there's there, there's several 0:16:37.920 --> 0:16:41.640 different actions going on, and and that scrutiny is now 0:16:41.680 --> 0:16:44.120 migrating to the United States. So I think if he's 0:16:44.120 --> 0:16:48.480 not running for president, um, he is probably partly you know, 0:16:48.600 --> 0:16:51.200 just wants to get a better sense of whose customers 0:16:51.240 --> 0:16:53.760 are and I think partly wants to you know, show 0:16:53.800 --> 0:16:57.120 people that Facebook is is not to be feared. Yeah. Well, 0:16:57.120 --> 0:16:59.760 I imagined that the regulation is definitely something that they 0:16:59.800 --> 0:17:03.120 talk a lot about internally at Facebook. Another tension that 0:17:03.200 --> 0:17:06.359 your article really highlighted, which I really loved, was this 0:17:06.440 --> 0:17:09.080 idea that while Mark Zuckerberg would like to think of 0:17:09.080 --> 0:17:12.199 Facebook is bringing people together and has espoused, uh, you know, 0:17:12.240 --> 0:17:15.520 sort of the universalism of a lot of tech companies, 0:17:16.000 --> 0:17:19.679 a lot of people criticize Facebook for alienating people and 0:17:19.760 --> 0:17:22.879 not being a satisfying kind of relationship building tool, but 0:17:23.080 --> 0:17:25.840 rather something that keeps people in their bubbles and frankly 0:17:26.080 --> 0:17:29.040 away from actual human interaction, right. I mean this is 0:17:29.119 --> 0:17:31.040 he's sort of over the last few months he's developed 0:17:31.040 --> 0:17:33.760 this kind of political philosophy, which is that, uh, the 0:17:33.840 --> 0:17:38.680 reason that Donald Trump won, the reason that Brexit um, 0:17:38.720 --> 0:17:40.680 you know, happened, the reason that we have this rise 0:17:40.680 --> 0:17:43.760 of nationalism you know, around the world is that there's 0:17:43.760 --> 0:17:47.400 sort of a sense of isolation. People are not joining 0:17:47.440 --> 0:17:50.080 things in the way they used to. Church attendance is lower, 0:17:50.240 --> 0:17:53.080 you know, little leagues are lower. This this idea became 0:17:53.119 --> 0:17:56.119 popular around two thousand with the publications book Bowling Alone. 0:17:56.600 --> 0:18:00.240 Zugerberg has kind of discovered the idea. The problem is 0:18:00.320 --> 0:18:02.720 that a lot of people think Facebook is sort of 0:18:02.760 --> 0:18:06.399 causing this exactly, and so so he his argument is 0:18:06.400 --> 0:18:08.040 sort of like the way to make the world better 0:18:08.160 --> 0:18:11.200 is with more Facebook, whereas a critic might say no, 0:18:11.320 --> 0:18:14.280 in fact, you know, you're this is this is like 0:18:14.400 --> 0:18:16.560 the an expression of all all the things that are 0:18:16.560 --> 0:18:18.280 wrong with the world. And I think that is what 0:18:18.480 --> 0:18:22.080 is so dangerous about what's happening in Washington right now. 0:18:22.119 --> 0:18:26.240 Like that is why Facebook is worried, because this really 0:18:26.280 --> 0:18:29.840 cuts against the sort of promise of the of the company. Yeah, 0:18:29.880 --> 0:18:31.800 you you had a statistic in here that about five 0:18:31.880 --> 0:18:36.280 percent of Facebook users consider the interactions that they have 0:18:36.760 --> 0:18:40.359 to be meaningful on Facebook. That was stunning to me. 0:18:41.040 --> 0:18:43.240 How does he respond to that? So, so the statistic 0:18:43.320 --> 0:18:46.680 is they're they're part of groups that they find meaningful. 0:18:46.920 --> 0:18:49.320 Um and and and a lot of almost everyone on 0:18:49.359 --> 0:18:52.560 facebooks sort of has interacted with the group's portion of it. 0:18:52.560 --> 0:18:54.480 It's it's like how you go to an event or 0:18:54.720 --> 0:18:57.200 or whatever. Pant suit Nation, the Hillary Clinton group was 0:18:57.240 --> 0:19:00.800 a group. Um. Mark Zuckerberg is disp wointed in that 0:19:00.920 --> 0:19:03.000 he you know, the fact that only a hundred million 0:19:03.000 --> 0:19:04.879 people hundred million people sounds like a lot are in 0:19:04.920 --> 0:19:07.879 meaningful groups strikes him as as a failure of the 0:19:07.960 --> 0:19:10.200 platform and something that needs to be corrected. And he's 0:19:10.280 --> 0:19:13.280 told his employees, as we've as we wrote in the story, 0:19:13.320 --> 0:19:15.840 that he wants to get to a billion people in 0:19:15.880 --> 0:19:21.280 meaningful groups. Mark Zuckerberg loves things that come in you know, billions. Uh. 0:19:21.359 --> 0:19:23.200 And so that's the big goal. That's the push. That 0:19:23.280 --> 0:19:26.639 would be like a tenfold improvement in in their group's products. 0:19:26.640 --> 0:19:28.199 So that's what they're working on right now. This is 0:19:28.200 --> 0:19:30.080 a fantastic story. I love the ending to or he 0:19:30.119 --> 0:19:33.439 really bristles against former coverage of Bloomberg Business Week and 0:19:33.480 --> 0:19:37.280 how he outsources some of his personalized Facebook page and 0:19:37.480 --> 0:19:39.760 other um. It sort of highlights how he wants to 0:19:39.800 --> 0:19:42.159 seem like the guy next door, kind of can't be 0:19:42.160 --> 0:19:43.960 because he likes things and billions and most of us 0:19:44.000 --> 0:19:45.679 can't afford to Max chaff and thank you so much 0:19:45.680 --> 0:19:49.200 for joining me. Max chaffin his technology reporter for Bloomberg 0:19:49.320 --> 0:19:53.239 Business Week, really a fabulous story. I recommend checking it 0:19:53.400 --> 0:20:10.200 out well. Right now, I have two big questions about 0:20:10.240 --> 0:20:14.800 equity markets. One is will banks benefit as the FED 0:20:14.920 --> 0:20:18.440 withdraw stimulus or not? And the second one is is 0:20:18.520 --> 0:20:21.199 tech the next shoe to drop with some of the 0:20:21.240 --> 0:20:25.560 big favorites of the year uh plunged facing a potential fall. 0:20:25.840 --> 0:20:28.200 To answer both of those questions, as Phil Orlando, chief 0:20:28.240 --> 0:20:33.080 equity strategistic Federated Investors who joins us now, Phil, I 0:20:33.119 --> 0:20:36.560 want to start with the first question. Bank stocks. They're 0:20:36.640 --> 0:20:39.080 up more than ten percent this year. A lot of 0:20:39.080 --> 0:20:41.720 people think that they're going to be in prime position 0:20:41.760 --> 0:20:44.919 to capture extra profits. For many of volatility is the 0:20:44.960 --> 0:20:47.600 fedbacks away from their stimulus as well as higher yields. 0:20:47.760 --> 0:20:50.439 What we're seeing now is not a very clear picture. 0:20:50.560 --> 0:20:55.120 Volatility expectations not up even as the FED withdraw stimulus. Rates, Yes, 0:20:55.160 --> 0:20:57.040 in the short term up, but long term we're seeing 0:20:57.080 --> 0:21:00.160 that yield curve narrow. Is this a net benefit where 0:21:00.160 --> 0:21:02.040 the banks or frankly, is this going to make it 0:21:02.080 --> 0:21:04.800 even harder for the banks going forward? So our view 0:21:04.880 --> 0:21:07.760 is that the banks are one of the prime beneficiaries 0:21:07.880 --> 0:21:10.520 of of what we believe will be this sort of 0:21:10.600 --> 0:21:15.560 unfolding FED policy. So Yelling yesterday lays out UH the 0:21:15.640 --> 0:21:19.199 case for beginning to balance sheet shrinkage starting in October. 0:21:20.000 --> 0:21:23.440 UH That shrinkage over the course of the next few 0:21:23.520 --> 0:21:26.840 years should gradually take the Fed's balance sheet down from 0:21:26.840 --> 0:21:29.919 about four and a half trillion to something in the 0:21:30.000 --> 0:21:32.960 order of two and a half to three trillion dollars. 0:21:33.000 --> 0:21:34.800 That's the level that I think will be sort of 0:21:34.800 --> 0:21:37.480 the new normal for the FED. But the some of 0:21:37.480 --> 0:21:40.600 the experts have said that that process will be the 0:21:40.640 --> 0:21:44.280 equivalent of of moving interest rates up by about seventy 0:21:44.280 --> 0:21:49.280 five basis points over time UM with inflation UH troughing 0:21:49.280 --> 0:21:51.480 a little bit. Here. The FED wants to give itself 0:21:51.480 --> 0:21:54.880 a couple more months for the core PC to perk up. 0:21:55.000 --> 0:21:57.000 By the end of the year, we think that will happen. 0:21:57.080 --> 0:22:00.639 We think there's another rate high coming quarter point at 0:22:00.680 --> 0:22:03.480 the end of the year. So the prospect of the 0:22:03.560 --> 0:22:08.480 withdrawal of accommodation from the Federal Reserve, both in terms 0:22:08.680 --> 0:22:12.480 of the balance sheet and adjusting the FED funds rate, 0:22:12.840 --> 0:22:16.240 we think will will allow interest rates to move up 0:22:16.280 --> 0:22:19.080 over time. I think the bond market has started to 0:22:19.119 --> 0:22:21.840 price that in already. Just in the last month or so, 0:22:21.920 --> 0:22:25.160 we've gone from just over the two percent level. We're 0:22:25.240 --> 0:22:27.359 up in the two and a quarter to two point 0:22:27.440 --> 0:22:33.640 three percent level right now. And thank you benchmark ten's. UH. 0:22:33.800 --> 0:22:37.240 Banks will benefit from higher interest rates, it will lighten 0:22:37.320 --> 0:22:42.280 their margins. UH. Just what the Fed is doing implies 0:22:42.359 --> 0:22:46.600 that there is an expectation of firmer economic growth. Increased 0:22:46.640 --> 0:22:49.200