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It is a Fed Wednesday, not a decision, but we're getting the Fed minutes from that first meeting of twenty twenty six, happened on January twenty eighth. You know, that's the meeting when the Fed kept rate steady and you had two FED governors Chris Waller and Stephen Meyern, voting against the decision in favor of lowing rates by a quarter of a point. So we are waiting for them to cross. They will cross any moment from now.
Beetcher Powell also back then talked up a quote clear improvement in the US outlook, and so the job market shows sign of steadying, studying signaling a cautious optimism.
All right, let's head to DC, and outside the Federal Reserve is our own Michael McKee Mike.
Okay, here's the headline. In a very newsy set of minutes, Several participants indicated that they would have supported a two sided description of the committee's future interest rate decisions, reflecting the possibility that upward adjustments could be appropriate. The focus of the January meeting on inflation largely rather than jobs, and concern that bringing it down had stalled. Officials anticipated inflation would move down this year, but the pace and
timing remained uncertain. The continuing rise in prices driven by tariffs, the minute say the effects would likely start to diminish this year, and ongoing moderation and housing prices would also help. High productivity growth from technology might also put downward pressure on inflation, and a few participants mentioned that companies were telling them they are on mading more operations to try
to offset some price increased needs. Most participants, however, cautioned that progress toward the two percent objective might be slower and more uneven than generally expected, and judged that the risk of inflation running persistently above the committee's objective was meaningful. Some cited reports from business contacts expecting to raise prices this year. The labor market the committee's big concern last
year was less of a concern this year. The vast majority of participants judged the minutes say that labor market conditions had been showing some signs of stabilization and that downside risks to the labor market had diminished. Still, most agreed downside risks to the labor market remained in place,
particularly as the labor supply diminished. Overall, the economy appeared to be expanding at a solid pace, with resilient consumer spending and robust business investment, particularly in technology, although suggested a lot of that was due to spending by higher income consumers. Lower income spending was soft. There was a long discussion of markets, with several commenting on high asset
valuations and historically low credit spreads. Some saw vulnerabilities in AI, including elevated equity valuations and gains concentrated in a small number of companies. Several highlighting concern about the private credit sector, and others commented on risks associated with hedge funds and rising leverage. Finally, the January meeting is when the Open
Market Committee elects its officers for the year. J Powell again named chair of the Committee, but the minute, say, until the selection of their successors at the first meeting of twenty twenty seven.
Gotta say, Mike, it sounds like they all had their readings that morning because the meeting, right, it sounds like they covered a lot of stuff. Hang on for a second, because I want to see what you think is of most important importance. Thank you the Bloomberg audience. Having said that, just taking a look at equity markets firming up a little bit on the S and P and the Dow, but pretty much NAZEQ one hundred, staying where it was
prior to the Fed Meat Fed minutes coming out. If I look at the Treasury curve, you are looking at pretty much the ten and five where they were prior to the release of the minutes. Looking at the shorter end of the Yeald curve, slide uptick, the two year yield moving from like three forty five to three forty six, kind of back there. So I would say, not much market reaction, which is kind of interesting, Mike. What is most notable because investors seem to be taking this in stride.
Well, this is the first commentary from anybody at the FAD about the possibility of rate increases several is referred to only two or three members, and we kind of know who those members might be. But the idea that they did put the idea out there is something that we haven't seen in years, and so it does become a significant talking point as we go forward ward and watch to see what inflation does. The emphasis clearly shifting to inflation at this meeting from last year's focus on jobs.
Hey Mike, A couple the headlines that are worth repeating. Several more cuts of inflation declinents as expected, yet most caution disinflation could be slower than expected. What could lead to slower disinflation.
Well, they're concerned about tariff price increases and maybe they don't fade out as fast. And then additional demand in the economy because we're going to get some stimulus from tax refunds and because of all the spending on AI might also push prices higher. So there's concerns that inflation, while it may not rise significantly, could stabilize at a higher than desired level and that might lead the FED to have to do something about it.
Hey Mike, A lot going on. Obviously, there's Fed minutes. We had some economic news today as well, we also had Kevin Hassett out there on a New York Fed tariff study, and I got to about that. He is, of course President Trump's NEC director, and he says that a New York Fed study showed that the US companies bearing most of the tariff burden is an embarrassment and the people associated with it should be disciplined. He spoke about this earlier on CNBC. Here's exactly what he had
to say. He said, what they've done is they put out a conclusion which has created a lot of news that's highly partisan, based on an analysis that wouldn't be accepted any first semester ECON class. I've been in that first semester ECON class. So, Mike, FED researchers found nearly ninety percent of the economic burden from tariffs last year
were born by US companies and consumers. Let's say, you, Mike McKee and the folks that you talked to the economic community, who really bears the cost of those tariffs.
Companies and consumers in the United States. Mister Hassett's comments seem to have adopted the attack dog language of the Trump administration much more than even Kevin had done before. Maybe because he's not a candidate for a FED chair
at this point. But you got to point out that the New York Fed, by saying ninety percent is picked up by Americans, is the outlier here because of study by the University of Chicago found ninety nine percent, study by the CBO found ninety five percent, the Kiel Institute in Germany found ninety four percent. So all of these people found that Americans are buying ninety percent or more or paying ninety percent or more of the tariffs. So I think mister Hassett is look at it the wrong way.
And obviously the Trump administration doesn't like criticism.
Okay, good to have that on the program, Mike. Just before we let you go, that the jobless boom a most read story on the Bloomberg terminal about the unprecedented jobless boom in the US. How economists are warning that the US economy is vulnerable to shocks because the labor market is not growing. Some are predicting that economic growth will slow due to stagnant labor markets. Camp productivity increase as the result well productivity of technology. Excuse me, as a result of.
Technology, Well, that can happen. The question is how fast does the technology get adopted and how quickly and how deeply does it get adopted to drive productivity significantly higher. The concern about the labor market and the jobless recovery is reflected in these minutes, and members of the Open Market Committee did talk about that as a possibility, a possible risk to the economy, although as I said, inflation was sort of their number one concern this time.
All right, so appreciate it as always our own Michael McKee down there outside the Federal Reserve. Were actually inside the Federal Reserve because it's kind of still cold outside, I think, Mike, Thank you so much. Safe travels back, stay with us.
More from Bloomberg Business Week Daily coming up after this.
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Hey listen. Investor is definitely keeping a watch on economic data fed expectations for what else is a top of mind is someone who's been looking at the recent volatility in the markets. He says it's typical of a major investment cycle, and that's some dynamics around the fear of AI disruption or contradictory. It is the view of our next guest. He is Mike Wilson of Morgan Stanley. He was among the rare forecasters who held on to a bullish few last April, even as stock sank in the
aftermath of sweeping US tariff's. His conviction proved correct, with the S and P, as you know, rebounding to a record as President Trump dialed down his trade war. He does see the S and P rally I think about sixteen percent this year, but that was his call him in November. We'll see if he has an update. We welcome Mike Wilson. He's chief US equity strategist, chief investment officer for Morgan Stanley. He's in New York City. Might
good to have you here. And someone who has followed Mike's call and writes calls, I should say, and writes about him a lot is our own Alex Sevenover. She's Bloomberg News equities reporter. She's here in studio. We want to talk about the markets, Mike. Are we in the midst of a new bull market and earning cycle? Especially from any of the lagging areas of the index. That was your call in mid November. Is that a call you still stick to.
Yeah, well, good afternoon. First of all, I would say yes. I mean, you know, the story we actually started writing about in May of last year, which is a midyear update, was exactly that. I think our view still remains out of consensus around this idea that Liberation Day marked the end of what we call a rolling recession. So we're actually not only in a new earning cycle, we're in
a new economic cycle. And that's why we're seeing the broadening out now, because there have been many parts of the economy that have been sort of mired in a recession for the last three years or so and they're just now starting to emerge. Areas like consumer goods, it's some of the financial sector, industrials obviously we're just getting a boost from AI campex, but also getting a boost from you know, basically underspending for the last several years.
Parts of technology are still doing quite well, and so that broadening out is that is the real story. And we doubled down on that in November because the evidence was coming through, and you know, in May we didn't know, but now we know. I mean that the earnings growth for the media and stock and the Russell three thousand is now running double digit growth year every year. That's the first time we've seen that in four years. So it's happening. The question, you know, the question now is
how long can it last? You know, what could derail that? And you know, what do you pay for? I mean, those are always the questions. But but the but the first part of your question is resounding. Yes, we are in a new earnings and economic cycle and the market has figured it out.
Man, it's been pretty remarkable to see that you've got this stock volatility at the single stock level, also at the sector level, but when you look at the S and P five hundred, it actually hasn't really done much this year. What is it going to take to break us out of this range? And what could be the catalyst to get us past that elusive seven thousand level that everyone's waiting for.
Yeah, that seems to be the question. I mean, obviously, stock investors don't mean if you can make money in other areas, that's fine. I think that's the real main message is that the market is not going anywhere at d SMP level, But there are many sectors that are doing well and that's the name of the game. Now to your question, I think what's going to break us
out ultimately are two things. Number One, there is some uncertainty around the AI capex cycle and the disruption that perhaps it could cause in the labor market and other areas. So I think we're in one of those testing periods.
Now.
We worked about that this week. We think that ultimately it's a little bit premature to kind of throw a cold blanket on the AI cycle. It's just getting going from our standpoint. And then secondarily, I think we have a new FED chair nominee with Kevin worsh and the market always tests the new FED chair, whoever it is,
when they come into into power office. And so first we have to go through the you know, the nominate, the confirmation hearings, and then we've got to learn a little bit more about what he really intends to do so that you know, that could lead to this, you know, the market kind of struggling for another month or two.
And then ultimately we think once he takes office, we think that'll that'll be another catalyst for why the market can have a really good second half, and we stand by our seventeen hundred dollars price target for the SMP by the end of this year.
Okay, so those are all the reasons and more that that you think we could see a sixteen percent increase in the S and P five hundred this year. What changes your mind, Mike? What could happen between now and the end of the year that could cause you to go back and sharpen the pencils, break out the excel and say, wait a second, we've got to recalculate this.
Yeah, well, we do that every week anyways because we have to. But but I would say, you know, what would change our view is probably the things that are going right now. So for example, if we would see the earning cycle start to deteriorate, and then that could happen cent O four cast, but if the earnings revisions would just start to narrow again or start to really break down, that would be clearly something that would change
our view. The second would be that, you know, the fear around Kevin worsh being kind of a balance sheet hawk, where you know he's going to maybe shrink the balance sheet and we're going to have a little bit of an liquidity problem potentially that would cause multiples to come down. We don't think that's going to be the case this year. That might be a story for twenty twenty seven. Well, we'll think about it then, but maybe we're wrong on that.
The other one, of course, is you get another exogenous shock of some kind, and I think, you know, the one I mentioned earlier is starting to weigh on stocks here in the short term, which is this concern that you know, AI is happening so fast and it's you know, it's migrating now into the corporate world, that we're going to see a big labor cycle. That's not our view, but it could happen. And so there are those would be the top three. I would say that could derail our positive view for this year.
We've heard time and time again that big text profits are going to slow, that it's time to rotate, and anyone who said that for the last few years has been wrong on that. Do you think that this year is different? And when you think about the end of twenty twenty six, when we close out, who are going to be the new winners?
And I love that you went there, because Mike, it feels like the last three years, people have said, get away from big tech, diversify, and yet that's where we've seen so much of the games. It's great, it's a great yes.
Well, I mean, I think a lot of people also made the other side of the call, which is to kind of upgrade small caps or the equal weighted s and p We didn't do that. You know, we don't get everything right, but we waited until November to make that call because our view is not that tech earnings are going to collapse. It's that the rest of the market's earnings are going to improve, and that's what usually
drives relative performance. So it's really the spread between sort of the mag seven or large cap growth stacked earnings growth and the other four hundred and ninety three stocks or the other equal weighted index, whatever you want to call it. And that spread is narrowing now. And so the areas that we have been you know, recommending, is based on where that earnings growth is accelerating the most.
That would be things like consumer goods or financials, some of the industrial segments, some of the small MidCap areas, and we stand by that that that that's what we're seeing, and that that's what we think is going to continue for the rest of this year.
And that's really the story.
It's not a it's not an anti tech or anti large cap growth call. It's more of a just a bullish call on all these parts of the economy and the market that have been under earning because of this rolling recession.
So is it fair mic to say that you like the equal weighted version of the S and P five hundred more than the main index.
Absolutely that that was our one of our lead calls in the November outlook, and and that has worked so far, so not on avoid hopefully that continues. And based on what we've seen so far this year in the earnings and what we see kind of in this you know that the economy itself, which which I think quite frankly is booming at the moment because you have capital spending increasing and consumer spending holding up, that that's a much better environment for the app.
Hey, Mike, two things I just real quickly. I'm curious about do you think that White House is still a risk to financial markets? Are with midterms looming, do you think that the President and his team are going to be very careful about unsettling things in the financial markets. Many have said he certainly keeps an eye on it. Maybe that's the checks and balances on the White House. And secondly, Kevin warsh if indeed he does become fed cheer, will he be an independent fed.
Yeah?
No, I think I mean, look, I think that this administration and the president you know, specifically has shown that you know, they're going to he's going to kind of operate in his speed, and so I don't anticipate that we're going to see, for example, you know, this administration and trying to lose momentum in what they're trying to achieve,
which which means more of the same. Quite frankly, it's going to be you know, it's going to be active, and that creates you know, periods of volatility, uncertainty.
Whatever you want to call it.
But I mean, I think the mission that what they're trying to accomplish is now crystal clear, trying to rebalance the economy on three different planes at the same time, and I think you're having some success with that. That's why we're seeing productivity increase already, we're seeing GDP increase, We're seeing earnings you know, broaden out, and so as long as they're seeing results like that, I think they're going to stay the course. With respect to the FED independence.
I mean I've probably had a bit different view here. I mean, as far as I can tell. I mean, the FED independence has been sort of fading for the better part of twenty years really since the financial crisis, and we're not staying independent. I don't mean they're under the thumb of the White House. I mean is that they have to play ball in terms of their role to help the government fund itself, Okay, And we saw
that after the financial crisis. We saw that in twenty twelve, We saw that, you know when you know, we had a regional banking stress in twenty twenty three. So the FED is obligated to, you know, help financial markets operate. I mean like it's their third mandate. They even call it that. So so that to me is where the FED independence has been challenged for better part of two decades.
And I think that's going to continue.
I think the FED and treasur are going to work closer together, okay, climber to the two thousand World War two period. And that's a good thing because that means they're going to figure it out.
All right, well, we all want you back here, so feel free to stop Buyer Studio anytime. Mike Wilson, chief US equity strategist, chief investment Officer over at Morgan Stanley, and of course are Alex Evanova.
This is the Bloomberg Business Week Daily Podcast. Listen live each weekday starting at two pm Eastern on Apple car Play and Android Auto with the Bloomberg Business App. You can also listen live on Amazon Alexa from our flagship New York station. Just Say Alexa played Bloomberg eleven thirty.
So US Treasury yields. We did see you move up today. Earlier on some strong economic date including reports on housing. New residential construction in the US rose to a five month high in the month of December that as home builders boosted production to take advantage of lower barring costs
that work out there. The advance, we should point out was broad based, both single family home starts and apartment projects rising at years end, the number of one family homes started was tim the highest since the month of February.
The stronger construction numbers suggest that builders were growing more confident at year's end, even as they continue to sell off a bloated inventory of new houses for the full year, though starts notched a fourth straight annual decline. For more on the US housing market, we're joined by Comedy Lane, President and CEO of Coldwell Banker Realty. It's got nearly forty nine thousand affiliated real estate agents doing business in more than fifty five markets across the United States. She
joins us from Los Angeles. It's good to have you on the program. The spring buying season is about to get underway. You have agents all over the country who are giving you real time feedback about what things are looking. This is not a monolithic market. I hear that location, location, location is everything. What can you tell us about the state of the real estate industry in the US.
Yeah, you know, we have seen some really good indicators at the end of last year, both in terms of housing starts and in terms of new construction. And you know, inventory really is sort of the issue to tackle in the housing market right now. We know that, you know, more than eighty five percent of people believe that home ownership is central to the American dreams, so that aspiration has.
Not gone away.
However, we need inventory. We need inventory to get people into those homes. So you know, it is location, location, location, but it really is inventory, inventory, inventory, and we see sort of mixed inventory across the country. You know, if you look at sort of the Midwest and the Northeast, we still have really tight inventory, whereas in other markets we do see loosening of inventory, which is causing more price stability.
Is there anything that gets inventory to increase without actually just building more homes would lower mortgage rates increase inventory?
Absolutely?
I think.
You know, we've talked a lot about that lock in effect that started occurring because of the historic low interest rates, you know around post COVID era, where we saw sellers that were really locked into their homes because they didn't want to give up that three.
Or four percent interest rates.
So with a loosening of that lock in effect, we're going to see sellers who are more willing to put their homes on the market, who are a little bit more realistic about prices, right because we're not seeing the double digit year rear price increases that we saw kind of,
you know, four or five years ago. And so when we get more sellers to release that lock in effect, when we get sellers to get realistic about pricing, that's really going to be the other factor, in addition obviously to new building that gets more inventory on the market.
Company that lock in effect, where people you know, have a low rate, they don't want to move. Is it is it everybody or is it largely an older population who ether maybe retired around COVID or made some decisions and you know, it's just more to do with demographics than people who locked in lower rates or is it a little bit of both.
It's you know, it's everybody. I mean, who doesn't love, you know, three percent interest rate? Right? But I think that what folks are starting to realize is that those were historical lows for a reason, and now we are you know, mortgage rates are about six percent one hundred basis points lower than last year and very much in line with US historical averages. So I think this idea of just holding on to an interest rate is starting to loosen across all demographics, and people are realizing that
there are other reasons to move. Now you couple that with the increase in home equity and the increase in wage earning over the last couple of years, and folks are really loosening. The fact loosening to the idea that that low interest rate is the only thing holding them
in their home. They're starting to realize that if they do put their home on the market, they can take advantage of some of those equity gains from price increases, you know, and just being more realistic about what rates are in line with historical averages.
You mentioned earlier that I think there's tighter inventory in the northeast. Other areas are looser us around the country and what you're seeing and be more specific in terms of markets.
Yeah, sure, So you know Texas is one market, Austin in particular, where we are seeing year over your price decreases because we've got a lot of inventory there. Florida actually has more inventory this this time this year than it did last year, which is sort of an interesting and unexpected dynamic. And you know, one market that I think is fascinating right now is the city of San Francisco.
We saw eurover your price declines around the covid Era in the city of San Francisco, and now because of the AI boom, we're seeing a really strong price increases in the city of San Francisco, both in terms of rent and in terms of single family homes, and I think that that's going to continue to increase. So price increases in that city, you know, but not a lot, not a lot of inventory. I live in Los Angeles, and we're actually seeing sort of a studying of the
market in Los Angeles. We had historical highs in terms of year over your price increases a few years ago, and now we see prices are really studying out in Los Angeles and supply and demand are starting to even out a little bit.
In Los Angeles. Did the devastating fires last year affect the way that people think about living in an environment such as that.
You know, Los Angeles is always going to be a really attractive city, just the combination of the weather, the proximity to the beach, the ocean, you know, mountains, the
entertainment industry. The fires certainly had a devastating effect on specific communities, but we actually saw, particularly in the high end, that that demand that was in the Palisades and Malibu communities that were devastated by the fires transferred almost one to one into neighboring communities like Beverly Hills, bel Air, Santa Monica, Brentwood. And so I don't think that the demand to live in Los Angeles has changed at all
because of the because of the fires. We're just seeing a sort of a rebalancing in where folks have moved.
You know, I'm curious to what sellers are having to do. So is it more of a seller's market or buyer's market or again depends on the on the market. And I am curious about when it's new versus previously owned homes, what you're seeing. And I bring that up because Toll Brothers reported after the close yesterday our own in house intelligence team, writing the post first quarter earnings outlook, first
quarter orders are flat five percent below consensus. It did keep its full year guidance when it comes to deliveries, management, saying January's gotten off to a promising start, with most customer metrics modestly higher than last year, though caution that it's still early in the spring season. I mean, the spring season is an important one, and I am curious if sellers, particularly new homes, are having to incent buyers throwing in different things to get sales going or is that not the case?
You know, so, you know, for new constructions, for new construction, incentives have not actually changed, and so we're not seeing, you know, shift in the sort of buyer's market or
seller's market dynamic with regards to new construction. But to your point, you know, whether it's a buyer's market or seller's market really does differ around the country, and it really is just dictated by inventory because the macroeconomic factors around the country are steady right in terms of wage increases, in terms of mortgage rates, and so it really is
dependent on inventory. So when you look at a market like New England, for example, where we still have very very tight inventory, you know that's going to dictate that sellers have a little bit more power than buyers do. However, in a market like Texas, and you know Texas is
very broad, but I'll talk to Austin in particular. We've got a lot of inventory in Austin and so prices are down year over here about six percent, So that indicates that it's more of a buyer's market where buyers have a little bit more power at that negotiating table. So you know, again, inventory really is the thing that's dictating market dynamics across the country, and it very much is region specific.
You know, I'm wondering about compensation for the agents that you have that you oversee. And you know, if we think about the industry, this is one where they're essentially private contractors, right, They're not employed by you, They work for themselves. They eat what they kill. The commissions have been under scrutiny for quite a bit of time. There
was the big settlement in recent years. What are commissions looking like in different markets and is their pressure on commissions as a result of that?
Yeah, great question.
So at Coltal Banker Realty, we have about forty nine thousand affiliated agents, all independent contractors, and you know, what we're actually seeing is that on the cell on the list side, commissions have gone up a little bit. And I think that is because after the massive conversation and the news cycle around commissions, our agents got better at
talking about the value that they provide. So at that kitchen table, when you're negotiating with an agent to decide who is going to list your home, which you know, by the way, the vast majority of Americans have the vast majority of their wealth tied up in the equity of their home, So that is an incredibly important decision. Who is going to help you with the most important
financial transaction of your life. Those agents are better able to articulate their value, and consumers are recognizing that and they're willing to pay for it. And that is what the commission is. It's compensation for the incredible value that the real estate professional is providing. So contrary to what a lot of people assume, we actually have not seen commissions decline in the last year or so. They're actually
going up. And I think it really is because of that value that the real estate professional is providing, particularly at a firm like Coldelbinker Realty Comedy.
One thing we have to ask about is AI. The Impact of Fortune has a story out from Zillo citing Zillo CTO chief Technology officer, and he is saying that AI is reinventing every step of the home buying process, making it easier for shoppers to search for a home and lead a transaction. We've recently seen the AI scare trade impact some of the residential or not residential, but real estate servicing companies. AI in your world just got
about forty seconds left here. How is it impacting it so far and how might it I think?
I think artificial intelligence is an amazing tool to help our real estate professionals use their time more effectively and efficiently. At the end of the day, real estate really is about relationships. It's the most personal transaction that most people are ever going to encounter in their lives, and so that really does require.
A human at the center.
However, AI can make that human more powerful, use their time more efficiently, use data more efficiently, and be more effective in that transaction.
So real quickly. It's an aid. It's not going to wipe out what you guys do or your agent's doing.
You know.
It is an aid.
It is an empowerment tool, but real estate is fundamentally human.
All right, good leave it there, Company Lane, thank you so much. Presidency of cold Well Banker Realty joining us.
Stay with us. More from Bloomberg Business Week Daily coming up after this.
If you're listening to the Bloomberg Business Weekdaily podcast, catch us live weekday afternoons from two to five pm Eastern Listen on Apple CarPlay and Android Auto with the Bloomberg Business app, or watch us live on YouTube.
There's another thing we've been keeping track of. It happened out on the West Coast. It involved one of the largest market cap companies out there and a major player in social media. Are you talking about meta?
Yeah, Mark Zuckerberg, testifying that it's quote very difficult to enforce Instagram's age limits. He sought to defend the platform during a landmark trial over social media addiction. He was sharply questioned on the witness stand today about whether he and other leaders are aware of the volume of children under age thirteen who use the photo sharing app. Ker
Wagner is senior technology reporter. He covers social media. He's also the author of Battle for the Bird, Jack doors Elon Musk in the forty four billion dollar Fight for Twitter. So he joins us from Denver. Kurt, There's so many directions we want to go here. I mean, there are some out there who are comparing this to what happened with tobacco company executives on the stand, you know, when when we were kids, and and the way that that changed the public health view of cigarettes, and the way
that that has looked back on historically. What's at stake here?
Yeah, I mean, this is to your point, sort of in the same general vain as those those cigarette tobacco industry trials, opioid industry trials, Like this is a question of whether these social networks specifically are built, you know, with the intention of addicting users, especially particularly addicting young
people teenagers to their products. And so this is a real, uh, you know, signature moment, I would say, for this industry to kind of be challenged with these allegations, and you know, in Mark Zuckerberg's case, to defend himself in his company against the accusations. And so it's been highly watched, highly anticipated, and this is just really the first of more than
a thousand potential trials that we could see. There's thousands of lawsuits in this same vein, and so we're paying particularly close attention to this one because the outcome of this could sort of signal what we might see from a lot of these other lawsuits that have yet to be tried.
How do you differentiate or how does a judge or how do lawyers differentiate on whether something is addictive, meant to be addictive to kids, or just it's addictive in nature, so it doesn't matter if the person who's using it is twelve years old or twenty five years old.
Yeah, I mean, this is why it's such a challenging question. I don't know, is the short answer to the answer to this, But I can tell you that what plaintiff's lawyers were doing this morning with Mark Zuckerberg on the
stand was they were trying to show two things. The first was they were challenging him over Meta's enforcement of its age restricts, basically saying, you know, are you actually enforcing this idea that those under thirteen should not be on the platform, and if so, are you doing everything possible to actually do that? And I feel like that's really been maybe the main argument that's been happening is that they haven't really enforced their own policies on that.
Mark Zuckerberg has admitted, Hey, this is a difficult thing for us to do, and you may recall like this actually ties into a broader tech industry discussion we've had over the last couple of years where Meta has said, hey, this should be the job of the app stores, This should be.
An Apple and Google thing.
An Apple and Google are saying no, no, no, no, this is your responsibility.
Meta.
You know, you have to determine who how old the users are on your platform. And so this sort of plays into a discussion we've really heard more broadly accross the industry for the last couple of years.
What's so fascinating, Kurt, It's happening on a day when we've talked about CBS and what's happened on Stephen Colbert's show in terms of one specific Texas politician who is running for now a federal state federal Senate seat. But I mean just the rules and oversight, and it's just fascinating that when you know, traditional airwaves came out, there was oversight, right, there was you know, rules about what could be on air, And now most of us are
getting information from social media. Right, it's not your linear broadcast and so on. So you do wonder like when does the oversight come from all of this? And as you write in your story, I mean, this is one case. You have three thousand cases brought by children, adolescents and young adults through their parents. You've got school districts, You've
got I mean, so much going on. It's not so how important is this first case, because it sounds like there's a lot more legal overhang from Meta and others.
I think it's really important.
I mean, we had some time with Meta's lawyers a few weeks ago, their legal team and what they told us was, you know, each case is different, each trials different, each jury is different. So getting a verdict in their favor one way or the other on this first case, you know, isn't a huge deal. But I think for those watching on the outside, I mean, this is going to signal do these cases have merit?
Do these cases have legs?
Certainly it's going to be hard for lawyers in the other cases not to look here and say, Okay, what worked and what didn't work in terms of arguments and lines of questioning.
So I think it's very important. It could also be the kind of.
Thing, you know, if Meta loses a case early on, you know, do they choose to start to settle some of these cases down the line to avoid having to go through the actual jury process every time?
And so I think this is important.
It certainly will signal or set sort of the expectation for things to come. Even though it is true I think that each each case will have its own nuances and details to flush out. So this will kind of serve as a belt weather.
Listen, this is not a US issue, as you well known, Kurt, It's a global issue. And I'm looking at a story that was on the Bloomberg yesterday India discuss India discussing age based social media curbs. According to one of its ministers, You've got countries right tim around the world that are taking steps to crack down on use. Australia the first country to implement a legal ban, which included Meta Meta's Instagram and Facebook, snap Elon, Musk's ex TikTok and Google's
you Tube Ireland. Like you know, it is going across Europe. So like we are seeing so many different things go on.
Yeah, kurb, what do public health officials, not just in the US, but in public health observers say about these platforms in general and kids?
Well, I mean there's been research for years that these platforms can be very divisive. You know, it's easy to for misinformation, for example, to run rampant on these platforms. We've all certainly witnessed that. I think it was the in the US where they wanted to apply sort of similar warnings that you would get on cigarettes, right like smoking labels essentially, but for social media. And so there's
been a lot of talk about this. I think what's interesting about these bands or these restrictions for teens is that they are you know, everyone's watching Australia. You mentioned India, there's other several other countries in Europe that are considering similar restrictions.
But there's also states in the US that.
Are trying to get this done as well, to try and sort of limit social media use for teens. And it'll be interesting to see if, like there's a snowball effect at some point, right because right now it's limited.
It's a lot of chatter.
But you know, a year from now, two years from how are we going to look up and say, hey, this is now the norm right that those under sixteen just can't use social media?
And I think that's it's certainly possible.
I mean it's wild. I mean Ireland, right home to kind of the EU tech hub, it's considering plans to introduce age restrictions on social media platforms as part of a broader AI strategy, and they've talked about this. Do you feel, like, Kurt, you follow this world, that we are getting to a moment of reckoning when it comes to social media. There's a great story by Max Chafkin about dumb phones. Dumb phones, you know, rather.
Than every parent in the newsroom, we were talking about this today, we're all like, yeah, like, what is the solution for our kids?
Like parents are stepping in because they just don't want this. So are we at a at maybe a turning point or I don't know, Like what do you what do you think? We've just got about thirty seconds here.
Yeah, I can see.
I can tell you that it's a massive theme that we're following on our sort of social media pod here at Bloomberg. Yeah, because it's not just this trial in LA We mentioned the thousands of others. There's state ags that are suing, school districts that are suing, Like, this is not a storyline.
That's going to go away.
And I think the ban or the restrictions excuse me in Australia and potentially in your or just adding to that. So certainly can't remember a time when it's been talked about this much before.
Great stuff, as always, Kurt Wagner, thank you so much, senior technology reporter cover social media. Check out his book Battle for the Bird.
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