WEBVTT - China Intellectual Property Poses Biggest Thorn For U.S. (Podcast) 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 Bramowitz. 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 --> 0:00:32.920 Podcast on Apple Podcasts, SoundCloud, and Bloomberg dot Com. China 0:00:33.040 --> 0:00:35.800 and the US have been engaged in a trade skirmish 0:00:35.920 --> 0:00:38.479 for quite a while now, although there is a sign 0:00:38.920 --> 0:00:41.879 that perhaps these tensions are easing. Joining us now as 0:00:41.920 --> 0:00:44.720 Bill Rhodes, President and chief executive officer of William R. 0:00:44.760 --> 0:00:47.920 Rhodes Global Advisors, author of Banker to the World, Leadership 0:00:48.000 --> 0:00:51.800 Lessons from the front Lines of Global Finance, helped broker 0:00:51.960 --> 0:00:54.680 some of the biggest deals both at a sovereign and 0:00:54.720 --> 0:00:58.480 corporate level, over the past decades in which he's been active. 0:00:58.680 --> 0:01:02.320 He's shoining us here in our interactive Broker Studios. So, Bill, 0:01:02.560 --> 0:01:05.160 you just got back from China. Do you get the 0:01:05.160 --> 0:01:08.479 feeling that there is a thawing in the tensions between 0:01:08.480 --> 0:01:11.240 the US and China from the Chinese perspective? Well, first 0:01:11.240 --> 0:01:13.360 of all, at least I want to thank you and 0:01:13.520 --> 0:01:18.480 Tim for inviting me. Is my favorite program, So anyway, 0:01:20.280 --> 0:01:23.119 it was. It was a very interesting week I spent there, 0:01:23.200 --> 0:01:26.560 and particularly with the trade tensions. UH. There's no doubt 0:01:26.600 --> 0:01:28.800 that China wants to come to an agreement because the 0:01:28.880 --> 0:01:32.520 Chinese economy is slowing down. They have this mountain of 0:01:32.560 --> 0:01:37.199 debt of over three percent of gross of GDP gross 0:01:37.280 --> 0:01:40.840 national product, and they have a lot of stresses there 0:01:40.880 --> 0:01:45.840 on manufacturing is down and sold. No matter what they 0:01:45.880 --> 0:01:48.680 say in the sense of tough talk, they want to 0:01:48.720 --> 0:01:50.720 do a deal. It's not going to be in ninety days. 0:01:50.800 --> 0:01:52.800 But I think we'll see some progress. We already saw 0:01:52.800 --> 0:01:56.160 the oobile tariffs UH, and I think we're going to 0:01:56.240 --> 0:01:58.600 see other things going forward. But it's not gonna be 0:01:58.600 --> 0:02:02.240 solved overnight. The basic problem between the United States and 0:02:02.320 --> 0:02:06.120 China will not be trade going forward, because I think 0:02:06.360 --> 0:02:08.000 something can be worked out. I think it's going to 0:02:08.040 --> 0:02:10.359 be intellectual property. That's going to be a tough one. 0:02:10.400 --> 0:02:14.000 And I've said this on on your program before. As 0:02:14.000 --> 0:02:17.320 far as the Chinese economy is going itself, they'll make 0:02:17.360 --> 0:02:20.040 their six and a half projection for this year, but 0:02:20.160 --> 0:02:21.760 next year is going to be a tough year. For 0:02:21.800 --> 0:02:25.400 them because they need to continue financial reform, which means 0:02:25.919 --> 0:02:29.400 reigning in the bank's bad loans. Uh. You know, the 0:02:29.480 --> 0:02:33.120 municipality bad loans and the provinces bad loans, and they 0:02:33.120 --> 0:02:36.160 have to shut down some of these small regional banks 0:02:36.160 --> 0:02:40.000 in northeast China, which basically a zombie institution. So there's 0:02:40.000 --> 0:02:42.079 gonna be a lot of pressure on the Chinese economy 0:02:42.120 --> 0:02:45.360 next year. Uh. They hope they can get six percent, 0:02:45.520 --> 0:02:48.359 but it could fall below six for the first time ever. 0:02:49.440 --> 0:02:54.840 Bill Rhodes, you have negotiated during your career with dictators 0:02:54.880 --> 0:02:59.720 strong men, as well as corporate executives and government officials 0:02:59.760 --> 0:03:04.240 and central bank regulators. Who are the key people in 0:03:04.440 --> 0:03:08.960 China right now? Well, obviously, uh, you start off with 0:03:09.000 --> 0:03:13.919 the president and leader uh Shi Jinping. His vice president 0:03:14.080 --> 0:03:18.079 is very strong because he is an expert on economics 0:03:18.120 --> 0:03:22.720 one Shi Shan. He's also was a trouble shooter for 0:03:22.840 --> 0:03:25.679 previous governments. He's the one who cleaned up stars in Beijing. 0:03:26.240 --> 0:03:28.880 He's the one who cleaned up the problems in Guangdong Province. 0:03:28.919 --> 0:03:34.640 He's a disciple mentory of of Joranji, the great Premier 0:03:34.720 --> 0:03:36.920 of China, who cleaned up their Economy and got him 0:03:36.960 --> 0:03:39.680 into the w t OH. But also the head of 0:03:39.720 --> 0:03:42.920 the People's Bank of China is very important. We have 0:03:42.960 --> 0:03:45.800 a technician in there, and I was privileged enough to 0:03:45.800 --> 0:03:47.800 to spend an hour and a half alone with him 0:03:47.840 --> 0:03:51.960 at lunch. Ye Gang his name is. He actually taught 0:03:51.960 --> 0:03:55.520 at the University Indiana for uh eight years, so his 0:03:55.600 --> 0:03:59.120 English is as good as ours. And the previous Governor 0:03:59.200 --> 0:04:01.680 of the People's Bank of China, Joshiah Schwan, who's a 0:04:01.760 --> 0:04:05.160 leading reformer who's still although he does not have the 0:04:05.200 --> 0:04:07.920 official position in the People's Bank of China, he has 0:04:07.920 --> 0:04:11.080 the title uh, you know, President emeritus there and he's 0:04:11.080 --> 0:04:15.600 advising UH both the President Si Jinping and uh Want 0:04:15.640 --> 0:04:18.200 Hi Sean. And then there's one other person who has 0:04:18.200 --> 0:04:23.760 the title Vice Premier of the Economy, and that's uh 0:04:23.839 --> 0:04:27.599 someone named who's new that in the sense that we 0:04:27.640 --> 0:04:30.520 didn't see him before, and that's his name is Lee Who, 0:04:31.000 --> 0:04:34.840 And he's the one who's talking with Manuchin on the telephone. 0:04:35.240 --> 0:04:38.360 The big problem among others that the Chinese have with us, 0:04:38.640 --> 0:04:41.680 they don't know who's on first, second, and third in negotiation. 0:04:41.760 --> 0:04:43.960 It's like tinkers to have is a chance one in 0:04:44.040 --> 0:04:48.599 his lightheiser the next minutes in Manuchin. Uh, they're confused, well, 0:04:48.680 --> 0:04:51.800 they're they're confused about who's on first. But also, you know, 0:04:52.080 --> 0:04:54.919 sort of the distinction between the trade tensions and intellectual 0:04:54.960 --> 0:04:58.960 property is confusing to me because I don't totally understand 0:04:58.960 --> 0:05:02.000 how intertwined those are. Well, I think for the United 0:05:02.000 --> 0:05:05.000 States is very important because the Chinese announced their program 0:05:05.040 --> 0:05:08.800 of two thousand twenty five, which was their goal to 0:05:08.880 --> 0:05:13.680 be the leading UH innovators in technology in the world, 0:05:14.240 --> 0:05:16.680 and of course that gets into five G and all 0:05:16.720 --> 0:05:20.560 of these things, and the United States Silicon Valley forever, 0:05:20.680 --> 0:05:25.120 we've been the leaders in technology, and so the feeling 0:05:25.279 --> 0:05:29.520 is that there's a real challenge to us. Also, UH, 0:05:29.560 --> 0:05:31.560 there's also a feeling here in the United States and 0:05:31.600 --> 0:05:34.280 in Europe that the Chinese have gone out of their 0:05:34.320 --> 0:05:39.040 way to gain technology through several different ways. One when 0:05:39.120 --> 0:05:43.240 in American the European company wants to operates up in 0:05:43.360 --> 0:05:46.200 China on a joint venture, they make them turn over 0:05:46.200 --> 0:05:49.080 their intellectual property. The other thing is many people in 0:05:49.120 --> 0:05:51.960 the US and Europe feel the Chinese have been stealing 0:05:52.040 --> 0:05:56.520 technology from us. So this question of intellectual property is 0:05:56.520 --> 0:05:58.880 going to be tougher to solve than the trade issue, 0:05:59.240 --> 0:06:02.760 because let's say the economy slowing down in China, the 0:06:02.760 --> 0:06:05.480 economy is slowing down here, and so I think it's 0:06:05.520 --> 0:06:09.159 on both, you know, both governments. I think want to 0:06:09.160 --> 0:06:11.160 come to a deal, all right, Bill Rhodes. He is 0:06:11.200 --> 0:06:14.440 the author of Banker to the World Leadership Lessons from 0:06:14.480 --> 0:06:34.560 the front Lines of Global Finance. Oil definitely having a 0:06:34.720 --> 0:06:37.920 trickle down effect on broader markets over the past week 0:06:38.000 --> 0:06:41.440 or so. Uh, the three days ended yesterday, it comprised 0:06:41.520 --> 0:06:45.920 comprised the biggest drop in the in the oil index, 0:06:45.920 --> 0:06:49.240 in the oil prices. Joining us now to understand what's 0:06:49.240 --> 0:06:51.640 been driving the big moves we've been seeing there, John Kilduff, 0:06:51.760 --> 0:06:55.720 founding partner of Again Capital. So John, let's just start there. 0:06:55.720 --> 0:06:58.640 What is the main driver behind the declines that we've 0:06:58.640 --> 0:07:02.599 seen in the price of crude? Well, a relative over 0:07:02.640 --> 0:07:06.800 supply to the market, partly because sanctions that we're supposed 0:07:06.839 --> 0:07:09.680 to go on Iran didn't really come to pass, and 0:07:09.720 --> 0:07:13.520 so they're still producing, and Saudias and Russians rushed production 0:07:14.280 --> 0:07:16.400 onto the market to make up for what was supposed 0:07:16.400 --> 0:07:19.640 to be lost barrels. And then now the economic slowing 0:07:19.680 --> 0:07:24.720 that we're seeing, particularly in China in Asia has weakened 0:07:24.760 --> 0:07:26.720 the demand side of the equation. So it's sort of 0:07:26.720 --> 0:07:29.640 been a one to punch here. Uh for the oil 0:07:29.680 --> 0:07:36.600 commodity John, who are the sellers and are they forced sellers? Well, 0:07:36.640 --> 0:07:39.720 I'll tell you him. A big speculative long position did 0:07:39.760 --> 0:07:42.560 get built up into this market, um, right around the 0:07:42.640 --> 0:07:44.960 highs in October there when we were up around over 0:07:45.000 --> 0:07:47.720 seventy dollars a barrel for w t I based upon 0:07:47.760 --> 0:07:51.000 the CFTC data that we get to see every Friday. Uh, 0:07:51.080 --> 0:07:54.840 they've been washed out. And yes, there's been rumors of 0:07:54.960 --> 0:07:59.360 forced hedge fund liquidation UM and and a growing a 0:07:59.400 --> 0:08:02.520 barrish fishooning in this market, and that there's a net 0:08:02.520 --> 0:08:06.520 short sellers in here now too. So sentiment has really 0:08:06.560 --> 0:08:10.080 turned quite negative at this point, UM, and it remains so. 0:08:11.360 --> 0:08:14.040 One thing that I'm struggling with is Saudi Arabia just 0:08:14.080 --> 0:08:17.520 came out with their budget for next year, and I'm 0:08:17.520 --> 0:08:21.040 struggling with the idea that they are assuming eighty dollars 0:08:21.160 --> 0:08:25.280 a barrel for the price of crew next year in 0:08:25.440 --> 0:08:28.440 order to make their budget work, and they would need 0:08:28.480 --> 0:08:31.880 a price upwards of ninety dollars a barrel in order 0:08:31.880 --> 0:08:37.920 to balance their budget. Does that concern you, um? If anything, 0:08:37.960 --> 0:08:39.880 it's um. You know. It shows me that they have 0:08:39.920 --> 0:08:43.800 a real incentive to follow through on the the old 0:08:43.800 --> 0:08:45.840 peck Russia, a chord that was struck a couple of 0:08:45.840 --> 0:08:48.640 weeks ago. I think they're feeling a little flushed with 0:08:48.679 --> 0:08:51.240 success because of what they they were able to achieve 0:08:51.280 --> 0:08:54.559 in the aftermath of the November deal. This whole thing 0:08:54.600 --> 0:08:57.760 just fell apart over the summer again because of the 0:08:57.840 --> 0:09:00.440 real almost trick that was put on the market with 0:09:00.480 --> 0:09:02.840 the Iran sanctions. So I guess they believe they can 0:09:02.880 --> 0:09:05.719 do it again. I also think they have barring capacity, 0:09:05.800 --> 0:09:07.160 so they're not going to worry about it. But they 0:09:07.200 --> 0:09:11.040 also have home fires to tamp down. Here is there's 0:09:11.080 --> 0:09:13.720 some unrest in the kingdom. No better way to play 0:09:13.800 --> 0:09:16.400 kate that than to uh, you know, give away some money, 0:09:16.400 --> 0:09:18.600 which is which is what this budget does in a big, 0:09:18.640 --> 0:09:20.960 big way, lots of extra money to government workers and 0:09:21.000 --> 0:09:26.000 others that should help keep the you know, waters calm 0:09:26.120 --> 0:09:29.319 or calm there as as we move forward here almost 0:09:29.400 --> 0:09:32.640 on que by the way, the facility. The Saudi Oil 0:09:32.679 --> 0:09:35.280 Minister this morning was all over the wires trying to 0:09:35.320 --> 0:09:38.800 talk up the price, committing to a big cutback and 0:09:38.880 --> 0:09:43.079 extending this deal next April when they all meet again. So, Um, 0:09:43.120 --> 0:09:46.080 they're trying to do everything they can to support this price, 0:09:46.080 --> 0:09:50.080 for sure, John speak if you can about us shail producers, 0:09:50.160 --> 0:09:56.559 At what price do share producers stop making money? You're 0:09:56.559 --> 0:09:59.040 getting into that zone now, Pam. You know, particularly when 0:09:59.040 --> 0:10:00.920 you've sort of had an all the cost not just 0:10:01.040 --> 0:10:05.560 the pure stage drilling and extraction methodologies. It's gonna start 0:10:05.600 --> 0:10:08.360 to get tough for them right now. But they have 0:10:08.520 --> 0:10:11.240 been successful, many of them, particularly in the in the 0:10:11.240 --> 0:10:14.400 Permian basin, where they've driven break even course down two 0:10:14.520 --> 0:10:16.800 round thirty five to forty dollars a barrel. Now, some 0:10:16.840 --> 0:10:18.439 of those numbers are all over the place, so they're 0:10:18.440 --> 0:10:21.080 gonna try to hang in there. Um. And I know 0:10:21.120 --> 0:10:23.560 there's a lot of concern too about the indebtedness of 0:10:23.600 --> 0:10:26.360 the group. I'll tell you when the last generation of 0:10:26.400 --> 0:10:30.160 this price is crashing back in two era. Um, what 0:10:30.280 --> 0:10:34.440 the banks basically did was extend the loans, recapitalized the loans, 0:10:34.480 --> 0:10:37.480 and repackaged a loans. So I'm not as worried about 0:10:37.480 --> 0:10:39.560 the group falling apart this time, unless we were to 0:10:39.600 --> 0:10:42.960 get another sort of extended sell off down into the 0:10:42.960 --> 0:10:45.480 same mid to low thirties. But it's hard to see 0:10:45.520 --> 0:10:48.319 that happening. John. Every time you've been on, you've been 0:10:48.320 --> 0:10:52.320 incredibly accurate, and I've been impressed by some of your forecasts. 0:10:52.400 --> 0:10:56.200 So what's your sense of where oil heads. I don't 0:10:56.200 --> 0:11:00.559 know throughout next year, it's at the say it's it's 0:11:00.559 --> 0:11:03.120 a tough call right now. I've been trying to shake 0:11:03.200 --> 0:11:06.760 up the magic eight ball vigorously um these days. But 0:11:07.120 --> 0:11:11.520 uh my, my inclination is too as the guys in 0:11:11.559 --> 0:11:13.440 the bun or guys and gals in the bond markets say, 0:11:13.480 --> 0:11:16.560 don't fight the Fed, I'm inclined not to bite Saudi Arabia. 0:11:17.200 --> 0:11:19.800 So if they do come through with the extensive cuts 0:11:19.840 --> 0:11:23.600 that they're talking about, prices should head back higher. And 0:11:23.679 --> 0:11:26.800 because also because sentiment has just gotten so negative in 0:11:26.840 --> 0:11:29.480 this market that there's a tendency to overshoot here in 0:11:29.520 --> 0:11:32.480 commodities especially, and we should swing back. So I would 0:11:32.520 --> 0:11:36.040 expect this to be back into the you know, at 0:11:36.120 --> 0:11:40.360 least low sixties, say by by midyear next year. All right, 0:11:40.400 --> 0:11:44.640 Thanks very much, John Kilduff, founding partner again Capital speaking 0:11:44.640 --> 0:12:05.120 about the world of oil. The topic now is the 0:12:05.240 --> 0:12:09.160 housing market. Sales are previously owned US homes rose for 0:12:09.200 --> 0:12:13.400 a second consecutive month and exceeded forecasts in November. It 0:12:13.520 --> 0:12:18.600 suggests that consumer demand is picking up as price gains moderate. 0:12:19.000 --> 0:12:22.760 Here to tell us more, Darryl Fairweather, chief economist for 0:12:22.960 --> 0:12:26.560 Redfinn Corp. Joining us from Seattle. Darryl, thank you very 0:12:26.640 --> 0:12:29.920 much for being with us. Do you believe that the 0:12:30.000 --> 0:12:34.120 sales of previously owned US homes that this rise will continue? 0:12:35.440 --> 0:12:37.720 The market right now is much different than it was 0:12:37.800 --> 0:12:41.000 earlier this year. Earlier this year we had really fast 0:12:41.040 --> 0:12:45.600 price growth, especially in coastal markets like San Francisco and Seattle. 0:12:45.679 --> 0:12:48.679 Prices were growing in the double digits every year, and 0:12:48.720 --> 0:12:51.840 that has moderated since earlier this year. Now price growth 0:12:52.120 --> 0:12:55.280 is more around four percent. And it's actually taken a 0:12:55.280 --> 0:12:58.320 while for sellers to get the news that buyer demand 0:12:58.400 --> 0:13:00.920 isn't what it used to be, so we've seen fewer 0:13:00.920 --> 0:13:04.600 bidding wars, more price drops. But I think finally sellers 0:13:04.600 --> 0:13:06.800 are starting to get the message are dropping their prices 0:13:06.880 --> 0:13:09.280 and that's why we've seen sales pick up this month. 0:13:09.559 --> 0:13:11.440 So Daryl, do you can you just give us a 0:13:11.480 --> 0:13:14.320 sense of why there has been a slowdown in the 0:13:14.440 --> 0:13:17.360 US housing market. Is it an interest rate story, is 0:13:17.360 --> 0:13:20.520 it just a demand story, or is it a supply story. 0:13:21.080 --> 0:13:24.680 I think the story here is affordability. So prices were growing, 0:13:24.800 --> 0:13:28.040 and they were growing very quickly, and recently interest rates 0:13:28.040 --> 0:13:30.640 one up at the same time, and buyers has finally 0:13:30.640 --> 0:13:34.079 had enough. They couldn't keep raising their prices and keep 0:13:34.120 --> 0:13:37.559 paying these high prices getting the same homes. So we've 0:13:37.559 --> 0:13:40.760 seen buyers back off, and as a result, sellers are 0:13:40.760 --> 0:13:43.360 starting to drop their prices and meet buyers at their 0:13:43.400 --> 0:13:47.720 at their price reservation. Do you expect mortgage rates to 0:13:47.840 --> 0:13:53.040 continue to decline? It's interesting. So mortgage rates follow both 0:13:53.080 --> 0:13:56.120 supply and demands. So on the supply side, the cost 0:13:56.200 --> 0:13:59.080 of borrowing is higher, and if the FED rates interest 0:13:59.160 --> 0:14:02.040 rate rates today, the cost of borrowing will continue to 0:14:02.160 --> 0:14:05.000 rise for the people who are supplying these mortgages. But 0:14:05.040 --> 0:14:08.600 at the same time, we've seen mortgage rate demand fall 0:14:08.800 --> 0:14:10.839 because people are buying fewer homes now than they were 0:14:10.920 --> 0:14:13.480 last year. It'll be interesting to see which of these 0:14:13.760 --> 0:14:18.920 forces uh end up dominating. So we could see and 0:14:19.160 --> 0:14:22.600 a rise in interest rates and on mortgage interest rates. 0:14:22.640 --> 0:14:25.240 But it buyers back off, then maybe that will be mitigated. 0:14:25.640 --> 0:14:27.720 So which areas of the market do you think are 0:14:27.840 --> 0:14:31.320 still poised for significant price increases? I mean are their 0:14:31.360 --> 0:14:34.040 regions or their sectors of the housing market that still 0:14:34.080 --> 0:14:41.960 have upside that are significant. Yeah, so places like Nashville, UM, Atlanta, Austin, 0:14:42.320 --> 0:14:45.360 some of these inland markets. That's where we'll see more 0:14:45.360 --> 0:14:48.440 buyer demand grow. And that's because people are moving towards 0:14:48.520 --> 0:14:52.160 more affordable places. We have this migration data redfin where 0:14:52.160 --> 0:14:54.760 we can see where people are searching for homes based 0:14:54.800 --> 0:14:58.400 on their IP address, and we see increasing number of 0:14:58.440 --> 0:15:01.840 people searching for homes and are affordable places, especially in 0:15:01.880 --> 0:15:05.280 really expensive places like San Francisco or Seattle or Washington, 0:15:05.400 --> 0:15:08.240 d C. They're looking to move inland. What do you 0:15:08.280 --> 0:15:14.640 believe institutional owners of real estate will face in I 0:15:14.680 --> 0:15:17.960 think that so there do you mean by institutional owners 0:15:18.040 --> 0:15:20.360 companies or do you mean like a typical investor? No, no, 0:15:20.520 --> 0:15:25.880 A companies. You know the institutional part of the market, right, right, 0:15:26.000 --> 0:15:28.920 So we have redfind now and there are other institutional 0:15:28.960 --> 0:15:31.880 owners um like open door and Delo has their own 0:15:31.880 --> 0:15:35.360 institutional owners UM, they are going to have to change 0:15:35.400 --> 0:15:39.320 their strategy. Buyers. Previously, they may have seen an offer 0:15:39.360 --> 0:15:41.320 from an institutional owner and thought this was a really 0:15:41.400 --> 0:15:44.960 good price. But institutional owners may have to lower their price, 0:15:45.200 --> 0:15:49.200 and sellers may not want to accept those prices, thinking 0:15:49.240 --> 0:15:51.640 that the market hasn't changed as much as these institutional 0:15:51.640 --> 0:15:54.000 owners think the market has changed. So, Daryl, where do 0:15:54.040 --> 0:15:58.280 you see prices declining the most regionally or in a 0:15:58.360 --> 0:16:03.040 specific sector? So the places that really saw the most 0:16:03.160 --> 0:16:06.000 price growth, we're going to see that price growth slow. 0:16:06.040 --> 0:16:09.840 I don't think that price growth will necessarily go negative. UM, 0:16:09.840 --> 0:16:12.640 but in places like Seattle and San Francisco, that price 0:16:12.720 --> 0:16:15.080 growth is not going to be what it was earlier 0:16:15.080 --> 0:16:18.400 this year or in We're going to see price growth slow. 0:16:18.720 --> 0:16:20.880 But that's interesting to me. You don't see it actually 0:16:20.880 --> 0:16:23.560 going negative. Well, So with that, a lot of people 0:16:23.600 --> 0:16:28.320 actually UM prices have fallen from earlier this year. Some 0:16:28.400 --> 0:16:31.680 of that is seasonality. The prices have dropped more than 0:16:31.720 --> 0:16:34.240 just a seasonal effect in places like Seattle in San Francisco. 0:16:34.760 --> 0:16:39.360 But come spring, prices maybe exactly where they were last spring, 0:16:39.440 --> 0:16:42.440 maybe a little bit higher. Uh, there's a possibility that 0:16:42.440 --> 0:16:44.080 may be lower than they were last spring. But I 0:16:44.120 --> 0:16:48.040 think that's a small a small possibility. Since you're coming 0:16:48.080 --> 0:16:51.360 to us from Seattle, can't avoid asking the question having 0:16:51.400 --> 0:16:55.200 to do with Amazon dot Com and new headquarters. What 0:16:55.360 --> 0:16:57.960 does this mean for those areas? We think prices might 0:16:57.960 --> 0:17:00.960 go up, but what does it also mean for housing 0:17:01.000 --> 0:17:04.480 prices in Seattle? Yes, so I actually used to work 0:17:04.520 --> 0:17:06.640 for Amazon before I came to Redfin, and I had 0:17:06.680 --> 0:17:10.440 co workers who were tracking where the h Q two 0:17:10.480 --> 0:17:12.080 is going to go and thinking that they were going 0:17:12.160 --> 0:17:14.200 to move back home. We're to be close to family 0:17:14.240 --> 0:17:16.840 depending on where it went. I actually have one friend 0:17:16.920 --> 0:17:19.520 who whose mom was calling her the day that they 0:17:19.520 --> 0:17:21.920 announced in Washington, d C. Asking her if she was 0:17:21.920 --> 0:17:24.560 going to move back home. So I think we'll see, um, 0:17:24.600 --> 0:17:27.359 some Amazon workers in Seattle put their homes up for 0:17:27.400 --> 0:17:29.959 sale to move to these new locations because there are 0:17:29.960 --> 0:17:32.480 all these new jobs and the transfer is pretty easy. 0:17:32.960 --> 0:17:35.880 In the actual places where the head cars are going home, 0:17:35.920 --> 0:17:38.520 prices will be affected. Um. It will kind of depend 0:17:38.600 --> 0:17:42.000 on the transportation that is around those areas. So in 0:17:42.040 --> 0:17:45.800 a place like Crystal City that's slightly outside the study center, 0:17:46.160 --> 0:17:49.639 we will probably see housing demand grow the most in 0:17:50.000 --> 0:17:52.639 the suburbs that are far away from d C but 0:17:52.720 --> 0:17:55.280 relatively close to Crystal City. So if your commute is 0:17:55.320 --> 0:17:57.800 going from an hour commute to a half hour commute, 0:17:58.040 --> 0:18:01.680 that's where we'll see demand go up. Darryl Fairweather, thank 0:18:01.720 --> 0:18:04.080 you so much for being with us. Daryl Fairweather is 0:18:04.200 --> 0:18:08.880 chief economist for Redfinn. Interesting to be getting more signs 0:18:08.920 --> 0:18:11.360 of stability in the US housing market and a more 0:18:11.440 --> 0:18:29.000 sanguine view of what's to come in the meantime. I 0:18:29.040 --> 0:18:33.200 want to turn our attention to the information that big 0:18:33.240 --> 0:18:38.240 tech reveals about its users to uh other companies and 0:18:38.480 --> 0:18:40.480 profit from it. And joining us now is Mark Douglas, 0:18:40.600 --> 0:18:44.159 chief executive of Steelhouse. Mark, thank you so much for 0:18:44.200 --> 0:18:45.879 being with us. The New York Times put out a 0:18:45.920 --> 0:18:49.400 story that was really eye opening of how Facebook collected 0:18:49.480 --> 0:18:52.280 data from its users and shared them with other big 0:18:52.320 --> 0:18:57.000 companies such as Amazon, profiting from it without necessarily disclosing this. 0:18:57.040 --> 0:19:00.119 So what did you make of that article? Um, well, 0:19:00.160 --> 0:19:04.080 it's not good, that's that's for sure. I think it's 0:19:04.080 --> 0:19:08.439 clearly part of a pattern that Facebook's definition of personal 0:19:08.440 --> 0:19:13.280 information and the common consumer, and certainly government, you know, 0:19:13.359 --> 0:19:16.880 kind of your euro government, and now US government definition 0:19:16.880 --> 0:19:22.159 of personal information are very different. And Facebook view that information, 0:19:22.359 --> 0:19:25.240 like you just said, is something that could they could 0:19:25.280 --> 0:19:27.640 sell and they could profit ford and they can provide 0:19:27.640 --> 0:19:32.320 the partners, and you know, it's it's just not a 0:19:32.359 --> 0:19:35.640 great pattern that they've established. And now is even more 0:19:35.680 --> 0:19:39.000 is coming light with the story Mark Douglas, do you 0:19:39.040 --> 0:19:42.399 believe this to be an intentional effort on the part 0:19:42.480 --> 0:19:47.520 of Facebook to obscure what actually happened? Or is this 0:19:47.680 --> 0:19:52.600 something that, as they describe many times, the technological wherewithal 0:19:52.680 --> 0:19:57.680 in order to follow all this may not be available. Well, 0:19:57.720 --> 0:20:03.159 I think essentially the this is based on the reporting 0:20:03.240 --> 0:20:06.720 from the New York Times, this was intentional. This wasn't 0:20:07.080 --> 0:20:11.760 a data breach, This was an accidental. Facebook provided information 0:20:11.840 --> 0:20:15.840 to partners in order to benefit those partners businesses and 0:20:15.960 --> 0:20:19.560 for Facebook to benefit ultimately. The reason they're doing it 0:20:19.640 --> 0:20:21.800 is because they don't think there would be a backlash 0:20:21.840 --> 0:20:24.600 from the users, and quite frankly, there hasn't been much 0:20:24.600 --> 0:20:27.720 of a backlash from the users. Although Facebook usages down, 0:20:28.119 --> 0:20:32.760 Instagram usages is continuing to expand rapidly, and at the 0:20:32.880 --> 0:20:34.880 end of the day, you know, these stories come out 0:20:35.000 --> 0:20:37.879 and people just keep using these platforms and and somewhat 0:20:37.960 --> 0:20:40.440 yawned about them. And so as long as that's the 0:20:40.480 --> 0:20:43.159 case Facebook, I think now it's such a spotlight on 0:20:43.240 --> 0:20:46.120 them that they have to restrict those actions. But they 0:20:46.119 --> 0:20:49.280 didn't have that spotlight when this was occurring, and so 0:20:49.280 --> 0:20:51.560 so they had no incentive not to do it. You know. 0:20:52.440 --> 0:20:54.320 But Mark, I mean to push back a little bit 0:20:54.480 --> 0:20:57.640 exactly the point that you're making that users don't care. 0:20:57.720 --> 0:21:00.679 That they're willing to go along with this contract of 0:21:00.720 --> 0:21:03.240 getting free access to platforms that connect them with their 0:21:03.280 --> 0:21:06.520 friends and give them access to news or in return 0:21:06.640 --> 0:21:09.240 for giving up some of their privacy. So where does 0:21:09.240 --> 0:21:13.919 the problem come in, Well, the problem comes in in 0:21:14.000 --> 0:21:19.359 that the governments are not agreeing with the consumers using 0:21:19.400 --> 0:21:24.439 the platforms, you know, the the EU, the European Union 0:21:24.560 --> 0:21:28.280 clearly doesn't agree with all the laws they've been passing, 0:21:29.000 --> 0:21:31.080 and the U s Government seems to be somewhere in 0:21:31.119 --> 0:21:34.360 the middle. We have hearings, but then there's no legislation, 0:21:35.000 --> 0:21:38.639 and so the and and again the reason that's probably 0:21:38.640 --> 0:21:43.159 occurring is because the senators and congressmen are not are 0:21:43.200 --> 0:21:46.760 not getting you know, kind of a huge consumer backlash 0:21:46.880 --> 0:21:49.800 on this. And I think consumers. You know, they think 0:21:49.840 --> 0:21:52.320 of this like, Okay, so my friend list was shared 0:21:52.320 --> 0:21:55.800 with Spotify and I got better music Again what you 0:21:55.880 --> 0:21:59.199 just said. They think it's a quid pro quo and um, 0:21:59.640 --> 0:22:02.600 but think ultimately this church Facebook. I think the big, 0:22:02.640 --> 0:22:05.200 big problem Facebook is going to have, it's going to 0:22:05.280 --> 0:22:07.040 be I think it's going to be very hard for 0:22:07.080 --> 0:22:10.719 them to make acquisitions. Um. Everything they do is going 0:22:10.720 --> 0:22:13.199 to be scrutinized going forward. And I think this is 0:22:13.200 --> 0:22:15.280 starting to put it over the top. This is a 0:22:15.440 --> 0:22:19.359 just clear disclosure of information without the slosing it to 0:22:19.400 --> 0:22:23.800 the consumers that that provided the information. Mark Douglas. This 0:22:23.960 --> 0:22:29.280 comes at a time when the government has received investigations 0:22:29.359 --> 0:22:34.000 and reports about the use of platforms such as Facebook, Twitter, 0:22:34.160 --> 0:22:38.879 and Instagram, which is owned by Facebook, as part of 0:22:38.920 --> 0:22:44.000 an effort on the part of the Russian Internet Research 0:22:44.119 --> 0:22:51.719 Agency to manipulate what people see an access online. Is 0:22:51.760 --> 0:22:55.199 that in any way connected based on the culture that 0:22:55.280 --> 0:22:58.879 you know about Facebook, No, I don't think that's in 0:22:58.920 --> 0:23:01.919 any way connected. At think that what that proves is 0:23:01.920 --> 0:23:06.000 that Facebook's ultimate business as they are an advertising platform 0:23:06.000 --> 0:23:08.560 to reach the consume. The two point two billion users 0:23:08.600 --> 0:23:12.800 reaching Facebook, the over billion users using Instagram, over billion 0:23:12.880 --> 0:23:17.560 users using What'sapp, and it's a very effective advertising platform. 0:23:17.600 --> 0:23:21.639 And essentially the Russian government figured out that they could 0:23:21.760 --> 0:23:24.359 you can sway elections. You can you cannot only use 0:23:24.440 --> 0:23:26.720 it to sell clothes, you could use it to sell 0:23:26.840 --> 0:23:31.480 presidents and they and they did that. I can't say 0:23:31.520 --> 0:23:35.840 that the Russian government led to the current president's elections, 0:23:36.359 --> 0:23:39.120 but clearly there was a lot of that spending going 0:23:39.200 --> 0:23:42.040 on to to try and influence it. And so this 0:23:42.119 --> 0:23:45.359 is the quandary that that we're in. The platforms are 0:23:45.480 --> 0:23:50.760 very fun and useful Facebook, Instagram, they're super effective advertising platforms, 0:23:50.880 --> 0:23:53.119 and there's not a lot of controls on either one 0:23:53.200 --> 0:23:57.880 of those. And you know, Facebook is imposing controls on themselves, 0:23:57.920 --> 0:24:00.600