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ROMAINE: DOES THE BULL MARKET DESERVE THE BENEFIT OF THAT OUT? I'M ROMAINE BOSTICK. KATIE: I'M KATIE GREIFELD. WE ARE KICKING YOU OFF TO THE CLOSING BILL IN THE U.S. IT LOOKS GOOD SO FAR ON THIS MONDAY. S&P 500 UP MORE THAN 1%. BIG TECH LEADING THE ACTION. NASDAQ 100 HIGHER BY 1.4%. STILL A BID PUSHING THE 10-YEAR YIELD BELOW 4%. TAKE A LOOK AT WHAT IS GOING ON IN THE VIX, DROPPING FOR ANOTHER DAY. BACK BELOW 19, EVEN.
ROMAINE: THAT SPIKE WE SAW OVER THE LAST FEW DAYS A THING OF THE PAST. FOR ANYONE WONDERING ABOUT THE DURABILITY OF THE BULL MARKET, TODAY'S SESSION ON FRIDAY'S GIVING YOU AN ANSWER. STRONGEST RALLY FOR THE S&P AND NASDAQ SINCE JUNE. RETAIL CROWD KEEN TO BUY THE MARKET DIPS. >> I AM VERY BULLISH. MARKET GOES TO NEW HIGHS NEAR THANKSGIVING. ONE SIMPLE REASON, IT'S EASY MONEY.
ROMAINE: MAYBE IT IS EASY MONEY. THE RISKS ARE MOUNTING GOOD INDIVIDUAL INVESTOR SENTIMENT IS SUBDUED. INSTITUTIONAL MONEY MANAGERS ARE DOING BY HITTING THAN BUYING. POSITIONING TUMBLED THE MOST SINCE LAST WEEK FROM MODERATELY OVERWEIGHT TO NEUTRAL. MORGAN STANLEY'S MIKE WILSON IN HIS WEEKLY NOTE FLAGGED AND UNRESOLVED RISK AROUND TRADE TENSIONS THAT COULD KNOCK AS MUCH AS 11% OF THE S&P OF THE U.S.-CHINA TARIFF SPAT ISN'T RESOLVED. HE IS STILL BULLISH ON ECONOMIC FUNDAMENTALS. OTHER STRATEGISTS SEO FREE DUE TO CORPORATE FUNDAMENTALS AS EARNINGS SEASON RAMPS UP WITH INTEL, NETFLIX, TESLA, FORD, AND PROCTER & GAMBLE.
KATIE: YOU ARE SEEING SOME CAUTION COME HERE WHEN IT COMES TO THE OUTLOOK FOR EARNINGS SEASON. TAKE A LOOK AT CITIGROUP DATA. EARNINGS REVISIONS HEADING INTO THE HEART OF EARNINGS SEASON. WE'VE SEEN THE REVISIONS COME DOWN. WE'VE HAD A NICE STREAK WHERE WE WERE GETTING REVISED HIGHER AND HIGHER. TWO STRAIGHT WEEKS IN A ROW, WE HAVE NOT SEEN THAT SINCE THE MID-PART OF THIS YEAR. WE HAVE SEEN THE COMPANIES THAT HAVE REPORTED EARNINGS SO FAR, 85%. 85% HAVE BEEN ON PROFIT ESTIMATES. IT IS STILL EARLY YET, AND THE BIG GUYS ARE TAKING THE STAGE THIS WEEK.
ROMAINE: KEITH LERNER JOINS US TO KICK US OFF TO "THE CLOSE," CHIEF STRATEGIST AT ADVISORY SERVICES. THERE HAS BEEN THIS IDEA THAT WE HAVE GONE WELL PAST THE IDEA OF FOMO. THIS IS A BULL MARKET THAT HAS BEEN LEFT TO ITS OWN DEVICES. I'M CURIOUS IF YOU SEE ANY POTENTIAL CRACKS THAT COULD POTENTIALLY IF NOT BRING IT TO AN END, CERTAINLY CURTAIL IT. >> FIRST, GREAT TO BE WITH YOU. OUR MAIN POINT UP FRONT IS WE THINK THIS BULL MARKET DESERVES THE BENEFIT OF THE DOUBT. THERE IS ALWAYS POTENTIAL CRACKS. WE HAD CONCERNS ABOUT THE CREDIT SIDE. THERE WAS CONCERNS ABOUT SENTIMENT. IN A BULL MARKET YOU CLIMB THIS WALL OF WORRY, AND THAT IS WHAT WE ARE SEEING AGAIN. ONE THING YOU WANT TO SEE HIS WHEN A BULL MARKET GETS HIT, IT COMES BACK AND WE WILL GET AN ANSWER TODAY. IT IS IMPORTANT WHERE EVALUATIONS WHERE THEY ARE TODAY THAT EARNINGS COME THROUGH, AS KATIE MENTIONED, VERY EARLY INTO THE EARNINGS SEASON. THAT IS BETTER THAN NORMAL. WE WANT TO SEE THAT CONTINUE. THE HISTORIES IS ON THE SIDE OF THE BULL MARKET CONTINUING EVEN IF WE HAVE SOME BRUISES ALONG THE WAY.
ROMAINE: ARE YOU RELATIVELY OPTIMISTIC ABOUT THIS EARNINGS SEASON AND WHAT WE ARE GOING TO HEAR, PARTICULARLY NOW THAT WE'RE GETTING TO THE HEART OF IT WITH THE BIGGEST COMPANIES IN THE HOTTEST SECTORS? KEITH: I AM. THE BIGGEST RISK IS THAT EXPECTATIONS ARE SOMEWHAT HIGHER. I KNOW KATIE JUST SHOWED WE ARE SEEING REVISION HITS RECENTLY. INTO THIS EARNINGS SEASON WHAT WAS UNUSUAL IS THAT ANALYSTS RAISE THEIR ESTIMATES INTO THE EARNINGS SEASON, WHICH IS UNUSUAL. ALL AS I THINK ABOUT THE BULL MARKET ANALYTIC NARRATIVES FROM INFLATION, INTEREST RATES, TARIFFS, THE NORTHSTAR HAS BEEN PROFITS. EACH TIME THE COMPANIES HAVE COME OUT THE OTHER SIDE MORE RESILIENT. WE ARE SITTING ESTIMATES FOR THE S&P AT AN ALL-TIME HIGH AND WE ARE SEEING THAT IN THE EQUAL WEIGHTED INDEX AND SMALL-CAP. ULTIMATELY AS LONG AS EARNINGS MOVE FORWARD, AND WE THINK THEY WILL, THE MARKETS SHOULD BE SUPPORTED. WE ARE ANTICIPATING A SLIGHT UPTICK IN ECONOMIC GROWTH OVER THE NEXT YEAR. THAT SHOULD BE SUPPORTIVE OF PROFITS.
KATIE: KEITH, LET'S TALK ABOUT ONE OF THE OTHER THINGS THAT SPOOK INVESTORS THE PAST WEEK, WE CAN HAVE, AND THAT IS WHAT WE WEEK, WEEK AND A HALF -- WEEK, WEEK AND I HAVE, AND THAT IS WHAT WE SAW IN THE CREDIT MARKETS. INTERESTING NOTE FROM BANK OF AMERICA THAT WE COULD SEE SOME FORCED STOCK SELLING FROM LONG-ONLY ACCOUNTS IF WE SEE CREDIT PROBLEMS PERSIST. I WONDER WHAT YOU MAKE OF THAT DAISY BETWEEN THE DIFFERENT ASSET CLASSES AND HOW MANY DOMINOES THERE IS STILL AFTER SO FAILURE. KEITH: IT'S A GOOD POINT. IT IS A RISK WE SHOULD BE MONITORING A LOT OF WHAT WE KNOW IN THE PRIVATE MARKET IS IT IS SOMEWHAT OPAQUE. IF YOU THINK ABOUT LAST WEEK, IT WAS A TALE OF TWO MARKETS AS FAR AS THE FINANCIAL SECTOR. WE HAD THE BIG BANKS COME OUT AND TALK ABOUT IMPROVED CREDIT QUALITY AND AN ECONOMY THAT IS RESILIENT. THEN YOU HAVE THESE ONE-OF SITUATIONS. FROM WHAT WE HAVE SEEN SO FAR, AND I WANT TO KEEP AN OPEN MIND, BUT IT DOES NOT SEEM LIKE SOMETHING SYSTEMIC WE ARE SEEING ACROSS THE ECONOMY, ESPECIALLY MENTIONING THESE BIGGER BANKS, THE DOMINANT LENDING FORCE FOR THIS ECONOMY, SHOWING SOME RESILIENCY. WE SHOW A COMPANY LIKE AMERICAN EXPRESS TALKING ABOUT THE HIGH END HOLDING UP RELATIVELY WELL. THE HIGH END IS HOLDING UP RELATIVELY WELL.
KATIE: TWO-SPEED ACADEMY FOR THE CONSUMER, I LIKE THAT FACING. YOU TAKE A LOOK AT SMALL-CAP FINANCIALS, FOR EXAMPLE, THEY HAVE PLUNGED OVER 10% FROM THE RECENT HIGHS. AGAINST THAT BACKUP YOU DESCRIBE, IS THAT A BUYING OPPORTUNITY, OR IS THAT SOMEWHERE YOU WOULD STAY AWAY FROM? KEITH: I DON'T THINK IT IS LEADERSHIP YET. IT WILL PARTICIPATE AND THINGS GOT OVERDONE LAST WEEK. SMALL CAPS IN GENERAL, FINANCIALS AND INDUSTRIALS ARE BIGGER COMPONENTS OF THE SMALL-CAP INDICES RELATIVE TO LARGE CAPS MUCH MORE DOMINATED, BY GROWTH IN TECHNOLOGY. IT IS A HEALTHY SIGN THAT YOU ARE SEEING A REBOUND. LEADERSHIP IS STILL WITH THE LARGER BANKS. WE WOULD STICK MORE THERE WITHIN FINANCIALS. MORE BROADLY THERE MIGHT BE CATCH-UP POTENTIAL. THE STRUCTURAL AI THEME STAYS WITH A LARGE CAPS. WE HAVE BEEN OVERWEIGHT TECH AND COMMUNICATIONS SERVICES BECAUSE THAT IS DOMINANT THEME OF THIS BULL MARKET.
ROMAINE: I'M CURIOUS ABOUT THE INTERPLAY WITH WHAT IS GOING ON GLOBALLY NOT JUST WITH TRADE, BUT THE IDEA OF THE WEAKNESS OF THE DOLLAR AND HOW THAT FEEDS INTO THE U.S. EQUITY TRADE AND WHETHER THERE IS ANY REAL ARGUMENT TO MAKE FOR DIVERSIFYING GEOGRAPHICALLY OUTSIDE OF THE U.S. KEITH: IT'S INTERESTING, BECAUSE RIGHT NOW IF YOU LOOK AT YOUR TODAY, EMERGING MARKETS -- YEAR TO DATE, EMERGING MARKETS HAVE BEEN IN THE U.S., BUT THAT CAME FROM A TWO-MONTH SPAN AND A BIG PART OF THAT WAS THE DOLLAR. YOU THINK ABOUT THE OUTPERFORMANCE THIS YEAR, THE U.S. DOLLAR HAS BEEN ABOUT 10% OF THAT FOR INTERNATIONAL MARKETS. WHAT YOU ARE SEEING MORE RECENTLY IS THAT THE U.S. DOLLARS STABILIZED. IN REGARDS TO YOUR QUESTION, WE ARE STILL TEAM USA, WE THINK THE FUNDAMENTALS IS BEST YEAR, BUT IT STILL MAKES SENSE TO DIVERSIFY. YOU ARE SEEING JAPAN MAKE FRESH ALL-TIME HIGHS. A COUPLE WEEKS AGO WE WERE TALKING ABOUT FRANCE AND ALL THE GEOPOLITICAL ISSUES. THE MARKET IS CLOSE TO BACK TO NEW HIGHS AS WELL. IN EMERGING MARKETS, FRANCHISE. WHAT IS STRESSING OF THIS MARKET IS NOT JUST EITHER-OR, IT IS BOTH. YOU WANT EXPOSURE TO SOME OF THESE OTHER MARKETS. IN A CASE THE DOLLAR WEAKENS AGAIN SOME POINT THIS YEAR.
ROMAINE: GOT TO LEAVE IT THERE. KEITH LERNER, CHIEF MARKET STRATEGIST AT TRU IST, KICKING US OFF TO THE" JP MORGAN OUT WITH ITS OUTLOOK. A SIT DOWN WITH DAVID KELLY AND STEPHEN PARKER IN JUST A SECOND. KATIE: FROM LONG FORECAST ELECTORAL LISTINGS, RYAN SERHANT WITH WHETHER THE BIG APPLE MARKET IS RIPE FOR THE PICKING. ROMAINE: HIGH-RISES TO HIGH SEAS, HOW ABOUT THAT FOR A PUN? RICHARD FAIN HAS A NEW BOOK OUT ON THE LESSONS HE LEARNED IN BUSINESS AND KEEPING THE CRUISE LINE SAILING. THIS IS "THE CLOSE" ON BLOOMBERG. ♪
KATIE: RARE EARTH, FENTANYL, AND SOYBEANS, THE KEY ISSUES ON THE TABLE AS PRESIDENT TRUMP PREPARES TO RESTART NEGOTIATIONS WITH CHINA. SOYBEAN LEVELS ENDING THE HAS LEVELS IN THE MONTH WITH OFFICIALS OPTIMISTIC THAT THE TAX COULD EASE TENSIONS BETWEEN THE GLOBAL SUPERPOWERS. JOINING US IS PRESIDENT OF CHINA MOON STRATEGIES AND FORMER ASSISTANT U.S. TRADE REPRESENTATIVE FOR CHINA. GREAT TO HAVE YOU BACK WITH US. A CRUCIAL STRETCH WITH THESE MEETINGS. WHAT WOULD SUCCESS LOOK LIKE COMING OUT OF THEM FOR THE U.S. AND FOR CHINA? >> I THINK THE MOST IMPORTANT THING IS WE GET SOME TYPE OF DÉTENTE BETWEEN THE COUNTRIES WHERE THEY STOP SNIPING AT EACH OTHER AND MAKING THREATS AND BACKING OFTEN GOING FORTH. BUSINESS CREATES SOME KIND OF STABILITY. I THINK THAT IS WHAT WE ARE LOOKING FOR. IN TERMS OF MORE SPECIFIC THINGS, WE ARE GOING TO GET VERY MODEST DELIVERABLES. THE ELEMENTS ARE THAT CHINA WANTS TO DECREASE U.S. TARIFFS, THEY WANT REDUCED EXPORT CONTROLS, U.S. INVESTMENT OPPORTUNITIES, AND THE U.S. ONCE RARE EARTHS AND MARKET ACCESS FOR SOYBEANS AND OTHER PRODUCTS.
KATIE: HEADING INTO THE SUMMIT, IT REMAINS TO BE SEEN IF WE WILL SEE THE LEADERS OF THESE TWO COUNTRIES MEET. WHAT DO YOU THINK HIS DAUGHTER CONVERSATION, OR THE -- IS THE HARDER CONVERSATION, OR THE MORE DELICATE CONVERSATION WITH THESE NOT TARIFF MEASURES -- WHERE EARTHS, SOVIET -- RARE EARTHS, SOYBEANS, ETC.? JEFF: IT IS CLEARLY RARE EARTHS. RARE EARTHS HAS CHANGED THE GAME. CHINA HAS LEVERAGE THEY HAVE NEVER HAD BEFORE, AND THEY ARE DETERMINED TO EXERT IT IN A VERY AGGRESSIVE WAY. WE ARE ON THE VERGE OF A NEW ERA. CHINA IS GOING TO START SPOON FEEDING RARE EARTHS TO THE U.S. AND OTHER COUNTRIES. I THINK THEY ARE GOING TO USE THAT LEVERAGE AND A VARIETY OF WAYS, NOT JUST IN TRADE. WHENEVER THEY ARE DISPLEASED PEOPLE ARE GOING TO HEAR MORE ABOUT RARE EARTH'S. HOW ARE COUNTRIES GOING TO RESPOND? ON THE TARIFF ISSUES, THERE ARE PRETTY CLEAR SOLUTIONS OR OUTCOMES WE CAN ARRIVE AT. TRUMP WANTS YOU -- HE SAID HE WANTS TO REDUCE THE TARIFFS, INTENTIONAL -- AND FENTANYL ACCOUNTS FOR 20%. THERE MAY BE SOME WAY THEY CAN FIND AN ACCOMMODATION. THOSE KINDS OF TERMS THAT CAN ARRIVE AT. BUT THE MONOPOLY ON RARE EARTHS IS SOMETHING WE WILL TALK ABOUT FOR MANY YEARS TO COME.
ROMAINE: ABSOLUTELY. WITH REGARD TO THE OTHER ISSUES, THERE HAS BEEN A LOT OF DISCUSSION ABOUT CHINA'S FOCUS, PARTICULARLY WHEN IT COMES TO TECHNOLOGY. I DO WONDER HOW THIS COMPLICATED AND IN NEGOTIATIONS. I FEEL LIKE IF YOU HAD THESE NEGOTIATIONS 10 YEARS AGO, CHINA HAD A CERTAIN NEED TO BE PARTNERED WITH THE U.S. ON A LOT OF THESE THINGS. CORRECT ME IF I'M WRONG, THEY SEEM TO BE TELEGRAPHING THIS IDEA THAT THEY DON'T NECESSARILY NEED US AT LEAST TO THE SAME EXTEN THEY DID IN THE PAST. JEFF: MAYBE NOT TO THE PAST, BUT A LOT OF THIS COMMENTARY OF WE DON'T NEED YOU ANYMORE, YOU NEED US, THAT IS A TYPICAL CHINESE NEGOTIATING TECHNIQUE. THEY WANT THE CHIPS, THEY WANT THE HIGH-TECHNOLOGY, THEY KNOW ABOUT AND RESPECT THE FACT THAT THE U.S. HAS A LEAD AND OTHER AREAS. THEY ARE TELLING US IT IS IMPORTANT BECAUSE RIGHT NOW THEY ARE HAVING THEIR MEETING IN BEIJING WHERE THEY ARE PONDERING THE ANNUAL FIVE-YEAR PLAN. CHINA TELLS US IN FIVE-YEAR PLANS WHAT IS MOST IMPORTANT TO CHINA, AND THE MOST IMPORTANT THING IS TECHNOLOGY. I DISCOUNT A LOT OF THE COMMENTARY AND THINK THAT IS A WAY TO DRIVE THE BARGAIN MORE EASILY.
ROMAINE: WHAT ABOUT CHINA'S FINANCIAL SITUATION? I KNOW THAT FROM INTERNATIONALLY. THEY HAD AMBITIONS TO MAKE YOU WANT A STANDARDBEARER FROM THE GLOBE -- THE YUAN A STANDARDBEARER FOR THE GLOBE. DOES THIS GIVE CHINA AN OPPORTUNITY TO PUSH A LITTLE BIT HARDER ON ITS OWN CURRENCY VALUATIONS? JEFF: CHINA'S PROBLEM IS THAT ITS CURRENCY IS NOT CONVERTIBLE. THEY CAN TRY TO DEDOLLARIZE, BUT I'M TOLD THEY DO SOMETHING ABOUT THE FUNDAMENTAL PROBLEM, I DON'T THINK THINGS ARE GOING TO CHANGE VERY MUCH. THIS HAS BEEN AN EFFORT OF MANY YEARS TO PROMOTE THE YUAN OVERSEAS, DIGITAL CURRENCY. THIS IS A RECURRING THEME. WE ARE TALKING ABOUT MORE DURING THE TRUMP TRADE WAR BECAUSE OF CONCERNS ABOUT BONDS IN THE U.S. DEBT, BUT THIS IS A LONG-STANDING ISSUE CO.
KATIE: BEFORE WE LET YOU GO, I WANT TO TALK MORE DETAILS ABOUT SOYBEANS. BLOOMBERG NEWS HAS REPORTED THAT HE TALKED ABOUT U.S. FARMERS, KEY TO DONALD TRUMP'S SUPPORT BASE, THEY ARE RUNNING OUT OF STORAGE FOR UNSOLD BEANS. I WONDER HOW MUCH OF A POINT OF LEVERAGE IS THAT FOR CHINA, THAT THREAT OF WHETHER OR NOT THEY ARE GOING TO BUY THESE U.S. SOYBEANS? JEFF: I THINK IT IS A MAJOR POINT OF LEVERAGE BECAUSE PURCHASES BY THE CHINESE OF SOYBEANS USED TO B MANAGEMENT UNTIL THE TRUMP I TRADE WAR AND THE THREATS DROVE THE CHINESE TO SEEK AND ENCOURAGE OTHERS APPLIES LIKE BRAZIL TO MAKE OF THE DIFFERENCE. NOW THOSE COUNTRIES THAT MAKE UP THAT DIFFERENCE. THE TRADE DEAL IN SEOUL COULD INCLUDE SOME ELEMENT OF SOYBEANS, BUT IF IT DID SO, IT WOULD BE THE CHINESE SEEING THEMSELVES AS DOING A FAVOR, BECAUSE THEY HAVE DEVELOPED ALTERNATIVE SUPPLIES IN VARIOUS DIFFERENT COUNTRIES.
ROMAINE: REALLY APPRECIATE IT. FORMER ASSISTANT U.S. TRADE REP FOR CHINA AND PRESIDENT OF CHINA MOON STRATEGIES. WHEN WE COME BACK, WE WILL TURN TO THE REGIONAL TAKING SECTOR. REBOUND AFTER THE LAST DAYS SELLOFF. WE WILL TALK TO AN ANALYST TO GET HIS THOUGHTS ON THE OUTLOOK. THIS IS "THE CLOSE" ON BLOOMBERG. ♪
ROMAINE: LET'S GET TO OUR TOP CALLS, BIG MOVERS ON THE BACK OF ANALYST RECOMMENDATIONS. WE START WITH KATIE'S FAVORITE, LULULEMON. SELL EQUIPMENT RATING FOR MORE THAN YEAR-AND-A-HALF UPGRADED TO NEUTRAL FROM OUTPERFORM. ANALYST SAYS THE REASON SELLOFF PRICED AND A LOT OF THE BAD NEWS. THE BRAND'S PARTNERSHIP WITH AMERICAN EXPRESS COULD BE A POSITIVE. UP NEXT, PROGRESSIVE. MORGAN STANLEY DOWNGRADING THE INSURER TO UNDERWEIGHT. THE ANALYST SEES CAUSE FOR CONCERN AFTER THE LATEST EARNINGS REPORT, SAYING A REBOUND IS "FAR OFF." SHARES AT THE LOWEST LEVEL SINCE AUGUST OF LAST YEAR. FINALLY, CORVO. ALSO REDUCING A RECOMMENDATION ON SKYWARD, SAYING THE TWO COMPANIES, SUPPLIERS TO APPLE, FACE SOFTENING IPHONE DEMAND. WE DID GET POSITIVE NEWS ON APPLE, RAILING TO ITS FIRST RECORD HIGH OF 2025. WE WANT TO GO THROUGH THE REGIONAL BANK SPACE, RECOUPING SOME OF THE LOSSES AFTER CLENCHING ON A NEWS THAT ZIONS AND WESTERN ALLIANCE WERE VICTIMS OF FRAUD. INVESTORS ARE RUNNING TO SEE IF ZIONS WILL PROVIDE ADDITIONAL INSIGHT WHEN THE REPORTS AFTER THE BELL TONIGHT. JOINING US NOW, MANAGING DIRECTOR AND HEAD OF RESEARCH AT KBW. I UNDERSTAND WE HEARD FROM THESE COMPANIES LAST WEEK SEEMED RELATIVELY MINOR. I CAN ALSO UNDERSTAND THE ALARM BY INVESTORS. I'M CURIOUS, BASED ON YOUR OWN RESEARCH AND WHAT YOU KNOW, IS THERE ANY SENSE THAT WHAT WE LEARNED ABOUT LAST WEEK IS THE TIP OF THE ICEBERG OR PRETTY MUCH THE WHOLE ICEBERG? >> THANKS FOR HAVING ME BACK. I WOULD SAY THIS IS PART OF THE CREDIT NORMALIZATION PROCESS. THE CHALLENGES WE HAVE HAD THREE NOT-SO-SUBTLE REMINDERS IN WEEKS ABOUT BANKS EXTENDING CREDIT. BANK BALANCE SHEETS ARE NATIVITY POSITION. BALANCE SHEETS ARE LIQUID. THE QUARTER WE ARE SEEING FROM A FUNDAMENTAL PERSPECTIVE IS SHOWING A LOT OF POSITIVE SIGNS.
ROMAINE: WE TALK ABOUT THIS IDEA OF LOAN-LOSS RESERVES AND OTHER METRICS WE LOOK TO TO SEE WHAT THE CONSUMER AND MORE IMPORTANTLY THE BORROWER IS. ANYTHING GIVE YOU CONCERN? >> NO, I THINK FROM A CONSUMER PERSPECTIVE EMPLOYMENT IS PRETTY STRONG. COMMERCIAL LOSSES TEND TO BE HIGHER IN CERTAIN ASSET CLASSES. NOTHING THAT WE ARE SEEING IS OUTSIDE THE REALM OF NORMAL. WHAT IS CAUGHT INVESTORS OFF GUARD IS THAT THIS IS SEEMINGLY OUT OF NOWHERE. BUT OVERALL WE THINK CREDIT QUALITY, WE THINK ZIONS'S NUMBERS IN ABOUT AN HOUR GOING TO BE GENERALLY GOOD.
KATIE: THAT IS WHERE I WANTED TO GO. ZIONS AS YOU MENTIONED, WE ARE EXPECTING THE RESULTS IN ABOUT AN HOUR'S TIME. THIS IS A STOCK THAT YOU ARE MARKET PERFORM ON WHEN IT COMES TO YOUR RATING. YOU LOOK AT HOW IT HAS PERFORMED THE LAST WEEK OR SO, IT GOT HAMMERED LAST THURSDAY. IT HAS REBOUNDED A BIT. WHAT DO EXECUTIVES NEED TO SAY, WHAT TONE DO THEY NEED TO TAKE TO REASSURE INVESTORS OF WHAT THEIR BOOKS LOOK LIKE? CHRISTOPHER: SURE, I WOULD PUT CONTEXT INTO THE PAST WEEK, KATIE. ZIONS HAS LOST $500 MILLION IN MARKET CAP, AND THE LOSS WE ARE TALKING ABOUT IS $50 MILLION. THAT IS A PRETTY BIG OVERREACTION. ON A CONFERENCE CALL WE CAN ASK ABOUT WHEN DID WE DISCOVER THIS PROBLEM, WAS THERE SOMETHING THEY COULD HAVE DONE DIFFERENTLY FROM CONTROL PERSPECTIVE, OR WAS THIS FRANKLY JUST FRAUD. WE WILL GET A LOT MORE DETAILS FROM WESTERN ALLIANCE AS WELL. IT WILL PUT THEIR BEST FOOT FORWARD AND TALK ABOUT HOW THEY ARE A LOT LESS RISKY THAN WHAT THE MARKET THINKS THEY ARE.
KATIE: ABSOLUTELY. WE WILL GET THAT DETAIL IN ABOUT AN HOUR'S TIME ON "THE CLOSE." I LIKE THE WAY THAT YOU SECTION YOUR COVERAGE, BECAUSE YOU HAVE UNIVERSAL BANKS, THEN THE LARGE REGIONALS, WHERE YOU SAY YOU NEED TO BE SELECTIVE, AND THEN YOU HAVE THE BANKS WITH THE MARKET CAP OF $50 BILLION TO $100 BILLION GOOD CERTAINLY ON THE SMALL SIDE THERE. THIS IS AN AREA YOU ACTUALLY LIKE. I WOULD LIKE TO HEAR WHY, ESPECIALLY AS IT SOMEBODY'S CREDIT CONCERNS PERCOLATE. CHRISTOPHER: WE ARE OVER WITH UNIVERSAL BANKS. WHAT WE SAW IS SCALE IS WINNING, THE CONSISTENCY OF THESE RETURNS ARE SUSTAINABLE, AND THEY HAVE GOT FRANKLY A BETTER MOUSETRAP THAN MOST BANKS. THE SMALL-CAP BANKS WE TALKED ABOUT ARE THE $50 BILLION, $100 BILLION ASSET COMPANIES. MID TO HIGH TEENS RETURN ON EQUITY CAN AND THEY ARE TRADING AT A TIMES EARNINGS. THE REASON WE LIKE THIS GROUP OF BANKS IS THE DEREGULATORY NARRATIVE UNFOLDING IN FRONT OF US NOW. THESE BANKS SHOULD BE ALLOWED TO GROW MORE FREELY AND SPEND LESS MONEY ON NONREVENUE PRODUCING ITEMS. THERE IS A REWRITING NARRATIVE IN THE MID-CAP. IN BETWEEN, THE FUNDAMENTALS ARE GREAT. OUR NEAR-TERM QUESTION IS THEY ARE ACQUIRERS, AND SO HISTORY SAYS YOU NEED TO BE A LITTLE BIT MORE CAREFUL WHEN BANKS ARE CONSOLIDATED.
KATIE: GREAT TO GET TIME WITH YOU AHEAD OF THE SCIENCE RESULTS IN ABOUT AN HOUR'S TIME. THAT IS THE MANAGING DIRECTOR AND HEAD OF U.S. BANK RESEARCH AT KBW. CERTAINLY INTERESTING EARNINGS WEEK COMING UP.
ROMAINE: WE SHOULD POINT OUT THAT WE ARE SEEING THESE BELOW WHERE THEY WERE PRIOR TO THE SELLOFF WE HAD. THEY SEEM TO BE BOUNCING BACK PRETTY FAST. YOU SEE THE RIPPLE EFFECTS OF THAT, MORE OF A BANKER ON -- MORE OF A REAL BANK RUN. KATIE: COULD BE SETTING UP FOR A REALITY CHECK. WE WILL FIND OUT IN JUST ABOUT AN HOUR. COMING UP ON "THE CLOSE," I'M PLEASED TO SAY COMMIT DAVID KELLY AS WELL AS STEPHEN PARKER JOIN US NEXT TO TALK THROUGH -- THEY'RE HOT OFF THE PRESS REPORT FOR LONG-TERM INVESTING. THIS IS "THE CLOSE" ON BLOOMBERG.
ROMAINE: 3:30 P.M. IN NEW YORK. THIS IS "COUNTDOWN TO THE CLOSE ." I'M ROMAINE BOSTICK. KATIE: I'M KATIE GREIFELD. JP MORGAN OUT WITH A REPORT WITH THREE THEMES THAT WILL CHARACTERIZE THE COMING DECADE, ECONOMIC NATIONALISM, FISCAL ACTIVISM, TECH ADOPTION AND DEPLOYMENT THE FIRST ONE STOPPED ME IN MY TRACKS CAN ECONOMIC NATIONALISM, CERTAINLY A WORD DESCRIBE WHAT WE HAVE BEEN SEEING. ROMAINE: ABSOLUTELY, NOT ONLY IN THE U.S., BUT AROUND THE WORLD AS WELL. IT GETS TO THE QUESTION OF WHETHER THAT IS INVESTABLE. KATIE: BIG QUESTION CERTAINLY LET'S POSE THAT TO THE PEOPLE BEHIND THIS REPORT. DAVID KELLY IS CHIEF GLOBAL STRATEGIST FOR JP MORGAN ASSET MANAGEMENT, AS WELL AS STEPHEN PARKER, COHEAD OF GLOBAL INVESTMENT STRATEGY FOR JP MORGAN PRIVATE BANK. GREAT TO SEE YOU BOTH IN PERSON. , DAVID I WILL START WITH YOU. ECONOMIC NATIONALISM, IS THIS A WAY TO DESCRIBEDEGLOBALIZATION? DAVID: NO, IT IS TARIFFS AND LOCALIZATION. TO THE EXTENT THAT U.S. PUSHES OF TRADE BARRIERS, OTHER COUNTRIES WILL FOLLOW SUIT YOU SOME EXTENT. -- TO SOME EXTENT. ALSO AROUND THE WESTERN WORLD IS THIS PUSHBACK AGAINST IMMIGRATION. WE WANT TO KEEP THE GOODS OUT, MORE IMMIGRANTS OUT. THOSE ARE HEADWINDS FOR THE GLOBAL ECONOMY. THERE ARE OFFSETS WE WILL GET TO. THOSE ARE HEADWINDS BECAUSE THEY TEND TO PUT UP INFLATIONARY PRESSURES AND SLOW DOWN ECONOMIC GROWTH.
KATIE: STEPHEN, I'M GOING TO STEAL REMAINS QUESTION, BECAUSE IT IS A GOOD ONE. HOW DO YOU INVEST AROUND THAT YAKKING ON IF YOU TAKE THE EXAMPLE OF THE EQUITY MARKET JOSTLING BACK AND FORTH BETWEEN HEADLINES, IT SEEMS TO GO HIGHER? >> ONE OTHER THING TO REALIZE IN THIS REPORT IS THERE'S NEVER BEEN A BIGGER GAP BETWEEN THE STOCK MARKET AND THE ECONOMY. THERE IS A HUGE DIVERGENCE. WHAT WE ARE SEEING IN THE STOCK MARKET IS THIS SHIFT TO A MORE TECH-HEAVY FOCUS, SHIFT TO COMPANIES THAT HAVE MORE SUSTAINABLE MARGINS UNLESS ECONOMIC CYCLICALITY ALLOWS YOU TO GRAIN GATOR GREATER CONFIDENCE IN DEEP -- GREATER CONFIDENCE IN THE ABILITY TO GENERATE EARNINGS GROWTH, DESPITE THE FACT THAT THE PACE OF GROWTH MAY BE SLOWING.
ROMAINE: ARE YOU GETTING A GOOD READ ON THE MARKETS? WE ALWAYS RELY ON THE MACRO DATA AND MAYBE VICE VERSA AS WELL. WITH THAT GOLF, DOES IT CHANGE WHAT YOU HAVE TO LOOK AT? STEPHEN: I THINK WHAT IT MEANS IS YOU WILL SEE MORE DIVERGENCE WITHIN MARKETS. CONSUMER-ORIENTED PARTS OF THE MARKET WILL HAVE THAT CYCLICALITY AND ECONOMIC EXPOSURE. THE TECHNOLOGY SECTOR SEEMS TO BE DIVERGING FROM THE ECONOMY. THAT IS MORE OF A U.S. PHENOMENON. GLOBALLY THERE IS AN ELEMENT OF ECONOMIC CYCLICALITY IN PLACES LIKE EUROPE . WITH UPGRADED GROWTH EXPECTATIONS FOR EUROPE.
ROMAINE: THIS GETS TO THE IDEA OF YOUR IMMIGRATION POINT, THE IDEA OF ECONOMIC MOBILITY. WITH THIS NATIONALISM, WE HAVE SEEN IT IN THE U.S., SHUTTING OUT IMMIGRANTS, ESPECIALLY SKILLED IMMIGRANTS. EVEN ON THE TECH FRONT, WE GO BACK OVER THE LAST FEW DECADES AND YOU GO TO THE SHARING OF IDEAS ACROSS BORDERS, IS THAT LOSS OR IS IT GOING TO MORPH INTO SOMETHING DIFFERENT? DAVID: IT IS PARTIALLY LOST. SEND ME A TIRED, YOU'RE HUNGRY CAN ALSO SEND ME YOUR SKILLED, SEND ME YOUR IDEAS. THAT'S BEEN OUR ATTITUDE FOR TWO CENTURIES, AND NOW IT IS PLEASE KEEP IT AWAY FOR SOME THAT'S NOT GREAT. -- NOW IT IS PLEASE KEEP IT AWAY. THAT'S NOT GREAT. THERE'S IS ALSO A COUNTER REACTION. ALL AROUND THE WORLD THEY ARE ADAPTING TO A WORLD IN WHICH MAY BE THE U.S. ISN'T GOING TO BE THE ONLY PLACE FOR TECH GOING FORWARD. IT DOES COME AS STEPHEN IS SAYING, OPEN UP OPPORTUNITIES. WE ARE LOOKING AT PLACES LIKE EUROPE AND MARKETS WHERE PEOPLE ARE UNDERINVESTED AND THAT IS SOMETHING TO LOOK AT.
KATIE: I WANT TO TALK MORE DIRECTLY ABOUT ARTIFICIAL INTELLIGENCE BECAUSE IT IS HARD TO TALK ABOUT THE COMING DECADE WITHOUT SPEAKING SPECIFICALLY ABOUT AI. YOU WRITE THAT WHEN IT COMES TO THE AI BOOM, IT IS GOING TO BE A FACTOR, BUT WE ARE AT A CRITICAL JUNCTURE. I WOULD LIKE TO ARTICULATE WHAT THAT JUNCTURE IS. DAVID: WELL, YES, BECAUSE WE HAVE SEEN SO MUCH ENTHUSIASM. IT REMINDS ME OF THE LATE 1990'S WHERE WE HAD THE INITIAL INTERNET BOOM. IT WAS REAL, THERE IS NO DOUBT THAT THE INTERNET CHANGED THE WORLD, BUT YOU STILL HAVE TO BE CAREFUL BECAUSE WE HAD A HUGE SELLOFF IN TECHNOLOGY STOCKS AND WE HAD A SMALL RECEPTION IN THE EARLY 2000'S GOOD WE COULD GET OUT OF OUR SKIS IN CERTAIN TECH COMPANIES. BE VERY CAREFUL WHICH TECH WINNERS WERE LOOKING AT. THIS IS LONG-TERM INVESTING. THE NEXT 5, 10, 15 YEARS, YOU ARE GOING TO SEE AI MORE INTEGRATED. I WILL PUSH UP PRODUCTIVITY -- THAT WILL PUSH UP PRODUCTIVITY GROWTH. PRODUCTIVITY GAINS TEND TO GO TOWARDS COMPANIES. THIS IS PART OF THE TORTOISE SCENARIO, TORTOISE OPEN ECONOMY AND A HARE OF A MARKET .
ROMAINE: IS THERE A VALUE YOU COULD PUT ON PRODUCTIVITY IMPROVEMENTS? STEPHEN: WE FORECAST OVER THE NEXT 10 TO 15 YEARS SOMETHING LIKE A 20 TO 25% DECLINE IN MULTIPLES. U.S. EQUITIES CAN GENERATE CLOSE TO 7% A YEAR, DOUBLING YOUR MONEY OVER THAT TIME PERIOD. WHAT IS IMPORTANT AND RECOGNIZES MULTIPLES, WHILE THEY MAY COME DOWN, WE DON'T THINK IT WILL COME DOWN TO THE LONG-TERM LEVELS. THE COMPOSITIONAL IS BETTER SUPPORTED, STRONGER SECULAR GROWTH. THOSE MARGINS ARE STRUCTURALLY HIGHER AND AI IS ONLY GOING TO SUPPORT THAT.
KATIE: I WANT TO SWITCH GEARS AND TALK ABOUT PUBLIC VERSUS PRIVATES. IN THE ALTERNATIVE SECTION OF YOUR REPORT YOU WRITE THAT WHEN IT COMES TO PRIVATE EQUITY, THE RETURN ASSUMPTION IS 10.2% RIGHT NOW. YOU COMPARE THAT TO PUBLIC EQUITIES. IT IS PRETTY MUCH ON PAR. THE LAST COUPLE YEARS INTEREST IN PRIVATE MARKETS IS ABSOLUTELY EXPLODED. WHEN YOU COMPARE THE TRANSFER PUBLIC AND PRIVATE, DOES THAT FAVOR ONE OVER THE OTHER? STEPHEN: WE DON'T THINK IT FAVORS ONE OVER THE OTHER, IT FAVORS A COMPLEMENT OF BOTH. CAPITAL MARKETS HAVE EVOLVED AND COMPANIES HAVE THE ABILITY TO STAY PRIVATE MUCH LONGER. THE POND FROM WHICH PRIVATE EQUITY INVESTORS ARE FISHING HAS GOTTEN BIGGER AND POTENTIALLY HIGHER QUALITY. THE COMPARISON WE LIKE TO MAKE IS LOOKING AT PRIVATE EQUITY RELATIVE TO PUBLIC SMALL-CAP COMPANIES. TRADITIONALLY WHEN YOU ARE LOOKING FOR THE NEXT BIG GROWTH COMPANIES LOOK TO SMALL-CAP. OUR SMALL-CAP EXPECTATIONS ARE MODERATING RELATIVE TO LARGE-CAP COMPANIES AND PRIVATE EQUITY. WE ARE HAVING MORE STRATEGIC CONVERSATIONS WITH CLIENTS WHO TRADITIONALLY WOULD'VE HAVE ALLOCATED TO PUBLIC MARKETS TO FIND THE NEXT BIG WINNERS IN PLACES LIKE AI TO GET EXPOSURE THROUGH PRIVATE MARKETS. DAVID: WHENEVER BIG THEMES COME -- ONE OF OUR BIG THEMES, IF YOU HAVE DONE NO ALTERNATIVES, GET STARTED. BON ALONED IS NOT ENOUGH TO DIVERSIFY THE PORTFOLIO. MORE THAN ALTERNATIVES MAY MAKE SENSE. IF YOU ARE MORE SOPHISTICATED, MAYBE 30% IN ALTERNATIVES WOULD MAKE SENSE. WHAT WE FIND IS IT WILL ADD TO RETURNS BUT LOWER VOLATILITY OF PORTFOLIOS, PARTICULARLY WHEN PUBLIC MARKETS HAVE DONE SO WELL ADDING THINGS LIKE PRIVATE EQUITY, BUT ALSO TRANSPORTATION, REAL ESTATE, IT HELPS GIVE IT SOME BALANCE WHEN MARKETS ARE VERY BALANCED.
ROMAINE: WE WILL HAVE TO LEAVE IT THERE, BUT I ENCOURAGE EVERYONE IF YOU HAVE ACCESS TO THIS REPORT, VERY ELIMINATING. -- VERY ELIMINATING. DAVID KELLY IS THE CHIEF GLOBAL STRATEGIST FOR JP ASSET MANAGEMENT AND STEPHEN PARKER IS COHEAD OF GLOBAL INVESTMENT STRATEGY FOR J.P. MORGAN PRIVATE BANK. WE WILL CONTINUE TO COUNT YOU DOWN TO THE CLOSE WITH STOCKS APPROACHING FRESH RECORD HIGHS COULD APPLE, BELIEVE IT OR NOT, HITTING THE FIRST RECORD HIGH OF 2025. STOCK OF THE HOUR, AND IT I UP NEXT TO THIS IS "THE CLOSE" ON BLOOMBERG. ♪
ROMAINE: TIME FOR OUR STOCK OF THE HOUR, AND TAKING A CLOSER LOOK AT APPLE, BY FAR THE BIGGEST POINT CONTRIBUTOR TO THE S&P TODAY AS IT HITS ITS FIRST RECORD HIGH SINCE DECEMBER. EARLY SALES DATA OUT SHOWING DEMAND FOR THE NEW IPHONE 17 OUTPACING PREVIOUS GENERATIONS. NORAH MULINDA JOINS US TO TALK MORE ABOUT THIS. A, KIND OF SURPRISING THAT IT HAS BEEN 10 AND HALF MONTHS SINCE APPLE HAD A RECORD HIGH. ALSO, WHAT IS DRIVING THE RENEWED OPTIMISM? IS IT THAT PEOPLE ARE LOOKING AT SALES AND SAYING IT IS NOT AS BAD AS WE THOUGHT WE WERE GOING TO BE? NORAH: WE ARE SEEING A 14% INCREASE IN COMPARISON TO THE PREVIOUS SERIES,-16. ROMAINE: WHAT MODEL DO YOU HAVE? NORAH: I MET THE 14, EMBARRASSINGLY SO --I AM AT THE 14, EMBARRASSINGLY SO. DON'T JUDGE ME. ROMAINE: YOU'RE HURTING THE ECONOMY. NORAH: MIGHT BE TEMPTED UPGRADE. YOU ARE SEEING PEOPLE COMING OUT IN DROVES. A LOT OF PEOPLE ARE GOING FOR THE PRO MACS. KATIE: I DON'T EVEN KNOW WHAT THAT IS. NORAH: YOU GOTTA HAVE THE PRO MAX. ROMAINE: IS THAT THE ONE THAT FOLDS? NORAH: JUST A LARGER SCREEN. KATIE: IPHONE 24 LET'S LOOK AT THE NARRATIVES THAT ARE HUNTING APPLE. -- HAUNTING APPLE. THE IDEA THAT THEY WERE FALLING BEHIND ON AI. NORAH: THAT WAS A DISCUSSION WITH APPLE IN PARTICULAR COMPARED TO THE MAG SEVEN COUNTERPARTS. EVERYONE IS FOCUSED ON THE AI PUSH AND IT SEEMS LIKE THAT IS WHAT THE STREET IS LOOKING FOR NOW ON THE MIND OF INVESTORS CONTINUES TO BE THE TARIFF CONVERSATION. WHEN YOU THINK OF TRADE RELATIONS BETWEEN THE U.S. AND CHINA, ALSO RARE EARTH MATERIALS, NOT ONLY A CONVERSATION ABOUT APPLE, BUT A LOT OF THE OTHER COMPANIES REPORTING THIS WEEK. A LOT THAT THIS COMPANY HAS BEEN GRAPPLING WITH.
ROMAINE: YOU SAY THEY HAVE BEEN GRAPPLING WITH IT, BUT FOR THE LAST COUPLE EARNINGS REPORTS THEY HAVE SHOWN THEY CAN NAVIGATE IT. TIM COOK JUST LIVES AT THE WHITE HOUSE AT THIS POINT, THAT NEW ROSE GARDEN. IT GETS TO THIS IDEA AS TO WHY WOULDN'T INVESTORS BE SKITTISH AT THIS POINT. WE KNOW HOW BIG THE APPLE ECOSYSTEM IS, AND WHILE GROWTH MAY NOT BE WHAT IT WAS, WHY WOULD IT BE WITH A COMPANY THIS SIZE? WHAT ELSE ARE PEOPLE GOING TO BUY? I KNOW YOU HAVE THIS UNIVERSE OF ANDROID USERS, BUT THAT GROWTH THERE ISN'T ANY BETTER THAN WITH IOS. NORAH: I THINK THE EXPECTATIONS TEND TO BE SUPERHIGH WITH APPLE. THEY ARE THE HALLMARK PHONE. IT IS YOU HAVE AN IPHONE OR "WHAT, YOU HAVE AN ANDROID?" THAT IS WHAT THE PRESSURE IS FOR APPLE. PEOPLE ARE ALWAYS LOOKING FOR WHAT THE NEW THING IS GOING TO BE COMING OUT OF THE COMPANY .
ROMAINE: I'VE BEEN THINKING ABOUT DOWNGRADING MY PHONE. KATIE: LIKE A FLIP PHONE? BLACKBERRY? ROMAINE: THAT WOULD BE NICE. GO ALL THE WAY BACK TO A PAGER. KATIE: HARD TO KEEP IN TOUCH ABOUT THE SHOW, THAT WOULD BE FUN, TOO. [LAUGHTER] THAT IS BLOOMBERG'S NORAH MULINDA. APPLE GETTING A LITTLE BIT OF ITS MOJO BACK. SO, TOO, IS THE BROADER EQUITY MARKET. WE ARE 15 MINUTES AWAY FROM THE CLOSING BELL. GLOBAL CIO OF FUNDAMENTAL EQUITIES AT BLACKROCK, THAT CONVERSATION THAT. THIS IS "THE CLOSE" ON BLOOMBERG. >> I THINK THE MAIN POINT IS WE STILL THINK THIS BULL MARKET DESERVES THE BENEFIT OF THE DOUBT. THERE IS ALWAYS POTENTIAL CRACKS. WE HAD CONCERNS LAST WEEK AROUND THE CREDIT SIDE, THERE WAS CONCERN ABOUT SENTIMENT. BUT IN A BULL MARKET YOU CLIMB THIS WALL OF WORRY, AND THAT IS WHAT WE ARE SEEING AGAIN.
ROMAINE: KEITH LERNER KICKING US OFF TO THE CLOSE 50 MINUTES AGO. STOCKS WERE NEAR SESSION HIGHS, AND STOCKS RIGHT NOW, KATIE GREIFELD, NEAR SESSION HIGHS. KATIE: ABSOLUTELY RIPPING RIGHT NOW ON THE S&P 500. LOOKING AT THE BEST TWO-DAY ADVANCE FOR THE S&P 500 SINCE JUNE, AND IT'S BIG THAT IS LEADING THE WAY NASDAQ 100 HIGHER BY 1.4%. CANNOT EXPLAIN THE BID INTO THE BOND MARKET. WE ARE BELOW 4%. ROMAINE: BELOW 4% THERE. VERY MODEST BID ON THE DAY. WE ARE STILL IN THE MIDDLE OF A SHUTDOWN AND THERE'S A LOT OF RISK OUT THERE. IT MAKES SOME DEGREE OF SENSE THAT YOU ARE SEEING SOME BIDS COME INTO THOSE ASSET CLASSES. KATIE: THE EQUITY MARKET, IT SEEMS LIKE FOR STEVE MADDEN. VIX--EQUITY MARKET, IT SEEMS LIKE FULL STEAM AHEAD. VIX DROPPING LIKE A STONE.
ROMAINE: LET'S BRING TONY DESPIRITO INTO THE CONVERSATION, CIO OF FUNDAMENTAL EQUITIES AT BLACKROCK. THERE'S A LOT OF PEOPLE LOOKING AT THIS BULL MARKET. WE HAVE ENTERED THE THIRD FULL YEAR OF THIS IF YOU GO OFF THE BEAR MARKET LOWS IN 2022. EVERYONE IS TRYING TO FIGURE OUT, A, WHY WE ARE NOT SEEING MORE CONVICTION TO THE UPSIDE, BUT MORE IMPORTANTLY, WHY THERE DOESN'T SEEM TO BE ANYTHING THAT CAN KNOCK THIS BULL MARKET OFF. TONY: WE ARE KIND OF IN A K- SHAPED ECONOMY AND K- SHAPED MARKET. AI ON THE UPSIDE. THE ECONOMY IS DEFINITELY SOFT, PARTICULARLY AT THE LOW END, LOW-END CONSUMER. EVEN TOOTHPASTE SALES ARE WEAK, SQUEEZING MORE OUT OF THE TUBE. WE ARE SEEING THAT DIVERGENCE AND THAT EXPLAIN WHAT WE ARE SEEING.
ROMAINE: WE WERE SPEAKING WITH STEPHEN BARKER OF JP MORGAN PRIVATE BANK ABOUT THE LATEST OUTLOOK, AND HE TALKED ABOUT THE GAPS BETWEEN WHAT WE ARE SEEING IN THE ECONOMY AND WHAT WE ARE SEEING IN THE MARKETS. WE HAVE HEARD THIS FROM A LOT OF FOLKS, THAT THAT GAP HAS WIDENED. THERE HAS ALWAYS BEEN A GAP, BUT IT HAS WIDENED. I'M CURIOUS IF THAT WORRIES YOU AT ALL IN TERMS OF BEING ABLE TO DEFINE WHAT MOVES THE MARKET IN EITHER DIRECTION. TONY: AS YOU POINT OUT, IT IS PRETTY TYPICAL THAT THE ECONOMY AND THE MARKET DON'T MOVE TOGETHER. WITH THIS OFFER ECONOMY, IT IS NOT WEAK, BUT SOFTER ECONOMY, WE ARE SEEING LOWER RATES. 10-YEAR TREASURY, YIELD HAS FALLEN FROM 4% PERCENT BEGINNING OF THE YEAR --4.6% BEGINNING OF THE OBIT THAT IS POSITIVE, THAT GIVES BOOST DEVALUATIONS. WE ARE SEEING--THAT GIVES BOOST TO VALUATIONS. WE ARE SEEING STRONG EARNINGS. EARNINGS WERE UP 11% YEAR-OVER-YEAR. THAT IS NOTHING TO SNEEZE AT. OF COURSE EXPECTATIONS FOR THIRD QUARTER THAT BULLISH, BUT THE BAR IS PRETTY LOW. WE WILL BEAT EARNINGS PRETTY NICELY AND END UP WITH 10%, 11% EARNINGS GROWTH ONCE AGAIN. THOSE ARE THE THINGS THAT ARE DRIVING THE MARKET.
KATIE: I GUESS WHEN IT COMES TO EARNINGS, THE EXPECTATIONS LOOK PRETTY GOOD RIGHT NOW. THINGS HAVE BEEN PRETTY SOLID. HOW BROAD-BASED ARE WE TALKING ABOUT? IT FEELS LIKE YOU DISSECT ANYTHING, PEEL BACK ENOUGH LAYERS, AND TECH IS DRIVING EVERYTHING. IS THAT EXPECTED TO BE THE CASE IN THIS LEARNING CYCLE AS WELL? TONY: OBVIOUSLY TECH IS A BIG OPPORTUNITY. BUT THAT DOESN'T MEAN THERE AREN'T OPPORTUNITIES BEYOND THAT. I SEE OPPORTUNITIES IN HEALTH CARE, I SEE OPPORTUNITIES AND FINANCIALS, I SEE OPPORTUNITIES IN THE HOUSING MARKET. I AM SEEING A REALLY BROAD BASE OF OPPORTUNITIES BEYOND THE MAG 7.
KATIE: I WANT TO TALK ABOUT TECH A LITTLE BIT MORE. EVEN THOUGH THERE ARE ALL THOSE OPPORTUNITIES, I CONVERSATION OVER THE PAST WEEK, TWO WEEKS, IS YOUR STRENUOUS SEE THE RELATIONSHIP BETWEEN THE BIG TECH COMPANIES AND HOW THEY TREAT THE DEBT MARKET CHANGE. THERE IS MORE DEBT TIED TO AI THEN THERE IS TO FINANCIALS, WHICH IS PRETTY STUNNING AND A SIGN OF THE TIMES. I WONDER AS WE SEE AMBITIONS EXPAND AT SOME OF THESE TECH BUD COMPANIES AND WE SEE THEM TAP THE DEBT MARKETS TO FUND THAT, DOES THAT CHANGE THE NATURE OF INVESTING IN THESE TECH NAMES? TONY: WELL, I'M A BIG FAN OF PLAYING IT REASONABLY SAFE, I'LL CALL IT. A LOT OF THINGS WHICH DISTINGUISH WHAT IS GOING ON OUT VERSUS THE TECH BUBBLE THAT WE HAD IN 2000 THE TECH BUBBLE IN 2000, THE NASDAQ WAS UP 90% -PLUS TWO YEARS IN A ROW, VALUATIONS WERE OFF THE CHARTS. I COULD GIVE YOU A WHOLE LIST OF COMPANIES TRADING 100 TIMES EARNINGS, CISCO, QUALCOMM, ETC., ETC. THAT IS NOT WHAT WE HAVE TODAY WITH THE MEGA CAPS AI COMPANIES. THEY ARE TRADING 20, 25, 30 TIMES NEXT 12 MONTHS EARNINGS, VERY MODEST COMPARED TO WHAT WE SAW IN THE TECH BUBBLE. TECH BUBBLE, AT THE END OF IT YOU HAD THE FED TIGHTENING. NOW WE HAVE THE FED LOOSENING. ONE OF THE THINGS I LIKE ABOUT THE SITUATION NOW IS THE FREE CASH FLOW, THE BIG SPENDERS FOR THE MOST PART SPENDING OUT OF FREE CASH FLOW, NOT BORROWING MONEY. I THINK IT IS. TO STICK WITH THE COMPANIES FUNDING INVESTMENTS INSTEAD OF BIG BORROWING COMMITMENTS. THERE IS PLENTY OF UPSIDE THROUGH AI, PLAY AT THE SAFEWAY.
ROMAINE: AND YOU WORRY ABOUT THE INVESTMENT AND LACK OF RETURN ON IT? TONY: IT IS CERTAINLY SOMETHING WE HAVE TO WATCH, BUT WE ARE HEARING COMPANIES START TO GO FROM R&D STAGE WITH AI TO IMPLEMENTATION. I THINK WE HAD A JAMIE DIMON LAST WEEK SPEAKING ABOUT HOW THE COST SAVINGS ROUGHLY EQUAL THE INVESTMENT HE IS MAKING AN AI. THAT IS A POWERFUL STATEMENT. ONE-YEAR PAYBACK? THAT IS TREMENDOUS. WE ARE GOING TO INCREASINGLY SEE THAT KIND OF RHETORIC COMING OUT OF COMPANIES. THE RETURNS ARE COMING. SOMETHING WE HAVE TO WATCH.
ROMAINE: WE HAVE ABOUT A MINUTE LEFT, BUT I'M CURIOUS ABOUT THE IPO PIPELINE AND THE OPENING OF PUBLIC MARKETS TO THIS HORDE OF PRIVATE COMPANIES WITH LARGE VALUATIONS AND IN SOME CASES RELATIVELY GOOD FUNDAMENTALS. DO YOU THINK WE ARE GOING TO SEE A REAL MARCH IN THE PUBLIC MARKETS FROM SOME OF THESE PRIVATE COMPANIES? TONY: OH, I THINK THE CAPITAL MARKETS -- WE SAW FROM REPORTED EARNINGS THEY ARE QUITE STRONG, WE KNEW THAT. THEY WILL CONTINUE TO BE STRONG. THERE ARE A LOT OF COMPANIES WAITING TO TAP THE PUBLIC MARKETS. SOME WILL BE VERY ATTRACTIVE, SOME NOT SO ATTRACTIVE, AND THAT IS THE JOB OF US AS INVESTORS TO SORT THROUGH THAT.
ROMAINE: TONY, ALWAYS GOOD TO HAVE YOU. TONY DESPIRITO, GLOBAL CIO FUNDAMENTAL EQUITIES AT BLACKROCK, COUNTING US DOWN TO THE CLOSING BELL. STOCKS NEW SESSION HIGHS, BUT THIS IS A PRETTY BROAD-BASED RALLY. TECH IS OUT LED LARGELY BY THE BIG UPSWING BY APPLE ON THE DAY. A LOT OF OTHER FOLKS PARTICIPATING AS WELL. KATIE: ABSOLUTELY. LOOKING AT THE S&P 500, MORE THAN 400 NAMES IN THE GREEN. A LOT OF PARTICIPATION, EVEN THOUGH YOU HAVE VOLUME A TOUCH LOWER. WE ARE GETTING INTO THE EXCITING STUFF THE NEXT COUPLE DAYS. ROMAINE: ABSOLUTELY. A LOT OF EARNINGS AND POTENTIAL BIG GEOPOLITICAL ISSUES THAT COULD BE SORTED OUT. A FULL BREAKDOWN OF THE MARKET ACTION AND A PUSH AHEAD TO WHAT COMES NEXT, THAT STARTS NOW WITHOUT GLOBAL SIMULCAST.-- WITHOUT GLOBAL SIMULCAST. >> "THE CLOSING BELL," BLOOMBERG'S COMPREHENSIVE CROSS-PLATFORM COVERAGE OF THE MARKET CLOSE, STARTS RIGHT NOW. ROMAINE: AND RIGHT NOW WE ARE TWO MINUTES AWAY FROM THE END OF THE TRADING DAY. ROMAINE BOSTICK WITH KATIE GREIFELD TAKING YOU THROUGH TO THE CLOSING BELL WITH THE GLOBAL SIMULCAST. WE ARE JOINED BY CAROL MASSAR AND THE RADIO BOOTH, TIM STENOVEC BY HER SIDE. WELCOME TO OUR AUDIENCES ACROSS ALL OF OUR BLOOMBERG PLATFORMS ON THIS MONDAY AFTERNOON, WITH STOCKS NEW SESSION HIGHS. CAROL: I JUST WANT TO KNOW WHERE ALL OF YOU GUYS WERE THIS WEEKEND, BECAUSE TIM WANTED TO KNOW WHERE I WAS THIS WEEKEND. I WAS NOT IN PARIS. WERE ANY OF YOU IN PARIS? KATIE: NO. I DON'T KNOW WHERE ROMAINE WAS, BUT I CERTAINLY WASN'T. TIM: CAN YOU IMAGINE ONE OF THESE TWO SHOWING UP WEARING THE JEWELS? KATIE: THERE WAS A GORGEOUS EMERALD NECKLACE THAT WAS STOLEN. CAROL: THIS STORY IS AMAZING! KATIE: SEVEN MINUTES, YOU CAN DO ANYTHING IN THAT AMOUNT OF TIME. CAROL: I THINK IT'S AN AMAZING STORY. ROMAINE HASN'T SAID ANYTHING, SO I'M A LITTLE SUSPICIOUS. ROMAINE: FIRST RULE OF JEWEL HEIST CLUB IS DON'T TALK ABOUT THE JEWEL HEIST CLUB. [LAUGHTER] CAROL: SMALL CAPS ARE UP ALMOST 2%. TIM: WHAT HAPPENS WHEN WE HEAR FROM ALL OF THESE COMPANIES? THIS WEEK WE WILL HEAR FROM GENERAL MOTORS AND FORD, TEXAS DOES THE CHON --TONE CHANGED AFTER TODAY? KATIE: AND WHAT ABOUT ZION AND WHAT THE C-SUITE HAS TO SAY? ROMAIN: EARNING EXPECTATIONS HAVE COME UP OVER THE LAST FEW WEEKS. WHEN YOU LOOK AT THE EARNINGS REVISIONS TO THE UPSIDE, SOME WOULD SAY THIS IS ONE OF THE STRONGEST UPSIDE REVISIONS IN SEVERAL YEARS. BEING RAISED A LITTLE BIT HERE. SO FAR, THE BEADS WE HAVE SEEN IN THIS RELATIVELY SHORT EARNINGS SEASON ARE ENCOURAGING. TAKING A LOOK AT THE NASDAQ COMPOSITE OF 300 POINTS. THAT IS GOING TO BE ENOUGH POTENTIALLY FOR A RECORD HIGH. FOR ABOUT 1.4% ON THE DAY. THE DOW JONES ADDING MORE THAN 500 POINTS AT 1.12%. THE RUSSELL 2000 ACTUALLY LEADING THE ACTION. 48 POINT UPSWING FOR THE RUSSELL 2000. CAROL: SOME NICE OUTPERFORMANCE. BACK TO THE BIG CAPS. THE RALLY PRETTY BROAD-BASED. 414 NAMES IN THE S&P TO THE UPSIDE TODAY. KATIE: THE CIRCLE BROADLY SAYS THE SAME THING. JUST TWO IN THE RED. COMMUNICATION SERVICES, MATERIALS, INDUSTRIALS. THOSE ARE TYPICALLY DEFENSIVE SECTORS. ROMAINE: I JUST WANT TO POINT OUT THE NASDAQ DID CLOSE AT A RECORD HIGH, NOT THE COMPOSITE. CAROL: GOOD TO KNOW. A GOOD REASON WHY WE SAW THE COMPOSITE MOVING UP MONDAY. APPLE SHARES FINISHING OFF THE HIGHS OF THE SESSION. UPGRADING FROM BUY TO HOLD. CITING POSITIVE DEMAND. WE ARE TALKING ABOUT THE IPHONE 17 SERIES OFF TO A FASTER START THAN USUAL. GOT TO MENTION CLEVELAND CLIFFS. THE COMPANY SAID IT DISCOVERED TWO SITES WITH POTENTIAL TO PRODUCE RARE EARTH MINERALS. ONE IN MICHIGAN, ANOTHER IN MINNESOTA AND IS EVALUATING RATHER WHERE EARTH -- RARE EARTH MINERALS CAN BE EXTRACTED FROM THOSE MINDS. WE SEE THAT HAVING MOMENTUM. WE ARE WAITING FOR ZIONS TO REPORT EARNINGS. HIGHER AFTER A WILD WEEK ON CONCERNS ABOUT CREDIT. WE WILL WAIT FOR AN UPDATE AS IT GETS READY TO REPORT. THOSE RARE EARTH AND CRITICAL MINERAL STOCKS ON THE MOVE. AFTER WILLIAM BLAIR CAME OUT AND TALKED ABOUT THESE COMPANIES INITIATING. THAT STOCK WAS UP 19% IN TODAY'S SESSION. THAT WAS A BIG MOVE HIGHER, ESPECIALLY FOR THAT COMPANY THAT HAS DOUBLED SO FAR THIS YEAR. TIM: STOCKS IN THE RED. FELL FOR HIS SECOND DAY IN A ROW. DOWN CLOSE TO 5% TODAY. NO REAL CATALYST FOR THIS MOVE. STILL UP MORE THAN 66% THIS YEAR. SHARES FELL AFTER THE NEW YORK POST REPORTED THAT STATE REGULATORS HAVE REACHED OUT TO MULTIPLE SHORT-SELLERS FOR THE MOBILE ADVERTISING COMPANY. THE STATES INCLUDE DELAWARE, OREGON, AND CONNECTICUT. THE SEC HAS BEEN PROBING THEIR DATA COLLECTION. THE JURY FOUND BNP PARIBAS WAS LIABLE FOR ITS ROLE IN THE GENOCIDE IN SUDAN, GIVING $21 MILLION TO THREE PLAINTIFFS. THEY WILL HAVE TO AGREE TO EXPENSIVE SETTLEMENTS WITH A POSSIBLE SETTLEMENT IS MUCH AS $10 BILLION. THE VERDICT IS SPECIFIC TO THESE THREE PLAINTIFFS AND ANY ATTEMPT TO EXTRAPOLATE IS WRONG. THE BANK IN PART SAID IN A STATEMENT. ROMAINE: LET'S TAKE A LOOK AT YIELDS. PRICES HIGHER AT THE LONG END OF THE CURVE. CAROL: GOOD STUFF. AS WE AWAIT ZION, THIS STORY HAS TO DO WITH WOMEN FOCUSED RESORTS BECOMING THE NEXT BIDDING WELLNESS TREND. CANYON RANCH IS GETTING READY TO DEVELOP ITS THIRD LOCATION. TIM: IT IS A 600 ACRE RANCH CLOSE TO AUSTIN, TEXAS. THE WELLNESS INDUSTRY HAS UNDERSERVED WOMEN. COMPANIES ARE SEEING AN OPPORTUNITY FOR THAT AND THEY ARE COMING UP WITH THESE TARGETED RETREATS FOCUSING ON WOMEN AND ATTRACTING WOMEN TO THESE PLACES. KATIE: I WENT THERE WITH MY MOM AND MY AUNT WHEN I WAS A PRETEEN. CAROL: IS IT OUTSIDE THE BERKSHIRES? KATIE: IT IS ABOUT RIGHT. TIM: THE MAJORITY OF PEOPLE WHO GO TO THEM ARE WOMEN ALREADY. CAROL: IT IS ALSO FOR WOMEN IN DIFFERENT STAGES OF THEIR LIFE. ROMAINE: SPEAKING OF WELLNESS, I WAS KEEPING AN EYE ON THE WANING INTEREST WE ARE SEEING IN LOTS OF WELLNESS PRODUCTS IN THE FOOD SPACE WHEN IT COMES TO THESE ALTERNATIVE MOOD SPACES. NOT MILK, O.A.T. MILK. THE CEO VOTE -- OF OATLY SAID THE DROP IN DEMAND HE IS BLAMING ON THE LACK OF DISCUSSION ABOUT CLIMATE CHANGE AND OTHER THINGS HELPED CREATE THIS INDUSTRY IN THE FIRST PLACE. KATIE: AT LEAST WHEN IT CAME TO ALMOND MILK, THEY GOT A LOT OF BAD PRESS FOR JUST HOW WATER INTENSIVE ALMONDS WERE. OAT MAY BE A DIFFERENT STORY. IT JUST FEELS LIKE ONE OF THOSE FADS WE PUT BEHIND US. IF YOU ARE A CEO AT ONE OF THESE COMPANIES THAT SOARED SO MUCH. CAROL: SO PEOPLE ARE FED UP WITH CLIMATE TOP? ROMAINE: THE IDEA IS WE ARE NOT PUTTING AS MUCH FOCUS ON IT. THE ROYAL WE. THE ONE -- ONE OF THE MAIN SELLING POINTS WAS NOT JUST NUTRITION BUT WHAT WE WERE DRINKING WAS BETTER FOR THE ENVIRONMENT. BUT WHO KNOWS? TIM: ANECDOTALLY SPEAKING I TRIED ALL THIS STUFF BACK IN THE EARLY 20 20'S, THE BEYOND MEAT AND THE IMPOSSIBLE. A LOT OF PEOPLE ARE LIKE, WAIT A SECOND, THIS IS KIND OF MOVING AWAY FROM SINGLE INGREDIENT THINGS, RIGHT? ROMAINE: AS HE STARTED TO LOOK AT THE INGREDIENTS, HOW IS THIS ACTUALLY BETTER FOR ME THAN EATING SALAD OR SOMETHING A LITTLE BIT PURE? KATIE: I WILL SAY THE ONE THING I APPRECIATE ABOUT THESE MILKS IS THAT YOU DON'T HAVE TO REFRIGERATE THEM, SO THAT IS COOL. TIM: BUT DON'T TAKE THAT ADVICE, RIGHT? ROMAINE: YOU DON'T HAVE TO REFRIGERATE A COW. THEY LIVE OUTSIDE. KATIE: BUT YOU SHOULD REFRIGERATE COW MILK. CAROL: THIS IS WHY WE SHOULD JUST DRINK TEQUILA. I'M PUTTING THAT OUT THERE -- JUST PUTTING THAT OUT THERE. NOT FOR BREAKFAST, THOUGH. WE WILL SEE YOU AGAIN SAME TIME, SAME PLACE TOMORROW. ROMAINE: AS WE AWAIT THOSE EARNINGS OUT OF ZION, WE KEEP A LOOK AT THE BROADER EARNINGS. IT ISABEL IS GOING TO BE JOINING US, THE BMP PERRY BACH GROUP CHIEF ECONOMIST. ♪ >> THE COUNTDOWN IS ON. KATIE: WELCOME TO THE CLOSE. ROMAINE: THE NASDAQ CLOSING AT A RECORD HIGH. THE S&P CAME CLOSE AS WELL. A STRONG BID ON THE PHILADELPHIA SEMICONDUCTOR INDUSTRY. AS WE AWAIT THE EARNINGS TODAY. ROMAINE: LET'S TAKE A LOOK AT THE QUICK MOVE AT THE BIG MOVERS IN THE EQUITY MARKET. UP ABOUT 4% ON THE DAY, APPLE. NVIDIA DOWN SLIGHTLY. I HIGHLIGHT THAT BECAUSE EVEN WITH THE SLIGHT DECLINE DOWN 60% YEAR TO DATE. ROMAINE: 100 27%? KATIE: IT SEEMS LIKE IT IS -- IT HAS CAUGHT THE EYE OF SOME RETAIL TRADERS. EARNINGS SEASON IS WELL UNDERWAY. 85% OF COMPANIES IN THE S&P 500 REPORTING BEATING EXPECTATIONS. THIS IS THE LAST OF THE REGIONAL BANKS STARTING TO TRIPLE IN INCLUDING ZIONS WHICH JUST LAST WEEK SAID IT WOULD RECORD A $60 MILLION PROVISION IN A CHARGE-OFF OF $50 MILLION FUELING CONCERN THERE ARE MORE CRACKS EMERGING. ROMAINE: HERMAN CHAN JOINS US IN STUDIO. I KNOW YOU HAVEN'T HAD A LONG CHANCE TO LOOK THROUGH THE NUMBERS, BUT AS EXPECTED WE DID SEE CHARGE OUTS COMING ABOVE EXPECTED. NET INTEREST MARGIN. THE PROVISION FOR CREDIT LOSSES, ARE THEY IN LINE WITH WHAT YOU WERE THINKING OF? >> THEY WERE. THAT BEING SAID THEY TALKED ABOUT NET CHARGE BEING OUTSIDE, NO ISSUES FROM CREDIT. KATIE: YOU SEE THE REACTION AFTER HOURS. ZIONS IS UP ABOUT 2.5%. THE NUMBERS LOOK PRETTY GOOD. HERMAN: THE MESSAGE WILL BE ABOUT THREE ASSURING THE MARKET. HOW THEY SELECT CLIENTS AND MONITOR THEIR CREDIT. THEY HAVE THIS ISSUE AND THEY ONLY FOUND OUT ABOUT IT AFTER WESTERN ALLIANCE SUED. CREDIT MONITORING IN GENERAL. ROMAINE: THAT GETS TO A BROADER POINT AS TO WHAT DO DILIGENCE HAS BEEN OR MAY BE NOT BEEN. THERE ARE BROADER QUESTIONS BEING RAISED ABOUT WHETHER WE DID SEE A DROP IN PEOPLE DROPPING THEIR GUARD OR MORE IN PURSUING THESE DEALS. HERMAN: I THINK THAT IS PROBABLY A COMMON THREAD WITH ZIONS AND WESTERN ALLIANCES. HOW YOU DO WITH YOUR CUSTOMERS AND ARE YOU CREATING AN INCENTIVE. ROMAINE: ARE YOU WORRIED ABOUT THAT? THERE WERE A COUPLE OF FOLKS IN THE PRIVATE CAPITAL SPACE THAT APPARENTLY SAW THIS AND GOT OUT. WHY CAN THEY SUSS IT OUT AND NOT THE BANKS? HERMAN: THAT IS A GOOD QUESTION AND WHEN MARKETS ARE TRYING TO FIGURE OUT. UNDERWRITING HAS NOT BEEN THAT LAX. WE ARE SEEING THIS OFF. KATIE: JUST QUICKLY SPEAKING OF THE INDUSTRY, IT IS NOT JUST ZIONS, IT IS WESTERN ALLIANCE AS WELL. SHARES MOVING A LITTLE BIT HIGHER AS WE PARSE THROUGH THESE RESULTS. IS THERE ANYTHING WE CAN EXTRAPOLATE FROM ZIONS THAT MIGHT PORTEND WHAT WE COULD HEAR FROM WESTERN ALLIANCE? HERMAN: THEY HAVEN'T REALLY SAID THEY WOULD TAKE THE CHARGE OUTS. RELATED TO THEIR EXPOSURES TO THIS LOAN. HERMAN CHAN A BLOOMBERG INTELLIGENCE PARSING THROUGH THOSE ZIONS RETURNS. ZIONS UP ABOUT 2.5%. A LOT OF FOCUS WILL BE ON HOW THEY ARE SELECTING AND DOING DUE DILIGENCE. ROMAINE: THIS IS VERY CLEARLY A QUESTION.
WHY IT WASN'T ACTED ON.
KATIE: COMING UP NEXT, INVESTORS AND THE FED FLYING BLIND INTO FRIDAY'S CPI PRINT. BNP PARIBAS CHIEF ECONOMIST ISABELLE MATEOS Y LAGO JOINS US NEXT TO CUT THROUGH THE NOISE. THIS IS THE CLOSE ON BLOOMBERG.
♪
ROMAINE: WE ARE LOOKING AT THE CPI PRINT. THIS STEADY MONTHLY FIGURE ANALYSTS SAY IT IS A MURKIER PICTURE. ISABELLE MATEOS Y LAGO JOINS US RIGHT NOW, CHIEF ECONOMIST OVER AT BNP PARIBAS TO TALK A LITTLE BIT MORE ABOUT THIS. WE ARE TALKING ABOUT INFLATION THAT HAS BEEN ABOUT THE 2% TARGET FOR SOMETHING LIKE THREE YEARS NOW. DO YOU SEE ANY MEANINGFUL ATTEMPTS FOR IT TO COME DOWN?
ISABELLE: THANK YOU FOR HAVING ME. I THINK THE QUESTION IS YES, IT WILL COME BACK DOWN TO ITS TARGET. THAT IS WHAT MARKETS BELIEVE. THAT IS LIKE INFLATION EXPECTATIONS HAVE NOT LIFTED IN LINE, BUT ANY TIME? PROBABLY NOT. THE ONLY WAY TO GO IS UP. WE SEE INFLATION CONTINUING TO ACCELERATE OVER THE NEXT SIX MONTHS AND PEEKING AROUND 3.8% ASSUMING THE FED RUNS BY MONETARY POLICY. THEN INFLATION WILL START DECLINING.
ROMAINE: DO YOU THINK MONETARY POLICY IN THE U.S. IS IN CONFLICT WITH WHAT WE ARE SEEING IN OF THE FISCAL SIDE?
ISABELLE: SO THE QUESTION IN FRONT OF THE FED IS THE FED HAS A DUAL MANDATE. IF YOU HAD A SINGLE MANDATE, IT PROBABLY WOULD NOT EVEN THINK OF EASING. ON THAT GROUND, THERE ARE REASONS TO BE MORE CAUTIOUS AND TO EVEN THINK MAYBE WE SHOULDN'T BE RUNNING RESTRICTIVE MONETARY POLICY AT ALL. IT IS A BALANCING ACT AND I THINK THAT IS WHY THEY WILL PROCEED VERY CONSCIOUSLY. THAT IS WHAT WE HEARD FROM FOMC MEMBERS AROUND TOWN LAST WEEK. I THINK ALL OF THEM REALLY EMPHASIZED THE NEED TO KEEP THE BALANCE ON BOTH SIDES OF THE MANDATE. THEY HAVE TO BE REALLY CAREFUL THAT THERE ARE NO SECOND-ROUND EFFECTS.
KATIE: IT IS REALLY INTERESTING THAT LISTENING TO THE FOMC MATTERS -- MEMBERS SPEAK, SOMEONE WAS MAKING THE POINT TO ME THAT FOR THE FIRST TIME IN WHAT FEELS LIKE A LONG TIME, YOU HAVE REALLY OVERT HAWKISHNESS AND DOVISHNESS ON EITHER SIDE OF THE BAIT. IN THE PANDEMIC IT FELT LIKE THE FOMC WAS MARCHING AS ONE, THE PUBLIC FACING SPEECHES CAME FROM THE SAME PERSPECTIVE. YOU HAVE A LOT OF DISPERSION NOW WHEN IT COMES TO VIEWS.
ISABELLE: THERE IS ONE FED GOVERNOR WHO IS OUTSPOKEN IN SAYING THERE SHOULD BE FRONT LOADING OF RATE CUTS IN THE CYCLE. I DIDN'T HEAR HIM SAY HE DOESN'T CARE ABOUT INFLATION BUT HE THINKS GIVEN THE CIRCUMSTANCES THAT WOULD BE THE APPROPRIATE THING TO DO. ALTOGETHER SEVEN VERY CAUTIOUS IN EMPHASIZING THE RISKS TO BOTH SIDES OF THE MANDATE AND THEY MAY HAVE A SLIGHTLY DIFFERENT APPROACH. BUT ACTUALLY I FIND THAT IN TERMS OF THEIR FOCUS ON MANAGING BOTH SIDES OF THE MANDATE, THERE ISN'T THAT MUCH CAP.
KATIE: FAIRPOINT AND WE HAVE SPOKEN ABOUT THE INFLATION SIDE OF THE MANDATE. LET'S TALK IN MORE DETAIL ABOUT THE LABOR SIDE OF THINGS. WE HAVE SEEN INDICATIONS THAT THIS LABOR MARKET EVEN WITHOUT THE TOOL THAT IS U.S. GOVERNMENT OFFICIAL DATA. I WONDER IF -- WHEN IT COMES TO THREADING THAT NEEDLE, HOW WORRIED ARE YOU ABOUT THE LABOR MARKET SIDE OF THINGS?
ISABELLE: NOT VERY. THE LABOR MARKET HAS BEEN MODERATING VERSUS WEAKENING. AS YOU WELL KNOW, THE UNEMPLOYMENT RATE REMAINS CLOSE TO HISTORICAL LOWS. SOME HAVE SAID YOU CAN'T RELY SINGLE-MINDEDLY ON THE UNEMPLOYMENT RATE AND THAT IS RIGHT. ALL OF THESE VARIABLES ARE SORT OF IN LINE WITH THEIR LONG-TERM AVERAGE. IT IS A LABOR MARKET THAT IF THE ECONOMY WERE TO BE HIT BY A SHOCK, YOU WOULD SEE A RAPID DETERIORATION AND THE FED CLEARLY DOES NOT WANT TO TAKE THAT RISK. THAT IS WHY ON BALANCE, THEY WANT TO PLAY IT SAFE AND EASE A LITTLE BIT. YOU HAVE TO LOOK AT THE OVERALL ECONOMY. YOU HAVE AN ECONOMY RUNNING AT 3.8%. THAT IS NOT SCREAMING FOR A RATE CUT. YOU MENTIONED EARLIER THE K SHAPED ECONOMY. THERE IS CLEARLY PART OF THE POPULATION THAT IS CUTTING ANOTHER FACT THAT THEY CANNOT CONSUME MORE. THE PICTURES VERY LOPSIDED. ON NORMAL BUSINESS CYCLE INVESTMENT AND THEN RESIDENTIAL STRUCTURES. THIS IS A SIGN OF AN ECONOMY THAT HAS GREAT DYNAMISM. I THINK IT MAKES SENSE IN THAT CONTEXT.
ROMAINE: I'M CURIOUS ABOUT THE DISPARITY WE ARE ABOUT TO SEE AND WHAT OTHER CENTRAL BANKS ARE GOING TO DO OR MAY HAVE ALREADY DONE. YOU HAVE OTHERS SAYING WE ARE ABOUT TO START CUTTING RATES.
ISABELLE: THE MOST IMPORTANT THING IS THAT EACH CENTRAL BANK RUNS MONETARY POLICY THAT IS APPROPRIATE FOR THEIR CIRCUMSTANCES. IF THEY DON'T, YOU HAVE BIGGER PROBLEMS. YOU WILL SEE AN IMPACT ON THINGS LIKE EXCHANGE RATES. YOU WILL HAVE AN ECB THAT IS VERY LIKELY NOT CUTTING. YOU WILL HAVE A FED THAT WILL PROBABLY DO MULTIPLE CUTS. COULD IT IMPACT THE DOLLAR NEGATIVELY? PROBABLY. BUT THAT IS NOT SOMETHING TO WORRY ABOUT.
KATIE: AS WE LOOK INTO 2026. AS WE LOOK INTO THE NEXT YEAR IS THAT SOMETHING THAT CONCERNS YOU AS WELL?
ISABELLE: IT IS INTERESTING THAT YOU MAKE THIS A 2026 ISSUE. THANKS TO THE TIMING ANNOUNCED BY THE SUPREME COURT NOTHING IS GOING TO HAPPEN UNTIL THEN WHICH IS FRANKLY VERY HELPFUL. THERE IS MORE TIME TO THINK THROUGH THE IMPLICATIONS OF ONE SCENARIO OR ANOTHER. YES, THAT IF SHE WAS GOING TO BE VERY IMPORTANT AND WHAT I WANT TO STRESS IS EVERYONE IS CALLING IT THE ISSUE OF CENTRAL-BANK INDEPENDENCE. INDEPENDENCE I DON'T THINK IS REALLY THE QUESTION. THE QUESTION IS THE CREDIBILITY. SO FAR, THERE IS NO REASON TO DOUBT THE FED'S CREDIBILITY BUT THAT NEEDS TO BE PRESERVED.
KATIE: UP AGAINST THE CLOCK, GREAT TO HAVE YOU BACK. CHIEF ECONOMIST AT BNP PARIBAS, ISABELLE MATEOS Y LAGO.
♪
KATIE: CONFIDENCE AMONG U.S. HOMEBUILDERS MOVING BY MORE THAN A MONTH, OUR NEXT GUEST SAYS THEY ARE HOVERING NEAR A ONE YEAR LOW. THAT GUEST JOINS US NOW, THE FOUNDER AND CEO. GREAT TO HAVE YOU ON SET WITH US. SO SOME RELIEF FOR BUYERS. IS THAT ENOUGH TO SAY THIS IS A BUYERS MARKET?
>> NO ONE WANTS A LOT OF RELIEF BECAUSE THEY DON'T COME WITH A LOT OF RELIEF. WE SHOULD HAVE ANOTHER FED RATE CUT IN ABOUT A WEEK OR SO THAT WILL SLOWLY PUT PRESSURE ON MORTGAGE PRICES. BUT I DON'T KNOW BECAUSE WE HAVE A GOVERNMENT SHUTDOWN RIGHT NOW. NO ONE KNOWS WHAT IS HAPPENING ON EMPLOYMENT. THAT IS A MOVING MARKET. IF WE DO GET MEANINGFULLY LOWER, HOW MANY BUYERS ARE LINED UP ON THE OTHER SIDE OF THOSE RATES READY TO JUMP IN?
RYAN: ABOUT 4 MILLION?
KATIE: YEAH?
RYAN: HISTORICALLY WHERE WE WERE , WE SHOULD HAVE AT LEAST 6 MILLION, IF NOT MORE HOME SALES NATIONALLY EVERY YEAR. YOU ARE STARTING TO SEE SOME OF THAT WEAKNESS. PRICING CONTINUOUSLY CREEPS UP SO WE NEED PRICING TO COME DOWN FOR MORE AFFORDABILITY. IT HASN'T HAPPENED IN QUITE SOME TIME. A LOT OF THINGS HAVE TO COME TOGETHER SO THE MARKET CAN OPEN BACKUP.
ROMAINE: IF WE DO SEE THE MARKET OPEN UP, WILL IT BE DESIGNED -- WILL IT BE ACROSS THE NATION?
RYAN: THE LUXURY MARKET IS ALWAYS THERE. PEOPLE LOOK AT IT AS AN OPPORTUNITY FOR OTHER TYPES OF INVESTMENT. WHAT WE REALLY WANT IS FOR THE ACTUAL AMERICAN TO BALANCE THE MONTHLY COST FROM A RENTAL TO A HOME. IT IS CHEAPER TO RENT IN MOST MARKETS THAN IT IS TO BUY. THE MARKET STARTER PRICE IS ABOUT A MILLION DOLLARS IN MOST MARKETS.
ROMAINE: THE IDEA OF USING REAL ESTATE AS AN INVESTMENT, ARE YOU SEEING MORE COMPETITION? LIKE THE IDEA THAT REAL ESTATE WAS THE TRIED AND TRUE REAL ASSET. ARE YOU SEEING ANY MEANINGFUL COMPETITION FOR REAL ESTATE?
RYAN: YES, I HAD BROWN HAIR THIS MORNING. [LAUGHTER] BETWEEN ALL OF OUR PRIME MARKETS WE HAVE OUR TV SHOW, OWNING MANHATTAN ON NETFLIX. THERE IS A DEAL ON THAT SHOW FOR $60 MILLION PROPERTY ON THE WEST SIDE OF NEW YORK, RESALE. THOSE BUYERS WANT WHAT THEY WANT. WE JUST PUT A 70 MILLION PROPERTY IN PALM BEACH, GET ACROSS THE STREET FOR A HOME WORTH MAYBE 10 TIMES LESS, IT IS TAKING TIME TO FIND MOVEMENT. AT THE TOP END OF THE MARKET THERE IS VERY LITTLE INVENTORY.
KATIE: THAT IS CERTAINLY A STRATOSPHERE VERY FEW CAN RELATE TO. LET ME BRING IT TO SOMETHING MARCH -- TANGIBLE. I'M LOOKING AT HOBOKEN.
ROMAINE: EVERY DAY SHE TALKS ABOUT IT.
KATIE: EVERY PLACE, EVERY PROPERTY GOES INTO A BIDDING WAR, EVERYONE IS A CASH BUYER. SOME OF THE PRESSURE PEOPLE FEEL AS WE ARE HEADING INTO THE HOLIDAYS AND YOU FALL INTO THIS GAME WHEN YOU GO INTO THESE OPEN HOUSES THAT HOW DO I KNOW I WON'T SEE SOMETHING BETTER LISTED IN JANUARY OR FEBRUARY? WHEN IT COMES TO SOME OF THESE REALLY HOT MARKETS, WHAT DOES THAT EQUATION LOOK LIKE?
RYAN: HOW LONG DOES IT TAKE YOU TO ORDER DINNER?
KATIE: ABOUT 10 MINUTES.
RYAN: THAT'S A LONG TIME. YOU CAN ALWAYS WAIT FOR SOMETHING BETTER IN WHICH PLACE YOU WERE GOING TO STAY IN THE CURRENT HOME YOU ARE IN AND YOU ARE NOT GOING TO BE ABLE TO ENJOY LIFE. AT SOME POINT YOU HAVE TO GIVE. IF YOU MAKE AN OFFER THAT IS A GOOD DEAL WHERE IF YOU GET IT YOU WON'T HAVE BUYERS REMORSE, BUT IF YOU LOSE IT, YOU WON'T FEEL BAD EITHER. AND YOU MOVE FORWARD. LIFE IS SHORT. A LONG TIME AGO AND ASTEROID CAME OUT OF THE SKY AND KILLED ALL THE DINOSAURS AND THEY DON'T GET TO HAVE HOUSES IN HOBOKEN EITHER.
KATIE: THAT'S TRUE.
ROMAINE: SO ONWARD AND FORWARD. IT GETS TO THIS IDEA OF THIS IDEA THAT SELLERS ARE LOCKED IN BECAUSE THEY BOUGHT AT LOWER RATES. I HAD ONE SELLER. ULTIMATELY THE PRICE WAS THE PRICE. HE SAID I'M BASICALLY BREAKING EVEN ON THIS. IF I TAKE WHAT YOU ARE OFFERING. I WONDER WHERE THAT BALANCES ACROSS THE BOARD.
RYAN: WE HAVE THAT CONVERSATION WITH EVERYONE, EVEN WITH THE LUXURY MARKET. THERE'S A CHANCE RIGHT NOW THAT YOU MIGHT BREAK EVEN OR TAKE A LOSS BUT IT IS NOT ABOUT -- NOT ALL ABOUT THE SINGULAR ASSET. LET'S LOOK AT YOUR PORTFOLIO. YOU HAVE GAINED WEALTH OVER HERE. YOU THINK ABOUT THE ENTIRE PACKAGE OF YOUR LIFE. IF THE MARKET GOES THE OPPOSITE WAY, THE OFFER YOU HAVE ON THE TABLE IS A PREMIUM TO WHAT YOU COULD GET SIX MONTHS FROM NOW. YOU CAN ROLL THE DICE IF YOU WANT TO. PEOPLE SIT AND COUNT PENNIES.
ROMAINE: YOU SHOULD GET YOUR OWN SHOW.
RYAN: OWNING MANHATTAN SEASON 2 IS THE GREATEST SHOW.
ROMAINE: THE STAR OF NETFLIX'S OWNING MANHATTAN. SPEAKING OF NETFLIX, HOW'S THAT FOR A SEGWAY? THEY ARE SCHEDULED TO REPORT EARNINGS TOMORROW. RIGHT NOW, WE GIVE YOU A PREVIEW WITH OUR MAN OUT IN LOS ANGELES. I DON'T KNOW IF YOU ARE A BIG FAN, YOU HAVE TO SAY YOU ARE. LET'S TALK ABOUT NETFLIX'S RESULTS.
>> THE MARKET IS LOOKING AT DOUBLE-DIGIT GAINS. THEY HAVE HAD A LOT OF REALLY POPULAR JOE'S -- SHOWS. K POP DEMON HUNTERS, SQUID GAME, OF COURSE OWNING MANHATTAN. THIS COULD BE ANOTHER KILLER QUARTER FOR THEM.
KATIE: IT'S INTERESTING. JUST THE MOAT NETFLIX IS BUILT AROUND THEMSELVES. WHEN IT COMES TO NETFLIX VERSUS THE REST OF THE COMPETITION, WHAT DOES THE COMPETITIVE LANDSCAPE CURRENTLY LOOK LIKE?
>> ONE OF THE ISSUES IS THEY ARE NOT REPORTING NEW SUBSCRIBER NUMBERS ANYMORE, JUST KIND OF THE STANDARD METRICS OF REVENUE AND PROFIT. THERE ARE FIRMS THAT ESTIMATE THEM. ANTENNA JUST CAME OUT WITH NUMBERS TODAY, CONTINUED STRONG RESULTS. ONE OF THE MOST NOTABLE THINGS IS SOMETHING CALLED THE CHURN RATE. JUST 2% AT NETFLIX VERSUS 8% OR 10% FOR SOME OF THE OTHER STREAMING SERVICES. YOU ARE SEEING THEY ARE THE TV UTILITY THAT NO ONE BOTHERS TO COME IN AND OUT OF.
ROMAINE: WE AWAIT THE RESULTS COMING IN
KATIE: LET'S TAKE A LOOK AT HOW THE MARKETS CLOSED TODAY. A LOT OF GREEN ON THE SCREEN. THE PHILADELPHIA SEMICONDUCTOR INDEX. A BIG BOUNCE BACK WHEN IT COMES TO THE REGIONAL BANKS. THE INDEX ITSELF FINISHED UP MORE THAN 2%. AND THE VIX WITH AN 18 HANDLE ON YOUR FEAR INDEX. THIS IS THE CLOSE ON BLOOMBERG.
ROMAINE: ALL RIGHT, LET'S TALK ABOUT CRUISE LINES. CRUISE TRAVEL IS SET FOR ITS FOURTH STRAIGHT RECORD YEAR OF DEMAND IN 2026 ACCORDING TO NEW REPORTS. THE INDUSTRY FINDING ITSELF IN THE MAINSTREAM AS MORE SELECTIVE CONSUMERS SEEK A BETTER BANG FOR THEIR BUCK IN LEISURE TRAVEL. OUR NEXT GUEST KNOWS MORE ABOUT IT THAN ANYONE. HE SPENT THREE DECADES AT THE HELM OF ROYAL CARIBBEAN AND HE IS NOW OUT WITH A NEW BOOK "DELIVERING THE WOW," THE CHAIRMAN AND FORMER CEO OF ROYAL CARIBBEAN RICHARD FAIN JOINS US NOW. GREAT TITLE TO YOUR BOOK. I DO WANT TO GO BACK AND START THIS CONVERSATION IN THE LATE 1990'S WHEN YOU JOIN ROYAL CARIBBEAN WHICH WAS STILL A RELATIVELY SMALL CRUISE OPERATOR. I'M CURIOUS AS TO WHAT YOU THOUGHT ABOUT WHEN YOU WALKED THROUGH THE DOORS OR WALKED INTO YOUR OFFICE AS THE CEO AND TRIED TO MAP OUT HOW TO GROW THIS BUSINESS?
RICHARD: YOU KNOW, THANK YOU FOR HAVING ME. THIS INDUSTRY HAS GROWN BY LEAPS AND BOUNDS. 35 YEARS AGO, WE WERE A SMALL, BUT SUCCESSFUL RUSE LINE, BUT CRUISING WAS A NICHE OPERATION. EVERYBODY'S VACATION EXPECTATIONS HAVE NOW COME TO INCLUDE CRUISES. WE HAVE GONE FROM BEING A REALLY SMALL OPERATION TO BEING ONE OF THE MOST VALUABLE IF NOT THE MOST VALUABLE COMPANY IN THE VACATION BUSINESS. MORE THAN ANY AIRLINE OR HOTEL, ALMOST ANYTHING YOU CAN NAME BECAUSE CRUISING OFFERS SUCH AMAZING VALUE AND TIME FOR OUR GUESTS.
ROMAINE: WHAT IS THE SUCCESS? WAS THAT LARGELY DUE TO THE WAY YOU MARKETED THE PRODUCT? OR WAS IT A LITTLE BIT MORE ORGANIC? HOW DO YOU GET THERE?
RICHARD: IT IS NOT SO MUCH THE MARKETING, WHAT WE OFFERED WAS A PRODUCT THAT APPEALED TO EVERYBODY. IT WASN'T A PRODUCT THAT APPEALED TO A SMALL PART OF THE TOTAL VACATION MARKET, MOSTLY OLD OR RETIRED PEOPLE. WE NOW HAVE SOMETHING FOR EVERYBODY. LARGE TRIPS, SMALL TRIPS, THE TRIPS ARE SPECTACULAR. IT IS REALLY DELIVERING THE WOW, I HATE TO, ACTUALLY I DON'T HATE TO USE THE TITLE OF THE BOOK, BUT WE DELIVER THE WOW TO OUR BOOK AND THE PEOPLE WHO COME BACK FROM A CRUISE VACATION DON'T JUST RAVE ABOUT IT, THEY ARE OBNOXIOUS ABOUT HOW MUCH THEY LOVE THEM.
KATIE: IT'S INTERESTING, RICHARD, YOU THINK ABOUT YOUR TENURE AT THE COMPANY, OVER THREE DECADES, YOU ARE THE CEO FROM 1998 UNTIL 2022. SOMETHING BIG HAPPENED IN 2020, THE GLOBAL PANDEMIC. I WOULD HAVE TO IMAGINE THAT WAS ONE OF THE MORE CHALLENGING PARTS OF YOUR TENURE. TUCKER LITTLE BIT ABOUT THAT TIME. IT WAS REALLY AT THE FRONT LINE OF WHAT WAS EXPECTED -- AFFECTED.
RICHARD: KATIE, THANK YOU FOR BRINGING BACK THE WORST TIME OF MY LIFE AND MAKING ME RELIVE IT. [LAUGHTER] IT WAS A TIME WHEN EVERYONE SAYS THIS WAS AN EXISTENTIAL RISK TO YOUR BUSINESS, THE LIKELIHOOD IS YOU WON'T SURVIVE. THE FOCUS HAS TO BE HOW ARE YOU GOING TO GET THROUGH THIS. WE REFUSED TO DO THAT. WE SET THE OBJECTIVE ISN'T TO GET THROUGH THIS, THERE WAS NO POINT IN GETTING THROUGH IT AS A CRIPPLED ENTITY. WE WANTED TO GET THROUGH SO THAT WE WERE STRONG AND WE EMERGED FROM THE PANDEMIC STRONG AND READY TO GROW.
KATIE: SO WHEN YOU LEFT IN 2022, YOU THINK ABOUT WHERE THE WORLD WAS AND WHAT IT FELT LIKE AND THEY WERE STILL A LOT OF DOOMSDAY PREDICTIONS THAT TRAVEL WOULD NOT RETURN TO LEVELS PRIOR TO THE PANDEMIC. THAT THINGS HAVE FUNDAMENTALLY ALTERED. AS YOU SIT HERE IN 2025 AND REFLECT ON HOW YOU FELT IN 2022, HOW CLOSE ARE THOSE DIVISIONS -- THOSE TWO VISIONS?
RICHARD: ACTUALLY, WE DID ANTICIPATE THIS. THERE WERE AN AWFUL LOT OF PEOPLE PREDICTING DOOM AND GLOOM, THE VACATION BUSINESS WOULD NEVER COME BACK BUT THOSE PEOPLE WERE NOT TALKING TO OUR GUESTS. THOSE PEOPLE WERE NOT LISTENING TO THE PUBLIC. THEY WERE DEALING WITH THEIR OWN FEARS. WE WERE DEALING WITH THE FACTS OF WHAT WE WERE OFFERING. THE PICTURES ARE SO EXCEPTIONAL. WE WERE LOOKING AT OUR FORWARD BOOKINGS. WE WERE LOOKING AT OUR GUESTS. OUR GOAL AT THE BEGINNING OF THE PANDEMIC WAS TO MAKE SURE WE WERE STRONG AND EXTRAORDINARY AND THAT IS WHAT HAPPENED. THE PASSION OF OUR PEOPLE WAS OVERWHELMING AND THEY DELIVERED A -- DELIVERED THE WOW AT A VERY GOOD PRICE AND THE RESULT WAS PREDICTABLE, THE MARKET HAS BOOMED.
ROMAINE: I'M CURIOUS AS TO THE CURRENT STATE OF THE CRUISE INDUSTRY MORE FROM THE SIDE OF THE COMPANIES THEMSELVES WITH REGARD TO BEING ABLE TO HIRE THE RIGHT PEOPLE AT THE RIGHT PRICE AND ALSO OF COURSE GETTING YOUR HANDS ON THE SUPPLIES AND OTHER MATERIALS YOU NEED PARTICULARLY INSIDE OF -- IN LIGHT OF SOME OF THE INFLATION WE HAVE SEEN OUT THERE. WHAT HAS BEEN THE PROCESS YOU HAVE SEEN WITH YOUR CEO AND PEERS MANAGING THAT?
RICHARD: WILL WE BE ABLE TO GET TO ENOUGH PEOPLE OR ATTRACT THE GUESTS OR WILL TARIFFS CAUSE A PROBLEM WITH THE SUPPLY CHAIN? I'VE BEEN VERY FORTUNATE THAT MY SUCCESSOR HAS BEEN A VERY GOOD LEADER. WE HAVE OVER 100,000 EMPLOYEES AND FRANKLY IT HASN'T BEEN A REAL CHALLENGE TO HIRE THEM. THE WHOLE BOOK IS ABOUT OUR CULTURE AND OUR CULTURE HAS MADE IT POSSIBLE TO ATTRACT THE BEST AND THE BRIGHTEST. WE HAVE HAD NO DIFFICULTY ATTRACTING THE PEOPLE WE NEED AS WE HAVE EMERGED FROM THE PANDEMIC AND HAVE CONTINUED TO GROW AT GOOD RATES. WE HAVE HAD VERY LITTLE PROBLEM ON THE SUPPLY CHAIN SIDE. IT IS DIFFICULT. BUT THERE IS ALWAYS SOME CHALLENGE. WE HAVE BEEN ABLE TO MEET OUR NEEDS FRANKLY WITH CONTROLLING OUR COSTS TO A NORMAL DEGREE. AGAIN, WE SHOULDN'T SPEND OUR TIME LOOKING AT PEOPLE WHO DON'T NECESSARILY TALK TO THE GUESTS OR THE SUPPLY CHAIN. WE SHOULD LOOK AT THE FACTS ON THE GROUND AND HAVE A CULTURE AND WHAT I'M PROUDEST ABOUT IN MY 30 YEARS WAS PARTICIPATING IN DEVELOPING THAT CULTURE THAT CREATED THE WOW NOT ONLY FOR OUR GUESTS, BUT THE SUPPLY CHAIN PEOPLE DELIVERING WHAT IS NEEDED FOR THE SHIPS AND CREWMEMBERS DELIVERING WHAT IS NEEDED FOR THE GUESTS.
ROMAINE: WITH REGARD TO THOSE EMPLOYEES AND I'M CURIOUS ABOUT LONGEVITY, YOU HAVE BEEN WITH THE COMPANY FOR MORE THAN THREE DECADES, CEO FOR 32, 33 YEARS. IS THAT TYPE OF LONGEVITY NORMAL FOR OTHER FOLKS OUT THERE, NOT JUST THE CEO?
RICHARD: THAT TYPE OF LONGEVITY IS NOT TYPICAL. CEOS IN THE UNITED STATES AVERAGE 60 YEARS I THINK. ONE OF THE BEAUTIES -- AVERAGE SIX YEARS I THINK. ONE OF THE BEAUTIES OF BEING IN THE JOB AS YOU GET TO WORK WITH PEOPLE, YOU GET TO DEVELOP PEOPLE, SO THE TOP MANAGEMENT AT ROYAL CARIBBEAN ARE ALL LONG TERM. THE AVERAGE OF AN OFFICER OF ROYAL CARIBBEAN IS MORE THAN 15 YEARS TODAY. THAT MEANS THEY HAVE SEEN IT ALL, THEY HAVE BEEN THROUGH DIFFERENT CRISES. LIKE ANY OTHER INDUSTRY, WE HAVE OUR CRISES. 9/11, THE GREAT RECESSION, COVID. BUT THE CULTURE HELPED US FIND SOLUTIONS TO WHAT THE PROBLEMS WERE AND CONTINUE TO LOOK FORWARD, NOT BACK.
KATIE: TO THAT POINT, I WANT TO REFLECT BACK ON YOUR TENURE AT ROYAL CARIBBEAN. YOU HAVE LIVED THROUGH A LOT OF DIFFERENT CRISES AND ECONOMIC CYCLES. THERE ARE CONCERNS ABOUT THE LABOR MARKET. WE KNOW CONSUMERS ARE TIRED AFTER YEARS OF INFLATION AT THESE PERSISTENTLY HIGH LEVELS. THE KING BACK ON PAST PERIODS OF HIGH INFLATION, WHAT WAS IT LIKE MANAGING THROUGH THAT AND WHAT EXPERIENCE, HOW WOULD THAT EXPERIENCE INFORM HOW YOU WOULD HANDLE THIS PERIOD WHERE AGAIN INFLATION AND PRICE JUST SEEM STUBBORNLY HIGH?
RICHARD: I DO THINK IN COMING BACK TO ROMAINE'S POINT, THE FACT THAT WE HAVE LIVED THROUGH THIS BEFORE AND HAVE THE EXPERIENCE SO WE HAVE THE CONFIDENCE TO BE ABLE TO LOOK LONG-TERM. EVERYBODY ELSE IS LOOKING AT NEXT MONTH, NEXT YEAR, WE HAVE THE ABILITY BECAUSE WE HAVE ALL BEEN THROUGH THIS AS YOU SAY, SO MANY ECONOMIC CYCLES, SO MANY OTHER KINDS OF CRISES, TO KNOW THAT YOU DO EMERGE ON THE OTHER SIDE. NOW, WE ARE BENEFITED IN THE CRUISE BUSINESS BECAUSE NOT ONLY DO WE PROVIDE A FANTASTIC VACATION AND, BY THE WAY, I'M HAPPY TO SELL A CRUISE IF WEEKEND GET TO THAT IN THE PROGRAM. IF I CAN'T SELL YOU A CRUISE, I CAN POINT OUT THAT THE CRUISE IS A GOOD VALUE. WE HAVE SEEN THAT THE CRUISE INDUSTRY DOESN'T SUFFER AS MUCH AS OTHERS. PEOPLE DON'T STOP VACATIONING, THEY JUST ARE MORE CAREFUL ABOUT WHAT THEY CHOOSE. WHEN THEY LOOK AT US, THEY FIND IT IS GOOD VALUE FOR MONEY. THAT EXPERIENCE, THE CULTURE OF EVERYBODY ALIGNED TO A LONG-TERM GOAL, THOSE THINGS HAVE GOTTEN US THROUGH IN THE PAST AND I FEEL VERY GOOD ABOUT WHERE THEY ARE GETTING US THROUGH TO TODAY.
KATIE: GREAT TO GET SOME TIME WITH YOU. THAT IS ROYAL CARIBBEAN CHAIRMAN AND CEO RICHARD FAIN, THE AUTHOR OF THE NEW BOOK "DELIVERING THE WOW: CULTURE AS A CATALYST FOR LASTING SUCCESS." ROYAL CARIBBEAN, A MARKET CAP ABOVE $82 BILLION.
ROMAINE: I WAS GOING BACK, I WAS LOOKING THROUGH HIS BOOK AND YOU GO BACK TO WHAT THE INDUSTRY WAS LIKE IN THE 1970'S, IT REALLY WAS A RICH INDUSTRY AND I WHAT IS ON PAR WITH YOUR MARRIOTTS AND DISNEYS AND PICK ANOTHER MAJOR TRAVEL COMPANY AND THEY ARE BASICALLY RIGHT UP THERE.
KATIE: HAVE YOU BEEN ON A CRUISE?
ROMAINE: NOT YET, KATIE GREIFELD.
KATIE: ME EITHER.
ROMAINE: WE WILL SET YOU UP FOR WHAT TO WATCH OVER THE NEXT WHEN HE FOR HOURS. THIS IS BLOOMBERG.
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ROMAINE: HERE IS WHAT THE MARKETS ARE GOING TO HAVE THEIR EYES ON. IT INCLUDES QUITE A BIT OF EARNINGS.
KATIE: GM, GENERAL ELECTRIC, COCA-COLA, LOCKHEED MARTIN, A REAL SMATTERING OF INDUSTRIES.
ROMAINE: NORTHROP GRUMMAN. DON'T CUT THEM SHORT, KATIE. NETFLIX.
KATIE: THAT WILL BE RIGHT IN THE MARKETS I.
ROMAINE: CAPITAL ONE AND WESTERN ALLIANCE. DON'T CUT THEM OFF, KATIE.
KATIE: I'M SORRY.
ROMAINE: WE ARE GOING TO HEAR FROM THE ECB PRESIDENT. FULL COVERAGE TOMORROW RIGHT HERE ON BLOOMBERG.
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