Roger McNamee: Tech is the Oasis In a Boring Market (Audio)

stack up nineteen to fifty one fifty nine. Again, there are four tens of one percent SMP five hundred index close to a record. The record there twenty one seventy five. Right now. We have got the tenure down to thirty seconds. That yield one point five percent Gold up six dollars anounced the thirteen thirty two again, there are five tenths

of one percent. West Texas Intermediate Crew down two percent, forty one eleven of barrel right now on w T I I'm Charlie Pallett, and that is a Bloomberg Business Flash. Thank you very much, Charlie Pellett. It time now for the e T F report. It's brought to you by Sector Spider e t F s Why by a single stock when you can invest in the entire sector. Visits Sector sp drs dot com or call one eight six six Sector e t F. Let's go to Catherine Cowdery

for the Exchange Trade Funds report. A milestone is on its way. That's the word from Todd Rosenblooth, director of E t F Research at SMP Global Market Intelligence. In the middle of September, the S is gonna have a new sector. Real Estate, which is currently part of financials is being carved out. The real estate industry will become

the S and P S eleventh sector. Rosenblue said there's going to be a massive trade when that happens, involving some e t s, including the real Estate Select Sector spider fund ticker x l r E that has a little money in it right now, twenty million in underlying assets and because of a dividend payout from the Financial Sector Spider XLF, it's gonna roll it away overnight in September get three billion dollars following it. Rosen Blue says that soon to be eleventh sector. It's a good place

to invest when interest rates are low. The reason Rose and Blue sites the stable and growing income streams from real estate investment trusts. That's your Bloomberg E d F Report. I'm Katherine Cowdery. Your listenates are taking start with Kathleen Hayes and Kim Fox on Bloomberg Radio. Alphabet, owner of Google reports after the bell. Facebook reported yesterday, boy, they

had quite a quarter. We want to talk tech, We want to talk to stock market, and we want to talk music now with Roger McNamee, co founder of Elevation Partners at in Menlo Park, California. In fact, he was one of the very early investors in Facebook years ago. He's also on the road again, as he is every summer with the Doobie Despel System. It's a band that is part of his larger band Moon Alice, and he's taking some time out in Buffalo where he's performing tonight

to talk to us about the market. Roger, welcome, It's a pleasure, Kathleen. I'm actually Sarahtoga Springs. Okay, well, well the other night. We're just moving our way east right now. But it's uh, it's a beautiful day here and it's lovely to be chatting with you. It's to chat with you two. We're gonna talk to about for a minute about your show in Brooklyn tomorrow night if we have a minute. But I want to dive right into Google

slash Alphabet. You like this business model, You've always like Google and and this whole structure now with alf alpha that you said works very well. I think it's it's really important as an adhastor that the Google has made the conscious effort to break out its business into the mature, uh, traditional search businesses and then all the new ventures. And you know, to me, the perfect outcome will come when they have a tracking stock for the new business that

is separate from the more mature ones. But the fact that they have chosen to break it out for reporting purposes is really helpful to investors. And I think it's brought a discipline inside Google that has helped everyone. And so I'm I'm super impressed by what the management team

at Google has been doing. And you know, I don't have any more visibility to the numbers than anybody else, but I do know that the trends that have been benefiting Facebook also benefit Google to a slightly lesser degree, but nonetheless the one that will be dramatically, I think, better than what we're seeing in terms of earning for the markets all. Are you super impressed with the results

from Apple and the performance of Tim Cook? Well, I am, And you know, I think the last time we spoke, I was sharing with you my view that the products cycle around smart phones in me, I felt, in particular, was it, without exaggeration, the mother of all technology product cycles. There's never been anything like that. And Apple's announcement is now shift a billion iPhones will last whatever it is.

So here's eight years is uh just truly amazing. And I look at the situation now and though we're going to have quarters like this everyone so while where you get a really nice subside surprise, and the stock had been trading as though it was never going to have another up quarter, and so people are totally stunned. And you know, Apple is a great company, and I think him Cook has played the hand very very well. I

wish they were better at the software. I think almost all the software Apple makes is less good today that it was a few years ago. And I'm hopeful that at some point, uh, they will be able to do something about that. But I think as a value stock. Apple simply cannot be there's I can't think of a scenario where the sp moves up where Apple doesn't do better. And I can't imagine a scenario where the sp gets hurt where Apple at least does, or Apple fails to

provide at least relative performance. So I think you're kind of leading us now into a big picture question. We can dig some more into the details of these tech companies in a minute, Roger. But you told me earlier today we were talking on the phone ahead of this interview, that the tech companies are running against the tide. It

is a larger concern about the spire. But I I look out at at the broad global economy, and the thing that is incredibly clear is that China, the blips downward that we saw in China last year's appears to actually to be more significant than it initially look to me, and that we we can't view China as the engine of global growth on a consistent basis the way we could for the past decade. It's also clear that Europe will remain punk and the Brexit UH at least creates

uncertainty that's not good for earnings from Europe. So the while the US economy is actually pretty decent shape. It's not great, it's not barnburner anything, but it's it looks good round to the rest of the world. Unfortunately, most of the SMP five dred is getting more of its earnings outside of the US, so the slowdown elsewhere is going to be a drag. I think we also because of the very small upticking interest rates and a few other factors, uh, we're going to make it harder for

companies to buy stock back. So I think a lot of the things that have been driving the S and P five hundred look less good today than they did. Which just not to say we're gonna have a bear market, because I don't see that either, but I think it's going to be slow going on the earnings for most of the S and P five d and in that context,

the leaders of the tech market looks fantastic. You know Facebook's numbers, those are great growth numbers in any market environed, particularly for a company at that scale, and you know, with that market liquidity, it's obviously for growth. Innfessors must have security and Google is not growing anything like that fast, but it's growing a lot faster than the SMP five hundred, and it's priced very attractively. Interpress the SMP and Apple,

which sells for a big, big discount. The SP five dred is and growing much but at least it's growing and it's so cheap that you know, those three stocks really uh offer growth investors, I think an opportunity. I think there are other fixed tech like Amazon, where the growth numbers are going to be much better than the market as a whole. And so in that context, I think tech is is an oasis in an otherwise you know, boring market farm. We're speaking with Roger McNamee. He is

the co founder of Elevation Partners. They're based in Menlo Park, California. Rogers speaking of broad trends, Oracle paying nine point three billion dollars for net Suite to expand their cloud computing business. What if you could talk about cloud computing but in the context perhaps of your own investment in a company called up there, you bet so, what I would tell you is that cloud computing is now deeply entrenched the accompany.

When we when we think about what's happened at smartphones, we had this massive adoption phase and now we're about to begin the adaptation phase with the economy adjust to the fact that every consumer has got a smartphone. Now.

In order for all these things to work, you have to have some way to manage the information that people are accessing on the smartphones and putting all the information on servers in the cloud, which is to say, making them accessible from anywhere as opposed to having them sit

next to your computer. That notion has been building for the last decade, and we saw with Salesforce and a few other companies like net Suite early leaders with Amazon's web services business, we now see the mature version of it. And for net Suite and for Salesforce, their original architectures were a big leap forward from or all the things that came before, but they are not actually the most uh cost effective systems for cloud computing that are out there.

So it's a very smart sale by net Suite, and from Oracle's point of view, all they want to do is consolidate the things to customers own, so it may

actually be a pretty good deal both ways. The one observation with with up there, we've got a company, really extraordinary team out of Apple building next generation cloud services and The whole principle here is that we all have data that we need to have access to, and we're spending less and less time at a desktop with a computer, or more time accessing things off of smartphones and tablets. You really wanted your information in the cloud where you

can find it, and maybe you have Dropbox. Maybe you want to use products like up there to do that. What we can say without their correction is that enterprises are making that move aggrogressively. It's such a cost status for corporations that this will be a strategy that investors need to understand. We've got to leave it there. Roger mcamee, co founder Elevation Partners, has banned a Doby decibel system at the Brooklyn Bowl tomorrow night. We take you through to the close. This is Bloomberg