Latest / Bloomberg Intelligence / We Are In The Age of Surveillance Capitalism: Zuboff (Podcast)

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We Are In The Age of Surveillance Capitalism: Zuboff (Podcast) · Bloomberg Intelligence

0:02
Speaker 1: Welcome to the Bloomberg Penel Podcast. I'm Paul Swinge. You,
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Speaker 1: along with my co host Lisa Brahma wits each day
0:07
Speaker 1: we bring you the most noteworthy and useful interviews for
0:10
Speaker 1: you and your money. Whether at the grocery store or
0:12
Speaker 1: the trading floor. Find a Bloomberg penl podcast on Apple
0:15
Speaker 1: podcast or wherever you listen to podcasts, as well as
0:17
Speaker 1: at Bloomberg dot com. If you have an Alexa right now,
0:23
Speaker 1: they're probably listening to everything that you're saying. Certainly everything
0:26
Speaker 1: that I'm saying, and UH is getting data from you
0:30
Speaker 1: and is collecting it and storing it, and the storage
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Speaker 1: and the collection of this data and other similar activities
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Speaker 1: by other companies is changing the fabric of our society.
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Speaker 1: That is the argument put forward by Shoshanna Zubof, Professor
0:44
Speaker 1: Amerda at Harvard Business School. She joins us here in
0:46
Speaker 1: our Bloomberg Interactive Broker's studio. She is the author of
0:49
Speaker 1: a new book which will scare you. It was scary
0:52
Speaker 1: to me, but really really interesting. The age of surveillance, capitalism,
0:55
Speaker 1: the fight for a human future at the new frontier
0:59
Speaker 1: of power are so so Shauna, What prompted you to
1:03
Speaker 1: write this story. How does it differ from what people
1:06
Speaker 1: have been arguing, which is that you know, these companies
1:09
Speaker 1: have too much of a grip on what we do
1:11
Speaker 1: every day and can market our daily routines to uh
1:15
Speaker 1: two potential companies. Well, you know, surveillance capitalism is a
1:23
Speaker 1: very specific logic of capitalism that differs from what we've
1:26
Speaker 1: seen in the past. And while it began in the
1:30
Speaker 1: big internet companies, first Google, then Facebook, then the tech sector,
1:35
Speaker 1: it is now spreading across across the normal economy into
1:39
Speaker 1: literally every economic sector. So we're talking about something now
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Speaker 1: that is becoming the dominant form of capitalism in our time.
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Speaker 1: It has very specific consequences for individuals and for democracy,
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Speaker 1: consequences that are in their own way, violent and destructive.
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Speaker 1: And that it's what drove me to spend seven years
2:02
Speaker 1: working on this book. All right, can you um shna,
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Speaker 1: can you give us some examples of surveillance capitalism from
2:09
Speaker 1: your perspective? Yes, of course, So let me go back
2:14
Speaker 1: and define surveillance capitalism if I might, just quite briefly,
2:18
Speaker 1: and then we can we can look at some examples.
2:21
Speaker 1: So it has long been understood that capitalism evolved by
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Speaker 1: taking things that exist outside the marketplace, bringing them into
2:30
Speaker 1: the market dynamic so that they can be sold as
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Speaker 1: commodities and purchased. Industrial capitalism claim nature for the market
2:38
Speaker 1: dynamic reborn as real estate, as land that could be
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Speaker 1: sold and purchased. In the case of surveillance capitalism, it
2:48
Speaker 1: seems to emulate this pattern, but it does so with
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Speaker 1: a dark and unexpected twist. Surveillance capitalism goes after the
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Speaker 1: last virgin would to turn into commodities, and it turns
3:03
Speaker 1: out that this last virgin wood is our private human experience.
3:09
Speaker 1: It unilaterally claims our experience as a free source of
3:14
Speaker 1: raw material to be translated into behavioral data, which are
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Speaker 1: then shunted into its manufacturing processes, which we call artificial
3:25
Speaker 1: intelligence machine intelligence. From those black boxes are produced surveillance
3:33
Speaker 1: capitalism's products. These products are actually predictions of our future behavior,
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Speaker 1: predictions of what we will do now soon and later.
3:43
Speaker 1: Turns out there are a lot of businesses who are
3:46
Speaker 1: interested in knowing our futures, and these businesses constitute new
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Speaker 1: prediction markets where these new prediction products are sold to
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Speaker 1: businesses who have an interest in knowing what we're about
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Speaker 1: to do. This logic that I've just described to you
4:03
Speaker 1: was first invented in the context of online targeted advertising,
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Speaker 1: and the bit of future behavior that was being predicted
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Speaker 1: is what the folks called click through rates. And the
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Speaker 1: business customers who came into these markets to bet on
4:20
Speaker 1: click through rates are people that we call advertisers, specifically
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Speaker 1: online advertisers. And what they did was they gave up
4:30
Speaker 1: all of the old premises of advertising in order to
4:34
Speaker 1: buy into Google's black box. And Google's black box said
4:39
Speaker 1: We're not going to let you know what is the
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Speaker 1: data that goes into the box, or what are the
4:44
Speaker 1: computations we make. There's gonna it's gonna spit out a result,
4:47
Speaker 1: and if you put your add down where it tells
4:50
Speaker 1: you to, you will make a lot of money. And
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Speaker 1: indeed that is exactly what happened. The final point on
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Speaker 1: this is that while surveillance capitalism originated in this context
5:01
Speaker 1: of online targeted advertising, it is no more confined to
5:06
Speaker 1: that context. We have learned then, let's say mass production
5:11
Speaker 1: is confined to the original production of Ford model t s,
5:16
Speaker 1: you know, back in early twentieth century. So so I
5:18
Speaker 1: guess then the question becomes, you know, would people use
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Speaker 1: this data and the sort of predictive power that it
5:24
Speaker 1: has when paired with artificial intelligence and machine learning to
5:29
Speaker 1: manipulate behaviors aside from by my product. And you know,
5:34
Speaker 1: how do you see that being born out? Okay, that's
5:37
Speaker 1: such a good question, Lisa, because that brings us to
5:41
Speaker 1: the heart of the economic imperatives. That may sound like
5:44
Speaker 1: a bit of jargon, but the idea here is that
5:47
Speaker 1: once you understand that this is an economic logic, it's
5:51
Speaker 1: not the same as technology. It's not the same as
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Speaker 1: digital technology. This economic logic require there's digital technology to
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Speaker 1: express itself. But we can easily imagine digital technology without
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Speaker 1: surveillance capitalism. We can, and we have, and I can
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Speaker 1: give you examples of that. But at this point what
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Speaker 1: we see is surveillance capitalism is the puppet master. The
6:19
Speaker 1: digital technology is simply the puppet. So we have this
6:23
Speaker 1: hijacking of the digital for these specific commercial goals. And
6:29
Speaker 1: within this logic, um, longer I've studied it, the more
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Speaker 1: I've come to understand there are very specific and imperative,
6:37
Speaker 1: sorry specific and predictable and um economic imperatives. That's part
6:42
Speaker 1: of the logic. As they follow these economic imperatives, where
6:49
Speaker 1: do the economic comparatives come from They come from competition.
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Speaker 1: What are they competing over? They're competing over who has
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Speaker 1: the best predictions. How do you get the best predictions?
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Speaker 1: First of all, you must have a lot of data,
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Speaker 1: So that's imperative number one. You need scale, you need volume, alright,
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Speaker 1: they're competing on volume. New competitive demands arise. We need
7:12
Speaker 1: not only a lot of data, we need different kinds
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Speaker 1: of data, varied data. So we need scale and we
7:18
Speaker 1: need scope. We're competing. New competitive demands arise. Then they
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Speaker 1: discover that the very best, the choicest predictive data comes
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Speaker 1: from actually being able to intervene in the state of play,
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Speaker 1: intervene in your behavior, to subtly and outside of your awareness,
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Speaker 1: shape and herd and tune your behavior towards their commercial outcomes. Wow,
7:45
Speaker 1: that is externally interesting. We could have a whole show
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Speaker 1: on this. Uh. Shoshanna Zuba, Professor Amerita Harvard Business School,
7:52
Speaker 1: author of the book The Age of Surveillance Capitalism, The
7:55
Speaker 1: fight part fascinating. Yeah, yeah, the fight for a human
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Speaker 1: future at that new frontier of power. Thank you very
8:01
Speaker 1: much for joining us in our Bloomberg Interactive Broker studio.
8:05
Speaker 1: We will certainly love to follow up on that. I'm
8:07
Speaker 1: sure that will spur a lot of discussions. Well, it
8:22
Speaker 1: looks like ride sharing company Lift is going to beat
8:25
Speaker 1: its Uber competitor Uber to the I p O market.
8:29
Speaker 1: We're expecting a filing and IPO filing from Lift sometime
8:32
Speaker 1: today seeking evaluation up to twenty billion dollars for the
8:37
Speaker 1: ride sharing company. Help us dig into this pending I
8:41
Speaker 1: p O. As Man Deep seeing, Man Deep is a
8:43
Speaker 1: senior technology industry analysts Bloomberg Intelligence covering all things software.
8:48
Speaker 1: He joins us on a Bloomberg Interact to Broker Studio
8:50
Speaker 1: here in New York. Man Deep, thanks for joining us. So,
8:53
Speaker 1: first of all, how important is it for Lift to
8:57
Speaker 1: be first to market visa the Uber? Sure? So we
9:01
Speaker 1: think since Lift is the smaller guy, and you know,
9:05
Speaker 1: they don't have the same branding as Uber has, you
9:08
Speaker 1: know globally, it makes sense for them to go first
9:12
Speaker 1: simply because they can generate some excitement around the numbers.
9:16
Speaker 1: You know, the fact that this is a large market.
9:18
Speaker 1: We think it could be a trillion dollar market in
9:21
Speaker 1: the next five years. I think it makes sense for
9:25
Speaker 1: them to go first just because of you know the
9:27
Speaker 1: fact that they are the smaller guy and and they
9:30
Speaker 1: can garner a higher evaluation if they were to go first.
9:33
Speaker 1: So let's say Lift does get evaluation between twenty and
9:37
Speaker 1: billion dollars, which I believe is the target. Correct. What
9:40
Speaker 1: does that say about the valuation of Uber? Yeah, so
9:43
Speaker 1: we value the company based on its sales right now.
9:46
Speaker 1: So from what we know, the trailing twelve month sales
9:49
Speaker 1: for Lift with is somewhere around two billion dollars. And
9:53
Speaker 1: if they do if they're doing like about fifty growth
9:57
Speaker 1: next year, so based on afford multiple, they around twenty five.
10:01
Speaker 1: Like you said, so Uber is five times left. Uber
10:05
Speaker 1: is revenue somewhere around eleven to twelve billion dollars. If
10:09
Speaker 1: you value them, you know, based on the fact that
10:12
Speaker 1: they could grow thirty next couple of years, We're talking
10:16
Speaker 1: about at least a hundred billion dollar evaluation for Uber.
10:20
Speaker 1: So I'd like to say a lot of men deeps
10:22
Speaker 1: companies you have to value on revenue because there's little
10:25
Speaker 1: to no cash load, there's little to no earnings. So
10:28
Speaker 1: let's go down the income statement here for Uber, is
10:31
Speaker 1: a company profitable? If not, when do you think it
10:33
Speaker 1: becomes profitable? Yeah, So that's the uncertainty around the business
10:38
Speaker 1: model for these companies, the fact that it's a large market,
10:42
Speaker 1: the fact that these guys are have a duopoli uber
10:45
Speaker 1: on Lift is great, but when it comes to gross margins,
10:49
Speaker 1: we still don't know if their gross margins are as
10:51
Speaker 1: high as other tech companies, that it could happen that
10:55
Speaker 1: they are subsidizing their rides and drivers so much that
10:58
Speaker 1: their gross margins are sub which we think could be
11:03
Speaker 1: a headwind for profitability in the next three or four years.
11:06
Speaker 1: And that's the biggest concern that the fact that they're
11:09
Speaker 1: not cash flow positive, the fact that if their growth
11:12
Speaker 1: margins are lower than other tech companies, then what's the
11:15
Speaker 1: path to profitability? And that's an unanswered question. So Lift,
11:19
Speaker 1: like Uber and other tech companies, have relied on private
11:22
Speaker 1: markets and debt markets until this point to finance themselves
11:26
Speaker 1: and have leaned heavily on those markets. And I'm just wondering,
11:30
Speaker 1: at this point in the life cycle of Lift and
11:33
Speaker 1: soon to be Uber, how much upside could there potentially
11:37
Speaker 1: be for equity investors. In other words, is this still
11:40
Speaker 1: very much a growth story that they're peddling, or is
11:43
Speaker 1: this a mature company that is going to try to
11:46
Speaker 1: solidify their market share. Oh, it is definitely a growth story.
11:50
Speaker 1: I mean, I go back to the fact that no
11:52
Speaker 1: matter how you slice this market based on the total
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Speaker 1: number of milds travel globally, which is close to eight
12:00
Speaker 1: million miles, so you know, right, sharing is still sup
12:03
Speaker 1: five percent of the total miles travel. And the fact
12:06
Speaker 1: that everyone has a smartphone. Now you can track their location,
12:11
Speaker 1: you can offer them mobility services. These guys can expand
12:15
Speaker 1: into food delivery. But but what's the barrier to entry here? Well,
12:19
Speaker 1: the barrier to entry is the scale. So the fact
12:22
Speaker 1: that Uber has a scale, d D has a scale
12:24
Speaker 1: in China, Lift to an extent is the number two
12:27
Speaker 1: in the US. Once you have scale, you have network effects,
12:31
Speaker 1: and this is a mode that keeps growing because you
12:34
Speaker 1: are constantly acquiring more data about the rides, about you know, people,
12:39
Speaker 1: and over time, this is a mode that's hard to crack. So,
12:43
Speaker 1: being first out to the marketplace, what do you think
12:45
Speaker 1: Lift is going to do or say to try to
12:47
Speaker 1: differentiate itself from Uber. Yeah, so we think the fact
12:52
Speaker 1: that Lift focuses more on the US market, which has
12:54
Speaker 1: higher a SPS in terms of the average ride. You know,
12:59
Speaker 1: compare them to globally, the average costs provide is much lower,
13:03
Speaker 1: so US is a much more attractive market from a
13:06
Speaker 1: profitability perspective. And now they have expanded into China and
13:10
Speaker 1: and lifts market share is growing in the US. So
13:13
Speaker 1: Uber previously had eight percent share, now it's seventy and
13:17
Speaker 1: Lift is closed to so we think the fact that
13:21
Speaker 1: they are more domestically focused, which is a more attractive market,
13:25
Speaker 1: is good for a LIFT. Thank you so much for
13:26
Speaker 1: being with us. We know you've got a busy few
13:28
Speaker 1: weeks ahead of you, but deep saying it. Is a
13:30
Speaker 1: senior tech industry analyst for Bloomberg Intelligence, we hear a
13:49
Speaker 1: lot about trade. The question now is what will be
13:52
Speaker 1: the impact on the global economy. And there is no
13:55
Speaker 1: better industry to have a good window into this than
13:58
Speaker 1: the shipping industry. Enjoying us here is Victor Garcia, chief
14:01
Speaker 1: executive officer of c AI International, based in San Francisco,
14:05
Speaker 1: but he enjoins is here in our Bloomberg Interactive Brokers studios.
14:08
Speaker 1: So Victor, before we get started, watch tell us just
14:10
Speaker 1: a little bit about your business and and how much
14:13
Speaker 1: it gives you a sense of the global economy. Sure,
14:16
Speaker 1: thank you for having me. Our business. We're in the
14:19
Speaker 1: marine container re leasing business. It's a global business. We
14:21
Speaker 1: have about a million containers that go around and we
14:23
Speaker 1: ship uh we leased containers to the global shipping lines.
14:27
Speaker 1: And so we've been were thirty year company, publicly traded um.
14:31
Speaker 1: We we have about two billion dollars in assets. We
14:34
Speaker 1: continue to grow. We had a big year last year.
14:36
Speaker 1: We grew. We also have two other businesses of rail
14:39
Speaker 1: car leasing business to you know, based in the United States,
14:42
Speaker 1: basic commodities that we move around, energy, agriculture and things
14:45
Speaker 1: like that. And then we in the United States, we
14:47
Speaker 1: also have a global logistics business, so we do brokerage
14:51
Speaker 1: and and intermortal movements. So with a million containers all
14:55
Speaker 1: around the world, obviously you get a great sense of
14:57
Speaker 1: you know, global trade in general. So what kind of
15:00
Speaker 1: what are you feeling right now? I know there's a
15:01
Speaker 1: lot of trade uncertainty out there right now, but kind
15:04
Speaker 1: of what is your business? What are your customers telling
15:06
Speaker 1: you now about their prospects for global trade? Okay, So
15:08
Speaker 1: what I would say is almost uniformally, particularly on the
15:11
Speaker 1: international side, there is a cautious optimism. There's a there's
15:16
Speaker 1: a feeling that there's an underlying strength to the to
15:19
Speaker 1: the economy, even the global economy that is buttressing some
15:23
Speaker 1: of these concerns. But as they look forward, UH, they
15:26
Speaker 1: are concerned about what the implications could be of if
15:29
Speaker 1: the tariffs continue to be escalated. But what they're seeing
15:32
Speaker 1: today is still good underlying demand. The U s economy
15:36
Speaker 1: continues to be the strength of the global economy. UH.
15:40
Speaker 1: There is concern about the amount of slippage that we're
15:42
Speaker 1: seeing in China. Southeast Asia starting to get a little
15:46
Speaker 1: bit affected by that because they do a lot of
15:48
Speaker 1: trade with China, but but it's a moderate degree at
15:51
Speaker 1: this point. So I'm trying to reconcile the strength that
15:55
Speaker 1: you're talking about. With the dry bulk index, which a
15:58
Speaker 1: lot of people use, is sort of engage of the economy.
16:00
Speaker 1: It sort of gives you a sense of the cost
16:02
Speaker 1: of some of these containers to to ship goods. I'm
16:05
Speaker 1: just wondering, it's near it's all time lows. That doesn't
16:08
Speaker 1: give a very positive outlook on the economy. What are
16:11
Speaker 1: you seeing that gives you, that gives your customers a
16:14
Speaker 1: sense of confidence here, So the dry bulk Industry index
16:19
Speaker 1: tends to focus more on basic commodities. So so those
16:23
Speaker 1: basic commodities have been on a decline, and I think
16:25
Speaker 1: that's reflective of of what's going on in China's concern
16:28
Speaker 1: about China itself. A lot of the stuff that moves
16:31
Speaker 1: in our containers tends to be consumer driven, and the
16:34
Speaker 1: consumer globally, for the most part, is doing pretty well.
16:37
Speaker 1: So what's hot right now that you see a lot
16:39
Speaker 1: of you know, getting shipped more frequently, Well, we don't
16:41
Speaker 1: We don't know exactly what's in the containers, but I
16:43
Speaker 1: would say most most commodities that would you would be
16:46
Speaker 1: finding an Amazon or or in a Walmart. Um, those
16:50
Speaker 1: are the kind of things electronics we're seeing a lot of. So,
16:53
Speaker 1: you know, that's one of the things we talked about
16:55
Speaker 1: little bit earlier with this incredible growth of just you know,
16:59
Speaker 1: Amazon on you know, free shipping just in time to delivery. Um,
17:04
Speaker 1: how has that changed your business in the shipping business
17:06
Speaker 1: in general, Well, everybody's expecting just in time, So supply
17:09
Speaker 1: chains are getting tighter, Uh, inventories are more limited than
17:13
Speaker 1: they used to be. Responsiveness is important. Um. One of
17:16
Speaker 1: the things that the supply chains are all dealing with
17:18
Speaker 1: is a capacity shortage, particularly United States. You know, labor
17:22
Speaker 1: and UH equipment capacity is limited, which means everybody has
17:26
Speaker 1: to even be more focused to be able to deliver
17:28
Speaker 1: on time. So I'm I'm struggling to understand this sort
17:32
Speaker 1: of strength that you're talking about. You're saying that it
17:34
Speaker 1: is being driven by the United States, which makes sense
17:37
Speaker 1: to me. Are there other regions in the world that
17:39
Speaker 1: you think are stronger economically than many give credit to? Well,
17:44
Speaker 1: I'd say if you look down in Latin America, that's recovering.
17:47
Speaker 1: It's Uh. Latin America has been a brazili in particular
17:50
Speaker 1: has been a soft spot, but that's coming back. UM.
17:53
Speaker 1: I think confidence back in Brazil. Um. Europe has been um,
17:58
Speaker 1: not as strong, but it was still seeing some strength
18:01
Speaker 1: out of Europe. We haven't seen any effects from Brexit. Um,
18:04
Speaker 1: we're not seeing any disruptions. I think everybody's expecting that
18:06
Speaker 1: something will get resolved. UM. So Europe continues to move along,
18:11
Speaker 1: although it slowed a little bit, but everything has been
18:14
Speaker 1: pretty tight. So for your business, what's I know you
18:16
Speaker 1: just reported uh earning a couple of weeks ago. What's
18:19
Speaker 1: driving your business here over the next you know, over
18:22
Speaker 1: the twenty nineteen what are the key drivers for your company,
18:24
Speaker 1: It's gonna be volume we have our Our business is
18:28
Speaker 1: contractual nature, so we build off every year. So we
18:30
Speaker 1: we've built a lot of investment over the last couple
18:34
Speaker 1: of years. About of our overall investment has been over
18:37
Speaker 1: the last couple of years, and so we continue to
18:40
Speaker 1: do that, and we see and we are are people
18:42
Speaker 1: are talking to our customers and it's a good situation
18:45
Speaker 1: for us because of the uncertainty. They tend not to
18:47
Speaker 1: make our own purchasing decisions and they're depending on us
18:50
Speaker 1: to be able to supply them. So I think we
18:52
Speaker 1: we have the opportunity to actually have a pretty strong
18:55
Speaker 1: two thousand nineteen. What keeps you up at night? What
18:57
Speaker 1: do you worry about? Worry about? As far as a
18:59
Speaker 1: sort of win to this whole scenario, I think it
19:02
Speaker 1: would be one of the, you know, an economic shock.
19:04
Speaker 1: I think we were worried that the FED was going
19:05
Speaker 1: to be increasing rates too aggressively and that would put
19:08
Speaker 1: a stall in the economy. I think that's been taken
19:10
Speaker 1: off the table. I think most people feel better about that.
19:13
Speaker 1: The other would be some kind of systemic risk related
19:16
Speaker 1: to the slowdown in China. I think that's that would
19:18
Speaker 1: be a concern. You know, we don't see anything right now,
19:20
Speaker 1: but that's you know, those are the kind of things
19:22
Speaker 1: that could could really disrupt the outlook. Interesting. Thank you
19:26
Speaker 1: so very much for a great overview on the global
19:28
Speaker 1: shipping business and kind of some of the UM I
19:31
Speaker 1: think takeaways. We can you know, glean about global um GDP,
19:36
Speaker 1: global economy, gold, global trade. And people like stuff and
19:39
Speaker 1: they want their stuff now, and they want their stuff now,
19:41
Speaker 1: and they and it comes in containers. You see the
19:42
Speaker 1: ships going and port with these monsters containers. That's Victor's company.
19:46
Speaker 1: And how about the rail cars with all of those containers.
19:50
Speaker 1: I love watching those. Yes, that's very cool the shipping business.
19:53
Speaker 1: Victor has to get us on one of those big
19:55
Speaker 1: ships one day so we can go out out to
19:56
Speaker 1: sea with the big container ships. That'll be our next one,
19:59
Speaker 1: our next trip remote. Thank you Victor. We appreciate its
20:02
Speaker 1: CEO of c AI internationally in our Bloomberg eleven three
20:05
Speaker 1: oh studios. Well, markets have been relatively range bound this week.
20:23
Speaker 1: I'm talking about US equities as well as bonds, where
20:26
Speaker 1: you can see volatility and implied volatility and treasury yields
20:30
Speaker 1: has fallen to nearly all time loads with the smallest
20:34
Speaker 1: range of price swings in years. Joining us now as
20:37
Speaker 1: Phil Orlando, chief equity market strategist at Federated Investors. Phil,
20:42
Speaker 1: has this been an incredibly exciting week for you? It's
20:44
Speaker 1: been an incredibly inciting year. This week has been a
20:48
Speaker 1: little more, as you said, sort of going sideways. So
20:53
Speaker 1: we're Lisa, We're up twenty since Christmas Eve. I mean,
20:57
Speaker 1: this is one of the strongest periods of stock market
21:01
Speaker 1: performance we've seen, I think since so, you know, roughly
21:06
Speaker 1: thirty years. But so then my question is have we
21:10
Speaker 1: already gotten all the games or are we just heading
21:13
Speaker 1: straight up as the next catalyst gonna send markets shooting higher.
21:17
Speaker 1: So we haven't gotten all of the games for the year,
21:21
Speaker 1: but we've had a phenomenal run, and frankly, we've been
21:25
Speaker 1: looking for the spot where the market was going to
21:29
Speaker 1: consolidate and at least take a deep breath. Now. You
21:32
Speaker 1: and I talked about earlier in the year that the
21:34
Speaker 1: month of March was going to be sort of a
21:36
Speaker 1: critical month because there were sort of a couple of
21:39
Speaker 1: things that we thought were important coming up. We had
21:42
Speaker 1: this trade deal with China in the US. We had
21:45
Speaker 1: a deadline set for today that's been sort of extended,
21:48
Speaker 1: but the stuff is moving in the right direction. Then
21:51
Speaker 1: you've got what I think is going to be a
21:52
Speaker 1: critical fo MC meeting in the middle of the month.
21:54
Speaker 1: I think it's March twenty, and then you've got this
21:57
Speaker 1: Brexit mess at the end of the month. I think
21:59
Speaker 1: that's March nine. And so our view is that you know,
22:02
Speaker 1: we we'd have a nice bounce to start the year,
22:04
Speaker 1: and then you know there might be a little you know,
22:07
Speaker 1: consolidation ahead of uh, these three critical signposts in March,
22:13
Speaker 1: and then depending upon how well they go, then then
22:17
Speaker 1: we sort of continue the rally from there. So I mean,
22:20
Speaker 1: it's you bring up a good point because you know,
22:22
Speaker 1: we're we're the feed is on the sidelines, we're through earnings,
22:25
Speaker 1: and so it seems like the market will be looking
22:27
Speaker 1: maybe more than it should towards some of these geopolitical issues.
22:31
Speaker 1: But there's always a risk that these things turned the
22:33
Speaker 1: wrong way. I mean, Brexit looks as much as up
22:35
Speaker 1: in air as it's ever been, and who knows about China,
22:37
Speaker 1: So is that more of a risk do you think
22:40
Speaker 1: to this market, or certainly with stalks up in the
22:44
Speaker 1: last nine weeks. You're You're absolutely right, Paul. But let's
22:47
Speaker 1: let's take a look at each of these. Okay, you've
22:49
Speaker 1: got China US first. Our view is that China US
22:52
Speaker 1: this trade deal is going to go well, but both
22:55
Speaker 1: countries are significantly motivated to get a deal. I think
22:59
Speaker 1: the thing is moving in the right direction. So of
23:01
Speaker 1: the you know, of the three, I feel really comfortable
23:06
Speaker 1: that we're going to get a Chinese US trade deal soon,
23:09
Speaker 1: and and it's gonna be uh, it's gonna be to
23:12
Speaker 1: the U. S A is liking the FED meeting in
23:14
Speaker 1: the middle of the month, I'm gonna also put that
23:16
Speaker 1: in the wind column. I think that the FED uh,
23:20
Speaker 1: you know, if you look at um some of the
23:23
Speaker 1: flip flops that we saw over the course of last
23:26
Speaker 1: year versus what we've seen this year. You know, the
23:29
Speaker 1: Atlanta UH speech in the beginning of January, in a
23:33
Speaker 1: c meeting at the end of January, you've had some
23:36
Speaker 1: interim comments. I think the FED is has telegraphed that
23:40
Speaker 1: at this March twentieth meeting, we're gonna see the FED
23:44
Speaker 1: pulling their horns on a couple of dot plots and
23:47
Speaker 1: we're gonna see them announce that the wind down of
23:51
Speaker 1: the balance sheet is going to be a lot is
23:54
Speaker 1: going to end quicker than the market had expected, that
23:56
Speaker 1: that maybe to end by the end of the year
23:58
Speaker 1: around three and a half trillion dollars. The Brexit situation
24:02
Speaker 1: is the biggest wild card at the end of the
24:04
Speaker 1: month because we literally have no control over that here
24:07
Speaker 1: in the United States, and I don't think uh May
24:11
Speaker 1: and the Brits and the Europeans have any idea what
24:13
Speaker 1: they're doing on this, so they're gonna be as surprised
24:16
Speaker 1: as we are as to how this thing turns out. Um,
24:20
Speaker 1: I can I can paint multiple scenarios as to what
24:23
Speaker 1: direction this thing goes. I don't have any sense of
24:26
Speaker 1: confidence and can't put any probability on what any of
24:29
Speaker 1: these scenarios are gonna be. So that could be the
24:33
Speaker 1: ultimately wild card that either gives us a correction near
24:36
Speaker 1: term or allows the market to say, all right, we've
24:39
Speaker 1: checked the Brexit box and now we can keep plowing ahead.
24:42
Speaker 1: I gotta say, when I say Brexit, I just see
24:45
Speaker 1: people immediately fall asleep. So it would be really interesting
24:47
Speaker 1: if that's the catalyst that actually shakes this market, uh,
24:50
Speaker 1: and gives it some direct direction one way or another.
24:54
Speaker 1: I am wondering, so I want to change gears a
24:56
Speaker 1: little bit because going from the macro to the micro.
24:58
Speaker 1: We're getting news today our own Dave Wilson called it
25:01
Speaker 1: fracture Friday, with the breakups and firms such as Gap,
25:06
Speaker 1: Gap shares up, now L Brands and sympathy rising about
25:10
Speaker 1: nine percent. Do you think that this will be the
25:13
Speaker 1: year of corporate breakups and that it will be a
25:15
Speaker 1: very positive thing for equity valuations? So so the short
25:19
Speaker 1: answers yes, and and well, I haven't spent a lot
25:22
Speaker 1: of time on either of those companies, that the Gap
25:26
Speaker 1: breakup makes a tremendous amount of sense because Old Navy
25:29
Speaker 1: has been doing really really well over the years, and
25:32
Speaker 1: their value was probably clouded in sort of the conglomerate
25:37
Speaker 1: of what had become Gap. So I'm sure their investment
25:40
Speaker 1: bankers explained to them, if you split Old Navy out
25:43
Speaker 1: as its own company and that gets valued appropriately, that's
25:47
Speaker 1: going to enhance the consolidated value of the company. Um
25:51
Speaker 1: L Brands, Uh, They've got they've got some they've got
25:55
Speaker 1: some bigger issues. The lingerie business hasn't been going great
25:59
Speaker 1: guns here, there's a lot more competition. Bath and Body
26:02
Speaker 1: Works looks like it's great. I don't know if there
26:06
Speaker 1: you know the thought processes, let's strip you know Bath
26:09
Speaker 1: and Body Works out uh and and and that you
26:13
Speaker 1: know might be a home run. And then you know,
26:14
Speaker 1: concentrate on fixing the parts of the lingerie business that
26:18
Speaker 1: that that aren't working. So maybe the thought process there.
26:21
Speaker 1: If gaps doing this, then than l brands will as well.
26:24
Speaker 1: So Phil, given the fact that we have had this big,
26:27
Speaker 1: big run off of the December low. Uh and given
26:31
Speaker 1: your it's called a March catalyst calendar that you're looking at,
26:34
Speaker 1: where are you putting fresh capital to work today? So
26:37
Speaker 1: the areas that look most attractive to us are domestically
26:42
Speaker 1: value versus growth, and specifically the the energy, industrial and
26:48
Speaker 1: financial service areas are the ones that appear to be
26:51
Speaker 1: offering the most attractiveness in terms of value. Uh. We
26:55
Speaker 1: still love small cap that that's a category that's done
26:59
Speaker 1: well since Christmas eve and we think continues to do well.
27:03
Speaker 1: And and uh for those that need to put some
27:05
Speaker 1: money internationally, were concerned about what's going on in the
27:10
Speaker 1: developed markets. We talked about Europe. Japan is sort of
27:13
Speaker 1: sort of chugging away here, but but emerging markets look
27:16
Speaker 1: very attractive to us as well. So those would be
27:18
Speaker 1: the ways we play real quick here, Phil, Was this
27:21
Speaker 1: a year that you should take your cash and spend
27:23
Speaker 1: it as a consumer? No, as a as an investor, Well, no,
27:32
Speaker 1: we're we're gonna We're gonna take a polo the money
27:34
Speaker 1: this year. Stock market. If we're right, and and you know,
27:38
Speaker 1: we talked about this a couple of months ago, Lisa,
27:40
Speaker 1: our forecast off of that Christmas Eve bottom is stock
27:44
Speaker 1: market is going to be up thirty two over the
27:47
Speaker 1: course of this year. We think the S and P
27:49
Speaker 1: gets and that looked like a ridiculous forecast nine weeks ago.
27:54
Speaker 1: We're halfway home to that and we're still feeling very
27:58
Speaker 1: comfortable about that. We think the corporate earnings will be up,
28:01
Speaker 1: you know, maybe five next year to a hundred and
28:03
Speaker 1: seventy dollars. The multiple that was eighteen times last stepemper
28:09
Speaker 1: which collapsed down to fourteen. We think we're on our
28:12
Speaker 1: way back to eighteen. If all of those hit we
28:14
Speaker 1: believe they will, We've got a thirty one hundred. That's
28:17
Speaker 1: a bullish call. That's a bullish called Philo Landos. Thank
28:20
Speaker 1: you very much. Philo Lando's chief executive. Equity strategies are federated.
28:24
Speaker 1: Thanks for listening to the Bloomberg P and L podcast.
28:26
Speaker 1: You can subscribe and listen to interviews at Apple Podcasts
28:29
Speaker 1: or whatever podcast platform you prefer. Paul Sweeney, I'm on
28:32
Speaker 1: Twitter at pt Sweeney. I'm Lisa Bramwoy. It's I'm on
28:35
Speaker 1: Twitter at Lisa Bramwoyit's one before the podcast. You can
28:38
Speaker 1: always catch us worldwide. I'm Bloomberg Radio