>>> WND THE
>>> WAR THE
>>> WARNIHE
>>> WARNING THAT MOMENTUM WILL
SLOW IN 2020.
MY NEXT GUEST IS CASUALLY
OPTIMISTIC BUT 2019 BUT SAID THE
NEXT RESCISSION COULD BEGIN IN
2019 AND THE RISK OF A MARKET
SELLOFF GREATER THAN 20% IS HIGH
IN 2019.
DAN NILES IS WITH ME NOW TO TALK
MORE ABOUT THAT.
GREAT TO SEE YOU.
>> GREAT TO SEE YOU TOO.
MARIA: SO MUCH TO TALK ABOUT, IN
PARTICULAR ABOUTFACE BOOK
PARTICULAR ABOUT FCE BOOK
PARTICULAR ABOUT FAC BOOK
PARTICULAR ABOUT FACEBOOK AND
TECHNOLOGY.
LET'S TALK ABOUT THE BROADER
MARKET AND THE ECONOMY.
YOU THINK THINGS ARE GOING TO
TURN POSSIBLY RECESSION NAIR IN
2019.
>> AS YOU GET TOWARD 2019 AND
YOU HAVE THE POSITIVES FOR THIS
YEAR, LIKE CENTRAL BANKS
STIMULUS STARTING TO REVERSE.
THAT COULD BE AN ISSUE.
THERE'S A SLIDE I GAVE YOU ABOUT
HOW LONG THE BULL MARKET HAS
BEEN.
IT'S BEEN 107 MONTHS --
MARIA: WITHOUT A 20% CORRECTION.
>> WITHOUT A 20% CORRECTION.
AND THAT'S THE SECOND LONGEST
SINCE WORLD WAR II.
AND WHEN YOU HAVE THESE LONG
LASTING BULL MARKETS, YOU THINK
ABOUT THE ONE THAT ENDED IN
2007, MARKET WENT DOWN 57% FOR
THE S&P, THE ONE THAT ENDED IN
2000, WHICH WAS THE LONGEST IN
HISTORY AT 114 MONTHS, MARKET
WENT DOWN 49% ON THE BACK OF
THAT.
SO YOU KNOW, THIS IS OBVIOUSLY
BEEN A WONDERFUL EXPANSION, THE
S&P IS UP OVER 300%.
BUT I THINK WHAT YOU NEED TO
WORRY ABOUT IS OKAY, THIS NEXT
CORRECTION WHEN IT HAPPENS, IT'S
LIKELY TO BE VICIOUS, LIKELY TO
BE HARD AND THE CENTRAL BANKS
DON'T HAVE THAT KIND OF STIMULUS
ANYMORE BECAUSE THEIR BALANCE
SHEETS EXPANDED FROM
6.4 TRILLION AT THE END OF 2017,
THOSE BALANCE SHEETS OF THE BIG
FOUR CENTRAL BANKS, THAT'S
$20.6 TRILLION.
SO THEY'RE NOT GOING TO HAVE AS
MUCH AMMUNITION ANYMORE.
MARIA: AND I THINK ONE AREA YOU
POINT OUT IS APPLE AND ITS
SUPPLY CHAINS.
AND YOU KNOW, YOU CALLED THIS
BEFORE IT ACTUALLY HAPPENED AND
IT HAPPENED THIS WEEK WHERE YOU
SAW TAIWAN SEMI CONDUCTOR GET
TAKEN TO THE WOOD SHED AND IT
HAD A LOT TO DO WITH APPLE.
TELL ME WHAT HAPPENED.
>> IF YOU LOOK AT TAIWAN SEMI
CONDUCTOR, IT'S ONE OF THE
GREATEST SEMI CONDUCTOR
COMPANIES EVER.
THEY ARE MORE THAN HALF OF THE
FOUNDRY CAPACITY IN THE WORLD.
THEY MAKE CHIPS FOR OTHER
COMPANIES.
ONE OF THE COMPANIES THEY MAKE
CHIPS FOR IS APPLE.
THE ESTIMATION IS THAT'S 20% OF
THEIR REVENUES.
PEOPLE WERE THINKING THEY WOULD
GUIDE THE JUNE QUARTER TO BE
FLAT, MAYBE SLIGHTLY UP.
INSTEAD THEY GUIDED DOWN OVER
7%.
WAIT A MINUTE, THAT'S 20% OF THE
REVENUES AND THEY SAID HIGH IN
SMARTPHONES, CODE WORD FOR
APPLE.
IF THAT'S WHAT'S HAPPENING TO
THEM, YOU HAVE TO LOOK FORWARD
AND AWHAT'S GOING TO HAPPEN TO
THE REST OF THE COMPANIES THAT
ARE GOING TO REPORT AND WHAT
DOES THAT MEAN WITH WHAT'S GOING
ON WITH APPLE'S BUSINESS.
MARIA: SO YOU THINK WE'RE GOING
TO SEE THE SUPPLY CHAIN STRUGGLE
AND YOU ALSO THINK APPLE IS
GOING TO HAVE A MISS WHEN IT
REPORTS.
>> YEAH, I DO.
MARIA: SO APPLE REPORTS IN MAY.
WATCH FOR THAT.
DAN THINKS THEY'RE GOING TO MISS
ON THE NUMBERS.
GOOGLE PARENT ALPHABET YOU ALSO
THINK MAY MISS?
>> THAT ONE I LIKE QUITE A BIT
OVER THE LONGER TERM.
THE PROBLEM IS GOOGLE IS THE
EXACT OPPOSITE WITH FACEBOOK.
WITH FACEBOOK THEY GUIDED
EXPENSES UP 5078% THIS YEAR
BEFORE THE DATA BREACH STUFF
EVER HAPPENED.
WHEN YOU LOOK AT GOOGLE, THEY
HAVE EXPENSES MODEL FOR SOME
REASON, WALL STREET DOES, GOOGLE
DOESN'T GUIDE, BUT WALL STREET
HAS EXPENSES MODELED TO GO UP BY
THE SLOWEST PACE IN THE LAST
FIVE YEARS.
AND I THINK THE EXPENSES ARE
ACTUALLY GOING TO BE A BIT
HIGHER.
THE REVENUE WILLS BE FINE BUT I
THINK YOU'RE GOING TO HAVE A
PROBLEM ON THE MARGIN FRONT AND
THE EPS IS GOING TO HAVE AN
ISSUE.
THAT'S ONE OF THE STOCKS THAT
AFTER THAT IS IN GOOD SHAPE
GOING FORWARD.
MARIA: YOU LOVED FACEBOOK FOR A
LONG TIME.
YOUR NUMBER ONE POSITION.
YOU'VE MADE SOME MOVES.
LET'S TALK ABOUT FACEBOOK.
>> SURE.
MARIA: DO YOU THINK THIS DATA
BREACH, THE NEW CHANGES THAT THE
COMPANY IS COMING OUT WITH
CREATES A DIFFERENT FUNDAMENTAL
IN TERMS OF HOW THEY MAKE MONEY
AND CHANGES THE REASON TO OWN
THE STOCK?
>> I REALLY DON'T THINK SO.
I MEAN, WHEN I LOOK AT FACEBOOK,
YOU'VE ALWAYS HAD PRIVACY
SETTINGS.
MOST PEOPLE DON'T TURN THEM ON
OR WORK THEM AS MUCH AS THEY
COULD.
HAVING SAID THAT, I LIKE HAVING
ADS SHOWN TO ME THAT ARE
RELEVANT.
I DON'T WANT TO SEE BABY FOOD
ADS WHEN MY KIDS ARE 17 YEARS
OLD.
I WOULD RATHER SEE ADS FOR
TENNIS GEAR ET CETERA.
MARIA: STUFF YOU'RE INTERESTED
IN.
>> FOR FACEBOOK, I DON'T SEE IT
AFFECTING THEM MUCH.
AND REMEMBER, GOOGLE HAD A
PROBLEM IN MARCH OF 2017 WHERE
THEY WERE ACTUALLY SHOWING ADS
NEXT TO EXTREMIST VIDEOS.
IF YOU GO BACK AND LOOK AT IT,
IT DIDN'T AFFECT THEIR BUSINESS
ONE IOTA.
MARIA: DAN, GREAT TO HAVE YOU.
THANK YOU FOR JOINING US.