WEBVTT - Facebook Unit Works With Nearly Anyone Seeking Power: Silver 0:00:05.800 --> 0:00:08.720 Welcome to the Bloomberg pim L Podcast. I'm pim Fox. 0:00:08.760 --> 0:00:11.520 Along with my co host Lisa Abramowitz. Each day we 0:00:11.640 --> 0:00:15.120 bring you the most important, noteworthy, and useful interviews for 0:00:15.200 --> 0:00:17.840 you and your money, whether you're at the grocery store 0:00:17.960 --> 0:00:20.720 or the trading floor. Find the Bloomberg p and L 0:00:20.840 --> 0:00:33.240 Podcast on Apple Podcasts, SoundCloud and Bloomberg dot com. What 0:00:33.360 --> 0:00:37.440 does what does India's Prime Minister Narendra Modi have in 0:00:37.600 --> 0:00:41.159 common with the President of the Philippines, Rodrigo du Terte, 0:00:41.360 --> 0:00:44.199 as well as the Scottish National Party, an alternative for 0:00:44.360 --> 0:00:47.519 Germany another party that is based in Germany. Well, here 0:00:47.560 --> 0:00:51.040 to tell us is Vernon Silver Projects, an investigations reporter 0:00:51.280 --> 0:00:55.480 for Bloomberg. He joins us from Rome, Vernon, I'm gonna 0:00:55.560 --> 0:00:57.880 let you tell people what do what do all four 0:00:57.920 --> 0:01:03.200 of these different political connections have in common? They've all 0:01:03.280 --> 0:01:08.040 gotten advice in elections from Facebook, from a special unit 0:01:08.480 --> 0:01:12.920 within the company that focuses on politics and governments and 0:01:13.360 --> 0:01:18.880 has apparently increasingly participated in helping in electioneering. This is 0:01:18.920 --> 0:01:21.520 an amazing story. I highly recommend everyone read it. This 0:01:21.560 --> 0:01:26.559 Facebook team helps regimes that reach out and cracked down um, Vernon, 0:01:26.880 --> 0:01:29.319 do we have a sense of the financials here of 0:01:29.360 --> 0:01:33.440 how much Facebook earns from helping these campaigns to disseminate 0:01:33.480 --> 0:01:37.920 their message as widely as possible on social media. What's 0:01:38.000 --> 0:01:41.520 what's interesting about this is how small the direct numbers are. 0:01:41.640 --> 0:01:43.920 You know, in some of these campaigns. Uh, they were 0:01:43.959 --> 0:01:48.000 only spending hundreds of thousands of dollars on these campaigns. 0:01:48.040 --> 0:01:53.000 But as Facebook has learned through the last few election cycles, UM, 0:01:53.120 --> 0:01:55.720 these are big events. Elections are big events that rank 0:01:55.760 --> 0:01:58.760 alongside the Super Bowl in the Olympics in terms of 0:01:58.840 --> 0:02:03.120 drawing black block blockbuster ad dollars from elsewhere, you know, 0:02:03.160 --> 0:02:06.640 stuff that other participants are bringing into the conversation and 0:02:06.720 --> 0:02:09.760 more importantly, boost engagement, which is sort of the key 0:02:09.800 --> 0:02:12.680 metric at Facebook. That includes you know, how many people 0:02:12.720 --> 0:02:15.680 are clicking how many times and sharing how many times? 0:02:15.760 --> 0:02:19.040 And so if you get a party in Germany or 0:02:19.080 --> 0:02:23.000 the Philippines that's spending hundreds of thousands, um, you might 0:02:23.160 --> 0:02:26.040 end up seeing a multiplier effect, and that's what they've 0:02:26.120 --> 0:02:29.840 really tuned into. So Vernon, can you give us some 0:02:29.960 --> 0:02:34.680 details about what encouraging engagement means, What does it mean 0:02:34.720 --> 0:02:38.880 to help these campaigns, what did this unit actually do well? 0:02:38.919 --> 0:02:42.720 It started out, this unit started in Europe servicing the 0:02:42.720 --> 0:02:46.440 Middle East after the Arab Spring, talking to new leaders 0:02:46.480 --> 0:02:49.160 transitional governments, trying to let them know what this new 0:02:49.200 --> 0:02:51.280 tool was Facebook. I mean, this is just a few 0:02:51.320 --> 0:02:54.400 years ago. Facebook did not have the two billion users 0:02:54.440 --> 0:02:57.519 that it had. And then a few years ago they 0:02:57.560 --> 0:03:00.960 started staffing up in Washington, and they did so with 0:03:01.040 --> 0:03:05.480 people who came from political campaign backgrounds. And what they 0:03:05.520 --> 0:03:09.120 started doing was taking the traditional pitch, like you know, hey, 0:03:09.520 --> 0:03:12.800 campaign X and Y, because they were helping everybody in 0:03:12.800 --> 0:03:15.240 every race that they went to deal with UM in 0:03:15.280 --> 0:03:19.560 addition to verifying you as an authentic Facebook user, helping 0:03:19.600 --> 0:03:21.520 you figure out how to use the basic tools and 0:03:21.600 --> 0:03:24.560 leaving you the campaign to do it. They started getting 0:03:24.600 --> 0:03:27.360 more engaged to the point where in the last election 0:03:27.400 --> 0:03:31.640 in the US there were Facebook employees embedded with the 0:03:31.720 --> 0:03:35.720 Trump campaign and you know, even in local elections, we 0:03:35.760 --> 0:03:39.880 saw that some in the US were being offered collaboration 0:03:39.920 --> 0:03:43.880 on testing different video formats with Facebook. So the collaborative 0:03:44.000 --> 0:03:47.440 nature grew. And that's what the issue is that some 0:03:47.480 --> 0:03:51.000 of the critics are having. Can you explain or maybe 0:03:51.000 --> 0:03:54.760 just give a little uh sort of story about Katie 0:03:54.960 --> 0:03:59.800 Harbath and Elizabeth Linder who are these two individuals. There's 0:04:00.120 --> 0:04:04.520 interesting Elizabeth Linder Um started the unit. She was based 0:04:04.560 --> 0:04:07.720 in London for Facebook. She was very early Facebook employee 0:04:08.160 --> 0:04:11.960 and she started sort of as an ambassadorial figure making 0:04:12.000 --> 0:04:14.320 the rounds in Europe and the Middle East and Africa, 0:04:15.080 --> 0:04:18.040 helping introduce people to the tools, and she would just 0:04:18.040 --> 0:04:19.920 sort of leave them there with them and she would 0:04:19.960 --> 0:04:22.080 make a presentation to the candidates on the right and 0:04:22.120 --> 0:04:25.000 the candidates on the left, and that was it. But 0:04:25.160 --> 0:04:28.400 then a few years in UM Katie Harbath is hired 0:04:28.440 --> 0:04:31.760 and she's a former Republican strategist who worked at Rudy 0:04:31.800 --> 0:04:36.679 Giuliani's two thousand and eight presidential campaign. And things started changing. 0:04:36.720 --> 0:04:40.560 Among other things, that Katie became the the global leader 0:04:40.600 --> 0:04:44.240 of this politics and government unit within Facebook, which is 0:04:44.240 --> 0:04:46.159 a small unit at most, you know, maybe a hundred 0:04:46.240 --> 0:04:50.400 or something people during a pea collection time. And according 0:04:50.440 --> 0:04:53.360 to what Elizabeth Linder, who is no longer with Facebook, 0:04:53.400 --> 0:04:56.040 she left because of a different opinion about the direction 0:04:56.080 --> 0:05:00.680 they were going. UM they started tailoring the advice that 0:05:00.760 --> 0:05:03.640 they had to each of the parties that were involved 0:05:03.640 --> 0:05:07.160 in getting more and more involved. So it went from 0:05:07.240 --> 0:05:11.280 sort of a think tanking NGO vibe to one where like, 0:05:11.400 --> 0:05:13.880 we will bring in democrats to work with the democratic 0:05:13.960 --> 0:05:16.479 side and Republican support with the work with the other side, 0:05:17.000 --> 0:05:20.000 and you know, we're going to help you use as 0:05:20.080 --> 0:05:23.520 many of the Facebook tools as possible to know, in 0:05:23.560 --> 0:05:27.320 the end boosting engagement and controversy also is really great 0:05:27.400 --> 0:05:30.320 for for boosting engagement during election time. And you know, 0:05:30.360 --> 0:05:33.279 in all these countries, whether it's Poland or Germany or 0:05:33.320 --> 0:05:37.280 the Philippines, are India, which is essentially, in a lot 0:05:37.279 --> 0:05:40.880 of measures, the biggest market for the company right vernon, 0:05:40.920 --> 0:05:43.520 A lot of people will read this story and think, wow, 0:05:43.560 --> 0:05:47.560 how can Facebook allow this? It basically is helping fuel 0:05:47.640 --> 0:05:53.440 the rise of some misinformation or certainly higherly or more 0:05:53.800 --> 0:05:58.800 highly politicized types of rhetoric. At the same time, Facebook 0:05:58.800 --> 0:06:01.159 isn't doing anything wrong, is it, I mean, is it 0:06:01.400 --> 0:06:05.200 disseminating bad information on purpose? Or you know, some people 0:06:05.200 --> 0:06:07.279 could say, well, it's just doing its job. It's helping 0:06:07.320 --> 0:06:10.720 clients use the platform as well as they possibly can. Yeah, 0:06:10.720 --> 0:06:13.599 I mean, that's a really interesting question because what you 0:06:13.720 --> 0:06:16.120 have is and let's say, a face like a place 0:06:16.160 --> 0:06:19.360 like the Philippines where they came in and they offered 0:06:19.400 --> 0:06:23.040 their services to all the candidates. UM. But there was 0:06:23.120 --> 0:06:27.640 one candidate who really embraced the technology and once he 0:06:27.760 --> 0:06:31.440 was in power, um, Facebook again helped, you know, sort 0:06:31.440 --> 0:06:35.720 of writing the cotails into the presidential palace, so to speak. UM. 0:06:35.800 --> 0:06:40.960 And they started broadcasting through Facebook channels official events and 0:06:41.680 --> 0:06:43.560 in a lot of countries. And we see this in 0:06:43.600 --> 0:06:48.200 India also. The campaign work then becomes this door into 0:06:48.240 --> 0:06:52.120 being part of the power structure in the country. And 0:06:52.120 --> 0:06:55.160 what this is really a contrast to what Mark Zuckerberg 0:06:55.240 --> 0:06:59.719 has said in saying that the company is agnostic politically. Yeah, 0:07:00.000 --> 0:07:02.039 we we're gonna have to leave it. They're fascinating a story. 0:07:02.040 --> 0:07:04.880 Thank you so much for joining us. Vernon Silver Projects 0:07:04.920 --> 0:07:09.960 and Investigations reporter for Bloomberg News. Facebook team helps regimes 0:07:09.960 --> 0:07:26.840 that reach out in cracktown. This is Bluemberg. Will Big 0:07:26.880 --> 0:07:29.760 Tech keep on rallying to the degree that they did 0:07:29.960 --> 0:07:33.400 this year? That is the question and the answer, according 0:07:33.440 --> 0:07:36.720 to John Patritis, is no. He is managing director and 0:07:36.760 --> 0:07:41.280 portfolio manager for Point View Wealth Management in Summit, New Jersey, 0:07:41.280 --> 0:07:44.160 and he joins US now. John, thanks so much for 0:07:44.240 --> 0:07:46.800 being with us. So what's going on here? Why do 0:07:46.840 --> 0:07:50.800 you think that the fang stacks, the Facebook, Amazon, Netflix, 0:07:50.840 --> 0:07:53.840 and Google shares are not going to have such a 0:07:53.880 --> 0:07:57.120 great year next year? Well, thanks for having me on. 0:07:57.200 --> 0:08:00.000 I think that investors love to rally around us store 0:08:00.000 --> 0:08:02.760 worry stock. You know, in the late sixties, early seventies, 0:08:02.760 --> 0:08:06.160 it was the fifty fifty, and the eighties it was 0:08:06.200 --> 0:08:09.440 the Go Go Stox, and then nineties it was dot com. Uh. 0:08:09.440 --> 0:08:11.960 In the early part of the turn of the century, 0:08:11.960 --> 0:08:14.360 it was the brick stocks, you know, the International StockX 0:08:14.400 --> 0:08:16.480 and now you know fangs all our age. I mean, 0:08:16.840 --> 0:08:19.000 is there anything else we've spoken about more this year 0:08:19.080 --> 0:08:21.960 outside of bitcoin than the fang Stox. So I think 0:08:22.000 --> 0:08:26.160 investors have piled into these, uh, these companies, and I 0:08:26.200 --> 0:08:28.680 think valuations are starting to get stretched, and I don't 0:08:28.720 --> 0:08:33.560 think the downside risks are priced into the stocks at all. Well, John, 0:08:34.480 --> 0:08:37.760 I'm looking at you know, their sales annual sales for 0:08:37.840 --> 0:08:43.079 Facebook thirty six and a half billion, and they got 0:08:43.120 --> 0:08:47.800 net income of fifteen billion. You know any other company 0:08:47.840 --> 0:08:51.720 that does that kind of business? Right? Maybe Amazon? How 0:08:51.720 --> 0:08:53.440 about still look at some of the other fangs dots. 0:08:53.440 --> 0:08:56.440 How about Amazon does so the uh no, no, no, 0:08:56.440 --> 0:08:58.800 no no, but Amazon doesn't. I mean you're talking a 0:08:58.880 --> 0:09:01.439 company does thirty six and a half billion in sales 0:09:01.600 --> 0:09:06.680 and puts fifteen of it in their pocket. Said and done, right, 0:09:06.760 --> 0:09:10.040 So let me clarify all five of the FANG stocks 0:09:10.040 --> 0:09:12.080 and if you want to add Microsoft into that as well, 0:09:12.080 --> 0:09:14.440 they don't fit nice into the acronym. But Microsoft has 0:09:14.440 --> 0:09:18.360 boosted the tech sector as well. Are fantastic companies. What 0:09:18.400 --> 0:09:20.480 I'm saying is I think the market is pricing these 0:09:20.480 --> 0:09:23.000 companies that they could do no wrong. And that's where 0:09:23.000 --> 0:09:25.559 investors have to be careful of because every great investment 0:09:25.600 --> 0:09:27.400 is always a function of the price you pay for it. 0:09:27.640 --> 0:09:30.280 So I think Facebook and Google can be under significant 0:09:30.280 --> 0:09:33.160 regulatory pressure in two thousand eighteen. I think the whole 0:09:33.200 --> 0:09:37.120 Russian interference with Facebook is a big red flag. And 0:09:37.160 --> 0:09:40.720 I don't think any political risk or regulatory risk or 0:09:40.720 --> 0:09:44.120 price into those stocks at all. So the companies are fantastic, 0:09:44.200 --> 0:09:47.200 but I think you could see discounts priced into the 0:09:47.200 --> 0:09:51.880 stocks because of regulatory issues. You know, everyone is excited 0:09:51.920 --> 0:09:54.959 about Apple because of the new iPhone, but Apple is 0:09:55.000 --> 0:09:58.520 now a hundred, eight hundred and fifty billion dollar company. 0:09:58.800 --> 0:10:00.840 You know, if you want a dent return on Apple 0:10:00.880 --> 0:10:02.960 from here, you're gonna have a one point six trillion 0:10:03.000 --> 0:10:05.599 dollar company. They have to sell a lot of iPhones 0:10:05.640 --> 0:10:07.319 to do that, right, So you're getting up, but you're 0:10:07.320 --> 0:10:09.920 pushing up against law of large numbers. Some people do 0:10:10.040 --> 0:10:12.440 think that it will be a trillion dollar country company. 0:10:12.480 --> 0:10:15.599 Actually almost said country pretty soon. But but John, you know, 0:10:15.640 --> 0:10:18.920 I want to talk specifically about the regulatory issues you 0:10:19.200 --> 0:10:23.120 pinpointed Amazon and Google in particular. Uh, can you just 0:10:23.200 --> 0:10:26.920 play out what some of those regulatory pressures would look 0:10:26.960 --> 0:10:29.280 like that would cause a stock swoon because we hear 0:10:29.320 --> 0:10:31.680 a lot about it, but I don't hear of any 0:10:31.720 --> 0:10:35.680 regulatory efforts that are currently being discussed in concrete terms 0:10:35.720 --> 0:10:38.160 on the hill, And I'm not sure what would do 0:10:38.200 --> 0:10:40.600 it to these two. So yeah, I think so the 0:10:40.600 --> 0:10:43.640 regular issues I think you for Facebook and Google specifically 0:10:43.679 --> 0:10:46.440 because of the massive amount of data that they have 0:10:46.679 --> 0:10:50.920 on all of their users. And I think the fact 0:10:50.960 --> 0:10:54.720 that it was disposed that Russia was buying uh ads 0:10:54.840 --> 0:10:59.720 on Facebook and using that uh along with it too 0:10:59.800 --> 0:11:03.240 many pilate to a degree the uh the election results 0:11:03.360 --> 0:11:06.640 I think is um uh you know, could within the 0:11:06.720 --> 0:11:08.520 argument can we make within Congress to that as a 0:11:08.640 --> 0:11:12.800 national security issue? So I think that if that's the case, 0:11:12.840 --> 0:11:15.280 what that does is it forces Google and Facebook to 0:11:15.320 --> 0:11:18.960 go back to the drawing board and tighten up UH 0:11:19.120 --> 0:11:21.880 their own practices, which will add to their own to 0:11:21.960 --> 0:11:24.559 their expenses and their costs. So my point behind all 0:11:24.640 --> 0:11:26.920 that is, I don't think that Google and Facebook go 0:11:26.960 --> 0:11:29.000 out of business. All I'm saying is that I think 0:11:29.000 --> 0:11:32.080 their stocks are overvalued at current levels and they're not 0:11:32.160 --> 0:11:35.679 pricing in any potential downside risk, And I think investors 0:11:35.679 --> 0:11:39.160 fall in love with stocks like that. Who's chart what's fantastic? 0:11:39.400 --> 0:11:42.400 If you're looking backward, UH could become a risky place 0:11:42.400 --> 0:11:44.679 in two thousand eighteen, all right, So where is their 0:11:44.800 --> 0:11:47.720 value to be had? So I still like the financials 0:11:47.960 --> 0:11:50.840 despite the fact, again looking backward over the last eighteen months, 0:11:50.840 --> 0:11:54.079 the banks have done a fantastic job from a performance standpoint. 0:11:54.320 --> 0:11:57.960 You nowhere near valuation stamp valuation levels of where we 0:11:57.960 --> 0:12:01.240 were in two thousand five, six seven during the apex 0:12:01.280 --> 0:12:03.560 of the dot com bubble, and the fundamentals of the 0:12:03.559 --> 0:12:06.680 financials are fantastic. Right. Interest rates continue to creep higher. 0:12:07.080 --> 0:12:10.200 You're in a government to a regulatory situation where there's 0:12:10.200 --> 0:12:13.680 deregulation going on. The bank's balance sheets are as healthy 0:12:13.679 --> 0:12:17.800 as they've been so um since World War Two. So 0:12:18.240 --> 0:12:20.040 you know, I still still think there's room to run 0:12:20.040 --> 0:12:22.400 on the financial sector. I also think, you know, the 0:12:22.480 --> 0:12:26.320 selloff and healthcare that we saw in October and September 0:12:26.320 --> 0:12:28.520 and even a little bit in November provides an opportunity 0:12:28.679 --> 0:12:33.520 healthcare insurers, how medical devices, pharmacy. I like big farmer 0:12:33.960 --> 0:12:37.840 um particularly. Uh So if you look at where you know, 0:12:37.880 --> 0:12:41.520 globally again thinking long term, where investors not traders, so 0:12:41.520 --> 0:12:43.559 we're not thinking about next quarter. You know, as the 0:12:43.600 --> 0:12:47.600 global population grows and ages, the utilization of the healthcare 0:12:47.640 --> 0:12:51.040 system was only going to increase. So big farmer companies 0:12:51.080 --> 0:12:54.040 are sitting with a ton of cash um. They have 0:12:54.120 --> 0:12:57.280 the ability to reinvest in their pipeline and or do 0:12:57.400 --> 0:13:01.200 acquisitions to bolster their own pipeline. They usually pay at 0:13:01.240 --> 0:13:03.760 a big dividend and they buyback spots do so I 0:13:03.800 --> 0:13:06.839 think it's a long term story out there that is 0:13:06.880 --> 0:13:10.520 being overly discounted by investors because this fear of regulation 0:13:10.640 --> 0:13:13.360 or drug prices. We're gonna have to leave it there 0:13:13.360 --> 0:13:16.480 but thanks very much for enlightening us. John Patries is 0:13:16.520 --> 0:13:21.000 Managing director portfolio manager for point View Wealth Management. They 0:13:21.000 --> 0:13:24.040 are based in some New Jersey, and he was making 0:13:24.040 --> 0:13:42.400 the bear case for those fang stocks. He watches all 0:13:42.520 --> 0:13:46.560 of the information, whether it's the average private work week, 0:13:46.600 --> 0:13:49.640 whether it's wage growth or even the conference board leading 0:13:49.640 --> 0:13:53.600 indicators which we receive today, but he also follows Christmas trees. 0:13:53.920 --> 0:13:57.320 Phil Orlando is the chief equity market strategist and head 0:13:57.320 --> 0:14:01.080 of client portfolio Management at Federated. He thought you were 0:14:01.160 --> 0:14:02.560 joking when you said we were going to talk about 0:14:02.600 --> 0:14:05.840 Christmas trees. I'm not gonna choking. It's a big business. 0:14:05.920 --> 0:14:08.120 It is a big business. And and thank you for 0:14:08.200 --> 0:14:11.199 having me back on again. Merry Christmas, Happy Honkkah, and 0:14:11.200 --> 0:14:13.839 and let's talk Christmas trees. Then that's my point. I 0:14:13.920 --> 0:14:15.840 wanted to ask you about Christmas trees because I know 0:14:15.880 --> 0:14:18.560 I heard about the shortage, because this has to do 0:14:18.679 --> 0:14:22.200 with the economy in two thousand seven and eight. But 0:14:22.280 --> 0:14:24.600 you've done some work, so let me So. I've got 0:14:24.600 --> 0:14:27.240 to give props to my buddies at ever Core I 0:14:27.440 --> 0:14:29.800 s I. Oscar slaughter Back is the guy that runs 0:14:30.280 --> 0:14:33.120 this regular survey for them for the last fifteen years. 0:14:33.160 --> 0:14:36.160 And the issue. The problem here is that it takes 0:14:36.200 --> 0:14:39.360 about eight to ten years for a seedling to sort 0:14:39.360 --> 0:14:42.080 of grow into a mature tree. But think about ten 0:14:42.160 --> 0:14:44.760 years ago, we were starting, we were growing into the 0:14:44.760 --> 0:14:48.600 Great Recession. So a lot of these smaller independent tree 0:14:48.640 --> 0:14:51.840 farms around the country Canada whatever, they said, we don't 0:14:51.840 --> 0:14:54.640 have the money were we were, we cut back our planning, 0:14:54.720 --> 0:14:57.440 we went out of business. And so now ten years later, 0:14:57.760 --> 0:15:01.400 we've got a shortage of trees. So uh, when I 0:15:01.600 --> 0:15:04.000 s I put out the you know, they do this 0:15:04.080 --> 0:15:07.520 survey over the four weeks of Christmas, the numbers, frankly 0:15:07.520 --> 0:15:09.800 on a year of year basis, didn't look particularly good. 0:15:09.880 --> 0:15:14.120 Yet we've got a very bullish forecast for Christmas. So 0:15:14.240 --> 0:15:16.160 in my mind, I'm trying to say, okay, wait a second, 0:15:16.200 --> 0:15:18.000 one of the key things we look at not working 0:15:18.240 --> 0:15:20.480 yet I think Christmas is gonna be really good. And 0:15:20.520 --> 0:15:23.600 then I sort of stumbled upon this, this this Great 0:15:23.600 --> 0:15:26.640 Recession thing that I think that the shortage of trees 0:15:27.080 --> 0:15:29.560 and the fact that prices have gone up, I think 0:15:29.600 --> 0:15:32.640 people are either doing without or they're they're shifting over 0:15:32.800 --> 0:15:36.600 artificial Now I s I survey doesn't capture artificial sales, 0:15:36.880 --> 0:15:40.360 so we don't know how much of that mix shift occurred. 0:15:40.640 --> 0:15:42.840 So I'm still sticking in my forecast that we're gonna 0:15:42.880 --> 0:15:45.080 have a great Christmas. You know, based upon some of 0:15:45.120 --> 0:15:47.320 the indicators we're looking at, this could be the best 0:15:47.360 --> 0:15:51.280 Christmas since eleven when year of your Christmas sales were 0:15:51.360 --> 0:15:53.880 up like six percent. So we're we're you know, we're 0:15:53.880 --> 0:15:56.640 gonna have I think a pretty good year. Three hundred 0:15:56.720 --> 0:16:01.600 and fifty million real Christmas trees currently growing on Christmas 0:16:01.640 --> 0:16:04.880 tree farms in the US alone, so this isn't a 0:16:04.880 --> 0:16:08.720 tiny business. This is. But again, because it takes about 0:16:08.760 --> 0:16:12.240 ten years that million, you're going to chop down maybe 0:16:12.400 --> 0:16:14.680 thirty million of them in a given year, al right, 0:16:14.720 --> 0:16:16.880 So as people chop down their trees and get ready 0:16:16.880 --> 0:16:20.040 for for the holidays, I'm just wondering. You know, we 0:16:20.120 --> 0:16:22.200 talked to a lot of people. There seems to be 0:16:22.480 --> 0:16:25.560 some consensus forming, not as much as going into going 0:16:25.600 --> 0:16:29.280 into this year, but the consensus seems to be growth 0:16:29.360 --> 0:16:31.680 is pretty good. We're going to get a modest boost 0:16:31.680 --> 0:16:34.400 from the tax plan, not anything to write home about. 0:16:34.720 --> 0:16:38.400 The dollar will remain range bound, possibly go down. Uh, 0:16:38.600 --> 0:16:41.360 Stocks in the US will continue to do well, maybe 0:16:41.360 --> 0:16:43.080 not as well as this year, but we'll continue to 0:16:43.120 --> 0:16:46.040 do well, and bonds might sell off, but it won't 0:16:46.080 --> 0:16:50.320 be a disorderedly unwind. What's wrong about those consensus ideas. 0:16:50.360 --> 0:16:53.000 There's nothing wrong with them. I mean, basically your point 0:16:53.000 --> 0:16:56.119 painting by and large, a goldilocks kind of an environment 0:16:56.640 --> 0:17:00.000 where we think treasure yields will sort of grind up 0:17:00.040 --> 0:17:02.640 to three percent over the next year year and a half, 0:17:03.040 --> 0:17:05.600 stocks will grind up to three thousand over the course 0:17:05.600 --> 0:17:09.840 of the next year or so. Uh GDP growth is 0:17:10.240 --> 0:17:12.000 you know, we've been at a three percent run right 0:17:12.040 --> 0:17:14.360 the last couple of quarters. We've got a three point 0:17:14.440 --> 0:17:17.280 two percent estimate for the fourth quarter, We've got a 0:17:17.280 --> 0:17:19.680 three percent estimate for next year. We're sort of back 0:17:19.720 --> 0:17:23.200 to trendline. It's all good as far as we can tell. Okay, 0:17:23.240 --> 0:17:26.840 So given that backdrop, what do you tell your clients 0:17:26.880 --> 0:17:31.800 with respect to active management, Because this goldilocks scenario is 0:17:31.840 --> 0:17:37.320 great for indexing well, not necessarily, because there are aspects 0:17:37.400 --> 0:17:41.240 of this market that active management will be able to 0:17:41.320 --> 0:17:44.639 do a better job. For example, UM, I'm going to 0:17:44.760 --> 0:17:47.920 disagree with one of the elements of your analysis, which 0:17:48.000 --> 0:17:52.040 was the dollar. If the economy, which was growing at 0:17:52.080 --> 0:17:54.360 one and a half percent last year and is now 0:17:54.400 --> 0:17:57.520 sort of at a three percent run right now, continues 0:17:57.560 --> 0:18:00.359 at that pace, and that's our call, uh, and the 0:18:00.400 --> 0:18:03.919 transition from from yelling at Powell is successful, and and 0:18:04.320 --> 0:18:09.800 the Fed continues to gradually remove accommodation. UH. That combination 0:18:09.840 --> 0:18:13.479 of better economic growth, better corporate earnings growth, UH, tighter 0:18:13.520 --> 0:18:16.119 monetary policy out of the Fed should result in a 0:18:16.160 --> 0:18:19.800 stronger dollar over time. So we went from dollar euro 0:18:19.960 --> 0:18:21.560 I think we were one oh three or so at 0:18:21.600 --> 0:18:24.200 the beginning of the year, topped down at about one two. 0:18:24.880 --> 0:18:28.119 We started to strengthen down about one s eighteen. We 0:18:28.200 --> 0:18:30.719 seem to be temporarily going back the other way. I 0:18:30.760 --> 0:18:33.480 think we're gonna we're gonna catch a bid here, uh, 0:18:33.520 --> 0:18:35.920 and we're gonna get the dollar euro back into that 0:18:36.080 --> 0:18:39.199 you know, one one fifteen neighborhood over the course of 0:18:39.200 --> 0:18:43.920 the next year. In that scenario, small cap stocks UM, 0:18:44.080 --> 0:18:47.680 stronger economic growth, UH, the tax cuts, Remember small cap 0:18:47.720 --> 0:18:51.239 companies pay very high taxes. UH, stronger dollar, So that 0:18:51.280 --> 0:18:55.640 benefits UH more of the domestic oriented smaller cap companies 0:18:55.680 --> 0:18:58.640 as opposed to the international companies. Small cap stocks ought 0:18:58.720 --> 0:19:01.320 to do well in that environment. That's an environment that 0:19:01.440 --> 0:19:05.040 active management really has an advantage in the indexers not 0:19:05.160 --> 0:19:09.560 so much. Also, growth stocks, Remember large cap growth did 0:19:09.640 --> 0:19:12.560 much better than large cap value and the first part 0:19:12.600 --> 0:19:16.080 of the year we've rotated right around Labor Day to 0:19:16.160 --> 0:19:19.920 a value trade. So we think the financials, the energies, 0:19:19.960 --> 0:19:22.600 the industrials, et cetera. Those companies ought to catch a 0:19:22.680 --> 0:19:25.640 bid relative to some of the growth stocks that did 0:19:25.680 --> 0:19:27.439 really well of the first seven or eight months of 0:19:27.440 --> 0:19:30.160 the year. So there are parts of the market that 0:19:30.160 --> 0:19:32.640 that ought to do well here given the environment we've 0:19:32.720 --> 0:19:36.680 laid out that that in our view, should benefit active 0:19:36.720 --> 0:19:40.440 management rather than passive management. Phil, I would imagine you've 0:19:40.480 --> 0:19:42.840 racked up a number of miles this year, traveling all 0:19:42.840 --> 0:19:46.560 over the country talking to various investor groups. Has the 0:19:46.680 --> 0:19:50.399 investor changed in the last decade we've talked about Christmas Trees. 0:19:50.440 --> 0:19:55.560 Has investors mature to the point where they better understand 0:19:55.640 --> 0:19:58.600 the investing environment that you're in today. I thought you 0:19:58.640 --> 0:20:00.000 were going to say that they're gonna be chopped out. 0:20:00.960 --> 0:20:03.639 I don't think so. I travel You're right, I travel 0:20:03.680 --> 0:20:06.119 around the country talking to client groups all over the place, 0:20:06.400 --> 0:20:10.760 and people are still scared to death because they they uh, 0:20:10.800 --> 0:20:14.320 they're they're they're furious with the nonsense that's going on 0:20:14.359 --> 0:20:17.600 in Washington, the stupidity in Washington. I think the single 0:20:17.600 --> 0:20:20.119 biggest mistake a lot of investors have made over the 0:20:20.200 --> 0:20:24.600 last year is allowing their political biases to influence their 0:20:24.640 --> 0:20:27.320 investment judgment. I mean, that's a huge deal. And then 0:20:27.600 --> 0:20:29.800 you know, you flip on the TV and and you've 0:20:29.840 --> 0:20:34.160 got any number of of theoretically credible people saying Trump's 0:20:34.160 --> 0:20:37.920 an idiot, This tax plans a disaster, it's not gonna work. Uh, 0:20:38.080 --> 0:20:40.600 the stock markets are overvalued. You know, we're going to 0:20:40.680 --> 0:20:43.800 hell in a handbasket. The average person doesn't know that 0:20:43.800 --> 0:20:47.080 that's bad information and and that that we're in pretty 0:20:47.080 --> 0:20:49.760 good shape right now. Is Lisa just articulated a moment 0:20:49.800 --> 0:20:53.080 ago beautifully and that we're grinding up towards the three 0:20:53.080 --> 0:20:55.919 thousand SMP over the next year or so, so we 0:20:56.000 --> 0:20:58.479 think you gotta stick with it. That's a tough message 0:20:58.480 --> 0:21:01.000 to get across, phil Or And oh, thank you so 0:21:01.080 --> 0:21:03.879 much for being with us, and good luck with your Christmas. 0:21:03.920 --> 0:21:08.160 Tree Business Analytics and Merry Christmas too, Merry Christmas. Tick 0:21:08.160 --> 0:21:10.720 to Fill Orlando, chief equity markets strategist and head of 0:21:10.800 --> 0:21:16.000 client portfolio management for Federated Investors. We always love having 0:21:16.080 --> 0:21:18.240 him and UH, you know, I never realized that it 0:21:18.320 --> 0:21:19.920 was that big of a business, to be honest, the 0:21:19.920 --> 0:21:35.560 whole Christmas Tree business. UH. Here to help us understand 0:21:35.560 --> 0:21:38.240 a little bit about the risks that perhaps are in 0:21:38.440 --> 0:21:41.800 the financial world is Mike Bodson. He is the chief 0:21:41.840 --> 0:21:46.000 executive of the Depository Trust and Clearing Corporation. Mike, thank 0:21:46.040 --> 0:21:48.360 you very much for being with us. Tell people what 0:21:48.440 --> 0:21:52.000 does the d t c C do and then explain 0:21:52.119 --> 0:21:56.680 what is your systemic risk barometer? Thank you, good morning. UH. 0:21:57.240 --> 0:22:01.240 Dt c C is basically the central counterparty for the 0:22:01.320 --> 0:22:04.600 US cash securities market, and we're also the central securities 0:22:04.720 --> 0:22:08.800 the depository for cast security markets. So in a nutshell, 0:22:08.920 --> 0:22:11.640 we process every cast trade done in the United States, 0:22:11.680 --> 0:22:15.800 every bond, stock, treasury security, mortgage backed security. So we 0:22:15.840 --> 0:22:18.199 do about a hundred million transactions to day. We do 0:22:18.320 --> 0:22:21.880 about one point five quadrillion dollars a year flows through us. 0:22:22.240 --> 0:22:25.960 So we're basically the uh, the processors of all transactions 0:22:25.960 --> 0:22:28.680 in the US markets as well as some other ancillary businesses. 0:22:29.600 --> 0:22:33.560 Our Systemic Risk Barometer is just something we started a 0:22:33.640 --> 0:22:36.800 few years ago where we go out and survey our 0:22:36.840 --> 0:22:41.280 membership primarily US but internationally as well, UH to get 0:22:41.280 --> 0:22:43.320 a gauge of where people are focused on from a 0:22:43.440 --> 0:22:47.120 systemic risk basis, where the leading issues, and from there 0:22:47.160 --> 0:22:50.040 we build the thought leadership pieces. We've done thought leaderships 0:22:50.040 --> 0:22:53.720 on fintech, on cloud, on interconnectedness, risk, and things along 0:22:53.760 --> 0:22:58.959 that deadline. I found it interesting that an emerging worry 0:22:59.160 --> 0:23:01.640 among the people who you spoke with and with respect 0:23:01.720 --> 0:23:06.080 to financial stability with fintech financial technology in particular, it's 0:23:06.160 --> 0:23:11.600