Powell Testifies Before the House | Bloomberg: The Close 07/10/2024
>> THIS IS "THE CLOSE." ROMAINE: A FULL ON EMBRACE OF S&P AT 5600 AND ALSO ENTHUSIASM FOR PRESIDENT -- LOSS OF ENTHUSIASM FOR PRESIDENT AT 81. I'M ROMAINE BOSTICK. ALIX: I'M ALIX STEEL. NETHERLANDS OR ENGLAND? ROMAINE: USA, USA! ALIX: I'M GOING TO GO WITH ENGLAND, BUT WHATEVER. IT IS REALLY TRULY LED BY TECH. NASDAQ UP BY ONE PERCENTAGE POINT.
ALPHABET AT A RECORD AS WELL. VIX GOES NOWHERE FAST. WE ARE GETTING INTO VOLATILITY HERE POTENTIALLY WHEN IT COMES TO CPI, WHEN IT COMES TO BANK EARNINGS. WILL WE SEE FINAL MOVEMENT AND VOLATILITY? ROMAINE: IT SHOULD BE NOTED WHEN WE LOOK AT THE COMPLEXION OF THIS RALLY, IS AN IMPRESSIVE VALLEY INDEED. WE SHOULD POINT OUT THIS IS GOING TO BE THE BROADEST RALLY WE HAVE SEEN GOING BACK TO MAY 31.
ROUGHLY 75% OF THE MEMBERS OF THE S&P ARE HIGH ON THE DATE, AND THAT COULD INCREASE AS WE GET CLOSER TO THE VELVET TRADING VOLUME ACROSS THE U.S. HAS BEEN WELL BELOW THE 20-DAY, 100-DAY, AND SIX-MONTH AVERAGES OVER THAT STRETCH, AND THAT COULD BE A PROBLEM. VOLUME COULD PICK UP TOMORROW. WITH THE RELEASE OF CONSUMER PRICE DATA, THE OPTIONS MARKET BETTING THAT THE S&P IS GOING TO MOVE .8%. BLOOMBERG ECONOMICS EXPECTING "REALLY GOOD REPORT," BORROWING A PHRASE OF FED CHAIR JAY POWELL. >> I HAVE SOME CONFIDENCE, AS I SAID EARLIER, THAT WE ARE ON A DOWNWARD PATH. IF YOU LOOK AT THE DATA, IT IS CLEAR. WE HAVE NOT SAID WE HAVE SUFFICIENT CONFIDENCE, AND THAT
WILL BE A DECISION OUR COMMITTEE MAKES. ROMAINE: ONE OF THE SWORD TO KEEP AN EYE ON IS THAT PERSISTENT DIN AROUND WHETHER PRESIDENT JOE BIDEN SHOULD END HIS REELECTION BID AMID CONCERN ABOUT HIS PHYSICAL AND MENTAL FITNESS. TWO PROMINENT VOICES SAYING JOE NEEDS TO GO. LET'S CIRCLE BACK TO WHAT IS ACTUALLY MOVING THE MARKETS HERE, AND A LOT OF TALK ABOUT THE START OF EARNINGS SEASON COMING UP OFFICIALLY TOMORROW. ALIX: WHAT WE HOPE, I GUESS, IS
MOVEMENT IN THE EARNINGS SEASON WHERE WE GET IDIOSYNCRATIC MOVES. IT'S THE BROADENING EARNINGS GROWTH POTENTIAL. THIS IS FROM THE EA FUNCTION ON THE TERMINAL. GO TO "GROWTH"
AND "EARNINGS GROWTH PERCENTAGE," AND YOU LOOK AT THE INDIVIDUAL SECTORS, AND YOU KIND OF SEE WHAT WE ARE EXPECTING THIS QUARTER. IT IS NOT JUST TECH. TECH IS ONLY GOING TO SEE 44% GROWTH. IT IS GOING TO BE LED BY FINANCIALS, DISCRETIONARY, STAPLES AND MATERIALS. THE OVERALL GROWTH PICTURE FOR THE EARNINGS SITE IS GOING TO COME IN 4.5% VS. THE GROWTH FORECAST AT 8%. THE QUESTION IS CAN THEY BEAT IT, ARE ESTIMATES TO HIGH, ARE WE SEEING BROADENING OUT OF EARNINGS. ROMAINE:
THAT IS THE QUESTION ON TOP OF EVERY INVESTOR'S MIND. LET'S GET ANSWERS FROM A BRILLIANT MIND. HEATHER BRILLIANT IS THE CEO AT DIAMOND HEALTH, $29 BILLION IN ASSETS UNDER MANAGEMENT. I'D LIKE TO SAY THANK YOU FOR WEARING PURPLE TODAY. [LAUGHTER] I FEEL UNDERDRESSED, FELLOW
WILDCAT. LET'S TALK ABOUT THE START OF RUNNING SEASON THERE'S BEEN TALK ABOUT HOW THIS MARKET ISN'T THE AGGREGATE MARKET WE TEND TO FOCUS ON, IT IS MUCH MORE IDIOSYNCRATIC, WAY MORE THAN WHAT IT WAS THE LAST FEW YEARS. HOW DOES THAT AFFECT, IF AT ALL, EARNINGS SEASON? >> FIRST OF ALL, I THINK THERE ARE SO MANY HIGH EXPECTATIONS BUILT INTO THOSE TECH STOCKS. WHETHER THE MARKET CAN SUSTAIN THIS RALLY HAS EVERYTHING TO DO WITH THOSE STOCKS. ALIX WAS TALKING ABOUT THE VIX BEING SO LOW, THAT IS SO INTERESTING, THE OVERALL VOLATILITY STILL LOOKING SO LOW WHEN UNDERNEATH THE SURFACE THERE IS SO MUCH VOLATILITY IN INDIVIDUAL NAMES, THE DISPERSION IS UNPRECEDENTED. ROMAINE: IT IS PRETTY UNPRECEDENTED, BUT IT CREATES VALUE, OR OPPORTUNITY, I SHOULD SAY, FOR THE STOCK PICKERS OUT THERE. YOU COULD HITCH YOUR WAGON TO
NVIDIA AND HOPE FOR THE BEST, BUT MORE EXPERIENCED PEOPLE LIKE YOURSELF RELATE THERE'S MORE TO LIFE THAN NVIDIA. HEATHER: WE COMPLETELY AGREE THIS IS A GREAT OPPORTUNITY AND DOES OPEN THE DOOR. WHAT IS PRETTY INTERESTING IS STARBUCKS.
YES, STARBUCKS, OBVIOUSLY A HOUSEHOLD NAME. THEY HAVE UNDERGONE SOME CHALLENGES RECENTLY. THEY HAVE HAD SOME CHANGES IN THE SENIOR RANKS, AND THEY HAVE ALSO HAD SOME OPERATIONAL CHALLENGES, MEETING DEMAND IN THE MORNING, GETTING ENOUGH DEMAND IN THE AFTERNOONS. I THINK THAT IS SOMETHING THAT IS TEMPORARY TO SOME EXTENT, AND THAT THEY CAN WORK THROUGH OVERTIME.
I THINK THERE IS AN OVERHANG FROM CHINA. REALLY, CHINA IS QUITE A SMALL PART OF THE BUSINESS, ONLY AROUND 5%. IF YOU EXCLUDE CHINA, THE EVALUATION LOOKS ATTRACTIVE. ALIX: OOH, CONSUMER DISCRETIONARY, THAT'S NOT GOING TO DO WELL, LOOKING AT VALUE WAR, WHAT HAPPENED WITH KELLOGG IS NOT GOING TO WORK OUT FOR STARBUCKS. THAT IS THE IDEA, YOU HAVE A
SECTOR THEME AND YOU FIND STOCKS THAT HAVE THE UPSIDE. HEATHER: EXACTLY. AND BECAUSE STARBUCKS IS A HABITUAL ITEM, SOME SAY ADDICTIVE, PEOPLE NEITHER COPY.
THERE IS NOT THE SAME -- PEOPLE NEEDED THEIR COFFEE. THERE IS NOT THE SAME LULL OF COMPETITION LIKE THERE IS IN THE BROUGHT RESTAURANT SPACE. ALIX: I KEEP MEETING NORMAL PEOPLE WHO DON'T DRINK COFFEE, WHICH IS AHEAD SCRATCHER TO ME. I HAVE THREE CUPS HERE. WHICH IS STOCKS PROVIDE THAT UNIQUE OPPORTUNITY? HEATHER: ANOTHER ANY SMALL-CAP SPACE IS RED ROCK RESORTS.
IT OWNS REAL ESTATE IN LAS VEGAS AND IS DEVELOPED CASINOS IN THE LOCALS MARKET. VEGAS AND NEVADA MORE BROADLY AS A NO-INCOME-TAX STATE IS SEEING MEANINGFUL PUBLISHING GROWTH, AND REDROCK IS WELL-POSITIONED TO CAPITALIZE ON A NON-STRIP CASINOS, BUT ALSO HAS A LOCKUP ON THE LAND TO BUILD FUTURE ONES AS DEMAND CONTINUES TO GROW. ROMAINE: ANOTHER INTERESTING PICK FROM YOU FOLKS, WHEN I'M NOT TOO FAMILIAR WITH, BUT MORE OF AN INTERNATIONAL PLAY. HEATHER: CAPS ON COPPER IS INTERESTING BECAUSE AS WE SEE CONTINUED ELECTRIFICATION AND GROWTH IN AREAS LIKE AI AND DEMAND FOR MORE AND MORE ABILITY TO ME TO THE ELECTRICITY NEEDS OF OUR FUTURE TECHNOLOGY -DRIVEN ECONOMY, WE ARE GOING TO NEED MORE COPPER. CAPSTONE IS AN INTERESTING COMPANY BECAUSE IT IS HEADQUARTERED IN CANADA AND ITS BIGGEST MINE IS IN CHILE AND HAS COMPLETED A HUGE PROJECT ON TIME AND ON BUDGET, WHICH NO ONE CAN SAY. IT GIVES IT CAPACITY IN AN INDUSTRY WHERE YOU HAVE TO KEEP ON INVESTING IN ORDER TO CONTINUE TO GENERATE THAT CAPACITY. ROMAINE: WE WOULD BE REMISS IN NOT
ASKING ABOUT THE MACRO -- YOU ARE MORE OF A BOTTOM-UP TYPE PERSON, BUT I'M SURE YOU HAVE YOUR EYE ON WHAT IS GOING ON WITH THE ECONOMY. BIG INFLATION READ TOMORROW THAT MAY OR MAY NOT RATIFY THE NARRATIVE. HEATHER: I DON'T HAVE SPECIFIC EXPECTATIONS FOR TOMORROW OTHER THAN THAT WHEN THE ECONOMIC REALITY COMES IN DIFFERENTLY THAN HOW THE MARKET IS EXPECTING, IT CREATES OPPORTUNITIES FOR US. BECAUSE WE ARE TAKING A LONG-TERM PERSPECTIVE, WE'RE OK WITH DISLOCATIONS THAT LEAD TO OPPORTUNITIES FOR COMPANIES WE CAN PROTECT LONG-TERM EARNINGS STREAM EVEN IF IN THE SHORT TERM THEY MAY GET DISRUPTED.
ROMAINE: THIS MIGHT BE THE FIRST TIME THAT WE'VE HAD AN ALL-NORTHWESTERN WILDCAT FOLKS AROUND THE TABLE HERE. ALIX: ACTUALLY THE SECOND TIME. ROMAINE: OH, WE DID THIS BEFORE? OK, I FORGET. [LAUGHTER] WELL, IT FEELS GOOD. WISH WE COULD KEEP YOU AROUND THE ENTIRE SHOW. HEATHER BRILLIANT, CEO OF DIAMOND HILL, KEEPING US UP TO THE CLOSE ON THIS WEDNESDAY AFTERNOON. AFTER THE BREAK, SHARES OF APPLE RAILING TO ANOTHER RECORD HIGH, PARTLY ON THE BACK OF A REPORT THAT THE COMPANY IS TARGETING 10% GROWTH IN SHIPMENTS OF THE NEW IPHONE YET TO BE RELEASED.
WE WILL HAVE THE LATEST ON THEIR STRATEGY. ALIX: AND INSIGHT IN THE CREDIT MARKETS WITH THE GLOBAL HEAD OF LIQUID CREDIT AT CARLISLE. ROMAINE: ANOTHER STOCK MOVING TO THE UPSIDE, CARVANA. UPGRADING THE COMPANY FROM BUY TO HOLD. WHY ANALYSTS ARE SO CONFIDENT ON A STOCK THAT A LOT OF PEOPLE LEFT FOR DEAD TWO YEARS AGO. THIS IS "THE CLOSE" ON BLOOMBERG.
>> THE COMMERCIAL REAL-ESTATE SITUATION, SIGNIFICANTLY DOWNTOWN OFFICE AND RETAIL, THINGS LIKE THAT, THIS IS SOMETHING THE BANKS HAVE BEEN WORKING THEIR WAY THROUGH THE LAST COUPLE OF YEARS. I THINK IT WILL TAKE MORE TIME, MORE YEARS TO WORK ALL THE WAY THROUGH IT. DOESN'T SEEM TO BE A SYSTEMIC PROBLEM OR ONE THAT THREATENS FINANCIAL STABILITY. IT DOES THAT A -- IT DOES THREATEN BANK PROFITABILITY AND THOSE SORTS OF THINGS. IT WILL BE WITH US FOR A WHILE, WE WILL KEEP WORKING OUR WAY THROUGH IT. ALIX: THAT WAS VENTURED JAY POWELL SPEAKING ABOUT -- FED CHAIR JAY POWELL SPEAKING ABOUT THE RISKS TO BANKS, WHICH REPORT ON FRIDAY. NEIL, I'VE BEEN WAITING FOR
COMMERCIAL REAL ESTATE YOU JUST IMPLODE, AND INSTEAD IT SEEMS LIKE IT IS GOING TO BE A SLOW BOWLING BALL THAT WILL TAKE MANY YEARS TO WORK ITS WAY OUT. WHAT HAVE YOU BEEN NOTICING? >> 100%. COMMERCIAL REAL ESTATE TENDS TO BE A MUCH SLOWER MARKET DECLINE THAT EQUITIES AND BONDS AND CREDIT. PARTLY THAT IS BECAUSE BANKS TEND TO NOT WANT TO RECOGNIZE LOSSES OR MANAGE RECOGNITION LOSSES OVER TIME. CRASHES TEND TO TAKE FOUR TO
FIVE YEARS, IN SOME CASES LONGER THAN THAT. WE ARE AT THE END OF THE BEGINNING OF WHAT IS GOING TO HAPPEN HERE. YOU WILL START TO SEE BANKS IN THE U.S. HAVE PROBLEMS IN TERMS OF THE LOAN BOOKS. NOT NECESSARILY MUCH WHAT IS HAPPENING, AND YOU ARE BEGINNING TO SEE THE EMERGENCE OF DISTRESS. AT THE MOMENT PRIVATE EQUITY IS
GETTING READY TO TAKE ADVANTAGE OF THIS AND IT HAS THE HIGHEST AMOUNT OF MONEY ALLOCATED TO NORTH AMERICA IN 20 YEARS. THAT IS BECAUSE DISTRESS TENDS TO TURN UP THERE FIRST. IN THE REST OF THE WORLD ATTENDS TO BE A FEELING OF WE HAVE TIME AND WE ARE GOING TO TAKE OUR TIME AND WE ARE GOING TO TAKE A FEW YEARS AND WE ARE GOING TO GRADUALLY RECOGNIZE THESE LOSSES. THE U.S. IS MUCH MORE QUICKER IN TERMS OF DEALING WITH PROBLEMS. ROMAINE:
THIS IS INTERESTING, NEIL, WHEN WE TALK ABOUT WHERE THE MONEY COULD GO AND IT ENDS UP CONCENTRATED MORE IN NORTH AMERICA, IN THE U.S. NOT ONLY THAT, ACCORDING TO YOUR REPORT AND OTHER BLOOMBERG REPORTING, IT IS MORE CONCENTRATED IN HIGHER-QUALITY PROPERTIES? OR ARE FOLKS INTERESTED IN SELLING BEYOND CLASS A? NEIL: I THINK THE OPPORTUNITY OUTSIDE CLASS A WILL BE REPOSITIONING. YOU WILL FIND OLD WAREHOUSE PARKS OR SUBURBAN OFFICE PARKS TAKING ON NEW LIFE AS DATA CENTERS, WITH THE CLOUD AND AI. YOU WILL SEE PEOPLE TRY TO REPOSITION ASSETS LIKE THAT.
IN THE MAIN IT IS GOING TO BE WHAT WE DO WITH THESE DOWNTOWN OFFICE BLOCKS. HOW CAN WE BUY THEM AT CHEAP ENOUGH PRICES THAT WE CAN CHARGE AND A FRIEND AND FILL THEM UP AND MAKE MONEY THAT WAY -- CHARGE ENOUGH RENT AND FILL THEM UP AND MAKE MONEY THAT WAY WHEN THE MARKET BOUNCES BACK? YOU WILL HAVE GOOD ASSETS IN GOOD LOCATIONS THAT DON'T HAVE TOO MUCH DEBT. BAD ASSETS IN GOOD LOCATIONS THAT WILL BENEFIT FROM BEING TURNED INTO SOMETHING COMPLETELY DIFFERENT. YOU WILL SEE SOME OF THESE OFFICES BECOME HOTELS, FOR EXAMPLE. ALIX: THAT'S NOT EASY TO DO, THOUGH. YOU CAN'T JUST FLIP A SWITCH AND CHANGE WHAT COMMERCIAL REAL ESTATE IS SUPPOSED TO BE. WHAT KIND OF COST DOES THAT
ENTAIL? DOES THAT HELP THE SITUATION? NEIL: THE GREAT MYTH IS YOU CAN TURN EVERY A OFFICE BLOCK ENTERED INTO THE HOUSING. THE ACTUAL COSTS ARE ENORMOUS. THERE IS CABLING, MECHANICAL ENGINEERING ISSUES, FIRE ESCAPE ISSUES.
THE IDEA THAT YOU CAN TURN IT ON INTO RESIDENTIAL DOESN'T WORK, AND IN A LOT OF CASES IT WILL BE WEIGHED UNTIL THE ASSET FALLS SO MUCH THAT YOU CAN LOWER THE RENT FOR PEOPLE IN A THERE. YOU DON'T HAVE TO CHARGE $100 A SQUARE FOOT, YOU MIGHT CHARGE $40 AND STILL MAKE MONEY COULD ROMAINE: GREAT STUFF. NEIL, GOING TO HAVE TO LEAVE IT THERE. GREAT STORY ON THE BLOOMBERG
TERMINAL, A CLOSER LOOK AT THE COMMERCIAL PROPERTY SECTOR AND HOW PEOPLE ARE LOOKING FOR A CRASH AND OPPORTUNITY. ONE THING HE SAID ABOUT CONVERSION TO HOTELS OR ANYTHING OTHER THAN OFFICE SPACE, I ACTUALLY STAYED IN A HOTEL THAT WAS A CONVERTED OFFICE SPACE. I WAS IN CHICAGO AND THERE WAS AN OLD OFFICE BUILDING. WHAT'S INTERESTING IS THE HOTEL ONLY OCCUPIED THREE OR FOUR FLOORS. THEY ONLY OCCUPIED THREE OR FOUR STORIES. IT WAS KIND OF WEIRD, BUT KIND
OF AN INTERESTING WAY TO DO IT. RATHER THAN CONVERT THE WHOLE BUILDING, JUST TAKE A CERTAIN PORTION OF IT AND CONVERT THAT TO HOTEL AND FIND OTHER USES, RETAIL, RESTAURANTS IN THE OTHER SPACE. ALIX: WAS PART OF THE AREA RENTED OUT? ROMAINE: IT WAS HARD TO SAY BECAUSE CLEARLY THEIR REPORTS WE COULDN'T GO TO, BUT IT LOOKED LIKE THERE WERE OFFICES STILL IN IT AND THERE WAS RETAIL ON THE GROUND FLOOR AND A RESTAURANT, A COUPLE RESTAURANTS AT THE TOP. IT WAS A MIX, BUT IT WASN'T 100% OCCUPIED. ALIX: MIXED USE. ROMAINE: IT WAS THE MORE CREATIVE THOUGHT THAT STRUCK ME -- WHO WOULD'VE THOUGHT -- BECAUSE YOU WALKING, THE HOTEL IS NOT ON THE FIRST FLOOR. YOU HAVE TO GO UP AN ELEVATOR, IT IS KIND OF CONFUSING. ALIX: WHERE IS MY BELLHOP ON THE
GROUND FLOOR? ROMAINE: HIGH MAINTENANCE. ALIX: NO, I'M GETTING, I DON'T CARRY CASH. HAVE TO HAVE VENMO OR THERE'S NO POINT. ROMAINE: HAVEN'T THEY SORTED THIS OUT? IT'S A BIG DEAL. ALIX:
NO NO, I HAVE NO MONEY. ROMAINE: CONVENIENT EXCUSE, ALIX. [LAUGHTER] WE WILL LOOK AT SHARES OR CARVANA MOVING HIGHER ON THE BACK OF AN UPGRADE AT NEEDHAM. ANALYSTS SITTING STREET HIGH-PRICED TARGET FOR A STOCK THAT A LOT OF PEOPLE LEFT FOR DEAD A COUPLE YEARS AGO.
THAT IS COMING UP ON "THE CLOSE" ON BLOOMBERG. ♪ ROMAINE: LET'S GET A VIEW FROM THE SELL SIDE COULD TOP CAUSE. WE START WITH SPOTIFY. DOWNGRADING THE STOCK TO SELL WITH A PRICE TARGET OF $230 A SHARE. ANALYSTS CITING COMPETITIVE AND STRUCTURAL CHALLENGES FOR THE MUSIC STREAMING INDUSTRY THAT WILL MAKE IT DIFFICULT FOR SUSTAINED PRICING INCREASES. THOSE SHARES DOWN ABOUT A PERSON ON THE DAY. NEXT UP, KELLOGG, THE CEREAL MAKER FEELING THE CRUNCH OF A DOWNGRADE, WITH ANALYSTS CITING CONCERNING VOLUME TRANSFER THE PACKAGED-FOOD INDUSTRY, ADDING THAT SALES HAVE BARELY IMPROVED DESPITE HOPES THAT GOVERNMENT NUTRITION ASSISTANCE PROGRAMS AND A MORE PROMOTIONAL ENVIRONMENT WOULD PROVIDE A LIFT. THAT LIFT NOT THERE, NOT FOR
THE STOCK AS WELL, DOWN ABOUT 2% ON THE DAY. LET'S LOOK AT CARVANA. NEEDHAM IS SENDING CARVANA STOCK INTO OVERDRIVE WITH AN UPGRADED TO BUY AND A NEW STREET-HIGH PRICE TARGET. THE FIRM SINK AT THE ONLINE USED CAR RETAILER HAS ROOM TO GROW BOTH CAR SALES AND INDUSTRY SHARE BY LEVERAGING THEIR ONLINE EXPERIENCE AND UNDERUTILIZED PHYSICAL FOOTPRINT. THOSE SHARES UP 3% ON THE DAY. THOSE ARE OUR TOP CAUSE. WE WILL STICK ON THE LAST ONE BECAUSE 129.3 DOESN'T TELL THE
WHOLE STORY. THIS STOCK PLUNGED 98% TO LESS THAN FOUR DOLLARS A SHARE A YEAR-AND-A-HALF AGO. A HUGE REBOUND, MORE THAN 3000% HIGHER OFF THOSE LOWS. JOINING IS NOW, SENIOR ANALYST AT NEEDHAM. WHILE THE 3000% GAIN OFF THE LOWS DOESN'T GET A CLOSE BACK TO ITS ALL-TIME HIGH, IT A REMARKABLE TURNAROUND. I'M WONDERING WHAT YOU THINK IS FUELING THE TURNAROUND BEYOND JUST INVESTOR OPTIMISM.
>> OH, I THINK YOU HAVE HAD A NUMBER -- WE HAVE HAD A NINE-MONTH HALO EFFECT. WE HAVE THE DEBT RESTRUCTURING, WE HAD THEM SHOW POSITIVE THOSE PROFITS PER UNIT. WE HAVE SEEN CARVANA BECOME THE COMPANY PEOPLE THOUGHT THEY COULD BE IN 2018, 2019. IT'S BEEN A ROCKY ROAD TO GET HERE. I DON'T THINK ANYONE DOUBTED
THEY COULD SELL CARS. IT IS ABOUT PUTTING THE PLUMBING IN PLACE WITH POSITIVE GROSS PROFITS PER UNIT. THEY HAVE POSTED INVESTORS AT IRC'S RECENTLY AND SHOWN IN K PI'S THEY REPORTED, YOU HAVE ARGUABLY THE BEST MOUSETRAP WITH A FRAGMENT OF THE INDUSTRY AND THEY ARE SHOWING THAT THEY PUT THE PLUMBING IN PLACE TO PROFIT PROFITABLY SELL CARS.
AS YOU SEE THEM SHIFTED TOWARDS GROWTH AND AS YOU SEE CONSENSUS ESTIMATES GO HIGHER, THE STOCK WILL MOVE HIGHER AS THE GROWTH SHARE WITH USED CARS. ROMAINE: ARE YOU LOOKING AT THE BALANCE SHEET, IN A MORE POSITIVE WAY BECAUSE THAT WAS A BIG IMPETUS FOR THAT 90% SELLOFF WE SAW, EVERYONE LOOKING AT THAT BALANCE SHEET AND SING THIS COMPANY CAN'T SURVIVE. CHRIS: THAT WAS THE STORY NINE MONTHS AGO WHEN THEY GOT THE DEBT RESTRUCTURING DONE, PUSHING OUT SOME OF THE PAYMENT. EVEN THAT, WHEN THEY DID THE ORIGINAL DEAL, BEARS HIGHLIGHTED HOW THEY HAD TO DO PAYMENT IN TIME AND LIMITED AND THINK THEY COULD MAKE CASH-INTEREST PAYMENTS. OVERALL, WITH THE DEBT RESTRUCTURING, GROWTH OF THE BUSINESS, THE BALANCE SHEET, IS IMPROVED POTENTIALLY IMPROVING, PAYING LOW- DOUBLE-DIGIT INTEREST RATES AND ABLE TO REFINANCE THESE RATES IN THE COMING YEARS. NEVER MIND THE BUSINESS FLOW IN THE USED-CAR BUSINESS FROM LOW INTEREST RATES -- ALIX:ALIX: THAT'S WHAT I WAS GOING TO ASK.
IF YOU HAVE THE FED CUTTING RATES, WHAT KIND OF TAILWIND -- CAN YOU QUANTIFY IF WE GET RATE CUTS IN THE NEXT SIX MONTHS? CHRIS: I WOULD SAY THAT WE ARE YOU KNOW, IF YOU THINK ABOUT USED AUTOS AS A MONTHLY PAYMENT PEOPLE ARE BUYING, USED AUTO PAYMENTS HAVE NOT GONE DOWN AND ALL EVEN THOUGH WE HAVE SEEN MODEST PRICE DECREASES ARE CROSSED THE USED--ACROSS THE USED-AUTO SPACE. NEW CAR SUPPLY IS HIGH. WE WILL SEE MORE INCENTIVES, ALREADY SEEING THAT THERE. AS NEW CAR PRICES COME DOWN, THAT PUTS PRESSURE ON USED CAR PRICES.
INTEREST RATES SPECIFIC TO QUANTIFY, HARDER TO SAY. YOU HAVE A NUMBER OF TAILWIND TO GROW USED AUTO UNITS WITHIN THE INDUSTRY, A CYCLICAL BOUNCE THERE. CARVANA IS A SECULAR SHARE GAIN WITH THE ONLINE MOUSETRAP. ALIX: SECULAR SHIFT, UPSIDE, AND TAKING ADVANTAGE OF THE CYCLICALITY ON THE UPSIDE AS WELL. HOW DOES THE INVENTORY LOOK AS WELL? CHRIS: THEY HAVE BEEN GROWING MODERATELY WITH THIRD-PARTY DATA. HARD TO GAUGE INVENTORY NOW
VERSUS INVENTORY IN 2021, 2022. THERE WAS MANIA FOR USED CARS AND VALUES WERE MOVING HIGHER. IT PEAKED AROUND $3 BILLION, AND NOW IT'S SOMEWHERE AROUND $1 BILLION. THEY HAVE CAPACITY TO GROW INVENTORY AND THAT IS A BULLISH SIGNAL BECAUSE THE MORE THEY HAVE ON HAND, THE HIGHER CONVERSION THEY SEE. THAT IS SOMETHING THAT INVESTORS ARE VIEWING IS A POTENTIAL SIGNAL THAT MAYBE THEY WILL HIT THE GROWTH LEVER AT SOME POINT IN THE NEXT SIX MONTHS, ONE YEAR. EXPLICITLY TIMING IT IS
DIFFICULT, BUT PUTTING THE PLUMBING IN PLACE TO SELL UNITS SO WHEN THEY HAD THE GROWTH LEVER, WE WILL SEEK HIGH FLOW THROUGH TO ADJUSTED EBITDA. ROMAINE: I'M CURIOUS ABOUT THE ACQUISITION THEY MADE A COUPLE YEARS AGO, THE EXTENSION OF THE PHYSICAL FOOTPRINT. THERE WERE TECHNOLOGY COMPONENTS THAT WENT INTO THAT DEAL AS WELL. HAS THAT SHOWN UP AS SOMETHING POSITIVE FOR THE COMPANY? CHRIS: IT'S FUNNY, IF YOU LOOK BACK AT THAT MOMENT IN TIME, THE DEAL WAS JUST ON AN INVESTOR LIKELY BAD TIME WITH THE BENEFIT OF FINES -- AN HISTORICALLY BAD TIME WITH THE BENEFIT OF HINDSIGHT. NOW THAT THEY HAVE REFINANCED THE DEBT AND CAN LOOK FORWARD, YOU HAVE THIS UNUSED CAPACITY WHERE CARVANA, THEY ARE NOW WITHIN 100 MILES OF 78% OF THE U.S. CALCULATION. USED TO BE 32&. THEY HAVE THIS UNDERUTILIZED CAPACITY WHERE THEY CAN 3X THE NUMBER OF CARS RUNNING THROUGH RECONDITIONING CENTERS NOW.
THAT POINTS TO GROWTH GOING FORWARD. ALIX: THANKS A LOT, WE SUPER APPRECIATE IT. CHRIS PIERCE AT NEEDHAM JOINING US. MM-HMM? ROMAINE: HAVE YOU EVER USED THE VENDING MACHINE THING? WITHOUT A NOVELTY? ALIX: NO, I'VE NEVER USED IT. ROMAINE:
YOU HAVE TO USE THE VENDING MACHINE OR SOMETHING? ALIX: THEY BRING IT TO YOU. THEY BRING IT TO YOU TO TEST DRIVE, AND THEN YOU BUY ONE AND THEY BRING IT TO YOUR DOOR. IT'S EASY ACCESS. YOU DON'T HAVE TO GO TO THE DEALERSHIP OR ANYTHING. ROMAINE: OK, INTERESTING. ALIX: IF YOU'RE KEEPING SCORE, 1-1, NETHERLANDS AND ENGLAND.
30 MINUTES OF THE CLOSING BELL, THEY ARE 30 MINUTES TO THE SEMIFINALS. 1-1, NETHERLANDS VS. AN GOOD. WE WILL GET INSIGHT ON THE STATE OF THE CREDIT MARKET WITH ROMAINE: JUST ABOUT 3:30 P.M. HERE IN NEW YORK. THIS IS "COUNTDOWN TO THE CLOSE ."I'M ROMAINE BOSTICK . ALIX:
I'M ALIX STEEL. IT IS STILL RISK ON. YADA YADA -- ROMAINE: IPOD THAT WEEKS AGO -- I BOUGHT THAT WEEKS AGO AND I'M GLAD IT PAID OFF AS KEEP THIS AT MY DESK. ALIX: NO MATTER WHAT IS HAPPENING IN EQUITY MARKET, YOU GET WORRIES ABOUT BUBBLES IN EQUITY, IN THE LATEST IS PIMCO MORNING GET THE CREDIT MARKET RETURNS ARE FAILING TO COMPENSATE FOR RISKS. THE CIO WROTE THAT "LIQUIDITY
PREMIUMS HAVE COMPRESSED IN PUBLIC AND PRIVATE CREDIT MARKETS WITH LOWER-QUALITY SEGMENTS OF EACH FACING ELEVATED VULNERABILITY AND HIGHER INTEREST RATES." JOINING US IS LAUREN BASMADJIAN, GLOBAL HEAD OF LIQUID CREDIT AT CARLYLE. THANK YOU SO MUCH FOR JOINING. LAUREN: HAPPY TO BE HERE. ALIX: YOU PLAY BIG WHETHER IT IS DIRECT LENDING AND HIGH LEVERAGE YIELD. WHAT DO YOU SEE?
LAUREN: YOU ARE STILL GETTING PAID 8 TO 9% FOR RISKS, LARGE CORPORATE BORROWERS WITH $850 MILLION EBIDTA ON AVERAGE. YOU CAN GET GOOD VALUE IN THE CREDIT MARKETS. WHAT WE ARE SEEING IN FUNDAMENTAL PERFORMANCE -- THINK ABOUT OUR MARKET, MOST OF THESE ARE PRIVATE BORROWERS. WE LEARNED TO DO OVER 600 U.S. COMPANIES AND 200 IN EUROPE. WE HAVE DIFFERENTIATED DATA THAT WE CAN TAKE A LOOK AT AND WE ARE SEEING THE HIGHEST PERCENT OF OUR COMPANIES GROW EBITDA THAT WE'VE SEEN IN TWO YEARS. EVEN UKRAINE, EBITDA IS GROWING FASTER THAN SALES. RATES ARE HIGHER AND THEY HAVE
ACCEPTED THEY ARE GOING TO LIVE IN IS HIGHER FOR LONGER RATE ENVIRONMENT. ALIX: WHAT ABOUT ACTUAL SALES? DO WE CARE ABOUT SALES? IS THAT A WORRY, OR IS IT JUST THEY ARE GOING TO EBITDA IT'S ALL RIGHT? LAUREN: YOU CARE ABOUT SALES IF YOU'RE GOING INTO A RECESSION. SALES ARE SLOWING. BUT THAT MAKES SENSE TO ME BECAUSE COMPANIES ARE FOCUSED ON PROFITABILITY AND CASH FLOW. ROMAINE:
LET'S TALK ABOUT DEFAULTS FOR A SECOND. THERE HAS BEEN DISCUSSION ABOUT WHY WE DIDN'T SEE HIGHER DEFAULT RATES, WHETHER THAT WAS A HEAD FAKE, WHETHER IT IS THE BOGEY MONSTER OUT THERE. ARE WE PASSED THAT POINT WHERE WE ASSESS DEFAULT RATES? LAUREN: I THINK SO, UNLESS WE GO INTO A DEEP RECESSION. THERE ARE HIGH PROJECTIONS OUT THERE. WE ARE 1% AS A MARKET. THAT IS LOWER THAN LONG-TERM
AVERAGES CAN WHICH ARE BETWEEN 2% AND 3%, DEPENDING ON THE TIMEFRAME YOU ARE LOOKING AT LOW MARKET IS VERY BIFURCATED. MOST OF OUR COMPANIES THAT TRADE AROUND PAR, MEANING THERE IS NOT REALLY PROBLEMS IN CREDITS, AND THEN YOU HAVE 4% OF THE MARKET TRADES UNDER 80. I'VE WATCHED THAT FOR MORE SIGNS OF STRESS. THAT IS THE LOWEST IT HAS BEEN IN TWO YEARS. IT HAS CALMED DOWN SINCE UKRAINE. ROMAINE: WHEN WE TALK ABOUT PRICING AND IT SPREADS IN THE SECONDARY MARKET, ARE WE GOING TO SEE THAT ALSO IMPROVE, GIVEN THAT IT FELT LIKE EVERYONE WAS PRICING IN GLOOM AND DOOM A YEAR AGO AND THAT DIDN'T MATERIALIZE? LAUREN: THERE IS A LOT OF REFINANCING IN THE MARKET, MEANING SPREADS ARE COMING DOWN. ALIX:
WHAT ABOUT BANKS REPORTING ON FRIDAY? WE ARE LOOKING FOR THAT BANK INVESTING, REVENUE BUT IT IS ABOUT M&A, ARE THE BANKS GOING TO COME BACK, ARE THE BANKS GOING TO MAKE MONEY FROM IT, ARE WE GOING TO SEE LEVERAGED LOANS TO PAY FOR THE M&A? IS THAT WHAT HAPPENED? LAUREN: THERE IS A LOT OF LEVERAGED LOAN ACTIVITY BUT IT IS MOSTLY REFINANCING. AS FAR AS M&A, WE ARE STARTING TO SEE TRICKLES OF THAT. FINANCING MARKETS ARE WIDE OPEN. IF YOU WANT TO ACQUIRE OUR COMPANY, IT'S AVAILABLE TO YOU RATES ARE HIGH. I DON'T THINK YOU GO BACK TO AN ENVIRONMENT LIKE 2021 WHERE YOU HAD A RECORD M&A, BUT WE SHOULD BE BUSIER THAN WE WERE LAST YEAR. ALIX: IF YOU SEE THE FED CUT 50 BASIS POINTS, DOES THAT CHANGE -- HOW DOES THAT CHANGE THE LANDSCAPE THEN? LAUREN: I DON'T THINK 50 BASIS POINTS MAKES A BIG DIFFERENCE.
I THINK IT IS THE EXPECTATION FOR CONTINUED CUTS. WHEN YOU ARE RUNNING YOUR MODELS AND YOU THINK THAT THE COST WILL CONTINUE TO COME DOWN, THAT IS THE DIFFERENCE. ROMAINE: I WANT TO TALK ABOUT THIS IDEA OF PORTFOLIO ALLOCATION. THERE WAS A LOT OF DISCUSSION OVER THE LAST YEARS ABOUT HOW SOME OF THE INSTITUTIONAL INTERESTS MAY BE TAPPED OUT OR AT LEAST REGION ALLOCATION LEVEL BUMPING UP AGAINST THEIR OWN INTERNAL LIMITS, AND THERE WAS A MUCH MORE FOCUS ON MOVING OUT TO WEALTH MANAGEMENT AND HIGH NET WORTH INDIVIDUALS. ARE YOU SEEING MORE APPETITE
COMING FROM THE RETAIL SIDE RELATIVE TO MAYBE WHAT WE SAW ON THE INSTITUTIONAL SIDE A FEW YEARS AGO? LAUREN: YEAH, I WOULD SAY TWO THINGS. AND ASSET CLASS WHERE THERE IS ACTUALLY STILL DEMAND BECAUSE THEY ARE GETTING BACK THEIR MONEY. AND TWO, WE HAVE SEEN A RECORD YEAR OF UTILITYMAN FOR THE FLOATING-RATE PRODUCT, WHICH MAKES SENSE BECAUSE RATES ARE HIGHER AND YOU'RE ARE GETTING FLOATING-RATE PRODUCT. IT IS THE FIRST TIME HAVE SEEN SOME DEMOCRATIZATION OF INSTITUTIONAL PRODUCT IN THE MARKET BEING OFFERED TO RETAIL INVESTORS. ROMAINE: ARE YOU WORRIED ABOUT THE REGULATORY ENVIRONMENT AROUND THAT, AS MORE INVESTORS GET INVOLVED IN OTHER AREAS OF ALTERNATIVE INVESTMENTS, FOLKS IN WASHINGTON START TO GET A LITTLE ANTSY AND THEY SAY IS THIS TOO RISKY FOR THOSE TYPES OF FOLKS? LAUREN: WHAT IS GREAT ABOUT CIELO'S THEY HAVE A 25-YEAR TRACK RECORD AND THEY PERFORM AS ADVERTISED. ALIX: THERE WAS AN ARTICLE
ON THE BLOOMBERG TERMINAL ABOUT HOW THERE ARE TENS OF TOURISTS IN THE MARKET AND IF LIQUIDITY DRIES UP, THE TOURISTS WILL GET CAUGHT WITH THEIR PANTS DOWN -- THE ARTICLE DIDN'T SAY THAT, THIS IS ME ENCAPSULATING THE IDEA. WILL IT BE THE SAME WITH CLO'S ? IS THAT A RISK IF LIQUIDITY DOES DRY UP? LAUREN: YOU COULD SEE OUTFLOWS. SOME OF THE BIGGEST INFLOWS ARE AAA PRODUCT, A VERY STABLE PRODUCT. IF YOU SAW A LOT OF OUTFLOWS, IT WOULD GET A LITTLE MORE VOLATILE, YES, BUT INSTITUTIONAL DEMAND WOULD BE THERE. ALIX: BUY MONEY IN A MONEY MARKET FUND, I DON'T KNOW WHAT TO DO WITH IT. IT'S NOT ME, IT'S A FRIEND.. LAUREN: WE ARE SEEING VALUE ACROSS THE LIQUID SPACE F. I WOULD TALK ABOUT CLO BB'S,
AND IF YOU COMPARE THAT IS SOMETHING LIKE HIGH YIELD, CLOSE TODAY PERCENT, A BETTER TOTAL RETURN, BUT HER CURRENT COUPON, BETTER SHARP RATIO, THERE IS GOOD RELATIVE VALUE THERE. AND I LOOK AT CLO EQUITY, AND WE ARE SEEING GUYS CASH IS TO BE VISION'S THAT WE HAVE SINCE -- THE HIGHEST CASH DISTRIBUTIONS THAN WE HAVE SINCE 2015. ROMAINE: REALLY PUTRID YOU STOPPING BY. LAUREN BASMADJIAN, GLO -- REALLY APPRECIATE YOU STOPPING BY. LAUREN BASMADJIAN. WE HAVE TALKED A LOT ABOUT THIS WITH PRIVATE CREDIT AND PRIVATE EQUITY ALLOCATIONS SHIFTING MORE TO THE RETAIL SIDE.
AND NOW YOU ARE SEEING THE SAME THING IN THAT MARKET. ALIX: $6 TRILLION IN MONEY MARKET FUNDS, DOES THAT BELONG SOMEWHERE ELSE? WHERE DOES THAT GO TO, OR IS THAT BASICALLY A SAVINGS ACCOUNT YOU ARE KEEPING IN A HIGH-YIELD MARKET BASICALLY? ROMAINE: IT HAS GOT TO GO SOMEWHERE EVENTUALLY. ALIX: DOES IT? ROMAINE: YOU CAN'T GET FIVE, 6% FOREVER. IT WOULD HAVE TO FIND A HOME SOMEWHERE ELSE, YOU WOULD THINK. ALIX: INTERESTING TO SEE. ROMAINE: GREAT CONVERSATION ABOUT WHAT IS GOING ON IN THE PRIVATE MARKETS. DISCUSSION BACK TO THE PUBLIC
MARKETS WITH APPLE IN FOCUS, AS SHARES ARE SETTING UP FOR ANOTHER RECORD HIGH. WE LEARNED EARLIER THAT THE COMPANY IS READY TO ANNOUNCED BIG PLANS TO RAMP UP SHIPMENTS OF IPHONES. WE WILL BREAK DOWN WHAT IS GOING ON IN OUR STOCK OF THE HOUR. THIS IS "THE CLOSE" ON BLOOMBERG. ♪ ROMAINE: TIME FOR OUR STOCK OF THE HOUR, AND WE ARE WATCHING SHARES OF APPLE, UP TO ANOTHER RECORD HIGH. THIS AFTER REPORTS THAT THE COMPANY IS SAID TO HAVE TOLD PARTNERS AND SUPPLIERS THAT IT IS TARGETING 10% GROWTH IN YOU IPHONE SHIPMENT -- IN A NEW IPHONE SHIPMENTS. ABIGAIL DOOLITTLE JOINS US TO
TALK MORE ABOUT ONE OF THE MORE STEALTH RALLIES IN THE MARKET. I WAS JUST LOOKING, YOU GO OFF THAT APRIL LOW THAT APPLE HIT, UP 40% SINCE THEN, WHICH FOR A COMPANY OF THAT SIZE IS A PHENOMENAL RUN. ABIGAIL: IT IS A PHENOMENAL RUN. I THINK OF ANOTHER STEALTH RALLY, TESLA, TWO WEEKS OF 40%. THIS ONE CAUGHT ME BY SURPRISE. I HAVEN'T LOOKED AT THIS CHART IN ABOUT TWO WEEKS. ABOVE 220, JUST REALLY
SURPRISING THE WAY THAT THIS HAS GONE UP. UP SEVEN DAYS IN A ROW. THAT IS THE LONGEST WINNING STREAK SINCE THE BEGINNING OF JUNE. THERE HAS BEEN THIS INCREDIBLE RALLY. WE HAVE THIS FUNDAMENTAL NEWS BECAUSE IF YOU RECALL, INTO APRIL IT HAD BEEN A BEAR MARKET AND IT SEEMED TO BE A FUNDING SHORTFALL OF BIG TECH NAMES. WHY IS THE STOCK GOING UP NOW?
THERE WAS EXCITEMENT ABOUT APPLE INTELLIGENCE, BUT THAT THEY DELIVER 90 MILLION IPHONE 16S BY THE MIDDLE OF SEPTEMBER TO THE VENETO OF THE YEAR THAT IT -- TO THE END OF THE YEAR, THAT IS IMPRESSIVE. I DID DIG IN ON THIS. ROMAINE: DID YOU? ABIGAIL: I DID. [LAUGHTER] IT IS GOING TO SUMMARIZE TEXT AND CREATE IMAGES AND RETRIEVE THE MOST RELEVANT DATA, PLUS A REVAMPED SIRI. FOR ME, I WOULD TURN THAT AWFUL OFF. ROMAINE: I DON'T USE SIRI BECAUSE I FIND IT UNRELIABLE. IF THEY CAN MAKE IT BETTER -- ABIGAIL: MAYBE THAT WILL BE A DRIVER. ROMAINE:
MY SON DROPPED HIS PHONE YESTERDAY. ABIGAIL: OH, DID IT CRACK? ALIX: DON'T YOU HAVE THE COVER PART? ROMAINE: HE'S A TEENAGE BOY. I DON'T ASK THOSE QUESTIONS. ABIGAIL: SO IS HE GETTING AN IPHONE 16? ROMAINE: HE IS GOING TO GET A MOTOROLA. FLIP PHONE AT THIS POINT. [LAUGHTER] ALIX: NONE OF THIS ADDRESSES CHINA AND THE SLOW DOWN OF SALES IN CHINA. ABIGAIL: COMING OUT OF APRIL, BECAUSE OF
DISCOUNTING, THEY HAVE IMPROVED. I REMEMBER STORIES NOT SO LONG AGO, GOVERNMENT AGENCIES AND AGENCIES IN CHINA NOT ALLOWING IPHONES AT WORK, AND THERE IS CONCERN ABOUT BEIJING'S POLICIES AROUND AI. THEY MAY NOT PUT AI INTO THE IPHONES THAT GO TO CHINA. I PERSONALLY WOULD PREFER TO BE
ABLE TO TURN AI ON OR OFF. MAYBE THAT WOULD BE A SOLUTION. MOST PEOPLE ARE GOING TO WANT -- ROMAINE: I HOPE THEY THEY CUT IN, IT IS A CONCERN. WITH COMPUTERS, PEOPLE SAYING HOW DO I NOT HAVE THIS. ALIX:
CAN YOU NOT DO THAT RIGHT NOW? ROMAINE: I DON'T KNOW THE ANSWER THAT QUESTION, THAT'S A GOOD QUESTION. BASED ON WHAT I'VE SEEN ONLINE, IT IS BAKED INTO THE SYSTEM. ALIX: YOU ARE GOING TO GET THE PHONE? ROMAINE: UNFORTUNATELY, IT IS ALSO -- HE'S NOT WATCHING. IT IS A TRACKING DEVICE FOR HIS PARENTS. [LAUGHTER] SO THAT'S REALLY THE IMPETUS TO KEEP HIM TETHERED TO THAT ECOSYSTEM. ALIX: ABIGAIL, THANKS A LOT. MY PHONE STOPS WORKING EVERYDAY. ROMAINE:
LET ME SEE WHERE HE IS AT RIGHT NOW. ALIX: CONTINUING TO GRIND THEIR WAY -- ROMAINE: ARE YOU AN IPHONE PERSON? ALIX: I AM AN IPHONE PERSON. I RESENT IT, BUT I AM ONE. THEY FORCED ME TO KEEP BUYING THE PRODUCTS. WHAT IF I WANT TO CHANGE?
IT'S TRICKY. NETHERLANDS-ENGLAND, STILL 1-1. ROMAINE: HOW LONG DO THESE THINGS GO? ALIX: 40 FIVE MORE MINUTES TO GO. ROMAINE: YOU BROUGHT THIS UP 90 MINUTES AGO. STILL GOING? ALIX: I BROUGHT IT UP AT THE TOP OF
THE HOUR AND THEN THE BOTTOM OF THE HOUR. WE ARE ALMOST TO THE CLOSE. DAN TSUZUKI IS DEPUTY CIO AT SANFORD BERNSTEIN.
THIS IS "THE CLOSE" >> I, FIRST OF ALL, THINK THERE IS SO MANY HIGH EXPECTATIONS BUILT INTO THOSE TECH STOCKS. WHETHER THE MARKET CAN SUSTAIN THIS RALLY HAS EVERYTHING TO DO WITH THOSE STOCKS. THE OVERALL VOLATILITY IS STILL LOOKING SO LOW WHEN UNDERNEATH THE SURFACE THERE IS SO MUCH MORE VOLATILITY IN INDIVIDUAL NAMES. THE DISPERSION IS PRETTY UNPRECEDENTED. ROMAINE: HEATHER BRILLIANT OF DIMON HILL KICKING US OFF TO THE CLOSE ABOUT AN HOUR AGO. THE DISPERSION AND VOLATILITY
SHE IS SEEING UNDER THE SURFACE WORKING IN FAVOR OF STOCK. ROMAINE BOSTICK ALONGSIDE ALIX STEEL. SCARLET FU JOINING US EARLIER THAN SHE DOES TO TAKE US TO TO THE CLOSING BELLS. IT IS A PRETTY DECENT RALLY.
SCARLETT, YESTERDAY WE WERE TALKING ABOUT YESTERDAY'S RECORD RALLY, .1% GAIN ON THE S&P. TODAY WE GOT REAL SURPRISING NEWS. SCARLET: SURPRISING GIVEN HOW POWELL DIDN'T SAY ANYTHING GIVEN, BUT CLOSER TO THE EARNINGS SEASON WHERE THE RUBBER HITS THE ROAD, OR MEETS THE ROAD. ALIX: EITHER ONE, I THINK IT'S FINE. INDIVIDUALLY THERE INTERESTING MOVES. APPLE DOING WELL, THESE ARE GETTING IT ON.
, DECKERS THE WORST STOCK IN THE S&P. INTUIT ALSO DOING PRETTY POORLY. THAT GOES TO YOUR THEME, ROMAINE , ABOUT SOFTWARE NAMES. UNDER THE SURFACE, INTERESTING STUFF. ROMAINE: THAT SHOCKED ME WHEN I SAW THE SHARES DROP. THIS GETS TO THE CONSUMER SPENDING STORY AS WELL. IS IT WEAK BECAUSE PEOPLE ARE
SPENDING ON SHOES, JUST NOT DECKERS, OR IS IT A STORY OF CONSUMERS PULLING BACK? SCARLET: THIS WILL BE THE QUESTION AS WE HIT EARNINGS SEASON AND HOW THEY ARE PREPARING FOR WHATEVER THE CONSUMER DOES TO GOING FORWARD. ALIX: FROM WHAT THE ANALYSTS SAY IT IS A PRODUCT THING. HAVE THE RIGHT PRODUCT. SCARLET: LET'S BRING IN -- EXCUSE ME, LET'S BRING IN DAN SUZUKI -- [LAUGHTER] RICHARD BERNSTEIN ADVISORS. I WAS READING THE WRONG THING. GOOD TO SEE YOU. THANK YOU SO MUCH FOR JOINING
US. WE TALK ABOUT THE S&P 500 AT RECORD HIGHS. IS THIS BUY ON RUMOR AND SELL ON NEWS ONCE PRINTING SEASON BEGINS? DAN: WITH REGARD O CPI, I DON'T LIKE IT IS GOING TO BE A HUGE SURPRISE. THE PATH OF LEAST RESISTANCE IS FOR INFLATION PRESSURES TO COME DOWN AND EARNINGS WILL COME IN GOOD. THAT IS PRETTY SUPPORTIVE OF MARKETEER. THE ONE FLY IN THE OINTMENT IS
WE'VE HAD THIS INCREDIBLE RUN OF LIQUIDITY. YOU LOOK AT THE BLOOMBERG FINANCIAL CONDITIONS INDEX, WE ARE AT THE HIGH END OF THE HISTORICAL RANGE. DIFFICULT TO PREDICT WHEN THAT WILL PULL BACK. YOU NEED TO BE CAREFUL BECAUSE THE MIX OF EARNINGS IS CHANGING AND LIQUIDITY, YOU HAVE TO BE CAREFUL. ROMAINE: I DO WANT TO TALK ABOUT THE IDIOSYNCRATIC STORIES WITH THE START OF EARNINGS SEASON.
I KNOW THE MACRO IS DRIVING THINGS, BUT WE HAVE HEARD ABOUT THIS IDEA THAT THIS IS A FUNDAMENTALLY DIFFERENT MARKET AND MORE A MARKET-DRIVEN BY INDIVIDUAL STOCKS RATHER THAN THE AGGREGATE. DO YOU THINK EARNINGS SEASON WILL SUPPORT THAT OR PUSH AGAINST IT? DAN: YOU KNOW, ROMAINE, THAT'S A REALLY GOOD POINT BECAUSE THERE IS GOING TO BE BOTH. ON ONE HAND THIS MIGHT BE THE MOST DESINK A NICE PROFIT SINGLE -- DESYNCHRONIZED PROFIT CYCLE WE HAVE SEEN IN DECADES. TO THAT END IT IS A
SECTOR-SPECIFIC STORY, COMPANY-SPECIFIC STORY. THERE'S A LOT OF DIFFERENT DYNAMICS HAPPENING, WHICH MAKES FOR GREAT OPPORTUNITIES FOR SLOT TAKING. AT THE SAME TIME, THE OTHER THING YOU WILL SEE IS BROADENING OUT OF GROWTH. YOU WILL SEE IT AT THE SECTOR LEVEL, MORE SECTORS IMPROVING. REGIONALLY YOU WILL SEE MORE AREAS IMPROVING. YOU WILL SEE MORE COMPANIES PUTTING UP FASTER GROWTH. I THINK THE MACRO MAY START TO
TAKE HOLD MORE AS YOU GET IT OR ON THIS YEAR. FOR NOW IT IS DISPARATE. ALIX: WHAT SECTORS DO YOU LIKE BASED ON THAT? DAN: IF YOU BELIEVE IN THE BROADENING OUT OF GROWTH STORY, THERE IS A HUGE NUMBER OF OPPORTUNITIES BECAUSE NO ONE HAS WANTED TO OWN ANY OF THESE STORIES BECAUSE EARNINGS HAVE BEEN WEEK.
IF EARNINGS GET LESS BAD, THERE IS A LOT OF OPPORTUNITIES. I WOULD SAY THE CYCLICAL SECTORS ACCELERATING, AND NOT JUST SECTORS, BUT REGIONS AS WELL. EMERGING MARKETS WILL SEE EARNINGS ACCELERATION. HOPEFULLY THIS QUARTER WILL BE THE FIRST QUARTER WHERE YOU SEE MEANINGFUL PICKUP IN SMALL-CAP EARNINGS, FUNDAMENTALS -- ROMAINE: THAT WOULD BE HUGE IF WE GET THAT SMALL-CAP PICKUP. THAT IS THE COMPONENT THAT HAS BEEN MISSING. DAN: 100%.
THIS HAS BEEN A UNIQUE FACTOR IN THE ABSENCE OF EARNINGS FUNDAMENTALS. ONCE EARNINGS AND OPERATING LEVERAGE COMES THROUGH, I THINK IF IT IS GOING TO TAKE A BACKSEAT. SCARLET: I THINK BUT IT PERFECTLY, AND I LOOK AT THE ECONOMIC SURPRISING AND HOW IT HAS GONE DOWN DOWN DOWN DOWN DOWN AND THE S&P 500 IN THE INVERSE, UP UP UP UP. INEVITABLY IT WILL HAPPEN BECAUSE IT IS SELF-CORRECTING, DO WE GET THE KNEE-JERK CORRECTION OF THE MARKET LEVELING OFF? DAN: WELL, I THINK IT IS A MIX ISSUE. CERTAIN AREAS HAVE BENEFITED FROM THAT DYNAMIC AS PEOPLE FLEET UP HIGHER-QUALITY COMPANIES, SAFER COMPANIES, COMPANIES THAT HAVE EARNINGS GROWTH TODAY. IT MAY BE A SWITCH WHERE PEOPLE MOVE INTO THE STOCKS THAT ARE STARTING TO IMPROVE. AT THE NEXT LEVEL IT MAY NOT BE
A HUGE UPSIDE STORY. WITHIN THAT THERE COULD BE SHIFTS. ALIX: YOU MENTIONED CYCLICALS. DOES THAT INCLUDE FINANCIALS? DAN: THAT'S AN INTERESTING QUESTION. FINANCIALS SHOULD DO FINE. ALIX:
I HATE THE WORD "FINE." [LAUGHTER] DAN: I HAD TO WORK IT IN SOMEHOW. NO, I WOULD SAY THERE'S PROS AND CONS. IF THE ECONOMY IS DOING OK, THERE WILL BE MORE DEMAND FOR LOAN GROWTH, ETC. BUT I THINK THE CONSUMER, WHICH HAS BEEN THE SHINING STAR IN THE ECONOMY, IS SLOWING. AND WITH THAT YOU WILL SEE MORE
CREDIT RISK AND CREDIT DEFAULTS AND DELINQUENCIES AND ISSUES. THERE IS GOING TO BE MORE OF A PROS AND CONS VS. AREAS THAT HAVE MORE PURE UPSIDE. ROMAINE: WHEN WE TALK ABOUT SLOWING CONSUMER OR SOFTENING CONSUMER, AND I GUESS CONSEQUENTIALLY SOFTENING ECONOMY, WHY ARE PEOPLE STILL SO OPTIMISTIC ABOUT THIS YEAR AND 2025 WHEN IT COMES TO EQUITIES? DAN: ARE THE OPTIMISTIC? I GUESS IT DEPENDS ON WHO YOU ARE TALKING TO. YOU LOOK AT CONSUMER SURVEYS, CLEARLY THERE IS A LOT OF CONCERN OUT THERE. BUT I THINK THERE HAS BEEN A
HUGE DISCONNECT BETWEEN PROFITS AND THE ECONOMY. LAST YEAR THE ECONOMY WAS ROCKING AND ROLLING AND PROFITS WERE STARTING TO PICK UP. NOW YOU HAVE AN ECONOMY THAT IS STARTING TO SLOW AND THE PROPHETS ARE CONTINUING TO PICK UP. IF YOU BREAK UP WHAT DRIVES THE S&P, IS DIFFERENT THAN GDP. IT IS MORE GOODS, TRADE,
MANUFACTURING, EXPORTS. THE ECONOMY IS THE CONSUMER. IF THE ECONOMY SLOWS, THERE'S A LOT OF AREAS WHERE COMPANIES WITH PROFITS CAN IMPROVE. SCARLET: HOW CLOSELY DO YOU PAY ATTENTION TO WHAT IS GOING ON IN POLITICS? DAN: IT'S HARD TO AVOID. [LAUGHTER] SCARLET: BUT CLIENTS MUST ASK YOU ABOUT THIS. DAN:
CLEARLY THE MARKET -- THE CLOSER WE GET, THE MORE VOLATILITY USE ESP PRICING THESE THINGS. DOES IT ACTUALLY MATTER IN THE LONG RUN? I PUT OUT TO PEOPLE ALL THE TIME THAT IF YOU KNEW PRESIDENT BIDEN WAS GOING TO GET ELECTED LAST ELECTION, YOU WOULD'VE SOLD ALL YOUR ENERGY STOCKS, BEST-PERFORMING PART OF THE MARKET. WITH TRUMP YOU WOULD HAVE BOUGHT COAL AND STEEL AND ENERGY. I DON'T THINK IT IS A GOOD IDEA TO TRADE ON IT. AND IT'S ALSO DIFFERENT BECAUSE THE LAST TIME WHEN TRUMP WAS ELECTED, THERE WAS CORPORATE TAX CUTS ON THE TABLE. THIS TIME YOU ARE CHOOSING BETWEEN TARIFFS AND TAXES, AND BOTH SIDES ARE GOING TO SPEND A LOT SO IT IS NOT GOING TO HELP THE DEFICIT. THE IMPLICATIONS FOR THE MARKET
ARE GOING TO BE A LOT LESS CLEAR AND A LOT MORE STRAIGHTFORWARD. EVEN IF YOU DO KNOW, THE MARKET USUALLY DOESN'T WORK OUT THAT NICELY, EVEN WHEN YOU KNOW WHAT THE POLICIES ARE AND WHO IS GOING TO WIN. ALIX: COUPLE MINUTES AWAY FROM THE CLOSE. BEST WINNING STREAK FOR THE S&P 500 SINCE NOVEMBER 2023, SPIKING INTO THE CLOSE, THE WHOLE THING.
HOW MUCH MORE UPSIDE ON THE NEXT LEVEL? DAN: AGAIN, THE NEXT LEVEL IS MORE AT RISK, BECAUSE LIQUIDITY HAS BEEN A BIG DRIVER, WE ARE KIND OF STRETCHED ON THAT FRONT, AND EARNINGS GROWTH FOR THE BIG DRIVERS OF THIS MARKET ARE STARTING TO SLOW. FROM THAT VANTAGE POINT THERE ARE RISKS THAT THE NEXT LEVEL. I WOULD BE TRADING WITHIN IT. TO ROMAINE'S POINT ABOUT BEING CHOOSY ABOUT WHAT YOU OWN, THIS IS THE TIME TO DO THAT. ROMAINE: I JUST WANT TO SAY THIS WAS A
GREAT CONVERSATION. [LAUGHTER] NOT MARK THERE. THE ONE AND ONLY DAN SUZUKI, DEPUTY CIO AT RICHARD BERNSTEIN ADVISORS. I WAS TAKING A LOOK AT THE INTRADAY CHART HERE. SESSION HIGHS AS WE SPEAK. KIND OF INTERESTING, THIS IS
THE FIRST DAY IN A LONG TIME THAT I COULD REMEMBER WHERE EVERYTHING A MAJOR U.S. INDEX WAS IN THE GREEN. SCARLET: I WAS JUST LOOKING AT THAT, TOO. ALIX: DOW HAS KIND OF LAGGED AS TECH GRINDS ITS WAY HIGHER. ONLY BEEN LED BY AN APPLE SITUATION. SCARLET: RUSSELL 2000 ABOUT 1%. HOW OFTEN CAN WE SAY THAT?
THE LAST TIME THAT HAPPENED, BIGGEST JANE SINCE JUNE 12. ROMAINE: THAT IS KIND OF INTENDANT BECAUSE IT SEEMS LIKE EVERY TIME WE GET THESE RALLIES, IT WAS ONE OF THE OTHER. YOU WOULD GET THE NASDAQ AND BIG TECH MOVING HIGHER AND THEN SMALL CAPS IN EVERY THING ELSE MOVING LOWER, VICE VERSA. OF THESE FOR ONE DAY WE GET A TASTE OF WHAT THE BULL MARKET USED TO LOOK LIKE, 1% GAINS ACROSS THE BOARD. GREEN ACROSS THE SCREEN. YOU PICK AN INDEX, PROBABLY HIGH ON THE DAY. DOW JONES INDUSTRIAL AVERAGE UP ABOUT 400 POINTS.
S&P UP 57 POINTS -- INDEED, THAT IS A RECORD HIGH. WE WAIT FOR THE NUMBERS TO SETTLE. NO MATTER WHERE THEY SETTLE, IT WILL BE A RECORD HIGH. NASDAQ COMPOSITE AND NASDAQ 100 EACH OTHER 1% ON THE DAY-- UP 1% ON THE DAY. ALSO 2000 UP 1.1%. MID-CAPS UP 1.2. DOW TRANSPORTS UP ON THE
ACTION, .7%. SCARLET: PICK AN INDEX THAT IS HIGHER. THAT IS THE CASE FOR ALL 11 SECTORS OF THE S&P 500. THEIR WORKABLE LAGGARDS, BUT THE WORST PERFORMING SECTOR IS FINANCIALS. CONSUMER STAPLES UP .5%. THESE ARE THE WEAKLINGS. THE BEST PERFORMING SECTORS, TECHNOLOGY, DRIVEN BY THE CHIP COMPANIES. UP 1.7%. HEALTH CARE GETTING 1%. WHEN YOU BREAK DOWN THE RUSSELL
2000, BEST-PERFORMING GROUPS ARE THE FINANCIALS. ROMAINE: THAT IS KIND OF FITTING, I GUESS, HEADING INTO EFFECTIVELY THE START OF EARNINGS SEASON. ALIX: TAKE A LOOK AT THE BOND MARKET, HEADLINE LEVEL IS TERRIBLY UNEXCITING A BIT OF A BIT INTO THE BOND MARKET. WHAT I FIND SO INTERESTING IS WE HAVE THE THREE-YEAR OPTION YESTERDAY, THEN $39 BILLION OF 10-YEAR BOND SALES, SUPER SOLID. TOMORROW, $22 BILLION 30-YEAR. IF THE TREND CONTINUES, THAT SHOULD BE RELATIVELY SOLID AS WELL.
THAT WHOLE IDEA THAT EVENTUALLY THERE WILL BE NO BUYERS FOR ALL THE BONDS THE GOVERNMENT IS ISSUING HAS NOT HAPPENED. ROMAINE: WE TALKED ABOUT A BOND MARKET THAT COULD GET AWAKEN ON THE BACK OF THE CPI REPORT 8:30 A.M. WASHINGTON TIME TOMORROW MORNING.
EARNINGS SEASON KICKING OFF IN THE MORNING WITH EARNINGS OUT OF DELTA AND BIG BANKS ON FRIDAY. LET'S GET INSIGHT ON WHAT COULD GO ON TOMORROW. BAILEY LIPSCHULTZ AND JUST MENTIONED -- JESS MINTON.
BAILEY, I WILL START WITH YOU BECAUSE THE TELEPHONE FOR TELLS ME TO--TELEPROMPTER TELLS ME TOO. [LAUGHTER] ALIX: JUST GOT MARRIED. ROMAINE: WE ARE AT LEAST FOR ONE DAY, MORE OF A BROADENING OF THIS RALLY, A RALLY THAT HAS BEEN CONFUSINGLY PERSISTENT. BAILEY: YOU LOOK AT RECORD HIGH AFTER RECORD HIGH -- SEEMINGLY DRIVEN BY CHIPMAKERS AND APPLE NEWS. IF YOU LOOK AT THE TOP PERFORMER IN THE NASDAQ 100, GENE SEQUENCING SPACE, WE ARE SEEING A BROADENING OF THIS RALLY. ILLUMINA HAVING ITS BEST DAY IN
ABOUT A MONTH. ALSO WANT TO LOOK AT APPLE, AND MAJOR SHIP AND PERCENT MORE NEW -- AIMING TO SHIP 10% MORE NEW IPHONES. I PERSONALLY WANT TO KNOW WHAT THAT MEANS FOR ME BECAUSE I UPGRADED A FEW YEARS AGO. ROMAINE: YOU WANT THESE AI FEATURES? BAILEY: THE THING WITH APPLE TO ME IS THE SECOND AND THIRD GENERATIONS -- MAYBE I WANT TO GET THE 2024 UPGRADE -- ALIX: WE WERE TALKING ABOUT WHETHER YOU WANT AN OPPORTUNITY TO TURN ON AND OFF AI FEATURES. BAILEY: OPT IN OR OPT OUT? I AM PROBABLY UPPING APPLE MAKES EVERYTHING SO EASY. ROMAINE: ESPECIALLY ITUNES, THAT'S DEAD TO ME. SCARLET:
ITUNES IS ALL KINDS OF PROBLEMATIC. BAILEY: WE SAW OTHER SUPPLIERS RALLYING TODAY. BIG DATA, BIG RELEASE FROM TAIWAN SEMI. THAT SPARKED A RALLY FOR THE CHIPMAKERS. IT IS DRIVING THE FURTHER LEG HIGHER ON THE MOV FUNCTION. NVIDIA COUNTY FOR 10 POINTS ON THE S&P 500. APPLE 7.4. ROMAINE:
I ALWAYS WONDER WHY WE DIDN'T SEE MORE OF A LOCKSTEP WITH NVIDIA'S RISE. THEY GOT A LITTLE BIT OF A BUMP, BUT IT WASN'T ONE-ON-ONE. OBVIOUSLY TAIWAN SEMI IS A BIG BENEFICIARY OF THESE GIGANTIC SHIP THINGS. SCARLET: AND THERE ARE ALL THESE LITTLE DYNAMICS YOU HAVE TO KEEP IN MIND, TRADING BETWEEN THE ADR'S IN THE UNDERLYING STOCK IN TAIWAN. TAIWAN SEMI IS GOING TO BE REPORTING EARNINGS I BELIEVE SOMETIME NEXT WEEK.
THAT WILL GIVE US AN EARLY READ ON WHAT THE AI JIM DEMINT LOOKS LIKE. --CHIP DEMAND LOOKS LIKE. ALIX: LET'S GET TO THE DECLINERS. THANK YOU, BAILEY. DOWNSIDE IS JESS. JESS: DECKERS IS THE BIGGEST- PRESENT DECLINER IN THE S&P 500 TODAY. THIS IS THE WORST DAY SINCE
APRIL 25. IT HAD A WARNING FROM A RESEARCH FIRM THAT HAD A DOWNWARD NOTE WHEN IT CAME TO THE FOOTWORK COMPANY TALKING ABOUT HOW IT SAW A NOTABLE DECELERATION AS WELL AS UGG SALES. I DON'T PERSONALLY OWN ANY UGG SHOES. ROMAINE: SCARLET OWNS 20 OF THESE THINGS. JESS: I DON'T KNOW IF PEOPLE START LOADING UP ON THOSE EARLY. ALIX:
CYCLICAL BUYING. JESS: AND PEOPLE ARE CURRENTLY BUYING THEM -- ROMAINE: A LITTLE LOW TOP? JESS: I LOVE WHEN IT STARTS TO GET CLEARANCE PEOPLE START BRINGING IT OUT -- STARTS TO GET COOLER AND PEOPLE START BRINGING IT OUT WHEN IT IS 60 DEGREES. ALIX: YOU DON'T WANT TO BET ON WHAT I BUY, THAT IS A BAD MIX. JESS: ALSO CROWD STRIKE, THE WORST PERFORMER IN THE NASDAQ 100, DOWN 3% TODAY, WORST DAY SINCE MAY 30. THAT IS THE THIRD CONSECUTIVE
DAY OF DECLINES. IF YOU LOOK AT IGV, TRACKING MORE SOFTWARE COMPANIES IN THE S&P 500, YOU ARE SEEING OTHER COMPANIES AS WELL AS SALESFORCE AND SNOWFLAKE THAT ARE COMING DOWN. WE SAW A ROTATION AT THE END OF LAST MONTH WHERE MONEY WAS FALLING MORE INTO THE SOFTWARE-TYPE NAMES RATHER THAN WHAT WAS HAPPENING WITH CHIP STOCKS. SEEING A BIT OF A PAUSE RIGHT NOW. YOU ARE SEEING A PRESSURE CROWD STRIKE TODAY. ALIX:
INTUIT, MENTIONING INTUIT EARLIER, THAT WAS INTERESTING. JESS: THAT IS THE PARENT COMPANY WHEN WE TALK ABOUT TURBOTAX. WHEN YOU LOOK AT THE STOCK, DOWN ABOUT 2.7% WORST DAY SINCE MAY 30. IT HAS PLANS TO CUT ABOUT 10% OF ITS WORKFORCE FROM 1800 JOBS. WHEN WE THINK ABOUT A LOT OF THE COST-CUTTING EFFORTS FROM BIG TECH COMPANIES OVER THE PAST COUPLE YEARS, THIS COMPANY HAS BEEN WERE SHIELDED.
THIS HAD TO DO WITH WHAT THEY WERE CALLING UNDERPERFORMERS OF THE COMPANY. THEY PLAN TO REHIRE SIMILAR AMOUNT BECAUSE THEY WANT TO CREATE MORE JOBS RELATED TO AI BECAUSE THEY FEEL LIKE THEY NEED TO GET ON THE BANDWAGON AGAINST SOME OF ITS PEERS AS WELL. THAT IS WHY YOU ARE SEEING THAT. THE INITIAL DROP IN THE STOCK,
WE WILL HAVE TO SEE WHERE IT GOES FROM HERE. ROMAINE: DOES THAT MAKE TAX PREP CHEAPER? JESS: MILLION DOLLAR QUESTION. ALIX: FOR A SMALL BUSINESS IT WILL BE EASIER BUT WE DON'T CARE ABOUT YOU GUYS. SCARLET: FOR YOU CAN GO TO THE GOVERNMENT WEBSITE AND USE THE SOFTWARE THEY PROVIDE, TOO. ALIX: WHAT?
THAT SEEMS INEFFICIENT, I DO NOT WANT TO DO THAT. SCARLET: THOSE ARE THE GAINERS AND DECLINERS, BIG GAINS ACROSS THE BOARD WHEN YOU TALK ABOUT YOUR NEXT IS. ONE STORY THAT CAUGHT MY EYE IS THE LATEST CENSUS REPORT SHOWS NEW YORK CITY KID PUBLISHING IS DOWN 18%. BOTH OF YOU LIVE IN THE CITY AND BUT IF YOU HAVE KIDS UNDER 18. ROMAINE: I'M SORRY, WHERE ARE THESE KIDS? SCARLET: THEY'VE MOVED TO THE SUBURBS.
ROMAINE: HAVE THEIR PARENTS GONE WITHOUT? [LAUGHTER] ALIX: OR ARE THEY HAVING LESS KIDS? SCARLET: THAT MIGHT BE IT, TOO. ROMAINE: WHAT IS DRIVING THIS, COST-OF-LIVING? SCARLET: COST-OF-LIVING IS A BIG ONE, AND THE PANDEMIC CHANGE THE WAY PEOPLE THINK ABOUT LIVING IN THE CITY. THEY MOVED OUT AND DIDN'T COME BACK. OR THE ONE TO STATE HAVE FEWER KIDS. ROMAINE: GOING OUTSIDE, IT'S NICE. 90-SOME-DEGREE DAY WITH ODORS -- ALIX: NO WAY. SCARLET: NOT OF HIM?-- NJOT A FAN?
ALIX: I WAS BORN IN NEW YORK CITY. 14% IN LOS ANGELES. IT IS NOT JUST LIKE NEW YORK, IT IS OTHER MAJOR CITIES. SCARLET: SHOULD BE EASIER FOR YOU GUYS TO GET YOUR KIDS INTO THE AFTERSCHOOL PROGRAMS AND ACTIVITIES. ROMAINE: HA HA HA!
NO. ALIX:ALIX: ACTUALLY REALLY GOOD POINT. ROMAINE: STILL NEW YORK CITY. ALIX: I LIVE IN BROOKLYN, IT'S DIFFERENT. ROMAINE: WE SHOULD POINT OUT OUR THANKS TO JESS MINTON AND BAILEY LIPSCHULTZ, WALKING YOU THROUGH ALL THE NUMBERS. A LOT MORE COVERAGE ON
BLOOMBERG TELEVISION. TE CH AND MEDIA TITANS GATHERING IN SUN VALLEY, IDAHO, FOR THE ANNUAL CONFERENCE. ALL THE DRAMA AROUND PARAMOUNT AND SKY DANCE AND THE HEALTH OF THE ADVERTISING INDUSTRY. THIS IS "THE CLOSE" ON BLOOMBERG. SCARLET: WELCOME BACK TO "THE CLOSE."
I'M SCARLET FU. ALIX: I'M ROMAINE BOSTICK. SCARLET: I'M WEARING GREEN, SO THERE YOU GO. ROMAINE: YOU WERE THE RIGHT SHOULD FOR THIS DAY BECAUSE UNLIKE YESTERDAY WHEN WE WERE POOH-POOHING THAT 10% RALLY, GAINS ON THE S&P 500.
GAINS ON THE NASDAQ AND RUSSELL 2000. PHILADELPHIA SEMICONDUCTOR INDEX COMMIT TECH STOCKS, CHIP STOCKS, LEADING THE CHARGE. THIS WAS ONE OF THE MORE BROAD RALLIES WE HAVE SEEN THE END OF MAY. IN THE RESTAURANT SPACE WITH GARDEN AND BITCOIN, IT CONTINUES TO REMAIN ON THE BACK FOOT. SCARLET: IT WAS TECH THAT TOOK THE FRONT
STAGE, CENTERSTAGE, IN TERMS OF BIG GAINS. ALPHABET BETTER BY 1%. THIS IS THE CASE ACROSS THE MAGNIFICENT SEVEN SPACE. HUB SPOT LOSING AS MUCH AS 90% AFTER BLOOMBERG REPORTED THAT ALPHABET HAS SHELVED EFFORTS TO ACQUIRE THE COMPANY.
ALPHABET WAS INTERESTED IN IT A POTENTIAL DEAL THIS YEAR BUT THE TWO SIDES DID NOT GET TO THE DUE DILIGENCE STAGE. THIS IS ACCORDING TO PEOPLE FAMILIAR WITH THE MATTER. WHY AND ELECTRIC OF 21% ON THE DAY AFTER A LOCAL NEWS OUTLET REPORTED THAT A SETTLEMENT RESOLVING ALL CLAIMS OVER THE WILDFIRES WAS PROGRESSING AND ADVANCING THROUGH THE MAUI COUNTY COUNCIL. GOOD NEWS FOR SHAREHOLDERS OF HAWAIIAN ELECTRIC. OUR TOP STORY THIS HOUR COMES
DOWN TO INFLATION. JAY POWELL SAYS HE IS NOT READY TO CLAIM VICTORY OVER IT, AS THE FEDERAL RESERVE AWAITS THE LATEST READ ON CONSUMER PRICES, DUE OUT TOMORROW, TO DETERMINE THE PROGRESS OF INFLATION MODERATING TO THE 2% TARGET. BULLISH FUN WAGERS OVER THE PAST WEEK AND HALF. LATER THIS HOUR WE WILL HEAR FROM THE CEO OF GENERAL MILLS OF HOW THE FOOD COMPANY WILL BE ADDRESSING INFLATION. ROMAINE: WE WANT TO FOCUS ON WHAT HAS BEEN GOING ON IN THE WORLD OF MEDIA AND TECH. SUN VALLEY, IDAHO, FOR THE ANNUAL CONFERENCE, AND PARAMOUNT'S MERGER WITH SKY MEDIA IS THE TALK OF THE TOWN, TO SAY THE LEAST. CEO OF WARNER BROS.
DAVID JUST LEFT, WAS SAYING THAT THE PARAMOUNT IS GOOD FOR THE INDUSTRY. JOINING US RIGHT NOW, PRESIDENT AND CEO OF MOUNTAIN, WHICH BUILDS ADVERTISING SOFTWARE FOR BRANDSS. HE JOINS US TO TALK ABOUT WHAT IS GOING ON. I WANT TO GET YOUR INITIAL REACTION TO -- I THINK THIS IS A DONE DEAL, KNOCK ON WOOD -- THE SKYDANCE-PARAMOUNT SAGA APPEARS TO HAVE BEEN RESOLVED. >> I THINK THAT OBVIOUSLY THE DEAL IS RISKY IN THE SENSE THAT PARAMOUNT IS A COMPANY THAT HAS BEEN HURTING, SO I THINK DOING THE TURNAROUND IS ALWAYS EXTREMELY DIFFICULT.
I THINK WHY SOMEONE MIGHT SAY IT IS GOOD FOR THE INDUSTRY IS BECAUSE IF YOU BUY PARAMOUNT, YOU'RE GOING AFTER REALLY REBUILD IT AROUND SOME SPECIFIC SET OF CONTENT THAT PEOPLE JUST LOVE. IN THEIR CASE IT IS LIKELY SCI-FI. THEY HAVE STAR TREK AND OTHER SHOWS ON THE CHANNEL. THAT IS PROBABLY GOING TO LEAD TO MORE ACQUISITIONS. THIS IS THE FIRST OF MANY IS WHAT I WOULD PREDICT IN THIS SAGA. ROMAINE: WE TALK ABOUT THE SUN VALLEY
CONFERENCE AS WHERE DEALS GET MADE. THE LAST COUPLE YEARS IT HAS BEEN A LITTLE MORE MUTED. EVEN THIS YEAR DOESN'T SEEM LIKE THERE'S A LOT OUT THERE.
WHAT'S INTERESTING ABOUT THESE CONFERENCES IS NOT JUST TO SHOWS UP, BUT WHO ISN'T THERE. THERE IS NOTABLE NAMES WE HAVE SEEN IN THE PAST THAT HAVE FOR WHATEVER REASON DECIDED TO SKIP THIS YEAR. MARK: YEAH, I THINK SOME OF THOSE NAMES ARE WARREN BUFFETT, SOME OF THEM ARE -- WARREN BUFFETT AND ELON MUSK ARE TWO OF THE MOST NOTABLE NAMES NOT THERE. ELON MUSK, QUITE FRANKLY HE IS BUSY GETTING ROCKETS GOING INTO SPACE. HE'S ALSO PROBABLY FEELING A
LITTLE BEAT UP. I DON'T THINK THERE'S MANY MORE QUESTIONS HE WANTS TO ANSWER PUBLICLY THESE DAYS. I'M NOT SURE HE CAN -- I'M NOT SURE YOU CAN READ TOO MUCH INTO IT. PEOPLE ARE REALLY BUSY. IT'S A BUSY SUMMER, THERE'S A LOT HAPPENING IN THE BUSINESS WORLD IS ALL AROUND. I DON'T THINK THERE'S ANYTHING MORE TO LOOK AT OTHER THAN PEOPLE FINISHING OFF WHAT'S REALLY FOR A A LOT OF PEOPLE A REALLY GOOD YEAR. SCARLET: AND WE WILL WAIT TO HEAR WHETHER THERE ARE ANY SPECULATIONS OF DEALS COMING OUT OF THE CONFERENCE AS THE WEEK CONTINUES.
GOING BACK TO PARAMOUNT AND SKYDANCE FOR A MOMENT, DAVID ELLISON CALLS SKYDANCE A NEXT-GEN PURE PLAY CONTENT ENGINE AND PARAMOUNT AS A WORLD-CLASS STORYTELLING ENTERPRISE. A LOT OF BUZZWORDS, ADMITTEDLY. FOR THOSE OF YOU IN THE ADVERTISING SPACE, WHAT DOES A REINVIGORATED PARAMOUNT BACKED BY ELLISON MONEY MEAN? MARK: I THINK THE STREAMING WILL HAS BEEN CONSOLIDATED TO POTENTIALLY HAVE A CONSOLIDATOR. ESSENTIALLY WHAT IS HAPPENING IS IF YOU HAVE BRANDS THAT THE CONSUMER UNDERSTANDS WHAT THEY REPRESENT, ESPN FOR SPORTS, POTENTIALLY PARAMOUNT WITH SCIENCE-FICTION, THOSE ARE GOING TO BE THE CONTINUED WINNERS IN STREAMING. EVERYONE ELSE WITHOUT THAT ARE GOING TO BE ESSENTIALLY ACQUIRED FOR THEIR PREVIOUS CONTENT. TO HAVE REALLY DEEP POCKETS IN THE FORM OF ELLISON AND HIS FATHER IS LARRY ELLISON, COMING INTO THIS MARKET POTENTIALLY TO BECOME A NEW CONSOLIDATOR AND BUILD ANOTHER TENTPOLE AROUND BRANDED EFFORT IS NEEDED IN THE INDUSTRY. WE NEED MORE THAN JUST NETFLIX
AND DISNEY AND A HANDFUL OF OTHERS. I THINK IT'S GOOD. SCARLET: WE NEED MORE, BUT AT THE SAME KIND THERE IS A LOT OF WEAK STREAMERS. PARAMOUNT HAS A COUPLE STREAMING SERVICES -- YOU HAVE PARAMOUNT PLUS, BUT YOU ALSO UP PLUTO, WHICH IS FREE. WHAT HAPPENS TO SOMETHING LIKE PLUTO? MARK: THEY ARE ALL BEING CONSOLIDATED THE PLUTO BRAND, AS AN EXAMPLE, RUNS INTO PENALTY BECAUSE IT IS FREE AND REPRESENTS THAT. FOR THE MOST PART, THE CBS BRAND, ALL THE ORIGINAL BRANDS, CBS AND ABC, ARE AT RISK OF GOING ULTIMATELY LIKE YOU REMEMBER THEM, BUT THEY DON'T EXIST ANYMORE. I DON'T EVEN THINK THAT IS A POSSIBILITY, I THINK IT IS LIKELY. IF I ASK SOMEONE ON THE STREET,
WHAT DO YOU GO TO ABC TO WATCH TONIGHT, YOU GET A BLANK STARE. WHY DOES THE BRAND EXIST? CBS IS KIND OF ON THE CUSP OF THAT SAME ANSWER. THEY'RE ABLE TO SAY SPORTS, BUT I THINK PEOPLE ARE HARD-PRESSED TO SAY WHAT ELSE. A LOT IS GOING TO BE REWIRED THERE IN ORDER TO BUILD A REAL BRANDED THAT CONSUMERS UNDERSTAND. SCARLET: GOT IT. REALLY APPRECIATE YOU JOINING US. MARK DOUGLAS IS PRESIDENT AND CEO OF MNTN.
THE JURY IN THE BILL HWANG TRIAL OF ARCO WILL DELIVER A VERDICT ON BILLY LONG AND THE CFO, PATRICK CALLAGHAN. WHEN THAT DOES CROSS, WE WILL BRING IT TO YOU. WE HAVE GOT THE TOP THREE, WE WILL FOCUS ON THE TOP THREE MOVERS AND SHAKERS. THIS IS "THE CLOSE." ROMAINE: THE JURY IN THE BILL HWANG CASE HAS REACHED A VERDICT. THE TRIAL OF THE FORMER HEAD OF ARCHEGOS, THE JURY HAS REACHED A VERDICT DECIDING THE FATE OF BILL HWANG, WITH THE FOCAL POINT OF THE BREAKDOWN OF ARCHEGOS.
THE FAMILY HAD A LOT OF TIES TO OTHER FUNDS INCLUDING MARK INVESTMENTS. CATHIE WOOD WAITING TO GET THE VERDICT AND WE WILL BRING IT TO YOU AS SOON AS WE GET IT. SCARLET: IN THE MEANTIME, IT IS TIME FOR THE TOP THREE. WE WILL NAME FOLKS DRIVING THE DATE'S MOST TALKED ABOUT STORIES. STEPPING DOWN AS CFO OF 3M TO TAKE ON THE SYMBOL AT ARCHER DANIELS MIDLAND, GOING FROM ONE CHALLENGING SITUATION TO ANOTHER.
3M, THE COMPANY HE IS LEAVING, HAS ALL THESE LEGAL LIABILITIES FROM DEFECTIVE EARPLUGS TO CHEMICALS. THE NEW COMPANY IS GOING TO HAS ACCOUNTING ISSUES. ROMAINE: THEY'VE GOT A LOT OF ISSUES. IT IS INTRIGUING THAT HE WOULD CHOOSE TO TAKE THIS ON. I DON'T KNOW, MAYBE YOU FIND OPPORTUNITIES IN CHAOS. WE DON'T KNOW HIS PERSONAL THINKING, BUT MAYBE THAT IS WHAT IT HAS TO DO WITH.
I DON'T KNOW IF HE HAS BROADER AMBITIONS THAN THIS. IF I WAS HIM I WOULD MAYBE JUST RETIRE. SCARLET: IT IS A GOOD TIME TO PROVE HIS METTLE. ROMAINE: A PERSON-KEEPING AN EYE ON IS THE SOCCER PLAYER WITH SPAIN, AND HE BECAME YESTERDAY AT THE AGE OF 16 THE YOUNGEST-EVER SCORER AT THE EUROPEAN CHAMPIONSHIP.
ONE THING THAT CAUGHT MY EYE IS THE PICTURE YOU SEE ON YOUR SCREEN -- YOU CAN'T HELP, BUT THE BABY IS HIM, THE GUY TOUCHING HIM IS LIONEL MESSI. SCARLET: OH, MY GOSH, INCREDIBLE. ROMAINE: SOUNDS LIKE THERE IS A SOCCER CAMP HIS MOTHER WAS INVOLVED IN, AND I DOUBT MESSI KNEW AT THE TIME THAT THE LITTLE BABY WOULD GROW UP TO BECOME AT LEAST FOR TODAY ONE OF THE MOST TALKED ABOUT SOCCER STARS. SCARLET: AND THERE IS THE LINK TO BARCELONA, TOO. YAMAL TURNED 17 ON SATURDAY. WE KNOW WHAT HE WILL BE WISHING
FOR. ON SUNDAY HIS TEAM, SPAIN, WILL BE PLAYING THE FINAL AGAINST EITHER THE NETHERLANDS OR ENGLAND. THE GAME IS CONTINUING. DRAW, TIE? ROMAINE: STILL 1-1? THEY HAVEN'T SCORED ANYMORE GOALS? SCARLET: NO, THEY HAVEN'T. ARE THEY IN EXTRA TIME? I CAN'T TELL WITH THE SOCCER GAMES HOW LONG THESE ARE SUPPOSED TO GO FOR GOOD ROMAINE: I'M TOLD 90 MINUTES. SCARLET: BUT THEN YOU ADD-ON FOR PENALTIES, IT'S CONFUSING. NUMBER THREE IS JENNIFER
O'CONNOR, NEW GENERAL COUNSEL FOR HARVARD UNIVERSITY, WHICH MEANS SHE WILL LEAD AT THIS SCHOOL'S STRATEGY THROUGH LAWSUITS AND CONGRESSIONAL PROBES AND CALLS TO CUT FINANCIAL TIES WITH MILITARY CONTRACTORS. SPEAKING CHALLENGING JOBS, RIGHT? SHE HAS RELEVANT EXPERIENCE. HER LAST JOB WAS AT NORTHROP GRUMMAN, WHICH IS FACED PROTESTS CALLING FOR DIVESTMENT FROM ISRAEL AS WELL. SPEAKING OF PEOPLE WE ARE
WATCHING, A CHORUS OF DEMOCRATS SIGNALING UNEASE WITH PRESIDENT JOE BIDEN. FORMER HOUSE SPEAKER NANCY PELOSI DECLINED TO SUPPORT BIDEN'S INTENTION TO SEEK REELECTION, INSTEAD SAYING IT REMAINS HIS DECISION TO MAKE. ONE OF THE PARTY'S BIGGEST CELEBRITY SUPPORTERS AND DONORS, GEORGE CLOONEY, IS CALLING FOR A NEW NOMINEE.
LET'S BRING IN KAILEY LEINZ. IT FEELS LIKE THE MOMENTUM IS MOVING IN THE DIRECTION OF SOMETHING HAPPENING, AND WE KNOW THE WHITE HOUSE IS GOING TO BE MEETING WITH THE DEMOCRAT LEADERS SOON. KAILEY: CAMPAIGN OFFICIALS ARE GOING TO BE MEETING WITH SENATE DEMOCRATS ON THE HILL TOMORROW AT 12:30 P.M. AHEAD OF BIDEN'S HIGH-PROFILE PRESS CONFERENCE AT THE NATO SUMMIT. EVERYONE WILL BE WAITING AND
WATCHING FOR THAT. IT SEEMS HE HAS NOT BEEN ABLE TO STOP THE BLEEDING WITHIN HIS OWN PARTY. STILL GETTING THIS TRICKLE TRICKLE OF DOUBTERS, INCLUDING GEORGE CLOONEY, WHO WEEKS AGO WAS FUNDRAISING ALONGSIDE BIDEN IN CALIFORNIA AND RAISED TENS OF MILLIONS OF DOLLARS. TODAY SAYING AT THE FUNDRAISER HE SAW THE SAME AS IN THE DEBATE TWO WEEKS AGO, AND IT WAS DEVASTATING FOR HIM TO SAY THAT. WE HAVE AN EIGHTH MEMBER OF THE HOUSE CALLING FOR BIDEN TO STEP OUT OF THE RACE, DEMOCRATIC CONGRESSMAN PAT RYAN OF NEW YORK.
NEW YORK'S LIEUTENANT GOVERNOR CALLING FOR BIDEN TO STEP ASIDE. NANCY PELOSI, WHEN GIVEN THE OPPORTUNITY TO ENDORSE HIS REELECTION EFFORT, DECLINED TO DO SO, JUST SAYING IS HIS DECISION TO MAKE. BIDEN HAS SAID HIS DECISION IS MADE. FOR THE SPEAKER EMERITA SUGGESTING THERE IS A DECISION SUGGESTS THAT THERE ARE DIFFERENT COMPOSITIONS. ROMAINE: HOLD ON, IT IS NOT BIDEN'S
DECISION TO MAKE, IT IS THE PARTY'S DECISION. I'M CURIOUS IF THEY WRESTLED WITH WHETHER THEY HAVE A BETTER SHOT WITH SOMEBODY OTHER THAN BIDEN, ARE ALL THESE FOLKS ASKING HIM TO STEP ASIDE SANK WITH A ONE IN HIS PLACE? -- SAYING WHO THEY WANT TO DISPLACE? KAILEY: NO COMBAT IS AN ENTIRELY DIFFERENT CONVERSATION. THE DELEGATES AT THE CONVENTION HAVE BEEN PLEDGED TO BIDEN AS HE DID WHEN THE DEMOCRATIC PRIMARY, SO HE DOES HAVE TO DECIDE HE IS EXITING UNTIL THE DELEGATES TO VOTE FOR SOMEONE ELSE.
IT VERY MUCH IS UP TO PRESIDENT BIDEN, ALTHOUGH INFLUENTIAL MEMBERS IN THE PARTY LIKE SPEAKER EMERITA PELOSI, THE CURRENT MEMBER OF THE DEMOCRATIC LEADERSHIP, COULD EXERT PRESSURE, AS WELL AS HIS OWN FAMILY. IT COMES DOWN TO WHETHER THE PRESIDENT DECIDES HE IS IN OR OUT. TOMORROW'S PRESS CONFERENCE COULD BE HIGHLY CONSEQUENTIAL INFLUENCING THAT DECISION. ROMAINE: WONDER WHOSE IDEA THAT WAS. KAILEY LEINZ, CHECK HER OUT TOP OF THE HOUR ON "BALANCE OF POWER." SCARLET: THAT THING THAT CAME UP DURING THE POWELL HEARING TODAY, SOME SENATORS ASKED POWELL WHAT HE THOUGHT OF PRESIDENT BIDEN AND HE SAID HE HASN'T BEEN WITH HIM FOR YEARS, BUT HE HAD NOT SEEN ANY ME
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