>> FROM AN ENVIRONMENT WHERE
THE DATA IS TOO HOT TO STARTING TO COOL DOWN. >> THE QUESTION ON EVERYONE'S
MIND IS HOW RESTRICTIVE. >> THE FED ENDORSED HIGHER FOR
LONGER. >> WE HAVE NOT BUTTON THE
CLEAREST COMMUNICATION FROM THE FED.
WHAT DOES MORE CONFIDENCE LOOK LIKE. >> WE ARE SO FIXATED ON THE FED
THAT WE ARE MISSING THIS CLEAR TURN. >> THIS IS "BLOOMBERG
SURVEILLANCE" WITH JONATHAN FERRO, LISA
ABRAMOWICZ, AND ANNMARIE HORDERN. JONATHAN: LIVE FROM NEW YORK CITY, GOOD
MORNING, GOOD MORNING. THIS IS "BLOOMBERG
SURVEILLANCE." JUST ABOUT POSITIVE ON THE S&P
500. THE POLITICS ON DOLLAR-YEN. DOLLAR-YEN POSITIVE .4%.
THE BOJ GOVERNOR MEETING WITH THE PRIME MINISTER WHO SAYS HE
WILL CLOSELY IMPACT THE IMPACT OF A WEEAK YEN ON PRICING. THE JAPANESE OFFICIAL SNAPPING
BACK SAYING IF THE MARKET IS FUNCTIONING PROPERTY THERE IS
NO NEED BUT A SUGGESTION THAT MAYBE IT IS NOT. LISA: ALL OF THIS GOES TO SAY THAT
PEOPLE WHO ARE BEARISH ON THE YEN ARE GETTING BOLDER.
I WONDER HOW MUCH JANET YELLEN WILL PUT THE PRESSURE ON
JAPANESE AUTHORITIES VERSUS MAYBE THERE IS A SENSE THEY
HAVE USED UP THE LITTLE AMMUNITION THEY ARE WILLING TO
SEND. ANNMARIE: SHE SAID CONSULTATION SHOULD
TAKE PLACE AND THEN SHE CALLED THE REPORTED JAPANESE ACTION A
RUMOR WHICH MAKES ME THINK THE JAPANESE DID NOT CALL
WASHINGTON TO ASK AND LET THEM KNOW WE ARE GOING TO MAKE A
MOVE AND INTERVENE. JONATHAN: DOLLAR-YEN, BIG SWINGS OVER
THE LAST WEEK. ALL THE WAY BACK DOWN TO
SOMETHING LIKE 152 TO START THE WEEK.
SOMEWHERE BETWEEN 155 AT THE MOMENT.
MORE IMPORTANT STORY OUT OF THE MIDDLE EAST. THE LATEST OUT OF
ISRAEL AND GAZA. ISRAELI TROOPS TAKING CONTROL
OF THE RAFAH BORDER CROSSING. HAMAS SAYING ALL AID FROM EGYPT
HAS STOPPED AFTER ISRAEL TOLD RESIDENTS IN EASTERN RAFAH TO
FLEE IMMEDIATELY. WE ARE WATCHING THIS
PLAY-BY-PLAY AND HOUR-BY-HOUR. LISA:
HAMAS CAME OUT AND SAID THEY HAD AGREED TO A CEASE-FIRE DEAL.
ISRAEL SAID THEY ARE NOT ACCEPTING THAT.
THEN THERE WAS REPORTING ABOUT THE IDEA THAT MAYBE IT WAS NOT
DIFFERENT BY THAT MUCH WHICH RAISES THE QUESTION, IS THIS A
BENJAMIN NETANYAHU THAT WANTS TO GO INTO PROFIT NO MATTER
WHAT -- THAT WANTS TO GO INTO RAFAH NO MATTER WHAT? ANNMARIE:
EVEN THOUGH ISRAEL SAID THEY DO NOT ACCEPT THIS DEAL WE KNOW
THEY ARE SENDING REPRESENTATIVES TO EGYPT AND
THE FACT THAT ISRAEL SAYS THEY ARE STILL SEEKING TO FIND AN
AGREEMENT. PERHAPS THEY ARE USING RAFAH AS
A POINT OF LEVERAGE. WE WILL CATCH UP WITH NORMAN
ROULE IN A FEW MINUTES. S&P 500, THREE DAYS OF GAINS.
WHAT A RUN IN THE BOND MARKET. YIELDS FALLING ONCE AGAIN. LISA:
WHAT IS INTERESTING TO ME IS THE RALLY HAS CONTINUED ON THE
LONG END BUT ON THE SHORT END IT IS HITTING YOUR ASSISTANCE
POINT. IT IS NOT LIKE PEOPLE ARE SAYING LET'S GO BACK TO SEVEN
RATE CUTS. AT THE SAME TIME WHAT WE HEARD
YESTERDAY FROM JOHN WILLIAMS AS WELL AS FROM TOM BARTON OF THE
RICHMOND FED ENDORSING FED CHAIR JAY POWELL'S VIEW.
THEY SAID THE NEXT MOVES ARE CUTS. WE ARE NOT THERE YET.
MAYBE RATES WHERE THEY ARE WILL HAVE A LONG EFFECT.
THIS IS NOT A HAWKISH TYPE OF TALK FROM FED OFFICIALS.
JONATHAN: ALL OF THE FLEXIBILITY SEEMS TO
BE AT THE LONG END. WE ARE DOWN FIVE CONSECUTIVE
DAYS. 10-YEAR GILTS ARE FOLLOWING. -- 10 YEAR YIELDS ARE FOLLOWING
-- 10 YEAR YIELDS ARE FALLING. COMING UP WE WILL CATCH UP WITH
SHARON BELL OF GOLDMAN SACHS. FORMER SENIOR INTELLIGENCE
OFFICIAL NORMAN ROULE. AND SIMON FRENCH.
WITH GLOBAL BONDS GAINING ON INFLATION OPTIMISM. U.S.
STOCKS COMING OFF THEIR THREE DAY WINNING STREAK.
THE BEST BACK TO NOVEMBER. SHARON BELL SAYING THE RISE OF
THE RELATIVE SIZE OF THE U.S. EQUITY MARKET HAS REFLECTED THE
DOMINANCE OF THE U.S. ECONOMY. SHE JOINS US FOR MORE.
GOOD MORNING TO YOU. THE QUESTION IS HOW MUCH LONGER
THAT DOMINANCE CAN LAST. HOW ARE YOU THINKING ABOUT THAT NOW?
SHARON: THE U.S. MARKET HAS BEEN PHENOMENAL. THE SIZE OF THE MARKET -- IT IS
DOWN TWO OR THREE TIMES THE SIZE OF THE EUROPEAN MARKET. I THINK WE ARE NOT GOING TO
BACK TO WHERE WE WERE IN 2007 BUT THE U.S.
HAS HAD A LONG RUN OF DOMINANCE. IT HAS ALSO HAD A STRONG CYCLICAL PATH IN RECENT
MONTHS. THAT IS THE REASON MANY PEOPLE
HAVE PUSHED OUT WHEN THEY EXPECT THE FED TO CUT RATES.
CYCLICALLY THE REST OF THE WORLD WILL DO BETTER FROM HERE. WE'VE SEEN THE CHINESE STOCK
MARKET DO WELL, WE'VE SEEN THE U.K. STOCK MARKET DO WELL.
WE HAVE SEEN MARKETS GLOBALLY DO BETTER. THE U.S.
WAS THE ONE THAT OUTPERFORMED ON EVERY SINGLE ECONOMIC METRIC
THROUGH THIS LAST YEAR. THE REST OF THE WORLD HAS BEEN
LAGGING AND THAT IS CATCHING UP WITH IT A BIT. LISA:
THERE IS A QUESTION OF HOW MUCH HAVE WE BROUGHT FORWARD SOME OF
THIS BETTER OUTLOOK IN EUROPE, IN EQUITY MARKETS?
HAVE WE ALREADY OUTPERFORMED AS MUCH AS WE ARE GOING TO
OUTPERFORM THE U.S. GOING FORWARD GIVEN THE FACT
THAT SO FAR EUROPEAN EQUITIES HAVE DONE MUCH BETTER THAN MOST
OF THE SAME SECTORS IN THE U.S.? SHARON:
I THINK WE HAVE BROUGHT FORWARD A LITTLE BIT OF IT.
THE MARKET TENDS TO PAY FOR THINGS SIX MONTHS BEFORE THEY
HAPPEN. HE STILL HAVE THIS HUGE VALUATION GAP BETWEEN THE U.S.
AND EUROPE. IT HAS CLOSED A TINY BIT BUT
NOT THAT MUCH. WE HAVE UPGRADED OUR TOP-DOWN
MACRO VIEW OF EARNINGS. AS YOU'VE SEEN IN THE FIRST
QUARTER EARNINGS DO REASONABLY WELL, AS YOU'VE SEEN OIL PRICES
RISE THROUGH MOST OF THIS YEAR, AS YOU'VE SEEN THE EURO AND
OTHER CURRENCIES WEEKEND, ALL OF THAT IS GOOD FOR EUROPEAN
EARNINGS. THE EARNINGS IN THE VALUATION
GAP NOT CLOSING BUT AIRING A LITTLE BIT TO SEE A BIT MORE
OUTPERFORMANCE. ANNMARIE: HOW MUCH DO YOU THINK THE
TAILWIND OF POTENTIAL ECB RATE CUTS WILL BOOST YOUR REGION
MORE THAN PEOPLE ARE FACTORING IN? SHARON: I COMPLETELY AGREE. THERE IS A GOOD CHANCE THE ECB
NOW GOES BEFORE THE FED. WE STILL EXPECT FED RATE CUTS
THIS YEAR BUT AFTER WE EXPECT CUTS IN EUROPE.
EUROPE GOING AHEAD OF THE FED WILL BE THE FIRST TIME THEY
HAVE DONE THAT. IT WILL BE A BIG RUBICON TO
CROSS AND THEY WILL BE MORE EXCITED IN EUROPEAN MARKETS.
ANNMARIE: WHAT EXACTLY IN EUROPE DO YOU
LIKE OUTSIDE OF FINANCIALS? SHARON:
FINANCIALS ARE A NICE AREA BECAUSE OF RATES STAY HIGHER
FOR LONGER THEY DO WELL. IT IS NOT JUST FINANCIALS.
THEIR OTHER POCKETS. -- THERE ARE OTHER POCKETS IN
EUROPE. SIMILAR GROWTH IF NOT BETTER.
VALUATIONS BELOW WHAT WE SEE IN THE U.S..
I THINK THERE ARE A FEW AREAS. ENERGY IS ANOTHER AREA WE GROW.
VALUATIONS ARE A BIG GAP TO THE U.S.
IN THESE AREAS ARE ALL ABOUT SHARES, GIVING MONEY BACK TO
SHAREHOLDERS, A HUGE AMOUNT, JUST FROM BUYBACKS AND
DIVIDENDS FROM THE ENERGY SECTORS.
THERE ARE -- THEY HAVE THE GROWTH RELATIVE U.S.
COUNTERPARTS ON LOW VALUATIONS OR THEY ARE EXTREMELY CHEAP AND
GIVING YOU BACK THE MONEY AND SHARE BUYBACKS. ANNMARIE:
DO YOU THINK WE HAVE SEEN THE PEAK OF U.S.
EXCEPTIONALISM OR IS IT THE REST OF THE WORLD STARTING TO
CATCH UP? SHARON: THAT IS A GREAT QUESTION.
I DO NOT THINK THE U.S. MARGIN WILL COLLAPSE OR EUROPE
WILL CATCH UP IN TERMS OF GDP GROWTH TO THE U.S.
ALL OF THOSE GAPS EXIST AND WILL CONTINUE TO EXIST. I THINK
HOW THEY ARE PRICED AT THE MOMENT IS EXTREME.
IT IS NOT THAT I THINK THE U.S.. BEING EXCEPTIONAL.
-- IT IS NOT THAT I THINK THE U.S.
WILL STOP BEING EXCEPTIONAL, IT IS JUST THE REST OF THE WORLD
WILL CATCH UP A LITTLE BIT ON SOME OF THAT EXCEPTIONALISM.
JONATHAN: DID WE TALK ABOUT MARGINS,
WHERE YOU SEE PRICING POWER. WE'VE BEEN TALKING ABOUT --
WHERE DO YOU SEE SOME OF THAT TAKING PLACE? SHARON:
IT IS INTERESTING. THERE HAVE BEEN SOME WARNINGS,
WEAKER EARNINGS FIGURES ANNOUNCED BY U.S.
CONSUMER DISCRETIONARY COMPANIES.
IN PARTICULAR SOME LAST MONTH. WE'VE SEEN A LITTLE BIT LESS ON
EUROPEAN COMPANIES AND THIS REFLECTS A SLIGHTLY DIFFERENT
DYNAMIC IN EUROPE WHERE IN EUROPE THE SAVINGS IS STILL
EXTREMELY HIGH. EUROPEANS ARE STARTING TO SEE
POSITIVE REAL WAGE GROWTH WITH THEY'VE NOT SEEN FOR SOME TIME
AS INFLATION COMES DOWN AND ENERGY PRICES YOU ARE PAYING IN
YOUR UTILITY BILLS ARE STARTING TO COME DOWN. IN TERMS OF COMPANIES PRICING
ON THE MARGINS. IF YOU LOOK THE EARNINGS
FIGURES FOR THE FIRST QUARTER, MARGINS HAVE PROVED MORE ROBUST
AND MORE SUSTAINABLE THAN WE EXPECTED.
THAT IS ONE OF THE REASONS WE HAVE POPPED OUR EARNINGS
FORECAST THIS YEAR. I DO NOT EXPECT A HUGE
EXPANSION IN MARGINS IN EUROPE OR THE U.S.
OVER THIS YEAR OR THE NEXT YEAR. MARGINS ARE ALREADY VERY HIGH.
LISA: I AM TRYING TO ALWAYS UNDERSTAND HOW SOME OF THE MAIN
STORIES OF A GIVEN DATE FACTOR INTO THE BREAD AND BUTTER OF
WHAT COMPANIES DO EVERY DAY. XI JINPING VISITING EMMANUEL
MACRON, TALKING ABOUT AVOIDING A NEW COLD WAR, TRYING TO
BUTTER THE PAN TO MAKE SURE CHINA CAN SELL GOODS IN FRANCE.
HOW MUCH IS THAT PRESSURE MARGINS AND EUROPEAN COMPANIES?
IS THIS SOMETHING THAT FACTORS INTO THE BOTTOM LINE IN THE
NEAR TERM? SHARON: IT IS TRICKY. IF YOU ASK MOST CEOS OR
EXECUTIVES WHAT THEIR BIGGEST CONCERN IS THEY WILL TALK ABOUT
GEOPOLITICAL RISKS. SAYING THINGS LIKE THIS IS
CRUCIAL FOR COMPANIES. -- SEEING THINGS LIKE THIS IS
CRUCIAL FOR COMPANIES. IN TERMS OF NEAR-TERM MARGINS,
GLOBALLY WE ARE DEEP GLOBAL ICING AND BECOMING MUCH MORE
REGIONAL. COMPANIES ARE HAVING TO
REPLICATE COSTS. THEY CANNOT PRODUCE THINGS IN
ASIA. THEY'RE TRYING TO REPLICATE
COSTS IN EUROPE OR THE U.S. OR ELSEWHERE.
GEOPOLITICAL RISKS ARE RISING. WE SAW THE PROBLEM WITH SUPPLY
CHAINS AFTER THE PANDEMIC AND THE DIFFICULTY WITH PRODUCTION.
COSTS ARE RISING. YOU WILL NOT SEE IT QUARTER BY
QUARTER BUT I THINK GENERALLY THAT IS ONE OF THE REASONS I DO
NOT THINK MARGINS KEEP EXPANDING IT IS BECAUSE COSTS
ARE GENERALLY RISING IN SOME OF THIS IS TO DO WITH LOCALIZING
AND SOME OF THAT IS GEOPOLITICAL RISK. JONATHAN:
SHARON BELL OF GOLDMAN SACHS. FINALLY A WORD ON PRESIDENT XI
VISITING EUROPE. I FIND THIS FASCINATING.
I'M SURPRISED IT IS NOT BEING WRITTEN MORE ABOUT.
FIRST OF ALL YOU GO TO FRANCE WHERE YOU BELIEVE THERE MIGHT
BE AN OPENING WITH EMMANUEL MACRON TO TAKE ON THE UNITED
STATES. THE SECOND IS TO MAKE THE POINT
ON THE 25TH ANNIVERSARY OF THE DEADLY BOMBING OF A CHINESE
EMBASSY IN BELGRADE. YOU ARE GOING TO REMIND OF THE
MISTAKES BY U.S. FORCES. LISA: THIS A DELIBERATE EFFORT TO
WIDEN THE DIVIDE BETWEEN EUROPE AND THE U.S., TRYING TO PUT A
WEDGE BETWEEN THAT RELATIONSHIP, SAYING YOU'RE
THROWING YOUR WEIGHT BEHIND THEM AND WHY.
WE CAN BRING CHEAP GOODS HERE. THEY ARE TRYING TO CREATE A
DISTINCT FOREIGN POLICY AND ECONOMIC POLICY BETWEEN THE U.S.
AND EUROPE. ANNMARIE: MAKING AN ABSOLUTE STATEMENT
WHEN HE GOES TO SERBIA , WRITING IN THE LOCAL LANGUAGE
TO THE SERBIAN PEOPLE SAYING 25 YEARS AGO NATO FLAGRANTLY
BOMBED THE CHINESE EMBASSY IN YUGOSLAVIA.
THIS WE SHOULD NEVER FORGET. IN BELGRADE WHAT YOU SEE IS NOT
JUST SERBIAN FLAGS BUT CHINESE FLAGS. JONATHAN:
THEY ARE PRETTY TRANSPARENT ABOUT IT.
EQUITY FUTURES ON THE S&P JUST ABOUT POSITIVE.
LET'S GET YOU AN UPDATE ON STORIES ELSEWHERE.
HERE IS EUROPE BLOOMBERG BRIEF WITH DANI BURGER. DANI:
IN A SPEECH TODAY PRESIDENT BIDEN PLANS TO DENOUNCE
ANTI-SEMITISM AT COLLEGE CAMPUS PROTEST. HE WILL BE DELIVERING
THE U.S. -- THE KEYNOTE ADDRESS AT THE
HOLOCAUST MUSEUM'S DAY OF REMEMBRANCE.
THE SPEECH UNDERSCORES BIDENS POLITICAL DILEMMA SEVEN MONTHS
IN ISRAEL'S WAR IN GAZA THAT HAS EXPOSED DIVISIONS IN THE
DEMOCRATIC PARTY THAT COMPLICATE HIS ODDS OF WINNING
IN NOVEMBER. ANOTHER SETBACK FOR BOEING.
THIS TIME IT IS SPACE RELATED. THE LAUNCH OF ITS STAR LINER
SPACE CAPSULE HAS BEEN DELAYED BECAUSE THEY FOUND SOMETHING
WRONG WITH THE VALVE ON THE ROCKET.
THE VALVE WAS USED TO REGULATE PRESSURE.
INVESTIGATORS NEED TO DECIDE IF IT NEEDS TO BE REPLACED.
NEXT BACK UP DAYS FOR LIFT OFF OUR TODAY, THIS FRIDAY, AND
SATURDAY. ELON MUSK SAT DOWN -- HE
DISCUSSED ISSUES FROM IMMIGRATION TO FREE SPEECH, AND
THEN HE HONED ON THREATS POSED TO HUMANITY BY AI. >> AI MIGHT BE THE MOST
IMPORTANT QUESTION OF ALL. THE PERCENTAGE OF INTELLIGENCE
THAT IS BIOLOGICAL GROWS SMALLER WITH EACH PASSING MONTH.
EVENTUALLY THE PERCENTAGE OF INTELLIGENCE THAT IS BIOLOGICAL
BE LESS THAN 1%. DANI: HE WENT ON TO ADD THAT AI HAS A
LONG WAY TO GO BEFORE BECOMING A VIABLE TOOL IN SPACE
EXPLORATION. THAT IS YOUR BLOOMBERG BRIEF.
JONATHAN: UP NEXT, ISRAEL PRESSING AHEAD
IN GAZA. >> WE MAKE CLEAR OUR VIEWS
ABOUT OPERATION -- WE MADE CLEAR OUR VIEWS ABOUT
OPERATIONS IN RAFAH AND WE BELIEVE A HOSTAGE NEGOTIATION
IS THE BEST WAY TO AVOID THAT SORT OF AN OUTCOME. JONATHAN: JONATHAN:
THREE DAY WINNING STREAK ON THE S&P 500.
QUITE A RUN IN THE BOND MARKET. YIELDS LOWER BY FOUR DAYS.
4.4692. LISA:
IT HAS BEEN THE 12 PUNCH WITH FED OFFICIALS SAYING THEIR BIAS
IS TO CUT EVEN WITH HOTTER THAN EXPECTED PRINTS AND THEN WE GOT
WEAKER THAN EXPECTED PRINTS. HOW LONG WE BEFORE WE FLIP IT
BACK TO SAY WE GET SUMMER RATE CUTS BECAUSE THE THRESHOLD HAS
BEEN MET? JONATHAN: WE HAD THAT BIG MOVE WITH
YIELDS UP A WEEK AGO THIS MORNING AND THAT IT HAS BEEN
YIELDS DOWN OVER THE LAST FIVE DAYS. LISA:
WHICH GOES TO THE IDEA THAT THERE IS ASYMMETRIC RISK BEING
PRICED OUT BY A LOT OF PEOPLE IN THE MARKET. JONATHAN:
ENCOURAGED BY WHAT WE SAW IN THE PAYROLLS REPORT ON FRIDAY.
ISRAEL PRESSING AHEAD IN GAZA. >> WE WANT TO GET THE HOSTAGES
OUT AND GET A CEASE-FIRE IN PLACE FOR SIX WEEKS.
WE MADE OUR VIEWS CLEAR ABOUT OPERATIONS IN RAFAH THAT COULD
PUT PEOPLE AT GREATER RISK. WE BELIEVE THE HOSTAGE DEAL IS
THE BEST WAY TO AVOID THAT OUTCOME.
I DO NOT KNOW THAT HE GETS ANY MORE SENSITIVE THAN RIGHT NOW.
JONATHAN: ISRAELI FORCES MOVING FORWARD
WITH THEIR OFFENSIVE INTO RAFAH AFTER TURNING DOWN A CEASE-FIRE
PROPOSAL FROM HAMAS. TROOPS HAVE TAKEN CONTROL OF
THE BORDER CROSSING WITH EGYPT. ISRAEL SAYING IT STILL PLANS TO
SEND A DELEGATION TO MEET WITH MEDIATORS IN CAIRO.
NORMAN ROULE JOINS US FOR MORE. WONDERFUL TO GET YOUR
PERSPECTIVE. CAN YOU DESCRIBE WHAT IS ON THE
TABLE FROM HAMAS TO THE ISRAELIS AND WHY THE PROPOSAL
HAS BEEN TURNED DOWN? NORMAN: FIRST WE MUST RECOGNIZE THIS IS
VERY DIFFICULT AND COMPLICATED DIPLOMACY AND ONEROUS DUE TO
ALL THE DIPLOMATS INVOLVED. HAMAS HAS NOT APPROVED THE
PROPOSAL BY THE ISRAELIS, QATAR, AND UNITED STATES, BUT
HAS OFFERED A COUNTER PROPOSAL. IT WHITTLES DOWN DEMANDS,
ALREADY DESCRIBED AS EXTRAORDINARILY GENEROUS.
HAMAS IS PROPOSING IT RELEASED THREE PRISONERS A WEEK FOR SIX
WEEKS AND THEN 15 LIKELY BODIES OF PRISONERS AT THE END. IN RETURN IT WILL RECEIVE 50
PALESTINIAN PRISONERS FOR EACH ISRAELI, 30 WILL BE OF
LICENSES, WHICH WILL BE THE WORST OF TERRORIST CRIMES, AND
HAMAS CLAIMING A PERMANENT CEASE-FIRE. THE U.S.
IS SEEING A SUSTAINABLE CALM WHICH IS VAGUE AND ALLOWS FOR
DIPLOMACY. JONATHAN: WHAT WE KNOW ABOUT THE
WELL-BEING OF THE HOSTAGES TAKEN IN OCTOBER? NORMAN:
THEIR SITUATION IS SERIOUS. THE NUMBER OF DECEASED HOSTAGES
WILL BE GREATER THAN MANY HOPE. ONE THING HAMAS HAS RENEGED ON
HIS IT HAS REFUSED TO PROVIDE A LIST OF LIVING AND DEAD
HOSTAGES WHICH COMES AS A BLOW TO THE FAMILIES OF HOSTAGES IN
ISRAEL. THE STORIES OF HOW FEMALE
HOSTAGES HAVE BEEN TREATED HAVE BEEN VERY DARK. ANNMARIE: THE NEW YORK TIMES IS REPORTED
THAT CNA -- THAT THE CIA DIRECTOR BILL BURNS WAS
CONSULTED ON THE CHANGES THAT HAMAS SIGNED UP FOR AND THE WORDS "SUSTAINABLE CALM,"
WORDS ISRAEL HAS AGREED TO BUT IS NOT ANYMORE.
WHY IS THAT SO DIFFICULT AT THE MOMENT? NORMAN: IT COMES DOWN TO
INTERPRETATION. SUSTAINABLE CALM DOES NOT MEAN
THE END OF THE CONFLICT. FOR ISRAEL THE ERADICATION OF
HAMAS IS THE GOAL. FOR HAMAS IT MEANS THE CONFLICT
IS OVER AND IT RETURNS TO POWER. WE LIKE IT IN THE WEST. THE
PROBLEM IS THAT IT MEANS THE END OF THE WAR AND THE SURVIVAL
OF HAMAS WILL HARD IT IS REALLY VIEWS ON THE LANGUAGE. ANNMARIE:
NOW THAT WE KNOW ISRAEL HAS TAKEN CONTROL OF THE CROSSING.
WE HEARD FROM THE STATE DEPARTMENT.
THE STATE DEPARTMENT SAID THE U.S.
HAD PUT PROPOSALS ON THE TABLE FOR ISRAEL TO GO INTO RAFAH.
IS IT YOUR UNDERSTANDING THE ISRAELI GOVERNMENT IS USING ONE
OF THOSE PROPOSALS THE U.S. HAD GREENLIGHTED? NORMAN:
WE HAVE THREE THINGS UNDERWAY. THE ISRAELIS HAVE UNDERTAKEN
CLEARING OPERATIONS THAT COULD ENABLE THE RAFAH OPERATION.
THAT DOES NOT MEETING WILL TAKE PLACE. IT COULD BE OVERTAKEN BY
DIPLOMACY. THEY HAVE BEGUN AIRSTRIKES.
THEY HAVE TAKEN OUT MILITANTS AND MILITARY TARGETS.
THAT IS SOMETHING THE UNITED STATES HAD REPORTEDLY ENDORSED.
THE ISRAELIS ARE ALSO TALKING ABOUT MOVING 100,000
PALESTINIAN REFUGEES SEVEN MILES AWAY INTO SAFE AREAS WITH
FIELD HOSPITALS, HOUSING AND FOOD.
THAT IS SOMETHING THE UNITED STATES HAS REQUESTED. THE REFILE CROSSING -- THE REP
-- THE RAFAH CROSSING IS IMPORTANT FOR CONTROL BECAUSE
IT CONTAINS TUNNELS. HERE IS THE COUNTERPOINT.
RAFAH IS ONE OF THE TWO CROSSINGS WERE FOOD AND FUEL
ARE BROUGHT INTO GAZA. FUEL IS IMPORTANT NOT ONLY FOR
TRUCKS BUT DESALINATION PLANTS. RIGHT NOW TROUGH A IS CLOSED
AND THE OTHER CROSSING IS CLOSED BECAUSE HAMAS IS FIRING
ROCKETS TO STOP AID INTO GAZA AND THERE ARE REPORTS WITHIN
THE LAST HOUR THAT HAMAS HAS FIRED ROCKETS AT THIS SITE.
IT IS A DIFFICULT SITUATION FOR THE REFUGEES. LISA:
THERE IS A BROADER QUESTION OF JUST HOW MUCH CONTROL DOES THE
U.S. ADMINISTRATION HAVE ON ISRAEL
OVER ITS PLANS AS IT GOES INTO RAFAH AND IT PROCEEDS WITH THIS
CONFLICT. THE WALL STREET JOURNAL HAD A
REPORT THAT THE U.S. HAD DELAYED SENDING PRECISION
WEAPONS TO ISRAEL TO PRESSURE THEM TO DELAY THE INVASION OF
RAFAH OR THE BLOCKING OFF OF THE ENTRANCE THERE.
WHAT DO YOU MAKE OF THAT? HOW DO WE READ THAT IN TERMS OF
INFLUENCE FROM THE U.S. TO ISRAEL? NORMAN:
THE NATIONAL SECURITY COUNCIL SPOKESMAN REFUSED TO COOPERATE
THAT REPORT. LIKEWISE HE DID NOT DENY IT.
LOGISTICS IS PROBABLY THE MOST CONSTRAINING ELEMENT WE HAVE AN
U.S. POLICY TOWARDS ISRAEL. WE SHOULD NOT OVERSTATE OUR
LEVEL OF CONTROL. ISRAEL SUFFERED 1200 DEAD. THEY PERSON NOW -- THEY HAVE
PERSONNEL FIGHTING WHAT THEY BELIEVED TO BE A WAR FOR THE
SURVIVAL OF ISRAEL IN GAZA. THERE WILL NOT BE A TREMENDOUS
AMOUNT OF ENTHUSIASM FOR ALLOWING HAMAS TO REMAIN IN
POWER. THE REVERSE IS THERE IS VERY
LITTLE PRESSURE ON HAMAS. YOU HEAR VERY LITTLE FROM THE
WEST OR OTHER COUNTRIES SAYING HAMAS MUST STOP.
THE ISRAELI POSITION IS THE PRESSURE IS ALL ON THEIR SIDE.
JONATHAN: WE APPRECIATE YOUR INSIGHTS.
FORMER SENIOR U.S. INTELLIGENCE OFFICIAL NORMAN
ROULE. THE PLEADING FOR THE RELEASE OF
HOSTAGES SEEMS TO HAVE FADED AWAY OVER THE LAST SEVERAL
MONTHS. ISRAEL RISKS LOSING EVEN MORE
SUPPORT ON THE INTERNATIONAL STAGE BASED ON THIS RECENT
EFFORT. I DO NOT KNOW WHAT THE FUTURE
IS. YOU GO FURTHER INTO RAFAH AND
IT WILL GO IN THAT DIRECTION. LISA:
WE WERE TALKING TO SOMEONE WHO SAID THE PROTESTS HAVE MADE
ISRAEL FEEL MORE ISOLATED AND IF WE DO NOT FIGHT FOR
OURSELVES WHO WILL FIGHT FOR US. JONATHAN:
A QUOTE FROM PRESIDENT BIDEN LAST OCTOBER, WHILE YOU FEEL
THE RAGE CANNOT BE CONSUMED BY IT.
AFTER 9/11 WE WERE CONSUMED BY RAGE IN THE UNITED STATES AND
WHILE WE SAW JUSTICE WE ALSO MADE MISTAKES. JONATHAN:
THREE DAYS OF GAINS ON THE S&P 500 INTO TUESDAY. S&P 500 FUTURES POSITIVE .04%.
A DECENT RUN. BEST THREE-DAY RUN OF THE YEAR.
THE NASDAQ UP 4%. SMALL CAPS DOING NICELY. IN THE BOND MARKET, YIELDS
LOWER FOR FIVE CONSECUTIVE SESSIONS ON THE 10-YEAR.
DOWN ANOTHER TWO BASIS POINTS. WE HAVE SEEN A 21 BASIS POINT
MOVE. DOWN TWO BASIS POINTS ON THE
SESSION. LET'S GET SOME EARNINGS. DISNEY.
SECOND-QUARTER EPS 121. ESTIMATE 112.
LOOKING FORWARD THEY SEE THE FULL-YEAR ADJUSTED EPS GROWTH
TARGET OF 25%. THAT A FIRST LOOK LOOKS OK.
THE STOCK IS DOWN .7%. LISA: HERE IS THE WHY.
YOU CAN SEE SUBSCRIBERS FOR DISNEY PLUS CAME IN LATER THAN
EXPECTED, REVENUE CAME IN LATER THAN EXPECTED, WHICH RAISES THE
QUESTION OF HOW MUCH IS THE INCREASED EARNINGS-PER-SHARE
GOING TO FRAME -- GOING TO BE FROM COST EFFICIENCIES.
ARE THEY GOING TO RAISE THIS AT A TIME YOU'RE NOT SEEING
MASSIVE GROWTH IN ANY OF THEIR UNITS? JONATHAN:
WILL CATCH UP WITH THE CFO OF DISNEY IN ABOUT 30 MINUTES.
I FIND THE BATTLE OVER HULU TO BE FASCINATING.
ULTIMATELY WE HAVE TO AGREE ON A PRICE.
JP MORGAN HAS VALUED HULU AND 27.5 BILLION IN MORGAN STANLEY
HAS VALUED HULU FOR COMCAST. WE NEED TO WORK OUT WHAT THAT 33%
STAKE IS WORTH SO WE CAN CLOSE THAT DEAL. LISA:
IS A MATTER OF DISTRIBUTION, A MATTER OF WHO CAN GROW IT MORE?
DO THEY HAVE A SENSE OF THAT? WILL THEY TALK ABOUT IT TODAY?
IS THE REASON THEY HAVE SUCH OPTIMISM THEY CAN INCREASE
THEIR GROWTH TARGET FOR A 5%. JONATHAN:
THE HULU SUBSCRIPTION WORTH EVERY PENNY FOR SHOW GUN -- FOR
SHOGUN. LISA: YOU HAVE BEEN PUSHING THIS.
JONATHAN: WHEN WE DID THE FED SHOW AND TK
STARTED TALKING ABOUT TORONAGA. JONATHAN:
THAT IS AN UNACCEPTABLE ACCUSATION FOR JOURNALISM.
LET'S GET TO THE EURO. EXCLUSIVE COVERAGE BY CHRISTINE
LAGARDE. THE EURO AGAINST THE DOLLAR
LOOK SOMETHING LIKE THIS. THE EURO AT THE MOMENT AGAINST
THE DOLLAR IS A LITTLE BIT WEAKER. DOWN ABOUT .06%. DOLLAR-YEN AS WELL 154.61.
IT IS THE SCARF. ANNMARIE: SHE IS A FASHION ICON. JONATHAN:
YOU ARE AN ICON AS WELL. ISRAELI TROOPS TAKING CONTROL
OF THE RAFAH BORDER CROSSING IN GAZA.
THE MOVE IS THE FIRST OF ITS KIND SINCE THE WAR BEGAN IN
OCTOBER. PRESIDENT BIDEN SPEAKING TO
BENJAMIN NETANYAHU YESTERDAY. BOEING IN THE SPOTLIGHT OF
REGULATORS. THE FAA INVESTIGATING
INCOMPLETE EXPANSIONS OF THE 787 DREAMLINER.
THIS INCLUDES SUSPICIONS WORKERS MAY HAVE FALSIFIED
RECORDS TO COVER UP SHORTCUTS THEY FACTORY IN SOUTH CAROLINA.
BOEING SAYING THERE IS NO IMMEDIATE SAFETY ISSUE.
EVERY SINGLE TIME ANY NEWS COMES OUT ABOUT THIS COMPANY IS
NOT GOOD. LISA: THERE'S A QUESTION MARK AROUND
WHEN WE WILL GET A FLOOR, A SENSIBLE WASHOUT, SOMETHING
FROM THE AUTHORITIES SAYING WE UNDERSTAND WHAT HAPPENED AND WE
ARE DONE. THE FACT THAT THE FAA IS
EMBARKING ON A NEW INVESTIGATION AT A TIME THEY'VE
ALREADY HAD A GAZILLION OTHER INVESTIGATIONS, ARE THEY ON TOP
OF THINGS YET? ANNMARIE: THIS GOES BACK TO THE POINT
THAT THE FAA HAD THAT A LOT OF THE WORK BEING DONE ON THE
MANUFACTURING FLOOR IS NOT GETTING UP TO THE C-SUITE AND
THERE IS A HUGE DISCONNECT FROM THE INDIVIDUALS GOING THROUGH
THE SAFETY PRECAUTIONS, BUILDING THESE PLANES, AND THE
PEOPLE LEADING THE COMPANY. JONATHAN:
LATER ON DO NOT MISS OUR CONVERSATION WITH THE EQUITY
RESEARCH ANALYST OUT OF JEFFRIES ON BOEING AND THE
LATEST DIFFICULTIES. LET'S FINISH THIS ROUND UP WITH
UBS RETURNING TO PROFIT AFTER THEIR RESCUE OF CREDIT SUISSE.
THE MOVE REVERSES TWO LOSSMAKING QUARTERS. >> IS GOOD MOMENTUM.
YOU MAY REMEMBER IN THE FOURTH QUARTER WE HAD A STRONG
PERFORMANCE IN BANKING AS WE INTEGRATE NEW CALLINGS FROM
CREDIT SUISSE ON OUR PLATFORM WE START TO SEE THE PIPELINE
DEVELOPING. WE ARE ABLE TO EXECUTE.
IT IS VERY MUCH ALIGNED WITH OUR EXPECTATIONS OF IMPROVING
THE MIX BETWEEN OUR MARKETS BUSINESS AND OUR BANKING
BUSINESS. JONATHAN: A FANTASTIC EXCHANGE.
WHAT STOOD OUT FOR YOU? JAN: I WOULD SAY THE REPORT AS A
WHOLE, IT WAS A GREAT QUARTER FOR UBS.
PROFITABILITY RETURNING TO THE BAG WHICH SHOWS INTEGRATION IS
WORKING. THEY ARE ON TRACK WITH THEIR
PLANS WHEN IT COMES TO INTEGRATING CREDIT SUISSE.
THEN YOU HAVE THE NON-CORE UNIT WHERE THEY WIND DOWN THE STUFF
THEY INHERITED FROM CREDIT SUISSE AS WELL.
THEY MADE PROFITS SO IT IS NOT LIKE THE MINEFIELD SOME
SHAREHOLDERS HAVE FEARED ABOUT THAT THIS COULD HAPPEN WITH ALL
OF THE ASSETS ON THE BALANCE SHEET. THAT IS VERY GOOD.
THE OUTLOOK IS NOT TOO BAD FOR THE BANK.
ALL AROUND THEY ARE DOING EVERYTHING THEY NEED TO DO.
THEY ARE ON TRACK WITH THE MERGER WHICH IS THE MOST
IMPORTANT THING. THEY ARE COMMUNICATING WHAT
THEY ARE DOING. THERE ARE A FEW THINGS THAT ARE
UNCERTAIN BUT OVERALL UBS IS DOING WHAT CREDIT SUISSE FAILED
TO DO. COMMUNICATING CLEARLY, EXECUTING ON THE PLAN, NOT
OVERPROMISING AND DOING THE RIGHT THING AT THE RIGHT TIME.
JONATHAN: NOBODY WANTS TO SEE LAYOFFS.
CAN YOU TELL US WHETHER WE HAVE WORKED THROUGH ALL OF THE
LAYOFFS OF THIS COMBINATION? JAN-PATRICK:
THERE IS STILL A LOT OF THINGS TO COME AS THEY WORK OUT WHAT
THEY WANT TO KEEP AND HOW THEY WANT TO STRUCTURE THE NEW
BUSINESS. I WOULD ARGUE THEY'RE PROBABLY
HALFWAY THROUGH. AS WE SAID, LAYOFFS ARE NEVER A
GOOD THINGS. IF YOU MERGE THESE MASSIVE
BANKS YOU WILL HAVE OVERHANG AND YOU WILL NEED TO REDUCE THE
HEADCOUNT. WE KNOW UBS HAS PUT OUT A BIG
PROMISE IN REDUCING THE COST. WE KNOW THE HEADCOUNT IS A BIG
TOPIC OF THAT. THEY STILL NEED TO WORK THROUGH
THIS. IF YOU WANT TO HAVE A
SUSTAINABLE LENDER OF THAT SIZE AND YOU NEED TO HAVE COSTS IN
CHECK WHICH UNFORTUNATELY MEAN SOME JOB LOSS. LISA:
HOW MUCH ARE WE LOOKING AT INCREASING REGULATIONS THAT UBS
IS ARGUING AGAINST THAT IS ARGUING COULD CRIMP PROFITS
BECAUSE THEY ARE THE ONLY GAME IN TOWN? JAN-PATRICK:
IT IS FUNNY BECAUSE ON THE ANALYST CALL THERE WAS QUESTION
AFTER QUESTION OF CAPITAL REGULATION AND HE WAS VERY
STOIC SAYING IT IS TOO EARLY TO DISCUSS THE MATTER.
I UNDERSTAND UBS'S POINT OF VIEW THAT THEY SAY WE ARE NOT
SUPER DOMINANT IN SWITZERLAND. THERE ARE PLENTY OF OTHER BANKS.
IT WAS MORE THE LOSS OF TRUST. TO BE FAIR I GUESS YOU CAN
CAPITALIZE THE BANK AS MUCH AS YOU LIKE.
IF YOU LOSE TRUST IN LIQUIDITY AND DEPOSITS IT WILL NEVER SAVE
YOU. THAT IS THE LINE OF ARGUMENT OF
UBS ALSO WHEN THEY TALK TO THE REGULATOR AND THE POLITICS.
ON THE OTHER HAND I UNDERSTAND SWITZERLAND.
TAXPAYER MONEY WAS INVOLVED IN THAT RESCUE.
THEY HAVE TO TIGHTEN THE ROAD SOMEWHAT TO SAY IT CANNOT BE
ALWAYS THE SAME WAY WHEN SOMETHING GOES WRONG THAT THE
TAXPAYER HAS TO STEP IN ON AN IMMEDIATE BASIS.
IT IS STILL A TOPIC THAT IS PROBABLY THE BIGGEST
UNCERTAINTY FOR UBS GOING FORWARD AND I UNDERSTAND THEY
DO NOT WANT TO COMMENT ON IT AT THIS POINT.
I GUESS PEOPLE ARE FINE WITH IT. IN THE COMING MONTHS WE NEED
MORE CLARITY FROM THE REGULATOR AND FROM UBS ON HOW THEY WANT
TO HANDLE THE MATTER BECAUSE OTHERWISE JOURNALISTS WILL NOT
BE HAPPY WITH THE UNCERTAINTY. LISA:
I LOVE HOW YOU DESCRIBED THE SWISS CEO OF BEING STOIC.
I WONDER IF YOU CAN GO FORWARD ANY AREAS HE IS NOT STOIC ABOUT
AS FOR HIS AREAS OF GROWTH. U.S. THERE ARE QUESTION MARKS AROUND
ASIA. WHERE WILL THE GROWTH COME FROM? JAN-PATRICK:
IT IS NOT COMING FROM EUROPE. HE WAS VERY CLEAR GROWTH IS
COMING FROM ASIA AND THE U.S. THESE ARE THE AREAS THE BANK IS
FOCUSING ON. IT WAS INTERESTING WHEN HE
TALKED ABOUT CAPITAL AND REGULATION HE WAS SHRINKING THE
BACK -- SHRINKING THE BANK BACK TO GREATNESS IS NOT THE WAY.
HE SHOWED US HE IS ABLE TO DO THAT.
DEPOSITS WERE GROWING, WEALTH MANAGEMENT IS GREAT.
WE KNOW IT IS A SEASONAL BUSINESS AND VOLATILE.
THE OPERATIONAL BUSINESS OF UBS IS DOING OK.
WE SAW SOME GROWTH COMING FROM THE FORMER CREDIT SUISSE
ENTITIES. OVERALL I WOULD SAY THAT
OPERATIONAL THE BANK IS ON A GOOD PATH AND THEY NEED TO KEEP
ON DOING THAT. SHAREHOLDERS WILL PROBABLY BE
HAPPY WITH THAT. ANNMARIE: WHEN IT COMES TO CREDIT SUISSE
CLIENTS AND MERGING THEM ONTO UBS PLATFORMS, WHAT IS THE
TIMELINE? JAN-PATRICK: THEY STILL WANT TO COMPLETELY
MERGER OF THE LEGAL ENTITIES IN THE COMING WEEKS.
THAT IS THE FIRST IMPORTANT STEP , TO CONTINUE THE SHARE
BUYBACK THEY HAVE ANNOUNCED. BY THE END OF THE YEAR WILL BE
ROUGHLY HALFWAY THROUGH THE WHOLE MERGER.
THE FURTHER WE MOVE DOWN THE TIMELINE THE CLEARER THE RISK
CAN BE ON WHAT THEY WANT TO DO. TODAY IN THE REPORT THEY TOLD
US THEY HAVE CLOSED 35% OF THE BOOKS.
THEY HAVE DECOMMISSIONED 15% OF THE I.T. INFRASTRUCTURE.
IT SHOWS YOU THERE IS STILL SOME WAY TO GO BUT THEY ARE ON
TRACK AND THIS IS THE MOST IMPORTANT THING.
THEY ARE TICKING THOSE BOXES AND TAKEN THOSE MILESTONES THEY
HAVE LAID OUT A YEAR AGO. THAT IS ALL THE MARKET CARES
ABOUT FOR THE MOMENT, THAT THEY STICK TO THE PLAN.
THAT THE PLATE IS EXECUTED EXTREMELY WELL.
THE WHOLE THING COULD ACT AS A BLUEPRINT FOR FURTHER MERGERS.
NOT IN TERMS OF THE TACTICAL BUT IN HOW YOU COMMUNICATE WITH
THE MARKET AND HOW YOU EXERCISE ON YOUR PLAN, THAT YOU ARE NOT
OVERPROMISING BUT CLEAR ON WHAT YOU ARE DOING.
BRINGING BACK THE CEO IS A PERFECT STEP. REALLY WELL DONE.
THAT IS WHY THE SHARE PRICE IS SO STRONG EVEN THOUGH THE
NUMBERS ARE NOT 100% SUPPORTING THAT.
THE BANK IS DOING RIGHT THING AND COMMUNICATING AND
EXERCISING ON THE PLANS. JONATHAN:
GREAT TO CATCH UP AS ALWAYS. SMALLER MOVE FOR THE WALT
DISNEY COMPANY. COMING INTO THIS EARNINGS
RELEASE THE STOCK WAS UP 29% THROUGH MONDAY.
PULLING BACK IN TOUCH BY 1%. IF YOU'RE JOINING US WELCOME TO
THE PROGRAM. 121 EPS AGAINST AN ESTIMATE OF
112. PROPERTY CLIMBING 12% AT THE
DIVISION THAT INCLUDES THEME PARKS AND LOSSES FOR STREAMING
NARROW THAN EXPECTED. LISA: THIS IS A COMPANY THAT HAS BEEN
BOLSTERED BY RAISING PRICES ON PEOPLE WHO ARE DISNEY WORLD
FANATICS. THEY WERE ABLE TO CASH AND MUCH
MORE SIGNIFICANTLY. THERE WERE BRIGHT SPOTS AND
WEAKER SPOTS. CRICKET, THERE WAS CONCERNED
ABOUT INCREASED COSTS AROUND CRICKET.
THERE IS A QUESTION ABOUT WHAT THEY WILL DO TO INCREASE THEIR
EARNINGS BY 20% TO 25% WITHOUT A MORE MATERIAL SHIFT IN THE
BUSINESS STRATEGY. ANNMARIE: ALSO THEY TOOK IN MORE THAN $2
BILLION IN CHARGES RELATED TO START INDIA. JONATHAN:
I TRIED TO TALK ABOUT CRICKET. ANNMARIE:
BECAUSE YOU ARE A WICKETKEEPER? JONATHAN:
ANNMARIE SAID IT WAS LIKE TALKING ABOUT QUIDDITCH.
ANNMARIE: THAT WAS INCLUDED IN THEIR
EARNINGS YOU CAN FOLLOW THAT CLOSER. JONATHAN:
HERE IS YOUR BLOOMBERG BRIEF WITH DANI BURGER. DANI:
SCORES OF PRO-PALESTINIAN PROTESTERS WERE BLOCKED BY THE
POLICE FROM GETTING CLOSER TO THE MET GALA.
DEMONSTRATORS WERE HEADING TOWARDS THE VENUE WHEN THEY
WERE INTERCEPTED BY THE NYPD. A GROUP OF THEM HAD TRIED
SKIRTING THE POLICE BY GOING TO BE A CENTRAL PARK AND WERE MET
WITH BARRICADES AND THREATS OF ARRESTS.
LET'S GET YOU A QUICK CHECK ON PALANTIR, DOWN 10%.
THE BAR WAS HIGH FOR THEM GIVEN IT HAS BEEN ONE OF THE MARKETS
AI DARLINGS WITH A 47% YEAR TO DATE GAIN.
ANALYST AT WILLIAM BLAIR SAID THE STOCK WAS DOWN SO MUCH
BECAUSE OF A STOP -- BECAUSE OF A SHARP SLOWDOWN IN U.S.
COMMERCIAL REVENUE GROWTH, SOMETHING CRUCIAL TO ITS AI
PUSH. APPLE IS DEVELOPING A HOMEGROWN
PUSH -- A HOMEGROWN SHIP TO RUN AI AND DATA CENTERS.
IT WILL BUILD ON PREVIOUS EFFORTS TO MAKE IT IN-HOUSE
CHIP ACCORDING TO THE JOURNAL, WHICH CITED UNIDENTIFIED PEOPLE
FAMILIAR TO THE MATTER. THE CODENAME PROJECT INTERNALLY
IS AC/DC WHICH STANDS FOR APPLE CHIPS AND DATA CENTERS.
APPLE ANNOUNCING MAJOR UPDATES TO ITS IPADS. JONATHAN:
WILL CATCH UP WITH DANI IN ABOUT 30 MINUTES TIME.
PEOPLE ACTUALLY PLAY QUIDDITCH? THEY DRESS OUT AND FLY AROUND
ON FAKE BROOMS? LISA: THEY DO NOT FLY BECAUSE WE
CANNOT FLY AROUND ON FAKE BROOMS. I'M NOT AN EXPERT ON
REAL LIFE QUIDDITCH. JONATHAN: IS IT THAT JUST LACROSSE?
THERE'LL BE LACROSSE PLAYERS WATCHING THIS WHO ARE LIKE HOW
DARE YOU? THE FED URGING PATIENCE. >> WE WANT TO MAKE SURE WE ARE
LOOKING AT THE BROAD PICTURE. WE WILL MAKE OUR DECISIONS
BASED ON THAT. JONATHAN: THAT CONVERSATION IS COMING UP
SHORTLY. PEOPLE GET VERY PASSIONATE
ABOUT LACROSSE 55-YEAR-OLD MAN STILL GOING ROUND WITH THE
T-SHIRT. ANNMARIE: I PLAYED LACROSSE. LISA:
THE QUIDDITCH PLATE IN REAL LIFE IS CALLED MUGGLE WHICH.
JONATHAN: BECAUSE YOU ARE A MUGGLE. JONATHAN:
EQUITIES ON THE S&P 500. POSITIVE .04%.
BRAMO HAS LOST IT. 4.46 ON THE 10 YEAR.
DOWN FIVE CONSECUTIVE SESSIONS. A MOVE LOWER OF MORE THAN 20
BASIS POINTS ENCOURAGED BY CHAIRMAN POWELL AND THE DATA.
THE FED URGING PATIENTS. -- THE FED URGING PATIENCE. >> WANT TO MAKE SURE WE ARE
LOOKING AT THE BROAD PICTURE. WE HAVE MAXIMUM EMPLOYMENT AND
PRICE STABILITY GOALS. WE WANT TO MAKE SURE WE HAVE
THE INFORMATION THAT SPEAKS TO ALL OF THAT AND AS THE DATA
COMES IN WE WILL BE MOVING IN THE DIRECTION WE WANT TO SEE ON
INFLATION AND IN TERMS OF RESTORING BALANCE TO THE
ECONOMY. WE WILL MAKE OUR DECISIONS
BASED ON THAT. JONATHAN: NEW YORK FED PRESIDENT JOHN
WILLIAMS SINGH THERE'LL BE RATE CUTS AND RICHMOND FED PRESIDENT
SAYING THE FULL IMPACT OF RATES YET TO COME.
SIMON FRENCH JOINS US NOW FOR MORE.
WONDERFUL TO GET YOU ON THE PROGRAM TO GET YOUR VIEWS ON
THE RECENT FED SPEAK. WALK ME THROUGH YOUR BASE CASE
AND WHETHER IT HAS CHANGED AFTER PAYROLLS ON FRIDAY? SIMON:
WE GET OUR FIRST RATE CUT IN SEPTEMBER.
I THINK YOU CAN MAKE THE ARGUMENT THAT THE MARKET OVER
INTERPRETED THE WEAKNESS OF THE EARNINGS DATA. WE KNOW THE PAYROLL AND WAGE INFLATION PICTURE IS ONE OF
THOSE -- IF YOU'RE TALKING ABOUT THE BROADER MARKET
NARRATIVE THERE NEEDS TO BE PROGRESS ON THE HEADLINE
INDICATORS ON CPI INFLATION AND PCE INFLATION STALLED FOR SIX
MONTHS. THE FIT COMMUNICATION MINDIS
WAS THE -- THE FIT COMMUNICATION MINUTES WAS THE
LAST MARKET MOVING GUIDE THAT DO NOT SEE THE THRESHOLD ACROSS
THE CORE PRICE INDICES OF MAKING SUFFICIENT PROGRESS TO
MAKE ANY CUTS. JONATHAN: I WANT TO PICK UP ON SOMETHING
YOU SAID THAT MAYBE WE ARE PUTTING TOO MUCH GROWTH ON THE
WAGE FIGURE. CAN YOU EXPLAIN WHY THAT MIGHT
BE THE CASE? SIMON: YOU HAVE A LOT OF BASE EFFECT
AT THE MOMENT THAT ARE PERHAPS BEING OVER INTERPRETED.
PEOPLE HAVE PLACED TOO MUCH WEIGHT ON THE TIGHTNESS OR
OTHERWISE OF THE U.S. LABOR MARKET AS A DRIVER OF
WAGE PRICES. I THINK THOSE MODELS, THAT DID
NOT WORK PARTICULARLY WELL PRE-THE COVID PANDEMIC AND FREE
INFLATION SURGE HAVE NOT WORKED PARTICULAR WELL AT
UNDERSTANDING NOMINAL WAGE WARS AROUND MOST OF THE DEVELOPED
WORLD. YOU WOULD NATURALLY EXPECT A
RETURN -- A FALLING OF THE NOMINAL INCREASE IN WAGES TO
ATTACK ON TO THE FALL IN ENERGY PRICES AND THE SUPPLY-SIDE
ELEMENT OF PRICE GROWTH. IT IS NO REAL READING OF THE
UNDERLYING TIGHTNESS OR CAPACITY OR WEAKENING OF JOBS
DEMAND IN THE U.S. ECONOMY. I THOUGHT THAT WAS THE
MISINTERPRETING WE SAW LAST WEEK. LISA:
ONE OF THE REASONS WHY THE MARKET IS PRICING IN RATE CUTS
AND THE FLIPPING AND FLOPPING IS BECAUSE THERE IS A FEELING
THAT WHEN YOU START TO SEE A LITTLE BIT OF WEAKENING IT WILL
HAPPEN ALL AT ONCE. WE HAVE HEARD THIS FROM
CITIGROUP AND A LIST OF PEOPLE. DO YOU ADHERE TO THAT IDEA?
SIMON: I DO NOT THINK THAT IS THE WAY
ECONOMIES WORK, I THINK IT IS THE WAY MARKETS WORK.
IF YOU LIKE THE BATTLE THIS YEAR FOR NARRATIVES.
THAT IS A NICE WAY OF DESCRIBING IT.
THOSE WHO LOOK AT PREVIOUS CYCLES, WHICH IS ONE OF THOSE
FAST-MOVING CONSUMER GOODS, I THINK IT WAS PRINGLES, WHEN YOU
POP YOU CANNOT STOP. IF YOU ARE THE FEDERAL RESERVE
ONCE YOU START CUTTING RATES CAN YOU STOP?
EVERYONE IS TALKING ABOUT A VERY GRADUAL EASING CYCLE, IF
YOU LOOK BACK AT PREVIOUS EPISODES YOU SAY THAT IS NOT
REVEALED BEHAVIOR. ONCE YOU START THE EXERCISE YOU
HAVE TO KEEP GOING. THAT IS ONE OF THE REASONS WHY
WE HAVE HAD THIS TUG-OF-WAR BETWEEN A NARRATIVE THAT TAKES
HISTORIC REVEALED BEHAVIOR VERSUS THOSE LOOKING AT THE
REAL TIME INDICATOR AND SAYING IT DOES NOT JUSTIFY AN EASING
CYCLE FROM THE FED OR ANY MAJOR CENTRAL BANKS. JONATHAN: CENTRAL BANKS -- LISA:
CENTRAL BANKS IN A REBRANDING EFFORT.
MAYBE WE SHOULD GO TO THE PRINGLES PEOPLE.
YOU CAN POP AND THEN LET IT GET STALE.
HOW MUCH ARE WE SEEING THE MESSAGE COMING FROM TOM BARKIN,
HOW MUCH OF THAT IS WHAT FED OFFICIALS ARE TRYING TO
COMMUNICATE, OR DO THEY ALSO THINK THEY WILL HAVE TO CUT
RATES AGGRESSIVELY AND THEY WILL NOT GET BEHIND THIS HIGHER
FOR LONGER NARRATIVE? SIMON: WHILE THIS IS NOT EXPLICIT
FORWARD GUIDANCE, IT IS FINANCIAL CONDITIONS MANAGEMENT.
WE HAVE SPOKEN ON PREVIOUS SHOWS FOR THE LAST OF THE --
FOR MOST OF THE LAST 18 MONTHS ABOUT THE CREDIBILITY OF THE
MESSAGE BEING KEY THAT YOU DO NOT HAVE TO FOLLOW THROUGH WITH
THE POLICY MOVE THE MARKET WILL HAVE INDIGESTION ABOUT.
WHETHER THAT IS THE SPECULATION ROUND OF FURTHER HIKE TO
INTEREST RATES OR WHETHER THAT IS THE CREDIBILITY OF YOUR
MESSAGE OF AN EASING CYCLE. IF YOU CAN GET THAT MESSAGE
ACROSS AND SAY REVEALED BEHAVIOR OF PREVIOUS CYCLES MAY
NOT BE THE GUIDE YOU THINK IT IS EVEN THOUGH IT POPULATES ALL
OF YOUR RESPONSE MODELS, THAT IS AN IMPORTANT CHARACTERISTIC
OF FED SPEAK THIS WEEK, NEXT WEEK, ALL THE WAY THROUGH THE
SUMMER. THE ABILITY TO ASCRIBE CREDIBILITY TO THAT MESSAGE
VERSUS WHAT IS TRYING TO AVOID THE DIFFICULT POSITION YOU DO
NOT WANT TO BE IN AS A POLICYMAKER, THAT IS THE SKILL
IN THESE MARKETS. LISA: IN THE MEANTIME THE SECOND AND
THIRD TIER BANKS -- AS JOHN WOULD CALL THEM -- WE GOT THE
BANK OF SWEDEN. THEY DID NOT CUT RATES.
ON THURSDAY WE GET THE BANK OF ENGLAND DECISION.
HOW MUCH DO YOU EXPECT TO PUSH BACK FROM CENTRAL BANKS NOT
BECAUSE CONDITIONS WARRANT BUT BECAUSE THE FED HAS NOT GIVEN
THE GREEN LIGHT AND THEY NEED THAT? SIMON:
I WROTE IN MY NOTES IN 1984 THERE WAS THE PLAZA COURT.
THE U.S. DOLLAR, OUR CURRENCY, YOUR
PROBLEM. 40 YEARS ON IT IS OUR CURRENCY,
OUR DEBT, OUR DEMAND, YOUR PROBLEM.
THAT IS SYMPTOMATIC WHAT WE WILL HEAR FROM THE ECB AND
LATER IN THE WEEK FROM THE BANK OF ENGLAND.
HOW MUCH CURRENCY WEAKNESS DO YOU WANT TO ABSORB INTO YOUR
DOMESTIC ECONOMY? YOU ONLY NEED TO LOOK AT EVENTS
IN JAPAN TO RECOGNIZE THERE IS A POTENTIAL PATH WHERE YOU
START TO HAVE QUITE DAMAGING CURRENCY WEAKNESS.
PERHAPS NOT IN TERMS OF JAPAN IMPORTING INFLATION RISK, BUT
FURTHER UP LIKE THE SECOND AND THIRD TIER BANKS JONATHAN
REFERS TO, YOU HAVE REAL CONCERNS, MAYBE NOT SPOKEN
PUBLICLY BUT CERTAINLY PRIVATELY ABOUT CURRENCY
WEAKNESS GENERATING A SECOND ROUND OF INFLATIONARY FACTS.
JONATHAN: YOU ARE ONE OF THE BEST. SIMON
FRENCH ON THE LATEST. ENJOY YOUR PEACE IN THE TIMES OVER
THE WEEKEND. IT DOES NOT MEAN I HAVE ANY
LESS RESPECT FOR THESE INSTITUTIONS.
WORLD'S OLDEST CENTRAL BANK IN SWEDEN.
IN TERMS OF THEIR IMPACT ON MARKETS YOU HAVE TIER ONE
CENTRAL BANKS AND TIER TWO AND TIER THREE. LISA:
WILL NOW CONSISTENTLY REFER TO THEM AS THAT AND CREDIT YOU.
JONATHAN: THAT IS WHY I REFER TO THEM AS
TO YOUR TWO AND TIER THREE. LISA: IS RELEVANT AND FAIR.
THERE'S A QUESTION AROUND THE CENTRAL BANKER OF THE WORLD,
JAY POWELL, HOW MUCH HE NEEDS TO SET A TONE BEFORE THE REST
CAN FOLLOW. A LOT OF PEOPLE ARSON THE FIRST
CUT DOES NOT MATTER. IS THAT TRUE BECAUSE THERE IS A
PAIN POINT. JONATHAN: YOU ARE POINTING TO CHRISTINE
LAGARDE. LISA: FASHION ICON. THE FASHION ICON OF ECONOMICS?
ANNMARIE: SHE IS VERY CHIC. LISA: IS THAT YOUR MODEL?
JONATHAN: YOU ARE IN ON THIS TOO?
ANNMARIE: I AM NOT HAVING A GO. LISA: I THINK IT IS LOVELY.
I THINK IT IS BEAUTIFUL. JONATHAN:
COMING UP, DISNEY CFO HUGH JOHNSTON WILL BE JOINING US.
FORMER WHITE HOUSE FELLOW ELLIOTT ACKERMAN AND DEBORAH
CUNNINGHAM. THAT IS ALL STILL TO COME.
EQUITY FUTURES POSITIVE NOT EVEN .1% ON THE S&P.
YIELDS LOWER ON THE 10 YEAR. ♪ >> THE KEY DRIVER FOR U.S.
EQUITIES HAVE BEEN EARNINGS DRIVEN BY LARGE CAP TRADE. >> THEY HAVE DELIVERED ON THE
EARNINGS FRONT. >> THE BIGGEST DRIVER HAS BEEN
BIG TECH COMPANIES. >> NEAR-TERM I LIKE BANKS AND
OTHER SECTORS TO BENEFIT FROM THE GOLDILOCKS. >> WE ARE OPTIMISTIC FOR AN
IMPROVED MERGERS AND ACQUISITIONS UNDERWRITING
MARKET FOR THE REST OF THIS YEAR. >> THIS IS "BLOOMBERG
SURVEILLANCE" WITH JONATHAN FERRO, LISA
ABRAMOWICZ, AND ANNMARIE HORDERN. JONATHAN:
THE SECOND HOUR OF BLOOMBERG SURVEILLANCE BEGINS RIGHT NOW.
PLENTY TO TALK ABOUT. LET'S BEGIN WITH THE WALT
DISNEY COMPANY. THAT STOCK LOWER 4% TO 5% IN
THE PREMARKET FOLLOWING A DECENT RUN OF GAINS YEAR TO
DATE. YOUR TO DATE. BEFORE TODAY WAS HIGHER 29%.
A LITTLE BIT SOFTER THIS MORNING. THE NUMBERS DECENT.
IT IS A BEAT ON EARNINGS. UPWARD REVISION TO THE OUTLOOK
AND THE LOSSES IN THE STREAMING BUSINESS APPEARED TO BE
NARROWING. LISA: PEOPLE STILL WANT TO GO TO THE
PARKS AND STILL WANT TO GO ON DISNEY CRUISES.
PEOPLE HAVE SEEN PRICING POWER RISING TO OFFSET THE LOSSES.
THEY'VE ALSO SAID THEY WILL INCREASE GUIDANCE FOR FULL-YEAR
GROWTH BY 20% TO 25%. A LOT OF THE GAINS HAVE COME
FROM COST-CUTTING AS WELL AS A REFOCUSING.
WHAT WILL ADDITIONAL GAINS COME FROM? ANNMARIE:
I LOOK AT THIS TO BILLION DOLLARS IMPAIRMENT CHARGE THEY
TOOK. THAT IS WHAT IS WEIGHING ON THE
STOCK THIS MORNING. TO YOUR POINT THEY BEAT
ESTIMATES AND NARROW IN TERMS OF THE LOSSES IN STREAMING TB
BUSINESSES. HIGHER TICKET PRICES.
YOU SEE THIS DEMAND FOR THESE EXPERIENCES AT THEIR THEME
PARKS AND WIRE WE SEEING PRESSURE? JONATHAN:
IT IS THE CONSUMER PRICE TOLERANCE I AM INTERESTED IN.
WHAT WE HAVE HEARD REPEATEDLY HIS UPPER END STABILITY AND
LOWER END FRAGILITY. WE HAVE HAD GUESTS THAT SAY
THOSE WORDS. THE THEME PARK BUSINESS SEEMS
TO BE BOOMING. LISA: PEOPLE STILL FAVORITE
EXPERIENCES. THE POST-PANDEMIC LURE OF
EXISTING IN THE WORLD AND NOT JUST THROUGH A SCREEN HAS
PERSISTED. HOW FAR CAN THAT GO? I WOULD ARGUE THERE IS THIS ONE
QUESTION MARK ALSO WHICH IS THE STREAMING NUMBERS DO NOT COME
IN AS HIGH AS PEOPLE HAD EXPECTED FOR DISNEY PLUS.
WHAT IS GOING TO OFFSET ON THE OTHER SITE AT A TIME CONSUMERS
ARE WILLING TO SPEND ON THE EXPERIENCE.
ARE THEY WILLING TO SPEND ON THE STREAMING? JONATHAN:
THAT STOCK IS LOWER 4%. FUTURES ON THE S&P 500 POSITIVE
0.05%. THREE DAYS OF GAINS ON THE S&P.
IN THE BOND MARKET YIELDS RALLY. LOWER TWO OR THREE BASIS POINTS
ON THE 10 YEAR TO 4.46. COMING UP WE WILL CATCH UP WITH
THE DISNEY CEO HUGH JOHNSTON. ALEX GEL OFF OF BERNSTEIN AND
U.S. MARINE CORPS VETERAN ELLIOTT
ACKERMAN AS ISRAELI TROOPS TAKE CONTROL OF THE RAFAH BORDER
CROSSING. DISNEY REPORTING PHYSICAL
SECOND QUARTER -- DISNEY REPORTING FISCAL SECOND QUARTER
PROFITS. PUTTING US NOW FOR MORE IS THE
DISNEY CFO HUGH JOHNSTON. WONDERFUL TO CATCH UP WITH YOU
ONCE AGAIN. I WANT TO BEGIN TALKING ABOUT
THE THEME PARK BUSINESS AND THE CONSUMER PRICE TOLERANCE YOU
SEE. YOU STILL HAVE THAT PRICING POWER AT A TIME WHEN MANY
COMPANIES ARE REPORTING THERE IS UPPER END STABILITY BUT MAY
LOWER END FRAGILITY? HUGH:
GOOD MORNING AND GREAT TO BE WITH YOU.
30% EPS GROWTH IS WHAT LET US TO RAISE GUIDANCE TO 25% EPS
GROWTH FOR THE YEAR WHICH IS QUITE STRONG. TWO BIG STORIES. NUMBER ONE, OUR EXPERIENCES
BUSINESS WAS UP 10% ON A REVENUE BASIS. 12% ON A NO WAY OUT -- ON AND
OI BASIS. THE VALUE CONSUMER IS
STRUGGLING AND MAKING CHOICES. WE ARE NOT SEEING AS MUCH IS
THAT IN OUR PORTFOLIO OF PRODUCTS.
THE OTHER POSITIVE IS THE STREAMING SERVICE.
LAST YEAR WE LOST ABOUT $600 MILLION. THIS YEAR WE ARE ABOUT
BREAKEVEN AND WE SAW 12% REVENUE GROWTH.
WE WERE ENCOURAGED BY THE PROGRESS IN A RELATIVE SHORT
TIME. LISA: YOU SAID YOU'RE NOT SEEING THAT
KIND OF PRICE SENSITIVITY. HOW MUCH COULD YOU INCREASE
PRICES HUGH:? HUGH:IS A GREAT QUESTION.
WE TOOK PRICES UP IN THE BEGINNING OF THIS YEAR AND DID
NOT SEE MUCH OF AN IMPACT. AS TO WHAT THE FUTURE BRINGS WE
ARE VERY JUDICIOUS WITH THE WAY WE PRICE.
WE WANT TO PROVIDE ACCESS TO AS MANY GUESTS AS WE POSSIBLY CAN.
WE BELIEVE THE GREAT EXPERIENCES WE PROVIDE.
PEOPLE ARE WILLING TO PAY FOR. JONATHAN:
LET'S TALK ABOUT THE STREAMING BUSINESS JUST A LITTLE BIT MORE
AND MORE SPECIFICALLY HULU. I WANT TO GET INTO THE FUTURE
OF THAT BUSINESS. CAN WE TALK ABOUT THE LIKES OF
SHOGUN ON HULU, HOW IMPRESSIVE THAT CONTENT WAS.
WHEN YOU HAVE A BIG HIT OUT DOES IT TRANSLATE INTO GAINS
FOR THE COMPANY? HOW DOES IT FALL TO THE BOTTOM
LINE? HUGH: IT DOES CREATE TWO THINGS.
IT BRINGS NEW SUBSCRIBERS. WE CALL THEM FIRST SUBSCRIBERS.
THOSE SHOWS PULL PEOPLE INTO THE SERVICE.
ONCE THERE INTO THE SERVICE THEY REALIZE THE GREAT AMOUNT
OF CONTENT THAT IS OUT THERE. THOUGH SHOWS INCREASED
STICKINESS OVER TIME. FROM BOTH PERSPECTIVES THEY ARE
TRULY ADDITIVE. THE OTHER PIECE THAT IS
TERRIFIC IS IT DOES INTEGRATE WELL WITH THE LINEAR BUSINESS.
WE USE THESE DIFFERENT WINDOWS TO CHOOSE WHEN TO SHOW THINGS,
WHETHER IT IS ON FX OR ON ABC AND THEN INTO THE STREAMING
SERVICE. WE ARE GETTING QUITE GOOD AT
REACHING DIFFERENT AUDIENCES, STREAMING BEING A YOUNGER
AUDIENCE, THE LINEAR BUSINESS BEING A MORE MATURE AUDIENCE.
IT GIVES US THE ABILITY TO REACH THE MOST PEOPLE WHICH IS
TERRIFIC FROM AN ADVERTISING AND SUBSCRIBER PERSPECTIVE.
JONATHAN: THAT SETS UP THE CONVERSATION
ABOUT THE FUTURE OF HULU. HER REPORT YESTERDAY FROM
REUTERS THAT JP MORGAN HAS VALUED THE COMPANY AT CLOSE TO
$27.5 BILLION, MORGAN STANLEY VALUING HULU FOR COMCAST AT
MORE THAN $40 BILLION. THEY ALSO REPORTED WE ARE
LOOKING FOR AN INDEPENDENT VALUATION TO CLOSE THE GAP.
COULD YOU TELL US OF THAT IS AN ACCURATE REPRESENTATION OF THE
CURRENT STATE OF AFFAIRS? HUGH: WE HAVE A WELL-DEFINED PROCESS
IN TERMS OF HOW THIS WILL PLAY OUT. JAN THAT I WILL NOT COMMENT
RIGHT NOW. ONE OF THE DISCIPLINES --
BEYOND THAT I WILL NOT COMMENT ON THAT.
ONE OF THE DISCIPLINES I HAVE IS I TALK ABOUT EMANATE AFTER
IT IS DONE. JONATHAN: LET'S TALK ABOUT GOING FORWARD
FROM HERE. WHAT THE BIG OPPORTUNITIES ARE
FOR THE STREAMING BUSINESS. HUGH:
I THINK THERE ARE A MULTITUDE OF OPPORTUNITIES.
NUMBER ONE, GREAT PROGRAMMING. WE CREATE SO MUCH OF OUR OWN IP.
NUMBER TWO IS DRIVING ENGAGEMENT AND BUNDLING DOES
THAT, WHETHER IT IS WITH SPORTS, WHETHER IT IS WITH
LATIN AMERICA WHERE WE ARE PUTTING SPORTS, GENERAL
ENTERTAINMENT COME AND DISNEY PLUS TOGETHER, AND WE ADDED
HULU ON DISNEY PLUS. BUNDLING IS AN OPPORTUNITY.
THIRD IS PASSWORD SHARING. THAT IS AN OPPORTUNITY THAT IS
SUBSTANTIAL AND WILL DRIVE GROWTH.
FOURTH IS DISTRIBUTION COSTS. GOING DIRECT TO CONSUMER IT WE
CAN BUILD A STRONGER RELATIONSHIP WITH THE CONSUMER
AND ALSO REDUCE OUR COST. FIT IS TECHNOLOGY.
CLEARLY AN IN TERMS OF RECOMMENDATIONS. WE ARE WELL CONVINCED THIS WILL
BE -- ANNMARIE: YOU MENTIONED A NUMBER OF
THINGS, INCLUDING PASSWORD SHARING. MUCH TO EXPECT THOSE
INITIATIVES TO SAVE MONEY? WHAT IS THE COST-BENEFIT? HUGH:
THINGS LIKE PASSWORD SHARING DRIVE REVENUE GROWTH.
DISTRIBUTION COSTS SAVE MONEY. THINGS LIKE RECOMMENDATION
ENGINES AND DIRECT TO CONSUMER MARKETING TENDS TO REDUCE CHURN
WHICH ALLOWS YOU TO REDUCE MARKETING COSTS.
THERE IS SYNERGY BETWEEN THE REVENUE BENEFITS AND THE COST
BENEFITS. OVERALL WE ARE LOOKING TO MAKE
THIS INTO A GREAT BUSINESS, NOT JUST A GROWTH BUSINESS BUT A
GREAT MARGIN BUSINESS FOR THE COMPANY. LISA:
WE HAVE BEEN TALKING ABOUT THE COST CUTTING OPERATIONS IN
DISNEY. HAVE WE FINISHED SOME OF THE
SHRINKING? ARE YOU BACK ON SOME SORT OF
GROWTH TRAJECTORY? HUGH: WE ARE BACK ON A GROWTH
TRAJECTORY. THAT SAID WE WILL ALWAYS BE
LOOKING HARD IN OUR COST STRUCTURE AND IN PARTICULAR
LOOKING TO REDUCE COSTS WHERE THEY HAD LESS VALUE THAN THEY
USED TO AND REDEPLOY SOME OF THAT MONEY INTO THE BUSINESS SO
WE CAN ACTUALLY GROW THE BALANCE OF THE BUSINESS.
I THINK THAT IS A NEVER-ENDING EXERCISE OF LOOKING FOR WAYS TO
BE MORE EFFICIENT AS A COMPANY SO YOU CAN INVEST IN YOUR
FUTURE. LISA: WHEN YOU TALK ABOUT GROWING,
WHERE THE GROWTH GEOGRAPHICALLY? IN U.S.
THERE IS A STRONG BUSINESS AND IN EUROPE THERE IS A PARKS
PRESENCE, BUT IN ASIA AND IN CHINA THAT HAS BEEN A GROWTH
AREA. HOW MUCH CAN THAT BE A BRIGHT
SPOT AT A TIME OF INCREASING GEOPOLITICAL TENSIONS? HUGH:
CANNOT JUST CHINA BUT ALL OF ASIA REPRESENT GROWTH
OPPORTUNITIES, BOTH IN TERMS OF THE STREAMING SERVICE AND IN
TERMS OF THE PARKS BUSINESS. WE SEE GOOD GROWTH
OPPORTUNITIES. EUROPE AND LATIN AMERICA
CONTINUE TO BE GOOD GROWTH OPPORTUNITIES.
NORTH AMERICA, WE ARE NOT DONE GROWING.
WE THINK THERE ARE TRADITIONAL -- WE THINK THERE OPPORTUNITIES
AT HOME. ANNMARIE: WHEN IT COMES TO ASIA-PACIFIC
IS IT DOMESTIC DEMAND OR TOURIST IN THE REGION? HUGH:
A COMBINATION OF BOTH. ANNMARIE: WHEN YOU LOOK AT CHINA. TO LISA'S POINT, WE ARE GOING
INTO A HEATED POLITICAL ELECTION IN NOVEMBER, VERY HOT
RHETORIC REGARDING CHINA, IS IT BECOMING MORE CHALLENGING TO
DEAL WITH AUTHORITIES IN BEIJING AND BUSINESS ON THE
GROUND GIVEN THE INCREASED GEOPOLITICAL TENSIONS? HUGH:
IT HAS NOT BEEN FOR US. ONE OF THE BENEFITS OF WHAT WE
DO FOR A LIVING IS WE MAKE PEOPLE SMILE, WE BRING THEM
HAPPINESS, WE BRING THEM TO THE MOST MAGICAL PLACE ON EARTH.
THE GOVERNMENT IS INVESTING IN INFRASTRUCTURE TO MAKE IT
EASIER FOR GUESTS TO GET TO AND FROM THE PARK, WE ARE
CONTINUING TO INVEST IN THE PARK TO DRIVE GROWTH.
IT IS DOING BETTER NOW THERE NEVER HAS. WE ARE THE FORTUNATE
BENEFICIARIES OF BRINGING PEOPLE JOY IN A WORLD THAT
NEEDS IT. JONATHAN: WE HAVE TO TALK ABOUT THE NBA
DEAL AS WELL. HOW DO YOU MAKE MONEY FROM
SOMETHING LIKE THAT? I WANT TO UNDERSTAND THE
NUMBERS BUSINESS. HUGH: THE NBA, WE ARE IN THE MIDDLE
OF DISCUSSIONS. I DO NOT COMMENT ON SPECIFIC
DEALS UNTIL THEY ARE DONE. WE HAVE HAD A LONG AND
PRODUCTIVE RELATIONSHIP WITH THE NBA. AS THINGS COME UP, WE'LL DECIDE
WHETHER WE WANT TO CONTINUE IN THE CURRENT FORM, REDUCE THEM,
OR EVEN NOT CONTINUE TO CARRY THEM ANYMORE.
I THINK WE WILL BALANCE THE PORTFOLIO AND GET THINGS WE
NEED AS THE 35% MARKET SHAREHOLDER IN THE SPORTS
BUSINESS TO CONTINUE TO MAKE ESPN AND TRUE LEADER IN SPORTS.
JONATHAN: YOU SAID YOU WILL NOT COMMENT
ON DEALS UNTIL THEY ARE DONE BUT MAYBE WE'LL COME ON OTHER
PEOPLE'S DEALS. SONY AND PARAMOUNT, HOW WILL
THAT IMPACT HOLLYWOOD, IS THAT SOMETHING YOU WOULD IMPOSE --
YOU WOULD OPPOSE? HUGH: I DID NOT HAVE A REAL COMMENT
ON THAT. JONATHAN: I DID NOT EXPECT YOU TO.
WE HAVE TO ASK. HUGH JOHNSTON. THAT STOCK IS DOWN BUT UP ON
THE YEAR, HIGHER ABOUT 29%. THEME PARK BUSINESS THERE IS
PRICING POWER, LOSSES IN THE STREAMING BUSINESS -- THERE'S A
LOT YOU CANNOT COMMENT ON -- THERE'S A LOT HUGH CANNOT
COMMENT ON. THERE IS A LOT OF POTENTIAL.
LISA: ALSO THE POTENTIAL FOR PARAMOUNT AND IF THEY GET
BOUGHT BY SONY. THERE IS A REAL QUESTION GOING
FORWARD ABOUT WHAT MEDIA LOOKS LIKE AND WE HAVE NOT SHAKEN
THAT OUT AND WHERE DISNEY FITS INTO THAT WILL HAVE TO BE
DETERMINED BY THE LANDSCAPE. JONATHAN:
SOFTER ON THE SESSION IN THE PREMARKET.
LET'S GET YOU AN UPDATE ON THE STORIES ELSEWHERE. DANI: PRESIDENT BIDEN PLANS TO
DENOUNCE ANTISEMITISM IN A SPEECH.
HE WILL BE DELIVERING THE KEYNOTE ADDRESS AT THE
HOLOCAUST MUSEUM'S DAY OF REMEMBRANCE.
THE SPEECH WILL UNDERSCORE BIDEN'S POLITICAL DILEMMA SEVEN
MONTHS INTO THE WAR IN GAZA. DIVISIONS WITHIN THE DEMOCRATIC
PARTY COMPLICATE HIS ODDS OF WINNING THE NOVEMBER ELECTION.
COLLEGE CAMPUSES ACROSS THE COUNTRY ARE STILL GRAPPLING
WITH PRO-PALESTINIAN PROTESTS. COLUMBIA UNIVERSITY HAS CALLED
OFF ITS MAIN COMMENCEMENT CEREMONY YESTERDAY LESS THAN A
WEEK AFTER CALLING IN POLICE DEMONSTRATORS.
HARVARD AND M.I.T. ARE WARNING STUDENTS TO LEAVE
THEIR AND CAM IT OR FACE SUSPENSION.
GOOD NEWS FOR THE BOND DESKS. BONUSES ARE SET TO SWELL THIS
YEAR. PAYOUTS ROSE AS MUCH AS MUCH IS
25% THIS YEAR ACCORDING TO A REPORT.
FOR THE BOND TRADERS AND EQUITY UNDERWRITERS BONUSES MAY RISE
20%. FOR INDUSTRYWIDE FIGURES, STILL
ABOVE THE SOARING PAYOUTS. THE CONSULTANCY FIRM SAID WALL
STREET IS ENTERING A PHASE MORE SUSTAINABLE GROWTH.
THAT IS YOUR BLOOMBERG BRIEF. JONATHAN:
WILL TOUCH BASE WITH YOU AGAIN IN ABOUT 30 MINUTES.
UP NEXT, TRADERS LOOKING FOR THE BIG ROTATION. >> WE HAVE HAD THE BULL RUN
FROM U.S. EQUITIES DRIVEN BY TECH AND THE
AI STORY. FROM A MORE TACTICAL VIEW
PIERCING MORE CONVERGENCE. JONATHAN:
THAT CONVERSATION JUST AROUND THE CORNER.
LIVE FROM NEW YORK, GOOD MORNING. JONATHAN:
EQUITIES ON THE S&P 500 UNCHANGED THIS MORNING
FOLLOWING A THREE-DAY WINNING STREAK ON THE S&P.
YIELDS LOWER FOR A FOR A FIFTH CONSECUTIVE SESSION IN THE BOND
MARKET. DOWN THREE BASIS POINTS ON THE
10 YEAR. 4.45. TRADERS LOOKING FOR THE BIG
ROTATION. >> WE HAVE HAD THE BULL RUN
FROM U.S. EQUITIES DRIVEN BY TECH AND THE
AI STORY. THAT IS A SECULAR THING THAT
MAKES THE U.S. STAND OUT A STRUCTURAL BASIS.
FROM A MORE TACTICAL VIEW WE ARE SEEING MORE CONVERGENCE.
A BIT OF A CATCH UP TRADE. JONATHAN:
THE S&P 500 ON TRACK FOR ITS BEST THREE-DAY RUN THIS YEAR
WITH INVESTORS LOOKING OUT FOR OPPORTUNITIES ACROSS THE
BROADER MARKET. BERNSTEIN WRITING "THEY'RE BIG
FANS OF THE MARKET BROADENING OUT, NOT ONLY AS STOCK PICKERS
BUT IS A BIG INDICATOR. WE LOOK BACK AT WHEN
CONCENTRATION GAVE WAY TO BREATH AND THE RESULTS ARE GOOD
FOR THE ECONOMY AT THE MARKETS." ALEX IS WITH US.
WHY DO YOU THINK THIS COULD BE DURABLE? ALEX:
EVERYONE WAS SO CONCERNED WHEN THE MAGNIFICENT SEVEN STARTED
TO WEAKEN. OUR VIEW IS WE HAVE BEEN
WAITING FOR IT FOR A WHILE AND WE ARE HAPPY TO SEE A LOT OF
THE FORGOTTEN 493,. OUR VIEW IS A BROADER MARKET --
A LOT OF THE FORGOTTEN 493 COME UP.
INVESTORS ARE NOT FOCUSED ON A SMALL SUBSET OF COMPANIES BUT
ON BROAD MARKET OPPORTUNITIES. JONATHAN:
DOES THIS EXTEND TO SMALL CAPS? APRIL WAS DREADFUL FOR THE
RUSSELL. WHY DOES THIS GET BETTER? ALEX:
IF YOU TELL ME WHERE THE ECONOMY LANDS AND INFLATION
LANDS THAT I CAN TELL YOU WHAT SMALL CAPS WILL DO.
SMALL CAPS ARE EXTREMELY DEPENDENT ON THE U.S.
ECONOMIC EXPANSION. IT IS HARD FOR THEM TO DO WELL
WHEN THE ECONOMY IS BOUNCING AROUND.
OUR VIEW IS WE ARE NOT IN RECESSION, WE DO NOT THINK WE
ARE GOING INTO RECESSION, BUT IT IS BEEN HARD FOR SMALL CAPS
TO BREAK OUT. LISA: IT HAS ALSO BEEN YIELDS HAVE
BEEN HIGHER THAN SMALLER COMPANIES CAN SUSTAIN.
THERE ARE MORE INTEREST-RATE SENSITIVE AND THEIR CONCERNS
ABOUT THE DEBT. A MUCH IS YOUR VIEW PREDICATED
ON THE IDEA OF A FED THAT CAN CUT RATES IN THE FACE OF
IMMACULATE DISINFLATION? ALEX: I DO NOT THINK THE FED NEEDS TO
CUT RATES AS LONG AS THEY DO NOT HIKE RATES.
OUR VIEW IS THE 10-YEAR FINISHES THE YEAR AT 4.25%, NOT
FAR FROM WHERE WE ARE TODAY. IT WILL BE A GRIND.
IT WILL NOT BE LIKE IT WAS A ROCK STAR TORI 24 IT WAS IN
2023, BUT WE WILL GRIND HIGHER FROM HERE. LISA:
THIS WILL BE NOT NECESSARILY IN THE FACE OF WEAKNESS BUT SIMPLY
NORMALIZATION. NOT ALL RATE CUTS ARE CREATED
EQUAL. JONATHAN: IT HAS BEEN A WHILE -- ALEX:
IT HAS BEEN A WILD SINCE WE HAVE SEEN A RATE CUT THAT
OCCURRED SINCE WE HAVE NOT SEEN AN EMERGENCY.
THERE ARE NOT A LOT OF PEOPLE THAT REMEMBER THE LAST TIME WE
CUT RATES WHEN EVERYTHING WAS FINE. THIS WILL BE THE FIRST
EXPERIENCE. WHAT YOU HAVE SEEN AS INVESTORS
ARE WAITING AND WAITING AND CANNOT WAIT TO GET TO THE OTHER
SIDE WHERE WE WILL HAVE THAT FIRST CUT.
OUR VIEW IS IT IS DECEMBER. TODAY IT IS MAY.
MAYBE DECEMBER OR THE NEXT TIME I AM HERE I SAY WE NEVER SAID
DECEMBER, IT IS MARCH. OUR EXPECTATION IS RATES STAY
WHERE THEY ARE, POTENTIALLY A CUT AT THE END OF THE YEAR,
THAT IS SUPPORTED BY MARKETS. LISA:
WAITING AND WAITING AS THE CASH AND MONEY MARKET FUNDS.
THAT IS THE MARKET MEASURE FAMILY PEOPLE ARE WAITING.
IT IS MORE THAN $6 TRILLION. IS THAT THE SIGNAL YOU SEE THAT
THIS IS THE TIME WHEN YOU'LL START TO SEE MONEY MARKET FUNDS
DOWN AS PEOPLE DEPLOY? ALEX: I WISH I COULD SAY THAT WOULD
OCCUR. THE MATH IS RELIABLE OVER MULTIPLE PERIODS IN HISTORY.
IF YOU ARE INVESTING OUT OF CASH AND INTO SOMETHING THAT
HAS DURATION IN THE FIXED INCOME MARKETS, YOU DO MUCH
BETTER SIX MONTHS IN ADVANCE OF THE FIRST RATE CUT.
I THINK THIS ONE INVESTORS WILL BE LATE IN GENERAL.
I THINK THEY WILL NEED TO SEE THE ANNOUNCEMENT COME OUT.
WE ARE CUTTING. THEN WE WILL SAY IT LET ME MOVE
THE MONEY MARKET. THERE NOT A LOT OF APPETITE TO
MOVE IN ADVANCE EVEN THOUGH THE MAT SAYS YOU SHOULD. LISA: IS NEAT -- JONATHAN:
DISNEY IS DOWN THIS MORNING BY 6%. PRICING POWER AND THE THEME
PARK BUSINESS, NOT WHAT WE'RE ARE HEARING ELSEWHERE.
WE ARE HEARING A LOSS OF PRICING POWER PUSHING TOWARDS
THE TIME WHEN MARGINS START TO GET SQUEEZED.
HOW CLOSE DO YOU THINK WE ARE TO THAT BIG MOMENT IN THIS
ECONOMY? ALEX: I THINK COMPANIES ARE BEING
MUCH MORE CAREFUL WITH COSTS. I THINK THEY RECOGNIZE THAT
TURNING THE DIAL AFTER INFLATION HAS PEAKED IS HARDER.
A YEAR OR TWO AGO IT WAS EASIER TO RAISE PRICES.
I SPEND A LOT OF TIME FLYING ACROSS THE COUNTRY AND I WATCH
-- NOT A TERRIFIC BAROMETER -- WHERE WE ARE IN PRICING POWER.
THERE ARE STILL INDUSTRIES THAT HAVE IT.
IT IS NOT AS IF ONCE WE ARE OVER THIS PECAN INFLATION WILL
BE IN DEFLATION. PRICES ARE NOT COMING DOWN,
THEY ARE JUST NOT GOING UP. COMPANIES ARE FINE TUNING THEIR
COST STRUCTURE TO ALLOW THEM TO BE AS PROFITABLE AS THEY ARE.
WE ARE HAVING A PRETTY GOOD EARNINGS SEASON AND THAT WAS
THE EXPECTATION. NOT AS GOOD AS WE HAVE HAD IN
OUR EXPECTATION IS THAT CONTINUES FOR THE REST OF THE
YEAR. JONATHAN: YOU MENTIONED INDUSTRIES WHERE
THERE WAS PRICING POWER. WHICH ONES? ALEX:
IT IS STILL IN DISCRETIONARY SPENDING WHERE THERE IS
HOUSEHOLD BALANCE SHEET STRENGTH.
TRAVEL AND LEISURE HAS BEEN VOLATILE. IT HAS BOUNCED AROUND.
WE GET EXCITED ABOUT THE AI REVOLUTION.
THERE ARE THOSE COMPANIES THAT WE VIEW AS ENABLERS OF THE AI
SPACE AND THEY'VE BEEN ABLE TO CHANGE PRICING.
THERE IS ALSO THE AI BENEFICIARIES THAT WILL PERFORM
BETTER AND BE MORE PRODUCTIVE AS A DIRECT RESULT OF AI AND WE
THINK THEY WILL COMMAND HIGHER PRICES AS WELL. ANNMARIE:
WHAT ARE YOU STAYING AWAY FROM? ALEX:
YOU HAVE TO BE CAREFUL ABOUT AREAS, COMPANIES THAT HAVE DONE
EXCEPTIONALLY WELL WITHOUT THE EARNINGS.
THERE IS A LOT OF HOPE THAT HAS OCCURRED IN THIS MARKET.
THAT IS A BIG PART OF 2023. A LOT OF INVESTORS MADE BETS ON
COMPANIES THINKING THEY WOULD DELIVER.
AS WE HAVE SEEN THERE HAS BEEN WOBBLING IN EARNINGS IN THOSE
NAMES. I WOULD SAY WE ARE FOCUSED ON
RELIABLE AND TRANSPARENT EARNINGS WHERE WE HAVE GOOD
VISIBILITY, AND STAYING AWAY FROM THE HOPE TRAIN. LISA:
THERE'S A QUESTION ABOUT HOW MUCH COMPANIES ARE CONTROLLING
COSTS. WE HAVE SEEN EARNINGS-PER-SHARE
BETTER THAN REVENUES. THIS HAS BEEN CONSISTENT AND
THIS IS THE PREDECESSOR TO COST-CUTTING.
HOW FAR WILL THAT GO? WILL THAT GO TO JOBS OR OTHER
AREAS? IS THERE ANYTHING LEFT TO CUT?
ALEX: THERE ARE AREAS TO CUT BROADLY
SPEAKING. HAVING SAID THAT YOU'VE SEEN
THE JOBS NUMBERS STAY STRONG. I SAID ABOUT THE JOBS NUMBER ON
FRIDAY IT IS AS PERFECT AS ONE COULD BE. I DO NOT HAVE AN EMOJI FOR
GOLDILOCKS ON MY PHONE BUT I'M SENDING A BUNCH OF THREE BEARS.
YOU WILL SEE COMPANIES LETTING PEOPLE GO OR SHRINKING COSTS
BUT GETTING SCOOPED UP QUICKLY. IT IS STILL A TIGHT JOB MARKET
AND THAT IS A KEY INDICATOR WE ARE NOT GOING INTO RECESSION.
WE DO NOT GO INTO RECESSION WE HAVE A JOB MARKET LIKE WE HAVE
TODAY. JONATHAN: STILL IMPRESSIVE.
LATER ON TODAY WILL CATCH UP WITH MR. ZANDI OF MOODY'S. MANY
PEOPLE HAVE COME ON THE PROGRAM AND TALK ABOUT THE SUPPLY-SIDE
BOOM, PEOPLE CROSSING THE BORDER AND GIVING JOBS TO
AMERICA WITHOUT WAGE GROWTH TAKING OFF.
WE HAD A REPORT THAT BORDER CONTACTS HAVE DROPPED BY QUITE
A LOT. IF YOU BELIEVE THAT IS WHAT WAS
HOLDING BACK WAGES BEFORE, WHAT WILL THIS LOOK LIKE IN THREE
MONTHS, SIX MONTHS, NINE MONTHS? LISA:
IF THIS IS A SUPPLY-SIDE DRIVEN RESPONSE, IF THAT STOPS BEEN
THE RESPONSE, HOW MUCH DO YOU SEE THE REAL WAGE PRESSURE
COMING BACK INTO PLAY? HOW MUCH IS THIS A CONSISTENT
GIVEN THAT CAN CONTINUE. JONATHAN:
MARK ZANDI, CHIEF ECONOMIST OF MOODY'S JOINING US.
COMING UP WE'LL CATCH UP WITH FORMER WHITE HOUSE FELLOW ELLIE
ACKERMAN ON THE MIDDLE EAST. DISNEY NEAR SESSION LOWS.
THAT STOCK WAS DOWN HARD IN THE PREMARKET COME IT IS -6%. ♪ JONATHAN: 0% WALT DISNEY COMPANY BY 6%
IN THE LAST 5, 10 MINUTES OR SO. FIVE DAYS OF YIELDS FALLING ON
A 10 YEAR. DOWN ANOTHER TWO OR THREE BASIS
POINTS. WE'VE HAD A MOVE OF MORE THAN 20 BASIS LOWER, AROUND THAT ECI
PRINT SINCE THEN, THAT MOVE HAS FADED AND FADED HARD. LISA: THE MARKET WAS EXPECTING A FED
PIT. THEY DIDN'T GET IT, SO THEY WENT BACK TO THE WAY IT WAS OR.
THE QUESTION REALLY IS JUST HOW MUCH ARE WE SWINGING TO THE
OTHER SIDE? MAYBE WE GOT A COUPLE OF PRINTS
THAT WERE UNEXPECTED? JONATHAN: AFTER COMMENTARY BACK IN U.S.
OFFICIALS, JANET YELLEN AND JAPANESE OFFICIALS OUT OF THE
MINISTRY OF FINANCE. ANNMARIE: SHE SAID SHE EXPECTS
INTERVENTIONS TO BE RARE, THEN SHE SET WHAT ARE RUMORS WHICH I --? LISA: WHY WOULD THEY? WHAT IS THAT THE USS WHY DIDN'T
YOU GIVE US A QUALIFIED ABOUT THAT OF THIS?
PEOPLE ARE SAYING THAT THIS IS A DROP IN THE POCKET.
IT IS NOT LIKE THEY ARE TRYING TO MANIPULATE THE CURRENCY FOR
SOME SORT OF TRADE DYNAMIC THIS IS SIMPLY A WAY TO STABILIZE
SOMETHING. JONATHAN: THEY HAVE AN AGREEMENT TO
INTERVENE IN CERTAIN CIRCUMSTANCES AND FOR THERE TO
BE A IN TRIPS TO PARTIES AT --
CORRESPONDENCE. LISA: I CERTAIN POINT THAT JONATHAN: HERE WE ARE. CURRENT MONETARY LESION TARGET
MINNEAPOLIS 1:15 THIS AFTERNOON. DON'T MISS THAT.
SEVEN MORE SPEAKERS ON DECK LATER THIS WEEK. " I CARE OF I PACED LIKE OUTLOOK
TO BE HAPPY LESION WILL FURTHER WITH THE POLICY. CURRENT
RATES OF THE CURRENT LEVEL, WE KEEP LOCKYER. LISA: WHAT THIS MARKET IS LOOKING FOR INSIDE RIGHT CAP LIKE HOLDING
NAMEPLATE CUT OFF FUTURE? YOU HAVE A JOB WITH THE SAME WE
ARE GOING TO MAKE A CUT, IT IS JUST TERRIBLE WHEN. JONATHAN: AS OUR GOOD FRIEND TK WOULD
SAY, EXTEND THE AXIS. THANKS IN PART TO NARROWER
LOSSES IN THE STREAMING BUSINESS AND HIGH TICKET PRICES.
EARNINGS GROWTH TO 25% FROM 20. NOT ENOUGH TO SATISFY A LOT OF
INVESTORS. STOCKS DOWN BY MORE THAN 6%
AFTER A PRETTY STELLAR RUN. ANNMARIE:
UTTERLY PROFIT AND THIS HAS TO GO TO THE LIKES OF PEOPLE LIKE
YOU WATCHING "SH OGUN." PRETTY GOOD NUMBERS, YET THE
STOCK IS A LITTLE BIT LOWER THAN EXPECTED. LISA:
THEY CAME IN SHORT OF ESTIMATES. HOW ARE THEY GOING TO GROW? IS IT JUST TO SELLOFF DIFFERENT
PIECES OF THIS? WE ARE NOT REALLY GETTING CLEAR
ANSWERS. JONATHAN: STREAMING IS A VERY DIFFICULT
BUSINESS RIGHT NOW. WE WILL CATCH UP WITH STEVE
EISMAN A LITTLE BIT LATER. HE IS SETTING GOOD TIMES.
YOU TALK ABOUT STORIES AND BAD TIMES YOU FOCUS ON BALANCE
SHEET. 2020 WAS GOOD TIMES FOR STREAMING. 2024 IS BAD TIMES.
LISA: WHICH IS THE REASON YOU'VE SEEN
SOME IN DISCUSSIONS AROUND CONSOLIDATION WHICH RAISES THE
RUSSIAN OF HOW ARE THEY GOING TO CONSOLIDATE?
RIGHT NOW THE FOCUS IS NOT ON EXPANDING THEIR BASE OF
SUBSCRIBERS, IT IS ON PASSWORD SHARING, SOME OF THESE OTHER
REVENUE DRIVERS. HOW MUCH CAN YOU BANK ON THAT
AND WHAT PRICE POINTS CAN PEOPLE EXPECT? JONATHAN:
STOCK LOWER BY ABOUT 6% IN THE PREMARKET.
ISRAEL ORDERED PLANS TO TAKE THE GAZAN CITY OF RAFAH. HAMAS SAYING ALL MOVING --,
THIS COMES AFTER ISRAEL REJECTED A CEASE-FIRE AGREEMENT
SAYING IT IS FAR FROM ISRAEL'S NECESSARY DEMANDS.
ELLIOT, WE TALKED IN THE PAST ABOUT THE NATURE OF COMBAT IN
GAZA. HOW DIFFERENT WILL IT BE IF
THEY BECOME MORE AGGRESSIVE IN PLACES LIKE RAFAH> >> I THINK
AS THIS OFFENSIVE PROCEED, WHAT WE ARE NATURALLY GOING TO SEE
IS THAT HAMAS WILL HAVE ITS BACK INCREASINGLY TO A WALL IN
THE NATURE OF THE FIGHTING COULD VERY WELL BECOME MUCH
MORE DESPERATE AND MUCH MORE AGGRESSIVE.
CONVERSELY, THE ISRAELIS ARE VERY MUCH ON THE CLOCK, GETTING
TO A POINT WHERE THE INTERNATIONAL IMMUNITY NEEDS TO
SEE SOME TYPE OF LIGHT AT THE END OF THE TIME WILL HEAR.
ANNMARIE: AXIOS SAYS THE BIDEN ADMINISTRATION KNEW ABOUT THE
LATEST CEASE-FIRE DEAL PROPOSAL THAT WAS NEGOTIATED BUT DID NOT
BRIEF ISRAEL BEFORE IT GOES ON TO SAY THIS EPISODE CREATED
DEEP DISAPPOINTMENT AND SUSPICION AMONGST SENIOR
ISRAELI OFFICIALS. HOW DIVIDED RIGHT NOW DO YOU
SEE THE BIDEN ADMINISTRATION WITH NETANYAHU AND HIS WAR
CABINET? >> I THINK TENSIONS COULD NOT
BE HIGHER. PRESIDENT BIDEN AS WE ARE
SEEING ON COLLEGE CAMPUSES AROUND THE UNITED STATES AND AS
WE ARE HEADING INTO THE DENTAL ELECTION IN THE WALL IS PAYING
A VERY REAL POLITICAL PRICE FOR THE WAR THAT IS GOING ON IN
GAZA. PRESIDENT BIDEN IS NOT JUST AN
ABSTRACTION, HIS EXISTENCE AND HIS SECOND ADMINISTRATION COULD
IN MANY WAYS HINGE ON GETTING SOME TYPE OF RESOLUTION IN
GAZA, SO TENSIONS ARE VERY HIGH NOT JUST INTERNATIONALLY,
DOMESTICALLY PROVIDING ANNMARIE: WHEN YOU LOOK AT THAT DEEP
PRESSURE AND THEN YOU SEE THAT IS REAL EVEN YESTERDAY WHEN
THEY SAID THAT THEY WILL NOT ACCEPT STEEL BUT THEY WANT TO
SEEK AN AGREEMENT, AND WE DO KNOW MEDIATORS WILL BE IN EGYPT
TODAY, DO YOU THINK WE CAN GET SOME SORT OF AGREEMENT? >> IT IS TO BE SEEN. IN ANY CONFLICT ULTIMATELY YOU
ONLY GET AN AGREEMENT WHEN BOTH SIDES REALIZE THEY HAVE MORE TO
GAIN BY NEGOTIATING THAN BY FIGHTING.
ISRAEL AT THIS POINT DOES NOT DEAL THAT HAS MORE TO GAIN BY
NEGOTIATING. IT DOESN'T FEEL THAT IS GOING
TO GET ALL OF THE HOSTAGES RELEASED AND IT FEELS THAT
HAMAS STILL REPRESENTS A THREAT THAT IS UNTENABLE ACROSS THEIR
BORDER. THEY WOULD LIKE TO NEGOTIATE,
BUT ONLY TO A POINT. THIS NECESSITATES THAT BOTH
SIDES DECIDE THAT THEY NO LONGER HAVE MORE TO GAIN BY
FIGHTING AND WE ARE JUST NOT THERE YET. LISA:
WE WERE SPEAKING WITH NORMAN RULE EARLIER THIS MORNING AND
HE SET ALL THE PRESSURE RIGHT NOW HAS BEEN ON ISRAEL.
THERE HASN'T BEEN THAT MUCH PRESSURE ON HAMAS.
DO YOU AGREE WITH THAT? >> ABSOLUTELY. I THINK THAT WHAT HAMAS AND
THEIR ALLIES, PARTICULARLY IRAN HAS DONE IS THEY HAVE DONE AN
EXCEPTIONAL JOB RINGING THE WAR TO EVERYBODY'S DOORSTEP, MAKING
IT THE NUMBER ONE ISSUE THAT HAS BEEN RUNNING IN THE U.S.
NEWS THE LAST WEEK 10 DAYS ON THESE COLLEGE CAMPUSES AND
HAMAS HAS NOT HAVE THE SAME TYPE OF PRESSURE.
ISRAEL HAS NOT BEEN ABLE TO DRIVE THE CONVERSATION.
LOOK AT THE DISPROPORTIONATE AMOUNT OF MEDIA COVERAGE TO
THESE PROTESTS IN THE U.S. VS. MEDIA COVERAGE ON THE FATE OF
THE HOSTAGES. THAT IS NOT AN INDICTMENT OF
U.S. MEDIA BUT MORE JUST EVIDENCE OF
HOW HAMAS HAS DONE A BETTER JOBS DURING THE CONVERSATION.
LISA: IT IS NOT NEW TO HAVE MEDIA
ANOTHER FRONT OF DIFFERENT WARS AND TRYING TO SKEW PUBLIC
OPINION BUT DEALS SLIGHTLY DIFFERENT IN TERMS OF HOW IT IS
BEING DISTRIBUTED. DO YOU HAVE A SENSE OF WHAT IS
DRIVING THIS, HOW HAMAS HAS GOTTEN THE UPPER HAND? >> IT IS REALLY A CONFLUENCE OF
EVENTS. THERE'S BEEN A LOT OF CONVERSATION THAT HIGHER
EDUCATION IN THE UNITED DATE AND TYPES OF MACRO NARRATIVES
THAT HAVE BEEN FED INTO U.S. INSTITUTIONAL FOR A DECADE NOW. YOU HAVE A MEDIA SCAPE THAT IS
INITIALLY GOING TO EVEN MORE SYMPATHETIC TO GAZA AND MORE
SYMPATHETIC IN A WAY THAT FAVORS HAMAS. I THINK THE SEED THEY PLANTED OVER YEARS ARE VERY
--BEARING FRUIT RIGHT NOW. ISRAEL'S ALLIES HAVEN'T PAID
ATTENTION TO THIS LONG GAME OPINION.
IT WILL BE INTERESTING TO SEE WHETHER ISRAEL AND ISRAEL'S
ALLIES WAKE UP TO THAT. JONATHAN:
I JUST WANT TO SIT ON THAT, THAT HAMAS, A DESIGNATED
TERRORIST ORGANIZATION IN THE UNITED STATES IS DOING A BETTER
JOB OF SECURING THE CONVERSATION THEN ISRAEL IS.
WHAT DOES THAT TELL YOU ABOUT A SITUATION, IS HAMAS STEERING
THINGS ARE JUST THE SITUATION ON THE GROUND IN GAZA THAT IS
DOING THAT? >> WARS ARE ALWAYS FOUGHT IN
TWO PLACES. THEY ARE FOUGHT IN THE
BATTLEFIELD AND ALSO IN THE REALM OF OPINION.
I THINK WHAT WE'RE SEEING IS A REAL DISCONNECT.
ON THE ONE HAND WHERE ISRAEL CERTAINLY HAS THE ADVANTAGE ON
THE BATTLE, WE'RE SEEING THAT IN THE NARRATIVE OR THE
SEGMENTS OF WESTERN CULTURE, HAMAS VERY MUCH HAS THE UPPER
HAND BECAUSE THEY ARE THE ONES REPRESENTING THEMSELVES AS THE
VICTIMS HERE. I THINK WE JUST HAVE TO BE
COGNIZANT ABOUT THAT. COUNTERINSURGENCY IT HAS OFTEN
BEEN SAID IS LIKE TRYING TO EAT SOUP WITH A KNIFE. IT IS VERY SQUISHY TRYING TO
WIN THESE IN THE REALM OF PUBLIC OPINION AND THAT IS WHAT
WE ARE SEEING RIGHT NOW. JONATHAN: SOME MIGHT SAY IT IS
IMPOSSIBLE. THE WAR BETWEEN HAMAS AND
ISRAEL. BUT GET AN UPDATE ON STORIES
ELSEWHERE. HERE'S DANI BURGER. "BLOOMBERG SERVEILLANCE" >> EMIRATES CHAIRMAN AND CEO
HAS TOLD BLOOMBERG NEWS THAT THE AIRLINE IS NOT PLEASED WITH
BOEING PRODUCTION DELAYS. >>
THE DELAY THAT WE SEE, I DON'T THINK WE ARE HAPPY.
I MET UP WITH NEW MANAGEMENT JUST RECENTLY TO TOUCH BASES.
THEY PROMISED THEY WOULD BE ABLE TO CHANGE AND MAKE THINGS
GO FASTER, AND I HOPE SO. >> HE WENT ON TO SAY THAT THE
AIRLINE IS HAVING ISSUES WITH ENGINES ON CERTAIN AIRBUS
MODELS. NINTENDO HAS ANNOUNCED A NEW
GAMING CONSOLE THAT WILL SUCCEED THE CURRENT SWITCH
CONSOLE. BOTH FANS AND INVESTORS HAVE
BEEN WAITING FOR NEWS OF THE NEW GADGET BECAUSE THE NEW
SWITCH HAS LOST GROUND WAYSTATION AND XBOXES.
NINTENDO'S PRESIDENT SAID THE NEW DEVICE WILL BE UNVEILED IN
THE COMING YEAR. ALSO TODAY, NINTENDO FORECAST A
BIGGER THAN EXPECTED PROFIT DECLINE FOR THE CURRENT FISCAL
YEAR. THE PROBE INTO TESLA'S AUTOPILOT FEATURE IS ESCALATING
REGULATORS ARE SEEKING DETAILED ANSWERS ON THE RECALL OF
AUTOPILOT WAS ORIGINALLY ISSUED AFTER USERS KEPT CRASHING WHILE
USING IT IN A LETTER, THE NATIONAL TRAFFIC HIGHWAY SAFETY
ADMINISTRATION THAT IT HAD SEVERAL CONCERNS REGARDING THE
RECALL AND WANTS DATA ON THE PERFORMANCE OF CARS BOTH AFTER
-- BEFORE AND AFTER THE CARDS WERE ISSUED. JONATHAN:
WE WILL TOUCH BASE AGAIN IN ABOUT 30 MINUTES.
UP NEXT, IT IS A DATA DEPENDENT SAID. >> YOU PROVIDE NO FORWARD
GUIDANCE, THE MARKETS CAN OVER EXTRAPOLATE FROM EVERY SINGLE
DATA POINT. THIS MARKET IS GOING TO KEEP
SWINGING AROUND BUT AT THE END OF THE DAY I THINK THE
VALUATIONS ARE ATTRACTIVE. JONATHAN:
THAT IS THE LATEST ON THE BOND MARKET. YIELDS FALLING FOR 50
CONSECUTIVE SESSION. EQUITY MARKETS WINGBACK JUST A
TOUCH ON THE. ♪ JONATHAN:
EQUITIES UNCHANGED ON THE S&P 500, GOING TOWARD THE OPENING
BELL THIS TUESDAY MORNING. FOLLOWING YIELDS CONTINUE, DOWN
ANOTHER TWO BASIS ON THE 10 YEAR. DOWN FOR FIVE DAYS.
FIVE DAYS OF YIELDS FALLING. IT HAS BEEN QUITE A WHILE SINCE
WE'VE SEEN THINGS LIKE THAT. LISA:
AND IT COMES AT A TIME WHEN THE PENDULUM SEEMS TO BE SWINGING
IN THE OPPOSITE DIRECTION. THERE IS A FEELING WITH THE
DATA SOFTENING THAT MAYBE PEOPLE ARE UNDERPLAYING HOW
MUCH IT IS GOING TO SOFTEN THE ISSUE THAT I DON'T SEE YET IS
WHEN DOES THAT START TO MEAN EQUITY WEAKNESS?
WHEN DOES THAT SUGGEST SOMETHING THAT IS PROBLEMATIC
FOR COMPANIES VS. JUST AN EXCUSE TO CUT? JONATHAN:
WHAT IS A WELCOME CALLING OF THE LABOR MARKET AND WHAT IS AN
UNWELCOME DETERIORATION? CLEARLY 175 IS NOT AN UNWELCOME
DETERIORATION BUT START THINKING OF SOMETHING CLOSER TO
100 AND THE CONVERSATION CHANGES. LISA: I WILL LET THAT GO, YOU SHOULD
HAVE A GOLDILOCKS EMOJIS TO REALLY MAKE IT CLEAR. JONATHAN:
IS THAT WHAT YOU WOULD LIKE TO SEE OVER AT APPLE? LISA: 100%.
IT IS GOING TO BE SCREENSAVER. JONATHAN:
LONGEST STREAK BACK TO AUGUST OF 2023. A DATA DEPENDENT SAID. >> THE MARKET IS GOING TO OVER
EXTRAPOLATE FROM EVERY SINGLE DATA AND WE ARE GOING TO SEE
THIS OVER THE NEXT COUPLE OF WEEKS.
A COUPLE MONTHS AGO WE WERE PRICING IN A FULL RATE CUT BY
MARCH THAT HAS GONE DOWN TO ONE RIGHT BEFORE PAYROLL.
THIS MARKET IS GOING TO KEEP SWINGING AROUND BUT AT THE END
OF THE DAY IT ZOOM OUT, I THINK THE VALUATIONS ARE ATTRACTED.
JONATHAN: INVESTORS AWAIT A SPEECH FROM
MINNEAPOLIS THAT PRESIDENT NEEL KASHKARI LATER ON TODAY.
THE U.S. ECONOMY ISN'T MOVING BACK OR
RUNNING IN PLACE, BUT SIMPLY IN OVERTIME IN A GAME IN WHICH
CASH REMAINS KING. TWO CUTS ARE LIKELY THE MOST WE
WILL GET THIS YEAR. DEBORAH, LISA WENT THERE.
WHAT WOULD IT TAKE TO UNLOCK THAT MONEY PILED UP IN MONEY
MARKET FUNDS WHAT ARE WE WAITING FOR? >> I THINK AT THIS POINT IT
TAKES A CUT BY THE FED AS WAS MENTIONED IN THAT EARLIER CLIP.
WHEN WE BEGAN THE YEAR, I THINK OUR PEAK WAS SIX NINE CUTS
EXPECTED IN 2024, AND WE ARE DOWN TO SOMETHING THAT IS
BETWEEN 1.5 AND TWO AT THIS ONE. NOBODY HAS FAITH IN WHEN THAT
CUT IS GOING TO HAPPEN. SO IF YOU BOUGHT INTO THAT
STORY BACK IN JANUARY AND YOU STARTED TO EXTEND, YOU WOULD'VE
LOST 5.5% IN YIELDS FOR MONEY MARKET FUNDS AND GONE INTO
SOMETHING THAT WAS LESSER IN RETURN FOR A TIME THAT AT THIS
POINT IS NOW UP TO HALF A YEAR. I THINK THE ACTUAL RATE CUT HAS TO OCCUR BEFORE THE CHANGE FROM
THE SAFE MONEY MARKET CASH RETURN TYPE OF TRADE TAKES A
BACKSEAT FOR SOME INVESTORS. I THINK FROM A RETAIL
STANDPOINT THE CASH WILL KEEP COMING IN BECAUSE THERE CASH
ALTERNATIVE IN THE POSITS CONTINUES TO BE SOMETHING THAT
IS MUCH, MUCH LESS THAN THE 5% PLUS THAT MONEY MARKETS ARE
RETURNING AT THIS POINT. AND I AGREE WITH THE 175,000 IS
WHAT THE MARKET IS RALLYING ON RIGHT NOW FROM THE BOND
PERSPECTIVE. THAT IS CERTAINLY NOT A NUMBER
THAT HAS BEEN GOING TO THE WEAK SIDE.
THAT IS NOT SOMETHING THAT IS GOING TO BE HELPING THEM GAIN
CONFIDENCE THAT THE ECONOMY IS SLOWING AND THAT INFLATION IS
TICKING DOWN TO WHERE THEY WANT TO SEE IT. LISA: YOU WENT THERE, LET'S TALK
ABOUT THE TO SPEED ASPECT OF MONEY MARKET FUNDS.
YOU THINK THEY ARE STICKY AND THEN YOU HAVE THE INSTITUTION
THAT ARE WAITING FOR THE EYES OF THE FIRST RATE CUT TO PLAY
THAT CASH ELSEWHERE. HOW FAST IS THAT MONEY AND HOW
MUCH IS? >> THE INSTITUTIONAL SIDE
PROBABLY AT THIS POINT REPRESENTS FROM A SLOW STAND
LESS THAN 20% OF THE MARKETPLACE. WHEN THE 2014 REFORMS THAT WERE
IMPLEMENTED IN 2016 TOOK PLACE WE HAD TO SEPARATE THE RETAIL
SIDE FOR FUNDING VS. THE INSTITUTIONAL SIDE FOR
EVERYTHING BUT GOVERNMENT FUNDS. THAT REALLY KIND OF CAP THE
INSTITUTIONS TO THE SMALLER PLAYERS IN THIS MARKET.
THEY ARE LARGE IN THE GOVERNMENTS FACE, BUT THAT IS
ESSENTIALLY THE PLACE WHERE THERE CASH LIES AT THIS POINT,
AND THAT YIELD IS A LITTLE BIT LOWER THAN PRIME AND ON A TAXED
SIDE AND ON AN ADJUSTED BASIS. SO I THINK YOU'RE TALKING ABOUT
THE FLOW FROM INSTITUTIONS REPRESENTING SOMETHING THAT IS
ONLY ABOUT 20% OF THE SIDE OF THE LOW IN THE TOTAL MARKET.
LISA: AT THE SAME TIME IT RAISES THE
QUESTION, WHERE IS IT HEADED IF IT DOES WITH MONEY MARKET?
IS IT GOING TO LONG DURATION BONDS OR IS IT GOING TO STOCKS? >> PROBABLY A LITTLE OF BOTH.
WE ALSO MANAGE MICRO SHORT FUNDS WHICH ARE JUST GONE MONEY
FUNDS. JUST SORT OF THE SIX MONTHS TO
MAYBE 180 DAYS SORT OF MATURITIES.
THEN WE HAVE ULTRASHORT FUNDS THAT KIND OF STARTED A HALF
YEAR AGO. BOTH OF THOSE TYPES OF FLOWS
HAVE STARTED TO TURN POSITIVE. I THINK THAT IS AN AREA WHERE
PEOPLE FEEL A LITTLE BIT OF COMFORT EXTENDING, YET STAYING
WITHIN THE FIXED INCOME MARKETPLACE.
BUT THERE ARE OTHERS I THINK DEPENDING UPON WHAT TYPE OF
EQUITY YOU ARE LOOKING AT THAT ARE COMFORTABLE GOING INTO MORE
OF THE VALUE STOCKS. NOT SO MUCH GROWTH AT THIS
POINT, MAYBE A LITTLE BIT OF DIVERSIFICATION INTO
INTERNATIONAL. CERTAINLY STILL INTEREST IN THE
TECH STOCK SIDE OF THE EQUATION, AND I THINK YOU WILL
SEE PORTIONS OF AGO THERE. JONATHAN:
WE KEEP HEARING A PHRASE, LATE CYCLE. WHEN DID THE CYCLE BEGIN?
WHEN YOU HEARD THAT PHRASE TO THE LAST TWO YEARS, HOW LATE
ARE WE? >> I SAY THE CYCLE DIDN'T
BEGIN, WE NORMALIZED. WHEN THE FED STARTED RAISING
RATES BACK IN MARCH OF 2022, REMEMBER, IT WAS OFF OF A ZERO
RATE IS, BASICALLY UNTIL YOU GOT 2%, 2% WAS NORMAL.
I WOULD CALL THE FIRST 175 BASIS WANES OF INCREASING RATE
THEY DID MORE A NORMALIZATION THAN A RETURN TO A RATE CYCLE.
FROM THERE, WHICH WAS PROBABLY THE BEGINNING OF 2023, THAT IS
WHEN YOU STARTED WHAT I WOULD CALL THE CURRENT RATE CYCLE.
I THINK WHEN PEOPLE ARE REFERENCING THE RATE CYCLE
BEING LONG THEY ARE LOOKING AT THE FACT THAT THE LAST TIME THE
FED ACTUALLY MADE A MOVE WAS OVER NINE MONTHS AGO.
GENERALLY SPEAKING, THAT MOVE IS EXPECTED TO BE A CHANGE, SO
A CHANGE FROM AN INCREASE TO NOW A CHANGE TO A DECREASE IN
RATES FROM THE FED POLICY PERSPECTIVE.
NORMALLY THAT DOESN'T TAKE MORE THAN NINE MONTHS AND WE ARE
PAST THAT. I THINK YOU GOT A COMBINATION
OF PEOPLE NORMALIZING CYCLE INITIALLY WAS THE ENDING OF THE
CYCLE ITSELF AND I DON'T THINK THAT IS CORRECT.
I THINK THAT THE NINE-MONTH ASPECT AT THIS POINT BETWEEN
WHEN THE FED LAST MOVED AND NOW ADDS TO THAT. JONATHAN: WITH THAT IN MIND, WHAT IS THE
NEW EQUILIBRIUM? >> IT IS HARD TO SAY BECAUSE
THAT NEW EQUILIBRIUM IS CHANGED DRASTICALLY IN 2024.
I THINK THE NEW EQUILIBRIUM GETS US TO SOMETHING THAT MAY
BE THIS YEAR HAS ONE OR TWO RATE CUTS AND POST, YOU POSTED
THE QUOTES FROM A COMMENTARY THAT I DID JUST LAST WEEK.
NO MORE THAN TWO RATE CUTS THIS YEAR.
IN THE END WITHOUT THE FED MAY BE ADMITTING IT, TO PERCENT
INFLATION IS THE GOAL BUT NOT ONE THAT IS NECESSARILY NEEDED
TO SEE MET. THAT THEY COULD BE COMFORTABLE. YOU'RE TALKING ABOUT RATES THAT
ONLY NEED TO GO FROM 5.5 DOWN TO MAYBE 3.5. JONATHAN:
THE LATEST ON THE FEDERAL RESERVE AND THE BOND MARKET.
HARARE, JUST GETTING EARNINGS FROM THEM.
HALTED DOWN 5% IN ITALIAN TRADING THE BAR FOR EARNINGS
APPEAR TO BE PRETTY HIGH. LISA:
YOU JUST WANTED TO BRING UP FOR ARI. JONATHAN: I DID, YEAH.
LISA: YOU WANT TO BUY ONE? JONATHAN: I'D LOVE TO.
CAN'T AFFORD ONE. ANNMARIE: BUT YOU ACCEPT GIFTS. JONATHAN:
I ACCEPT GIFTS. ONLY I DON'T, JUST TO CLARIFY
FOR A SECOND TIME. YOU WERE TELLING ME I WAS PAID
OFF BY DISNEY EARLIER. >> WE'VE MOVED FROM AN
ENVIRONMENT WHERE IT IS TOO HOT TO STARTING TO COOL DOWN. >> WE KNOW WE ARE RESTRICTIVE,
THE QUESTION IS JUST HOW RESTRICTED. >> THE FED ENDORSED HIGHER FOR
LONGER BUT MARKETS ARE HOLDING UP. >> WE KNOW THAT THEY WANT MORE
COMPETENCE BUT WHAT IS MORE CONFIDENCE, WHAT DOES THAT LOOK
LIKE? >> WE'VE JUST BEEN SO FIXATED
ON INFLATION AND THE FED THAT WE ARE MISSING THIS REAL TURN.
WE COULD SEE THIS GAP BACK TO HARD LANDING. ANNOUNCER: THIS IS "BLOOMBERG SERVEILLANCE"
JONATHAN FERRO, LISA ABRAMOWICZ AND ANNMARIE HORDERN. JONATHAN:
USUALLY GUESTS COME INTO THE STUDIO AND THEY ARE REALLY
CAGEY ABOUT WHAT WE ARE GOING TO TALK ABOUT.
STEVE EISMAN WALKS IN. ASK ME HE WAS GOING TO AN
ELECTION AND I WILL TELL YOU. WE ARE GOING TO SKIP EVERYTHING
AND GO STRAIGHT TO STEVE EISMAN. STEVE ON WHY HE IS BULLISH ON
AI-RELATED STOCKS. MARK ZANDI ON MOODY'S.
BOEING FACES YET ANOTHER PROBE. DON'T MISS THAT THAT BUT WE
BEGIN WITH OUR TOP STORY. STOCKS DELIVERING THE BEST 3D
RALLY SINCE NOVEMBER. STEVE EISMAN SAYING HE IS LONG
ORIENTED ON THE U.S. MARKET MISSING ON COMPANIES
LIKE APPLE BUTTER POSITIONING FOR THE SECOND WAVE OF AI AND
HE HAS A TON TO SAY ABOUT U.S. POLITICS WHICH IS RARE THESE
DAYS. STEVE, GOOD MORNING TO YOU.
FIRST QUESTION, WHO WINS? >> CAVEATS FIRST, I'M NOT
SPEAKING FOR NEUBERGER BERMAN, I'M SPEAKING JUST FOR MYSELF.
WHAT I'M ABOUT TO SAY IS PURE POLITICAL ANALYSIS AND THE
ANALOGY I WILL DRAW IS TO THE FINANCIAL CRISIS. IN AUGUST OF 2007, THE --
MARKET COLLAPSE. AT THAT POINT WHEN YOU LOOK
BACK ON IT, THE FINANCIAL CRISIS WAS BIG EVERYTHING ELSE
WAS COMPLETELY INEVITABLE. SO I THINK IT IS COMPLETELY
INEVITABLE AT THIS POINT THAT DONALD TRUMP WILL WIN EVERY
SINGLE SWING STATE AND WILL GET ELECTED.
THE REASON WHY IS BECAUSE PART ONE OF THE STORY IS THAT THE
PROTESTERS AT ALL THE UNIVERSITIES ARE BECOMING THE
FACE OF THE DEMOCRATIC PARTY, BUT THAT IS NOT 100% AT THIS
POINT BUT WHAT IS GOING TO SOLIDIFY IT IS IN AUGUST AT THE
DEMOCRATIC CONVENTION WHICH IS IN CHICAGO, IRONIC, YOU WILL
SEE ALL THESE PROTESTERS AGAIN AND A LOT OF THEM WILL BE
SCREAMING AND YELLING THINGS NOT JUST AT THE ISRAEL, BUT
DEATH TO AMERICA, BECAUSE THEY CAN'T HELP THEMSELVES.
THE COUNTRY WILL BE APPALLED AND THAT WILL BEGET.
IT WILL BE OVER. JONATHAN: LET'S SAY YOU ARE RIGHT,
CRISTOBAL, DEAD ON. WHAT DO I DO WITH THAT
INFORMATION AND WIND WEB WITH THE TRADES ON, AND WHAT ARE THE
TRADES? >> I WOULD SAY YOU DO LARGELY
NOTHING BECAUSE I DON'T THINK THAT WHETHER TRUMP WINS OR
BIDEN WINS HAS ANY REAL IMPACT ON THE ECONOMY AT ALL.
THERE WILL BE THINGS THAT PEOPLE WILL WANT TO TRADE,
WHICH I'M NOT GOING TO TALK ABOUT BECAUSE I HAVEN'T PUT OUT THOSE TRADES YET BECAUSE IT IS
TOO EARLY. I THINK THERE WILL BE THINGS TO
DO, BUT THAT WILL JUST BE SHORT-TERM TRADE. JONATHAN:
THAT IS WHAT I'M INTERESTED IN. YOU SAID IT IS TOO EARLY.
WHEN IS THE RIGHT TIME TO START EXPRESSING THESE TRADES? >> AT THE CONVENTION EVERYONE
WILL REALIZE THAT IS THE CASE. LISA: YOU SAID IT DOESN'T REALLY
MATTER WHO GETS ELECTED. THAT IS FASCINATING TO ME
BECAUSE SOME PEOPLE ARE SAYING THE DONALD TRUMP WOULD PUT ON
PRETTY SIGNIFICANT TARIFFS, PARTICULARLY TO CHINA, AND THAT
THIS WOULD INCREASE IN LAOIS AND DE FACTO IN THE U.S.
I CAN SEE YOU ROLLING YOUR EYES, HE CAN RESPOND IN A
SECOND. AT THE SAME TIME, THE TAX CUTS
INSTATED. >> CATS AND DOGS LINE TOGETHER
AND THE END OF THE WORLD. LISA: WHY DO YOU DISCOUNT THIS? >> DO I THINK DONALD TRUMP
WOULD INCREASE TARIFFS TO CHINA, SURE.
DO I THINK THAT WOULD HAVE A MASSIVE INFLATIONARY IMPACT ON
THE UNITED STATES, I THINK THAT'S RIDICULOUS.
ON THE MARGIN, I WILL GIVE YOU A COMPANY.
FIRST SOLAR SELLS SOLAR PANELS TO UTILITY.
THERE ARE ALREADY MASSIVE TARIFF THAT ARE HELPING THEM
NOW. COULD TRUMP INCREASE THE TARIFFS OR MAKE THEM LONGER SO
THAT STOCK WOULD DO BETTER? COULD BE.
ARE THE PRICE OF T-SHIRTS GOING TO GO UP, THE PRICE OF FOOD
GOING TO GO UP? NO. THE UNITED STATES IS, OF ALL
THE DEVELOPED WORLD, THE MOST INSULAR ECONOMY.
THE FACT THAT TARIFFS WILL GO ON IN CHINA, A DEAL.
-- THE DEAL. ANNMARIE: ONE THING USUALLY SPOKE ABOUT
WAS INFRASTRUCTURE SPENDING AND HOW YOU LIKE ALL OF THOSE
TRADES. ALL OF THAT IS ATTACHED TO THE
BIDEN ADMINISTRATION. >> TRUE.
BUT DON'T FORGET THAT THE SOLAR TARIFFS WERE PUT ON BY TRUMP
ORIGINALLY. MORE THAN 50% OF ALL THE
GOVERNMENT SPENDING IS ACTUALLY GOING TO RED STATES.
SO I DON'T THINK HE'S GOING TO WANT TO MESS WITH HIS OWN
VOTERS. COULD THERE BE TINKERING AT THE
EDGES? SURE. ARE THERE ENOUGH VOTES IN THE
U.S. SENATE TO REPEAL THE ACT? NOT EVEN CLOSE.
YOU WILL HEAR LOTS OF RHETORIC ABOUT REPEALING THE IRA OR
CHANGING THE IRA AND STOCKS WILL MOVE ON THAT, BUT AT THE
END OF THE DAY, NOTHING WILL HAPPEN. LISA:
SPENDING WILL CONTINUE, TO ME IT RAISES QUESTIONS BUT A LOT
OF PEOPLE HAVE TALKED ABOUT WHICH IS THE DEFICIT NOT GOING
AWAY AT A TIME WHEN YOU'RE GOING TO HAVE TO SEE SOME OF
THE ISSUANCE NUMBERS REALLY START TO PICK UP.
YOU SEEM TO DISCOUNT THAT. >> 100% IT IS NOT AN ISSUE.
LISA: YOU DON'T THINK THE DEFICIT IS
AN ISSUE. >> I'M NOT AN ECONOMIST. I CAN
ONLY SAY THIS. THE PEOPLE WHO HAVE BEEN
COMPLAINING ABOUT THE DEFICIT, AND I LIKE TO CALL THEM THE
DEFICIT PEOPLE, I'VE LITERALLY BEEN SAYING THAT FOR 40 YEARS.
40 YEARS. IN MY BUSINESS BEING TOO EARLY
IS THE EQUIVALENT OF BEING WRONG.
BUT IN MY BUSINESS WHEN YOU ARE TO REALLY YOU ARE A YEAR TOO
EARLY, TWO YEARS TOO EARLY YOU ARE NOT 40 YEARS TOO EARLY.
WHEN YOU'RE 40 YEARS TOO EARLY YOU PROBABLY SHOULD JUST KEEP
YOUR MOUTH SHUT. BUT I WOULD SAY THIS.
THE SIGN THAT THE DEFICIT WILL BE RIGHT IS WHEN RATES ACTUALLY
GO UP A LOT. UNTIL THEN, EVERYBODY SHOULD
JUST BE QUIET. LISA: BUT HOW DO YOU KNOW WHEN THAT'S
GOING TO HAPPEN? >> YOU'LL SEE A.
I WILL BE ON THE SHOW AND YOU WILL SAY LONG-TERM RATES WENT
UP 50 BASIS POINTS IN ONE DAY. LISA:
SOUNDS SO NATURAL COMING OUT OF YOUR MOUTH. >> UNTIL THEN IT'S NOT RELEVANT.
LISA: PEOPLE INCREASINGLY ARE FOCUSED
ON THIS IN THE MARKET, PEOPLE WHO ACTUALLY COULD DETERMINE
WHAT THOSE RATES ARE CAN SEND THOSE RATES UP 50 BASIS WANTS. >> OUR RATES GOING UP? LISA:
THERE WAS A TIME WHEN THEY WERE. YOU ARE SAYING THAT YOU ARE
LONG LONG-TERM RATES BECAUSE ALL OF THIS DISCUSSION ABOUT
THE DEFICIT IS STILL WAY TOO EARLY. >> THAT'S GOING TO BECOME A
MEME NOW, I LITERALLY JUST MADE IT UP. LISA: THAT'S REALLY GOOD.
ANSWER THE QUESTION. >> I LOST MY TRAIN OF THOUGHT.
LISA: AT WHAT POINT DO YOU SAY OK, IF
WE THINK THE DISCUSSION OF THE DEFICIT IS OVERBLOWN, GO INTO
LONG TREASURIES. BUY THEM BECAUSE ALL THE PEOPLE
WORRIED ABOUT THAT ARE GOING TO BE PROVEN WRONG. >> LOOK, I'M NOT REALLY A BOND
PERSON, I AM MORE OF A STOCK JOCKEY.
WHAT CAUSED THE MARKET TO GO DOWN INTO 2022?
THE FED RAISED RATES. I DON'T THINK THE FED IS GOING
TO BE RAISING RATES. DO I THINK THE FED IS GOING TO
CUT RATES? IT DOESN'T REALLY MATTER.
EVEN IF THEY CUT THEY ARE ONLY CUTTING A LITTLE BIT.
PEOPLE LIKE TO TALK ABOUT IT ON THAT DAY AS IF MOSES CAME DOWN
WITH THE TABLETS. LET'S EXAMINE WHETHER THE 10
COMMANDMENTS ARE ON THERE BECAUSE WE WILL LOOK AT WHETHER
THERE WAS A COMMA REMOVED, THAT IS SO SIGNIFICANT LET'S BY THE
S&P. WOW, WHAT DOES THAT MEAN? YOU KNOW WHAT, IT IS NOT
RELEVANT. LISA: SO YOU DON'T NECESSARILY SEE
THE POTENTIAL RATE CUTTING HEIGHT AS POTENTIALLY RELEVANT. >> THERE'S NO AGGRESSIVE RATE
CYCLE COMING OF CUTTING. THAT WOULD MATTER.
IF THE FED IS GOING TO CUT RATES ONCE, TWICE TO TINKER
WITH IT AT THE EDGES. JONATHAN: WE COULD LIVE WITH 5%. >> WE SEEM TO BE LIVING JUST
FINE WITH IT RIGHT NOW. THE ECONOMY IS FINE WHICH I
THINK SURPRISED EVERYBODY. JONATHAN:
I WAS LISTENING TO THE PODCAST HE DID WITH TRACY AND JOE. YOU TALKED ABOUT GOOD TIMES IS
FOR STORYTELLING, BAD TIMES FOR THE FOCUS ON THE BALANCE SHEET. >> THIS IS DEFINITELY A GOOD
TIME. I WILL REPEAT WHAT I SET ON
THAT SHOW BECAUSE I LIKE IT. THERE ARE THREE GREAT TEAMS OF
OUR TIME. THERE'S AI, EVERYTHING HAVING
TO DO WITH INFRASTRUCTURE, AND CRYPTO.
AND I BELIEVE IN THE FIRST TWO AND I DON'T BELIEVE IN THE
THIRD. JONATHAN: WHY NOT THE THIRD? >> IS IT A CURRENCY AND IF IT
IS A CURRENCY, SHOULD YOU OWN IT? LET'S SKIP THE FIRST PART. THERE'S NO STRUCTURE TO IT.
SO IF IT IS A CURRENCY, WHY SHOULD YOU?
LET'S ASK THE PEOPLE WHO OWN CRYPTO.
THEY ALL SAY THE SAME THING. IT'S DEFINITELY GOING TO BE A
MEME. MY FIRST MEME. LISA: NOT YET. >> IT IS A HEDGE AGAINST THE
DEMISED. CATS AND DOGS ONE DAY WILL LIVE
TOGETHER, YOU WILL BE IN A CAVE BUT AT LEAST YOU WILL HAVE YOUR
CRYPTO. IT IS LIKE DIGITAL GOLD, THAT
IS THE THESIS. LET'S TAKE THEM AT THEIR WORD.
IF THAT IS THE THESIS, THEN ON DAYS WHERE EVERYBODY IS WORRIED
ABOUT PATIENT, THEY ARE WORRIED ABOUT THE DEFICIT, THE NASDAQ
IS DOWN 300 POINTS AND INTEREST RATES ARE UP, GO SHOULD BE UP.
AND ON DAYS WHEN EVERYBODY IS FEELING GREAT, AND HE IS UP,
RATES ARE DOWN, BUT HE CARES ABOUT PATIENT, GO SHOULD BE
DOWN. DOES IT ACT THAT WAY? IT IS NOT.
IT ACTS EXACTLY THE OPPOSITE OF ITS OWN THESIS.
THE CORRELATION TO THE NASDAQ IS LIKE 75% TO ME IT IS JUST
ANOTHER WAY FOR PEOPLE TO SPECULATE ON ACTIVATING THERE'S
NO DATA POINT OF RESEARCH THAT SAYS THAT IT IS RIGHT OR THAT
IT IS WRONG. LISA: SO YOU DON'T LIKE CRYPTO. >> I NEVER HAVE.
I DON'T SHORT IT BECAUSE THERE IS NOTHING TOO SHORT. LISA:
HOW DO YOU GET THE EDGE AND A TIME WHEN EVERYONE LOVES AI >>
I WILL GIVE YOU ONE EXAMPLE OF A STOCK THAT I THINK EVENTUALLY
BECOME A GREAT AI PLAYER. THE WHOLE THING AT GETTING AN
EDGE IS I THINK OVERRATED. MOST PEOPLE HAVE ALL THE FACTS.
IT IS A QUESTION OF HOW YOU INTERPRET THE FACTS.
PEOPLE THINK I HAD SOME SORT OF UNBELIEVABLE EDGE ABOUT THE
SUBPRIME MORTGAGE SECTOR. I HAD THE SAME FACTS EVERYBODY
ELSE HAD, I JUST LOOK AT THEM DIFFERENTLY.
RIGHT NOW EVERYBODY IS FOCUSED ON NVIDIA, AMD, DATA CENTERS.
BUT ONE DAY, AND THAT DAY IS NOT FAR FROM NOW, THERE WILL BE
A LOT OF AI APPS THAT YOU AND I WILL USE.
AND WE ARE NOT GOING TO USE THEM AT A DATA CENTER IN THE
CLOUD, WE ARE GOING TO WANT TO USE THEM ON OUR PHONE BECAUSE
WE WANTED AT THE HEAD END. HERE. SO AT THAT POINT IT'S GOING TO
BE, I THINK, AN ENTIRE NEW SALES LIKE OF PHONES, LAPTOPS
THAT ARE GOING TO NEED TO BE UPGRADED TO BE ABLE TO DO ALL
THE STUFF THAT EVENTUALLY WANT TO DO. LISA:
SO YOU ARE BUYING APPLE AGGRESSIVELY. >> WE'VE OWNED IT FOR A LONG
TIME AND WE CONTINUE TO OWN IT. IT IS NOT ACTIONABLE AT THE
SECOND BECAUSE THERE HAS NOT BEEN ANY APP.
WHEN IT SHOWS UP I WILL LET YOU KNOW. UNTIL THEN, THAT AT THAT POINT
I HAVE THE NEW PHONE. THAT PHONE IS ROB LEE NOT GOING
TO BE CAPABLE TO DO SOME OF THE APPS THAT YOU ARE GOING TO WANT
TO DO. JONATHAN: IT APPEARS THAT AT THE
DIRECTION OF TRAVEL. I'D LOVE TO HEAR IT AGAIN.
THE ELECTRICITY GRID, THE DEMAND ON ELECTRICITY IN THIS
COUNTRY GIVEN WHERE POLICY IS, WHERE AI IS GOING, HOW GREAT IS
IT GOING TO BE? ARE WE IN A POSITION TO SUPPLY
IT? >> BUDGETS GO UP EVERY SINGLE
YEAR. THEY UPDATE THEM ON LIKE A FORWARD LOOK AND THAT COMES OUT
JANUARY WHEN THEY REPORT AND THE BUDGETS ARE UP 20%.
THEY ARE GOING TO GO UP EVEN MORE BECAUSE THE NVIDIA AMD
CHIPS USE A LOT MORE ELECTRICITY THAN THE CPUS DO.
SO THERE'S EVEN MORE PRESSURE ON THE GRID. SO THE CYCLE OF IMPROVING THE
GRID, BUILDING A GREEN TYPE OF UTILITY STRUCTURE, WHETHER IT
IS WIND AND SOLAR OR JUST UPGRADING WHAT YOU HAVE IS
GOING TO GO ON FOR A VERY LONG TIME.
I WILL JUST MENTION ONE STOCK THAT I TALKED ABOUT BEFORE.
WHAT UTILITIES DO? THEY SEND A BILL.
BUT WHEN THEY ACTUALLY HAVE TO DO SOMETHING, THEY HIRE
SOMEBODY TO DO IT. SO WHEN YOU HEAR THAT UTILITY A
IS INCREASING ITS CAP X BUDGET OR BUILDING A SOLO OR A GAS
WHATEVER, NINE TIMES OUT OF 10 THEY HIRE A COMPANY CALLED WANT
TO WHICH IT THE LARGEST UTILITY- RELATED ENGINEERING
COMPANY IN THE COUNTRY. WE'VE OWNED IT FOR A LONG TIME.
THE AMUSING THING IS I'M ON THE QUARTERLY CALL EVERY QUARTER
AND EVERY QUARTER THE CEO LOOKS HAPPIER.
AND YOU ARE THINKING HOW COULD HE LOOK HAPPIER BECAUSE IT WAS
SO HAPPY LAST ORDER, BUT HE IS EVEN HAPPIER TODAY BECAUSE HE
HAS MUCH BUSINESS HE WOULD ALL. JONATHAN: THAT IS THE WINNER.
IS THERE A LOSER, IS THERE A SHORT FOR YOU? >> I'M NOT TALKING ABOUT SHORTS.
I DO A LITTLE SHORTING FOR MYSELF, BUT THAT IS IT.
JONATHAN: CAN YOU THINK OF A GROUP OF
COMPANIES THAT WOULD LOSE IN THAT WORLD? >> I WOULD SAY JUST AS A THEME
ABOUT COMPANIES THAT I WOULD NOT INVEST IN, THE STOXX -- THE
STOCKS THAT DID REALLY WELL IN 2019 2021 WITH A VERY HIGH
REVENUE ROSE NEGATIVE EARNINGS COMPANIES.
KIND OF LIKE PUBLIC VENTURE CAPITAL COMPANIES.
THOSE GOT DESTROYED IN 2022. DOWN LITERALLY 75-90% BUT WHEN
YOU ARE DOWN 75%-90% AND THEN YOU GO UP 50%, IT DOESN'T LOOK
SO GOOD ON SHORT. I WOULD JUST AVOID THOSE
COMPANIES UNTIL IT BECOMES CLEAR THEY HAVE REAL BUSINESS
MODELS WHERE THEY CAN ACTUALLY MAKE MONEY. JONATHAN:
IN JUST A MOMENT WE WILL CATCH UP WITH THE WALT DISNEY
COMPANY, THAT STUCK DOWN BY ABOUT 5% THIS MORNING.
CAN WE SQUEEZE IN A QUESTION ON MARBLE?
THIS CONVERSATION TO GO A WHOLE LOT LONGER. >> THEY COULD GO FOR HOURS.
I'M GOING TO BRAG A LITTLE BIT. I OWN ONE OF THE LARGEST JEWEL
BOOK COLLECTIONS ON PLANET EARTH. IT IS 11,000 COMICS ON MY IPAD
AND I'VE READ ALL 11,000. SO I COULD WRITE A DISSERTATION
ON DR. STRANGE THAT WOULD GO FOR 200 PAGES. JONATHAN:
BOB IGER MIGHT READ IT. >> IT WOULD BE VERY INTERESTING.
ANNMARIE: MAYBE THEY SHOULD MAKE IT INTO
A MOVIE. >> THE PROBLEM WITH MARVEL
MOVIES TO ME IS THEY HAD A GREAT STORY AND IT ENDED.
IRONMAN IS DEAD, CAPTAIN AMERICA IS 90 AND THOR, AND
THIS REALLY UPSETS ME AND I'M SERIOUS ABOUT THIS, THEY MADE
THOR INTO A COMEDIC BUFFOON. THAT WAS ALWAYS ONE OF MY
FAVORITE COMICS, SO THOR BEING A COMEDIC BUFFOON I FIND
EXTREMELY UPSETTING. JONATHAN: THIS IS HEMSWORTH. >> YES.
THERE'S NO STORY ANYMORE. THEY HAD A STORY WHERE THEY HAD
ALL THESE DIFFERENT TANGENTS, AUDIT ALL WOVE INTO ONE
EVENTUAL STORY AND IT IS OVER AND THEY HAVE BEEN UNABLE TO
FIND A NEW STORY. THE PROBLEM IS THAT THE MAIN
CHARACTERS ARE GONE SO EVEN IF THEY HAD A STORY, WHO WOULD
WANT TO WATCH? THE LAST "GUARDIANS OF THE
GALAXY" MOVIE WAS UNWATCHABLE. JONATHAN: STEVE EISMAN.
THANKS AS ALWAYS. THIS DESTOCKED DOWN BY 5% FOR
OTHER REASONS. UP NEXT, DISNEY REPORTING
BETTER-THAN-EXPECTED EARNINGS. WHY THE STOCK IS LOWER FROM
GEETHA OF BLOOMBERG INTELLIGENCE.
YOU ARE WATCHING "BLOOMBERG SERVEILLANCE." JONATHAN:
EQUITIES JUST ABOUT UNCHANGED ON THE S&P 500, GOING
ABSOLUTELY NOWHERE. FIRST UP, CITI SETTING STRONG
FIRST-QUARTER EARNINGS AND FULL-YEAR MOMENTUM AHEAD.
ALSO NOTING MANAGEMENT'S CONSERVATIVE GUIDANCE.
THE SECOND CALL, HIGHLIGHTING THE DOWNSIDE HEALTH OF
UNCERTAINTY IN THE FIRST QUARTER.
AN UNCERTAIN 2025 OUTLOOK FOR THE DRUGSTORE CHAIN. AND FINALLY, APPLE'S LATEST
IPAD UNVEILING. WEDBUSH MANAGER SAYING STREET
FOCUS WILL BE ON THE DRUM ROLL FOR APPLE'S AI REVEAL AT WWDC
IN JUNE. THIS PRODUCT CYCLE WILL ALSO
INCLUDE NEW IPADS ANNOUNCED TODAY ARE THERE SPEAKING TO A
BROADER APPLE-HARDWARE DRIVEN CYCLE OVER THE COMING YEAR.
WE BELIEVE THE WORST IS IN THE REARVIEW MIRROR THE START.
DISNEY REPORTING BETTER-THAN-EXPECTED EARNINGS
THANKS TO NARROW STREAMING AND HIGHER TICKET PRICES AT PARKS.
SHARES WERE UP 29% BEFORE TODAY AT THE COMPANY BEAT ESTIMATES
THE FOURTH STRAIGHT QUARTER. GEETHA, THAT STOCK IS LOWER BY
SOMETHING LIKE 5%. CAN YOU IDENTIFY WHY THIS
MORNING? >> GOOD MORNING.
I THINK THE REASON IS DOWN IS BECAUSE THE GUIDANCE THE FISCAL
THIRD ORDER SEEMS TO BE A LITTLE WEAK.
THEY DID RAISE GUIDANCE FOR GAINS TO 25% VS.
ABOUT 20%, SO THAT IS DEFINITELY POSITIVE, BUT I
THINK WHAT THEY SAID ABOUT THE THIRD QUARTER, AND THIS IS
REALLY THROWING INVESTORS OFF, THERE IS GOING TO BE ABSOLUTELY
NO GROWTH IN SEGMENT. THAT WAS AFTER REPORTING 12%
GROWTH IN THE QUARTER THAT THEY JUST REPORTED. SO THAT KIND OF BRINGS INTO
QUESTION THEIR GUIDANCE FOR FULL YEAR PROFITS BECAUSE THEY
ORIGINALLY SAID IT WAS GOING TO GROW LOW DOUBLE DIGITS AND I
THINK THAT THAT SPOOKED INVESTORS A LITTLE BIT TODAY.
JONATHAN: WHAT IS THE CHALLENGE AND WHERE
IS IT COMING FROM? NO SIGN THAT CONSUMERS ARE
TAPPED OUT, THEY ARE ABLE TO PRICES, THOSE PRICE HIKES ARE
BEING ABSORBED. WHERE IS THE CHALLENGE COMING
FROM? >> IN YOUR CONVERSATION WITH
THE CFO THIS MORNING WHAT HE SAID WAS THIS IS REALLY MORE
DUE TO HIGHER COSTS. REMEMBER, DISNEY IS EMBARKING
ON THIS HUGE EXPANSION IN THE PARK BUSINESS, EXPANDING
CAPACITY ACROSS ALL PARTS. IN THE SHORT TERM THEY ARE
ADDING THREE NEW SHIPS, SO I THINK WHAT HE POINTED TO WAS
ELEVATED LAUNCH COST FOR THE CRUISE SHIPS.
I'M NOT SURE THE MARKET IS COMPLETELY BUYING THAT.
I THINK THEY DO THINK THAT MAYBE MOMENTUM IS SLOWING A
LITTLE BIT. WE WILL HAVE TO WAIT AND LISTEN
TO THE CALL. LISA: HOW IMPORTANT IS THE CHINA
STRATEGY RIGHT NOW? >> CHINA STRATEGY IS DEFINITELY
IMPORTANT FOR DISNEY. WE'VE SEEN THIS KIND OF ACROSS
THE BOARD, DISNEY OBVIOUSLY ENJOYS A HUGE PRESENT CHINA NOT
JUST WITH ITS FILMS BUT ALSO WITH ITS THEME PARKS.
THE MENTORS BACK IN A VERY BIG WAY.
BOTH IN SHANGHAI AS WELL AS IN HONG KONG.
WE'VE SEEN SOME REALLY GOOD RESULTS THAT HAVE ACTUALLY
CONTRIBUTED TO THE PROFITABILITY IN THE THEME
PARKS THROUGHOUT THIS YEAR SO FAR. BUT AS FAR AS THE MOVIE
STRATEGY GOES, WE'VE SEEN THAT CHINA HAS ALMOST SHUT DOWN
HOLLYWOOD RELEASES. THAT IS GOING TO BE A BIG
OVERHANG FOR DISNEY AND ACROSS THE BOARD FOR MOST STUDIOS.
THE THEATRICAL RESULTS, AND THIS IS WHERE DISNEY HAS
STRUGGLED A LITTLE BIT OVER THE PAST FEW ORDERS, THEY HAD A
WHOLE STRING OF UNDERWHELMING RELEASES.
I'M NOT SO SURE WE CAN BANK ON A STRONG CHINA PERFORMANCE FOR
DISNEY GOING FORWARD. ANNMARIE: THE CFO REALLY WANTED TO JUST
NOT DISCUSS THAT AND SAY WE MAKE PEOPLE SMILE AND CHINA,
THAT IS WHAT WE ARE GOING TO CONTINUE TO DO.
JONATHAN TRIED TO GET HIM TO BITE ON HULU.
WHERE DO YOU SEE HUGH LU VALUATION? >> WE'VE ACTUALLY RUN SOME
NUMBERS ON HULU. WE ARE ACTUALLY CLOSER TO THAT
$40 BILLION MARK THAT WAS PUT OUT BY COMCAST. THEY ARE HAVING
AN INDEPENDENT APPRAISER KIND OF RUN THE VALUATION NUMBERS
AGAIN. I THINK WHAT WE HAVE TO LOOK AT
WITH HULU'S FIRST OF ALL, THEY HAVE AN EXTREMELY COMPARABLE,
EXTREMELY GOOD ADVERTISING BUSINESS.
THEY WERE THE FIRST PIONEERS IN TERMS OF CONNECTED TV
ADVERTISING WITH ALMOST 3, 3 .5 BILLION DOLLARS IN REVENUE
EVERY YEAR. AND THEN YOU KIND OF HAVE TO
THINK ABOUT THE BIGGER PICTURE. ONCE THEY INTEGRATE HULU INTO
DISNEY BUS WE ARE GOING TO LOOK AT A TREMENDOUS MENTOR OUR
SAVINGS MOST TO THE TUNE OF $750 MILLION, ALMOST $1 BILLION.
AT THE END OF THE DAY, IT IS THE DISNEY BUNDLE THAT REALLY
WORKS. ABOUT 40% OF SUBSCRIBERS ARE ON
THE BUNDLE, SO THE BUNDLE HAS VALUE. FOR THEM, HULU IS AN IMPORTANT
PART OF THE STRATEGY AND THAT IS WHERE A LOT OF THE VALUES
GOING TO COME FROM. JONATHAN: DOES THE MARVEL CATALOG HAVE
VALUE ANYMORE? STEVE EISMAN BRUTAL JUST A FEW
MOMENTS AGO. >> I THINK THERE IS STILL A LOT
OF VALUE LEFT. THIS IS WHAT BOB IGER IS
WORKING ON, A WHOLE REJIGGERING OF THE PIPELINE INCLUDING
MARVEL. WE WILL SEE THAT LATER THIS
YEAR AS WELL AS NEXT YEAR WITH THE NEW CAPTAIN AMERICA MOVIE.
JONATHAN: CAPTAIN AMERICA IS 90 YEARS OLD
AND ANOTHER MOVIE IS COMING SOMETIME TO A MOVIE THEATER
NEAR YOU. LISA: AND IRON MAN IS DEAD AND THOR
IS A PARODY OF HIMSELF. JONATHAN:
WE WILL TELL YOU WHAT THE POINT IS TIME WE COVER DISNEY WITH
HER. STEVE WAS GREAT. LISA: HONESTLY, MY SON AGREES WITH
HIM. JONATHAN: I'M NOT SURE HOW BOB IGER WOULD
RESPOND. LISA: BOB, IF YOU ARE LISTENING, WE
WANT TO HAVE A FULLY INFORMED GUSHING. JONATHAN: COMING UP, MOODY'S CHIEF
ECONOMIST, MARK ZANDI. THIS IS BLOOMBERG. ♪ JONATHAN: 60 MINUTES FROM THE
OPENING BELL, EQUITIES JUST ABOUT UNCHANGED ON THE S&P 500.
THE NASDAQ DOWN BY 2/10 OF 1%. THREE DAYS OF GAINS ON THE S&P.
UP BY ABOUT 3%. BEST THREE-DAY GAIN OF THE YEAR
SO FAR. THE NASDAQ UP SOMETHING LIKE 4%.
COULD BECOME A FIVE-DAY WINNING STREAK. OY THE BOND MARKET, OY THE
DEFICIT. STEVE EISMAN OVER ABOUT 20
MINUTES AGO SAYING OY THE DEFICIT PEOPLE ARE JUST GETTING
IT WRONG, SO LET'S TALK ABOUT THE DEFICIT.
$58 BILLION IN THREE-YEAR NOTES COMING LATER. THE DAY AFTER THAT, $25 BILLION
OF 30 YEAR BONDS. LISA: IF YOU MISSED IT, BASICALLY
STEVE EISMAN SAID PEOPLE HAVE BEEN SAYING OY THE DEFICIT FOR
THE PAST 30, 40 YEARS. I CAN VERIFY MY GRANDFATHER WAS
SITTING AT HIS TABLE SAYING OY THE DEFICIT BACK IN THE DAY.
BUT HERE'S THE THING. HERE'S THE QUESTION GOING
FORWARD. IS THAT SORT OF SHIFTING IN
TERMS OF YES, BEING TOO EARLY IS BEING LONG IN THIS INDUSTRY,
AND YET THIS HAS BECOME AN UNUSUAL TIME OF FISCAL
EXPANSION WHERE THERE HASN'T BEEN A HUGE PROBLEM IN THE
ECONOMY? IF YOU PUT THAT TOGETHER,
PEOPLE SAY IT IS GOING TO START TO MATTER.
MY BIG QUESTION IS IF IT DOESN'T MATTER, SHOULDN'T
YIELDS BE A LOT LOWER? >> ONLY IF THE ECONOMY IS DOING
TERRIBLY, IS ABOUT THE ARGUMENT? THE FEDERAL RESERVE STARTS
PRODUCING INTEREST RATES BECAUSE OF THAT BOND RALLY,
YIELDS DROP. LISA: IF YOU BELIEVE THAT LONGER-TERM
THE ECONOMY IS GOING TO DO WELL AND THAT THE THAT IS GOING TO
KEEP RATES AT ABOUT THREE, 3.5%, THAT IS A NEW PARADIGM I
DON'T THINK A LOT OF PEOPLE HAVE GOTTEN TOGETHER WITH IF
THAT IS THE CASE THEN YOU CAN SEE 10 YEAR YIELDS AT OR .2,
4.3%. BUT THAT IS MY KEY QUESTION
LONGER-TERM. AT WHAT POINT DO YOU START
SAYING IF YOU TAKE OUT THE FISCAL DEFICIT OVERHANG, YOU
GET A BIG RALLY IN BOND MARKET HAVE BEEN A LITTLE BIT SPOOKED
BY BOND AUCTIONS THAT HAVEN'T GONE THAT WELL. JONATHAN:
STEVE EISMAN, BRILLIANT. LET'S TALK ABOUT THE STOCK THAT
HE WAS TALKING ABOUT WHICH THE WALT DISNEY COMPANY.
DISNEY AND THE FREE MARKET IS DOWN BY ABOUT 4%.
HIS COMMENTS ON MARVEL, I MEAN, LOOK.
HE GOES THROUGH SOME OF THE CHARACTERS, THE FACT THAT IRON
MAN IS NOW DEAD AND CAPTAIN AMERICA IS 90 AND HE IS VERY
UPSET WITH WHAT THEY'VE DONE TO THOR, WHICH IS SORT OF SHOWING
-- THROWING SHADE AT MR. HEMSWORTH, COLIN HIM A COMEDIC
BUFFOON. HAVE WE SEEN THAT EXHAUSTED
MOVIE THEATERS? SOME PEOPLE WOULD ARGUE WE HAVE.
LISA: TO BE CLEAR, DISNEY SHARES ARE
NOT DOWN 5.1% BECAUSE STEVE EISMAN IS NOT HAPPY WITH WHERE
MARVEL HAS GONE, JUST TO BE VERY CLEAR.
IT DOES RAISE QUESTIONS ON A BROADER SCALE ABOUT NUMBER OF
SUBSCRIPTIONS AND WHO THEY CAN ATTRACT AT A TIME WHERE THERE
IS OFTEN ABOUT NEW CONTENT, INCLUDING MARVEL. JONATHAN:
I FEEL LIKE I AM BEING REGULATED.
THIS IS WHAT I USED TO HAVE TO DO FOR TOM. LISA:
I'M NOT REGULATING, I'M JUST CLARIFYING.
ARE YOU SAYING IT IS A SIGNIFICANT PART OF IT?
JONATHAN: ABSOLUTELY NOT. UNDER SURVEILLANCE THIS
MORNING, ISRAELI TROOPS TAKING CONTROL OF THE BORDER CROSSING
IN GAZA AS CEASE-FIRE NEGOTIATIONS STALLED ONCE AGAIN.
ISRAEL IS TELLING PEOPLE TO EVACUATE EASTERN RAFAH AS IT
MOVES FORWARD WITH PLANS TO INVADE.
THIS COMING AFTER A REJECTION OF THE CEASE-FIRE DEAL SAYING
IT IS FAR FROM ISRAEL'S NECESSARY DEMANDS. ANNMARIE:
POTENTIALLY WE WILL GET AN UPDATE TODAY BECAUSE MEDIATORS
WILL BE MEETING ONCE AGAIN. ISRAEL DID SAY YESTERDAY WHEN
THEY SAID THEY ARE NOT GOING TO ACCEPT IT THAT THEY DO STILL
SEEK AN AGREEMENT AND THEY WILL BE SENDING REPRESENTATIVES TO
HAVE THESE DISCUSSIONS. A LOT OF REPORTING COMING OUT,
THE NEW YORK TIMES SAYING IT WAS ON MY WORD CHANGES AND THEN
AXIOS, A VERY INTERESTING REPORT SAYING ISRAEL IS VERY
FRUSTRATED WITH HOW THE U.S. IS HANDLING THESE HOSTAGE TALKS.
IF THAT'S THE CASE, WHY WOULD ISRAEL POTENTIALLY GIVE IN
YESTERDAY? LISA: YOU ASK A QUESTION ABOUT THE
HOSTAGES, WHAT IS THE CONDITION OF THEM? JONATHAN: DON'T KNOW. LISA:
ONE OF THE REASONS WHY WE'VE HEARD THERE HAS BEEN SOME
QUESTIONS AROUND THESE NEGOTIATIONS IS BECAUSE HAMAS
CANNOT DELIVER 33 HOSTAGES THAT MEET THE CRITERIA ISRAEL IS
ASKING FOR, LIFE. AND THAT IS ALSO THE
UNDERCURRENT HERE WHEN THERE IS NOT A CLEAR LIST OR
UNDERSTANDING OF WHO IS STILL ALIVE AND WHO IS NOT. JONATHAN:
WITHOUT A DOUBT AND WELL-SAID. APPLE HAS BEEN REPORTEDLY
DEVELOPING ITS OWN SHIP TO RUN AI TOOLS AND DATA CENTERS.
THE WALL STREET JOURNAL ACCORDING TO THE EFFORT TO
BUILD ON THE PREVIOUS ATTEMPTS TO MAKE IN-HOUSE CHIPS.
THIS COMING AS APPLE IS SET TO UNVEIL ITS LATEST IPAD LINE UP
A LITTLE BIT LATER THIS MORNING AND THEN BUILD ON THAT GOING
INTO. WE ALL WANT A SNEAK PEEK OF
WHAT THIS IPHONE MIGHT LOOK LIKE IN SEPTEMBER. LISA:
AND IT IS NOT NECESSARILY THE LOOK AS MUCH AS WHAT IT WILL
HOLD IN TERMS OF WHAT KIND OF PARTIAL -- ARTIFICIAL
INTELLIGENCE TICKET OFFER. THERE HAVE BEEN A NUMBER OF
REPORTS ABOUT APPLE CREATING ITS OWN CHIPS.
I WANT TO SEE WHAT TECHNOLOGIES THEY ARE PUTTING FORWARD AS
THEY TRY TO ADAPT THEIR OWN TECHNOLOGY. JONATHAN:
THIS GETS MORE INTERESTING GIVEN WHAT STEVE WAS TALKING
ABOUT, BUT ULTIMATELY YOU WILL SEE THESE APPS.
HE DOESN'T KNOW WHAT THEY ARE GOING TO LOOK LIKE.
PROBABLY AN IPHONE FOR A LOT OF PEOPLE WHO CAN'T GET AWAY FROM
THE THING. LISA: IT IS GOING TO BE A DEFICIT APP
THAT IS GOING TO BE OY THE DEFICIT THAT WILL HAVE SOME
SORT OF REAL-TIME METRIC ABOUT CONCERN BEING PRICED IN.
ANNMARIE: I HOPE THAT IS NOT THE CASE BUT
YOU STEVE'S POINT, HE JUST BOUGHT A BRAND-NEW IPHONE AND
HE SAID WHEN ALL THESE AI TECHNOLOGIES ARE TO DEVELOP IS
GOING TO HAVE TO UP RAY BECAUSE THE AI CAPABILITY IS GOING TO
BE ACTUALLY IN THE HARDWARE, NOT JUST IN THE APP. JONATHAN:
I THINK APPLE IS HOPING THE DEVELOPERS COME UP WITH
SOMETHING BETTER. ANNMARIE: ME TOO, THAT SOUNDS DO MANY
GLOOM. JONATHAN: MINNEAPOLIS THAT PRESIDENT
KASHKARI STICKING TO BLOOMBERG TV 1:15 EASTERN TIME THIS
AFTERNOON. DO NOT MISS THAT CONVERSATION.
THIS COMING AFTER COMMENTS FROM TOM BARTON AND NEW YORK FED
PRESIDENT JOHN WILLIAMS SAYING CURRENT MONETARY POLICY IS
RESTRICTIVE ENOUGH TO GET INFLATION TO THE FED'S 2%
TARGET. I'M PLEASED TO SAY THAT JOINING
US IS MARK ZANDI OF MOODY'S ANALYTICS.
THANKS VERY MUCH FOR CATCHING UP WITH US MORNING. WHY IS THE CONCERN, YOUR WORDS,
AROUND INFLATION BEING ABOVE TARGET, WHY IS THAT MISPLACED? >> I THINK INFLATION IS AT
TARGET. AT LEAST UNDERLYING INFLATION. IT'S VERY PROBLEMATIC MEASURING
THE COST OF HOUSING SERVICES, PARTICULARLY OWNERS WITH LITTLE
RENT. IF YOU LOOK AT HARMONIZED INFLATION, WE ARE THERE AND WE
HAVE BEEN THERE FOR WHITE SOME TIME. I THINK THE FED SHOULD BE FOCUSED ON THE UNDERLYING RATE
OF INFLATION, TRYING TO EXTRACT THE VAGARIES OF THE DATA. AT THIS POINT IN TIME I WOULD
ALSO EXCLUDE OER AND IF YOU DO THAT, WE ARE THERE.
WE SPEND THERE FOR ABOUT 6, 9 MONTHS TO ME, IT FEELS LIKE THE
FED HAS ACHIEVED ITS GOAL. WE ARE AT TARGET ON INFLATION
AND RATION EXPECTATIONS ARE NAILED DOWN TO THAT 2% TARGET.
TO ME, EVERYTHING IS POINTING GREEN FOR THE TO START CUTTING
RATES HERE. JONATHAN: WHY DO YOU THINK THEY DON'T
TALK ABOUT IT IN THE SAME WAY? MARK: A MATTER OF CREDIBILITY.
THIS IS OUR NUMBER, LOOKING AT CORE CONSUMER EXPENDITURE.
THAT IS THE BENCHMARK WE ARE USING FOR UNDERLYING NATION.
WE SAID WE ARE GOING TO GET THE 2% AND WE ARE GOING TO GET
THERE BECAUSE THEY WANT TO ENSURE THAT THEY ARE CREDIBLE
GOING FORWARD. BUT I GET IT, I UNDERSTAND THAT.
THAT IS WHY I DON'T THINK THEY ARE GOING TO MOVE UNTIL LATER
IN THE YEAR, PROBABLY AROUND SEPTEMBER.
THAT SEEMS LIKE THE MOST LOGICAL POINT WHERE THEY START
CUTTING RATES. BUT THEY ARE RUNNING A RISK BY
DOING SO. I DO THINK THE FEDERAL FUNDS
RATE TARGET OF 5.5% IS HIGH-END WHEN HE A LOT OF PRESSURE ON
THE BROADER ECONOMY. THEY RUN THE RISK OF BREAKING
SOMETHING SO THEY ARE TAKING A CHANCE HERE.
BUT AT THE END OF THE DAY THEY WANT TO MAKE SURE THEY DID WHAT
THEY SAID THEY WERE GOING TO DO, THEY HIT 2% ON THE CORE PCE
DEFLATOR. LISA: IF TOM WERE HERE HE WOULD SAY
LET'S RIP UP THE SCRIPT BECAUSE I'M GETTING A LOT OF HATE MAIL
PEOPLE WHO MIGHT FALL INTO THE OY THE DEFICIT CAMP.
HE BASICALLY SAID THE DOOM AND GLOOM ABOUT THE DEFICIT IS WHAT
WE'VE HEARD FOR THE PAST 30 OR 40 YEARS, AND IT WON'T REALLY
MATTER, DOESN'T MATTER FOR NOW ECONOMICALLY.
DO YOU AGREE, OR DO YOU THINK THAT THE DEFICIT IS ACTUALLY AN
ECONOMIC CONCERN GOING FORWARD FOR THIS GOVERNMENT AT A TIME
WHERE WE COULD BE HEADING INTO POTENTIALLY A LESS POSITIVE
GROWTH SCENARIO? MARK: I THINK IT MATTERS.
WHAT HAPPENED IN THE PAST WE SAID OY BECAUSE IF WE DIDN'T
CHANGE SOMETHING WE WOULD HAVE A PROBLEM.
BUT WE CHANGED SOMETHING. IF YOU GO BACK AND LOOK AT
PREVIOUS HISTORICAL POINTS WHERE THE DEFICIT, YOU REALIZE
YOU LIKE THE EARLY TO MID 1990'S CASE STUDY, WE RESPONDED
COLLECTIVELY IN TERMS OF TAXES AND SPENDING TO PUT THINGS ON A
MORE SUSTAINABLE PATH. HERE WE ARE TODAY.
RIGHT NOW I DON'T THINK DEFICITS AND DEBT MATTER, BUT
LOOK AT THE FORECAST. PRETTY REASONABLE.
THE NONPARTISAN GROUP THAT DOES THE BUDGETING, IF WE DON'T
CHANGE SOMETHING, THE DEBT BY GDP GOES A LOT HIGHER THAN IT
WAS 20, 25 YEARS AGO. SO WE ARE AT 100% GDP IN ALL OF
THE TRENDLINES LOOK PRETTY BAD. HOPEFULLY WE COME TOGETHER AND
CHANGES. OF COURSE IN THE FRACTURED
POLITICAL ENVIRONMENT WE LIVE IN, IT FEELS LIKE THAT IS GOING
TO BE A PRETTY HEAVY LIFT. LISA: WHICH RAISES THE QUESTION OF AT
WHAT POINT DOES IT BECOME REALITY?
IT'S NOT GOING TO BE REALITY UNTIL YIELDS MATERIALLY SHIP
HIGHER IN A WAY THAT IS PUNITIVE THE U.S.
GOVERNMENT AND SOME OF THESE CONCERNS.
DO YOU HAVE A SENSE OF WHAT THAT RATE WOULD BE BEFORE IT
BECOMES UNDULY PUNITIVE TO THE U.S.
GOVERNMENT IN TERMS OF INTEREST EXPENSES AND WHERE THAT TAKES
MONEY AWAY FROM? MARK: IT'S GETTING A LITTLE
UNCOMFORTABLE. YOU LOOK AT INTEREST PAYMENTS,
I THINK IT IS OVER $1 TRILLION NOW. I THINK WE JUST PASS TO THE
AMOUNT WE SPEND ON DEFENSE. I THINK THAT IS THE FIRST TIME
THAT HAS EVER HAPPENED. THAT FEELS WEIRD.
WE ARE SPENDING MORE ON INTEREST PAYMENTS ON OUR DEBT
THAN OUR OWN NATIONAL DEFENSE. HERE IS THE THING.
I DON'T THINK THE DEFICIT AND THAT RA CLIP EVENT.
IT IS NOT LIKE YOU COME UP TO A CLIFF AND YOU GO OVER.
IT IS A CORROSIVE ON THE ECONOMY.
AS DEBT LEVELS RISE, INTEREST RATES RISE.
A LOT OF EMPIRICAL WORK TRYING TO UNDERSTAND WHAT THE
RELATIONSHIP IS, HERE IS A GOOD OF BOB.
FOR EVERY PERCENTAGE POINT INCREASE, FROM 100% TO 110%,
THAT ADDS A BASIS POINT. IT IS NOT PERFECTLY RIGHT, BUT
THAT IS ROUGHLY RIGHT. THE OTHER THING I WOULD SAY IS
IT IS NONLINEAR MEANING GOING FROM 100% TO 10% IS ONE THING.
AT LEAST FOR THE FORESEEABLE FUTURE, WE'VE GOT A CLIFF AHEAD
OF US. BUT THIS IS A CORROSIVE ON OUR
ECONOMY'S ABILITY TO GROW. ANNMARIE:
YOU MENTION HOW WE ARE RUNNING A TIGHT LABOR MARKET.
THE CONFERENCE BOARD RECENTLY CAME OUT AND CONSUMERS WERE
LESS CONCERNED ABOUT RATION AND MORE CONCERNED ABOUT CRACKS IN
THE LABOR MARKET. IS IT DISCERNING TO YOU WHEN
YOU LOOK THROUGH THIS DATA, THE LAST SURVEY RESPONSE RATE WAS
54.9%, THE LOWEST 2002. MARK: THE SURVEY RATE? ANNMARIE:
DO WE HAVE THE CORRECT READ ON THIS DATA? MARK:
IT BOTHERS ME AND IT IS GOING TO BE GETTING WORSE AND WORSE. I THINK THE JOB OPENING SURVEY,
WE ARE DOWNSELECT ONE THIRD OF RESPONDENTS GETTING BACK.
IT IS A BROADER POINT. ALL THE SURVEYS THAT WE LOOK AT
AND ALL THE POLES WE ARE LOOKING AT ARE INCREASINGLY
LESS RELIABLE. THIS IS A BIG PROBLEM AND WHY
ALTERNATIVE DATA AND THIRD-PARTY DATA SOURCES ARE
BECOMING MORE IMPORTANT. WE CAN'T RELY ON THE SURVEYS.
PARTICULARLY MONTH-TO-MONTH. IT JUST GETS TO BE INFLATION
PERSISTENCE IN THE FIRST QUARTER. THAT IS JUST A BUNCH OF, IN MY
VIEW, TECHNICAL FACTORS, RESIDUAL EFFECTS.
PERHAPS SURVEY ISSUES, SEASONAL ADJUSTMENT ISSUES.
THIS COMPLICATES USING DATA THE WAY WE HAVE BEEN USING DATA
MONTH-TO-MONTH TO SET MONETARY POLICY. JONATHAN:
WE WOULD LOVE YOUR VIEW ON IMMIGRATION AS WELL.
QUITE A FEW GUESTS ON THIS PROGRAM A SICKLY SAYING WAGES
HAVE STAYED LOW EVEN WITH THESE REALLY DECENT, TREMENDOUS
PAYROLLS FIGURES BECAUSE OF IMMIGRATION.
DO YOU SEE IT IN QUITE THE SAME WAY? MARK: I DO.
OBVIOUSLY THE IMMIGRATION AND WHAT IS GOING ON AT THE
SOUTHERN BORDER IS A REAL CHALLENGE, BUT THE ONE CLEAR BENEFIT AT THIS POINT IN TIME,
THE SURGE IN IMMIGRATION. THERE IS A REAL CLEAR LENGTH
BETWEEN IMMIGRATION, WHERE THOSE IMMIGRANTS ARE GOING IF
YOU LOOK ACROSS INDUSTRIES LIKE LEISURE AND HOSPITALITY, AND
WAGE GROWTH IN THOSE INDUSTRIES. I THINK WE CAN CONNECT THE DOTS
AND I THINK HE WILL BE VERY IMPORTANT.
THIS IMMIGRATION ALLOWS THE ECONOMY TO GROW MORE WIGGLY AND
AT THE SAME TIME TAKE PRESSURE OFF OF INFLATION.
IT HAS BEEN PARTICULARLY FORTUITOUS AND REALLY IMPORTANT.
AND IF THERE IS ONE THING WE CAN DO TO ADDRESS LONG-TERM
FISCAL PROBLEMS, IT WOULD BE TO HAVE A RATIONAL IMMIGRATION
POLICY. IF WE COULD HAVE MORE IMMIGRANTS, THE RIGHT KIND OF
IMMIGRANTS, THAT IS GOING TO SOLVE A LOT OF PROBLEMS
INCLUDING OUR LONG-TERM FISCAL PROBLEMS AND WE WON'T HAVE TO
SAY OY. WE WILL HAVE A STRONGER ECONOMY
GENERATING THOSE TAX REVENUES. JONATHAN:
I LIKE A THAT IS CATCHING ON. I DO WANT TO FINISH ON THIS
QUESTION. IF IT IS IMPORTANT FOR WHAT IS
HAPPENING IN WAGES IN VERY SPECIFIC SECTORS AND
INDUSTRIES, WHAT HAPPENS IF ORDERING -- BORDERING -- DROP,
WHICH THEY HAVE? WHAT HAPPENS NEXT? MARK:
THE LABOR MARKET IS GOING TO TIGHTEN UP AND PUT PRESSURE ON
WAGES UNLESS WE SEE CONTINUED MODERATION AND DEMAND.
AND I THINK WE WILL. I THINK THAT WILL HAPPEN HERE.
INTEREST RATES ARE HIGH. THAT TARGET I DO BELIEVE IS
RESTRICTIVE AND IT MORE RESTRICTIVE OVER TIME.
ONE REASON WHAT I IS NOT IT REALLY HARD SO FAR IS THAT
HOUSEHOLDS AND BUSINESSES DID A REALLY GOOD JOB LOCKING IN THE
PREVIOUSLY RECORD LOW INTEREST RATES BUT THAT ONLY WORKS FOR A
TIME AS MORE HOUSEHOLDS AND BUSINESSES FACE HIGHER INTEREST
RATE I THINK THE ECONOMY WILL SLOW AND EVEN WITH LESS
IMMIGRATION, I THINK THE FED WILL BE IN A POSITION TO CUT
INTEREST RATES VERY SOON. JONATHAN:
THIS WAS INTERESTING, ALWAYS GOOD TO HEAR FROM YOU.
OY IS CATCHING ON. LISA: GOOD. WE DON'T HAVE TO SAY OY ANYMORE
ACCORDING TO HIM. >> MY 90 EURO EURO JEWISH
GRANDMOTHER WOULD BE SO PROUD OF YOU BOTH.
BP HAS MAINTAINED THE PACE OF ITS SHARE BUYBACKS EVEN THOUGH
PROFIT AND CASH FLOW FELL MORE THAN EXPECTED.
THE CEO SAID WE ARE HIGHLY UNDERVALUED COMPARE OURSELVES
TO OUR AMERICAN PEERS AS LONG AS I KIND OF GAP EXISTS.
WE SHOULD CONTINUE TO BUY BACK SHARES.
BP IS THE LAST OIL MAJOR TO REPORT AND IT HAS BEEN MIXED.
EXXON FELL SHORT. INSTACART IS PARTNERING WITH
UBER ON RESTAURANT DELIVERED IS -- DELIVERIES. USERS IN THE U.S.
WILL BE ABLE TO WATER FROM HUNDREDS OF THOUSANDS OF
RESTAURANTS ON AN INTERFACE. THE CEO TOLD EMILY CHANG THAT
THIS IS AN OPPORTUNITY FOR BOTH COMPANIES. >> CERTAINLY IS A VERY STRONG
COMPETITOR AS IT RELATES TO GROCERY BUT FOR US, IT WAS AN
OPPORTUNITY TO EXPAND ESSENTIALLY THE UBER EARS
BUSINESS -- EATS BUSINESS ESPECIALLY INTO THE SUBURBAN
MARKETS. >> DOORDASH OWNS ABOUT 67% OF
THE FOOD DELIVERY MARKET. APPLE IS DEVELOPING A HOMEGROWN
CHIP TO RUN AI TOOLS IN DATA CENTERS ACCORDING TO THE WALL
STREET JOURNAL. IT BUILDS ON THE PREVIOUS
EFFORTS TO MAKE IN-HOUSE CHIPS WHICH WANTED DEVICES. ACCORDING TO THE JOURNAL, THE
CODENAME INTERNALLY FOR THE PROJECT IS AC/DC FOR APPLE
CHIPS AND DATA CENTERS. APPLE IS GOING TO BE HOSTING
ANOTHER MAJOR UPGRADE TO ITS IPADS TODAY.
THAT IS YOUR BLOOMBERG BREEZE. JONATHAN:
APPRECIATE IT THIS MORNING. ANOTHER SETBACK FOR BOEING. >> THERE ARE BOTTLENECKS IN
PRODUCTION. BOEING HAS PROBLEMS,
EFFECTIVELY PUTTING OUT DEFECTIVE AIRPLANES. JONATHAN:
THE COMPANY HAS A PROBLEM. SOME OF THE ALLEGATIONS AND THE
RESPONSE FROM THE COMPANY. THE VIEW GOING FORWARD. ♪ JONATHAN: 40 MINUTES AWAY
FROM THE OPENING BELL, EQUITY FUTURES ON THE S&P 500 POSITED
BY 0.1%. YIELDS ARE LOW ONCE AGAIN FOR
SESSION. THAT IS QUITE A TURNAROUND.
UNDER SURVEILLANCE THIS MORNING, ANOTHER SETBACK FOR
BOEING. >> ALL THE PROBLEMS THAT WE'VE
HAD, WE PUT AND THEY'D OVER BAND-AID TO RESOLVE THE
PROBLEMS AND BAND-AID OVER BAND-AID DOESN'T COVER IT. BOEING HAS PROBLEMS PUSHING
PIECES TOGETHER WITH EXCESSIVE FORCE.
EFFECTIVELY THEY ARE PUTTING OUT DEFECTIVE AIRPLANES.
JONATHAN: THE LATEST, BOEING FACING YET
ANOTHER FAA INVESTIGATION NOW INVOLVING ITS 787 DREAMLINER.
THE TROUBLED PLAYMAKER SAYING IT HAD ALERTED AUTHORITIES A
POTENTIALLY INCOMPLETE INSPECTIONS OF SOME OF IT JETS
AS WELL AS SUSPICION OF OSSIFIED RECORDS AT A SOUTH
CAROLINA FACTORY. THAT STOCK DOWN BY ABOUT THREE
QUARTERS OF 1%. WE OFTEN HAVE TO GO THROUGH
INVESTIGATION AFTER INVESTIGATION.
HOW SERIOUS IS THIS? >> WE DON'T KNOW YET.
BOEING DID SELF-REPORT TO THE FAA WHICH IS A POSITIVE STEP.
IT IS A VERY HEAVY PHYSICAL TASK THAT THE BOEING WORKFORCE
PERFORMS IN CHARLESTON ON THE 787 WITH A LOW FAILURE RATE BUT
WE DON'T KNOW WHEN THEY STOP PERFORMING IT AND HOW MUCH WE
WORK IS INVOLVED. SPIRIT IS REPORTING A $50
MILLION LOSS FOR THEM IN THE SECOND ORDER BECAUSE BOEING IS
GOING TO HAVE TO SLOW PRODUCTION BECAUSE OF THIS.
BOEING IS ALSO STALLING PRODUCTION BECAUSE OF HEAT
EXCHANGERS USING TITANIUM FROM RUSSIA AS WELL AS SOME INTERIOR
SUPPLIER DELAYS. SO WE'VE SEEN THREE ISSUES
PILEUP AND THAT IS REALLY WHAT MADE US A DELIVERY FORECAST
FROM 90 TO 60 UNITS FOR THE YEAR.
THIS IS A PROBLEM INSIDE THE BOEING FACTORY.
CHARLESTON IS A BEAUTIFUL PLACE TO LIVE, A BEAUTIFUL FACTORY.
THERE'S NOTHING THEY COULD BE VERY NEFARIOUS AT THAT SITE SO
I THINK NEW CEO HAS TO COME IN AND ASK THE WORKFORCE WHAT IT
NEEDS TO PERFORM TASKS ACCURATELY, WHETHER IT IS WAGES
-- LISA: I'M SORRY, PAUSE. WHY ARE WE NOT JUST DOING SOME
BIG, WHOLE SCALE INTERNAL INVESTIGATION?
WHY ARE THEY NOT HIRING AN OUTSIDE FIRM TO COME IN AND
BASICALLY DO AN UNBIASED, COMPLETE SWEEP OF WHAT COULD GO
WRONG SO THEY CAN FIGURE OUT HOW TO CHANGE THINGS? SHEILA:
THERE'S BEEN A HOST OF COMMITTEE AFTER COMMITTEE.
THIS LEADERSHIP, THAT LEADERSHIP.
I THINK WHAT WE NEED TO DO IS SEE WHAT THE WORK WORSE NEEDS.
ONE OF THE THINGS WE TALKED ABOUT IS THE WORKFORCE HASN'T
HAD A PAY RAISE SINCE 2014. 30% OF THE WORKFORCE IS SET TO
NEGOTIATE IN SEPTEMBER. FOR IN THE SUMMER, SEPTEMBER
DEADLINE. SO WE WILL SEE IF THAT BRINGS
ANY IMPROVEMENTS IN TERMS OF THE WORKFORCE.
30%-40% RAISES ACROSS THE AIRLINES SO WE CAN SEE
SOMETHING OF A SIMILAR MAGNITUDE AT OWING.
BUT ALSO SOME OF THESE PROCESSES NEED TO BE FIXED.
MAYBE WORKING WITH THE FAA AND SAYING THIS TEST DOESN'T MAKE
SENSE, IT IS VERY PHYSICALLY ARDUOUS TO PERFORM, SO COULD WE
REMOVE IT, AND IT DOESN'T HAVE A FAILURE ASSOCIATED WITH IT? I THINK RATHER THAN A LAW FROM
COMING IN OR AUDIT COMMITTEE COMING IN OR SAFETY COMMITTEE
AND JUST PEEKING TO EMPLOYEES AND SAYING HOW TASK COULD BE
PERFORMED DIFFERENTLY. ANNMARIE: I GO BACK TO AN EARLIER REPORT
TO TALK ABOUT THIS DISCONNECT, WHO IS RUNNING THAT NOW?
WHO IS TRYING TO UNDERSTAND WHAT IS GOING ON SHOP FLOOR AND
WHY THAT INFORMATION DOESN'T SEEM TO TRICKLE UP TO
MANAGEMENT? SHEILA: BOEING HAS HEADS OF PROGRAMS
WHETHER IT IS THE MAX OR THE 787.
THEY ALSO HAVE A COO IN PLACE. THERE ARE LAYERS OF MANAGEMENT.
PERHAPS AN OVERALL OF THE SYSTEM AND HAVE BETTER
MANUFACTURING PROCESSES COULD BE PUT IN PLACE.
AND WE'VE SEEN THAT DONE. I GO BACK TIME AND TIME AGAIN
TO GENERAL ELECTRIC WHERE FACILITIES USED TO BE RUN
DIFFERENTLY AND WITH NEW MANAGEMENT, THEY CHANGED THE
FACILITY LAYOUT TO BETTER PERFORM FOR WORKERS IN THE
FACTORY. SO I THINK IT IS MAYBE A LITTLE
BIT OF AN OVERHAUL AND THAT IS WHY SPIRIT, I'M GOING TO BRING
SPIRIT UP TODAY BECAUSE THEY JUST REPORTED A MASSIVE LOSS
THIS MORNING, THAT BOEING IS LOOKING TO TUMBLE DOWN.
NOT BECAUSE I THINK THAT IT COULD BE EASIER TO BUY SPIRIT,
BUT BECAUSE YOUR IT WILL NEED THAT CASH INFUSION WHETHER IT
IS AUTOMATION, A NEW FACILITY, A FACILITY OVERHAUL TO PERFORM
BETTER. JONATHAN: WHEN AUTOMAKERS GET INTO
TRAVEL, I'M THINKING MORE RECENTLY OF THE AIRBAG SCANDAL
IF YOU COULD CALL IT THAT, WHEN YOU HAVE TO RECALL TENS OF
MILLIONS OF VEHICLES, HOW DOES A MASSIVE RECALL OF AIRPLANES,
WHAT DOES THAT LOOK LIKE IF THEY HAD TO DO ONE? SHEILA:
WE'VE SEEN THAT SINCE 2020. LET'S NOT FORGET THE 787 DID
NOT DELIVER A SINGLE AIRPLANE FOR TWO YEARS.
IT JUST RESTARTED DELIVERIES ABOUT 18 MONTHS AGO.
SO IT HAS HAD A WHOLE HOST OF ISSUES.
BUT IT IS PRODUCING AT A LOWER VOLUME.
WE ARE AT FIVE A MONTH, BUT WE ARE REALLY AT 15-20 PER MONTH.
AND THE FACILITY IS BRAND-NEW IN CHARLESTON, SO IT IS A MUCH
CLEANER, LEANER FACILITY TO WORK AT. JONATHAN:
THIS WAS AWESOME AS ALWAYS. ALLEGATIONS AND INVESTIGATIONS
KEEP PILING UP OVER AT BOEING. LISA:
I THOUGHT WHAT SHE SAID IT THAT WAS INTERESTING.
BASICALLY IF YOU HAVE PEOPLE WHO HAD TO GO INTO THE OFFICE
OR A PLANT DURING THE PANDEMIC WHO GOT NO RAISES AND THEY HAD
TO DO ALL OF THESE EXTRA THINGS THAT TOOK A LOT MORE WORK, WHY
NOT CUT SOME CORNERS BECAUSE NO ONE IS PAYING THEM ANYWAY?
HOW MUCH IS THIS A QUIET QUITTING ISSUE OR HOW DO YOU
GET PEOPLE ENTHUSIASTIC AGAIN? JONATHAN:
AS SOME PEOPLE SUSPECT BASED ON YESTERDAY, SOME CORNERS HAVE
BEEN CUT. IN FACT, MANY CORNERS. THE OPENING BELL IS ABOUT 34
MINUTES AWAY. TOMORROW, MARVIN LOW OF STATE
STREET, WE WILL CATCH UP WITH MANDY XU AND WE WILL SPEAK TO
KATHY JONES OF CHARLES SCHWAB AT THIS BOND MARKET KEEPS ON
RALLYING. LISA: BECAUSE PEOPLE BELIEVE IN THE
DISINFLATION. MARK ZANDI SAYING THIS FINALLY
GIVES US THE EXCUSE WE ARE ALL SEEING WHICH IS THAT INFLATION
IS COMING DOWN AND THE FED WILL BE ABLE TO COME WITH IT.
JONATHAN: HE IS NOT SCREAMING OY THE
DEFICIT. LISA: HE IS SAYING WE SHOULD SAY OY
THE DEFICIT A LITTLE BIT. THE OY IS WHAT MAKES IT NOT A
PROBLEM. JONATHAN: THREE HOURS OF SOPHISTICATED,