FAANG Can Go Another 25-30% Higher by Mid-2021: Wedbush's Ives

Securities analyst Dan Ives and Dan joins us here. Dan, thanks so much for joining us here. I love that quote you had, and the numbers we saw last night really bear that out. So let's step back, you know, thirty feet, and we have those big four tech companies last night report strong to extraordinarily strong results. How should we put all this in context? Yeah, I mean these stocks have had massive moves and really it's what's led the market to touch the all time highs that we're seeing.

And but there was a lot of pressure, especially what we saw last week with Microsoft and TESSAs, and the momentum came off last night was a fork in the road situation for tech and they needed to not just talk to talk, but walk to walk. And this is a tech freight train right now that I is showing no sign to slowing down across the board as the COVID environment has really ACCELERI these growth stories by eighteen

to twenty four months with Apple front and center. So what kind of stock gains are we looking at and what will these text dooks trade us in say a year's time. Well, I also think there's a rerating going on, and you know the haters will hate, but but I don't see that now. I think there's a middle innings of a re rating intact because there's a lack of security growth stories. And if you look more and more, you've seen that consolidation. I still think fang names going

to the higher over the next nine months. And I think what you saw from these numbers, it reflects the fundamental cases. And now you're going to continue to see investors with a green light to by tax this morning, and I think over the coming weeks and months. Let's

talk about alphabet the parent of Google. Uh, Tom Kin doesn't even it's it's an alphabet free studio with Tom Keane, but we'll go with it a little bit here stocks all four and a half percent here, just a sense of kind of the advertising and the business model for Google here in a pandemic world. Yeah, definitely digital advertising and seeing headwinds and that's what alphabets being and I

think you've seen the stock reflecting that. But but I do think that this is more of a call one to three quarter issue radding something that's going to be sustainable. But you're seeing a knee jerk negative reaction as this clearly is a headwind and they're seeing that front and center, and some of those other areas like Google Cloud still small, that continues to be the core business and unlike their fang brethren, definitely not the results investors wanted to see,

even though anticipation it was going to be weak. Numbers even weaker than the whisper. Let me ask you, if we don't get some kind of new stimulus that gives people a few little extra dollars in their pocket, If this, you know, next round, is going to make people really cut back, do we see them coming back on things like tech spending or you know, streaming services spending. I think most consumers view all of these fang games is

almost utilities. It's bread. You know, it's really food, water, and a lot of these fangs in terms of from Facebook to Apple and Amazon to others in terms of interaction and really consumer uteries. And I think that's what's really happened here, is is that these stocks really become tech utilities, and of course the consumer environment, especially a thousand hour Apples and some other purchases should definitely get hit.

I think what you're seeing is for Apple to beat iPhones by four billions in the middle of a once in a hundred year pandemic. That's a jaw dropper. I mean I almost fell off my chair when I saw those numbers. Head Dan on Wednesday, again, the CEOs of some of these companies are right in front of Congress talking about antitrust ostensibly. Um, any takeaways there, what's the risk factors it relates to? Just regulatory risk? Give us

an update there? Well, the one takeaway it's better they did it the day before earnings than the day after, just given the the types of profits they showed in uh, you know, Monster Quarters book. I think it's a it's a risk. I think it's viewed at in terms of it was still a little more grandstanding and more of a circus atmosphere, and I think investors came away feeling like nothing's going to happen in near term in terms

of breakup. But I do believe momentum building in the Beltway as well as in the EU against these tech giants. The stronger getting stronger in this environment. A lot of it really hinges on any type of legislative fix and or what happens in terms of blue or red as we go into the election, because I think if you get blue across the board, that's viewed is much more negative in terms of antitrust toward attack. Briefly done your

thoughts on fourth one stock split a smart move. I think other tech giants are going to follow the same pattern because I think Cook and the board they want more broader ownership of Apple, and by having a quarnuicoard cheaper stock in a four for one, it's something that I think it was a smart move. I think others are gonna follow and it just shows right now they are in it just a massive position of strength and to be in a position to do a fourth one stock split with a stock in all time high in

the middle of a pandemic. Yeah, I mean, it's pretty phenomenal listeners. Don Ives, Equity analyst at Wedbush Security, is always such a pleasure to speak with you, and boy, was there a lot to speak with Don about today, Paul. I mean, we were to a certain extent anticipating this, but I think in the era that's in it, I'm not sure we were even expecting the amount of you know, beats and good news and lack of uncertainty and so on that we saw from the Big Four. Yeah, it's

just extraordinary in this environment. Is Dan was mentioning to see how well these companies do and how it was a big, big pivot for the technology Industrys relates to Wall Street, it is time for Bloomberg Opinion. Welcome to have a Gary Shilling, president of a Gary Shilling and Company, in a Bloomberg Opinion columnists joining us, Gary, your most recent comment or your column here. Bonds are sending the

right signals. Now what do you mean by that, Well, bon bons typically leads stocks and that was certainly true earlier this year. UH Treasury bond started a rally rache decline literally the first trading day, the second of of January, UH, anticipating that the Corona crisis, and of course it was barely known, but it wasn't until seven weeks later, on February nine, the stocks peaked out. I think we've got

the same pattern now. In the last month we've seen a again a significant rally in treasuries, and I rather suspect that it is leading a sell off in stocks because we are getting the second wave of the virus um. Maybe we'll get a vaccine, but that's hard to know. When restarting the economy is difficult. Washington is struggling over the next fiscal stimulus bill. So I think there are a lot of reasons to suggest that the economy is going into a second down leg and that stocks will

be in fact reflecting that. How will it manifest in the data? I mean, we're already seeing GDP both you know, down, no growth at all, down by contraction. I mean, are we going to see more quarters like that? Gary, Yeah, Well, we won't see more quarters like that. We'll be at zero the economy. I mean, you know, this is a if you annualize this, this is something like a annual

rate uh, that will work for very long. But I do think that rather than the v recovery that many people thought, and you don't hear much talk about the V anymore. UM. I think it's more an l a big decline initially and then a downwards sloping lower leg which will extend into next year. So when we start to see a concrete evidence on the third quarter, UM, I think that's when people are gonna be forced to say, hey,

wait a minute, this is an extended recession. And that's what I think stocks would probably sell off and and follow bonds which have already rallied prices up, rate interest rates down. So Gary, we're a waiting word from White House, uh, Chief of Staff Mark Meadows and just moments about potentially some progress that may be mean on the um stimulus spill, How important is that? Uh? I don't think it is it it's it's it's best is stabilizing the situation. I

don't think it's really reviving. If you look at the second quarter numbers, you had a huge jump in the saving rate I have, the personal saving rate I think was in other words, people have this money, but they're not they're not spending it, and a lot of people are scared to go out, so putting money in their pockets and spending and stimulating the economy, creating jobs and so on are really two different issues. Gary, what do we need to hear from the administration and basically from Congress.

We're awaiting Mark Meadows come out and make some kind of commentary. We don't know what it will be. Maybe it will be some progress on on what they're trying to talk about. But apparently the Senate went home and we didn't get an agreement on the next round of stimulus. What do we need, Well, you probably need at least enough to continue in some some of what was going

on now. There's a big hang up of course in the unemployment insurance because the federal program on top of the state programs, of the six dollars federal program with the state programs, you know, there are many many people. I think roughly half of the half of the workforce was making more staying home than working, and that the Republicans are saying no way to that. So whatever whatever comes out of this, I think it's gonna be less

generous turn it was before. So Gary, I mean, give it a sense that this may be longer for lower Um, what do you think the Fed is doing a We heard from the FED Chairman pal Or earlier this week, seems like the FETE is there to support and to do quote whatever is needed. Is that enough? Well, they've done pretty much everything you can do. They brought everything

in sight. They've even brought fallen angels, h bonds that are now rado junk that previously we're we're investment grade before the before the crisis, and you know, buying corporates are supporting statan local governments. They've got two hundred billion dollar line of the treasury to cover their losses. The FETE is already deep into fisical policy and polin effect of saying that, he's really saying, uh, the next step

has to be in terms of fiscal policy. Now, whether fiscal policy is going to work as they say is another issue. But you know, it's it's started as saying, hey, we've done everything we can. Somebody else has got to carry the ball from here on. Gary, when you talk to all the people that you talk to, your clients and everybody who calls you, well, what are they saying

about the election? Are they sort of anticipating at this point that there won't to be a second term from the president's or is that not at all a done deal yet. And for those that are talking about a Biden presidency, you know, what do they think that will bring? Well? Uh, I think people are very much up in the air on this. That nobody wants to underestimate Trump because you know, it looked like Hillary was going to win hands down in twenty sixteen and Loan the whole It was quite

the other way. Uh. The reality is that it's very difficult for any income at president to get re elected in a economic recession. And of course, uh, Trump has been trying to get the economy restarted. Now he's realized that isn't going to happen by the election day. So now he's saying he's delay the election. I mean, he realizes he's in a hotspot as far as Biden is concerned. Um, you know, I don't I don't think there's I don't think there's a lawful lot that people are looking for

in Biden. He so he's tough on China, or he says he is like like crump Um, he's for more um more income retribution. Uh, short of the classic Democratic program. But there isn't an awful lot of new initiative. And I think the election is more, um, it's more a referendum on Trump than it is a vote for Biden. Garret. What happens if the you know, again, in the election.

We're focusing obviously, as we should, on the presidential election, but also the a lot of big issues as it relates to the Senate and potential for the Senate to go from Republican control to Democratic control. So you might have a scenario with uh, you know, a democratic sweep of both Houses of Congress and the White House. Yeah, is that a concern? Is that possibility? And of course the Democrats already control the House and and the Republican

majority in the Senate is pretty thin. Um. If you had that, UM, I think the initial reaction of of the shock market would be a big shell off, because it would be assumed that the Democrats would make good on their pledge to redistribute income. They would increase taxes on higher income people, they would resame the corporate tax cuts, UM. They would an attempt to redistribute income to basically their constituents lower income people, UM, minority groups and so on

and so forth. And I don't think that that would be at all well received on Wall streets. So, um, if you have that, I'd say, you know, look out below. I have to ask about bees in a moment. Gary always have to ask you about what kind of season it is for those creatures. But I do also want to ask you, do we need to be hard on China? I mean there's so much talk it's become sort of almost during gery now talk about a new Cold War, But is that really what we're about to be in

the middle of. Well, we're in a it isn't a Cold war in essentially is military, but as certainly as the Cold War in terms of the economy. The Chinese want to be the top dogs in the world. Um. And they really feel that that's their destiny. Um that they they had that traditionally nineteenth century, Uh, the the Europeans basically took over China partitioned it. Uh. They call that the century of Shame. They think they want they want to get back on top. This is the way

they see it. And what's interesting the way they the way they need to do that. Yeah, They've got all the military exploit and that's how China. See. They've got the Belton Road Program, which is spreading a lot of money around although a lot of it is is at losses. But I think the primary battle is going to be over technology because China, as a result of the one one child per couple UH birth policy, is going to have a declining labor force for the next thirty years,

regardless of what happens now. Those people that aren't going to go into labor force already not born. So they need productivity to have economic growth. And how do you get that. You get that true technology. Now. They've already, of course been invading the West, stealing technology, demanding tech transfer and so on, and now they're trying to develop technology. They're way behind the West, but they're doing their best to catch up. And I think that's where the battleground

it's going to be. It isn't going to be a military It isn't gonna be rattling arms and and you know, praise of tanks and guns and red square the technology. Yeah, Gary, I do have to ask you about the bees because obviously, you know, humans are facing coronavirus, and you are a beekeeper and you make honey every single year from from your bees. How are you managing in this time of coronavirus to take care of the bees and what kind

of a season is it for bees? Well, a good question, monny. Um. It started off very very mixed because it was a very warm back in March, and the bees got going and they muliplied and then they swarmed. And that's what happens when there are too many bees, and the old queen the old queen, and half the bees take off

and they make a new queen. But even if he catched the swarm, and I caught six swarms this year, I've got about a hundred colonies and at all time high record, and you don't get any honey out of either the old colony or the the new one. Now, the one thing about this is that there's always a snap back, and that's what it is. And as a matter of fact, in two weeks we're going to be taking the honey off. And it looks like we're gonna

have a we're gonna have a great harvest. I was, I was amazed, but you know, this is agriculture, and and you never know what's going to happen, the vicissitudes of nature, and sometimes you're lucky and sometimes you aren't. But it looks like we're looks like we're lucky this year. That's phenomenal. And I have to tell all of our listeners. Gary, you know, makes these wonderful jars of honey, but he

also comes up with the fantastic names for them every year. Gary, I just can't remember what the one last year was, but I'm sure this year will have to be something the pandemic related. Yeah, I think it was. I think it was regardless of the party. Our honey is de electable, yes, because it was a lot to talk about impeachment last year. Anywhere. Any of our listeners haven't got any great slogans. We always like to have a topical, usually usually with a

political economic twist. But the issue is that we you know, we send out the honey to you and all our friends and clients right before Christmas, and we need a we need a label that's going to be current into the next year, and those it can't be ephemeral with appoint at by the time January one, rules were all, well, I think you're fairly secure with things. I think you're

fairly secure with things like pandemic, vaccine, faucci. All of these things might provide some fodder for the title, what do you think, Paul, Yes, just the suggestion of it, because because I don't think that issue is going to go away, and maybe we can get some variation that our you know, our our bees, our corona, our corviate nineteen free. You may not want to go that direct, but they get plenty of diseases and validies, but they

don't get the carved nineteen. That's great. Gary Shilling, thanks so much for joining us. Gary Shilling, president of a Gary Shilling in Company and a Bloomberg opinion columnists. You know, as we take a look at the economy, we really start to really have to focus on the consumer with all those terrible unemployment numbers and the impact on some personal spending. Personal income. We had some numbers out today. Let's dig into those. We can do that with Read Pickart,

she covers US economy for Bloomberg News. Read thanks so much for joining us here. Personal income. What's the data showing us? Yeah, thanks for having me so today we got the income and spending data for June, and it showed us two mean things. It showed us that, you know, spending continued its rebound in June um but remains below

it's pre pandemic level. UM, and two, it showed us that incomes declined for another month as the initial boost from the one time stimulus checks those checks UM that were largely distributed in April have continued to wind down UM. But a very interesting part of it, at least that I thought, was, at the same time, we saw that payments for unemployment insurance from the previous month, especially pay out for that weekly six and unemployment benefits that expire

today UM, you know, increase. So you know, we're seeing that households are more reliant on those unemployment benefits as a portion of their income than they have ever before. Read what does it mean for you know, consumer companies going forwards had this amazing quarter a couple quarters for profiting gamble for example. I mean, will that be in jeopardy of people literally can't buy what they need to eat and clean themselves and and do all of the

you know, human functions necessary. So the six hundred dollar, the extra six hundred dollars in weekly unemployment benefits UM has really been a crucial lifeline for the economy in this pandemic because it is broadly buoyed incomes UM and spending. In recent months, even as the economy um, you know, has has has spaced this pandemic um and and it's it's hard to you know, see exactly what the impact

will be. But when you have these six hundred dollar payments, you know, keeping these incomes up and allowing people to pay their bills, allowing them to you know, keep spending at those businesses. UM, it is concerning in terms of what this means for the economic recovery and the coming months. Um. You know, especially at a time like now when UM, some of the data that we're seeing is showing that that economic recovery is is stalling and and has been

you know for the for the month of July. So read us a sense of kind of spending versus saving over the last four or five months. Again, there's been a crazy time here. The government's responded with that six hundred dollars per month. What's the data showing us about what people are spending versus what they're saving? M hm. So the satings rate searched to a record in in April, and that was mainly because of those stimulus checks, UM. And we've seen the statings rate come down each month since,

but still remains quite high. So so the hope is that you know, the stimulus checks plus those six hundred dollars an extra weekly benefits that people are patting their bank accounts UM. You know, as as we're moving into this period of uncertainty in terms of you know, when people will you know when and if people will get an extra federal supplement to their unemployment insurance UM. But as far as spending, I mean, we've seen spending you know,

rebound in a lot of ways. You know, retail sales, for instance, UM are almost almost in line with their pre pandemic levels. UM. But as far as the actual amount of consumer spending, we're still below what we were at before the pandemic. And it will be interesting to see on in terms of whether we're put whether it's possible to get you know, back to that pre pandemic

level of spending. You know, a while we have this level the amount of joblessness that we have b if you have these you know, extra benefits expire UM and see just while the pandemic is you know, impacting the economy, I mean, if if people are if people don't want to eat out in a restaurant when they normally eat out in a restaurant on the Friday on a Friday and Saturday night. You you fundamentally have those people spending last in the economy. Then then they were, you know,

back in February. Read thank you for joining. Always a pleasure to speak with you. Read Pickerts. It covers the U. S. Economy from Washington, d C. For Bloomberg News. And of course she's on today because personal income was down one point one percent for June, which missed the economist estimate for it being down point six percent, and then the previous month was revised lower two down four point four percent.

So obviously we might have anticipated personal income really suffering, but personal spending was higher than forecast five point six percent. This is Bloomberg Markets with Paul Sweeney and Vanny Quinn on Bloomberg Radio. All right, it is time now to talk to somebody who knows a lot about Facebook, but also about all of the other advertising companies and the tech companies in general. Mark Douglas is CEO of steel House.

Now that's a company that specializes in targeted ads. They're the leader in highly targeted ads on connected TV as well. So Mark knows pretty much everything about you already. You really don't need to and do him at all. Market just kidding. What did you make of the testimony this week from the Big four? Was there any danger for any of them that they might stray into territory that

was you know a little gray? Yeah, well, I thought Apple out off the hoof, they have an absolute monopoly on the app Store, and it was mentioned, and but they kept talking about how you know, it's only thirty percent and we've never raised it up. I think they they were given kind of a free path in the hearing, and I felt like Google kind of um, their CEO did a pretty bad job in the testimony. He sound, I mean, it was just kind of shocking how bad

things went. But Amazon steared really well. I think Jeff Bezos, you know, said I'm running a company here, I want to win and I try my best to do things fairly, so, you know, overall, and Mark Nutderberg literally has done it before, and he he looked so much better in this hearing than he had had like two or three years ago when he did his first hearing before Congress. So I think overall, Facebook, Mark Nunderberg was probably a big winner.

And Google, um, you know, I just didn't do well, in terms of that testimony, let's let's focus on Google a little bit. Marked the big tech companies. They had their earnings last night, generally very very strong numbers, particularly Apple and Amazon. Google disappointing. The revenue, you know, came in below expectations, down ten per What's going on to Google, Yeah, I mean, I think that indicates a pretty big problem.

So when you have as much revenue, just as someone who runs the company and has been involved in a lot of tech companies, when you have as much revenue as Google has, and you have as much data as they have, you have a lot of levers to pull to kind of hit your targets. And if they missed, you know, kind of underperformed against last year by ten percent, that means they were on track to do a lot

worse than that. So they pulled out all stops inside the company, you would assume, and still missed by ten percent. So that's a pretty big indicator that there's something more seriously wrong at the core. UM. In terms of the advertising business, the YouTube business I think is under a lot of pressure from connected tv. UM. All of the growth of that supported connected TV which is happening now,

is going to take money away from YouTube. So that's a big threat that's already kind of impacting them, and it's going to kind of continue to have an impact in future quarters. And there their um cloud hosting business to really well, but it just is nowhere near where

Amazon Aws is basically inbedded the market. So I think there's a lot wrong with Google right now when you see that big a mysth um and and with that much revenue and leverage to pull to make sure they don't miss Yeah, I mean it would benefit you, right if if if YouTube did sort of lose out a connected TV. On which note, can I ask you about your partnership with with Facebook? Obviously is is well known and I'm sure your partner with most of the companies.

What are they anticipating? What are you anticipating for election season? Um? In terms of well, you know, it's I honestly can't can't recall whether they're gonna election ads or not, because I think they kind of keep going back and forth on that, I mean without even without kind of paid ads. Obviously, Facebook is going to be used as a platform to promote each candidates you know, perspective and each party's perspective.

Facebook is generally taking the approach that they're going to allow content and not gonna censor content unless it's like harmful to the user. Um. I think they're in a kind of no win situation on that topic. If they try, if they censor its censorship. If they don't censor, people have pissed off. And so you know, that's another thing

related to the testimony. I think that that thing come up in the congressional testimony as much as you would expect, and I think wide didn't come up is because Facebook has taken a position Mark Zuckerberg in particular, that they're not going to, um, they're gonna avoid as much as possible, engaging in censorship and kind of just allowing their community be more informed except where it's harmful. Um, specifically harmful to the people. And let's just say that censorship is

a particular word in itself. That's that that that has a particular bias built in, So you can call a censorship or you could just call it you know, not allowing you know, things that aren't fact checked online to be published. Yeah. I mean the thing about Facebook, a topic that also didn't come up that much in a testimony is if I want to come in advertise, let's stay on Bloomberg. There's standards in place, this checking of the credibility advertising, all these things that happen, and Facebook

doesn't do those things. And I think that's really, for years now been the big crust to the issue. Where can you go You'll put in a credit card and say, hey, can I deliver this message to two million people? And you have no idea who I am or what I'm gonna say, or care what I'm gonna say. And I think that at the core is the real issue there

with Facebook. Are they going to actually operate like a media company or and or they're going to continue to pretend that they're not a media company even though they take media dollars. And I think that's, you know, really the issue that everyone That is kind of the core of what you can almost call the Facebook question or the Facebook issue. So, Mark, we you mentioned some of those challenges facing Google's advertising business, but it doesn't appear

to be impacting Facebook as much. The stock is up eight percent today, it's at an all time high. How does Facebook and their advertising business, how do they avoid some of the issues that are plaguing maybe some of the other digital advertising companies during this pandemic. Yeah, so Facebook does predominantly what's called direct response to advertising. The easiest way to think about it is they sell revenue.

So you want to basically reach a consumer, Facebook has access that access to that consumer, and they have a lot of information about that consumer. And so they're essentially selling your revenue in the sense that we can reach the people you are looking for, and we can deliver them to your website or to your or to your

mobile app. And that is just that value proposition. Um. They have some competition from Google when the person knows what they're looking for, but most of the things you see advertising on Facebook or things you're discovering, and so for discovering new products, there's really Facebook has no competition. And when you're selling revenue, that's not going to go

out of style. That's gonna survive, you know, pandemics, that's gonna survive boycotts and and the the and the even advertisers that have boycotted some of them has come back because you just literally can't afford to not use Facebook if you need to buy revenue to fuel your own business. And so I think Facebook's advertising business is not under any immediate threat right now. The long term threat is if their data declined, if there were a massive data boycotts,

then Facebook would have some missus Mark, but then they're not. Yeah, Mark, thanks so much for joining us. We really appreciate that getting your thoughts, and I like that buying revenue. That's a great term. I'm going to use that. Mark Douglas, CEO of Steelhouse, giving us his thoughts of some of his big tech media companies. Funny great numbers last night out of most of those tech companies, and really kind of giving a lift to the NASDAC for Ronnie Quinn.

I'm Paul Sweeney. You're listening to Bloomberg Radio. Thanks for listening to the Bloomberg Markets podcast. You can subscribe and listen to interviews at Apple Podcasts or whatever podcast platform you prefer. I'm Bonnie Quinn. I'm on Twitter at Bonnie Quinn, and I'm Paul Sweeney. I'm on Twitter at pt Sweeney. Before the podcast, you can always catch us worldwide at Bloomberg Radio