About this transcript: This is a full AI-generated transcript of Stocks & Bonds Fall as Oil Jump Fuels Fed-Hike Bets — The Close 7/13/2026 from Bloomberg Television, published July 14, 2026. The transcript contains 16,529 words with timestamps and was generated using Whisper AI.
"THE COUNTDOWN IS ON. EVERYTHING YOU NEED TO GET THE EDGE AT THE END OF THE MARKET DAY. THIS IS THE CLOSE. NO MERCY, NO MALICE. INVESTORS GET READY FOR MAKE OR BREAK WEEK. LIVE FROM STUDIO 2, FROM BLOOMBERG HEADQUARTERS IN NEW YORK, I AM ROMAINE BOSTON. I AM KATIE GREYFELD. THANK YOU FOR JOINING US."
[00:00:01] Speaker 1: THE COUNTDOWN IS ON.
[00:00:07] Speaker 2: EVERYTHING YOU NEED TO GET THE EDGE AT THE END OF THE MARKET DAY. THIS IS THE CLOSE. NO MERCY, NO MALICE. INVESTORS GET READY FOR MAKE OR BREAK WEEK.
[00:00:21] Speaker 3: LIVE FROM STUDIO 2, FROM BLOOMBERG HEADQUARTERS IN NEW YORK, I AM ROMAINE BOSTON. I AM KATIE GREYFELD. THANK YOU FOR JOINING US. A LOT OF THAT WEAKNESS COMING THROUGH IN YOUR TECH NAMES. THE BIG ACTION IS UNDERWAY IN CRUDE OIL RIGHT NOW. HIGHER BY ABOUT 9%. WE ARE TRADING ABOVE $80 A BARREL. WE HEARD FROM THE PRESIDENT EARLIER TODAY. REINSTATING THAT U.S. BLOCKADE ON IRANIAN SHIPS THROUGH EARLIER. WE ARE SEEING ENERGY PRICES HIGHER. ALSO SEEING YIELDS COME HIGHER AS WELL. ABOUT FIVE BASIS POINTS ON YOUR TEN YEAR TREASURY YIELD.
[00:01:09] Speaker 2: A LOT OF TALK ABOUT WHAT THIS FED IS GOING TO DO AND WHETHER THE FED IS GOING TO DO, THE SUMMER DOLDRUM FEEL WE HAD LAST WEEK. THAT IS GOING TO CONFRONT A CALENDAR OF CATALYSTS THIS WEEK. THAT INCLUDES SOME KEY U.S. INFLATION READINGS, DATA ON RETAIL SALES, KEVIN WASH'S FIRST CONGRESSIONAL TESTIMONY AS FED CHAIR. YOU HAVE THE OFFICIAL START OF EARNINGS SEASON WHERE EXPECTATIONS ARE SKY HIGH, NOT JUST FOR BIG TECH, BUT ALSO FOR SOME OF THOSE BIG BANK EARNINGS.
[00:01:40] Speaker 4: CAN THE MEGA CAP BANKS REALLY EXCEED THE MEGA EXPECTATIONS THAT HAVE BEEN PUT ON? SO THE WHISPER NUMBERS FROM THE BUY SIDE OR THE INVESTOR BASE, ESPECIALLY FOR GOLDMAN AND MORGAN, TEND TO BE HIGHER THAN WHERE CONSENSUS IS. AND SO WITH FIVE OF THE SIX OF THEM REPORTING AND EXPECTATIONS RATCHETED UP PRETTY HIGH, I'M A LITTLE BIT NERVOUS THAT TOMORROW IS GOING TO BE A LITTLE BIT OF A MESS.
[00:02:07] Speaker 2: THANK YOU. A MESS INDEED, PARTICULARLY WHERE YOU HAVE THESE CROWDED TRADES, CROWDED TRADES THAT ARE CERTAINLY GOING TO GET AUDITED. IT'S A SCENARIO ALREADY PLAYING OUT FOR CHIPS WHERE THE PHILADELPHIA SEMICONDUCTOR INDEX DOWN 15% FROM ITS RECORD HIGH ON JUNE 22ND. THE SOUTH KOREAN KOSPI INDEX, THE BEST PERFORMING MAJOR EQUITY BENCHMARK, CAUGHT IN A TORRENTAL SELL-OFF THAT HAS PUT IT DOWN 25% IN THREE WEEKS AS INVESTORS REALLY STARTING TO DELEVERAGE AND REPARSE JUST WHERE THEY WANT TO SIT IN THAT A.I. WANT TO SIT INVESTORS? IT'S NOT GOING TO SIT INVESTORS. I THINK THE ANXIETY IS THAT CREEP HIGHER IN YIELDS THAT KATIE WAS SHOWING. THE TWO-YEAR TREASURY NOW AT HIS HIGHEST SINCE FEBRUARY OF 2025. RENEWED IRAN TENSIONS OUT THERE, PUSHING UP OIL PRICES AND FRESH COMMENTS FROM FRED GOVERNOR CHRIS WALLER. ONE MORE HOT READING ON CORE INFLATION, THAT WOULD MEAN THE FOMC SHOULD ACTUALLY CONSIDER TIGHTENING MONETARY POLICY.
[00:02:58] Speaker 3: WE HAVE AN UPDATE ON THAT MEASURE TOMORROW MORNING AT 8:30 A.M. SO CERTAINLY AS ROMAINE SAID, A MAKE OR BREAK KIND OF WEEK. LET'S TALK A LITTLE BIT MORE ABOUT THE BOND MARKET AND HOW THE DYNAMIC WITH INFLATION EXPECTATIONS IS SHAPING UP. BECAUSE BEHIND ME ON THIS CHART, IN BLUE IS YOUR TWO-YEAR TREASURY YIELD. IN WHITE IS YOUR 10-YEAR BREAK EVEN RATE, WHICH IS BASICALLY A PROXY HERE FOR LOOKING AT INFLATION EXPECTATIONS. AS YOU CAN SEE, THESE TWO LINES DESPITE BEING DIFFERENT TENORS, THEY'VE REALLY TRACKED EACH OTHER THROUGH MUCH OF THIS YEAR. BUT THEN YOU SAW A BIG DIVERGENCE BASICALLY ERUPT WHEN IT COMES TO MAY. YOU SAW, OF COURSE, TWO-YEAR YIELDS CONTINUE. THEY'RE CLIMB HIGHER NOW AT THE HIGHS IN OVER A YEAR HERE. BUT YOU SAW 10-YEAR BREAK EVEN RATES REALLY TAKE A DIVE LOWER. THE QUESTION WAS, HOW DO THESE TWO LINES COME BACK TOGETHER? AND IF YOU REALLY TRAIN YOUR EYES TOWARDS THE RIGHT OF YOUR SCREEN HERE, YOU CAN SEE THAT 10-YEAR BREAK EVEN RATE, THAT INFLATION EXPECTATION PROXY BEGINNING TO BUMP BACK UP AGAIN.
[00:03:56] Speaker 2: WE'RE GOING TO GET SOME INSIGHTS ON WHERE YIELDS ARE GOING AND, QUITE FRANKLY, THE REST OF THE MARKET. BUT WE WANT TO KICK THINGS OFF TODAY WITH A LOOK AT A MAJOR DEAL SHAKING UP THE WORLD OF INVESTING. 90-YEAR-OLD ASSET MANAGER RUSSELL INVESTMENTS AGREEING TO BE BOUGHT BY A GROUP LED BY VENTURE CAPITAL FIRM, B-CAPITAL, AS WELL AS CALPERS, ONE OF THE BIGGEST PENSION FUNDS OUT THERE, A MOVED AIM AT PRIMING THE COMPANY FOR THE AI ERA. PLEASED TO SAY JOINING US HERE IN STUDIO TWO IS KATE ELHILLO, THE PRESIDENT AND CIO OVER AT RUSSELL INVESTMENTS GROUP. KATE, GREAT TO HAVE YOU HERE. I DO WANT TO START OFF WITH THE NEWS THAT BLOOMBERG BROKE LAST WEEK AND THAT NOW HAS BEEN CONFIRMED. A HISTORIC FIRM IN RUSSELL INVESTMENTS GOING BACK 90 YEARS, PAIRING UP WITH RELATIVELY YOUNG VENTURE CAPITAL FIRM. WHAT'S THE RELATIONSHIP THERE?
[00:04:41] Speaker 5: YEAH. I'D SAY FIRST IT'S A GREAT OUTCOME FOR YOUR CLIENTS AND THE ASSOCIATES AND INVESTORS. BUT WE'RE AT A PRETTY UNIQUE INFLECTION POINT I'D SAY IN LOTS OF DIFFERENT INDUSTRIES AND SECTORS AND HAVING THE BENEFIT OF CAPITAL PARTNERS COMING IN THAT HAVE A REALLY STRONG TECHNOLOGY BACKGROUND AND A TRACK RECORD OF REALLY LEANING INTO COMPANIES THAT ARE LOOKING TO SHAPE THE INDUSTRY. I THINK IT'S A PERFECT TIMING FOR B CAPITAL TO COME IN. PAIRED WITH CALPERS WHO THINK ABOUT IT, LONG-TERM INVESTOR, RETIREMENT FOCUS, FINANCIAL WELLNESS, REALLY ALIGNED TO RUSSELL AND HOW WE THINK ABOUT MANAGING MONEY.
[00:05:17] Speaker 2: SO A GOOD COMPLIMENTARY COMBINATION. THE BIGGEST PENSION FUND OUT THERE. IS THIS STARTING TO BECOME A LITTLE BIT MORE OF THE MODEL OUT THERE, NOT SO MUCH THE B CAPITAL SIDE, BUT THE IDEA OF HAVING A BIG PENSION FUND LIKE THIS, KIND OF OWN A PIECE OF THE PLUMBING,
[00:05:29] Speaker 5: SO TO SPEAK, OF WHAT'S REALLY GOING ON OUT THERE. HAVING THAT ALIGNMENT IN TERMS OF LONG-TERM CAPITAL, WHICH IS VERY MUCH HOW MOST CLIENTS THINK ABOUT THEIR INVESTMENT STRATEGY AND DECISIONS, IS A POSITIVE. WE'VE SEEN IT WITH SOME OTHER ASSET MANAGERS OUT THERE, WHERE YOU'RE SEEING ASSET OWNERS WITH THAT KIND OF LONG-TERM FOCUS LEANING INTO OWNING COMPANIES LIKE OURS.
[00:05:48] Speaker 3: TALK TO US A LITTLE BIT ABOUT HOW YOU'RE GOING TO BE APPROACHING AI UNDER THIS NEW OWNERSHIP STRUCTURE, BECAUSE IT'S SOMETHING WE HEAR ABOUT A LOT WHEN IT COMES TO ASSET MANAGEMENT. AND YOU SORT OF HEAR THESE STATEMENTS AND THEY'RE HARD TO GRASP. HOW DO YOU SEE THAT ACTUALLY IMPACTING THE WAY THAT YOU LOOK AT INVESTMENTS AND YOU MANAGE MONEY?
[00:06:07] Speaker 5: FIRST, THE GREAT THING IS THAT FROM A CLIENT PERSPECTIVE, FROM A PLATFORM AND TEAM PERSPECTIVE, IT'S STAYING THE SAME. PART OF THIS IS A PLATFORM PLAY. RUSSELL ALLOCATES TO ALL THE BEST INVESTORS IN THE WORLD WHEN WE BUILD PORTFOLIOS AND IT GIVES US A UNIQUE SET OF DATA AND INSIGHTS THAT WE HAVE TO WORK WITH WHEN WE'RE MANAGING CLIENT'S MONEY. HAVING MORE ROBUST AND MAYBE A BIT OF A BOLDER APPROACH IN TERMS OF INVESTING IN TECHNOLOGY TO HELP THINK THROUGH HOW WE CAN TAKE ADVANTAGE OF THAT DATA SET AS WE THINK ABOUT MANAGING MONEY FOR CLIENT PORTFOLIOS IS ONE OF THE KEY EXCITEMENTS THAT WE HAVE AROUND THIS. IT CAN BE AROUND THINKING ABOUT MANAGERS THAT WE'RE INVESTING IN, IT CAN BE AROUND JUST BEING MORE SCALED AT HOW WE'RE CUSTOMIZING SOLUTIONS FOR CLIENTS. IT COULD BE ON THE RETAIL SIDE AND TAX OR MANAGING A PENSION. PENSION PLANS LIABILITIES MORE EFFECTIVELY. BUT TECHNOLOGY AND DATA AND AI HELPING US BE MORE DYNAMIC IS THE BACKBONE OF A LOT OF THOSE DECISIONS.
[00:07:00] Speaker 3: AND YOU TOUCHED ON THIS A LITTLE BIT BUT RUSSELL OF COURSE IS KNOWN FOR BEING ONE OF THE LARGEST OCIO'S OUT THERE, OUTSOURCE CHIEF INVESTMENT OFFICERS. IT'S AN INTERESTING WAY OF APPROACHING INVESTING, TAKING A LOOK AT ALL THESE DIFFERENT FUNDS AND MANAGERS AND PUTTING THEM TOGETHER. I WONDER IN YOUR VIEW WHY YOU THINK THAT STYLE OF INVESTING, WHY OCIO'S IN PARTICULAR SEEM TO BE GAINING MORE TRACTION IN THIS KIND OF MARKET?
[00:07:26] Speaker 5: I THINK PART OF IT IS YOU HAVE THE FLEXIBILITY TO MAKE ADJUSTMENTS TO THE STRATEGY AS YOU NEED TO. IT'S THE BALANCE OF BEING LONG-TERM FOCUSED IN TERMS OF YOUR OBJECTIVE BUT NOT BEING SO ANCHORED TO ONE INVESTMENT STRATEGY IN TERMS OF HOW YOU ACTUALLY MANAGE THE PORTFOLIO. IF THERE ARE SHIFTS BETWEEN PUBLIC AND PRIVATE OR DIFFERENT TYPES OF STRATEGIES THAT ARE IN OR OUT OF STYLE, WE CAN MAKE SHIFTS VERY NATURALLY BECAUSE WE ARE INDEPENDENT AND OBJECTIVE IN TERMS OF HOW WE THINK ABOUT ALLOCATING CAPITAL. I THINK IN AN ENVIRONMENT WHERE STRUCTURAL CHANGE IS SOMETHING WE ALL NEED TO BE UNDERSTANDING AND THINKING ABOUT LONGER TERM, HAVING FLEXIBILITY ABOUT HOW YOU ARE GETTING DIVERSIFICATION IN YOUR PORTFOLIO AND USING DIFFERENT TYPES OF STRATEGIES TO DO IT. OPEN ARCHITECTURE GIVES YOU SO MUCH FLEXIBILITY TO FIND SOME OF THOSE WAYS.
[00:08:05] Speaker 2: LET'S TALK A LITTLE BIT MORE ABOUT THE MARKETS IN THE HERE AND NOW. YOU HAVE MORE THAN $400 BILLION UNDER YOUR PURVIEW HERE. COMING OFF OF THE FIRST HALF THAT WAS RELATIVELY DECENT NO MATTER THE ASSET CLASS SAVED FOR A COUPLE OF HERE. AS YOU LOOK AT WHAT IS HAPPENING WITH REGARD TO THE EARNINGS PICTURE AND THE TRAJECTORY, THE MACROECONOMIC BACKDROP AND STILL A LOT OF UNCERTAINTY ON GEOPOLITICS. IS THERE A RETHINK IN WHAT YOUR OUTLOOK AND YOUR INVESTMENT STRATEGY SHOULD BE GOING FORWARD?
[00:08:34] Speaker 5: I WOULD SAY THE REACCELERATION WE ENTER THE YEAR IN IS NOT KIND OF OUR BASE CASE ANYMORE. BUT THE RESILIENCE THAT WE ARE SEEING IN THE ECONOMY, WHETHER IT'S GEOPOLITICAL RATES, VOLATILITY, OR JUST A GENERAL SHIFTS IN TERMS OF SECTOR LEADERSHIP, DIVERSIFICATION AND BEING REALLY DISCIPLINED ABOUT HOW YOU ARE THINKING ABOUT THE MARKET ENVIRONMENT WE THINK IS CRITICAL. IN SOME WAYS IT FEELS LIKE A BIT MORE OF A TRADING ENVIRONMENT THAT WE ARE OPERATING IN. SO BEING ABLE TO BE DISCIPLINED AND THOUGHTFUL ABOUT WHEN TO TRIM THOSE WINNERS AND HOW YOU WANT TO THINK ABOUT WHAT IS THAT NEXT STRATEGY.
[00:09:06] Speaker 2: I UNDERSTAND THE ARGUMENT FOR DIVERSIFICATION. OBVIOUSLY THAT'S AN AGE-OLD ARGUMENT. THEN PEOPLE LOOK AT THE AI STOCKS, THE CHIP STOCKS, AND THEY DON'T WANT TO MISS OUT ON THAT. THEN YOU START TO GET THIS BROADING OUT OF THE TRADING. THEN SOMETHING HAPPENS. IRAN OR SOMETHING ELSE HAPPENED. EVERYBODY SORT OF GOES BACK INTO THAT FUNNEL OF THOSE FIVE TO TEN NAMES THAT HAVE TAKEN US HERE. IS THAT JUST KIND OF THE CYCLE THAT WE SHOULD PREPARE OURSELVES FOR?
[00:09:28] Speaker 5: I THINK YOU NEED TO MAKE SURE AT THE TOTAL PORTFOLIO LEVEL YOU'RE POSITIONED FOR WHERE THE WORLD IS GOING. YOU NEED TO UNDERSTAND THERE ARE DIFFERENT WAYS TO GET EXPOSURE TO THAT AI TRADE. YOU'RE LOOKING AT DIFFERENT EXPOSURES IN YOUR PORTFOLIO AND MAKING SURE YOU'RE POSITIONED FOR WHERE THAT STRUCTURAL GROWTH IS CRITICAL. ONCE YOU'VE DONE THAT, MAKING SURE YOU'RE NOT TOO ANCHORED HENCHED THAT PARTICULAR TRADE AND HOW YOU'RE GETTING DIVERSIFICATION IN THE PORTFOLIO WHERE INFLATION CAN START TO SPIKE UP AGAIN. THERE COULD BE DIFFERENT RISKS THAT THE PORTFOLIO IS VERY EXPOSED TO. THOSE ARE EQUALLY IMPORTANT. WHEN WE SAY DIVERSIFICATION, IT'S MAKING SURE THROUGH DIFFERENT TYPES OF MARKET ENVIRONMENTS THAT YOU HAVE BUILT THE PORTFOLIO TO BE ABLE TO BE STAND DRAWDOWNS. SO IT MIGHT NOT BE FIXED INCOME. THAT IS YOUR BEST DIVERSIFICATION APPROACH THAT YOU'RE THINKING OF. THERE MIGHT BE CERTAIN TYPES OF HEDGE FUNDS THAT YOU WANT TO ALLOCATE TO. BEING THOUGHTFUL ABOUT THAT. THAT'S WHEN WE SAY DIVERSIFICATION. IT'S ABOUT THE TYPES OF STRATEGIES AND ASSET CLASSES YOU'RE INVESTING IN AS WELL AS UNDERLYING STOCKS AND BONDS.
[00:10:19] Speaker 3: WHAT ARE YOUR EXPECTATIONS FOR INFLATION? WE HEARD FROM FED GOVERNOR CHRISTOPHER WALLER EARLIER TODAY SAYING THAT IF WE GET ANOTHER HOT READING ON CORE INFLATION THIS WEEK, THE FOMC WILL NEED TO CONSIDER TIGHTENING MONETARY POLICY IN THE NEAR TERM. REALLY PUTTING THAT RATE HIKE QUESTION BACK FIRMLY INTO THE CONVERSATION. I WONDER IF YOU VIEW THE STAKES AS BEING THAT HIGH AS WE HEAD INTO SOME OF THESE INFLATION READINGS.
[00:10:46] Speaker 5: OUR VIEW WAS THE PROTRACTED STATUS QUO COMING FROM THE FED ABSENT THE ESCALATION IN THE MIDDLE EAST STARTING TO TAKE HOLD AGAIN. INFLATION IS A CONCERN. BUT BACK TO EARNINGS AND WHAT'S DRIVING THIS MARKET, THAT'S WHERE WE THINK THE FOCUS IS. YES, RATES STARTING TO BACK UP IS IMPORTANT AND A MATERIAL SHIFT IN INFLATION EXPECTATIONS COULD BE A CONCERN BUT NOT SHIFTING AT THIS STAGE ON THAT FRONT. IT REALLY IS AROUND EARNINGS AND WHAT WE'RE GOING INTO AND WHETHER AI CAPEX IS GOING TO CONTINUE, WHETHER INPUT COSTS ARE STARTING TO INCREASE. EVEN ARE WE STARTING TO SEE SOME PROFITABILITY IN RI SIGNALS COMING THROUGH AND WHERE THE INVESTMENTS HAPPENING. IN OUR VIEW THAT'S MUCH MORE IMPORTANT THAN THIS NEXT INFLATION READING OR A HIGH THAT COULD HAPPEN AT THE HALF OF THE YEAR.
[00:11:32] Speaker 2: THERE HAS BEEN SOME CONCERNS EVEN AS PEOPLE TRY TO MEASURE THAT ROI, WHETHER IT'S ON THE PRODUCTIVITY SIDE OR WHETHER IT'S ACTUAL TANGIBLE WHATEVER COMING OUT OF DATA CENTERS OR WHATEVER. BUT THE COSTS GOING INTO IT WHICH AS WE KNOW IS EXPONENTIAL, CERTAINLY WHEN IT COMES TO THE DATA CENTER BUILD OUT HERE. DOES THAT WORRY YOU AT ALL THAT MAYBE THERE IS A BIT OF A MISMATCH BETWEEN THE UPFRONT COSTS AND THE POTENTIAL RETURN DOWN THE ROAD? THERE WILL BE WINNERS AND LOSERS.
[00:11:54] Speaker 5: THERE WILL BE AN ACTIVE DECISION AND SOME OF IT WILL BE HOW PEOPLE DECIDE TO INVEST, WHICH MODELS THEY ARE USING, HOW THEY ARE MEASURING THAT ROI. WE SEE IT AT OUR OWN FIRM. I'M HEARING THIS FROM A LOT OF MANAGERS. PEOPLE ARE USING THE MOST EXPENSIVE MODELS TO DO THINGS YOU CAN USE A CHEAP MODEL FOR. BE MORE DISCIPLINED ABOUT HOW PEOPLE ARE ROLLING OUT A.I. AND BE REALISTIC ABOUT HOW LONG IT TAKES TO REALLY GET THAT EMBEDDED IN INSTITUTIONS AND DIFFERENT SECTORS IS IMPORTANT TO KEEP BALANCE WITH.
[00:12:23] Speaker 2: KATE, REALLY WONDERFUL TO HAVE YOU. KATE ELHILLO, PRESIDENT AND CIO OVER AT RUSSELL INVESTMENTS GROUP. KICKING US OFF TO THE CLOSE ON THIS MONDAY AFTERNOON. WHEN WE COME BACK, A CONVERSATION WITH THE CEO OF CHIPOTLE, SCOTT BOATWRIGHT, ABOUT TO GO WHERE CHIPOTLE HAS NEVER GONE BEFORE. THAT CONVERSATION COMING UP AFTER THE BREAK, RIGHT HERE ON BLOOMBERG. SOME BREAKING NEWS. WE'VE LEARNED THAT CHIPOTLE, THE TEX-MEX CHAIN THAT IS PRIMARILY BASED HERE IN THE UNITED STATES, IS SET TO OPEN ITS FIRST LOCATION IN MEXICO LATER THIS WEEK. IT'S A SUBSTANTIAL EXPANSION THAT WILL EVENTUALLY EXTEND TO MEXICO CITY IN 2027. AND IT'S PART OF A BROADER INTERNATIONAL EXPANSION BY RELATIVELY NEW CEO, SCOTT BOATWRIGHT. WE HAD A CHANCE TO SIT DOWN WITH SCOTT A FEW MINUTES AGO. HERE'S WHAT HE HAD TO SAY ABOUT THE OPENING.
[00:13:11] Speaker 6: WE BELIEVE MEXICO IS A REALLY IMPORTANT MILESTONE FOR OUR GREAT BRAND AS WE CONTINUE TO LEAN INTO OUR GLOBAL STRATEGY. IT'S AN IMPORTANT COUNTRY FOR US. WE RECOGNIZE AND ADMIRE THE CULINARY HERITAGE THAT IS A PART OF THE MEXICAN CULTURE. AND WE RESPECT WHAT WE BELIEVE TO BE SOME OF THE BEST FOOD IN THE WORLD. WHAT WE'RE WORKING TO DO IS REALLY TACKLE THIS EMERGING TREND THAT WE SEE AROUND THE GLOBE. WE ALSO SEE IT DOWN IN MEXICO. THIS IDEA AROUND FRESH INGREDIENTS BEING PREPARED SAME DAY FRESHLY IN RESTAURANTS. AND WE BELIEVE WHAT WE DO AND WHAT WE OFFER WILL REALLY RESONATE WITH THE MEXICAN COMMUNITY.
[00:13:50] Speaker 2: I KNOW YOU'VE HAD TO HAVE DONE A LOT OF MARKET RESEARCH AND THERE'S BEEN A LOT OF TALK ABOUT THIS IDEA OF JUST HOW PROLIFIC NOT JUST MEXICAN TAKERIAS ARE, BUT OBVIOUSLY ALL OF THE SORT OF UNAUTHORIZED STANDS, ANYONE WHO'S WALKED AROUND MEXICO CITY, MONTEREY, THESE BIG CITIES, THEY ARE EVERYWHERE. AND I SAW ONE STAT THAT SAID BASICALLY IF YOU LIVE IN AN URBAN AREA IN MEXICO, YOU DON'T HAVE TO GO MORE THAN 200 OR 300 FEET BEFORE YOU FIND A TACO CARD OF SOME KIND OR ANOTHER. HAVE YOU FACTORED THAT INTO YOUR EQUATION THAT YOU'RE NOT JUST COMPETING AGAINST ESTABLISHED CHANGE, BUT BASICALLY THAT MA OR PA, SO TO SPEAK, ON THE STREET, SELLING FOOD FROM THEIR CARDS?
[00:14:28] Speaker 6: YEAH, IT'S A GREAT QUESTION AND WE HAVE. SO WE HAVE PARTNERED WITH WHAT WE BELIEVE TO BE A WORLD-CLASS PARTNER IN ALSEA IN MEXICO WHO HAS BROUGHT OTHER U.S. BRANDS INTO THE COUNTRY AT A VERY SUCCESSFUL PACE OF GROWTH WITH BRANDS LIKE STARBUCKS AND CHEESECAKE FACTORY. AND THEY'VE DONE AN INCREDIBLE JOB. SO WE BELIEVE THE RIGHT PARTNERSHIP, STRENGTH OF THE PARTNERSHIP, AND THE OPPORTUNITY TO GO INTO MONTEREY FIRST AND SHOWCASE THE BRAND IN A REALLY UNIQUE WAY DOWN IN SAN PEDRO IS REALLY STEP ONE. AS WE CONTINUE TO MOVE THROUGH MONTEREY AND OPEN UP AND EXPAND, WE'LL HAVE OUR SITE SET ON MEXICO CITY NEXT. WE BELIEVE WHAT WE OFFER, THE IDEA OF THE BEST INGREDIENTS IN THE WORLD, PREPARED FRESH IN RESTAURANT DAILY, AT AN ABUNDANCE AND VARIETY AND SPEED, WHICH IS UNMATCHED, AT A COMPETITIVE PRICE POINT, WILL RESONATE WELL WITH THE CONSUMERS IN THE MARKET.
[00:15:20] Speaker 3: WELL, SCOTT, AS YOU MENTIONED, YOU ARE STARTING IN MONTEREY, YOU HAVE PLANS TO EXPAND INTO MEXICO CITY A LITTLE BIT LATER IN TERMS OF TIMELINE HERE. TALK TO US ABOUT THAT CADENCE, WHY YOU CHOSE TO START IN MONTEREY, WHAT SORT OF BOXES THAT REGION CHECKED FOR YOU?
[00:15:36] Speaker 6: IF YOU HAVEN'T BEEN TO MONTEREY, IT IS A REALLY BEAUTIFUL CITY, REALLY PROGRESSIVE CITY IN MEXICO. WE LOVE THE TRADE AREA, WE LOVE THE CONSUMER PROFILE IN THAT MARKET SPECIFICALLY. WE PLAN TO EXPAND AT A VERY MEASURED PACE TO SHOW THAT THE BRAND CAN WORK IN REALLY ANY GEOGRAPHY AROUND THE WORLD. WE THINK MONTEREY IS A GREAT STARTING POINT FOR US. WE'LL LAUNCH THE BRAND THERE, MOVE TO A NUMBER OF RESTAURANTS, AND THEN MOVE TO MEXICO CITY WHERE WE THINK WE CAN BE HYPER-SUCCESSFUL IN A REALLY LARGE METRO CITY THAT IS PROBABLY ONE OF THE LARGEST CITIES IN THE WORLD.
[00:16:12] Speaker 3: WELL, AS ROMAINE SORT OF HINTED AT, THERE IS A LITTLE BIT OF IRONY WHEN IT COMES TO THE FACT THAT CHIPOTLE MEXICAN GRILL IS OPENING UP, EXPANDING INTO MEXICO. WITH THAT IN MIND, WHAT CHANGES DO YOU HAVE PLANNED FOR MEXICO? WHEN YOU THINK ABOUT PRICING, YOUR MENUS, POTENTIALLY YOUR INGREDIENTS, WHAT ARE YOU ADAPTING TO MEXICO? WHAT ARE YOU KEEPING THE SAME?
[00:16:34] Speaker 6: YEAH, SO WE PLAN TO USE THE SAME MENU WE HAVE HERE IN THE UNITED STATES IN MEXICO. WE'LL LOCALLY SOURCE AS MUCH OF THE PRODUCT WE BRING OVER THE BORDER TODAY AS IT RELATES TO AVOCADOS AND TOMATOES AND PEPPERS. WE'LL LOCALLY SOURCE THOSE, BUT IT WILL BE THE SAME MENU WE'VE LAUNCHED IN WESTERN EUROPE, THE SAME MENU WE'VE LAUNCHED IN THE MIDDLE EAST WITH OUR PARTNER ALSHAYA. WE HAVE 15 RESTAURANTS OPEN IN THAT REGION TODAY. AND THE BRAND REALLY RESONATES WELL WHEN WE DELIVER ON STANDARD THE SAME EXECUTION AND SAME MENU THAT WE HAVE IN THE UNITED STATES.
[00:17:06] Speaker 2: WITH REGARD TO YOUR PARTNERSHIP WITH ALSEA, I MEAN, THIS IS A LICENSED MODEL. AND I AM CURIOUS THAT GIVEN THAT YOU PRETTY MUCH OWN YOUR STORES HERE IN THE UNITED STATES, HOW DO YOU SORT OF ENSURE THAT QUALITY CONTROL, BOTH ON THE INGREDIENT SIDE, BUT ALSO IN TERMS OF SERVICE, IS GOING TO BE UP TO THE SAME STANDARD THAT ANYONE WOULD EXPECT IN ANY OTHER LOCATION?
[00:17:28] Speaker 6: YEAH, I THINK IT'S REALLY ABOUT WHEN YOU GO INTO A NEW MARKET IS REALLY ASSESSING THE PARTNER QUALITY. WE BELIEVE IN THIS IDEA OF A SLOW MEASURED APPROACH TO GLOBAL EXPANSION. WE'RE NOT OPENING RESTAURANTS AT A FAST PACE JUST FOR THE SAKE OF OPENING RESTAURANTS. WE'RE GOING TO PROTECT THE QUALITY OF OUR GREAT BRAND THROUGH THE STRENGTH OF THE PARTNERSHIP, MANAGEMENT OF THE SUPPLY CHAIN, AND THEN OVERSIGHT ON HOW WE DELIVER THE EXPERIENCE EACH DAY TO EACH COMMUNITY IN WHICH WE SERVE, WHETHER THAT'S IN THE MIDDLE EAST, LATIN AMERICA, AND OR SOUTHEAST ASIA, WHICH WILL OPEN UP LATER THIS YEAR.
[00:18:01] Speaker 2: I'M CURIOUS, HOW FAR DO YOU WANT TO TAKE THIS INTERNATIONAL EXPANSION? OBVIOUSLY, YOU'RE A RELATIVELY MATURE COMPANY, 30-PLUS YEARS OLD, PRIMARILY HERE IN THE U.S. YOU HAVE THE PARTNERSHIP IN THE MIDDLE EAST. YOU REFERENCE A PARTNERSHIP IN SOUTH KOREA, AND NOW IN MEXICO, LATIN AMERICA. IS THIS THE LONGER-TERM GROWTH STORY FOR CHIPOTLE UNDER SCOTT BOATWRIGHT?
[00:18:23] Speaker 6: IT IS. AS WE CONTINUE TO EXPAND IN NORTH AMERICA, WE HAVE A REALLY STRONG BUSINESS MODEL HERE. WE HAVE AN INCREDIBLE TEAM THAT IS OPENING UP RESTAURANTS AT A RECORD PACE. WE'LL OPEN UP IN NORTH AMERICA ALONE THIS YEAR, NORTH OF 350 RESTAURANTS. WE FEEL LIKE WE HAVE A REALLY GOOD FOOTHOLD HERE. WE UNDERSTAND HOW WE DELIVER THE MODEL AND HOW WE DELIVER ON CONSUMER EXPECTATIONS AND PREFERENCES IN A REALLY MEANINGFUL AND UNIQUE WAY. WHAT WE ENDEAVOR TO DO NOW IS BUILD CHIPOTLE TO A GLOBAL ICONIC BRAND IS REALLY SHOWCASE THAT THE BRAND WORKS IN EVERY REGION OF THE WORLD. AT THE HEART OF THE MENU, IT'S REALLY RICE, BEANS, HEAVY PROTEIN AND HEAVY VEG PREPARED FRESH, WHICH WE KNOW IS NOT UNIQUE AROUND THE GLOBE. WE'RE GOING TO SHOWCASE IN A VERY SLOW AND MEASURED WAY THAT WE CAN BE SUCCESSFUL IN EVERY REGION OF THE WORLD.
[00:19:09] Speaker 3: SCOTT, YOU MENTIONED HEAVY VEG AND I WANT TO APOLOGIZE FOR THIS NEXT QUESTION SINCE WE ARE TALKING ABOUT FOOD, BUT WE HAVE TO TALK A LITTLE BIT ABOUT CYCLOSPORIASIS. I HOPE I'M SAYING THAT RIGHT. IT'S THAT PARASITE THAT'S BEEN LINKED TO SEVERE DIARRHEA. WE'VE SEEN OUTBREAKS IN MORE THAN 30 U.S. STATES AND THEY'RE USUALLY LINKED TO BASIL, CILANTRO, LETTUCE, THINGS THAT I'M SURE YOU USE A LOT AT CHIPOTLE. SO WHAT HAVE YOU SEEN? WHAT DO YOU KNOW ABOUT THIS? HAVE YOU SEEN ANY NOTICES FROM YOUR SUPPLIERS OR ANYTHING ALONG THOSE LINES?
[00:19:39] Speaker 6: WELL, FIRST AND FOREMOST, THE CARE AND SAFETY OF OUR TEAM MEMBERS AND OUR GUESTS IS ALWAYS OUR HIGHEST PRIORITY. WE HAVE GONE THROUGH OUR SUPPLY CHAIN INGREDIENTS WITH OUR PARTNERS TO UNDERSTAND IF ANY OF OUR INGREDIENTS HAVE BEEN INDICATED IN THE CYCLOSPORA OUTBREAK AND THEY HAVEN'T TO DATE. WE DON'T EXPECT THAT THEY WILL. BUT WE'LL CONTINUE TO MONITOR OUR SUPPLY CHAIN AND BE HYPERVIGILANT TO ENSURE WE ARE PROTECTING BOTH OUR TEAM MEMBERS AND OUR GUESTS IN OUR FULLEST WAY.
[00:20:07] Speaker 3: AND OUR THANKS AGAIN TO CHIPOTLE CEO SCOTT BOATRIGHT TALKING ABOUT THE CHAINS EXPANSION INTO MEXICO. COMING UP ON THE CLOSE, THE CEO OF MICHAEL, HE JOINS US IN STUDIO TO TALK CRAFTING THE COMPANY'S ONGOING OVERHAUL AND HOW CONSUMER SPENDING TRENDS ARE MOLDING THE OPPORTUNITY SET. THIS IS THE CLOSE ON BLOOMBERG.
[00:20:29] Speaker 2: TIME NOW FOR OUR TOP CALLS TO LOOK AT SOME OF THE BIG MOVERS ON THE BACK OF ANALYSTS RECOMMENDATIONS. WE ARE GOING TO START OFF TODAY WITH AMERICAN EXPRESS. AN UPGRADE OVER AT JP MORGAN ON THE CREDIT CARD COMPANY TO OVERWEIGHT, CALLING AMERICAN EXPRESS REVENUES DEFENSIVE IN NATURE. THE ANALYSTS ALSO HIGHLIGHTING THE POWER OF THE COMPANY'S AFFLUENT CUSTOMER BASE. THE PRICE TARGET GOES TO 400, UP FROM 328. AMERICAN EXPRESS REPORTS EARNINGS NEXT WEEK. THE SHARE IS UP FOR A THIRD STRAIGHT DAY IN A ROW. NEXT UP, LET'S TAKE A LOOK AT DECKERS. JEFFREY IS STEPPING IN, UP ITS RATING ON THE SHOE COMPANY TO BUY. THIS AFTER HAVING A HOLD RATING FOR A MONTH. IT'S CITING THE STRENGTH OF DECKERS HOCA SNEAKER BRAM. THE FIRM NOW EXPECTING THE STOCK TO RUN UP TO 130 A SHARE ENCOURAGED BY RECENT MEETINGS THAT IT'S HAD WITH MANAGEMENT. DECKERS REPORTS EARNINGS NEXT WEEK AS WELL. THOSE SHARES UP FOR A THIRD STRAIGHT DAY INTO THAT PRINT. FINALLY, HUMANA, WELLS FARGO, BOOSTING ITS RATING ON THE HEALTH INSURANCE SOCK TO OVERWEIGHT. THE PRICE TARGET GOES UP TO 502. THE ANALYSTS CITING MODERATING COST TRENDS FOR MEDICARE ADVANTAGE AS A MAJOR RISK REDUCER ON THE EARNINGS FRONT. THOSE SHARES UP ABOUT 4% HERE ON THE DAY. THOSE ARE SOME OF OUR TOP CALLS. OF COURSE, KATIE, THREE BRIGHT SPOTS HERE ON AN OTHERWISE DOWN DAY WITH THE NASDAQ NOW DOWN ABOUT 2% ON THE DAY.
[00:21:48] Speaker 3: ABSOLUTELY, SEEING THAT WEAKNESS COME THROUGH IN BIG TECH, OF COURSE, THAT IS LEADING INTO THE S&P 500 WHICH JUST COMPLETED TWO CONSECUTIVE WEEKS OF GAINS. BUT IT LOOKS LIKE A ROCKY START TO A VERY, VERY BUSY WEEK. COMING UP NEXT ON "THE CLOSE," I'M PLEASED TO SAY WE WILL BE JOINED BY MICHAEL CEO DAVID BOONE JOINING US IN STUDIO TO TALK ABOUT THE COMPANY'S GROWTH OPPORTUNITIES AND WHAT LIES AHEAD FOR SHOPPERS. THAT CONVERSATION UP NEXT. THIS IS "THE CLOSE" ON BLOOMBERG.
[00:22:18] Speaker 2: THIS IS THE COUNTDOWN TO "THE CLOSE." I'M ROMAIN BOSTICK.
[00:22:28] Speaker 3: I'M KATIE GRIEFELD, KEEPING AN EYE ON THESE PUBLIC EQUITY MARKETS, ALSO KEEPING AN EYE ON THE RETAIL LANDSCAPE AND SPECIFICALLY MICHAELS. I'M SURE YOU CAUGHT THAT BLOOMBERG STORY ABOUT HOW APOLLO, OF COURSE, WHICH OWNS MICHAELS, HAS SORT OF HELPED STEER THE CHAIN TO A REALLY UNLIKELY SUCCESS RELATIVE TO MAYBE WHERE THEY WERE ONE, TWO YEARS AGO.
[00:22:50] Speaker 2: YEAH, AND IT'S A GREAT STORY. IT KIND OF GETS TO THIS IDEA OF OBVIOUSLY, YOU KNOW, GOOD MANAGEMENT, BUT ALSO GOOD TIMING, AND THE IDEA THAT A LOT WAS GOING ON IN THAT RETAIL LANDSCAPE THAT HELPED TO AID MICHAELS AS WELL. ALSO WAS KIND OF INTERESTING TOO TO SEE JUST HOW INVOLVED APOLLO WAS, PARTICULARLY WHEN IT LOOKED LIKE THINGS MIGHT HAVE GONE SOUTH WHEN IT CAME TO THE IMPACT OF TARIFFS.
[00:23:10] Speaker 3: YEAH, CERTAINLY YOU THINK ABOUT APRIL, MAY OF 2025, A REALLY TENUOUS TIME ACROSS INDUSTRIES, BUT PARTICULARLY FOR MICHAELS. SO LET'S, OF COURSE, CONTINUE THIS CONVERSATION WITH NONE OTHER THAN THE CEO OF MICHAELS. HIS NAME IS DAVID BOONE. HE'S SITTING NEXT TO US. DAVID, GREAT TO SEE YOU IN STUDIO.
[00:23:29] Speaker 7: GREAT. THANKS FOR HAVING ME.
[00:23:31] Speaker 3: SO YOU TOLD OUR BLOOMBERG NEWS COLLEAGUES THAT MICHAELS HAD THIS REPUTATION FOR BASICALLY BEING YOUR GRANDMOTHER'S STORE. AND ONE OF THE THINGS THAT YOU HAD TO SORT OF ENGINEER WHEN YOU TOOK OVER AS CEO IN FEBRUARY 2025 WAS CHANGING THAT REPUTATION, TRANSFORMING THE BRAND. SO TALK US THROUGH HOW YOU EVEN START GOING ABOUT SOMETHING LIKE THAT.
[00:23:52] Speaker 7: SO IT'S INTERESTING YOU SAY GRANDMOTHER'S STORE. WHAT I WOULD SAY IS MICHAELS IS A BELOVED BRAND. THERE ISN'T A PLACE THAT I DON'T GO, OUR TEAM MEMBERS DON'T GO, AND YOU SAY I WORK FOR MICHAELS, AND PEOPLE DON'T SAY I LOVE IT. WHAT I THINK WAS HAPPENING IS WE WEREN'T REALLY LIVING UP TO OUR PROMISE FROM AN IN-STORE EXPERIENCE POINT OF VIEW, FROM A CATEGORY POINT OF VIEW. SO WE EMBARKED ON REALLY A THREE-POINT PLAN. YOU MENTIONED CHANGES IN THE RETAIL SECTOR. OUR INDUSTRY HAD SOME EXITS, AND SO WE CONSOLIDATED THE SPACE. WE MOVED INTO SOME NEW CATEGORIES. AND NOW WE HAVE BEGUN TRANSFORMING THAT RETAIL EXPERIENCE, CULMINATING IN A WHOLE NEW STORE CONCEPT THAT WE JUST LAUNCHED A FEW WEEKS AGO IN COLUMBUS, OHIO.
[00:24:31] Speaker 3: SO I WANT TO TALK ABOUT SOME OF THOSE EXITS BECAUSE ROMAINE MENTIONED THAT TIMING CERTAINLY PLAYS A ROLE HERE. AND YOU THINK ABOUT HOW YOU EXPANDED AGGRESSIVELY IN BALLOONS WHEN YOU SAW BANKRUPT CITY OR PARTY CITY GO BANKRUPT. YOU ALSO ACQUIRED IP AND BRANDS FROM JOANN AS WELL. THEY FILED FOR CHAPTER 11 A FEW DIFFERENT TIMES. SO I MEAN, WHEN YOU REFLECT ON THAT, HOW MUCH MARKET SHARE DO YOU THINK THAT YOU'VE BEEN ABLE TO TAKE FROM SOME OF YOUR COMPETITORS AND THEIR UNTIMELY DEMISE?
[00:24:58] Speaker 7: SO I THINK ABOUT IT IN A COUPLE WAYS. WITH RESPECT TO JOANN, THAT WAS A BELOVED BRAND WITH A VERY LOYAL CUSTOMER FOLLOWING. SO WE WORKED REALLY HARD AT PACE TO BUILD OUT THESE KNIT AND SEW SHOPS IN 1400 STORES IN SIX MONTHS. REALLY UNHEARD OF PACE IN RETAIL. AND I THINK WE'RE DOING QUITE WELL TAKING SHARE IN THOSE CATEGORIES, PRETTY SIGNIFICANT SHARE. IF YOU THINK ABOUT THE PARTY CITY, THAT WAS MORE OF AN ADJACENT BUSINESS TO US. SO BALLOONS, PARTY SUPPLIES, REASONABLY WELL SERVED MARKET AND PARTY SUPPLIES. WE BUILT THE PARTY SHOP BY MICHAELS IN THAT SIX MONTH PERIOD. I CAN TELL YOU RIGHT NOW, AT LEAST IN BALLOONS, WE HAVE THE MOST ROBUST, COMPELLING OFFERING IN THE COUNTRY, IN NORTH AMERICA, I WOULD SAY. AND WE'RE GROWING QUITE A BIT. SO WE'RE VERY EXCITED BY THAT.
[00:25:41] Speaker 2: I'M CURIOUS ABOUT HOW YOU STRUCTURED THE STORES, AND YOU TALK ABOUT THE NEW CONCEPT, AND MAYBE YOU CAN WALK US THROUGH THAT, BECAUSE THIS ISN'T JUST SO MUCH, OKAY, JUST FIND SOME SHELF SPACE AND PUT THIS STUFF ON THERE. PARTICULARLY, I HAVE PEOPLE IN MY FAMILY THAT WERE REALLY INTO JOANNE, AND THEY WERE ABSOLUTELY DEVASTATED WHEN IT WENT UNDER FOR THE SECOND TIME. BUT IT GETS TO THIS IDEA OF HOW YOU SORT OF CAPTURE THE ETHOS OF WHAT JOANNE WAS INSIDE THE MICHAELS UMBRELLA.
[00:26:06] Speaker 7: A COUPLE OF THINGS. WE ACQUIRED THE IP, AND THERE WERE SOME BRANDS IN THERE, ONE CALLED BIG TWIST IN THE YARN CATEGORY THAT WE IMMEDIATELY LAUNCHED WITHIN SIX MONTHS, BROUGHT THAT PRODUCT OUT. THAT WAS BELOVED. WE THEN EXPANDED FABRIC INTO EVERY STORE IN THE CHAIN. IN FACT, WE'RE NOW IN THE PROCESS OF GOING BACK TO EXISTING STORES AND EXPANDING THE ASSORTMENT. WE LIKELY WON'T HAVE THE SAME LEVEL OF ASSORTMENT IN STORE THAT JOANNE HAD, BUT WHAT WE HAVE DONE IS WE NOW HAVE HUNDREDS OF THOUSANDS OF FABRIC ASSORTMENT ONLINE. AND I WOULD HAZARD A GUESS TO SAY THE BIGGEST ASSORTMENT OF CUT TO ORDER FABRIC ONLINE IN THE INDUSTRY. SO THAT'S HOW WE'RE SERVING THAT CUSTOMER. AND WE BRANDED THESE DEPARTMENTS WITH JOANNE. SO REALLY TRYING TO SERVE THEM HOW THEY -- THE PRODUCTS THEY BOUGHT AT JOANNE'S WHEN THEY WERE THERE.
[00:26:51] Speaker 2: DID MOST OF THAT PRODUCT COME FROM THE ORIGINAL JOANNE VENDORS, OR DID YOU HAVE TO REACH OUT TO NEW VENDORS IN ORDER?
[00:26:57] Speaker 7: A BIT OF BOTH. SO ONE OF THE THINGS THAT WE DID DO IS WE CALLED ALL OF THE VENDORS THAT WERE FORMER JOANNE VENDORS, AND MANY OF THEM WERE SHARED INTO A BIG CONFERENCE AND SAID, LOOK, WE ARE GOING TO STEP INTO THIS SPACE. THESE CUSTOMERS ARE NOT BEING SERVED. HELP US GET PRODUCT AS FAST AS YOU POSSIBLY CAN FROM IN NORTH AMERICA, FROM AROUND THE WORLD, SO WE CAN PUT IT ON SHELF, AND THAT'S WHAT WE DID. AND YOU WERE ABLE TO DO THAT AT A FAVORABLE COST? YES. YEAH.
[00:27:22] Speaker 3: AND SO CLEARLY YOU FOUND AN AUDIENCE HERE, AND OF COURSE YOU HAVE A LOYAL FOLLOWING. BUT I DO WONDER, I MEAN, THINKING ABOUT THE FUTURE AND SORT OF EXPANDING YOUR ADDRESSABLE MARKET FOR A LOT OF SHOPPERS, FOR A LOT OF CONSUMERS, GOING TO AMAZON AND HITTING BUY, I MEAN, THAT IS THE MUSCLE MEMORY. SO HOW DO YOU SORT OF INSULATE MICHAELS FROM THAT? HOW DO YOU AMAZON PROOF YOUR BUSINESS GOING FORWARD?
[00:27:44] Speaker 7: SO ONE OF THE GREAT THINGS ABOUT ARTS AND CRAFTS AND CELEBRATION IS A VERY TACTILE CATEGORY. THE MAJORITY OF OUR SALES COME THROUGH STORES, AND WHAT I CAN TELL YOU IS WE ARE ATTRACTING NEW CUSTOMERS AND NEW TRAFFIC TO OUR STORES. WE'RE ATTRACTING THEM ONLINE AS WELL, BUT WE'RE ALSO ATTRACTING THE STORES. SO HOW DO YOU GO ABOUT IT? ONE IS HAVING A DISTINCTIVE ASSORTMENT. THE MAJORITY OF WHAT WE SELL IS OUR OWN BRAND OR OUR OWN BRANDS. WE HAVE SOME GOOD NATIONAL BRAND PARTNERS. YOU CREATE AN INSPIRATIONAL AND EXPERIENTIAL EXPERIENCE. THINGS LIKE BIRTHDAY PARTIES, EVENTS HAPPENING IN STORE. AND THEN YOU WORK WITH YOUR TEAM. WE HAVE MANY TEAM MEMBERS THAT ARE REALLY DEEP INTO A PARTICULAR CRAFT OR CATEGORY THAT WORK WELL WITH OUR CUSTOMERS WHEN THEY COME INTO THE STORE. SO IT REALLY FAVORS OUR ENVIRONMENT.
[00:28:27] Speaker 3: AND AS WE MENTIONED AT THE TOP, MICHAELS IS OWNED BY APOLLO. THEY BOUGHT YOU FIVE YEARS AGO. SO FIVE YEARS IS TYPICALLY WHEN PE STARTS MAYBE LOOKING FOR AN EXIT. I WONDER IN YOUR SITUATION, WHAT THAT MIGHT LOOK LIKE? WHAT SORT OF TIMELINE MIGHT YOU BE EXPLORING HERE?
[00:28:44] Speaker 7: I WOULD SAY THERE'S NO SPECIFIC TIMELINE. IT'S OBVIOUSLY, AS YOU MENTIONED, BEEN SOMETIMES SINCE APOLLO OWNED THE COMPANY. SO I WOULD IMAGINE THEY WANT TO MAKE A RETURN ON THEIR INVESTMENT. BUT THE MANAGEMENT TEAM IS SQUARELY FOCUSED ON BUILDING THE BUSINESS, SERVING CUSTOMERS, AND WOWING THEM, QUITE FRANKLY.
[00:29:00] Speaker 2: I KNOW YOU'RE A PRIVATE COMPANY, SO WE HAVEN'T SEEN PUBLIC REPORTS FROM MARU, BUT ARE COMP SALES GOING UP? CAN YOU GIVE US A SENSE HERE AS TO WHAT THE TREND IS?
[00:29:09] Speaker 7: SALES ARE GROWING, EARNINGS ARE GROWING, AND WE'RE ATTRACTING MILLIONS OF NEW CUSTOMERS.
[00:29:14] Speaker 2: YOU ARE STILL SITTING ON SOMETHING LIKE FIVE TIMES LEVERAGE BASED ON BLOOMBERG REPORTING. IS THERE A PLAN TO TRY TO REDUCE THE DEBT LOAD AND THE DEBT SERVICING THAT YOU HAVE UNDER YOU BEFORE YOU MAKE WHATEVER NEXT STEP YOU MIGHT MAKE?
[00:29:25] Speaker 7: YOU MAY BE AWARE THAT WE REFINANCED OUR DEBT EARLIER THIS YEAR, SO IT WAS A BIG COMMITMENT BY OUR FINANCIAL PARTNERS AND A BELIEF IN THE COMPANY. AND AS OUR EARNINGS CONTINUE TO GROW, WE'RE ABLE TO PAY DOWN DEBT AND WE'RE ABLE TO REDUCE OUR LEVERAGE RATIO.
[00:29:39] Speaker 2: ARE YOU WORRIED AT ALL ABOUT ANY SORT OF RE-ENTRANCE INTO THIS SPACE THAT COULD BE A COMPETITOR OF SOME TYPE
[00:29:45] Speaker 7: OR ANOTHER? I DON'T, FOR A COUPLE REASONS. ONE, THE FABRIC CRAFT BUSINESS IS VERY UNIQUE. IT'S VERY SKU INTENSIVE, HARD TO SERVE, AND WE HAVE SOME UNIQUE CAPABILITIES THERE. WE PRODUCE 24,000 NEW SKUs A YEAR. WE HAVE THAT CAPABILITY SO THAT'S DIFFICULT TO GET INTO. WITH RESPECT TO PARTY AND BALLOONS, WE'RE AHEAD OF OUR COMPETITORS. WE EXPECT TO STAY AHEAD OF OUR COMPETITORS. AND WE EVEN TALKED ABOUT ONE OF THE BIG TRENDS THAT I THINK FAVORS MICHAELS IS THE ANALOG, WE'RE CALLING IT THE ANALOG REVOLUTION OR ANALOG HOBBIES. THERE IS A BACK TO THE FUTURE, HOWEVER YOU WANT TO DESCRIBE IT, WHERE PEOPLE WANT TO GET OFF SCREENS AND DO TACTILE THINGS WITH THEIR HANDS. THEY WANT TO CELEBRATE TOGETHER. THINGS LIKE ANALOG HOBBIES SEARCHES ON OUR WEBSITE. GIRLS' NIGHT CRAFTS. THESE SEARCHES ARE GOING UP THROUGH THE ROOF. THAT FAVORS A BUSINESS LIKE MICHAELS.
[00:30:34] Speaker 3: YEAH, IT'S PRETTY WILD. IT'S SOMETHING I'VE NOTICED IN MY OWN PERSONAL LIVES. THE UPSWELL OF THESE KNITTING TYPE GROUPS. I DO WANT TO GO BACK TO THE FACT THAT YOU ARE PE OWNED BECAUSE I THINK IT'S REALLY INTERESTING THAT YOU HAVE MANAGED TO EXECUTE THIS TURN AROUND, STILL GAINING TRACTION HERE. AND I WONDER, I MEAN, WHEN YOU REFLECT ON THAT, WHAT HAVE YOU BEEN ABLE TO DO IN HELPING TO PULL THAT OFF AS A PRIVATELY HELD PE-BACKED COMPANY VERSUS BEING A PUBLIC COMPANY AS SOME OF YOUR PEERS HAD
[00:31:02] Speaker 7: BEEN? I'VE BEEN ASKED THAT QUESTION A LOT. AND I THINK THE ANSWER IS WE'VE BEEN ABLE TO WORK AND OPERATE DECISIVELY AND AT SPEED. SO WHEN WE MADE THE DECISION, HEY, WE ARE GOING TO GO AFTER THESE CUSTOMERS, WE ARE GOING TO SERVE THEM, WE ARE GOING TO GO INTO THESE MARKETS, WE ARE GOING TO BUY HUNDREDS OF MILLIONS OF DOLLARS OF INVENTORY TO SUPPORT THEM. WE ARE GOING TO UPDATE OUR STORES. WE HAD A GREAT PARTNER IN APOLLO WHO ALLOWED US TO MAKE THOSE DECISIONS QUICKLY AND TAKE THAT RISK.
[00:31:29] Speaker 2: WE ARE GOING TO HAVE A GREAT PARTNER. I DO WANT TO ASK YOU ABOUT THE REIMAGINED STORES AND THAT CONCEPT. HOW WELL IT IS DOING AND
[00:31:38] Speaker 7: DOES THAT BECOME A TEMPLATE FOR THE OTHER THOUSAND-PLUS STORES GOING FORWARD? WE ARE GOING TO HAVE A GREAT PARTNER. WE ARE GOING TO HAVE A GREAT PARTNER. WE ARE GOING TO HAVE A GREAT PARTNER IN COLUMBUS, OHIO. WE HAVE 10 PLAN FOR THIS YEAR PLUS SOME REMODELS. OUT OF THE GATE, THE CUSTOMER RESPONSE TO THE STORE HAS BEEN TREMENDOUS. WE ARE VERY EXCITED ABOUT WHAT CUSTOMERS ARE SAYING ABOUT IT AND THE SALES GROWTH IN THOSE STORES. WHAT WE WILL DO IS THERE IS WHAT WE ARE DOING IS WE WILL TAKE THE LEARNINGS OF THAT, WHAT REALLY RESONATED WITH CONSUMERS AND THEN ROLL THAT OUT ACROSS THE CHAIN. DOES THAT MEAN YOUR TOTAL FOOTPRINT? TOTAL FOOTPRINT IS GOING TO GROW. WE HAVE BEEN INVESTING IN OUR STORES AND YOU ARE GOING TO CONTINUE TO SEE OUR CAPITAL GO TOWARDS OUR STORE NETWORK. THAT IS SORT OF WHERE I WAS GOING TO GO NEXT.
[00:32:22] Speaker 3: YOU THINK ABOUT THE FACT THAT YOU HAVE BEEN AT THE HELM FOR 16 MONTHS. IT HAS BEEN AN EVENTFUL 16 MONTHS. WHAT DO THE NEXT 16 MONTHS OR SO, WHATEVER TIME FRAME YOU WANT TO PICK, WHAT DO THEY LOOK LIKE? WHAT IS THE PRIORITY?
[00:32:36] Speaker 7: THE PRIORITIES ARE THE FOLLOWING AND IT IS PRETTY STRAIGHTFORWARD. IMPROVE THE RETAIL EXPERIENCE PRIMARILY THROUGH STORES BUT ALSO IMPROVE OUR DIGITAL BUSINESS AS WELL AND OUR INTERACTION WITH CONSUMERS. TRANSFORM OUR MERCHANDISE, OUR CORE MERCHANDISE TO CONTINUE TO INCREASE RELEVANCE. AND THEN SERVICES AND EVENTS ARE A BIG PART OF OUR PROPOSITION. THIS IS KIDS BIRTHDAY PARTIES, FREE KIDS CRAFTING ALL SUMMER. THIS IS TEACHING PEOPLE HOW TO SEW. WE ARE CONTINUING TO BUILD OUT THAT BUSINESS ALL ON TOP OF A BUSINESS THAT IS POWERED BY THIS ANALOG TREND AND OUR ENTRY INTO THESE NEW CATEGORIES.
[00:33:11] Speaker 2: ALL RIGHT. WELL, I CAN DEFINITELY TELL YOU, DAVID, I HAVE A COUPLE OF NIECES UNDER THE AGE OF 11. THEY ARE BOTH BIG NITTERS. YOU ARE DEFINITELY TAPPING INTO SOMETHING. DAVID BOONE, THE CEO OVER AT MICHAELS. WHEN WE COME BACK, WE ARE GOING TO TAKE A LOOK IN AT THOSE OIL PRICES THAT BIG SPIKE UP AND THE
[00:33:30] Speaker 3: STOCK OF THE HOUR BECOMES A SECTOR OF THE HOUR AS WE WATCH OIL PRICES WHICH ARE SHARPLY HIGHER AS PRESIDENT DONALD TRUMP REINSTATES HIS BLOCKADE OF IRANIAN PORTS SAYING THAT ENFORCEMENT WILL BEGIN AT 4:00 P.M. EASTERN TOMORROW, ALSO PLANNING A 20% CHARGE ON ALL OIL PRICES HIGHER BY 9% WHEN YOU TAKE A LOOK AT RENT AND NEW YORK CRUDE AND AS SUCH, ENERGY IS YOUR TOP PERFORMING SECTOR IN THE S&P 500 TODAY. WE KIND OF CAME IN TODAY WITH OIL ALREADY ELEVATED BECAUSE
[00:34:10] Speaker 2: OF WHAT TRANSPIRED OVER THE WEEKEND BUT THEN YOU GOT ALL OF THESE HEADLINES FROM TRUMP AROUND KIND OF 10:20 ISH, 10:30 ISH EASTERN TIME. I DON'T KNOW WHAT TO MAKE OF IT. OBVIOUSLY, A NEW BLOCKADE OF THE STRAIGHT OF HOUR MOVES, BUT ALSO JUST A REMINDER, QUITE FRANKLY, A THIS THING HAS NEVER BEEN RESOLVED. BRENT CRUDE BACK SOLIDLY ABOVE 80 BUCKS A BARREL, WTI AROUND THAT 77, 78 A BARREL NUMBER.
[00:34:36] Speaker 3: YOU SEE THAT RISK PREMIUM BEING REINSERTED BACK INTO OIL IN A BIG WAY. WE HAVEN'T SEEN A MOVE LIKE THIS IN QUITE A BIT.
[00:34:42] Speaker 2: I THINK YOU MENTIONED A LITTLE BIT EARLIER IN ONE OF OUR CONVERSATIONS ABOUT CHRISTOPHER WALLER AND SOME OF HIS COMMENTS AND THE IDEA NOW THAT THE INFLATION STORY AND MORE IMPORTANTLY THE POTENTIAL INCREASE IN FED RATE STORY, THAT ACTUALLY MIGHT BE BACK ON THE TABLE PRIMARILY BECAUSE THIS HASN'T BEEN RESOLVED.
[00:34:56] Speaker 3: ABSOLUTELY AND ALL EYES ON CPI TOMORROW WILL CERTAINLY BE TOP OF MIND BUT COMING UP, IT'S THE CLOSING BELLS. WE'RE GOING TO TAKE YOU THERE NEXT WITH ALLIE McCARTNEY. THIS IS THE CLOSE.
[00:35:10] Speaker 2: WELCOME BACK TO THE CLOSE. I'M ROMAINE BOSTICK. AND I'M KATIE GRIEFELD.
[00:35:17] Speaker 3: OF COURSE WE ARE 10 MINUTES AWAY FROM THOSE CLOSING BELLS. THE S&P 500 NOT QUITE AT SESSION LOWS AS WE COUNTDOWN BUT PRETTY DANG CLOSE. DOWN ABOUT 0.8%. A LOT OF THAT WEAKNESS COMING THROUGH IN BIG TECH AND CERTAINLY AS WE'VE BEEN TALKING ABOUT OIL, THAT RISK PREMIUM BEING PRICED BACK IN. BRENT PRICES HIGHER BY ABOUT 9% AND SELL OFF IN THE BOND MARKET TO BOOT.
[00:35:41] Speaker 2: ABSOLUTELY. YOU HAVE THAT INCREASE IN OIL PRICES, THAT INCREASE IN YIELDS, THAT PUTS A DAMPER ON STOCKS AND IT COMES AHEAD OF WHAT IS ABOUT TO BE AN INCREDIBLY VOLATILE FEW DAYS. THANK YOU FOR JOINING US. WE'VE GOT TO HEAR FROM KEVIN WARSH, WHICH COMES ON THE BACKDROP OF SOME INTERESTING COMMENTS EARLIER TODAY BY FED GOVERNOR CHRISTOPHER WALLER. ALLIE McCARTNEY JOINS US RIGHT NOW, MANAGING DIRECTOR OF WEALTH MANAGEMENT AND PRIVATE WEALTH ADVISOR OVER AT UBS ALIGNMENT PARTNERS. GREAT TO SEE YOU AGAIN, ALLIE. LET'S START OFF FIRST WITH EARNINGS SEASON, BECAUSE ANYTIME WE SORT OF HAD ANY SORT OF TROUBLE IN MARKETS, THERE WAS ALWAYS THIS IDEA THAT EARNINGS GROWTH WAS THERE, EARNINGS GROWTH WOULD CONTINUE TO BE THERE AND IT WOULD BE VERY STRONG. WE START TOMORROW WITH, OF COURSE, THIS FIRE HYDREN OUT OF THE BIG BANKS. BUT AS WE GET DEEPER INTO THE SEASON WITH THE TECH STOCKS AND SOME OF THE OTHERS, ARE YOU STILL OPTIMISTIC THAT THOSE COMPANIES ARE GOING TO DELIVER ON SOME OF THESE EARNINGS EXPECTATIONS?
[00:36:36] Speaker 8: VERY. AND I THINK THAT'S WHY WITH ALL OF THE BACK AND FORTH THAT WE'VE SEEN, YOU STILL SEE THEM SUPPORT IN THIS MARKET. THAT SUPPORT HAS LARGELY BEEN IN SHORT COVERING OVER THE LAST MONTH. BUT WE'RE ABOUT TO START SECOND QUARTER EARNINGS SEASON. THE EXPECTATION IS FOR A 20% INCREASE IN EARNINGS YEAR-ON-YEAR. THAT'S GOING TO BE DRIVEN AS IT HAS BEEN FOR QUARTERS NOW, LARGELY BY TECH TITANS, WHICH ARE GOING TO COME IN JUST SHY OF 50%. BUT YOU STILL HAVE 11 OF THE 12 SECTORS LIKELY TO BE UP. AND THIS IS -- IT'S A HIGH BAR BECAUSE WE'VE BEEN REVISING UP AND UP AND UP. BUT IT REMAINS VERY, VERY CONSISTENT WITH THE MESSAGING THAT WE'VE BEEN PUTTING OUT THERE, AND MANY OTHER BANKS HAVE TOO, WHICH IS THAT THERE IS A SUPPORT LEVEL AND THAT SUPPORT LEVELS AND EARNINGS, AND SO THERE CAN BE VOLATILITY, THERE CAN BE SOME BACK AND FORTH, BUT THAT ULTIMATELY MULTIPLES CAN EXPAND INTO THIS EARNINGS REGIME.
[00:37:36] Speaker 2: THAT GETS TO THIS IDEA OF EARNING SURPRISE. AND IT'S GOING TO BE HARD FOR SOME OF THESE TECH COMPANIES TO SURPRISE, GIVEN HOW HIGH THE EXPECTATIONS. BUT THERE'S BEEN A FEW OTHER STRATEGISTS AND ANALYSTS ON THIS PROGRAM THAT HAVE TALKED ABOUT THIS IDEA OF THE NON-TECH SECTORS, HAVING THE ABILITY TO SURPRISE MORE MEANINGFULLY TO THE UPSIDE. IS THE ECONOMIC BACKDROP, WAS IT THERE LAST QUARTER, MORE IMPORTANTLY, IS IT GOING TO BE THERE GOING FORWARD FOR THEM TO PROVIDE NOT ONLY A SURPRISE ON EARNINGS BUT ON GUIDANCE POTENTIALLY AS WELL?
[00:38:06] Speaker 8: I THINK IT WILL. I THINK IT'S GOING TO BE VERY INTERESTING WHEN YOU, AGAIN, IN THOSE OTHER SECTORS, BECAUSE ULTIMATELY RIGHT NOW WHAT YOU'RE SEEING, AND WHAT WE SAW A LITTLE BIT OF LAST SEASON, TOO, IS THE MARKET IS HYPERFOCUSED ON TRUE REVENUE, PRODUCTIVITY, AND EARNINGS INCREASES BECAUSE OF POSITIVE EFFECTS OF AI, NOT JUST BENDING ON IT. AND SO THERE'S ABSOLUTELY ROOM, I THINK, IN THOSE OTHER SECTORS AND IN INDIVIDUAL STOCKS, SHOULD THEY BE ABLE TO DEMONSTRATE GROWTH AND INCREASE PRODUCTIVITY? NOW, THERE'S GOING TO BE -- IT'S GOING TO BE A LITTLE BIT OF A TAIL OF TWO CITIES, BECAUSE THERE ARE CERTAINLY GOING TO BE A NUMBER OF STOCKS AND COMPANIES THAT ARE GOING TO HAVE TROUBLE BOTH MEETING AND EXTENDING THEIR EARNINGS BASED ON SOME OF THE PULL AWAY THEY SAW FROM GAS AND ENERGY PRICES LAST QUARTER. BUT JUST AS WE EXPECT THIS WEEK TO BE IN THE INFLATION PRINT, I THINK YOU WILL START TO SEE FORWARD GUIDANCE EVEN WITH WHAT WE'RE SEEING NOW WITH RENEWED TENSIONS IN THE STRAIGHT OF RENEWED TENSIONS IN THE STRAIGHT. IT'S GOING TO BE BASICALLY REFLECTING A POSITIVE TREND, A
[00:39:17] Speaker 3: DECREASE IN BOTH SHORT AND LONG-TERM INFLATION. WELL, YOU MENTIONED GAS PRICES AND CERTAINLY THEY WERE A STARRING CHARACTER WHEN IT COMES TO PEPSI'S EARNINGS. I WANT TO TALK A LITTLE BIT ABOUT THE EARNINGS SEASON FOR SOME OF THE MAGNIFICENT SEVEN. WE HAVE A COUPLE OF WEEKS TO GO STILL HERE. WE HAVE TO TALK ABOUT THE REST OF THE MARKET. THE REST OF THE MARKET HAS LAGGED YEAR TO DATE IN A
[00:39:43] Speaker 8: PRETTY MEANINGFUL WAY. AS WE HEAD INTO SOME OF THESE REPORTS, HOW DO YOU THINK THAT WILL CHANGE THE NARRATIVE AND THUS HOW THEY'RE PERFORMING RELATIVE TO THE REST OF THE MARKET? WELL, LOOK, I THINK A LOT OF THIS DEPENDS ON THE SEMANTICS AND ARBITRAINESS OF WHAT YOUR TIME FRAME IS. IF YOU LOOK AT A SERIES OF ROLLING 12-MONTH PERIOD, IF YOU LOOK AT THE MARKET, YOU LOOK AT THE MARKET, YOU LOOK AT THE MARKET, YOU LOOK AT THE MARKET, YOU LOOK AT THE MARKET, YOU LOOK AT THE MARKET BECAUSE THEY ARE ULTIMATELY CREATING EARNINGS. AND SO I THINK FOR THEM, THE COMPS FROM LAST YEAR AND THE BAR IS GETTING HIGHER AND HIGHER, SO 50% EARNINGS GROWTH FROM THOSE MAG-7 STOCKS PLUS THE SEMIS, IT'S NOTHING TO SEE THAT. BUT WHEN YOU HAD 100% OR 150% GROWTH, AND YOU'RE RELATIVELY LOOKING BACK, IT'S LESS EXCITING. I BELIEVE IN THE TRANSFORMATIONAL POWER OF A.I. I BELIEVE IN IT NOT ONLY FOR THE HYPER SCALERS, BUT FOR THE SORT OF ENTIRE CORPORATE S&P 500, DOW JONES KIND OF WORLD. AND I THINK THAT IT'S GOING TO BE SLOWER TO SHOW, BUT THAT WE REALLY EVEN LAST QUARTER, AS I SAID, STARTED TO SEE IT. IT'S GOING TO BE A LAST QUARTER, AND SO YOU ARE STILL SEEING, YOU KNOW, A VERY HIGH CONCENTRATION OF BOTH EARNINGS AND MARKET CAPITALIZATION IN MOST OF OUR INDICES. BUT YOU ARE ALSO SEEING, OR TO THE -- IT CAN BE AND AND NOT BUT, YOU ARE ALSO SEEING AN EARNINGS BROADENING. SO I THINK BOTH CAN BE TRUE GOING FORWARD.
[00:41:06] Speaker 3: WELL, IN ADDITION TO EARNINGS SEASON, UNOFFICIALLY KICKING OFF WITH THE BIG BANKS, WE HAVE A VERY IMPORTANT CPI READING TOMORROW. WE'RE GOING TO HEAR ALSO FROM FED CHAIRMAN KEVIN MORRISH. AND WHEN YOU THINK ABOUT THE BACKDROP RIGHT NOW, YOU HAD FED GOVERNOR CHRISTOPHER WALLER CALLING OUT CORE CPI AS THE FIGURE TO WATCH TOMORROW. WE KNOW THAT BOND TRADERS SEE ABOUT A 50% CHANCE THAT THE FED WILL ACTUALLY HIGH RATES THIS MONTH. AND WHEN YOU THINK ABOUT THE POSSIBILITY OF RATES BEING RAISED HERE, DO YOU THINK THAT'S SOMETHING THAT THE MARKET IS POTENTIALLY PREPARED FOR?
[00:41:41] Speaker 8: FIRST OF ALL, I WILL SAY THAT WE AT UBS DON'T SEE THAT AS THE NEXT MOVE. WE SEE NO MOVEMENTS THIS YEAR AND THEN EASING NEXT YEAR. AND TO ME, THE COMMENTARY THAT WAS RELEASED TODAY MAYBE WAS A LITTLE LESS FAUKISH THAN WHAT WE HEARD AT THE LAST FED MEETING. AND CLEARLY, I THINK IN THE TESTIMONY WE'RE ABOUT TO GET, IT YOU KNOW, IT HAS ALREADY BEEN BROUGHT TO OUR ATTENTION IN MYRIAD FORMATS THAT WORSH IS NOT GOING TO COMMUNICATE AND PROGNOSTICATE AND LET US SEE WHAT'S GOING ON SORT OF UNDER THE KIMONO, THE SAME WAY THAT PAST FED CHAIRS HAVE. AND I ASSUME THAT THIS WILL BE A PAUSE. AND I THINK THAT WHAT WE'RE LIKELY TO SEE IS, YOU KNOW, WORSH MADE VERY CLEAR THAT THE PRIMARY FOCUS OF THE FED IS PRICE STABILITY. WE'RE ABOUT TO GET, I THINK, SOME LEEWAY ON THAT AGAIN, GIVEN THE ENERGY PRICES OF THE LAST, LET'S SAY, MONTH AND A HALF. BUT THAT'S WHAT WE NEED TO FOCUS ON. TO THE EXTENT THAT WE DO HAVE PEAK INFLATION BEHIND US, THEN WHAT YOU ARE GOING TO SEE IS VOLATILITY IN THE INTEREST RATE MARKET, BUT ULTIMATELY, YOU'RE GOING TO SEE A PAUSE THAT ENDS IN EASING NEXT YEAR.
[00:42:58] Speaker 2: ALLIE MCCARTNEY, MANAGER AND DIRECTOR OF WEALTH MANAGEMENT OVER AT UBS ALIGNMENT PARTNERS, COUNTING US DOWN TO THE CLOSING BELL. OUR SIMULCAST STARTS NOW.
[00:43:09] Speaker 1: THE CLOSING BELL, BLOOMBERG'S COMPREHENSIVE CROSS-PLATFORM COVERAGE OF THE U.S. MARKET CLOSE STARTS RIGHT NOW.
[00:43:19] Speaker 2: AND RIGHT NOW, WE ARE TWO MINUTES AWAY FROM THE END OF THE TRADING DAY. ROMAINE BOSTICK ALONGSIDE KATIE GRIFFEL TAKING YOU THROUGH TO THAT CLOSING BELL. IT'S A GLOBAL SIMULCAST. CAROL MASTER AND TIM STONEVIC JOINS US RIGHT NOW. WELCOME TO OUR AUDIENCES ACROSS ALL OF OUR BLOOMBERG PLATFORMS, TELEVISION, RADIO, OUR PARTNERSHIP WITH YOUTUBE AS WE PARSE THE MOST CRUCIAL MOMENTS OF THE DAY. TIM, YOU MISSED A LOT LAST WEEK, BUT DON'T WORRY, WE HAVE ERASED ALL OF THAT HERE TODAY WITH STOCKS DOWN DEEP INTO THE RED.
[00:43:45] Speaker 3: WHAT DID YOU SAY WHEN YOU CAME BACK?
[00:43:47] Speaker 9: WE ARE TALKING ABOUT THE STRAIGHT OF HORMUZE AND OIL AGAIN.
[00:43:50] Speaker 3: TIME IS A FLAT CIRCLE.
[00:43:52] Speaker 9: I DON'T THINK YOU ARE WRONG ABOUT THAT, KATIE. LOOK, THIS WAS SUPPOSED TO BE -- HIGHER OIL PRICES WERE SUPPOSED TO BE IN THE REARVIEW MIRROR. I'M KIND OF JUMPING ON WHAT YOU ARE GOING TO BE TALKING ABOUT, CAROL. WE HAVE RENT UP MORE THAN 9% TODAY. WE HAVE WTI UP 8.8% TODAY. I THOUGHT HIGHER OIL PRICES -- I THOUGHT WE WERE PAST THAT.
[00:44:11] Speaker 10: I THINK ANY GIVEN DAY, INVESTORS LOOK THROUGH IT AND SOMETIMES THEY DO. I'M STARTING TO THINK ABOUT WHAT WE WILL BE FOCUSING ON, ESPECIALLY AS WE GET THAT BIG DROP OF EARNINGS TOMORROW. FIVE BIG BANKS REPORTING THEIR RESULTS. THAT COMMENTARY, KATIE, WILL BE SO IMPORTANT ABOUT THE HEALTH OF THE ECONOMY, THE HEALTH OF LENDING, THE HEALTH OF THE CONSUMER.
[00:44:31] Speaker 3: REALLY AN EMBARRASSMENT OF RICHES WHEN IT COMES TO POTENTIAL CATALYSTS THIS WEEK. YOU MENTIONED BIG BANKS KICKING US OFF EARLY TOMORROW MORNING, THEN WE HAVE CPI. WE ARE ALSO GOING TO HEAR FROM KEVIN WORSH HIMSELF AND FED GOVERNOR CHRISTOPHER WALLER. I FEEL LIKE HE REALLY THREW INFLATION AND THE POSSIBILITY THAT THIS FED IS GOING TO HIGH RATES FIRMLY BACK INTO THE CONVERSATION WHEN HE SAID FOCUS ON CORE CPI.
[00:44:55] Speaker 2: ABSOLUTELY. QUITE FRANKLY, YOU DON'T EVEN NEED TO FOCUS ON THE CORE. YOU CAN PUT ALL THE OIL AND GAS BACK IN THERE GIVEN THE BIG BUMP UP THAT WE SAW TODAY AND WHAT LOOKS LIKE A STILL HEAVILY UNRESOLVED ISSUE WHEN IT COMES TO IRAN. THE STRAIGHT OF HORMOUZ. THE STRAIGHT OF HORMOUZ, MODEST LOSSES FOR THE DOW JONES INDUSTRIAL AVERAGE LOSING ABOUT 138 POINTS OR A QUARTER OF A PERCENT. THE S&P DOWN ABOUT 60 POINTS OR EIGHT-TENDS OF 1%. THE NASDAQ COMPOSITE AND THE NASDAQ 100 TAKING IT THE HARDEST. THE NASDAQ COMPOSITE DOWN ABOUT 1.6%. THE NASDAQ 100 DOWN ABOUT 1.9% WHILE THE RUSSELL 2000 LOSING
[00:45:35] Speaker 10: ROUGHLY 25 POINTS OR EIGHT-TENDS OF 1%. THE NASDAQ COMPOSITE. THE NASDAQ COMPOSITE. THE NASDAQ COMPOSITE DOWN. THE NASDAQ COMPOSITE DOWN. THE NASDAQ COMPOSITE DOWN. THE NASDAQ COMPOSITE DOWN.
[00:45:50] Speaker 9: THE NASDAQ COMPOSITE DOWN.
[00:45:51] Speaker 3: THE NASDAQ COMPOSITE DOWN.
[00:45:53] Speaker 9: THE NASDAQ COMPOSITE DOWN. THE NASDAQ COMPOSITE DOWN. WHAT HAPPENED TO THE SOCKS TODAY? YEAH. BUT YOU KNOW WHAT?
[00:45:59] Speaker 3: STILL UP.
[00:46:00] Speaker 9: KATIE, MORE THAN 65% THIS YEAR.
[00:46:03] Speaker 3: BUT ALL 30 MEMBERS OF THE SOCKS DOWN THEN. THE WHOLE SOCKS FELL 4.8%. IT WAS AN UGLY DAY FOR THOSE CHIPS. AS YOU MENTIONED, COMING OFF SOME PRETTY INCREDIBLE GAINS. LET'S TAKE A LOOK AT THE SECTOR PERFORMANCE TODAY AS MEASURED BY THE CIRCLE. BECAUSE, BOY, WHAT A FANTASTIC DAY FOR ENERGY. THE SECTOR IS DOWN ABOUT 3.2%. BUT THE REASON WHY WE SAW SUCH A BIG DECLINE IS INFORMATION TECHNOLOGY ON THE OTHER SIDE OF THAT. THAT SECTOR DOWN ABOUT 2%. SO CLEARLY, THAT IS THE BIG WEIGHT THAT DRIVED INDEXES DOWN. BUT ALSO A GOOD DAY WHEN IT CAME TO UTILITIES, FINANCIALS, CONSUMER STAPLES. AND THEN ON THE DOWNSIDE, IN ADDITION TO TECHNOLOGY, YOU ALSO HAVE COMMUNICATION SERVICES AND INDUSTRIALS FALL TODAY.
[00:46:43] Speaker 10: CAROL. ALL RIGHT, GUYS. LET'S GO TO SOME OF THE INDIVIDUAL GAINERS. PARAMOUNT SKYDANCE AND WARNER BROTHERS DISCOVERY, BECAUSE YOU DID SEE PARAMOUNT SKYDANCE UP AS MUCH AS 4% IN TODAY'S SESSION, FINISHING THE GAIN -- FINISHING THE DAY, EXCUSE ME, WITH A GAIN OF ABOUT 1.5%. WARNER BROTHERS DISCOVERY WAS UP AS MUCH AS JUST ABOUT 4%. BUT IT TOO FINISHED THE DAY WITH A GAIN OF ABOUT 1.9%. SO OFF ITS HIGHS. BUT NONETHELESS, YOU KNOW THE STORY. WE'VE ALL BEEN TALKING ABOUT A GROUP OF 12 STATES SUING PARAMOUNT SKYDANCE, SEEKING TO BLOCK ITS BID TO BUY WARNER BROTHERS DISCOVERY. THEY ALLEGED THE DEAL WOULD LEAVE VIEWERS WITH HIGHER PRICES AND FEWER CHOICES FOR MOVIES AND TV. SO YEAH, THIS IS GOING BACK AND FORTH. WE DID GET A STATEMENT, TOO, FROM PARAMOUNT. PRETTY BROAD IN GENERAL FROM WHAT OUR -- JENNIFER REE, WHO COVERS ANTITRUST AT OUR BLOOMBERG INTELLIGENCE TEAM. BUT NONETHELESS, BACK AND FORTH AGAIN. AND SO THERE'S GOING TO BE SOME LITIGATION OR WE'LL SEE WHETHER OR NOT THESE GUYS SETTLE. BUT NONETHELESS, WE DID SEE INVESTORS COMING BACK INTO THESE NAMES. AND I FEEL LIKE THE THEME -- I HAVE A THEME OF DEALS. DEALS THAT ARE HAPPENING OR SOME SNAFUS. I WANT TO GO TO MATTEL AND HASBRO. MATTEL SHUT UP TO MORE THAN 7% INTRADAY FINISHING WITH A GAIN OF 3.8%. HASBRO WAS UP ALMOST 3% AT ITS INTRADAY HIGH FINISHING WITH A SEVEN TENS OF A PERCENT GAIN. AND WHAT WE SAW THAT UBS CAME OUT IN A NOTE TODAY SAID THE INVESTMENT CASE IN MATTEL IS NOT JUST ABOUT TOYS BUT ITS PORTFOLIO BRAND EQUITY THAT IS WORTH FAR MORE THAN THE MARKET CURRENTLY ATTRIBUTES TO THE COMPANY. IT SAYS IT OWNS ONE OF THE MOST CONCENTRATED PORTFOLIOS OF EVERGREEN MULTIGENERATIONAL FAMILY ENTERTAINMENT INTELLECTUAL PROPERTY. THEY MAINTAIN THEIR BUY RATING AND A $28 PRICE TARGET BUT ALSO LATE ON FRIDAY EARLY INVESTMENTS JOHN ROGERS SAID AS A PANELIST FOR BARON'S MID-YEAR ROUND TABLE THAT HE RECOMMENDED BUYING MATTEL IN LAST YEAR'S MID-YEAR ROUND TABLE AND RECOMMENDING IT AGAIN SAYING ACTIVIST INVESTORS ARE NOW INVOLVED WITH SOUTHEASTERN ASSET MANAGEMENT HAVING SENT THE COMPANY AN OPEN LETTER IN MAY URGING THEM TO EXPLORE A POSSIBLE SALE TO HASBRO. SO HE IS BASICALLY SAYING GIVEN THE CURRENT REGULATORY ENVIRONMENT THIS WOULD BE THE TIME TO PUT THESE TWO GREAT COMPANIES TOGETHER AND ONE MORE NOT A HOUSEHOLD NAME TICKERS FERGUSON ENTERPRISE UP TWO AND A HALF PERCENT THE COMPANY ROSE AFTER THE PRODUCTS AND SOLUTIONS PROVIDER FOR AREAS INCLUDING PLUMBING HVAC AND APPLIANCES AGREED TO ACQUIRE FWI HOLDINGS FROM WIND CHURCH CAPITAL. SO THE THINKING FROM SOME OF THE COMMUNITY THAT WEIGHED IN THE ANALYSTS IS THAT IT MAY BE BASICALLY KIND OF EXPANDS THEIR MARKET SHARE. SO A LOT OF DEAL FLOW WE ARE FINDING.
[00:49:20] Speaker 9: A LOT OF FOCUS TO YOU ON CHIPS AS I MENTIONED. THE SOCKS FALLING MORE THAN 4% TODAY. I DO WANT TO TALK ABOUT SK HYNICS ADR'S DOWN 9.3% TODAY. SHARES OF SK HYNICS PLUNGED THE RECORD 15% IN SOUTH KOREA. WE SAW THE COST SPEED INDEX DOWN 9% IT TRIGGERED A MARKETWIDE TRADING SUSPENSION. SO WE WANTED TO HIGHLIGHT THIS NEW ADR HERE IN THE U.S. DOWN 9.3%. KENVIEW SHARES ALSO UNDER PRESSURE TODAY DOWN 1.3%. A FEDERAL APPEALS COURT REVIVING LAWSUITS CLAIMING THAT KENVIEW HIT ALLEGED RISKS THAT TYLENOL COULD CAUSE AUTISM IN CHILDREN WHOSE MOTHERS TOOK THE MEDICATION WHILE PREGNANT. THE DECISION ALLOWS THE CASE TO PRECEDE. THE PLAINTIFF'S ATTORNEY SAYS THAT IT'S A VINDICATION FOR SCIENTIFIC EVIDENCE PRESENTED. KENVIEW EMPHASIZED THAT THE RULING DIDN'T ADDRESS THE UNDERLYING FACTS OF THE CASE. KENVIEW DOWN 1.3%. AND THIS WAS AMONG THE WORST PERFORMERS IN THE S&P 500. I'M TALKING ABOUT THE AD TECH COMPANY APP LOVING. CHAIRS FELL 12.7% TODAY. BANK OF AMERICA CITED DATA THAT SAID THAT THE COMPANY'S E-COMMERCE FOOTPRINT IS EXPANDING AT A SLOWER THAN EXPECTED PACE FOLLOWING MAKING THIS NEW PLATFORM AVAILABLE TO EVERYONE THAT IT RELEASED A FEW MONTHS AGO SORT OF THE SOFT LAUNCH BUT NOW IT'S AVAILABLE TO EVERYONE AND ACCORDING TO BANK OF AMERICA THE ROLLOUT IS GOING A LITTLE SLOWER SHARES DOWN 12.7% TODAY.
[00:50:37] Speaker 2: A QUICK LOOK AT YIELDS HIGHER ACROSS THE CURVE PARTICULARLY ON THE SHORTER END WITH THAT SIX BASIS POINT JUMP ON THE TWO-YEAR YIELD PUSHING IT BACK TO THE HIGHEST LEVELS GOING BACK TO 2025. THEY WERE ALREADY ELEVATED COMING INTO THIS SESSION BUT SOME OF THE HAWKISH COMMENTARY WE HEARD A LITTLE BIT EARLIER FROM FED GOVERNOR CHRISTOPHER WALLER CERTAINLY NOT HELPING WHEN IT COMES TO THE SELL-OFF THAT WE SAW WHEN IT COMES TO TREASURY PRICES.
[00:51:01] Speaker 10: ALL RIGHT GUYS TO SOME STORIES ON OUR RADAR. I DON'T KNOW IF YOU SAW IT BUT IT SOUNDS LIKE IT'S GOING TO GET HOTTER AS THE WEEK MOVES ON. A STORY THAT CAUGHT OUR ATTENTION BY OUR SAMANTHA KELLY ABOUT THIS DYSON PORTABLE FAN. I DON'T EVEN -- I HAVEN'T SEEN IT. THE HUSJET MINI COOL PORTABLE FAN. IT'S ABOUT $100. BUT IT'S BEING HARD TO KIND OF GET A HOLD OF SINCE I GUESS IT HAS BECOME IN HIGH DEMAND BECAUSE OF ALL THE HIGH TEMPERATURES THAT ARE OUT THERE. I'VE ACTUALLY NEVER SEEN THIS THING EITHER.
[00:51:25] Speaker 9: I'VE NEVER SEEN IT. APPARENTLY EVERYBODY WANTS TO BUY THESE. THE COMPANY SAYS CONSUMER RECEPTION HAS BEEN INCREDIBLE. AS YOU SAID, CAROL, THE HUSJET MINI COOL HAS A STRONG AIRFLOW, SEVERAL SPEED SETTINGS. IT'S GOT TRADE-OFFS INCLUDING BEING HEAVIER THAN EXPECTED. NOT AS QUIET AS -- THESE THINGS AREN'T QUIET. I SEE THEM EVERYWHERE.
[00:51:43] Speaker 2: THEY'RE NOT QUIET. YOU DEFINITELY HEAR THEM. IT'S LIKE A DATA CENTER HOME.
[00:51:49] Speaker 3: I HAVEN'T SEEN THEM EITHER. THAT CAN BE MISLEADING. I FEEL LIKE I'VE SEEN A LOT OF KNOCK-OFFS POTENTIALLY OF THIS. IT'S JUST A FAN. I FEEL LIKE YOU WALK AROUND ESPECIALLY ON STROLLERS AND YOU SEE A LOT OF THESE HANDHELD FANS.
[00:52:04] Speaker 2: YOU SHOULD GET ONE. NOW WE KNOW WHAT TO GET KATIE FOR HER SHOWER. IF YOU CAN FIND ONE.
[00:52:10] Speaker 3: I DON'T NEED THE HUSJET.
[00:52:12] Speaker 2: ANOTHER STORY I WAS KEEPING AN EYE ON. I KNOW YOU ARE A BIG SPORTS FAN. I DON'T KNOW WHERE YOU WERE. THE SEATTLE SEAHAWKS HAVE AGREED TO A SALE. THERE HAS BEEN A LOT OF SPECULATION AS TO WHO WOULD GET IT AS THE ESTATE OF PAUL ALLEN WAS SEEKING TO UNLOAD IT. THEY DID FOR $9.6 BILLION. HE DIDN'T BELIEVE. HE DIDN'T BELIEVE HE DIDN'T BELIEVE. HE WAS PROBABLY KNOWN FOR THE VENTURE CAPITAL STUFF THAT HE'S BEEN DOING SINCE THE '80s INCLUDING BEING AN EARLY INVESTOR IN DOORDASH AND INSTA-CART AND A BUNCH OF OTHER BIG COMPANIES
[00:52:45] Speaker 3: LIKE THAT WHICH GAVE HIM THE BILLIONS TO BUY THIS COMPANY. ABSOLUTELY. YOU THINK ABOUT WHAT WE ARE TALKING ABOUT HERE. THIS DEAL VALUED AT $9.6 BILLION. I CAN'T ADMIT OR I CAN'T PRETEND THAT I KNOW MUCH ABOUT
[00:52:57] Speaker 2: FOOTBALL BUT I DEFINITELY KNOW THE SEATTLE SEAHAWKS.
[00:52:59] Speaker 3: AMERICAN FOOTBALL.
[00:53:02] Speaker 9: I HAVE NO IDEA WHAT'S GOING ON. WHERE HAVE YOU BEEN, TIM? WHERE WAS I? I WAS WATCHING THE WORLD CUP, OBVIOUSLY. OKAY. BIG SPORTS GUY. AND IN FACT THEY DON'T CALL IT THE SEAHAWKS STADIUM. THEY JUST CALL IT SEATTLE. SEATTLE.
[00:53:14] Speaker 2: THAT'S LIKE NEW YORK AND JERSEY STADIUM. LOS ANGELES STADIUM.
[00:53:17] Speaker 9: YOU CAN'T BUY BRANDING LIKE THAT. VERY CONFUSING. I THOUGHT COSTLA WAS A CALIFORNIA GUY. HE'S GOT HIS ALLEGIANCE. IT'S ON THE SAME COAST.
[00:53:26] Speaker 2: THERE'S ONLY SO MANY TEAMS THAT COME UP TO SALE. LOOK AT THIS GUY, DEBBIE DOWNER. WHERE'S YOUR $9.6 BILLION TO BUY THIS THING? YOU'RE A CALIFORNIA GUY. YEAH, I AM.
[00:53:35] Speaker 9: AND YOU DIDN'T BID? WELL, YOU AND I WERE GOING TO GO IN ON IT. THEY REJECTED OUR MEASLY BID OF $1,600.
[00:53:42] Speaker 10: YOU MIGHT BE ABLE TO BUY ONE OF THOSE FANS IF YOU COULD FIND IT.
[00:53:46] Speaker 2: I'LL GET ONE FOR YOU TOO, CAROL.
[00:53:48] Speaker 10: NOW YOU WON'T. THAT IS A WRAP. OUR CROSS-PLATFORM. IT'S A MONDAY. RADIO, TV, YOUTUBE, BLOOMBERG OR RAGELS. WE CALL IT THE CLOSING BELL. KATIE AND ROMAIN CONTINUING THERE ON TELEVISION, ON THE CLOSE. TIM AND I BACK HERE ON BLOOMBERG BUSINESS WEEK DAILY ON BLOOMBERG RADIO. WE WILL SEE YOU AGAIN SAME TIME, SAME PLACE TOMORROW.
[00:54:08] Speaker 2: AND ANOTHER BIG SELL-OFF IN THE CHIP SECTOR TODAY. WE'RE GOING TO TAKE A DEEPER DIVE INTO EXACTLY WHAT HAS BEEN VEXING INVESTORS. GIL LAURIE, HEAD OF TECHNOLOGY RESEARCH AT DA DAVIDSON. HE JOINS US AFTER THE BREAK, RIGHT HERE ON THE CLOSE, RIGHT HERE ON BLOOMBERG.
[00:54:23] Speaker 1: THE COUNTDOWN IS ON. EVERYTHING YOU NEED TO GET THE EDGE AT THE END OF THE MARKET DAY. THIS IS THE CLOSE.
[00:54:34] Speaker 3: WELCOME BACK TO THE CLOSE. I'M KATIE GRIEFELD.
[00:54:39] Speaker 2: AND I'M ROMAIN BOSTICK. A DOWN DAY TO START THE NEW WEEK. A TON OF CATALYSTS ON TAP AND INVESTORS REALLY TRYING TO FIND A WAY TO ADJUST. THE S&P DID CLOSE DOWN ABOUT 0.8% ON THE DAY, LED LARGELY BY A BIG DROP THAT WE SAW ONCE AGAIN IN THE CHIP SECTOR. THE PHILADELPHIA SEMICONDUCTOR WELCOME BACK TO THE CLOSE. THAT IS THE LARGELY DROPPED SINCE LIKE TWO WEEKS AGO HERE. REALLY A SYMBOL OF THE TYPE OF VOLATILITY THAT WE CONTINUE TO SEE IN THAT SPACE. KEEP AN EYE ON BANK, WHICH WE GET ABOUT FIVE OF THE BIG U.S. BANKS REPORTING EARNINGS ALL WITHIN BASICALLY ABOUT AN HOUR-LONG PERIOD TOMORROW MORNING. THANKS FOR JOINING US. THANKS FOR JOINING US. BRENT CRUDE UP ABOUT 10% ON THE DAY. WHEN THE NEW SESSION OPENS, IT MAY GO HIGHER.
[00:55:31] Speaker 3: A REDHEAD CROSSING THE BLOOMBERG TERMINAL. PRESIDENT TRUMP SAYING THE U.S. PLANS TO HIT IRAN HARD ON THE LARGELY SECTOR TODAY. WE WILL KEEP AN EYE ON THAT. LET'S TALK ABOUT SOME OF THE OTHER MOVERS WHEN IT COMES TO THE INDIVIDUAL STOCK LEVEL. I WANTED TO HIGHLIGHT CHIPOLATE MEXICAN GRILL AS WE DISCUSSED WITH THE CEO. THE RESTAURANT CHAIN EXPANDING INTO MEXICO. THAT IS HAPPENING THIS WEEK. SHARES HIGHER BY ABOUT 4%. ALSO KEEPING A CLOSE EYE ON WHAT IS GOING ON WITH SPACEX. ANOTHER DAY OF DECLINE. SHARES FALLING ABOUT 4.2%. CLOSING JUST ABOUT $139. GETTING CLOSER AND CLOSER TO THAT IPO PRICE OF $135. AND THEN OF COURSE SK HYNIX ADR'S TOP OF MINE AS WELL FALLING ABOUT 9%. AND THAT IS OUR TOP STORY THIS HOUR. AN AI FUEL STOCK ROUTE IN SOUTH KOREA SPILLING OVER INTO U.S. MARKETS. ADR'S OF SK HYNIX FALLING IN ITS SECOND DAY OF TRADING WITH MEMORY AND STORAGE PEERS DROPPING ACROSS THE BOARD. MICRON, SANDIS AND WESTERN DIGITAL ALL IN THE RED EVEN THOUGH YOU HAD A 36% JUMP IN TSMC'S QUARTERLY SALES THAT FAILED TO LIVE SENTIMENT IN THE SPACE. I'M GLAD YOU BROUGHT THAT UP.
[00:56:39] Speaker 2: IT IS SHOWING A BIT OF A DISCONNECT RIGHT NOW BETWEEN WHAT WE ARE SEEING WITH REGARDS TO THOSE FUNDAMENTALS AND WITH REGARDS TO INVESTORS SENTIMENT AROUND THE SPACE. GILL LOREA JOINS US RIGHT NOW, HEAD OF TECHNOLOGY RESEARCH OVER AT DA DAVIDSON. GILL, THAT IS WHERE I WANT TO START. WHEN WE HAD THIS BIG RALLY IN THESE CHIP NAMES OVER THE LAST FEW MONTHS, IT WAS KIND OF THE OPPOSITE EFFECT. YOU HAD THIS EUPHORIC SENTIMENT AND EVERYBODY WAS WONDERING ARE THE FUNDAMENTALS GOING TO MATCH IT. NOW WE ARE GETTING PROOF OF LIFE THAT THE FUNDAMENTALS ARE THERE, BUT EVERYBODY FOR SOME REASON STILL SEEMS TO BE LOOKING FOR THE DOOR. IS THIS JUST PROFIT TAKING OR IS THERE SOMETHING MORE SIGNIFICANT GOING ON WITH REGARDS TO INVESTORS SENTIMENT?
[00:57:17] Speaker 11: THE PROFIT TAKING IS A PART OF IT, BUT INVESTORS JUST OVERALL ARE CONCERNED. THERE IS A NOTION IN A SENSE THAT BECAUSE WE ARE SPENDING SO MUCH, BECAUSE EARNINGS FOR THESE COMPANIES HAVE GONE UP SO MUCH, THAT CAN'T POSSIBLY CONTINUE. AND WE WOULD ARGUE THAT WE ARE SEEING SIGNS THAT THERE IS A LOT OF ACTIVITY, A LOT OF REAL ECONOMIC ACTIVITY HAPPENING AROUND AI. IF YOU ADD UP THE REVENUE RUN RATE FOR OPEN AI AND ANTHROPIC AND MAYBE PIECES OF GOOGLE AND META THAT ARE RELEVANT, XAI THAT ARE RELEVANT, YOU GET TO ABOUT A $100 BILLION REVENUE RUN RATE. THAT NUMBER WAS ZERO TWO YEARS AGO. SO CLEARLY THERE IS REAL ECONOMIC ACTIVITY HAPPENING, WHICH IS TO SAY THE COMPANIES THAT ARE BUYING CHIPS WILL LIKELY CONTINUE TO BUY THEM. AND SPECIFICALLY IN MEMORY, WE ARE NOT MAKING NEARLY ENOUGH CHIPS AND WE WON'T BE MAKING NEARLY ENOUGH CHIPS AT LEAST FOR THE NEXT YEAR OR TWO. SO THE FUNDAMENTALS ARE STILL VERY GOOD. INDICATIONS ARE THAT THEY STAY THAT WAY. BUT INVESTORS THAT HAVE GONE THROUGH THIS LONG RIDE ARE NOT WORRIED THAT MAYBE THE RIDE IS COMING TO A NET.
[00:58:24] Speaker 2: WE ARE NOT WORRIED. WE ARE NOT WORRIED. WE ARE NOT WORRIED. WE GOT THE UPDATE FROM TSMC. WE GET THE FULL EARNINGS REPORT IN A COUPLE OF DAYS. ASML OVER THERE IN EUROPE ALSO SCHEDULED TO SORT OF PUT ITS CARDS ON THE TABLE I BELIEVE ON WEDNESDAY U.S. TIME. IS THERE A SENSE HERE THAT WE CAN EXPECT OUT OF NVIDIA AND QUALCOM AND BROADCOM, ET CETERA?
[00:58:50] Speaker 11: YEAH, ABSOLUTELY. AND THOSE RESULTS ARE VERY GOOD AND CONTINUE TO BE VERY GOOD. IN FACT, AGAIN, ALL SEMIS, ALL THE SEMIS THAT ARE REPORTED ANYTIME RECENTLY HAVE REPORTED ACCELERATING REVENUE GROWE BECAUSE THE PURCHASERS OF COMPUTE, THE AMAZON, MICROSOFT, GOOGLE, META, ET CETERA, ARE BUYING MORE AND MORE. AND THEY'RE LIKELY TO CONTINUE TO SAY THAT. SO IN A COUPLE OF WEEKS, GOOGLE REPORT, MICROSOFT REPORT, WHAT THEY'RE GOING TO PROBABLY SAY IS, LOOK, OUR CAPEX IS PROBABLY GOING TO GO UP NEXT YEAR. IT WON'T GO UP AS MUCH AS IT DID THIS YEAR, BUT IT'S STILL GOING TO GO UP, WHICH IS TO SAY THE DEMAND FOR SEMIS WILL CONTINUE AT LEAST INTO NEXT YEAR. NOW, WHAT HAPPENS AFTER THAT? OBVIOUSLY, THERE'S A BIG DEBATE IN THE MARKET. ARE WE CLOSE TO A PEAK? IS THE PEAK IN 2030? WE SEE THE OPPORTUNITIES IN THE STOCKS THAT ARE PRICED AS IF THE CYCLE IS PEAKING, AND WE THINK THE STOCKS THAT ARE OVERVALUED ARE THE ONES WHERE THERE'S AN ASSUMPTION THAT WITH THE CYCLE PEAKS IN 2030. SO, NVIDIA, MICRON, SK HYNIX ARE PRICED AS IF WE'RE ROLLING OVER IN THE CYCLE. THAT MAKES THEM THE OPPORTUNITY. INTEL, CEREBRUS, A LOT OF THE SEMICAP, OPTICAL, NUCLEAR NAMES ARE TRADING AS IF THE PARTY IS GOING TO GO ON AT LEAST TO 2030. THAT'S WHERE THERE'S MORE RISK.
[01:00:05] Speaker 3: YOU'RE TOUCHING ON SOMETHING THAT I'VE BEEN WONDERING ABOUT. YOU KNOW, ONCE WE ROLL INTO SOME OF THESE REPORTS FROM THE BIG HEAVY WEIGHTS IN THE TECH SPACE, YOU KNOW, AND YOU HEAR IN YOUR EXPECTATION THAT THEY'RE STILL COMMITTED TO THEIR CAPEX PLANS. DO YOU THINK THAT WILL BE ENOUGH TO RESET SENTIMENT? BECAUSE, AGAIN, AS ROMAIN POINTED OUT, AS YOU'VE POINTED OUT, THE FUNDAMENTALS ARE THERE RIGHT NOW. BUT IT'S JUST THE STOCK THAT'S NOT RESPONDING.
[01:00:31] Speaker 11: YEAH, I THINK THEY NEED TO THREAD THE NEEDLE. SO WHAT I WOULD EXPECT, LET'S USE MICROSOFT AS AN EXAMPLE, BECAUSE IT'S THEIR FISCAL YEAR ERA, SO THEY'RE GOING TO GUIDE 12 MONTHS AHEAD ON CAPEX AND REVENUE GROWTH. IF THEY SAY, AZURE IS GOING TO GROW MORE THAN 40%, IT'S GOING TO ACCELERATE, AND CAPEX IS GOING TO DECELERATE, GROW LESS THAN LAST YEAR AND LESS THAN 40%, THAT'S A VERY POSITIVE MESSAGE. THAT MEANS AI IS WORKING, MICROSOFT'S GETTING A RETURN, AND THEY DON'T NEED TO CONTINUE TO ACCELERATE CAPEX IN ORDER TO ACHIEVE THAT. IF THEY CAN DELIVER THAT MESSAGE EFFECTIVELY, IT SHOULD HELP THE ENTIRE AI Sector.
[01:01:10] Speaker 3: WELL, GIL, YOU ALSO MADE THE POINT THAT YOU THINK ABOUT HOW SOME OF THESE NAMES ARE TRADING. THEY'RE ACTING AS IF, YOU KNOW, THINGS ARE ALREADY ROLLING OVER, AND I FEEL LIKE ONE OF THE NARRATIVES THAT'S HAUNTING SOME OF THESE MEMORY STOCK NAMES RIGHT NOW IS THAT MEMORY TYPICALLY HAS BEEN A VERY CYCLICAL INDUSTRY, AND YOU'VE HEARD THAT FROM MAYBE SOME MORE BEARISH COMMENTATORS ON THE STREET. I WONDER WHETHER YOU THINK THAT THE SECTOR OVERALL HAS BEEN ABLE TO ESCAPE SOME OF THOSE PATTERNS THAT IT HAS HISTORICALLY HAD. ALL SEMIS ARE CYCLICAL.
[01:01:43] Speaker 11: BUT I WOULD ARGUE THAT NOW, AS WE SIT HERE TODAY, MEMORY MAY BE THE LEAST CYCLICAL, AT LEAST FOR A COMPANY LIKE MICRON THAT GOT -- THAT WENT UP INTO ITS EARNINGS CALL AND SAID, LOOK, WE SIGNED FIVE-YEAR DEALS. WE EXCHANGED A LITTLE BIT OF THE UPSIDE TO ELIMINATE THE DOWNSIDE. SO ALL SEMIS ARE CYCLICAL. GPU'S ARE CYCLICAL. TPU'S ARE CYCLICAL. CPU'S ARE CYCLICAL. BUT MEMORY IS NOW BEING SOLD IN FIVE-YEAR DEALS. SO IT IS ACTUALLY LESS CYCLICAL THAN ALL THOSE SECTORS. AND YET THE LONG-TERM MEMORY IS PERSISTENT HERE, WHICH IS WHY THESE STOCKS ARE TRADING AT SUCH A DISCOUNT. CPU STOCKS TRADING AT 40 TIMES EARNINGS AND MORE. MEMORY STOCKS TRADING AT 8 TIMES EARNINGS OR LESS. IN SPITE OF THE FACT THAT I WOULD ARGUE CPU'S ARE NOW MORE CYCLICAL THAN MEMORY.
[01:02:33] Speaker 2: WELL, IT GETS TO THIS IDEA, THEN. I MEAN, IF WE ARE SEEING A REAL TRANSFORMATION HERE IN THAT RELATIONSHIP, GILL, DO YOU HAVE CONFIDENCE, THOUGH, THAT THAT IS INDEED -- ARE WE GOING TO BE TALKING ABOUT THIS 10 YEARS FROM NOW IN THE SAME MANNER, MEANING THE IDEA THAT IT IS A BIT MORE OF AN A-CYCLICAL OR LESS CYCLICAL INDUSTRY? OR ARE WE KIND OF DILUTING OURSELVES INTO JUST WHAT IS BASICALLY STILL A CYCLE, JUST A MUCH MORE PROLONGED ONE?
[01:03:00] Speaker 11: YEAH, I'M NOT ARGUING THAT IT IS NOT A CYCLE. THIS IS JUST THE NATURE OF THINGS THAT WHEN YOU BUILD A LOT OF SUPPLY, SOMETIMES YOU BUILD IT AHEAD OF DEMAND. THERE WILL BE A CYCLE AT SOME POINT. IT'S JUST THE LEVEL THAT THE CYCLE IS HAPPENING AT IS MUCH HIGHER. AND AGAIN, FOR A COMPANY LIKE MICRON THAT'S USING ITS CURRENT MARKET POWER TO LOCK IN FIVE-YEAR CONTRACTS AND ELIMINATE THE DOWNSIDE FROM THE CYCLE, THAT'S A MUCH BETTER VIEW. SO THE CYCLE IS AT A MUCH HIGHER LEVEL AND THEY'VE ELIMINATED THE DOWNSIDE. THAT'S WHY WE FIND THEM SO COMPELLING RIGHT NOW. ALL RIGHT, GIL.
[01:03:32] Speaker 3: ALWAYS GREAT TO GET SOME TIME WITH YOU. THAT IS GIL LAUREA. HE IS HEAD OF TECHNOLOGY RESEARCH OVER AT DA DAVIDSON. NOW COMING UP, TIMING THAT IPO WINDOW, WHAT SK HYNIX'S U.S. LISTING TELLS US ABOUT THE POTENTIAL IPOs TO COME. THAT CONVERSATION UP NEXT. THIS IS THE CLOSE ON BLOOMBERG. THE U.S. LISTING OF SK HYNIX FUELING AN ALREADY HOT IPO MARKET WITH MEGA DEALS BOOSTING U.S. VOLUMES PAST 2021 HIGHS. AT THE SAME TIME, COMPANIES WITHDREW OR POSTPONED $2.1 BILLION WORTH OF TRANSACTIONS SINCE THE START OF THE YEAR, RAISING QUESTIONS ABOUT THE TIMING FOR MAJOR LISTINGS STILL IN THE PIPELINE, SUCH AS OPEN AI AND ANTHROPIC. BLOOMBERG'S BAILEY LIPSHOTS JOINS US NOW. BAILEY, I LOVE THAT STAT THAT YOU THINK ABOUT THE $2.1 BILLION WORTH OF POSTPONED OR WITHDRAWN TRANSACTIONS ALL TOGETHER. IT FEELS UNINTUITIVE BECAUSE OVERALL, I MEAN, THE IPO MARKET HAS BEEN RED HOT THIS YEAR.
[01:04:38] Speaker 12: IT HAS, KATIE. BUT WHEN YOU LOOK AT THE DEALS THAT ARE BEING POSTPONED OR WITHDRAWN, THEY'RE IN EUROPE OR THEY'RE EXPOSED TO INDUSTRIES THAT ARE UNDERPERFORMING. WHEN YOU LOOK AT WHAT'S BEEN WORKING HERE IN THE U.S., IT'S BEEN ANYTHING AROUND THE BUILDOUT OF AI, SELLING AI CHIPS OR AT LEAST THE DREAM OF AI A LA SPACEX. SO THE BIG QUESTION FROM A GLOBAL PERSPECTIVE IS WHAT DO INVESTORS WANT? WELL, THEY WANT THEMES THAT ARE WORKING AND THEY PRETTY MUCH WANT TO AVOID ANYTHING THAT'S NOT. IT'S BEEN INTERESTING TO TRACK KNDS OVER IN EUROPE. WHEN THEY POSTPONED THEIR IPO, IF YOU GO BACK A FEW MONTHS, IT SEEMS LIKE DEFENSE, ANY DEAL COULD GET DONE. BUT THAT'S NO LONGER THE CASE. THAT'S JUST HOW QUICKLY THESE MARKETS CAN SHIFT.
[01:05:17] Speaker 2: I'M CURIOUS ALSO, TOO, JUST ABOUT THE IDEA, BAILEY, OF SOME OF THESE COMPANIES, SOME OF THE NON-U.S. COMPANIES LOOKING TOWARDS THE U.S. OBVIOUSLY, WE TALKED ABOUT THE ADR'S OF SK HINEX, BUT ALSO BENDING SPOONS COMING HERE TO THE U.S. IS THE IDEA THAT IF YOU HAVE THAT NARRATIVE AND THAT STORY, YOU'RE GOING TO END UP NOT JUST COMING INTO THAT IPO MARKET, BUT YOU'RE GOING TO MAKE SURE THAT IT'S HERE IN THE UNITED STATES.
[01:05:41] Speaker 12: AND, ROMAIN, YOU'RE GOING TO BENEFIT FROM AT LEAST THE BANKER PITCHES, DEEPER MARKETS, MARKETS THAT ARE MORE THAN HAPPY TO GIVE YOU A PREMIUM VALUATION THAN YOUR LIKELY LOCAL LISTING. AND TO THAT POINT, IT BECOMES A QUESTION OF CAN YOU SELL A STORY THAT U.S. INVESTORS BUY, ESPECIALLY RETAIL INVESTORS BUY, AND HOLD ON TO. THE BIG QUESTION COMING INTO THIS HINEX IPO WAS COULD THEY MAINTAIN NOT ONLY A PREMIUM, BUT COULD THEY EXPAND THAT. THE PREMIUM IS SITTING PRETTY DARN GOOD RELATIVE TO THOSE KOREAN SHARES. IT'S JUST THE UNDERLYING INHERENT VOLATILITY WHEN YOU LOOK AT SK HYNIX, WHICH IS A TRILLION-DOLLAR COMPANY THAT TRADES IN ASIA WHERE WE'VE SEEN STOMACH CHURNING VOLATILITY FOR A NUMBER OF WEEKS AT THIS POINT.
[01:06:19] Speaker 3: WELL, WHEN IT COMES TO SK HYNIX, THIS IS SOMETHING WE WERE TALKING ABOUT LAST WEEK, OF COURSE. YOU KNOW, THE IDEA OF WHETHER OR NOT THIS WOULD ATTRACT MORE OF THESE FOREIGN COMPANIES TO COME TO THE U.S. AND LIST OR IS SK HYNIX SUCH A DIFFERENT SITUATION, SUCH A SHINY OBJECT AT THIS POINT, GIVEN THAT THEY ARE AT THE CENTER OF THE MARKET MANIA THAT MAYBE YOU CAN'T EXTRAPOLATE OUT FROM IT.
[01:06:41] Speaker 12: IT DEPENDS, KATIE, TO YOUR POINT WHAT BOX YOU FIT INTO. KYOSHIA, WHICH IS A JAPANESE SEMICONDUCTOR COMPANY, HAS BEEN VOCAL ABOUT PLANS TO LIST ADR'S HERE IN THE U.S. IN THE FIRST HALF OF NEXT YEAR. THAT'S SPOT ON TO THE THEME OF THE AI BUILD OUT IN SEMICONDUCTORS. IF YOU'RE A SIMILAR COMPANY AND YOUR BUSINESS LOOKS A LOT LIKE THAT, A LA SAMSUNG ELECTRONICS, WHO BANKERS, AS FAR AS I KNOW, HAVE BEEN TRYING TO STEER TOWARDS THE U.S. BUT MANAGEMENT HASN'T WANTED TO, THAT'S PERFECT. AND THAT'S A STORY THAT IN THIS POINT IN TIME, THE U.S. MARKET WOULD WILLINGLY PAY UP FOR. BENDING SPOONS, INTERESTINGLY ENOUGH, KIND OF FITS INSIGHTLY DIFFERENT BUCKET, YOU KNOW, KIND OF THAT V.C. ROLL-UP MODEL, AOL, AND A NUMBER OF OTHER APPS THAT PEOPLE WOULDN'T EXPECT TO BE EXECUTABLE, BUT THEY ARE DOING THAT BECAUSE THE UTILIZATION OR AT LEAST THE PITCH OF A.I. AND STREAMLINING THAT MARGIN STORY.
[01:07:31] Speaker 2: ALL RIGHT, BILLY. ALWAYS APPRECIATE IT. BILLY LIPSHULTZ THERE. A CLOSER LOOK HERE AT THE IPO PIPELINE, JUST HOW PACKED IT IS AND WHETHER IT ALL FINALLY COMES OUT. NOW WHEN WE COME BACK, A CONVERSATION WITH THE CEO OF NEW MOUNTAIN CAPITAL, STEVE KLINSKI, WHO SAYS IT'S A GREAT TIME FOR BUYING ACROSS PRIVATE MARKETS. THAT CONVERSATION COMING UP NEXT RIGHT HERE ON BLOOMBERG. WE TALK A LOT ABOUT PRIVATE MARKETS ON THIS SHOW. DEPENDING ON THE DAY, YOU CAN SAY THINGS ARE DOING GOOD OR YOU CAN SAY THINGS ARE DOING BAD. A LOT OF MIXED SIGNALS BEING FLASHED. BLOOMBERG INTELLIGENCE NOTING THAT FUNDRAISING MOMENTUM, WELL, THAT IS ON THE UPSIDE. IT OVERCAME REDEMPTION CONCERNS IN THE FIRST HALF OF THE YEAR. HOWEVER, LENDING ACTIVITY DOES REMAIN SUBDUED. DATA FROM REUTERS AND PITCH BOOKS SHOWING U.S. DIRECT LENDING VOLUME ACTUALLY FALLING 50% QUARTER OVER QUARTER. JOINING US RIGHT NOW TO TALK A LITTLE BIT MORE ABOUT THE STATE OF PRIVATE MARKETS IS STEVE KLINSKI, FOUNDER AND CEO OF ALTERNATIVE INVESTMENT FIRM NEW MOUNTAIN CAPITAL. GREAT TO SEE YOU HERE, STEVE. THANKS FOR HAVING ME ON THE SHOW. LET'S FIRST START OFF WITH THE REDEMPTION REQUEST AND THE IDEA THAT AT LEAST BASED ON THE DATA WE'VE SEEN, THIS DIDN'T SEEM TO FUNDRAISING. IF YOU ARE ONE OF THE LARGER PRIVATE CREDIT FIRMS OUT THERE,
[01:08:54] Speaker 13: ARE YOU SEEING SIMILAR APPETITE OUT THERE FOR INVESTORS TO COME INTO THIS SPACE? THE REDEMPTION REQUEST WERE IN CREDIT AND THEY WERE ON THE RETAIL SIDE. I THINK WHAT YOU ARE SEEING ARE THE SMARTER INSTITUTIONAL INVESTORS ARE GOING MORE INTO CREDIT TO TAKE ADVANTAGE OF THE LOW PRICES. I THINK THERE'S A BIG BACKLOG OF COMPANIES WAITING TO BE SOLD, SO YOU ARE LIKELY TO SEE A PICKUP OF BOTH LOAN ACTIVITY AND EXIT ACTIVITY IN THE COMING MONTHS.
[01:09:17] Speaker 2: WHEN YOU LOOK AT THE REDEMPTION REQUEST, YOU SAID THAT WAS PRIMARILY A FUNCTION OF WHAT WE SAW ON THE INDIVIDUAL INVESTORS SIDE, THE IDEA THAT MAYBE SOME OF THE NATURE OF THESE FUNDS WASN'T NECESSARILY PITCHED IN THE RIGHT WAY OR THE INVESTORS DIDN'T UNDERSTAND THEM. YOU DID NOT SEE, OR AT LEAST IN YOUR VIEW, YOU DID NOT SEE ANY REAL CONCERN AMONGST THE LARGER INSTITUTIONS THEMSELVES.
[01:09:38] Speaker 13: I THINK THINGS HAVE TRADED DOWN AND I THINK IT'S OVERSOLD. I THINK THERE WAS A JUSTIFICATION FOR SOME DECLINE IN VALUATIONS, BUT I THINK THE MARKET'S OVERSHOT AND I THINK SOME INSTITUTIONS HAVE ALSO DECIDED THAT THE MARKET OVERSHOT TO THE NEGATIVE SIDE.
[01:09:53] Speaker 3: IT'S INTERESTING, WHEN YOU THINK ABOUT THE MOST RECENT QUARTERLY REDEMPTION REQUESTS THAT WE SAW, BROADLY ACROSS THE INDUSTRY, THEY PICKED UP FROM THE PRIOR QUARTER. I WONDER IF YOU HAVE ANY CONCERNS ABOUT INDUSTRYWIDE, WHERE THAT LEAVES THE QUALITY OF THOSE PORTFOLIOS ON THE HEELS OF THOSE REDEMPTION REQUESTS. IF YOU'RE SELLING ASSETS TO GET CASH TO GIVE BACK TO INVESTORS, I HAVE TO IMAGINE IT'S THE MORE LIQUID, POTENTIALLY BETTER QUALITY STUFF THAT'S GOING FIRST.
[01:10:22] Speaker 13: YEAH, I MEAN, IN MY OWN EXPERIENCE, FIRST OF ALL, WE DIDN'T HAVE ANY EXCESSIVE REDEMPTION REQUESTS IN OUR OWN FUNDS, BUT I CAN'T REALLY SPEAK TO WHAT'S INSIDE OTHER PEOPLE'S FUNDS. BUT I THINK THE SASPOCALYPSE IS, YOU KNOW, WELL OVERSTATED, AND I THINK THINGS -- IT'S JUST A PENDULUM. I THINK ALSO, IF YOU'RE DOING REDEMPTIONS, LET'S SAY YOU WANT A PIECE OF YOUR FUND OUT, YOU MAY MAKE A BIGGER REDEMPTION THINKING YOU'RE GOING TO BE SCALED BACK. SO THE REDEMPTIONS MAY BE OVERSTATING BECAUSE PEOPLE DON'T EXPECT TO NECESSARILY GET 100% OF THE REDEMPTION.
[01:10:50] Speaker 3: IT'S A FAIR POINT, YOU KNOW, TRYING TO SORT OF GAME THAT. SO YOU DO GET WHAT YOU WANT HERE. BUT LET'S COMPARE AND CONTRAST. BECAUSE YOU MENTIONED, YOU KNOW, YOU THINK ABOUT PRIVATE CREDIT, SEEMS OVERSOLD RIGHT NOW. SOME OF THAT SASPOCALYPSE DOOM MONGERING, WHATEVER YOU WANT TO CALL IT, MAYBE A LITTLE BIT OVERBLOWN. BUT WHEN IT COMES TO PE, IT'S A DIFFERENT PICTURE HERE. AND YOU SEE THE DEAL FLOW PICKING UP. I MEAN, WHAT ABOUT THIS ENVIRONMENT SORT OF LENS ITSELF TO THAT? AND WHEN DO YOU THINK THAT MATERIALIZES INTO MORE
[01:11:19] Speaker 13: MEANINGFUL EXITS? YEAH. WELL, FOR MY OWN FIRM, WE'VE HAD FIVE EXITS ALREADY THIS YEAR. WE'VE GOT $4.5 BILLION GOING BACK. AND WE'VE HAD FIVE OR SIX STEADY YEARS OF WAY MORE MONEY GOING BACK THAN WE DRAW DOWN. SO I THINK, REMEMBER, THERE'S 5,000 FIRMS. SO IT'S HARD TO MAKE ANY GENERAL STATEMENT ABOUT ALL PRIVATE EQUITY. BUT I THINK WE'RE IN A SITUATION WHERE COMPANIES ARE -- YOU KNOW, WE'VE HAD THE IRAN WAR. WE HAVE OTHER THINGS THAT HAVE DELAYED PEOPLE'S TIMING. BUT THERE'S SOME GOOD PURCHASES OUT BEING MADE. WE'VE ALSO BOUGHT A BUNCH OF COMPANIES THIS YEAR. AND I THINK IT'S ACTUALLY A GOOD TIME TO BE BUYING COMPANIES. WHENEVER YOU HAVE BAD NEWS, IT'S USUALLY A GOOD TIME TO BE GOING IN WITH FRESH MONEY ON BUYS OR IF CREDIT GOES TOO FAR LOW. IT'S A GOOD TIME TO COME IN AND BUY CREDIT.
[01:12:03] Speaker 3: WELL, TO THE POINT THAT YOU MADE THAT YOU THINK THINGS MAYBE LOOK A LITTLE BIT OVERSOLD WHEN IT COMES TO THE PRIVATE CREDIT SIDE OF THINGS, ARE YOU SEEING ANY DISCOUNTS WHEN IT COMES TO PE, ESPECIALLY WHEN YOU THINK ABOUT THE SOFTWARE SPACE? YEAH.
[01:12:16] Speaker 13: WHAT YOU'RE SEEING, WHAT WE'RE SEEING IS, YOU KNOW, ON OUR EXITS, IF YOU HAVE A COMPANY IN A CLEARLY GREAT SPACE, LIKE WE SOLD A COMPANY THAT IS ENGINEERING THE GROWTH OF THE POWER GRID OR THE WATER GRID. THOSE TYPE OF BUSINESSES ARE HOLDING VERY GOOD VALUE. I THINK FOR THE AVERAGE BUSINESS THAT, YOU KNOW, MULTIPLE MIGHT BE A POINT OR TWO LOWER THAN THEY USED TO BE AT THE HEIGHT. AND I THINK WHERE THERE WERE, THERE MIGHT HAVE BEEN OVERPAYMENT, WAS BACK IN '21, SOME SOFTWARE COMPANIES WERE BOUGHT. SO YOU MIGHT HAVE A BAD VINTAGE FOR SOFTWARE COMPANIES IN 2021. BUT THAT IS LIKE A BAD CROP IN AGRICULTURE. DOESN'T MEAN THAT FARMING DOESN'T MAKE SENSE AS A PRACTICE. SO I THINK IT WAS REALLY OVERPAYMENTS IN '21 ON SOME SOFTWARE COMPANIES.
[01:12:57] Speaker 2: I AM CURIOUS WITH SOME OF THE EXITS HERE. I MEAN, SOME OF THAT GOES INTO CONTINUATION VEHICLES. ARE SOME OF THOSE ALSO GOING TO THE SPONSORS AS WELL? YEAH.
[01:13:05] Speaker 13: WE'VE BEEN SELLING TO SPONSORS. WE'VE BEEN SELLING TO STRATEGICS. AND WE ARE A BIG BELIEVER IN TROPHY ASSET CONTINUATION VEHICLES AS AN IMPORTANT EVOLUTION IN PRIVATE EQUITY. AND WE'VE DONE SOME OF THOSE OURSELVES.
[01:13:16] Speaker 2: JUST THE STRUCTURE OF THESE, PARTICULARLY ON THE CONTINUATION SIDE. PEOPLE ARE COMFORTABLE WITH IT BECAUSE THERE ARE SOME PEOPLE THAT WILL LOOK AT, OKAY, WELL, IF WE HAVE THESE CONTINUATION VEHICLES, YOU HAVE THE GP BASICALLY SITTING ON EFFECTIVELY BOTH SIDES OF THE ASSETS GETTING ADDITIONAL CARRY ON SOMETHING THAT TRADITIONALLY WOULD HAVE ACTUALLY BEEN CARRYED OUT, SO TO SPEAK.
[01:13:34] Speaker 13: WELL, THE WAY I VIEW IT IS IT'S -- I'VE BEEN DOING PRIVATE SINCE 1981. I THINK IT'S ONE OF THE MOST IMPORTANT EVOLUTIONS IN THE SPACE THAT IF OUT OF ONE OF EVERY 10 OR 15 COMPANIES YOU HAVE A TRULY GREAT COMPANY, YOU'VE WORKED ON IT FOR FIVE YEARS, YOU'VE DOUBLED OR TRIPLE THE VALUE. YOU THINK YOU CAN DOUBLE OR TRIPLE AGAIN. ONE OF THE CRITICISMS OF PRIVATE EQUITIES, WHY DO THEY ALWAYS SELL OUT OF THESE COMPANIES SO SOON? IT'S BECAUSE THAT WAS THE ONLY WAY YOU COULD BEHAVE. NOW IT'S BEEN ESTABLISHED THAT IF YOU HAVE A GREAT COMPANY, YOU CAN KEEP IT GOING LONGER. AND THE INVESTORS CAN GET OUT WHO WANT TO GET OUT AND OTHERS CAN COME IN WHO WANT TO COME IN. SO IT'S JUST AN EXTRA CHOICE FOR THE LPs. THEY DON'T HAVE TO GET OUT.
[01:14:10] Speaker 2: I'M INTERESTED, AS PEOPLE STAY LONGER IN SOME OF THESE COMPANIES, A LITTLE BIT EARLIER, I KNOW YOU'RE NOT INVOLVED IN THIS, WE WERE SPEAKING WITH THE CEO OF MICHAELS AND THE IDEA OF THIS PRIVATE EQUITY BACKED BY APOLLO, AND IT'S HAD A PRETTY GOOD TURN AROUND. AND OBVIOUSLY THERE'S A LOT OF SPECULATION. THEY'VE HELD IT FOR FIVE YEARS. WHY DIDN'T IT GET OUT? BUT THERE'S ALSO THIS IDEA OF DO YOU JUST WANT TO MANAGE IT LONGER? I'M CURIOUS IF THERE IS AN INCENTIVE, PARTICULARLY IF THINGS ARE GOING WELL, THAT WOULD YOU HAVE AN INCENTIVE TO MANAGE THESE THINGS LONGER, EVEN IF THERE IS MAYBE A CLEAR EXIT POINT?
[01:14:42] Speaker 13: WELL, I THINK WE AND THE L.P.S. BOTH HAVE AN INCENTIVE TO STAY LONGER. IT'S LIKE IF YOU'RE A FISHERMAN AND YOU FISH 10 FISHING HOLES AND YOU FOUND A GREAT ONE AND THINGS ARE GOING WONDERFULLY AND YOU CAN SEE A GREAT FUTURE, YOU DON'T WANT TO JUST LEAVE BECAUSE TIME HAS RUN OUT. SO IT'S NOT FOR YOUR WORST COMPANIES, IT SHOULD BE FOR THE COMPANY THAT YOU HAVE THE CLEAREST FUTURE. BUT JUST TO SELL IT TO ANOTHER PRIVATE EQUITY FUND SO THEY GET ALL THE GAIN, LEAVES YOUR L.P.S. HIGH AND DRY. ON THE OTHER HAND, YOU DON'T WANT TO FORCE THEM TO STAY FOR TEN YEARS. SO I THINK IT'S A PRETTY SOLOMOTIC CHOICE. IF YOU WANT TO EXIT, EXIT. IF YOU WANT TO STAY, STAY. AND THE G.P. IS SHOWING THEIR OWN CONFIDENCE BY STAYING.
[01:15:17] Speaker 3: AND SO WHEN IT COMES TO CONTINUATION VEHICLES, I MEAN, STEVE, YOU MAKE A GREAT POINT THAT IF YOU'VE WORKED ON THIS COMPANY FOR FIVE YEARS, YOU DON'T WANT TO JUST DO AWAY WITH IT BECAUSE THE TIME RAN OUT. BUT EVEN STILL, I MEAN, CONTINUATION VEHICLES, THEY DO HAVE THIS REPUTATION OF, YOU KNOW, IT'S WHEN PE SORT OF IS SHUFFLING AROUND BAD ASSETS AND ET CETERA. THE SEC, BLOOMBERG REPORTED, IS ACTUALLY PROBING SOME OF THE CONTINUATION VEHICLES OUT THERE. WE REPORTED THIS IN LATE JUNE. AND I WONDER, YOU KNOW, IN YOUR VIEW, WHETHER YOU THINK THAT IS HAPPENING ON AN INDUSTRY-WIDE SCALE, NOT NECESSARILY AT YOUR OWN SHOP, BUT IS ANY OF THAT REPUTATION DESERVED?
[01:15:56] Speaker 13: I MEAN, I THINK THAT'S A VERY UNFAIR WAY TO THINK ABOUT IT OR PRESENT IT. I THINK, AGAIN, THE WAY I'VE TALKED ABOUT ON SINGLE ASSETS, AGAIN, ONE OUT OF EVERY 10 OR 15 COMPANIES WHERE YOU'VE SPENT FIVE YEARS WORKING IT, YOU'VE PUT THE RIGHT MANAGEMENT IN, YOU'VE GOT THE STRATEGY RIGHT, YOU HAVE A CLEAR PATH FOR THE FUTURE. YOU KNOW, PE USED TO BE CRITICIZED FOR BEING SHORT-TERM. WHY DON'T THEY HOLD THINGS LONGER THAN FIVE YEARS EVER? AND NOW THAT WE ARE, PEOPLE SAY, WHY DO THEY HOLD IT LONGER FOR FIVE YEARS? SO, I THINK IF YOU DO IT FOR THE RIGHT REASONS, IT MAKES -- IT'S A VERY GOOD THING FOR EVERYBODY.
[01:16:27] Speaker 3: AND IT'S A GOOD PERSPECTIVE HOW THE PENDULUM SWINGS THERE IN TERMS OF HOW YOU CAN BE CRITICIZED. BUT LET'S TALK A LITTLE BIT ABOUT WHERE YOU ARE STAYING AWAY FROM. WHEN YOU THINK ABOUT THE SECTOR LEVEL, THE INDUSTRY LEVEL, I MEAN, WHAT DOES IT MAKE SENSE RIGHT NOW? YEAH.
[01:16:43] Speaker 13: NEW MOUNTAIN ITSELF HAS ALWAYS HAD TWO IDEAS, DEFENSIVE GROWTH AND BUSINESS BUILDING. AND ONE OF THE GREAT LUXURYS OF PRIVATE EQUITY, YOU DON'T HAVE TO INHERIT YOUR GRANDFATHER'S IRON FOUNDERY AND TURN IT AROUND. YOU CAN ALWAYS SAY AT THIS POINT IN TIME, WHAT'S THE RIGHT SPACE FOR THE NEXT FIVE OR TEN YEARS? SO WE NOW HAVE 12 SECTORS STAKED OUT WITH 25 SUBSECTORS. WE'VE BEEN DOING A LOT IN INFRASTRUCTURE SERVICES, BUILDING OUT THE POWER GRID, THE WATER GRID, GEO SPACIAL, THOSE TYPE OF THINGS. WE'RE DOING A LOT IN ACCOUNTING FIRMS WE THINK ARE GREAT DIVERSIFIED BUSINESSES AND THAT AI IS ACTUALLY GOING TO HELP THEM, NOT HURT THEM. WE DO A LOT IN MUST HAVE DATA. SO WE'VE ALWAYS STAYED AWAY FROM, YOU KNOW, CYCLICAL HOUSING, FROM FASHION, FROM RESTAURANT CONCEPTS, FROM OIL PRICE LINKED COMPANIES. SO WE'VE ALWAYS HAD DEFENSIVE GROWTH BUT WE SLOWLY EVOVED THE LIST OVER TIME.
[01:17:31] Speaker 2: I'M TOLD THAT EVERY YEAR AT START OF THE YEAR YOU AND YOUR TEAM KIND OF SIT DOWN AND REALLY KIND OF GO OVER SECTOR SELECTION. BASED ON THE CONVERSATION YOU HAD AT THE START OF THIS YEAR WHENEVER THAT MEETING WAS, HOW THINGS HAVE PLAYED OUT SO FAR THROUGH THE FIRST SIX, SEVEN MONTHS OF THE YEAR. HAS IT BEEN RELATIVELY IN LINE WITH WHAT YOU GUYS WERE DEBATING BACK THEN?
[01:17:48] Speaker 13: YEAH, YOU CAN SEE WE BOUGHT THREE INFRASERVICES COMPANIES THIS YEAR. YEAH. AND WE'VE BEEN SELLING GREAT INFRASTRUCTURE SERVICE COMPANIES FROM OUR LAST FUND TO HARVEST WITHIN THE FIVE-YEAR PERIOD.
[01:18:00] Speaker ?: RIGHT.
[01:18:00] Speaker 13: AND THEN GOING BACK IN SO WE CAN STAY IN THE SPACE AND BUILD
[01:18:03] Speaker ?: IT AGAIN.
[01:18:03] Speaker 13: THERE'S ACTUALLY NINE NICHES WITHIN INFRASTRUCTURE. SO WE'VE BEEN DOING THOSE. BUT LIKE I ALSO SAY, WE OWN GRANT THORNTON ACCOUNTING FIRM. WE OWN BIG DATA COMPANIES. SO THOSE THEMES ARE PLAYING OUT, WE BELIEVE VERY WELL FOR US.
[01:18:15] Speaker 2: YOU KIND OF ALLUDED TO HOW LONG YOU'VE BEEN DOING THIS. YOU STARTED GOLDMAN'S PE BUSINESS BACK IN 1981. BEFORE BRANCHING OUT ON YOUR OWN WITH A NEW MOUNTAIN. WHAT'S CHANGED IN THE PE WORLD IN A SIGNIFICANT WAY FROM THE 80s TO WHERE WE ARE TODAY IN 2026?
[01:18:33] Speaker 13: I THINK A LOT HAS CHANGED. I THINK IT'S CHANGED FOR THE BETTER. AND I'VE ALSO BEEN CHAIR OF THE INDUSTRY OF THE AMERICAN INVESTMENT CONSUL AND I SAY PRIVATE EQUITY HAS GONE FROM A FORM OF FINANCE INTO A FORM OF BUSINESS. BACK IN 81, WE WERE IN STAGFLATION. THE TENURE TREASURE WAS 15.84%. THE STOCK WAS ABOUT SIX TIMES PE. AND IT REALLY WAS ABOUT FOUR INVESTMENT BANKERS IN A ROOM BORROWING AS MUCH MONEY AS WE HUMANLY COULD. AND WITH 95 PARTS DEBT AND FIVE PARTS EQUITY AND 10% INFLATION, YOU COULD TRIPLE YOUR MONEY IN A YEAR WITH NO GROWTH. SO THAT'S WHERE PRIVATE EQUITY STARTED. NOW IT IS A FORM OF BUSINESS. I HAVE 300 PEOPLE AT MY FIRM. WE EMPLOY 133,000 PEOPLE AT THE COMPANIES THAT WE OWN. WE WOULD BE 52 IN THE FORTUNE 500. AND IT IS HAVING A TEAM OF PEOPLE, NOT ME, BUILDING BUSINESS AFTER BUSINESS. IT IS EVERY ASPECT OF BUSINESS BUILDING. AND THAT IS WHAT GOOD PRIVATE EQUITY SHOULD BE. AND IF YOU HAVE A GREAT COMPANY SPENT FIVE YEARS BUILDING IT, YOU MAY WANT TO KEEP BUILDING IT BECAUSE YOU HAVE GREAT PLANS FOR IT. IT IS FUNNY.
[01:19:31] Speaker 2: YOU MENTIONED THE 15, 16% INTEREST RATES. SO PEOPLE ASK YOU NOW ABOUT THE FED FUNDS RATE GOING FROM 4.5. DO YOU JUST CHUCKLE? I DO, ACTUALLY.
[01:19:40] Speaker 13: THE HIGHEST INTEREST RATE -- I STARTED OCTOBER 181. THE HIGHEST INTEREST RATES IN HISTORY WERE THE DAY BEFORE I STARTED WORK. SO WHEN IT GOES BACK UP TO 4%, I GO, OH, THIS IS NOT -- THE WORLD IS OVER. AND 25 BASIS POINTS. DOES YOUR WHOLE INDUSTRY CHANGE BECAUSE OF 25 BASIS POINTS? NOT REALLY. AND ACTUALLY WHEN RATES ARE HIGH, YOUR PURCHASE PRICES ARE LOWER, YOU GET BETTER BUYS. SO WE ARE ALWAYS BUYING AND SELLING. SO IT IS A PRETTY NORMAL ENVIRONMENT IF YOU LOOK AT HISTORICAL AVERAGES.
[01:20:05] Speaker 3: WELL, STEVE, REALLY ENJOYED THIS CONVERSATION. GREAT TO GET YOUR PERSPECTIVE. THAT IS STEVE KLINSKI. HE IS THE FOUNDER AND THE CEO OF NEW MOUNTAIN CAPITOL. MEANWHILE, A QUICK LOOK ON WHERE WE CLOSED OUT ON THE DAY. ON THIS MONDAY, NOT TOO PRETTY. THE S&P 500 DOWN ABOUT 0.8%. YOU CAN SEE A LOT OF THAT PAIN WAS COMING THROUGH WHEN IT COMES TO THE CHIPMAKERS DOWN BY 4.8% ON YOUR PHILADELPHIA SEMICONDUCTOR INDEX. THE KBW BANK INDEX, SOMETHING TO WATCH AS WE START OFF A WAVE OF BANK EARNINGS TOMORROW. AND BRENT CRUDE, NOW HIGHER BY ABOUT 10%. THIS IS THE CLOSE ON BLOOMBERG. INVESTORS BRACING FOR A BANK BONANZA, THE LARGEST U.S. BANK SET TO REPORT THIS WEEK WITH J.P. MORGAN, CITY, WELLS FARGO, BANK OF AMERICA AND GOLDMAN SOX RESULTS ALL DUE TOMORROW. THE LARGEST LENDERS EXPECTED TO SHOW THEIR SECOND BEST STOCK TRADING REVENUE EVER. MIKE MAYO, HE IS HEAD OF U.S. LARGE CAP BANK RESEARCH OVER AT WELLS FARGO. HE JOINS US NOW ON SET. FIRST OFF, MIKE, IT'S GREAT TO SEE YOU.
[01:21:11] Speaker 14: THANKS FOR HAVING ME.
[01:21:12] Speaker 3: SO IT'S A LITTLE BIT OF AN UNUSUAL SITUATION TO HAVE FIVE OF THE SIX BIGGEST BANKS REPORTING ALL WITHIN A SPAN OF A COUPLE OF HOURS OF EACH OTHER. AND BEFORE WE GET INTO THE SPECIFIC NAMES, WE JUST LOVE TO HEAR OVERALL WHAT IS YOUR EXPECTATION FOR WALL STREET THIS QUARTER? BECAUSE CONSENSUS ON THE STREET SEEMS TO SAY THAT TRADING LOOKS PARTICULARLY BRIGHT.
[01:21:33] Speaker 14: I WOULD SAY OVERALL EARNINGS LOOK VERY GOOD. I LOOK FOR EARNINGS TO BE UP 15 TO 20% YEAR-OVER-YEAR. IF I HAD A TAG LINE, IT WOULD BE BANKS AND BARBELLS. AND BARBELLS FOR STRENGTH. BUT IT'S NOT JUST OVERALL STRENGTH AND EARNINGS AND REVENUES AND EFFICIENCY. IT'S A COMBINATION ON ONE PART OF THE BARBELL IS WALL STREET WHERE WE THINK THE INDUSTRY IS POISED TO HAVE RECORD REVENUES THIS YEAR FOR A VARIETY OF REASONS. CERTAINLY FIXED INCOME TRADING, EQUITY TRADING. NOW YOU'RE SEEING IPOs AND ACCELERATION OF MERGERS. BUT ALSO MAIN STREET. AND I THINK THAT'S THE NEWER EMERGING STORY WITH THIS ACCELERATION IN MIDDLE AMERICA COMMERCIAL LOAN GROWTH. SO SOME OF THAT MIGHT BE TRICKLED DOWN FROM AI. BUT ALSO COMPANIES ARE SAYING ENOUGH WAITING. THE GEOPOLITICAL SITUATION IS THE NEW NORMAL. LET'S BUILD THAT NEW FACTORY. LET'S BUILD THAT NEW PLANT. LET'S HAVE CAPITAL EXPENDITURES. I THINK YOU'RE GOING TO SEE THAT IN THE COMMERCIAL LOAN GROWTH AT THE LARGEST BANKS AND THEN THE REGIONAL BANKS WHEN THEY REPORT TO SO THE TWO PARTS OF THE BARBELL WALL STREET AND MAIN STREET. AND I THINK THAT'S A VERY GOOD SETUP.
[01:22:44] Speaker 3: SO BANKS AND BARBELLS. I MEAN, WHEN YOU THINK ABOUT SORT OF THE SETUP HERE AND THEN YOU GO THROUGH YOUR ROSTER OF COVERAGE, WHICH BANK, IF YOU HAD TO PINPOINT ONE OF THEM, ARE YOU MOST INTERESTED TO HEAR FROM AT THIS JUNCTURE?
[01:22:56] Speaker 14: WELL, JP MORGAN IS THE BIGGEST BANK. THEY'RE FIRST. WE HAVE JAMIE DIMON, WHO IS A GENERATIONAL CEO. AND HE JUST LOST THE PERSON I THOUGHT WAS GOING TO BE HIS SUCCESSOR. SO THIS IS THE FIRST EARNINGS CALL, I BELIEVE, WHEN WE HAVE SOMEBODY NEW WHO WILL BE OVERSEEING THE CONSUMER BUSINESS. SO I WANT TO HEAR HIS TAKE ON THE ECONOMY, THE FINANCIAL SYSTEM, THE COMPETITION, AND THEIR POSITIONING SPECIFICALLY AS RELATES TO THE CONSUMER, NOW THAT THEY'VE SHUFFLED MANAGEMENT AROUND A LITTLE BIT. BUT HE'S ALWAYS VERY AUTHENTIC ABOUT WHAT HE THINKS. HE'S VERY INDEPENDENT. AND SO WILL IT BE THE SKY IS FALLING OR THINGS ARE OKAY? SO THAT'S ALWAYS A BIG QUESTION WHEN IT COMES TO JAMIE DIMON AND JP MORGAN'S EARNINGS. BUT I DO THINK THEIR EARNINGS WILL BE QUITE STRONG TOMORROW.
[01:23:47] Speaker 2: I AM CURIOUS, TOO, ABOUT THE STOCK. AND IT'S DONE RELATIVELY WELL. BUT IS THAT ALSO THE DIMON PREMIUM? AND WHAT DOES THAT PREMIUM OR LACK THERE OF LOOK LIKE IF HE'S NOT THERE?
[01:23:58] Speaker 14: WELL, THE STOCK HAS UNDERPERFORMED THIS YEAR. OVER THE LAST THREE, FOUR YEARS, IT'S BEEN FANTASTIC. AND UNDER JAMIE DIMON, SINCE HE BECAME CEO, IT'S BEST IN CLASS. BUT THIS YEAR THINGS HAVE SLOWED DOWN BECAUSE THEY ARE SPENDING MORE THAN THEY ARE GENERATING REVENUES. AND THIS IS SIMPLY A TIMING MISMATCH. THEY INVEST FOR THE THREE TO FIVE YEAR HORIZON. AND SO YOU HAVE CONFIDENCE IN THEM BEING THE GROWTH STOCK AMONG BANKS. BUT THERE IS A JAMIE DIMON PREMIUM. I THINK THE BOTTOM LINE WITH THE EGGS OF MARIANNE LAKE IS THAT INVESTORS WANT JAMIE DIMON TO STAY. I THINK HE WILL PROBABLY STAY ANOTHER THREE YEARS. INVESTORS DID NOT WANT MARIANNE LAKE TO LEAVE. SHE WAS THE EX-HEAD OF CONSUMER. BUT IF THAT'S THE PRICE TO PAY, THAT'S THE PRICE YOU PAY.
[01:24:40] Speaker 2: TALK TO ME A LITTLE BIT ABOUT CITIGROUP. I WAS JUST READING A GREAT STORY TODAY IN THE FINANCIAL TIMES ABOUT A LOT OF THE CHANGES THAT JANE FRASER HAS MADE SINCE TAKING OVER. IN YOUR VIEW, HAVE THOSE CHANGES BEEN FOR THE BETTER? DO YOU LOOK AT CITIGROUP AS A LONG-TERM GROWTH STORY? COME ON.
[01:24:56] Speaker 14: IT'S BEEN MY NUMBER ONE PICK FOR THE LAST TWO YEARS. AND AS YOU KNOW, I HAD THE BIG CELL RATING ON IT BACK IN THE FINANCIAL CRISIS. AND I TESTIFIED TO CONGRESS PARTLY ABOUT CITIGROUP. CITIGROUP SO OVER THREE DECADES. I SAY CITIGROUP IS UNDERGOING A MULTI-DECADE CULTURAL TRANSFORMATION. AND CULTURAL CHANGES TAKE TIME. IT CAN TAKE FIVE TO TEN YEARS. BUT JANE FRASER HAS PUT THIS COMPANY ON THE RIGHT TRAJECTORY NOW. THEY'VE CHANGED FROM 50 YEARS OF A GLOBAL MATRIX STRUCTURE TO FIVE LINES OF BUSINESS. SO IT'S EASY TO TALK ABOUT IT NOW. I APPRECIATE IT BY PAYMENTS, BANKING, MARKETS, CARDS, AND
[01:25:36] Speaker ?: WEALTH.
[01:25:36] Speaker 14: THAT'S IT. AND THERE'S A CEO FOR EACH ONE OF THOSE FIVE LINES OF BUSINESSES WITH TARGETED RETURNS AND CEOs THAT ARE RESPONSIBLE FOR ACHIEVING THOSE RETURNS. AND THERE'S NOWHERE TO HIDE. THOSE FIVE CEOs REPORT DIRECTLY TO JANE FRASER. THERE'S NONE OF THESE CO-PRESIDENTS OR DUAL HEADS OR ANYTHING LIKE THAT. AND THAT IS NIGHT AND DAY DIFFERENT FROM CITIGROUP OF THE PAST. AND, FRANKLY, IT'S BETTER THAN SOME OF THEIR PEERS, TOO. YEAH, ABSOLUTELY.
[01:25:59] Speaker 3: AND WE'RE SEEING THAT CO-STRUCTURE REALLY EMERGE AT A LOT OF THE OTHER PLACES. I KNOW THAT GOLDMAN IS PARTICULARLY FOND OF IT. I DO WANT TO TALK ABOUT THE OTHER END OF THE BARBELL. BECAUSE WE'RE TALKING ABOUT WALL STREET, OF COURSE. BUT WHEN YOU THINK ABOUT THE REGIONALS, AND WE HAVE A LITTLE BIT TO WAIT HERE, HOW ARE YOU EXPECTING SOME OF THOSE SMALLER SIZE, THOSE MID-SIZED BANKS TO PERFORM?
[01:26:19] Speaker 14: WELL, THE STARS OF THIS QUARTER WILL BE, YOU KNOW, GOLIATHS IS WINNING THE LARGEST BANK, THAT'S BEEN OUR THEME. SO THAT'S GOING TO BE THE BIG FIVE THAT REPORTED. YOU'RE GOING TO SEE SOME STRONG RESULTS. CITIGROUP, JAPE MORGAN, BANK AMERICA, ESPECIALLY GOLDMAN SACHS, MORGAN STANLEY. SO THEY'RE GOING TO BE THE STANDOUPS. BUT, YOU KNOW, SURPRISE, NOT SURPRISE, REGIONAL BANKS HAVE SOME CAPITAL MARKETS ALSO. THEY BENEFIT FROM RECORD HIGH STOCK MARKETS. THEY'RE GOING TO DO QUITE WELL. BUT ALSO THAT COMMERCIAL LOAN GROWTH COMING BACK. AND IT'S BEEN A LONG WAY, DECADE TO DATE, COMMERCIAL LOANS, THE TRADITIONAL COMMERCIAL LOANS. I'M NOT TALKING ABOUT HYPER SCALERS OR DATA CENTERS OR THE AI STUFF. I'M TALKING ABOUT PLAN OLD MIDDLE AMERICA COMMERCIAL BORROWING. I THINK THIS IS AN INFLECTION POINT. AND I THINK THE REGION BANKS WILL BE TALKING A LOT MORE ABOUT THAT. AND I'LL BE DIGGING INTO THAT. WHAT REGIONS, WHAT INDUSTRIES, HOW SUSTAINABLE. I THINK THIS IS QUITE SUSTAINABLE FOR THE NEXT FEW YEARS. SO I'M RINGING THE BELL ON TRADITIONAL COMMERCIAL LOAN GROWTH COMING BACK. AND THAT SHOULD HELP THE REGIONALS DISPROPORTIONATELY MORE.
[01:27:22] Speaker 2: ONLY HAVE ABOUT 30 SECONDS LEFT. IS THERE ANYTHING THAT COULD SURPRISE YOU THIS EARNINGS SEASON OUT OF THE BANKS?
[01:27:28] Speaker 14: I WOULD SAY -- AND THAT'S ONE OF THE QUESTIONS, YOU KNOW, LIKE GOLDMAN AND MORGAN STANLEY, WHAT CAN MAKE THOSE STOCKS GO EVEN HIGHER? ABSENT -- IF THEY CONDUCTED -- IF THOSE TWO FIRMS CONDUCTED DUE DILIGENCE FOR THE BIG IPO AND ACTUALLY WENT TO MARS AND FOUND GOLD, THEN MAYBE THAT WOULD BE EXTRA UPSIDE. BUT NO, IF THE SPONSORS CAME BACK WITH MORE ACTIVITY, WE'VE BEEN WAITING FOR THAT FOR A WHILE. OR IF THERE'S ANY CREDIT ISSUES, THE TALK OF COCKROACHES, JAMIE DIAMOND'S TERM FOR CREDIT LOSSES, WE HAVEN'T SEEN THAT FOR A COUPLE OF QUARTERS. IF THAT WERE TO COME BACK, THE MARKET IS NOT PRICED FOR THAT.
[01:28:02] Speaker 2: MIKE MAYO, ONE OF THE BEST ON THE STREET, HEAD OF U.S. LARGE CAP BANK RESEARCH OVER AT WELLS FARGO. WHEN WE COME BACK, WE'RE GOING TO SET YOU UP FOR WHAT TO WATCH OVER THE NEXT 24 HOURS RIGHT HERE ON BLOOMBERG. HERE'S WHAT THE MARKETS ARE GOING TO HAVE THEIR EYES ON OVER THE NEXT 24 HOURS. WHAT TO WATCH INCLUDES THOSE EARNINGS OUT OF FIVE OF THE SIX BIGGEST BANKS IN THE U.S., INCLUDING J.P. MORGAN, CITIGROUP, GOLDMAN SACHS, BANK OF AMERICA, AND WELLS FARGO.
[01:28:32] Speaker 3: AND THEN THE GOOD TIMES ROLL ON BECAUSE 8:30 A.M. EASTERN, WE'RE GOING TO GET THAT U.S. CPI PRINT. A LOT OF FOCUS ON THAT REPORT, OF COURSE, ALWAYS. BUT ALSO AFTER THOSE COMMENTS FROM FED GOVERNOR CHRIS WALLER TAKING A LOOK AT CORE CPI.
[01:28:46] Speaker 2: IT COMES AGAINST AN INTERESTING BACKDROP BECAUSE OF COURSE ALL OF THOSE EARNINGS FROM THE BANKS AND THAT CPI DATA WILL COME RIGHT OUT BEFORE NEW FED CHAIR KEVIN WASH TESTIFIES BEFORE CONGRESS FOR THE FIRST TIME, THIS TIME BEFORE THE HOUSE FINANCIAL SERVICES COMMITTEE, THE OLD HUMFREY HUNKINS TESTIMONY.
[01:29:03] Speaker 3: LOOKING FORWARD TO COMMENTS FROM THE CHAIRMAN. WE'LL ALSO HEAR FROM BAR, GOOLSBY, COOK, AND BOWMAN IN TERMS OF THE FED SPEAK.
[01:29:11] Speaker ?: AND THEN 3:00 P.M., IT'S THE CLOSE. BUT IT'S ALSO --
[01:29:11] Speaker 2: THE CLOSE, THAT'S IT. THERE'S NOTHING ELSE GOING ON AT 3:00 P.M. TOMORROW.
[01:29:15] Speaker 3: I HEARD THERE'S ALSO FRANCE VERSUS SPAIN, BUT WHO'S WATCHING THAT?
[01:29:18] Speaker 2: ALL RIGHT. WELL, I TELL YOU WHAT, FOLKS. BET ON THE CLOSE. WE'LL BE BACK TOMORROW RIGHT HERE ON BLOOMBERG.