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Speaker 1: Yea. Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene

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Speaker 1: Jai Ley. We bring you insight from the best in economics, finance, investment,

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Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud,

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Speaker 1: Bloomberg dot Com, and of course, on the Bloomberg. On

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Speaker 1: the question of where is Mark Zuckerberg, Lisa Axios reporting

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Speaker 1: this morning that he might break his silence within the

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Speaker 1: next twenty four hours, and my question is whether it's

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Speaker 1: a fluffy webcast about making a world a better place

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Speaker 1: in his commitment to do that, or whether he will

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Speaker 1: actually sit in front of the reporter and take some

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Speaker 1: serious questions in a way that he hasn't done it

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Speaker 1: for a long time, or whether he will pledge to

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Speaker 1: go to Washington, d C. And testify in front of Congress,

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Speaker 1: which could end up being a tipping point. The other

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Speaker 1: thing I'm looking at to see whether it is a

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Speaker 1: tipping point is whether we have reached the level at

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Speaker 1: which any additional FED rate hikes actually lead to a

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Speaker 1: tightening of financial conditions, because John, as you were pointing

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Speaker 1: out before, wisely, so far rate hikes have actually led

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Speaker 1: to a loosening of financial conditions joining us now, John Sylvia,

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Speaker 1: he is joining us from a snowy Boston and he

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Speaker 1: is very proud to be here. Thank you so much,

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Speaker 1: Chief economist at Wells Fargo. UM. So let's talk about that.

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Speaker 1: Have we reached the tipping point? Now? If you look

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Speaker 1: at the Bloomberg Financial Conditions Index, you'll see that the

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Speaker 1: improvement over the last six months to a year in

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Speaker 1: the equity market, as well as the weaker dollar has

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Speaker 1: really meant that the financial conditions index is easier today

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Speaker 1: than it was six months ago. So if the Fed

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Speaker 1: would raise rates in March and June, I don't think

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Speaker 1: we're reaching that tipping point now. Clearly, you know, given

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Speaker 1: that your dad was a mathematician, Lisa Um, he'll explain

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Speaker 1: to you that these linear projections oftentimes don't work out

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Speaker 1: in a non linear world. And so we see in

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Speaker 1: and again two thousand five, two thousand seven. Yes, the

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Speaker 1: Fed can continue to project raising interest rate twenty five

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Speaker 1: basis points every other meeting, but at some point there

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Speaker 1: will be a challenge in the marketplace. Are we anywhere

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Speaker 1: near to that? No? I think at this point in time. Now,

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Speaker 1: this this year, you got two and a half to

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Speaker 1: three percent growth in the economy and maybe, uh, maybe, Jonathan,

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Speaker 1: when the Treasury continues to increase its financing of the deficit,

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Speaker 1: that you may see some additional pressure on the economy.

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Speaker 1: We're trying to understand the relationship between unemployment and inflation

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Speaker 1: and trying to get some insight from Chairman Powell on

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Speaker 1: his thoughts of that. The the estimated equilibrium for unemployment

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Speaker 1: seems to be marked a market at the Federal Reserve

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Speaker 1: just drifts lower because unemployment is just drifting lower. Did

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Speaker 1: they have a clue, John, No, I think the markets

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Speaker 1: themselves don't have a clue. It's been quite a surprise

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Speaker 1: that the wage numbers have not increased in line with

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Speaker 1: the decline the unemployment for the last year or so.

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Speaker 1: We see total labor compensation rising. But no, I mean

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Speaker 1: a lot of discussion about the flat, the flat Phillips

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Speaker 1: curve um, the very very you know, slight slope to it.

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Speaker 1: It's just totally up in the air. We don't know

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Speaker 1: what the equilibrium interest rate is in terms of the

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Speaker 1: Federal fund, right, And you're right, there's this problem in

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Speaker 1: economics that the latest data dictates the equilibrium. All right,

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Speaker 1: I want to push back a little bit, because you're

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Speaker 1: saying we haven't reached that point where you're gonna get

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Speaker 1: tightening financial conditions in response to rate hikes, and that

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Speaker 1: we're nowhere near that, And yet libor is the big

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Speaker 1: story tightening, rising rapidly to the highest level since two

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Speaker 1: thousand and eight, and it's the factor are tightening of

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Speaker 1: financial conditions? What do you make of that? Well? It

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Speaker 1: is I think when you're looking at the short interest rate,

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Speaker 1: you are seeing a tightening and financial conditions. But surprisingly,

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Speaker 1: when you broaden that out to again look at the

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Speaker 1: Bloomberg financial conditions in deck, and you look at the

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Speaker 1: dollar and equity markets and the ability of corporations to

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Speaker 1: finance or slee bonds, it's still pretty easy, all right.

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Speaker 1: So how far does the Fed have to hike before

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Speaker 1: it reaches that to big point? Mean, what's the what's

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Speaker 1: the number? Um? I think, again, when you're looking at

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Speaker 1: March and June, that's a layup. But I would say

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Speaker 1: to September and December moves are much more challenging because

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Speaker 1: at that point in time you do have the FED

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Speaker 1: shrinking its balance sheet and the Treasury increasing its financing.

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Speaker 1: That to me is a very very challenging purer. So

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Speaker 1: the second half of this year could be challenging in

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Speaker 1: some financial mark and the extra led to that as well.

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Speaker 1: John is to to some extent, maybe even a greater extent,

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Speaker 1: the c B has provided cover for them over the

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Speaker 1: last couple of years. It's one of the reasons financial

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Speaker 1: conditions of East Well again, one of the challenge just

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Speaker 1: you know, Lisa and Jonathan, is the the e c

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Speaker 1: B buys corporate debt, and so when you think about

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Speaker 1: corporate bond issuance in the United States, it's a lot

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Speaker 1: easier when you've got a central bank buying in Europe.

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Speaker 1: John Sylvia, thank you so much for joining us. It's

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Speaker 1: really a pleasure of having you. We'll be checking back

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Speaker 1: with you to see whether you've changed that tipping point

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Speaker 1: as soon. John Sylvia, Wells Fargo chief Economists joining us

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Speaker 1: here in our Bloomberg eleven three oh studios. What does

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Speaker 1: Facebook have to do to keep traders from continuing to sell?

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Speaker 1: Answering that question, Eileen Bourbage, partner at Passionate Capital also

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Speaker 1: known as tech City UK. She is a chair there.

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Speaker 1: Uh and Eileen joins us now, thank you so much

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Speaker 1: for being with us. Eileen So what does Facebook have

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Speaker 1: to do to adequately respond to this crisis and uh

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Speaker 1: prompt traders to buy again. Yeah, I think first and

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Speaker 1: foremost they're going to have to write it out a

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Speaker 1: little bit. But what will help is if they start

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Speaker 1: to get in front of the messaging and in front

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Speaker 1: of the information disclosure. And that's that's I think been

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Speaker 1: a real problem. Their response to what's been happening now

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Speaker 1: for the last few days has been largely one of

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Speaker 1: silence or of just saying playing the victim and not

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Speaker 1: coming from you know, Mark Zuckerberg himself or even Sheryl Sandburg,

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Speaker 1: and I think that's what's worrying investors a bit. Um.

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Speaker 1: I would assume that they want to hear from those

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Speaker 1: two directly, and they also want to being slightly reassured

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Speaker 1: that this isn't going to bring about um over the

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Speaker 1: top regulation now as a consequence, and I would guess

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Speaker 1: that those two things need to be addressed. Sp Eileen,

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Speaker 1: We forget, actually how young Mark Zuckerberg still is. You've

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Speaker 1: worked with so many young tech leaders, tech CEOs. He's

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Speaker 1: shown a phenomenal ability to orientate this company to areas

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Speaker 1: of growth. What he did with mobile a number of

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Speaker 1: years ago was very, very impressive. But this is his

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Speaker 1: first real crisis that he's had to deal with as

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Speaker 1: the CEO of Facebook in terms of the pr around

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Speaker 1: the company. Eilan, are we seeing some immaturity from Mark

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Speaker 1: Zuckerberg at this point? I don't necessarily think that's the case.

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Speaker 1: I mean, I think obviously he's got to continue to develop.

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Speaker 1: But I recall years ago when you know, he used

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Speaker 1: to get criticized for wearing his hoodies on stage, and

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Speaker 1: and that's when the market sort of thought, really is

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Speaker 1: this guy going to be able to take the company public?

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Speaker 1: And how's he going to development? I think he's He's

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Speaker 1: demonstrated a really really great wisdom and being very judicious

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Speaker 1: and surrounding himself with really strong advisors or people such

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Speaker 1: as Cheryl Sandberg or others who can compliment him really well.

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Speaker 1: And I think this is going to be a team effort.

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Speaker 1: It's not just him, but he's you know, he needs

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Speaker 1: to be advised, he is to be fully briefed. He

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Speaker 1: needs to own and and understand that he's as accountable

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Speaker 1: or more accountable than anybody else for this, and to

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Speaker 1: be able to sort of communicate that in a really

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Speaker 1: passionate and efective way. Well, I mean strategically, yes, I

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Speaker 1: mean he showed himself to be phenomenal. I was one

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Speaker 1: of those individuals that also questioned what this gentleman was

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Speaker 1: doing in a hoodie on a road show to take

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Speaker 1: a company public. And he's proved everybody wrong. He's proved

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Speaker 1: everyone wrong with his m and A strategy as well.

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Speaker 1: But on this particular instance, he's been completely tone deaf

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Speaker 1: to what's been happening over the last twelve months, hasn't he. Uh,

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Speaker 1: it does seem that that he took it for granted actually,

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Speaker 1: or he didn't realize or appreciate how big it was

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Speaker 1: going to get. Yes, I think that's the case. And

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Speaker 1: I think that's because, you know, the company position is

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Speaker 1: probably one that right at the time that this happened,

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Speaker 1: we had teas and teas that allowed this, but look

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Speaker 1: we changed those subsequently. Um, it wasn't necessarily a leak

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Speaker 1: as such or a breach as such, as you know,

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Speaker 1: one person making use of our APIs sharing information which

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Speaker 1: I shouldn't have done with another party, and so they

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Speaker 1: kind of had a defensive approach or response as in

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Speaker 1: sort of very technically, you know, we don't think we

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Speaker 1: did anything wrong, and I think that from your right

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Speaker 1: that is tone deak. You need to come out in

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Speaker 1: front now, this whole team needs to come out and

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Speaker 1: sort of acknowledge that whether it was technically you know,

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Speaker 1: against their rules or not, or in any violation or anythink,

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Speaker 1: it's not what people want the social network to be

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Speaker 1: used for. You know, Eileen, yesterday we were talking about

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Speaker 1: regulation and this was sinking a number of tech shares,

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Speaker 1: in particular Twitter with shares following more than ten But

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Speaker 1: today it looks like an increasingly Facebook specific story because

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Speaker 1: Facebook shares are continuing to decline what Twitter is popping

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Speaker 1: in pre market trade almost two percent. So what does

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Speaker 1: that say to you about sort of the delineation here

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Speaker 1: between the companies that are responding to these things well

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Speaker 1: and those that don't and uh and sort of independent

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Speaker 1: really of even regulatory action here. Yeah, I do think

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Speaker 1: it does demonstrate that investors and customers more more to

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Speaker 1: the point, really want to hear about the company ethos.

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Speaker 1: They want to understand what the mindset is behind the company.

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Speaker 1: They want to hear about their values, and they want

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Speaker 1: to understand that executives are mindful of their sort of

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Speaker 1: consumers point of view, and I think Twitter has handled

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Speaker 1: that well. Of course they had less to sort of

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Speaker 1: fall or to sort of stay off. But Facebook really

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Speaker 1: hasn't done anything, and that is a massive problem. Yeah, Eileen.

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Speaker 1: At the center of this is this business model for

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Speaker 1: Facebook where essentially you get to use the platform for free,

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Speaker 1: but the currency that they charge is your personal data,

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Speaker 1: and they use that personal data to generate ad revenue. Ultimately,

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Speaker 1: that's the core of the business model, Eileen. Is that

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Speaker 1: business model being challenged? Is there an existential threat or

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Speaker 1: is it too early to say that? I think I

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Speaker 1: think it's too early to say that. I think it's

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Speaker 1: an age old business model and I don't think it's

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Speaker 1: going to go away. However, will the companies start to

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Speaker 1: rely on or become stronger because of alternative business models, Yes,

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Speaker 1: I think so. You know, it starts to make money

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Speaker 1: off of other things that are not just advertising based,

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Speaker 1: whether they're transactional related or even financial services like and

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Speaker 1: I think that's going to continue to be more and

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Speaker 1: more important. But I do think advertising is good here

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Speaker 1: to stay. Then, I think the point about the regulatory

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Speaker 1: situation is that we're in a new kind of operating dynamic,

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Speaker 1: and there's there's got to be new rules around how

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Speaker 1: aggressive or how deeply one can go, you know, Eileen,

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Speaker 1: I just want to take a little bit of a

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Speaker 1: broader look at sort of whether this marks in some

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Speaker 1: ways the peak of the massive run up in tech

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Speaker 1: shares and the incredible rally there just because at this

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Speaker 1: point they're being treated like real companies, not just unicorns

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Speaker 1: or uh you know, all growth, all potential and uh

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Speaker 1: nothing to stop them. I mean, are we are we

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Speaker 1: seeing sort of a tipping point here? I mean, I

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Speaker 1: think it's a good sort of reset. It's a good

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Speaker 1: time to take stock and to sort of understand more

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Speaker 1: so for the executive teams of these companies that they

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Speaker 1: have a great responsibility right to the customers that they service,

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Speaker 1: and they have a huge responsibilit the uh as to

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Speaker 1: how they impact maybe even geopolitical events, and whether they're

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Speaker 1: they're acting transparently enough um and being upfront enough about

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Speaker 1: what their business models are. How that might be you know,

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Speaker 1: used by malicious characters or other people that you know,

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Speaker 1: they're not there to service, but who could take advantage

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Speaker 1: of what they offer. I think that's absolutely true. Well,

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Speaker 1: and I say this in light of a number of

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Speaker 1: initial public offerings from the tech companies. Were finally seeing

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Speaker 1: these companies go public. And there is a question that

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Speaker 1: one guest on radio yesterday was raising, which is does

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Speaker 1: this mark sort of the peak where some of these

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Speaker 1: founders want to cash in and get out UM? And

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Speaker 1: I'm wondering, you know, from from an advisory standpoint, is

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Speaker 1: that the mindset of some of these founders. I wouldn't

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Speaker 1: have thought so. I mean, perhaps I'm too much of

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Speaker 1: an idealist, But then again, I am an investor, so

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Speaker 1: I'm going to be an optimist. But I don't think

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Speaker 1: UM founders start businesses, first of all, to to necessarily help,

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Speaker 1: you know, enable the various sort of actors. They don't

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Speaker 1: start companies or platforms to try and help other people

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Speaker 1: manipulate them. And so there I think these take them

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Speaker 1: by surprise, and that is part of why there's such

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Speaker 1: a backlash and a reaction now against Zuckerberger, against the

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Speaker 1: company Facebook. It's sort of like, really, did you not,

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Speaker 1: you know, expect that this might happen, or did you

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Speaker 1: not consider your responsibility and trying to manage this kind

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Speaker 1: of situation. UM. But then even when it doesn't happen.

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Speaker 1: I don't think, um, you know, the strong entrepreneurs are

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Speaker 1: looking to get out then I think, you know, if anything,

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Speaker 1: there might be a sort of a battening down the hatches,

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Speaker 1: you know, to remind people know the reason I said

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Speaker 1: about doing this, or that we as a team wanted

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Speaker 1: to do this because of all the positive you know,

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Speaker 1: benefits that we can bring, whether they're commercial or otherwise.

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Speaker 1: And I don't think they look to get out. Eileen,

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Speaker 1: it's great to catch up with you. It's been way

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Speaker 1: too long. Thank you very much for joining us on

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Speaker 1: Bloomberg Radio. Eileen Bourberg, who haven't been able to speak

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Speaker 1: to for a long long time, but it's such an

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Speaker 1: insightful voice in the world of technology. Partner of Passion Capital,

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Speaker 1: also the Text City you k cha hm Tresy. I

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Speaker 1: want to just pick up on the weaker dollar versus

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Speaker 1: it's peers today. I'm sure that comes as sweet satisfaction

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Speaker 1: to a lot of people out there who are bearish

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Speaker 1: on the dollar going forward, But what happens if they

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Speaker 1: end up being wrong? Elsa Limnos joins us now. She's

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Speaker 1: RBC Global head of FX Strategy. Also, thank you so

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Speaker 1: much for being with us. Arguably, the bet that the

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Speaker 1: dollar will continue to weaken is the most crowded trade

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Speaker 1: out there right now, at least according to some analysts.

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Speaker 1: I'm wondering, do you think that the likelihood of a

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Speaker 1: reversal of some sort of strengthening actually is getting more realistic. Yeah,

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Speaker 1: it's definitely one of the most crowded trades out there, um,

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Speaker 1: and the most popular amongst the majors. And it's interesting

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Speaker 1: because the dollar, having started the year very badly in January,

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Speaker 1: hasn't actually been going anywhere through February and March. Um.

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Speaker 1: And I think the longer you see this position stoll Um,

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Speaker 1: the more likely there's people start questioning that very varish consensus.

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Speaker 1: What's the story that backs up the dollar weakness? And

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Speaker 1: we're looking at capital flows because rate differentials, certainly out

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Speaker 1: for the last year or so, don't really explain the move.

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Speaker 1: So there's a number of reasons that people are pointed to,

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Speaker 1: none of them particularly well founded. Um. There's been a

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Speaker 1: lot of talk around you know, when front end rate

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Speaker 1: differentials didn't work, people looked at the long end, and

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Speaker 1: then that stopped working, so people started scrambling around for

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Speaker 1: other relationships at the moment, there's a lot of focus

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Speaker 1: on the two fives part of the curve, the relationship

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Speaker 1: with eurodollar, even that now seems to be breaking down. UM.

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Speaker 1: So that's one thing, you know, people are kind of

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Speaker 1: constantly looking for new rate relationships that may explain it. Um.

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Speaker 1: The second one that gets a lot of traction with

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Speaker 1: some people is this idea that the US budget deficit

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Speaker 1: blowing out, we're going to go back into a twin

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Speaker 1: deficit world like in the early two thousands, and that

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Speaker 1: means dollar weakness across the board. And of course there

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Speaker 1: are some key differences between now and then, um, namely

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Speaker 1: the fact that the private sector is not in depth

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Speaker 1: sit as it was back then. And so you can

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Speaker 1: go through these reasons one by one and it's not

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Speaker 1: really questioning whether or not they're really going to hold

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Speaker 1: in practice. You know. Also, one thing that I'm struck

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Speaker 1: by is that the economic data in Europe, which many

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Speaker 1: people have had really high hopes for, has been disappointing

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Speaker 1: again and again with each additional reading. And I wonder

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Speaker 1: at what point this really becomes Europe versus US story.

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Speaker 1: If those disappointments continue, could we just see a de

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Speaker 1: facto strengthening in the dollar that could potentially be disruptive

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Speaker 1: in response. So that's right. You know, you tend to

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Speaker 1: see that with economic expectations and surprises, that they build

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Speaker 1: up as economists have underestimated the ranks of the recovery,

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Speaker 1: and you get all these positive surprises cumulating, and then

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Speaker 1: expectations catch up to the reality and usually over shoot

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Speaker 1: UM and then you start getting the negative surprises. That's

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Speaker 1: certainly what we're seeing at the moment. In Europe. You know,

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Speaker 1: we had a very long run of positive economic surprises

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Speaker 1: on our indicators UM around thirty three out of thirty

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Speaker 1: four weeks were positive, and that really came to an

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Speaker 1: end a few weeks ago, and since then, um, we've

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Speaker 1: seen Pierre mis this pointing we're going to get another

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Speaker 1: batch of Pierre Mice tomorrow. The hard data are pointing

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Speaker 1: to maybe a bit of softening momentum as well, And

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Speaker 1: I think it really cools into question this thesis that

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Speaker 1: you know, the US is slowing down and the rest

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Speaker 1: of the world is still picking up at the same time.

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Speaker 1: I just don't think that's validated by the data. Yeah,

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Speaker 1: one thing I want to broaden out and talk about

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Speaker 1: inherent leverage in this system tied to this bet on

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Speaker 1: a weaker dollar. We see this with the emerging markets

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Speaker 1: and how popular they've become investors going in unhedged, even

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Speaker 1: though it really is a currency bet. UM. Has the

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Speaker 1: market ever been this levered to the bet that the

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Speaker 1: dollar will continue to weaken um. It's certainly been a

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Speaker 1: while since consensus was this strong against the dollar. UM.

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Speaker 1: You know, when you look at emerging markets, and typically

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Speaker 1: m vets will always be on hedge because of course

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Speaker 1: the cost of hedging is so high UM, but it's

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Speaker 1: unusual for people to be unhedged in d m UM

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Speaker 1: as well. So you know, when you're actually paid to

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Speaker 1: hedge European exposure, Japanese exposure. At the moment, as a

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Speaker 1: US investor, to take the decision to be on hedged,

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Speaker 1: it means that you're actually giving up a bit of

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Speaker 1: carry that you could pick up. And so that's where

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Speaker 1: I would look for the first signs of the dollar

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Speaker 1: bearish consensus cracking. It's really against the developed markets where

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Speaker 1: you may see that fallings first. That's a really really

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Speaker 1: interesting point. Else So I do want to pivot towards

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Speaker 1: the federal reserve a little bit later today. What are

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Speaker 1: you looking for from Chairman Pale and what would you

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Speaker 1: like the first question to be for him? Nah? Um,

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Speaker 1: you know, the testament, it may not be that different

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Speaker 1: um to what we heard in his semi annual testament.

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Speaker 1: You know, the press conference may not be that different. UM.

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Speaker 1: There's a lot of focus clearly on what the median

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Speaker 1: dots are going to show UM, although the hurdle for

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Speaker 1: the median shifting from three to four dots is probably

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Speaker 1: fairly high. UM. I think there'll be quite a bit

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Speaker 1: of focused on the language around the statement. You know,

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Speaker 1: what will they say about the balance of risks. A

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Speaker 1: lot of people have been focusing on the brain Ard

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Speaker 1: speech from a few weeks ago, and the fact that

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Speaker 1: growth is expected to be high this year and next

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Speaker 1: UM with the tax cards coming through UM, and so

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Speaker 1: there will be a lot of attention on the language

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Speaker 1: around the decision. So are those forecasts for growth to

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Speaker 1: pick up this year and next anchored in hope more

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Speaker 1: than anything else, because I don't see a pick up

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Speaker 1: in the first quarter here in the United States, you know,

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Speaker 1: for better or for worse, think most central bankers still

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Speaker 1: rely heavily on their traditional economic models. UM. And typically

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Speaker 1: when you see fiscal stimulus of the size that we've seen, UM,

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Speaker 1: you'd expect that to lead to to high short term growth. UM.

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Speaker 1: It's it remains to be seen how long that will

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Speaker 1: take to feed through. It sometimes takes a little bit

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Speaker 1: longer than expected. I mean, we've certainly seen that in

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Speaker 1: other countries. Canada, for example, voted through quite a large

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Speaker 1: UM fiscal use in package a few years back, and

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Speaker 1: it took a while for that to come through in

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Speaker 1: the data. But it does tend to come through eventually.

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Speaker 1: Just that real quick, I'd love to get your sense

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Speaker 1: on the just going back to the dollar weakness, and

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Speaker 1: I wonder if how much the FED is sort of

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Speaker 1: watching this is something that's easing financial conditions. I wondered

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Speaker 1: to what degree that reflects political risk and what degree

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Speaker 1: that reflects the deficit that you're talking about earlier. That's

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Speaker 1: a good point because I think if you look at

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Speaker 1: traditional explanatory factors for effects, whether that's great so capital

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Speaker 1: flows or anything else, UM, it's hard to fully explain

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Speaker 1: dollar weakness on those alone. And so some people have

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Speaker 1: pointed to this unexplained gap and and said it reflects

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Speaker 1: some kind of negative political risk premium UM rightly or

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Speaker 1: wrongly UM. The problem with calling it that is that

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Speaker 1: it's very difficult to identify whether it should grow or reduce,

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Speaker 1: and what the mechanism is behind it. UM. I think

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Speaker 1: the safest thing to say is that, you know, we

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Speaker 1: are certainly seeing much more conventional policy from this administration. UM.

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Speaker 1: But whether it's tariffs and the response from China, or

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Speaker 1: whether it's UM the approach to tax cuts or anything else,

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Speaker 1: the economic transmission mechanisms should actually be the same as

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Speaker 1: always been. An easy episical policy means tighter monetary and

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Speaker 1: SELENOS has been grebably catch up with your joining us

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Speaker 1: from the City of London, the RBC Global head of

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Speaker 1: f A strategies him there was a headline that crossed

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Speaker 1: this morning that I found really interesting. It's not just Facebook.

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Speaker 1: Big tech revolt has begun this according to Namur currency

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Speaker 1: strategist Bilal half Fees. I want to bring in Stephanie Miller,

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Speaker 1: Hit Capital Markets senior analyst, joining us from our studios

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Speaker 1: in Washington, d C. Stephanie, thank you so much for

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Speaker 1: being with us. Do you agree do you think that

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Speaker 1: there is some big revolution against technology companies as we

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Speaker 1: know them? Now that is just in its infancy. Well,

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Speaker 1: thanks for having me, And I love that question because

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Speaker 1: it reminds me of something I read about a month

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Speaker 1: ago an interview with Bill Gates when he basically said

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Speaker 1: that that very thing was probably coming and and he

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Speaker 1: if anyone would know what it means to be a

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Speaker 1: technology company that's targeted by regulators, and he basically, uh

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Speaker 1: intimated that the way that current big technology is, certainly

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Speaker 1: social media companies specifically we're are acting and the way

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Speaker 1: that consumer data is or isn't protected with sort of

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Speaker 1: begging for a regulatory intervention. Stephanie, do you think that

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Speaker 1: there's a conversation or a meeting going on at Facebook

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Speaker 1: where someone is asking, Okay, how much is this going

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Speaker 1: to cost us? And when this is going to go away? Absolutely,

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Speaker 1: but I think it probably goes even further because it's

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Speaker 1: cost them quite a bit already in the market. I

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Speaker 1: think it's a maybe close to fifty billion now in

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Speaker 1: market value loss, the amount of Tesla's market capitalization right

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Speaker 1: in two days, exactly in two days. And so the

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Speaker 1: question is has to be beyond what regulators will make

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Speaker 1: Facebook do or make some of these other big tech

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Speaker 1: companies like Twitter, uh do, but more what they should

431
00:23:46,119 --> 00:23:48,600
Speaker 1: be doing themselves to self regulate. And I work at

432
00:23:48,600 --> 00:23:51,600
Speaker 1: a brokerage firm. We are a member of FINNRA. We

433
00:23:51,680 --> 00:23:54,639
Speaker 1: have our own self regulator. It is not uncommon to

434
00:23:55,240 --> 00:23:57,840
Speaker 1: have an industry regulate itself. So whether it is a

435
00:23:58,200 --> 00:24:02,359
Speaker 1: industry wide regulation or a company internal best practices, I

436
00:24:02,359 --> 00:24:04,600
Speaker 1: think they have to be very seriously thinking about what

437
00:24:04,640 --> 00:24:07,040
Speaker 1: this means for them going forward. So definitely, as we talk,

438
00:24:07,119 --> 00:24:12,360
Speaker 1: Facebook shares down nearly two percent, another day of deepening declines.

439
00:24:12,440 --> 00:24:13,960
Speaker 1: I want to go back to what you were saying

440
00:24:14,240 --> 00:24:17,640
Speaker 1: with respect to what Bill Gates noted that he expected

441
00:24:17,720 --> 00:24:20,760
Speaker 1: a backlash, And I'm wondering what is going to be

442
00:24:20,800 --> 00:24:22,119
Speaker 1: the shape of this right, I mean, are we going

443
00:24:22,160 --> 00:24:25,080
Speaker 1: to see just outlawses across the board for tech companies

444
00:24:25,080 --> 00:24:27,280
Speaker 1: that we're going to see uh, some kind of forced

445
00:24:27,359 --> 00:24:29,879
Speaker 1: self regulatory agency. What do you think are the steps

446
00:24:29,880 --> 00:24:32,840
Speaker 1: in the next few months. I think the immediate steps

447
00:24:32,880 --> 00:24:34,919
Speaker 1: that are going to be most visible to the public

448
00:24:34,960 --> 00:24:38,720
Speaker 1: will be hearings in Congress. I think it's unlikely Congress

449
00:24:38,720 --> 00:24:40,119
Speaker 1: it's going to be in a position this year to

450
00:24:40,160 --> 00:24:44,400
Speaker 1: actually legislate. UH. There are a lot of reasons compelling

451
00:24:44,440 --> 00:24:46,879
Speaker 1: reasons for members from both sides of the aisle to

452
00:24:46,960 --> 00:24:49,920
Speaker 1: be tough on Facebook. But also, once you actually start

453
00:24:50,040 --> 00:24:53,360
Speaker 1: limiting Facebook's ability to do business, you start impacting companies

454
00:24:53,359 --> 00:24:56,760
Speaker 1: and all jurisdictions, all congressional jurisdictions who rely on Facebook

455
00:24:56,800 --> 00:24:59,560
Speaker 1: themselves for their own bottom line. So it gets really

456
00:24:59,560 --> 00:25:02,240
Speaker 1: complicate aided really fast. So I think the easiest path

457
00:25:02,280 --> 00:25:05,480
Speaker 1: forward for Congress right now are really tough hearings on

458
00:25:05,560 --> 00:25:08,919
Speaker 1: the On the regulatory side, the FTC, the Federal Trade

459
00:25:09,040 --> 00:25:12,560
Speaker 1: Commission is already announced or they didn't announce that, I

460
00:25:12,560 --> 00:25:15,600
Speaker 1: should say, but someone UM told the press that they

461
00:25:15,640 --> 00:25:18,720
Speaker 1: are undergoing an investigation themselves, which could come with a

462
00:25:18,760 --> 00:25:21,880
Speaker 1: fine on Facebook. It was just not the only companies

463
00:25:21,880 --> 00:25:23,760
Speaker 1: that are affected by this right, I mean, you have

464
00:25:23,840 --> 00:25:26,520
Speaker 1: data breaches that affect not only areas of the US

465
00:25:26,680 --> 00:25:30,600
Speaker 1: government but also companies such as Equifax. What has been

466
00:25:30,600 --> 00:25:34,439
Speaker 1: the response there, It's a great question. And Equifax, the

467
00:25:34,480 --> 00:25:37,879
Speaker 1: type of data that was was breached in that instance

468
00:25:38,400 --> 00:25:41,639
Speaker 1: was social security numbers and and things that result in

469
00:25:41,640 --> 00:25:46,360
Speaker 1: in UM identity theft UM, and so far there has

470
00:25:46,400 --> 00:25:50,760
Speaker 1: been no legislative reaction to Equifax by members of Congress.

471
00:25:50,800 --> 00:25:54,520
Speaker 1: Other than hearing and from the FTC. The FTC is

472
00:25:54,520 --> 00:25:57,680
Speaker 1: in doing its own investigation, which could result in a fine.

473
00:25:57,720 --> 00:26:00,399
Speaker 1: But my colleague follows this closely doesn't ex back that

474
00:26:00,440 --> 00:26:03,280
Speaker 1: to occur until this summer at the absolute soonest, So

475
00:26:03,520 --> 00:26:09,440
Speaker 1: why would this breach at Facebook be considered more serious

476
00:26:10,080 --> 00:26:15,879
Speaker 1: than the acquisition of people's social security numbers and in

477
00:26:15,920 --> 00:26:20,800
Speaker 1: many cases credit card information, credit history, as well as

478
00:26:20,920 --> 00:26:25,320
Speaker 1: financial data. Why would the personal data that you enter

479
00:26:26,080 --> 00:26:31,840
Speaker 1: that was used supposedly to create the psychographic profiles, why

480
00:26:31,840 --> 00:26:36,359
Speaker 1: would that be more egregious, let's say, than than sort

481
00:26:36,359 --> 00:26:40,280
Speaker 1: of having access or or giving access and not protecting

482
00:26:40,359 --> 00:26:45,320
Speaker 1: people's personal financial records. I think this is a question

483
00:26:45,359 --> 00:26:48,360
Speaker 1: that's rooted in politics, and at the end of the day,

484
00:26:48,440 --> 00:26:51,760
Speaker 1: it will be more egregious if if people tell members

485
00:26:51,760 --> 00:26:54,240
Speaker 1: of Congress that it's more egregious. I think the thing

486
00:26:54,280 --> 00:26:57,280
Speaker 1: that would make you, know, you and me and and

487
00:26:57,400 --> 00:27:00,479
Speaker 1: our our friends and family really concerned here is if

488
00:27:00,520 --> 00:27:03,520
Speaker 1: we feel that democracy is being threatened, that tends to

489
00:27:03,680 --> 00:27:06,960
Speaker 1: rise to sort of a five alarm level. Uh, just

490
00:27:07,040 --> 00:27:09,720
Speaker 1: as bad as identity theft. But when it comes to

491
00:27:09,920 --> 00:27:13,600
Speaker 1: just this type of data that it was leaked by

492
00:27:13,640 --> 00:27:17,000
Speaker 1: this third party who wasn't even Facebook. Um, it's not

493
00:27:17,080 --> 00:27:19,280
Speaker 1: the type of data that I think people in and

494
00:27:19,320 --> 00:27:22,520
Speaker 1: of itself really care about. I think we've known that

495
00:27:22,520 --> 00:27:25,119
Speaker 1: that social media companies use this data and share this

496
00:27:25,200 --> 00:27:28,000
Speaker 1: data with marketers, and we are all still participating in

497
00:27:28,080 --> 00:27:30,360
Speaker 1: social media, you know, Stephanie, I want to pick up

498
00:27:30,440 --> 00:27:33,719
Speaker 1: on what you said about the political aspect of this

499
00:27:33,880 --> 00:27:38,520
Speaker 1: Facebook stories. You have Facebook, which has been reticent to

500
00:27:39,000 --> 00:27:41,920
Speaker 1: anger either the left or the right too much, the

501
00:27:42,000 --> 00:27:45,119
Speaker 1: right in particular at a time when Republicans are in

502
00:27:45,240 --> 00:27:49,080
Speaker 1: Congress and could potentially crack down on them in retaliation

503
00:27:49,200 --> 00:27:51,840
Speaker 1: as a majority. Uh. And then you know, you have

504
00:27:52,040 --> 00:27:56,960
Speaker 1: potential allegations that people saying that this fast Facebook data

505
00:27:56,960 --> 00:28:00,280
Speaker 1: breaches a threat to democracy are trying to politicize on

506
00:28:00,320 --> 00:28:02,920
Speaker 1: the other side by making it a bigger issue than

507
00:28:02,960 --> 00:28:05,840
Speaker 1: it was. Where do you stand on that? I think

508
00:28:06,080 --> 00:28:08,639
Speaker 1: again the question is going to be, is does that

509
00:28:08,800 --> 00:28:11,520
Speaker 1: rise to the occasion where those one or both of

510
00:28:11,520 --> 00:28:14,159
Speaker 1: those issues becomes something that members of Congress are not

511
00:28:14,200 --> 00:28:17,880
Speaker 1: allowed to ignore, especially ahead of this November election. Um,

512
00:28:18,000 --> 00:28:20,399
Speaker 1: And right now, I'm not convinced that I see it

513
00:28:20,440 --> 00:28:23,680
Speaker 1: trending that way. If Facebook takes some proactive steps to

514
00:28:23,760 --> 00:28:27,560
Speaker 1: demonstrate that it is taking this seriously. And I think

515
00:28:27,600 --> 00:28:30,480
Speaker 1: Facebook really faces much more of a reckoning with Wall

516
00:28:30,520 --> 00:28:33,560
Speaker 1: Street than it does with Washington in this instance. Um,

517
00:28:33,760 --> 00:28:37,520
Speaker 1: and I'm not sure that anything Washington could do uh

518
00:28:37,720 --> 00:28:42,360
Speaker 1: could compete with what's already happened in the markets just quickly.

519
00:28:42,400 --> 00:28:45,600
Speaker 1: Does this also apply to organizations like LinkedIn where people

520
00:28:45,600 --> 00:28:48,720
Speaker 1: put a lot of their personal information online and they

521
00:28:48,760 --> 00:28:51,880
Speaker 1: think that they are being viewed by legitimate companies for

522
00:28:52,000 --> 00:28:56,320
Speaker 1: legitimate positions or indeed making legitimate connections. Yes, LinkedIn, I

523
00:28:56,320 --> 00:29:00,200
Speaker 1: would say Twitter also, and even Google. I think this

524
00:29:00,280 --> 00:29:02,800
Speaker 1: is where it start begins to argue for the industry

525
00:29:02,800 --> 00:29:06,320
Speaker 1: to come together and self regulate. That is a really

526
00:29:06,360 --> 00:29:09,440
Speaker 1: long process I would have to imagine. But you know

527
00:29:09,440 --> 00:29:13,240
Speaker 1: another good analog we talked about Equifax. The tobacco industry

528
00:29:13,920 --> 00:29:16,240
Speaker 1: was dragged in front of Congress for their first hearing

529
00:29:16,680 --> 00:29:19,720
Speaker 1: in if you remember that photo on the front page

530
00:29:19,720 --> 00:29:21,680
Speaker 1: of the New York Times with them all giving testimony

531
00:29:21,800 --> 00:29:24,840
Speaker 1: saying that cigarettes don't kill you. And it took fifteen

532
00:29:24,920 --> 00:29:27,960
Speaker 1: years for the federal government to have give itself the

533
00:29:27,960 --> 00:29:31,240
Speaker 1: authority to even regulate the tobacco industry. So fe Miller.

534
00:29:31,400 --> 00:29:33,440
Speaker 1: Thank you so much for that perspective. It may take

535
00:29:33,480 --> 00:29:37,280
Speaker 1: a very long time before Congress takes material steps. Stephanie Miller,

536
00:29:37,360 --> 00:29:47,880
Speaker 1: Hight Capital Markets Senior Analyst, Thank you for that. Thanks

537
00:29:47,920 --> 00:29:52,160
Speaker 1: for listening to the Bloomberg Saveillance podcast. Subscribe and listen

538
00:29:52,400 --> 00:29:57,720
Speaker 1: to interviews on Apple Podcasts, SoundCloud, or whichever podcast platform

539
00:29:57,840 --> 00:30:02,120
Speaker 1: you prefer. I'm on Twitter at I'm Keen. Before the podcast,

540
00:30:02,200 --> 00:30:05,680
Speaker 1: you can always catch us worldwide. I'm Bloomberg Radio