WEBVTT - Surveillance: Too Much Data, Too Little Analysis, Shilling Says 0:00:00.080 --> 0:00:13.040 Yeah, Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene 0:00:13.480 --> 0:00:17.560 Jay Leye. We bring you insight from the best in economics, finance, investment, 0:00:18.000 --> 0:00:23.520 and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 0:00:23.600 --> 0:00:33.600 Bloomberg dot Com, and of course on the Bloomberg to 0:00:33.640 --> 0:00:35.760 the Treasury market. Then, what a start of the year. 0:00:35.800 --> 0:00:38.839 It's been the tenure starting the year around to forty, 0:00:39.320 --> 0:00:41.800 up thirty four basis points since then, and up another 0:00:41.800 --> 0:00:44.400 three or four basis points in today's session alone. Two 0:00:44.479 --> 0:00:47.760 point seven four pc is your yield on a US 0:00:47.840 --> 0:00:51.440 ten uere For year after year many strategists have called 0:00:51.479 --> 0:00:53.760 for three percent, and for year after year many of 0:00:53.800 --> 0:00:56.560 those strategists have been disappointed. When I can tell you 0:00:56.680 --> 0:00:59.120 this year we're a whole lot closer than we have 0:00:59.280 --> 0:01:01.840 been the quite a while. John gets not to discuss 0:01:01.880 --> 0:01:04.319 in New York City is a bond market legend in 0:01:04.360 --> 0:01:08.040 these pasts. His name is Gary Shilling, a Gary Shilling President. 0:01:08.080 --> 0:01:12.480 Gary always great to get your insight on what's happening. 0:01:13.240 --> 0:01:15.600 Can you tell me where we're out now at seventy 0:01:15.680 --> 0:01:19.360 four and what kind of world with pricing in Well, 0:01:19.400 --> 0:01:21.440 we're in a world where the Fed is obviously got 0:01:21.440 --> 0:01:23.440 the bit in their mouth to raise rates, and there 0:01:23.520 --> 0:01:26.400 is a spillover effect. I mean, if you look at 0:01:26.400 --> 0:01:29.200 the entire post work period and look at the average 0:01:29.240 --> 0:01:31.959 spill over. Now this is average, of course, but for 0:01:32.000 --> 0:01:35.280 every hundred basis point increase in the FED controlled FED 0:01:35.360 --> 0:01:38.560 funds rate, you get a forty four basis point increase 0:01:38.640 --> 0:01:41.039 in the ten year yield. And that's over about the 0:01:41.080 --> 0:01:43.160 next six months. Now when you get out to the 0:01:43.160 --> 0:01:46.120 thirty year yield, it's much less. It's thirty four basis 0:01:46.120 --> 0:01:49.320 points for every hundred basis point increase in FED funds 0:01:49.400 --> 0:01:51.800 Or isn't that's what you'd expect. The further further, what 0:01:51.880 --> 0:01:54.360 you get from where the Fed is the less the impact. 0:01:54.800 --> 0:01:56.640 And the third year has a lot of other forces 0:01:56.680 --> 0:02:00.240 acting on it, uh deflationary forces in my view, things 0:02:00.280 --> 0:02:04.920 like globalization, certainly very important, things like Amazon what they're 0:02:04.920 --> 0:02:09.120 doing to online sales, a lot of other forces affecting 0:02:09.120 --> 0:02:11.720 the longer run. So for anyone getting excited about the 0:02:11.760 --> 0:02:14.960 reflation theme finally taking hold of the treasury market, are 0:02:14.960 --> 0:02:17.200 you saying that to state, take a step back, garyon 0:02:17.400 --> 0:02:20.000 and look at the bigger pitch of world Watte. Hey, John, 0:02:20.080 --> 0:02:24.760 I I the yield on the thirty year bond was 0:02:24.880 --> 0:02:28.720 twelve point six and I said in writing, we're in. 0:02:28.960 --> 0:02:32.359 We're ending the bond rally of a lifetime now, all 0:02:32.400 --> 0:02:35.079 the way down in yields, all the way up in prices. 0:02:35.639 --> 0:02:38.960 The the consensus has been, oh, no, rais are going up, 0:02:39.040 --> 0:02:41.600 razor going up raisor going up, Raiser going up. I 0:02:41.639 --> 0:02:44.639 can't remember one time when there was any general agreement 0:02:44.720 --> 0:02:47.919 with this, with this position, and yeah, maybe it's right 0:02:47.960 --> 0:02:51.200 this time. But the point is that this is this 0:02:51.240 --> 0:02:54.440 has happened so many times in the past that I'm 0:02:54.440 --> 0:02:56.800 not persuaded because I look at I look at what 0:02:56.840 --> 0:02:59.520 I consider the fundamentals. Let's say, when you look at 0:03:00.080 --> 0:03:03.400 what's going on in terms of even in the service economy, 0:03:03.480 --> 0:03:08.440 and we're increasingly as incomes. As economies expand, service has 0:03:08.520 --> 0:03:10.640 become more important than goods. You can only put so 0:03:10.639 --> 0:03:12.400 many cars in your drive away, but you can spend 0:03:12.560 --> 0:03:15.800 infinite a louts of money on healthcare, recreation, travel and 0:03:15.840 --> 0:03:19.800 so on. And and even in the service inflation area, education, 0:03:20.280 --> 0:03:23.520 service costs are coming down. A lot of pressure. UH, 0:03:23.680 --> 0:03:26.119 students and their parents are saying, hey, this is too expensive. 0:03:26.200 --> 0:03:28.880 I'm going to go to apprenticeship program rather than for 0:03:29.080 --> 0:03:32.360 your college. Healthcare. A lot of pressure there. And you 0:03:32.400 --> 0:03:37.640 see this this recent decision by h Morgan Bank uh 0:03:37.840 --> 0:03:45.600 Um Amazon, and yeah, and you know that these things 0:03:45.640 --> 0:03:48.560 are really coming under control. So I think there's a 0:03:48.680 --> 0:03:51.320 there's just a lot of deflationary forces in the world, 0:03:51.800 --> 0:03:54.720 and I'm not sure the feed is properly recognize those. 0:03:54.760 --> 0:03:57.720 They will be they're beginning to. They've they've an effects 0:03:57.760 --> 0:04:00.600 said that the natural rate of interest, this sort of 0:04:00.600 --> 0:04:03.520 interest rate where we're in nirvana and everything is just 0:04:03.640 --> 0:04:08.520 copacetically right off into the into the horizon, into the sunset. 0:04:08.840 --> 0:04:11.480 You know, equilibrium never exists. It's just a it's just 0:04:11.520 --> 0:04:14.800 a momentary point you're passing through on the way to 0:04:14.840 --> 0:04:17.920 one extreme or the other. But even the FED, I think, 0:04:18.080 --> 0:04:20.560 is beginning to recognize that the world has changed. Do 0:04:20.600 --> 0:04:24.080 you think do you think that yields have to go down? Then? 0:04:24.120 --> 0:04:27.360 And I ask in this context that Feds raised rates 0:04:27.400 --> 0:04:32.080 five times and financial conditions are looser than ever, so 0:04:33.160 --> 0:04:35.839 you could argue that what they're doing isn't the problem 0:04:36.080 --> 0:04:39.839 and yields don't have to fall. Well, yeah, that's a 0:04:39.880 --> 0:04:43.000 good point. Mike, and I think the reality is that 0:04:43.040 --> 0:04:46.520 there is so much liquidity slashing around the world as 0:04:46.520 --> 0:04:50.719 a result of quantitative easing, the FED, the Bank of England, 0:04:50.720 --> 0:04:54.520 Bank of Canada, Bank of Japan, European Central Bank, uh, 0:04:54.600 --> 0:04:57.400 the the Swedish Rice Bank. You have all this liquidity 0:04:57.400 --> 0:04:59.960 slashing around the world, and it's gonna take a while 0:05:00.120 --> 0:05:03.200 to soak that up. In other words, and and so 0:05:03.480 --> 0:05:05.640 I think, you know, if the FED raisers raised three 0:05:05.640 --> 0:05:08.240 times this year, four times, I'm not sure that makes 0:05:08.240 --> 0:05:10.640 a lot of difference to the overall equidity now. Sooner 0:05:10.680 --> 0:05:13.200 or later, if the FED continues to do what they 0:05:13.320 --> 0:05:16.159 what they always do are almost always do, and that 0:05:16.400 --> 0:05:19.240 is get credit too tight and kill the economy, get 0:05:19.240 --> 0:05:23.000 a bear market in stocks, and and uh, by my account, 0:05:23.360 --> 0:05:25.760 in eleven or twelve times in the post World War 0:05:25.800 --> 0:05:27.960 two period when the FED started on a tightening binge, 0:05:28.360 --> 0:05:31.320 they ultimately did achieve that they only had one stoft 0:05:31.400 --> 0:05:33.760 landing in the mid nineties, But that could be years 0:05:33.800 --> 0:05:35.960 away because there's so much liquidity out there to be 0:05:36.000 --> 0:05:38.720 soaked up. Let me ask you this, Johnna, I've been 0:05:38.720 --> 0:05:41.600 insulting Gary all day by asking him questions about the 0:05:41.600 --> 0:05:45.680 olden days. Um, But because you've been doing this for 0:05:45.720 --> 0:05:49.559 so long, do we have better data now that would 0:05:49.760 --> 0:05:53.440 enable a central bank to get ahead of the idea 0:05:53.480 --> 0:05:55.960 that they could go too far? I mean we have 0:05:56.040 --> 0:06:01.120 all these, for example, financial condition indexes. I don't think so. 0:06:01.320 --> 0:06:04.040 The problem is there's really too much data and too 0:06:04.080 --> 0:06:07.560 little analysis. I mean you look for example, at at 0:06:07.640 --> 0:06:11.479 the data on consumer sentiment the Conference Board of the 0:06:11.480 --> 0:06:15.840 Michigan to leading surveys on this. The correlation between that 0:06:15.920 --> 0:06:18.719 and what consumers spend is lawful. As a matter of fact, 0:06:19.240 --> 0:06:23.840 the way it is that consumers spending leads confidence, it's 0:06:23.880 --> 0:06:26.000 it's quite the reverse of what you'd expect. It's not 0:06:26.040 --> 0:06:29.640 a leading it's a lagging indicator. And I just think 0:06:29.640 --> 0:06:32.880 that the that the idea of you can rely on data. 0:06:33.120 --> 0:06:35.520 I mean that this years ago, there was this belief 0:06:35.600 --> 0:06:40.280 that this belief that you could design these huge econometric 0:06:40.320 --> 0:06:44.400 models of the economy two and three D equation jobs. 0:06:44.400 --> 0:06:47.360 And I was trained as econometrician. Uh when I got 0:06:47.360 --> 0:06:50.159 my PhD of Sanford, and everybody thought these were going 0:06:50.200 --> 0:06:53.520 to solve the world. Well, the problem is that they didn't. 0:06:53.720 --> 0:06:56.480 And and there's so many nuances, there's so many unknowns. 0:06:56.480 --> 0:06:59.200 There's so many, so many things you have to put 0:06:59.240 --> 0:07:02.360 in to wreck the models from blowing up, from giving 0:07:02.400 --> 0:07:05.400 a nonsensical answers that by the time you get through 0:07:05.680 --> 0:07:07.440 your shower, Say, wait a minute, there's a lot of 0:07:07.520 --> 0:07:10.200 human nature in here that you never really can quite 0:07:10.280 --> 0:07:13.080 you can't quantify, at least not in today's world. Everybody 0:07:13.120 --> 0:07:16.800 hated economists after the Great Financial Crisis because nobody called 0:07:16.840 --> 0:07:20.080 the Great Financial Crisis. Now, wait a minute, except for 0:07:20.200 --> 0:07:23.760 a Gary Sully, it seems to be that I do 0:07:23.920 --> 0:07:26.720 love the way that history has kind of rewritten itself 0:07:26.800 --> 0:07:30.240 with the words nobody predicted this. Michael. I don't know 0:07:30.360 --> 0:07:32.000 where you were going with it. But Gary, does that 0:07:32.080 --> 0:07:35.520 frustrate you that somehow we sit and we sit here 0:07:35.560 --> 0:07:40.960 and say, nobody predicted this? People did? Yeah? Yeah, And 0:07:41.000 --> 0:07:43.440 of course there's there's always a question of the degree 0:07:43.480 --> 0:07:46.960 of prediction. I mean, it's a somebody who said, um, 0:07:48.000 --> 0:07:50.440 say five years I mean, we were on top of 0:07:50.440 --> 0:07:53.600 the of the housing bubble. The first time we started 0:07:53.600 --> 0:07:56.360 writing about this was in uh two thousand two, and 0:07:56.360 --> 0:07:58.640 we said, a bubbleist farming sooner or later. A crack 0:07:59.160 --> 0:08:03.120 Now it only crack. Actually February of of two thousand 0:08:03.240 --> 0:08:05.960 eight was probably the time that you could because that 0:08:06.160 --> 0:08:08.320 was on the A b X UH when the A 0:08:08.440 --> 0:08:12.600 b X trouble b UH minus index went off the cliff. 0:08:13.080 --> 0:08:16.760 But did anybody say February is a data ahead of time. 0:08:17.080 --> 0:08:19.400 We didn't, and I think we're as good as anybody. 0:08:19.440 --> 0:08:21.400 But it's always a degree. I mean, when you know, 0:08:21.440 --> 0:08:24.320 and hey, let's face it, the Tennessee is when you're 0:08:24.400 --> 0:08:26.880 right to go back and say, well, I told you so, 0:08:27.480 --> 0:08:30.440 and I refer to this, and of course, uh, there're 0:08:30.480 --> 0:08:32.880 guys like Michaelill remind you that there's sometimes you said 0:08:32.960 --> 0:08:35.440 things that didn't come up and come through and that's 0:08:35.440 --> 0:08:38.680 weekly valid. But you know, it is a degree. It 0:08:38.800 --> 0:08:40.800 is a degree of forecast. It's not a it's not 0:08:40.880 --> 0:08:43.360 a one off kind of you're either right or either wrong. 0:08:43.480 --> 0:08:45.720 Just to finish things up with you before we before 0:08:45.760 --> 0:08:47.439 we lose you. We've got one minute left. What do 0:08:47.480 --> 0:08:52.000 you think people are getting wrong? Now? Um? I think 0:08:52.080 --> 0:08:56.360 they're getting wrong. The conviction that this is going to 0:08:56.440 --> 0:09:00.920 continue forever. The complacency in markets is extreme. Now, that 0:09:00.960 --> 0:09:03.880 doesn't mean that they're gonna have a big come up 0:09:03.880 --> 0:09:07.000 and tomorrow or the next day. But I do think 0:09:07.080 --> 0:09:10.560 and and the latest example of this is bitcoin. When 0:09:10.559 --> 0:09:13.000 you see this, when people are just desperate for returns 0:09:13.040 --> 0:09:16.839 and they're going to speculative areas like this, it tells 0:09:16.880 --> 0:09:20.079 you that they really have that that the greed has 0:09:20.120 --> 0:09:25.280 overcome fear. Alright, Gary Shilling, Um, we will continue to 0:09:25.320 --> 0:09:28.720 hold your feet to the fire because that's what I do. Okay, 0:09:28.760 --> 0:09:32.480 love you the bees. Okay, the bees are okay. It's 0:09:32.520 --> 0:09:37.880 been produced. So I wish I checked him out a 0:09:37.880 --> 0:09:40.160 couple of weeks ago ahead and give him a food. 0:09:40.200 --> 0:09:42.679 It's called fonding his cake decoration for they can eat 0:09:42.679 --> 0:09:44.400 to get through the winter. I don't want him to starve. 0:09:44.440 --> 0:09:47.040 But uh, out of a hundred hives, and I only 0:09:47.040 --> 0:09:48.959 had about five of them that have died so far 0:09:49.000 --> 0:09:51.319 in the winter. And that's pretty good. That's pretty good. 0:09:51.320 --> 0:09:55.360 Gary Shilling, Hey, Gary Shilling Company and a beekeeper. We 0:09:55.400 --> 0:10:12.720 love them here on Bloomberg Surveillance. The story, though, for 0:10:12.760 --> 0:10:15.560 the equity market will be all about the tech earnings, 0:10:15.559 --> 0:10:19.680 and we have had a taster from Facebook. The story 0:10:19.720 --> 0:10:22.520 from Wall Street is that less time spent on Facebook 0:10:22.559 --> 0:10:24.760 is apparently no big deal. So let's have a big 0:10:24.800 --> 0:10:27.280 conversation about Facebook. Shall we with the man who quite 0:10:27.320 --> 0:10:31.720 literally wrote the book on Facebook. It's David Kirkpatrick, CEO 0:10:32.080 --> 0:10:36.480 of and founder of Teconomy Media, David Kirkpatrick joining us 0:10:36.520 --> 0:10:38.880 on the phone. David helped me out here. Less time 0:10:38.880 --> 0:10:42.040 spent on Facebook apparently no big deal? Is it a 0:10:42.080 --> 0:10:44.720 big deal? Um? I don't. I don't think it's yet 0:10:44.760 --> 0:10:46.560 a big deal, and thanks for having me. And I 0:10:46.600 --> 0:10:48.760 think that in the United States and North America is 0:10:48.760 --> 0:10:51.040 where we saw this trend just begin for the first 0:10:51.040 --> 0:10:53.160 time ever, that there was actually a net loss of 0:10:53.840 --> 0:10:58.200 uh daily active users. But on the global basis, which 0:10:58.240 --> 0:11:01.440 is really what the level of would Facebook operates and 0:11:01.640 --> 0:11:05.200 you have to think and where it's opportunity ultimately lies, 0:11:06.120 --> 0:11:10.240 that was not the trend. The monthly average users continued 0:11:10.320 --> 0:11:15.040 to go up globally, actually quite considerably. So I don't 0:11:15.080 --> 0:11:18.640 think yet you can say that the decline in North 0:11:18.679 --> 0:11:23.480 America in daily users is extremely serious and that company 0:11:23.600 --> 0:11:28.320 is saying, which I probably for now would accept, that 0:11:28.400 --> 0:11:32.800 this change is something you might expect given the level 0:11:32.840 --> 0:11:36.319 of penetration this company has in the North American population. 0:11:36.400 --> 0:11:39.320 That's something more like a fluctuation. You mean they couldn't 0:11:39.400 --> 0:11:42.320 go up forever in terms of getting you know, more 0:11:42.360 --> 0:11:46.600 than they can't get more than everybody to be on Facebook, 0:11:46.600 --> 0:11:50.320 and they've gotten perilously close to that. So that particular 0:11:50.400 --> 0:11:53.240 thing doesn't worry me yet it could if it continued 0:11:53.280 --> 0:11:55.199 to be a trend. Is it too early, David to 0:11:55.240 --> 0:11:58.640 say that in North America that we're seeing significant signs 0:11:58.640 --> 0:12:02.920 of saturation. Oh? No, I think we've seen saturation coming 0:12:02.960 --> 0:12:06.120 for some time, which isn't necessarily a problem if they 0:12:06.120 --> 0:12:10.200 can at least keep those people there and then begin 0:12:10.280 --> 0:12:13.080 to raise their AD rates over time, which they have 0:12:13.240 --> 0:12:15.120 been able to do in many I mean, AD rates 0:12:15.640 --> 0:12:18.960 are going up on Facebook, So that's their kind of 0:12:19.040 --> 0:12:23.120 lever they can play with regardless of what happens with users. 0:12:23.160 --> 0:12:25.160 But they have to of course retain the interest of 0:12:25.240 --> 0:12:28.000 their of their community. To use the word they love 0:12:28.040 --> 0:12:30.640 to use. To your point, ad rates are going up, 0:12:30.679 --> 0:12:33.439 and AD revenue growth still is pretty strong to me, David. 0:12:33.520 --> 0:12:36.600 So they've warned about engagement, and actually the warnings of 0:12:36.640 --> 0:12:40.319 engagement actually materialized, but the warnings around ad growth haven't 0:12:40.360 --> 0:12:43.800 really materialized at all. Is there any reason to believe 0:12:43.840 --> 0:12:45.520 Facebook when they tell us that this is going to 0:12:45.600 --> 0:12:50.080 slow sometime soon. Well, you know what what they've said 0:12:50.200 --> 0:12:53.959 especially is that add load, meaning the amount of ads 0:12:53.960 --> 0:12:56.920 that are given user sees when they go on Facebook, 0:12:57.840 --> 0:13:00.000 will go down, and that they'd actually like to see 0:13:00.000 --> 0:13:02.240 it go down a little bit. But because they seem 0:13:02.320 --> 0:13:07.040 to have so much leverage in pricing UH, that doesn't 0:13:07.080 --> 0:13:09.719 seem to affect their results. I mean, and I think 0:13:09.720 --> 0:13:15.600 it's worth pausing to notice the unbelievable impressiveness of the 0:13:15.679 --> 0:13:20.800 financials here. I mean, this is a company h which 0:13:21.080 --> 0:13:27.000 is growing its revenues considerably more than its costs, where 0:13:27.040 --> 0:13:32.400 you know, their profitability rates increased um and their profit 0:13:32.480 --> 0:13:37.440 growth was something like uh at a time when they're 0:13:37.480 --> 0:13:40.720 close to a fifty billion dollar company. I mean, this 0:13:40.800 --> 0:13:43.600 is this is something you haven't seen in companies like 0:13:43.679 --> 0:13:47.360 this before. Really, there hasn't been a company like this before. 0:13:47.880 --> 0:13:51.360 And the financials remained spectacular. So I think that's the 0:13:51.400 --> 0:13:55.160 reason why the stock, even though it dropped considerably in 0:13:55.160 --> 0:13:58.439 the few minutes after the earnings were released, once people 0:13:58.440 --> 0:14:00.600 had more time to digest what was really going on, 0:14:01.040 --> 0:14:02.959 they turned around and now the stock is up from 0:14:02.960 --> 0:14:04.839 where it was before the release. And of course it's 0:14:04.840 --> 0:14:06.199 worth a night in David that for all of these 0:14:06.200 --> 0:14:08.480 tech companies that report over the next twenty four hours, 0:14:08.480 --> 0:14:10.559 the comps for the whole of the next year are 0:14:10.559 --> 0:14:13.360 going to be really, really tough, because just last year 0:14:13.920 --> 0:14:17.120 was so so, so so good. I looked at some 0:14:17.120 --> 0:14:20.600 of the numbers in the quarterly earnings release yesterday after 0:14:20.560 --> 0:14:24.880 the close head count and costs arising materially now that 0:14:24.960 --> 0:14:27.000 may be outstripped by what they're doing with that revenue. 0:14:27.000 --> 0:14:28.920 And that's great, David, But on the costs and the 0:14:29.000 --> 0:14:32.760 head count, what's the story behind that? Well, I mean, 0:14:32.760 --> 0:14:35.280 I think they've said they were going to double the 0:14:35.360 --> 0:14:38.760 number of people who they devote to overseeing content to 0:14:38.840 --> 0:14:42.240 try to address some of these very serious criticisms they've 0:14:42.240 --> 0:14:45.320 received from received for their social role, that it was 0:14:45.360 --> 0:14:47.760 going to go from ten thousand to twenty thousand, and 0:14:47.760 --> 0:14:50.800 they have said that in October. So some of that 0:14:50.880 --> 0:14:53.600 increase is probably attributable to that. I think a lot 0:14:53.640 --> 0:14:56.000 of it is also attributable to just the scale of 0:14:56.040 --> 0:14:59.040 their global growth and the fact that they continue to 0:14:59.080 --> 0:15:03.080 become a more and more important platforms in literally something 0:15:03.160 --> 0:15:05.560 like a hundred and ninety countries, which means they have 0:15:05.680 --> 0:15:08.080 to have people on the ground in many of those places. 0:15:08.560 --> 0:15:15.720 Um so UM. I don't think the cost problem worries 0:15:15.760 --> 0:15:17.720 me that much. I mean, I'm just looking at the 0:15:18.760 --> 0:15:25.880 release right now advertising increased, costs increased. You know, as 0:15:25.920 --> 0:15:28.320 long as they could keep that kind of ratio, they 0:15:28.320 --> 0:15:30.760 don't have a problem with costs, even if they're adding 0:15:30.760 --> 0:15:33.080 more people and spending more money. They've also said they're 0:15:33.080 --> 0:15:36.240 going to spend a lot of money on infrastructure and 0:15:37.200 --> 0:15:41.320 server farms and cloud infrastructure and all the back end 0:15:41.400 --> 0:15:43.160 stuff that they have to spend on to keep this 0:15:43.280 --> 0:15:47.160 service operating. Uh, and they're very aggressive in that kind 0:15:47.200 --> 0:15:50.400 of spending. But so far there's no sign and that 0:15:50.520 --> 0:15:52.920 I can see that that's affecting their profitability. To me, 0:15:53.480 --> 0:15:56.960 the threat, such as it is, and it's something of 0:15:56.960 --> 0:16:01.600 a unique one, is a political, social, of socioeconomic threat 0:16:01.920 --> 0:16:05.920 and perceptual one. And if they if they cannot shift 0:16:05.960 --> 0:16:10.119 the narrative and begin to be seen as a positive 0:16:10.160 --> 0:16:15.160 contributor to society, I think that implies all kinds of peril, 0:16:15.240 --> 0:16:19.000 including eventually financial peril. Well, Scott Galloway of n y 0:16:19.120 --> 0:16:22.200 U has been quite vocal about this. I'm sure you know, David. 0:16:22.240 --> 0:16:24.640 He said that the company has been tone deaf to 0:16:24.720 --> 0:16:31.800 these kind of things, I think slipping. Um, Yes, I 0:16:31.800 --> 0:16:35.880 mean there's certainly they are tone deaf. I think their 0:16:35.880 --> 0:16:41.240 immaturity as a company is increasingly evident. Um. They are 0:16:41.280 --> 0:16:44.520 a young company, especially to now be fifty billion dollar 0:16:44.600 --> 0:16:47.440 company making this kind of profit, you know, run by 0:16:47.480 --> 0:16:52.480 a someone in his early thirties who has absolute power. Um. 0:16:52.600 --> 0:16:57.520 These are delicate and challenging realities. I mean, Galloway goes 0:16:57.600 --> 0:17:00.320 much further. He says Facebook should be broken up in 0:17:00.360 --> 0:17:03.560 no unequivocal terms. I heard him speak just last week 0:17:03.640 --> 0:17:08.920 in Munich. Um. The guy is rapidly critical of not 0:17:09.000 --> 0:17:11.960 just Facebook but all the Internet giants, but he singles 0:17:11.960 --> 0:17:16.399 them out especially for criticism. Believe Facebook should be broken up, David, No, 0:17:16.720 --> 0:17:18.320 I don't see how you could break it up. I 0:17:18.320 --> 0:17:22.919 think breakup is the wrong term. Um. But you know, 0:17:23.200 --> 0:17:27.960 here's what I do think. Um, Facebook operates on its 0:17:28.000 --> 0:17:31.520 own with no oversight in a hundred and nineties some 0:17:31.680 --> 0:17:35.040 countries h at a at a time when we know 0:17:35.960 --> 0:17:41.720 that it is having, alongside many many deeply beneficial effects, 0:17:41.760 --> 0:17:46.679 some extremely worrisome negative effects on both individuals and society. 0:17:47.440 --> 0:17:50.240 So we have issues of addiction, and also we have 0:17:50.359 --> 0:17:53.680 a lot of other things, including issues of political manipulation 0:17:53.760 --> 0:17:57.359 inside an ungoverned platform, which we saw very evident in 0:17:57.359 --> 0:18:00.800 the United States, and Americans ought to be clearied in 0:18:00.920 --> 0:18:04.680 realizing is a problem in every country. This is not 0:18:04.840 --> 0:18:07.280 It's not just the US election you know might have 0:18:07.320 --> 0:18:10.960 been uh manipulated, or the Russians might have attempted to 0:18:11.000 --> 0:18:15.480 manipulated inside Facebook. They and bad actors, including the governments 0:18:15.480 --> 0:18:18.879 themselves when they're not democratic, are attempting to manipulate public 0:18:18.880 --> 0:18:23.200 opinion inside Facebook in literally every country. So we need 0:18:23.240 --> 0:18:29.120 to find a way to somehow combat that. Facebook needs 0:18:29.160 --> 0:18:31.880 to find a way to combat that. But I don't 0:18:31.880 --> 0:18:34.640 see how that could ever be found by them alone. 0:18:34.720 --> 0:18:37.960 I think somehow a new form of compact needs to 0:18:38.000 --> 0:18:42.600 be arrived at between governments, the general's public business, and 0:18:42.840 --> 0:18:45.680 these platforms, particularly Facebook. Many of these same points hold 0:18:45.680 --> 0:18:47.760 true for Google and some of these other companies, I 0:18:47.800 --> 0:18:49.840 would say as well, but Facebook is the one where's 0:18:49.920 --> 0:18:54.080 most obvious. David Kirkpatrick, they see and founder of Teconomy Media, 0:18:54.160 --> 0:18:56.680 joining us on those facebooktarnings. Really appreciate your time, sir, 0:18:56.760 --> 0:18:59.080 Thank you very much from New York city you're listening 0:18:59.160 --> 0:19:14.520 to val Kate Warren is in just was tragic, said 0:19:14.680 --> 0:19:18.480 Edward Jones. We've ostensibly brought her in to talk about 0:19:18.520 --> 0:19:21.359 the FED and jobs and markets ahead, and I'm gonna 0:19:21.400 --> 0:19:25.160 start with the markets rather than the Fed, because when 0:19:25.240 --> 0:19:28.520 we started the show today, futures were up and it 0:19:28.640 --> 0:19:31.000 was like, all right, you know, forget that little sell 0:19:31.040 --> 0:19:33.040 off we had. And then we've started to get some 0:19:33.400 --> 0:19:37.080 bad earnings numbers today, and now we've got these Ford 0:19:37.160 --> 0:19:41.200 and Chrysler numbers which suggests January was not at all 0:19:41.280 --> 0:19:45.160 a good month for auto sales. Is there a crack 0:19:45.160 --> 0:19:47.159 of the armor? Is there something to start to be 0:19:47.280 --> 0:19:49.400 worried about here? Or is this just going to turn 0:19:49.400 --> 0:19:52.439 out to be one day story and into tonight, Apple 0:19:52.520 --> 0:19:56.000 or Faith, you know, or or Amazone's gonna come out 0:19:56.040 --> 0:19:58.160 and say, you know, earnings were great and everybody's buying 0:19:58.160 --> 0:20:01.679 again tomorrow. Well it's har to tell, because short term 0:20:01.720 --> 0:20:04.440 you never know exactly why where the markets are going 0:20:04.480 --> 0:20:06.280 to move. And I don't think there's really a crack 0:20:06.320 --> 0:20:08.320 in the armor. But I think investors have gotten a 0:20:08.320 --> 0:20:11.400 little ahead of themselves in terms of thinking that all 0:20:11.440 --> 0:20:14.359 the good news we're seeing from earnings earlier was going 0:20:14.359 --> 0:20:18.480 to translate into nothing but great earnings from everyone. So 0:20:18.640 --> 0:20:20.800 I wouldn't be too worried about this. I would certainly 0:20:20.800 --> 0:20:23.879 be using it as an opportunity to add investments to 0:20:24.000 --> 0:20:27.080 broaden the diversification in your portfolio. But I think it's 0:20:27.080 --> 0:20:29.560 a good reminder for investors also that if you have 0:20:29.640 --> 0:20:32.040 too much in stocks, now is the time to add bonds. 0:20:32.160 --> 0:20:33.760 Even though, of course the Feds on the way to 0:20:34.000 --> 0:20:39.119 raising interest buying bonds, they're going down in value. Yes, exactly, 0:20:39.160 --> 0:20:42.119 everything is going down. And that's a situation where you 0:20:42.160 --> 0:20:43.760 look at the markets and you say, how do you 0:20:43.800 --> 0:20:46.240 protect in a world where interest rates are rising and 0:20:46.320 --> 0:20:50.680 stocks maybe you know, poised for dropping, and we don't 0:20:50.680 --> 0:20:53.680 even have bitcoin anymore to invest it, so well, we'd 0:20:53.720 --> 0:20:56.600 stay away from bitcoin. So so don't take that as 0:20:56.600 --> 0:21:00.959 an investment careful they're so, what do you do? I 0:21:00.960 --> 0:21:03.080 think what you do is make sure you've got the 0:21:03.160 --> 0:21:05.639 right mix of stocks and bonds, and you prepare for 0:21:05.680 --> 0:21:09.400 that volatility by realizing that it's likely to be short 0:21:09.520 --> 0:21:12.080 term that stocks are going to bounce like we've seen 0:21:12.080 --> 0:21:15.800 the last couple of days sometimes, so you just you 0:21:15.880 --> 0:21:18.640 hold on for this that you said the right stocks 0:21:19.240 --> 0:21:22.280 or the right investments. What are the right investments? I 0:21:22.320 --> 0:21:25.159 think right now it's quality companies that can make their 0:21:25.200 --> 0:21:27.640 own luck in this environment. And that's part of why 0:21:27.680 --> 0:21:29.760 tech has done so well is they've been able to 0:21:29.800 --> 0:21:33.520 grow markets, they've been able to grow market share, and 0:21:33.640 --> 0:21:36.200 they've sort of powered through whether the economy was fast 0:21:36.280 --> 0:21:39.280 or slow. So I'm not too worried about the technology 0:21:39.280 --> 0:21:42.000 stocks right now. I'd certainly be adding that. But many 0:21:42.040 --> 0:21:44.199 people may be overweight. So what you're trying to do 0:21:44.240 --> 0:21:46.399 is be sure you're not taking too much risk in 0:21:46.480 --> 0:21:49.600 any specific place. And I think that's really the key, 0:21:49.640 --> 0:21:53.560 which is positioning your portfolio not based on what's just 0:21:53.600 --> 0:21:56.200 done great, but making sure that you're sort of looking 0:21:56.280 --> 0:21:59.200 more at over time, how are these companies going to 0:21:59.280 --> 0:22:01.320 do well? And do you have the right mix and 0:22:01.359 --> 0:22:04.360 stocks and bonds to stay invested in case stocks continue 0:22:04.400 --> 0:22:08.080 to go down? Do I wanna buy any gold or 0:22:08.480 --> 0:22:12.080 put any cash aside, or or even get into commodities 0:22:12.160 --> 0:22:14.600 or something something besides stocks and bonds, which is we're 0:22:14.680 --> 0:22:18.040 just saying we're both going down. I think that you 0:22:18.080 --> 0:22:20.320 don't want to buy gold in this environment unless you 0:22:20.320 --> 0:22:23.440 think that the price is going higher and certainly won't 0:22:23.480 --> 0:22:25.960 know the things we've seen disconnect is typically when the 0:22:26.000 --> 0:22:29.040 US dollar drops, gold goes up instead. It's been going 0:22:29.080 --> 0:22:32.560 down too, although it's somewhat higher, so I would say no, 0:22:32.800 --> 0:22:35.720 the commodities gold are not the place to be that 0:22:35.800 --> 0:22:38.360 it really is more traditional stocks and bonds, and that's 0:22:38.400 --> 0:22:42.080 sufficient to build a well diversified portfolio. Well, if if 0:22:42.160 --> 0:22:44.359 most of us know that this isn't gonna last forever, 0:22:45.000 --> 0:22:48.000