Bloomberg Markets: The Shut 01/22/2024

That three month, $10 trillion rally inthe S&P just added a few billion dollars more.Live from studio two here at bloomberg headquarters in new york, I'm RomaineBostick. And we're kicking you off today on avery historic day not only for the markets, but also apparently for thisshow as well. Alix Steel joining us.I'm so happy to be part of the clothes. It is so great to sleep in by next hour.And so great to hang with you, Romain. Thanks for having me.Looking forward to it. Let's kick you off, Ben, as we're aboutan hour away from the closing bell.

And if you look at the overallheadlines, it looks like it could be a risk on day.You're looking at the S&P up by 2/10 of 1%.The VIX goes nowhere, the ten year goes nowhere, and you have a crude higher by2%. Sure, you're at record highs, but itdoesn't feel like there's a lot of momentum.And underneath the hood, there are a lot of individual stock stories moving big.I'm going to break all those down for you over the next 2 hours.We certainly are. Alex, we talk about that wobbly start tothe year for equities, but the S&P, of.

Course, coming off the record day onFriday, finding some firm footing today could potentially be a new record high,but it's setting up for a potentially interesting confrontation between thosetechnical levels that indicate overbought conditions and the pendingslate of corporate earnings needed to justify those elevated valuations.It's a face off that could feed the naysayers who say stocks are stretchedor maybe it bolsters the case. The bulls have laid out that the worrywords out there are just looking at valuations all wrong.It's a bit of a chesty bet fueled by wages.And not only that a recession risk are.

Behind us, but that economic conditionswill be nothing short of rosy. Jason Cummings, the chief economist overat Brendon Howard, says maybe just take it down a notch.In an interview on the Odd Lights podcast, he said the conventional wisdomof economic good times will be just as wrong in 2024 as the predictions foreconomic bad times were for 2023. He argues monetary policy is already sorestrictive there's almost no speed of rate cuts that would immediately counterthe softness we're already seeing in the labor market.And this really raises the bigger question right now, Alex, about thedirection of the Treasury market, the.

Direction of those yields, whetherthat's going to be sort of a all tied, all tides lift, all boats or whateverthe phrase is. I hope, you know, these phrases canalways have these senior moments here or whether it's going to be lopsided on oneend of the curve or another. Yeah.And knowing where the curve goes really helps you understand the equity riskpremium. And are you getting compensated enoughin the equity market to go buy stocks? So overall, you're taking a look at saythe curve, right? So I took the three month and the tenyear.

You can look at different curves.They have different stories. But this one in particular, you'relooking at -124 basis points. That means a three month yield has a 100basis points extra over the ten year. That's quite significant.It's also trading right around the Fed's band of policy ranges.Does it stay there? Really is the question.Now, the broader issue is, does this curve actually tell me anything you cansee here when you've had a big steepening, then you have a recessionextension recession, but now you're negative.124?.

I don't know.Does it tell me something. The reason why it's important is whatpart of the curve move? What when is where you're going to getthe key. So the front end of the curve is it movelower because we're actually seeing potentially more cuts coming down theroad or do we price out those cuts, in which case maybe the back end winds upmoving lower and that's going to dictate how you want to invest in yourportfolio, how much risk you're going to want to take on what that equity riskpremium is if they're trading right around the same level.Well, what's the point in owning.

Equities?And are you getting compensated enough for that?So remain. I feel like that's a broader questionthat's sort of outlining the market right now.And that's why I wonder if it feels like the equity market rally isn't asexciting as they may have thought being a record highs for the Nasdaq, for theNasdaq 100, as well as for the S&P. Yeah, certainly.So, Alex, I mean, we talk about looking to get towards in the mouse and I guessthere is technically some maybe some rationale for doing just that.We talk about this rally, how lumbering.

It has been up to that record high andmore importantly, whether there's a little bit more gas left in the tank.Remember, this is going to be a big week for earnings this week and next.70 companies in the S&P reporting and almost double that reporting thefollowing week here. That cross-section of the market, thatcross-section of the economy maybe will tell us a little bit more here aboutwhether that run up was actually justified.Now, you asked a lot of questions there, Alex, questions that I myself can'tanswer, but hopefully I think our next guest might actually be able to answerthat.

As we kick you off to the close here onthis Monday afternoon here with a broader discussion about the markets,the economy and everything in between, we welcome legendary investor BillGROSS, co-founder of PIMCO, for an exclusive conversation.Bill, great to have you here on the program.And I do want to start off here with the yield curve itself, what it's tellingus, and more importantly, as Alex was kind of alluding to, how do you positionaround this, if you're not quite sure, not just whether the yield curvesteepen, but what will actually drive that steepening?Well, let me start, Ramon, by saying.

That a negative yield curve and I, I usethe 2 to 10 year spread, which is about a -23 or 24.It's been as high as 50 to 75 basis points.So it's less negative now. But when you think about it,commonsensical, when you think about it, capitalism and a finance based economy,which is what we have, can't really do well, when you can get a higher returnfor less risk, that's not the basis of a capitalistic economy.You need to get a higher return for more risk.And it's just the reverse now. And so, you know, I think ultimately theyield curve has to go positive in order.

To produce a relatively stable economyand a stable inflation rate around 3%. Do you have faith right now in theeconomy and more importantly, the folks who are shepherding that economy?Well, no, that's you know, that's let me put it out there.You know, the Fed has not done well in the past three or four years in terms ofor five years in terms of trying to find that magic Fed funds rate that willneither increase inflation or produce deflation.And so, you know, are they wise enough now to know exactly what the Fed fundsrate should be at any point in time or even, you know, 6 to 12 months down theroad?.

You know, I'd be very cautious.And I view economic statistics like they do.But from an investors standpoint that, you know, speak to fundamentals that theFed isn't necessarily following. Well, let me ask you, what what wouldyou do different if if for some reason you were magically in the shoes of JayPowell? What would you do different at thispoint? Well, I would stop quantitativetightening. I think that's just not a correctphilosophy in policy at this point in time to, you know, continue to tightenquantitatively.

They should leave the, you know, thereserve balance around $7 trillion and justsee what happens going forward. I also think that, yes, the Fed shouldlower interest rates over the next 6 to 12 months.Real interest rates are simply too high. The ten year real interest rate is 1.8%,which historically is very restrictive. And, you know, I think not only the Fed,but I would like to see the real interest rate on our ten year a comedown to one and a half or 1%. And so the way to do that is to lowerinterest rates from where we have it now at five and a quarter percent for Fedfunds into, you know, basically balance.

Out real interest rates and lower themso that the economy won't go into a significant recession.So, Bill, if you think we're going to get cuts in the next 6 to 12 months, arewe cutting because of normalization to get that real yield kind of at a morenormal level or we cutting because the economy looks really bad?Well, we're certainly not talking about cuttingthe Fed funds rate based upon an economy that looks bad, although there areindicators such as the, you know, leading indicator number that came outtoday and other indicators that suggest, like we talked about in terms of thenegative yield curve, that suggests.

That, you know, at some point we'regoing to see a zero line, you know, real GDP and maybe something lower.I think, you know, to basically keep an economy going and this finance basedeconomy that we've had for a long time now, five, ten, 15, 20 years, you needinterest rates lower than nominal GDP. That's what drives, you know, basicallytoday's economy as opposed to what we saw 50 to 100 years ago.And so with nominal GDP at five and 6% and perhaps other before, but we needthe ten year to be lower than nominal GDP in order to continue a, you know,steady progression in terms of economic growth.So, Bill, in that environment, does it.

Make sense that equities are at a recordright now? I'm sorry.Seven. Does it make sense that equities are ata record right now based on what you're talking about?Oh, no, I don't think it does. I mean, you know, I've got somehistorical charts and others have provided those for me.Bloomberg being one of them that basically suggests that PE ratiosof 19 to 20 times, which is what we're at that moment and perhaps a little bitlower based on forward expectations that, you know, a PE of 19 times is muchtoo high relative to a 1.8% real.

Interest rate.You know, real interest rates are down at a negative -2%.You know, just as recently as 2 to 3 years ago.And so they've risen significantly, but PE ratios haven't haven't reallydropped. And so I think ultimately and this isthe long term, you know, type of statement that a long term thesis.Ultimately, PE ratios have to get more in balance with real interest rates,which are, you know, relatively high. Now, that certainly, Bill, seems to be aquestion for those folks who are looking for an entry point into this market, forthose folks, folks who are already.

Invested and particularly those folkswho piled into a lot of those big cap tech stocks, the Magnificent Seven.And even if you broaden that out, basically kind of the top 14 here.Is that also a signal that maybe they should be looking for the exit?Well, maybe not the exact romance, but, you know, certainly in terms ofadditional funds going into those magnificent seven or 14, as youmentioned, you know, is probably the time to to cool it off a little bit andto, you know, to put your money elsewhere.You know, that's always a difficult statement in terms of timing, because ifI'd said this a month ago, you know, I.

Would have been more of a fool than Imight be a month from now. But I think there are values in themarket. I'm not suggesting get out of themarket. I'm suggesting that, you know, perhapsyou should be a little more conservative, but you need to beinvested. You know, a 5% Treasury bill.Yes, that's attractive. And I have some.But basically, you know, there are certain stocks with higher yields,relatively safe dividends that are more attractive to me than the MagnificentSeven.

Like Like what, Bill?Are these places where you yourself have put your own money?Oh, yeah. You know, for instance, you know, I havetalked about the master limited partnerships for pipelinesthat yield 8 to 9% with a tax deferred type of status.And, you know, just this morning, Ramon NuStar, which is one of those MLPpipelines, was purchased, not purchased yet, butthere was an offer from Sunoco to buy NuStar at a 10 to 15% premium.And so with yields at 8 to 9% and with this type of value in attraction fromfrom other companies that are in the.

Takeover type of business, I thinkthat's one clear example of what you should be buying relative to theMagnificent Seven. And we'll definitely get more to M&Abecause I know remain super excited about M&A.Ah, so hold that thought. But I just want to get your quick takeon certain other areas of the equity market.What about banks, for example? What about reeds?What about areas where you can get some good yields and maybe some more risk ispriced in there trading really cheaply? What do you do with those areas?Well, I like them.

You know, as you know, I've sort ofbecome famous or infamous in the past five or six months talking about bankstocks and how they were, you know, relatively historically cheap with abook to price to book type of ratio at about 2.5, which is about as low asthey've ever gone. Now it's much higher and they've donewell. But there are certain bank stocks that Iown that yield about 6%. One of them is CFTC.Another is a K UI. Another one,Truist TFC, which is down today, but know these are attractive type ofsituations with 6% yields and still some.

Upside.Although you know, at this point they're they're probably going to level off too.Bill I guess a good question is I understand why you like those thosenames and why you like the dividend yield, but none of that is big tech andthe I trend and semis. How do you play the trend without buyinginto the big guys that are already expensive?Is there is there a happy medium for Bill GROSS?Well, I don't own any of the Magnificent Seven, although Ithink Microsoft is certainly a great long term value and can be bought, youknow, at this point with expectations of.

A of an attractive return going forward.There's a stock in Europe, in Euroland, that's basically the Microsoft of Euroland symbol as e p a m and it trades in amuch cheaper value that it's got some interest in Poland and so on, which aregeopolitically risky. But I think that's an attractivesituation. And, you know, so you can pick andchoose, but for the most part, the Magnificent Sevenare not on my list. All right.Well, let's talk about some of the other things that are on your buy list, atleast what we know publicly.

You have been involved in some mergerarbitrage plays, including Capri Holdings and at least a couple of othershere. Why do you find just overall mergerarbitrage attractive, an environment where, quite frankly, there doesn't seemto be that many mergers anymore? Well, we just had one this morning witha new star. But yes, I think in terms of Capri, youknow, it was just approved basically by China a few weeks ago in terms of thepotential going forward. And that tends to be a relativelyconsistent indicator of what we might do here in the United States.You know, capris trading around 40, it's.

Got a buyout around 47.And so that's seven points on a base of 40.So that's about a 16, 17% return, you know, over the next six months if itgoes through. So there's certainly some risk there.As Peel K is another one. It's it's called Splunk.Yeah. And Splunk Splunk is an attractivesituation for with a smaller total return, maybe four or five points goingforward. But it, you know, consistently moveshigher each and every day. And so,you know, these aren't, oh, Nvidia type.

Of stocks, but they're, you know,situations where you can certainly outperform Treasury bills with a prettygood margin of safety. I am I'm curious when we talk about theidea of sort of whether these deals go through, there's been so much talk aboutsome of the deals that either failed because of regulatory pressure or maybejust because the the buyers or the sellers got cold feet out of it.I am curious as to whether it's easier or harder to sort of assess these sortof the potential for these mergers to actually make it through, given theregulatory environment, given the cost of capital to finance it and quitefrankly, given investor appetite, which.

At times seems to be a little bit tepidfor these types of tie ups. Yeah, I think it's harder, Ramon.No, there's no doubt the conditions that you just mentioned, you know, make itmore difficult. But, you know, we're talking aboutrelative value here compared to the Magnificent Seven and some of the othersthat stocks at 19 years. And so it just seems to me that, youknow, a relatively conservative investor can make a 10 to 15% annualized type ofreturn without as much risk as being in the, you know, high tech stocks.Hey, Bill. Looking ahead, it's an election year.New Hampshire primary is today.

Do you have a President Trump 2.0playbook yet? Hmm.Are you talking about? Did I say digital?No, I'm talking about President Trump becomes a president again.Oh, what do you do? Where do you go?Oh, well, that's certainly a risk.So we have political risks domestically. We have geopolitical risk in terms of,you know, a number of situations around the world.So what do you do? Um, typically you remain very cautious.So what does conscious mean?.

Does that mean you want to go by the tenyear or is it by the dollar? Is it get out of certain positions?What what does cautious mean for bill growth in that environment?Well, I think it means, you know, going for an attractive yield,an attractive dividend that's, you know, consistent going forward.I don't really want to mention this because these these stocks are not onthe favorite list of any investor. But, you know, tobacco stocks likeAltria yield nine and a half to 10%. And, you know, dividend has been raisedevery year despite the problems with, you know, the tobacco industry.There are stocks like Verizon and AT&T.

That yield six and a half to 7%.And so you can go to areas where there's perhaps still some growth like withVerizon and AT&T and high yield at the same time, it just seems like a betterbet for an investor that wants to conservatively, you know, earn perhapsdouble digits going forward. All right, Bill, I'm going to save youfrom the political questions from Alex. Well handled there.I am curious about opportunities outside of the United States.There's been a lot of discussion about how basically one of the best performingmarkets out there isn't the U.S., it's Japan.There's been a lot of discussion here.

About how there is a lot more moneythat's coming out of China and looking for a place to go in sort of, I guess,the developing world, if not to Japan itself as well here.Do you look at a turning point in any of those markets that might provide, atleast on a relative basis, a little bit more return than what you can get herein the U.S.? Yeah, I think so.I'm looking and I've dabbled a little bit because, you know, as you point out,Ramon, you know, non-U.S.stocks have not done well relative to the rest of the universe.Japan is doing, you know, better this.

Year and last year.But, you know, there's there's a an ETF bythe symbol of the E.U. that contains all or most stocks thatare non-U.S. related.And so, you know, it's a it's a long term timing situation in which, youknow, the expectations for this, you know, have to turn around.But I think there's value more of that in European stocks thanthan in the United States based upon price earnings ratios and otherconsiderations of stocks like Volkswagen, for instance, or BMW.Gosh, the p e ratios, there are 2 to 3.

To four times relative to GM and Fordand certainly Tesla. And so, yeah, there are considerationsin outside the United States. I think an investor should look at that.This is interesting, Bill. I mean, I always love talking to you.I mean, for a guy who basically made his name and his fortune in the fixed incomespace here, you really seem to have a very interesting view about just thepace of equities right now and the attractiveness there.Is it more exciting now for you to, I guess, do what you're doing?Obviously, you have the independence to do whatever the heck you want now, butis it more exciting, I guess, to be more.

In that space than in bonds and fixedincome? Well, yeah, I think it is.You know, the volatility is higher. But, you know, to be fair, and I'm stillin the Treasury market with puts and calls and options and, you know, even ifyou don't have a bullish outlook on the ten year Treasury, which I don't,you know, you can still make a decent return by, you know, doing a spreadtrade up put and a call spread trade that over a month's period of time canprovide a decent return. Soyeah, it's more exciting to be in stocks and and remain one of the considerationsin the stock market is consistent with.

What I did at PIMCO.You know, stocks are a volatility type of consideration.At PIMCO, we sold volatility consistently going off going forwardbased upon mortgage passes, etc., etc.. And so, yeah, I, I, I like dabbling inthe equity market more than bonds, but funds are still there.I don't think I'd ever would have a thought that Bill GROSS would say that.Bill, before we let you go, I would kick myself if I didn't ask you this.We are having exploding fiscal deficits in the U.S.Whoever takes the White House, that's going to continue to grow.At some point, Do you think the bond.

Market can start telling Washington,D.C. to trim more fat like the bond marketdid in the UK with former Prime minister Liz Truss?Well, hopefully, yes. But I don't think the bond market cantell Washington anything. I think it's Washington that dictatesthe bond market. You know, Washington is concerned in anelection year with maintaining a deficit of one and a half trillion or more andin order to keep nominal GDP higher. And so,yes, I think this election year is important, but I don't think the bondmarket, even under a supply.

Consideration that suggests higherinterest rates is going to do much good in terms of giving a lesson toWashington that's vice versa. Do you think we're going to actually seethat lesson, I guess, in your lifetime? In my lifetime, Or is this justsomething that our children, our grandchildren are going to going toinherit? Well, you know, you know, demographicsargue for higher deficits going forward with Social Security, with Medicare andMedicaid. You know, it seems to me that we're in asituation where long term deficits, as far as the eye can see, are going to beconsistently high, not just here but in.

Your land and elsewhere.It's simply a situation now where there's too much debt and in order to,you know, keep that debt rolling and keep the economy rolling on a nominalbasis, it's necessary on the part of central banks to,you know, to maintain a relatively easy monetary policy.And the same thing with fiscal I think I think one and a half trillion dollardeficits are here to stay. All right, Bill, really appreciate youtaking time for us. Always insightful.Bill GROSS, of course, the co-founder of PIMCO, helping us kick off to the closehere on this Monday afternoon Alex.

Interesting, too.I do kind of find a little humorous and he kind of, you know, makes the pointthat when he was managing those PIMCO funds, he was doing a lot of stuff thatI guess would sort of be on the outskirts of the equity market.But he always seems to be very, if not all in on equity, certainly talks abouta little bit more favorably. He says it has to say about the pictureis pretty funny. I mean, and I appreciate the idea thatyou have good high yields like for MLPs, for example, or you're yielding a lotfor banks and you want to get in on that and clip a coupon and get some safety.I get that.

What's interesting, though, was hiscomments about some European equities like Volkswagen.Yes, I get they're trading cheaply, but definitely for a reason.And the value trade has been a fakeout. It has been a consistent fakeout andkind of when does it pay back? But you see where his mind is thatright? I mean, the idea is he's looking for theyield. Yes.And he's talking about dividend players. He's talking about those companies thatmay not be they have the sexiness of the Magnificent Seven, but they have thebalance sheets and they have the.

Dividends to provide some returns, atleast in his view. And if not, you should get the coupon.Absolutely here. A lot more coming up here on theprogram. Our next guest says that inflation hascome down with no thanks to the Fed. Stephanie Kelton, Stony Brook Universityprofessor, joining us in just a second. Plus, shares of Gilead Sciences see thebiggest drop in over eight years. We're going to break down what's fuelingthe fall in today's Stock of the hour. United Airlines also set to reportresults after the bell. We're going to give you an aerial viewas soon as those numbers cross.

All that and more coming up in a bitright here on the close on Bloomberg. Just about 330 here in New York.This is the countdown to the close. I'm Romaine Bostick and I'm Alix Steel.Okay. I'm looking to market record highs,yadda, yadda. I get that.I don't feel the excitement. I don't feel the push.Higher above 3/10 of a percent gain on the S&P 500.Doesn't get you excited. Does not get me excited.Well, maybe this will get you excited because everybody's talking about howwe're kind of at overstretched levels.

We're almost at oversold conditions onthe S&P 500 with that RSI bumping up against 70.But there are a lot of people saying you're looking at valuation to wrongAlix Steel If you really stop and look it here at what these companies are ableto grow and more importantly, obviously some of the cost cuts they've made,which also feeds into earnings here, that maybe, just maybe this is the startof something new rather than just sort of this lumbering doldrums we've beenin. I know, but I just feel like, how doesthat feel? Just are you buying it?No, we're just finding a way to explain.

The rally at this point until we get toearnings and can really see if we have true beats and a good outlook.And then, of course, you got, you know, inflation in the Fed.We've got to see where that goes. Absolutely.For macro, macro macro. But that's going to be back in picturein a couple of weeks when the Fed meets again.I do love my macro because we can talk about that, right?You know, I do inflation. Speaking of inflation, really inchingcloser to the Fed's 2% target. And the question really, though, is why?And this is where I do like the macro.

So some credit the Fed's interest ratehikes and others say that that policy hasn't really done that much.In an interview with the Financial Times, Stony Brook, Stephanie Keltonsays, quote, Everybody talks about a soft landing and the Fed pulling off thenear impossible. But I think inflation has come down inspite of what the Fed has done, not because of what the Fed has done.We are joined now by Stephanie Kelton, herself, professor of public policy andeconomics at Stony Brook University. Stephanie, it's great to get yourperspective. Are you purely talking though, aboutdifference supply side versus demand.

Side?Inflation supply side was really hit with COVID.The Fed didn't really affect that and the demand side hasn't been felt yet.I mean, that's basically what it comes down to.We had a collision with the pandemic and the brittle supply chains.And I'm not suggesting that demand didn't play a role.Obviously, we had big fiscal stimulus. We had a shift in the way that consumersspent income away from services toward durable goods.So all of these things sort of combined to give us the initial impulse withinflation.

And then, of course, we had what wereessentially a rolling series of supply shocks with new waves of, you know,different variants of the virus and shutdowns taking place at differentmoments in time in factories in countries across the world.So, yeah, I think most of this is a supply side story, to be sure.So can I imply then that either the Fed rate cuts are hikes haven't been feltand that we're going to see that pain fairly soon, or that the Fed really onlyaffected the housing market and mortgage rates and that that's kind of it.I mean, they definitely did impact housing and they definitely have had animpact on, you know, the ability and.

Willingness of many consumers to buydurable goods like automobiles and so forth.So I'm not suggesting that the rate hikes don't have an impact, but I thinkwhen you look at the data, yes, there are pockets of weakness in the economy,but overall, we've had upward revisions to real GDP.Look at the Atlanta Fed, another upward revision just the other day.The labor market remains resilient. Consumer spending is strong, sentimentis strong. So I think, you know, there are a numberof ways that I can actually look at the rate hikes and say, you know, the ratehikes themselves are forcing the federal.

Government to pay out hundreds ofbillions of dollars in additional interest income each year.That is providing some fiscal support. It's a regressive kind of fiscalstimulus for sure, but it is providing some additional support.And I think that too often is underappreciated in the whole storyabout why the economy continues to perform as well as it does.So let's get to a broader question, too, about kind of the disconnect, Stephanie,that we're seeing in some of the economic data and some of the anecdotalevidence that you get from folks on the ground.And I thought it was interesting.

Paul Donovan, who's the chief economistover at UBS, had a great op ed in The New York Times kind of talking about thedisinflation that we're seeing in durable goods and some of those bigticket items, big ticket items that, of course, we don't actually buy every day.But of course, the items we do buy every day and every week, those prices stillremain elevated. Well, prices remain elevated, but ofcourse, what we're really interested in is the rate of increase.And the rate of increase in the overall price level, of course, has been comingdown now on a fairly nice glide path for the better part of the last year.So that's what the Fed is after.

It isn't that we anticipate the pricelevel of specific goods. You know, maybe we're used to walkinginto the grocery store and paying a certain price for something they've beenbuying for a long time. And you notice that it hasn't reallycome down. And for a lot of consumers, that feelslike inflation is really sticking around and not coming down.But of course, that's not what inflation is.So I think that to look at the whole, you know, index of prices and we knowthat inflation is sharply down. In fact, if you look at some measures,we're running really close to the Fed's.

2% target right now.But, Stephanie, I mean, you're 100% right.I don't disagree with you, but of course, you also know that a lot ofpeople don't understand the definition of inflation, right?I mean, you do because you're an economist, but there are a lot of folkswho just see those elevated prices on the on the shelves.All they know is I'm paying more for eggs than I was maybe a year ago here.Doesn't that not feed into inflation expectations?And then does that not affect some of the policy decisions that the Fed has tomake?.

I mean, it could.Right. Misunderstanding and consumers nothaving a clear sense of what it means to have inflation coming down.But if you look at the most recent data, again, consumer sentiment and inflationexpectations, it suggests that consumers are starting to put the sort of puzzletogether and to understand that inflation really has come down.I don't think that there's any evidence really that we can point to to say thatconsumers have, you know, inflation expectations that are becoming unmooredor that, you know, consumers are expecting inflation to reaccelerate oranything.

I think that that people have started tocome to terms with the fact that, you know, their wages have, in fact, for themost part, kept up and in many cases outpaced inflation.And folks are doing better. And the data and what they're telling usin surveys seems to reflect that. Stephanie, I asked this question in thelast segment of Bill GROSS, and it also goes into your modern monetary theoryidea that at some point the fiscal budget is going to be so blown thatwe're going to have some kind of reckoning with the bond market, The bondvigilantes are going to put the government to task on getting theirfiscal house in order, like we saw in.

The U.K.about a year and a half ago with Liz Truss government.You ardently don't believe in that. And I just really don't understand whyand kind of when that reckoning, though, may happen.Well, okay, first thing is the the funds to buy the bonds are supplied by thedeficit itself. So the government runs the $1.4 trilliondeficit. It is by definition putting in 1.4trillion into the banking system that would show up as reserves.But what happens is the Treasury matches the deficit by selling bonds, and so thefunds to buy the bonds are in place by.

Virtue of the fact that the deficit hasbeen right. You're not going to get into a situationwhere you have auctions that don't materialize because, of course, you havea primary dealer market. The system has been designed to ensurethat the bonds get taken up. So I don't worry about things like that.But I would say the biggest driver, the single biggest driver of the fiscaldeficit right now, as we sit here having this conversation, are the rate hikesthemselves. So again, another thing that I think toooften gets forgotten. If folks want to talk about the federalbudget and look at different line items.

And say, where do we want to see maybesome restraint, Yeah, look at the biggest deficit.I mean, well, maybe that's the case, Stephanie, but what was the alternative?I mean, at the fed and raise rates, which will we still be staring down, youknow, 9% headline CPI? I mean, the Fed had to do something.And the net result of that is that, well, financing costs have gone uphigher for the government, whether they like it or not.There's a lot on the books right now that they've taken up over the last fewmonths and years that they're going to be paying off down the road at a muchhigher rate than they would have should.

Rates have stayed that low.So if we find a cost of living crisis by raising interest rates, which raises theprice of investment increases the cost of financing investment reduces andrestricts capacity and supply increases the cost of financing homes andautomobiles and other durable goods. What did the Bank of Japan do?You said the Fed had no choice. They had to raise interest rates.I don't think that's right. I think the Fed could have taken adifferent read of the situation as the BOJ did.The Fed could have said, look, we don't think raising interest rates is theright way to address what is largely a.

Supply side problem.In fact, we want to encourage borrowing and spending and building of capacity.The Bank of Japan did not raise interest rates through this entire period.Inflation went up because it was a global phenomenon and it has comecrashing down in Japan the way it has around the world without the need formonetary tightening. So I do think there was an alternativepath. So you think if the Fed had taken asimilar tact and basically been more patient, we would have still seenthe CPI rates and the other inflation metrics come down.Sure, because the things that drove it.

Up abated and that was already, I think,always baked in as the as the supply chains healed, as the labor markethealed, as the pandemic abated, as things got back to normal.Inflation was always destined to come back down.All right, Stephanie, got to have to leave it there.Always great to get your insights. Stephanie Kelton there, professor overat Stony Brook University, author of The Deficit Myth and one of the foremostexperts out there here on inflation and deficits.Coming up here on the program, our Stock of the hour.Look at Gilead Sciences having its worst.

Session in more than eight years afterits cutting edge cancer drug failed to meet one of the primary goals.That's coming up next right here on the close on Bloomberg.And. Time now for our Stock of the Hour.A closer look at Gilead Sciences, the pharma company having its worst daygoing back to 2014. Abigail Doolittle joining us right nowto explain why. Why is it down?Yeah, and this really stands out. It's a huge binary event, clearly.And it went to the side of people not successful making their bets.And the reason that stands out is you.

Have a lot of smart money in thiscompany. There's hedge fund managers who only dohealth care. Health care managers, they put in a lotof research to this and they got it wrong.And now what they got wrong was what we're talking about is there's a cancerdrug, their therapy called TRO Delve. It was a late stage trial of 603 peoplewith non-small cell lung cancer. It was supposed to extend their survivaland it really did not. Now, the other reason this isdisappointing is it's in this new class of drugs called an ADC or an antibodydrug conjugate, which basically gets you.

Injected into the tumor less sideeffects. And so this new class of drugs issupposed to be very promising, but here you have this failure.But Juliet is not giving up, which is also interesting.So the kind of move that we're seeing, though, is what I would think we wouldsee with a small biotech company that's like reliant on like one kind of drug.Right? Gilead hasn't managed its expectation.Like a few weeks ago, they still sounded relatively positive.Yeah, I would agree with you on that. We are seeing this outsized reaction,and I think some of it does have to do.

With Gilliatt because apparently forweeks and months they've really been talking up this potential.I think what this comes down to, based on my reading around it, is the factthat this drug is not one size fits all. It can help some people, but it mightnot help other people. So some analysts are saying that theyneed to pick their trial, better pick the people who respond better to it, andthen they'll do well. AstraZeneca had a similar failure lastyear. They're still trying to redo it.So Gilead is going to look at these results with regulators and see if theycan again figure out a way to better.

Target their the better audience.All right, Abigail, thanks a lot. Really appreciate it.I wonder if on their earnings call, we hear something about weight loss drugs.I don't know. Yeah, we like to say the words.Yeah, absolutely. And I mean, look, I mean, this hasreally been the Holy Grail. I mean, there's a lot of drugs out therethat have been Look at the Holy Grail. Of course, lung cancer just reallydifficult to treat. Yeah, Yeah, 100%.Anyway, the close coming up next, we got our Wall Street risk appetite is stillpretty good.

Our next guest says she's still in therecession camp, though. More and more with Lauren Goodwin,economics and chief market strategist over at New York Life investments.This is the close on Bloomberg and. This is the countdown to the closeRomaine Bostick here alongside Alix Steel.10 minutes until we get to those closing bells.Alex And yes, Alix Steel you may not like this rally, but it is a record.I doesn't tend to get excited by it and I just can't.But yes, your record high now is like 100 year to record high with the S&P.But within that, the Dow Jones.

Industrial Average.Oh, don't forget the Dow Jones. Everyone loves the Dow.But there are some really interesting stories in the mix of that.One. Is Archer-daniels-midland falling themost on record at a three year low? It's like a double whammy.Cut its earnings outlook and also its CFO is placed on leave because ofaccounting issues. And Stiefel just like took it you know,just like what you don't want to see price target you don't want yeah younever want to have a headline say CFO resigns amid concerns about accounting.It's like it's not like being.

Inappropriate, like accounting.And also there's like five of these big guys.So having one of them go under a lot of issues is a big deal.And then the flip side, you Western Digital, it's a semi it's MorganStanley's top pick among us semiconductor it's kind of have and havenot those stories I'm jazzed about. Yeah well look I mean we take a look atthe S&P 4852 right now and of course these are all individual stock storiesmaking up the aggregate story as well. Lauren Goodwin joining us right now.She's the economist and chief market strategist over at New York LifeInvestments, helping us count down to.

The closing bell.Chief market strategist has a nice sound to it.So give us your chief market strategist outlook here, because Alex says thisrally is way too much. It's gone too far.She hasn't actually said that. But there are a lot of people sayingthat and they're really wondering whether the run up we've seen in pricesis actually going to be justified by corporate and economic fundamentals.I'm with Alex on this one. I think we are right back in said pivotpurgatory. We've seen a risk assets move higherreally across the board as a result of.

The meaningful improvement in financialconditions that the Fed has engineered. But we're also looking at almost 12%earnings growth expectations for this year.And so for that to happen, we'd have to have growth reaccelerate because theearnings growth was 0% last year. And if growth accelerates, I think wehave inflation. So I'm a little bit worried about theequity market moving forward. Yeah.One thing that I'm curious about too, is just this idea.You know, we talk about the two years or so since we had the last record highback in early first day of January 2022,.

And the idea that we went through thetwo year period, we didn't actually have sort of a real recession.We didn't really have really a real bear market, if you think about it here.So are we kind of jumping the line in a way that's going to come back to biteus? I think that if we learned anything fromthe last couple of years, it should be that it does not pay to sit the marketout, even when every economist, strategist and chief of anything issuggesting that economic growth is going to slow.I do think that economic growth is liable to slow this year, but so do thefolks who are cheering for a soft.

Landing.And so despite those realities, it's been about being in the market and aboutstaying invested, looking for quality and yield.And so I think those tried and true narratives are likely to serve investorswell. And when you say slow, slow, not anactual contraction, right? You do.I'm just I'm just you know, we have to clarify, sometimes we we do expect thatwe'll see a mild recession this year. But a couple of caveats to that.The first is that, again, everybody expects economic growth to slow thisyear.

It's just a matter of which side of zeroyou sit on, a little too little above the line, a little below that, Jane.But the other caveat I'd add is that even though we do expect a recession, Idon't think that's actually a pessimistic view for risk assets in themedium term. Of course, as economic growth slows,you're likely to see equity market valuations tumble, you're likely to seespreads widening. But then you also see some of thefactors contributing to this sticky inflation environment abate and youprobably get a much more benign credit cycle.So I actually think a recession sooner.

Rather than later is a more optimisticor constructive view for risk assets. So I want to get your take.I was interested. The Atlanta Fed had a paper like a staffpaper out talking about inflation and basically saying that the Fed doesn'tneed to exert any more effort to bring inflation down.Like reaching that last mile is not actually going to be that hard to getto. What do you what do you think aboutthat? Like to draw that kind of aggressiveconclusion? Kind of feels like the Fed can be okaywhere they're at, which would be.

Constructive for risky assets.Yeah, And it's it's one of the things that I think is really stumping Fedwatchers, including myself right now, which is that after a couple of years offocusing only on inflation, which was appropriate, the Fed has navigated thiskind of shift in framework, which may also be appropriate to the point of thispaper. When I say shift in framework, I don'tmean that they're looking at completely different things.Inflation and labor market data still matter, but those data suggest that theyshouldn't be talking about cutting just yet.And so what investors are grappling with.

Is that they're probably looking at morefactors now. I think financial stability is likely tobe a swing vote. I think that politics shouldn't be aswing vote, but on the very margin may be a swing vote and.So that's that's a actually trickier Fed watching said gaming dilemma forinvestors than even just a couple of months ago.How do you handle the risk? We're looking primarily at quality andyield. What does it look like in the equitymarkets? I mentioned that we're concerned thatthe valuations can't keep up with.

Earnings growth expectations.And so we're looking at a mix of quality growth, SMID growth and some of the moreresilient themes that we expect can navigate slower economic activity likeinfrastructure. Another high conviction investment ideafor us is that if you're worried about earnings growth, why not take some ofyour equity like risk in high yield or other credit asset classes where maybeyou have some of the same price risk, but you can can gain yield while you'rewaiting out the economic scenario you find that attractive even in a scenarioof an economic slowdown. I do.I would expect in an economic slowdown.

That spreads will widen, but you'd alsosee equity market valuations fall. And so if you're looking at your equitylike risk bucket for investors that have that capability, that's a that's a nicetrait, especially when we've already seen a run up in equity prices to theextent that we have after the Fed pivot. Because it gets to a broader question,too. I mean, it's funny, we were speakingwith Bill GROSS a little bit earlier, and he was actually talking about, quoteunquote, value stocks, a lot of dividend plays that he views as more attractivethan kind of the Magnificent Seven and those growth stocks here.Is this an either or proposition?.

I don't think so, although I will saythat if we learned one thing in 2023 aboutstaying invested, probably the other thing we learned in 2023 was not tochase late trends unless we expect growth to accelerate.I do think that this surge into small caps in value on a blanket basis isprobably a little overoptimistic when it comes to the tradeoff.With tech specifically, we're looking at three things.First, the foundational layer of tech. The Magnificent Seven valuations haverun up a lot, but these are companies that are likely to be irreplaceable inthe short term.

So instead of foregoing them altogether,we're balancing them with the physical layer, the infrastructure that supportsthat trend, as well as the application layer.This mid growth that we think will be built on top of it.Loren, always a great conversation with you.Loren Goodwin, economist and now chief market strategist over at New York LifeInvestments, helping us count down to the close Alix Steel.We're about two and a half minutes away here, and I know normally you're so usedto covering the European close, which is several hours prior to this here.Are you still awake?.

I'm so excited.Yeah. I don't have to hear a guy mispronouncewords. This can be so awesome.But also we've got earnings and I'm really into earnings because I wonder ifthe bar has been lowered enough so anything would be a good beat.And then how we react off of that in the stock market scheduled to get Unitedearnings after the bell and S&P 500 up about 2/10 of a percent.That's your laggard on the day. The big winner today that belongs to theRussell 2000, up about 2% here. As we get closer to those closing bells,we're about to take it to the bell and.

Beyond.Beyond the Bell. Bloomberg's Comprehensive cross.Coverage of the U.S. market.Close starts right now. And right now we are 2 minutes away fromthe end of the trading day Romaine Bostick alongside Alix Steel.We're counting down to the closing bell and here they'll take us beyond thebell. It's a global simulcast that used to befor people. It's gotten so big it has to be fiveScarlet Fu who you know. Joining us now, Tim Stanwick, who Ithink you know, also joining us now.

And let me introduce to you, CarolMassar everyone to meet all of you and everybody knows Carol.Come on now. I'm here to find Box, you guys.This feels huge. Room there for a six.Can we just skip them over there? True.Why not? You guys get everything?Yeah. Look at us.We feel outnumbered right now. Maybe we should just widen, Maybe make.Yeah. I don't see any of us on TV.Because if I miss you all the top at.

3:00.Yeah. I'm so used to just being able to hangout and all get together. He was just stuck with me.He really wanted other people. That's the subtext, but that's not whatI said. So an interesting trade, right?We're off our highs in terms of the equity market.It's pretty broad based. So we're definitely seeing a risk ontrade here. But I really do feel like the countdownis to to next week's Fed meeting and if we get GDP this week.But I really just feel like we're all.

Trying to figure out your jumping thatfar ahead. I am.What? Well, where are you?Well, we get united earnings, we get Tesla, Netflix, and next week we get abunch of other tech companies. Yeah, but don't worry.Go ahead. Jump forward to the 31st of January.I'm looking at something that I know Romain finds incredibly important, whichis the way that Bitcoin has moved in recent days.Oh, is I mean, I thought Bitcoin only went up, but now itdropped below $40,000 today.

You know, I thought the ETFs weresupposed to be, you know, energise Bitcoin, but they happened.They happened. So now it's okay.Now you can, you know, move on now people have sold.Yeah. I mean, in fairness though, I think alot of the advisors we spoken to say it's going to take some time.All this is going to flow through the register registered investment advisors,and they need a little time, I guess, to come up with their sales pitch.Maybe, maybe not. Yeah.Or buy the rumor, sell the news guys.

Just straight up by the rumor.Sell it. All right.We are getting the clapping and cheering on Wall Street on this Monday afternoon.An extension of the record high rally from Friday extends to record highs hereon this Monday. And S&P 500 closing higher by about 11points, 2/10 of a percent, 4850. And change the Dow Jones IndustrialAverage also at a fresh record high, up 138 points, cracking the 38,000 level.The Nasdaq composite, of course, still not near its record highs, still up 49points or 3/10 of a percent. But the outperformer on the day you findthat in Dow transports up 2%.

You find that in the S&P 400, mid-capsup 1%. And you find that in the Russell 2000 up2% here on the day. All right, guys, before we move on, Ithink we are getting earnings right now out of United Airlines.If you want to jump right to them, everybody jump in the ball here withfour Q adjusted EPS coming in at $2 a share.That is a beat. The Street on average was looking for$1.69. And as far as the revenue itself,operating revenue also coming in as a beat guys, 13.63 billion versus thestreet estimate of 13.5.

Yeah, quite a pop here in theaftermarket, up 1.3% here. Talking about the metrics, definitelysome outperformance here. What I really though I'm kind of waitingfor and I think maybe it's going to come on the call is I am curious about theimpact from those Boeing planes and whether or not there's a great story onthe Bloomberg already where the United Airlines CEO was a little frustrated bywhat's going on at Boeing. Alex.So I'm looking for some color around that.Yeah, but, you know, the golden measure to this is passenger revenue per seatmile.

And that came in pretty solid.It missed estimates by like $0.02, but it came in pretty solid at $16.85.And I do want to point out their full year adjusted earnings forecast, SGR, a2024, is still higher than estimates. So they're basically raising that over$10. And remember, this is a stock that hastumbled quite a bit since Delta came out with its cautious forecast for 2024.So a lot of bad news has been priced in. So this stock move in after hourstrading of up three and a half percent. You got to keep in mind the contexthere. Yeah.Excuse me.

I'm glad you mentioned Delta Scarlettbecause the entire airline industry romance has been hit since Delta cameout. With that cautious forecast, I will saythe word Boeing. The number is 737 max, in the words thatMax is not in the press release anywhere.But, Carol, I think you're absolutely right that the questions will come fromanalysts on the call today about, okay, how long is this thing going to begrounded? And we know it's not up to Boeing, it'sup to the FAA. The FAA says we're going to take it, youknow, when it's when it's no longer when.

It is safer for consumers to fly on,that's when we'll get it back in the skies.But no question, there's frustration over this.Hey, can I just point out Delta looks like they're up about 1.4% in theaftermarket as well. So we're seeing some left to some of theother players in the space. Yeah, absolutely.United itself up about three and a half percent, as you can see there.And most of the other airlines also getting a modest bid here in after hourstrading here. That overall sort of I think picture,though, is this idea that we are still.

Traveling, we are still spending moneyon these flights. And at least for right now, theredoesn't really seem to be any indication that we're going to see a significantreversal of that anytime soon. I do want to point out, though, thatthey are saying that their first quarter adjusted loss per share, the bans reallywide, could be $0.35 a share to $0.85 a share.The estimate was $0.21. Share loss.I'm kind of like, watch that as we move forward.But I do wonder what the Boeing issue will sort of have on that.But you're right, in that premium cabin,.

Even economy cabin all saw some supersolid increases year over year. Scarlett.Yeah. Compared to some of the second tierairlines which are struggling with domestic demand for domestic travelunited and American. They definitely benefit from theincreased demand for international travel.The big question now is geopolitics and how that plays into demand for corporatetravel going forward. Yeah, I'm looking at the United Airlinespress release. I'm sure you guys have done this aswell, just putting in Boeing and.

Searching and it's so far not coming upat all. But we'll see what we get kind of lateron on the call, guys. Yeah.Again, I want to go back to the idea of understanding from the company whatthey're expecting when it comes to the front of the plane here.I mean, that's been a big question over the last couple of years.Okay. Post-Pandemic people are traveling more.Yes, we're seeing more leisure travel. There was pent up demand for Europe overthe summer. But our business travelers traveling tothe same extent that they traveled at.

Before the pandemic with the advent ofZoom with hot or not Advent, but with the use of Zoom romance, with hybrid,with hybrid work. Are people getting into the front of thecabin as much as they were? Because that is where a lot of the moneycomes from. It certainly is here, and at least weknow anecdotally the answer to that is probably no.But the question is the airlines, at least for right now, if on the way tosort of make up for that revenue in other ways, I guess, how much of arunway do they have to continue doing that?Yeah, I use all my miles guys like it's.

Way back to the plane.So you better soon because they're getting rid of all those programs.I know. That's why I'm dumb tostart anytime Itravel, it's definitely all over. Yeah.I just want to point out, also in this release, they talk a lot about this ideaof sort of cost convergence across the industry.And this has obviously been a big part of the story for keeping these companiesprofitable here, but they kind of paint it less as a united specific story andmore as something that's more industry wide here.And I just think it's kind of.

Interesting the way that they're framingit. Do you think cause convergence refers toeconomy, plus that idea that in between business and economy, you have somethingin between where you pay a little bit more and you just squeeze out some moremargin from feel better about yourself, you to do that, you're allowed to bringa bag on the plane. You actually can stretch out your legs.You can you can you can not bend your knees the whole time.I don't know. It's it's actually it's interesting youbring that up. Scarlett is a product that's verypopular outside of the U.S., that not.

Necessarily economy plus, but like theyou know, there is this there is a real market outside of the U.S.for for something that's premium but not quite business class and it hasn'treally caught on here in the U.S.. I will say, though, for the first time,and I'm trying to think the last trip, but over the last few months, taking atrip, a business trip and seeing empty seats, which I feel like I have not seenin a long time. So I don't know what that says, whetherthere's some push back and maybe people are you know, maybe the businesstravelers aren't traveling as much. But it was just kind of an interestingthing to notice.

Were you able to move up?No, they don't let you move. Nobody gets to move.Yeah, that's that's called capacity. I feel like that It's artificialcapacity right now that kind of keeps those seats full gear.Nevertheless, united. Now the second biggest mover, at leastgain, or I should say, in after hours trading up 6%.Yeah, just watch on the call, though, because they did forecast that worsethan expected loss this quarter because of the grounding of the Boeing.And there was a great report out before their earnings crossed that CEO JackKirby is really angry at Boeing.

I'm sort of putting the angry on therebut are very upset about Boeing and the management there.So they don't want choices. But, you know, like, what's it going todo to that plane's elsewhere? Well, I mean, to that point, they doactually talk about an Airbus plane. In the press release, they said theytook delivery and flew the first revenue flight of the airline's first a321neo.The new aircraft is achieving the highest customer survey results in theentire fleet. Okay.There's no comment about a Boeing plane getting high customer satisfactionresults.

Yeah, because they're grounded for tech.So there's that. No one wants to bring it up if theydon't have to. So that's the question.Sorry, Are they going to buy more of those?I there I there's been a lot of reporting over the last few weeks in thewake of what happened with Alaska Airlines.Yeah. That there used to be this duopoly thatwe you know, we we called it a duopoly all the time, but it's looking less andless like a duopoly because over the last few years, in the wake of theearlier max tragedies, in 2018, 2019,.

Customers started moving more towardAirbus. Yes, they don't have a choice.I mean, Southwest doesn't have a choice, right?It's an All-boeing fleet, for example. But they but there are other othercompanies that fly both those sets of equipment.Yeah. Okay.Carol, do you have something to say here?I mean, usually you're pretty talking. I was trying to give you some space.I know, I know. No, I'm just taking a moment here now.I'm, you know, kind of thinking about I.

Think what's interesting is there's agreat thing in pursuits. And I know we didn't really get to it,but it's physical copy. It's that you held on to that place inher desk, guess. But anyway, it's where to go in 2024.People are still traveling. You guys have talked to people.I mean, people still want to go places. Maybe they might go more domestically ifthey're getting squeezed in terms of their pocketbook.That's what I want to watch. Can consumers still have enough money tokind of go places or do they stop going overseas?Are they going to start doing more.

Travel as also radar miles and use themall up? And yes, maybe I have no miles either,Alex. I'm not.I'm I've used them all. Maybe.All right. Watch the airline group in the afterhours, because it's definitely on the move to the.It's certainly something we're going to follow into the Tuesday trade.I was busy. I'm just, you know, this great listwhere I want to go. Transylvania is on the list.I saw.

Yeah.It's a real place. That's actually.Wow. Oh, my gosh.Let's be beautiful. Okay.Our apologies to all of our children. Beautiful and also very affordable.Like it's like the least expensive place on the list.There's a reason. There's a reason.All right, guys, that's a wrap. Welcome.Welcome. We love you, Alex.So fun to have you here as part of this.

Party, our market party.That's a wrap, though, across platform radio, TV, YouTube, Bloomberg Originals.Folks will see you again tomorrow. All right.And the party continues right here on Bloomberg Television.A deeper dive into those results. Out of United Airlines plane backers,senior research analysts over at TD Cowan going to be joining us in just asecond. As we say goodbye to Alex, say hello toScarlett. Stick with us.A lot coming up here on the close on Bloomberg.

This is the clothes on BloombergTelevision. Let's get you recap of how marketsclosed on the day on this Monday. We had big caps at record highs at theend of last week, and we continue to build on those advances with the S&P 500and the NASDAQ 100 setting new highs, new all time highs, The NASDAQ closingat 17,330. The index, the S&P 500 at 4850.Not a whole lot of movement in the Treasury market.Modest moves in yields across the curve. And there was no real market movingeconomic data. And of course, we are on Fed speakblackout right now because the FOMC.

Announcement comes on January 31st.But there is movement in the oil markets.WTI moving up past $75 a barrel, Brent above $80.Concern about potential supply tightness after a Ukrainian attack on a Russianfuel terminal raised concerns about some supply disruptions.Let's go back to the equity market for a moment here, because there is theMagnificent Seven and then there's everyone else.And for all the talk that there would be some kind of broadening out of the rallythis year. Yes, it happened, but only to a point.The white line here is the S&P 500.

And there's a record high today.At the very end there, the blue line is the percentage of S&P 500 companies thatare trading above their short term trend light.The 50 day moving average at the start of this month, it was at about 92%, butit's come way down and last week it fell to 71%.So that's something to keep in mind here in terms of the durability of thisadvance. But let's go over to the actual movershere. And we don't have that screen up, but Iwas taking a look at companies like Archer Daniels Midland dropping the moston record.

Sunoco, Sunoco, excuse me, falling to afive month low after making a purchase of $7.3 billion all equity deal ofNuStar Energy and of course, Citigroup rising as much as 3.1%.Warren Buffett, one of the biggest shareholders, saying he's on board withJane Frazier's restructuring plan for me.All right. Nice wrap up there, Scarlett here assomewhat moved, of course, during the CARES session when we take a look atwhat's going on here in the post-market, when the second biggest movers out thereright now on a percentage basis is United Airlines out with results just afew minutes ago.

Abigail Doolittle standing by with areadout of what we learned. Abigail indeed, Romanian investorsliking these results so far, even though they're somewhat ones.So first of all, to your point, we do have a nice percentage gain.United Airlines right now up 5% heading to if if this was a trading day, itwould be the best day since the middle of December.They beat earnings, adjusted earnings in the quarter.That was by nearly 20% to put up $2 per share.Revenues came in in line. Now, the guidance, this is where it'snew ones for the current quarter.

The guide is below what investors hadbeen looking at. They're now looking at an adjusted lossof 35 to $0.85 per share. That is a lot more than what wasestimated $0.21. But in terms of all of 2024, they're nowlooking at a range of $9 to $11. The estimate is $9.45.So some of it's below the street estimate, but the bulk of it is above.So if you recall last week or two weeks ago, Delta had an issue where theyreally were very conservative with their profit guidance.It looks like that's not as much the case with United.Or maybe investors have been prepared to.

Some degree for these results for Delta.But no matter how you look at it right now, stock at post-market highs up about6%. All right, Abigail Doolittle a nicebreak down there. Helane Becker joining us right now.Todd Cohen, senior research analyst, to walk through not just the numbers here,but really kind of what folks should be expecting.Helane, we're looking at share the United higher by about 8% now here inafter hours trading, despite the fact that they're forecasting a slightlywider loss than maybe what the Street was looking for here.What's the optimism?.

Where's that coming from?Hi, Raymond. So I think a lot of it is that slowercapacity growth is always good for the industry, or at least that's the thesupposition by investors, because if airlines grow slower, you don't run intoan overcapacity situation and you can raise ticket prices, which basicallyhave been coming down more recently. So slowing growth is really helpful.Unfortunately, what we're seeing is a lot of infrastructure issues with, toyour point earlier, the max with the Max nine being grounded and the FAA askingthe airlines to take a look at the 900 yards and Boeing Airbus has been delayedon some of their deliveries.

So I think as capacity grows slower thanGDP growth, that would be viewed favorably for theairlines. I am curious that when we talk about theBoeing issues, particularly with the Max nine, I mean, we know that United isbasically the biggest operator of this fleet so far here.We know that some of the costs that they're alluding to are directly relatedto that grounding, particularly if that grounding goes beyond the end of thismonth here. How much of a concern should that be forinvestors if this is prolonged beyond the next couple of weeks?Yeah, I think it's.

Very concerning in general.January is generally a month. That's not a high load factor a month.Once you get past the first week, the return travel from the year endholidays is always robust. But then as we've looked at the numberssince, let's say January 5th or seventh, you've seen the week over week growthrate slow and that's consistent with what you would expect to see right untilmid February when you have Presidents Day holiday and vacation start and thenyou roll into March spring breaks and then you roll into Easter, which thisyear is also in March. We have the one extra day in February.So what will happen, I think, is if it.

Rolls intomid-February, as demand starts to pick up again, it's going to be ratherdifficult for the airlines to handle all of the traffic that that's pending.Well, the issue or the concerning thing for United and other carriers is thatthis is something that they have absolutely no control over.The FAA is going to do what it needs to do on its own timeline.So whatever happens, happens. Is there anything or are there anyspecific levers that United and other carriers can pull to kind of takecontrol of managing their capacity? Or are they basically at the mercy ofthe FAA?.

Well, there are always of course, safetyis the number one priority. But, you know, I don't have to say.But on the other hand, yes, they are somewhat at the mercy of the FAA, andthe FAA is concerned about safety. The way I'm thinking about it is when anincident occurs, as this one did, and Alaska Air immediately grounded itsaircraft. And I know we're talking about Unitedand then United started some inspections and found some issues.And within a few hours, actually, of Alaska grounding its aircraft, the FAAissued the order to ground all planes. Okay.So that's problematic for the first few.

Days because you have these planesscheduled. But as you move further away from whenthe incident actually occurred, you're able to backfill the capacity with otheraircraft. And of course, that's what the airlinesare doing now. And to your point, about February 1st,we're also thinking that by February 1st, this should hopefully be somewhatresolved because as you get, it's easier to re accommodate passengers, easier inJanuary when you don't have a lot of demand versus getting into February andMarch. We're going to have a lot of demand.And this is something we'll be watching.

For when they hold their earningsconference call. You know, we were talking earlier aboutDelta's cautious outlook for 2024 and how that triggered a real rerating ofairline stocks across the board. You had United falling about 14% sincethen, at least before today's pre post market bounce.How does United stack up against the other carriers when it comes tovaluation and the bad news priced in now?I think Delta really set the tone for the entire industry for this quarterwhen they made their comments about their the way they were looking atdemand and at and how they were handling.

Capacity and what they were thinkingabout pricing. And so that really, to your point,caused all the stocks to sell off and now they've all had a chance to adjustand were expecting I guess at this point people are expecting lower end of theranges and in this case, United's coming in at 9 to 11 for the full year.I mean, we're so far, you know, we've got 11 months to go and all happened, asyou know. But included in there I think is adifference. United is selling Tel Aviv, for example,beginning February 1st versus Delta, which is selling beginning April 1st.And that's a big difference for the two.

Because Tel Aviv flights are veryprofitable. United was flying two a day out ofNewark, Right. Among others, and selling it two monthsearlier than Delta would affect profitability for sure.It would affect revenue probably by about one or 2%.So that would be beneficial to United. So I think there's some stuff that'svery specific to each of the airlines in Asia.It's really different compared to when, you know, compared to over the lastdecade or so and before that where they all traded in a group together.And now they're really you're really.

Seeing the differentiation in wherethey're focused and where they're concentrated.And I think that's what you have here. Helane, really, really appreciate yourbreaking it down, not just on United, but for the airline sector as a whole.Helane Becker of Ted Cowan on the heels of United's earnings report and remain,I think, about what's going on with United and of course, JetBlue and howthey've got to manage through this interesting situation now to followingthe blockage of their plan to buy Spirit Airways.Now they're going to move forward by appealing that ruling.But it's going to be a tough road.

It's going to.A tough road is going to be a long road and a lot of questions as to whetherSpirit actually has that runway, pun intended, to actually sort of navigatethis here. I mean, how many pieces are we seenalready sort of written about this in the media?Yes, They're basically look, the clock is ticking.Yeah. And a lot of analysts saying that theymay have no choice but to file for bankruptcy protection.Absolutely. All right.Coming up, we're going to focus on the.

Top three and take a look at the topthree movers and shakers at the center of the day's big stories.This is the close on Bloomberg. 24 nominating contests are here and thecandidates are making their cases to New Hampshire voters ahead of the primary.New Hampshire is going to speak very loudly.Bloomberg is live on the ground bringing you the fastest news.Trump is leading by a long shot, insightful interviews.Nikki is the one that has knocked all these other candidates out of the raceand the most informative analysis about what it all means for November'spresidential election.

What is your path to the nomination?Coverage continues today only on Bloomberg. This is too close.It's time now for the top three, where we take a deep dive into the people atthe center of the day's top stories. And first up is Christine Lagarde.Not everyone at the European Central Bank is pleased with her leadership sofar. She's about halfway through her eightyear term. Just over half of respondents in a staffunion survey deemed her presidency as either poor or very poor, and more than53% said she's not currently the right.

Person for the job.Sorry, who were these people surveyed? These are people who belong to a unionat the ECB. Okay.All right. Because I'm just curious.I mean, whether are they criticizing her monetary policy decisions or they'recriticizing how she's running the ECB in turn?That is a great question. Apparently, she was criticized forspending too much time on topics unrelated to monetary policy and goingto frequently in the, quote, political domain, talking about politics and theother big world events.

Okay.All right. I mean, I mean, I don't know whetherthat's true or not here. I mean, she's obviously gets asked a lotof questions the way. Yes, she's answering politics.And like I said, she leads a bank that has, you know, you know, more than adozen members that are all have different sometimes politicalideologies. So that's a fair Why wouldn't it notcome up? Exactly.And, you know, to the union's point, the results were significantly worse thanthose for Mario Draghi and Jean-Claude.

Trichet in the past.All right. Well, a little bit of doing on her and abig thing here on our next person that we were keeping an eye on.His name is Vikram Luther. You probably haven't heard of him, butup until yesterday, he was the chief financial officer over at Archer DanielsMidland. Of course, this is the giant commoditiestrader here. Basically, they made an announcement onSunday afternoon, basically saying they've placed Vikram on leave.They've launched an investigation into accounting practices and said they'regoing to delay their earnings report,.

Which was scheduled for this week aswell as their 10-K filing. And they say that this was all promptedby a voluntary document request from the SEC here in the U.S.that is focused on, quote, inter-segment transactions involving the nutritionunit. And this is key because Vikram, beforehe was elevated CFO in 2022, he was the CFO of that particular unit.So there does appear to be, I guess, some questions, I guess, about what wasgoing on. It's not a good look for him.And of course Adam was in a scandal in the nineties, a price fixing conspiracy.So and we should just be clear here, we.

Did reach out to Vikram.We also reached out to the SEC and we weren't able to get comment from them.All right. Let's move on to our third person.Jensen Huang, the Nvidia CEO, made his first trip to mainland China in fouryears. He's visiting staff in the company'sShenzhen, Shanghai and Beijing offices. And interestingly, he was there tocelebrate the upcoming new Year. So there are pictures of him released inwhich he was not wearing his trademark leather jacket.He was actually wearing a colorful vest and dancing on a stage.Again, this was in celebration of the.

Upcoming Lunar New Year.Yeah, I mean, you know, great for him. Of course, I think the celebration isgoing to be whether he can sort of navigate the political issues.Right now. He's a man.Of course, he wants to sell chips to the world.And the U.S. government at least says there are someof those chips we don't want you to sell to China.Yeah, it's a tricky place for video and for Jensen Huang to navigate, for sure.All right. Coming up here, we're going to open upthe almanac.

On this day in 1984, a major techcompany released an ad to change personal computing forever. And.All right. You see the question behind me that Iforgot to ask before which tech company released an iconic ad on this day in1980 for Apple? Let me set the scene for you.January 24th, 1984. Here we talk about the release here ofthat Super Bowl ad. It was shortly after halftime for SuperBowl 18 when one of the more curious advertisements of the night aired.Yeah, that athletic woman in those.

Colorful clothes running through a seaof men dressed in gruff, drab, gray, launching a sledgehammer through themovie screen to erode the release of the Apple Macintosh.Of course, it was billed as a non-conformist personal computer, and ofcourse, it was a direct jab at IBM and still one of the most talked abouttelevision ads ever. Apple creative director Lee Clowactually weighed in on the interview with Bloomberg Businessweek.Take a listen. 1984 wasn't designed to only run on theSuper Bowl. It was designed to have a media lifebeyond the Super Bowl.

But the board of directors at Appledecided it was irresponsible, since it didn't show the product and the productwasn't an available yet to continue running it.All right. But how effective was it actuallyselling computers? 250,000.That was the number of Macintosh units shipped in 1984, well below Wall Streetexpectations, though Apple says it could have sold more, just had the productioncapacity. Now, whether that's true or not, we'vecome a long way since then. And that brings us to our big number ofthe day, 260 million.

That's how many personal computers,desktops and notebooks shipped worldwide last year, 2023, led by Lenovo, HP andDell, not Apple. 260 million sounds like a lot, butthat's also down 14% from 2022, according to preliminary data by IDC.But despite the shift to mobile devices, researchers see a potential rebound inPC demand because of artificial intelligence.Chip Foundry TSMC is betting that more A.I.work will be done directly on consumer devices like PCs and video Intel, AMDLenovo saying the same thing. They've already touted what they see asa once in a generation A.I.

Fueled change for that market as well asfor Apple. It's attention is a little bit focusedelsewhere on smartphones and wearables like the Vision Pro.In fact, in 2023, it sold only 22 million Mac desktops and laptops thatamounted to less than 8% of its total corporate revenue and less than 10% ofthe total market for PCs worldwide. Yeah, but then look what happened.So I guess that's the thinking that the Vision Pro will serve a similartrajectory as well. All right, let's shift from technologyto travel, because more U.S. consumers are prioritizing vacationsthis year, even if it costs more to take.

One.More than two thirds of travelers say that they're expecting to fork out morebucks for their vacations, with most citing inflation as the main reason why.And if they go over their initial budgets, many are prepared to simplyspend more. That's according to the first BloombergIntelligence U.S. Travel Survey.Joining us now to give us some more details is Jodi Lurie.She is Bloomberg Intelligence senior credit analyst.And Jodi is actually joining us from Royal Caribbean's Icon of the Seascruise ship, where she is lucky for her.

Doing real research, field research forher work. Jodi, fantastic to speak with you.Tell us a little bit about what you learned from this survey and how itaffects how you think about corporate bonds from these leisurecompanies, these travel leisure companies.So I think I think that was the most interesting piece of the survey,Scarlett, is our narrative has been that consumers are done with revenge travel.Revenge travel was a concept where they were cooped up, post-pandemic, justspent like crazy the past year, and come 2024 they might pull back a little bit.While we're not necessarily seeing that.

Right.So, yes, inflation is causing people to travel more, but more importantly,people are willing to travel more on activities and experiences.People are willing to push their beyond their budget if they need to spend moreon vacation. And we're seeing that in the data andwe're seeing that as we talk to the companies.I mean, you know, you mentioned that I'm on I kind of this is not just talking toRoyal Caribbean, but talking to other companies within the sector.They're seeing similar trends. It's not necessarily equally weightedacross the sector, though.

And I think that's the key.And that's what makes 2024 different than 2023.Well, that's what I'm curious about here.And maybe I mean, since you're, you know, somehow managed to convince yourboss to send you on a cruise. Let's talk a little bit about the cruiseindustry, because that was something we remember when you shut down during thepandemic. Everyone's like, oh, this is going to bethe death knell. And as soon as those COVID restrictionswere lifted for the cruise lines, you know, everybody rushed back.I mean, let's face it, cruise line.

People are a certain type of people, ifyou will, to put it diplomatically here. So is that does that end up being thereal bright spot in the travel industry remain?I mean, let's take a step back. I'm here completely for research.I didn't want to convince anyone. So.So beyond that, though, Yeah, I mean, I think so.Cruise people are dedicated people. There are the return cruisers who arededicated. Well, we have the new to cruisers andthose new to cruisers are going on cruises.The number of people before this and.

This is anecdotal evidence, but thenumber of people before this I kind of the seas test voyage came up to me andasked me about it was way more than I've ever seen.I mean, I haven't seen a buzz about something like this before.And I think, you know, it's likely because it is the biggest but the thejust the narrative around cruises in general has been so incredibly positivein the momentum around them has been strong.And that's coming off a very negative sort of press a few years ago.And we're seeing it in the bond market and that just carries over, in myopinion.

I think everything that happens in thebond market sort of filters into the rest of the world, even if people don'trealize it. And so when you have this positivecomeback story in the bond market where, you know, Carnival and Royal Caribbeanand region are all paying down their debt very quickly, you now have thisscenario where it's just flowing into the story of these companies.It's making for a much brighter sort of scenario.All right, Jody, great to catch up with you.Jodi Laurie over at the Bloomberg Intelligence Center, her and her team.I have a great survey here on U.S.

Travel and leisure trends for the NewYear, including, of course, that cruise ship that she's out there sailing onright now. We continue our focus on travel here onthe back of those earnings out of United Airlines.The Points Guy founder and CEO Brian Kelly, he joins us right now to talk alittle bit more about some of these trends that we were just talking aboutwith our own analysts. Hear about cruise lines and just, youknow, how rabid cruise line people can be.So I'm not surprised that maybe that side of the travel industry holds up.But are we going to be spending money.

Elsewhere outside of just cruises?Oh, yeah. You know, the airlines are going to seerecord sales this year over Thanksgiving.We saw the most amount of passengers go through the TSA, 2.9 million people.And it's looking like it's going to be a really robust year, especially in thefront of the cabin. The premium cabin sales ticket sales arewhat drive the airlines profit. So, you know, the big three airlineshave invested a lot in new business class.And I think it's going to be another really busy summer with people payingextraordinary amounts to go to Europe.

And Asia and beyond.Well, I am curious as to exactly what they're going to be doing right beforethe show. Brian, I was listening on Repeat toShake It Off by Taylor Swift, as I do every day for our show here.And unless she's going to be touring for the extent of the year and Beyonce andall the other big folks, that of course, set the world on fire in 2023, is theregoing to be a reason for us to actually go to some of these places?Absolutely. You know, Asia is the big hot spot now.I think a lot of it, myself included. I'm actually going to Tokyo next weekand I just so happen to be there for the.

First night of Taylor's Asia tour andI'm all I got to go. Funny enough, unlike the U.S.where Taylor Swift caused huge spikes in hotel prices, Tokyo is the opposite.I'm staying at the peninsula for $500. And the reason is, in Japan, it'sillegal to sell to resell tickets to concerts.So basically no one is coming in from out of town in February to see her inJapan. Luckily, I have a connection there andI'm able to go, but it was kind of funny to see hotel prices at their.Historic lows when I'm going. But yeah, I mean, a lot of people aregoing to be going to Europe this summer.

To see Taylor, you know, flying toEurope and getting tickets is still cheaper than going in the U.S., where itwas $2,000 and up if you were buying tickets on the resale market.Yeah, you're certainly exercising that strong dollar, at least for yourupcoming trip to Japan. And it's so interesting that you found ahack to this. And of course, that's why we talk toyou, because you are the leading voice in these loyalty programs and points andmiles and credit cards. I'm curious to hear from you, Brian.What do we know about the outstanding miles and points that are still outthere that people are looking to use.

Over the next couple of months?Because during the pandemic, everyone was spending a lot, but they weren'tnecessarily using the points. Then the revenge travel of 2023 camearound and people were drawing down on them.Have we have we use them all up? No, there's still I think I forget whatcountries GDP there's like more than Denmark's GDP and unused point to milesout there and my biggest tip to everyone is use those frequent flyer miles.There are a ton of different accounts you can follow.There's now technology instead of having to go to an airline's website and, youknow, say you want to go to Europe or.

Germany in September, you have to checkeach airline one by one. There are a bunch of websites like Roam,dot travel, Bubble seats, dot Arrow. These are tools where you can put inactually, I'm going to Tokyo. You can actually put it in seats thatarrow, and it'll show you every single day over the next 60 days.Business Economy award tickets to Asia to Dubai.So what I recommend to people is reverse engineer your trips with all those milesyou have, see where you can go, and then book a trip where your miles will takeyou. You know, when your flight's free onpoints, you can spend more at your desk.

Or at your destination, like on TaylorSwift tickets. Absolutely.So my question is, you know, obviously people want to be able to draw down ontheir miles or their points as quickly as possible.But and part of what's pushing them is that the airlines often devalue thosepoints very quickly as as well, which airlines have done the best job atmanaging their their miles or their points, their programs, essentially?Well, here's the biggest tip. The foreign frequent flyer programs arewhere it's at. So if you've got Amex Chase, Citi Beltpoints, you want to transfer them to Air.

France, flying blue, Air Canada,Aeroplan, even Avianca life. Miles These foreign frequent flyerprograms have not devalued like United, Delta and American.And the reason is in the U.S., we've got credit cards galore where everyone'sgetting 100,000 points for for credit card signups in countries like France.Air France is frequent flyers. They don't have the same opportunity toget credit cards. So they started devaluing the programslike crazy. There would be riots because they don'thave the same access. So what you can that's how you leverageis by using your U.S.

Credit card points, transferring toforeign programs. I booked this summer Air France businessclass, multiple dates, multiple tickets, me, my nanny, my child for 50,000 pointseach way. Business class.So the bottles are out there. You just have to know how to find them.All right? You got to do the legwork.But yeah, 50,000 points to do that sounds pretty incredible.Brian, thank you so much for joining us. Brian Kelly is the points guy and remainI mean this is a whole game it's it's actually not it's beyond the game it'sit's you know something you have to kind.

Of master as Brian was telling us, it'sa lot of time spent trying to figure out how to get the most for your points wehave. That's why you built a whole businesscalled a points guy. I certainly don't have the patience toactually go through that game. I mean, I try to play it every now andthen, but I always feel like I just end up losing and paying, you know?Yeah, whatever the airlines. I know.Me too. And then I'm just like, you know what?I just got to cash it in while I can, right?Yeah.

All right.Let's talk a little bit about what happened.Just give you a recap of how the markets closed on the day.Record highs for the S&P 500 and the NASDAQ 100.In fact, within the S&P 583 companies made 52 week highs.A three companies made 52 week low. So that just gives you a sense of thebreadth of today's advance. And the Russell 2000 was the big winneron the day gaining more than 2%. I'm also highlighting Macy's gaining asmuch as four and a half percent after rejecting the $21 share takeover offerfrom P firms, which said it lacks.

Compelling value.In response, Ark House's managing partner said he's hopeful the offer canbe increased if they got an increase. I mean, 21 was just ridiculous.I mean, anybody with you can just do back of the envelope sort of valuationcould see that. I mean, you know, they have a lot ofassets on their books like real estate that are probably worth more than that,you know, 18 or whatever they're trading at now, 18, 19 bucks a share.So the only offer a premium up to 21. How about I told them to kick rocks?So that would have been your response hereabout Citigroup was buying them.

Citigroup is up as much as 3.1% or didgain as much as 3.1%. Warren Buffett reportedly told the CEOJane Frazier to keep going with the lender's reorganization.So he goes he's saying a big thumbs up endorsement from Warren Buffett.Can't get much better than that, right? Yeah.The stock now has 12 buys, 14 hold and two sells.All right. You come a long way.Yeah. I thought All right, this is the close.I'm Bloomberg. And.

Voters in New Hampshire.They are heading to the polls tomorrow to vote for a primary candidate and forthe GOP. The odds are pointing in favor of formerPresident Donald Trump after Florida Governor Ron DeSantis dropped out of therace. So let's bring in now Kelly Lyons,co-host of Bloomberg's Balance of Power, to give us more on what we can expect.So DeSantis out, Trump still in. He is, of course, leading in the polls.Nikki Haley moves up a little bit. What what are people saying in terms ofwhether she can actually pull off a victory tomorrow?It's going to be an uphill climb,.

Scarlett, for her to actually pull off avictory here in New Hampshire. She herself and even her most powerfulsurrogate here in New Hampshire, Governor Chris Sununu, have really setthe bar at second place, which in a two person contest, which it now is, istechnically losing. But they say a strong second.Anything stronger than she put up in Iowa is going to be considered a win forthem here. The fact of the matter is that pollingleading up to today, the polls that dropped today, in fact, show that Trumpis leading her by a wide margin, one of them showing a 19 point spread.That would be the Suffolk University.

Poll that's running daily.Others, like the Monmouth University poll show an 18 point spread.So they're pretty consistent and they pretty consistently show that Trump isin the lead here. It's going to become a question, ofcourse, of turnout as there is a more moderate Republican independent voterbase here in New Hampshire. How much of some of those undeclaredvoters could actually come out and show up for Nikki Haley tomorrow is thequestion. And upset is not entirely out of thequestion, but a lot of the strategists I'm talking to here seem to think it isinevitable that Trump ultimately wins in.

New Hampshire and by extension, becomesthe Republican nominee. Well, that's the part I have to quibblewith. We're talking about two states here.And while I understand the wide margin of victory means a lot of folks thinkthat this is basically in the bag. But of course, we know there's still alot hanging over Trump in terms of his legal issues.And I'm wondering, is there incentive and more importantly, is there willpowercoming out of the Haley campaign to continue this and see this through, evenif she falls short in New Hampshire and even some of the other primaries?Well, what they're messaging right now.

Is she will at least be taking this toSouth Carolina, her home state. That primary, of course, is about fourweeks away on February 24th. Super Tuesday follows that about tendays later, on March 5th. She does have the resources.She has the backing of Americans for Prosperity Action, the Coke backed PACthat has been showing out to support her and did so in Iowa as well.So it wouldn't be a resource question. It really is kind of a headwind questionas you have more and more former candidates, Ron DeSantis, includingSenator Tim Scott, the senator from South Carolina that Nikki Haleyappointed, lining up behind the former.

President.It's just going to get tougher as the going continues.Theoretically, if her candidacy can really withstand that.But to your point, remain. We don't know what's going to behappening by July when the Republican nomination convention actually is takingplace. And theoretically, you can still bepolling delegates in these other states, even if you aren't outright winningthem. That is a very far into the futurehypothetical, though. Yeah, We should point out there is evensome members of her own state there that.

Aren't even necessarily backing herhere. It'll be interesting to see what shakesout here tomorrow night. Kelly Lines and the whole team, thebalance of power out there in New Hampshire.Be sure to tune in for full coverage right here on Bloomberg of that primaryprocess. Still ahead here on the big program,we're going to set you up for what to watch here over the next 24 hours.We'll be back in a moment. This is the close on Bloomberg. One of the biggest stories to watch foron Tuesday, Netflix, because it's coming.

Out with earnings after the bell.And here to help us take you through what to expect is Jason Bellini, Citiglobal head of EMT sector. Jason, so good to speak with you.What's the number one number that you will be watching for that you thinkNetflix can top? Well, I think the street's going to caremost about the net ad number, actually. Management is trying to get the streetnot to pay attention to that. But but I think that's where thestreet's going to be focused. And the reason is really simple, right?They've got the password sharing crack down in the ad tier that have sort ofcaused the firm to reaccelerate.

And people are keenly interested in sortof the magnitude of success that those two initiatives will have not only forthe quarter, but over the next couple of years.This gets to the question, though, when we talk about what Netflix really wantsfolks to focus on, Jason. And the idea here, of course, we're allreally going to focus on here, are we setting ourselves up for potentialdisappointment simply because Netflix has kind of moved the goalposts?Well, I would I would freeze it slightly differently.I mean, the reason I'm a little bit nervous is, is Netflix went from a stockwhere nobody cared about the ad tier.

No one really believed it was going tohappen. And now you look at the consensusnumbers, they've got accelerating top line growth to 13%.They have record EBIT margins, They have content spend sort of nominally flattishat 18 billion and record buybacks. And so you're now at a point where thesell side is expecting all sorts of good things to happen.And the buy side is actually on some of the key metrics even ahead of the sellside. So the set up doesn't strike me asparticularly favorable. And that's one reason we we recentlydowngraded and recently I mean, we've.

Talk about the last earnings report.There was a lot of focus on cost. But of course, this is a company thatstill thrives on content. Content, as we know, is expensive andit's not going to get cheaper here. What did they have to sacrifice if theydo want to continue to continue to cut costs?Well, this is a big debate. I mean, you know, our view is thecontent costs are going to have to march higher, closer to $20 billion next year.There's a big debate on the street. A lot of investors think that Netflixdoesn't have to spend that amount of money.And, you know, our view is just based on.

What Netflix has done historically interms of how much of their revenue growth they've plowed in the business.But it's a real debate because we've never really seen a business model likethis, right. Where it's direct to consumer streaming.So we don't have a lot of a lot of.Hey, Jason, I'm just going to interrupt you for just one second here.We're actually getting some breaking news on Netflix right now.Apparently, we're just learning that Scott Stuber, who is the head of thefilm division over at Netflix, plans to leave Netflix in order to start his owncompany here.

I don't know a great deal about him, butI am curious when you have somebody like that leaving a company here, a company,of course, that basically sort of thrives on that film division here.Is that concerning to you at all? No, I think in general, the Street looksat Netflix as it's all about the business model.It's actually less about management. I mean, I think if you went back a fewyears when Mr. Hastings stepped down, you know, maybethere was a little bit of anxiety, but but relatively modest.My general sense is the street cares much more about management teams whenyou're going through a strategic pivot,.

Which a lot of traditional mediacompanies are doing. But right now, Netflix, they're viewedas having the best mousetrap and therefore sort of a key man risk is lessthan it would be for a lot of other companies.All right, Jason, appreciate your taking time.Jason Basin there over at Citi. A little bit of a preview, Scarlett,what we're going to get out of Netflix. Those earnings, of course, will becoming after the bell tomorrow. We'll have full market coverage of that.We also want to dive a little bit deeper into some of the other potentialcatalysts for the markets tomorrow, and.

That includes additional earnings.Yeah, we have in the morning General Electric, Johnson and Johnson,Halliburton, P&G, and notable for Halliburton, as you start to get some ofthe big energy companies starting to report as well.And of course, the macro is going to be in focus as well.We expect to get a decision out of the Bank of Japan.Yeah, the Bank of Japan will likely hold policy unchanged, keeping as a negativeinterest rates. But at issue is what happens with theyen. It's 148 getting close to that levelwhere there's usually some intervention.

At 150.And meanwhile, back here in the United States, we were just talking about ithere. The presidential primary continues on abig test for Nikki Haley in New Hampshire.Yeah, but I mean, at this point, it's pretty much president former PresidentDonald Trump marching his way to victory in New Hampshire, given how far ahead heis. Yeah, though a lot of people are holdingout hope, particularly some of her donors and supporters here.And then, of course, we come back here to the U.S.We're just talking about Netflix and.

Film divisions.We're actually going to get the real Oscar nomination.Remember a few weeks ago where they came out with some random list of nominees,but they weren't like front up interest? Yeah.So now we learned the big ones, the best film, best actor, all that bestdirector, all of that. I believe Barbie and Oppenheimer will betopping. What's your favorite movie of 2023?I really liked Barbie. All right.Well, we'll see what gets the nomination tomorrow.We'll have full coverage of that as.

Well.Balance of power is coming up next right here on Bloomberg.

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