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Speaker 1: This is the Bloomberg Surveillance Podcast. I'm Tom Keene, along

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Speaker 1: with Jonathan Farrell and Lisa Abramowitz. Join us each day

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Speaker 1: for insight from the best and economics, geopolitics, finance and investment.

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Speaker 1: Subscribe to Bloomberg Surveillance on demand on Apple, Spotify and

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Speaker 1: anywhere you get your podcasts, and always on Bloomberg dot Com,

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Speaker 1: the Bloomberg Terminal, and the Bloomberg Business App. And we

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Speaker 1: are so thrilled to bring it. Someone truly expert on

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Speaker 1: the political economics and fabric of Europe, Aungrish Media, joins us,

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Speaker 1: chief economists of Barenburg Holgo. I'm gonna go to one

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Speaker 1: brilliant sentence in your note, Thank you France, Thank you Spain.

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Speaker 1: You made real clear the lift that provides comfort to

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Speaker 1: institutions in Europe as France and Spain are leading the

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Speaker 1: way away from recession. Does that have legs? Can it continue? Yes?

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Speaker 1: I do think it does have legs. What we are

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Speaker 1: seeing is that Europe as a whole is not falling

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Speaker 1: into winter recession, but in what you could call a

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Speaker 1: winter stag nation. Germany, most exposed to Russia, is having

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Speaker 1: a contraction in its GDP, but some of the other countries,

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Speaker 1: especially France and Spain, are making up for that. They

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Speaker 1: are not as exposed to Russia as Germany and not

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Speaker 1: as exposed to some downturn or weakness in global trade

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Speaker 1: at the moment. And this is of course good news

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Speaker 1: that the region Europe, which really last year was the

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Speaker 1: focus of all the bad news war in Europe energy,

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Speaker 1: the shock that Europe is now actually outperforming expectations. Olger

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Speaker 1: Do you think that in the e CP press conference,

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Speaker 1: uh Madame Leguard should push back on the market activity,

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Speaker 1: perhaps more aggressively than j Powell did yesterday. That is

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Speaker 1: quite possible. After all, the e CP has de facto

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Speaker 1: pre announced they're going to do another of fifty basis

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Speaker 1: points in March. Thereafter, however, they will re evaluate their approach.

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Speaker 1: That leaves the door wide open to going just up

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Speaker 1: twenty five basis points in May and beyond that we'll

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Speaker 1: have to see. The press conference may provide some clues,

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Speaker 1: but probably the e CP has not made up its

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Speaker 1: mind yet on what happens after March, so Laguard probably

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Speaker 1: cannot give us clear guidance relative to the FAT What

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Speaker 1: is clear the ECB, having started later, still has some

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Speaker 1: more route to go to the upside than the FED.

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Speaker 1: From where we are now, Okay, sufficiently restrictive? Was this

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Speaker 1: phrase that we heard a lot in December. Do you

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Speaker 1: think we are now? Well? My personal view is we

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Speaker 1: are sufficiently restrictive. But I'm fairly certain this is not

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Speaker 1: the e CPS majority view. So the majority on the

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Speaker 1: Council will want to go further fifty basis points in

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Speaker 1: March and at least twenty five basis points in May,

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Speaker 1: with the risk that they could more. But as we

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Speaker 1: have seen, for instance in the generally data or Eurozone

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Speaker 1: inflation coming down sharply and more good news in the

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Speaker 1: pipeline for March and April, it probably does not take

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Speaker 1: the ECB to go much further to get invasion back

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Speaker 1: better under control. How can I squeeze this in just quickly?

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Speaker 1: What happened to German CPI this week? And how much

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Speaker 1: can we actually read into the Eurozone CPI data? Well,

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Speaker 1: the eurone CPI data maybe revised significantly because simply for

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Speaker 1: Germany there's a change in the methodology and apparently the

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Speaker 1: Stats Office was not ready and is not ready to

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Speaker 1: apply that in time. The German data could be weird

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Speaker 1: and raise the Eurozone first estimate somewhat. What happened to

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Speaker 1: German efficiency? Holga? What happened to that? Everyone looking very good? Question.

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Speaker 1: We probably have a lack of thought the qualified staff

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Speaker 1: in many places, including some statistics office bottles. If that's

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Speaker 1: usually that's so efficient? I know it's you're telling me

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Speaker 1: the Germans weren't ready for a change in methodology. Really,

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Speaker 1: you're going to really put this out there, this battle

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Speaker 1: betunity in Germany conficient shocking Abraham right, Barry joins us

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Speaker 1: now chief currency strategist at City. Abraham's amazing at the

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Speaker 1: ECB at March sixteenth, the telling us that data dependent

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Speaker 1: at the same time they tell us they've got another

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Speaker 1: fifty Would you make of this? I actually think the

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Speaker 1: March meeting is going to be really interesting for the

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Speaker 1: e c B, and it was Chair Powell that made

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Speaker 1: it that interesting. So when you look at the market

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Speaker 1: reaction today, I think what they're telling us is that

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Speaker 1: string of hawkers Central Bank meetings is over and the

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Speaker 1: market was surprised very much yesterday. You saw that in

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Speaker 1: the reaction, and what we're seeing today is telling us

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Speaker 1: in March we won't be surprised by a similar I

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Speaker 1: think people call it pivot by the ECB in March,

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Speaker 1: and I'll be very curious to see what we hear

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Speaker 1: from President Laguard, but I would strongly advise her to

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Speaker 1: be a bit more like Powell and stop guiding too

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Speaker 1: strongly about intentions from here, because the CB two has

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Speaker 1: gone a long way, and as your colleague just said,

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Speaker 1: the data actually come in pretty cloudy of late, even

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Speaker 1: in the Euroszone. Ibrahim, Are we coming up with a

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Speaker 1: narrative to fit the flows that are going on in

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Speaker 1: markets right now? So I do think the price action

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Speaker 1: we've seen since the beginning of the year is very

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Speaker 1: strongly flow drip. Obviously, a number of things have fallen

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Speaker 1: into place, fundamentally to chiny to reopening a degree of

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Speaker 1: this inflation, but particularly when it comes to the performance

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Speaker 1: of risk assets, and particularly the riskiest of risk assets.

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Speaker 1: That's really because there's so much cash on the sidelines

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Speaker 1: and that's been that under positioning in these assets. So

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Speaker 1: there is a big flow element to the price action

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Speaker 1: we've seen yesterday, but really throughout this year so far, Ibrahm,

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Speaker 1: what's the dollar going to do? And as we're getting

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Speaker 1: lots of research notes that markets clear, we get clarity,

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Speaker 1: we move on to a lesser volatility. Does that put

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Speaker 1: new legs to an ever weaker dollar. So we do

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Speaker 1: think that that a string of dollar weakness has has

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Speaker 1: further to go. And we think that's particularly evident still

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Speaker 1: in the areas of the market that benefit from lower

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Speaker 1: rates and lower rates volatility. So that's Carrie Trades em

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Speaker 1: areas that have seen large outflows over the last few years.

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Speaker 1: Within g turn in the currency spectrum, that's probably the

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Speaker 1: end in In the end, it's the Mexican pay so

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Speaker 1: that tends to be most strongly related to th U

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Speaker 1: S rates. But if you put these things together, it

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Speaker 1: does tell you the dollar probably still has a little

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Speaker 1: bit further to go. But I would also mention Cha

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Speaker 1: Powell used to say, be humble and nimble. We're still

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Speaker 1: going to be in a in a in a very

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Speaker 1: challenging environment this year. So I don't think we're going

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Speaker 1: to see the dollar straight down down in a straight line.

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Speaker 1: I think it will go down from here and then

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Speaker 1: we'll reevaluate over the next couple of months as that

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Speaker 1: soft landing debate continue. Abraham, this was great. It's just

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Speaker 1: fantastic to catcher with you and I'm sorry this was

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Speaker 1: so sure as we worked through the e c V

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Speaker 1: right decision, Abraham like married there a city group right now,

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Speaker 1: an important conversation with Ray Luberg's wealth with this now

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Speaker 1: global chief investment strategies of black Rock, and she knows

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Speaker 1: Lawrence fi think is going to walk back the chairman's

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Speaker 1: comments yesterday, what were you thinking at PM yesterdaynd your

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Speaker 1: Bloomberg and seeing what we saw, it was quite an

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Speaker 1: incredible day. Going into the meeting itself, we thought the

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Speaker 1: focus would be around the disconnect between market pricing in

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Speaker 1: terms of cash paths, future Ray cuts and what the

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Speaker 1: fat is going to say, But what we ended up

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Speaker 1: having is a disconnect between j Powe and himself. Right

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Speaker 1: in his prepared remarks, he was very clear that they

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Speaker 1: will stay the course until the draw is down. He

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Speaker 1: was also very clear that parts of the market service inflation,

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Speaker 1: core service inflation, they have yet to see signs of

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Speaker 1: this inflation. But in the unscripted part the press conference,

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Speaker 1: he then was not clear in pushing back against the

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Speaker 1: financial conditions, and he was also distancing a little bit

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Speaker 1: from the December forecast, but without giving any clue intense

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Speaker 1: of what he thinks it could be, and that's why

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Speaker 1: markets didn't just jump. Do you have an institutional call

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Speaker 1: of a shorter duration I'm gonna call it somewhat higher

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Speaker 1: yield strategy. We're all conversant in equities and shorting. There

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Speaker 1: seems to be a massive short beat in the in

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Speaker 1: the in the bond market as well. Do you worry

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Speaker 1: about a jump condition where you get a bond shortcover

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Speaker 1: and you get price up as a general statement and

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Speaker 1: yield shockingly lower. Is that part of your probabilistic structure?

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Speaker 1: I think, Well, we have seen so far this year?

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Speaker 1: Is everything really right? So John talked about equity really

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Speaker 1: but he has been an incredible really in bound market

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Speaker 1: as well, and part of that was driven precisely as

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Speaker 1: you said, Tom, this short covering short squeeze and also

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Speaker 1: this fear of missing out. So think about everybody finishing

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Speaker 1: deeply traumatic year across aquities and bonds, and start of

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Speaker 1: twenty three, sentiments seems to be taking a turn and

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Speaker 1: people just two just wants to jump in without kind

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Speaker 1: of assessing how much of the damage is being priced

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Speaker 1: in which at this juncture, none of the damage is

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Speaker 1: being priced in People are talking about is it going

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Speaker 1: to be recessioning, is going to be soft lending markets

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Speaker 1: are pricing in takeoff from here. We're not talking about

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Speaker 1: landing anything. So you know, it's it's it's it's a

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Speaker 1: huge amount of animal spirits boosted by cash being deployed

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Speaker 1: into the market. And this is the momentum that we're seeing.

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Speaker 1: If J. Powell doesn't push back against this market, as

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Speaker 1: he did not yesterday, what's going to trigger some sort

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Speaker 1: of reversal And what we're seeing right now, I think

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Speaker 1: when it becomes clear that part of the inflation complex

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Speaker 1: is still persistent, is still sticky. So specifically we're talking

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Speaker 1: about core service acts shouter right like yes, goods service

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Speaker 1: rotation leading to goods disinflation. There is a trend that

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Speaker 1: has been many months in making shelter, expecting that to

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Speaker 1: come down over time as well, but service uh, core

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Speaker 1: service acts shelter very linked to wage dynamics as well.

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Speaker 1: Labor market is still very very tight, and I think

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Speaker 1: the jury is still out there that we can become

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Speaker 1: comfortable and complaisant that inflation is on the way down,

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Speaker 1: all the way to targets. What's your conviction level? I mean,

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Speaker 1: it's just the time to lean heavily against the tech rally,

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Speaker 1: to basically sell everything cash out and just hide out

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Speaker 1: in cash until you start to see that down. For

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Speaker 1: I think this is the time to stay invested right now.

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Speaker 1: We don't want to chase the tech really, just because

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Speaker 1: of the incredible momentum that yourself described as well, and

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Speaker 1: more broadly looking at would developed market occulties a pricing

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Speaker 1: very very positive outcome is priced for perfection. It's hard

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Speaker 1: for us to chase that. But we have had a

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Speaker 1: preference for emerging markets that have been doing really well

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Speaker 1: on a year today basis. We have had a preference

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Speaker 1: for short duration bonds and I credit and mortgage agency

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Speaker 1: bagged mortgages and all of that have been holding up

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Speaker 1: okay as well. We're talking about and everything really, so

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Speaker 1: staying investors is important way just to finish on the

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Speaker 1: Feder reserve if we can. We talked a long time

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Speaker 1: about the end of the FED put the introduction of

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Speaker 1: a FED called did that get done away with yesterday?

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Speaker 1: And that news conference, well, he was not very consistent

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Speaker 1: within himself. So I think markets are reading into it

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Speaker 1: what it wants to readly into it, which is to

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Speaker 1: jump and kind of build momentum and chase this. Really

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Speaker 1: so I think it's too early to say do we

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Speaker 1: have a fat put turning into a fat called turning

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Speaker 1: back into a fat put? We don't have a very

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Speaker 1: consistent fat at this moment. We're here from chairman po

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Speaker 1: next week. Why can I just say thank you, thank you,

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Speaker 1: thank you for tolerating from now and after every third meeting.

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Speaker 1: Really absolutely not that next time. I have thought for

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Speaker 1: days that there's only one person I want to talk

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Speaker 1: to in the tech season, and all I can say,

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Speaker 1: I'm looking it up right now. The copyright he was

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Speaker 1: like eighteen years old when he wrote this, but you know,

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Speaker 1: the copyrights back twelve years. And what book can you say,

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Speaker 1: Paul about technology with a copyright of two thousand and ten?

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Speaker 1: It is still worth still absolutely if you want to

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Speaker 1: understand Zuckerberg, you start with David Kirkpatrick and is the

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Speaker 1: Facebook effect. I can't say enough about the book At

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Speaker 1: the time, I gave it as much acclaim as I could. David,

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Speaker 1: thank you so much for joining us on your show

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Speaker 1: more often. You gotta be on my show, David that

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Speaker 1: you went in the book. I remember this, He's backing

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Speaker 1: out of a parking lot or something, and he's just

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Speaker 1: had his world turned upside down by the success of

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Speaker 1: all this. You were with me the day they went public.

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Speaker 1: You absolutely nailed the tobacco and the recovery. What was

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Speaker 1: to come to Jesus of Mr Zuckerberg yesterday? What does

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Speaker 1: the new Zuck look like? Well, I think it's taken

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Speaker 1: a few quarters for him to come to Jesus, so

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Speaker 1: to speak. He finally The way I'm looking at it is,

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Speaker 1: he's finally decided to be a business person and no

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Speaker 1: longer a starry eyed visionary, which he was able to

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Speaker 1: sustain for pretty much a decade of of of a

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Speaker 1: period when the stock and the results and the user

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Speaker 1: growth just kind of kept magically rising and he could

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Speaker 1: do whatever he wanted. And he can't do whatever he

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Speaker 1: wants anymore, although he's still got this weird obsession with

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Speaker 1: the metaverse. But I really think it's a stunning turnaround

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Speaker 1: that he's trying to be a real manager again and

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Speaker 1: more for the first time ever. Really, in your new book,

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Speaker 1: it's like seven hundred pages, folks. I'll give you the punchline,

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Speaker 1: chapter forty two. Kirkpatrick on the metaverse. Help me, David,

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Speaker 1: what's the metaverse? Well, if I really knew, I might

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Speaker 1: be more excited about it. I the metaverse as Facebook

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Speaker 1: and meta portrays it their newly renamed company in homage

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Speaker 1: to this excuse me effect doesn't work. No, no, well,

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Speaker 1: you know it's a it's a legless, cartoony game like

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Speaker 1: space that most people wouldn't want to enter. Uh and

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Speaker 1: and in fact, it takes tremendously inconvenient hardware to access

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Speaker 1: and and money and and and and an extraction from

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Speaker 1: the real world rather than engagement with it, which I

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Speaker 1: don't like. And just that alone I don't like. So

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Speaker 1: I think it is crazy and strange, weird, inexplicable, whatever

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Speaker 1: word you want to use. Why he was so and

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Speaker 1: still is so obsessed with this that he had to

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Speaker 1: rename his company. And he's willing to spend four billion

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Speaker 1: plus per quarter in losses in order to build out

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Speaker 1: this timerical vision. It is never in the near term

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Speaker 1: going to be a great business for billions of people, period,

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Speaker 1: end of story. And I don't know where he's going

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Speaker 1: with that, David, who is the voice of reason within

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Speaker 1: the senior ranks of Facebook these days, We used to

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Speaker 1: think it was Cheryl Sandberg, she has now departed. Talk

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Speaker 1: to us about who was who surrounds Mr Zuckerberg. Well,

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Speaker 1: I always had tremendous respect for Chris Cox, who left

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Speaker 1: in protest at one point and was lured back and

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Speaker 1: is now head of Product and really a very smart,

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Speaker 1: very visionary, very thoughtful, balanced human being and quite close

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Speaker 1: to Zuckerberg. So he would be my top choice, actually

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Speaker 1: my trap for who was the chief technology officer for

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Speaker 1: over a decade and was was on on stage with

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Speaker 1: me at the tech Onomy conference in November and he

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Speaker 1: was actually he still works there two days a week

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Speaker 1: as a fellow, and he was saying, you know, we

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Speaker 1: haven't explained this man diverse thing very well. And there

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Speaker 1: there's some brilliant people surrounding Zuckerberg, but Zuckerberg has a

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Speaker 1: tendency not to care what other people think. He is

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Speaker 1: so confident in his own judgment he will just go

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Speaker 1: that way no matter what. David bro at the time

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Speaker 1: we got left broader question and this goes to Techonomy

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Speaker 1: and all that you're doing with your leadership of thinking

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Speaker 1: about our American silicon valley. Well, I don't know if

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Speaker 1: you knew this, You know the ubiquitous shoes of the

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Speaker 1: stupid white souls. Kirkpatrick was the first one where has

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Speaker 1: a long time ago the rage David, you go into

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Speaker 1: some overpriced Lante stop fifteen dollars for a coffee of

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Speaker 1: him picked organic beans from Saskatchewan. Whatever. You go into

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Speaker 1: one of those pretentious shops. How is the mood changed

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Speaker 1: in your Silicon Valley? Oh, Silicon Valley is fundamentally changed.

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Speaker 1: I think forever change. I feel that the era in

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Speaker 1: which a small number of giant internet companies lad global

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Speaker 1: markets upwards has ended decisively. We are looking for a

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Speaker 1: new economic phase that cannot and will not be led

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Speaker 1: by those same companies. So that is a real disappointing

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Speaker 1: turn of events for a lot of these true believers. Look,

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Speaker 1: I'm very excited about climate tech myself, and I think

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Speaker 1: there's huge necessity for great investment in climate and a

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Speaker 1: lot of economic opportunity in doing so. So I'm hoping

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Speaker 1: that's the next phase. We are not going to see

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Speaker 1: another era of the companies like metago to three D

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Speaker 1: eight and people expected to keep going up. It's not

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Speaker 1: gonna happen. Tim Cook Apple this afternoon. Maybe it's not

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Speaker 1: the Kirkpatrick expertise. But David Kirkpatrick, Tim Cook, is he

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Speaker 1: the CEO of the pandemic for for Silicon Valley, Well,

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Speaker 1: I think him and Sakia Adela both are extraordinary leaders

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Speaker 1: who have been shining in recent times. And yeah, you know,

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Speaker 1: Apple has the benefit of not being an advertising based business,

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Speaker 1: um and that really has insulated it and the fact

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Speaker 1: that it's led by a supply chain genius, which is

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Speaker 1: what Cook is UM. So I still am optimistic about

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Speaker 1: Apple long term very much. What's your first event with

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Speaker 1: your climate text sellers forward on David Kirkpatrick and climate, Well,

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Speaker 1: I'm actually trying to come up with a book idea

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Speaker 1: that's an optimistic take on how climate can really save

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Speaker 1: the economy. Climate action can turn the economy into something

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Speaker 1: truly marvelous. I really believe that, and I don't think

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Speaker 1: that's understood. Look forward to hearing that. Of course that

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Speaker 1: dovetails is what we're doing in Bloomberg Green as well,

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Speaker 1: David Kirkpatrick, the Facebook effect. Where else can I say?

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Speaker 1: Paul a book twelve years old is still worth still

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Speaker 1: remember I remember when he was on our on our

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Speaker 1: set on talking about it and us people were really

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Speaker 1: trying to get a handle on who is this Mark Zuckerberg?

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Speaker 1: What is this Facebook thing? Um? What is social media?

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Speaker 1: Isn't social media? Pick up the phone and calling a buddy,

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Speaker 1: you know. So that was where we were back in

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Speaker 1: the day. Subscribe to the Bloomberg Surveillance podcast on Apple, Spotify,

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Speaker 1: weekday starting at seven am Eastern. I'm Bloomberg dot Com,

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Speaker 1: the I Heart Radio app tune In, and the Bloomberg

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Speaker 1: Business app you can watch us live. I'm Bloomberg Television

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Speaker 1: and always I'm the Bloomberg Terminal. Thanks for listening. I'm

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Speaker 1: Tom Keane, and this is Bloomberg