Bloomberg Markets: The Shut 02/08/2024

Happy Friday, Eve.Live from studio two at bloomberg headquarters in new york.I'm Scarlet Fu. I'll let her trick you.This is actually her friday. That's why she's so pumped.I'm Alix Steel and we're kicking you off to the closing bell right here in theU.S. It feels like the rally is trying tobroaden out here. So the stuff that didn't go along withthe rally before is now playing a little bit of catch up headline.S&P goes Nowhere but the Russell 2000. A nice solid rally up by one and a halfpercent.

S&P energy index, the best performingsector within the S&P up by 1%. Oil really outperforming as well and the30 year had that auction earlier today, $1 billion more than we saw in November.It went down pretty well. Nonetheless, the whole curve is tradinga little bit heavy and yields moving a touch higher.But it really does feel like we're trying to get to that everything plusrally score. We're really trying.All right. Janet Yellen.Alex sees more turmoil ahead in commercial real estate.And while that may lead to bank stress.

And financial losses, the treasurysecretary says she doesn't see the fallout posing a systemic risk to thebanking system. Yellen also told Congress that somenon-bank mortgage companies may be at risk of failing in stressful marketconditions because they lack access to deposits that traditional banks don't.Having said all of that, CEOs are feeling better about the economyOverall, the Conference Board's measure of CEO confidence.It rose to a two year high, thanks to growing expectations for lower interestrates amid slowing inflation. Even so, corporate leaders do worryabout the upcoming November elections.

And the risk of international conflictsworsening. We all do.So you put it all together. U.S.stocks continue to push higher, Alex, setting new records.We see that if it's global stocks as well, because you look at the MSCI WorldIndex, it too is at an all time high. So it sets up a pretty stark contrast towhat's happening elsewhere, particularly China.Yeah, for fear point like you get to 5000 round numbers actually mean stuff.You look at your four one case, you see it on the headline like that could driveactually more coming into the equity.

Market as Scott was pointing out thisorange line here is the MSCI all country index.So that's everywhere. And you can see the outperformanceversus Chinese equities, which is really underperformed, in fact, since its peakthat we hit since 2021, Chinese stocks have lost almost $5 trillion in value.However, guys, it's all about tech. So this blue line here is the S&Poutperforming all the all world country index and then the red line here, well,that's the Nasdaq 100. And you clearly see at the run thatwe've had over the last three years has purely been tech driven.It doesn't mean you can't have a little.

Spats of outperformance here and there.Just take a look at today where the Russell and say energy.But still what's driving the world index is really about U.S.tech SCARLETTE. All right.That's a great way to start off our conversation with Bob Elliott.He has CEO and CIO over at Unlimited. And Alex says it's all about tech.Maybe they should be their own index. And, you know, The Magnificent Seven, itpretty much is. And then you look at all the othernational markets, whether it's the US, whether it's China, whether it'sanything else, you take out U.S.

Tech, how attractive is the US marketand the U.S. economy to the rest of the investinginvesting world? Well, I think what the mega tech techstocks really are highlighting is the is the cyclical strength of the economy.When you actually break these these stocks down, what are they really?Amazon is consumer sales and business investment.Google is advertising better as advertising.And so I think what they're really showing is that in aggregate, the U.S.economy, nominal GDP growth, it's very strong, it continues and they just havesome of the highest betas and best cash.

Flows to that strength in the overalleconomy. So when you look to the rest of the theoverall market, what you see is companies that maybe aren't quite asstrong and are more sensitive to the liquidity conditions that are going on,but those companies have a chance to rally in these sort of environments.As liquidity starts to ease a little bit, the Fed shifts their policy stanceand GDP growth continues to expand. So that by smallcaps.That's right. I mean, you could easily get a rotationhere into the small cap. Will it last?I mean, we saw this trap last year.

It did not last.Well, I think I think the main reason why it didn't last was the real questionwas whether monetary policy was going to continue to be tight and whether thatwas that tightness of monetary policy in the difficult financing conditions wasgoing to keep weighing on those on those companies that needed the ongoingfinancing were shifting to almost a perfect situation for many of thosecompanies where the economy is good. But we're shifting to an easing cyclewith low valuations. You put that all together.If people are looking for, you know, corners of the market that haven't beenbuilt up nearly as much, they're going.

To look to those areas like energy andsmall caps. All right.Let's fold fixed income to this into this conversation as well.Alex was talking about the 30 year Treasury auction.Pretty good demand, pretty good demand for the ten year auction as well.So February looking okay when it comes to the Treasury refunding itself, Whatis your read here on the supply that we're going to get this year and whetherthat demand will continue to show up? Well, those 30 years that got issuedearlier this afternoon are now, you know, through the bottoms.And so we're seeing yields rising.

We're seeing that creeping happening formany of those buyers that are. Continuing to experience losses.You know, we moved from well under well under for in now, you know, up to 415 ontens. And I think the key thing to rememberwith the bond issuance dynamic is that it's going to be very hard to front run$500 billion of net new supply in quarter two.And so it's every day what you're seeing is a weight on the bond market that'scoming as that issuance comes. And remember that Q2 net issuance isgoing to be twice as big as Q1. So right now, the actual flow, theactual demand to borrow is not that bad.

Just wait till Q2 when it doubles insize on next year. But we could have said that like in thefourth quarter of last year and then the take down actually went, okay, what doyou do in a market though? You come in every day and things lookoverbought, technicals do not look good. We continue to grind higher.Like how do you manage that? Well, I think you got to you got to lookat the linkages that that will either stop the economy in its tracks or keepit going. And we've got this income fueledexpansion. And in that environment, stocks cancontinue to outperform, perform,.

Particularly bonds, as income growthcontinues to finance spending. And we continue to get strong nominalGDP growth. That's a very resilient type of growth.This is not the debt fueled growth of, you know, cycles past.This is a very this is a this is a expansion that can continue for anextended period of time until we get enough tightening in the financialmarkets to start to bring down asset prices and slow the overall economy.So right now we're really in that that sweet spot of strong enough growthwithout enough tightening, particularly on the long end of the bond market tobring things back, how high the yields.

Have to go before you start to see itshow up in equities in a bad way? Well, I think we saw a little bit of aflavor of that last year, but we we moved bond yields up to five andequities sold off, you know, 10%, 15%. That's not that big a deal.Equities sell off ten or 15% all the time.And so we're probably going to need to get bond yields up there and for anextended period of time before there's enough of a wait on asset prices in thereal economy to really bring this expansion to a halt.All right, Bob, really appreciate your joining us today.Bob Elliott is CEO and CIO at Unlimited.

We've got a lot more coming up on theclose. Coming up, shares of arm surging themost since its IPO after giving a strong sales outlook.The stock getting an upgrade as it pushes beyond smartphone chips.That's in our top calls. Plus, we're going to hear from myconversation with Lynn Good, the CEO of the power company.It's a big, huge utility, Duke Energy, her take on the US energy transition asdemand for electricity skyrockets. And we'll focus on potentialopportunities right now in commercial real estate in spite of all the marketturmoil.

Our guest, Anton Pil, global head ofalternatives at Jp morgan Asset Management.This is the close. Shares of Duke Energy, the worstperformer within the S&P utilities sector.That's after mixed results this morning. Despite the share move, though, CEO LynnGood is remaining confident on future growth.We are seeing a level of growth that we haven't seen in decades.And a couple of things I would point to its population migration that continuesreally from the pandemic forward. But adding to that is extraordinaryeconomic development growth in all of.

Our service territories.So think about offshoring, U.S. manufacturing, semiconductors, battery,automotive. And is the U.S.continues to pursue leadership in artificial intelligence and datacenters. And so all of that growth gives us anopportunity to continue capital investment at a pace that not onlyserves customers, but delivers returns to investors.So your five year CapEx plan was updated by $8 billion to $73 billion.What is your level of confidence that you won't have to revise that up again?It's a good question, Alex, because I.

Believe the capital plans will continueto be refined. You might, in following us, know that wedo have generation plans in front of our commissions in North and South Carolinaas well as in front of Indiana, where they'll be working with us on the paceand the type of generation investment. In addition to all of the gridinvestment that's underway. So I believe those capital plans willcontinue to be refined. I would say the bias would be to theupside because of the growth potential, but pursuing it in a disciplined waythat keeps an eye on the reliability and affordability is another important pointthat I would just underscore.

We have to do all of those things right.Managing the surge in demand is going to be huge.Do you think that we're going to see slower closure of coal plant plantsbecause of that? It's an interesting question because ithas to do with are we going to be able to bring resources onto the system atthe right pace to meet the demand. And right now, we remain committed toreliably closing coal in 2035 and are bringing a wealth of resources, solarand battery. We're taking advantage of energyefficiency, demand side management, some natural gas, and continuing to pursuenew nuclear as well.

Small modular reactors in the mid 2030s.And I think, Alex, if we can keep this diverse set of resources moving, it willallow us to continue to target reliably retiring coal in 2035.What is the conversation around a new natural gas plant in the board roomright now? It feels like that is a very tough,tough subject and putting money into something that's going to be there forthe next 40 years goes in the face of sort of climate neutral or going greenfor the United States. Like what do you guys talk about inrelation to natural gas? Our assignment, Alex, is a three foldassignment, reliability, affordability.

And increasingly clean.And I think the question you're really raising in the question that's in theDuke boardroom is, is it wise to invest in natural gas?Is it wise for our customers, for our communities, for our investors?And I think this context of growth has to be a part of that conversationbecause we we need to serve the growth. We need to balance the short term withthe long term. And so where we come out is a diverseset of resources is going to be necessary.We're going to need to lean on some existing technologies while we're alsoexploring hydrogen carbon capture needed.

To clear offshore wind and technologiesthat'll be maturing into the 2030s. So we continue to believe that naturalgas represents a clean form of generation complementary to renewables.Important as we retire coal and we also believe that as hydrogen develops, it'llbe a continuing clean source of generation for years to come.In the meantime, we were mentioning the demand side.Have you had to turn away any big customers because you just don't havethe capacity yet? We haven't faced that yet, Alex, but wewatch it really closely. As you can imagine, economic developmentin all of our states is a partnership.

With the states.We're working closely with economic development organizations, with commerceorganizations, and really working to market our states in a way that achievestheir objectives of job creation and economic growth, while also making surethat we have the resources to serve. Do you expect that you'll have to havethose conversations at some point? You know, I don't foresee it in the nearterm, Alex, But that's the conversation that's ongoing in front of ourregulatory commissions right now in North Carolina.We filed a generation plan in August of this year and we've already updated it,filing it again.

Wow.In January this year with more load growth, with more need for generation.And I think it's just an important conversation that we're going to have inall of our states. Just find the if to find a happybalance. So then to flip it.Are you seeing industrial customers that want to go into your territory that arelooking to build factories, that they say, Ooh, you know what, Lynn, I got toget back to you. I don't know if I can actually get thisdone because of the power. I haven't heard that.Alex You know, the conversation with.

Industrial customers is a broad rangingconversation. They're looking for workforce, they'relooking for supply chain, they're looking for sources of energy.They're looking for a state that they can partner with that has fiscalpolicies that meet their needs and expectations.And North Carolina is, you know, has been ranked number one for business fora couple of years running. So that conversation around economicdevelopment has been well seeded. And we expect those conversations in allof our territories to continue. What about in a Trump presidency?And I say that because you were.

Mentioning the chip side to get the IRAand the Infrastructure Act. Is there a conversation that any of thatwill be repealed if you get Trump back in the White House and sort of what thatdoes to the demand side of your business?I'm not going to speculate on the politics out of this, frankly.I don't know. But I would say when we think aboutpolitics and we think about how it impacts our business and it impacts thecommunities that we serve. Our objective is to be advocating forpolicies that support where our states are trying to go, what our customersneed, what we need in our business in.

Order to continue to to serve.And what we find is in a bipartisan way, there's a strong interest ininfrastructure in making sure that the U.S.remains globally competitive, that we onshore these industries in a way thatstrengthens us not only economically, but from a national security standpoint.And then any way that we can lower the price of energy to further underscorethat, that economic competitiveness is also something that's a part of theconversation. So infrastructure and low energy prices,I think that's a combination that enjoys a lot of support in the political arena.That was Lynn Good chair, president and.

CEO of Duke Energy.So a couple of things. There's the demand side.They got to spend more money. How do they wind up financing the money,the balance sheets looking back, much better.But still, that's the risk. But on that net net, like all thesechanges about Infrastructure Act, chips, Act, IRA, huge, huge, monumental changesfor these companies. Just a perfect example of one of thoseCEOs who are feeling better overall about the economy, a little moreconfident, but at the same time kind of concerned about what's to come inNovember with the election changing up a.

Lot of those things like the IRA, whichsounds like it's been good for Duke. Yeah, because you can definitely getsome upside for tax credits and hydrogen, for example, or nuclear.They have a ton of nuclear storage as well as renewables.So you can get that. But also if you are want to build an EVplant in the Carolinas, you're going to be plugging into Duke and that is goingto really help the demand side of it. But again, then you got to spend themoney. So and also a lot of these companies arealready sinking their cash, like it's going to be really hard to roll backsome of the CHIP and Infrastructure Act.

Stuff, even if President Trump goes backto office because it's already sunk. It's already they're already planningit. Right?Well, can't reverse that that that money's already been earmarked.Yeah all right kind of aam shares are skyrocketing here that's afterimpressing some analysts with its sales and profit outlook we're going to recapthe earnings and first CEO renaissance tells Bloomberg how artificialintelligence is shocker driving the upside this is the clothes on Bloombergwhat designers want to do and need to do is future proof their designs with moreand more compute.

And that is really driving a stronglicensing cycle force in terms of more demand. It's time now for our top calls and lookat some of the big movers on the back of analyst recommendations.And we start with Spirit Aerosystems and upgraded to outperform from marketperform at Cowan on hopes of a rebound in free cash flow.The aerospace manufacturer increasing volume and productivity and oncecontract talks with Airbus are settled, the analyst says its cash positionshould improve in the second half of the year.The shares are up by two thirds of 1%.

Next in line is Hertz.Morgan Stanley hitting the brakes on the rental car company with an equal weightrating about three weeks after it had upgraded Hertz to overweight analystAdam Jonas warning investors about the risks facing its EV strategy.Jonas says shrinking the fleet is an important first step, but more needs tobe done. Shares right now down about 1% andfinally, arm's price. Target lifted to $115 at Citi, up from86 and Citi keeps a buy rating on the stock.Analyst Andrew Gardner was impressed with the latest earnings report withroyalties and licensing driving the.

Upside, he sees sales trends remainingrobust into fiscal 2025. The shares right now up almost 50% onthe day. And those are some of our top calls.So joining us now is the analyst behind that call, Andrew Gardner.He's staying up late for us. He is head of European Technology EquityResearch at Citi. Andrew, thank you so much for staying upto speak with us. AAM as you've noted in your recentresearch report delivered an impressive beat in RES but a 50% jump in stockprice. Does that get it to a point where itgets a little expensive?.

I mean, ARM has long traded at a premiummultiple. I suppose it's it's one of those stocksthat's got a very strong structural story both at the top line in terms ofthe revenue growth that's happening today as well as into the future.And it's got a very strong operating margin profile again, something that'slikely to expand nicely into the future. So yes, it does trade on a premiummultiple, but I would say it's very much justified given those strongfundamentals. Andrew, do you feel like the valuationthat you've now put on it incorporates licensing and royalties at a certainpoint like what credit is aam getting.

For which right now.Yeah. I mean I think the market is lookinginitially at the you know the near term royalties that represents the chips thatare being delivered at the moment. They did see upside there in the quarterbut really the impressive upside in the December quarter came fromthe licensing side and that as you'd heard earlier from Rene Haas, the CEOhas really been driven by increased need for arm's designs as their customerslook to do more in the area of artificial intelligence.And, you know, I think, again, as the company has laid out and I would agree,we're very much in the early innings of.

Artificial intelligence adoption this issomething that arm's customers are taking technology from.AAM today they're going to go away they're going to design those chips andyou're going to see more come from them over the next three four or five years.It's a very long lead time item that they are licensing out to the customerbase. So that is really what is supportingsuch strong long term growth into the future long term growth.We know that the the line the trend line is going up for the next three or fouror five years. But how do you begin to model that outyear over year when you actually put.

Numbers to that?What does it look like or what are the challenges of doing that?Yeah, I suppose it's twofold. I mean, on the royalty side, it'sperhaps a little bit easier because that's happening here and now and we cantry and get an estimate as to what's happening in the mobile phone market,which is, you know, a third of of arm's business at the moment used to be muchhigher. It's come down as they've diversified,but it's still the biggest single driver.And we've got estimates of what the mobile phone market is doing thatgaining share into the infrastructure.

Space.So you're seeing more cloud computing companies adopt arm based designs.Automotive is another big growth driver into the future as our cars become moreintelligent over time. So we can look at those end markets andtry and think about the unit volume and the rate of ARM adoption and the pricingof arm's technology. So that side of it, we've got the, youknow, the the variables there to play with and make forecasts.The licensing side of things is a little bit trickier.It can be quite lumpy quarter to quarter or even year to year.It very much depends on when those big.

Chip customers come to arm and say,Right, we're ready for the next slug of technology from you guys.You know, we're looking further out into the future, but we need thisarchitecture today in order to design those chips.So that's a little bit trickier. We do take, you know, some guidance fromthe company in terms of how to model that.The royalty side is a little bit more predictable.I mean, quickly here, Andrew, I mean, the stock is at 114 113.We're like kissing your upgrade that you just gave today.I mean, how quickly you're going to have.

To be rethinking the stock and modellingit out is no question.It's a you know, it's a fast moving name.And I think the surprise that we've had today, particularly on the artificialintelligence front, is where everyone is going to have to go back and, you know,do a bit more work and really see how arm's technology is going to be adoptedfurther into the future. Again, the company with the results forthe December quarter last night gave us some initial idea there, but we're inthe early stages here, so I think there's more to come from them.They certainly promised us a bit more of.

An update in three months as theythemselves go away and reassess things. Andrew, really appreciate it.Thank you so much for staying up. We really appreciate that.Andrew Gardner over at Citi. But point blank, like when you have a$120 billion company that's been 50% on solid numbers, I mean, that's anincredible move. Like how often are going to continue todo that when people worry that aam was to rely on Apple that's gone away nowthat is just dead in the water with two letters yeah exactly right.Next up we're going to talk to engine pill global head of alternatives over Jpmorgan asset management.

This is Bloomberg. And. Andit is just about 330 in New York. This is the countdown to the close.I'm Scarlet Fu and I'm Alix Steel. Please get this headline here.Money market funds reach a record again of, say, over $6 trillion after we havebeen pricing back some of the Fed rate cuts.I mean, we talk about that money moving out and where that money belongs to.That money likes where it is. Yeah, it's pretty happy.It's earning a pretty good yield.

It contains zero.So I can't count those zeros. How many is that?12. One, two, three, four, five, six.Yes, well, it's 12. It's a lot of zeros and a lot of commason top of that. Yeah.The big question is, is that dry powder for something?Yes. But when and where And it hasn'thappened yet. No.And we're waiting for that moment to happen.Where it's definitely not going is New.

York Community Bank.How how's that square for you? That is a great one.Thank you. Shares are down yet another 7% today.Remember, the stock has lost more than half of its value since late Januarywhen it took losses in provisions against real estate loans that were morethan ten times bigger than analysts had anticipated.And commercial real estate is a risk for all types of lenders.We saw some property guys over in Germany get hit earlier today.Treasury Secretary Janet Yellen did highlight these additional risksstemming from non-bank mortgage lenders.

If Sark is very focused on that becausenon-bank mortgage companies lack access to the two deposits which banks have,there is concern that in stressful market conditionswe could see the failure of one of these.More insight. Want to bring in Anton Pill, global headof alternatives over at JPMorgan Asset Management.Alternatives is going to be key for you. Yeah, I know where you can put some ofthat money. Well, you know, we go that you can, butwe say alternatives. What is it?I mean, is it private credit?.

Is it these non-bank lenders that JanetYellen is worried about? Is it gold under my bed?What is it? It's a little bit of all of the above.We tend to think of it in sort of two concepts, obviously, private assets,which are, you know, anything that is not traded publicly, but also non indexbased long short managers, hedge funds, things that where you can go long andshort, which is a little bit different, is there's a different set of tools.So that's kind of how we think about alternatives.It's it's not your traditional bond market, it's not your traditional stockmarket.

It is effectively asset class that canhelp diversify your overall portfolio. It can help diversify your overallportfolio. And it's certainly a lot more accessiblenow than it had been in years past. But how what is the take up byinvestors, particularly retail investors who are sitting pretty happily withtheir passive funds just following the S&P 500?Yeah, look, there might have been a great trade in 2023.I don't remember a lot of people being that excited in 2022 when, for example,alternatives actually had a very strong year.I think what alternatives can do is help.

Smooth the ride, including forindividuals of their actual portfolio performance.And and frankly, when we think of some of the uncertainty in the marketplaceright now, for example, you know, many people are currently debating the whenis the Fed going to cut rates? Are they cutting rates?What is going to happen? That's all resulting in more volatilityin both equities and fixed income, which really, as a long term investor, you'renot really enjoying that ride. I think alternatives can really helpsmooth that and keep people invested longer term for their eventual wealthbuildup.

So we just take the private credit worldfor a second. Yes, I feel like there's two schools ofthought. One is like, guys, we have no idea whatall this money going to private credit is going to do.If there's a massive downturn, it's hard to price these things.And then the other is like, hey, yeah, but your money is locked up for tenyears. There's a long time horizon like it'sgoing to be okay. Which camp are you?Okay, You're me in the first camp. But why are you going?Actually, I'm a little bit more.

I'm probably out of all the sort ofalternative asset classes. Private credit is the one I'm probablymost cautious about. And not so much because of of badcovenants or of the lending standards, but frankly, because valuations therehave started converging more closely to high yield.And I think in an environment where you're uncertain and have a lot ofvolatility, I think on the margin, I would probably make sure that theprivate credit you own is extremely high quality.And if you want to own something a little weaker, go into the high yieldmarket where you'll have some degree of.

Liquidity.It's not that popular of a view amongst many pairs of mine, but I do thinkvaluation plays a big role. Now you are correct, having a long termhold period allows you to ride out a lot more uncertainty and actually allows youto negotiate with these companies to help think about how they survivethrough a liquidity squeeze. The flip side is if the Fed does cutrates, liquidity is injected back in the marketplace.Most of these asset classes will do quite well, including private credit.Mm hmm. Mm hmm.We were talking a little bit earlier.

About your biography and how you startedoff in the public markets, fixed income currencies, commodities, equities aswell. And then you've transitions since thento alternative assets and now alternative investments.Is the industry made up of people like you or those who started off inalternative investments and therefore don't really have the scope ofunderstanding markets as a whole? I think it's a combination of both.I think some people really grew up in the private equity business and havebeen in that sort of trend for a while. Other, similar to myself, started inpublic markets and started realizing the.

Growth of private markets and thereforelooking at private markets as being sort of the next opportunity where you canapply the learnings from public markets. And as private credit continues to growand private equity continues to grow, these markets are beginning to be equalor larger in size than the public markets.So expect that to that trend to continue.What has surprised you the most about making that transition into alternativeinvestments from the public markets? I think many public market investors aresometimes a little annoyed that we have a much longer time horizon where I don'thave to worry about like earnings this.

Second right now because I have a muchlonger time horizon. And I think for a lot of investors thatcan be particularly powerful for their portfolio, they can they can kind of notget scared when something bad happens overnight and then three or four weekslater not worry about it. So how worried would someone who has along time horizon be about the commercial real estate wobbling thisthat we're seeing right now? So, you know, I actually have a littlebit of a different view than most. I think we're beginning to bottom on thesector is actually that most people are worried about.I think on the office side, we're.

Beginning to see a lot more people gointo the office. If you look at the house stuff, peopleare in an office, especially in the U.S. A lot of people probably we're going toneed more office space if the growth in the US continues.So I think a lot of it is if you can buy a high quality office that's fullyleased, the values are there and you're probably going to bottom out by the endof the year. Early next year.So I'm actually more optimistic on the commercial real estate side than mostabout residential real estate, because in some ways, I mean, that was reallyNew York Community Bank.

That was the tough one, right?Right in front of the rent controlled building.I think that's right. And I think some of the segments in realestate that people are most excited about, which are multifamily, I actuallythink could be on the verge of a much more difficult second half of the yearbecause of an oversupply of that's coming in the marketplace.I also wanted to get your thoughts on private equity before we let you go,because it's sort of a similar story with private credit in terms of the timerising sector. But what we've seen in the last fewyears is the lack of exit strategy in.

Creative ways, where you have to fundyourself, where you can't exit. What do you think of as an investmentnow? I actually think it's going to be a verygood vintage year for private equity. We've seen valuations come off in 2023from some of the highs and frankly, a lot of the people who needed thatliquidity that you just described are being for sellers.And if you can pick that up and even for individual investors who can get accessto products that are buying these in the secondary market someone else's andproviding liquidity, I think it's actually going to turn out to be a verygood year.

Looking back, you say for private equityon the buyout side that there are certain areas that are more attractivethan others, mid-market, small market in particular.But I look at, for instance, the Russell 2000 and how it hasn't had thatbreakout. I mean, we had a guy that had the rise.We've had many of these companies are staying private much longer, and that'spart of the problem. Exactly.And talk us through why you see value in smallcaps when public market investorscan't seem to. Yeah, I think partially because at theend of the day, when you're doing a.

Small and mid-sized company, it's notabout the financial leverage to try to get your return.You're actually going to manage that company to try to improve the companyitself. So it's much more about managing thenuts and bolts of day to day activity than trying to bet on whether rates arehigher or lower in your next refinancing wave.And that's what's exciting. Like on the small and mid-cap size, wecan see the real time impact of things we're doing on these companies anddevalue your generated by managing them well, which is a lot harder to do onbigger companies, which are much more.

Dependent on financial leverage.Anton Really great. We really enjoyed talking to you andit's great to be here, guys. Thank you.Bobble head and contrary. I like that bobble head of alternativesat JPMorgan Asset Management. Some breaking news for those of you whofollow oil like I do. ExxonMobil is now exiting EquatorialGuinea within months. They've been there for 30 years, whilealmost 30 years they have helped transform this nation into one of OPEC'ssmallest members. What this tells me, Scarlett, is thatthis is Exxon continuing to trim any fat.

That they have to pour all of theirfocus and resources on the Permian, for example, integrating Pioneer and reallyhelping to streamline what they are able to accomplish.Is this a call on Equatorial Guinea or is this more just the Permian Basin isjust so attractive? We want to place all our bets there.I would say something probably in the middle that they probably can't bringany more value to to Guinea. I mean, they're probably up and runningand they're testing a lot and the technology, etc.maybe won't be useful there. They can apply their technology in abig, big way.

Is they to pioneer as wells, forexample, or to other assets that they have, probably not this asset.So it's Exxon making a call, essentially.And I think that you're right about something we'll watch for.ExxonMobil currently up about a dollar 93 at one over 15.All right. Let's talk about our stock of the hour,because it is coming up. It is a Chinese holographic tech companyreally capturing the attention of meme stock traders.Look at that move today, up 45%. This is the close on Bloomberg.

It's time now for our Stock of the Hour.And today we're looking at a battered Chinese company that developsholographic technology. The name of the company is Micro CloudHologram. And the shares are soaring today aftergarnering attention from who knows, the meme stock crowd.Later, Bill Pina is here with us now. Over the last two days, it's gained 1800percent. That boggles the mind, Alina.And the ticker is hello. Hello.Exactly. Hello is very similar to YOLO, whichstands for you only live once.

So this stock closed at an all time lowon Tuesday. It rallied tenfold on Wednesday and nowthey're 100% early in the day on Thursday on no apparent reason.It's just that, you know, the meme stock crowd decided to push it higher, as wasthe case in 2021. But guess what?Options on this stock I'm not trading so it's not call options that I'm drivingto sell my car. It's just the shares that are rallyingso much now, no guarantees. So is this like a risk appetite amongretail guys up again? Like, is this going to be 2021 all overagain?.

Yeah, it's it's also it's one of thosetickers that, you know, it was trading near $1 a share, which is very close tothe mark where it gets kicked out of official stock exchanges and goes to theLTC market. That's why did Garner stock split.But yeah, it could rally some more based on the appetite of the crowd.Okay. So you and your colleagues are onBloomberg's cross asset team and stocks team.You are trying to talk to analysts and investors who actually cover thiscompany. Do you are you able to find anyone whocan tell you anything fundamental about.

This company?Nothing fundamental. Yeah.It was an absolutely penny stock company.It did irreversibly on Friday. It went public in 2022.It wasn't doing really well. It is a Chinese based stock that had nocoverage on Wall Street, no apparent, no value that would take it so much higherin such a short period of time. And this is why David Einhorn gets mad.But this makes sense, right? Okay, Alina, thanks.Alina Pina joining us from Bloomberg. All right.Coming up, we are still on Earnings.

Watch.We get a firm remember the buy now pay later company.We got Pinterest. We got take out with results after thebell. We're going to break down on what towatch with Dan Suzuki. He is deputy CEO over at Richardbernstein advisors. You are watching the close on Bloombergvolume. Not that exciting overall index level.Not that exciting, but you're still seeing the Russell do pretty well.You're also seeing sort of the the the unloved stuff like energy do wells ordoes feel like at least today the rally.

Is broadening out.Yeah the Russell 2000 having an impressive rally on a day in which notmuch else is happening. We are hugging record high so it's awrong number and. This is the countdown to the close.I'm Scarlet Fu here with Alix Steel Alex.Not a whole lot to look at. If you're paying attention to the S&P500, which most people are because they're invested in some kind of indexfund, But a lot to get excited about, I guess, if you like small caps.Well, at least today, I mean, the.

Russell doing quite well today, aboutone and a half percent energy that was mentioning earlier.Also up so doing well over 1%. I just want to point out a winner and aloser just because they're fun to talk about.So one loser was PayPal. We had the report yesterday after thebell, the worst performing stock in the S&P, cutting cost streamliningoperations. Usually that gets investors excited,just not so much with this stock. And then Ralph Lauren totally missedthis one, up 17%. I was interested by the strong reboundin China, which totally flies in the.

Face of things like Estee Lauder andL'Oreal. I realize that skincare but that did notthat label China as the reason why the earnings weren't as good.But Ralph Lauren just totally defying that.The Chinese consumer really likes the preppy look.I guess I really am right. I mean, I don't know.Lauren's sales are pretty consistent always and within that preppy school.All right. Let's talk about earnings season so farbecause they're rolling on. And after the close, we're going to geta firm Pinterest, a cloud for Cloudflare.

Pricing that quickly out after the bell.Our next guest expects earnings to, quote, continue to accelerate for atleast a couple more quarters, adding that he likes companies least price tobenefit from that acceleration, such as small caps, industrials and emergingmarkets dances. Yuki, deputy CIO over at RichardBernstein Advisors, joins us for more Smallcaps We keep talking about them andwe keep hoping that they'll actually be able to hold on to some of their gains.But it doesn't come. I mean, there are so many leadingadvances. What's different this time?Well, I think to some extent that makes.

Sense.I mean, if you look at the under the underlying you look under the hood atearnings, you know, it has been a tech driven story up until now.But if you look at the acceleration that analyst forecast for the rest of theyear, you know, that's going to be less and less the case.So you're going to see, you know, the further acceleration of earnings isgoing to be less about Texas Tech and those related sectors growing.They're actually going to be growing at a slower pace and it's going to be morethe traditional cyclical areas of the market, like small caps, likeindustrials, like energy, whose earnings.

Are expected to accelerate if youbelieve the analyst forecasts, you do. Yeah.So why is this time different than like last year, which was like a fake out?Well, last year we were in a profits recession for the first part of it.And then as you accelerated, it was really it really truly was, you know,the tech stocks who led us into the earnings recession, which had bigbounces coming out of that. So to some extent, you know, it makessense that people are getting excited about that.You know, turnaround and growth. We try to get excited all the time aboutthese other companies, anything beyond.

The Magnificent Seven, but it doesn'twork. And in the end, everyone just looks atthe same seven stocks, maybe not Tesla so much and piles into those.I mean, we talk about the broadening of the rally.It hasn't happened. I know.And you talked about broadening like maybe if the gap was this big and itgoes to this big, I guess it broadened. But still, I mean, Dan, how can I justwhy do I want to buy small caps? Go buy.Well, there's there's two things going on, right?I mean, there's we've been talking for.

For a long time about the dominance ofMagnificent Seven. But, you know, this year, every time Iturn on the TV, it's like the Super six and the Fab Five and the Fantastic Four.I mean, at some point, you know, maybe you are just getting an implicitbroadening out here where it's less and less stocks that are driving the markethigher. But I think the other thing is, if youlook at the history of markets, you don't have sustainable markets, longlasting bull markets that don't at some point come with breadth.I mean, we saw last year was the worst breath basically in history.And I don't think that that's going to.

Continue.If it does continue, it's probably a very bearish sign for markets and abullish one, because if you think about it, you it's okay to huddle up in thehandful of stocks that have the best growth when there's not much growth outthere. But the more the profits accelerate, themore companies put up really strong growth.And then you can become comparison shoppers and say, why pay?Why would I pay 30 or 40 times for a stock growing at 20% when I can pay tentimes for a stock that's growing faster? You know, we were just talking aboutheadline earlier about money market.

Assets hitting a record $6.02 trillion.That was 12 zeros we counted on after the Fed minutes pushback after it becameapparent that the Fed was not going to cut rates in March.Is any of that money being deployed right now?What are you seeing? It looks like it's being deployed, butit's being deployed very narrowly. I mean, if you look at the the sectorflows year to date, I mean, there's one sector that's got all the flows andeverything else is basically flat to down.So and actually what's also interesting is you're seeing people focus less onbuying broad market indices.

That's yesterday's story.You can just go buy the three or five, seven stocks.They're driving everything. So people actually just back to stockpicking now and not really picking those buying those seven stocks.So let's go to the Russell for a second. Would you would you sort of use the sametemplate that. Some are doing with the mag seven butuse it in the Russell. So is it a value versus growth situationwithin the Russell? Do you need to buy Russell growth ratherthan value or you break the back? I think I think the time, historicallythe time to own growth is when growth is.

Weakening and slow.Well, that's not the case of growth is going to continue to accelerate.This is actually a better time to own value.And so owning value, owning cyclicality is the right thing to to to do whilethis earnings recovery lasts. Now, we I can come back here six monthsfrom now and very well be seeing signs that the profit cycle is starting toroll over. If that's the case, you're probablygoing to reverse that trend and maybe add more growth back into the portfolio.But I just don't think this is the time when profits are actually stillaccelerating.

I want you to weigh in on the other bigstory that's really been plaguing investors the last few weeks, and thatis, of course, commercial real estate and your community bank and what thatsays about the bad loans out there and who that's going to hit, because we'veseen a German bank bond get affected. We've seen Japanese companies getaffected. How worried are you about commercialreal estate rearing its ugly head again? You know, I think you have to be youhave to be aware of what your exposures are.I think that, you know, the fact that it's everybody's talking about it andit's all over the headlines and banks.

Are are failing over.I think, you know, to some extent that should give you comfort that a lot ofthe bad news is priced in. But there's still going to be I mean,you should never be surprised when there's there's a few a handful ofcompanies that are going to be taken down by this.I mean, that's just the history of how things go.It doesn't mean that it's going to be this worsening crisis from here.In fact, I assume in many cases, a lot of the bad news is priced.When do you think we start to get an earnings roll over again?You know, a lot of people, maybe most of.

The people that come on this show willproclaim to be able to see the future. We really don't try to make thatproclamation what we try to tell people as the best and second best thing tothat is actually trying being timely and identifying the inflection points.And for the time being, we're not seeing any signs of inflection.In fact, actually, things are still getting stronger from an earningsperspective. But again, we have visibility a coupleof quarters out. So as we get into third, fourth quarter,you know, who knows what's going to be happening?There's going to be a lot going on at.

That point in time.What are you most worried about right now?Very quickly, what what weighs on your mind?Well, just at the risk of sounding like a broken record, I think there's massiveconcentration risk in the markets today. And so it doesn't take a whole lot forthe wind to come out of those sails at any moment.All right. Dan Suzuki, really appreciate it, deputyCEO over at Richard Bernstein Advisors. He's worried about something that we'vetalked about for so long over concentration risk, but still has notyet really come to fruition.

No.And also just the idea that just because you think that now doesn't mean that sixmonths you won't change your view. Right.It's a fluid market. So fluid opinion.All right. We're moving closer to the closing bellfor market coverage right here on Bloomberg.Beyond the Bell. Bloomberg's comprehensivecross-platform. Coverage of the U.S.market. Close starts right now.We're about 2 minutes away from the end.

Of the trading day.I'm Scarlet Fu here with Alix Steel. We're counting you down to the closingbell. And here to help us take you beyond theBell with a global simulcast, Carol Massar and tim Stanwick.And, of course, welcome to our bloomberg television, bloomberg radio and YouTubeaudiences who are joining us online to take a look at this trading day, whichby the measures of the S&P 500, we're not seeing a whole lot of action, butwe're near record highs. And the Russell 2000 finally gets a bitof a pick up, which is good to see. Right.The small caps are participating.

But yeah, I keep calling it a day again.But 49 99.68. Right.Is what we got in the S&P. So yeah, so close to 5000 Charlie BellAnd I like all of us, we've been kind of obsessed watching whether or not we getabout 5000. The indices, though, they're masking thebig moves that we're seeing in individual equities today.And look at look at, Alex, what ARM is doing today, up more than 60% at onepoint in the day, Disney higher by double digits.We're seeing PayPal down by double digits.So we're not getting the real story by.

Looking at the indices.No and particularly with aam too I was mentioned this earlier that's you know$120 billion company right and it's moving by this much that's pretty quitea lot of churn within the equity market but I'm still in the the small cap storythe energy story like the the laggards over the last few weeks playing a littlebit of catch up. Well will they be followed throughtomorrow. I don't know.I'm more skeptical. We do get a CPI print.You do wonder if it'll change if anything kind of returns.Yeah.

And revisions which Yeah.Could hold a lot of change. So it's worth noting as well.We had a pretty decent 30 year Treasury auction following a decent ten yearTreasury auctions. Now you like the auctions?She was making fun of me yesterday for the auction.Why? We shouldn't wait.What's going on here? I was in front of her so much as saying.You really want to talk about. Well, we've got to separate you two.We did the top of our show with Michael Mackenzie on the auction.Yes.

Oh, okay.I see. I was just like,All right, let's take a look at how markets are closing on the day.You have green all around. But did we get to that 5000 level?No. 4998.52 is the early read.But of course, we're waiting for it to settle.We're going to come shy of that 5000 level.It is a gain of almost 1/10 of 1%. Dow Industrials adding about the sameamount and Nasdaq gaining a quarter of 1%.All right, folks, let's get to some.

Earnings crossing the Bloombergterminal. We're talking about Expedia, home to somany travel websites. Men getting killed in the aftermarketdown about eight and a half percent. Let's go to the numbers.Fourth quarter adjusted revenue, our fourth quarter revenue excuse me, 2.89billion, slightly higher than the street estimate of 2.88 billion fourth quarteradjusted EPS, $1.72. That's three pennies better than thestreet was expecting. Fourth quarter negative free cash flow,415 million. The estimate was for a -192.6 million.So that's going to disappoint investors.

Fourth quarter gross bookings, 21.67billion. And Tim, that's also coming in light 22billion was the estimate stock down about 7.8% here.Yeah. Peter Kern, the vice chairman and CEO ofExpedia, saying our work is finally starting to deliver results and we arein the best place we've seen we've ever been technologically moving forward.We are now able to execute without the numerous constraints we have faced inrecent years. We will continue to focus on acquiringand retaining the right customers, driving share growth in our B2C and B2Bbusinesses, and providing the best.

Product and partner experience in theindustry. And Expedia also announcing a CEOtransition plan and Pause. Two other really interesting things.One arm adds $38 billion in value, record 48% jump.And and the S&P briefly broke above 5000 guys.It didn't it didn't settle there, but it briefly broke above that first timeever. Really?Yeah. There should be like, you know, balloonsand confetti and thousand point four We did This is true.Yeah.

But it's a touch and go, right?It gets old. It doesn't count though.If it was intra day like we only counted when it's the close.Right. You break out the hats when it when itwas about that close. There's options.Tomorrow it's going to move. All right.Right, Right. We'll see whether it is this weekend.Yeah. Okay.No, let's get to some of the individual gainers.Surprise, surprise.

ARM Holdings was a gainer soaring to arecord up the most since its IPO last September.You know the news, you know the story. The company issued a surprisinglybullish earnings forecast showing and we've all had conversations about thatpushing beyond smartphones is helping fuel growth.So that was certainly a big outstanding name.Another chip name on my radar and this is monolithic power say that five timesfast among the top of the Nasdaq 100. It's a semiconductor device companyreported fourth quarter results beat expectations.It also gave a positive outlook.

Analysts noted a tailwind fromartificial intelligence. You had a lot of analysts raising theirprice. KeyBanc Cohen, Oppenheimer Truist allraising their price targets KeyBanc. With the Street High now of 830 a share,boosting it from a previous target of 600.But again, the stock up 47% by the close here.And then Disney had to talk about it rallying big time, most intraday or mostin about three years since December of 2020.You know, the story there reported better than expected earnings for itsfiscal first quarter, raised its.

Dividend 50%, approved a $3 billionstock buyback plan. And issued an upbeat profit outlook forthe year. So again, that one was up more than 11%in today's trade. All right.Well, let's look at some of the decliners as we continue to wait a waiton earnings. Let's start with PayPal.Among the worst performers on a percentage basis in the S&P 500, seekingmore than 11%, the most in months. This after the company issued adisappointing 2024 outlook. PayPal said it expects earnings to beflat this year as it continues to cut.

Costs and streamline operations.Just a reminder, the company did announce last month it's going to cutabout 9% of its workforce. Part of the CEO's efforts to boostprofits. Taking a look at snap on tools fallingthe most intraday since March of 2020, after the company's tools group reporteda sales shortfall. Management did say the segment'sperformance was, quote, not at our standard.Shares finished, then down by 9.7%. And then have you guys been talkingabout 23 and me much. The stock has been on a tear has beentalking about it there.

Right.It's barely barely there. I mean, they're concerned that it'sgoing to get de-listed. Shares today falling for yet anotherday. The company's CEO and will diski tellingbloomberg news that she's considering splitting up the dna testing company'sconsumer therapeutics businesses in an effort to revive a sagging stock priceand avoid being delisted, down another 13% today.Total return on the stock has been decline of more than 90%.You guys taking one of those 23 retest? I mean, like everyone who was going todid it a few years ago, that's exactly.

The problem.Right. It's not a recurring plus, but they keepadding more people to the database so then you can keep going back.So I haven't done it, but my husband does.He's totally into it. He loves the whole let's go back andthen see what does he pay each time he goes back.He doesn't tell me these things. I do wonder, let's say let's say thecompany is delisted, that split up. I wonder what happens to the data.Because a big question that I have is about the privacy of this data.This is why I don't do it, because I.

Don't want to share this.There are others. Yeah, that's so that that's a questionthat they already have all the data please from your smartphone.Anyway, stop. Right.And just a quick pivot here on yields, because we did see yields climb.We had that successful 30 year auction, but yields moved higher.We had a little bit of a sell off, but not at all affecting the equity market.It does feel like we can have higher yields now and higher equity market.Yeah, it's it's kind of a whole Hamdi and Treasuries.I'm accustomed to seeing 23 basis points.

Moves.So that that's kind of shocking in how slow and boring it is.We have take two numbers coming out and take two.Of course, the video game publisher, everyone cares about it because of GrandTheft Auto six. When that does come out, not a whole lotof numbers to work on right now, but third quarter net bookings of $1.34billion, slightly higher than what was anticipated, which was 1.32 billion.We're waiting for some more numbers across right now.But if you look at how the stock is trading in after hours, we have itclosing up $0.03 at 169, 60, about 1%.

Higher, right?Yeah, Yeah, just a little bit right here.Yeah. This is a stock that I'm just lookingat. It's up about 5% here so far this year.But again, you're seeing a little bit of momentum up two and a half percent.The company saying it sees fiscal year net bookings of 5.25 to 5.30 billion.The estimate on the street, this looks a little like 5.44 billion.And again, third quarter net bookings coming in at 1.34, a little bit abovethat estimate of 1.32 shares of Pinterest.I want to go to those.

They're getting crushed in theaftermarket right now, down more than 19%, down 20%.Fourth quarter adjusted earnings per share did beat estimates coming in at$0.53 versus $0.48. Fourth quarter revenue coming in belowestimates, 981.3 million versus 990.2 million.Adjusted EBIT coming in just above estimates.364.8 million estimates are for 358.4 million.I mean, they're looking for the first quarter of 2024, though, to be about 15to 17% growth year over year. But that's kind of doing nothing forinvestors right now.

I feel like we got a sense that this wascoming after Snap's results, which weren't that great either.The kind of move that we're seeing in Pinterest kind of mimics what we saw inSNAP. Like, I'll go to Pinterest, but I'mgoing to buy anything on Pinterest. It's becoming a tale of like twodifferent types of companies, right? You have the Alphabet's and the othermedia platforms that are just dominating when it comes to social.When I covered when it comes to advertising, I should say, and then the,you know, the challenging, the ones that are the challengers, the Snap's in thethe big get bigger.

Yeah, yeah.Let's go to a firm that's a fine company to watch.It's a buy now pay later. So a firm, the one you want to payattention to is their gross merchandise volume.And this is for the third quarter. That's how they do their fiscal yearthat's coming in at the high end of 6 billion.The estimate was for 5.89 billion. So a bit better than estimates.They see third quarter revenue on the high end.Pretty good come in at 550 million. That's not though, down by about 13%.I have to sort of dig into a little bit.

Now, John, about 20%.I'm trying to look through here on the press release.That is pretty remarkable. As you said, second quarter revenue, 591that looks better than the Street was expecting, looking at the outlook.Third quarter gross merchandise volume of 5.8 to 6 billion.The street estimate was 5.89. So there's got to be something here thatis making investors kind of run for cover and it's down about 20%.Yeah, the quarter that ended the second quarter revenue blew out expectations,591 million versus the expected 520.7 million.So that's curious.

We'll have to dig into that a little bitmore. I guess people's expectations were justmuch, much higher than what we actually saw.Yeah, a lot of stocks on the move, though.A firm down 16% in the aftermarket, Expedia down 13% in the aftermarket.So we'll continue to track them here and look for some commentary in some ofthose calls. All right, guys, that's a wrap.A busy one across flat from radio, TV, YouTube and Bloomberg Originals.We will see you again same time tomorrow.All right.

Coming up.You're in Tema. The director of global Macro over atFidelity will be joining us. Alex has a lot of questions for himabout all that dry powder on the sidelines, whether that's going to beput to work and if so, where. This is the close on Bloomberg. And. And big cap stocks in the U.S.finished the day. Little change, but the S&P 500 did tradeabove 5000 for the first time ever. Alex, you pointed that out.It was a banner moment.

Yes, Banner was a better moment, but wedidn't end there. And don't forget, it's gained about 14%in the past three months. So it's had quite the ride.This is, of course, a standard market cap weighted version of the index thatI'm referring to, and that's heavily influenced by the moves of the Mega-captech stocks. However, if you look at the equalweighted version of the S&P 500, different picture with the rally more orless stalling out this year, you're in. Temer joins us now.He's director of global macro at Fidelity.You're in how much of what we're seeing.

In equities is determined by thevolatility that we've seen in bonds? Well, so the market, as you said, ismaking new highs and it has momentum. Right.So the volatility has not been huge, but the momentum has been good, generousenough month. That tends to bode well, of course, whenthe market makes a new all time high after some sort of bear market orcorrection, the odds go up significantly of continued new highs.So momentum begets more momentum. But the indices that I really am lookingat and you mentioned S&P 500 equal, you know, SBW on your Bloomberg that has nowbeen in a range for like 107 weeks.

So we're still a few percent below thehighs. But, you know, I've studied this andgenerally the generals lead the way, no pun intended and the soldiers follow.And so typically, you know, smaller caps go down more than large caps in a bearmarket. And so therefore, they have more torecover. And so the Russell is still well belowits highs. The SBW is slightly below its highs.MSCI all country world is slightly below its highs.But once the generals are leading the charge, I think the rest of the marketwill will follow.

And I, I think it's just a matter oftime before we are talking about new highs for for all the indices.So if I read between the lines, I should go buy small caps now and I should gobuy what materials, industrials and energy.Well, one one of the good stories of this market has been that a lot ofstocks have been left behind. I mean, that's not a good story.But for investors who may have missed it, Right, Because you want to buy techhere because there there's a lot of low hanging fruitout there. Right.So the even the SB 500 equal weight is.

Trading at a 90 multiple.The Russell is trading at a 16 multiple. You know ex-U.S.the world's trading at about a 14 multiple emerging markets at a 12.So there are a lot of stocks that are still somewhat uncovered.And if they do follow the generals and I think that that offers an opportunityfor me, the big question is not so much will they follow, but will theyoutperform? And that that is a whole differentquestion. And we've only had really two otherepisodes over the past, you know, century or so where such a small handfulof very large cap companies have.

Dominated, you know, the original Nifty50 in the seventies and of course, during the dot com boom as well.So we don't have a large sample size. But last year, only 26% of the stocks inthe S&P outperformed the S&P. And that is the lowest on record.Right. And this is something we're we're we'reall waiting with bated breath to see things broaden out.You're director of global macro, which, I mean, do pay attention to what the Fedsays, how people are pricing in what the Fed does next.The Fed has made it clear it's not doing anything in March.And maybe maybe we'll get something in.

May or June.Until then, are we stuck with what we have here?Everything you just described, where we're just kind of waiting andeventually these things will happen, but something has to trigger it.And the catalyst is macro events. That's not happening.Yeah, I think the catalyst is earnings. So if you look at equity valuation, it'sabout earnings and interest rates and then the risk premium, right.Which is really a sentiment measure or the p e ratio.And I think the Fed is correct in cutting rates some but not too much.And my personal theory is that the Fed.

Is trying to not repeat the mistakesfrom the 1960s, and it's a long time ago.But during the sixties, the Fed pivoted too quickly when there was sign aweakness because it was all about full employment at the time, less focus oninflation, and the Fed had to kind of walk back that rate cut in 67, I thinkit was. And then the great inflation had alreadybeen unleashed. And today, of course, we have a lot offiscal stimulus, so deficits, six, 7%. And so my sense is that the Fed is goingto err on the side of being more hawkish.And I think for the market, that's okay.

I mean, the market has been prettyresilient, the economy has been resilient.And so the market has advanced quite a bit in expectation of an earningsrecovery. I mean, the p e ratio in October 2020.Two is 15. Today it's 21.And so that's fairly normal. But those earnings have to come through.And of course, we're in the middle of earnings season right now and so far, sogood. And it looks like Q3 last year was theinflection for earnings. So from what you're describing from theFed, that's very much of a normalization.

Process, in which case you can haverelatively higher yields and also equities go higher at the same time inthe same macro backdrop. Is that true?Yes. So if you look at a discounted cash flowmodel, right, you have earnings in the numerator, interest rates in thedenominator and earnings are by far the more powerful driver of the two.I mean, last summer when the bond yield was pushing against 5%, that was a painpoint. But earnings were falling last year andthis year they're at least expected to grow about 9%.And so earnings are the dominant factor.

But again, you look at that equity riskpremium, right? So the bond yield plus the equity riskpremium together make up the cost of capital, and that's how you discountfuture earnings to come up with a present value of those earnings.And that's your fair value valuation. And so the big delta here is that theequity risk premium a year and a half ago or October of 22 was 5.7.Today it's 3.7. And so that's your swing of the market,anticipating a lot of good news and the market's pricing in both an earningsrecovery and a Fed pivot, They don't tend to happen often at the same time,right?.

Correct.How worried are you about events in the second half, the election, internationalcrises worsening and how how early or how quickly should investors startpositioning themselves, preparing themselves for that?So there's always going to be geopolitical issues and headlines.I mean, it's sad to say, but that's kind of a reality.And there are always big things to worry about.And certainly this year is is no difference.And for the for investors, you know, you have to kind of cut through the stuff.I mean, it all matters.

Of course, there's human tragedieshappening. But for investors, you have to figureout what is systemic to the markets, Right.And then you come back to earnings, the economy, interest rates, and and themarket is weathering those storms pretty well.And then for the election, of course, this is a big one.I mean, they're always big, but the market's $40 trillion, the economy's 28trillion, and the economy tends to be bigger than any particular election,which is not to say that the election is not going to have impact on or onsectors and policy and taxes and things.

Like that.But the market tends to do what the market does, and the election tends tohave less impact than maybe the presidential candidates would like tobelieve. They always think they have a moredirect impact, a direct hand in everything you're in.Thank you so much for joining us. You're in.Tamara is director of Global Macro at Fidelity.Coming up on the close, we're going to talk about the top three.We focus in on the top three movers and shakers at the center of the day's bigstories.

Who's on top?That's next. This is a close family. And. If happen, we cross that 5000 level forthe S&P. We didn't hold there, but we did crossit. But then we get a slew of earningsscarlet that came in after the bell and some of them like Pinterest, down 15%.A firm also down like if you miss, you get punished really, really hard.But on a headline level, we're there. Yeah.Pinterest is interesting to me because.

Even though its user base is fairlysmall, it's a read on the advertising market and like SNAP before it, the readfrom the smaller companies. So on smaller platforms is that it's notas great as what Alphabet or Metta would have you believe.I mean yeah, it's that's also true. Like it's easier to buy stuff onInstagram than Pinterest for example. But it is interesting.Look at the S&P overall near 5000 because tomorrow is an options.You do expire options on Friday. So trading around, that's going to bequite interesting and any kind of follow through that winds up happening.Maybe we'll see a pickup in volume.

Because there wasn't a whole lot goingon today. It felt kind of slow week has been likethat actually start to focus on the bond auctions was that it?Ha ha ha. I wasn't at the wrong that's an insider.I was not. And then now she's all talking about thebond auctions. Maybe, maybe they were all trading bondsand that was the problem. Okay.You talked about how there's a lot of earnings.I think we need to get a recap on all that.All right, let's do it.

So Isabelle Li and Emily Greenvale arelooking into all these names. Hey, Isabella, kick it off.Hey, Alex. So we have Pinterest shares falling asmuch as 16%. And up until today, the shares are upactually, but around 10%. But then we see that investors aren'thappy with what they're seeing their fourth quarter revenue missing, analystsestimates. And it follows its peers SNAP, which issuffering from sluggish sales. So sales of the company rose 12%.That's lower than analysts estimates it did.Top projections for user growth.

We have that hitting a record.It's been a tough time for Pinterest. Pinterest has been trying to shakethings up and they've done this by targeted ads, but that seems to be kindof on shaky grounds as well. But the company also focused onshoppable content, so we'll see how that goes.And here we have Take-Two Interactive. It's a video game operator and sharesare also down around 5%. The company narrowly missed estimates onits in-line net bookings and badly missed guidance when it comes to itscurrent quarter. The company cut its net bookings for theyear and also its guidance missed the.

Average earnings estimates.The company said We are reducing our outlook for the year to reflect thetough macroeconomic environment. The shares are now down in post-markettrading by 5%. What do you got, Emily?Well, Isabelle, I have another miss here, an earnings and a stock in thered. I'm looking at Affirm Holdings, the buynow pay later company. That stock is down about 6% right now inthe post-market. Not all the earnings were that bad theyhad a beat on second quarter revenue coming in at $591 million versusestimates of 520.

So that was a beat there, a beat on thethird quarter revenue forecast. The EPS was inline.Exactly what's driving this decline in the post market.Perhaps it's a miss slightly on the gross merchandise volume forecast, buteven then it came in at 25.25 billion versus estimates of 25.45 billion.So not exactly that much of a loss. Perhaps it was at the company was up400% in 2023. Expectations were really high here.I'm also looking at a software company, Cloudflare, that was more of a beat inthat stock and we are seeing a big gain 16%.There was a beat on fourth quarter.

Adjusted EPS, a beat on revenue and abeat on the adjusted gross margin. Scarlett and Alex, fantastic roundup ofall the earnings after the bell, Emily Garfield and Isabel Lee of BloombergNews. All right.Let's go now to the top three where we take a deep dive into the people at thecenter of the day's top stories. And first up is David Einhorn.He is taking aim at regulators. The investor says the SEC has stoppedpolicing corporate behavior unless the company files for bankruptcy.His take, Alex If the FCC takes action against a public company, the stockmight take a hit and the regulator could.

Get blamed.And the FCC doesn't want that. It does want to deal with that.No, it does not want to deal with it. Also, like, you know, he wants thingseasier. He just wants to rule easier.All right. Well, I'm watching just daily.It turns out the former Barclays CEO had plenty of contact with Jeffrey Epsteinlong after he said they stopped talking. According to legal documents thatBloomberg has seen daily. And Epstein stayed in regular contact byusing an unnamed intermediary. It's pretty remarkable because Epsteinwould email this third party who would.

Then verbally pass things on to justdaily, who would then give an answer back to the intermediary to pass on toEpstein. It's like feels very much like highschool, like writing a note and asking your friend to pass along to that guyduring their free period. And you do that when you're shy or whenyou're in class and you can, but if you're an adult, you do that.I don't know, don't you? You kind of know there's something offwith that transmission mechanism. That might be the reason why this issuch a fascinating story. All right.Finally, our third person is Snoop Dogg.

The rap star is suing Walmart and PostFoods claiming that they conspired to crush his Snoop cereal.The cereal was intended to be a model for other minority owned brands and thenames of these cereals, fruity hoops with marshmallows for frosted dressersand cinnamon toast. Yes, there's a lot of Zs in here thatthat are not coming through as I see them.What he says Walmart did is keep them off the shelves at Post's instructions.But. There has been other accusations byother artists, too, when they try and get into products that their stuff isn'tpromoted like like Diddy, Jay-Z, they.

Had had some sour joint ventures.So, yeah, okay. The high profile team up might not work,but this has happened. This has happened.And, of course, Snoop Dogg will continue to watch for all of that.But some legal action on the part of Snoop Dogg and Master P coming up.What SOC, which stock market was the first to trade online?We've got the answer to that coming up next.This is a close on Bloomberg. Which U.S.stock market was the first to trade online?The answer NASDAQ NASDAQ 53 years ago.

Today began operations.It was a system for stocks to electronically update their quotes andmarked a distinct shift away from the traditional floor based trading modelsof other exchanges. It became an established venue for manytech companies to get their start. You had Intel IPO on Nasdaq back in1971, followed by Apple in 1980 and Microsoft in 1986 and in 1998 or 1980,excuse me, the Nasdaq became the first U.S.equities market to trade online. We spoke with the current CEO, AdenaFriedman, back in 2016, right before she took charge.Listen to what she said.

We've been transforming Nasdaq into aglobal market technology provider or a global financial technology provider.And I will expect that I'll continue to take that journey with with the clientsand with our employees as we continue also, of course, to be a great exchangeoperator. I didn't know that.That is terribly interesting. I totally love that.I love these I love these questions. What this day in history kind of thing.I love I eat the stuff up. I don't want to come up with them, but Ilove being tricked in them, into them and figuring them out.Okay.

Let's get to a stock that moved over theday, and that is Mattel. It ended up by about 3/10 of 1%.It releases the latest results after the close yesterday.The company sales jumping in the fourth quarter after the box office success ofBarbie adjusted earnings and net sales did miss estimates.It is forecasting weaker demand for Barbie and its toys overall in 2024.Joining us now for more is in on creates the CEO of Mattel.You know it's so great to chat with you I'm very excited full disclosure I wasan enormous Barbie movie fan. Do you have to have a Barbie to and aBarbie three to make me keep wanting to.

Go buy Barbies over the next 2 to 3years? Well, there's a lot to be excited aboutwhen it comes to Barbie, that's for sure.But, you know, before we dive in, just to give you a bit of context forfor the quarter and the year, this was a very strong fourth quarter for thecompany with double digit growth in top and bottom line and significant marginexpansion. The year as a whole was a milestone yearfor Mattel, in addition to the incredible success of the movie of theBarbie movie, we extended our leadership in key toy categories and gainedsignificant share overall and continue.

To strengthen our financial positionwith over $700 million of free cash flow, which is more than two and a halftimes that we generated last year. And in line with that, we just announceda $1 billion share repurchase program and believe we are in an excellentposition to continue to execute on our strategy with Barbie and all of ourother brands. Okay.So let me ask you about one of your other brands, which is Fisher Price.I know you're making some management changes for that division.What are your ambitions for the brand's future and do you see it as a core brandfor Mattel overall?.

Our Fisher Price had a very strongfourth quarter. It was up double digit.It's the number one brand in the infant toddler preschool category, and itcontinued to gain share for the year. And within that, little peopleperformed, especially especially strongly with expanded adult collectorline, including for the Super Bowl. So there's a lot of cultural touchpointswithout that, without brand as well in 24.Fisher-Price will expand its core product lines.Enter a new new segment, will it will expand its slice in the entertainmentoffering and continue to exit low margin.

Segments, which is something that wehave been doing consistently. And that in some ways distorts theoverall perspective around the brand because there are segments that wemanaged the exit of that brought the broader revenue down.But there's a lot of core brand. Can you repeat the question, please?What is not a core brand right now? Well, as a as a management team, weconstantly evaluate our portfolio as a whole.We believe we have a very strong portfolio, but we constantly look andevaluate and measure our performance in order to create long term shareholdervalue and position the company for.

Profitable, profitable growth.And this is something that we do all the time as a team, and this is ourexpertise. And what is behind the success of manyof our other brands in our portfolio? You know, an activist investor, aBarrington, thinks that Fisher Price and American Girl may not be core and thatyou should divest. What do you think?Without commenting specifically about any one brand as a team, this is what wedo. We constantly evaluate our portfolio andin some cases we have work to do and we're doing that work.And as you mentioned earlier, in the.

Case of Fisher Price, we announced aleadership change a few weeks ago. We are looking to make more changes thatwe will be able to talk about in the upcoming analyst presentation.American Girl had some really exciting positive trends in the fourth quarter,and that brand as well is becoming a part of the North America business.So we can leverage our strong, our strong direct to consumer capabilitiesand our ability to create demand in a way that very few companies can do.So we have the capabilities and skills to drive those brands forward.Alex Porter Barrington Capital, which of course is pushing for some changes.We also notice, of course, is that you.

Hired Christopher Farrell as chiefstrategy officer and he had an earlier career in M&A.So there are a lot of questions about what that signals, what Mattel issignaling about how you think through your portfolio, what's core, what's not,what should be built up further, what can be downsized a little bit.Yeah. Chris Farrell has extensive experiencein in corporate finance, investment banking and corporate strategy and M&Aand in line with our capital allocation priorities.We talked about investing in organic growth of the company, maintaining aninvestment grade and a 2 to 2 and a half.

Times leverage ratio, as well as M&A andshare repurchase. And we think of these termsholistically. We just announced the $1 billion sharerepurchase program on one side. And on the other side, we continue tothink about M&A opportunities that we're exploring right now, given our strength,our market leadership, our share gain and our capital structure.We have we have optionality when it comes to M&A.The criteria criteria would be does it adds.Is it additive to our strategy? Is it accretive?Is it holistic to our approach overall?.

And we're being very thoughtful, verydisciplined and very methodical about the opportunities we're looking at.This is a this is a fun, funny question, but but I actually kind of mean it.Do you need to have a Taylor Swift toy? And I'll just use my daughter as anexample. She's nine.She's I want to play with Barbies anymore.But if you guys are something Taylor Swift related, you would absolutely wantto buy it and play with it. How do you how do you bridge the gap ofsort of the zeitgeist of Americana versus the products that you have?Well, she might be one of the very few.

People who don't want to play withBarbie right now, because a lot of people do.But when it comes to our capabilities as a companywhere we excel, one of our expertise is to create cultural moments and touchtouch on societal trends that that that matter to the world.And we do that really well. We did it around the Barbie movie.We do it with all of our brands and finding those moments, those keytouchpoints and taking brands at the timeless and making them timely is acore skill set that that that was the company and, and you saw it in the movieand you will continue to see that in.

Taylor Swift for that matter is a greatartist. And in my household we have a lot offans that as well Taylor and and will continue to find ways outside of thequestion yeah to engage and collaborate with with the with with artists and theand role models. So Mattel has plans for an American Girlmovie. You're also I understand reportedlyworking with J.Lo on a Bob the Builder film.So you're leaning on that IP to continue to drive demand for film toentertainment and bring in toy sales as well.Can you give us a just a sneak preview.

Of when we can expect some of thesemovies to come out? Yes, we have a very exciting film slateand it continues to grow and they are. And what we're looking to do is tocollaborate with leading filmmakers to make standout quality movies based onour iconic brands that will resonate in culture and appeal to global audiences.We haven't said when is the next movie coming out, but we have an excitingslate. We slate we're collaborating with someof the most prolific filmmakers in the world, and we're going to share morealong the way when when these movies are ready.But it's going to be worth the wait.

Are you going to the Oscars and on?I am. I am.It's great to have Barbie in the running.We could not be more excited about Barbie and the reception that the moviehas received in not just in terms of box office, but also critically and by fansall over the world. It's it's it's exciting to see and agreat tribute to Greta Gerwig's vision. Absolutely.And interpretation of the Barbie brand and Margot Robbie as well as she was akey key part of that. You know, Margot Robbie.Margot Robbie has been a terrific.

Partner of both us in front of thecamera, but also as a producer. And it's we're very fortunate tocollaborate with these talented filmmakers.You know, thank you so much for joining us on.Chris is the CEO of Mattel and of course,still bewildered why she didn't get a best actress nomination and why GretaGerwig didn't get a best director nomination.I know, I but but but I feel like that perfectly encapsulates the whole pointof Barbie. That's why in my mind, the movie is sobrilliant.

All right.Let's by the way, take a look at how markets closed on the day 5000.We got there in intraday trading. We didn't close there, so doesn't count.So according to Scala, that does not count.Well, it doesn't count in the overall. Did we close at that 5000 level?No, we did not. 49974.The S&P 500 barely any moves in the Treasury market.Despite a fairly decent 30 year auction, the US dollar levitates a little bit upby 2/10 of 1%. And look at that new your crude, Alex upthree and a half percent.

Yeah it feels like if we go towardspeace in the Middle East or. Cease fire that is negative for oil.If that's reneged in any way, it's positive for oil.I say that with skepticism because I don't actually know if that's entirelywith leading the oil market. But yes, there's a lot of supply that'sdefinitely, definitely there and in questions of demand for sure.All right. This is the close.I'm Bloomberg. I'm. Ah, You want to look at a winner?You want to look at a winner in today's.

Session?Look no further than ARM. You had ARM Holdings surging as much as64%. I think it added, like, what, $38billion in value after this record jump. Ah, I helped bolster the chip designersforecast. CEO Renee spoke exclusively withBloomberg's Ed Ludlow and Caroline Hyde. This is really the result of strategiesthat were put in place a number of years ago that are now just really starting tocome to fruition. Yeah, when we think about thevindication, when we think though, still about basically more of your technologygoing into more types of equipment,.

You've managed to see a diversificationout of phones. Paint us the strategy of ARM goingforward, because many would say actually you're not just the overall designer ofchips. You're basically making the chips sofabulous in some way. How do you see that relationship goingforward with Qualcomm, for example? Well, a lot of folks, as you said,didn't really understand the company well and where we fit.And obviously, we had a lot of growth to catch the smartphone market.But ARM is in a lot of devices that people may not naturally think about.We're in a Tesla vehicle, we're in a.

Ford F-150, we're in a ring smartcamera, we're in in the Samsung TV, a Samsung smart appliance.So just about every device you can think of has arm inside and just about everydevice you can think of needs more and more compute, particularly as AI is nowdriving a whole new demand cycle. Talk to us about is Jefferies reallysingling that out? The analyst there saying that thisreally shows your beneficiary from AI, but where does the AI focus come?You? Of course we're in in video before theyare all about air accelerators. And I'm interested as to whether or notthat would be an area that you get into.

Other than servers.Well, right now Nvidia has a great partner there, Grace Hopper.Chip, a super chip, uses a lot of arm CPUs in combination with your GPU, whichis a really, really great solution for high end AI training in the data centeras well as inference. But when you start moving to smallerdevices, say smartphones or PCs, A.I. is going to run there too.If you look at some of the recent announcements by by Samsung and Googlerelative to their smartphones, there's a lot of things such as circling an imageon a browser and then having that browser go off and do search based onthe circle that's A.I.

That's actually running on a smartphone.And what we're seeing is really a drive for more and more compute capacity torun these AI algorithms so that people don't even know what they are yet.But what designers want to do and need to do is futureproof their designs withmore and more compute. And that is really driving a stronglicensing cycle for us in terms of more demand.That was ARM CEO Rene just speaking exclusively to Caroline Hyde and EdLudlow of Bloomberg Television. And meantime, the Super Bowl is onSunday Alix Steel. You're actually going to watch, right?We're debating.

We're debating.I am going to a lunar New Year party on Sunday, well, Saturday and Sunday, buton Sunday. But maybe there'll be the Super Bowl onwhile we have noodles. I think that's a given.There's that it's supposed to be anti Super Bowl party but I don't thinkthat's going to actually have. All right well Americans maybe Alex aswell. But you know anyone in the US reallystocking up for their game days, Fred. So here now to tell us what's on themenu is Jennifer Porteous. She is senior analyst for packaged foodand retail staples at Bloomberg.

Intelligence.Jen, it's great to speak with you. Give us just the first numbers that youguys have, crunch, because certainly spending is going to increase by howmuch and what does that represent from last year?Yeah, so overall, total spending for food and beverages for the big game arelooking like they're going to be up almost 13%, up upwards of $8.8 billion.That's one of the biggest spending holidays, if you want to call it that inthe United States every year. With regards to food within thatcategory, snacks are really the shining feature.And because of the Taylor Swift effect.

And because of the people who are in thegame, we're actually seeing snacks still snack sales going up nearly 14% to top$900 million just for this weekend. Well, you mentioned the Taylor Swiftthing. Does that mean that different people arewatching it now that will have different snack preferences?It's not all like wings and beer. Well, we certainly expecting a largercohort of younger viewers to at least watch part of the game.And we're attributing that to Taylor Swift.So in addition to the regular wings and pizza and things like that, we'reexpecting more of those snack food items.

Because that does tend to be where theyounger generation likes to nosh. Yeah, definitely.I think about my son and all he eats are those horrible takis which leave youwith your fingers with all the muscle growth.It's like red and blue, not to mention like your gut, but to mention that.Talk a little bit about the most popular Super Bowl food.Alex is going to have noodles. She says, well, but you know New Year.But yeah but I mean she's going to do those chicken wings pizza, right?I mean that's that's usually what we're expecting.That's really where the largest sales.

Are.Most of the planning goes in. I'm sorry, Alex, but noodles justusually aren't on the top of that list. But but chicken wings, pizza, crunchysnacks, obviously. Soda, beer, those are really the biggestsellers for this, for this big game. Okay, John.So when a company level, what am I buying in a Super Bowl weekend?Well, in terms of the companies with the exposure, you know, anybody who's insnacks. So PepsiCo, this is really a big forthem, you know, between salty snacks and carbonated beverages, obviously,Coca-Cola, any of your any of your beer.

Producers.And then on the protein side, you know, companies like Tyson that have, youknow, a wide variety of already pre seasoned chicken products are probablyset to do pretty well in terms of sales this week.All right, Jen, thank you so much for giving us a sneak preview of what we canexpect we'll be eating on Sunday. Jennifer.Bye. Tarshis from bloomberg intelligence withher analysis on our spending habits on super bowl sunday in preparation forsuper Bowl sunday. I want to go back to the broader economyfor a moment here because we did get.

Some report on credit today.And credit conditions do seem to be moderating.And that is according to the latest senior loan officer opinion survey.You like this? I love this, Liz.Okay. Well, I love this, Liz, because of this,exactly what you're going to read is why I love them.It's being actualized through a slight recovery in loan demand from both largeand small firms. And that suggests that the majority ofbanks don't feel as exposed to mortgage loans.And this is exactly what lenders like.

One United Bank are really working toavoid. Founded in 1968, one, United is thenation's largest black owned bank. It prides itself on giving its clientsthe tools to serve the black community, creating generational wealth and closingthe racial wealth gap. Here now in studio, I'm pleased to sayto offer more insight is Kevin Kahi, chairman, CEO and owner of One UnitedBank, which has grown its assets to more than $650 million and financed almost $1billion in loans. Kevin, so good to see you.It's good to see you. So give us a taste of what you're seeingright now in the economy, demand for.

Credit from your customers.Well, I think you see moderate demand. As you know, the high interest rateshave dampened demand. And so I think I see it picking up alittle bit is how I would describe it. Has your have your lending standardschanged of demands picking up a little bit?How are you looking at lending? Well, from one United Banks perspective,we do a variety of different types of lending.One big part of what we do is consumer loans.These what they call emergency loans that are in small dollar amounts forshort periods of time.

There's a continuous demand for thattype of product. So you have to remember when you'retalking about loans, they could be very different.And the demand for those loans differs for people in different circumstances.Do you worry about commercial real estate?Are you exposed to that in any way, given what we've seen?No one, United Bank is not exposed to to commercial real estate, so we don't facethat challenge. As you probably know, when United Bankoperates on an on a national basis. And so a lot of the things that we doare on the consumer side of the business.

As opposed to being on the commercialside of the business. So the the loans that we call commercialloans are primarily multi-family housing that are designed to provide affordablehousing to people. So that type of credit that the type ofcredit that we're involved in specifically which people might call Cbuildings, there is tremendous demand. So you have to differentiate between theneed for certain types of housing and the demand for certain types of housingand the various types of loans that are that are needed for various parts of thepopulation and that affects their demand.You are serving your customer and as we.

Mentioned, your customer is the blackcommunity and you're the first black bank to launch an air tool as well tohelp your customer base really manage your money and understand their money.It's a real time financial wellness companion.Can you tell us a little bit about wise one and how people are using it?Well, it's it's key. As you know, we live in a society wherewe forgot to teach financial literacy. So true.Let's just put it like that. I learned until my thirties well andthink big about the impact that has on people.It would it would be no different than.

If we had not taught reading in schools.Well, guess what? If we didn't teach reading, we wouldhave a bunch of people who couldn't read.Instead, what we have is a lot of people who are financially illiterate.And that's not not any particular group is a pervasive problem throughout theUnited States For all income groups, the lack of being financially literate.The good news is what you just talked about is tech.Technology has reached a critical inflection point where the technologyaround that data aggregation, the technology around artificialintelligence have reached the point.

Where they could supplant people'sknowledge that the whole concept of what we call artificial intelligence, whetheryou use the word artificial or not, is a form of intelligence.So it's created this unique opportunity in our society for people who whohaven't had its foundation. Financial literacy.To all of a sudden become very literate. And so that's what Ys one does it doesit it takes it the data aggregated technology to put together all theinformation on a person. So for many people, it's the first timethat they really understand their financial selves.So they understand their revenues, they.

Understand their expenses.They understand their surplus. They understand their assets, theirliability and their net worth. And most importantly, they understandhow cash flows through their world. So you have this whole groups of largegroups of Americans who have no idea of what their financial situation isbecause their dad is in all these different places.Suddenly it's all together and organized in a way they could see it.Then that's where the real magic comes in, because then we use our artificialintelligence technology to evaluate that information on a real time basis and togive them insights as to what they.

Should be doing financially.That and that. And that's really one of the keys toincreasing net worth. So we're part of this new generation ofbanking of banks that create products that actually increase your net worth asopposed to utilitarian products like checking and savings account, which helpto perform some specific function. Yeah, the our products actually help youto feel net worth directly addressing these types of issues.You mentioned things like the racial wealth gap and clearly you're reallypassionate about that. And I'm wondering if we just turninternally about the hiring practices.

There's been a backlash against I forsome reason, the SCOTUS ban on affirmative action.How has that affected how you hire and promote within the company?It hasn't affected us at all. What what is affecting us is technologyand the opportunity offered by technology.You're in a situation, okay, banking as we know it, it's shifted dramatically.We now have we have went from community banking models to now you going tomodels where, number one, people can actually bank from wherever they are.You can use your phone, you can use your computer, you can you have access tobanking services seven days a week, 24.

Hours a day, and you can spend money allaround the world. So start with that.And then you have the creation of these new types of products that I'm talkingto you about, and that creates this unique opportunity set and that's goingto help all of our society, not just black Americans.Kevin, appreciate your joining us today. Kevin Co, he is chairman and CEO of oneUnited Bank. And that does it for us here on theclose balance of power is up next. Have a great evening.This is Bloomberg.

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