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Dollar to Weaken on Mexico Trade Tensions: Nordvig · Bloomberg Intelligence

• 0:02
  Speaker 1: Welcome to the Bloomberg Penl podcast. I'm Paul swing you
• 0:05
  Speaker 1: along with my co host Lisa Brahmawitz. Each day we
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  Speaker 1: bring you the most noteworthy and useful interviews for you
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  Speaker 1: and your money, whether at the grocery store or the
• 0:12
  Speaker 1: trading floor. Find a Bloomberg Penl podcast on Apple podcast
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  Speaker 1: or wherever you listen to podcasts, as well as at
• 0:18
  Speaker 1: Bloomberg dot com. We'll trade tensions between the US and
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  Speaker 1: some of its leading trading partners continued to escalate. First
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  Speaker 1: it was China, uh, then Mexico and now India. To
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  Speaker 1: get a sense of where we go next, we welcome
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  Speaker 1: our next guest, end Nordvig, founder in CEO of Exante
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  Speaker 1: Data LLC, also a chief strategist there at Exante based
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  Speaker 1: in New York City, YenS, Thanks so much for joining us. Um.
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  Speaker 1: It just seems like these concentric circles of ever growing
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  Speaker 1: trade tensions continue to widen. What is your sense of
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  Speaker 1: how this will play out for US economic growth? Yeah,
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  Speaker 1: I have to say it's rudy Stantin to be a
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  Speaker 1: so a big compounding effect in the sense that, okay,
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  Speaker 1: maybe the US economy could sort of take one trade
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  Speaker 1: war but when you start to have multiple trade wars
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  Speaker 1: at the same time, it becomes much harder to handle.
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  Speaker 1: So obviously, having a small amount of tariffs on as
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  Speaker 1: a small portion of trade is one thing, and we
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  Speaker 1: had that initially with the steel terroriffs. But we're starting
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  Speaker 1: to look at a situation where we could have tariffs
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  Speaker 1: on all imports from China. And the process that we're
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  Speaker 1: in now with Mexico starts from a low level of terrorists,
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  Speaker 1: but it is potentially on all goods ramping up to
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  Speaker 1: so if this goes the wrong way, we're really looking
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  Speaker 1: at a situation where you have tariffs on a very,
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  Speaker 1: very big number of imports. And most of the research
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  Speaker 1: has coming out on how this feed through into the
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  Speaker 1: economy suggests that US consumers pay really the bulk of
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  Speaker 1: the bill, and that's how you you get a really
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  Speaker 1: big negative impact on the US economy. What's interesting to
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  Speaker 1: me and is where the havens have been. I mean,
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  Speaker 1: we've seen people flood into the dollar, the broad Dollar
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  Speaker 1: index gaining about a half a percentage point last month. Meanwhile,
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  Speaker 1: we're also seeing people flood into US treasury, so US
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  Speaker 1: the sort of biggest beneficiary. UH, so far do you
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  Speaker 1: think that's going to continue. Yes. I think when you
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  Speaker 1: had the US China tension really driving things, it made
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  Speaker 1: some sense that there was a sort of positive dollar
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  Speaker 1: effect for a period of time, and that was linked
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  Speaker 1: to the fact that, Okay, China is a big part
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  Speaker 1: of the global economy, so the global growth situation with
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  Speaker 1: the terra rate and also the Chinese currency is such
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  Speaker 1: a big drive of global currency markets that if the
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  Speaker 1: Chinese currency was weakening, it was going to essentially push
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  Speaker 1: a lot of other currencies down with it and sort
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  Speaker 1: of implicitly generate dollar strength. But I think one once
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  Speaker 1: you escalate the trade war to include Mexico, it becomes
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  Speaker 1: different because number one day, the hit to the U
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  Speaker 1: s economy is disproportionate larger, in part because Mexico has
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  Speaker 1: more imports from the US that they can retaliate against,
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  Speaker 1: but also just because those two effects start to stack
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  Speaker 1: up to on top of each other and and the
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  Speaker 1: FED really is forced to respond more forcefully. And that's
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  Speaker 1: what you're started to see obviously in FED pricing having
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  Speaker 1: moved very aggressively. So now not only are we pricing
• 3:32
  Speaker 1: a FED cut by September, but we're really starting to
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  Speaker 1: pry a high probability that the Fed will be forced
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  Speaker 1: to move sooner than that. It's a pretty extraordinarily quick shift.
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  Speaker 1: And the rate moves are now such that that the
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  Speaker 1: dollar is starting to take a hit, And I think,
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  Speaker 1: right this so and I think the problem is that
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  Speaker 1: we've we've come from a period where the dollar has
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  Speaker 1: been strong for about a year, So momentum starts to turn,
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  Speaker 1: there could be a lot of technical adjust ones that
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  Speaker 1: that can really put the dollar on quite a bit
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  Speaker 1: of pressure. And today might be a really important day
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  Speaker 1: because the euros down to move. Gold is having a
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  Speaker 1: very big move today, which is typically a reflection of
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  Speaker 1: the broader dollar direction. So it's a quite important day
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  Speaker 1: for the currency market today, I would argue. So, yeah,
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  Speaker 1: staying with the currency markets, the when we think about China,
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  Speaker 1: in particular the trade tensions there to what extent I mean,
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  Speaker 1: historically the Japanese yen has been perceived as a safe haven.
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  Speaker 1: Do you still consider that to be the case? Yes,
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  Speaker 1: I think the yen has has clearly participated in this
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  Speaker 1: UH dynamic over the last few sessions where the dollar
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  Speaker 1: is trading on the back foot, and that has generated
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  Speaker 1: a decent size move. Thow on dollar yen. It's not
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  Speaker 1: like a big break from the range we've seen the
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  Speaker 1: last couple of years. We've sort of been in a
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  Speaker 1: in a one oh five one of fifteen range, which
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  Speaker 1: is relatively now a range over the last two three years.
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  Speaker 1: So the big question is whether we're gonna really break
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  Speaker 1: out of that range. And I think there's two big
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  Speaker 1: questions that The one question is, okay, a Japanese investor
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  Speaker 1: is going to start to hitch the US assets Differently
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  Speaker 1: if we're looking at potentially a big slow adown in
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  Speaker 1: US growth and the fail actually cutting rates, So that's
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  Speaker 1: something that that certainly will come into play if if
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  Speaker 1: the FED really delivers and they carry involved in in
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  Speaker 1: in this trade and therefore the cost of hedging comes down.
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  Speaker 1: And then the other thing that that's really important to
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  Speaker 1: the end is Japanese companies have been on a bit
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  Speaker 1: of a buying spree in terms of buying up other
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  Speaker 1: companies around the world m and a activity that could
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  Speaker 1: be in question if we have a real sort of
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  Speaker 1: tense global environment, and that would also see the end
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  Speaker 1: strength and if that outflow stops. So I think there's
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  Speaker 1: a chance we can break out of this range. The
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  Speaker 1: big thing to watch in the short term is is
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  Speaker 1: this theme of escalation sticking, Like are we going to
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  Speaker 1: have the escalation on June ten with the tariffs actually
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  Speaker 1: coming into effect in relation to Mexico, and then are
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  Speaker 1: we going to have some kind of positive headlines at
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  Speaker 1: the G twenty meeting when when it takes place in
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  Speaker 1: Japan at the end of the month, or are we
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  Speaker 1: just going to literally move to the full blown trade
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  Speaker 1: war versus China. I think those are the really key
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  Speaker 1: things to watch there. How much for the dollar weaken
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  Speaker 1: in your view? So I think if if the FED
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  Speaker 1: is really delivering cuts here in coming months, and we
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  Speaker 1: have an environment where where perhaps the Chinese actually hold
• 6:36
  Speaker 1: their currency, so that's a key one. But if the
• 6:39
  Speaker 1: Chinese don't allow their currency to move, then I think
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  Speaker 1: we're in an environment where the dollar can weaken meaningfully.
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  Speaker 1: But if the Chinese allow their currency to break seven,
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  Speaker 1: so a depreciation beyond what they've allowed in recent years,
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  Speaker 1: then you have a sort of tricky situation with as
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  Speaker 1: dollar bearish impulse from the FED, but actually accounts of
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  Speaker 1: force from the direction of the Chinese currency. So it's
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  Speaker 1: absolutely crucial whether the Chinese are going to hold the
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  Speaker 1: currency here as they've done in recent weeks, or whether
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  Speaker 1: they're going to allow a break of seven if we
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  Speaker 1: move to a full blown trade war. So yeah, it's
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  Speaker 1: just given the uncertainty surrounding global trade, are there pockets
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  Speaker 1: of relative safety that you're looking at in terms of currencies? Um, well,
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  Speaker 1: I think I think one thing that's been very interesting
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  Speaker 1: over the last week or so that I actually think
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  Speaker 1: can continue is that we're now seeing that emerging market
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  Speaker 1: currencies that had a really bad year over the last
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  Speaker 1: year or so can actually start to perform better. So, um,
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  Speaker 1: it's it's a situation where we have a sort of
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  Speaker 1: bearish positioning in e M space that is now perhaps
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  Speaker 1: too bare if we have a much low environment for
• 8:02
  Speaker 1: global yields, So I think EM currencies can start to
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  Speaker 1: ironically do better, especially relative to other risk asses. So
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  Speaker 1: for example, if to compare with the S and P,
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  Speaker 1: I think currencies can do better. Nord Vig, thank you
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  Speaker 1: so much for being with us. A really interesting call
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  Speaker 1: there about how emerging market currencies will do well as
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  Speaker 1: yields continue to go lower here in the United States.
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  Speaker 1: YenS nord vigas founder and chief executive officer of Exante Data,
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  Speaker 1: also chief strategist at Elexante Advisors. There's been a market
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  Speaker 1: shift in sentiment from oh, China and the US will
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  Speaker 1: come to some sort of deal to what will it
• 8:50
  Speaker 1: protracted trade war look like? Joining us now to think
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  Speaker 1: about that is Carl Weinberg, Founder in chief international economist
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  Speaker 1: at High Frequency Economics. Carl, let's start and fast forward
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  Speaker 1: making some assumptions that trade wars rage on, the market
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  Speaker 1: keeps declining, and an economic downturn ensues. What does that
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  Speaker 1: economic downturn look like? Well, good morning, Lisa Um. You know,
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  Speaker 1: the economic downturn that we're looking at worldwide right now
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  Speaker 1: is a little bit broader than trade, but than the
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  Speaker 1: trade wars, but it all has its roots in trade,
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  Speaker 1: which is now flatter declining depending on the metric you
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  Speaker 1: look at worldwide, and you know, companies that export are
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  Speaker 1: the ones that are affected. First. Tariffs affect consumers make
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  Speaker 1: them a little bit less reluctant to buy stuff because
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  Speaker 1: they have less disposable income, is they're they're spending power
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  Speaker 1: goes down. But the first reel hit is probably going
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  Speaker 1: to be on the side of corporations that are going
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  Speaker 1: to face supply chain issues. They're going to face cost
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  Speaker 1: issues and then that will lead to financial market implications. So,
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  Speaker 1: Dr Winberg, we got some disappointing US manufacturing data out today,
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  Speaker 1: give us a sense of to the extent that these
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  Speaker 1: trade skirmishes uncertainties continue, maybe even expand. If you think
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  Speaker 1: about you know, India as well now being in the crosshairs,
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  Speaker 1: how do you think the manufacturing community around the world
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  Speaker 1: will respond, Good morning, Paul. Yes, everybody has got to
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  Speaker 1: be alarmed by this because the expansion of the U. S.
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  Speaker 1: Administration's tariff i'll call a tariff aggression to borrow language
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  Speaker 1: from the Chinese UM basically undermines the confidence that companies
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  Speaker 1: of all kinds all around the world face and making
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  Speaker 1: business plans and decisions. They don't really know the cost
• 10:32
  Speaker 1: structure that they're going to face, they don't really know
• 10:35
  Speaker 1: the trade and the tariff regime, and as the FedEx
• 10:38
  Speaker 1: example indicates, they don't even know if they're going to
• 10:40
  Speaker 1: be constrained in their business. Enterprises and companies that resist
• 10:45
  Speaker 1: the tariff advances by the United States, the tariff increases.
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  Speaker 1: So it's a general role of uncertainty, it's a role
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  Speaker 1: of profit compression, and it's certainly in these uncertain times,
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  Speaker 1: it's one that causes companies to cut back on investment
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  Speaker 1: until the all clears, and of course that's always bad
• 11:01
  Speaker 1: for the world economy. You were saying earlier that there
• 11:04
  Speaker 1: will be financial market implications. Basically, the market's going to
• 11:08
  Speaker 1: sell off. Risk assets are going to sell off in
• 11:11
  Speaker 1: this scenario. How much is this going to be a crash? Like, yeah, Well,
• 11:16
  Speaker 1: you know, I was listening to Bloomberg Radio as I
• 11:18
  Speaker 1: was driving into the office this morning and heard you
• 11:20
  Speaker 1: guys talking about individual companies and the impacts that this
• 11:24
  Speaker 1: is having on their earnings forecasts, on their profit forecast,
• 11:27
  Speaker 1: on their general rural view of the world in there,
• 11:30
  Speaker 1: and their guidance to markets. So this is really how
• 11:33
  Speaker 1: it begins, you know, crashes. You know, I'm not in
• 11:36
  Speaker 1: the business of predicting crashes. You know, I don't think
• 11:39
  Speaker 1: we have to have a stock market crash. The stock
• 11:41
  Speaker 1: market is certainly high enough that some kind of correction
• 11:45
  Speaker 1: is probably coming anyway. This just increases the odds of
• 11:48
  Speaker 1: that happening. But a crash, you know that that's not
• 11:51
  Speaker 1: my domain to predict it. I don't have anything on
• 11:54
  Speaker 1: my horizon that will cause a crash. Dr Weinberg, I
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  Speaker 1: think I have a straightforward question here. Who pays for tariffs? Oh,
• 12:01
  Speaker 1: that's a really straightforward question, very refreshing also because the
• 12:04
  Speaker 1: Trump administration has it all wrong when they raise tariffs
• 12:08
  Speaker 1: on things that come from China. You pay the tariffs, right,
• 12:11
  Speaker 1: not the Chinese. Now, the Chinese may lose themselves to
• 12:15
  Speaker 1: the United States, but since the exports are growing between
• 12:18
  Speaker 1: oh say, five and ten percent per year anyhow, they're
• 12:21
  Speaker 1: probably going to sell whatever they don't sell to you
• 12:23
  Speaker 1: to somebody else and um. In terms of the counterfeariling tariffs,
• 12:27
  Speaker 1: the Chinese have been very careful to tariff things for
• 12:30
  Speaker 1: which they consumers at home have a lot of substitutes,
• 12:33
  Speaker 1: like soybeans. Think by soybeans from any number of countries
• 12:36
  Speaker 1: in the world. They just buy less from the U. S. Farmer,
• 12:39
  Speaker 1: and the U. S. Farmer is the one who pays
• 12:41
  Speaker 1: the tariff. So at the end of the day, when
• 12:43
  Speaker 1: you go out to buy your iPad and you can't
• 12:46
  Speaker 1: buy it from any source other than China, you end
• 12:49
  Speaker 1: up paying the tariff. Your income to spend on other
• 12:51
  Speaker 1: things is reduced, and you're the one who then has
• 12:54
  Speaker 1: the vote to determine whether or not this regime is
• 12:58
  Speaker 1: going to continue. So one sort of theory, and President
• 13:01
  Speaker 1: Trump has put this out, is that eventually companies will
• 13:04
  Speaker 1: rejigger their supply chains so they don't rely on countries
• 13:08
  Speaker 1: that are the most tariff And this is sort of
• 13:11
  Speaker 1: the point of putting on these levies. I guess my
• 13:14
  Speaker 1: question is, you know, how do you respond to people
• 13:16
  Speaker 1: who say, look, this is temporary in order to get
• 13:19
  Speaker 1: the trading situation more fair, and then the US will
• 13:23
  Speaker 1: prosper as a result of it. A Lisa, you sound
• 13:26
  Speaker 1: like a Wall Street economist. You know, at the end
• 13:28
  Speaker 1: of the day, everything's going to be all right. But
• 13:30
  Speaker 1: until we get there, all right, we have to survive,
• 13:33
  Speaker 1: al right. A company who supply chain is interrupted today
• 13:36
  Speaker 1: has to live until tomorrow to be able to take
• 13:39
  Speaker 1: advantages of whatever is coming better and tomorrow. We economists
• 13:43
  Speaker 1: are always guilty of ignoring transition costs and transition obstacles
• 13:49
  Speaker 1: as we talk about one new situation being better than another.
• 13:53
  Speaker 1: You know, maybe we will or maybe we won't be
• 13:55
  Speaker 1: better off tomorrow. We can debate that forever. But for
• 13:57
  Speaker 1: a car company that has to source parts from a
• 14:00
  Speaker 1: country that can no longer trade with or at a
• 14:02
  Speaker 1: twenty higher costs. That's a problem for survival today. That's
• 14:06
  Speaker 1: a problem for pricing today, for profits today, for making
• 14:09
  Speaker 1: payroll today, for hiring and firing workers today. And that's
• 14:13
  Speaker 1: really what we're talking about in the financial markets, isn't it.
• 14:15
  Speaker 1: It's today? So Dr Weinberg, are the particular industries that
• 14:20
  Speaker 1: you think are most at risk here? In? It's just
• 14:22
  Speaker 1: a rising and trade tension environment. Um is there anything
• 14:27
  Speaker 1: particularly that I think investor should be looking out for. Well,
• 14:29
  Speaker 1: you know, I can hide behind my role as a
• 14:31
  Speaker 1: macro economist and say that I don't look at industries,
• 14:34
  Speaker 1: but as a macro economist, what I can say is
• 14:37
  Speaker 1: that pretty much every industry, whether it's manufacturing or services,
• 14:42
  Speaker 1: today has gone global. Pretty much all industries, pretty much
• 14:45
  Speaker 1: all companies have some kind of linkage to the rest
• 14:48
  Speaker 1: of the world, and therefore every company is vulnerable to
• 14:52
  Speaker 1: um uh these uh this tariff regime and um I
• 14:57
  Speaker 1: can't even think of any exceptions of a pure domestic
• 15:01
  Speaker 1: company that purely sources things domestically. I mean, even if
• 15:04
  Speaker 1: you just use a laptop computer to do your books.
• 15:07
  Speaker 1: You know, Joe the plumber is vulnerable to higher tariffs
• 15:10
  Speaker 1: on that computer that he does his books on because
• 15:13
  Speaker 1: of the tariff things. So we're all subject to this
• 15:17
  Speaker 1: in one way or another, all industries, al sectors, all people,
• 15:20
  Speaker 1: no place to hide. One thing that I find interesting
• 15:23
  Speaker 1: is the question of who's going to suffer more, the
• 15:25
  Speaker 1: US or emerging markets, including China. We have PIMCO coming
• 15:29
  Speaker 1: out and saying investors are underestimating the value in emerging
• 15:32
  Speaker 1: market stocks. Do you think that right now developing markets
• 15:36
  Speaker 1: are going to be less hard hit than the United States? Well,
• 15:40
  Speaker 1: you know, the developing markets. I mean, let's look at China. Alright.
• 15:43
  Speaker 1: China makes a wide variety of stuff, and the United
• 15:46
  Speaker 1: States is only about fift of its export market, and
• 15:50
  Speaker 1: it's not going to lose all its exports of the
• 15:51
  Speaker 1: United States. For sure, Americans will pay more for the
• 15:54
  Speaker 1: stuff that they can't get from somewhere else. However, all right,
• 15:59
  Speaker 1: a lot of the stuff that they won't sell here
• 16:01
  Speaker 1: in the United States. They've got eight five percent of
• 16:03
  Speaker 1: the world to sell their stuff too. Now, China is
• 16:06
  Speaker 1: an extraordinary case because of the diversity of its products.
• 16:09
  Speaker 1: But whether you're selling you know, broad based commodities or
• 16:13
  Speaker 1: high end manufactured goods. If you're any country in the world,
• 16:17
  Speaker 1: you can sell it probably to somebody else if you
• 16:20
  Speaker 1: can't sell it in the United States. And that's really
• 16:22
  Speaker 1: one of the flaws in the strategy. Unilateral attacks on
• 16:26
  Speaker 1: countries like this when you're not the biggest dominant player
• 16:29
  Speaker 1: in the world anymore, that is a strategic error in
• 16:32
  Speaker 1: my opinion, Dr Carl Weinberg, thank you so much. Dr
• 16:35
  Speaker 1: Weinberger's that found their in chief international economists at High
• 16:38
  Speaker 1: Frequency Economics. I think a couple of takeaways there are.
• 16:42
  Speaker 1: Number one, trade wars are bad um and number two,
• 16:46
  Speaker 1: tariffs ultimately are paid by the consumer, neither of which
• 16:51
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• 17:10
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• 17:13
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  Speaker 1: UM many homeowners are spending three thousand, four thousand dollars
• 18:48
  Speaker 1: a year on fuel, oil or propane um. That payback
• 18:52
  Speaker 1: period tends to be very very fast, and we offer financing,
• 18:56
  Speaker 1: so actually most of our homeowners choose to pay nothing
• 18:59
  Speaker 1: up front, so zero cost, and then UM they pay
• 19:03
  Speaker 1: off the system over time and the repayment amount each
• 19:07
  Speaker 1: month is less than what they would have been spending
• 19:09
  Speaker 1: to eat their home otherwise, so they're actually coming out
• 19:12
  Speaker 1: ahead every single month that they have the system. One
• 19:15
  Speaker 1: thing that I find really interesting about this company is
• 19:18
  Speaker 1: that it's to spin out from Google X, which is
• 19:20
  Speaker 1: where all moonshot ideas are born at Google and you
• 19:25
  Speaker 1: worked there before becoming the CEO and co founder of
• 19:28
  Speaker 1: Dandeline Energy. Why did you decide to spin it out?
• 19:32
  Speaker 1: So we made the decision with Google X to spin
• 19:34
  Speaker 1: it out because this company really UM was ready. It
• 19:39
  Speaker 1: was ready to start selling products to homeowners. And what
• 19:44
  Speaker 1: Google X specializes in as research and development UM moonshot
• 19:48
  Speaker 1: projects that can take a decade to come to fruition,
• 19:51
  Speaker 1: but then when they do, they change the world. And
• 19:53
  Speaker 1: for this project, we didn't need that decade. We UM
• 19:57
  Speaker 1: we were ready to start selling the product, so we
• 19:59
  Speaker 1: decided to been it out and started to sell. So
• 20:03
  Speaker 1: talking about this, the German Geothermal market is it? I mean,
• 20:07
  Speaker 1: how big is it? How fast is it growing? Um,
• 20:10
  Speaker 1: just give us a sense of what the market looks like. Well, today,
• 20:13
  Speaker 1: it is actually quite a small market in the sense
• 20:16
  Speaker 1: that very few homeowners get to enjoy geothermal heating and cooling.
• 20:21
  Speaker 1: And I would say many homeowners haven't really heard about
• 20:25
  Speaker 1: it even, which is a shame because there's just so
• 20:29
  Speaker 1: much money that homeowners could save if they were to
• 20:32
  Speaker 1: adopt the technology. What's been preventing it from being larger
• 20:35
  Speaker 1: in the past has been it's been too expensive. So
• 20:37
  Speaker 1: a typical system in the past has cost fifty or more,
• 20:42
  Speaker 1: which is just out of range for almost everyone. Um.
• 20:45
  Speaker 1: But the heating and cooling market couldn't be bigger. So
• 20:49
  Speaker 1: all of us spend so much money, especially in climates
• 20:52
  Speaker 1: that get cold in the winter, on heating, and that
• 20:56
  Speaker 1: market is hundreds of billions of dollars. What was it
• 20:59
  Speaker 1: like working at Google x Oh it was fantastic. So
• 21:03
  Speaker 1: my job, which I was so lucky to have, I
• 21:06
  Speaker 1: was a rapid evaluator is what we called it. So
• 21:09
  Speaker 1: what that meant is I got to explore new opportunities
• 21:13
  Speaker 1: for Google to invest in technologies that could have a
• 21:16
  Speaker 1: huge impact and become huge businesses someday. And I think
• 21:20
  Speaker 1: one of the great things about X is just the
• 21:23
  Speaker 1: intellectual freedom that we were given to do that sort
• 21:26
  Speaker 1: of thing, and then also, of course the quality of
• 21:29
  Speaker 1: the people that we got to work with. Who So
• 21:32
  Speaker 1: when you think about the Google lex is you know,
• 21:34
  Speaker 1: I guess investors, when I think about Google X, it
• 21:36
  Speaker 1: really is these moon shots. How many projects are roughly
• 21:39
  Speaker 1: being worked on, I guess, or how many you know
• 21:42
  Speaker 1: at any given time, and then I guess you just
• 21:44
  Speaker 1: decide when it's time to spin out, right, Yeah, So
• 21:47
  Speaker 1: the way it works is at the very early stages,
• 21:49
  Speaker 1: things are just an idea. So it's really you know,
• 21:53
  Speaker 1: there are there are hundreds of ideas getting batted around
• 21:56
  Speaker 1: at any given time, but most of them, as you
• 21:59
  Speaker 1: can imagine, make it very far because part of the
• 22:03
  Speaker 1: process it access to identify as quickly as possible. Why
• 22:07
  Speaker 1: I give an idea is doomed not to work. So
• 22:10
  Speaker 1: we're trained to be optimists, but optimists who are always
• 22:14
  Speaker 1: looking for the fatal flaw. Because opportunity costs is such
• 22:17
  Speaker 1: a real thing, especially at a place like Google with
• 22:20
  Speaker 1: so many resources, So the areas that are most ripe
• 22:23
  Speaker 1: for disruption energy. You pinpointed, is are there any others
• 22:27
  Speaker 1: that are sort of high areas of interest? Well, I
• 22:30
  Speaker 1: haven't been there for two years, so I can't speak
• 22:34
  Speaker 1: about the areas of interest there today, but I know
• 22:37
  Speaker 1: that UM we were always very attentive to trends and technology,
• 22:42
  Speaker 1: so you can imagine that UM areas like artificial intelligence, robotics, UM,
• 22:49
  Speaker 1: you know, maybe maybe agriculture, maybe bio. I think all
• 22:55
  Speaker 1: of those areas we're just seeing such rapid development that
• 22:58
  Speaker 1: I wouldn't be surprised if they were fertile ones for acts.
• 23:01
  Speaker 1: Kathy Hannon, thank you so much for being with us.
• 23:04
  Speaker 1: Kathy Hannon, chief executive officer and co founder of Dandelion Energy,
• 23:08
  Speaker 1: looking at the trapped heat in the ground as a
• 23:13
  Speaker 1: potential source of energy and depositor of energy in the
• 23:16
  Speaker 1: summertime as a way to have a more green way
• 23:20
  Speaker 1: of heating your home. Alphabet shares falling today at nearly
• 23:40
  Speaker 1: six percent, currently down five point one percent, five point
• 23:44
  Speaker 1: seven percent. Excuse me. This comes as the Department of
• 23:47
  Speaker 1: Justice in the United States is considering an antitrust probe
• 23:51
  Speaker 1: into the company. Very interesting development. Sharre OVERDA Bloomberg Opinion
• 23:55
  Speaker 1: columnist joining us here, What do you make of this?
• 23:58
  Speaker 1: Why now? I think that's a very good question, and
• 24:01
  Speaker 1: it remains to be seen. Look, there's obviously a different
• 24:04
  Speaker 1: administration in Washington, and the tech companies, including Google, are
• 24:10
  Speaker 1: also getting big, bigger every day, and more powerful every day,
• 24:15
  Speaker 1: and officials in government, including the head of the Department
• 24:21
  Speaker 1: of Justice, have signaled an interest in the size and
• 24:25
  Speaker 1: power of big tech companies, although I think people like
• 24:28
  Speaker 1: Attorney General Bill Barr have been quick to note that
• 24:30
  Speaker 1: looks size itself is not an antitrust violation, but how
• 24:34
  Speaker 1: you use your power can be. That's interesting because I
• 24:37
  Speaker 1: think it's obviously a big issue for Google today. But
• 24:40
  Speaker 1: as you suggest this, I think investors probably are also
• 24:43
  Speaker 1: concerned that they're just looking at tech more broadly, given
• 24:46
  Speaker 1: how some mean, is that really a risk out there?
• 24:48
  Speaker 1: From what you know? I mean to me, Look, this
• 24:50
  Speaker 1: is one of the biggest risks of any of these
• 24:53
  Speaker 1: large US tech companies, is the possibility of continued, persistent,
• 24:58
  Speaker 1: permanent political and rap aleatory pressure. You were seeing today
• 25:01
  Speaker 1: right that both Amazon and Facebook have a little bit
• 25:04
  Speaker 1: of a stock declined today. There was news out of
• 25:07
  Speaker 1: Washington over the weekend that you know, the Department of
• 25:10
  Speaker 1: Justice in the FCC have sort of d vied up
• 25:12
  Speaker 1: responsibility or the d o J is sort of taking
• 25:16
  Speaker 1: responsibility for Google and the Federal Trade Commission, Sorr said, FCC,
• 25:20
  Speaker 1: the Federal Trade Commission has taken responsibility of Amazon. So
• 25:24
  Speaker 1: that suggests that there may also be kind of regulatory
• 25:27
  Speaker 1: interest looking at Amazon. And I think that the share
• 25:30
  Speaker 1: price of Amazon today reflects that possibility. Which segments of
• 25:34
  Speaker 1: Alphabet's business are most likely to come under particular scrutiny.
• 25:39
  Speaker 1: You are shaking your head. It could be anything, right, Look,
• 25:43
  Speaker 1: so there is some precedent here, right, The Google or
• 25:47
  Speaker 1: Google's parent company, Alphabet has been fined multiple times by
• 25:50
  Speaker 1: European anti trust regulators, and that was over a number
• 25:54
  Speaker 1: of issues, including UM the way that Google sort of
• 25:57
  Speaker 1: tied its Android smart phone operating system to other aspects
• 26:02
  Speaker 1: of its business, including UM, it's it's apps, and it's
• 26:07
  Speaker 1: Chrome browser for smartphones. There was a fine related to
• 26:11
  Speaker 1: how Google UM handles Internet shopping and other kind of
• 26:18
  Speaker 1: comparison internet shopping engines. The Federal Trade Commission investigated Google
• 26:24
  Speaker 1: for possible antitrust investigation violations more than six years ago,
• 26:28
  Speaker 1: and it looked at a number of issues, including Google
• 26:31
  Speaker 1: kind of scraping information without permission from other Internet providers
• 26:37
  Speaker 1: including Yelp and trip Advisor to sort of improve Google
• 26:41
  Speaker 1: search results. So look, the d o J could look
• 26:44
  Speaker 1: at any of those things, or really anything, I guess,
• 26:48
  Speaker 1: you know, taking a look at it from Google's perspective,
• 26:51
  Speaker 1: they can probably just come back to regulators around the
• 26:53
  Speaker 1: world and say, hey, we built the best mouse trap
• 26:55
  Speaker 1: out there. That's why we have seven year per share
• 26:58
  Speaker 1: of church queries. But that doesn't seem to be winning
• 27:01
  Speaker 1: the day here. I think that is there a sense
• 27:03
  Speaker 1: that maybe that argument has to change that yet it's
• 27:06
  Speaker 1: not just that their substitutes, but you guys maybe just
• 27:10
  Speaker 1: mishandle your market dominance. So I think that's a great question.
• 27:15
  Speaker 1: And look at the Google is very practiced now at
• 27:18
  Speaker 1: dealing with these kind of anti monopoly concerns and regulations.
• 27:22
  Speaker 1: And Google's line has always been, as you said, we
• 27:25
  Speaker 1: built a better mouse trap. Competition is just one click away,
• 27:29
  Speaker 1: as their kind of favorite phrase. And it is hard,
• 27:32
  Speaker 1: right because you can't necessarily point to direct consumer harm
• 27:37
  Speaker 1: because Google provides Internet services that are free and a
• 27:41
  Speaker 1: lot of billions of people use them around the world,
• 27:43
  Speaker 1: and they're valuable, But what regulators look at as well,
• 27:46
  Speaker 1: or what they might look at as well is Okay,
• 27:49
  Speaker 1: let's play the long game here. If Google manages to
• 27:52
  Speaker 1: kind of put out of business or guest stranglehold on
• 27:55
  Speaker 1: lots of aspects of internet advertising or lots of of
• 27:59
  Speaker 1: aspects of information online, does that harm consumers? Or is
• 28:04
  Speaker 1: Google doing things um that basically abuse its power in
• 28:09
  Speaker 1: such a way that it crushes competitors. And the problem
• 28:12
  Speaker 1: with anti trust and investigations is that they're broad and
• 28:15
  Speaker 1: you just don't know what the investigators will find interesting.
• 28:19
  Speaker 1: Sure of a day Bloomberg Opinion colums covering all things
• 28:21
  Speaker 1: tech for us coming in at the last minute to
• 28:23
  Speaker 1: give us some color on Google. Thanks for listening to
• 28:25
  Speaker 1: the Bloomberg P and L podcast. You can subscribe and
• 28:28
  Speaker 1: listen to interviews at Apple Podcasts or whatever podcast platform
• 28:31
  Speaker 1: you prefer. Paul Sweeney, I'm on Twitter at pt Sweeney.
• 28:34
  Speaker 1: I'm Lisa abram Woyds. I'm on Twitter at Lisa Abramoyit's
• 28:37
  Speaker 1: one before the podcast. You can always catch us worldwide.
• 28:40
  Speaker 1: I'm Bloomberg Radio