WEBVTT - Coronavirus Won't Be The Thing To Cause A Recession 0:00:02.640 --> 0:00:05.320 Welcome to the Bloomberg Penel Podcast. I'm Paul swing you, 0:00:05.360 --> 0:00:07.640 along with my co host Lisa Brahma wits. Each day 0:00:07.720 --> 0:00:10.240 we bring you the most noteworthy and useful interviews for 0:00:10.280 --> 0:00:12.520 you and your money, whether at the grocery store or 0:00:12.560 --> 0:00:15.480 the trading floor. Find a Bloomberg Penil podcast on Apple 0:00:15.520 --> 0:00:17.959 podcast or wherever you listen to podcasts, as well as 0:00:17.960 --> 0:00:20.360 at Bloomberg dot com. Police and I've been talking about 0:00:20.480 --> 0:00:23.280 really over the last several days. You know, we're somewhat 0:00:23.320 --> 0:00:27.440 surprised at how well the equity markets are kind of discounting, 0:00:27.480 --> 0:00:31.360 if you will, the coronavirus and the economic income economic 0:00:31.440 --> 0:00:35.080 impact that may have going forward. Help us kind of 0:00:35.120 --> 0:00:37.120 put into perspective kind of what's going on out there 0:00:37.120 --> 0:00:38.720 in the world. We welcome, as always, our good friend 0:00:38.720 --> 0:00:42.000 Barry Ridholtz, Bloomberg Opinion columist and host of Masters in 0:00:42.080 --> 0:00:44.839 Business on Bloomberg Radio, also the founder and chairman and 0:00:44.880 --> 0:00:47.920 chief investment officer Rid Holtz Wealth Management, joining us here 0:00:47.960 --> 0:00:51.519 on our Bloomberg Interactive Broker Studio. So, Barry, one of 0:00:51.560 --> 0:00:53.279 the things that you know, people have been were ten 0:00:53.360 --> 0:00:55.520 or eleven years into this economic cycle, and people were 0:00:55.560 --> 0:00:58.360 thinking about what's going to cause or push us into 0:00:58.360 --> 0:01:00.880 the next recession. What are your thoughts on that as 0:01:00.880 --> 0:01:03.080 we think about the coronavirus and all the other crazy 0:01:03.120 --> 0:01:05.280 things going on out in the world. So, the two 0:01:05.360 --> 0:01:11.600 big things I keep hearing from pundits and investors and economists. 0:01:12.040 --> 0:01:16.039 One is a geopolitical event, and certainly the coronavirus qualifies 0:01:16.080 --> 0:01:18.959 as that. And the other is this. You know, look 0:01:19.000 --> 0:01:24.200 at Tesla, This this crazy tech boom and bubble is 0:01:24.200 --> 0:01:26.440 going to lead us to a recession. And I don't 0:01:26.440 --> 0:01:32.080 think either of those are genuine recessionary factors. Let's start 0:01:32.080 --> 0:01:34.800 with the coronavirus, which I know you guys can't get 0:01:34.920 --> 0:01:37.120 enough of. You been talking about it for solidly for 0:01:37.120 --> 0:01:40.760 a week. Look, this is gonna be the case. He well, 0:01:40.760 --> 0:01:43.000 he wants to be. Version. The a version is the 0:01:43.240 --> 0:01:45.840 is the problematic. Look at that. You think we're obsessed. 0:01:45.880 --> 0:01:52.960 You actually light here. So when you look at the 0:01:53.000 --> 0:01:56.160 impact of this, it's going to affect imports and exports 0:01:56.160 --> 0:02:00.520 out of China, It'll affect Australia and Korea and Vietnam. Um, 0:02:00.560 --> 0:02:03.440 there'll be some knock on effect in the United States. 0:02:03.480 --> 0:02:07.840 But this isn't the sort of thing without its spiraling 0:02:08.120 --> 0:02:11.239 wildly out of control. This isn't the sort of thing 0:02:11.360 --> 0:02:13.880 that leads to a recession. So we have less than 0:02:13.880 --> 0:02:17.080 a thousand deaths, right, which are tragic, and we have 0:02:17.560 --> 0:02:21.840 about ten thousand cases, and I think the death rate 0:02:21.880 --> 0:02:25.480 is somewhere around two p which is high. But last 0:02:25.560 --> 0:02:28.520 year in the United States were ten thousand influenza deaths. 0:02:29.320 --> 0:02:32.480 The flu kills ten thousand people a year out of 0:02:32.480 --> 0:02:35.400 admittedly much higher infection rates. It's a it's about a 0:02:35.400 --> 0:02:40.160 tenth or so. This doesn't cause a global recession. But 0:02:40.200 --> 0:02:42.920 this is basically what's being priced into the market today 0:02:42.919 --> 0:02:45.680 that people are saying, we hear you. Valuations in the 0:02:45.680 --> 0:02:49.079 tech companies high, and yet this is the future, so well, 0:02:49.080 --> 0:02:51.320 why not? And it seems to be justified to some 0:02:51.360 --> 0:02:53.639 degree by some of the results. It's much it's more 0:02:53.680 --> 0:02:55.400 than that. I'm gonna jump up right here, all right. 0:02:55.680 --> 0:02:57.359 It's much more than that, because if you look at 0:02:57.360 --> 0:03:01.600 the trailing five year returns, the SMP five hundred is 0:03:01.680 --> 0:03:05.880 up sixty over the past five years. The tech sector 0:03:06.400 --> 0:03:09.080 a lot more growth, a lot more potential. It's up 0:03:09.080 --> 0:03:12.959 a hundred and twenty, which sounds like a lot. Look 0:03:13.000 --> 0:03:15.799 at the exact same five year period only instead of 0:03:15.840 --> 0:03:21.040 going back from February, look at it from February two thousand, 0:03:21.480 --> 0:03:24.960 the previous five years, the NASDAC gained eight hundred and 0:03:25.000 --> 0:03:29.240 sixty five seven times the past five years growth of 0:03:29.280 --> 0:03:32.040 the NASDAC. Now. And let me also point out that 0:03:32.320 --> 0:03:36.640 tech stocks are making bootles and bootles of money. They're 0:03:36.840 --> 0:03:41.360 enormously profitable. Look at look at Apple, Microsoft, Amazon, go 0:03:41.440 --> 0:03:43.600 down the list of the amount of cash on the 0:03:43.600 --> 0:03:47.200 balance sheet. This is not the dot com era, This 0:03:47.280 --> 0:03:51.840 isn't even remotely close. These are large, profitable companies, some 0:03:52.000 --> 0:03:57.040 of which are monopolies Google, Facebook arguably monopolies or essentially 0:03:57.080 --> 0:04:00.880 I just pointed out something that Danielle DiMartino booth um 0:04:01.000 --> 0:04:04.920 Um just retweeted. She appears on our show often basically 0:04:04.960 --> 0:04:06.560 just kind of referencing what's going on in the repo 0:04:06.640 --> 0:04:09.600 market and the fact that the Fed's injecting money into 0:04:09.680 --> 0:04:11.880 the short end of the market, and she says that 0:04:12.160 --> 0:04:15.240 is what's driving the markets. Everybody is entitled to be 0:04:15.320 --> 0:04:17.839 as wrong as they want, and I have been arguing 0:04:17.839 --> 0:04:21.719 with daniel de Martino about this for a solid decade. 0:04:22.480 --> 0:04:25.080 Let's assume she's right Okay, so the Fed is doing this. 0:04:25.520 --> 0:04:28.000 Now you know the Fed is driving the market higher 0:04:28.040 --> 0:04:30.600 than you must really like stocks because there is no 0:04:30.680 --> 0:04:33.279 sign the Fed's gonna stop doing this. I don't believe 0:04:33.400 --> 0:04:37.880 the repo market directly in equity value, but put the 0:04:37.880 --> 0:04:39.680 repo market aside, because a lot of people say that 0:04:39.680 --> 0:04:42.400 that's just completely a structural issue. It's not necessarily pumping 0:04:42.400 --> 0:04:44.520 liquidity into markets. Uh. There have been a lot of 0:04:44.600 --> 0:04:47.880 arguments build Dudley in particular, making it in a Bloomberg 0:04:47.880 --> 0:04:50.400 opinion column recently in former New York FED president. But 0:04:50.480 --> 0:04:53.400 just on a larger point here, this concept of Fed stimulus, 0:04:53.400 --> 0:04:55.599 I think it's poignant at a time when Christine Lagarde 0:04:55.640 --> 0:04:59.159 came out overnight the ECB president and said, we don't 0:04:59.240 --> 0:05:03.600 have that much more leverage to lower rates to stimulate 0:05:03.600 --> 0:05:07.719 the economy. Hey, lawmakers, it's your turn, and that's what 0:05:07.839 --> 0:05:10.440 she was saying. And you're hearing this increasingly, this feeling 0:05:10.560 --> 0:05:13.360 that yeah, they're in there supporting the market, but they're 0:05:13.400 --> 0:05:16.160 running out of ammunition. That doesn't concern you. The fact 0:05:16.160 --> 0:05:18.200 that they're running out of ammunition and they haven't gotten 0:05:18.320 --> 0:05:23.000 inflation up further, and you're seeing capex go down. I mean, 0:05:23.000 --> 0:05:24.520 there are a whole host of things you can point 0:05:24.520 --> 0:05:26.599 to to be barished. So I have a post of 0:05:26.680 --> 0:05:29.960 on the blog a couple of years ago with a quote, 0:05:30.000 --> 0:05:32.720 the FETE is running out of ammunition. Central bankers running 0:05:32.720 --> 0:05:35.280 out of communition. This is a slide in the presentation 0:05:35.320 --> 0:05:38.160 I do. Every year for the past twelve years, someone 0:05:38.200 --> 0:05:39.720 has come out and said the FETE is running out 0:05:39.720 --> 0:05:42.360 of ammunition, And as far as I can tell, they 0:05:42.400 --> 0:05:47.000 have an infinite amount of ammunition. Because they issue credit 0:05:47.040 --> 0:05:51.840 and they affect rates ps. Nobody is making buy or 0:05:51.880 --> 0:05:55.760 cell decisions these days, about capex, about homes, about any 0:05:56.960 --> 0:06:01.000 large purchase um because of we're its are if rates 0:06:01.000 --> 0:06:04.320 go up a percent, they're still historically cheap, so that 0:06:04.560 --> 0:06:07.640 that's not the issue. When we'd say the FED is 0:06:07.720 --> 0:06:11.520 running out of ammo, the question is how low are 0:06:11.560 --> 0:06:14.120 they going to keep rates and for how long? And 0:06:14.160 --> 0:06:18.480 how much is that affecting other people's UM purchase decisions, 0:06:18.560 --> 0:06:23.440 consumer demand, etcetera. I don't like the entire FED argument, 0:06:23.560 --> 0:06:27.960 the central bank argument. It's clear the economy is instill 0:06:28.000 --> 0:06:30.920 in a post credit crisis state and it is not 0:06:31.080 --> 0:06:33.880 the most robust. Contrary to what you may have heard 0:06:33.880 --> 0:06:37.080 at the State of the Union address, the global economy 0:06:37.120 --> 0:06:40.200 and the U S economy have been highly dependent on 0:06:40.320 --> 0:06:43.320 monetary policy. I'll give that much to Danielle. She's right 0:06:43.360 --> 0:06:47.159 about that. And where Christine Legard is half right is 0:06:47.200 --> 0:06:51.880 that we understand the Kinsian playbook in a crisis, when 0:06:52.080 --> 0:06:56.000 when demand from consumers and demand from UH the business 0:06:56.000 --> 0:07:00.000 sector drops, the government should step in with fiscal stimulus. 0:07:00.040 --> 0:07:03.760 The fact that we've gone so long relying mostly on 0:07:03.839 --> 0:07:07.719 monetary policy is a giant policy mistake. It should have 0:07:07.720 --> 0:07:11.760 been fiscal stimulus from day one, with monetary stimulus right 0:07:11.800 --> 0:07:16.560 behind it. Christine Legarde is absolutely right, albeit a decade late, 0:07:17.040 --> 0:07:20.560 and it is remember the Austerians in the UK and Europe. 0:07:20.840 --> 0:07:23.760 They took a bad situation and said, how could we 0:07:23.880 --> 0:07:27.840 make this much much worse? I know, let's cut back 0:07:27.880 --> 0:07:31.680 spending right into the teeth of a drop of demands, 0:07:31.720 --> 0:07:35.800 and they very successfully made the circumstances in Europe much worse. 0:07:36.120 --> 0:07:40.440 There is a reason why the US recovery preceded that 0:07:40.520 --> 0:07:44.280 in Japan and then in Europe. We recognize this immediately 0:07:44.440 --> 0:07:47.720 for what it was. We had Bernanke doing monetary stimulus, 0:07:47.880 --> 0:07:50.560 and we still did a modest seven or eight hundred 0:07:50.560 --> 0:07:53.160 billion dollar stimulus should have been three or four trillion. 0:07:53.240 --> 0:07:55.600 But let's hold that aside. Barry rid Holts, founder of 0:07:55.640 --> 0:07:59.800 red Holts Wealth Management, Bloomberg opinion columnist, founder of rit Holts, 0:07:59.800 --> 0:08:04.200 while the management and incredible orator on the woes and 0:08:04.280 --> 0:08:07.320 the lack of fiscal stimulus, I will say, I love 0:08:07.360 --> 0:08:10.280 them sitting around thinking how can we make this much 0:08:10.400 --> 0:08:24.480 much worse? Here we go, we're gonna be hearing from 0:08:24.480 --> 0:08:28.800 President Trump after he was acquitted of the impeachment charges 0:08:28.840 --> 0:08:32.200 brought to him by the House of Representatives. Senators, particularly 0:08:32.240 --> 0:08:36.280 the Republicans, really joined forces and voted to acquit him. 0:08:36.360 --> 0:08:39.280 Joining us now to discuss Preneur, a senior editor for 0:08:39.320 --> 0:08:42.360 the National Review, also a Bloomberg opinion columnist, coming to 0:08:42.480 --> 0:08:45.280 us from Washington, d C. I just want to start 0:08:45.280 --> 0:08:49.800 a mesh uh your opinion of the stance that Republicans took. 0:08:49.840 --> 0:08:52.160 Do you think that they did the right thing in 0:08:52.240 --> 0:08:57.880 acquitting President Trump. I think that Senator Romney had the 0:08:57.920 --> 0:09:02.520 better of the argument among Republicans. I think that President 0:09:02.640 --> 0:09:05.599 Trump abused his power, and even some of the Republicans 0:09:05.840 --> 0:09:10.600 who voted to acquit him agreed with that. Uh and UH. 0:09:10.640 --> 0:09:13.719 The impeachment power was put into the Constitution by the 0:09:13.760 --> 0:09:18.320 founders precisely to deal with presidential abuses of power of 0:09:18.360 --> 0:09:22.720 this nature. So I think he should have been convicted. Remesh. 0:09:22.800 --> 0:09:25.800 The National Review is thought of as a right leaning, 0:09:25.800 --> 0:09:30.560 a conservative leaning, typically Republican publication. How much pushback do 0:09:30.679 --> 0:09:32.920 you get when you say things like this given the 0:09:32.920 --> 0:09:36.240 fact that President Trump has a near record amount of 0:09:36.280 --> 0:09:40.560 support among Republicans, Well, the official editorial position of the 0:09:40.600 --> 0:09:42.960 magazine is on the other side. For me, most of 0:09:42.960 --> 0:09:45.080 my colleagues are on the other side, So I do 0:09:45.240 --> 0:09:51.360 get a lot of uh, pushback, disagreement, um, sometimes very 0:09:51.360 --> 0:09:56.560 politefully politely and thoughtfully expressed uh from our readers, sometimes 0:09:56.640 --> 0:09:59.800 less so so. Remesh. Let's look forward a little bit. 0:10:00.000 --> 0:10:04.280 Do you think the acquittal or the in the Senate 0:10:04.520 --> 0:10:06.880 means for President Trump and the Democrats? How do you 0:10:06.880 --> 0:10:08.880 think that's going to kind of play out for the election? 0:10:10.320 --> 0:10:13.760 I suspect that it will not be a top of 0:10:13.840 --> 0:10:17.960 mind issue by the time of the election. UM. I 0:10:18.040 --> 0:10:20.200 just think that we have a lot of time between 0:10:20.200 --> 0:10:24.840 now and November, and media cycles and news cycles are 0:10:24.880 --> 0:10:27.559 just a lot faster than they used to be, so 0:10:27.600 --> 0:10:30.559 I think we'll all probably be obsessing about something else 0:10:30.840 --> 0:10:33.520 in the last weeks of October in the beginning of November. 0:10:33.840 --> 0:10:37.200 Do you think that going forward that this will actually 0:10:37.240 --> 0:10:40.200 solidify President trump space behind him or do you think 0:10:40.240 --> 0:10:42.720 that this will just sort of be a side note 0:10:42.840 --> 0:10:49.880 as we proceed towards November. President Trump has been extremely 0:10:50.000 --> 0:10:54.520 careful to keep his base together. He has done a 0:10:54.559 --> 0:10:58.360 lot of things that previous Republican presidents would not have done, 0:10:58.679 --> 0:11:02.360 but on the core issues that mattered Republican voters, like 0:11:03.240 --> 0:11:06.360 guns and taxes and abortion, he has been a completely 0:11:06.559 --> 0:11:11.080 orthodox Republican and so he had a unified base even 0:11:11.160 --> 0:11:16.720 before impeachment. Impeachment may have slightly solidified that base, but 0:11:16.920 --> 0:11:21.520 the partisan dynamic of a presidential election was likely to 0:11:21.800 --> 0:11:25.440 generate that result anyway. What do you make of Senator 0:11:25.480 --> 0:11:30.680 Mitt Romney's decision to vote to convict Well, I think 0:11:30.800 --> 0:11:33.840 that it surprised a lot of people who had just 0:11:34.120 --> 0:11:39.920 resigned themselves to this being uh an almost completely perfectly 0:11:40.679 --> 0:11:45.120 uh party line vote. Um. I think um. Senator Romney 0:11:45.160 --> 0:11:50.560 made a good case for his decision. Uh, it's not uh, 0:11:50.600 --> 0:11:53.800 you know, obviously doesn't have change the outcome. UM, but 0:11:53.880 --> 0:11:57.480 it just sort of puts him on record about, UM, 0:11:57.720 --> 0:12:02.000 what the appropriate norms for presidential conduct ought to be. 0:12:03.720 --> 0:12:06.640 Considering your stance that you thought that President Trump should 0:12:06.640 --> 0:12:10.600 have been convicted, do you think that he should lose 0:12:10.720 --> 0:12:15.480 or are you voting for someone else in November? Well, 0:12:15.520 --> 0:12:18.160 I don't even know who the Democratic nominee is going 0:12:18.200 --> 0:12:23.800 to be. UM. I certainly think it's unlikely, UM, that 0:12:23.920 --> 0:12:26.840 I am going to vote for President Trump. I didn't 0:12:26.880 --> 0:12:30.640 vote for him last time. Uh, and I continue to 0:12:30.760 --> 0:12:35.200 have UM serious objections to the way he has conducted 0:12:35.280 --> 0:12:38.239 himself in office. Do you think there are any Democrats 0:12:38.280 --> 0:12:41.280 as we as currently currently constituted in the field that 0:12:41.320 --> 0:12:46.040 can be President Trump? Oh? You know, UM, right now, 0:12:46.120 --> 0:12:50.760 I'd say that President Trump is probably favored to win, 0:12:51.040 --> 0:12:55.120 but I wouldn't say that he's an inevitably going to win. 0:12:55.520 --> 0:12:58.600 And I think a number of the Democratic candidates could 0:12:58.679 --> 0:13:03.880 potentially defeat him. Um. Some are I think riskier than others. 0:13:03.920 --> 0:13:08.079 I think Senator Sanders UM would be a risky nominee 0:13:08.120 --> 0:13:12.120 for the Democratic Party given the historic and continuing on 0:13:12.320 --> 0:13:16.720 popularity of socialism in the United States. Thank you so 0:13:16.800 --> 0:13:19.959 much for joining us. We appreciate your thoughts. Peuro was 0:13:20.000 --> 0:13:23.280 a senior editor for the National Review, also Bloomberg opinion 0:13:23.679 --> 0:13:26.400 columnist as well, and you could read the work from 0:13:26.400 --> 0:13:29.680 Remesh and the other Bloomberg opinion columnists at Bloomberg dot com, 0:13:29.800 --> 0:13:33.439 slash Opinion and on the terminal O p I n Go. 0:13:46.000 --> 0:13:50.480 Tex shares absolutely surging after better than expected earnings from 0:13:50.480 --> 0:13:54.400 a lot of the giants, plus looking at the trajectory 0:13:54.520 --> 0:13:57.720 forward that they are the future. Big question, could the 0:13:57.760 --> 0:14:01.040 coronavirus and the spread there disrupt supply chains enough to 0:14:01.040 --> 0:14:05.000 make a material DNT for these companies? And just how 0:14:05.120 --> 0:14:08.200 much good news has already been priced in without perhaps 0:14:08.400 --> 0:14:11.360 that good news actually happening. Bradstone joining us here in 0:14:11.400 --> 0:14:13.839 our interactive broker studios we're so glad to have. Do 0:14:13.880 --> 0:14:15.959 you hear in New York normally San San Francisco, Senior 0:14:16.000 --> 0:14:19.240 Executive editor of Global Tech for bloom Bloomberg News. Brad, 0:14:19.360 --> 0:14:22.720 Let's just start with what we've seen in terms of 0:14:22.880 --> 0:14:27.040 the supply chain challenges UH stemming from the coronavirus for 0:14:27.120 --> 0:14:29.640 big tech. We've heard from Apple. What else are we 0:14:29.680 --> 0:14:32.640 hearing with with chips? With other areas? Thankfully so well. 0:14:32.680 --> 0:14:34.600 I mean, I think there's a lot of ambiguity, there's 0:14:34.600 --> 0:14:37.960 a lot of concern, uh and and and doubt. I 0:14:38.000 --> 0:14:40.520 mean just like the World Health Organization you know, is 0:14:40.520 --> 0:14:44.440 saying it doesn't quite know, you know, how this virus operates, Um, 0:14:44.720 --> 0:14:47.680 how it started, whether we're at peak infection. You know, 0:14:47.760 --> 0:14:49.720 the tech companies don't know what's coming. And so we've 0:14:49.760 --> 0:14:52.680 seen a lot of of the of the big suppliers 0:14:52.760 --> 0:14:56.080 kind of warren. Uh, not much concrete evidence yet. So 0:14:56.080 --> 0:14:58.840 so Fox con Right, the maker of the iPhone, saying 0:14:58.840 --> 0:15:00.840 it expects one to three or sent growth and set 0:15:00.920 --> 0:15:03.800 us three to five. You know, qual Calm warning that 0:15:03.840 --> 0:15:08.480 it could be material materially impacted. We've seen LG Electronics 0:15:08.520 --> 0:15:13.400 withdraw from the big Mobile World Congress trade show in Barcelona. Um. 0:15:13.440 --> 0:15:15.840 You know, so if you're a tech company with the exposure, 0:15:16.120 --> 0:15:18.680 if you're supply chains in China, you know you're watching 0:15:18.720 --> 0:15:20.440 it and it's sort of up in the air what 0:15:20.440 --> 0:15:22.280 what the impact is going to be and whether it 0:15:22.280 --> 0:15:25.360 will impact global demand. So Brad, you and your the 0:15:25.400 --> 0:15:27.280 technology team out on the West coast to cover this 0:15:27.360 --> 0:15:30.400 so so well, uh, thinking about all the supply chain 0:15:30.440 --> 0:15:34.280 of global technology. First, we had the trade uncertainty, which 0:15:34.280 --> 0:15:36.640 I guess still is there between the US and China 0:15:36.720 --> 0:15:39.040 despite the Phase one deal. Now we've got this virus. 0:15:39.440 --> 0:15:41.560 A lot of times company has been talking about trying 0:15:41.600 --> 0:15:44.440 to de emphasize or take some of the supply chain 0:15:44.480 --> 0:15:46.440 out of China, maybe move with the Vietnam or other 0:15:46.480 --> 0:15:48.640 areas in Asia. Is there any evidence that that they're 0:15:48.640 --> 0:15:50.080 going to follow through with that or that they can 0:15:50.120 --> 0:15:52.200 actually do that to move the needle. I mean, I 0:15:52.200 --> 0:15:54.240 think they will follow through, but that's such a long 0:15:54.360 --> 0:15:56.840 term process, right, and you've got you know, you've got 0:15:56.960 --> 0:16:00.160 thirty years of the supply chain consolidating in China, in 0:16:00.200 --> 0:16:03.280 particular in areas of China like shen Zen, and and 0:16:03.320 --> 0:16:05.640 you're it's not gonna it's not gonna happen anytime soon. 0:16:05.680 --> 0:16:08.600 And some of the you know, the politically motivated promises 0:16:08.720 --> 0:16:11.640 like Fox Con saying it's going to build a facility 0:16:11.720 --> 0:16:14.760 in Wisconsin. Uh, you know, that's been a little more 0:16:14.840 --> 0:16:17.680 hyped than reality. So none of these companies can adjust 0:16:17.720 --> 0:16:20.000 fast enough to contend with what's happening now in China. 0:16:20.080 --> 0:16:22.400 So you talked about some of the supply chain challenges, 0:16:22.440 --> 0:16:24.520 and yet we're looking at the NASDAC up six point 0:16:24.600 --> 0:16:29.800 six percent. We're looking at a Fang plus index having 0:16:29.960 --> 0:16:32.880 its biggest run in the most valuation relative to the 0:16:33.480 --> 0:16:35.920 S and P I think in history. I mean, we're 0:16:35.960 --> 0:16:39.640 looking at some pretty extreme valuations. When you talk to people, 0:16:39.720 --> 0:16:41.480 is there a sense that there's too much good news 0:16:41.800 --> 0:16:45.760 baked in? No? I think. I think it's really driven 0:16:45.840 --> 0:16:51.200 by the kind of consolidation of of tech into you know, 0:16:51.280 --> 0:16:53.720 into a few companies, and like you have the virus, 0:16:53.760 --> 0:16:57.880 and you have the regulatory overhang, and yet right Apple 0:16:57.960 --> 0:17:00.760 Blockbuster iPhone sales, you know, the dock near an all 0:17:00.800 --> 0:17:03.600 time high, you know, Amazon, the re acceleration of the 0:17:03.600 --> 0:17:07.920 cloud business despite all the fear and uncertainty around like Microsoft, 0:17:08.000 --> 0:17:10.639 you know, winning the Jedi contract and whether Amazon's cloud 0:17:10.640 --> 0:17:14.000 growth was slowing down, and are re acceleration in retail right, 0:17:14.320 --> 0:17:17.120 more people becoming prime members and so yeah, you're right, 0:17:17.119 --> 0:17:19.399 it seems oversold, I mean, and of course you have 0:17:19.480 --> 0:17:23.359 examples where that is true, like Tesla right over overbought um. 0:17:23.400 --> 0:17:25.520 And yet you know, when you look at the performance 0:17:25.560 --> 0:17:28.399 of these companies, despite the sort of bad news and 0:17:28.440 --> 0:17:31.040 the regulatory concerns, they're still doing really well. All right, 0:17:31.160 --> 0:17:34.960 So can that enthusiasm translate and spill back over to 0:17:35.119 --> 0:17:38.520 the unicorn world, which had some of its shine taken 0:17:38.520 --> 0:17:40.639 off at the end of last year after a couple 0:17:40.680 --> 0:17:43.919 of less than happy IPO situations. That's right now and 0:17:43.920 --> 0:17:46.119 then and then we're sort of into a different discussion, 0:17:46.200 --> 0:17:48.280 right because you know, when you when you look at 0:17:48.320 --> 0:17:51.200 the companies I'm on public last year, Uber and Peloton 0:17:51.320 --> 0:17:53.040 and then of course we Work, which didn't even make 0:17:53.080 --> 0:17:55.560 it out, you had a situation where the hype did 0:17:55.600 --> 0:17:57.639 collide with reality and a lot of the value was 0:17:57.680 --> 0:18:01.600 taken out already by private equity, by soft bank, by 0:18:01.600 --> 0:18:04.199 the venture capital firms. So you know, there you have 0:18:04.280 --> 0:18:08.760 a situation where you've got companies like Airbnb or or 0:18:08.880 --> 0:18:11.440 or the fintech company robin Hood, which are probably looking 0:18:11.440 --> 0:18:14.359 at this market with a lot of anxiety, wondering and 0:18:14.520 --> 0:18:16.760 cast for the Mattress company of course, today, you know, 0:18:16.840 --> 0:18:19.639 how are the public markets going to react, particularly if 0:18:19.680 --> 0:18:22.720 they if they remain unprofitable. So one of the issues 0:18:22.920 --> 0:18:26.199 that has kind of crept into the technology discussion over 0:18:26.240 --> 0:18:30.720 the last year or two has been regulatory overhang. Now, 0:18:30.760 --> 0:18:32.960 historically the U. S Government has taken I think pretty 0:18:33.040 --> 0:18:36.200 light touch to the U S. Tech industry that might 0:18:36.280 --> 0:18:38.320 be changing. How what's the feeling in the valley. There 0:18:38.400 --> 0:18:40.280 is this a paradigm shift, and they've got to really 0:18:40.280 --> 0:18:42.119 start thinking about this. I think that's right, Paul. I 0:18:42.160 --> 0:18:45.560 mean storm clouds. Right, it's coming at them from all angles. 0:18:45.600 --> 0:18:48.240 You've you've got the EU, which is obviously the most 0:18:48.280 --> 0:18:51.359 active over the last few years. UM. But then in 0:18:51.400 --> 0:18:55.200 the US, the Justice Department seeming to increase the pace 0:18:55.280 --> 0:18:58.879 of its investigation, particularly of Google. UM. But then and 0:18:59.000 --> 0:19:01.880 particularly with the guards. So it's third party ad network. 0:19:02.200 --> 0:19:04.000 You know, we've reported on the Wall Street Journal has 0:19:04.040 --> 0:19:08.040 reported that they're interviewing publishers looking at Google's ad dominance. 0:19:08.280 --> 0:19:11.920 Then you've got the FDC, You've got Attorneys General. Um, 0:19:11.960 --> 0:19:16.600 you've got the David Cellini, uh, the the the House 0:19:16.640 --> 0:19:20.520 member from Rhode Island, you know, leading these discussion panel 0:19:20.560 --> 0:19:24.040 discussions looking at big tech. And so yeah, I think 0:19:24.040 --> 0:19:26.880 we're sort of at peak or we're close to peak. Um, 0:19:27.280 --> 0:19:29.520 you know, scrutiny of the big tech companies, and that's 0:19:29.520 --> 0:19:31.560 not that's what we're just getting started there. And it 0:19:31.560 --> 0:19:33.320 does seem to be the one thing that all the 0:19:33.320 --> 0:19:36.400 presidential candidates kind of agree on right now markets basically 0:19:36.400 --> 0:19:38.520 saying it doesn't look like those politicians are going to 0:19:38.600 --> 0:19:41.440 move soon on anything. And it seems like tech companies 0:19:41.480 --> 0:19:44.040 believe that as well. Is there a sign, any sign 0:19:44.080 --> 0:19:46.879 whatsoever that they're wrong, that there is some kind of 0:19:46.880 --> 0:19:49.120 push to get some regulation passed in the near term. 0:19:49.640 --> 0:19:52.239 I think you're I don't think they're wrong. I think 0:19:52.320 --> 0:19:54.639 this is a long term process, you know. And and 0:19:54.720 --> 0:19:56.840 we saw it with the Microsoft case in the nineties. 0:19:56.920 --> 0:19:59.800 It takes years, it's appealed, the Supreme Court often has 0:19:59.840 --> 0:20:02.000 to get into these things. But you know, when we 0:20:02.040 --> 0:20:05.159 saw Makon del Rahim, the head of the d o 0:20:05.280 --> 0:20:09.640 j Antitrust Division, recused himself from the Google investigation, there 0:20:09.640 --> 0:20:12.199 are signs that things are accelerating, you know. And he 0:20:12.240 --> 0:20:14.359 was involved in the sale of double click to Google. 0:20:14.400 --> 0:20:16.280 So it's one reason why you'd want to step back. 0:20:16.560 --> 0:20:19.240 But things like that, you know, suggests that we're we're 0:20:19.280 --> 0:20:21.360 no longer in the realm of the hypothetical. It might 0:20:21.359 --> 0:20:24.359 take a long time, but these companies are girding for battle. 0:20:24.880 --> 0:20:26.520 Brad Stone, thanks so much for joining us. To really 0:20:26.560 --> 0:20:30.159 appreciate you coming into our Bloomberg studios, usually based in 0:20:30.200 --> 0:20:33.040 San Francisco. Brad Senior Executive editor of Global Technology for 0:20:33.080 --> 0:20:35.280 Bloomberg News. He in a team do a great job 0:20:35.359 --> 0:20:37.840 covering everything on the tech space. They've been very busy 0:20:37.840 --> 0:20:39.880 with all these I p o s and all these 0:20:39.880 --> 0:20:53.960 big issues affecting big tech. The Treasury Department gave details 0:20:54.000 --> 0:20:57.480 about their issuance of twenty year treasuries for the first time, 0:20:57.880 --> 0:21:00.639 as they laid out a plan to find as a 0:21:00.760 --> 0:21:04.280 deficit for the federal government that should reach one trillion 0:21:04.320 --> 0:21:07.639 dollars annually over the next ten years. Is according to 0:21:07.840 --> 0:21:11.760 independent analyzes. The question is doesn't matter and this has 0:21:11.760 --> 0:21:14.240 been a subject of huge debate. Joining us now the 0:21:14.280 --> 0:21:17.199 way in Chris Edwards, director of tax policy Studies at 0:21:17.200 --> 0:21:21.879 the Cato Institute an editor of Downsizing Government dot org. Chris, 0:21:22.000 --> 0:21:25.040 you have come out with some pretty stark warnings about 0:21:25.119 --> 0:21:28.240 the federal deficit. Can we just start about why a 0:21:28.280 --> 0:21:31.520 federal deficit is so problematic? A lot of people challenging 0:21:31.520 --> 0:21:34.320 that concept in an era where there is an encouragement 0:21:34.320 --> 0:21:38.080 for more fiscal stimulus. Well, what the federal government is 0:21:38.160 --> 0:21:40.920 doing right now is completely unique in in our two 0:21:41.119 --> 0:21:44.280 stories of history in the past We've had spikes in 0:21:44.280 --> 0:21:47.440 federal government that usually during wars, you know, the Civil 0:21:47.520 --> 0:21:49.639 War and World War One and World War Two, but 0:21:49.720 --> 0:21:53.040 the government has always paid the debt back down again. 0:21:53.520 --> 0:21:55.760 Now we are not at war. We're in the eleventh 0:21:55.840 --> 0:21:59.880 year of economic expansion. Now we should be down our debt. 0:22:00.240 --> 0:22:02.919 But our debt is the highest in our peacetime history, 0:22:03.240 --> 0:22:06.080 and it is going up. The latest Congressional Budget Office 0:22:06.200 --> 0:22:10.600 data shows that the annual deficit is going from a 0:22:10.640 --> 0:22:13.600 trillion this year to one point seven trillion ten years 0:22:13.680 --> 0:22:16.640 from now. And I think that's optimistic. For one thing, 0:22:16.680 --> 0:22:21.080 the CBO doesn't put any recessions in its projections, and 0:22:21.160 --> 0:22:24.520 yet we probably will have a recession in coming years sometime, 0:22:24.600 --> 0:22:27.359 and that will blow an even bigger hole. So I 0:22:27.400 --> 0:22:30.440 think the outlook is very scary. Chris. Are you surprised 0:22:30.480 --> 0:22:33.560 that the Republican Party hasn't made this bigger of an 0:22:33.560 --> 0:22:37.080 issue and and really tried to work harder to uh 0:22:37.359 --> 0:22:39.760 shrink the size the government to deal with this deficit. 0:22:40.840 --> 0:22:44.159 It is remarkable. There's been huge responsibility on both sides. 0:22:44.480 --> 0:22:46.800 You know, the Republicans they just want to cut taxes, 0:22:46.840 --> 0:22:50.639