This is Bloomberg Business Wait Inside from the reporters and editors who bring you America's most trusted business magazine, plus global business, finance and tech news. The Bloomberg Business Week Podcast with Carol Messer and Tim Stenebeck from Bloomberg Radio.
All Right, everybody, Well, one of the risk overhangings on financial Marcus, we've been talking about this certainly over the last week or so, is that UAW strike now and its second week, with economic losses already estimated at one point six billion dollars. The standoff between the union and the big US automakers remained far apart on key issues such as pay benefits, also on terms I own. A.
Bloomberg News team spoke with struck some striking workers about what has them worried and whether politicians can change that. Here with the latest on the situation and what's on the minds of those striking workers is Bloomberg News Real Economy Team reporter Mark Niquette. He joins us on so Marco to have you this afternoon, some really fantastic reporting
from the inside with you, Gaby Koppola, Josh Idelsin. First up, though, just describe sort of the mood or the moods of those that you know, you spoke to, who you worked with, how would you describe how they're feeling.
Well, we essentially went to the picket lines of the factories that are on strike. The UAW is doing sort of a unique approach this time where they're striking all three autoworkers a big three at the same time, but limited plants, not all clients. And the workers who are out on strike, I would say it's sort of a
mixed mood. They're happy to be fighting for what they think they deserve, particularly after they gave up pay and benefits after the financial collapse, but they're also worried about obviously their jobs and.
The future, particularly for their job security.
One of the big issues on the picket line is the transition to electric vehicles. It's sort of emerged as a big issue in this strike right now because the.
Auto workers are very concerned.
That the fact that it takes fewer workers to put together these electric vehicles, this could mean less job security in the future.
You know what struck me. I think it was Jacob Bishop, aged twenty three, you talked to and it said, you know, in this transition to EV's like they get it, they understand it's happening. He said. Many of us have accepted that we want to make sure that in this transition the companies don't try and use that as a little
bit of a scapegoat to try and transition. They are relatively good paying union jobs, and you do wonder you know, it wouldn't be the first time a company, you know, kind of as we're going through, transition is a tough time. And sorry, you know so, I mean, you understand really these real concerns of these workers who are wondering, like do we get lost in the shuffle right?
And then again, like you said, some of our outright seguente about it, they would say, look, you know, we know, you know, coal miners lost their jobs and when we after the industrial revolution, you know, this is just sort of the natural progress of things and has consequences. But like I said that they definitely want to see in the short term at least.
That they're taken care of. In particular, they.
Want to see pensions restored. It's going to be a big issue in the negotiations because it's not clear yet, you know, how we'll get to an agreement with the automakers and and the u A w on pensions, but they want to have that sense of security that you know, they'll have something when they retire, in addition to the colon and the pay increase and the other benefits that they're looking for.
We want to ask you about Trump, because that was certainly a factor, but I want to also ask you what happened. What happened to those auto jobs that used to provide a really good middle class you know living, you know, a family that could not only just survive, they could actually thrive.
Yeah, that's another issue in the strike is sort of these tear pays where you know, the folks who come into the shops in the union at you know, the entry level are paid less than the workers who have been there longer. And you know, there's there's real concern that, particularly on the on the entry level, it's not a livable wage or it's not a wage that would allow even these autoworkers to buy the products that they're making,
the cars that they're building. So it's and it's it's a thorny issue because this is the sort of the pay structure that the automakers have worked out in the industry has worked out to allow them, the RT makers, to be profitable. But you're right, it doesn't work for a lot of workers, particularly at the lower end.
I mean, let's talk numbers here, because one thing that we have heard throughout the strike and even ahead of the strike is the way that real wages have come down as a result of inflation, but also as a result of their wages just not keeping up with inflation
and not getting raises. One person who you and the team spoke to, Robert Schuch, says that he earns only two dollars and fifty three cents an hour more than he did all the way back in two thousand and eight, and that he and his wife they have to work to put in overtime to make ends meet. Uh, this is pretty shocking to see, given that how long ago that was, how much more expensive things are now, and their wages are still haven't haven't kept anywhere close to inflation.
Yeah, and that's another factor that's that's playing out right now with the strike, and that's just the high inflation environment.
You know who we are in the economy right now.
You know, these workers, like like everybody else, you know, they have to buy red milk and gas and and and they're seeing the prices moderate for sure, but you know, not not enough for them to make ends meet. And you know, it's sort of another worry because you know, they do get a strike benefit while they're on the picket line, but.
It's nowhere near with their salary. Is so more of a complicated actor.
I want to ask you, you and Gabby and Josh, what did as you were talking to workers, what was the mood or the moods of those that you worked with and and just kind of, you know, just get a feel of how they were feeling. Were they just you know, were they angry? Were they.
I don't know, like how.
Would you describe them? Was there a couple of words to describe overall the group?
Yeah, I don't know if there was a sort of a consistent theme there. I mean it was it was almost, you know, depending on the individual and what the individual circumstances were.
Some were definitely angry, you know that they had to be out on this picket line.
They felt like, you know, this, this this could have been avoided that you.
Know, the company, particularly with the company executives making millions of dollars, they feel like, you know, there could have been more spreading around of the money and you know, taking.
Care of them without having to go on strike.
Others are are sort of happy, i would say, for the ability to fight for what they think they deserved. So while they would prefer, I'm sure, not to be on strike, you know, they're certainly willing to, you know, stand next to the barrel and you know, wave the signs. And I think they're also encouraged by the support they're getting. If you stand on the picket lines in Detroit, you know, cars passing our hopey horns, and you know folks are bringing in uh water and you know, donations to buttress
the workers. So I think there's a society they are being supported in the strike.
Well, the reporting you did and Gabby Coppola and Josh Eidelson, it really just give us a feel of truly how these guys are feeling and why they're at on strike, So we so appreciate it. Bloomberg News Real Economy Team reporter Mark Naquette joining us on zoom and Columbus, Ohio.
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All right, everybody, This week has been full of AI related news.
We just talked about Nvidia, the raid over in their French offices, concerns about anti competitive practices. Of course, that has been the AI stock I feel like of the year, or at least one of them meta platforms. Those shares higher on today, I should say, in the trade after Alice Wad and positively on the AI potential of the new artificial intelligence features that we talked about yesterday. The company
unveiling its annual developers conference yesterday and veiled there. Wall Street Journal also reporting earlier this week that Open Ai, the company behind chat chept, tim exploring a sale of shares that could value the company up to ninety billion.
That's a pretty big deal.
It's a huge deal. Okay, So we know we can use AI to chat with Tom Brady if you're soon, if you're using meta platforms new Thing or Snoop dogg or like you know, help you with recipes if you're using chat gpt. But what about AI when it comes to medicine, Carol? How can it help doctors make better decisions and ultimately make us healthier and live longer.
All right, well with us to talk about that. Elizabeth Stoddinger. She is managing board member at Seamen's Health and Years. It's a fifty seven billion dollar medical tech company that does medical imaging, testing, diagnostics and more. Delighted to have her with us on Zoom from Munich, Germany. Elizabeth, thank you so much for joining us on Bloomberg Business Week. I think we are all curious about the value of AI as it starts to seep into all walks of
life personally and professionally. Give us some insight about how you all are thinking about it.
If you think of a world where getting healthy and staying healthy is a right and not a luxury, regardless of whether you are in Vietnam or a head of state. If that's a vision you want to buy into and you believe in, then AI actually can be one of the leavers that can help us get there.
Okay, So what does that look like in terms of diagnostic imaging? I mean this is when I think about a lot. You know, we have people reading mammograms, and people reading mammograms miss things, They make mistakes.
That's absolutely right, because reading mammograph is quite it's not so easy to do and you need a lot of experience. And that is one of the beautiful use cases and examples where artificial intelligence really can help physicians find the most suspicious parts of the mammogram much faster and also can help with guiding attention to potentially suspicious lesions and thereby support physicians to make diagnosis in a more accurate
way and also look after more patients. So this is actually one of the really very real use cases which already make a difference for patients today.
Elizabeth, as a world globally, are we all going to work together on this so that we can get to the power of generative AI and its impact on the global world sooner rather than later. And I asked that because you have is Tim reminded me incredible experience working overseas, especially in China in particular you lead the Semen's Health and Ear's business in Asia Pacific. There's just lots of experience with that at a time where there's lots of
global tensions. I mean, just this week or we recently talked about technology rules and the EU model versus the US model. Versus the Chinese model and how it plays out. So give us some insight and smart narrative if you will, or a smart narrative on how we need to think about this and what kind of collaboration we need.
If you think about building high quality AI solutions which make a benefit for patients, there is a few ground rules you have to follow. First of all, you have to make it easy for physicians to adopt the tools and the possibilities of AI in their tools. And secondly, and this is very important, you need high quality data
and you need lots of it. And in order to provide that strong foundation to build meaningful and impactful AI algorithms, you do benefit from leveraging a global network to collect the images. Make sure you annotate the images in a good way that you can use them for training AI algorithms. So we collaborate with scientists and clinical partners all over
the world. We've collected more than a billion images and we then feed these images into our supercomputer, which is actually based in the United States, and we call the computer Charlocke because it helps us find the most relevant bits and pieces of information.
I want to go back to just talking about China, because you did spend so much time in China, and I'm curious, Elizabeth, you must still know people on the ground there. We've talked so much over the last few months about the economic woes facing China. What are you hearing from your contacts there right now.
I mean, China is and always has been a very fascinating place for me personally. It's a place where I've spent a lot of time, where I keep going back to regularly, and I've always been really inspired by the energy and by the drive of the people in China, by the willingness to continue to build their country and
their economy. Now, following the experience of the last three years with the very stringent COVID measurements, I mean, there is some thought process going on where people go back and say, well, maybe we could have done this differently as well, and people are feeling the impact now of the slower economy. At the same time, I continue to be optimistic and positive about China. The economy continues to grow, and I'm quite confident we will see it picking up a game.
Put on a corporate put on a corporate perspective. Is China still the friend of EU? Corporations or companies in the EU, companies in the United States, is there going to be that collaboration on things like new science or new technology.
I mean, for us, over the past years, we have moved focus into also understanding what do patients in China need. China has a population of one point four billion people,
and these people need healthcare and want better healthcare. So we have added also our and d activities in China to our global network, and we continue to believe that for the benefit of patients globally, there is value in keeping the collaboration and working together on addressing some of the most some of the most challenging topics for mankind, like, for instance, addressing the threat of cancer.
Just one last question and just got about thirty forty seconds here, how are you thinking about how AI could really change the way medicine works.
ICAI as a phenomenal opportunity because it will help us to address some of the most pressing needs that we're facing in healthcare systems. We don't have enough people. There is mistakes that people grow older, there is certain diseases which become chronic, and in all of these areas AI
can and will make a difference. So to me, AI is really it's not a threat, it's an opportunity and if we make right use of it, it can help us focus us humans on what we do best and get the support of the AI to treat more people in more places and on a higher quality level around the world.
Elizabeth a great. I really appreciate your time, Elizabeth Stottinger. She is managing board member of its Semen's Health and Yours. Joining us on zoom from Munich, Germany, you're.
Listening to the Bloomberg Business Week podcast. Catch us live weekday afternoons from three to six Eastern on Bloomberg Radio, the Bloomberg Business app, and YouTube. You can also listen live on Amazon Alexa from our flagship New York station Just Say Alexa playing Bloomberg eleven thirty.
So over the summer. In July, to be exact, Bloomberg News came out reporting that US venture capital deal spending fell by half in the second quarter, funding fewer startups, especially at the early stages of a company's life. This is according actually to data from research firm Pitchbooks. So we'll be looking for kind of the update on these numbers.
You know what, they say you got to adjust for one time things. Okay, So if you do the math, take out that more than six five billion dollars that investors spent on payments company Stripe, and the total looks even worse. That's according to Pitchburg analyst Kyle Stanford. We got a great guest on the VC world.
Yes, let's get to it. Michael Marx is with us, founding managing partner at the venture capital firm Celesta Capital. He's with us on Zoom from Mulla, Nebraska. By the way, his firm is funded over one hundred tech companies twenty nine exits to date, and prior to Celestia, Michael was a founding partner at Riverwood Capital, a Menlo Park based private equity firm. He also served as partner and senior advisor at kk R. He'spent thirteen years of CEO and
then chairman of Flextronics International. Also served as an interim CEO a Tesla three months back in seven. So he comes at this just to remind everybody with a great perspective. Michael, great to have you back with us. How are you and how would you describe the VC space right now?
Well, thanks for having me on I've been great. Look, the VC space is fantastic.
Now.
There's lots of lots of noise in the system because of you know, the stock market going down and less I pos and so on, but it is an incredibly active environment. We're seeing better companies than we've really ever seen. It's great.
What's so great about it? Well, what's great? I got the memo. But rates are high right now?
Yeah, Actually that that's actually helping the in the venture world. So look what you know, values go up and go down.
It's better for venture capitalists when values are down. And values are down now because of the reasons we just talked about it, there's you know, there's there's less exits and and frankly, the venture firms are husbanding their cash to be able to support their best companies, and so there's less money for new companies, which is which is good if you have capital to deploy, which we do.
What's great about this environment and and and I think it's what really defines venture capital these days is that you know, venture I've been around for a long time. Venture capital started in the sixties and the seventies with you know, Sequoia Capital and Kliner Perkins and any of these companies you know started come you know, out of fair Child Semiconductor, National Semiconductor there for the name Silicon Valley, and so the venture business in those days was pretty
much limited to semiconductors. Then you had computers and cell phones, whole computing revolution, you know, than than enterprise software and sasact and then came e commerce. And now here you are in twenty twenty three with you still have all those I'm sure you recognize what's happening to the semiconductor world.
But now we have you know, bioconvergence, all kinds of biotechnology, of climate investing, of energy investing, and so there are many, many more companies and more choices to invest in it. So it's a great time to be a venture capitalist.
Hey, okay, forgive me here, but this is you're based in Menlo Park. We spoke to Steve Case yesterday who talked all about the opportunities between California and New York. You're in Mullen, Nebraska right now. What brings you to Mullen.
I'm just visiting friends, okay.
Because this is a tiny town with like five hundred people.
I do exactly.
I don't know if you were exploring some venture opportunities in Mullen. I am, okay, we'll tell Steve case.
Well, it's interesting, you sound very upbeat and you talked about the rate environment. How that's a helpful to you. I also was curious about before we get into some of the areas you're investing the private lending space. I know they tend to play more in the middle market and it's not necessarily early in startups, but is that at all having an impact on deals or valuations for you?
It is, in fact, it's having a big impact in a couple of ways. One is that you know, the cost of borrowing, you know, if you think about venture debts. So venture debt, which is important in the venture industry, has taken two hits. The first hit was Selgan Valley Bank went out and that was the biggest lenders to the space. And the second is the cost of capital has gone way up. And so when it comes to
raising capital, for example from limited partners. You know, now limited partners can get can invest in credit funds and get twelve to fifteen percent IRRs without taking very much risk. And so that does siphon capital out of the out of the venture world.
All right, so let's talk about where you're investing. We know, deep technologies where you play, so AI, semis, semi conductor's, biotech, cloud infrastructure. What's really exciting and active right now where you are looking and hungrily to kind of amp your exposure in the VC space.
Well, thank you for that question. It's actually a really good question because there are lots of opportunities and we have to get focused. I'd say there are two areas that we find the most attractive right now. One is semiconductors. I mean, it's amazing how few people have wanted to invest in semiconductors over the last twenty or thirty years. And now you have you know, my good friend Jensen Wang at Nvidia, and you've got you know, hot Tan
over Broadcom and Qualcomm and so on. You know, these are becoming some of the most valuable companies in the world. And then you have a generative AI, which requires much higher speeds, you know, much more memory management, and so there's an explosion of new kinds of semiconductors. So we have two companies in our portfolio that make processors along the lines of what Nvidia does, but more specialized for certain applications, but then you also have you know, connectors, semiconductors,
you need a lot more throughput and so on. So this is actually placed right to our strength and we've made a number of investments that are doing really well.
You mentioned it, Can I just say you mentioned Nvidia And we did a story earlier at the top of our broadcast about how there are French offices were rated by France's Anti Trust authority over concerns the companies engage in anti competitive behavior. This is coming from the Wall Street Journal. Any thoughts though about Nvidia and practices And I don't know about the industry, I.
Really don't, you know, I don't know about that, so I really couldn't get any about it. But it's a wonderful company, do you think, and a very company.
These it's really really tough to make semis and uh, you know, we've seen the way that TSMC is doing well. We've seen just the in the in the industry, like you know, we covered TSMC and video. Can startups actually pull it off or is this something that you know you have to rely on the big guys.
For you know, it's another tough question. The answer is it takes a lot of support to be a semiconductor company today. You're exactly right. I mean, to tape out a three three narimeter chip at TSMC can be one hundred million dollars, So that is typically So what we do from a venture standpoint is help get these companies started, but they really need growth capital or private equity capital to get to the finish line in that kind of
a semiconductor segment. There are other semi conductor segments. Center and is expensive. But of course TSMC is one of the most powerful companies in the world because they're the only company that can really do this at the most you know, the smallest geometries. But yeah, that's this is the world that takes a lot of capital.
Hey, Michael, sorry, we're run out of time. Do come back soon because I'd love to talk more about where you guys are investing in this world. Michael Marks, founding managing partner at the venture capital firm Celesta Capel, joining us on Zoom from mull In, Nebraska, but as we know, he is based out there on the West Coast. You're listening and watching Bloomberg Radio.
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All right, this next story safe to say. We're trying to figure out exactly who may be the bad actors here. You can say bad boys, bad boys. Step back first. Google, as you know, maintains one of the world's most comprehensive repositories of location information. It can often estimate a user's weirreabouts two within several feet. The company mainly gathers this information to sell advertising, but in recent years police started dipping into it to further their investigations.
Yeah, the company's trove of user data now attracts thousands of requests from law enforcement across the US in cases large and small. Police say the warrants can unearth valuable leads when the texts are at a loss. But to get those leads, cops often have to rummage through Google data on people who had nothing to do with a crime.
Car There's a lot of information there for them to go over to better understand this process and its consequences, we dive into this week's Bloomberg Business Week cover story with our Bloomberg News Tech team of Julia Love and Davey Alba, as well as the editor of the magazine, Joel Weber. Jill's here in our Bloomberg Interactor Brokers studio, Julia out there in our San Francisco bureau, and Davy
on the phone from Stanford, California. As you said, it's the cover story in the new issue on newstands online, and of course on the Bloomberg Jel Killer story.
Julia, Davey and company have been working on this for a while and I from the moment I found out about it, I was like, tell me everything. And it required just a ton of data and analysis for us to actually be able to look at this story. But what it revealed is that there's a troubling element to how law enforcement has turned increasingly to Google over the past couple of years, and the location history that people
have on their phone search data. All of that is basically become a tool that can reverse engineer people who were at scenes of crimes, and sometimes being at a location neurolocation does not actually mean that you did the crime, and that's sort of where it gets interesting. And where privacy experts in particular are a little terrified of how this is actually shaping up in the real world. So Julie, let's start with you. How did you, how did how
did you happen upon this story? And where did where did you have to go in order to piece it all together?
Sure, well, in the wake of the Supreme Court's decision to overturn Roe versus Way, there was a lot of interest in how law enforcement would use all of the data that DOODLE has about us, and so we wanted to look at the search warrants that police are submitting to DOODLE because we knew that that was the best way that we did a handle on what was actually happening.
And so to do that and I and our colleges fanned out to different courthouses around the country and we just took it page by page, thumbing through these warrants, identifying the ones that were submitted to DOODLE, and then scrutinizing them to see the nature of the case and what cops ultimately got.
So give us an example of how this has played out in the real world.
So one interesting example, there was a young detective in North Carolina. He's getting ready for work.
He leaves his.
Car running and he comes out and the car's gone and inside is sent the car. Hearne like, yes, it is personal vehicle. Yeah, but but but there's near inside and it's done, and you know, the department tells him, you know, they're very supportive. They reassure him it'll be all right. But then they go to work and they turn to Doodle. They send them a warrant for everyone who's devices were near the place where the vehicle disappeared. And they also asked for information about people who searched
for the model of the radio. And Goodle told us that they didn't provide search data, but they did provide some location data. And so this is, you know, just a real world example of how property crimes are attracting these requests.
And obviously with that information they were able to get the radio back, right, they were not the radio outstanding. Can you see?
So Davey, come on in on this, because what it really turns upside down And you guys lay this out so clearly in the story. The idea of a search warrant, right would be typically on an individual, right, And now you've got thanks to Google, you can take a location and kind of search for information. But it feels like it opens up that information can reach a wider swath potentially of individuals, some who may not at all be connected to a possible crime. So come on in a that.
Yeah, absolutely so. Tech companies hold a lot of data on people. That's no surprise. But usually when you think of search warrants in the traditional sense, you would think, Okay, police are looking at this one suspect, let's go and learn more about them, and maybe we'll serve a search warrant to a company to get information on a particular individual a suspect. In this case, police are using the most basic parameters to even jumpstart sort of leads when
they don't have any leads. So they'll they'll, for instance, give for location coordinates. These are just x y coordinates on a map, and then within these four points you'll draw like a little polygon. And then they will say that to a judge, like, we have reasonable expectations that there will be a criminal that we can find within this area if you sign off on this warrant for
a certain period of time. So that's geofen's warrants, and then you know police are also increasingly using search warrants, keyword search warrants, I should say, which are you know, sort of warrants that are served to Google to try to surface people who have Googled a certain term. So in one of the cases that we covered in our story, there was a terrible crime. It was an arson and a family died in this fire. And what investigators did was go to Google and say, hey, did anyone search
for this address? So that that yield did some some suspects in that case, Well.
Let's let's stick with that one, because that one hasn't totally played out yet and it gets to I think maybe the ultimate tension in the story, right.
Yeah, absolutely that that one. You know, the Colorado Supreme Court is going to rule on it. We don't know exactly when, but we're expecting it to come down at some point this year to just sort of decide whether or not Google providing that data to investigators was an
overreach on the investigator's part. And and if you think about especially searching on Google, that is just so many people that that could ensnare you know, going back to the example that Julia mentioned at the at the very beginning, they police had served Google with a warrant for anyone searching on this particular car radio model, and Google did not turn over data in that case, to be clear, But you could imagine people like radio enthusiasts who might
be searching for a particular radio model completely innocently, who could potentially get swept up in one of these wants.
So I'm guessing privacy experts have something to say about this and activists because you know, if Carol Tim and I get swept up in the same search, I didn't do it. Okay, truly I didn't do it, but I did. I'm making fun of something that is incredibly serious. But what do the privacy advocates have to say about all of this?
Julie, you want to come back?
Yeah, sure, yeah, So privacy advocates are very concerned about both of these techniques. You know, the thing is, if there's no suspect involved, then the only way that goodle can provide a list of hits is to search everyone's data. And so law enforcement will receive, you know, a short list of people who fit the criteria, and they then have to go through and identify who they think, you know,
might be their suspect. But everyday, people who had nothing to do with the crime are often swept up by these by these warrants, and so I think that's really the heart of privacy advocates concerns, and legislation has been proposed in California and New York that would ban the police from seeking these warrants of Google. The legislation has stalled so far, but activists are still hoping to get
something done on that front. And the Colorado case would also be the first time that a court weighs in on the on the constitutionality of that keyword search technique.
Okay, so how does Google feel all about this?
It puts them in a difficult spot. You know, these are court orders, they're they're not optional. Doodle has to comply and they often are important cases. However, safegriving user privacy is you know, a key responsibility that they have, and so they have to walk a very fine line there.
Okay, so what about insight. There's the official Google response, and then there's what you were able to report from within the company with some great reporting. What did what did some of those sources reveal?
Yeah, so we found that there there's a department within Doodle that's responsible for scrutinizing these requests. It's a midst of lawyers and l i S specialists, and those specialists, you know, the rank and file there are often just a few years out of college. Some of them harbor dreams of becoming a lawyer, and I think they're often quite motivated by, you know, this job of really scrutinizing
law enforcement requests. We heard of examples in which they were really just looking for any reason to send the request back to law enforcement. In one case, you know, an officer might send a request for email from an account ending in at gmail dot com. But if the officer has a typo, if they say at gamble dot com, that's a note, they would send that request back. But nonetheless, if it's been signed off by a judge, you know, eventually they're going to get something.
And by the way l i S Legal Investigation Support. I find this just fascinating because it's like Google's kind of their hands are tied here, right, like, yeah, if law enforcement asks for something, a judge signs off on it, they're gonna have to comply. But I love that there's like this element within the company that's like you spilled Gmail wrong, You're not going to get to what you're asking for.
I want to spilled Gmail wrong when I'm trying to pay a traffic take it so I parking ticket, so I had to pay it twice. Oh yeah, because I got a late fee for it. So I'm never I always check how I spelled to you.
But the point is, once they give information on a case like, how can they pick and choose right, like once the door is open like you do? Wonder if they're asked and requested, as long as they get the Gmail right, you know, do they just have to do it?
Julia?
Yes, you know.
I think there's an old dodge in Silicon Valley. If you build it, they will come, they say. Essentially, if you collect this data, law enforcement will come knocking and they will eventually find a way to get it. And so I think that's just the heart of this issue. Google collects this data in large part because it helps them sell advertising, and as a result they they are in this uncomfortable position.
Davy al will come back in here. I always wonder, when you know people work on a story like this and learn so much about how our information is collected, are you going to change the way you use these services after reading a story I want to change the way I use these services.
Well, yeah, I mean I think it's it's a good reminder to all of us to take a look at our opt out slash opt in options on our settings for various Google services. You know. Google told us that this one product that they particularly used to store location data, called location History, is off by default, but there they do send notifications to people to sort of suggest, hey, do you want to turn this feature on? It could
help you in all sorts of ways. For instance, if you wanted to remember where you were last week, or see how many miles you've traveled, or just kind of have a cool record of where you've been and you know what places you visited. And I think that that's not always clear when you're getting these like features pitched to you, that there could be privacy consequences there.
I just want to end U in a big number. Google says it received a record sixty four hundred and seventy two search worms in the US last year. That's more than double the number from twenty nineteen.
So this is their use, all right, Julia Love David Alban Of course, Joe Weber. This is the cover story. Check it out. Lots of details in that story.
Umbrother mac.
A Journal.
How about you let me drive?
Oh no, no, no, no, who's going to drive?
Alright please, I'll do the gravel.
Let's wait, I want to drive.
It's a question.
This is the drive to the clothes dot com effect.
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On Bloomberg Radio.
All right, everybody, just about thirteen minutes left in today's trading session. Kicking around, bouncing around, definitely off our loads of this session here, Charlie, just breaking down those numbers for you. So much of the week and I for the last couple of weeks. Sin since that latest FED meeting, we've been obsessed with what's going on in the rates market, and you are seeing rates pulled down a little bit. We'd talked about consumption spending, personal consumption spending. It is
down some data points this morning. But and then of course we just.
Heard from Tom Barkin from the Richmond Fed, President of the Richmond Fed. Yeah, Carol, what did he say about the bond market?
Slow your role, everybody stopp being so obsessed.
One takeaway Carol had from that twelve minute interview that Mike McKee just did with the president of the Richmond Fed. It's trying to spend too much time.
Because we pars over every little I.
Mean, the bond market. Well, let's hear what Samir Samana has to think about the bond market. Samir Samana's senior global market strategist at Wells Fargo Investment Institute. He's at joining us in our Bloomberg Interactive Brokers studio. Okay, before we get to the bond market, you're expecting more weakness and equities with the S and P five hundred now below it's fifty day and one hundred day moving averages. Talk to us a little b about the equity picture for the rest of the year.
Yeah, I mean, look with rates soon what they're doing. And sorry to talk about the bond market, and we're supposed to say you're done, you're out all about it. Yeah, but I mean rates are basically a soft cap on valuations, right and you're you know, trading a basically low twenties on the S and P right now, at least based on our earning's number. And that's just too high with rates being as high as they are, so in our opinion, you know, probably fair value somewhere in that four thousand,
forty two hundred area. Now, it could be that we end the year at those levels because again we think of recession you know, starts to kind of you know, unfold at the very tail end of twenty twenty three into early twenty twenty four. But we would be pretty cautious on equity markets here.
What's interesting too, though, is I am thinking about you say, like a value cap right in terms of the higher rate environment when it comes to the equity side of things. But if growth comes in right Tom Barkin mentioning, it's hard to see inflation coming down because of the growth picture, how do you kind of strategize around higher rates but maybe a fairly okay growth environment. So what does that mean for the value cap or what is the right value cap?
Then?
Well, that means inflation doesn't down, and that means the FED has to revisit rate hikes and or the long end has to do the work for the FED because they're on pause, which means maybe, you know, five percent isn't the right level for long rates. Maybe it's something even higher.
But if we have growth in the economy, even in a higher rate environment, like what's the right thinking in terms of what equity valuation should be.
Well, eventually those higher rates will put downward pressure on growth, right. I mean when you look at what's going on with existing home sales, right, I mean, I think turnover this year on existing home sales is like one percent throughout the economy, right, And when you think about basically that big a part of the economy that's just frozen.
Right.
People aren't moving for jobs, they're not selling their homes, the realtors aren't earning the commissions, you're not redecorating a house after buying it.
You know.
Again, you're going to see that more and more on things like autos and maybe even things like you know, your credit card. So we think after the holidays especially, people are going to head a pretty pretty strong wall, you know, with respect to the consumer. And it's just very difficult for the economy to continue going if the consumer's setting a wall.
So the weakness in terms of the consumer side of consumer spending picture, which I know some analysts I think the Nike down growth and I think right, or the.
Concerns over Nike about the consumer right.
Exactly, So some concerns about consumer spinning do you think we're going to see that and it's going to be rough?
We do?
I mean, look Q two GDP came out this morning, right and the part that was revised down by fifty percent is personal consumption and that was Q two, So that was before oil prices and gas prices did what they're doing right now.
Okay, so it's not sounding that pretty. What are what does our investing audience need to know about?
You use the word recession.
I did use the word recession.
I did.
I mean, look, we would focus on larger cap you know, US equities, We've been favorable there for almost as far back as I can remember. On the flip side, we'd avoid smaller caps in the US, and we would more avoid emerging market equities, so.
Their evaluation play looks a little bit better than larger caps right now.
Yeah, they're cheap for a reason, though, I think I think that's the tricky part is those are value traps. So now when the cycle turns, you're absolutely right, those valuations have a lot of room to expand, but we wouldn't mess with those until you get to the recession.
Do you think there's more downside to the S and P five hundred this year.
We do we would not be surprised to see US trade with a three handle during the midst of recession.
Would the midst of recession.
Be so we would probably say probably early part of next year. Again, it probably starts later this year and probably you know, bleeds into twenty twenty four.
You know.
I think of Tim this conversation we had with Peter at order of William and Mary and Chris runs his own financial insights firm. But I do wonder if any his concern was are we missing some of the bad stuff?
Right?
Yeah, but it hasn't been concerned about that for.
Months he has been but like it just there's this feeling out there, Oh, we're gonna bounce back, because we have been only bouncing back thanks to stimulus and so on and so forth. But I do wonder if it gets bad, and if we do get a recession, is it why deep?
Long?
So we would say we really know, say.
Moderate, We would say moderate, and we would say a couple of quarters. I think what you have to watch for is the Fed's reaction function is how quickly do they switch from inflation fighting mode to propping up the economy mode and to the extent that the FED is late, to the extent that they're folks on inflation, which is probably the most lagging indicator of all time. I think that's where things could get really.
Tricky when I mean, I have so many questions here. Fortunately we have a few more minutes, Uh, Samir, When when would you think the FED would need to start cutting rates given where you think that a recession is happening.
I mean it's probably going to be the middle to later part of next year. Yeah, yeah, I mean they're.
Going to be love you talk about rate cuts this year.
I know, I think they may compound the inflation is transitory mistake with a possibility that disinflation is transitory mistake.
Right, But if you're saying, if you're saying that it's such a lagging indicator, then ostensibly what you think the FED needs to do is cut rates earlier than anticipated.
Well, I mean again, first, I think we have to enter the recession, right, I mean it's part of the kind of slow year role theme of this interview, right, I mean, it can't cut until we actually see the recession. You can't see the recession until financial markets comply, right, because right now they're all out fighting the FED. Right when you look at credit spreads, when you look at equity multiples, I mean, the market isn't making the FED jobs fairly easy?
Okay? What happened here? Because six weeks ago, Carol, all we were talking about was a soft landing and you had, you know, adjustments coming from so many of the major things.
Everybody picked piles on it.
Okay, that's what you're like, even you know, a recession wasn't a base case for the FED anymore. What happens to mar what changed?
Look?
Six weeks ago I went through probably the roughest you know, stretch that we've had this year. Right with respect to you, guys are crazy. This is a new bull market. You've missed it. My clients have too much cash. You know, great job, thanks a lot.
So great August, so June July, right when.
We had forty six hundred for you, we got to and you know, we had this four thousand to forty two hundred year on target for twenty twenty three, and we were basically talking to the clients, to advisors and saying, look, this will turn. I mean, this can't keep going.
Because again, why was the street though constantly playing ketchup and ratcheting up their numbers. To me, it's always a contrarian indicator when everybody piles on.
That's exactly how I viewed it as well, and you could see that in the flows data. You could see that in sediment, and that was the reason why we were like in a look, fundamentals matter. You can't just base a whole you know, investment philosophy on sentiment, technicals and momentum.
So what's your end of your target for the SMBF. I've heard now it's four thousand and forty two hundred for this year.
That being said, it's forty six hundred to forty eight hundred for next year. So again, as we get those opportunities, what is it for.
These four thousand to forty two hundred.
Four thousand to forty two hundred that's for this year and then forty six to forty eight for next year exactly, So look.
For opportunities for those brighter days ahead.
You're a global market strategist, so that to me says you can kind of go anywhere and go into a lot of different asset classes. What's your number one investment idea right now?
I would say commodities look really interesting to us. We've been favorable for a long time. We think we're in
a bull super cycle for commodities. We think there are a great diversifier and what's going to surprisementities or we really like a basket because in a bull super cycle, what you tend to see is different commodities tend to come in and out of favor, and so rather than you know, individual clients trying to figure out which commodities currently most in favor, just own a broad basket and then you know, I know. So it's probably a little bit how.
Much of is it the energy story or it's not just that.
A lot of it's the energy story, but I think a lot of it's just supplied discipline. You've just had a lot of folks that overinvested in supply during the go go China years, and with China having really slowed down, a lot of the supplied discipline is going to find its way into thse higher commodity.
We have a great story about ag and supremacy, US supremacy in the agricultural world and how that is shifted. It's at the end of our broadcast, so highly recommend everybody stick around for that.
Hei Samir, you said avoid small caps and avoid emerging markets, right now, what else? What else would you avoid? We would we would avoid the consumer.
We would avoid consumer discretionary so like Nike, like Nike exactly, and we would also, you know, avoid real estate. We don't like rates. Again, they're hit only you know, not only by higher interest rates, but also all these issues surrounding probably a economist that's still probably over retailed, overbanked, all these physical spaces probably will will kind of be reduced over time as we all move online.
What's like the number one you think about when you get up in the morning and you're thinking about the market and the environment.
Right now, it's I mean, if there is one chart to watch, it's oil because again it's tripping rates, it's firing up the FED with respect to what does this mean for inflation? That's the number one chart I'd have my eyes on right now.
Yeah, really interesting. And from the FED speakers, do you pay attention? I mean, forgive me, Mike, we love you and anybody you.
Talk to pay attention.
But is it do you like look for little nuances?
You know?
I think the FED kind of gave up some of their importance when they said that they're data dependent rights the transitive property in math. Right, if the fed's watching the data and I can watch the data instead of watching the FED, I'll just watch the data and I'll go even a step further. I would say the markets
usually tend to run a step ahead of the data. Yeah, And I think that's that's what's telling the story right now, is when you look at small's relative to large, when you look at what's going on with certain parts of the credit markets. I mean that's really where the game's being played.
Well, thank you for playing. Speaking of games, playing along with the slow the role kind of game today, so appreciate it's some mere Samanas, Senior at Global Market Strategist at Wells Fargo Investment Institute, joining us here at our Burg Interactive Roper State. I know it's Thursday, but have a good weekend.
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