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tv   Maria Bartiromos Wall Street  FOX Business  February 10, 2019 11:00am-11:31am EST

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own hit or miss, tweet it to us @jer on nfc. finish fnc. hope to see you right here next stuck in -- [inaudible] have a good weekend. ♪ >> from the fox studios in new york city, this is maria bartiromo's "wall street." maria: happy weekend to you. welcome to the program that analyzes the week that was and helps position you for the week ahead. i'm maria bartiromo. coming up in just a few moments, two fantastic guests this weekend for you. technology investor, former mark zuckerberg mentor, roger mcthatmy is with me, and the dallas federal reserve president and ceo robert kaplan giving us a sense of where we are in the economic movements up or down. technology stocks reigned supreme this week, netflix, apple, amazon, social media giants facebook all helping push
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the broader markets higher. but just how much higher can they go at this point, and how do you informs in this -- invest in this group today? my next guest knows a thing or two about technology, especially facebook. not only was he an early investor, he was a longtime mentor to mark zuckerberg and helped the site become what it is today. author of "zuck'd: waking up to the facebook catastrophe," roger mcthatmy joins me right now. roger, thanks so much for being here. >> maria, it is always fun to be on with you. maria: congratulations on the book, i'm going to get to it in a moment. what a great name and what an important story. i'll get to that coming up, but first, assess the week for me and sort of the most recent several months for us in technology. you had earnings out, we saw snap activity this week, facebook, apple, disney earnings as well. how would you characterize what's happening today? >> so, maria, the most important
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thing for investors to keep in mind is that tech has become monopolized in many categories, and as a consequence, the mighty are getting mightier all the time. you see in this the contrast between facebook's earnings and snap's earnings. snap, the stock had a wonderful bounce because expectations were zero. but they are up against facebook, really instagram -- which is part of facebook -- and facebook has invested so much money in burying snap, and i just don't see a long-term success path for snap here. when you look at the facebook earnings, what you're seeing is a company that is the most important platform for advertisers. advertisers have to go there. but the other thing you see is because, as nielsen reports, the time on the site is declining for users, facebook's having to load more and more advertisements into everyone's news feed, and the result is very soon we're going to run out of space to put ads, and facebook's going to have a much, much tougher set of comparisons
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going forward. maria: yeah. i mean, there were other things too. when you saw the twitter number, first people thought they were strong numbers, and then we thought the number of users was do do -- was a disappointment. >> twitter's situation is that they dominate the media industry, politics and entertainment. but as a business, it's always been touch and go. they've really never had the kind of focused monetization strategy that facebook or google had. and i think it's partly because of the design of the product, and it's partly because of the management team. and i look at that and say i think you're just going to have more of the same. you know, it's a really important business in our culture, in our economy, but it's not ever going to be the kind of flagship earnings stock that google and facebook have been -- maria: oh, yeah. i totally can understand that given the fact that the others are so deep in terms of monetize
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thing their products. apple's an interesting story, right, roger? i mean, this is really an indicator of the broader economy, in my view, because this is one of our most important purchases, our phones. >> it is. indeed, maria, i look at apple as important in two different dimensions. as you say, for the economy the smartphone business is now mature. everyone's on their third or fourth, and nobody needs to upgrade every year. it's harder and harder to make a new phone that really says you must buy me right now. apple is now converting to a strategy that emphasizes the services, and a bunch of things are interesting about this. one is their retail chief just left. that may be signaling a change in strategy relative to the stores or simply she may have said i've had a huge went here, i'm going to move on and do something else. it really doesn't matter. apple now is the dominant player relative to protecting the privacy and security of people who use smartphones. the advantage over google's android which is, basically,
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everything else in the marketplace is so huge now that, in my opinion, it more than justifies the difference in price. maria: yeah. >> and i think with the stores they're really moving to this model the stores are the place you go because you know that apple's going to take care of you as a customer, and you always have a place to go that's kind of safe in a world of technology where there are a lot of predators out there. apple's a super cheap stock. i happen to own it personally, i happen to really like what they're doing. they're not perfect. there are issues at apple. obviously, you'd much rather have the iphone growing 20% year-over-year. but the stock reflects, i think, the challenges they face, and i really like the position they're taking on privacy and security. maria: roger, stay right there. we've got a lot more to discuss. stay with us. >> he was one of facebook's earliest investors and was the man responsible for sheryl sandberg joining the company, so why is he now blowing the whistle on the social media giant? >> they just need to have an
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♪ ♪ maria: welcome back. we continue my conversation with roger mcnamee. let's talk about the book. i love the name, "zucked." it's important for people to recognize that you were a huge lover of this company -- >> huge, huge. maria: you, obviously, were an early investor. you saw the growth potential. but then along the way this company really disappointed you. >> so here's the, here's the problem, and this is the thing i would say to everybody we really need to think about. i've been investing in it can since 198the2. i was lucky enough to meet mark, i gave him some good advice, became a mentor for a few years. the most important thing was introducing sheryl sand berg and
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helping to bring her into the company. i was a giant cheerleader, and i was sitting on the sidelines in 2016, and i saw a series of things completely unrelated to each other all over the place, related to housing, related to brexit, related to civil rights where, basically, bad people were using the facebook advertising tools to harm innocent people. and i went to mark and sheryl in october of 2016 and sounded the alarm. i said, guys, i think there's something wrong with the business model and the algorithms that's basically allowing all this harm to take place. you've got to get on top of it. i spent three months pleading with them. they weren't interested, so i became an activist. it was the hardest thing i've ever done -- maria: i bet. >> i wake up every day, and it's so depressing because i loved this company. i was so proud of it. i really like mark and sheryl. they're really smart and such good people. i will tell you this, here's the problem. in order to make their business
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model work, they have the hold to our attention. in order to do that, they have to know everything about us, so they use surveillance like crazy, and they do it on everybody, including the people who to not use their products. google does exactly the same thing. so it's not just a facebook problem. if you're on instagram, you're on facebook, you're on what's app, you're on google, youtube, this problem exists. and what's happened is doing all this surveillance, they're basically trying to manipulate the attention of people in order to change their behavior to direct them to stuff that makes more money for them. and here's where it gets bad. it gets bad because those products are media products. they now dominate politics in every democracy in the world, in europe, north america, south america. and they're the dominant voice. and nobody elected them. nobody can hold them accountable. they pretend like, hey, we're not responsible for what happens on our platform. and that is nonsense. it's just like a toxic chemical
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spill. if you hurt people, you gotta pay the cost of cleaning it up. maria: yeah. but they also said, oh, we don't sell your data. the business model is based on selling the data. >> well, it's actually worse than that, it's based on giving it away. maria: yeah, giving it away. >> it's bundled in with the ads. this is the reason why i'm out now and so forceful. you have kai fu coming in next week, he does artificial intelligence. maria: yes. >> the problem with silicon valley, we develop products and let the customers, the users tell us if there are bugs or flaws. that's fine if your product's lit and maybe it's a game or music or something. but if it's something that touches everyone, and keep in mind there are as many people on facebook's platform as there are members of christianity. maria: wow. >> if you add in what's app and instagram, they're wildly bigger than christianity. and here's the problem, that when you ship a product like
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a.i., it changes people's lives. the thing you have to watch out for is that in the real world there are flaws. maria: yeah. >> in real estate biases against certain religions, there are biases against races. in jobs, right? historically people have been biased against gender, right? and biased against race. and if you train your artificial intelligence with the data from the real world and you don't make any adjustments, all those biases get baked in. but now they're from a black box that nobody, nobody has an appeal against. maria: that's incredible. >> and that's what's going on in a. i. right now. it doesn't have to be that way, right? but they have to be careful. and here's the thing. if you have an alexa, any kind of smart device you talk to -- maria: i don't. i'm afraid of those things. >> exactly. and people should be afraid. it's not that they aren't interesting and valuable, it's that they deliver a small amount of veeps, but they're listening all the time. it's okay if they listen in the kitchen, how would you feel if they're listening in the
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bedroom, right? maria: yeah. >> and somebody hacked -- google has a security product called nest? somebody hacked it last week and tricked a family into thinking that there was a nuclear missile launch coming to their town. maria: unbelievable. >> i mean, these things are hackable, plus there's a security problem. my point here is not this isn't cool, interesting stuff, not that we shouldn't have it, but that we have to change the way the products are designed, and we have to hold the companies accountable for the damage done when they, when they ship a product. maria: so, i mean, would you buy the stock again? >> well, here's the thing, i still own facebook because i'm out as an activist. and i don't want anybody to think that the reason i'm an activist is because i don't own the stock and i want to tank it, right? i till own it, but i'm not confident about the future. and to be honest with you, in a perfect world i want mark and sheryl to sit down with me -- i think they're literally one good
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night's sleep away from getting this right. maria: yeah. >> they just need to have an e by nebraska. it's when you wake up and realize, wait a minute, i can do better. they're the rich earth people around, they've succeeded beyond their dreams, and they have the opportunity to make the world a better place through changing the way the product works. and that means changing the business model. maria: great conversation. thank you, roger. my thanks to roger mcnamee. don't go anywhere, more with the wall street" right after this. >> democrats are looking to eliminate fossil fuels completely, but going green will cost some serious green. so can it be done? >> we're going to see substantial growth in alternatives; wind, solar. >> dallas fed reserve robert kaplan weighs in next. ♪
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♪ ♪ maria: welcome back. president trump taking a victory lap on tuesday and touting the success of the economy at the state of the union address. watch. >> in just over two years since the election, we have launched an unprecedented economic boom, a boom that has rarely been seen before. there's been nothing like it. we have created 5.3 million new jobs and, importantly, added 600,000 new manufacturing jobs, something which almost everyone said was impossible to do. but the fact is, we are just getting started. [applause] maria: and joining me right now is federal reserve bank of dallas president and ceo robert kaplan. it is good to see you, sir, thanks so much for joining us this weekend. >> good to talk to you, maria. maria: so we heard the president, just getting started,
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a boom not seen before, and yet with we know now that the federal reserve is on pause watching for data to dictate next move because of a slowdown that we're seeing in europe and china. so what happened? >> well, 2018 was a year of strong growth in the united states. part of it was aided by sizable fiscal stimulus and also global growth was very strong. and that helped the united states. as we head into '19, fiscal stimulus is waning, and global growth is decelerating, and we've also seen some tightening in financial conditions since october, although it's moderated somewhat in january. so those were all factors that are having an effect on the prospects for '19 and 2020. maria: and i guess the situation in europe is sort of an unknown. we don't know what's happening with brexit, we don't know what's happening in terms of france protests, we don't know
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what's happening with the budget in italy. are these developments that could, or you know, spike and actually impact the economy in the u.s. more so than people thought? >> yeah, the u.s. is not immune to slowing global growth, and we're watching germany very carefully, which is slowing. italy is slowing. obviously, china below the headline numbers clearly shows signs of slowing. and normally when that happens, it eventually spills over into the united states. and you see it first in u.s. corporates, something like 45% of revenues from the s&p 500 come from outside the united states, and we're already seeing signs of it now. maria: and i remember when you said down to 1.75%, so that's still growth. no recession yet on the horizon? >> i don't see a recession yet on the horizon, and the reason i say that is the consumer is very
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strong. household sector balance sheets are in good shape, job market is tight, and the consumer's 70% of the economy. the thing i'm worried about is if growth slows globally and some weakness in industries in the united states, will that cause companies to spend less on cap-ex. and, result -- ultimately, might it affect hiring plans. i don't think we're going the see that for a while, so i certainly don't see a recession in 2019, but i'm watching, you know, this cycle of events to see if it'll affect the job market. if it starts affecting the job market, it'll probably have an effect on the consumer, but i'm not seeing that for 2019 at least. we might see it in '20s. maria: one of the issues with low interest rates is it has removed wiggle room and the leverage with which to use if
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you do need a boost for an economy that is slowing down. let's talk about the wiggle room that you and your colleagues have, because not just the rate moves, but it's also the balance sheet. you've suggested that you're giving a serious look at this unwind of the balance sheet. $4.5 trillion at its high, right? are you now just above $4 trillion on the balance sheet, and where to you expect that to go in the next two years? >> on the one hand, i think the balance sheet can go somewhat lower. on the other hand, we've said publicly in the aftermath of the january meeting that we're taking a hard look at what the level of reserves we think are required in the economy, what the composition and size of the balance sheet ought to be. and i think we'll be making some judgments, i would think over the next several months and communicating more about that. but my guess is the balance sheet will go lower, but it may
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be higher than people might have thought when we started this process. the wiggle room also relates to, which concerns me, a government debt to gdp is historically high, and we've just leveraged up recently which has taken away some of our fiscal wiggle room away from the fed. and then the other thing i'm watching while the financial sectors deleverage, corporate leverage is historically high. i don't think that's a systemic risk, but it means if we start to slow, you might see that being an amplifier to the downside. maria: we are, obviously, well positioned on energy as well. coming from texas, i want to ask you about this because the u.s. is now the number one producer, which is quite extraordinary. meanwhile, heading into the 2020 elections lots of campaign slogans out there about new ideas. alexandria ocasio-cortez calling her new energy idea the green deal, the new green dream is what nancy pelosi called it. she wants to get rid of positive
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sill fuels9 -- fossil fuels in the next ten years. you have studied this a lot. you were on the sustainability unit for harvard. so i want to ask your thoughts on fossil fuels and the likelihood that we can get rid of them in ten years and what the impact would be. >> so all the work -- and we do a lot of work on this at the clasp fed and, as you mentioned, i had a leadership role at harvard on this. we're going to see substantial growth in alternatives, wind, solar or, or others. you know, texas is the largest wind producer in the country. and we think that's a good thing. i think many major oil company are now establishing sustainability alternative energy initiatives. but having said that, even with substantial growth in alternatives, the united states and the world based on our work is still going to be heavily reliant on fossil fuels most likely 25 years from now. so i think all these initiatives, i personally think all these initiatives on green
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energy and alternatives are positive. but it's not going to change the fact we're going to still have some heavy reliance on fossil fuels in the future. maria: robert kaplan, it's wonderful to see you. thanks so much. >> thanks, maria. maria: president and ceo of the dallas federal reserve. don't go anywhere. more" wall street" right after this. ♪ ♪ -we're doing karaoke later, and you're gonna sing. -jamie, this is your house? -i know, it's not much, but it's home. right, kids? -kids? -papa, papa! -[ laughs ] -you didn't tell me your friends were coming. -oh, yeah. -this one is tiny like a child. -yeah, she is. oh, but seriously, it's good to be surrounded by what matters most -- a home and auto bundle from progressive. -oh, sweetie, please, play for us. -oh, no, i couldn't.
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special guest. 10 a.m. eastern live sunday morning on fox news. plus here on fox business, start smart every weekday on fox business from 6-9 a.m. eastern on "mornings with maria." that'll do it for us thisthanks, i'll see you next time. ♪ ♪ gerry: hello, and welcome to ""the wall street journal" at large." well, it's been a roller coaster few years for former new jersey governor chris christie. not so long ago, he was a hot pick to be the next president of the united states. a u.s. attorney with a track record of successful prosecutions of terrorists and white collar criminals among others, elected republican governor of the blue state of new jersey in 2009, he quickly earned a reputation as a straight-talking, take no prisoners chief ecu

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