Bloomberg Surveillance 05/07/2024
>> FROM AN ENVIRONMENT WHERE THE DATA IS TOO HOT TO STARTING TO COOL DOWN. >> THE QUESTION ON EVERYONE’S MIND IS HOW RESTRICTIVE. >> THE FED ENDORSED HIGHER FOR LONGER. >> WE HAVE NOT BUTTON THE CLEAREST COMMUNICATION FROM THE FED. WHAT DOES MORE CONFIDENCE LOOK LIKE. >> WE ARE SO FIXATED ON THE FED THAT WE ARE MISSING THIS CLEAR TURN. >> THIS IS "BLOOMBERG SURVEILLANCE" WITH JONATHAN FERRO, LISA ABRAMOWICZ, AND ANNMARIE HORDERN. JONATHAN: LIVE FROM NEW YORK CITY, GOOD MORNING, GOOD MORNING. THIS IS "BLOOMBERG SURVEILLANCE." JUST ABOUT POSITIVE ON THE S&P 500. THE POLITICS ON DOLLAR-YEN. DOLLAR-YEN POSITIVE .4%. THE BOJ GOVERNOR MEETING WITH THE PRIME MINISTER WHO SAYS HE WILL CLOSELY IMPACT THE IMPACT OF A WEEAK YEN ON PRICING. THE JAPANESE OFFICIAL SNAPPING BACK SAYING IF THE MARKET IS FUNCTIONING PROPERTY THERE IS NO NEED BUT A SUGGESTION THAT MAYBE IT IS NOT. LISA: ALL OF THIS GOES TO SAY THAT PEOPLE WHO ARE BEARISH ON THE YEN ARE GETTING BOLDER. I WONDER HOW MUCH JANET YELLEN WILL PUT THE PRESSURE ON JAPANESE AUTHORITIES VERSUS MAYBE THERE IS A SENSE THEY HAVE USED UP THE LITTLE AMMUNITION THEY ARE WILLING TO SEND. ANNMARIE: SHE SAID CONSULTATION SHOULD TAKE PLACE AND THEN SHE CALLED THE REPORTED JAPANESE ACTION A RUMOR WHICH MAKES ME THINK THE JAPANESE DID NOT CALL WASHINGTON TO ASK AND LET THEM KNOW WE ARE GOING TO MAKE A MOVE AND INTERVENE. JONATHAN: DOLLAR-YEN, BIG SWINGS OVER THE LAST WEEK. ALL THE WAY BACK DOWN TO SOMETHING LIKE 152 TO START THE WEEK. SOMEWHERE BETWEEN 155 AT THE MOMENT. MORE IMPORTANT STORY OUT OF THE MIDDLE EAST. THE LATEST OUT OF ISRAEL AND GAZA. ISRAELI TROOPS TAKING CONTROL OF THE RAFAH BORDER CROSSING. HAMAS SAYING ALL AID FROM EGYPT HAS STOPPED AFTER ISRAEL TOLD RESIDENTS IN EASTERN RAFAH TO FLEE IMMEDIATELY. WE ARE WATCHING THIS PLAY-BY-PLAY AND HOUR-BY-HOUR. LISA: HAMAS CAME OUT AND SAID THEY HAD AGREED TO A CEASE-FIRE DEAL. ISRAEL SAID THEY ARE NOT ACCEPTING THAT. THEN THERE WAS REPORTING ABOUT THE IDEA THAT MAYBE IT WAS NOT DIFFERENT BY THAT MUCH WHICH RAISES THE QUESTION, IS THIS A BENJAMIN NETANYAHU THAT WANTS TO GO INTO PROFIT NO MATTER WHAT — THAT WANTS TO GO INTO RAFAH NO MATTER WHAT? ANNMARIE: EVEN THOUGH ISRAEL SAID THEY DO NOT ACCEPT THIS DEAL WE KNOW THEY ARE SENDING REPRESENTATIVES TO EGYPT AND THE FACT THAT ISRAEL SAYS THEY ARE STILL SEEKING TO FIND AN AGREEMENT. PERHAPS THEY ARE USING RAFAH AS A POINT OF LEVERAGE. WE WILL CATCH UP WITH NORMAN ROULE IN A FEW MINUTES. S&P 500, THREE DAYS OF GAINS. WHAT A RUN IN THE BOND MARKET. YIELDS FALLING ONCE AGAIN. LISA: WHAT IS INTERESTING TO ME IS THE RALLY HAS CONTINUED ON THE LONG END BUT ON THE SHORT END IT IS HITTING YOUR ASSISTANCE POINT. IT IS NOT LIKE PEOPLE ARE SAYING LET’S GO BACK TO SEVEN RATE CUTS. AT THE SAME TIME WHAT WE HEARD YESTERDAY FROM JOHN WILLIAMS AS WELL AS FROM TOM BARTON OF THE RICHMOND FED ENDORSING FED CHAIR JAY POWELL’S VIEW. THEY SAID THE NEXT MOVES ARE CUTS. WE ARE NOT THERE YET. MAYBE RATES WHERE THEY ARE WILL HAVE A LONG EFFECT. THIS IS NOT A HAWKISH TYPE OF TALK FROM FED OFFICIALS. JONATHAN: ALL OF THE FLEXIBILITY SEEMS TO BE AT THE LONG END. WE ARE DOWN FIVE CONSECUTIVE DAYS. 10-YEAR GILTS ARE FOLLOWING. — 10 YEAR YIELDS ARE FOLLOWING — 10 YEAR YIELDS ARE FALLING. COMING UP WE WILL CATCH UP WITH SHARON BELL OF GOLDMAN SACHS. FORMER SENIOR INTELLIGENCE OFFICIAL NORMAN ROULE. AND SIMON FRENCH. WITH GLOBAL BONDS GAINING ON INFLATION OPTIMISM. U.S. STOCKS COMING OFF THEIR THREE DAY WINNING STREAK. THE BEST BACK TO NOVEMBER. SHARON BELL SAYING THE RISE OF THE RELATIVE SIZE OF THE U.S. EQUITY MARKET HAS REFLECTED THE DOMINANCE OF THE U.S. ECONOMY. SHE JOINS US FOR MORE. GOOD MORNING TO YOU. THE QUESTION IS HOW MUCH LONGER THAT DOMINANCE CAN LAST. HOW ARE YOU THINKING ABOUT THAT NOW? SHARON: THE U.S. MARKET HAS BEEN PHENOMENAL. THE SIZE OF THE MARKET — IT IS DOWN TWO OR THREE TIMES THE SIZE OF THE EUROPEAN MARKET. I THINK WE ARE NOT GOING TO BACK TO WHERE WE WERE IN 2007 BUT THE U.S. HAS HAD A LONG RUN OF DOMINANCE. IT HAS ALSO HAD A STRONG CYCLICAL PATH IN RECENT MONTHS. THAT IS THE REASON MANY PEOPLE HAVE PUSHED OUT WHEN THEY EXPECT THE FED TO CUT RATES. CYCLICALLY THE REST OF THE WORLD WILL DO BETTER FROM HERE. WE’VE SEEN THE CHINESE STOCK MARKET DO WELL, WE’VE SEEN THE U.K. STOCK MARKET DO WELL. WE HAVE SEEN MARKETS GLOBALLY DO BETTER. THE U.S. WAS THE ONE THAT OUTPERFORMED ON EVERY SINGLE ECONOMIC METRIC THROUGH THIS LAST YEAR. THE REST OF THE WORLD HAS BEEN LAGGING AND THAT IS CATCHING UP WITH IT A BIT. LISA: THERE IS A QUESTION OF HOW MUCH HAVE WE BROUGHT FORWARD SOME OF THIS BETTER OUTLOOK IN EUROPE, IN EQUITY MARKETS? HAVE WE ALREADY OUTPERFORMED AS MUCH AS WE ARE GOING TO OUTPERFORM THE U.S. GOING FORWARD GIVEN THE FACT THAT SO FAR EUROPEAN EQUITIES HAVE DONE MUCH BETTER THAN MOST OF THE SAME SECTORS IN THE U.S.? SHARON: I THINK WE HAVE BROUGHT FORWARD A LITTLE BIT OF IT. THE MARKET TENDS TO PAY FOR THINGS SIX MONTHS BEFORE THEY HAPPEN. HE STILL HAVE THIS HUGE VALUATION GAP BETWEEN THE U.S. AND EUROPE. IT HAS CLOSED A TINY BIT BUT NOT THAT MUCH. WE HAVE UPGRADED OUR TOP-DOWN MACRO VIEW OF EARNINGS. AS YOU’VE SEEN IN THE FIRST QUARTER EARNINGS DO REASONABLY WELL, AS YOU’VE SEEN OIL PRICES RISE THROUGH MOST OF THIS YEAR, AS YOU’VE SEEN THE EURO AND OTHER CURRENCIES WEEKEND, ALL OF THAT IS GOOD FOR EUROPEAN EARNINGS. THE EARNINGS IN THE VALUATION GAP NOT CLOSING BUT AIRING A LITTLE BIT TO SEE A BIT MORE OUTPERFORMANCE. ANNMARIE: HOW MUCH DO YOU THINK THE TAILWIND OF POTENTIAL ECB RATE CUTS WILL BOOST YOUR REGION MORE THAN PEOPLE ARE FACTORING IN? SHARON: I COMPLETELY AGREE. THERE IS A GOOD CHANCE THE ECB NOW GOES BEFORE THE FED. WE STILL EXPECT FED RATE CUTS THIS YEAR BUT AFTER WE EXPECT CUTS IN EUROPE. EUROPE GOING AHEAD OF THE FED WILL BE THE FIRST TIME THEY HAVE DONE THAT. IT WILL BE A BIG RUBICON TO CROSS AND THEY WILL BE MORE EXCITED IN EUROPEAN MARKETS. ANNMARIE: WHAT EXACTLY IN EUROPE DO YOU LIKE OUTSIDE OF FINANCIALS? SHARON: FINANCIALS ARE A NICE AREA BECAUSE OF RATES STAY HIGHER FOR LONGER THEY DO WELL. IT IS NOT JUST FINANCIALS. THEIR OTHER POCKETS. — THERE ARE OTHER POCKETS IN EUROPE. SIMILAR GROWTH IF NOT BETTER. VALUATIONS BELOW WHAT WE SEE IN THE U.S.. I THINK THERE ARE A FEW AREAS. ENERGY IS ANOTHER AREA WE GROW. VALUATIONS ARE A BIG GAP TO THE U.S. IN THESE AREAS ARE ALL ABOUT SHARES, GIVING MONEY BACK TO SHAREHOLDERS, A HUGE AMOUNT, JUST FROM BUYBACKS AND DIVIDENDS FROM THE ENERGY SECTORS. THERE ARE — THEY HAVE THE GROWTH RELATIVE U.S. COUNTERPARTS ON LOW VALUATIONS OR THEY ARE EXTREMELY CHEAP AND GIVING YOU BACK THE MONEY AND SHARE BUYBACKS. ANNMARIE: DO YOU THINK WE HAVE SEEN THE PEAK OF U.S. EXCEPTIONALISM OR IS IT THE REST OF THE WORLD STARTING TO CATCH UP? SHARON: THAT IS A GREAT QUESTION. I DO NOT THINK THE U.S. MARGIN WILL COLLAPSE OR EUROPE WILL CATCH UP IN TERMS OF GDP GROWTH TO THE U.S. ALL OF THOSE GAPS EXIST AND WILL CONTINUE TO EXIST. I THINK HOW THEY ARE PRICED AT THE MOMENT IS EXTREME. IT IS NOT THAT I THINK THE U.S.. BEING EXCEPTIONAL. — IT IS NOT THAT I THINK THE U.S. WILL STOP BEING EXCEPTIONAL, IT IS JUST THE REST OF THE WORLD WILL CATCH UP A LITTLE BIT ON SOME OF THAT EXCEPTIONALISM. JONATHAN: DID WE TALK ABOUT MARGINS, WHERE YOU SEE PRICING POWER. WE’VE BEEN TALKING ABOUT — WHERE DO YOU SEE SOME OF THAT TAKING PLACE? SHARON: IT IS INTERESTING. THERE HAVE BEEN SOME WARNINGS, WEAKER EARNINGS FIGURES ANNOUNCED BY U.S. CONSUMER DISCRETIONARY COMPANIES. IN PARTICULAR SOME LAST MONTH. WE’VE SEEN A LITTLE BIT LESS ON EUROPEAN COMPANIES AND THIS REFLECTS A SLIGHTLY DIFFERENT DYNAMIC IN EUROPE WHERE IN EUROPE THE SAVINGS IS STILL EXTREMELY HIGH. EUROPEANS ARE STARTING TO SEE POSITIVE REAL WAGE GROWTH WITH THEY’VE NOT SEEN FOR SOME TIME AS INFLATION COMES DOWN AND ENERGY PRICES YOU ARE PAYING IN YOUR UTILITY BILLS ARE STARTING TO COME DOWN. IN TERMS OF COMPANIES PRICING ON THE MARGINS. IF YOU LOOK THE EARNINGS FIGURES FOR THE FIRST QUARTER, MARGINS HAVE PROVED MORE ROBUST AND MORE SUSTAINABLE THAN WE EXPECTED. THAT IS ONE OF THE REASONS WE HAVE POPPED OUR EARNINGS FORECAST THIS YEAR. I DO NOT EXPECT A HUGE EXPANSION IN MARGINS IN EUROPE OR THE U.S. OVER THIS YEAR OR THE NEXT YEAR. MARGINS ARE ALREADY VERY HIGH. LISA: I AM TRYING TO ALWAYS UNDERSTAND HOW SOME OF THE MAIN STORIES OF A GIVEN DATE FACTOR INTO THE BREAD AND BUTTER OF WHAT COMPANIES DO EVERY DAY. XI JINPING VISITING EMMANUEL MACRON, TALKING ABOUT AVOIDING A NEW COLD WAR, TRYING TO BUTTER THE PAN TO MAKE SURE CHINA CAN SELL GOODS IN FRANCE. HOW MUCH IS THAT PRESSURE MARGINS AND EUROPEAN COMPANIES? IS THIS SOMETHING THAT FACTORS INTO THE BOTTOM LINE IN THE NEAR TERM? SHARON: IT IS TRICKY. IF YOU ASK MOST CEOS OR EXECUTIVES WHAT THEIR BIGGEST CONCERN IS THEY WILL TALK ABOUT GEOPOLITICAL RISKS. SAYING THINGS LIKE THIS IS CRUCIAL FOR COMPANIES. — SEEING THINGS LIKE THIS IS CRUCIAL FOR COMPANIES. IN TERMS OF NEAR-TERM MARGINS, GLOBALLY WE ARE DEEP GLOBAL ICING AND BECOMING MUCH MORE REGIONAL. COMPANIES ARE HAVING TO REPLICATE COSTS. THEY CANNOT PRODUCE THINGS IN ASIA. THEY’RE TRYING TO REPLICATE COSTS IN EUROPE OR THE U.S. OR ELSEWHERE. GEOPOLITICAL RISKS ARE RISING. WE SAW THE PROBLEM WITH SUPPLY CHAINS AFTER THE PANDEMIC AND THE DIFFICULTY WITH PRODUCTION. COSTS ARE RISING. YOU WILL NOT SEE IT QUARTER BY QUARTER BUT I THINK GENERALLY THAT IS ONE OF THE REASONS I DO NOT THINK MARGINS KEEP EXPANDING IT IS BECAUSE COSTS ARE GENERALLY RISING IN SOME OF THIS IS TO DO WITH LOCALIZING AND SOME OF THAT IS GEOPOLITICAL RISK. JONATHAN: SHARON BELL OF GOLDMAN SACHS. FINALLY A WORD ON PRESIDENT XI VISITING EUROPE. I FIND THIS FASCINATING. I’M SURPRISED IT IS NOT BEING WRITTEN MORE ABOUT. FIRST OF ALL YOU GO TO FRANCE WHERE YOU BELIEVE THERE MIGHT BE AN OPENING WITH EMMANUEL MACRON TO TAKE ON THE UNITED STATES. THE SECOND IS TO MAKE THE POINT ON THE 25TH ANNIVERSARY OF THE DEADLY BOMBING OF A CHINESE EMBASSY IN BELGRADE. YOU ARE GOING TO REMIND OF THE MISTAKES BY U.S. FORCES. LISA: THIS A DELIBERATE EFFORT TO WIDEN THE DIVIDE BETWEEN EUROPE AND THE U.S., TRYING TO PUT A WEDGE BETWEEN THAT RELATIONSHIP, SAYING YOU’RE THROWING YOUR WEIGHT BEHIND THEM AND WHY. WE CAN BRING CHEAP GOODS HERE. THEY ARE TRYING TO CREATE A DISTINCT FOREIGN POLICY AND ECONOMIC POLICY BETWEEN THE U.S. AND EUROPE. ANNMARIE: MAKING AN ABSOLUTE STATEMENT WHEN HE GOES TO SERBIA , WRITING IN THE LOCAL LANGUAGE TO THE SERBIAN PEOPLE SAYING 25 YEARS AGO NATO FLAGRANTLY BOMBED THE CHINESE EMBASSY IN YUGOSLAVIA. THIS WE SHOULD NEVER FORGET. IN BELGRADE WHAT YOU SEE IS NOT JUST SERBIAN FLAGS BUT CHINESE FLAGS. JONATHAN: THEY ARE PRETTY TRANSPARENT ABOUT IT. EQUITY FUTURES ON THE S&P JUST ABOUT POSITIVE. LET’S GET YOU AN UPDATE ON STORIES ELSEWHERE. HERE IS EUROPE BLOOMBERG BRIEF WITH DANI BURGER. DANI: IN A SPEECH TODAY PRESIDENT BIDEN PLANS TO DENOUNCE ANTI-SEMITISM AT COLLEGE CAMPUS PROTEST. HE WILL BE DELIVERING THE U.S. — THE KEYNOTE ADDRESS AT THE HOLOCAUST MUSEUM’S DAY OF REMEMBRANCE. THE SPEECH UNDERSCORES BIDENS POLITICAL DILEMMA SEVEN MONTHS IN ISRAEL’S WAR IN GAZA THAT HAS EXPOSED DIVISIONS IN THE DEMOCRATIC PARTY THAT COMPLICATE HIS ODDS OF WINNING IN NOVEMBER. ANOTHER SETBACK FOR BOEING. THIS TIME IT IS SPACE RELATED. THE LAUNCH OF ITS STAR LINER SPACE CAPSULE HAS BEEN DELAYED BECAUSE THEY FOUND SOMETHING WRONG WITH THE VALVE ON THE ROCKET. THE VALVE WAS USED TO REGULATE PRESSURE. INVESTIGATORS NEED TO DECIDE IF IT NEEDS TO BE REPLACED. NEXT BACK UP DAYS FOR LIFT OFF OUR TODAY, THIS FRIDAY, AND SATURDAY. ELON MUSK SAT DOWN — HE DISCUSSED ISSUES FROM IMMIGRATION TO FREE SPEECH, AND THEN HE HONED ON THREATS POSED TO HUMANITY BY AI. >> AI MIGHT BE THE MOST IMPORTANT QUESTION OF ALL. THE PERCENTAGE OF INTELLIGENCE THAT IS BIOLOGICAL GROWS SMALLER WITH EACH PASSING MONTH. EVENTUALLY THE PERCENTAGE OF INTELLIGENCE THAT IS BIOLOGICAL BE LESS THAN 1%. DANI: HE WENT ON TO ADD THAT AI HAS A LONG WAY TO GO BEFORE BECOMING A VIABLE TOOL IN SPACE EXPLORATION. THAT IS YOUR BLOOMBERG BRIEF. JONATHAN: UP NEXT, ISRAEL PRESSING AHEAD IN GAZA. >> WE MAKE CLEAR OUR VIEWS ABOUT OPERATION — WE MADE CLEAR OUR VIEWS ABOUT OPERATIONS IN RAFAH AND WE BELIEVE A HOSTAGE NEGOTIATION IS THE BEST WAY TO AVOID THAT SORT OF AN OUTCOME. JONATHAN: JONATHAN: THREE DAY WINNING STREAK ON THE S&P 500. QUITE A RUN IN THE BOND MARKET. YIELDS LOWER BY FOUR DAYS. 4.4692. LISA: IT HAS BEEN THE 12 PUNCH WITH FED OFFICIALS SAYING THEIR BIAS IS TO CUT EVEN WITH HOTTER THAN EXPECTED PRINTS AND THEN WE GOT WEAKER THAN EXPECTED PRINTS. HOW LONG WE BEFORE WE FLIP IT BACK TO SAY WE GET SUMMER RATE CUTS BECAUSE THE THRESHOLD HAS BEEN MET? JONATHAN: WE HAD THAT BIG MOVE WITH YIELDS UP A WEEK AGO THIS MORNING AND THAT IT HAS BEEN YIELDS DOWN OVER THE LAST FIVE DAYS. LISA: WHICH GOES TO THE IDEA THAT THERE IS ASYMMETRIC RISK BEING PRICED OUT BY A LOT OF PEOPLE IN THE MARKET. JONATHAN: ENCOURAGED BY WHAT WE SAW IN THE PAYROLLS REPORT ON FRIDAY. ISRAEL PRESSING AHEAD IN GAZA. >> WE WANT TO GET THE HOSTAGES OUT AND GET A CEASE-FIRE IN PLACE FOR SIX WEEKS. WE MADE OUR VIEWS CLEAR ABOUT OPERATIONS IN RAFAH THAT COULD PUT PEOPLE AT GREATER RISK. WE BELIEVE THE HOSTAGE DEAL IS THE BEST WAY TO AVOID THAT OUTCOME. I DO NOT KNOW THAT HE GETS ANY MORE SENSITIVE THAN RIGHT NOW. JONATHAN: ISRAELI FORCES MOVING FORWARD WITH THEIR OFFENSIVE INTO RAFAH AFTER TURNING DOWN A CEASE-FIRE PROPOSAL FROM HAMAS. TROOPS HAVE TAKEN CONTROL OF THE BORDER CROSSING WITH EGYPT. ISRAEL SAYING IT STILL PLANS TO SEND A DELEGATION TO MEET WITH MEDIATORS IN CAIRO. NORMAN ROULE JOINS US FOR MORE. WONDERFUL TO GET YOUR PERSPECTIVE. CAN YOU DESCRIBE WHAT IS ON THE TABLE FROM HAMAS TO THE ISRAELIS AND WHY THE PROPOSAL HAS BEEN TURNED DOWN? NORMAN: FIRST WE MUST RECOGNIZE THIS IS VERY DIFFICULT AND COMPLICATED DIPLOMACY AND ONEROUS DUE TO ALL THE DIPLOMATS INVOLVED. HAMAS HAS NOT APPROVED THE PROPOSAL BY THE ISRAELIS, QATAR, AND UNITED STATES, BUT HAS OFFERED A COUNTER PROPOSAL. IT WHITTLES DOWN DEMANDS, ALREADY DESCRIBED AS EXTRAORDINARILY GENEROUS. HAMAS IS PROPOSING IT RELEASED THREE PRISONERS A WEEK FOR SIX WEEKS AND THEN 15 LIKELY BODIES OF PRISONERS AT THE END. IN RETURN IT WILL RECEIVE 50 PALESTINIAN PRISONERS FOR EACH ISRAELI, 30 WILL BE OF LICENSES, WHICH WILL BE THE WORST OF TERRORIST CRIMES, AND HAMAS CLAIMING A PERMANENT CEASE-FIRE. THE U.S. IS SEEING A SUSTAINABLE CALM WHICH IS VAGUE AND ALLOWS FOR DIPLOMACY. JONATHAN: WHAT WE KNOW ABOUT THE WELL-BEING OF THE HOSTAGES TAKEN IN OCTOBER? NORMAN: THEIR SITUATION IS SERIOUS. THE NUMBER OF DECEASED HOSTAGES WILL BE GREATER THAN MANY HOPE. ONE THING HAMAS HAS RENEGED ON HIS IT HAS REFUSED TO PROVIDE A LIST OF LIVING AND DEAD HOSTAGES WHICH COMES AS A BLOW TO THE FAMILIES OF HOSTAGES IN ISRAEL. THE STORIES OF HOW FEMALE HOSTAGES HAVE BEEN TREATED HAVE BEEN VERY DARK. ANNMARIE: THE NEW YORK TIMES IS REPORTED THAT CNA — THAT THE CIA DIRECTOR BILL BURNS WAS CONSULTED ON THE CHANGES THAT HAMAS SIGNED UP FOR AND THE WORDS "SUSTAINABLE CALM," WORDS ISRAEL HAS AGREED TO BUT IS NOT ANYMORE. WHY IS THAT SO DIFFICULT AT THE MOMENT? NORMAN: IT COMES DOWN TO INTERPRETATION. SUSTAINABLE CALM DOES NOT MEAN THE END OF THE CONFLICT. FOR ISRAEL THE ERADICATION OF HAMAS IS THE GOAL. FOR HAMAS IT MEANS THE CONFLICT IS OVER AND IT RETURNS TO POWER. WE LIKE IT IN THE WEST. THE PROBLEM IS THAT IT MEANS THE END OF THE WAR AND THE SURVIVAL OF HAMAS WILL HARD IT IS REALLY VIEWS ON THE LANGUAGE. ANNMARIE: NOW THAT WE KNOW ISRAEL HAS TAKEN CONTROL OF THE CROSSING. WE HEARD FROM THE STATE DEPARTMENT. THE STATE DEPARTMENT SAID THE U.S. HAD PUT PROPOSALS ON THE TABLE FOR ISRAEL TO GO INTO RAFAH. IS IT YOUR UNDERSTANDING THE ISRAELI GOVERNMENT IS USING ONE OF THOSE PROPOSALS THE U.S. HAD GREENLIGHTED? NORMAN: WE HAVE THREE THINGS UNDERWAY. THE ISRAELIS HAVE UNDERTAKEN CLEARING OPERATIONS THAT COULD ENABLE THE RAFAH OPERATION. THAT DOES NOT MEETING WILL TAKE PLACE. IT COULD BE OVERTAKEN BY DIPLOMACY. THEY HAVE BEGUN AIRSTRIKES. THEY HAVE TAKEN OUT MILITANTS AND MILITARY TARGETS. THAT IS SOMETHING THE UNITED STATES HAD REPORTEDLY ENDORSED. THE ISRAELIS ARE ALSO TALKING ABOUT MOVING 100,000 PALESTINIAN REFUGEES SEVEN MILES AWAY INTO SAFE AREAS WITH FIELD HOSPITALS, HOUSING AND FOOD. THAT IS SOMETHING THE UNITED STATES HAS REQUESTED. THE REFILE CROSSING — THE REP — THE RAFAH CROSSING IS IMPORTANT FOR CONTROL BECAUSE IT CONTAINS TUNNELS. HERE IS THE COUNTERPOINT. RAFAH IS ONE OF THE TWO CROSSINGS WERE FOOD AND FUEL ARE BROUGHT INTO GAZA. FUEL IS IMPORTANT NOT ONLY FOR TRUCKS BUT DESALINATION PLANTS. RIGHT NOW TROUGH A IS CLOSED AND THE OTHER CROSSING IS CLOSED BECAUSE HAMAS IS FIRING ROCKETS TO STOP AID INTO GAZA AND THERE ARE REPORTS WITHIN THE LAST HOUR THAT HAMAS HAS FIRED ROCKETS AT THIS SITE. IT IS A DIFFICULT SITUATION FOR THE REFUGEES. LISA: THERE IS A BROADER QUESTION OF JUST HOW MUCH CONTROL DOES THE U.S. ADMINISTRATION HAVE ON ISRAEL OVER ITS PLANS AS IT GOES INTO RAFAH AND IT PROCEEDS WITH THIS CONFLICT. THE WALL STREET JOURNAL HAD A REPORT THAT THE U.S. HAD DELAYED SENDING PRECISION WEAPONS TO ISRAEL TO PRESSURE THEM TO DELAY THE INVASION OF RAFAH OR THE BLOCKING OFF OF THE ENTRANCE THERE. WHAT DO YOU MAKE OF THAT? HOW DO WE READ THAT IN TERMS OF INFLUENCE FROM THE U.S. TO ISRAEL? NORMAN: THE NATIONAL SECURITY COUNCIL SPOKESMAN REFUSED TO COOPERATE THAT REPORT. LIKEWISE HE DID NOT DENY IT. LOGISTICS IS PROBABLY THE MOST CONSTRAINING ELEMENT WE HAVE AN U.S. POLICY TOWARDS ISRAEL. WE SHOULD NOT OVERSTATE OUR LEVEL OF CONTROL. ISRAEL SUFFERED 1200 DEAD. THEY PERSON NOW — THEY HAVE PERSONNEL FIGHTING WHAT THEY BELIEVED TO BE A WAR FOR THE SURVIVAL OF ISRAEL IN GAZA. THERE WILL NOT BE A TREMENDOUS AMOUNT OF ENTHUSIASM FOR ALLOWING HAMAS TO REMAIN IN POWER. THE REVERSE IS THERE IS VERY LITTLE PRESSURE ON HAMAS. YOU HEAR VERY LITTLE FROM THE WEST OR OTHER COUNTRIES SAYING HAMAS MUST STOP. THE ISRAELI POSITION IS THE PRESSURE IS ALL ON THEIR SIDE. JONATHAN: WE APPRECIATE YOUR INSIGHTS. FORMER SENIOR U.S. INTELLIGENCE OFFICIAL NORMAN ROULE. THE PLEADING FOR THE RELEASE OF HOSTAGES SEEMS TO HAVE FADED AWAY OVER THE LAST SEVERAL MONTHS. ISRAEL RISKS LOSING EVEN MORE SUPPORT ON THE INTERNATIONAL STAGE BASED ON THIS RECENT EFFORT. I DO NOT KNOW WHAT THE FUTURE IS. YOU GO FURTHER INTO RAFAH AND IT WILL GO IN THAT DIRECTION. LISA: WE WERE TALKING TO SOMEONE WHO SAID THE PROTESTS HAVE MADE ISRAEL FEEL MORE ISOLATED AND IF WE DO NOT FIGHT FOR OURSELVES WHO WILL FIGHT FOR US. JONATHAN: A QUOTE FROM PRESIDENT BIDEN LAST OCTOBER, WHILE YOU FEEL THE RAGE CANNOT BE CONSUMED BY IT. AFTER 9/11 WE WERE CONSUMED BY RAGE IN THE UNITED STATES AND WHILE WE SAW JUSTICE WE ALSO MADE MISTAKES. JONATHAN: THREE DAYS OF GAINS ON THE S&P 500 INTO TUESDAY. S&P 500 FUTURES POSITIVE .04%. A DECENT RUN. BEST THREE-DAY RUN OF THE YEAR. THE NASDAQ UP 4%. SMALL CAPS DOING NICELY. IN THE BOND MARKET, YIELDS LOWER FOR FIVE CONSECUTIVE SESSIONS ON THE 10-YEAR. DOWN ANOTHER TWO BASIS POINTS. WE HAVE SEEN A 21 BASIS POINT MOVE. DOWN TWO BASIS POINTS ON THE SESSION. LET’S GET SOME EARNINGS. DISNEY. SECOND-QUARTER EPS 121. ESTIMATE 112. LOOKING FORWARD THEY SEE THE FULL-YEAR ADJUSTED EPS GROWTH TARGET OF 25%. THAT A FIRST LOOK LOOKS OK. THE STOCK IS DOWN .7%. LISA: HERE IS THE WHY. YOU CAN SEE SUBSCRIBERS FOR DISNEY PLUS CAME IN LATER THAN EXPECTED, REVENUE CAME IN LATER THAN EXPECTED, WHICH RAISES THE QUESTION OF HOW MUCH IS THE INCREASED EARNINGS-PER-SHARE GOING TO FRAME — GOING TO BE FROM COST EFFICIENCIES. ARE THEY GOING TO RAISE THIS AT A TIME YOU’RE NOT SEEING MASSIVE GROWTH IN ANY OF THEIR UNITS? JONATHAN: WILL CATCH UP WITH THE CFO OF DISNEY IN ABOUT 30 MINUTES. I FIND THE BATTLE OVER HULU TO BE FASCINATING. ULTIMATELY WE HAVE TO AGREE ON A PRICE. JP MORGAN HAS VALUED HULU AND 27.5 BILLION IN MORGAN STANLEY HAS VALUED HULU FOR COMCAST. WE NEED TO WORK OUT WHAT THAT 33% STAKE IS WORTH SO WE CAN CLOSE THAT DEAL. LISA: IS A MATTER OF DISTRIBUTION, A MATTER OF WHO CAN GROW IT MORE? DO THEY HAVE A SENSE OF THAT? WILL THEY TALK ABOUT IT TODAY? IS THE REASON THEY HAVE SUCH OPTIMISM THEY CAN INCREASE THEIR GROWTH TARGET FOR A 5%. JONATHAN: THE HULU SUBSCRIPTION WORTH EVERY PENNY FOR SHOW GUN — FOR SHOGUN. LISA: YOU HAVE BEEN PUSHING THIS. JONATHAN: WHEN WE DID THE FED SHOW AND TK STARTED TALKING ABOUT TORONAGA. JONATHAN: THAT IS AN UNACCEPTABLE ACCUSATION FOR JOURNALISM. LET’S GET TO THE EURO. EXCLUSIVE COVERAGE BY CHRISTINE LAGARDE. THE EURO AGAINST THE DOLLAR LOOK SOMETHING LIKE THIS. THE EURO AT THE MOMENT AGAINST THE DOLLAR IS A LITTLE BIT WEAKER. DOWN ABOUT .06%. DOLLAR-YEN AS WELL 154.61. IT IS THE SCARF. ANNMARIE: SHE IS A FASHION ICON. JONATHAN: YOU ARE AN ICON AS WELL. ISRAELI TROOPS TAKING CONTROL OF THE RAFAH BORDER CROSSING IN GAZA. THE MOVE IS THE FIRST OF ITS KIND SINCE THE WAR BEGAN IN OCTOBER. PRESIDENT BIDEN SPEAKING TO BENJAMIN NETANYAHU YESTERDAY. BOEING IN THE SPOTLIGHT OF REGULATORS. THE FAA INVESTIGATING INCOMPLETE EXPANSIONS OF THE 787 DREAMLINER. THIS INCLUDES SUSPICIONS WORKERS MAY HAVE FALSIFIED RECORDS TO COVER UP SHORTCUTS THEY FACTORY IN SOUTH CAROLINA. BOEING SAYING THERE IS NO IMMEDIATE SAFETY ISSUE. EVERY SINGLE TIME ANY NEWS COMES OUT ABOUT THIS COMPANY IS NOT GOOD. LISA: THERE’S A QUESTION MARK AROUND WHEN WE WILL GET A FLOOR, A SENSIBLE WASHOUT, SOMETHING FROM THE AUTHORITIES SAYING WE UNDERSTAND WHAT HAPPENED AND WE ARE DONE. THE FACT THAT THE FAA IS EMBARKING ON A NEW INVESTIGATION AT A TIME THEY’VE ALREADY HAD A GAZILLION OTHER INVESTIGATIONS, ARE THEY ON TOP OF THINGS YET? ANNMARIE: THIS GOES BACK TO THE POINT THAT THE FAA HAD THAT A LOT OF THE WORK BEING DONE ON THE MANUFACTURING FLOOR IS NOT GETTING UP TO THE C-SUITE AND THERE IS A HUGE DISCONNECT FROM THE INDIVIDUALS GOING THROUGH THE SAFETY PRECAUTIONS, BUILDING THESE PLANES, AND THE PEOPLE LEADING THE COMPANY. JONATHAN: LATER ON DO NOT MISS OUR CONVERSATION WITH THE EQUITY RESEARCH ANALYST OUT OF JEFFRIES ON BOEING AND THE LATEST DIFFICULTIES. LET’S FINISH THIS ROUND UP WITH UBS RETURNING TO PROFIT AFTER THEIR RESCUE OF CREDIT SUISSE. THE MOVE REVERSES TWO LOSSMAKING QUARTERS. >> IS GOOD MOMENTUM. YOU MAY REMEMBER IN THE FOURTH QUARTER WE HAD A STRONG PERFORMANCE IN BANKING AS WE INTEGRATE NEW CALLINGS FROM CREDIT SUISSE ON OUR PLATFORM WE START TO SEE THE PIPELINE DEVELOPING. WE ARE ABLE TO EXECUTE. IT IS VERY MUCH ALIGNED WITH OUR EXPECTATIONS OF IMPROVING THE MIX BETWEEN OUR MARKETS BUSINESS AND OUR BANKING BUSINESS. JONATHAN: A FANTASTIC EXCHANGE. WHAT STOOD OUT FOR YOU? JAN: I WOULD SAY THE REPORT AS A WHOLE, IT WAS A GREAT QUARTER FOR UBS. PROFITABILITY RETURNING TO THE BAG WHICH SHOWS INTEGRATION IS WORKING. THEY ARE ON TRACK WITH THEIR PLANS WHEN IT COMES TO INTEGRATING CREDIT SUISSE. THEN YOU HAVE THE NON-CORE UNIT WHERE THEY WIND DOWN THE STUFF THEY INHERITED FROM CREDIT SUISSE AS WELL. THEY MADE PROFITS SO IT IS NOT LIKE THE MINEFIELD SOME SHAREHOLDERS HAVE FEARED ABOUT THAT THIS COULD HAPPEN WITH ALL OF THE ASSETS ON THE BALANCE SHEET. THAT IS VERY GOOD. THE OUTLOOK IS NOT TOO BAD FOR THE BANK. ALL AROUND THEY ARE DOING EVERYTHING THEY NEED TO DO. THEY ARE ON TRACK WITH THE MERGER WHICH IS THE MOST IMPORTANT THING. THEY ARE COMMUNICATING WHAT THEY ARE DOING. THERE ARE A FEW THINGS THAT ARE UNCERTAIN BUT OVERALL UBS IS DOING WHAT CREDIT SUISSE FAILED TO DO. COMMUNICATING CLEARLY, EXECUTING ON THE PLAN, NOT OVERPROMISING AND DOING THE RIGHT THING AT THE RIGHT TIME. JONATHAN: NOBODY WANTS TO SEE LAYOFFS. CAN YOU TELL US WHETHER WE HAVE WORKED THROUGH ALL OF THE LAYOFFS OF THIS COMBINATION? JAN-PATRICK: THERE IS STILL A LOT OF THINGS TO COME AS THEY WORK OUT WHAT THEY WANT TO KEEP AND HOW THEY WANT TO STRUCTURE THE NEW BUSINESS. I WOULD ARGUE THEY’RE PROBABLY HALFWAY THROUGH. AS WE SAID, LAYOFFS ARE NEVER A GOOD THINGS. IF YOU MERGE THESE MASSIVE BANKS YOU WILL HAVE OVERHANG AND YOU WILL NEED TO REDUCE THE HEADCOUNT. WE KNOW UBS HAS PUT OUT A BIG PROMISE IN REDUCING THE COST. WE KNOW THE HEADCOUNT IS A BIG TOPIC OF THAT. THEY STILL NEED TO WORK THROUGH THIS. IF YOU WANT TO HAVE A SUSTAINABLE LENDER OF THAT SIZE AND YOU NEED TO HAVE COSTS IN CHECK WHICH UNFORTUNATELY MEAN SOME JOB LOSS. LISA: HOW MUCH ARE WE LOOKING AT INCREASING REGULATIONS THAT UBS IS ARGUING AGAINST THAT IS ARGUING COULD CRIMP PROFITS BECAUSE THEY ARE THE ONLY GAME IN TOWN? JAN-PATRICK: IT IS FUNNY BECAUSE ON THE ANALYST CALL THERE WAS QUESTION AFTER QUESTION OF CAPITAL REGULATION AND HE WAS VERY STOIC SAYING IT IS TOO EARLY TO DISCUSS THE MATTER. I UNDERSTAND UBS’S POINT OF VIEW THAT THEY SAY WE ARE NOT SUPER DOMINANT IN SWITZERLAND. THERE ARE PLENTY OF OTHER BANKS. IT WAS MORE THE LOSS OF TRUST. TO BE FAIR I GUESS YOU CAN CAPITALIZE THE BANK AS MUCH AS YOU LIKE. IF YOU LOSE TRUST IN LIQUIDITY AND DEPOSITS IT WILL NEVER SAVE YOU. THAT IS THE LINE OF ARGUMENT OF UBS ALSO WHEN THEY TALK TO THE REGULATOR AND THE POLITICS. ON THE OTHER HAND I UNDERSTAND SWITZERLAND. TAXPAYER MONEY WAS INVOLVED IN THAT RESCUE. THEY HAVE TO TIGHTEN THE ROAD SOMEWHAT TO SAY IT CANNOT BE ALWAYS THE SAME WAY WHEN SOMETHING GOES WRONG THAT THE TAXPAYER HAS TO STEP IN ON AN IMMEDIATE BASIS. IT IS STILL A TOPIC THAT IS PROBABLY THE BIGGEST UNCERTAINTY FOR UBS GOING FORWARD AND I UNDERSTAND THEY DO NOT WANT TO COMMENT ON IT AT THIS POINT. I GUESS PEOPLE ARE FINE WITH IT. IN THE COMING MONTHS WE NEED MORE CLARITY FROM THE REGULATOR AND FROM UBS ON HOW THEY WANT TO HANDLE THE MATTER BECAUSE OTHERWISE JOURNALISTS WILL NOT BE HAPPY WITH THE UNCERTAINTY. LISA: I LOVE HOW YOU DESCRIBED THE SWISS CEO OF BEING STOIC. I WONDER IF YOU CAN GO FORWARD ANY AREAS HE IS NOT STOIC ABOUT AS FOR HIS AREAS OF GROWTH. U.S. THERE ARE QUESTION MARKS AROUND ASIA. WHERE WILL THE GROWTH COME FROM? JAN-PATRICK: IT IS NOT COMING FROM EUROPE. HE WAS VERY CLEAR GROWTH IS COMING FROM ASIA AND THE U.S. THESE ARE THE AREAS THE BANK IS FOCUSING ON. IT WAS INTERESTING WHEN HE TALKED ABOUT CAPITAL AND REGULATION HE WAS SHRINKING THE BACK — SHRINKING THE BANK BACK TO GREATNESS IS NOT THE WAY. HE SHOWED US HE IS ABLE TO DO THAT. DEPOSITS WERE GROWING, WEALTH MANAGEMENT IS GREAT. WE KNOW IT IS A SEASONAL BUSINESS AND VOLATILE. THE OPERATIONAL BUSINESS OF UBS IS DOING OK. WE SAW SOME GROWTH COMING FROM THE FORMER CREDIT SUISSE ENTITIES. OVERALL I WOULD SAY THAT OPERATIONAL THE BANK IS ON A GOOD PATH AND THEY NEED TO KEEP ON DOING THAT. SHAREHOLDERS WILL PROBABLY BE HAPPY WITH THAT. ANNMARIE: WHEN IT COMES TO CREDIT SUISSE CLIENTS AND MERGING THEM ONTO UBS PLATFORMS, WHAT IS THE TIMELINE? JAN-PATRICK: THEY STILL WANT TO COMPLETELY MERGER OF THE LEGAL ENTITIES IN THE COMING WEEKS. THAT IS THE FIRST IMPORTANT STEP , TO CONTINUE THE SHARE BUYBACK THEY HAVE ANNOUNCED. BY THE END OF THE YEAR WILL BE ROUGHLY HALFWAY THROUGH THE WHOLE MERGER. THE FURTHER WE MOVE DOWN THE TIMELINE THE CLEARER THE RISK CAN BE ON WHAT THEY WANT TO DO. TODAY IN THE REPORT THEY TOLD US THEY HAVE CLOSED 35% OF THE BOOKS. THEY HAVE DECOMMISSIONED 15% OF THE I.T. INFRASTRUCTURE. IT SHOWS YOU THERE IS STILL SOME WAY TO GO BUT THEY ARE ON TRACK AND THIS IS THE MOST IMPORTANT THING. THEY ARE TICKING THOSE BOXES AND TAKEN THOSE MILESTONES THEY HAVE LAID OUT A YEAR AGO. THAT IS ALL THE MARKET CARES ABOUT FOR THE MOMENT, THAT THEY STICK TO THE PLAN. THAT THE PLATE IS EXECUTED EXTREMELY WELL. THE WHOLE THING COULD ACT AS A BLUEPRINT FOR FURTHER MERGERS. NOT IN TERMS OF THE TACTICAL BUT IN HOW YOU COMMUNICATE WITH THE MARKET AND HOW YOU EXERCISE ON YOUR PLAN, THAT YOU ARE NOT OVERPROMISING BUT CLEAR ON WHAT YOU ARE DOING. BRINGING BACK THE CEO IS A PERFECT STEP. REALLY WELL DONE. THAT IS WHY THE SHARE PRICE IS SO STRONG EVEN THOUGH THE NUMBERS ARE NOT 100% SUPPORTING THAT. THE BANK IS DOING RIGHT THING AND COMMUNICATING AND EXERCISING ON THE PLANS. JONATHAN: GREAT TO CATCH UP AS ALWAYS. SMALLER MOVE FOR THE WALT DISNEY COMPANY. COMING INTO THIS EARNINGS RELEASE THE STOCK WAS UP 29% THROUGH MONDAY. PULLING BACK IN TOUCH BY 1%. IF YOU’RE JOINING US WELCOME TO THE PROGRAM. 121 EPS AGAINST AN ESTIMATE OF 112. PROPERTY CLIMBING 12% AT THE DIVISION THAT INCLUDES THEME PARKS AND LOSSES FOR STREAMING NARROW THAN EXPECTED. LISA: THIS IS A COMPANY THAT HAS BEEN BOLSTERED BY RAISING PRICES ON PEOPLE WHO ARE DISNEY WORLD FANATICS. THEY WERE ABLE TO CASH AND MUCH MORE SIGNIFICANTLY. THERE WERE BRIGHT SPOTS AND WEAKER SPOTS. CRICKET, THERE WAS CONCERNED ABOUT INCREASED COSTS AROUND CRICKET. THERE IS A QUESTION ABOUT WHAT THEY WILL DO TO INCREASE THEIR EARNINGS BY 20% TO 25% WITHOUT A MORE MATERIAL SHIFT IN THE BUSINESS STRATEGY. ANNMARIE: ALSO THEY TOOK IN MORE THAN $2 BILLION IN CHARGES RELATED TO START INDIA. JONATHAN: I TRIED TO TALK ABOUT CRICKET. ANNMARIE: BECAUSE YOU ARE A WICKETKEEPER? JONATHAN: ANNMARIE SAID IT WAS LIKE TALKING ABOUT QUIDDITCH. ANNMARIE: THAT WAS INCLUDED IN THEIR EARNINGS YOU CAN FOLLOW THAT CLOSER. JONATHAN: HERE IS YOUR BLOOMBERG BRIEF WITH DANI BURGER. DANI: SCORES OF PRO-PALESTINIAN PROTESTERS WERE BLOCKED BY THE POLICE FROM GETTING CLOSER TO THE MET GALA. DEMONSTRATORS WERE HEADING TOWARDS THE VENUE WHEN THEY WERE INTERCEPTED BY THE NYPD. A GROUP OF THEM HAD TRIED SKIRTING THE POLICE BY GOING TO BE A CENTRAL PARK AND WERE MET WITH BARRICADES AND THREATS OF ARRESTS. LET’S GET YOU A QUICK CHECK ON PALANTIR, DOWN 10%. THE BAR WAS HIGH FOR THEM GIVEN IT HAS BEEN ONE OF THE MARKETS AI DARLINGS WITH A 47% YEAR TO DATE GAIN. ANALYST AT WILLIAM BLAIR SAID THE STOCK WAS DOWN SO MUCH BECAUSE OF A STOP — BECAUSE OF A SHARP SLOWDOWN IN U.S. COMMERCIAL REVENUE GROWTH, SOMETHING CRUCIAL TO ITS AI PUSH. APPLE IS DEVELOPING A HOMEGROWN PUSH — A HOMEGROWN SHIP TO RUN AI AND DATA CENTERS. IT WILL BUILD ON PREVIOUS EFFORTS TO MAKE IT IN-HOUSE CHIP ACCORDING TO THE JOURNAL, WHICH CITED UNIDENTIFIED PEOPLE FAMILIAR TO THE MATTER. THE CODENAME PROJECT INTERNALLY IS AC/DC WHICH STANDS FOR APPLE CHIPS AND DATA CENTERS. APPLE ANNOUNCING MAJOR UPDATES TO ITS IPADS. JONATHAN: WILL CATCH UP WITH DANI IN ABOUT 30 MINUTES TIME. PEOPLE ACTUALLY PLAY QUIDDITCH? THEY DRESS OUT AND FLY AROUND ON FAKE BROOMS? LISA: THEY DO NOT FLY BECAUSE WE CANNOT FLY AROUND ON FAKE BROOMS. I’M NOT AN EXPERT ON REAL LIFE QUIDDITCH. JONATHAN: IS IT THAT JUST LACROSSE? THERE’LL BE LACROSSE PLAYERS WATCHING THIS WHO ARE LIKE HOW DARE YOU? THE FED URGING PATIENCE. >> WE WANT TO MAKE SURE WE ARE LOOKING AT THE BROAD PICTURE. WE WILL MAKE OUR DECISIONS BASED ON THAT. JONATHAN: THAT CONVERSATION IS COMING UP SHORTLY. PEOPLE GET VERY PASSIONATE ABOUT LACROSSE 55-YEAR-OLD MAN STILL GOING ROUND WITH THE T-SHIRT. ANNMARIE: I PLAYED LACROSSE. LISA: THE QUIDDITCH PLATE IN REAL LIFE IS CALLED MUGGLE WHICH. JONATHAN: BECAUSE YOU ARE A MUGGLE. JONATHAN: EQUITIES ON THE S&P 500. POSITIVE .04%. BRAMO HAS LOST IT. 4.46 ON THE 10 YEAR. DOWN FIVE CONSECUTIVE SESSIONS. A MOVE LOWER OF MORE THAN 20 BASIS POINTS ENCOURAGED BY CHAIRMAN POWELL AND THE DATA. THE FED URGING PATIENTS. — THE FED URGING PATIENCE. >> WANT TO MAKE SURE WE ARE LOOKING AT THE BROAD PICTURE. WE HAVE MAXIMUM EMPLOYMENT AND PRICE STABILITY GOALS. WE WANT TO MAKE SURE WE HAVE THE INFORMATION THAT SPEAKS TO ALL OF THAT AND AS THE DATA COMES IN WE WILL BE MOVING IN THE DIRECTION WE WANT TO SEE ON INFLATION AND IN TERMS OF RESTORING BALANCE TO THE ECONOMY. WE WILL MAKE OUR DECISIONS BASED ON THAT. JONATHAN: NEW YORK FED PRESIDENT JOHN WILLIAMS SINGH THERE’LL BE RATE CUTS AND RICHMOND FED PRESIDENT SAYING THE FULL IMPACT OF RATES YET TO COME. SIMON FRENCH JOINS US NOW FOR MORE. WONDERFUL TO GET YOU ON THE PROGRAM TO GET YOUR VIEWS ON THE RECENT FED SPEAK. WALK ME THROUGH YOUR BASE CASE AND WHETHER IT HAS CHANGED AFTER PAYROLLS ON FRIDAY? SIMON: WE GET OUR FIRST RATE CUT IN SEPTEMBER. I THINK YOU CAN MAKE THE ARGUMENT THAT THE MARKET OVER INTERPRETED THE WEAKNESS OF THE EARNINGS DATA. WE KNOW THE PAYROLL AND WAGE INFLATION PICTURE IS ONE OF THOSE — IF YOU’RE TALKING ABOUT THE BROADER MARKET NARRATIVE THERE NEEDS TO BE PROGRESS ON THE HEADLINE INDICATORS ON CPI INFLATION AND PCE INFLATION STALLED FOR SIX MONTHS. THE FIT COMMUNICATION MINDIS WAS THE — THE FIT COMMUNICATION MINUTES WAS THE LAST MARKET MOVING GUIDE THAT DO NOT SEE THE THRESHOLD ACROSS THE CORE PRICE INDICES OF MAKING SUFFICIENT PROGRESS TO MAKE ANY CUTS. JONATHAN: I WANT TO PICK UP ON SOMETHING YOU SAID THAT MAYBE WE ARE PUTTING TOO MUCH GROWTH ON THE WAGE FIGURE. CAN YOU EXPLAIN WHY THAT MIGHT BE THE CASE? SIMON: YOU HAVE A LOT OF BASE EFFECT AT THE MOMENT THAT ARE PERHAPS BEING OVER INTERPRETED. PEOPLE HAVE PLACED TOO MUCH WEIGHT ON THE TIGHTNESS OR OTHERWISE OF THE U.S. LABOR MARKET AS A DRIVER OF WAGE PRICES. I THINK THOSE MODELS, THAT DID NOT WORK PARTICULARLY WELL PRE-THE COVID PANDEMIC AND FREE INFLATION SURGE HAVE NOT WORKED PARTICULAR WELL AT UNDERSTANDING NOMINAL WAGE WARS AROUND MOST OF THE DEVELOPED WORLD. YOU WOULD NATURALLY EXPECT A RETURN — A FALLING OF THE NOMINAL INCREASE IN WAGES TO ATTACK ON TO THE FALL IN ENERGY PRICES AND THE SUPPLY-SIDE ELEMENT OF PRICE GROWTH. IT IS NO REAL READING OF THE UNDERLYING TIGHTNESS OR CAPACITY OR WEAKENING OF JOBS DEMAND IN THE U.S. ECONOMY. I THOUGHT THAT WAS THE MISINTERPRETING WE SAW LAST WEEK. LISA: ONE OF THE REASONS WHY THE MARKET IS PRICING IN RATE CUTS AND THE FLIPPING AND FLOPPING IS BECAUSE THERE IS A FEELING THAT WHEN YOU START TO SEE A LITTLE BIT OF WEAKENING IT WILL HAPPEN ALL AT ONCE. WE HAVE HEARD THIS FROM CITIGROUP AND A LIST OF PEOPLE. DO YOU ADHERE TO THAT IDEA? SIMON: I DO NOT THINK THAT IS THE WAY ECONOMIES WORK, I THINK IT IS THE WAY MARKETS WORK. IF YOU LIKE THE BATTLE THIS YEAR FOR NARRATIVES. THAT IS A NICE WAY OF DESCRIBING IT. THOSE WHO LOOK AT PREVIOUS CYCLES, WHICH IS ONE OF THOSE FAST-MOVING CONSUMER GOODS, I THINK IT WAS PRINGLES, WHEN YOU POP YOU CANNOT STOP. IF YOU ARE THE FEDERAL RESERVE ONCE YOU START CUTTING RATES CAN YOU STOP? EVERYONE IS TALKING ABOUT A VERY GRADUAL EASING CYCLE, IF YOU LOOK BACK AT PREVIOUS EPISODES YOU SAY THAT IS NOT REVEALED BEHAVIOR. ONCE YOU START THE EXERCISE YOU HAVE TO KEEP GOING. THAT IS ONE OF THE REASONS WHY WE HAVE HAD THIS TUG-OF-WAR BETWEEN A NARRATIVE THAT TAKES HISTORIC REVEALED BEHAVIOR VERSUS THOSE LOOKING AT THE REAL TIME INDICATOR AND SAYING IT DOES NOT JUSTIFY AN EASING CYCLE FROM THE FED OR ANY MAJOR CENTRAL BANKS. JONATHAN: CENTRAL BANKS — LISA: CENTRAL BANKS IN A REBRANDING EFFORT. MAYBE WE SHOULD GO TO THE PRINGLES PEOPLE. YOU CAN POP AND THEN LET IT GET STALE. HOW MUCH ARE WE SEEING THE MESSAGE COMING FROM TOM BARKIN, HOW MUCH OF THAT IS WHAT FED OFFICIALS ARE TRYING TO COMMUNICATE, OR DO THEY ALSO THINK THEY WILL HAVE TO CUT RATES AGGRESSIVELY AND THEY WILL NOT GET BEHIND THIS HIGHER FOR LONGER NARRATIVE? SIMON: WHILE THIS IS NOT EXPLICIT FORWARD GUIDANCE, IT IS FINANCIAL CONDITIONS MANAGEMENT. WE HAVE SPOKEN ON PREVIOUS SHOWS FOR THE LAST OF THE — FOR MOST OF THE LAST 18 MONTHS ABOUT THE CREDIBILITY OF THE MESSAGE BEING KEY THAT YOU DO NOT HAVE TO FOLLOW THROUGH WITH THE POLICY MOVE THE MARKET WILL HAVE INDIGESTION ABOUT. WHETHER THAT IS THE SPECULATION ROUND OF FURTHER HIKE TO INTEREST RATES OR WHETHER THAT IS THE CREDIBILITY OF YOUR MESSAGE OF AN EASING CYCLE. IF YOU CAN GET THAT MESSAGE ACROSS AND SAY REVEALED BEHAVIOR OF PREVIOUS CYCLES MAY NOT BE THE GUIDE YOU THINK IT IS EVEN THOUGH IT POPULATES ALL OF YOUR RESPONSE MODELS, THAT IS AN IMPORTANT CHARACTERISTIC OF FED SPEAK THIS WEEK, NEXT WEEK, ALL THE WAY THROUGH THE SUMMER. THE ABILITY TO ASCRIBE CREDIBILITY TO THAT MESSAGE VERSUS WHAT IS TRYING TO AVOID THE DIFFICULT POSITION YOU DO NOT WANT TO BE IN AS A POLICYMAKER, THAT IS THE SKILL IN THESE MARKETS. LISA: IN THE MEANTIME THE SECOND AND THIRD TIER BANKS — AS JOHN WOULD CALL THEM — WE GOT THE BANK OF SWEDEN. THEY DID NOT CUT RATES. ON THURSDAY WE GET THE BANK OF ENGLAND DECISION. HOW MUCH DO YOU EXPECT TO PUSH BACK FROM CENTRAL BANKS NOT BECAUSE CONDITIONS WARRANT BUT BECAUSE THE FED HAS NOT GIVEN THE GREEN LIGHT AND THEY NEED THAT? SIMON: I WROTE IN MY NOTES IN 1984 THERE WAS THE PLAZA COURT. THE U.S. DOLLAR, OUR CURRENCY, YOUR PROBLEM. 40 YEARS ON IT IS OUR CURRENCY, OUR DEBT, OUR DEMAND, YOUR PROBLEM. THAT IS SYMPTOMATIC WHAT WE WILL HEAR FROM THE ECB AND LATER IN THE WEEK FROM THE BANK OF ENGLAND. HOW MUCH CURRENCY WEAKNESS DO YOU WANT TO ABSORB INTO YOUR DOMESTIC ECONOMY? YOU ONLY NEED TO LOOK AT EVENTS IN JAPAN TO RECOGNIZE THERE IS A POTENTIAL PATH WHERE YOU START TO HAVE QUITE DAMAGING CURRENCY WEAKNESS. PERHAPS NOT IN TERMS OF JAPAN IMPORTING INFLATION RISK, BUT FURTHER UP LIKE THE SECOND AND THIRD TIER BANKS JONATHAN REFERS TO, YOU HAVE REAL CONCERNS, MAYBE NOT SPOKEN PUBLICLY BUT CERTAINLY PRIVATELY ABOUT CURRENCY WEAKNESS GENERATING A SECOND ROUND OF INFLATIONARY FACTS. JONATHAN: YOU ARE ONE OF THE BEST. SIMON FRENCH ON THE LATEST. ENJOY YOUR PEACE IN THE TIMES OVER THE WEEKEND. IT DOES NOT MEAN I HAVE ANY LESS RESPECT FOR THESE INSTITUTIONS. WORLD’S OLDEST CENTRAL BANK IN SWEDEN. IN TERMS OF THEIR IMPACT ON MARKETS YOU HAVE TIER ONE CENTRAL BANKS AND TIER TWO AND TIER THREE. LISA: WILL NOW CONSISTENTLY REFER TO THEM AS THAT AND CREDIT YOU. JONATHAN: THAT IS WHY I REFER TO THEM AS TO YOUR TWO AND TIER THREE. LISA: IS RELEVANT AND FAIR. THERE’S A QUESTION AROUND THE CENTRAL BANKER OF THE WORLD, JAY POWELL, HOW MUCH HE NEEDS TO SET A TONE BEFORE THE REST CAN FOLLOW. A LOT OF PEOPLE ARSON THE FIRST CUT DOES NOT MATTER. IS THAT TRUE BECAUSE THERE IS A PAIN POINT. JONATHAN: YOU ARE POINTING TO CHRISTINE LAGARDE. LISA: FASHION ICON. THE FASHION ICON OF ECONOMICS? ANNMARIE: SHE IS VERY CHIC. LISA: IS THAT YOUR MODEL? JONATHAN: YOU ARE IN ON THIS TOO? ANNMARIE: I AM NOT HAVING A GO. LISA: I THINK IT IS LOVELY. I THINK IT IS BEAUTIFUL. JONATHAN: COMING UP, DISNEY CFO HUGH JOHNSTON WILL BE JOINING US. FORMER WHITE HOUSE FELLOW ELLIOTT ACKERMAN AND DEBORAH CUNNINGHAM. THAT IS ALL STILL TO COME. EQUITY FUTURES POSITIVE NOT EVEN .1% ON THE S&P. YIELDS LOWER ON THE 10 YEAR. ♪ >> THE KEY DRIVER FOR U.S. EQUITIES HAVE BEEN EARNINGS DRIVEN BY LARGE CAP TRADE. >> THEY HAVE DELIVERED ON THE EARNINGS FRONT. >> THE BIGGEST DRIVER HAS BEEN BIG TECH COMPANIES. >> NEAR-TERM I LIKE BANKS AND OTHER SECTORS TO BENEFIT FROM THE GOLDILOCKS. >> WE ARE OPTIMISTIC FOR AN IMPROVED MERGERS AND ACQUISITIONS UNDERWRITING MARKET FOR THE REST OF THIS YEAR. >> THIS IS "BLOOMBERG SURVEILLANCE" WITH JONATHAN FERRO, LISA ABRAMOWICZ, AND ANNMARIE HORDERN. JONATHAN: THE SECOND HOUR OF BLOOMBERG SURVEILLANCE BEGINS RIGHT NOW. PLENTY TO TALK ABOUT. LET’S BEGIN WITH THE WALT DISNEY COMPANY. THAT STOCK LOWER 4% TO 5% IN THE PREMARKET FOLLOWING A DECENT RUN OF GAINS YEAR TO DATE. YOUR TO DATE. BEFORE TODAY WAS HIGHER 29%. A LITTLE BIT SOFTER THIS MORNING. THE NUMBERS DECENT. IT IS A BEAT ON EARNINGS. UPWARD REVISION TO THE OUTLOOK AND THE LOSSES IN THE STREAMING BUSINESS APPEARED TO BE NARROWING. LISA: PEOPLE STILL WANT TO GO TO THE PARKS AND STILL WANT TO GO ON DISNEY CRUISES. PEOPLE HAVE SEEN PRICING POWER RISING TO OFFSET THE LOSSES. THEY’VE ALSO SAID THEY WILL INCREASE GUIDANCE FOR FULL-YEAR GROWTH BY 20% TO 25%. A LOT OF THE GAINS HAVE COME FROM COST-CUTTING AS WELL AS A REFOCUSING. WHAT WILL ADDITIONAL GAINS COME FROM? ANNMARIE: I LOOK AT THIS TO BILLION DOLLARS IMPAIRMENT CHARGE THEY TOOK. THAT IS WHAT IS WEIGHING ON THE STOCK THIS MORNING. TO YOUR POINT THEY BEAT ESTIMATES AND NARROW IN TERMS OF THE LOSSES IN STREAMING TB BUSINESSES. HIGHER TICKET PRICES. YOU SEE THIS DEMAND FOR THESE EXPERIENCES AT THEIR THEME PARKS AND WIRE WE SEEING PRESSURE? JONATHAN: IT IS THE CONSUMER PRICE TOLERANCE I AM INTERESTED IN. WHAT WE HAVE HEARD REPEATEDLY HIS UPPER END STABILITY AND LOWER END FRAGILITY. WE HAVE HAD GUESTS THAT SAY THOSE WORDS. THE THEME PARK BUSINESS SEEMS TO BE BOOMING. LISA: PEOPLE STILL FAVORITE EXPERIENCES. THE POST-PANDEMIC LURE OF EXISTING IN THE WORLD AND NOT JUST THROUGH A SCREEN HAS PERSISTED. HOW FAR CAN THAT GO? I WOULD ARGUE THERE IS THIS ONE QUESTION MARK ALSO WHICH IS THE STREAMING NUMBERS DO NOT COME IN AS HIGH AS PEOPLE HAD EXPECTED FOR DISNEY PLUS. WHAT IS GOING TO OFFSET ON THE OTHER SITE AT A TIME CONSUMERS ARE WILLING TO SPEND ON THE EXPERIENCE. ARE THEY WILLING TO SPEND ON THE STREAMING? JONATHAN: THAT STOCK IS LOWER 4%. FUTURES ON THE S&P 500 POSITIVE 0.05%. THREE DAYS OF GAINS ON THE S&P. IN THE BOND MARKET YIELDS RALLY. LOWER TWO OR THREE BASIS POINTS ON THE 10 YEAR TO 4.46. COMING UP WE WILL CATCH UP WITH THE DISNEY CEO HUGH JOHNSTON. ALEX GEL OFF OF BERNSTEIN AND U.S. MARINE CORPS VETERAN ELLIOTT ACKERMAN AS ISRAELI TROOPS TAKE CONTROL OF THE RAFAH BORDER CROSSING. DISNEY REPORTING PHYSICAL SECOND QUARTER — DISNEY REPORTING FISCAL SECOND QUARTER PROFITS. PUTTING US NOW FOR MORE IS THE DISNEY CFO HUGH JOHNSTON. WONDERFUL TO CATCH UP WITH YOU ONCE AGAIN. I WANT TO BEGIN TALKING ABOUT THE THEME PARK BUSINESS AND THE CONSUMER PRICE TOLERANCE YOU SEE. YOU STILL HAVE THAT PRICING POWER AT A TIME WHEN MANY COMPANIES ARE REPORTING THERE IS UPPER END STABILITY BUT MAY LOWER END FRAGILITY? HUGH: GOOD MORNING AND GREAT TO BE WITH YOU. 30% EPS GROWTH IS WHAT LET US TO RAISE GUIDANCE TO 25% EPS GROWTH FOR THE YEAR WHICH IS QUITE STRONG. TWO BIG STORIES. NUMBER ONE, OUR EXPERIENCES BUSINESS WAS UP 10% ON A REVENUE BASIS. 12% ON A NO WAY OUT — ON AND OI BASIS. THE VALUE CONSUMER IS STRUGGLING AND MAKING CHOICES. WE ARE NOT SEEING AS MUCH IS THAT IN OUR PORTFOLIO OF PRODUCTS. THE OTHER POSITIVE IS THE STREAMING SERVICE. LAST YEAR WE LOST ABOUT $600 MILLION. THIS YEAR WE ARE ABOUT BREAKEVEN AND WE SAW 12% REVENUE GROWTH. WE WERE ENCOURAGED BY THE PROGRESS IN A RELATIVE SHORT TIME. LISA: YOU SAID YOU’RE NOT SEEING THAT KIND OF PRICE SENSITIVITY. HOW MUCH COULD YOU INCREASE PRICES HUGH:? HUGH:IS A GREAT QUESTION. WE TOOK PRICES UP IN THE BEGINNING OF THIS YEAR AND DID NOT SEE MUCH OF AN IMPACT. AS TO WHAT THE FUTURE BRINGS WE ARE VERY JUDICIOUS WITH THE WAY WE PRICE. WE WANT TO PROVIDE ACCESS TO AS MANY GUESTS AS WE POSSIBLY CAN. WE BELIEVE THE GREAT EXPERIENCES WE PROVIDE. PEOPLE ARE WILLING TO PAY FOR. JONATHAN: LET’S TALK ABOUT THE STREAMING BUSINESS JUST A LITTLE BIT MORE AND MORE SPECIFICALLY HULU. I WANT TO GET INTO THE FUTURE OF THAT BUSINESS. CAN WE TALK ABOUT THE LIKES OF SHOGUN ON HULU, HOW IMPRESSIVE THAT CONTENT WAS. WHEN YOU HAVE A BIG HIT OUT DOES IT TRANSLATE INTO GAINS FOR THE COMPANY? HOW DOES IT FALL TO THE BOTTOM LINE? HUGH: IT DOES CREATE TWO THINGS. IT BRINGS NEW SUBSCRIBERS. WE CALL THEM FIRST SUBSCRIBERS. THOSE SHOWS PULL PEOPLE INTO THE SERVICE. ONCE THERE INTO THE SERVICE THEY REALIZE THE GREAT AMOUNT OF CONTENT THAT IS OUT THERE. THOUGH SHOWS INCREASED STICKINESS OVER TIME. FROM BOTH PERSPECTIVES THEY ARE TRULY ADDITIVE. THE OTHER PIECE THAT IS TERRIFIC IS IT DOES INTEGRATE WELL WITH THE LINEAR BUSINESS. WE USE THESE DIFFERENT WINDOWS TO CHOOSE WHEN TO SHOW THINGS, WHETHER IT IS ON FX OR ON ABC AND THEN INTO THE STREAMING SERVICE. WE ARE GETTING QUITE GOOD AT REACHING DIFFERENT AUDIENCES, STREAMING BEING A YOUNGER AUDIENCE, THE LINEAR BUSINESS BEING A MORE MATURE AUDIENCE. IT GIVES US THE ABILITY TO REACH THE MOST PEOPLE WHICH IS TERRIFIC FROM AN ADVERTISING AND SUBSCRIBER PERSPECTIVE. JONATHAN: THAT SETS UP THE CONVERSATION ABOUT THE FUTURE OF HULU. HER REPORT YESTERDAY FROM REUTERS THAT JP MORGAN HAS VALUED THE COMPANY AT CLOSE TO $27.5 BILLION, MORGAN STANLEY VALUING HULU FOR COMCAST AT MORE THAN $40 BILLION. THEY ALSO REPORTED WE ARE LOOKING FOR AN INDEPENDENT VALUATION TO CLOSE THE GAP. COULD YOU TELL US OF THAT IS AN ACCURATE REPRESENTATION OF THE CURRENT STATE OF AFFAIRS? HUGH: WE HAVE A WELL-DEFINED PROCESS IN TERMS OF HOW THIS WILL PLAY OUT. JAN THAT I WILL NOT COMMENT RIGHT NOW. ONE OF THE DISCIPLINES — BEYOND THAT I WILL NOT COMMENT ON THAT. ONE OF THE DISCIPLINES I HAVE IS I TALK ABOUT EMANATE AFTER IT IS DONE. JONATHAN: LET’S TALK ABOUT GOING FORWARD FROM HERE. WHAT THE BIG OPPORTUNITIES ARE FOR THE STREAMING BUSINESS. HUGH: I THINK THERE ARE A MULTITUDE OF OPPORTUNITIES. NUMBER ONE, GREAT PROGRAMMING. WE CREATE SO MUCH OF OUR OWN IP. NUMBER TWO IS DRIVING ENGAGEMENT AND BUNDLING DOES THAT, WHETHER IT IS WITH SPORTS, WHETHER IT IS WITH LATIN AMERICA WHERE WE ARE PUTTING SPORTS, GENERAL ENTERTAINMENT COME AND DISNEY PLUS TOGETHER, AND WE ADDED HULU ON DISNEY PLUS. BUNDLING IS AN OPPORTUNITY. THIRD IS PASSWORD SHARING. THAT IS AN OPPORTUNITY THAT IS SUBSTANTIAL AND WILL DRIVE GROWTH. FOURTH IS DISTRIBUTION COSTS. GOING DIRECT TO CONSUMER IT WE CAN BUILD A STRONGER RELATIONSHIP WITH THE CONSUMER AND ALSO REDUCE OUR COST. FIT IS TECHNOLOGY. CLEARLY AN IN TERMS OF RECOMMENDATIONS. WE ARE WELL CONVINCED THIS WILL BE — ANNMARIE: YOU MENTIONED A NUMBER OF THINGS, INCLUDING PASSWORD SHARING. MUCH TO EXPECT THOSE INITIATIVES TO SAVE MONEY? WHAT IS THE COST-BENEFIT? HUGH: THINGS LIKE PASSWORD SHARING DRIVE REVENUE GROWTH. DISTRIBUTION COSTS SAVE MONEY. THINGS LIKE RECOMMENDATION ENGINES AND DIRECT TO CONSUMER MARKETING TENDS TO REDUCE CHURN WHICH ALLOWS YOU TO REDUCE MARKETING COSTS. THERE IS SYNERGY BETWEEN THE REVENUE BENEFITS AND THE COST BENEFITS. OVERALL WE ARE LOOKING TO MAKE THIS INTO A GREAT BUSINESS, NOT JUST A GROWTH BUSINESS BUT A GREAT MARGIN BUSINESS FOR THE COMPANY. LISA: WE HAVE BEEN TALKING ABOUT THE COST CUTTING OPERATIONS IN DISNEY. HAVE WE FINISHED SOME OF THE SHRINKING? ARE YOU BACK ON SOME SORT OF GROWTH TRAJECTORY? HUGH: WE ARE BACK ON A GROWTH TRAJECTORY. THAT SAID WE WILL ALWAYS BE LOOKING HARD IN OUR COST STRUCTURE AND IN PARTICULAR LOOKING TO REDUCE COSTS WHERE THEY HAD LESS VALUE THAN THEY USED TO AND REDEPLOY SOME OF THAT MONEY INTO THE BUSINESS SO WE CAN ACTUALLY GROW THE BALANCE OF THE BUSINESS. I THINK THAT IS A NEVER-ENDING EXERCISE OF LOOKING FOR WAYS TO BE MORE EFFICIENT AS A COMPANY SO YOU CAN INVEST IN YOUR FUTURE. LISA: WHEN YOU TALK ABOUT GROWING, WHERE THE GROWTH GEOGRAPHICALLY? IN U.S. THERE IS A STRONG BUSINESS AND IN EUROPE THERE IS A PARKS PRESENCE, BUT IN ASIA AND IN CHINA THAT HAS BEEN A GROWTH AREA. HOW MUCH CAN THAT BE A BRIGHT SPOT AT A TIME OF INCREASING GEOPOLITICAL TENSIONS? HUGH: CANNOT JUST CHINA BUT ALL OF ASIA REPRESENT GROWTH OPPORTUNITIES, BOTH IN TERMS OF THE STREAMING SERVICE AND IN TERMS OF THE PARKS BUSINESS. WE SEE GOOD GROWTH OPPORTUNITIES. EUROPE AND LATIN AMERICA CONTINUE TO BE GOOD GROWTH OPPORTUNITIES. NORTH AMERICA, WE ARE NOT DONE GROWING. WE THINK THERE ARE TRADITIONAL — WE THINK THERE OPPORTUNITIES AT HOME. ANNMARIE: WHEN IT COMES TO ASIA-PACIFIC IS IT DOMESTIC DEMAND OR TOURIST IN THE REGION? HUGH: A COMBINATION OF BOTH. ANNMARIE: WHEN YOU LOOK AT CHINA. TO LISA’S POINT, WE ARE GOING INTO A HEATED POLITICAL ELECTION IN NOVEMBER, VERY HOT RHETORIC REGARDING CHINA, IS IT BECOMING MORE CHALLENGING TO DEAL WITH AUTHORITIES IN BEIJING AND BUSINESS ON THE GROUND GIVEN THE INCREASED GEOPOLITICAL TENSIONS? HUGH: IT HAS NOT BEEN FOR US. ONE OF THE BENEFITS OF WHAT WE DO FOR A LIVING IS WE MAKE PEOPLE SMILE, WE BRING THEM HAPPINESS, WE BRING THEM TO THE MOST MAGICAL PLACE ON EARTH. THE GOVERNMENT IS INVESTING IN INFRASTRUCTURE TO MAKE IT EASIER FOR GUESTS TO GET TO AND FROM THE PARK, WE ARE CONTINUING TO INVEST IN THE PARK TO DRIVE GROWTH. IT IS DOING BETTER NOW THERE NEVER HAS. WE ARE THE FORTUNATE BENEFICIARIES OF BRINGING PEOPLE JOY IN A WORLD THAT NEEDS IT. JONATHAN: WE HAVE TO TALK ABOUT THE NBA DEAL AS WELL. HOW DO YOU MAKE MONEY FROM SOMETHING LIKE THAT? I WANT TO UNDERSTAND THE NUMBERS BUSINESS. HUGH: THE NBA, WE ARE IN THE MIDDLE OF DISCUSSIONS. I DO NOT COMMENT ON SPECIFIC DEALS UNTIL THEY ARE DONE. WE HAVE HAD A LONG AND PRODUCTIVE RELATIONSHIP WITH THE NBA. AS THINGS COME UP, WE’LL DECIDE WHETHER WE WANT TO CONTINUE IN THE CURRENT FORM, REDUCE THEM, OR EVEN NOT CONTINUE TO CARRY THEM ANYMORE. I THINK WE WILL BALANCE THE PORTFOLIO AND GET THINGS WE NEED AS THE 35% MARKET SHAREHOLDER IN THE SPORTS BUSINESS TO CONTINUE TO MAKE ESPN AND TRUE LEADER IN SPORTS. JONATHAN: YOU SAID YOU WILL NOT COMMENT ON DEALS UNTIL THEY ARE DONE BUT MAYBE WE’LL COME ON OTHER PEOPLE’S DEALS. SONY AND PARAMOUNT, HOW WILL THAT IMPACT HOLLYWOOD, IS THAT SOMETHING YOU WOULD IMPOSE — YOU WOULD OPPOSE? HUGH: I DID NOT HAVE A REAL COMMENT ON THAT. JONATHAN: I DID NOT EXPECT YOU TO. WE HAVE TO ASK. HUGH JOHNSTON. THAT STOCK IS DOWN BUT UP ON THE YEAR, HIGHER ABOUT 29%. THEME PARK BUSINESS THERE IS PRICING POWER, LOSSES IN THE STREAMING BUSINESS — THERE’S A LOT YOU CANNOT COMMENT ON — THERE’S A LOT HUGH CANNOT COMMENT ON. THERE IS A LOT OF POTENTIAL. LISA: ALSO THE POTENTIAL FOR PARAMOUNT AND IF THEY GET BOUGHT BY SONY. THERE IS A REAL QUESTION GOING FORWARD ABOUT WHAT MEDIA LOOKS LIKE AND WE HAVE NOT SHAKEN THAT OUT AND WHERE DISNEY FITS INTO THAT WILL HAVE TO BE DETERMINED BY THE LANDSCAPE. JONATHAN: SOFTER ON THE SESSION IN THE PREMARKET. LET’S GET YOU AN UPDATE ON THE STORIES ELSEWHERE. DANI: PRESIDENT BIDEN PLANS TO DENOUNCE ANTISEMITISM IN A SPEECH. HE WILL BE DELIVERING THE KEYNOTE ADDRESS AT THE HOLOCAUST MUSEUM’S DAY OF REMEMBRANCE. THE SPEECH WILL UNDERSCORE BIDEN’S POLITICAL DILEMMA SEVEN MONTHS INTO THE WAR IN GAZA. DIVISIONS WITHIN THE DEMOCRATIC PARTY COMPLICATE HIS ODDS OF WINNING THE NOVEMBER ELECTION. COLLEGE CAMPUSES ACROSS THE COUNTRY ARE STILL GRAPPLING WITH PRO-PALESTINIAN PROTESTS. COLUMBIA UNIVERSITY HAS CALLED OFF ITS MAIN COMMENCEMENT CEREMONY YESTERDAY LESS THAN A WEEK AFTER CALLING IN POLICE DEMONSTRATORS. HARVARD AND M.I.T. ARE WARNING STUDENTS TO LEAVE THEIR AND CAM IT OR FACE SUSPENSION. GOOD NEWS FOR THE BOND DESKS. BONUSES ARE SET TO SWELL THIS YEAR. PAYOUTS ROSE AS MUCH AS MUCH IS 25% THIS YEAR ACCORDING TO A REPORT. FOR THE BOND TRADERS AND EQUITY UNDERWRITERS BONUSES MAY RISE 20%. FOR INDUSTRYWIDE FIGURES, STILL ABOVE THE SOARING PAYOUTS. THE CONSULTANCY FIRM SAID WALL STREET IS ENTERING A PHASE MORE SUSTAINABLE GROWTH. THAT IS YOUR BLOOMBERG BRIEF. JONATHAN: WILL TOUCH BASE WITH YOU AGAIN IN ABOUT 30 MINUTES. UP NEXT, TRADERS LOOKING FOR THE BIG ROTATION. >> WE HAVE HAD THE BULL RUN FROM U.S. EQUITIES DRIVEN BY TECH AND THE AI STORY. FROM A MORE TACTICAL VIEW PIERCING MORE CONVERGENCE. JONATHAN: THAT CONVERSATION JUST AROUND THE CORNER. LIVE FROM NEW YORK, GOOD MORNING. JONATHAN: EQUITIES ON THE S&P 500 UNCHANGED THIS MORNING FOLLOWING A THREE-DAY WINNING STREAK ON THE S&P. YIELDS LOWER FOR A FOR A FIFTH CONSECUTIVE SESSION IN THE BOND MARKET. DOWN THREE BASIS POINTS ON THE 10 YEAR. 4.45. TRADERS LOOKING FOR THE BIG ROTATION. >> WE HAVE HAD THE BULL RUN FROM U.S. EQUITIES DRIVEN BY TECH AND THE AI STORY. THAT IS A SECULAR THING THAT MAKES THE U.S. STAND OUT A STRUCTURAL BASIS. FROM A MORE TACTICAL VIEW WE ARE SEEING MORE CONVERGENCE. A BIT OF A CATCH UP TRADE. JONATHAN: THE S&P 500 ON TRACK FOR ITS BEST THREE-DAY RUN THIS YEAR WITH INVESTORS LOOKING OUT FOR OPPORTUNITIES ACROSS THE BROADER MARKET. BERNSTEIN WRITING "THEY’RE BIG FANS OF THE MARKET BROADENING OUT, NOT ONLY AS STOCK PICKERS BUT IS A BIG INDICATOR. WE LOOK BACK AT WHEN CONCENTRATION GAVE WAY TO BREATH AND THE RESULTS ARE GOOD FOR THE ECONOMY AT THE MARKETS." ALEX IS WITH US. WHY DO YOU THINK THIS COULD BE DURABLE? ALEX: EVERYONE WAS SO CONCERNED WHEN THE MAGNIFICENT SEVEN STARTED TO WEAKEN. OUR VIEW IS WE HAVE BEEN WAITING FOR IT FOR A WHILE AND WE ARE HAPPY TO SEE A LOT OF THE FORGOTTEN 493,. OUR VIEW IS A BROADER MARKET — A LOT OF THE FORGOTTEN 493 COME UP. INVESTORS ARE NOT FOCUSED ON A SMALL SUBSET OF COMPANIES BUT ON BROAD MARKET OPPORTUNITIES. JONATHAN: DOES THIS EXTEND TO SMALL CAPS? APRIL WAS DREADFUL FOR THE RUSSELL. WHY DOES THIS GET BETTER? ALEX: IF YOU TELL ME WHERE THE ECONOMY LANDS AND INFLATION LANDS THAT I CAN TELL YOU WHAT SMALL CAPS WILL DO. SMALL CAPS ARE EXTREMELY DEPENDENT ON THE U.S. ECONOMIC EXPANSION. IT IS HARD FOR THEM TO DO WELL WHEN THE ECONOMY IS BOUNCING AROUND. OUR VIEW IS WE ARE NOT IN RECESSION, WE DO NOT THINK WE ARE GOING INTO RECESSION, BUT IT IS BEEN HARD FOR SMALL CAPS TO BREAK OUT. LISA: IT HAS ALSO BEEN YIELDS HAVE BEEN HIGHER THAN SMALLER COMPANIES CAN SUSTAIN. THERE ARE MORE INTEREST-RATE SENSITIVE AND THEIR CONCERNS ABOUT THE DEBT. A MUCH IS YOUR VIEW PREDICATED ON THE IDEA OF A FED THAT CAN CUT RATES IN THE FACE OF IMMACULATE DISINFLATION? ALEX: I DO NOT THINK THE FED NEEDS TO CUT RATES AS LONG AS THEY DO NOT HIKE RATES. OUR VIEW IS THE 10-YEAR FINISHES THE YEAR AT 4.25%, NOT FAR FROM WHERE WE ARE TODAY. IT WILL BE A GRIND. IT WILL NOT BE LIKE IT WAS A ROCK STAR TORI 24 IT WAS IN 2023, BUT WE WILL GRIND HIGHER FROM HERE. LISA: THIS WILL BE NOT NECESSARILY IN THE FACE OF WEAKNESS BUT SIMPLY NORMALIZATION. NOT ALL RATE CUTS ARE CREATED EQUAL. JONATHAN: IT HAS BEEN A WHILE — ALEX: IT HAS BEEN A WILD SINCE WE HAVE SEEN A RATE CUT THAT OCCURRED SINCE WE HAVE NOT SEEN AN EMERGENCY. THERE ARE NOT A LOT OF PEOPLE THAT REMEMBER THE LAST TIME WE CUT RATES WHEN EVERYTHING WAS FINE. THIS WILL BE THE FIRST EXPERIENCE. WHAT YOU HAVE SEEN AS INVESTORS ARE WAITING AND WAITING AND CANNOT WAIT TO GET TO THE OTHER SIDE WHERE WE WILL HAVE THAT FIRST CUT. OUR VIEW IS IT IS DECEMBER. TODAY IT IS MAY. MAYBE DECEMBER OR THE NEXT TIME I AM HERE I SAY WE NEVER SAID DECEMBER, IT IS MARCH. OUR EXPECTATION IS RATES STAY WHERE THEY ARE, POTENTIALLY A CUT AT THE END OF THE YEAR, THAT IS SUPPORTED BY MARKETS. LISA: WAITING AND WAITING AS THE CASH AND MONEY MARKET FUNDS. THAT IS THE MARKET MEASURE FAMILY PEOPLE ARE WAITING. IT IS MORE THAN $6 TRILLION. IS THAT THE SIGNAL YOU SEE THAT THIS IS THE TIME WHEN YOU’LL START TO SEE MONEY MARKET FUNDS DOWN AS PEOPLE DEPLOY? ALEX: I WISH I COULD SAY THAT WOULD OCCUR. THE MATH IS RELIABLE OVER MULTIPLE PERIODS IN HISTORY. IF YOU ARE INVESTING OUT OF CASH AND INTO SOMETHING THAT HAS DURATION IN THE FIXED INCOME MARKETS, YOU DO MUCH BETTER SIX MONTHS IN ADVANCE OF THE FIRST RATE CUT. I THINK THIS ONE INVESTORS WILL BE LATE IN GENERAL. I THINK THEY WILL NEED TO SEE THE ANNOUNCEMENT COME OUT. WE ARE CUTTING. THEN WE WILL SAY IT LET ME MOVE THE MONEY MARKET. THERE NOT A LOT OF APPETITE TO MOVE IN ADVANCE EVEN THOUGH THE MAT SAYS YOU SHOULD. LISA: IS NEAT — JONATHAN: DISNEY IS DOWN THIS MORNING BY 6%. PRICING POWER AND THE THEME PARK BUSINESS, NOT WHAT WE’RE ARE HEARING ELSEWHERE. WE ARE HEARING A LOSS OF PRICING POWER PUSHING TOWARDS THE TIME WHEN MARGINS START TO GET SQUEEZED. HOW CLOSE DO YOU THINK WE ARE TO THAT BIG MOMENT IN THIS ECONOMY? ALEX: I THINK COMPANIES ARE BEING MUCH MORE CAREFUL WITH COSTS. I THINK THEY RECOGNIZE THAT TURNING THE DIAL AFTER INFLATION HAS PEAKED IS HARDER. A YEAR OR TWO AGO IT WAS EASIER TO RAISE PRICES. I SPEND A LOT OF TIME FLYING ACROSS THE COUNTRY AND I WATCH — NOT A TERRIFIC BAROMETER — WHERE WE ARE IN PRICING POWER. THERE ARE STILL INDUSTRIES THAT HAVE IT. IT IS NOT AS IF ONCE WE ARE OVER THIS PECAN INFLATION WILL BE IN DEFLATION. PRICES ARE NOT COMING DOWN, THEY ARE JUST NOT GOING UP. COMPANIES ARE FINE TUNING THEIR COST STRUCTURE TO ALLOW THEM TO BE AS PROFITABLE AS THEY ARE. WE ARE HAVING A PRETTY GOOD EARNINGS SEASON AND THAT WAS THE EXPECTATION. NOT AS GOOD AS WE HAVE HAD IN OUR EXPECTATION IS THAT CONTINUES FOR THE REST OF THE YEAR. JONATHAN: YOU MENTIONED INDUSTRIES WHERE THERE WAS PRICING POWER. WHICH ONES? ALEX: IT IS STILL IN DISCRETIONARY SPENDING WHERE THERE IS HOUSEHOLD BALANCE SHEET STRENGTH. TRAVEL AND LEISURE HAS BEEN VOLATILE. IT HAS BOUNCED AROUND. WE GET EXCITED ABOUT THE AI REVOLUTION. THERE ARE THOSE COMPANIES THAT WE VIEW AS ENABLERS OF THE AI SPACE AND THEY’VE BEEN ABLE TO CHANGE PRICING. THERE IS ALSO THE AI BENEFICIARIES THAT WILL PERFORM BETTER AND BE MORE PRODUCTIVE AS A DIRECT RESULT OF AI AND WE THINK THEY WILL COMMAND HIGHER PRICES AS WELL. ANNMARIE: WHAT ARE YOU STAYING AWAY FROM? ALEX: YOU HAVE TO BE CAREFUL ABOUT AREAS, COMPANIES THAT HAVE DONE EXCEPTIONALLY WELL WITHOUT THE EARNINGS. THERE IS A LOT OF HOPE THAT HAS OCCURRED IN THIS MARKET. THAT IS A BIG PART OF 2023. A LOT OF INVESTORS MADE BETS ON COMPANIES THINKING THEY WOULD DELIVER. AS WE HAVE SEEN THERE HAS BEEN WOBBLING IN EARNINGS IN THOSE NAMES. I WOULD SAY WE ARE FOCUSED ON RELIABLE AND TRANSPARENT EARNINGS WHERE WE HAVE GOOD VISIBILITY, AND STAYING AWAY FROM THE HOPE TRAIN. LISA: THERE’S A QUESTION ABOUT HOW MUCH COMPANIES ARE CONTROLLING COSTS. WE HAVE SEEN EARNINGS-PER-SHARE BETTER THAN REVENUES. THIS HAS BEEN CONSISTENT AND THIS IS THE PREDECESSOR TO COST-CUTTING. HOW FAR WILL THAT GO? WILL THAT GO TO JOBS OR OTHER AREAS? IS THERE ANYTHING LEFT TO CUT? ALEX: THERE ARE AREAS TO CUT BROADLY SPEAKING. HAVING SAID THAT YOU’VE SEEN THE JOBS NUMBERS STAY STRONG. I SAID ABOUT THE JOBS NUMBER ON FRIDAY IT IS AS PERFECT AS ONE COULD BE. I DO NOT HAVE AN EMOJI FOR GOLDILOCKS ON MY PHONE BUT I’M SENDING A BUNCH OF THREE BEARS. YOU WILL SEE COMPANIES LETTING PEOPLE GO OR SHRINKING COSTS BUT GETTING SCOOPED UP QUICKLY. IT IS STILL A TIGHT JOB MARKET AND THAT IS A KEY INDICATOR WE ARE NOT GOING INTO RECESSION. WE DO NOT GO INTO RECESSION WE HAVE A JOB MARKET LIKE WE HAVE TODAY. JONATHAN: STILL IMPRESSIVE. LATER ON TODAY WILL CATCH UP WITH MR. ZANDI OF MOODY’S. MANY PEOPLE HAVE COME ON THE PROGRAM AND TALK ABOUT THE SUPPLY-SIDE BOOM, PEOPLE CROSSING THE BORDER AND GIVING JOBS TO AMERICA WITHOUT WAGE GROWTH TAKING OFF. WE HAD A REPORT THAT BORDER CONTACTS HAVE DROPPED BY QUITE A LOT. IF YOU BELIEVE THAT IS WHAT WAS HOLDING BACK WAGES BEFORE, WHAT WILL THIS LOOK LIKE IN THREE MONTHS, SIX MONTHS, NINE MONTHS? LISA: IF THIS IS A SUPPLY-SIDE DRIVEN RESPONSE, IF THAT STOPS BEEN THE RESPONSE, HOW MUCH DO YOU SEE THE REAL WAGE PRESSURE COMING BACK INTO PLAY? HOW MUCH IS THIS A CONSISTENT GIVEN THAT CAN CONTINUE. JONATHAN: MARK ZANDI, CHIEF ECONOMIST OF MOODY’S JOINING US. COMING UP WE’LL CATCH UP WITH FORMER WHITE HOUSE FELLOW ELLIE ACKERMAN ON THE MIDDLE EAST. DISNEY NEAR SESSION LOWS. THAT STOCK WAS DOWN HARD IN THE PREMARKET COME IT IS -6%. ♪ JONATHAN: 0% WALT DISNEY COMPANY BY 6% IN THE LAST 5, 10 MINUTES OR SO. FIVE DAYS OF YIELDS FALLING ON A 10 YEAR. DOWN ANOTHER TWO OR THREE BASIS POINTS. WE’VE HAD A MOVE OF MORE THAN 20 BASIS LOWER, AROUND THAT ECI PRINT SINCE THEN, THAT MOVE HAS FADED AND FADED HARD. LISA: THE MARKET WAS EXPECTING A FED PIT. THEY DIDN’T GET IT, SO THEY WENT BACK TO THE WAY IT WAS OR. THE QUESTION REALLY IS JUST HOW MUCH ARE WE SWINGING TO THE OTHER SIDE? MAYBE WE GOT A COUPLE OF PRINTS THAT WERE UNEXPECTED? JONATHAN: AFTER COMMENTARY BACK IN U.S. OFFICIALS, JANET YELLEN AND JAPANESE OFFICIALS OUT OF THE MINISTRY OF FINANCE. ANNMARIE: SHE SAID SHE EXPECTS INTERVENTIONS TO BE RARE, THEN SHE SET WHAT ARE RUMORS WHICH I –? LISA: WHY WOULD THEY? WHAT IS THAT THE USS WHY DIDN’T YOU GIVE US A QUALIFIED ABOUT THAT OF THIS? PEOPLE ARE SAYING THAT THIS IS A DROP IN THE POCKET. IT IS NOT LIKE THEY ARE TRYING TO MANIPULATE THE CURRENCY FOR SOME SORT OF TRADE DYNAMIC THIS IS SIMPLY A WAY TO STABILIZE SOMETHING. JONATHAN: THEY HAVE AN AGREEMENT TO INTERVENE IN CERTAIN CIRCUMSTANCES AND FOR THERE TO BE A IN TRIPS TO PARTIES AT — CORRESPONDENCE. LISA: I CERTAIN POINT THAT JONATHAN: HERE WE ARE. CURRENT MONETARY LESION TARGET MINNEAPOLIS 1:15 THIS AFTERNOON. DON’T MISS THAT. SEVEN MORE SPEAKERS ON DECK LATER THIS WEEK. " I CARE OF I PACED LIKE OUTLOOK TO BE HAPPY LESION WILL FURTHER WITH THE POLICY. CURRENT RATES OF THE CURRENT LEVEL, WE KEEP LOCKYER. LISA: WHAT THIS MARKET IS LOOKING FOR INSIDE RIGHT CAP LIKE HOLDING NAMEPLATE CUT OFF FUTURE? YOU HAVE A JOB WITH THE SAME WE ARE GOING TO MAKE A CUT, IT IS JUST TERRIBLE WHEN. JONATHAN: AS OUR GOOD FRIEND TK WOULD SAY, EXTEND THE AXIS. THANKS IN PART TO NARROWER LOSSES IN THE STREAMING BUSINESS AND HIGH TICKET PRICES. EARNINGS GROWTH TO 25% FROM 20. NOT ENOUGH TO SATISFY A LOT OF INVESTORS. STOCKS DOWN BY MORE THAN 6% AFTER A PRETTY STELLAR RUN. ANNMARIE: UTTERLY PROFIT AND THIS HAS TO GO TO THE LIKES OF PEOPLE LIKE YOU WATCHING "SH OGUN." PRETTY GOOD NUMBERS, YET THE STOCK IS A LITTLE BIT LOWER THAN EXPECTED. LISA: THEY CAME IN SHORT OF ESTIMATES. HOW ARE THEY GOING TO GROW? IS IT JUST TO SELLOFF DIFFERENT PIECES OF THIS? WE ARE NOT REALLY GETTING CLEAR ANSWERS. JONATHAN: STREAMING IS A VERY DIFFICULT BUSINESS RIGHT NOW. WE WILL CATCH UP WITH STEVE EISMAN A LITTLE BIT LATER. HE IS SETTING GOOD TIMES. YOU TALK ABOUT STORIES AND BAD TIMES YOU FOCUS ON BALANCE SHEET. 2020 WAS GOOD TIMES FOR STREAMING. 2024 IS BAD TIMES. LISA: WHICH IS THE REASON YOU’VE SEEN SOME IN DISCUSSIONS AROUND CONSOLIDATION WHICH RAISES THE RUSSIAN OF HOW ARE THEY GOING TO CONSOLIDATE? RIGHT NOW THE FOCUS IS NOT ON EXPANDING THEIR BASE OF SUBSCRIBERS, IT IS ON PASSWORD SHARING, SOME OF THESE OTHER REVENUE DRIVERS. HOW MUCH CAN YOU BANK ON THAT AND WHAT PRICE POINTS CAN PEOPLE EXPECT? JONATHAN: STOCK LOWER BY ABOUT 6% IN THE PREMARKET. ISRAEL ORDERED PLANS TO TAKE THE GAZAN CITY OF RAFAH. HAMAS SAYING ALL MOVING –, THIS COMES AFTER ISRAEL REJECTED A CEASE-FIRE AGREEMENT SAYING IT IS FAR FROM ISRAEL’S NECESSARY DEMANDS. ELLIOT, WE TALKED IN THE PAST ABOUT THE NATURE OF COMBAT IN GAZA. HOW DIFFERENT WILL IT BE IF THEY BECOME MORE AGGRESSIVE IN PLACES LIKE RAFAH> >> I THINK AS THIS OFFENSIVE PROCEED, WHAT WE ARE NATURALLY GOING TO SEE IS THAT HAMAS WILL HAVE ITS BACK INCREASINGLY TO A WALL IN THE NATURE OF THE FIGHTING COULD VERY WELL BECOME MUCH MORE DESPERATE AND MUCH MORE AGGRESSIVE. CONVERSELY, THE ISRAELIS ARE VERY MUCH ON THE CLOCK, GETTING TO A POINT WHERE THE INTERNATIONAL IMMUNITY NEEDS TO SEE SOME TYPE OF LIGHT AT THE END OF THE TIME WILL HEAR. ANNMARIE: AXIOS SAYS THE BIDEN ADMINISTRATION KNEW ABOUT THE LATEST CEASE-FIRE DEAL PROPOSAL THAT WAS NEGOTIATED BUT DID NOT BRIEF ISRAEL BEFORE IT GOES ON TO SAY THIS EPISODE CREATED DEEP DISAPPOINTMENT AND SUSPICION AMONGST SENIOR ISRAELI OFFICIALS. HOW DIVIDED RIGHT NOW DO YOU SEE THE BIDEN ADMINISTRATION WITH NETANYAHU AND HIS WAR CABINET? >> I THINK TENSIONS COULD NOT BE HIGHER. PRESIDENT BIDEN AS WE ARE SEEING ON COLLEGE CAMPUSES AROUND THE UNITED STATES AND AS WE ARE HEADING INTO THE DENTAL ELECTION IN THE WALL IS PAYING A VERY REAL POLITICAL PRICE FOR THE WAR THAT IS GOING ON IN GAZA. PRESIDENT BIDEN IS NOT JUST AN ABSTRACTION, HIS EXISTENCE AND HIS SECOND ADMINISTRATION COULD IN MANY WAYS HINGE ON GETTING SOME TYPE OF RESOLUTION IN GAZA, SO TENSIONS ARE VERY HIGH NOT JUST INTERNATIONALLY, DOMESTICALLY PROVIDING ANNMARIE: WHEN YOU LOOK AT THAT DEEP PRESSURE AND THEN YOU SEE THAT IS REAL EVEN YESTERDAY WHEN THEY SAID THAT THEY WILL NOT ACCEPT STEEL BUT THEY WANT TO SEEK AN AGREEMENT, AND WE DO KNOW MEDIATORS WILL BE IN EGYPT TODAY, DO YOU THINK WE CAN GET SOME SORT OF AGREEMENT? >> IT IS TO BE SEEN. IN ANY CONFLICT ULTIMATELY YOU ONLY GET AN AGREEMENT WHEN BOTH SIDES REALIZE THEY HAVE MORE TO GAIN BY NEGOTIATING THAN BY FIGHTING. ISRAEL AT THIS POINT DOES NOT DEAL THAT HAS MORE TO GAIN BY NEGOTIATING. IT DOESN’T FEEL THAT IS GOING TO GET ALL OF THE HOSTAGES RELEASED AND IT FEELS THAT HAMAS STILL REPRESENTS A THREAT THAT IS UNTENABLE ACROSS THEIR BORDER. THEY WOULD LIKE TO NEGOTIATE, BUT ONLY TO A POINT. THIS NECESSITATES THAT BOTH SIDES DECIDE THAT THEY NO LONGER HAVE MORE TO GAIN BY FIGHTING AND WE ARE JUST NOT THERE YET. LISA: WE WERE SPEAKING WITH NORMAN RULE EARLIER THIS MORNING AND HE SET ALL THE PRESSURE RIGHT NOW HAS BEEN ON ISRAEL. THERE HASN’T BEEN THAT MUCH PRESSURE ON HAMAS. DO YOU AGREE WITH THAT? >> ABSOLUTELY. I THINK THAT WHAT HAMAS AND THEIR ALLIES, PARTICULARLY IRAN HAS DONE IS THEY HAVE DONE AN EXCEPTIONAL JOB RINGING THE WAR TO EVERYBODY’S DOORSTEP, MAKING IT THE NUMBER ONE ISSUE THAT HAS BEEN RUNNING IN THE U.S. NEWS THE LAST WEEK 10 DAYS ON THESE COLLEGE CAMPUSES AND HAMAS HAS NOT HAVE THE SAME TYPE OF PRESSURE. ISRAEL HAS NOT BEEN ABLE TO DRIVE THE CONVERSATION. LOOK AT THE DISPROPORTIONATE AMOUNT OF MEDIA COVERAGE TO THESE PROTESTS IN THE U.S. VS. MEDIA COVERAGE ON THE FATE OF THE HOSTAGES. THAT IS NOT AN INDICTMENT OF U.S. MEDIA BUT MORE JUST EVIDENCE OF HOW HAMAS HAS DONE A BETTER JOBS DURING THE CONVERSATION. LISA: IT IS NOT NEW TO HAVE MEDIA ANOTHER FRONT OF DIFFERENT WARS AND TRYING TO SKEW PUBLIC OPINION BUT DEALS SLIGHTLY DIFFERENT IN TERMS OF HOW IT IS BEING DISTRIBUTED. DO YOU HAVE A SENSE OF WHAT IS DRIVING THIS, HOW HAMAS HAS GOTTEN THE UPPER HAND? >> IT IS REALLY A CONFLUENCE OF EVENTS. THERE’S BEEN A LOT OF CONVERSATION THAT HIGHER EDUCATION IN THE UNITED DATE AND TYPES OF MACRO NARRATIVES THAT HAVE BEEN FED INTO U.S. INSTITUTIONAL FOR A DECADE NOW. YOU HAVE A MEDIA SCAPE THAT IS INITIALLY GOING TO EVEN MORE SYMPATHETIC TO GAZA AND MORE SYMPATHETIC IN A WAY THAT FAVORS HAMAS. I THINK THE SEED THEY PLANTED OVER YEARS ARE VERY –BEARING FRUIT RIGHT NOW. ISRAEL’S ALLIES HAVEN’T PAID ATTENTION TO THIS LONG GAME OPINION. IT WILL BE INTERESTING TO SEE WHETHER ISRAEL AND ISRAEL’S ALLIES WAKE UP TO THAT. JONATHAN: I JUST WANT TO SIT ON THAT, THAT HAMAS, A DESIGNATED TERRORIST ORGANIZATION IN THE UNITED STATES IS DOING A BETTER JOB OF SECURING THE CONVERSATION THEN ISRAEL IS. WHAT DOES THAT TELL YOU ABOUT A SITUATION, IS HAMAS STEERING THINGS ARE JUST THE SITUATION ON THE GROUND IN GAZA THAT IS DOING THAT? >> WARS ARE ALWAYS FOUGHT IN TWO PLACES. THEY ARE FOUGHT IN THE BATTLEFIELD AND ALSO IN THE REALM OF OPINION. I THINK WHAT WE’RE SEEING IS A REAL DISCONNECT. ON THE ONE HAND WHERE ISRAEL CERTAINLY HAS THE ADVANTAGE ON THE BATTLE, WE’RE SEEING THAT IN THE NARRATIVE OR THE SEGMENTS OF WESTERN CULTURE, HAMAS VERY MUCH HAS THE UPPER HAND BECAUSE THEY ARE THE ONES REPRESENTING THEMSELVES AS THE VICTIMS HERE. I THINK WE JUST HAVE TO BE COGNIZANT ABOUT THAT. COUNTERINSURGENCY IT HAS OFTEN BEEN SAID IS LIKE TRYING TO EAT SOUP WITH A KNIFE. IT IS VERY SQUISHY TRYING TO WIN THESE IN THE REALM OF PUBLIC OPINION AND THAT IS WHAT WE ARE SEEING RIGHT NOW. JONATHAN: SOME MIGHT SAY IT IS IMPOSSIBLE. THE WAR BETWEEN HAMAS AND ISRAEL. BUT GET AN UPDATE ON STORIES ELSEWHERE. HERE’S DANI BURGER. "BLOOMBERG SERVEILLANCE" >> EMIRATES CHAIRMAN AND CEO HAS TOLD BLOOMBERG NEWS THAT THE AIRLINE IS NOT PLEASED WITH BOEING PRODUCTION DELAYS. >> THE DELAY THAT WE SEE, I DON’T THINK WE ARE HAPPY. I MET UP WITH NEW MANAGEMENT JUST RECENTLY TO TOUCH BASES. THEY PROMISED THEY WOULD BE ABLE TO CHANGE AND MAKE THINGS GO FASTER, AND I HOPE SO. >> HE WENT ON TO SAY THAT THE AIRLINE IS HAVING ISSUES WITH ENGINES ON CERTAIN AIRBUS MODELS. NINTENDO HAS ANNOUNCED A NEW GAMING CONSOLE THAT WILL SUCCEED THE CURRENT SWITCH CONSOLE. BOTH FANS AND INVESTORS HAVE BEEN WAITING FOR NEWS OF THE NEW GADGET BECAUSE THE NEW SWITCH HAS LOST GROUND WAYSTATION AND XBOXES. NINTENDO’S PRESIDENT SAID THE NEW DEVICE WILL BE UNVEILED IN THE COMING YEAR. ALSO TODAY, NINTENDO FORECAST A BIGGER THAN EXPECTED PROFIT DECLINE FOR THE CURRENT FISCAL YEAR. THE PROBE INTO TESLA’S AUTOPILOT FEATURE IS ESCALATING REGULATORS ARE SEEKING DETAILED ANSWERS ON THE RECALL OF AUTOPILOT WAS ORIGINALLY ISSUED AFTER USERS KEPT CRASHING WHILE USING IT IN A LETTER, THE NATIONAL TRAFFIC HIGHWAY SAFETY ADMINISTRATION THAT IT HAD SEVERAL CONCERNS REGARDING THE RECALL AND WANTS DATA ON THE PERFORMANCE OF CARS BOTH AFTER — BEFORE AND AFTER THE CARDS WERE ISSUED. JONATHAN: WE WILL TOUCH BASE AGAIN IN ABOUT 30 MINUTES. UP NEXT, IT IS A DATA DEPENDENT SAID. >> YOU PROVIDE NO FORWARD GUIDANCE, THE MARKETS CAN OVER EXTRAPOLATE FROM EVERY SINGLE DATA POINT. THIS MARKET IS GOING TO KEEP SWINGING AROUND BUT AT THE END OF THE DAY I THINK THE VALUATIONS ARE ATTRACTIVE. JONATHAN: THAT IS THE LATEST ON THE BOND MARKET. YIELDS FALLING FOR 50 CONSECUTIVE SESSION. EQUITY MARKETS WINGBACK JUST A TOUCH ON THE. ♪ JONATHAN: EQUITIES UNCHANGED ON THE S&P 500, GOING TOWARD THE OPENING BELL THIS TUESDAY MORNING. FOLLOWING YIELDS CONTINUE, DOWN ANOTHER TWO BASIS ON THE 10 YEAR. DOWN FOR FIVE DAYS. FIVE DAYS OF YIELDS FALLING. IT HAS BEEN QUITE A WHILE SINCE WE’VE SEEN THINGS LIKE THAT. LISA: AND IT COMES AT A TIME WHEN THE PENDULUM SEEMS TO BE SWINGING IN THE OPPOSITE DIRECTION. THERE IS A FEELING WITH THE DATA SOFTENING THAT MAYBE PEOPLE ARE UNDERPLAYING HOW MUCH IT IS GOING TO SOFTEN THE ISSUE THAT I DON’T SEE YET IS WHEN DOES THAT START TO MEAN EQUITY WEAKNESS? WHEN DOES THAT SUGGEST SOMETHING THAT IS PROBLEMATIC FOR COMPANIES VS. JUST AN EXCUSE TO CUT? JONATHAN: WHAT IS A WELCOME CALLING OF THE LABOR MARKET AND WHAT IS AN UNWELCOME DETERIORATION? CLEARLY 175 IS NOT AN UNWELCOME DETERIORATION BUT START THINKING OF SOMETHING CLOSER TO 100 AND THE CONVERSATION CHANGES. LISA: I WILL LET THAT GO, YOU SHOULD HAVE A GOLDILOCKS EMOJIS TO REALLY MAKE IT CLEAR. JONATHAN: IS THAT WHAT YOU WOULD LIKE TO SEE OVER AT APPLE? LISA: 100%. IT IS GOING TO BE SCREENSAVER. JONATHAN: LONGEST STREAK BACK TO AUGUST OF 2023. A DATA DEPENDENT SAID. >> THE MARKET IS GOING TO OVER EXTRAPOLATE FROM EVERY SINGLE DATA AND WE ARE GOING TO SEE THIS OVER THE NEXT COUPLE OF WEEKS. A COUPLE MONTHS AGO WE WERE PRICING IN A FULL RATE CUT BY MARCH THAT HAS GONE DOWN TO ONE RIGHT BEFORE PAYROLL. THIS MARKET IS GOING TO KEEP SWINGING AROUND BUT AT THE END OF THE DAY IT ZOOM OUT, I THINK THE VALUATIONS ARE ATTRACTED. JONATHAN: INVESTORS AWAIT A SPEECH FROM MINNEAPOLIS THAT PRESIDENT NEEL KASHKARI LATER ON TODAY. THE U.S. ECONOMY ISN’T MOVING BACK OR RUNNING IN PLACE, BUT SIMPLY IN OVERTIME IN A GAME IN WHICH CASH REMAINS KING. TWO CUTS ARE LIKELY THE MOST WE WILL GET THIS YEAR. DEBORAH, LISA WENT THERE. WHAT WOULD IT TAKE TO UNLOCK THAT MONEY PILED UP IN MONEY MARKET FUNDS WHAT ARE WE WAITING FOR? >> I THINK AT THIS POINT IT TAKES A CUT BY THE FED AS WAS MENTIONED IN THAT EARLIER CLIP. WHEN WE BEGAN THE YEAR, I THINK OUR PEAK WAS SIX NINE CUTS EXPECTED IN 2024, AND WE ARE DOWN TO SOMETHING THAT IS BETWEEN 1.5 AND TWO AT THIS ONE. NOBODY HAS FAITH IN WHEN THAT CUT IS GOING TO HAPPEN. SO IF YOU BOUGHT INTO THAT STORY BACK IN JANUARY AND YOU STARTED TO EXTEND, YOU WOULD’VE LOST 5.5% IN YIELDS FOR MONEY MARKET FUNDS AND GONE INTO SOMETHING THAT WAS LESSER IN RETURN FOR A TIME THAT AT THIS POINT IS NOW UP TO HALF A YEAR. I THINK THE ACTUAL RATE CUT HAS TO OCCUR BEFORE THE CHANGE FROM THE SAFE MONEY MARKET CASH RETURN TYPE OF TRADE TAKES A BACKSEAT FOR SOME INVESTORS. I THINK FROM A RETAIL STANDPOINT THE CASH WILL KEEP COMING IN BECAUSE THERE CASH ALTERNATIVE IN THE POSITS CONTINUES TO BE SOMETHING THAT IS MUCH, MUCH LESS THAN THE 5% PLUS THAT MONEY MARKETS ARE RETURNING AT THIS POINT. AND I AGREE WITH THE 175,000 IS WHAT THE MARKET IS RALLYING ON RIGHT NOW FROM THE BOND PERSPECTIVE. THAT IS CERTAINLY NOT A NUMBER THAT HAS BEEN GOING TO THE WEAK SIDE. THAT IS NOT SOMETHING THAT IS GOING TO BE HELPING THEM GAIN CONFIDENCE THAT THE ECONOMY IS SLOWING AND THAT INFLATION IS TICKING DOWN TO WHERE THEY WANT TO SEE IT. LISA: YOU WENT THERE, LET’S TALK ABOUT THE TO SPEED ASPECT OF MONEY MARKET FUNDS. YOU THINK THEY ARE STICKY AND THEN YOU HAVE THE INSTITUTION THAT ARE WAITING FOR THE EYES OF THE FIRST RATE CUT TO PLAY THAT CASH ELSEWHERE. HOW FAST IS THAT MONEY AND HOW MUCH IS? >> THE INSTITUTIONAL SIDE PROBABLY AT THIS POINT REPRESENTS FROM A SLOW STAND LESS THAN 20% OF THE MARKETPLACE. WHEN THE 2014 REFORMS THAT WERE IMPLEMENTED IN 2016 TOOK PLACE WE HAD TO SEPARATE THE RETAIL SIDE FOR FUNDING VS. THE INSTITUTIONAL SIDE FOR EVERYTHING BUT GOVERNMENT FUNDS. THAT REALLY KIND OF CAP THE INSTITUTIONS TO THE SMALLER PLAYERS IN THIS MARKET. THEY ARE LARGE IN THE GOVERNMENTS FACE, BUT THAT IS ESSENTIALLY THE PLACE WHERE THERE CASH LIES AT THIS POINT, AND THAT YIELD IS A LITTLE BIT LOWER THAN PRIME AND ON A TAXED SIDE AND ON AN ADJUSTED BASIS. SO I THINK YOU’RE TALKING ABOUT THE FLOW FROM INSTITUTIONS REPRESENTING SOMETHING THAT IS ONLY ABOUT 20% OF THE SIDE OF THE LOW IN THE TOTAL MARKET. LISA: AT THE SAME TIME IT RAISES THE QUESTION, WHERE IS IT HEADED IF IT DOES WITH MONEY MARKET? IS IT GOING TO LONG DURATION BONDS OR IS IT GOING TO STOCKS? >> PROBABLY A LITTLE OF BOTH. WE ALSO MANAGE MICRO SHORT FUNDS WHICH ARE JUST GONE MONEY FUNDS. JUST SORT OF THE SIX MONTHS TO MAYBE 180 DAYS SORT OF MATURITIES. THEN WE HAVE ULTRASHORT FUNDS THAT KIND OF STARTED A HALF YEAR AGO. BOTH OF THOSE TYPES OF FLOWS HAVE STARTED TO TURN POSITIVE. I THINK THAT IS AN AREA WHERE PEOPLE FEEL A LITTLE BIT OF COMFORT EXTENDING, YET STAYING WITHIN THE FIXED INCOME MARKETPLACE. BUT THERE ARE OTHERS I THINK DEPENDING UPON WHAT TYPE OF EQUITY YOU ARE LOOKING AT THAT ARE COMFORTABLE GOING INTO MORE OF THE VALUE STOCKS. NOT SO MUCH GROWTH AT THIS POINT, MAYBE A LITTLE BIT OF DIVERSIFICATION INTO INTERNATIONAL. CERTAINLY STILL INTEREST IN THE TECH STOCK SIDE OF THE EQUATION, AND I THINK YOU WILL SEE PORTIONS OF AGO THERE. JONATHAN: WE KEEP HEARING A PHRASE, LATE CYCLE. WHEN DID THE CYCLE BEGIN? WHEN YOU HEARD THAT PHRASE TO THE LAST TWO YEARS, HOW LATE ARE WE? >> I SAY THE CYCLE DIDN’T BEGIN, WE NORMALIZED. WHEN THE FED STARTED RAISING RATES BACK IN MARCH OF 2022, REMEMBER, IT WAS OFF OF A ZERO RATE IS, BASICALLY UNTIL YOU GOT 2%, 2% WAS NORMAL. I WOULD CALL THE FIRST 175 BASIS WANES OF INCREASING RATE THEY DID MORE A NORMALIZATION THAN A RETURN TO A RATE CYCLE. FROM THERE, WHICH WAS PROBABLY THE BEGINNING OF 2023, THAT IS WHEN YOU STARTED WHAT I WOULD CALL THE CURRENT RATE CYCLE. I THINK WHEN PEOPLE ARE REFERENCING THE RATE CYCLE BEING LONG THEY ARE LOOKING AT THE FACT THAT THE LAST TIME THE FED ACTUALLY MADE A MOVE WAS OVER NINE MONTHS AGO. GENERALLY SPEAKING, THAT MOVE IS EXPECTED TO BE A CHANGE, SO A CHANGE FROM AN INCREASE TO NOW A CHANGE TO A DECREASE IN RATES FROM THE FED POLICY PERSPECTIVE. NORMALLY THAT DOESN’T TAKE MORE THAN NINE MONTHS AND WE ARE PAST THAT. I THINK YOU GOT A COMBINATION OF PEOPLE NORMALIZING CYCLE INITIALLY WAS THE ENDING OF THE CYCLE ITSELF AND I DON’T THINK THAT IS CORRECT. I THINK THAT THE NINE-MONTH ASPECT AT THIS POINT BETWEEN WHEN THE FED LAST MOVED AND NOW ADDS TO THAT. JONATHAN: WITH THAT IN MIND, WHAT IS THE NEW EQUILIBRIUM? >> IT IS HARD TO SAY BECAUSE THAT NEW EQUILIBRIUM IS CHANGED DRASTICALLY IN 2024. I THINK THE NEW EQUILIBRIUM GETS US TO SOMETHING THAT MAY BE THIS YEAR HAS ONE OR TWO RATE CUTS AND POST, YOU POSTED THE QUOTES FROM A COMMENTARY THAT I DID JUST LAST WEEK. NO MORE THAN TWO RATE CUTS THIS YEAR. IN THE END WITHOUT THE FED MAY BE ADMITTING IT, TO PERCENT INFLATION IS THE GOAL BUT NOT ONE THAT IS NECESSARILY NEEDED TO SEE MET. THAT THEY COULD BE COMFORTABLE. YOU’RE TALKING ABOUT RATES THAT ONLY NEED TO GO FROM 5.5 DOWN TO MAYBE 3.5. JONATHAN: THE LATEST ON THE FEDERAL RESERVE AND THE BOND MARKET. HARARE, JUST GETTING EARNINGS FROM THEM. HALTED DOWN 5% IN ITALIAN TRADING THE BAR FOR EARNINGS APPEAR TO BE PRETTY HIGH. LISA: YOU JUST WANTED TO BRING UP FOR ARI. JONATHAN: I DID, YEAH. LISA: YOU WANT TO BUY ONE? JONATHAN: I’D LOVE TO. CAN’T AFFORD ONE. ANNMARIE: BUT YOU ACCEPT GIFTS. JONATHAN: I ACCEPT GIFTS. ONLY I DON’T, JUST TO CLARIFY FOR A SECOND TIME. YOU WERE TELLING ME I WAS PAID OFF BY DISNEY EARLIER. >> WE’VE MOVED FROM AN ENVIRONMENT WHERE IT IS TOO HOT TO STARTING TO COOL DOWN. >> WE KNOW WE ARE RESTRICTIVE, THE QUESTION IS JUST HOW RESTRICTED. >> THE FED ENDORSED HIGHER FOR LONGER BUT MARKETS ARE HOLDING UP. >> WE KNOW THAT THEY WANT MORE COMPETENCE BUT WHAT IS MORE CONFIDENCE, WHAT DOES THAT LOOK LIKE? >> WE’VE JUST BEEN SO FIXATED ON INFLATION AND THE FED THAT WE ARE MISSING THIS REAL TURN. WE COULD SEE THIS GAP BACK TO HARD LANDING. ANNOUNCER: THIS IS "BLOOMBERG SERVEILLANCE" JONATHAN FERRO, LISA ABRAMOWICZ AND ANNMARIE HORDERN. JONATHAN: USUALLY GUESTS COME INTO THE STUDIO AND THEY ARE REALLY CAGEY ABOUT WHAT WE ARE GOING TO TALK ABOUT. STEVE EISMAN WALKS IN. ASK ME HE WAS GOING TO AN ELECTION AND I WILL TELL YOU. WE ARE GOING TO SKIP EVERYTHING AND GO STRAIGHT TO STEVE EISMAN. STEVE ON WHY HE IS BULLISH ON AI-RELATED STOCKS. MARK ZANDI ON MOODY’S. BOEING FACES YET ANOTHER PROBE. DON’T MISS THAT THAT BUT WE BEGIN WITH OUR TOP STORY. STOCKS DELIVERING THE BEST 3D RALLY SINCE NOVEMBER. STEVE EISMAN SAYING HE IS LONG ORIENTED ON THE U.S. MARKET MISSING ON COMPANIES LIKE APPLE BUTTER POSITIONING FOR THE SECOND WAVE OF AI AND HE HAS A TON TO SAY ABOUT U.S. POLITICS WHICH IS RARE THESE DAYS. STEVE, GOOD MORNING TO YOU. FIRST QUESTION, WHO WINS? >> CAVEATS FIRST, I’M NOT SPEAKING FOR NEUBERGER BERMAN, I’M SPEAKING JUST FOR MYSELF. WHAT I’M ABOUT TO SAY IS PURE POLITICAL ANALYSIS AND THE ANALOGY I WILL DRAW IS TO THE FINANCIAL CRISIS. IN AUGUST OF 2007, THE — MARKET COLLAPSE. AT THAT POINT WHEN YOU LOOK BACK ON IT, THE FINANCIAL CRISIS WAS BIG EVERYTHING ELSE WAS COMPLETELY INEVITABLE. SO I THINK IT IS COMPLETELY INEVITABLE AT THIS POINT THAT DONALD TRUMP WILL WIN EVERY SINGLE SWING STATE AND WILL GET ELECTED. THE REASON WHY IS BECAUSE PART ONE OF THE STORY IS THAT THE PROTESTERS AT ALL THE UNIVERSITIES ARE BECOMING THE FACE OF THE DEMOCRATIC PARTY, BUT THAT IS NOT 100% AT THIS POINT BUT WHAT IS GOING TO SOLIDIFY IT IS IN AUGUST AT THE DEMOCRATIC CONVENTION WHICH IS IN CHICAGO, IRONIC, YOU WILL SEE ALL THESE PROTESTERS AGAIN AND A LOT OF THEM WILL BE SCREAMING AND YELLING THINGS NOT JUST AT THE ISRAEL, BUT DEATH TO AMERICA, BECAUSE THEY CAN’T HELP THEMSELVES. THE COUNTRY WILL BE APPALLED AND THAT WILL BEGET. IT WILL BE OVER. JONATHAN: LET’S SAY YOU ARE RIGHT, CRISTOBAL, DEAD ON. WHAT DO I DO WITH THAT INFORMATION AND WIND WEB WITH THE TRADES ON, AND WHAT ARE THE TRADES? >> I WOULD SAY YOU DO LARGELY NOTHING BECAUSE I DON’T THINK THAT WHETHER TRUMP WINS OR BIDEN WINS HAS ANY REAL IMPACT ON THE ECONOMY AT ALL. THERE WILL BE THINGS THAT PEOPLE WILL WANT TO TRADE, WHICH I’M NOT GOING TO TALK ABOUT BECAUSE I HAVEN’T PUT OUT THOSE TRADES YET BECAUSE IT IS TOO EARLY. I THINK THERE WILL BE THINGS TO DO, BUT THAT WILL JUST BE SHORT-TERM TRADE. JONATHAN: THAT IS WHAT I’M INTERESTED IN. YOU SAID IT IS TOO EARLY. WHEN IS THE RIGHT TIME TO START EXPRESSING THESE TRADES? >> AT THE CONVENTION EVERYONE WILL REALIZE THAT IS THE CASE. LISA: YOU SAID IT DOESN’T REALLY MATTER WHO GETS ELECTED. THAT IS FASCINATING TO ME BECAUSE SOME PEOPLE ARE SAYING THE DONALD TRUMP WOULD PUT ON PRETTY SIGNIFICANT TARIFFS, PARTICULARLY TO CHINA, AND THAT THIS WOULD INCREASE IN LAOIS AND DE FACTO IN THE U.S. I CAN SEE YOU ROLLING YOUR EYES, HE CAN RESPOND IN A SECOND. AT THE SAME TIME, THE TAX CUTS INSTATED. >> CATS AND DOGS LINE TOGETHER AND THE END OF THE WORLD. LISA: WHY DO YOU DISCOUNT THIS? >> DO I THINK DONALD TRUMP WOULD INCREASE TARIFFS TO CHINA, SURE. DO I THINK THAT WOULD HAVE A MASSIVE INFLATIONARY IMPACT ON THE UNITED STATES, I THINK THAT’S RIDICULOUS. ON THE MARGIN, I WILL GIVE YOU A COMPANY. FIRST SOLAR SELLS SOLAR PANELS TO UTILITY. THERE ARE ALREADY MASSIVE TARIFF THAT ARE HELPING THEM NOW. COULD TRUMP INCREASE THE TARIFFS OR MAKE THEM LONGER SO THAT STOCK WOULD DO BETTER? COULD BE. ARE THE PRICE OF T-SHIRTS GOING TO GO UP, THE PRICE OF FOOD GOING TO GO UP? NO. THE UNITED STATES IS, OF ALL THE DEVELOPED WORLD, THE MOST INSULAR ECONOMY. THE FACT THAT TARIFFS WILL GO ON IN CHINA, A DEAL. — THE DEAL. ANNMARIE: ONE THING USUALLY SPOKE ABOUT WAS INFRASTRUCTURE SPENDING AND HOW YOU LIKE ALL OF THOSE TRADES. ALL OF THAT IS ATTACHED TO THE BIDEN ADMINISTRATION. >> TRUE. BUT DON’T FORGET THAT THE SOLAR TARIFFS WERE PUT ON BY TRUMP ORIGINALLY. MORE THAN 50% OF ALL THE GOVERNMENT SPENDING IS ACTUALLY GOING TO RED STATES. SO I DON’T THINK HE’S GOING TO WANT TO MESS WITH HIS OWN VOTERS. COULD THERE BE TINKERING AT THE EDGES? SURE. ARE THERE ENOUGH VOTES IN THE U.S. SENATE TO REPEAL THE ACT? NOT EVEN CLOSE. YOU WILL HEAR LOTS OF RHETORIC ABOUT REPEALING THE IRA OR CHANGING THE IRA AND STOCKS WILL MOVE ON THAT, BUT AT THE END OF THE DAY, NOTHING WILL HAPPEN. LISA: SPENDING WILL CONTINUE, TO ME IT RAISES QUESTIONS BUT A LOT OF PEOPLE HAVE TALKED ABOUT WHICH IS THE DEFICIT NOT GOING AWAY AT A TIME WHEN YOU’RE GOING TO HAVE TO SEE SOME OF THE ISSUANCE NUMBERS REALLY START TO PICK UP. YOU SEEM TO DISCOUNT THAT. >> 100% IT IS NOT AN ISSUE. LISA: YOU DON’T THINK THE DEFICIT IS AN ISSUE. >> I’M NOT AN ECONOMIST. I CAN ONLY SAY THIS. THE PEOPLE WHO HAVE BEEN COMPLAINING ABOUT THE DEFICIT, AND I LIKE TO CALL THEM THE DEFICIT PEOPLE, I’VE LITERALLY BEEN SAYING THAT FOR 40 YEARS. 40 YEARS. IN MY BUSINESS BEING TOO EARLY IS THE EQUIVALENT OF BEING WRONG. BUT IN MY BUSINESS WHEN YOU ARE TO REALLY YOU ARE A YEAR TOO EARLY, TWO YEARS TOO EARLY YOU ARE NOT 40 YEARS TOO EARLY. WHEN YOU’RE 40 YEARS TOO EARLY YOU PROBABLY SHOULD JUST KEEP YOUR MOUTH SHUT. BUT I WOULD SAY THIS. THE SIGN THAT THE DEFICIT WILL BE RIGHT IS WHEN RATES ACTUALLY GO UP A LOT. UNTIL THEN, EVERYBODY SHOULD JUST BE QUIET. LISA: BUT HOW DO YOU KNOW WHEN THAT’S GOING TO HAPPEN? >> YOU’LL SEE A. I WILL BE ON THE SHOW AND YOU WILL SAY LONG-TERM RATES WENT UP 50 BASIS POINTS IN ONE DAY. LISA: SOUNDS SO NATURAL COMING OUT OF YOUR MOUTH. >> UNTIL THEN IT’S NOT RELEVANT. LISA: PEOPLE INCREASINGLY ARE FOCUSED ON THIS IN THE MARKET, PEOPLE WHO ACTUALLY COULD DETERMINE WHAT THOSE RATES ARE CAN SEND THOSE RATES UP 50 BASIS WANTS. >> OUR RATES GOING UP? LISA: THERE WAS A TIME WHEN THEY WERE. YOU ARE SAYING THAT YOU ARE LONG LONG-TERM RATES BECAUSE ALL OF THIS DISCUSSION ABOUT THE DEFICIT IS STILL WAY TOO EARLY. >> THAT’S GOING TO BECOME A MEME NOW, I LITERALLY JUST MADE IT UP. LISA: THAT’S REALLY GOOD. ANSWER THE QUESTION. >> I LOST MY TRAIN OF THOUGHT. LISA: AT WHAT POINT DO YOU SAY OK, IF WE THINK THE DISCUSSION OF THE DEFICIT IS OVERBLOWN, GO INTO LONG TREASURIES. BUY THEM BECAUSE ALL THE PEOPLE WORRIED ABOUT THAT ARE GOING TO BE PROVEN WRONG. >> LOOK, I’M NOT REALLY A BOND PERSON, I AM MORE OF A STOCK JOCKEY. WHAT CAUSED THE MARKET TO GO DOWN INTO 2022? THE FED RAISED RATES. I DON’T THINK THE FED IS GOING TO BE RAISING RATES. DO I THINK THE FED IS GOING TO CUT RATES? IT DOESN’T REALLY MATTER. EVEN IF THEY CUT THEY ARE ONLY CUTTING A LITTLE BIT. PEOPLE LIKE TO TALK ABOUT IT ON THAT DAY AS IF MOSES CAME DOWN WITH THE TABLETS. LET’S EXAMINE WHETHER THE 10 COMMANDMENTS ARE ON THERE BECAUSE WE WILL LOOK AT WHETHER THERE WAS A COMMA REMOVED, THAT IS SO SIGNIFICANT LET’S BY THE S&P. WOW, WHAT DOES THAT MEAN? YOU KNOW WHAT, IT IS NOT RELEVANT. LISA: SO YOU DON’T NECESSARILY SEE THE POTENTIAL RATE CUTTING HEIGHT AS POTENTIALLY RELEVANT. >> THERE’S NO AGGRESSIVE RATE CYCLE COMING OF CUTTING. THAT WOULD MATTER. IF THE FED IS GOING TO CUT RATES ONCE, TWICE TO TINKER WITH IT AT THE EDGES. JONATHAN: WE COULD LIVE WITH 5%. >> WE SEEM TO BE LIVING JUST FINE WITH IT RIGHT NOW. THE ECONOMY IS FINE WHICH I THINK SURPRISED EVERYBODY. JONATHAN: I WAS LISTENING TO THE PODCAST HE DID WITH TRACY AND JOE. YOU TALKED ABOUT GOOD TIMES IS FOR STORYTELLING, BAD TIMES FOR THE FOCUS ON THE BALANCE SHEET. >> THIS IS DEFINITELY A GOOD TIME. I WILL REPEAT WHAT I SET ON THAT SHOW BECAUSE I LIKE IT. THERE ARE THREE GREAT TEAMS OF OUR TIME. THERE’S AI, EVERYTHING HAVING TO DO WITH INFRASTRUCTURE, AND CRYPTO. AND I BELIEVE IN THE FIRST TWO AND I DON’T BELIEVE IN THE THIRD. JONATHAN: WHY NOT THE THIRD? >> IS IT A CURRENCY AND IF IT IS A CURRENCY, SHOULD YOU OWN IT? LET’S SKIP THE FIRST PART. THERE’S NO STRUCTURE TO IT. SO IF IT IS A CURRENCY, WHY SHOULD YOU? LET’S ASK THE PEOPLE WHO OWN CRYPTO. THEY ALL SAY THE SAME THING. IT’S DEFINITELY GOING TO BE A MEME. MY FIRST MEME. LISA: NOT YET. >> IT IS A HEDGE AGAINST THE DEMISED. CATS AND DOGS ONE DAY WILL LIVE TOGETHER, YOU WILL BE IN A CAVE BUT AT LEAST YOU WILL HAVE YOUR CRYPTO. IT IS LIKE DIGITAL GOLD, THAT IS THE THESIS. LET’S TAKE THEM AT THEIR WORD. IF THAT IS THE THESIS, THEN ON DAYS WHERE EVERYBODY IS WORRIED ABOUT PATIENT, THEY ARE WORRIED ABOUT THE DEFICIT, THE NASDAQ IS DOWN 300 POINTS AND INTEREST RATES ARE UP, GO SHOULD BE UP. AND ON DAYS WHEN EVERYBODY IS FEELING GREAT, AND HE IS UP, RATES ARE DOWN, BUT HE CARES ABOUT PATIENT, GO SHOULD BE DOWN. DOES IT ACT THAT WAY? IT IS NOT. IT ACTS EXACTLY THE OPPOSITE OF ITS OWN THESIS. THE CORRELATION TO THE NASDAQ IS LIKE 75% TO ME IT IS JUST ANOTHER WAY FOR PEOPLE TO SPECULATE ON ACTIVATING THERE’S NO DATA POINT OF RESEARCH THAT SAYS THAT IT IS RIGHT OR THAT IT IS WRONG. LISA: SO YOU DON’T LIKE CRYPTO. >> I NEVER HAVE. I DON’T SHORT IT BECAUSE THERE IS NOTHING TOO SHORT. LISA: HOW DO YOU GET THE EDGE AND A TIME WHEN EVERYONE LOVES AI >> I WILL GIVE YOU ONE EXAMPLE OF A STOCK THAT I THINK EVENTUALLY BECOME A GREAT AI PLAYER. THE WHOLE THING AT GETTING AN EDGE IS I THINK OVERRATED. MOST PEOPLE HAVE ALL THE FACTS. IT IS A QUESTION OF HOW YOU INTERPRET THE FACTS. PEOPLE THINK I HAD SOME SORT OF UNBELIEVABLE EDGE ABOUT THE SUBPRIME MORTGAGE SECTOR. I HAD THE SAME FACTS EVERYBODY ELSE HAD, I JUST LOOK AT THEM DIFFERENTLY. RIGHT NOW EVERYBODY IS FOCUSED ON NVIDIA, AMD, DATA CENTERS. BUT ONE DAY, AND THAT DAY IS NOT FAR FROM NOW, THERE WILL BE A LOT OF AI APPS THAT YOU AND I WILL USE. AND WE ARE NOT GOING TO USE THEM AT A DATA CENTER IN THE CLOUD, WE ARE GOING TO WANT TO USE THEM ON OUR PHONE BECAUSE WE WANTED AT THE HEAD END. HERE. SO AT THAT POINT IT’S GOING TO BE, I THINK, AN ENTIRE NEW SALES LIKE OF PHONES, LAPTOPS THAT ARE GOING TO NEED TO BE UPGRADED TO BE ABLE TO DO ALL THE STUFF THAT EVENTUALLY WANT TO DO. LISA: SO YOU ARE BUYING APPLE AGGRESSIVELY. >> WE’VE OWNED IT FOR A LONG TIME AND WE CONTINUE TO OWN IT. IT IS NOT ACTIONABLE AT THE SECOND BECAUSE THERE HAS NOT BEEN ANY APP. WHEN IT SHOWS UP I WILL LET YOU KNOW. UNTIL THEN, THAT AT THAT POINT I HAVE THE NEW PHONE. THAT PHONE IS ROB LEE NOT GOING TO BE CAPABLE TO DO SOME OF THE APPS THAT YOU ARE GOING TO WANT TO DO. JONATHAN: IT APPEARS THAT AT THE DIRECTION OF TRAVEL. I’D LOVE TO HEAR IT AGAIN. THE ELECTRICITY GRID, THE DEMAND ON ELECTRICITY IN THIS COUNTRY GIVEN WHERE POLICY IS, WHERE AI IS GOING, HOW GREAT IS IT GOING TO BE? ARE WE IN A POSITION TO SUPPLY IT? >> BUDGETS GO UP EVERY SINGLE YEAR. THEY UPDATE THEM ON LIKE A FORWARD LOOK AND THAT COMES OUT JANUARY WHEN THEY REPORT AND THE BUDGETS ARE UP 20%. THEY ARE GOING TO GO UP EVEN MORE BECAUSE THE NVIDIA AMD CHIPS USE A LOT MORE ELECTRICITY THAN THE CPUS DO. SO THERE’S EVEN MORE PRESSURE ON THE GRID. SO THE CYCLE OF IMPROVING THE GRID, BUILDING A GREEN TYPE OF UTILITY STRUCTURE, WHETHER IT IS WIND AND SOLAR OR JUST UPGRADING WHAT YOU HAVE IS GOING TO GO ON FOR A VERY LONG TIME. I WILL JUST MENTION ONE STOCK THAT I TALKED ABOUT BEFORE. WHAT UTILITIES DO? THEY SEND A BILL. BUT WHEN THEY ACTUALLY HAVE TO DO SOMETHING, THEY HIRE SOMEBODY TO DO IT. SO WHEN YOU HEAR THAT UTILITY A IS INCREASING ITS CAP X BUDGET OR BUILDING A SOLO OR A GAS WHATEVER, NINE TIMES OUT OF 10 THEY HIRE A COMPANY CALLED WANT TO WHICH IT THE LARGEST UTILITY- RELATED ENGINEERING COMPANY IN THE COUNTRY. WE’VE OWNED IT FOR A LONG TIME. THE AMUSING THING IS I’M ON THE QUARTERLY CALL EVERY QUARTER AND EVERY QUARTER THE CEO LOOKS HAPPIER. AND YOU ARE THINKING HOW COULD HE LOOK HAPPIER BECAUSE IT WAS SO HAPPY LAST ORDER, BUT HE IS EVEN HAPPIER TODAY BECAUSE HE HAS MUCH BUSINESS HE WOULD ALL. JONATHAN: THAT IS THE WINNER. IS THERE A LOSER, IS THERE A SHORT FOR YOU? >> I’M NOT TALKING ABOUT SHORTS. I DO A LITTLE SHORTING FOR MYSELF, BUT THAT IS IT. JONATHAN: CAN YOU THINK OF A GROUP OF COMPANIES THAT WOULD LOSE IN THAT WORLD? >> I WOULD SAY JUST AS A THEME ABOUT COMPANIES THAT I WOULD NOT INVEST IN, THE STOXX — THE STOCKS THAT DID REALLY WELL IN 2019 2021 WITH A VERY HIGH REVENUE ROSE NEGATIVE EARNINGS COMPANIES. KIND OF LIKE PUBLIC VENTURE CAPITAL COMPANIES. THOSE GOT DESTROYED IN 2022. DOWN LITERALLY 75-90% BUT WHEN YOU ARE DOWN 75%-90% AND THEN YOU GO UP 50%, IT DOESN’T LOOK SO GOOD ON SHORT. I WOULD JUST AVOID THOSE COMPANIES UNTIL IT BECOMES CLEAR THEY HAVE REAL BUSINESS MODELS WHERE THEY CAN ACTUALLY MAKE MONEY. JONATHAN: IN JUST A MOMENT WE WILL CATCH UP WITH THE WALT DISNEY COMPANY, THAT STUCK DOWN BY ABOUT 5% THIS MORNING. CAN WE SQUEEZE IN A QUESTION ON MARBLE? THIS CONVERSATION TO GO A WHOLE LOT LONGER. >> THEY COULD GO FOR HOURS. I’M GOING TO BRAG A LITTLE BIT. I OWN ONE OF THE LARGEST JEWEL BOOK COLLECTIONS ON PLANET EARTH. IT IS 11,000 COMICS ON MY IPAD AND I’VE READ ALL 11,000. SO I COULD WRITE A DISSERTATION ON DR. STRANGE THAT WOULD GO FOR 200 PAGES. JONATHAN: BOB IGER MIGHT READ IT. >> IT WOULD BE VERY INTERESTING. ANNMARIE: MAYBE THEY SHOULD MAKE IT INTO A MOVIE. >> THE PROBLEM WITH MARVEL MOVIES TO ME IS THEY HAD A GREAT STORY AND IT ENDED. IRONMAN IS DEAD, CAPTAIN AMERICA IS 90 AND THOR, AND THIS REALLY UPSETS ME AND I’M SERIOUS ABOUT THIS, THEY MADE THOR INTO A COMEDIC BUFFOON. THAT WAS ALWAYS ONE OF MY FAVORITE COMICS, SO THOR BEING A COMEDIC BUFFOON I FIND EXTREMELY UPSETTING. JONATHAN: THIS IS HEMSWORTH. >> YES. THERE’S NO STORY ANYMORE. THEY HAD A STORY WHERE THEY HAD ALL THESE DIFFERENT TANGENTS, AUDIT ALL WOVE INTO ONE EVENTUAL STORY AND IT IS OVER AND THEY HAVE BEEN UNABLE TO FIND A NEW STORY. THE PROBLEM IS THAT THE MAIN CHARACTERS ARE GONE SO EVEN IF THEY HAD A STORY, WHO WOULD WANT TO WATCH? THE LAST "GUARDIANS OF THE GALAXY" MOVIE WAS UNWATCHABLE. JONATHAN: STEVE EISMAN. THANKS AS ALWAYS. THIS DESTOCKED DOWN BY 5% FOR OTHER REASONS. UP NEXT, DISNEY REPORTING BETTER-THAN-EXPECTED EARNINGS. WHY THE STOCK IS LOWER FROM GEETHA OF BLOOMBERG INTELLIGENCE. YOU ARE WATCHING "BLOOMBERG SERVEILLANCE." JONATHAN: EQUITIES JUST ABOUT UNCHANGED ON THE S&P 500, GOING ABSOLUTELY NOWHERE. FIRST UP, CITI SETTING STRONG FIRST-QUARTER EARNINGS AND FULL-YEAR MOMENTUM AHEAD. ALSO NOTING MANAGEMENT’S CONSERVATIVE GUIDANCE. THE SECOND CALL, HIGHLIGHTING THE DOWNSIDE HEALTH OF UNCERTAINTY IN THE FIRST QUARTER. AN UNCERTAIN 2025 OUTLOOK FOR THE DRUGSTORE CHAIN. AND FINALLY, APPLE’S LATEST IPAD UNVEILING. WEDBUSH MANAGER SAYING STREET FOCUS WILL BE ON THE DRUM ROLL FOR APPLE’S AI REVEAL AT WWDC IN JUNE. THIS PRODUCT CYCLE WILL ALSO INCLUDE NEW IPADS ANNOUNCED TODAY ARE THERE SPEAKING TO A BROADER APPLE-HARDWARE DRIVEN CYCLE OVER THE COMING YEAR. WE BELIEVE THE WORST IS IN THE REARVIEW MIRROR THE START. DISNEY REPORTING BETTER-THAN-EXPECTED EARNINGS THANKS TO NARROW STREAMING AND HIGHER TICKET PRICES AT PARKS. SHARES WERE UP 29% BEFORE TODAY AT THE COMPANY BEAT ESTIMATES THE FOURTH STRAIGHT QUARTER. GEETHA, THAT STOCK IS LOWER BY SOMETHING LIKE 5%. CAN YOU IDENTIFY WHY THIS MORNING? >> GOOD MORNING. I THINK THE REASON IS DOWN IS BECAUSE THE GUIDANCE THE FISCAL THIRD ORDER SEEMS TO BE A LITTLE WEAK. THEY DID RAISE GUIDANCE FOR GAINS TO 25% VS. ABOUT 20%, SO THAT IS DEFINITELY POSITIVE, BUT I THINK WHAT THEY SAID ABOUT THE THIRD QUARTER, AND THIS IS REALLY THROWING INVESTORS OFF, THERE IS GOING TO BE ABSOLUTELY NO GROWTH IN SEGMENT. THAT WAS AFTER REPORTING 12% GROWTH IN THE QUARTER THAT THEY JUST REPORTED. SO THAT KIND OF BRINGS INTO QUESTION THEIR GUIDANCE FOR FULL YEAR PROFITS BECAUSE THEY ORIGINALLY SAID IT WAS GOING TO GROW LOW DOUBLE DIGITS AND I THINK THAT THAT SPOOKED INVESTORS A LITTLE BIT TODAY. JONATHAN: WHAT IS THE CHALLENGE AND WHERE IS IT COMING FROM? NO SIGN THAT CONSUMERS ARE TAPPED OUT, THEY ARE ABLE TO PRICES, THOSE PRICE HIKES ARE BEING ABSORBED. WHERE IS THE CHALLENGE COMING FROM? >> IN YOUR CONVERSATION WITH THE CFO THIS MORNING WHAT HE SAID WAS THIS IS REALLY MORE DUE TO HIGHER COSTS. REMEMBER, DISNEY IS EMBARKING ON THIS HUGE EXPANSION IN THE PARK BUSINESS, EXPANDING CAPACITY ACROSS ALL PARTS. IN THE SHORT TERM THEY ARE ADDING THREE NEW SHIPS, SO I THINK WHAT HE POINTED TO WAS ELEVATED LAUNCH COST FOR THE CRUISE SHIPS. I’M NOT SURE THE MARKET IS COMPLETELY BUYING THAT. I THINK THEY DO THINK THAT MAYBE MOMENTUM IS SLOWING A LITTLE BIT. WE WILL HAVE TO WAIT AND LISTEN TO THE CALL. LISA: HOW IMPORTANT IS THE CHINA STRATEGY RIGHT NOW? >> CHINA STRATEGY IS DEFINITELY IMPORTANT FOR DISNEY. WE’VE SEEN THIS KIND OF ACROSS THE BOARD, DISNEY OBVIOUSLY ENJOYS A HUGE PRESENT CHINA NOT JUST WITH ITS FILMS BUT ALSO WITH ITS THEME PARKS. THE MENTORS BACK IN A VERY BIG WAY. BOTH IN SHANGHAI AS WELL AS IN HONG KONG. WE’VE SEEN SOME REALLY GOOD RESULTS THAT HAVE ACTUALLY CONTRIBUTED TO THE PROFITABILITY IN THE THEME PARKS THROUGHOUT THIS YEAR SO FAR. BUT AS FAR AS THE MOVIE STRATEGY GOES, WE’VE SEEN THAT CHINA HAS ALMOST SHUT DOWN HOLLYWOOD RELEASES. THAT IS GOING TO BE A BIG OVERHANG FOR DISNEY AND ACROSS THE BOARD FOR MOST STUDIOS. THE THEATRICAL RESULTS, AND THIS IS WHERE DISNEY HAS STRUGGLED A LITTLE BIT OVER THE PAST FEW ORDERS, THEY HAD A WHOLE STRING OF UNDERWHELMING RELEASES. I’M NOT SO SURE WE CAN BANK ON A STRONG CHINA PERFORMANCE FOR DISNEY GOING FORWARD. ANNMARIE: THE CFO REALLY WANTED TO JUST NOT DISCUSS THAT AND SAY WE MAKE PEOPLE SMILE AND CHINA, THAT IS WHAT WE ARE GOING TO CONTINUE TO DO. JONATHAN TRIED TO GET HIM TO BITE ON HULU. WHERE DO YOU SEE HUGH LU VALUATION? >> WE’VE ACTUALLY RUN SOME NUMBERS ON HULU. WE ARE ACTUALLY CLOSER TO THAT $40 BILLION MARK THAT WAS PUT OUT BY COMCAST. THEY ARE HAVING AN INDEPENDENT APPRAISER KIND OF RUN THE VALUATION NUMBERS AGAIN. I THINK WHAT WE HAVE TO LOOK AT WITH HULU’S FIRST OF ALL, THEY HAVE AN EXTREMELY COMPARABLE, EXTREMELY GOOD ADVERTISING BUSINESS. THEY WERE THE FIRST PIONEERS IN TERMS OF CONNECTED TV ADVERTISING WITH ALMOST 3, 3 .5 BILLION DOLLARS IN REVENUE EVERY YEAR. AND THEN YOU KIND OF HAVE TO THINK ABOUT THE BIGGER PICTURE. ONCE THEY INTEGRATE HULU INTO DISNEY BUS WE ARE GOING TO LOOK AT A TREMENDOUS MENTOR OUR SAVINGS MOST TO THE TUNE OF $750 MILLION, ALMOST $1 BILLION. AT THE END OF THE DAY, IT IS THE DISNEY BUNDLE THAT REALLY WORKS. ABOUT 40% OF SUBSCRIBERS ARE ON THE BUNDLE, SO THE BUNDLE HAS VALUE. FOR THEM, HULU IS AN IMPORTANT PART OF THE STRATEGY AND THAT IS WHERE A LOT OF THE VALUES GOING TO COME FROM. JONATHAN: DOES THE MARVEL CATALOG HAVE VALUE ANYMORE? STEVE EISMAN BRUTAL JUST A FEW MOMENTS AGO. >> I THINK THERE IS STILL A LOT OF VALUE LEFT. THIS IS WHAT BOB IGER IS WORKING ON, A WHOLE REJIGGERING OF THE PIPELINE INCLUDING MARVEL. WE WILL SEE THAT LATER THIS YEAR AS WELL AS NEXT YEAR WITH THE NEW CAPTAIN AMERICA MOVIE. JONATHAN: CAPTAIN AMERICA IS 90 YEARS OLD AND ANOTHER MOVIE IS COMING SOMETIME TO A MOVIE THEATER NEAR YOU. LISA: AND IRON MAN IS DEAD AND THOR IS A PARODY OF HIMSELF. JONATHAN: WE WILL TELL YOU WHAT THE POINT IS TIME WE COVER DISNEY WITH HER. STEVE WAS GREAT. LISA: HONESTLY, MY SON AGREES WITH HIM. JONATHAN: I’M NOT SURE HOW BOB IGER WOULD RESPOND. LISA: BOB, IF YOU ARE LISTENING, WE WANT TO HAVE A FULLY INFORMED GUSHING. JONATHAN: COMING UP, MOODY’S CHIEF ECONOMIST, MARK ZANDI. THIS IS BLOOMBERG. ♪ JONATHAN: 60 MINUTES FROM THE OPENING BELL, EQUITIES JUST ABOUT UNCHANGED ON THE S&P 500. THE NASDAQ DOWN BY 2/10 OF 1%. THREE DAYS OF GAINS ON THE S&P. UP BY ABOUT 3%. BEST THREE-DAY GAIN OF THE YEAR SO FAR. THE NASDAQ UP SOMETHING LIKE 4%. COULD BECOME A FIVE-DAY WINNING STREAK. OY THE BOND MARKET, OY THE DEFICIT. STEVE EISMAN OVER ABOUT 20 MINUTES AGO SAYING OY THE DEFICIT PEOPLE ARE JUST GETTING IT WRONG, SO LET’S TALK ABOUT THE DEFICIT. $58 BILLION IN THREE-YEAR NOTES COMING LATER. THE DAY AFTER THAT, $25 BILLION OF 30 YEAR BONDS. LISA: IF YOU MISSED IT, BASICALLY STEVE EISMAN SAID PEOPLE HAVE BEEN SAYING OY THE DEFICIT FOR THE PAST 30, 40 YEARS. I CAN VERIFY MY GRANDFATHER WAS SITTING AT HIS TABLE SAYING OY THE DEFICIT BACK IN THE DAY. BUT HERE’S THE THING. HERE’S THE QUESTION GOING FORWARD. IS THAT SORT OF SHIFTING IN TERMS OF YES, BEING TOO EARLY IS BEING LONG IN THIS INDUSTRY, AND YET THIS HAS BECOME AN UNUSUAL TIME OF FISCAL EXPANSION WHERE THERE HASN’T BEEN A HUGE PROBLEM IN THE ECONOMY? IF YOU PUT THAT TOGETHER, PEOPLE SAY IT IS GOING TO START TO MATTER. MY BIG QUESTION IS IF IT DOESN’T MATTER, SHOULDN’T YIELDS BE A LOT LOWER? >> ONLY IF THE ECONOMY IS DOING TERRIBLY, IS ABOUT THE ARGUMENT? THE FEDERAL RESERVE STARTS PRODUCING INTEREST RATES BECAUSE OF THAT BOND RALLY, YIELDS DROP. LISA: IF YOU BELIEVE THAT LONGER-TERM THE ECONOMY IS GOING TO DO WELL AND THAT THE THAT IS GOING TO KEEP RATES AT ABOUT THREE, 3.5%, THAT IS A NEW PARADIGM I DON’T THINK A LOT OF PEOPLE HAVE GOTTEN TOGETHER WITH IF THAT IS THE CASE THEN YOU CAN SEE 10 YEAR YIELDS AT OR .2, 4.3%. BUT THAT IS MY KEY QUESTION LONGER-TERM. AT WHAT POINT DO YOU START SAYING IF YOU TAKE OUT THE FISCAL DEFICIT OVERHANG, YOU GET A BIG RALLY IN BOND MARKET HAVE BEEN A LITTLE BIT SPOOKED BY BOND AUCTIONS THAT HAVEN’T GONE THAT WELL. JONATHAN: STEVE EISMAN, BRILLIANT. LET’S TALK ABOUT THE STOCK THAT HE WAS TALKING ABOUT WHICH THE WALT DISNEY COMPANY. DISNEY AND THE FREE MARKET IS DOWN BY ABOUT 4%. HIS COMMENTS ON MARVEL, I MEAN, LOOK. HE GOES THROUGH SOME OF THE CHARACTERS, THE FACT THAT IRON MAN IS NOW DEAD AND CAPTAIN AMERICA IS 90 AND HE IS VERY UPSET WITH WHAT THEY’VE DONE TO THOR, WHICH IS SORT OF SHOWING — THROWING SHADE AT MR. HEMSWORTH, COLIN HIM A COMEDIC BUFFOON. HAVE WE SEEN THAT EXHAUSTED MOVIE THEATERS? SOME PEOPLE WOULD ARGUE WE HAVE. LISA: TO BE CLEAR, DISNEY SHARES ARE NOT DOWN 5.1% BECAUSE STEVE EISMAN IS NOT HAPPY WITH WHERE MARVEL HAS GONE, JUST TO BE VERY CLEAR. IT DOES RAISE QUESTIONS ON A BROADER SCALE ABOUT NUMBER OF SUBSCRIPTIONS AND WHO THEY CAN ATTRACT AT A TIME WHERE THERE IS OFTEN ABOUT NEW CONTENT, INCLUDING MARVEL. JONATHAN: I FEEL LIKE I AM BEING REGULATED. THIS IS WHAT I USED TO HAVE TO DO FOR TOM. LISA: I’M NOT REGULATING, I’M JUST CLARIFYING. ARE YOU SAYING IT IS A SIGNIFICANT PART OF IT? JONATHAN: ABSOLUTELY NOT. UNDER SURVEILLANCE THIS MORNING, ISRAELI TROOPS TAKING CONTROL OF THE BORDER CROSSING IN GAZA AS CEASE-FIRE NEGOTIATIONS STALLED ONCE AGAIN. ISRAEL IS TELLING PEOPLE TO EVACUATE EASTERN RAFAH AS IT MOVES FORWARD WITH PLANS TO INVADE. THIS COMING AFTER A REJECTION OF THE CEASE-FIRE DEAL SAYING IT IS FAR FROM ISRAEL’S NECESSARY DEMANDS. ANNMARIE: POTENTIALLY WE WILL GET AN UPDATE TODAY BECAUSE MEDIATORS WILL BE MEETING ONCE AGAIN. ISRAEL DID SAY YESTERDAY WHEN THEY SAID THEY ARE NOT GOING TO ACCEPT IT THAT THEY DO STILL SEEK AN AGREEMENT AND THEY WILL BE SENDING REPRESENTATIVES TO HAVE THESE DISCUSSIONS. A LOT OF REPORTING COMING OUT, THE NEW YORK TIMES SAYING IT WAS ON MY WORD CHANGES AND THEN AXIOS, A VERY INTERESTING REPORT SAYING ISRAEL IS VERY FRUSTRATED WITH HOW THE U.S. IS HANDLING THESE HOSTAGE TALKS. IF THAT’S THE CASE, WHY WOULD ISRAEL POTENTIALLY GIVE IN YESTERDAY? LISA: YOU ASK A QUESTION ABOUT THE HOSTAGES, WHAT IS THE CONDITION OF THEM? JONATHAN: DON’T KNOW. LISA: ONE OF THE REASONS WHY WE’VE HEARD THERE HAS BEEN SOME QUESTIONS AROUND THESE NEGOTIATIONS IS BECAUSE HAMAS CANNOT DELIVER 33 HOSTAGES THAT MEET THE CRITERIA ISRAEL IS ASKING FOR, LIFE. AND THAT IS ALSO THE UNDERCURRENT HERE WHEN THERE IS NOT A CLEAR LIST OR UNDERSTANDING OF WHO IS STILL ALIVE AND WHO IS NOT. JONATHAN: WITHOUT A DOUBT AND WELL-SAID. APPLE HAS BEEN REPORTEDLY DEVELOPING ITS OWN SHIP TO RUN AI TOOLS AND DATA CENTERS. THE WALL STREET JOURNAL ACCORDING TO THE EFFORT TO BUILD ON THE PREVIOUS ATTEMPTS TO MAKE IN-HOUSE CHIPS. THIS COMING AS APPLE IS SET TO UNVEIL ITS LATEST IPAD LINE UP A LITTLE BIT LATER THIS MORNING AND THEN BUILD ON THAT GOING INTO. WE ALL WANT A SNEAK PEEK OF WHAT THIS IPHONE MIGHT LOOK LIKE IN SEPTEMBER. LISA: AND IT IS NOT NECESSARILY THE LOOK AS MUCH AS WHAT IT WILL HOLD IN TERMS OF WHAT KIND OF PARTIAL — ARTIFICIAL INTELLIGENCE TICKET OFFER. THERE HAVE BEEN A NUMBER OF REPORTS ABOUT APPLE CREATING ITS OWN CHIPS. I WANT TO SEE WHAT TECHNOLOGIES THEY ARE PUTTING FORWARD AS THEY TRY TO ADAPT THEIR OWN TECHNOLOGY. JONATHAN: THIS GETS MORE INTERESTING GIVEN WHAT STEVE WAS TALKING ABOUT, BUT ULTIMATELY YOU WILL SEE THESE APPS. HE DOESN’T KNOW WHAT THEY ARE GOING TO LOOK LIKE. PROBABLY AN IPHONE FOR A LOT OF PEOPLE WHO CAN’T GET AWAY FROM THE THING. LISA: IT IS GOING TO BE A DEFICIT APP THAT IS GOING TO BE OY THE DEFICIT THAT WILL HAVE SOME SORT OF REAL-TIME METRIC ABOUT CONCERN BEING PRICED IN. ANNMARIE: I HOPE THAT IS NOT THE CASE BUT YOU STEVE’S POINT, HE JUST BOUGHT A BRAND-NEW IPHONE AND HE SAID WHEN ALL THESE AI TECHNOLOGIES ARE TO DEVELOP IS GOING TO HAVE TO UP RAY BECAUSE THE AI CAPABILITY IS GOING TO BE ACTUALLY IN THE HARDWARE, NOT JUST IN THE APP. JONATHAN: I THINK APPLE IS HOPING THE DEVELOPERS COME UP WITH SOMETHING BETTER. ANNMARIE: ME TOO, THAT SOUNDS DO MANY GLOOM. JONATHAN: MINNEAPOLIS THAT PRESIDENT KASHKARI STICKING TO BLOOMBERG TV 1:15 EASTERN TIME THIS AFTERNOON. DO NOT MISS THAT CONVERSATION. THIS COMING AFTER COMMENTS FROM TOM BARTON AND NEW YORK FED PRESIDENT JOHN WILLIAMS SAYING CURRENT MONETARY POLICY IS RESTRICTIVE ENOUGH TO GET INFLATION TO THE FED’S 2% TARGET. I’M PLEASED TO SAY THAT JOINING US IS MARK ZANDI OF MOODY’S ANALYTICS. THANKS VERY MUCH FOR CATCHING UP WITH US MORNING. WHY IS THE CONCERN, YOUR WORDS, AROUND INFLATION BEING ABOVE TARGET, WHY IS THAT MISPLACED? >> I THINK INFLATION IS AT TARGET. AT LEAST UNDERLYING INFLATION. IT’S VERY PROBLEMATIC MEASURING THE COST OF HOUSING SERVICES, PARTICULARLY OWNERS WITH LITTLE RENT. IF YOU LOOK AT HARMONIZED INFLATION, WE ARE THERE AND WE HAVE BEEN THERE FOR WHITE SOME TIME. I THINK THE FED SHOULD BE FOCUSED ON THE UNDERLYING RATE OF INFLATION, TRYING TO EXTRACT THE VAGARIES OF THE DATA. AT THIS POINT IN TIME I WOULD ALSO EXCLUDE OER AND IF YOU DO THAT, WE ARE THERE. WE SPEND THERE FOR ABOUT 6, 9 MONTHS TO ME, IT FEELS LIKE THE FED HAS ACHIEVED ITS GOAL. WE ARE AT TARGET ON INFLATION AND RATION EXPECTATIONS ARE NAILED DOWN TO THAT 2% TARGET. TO ME, EVERYTHING IS POINTING GREEN FOR THE TO START CUTTING RATES HERE. JONATHAN: WHY DO YOU THINK THEY DON’T TALK ABOUT IT IN THE SAME WAY? MARK: A MATTER OF CREDIBILITY. THIS IS OUR NUMBER, LOOKING AT CORE CONSUMER EXPENDITURE. THAT IS THE BENCHMARK WE ARE USING FOR UNDERLYING NATION. WE SAID WE ARE GOING TO GET THE 2% AND WE ARE GOING TO GET THERE BECAUSE THEY WANT TO ENSURE THAT THEY ARE CREDIBLE GOING FORWARD. BUT I GET IT, I UNDERSTAND THAT. THAT IS WHY I DON’T THINK THEY ARE GOING TO MOVE UNTIL LATER IN THE YEAR, PROBABLY AROUND SEPTEMBER. THAT SEEMS LIKE THE MOST LOGICAL POINT WHERE THEY START CUTTING RATES. BUT THEY ARE RUNNING A RISK BY DOING SO. I DO THINK THE FEDERAL FUNDS RATE TARGET OF 5.5% IS HIGH-END WHEN HE A LOT OF PRESSURE ON THE BROADER ECONOMY. THEY RUN THE RISK OF BREAKING SOMETHING SO THEY ARE TAKING A CHANCE HERE. BUT AT THE END OF THE DAY THEY WANT TO MAKE SURE THEY DID WHAT THEY SAID THEY WERE GOING TO DO, THEY HIT 2% ON THE CORE PCE DEFLATOR. LISA: IF TOM WERE HERE HE WOULD SAY LET’S RIP UP THE SCRIPT BECAUSE I’M GETTING A LOT OF HATE MAIL PEOPLE WHO MIGHT FALL INTO THE OY THE DEFICIT CAMP. HE BASICALLY SAID THE DOOM AND GLOOM ABOUT THE DEFICIT IS WHAT WE’VE HEARD FOR THE PAST 30 OR 40 YEARS, AND IT WON’T REALLY MATTER, DOESN’T MATTER FOR NOW ECONOMICALLY. DO YOU AGREE, OR DO YOU THINK THAT THE DEFICIT IS ACTUALLY AN ECONOMIC CONCERN GOING FORWARD FOR THIS GOVERNMENT AT A TIME WHERE WE COULD BE HEADING INTO POTENTIALLY A LESS POSITIVE GROWTH SCENARIO? MARK: I THINK IT MATTERS. WHAT HAPPENED IN THE PAST WE SAID OY BECAUSE IF WE DIDN’T CHANGE SOMETHING WE WOULD HAVE A PROBLEM. BUT WE CHANGED SOMETHING. IF YOU GO BACK AND LOOK AT PREVIOUS HISTORICAL POINTS WHERE THE DEFICIT, YOU REALIZE YOU LIKE THE EARLY TO MID 1990’S CASE STUDY, WE RESPONDED COLLECTIVELY IN TERMS OF TAXES AND SPENDING TO PUT THINGS ON A MORE SUSTAINABLE PATH. HERE WE ARE TODAY. RIGHT NOW I DON’T THINK DEFICITS AND DEBT MATTER, BUT LOOK AT THE FORECAST. PRETTY REASONABLE. THE NONPARTISAN GROUP THAT DOES THE BUDGETING, IF WE DON’T CHANGE SOMETHING, THE DEBT BY GDP GOES A LOT HIGHER THAN IT WAS 20, 25 YEARS AGO. SO WE ARE AT 100% GDP IN ALL OF THE TRENDLINES LOOK PRETTY BAD. HOPEFULLY WE COME TOGETHER AND CHANGES. OF COURSE IN THE FRACTURED POLITICAL ENVIRONMENT WE LIVE IN, IT FEELS LIKE THAT IS GOING TO BE A PRETTY HEAVY LIFT. LISA: WHICH RAISES THE QUESTION OF AT WHAT POINT DOES IT BECOME REALITY? IT’S NOT GOING TO BE REALITY UNTIL YIELDS MATERIALLY SHIP HIGHER IN A WAY THAT IS PUNITIVE THE U.S. GOVERNMENT AND SOME OF THESE CONCERNS. DO YOU HAVE A SENSE OF WHAT THAT RATE WOULD BE BEFORE IT BECOMES UNDULY PUNITIVE TO THE U.S. GOVERNMENT IN TERMS OF INTEREST EXPENSES AND WHERE THAT TAKES MONEY AWAY FROM? MARK: IT’S GETTING A LITTLE UNCOMFORTABLE. YOU LOOK AT INTEREST PAYMENTS, I THINK IT IS OVER $1 TRILLION NOW. I THINK WE JUST PASS TO THE AMOUNT WE SPEND ON DEFENSE. I THINK THAT IS THE FIRST TIME THAT HAS EVER HAPPENED. THAT FEELS WEIRD. WE ARE SPENDING MORE ON INTEREST PAYMENTS ON OUR DEBT THAN OUR OWN NATIONAL DEFENSE. HERE IS THE THING. I DON’T THINK THE DEFICIT AND THAT RA CLIP EVENT. IT IS NOT LIKE YOU COME UP TO A CLIFF AND YOU GO OVER. IT IS A CORROSIVE ON THE ECONOMY. AS DEBT LEVELS RISE, INTEREST RATES RISE. A LOT OF EMPIRICAL WORK TRYING TO UNDERSTAND WHAT THE RELATIONSHIP IS, HERE IS A GOOD OF BOB. FOR EVERY PERCENTAGE POINT INCREASE, FROM 100% TO 110%, THAT ADDS A BASIS POINT. IT IS NOT PERFECTLY RIGHT, BUT THAT IS ROUGHLY RIGHT. THE OTHER THING I WOULD SAY IS IT IS NONLINEAR MEANING GOING FROM 100% TO 10% IS ONE THING. AT LEAST FOR THE FORESEEABLE FUTURE, WE’VE GOT A CLIFF AHEAD OF US. BUT THIS IS A CORROSIVE ON OUR ECONOMY’S ABILITY TO GROW. ANNMARIE: YOU MENTION HOW WE ARE RUNNING A TIGHT LABOR MARKET. THE CONFERENCE BOARD RECENTLY CAME OUT AND CONSUMERS WERE LESS CONCERNED ABOUT RATION AND MORE CONCERNED ABOUT CRACKS IN THE LABOR MARKET. IS IT DISCERNING TO YOU WHEN YOU LOOK THROUGH THIS DATA, THE LAST SURVEY RESPONSE RATE WAS 54.9%, THE LOWEST 2002. MARK: THE SURVEY RATE? ANNMARIE: DO WE HAVE THE CORRECT READ ON THIS DATA? MARK: IT BOTHERS ME AND IT IS GOING TO BE GETTING WORSE AND WORSE. I THINK THE JOB OPENING SURVEY, WE ARE DOWNSELECT ONE THIRD OF RESPONDENTS GETTING BACK. IT IS A BROADER POINT. ALL THE SURVEYS THAT WE LOOK AT AND ALL THE POLES WE ARE LOOKING AT ARE INCREASINGLY LESS RELIABLE. THIS IS A BIG PROBLEM AND WHY ALTERNATIVE DATA AND THIRD-PARTY DATA SOURCES ARE BECOMING MORE IMPORTANT. WE CAN’T RELY ON THE SURVEYS. PARTICULARLY MONTH-TO-MONTH. IT JUST GETS TO BE INFLATION PERSISTENCE IN THE FIRST QUARTER. THAT IS JUST A BUNCH OF, IN MY VIEW, TECHNICAL FACTORS, RESIDUAL EFFECTS. PERHAPS SURVEY ISSUES, SEASONAL ADJUSTMENT ISSUES. THIS COMPLICATES USING DATA THE WAY WE HAVE BEEN USING DATA MONTH-TO-MONTH TO SET MONETARY POLICY. JONATHAN: WE WOULD LOVE YOUR VIEW ON IMMIGRATION AS WELL. QUITE A FEW GUESTS ON THIS PROGRAM A SICKLY SAYING WAGES HAVE STAYED LOW EVEN WITH THESE REALLY DECENT, TREMENDOUS PAYROLLS FIGURES BECAUSE OF IMMIGRATION. DO YOU SEE IT IN QUITE THE SAME WAY? MARK: I DO. OBVIOUSLY THE IMMIGRATION AND WHAT IS GOING ON AT THE SOUTHERN BORDER IS A REAL CHALLENGE, BUT THE ONE CLEAR BENEFIT AT THIS POINT IN TIME, THE SURGE IN IMMIGRATION. THERE IS A REAL CLEAR LENGTH BETWEEN IMMIGRATION, WHERE THOSE IMMIGRANTS ARE GOING IF YOU LOOK ACROSS INDUSTRIES LIKE LEISURE AND HOSPITALITY, AND WAGE GROWTH IN THOSE INDUSTRIES. I THINK WE CAN CONNECT THE DOTS AND I THINK HE WILL BE VERY IMPORTANT. THIS IMMIGRATION ALLOWS THE ECONOMY TO GROW MORE WIGGLY AND AT THE SAME TIME TAKE PRESSURE OFF OF INFLATION. IT HAS BEEN PARTICULARLY FORTUITOUS AND REALLY IMPORTANT. AND IF THERE IS ONE THING WE CAN DO TO ADDRESS LONG-TERM FISCAL PROBLEMS, IT WOULD BE TO HAVE A RATIONAL IMMIGRATION POLICY. IF WE COULD HAVE MORE IMMIGRANTS, THE RIGHT KIND OF IMMIGRANTS, THAT IS GOING TO SOLVE A LOT OF PROBLEMS INCLUDING OUR LONG-TERM FISCAL PROBLEMS AND WE WON’T HAVE TO SAY OY. WE WILL HAVE A STRONGER ECONOMY GENERATING THOSE TAX REVENUES. JONATHAN: I LIKE A THAT IS CATCHING ON. I DO WANT TO FINISH ON THIS QUESTION. IF IT IS IMPORTANT FOR WHAT IS HAPPENING IN WAGES IN VERY SPECIFIC SECTORS AND INDUSTRIES, WHAT HAPPENS IF ORDERING — BORDERING — DROP, WHICH THEY HAVE? WHAT HAPPENS NEXT? MARK: THE LABOR MARKET IS GOING TO TIGHTEN UP AND PUT PRESSURE ON WAGES UNLESS WE SEE CONTINUED MODERATION AND DEMAND. AND I THINK WE WILL. I THINK THAT WILL HAPPEN HERE. INTEREST RATES ARE HIGH. THAT TARGET I DO BELIEVE IS RESTRICTIVE AND IT MORE RESTRICTIVE OVER TIME. ONE REASON WHAT I IS NOT IT REALLY HARD SO FAR IS THAT HOUSEHOLDS AND BUSINESSES DID A REALLY GOOD JOB LOCKING IN THE PREVIOUSLY RECORD LOW INTEREST RATES BUT THAT ONLY WORKS FOR A TIME AS MORE HOUSEHOLDS AND BUSINESSES FACE HIGHER INTEREST RATE I THINK THE ECONOMY WILL SLOW AND EVEN WITH LESS IMMIGRATION, I THINK THE FED WILL BE IN A POSITION TO CUT INTEREST RATES VERY SOON. JONATHAN: THIS WAS INTERESTING, ALWAYS GOOD TO HEAR FROM YOU. OY IS CATCHING ON. LISA: GOOD. WE DON’T HAVE TO SAY OY ANYMORE ACCORDING TO HIM. >> MY 90 EURO EURO JEWISH GRANDMOTHER WOULD BE SO PROUD OF YOU BOTH. BP HAS MAINTAINED THE PACE OF ITS SHARE BUYBACKS EVEN THOUGH PROFIT AND CASH FLOW FELL MORE THAN EXPECTED. THE CEO SAID WE ARE HIGHLY UNDERVALUED COMPARE OURSELVES TO OUR AMERICAN PEERS AS LONG AS I KIND OF GAP EXISTS. WE SHOULD CONTINUE TO BUY BACK SHARES. BP IS THE LAST OIL MAJOR TO REPORT AND IT HAS BEEN MIXED. EXXON FELL SHORT. INSTACART IS PARTNERING WITH UBER ON RESTAURANT DELIVERED IS — DELIVERIES. USERS IN THE U.S. WILL BE ABLE TO WATER FROM HUNDREDS OF THOUSANDS OF RESTAURANTS ON AN INTERFACE. THE CEO TOLD EMILY CHANG THAT THIS IS AN OPPORTUNITY FOR BOTH COMPANIES. >> CERTAINLY IS A VERY STRONG COMPETITOR AS IT RELATES TO GROCERY BUT FOR US, IT WAS AN OPPORTUNITY TO EXPAND ESSENTIALLY THE UBER EARS BUSINESS — EATS BUSINESS ESPECIALLY INTO THE SUBURBAN MARKETS. >> DOORDASH OWNS ABOUT 67% OF THE FOOD DELIVERY MARKET. APPLE IS DEVELOPING A HOMEGROWN CHIP TO RUN AI TOOLS IN DATA CENTERS ACCORDING TO THE WALL STREET JOURNAL. IT BUILDS ON THE PREVIOUS EFFORTS TO MAKE IN-HOUSE CHIPS WHICH WANTED DEVICES. ACCORDING TO THE JOURNAL, THE CODENAME INTERNALLY FOR THE PROJECT IS AC/DC FOR APPLE CHIPS AND DATA CENTERS. APPLE IS GOING TO BE HOSTING ANOTHER MAJOR UPGRADE TO ITS IPADS TODAY. THAT IS YOUR BLOOMBERG BREEZE. JONATHAN: APPRECIATE IT THIS MORNING. ANOTHER SETBACK FOR BOEING. >> THERE ARE BOTTLENECKS IN PRODUCTION. BOEING HAS PROBLEMS, EFFECTIVELY PUTTING OUT DEFECTIVE AIRPLANES. JONATHAN: THE COMPANY HAS A PROBLEM. SOME OF THE ALLEGATIONS AND THE RESPONSE FROM THE COMPANY. THE VIEW GOING FORWARD. ♪ JONATHAN: 40 MINUTES AWAY FROM THE OPENING BELL, EQUITY FUTURES ON THE S&P 500 POSITED BY 0.1%. YIELDS ARE LOW ONCE AGAIN FOR SESSION. THAT IS QUITE A TURNAROUND. UNDER SURVEILLANCE THIS MORNING, ANOTHER SETBACK FOR BOEING. >> ALL THE PROBLEMS THAT WE’VE HAD, WE PUT AND THEY’D OVER BAND-AID TO RESOLVE THE PROBLEMS AND BAND-AID OVER BAND-AID DOESN’T COVER IT. BOEING HAS PROBLEMS PUSHING PIECES TOGETHER WITH EXCESSIVE FORCE. EFFECTIVELY THEY ARE PUTTING OUT DEFECTIVE AIRPLANES. JONATHAN: THE LATEST, BOEING FACING YET ANOTHER FAA INVESTIGATION NOW INVOLVING ITS 787 DREAMLINER. THE TROUBLED PLAYMAKER SAYING IT HAD ALERTED AUTHORITIES A POTENTIALLY INCOMPLETE INSPECTIONS OF SOME OF IT JETS AS WELL AS SUSPICION OF OSSIFIED RECORDS AT A SOUTH CAROLINA FACTORY. THAT STOCK DOWN BY ABOUT THREE QUARTERS OF 1%. WE OFTEN HAVE TO GO THROUGH INVESTIGATION AFTER INVESTIGATION. HOW SERIOUS IS THIS? >> WE DON’T KNOW YET. BOEING DID SELF-REPORT TO THE FAA WHICH IS A POSITIVE STEP. IT IS A VERY HEAVY PHYSICAL TASK THAT THE BOEING WORKFORCE PERFORMS IN CHARLESTON ON THE 787 WITH A LOW FAILURE RATE BUT WE DON’T KNOW WHEN THEY STOP PERFORMING IT AND HOW MUCH WE WORK IS INVOLVED. SPIRIT IS REPORTING A $50 MILLION LOSS FOR THEM IN THE SECOND ORDER BECAUSE BOEING IS GOING TO HAVE TO SLOW PRODUCTION BECAUSE OF THIS. BOEING IS ALSO STALLING PRODUCTION BECAUSE OF HEAT EXCHANGERS USING TITANIUM FROM RUSSIA AS WELL AS SOME INTERIOR SUPPLIER DELAYS. SO WE’VE SEEN THREE ISSUES PILEUP AND THAT IS REALLY WHAT MADE US A DELIVERY FORECAST FROM 90 TO 60 UNITS FOR THE YEAR. THIS IS A PROBLEM INSIDE THE BOEING FACTORY. CHARLESTON IS A BEAUTIFUL PLACE TO LIVE, A BEAUTIFUL FACTORY. THERE’S NOTHING THEY COULD BE VERY NEFARIOUS AT THAT SITE SO I THINK NEW CEO HAS TO COME IN AND ASK THE WORKFORCE WHAT IT NEEDS TO PERFORM TASKS ACCURATELY, WHETHER IT IS WAGES — LISA: I’M SORRY, PAUSE. WHY ARE WE NOT JUST DOING SOME BIG, WHOLE SCALE INTERNAL INVESTIGATION? WHY ARE THEY NOT HIRING AN OUTSIDE FIRM TO COME IN AND BASICALLY DO AN UNBIASED, COMPLETE SWEEP OF WHAT COULD GO WRONG SO THEY CAN FIGURE OUT HOW TO CHANGE THINGS? SHEILA: THERE’S BEEN A HOST OF COMMITTEE AFTER COMMITTEE. THIS LEADERSHIP, THAT LEADERSHIP. I THINK WHAT WE NEED TO DO IS SEE WHAT THE WORK WORSE NEEDS. ONE OF THE THINGS WE TALKED ABOUT IS THE WORKFORCE HASN’T HAD A PAY RAISE SINCE 2014. 30% OF THE WORKFORCE IS SET TO NEGOTIATE IN SEPTEMBER. FOR IN THE SUMMER, SEPTEMBER DEADLINE. SO WE WILL SEE IF THAT BRINGS ANY IMPROVEMENTS IN TERMS OF THE WORKFORCE. 30%-40% RAISES ACROSS THE AIRLINES SO WE CAN SEE SOMETHING OF A SIMILAR MAGNITUDE AT OWING. BUT ALSO SOME OF THESE PROCESSES NEED TO BE FIXED. MAYBE WORKING WITH THE FAA AND SAYING THIS TEST DOESN’T MAKE SENSE, IT IS VERY PHYSICALLY ARDUOUS TO PERFORM, SO COULD WE REMOVE IT, AND IT DOESN’T HAVE A FAILURE ASSOCIATED WITH IT? I THINK RATHER THAN A LAW FROM COMING IN OR AUDIT COMMITTEE COMING IN OR SAFETY COMMITTEE AND JUST PEEKING TO EMPLOYEES AND SAYING HOW TASK COULD BE PERFORMED DIFFERENTLY. ANNMARIE: I GO BACK TO AN EARLIER REPORT TO TALK ABOUT THIS DISCONNECT, WHO IS RUNNING THAT NOW? WHO IS TRYING TO UNDERSTAND WHAT IS GOING ON SHOP FLOOR AND WHY THAT INFORMATION DOESN’T SEEM TO TRICKLE UP TO MANAGEMENT? SHEILA: BOEING HAS HEADS OF PROGRAMS WHETHER IT IS THE MAX OR THE 787. THEY ALSO HAVE A COO IN PLACE. THERE ARE LAYERS OF MANAGEMENT. PERHAPS AN OVERALL OF THE SYSTEM AND HAVE BETTER MANUFACTURING PROCESSES COULD BE PUT IN PLACE. AND WE’VE SEEN THAT DONE. I GO BACK TIME AND TIME AGAIN TO GENERAL ELECTRIC WHERE FACILITIES USED TO BE RUN DIFFERENTLY AND WITH NEW MANAGEMENT, THEY CHANGED THE FACILITY LAYOUT TO BETTER PERFORM FOR WORKERS IN THE FACTORY. SO I THINK IT IS MAYBE A LITTLE BIT OF AN OVERHAUL AND THAT IS WHY SPIRIT, I’M GOING TO BRING SPIRIT UP TODAY BECAUSE THEY JUST REPORTED A MASSIVE LOSS THIS MORNING, THAT BOEING IS LOOKING TO TUMBLE DOWN. NOT BECAUSE I THINK THAT IT COULD BE EASIER TO BUY SPIRIT, BUT BECAUSE YOUR IT WILL NEED THAT CASH INFUSION WHETHER IT IS AUTOMATION, A NEW FACILITY, A FACILITY OVERHAUL TO PERFORM BETTER. JONATHAN: WHEN AUTOMAKERS GET INTO TRAVEL, I’M THINKING MORE RECENTLY OF THE AIRBAG SCANDAL IF YOU COULD CALL IT THAT, WHEN YOU HAVE TO RECALL TENS OF MILLIONS OF VEHICLES, HOW DOES A MASSIVE RECALL OF AIRPLANES, WHAT DOES THAT LOOK LIKE IF THEY HAD TO DO ONE? SHEILA: WE’VE SEEN THAT SINCE 2020. LET’S NOT FORGET THE 787 DID NOT DELIVER A SINGLE AIRPLANE FOR TWO YEARS. IT JUST RESTARTED DELIVERIES ABOUT 18 MONTHS AGO. SO IT HAS HAD A WHOLE HOST OF ISSUES. BUT IT IS PRODUCING AT A LOWER VOLUME. WE ARE AT FIVE A MONTH, BUT WE ARE REALLY AT 15-20 PER MONTH. AND THE FACILITY IS BRAND-NEW IN CHARLESTON, SO IT IS A MUCH CLEANER, LEANER FACILITY TO WORK AT. JONATHAN: THIS WAS AWESOME AS ALWAYS. ALLEGATIONS AND INVESTIGATIONS KEEP PILING UP OVER AT BOEING. LISA: I THOUGHT WHAT SHE SAID IT THAT WAS INTERESTING. BASICALLY IF YOU HAVE PEOPLE WHO HAD TO GO INTO THE OFFICE OR A PLANT DURING THE PANDEMIC WHO GOT NO RAISES AND THEY HAD TO DO ALL OF THESE EXTRA THINGS THAT TOOK A LOT MORE WORK, WHY NOT CUT SOME CORNERS BECAUSE NO ONE IS PAYING THEM ANYWAY? HOW MUCH IS THIS A QUIET QUITTING ISSUE OR HOW DO YOU GET PEOPLE ENTHUSIASTIC AGAIN? JONATHAN: AS SOME PEOPLE SUSPECT BASED ON YESTERDAY, SOME CORNERS HAVE BEEN CUT. IN FACT, MANY CORNERS. THE OPENING BELL IS ABOUT 34 MINUTES AWAY. TOMORROW, MARVIN LOW OF STATE STREET, WE WILL CATCH UP WITH MANDY XU AND WE WILL SPEAK TO KATHY JONES OF CHARLES SCHWAB AT THIS BOND MARKET KEEPS ON RALLYING. LISA: BECAUSE PEOPLE BELIEVE IN THE DISINFLATION. MARK ZANDI SAYING THIS FINALLY GIVES US THE EXCUSE WE ARE ALL SEEING WHICH IS THAT INFLATION IS COMING DOWN AND THE FED WILL BE ABLE TO COME WITH IT. JONATHAN: HE IS NOT SCREAMING OY THE DEFICIT. LISA: HE IS SAYING WE SHOULD SAY OY THE DEFICIT A LITTLE BIT. THE OY IS WHAT MAKES IT NOT A PROBLEM. JONATHAN: THREE HOURS OF SOPHISTICATED,
Jonathan Ferro, Lisa Abramowicz and Annmarie Hordern have the economy and global markets “under surveillance”. Their daily conversations with leaders and decision makers from Wall Street to Washington and beyond cover the latest in business, investment, and geopolitics. No other program better positions investors and executives for the trading day.
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Jonathan Ferro, Lisa Abramowicz and Annmarie Hordern have the economy and global markets “under surveillance”. Their daily conversations with leaders and decision makers from Wall Street to Washington and beyond cover the latest in business, investment, and geopolitics. No other program better positions investors and executives for the trading day.
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5 Comments
Greatstuff.
Nice episode.
Keep up the good work.
39:40 absolute comedy gold
48:33 Lisa having a go at it 🤣
USA great again ….
Good to hear TK mentioned… Extend the X axis