Tech Giants Fall in Late Hours on Micron's Outlook | Bloomberg: The Close 6/26/2024
>> THE COUNTDOWN IS ON. EVERYTHING YOU NEED TO GET THE EDGE OF THE MARKET DAY. THIS IS "THE CLOSE." ROMAINE: EVEN WITH NVIDIA DOWN, THE IT EITHER. IT NEVER SLEEPS. LIVE FROM STUDIO 2 HERE IN NEW YORK, I AM ROMAINE BOSTICK. ALEX BOWMAN: AND I AM ALIX STEEL. YOU KNOW WHO IS NOT SLEEPING?
AMAZON. THAT CONSUMER DISCRETIONARY IS OUTPERFORMING IN THE S&P. ASIDE FROM THAT STORY, IT'S ABOUT KING DOLLAR. THE STOXX INDEX IS DOWN FROM HIS MARK ON THE AI CHIPS STORY, BUT YIELDS ARE HIGHER AND THE BLOOMBERG DOLLAR INDEX IS AROUND THE HIGHEST OF THE YEAR, OBVIOUSLY PUTTING SIGNIFICANT PRESSURE.
WHEN THE MARKETS CARE ABOUT KING DOLLAR? WE ARE NOT THERE YET AS CHIPS ARE STILL IN FOCUS. FROM: CHIPS IN FOCUS, IT REMAINS THE STORY PARTICULARLY WITH EARNINGS THIS TIME OUT OF MACRON TONIGHT. REMEMBER, ITS MEMORY CHIPS HAVE BEEN A BIG BENEFICIARY, WALL STREET EXPECTING IT DOUBLING IN A JUST AND PROFITS. OPTIONS CONTRACT SIGNALING THE STOP COULD MOVE 12% UP OR DOWN, DEPENDING WHICH WAY THE REPORT GOES. ALSO KEEP AN EYE ON BANK STOCKS AS THE FED IS SET TO RELEASE RESULTS OF ITS LATEST STRESS TEST, WHICH WERE INVESTORS, SERVES AS A PRELUDE OF FIRST DIVIDEND PAYOUTS AND SHARE BUYBACKS.
THE BENEFITS PURCHASED $14 BILLION OF STOCK IN THE FIRST QUARTER AND THE PUTS THEM ON PACE FOR $58 MILLION BY THE END OF THE YEAR. AND IN THE FX CASE, THE JAPANESE YEN IS AT ITS WEAKEST SINCE 1986, SENDING SPECULATION THAT THE GOVERNMENT WILL HAVE TO STEP IN AGAIN. WILL IT WORK THIS TIME? THE PETERSON INSTITUTE.
>> IT IS NOW JUST A QUESTION OF MANAGING THE DOG -- DOWNWARD DESCENT RATHER THAN MANAGING THE POLICY. THEY WILL NOT BE ABLE, WITH INTERVENTION ALONE, TO STEM THIS. ROMAINE: THE GAP BETWEEN INTEREST RATES IN JAPAN AND THE U.S. KEEPS GETTING WIDER AND PUTTING PRESSURE ON THE YEN.
LET'S KICK OFF THE SHOW WITH A CLOSER LOOK AT AI AND, MORE IMPORTANTLY, A CLOSER LOOK AT MICRON COMING UP AFTER THE BELL. ALIX: THE STOCK HAS HAD A MONTH START RUN, TOP PICKS WHEN IT COMES TO FINANCIAL . SUSQUEHANNA AND CITI CALLING IT A TOP PICKS. MY WORDS GOT MUMBLED THERE. AND HERE IS WHY. THIS IS WHAT WE THINK THE MICRON REVENUE RAMP UP WILL LOOK LIKE IN THE NEXT FEW QUARTERS. THESE ARE ESTIMATES FROM ANALYSTS. THE YELLOW IS FIRST QUARTER.
WHITE'S SECOND QUARTER. BLUE IS THIRD-QUARTER AND PINK IS FOURTH-QUARTER. IT JUST KEEPS CLIMBING AND CLIMBING. CLEARLY THE AI STORY IS CYCLICAL, BUT WE DON'T KNOW WHAT THAT CYCLICALITY. LOOKS LIKE MANY ANALYSTS ARE EXPECTING A BEAT AND A RAISE AGAIN, BUT A 12% MOVE IS EXPECTED IN EITHER DIRECTION. SO IF MIKE ROUNDS DISAPPOINTS,
THIS COULD BE A BIG SELLOFF TOMORROW. ROMAINE: YES, CERTAINLY LOOKS LIKE ONE OF THOSE BINARY TRADES. JUTTING US NOW IS THE FOUNDER AND CEO AT BOKEH CAPITAL PARTNERS. LET'S START HERE WITH THE IT'S SITE TRADE AND WITH MICRON. EVERYONE IS LOOKING FOR MARKET BREADTH. LET'S TALK ABOUT BREATH,
SPECIFICALLY IN THE AI SPACE. DOES MICRON DELIVER THAT? GUEST: IT DOES. NOT IN A STRAIGHTFORWARD WAY THOUGH, PEOPLE HAVE TO UNDERSTAND THAT THE MODELS THEY ARE TRAINING AND THE MODELS THAT I THINK WILL WIN OVER TIME, AND IT'S A LONG TIME. IT WILL NOT BE TOMORROW OR THE NEXT DAY, WE ARE TALKING YEARS IS NOT A DECADE TO LET THIS AI THING FOR, WHAT IT CAN BE. WHAT DOES IT NEED MOST? DATA. WHERE DO YOU STORE THAT DATA ON? MEMORY. WHO MAKES IT?
JUST A HANDFUL OF PEOPLE, BUT MICRON MAKES IT AND THAT IS WHY THEY ARE IN FOCUS. ROMAINE: TO BE CLEAR, DO YOU HAVE A STAKE AT ALL IN MICRON? KIM: I DO NOT OWN NVIDIA CURRENTLY BUT I DO OWN MICRON AND IT IS BECAUSE OF THE INEXHAUSTIBLE -- LET'S NOT EVEN FORGET AI, WE ALL MAKE DATA AND STORE IT FOREVER. IT MAKES THOSE STORAGE BINS YOU DRIVE BY, THOSE STORAGE PLACES LOOK SMALL AND NOT VERY IMPORTANT BECAUSE OF ALL THE DATA EVERYONE CREATES EVERY DAY, AND BUSINESSES ON THE CREATE MORE DATA. SO WE ARE GOING TO BE -- WE
JUST HAVE A LOT OF DATA THAT GETS CREATED AND STORED ALIX: TOO FAR, TOO FAST? WE COULD MAKE THAT ARGUMENT FOR NVIDIA, BUT ALSO FOR MICRON. KIM: THEY HAVE A LITTLE WEIRD HICCUP IN THE LAST COUPLE OF YEARS. WHAT THE PROBLEM IS IS THAT THERE'S ONLY SIX MAKERS OF NAND DEVICES, THE STORAGE STUFF. SO THEY ALL DECIDED TO CREATE NEW FABRICATING PLANS AND THEN THERE WAS A SURPLUS OF THESE KIND OF PRODUCTS. IT IS KIND OF, BUT NOT REALLY, A COMMODITY.
SO YOU HAD TOO MUCH SUPPLY AND NOT ENOUGH DEMAND AND PRICES FELL. NOW WE ARE LEANING INTO THE OTHER WAY WHERE WE HAVE ADEQUATE SUPPLY. BUT WE ARE BACK AT A MORE NORMAL PRICING ENVIRONMENT WHERE PRICES GO UP, NOT DOWN. AND PEOPLE ARE THINKING
BOOPSIE,, THEY MIGHT HAVE MORE DEMAND AND NO WAY TO SUPPLY IT, SO THAT IS PROBABLY DRIVING THOSE KIND OF AGGRESSIVE PROJECTIONS. ALIX: YES, RECOVERING FROM THE CYCLE LOW IS SOMETHING AND THEN YOU ADD ON THE AI STORY. BANK OF AMERICA HAD A REPORT OUT THAT SAID THAT THE MAJORITY OF HEDGE FUNDS PHONE FOR OVER THE TOP FIVE STOCKS. IT'S A CRAZY NUMBER.
-- THAT THEY OWN FORM, OF THE TOP FIVE STOCKS. HOW DO YOU MANAGE THAT? KIM: YOU DON'T. YOU KNOW THIS IS FAST MONEY, RIGHT, WE WILL MOVE IN AND THEY WILL MOVE OUT. THEY TRY TO MAKE MONEY IN VERY
SHORT TIME IN INCREMENTS. I AM PLAYING A COMPLETELY DIFFERENT GAME WHERE ARE YOU LOOKING OUT THREE TO FIVE YEARS AND SAY, EH, THINGS WILL GO UP AND THINGS WILL GO DOWN BUT THESE ARE THE COMPANIES I WANT TO OWN. DECIDE WHAT GAME YOU ARE PLAYING AND PLAY IT. THE HEDGE FUND GAME IS KIND OF CRAZY ESPECIALLY WHENEVER ALL OF THEM ON THE SAME STOCKS, WHAT IS THE DIFFERENTIATOR? NONE THAT I CAN SEE. SO YOU KNOW, BE CAREFUL WHAT GAME YOU GET INVOLVED IN AND KNOW THAT OTHER PEOPLE ARE DOING DIFFERENT THINGS AND IT MAY AFFECT YOUR STOCKS, BUT IT SHOULD NOT AFFECT. ROMAINE: YOUR OUTLOOK DO YOU FEEL THOUGH, THAT THERE IS ENOUGH PRICE TRANSPARENCY IN THE MARKET GIVEN THE NARROWNESS OF THE RALLY? KIM: NOT REALLY.
I WOULD LIKE MORE PEOPLE TO BUY OTHER STOCKS, FREIGHT, AND IF YOU MISS, MAN, DO YOU GET PUNISHED. LOOK AT GENERAL MILLS TODAY. SO EVEN A SLEEPY STOCKS, IF THEY ARE NOT PERFORMING, YOU WILL GET PUNISHED. I THINK THAT IS JUST EVERYBODY TRYING TO OVERCOME THE NVIDIA SPIKE THAT IS IN YOUR PORTFOLIO THAT IS JUST DRIVING THE RETURNS AND KIND OF INESCAPABLE.
ALIX: THE REBALANCING. END OF QUARTER. HOW DO YOU EXPECT THE NEXT COUPLE OF DAYS TO BE? KIM: IT'S GOING TO BE CRAZY. THE OTHER THING WE ARE NOT TALKING ABOUT IS PRE-ANNOUNCEMENTS THAT CAN ALSO DRIVE PRICES. THERE WAS ONE LITTLE COMPANY CALLED POOL. THEY MAKE POOL SUPPLIES.
IT'S AN INTERESTING THING WHERE YOU ARE SEEING MAY BE THE MONEY AND THE POOL DEMAND, THAT WAS HUGE IN COVID, IS PROBABLY MET. SO THEY HAD A MISS ON THEIR EXPECTATIONS AND THEY ARE LOWERING EXPECTATIONS. WE WILL BE ON THE WATCH OUT THE NEXT COUPLE OF DAYS FOR OTHER PRE-ANNOUNCEMENTS AND THAT MIGHT TELL US WHAT COMPANIES WILL BE LIKE IN EARNINGS SEASON, WHICH IS REALLY AROUND. ROMAINE: THE CORNER GREAT POINT, KIM FORREST, FOUNDER AND CEO AT BOKEH CAPITAL PARTNERS, KICKING US OFF TO THE CLOSE. WE HAVE A LOT OF FREE ANNOUNCEMENTS SHOWING POTENTIAL WEAKNESS IN THE ECONOMY. IT IS NOT SHOWING UP IN THE ECONOMIC DATA? WE HAVE A CONVERSATION AT AHEAD WITH THE CHIEF U.S. ECONOMIST AT JP MORGAN. ALIX:
HOUSING SALES IN THE U.S. FLEW INTO THE LOWEST PACE SINCE NOVEMBER. WE WILL SPEAK WITH THE LARGEST RESIDENTIAL REAL ESTATE BROKERAGE IN THE U.S.'S CEO
ABOUT SALES VOLUME. ROMAINE:. ROMAINE: AND A CONVERSATION WITH THE CEO OF THE CRYPTO MINING COMPANY AT MARATHON DIGITAL. HIS OUTLOOK FOR BITCOIN AS WELL AS THE ELECTIONS IS UP AHEAD. STICK WITH US. THIS IS "THE CLOSE" ON BLOOMBERG. ALIX: WE HAD A BIG WEEK FOR ECONOMIC DATA UP AHEAD. TOMORROW IS ESTIMATED FIRST QUARTER GDP ALONG WITH DURABLE GOODS AND JOBLESS CLAIMS. FRIDAY, PERSONAL SPENDING AND INCOME AND THE ALL
IMPORTANT CORE PCE THE FED SIMPLY -- SIDE CLOSE IMPORTANT INFLATION METRIC. COME FRIDAY BY 8:35, WHAT WILL WE HAVE LEARNED? GUEST: WE WILL MOST LIKELY HAVE LEARNED THE CORE PCE NUMBER. THE CONSENSUS IS LOOKING FOR A ONE INCREASE OF THE MONTH, TWO POINT 6%, GETTING CLOSE ENOUGH TO THE FED'S TARGET. I THINK THE OTHER THING I WILL BE INTERESTED IN WATCHING TOMORROW AT 8:30 IS JOBLESS CLAIMS WHICH OVER THE PAST COUPLE OF WEEKS HAVE BEEN KIND OF DRIFTING HIGHER PARTICULARLY THE CONTINUING CLAIMS NUMBERS. SO FAR, NOTHING CONCERNING OR WORRISOME, BUT WE WANT TO KEEP AN EYE ON THAT. ALIX: GLAD YOU BROUGHT THOSE UP. FEELS LIKE THE FED, WHETHER IT
IS MARY DALY OR MICHELLE BOWMAN SAY IT'S AN INFLATION OR GROWTH THING. EITHER INFLATION WILL STAY TOO HOT OR GROWTH WILL FALL OFF TOO SOON. WHAT ARE YOU FOCUSED ON? MICHAEL: PROBABLY GROWTH.
WE KNOW A LOT OF THE PLOT LINE FOR INFLATION PRINT GOODS PRICING LOOKING SOFT. SHELTER INFLATION RUNNING FIRM. BUT THE JOBS NUMBERS, THERE ARE SOME HITS THERE. AGAIN THEY ARE OBVIOUSLY VERY STRONG AND THAT PAYROLL NUMBER THROUGH MAY, WE WENT TO SEE IF THAT HOLDS UP. PARTICULARLY WITH SIGNS OF SOFTER CONSUMER SPENDING IN THE RETAIL NUMBERS. ROMAINE: WHAT IS THE HOUSE FEEL OVER THERE? IF THEY START TALKING ABOUT THE POTENTIAL OF KEEPING RATES WHERE THEY ARE, IS THAT IN THE REALM OF POSSIBILITY IN YOUR FORECAST MICHELLE? MICHAEL: BOWMAN IS ONE OF THE MORE HAWKISH PERSONS ON THE FEDERAL RESERVE BOARD BUT IT IS NOT SOMETHING WE WOULD RULE OUT. IT A 10% PROBABILITY.
WE THINK IT IS LIKELY THAT FED CUTS THIS YEAR IN LIKE WITH THE -- IN LINE WITH THE MEDIA AND FOMC PARTICIPANTS' RECENT DOT PLOT. GDP GROWTH IS MODERATING. THE JOB MARKET IS GETTING INTO BETTER BALANCE. WE THINK THAT SETS THE STAGE FOR SOME CUTS LATER THIS YEAR. I WANT TO GET YOUR THOUGHTS ON WHAT HAS BEEN GOING ON OVERSEAS. THERE IS A BIG ISSUE RIGHT NOW THAT JAPAN IS DEALING WITH WHEN YOU TALK ABOUT INTEREST RATE DIFFERENTIALS, THE YEN TRADING AT 160 HERE. I KNOW WE STILL HAVE A FEW MORE WEEKS UNTIL THE NEXT BIG MEETING AT THERE, BUT AT SOME POINT THEY HAVE TO ADDRESS THIS. THE INTERVENTION, IF THEY
CHOOSE TO DO SO, WILL IT HAVE AN IMPACT, OR IS IT MORE JUST THE INTEREST RATE DIFFERENTIAL CLOSING THE GAP? MICHAEL: EVIDENCE WOULD SUGGEST THAT INTERVENTION IS AT BEST A VERY TRANSITORY SOLUTION TO THE PROBLEM AND THAT ULTIMATELY THE BOJ WILL HAVE TO RAISE INTEREST RATES AND WE OCCURS LATER THIS YEAR. ALIX: WHEN DO WE START WORRYING ABOUT THE STRONGER DOLLAR TWO NOBODY WILL WANT TO STAND IN FRONT OF IT. MICHAEL: A STRONG DOLLAR AT THIS POINT IS PROBABLY WELCOME FROM A DOMESTIC PERSPECTIVE, IT TAKES PRESSURE OFF IMPORT PRICES AND REDUCES THE AGGREGATE DEMAND FOR U.S. PRODUCTS. RIGHT NOW IT IS SERVING THE FED'S GOAL.
IF YOU LOOK AT FED POLICY AND SAID IT IS INEFFECTUAL, WELL, THE STRONG DOLLAR IS ONE OF THE MECHANICS THAT THEY ACT WITH US TO REDUCE INFLATION. LOOKS LIKE IT WILL BE PRETTY BENIGN IN PART BECAUSE I WOULD EXPECT IMPORT PRICES SHOULD CONTINUE TO LOOK, SHOULD LOOK SOFT AS WE GO FORWARD WITH THIS DOLLAR STRENGTH. ROMAINE: AS YOU LOOK AROUND OTHER PARTS OF THE WORLD AND LOOK AT ECONOMIC CONDITIONS WHETHER IT IS IN ASIA OR EUROPE, HOW THAT FEEDS BACK INTO THE U.S. ECONOMY, THERE HAS BEEN A LOT OF TALK ABOUT THOSE CORRELATIONS NOT BEING AS STRONG AS IN THE PAST. MICHAEL: THAT IS PROBABLY RIGHT. WE ARE SEEING CONTINUED SOFTNESS IN CHINA.
LAST WEEK WE HAD A SETBACK ANY EUROPEAN PMI'S. THE GROWTH IS NOT LOOKING THAT SUPPORTIVE RIGHT NOW FOR DOMESTIC DEVELOPMENTS. THAT BEING SAID, WHAT YOU SEE DRIVING THE ECONOMY IN THE PAST YEAR HAS BEEN SECTORS THAT ARE SENSITIVE TO GLOBAL DEVELOPMENT. IN PARTICULAR STATE AND LOCAL GOVERNMENT SPENDING HAS BEEN STRONG FROM THE DOMESTIC SPENDING ON SERVICES HAS BEEN STRONG SO THOSE AREAS WILL BE PRETTY IMMUNE TO SMALL PERTURBATIONS IN GLOBAL EX-U.S. DEVELOPMENTS. ALIX: GOING ON CRUISES, BUT NOT PUTTING IN ANOTHER POOL, YOU CAN SEE THAT IN EARNINGS.
ANOTHER QUESTION THAT GOES BACK TO THE GROWTH AND LABOR PART, WHICH EMPLOYMENT SURVEY DO YOU WEIGH THE MOST? HOUSEHOLD? MICHAEL: CAN I SAY BOTH? I THINK IN THE HOUSEHOLD, WE THINK THE RATIOS ARE INFORMATIVE. EMPLOYMENT POPULATION AND UNEMPLOYMENT. IF I WERE TO CHOOSE ONE AS A MEASURE OF EMPLOYMENT GROWTH, I WOULD PUT MORE WEIGHT ON THE ESTABLISHMENT SURVEY EVEN THOUGH I AM GUESSING IT WILL BE REVISED DOWN, I THINK IT IS CLOSER TO THE TRUTH IN TERMS OF OVER ALL OF JOBS GROWTH. ROMAINE: I APPRECIATE YOU TAKING THE TIME, MICHAEL FEROLI IS CHIEF U.S. ECONOMIST OVER AT JP MORGAN. AS WE AWAIT ADDITIONAL ECONOMIC DATA IN THE U.S.. DON'T KNOW IF YOU SAW THE HOSE
DATA, THERE WAS A REPORT THAT SHOWED INVENTORIES FOR A NEWLY CONSTRUCTED HOMES ARE SOME OF THE HIGHEST WE HAVE SEEN IN THIS WHOLE CYCLE, I THINK. ALIX: AND KK ARE BETTING ON RENTALS BECAUSE THEY SAY THERE WILL NOT BE ENOUGH SUPPLY AND RENT WILL HAVE TO END UP, THAT WILL BE TRICKY FOR THE EQUIVALENT OWNERS' RENT INPUT IN THE PCE. THEY DON'T LISTEN TO ME, NO ONE LISTENS TO ME. DID YOU KNOW ROMAINE: WE ARE GETTING TWO MORE PANDAS IN THE U.S.? ALIX: I DIDN'T KNOW. ROMAINE:
THEY ARE GOING TO SAN DIEGO. ALIX: ALIX: SUCH A BUMMER, I MISS THEM IN D.C. WITH MY DAUGHTER! [LAUGHTER] ROMAINE: ALRIGHT, WE WILL STICK ON WHAT HAS BEEN GOING ON IN THE HOUSING SECTOR BECAUSE THERE HAS BEEN A LOT FROM IT COMING UP, A CLOSER LOOK AT HOME DEPOT GETTING AN UPGRADE AT D.A.
DAVIDSON. WE WILL TALK TO THE ANALYST BEHIND THE CALL AND THE FIVE REASONS WHY HE SAYS THERE IS A BULL CASE FOR THIS STOCK. THIS IS "THE CLOSE" ON BLOOMBERG. ROMAINE: LET'S GET A VIEW FROM THE SOUTH SIDE WITH OUR TOP CALLS, SOME OF THE BIG MOVERS OFF THE BACK OF ANALYST RECOMMENDATIONS. WE START WITH APPLE. AN UPGRADE TO BUY, ROSENBLATT ENCOURAGED BY THEIR RECENT SURVEY THAT REVEALED STRONG PRIVACY TO BE THE MOST LONGED FOR FEATURE, WHICH ACTUALLY ALIGNS WITH APPLE'S FOCUS.
THE PRICE TARGET JUMPING TO 200 60, SHARES UP 2% OF THE DAY. NEXT IN LINE IS CAMPBELL SOUP. OUR SENIOR PRODUCER, FOR YOU. JP MORGAN: IT MM MM GOOD! AN UPGRADE FROM NEUTRAL TO OVERWEIGHT.
THE ANALYST SAYS THE COMPANY OFFERS PROOF THAT PACKAGED GOODS COMPANY CAN GROW ITS BOTTOM LINE. SHARES UP TODAY AT 3%. FINALLY IS HOME DEPOT, AN UPGRADE AT D.A. DAVIDSON. THE ANALYST SAYS BETWEEN A MORE FAVORABLE INTEREST RATE ENVIRONMENT ENGINEER AND HIGHER HOME SALES, GROWTH IN THE HOME IMPROVEMENT SECTOR SHOULD BE UNDERWAY. THOSE SHARES HIGHER 1% ON THE
DATES AND THOSE ARE SOME OF THE TOP CALLS. WE WANT TO STICK WITH THE HOME DEPOT CALL. MIKE OVER AT D.A. DAVIDSON JOINS US. YOU LAID OUT FIVE REASONS FOR THE UPGRADE AT HOME DEPOT. I WANT TO START FIRST WITH THE BIG ONE THAT INVOLVES THE INTEREST RATE ENVIRONMENT.
YOU S THINK WE COULD SEE SUPPORT AT LOWER INTEREST RATES? >> YES, THAT IS PART OF THE CALL. DON'T KNOW IF IT WILL BE IN 2024 OR 2025, BUT WE THINK WE ARE CLOSER TO THE END OF THE HIKING CYCLE AND AT THE BEGINNING OF AN EASING CYCLE. AND TYPICALLY AT HOME DEPOT, STOCKS OUT THE FORM IN AN ENVIRONMENT WHERE RATES ARE GOING DOWN. IN THE FIRST TWO AND A HALF YEARS, HOME DEPOT HAS UNDERPERFORMED THE MARKET AND THAT IS PART OF THE CALL, WE ARE GETTING THE STOCK CHEAPER THAN OTHER RETAILERS RELATIVE TO THEIR 52 WEEK HIGHS. HOME DEPOT OUTPERFORMED IN 2020 AND 2021.
THEN THE FED STARTED RAISING RATES AND IT HAS UNDERPERFORMED. DON'T FIGHT THE FED. I DON'T KNOW EXACTLY WHICH MEETING THEY WILL CUT RATES, BUT WE THINK THE NEXT MOVE IS TO CUT RATES. ROMAINE: WHAT ABOUT THE FATE OF THE HOUSING MARKET, OBVIOUSLY A LOT OF HOME DEPOT'S FORTUNES ARE TIED TO THE NATURE OF HOUSING, WHEN WE ARE BUYING OR RENOVATING. THINGS HAVE BEEN DISTORTED
COMING OUT OF THE PANDEMIC, BUT WHAT IS THE OUTLOOK ON THE HOUSE AND AND HOW THAT BEATS INTO EARNINGS? >> WE WOULD SAY IT MIXED. WE TEND TO LOOK AT EXISTING HOME SALES MORE THAN HIS NEW HOME SALES. EXISTING HOME SALES HAVE BEEN BOUNCING AROUND AT THE BOTTOM OF 4 MILLION OR SO ANNUALIZED HOMES TRADING IN THE LAST FOUR OR FIVE MONTHS, RIGHT IN THAT RANGE. MORE IMPORTANTLY, THE TURNOVER IS IN HOME PRICES.
WHAT WE HAVE SEEN IN THE LAST SIX MONTHS IS HOME PRICE APPRECIATION HAS BEEN UP YEAR-OVER-YEAR AN UNSOLICITED PACE. AN ABSOLUTE BASIS, EXISTING HOME PRICES ARE AT AN ALL-TIME HIGH AS OF LAST FRIDAY. THAT IS IN OF THE MOST IMPORTANT DRIVERS OF UNDERLYING DEMAND FOR THE HOME SALES. THE IDEA THAT WE ARE SEEING STRONG HOME PRICE APPRECIATION FOR EXISTING HOMES AT A RECORD HIGH. ALIX: DOES DEMAND AT HOME DEPOT COME FROM EITHER RENOVATIONS FOR EXISTING HOMES THAT MAKE IT CHEAPER AS RATES COME DOWN BECAUSE YOU CAN TAKE OUT A HOME LOAN, DOES IT COME FROM PEOPLE ACTUALLY MOVING, OR DOES IT COME FROM NEW-HOME SALES WHEN YOU HAVE TO FURNISH AND FATE AND ALL THAT STUFF? MICHAEL: ALL. BUT WHAT WE HAVE SEEN, AND WE HAVE SEEN DATA TO SUPPORT THIS, IT COMES FROM PEOPLE WHO ARE STAYING IN THEIR HOME BUT THEY THINK THEIR HOME IS WORTH MORE BECAUSE OF RAISING PRICES RATHER THAN TURNOVER.
TURNOVER, EACH OF THE PEOPLE INVOLVED IN BUYING AND SELLING A HOME WILL SPEND MORE THAN THE PEOPLE STAYING IN THE HOME. BUT WE ARE TALKING FOUR OR 5 MILLION HOMES A YEAR THE TURNOVER. YEAR-OVER-YEAR, IT'S A COUPLE HUNDRED THOUSAND LESS THIS YEAR THAN LAST YEAR. THE OTHER 80 MILLION STAYING PUT IN THEIR HOMES MORE THAN DOOR THE AMOUNTS AND -- DWARF THE AMOUNT SPENT FOR PEOPLE TO NEW HOMES. ALIX: IS THIS ALSO EQUALLY GOOD FOR LOWE'S? MICHAEL: WE HAVE BEEN LONGTIME BULLS FOR LOWE'S. WE DOWNGRADED IT THIS YEAR AND SWITCHED TO HOME DEPOT.
WE KNOW THAT LOWE'S, THE MARGIN IS ABOUT 650 BASIS POINTS DIFFERENCE THE HOME DEPOT FOR THE LOWER. SIX AND A HALF YEARS LATER, LOWE'S HAS CLOSED THAT GAP. BUT WE HAVE SEEN IS WE DON'T SEE A CLOSING THE MARGIN GAP. ONE OF THE POINTS WE MADE IN THE NOTE IS THAT OF THE GAP IS WIDENING BACK IN HOME DEPOT'S FAVOR AND THAT PLAYS WELL MORE SO FOR HOME DEPOT THAN LOWE'S.
LOWE'S HAVE DONE A GOOD JOB, WE THINK THAT STORY WILL PLAY OUT A BIT MORE. ALIX: ALRIGHT MIKE, THANKS A LOT, MIKE BAKER FROM D.A. DAVIDSON. APPRECIATE YOU JOINING US. I GUESS IT DEPENDS ON WHAT THAT RATE IS, IS A 30 YEAR TO COME DOWN TO 6 AND IF YOU HAVE GOOD CREDIT, YOU ARE GETTING 5 AND CHANGE? WE DON'T KNOW THE NUMBERS. ROMAINE: I DON'T THINK ANYONE KNOWS THE NUMBER BUT AT SOME POINT THEY WILL HAVE TO START SELLING HOMES. YOU HAVE PEOPLE WHO BUY HOMES FOR OPPORTUNISTIC REASONS, AND SOME FOR A NECESSITY.
IT HAS BEEN SO MUCH TALK ABOUT HOW THERE IS SO MUCH BACKLOGGED ON THE NECESSITY SIDE OF IT. MAYBE THAT PROVIDES MORE LIFE FOR THE HOUSING MARKET. ALIX: FOR PEOPLE LIKE ME WHO HAVE THAT 2.75% 30 YEAR RATE, I AM NEVER MOVING, BUT IF THINGS GET BETTER, I MIGHT DO SOME THINGS IN THE HOME, MAY BE FOR IN MY 14 200 SQUARE-FOOT APARTMENT. COMING UP, [LAUGHTER] [LAUGHTER] WE TAKE A LOOK AT THE REAL ESTATE MARKET U.S. HOME SALES DOWN. WE TALK TO THE CEO OF STATE ROMAINE: JUST ABOUT 3:30 P.M. THIS IS THE "COUNTDOWN TO THE
CLOSE." I AM ROMAINE BOSTICK. ALIX: WE GOT SOME ECO-DATA AND WE HAVE SOME STUFF COMING. ROMAINE: THE NEW-HOME SALES WHICH I THINK EVERYBODY KNEW IT WASN'T GOING TO BE GOOD.
IT WAS AN AWFUL, BUT YOU DID SEE THE DROP. I WAS MORE INTERESTED IN INVENTORIES. WE HAVE A HIGHER INVENTORY LEVEL. ALIX:
BUT YOU HAVE TO WONDER WHAT THE 30-YEAR SIX HAS TO BE TO CHANGE THE EQUATION. ROMAINE: IT'S NOT GOING BACK DOWN TO 2.75. ALIX: THE 30 YEAR FIXED, IT WAS NEVER THAT. YOU JUST EVENTUALLY GET THERE.
[LAUGHTER] ROMAINE: THAT LATEST ECONOMIC DATA INCLUDES HOUSING NUMBERS, NEW-HOME SALES SLUMPED, 11.3% IN MAY, LOWEST SINCE NOVEMBER. LET'S GET A READ FROM THE GROUND FROM THE CEO OF COMMON PASS, LARGEST RESIDENTIAL BROKERAGE IN THE U.S. BY SALES VOLUMES. ROBERT REFFKIN. LET'S TALK ABOUT SALES VOLUMES.
WHERE DO WE STAND NOW IN TERMS OF TRANSACTIONS RELATIVE TO THE PAST, ARE WE DOING WORSE OR BETTER? ROBERT: IN THE LAST 30 YEARS IT HAS RANGED FROM 40 MILLION HOMES ON AN ANNUAL BASIS TO 7.2 MILLION HOMES. THE MID-CYCLE IS 5.5. LAST YEAR WAS 4.0 NINE, THE LOWEST SINCE 1985. LAST YEAR WAS A REALLY BAD YEAR. LAST MONTH TO THE CURRENT
MARKET, IT WAS 4.1 MILLION HOMES ON A SEASONALLY ADJUSTED ANNUAL RATE BASIS WHICH IS STILL VERY LOW. WE STARTED A YEAR THINKING THERE WOULD BE SIX RATE CUTS. THE SPRING TURNED INTO A MARKET WHERE THERE IS AN OUTLOOK OF ZERO TO ONE RATE CUT. THERE ISN'T A GREAT MARKET, BUT IT DOES SEEM TO BE THE BOTTOM.
RATES HAVE ROMAINE: CHANGED THE COMPLEXION OF AFFORDABILITY, GOING FROM NEAR ZERO FED FUNDS RATE TO FIVE PLUS PERCENT RIGHT NOW. IF WE GET A DROP IN RATES, HOW MUCH DO WE NEED TO SEE THAT WOULD HAVE AN IMPACT OF LETTER A, ON THE MORTGAGE RATE, BUT TO THE POINT THAT IT WOULD SPUR GREATER TRANSACTION ACTIVITY? ROBERT: 6.5% WOULD FEEL GOOD. RIGHT NOW WE ARE AT 7%. I THINK WE WOULD BE AT 4.7 MILLION. IF WE GET BELOW 6%, 5.9%, IT WOULD BE MARKETING MAGIC.
EVERY AGENT WOULD GO OUT THERE AND SHARE WITH THEIR BUYERS THAT IT IS A GOOD TIME TO BUY PARTICULARLY AFTER A PERIOD WHEN WE REACHED EIGHT PLUS PERCENT MORTGAGE RATES? ALIX: DOES THAT SPUR PEOPLE TO PUT HOMES OF THE MARKET TO HELP THAT AFFORDABILITY ISSUE? ROBERT: WE ALREADY HAVE MORE HOMES ON THE MARKET. IF YOU LOOK AT THE LAST 31 WEEKS, EACH WEEK WE SAW IT MORE INVENTORY THAN WE DID IN THE PRIOR WEEK. THAT IS ONE OF THE REASONS WHY YOU SAW THE NEW HOMES DATA WHERE YEAR-OVER-YEAR, NEW-HOME SALES ARE DOWN. THAT'S BECAUSE THEY ARE NOT THE ONLY GAME IN TOWN RIGHT NOW. EXISTING HOMES BROUGHT NEW INVENTORY TO THE MARKET THIS SPRING. ALIX: HAVE THE PRICES COME DOWN ENOUGH TO COMPENSATE FOR THE HIGHER RATES? I FEEL LIKE THE GAP HAS BEEN A SUPER WIDE. ARE WE THERE YET?
ROBERT: PRICE IS RIGHT NOW, SORRY TO SAY, ARE AT AN ALL-TIME HIGH. [LAUGHTER] ALIX: HOW MUCH MORE DO WE HAVE TO RERATE TO GET THERE? ROBERT: THE ONE SILVER LINING ON THE PRICE SIDE IS THAT RIGHT NOW IN THE MARKET, 37% OF ALL THE HOMES ON THE MARKET HAVE HAD A PRICE DROP. WHICH SEEMS LIKE BUYERS ARE FINALLY STARTING TO PUSH BACK ON THE UPPER BOUNDS OF AFFORDABILITY.
THERE WAS MORE HOMES WITH A PRICE DROP IN JUNE THAN ANY TIME IN THE LAST 10 YEARS. ROMAINE: CURIOUS ABOUT THE GEOGRAPHY. ARE YOU SEEING DIFFERENCES DEPENDING ON WHICH PART OF THE COUNTRY? ROBERT: YES, THE MARKETS THAT SAW THE BIGGEST IMPROVEMENTS ARE STARTING TO PULL BACK THE MOST. THAT IS FLORIDA, TEXAS. ONE OF THE MARKETS THAT SAW SOME OF THE RECENT DRAWBACKS, LIKE SAN FRANCISCO, ARE STARTING TO MOVE FORWARD. .
THEY ARE HELPED BY NVIDIA, A LOT OF THE PEOPLE THAT WORK IN TECH -- ROMAINE: THEY HAVE GOT A LOT OF MILLIONAIRES THERE FROM NVIDIA WHO WILL BE LOOKING FOR HOME SOMETIME SOON. [LAUGHTER] WE TALKED ABOUT THE DEMOGRAPHIC CHANGES, PEOPLE FINDING NEW PLACES TO LIVE DURING THE PANDEMIC LIKE FLORIDA, TEXAS, LOW-COST AREAS. ARE THOSE SHIFTS PER MINUTE OR WILL PEOPLE CYCLE BACK TO WHERE THEY CAME FROM? ROBERT: I THINK THE MAJORITY WILL CYCLE BACK. SOME PEOPLE WILL MOVE TO FLORIDA ANYWAY AND 1, 2, 3, 5 YEARS, MAYBE THEY MOVED EARLIER. BUT WE ARE SEEING PEOPLE COME BACK. HERE IN NEW YORK CITY YOU CAN SEE OFFICE IS REALLY STARTING TO COME TO LIFE AND PEOPLE ARE ASKING PEOPLE TO COME BACK TO WORK. ALIX:. ALIX: I WAS INTERESTED IN KKR, THE
WALL STREET JOURNAL ARTICLE SAYING THAT KKR PUT A LOT OF MONEY INTO RENTALS BECAUSE THEY DON'T SEE THAT SAME SUPPLY COMING ONLINE. THAT WE WILL ALWAYS BE SHORT HOMES AND RENTS WILL START TO APPRECIATE VERY FAST. DO YOU AGREE? ROBERT: I WOULD AGREE.
KKR, VERY SMART COMPANY. THERE IS NOT INVENTORY ON EITHER SIDE, RENTALS AND NEW HOMES. WE ARE SEEING A INFLATION STARTING TO PLATEAU ON A YEAR-OVER-YEAR BASIS, WHICH, IS POSITIVE AND THAT SHOULD COME INTO THE DATA, IN THE NUMBERS IN THE MONTHS AHEAD. ALIX: SO WHY ARE RENTS PLATEAUING? IS IT BECAUSE WE HAVE REACHED THE AMOUNT PEOPLE ARE WILLING TO PAY? WHAT IS YOUR READ ON THAT? ROBERT: WE HAVE REACHED THE AMOUNT PEOPLE ARE WILLING TO PAY. AND MORE INVENTORY IS COMING INTO THE MARKET, PEOPLE HAVE BEEN BUILDING AND CONVERTING FROM OFFICE TO RENTAL. THERE IS MORE SUPPLY OF RENTALS
AND UNITS AS WELL AS NEW DEVELOPMENTS THAT HAVE COME ONLINE. ROMAINE: ON THE NEW DEVELOPMENTS, I KNOW THAT BUILDERS ARE LOOKING 10 YEARS OUT IN THE FUTURE, THEY AREN'T AS CONCERNED ABOUT WHETHER THE FED CUTS 25 BASIS POINTS IN THE NEXT COUPLE OF MEETINGS. BUT AS THEY DO THIS LONG-TERM PLANNING, ARE YOU SEEING A BIG DIFFERENCE IN WHAT THEY ARE PLANNING? I FEEL LIKE BEFORE THE PANDEMIC, IT WAS ABOUT THESE BIG, MULTI USE BUILDINGS, A MIXTURE OF OFFICE, RESIDENTS AND RETAIL ON THE BOTTOM.
IS THAT STILL THE PLAYBOOK? ROBERT: WHAT I AM SEEING MORE FROM DEVELOPERS IS MORE PURE PLAY. LAST OFFICE, MORE PURE PLAY WITH A WONDERFUL RESTAURANTS TO BRING IN TRAFFIC AND MAKE A FEW HIGH-END. ROMAINE: GREAT INSIGHT, ROBERT RASKIN IS CEO OF ONE OF THE LARGEST REAL ESTATE FIRMS BY SALES VOLUME. ALIX, I KNOW YOU AREN'T IN THE
MARKET, BUT I AM CURIOUS WHETHER WE START TO SEE EVERYBODY IN ACTIVITY. YOU ARE KIND OF GETTING A SENSE IN NEW YORK CITY THAT PRICES HAVE MODERATED A BIT, BUT NOWHERE NEAR WHERE WE WERE BACK IN 2019 OR BEFORE THAT. ALIX: AND IT WILL BE INTERESTING TO SEE THE REFI ACTIVITY TOO. WHETHER THAT WILL BRING IN A LOT OF ACTIVITY AS WELL IN TERMS OF THE BROKERAGE GUYS. ROMAINE: I HAVE BEEN TALKING WITH A LOT OF FOLKS, AND ONE THING OUR REALTOR HAS PITCHED TO US, IS THAT IT DOESN'T MATTER. YOU CAN LOCK IN THIS RIGHT NOW
AND BE ABLE TO REFINANCE AND A COUPLE OF YEARS WHEN JAY POWELL GETS HIS ACT TOGETHER. [LAUGHTER] ALIX: BUT YOU DON'T WANT TO JUST BUY A LEAD REFI? SEEMS LIKE YOU'RE JUST THROWING MONEY AWAY. [LAUGHTER] ROMAINE: NICE CONVERSATION ABOUT THE HOUSING MARKET. WE WILL FOCUS MORE ON WHAT HAS
BEEN GOING ON IN THE CRYPTO SPACE, ALIX, IN FACT, WE WILL MOVE TO OUR STOCK OF THE HOUR HERE NOW, NO BREAKS. WE ARE TAKING A CLOSER LOOK AT SHARES AT MARATHON DIGITAL IN THE AGREEMENT, AS MANY CRYPTO MINORS STAGE A COMEBACK AFTER BITCOIN SAW ITS WORST-DAY DROP IN MORE THAN TWO MONTHS TO START THE WEEK. JOINING US RIGHT NOW IS CHAIRMAN AND CEO OF MARATHON, FRED THIEL.
THANKS FOR BEING HERE. GIVE US A SENSE, I KNOW THERE WAS DISCUSSION COMING OUT OF THE HAVING HALVING IN APRIL. THAT WE WOULD SEE NEW HIGHS. BUT WE AREN'T TALKING ABOUT A DROP AS MUCH AS YOU'RE TALKING ABOUT A PLATEAU.
FRED: I THINK BITCOIN IS TRADING SIDEWAYS. THERE IS NO MICROMUSE BUT WILL DRIVE BITCOIN'S PRICE UP. CLEARLY EVERYBODY'S WAITING FOR JAY POWELL TO OFFICIALLY ANNOUNCE THE FIRST INTEREST RATE DECREASE. PEOPLE WERE HOPING THAT WOULD HOPEFULLY HAPPEN AFTER THE WYOMING EVENT. WE WILL HAVE TO SEE. OTHER THAN THAT, YOU WERE SEEING SOME NOISE IN THE MARKET REGARDING THE MT. GOX DISTRIBUTION. MT.
GOX WAS A CRYPTO EXCHANGE THAT WAS HACKED MANY YEARS AGO IN JAPAN ACTUALLY, IT WAS ONE OF THE LEADING EXCHANGES AT THE TIME, SORT OF THE BINANCE OF ITS DAY. AND THAT BANKRUPTCY AND THE BITCOIN THAT WAS HELD AT TO BE DISTRIBUTED NOW AFTER MANY YEARS. THAT IS ABOUT $9 BILLION OF BITCOIN. SO THERE IS A BIT OF A SUPPLY SHOCK RUMOR. WE SAW BITCOIN'S PRICE DROP DOWN TO ITS SUPPORT LEVEL IS JUST AROUND $57,000 THE OTHER DAY, AND THEN BOUNCE BACK UP. THERE IS STILL A LOT OF BUYERS OUT THERE AND NO REAL MOVEMENT IN THE MARKET.
ROMAINE: I AM GLAD YOU POINTED THAT OUT BECAUSE I AM CURIOUS WHAT YOU THINK THE NEXT POTENTIAL CATALYST COULD BE THAT COULD MOVE IT UP OR DOWN. THERE HAS BEEN DISCUSSION HERE ABOUT ECONOMIC CONDITIONS, CONCERNS ABOUT THE FISCAL DEFICIT. NOW YOU HAVE ONE OF THE MAJOR PRESIDENTIAL CANDIDATES MAKING THIS A CAMPAIGN ISSUE? FRED: YES, CLEARLY BITCOIN HAS BECOME AN ISSUE IN POLITICAL CAMPAIGNS. I INTERVIEWED SOMEONE YESTERDAY AT A CONFERENCE IN MIAMI AND IT IS CLEARLY ON THE REPUBLICAN AGENDA. THE PRESIDENTIAL CANDIDATE,
FORMER PRESIDENT TRUMP, IS OBVIOUSLY TAKING DONATIONS, AND CONTRIBUTIONS IN BITCOIN AND HE IS ALSO VERY PRO-BITCOIN. THERE IS A STANCE ABOUT BITCOIN BEING REPORTED FOR FINANCIAL SECURITY AND THAT BITCOIN MINING SHOULD BE DONE IN THE U.S. WHAT WE ARE SEEING IN THE MARKETPLACE IS GENERALLY A MORE POSITIVE WIND FROM BOTH SIDES REGARDING BITCOIN. . I THINK THE BIDEN ADMINISTRATION, WHICH ESSENTIALLY HAD BEEN AT WAR WITH BITCOIN AND CRYPTO HAS BEGUN TO SOFTEN THEIR STANCE A BIT BECAUSE THERE ARE OVER 50 MILLION VOTERS OUT THERE WHO BELIEVE IN CRYPTO AND BITCOIN, A VERY BIG VOTING BLOC. OUTSIDE OF THE ELECTION, GENERALLY YOU HAVE A COALITION
WITH BITCOIN AND RISK-BOUND ASSETS. AS HE HAS STARTED TO SEE IN THE MARKET NOW, VIA STARTED TO SEE A SLOWDOWN IN GROWTH, RISK-ON ASSETS BECOMING LESS POPULAR OUTSIDE OF SOME OF THE KEY TREND CENTERS ON THE TECH SIDE. I THINK WE WILL SEE BITCOIN WILL TRADE SIDEWAYS FOR A WHILE HERE, WAITING FOR THE NEXT CATALYST WHICH WILL LIKELY BE THE INTEREST RATE DROPPED FROM IT IF WE LOOK AT HISTORICAL CYCLES, YOU WOULD EXPECT BITCOIN TO START MOVING UP TOWARDS THE END OF THIS YEAR AND HAVE KIND OF A DOUBLE TOP AS IT IS TRADITIONALLY CALLED, GO DOWN IN THE EARLY PART OF NEXT YEAR AND THEN RUN UP THROUGH THE EARLY PART OF NEXT YEAR TO DOUBLE WHERE IT IS TOO INVASIVE TODAY. HISTORY IS NOT ALWAYS A PREDICTOR OF THE FUTURE. BUT WE ARE SEEING A LOT OF INTEREST FROM ITS TRADITIONAL INVESTORS. EDS ARE PREDOMINATELY A RETAIL PRODUCT TODAY, BUT WE ARE SEEING A LOT OF INSTITUTIONS EVALUATING IT, PENSION FUNDS, INSURANCE COMPANIES, SOVEREIGNS BEGINNING TO ACCUMULATE IT. AND IS ONLY UPSIDE.
ALIX: TO THAT POINT, HOW MUCH DO YOU THINK PENSION FUNDS, ET CETERA, WILL BE ACCUMULATING IT? 5% OF THEIR PORTFOLIO? 2%? WE DON'T KNOW THAT ANSWER YET AND THAT IS THE CATALYST PEOPLE WERE POINTING TO PARTICULARLY WHEN THE ETF WAS APPROVED BY THE SEC. FRED: I HAVE HAD CONVERSATIONS WITH STATE PENSION FUNDS AS WELL AS LARGE GROUPS OF WEALTH ADVISORS, AND THE GENERAL BELIEF WHERE I THOUGHT IT WOULD BE AROUND ONE PERCENT OR MAYBE SOMEWHERE 50 BASIS POINTS, I AM BEING TOLD 2% TO 3%, WHICH IS A PRETTY LARGE NUMBER WHEN HE PUT IT IN THE CONTEXT OF THE AMOUNT OF CAPITAL ON THE WEST SIDE, THE WEALTH MANAGEMENT SIDE AND ON THE PENSION SIDE. SO THE RISK-ADJUSTED RETURN OF BITCOIN OVER AT HISTORICAL PERIOD IS VERY ATTRACTIVE FOR THESE FUNDS' INVESTORS AND NOW THAT IT HAS BEEN LEGITIMIZED, WE WILL START TO SEE SHIRLEY MORE AND MORE. ONE OTHER BIT OF NEWS THAT IS IMPORTANT TO NOTE IS MOST OF THE BIG HOUSES HAS NOT APPROVED MARKETING OF THE ETF TO THEIR CLIENTS. WHEN THAT HAPPENS, AND IT IS IN THE PROCESS OF BEING DONE, I HAVE BEEN TOLD SOMEWHERE BETWEEN TWO TO SIX MONTHS FROM NOW, THAT WILL START A FLOOD OF LARGE RETAIL INVESTORS AGAIN, WEALTH MANAGEMENT CLIENTS COMING IN. ALIX: YOU MENTIONED DIFFICULTIES WITH
THE BIDEN ADMINISTRATION. WE HAD THE BITCOIN APPROVED AND LOOKS LIKE THE ETHEREUM ETF WILL BE APPROVED. WHAT IS YOUR PITCH TO BOTH SIDES? FRED: FOR TRUMP'S SIDE, IT'S A VOTING BLOC, BOTH SIDES WANT THESE 55 MILLION VOTERS WHO ARE BELIEVERS IN CRYPTO. BOTH SIDES WANT TO THEM. YOU HAVE SEEN BIPARTISAN WORK IN PROGRESS RELATED TO THE REPEAL OF SAB 121. YOU SEE A LOT OF EFFORT IN CONGRESS OF THEM TRYING TO GET THE REGULATION DONE.
THE ETH ETF WAS POTENTIALLY AN ATTEMPT BY THE ADMINISTRATION TO SAY WE ARE CHRISTOPHER EDLEY AS OPPOSED TO AN ENEMY OF CRYPTO. THE WAR ON CRYPTO AS ELIZABETH WARREN DECLARED IT, IS PRETTY MUCH DEAD, AT LEAST FOR NOW TO THE ELECTION. AFTER THE ELECTION, WHO KNOWS? THE BIDEN CAMPAIGN COMES OUT ON TOP, IT MAY BE BACK TO WAR ON CRYPTO. IF THE TRUMP CAMPAIGN WINS, THEY SEEM TO HAVE STATED A POSITION WHERE THEY ARE BROKEN -- PRO-BITCOIN.
ALIX: FRED, WE APPRECIATE YOU TAKING THE TIME TO JOIN US, FRED THIEL IS MARATHON DIGITAL HOLDINGS CHAIRMAN AND CEO. ROMAINE: CURIOUS, DO YOU THINK THIS WILL COME UP IN THE PRESIDENTIAL DEBATE FRIDAY NIGHT? ALIX: ABSOLUTELY NOT. DO YOU? ROMAINE: I MEAN, TRUMP HAS MADE IT A POINT, WE KNOW HE IS SCHEDULED TO MEET WITH BITCOIN INVESCO -- EXECUTIVES IN THIS CONFERENCE HE IS GOING TO ACCORDING TO AXIOS. HE IS CERTAINLY MAKING IT A THING. I DON'T KNOW HOW MUCH I BUT ACCORDING TO FRED, 55 MILLION VOTERS THINK IT'S AN ISSUE. ALIX: JUST DEPENDS, IS IT THE NUMBER ONE ISSUE YOU ARE VOTING ON, IT CLAIM? I HIGHLY DOUBT THAT.
IS IT? ROMAINE: NOT FOR ME! [LAUGHTER] ALIX: JUST CURIOUS, DO WE KNOW IT AS A CLASS IT IS YET? ROMAINE: BITCOIN? THAT IS A LOADED QUESTION, ALIX? ALIX: DO WE KNOW YET? ROMAINE: EVEN GARY GENSLER DOESN'T KNOW THE ANSWER TO THAT QUESTION. [LAUGHTER] WHICH I THINK WE ARE IN THIS MESS TO BEGIN WITH. >> PEOPLE REALLY HAVE TO UNDERSTAND THAT THE MODEL THEY ARE TRAINING AND THE MODELS THAT I THINK ARE GOING TO WIN OVER TIME, AND IT'S A LONG TIME, IT'S NOT GOING TO BE TOMORROW FOR THE NEXT DAY. WE ARE TALKING YEARS IS NOT FOR DECADES TO REALLY LET THIS AI THING BECOME WHAT IT CAN BE. WHAT DOES IT NEED MOST? DATA. WHERE DO YOU STORE THAT DATA ON? MEMORY. AND WHO MAKES IT? JUST A HANDFUL OF PEOPLE, BUT
MACRON MAKES IT AND THAT'S WHY THEY ARE IN THE FOCUS. ROMAINE: KIM FORREST AT BOKEH CAPITAL PARTNERS HELPED KICK US OFF TO THE CLOSE. A LOOK AHEAD AT WHAT IS GOING TO HAPPEN TO EARNINGS OF MICRON AND WITH HER AI STORY TAKES ON A DIFFERENT COMPLEXION, IT WILL NOT JUST BE ABOUT NVIDIA, AND IT'S NOT JUST MICRON, WE ARE LOOKING AT AMAZON. 2 TRILLION ON THE MARKET CAP, REALLY PROPELLING THE S&P HIGHER. HERE IS THE STOCK I WAS
WATCHING FOR, ONE IN 45 HEDGE FUNDS HOLD OVER 30% OF THEIR PORTFOLIO IN JUST FIVE STOCKS, ACCORDING TO BANK OF AMERICA. TALK ABOUT SERIOUS CONCENTRATION RISK. ROMAINE: ABSOLUTELY. I GUESS NOBODY WANTS TO BE LEFT BEHIND. THERE IS THAT FEAR OF MISSING
OUT. I THINK PEOPLE ARE LOOKING AT THE SECONDARY STOCKS, FOR LACK OF A BETTER PHRASE, NO DISRESPECT TO MICRON. THOSE EARNINGS COMING OUT LATER TONIGHT. LET'S TALK ABOUT THE MOVES IN THE BROADER MARKET AND BRING IN JONATHAN KRINSKY, CHIEF MARKET TECHNICIAN AT TIG HELPING TO COUNT AS DOWN TO THE CLOSING BELLS JUST MINUTES AWAY.
I AM CONFUSED. WE ARE TALKING ABOUT A MARKET THAT SEEMS TO BE INCHING BACK, WHEN A LOOK AT THE NASDAQ AND THE S&P DESPITE WHAT WE HAVE SEEN THE LAST COMPONENT OF DAYS. I DON'T KNOW WHAT THE FUNDAMENTAL CASE FOR THAT IS.
ARE YOU SEEING TECHNICAL INDICATORS THAT SHOW THAT MOMENTUM CAN CONTINUE TO PROPEL STOCKS HIGHER WHEN WE GET PAST THE END OF THIS QUARTER? JONATHAN: DEPENDS WHICH STOCKS WE ARE TALKING ABOUT. WE CONTINUE TO SEE UNPRECEDENTED STATISTICS IN THIS MARKET ON A DAILY AND WEEKLY BASIS. NVIDIA FOR INSTANCE, ONE OF THE LARGEST MARKET COMPANY IN THE U.S. LAST WEEK, TRADED 100% ABOVE ITS 200-DAY MOVING AVERAGE. WE WENT BACK AND LOOKED AT EVERY LARGE MARKET CAP COMPANY IN THE U.S. SINCE 1990 AND THE LARGEST SPREAD COMPANIES EVER TREATED ABOVE THE 200-DAY MOVING AVERAGE WAS 80%, CISCO WHEN IT TOPPED ITS ALL-TIME HIGH IN MARCH OF TWO THOUSAND.
WE WROTE IN THE NOTE TODAY THAT IT IS KIND OF WHACK-A-MOLE IN THE TOP 10 NAMES. WHEN ONE NAME TAKES -- LIKE IN VIDEO TODAY, YOU HAVE AMAZON AND APPLE PICKING UP AND LIFTING THE BOAT. AS LONG AS THAT ROTATION IN THE TOP NAMES CONTINUES, THE S&P AND NASDAQ WILL CONTINUE HIGHER. THE ISSUE IS WE JUST CAN'T SEEM TO GET THE BROADENING UNDER THE SURFACE. BUY OR TAKE BREAKS OUT, IT GIVES IT BACK. BY YOUR CAN'T SEEM TO MUSTER IN
A SUSTAINABLE RALLY. S&P AND NASDAQ CAN CONTINUE HIGHER . ROMAINE: THAT IS WHAT I AM CURIOUS ABOUT. EVERYBODY SAYS WE NEED TO SEE THE MARKET BROUGHT IN AND OUT. IF YOU LOOK AT THE LAST EIGHT
OR NINE MONTHS, SOME WOULD SAY SEVEN OR EIGHT STOCKS BROUGHT US HERE, WHY CAN'T THEY CONTINUE TO TAKE US FURTHER? JONATHAN: IT'S A PARADOX. THE BIGGER THOSE NAMES BECOME IN THE INDEX, THE LESS THAT BREATH THEM THAT MATTERS TO THE INDEX. I WOULD SAY THE REST OF THE 490 NAMES IN THE S&P COULD GO TO ZERO AND IT WOULDN'T MATTER.
SO IT IS ONLY AS A DOUBLE EDGED SWORD. AS LONG AS THOSE NAMES KEEP GOING HIGHER, THE S&P IS FINE. BUT I THINK MOST INVESTORS DON'T JUST ON THE S&P, THEY ARE ON THE INSTITUTIONAL SIDE. THAT IS THE ISSUE. IT'S HARD TO GET A SUSTAINABLE RALLY OUTSIDE THOSE BIG NAMES. ALIX: SO, WHEN YOU HAVE THIS KIND OF CONCENTRATION, WHAT DOES THE BLOW OFF WIND UP LOOKING LIKE WHEN YOU HAVE THESE CONDITIONS? JONATHAN: THERE HAS BEEN A LOT OF PARALLELS TO AUGUST AND SEPTEMBER OF 2020 IF YOU REMEMBER THAT PERIOD, AND IS WHEN APPLE WAS MOVING INTO IT STOCK SPLIT.
YOU HAD THE NASDAQ BUT STILL LIMITED TO THE UPSIDE. WE HAVE NOT SEEN THAT SORT OF EXHILARATION BECAUSE AGAIN, WE HAVE HAD A PUSH AND PULL AMONG THE TOP NAMES. BUT WE ARE SEEING SIGNS.
WHEN YOU SEE THOSE NAMES MOVE UP BEYOND THE BREADTH, FOR EXAMPLE, THE NASDAQ HAD ONLY 20 NAMES IN THE NASDAQ ACTUALLY HIGHER. THAT HAS ONLY HAPPENED A HANDFUL OF TIMES. I THINK ULTIMATELY TO SEE THE BLUE OFF TALK, YOU WILL SEE THE VOLATILITY MOVING UP AS WELL. WE ARE NOT SEEING THAT. WE'RE SEEING VOLATILITIES NEAR THE LOWS. SO WE ARE LACKING SOME PARTICIPATION AND THAT IS KIND OF THE RISK, THAT THOSE BIG NAMES PULL BACK. ALIX: THE OTHER PART OF THIS NOTE THAT BANK OF AMERICA HAD WAS THE RISE OF PASSIVE EQUITY INFLOWS. NOT THE ONLY PERSON I HAVE
HEARD TALKING ABOUT THIS. I AM WONDERING HOW MUCH OF THAT IS DISTORTING OVER ALL OF MARKET ACTION. IT MAKES OF THESE 10 MINUTES REALLY IMPORTANT. IT ALSO BECOMES A CIRCLE THAT YOU KEEP GETTING UP THE SAME STOCKS OVER AND OVER. JONATHAN: I THINK THAT'S RIGHT.
YOU MENTIONED BEFORE WHAT PERCENTAGE OF FUNDS HAVE IN THE TOP FIVE NAMES. ON THE IS ADDITIONAL SIDE AND ON THE RETAIL SIDE GIVEN THE ADVENT OF ETFS, THEY HAVE BEEN A LOT OF TALK ABOUT THIS XLK ETF, TWO NAMES NOW, MICROSOFT AND NVIDIA MAKE UP 40% OF THAT ETF. CERTAINLY THAT IS A FACTOR. BUT IT CAN WORK THE OTHER WAY, TOO,, WE JUST HAVEN'T SEEN THAT UNWIND YET. ROMAINE: GIVE US A SENSE, AS WE START TO TALK ABOUT THE EARNINGS SEASON COMING IN, WHERE FUNDAMENTALS WILL BE MAYBE MORE OF A FOCUS, HOW THAT AFFECTS THE TECHNICALS AND THE MOMENTUM TRADE, IF AT ALL, IS THERE A CORRELATION THERE THAT INVESTORS SHOULD BE LOOKING AT OR ARE THOSE TYPES OF INVESTOR THAT WOULD GO FOR IT ONE OR THE OTHER, ARE THEY DIVORCED FROM EACH OTHER? JONATHAN: WE DON'T LOOK SO MUCH AT THE ACTUAL UNDERLYING FUNDAMENTALS. AS TECHNICIANS, WE ARE LOOKING AT PRICE AND TREND. ONE THING WE LOOK AT, WE LOOK
AT THE SEASONALITY ASPECTS. THE CALENDAR. THERE HAS BEEN TALK ABOUT HOW DELIGHT IS QUITE BULLISH. THE NASDAQ 100 HAS NOT BEEN DOWN IN JULY SINCE 2007.
AT LIKE 16 STRAIGHT YEARS. I THINK THE ISSUE IS A LOT OF PEOPLE KNEW THAT IS WHY WE ARE SEEING STRENGTH IN JUNE. SO WE COULD BE IN FOR A SURPRISE IN JULY GIVEN THAT SEASONAL STRENGTH WAS PULLED FORWARD. BUT IT'S A PRETTY IMPRESSIVE START AND IT IS HARD TO FIGHT. ROMAINE: GREAT STUFF, JONATHAN KRINSKY, CHIEF MARKET TECHNICIAN AT BTIG HELPING US COUNT YOU DOWN TO THE CLOSING BELLS TWO AND A HALF MINUTES AWAY I FIND IT INTERESTING IN THE NEXT COUPLE OF DAYS, YOU HAVE PASSIVE FLOWS, HEDGE FUNDS INVESTED IN JUST A HANDFUL OF STOCKS, WHAT DOES THAT DO THAN TO THE NORMAL SEASONALITY TRENDS? WHAT KIND OF RISK IS EMBEDDED IN THAT? ROMAINE: AND I FEEL LIKE THIS SUMMER IT WILL BE SO WEIRD BECAUSE YOU ARE STILL WAITING ON THE FED AND THERE IS SO MUCH UNCERTAINTY. AS WE MOVE CLOSER TO THE
CLOSING BELLS, OUR COVERAGE STARTS RIGHT NOW. ANNOUNCER: "THE CLOSING BELL," BLOOMBERG'S COMPREHENSIVE CROSS-PLATFORM COVERAGE OF THE U.S. MARKET CLOSE STARTS RIGHT NOW. ♪ ROMAINE: RIGHT NOW WE ARE TWO MINUTES AWAY FROM THE END OF THE TRADING DAY. ROMAINE BOSTICK ALONGSIDE ALIX STEEL. HERE TO TAKE YOU THROUGH THE CLOSING BELL.
IT IS NOW OUR GLOBAL SIMULCAST, SCARLET FU IN THE STUDIO, CAROL MASSAR AND TIM STENOVEC IN THE BOOTH. AS WE WELCOME OUR AUDIENCES ACROSS ON BLOOMBERG PLATFORMS THIS AFTERNOON TO PARSE ON THE CRUCIAL MOMENT OF THE DAY. CAROL: I DON'T KNOW ABOUT CRUCIAL MOMENTS, MAY BE THE TREASURY AUCTION. HAVING SAID THAT, WE DID SEE SOME BUYING INTO THE CLOSE. THE S&P AND MAJOR INDICES ACTUALLY WENT HIGHER.
BUT IF YOU LOOK AT THE NUMBERS, WE ARE SEEING LITTLE CHANGES HERE. TIM: I AM WONDERING IF THE SUMMER IS JUST GOING TO BE LIKE THIS, IT REALLY QUIET TRADING DAYS UNTIL THE END OF THE DAY WHEN WE SEE MORE ACTIVITY. THE BOND MARKET NOT A SNOOZED TODAY. SEEING THE YIELDS MOVE HIGHER OVER THERE. SCARLET: YES, PRETTY DECENT AUCTION FOR THE SECOND TIME IN AS MANY DAYS.
WE HAVE THE END OF THE QUARTER AND THE END OF THE MONTH AND THE END OF THE WEEK COMING UP FRIDAY AND NOBODY WANTS TO GET AHEAD OF CORE PCE DATA. THE GAINS ARE RESPECTABLE, 4% GAIN FOR THE S&P 500 THIS QUARTER AND THIS MONTH. YOU DON'T NEED TO POSITION BEFORE IT.
ALIX: NOTHING WILL GET IN THE WAY OF THE DOLLAR RIGHT NOW UNTIL YOU GET THROUGH ALL THAT DATA. HIGHEST SINCE NOVEMBER FOR THE BLOOMBERG DOLLAR INDEX. PUTTING SERIOUS PRESSURE ON THE YEN. DO YOU WONDER WHEN IT'LL START TO BREAK STUFF. ROMAINE: ROMAINE: CERTAINLY THAT DOLLAR WAS ELEVATED TODAY. SEEING A PULLBACK IN THE YARD SPACE. [CLOSING BELL RINGING AND CHEERS]
MOST OF THE MAJOR INDICES OPENING THE DAY IN THE RED, MOST OF THEM WILL FINISH THE DAY IN THE GREEN INCLUDING THE DOW JONES INDUSTRIAL AVERAGE. JUST UP A FRACTION OF A PERCENT AS WE AWAIT THE NUMBERS TO SETTLE. THE S&P 500 IS UP NINE POINTS, 2/10 OF 1%. NASDAQ COMPOSITE 87 POINTS HIGHER, 0.5 PERCENT. NASDAQ 100, LOWER BY 0.2%.
CAROL: S&P 500, MUCH MORE OF A NEGATIVE RISK-OFF TRADE. 332 NAMES LOWER FOR THE WEDNESDAY TRADE. SCARLET, 168 TO THE UPSIDE, THREE AND. SCARLET: AND BECAUSE OF THE LAST MINUTE LEFT IN THE INDEXES, WE HAVE THREE SECTORS FINISHING IN THE GREEN. CONSUMER DISCRETIONARY WAS UP A HEALTHY 2% THANKS TO AMAZON AND TESLA AND THE CRUISE LINE OPERATORS. TECH WENT FROM NEGATIVE TO POSITIVE IN THE LAST HOUR OR SO. COMMUNICATION SERVICES ALSO
GAINING. ON THE FLIPSIDE, ENERGY FINANCIALS AND HEALTH CARE HAVE BEEN WEAK ALL DAY LONG. CAROL: ALRIGHT, LET'S GET TO THE INDIVIDUAL GAINERS, A RECORD, 2 TRILLION DOLLAR BLOC AT CAP. NO SURPRISE TO SEE IT AS THE TOP GAINER IN THE S&P 500 AND THE NASDAQ 100. UP ABOVE 4% ON THE CLOSE.
FEDEX, WE BROKE DOWN EARNINGS YESTERDAY. NUMBER ONE GAINER IN THE S&P 500, FINISHING AT ITS HIGHS, ALMOST 16% OF THE APSIDE. ITS FORECAST ABOVE WALL STREET'S EXPECTATIONS AND SAID IT WOULD BUY BACK $200 BILLION WORTH OF STOCK IN THE NEXT YEAR. A BIG LIST TO THAT ONE AND SIGNS OF THE CUTTING OF COSTS REALLY TAKING HOLD. MACRON GETTING ACROSS THE BLOOMBERG. ROMAINE: ADJUSTED REVENUE IN THE MOST RECENT QUARTER COMING IN AT $6.8 BILLION, IN LINE WITH
STREET ESTIMATES. THEY WERE LOOKING AT 6.7. THAT IS ABOUT AN 80% INCREASE FROM A QUARTER A YEAR AGO. BOTTOM LINE NUMBER, ADJUSTED OPERATING INCOME, NINE HUNDRED $41 MILLION. ADJUSTED EPS, 62 CENTS A SHARE, A BEAT OF ABOUT FOUR CENTS A SHARE. GUIDANCE GOING FORWARD, THE COMPANY SAYS GROWTH WILL CONTINUE. THE COMPANY GUIDING FOURTH-QUARTER ADJUSTED REVENUE TO SEVEN POINT 6 BILLION, PLUS OR MINUS 200 MILLION DOLLARS.
ADJUSTED EPS, 1.0 EI -- -- $1.08. ALIX: THESE ARE REALLY STRONG NUMBERS. SCARLET: BUT THIS IS A STOCK THAT HAD SURGED 60% OF THIS YEAR AT RIDING THE COATTAILS OF AI EXCITEMENT. IT REALLY NEEDED THAT INVESTORS REALLY WANTED TO SEE A WOW. CAROL: IS IT THE CASH FLOW FROM OPERATIONS? THE ESTIMATE WAS FOR 3.2 4 BILLION. I DON'T KNOW WHETHER WE ARE SPLITTING HAIRS, BUT INVESTORS ARE NOT SPLITTING HAIRS, THE STOCK IS DOWN 8%. TIM:
970 $6 MILLION VERSUS ESTIMATES OF 1.01 BILLION DOLLARS. REVENUE NUMBERS BEATING EXPECTATIONS. 6.8 $1 BILLION, UP 82% YEAR-OVER-YEAR, BEATING THE
ESTIMATE . ADJUSTED EPS, $.62, BEATING ESTIMATES OF $.62. LOOKING AT THE REVENUE FORECAST RANGE THAT THEY GAVE, THE STREET GOT IN THE MIDDLE OF THAT RANGE. I DON'T KNOW IF THIS IS ABOUT EXPECTATIONS BEING SO ELEVATED? THEY WERE LOOKING FOR 7.58 SO IF YOU TAKE THE LOW-END OF THAT RANGE, MAYBE IT IS CAUSING PEOPLE CONCERN. THEY ARE ALSO FORECASTING ADJUSTED GROSS MARGINS OF THE FISCAL FOURTH QUARTER 533.5 TO 34.5%. ALIX: LOOK AT THIS DECLINE, AI DEMAND DRIVES REVENUE GROWTH.
IT IS AN UNBELIEVABLE NUMBER, THAT IS THE AI DEMAND SIDE AND NOT ACCOUNTING FOR CYCLICALITY LIKE PCS AND SMARTPHONES. SCARLET: NOT SO LONG AGO WE WERE TALKING ABOUT THIS GLUT OF MEMORY CHIPS. PEOPLE HAD BOUGHT THEM UP AND THEN THEY WERE AFFORDING THEM. MICRON WAS SUFFERING FROM THAT. THEN ALL OF A SUDDEN THE AI STORY. CAROL: FOURTH-QUARTER GROSS MARGIN. THE ESTIMATE WAS 34.5%. AGAIN, I CAN TELL WHETHER IT IS WIDENING UP SOME OF THE FORECASTS A LITTLE BIT. IF YOU ARE ON THE STREET, LIKE
SCARLET, YOU MENTIONED THE STOCK IS UP 60%. DO INVESTORS SAY I DON'T WANT ANY ROOM WHERE YOU MIGHT BE A BIT LATER THAN WHAT WE HAVE BEEN THINKING? ROMAINE: WE SHOULD POINT OUT ITS PEERS ARE MOVING LOWER. WESTERN DIGITAL IS DOWN 3%. CHIPMAKERS LIKE SUPER MICRO OR BROADCOM, ALL ARE LOWER IN AFTER-HOURS TRADING. TIM: YOU KNOW, THE COMPANY HAS NOT YET POSTED THE PRESS RELEASE TO THE WEBSITE.
IT'S NOT UPDATED SINCE LAST QUARTER. SCARLET: IT JUST CAME OUT ACTUALLY AND THE FIRST THING THEY SAY, THE PRESIDENT AND CEO SAYS ROBUST AI DEMAND AND STRONG EXECUTION ENABLED MICRON TO DRIVE GROWTH EXCEEDING OUR GUIDANCE RANGE. WE ARE GAINING SHARE IN PRODUCTS SUCH AS DATA CENTER REVENUE. AI MENTIONED SEVERAL TIMES IN THIS ONE PARAGRAPH. ALIX: EXTENDED ABOUT EXPANDING AI-DRIVEN OPPORTUNITIES AHEAD. THE STOCK IS PARING LOSSES A BIT, NOW DOWN BY JUST 5.
ROMAINE: CURIOUS WHAT YOU WOULD WANT TO HEAR FROM THEM ON THE EARNINGS CALL. WHAT CAN THEY SAY HERE ? CAROL: I WANT TO KNOW THAT PEOPLE ARE BUYING AND SPENDING. THAT CAPITAL EXPENDITURES BY CUSTOMERS AND CLIENTS ARE CONTINUING AND THAT ORDERS ARE COMING IN. ALIX: AND ALSO WHAT WE HAVE BEEN
GETTING AT, TAKING A LOOK AT FOURTH-QUARTER REVENUE EARNINGS ESTIMATE. WHY THAT LOW-END WAS LOWER THAN EXPECTED AND WHY THAT FORECAST IS SO WIDE, WHY THEY HAD SO MUCH UNCERTAINTY WITH THAT. TIM: SHARES ARE RECOVERING. THEY ARE DOWN 4%, THEY WERE DOWN 8% IN THE OPENING OF AFTER HOURS. MAYBE THE ANSWERS WILL BE ANSWERED LATER ON THE CALL AT 4:30. MAYBE NOT. SCARLET: INVESTORS BEING EXTRA CAUTIOUS AND HOLDING BACK AND WE BE DROPPING A SURPRISE DURING THE CONFERENCE CALL. LIKE BOB IGER. HE PUTS ON A SHOW, RIGHT? [LAUGHTER] ALIX: AT THE END OF THE DAY, WE KNOW THIS WILL BE CYCLICAL. WE DON'T KNOW WHAT THE AI CHIP
STORY LOOKS LIKE IN A CYCLICAL WORLD. ANY COLOR ON THAT I WOULD FIND QUITE INTERESTING. ROMAINE: EVERY TIME WE TALK ABOUT THIS, PEOPLE TALK ABOUT THIS AS AN ENDLESS ADDRESSABLE MARKET. ISN'T THERE A POINT WHERE YOU BOUGHT ALL THE CHIPS FROM NVIDIA, THE MEMORY STUFF FROM MY OR WESTERN DIGITAL, AT SOME POINT DOESN'T IT TAP OUT? TIM: THE IDEA IS THAT THESE COMPANIES DEVELOP CHIPS WHICH ARE EVEN MORE ADVANCED AND THEIR CUSTOMERS HAVE TO GO AND BUY THEM.
CAROL: BLOOMBERG INTELLIGENCE WERE TALKING ABOUT THEY COULD POST RESULTS ABOVE THE MIDPOINT OF ITS GUIDANCE RANGE. CITI, WE EXPECT THE COMPANY TO POST RETURNS ABOVE CONSENSUS. IT GOES BACK TO EXPECTATIONS. TIM: TIM: THE STOCK IS UP 66% THIS YEAR. EXPECTATIONS ARE HIGH. CAROL: SOUNDS LIKE THERE WILL BE QUESTIONS ON THE CALL, GUYS. THAT'S A WRAP UP OF OUR CROSS-PLATFORM COVERAGE ON RADIO, TV, YOUTUBE AND BLOOMBERG ORIGINALS. WE WILL SEE YOU AGAIN SAME
TIME, SAME PLACE TOMORROW. ROMAINE: ALRIGHT, YOU ARE WATCHING "THE CLOSE" ON BLOOMBERG TELEVISION. COVERAGE CONTINUES WITH A DEEPER DIVE INTO THE RESULTS OUT OF MICRON. DON'T GO ANYWHERE. THIS IS BLOOMBERG.
SCARLET: WELCOME BACK TO "THE CLOSE." I AM SCARLET FU. ROMAINE: AND I AM ROMAINE BOSTICK. WE OPENED ACROSS THE BOARD IN THE RED FOR MAJOR INDICES BUT FINISHED ALMOST ACROSS THE BOARD IN THE GREEN WITH THE EXCEPTION OF THE RUSSELL 2000, S&P 500 UP 2%, SIMILAR MOVES IN THE NASDAQ AND THE MUCH SMALLER MOVE.
WE WILL GET BACK TO CHIP STOCKS IN THE SECOND. KEEP IN MIND WHAT IS GOING ON IN THE RATE OF SPACE AND THE ETHICS SPACE, A LOT OF SOFTNESS MESS OF THEIR IF YOU ARE OF JAPANESE SIDE. SCARLET: SCARLET: ABSOLUTELY. LET'S LOOK AT THE EQUITY MOVERS. WORLD FULL OF 17%. IT GAINED AS MUCH AS 19%, THE MOST SINCE 2020, IN MARCH, AFTER IT WAS REPORTED THAT BAUSCH IS CONSIDERING MAKING AN OFFER. WHIRLPOOL, AS WE KNOW, HAS SEEN A DISAPPOINTING SALES AS SHOPPERS PULLED BACK FROM BIG TICKET PURCHASES BECAUSE OF INFLATION AND CONCERNS ABOUT THE ECONOMY.
ACTIV IS A CARMAKER, THAT STOCK DROPPING AFTER ONE OF ITS KEY CUSTOMERS, VOLKSWAGEN, ANNOUNCED A $5 BILLION JOINT VENTURE WITH RIVIAN. I FOR SANDLER DOWNGRADED IT SAYING IT STRIKES AT THE CORE OF APTIV'S STRATEGY. THIS JOINT VENTURE WITH VOLKSWAGEN FOR RIVIAN IS A FINANCING LIFELINE.
THE TOP STORY THIS HOUR IS THE BENEFICIARIES OF AI. MEMORY CHIP MAKER MICRON HAS BEEN A BIG ONE, SHARES UP 66% THIS YEAR ON THE ANTICIPATION IT WILL BENEFIT FROM DEMAND FOR AI APPS AND A RAMP UP WITH A HIGH MEMORY CHIPS. AT THE SAME TIME, THE FINANCIAL SECTOR IS DEPLOYING AI TO ASSIST IN CREDIT MODELING AND PRODUCING WORK FOR JUNIOR BANKERS. ALL OF THIS WILL HAVE HUGE IMPLICATIONS ON THE KIND OF HUMAN TALENT TO THE INDUSTRY WILL RECRUIT IN THE FUTURE, AND WE WILL GET INTO THAT THIS HOUR. ROMAINE: MICRON RESULTS JUST OUT, THE COMPANY'S FORECAST PROVIDING A BIT OF DISAPPOINTMENT ON THE DAY. 7-7.8 MILLION IS THE RANGE. SLIGHTLY BELOW THE AVERAGE.
THE RESULTS FOR THE CURRENT QUARTER AS WELL AS THE QUARTER JUST PASSED, STILL TALKING TREMENDOUS GROWTH IN THIS COMPANY, 80% REVENUE GROWTH AND A MORE THAN DOUBLING IN THEIR REVENUE LINE. THE GLOBAL TEAM HEAD OF TECHNOLOGY INFRASTRUCTURE AT NEW STREET RESEARCH JOINS US NOW. PETER, I KNOW THAT EXPECTATIONS WERE HIGH, BUT IT MAKES ME SCRATCH MY HEAD WHEN I SEE A COMPANY GROW REVENUE BY 80% AND ALMOST DOUBLE THEIR BOTTOM LINE, I WONDER IF INVESTORS ARE BEING UNREALISTIC HERE. PETER: I WOULDN'T SAY UNREALISTIC. IN MEMORY, YOU DON'T MAKE MONEY BECAUSE YOU ARE SELLING MORE MEMORY CHIPS, YOU MAKE MONEY ONLY IF YOU SELL MORE MEMORY CHIPS AND YOU CAN MINUS -- THAN YOU CAN MANUFACTURE. SO WE ARE JUST TURNING AROUND
FROM A DEEP DOWN CYCLE IN MEMORY AND YOU HAVE AI DRIVING VERY STRONG GROWTH FOR CHIPS. SO THIS DEMAND FROM AI NEEDS FIRST TO SELL OUT THE OVERCAPACITY IN EXISTING FIRMS. AND IT TAKES TIME. IT TAKES TIME TO GET THE CHIPS OUT. ONCE THEY ARE OUT OF CAPACITY, WE WILL SEE THE FULL POTENTIAL OF AI MEMORY WHICH IS VERY STRONG GROWTH OVER LIMITED CAPACITY -- MANUFACTURERS HAVE NOT BEEN SPENDING MUCH ON CAPEX FOR THE LAST 18 MONTHS. THAT IS WHERE THE ECONOMIC POTENTIAL OF MICRON WILL TAKE A SIGNIFICANT SHOT. NOT SURPRISED BY THE NUMBERS TODAY.
I WAS ACTUALLY SLATED -- EXPECTING THINGS SLIGHTLY BELOW CONSENSUS IN THE NEAR TERM. BUT IT IS JUST A GAME OF BEING PATIENT. FOR ONE OR TWO MORE QUARTERS. . SCARLET: YOU MENTIONED THE GLUT OF MEMORY CHIPS THAT WE HAVE SEEN MICRON GET OVER. BOTH PRODUCTS, THE TYPES OF MEMORY CHIPS THEY MAKE, SEEING UPSWINGS? HOW DO THEIR TRAJECTORIES COMPARE WITH ONE ANOTHER? PIERRE: SO, DRAM WAS AT THE VERY LOW BOTTOM NINE MONTHS AGO. WE WERE JUST GETTING OUT OF THE TROUGH, SO THE FABS BECAUSE OF THAT, ARE UNDERUTILIZED.
HVM CHIPS ARE STILL A SIGNIFICANT PERCENTAGE OF THE VOLUME OF THE MARKET, BUT IT IS GROWING THROUGH THEM. BUT IT REQUIRES A DIFFERENT PACKAGING FOR THE MEMORY CHIPS, SO IT TAKES A LOT OF TIME TO GET THAT HBM CAPACITY RUNNING. AND THE MAINSTREAM DRAM PRODUCT IS COMING BACK AT THE SAME TIME, THAT IS WHAT WE ARE SEEING AT THE MOMENT.
ROMAINE: IT IS INTERESTING, WE ARE GETTING ADDITIONAL COMMENTARY COMING OUT OF THE SLIDES, MICRON TALKING ABOUT HOW AI DRIVEN DEMAND IS CAUSING TIGHTNESS ON THE NODES. IT EXPECTS CONTINUING SUPPLY ISSUES. IT ALSO SAYS IT FEELS LIKE IT WILL BE ABLE TO INCREASE PRICES AT LEAST THROUGH THE FULL YEAR, THE CALENDAR YEAR OF 2024. PIERRE: THAT IS EXACTLY IN LINE WITH WHAT I WOULD BE EXPECTING. SO ONE THING THAT MIGHT CONFUSE A BIT INVESTORS AT THE MOMENT, IS THAT YOU HAVE SUPPLY CONSTRAINTS IN HBM, BECAUSE IT IS DIFFICULT FOR THESE GUYS TO WRAP THE PACKAGING PRODUCTION LINES.
YOU HAVE NOT REACHED SUPPLY YET FOR THE DIET ITSELF AND THAT IS WHAT IS GOING TO COME IN THE NEXT THREE QUARTERS. IT WILL MAKE THEM A WAY MORE STRONGER THAN THEY ARE TODAY. SCARLET: VERY QUICKLY, WHAT DO YOU WANT TO HEAR FROM MICRON ON THE CONFERENCE CALL TODAY? PIERRE: I WOULD LOVE TO HEAR THEM TALK ABOUT HOW THEY SEE THE INCREASE IN PRODUCTION CAPACITY FOR THE BACK-END OF HBM'S , THE PACKAGING OF HBM'S. IT WOULD GIVE ME A GOOD HINT AT
ONE HBM WILL FILL UP THE FRONT-END FAB, HOW FAST THEY CAN RAMP UP SO THEY CAN FILL IN CAPACITY AND THAT IS WHEN WE WILL SEE MARGINS AND PRICING SHOOTING OUT ACROSS THE GLOBE, NOT ONLY IN HVM'S, EVERYWHERE, AND GROSS MARGINS GOING TO NEW HIGHS. SCARLET: GOT IT, PIERRE FERRAGU OF NEW STREET RESEARCH GIVEN US ANALYSIS ON MICRON AFTER ITS EARNINGS CAME IN BETTER-THAN-EXPECTED. THE INITIAL REACTION WAS A DECLINE. BUT THERE IS A LOT OF OPTIONS ACTIVITY AROUND THIS STOCK TOO. FOR ALL WE KNOW ROMAINE: ROMAINE: AND WE GET TO TOMORROW, IT RALLIES 30% GIVEN HOW CRAZY INVESTORS ARE THESE DAYS. IT ALSO SHOWS YOU THE PRICE OF HIGH EXPECTATIONS.
SCARLET: ABSOLUTELY. COMING UP, WE HAVE CONVERSATIONS FROM BLOOMBERG ROMAINE: ON THE HEELS OF THOSE EARNINGS OUT OF MICRON, LET’'S CONTINUE TO FOCUS ON AI. THE BLOOMBERG CONFERENCE IN NEW YORK WRAPPING UP TODAY.
A BIG TOPIC OF CONVERSATION WAS AI, NOT JUST THE FUTURE OF THOSE FOLKS MAKING THE PICKS AND SHOVELS, BUT HOW ASSET MANAGERS WILL BENEFIT FROM THE TECHNOLOGY. I SAT DOWN WITH THE CEO OF MAN GROUP, ROBYN GROUP, ABOUT THE IMPACT IT IS HAVING ON THE FINANCIAL SECTOR. >> AI IS EXCITING AND IT IS ABOUT EFFICIENCY. WHEN WE TALK ABOUT HOW WE USE TECHNOLOGY, AI, NLP, LLM'S, IT COULD HELP RESEARCH AND HOW WE EXECUTE TRANSACTIONS AND TRADES. IT IS HOW WE PUT CONCEPTIONS ON
HOW WE PUT CONTENT TOGETHER. IT IS AROUND PREDICTIVE MODELS NEEDING FINANCIAL PREDICTIONS OR IN ESG. IT IS ANY NUMBER OF THESE PIECES OF THE PUZZLE. IT IS ABOUT THE FACT THAT WE HAVE SENTIMENT ANALYSIS.
WE ARE ABLE TO DEPLOY TECHNOLOGY IN A WAY THAT ENABLES OUR DISCRETIONARY TRADERS TO OPERATE MORE EFFICIENTLY AND EFFECTIVELY IN THEIR'S THESIS OR IN QUANT, AS WE GO OUT TO MORE MARKETS, MORE DATA SOURCES, TO SEE IF WE CAN FIND MORE ALSO THAT WHICH IS, ULTIMATELY, TO THE BENEFIT OF OUR CLIENTS. ROMAINE: HOW MUCH FURTHER CAN YOU DEPLOY THIS TECHNOLOGY, WHAT IS THE NEXT EVOLUTION OF IT? . >> THE EVOLUTION OF TECHNOLOGY IS JUST THE NEXT ONE. THERE WILL BE ONE AFTER THIS AND ANOTHER ONE AFTER THAT. WE WILL BE A DOCTOR'S OF THOSE THINGS WITHIN REASON, WITHIN RESPECT. BUT WHAT WE ARE REALLY AFTER IS ENSURING THAT WE CONTINUE TO GROW CONTENT AND THAT WE HAVE RELEVANCE TO OUR CLIENTS. THIS IS A SPACE WHERE CLIENTS
ARE LOOKING FOR MORE FROM FEWER MANAGERS. THEY ARE LOOKING FOR GREATER CONTENT. THEY ARE LOOKING FOR A MORE CUSTOMIZED SOLUTIONS. TWO THIRDS OF OUR AUM IS NOW IN SOME FORM OF CUSTOMIZATION. WHEN YOU LOOK AT THE CLIENTS WE HAVE, THE TOP 25% OF THEM ARE -- OUR STRATEGIES.
THAT'S BECAUSE THEY WANT MORE CUSTOMIZED SOLUTIONS TO THE CHALLENGES THEY ARE FACING. THESE MARKETS ARE DIFFICULT TO NAVIGATE. THE WORLD IN WHICH WE ARE OPERATING IS TUMULTUOUS, IT IS TRICKY, SO WHEN YOU ARE SITTING DOWN WITH CLIENTS, WORKING WITH THEM, YOU WANT TO BE ANSWERING THE QUESTIONS THEY HAVE, THE CHALLENGES THEY HAVE, WORKING THROUGH THOSE CHALLENGES WITH THEM. SO FOR ME, IT'S ABOUT GROWING CONTENT AND CAPABILITY. IT'S ABOUT GROWING AND BEING SURE THAT WE ARE STILL RELEVANT AND THAT WE ARE AT THE TABLE WITH CLIENTS AT THEIR PARTNERS TO NAVIGATE THESE MARKET CYCLES. ROMAINE:
ROMAINE: THAT IS THE CEO OF MAN GROUP, ROBYN GREW, AT THE BLOOMBERG INVEST CONFERENCE. I KNOW YOU ARE AT THE CONFERENCE TODAY, RIGHT, AND YOU HAD A CHANCE ALSO TO TALK ABOUT AI. WE TALKED A LOT ABOUT AI. SCARLET: WE DID, THERE IS A LOT OF HYPE AND ALSO FEAR, THAT IT WILL TAKE OVER JOBS. IT'S SUPPOSED TO ADD VALUE AND MAKE THINGS EFFICIENT, BUT WHAT DOES IT MEAN FOR THE HUMAN JOBS? WHAT I LEARNED FROM BOTH JP MORGAN AND FROM PN C,'S THAT THEY ARE NOT QUITE THERE YET. ALL THE AI THEY HAVE DEPLOYED AND IMPLEMENTED IS STILL BACK-OFFICE. IT IS STILL INTERNAL-FACING.
IT IS MEANT TO HELP PEOPLE DO THEIR JOB QUICKLY AND EFFICIENTLY. THEY ARE MOVING SLOWLY BECAUSE THE FINANCIAL SERVICES INDUSTRY IS HIGHLY REGULATED. ROMAINE: THAT IS AN UNDERSTATEMENT. WE WILL GET YOU MORE FROM THAT CONFERENCE AS SOON AS WE HAVE A CHANCE. WE WANT TO GO TO SOME BREAKING NEWS, DEVELOPMENTS OUT OF THE SOUTH AMERICAN COUNTRY OF BOLIVIA. BOLIVIA'S PRESIDENTIAL PALACE WAS FORMED BY SOLDIERS LED BY A TOP GENERAL IN AN APPARENT COUP ATTEMPT, THIS WAS SHORTLY AFTER 8 -- WITH A SCENE CRASHING INTO THE PRESIDENTIAL PALACE.
OUR CORRESPONDENT JOINS US, HE IS OUR MEXICO CITY BUREAU CHIEF AND LEADS COVERAGE IN SOUTH AMERICA. WHAT CAN YOU TELL US ABOUT WHAT IS HAPPENING? GUEST: DETAILS ARE VERY SKETCHY. THIS WILL TAKE A WHILE TO SORT OUT AND FIGURE OUT. IT IS VERY CLEAR THIS IS A COUP ATTEMPT. A GENERAL WHO UNTIL VERY RECENTLY, APPARENTLY WAS A VERY HIGH RANKING MEMBER OF THE MILITARY.
THERE APPEARS TO HAVE BEEN SOME FALLING OUT BETWEEN HIM AND PRESIDENT ARCE IN BOLIVIA AND IT HAS LED TO THIS MOMENT. WE KNOW PRESIDENT ARCE HAS DENOUNCED WHAT HE CALLED THE REGULAR MILITARY ACTIONS THAT WERE GOING ON IN THE CENTRAL PLAZA IN THE CAPITAL. WE HAVEN'T REALLY HEARD FROM HIM SINCE THEN. THE VICE PRESIDENT HAS CALLED THIS A COUP ATTEMPT. EVO MORALES, FORMER PRESIDENT OF BOLIVIA WHO HAS HAD HIS OWN DIFFERENCES WITH PRESIDENT ARCE, HAS ALSO BEEN DENOUNCING THIS AS A COUP ATTEMPT.
SO THE LEFT OF BOLIVIA HAS ALIGNED OVER THIS IN A WAY THAT THEY HAVEN'T BEEN IN A WHILE, AND WE WILL SEE IF THAT PLAYS OUT IN THE WILD. SCARLET: REALLY INTERESTING GIVEN THE DIVISIONS BETWEEN PRESIDENT ARCE AND HIS PREDECESSOR. CAN YOU GIVE US A BIT OF BACKGROUND HERE? BECAUSE THERE HAVE BEEN PROTESTS OUTSIDE BOLIVIA'S CAPITAL LA PAZ IN RECENT DAYS. WHAT IS DRIVING THAT? CRAYTON: WHAT THE GOVERNMENT IN LA PAZ HAS BEEN DOING IS AROUND FUEL. I WILL NOT PRETEND -- I NEED TO
BRUSH UP ON THE DETAILS A BIT HERE, BUT THE BASICS ARE THAT FUEL PRICES ARE RISING AND IT HAS BEEN A LACK OF ACCESS TO FUEL. YOU HAVE SEEN IT ESPECIALLY FROM THE TRUCKING INDUSTRY IN BOLIVIA, PROTESTS ON THE ROADS. BUT THIS IS AFFECTING EVERYDAY BOLIVIANS I WELL. SO THERE HAS BEEN SOME DEGREE OF UNREST. IT'S A COUNTRY THAT HAS A LOT OF ISSUES. THEIR GOLD RESERVES WHICH THEY
DEPEND ON VERY MUCH HAVE BEEN DWINDLING. SO THE THOUGHT THAT A FISCAL CRISIS WAS ON THE HORIZON, IS NOT CRAZY. BONDS HAVE BEEN TRADING $.56 ON THE DOLLAR, THEY HAVE DROPPED A BIT ON THE NEWS TODAY. SCARLET: BLOOMBERG'S CRAYTON HARRISON WITH THE LATEST, REPORTING FROM MEXICO CITY COVERING THE REGION. THE BOLIVIAN PRESIDENTIAL PALACE FORMED IN AN APPARENT COUP ATTEMPT AFTER AN ARMORED VEHICLE CRASHED INTO THE BUILDING ACCORDING TO IMAGES BROADCAST ON LOCAL TELEVISION.
MILITARY'S PERSONNEL TAKING OVER THE CAPITOL MAIN SQUARE. LUIS ARCE, BOLIVIAN PRESIDENT, SAYING SOME MILITARY UNITS WERE CONDUCTING IRREGULAR OPERATIONS, AND CALLED FOR DEMOCRACY TO BE RESPECTED. DEFINITELY SOMETHING WE WILL WATCH. ROMAINE: OUT FOR US WE DID SEE A DROP IN THE CURRENCY. ALTHOUGH WE SHOULD POINT OUT MARKETS AND THERE ARE CLOSED.
AS CRAYTON HARRISON SAID, THE DROP IN PRICES THERE IS ALREADY PRETTY DRAMATIC SCARLET: . COMING UP, RESULTS FROM THE FED STRESS TESTS ARE DUE AND WE WILL BREAK IT DOWN WITH OUR BEST. THIS IS "THE CLOSE" ON BLOOMBERG. ROMAINE: THE PERIODIC STRESS TEST BY THE FEDERAL RESERVE'S OF THE LARGEST U.S. BANKS AND THE RESULTS ARE IN. ALL 30 ONE BANKS ARE SAID TO HAVE PASSED. THEY COULD WITHSTAND A
HYPOTHETICAL RECESSION. PASSING G
2024-07-02 05:20
