Stock Market Sell-Off: Why Disruption is a Good Thing | Pivot

1. KSKara Swisher0:00

   Stocks worldwide are tumbling as investors worry that the U.S. is headed into recession. A weaker-than-expected U.S. jobs report caused the panic. That seems odd. Um, at the time of the taping, the DOW was down 4.3% in the last five days, the S&P down 4.8%, and the NASDAQ down 6.5%. Outside of the U.S., big plunge, the Nikkei, uh, i- in Japan dropped 12.4% overnight, its biggest fall since 1987. That's a long time. In Europe, the Stoxx 600 index is down 2.5%. That's not so bad. So what was happening here, Scott? You were just saying, you know, there was uncertainty with tech earnings 'cause they're a little disappointing, although they've been going like gangbusters. I guess they stopped gangbuster-ing. Um, w- we can, uh, you know, just so people are aware, at the time of the taping, Amazon's stock is down 13% in the last five days after missing expectations on revenues and sales. Also to blame, Amazon says it plans to continue spending big in AI at the expense of short-term profits. This is everybody. Apple beat expectations for net sales and income, but revenue in the China region declined. China is seeing a real s- uh, problem with consumer spending as the company faces local competition and bans on governmental use also. Intel had the worst trading day in 40 years, announcing it would be cutting 15% of its workforce and suspending dividend payments as part of a restructuring plan that, uh, uh, the guy who's running it, Gensler, is having a real, um... I think that's his name. Um, is having a real, uh, issue, uh, catching up in AI. Um, tech stocks have overall seen their steepest three-week slump in two years, but they were getting a lot of profit-taking in that regard. Um, I don't know. Sc- Scott, big thoughts?

2. SGScott Galloway1:32

   Again, I think this is a little bit, you know, CNBC or whoever it is or the DOW or name your digital-

3. KSKara Swisher1:37

   Mm-hmm.

4. SGScott Galloway1:37

   ... media company, wants to get as many clicks as possible. As we stand here, the DOW is down, uh, it's down 1.9% and it's plummeted to levels not seen since July. I mean, this is not... It's not that big a deal. There, there's some company-

5. KSKara Swisher1:53

   Scott says calm down, but go ahead. Go ahead.

6. SGScott Galloway1:55

   Well, it, it, it's just true. It's had a historic run. I think this is, I think this is a bigger deal in Asia. They're worried about, uh, um... I mean, what's interesting, Pankaj Ghemawat, again, another one of my colleagues, uh, at NYU, always talks about trade is much more regional than people think. Our biggest trading partner is Mexico. I think our third, after China, is Canada. Basically, compa- Countries almost always have their biggest trading partners based on proximity. And when China's going in... When the second-largest economy's going into a slowdown, it's just gonna impact the entire region. The weird... The... If you look at the data, unemployment has ticked up. The jobs report, new jobs report was disappointing, so the market seems to believe that we may be going into recession. The other thing, quite frankly, is just stocks are, um... We're expecting a rate cut and there's a fear that the rate cut has not come soon enough and, uh, the, the expectation of a rate cut had been built into stocks. But if you look at what's really gone on here, it's just not... It's more, it's more s- spectacle than significant. When you s- drill down on some individual stocks, what I think you find is, is just some incredibly, um, interesting stories. So for example, Intel, I mean, just to give you one stat, Intel is now worth... Or okay, let me put this another way. NVIDIA is worth 20 times what Intel is worth right now. Intel, in the last five years, has lost half its market cap. I mean, this is a company, when I was in, graduating from business school in 1992, the two premier jobs that everyone wanted to go, uh, get at companies were Intel and Dell, which is g- It kind of marks the age. And Apple was a shitty company that might not come back. It had kind of lost the script and everyone said it was underpowered and overpriced. But everyone wanted to go to the best company, in terms of reputation for growing management and had just kept killing it in terms of the stock price, was Intel.

7. KSKara Swisher3:51

   Yeah, remember?

8. SGScott Galloway3:51

   And, and, uh, another thing, these, these CEOs need to stop tweeting. The CEO, Pat, uh, Gelsinger posted a quote from the Bible on Twitter. "Let your eyes look straight ahead. Fix your gaze directly before you. Give careful thought to the paths for your feet and be steadfast in all your ways." Proverbs 4:25-26. Here's another proverb, Pat. What the fuck are you gonna do to save shareholder value here, uh, said, said the Jesus of all markets inquiring to CEOs who are doing stupid shit like putting proverbs out on... Anyways.

9. KSKara Swisher4:25

   I would agree. I was just thinking this. Jamie Dimon did another, uh... I was like, "Sh- sit down, Jamie Dimon. Just run your bank. Stop pontificating at us in your arrogant fashion." But anyway, go ahead, sorry.

10. SGScott Galloway4:36

    Well, there's a, there's a difference between... (sighs)

11. KSKara Swisher4:39

    No seriously.

12. SGScott Galloway4:39

    What, what is-

13. KSKara Swisher4:40

    His opinion was called, "The next president must restore our faith in America." We got plenty of faith, Jamie. Jesus. Sorry.

14. SGScott Galloway4:46

    Must restore our faith in America.

15. KSKara Swisher4:48

    That's the thing. "We live at the-"

16. SGScott Galloway4:49

    W-

17. KSKara Swisher4:49

    The first line is, "We live in a perilous time." But go ahead.

18. SGScott Galloway4:52

    Wouldn't that be nice?

19. KSKara Swisher4:53

    Yeah.

20. SGScott Galloway4:54

    (laughs) Okay. Fair. That, that's hard to disagree with. But what, th- there's a huge, I think, opportunity for tech CEOs, not even tech CEOs, CEOs to have very well-orchestrated, working with IR, working with good production people, to put out earnings releases or statements about their earnings out on YouTube. I think it's powerful, I think it's a means of meeting retail investors, and it signals innovation. But I'm almost at the point now where CEOs, part of being a CEO is the fo- a, a few of the following things. One, you don't talk about religion or politics. You, you just give that up, because no one... Because you're just gonna alienate 50% of whoever, right? And we're not really interested in knowing about your views on Christianity or the president or, or whatever it might be. Two, you are not allowed to ever have sex with anyone at this organization. Doesn't matter if you fall in love, doesn't matter if you're divorced, doesn't matter if you've known each other. When you're the CEO, on a risk-adjusted basis, it means you make tens of millions of dollars, which makes you sexy anywhere in the world. Take it off campus. And then three, I would have no social media from you. It's just not worth it.... it's just not, on a risk-adjusted basis, sure, some people are good at it. Tory Burch was really good at it. Some CEOs are very, you could argue Elon Musk has built a huge following on Twitter, but the world does not need to know what the CEO of Intel was thinking at that moment. It's just not a good idea.

21. KSKara Swisher6:17

    Right. Yeah. Well, I agree with you. I was, I literally am so tired of reading, like, all of them. Like, stop talking. The, you know, and, and actually those that are causing danger, like Elon's been tweeting ab- these riots that are happening in Britain and this sad killing full of misinformation has caused all kinds of right-wingers to come out and attack Muslims. And he was encouraging it? It was, ugh, just get, sit down and do your jobs. That's my feeling. So you feel okay about this global selloff? Everyone's all-

22. SGScott Galloway6:45

    Oh, crash theory.

23. KSKara Swisher6:45

    ... like should the, Fed's gonna do an emergency cut. That's what they think.

24. SGScott Galloway6:49

    I, I've, well see, I hate that because-

25. KSKara Swisher6:51

    Mm-hmm.

26. SGScott Galloway6:52

    ... I mean, a couple things. One-

27. KSKara Swisher6:53

    Looks pan- looks panicky. Looks panicky, right? Doesn't it?

28. SGScott Galloway6:56

    Okay, but, but my generation has convinced Louie and Alex's generation and the generation of people who mostly work with me, the average age at Prop G, or I would say the median is 26, the average is probably 32, 'cause me and my, me and, me and Catherine who run the company are both really fucking old. But the median, the number of, almost, uh, 12 of our 14 employees are under the age of 30. And what my generation has managed to do is convince them of a myth, and that is that market highs and strong markets are a good thing, and that it's worth mortgaging their future in the form of debt and artificially suppressed interest rates to keep the markets high, and they're not. The markets touching all-time highs are good for Kara Swisher and Scott Galloway who already own real estate and already own, already own stocks 'cause there's two phases in your life. There's the investment phase where hopefully you've established professional currency, you are spending less than you're making and you're investing that money. There's the harvesting phase. To a certain extent, you and I are still making good money, but we're kind of harvesting. We're slowing down, we have nice lifestyles, we want to give money away, we want to take care of our kids, we want to do nice things, right? We want to start spending money. You want the harvest- the harvesters, my generation, wants markets at all-time highs, but what the youth don't recognize or that we've tried to evangelize as total fucking myth is that they should have market highs. No, when you're investing, you want the markets to crash.

29. KSKara Swisher8:23

    Yes, yes, you can buy into-

30. SGScott Galloway8:24

    The reason I am wealthy, I'm talented, I've started companies.

Episode duration: 10:31