Were at post 9 at the New York Stock Exchange jon fortt is off today joining us out west is general partner paul holland a lot to get to with paul. Good to see you, man first up, we talk snap reporting earnings after the bell dispinlted disappointed on revenue and growth stock is down this morning and currently trading down almost double digits, down 11 earlier today. A lot of discussion about daus not that they just missed but that instagram is able to add so many more to stories in the first half than snapchat has what did you make of the quarter . Well, paul, i think the snap story is fascinating and complicated at the same time i think youve got people here in the valley that are sort of snap owe fish nad yoes and cheerleaders you have folks that are more on the facebook corner. I think what you thought a year ago, maybe even a year and a half ago, you really thought snap had momentum and had a chance to overtake facebook in part of its core audience. I think that whole strategy is very much in doubt now part of it has been, of course, instagram in particular is able to copy many of those popular features that snap had pioneered. Ive got three teenage daughters. Theyre all heavy snapchat users. But theyre heavy instagram users also its an interesting time for snap Going Forward i think the analogy is going to be facebook . Well, will it rebound or twitter and sort of struggle along as people worry about this daus and about the usage . I think thats an open question. Yeah. A company hated that ing that a. Is the Smart Business decision to step on the gas, start spending even more money where they can or try to save some dry powder well, i think youve got theres a couple ways i would look at. This one, first, just kind of closing out on the stock part of it one of the things that people sometimes forget is that the employee lockup is coming off. And when that employee lockup comes off in, most cases, i think even the case of facebook, when they got to that period, it will depress the stock for some period of time i dont think you need to overrotate on that point you need to see what the long term trend is going to be on the stock. So i think thats part of it but then the other side of it is, yes, they have the huge war chest they built up very smartly over a period of time. And as you saw on the spending, theyre spending triple from last year. So i think theyre willing to step on the gas as it were to be able to get out there and to be able to really establish their dominance in that Key Marketplace where theyve been so strong now. I think one of the things thats going to be very interesting to see the balance in terms of what theyre spending is going to be as it relates to their core north American Market and as it relates to international markets. That will be a fascinating thing to watch over the next 18 months its been fascinating to also watch the evolution of evan stiegel before they went public. Everyone described him as a product genius then after the first earnings call, he was described by some investors as air ganlt, playing down the competition, playing up the fact that they wanted to be a Camera Company and then last night he took more initiative at least on some of the advertising goals. How would you describe what were seeing in terms of the leadership of everyone stiegel now in a Public Company . Sarah, thats a great point there were even rumors back when the snapchat was getting the advertising efforts started that they were having some kind of balky times out there with the major advertisers. They had initiatives underway that just didnt seem like they really took off on that perspective. Clearli, th clearly they got through that phase and they got to a place where they have a sustaining business and they have the phenomenal youth demographic to play into. But i think that characterization is an interesting one, partly, one, because i think there is a real chance that unlike a facebook where they brought in others and handed over Business Operations to cheryl sanldberg, a global quality executive to do that, in the case of snap, i think they were really counting on their fanatical users and continuing innovation around product. Perhaps were going to see some of the evolution of evan just as we see with many young ceos as they grow over time and learning more than just kind of the areas that are core and most comfortable for them but i do have to say this is kind of a two edge sword the way snapchat can come roaring back is innovate yet more fully around the product. And, yet, at the same time, theyll have this pressure to say okay, look, you have to make this a more mature business. So its theyre coming into a complicated period in their history. Yeah. Fascinating to watch whether youre investing or not. Paul, were going to switch to uber stay with us we want to send it to our reporter who has more on benchmarks lawsuit against Travis Kalanick this morning benchmark led the movement to get kalanick to resign now theyre trying to get the seat on the board and cut him off from uber entirely this is a remarkable develop ment uber is benchmarks single most valuable investment up until now this tension has been playing out through leaks but now it is all out in the open. Within the nearly 40 page suit right here, benchmark accuse kalanick among any m. Things of a selfish power grab, hiding information critical to the lawsuit. Benchmark is one of the early investors. This is an investment that according to the lawsuit has translated into a 13 stake of the company. Last valued at nearly 70 billion. They have he massed tremendous paper profits for the vc firm but the average Holding Duration for a vc investment is around seven years. Benchmark is getting close to that with uber and has been looking to cash in on some of the profits. Now additionally, kalanick accumulated 35 of ubers common stock which gives him an outsized influence in company votes. And just to add another layer to all of this, a source tells me that ubers valuation has fallen by billions in secondary markets, perhaps giving benchmark more incentive to cash out from another funding round soft bank could be one solution under the right circumstances. Benchmark has also asked for a preliminary enjunction which if granted would take kalanick out of the ceo search process completely wow thats a lot of the news this there. Thank you very much. Paul, were reminded of what gurley tweeted a few weeks ago saying travis would be very few entrepreneurs have had such a Lasting Impact on the world. This is a serious separation, isnt it yeah, its certainly a surprise from my perspective i spent most of my operating career working for various partners over there at benchmark. I have all the respect in the world in them as a firm. I think uber is a phenomenal company that executed amazingly well its unfortunate when things come to. This given that its a pending lawsuit tshgsz probably not appropriately for me to try to comment on specifics around. That but if you look at just the tension between boards and founders, when you get into the conflict type situations that youre seeing there, this is a fairly common phenomenon and, you know, you hope to be in situations and ive been pretty fortunate on my boards for the most part have avoided this kind of drama it is a smaller scale. But it happens at times. And theres many, many billions of dollars at stake. There are different visions for how companies should be run between the founders and sometimes between professional investors and professional manage ment that comes in. I think if you look at a company like a google, i think thats a company that handled that very, very well over a long period of time, you know, they had a terrific professional ceo that came in and worked with the company for some period of time. And now the founder, larry page, is running the company with sergei brynn i think there are ways can you do this and work with your board and for reasons that i dont know because im not close enough to it, that has not been able to work out for them. Is it clear to you, paul, that this conflict has much to do with the strategy for uber in term of exactly how the business should be run as posed oppose should be leading it from a cultural perspective as they look for a ceo, there are big directions as to the direction this business should take yeah. Again, skipping the specific case here because i dont want to get involved it in with them, the when it comes to these type of situations, what i see happen is that the liquidity angle is overreported. People read things like the 7 Year Holding Period and things like that look, weve had companies we funded Financial Engines back in 1996. It didnt go public until 2010 and were absolutely thrilled with the company its done great all along the way. Obviously, we love it when things go quickly. But at the same time, were here to try to build enduring companies. I know thats what the entire board is trying to do in their situation, try to get that to happen i just think you run into these situations where its mostly about a clash over control and its a clash over whos going to run the company oftentimes what happens when people talk about Venture Capital is you have one major decision to make as a Venture Capitalist on a board which is whos going to be the ceo . Whos going to run the company and sometimes it comes down to that you keep saying this is common and especially having a big investors clash with a founder, have we ever seen though one board member outright sue another board member for fraud . You know, im not a historian on the law im kind of a broader historian on the valley as you know. I cant remember a case like this but that doesnt mean that it hasnt occurred over time. Yeah. I suspect there probably has been something given that there literally are hundreds of thousands of funded companies over the last 50 years yeah. Sometimes turns contentious. Paul, you were an early investor in netflix we talked about it several times. Its a big week for streaming and content news disney said they would pull movies and shows from the streaming service. When he discussions that desk all week about what means for netflix, how far along they are in the race to make and withhold content for themselves did you see disney as being important . I dont think netflix has any single serious threat in my opinion. Theyve done such a strong job and as you recall, my partner mike shoe that made the investment in netflix in 1999 on behalf of Foundation Capital weve been very close to the company throughout and the Management Team there and i Work Together our first startup, pure software. But if i look at whats going on now, certainly i dont vini havent spoken to people at netflix about this theyre not surprised that a big company like disney wants to go their own way and im reading that the Major Properties will actually stay on the netflix platform for a while i think its part of a much larger trend that youre right, we spoke about several times here you know, four or five years ago i had friends in media and they were looking at netflix as sort of the greater fool. They said these guys are going around theyre buying all of our properties and spending all this money. This is great. Well, you know sh theres no free lunch at the end of the day when netflix is doing is pursuing a strategy of creating their own content. Now, of course, now that weve seen the strategy work out brilliantly. So diz i one disney is one of the latest there are 24 separate Media Properties that started their own approach to on demand Subscription Service i wish them luck i wish all of them luck in terms. That woinlt want to compete with ne netflix if i had any choice. And, of course, they said look, this is why weve been so big in original content for so long everyone sought general direction things were going. Of course, the bold case for netflix is that as subscribers grow, if it goes from 11. 5 billion in revenue today or fit doubles, the original content costs are not similarly going to double. There is going to be economies of scale it is very profitable. I wond fert fear though is new subscriber signups are so contingent on new content . In other words, its a bit of a treadmill. Its hard to get ahead of, do you worry about that for netflix . I wouldnt worry about that for netflix. Kinlt think of anyone in my universe that is going to change their subscription as a result of any one studio or player coming or going on to the platform so i dont think that aspect of it is the case if i look at netflix as an invettor, im looging at the more wholistic elements of the company. Are they succeeded on original content . Check. Are they succeeding on the International Connection i dont really follow the Public Information on this, if i understand it correctly, theyre getting close to where its 50 50 international and domestic thats a thing if you recall five or six years ago, netflix was severely criticized for having such an immature International Business so my judge ment for whatever it is worth is when the netflix Management Team puts their mind to something, they pig it oufigu and execute and come out number one in the space. They worked their way out of corners before as weve seen, paul thanks so much you covered a lot of ground. What a week for tech paul holland. I appreciate it thank you. When we come back, well dig into snaps numbers, take up what that company may be really worth. The quote destructive monday openization of the internet by google, facebook and amazon just one argument against all the power right now in Silicon Valley plus, more on the selloff, dow though, coming off the worst day since may. Marketed up 52 on the major index, were back in a minute. At fidelity, trades are now just 4. 95. We cut the price of trades to give investors even more value. And at 4. 95, you can trade with a clear advantage. Fidelity, where smarter investors will always be. And at 4. 95, you can trade with a clear advantage. I love you, droolius caesar, but sometimes you stink. Febreze car vent clip cleans away odors for up to 30 days. Because the things you love can stink. Carl, an interesting and maybe important comment from dallas fed president speaking in arlington, texas, hes saying that its okay to be patient on rate hikes because the mutual rate, where the fed is going, is closer to 2 than to 3 . Now the significance of this is janet yellen in testimony earlier this summer said the fed doesnt have as far to go as we thought. But nobody really put a number on that Robert Kaplan saying its closer to two than three is a significant change in the sense that median long term rate for the fed in their own forecast is 3 and theres only one person that is 2 1 2 , serve above tlachlt is a sense that they have to all come down in the outlook for how far the fed thooz has to go in e rate hikes ka kaplan wants o see more progress before raising rates again he wants to reduce the Balance Sheet soon we have to monitor this as to whether or not the long term rate for fed oeflz and where they think the funds rate is going it closer to 2 than 3 . Sarah . I ghaes would have implications for how many times they raised rates and how fast thank you. And fixed income markets and the sense where the two year ought to be correctly priced. Our Steve Liesman following the fed. For more, lets bring in mike kiesel, managing director of global credit at pimpco to talk about this market. Weve bun talking about how calm the credit market has been clearly its reacted to the heightened volatility this week. Do you see any big signs of cracks in the credit market that stock investors should be paying attention to well, i think one thing, sarah, and, you know, we have been at pimco derisking throughout this year as the credit spreads have tightened. Weve been taking risk off the table. Theres been a tremendous amount of issuance this year. Theres been 847 billion just in the investment grade. So there is a lot of m a deals hit the market and so whats happened is you had a lot of splupply hit the market we have taken our foot off the accelerator and held back. What happened with north korea, obviously, theres been a risk off move this week part of the widening and credit spreads has been that. And also just a significant amount of supply thats hit the market over the last month so, mark, yeah, i guess the credit market certainly being tested in a supply demand front as you say i wonder when we all keep referring to credit spreads being tight, being very little margin in corporate debt over treasury debt, if in fact its not quite as tight as it looks just because those treasury yields are so low. When you have a five year treasury at 1 p. 75 , is a margi of 100 basis points on top of that really all that tight do we have to adjust our sense of what tight and wide are yeah, carl, thats an excellent point. The tech anybodial marketplace, theres been 180 dwlr billion of inflows into high quality bonds this year. Thats actually 50 higher than all of last year so so theres tremendous inflow into income into u. N. Bond markets. So thats whats driving it. If you look at our rates, the 2 to 3 treasuries, you look at pimpcos high quality corporate funds, theyre yielding 4 to 5 believe me, japanese investors find u. S. Credit very attractive where their yields are zero, german yields are zero foreign flows continue to support our bond market. If you started at the beginning of the year, the spreads between treasuries and boonz and treasuries and guilts, were near the wides weve seen of 10, 15 years so what happened is the u. S. Bond market at a relative basis looks quite good and so money is flowing in and to your point, our yields actually look pretty attractive on a global basis. Mark, weve been talking rates for the past few minutes but just looking at Balance Sheet normalization, some tried to argue this week that there is really no monetary argument for normalizing any time soon. That its more of a political effort by the fed to get people or congress off of their back. Are you willing to go that far well, i think