Surveillance: Hill Hearings Eclipsed by Op-Ed, Cirilli Reports

an expert on a merchant markets. The man who wrote that line, Tim Ash Blue Basset Management Senior E. M. Soft Ridge Strategist, Tim, Good morning to You're always great to catch up with you tell us what's really going on? Good morning, Yeah, I mean everyone is negative, you know, unfortunate. I've only done emergant market thirty years, so so I'm a bit of a novice and I learned every day

something new. But but the reality is that, you know, there's a lot of lines around big em countries, you know, the Brazil's, Argentina's, Russia, South Africa, etcetera, that have their individual problems, but you know a lot of them is doing fine and you know, gross holding up okay. Commodity prices are fine, China's doing okay, and for the bulk of the m you know, that's kind of okay, And you know, top down, if you look at kind of systemic problems across EM, I mean you kind of struggling.

I mean, I look at ratios that you know this is important. I mean if you think of things like external debt GDP, general government debt GDP come acout deficits. I mean, just imagine this all the focus on current account deficit countries like Turkey. Inaggregate across emerging markets, the average current account deficit is point nine percent of GDP. Very moderate. Right, there's a lot of e m f X movement at the moment. Currencies are coming in on

a lot of pressure. BI course, countries do have big external financial requirements and FX adjustment is part of that process. But actually e m FX adjustment what should make you concerned is countries with a lot of gross external down And again the ratio of gross external debt to GDP across EM in Agria, he's only that's pretty moderate. This all sounds yeah, this all sounds great, And a lot of people have been saying this for almost a year now,

and the route that we've seen has deepened. And you know, I saw this interesting chart yesterday looking at the decline in the central bank assets at the four biggest central banks, paired with the average yield on local currency emerging markets debt, and the sell off correlates with a decline in assets at the big central banks. I mean, quinn't you say that's all fine and good, but the same hand that giveth taketh away now with the pullback of some of

the central banks. No, absolutely, I mean, look, the self is partially driven by FED tightening. Strong dollar. Uh, you know, em got got ahead of itself earlier in the year, was expensive. We're seeing an adjustment. The plus for me is that, say, unlike previous systemic crisis in the M say Asia n to two thousand two, where you had fixed exchange rates center of banks fighting that with using

FX reserves, burning ex reserves. Actually this time around, central banks have been pretty orthodox, right, I mean, essentially they're letting currencies go, that does the adjustment on current account and external fans, and they're raising rates, which is kind of what they should do to to to to address the obviously the pass through that comes from from f X weakening, So you know FX adjustments, you know, it's painful,

It grabs the headlines. Some of the moves have been very big, but it's part of the adjustment process and actually it's creating value and rates going how how it means you're getting nominal and real carry again in the end, which I think eventually will bring people back in tim How do you draw a distinction between a crisis and

an aggressive adjustment of price? Well, you know, a christ I mean, at the moment it looks I mean I think, you know, you've had so many big emerging markets with challenges as I mentioned, and you know, top down, I don't I don't see a systemic problem in the end. But as with Asia, you know, if you go back to that period ninety seven to two thousand two, we had Check, we had Highland, we had As, we had a Russia, Turkey, Argentina, Brazil. I mean, it was over.

Everyone was passing a baton to each other. And that's I guess the risk that said. You know, look, Argentina has gone to the Imath, it's trying to solve its problems. It's policy responces, pretty orthodox. Turkey hopefully finally the central Bank concept September of thirteen will have smelled enough Turkish coffee that they actually do what everyone has been telling them for a year to do, which is tightened policy. If they do that, you know, valuations on laure look

very interesting. Rebalancing is happening. So you need a couple of these countries to turn around. If that happens, I think the moved around the end will turn you know, Tim. One thing that I'm struck by is some of the losses, particularly actively managed emerging market debt funds seven eight percent, nine percent losses in the past month. And I'm talking about some of the biggest names out there that have

been managing this money. And I just have to wonder, you know, retail investors looking at those who have poured money into emerging markets. Mike, it's skittish, might withdraw You're already seeing the to this to some extent on the peripheries. To what extent could a tactical issue like that outflows really drive this regardless of whatever Turkish coffee they wake

up a spell? Well, it's it's a very valid point, you know, contagion, you know, people suffering risks in Argentina, move on to I mean the problems in South Africa probably are related to to Argentina. Argentina was a very owned position. People like the story because you know, the Argentineans are finally doing what they need to do. Uh. And South Africa was again an own story and I think people you know, connected the dots there. Um, what I would say is in the end, look think about this.

In the last twenty years EM the share of EM in global GDP has basically doubled to around right, And I think in the end, structurally most investors are not really invested in EM, right. I mean, it's very peripheral, and I think you know, over the longer term, people still need to put more money into EM. And this is a great oportunity because currencies have just had a big time. Remember a lot of noise around emerging markets, right,

And another the question beviously was about crisis. Actually, we haven't had a credit events, a big EM credit events in a m so far. It can happen, certainly, but so far, you know, currencies are just this is part of this, this is what should happen, and we haven't seen a big EM rollover, right, And I think that's really really encouraging. So Jim, I think that some people might be listening to this, and they'll say, someone who manages emerging markets funds is recommending the people put more

money into emerging markets funds. I'm wondering, from your perspective, what are you buying right now and how much personal conviction do you have that this is a good buying opportunity. Well, you know, at the moment, we are pretty neutral because we are waiting for some of those big countries to turn around. I mean, we're waiting for a resolution with Argentina in terms of the i m F. We think

that's coming. Uh. You know, we think that Turkey you know, certainly has some very good corporate some very good banks. They're working really really hard to turn this story around. We need the right policy action at the top, from the top down from central bank basically, and that I think we'll we'll give a green signal also in Turkey. Um. Uh. You know South Africa's you know, it's been a contagent story. Um in the end, you know, there is a there

is a deflation rate rate story there. The growth data came in very bad that you know currencies week, Uh, some great opportunities in South Africa local rates now that you know, value has been created. So I mean, look, it's all it's selective. It's about knowing the owning these country stories, knowing them really really well, feeling comfortable with them, and finding the turning point. And there are some wonderful

opportunities being created this year. Remember, I mean this is really part of the m investing, right, I mean, you know, it's uh, it can be a volatile asset class. You know, we've had a couple of fantastic years. We've seen a bit of pushback. But in the end, have you got to be an EM because it's such a big part of the global economy. The answers, yes, right, you can't

really ignore this asset class anymore. And I guess these are the kind of times that you know, you know, you've got to show a bit of durability and endurance and and opportunities are being created. Tomash, great to catch out with you. Blue By Asset Management, senior EM sovereign strategist, one of the experts out there in the house big tech companies. Yesterday they were actually in the Senate and

they were answering questions. And right now I'm looking at Nazak leading the Klehins, But Facebook and Twitter sharers largely unchanged ahead of the open um. Do we care about these hearings? Do I care about these hearings? And they were interesting? Let's ask someone else, Christmas Angie Belly Funds at CO chief investment officer, joining us here in our eleven three studios, Chris, should we care about these? Well, yesterday was a real three ring circus in Washington, between

the Kavanalt hearrings, the op ED and these hearings. A normal day, a normal day. And this comes in the context of course of Trump going after Google on Twitter and Bernie Sanders introducing the Stop Bezos Act. So big Tech is uh, one could say under under siege, but it has been for a while. I mean, is there anything that kind of came out of yesterday? No, I

don't think so. And I think the fact that Google didn't show up and had a little placard on their empty chair was indicative of what they think of these hearings. But I think ultimately listen radio was regulated this medium in nineteen four over the over the post World War two era, lots of regulations in place to limit the

voice of any particular broadcast television network owner. And we're just catching up now in the Internet age, and so there will be more regulation, more requirements on the on the part of the Internet come. But that's gonna have a cost associated with it. Why don't we celebrate sing the company as successful as Amazon in this country? Whant the politicians celebrating this? This is a huge success story, the envy of most in the world. It is, but it's it's a big company with a lot of influence,

and um, those companies tend to be targeted by politicians. Um. So interestingly obviously that it comes from the left, um, and you know, and the right and the right, which is which? Which is what makes it interesting? But you know, you mentioned Google, you mentioned that little placard and how they felt about the hearings. Google shares are actually down nearly a percent ahead of the open today, Facebook and Twitter largely flat. Do you think that that's significant or

is this just sort of noise? I think that's noise at this point. Um. You know, clearly Google survived the privacy regulation regime in Europe pretty well. And I think the the the endgame here is that the companies with scale like Google and Facebook and even Twitter are going to be the who are best able to put in the systems to comply with whatever Washington wants, and they're gonna be further entrenched by regulation. Chris, you out run

Goodbelly Funds. That's a lot of money. When you look at the tech sector right now, is there any reason why you wouldn't allocate capital to that sector based on a risk of regulations somewhere somehow in the future. Well, listen, yeah, I think, uh, it is just one element of the things that we look at. Um. You know, we invest, we've invested for many, many years, decades in the cable sector, and the biggest risk to the cable sector the distribution

industry has been, always will be regulation. And that's just something that you have to digest and and see if it's accounted for in the in the multiples. So right now, given the fact that you have a lot of big analysts saying things look a little heavy, maybe time to take chips off the table. What's the biggest opportunity that you see right now? Yeah, so listen, the the extended fang Facebook, Amazon, Netflix, Google, Microsoft and Apple are collectively

four point four trillion. It's like the SNP. They've accounted for about half of the games in the SNP so far this year. Um, you know, those companies I think in aggregate are probably a little bit ahead of themselves. Among them, there are probably better buys, like in my view, Google than uh than say Amazon. Um, but you know, beyond that, we we we have other areas that we look at. We like the cable sector. We think there's

gonna be consolidation amongst broadcast television networks. So that's an interesting area amongst others. Chris Ma greats, can't hump with you today, Thanks for dropping on the studio, can Bunny Funds co c I. Oh, the big news of the day is not in markets which are nearly flat, is Jonathan Farrow has pointed out today on several occasions. Um, it's really on the d C. It's on the DC

front And that editorial who done it? As you put it, John, and Kevin's really joining us now, Chief Washington correspondent Kevin This anonymous editorial in the New York Times, written as sensibly by someone close to the president, saying that he basically is on the cusp of incompetency. What's the fallout this morning? What's the mood? Good morning? Lead of the fallout?

Just within the last hour, Vice President Mike Tent's office releasing a statement saying that the Vice President was not one of the people behind the New York Times bombshell. Anonymous op ed, So the Vice President taking himself out of the equation. Meanwhile, k Kevin hold on one second, does that actually effectively take him out of the equation? I mean, these are words you don't want to say. I did not write an editorial about you, my boss,

saying that you are incompetent. Sorry, what's your question? So my question is, does that actually take him out of the equation? I mean, are we going to basically see everybody in the administration just put out statements saying that they are, uh, not the author of this work. Well, that's really what they're facing now at this particular point, is is that there's a lot of questions as to who wrote it. So the Vice President felt that he needed to put out a statement. He did within the

last hour. Meanwhile, the New York Times also confirming what White House Press Secretary Sarah Sanders said, which is essentially, the gender of this person is a male. So a lot of speculation this morning, the White House doubling down criticizing the New York Times, uh, supporters of our critics, supporters of the Times, critics of the president, are arguing that this is a White House on the brinks too collapse. At the moment, Kevin, it seems to be an internal crisis.

We now, apparently, according to the writer of this opaed, have an administration that is governed by some anonymous, unelected officials that are trying to stop the president from doing what he wants to do. Is that essentially what we have now, Kevin. That's absolutely correct, And in fact, when you talk to sources inside of the administration, they argue, hey, wait a minute, we've been saying this all along. Just

is the Duke state type of conspiracy. On the flip side of that, you have centrist Republicans as well as Democrats who were absolutely concerned. Was just at the pace in which, if it's not Bob woodwork book, it's now an anonymous op ed in the New York Times, The issue or the reissuing of the twenty fifth Amendment being talked about inside of the Beltway is not something that the administration wants to be discussing. And quite frankly, they

were caught completely flatfooted. They couldn't even get a hard copy of Bob Woodwork's book until hours after this was the experts were first made published. It shows a lack of communicative strategy, and it shows that they've caught flatfooted and completely on defense. They were brought a copy of The New York Times the White House Press Office. Uh oh ed, they were brought a copy of that after a competing outlet printed it out and showed it to them.

So Kevin, going forward ten, President Trump demand an unmasking of this person. Uh as he has so tweeted for the New York Times. Do uh? And if not, what's his recourse mean? What's it going to be like in the White House over the next week or two? Well, look in terms of the next twenty four hours. The President has urged in New York Times to reveal it source. I would find it hard. I highly doubt the New

York Times is going to give up this source. Republicans on Capitol Hill and the supporters of the President have actually been in locks death with him. They've been echoing his criticisms at the Times and calling on the Times to reveal its source. So you know, it's caught in the back and forth right now, we don't have pulling to understand whether or not UH this is going to

repose at all. The president is going to hit an aggressive midterm campaign cycle, and and hearing is on Capitol I mean, there were massive hearing yesterday on Capitol Hill, but all of that equipped by the by the reports of chaos coming out of six Pennsylvania. Kevin, I don't want to get too deep into the journalistic weeds, but something political wrote that I think is worth pointing out. There is a difference between protecting a source and protecting

an anomalous author, isn't that? You know? I think that's a really really good point, And and to be honest, I think it's completely That political piece is really indicative Jonathan, of a lot of the conversations that many within the industry are having last night as well as this morning about just how The New York Times decided UH to to run this, and in particular the explanation or the

lack thereof that they gave. Now, since not really giving an explanation but just posting this, they've come out with more information about how they relied on an intermediary UH to to bring forth this column to them, uh to protect everything about this source. But there's a lot of questions I think this morning that a lot of people are going to uh, a lot of conversations that are being had this morning and and uh and quite frankly,

it is a very unique situation. It's unique number one, the content of the off ed and it's speak number two, as you point out about the time decision to publish something of this nature. Kevin's really really really important, important insight into this. Covin's really chief Washington correspondent covering this and everything else that's been going on in Washington, d C.

For US, Thank you. Lawmakers in the U. S. Senate have raised the prospect of regulating social media platforms, and of course this came as the bosses of Twitter and Facebook testified that Russia had used their networks to interfere in elections in the US as well as other countries.

Here are some of the highlights from yesterday's testimony. Russia used social media as part of the I quote, a comprehensive and multifaceted campaign too so discord undermine democratic institutions and interfere in US elections and those of our allies. We were too slow to spot this and too slow to act. We believe many people you is Twitter as a digital public square to gather from all around the world to see what's happening and have a conversation about

what they see. Twitter cannot rightly serve as a public square if it's constructed around the personal opinions of its makers. We believe a key driver of a thriving public square is the fundamental human right of freedom of opinion and expression. If you ask whatever inauthentic accounts on Facebook, we believe at any point in time it's three to four percent of accounts. If we determine that people were subject to any um falsehoods or manipulation of any sort, we do

need to provide them the full context of that. And this is an area of improvement for us and something that we're going to be diligent to fix. I'm deeply disappointed the Google, one of the most influential digital platforms in the world, chose not to send its own top corporate leadership to engage this committee. All right, let's bring Bloomberg Stara Fryer, usually based in San Francisco, but joining

us today from Washington. Sara seems like Twitter, Facebook committed to trying to get better to explain how their algorithms are automated symptoms work and block certain content. They all

agreed to work harder together. What is the next step though, in terms of actually doing something concrete, Well, this is this is sort of the culmination of a lot of investigation that the Senate Intelligence Committee has done into this issue with the companies, and I think maybe one of the more constructive steps because now the senators are very educated looking at this, and they're telling the tech companies,

you need to provide more transparency for your users. When you're talking to a bot on Twitter, you should be able to know that you're talking to a bot. When you've been contacted by a campaign on Facebook that you may not see is run by a Ford agent, you should be able to know that. There should be more immediate feedback for the user in the moment and not months later saying we found this has happened to you. Uh and and the companies say that that's going to

be very difficult to deliver. On Twitter even said that it's difficult for them to know what's what the difference between about account and a human account is they also have to work on issues like user verification to verify their identities. UM. They have to figure out what to do about UM. A lot of the ways that people interact with their service in terms of abuse and harassment in people's reporting of that, which is a very uh

burdensome system for those people who are the victims. Yeah, and speaking ways of that users interact with the service. There was a recent Pew survey Sarah that found that only nine percent of Facebook users have downloaded their personal data from the company. But among the group those who did deleted the Facebook gap from their phone, seventy elected to adjust their privacy setting after downloading their data. So users are taking action and making some changes once they

realize the extent to which Facebook has their data. We're starting to see some of that show up in the results. To what extent do you see the company's really coming back with new offerings or new ways to manage this potential exodus. Well, the company is still growing. Facebook is still growing globally, and I really think that that's important to keep in mind here that that Facebook is not just the US market. Yes, it's the most lucrative market,

but it's not the company's future. And then the company also owns these other properties like Instagram, for example, which is popular globally, just hit a billion users. They have WhatsApp, they have Messenger, so the company. What's concerning here for investors is the company is going to have to figure out ways to grow beyond its main cash cow, which

is the Facebook news feed and advertising there. One of the reasons is because people are a little bit disenchanted with it now, but the other reason is that it's just so big around the world that there isn't much more room for it to grow, all right, Sarah Fryer, thank you so much for joining us Bloomberg Tech reporter, usually based in San Francesco, San Francisco, with us today

from Washington. Technology companies have been driving a lot of the dynamism that we've seen in the United States economy over the past five years, certainly in the stock markets. And the question I have is whether that can really continue given the saturation of smartphones and whether uh and the high valuations and I'm wondering whether anything and the hearings yesterday on Capitol Hill informed investors opinion about that.

UM let's bring in someone who knows about that was monitoring Gene Munster, who is Loop Adventures management managing director and co founder. Gene, thank you so much for being with us. Is there anything that you took away from these hearings that you think uh is important are crucial for investors going forward in terms of regulation and the

potential in the tech sector. Well, I think for Twitter investors, they have to understand that there's going to be more spending related to some of the governance that Facebook has already put into place. So Facebook has talked our last nine months about significantly increasing the like in order of like a billion dollars related to spending on twenty new employees and new tools to try to make the platform

more transparent. So I think that a Facebook investor, there probably wasn't a lot of real substance from yesterday from Twitter and Twitter shares reacted more negatively to Jack Dorsey's endorsement that they need to spend more money on the platform. There could be another shooting drop when they report their September quarter when they actually give some more guidance related to that spend. And then last Google, it's important to kind of roll back the tape and see exactly why

they weren't there. I think that the headlines are the Google decided not to show up. That is not not in fact true. They offered a low level of person, but the Senate felt snubbed by that and said lessons Larry Page, we don't want anybody. But that's still bigs the question for Google. They have some questions to answer around accounts in YouTube, because remember YouTube requires accounts to impact and there's obviously some influencing that can go on there.

So look for more to come from from Google. I think it's really interesting what you're saying about Twitter spending more money, and I think that that is actually the most informative thing I've heard so far in terms of why the shares UH saw more weakness in Facebook. That said Facebook is facing shrinking margins Gene and there was a there was a great story today on the Bloomberg talking about how in general, the sentiment has been clear

they're going to have to spend more. So do you think that investors are perhaps underestimating how much Facebook is going to have to spend going forward. I think on the spending side, investors generally have a good handle, in part because the company has a history of saying they're going to spend a certain amount and actually come in a little bit below that. So I don't think that there's another, um, another leg down in terms of how

much spending they're doing. I do believe there's a fundamentally bigger question about Facebook. And keep in mind, I'm old, I'm forty seven, so this is not my world. But I do believe that the world is not a better place for Facebook. And the way that that plays out is Facebook is coming up with new products to try to make it better, for example, groups that they announced on May first, or dating apps, but that's at the cost of them adding more transparency to the actual how

their users are being monetized. And as these new transparency tools roll through, they do have a negative impact on engagement. And so what that means is you we were just talking about the the the expense side of the ledger, but on the top line, the engagement side could be impacted. My Cobar and Pim Fox in the studio with us. You didn't take Cardie to your I'm old, I'm forty seven line, I'm Pim foxes him. Fox is dying. What does that mean? I mean? I don't know. I got

my horse outside. I better go right over and talk to Gene Munster right now and see if my dial phone still works. Don't take mine. Gotta say, I'm really happy that Jeans with us today, and I'm really disappointed because I've got to run away to TV. Jean's gonna stick with us, and I'm sure you can talk about Amazon and test Or and everything else. Yeah, there's so much coming up with Jeene Monster of Blue Ventures Management, managing director and co founder. Thanks for listening to the

Bloomberg Surveillance podcast. Subscribe and listen to interviews on Apple Podcasts, SoundCloud, or whichever podcast platform you prefer. I'm on Twitter at Tom Keane before the podcast. You can always catch us worldwide. I'm Bloomberg Radio a