00:00ROMAINE: A SOUR START TO THE WEEK, FLIPPING TO A SOARING FINISH ON THIS FRIDAY AFTERNOON OVER 4000 ON THE S & P 500. ROMAINE BOSTICK ALONGSIDE KRITI CUBA -- GUPTA. KRITI: IT IS A BEND TO THE BOND MARKET. THERE IS A LOT GOING ON WHEN YOU LOOK AT THE ECO-DATA AND WHAT IS GETTING REPRICED FROM THE FEDERAL RESERVE. ROMAINE: WE TALK ABOUT THAT BIG JUMP UP IN TREASURY YIELDS THIS WEEK. WE ARE GETTING A FALL IN THOSE HEELS. I DO NOT KNOW IF THAT WAS THE PESSIMISM WE HAD AT THE START OF THE WEEK, PEOPLE THOUGHT IT WAS TOO MUCH. KRITI: MAYBE TIME TO BUY AND REVERSING THE TRADE. YOU CANNOT THROW OUT EARNINGS AND THAT. A LOT OF THE TECH OUTPERFORMANCE COMING FROM BROADCOM, ANY OTHER AI NAMES THAT ARE FUELING THAT BEND. ROMAINE: YOU ARE GETTING BIG CAP TECHNIQUES -- TECH NAMES HELPING KEEP THEM AFLOAT. IT CONTINUES TO SHOW A RESILIENT ECONOMY, INCLUDING THE LATEST ISM SERVICES DATA. IT WAS NOT A BIG JUMP, BUT HOLDING 55 AND CHANGE SHOWING DEMAND FOR SERVICES REMAINS. KRITI: JANUARY WAS WRITTEN OFF AS A FLUKE NUMBER, A SEASONABLE NUMBER. TWO DATA POINTS IN A ROW, IS THAT ENOUGH TO SATE SERVICES ARE COMING BACK IN A NO LANDING SCENARIO? ROMAINE: BLOOMBERG INTELLIGENCE SAYING THIS MAY BE TEMPORARY AND WE SHOULD NOT BE GETTING TOO COMFORTABLE WITH THESE NUMBERS. WE DID GET EARNINGS OUT OF HPE AND OTHER BIG I.T. AND SOFTWARE COMPANIES. CORPORATE SPENDING IS HOLDING UP. WE WILL HEAR FROM THE CEO LATER. KRITI: PERHAPS HOLDING UP BUT NOT HAVING THE SAME MOMENTUM IN THE LAST TWO YEARS, THE BACKLOG HOLDING A COMPANY LIKE BROADCOM AND HPE AFLOAT. ROMAINE: WE HAVE TO TALK ABOUT THIS IDEA OF THE FOCUS ON CHINA. THAT WAS A CATALYST FOR THE GLOBAL RALLY THIS YEAR. THE REOPENING OF CHINA, THEY SEEM TO HAVE GOTTEN THERE MOJO BACK. A CONGRESS MEETING STARTING THIS WEEKEND. XI JINPING COMPLETELY REMAKING THAT PROLETARIAT AND THAT IMAGE, PROBABLY FOR THE FIRST TIME. KRITI: LET'S CONNECT THOSE TWO REGIONS TO THE CORPORATE STORY IN THE UNITED STATES. A LOT OF THAT EXPOSURE, THINK TECH NAMES, RETAIL NAMES, AND A LOT OF THE AMERICAN TRAIT AND GERMAN ARE GOING TO HAVE DIRECT EFFECTS FROM WHAT WE HEAR OVER THE WEEKEND. ROMAINE: WE WILL HEAR FROM STEPHEN ROACH LATER. WE WANT TO GET TO OUR FIRST GUEST WITH THE KICK OFF TO THE CLOSE. A LOOK AT THE CORRELATION BETWEEN BONDS AND STOCKS. WHETHER CASH REMAINS THE REFUGE THAT IT HAS BURNED -- BEEN FOR QUITE SOME TIME. MICHAEL HARTMAN SAYS TO AN EXTENT, YET. THE END OF THE BULL MARKET -- BEAR MARKET IS GOING TO COINCIDE WITH FALLING HOME PRICES. UNTIL THEN, CASH IS AS GOOD AS EVERY THING ELSE. THE YIELD IS THERE. EMILY HILL, FOUNDER AND CHIEF EXECUTIVE OFFICER AT BOWERSOX CAPITAL PARTNERS JOINING US. I WANT TO START WITH A LOT OF THE INTENTION INVESTORS HAD PAID, NOT SO MUCH TO CASH IN AND OF ITSELF, BUT THIS IDEA THAT YOU CAN GO TO A SIX-MONTH T-BILL, GET 5.1%. YOU'VE GOT THAT REINVESTMENT RISK GOING FORWARD, BUT FOR THE TIME BEING, THAT GETS YOU SOMETHING FOR A LOT OF PEOPLE YOU CANNOT GET IN THE EQUITY MARKET NOW. EMILY: T-BILLS, WE ARE STARTING TO BUY TWO-YEAR TREASURIES. ONE OF THE THINGS TO REMEMBER IS THAT THE TWO-YEAR HAS NOT YIELDED THIS MUCH MORE THAN THE 10 YEAR SINCE THE 1980'S, I THINK OCTOBER 1981. THESE SHORT-TERM TREASURIES AND T-BILLS IN PARTICULAR ARE, YES, THE BIGGER RISK IS THE REINVESTMENT RISK. AS EXPECTATIONS ARE BEING PUSHED OUT FOR WHEN THE FED WILL START CUTTING, THEY ARE LOOKING GOOD. ROMAINE: LOOKING GOOD. I AM CURIOUS WHAT YOU MAKE OF THE ECONOMIC DATA WITHIN THE CONTEXT OF THE SPECULATION ABOUT HOW MUCH OF A FIGHT THE FED HAS AHEAD OF IT WITH REGARDS TO INFLATION. I DO NOT WANT TO MAKE TOO MUCH OF SINGLE DATA POINTS, BUT MOST OF THE SINGLE DATA POINTS WE HAVE GOTTEN THE PAST COUPLE OF MONTHS SHOWS AN ECONOMY THAT DOES NOT SEEM TO BE A DISINFLATIONARY TRAJECTORY, AT LEAST TO THE EXTENT THE FED WOULD LIKE. EMILY: THERE IS SUCH CONFLICTING SIGNALS OUT THERE. I DO NOT KNOW IF YOU KNOW THIS, BUT I AM FROM LAWRENCE, KANSAS, HEART OF THE MIDWEST. MY FAMILY HAS BEEN IN THE PAPER BUSINESS FOR OVER 100 YEARS. I CALLED MY UNCLE WHO RUNS A CORRUGATED BOX COMPANY WHENEVER IS GOING ON OUT THERE WITH THE INDICATOR -- LEADING INDICATOR. HE THINKS ON THE MANUFACTURING SIDE, THINGS ARE DIRE. HE THINKS IT IS BECOMING EASIER TO HIRE PEOPLE, YET YOU GO DOWNTOWN AND YOU HAVE GOT TO CALL TWO WEEKS AHEAD OF TIME TO MAKE A RESERVATION AT A RESTAURANT. SPENDING AT RESTAURANTS IS UP 7%. THE AMERICAN CONSUMER CANNOT GET ENOUGH SERVICES. ONE OF THE THINGS THAT IS INTERESTING, YOU LOOK AT THE DISINFLATIONARY FORCES AND THE INFLATIONARY FORCES. IT IS HARD TO FIGURE OUT WHAT IS GOING ON OUT THERE. KRITI: WHEN YOU TALK ABOUT THE IDEA OF THE SERVICES SECTOR THAT IS HOLDING STRONG AND THE DIRE NEED FOR IT, IF YOU LOOK AT CORPORATE EARNINGS, IT IS SAYING THERE IS GOING TO BE A SLOWDOWN IN THE HURDLES WE HAVE SEEN IN THE PAST COUPLE OF YEARS, SUPPLY CHAIN ISSUES EASING A LITTLE BIT. TO WHAT EXTENT IS THAT FACTORED IN AS YET ANOTHER TAILWIND FOR SERVICES? EMILY: I THINK I UNDERSTAND YOUR QUESTION. I THINK DEFINITELY SOME FACTORS AND SUPPLY CHAIN ISSUES, THE GOODS SIDE OF INFLATION, I THINK THAT IS MUCH EASIER TO GET UNDER CONTROL. THE SERVICES SIDE IS VERY STICKY. I THINK WE ARE GOING TO FIND IT STICKING AROUND 3% TO 4%. THE QUESTION IS, ONE OF THE ISSUES IS, THERE IS SO MUCH LIQUIDITY IN THE ECONOMY. IT MADE HEADLINES, THE MONEY SUPPLY MAY DROP -- DROPPED THE BIGGEST ON RECORD LAST MONTH. THERE IS A LOT OF MONEY SLOSHING AROUND OUT THERE. WE ARE SEEING CONSUMER SENTIMENT TAKE DOWN A LITTLE BIT, SAVINGS LEVELS ARE DROPPING. IT IS GOING TO TAKE TIME. KRITI: LET'S BRING IT BACK TO THE STOCK MARKET. IT FELT LIKE ADDED LIQUIDITY WAS WHAT WAS POWERING THE S & P 500 FOR YEARS. HERE WE ARE RALLYING ONCE AGAIN WHILE LIQUIDITY IS DEALING WITH A POTENTIAL CRUNCH. ALSO IN THE TREASURY MARKET. WHAT IS THE MAJOR BULL CASE FOR STOCKS RIGHT NOW? EMILY: I HAVE TO BE HONEST, I WOULD LOVE YOUR OPINION. I CANNOT FIGHT FIGURE IT OUT. I THINK PART OF WHAT HAS HAPPENED IS, WE HAVE LIVED IN A LOW INFLATION, HIGH LIQUIDITY ENVIRONMENT FOR SO LONG. WE HAVE GONE THROUGH -- WE WENT THROUGH A RAPID SEACHANGE MARKED BY A GLOBAL PANDEMIC. I THINK A LOT OF THINGS IN THIS ECONOMY CHANGED. I DO NOT THINK TRADERS ARE GETTING THE FED'S MESSAGE, OR HAVE REALLY ACCEPTED THIS IS GOING TO BE A LONG SLOG. ROMAINE: ABSOLUTELY. WHEN YOU LOOK AT THE PRICE ACTION AND PARTLY TO WHAT YOU WERE TALKING ABOUT EARLIER, I FEEL KINSHIP WITH YOU NOW. I DO NOT TALK MUCH ABOUT THIS. MY FAMILY WAS IN THE CORRUGATED BOX BUSINESS, AS WELL. I AM CURIOUS ABOUT THE DISCONNECT WE SEE BETWEEN WHAT THE MARKET IS TRYING TO PRICE IN AND WHAT WE ARE REALLY SEEING ON THE GROUND IN THE REAL ECONOMY. AND THE IDEA JAY POWELL AT LEAST PUBLICLY SEEMED TO HAVE ARTICULATED THIS IDEA HE IS MUCH MORE CONCERNED ABOUT THE EFFECTS ON THE REAL ECONOMY UNLESS -- AND LESS CONCERNED ABOUT KEEPING FINANCIAL MARKETS HUMMING IN A WAY WE HAVE COME TO EXPECT OUT OF THE FED OVER THE LAST DECADE AND A HALF. EMILY: JAY POWELL HAS DECIDED HE IS GOING TO COMMUNICATE IN A WAY THAT PREVIOUS FED CHAIRMAN HAVE NOT. VERY REGULARLY. I THINK, FRANKLY, ANYTIME ANYTHING SLIGHTLY OPTIMISTIC LEAVES HIS LIPS, THE MARKET RALLIES. IT REVERSES WHAT THE FED IS TRYING TO DO. I AM A LITTLE PUZZLED HE IS NOT SENDING MORE NEGATIVE SIGNALS. WHEN THE CEO OF THE ATLANTA FED, RAFAEL BOSTIC, CAME OUT AND SUGGESTED THAT MAYBE THEY WOULD ONLY CUT BY 25 BASIS POINTS, THE MARKETS SOARED. IT IS ALMOST PEOPLE ARE LOOKING FOR OPTIMISTIC SIGNS. I THINK IT IS BECAUSE THERE IS A LOT OF MONEY OUT THERE. PEOPLE HAVE NOT GOTTEN THE MESSAGE. ROMAINE: GOING TO HAVE TO LEAVE IT THERE. GREAT TOP YOU. HAVE A WONDERFUL WEEKEND. EMILY HILL, FOUNDER AND CEO AT BOWERSOX CAPITAL PARTNERS HELPING US KICK OFF THE COUNTDOWN. A LOT COMING UP, AN INTERVIEW WITH THE CEO ON THE BACK OF THE EARNINGS REPORT. HIS LOOK AT WHERE I T N CORPORATE SPENDING IS GOING AHEAD. AFTER ANNOUNCING A LOT OF JOB COURT -- JOB CUTS, AMAZON IS GOING TO PAUSE CONSTRUCTION A PART OF THOSE SECOND HEADQUARTERS THEY HAD BEEN BUILDING OUT OF WASHINGTON, D.C. WE TALK ABOUT SOME MOVES AMAZON IS MAKING TO REIN IN ITS COSTS. ANOTHER VOLATILE WEEK FOR CRYPTO SPHERE. MORNINGS, BEN MCMILLAN THE CEO AT I FX IN HIS TAKE ON WHAT TO WATCH. STICK WITH US. A LOT TO COVER. THIS IS BLOOMBERG. ♪ ROMAINE: BREAKING NEWS ON ELECTRICAL VEHICLE MAKER NVIDIA AND SAYING IT COULD PRODUCE AS MANY AS 62,000 ELECTRIC VEHICLES THIS YEAR. A COUPLE OF DAYS AGO, THE COMPANY CAME UP WITH ATTORNEYS GAVE A 2023 PRODUCTION FORECAST OF 50,000 VEHICLES. YOU SAW A BIG SELLOFF IN THE STOCK. WE ARE LEARNING BASED ON BLOOMBERG REPORTING RIVIAN TELLING STAFF THAT HAS A PATHWAY TO HIT THAT 62,000 TARGET THAT A LOT OF INVESTORS HAVE BEEN LOOKING TO FOR 2023. KRITI: WE ARE TALKING PRODUCTION, MANUFACTURING, SERVICES. THE IDEA OF WHAT CAN THIS ECONOMY, CORPORATE'S, HANDLE IN THIS ENVIRONMENT. WHICH BRINGS US TO THE ISM SERVICES DATA WHICH CAME IN HIGHER-THAN-EXPECTED. THE STORY IS ABOUT THE CELEBRATION AND DECELERATION, WALK YOU THROUGH IT HERE. THE ACCELERATION IN 2020, THE REBOUND FROM COVID. YOU CAN SEE HOW STEEP THE REACTION IS. IT IS IMPORTANT TO TALK ABOUT AS WE SLOW DOWN THE ECONOMY, AS WE DEAL WITH THE PROSPECTS OF INFLATION AND POTENTIALLY RECESSION, THE DECELERATION IS NOT AS STEEP. WHEN WE TALK ABOUT THIS GOING BACK TO 2023, THE QUESTION IS AT WHAT POINT DO WE SEE THE REAL ACCELERATION IN A NO LANDING SCENARIO, DOES IT LOOK LIKE SOMETHING WHAT WE SAW IN 20 OR IS IT MORE SUBTLE? 1, 2, 3 DATA POINTS HOVERING BEFORE A MORE MEANINGFUL TAKEOFF. ROMAINE: JOINING US NOW TO GIVE US WHAT SHE THINKS IS AARON MURPHY, DEPUTY DIRECTOR DIRECTOR AND SENIOR FELLOW AT THE STREET -- AT THE CENTER FOR STRATEGIC AND INTERNATIONAL STUDIES. A LOT OF PEOPLE WERE LOOKING AT A LOT OF DATA COMING OUT OF JANUARY THAT THAT IT THAT WAS A FLUKE GRADE WE HAVE GOTTEN A COUPLE OF DATA POINTS OUT OF FEBRUARY. STILL SHOWING SOME DEGREE OF STRENGTH COMING OUT OF JANUARY. I AM WONDERING, SHOULD WE PREPARE OURSELVES AND MAYBE VERY -- AND MAYBE FEBRUARY COULD BE A FLUKE? > > I THINK THE JANUARY DATA DOES NOT TELL THE WHOLE STORY OF HOW THE ECONOMY IS GOING TO LOOK. EVERYBODY LOVES DATA. SO DOES THE FED, THAT IS HOW THEY MAKE THEIR DECISIONS. JANUARY IS USUALLY A TIME OF PRICE RESETTING, WHETHER THAT IS ON RENT, COST OF CERTAIN SERVICES AND PRODUCTS. DO NOT THINK WE CAN TAKE THE FULL STORY OF HOW THE ECONOMY IS GOING TO GO BASED ON THAT JANUARY DATA. THERE ARE INTERESTING POINTS COMING OUT OF FEBRUARY. THERE IS A LOT GOING ON FEEDING INTO SOME OF THESE NUMBERS. I DO NOT THINK WE CAN PREDICT ACCURATELY EXACTLY WHERE THIS IS GOING. I THINK YOU ARE SEEING ACCELERATION IN CERTAIN SECTORS, ESPECIALLY AS SUPPLY CHAINS ARE READJUSTING. YOU STILL HAVE A TIGHT LABOR MARKET. PRICES ARE STILL ON THE INCREASE. ROMAINE: WITH -- THIS IS A HASSLE -- A HALF LAST FOUR SITUATION. FIM. SCUM YOU CAN TALK ABOUT THE RED FLAGS IF ANY YOU ARE SEEING WITH REGARDS TO OUR ECONOMIC STRENGTH. ERIN: I THINK THERE ARE QUITE A FEW THINGS TO WATCH DOMESTICALLY, BUT THERE IS GEOPOLITICAL ISSUES THAT CAN IMPACT THE ECONOMY. GOING FORWARD, I THINK YOU WILL SEE WITH THE HEARING WITH JAY POWELL NEXT WEEK BUT AS WE START GETTING MORE DATA POINTS OUT OF FEBRUARY, I THINK ONE THING WE NEED TO LOOK AT IS INFLATION. THAT HAS BEEN A STORY FOR THE LAST YEAR. WHERE IS THIS GOING? THERE WAS UNCERTAINTY AROUND INFLATION. DUE TO THAT, IT IS HARD TO PREDICT WHERE THINGS ARE GOING. I THINK THE JANUARY NUMBERS THAT CAME OUT CAME AS A BIT OF A SURPRISE AS THE FED'S POLICIES AND INCREASING INTEREST RATES HAS SO FAR BEEN SEEN AS SOMEWHAT SUCCESSFUL. JANUARY TELLS A DIFFERENT STORY. I THINK ONE OTHER THING IN WASHINGTON WE SEEM TO BE OBSESSED WITH, NOT SURE OUTSIDE OF BC, BUT WHAT IS HAPPENING ON THE DEBT CEILING - D.C., BUT WHAT IS HAPPENING IN THE DEBT CEILING. ARE WE GOING TO BE -- MAYBE NOT GO DOWN THAT CRAZY ROAD? AND REALLY ADDRESS WHAT THE ISSUE IS THERE, AND SEE IF WE CAN EXTEND ALL NOT. THERE IS GEOPOLITICAL ISSUES WE NEED TO CONSIDER, AS WELL. I THINK YOU MENTIONED AT THE TOP OF THE SHOW AROUND CHINA, IT'S REOPENING. THAT CAN GO BOTH WAYS. IT MEANS THERE WILL BE AN INCREASED DEMAND FOR PRODUCTS, SERVICES, TRAVEL. THAT WILL HAVE A PRESSURE ON PRICES. BUT, IT HELPS READJUST THE ISSUES AROUND SUPPLY CHAINS. THERE IS NO LONGER A ZERO COVID POLICY, WHICH HELPS WHEN IT COMES TO MANUFACTURING, STOPPING AND STARTING. ALSO LOOKING AT THE U.S.-CHINA RELATIONSHIP. ROMAINE: IS THERE A RELATIONSHIP RIGHT NOW? WHAT IS IT? I KNOW TECHNICALLY WE ARE STILL WEDDED TO THEM ECONOMICALLY. POLITICALLY, THERE DOESN'T SEEM TO BE MUCH OF A RELATIONSHIP. ERIN: IT SEEMS MORE OF A TENSE RELATIONSHIP. IT IS STILL IMPORTANT ECONOMICALLY. WE ARE QUITE INTERTWINED. THERE IS EFFORTS TO DECOUPLE. THERE IS INDUSTRIAL POLICIES BEING PUT THROUGH LET THE CHIPS ACT, THE INFLATION REDUCTION ACT. THE POLITICAL SIDE HAS AN IMPACT ON THAT, WHETHER OR NOT WE INCREASE EXPORT CONTROLS OR ADD OTHER CHINESE COMPANIES TO A SO-CALLED BLACK LIST THAT U.S. COMPANIES AND ENTITIES CANNOT DEAL WITH. WE HAD THE BALLOON INCIDENT, TENSIONS OVER TAIWAN STRAIT. NOW, WE HAVE RUSSIA COMING INTO THIS. WHETHER OR NOT WE HAVE RED LINES OF WHAT CHINA'S POTENTIAL SUPPORT TO RUSSIA COULD BE, THAT COULD RESULT IN OTHER ECONOMIC ACTIONS ON OUR PART. KRITI: AARON MURPHY OF THE CENTER FOR STRATEGIC AND INTERNATIONAL STUDIES, WE THANK YOU AS ALWAYS. COMING UP, THIS WEEK'S WARNING FROM SILVER GATE BATTLES THE CRYPTO INDUSTRY AS FIRMS LIKE COINBASE WHICH THE BANK. WE GET INSIGHT FROM THE CIO OF IDX DIGITAL ASSETS. ROMAINE: TIME FOR OUR BIG NUMBER. 7.5 MILLION. THAT IS THE AMOUNT OF RESTATEMENT THE BITCOIN MINOR RIGHT BOUGHT CHAIN MADE THIS WEEK, SEVEN POINT $5 MILLION RESTATEMENT. IT ADDS TWO ADDITIONAL RESTATEMENTS FOR 2020 AND THE FIRST THREE QUARTERS OF 2022. THAT NUMBER MAY SEEM SMALL, BUT THE IMPAIRMENT IN OF ITSELF RAISES A BIG ISSUE. HOW DOES THE COMPANY ACCOUNT FOR A WILDLY VOLATILE ASSET ON ITS BALANCE SHEET? HOW THEY SHOULD RECOGNIZE AND MEASURE DIGITAL HOLDINGS LIKE BITCOIN. WHAT IS CLEAR, PARTICULARLY FOR THESE COMPANIES BEHIND ME THAT HAVE LARGE HOLDINGS, IF YOU ARE PUBLIC BE TRADED, NONINVESTMENT BUSINESS, THESE INVESTMENTS ARE CATEGORIZED AS INTANGIBLE. THAT MEANS YOU HAVE TO PICK A POINT IN TIME THAT IS BEST REFLECTION OF ANY LOSSES, EVEN ON PAPER. WRITE USED A SPOT PRICE AT A STANDARD CUT OFF TIME BUT HAD TO COME CLEAN AND SAID IT SHOULD HAVE USED ITS INTRADAY LOW PRICE INSTEAD. IT WAS A SECOND BY A CRYPTO MINOR THIS WEEK. WE TALKED ABOUT WHAT WE HEARD OUT OF MARATHON DIGITAL WHEN IT SAID YOU CANNOT RELY ON SEVERAL OF ITS PAST QUARTERLY REPORTS, PARTICULAR AFTER THE FCC ALERTED IT TO SOME IMPAIRMENT DISCREPANCIES. THESE TWO ARE NOT THE FIRST. GIVEN THE LACK OF CLARITY AROUND CERTAIN RULES, THEY ARE NOT TO BE THE LAST. KRITI: IT IS INTERESTING, THE TIMING YOU ARE STARTING TO SEE CONSOLIDATIONS, DEALS IN THE CRYPTO INDUSTRY. WHERE THERE ARE CONCERNS YOU JUST LAID OUT. JOINING US FOR MORE INSIGHT, CHIEF INVESTMENT OFFICER OF IDX DIGITAL ASSETS. I WANT TO START IN ADDITION TO THE DISCREPANCIES YOU ARE SEEING WITH RIOT, MARATHON DIGITAL, OFF THE HEELS OF SOMETHING LIKE SILVER GATE AND FTX. YOU HAVE NEWS LIKE COINBASE LOOKING TO BUY AN ASSET MANAGER TO HELP THEIR INSTITUTIONAL DEMAND. HOW DO YOU SQUARE THE TWO, DISTRUST IN THE INDUSTRY WITH DEALMAKING? BEN: IT IS A GOOD QUESTION. I THINK WHEN YOU GO BACK TO THE POINT ORIGINALLY MADE, THE IMPAIRMENT CHARGE MIGHT SEEM LIKE A SMALL NUMBER. FACT IT HAPPENED RAISES A LOT OF QUESTIONS, ESPECIALLY POST FTX. FTX WAS LOOKED AT AS A GOLD STANDARD BY MANY. INVESTORS ARE LOOKING WITH A HUGE AMOUNT OF SKEPTICISM IN ANY KIND OF RESTATEMENT AND WONDERING WHAT MIGHT BE UNDER THE HOOD. YOU SEE MINORS TRYING TO MIGRATE INTO OTHER BUSINESSES TO REFLECT DIVERSIFICATION OF -- DIVERSIFICATION ACROSS OTHER INDUSTRIES. I THINK IT MAKES SENSE FOR THESE CRYPTO CENTRIC BUSINESSES TO DIVERSIFY THEIR BUSINESS. IT MAKES SENSE FOR COINBASE TO ACQUIRE AN ASSET MANAGER. THAT IS A PRICE MODEL THAT PRESUMABLY GETS AWAY FROM THEIR PRICE ACTION MODEL. WE MIGHT SEE ROBINHOOD MAKE A SIMILAR PIVOT. THERE IS A FINE LINE BETWEEN DEALMAKING AND RESHUFFLING THE CARDS AND REINSTATEMENTS ON THE OTHER END OF THE SPECTRUM. KRITI: IT IS INTERESTING YOU BRING UP ROBINHOOD. I HAVE TO ASK ABOUT THE SUSTAINABILITY OF DEALS LIKE THIS AT A TIME WHERE IT FEELS LIKE THE INDUSTRY HAS TO BEAR WITH THE INTRODUCTION OF A DIGITAL DOLLAR, A DIGITAL EURO, ALL OF WHICH ARE EXPECTED TO MAKE THEIR DEBUT THIS YEAR. HOW DO YOU SQUARE SOMETHING LIKE THAT? BEN: THAT IS THE BIG THING. WE ARE SEEING AN ERA IN WHICH CRYPTO REGULATION IS COMING FAST AND FURIOUS. WE KNEW IT WAS COMING THROUGHOUT ALL OF 2022, FTX WAS THE CATALYST. THAT IS STARTING TO SHAPE WHO THE WINNERS AND LOSERS ARE GOING TO BE. YOU SEE FINANCING, STABLECOIN OFFSHORE. SILVER GATE IS HAVING AN EXISTENTIAL CRISIS OF ITS OWN. COINBASE IRONICALLY FROM A REGULATORY PERSPECTIVE LOOKS LIKE A BIG WINNER. THEY HAVE BEEN A REGULATED CUSTODIAN FOR A LONG TIME. THEIR STOCK PRICES HAS BEEN STRUGGLING BECAUSE OF BROADER CRYPTO WOES. I THINK ONE OF THE THINGS WE WILL SEE AS STABLECOIN BECOMES THE NEXT BIG FOCUS IS, HOW DID THESE COMPANIES PLAY WITH THAT REGIME THE TREASURY IS SETTING UP? ROMAINE: I'M GLAD YOU BROUGHT UP COINBASE. THIS HAS BEEN HERALDED AS A UNINTENDED STRENGTH OF THIS COMPANY BEING PUBLIC, MORE BOLD REGULATIONS IN A WAY SOME OF THEIR COMPETITORS ARE. DO YOU THINK WE COULD SEE WITHIN THAT VACUUM OF NOT HAVING A FORMER REGULATORY BODY -- FORMAL REGULATORY BODY ASSIGNED YET, WE COULD SEE THIS NEXT LEG OF THE CRYPTO INDUSTRY TRYING TO FOLLOW A MORE TRADITIONAL PATH SUCH AS LIQUID COINBASE -- SUCH AS COINBASE? BEN: ABSOLUTELY. I THINK THAT IS WHAT REGULATORS WANT TO SEE. THEY WANT TO GET AWAY FROM THE IDEA OF CRYPTO BEING THE UNREGULATED WILD WEST. A LOT OF THESE FIRMS WERE LOOKING AT BLOCKCHAIN TECHNOLOGY AS A WAY TO GET A WOUND -- AROUND REGULATIONS. COINBASE IS A GOOD EXAMPLE. PULLING REGULATORY FOCUS FROM DAY ONE, THEY ARE SETTING THE STANDARD FOR HOW COMPANIES NEED TO MOVE FORWARD. I THINK WE WILL SEE A LOT, MORE PEOPLE GET MORE REGISTERED, PROACTIVELY GO TO THE REGULATORS AND PLAY NICE BEFORE THEY LAUNCH THEIR BUSINESSES. ROMAINE: GOING TO HAVE TO LEAVE IT THERE. GREAT INSIGHTS. BEN MCMILLAN, THE CIO AT IDX DIGITAL ASSETS AND A LOOK AT WHAT IS GOING ON IN THE DIGITAL WORLD. A PRETTY BIG FLIP FROM WHERE WE WERE EARLIER IN THE WEEK FOR EQUITIES. NASDAQ 100 UP ALMOST 2%. KRITI: I WONDER HOW MUCH OF IT IS EARNINGS, POSITIONING AND A WEAKER DOLLAR INCENTIVIZING THOSE MOVES. ROMAINE: INTERESTING TO SEE THE DOLLAR FLIP BACK TO WEAKNESS. A BIG PART OF THE REASON YOU ARE SEEING EQUITIES HIGHER, A CAP TECH NAMES MOVING UP. TESLA HAVING A PHENOMENAL DAY. $200 EVEN, UP 5%. STICK WITH US, FROM NEW YORK TO OUR VIEWERS WORLDWIDE, THIS IS BLOOMBERG. > > HERE IS THE FIRST WORD. IN HONG KONG, A 42 STORY HOTEL BEING CONSTRUCTED IN ONE OF ITS TOURISM DISTRICT WENT UP IN FLAMES BEFORE FIREFIGHTERS BROUGHT THE FIRE UNDER CONTROL. TELEVISION FOOTAGE SHOWED FLAMES RUNNING UP THE LENGTH OF THE BUILDING. SOME NEIGHBORING BUILDINGS CAUGHT FIRE BEFORE THE BLAZES WERE EXTINGUISHED. THERE WERE NO CASUALTIES. IT IS A LUXURY HOT TELL THAT HOTEL. ANOTHER SIGN PRESIDENT BIDEN'S EDGING CLOSER TO A REELECTION ANNOUNCEMENT. THE TEAM HAS REPORTEDLY ANNOUNCED A BOARD THAT WILL SPEAK ON THE PRESIDENT'S BEHALF DURING THE PRESIDENT'S CAMPAIGN PAID THE WASHINGTON POST REPORTS -- GAVIN NEWSOM AND NEW JERSEY GOVERNOR PHIL MURPHY. PRESIDENT DONALD TRUMP -- FORMER PRESIDENT DONALD TRUMP ASKING A JUDGE TO DELAY THE TRIAL FOR A CIVIL FRAUD SUIT OVER HIS COMPANY'S ASSET VALUATIONS. HIS ATTORNEY SAYS THE CURRENT DATE OF OCTOBER 2 DOESN'T GIVE HIM ENOUGH TIME TO CRAFT A DEFENSE. TRUMP AND THREE OF HIS ADULT CHILDREN AND HIS COMPANY ARE ACCUSED OF MANIPULATING THE VALUE OF TRUMP'S ASSETS AND -- A ONCE PROMINENT SOUTH CAROLINA ATTORNEY CONVICTED OF MURDERING HIS WIFE AND SON SENTENCED TO LIFE IN PRISON WITHOUT PAROLE. DURING THE TRIAL PROSECUTOR SAID ALEX MURDAUGH STOLE AND USED HIS FAMILY'S CLOUD TO HIS ADVANTAGE. THE JURY DELIBERATED FOR LESS THAN THREE HOURS BEFORE FINDING HIM GUILTY OF THE JUNE 2021 MURDERS. GLOBAL NEWS POWERED BY MORE THAN 2,700 JOURNALISTS AND ANALYSTS IN MORE THAN 120 COUNTRIES. I AM JOHN HYLAND AND THIS IS BLOOMBERG. ♪ KRITI: WE ARE GETTING BREAKING NEWS. APPLES CLOUD CHIEF TO STEP DOWN AFTER A WAVE OF DEPARTURES. YOU ARE SEEING STOP DROP A LITTLE SLIGHTLY. BUT THEN BOUNCED BACK UP. APPLE SHARES UP 3.3 PERCENT. AT A TIME WHERE EVERYONE IS SAYING CLOUD IS THE BUZZ WORD. APPLE PERHAPS LOSING A VALUED PERSON. INTERESTING TO SEE. ROMAINE: INTERESTING TO SEE. GREAT SCOOP ON THE BLOOMBERG TERMINAL. ED LUDLOW JOINING US TO TALK MORE ABOUT THIS. THE COHOST OF BLOOMBERG TECHNOLOGY. THESE TYPES OF EXECUTIVE DEPARTURES, THESE PEOPLE COME AND GO. GIVE US A SENSE OF HOW SIGNIFICANT MICHAEL ABBOTT IS TO APPLE AND HIS CLOUD AMBITIONS. ED: SIGNIFICANT FOR THE GUYS -- FOR THE RECENT YOU GUYS OUTLINE. ABBOTT WAS A KEY DEPUTY, HIS AREA OF RESPONSIBILITY WAS MAINTAINING CLOUD-BASED SERVICES. I AM A USER OF ICLOUD. IN TERMS OF MAIL, STORAGE, ADDRESS, PHOTO SHARING. IN THE CONTEXT OF APPLE SERVICES PUSH, IT IS IMPORTANT. KRITI MAKES A VITAL POINT ABOUT CLOUD INFRASTRUCTURE, THIS IS A TEAM THAT HAS SPENT BIG INITIALLY BUILDING UP INFRASTRUCTURE BUT PIVOTING TO SOME HYPER SCALE, MOVING TO AMAZON WEB SERVICES AS AN EXAMPLE. THAT SERVICES TEAM IS DEPLETED. IT DOES RAISE QUESTION ABOUT STRATEGY GOING FORWARD. PETER STERN, QS OTHER DEPUTY, ALSO LEFT VERY RECENTLY. YOU HAVE TO PAY ATTENTION TO THE OUTGOINGS, NOT HEARING SO MUCH ABOUT INCOMING THAT APPLE WHEN IT COMES TO TOWN. KRITI: IT FEELS LIKE THIS FOLLOWS THEIR CHIEF OF DESIGN, CHIEF OF PRIVACY LEAVING. DO YOU HAVE ANY IDEA OF WHO MIGHT FILL THIS ROLE? ED: GOOD QUESTION. AS MARK WRITES IN THE STORY HE HAS JUST PUBLISHED, THE DEPARTURES HAVE COME FAST. THE DESIGN CHIEF LEAVING RACE IS A QUESTION. EVERY TIME A NEW GENERATION OF HANDSET DROPS, THE QUESTION FROM THE STREET IS, WHAT IS DIFFERENT ABOUT THIS GENERATION RELATIVE TO PAST ONES? WHAT IS GOING TO DRIVE NEW POCKETS OF DEMAND? THE SERVICES COMPONENT WITH ABBOTT IS KEY, A POINT OF DIFFERENTIATION FOR THEM. THEY HAVE MONETIZED IT IN TERMS OF HOW MUCH YOU PAY FOR STORAGE IN ICLOUD. THE QUESTION IS, WHO IS STEPPING UP TO BRING THE CLOUD-BASED OFFERING TO THE NEXT LEVEL AND COMPETE WITH GOOGLE? KRITI: ED LUDLOW, WE THINK USO IS FOR BRINGING YOU -- BRINGING US THAT NEWS. APPLE SHARES UP ON THE DAY UP BY 3.4 PERCENT. AFTER SLASHING JOBS AND REASSESSING REMOTE WORK, AMAZON PAUSING CONSTRUCTION ON ITS SECOND U.S. HEADQUARTERS NEAR WASHINGTON, D.C. JOINING US IS BLOOMBERG'S SPENCER SOPER. THIS IS AN INTERESTING DEVELOPMENT. WE KNOW THERE WAS A LONG SAGA AROUND ARLINGTON, VIRGINIA SPECIFICALLY BEING CHOSEN AFTER LONG ISLAND, NEW YORK WAS NOT. WHERE ELSE DID SOME OF THAT TRAFFIC GO IF ARLINGTON IS ON PAUSE? SPENCER: A LOT OF THIS IS REASSESSMENT IS, WHAT IS GOING TO HAPPEN NOW THAT PEOPLE ARE WORKING HYBRID? THIS LAUNCHED FOREVER AGO, 2017 WHEN THEY HAD THIS BIG BAKE-OFF THAT OFFERS FROM CITIES AROUND THE COUNTRY, GOING NUTS AND WANTED THIS PROJECT. THAT WAS PRE-PANDEMIC. ALL OF THOSE ARE STALE NOW. THE ANNOUNCEMENT RECENTLY HE WANTS ALL EMPLOYEES IN AT LEAST THREE DAYS A WEEK BEGINNING IN MAY, THAT IS A 40% REDUCTION OF FOOT TRAFFIC. AMAZON IS ASSESSING HOW MUCH OFFICE SPACE WE NEED, WHEN DO WE NEED TO PUT THIS PROJECT BACK TO WHERE WE ARE GOING TO BUILD IT? THEY HAVE NOT SAID SPECIFICALLY. ROMAINE: I THOUGHT IT WAS INTERESTING IN THIS STATEMENT, THEY TALK ABOUT IT WAS ALWAYS GOING TO BE A MULTIYEAR PROJECT, NOTHING TO WORRY ABOUT. THEY HAVE THE OPTIONALITY TO GO FORWARD WITH THIS AT SOME POINT. THEY THINK WHILE THE TREND HAS CHANGED WITH REGARDS WHERE WE WORK AND IN OFFICE SPACE. IS THAT TRUE? SPENCER: IT LOOKS LIKE THEY ARE ONE THIRD OF THE WAY. THEY HAVE COMMITTED TO VIRGINIA FOR 25,000 JOBS, MULTIBILLION-DOLLAR CONSTRUCTION BUSINESS. IN THAT SPACE, WE ARE ABOUT 8000. THE BUILDINGS THEY HAVE BUILT HAVE -- CAN ACCOMMODATE 14,000. THEY HAVE A LOT OF > > ABILITY. WHAT THEY HAVE PUT ON HOLD IS THIS ARCHITECTURAL CENTERPIECE, THE BIGGEST OF THE BUILDINGS. IT HAS THIS FUNKY, ICE CREAM CONE LOOKING, ARCHITECTURAL SIGNATURE THAT WAS GOING TO BE FILLED WITH PLANTS. IT IS A PAUSE ON THE MAIN PART OF THIS PROJECT THAT WE DO NOT KNOW WHEN THEY ARE GOING TO PRESUME IT. KRITI: TO YOUR POINT ON THE RETURN TO WORK, IS IT A NEED TO RESUME? IT IS NOT LIKE AMAZON HAS THE SAME NEED FOR CAMPUS LIKE APPLE DOES IN CUPERTINO, CALIFORNIA. SPENCER: GREAT QUESTION. WE DO NOT KNOW. WE KNOW ABBOTT HAS ANNOUNCED THEY WANT PEOPLE BACK, MAYBE THREE DAYS A WEEK. WE DO NOT KNOW WHAT THAT MEANS. THERE IS A LOT PUSHBACK WITHIN AMAZON. SOMEONE SAYS, I AM ON A LOCAL TEAM. WHY DO I HAVE TO COME INTO OFFICE AND ZOOM WITH SOMEONE IN THE COUNTRY? ROMAINE: COMING FROM A GUY BROADCASTING FROM HOME TODAY. ANOTHER STORY ON THE BLOOMBERG TERMINAL, APPLE SHUTTING DOWN CASHLESS STORES AROUND NEW YORK CITY, SAN FRANCISCO, SEATTLE. IS THIS A COST-CUTTING MOVE OR WAS THE DEMAND NOT THERE? SPENCER: I THINK THIS TIES INTO THE PIVOT. AMAZON OPENED -- SAMSUNG GO STORES, IT WAS SUPPOSED TO BE THIS BIG, GROUNDBREAKING THING. YOU TALK TO A CASHIER, GET WHAT YOU WANT, WALK OUT. EVEN BEFORE THE PANDEMIC, IT NEVER TOOK OFF. IT IS THE KIND OF THING THE CURIOSITY ABOUT TECHNOLOGY WILL GET YOU IN ONCE. ONCE YOU GET INTO AN AMAZON STORE AND ARE SURROUNDED BY BAGS OF POTATO CHIPS AND GAS STATION SANDWICHES, I DO NOT KNOW IF ROMAINE IS GOING BACK TO AMAZON TO EAT AND GAS STATION SANDWICH. AFTER THE PANDEMIC AND FEWER PEOPLE COMING INTO OFFICES, MUCH TIME CROWD GET THINNER, THERE IS LESS NEED THEN BEFORE. ROMAINE: WE HAVE ONE NEAR BLOOMBERG WORLD HEADQUARTERS. I HAVE BEEN THERE ONCE. IT WAS AN EXPENSE. I AM GLAD I CAN TELL MY GRANDCHILDREN I BOUGHT SOMETHING FROM AN AMAZON CASHLESS STORE. MAYBE THE TRENDS ARE SHIFTING WITH REGARDS TO WHERE WE GO TO WORK AND WHERE WE BUY. KEEPING AN EYE ON THE BROADER MARKETS AROUND THE HIGHS OF THE DAY. WE WILL BE BACK IN A MOMENT. THIS IS BLOOMBERG. ROMAINE: LET'S GET A VIEW FROM THE SOUTH SIDE WITH OUR TOP CALLS. BIG MOVERS ON THE BACK OF ANALYST RECOMMENDATIONS. WE START WITH HORMEL, ANALYSTS SAYING THE COMPANY HAS BEEN DOING LITTLE TO CHANGE ITS OUTLOOK FOR THE SECOND HALF DESPITE ISSUES EMERGING WHEN IT COMES TO SUPPLY CHAINS AND DEMAND. SHARES DOWN FOR A NINTH STRAIGHT DAY. NEXT, VARNADO. COMPANY'S EARNINGS COULD BE HIT BY HIGH INTEREST EXPENSES. FOR NATO DOWN .2% -- VORNADO DOWN .2%. FIRST SOLAR, UPGRADED AT UBS TODAY. 78 PERCENT BOOST. ANALYSTS SAY THE COMPANY POSITION FOR THE YEARS OF GOOD EARNINGS DRIVEN BY HIGH DEMAND THINGS TO ACQUIREMENTS UNDER THE ROOF -- INFLATION READ UP MEANT -- INFLATION REDUCTION ACT. KRITI: WHEN WE TALK ABOUT WHAT IS GREEN ON THE SCREEN, IMMEDIATELY WHAT COMES TO MIND IS THE TECH TRADE. THE GROWTH TRADE. WHAT HAPPENED TO SPECULATIVE TRADE, IPO'S, MEME STOCK FRENZY. A LOT OF DEALMAKING HAS DRIED UP THE LAST COUPLE OF YEARS. IT IS NOT THE SAME ENVIRONMENT WE SAW TWO YEARS AGO WHEN THE LIKES OF GAMESTOP, ETC. AND OTHER IPO'S WERE THRIVING IN THE TRADE. THAT BRINGS US TO THIS CHART. YOU CAN SEE THE ACCELERATION AND A WHOLE LOT OF NOTHING. THE IDEAS WHEN THE UNCERTAINTY IS SO HIGH, SPECIFICALLY AROUND RATE CONCERNS LIKE ROMAINE WAS TALKING ABOUT, THE FEDERAL RESERVES IMPACT ON SOME CORPORATE STORES, WHERE DOES THAT DEAL VOLUME GO AND DOES IT COME BACK? I WONDER IF IT IS COMING BACK. ROMAINE: LET'S FIND OUT. NOT EVERYONE IS GOING TO LET THIS MARKET UNCERTAINTY GET IN THEIR WAY. WE LEARNED EARLIER, SOFT BANKS ARE JUMPING IN INTO ONE OF THE MOST HIGHLY ANTICIPATED IDEAS. GLOBAL BANKS EXPECTING VALUATIONS ON THE 30 BILLION ON THE LOW-END TO 70 BILLION ON THE HIGH-END. TO TALK MORE ABOUT THIS, 30 BILLION, 70 BILLION. WHAT IS A FEW BILLION BETWEEN FRIENDS? WHAT IS THE APPETITE GIVEN MARKET CONDITIONS? > > WHEN YOU HAVE A NAME AS BIG AS ARM, IT DOESN'T MATTER WHAT THE MARKET CONDITIONS ARE. THERE IS ALMOST ALWAYS SOME TYPE OF APPETITE AND DEMAND FOR IT. ARMS TECHNOLOGY IS USED IN ALMOST EVERY DEVICE THESE DAYS. I THINK THE WIDE RANGE AND VALUATIONS WE ARE HEARING ABOUT IS A REFLECTION OF THE UNCERTAINTY AROUND VALUATIONS AND WHAT THAT MARKET IS GOING TO LOOK LIKE. ROMAINE: THAT IS WHAT I AM CURIOUS ABOUT. WHATEVER THEY PUT INTO THE TELEPROMPTER. THAT STRUCK ME AS ODD, $30 TO $70 BILLION. YOU DO NOT TYPICALLY SEE RANGES THAT WIDE. KRITI: IT IS INTERESTING WHAT SECTORS ARE COMING TO MARKET. A COUPLE OF WEEKS AGO, TXO ENERGY CAME TO MARKET. THE FIRST ENERGY IPO IN THREE YEARS. IS THERE A SECTOR LEANING IN TOWARDS THIS MARKET SPECIFICALLY OR IS THIS BROAD? DREW: ENERGY IS A BIG ONE. WE WILL HAVE ATLAS ENERGY COMING NEXT WEEK. WE HAD OUR -- STAR --NEXSTAR. WE ARE SEEING DIFFERENT STORIES THEN A FEW YEARS AGO, MONEY-LOSING TECH STARTUPS. DEALMAKERS ARE TRYING TO CREATIVE AND LOOKING FOR STORIES PEOPLE CAN BE ATTRACTED TO EVEN IF THERE IS A DOWNSIDE AROUND THE CORNER. ROMAINE: A COMMENT ABOUT MONEY-LOSING TECH STARTUPS IS A GOOD POINT TO HONE IN ON WHEN WE TALK ABOUT WHAT WE ARE GOING TO SEE THIS YEAR IN TERMS OF VOLUME IN TERMS OF VOLUME AND NUMBERS OF COMPANIES COMING TO MARKETS AND THE TOTAL ARGAN -- TOTAL AGGREGATE MARKETS. IS THERE A PIPELINE FOR SOME OF THESE PRIVATE COMPANIES TO COME TO MARKET RIGHT NOW? DREW: IT IS FUNNY FROM WHERE I AM SITTING TRADE SENTIMENT SEEMS TO CHANGE EVERY FEW WEEKS. IT IS STRONGLY LINKED TO THE OUTLOOK FOR INTEREST RATES AND WHAT THAT IS GOING TO DO TO THE MARKET THAT AS THAT OUT LOOK CHANGES ON A WEEK TO BE -- WEEK TWO WEEK BASIS, SO DOES THE SENTIMENT. IF YOU ASK ME IN JANUARY, I WOULD SAY PEOPLE ARE EXCITED AND IT COULD BE A BIG YEAR. FEBRUARY, PEOPLE WERE THINKING HIGHER FOR LONGER. THIS MONTH, PEOPLE DO NOT SEEM TO KNOW WHICH WAY WE ARE GOING GO. THEY ACKNOWLEDGE WE ARE ENTERING A REALITY WE ARE NOT GOING TO HAVE A GOOD REALITY FOR THE FORESEEABLE FUTURE. KRITI: THE CORE OF THIS IS FUNDRAISING. I AM WONDERING THE EXTENT TO WHICH THESE IPO'S COME IN, IS THIS A PICTURE MARKET, PICK YOUR BET VIBE? DREW: YOU HAVE HAD PEOPLE WAITING A LONG TIME FOR THIS DOWNTURN IN THE BROADER MARKET TO STOP. IT IS A CASE-BY-CASE BASIS IN TERMS OF HOW BADLY DO THEY NEED THE CASH, HOW PATIENT CAN THEY AFFORD TO BE, HOW WILLING ARE THEY TO ACCEPT LOWER VALUATIONS? KRITI: WE ARE STILL COMING OFF YEARS OF EXTRA STIMULUS, EXTRA ISSUANCE. WHEN THOSE SUPER LOW RATES WHEN EVERYONE WAS GETTING INTO THE CREDIT MARKET. IF YOU HAVE SO MUCH CASH ON YOUR BALANCE SHEETS, WHY IPO AT ALL? DREW: I THINK A LOT OF PEOPLE IN BOARD ROOMS ARE ASKING THAT. FOR THE PAST YEARS, THEY SAID WE SHOULD NOT. THAT IS WHY WE ARE SEEING HISTORICALLY LOW HERE IN IPO'S. I THINK LAST YEAR'S VOLUMES WERE 9% LESS THEN THE YEARS PRIOR. THAT IS A COMPLETE EVAPORATION OF A MAJOR PART OF OUR ECONOMY. ROMAINE: I WANT TO GET YOUR THOUGHTS ON SECONDARY OFFERINGS. WE GOT NEWS BUMBLE WAS COMING TO MARKET WITH A SECONDARY OFFERING, THOSE SHARES DOWN. WE HAD A FEW OTHERS THIS YEAR. I AM CURIOUS, I KNOW THEY CAN GET AWAY WITH THAT, BUT I AM CURIOUS AS TO WHETHER WE COULD SEE MORE OF THESE. DREW: THIS HAS BEEN THE BUSIEST WEEK OF SECONDARY OFFERINGS. A LOT OF PRIVATE EQUITY HOLDERS THAT A BEEN IN THESE STOCKS THEN THEY MAY BE PLANNED TO. SOMEHOW, THE IPO MARKET DID NOT LIKE VALUATIONS. THEY MIGHT HAVE DEADLINES COMING UP TO CLOSE FUNDS OR ARE FINALLY COMING ROUND TO ACCEPTING THE VALUATIONS WE ARE AT. PEOPLE THE -- THINK THIS ACTIVITY WILL COME UNTIL WE GET MORE ECONOMIC DATA. WE WILL SEE WHAT THIS DOES TO MARKET CONDITIONS. ROMAINE: WE ARE ONLY DAY THREE INTO MARCH. I GUESS WE SHOULD TALK TO YOU AT THE TOP OF EVERY MONTH. GREAT STORIES HERE. MAYBE ABOUT THE POTENTIAL ARM COMPANY COMING TO SOFT BANKS ARE. AHEAD, MORE TO TALK ABOUT. AND I ON THE MARKETS, POLITICS. GERMAN CHANCELLOR OLAF SCHOLZ AT THE WHITE HOUSE WITH THE PRESIDENT OF THE UNITED STATES. WE WILL CHECK IN WITH WHAT THOSE TWO HAD TO TALK ABOUT AND KRITI: PRESIDENT BIDEN HOSTING GERMAN CHANCELLOR OLAF SCHOLZ IN THE WHITE HOUSE TODAY TO DRIVE HOME THE ALLIES SUPPORT FOR THE WAR IN UKRAINE. IT IS THE CHANCES FIRST VISIT TO THE WHITE HOUSE SINCE THE WAR AGAIN. JOINING US IS THE MANAGER OF THE GF AND NORTH GERMAN MARSHALL FUND. ALWAYS A PLEASURE. LET'S START WITH THE U.S. QUESTION, NOT THE GERMANY QUESTION, BUT THE CHINA QUESTION. A LOT OF SCRUTINY BEING PLACED ON CHINA AS A NEUTRAL PLAYER AS OPPOSED TO CHINA AS PERHAPS AN ALLY AND A BIGGER TRADE PARTNER FOR RUSSIA. WHAT DO WE MAKE OF IT? > > I THINK THE CHINA QUESTION IS PROBABLY A BIG ONE ON THE TABLE BY HIS VISIT TODAY. CHINA HAS TALKED ABOUT NEUTRALITY IN THE CONTEXT OF THE UKRAINE WAR, BUT IN PRACTICE, IT HAS THIS EVER INCREASING PARTNERSHIP WITH RUSSIA. IT HAS HELPED RUSSIA ECONOMICALLY. THE QUESTION IS, DOES CHINA START HELPING RUSSIA WITH MORE -- WAR MATERIAL? ARMS, DRONES, THAT IS SOMETHING DISCUSSED RECENTLY. IF THAT HAPPENS THAT IN A WAY, CHINA BECOMES PARTY TO THE WAR AND CAN NO LONGER SAY IT IS NEUTRAL. THIS BRINGS UP A HARD QUESTION FOR THE U.S., BUT REALLY FOR EUROPEAN COUNTRIES LIKE GERMANY THAT ARE VERY EXPOSED TO CHINA AND THE DEPENDENCE IT HAS ON THEM. IF CHINA MAKES THE DECISION TO SUPPLY UKRAINE -- SUPPLY RUSSIA IN ITS WAR WITH UKRAINE WITH ARMS, THERE NEED TO BE CONSEQUENCES FOR CHINA, MUCH AS THERE ARE CONSEQUENCES NOW FOR RUSSIA. THE QUESTION IS, HOW MUCH CAN GERMANY TOLERATE, HOW MUCH CANDY U.S. TOLERATE -- CAN THE U.S. TOLERATE, AND WHAT DOES THIS PUNISHMENT LOOK LIKE? THIS CAN HAVE REPERCUSSIONS ON BOTH SIDE OF THE ATLANTIC. ON -- IN CHINA, SHOULD THERE BE AN OFFICIAL CONFIRMATION THIS TYPE OF ACTUAL ARMS ASSISTANCE -- ? KRITI: CHINA, THE BOTH MAIN TRADING PARTNER FOR GERMANY AND THE UNITED STATES, DEFENSE SPENDING SPECIFICALLY COMING FROM CHINA. OLAF SCHOLZ FIRST ELECTED MADE A MASSIVE SPLASH SAYING WE ARE INVESTING BIG IN OUR DEFENSE. WHICH THE U.S. EXPORTS A LOT OF GREAT TALK TO US ABOUT THAT DYNAMIC. KRISTINE: THERE IS A SENSE GERMANY HAS BEEN DRAGGING ITS FEET FOR A LONG TIME ON DEFENSE SPENDING. GERMANY BENEFITS TREMENDOUSLY FROM U.S. SECURITY PARTNERSHIP AND THE U.S. SECURITY GUARANTEE. GERMANY HAS FAILED TO ADEQUATELY INVEST IN ITS OWN DEFENSE, IN UPDATING ITS TANKS, CREATING NEW WEAPONS SYSTEMS, FOR A LONG TIME. SINCE THE WAR STARTED A LITTLE OVER A YEAR AGO, GERMANY HAS BEEN SAYING IT IS A NEW ERA, WE ARE GOING TO CHANGE, WE ARE GOING TO INVEST IN OUR ENERGY, OUR ARMS AND INVEST IN DEFENSE. WE ARE GOING TO BE -- MEET THE 2% REQUIREMENT FOR NATO. WE ARE GOING TO BE BETTER. GERMANY CONSISTENTLY FAILS TO DELIVER ON THAT. IT IS NOT WILLING TO PLAY A FLOOD -- A FRONT RUNNER ROLE, AS WE SAW ON THE LEPER TANKS. THE ONLY THING THEY SAID YES TO WITH LEPER TANKS AND PROVIDING THEM TO UKRAINE WAS, ONCE THE U.S. SAID THEY WOULD SEND ABRAMS. THERE IS FRUSTRATION WITH GERMANY FOR NOT BEING AS FORWARD AS IT SHOULD. ROMAINE: I WANT TO TALK ABOUT THE FLIPSIDE PARTICULARLY OUTSIDE OF WHAT IS GOING ON WITH UKRAINE AND CHINA AND MAYBE SOME OF GERMANY'S FRUSTRATION WITH THE U.S., PARTICULARLY WHEN IT COMES TO THE INFLATION REDUCTION ACT AND AT LEAST IN THEIR WORDS THEY APPEAR -- THEY FEEL LIKE THAT IS GOING TO UNDERMINE THEM, AN ALLY, RATHER THAN JUST UNDERMINING CHINA. KRISTINE: EXACTLY. THERE IS A LOT OF FRUSTRATION HERE. THE INFLATION REDUCTION ACT PROVISIONS TO HAVE A LOT OF THE NEW, TECH SAVVY EV TYPE THINGS PRODUCED IN THE U.S. IT WAS NOT WRITTEN TO BE AN OPPOSITION TO EUROPEAN ALLIES, BUT THEY WERE NOT INCLUDED. THAT HAS LED TO A LOT OF FEAR IN EUROPE THEY ARE GOING TO LOSE OUT IN THE NEW, HIGH-TECH AREAS BOTH SIDES OF THE ATLANTIC WENT TO WORK ON TOGETHER. THE U.S. IS PROTECTING ITSELF AT THE COST OF EUROPEANS, WHILE OSCO -- ALSO ASKING EUROPE TO DIVERSIFY AWAY FROM RUSSIA AND CHINA WHY NOT BEING ABLE TO HAVE GROWTH AND THE U.S. WILL. ROMAINE: APPRECIATE YOU TAKING TIME FOR US. HAVE A GREAT WEEKEND. A LOOK AT THAT MEETING BETWEEN THE HEADS OF GERMANY AND THE UNITED STATES. IN WHILE, A LOOK AT THE BROADER MARKET. YOU ARE LOOKING AT A BROADER MARKET AT HIGHS OF THE DAY. HIGHS OF THE WEEK MARKET, COMPLETELY FLIPPED WHERE WE WERE TWO OR THREE DAYS AGO. KRITI: STOCKS AND BONDS CATCHING A BIT. TWO YEAR YIELD COMING UP AGAINST AROUND NUMBER, 5% IS WHAT YOU WANT TO WATCH ON THE FRONT END OF THE CURVE ESPECIALLY INTO NEXT WEEK WHEN WE GET THAT FED SPEAK AND THE EFFECTS ON THE DOLLAR. ROMAINE: SEEING A LOT OF PRESSURE IN THE COMMODITIES SPACE, AS WELL AS THE FX SPACE. YOU'VE GOT A BIG WEEK AHEAD, NO REAL EARNINGS AND ECONOMIC DATA. YOU ARE GOING TO HEAR FROM JAY POWELL TWO STRAIGHT DAYS TUESDAY AND WEDNESDAY. A LOT TO DIGEST, STICK WITH US. GETTING READY TO RESET FOR THE FINAL HOUR OF TRADING. THIS IS BLOOMBERG. ANNOUNCER: "COUNTDOWN TO THE CLOSE", BLOOMBERG'S COMPREHENSIVE CROCKPOT FROM COVERAGE AHEAD OF THE U.S. MARKET CLOSE STARTS RIGHT NOW. ROMAINE: THIS IS THE "COUNTDOWN TO THE CLOSE". 60 MINUTES LEFT TO GO IN THE TRADING DAY AND WE. ROMAINE BOSTICK ALONGSIDE KRITI GUPTA, JOINED BY CAROL MASSAR AND JUST MINTED FILLING IN FOR TIM STENOVEC. CAROL MASSAR, YOU HAVE A SMILE ON YOUR FACE. THAT MUST MEAN YOU ARE FULLY INVESTED IN THIS MARKET AT THE HIGHS OF THE DAY. CAROL: SPEAK ABOUT WHERE INVESTORS ARE INVESTING TODAY. IT IS ALL AGAIN ON AI. CHECK OUT SOME MOVES WE ARE SEEING. THIS TYPICALLY, IT HAS TO DO WITH ONE COMPANY COMING OUT. WE ARE TALKING ABOUT THE AI SOFTWARE COMPANY, C3.AI. THAT STOCK IS UP 33% TODAY. EVERYONE IS PSYCHED AND ASKING ABOUT IT. BIG BEAR AI HOLDINGS AS OF ABOUT 70%. YOU HAVE BROADCOM, THE COMPANY HIGHLIGHTS A SUBSTANTIAL EXCITEMENT AROUND GENERAL AI. THAT IS A CATALYST FOR THE COMPANY NETWORKING BUSINESS. BROADCOM IS UP FOR SEVERAL REASONS BUT THE AI IS ALSO AT PLAY. JESS: I AM TAKING A LOOK AT WHAT IS HAPPENING WITH THE -- WITH THE DECLINERS TODAY. TAKING A LOOK AT COSTCO. IT HAS ITS LOWEST SALES GAIN IN A WHILE. IT IS CLOSE TO A MONTH DOWN. IF YOU WANT TO LOOK TO WHAT IS HAPPENING WITH SOME OTHER STOCKS, Z SCALER STOCK IS DOWN ALMOST 11%. THAT IS A SOFTWARE COMPANY DROPPING AFTER ITS MACRO UNCERTAINTY AS FAR AS WHAT IS COMING FORWARD DID NOT HIT IS BILLING. EVEN THOUGH SOME EARNINGS WERE BETTER THAN EXPECTED, IT MISSED ON THAT. AND THEN WITH BUMBLE, THE DATING SCENE, THE STOCK IS DOWN. ITS BIGGEST DECLINE SINCE NOVEMBER. IT DID ANNOUNCE A SECONDARY OFFERING OF OVER 13 MILLION SHARES SO YOU ARE SEEING THAT STOCK DOWN TODAY. ROMAINE: S & P RIGHT NOW UP 1.5 PERCENT. SIMILAR PRICE ACTION FOR THE REST OF THE MAJOR INDICES. THE DOW UP 1%. THE NASA OF ALMOST 1 -- UP -- THE NASDAQ UP ALMOST 2%. JESS: -- CAROL: THE STORY IS REALLY BREATH. BUT WE POINTED OUT EARLIER, CONSUMER DISCRETIONARY. DROID TESLA AND AMAZON IS IN THERE. BUT EVEN CONSUMER STAPLES LIKE HEALTH CARE AND UTILITIES. EVEN YIELDING STOCKS DOING WELL. I WONDER HOW MUCH IS A RESULT OF THE YIELD LOWER STORY? ROMAINE: YOU ARE SEEING A LOT OF THE BIG TECH RALLY ALL DAY. META HAS A GREAT DAY AND WEEK, UP ABOUT 6.5%. THAT WILL GIVE IT ROUGHLY A WEEK -- 89% GAIN ON THE WEEK. FOR IT IS UP. SOME DATA WE GOT IS GOOD BUT MORE IMPORTANTLY THE COMMENTARY ABOUT THE PACE AND CELEBRATION OF EV SALES. Z SCALER IS DOWN 11%. BARBELL TECHNOLOGY DOWN 5%. TAKE A QUICK LOOK AT WHAT HAS BEEN HAPPENING IN THE TREASURY MARKET, PARTICULARLY ON THE CASH. IT REMAINS KING. THE THIRD STRAIGHT WEEK OF INFLOWS. SOME OF THE MAIN ETF SUBTRACTS YIELDS. IF YOU WERE TO BUY A STRAIGHT UP SIX MONTHS OUT ON TREASURY YIELDS, YOU ARE GETTING 5.61%. YOU ARE LOOKING AT EARNINGS YIELDS AND DIVIDEND YIELDS. YOU ADJUST THAT FOR INFLATION, IT IS MY COMPETITION. CAROL: I DO NOT WANT TO BE A DEBBIE DOWNER. JESS:, CAROL, IT IS FRIDAY. CAROL: JAY POWELL GOES BEFORE CONGRESS NEXT WEEK AND WILL TALK ABOUT WHERE THE ECONOMY IS. THEY SAID THEY ARE COMMITTED TO TURNING INFLATION TO 2%. WE ARE NOT QUITE THERE YES MAYBE THE TREASURY MARKET HAS IT RIGHT OR MAYBE IT HAS TO GO HIGHER. LARRY SUMMERS, FORMER TREASURY SECRETARY, GOT UP WITH DAVID WESTIN AND THINKS THE FED NEEDS TO BE MORE AGGRESSIVE. IT IS WHAT HE HAD TO SAY. LARRY: THE FED RIGHT NOW SHOULD HAVE THE DOOR WIDE OPEN TO A 50 BASIS POINT MOVE IN MARCH. NO NEED TO BE COMMITTED TO THAT UNTIL WE SEE THE NEXT EMPLOYMENT FIGURES UNTIL ONE SEES WHAT HAPPENS IN MARKETS. IF MARKETS ARE NOW SAYING 22%, THAT MEANS THE DOOR IS NOT OPEN TO THAT POSSIBILITY. THERE IS A VERY SIGNIFICANT CHANCE THAT IS GOING TO BE THE RIGHT THING TO DO. CAROL: FORMER U.S. SECRETARY LARRY SUMMERS. IF THEY WENT 50 BASIS POINTS, DON'T YOU THINK THAT WOULD FREAK OUT INVESTORS IN THE EQUITY MARKETS DACA ROMAINE: THERE HAS BEEN A LOT OF TALK BECAUSE ONCE YOU DOWNSHIFT LIKE THAT, WHAT MESSAGE DOES THIS SEND? WE HEARD FROM MOHAMED EL-ERIAN THIS WHO BROUGHT UP THAT PARTICULAR ISSUE THAT A LOT OF INVESTORS HAD. THIS IS NOT JUST ABOUT WHERE RATES ARE AND A LEVEL OF RATE. IT IS ABOUT COMMUNICATION AND CONSISTENCY. CAROL: AND CONFIDENCE IN THE U.S. SOCIAL BANKS IN TERMS OF WHAT THEY HAVE BEEN SAYING. KRITI: I THINK THE UPSHIFT IS REALLY CRUCIAL BECAUSE 25 BASIS POINTS OR 50, THE MARKETS CAN HANDLE IT IS A QUESTION OF ABILITY. IF THE MARKETS ARE ALREADY QUESTIONING THE FED, THIS TAKES IT TO ANOTHER LEVEL. JESS: ESPECIALLY OFF THE BACK OF THE ISM SERVICES DATA WE GOT THIS MORNING. YOU ARE STRENGTHENING AS A -- EVEN IN FEBRUARY. IF WE SEE THE GANG BUSTER OF 17,000 JOBS AND HOW THIS HAS REVISED FOR THE LAST FEW MONTHS, AND WHAT WAYS INFLATION HAS TO DO WITH THIS DAY. ROMAINE: THE PAYROLL REPORTS AS YOU SAID WILL BE A BIG DRIVER. IT IS KIND OF INTERESTING. YOU DO NOT HAVE A TON OF FED SPEAK BECAUSE EVERYONE IS MAKING WAY FOR POWELL TO BE ON THE HILL AND YOU DO NOT HAVE A LOT OF ECONOMIC DATA LEADING UP TO THAT. WE TALKED ABOUT THE STARTING SEASON. CAROL: I WANT TO GO BACK TO THE ISM SERVICES DATA. MAYBE WHY YOU ARE SEEING ENTHUSIASM IN THE EQUITY MARKETS TODAY IS THE PRICES PAID COMPONENT IS COMING DOWN A LITTLE BIT. IT IS ALL ABOUT THE TREND LINE WHEN IT COMES TO INFLATION. IF WE CAN SEE A CONTINUATION OR TURNAROUND IN TERMS OF INFLATION COMING DOWN TO THE NEXT LEVEL DOWN, THAT WOULD BE A POSITIVE. KRITI: THAT DOESN'T EVEN TAKE INTO ACCOUNT THE OTHER FACTORS. IMPROVING SUPPLY CHAIN ISSUES. NO ONE IS SAYING THAT WILL BE A PERSISTENT ISSUE THE REST OF THE YEAR. THEY SAY THEY ARE AT THE TAIL END OF IT. CAROL: WE WILL BE BACK IN LESS THAN AN HOUR'S TIME. YOU'RE ON TRACK FOR THE S & P UP FOR A WEEKLY GAIN, FIRST TIME IN FOUR WEEKS. JESS: STOPPING A THREE WEEK LOSING STREAK. CAROL: BACK "BEYOND THE BELL", 4:00 P.M. WALL STREET TIME. ROMAINE: WE CONTINUE MARKET COVERAGE ON BLOOMBERG TELEVISION, COUNTING DOWN TO THE CLOSE ON THIS FRIDAY AFTERNOON. KATHY JONES JOINING US NOW, CHARLES SCHWAB TEETH INCOME STRATEGIST. WE HAVE BEEN TALKING ABOUT MACRO CONDITIONS AND WORKING OUR WAY DOWN. I WANT TO FLIP THAT AND LOOK CLOSER AT SOME FINANCIAL CONDITIONS OUT THERE. AND SOME RED FLAGS A LOT OF INVESTORS HAVE BEEN LOOKING FOR, WHETHER IT IS AGGREGATE FINANCIAL CONDITIONS OR CREDIT SPREADS WHICH MAY BE HAVE NOT WIDENED OUT TO THE POINT PEOPLE THOUGHT THEY WOULD WIDEN OUT. IS THE MARKETS WRIT LARGE SO PRICING IN A PESSIMISTIC OUTCOME TO WHATEVER THE FED IS TRYING TO DO ACTIVE > > WHEN YOU LOOK AT THE FIXED INCOME MARKET, IT IS CONSISTENT WITH THE FED GUIDANCE. THE FED GUIDANCE HAS BEEN FOR QUITE SOME TIME HIKE, HOLD, RECALIBRATE, WAIT FOR INFLATION NUMBERS TO COME IN. THE MARKET TO NOW IS PRICE FOR PEAK FUNDS RATE CLOSE TO 5.5% AND PRETTY MUCH HOLDING THERE FOR THE REST OF THIS YEAR. 80 RATE CUTS END OF NEXT YEAR. THE MARKETS HAS DIGESTED THAT INFORMATION. BUT WE HAVE NOT SEEN MARKETS DIGEST IS TO GET THAT SORT OF DECLINE IN INFLATION. YOU ARE STARTING TO SEE CREDIT CONDITIONS HEIGHTEN NOW THAT MAJOR INDICES DO NOT SHOW IT BECAUSE CREDIT SPREADS HAVE BEEN PRETTY TIGHT. WHEN YOU LOOK AT THE SENIOR LOAN OFFICERS SURVEY, MORE TO THE 40% SAYING TIGHTEN CREDIT CONDITIONS AND LENDING STANDARDS FOR BUSINESSES, SMALL, MEDIUM SIZE, AND LARGE. FOR CONSUMERS, IN THE AUTO LOAN AREA, THEY SUFFERED SOME DEFAULTS. I THINK THE MARKET IS BEING A LITTLE COMPLACENT HERE IN TERMS OF THE CREDIT SIDE, OTHER THAN THE INTEREST RATE SIDE. ROMAINE: I AM CURIOUS, WE ARE GOING TO GET UPDATES OF CONSUMER CREDIT OUT OF THE FED NEXT WEEK AS WELL, IF PEOPLE DO ANTICIPATE THAT WE ARE IN A RECESSION OR HEADING TOWARDS ONE OR THE AMOUNT OF DEMAND DESTRUCTION THE FED WILL HAVE TO DO TO GET ANYWHERE BACK TOWARDS ITS TARGET THAT IS OUR OUTLOOK IN FUTURE HERE. IS THERE ANY CASE TO BE MADE FOR TRYING TO GO OUT IN DURATION OR D STAY IN THESE SHORT-TERM INVESTMENTS WHICH SEEM TO BE -- DO YOU JUST STAY IN THE SHORT-TERM INVESTMENTS WHICH SEEMS TO BE WHAT THEY ARE ADVOCATING FOR RIGHT NOW. > > WE HAVE BEEN ADVOCATING FOR INVESTORS TO DO SHORT TERM DURATION. IF THEY'RE GOING TO LOCK IN 4.5%-FIVE .5%, SAY YOU ARE JUST DOING A FIVE YEAR TREASURY BOND, THEN YOU ARE LOCKING IN PRETTY ATTRACTIVE YIELDS THAT CAN HELP STABILIZE WERE PORTFOLIO. WE HAVE NOT HAVE -- NOT HAD 5% RISKS IN YEARS. IF THE FED SUCCEEDS, THE YIELDS WILL COME DOWN IN THE FUTURE. WE HAVE BEEN SUGGESTING SENDING DURATION BUT ONLY WITH HIGH CREDIT QUALITY BONDS. KRITI: WE ARE LOOKING AT THE 10 YEAR END THIS BLOWS MY MIND THAT WE ARE NOT ONLY ABLE TO SURPASS IT BUT SUSTAINABLY. IT REMINDS ME OF THE SHOW INDUSTRY WHEN THE SHOW CAME OUT AND SAID FOR PERCENT ON TREASURY YIELDS AND IT GOT DISDAIN FROM THE INDUSTRY. BUT HERE WE ARE. AS THE START TO PUSH OUT FOR FED CUTS INTO 2024 AND 2025, IS THAT PUT 6% ON THE TABLE REASONABLY WHEN IT COMES TO TERMINAL RATE? > > I DO NOT THINK SO. REMEMBER, THESE ARE LONG LAGS OF MONETARY POLICY. WE ARE ONLY 12 MONTHS OUT SINCE THE INITIAL RATE HIKE BY THE FED AND THE START OF QT. THEN WE HAD STUFF FROM THE EUROPEAN CENTRAL BANK AND OTHER CENTRAL BANKS LATER. WE ARE JUST GETTING TO WHERE YOU WOULD EXPECT THE IMPACTS OF MONETARY POLICY TIGHTENING TO START TO HIT THE ECONOMY IN A MEANINGFUL WAY. I THINK 6% IS HIGH TO ME. YOU CANNOT RULE OUT ANYTHING. IT SEEMS HIGH TO ME. PARTICULARLY, WHEN WE LOOK UNDER THE SURFACE AT FINANCING RISKS AND REFINANCING RISKS AND THE TRENDS WE ARE STARTING TO SEE AT SOME BIGGER COMPANIES TOWARD LAYOFFS OR NOT AS MUCH HIRING. I THINK WE WILL SEE THAT SLOW DOWN AND DECLINING INFLATION DOWN THE ROAD. 6% IS ON THE HIGH SIDE. KRITI: YOU BRING UP THE POINT OF A LAG WHEN IT COMES TO MONETARY TIGHTENING BUT WHAT IF THE TIGHTENING LAG IS MUCH SHORTER THIS TIME AROUND. IS THAT SOMETHING THE BOND MARKET IS CONSIDERING? > > THERE IS A BIG DEBATE RIGHT NOW BETWEEN THOSE WHO SAY THAT WE ARE LESS INTEREST RATE SENSITIVE IN THIS CYCLE THAN PREVIOUS CYCLES BECAUSE MOST PEOPLE'S MORTGAGES HAVE BEEN LOCKED IN AT LOW RATES. PEOPLE HAVE SAVINGS SOME PEOPLE HAVE JOBS. THERE ARE ACTUALLY SOME PEOPLE SAYING WE ARE LESS INTEREST RATE SENSITIVE AND IT WILL TAKE LONGER. WE HAVE TO SEE HOW THE CYCLE PLAYS OUT INEVITABLY, YOU CANNOT HAVE IT BOTH WAYS. YOU CANNOT HIKE RATES BY 450 BASIS POINTS AND NOT EXPECT SOME FALLOUT IN THE ECONOMY FROM THAT. ROMAINE: ALWAYS GREAT TO CATCH UP WITH YOU. KATHY JONES, THE PRIDE OF BIRTH WESTERN UNIVERSITY AND CHARLES SCHWAB'S CHIEF INCOME STRATEGIST. WE CONTINUE TO COUNTING DOWN TO THE CLOSING BELL. TEACH -- CAROL'S LIFE, IF HE CHIEF INVESTMENT OFFICER AT BMO FAMILY OFFICE. ALSO ANTONIO MARY -- NERI STOPPING BY. A LOT OF CONCERN ABOUT THE PACE OF CORPORATE SPENDING AND WE ARE GOING TO GET A PREVIEW OF THE NATIONAL PEOPLE'S CONFERENCE STOPPING ITS ANNUAL SESSION IN BEIJING. WE ARE GOING TO BREAK DOWN WHAT TO EXPECT. ALL THAT AND MORE COMING UP ON BLOOMBERG. ROMAINE: 43 MINUTES LEFT TO GO ON THE TRADING DAY. TAKE A LOOK AT THE BOARD BEHIND ME. META, AMAZON, TESLA, APPLE AND NVIDIA A BIG PART OF THE REASON WE ARE SEEING GREEN ON THE SCREEN. THE S & P 500 PUNCHING OF ABOUT 1% ON THE DAY, A BIG FLIP-FLOP FROM A COUPLE DAYS AGO. LITTLE RED ON THE SCREEN BUT THESE ARE IDIOSYNCRATIC STORIES. THE OVERALL MACRO ENVIRONMENT COMBINED WITH THE MICRO LEADS US TO AN S & P BACKUP ABOUT 4000. NEVERTHELESS, YOU ARE STILL SEEN YIELDS ELEVATED SLIGHTLY DOWN ON THE DATA ON A WEEKLY BASIS, WE CONTINUE TO SEE THE PUSH HIGHER. THE TWO-YEAR YIELD STILL CAMPS AROUND 4.9. THE 30 YEAR YIELD HAS SLIGHTLY DIPPED BELOW THE 4% MARK BUT STILL CAMPED OUT. KEEP AN EYE OUT ON THE INDIVIDUAL STORIES WE HAVE BEEN TALKING ABOUT. A BIG SURGE IN AI, A BIG DOWNDRAFT IN BUMBLE AND OTHER COMPANIES COMING TO MARKET. VOLKSWAGEN IN GERMANY UP 9%. INTERESTING COMMENTARY ABOUT HOW THE CHIP SUPPLY INDUSTRY MAY BE STARTING TO ABATE. THIS PRETTY MUCH WRAPS UP THE EARNINGS SEASON. THIS PRETTY MUCH CLEARS THE WAY FOR WHAT IS UP NEXT. A LOT OF FED SPEAK BRINGS US BACK TO THE BOND MARKET AND BRINGS US TO OPTION INSIGHT WHICH WE DO EVERY DAY AT THIS TIME. ABIGAIL DOOLITTLE HAS A VERY WELL-DESERVED DAY OFF. KRITI: WE ARE LOOKING AT THE BOND MARKET. WHAT ELSE WOULD WE BE LOOKING AT? HIGHER BY 4% EARLIER THIS WEEK. HOW DO YOU TRADE IT? DO YOU HAVE TO TRADE IT WHEN YOU HAVE THE YEN, GOLD, AND OTHER ALTERNATIVES FOR THE CLASSIC TRADE? WHO BETTER TO ASK? I WANT TO START WITH THE BOND STORY FIRST. WE KIND OF BOUNCE BACK FROM THE 4% LEVEL ON THE 10 YEAR YIELD. WE ARE LOOKING AT 5% ALMOST ON THE TWO-YEAR YIELD. WHAT DO YOU DO WITH BONDS? IS THIS A ONE-WAY SELLOFF? > > I THINK THIS IS ACTUALLY HIGH-RISK. FEBRUARY 16, I UTTERED A BOND BULL'S BETTER DEFEND HERE OR WE HAVE A RISK OF FURTHER TO GO LOWER. THIS IS A COORDINATOR -- COORDINATED TRADE WITH GOLD, YEN, AND BONDS. PACIFIC LEE THIS YEN INTERVENTION -- SPECIFICALLY THIS YEN INTERVENTION. SEPTEMBER 20 SECOND TRIGGERED ITS LARGEST YEN INTERVENTION IN 24 YEARS, FOLLOWED BY OCTOBER 21 AND OCTOBER 24. THERE HAS BEEN MASSIVE SUPPORT, OTHERWISE KNOWN AS QE IN BANK OF JAPAN BALANCE SHEET TO LIFT UP THE DOLLAR-YEN TO THIS 137 WHICH WAS CORRELATED FOR ME WITH BOTH GOLD AND BONDS. RIGHT NOW WE ARE HAVING A PULLBACK IN THE DOLLAR-YEN. BACK DOWN TO AROUND 135. GOLD IS PUSHING HIGHER TO AROUND 18.65. I THINK BOTH STOCKS AND BONDS ARE GOING TO COME UNDER MORE DISTRIBUTION AFTER NEXT WEEK. GOLD WILL COME BACK DOWN. THE DOLLAR WILL BALANCE. STOCKS WILL BE AT MORE RISK. THIS BASICALLY WILL BE A VERY HIGHLY TECHNICAL BOUTS FIVE THINK IT WILL BE A BOUNCE AND THEN TROUNCED INTO A LOVE MACRO RISK. KRITI: WHAT IS THE LOGIC HERE BECAUSE IF YOU HAVE THE DOLLAR-YEN REALLY TIED TO THE HIP OF THE BOJ, WHICH MAY OR MAY NOT FURTHER WIDEN THOSE BANDS, DOESN'T GOLD TRADE OFF THE FUNDAMENTALS OF MORE ASIA, CHINA AND INDIA THAN JAPANESE? > > AT THE SAME TIME, THE YEN IS THE SECOND-LARGEST WAITING IN THE DOLLAR BASKET. THEY ARE TO SHOW FROM THAT DIVERGENCE THE CHANGE IN THE DOLLAR RIGHT NOW. IT MAKES THE WEATHER. IF WE GET ABOVE 106 ON A WEEKLY CLOSE, THE ARRAY OF CHANGE WILL DETERMINE A VELOCITY OF THIS WEATHER. THAT IS GOING TO REALLY PUT A BID IN DOLLAR-YEN HIGHER WHICH IS THEN GOING AGAINST THEIR YIELD CURVE CONTROL. YOU WILL NOT HAVE MORE YIELD SPIKES U.S. GLOBAL. HE ALREADY HAD THE INFLATION STORY OUR WAY. I BASELINE BETS FOR 2023 AS WE ARE GOING TO HAVE WAVES OF INFLATION PEACE AND EQUITY BOTTOM. THE RACING RISK IS BREAKING BELOW THE 3900 SPF. CBT AND 101 FEATURES OR 101 AND TLT. HOWEVER YOU TRADE, THERE IS RISK OF WAR BOND AND STOCK SELLOFF WHICH IS OBVIOUSLY NOT AS AFTER PAYROLLS, A BIG IMPORTANT PRINT, AS WELL AS THE MARCH 10 CORONA MEETING AND THE MARCH 20 ECONOMIC REPORT IN JAPAN WHICH WILL ALSO SEE MORE INFLATION MOST LIKELY. THAT IS A TRIGGER FOR MORE BOND SELLING. KRITI: A LOT TO KEEP AN EYE ON. SAMANTHA LADUC, CONNECTING THE DOTS ON THE YEN, GOLD AND BONDS. WE THANK YOU AS ALWAYS. FROM NEW YORK, THIS IS BLOOMBERG. ♪ ROMAINE: CAN YOU HEAR ME NOW? THAT IS WHAT SOME COMPANIES ARE SAYING NOW THAT WORK PHONES ARE MAKING A COMEBACK. A LOT OF THIS IS ABOUT THE CONTROL TO OUR PERSONAL AND PRIVATE LIVES HAVE OVERLAPPED. AND WITH THE WAY SMARTPHONES HAVE EVOLVED, WE COULD DO EVERYTHING. BUT WITH SOME BANDS ON TIKTOK AND OTHER WAYS COMPANIES WANT TO MAKE SURE YOU ARE NOT DOING THINGS YOU SHOULD NOT BE DOING, THEY'RE JUST GOING TO ISSUE YOUR OWN WORK PHONE THAT WAY CAN CARRY AROUND TWO PHONES INSTEAD OF ONE. KRITI: BECAUSE I WORK POCKETS ARE GETTING BIGGER AND BIGGER. A CORPORATE PERSPECTIVE IS INTERESTING BECAUSE IT ADDS THAT BUSINESS INVESTMENT IS A LOT. THAT IS A CONVERSATION YOU ARE HEARING WITH A LOT OF TECH COMPANIES AND TELECOM COMPANIES. VERIZON, AT & T AND T-MOBILE ARE DEALING WITH DECLINES AS FEWER PEOPLE SUBSCRIBE TO THEIR STORIES -- SERVICES. ROMAINE: I CAN CERTAINLY SEE HOW IN SOME INDUSTRIES, YOU NEED TO USE THESE AND MAKE SURE YOUR EMPLOYEES ARE ONLY USING SOME APPS THAT THERE IS AN ISSUE OF COST FOR COMPANIES. WE ARE IN A PHASE WITH EVERY COMPANY IS LOOKING AT COST AND THE IDEA THEY ARE GOING TO RUN OUT AND BUY A BUNCH OF PEOPLE SMARTPHONES, WHICH EVEN A RELATIVELY DECENT ONE WILL STILL COST ABOUT 400 OR $500. KRITI: TAKE A LOOK AT MY PHONE. IT WAS RIPPED APART BY MY DOG. IT IS AN IPHONE SEVEN, I LIKE THE FINGERPRINT. I REFUSE TO UPGRADE. IT IS ALSO INTERESTING WITH THE CHATGPT BANDS ON WALL STREET. WHAT HAPPENS WHEN TECHNOLOGY GETS TOO SOPHISTICATED FOR CORPORATIONS? KRITI: IF WE JUST GAVE EVERYBODY AN IPHONE 2 LIKE YOU, YOU WOULD NOT BE ABLE TO EVEN ASK HIS HALF THESE APPS. CAN YOU EVEN GET CHATGPT? KRITI: I THINK WE SHOULD JUST GO BACK TO WRITING OTHER LETTERS. OR A BIG ROTARY PHONE. THOSE ARE CUTE. ROMAINE: AND IN THE ROLODEX IS, WHEN YOU HAD TO FLIP THROUGH THE CARDS. THAT TO THE BROADER MARKET, CAN'T AROUND THE HIGHS OF THE DAY. A LOT MORE TO COVER AS WE HEAD TOWARDS THE FINAL HALF HOUR OF TRADING. ROMAINE: THIS IS THE "COUNTDOWN TO THE CLOSE". JUST ABOUT 30 MINUTES UNTIL THE WEEKEND. MARKETS LOOKING TO CLOSE ON A HIGH NOTE. KRITI: A LOT OF GREEN ON THE SCREEN. TAKE A LOOK AT IT. NOT JUST TECH OUTPERFORMANCE EVEN THOUGH YOU SEE THE NASDAQ OUTPERFORMING THE S & P 500 BY A MARGIN. THE GREEN ON THE SCREEN IS ACROSS-THE-BOARD. A SUSTAINABLE MARKET RALLY NEEDS ALL THE PLAYERS INVOLVED. TECH IS LEADING THE CHARGE. CONSUMER DISCRETIONARY AND YIELDS AT THE TOP. EVEN UTILITIES CATCHING A BIT TODAY. ROMAINE: THE S & P HIGHER ON THE DAY. THE BIG NAMES IS WHAT YOU NEED TO SEE THE SUSTAINED. APPLE OF CREEPERS THAT. TESLA HAVING BEEN A PHENOMENAL DAY, UP ABOUT 4%. COSTCO, SOME CONCERNS ABOUT THE COMPANY PRICING POWER. CBS UP. THERE WAS IN THE RED EARLIER TODAY BUT NOW PUNCHING BACK INTO THE GREEN. I WANT TO TALK ABOUT I.T. SPENDING. EARNINGS OUT OF HP A LITTLE WHILE AGO WERE GOOD. WE HEARD FROM OTHER COMPANIES IN THESE ACE THAT SAY A LOT OF THEIR CLIENT SPEND IS HOLDING UP. OUR FOLKS AT BLOOMBERG INTELLIGENCE PUT OUT A GREAT REPORT LAST MONTH, TALKING ABOUT POTENTIAL MARKET SIZE WHEN IT COMES TO I.T. SPENDING IN THE SHIFT IN THE SPENDING. THE IDEA THAT THERE ARE A LOT OF LEGACY SYSTEMS THAT NEED TO BE UPDATED AND THE BIG SHIFTED TO THE CLOUD. THIS REPRESENTS A BIG OPPORTUNITY TO GET SOME COMPANIES OUT THERE WHO HAVE THE LEADERSHIP TO TAKE ADVANTAGE OF IT. KRITI: RESULTS FROM COOLER PACKET -- FROM HP CAME OUT EARLIER. THE COMPANY REPORTED FIRST-QUARTER RESULTS THAT BEAT WALL STREET ESTIMATES AND RAISE THE FORECAST FOR ADJUSTED EARNINGS. DURING THIS IS THE HPE CHIEF EXECUTIVE OFFICER. PLEASURE TO HAVE YOU ON THE SHOW. A VERY SOLEMN -- STRONG QUARTER. I HAVE QUESTIONS ABOUT THE SUSTAINABILITY OF THE STRING. IT FELT LIKE THERE WAS A LOT OF ENFORCEMENT PUT ON THE BACK LOG THAT YOU HAVE FROM A LOT OF BUSINESSES. ALONG THE BACKLOG GOING TO LAST? ANTONI: WE EXITED Q1 WITH A RECORD CERTAIN FOR FOUR MONTHS AND WAS THE BEST QUARTER SINCE 2016. WE BEAT REVENUE. THEN WE DELIVERED THE BEST EVER OPERATING PROFIT OF 11.8% AND THE HIGHEST EVER EPS IN THE HISTORY OF HEWLETT-PACKARD ENTERPRISE. THAT IS BASED ON THE FACT WE SAW A VERY STRONG AMOUNT IN 2022. WE COUNTERED THAT AMOUNT IN Q1 ON THE BOOK AND EXITED Q1 WITH A GOLDEN THAT WAS TWO TIMES HISTORICAL LEVELS. WE SEE THE STATE OF DEMAND IN STORAGE AND HPC AND AI AND A LITTLE BIT IN THE COMPUTER BUSINESS WITH THE FACT CUSTOMERS HAVE TO DIGEST SOME PURCHASES THEY HAD LAST YEAR. WHAT IS REALLY EXCITING ABOUT US IS THE FACT WE HAVE A WITNESS IN HP THROUGH LAKE AND THE AR BUSINESS GREW 31%. WHAT IS MORE IMPRESSIVE IS IN JUST TWO YEARS, WE HAVE DOUBLED THE AMOUNT OF TOTAL COMFORT VALUE IN -- AS A SERVICE BUSINESS FROM $5 BILLION TO $10 BILLION. THAT IS WHY WE ARE VERY CONFIDENT ABOUT THE MOMENTUM. KRITI: IT IS CLEAR THERE IS A CUSHION AVAILABLE TO HPE. WHAT HAPPENS IF WE DO GET A RECESSION AT THE END OF THIS YEAR? HOW QUICKLY CAN THE BACKLOG FALL APART? ANTONI: WE HAVE A UNIQUE DIVERSIFIED PORTFOLIO AND I WAS HEARING ROMAINE TALK ABOUT THE REPORT EARLIER. I HAVE TO TELL YOU, WE HAVE A PORTFOLIO ALIGNED TO THE MEGATRENDS WHERE THE SPEND IS SHIFTING. I -- AN INTELLIGENT EDGE. INTELLIGENT EDGE BUSINESS GREW 31% AND WE HAVE AN EXTREMELY ELEVATED BOOK. THAT WILL CARRY ON FOR THE BALANCE OF 2023. THEN AI. THAT IS TOP OF MIND FOR PEOPLE TODAY. ROMAINE: TALK ABOUT THAT BECAUSE IT IS HARD TO SEPARATE THE SUBSTANCE FROM THE HYPE. THERE HAS CERTAINLY BEEN HYPE AROUND THIS. HOW DO YOU INTEGRATE THIS INTO YOUR PRODUCT MIX AT COST EFFECTIVE WAY? ANTONIO: THIS IS ONE OF THE MAJOR INFLATION POINTS WE SEE IN A GENERATIONAL SHIFT LIKE A WEB, MOBILE, AND THE LIKE. FOR US, IT IS AN INFLATION POINTS THAT IS PERFECTLY ALIGNED TO OUR INTUBATION -- OUR INNOVATION POINT. BUT WE THINK ABOUT CHATGPT AND LANGUAGE MODELS, WE HAVE THE CAPABILITIES TO DO SO. OUR THINKING IS WE ARE GOING TO OFFER THE SUPERCOMPUTING AS A CLOUD BECAUSE IT REQUIRES A UNIQUE SET OF CAPABILITIES NO ONE ELSE HAS, NOT EVEN THE PUBLIC CLOUD. ACT AS AN OPPORTUNITY THAT WE ARE GOING TO INVEST OVER THE NEXT YEARS TO COME. ROMAINE: THE NECESSITY YOU NEED TO EXECUTE THAT, AS THE ALREADY THERE WITH OF THE COMPANY OR DO YOU ANTICIPATE YOU WILL NEED TO LOOK OUTWARD AND MAKE ACQUISITIONS TO MAKE GOOD ON SOME OF THESE OUTLOOKS? ANTONIO: WE GOT MOST OF IT. IF YOU THINK ABOUT WHAT WE JUST DID WITH THE FRONTIER SYSTEM, IT IS THE FIRST ASSISTANT JEWELS SKILLS SYSTEM SUPERCOMPUTER THAT CAN PROCESS ONE QUINTILLION ACTIONS PER SECOND. THINK ABOUT HOW CHATGPT NEEDS TO BE ACCURATE AND HAVE TO CONSTANTLY TRAIN AND RETRAIN ITSELF. IT NEEDS A LEVEL OF COMPUTATIONAL POWER AND COMPUTER POWER TO MANAGE THIS MODEL ON A MASSIVE SCALE. WE HAVE OUR OWN INVESTMENTS AROUND THE SOFTENING DEVELOPMENT FRAMEWORK THAT DEVELOPERS NEED TO TRAIN THOSE MODELS. WE ARE UNIQUELY POSITIONED. WE HAVE SOME OPPORTUNITY TO CAPITALIZE. ROMAINE: YOU TALK ABOUT THE COMPUTING POWER. THAT IS THE ACCENT ABOUT THESE AI PROGRAMS BUT THERE HAS BEEN A LOT OF TALK ABOUT THE COST OF THE COMPUTING POWER. IN ORDER TO MAKE THIS VIABLE FOR CLIENTS IN TERMS OF THE ECONOMICS YOU NEED TO WORK ON, I AM CURIOUS WHEN WE SEE A BIT MORE BALANCE THERE. ANTONIO: OBVIOUSLY, THE SYSTEM REQUIRES A LOT OF POWER BECAUSE WE THINK ABOUT 40,000 GPUS AND HAVE THE CAPABILITY TO GO EVEN TWICE AS MUCH AS THAT. IT REQUIRES A LOT OF POWER BUT IS DESIGNED IN A SUSTAINABLE WAY. THE SYSTEM USED 35% LESS POWER TO POWER ON A CERTAIN BASIS. WE THINK WE HAVE A UNIQUE, RADICAL INNOVATION. THERE ARE GOING TO PARTNER WITH THE RIGHT PEOPLE TO BRING THAT SUPERCOMPUTER POWER AT COST EFFECTIVE MODEL. ULTIMATELY, PART OF THE COST IS NOT JUST POWER BUT TO OPERATE THE SYSTEMS. IT REQUIRES A LOT OF EXPERTISE AND WE ARE THE ONLY COMPANY ON THE PLANET TO DO THAT SCALE. ROMAINE: WE DO APPRECIATE YOU TAKING TIME FOR US. THE CEO OF HEWLETT-PACKARD ENTERPRISES. ANTONIO NERI. CAROL SCHLEIF IS GOING TO BE STOPPING BY. DEPUTY CHIEF INVESTMENT OFFICER AT THE BMO FAMILY OFFICE. STILL HOLDING ONTO THE GAINS ON THE DAY AND WHAT IT WILL LOOK LIKE. SIZABLE GAINS ON THE GROUP AS WELL. KRITI: TECH OUTPERFORMANCE CONTINUES BUT THE QUESTION IS IT SUSTAINABLE? > > WE HAVE TO LOOK AT WHAT SOME OF THE WORST MOVERS ARE. A DAY WHEN WE ARE SEEING NOTHING BUT AN, COSTCO IS LEADING THE CHARGE LOWER. THE IDEA BEING THAT RETAIL IS NOT AS HEALTHY OR COMFORTABLE AS PERHAPS TECH MIGHT BE. THIS IS REALLY THE STORY. INFLATION IS BITING. ARE A LOTS OF THESE CORPORATIONS CAPITALIZING ON THE STRONG CONSUMER AND BUSINESS INVESTMENT AND CAN THEY DO SO? COSTCO IS TAKING THE PUNCH AND DRIVING THE MARKET LOWER BUT YOU ARE STILL SEEING GREEN ON SCREEN FROM THE BENCHMARK BASIS THANKS TO THESE GUYS, APPLE, MICROSOFT, META. THE IDEA AND YOU NEED BIG TECH ON WEBSITE FOR THE MARKET TO RALLIES EXACTLY WHAT WE HAVE. YIELDS ARE HELPING THE CASE BUT IT IS A GROWTH STORY, CHIP STORY AND AI STORY DRIVING TECH HIGHER. THE QUESTION IS DOES THIS SUSTAIN INTO TOMORROW WITH THE MACRO IS BACK IN CHARGE OF CHAIRMAN POWELL TESTIFYING IN CONGRESS? ROMAINE: CAROL SCHLEIF IS JOINING US NOW, THE CHIEF INVESTMENT OFFICER AT THE BMO OFFICE. IT HAS AROUND $2 BILLION IN ASSETS IN MANAGEMENT. WE HAVE BEEN SO FOCUSED ON THE MACRO. THERE IS A GREAT ANECDOTE FROM A FEW YEARS AGO THAT HARRY TRUMAN SAID GIVING A ONE ARMED ECONOMIST BECAUSE IT IS ALWAYS ON THE ONE HAND THIS AND HE WENT HAND -- AND THE ONE HAND THAT. THE ECONOMY IS GREAT BUT ON THE OTHER HAND MAYBE IT IS SOFTENING. CAROL: YOU DEFINITELY HAVE A YEN AND YANG TO THE ECONOMY WHICH I THINK IS KEEPING THE MARKET STUCK IN THIS TRADING RANGE AND LIKELY TO KEEP IT HERE FOR THE YEAR. THE LAST FEW WEEKS, WE HAVE BEEN ABLE TO FOCUS ON EARNINGS. AS YOU MENTIONED, WE ARE LARGELY THROUGH EARNINGS SEASON AND THE ONLY THING WE FOCUS ON FOR THE NEXT FIVE OR SIX WEEKS AS CHAIRMAN POWELL'S TESTIMONY NEXT WEEK AND THE FED MEETING AT THE END OF THE MONTH, AND EVERY DATA POINT IN BETWEEN. PEOPLE WILL BE PARSING TRYING TO FIGURE OUT WHAT THIS MEANS. AND HOW LONG THEY WILL KEEP GOING AND HOW HIGH THE ULTIMATE HEIGHT RATE WILL BE THE -- WILL BE. IT IS IMPORTANT TO REMEMBER THAT IT DOES NOT HAVE A LOT PUSHING IT DOWN AND NOT NECESSARILY ALLOWING IT TO COME UP EITHER. THERE IS A NICE FLOOR UNDERNEATH THINGS. KRITI: YOU MENTIONED CHAIRMAN POWELL. WHAT CAN YOU POSSIBLY SAY AT THIS POINT TO TAKE THE MARKETS? WHAT DOES HAWKINS LOOK LIKE RIGHT NOW? CAROL: I AM NOT SURE HE CAN NECESSARILY TAKE THE MARKETS. BUT THE ONE THING THAT HAS BEEN PERPLEXING OVER THE LAST YEAR IS HE HAS BEEN PRETTY CLEAR ON EXACTLY WHAT HE IS SAYING IN THE MARKETS HAVE CHOSEN TO INTERPRET IT THAT, BUT HE REALLY MEANS IS A DOVISH PIVOT. THE EFFECT IS THERE HAS BEEN MORE AND WERE COMMENTARY IN THE MARKETS, ANCHORED TO A HIGHER TERMINAL RATE AND A HIGHER FOR LONGER OVER THE LAST FEW WEEKS. I THINK PEOPLE WILL BE WATCHING CAREFULLY FOR ANY SHIFT IN THE COMMENTARY FOR HOW LONG DOES LONGER MEAN. THE MARKETS WAS HOPING FOR FLATTENING OR A KEPT BY THE END OF THE YEAR AND NOW THIS KEEPS LOOKING LIKE IT IS GOING TO BE PUSHED WELL INTO 2024. KRITI: YOU SAID MARKETS AREN'T LISTENING, BUT SHOULD THEY BE GIVEN THE FEDERAL RESERVE HAS A CREDIBILITY ISSUE? TWO YEARS AGO WE WERE TALKED ABOUT TRANSITORY INFLATION. WHY SHOULD THE MARKETS BELIEVE THE FED? I WOULD SAY TO WATCH THE FUNDAMENTALS. IT IS TOUGH BECAUSE HE WILL NOT HAVE FUNDAMENTALS TO HANG YOUR HAT ON THE NEXT FEW. IT WILL BE EARLY APRIL BEFORE WE ARE ABLE TO HAVE EARNINGS THESE AND AGAIN. -- SEASON AGAIN. INTERMEDIATE AND LONGER-TERM, ESPECIALLY FOR CLIENTS INVESTING FOR THE LONGER-TERM REALLY OUGHT TO BE FOCUSED ON ECONOMIC HEALTH. THAT IS ACTUALLY PRETTY SOLID. YOU HAVE SOLID EMPLOYMENT AND BUSINESSES IN DECENT SHAPE. YOU HAVE PEOPLE ADJUSTING TO A NEW NORMAL, PEOPLE AND BUSINESSES. THIS HAS SOME LEVEL OF INFLATION IN THERE. YOU ARE GOING TO BE WATCHING CAREFULLY TO SEE HOW QUICKLY INFLATION CAN MODERATE. WE THOUGHT IT WAS MODERATING MORE QUICKLY THAN IT SEEMS IT IS STILL DOWN FOR WHAT IT WAS. IT IS JUST THAT ABSORPTION AND RESUMPTION BACK TO A 2.5% OR 3% INFLATION RATE. ROMAINE: JUST GETTING STARTED. IN CONVERSATION WITH CAROL SCHLEIF, STICKING WITH US AS WE COUNT YOU DOWN TO THE CLOSING BELLS ON A FRIDAY AFTERNOON. MARKETS STILL CAMPED AROUND THE HIGHS OF THE DAY. THE NASDAQ SETTING UP FOR THE STAY IN A MONTH AND THE S & P SETTING UP FOR ITS BEST DAY SINCE MID-JANUARY. THIS IS BLOOMBERG. ROMAINE: THIS IS THE COUNTDOWN TO THE CLOSE. I AM ROMAINE BOSTICK. KRITI: I'M KRITI GUPTA. ROMAINE: STOCKS TRYING TO HOLD ONTO MOST OF THE GAINS ON THE DAY. S & P 500 UP ONE POINT 5%. THE NASDAQ UP ALMOST 2%. TAKE A LOOK AT ELEVATION WE SAW IN YIELDS ON A WEEKLY BASIS. YIELDS SLIGHTLY DOWN BY ABOUT TWO BASIS POINTS BUT STILL ELEVATED ON THE WEEK. HE SAW A PRETTY STRONG BID COME BACK INTO GOLD AND A LOT OF THE FINANCIAL STOCKS AS WELL AS A LOT OF CHINESE NAMES. THERE IS A LIGHT WEEK NEXT WEEK FOR EARNINGS. TESLA, KEEP AN EYE ON THEM, UP 3% ON THE DAY. WE ARE GETTING SOME NEWS CROSSING THE WIRE ON META PLATFORMS, UP ABOUT 6% ON THE SHARES END OF ALREADY BEEN HIRED HERE -- AND HIGHER SHARE. META IS CUTTING THE PRICE OF THE VR HEADSET PRIMARILY BECAUSE OF WEAK DEMAND OF BOTH THE CORPORATE A CONSUMER SIDE. THAT'S NEWS CROSSING THE WIRE RIGHT NOW. KRITI: BUT NOT NECESSARILY MOVING THE SHARES A WHOLE LOT. THAT TOO PLATFORM SHARES UP 6%. STILL WITH US, CAROL SCHLEIF, CHIEF INVESTMENT OFFICER AT BMO. SHE JOINS US VIA ZOOM. WALK US THROUGH THE CASE FOR GROWTH STOCKS FOR THINGS LIKE META, APPLE, AND MICROSOFT. IS IT A NO-BRAINER THAT ALL THE CARNAGE IS IN THE REARVIEW MIRROR? CAROL: IT IS NOT NECESSARILY A NO-BRAINER. IT IS IMPORTANT TO REMEMBER IN THE CONTEXT OF THINGS THAT IT IS NOT ALSO -- ALWAYS EXACTLY WHAT IT NEEDS COMING OUT OF IT. WE HAVE A BROAD PERSPECTIVE IN TERMS OF THE KINDS OF INDUSTRIES WE ARE LOOKING AT. MAYBE NOT ALL OF THE SAME SORTS OF TECH NAMES THAT PLAYED IN THE SAME DECADE OF SO -- THE LAST DECADE OR SO. WE ARE DOING A LOT AND BT OF A LOT OF FISCAL SPENDING FOR -- AND WE TEED UP A LOT OF FISCAL SPENDING FOR THINGS LIKE ROADS, BRIDGES AND AIRPORTS. LOTS OF DIFFERENT AREAS WILL BE 70 WANT TO FOCUS OUR ENERGY AND INTEREST. THESE SORTS OF INDUSTRIES WILL START TO PLAY AND THAT IS AN INTERMEDIATE AND LONGER-TERM. IT CROSSES OVER BECAUSE THERE IS AN TECH COMPONENT AND INDUSTRIAL COMPONENT AND LOTS OF DIFFERENT INDUSTRIES. ROMAINE: I'M CURIOUS TO GET YOUR THOUGHTS. HE MENTIONED CHIPS. WE SPENT A LOT OF TIME EARLIER THIS WEEK TALKING ABOUT THE EFFORTS TO RESHORE A LOT OF OUR MANUFACTURING FOR SOME MORE HIGHLY SENSITIVE CHIPS. I AM CURIOUS ABOUT THIS AS A BROADER STRUCTURAL BEEN GOING FORWARD, ABOUT TRYING TO MOVE MORE MANUFACTURING BACK TO THE U.S. AND NOT BE SO DEPENDENT ON OTHER NATIONS. DO YOU THINK THIS IS A NET OR TREND THAT WILL CONTINUE AND DO YOU THINK IT IS AN INVESTABLE TREND? CAROL: YES AND YES. KEEP IN MIND THAT WE STARTED AS INITIALLY 150 YEARS AGO-200 YEARS AGO AN AGRARIAN SOCIETY THAT MORPHED INTO A HEAVILY CONSTRUCTION ORIENTED AND MANUFACTURING ORIENTED SOCIETY. BUT I STARTED IN THIS BUSINESS, ONE OF THE FIRST THINGS I WAS TOLD IS AS GOOD AS DETROIT'S, SO GOES THE ECONOMY. WE WERE SO MANUFACTURING INDEPENDENT AND A LOT OF ECONOMIC CYCLES. THE MAY BURST INTO A MORE CONSUMER ORIENTED SOCIETY THROUGH THE 90'S AND 10 THOUSANDS UNTIL THE POINT -- AND 2000 UNTIL THE POINT WHERE THE ECONOMY WAS CONSUMPTION BASE. YOU BELIEVE YOU ARE SEEING SOME OF THAT BACK. THAT'S ABILITY AND WILLINGNESS TO WANT TO INVEST IN OUR INFRASTRUCTURE WHICH WE HAVE NOT DONE IN A MASSIVE WAY SINCE WE BUILT ALL OF THE INTERSTATES IN THE 1950'S AND THE SPACE SYSTEM IN THE 1960'S. THAT MOVEMENT INCREASES THE PRODUCTIVE CAPACITY POTENTIAL IN THE U.S. AND WE HAVE TEED OF A BUNCH OF FUNDING AND CREDITS. A LOT HAS BEEN MATCHED AT THE STATE LEVEL. ROMAINE: CONVERSATION WITH CAROL'S LIFE --CAROL SCHLEIF OVER AT BMO AS WE COUNT DOWN TO THE CLOSING BELL. OUR STOCK AT THE HOUR IS BROADCOM. EMILY: BROADCOM IS ONE OF THE BEST PERFORMERS IN THE S & P 500 TODAY AFTER THE CHIPMAKER POSTED SECOND-QUARTER REVENUE THAT BEAT ESTIMATES IN ITS EARNINGS YESTERDAY. THE COMPANY SAID IT EXPECTS A SOFT LANDING FOR DEMAND WHERE SALES GROWTH SLOWS RELATIVELY BUT CONSUMERS AND COMPANIES STILL WANT TO SPEND ON CHIPS. THAT STOCK IS GETTING A GUY SLIPPED THROUGHOUT THE TRADING DAY. THE EQUITY MARKET RALLY CERTAINLY HELPING BROADCOM. I WANT TO TALK ABOUT THIS RALLY BECAUSE WE ARE ABOUT TO END A THREE WEEK LOSING STREAK IN THE S & P 500 IN A FEW MINUTES TO FINISH OFF ALMOST 2%, 1.8%. THIS IS THE SAME WEEK WHEN AT ONE POINT, EVERY SINGLE RATE ON THE TREASURY CURVE TOP 1%. THE TWO-YEAR SURGED 80 BASIS POINTS 20 DAYS. CAROL, I WANT TO ASK YOU TO GO CROSS ASSET. OUR BONDS LOSING THE ABILITY TO STRIKE FEAR IN EQUITY TRADERS? CAROL: I DO NOT KNOW IF THEY ARE LOSING THE ABILITY TO STRIKE FEAR BUT EVERYONE IS GETTING USED TO IT. WE ARE GOING THROUGH A BIG RECALIBRATION PROCESS WHERE PEOPLE ARE TRYING TO READ ANCHOR A NUMERAL WHICH IS REALLY THE OLD NORMAL BECAUSE WHAT HAS BEEN ABNORMAL IS THE FACT THAT FOR TWO YEARS -- 10 YEARS WE HAD A ZERO INTEREST RATE ENVIRONMENT OR A NEGATIVE INTEREST RATE ENVIRONMENT TRILLIONS OF DOLLARS OF THE GLOBAL GOVERNMENT DEBT IN NEGATIVE YIELDS FOR MUCH OF IT. THE FACT THE STOCK MARKET AND EQUITY HELD AN OK RELATIVE TO HIGHER RATES THIS WEEK AND ARE FINISHING ON A STRONG NOTE IS PRETTY BIG POSITIVE FROM A CROSS ASSET STANDPOINT. KRITI: IS IT AS SIMPLE AS PERHAPS THEY ARE READY FOR IT? THEY SAYS BEEN PRICED IN. ANY HOSTAGES FROM A MACRO LEVEL IS AT REALLY AT THE END OF THE DAY A 2022 STORY. WHEN WE START TO SEE THE EARNINGS AND MICRO DRIVE THE STORY? CAROL: THAT IS GOING TO BE SOME PERIOD OF TIME WHICH IS WHY I THINK OUR EXPECTATIONS ARE MORE NORMAL THIS YEAR. ESSENTIALLY A RANGE BOUND KIND OF MARKETS AS MARKETS TRY TO ADJUST TO THE NEW NORMAL AND THE FACT WE HAVE TO FIGURE OUT HOW TO OPERATE IN A HIGHER INFLATION ENVIRONMENT. IT IS TOUGH THINKING ABOUT THE AVERAGE MORTGAGE IS TO 7% BUT DOES 5.5% OR 6% FEEL LIKE A BETTER RATE? CORPORATIONS ARE TRYING TO FIGURE OUT AND REMIND THEMSELVES WHAT COUNTING IS ALL ABOUT BECAUSE NOW WE HAVE TO FACTOR IN INFLATION INTO INVENTORIES AND OTHER THINGS WE ARE DOING. OUR EXPECTATION IS THIS NEAR TERM INTERMEDIATE-TERM MARKET WE HAVE HERE. WE WILL SEE A LOT OF FILLING AND ADJUSTMENT AS WE FIGURE OUT THE NEW NORMAL BUT IT IS IMPORTANT TO STAY FOCUSED ON FUNDAMENTALS. ULTIMATELY, WE WILL NOT HAVE ANYMORE BECAUSE WE ARE PRETTY MUCH THROUGH -- LARGELY THROUGH WITH EARNINGS SEASON AND DO NOT GET ANOTHER BIG BOOK FOR ANOTHER FIVE OR SIX WEEKS. I WILL BE AROUND TO WATCH ECONOMIC DATA. ROMAINE: ALWAYS WONDERFUL TO TALK TO YOU. HAVE A WONDERFUL WEEKEND. CAROL SCHLEIF, DEPUTY CHIEF INVESTMENT OFFICER AT BMO. WE APPROACH THE CLOSING BELLS ON THIS FRIDAY AFTERNOON. JUST ABOUT TWO MINUTES TO GO TO TAKE YOU TO THE BELL AND BEYOND. ROMAINE: WE ARE TWO MINUTES AWAY FROM THE END OF THE TRADING DAY. WE ARE COUNTING YOU DOWN TO THE CLOSING BELL. WE ARE JOINED RIGHT NOW BY CAROL MASSAR AND ADJUSTMENT IN. WELCOME TO OUR AUDIENCES ACROSS BLOOMBERGRADIO AND THOSE PEOPLE STREAMING ON YOUTUBE. APPLE, MICROSOFT AND TESLA HIGHER ON THE DAY. THAT IS WHAT YOU WANT TO SEE. THOSE ARE THE LEADERS ON THE DAY. > > SOLAR IS YOUR NUMBER ONE GAINER ON THE S & P. > > IF YOU ARE LOOKING AT THE BIGGEST DECLINERS, DISH NETWORK IS THE ONE, ESPECIALLY COMING OFF THE BACK OF THE MULTI-DAY OUTAGE AND ALSO DOWNGRADE FROM BANK OF AMERICA CLEARLY HITTING THAT STOCK THIS WEEK. > > WHEN IT COMES TIME TO LEADERSHIP, YOU ARE HEARING THE COMMENTARY THAT THE ERROR OF GROWTH IS OVERCOME, GET HERE WE ARE. > > WHAT DO YOU USE EVERY DAY? A CELL PHONE, GOOGLE, AMAZON? I AM JUST SAYING. > > GOOD POINT, WHO KNOWS? WE ARE AT A CLEAR INFLECTION POINT IN THE ECONOMY AND THE MARKETS. EUROPE MANAGED TO STAY OVER THE WATER LINE AS WELL. IT WAS A MIXED PICTURE IN THE COMMODITIES SPACE. EQUITIES HAD A THREE DAY STRETCH WHERE IT LOOKED LIKE WE WERE LOOKING FOR A DOWN WEEK. THE DOW JONES INDUSTRIAL AVERAGE HIGHER ON THE DAY BY 390 POINTS. UP ABOUT A PERCENT HERE ON THE DAY. THE S & P HIGHER BY 1.6% AND 2% ON THE WEEK. THE NASDAQ HIGHER BY ABOUT 2% ON THE DAY AND ROUGHLY 3% ON THE WEEK. LET'S TAKE A QUICK LOOK AT THE RUSSELL 2000. WE HAVE BEEN TALKING ABOUT THE CYCLICAL NAMES. RUSSELL 2000 HIGHER BY 1.3% ON THE DATE AND 2% ON THE WEEK. > > MOST NAMES ON THE S & P 500, TAKE A LOOK AT BANKS, THEY ARE UP ALMOST TWO PERCENT IN TODAY'S SESSION. I AM THINKING ABOUT JAMIE DIMON. > > IF YOU ARE TALKING ABOUT YIELDS HIGHER. THEY WERE ONE OF THE GAINERS. LET'S TALK ABOUT THE DECLINERS. IT IS NOT THAT MUCH TO PICK FROM. YOU SEE THE FOOD RETAIL SECTOR WITH THE LOWS. WHAT IS NOT PERFORMING WELL IS MOSTLY A COMPANY LIKE COSCO. THEY ARE NOT CAPITALIZING ON THE FACT THAT THE CONSUMER IS STILL STRONG, SO TAKE ADVANTAGE. > > WE GOT SOME KEY DATA POINTS BEFORE THE FED MAKES ITS NEXT DECISION THAT COULD CHANGE THE TONE. A LOT OF NAMES TO CHOOSE FROM WHEN IT COMES TO THE GAINERS TODAY. BROADCOM UP ALMOST 6% IN TODAY'S SESSION. THEY BEAT EXPECTATIONS AND GAVE A REVENUE OUTLOOK AHEAD OF ANALYSTS. ALSO, THEY TALKED ABOUT AI. SPEAKING OF AI, C #AI 33% HIGHER. AND ONE MORE, META-. IT HAS BEEN ON A TEAR. UP MORE THAN 50% IN 2023. ANOTHER 6% GAIN IN TODAY'S SESSION. IT HAS MORE THAN DOUBLED SINCE THE NOVEMBER 2020 TWO LOW. -- 2022 LOW. > > SECOND -- CHECKING BACK IN WITH THE DECLINERS. LOOKING AGAIN AT COSCO, A CLOSED DOWN MORE THAN 2%. THE SLOWEST MONTHLY SALES GAIN SINCE EARLY COVID. BIG-TICKET DISCRETIONARY ITEMS HAVE BEEN A BIT WEAK. ZSCALER DOWN ABOUT 11% TODAY. BUMBLE DOWN 8.8% AT THE CLOSE. IT DID ANNOUNCE A SECONDARY OFFERING, ABOUT $22 PER SHARE. BUT STILL SEEING THE STOCK DOWN QUITE A BIT TODAY. > > THE BOND SELLOFF DID ABATE TODAY. YIELDS SLIGHTLY LOWER ACROSS THE BOARD. ON A WEEKLY BASIS, SIX RATE WEEKS HIGHER. FOUR STRAIGHT WEEKS ON THE SIX MONTH BILLS. THIS GETS TO THE BROADER QUESTION ABOUT WHETHER YOU ARE PAYING ATTENTION TO THE MACRO AND THE MICRO. TWO STORIES ON THE BLOOMBERG TERMINAL BOWL, A LOT OF PEOPLE LOOKED AT RETAIL EARNINGS, BUT THEY HAVE CONCERNS ABOUT WHAT IS GOING FORWARD. WE TALKED ABOUT INFLOWS THIS WEEK. THEY WERE STILL GOING IN THINGS LIKE ETF'S. > > LOOKING AHEAD TO NEXT WEEK. WE HAVE A JOBS REPORT. YOU HAVE JAY POWELL ON CAPITOL HILL. GREAT DECISIONS IN SEVERAL DIFFERENT COUNTRIES. A LOT OF THINGS THAT CAN PUT SOME NERVOUSNESS BACK INTO THE MARKETS. > > THERE IS A LOT GOING ON. WE TALKED ABOUT THE TECHNICAL LEVELS FOR THE BOUND MARKET. WE CROSSED 4%, HOW FAR DO WE GO NEXT WEEK? > > WE DID PULL IN A LITTLE BIT, THAT IS SIGNIFICANT. > > WE TALKED ABOUT THE IDEA BEING IN IN RANGE FILM MARKETS. WHEN YOU LOOK AT 4000 AND WHERE WE ARE IN THE S & P, SIMILAR STORY WITH SOME OF THE OTHER ASSET CLASSES OUT HERE, WE HAVE NOT GONE MUCH FURTHER THAN WHERE WE HAVE BEEN OVER THE LAST COUPLE OF MONTHS. > > GIVEN WHERE THE S & P 500 CLOSED TODAY IF YOU LOOK AT THE TECHNICALS, A BULLISH SIGN IN THE NEAR TERM, EVEN BEYOND NEXT WEEK. ON THE 14TH WE GET THE CPI DATA. > > ALSO A BIG LEAD UP TO THE JOBS STATED THAT WE GET THE FOLLOWING FRIDAY. THAT WILL BE A GAME CHANGER FOR A LOT OF THESE EQUITY MARKETS. THE BOND MARKETS MERCHANT TO THE WRONG DURHAM -- MARCHING TO THEIR OWN DRUM. > > I THINK GIVEN ECONOMIC CONDITIONS HERE IN THE NEED TO HEAR FROM SOME OF THESE EXECUTIVES, I THINK IT COULD BE A MORE OF A CATALYST. > > TO BE FAIR, WE ARE SEEING I.T. SPENDING, IT IS HAPPENING. IT IS NOT LIKE YOU ARE SEEN A COMPLETE RETRENCHMENT IN THE CORPORATE COMMUNITY. IT IS SMART BUYING. IT SEEMS TO BE A LITTLE BIT OF A POSITIVE. > > ESPECIALLY WITH THE JOBS NEXT FRIDAY, IT LOOKS AS IF INVESTORS ARE ALMOST UNDER POSITIONED FOR VOLATILITY ON THAT DAY. IT ALMOST SEEMS THAT THE WE COULD STILL SEE GYRATIONS ESPECIALLY WHEN THE REPORT COMES OUT IN ABOUT A WEEK. > > I AM CURIOUS ABOUT WHAT JAMIE DIMON HAS TO SAY. DO YOU THINK HIS TONE WILL BE MUCH DIFFERENT THAN WHAT WE HEARD FOR THE CONFERENCE CALL WHEN THEY REPORTED EARNINGS A FEW WEEKS AGO? > > I THINK HE IS SOMEBODY WHO WILL SAY HOW HE FEELS. HE IS VERY REAL WHEN IT COMES TO THE ENVIRONMENT. THEY HAVE A LITTLE WHILE BEFORE EARNINGS COME OUT. I THINK HE WILL BE, I DO NOT KNOW, WE WILL SEE IF WE SEE JAMIE DIMON THE WEATHER FORECASTER. SUNNY SKIES. HAVE A GREAT WEEKEND. WE WILL SEE YOU AGAIN TOMORROW, NOT TOMORROW, ON MONDAY. BEYOND THE BELL, CATCH US ON MONDAY. ROMAINE: IT IS FRIDAY, A LOOK AT THE BIG FACTORS TO WATCH ON THE WEEK. WHAT MOVED THE MARKET AND WHAT COULD POTENTIALLY MOVE IT NEXT WEEK. STICK WITH US. THAT IS COMING UP AFTER THE BREAK. THIS IS BLOOMBERG. ROMAINE: IT WAS A TECH STOCKS THAT HELP LEAD TO THE BIG GAMES ON THE DAY, BUT I KNOW WEEKLY BASIS, IT WAS THE CYCLICAL NAMES. THIS IS THE POINT DIFFERENTIAL BETWEEN THE PEAK AND THE TROUGH FOR THE S & P ON A WEEKLY BASIS AND REMAINS RELATIVELY TIGHT COMPARED TO WHAT IT HAD BEEN. NEVERTHELESS, I THINK A LOT OF TRADERS WILL TAKE IT. THE NASDAQ 100 TRYING TO CREATE SOME DISTANCE TO THE UPSIDE WITH THE 2% GAIN TO CLOSE OUT THE WEEK. THE RELATIVE UNDERPERFORMER ON THE DAY. KEEP YOUR EYE ON THE GREEN SPACE. BEFORE WE GET TO THAT, THE NATIONAL PEOPLE'S CONGRESS TAKEN PLACE IN CHINA THIS WEEK. A LOT OF TRADERS HAVE BEEN TRYING TO FRONT RUN THAT. A LOT OF TRADERS PILING BACK IN TWO HONG KONG LISTED STOCKS IN ANTICIPATION OF MONETARY POLICIES THAT MIGHT HAVE A DIRECT BENEFIT ON A LOT OF THOSE NAMES. STAY TUNED. > > YOU ALSO HAVE TO TALK ABOUT THE OTHER INDEXES, THE RUSSELL 1000, SMALLER STOCKS OUTPERFORMING THEIR LARGER CAP PEERS ON A YEAR IN YOUR BASIS. A LOW-QUALITY RALLY AT LEAST SO FAR IN 2023. HERE TO BREAK IT ALL DOWN IS MICHAEL CASPER. IS IT THAT SIMPLE IF YOU ARE BETTING ESSENTIALLY AND NO RECESSION THAT YOU CAN BUY A BASKET OF SMALL CAPS AND BY IT -- CALL IT A DAY? > > INVESTORS ARE DIPPING THEIR TOES INTO SMALL CAPS. WHEN WE TALK ABOUT SMALL SIZE, WE ARE TALKING ABOUT THE BOTTOM 20% OF STOCKS BY MARKET CAP. THAT FACTOR HAS A LOT OF OVERLAP WITH THINGS LIKE HIGH VOLATILITY. BUT IT HAS BEEN BOUNCING IN 2023 AND IT HAS TO DO WITH THE ELEVATED RISK TOLERANCE. ROMAINE: WHEN WE TALK ABOUT PEOPLE PILING BACK INTO SOME OF THESE NAMES, THEY ARE SO BEATEN DOWN, MAYBE YOU CANNOT GET ANY LOWER SO MY NECK TAKE A CHANCE? YOU DO NOT NECESSARILY SEE THE SAME TYPE OF EMBRACE FOR THE LARGER CAPS. > > HAS BEEN A LITTLE SPLIT. WE ARE LOOKING AT A HEAVY CONCENTRATION WITHIN TECHNOLOGY. IT IS A LITTLE BIT MORE MIXED THAN IT HAS LET ON. AT THE END OF THE DAY WE ARE STILL A LITTLE BIT LESS FAVORABLE ON HIGHER VALUATION STOCKS. WE THINK RATES WILL STILL HAVE TO CREEP HIGHER. AS THEY CREEP HIGHER, THOUGH STOCKS ARE STILL EXPENSIVE. SO THINGS LIKE LOW VALUE SHOULD DO A LITTLE BIT BETTER. KRITI: YOU MENTION FINANCIALS AT THE SECTOR. HOW MUCH OF THAT IS A PURE PLAY ON HIGHER YIELDS? > > A LITTLE BIT. IT IS A LITTLE BIT MIXED. THEY OBVIOUSLY CUT GUIDANCE A LITTLE BIT. THAT HAS TO DO WITH HOW HIGH RATES WERE IN 2022. RATES ARE GOING TO STILL BE HIGH , BUS EARNINGS WILL BE PRETTY SUPPORTIVE IN 2023. ROMAINE: CAN YOU TALK A LITTLE BIT ABOUT INVESTOR SENTIMENT AND WHAT THE FED WILL AND WILL NOT DO HERE. TALKING ABOUT THIS IDEA ABOUT HOW RATES HAVE RISEN DRAMATICALLY AND IT FAVORS THE FED ACTED MORE DELIBERATELY THAN THE FAST PACE OF HIKES THAT THEY HAD LAST YEAR. > > TEMPERING IS DIFFERENT. OUR TEAM STILL THINKS INFLATION IS A LITTLE BIT EMBEDDED HERE. WHEN THEY REACH THEIR TERMINAL RATE, THEY WILL PROBABLY PAUSE AND NOT IMMEDIATELY REVERSE COURSE. WE WILL STILL BE IN A HIGHER RATE ENVIRONMENT. AT THE END OF THE DAY WE WILL BE STUCK WITH HIGHER RATES NO MATTER WHAT. KRITI: MICHAEL CASPER OF BLOOMBERG INTELLIGENCE. WE THANK YOU AS ALWAYS. HERE IS THE FIRST WORD NEWS WITH JOHN HEILEMANN. > > PRESIDENT BIDEN HAD A CANCEROUS SKIN LESION REMOVED FROM HIS TEST LAST MONTH ACCORDING TO A LETTER RELEASED BY THE PRESIDENT'S DOCTOR TODAY. ALL CANCEROUS TISSUE WAS SUCCESSFULLY REMOVED. > > PRESIDENT BIDEN LAUDED GERMANY'S COMMITMENT TO PROVIDING MILITARY EQUIPMENT TO UKRAINE. PRESIDENT ZELENSKYY HAS URGED ALLIES TO ADDRESS SHORTAGES OF AMMUNITION. VLADIMIR PUTIN MET WITH MEMBERS OF HIS SECURITY COUNCIL TODAY AFTER DENOUNCING AN ATTACK AS A TERRORIST ATTACK. OFFICIALS IN UKRAINE DISMISS THAT. IN THE UNITED KINGDOM, THE PARTY GATE SCANDALS IN THE SPOTLIGHT AGAIN. BORIS JOHNSON MAY HAVE MISLED PARLIAMENT ON MULTIPLE OCCASIONS. THE ALLEGATIONS OF RULE BREAKING PARTIES THAT 10 DOWNING STREET DURING THE PANDEMIC PRECIPITATED HIS DOWNFALL LAST YEAR. ONCE PROMINENT SOUTH CAROLINA ATTORNEY CONVICTED OF MURDERING HIS WIFE AND SON HAS BEEN FUNDS TO LIFE WITHOUT PAROLE. THE JURY DELIBERATED FOR LESS THAN THREE HOURS BEFORE FINDING ALEX MURDAUGH GUILTY. GLOBAL NEWS, 24 HOURS A DAY, ON AIR AND ON BLOOMBERG QUICKTAKE, POWERED BY MORE THAN 2700 JOURNALISTS AND ANALYSTS IN MORE THAN 120 COUNTRIES. THIS IS BLOOMBERG. ROMAINE: WE SAW A BIG RALLY IN EQUITY MARKETS, BUT CRYPTO MARKET SITTING THIS ONE OUT. AFTER THE EXPLOSION OF SILVER GAY CAPITAL, CRYPTO HAS BEEN HER BIG TIME. BITCOIN HITTING A LOW. THERE WAS SO MUCH THAT HAPPENED THIS WEEK IN THE CRYPTO SPACE. WE WILL START OUT WITH SOAP AND GATE. -- SILVERGATE. > > WE ARE SEEING A RIPPLE EFFECT STARTING WITH THE FALLOUT OF THE FTX COLLAPSE. FTX WAS A MAIN CLIENT FOR SILVERGATE. AS YOU SAID, THIS WEEK THEY ARE ANNOUNCING THEY CANNOT FILE THEIR ANNUAL FILING ON TIME. A RISK OF BEING INVESTIGATED BY THE DEPARTMENT OF JUSTICE AND THEY WERE DEVALUING IF THEY CAN STAY AFLOAT. THAT PROMPTED CONCERNS BY ALL THE COUNTERPARTIES. THEY ALL RELY ON SILVERGATE PLATFORM TOOL. KRITI: WITH FTX, YOU SAW PLAYERS THAT FELL LIKE DOMINOES. GEMINI FOR ME WAS THE BIG ONE. HOW MUCH MORE SHE DROPPING IS THERE TO GO? > > I THINK THIS ONE IS UNIQUE BECAUSE SILVERGATE IS THE BEHIND THE SCENES COMPANY. THEY PROVIDE CRITICAL INFRASTRUCTURE FOR THE CRYPTO INDUSTRY. THEY DO NOT THEMSELVES TOUCH CRYPTO, BUT THEY PROVIDE THE ABILITY FOR PEOPLE TO SEND U.S. DOLLAR TO THE CRYPTO ECONOMY. ROMAINE: THIS IS PUTTING A LOT OF RENEWED FOCUS ON HOW THESE COMPANIES WERE AUDITED, SOME OF THE OVERSIGHT THERE. WE KNOW THE CRYPTO INDUSTRY IS KIND OF WEIRD. THEY ARE STILL BEHOLDING TO PUBLIC ACCOUNTING RULES. NOT KNOWING THAT SILVERGATE WAS HAVING THESE PROBLEMS. THE IDEA THAT BY FINANCE PAM I WAS HAVING PROBLEMS PROVING SOME OF THEIR RESERVES. DID > > WE ARE SEEING THE SCRUTINY COMING FROM THE FEDERAL BANKER REGULATORS. THEY HAVE TO LOOK AT THE FINANCIAL ACCESS, THE ACCOUNTING , THE RECORDS FOR BOOKS. WE EXPECT TO SEE MORE FALLOUT. KRITI: THIS IS NOT A DONE DEAL. SILVERGATE SILVERGATE SAYS THEY ARE LOOKING FOR A WAY TO STAY INTO BUSINESS. HOW DO THEY DO THAT? > > THEY TOLD US THEY ARE WORKING TO BE ABLE TO FILE THEIR ANNUAL FILING AS SOON AS POSSIBLE. THE CRYPTO INDUSTRY CANNOT SIT AND WAIT, SOME OF THE BIGGEST CRYPTO COMPANIES ANNOUNCING THEY ARE ALREADY SUSPENDING TRANSFERS WITH SILVERGATE. TRYING TO FIND ALTERNATIVES FOR SILVERGATE, WHICH HAS BEEN HARD. ROMAINE: WE TALK ABOUT THE COLLAPSE WITH CRYPTO PRICES. BITCOIN COMING FROM THE HIGH IN 2021. WE SAW A RESURGENCE FOR A FEW WEEKS. THERE ARE A LOT OF PEOPLE BEST SAID THE FACT THAT IT NEVER REALLY COLLAPSED DOWN TO 1000 OR SOMETHING RIDICULOUS AND WE NEVER GOT IT, IS THAT AN ENCOURAGING SIGN? IS THERE A PRICE ACTION YOU WERE WATCHING THAT GIVES THE SIGNAL? > > WE DID SEE A RALLY IN BITCOIN PRICES, ALTHOUGH NOW BITCOIN PRICES ARE BEING HURT BY THIS SILVERGATE SENTIMENT IN THE INDUSTRY. LAST MONTH, THE SENTIMENT WAS MORE POSITIVE IN THE INDUSTRY. SOME WERE TALKING ABOUT A $30,000 PRICE POINT FOR BITCOIN. KRITI: $22,000 ON BITCOIN JUST FOR THE NEWS FROM THIS MORNING. HOW LOW CAN YOU GO? > > PEOPLE ARE ALSO CONCERNED ABOUT THE MACRO SITUATION. ON TOP OF THAT, WE HAVE SITUATIONS THAT ARE UNIQUE WITHIN THE CRYPTO INDUSTRY THAT ARE NOT LOOKING GOOD FOR FUTURE DEVELOPMENT. ROMAINE: WE ARE A LONG WAY AWAY FROM THAT. WE WILL CATCH UP WITH YOU POTENTIALLY NEXT WEEK. WE WANT TO TURN OUR ATTENTION TO WHAT HAS BEEN GOING ON IN THE AUTOMOTIVE INDUSTRY. HONDA MAKING A BIG NEW BET ON NEW BATTERY TECHNOLOGY, TRYING TO CATCH UP IN THE EB RACE. THEY ARE TRYING TO CATCH UP TO TESLA. TESLA HAS ALWAYS BEEN UPFRONT. WE WILL BREAK ALL THAT DOWN FOR YOU WHEN WE COME DOWN AFTER THE BREAK. PLEASE STICK WITH US. THIS IS BLOOMBERG. KRITI: ON STIPEND LOOK AT HOW THE MARKETS PERFORMED ON THE DAY A LOT OF BROTHER I CAN'T SAY IT WAS 100% SUCCESS RATE FOR STOCKS. A LOT OF IT WAS DRIVEN BY THE TECH STORY YOU CAN SEE THAT BY THE OUTPERFORMANCE TO PERCENT. THAT S & P 500 STILLY 1.6% GAIN NOTHING TO SCOFF AT OF COURT REPORTING THAT WEEKLY GAIN IN ABOUT A MONTH'S TIME DROPPING DOWN TO 18 I THINK ALL THE ACTION IS IN THE POND MARKET. WE START TO SEE YIELDS ON THE 10 YEAR OF COURSE NOT ENDING THEIR WE ARE LOOKING AT ABOUT 395 ON THE 1095 PEPE ARE GETTING CLOSER. THAT'S GOING TO BE A CRUCIAL QUESTION FOR NOT JUST A SUMMER CAP BUT FOR CORPORATIONS AS WELL THEY HAVE TO PRICE THIS STUFF IN. THEY NEED TO KNOW. ROMAINE: WE WANT TO PIVOT FROM NOT ROUTER MARKET AND TALK ABOUT WHAT'S GOING ON IN THE AUTO INDUSTRY. JAPANESE AUTOMAKERS BEHIND THE CURVE FOR A WHILE. NEW BATTERY TECHNOLOGY WILL HELP IT CATCH UP. AND AN INTERVIEW WITH DAVID WELCH HONDA CEO SAID THE ELECTRIC VEHICLE BUSINESS IS DEPENDENT ON BATTERY COSTS. DAVID WELCH JOINING US RIGHT NOW EXPLAIN A LITTLE BIT. THE COMMENT MADE SENSE BUT IT'S ONE THING TO HAVE AN IDEA, IT'S ANOTHER THING TO EXECUTE IT. > > THIS IS PARTICULARLY IMPORTANT FOR HONDA IF YOU THINK ABOUT WHAT THEY'RE REALLY GOOD AT IS HONDA CIVIC, HONDA ACCORD IT'S A SMALLER SUV THEY HAVE BIGGER STUFF AMERICANS LIKE BUT THEY'RE REALLY GOOD AT SMALLER VEHICLES AND THAT'S THE PART OF THE MARKET THAT'S BEEN REALLY TOUGH TO ELECTRIFY ROMAINE: I JUST WANT TO INTERRUPT YOU RIGHT THERE I ALSO THINK IT'S KEY THAT THEY ARE BIG ON AFFORDABLE VEHICLES SOMETHING WE DON'T NECESSARILY HAVE IN THE EV SPACE. > > HONDA OFFERS GREAT VALUE. A VENDOR MORE EXPENSIVE VEHICLES OFFER OF AUTO VEHICLE FOR THE MONEY. THE VEHICLES THEY ARE PLANNING TO PUT ON THE MARKET ARE GOING TO BE MORE EXPENSIVE. THE PROLOGUE SIMILAR TO THE PASSPORT WILL PROBABLY SO FOR ABOUT 50,000. THEY'VE GOT AN ACCURATE AS WELL THAT'S PROBABLY GOING TO BE WELL OVER 60,000 WHAT THE CEO IS SAYING IS THEY NEED ADVANCED BATTERY TECHNOLOGY TO HELP THEM LOWER THE COST SO THEY CAN MAKE SMALLER VEHICLES SOMETHING LIKE AN ELECTRIC CIVIC. KRITI: I DON'T NEED TO TELL YOU THAT TESLA KIND OF HAS THE BEGIN THEIR ABILITY TO RAMP UP GOING NOW TO PRESENT-DAY IT DROVE THEIR SHARE PRICE AND OTHER EV MAKERS AREN'T SEEING THAT RAMP UP AS QUICKLY TALK TO US ABOUT HOW MUCH HONDA CAN REV UP THEIR PRODUCTION WHEN IT COMES TO ACTUAL DELIVERIES. > > THERE RAMP UP AS A COUPLE OF YEARS OF WEIGHT TESLA IS THE RUNAWAY LEADER FORD IS KIND OF DISTANT NUMBER TWO GM WILL PROBABLY OVERTAKE FOR THIS YEAR. THE JAPANESE, THEY APPROACH THE ELECTRIC VEHICLE MARKET VERY CAUTIOUSLY BECAUSE THEY DON'T THINK AMERICAN BUYERS ARE READY FOR IT I THINK IT'S HAPPENING A LITTLE QUICKER THAN THEY EXPECTED. THEY HAVE TO GET BATTERY PLANTS BUILT AND START GETTING VEHICLES OUT AND THEY ARE JUST STARTING TO BREAK GROUND IT'S GOING TO BE A COUPLE YEARS AWAY BEFORE THAT EVEN GET CLOSE TO THE POINT OR TESLA IS. ROMAINE: I WANT TO STAY ON TESLA AND WE WILL TALK ABOUT THE CONGRESS COMING UP IN CHINA ON TESLA HAD ITS CAPITAL MARKET STAY THERE WERE A LOT OF QUESTIONS ABOUT THE OUTPUT COMING OUT OF THE SHANGHAI FACTORY AND THE EXECUTIVES APPEARED TO KINDA SAY YOU ARE OBSESSING OVER THIS TOO MUCH THE NUMBERS ARE THERE THERE HAS BEEN ISSUES BUT THEY HAVE BEEN MORE TEMPORARY AND RELATED TO COVID ZERO POLICIES DO YOU BUY THAT? > > TO A SIGNIFICANT DEGREE HE'S RIGHT THE CHINESE MARKET AND ECONOMY HAVE BEEN VERY VOLATILE. THIS ZERO POLICY HAS HURT SALES AND OTHER SECTORS AS WELL WHAT I LOOK ACROSS THE BOARD AT AUTOMAKERS PERFORMANCE OVER THERE IT HASN'T BEEN GOOD BECAUSE OF THIS. THERE'S ANOTHER FACTOR HERE TOO THAT WITH GEOPOLITICAL SENSITIVITY AND TENSION WITH THE UNITED STATES AND CHINA CHINESE BRANDS, I NEED THE MASS-MARKET ARE DOING A LOT BETTER GETTING MORE ATTENTION. YOU KNOW JAPANESE AUTOMAKERS ARE STRUGGLING AS WELL IT'S BEEN REALLY DIFFICULT FOR EVERYBODY BECAUSE OF TENSION AND ALSO THE GENERAL ECONOMY. KRITI: I WANT TO QUICKLY ASK ABOUT THE CHINESE COMMODITIES STORY BECAUSE IF YOU HAVE PLANS IN CHINA ACCESS TO COMMODITIES IS REALLY CRUCIAL. HOW DO YOU SECURE THE SUPPLY CHAINS FOR A LOT OF THESE EV MAKERS WHO NEED THINGS LIKE COBALT, LITHIUM? > > IT'S A BIG RACE RIGHT NOW. ALL THE CAR COMPANIES ARE TRYING TO SET UP LONG-TERM CONTRACTS. GM AND TESLA ARE INTERESTING IN MINING COMPANIES. I THINK THERE'S GOING TO BE A RACE TO BUY STAKES IN THESE COMPANIES. IT SOMETHING WE HAVE TO LOOK INTO BECAUSE WHAT GM TOLD US AS THEY GET BETTER AVAILABILITY OF METALS AND MINERALS. THEY DIDN'T SAY THIS BUT IMPLIED BETTER PRICING. IT'S NOT JUST THE CONTRACTS I THINK COMPANIES WILL HAVE TO PUT SOME MONEY DOWN TO REALLY GUARANTEE WHAT THEY'RE GOING TO GET AND TESLA IS CERTAINLY DOING THAT. ROMAINE: GOING TO HAVE TO LEAVE IT THERE, ALWAYS WONDERFUL TO CATCH UP WITH THE A FOCUS ON HONDA. A FOCUS ON TESLA. WE DO WANT TO GET BACK TO SOME BREAKING NEWS ON ONE OF THE WORST PERFORMING STOCKS SO FAR THIS YEAR. SILVER GATE LEARNING IT'S GOING TO BE CUT DOWN TO THE SECOND LOWEST RATING DOWN FROM B THREE. IT WAS ALREADY BELOW INVESTMENT GRADE. THERE IS REALLY ONLY ONE MORE NOTCH TO GO. A COMPANY UNDER PRESSURE. CHANGE IN THE AIR. THE PEOPLE'S CONGRESS SET TO BEGIN THIS WEEKEND. XI JINPING RESHAPING THE ADVISORY PANEL AT THE MONEY MAN WHO ADVISES HIM. COMING UP. STICK WITH US, THIS IS BLOOMBERG. ♪ KRITI: CHINA IS ABOUT TO GET AN ECONOMIC LEADERSHIP SHAKEUP. ECONOMIC OFFICIALS ARE MAKING WAY FOR ACADEMIC CREDENTIALS. HERE IS TOM WARLICK. A LOT OF THESE BIG PERSONNEL CHANGES ARE LOOMING WHAT ARE THE EXPECTATIONS HERE? > > I THINK THERE IS SOME CONCERN YOU HAVE A BUNCH OF FOLKS WHO ARE KNOWN TO INTERNATIONAL INVESTORS. SEEN AS SYMPATHETIC TO PREMARKET POLICIES. PEOPLE LIKE PLACE. ALL VERY LIKELY HEADED FOR RETIREMENT. THEIR REPLACEMENTS, WELL, FIRST ARE LESS FAMILIAR TO THE GLOBAL MARKETS BUT AS YOU MENTIONED THEIR CAREERS ARE MORE NOTABLE WITH CLOSE TIES TO XI JINPING. ROMAINE: TALK A LITTLE ABOUT WHERE THE MARKETS ARE GETTING AHEAD OF THEMSELVES. THERE IS LITTLE TALK ABOUT THE POLICY GOING FORWARD. I'M TALKING ABOUT NON-CHINESE INVESTORS. THE IDEA THAT THEY CONTINUE TO GET IT WRONG. MORE IMPORTANTLY HOW HE IMPLEMENTS IT ON AN ONGOING BASIS. > > I THINK YOU PUT IT WELL. THERE WERE ALL OF THESE CONCERNS AFTER THE PARTY LEADERSHIP SHIFT AT THE PARTY CONGRESS BACK IN OCTOBER WHEN XI INSTALLED A BUNCH OF HAS ALLIES AND THE IMMEDIATE REACTION WAS THIS IS A DISASTER. CHINA IS LURCHING LEFT BUT THEN PRETTY QUICKLY THE NEW LEADERSHIP TEAM TOOK LOTS OF PROGRAMMATIC -- PRAGMATIC MOVES. THEY AMPED UP SUPPORT FOR THE PROPERTY SECTOR. THEY EASED BACK ON THE CRACKDOWN ON TECH ENTREPRENEURS. THEY EVEN ATTEMPTED TO RAISE THE TEMPERATURE IN THE U.S. CHINA RELATIONS. I THINK THAT LESSON FROM THE PARTY CONGRESS IN OCTOBER WHERE THE MARKET TOOK A PESSIMISTIC GREED AND WERE PROVED WRONG WHEN THE NEW TEAM DELIVERED GROWTH POLICIES THAT SHOULD GIVE US PAUSE FOR THOUGHT BEFORE WE RUSH TO JUDGMENT ON THE NEW TEAM. KRITI: YOU USED THAT G WORD, GROWTH. WHAT DOES THIS PARTICULARLY MEAN FOR THE FISCAL BUDGET FOR CHINA? > > IN ADDITION TO THE PERSONNEL CHANGES THAT WERE LOOKING FOR AT THE NATIONAL PEOPLE'S CONGRESS THERE'S GOING TO BE A BUNCH OF OTHER IMPORTANT INFORMATION SO WERE GOING TO GET A GRIP TARGET FOR THE YEAR. WE THINK THEY'RE GOING TO BE TARGETING 5.5% GROWTH FOR THE YEAR WITH A BOOST FROM THE END OF COVID LOCKDOWNS PROVIDING A ONE-OFF FROM MOMENT TO HAVE. THEY'RE PROBABLY GOING TO ORAL BACK A BIT THE FISCAL DEFICIT ATTEMPTING TO CONTROL THEIR DEBT PROBLEM. THE OTHER THING PEOPLE ARE LOOKING FOR IS WE COULD HAVE A BIG REALIGNMENT OF POTENTIALLY CONSOLIDATION OF DEACONS REGULATOR INTO THE BANKING A BIG DEAL FOR CHINA'S GLOBAL MARKETS. ROMAINE: AN ICE PREVIEW HERE OF WHAT INVESTORS CAN EXPECT. WE WANT TO GET MORE INSIGHTS HERE WHEN I STARTED MY CAREER A FEW DECADES AGO I HAD THE GOOD FORTUNE OF SITTING ON A PRESENTATION BY STEPHEN ROACH HE REALLY TALKED A LOT ABOUT THE EMERGENCE OF ASIA AND HOW IMPORTANT IT WAS FOR INVESTORS BACK HERE IN THE U.S. TO UNDERSTAND IT AND GET IT RIGHT. HE IS JOINING AS RIGHT NOW GREAT TO HAVE YOU HERE I WANT TO PICK UP WHERE TOM LEFT OFF THIS IDEA OF WHAT'S GOING TO BE PRESENTED THIS WEEKEND THERE IS A BIG FOCUS ON THOSE ECONOMIC NUMBERS THAT'S A BOOK THEY PUT OUT BUT EVERYBODY IS OBSESSED RIGHT NOW ABOUT THIS NEW LEADERSHIP AND WITH THAT COMMUNICATES TO INVESTORS AROUND THE WORLD. > > THANK YOU FOR HAVING ME ON. I DIDN'T KNOW YOU'D REMEMBER OUR FIRST ENCOUNTER BACK IN THE JURASSIC ERA. [LAUGHTER] I THINK THERE WILL BE UNDERSTANDABLE FOCUS ON THE GROWTH TARGET AND ON ENTERING POLICIES. BUT I THINK TOM IS CORRECT IN SIGNALING A BIGGER ISSUE HERE WHICH IS REORGANIZATION OF CHINESE GOVERNMENT AND I AGREE THE BOKO 40 SAID THE ONE THAT I WOULD ADD TO THAT WHICH I THINK IS REALLY TERRIBLY IMPORTANT IS THAT THE POWER OF GOVERNMENT UNDER THIS REORGANIZATION IS LIKELY TO SHIFT AWAY FROM THE STATE COUNCIL WHICH IS SORT OF THE GOVERNMENT STRUCTURE OF THE CHINESE SYSTEM BACK TO THE PARTNERING -- PARTY WHICH IS GOING TO DRIVE THESE SUPER LARGE COMMITTEES FOCUSING ON FINANCE, TECHNOLOGY, INNOVATION AND MOST LIKELY SECURITY AS WELL WE'VE SEEN 10 YEARS OF GROWING CONCENTRATION OF PARTY POWER UNDER THIS SINGULAR LEADERSHIP AT THIS REORGANIZATION IS LIKELY TO BE THE LATEST STEP IN THAT REGARD. I THINK THAT'S VERY IMPORTANT FOR UNDERSTANDING THE THRUST OF HOW CHINA WILL BE MOVING GOING FORWARD AS WELL AS CHINA'S ENGAGEMENT WITH A TURBULENT AND CONTENTIOUS WORLD. ROMAINE: TALK ABOUT THE ENGAGEMENT HERE. THE IDEA THAT FOR SO MANY YEARS CHINA WAS MOVING OUTWARD TO THE WORLD AND THERE IS CONCERNED THEY MAY BE LOOKING A LITTLE MORE INWARD THE IDEA THEY CAN GROW AND PROSPER CERTAINLY NOT WITH THIS HEART TIES THAT WE HAD COME TO RELY ON. > > IT'S A FAIR POINT BUT PARTLY THEY'RE DOING THIS BY DESIGN BUT ALSO MY REACTION TO A WORLD THAT IS REALLY PUTTING TREMENDOUS PRESSURE ON CHINA ESPECIALLY THE UNITED STATES. IT WAS IN THE LAST FIVE YEARS LAUNCHED A TRADE WAR, A TECH WAR AND NOW THE EARLY STAGES OF A NEW COLD WAR AND THE LATEST ROUND OF SANCTIONS AND THE EXPANDED ENEMY LIST SQUEEZING CHINESE COMPANIES LEAVES THEM WITH LITTLE CHOICE BUT TO TURN INWARD TO DEVELOP THE TOOLS THEY NEED TO HIT THEIR GROWTH EXPECTATIONS IN THE YEARS AND DECADES AHEAD. KRITI: ONE OF THE ARGUMENTS DURING THE TRADE WAR HUMAN MENTION IS THERE'S NO WAY CHINA CAN THRIVE AND GROW WITHOUT THE AMERICAN CONSUMER BASE. THEREFORE THIS IS NOT THE THREAT TO A LOT OF AMERICAN TECH COMPANIES PEOPLE FOR WORRIED ABOUT. NOW THAT WE ARE TALKING ABOUT TURNING INWARD IS THIS SOMETHING THAT AMERICAN CORPORATE'S NEED TO BE TAKING MORE SERIOUSLY? > > THEY ARE TAKING IT SERIOUSLY A LOT OF MULTINATIONALS LEAD BY APPLE WHO PROBABLY MADE THE BIGGEST OFF SHORING BIT OF ANY U.S. HEADQUARTER MULTINATIONAL ON CHINA THEY ARE STARTING TO DIVERSIFY THEIR OFFSHORE PRODUCTION BY INITIALLY SHIFTING SEMI-CAPACITY TO, OF ALL PLACES, INDIA. SMALL SHIFTS INITIALLY BUT HEDGING OFFSHORE EXPOSURE TO CHINA IS CERTAINLY AN ISSUE THAT IS BEING CONSIDERED ACTIVELY IN TERMS OF MULTINATIONALS ALL OVER THE WORLD. I WANT TO GO BACK TO THE ONE POINT YOU SAID IT'S NOT JUST THAT CHINA NEEDS THE AMERICAN CONSUMER THE AMERICAN CONSUMER ALSO NEEDS LOW-COST HIGH-QUALITY PRODUCTION FROM CHINA. HOWARD TREASURY DATES CHINA AS AN IMPORTANT SOURCE OF DEMAND FOR TREASURIES THAT ARE REQUIRED TO FUND OUTSIDE BUDGET DEFICITS AND FINALLY BROADLY BASED U.S. MANUFACTURERS NEED CHINA BECAUSE IT IS THE THIRD LARGEST EXPORT ARC IT -- MARKET. IT'S NOT JUST ONE WAY THAT WE'VE GOT CHINA BY THE SHORT HAIRS. KRITI: I'M GLAD YOU MENTIONED THAT. HOW MUCH MORE WE MIGHT NEED CHINA WITH THE LABOR MARKET AS TIGHT AS IT IS. > > WELL, THERE'S A LOT OF PRESSURE BEING PUT ON CHINA RIGHT NOW BY BY THE Q WAS CONGRESS. I'M SURE YOU HAVE COVERED THE FIRST HEARING OF THE NEW HOUSE SELECT COMMITTEE ON CHINA THAT TOOK PLACE EARLIER THIS WEEK. BUT IN ADDITION TO THAT AND ALL THE PRESSURES THAT ARE BEING BROUGHT TO BEAR ON CHINA FROM TAIWAN AND TINA CHINA'S ON CONTRIBUTION TO THOSE PRESSURES THE RELATIONSHIP IS INCREASINGLY FRAUGHT HERE. IT'S HARD TO KNOW IF WE HAVE THE WHEREWITHAL TO PULL BACK THIS INCLINATION THAT WE HAVE FOR CONFLICT RIGHT NOW IN THE UNITED STATES. I FIND IT VERY WORRISOME AND THE SINGLE LARGEST GLOBAL RISK PROBABLY FOR THE NEXT SEVERAL YEARS INVESTORS AND CITIZENS SHOULD BE MINDFUL OF IT. ROMAINE: GOING TO HAVE TO LEAVE IT THERE WONDERFUL TO CATCH UP WITH YOU. THAT'S STEPHEN ROACH THERE. THE AUTHOR OF SEVERAL BOOKS INCLUDING ONE THAT CAME OUT LAST YEAR. THAT'S RAMPING UP BLOOMBERG MARKETS A CLOSE. A LITTLE BIT MORE TO TALK ABOUT STICK WITH US, THIS IS BLOOMBERG. ROMAINE: WRAPPING CAP OUR U.S. MARKETS COVERAGE ON THIS FRIDAY AFTERNOON. A BIG FOCUS ON CHINA AND THE PEOPLE'S CONGRESS. KRITI: IT'S NOT JUST A CHINA STORY WHAT DO ALL THE AMERICAN MULTINATIONAL COMPANIES HAVE THERE? ROMAINE: GOING TO BE INTERESTING THERE'S A CONFERENCE DOWN IN MIAMI WITH JP MORGAN AND WE WILL HAVE AN EXCLUSIVE INTERVIEW WITH JAMIE DIMON. KRITI: ISN'T THIS HIS CALL THAT HE MADE HE SAID IT'S ON THE TABLE AND ALL OF A SUDDEN ALL OF WALL STREET SAYS 6%, IT'S ON THE TABLE. ROMAINE: A LOT OF PEOPLE FOCUSED ON JAMIE DIMON AND WHAT HE HAS TO SAY. YOU ALSO DON'T WANT TO MISS JAY POWELL. HE IS SPEAKING TWICE ON THE SENATE AND IN THE HOUSE. KRITI: WE ARE ALREADY HIGHER THAN 4% ACROSS THE ENTIRE CURVE. HOW MUCH HIGHER CAN HE REALLY GO? ROMAINE: IT WILL BE INTERESTING TO SEE IF HE GOES HIGHER FOCUS ON THE THINGS THAT MARKETS CARE ABOUT. WE ARE GOING TO GET OUT WE HAVE SEEN THAT NUMBER TRENDING HIGHER. KRITI: I'M GOING TO BRING IT BACK TO THE CONGRESS PART AND THAT'S KIND OF DATA IS GOING TO BE IMPORTANT. ROMAINE: THE END OF AN ERA. 10 YEARS AT THE HELM OF THE BANK OF JAPAN THERE IS A POLICY MEETING AT THE END OF NEXT WEEK AS THEY MAKE THE TRANSITION TO NEW LEADERSHIP THANK YOU FOR JOINING US ON BLOOMBERG MARKETS TO CAUSE HAVE A GREAT EVENING.

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"Bloomberg Markets: The Close" (03/03/2023)

Romaine Bostick & Kriti Gupta bring you the latest news and analysis leading up to the final minutes and seconds before and after the closing bell on Wall Street and tackles the Biden-Scholz meeting, HPE's results and looking ahead to the National People's Congress Guests Today: Emily Hill of Bowersock Capital Partners, Erin Murphy of the Center for Strategic and International Studies, Ben McMillan of IDX Digital Assets, Kristine Berzina of the German Marshall Fund, Kathy Jones of Charles Schwab, Antonio Neri of HPE, Carol Schleif of BMO Family Office, Stephen Roach of the Yale Law School's Paul Tsai Center China Center (Source: Bloomberg)