Treasuries Hit as US Sales Struggle to Lure Buyers | Bloomberg Markets: The Close 5/28/2024

Bloomberg Television brings you the latest news and analysis leading up to the final minutes and seconds before and after the closing bell on Wall Street. Today’s guests are Mandy Xu, Cboe, Jess Menton, Bloomberg News, Savanthi Syth, Raymond James, Kenneth Bentsen, SIFMA President & CEO, Katrina Dudley, Franklin Mutual, Dana Telsey, Telsey Advisory Group, Daniela Sirtori, Bloomberg News, Matt Brown, CAIS Founder & CEO, Larry Tabb, Bloomberg Intelligence, Joe Mathieu, Bloomberg News.
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>> T MINUS — LIVE FROM STUDIO ONE HERE IN BLOOMBERG HEADQUARTERS IN NEW YORK, I AM ROMAINE BOSTICK. ALIX, YOU LOOK SO FAR AWAY. >> WE ARE KEEPING YOU UP TO THE CLOSING BELL HERE IN THE U.S. ON THIS SLEEPY TUESDAY AFTER MEMORIAL DAY WEEKEND. YOU HAD A RECORD HIGHS ON THE NASDAQ, COMING OFF THOSE LEVELS NOW. NVIDIA DID HIT A RECORD HIGH AND THAT HELPED PERFORMANCE OF TECH. THE BOND MARKET HERE, YIELDS MOVING HIGHER. OVER $40 BILLION WORTH OF 7 COMING TOMORROW. THE YEN IS BACK TO BEING LOW. YOU HAD THE POUND AT THE HIGHEST LEVEL IN 16 YEARS. WE ARE STILL WATCHING AND WAITING FOR THE YEN TO FIND STABILITY. ROMAINE: THANKS FOR INCLUDING THAT. THIS WILL BE A POTENTIALLY BUSY WEEK FOR TRADERS, AT LEAST WITH THE CLEARINGHOUSES THAT SETTLE TRANSACTIONS. THAT NEW T-1 GOES INTO EFFECT TODAY. ANYONE BUYING A U.S. STOCK HAS ONE DAY TO DELIVER THE MONEY WHILE ANYONE SELLING HAS ONE DAY TO SUPPLY THE SHARES. THAT IS A YEARS LONG EVOLUTION TO WHAT WAS FIVE DAYS SETTLEMENT . THE MOST NOTICEABLE EFFECT YOU’LL SEE IS INVESTORS GETTING THEIR PROCEEDS IN THEIR TRANSACTIONS IN HOURS, BROKERS ADDING LOWER MARGIN REQUIREMENTS, WITH THE FALL RISK LESSON, THAT MAKES SENSE. AS FAR AS MARKET VOLUME OR PRICING TODAY, THIS SHOULDN’T HAVE AN EFFECT, BUT KEEP AN EYE ON SOME OF THOSE GLITCHES. A SPIKE IN FAILED TRADES IS A FEAR IN THE INDUSTRY. A QUESTION IS HOW LARGE AND PERSISTENT THAT MIGHT BE. JP MORGAN’S A QUARTER OF THE CURRENCY TRADES IT PROCESSES WILL BE AFFECTED. BROWN BROTHERS HARRIMAN PUT CLIENTS THROUGH A T-1 SIMULATOR TO IDENTIFY ISSUES. BANKS SAYING THEY HAVE EITHER MOVED STAFF, REORGANIZED SHIFTS, OR BUILD NEW SYSTEMS TO PREPARE FOR THE CHANGE. TWO BIG STRESS TESTS COME THIS WEEK, INCLUDING TOMORROW WITH THE DONALD THAT DOUBLE SETTLEMENT DAY, AND TOMORROW WHEN THE MSCI REBALANCES ITS INDUSTRIES. THE ASSOCIATION IS TELLING PEOPLE TO PREPARE FOR ACUTE SPIKES IN VOLATILITY AND PRICE SPREADS AROUND NATIONAL HOLIDAYS. FOR NOW, IT’S WORTH NOTING THAT VOLATILITY REMAINS SUBDUED. BASED ON OPTION SELLING, VOLATILITY ISN’T GOING ANYWHERE FOR NOW. THE ARMY OF VOLATILITY SO THERE IS SWELL IN SIZE. ALIX: YOU CAN SEE THAT REFLECTED IN A VERY SIMPLE FUNCTION, CCRV, TRACKS THE CURVE OF THE VIX. I TOOK A LOOK AT ONE MONTH AND THE PRICE TODAY. GREEN LINE IS WHERE THE VIX WAS A MONTH AGO. ORANGE LINE IS WHERE IT IS NOW. YOU CAN SEE THE SPIKE IN VOL AROUND THE ELECTION, BUT WE BARELY HIT 20, BUT THE WHOLE CURVE HAS COME LOWER BY A FEW POINTS. REMAINS TO BE SEEN, VOLATILITY MOVES HIGHER, BUT WE ARE STILL MODESTLY SUBDUED FOR THE NEXT YEAR. ROMAINE: LET’S KICK THINGS OFF WITH MANDY XU, HEAD OF DERIVATIVES MARKETS INTELLIGENCE OVER AT CBOE. MANDY: GREAT TO BE HERE. ROMAINE: IF ANYBODY KNOWS WHAT IS GOING ON IN THE OPTIONS MARKET, VOLATILITY, IT’S YOU. WE HAVE BEEN TALKING ABOUT LOW VOLATILITY FOR A WHILE. I DON’T KNOW IF THAT IS DIRECTLY TIED TO WHAT IS HAPPENING TODAY OR WHETHER THAT IS A LOOK AHEAD TO THE ELECTION AND UNCERTAINTY AROUND IT. MANDY: LOW LEVELS OF THE VIX RIGHT NOW IS A REFLECTION OF WHAT IS GOING ON NOW. THE VIX IS A SHORT DATED MEASURE OF VOLATILITY, 30 DAYS BUT LOOKING FOR THE S&P. RIGHT NOW, THE LEVEL TODAY WILL NOT REFLECT THE ELECTION FEAR. ALIX POINTED OUT, IF YOU LOOK FURTHER OUT INTO THE FUTURES CURVE, THAT IS ONE OF THE CATALYSTS BEING EMBEDDED IN THE VOLATILITY CURVE. IN TERMS OF WHY VOLATILITY IS LOW, LARGELY ON THE BACK OF THAT POSITIVE MACRO FUND AND — FUNDAMENTALS, THE FED TAKING THE WIND OUT OF THE VOLATILITY, THE PATIENT’S THEY HAVE EXPRESSED, WILLING TO WAIT FOR INFLATION TO REACH ITS TARGET. ROMAINE: LET’S TAKE THE ELECTION OUT OF THE EQUATION. THE FED HAS A LOT OF UNRESOLVED BUSINESS. YOU WONDER WHAT WILL HAPPEN OVER THE NEXT COUPLE OF MEETINGS AS THEY TRY TO START COMMUNICATING WHETHER THEY WILL CUT RATES OR EVEN HIKE. MANDY: I THINK THE CONSENSUS EXPECTATIONS AROUND THE PATH OF INTEREST RATE CAN AND ME WILL SHIFT THROUGHOUT THE YEAR, BUT I DON’T SEE IT AS BEING A VOLATILITY CATALYST. AT THIS POINT, STICKY INFLATION, THE FED IS IN A WELL UNDERSTOOD RISK. WHAT TENDS TO DRIVE VOLATILITY HIGHER? IT TENDS TO BE THE UNKNOWN UNKNOWNS. WHETHER THAT IS GEOPOLITICAL, THE BIG SPIKE ON THE BACK OF THE ISRAEL-IRAN POTENTIAL ESCALATION. THE PATH OF INTEREST RATES, THERE IS STILL UNCERTAINTY AROUND IT, BUT I DON’T SEE IT AS A DRIVER OF SIGNIFICANTLY HIGHER EQUITY VOL AT LEAST NOT WITHOUT SOMETHING SHIFTING. MANDY: THAT IS DEBATABLE. SOME MAY SAY THE ZERO DAY TO OPTIONS IS WHAT IS DRIVING THE LOW VOLATILITY. I WILL TAKE THE OTHER VIEW FOR A COUPLE OF REASONS. THE ACTIVITY WE SEE WITHIN ZERO DAY OPTIONS IS BALANCED. IT IS NOT PREDOMINANTLY VOL SELLING WHICH IS SUPPRESSING VOLATILITY. IF YOU LOOK AT THE LOW VOLATILITY WE ARE SEEING, WE ARE SEEING IT ACROSS ASSET CLASSES, WHERE THERE ARE NO ZERO DAY OPTIONS BEING TREATED. CREDIT VOLATILITY IS WORTH HIGHLIGHTING. VIX IG INDEX HIT AN ALL-TIME LOW EARLIER LAST WEEK. CREDIT VOLATILITY, FX VOLATILITY COMMEMORATES VOLATILITY, VOLATILITY ACROSS EVERY ASSET CLASS IS LOW. THAT GOES BACK TO THE MACRO FUNDAMENTALS. WE AT LEAST APPEAR TO BE FIRMLY ON TRACK FOR A SOFT LANDING. ALIX: WHEN YOU LOOK AT WHERE THE HEDGES ARE, WHAT HAS CHANGED NOW VERSUS A COUPLE MONTHS AGO? IS THERE A DEMAND FOR UPSIDE HEDGING, DOWNSIDE HEDGING? WHERE ARE YOU SEEING THE DIFFERENCES? MANDY: GREAT QUESTION. AT THE BEGINNING OF THE YEAR, THE RISK THAT OPTIONS TRADERS WERE FOCUSED OR WORRIED ABOUT WAS UPSIDE RISK. WE SAW A LOT OF DEMAND FOR THOSE UPSIDE CALLS, Q4 LAST YEAR CARRIED THROUGH TO THE FIRST QUARTER OF THIS YEAR. NOW, WE ARE STARTING TO SEE A MEANINGFUL PICK IN DEMAND FOR DOWNSIDE PUT OPTIONS IN S&P. DEMAND FOR DOWNSIDE PUTS VERSUS CALLS IS REALLY PICKED UP IN RECENT DAYS. IT’S A FUNCTION OF THE FACT THAT WE ARE AT ALL-TIME HIGHS IN THE MARKET. VOLATILITY LEVELS BACK TO MULTI-YEAR LOWS. PEOPLE ARE OPPORTUNISTICALLY ADDING HEDGES IN THE MARKET. ROMAINE: HOW DOES THIS OVERLAY WITH THE IDEA OF WHAT’S HAPPENING OVERSEAS, NOT HAPPENING OVERSEAS? A LOT OF ACTIVITY IN THE FX SPACE, BOOST IN THE CARRY TRADE, CONCERNS ON FED POLICY AND ECONOMIC CONDITIONS, WE ARE DIVERTING ON A COUNTRY BY COUNTRY, MARKET BY MARKET BASIS. MANDY: THERE IS A LOT OF POLICY DIVERGENCE, ONE OF THE REASONS WHY FX VOLATILITY EXPERIENCED AN UPTICK THIS YEAR. FOR EQUITY MARKETS, THE RISK THEY ARE MOST SENSITIVE TO IS THE ECONOMIC GROWTH RISKS. THE U.S. IS STILL STRONG, THAT EXPLAINS WHY THE VIX IS STILL LOW. EVEN IF YOU LOOK IN VOLATILITY INDICATORS WERE OTHER REGIONS, MSCI, EMERGING MARKETS, VOLATILITY IS LOWER ACROSS REGIONS. GLOBAL GROWTH STILL TO THIS DAY REMAINS FAIRLY ROBUST. ALIX: THAT MAKES ME SO NERVOUS. WE JOKE, I WILL PUT GOLD UNDER MY BED, BUT I HAVE MONEY IN THE MONEY MARKET. EVERYTHING SEEMS TO BUT I COULD GET WORRIED. MANDY: WHAT IS INTERESTING, WE ARE SEEING RECORD VOLUME IN VIX OPTIONS, PARTICULARLY UPSIDE CALLS. THAT IS A SIGN THAT PEOPLE ARE GETTING NERVOUS, OPPORTUNISTICALLY ADDING SOME VIX UPSIDE HEDGES GIVEN WHERE LEVELS ARE. THAT COMMENT TO ME, YOU ARE WORRIED ABOUT THE BLACK SWAN EVENT. YOU BUY VIX OPTIONS REALLY DO HEDGES THAT BIG SHOCK TO THE MARKET, WHETHER THAT IS GEOPOLITICAL OR ANOTHER CATALYST. ROMAINE: ALWAYS SO SMART, GREAT TO HAVE YOU. WONDERFUL WAY TO KICK US OFF TO THE CLOSE. MANDY XU, DERIVATIVE MARKET INTELLIGENCE AT CBOE. TAKING A LOOK AT THOSE T-1 SETTLEMENTS TAKING EFFECT TODAY. KEN BENTSEN WILL BE STOPPING BY TO OFFER HIS INSIGHTS ON A BIG CHANGE FOR THE INDUSTRY. ALIX: OUR STOCK OF THE HOUR IS CELSIUS. MY THEY ARE IN A DEEP FREEZE. ROMAINE: EYES ARE NOW BACK ON THE FED. KATRINA DUDLEY FROM FRANKLIN MUTUAL SERIES HAS SOME THOUGHTS ON THAT. WE WILL TALK TO HER IN JUST A BIT HERE ON THE CLOSE. ALIX: SOME DEALS NEWS OF THE DAY. NOT MERGER MONDAY. T-MOBILE BY U.S. CELLULAR’S WIRELESS OPERATIONS, 30% OF SPECTRUM ASSETS FOR $2.4 BILLION. JOINING US NOW IS JUST MINTON. THIS IS JUST LET’S BUY UP AS MANY TOWERS AS WE CAN. >> THAT IS PRETTY MUCH IT. T-MOBILE IS THE SECOND LARGEST CARRIER BEHIND AT&T IN THE U.S. REMEMBER A COUPLE YEARS AGO WHEN IT HAD THAT MERGER WITH SPRINT, I WAS ONE OF THE CUSTOMER THAT GOT GRANDFATHERED INTO T-MOBILE, BUT IT BEEN TRYING TO EXPAND ITS PRESENCE TO RIVAL AT&T OR VERIZON. THIS IS ANOTHER STEP TOWARD THAT. USM UP 8% THIS MORNING HEADING INTO THE CLOSING BELL. THAT IS ITS BEST DAY SINCE MAY 9. T-MOBILE ONLY UP ABOUT .4%. YEAR TO DATE, THAT STOCK IS UP 3%. AT&T IS MARKEDLY LOWER FOR THE YEAR. THIS IS AN EFFORT TO EXPAND ITS PRESENCE, TO TAKE ANOTHER STEP FORWARD, COMPETE WITH THEIR BIGGER BIBLES. ROMAINE: IS THERE A CONCERN ABOUT THEM USING UP THEIR CASH? SHARES ARE NOT DOWN, BUT ARE INVESTORS CONCERNED? JESS: PART OF THAT IS $2 BILLION IN DEBT AND THEY WILL TAKE ON. IT IS NOT JUST CASH THEY ARE USING FOR THIS. JOHN BUTLER, AN ANALYST AT BLOOMBERG INTELLIGENCE, PUT ON HIS RESEARCH TODAY, TRACKING THE COMPANY AS WELL AS OTHER WIRELESS CARRIERS. THEY FEEL THIS DEAL WILL ACCELERATE ITS PRESENCE TAKING ABOUT T-MOBILE. ROMAINE EARNINGS PERSPECTIVE, WHAT THAT MEANS FOR 5G AND SOME OF THESE CARRIERS. ESPECIALLY WHEN IT COMES TO ITS PRESENCE AS TO WHAT IT MEANS FOR 4400 TELECOM TOWERS, ALSO HAS A LONGER TERM TENANT ON 2600 TOWERS FROM U.S. CELLULAR. BLOOMBERG INTELLIGENCE SEES THIS AS A POSITIVE FOR THE STOCK. ALIX: IF YOU LOOK AT CELLULAR TOWERS, PRIME REAL ESTATE AT THE END OF THE DAY. IT IS HARD TO BUILD THEM. YOU HAVE TO BUY THE ONES THAT ARE AVAILABLE, THEREFORE, IT IS MAY BE WORTH THE DEBT. JESS: THE WALL STREET JOURNAL REPORTED EARLIER THIS MONTH THAT VERIZON WAS ALSO LOOKING TO BUY UP PARTS OF U.S. CELLULAR, TOO, BUT THIS COULD TAKE LONGER, SO IT IS NOT JUST A T-MOBILE STORY. ROMAINE: ANY ANTITRUST ISSUES? JESS: ALWAYS A QUESTION. ROMAINE: YOU HEAR ABOUT THESE TOWERS BEING BOUGHT. I THINK THEY GOT MINT MOBILE. GREAT FOR THEM, BUT YOU HAVE SEEN THE FOLKS IN WASHINGTON. JESS: SO MUCH DISAGREEMENT ON CAPITOL HILL. THIS DEAL IS SUPPOSED TO CLOSE AT THE MIDDLE OF NEXT YEAR. MOST LIKELY THIS WILL GO THROUGH. DOESN’T SEEM TO BE A LOT OF PUSHBACK FROM THE REGULATORS, AT LEAST FROM OUR RESEARCH. BUT THAT REMAINS TO BE SEEN AS WE SEE A LOT OF DEALS LIKE THIS HAPPEN. WE HAVE TO WAIT AND SEE WHAT HAPPENS WITH WASHINGTON. RIGHT NOW IT DOESN’T SEEM LIKE THERE IS A MAJOR OBSTACLES TO THE DEAL. ROMAINE: JUST MINTON LOOKING AT THAT DEAL. U.S. CELLULAR HAVING A PRETTY GOOD DAY. A COUPLE OF THE BIG STORY THAT HAVE BEEN FLOATING AROUND HERE ON THE MARKET. YOU ARE INTO THE ENERGY SPACE. EVERYONE IS KEEPING AN EYE ON THE HESS MERGER. SHAREHOLDERS SIGNING OFF ON IT. ALIX: A COUPLE SHAREHOLDERS RECOMMENDING TO ABSTAIN BECAUSE THERE WAS AN ARBITRATION SUIT BETWEEN CHEVRON AND EXXON OVER HESS AND ITS PORTION OF GUYANA OFF THE COAST OF SOUTH AMERICA. IT WASN’T A SURE THING. IF IT HAD FAILED, IT WOULD BE SOMETHING. ROMAINE: SHAREHOLDERS HAVE APPROVED IT. WHERE DO WE STAND? ALIX: I DON’T KNOW, ASK THE LAWYERS. WE ARE NOT EVEN AT THE FTC LEVEL. THIS IS PURELY IN THE COURTS BETWEEN EXXON AND CHEVRON. EXXON THINK THEY HAVE THE RIGHT OF FIRST REFUSAL TO THIS EVEN THOUGH CHEVRON IS BUYING THE WHOLE COMPANY, NOT JUST THE ACID IN GOING ON A. ROMAINE: THIS IS NOT A REGULATORY ISSUE, JUST GETTING THROUGH THE LEGAL ISSUES. ALIX: IF THERE IS A DOOZY ISSUE, THAT’S A DIFFERENT STORY. BY THE ARBITRATION CASES PART OF THE REASON WHY THE SHAREHOLDERS WANTED TO ABSTAIN. ROMAINE: YOU KNOW WHO WINS IN ALL OF THIS? ALIX: LAWYERS. ROMAINE: RAYMOND JAMES SAYS LODGING INTO NEW MARKETS IS NOT GOING WELL FOR THE DISCOUNT AIRLINE GROUP. WE WILL TALK TO HER IN JUST A SECOND ON OUR TOP CALLS, COMING UP HERE ON BLOOMBERG. ROMAINE: IT IS TIME FOR OUR TOP CALLS, WHERE WE TAKE A LOOK AT SOME OF THE BIG MOVE WAS ON THE BACK OF ANALYST RECOMMENDATIONS. WE START OFF WITH ON HOLDING, THE MAKER OF THOSE POPULAR RUNNING SHOES, GETTING AN UPGRADE FROM BUY TO — FROM HOLD TO BUY. THE ANALYSTS ALSO SEE OPPORTUNITY FROM THE GROWING POPULARITY OF TENNIS APPAREL. SHARES HAVING A DECENT DAY, UP 3.5%. NORWEGIAN CRUISE LINES IS NEXT. THEY GOT AN UPGRADE TODAY FROM NEUTRAL TO BUY. THE ANALYSTS AS A AN ATTRACTIVE VALUATION AND POSITIVE BACKDROP OF LIMITED SUPPLY AND HEALTHY DEMAND. THE ANALYST CITES A SHIFT IN INVESTOR SENTIMENT AND EXPECTS COST CUTTING TO DRIVE GREATER THAN ANTICIPATED OPERATING LEVERAGE. THOSE C-SHARES UP ABOUT 3% ON THE DAY. FINALLY, LET’S LOOK AT FRONTIER AIRLINES. A IS CONCAVE AND GETTING DOWNGRADED FROM AN OUTPERFORM RATING TO MARKET PERFORM AT RAYMOND JAMES. THERE MOVES TO LAUNCH A NEW MARKETS AND DIVERSIFY PRICE OFFERINGS IS COMING ALONGSIDE SOME NEAR-TERM DOWNSIDE RISKS TO EARNINGS, ACCORDING TO THE ANALYST. SHE ALSO CITES LONG-TERM CONCERNS AFTER FRONTIER NIXED LATE FEES WERE CHANGES AND CANCELLATIONS WHICH ACCOUNTED FOR 8% OF ITS REVENUE LAST YEAR. SHARES ARE FRONTIER DOWN BY MORE THAN 9% ON THE DAY. THOSE ARE SOME OF OUR TOP CALLS. WE WANT TO STICK WITH FRONTIER. THE ANALYST BEHIND IT JOINS US NOW. SAVI SYTH IS THE MANAGING DIRECTOR AT RAYMOND JAMES. FRONTIER HAVE BEEN FACING A LOT OF CHALLENGES IN THE LAST FEW MONTHS, LAST FEW YEARS. WHAT PROMPTED YOU TO MAKE THE DOWNGRADE TODAY? SAVI: FRONTIER IS DOING SOME INTERESTING CHANGES TO THEIR NETWORK, PRICING STRUCTURE AND THE MARKETS THEY FLY INTO. WHILE ALL OF THIS IS VERY GOOD, CHANGES THEY NEED TO MAKE, I THINK THEY WILL BE SUCCESSFUL IN THE LONG TERM. HOWEVER, IT IS CAUSING 2024 TO BE AN INVESTMENT YEAR PROBABLY. EVEN THE LOSS OF CHANGE FEES AND CANCELLATION FEES SHOULD BE OVERWHELMED BY OTHER REVENUES. BUT IT WILL TAKE TIME. WE ARE CONCERNED ABOUT THE NEAR-TERM, ALSO SOME OF THE CHANGES THEY ARE MAKING TO THE NETWORK TO IMPROVE OPERATIONS. WE ARE NOT SEEING THE RESULTS YET, SO THAT GIVES US PAUSE HEADING INTO THE STRONG SUMMER SEASON. ROMAINE: WHAT DOES THAT MEAN WHEN WE TALK ABOUT THE STABILITY OF THESE DISCOUNT CARRIERS? WE HAVE SEEN OTHER CARRIERS INCLUDING SOUTHWEST, OTHERS EXPAND IN A LOT OF WAYS, WITH MORE FEES, DIFFERENT ROUTES, TRYING TO FIND SOMETHING TO DIFFERENTIATE THEMSELVES. SOME ARE JUST RAISING PRICES. IS THERE A FUTURE FOR THE BUSINESS MODEL OF BEING A PURE DISCOUNT AIRLINE? SAVI: I THINK THERE IS. YOU DEFINITELY HAVE A STRONG LONG-HAUL INTERNATIONAL DEMAND, CORPORATE RECOVERY, LEISURE, DOMESTIC LEISURE MAY NOT BE AS STRONG AS THOSE OTHER AREAS. ONE OF THE ISSUES, SOME OF THESE LOW-COST CARRIERS ADDED A LOT OF CAPACITY TO THEIR FLEETS. THEY WERE ANTICIPATING THE PANDEMIC TO BE MORE OF A NORMAL DOWNTURN. GIVEN THE LEVEL OF COST INFLATION WE HAVE SEEN, THEY NEED TO BE SMALLER THAN THEY PLANNED TO. THAT HAS CAUSED THESE AIRLINES TO GO THROUGH THIS TRANSITION. THEY WILL BE SUCCESSFUL BUT IT WILL TAKE TIME TO ADJUST. ALIX: YOUR PRICE CALLS IN DOLLARS BUT THE STOCK HAS A FIVE HANDLE RIGHT NOW. IS THE MARKET BEATING THEM UP UNFAIRLY? SAVI: OUR PRICE TARGET WAS THE EARLIER PRICE TARGET. THE NUMBERS ARE MOSTLY THERE. WE DON’T HAVE PRICE TARGETS FOR MARKET PERFORMING NAMES. THIS IS NOT A VALUATION CALL. I THINK THERE IS UPSIDE TO THE SHARES BASED ON VALUATION. IN TERMS OF EARNINGS RISK, THEREFORE, THE WAY THE SHARES WILL REACT, I SUSPECT THERE IS MORE EARNINGS RISK VERSUS THE OTHER AIRLINES HEADING INTO THE SUMMER. ALIX: HOW MUCH IS THE MACRO CONVERSATION, HOW MUCH IS A FRONTIER EXECUTION ISSUE? SAVI: OUR CALL IS ON THE FRONTIER EXECUTION ISSUE. MACRO SEEMS TO BE HOLDING. THERE ARE SIGNS THAT THE CONSUMER IS SHOWING SOME RESISTANCE. DEMAND IS STRONG BUT MAYBE A LITTLE MORE PRICE SENSITIVITY, ESPECIALLY IN THE OFF-PEAK PERIODS. PEAK PERIOD DEMAND IS REALLY STRONG, RECORD NUMBERS DURING THE HOLIDAYS. THE MACRO SEEMS TO BE HOLDING, THOUGH, THERE IS SOME SOFTNESS, AND THIS IS MORE OF A FRONTIER EXECUTION CALL IN THE NEXT SIX TO 12 MONTHS. ROMAINE: YOU SAY DEMAND IS HOLDING UP HERE. FRONTIER SPECIALIZES IN MORE THAN JUST CONSUMER TRAVEL, LEISURE TRAVEL. I’M CURIOUS ABOUT BUSINESS TRAVEL. I KNOW THAT IS NOT A BREAD AND BUTTER POSITION FOR FRONTIER, BUT WHEN YOU LOOK AT THEIR COMPETITORS, THEY ARE MORE DEPENDENT ON THAT. AND WE SEE ENOUGH OF A REBOUND IN THAT SPACE TO SEE MATERIAL IMPACT ON THE BOTTOM LINE? SAVI: I THINK YOU ARE SEEING SOME OF THE LAST HOLDOUTS COMING BACK TO TRAVEL, MOST NOTABLY TECH. WE ARE SEEING SOME REALLY GOOD RECOVERY THERE ESPECIALLY SINCE THE BEGINNING OF THE YEAR. BUSINESS DEMAND IS PROBABLY BACK CLOSE TO WHERE IT WAS IN 2019. IF THIS WAS NORMAL, DIDN’T HAVE THE PANDEMIC, YOU WOULD BE HIGHER THAN THAT. GETTING BACK TO 2019 ISN’T GREAT BUT IT IS SHOWING STRENGTH AND RECOVERY. IN CONTRAST TO LEISURE DEMAND WHICH IS MORE STABLE. ALIX: BEFORE WE GO, DO YOU EXPECT CONSOLIDATION WITH A SMALLER DISCOUNT CARRIERS? SAVI: I THINK THAT’S THE RIGHT ANSWER FOR SPIRIT, WOULD BE GOOD FOR FRONTIER. SPIRIT CAN GO TO THEIR CREDITORS AND CLEAN UP THEIR BALANCE SHEET, IN AGREEMENT WITH THEIR CREDITORS. A MERGER WITH FRONTIER WOULD BE GOOD FOR CONSUMERS, GOOD FOR THE AIRLINE AND ITS EMPLOYEES. I THINK THAT IS THE LONGER-TERM GOOD SOLUTION. WE WILL SEE IF THIS ADMINISTRATION WILL GO FOR IT. ALIX: THANK YOU SO MUCH, SAVI SYTH, AT RAYMOND JAMES. BACK TO YOUR FTC QUESTION, WE SAW WHAT HAPPENED WITH JETBLUE. MAYBE NOT THE FRIENDLIEST ENVIRONMENT FOR THESE DISCOUNTERS TO GET TOGETHER. MAYBE AFTER NOVEMBER, DIFFERENT STORY. ROMAINE: WHEN IT COMES TO M&A, FIRST PERSON THAT YOU CALL IS YOUR INVESTMENT BANKER. RIGHT NOW, IT IS YOUR LAWYERS AND HEAD OF REGULATORY AFFAIRS, TO SEE IF IT CAN GET DONE. ALIX: THERE WAS A CONVERSATION I HAD ON THE OIL PATCH. YOU MAY NOT THINK THE DEAL GETS DONE NOW, BUT GET IN THE QUEUE. NO MATTER WHO IS IN THERE IN NOVEMBER, GET IN LINE OR ELSE YOU WILL BE AT THE BACK OF THE LINE. WE WILL COME BACK TO TALK ABOUT OUR FAVORITE TOPIC OF THE DAY. KENNETH BENSON, HIS INSIGHT ON WALL STREET’S RETURN TO A-DAY SETTLEMENTS. HOW DID WE DO TODAY? EARLY VISIT JUST ABOUT 3:30 P.M. HERE IN NEW YORK. THIS IS THE "COUNTDOWN TO THE CLOSE." ROMAINE BOSTICK ALONGSIDE ALIX STEEL. ALIX: VOLUME IS STILL REALLY LIKE. IT WILL BE HARD TO FIND A CUSTOMER LIST — CATALYST. I KNOW WE HAVE PCE ON FRIDAY. ROMAINE BIDS WE ARE IN THAT WEIRD WORLD WHERE EARNINGS SEASON IS OVER AND THE FED, AT LEAST FOR NOW, HAS SHUT ITS MOUTH. ALIX: ALMOST, THE BLACKOUT THE CARL MESSER KEEPS TALKING ABOUT. YOU’RE ALMOST THERE. SO WE HAVE TO WAIT FOR JOBS. SOMETHING THAT DIDN’T HAPPEN TODAY IS SOMETHING THAT HAPPENED OVER 100 YEARS AGO. ROMAINE: EVERYTHING OLD IS NEW AGAIN. [LAUGHTER] ALIX: IT’S WHY I SHOULDN’T HAVE THROWN OUT THOSE OLD JEANS. SETTLEMENT TIMES FOR TRADES ROSE AS HIGH AS FIVE TO SEVEN DAYS IN THE 80’S. MORE RECENTLY IT HAS BEEN TWO DAYS. THE NEW SYSTEM IS CALLED 10 PLUS ONE AND IS INTENDED TO REDUCE RISK IN THE FINANCIAL SYSTEM. JODI ARIAS IS THE COCHAIR OF THE BRITISH-AMERICAN FINANCE ALLIANCE AND FORMER TEXAS CONGRESSMAN. EXPLAIN TO US WHY THIS IS A BIG DEAL AND WHY WE HAD TO SETTLE TRADES IN JUST ONE DAY. KEN: THANK YOU FOR HAVING ME ON THIS TOPIC IN PARTICULAR. THIS IS SOMETHING THAT THE INDUSTRY STARTED LOOKING AT IN THE FOURTH QUARTER OF 2020 AND ACTUALLY, YOU COULD GO BACK TO AS FAR AS WHEN WE CHANGE THE CYCLE FROM THREE DAYS TO TWO IN 2017, PEOPLE THINKING THAT WAS JUST A WAY STATION TO GET TO T+1. THE DESIRE IS TO MITIGATE AS MUCH RISK AS WE CALL FROM THE SYSTEM, ELIMINATES THE NEED TO HOLD EXCESS CAPITAL, BUT STILL BE ABLE TO PRESERVE THE VARIOUS ASPECTS OF THE SECURITIES MARKET, THINGS LIKE SECURITIES AND PRIME BROKERAGE WHICH ARE IMPORTANT FACETS OF THE MARKET. AND YOU POINTED OUT IT’S BEEN 100 EUROS TO GET BACK TO T+1. I WAS LOOKING AT SOMETHING TODAY, 100 YEARS AGO I THINK THE AVERAGE DAILY VOLUME IN EQUITIES IN THE U.S. WAS 4 MILLION. TODAY IT’S WORTH, 11 BILLION. A LOT HAS CHANGED IN THE CAPITAL MARKETS IN THE LAST SEVERAL MONTHS YEARS. ALIX: DO WE KNOW IF IT WENT WELL? KENNETH: WE ARE IN THE PROCESS. THE INDUSTRY SPENT THE WEEKEND — THIS IS A PARTNERSHIP BETWEEN SIFMA, THE INVESTMENT COMPANY INSTITUTE, AND THE DTCC, WORKING WITH BROAD INDUSTRY COUNTERPARTS, SOUTHSIDE SELLERS, UTILITIES AND SERVICE PROVIDERS. FICO ALL HANDS ON DECK EFFORT THAT WE HAVE BEEN WORKING ON FOR ALMOST FOUR FOR PIERCE BUT IN THE LAST SEVERAL MONTHS, IT’S AN ONGOING WEEKLY EFFORT THAT CULMINATED BEGINNING AT THE END OF LAST WEEK WITH SETTING UP AN INDUSTRY COMMAND POST THAT HAS BEEN RUNNING, IT IS RUNNING RIGHT NOW. IT’S ALSO BEEN IN COORDINATION WITH PARTNERS IN CANADA, MEXICO, ARGENTINA, PERU, ALL OF WHOM WENT TO T+1 YESTERDAY. THERE WILL BE HAVING THEIR DOUBLE SETTLEMENTS TODAY. IN THE U.S. WHICH OBVIOUSLY IS A MUCH LARGER MARKET BY A LONGSHOT, TOMORROW WILL BE THE DOUBLE SETTLEMENTS TODAY. SO SECURITIES THAT ARE TRADED TODAY WILL SETTLE TOMORROW VERSUS SECURITIES THAT ARE TRADED ON FRIDAY WILL ALSO SETTLE TOMORROW. THAT IS WHERE THE RUBBER HITS THE ROAD. BUT A TREMENDOUS AMOUNT OF WORK HAS BEEN PUT INTO THIS AND WE FEEL VERY OPTIMISTIC ABOUT WHERE WE ARE. ROMAINE: ARE YOU CONCERNED AT ALL WITH THE DOUBLE SETTLEMENTS TOMORROW AND WITH THE MSCI REBALANCING, ANY CONCERN HERE ABOUT ANY HICCUPS? KENNETH: WHAT MEMBERS ARE REPORTED TO US THAN WHAT THE VARIOUS SERVICE PROVIDERS ARE REPORTING TO DTCC, ALL SYSTEMS ARE A GO, EVERYTHING IS READY. WE SAW CANADA WHICH IS THE LARGEST OF THE HEAD OF MARKETS, THEY SEEM TO BE HANDLING IT WELL RIGHT NOW, SO I THINK WE ARE OPTIMISTIC. WE HAVE TAKEN EVERY PRECAUTION THAT WE CAN. WE HAVE TRIED TO INFORM THE BROAD ASPECT OF THE INDUSTRY, WE ARE LOOKING AT CROSS-BORDER IMPLICATIONS WHERE THEY ARE NOT SHIFTING, AND WE ARE LOOKING AT THAT. ROMAINE: LET’S TALK ABOUT THE CROSS-BORDER THING. INVESTORS HAVE MADE IT CLEAR THAT EVEN ONCE YOU GET EVERYBODY ON ONE PAGE, YOU WILL STILL HAVE ISSUES WITH REGARDS TO CURRENCY TRANSFERS AND THE IDEA THAT IT WILL NOT BE IN SYNC WITH THE TIME IT TAKES TO SETTLE. WHAT IS THE SOLUTION, IF THERE IS ONE, TO MAKE SURE THAT THAT IS SEAMLESS? KENNETH: PEOPLE HAVE FREE POSITION FOR THAT AT THIS POINT. THE U.S. SHIFTED FROM THREE TO TWO, WE WERE BEHIND THE REST OF THE WORLD WHICH HAD ALREADY GONE TO TWO. WE EXPECT MOST OF THE WORLD WILL FOLLOW. THE U.K. HAS SAID THEY WILL DO IT BY THE END OF 2027 AND WE EXPECT THE E.U. TO FOLLOW SOON ON THAT AS WELL. OBVIOUSLY IN THE FX WORLD, THAT SECTOR HAS BEEN MAKING PROVISIONS FOR THIS AND I THINK WE WILL SEE MORE ACTIVITY AMONG SERVICE PROVIDERS THERE AS WELL. ROMAINE: I KNOW YOU GUYS HAVE BEEN PREPARING FOR THIS FOR A YEARS, WE HAVE TALKED WITH MANY BANKS AND THEY HAVE MADE IT CLEAR YOU HAVE CONTINGENCY PLANS IN PLACE, BUT SOME OF THOSE BANKS ARE ALSO CONCERNED ABOUT THE RISKS, AT LEAST IN THIS TRANSITION, OF FAILED TRADES IN THE NEXT COUPLE OF WEEKS. IF WE END UP IN A SITUATION WHERE WE SEE MAJOR FIELD TRADES — SALE, TRADES, WITH A TAVERN FULL EFFECT OR WILL IT BE SOMETHING MORE ISOLATED TO JUST THAT PARTICULAR TRANSACTION? KENNETH: WELL, WE HAVE HAD PERIODS OF VOLATILITY WHERE WE HAVE SEEN A SPIKE IN FAILS. WE SAW IT IN MARCH 2020 WITH THE ONSET OF COVID AND THE REACTION IN THE U.S., WE START DOING THE MEME STOCK INCIDENTS IN 2021. THE INDUSTRY HAS BEEN ABLE TO COME TOGETHER. SIFMA HAS BEEN INVOLVED IN WORKING TO NEST ALLOWING FOR US TO SETTLE OUTFIELD TRANSACTIONS. IS THERE A CHANCE WE WILL SEE A SPIKE IN FAILS WITH THESE TRANSITIONS, SURE. BUT WE THINK PROVISIONS HAVE BEEN MADE TO ADDRESS THAT IF IT OCCURS. BUT OVER THE LONG RUN, WE THINK THE MARKET IS READY FOR THE T+1, THAT THE WORK HAS BEEN DONE TO GET US WHERE WE NEED TO BE. ALIX: IF WE SEE FAILED TRADES, WOULD IT BE BECAUSE OF THE FX ISSUE, WILL IT BE SECURITIES LENDING TO GET THE SHARES BACK OR ALLOCATION CONFIRMATION PROCESS BECAUSE SOME OF THE TRIGGERS ARE SMALLER? WHERE DO YOU THINK THE BIGGEST CRACK WILL BE? KENNETH: IT’S A GOOD QUESTION. I THINK IT WILL BE MORE ONE-OFF SITUATIONS WHERE PERHAPS FIRMS ARE NOT AS READY AS THEY MIGHT BE FOR THERE COULD BE — SOMETHING THAT NO ONE THOUGHT OF. BUT RIGHT NOW, WE ARE NOT SEEING ANY OF THAT. I THINK IT PROBABLY WILL BE MORE OF — AND I HOPE IT WILL BE MORE OF AN ANOMALY THAN ANYTHING THAT IS SYSTEMATIC. ROMAINE: BUT IT IS GREAT TO CATCH UP WITH YOU, KENNETH BENSON, PRESIDENT CEO OVER AT SIFMA, AS THOSE T+1’S RULES TAKE EFFECT TODAY. EVERYONE IS ON GUARD FOR MAYBE SOME POTENTIAL DISRUPTIONS, BUT AT LEAST BASED ON WHAT KEN SAID AND WHAT BANKS HAVE SAID, THEY SEEM PREPARED FOR IT. ALIX: AT LEAST THEY HAD A LOT OF TIME TO PREPARE FOR IT. ROMAINE: 100 YEARS. [LAUGHTER] ALIX: CAN YOU IMAGINE T+7. PAUL STANLEY TOLD ME WHEN HE WAS AN INVESTMENT BANKER, IT WAS T+7. ROMAINE: YES, PEOPLE WERE SAYING THAT WHEN THEY STARTED THEIR CAREERS, YOU WAITED A WEEK. BECAUSE IT WAS OUT PAPERWORK. SOMEBODY SIGNED OFF ON PAPER, YOU SENT IT DOWN TO THE BASEMENT TO GET IT NOTARIZED, THAT SOMEBODY HAD TO BAKE IT ACROSS THE WILDS OF MANHATTAN. IT WAS A LOT, ALYX:. ALIX: HORSE AND BUGGY TIME. [LAUGHTER] ROMAINE: WE WILL COME BACK HERE INTO THE FUTURE AND LOOK AT THE BIG MOVERS ON THE DAY. CELSIUS THE DRINKS COMPANY, THAT IS, HAVING ONE OF ITS WORST DAYS IN A COUPLE OF YEARS. THEY DOWNGRADE AND CONCERNS ABOUT THE SALES TRAJECTORY OF WHAT WAS ONE OF THE HOTTEST STOCKS ON THE STREET. IT IS OUR STOCK OF THE HOUR AND IT IS COMING UP NEXT, RIGHT ROMAINE: TIME NOW FOR OUR STOCK OF THE HOUR. WE ARE TAKING A CLOSER LOOK AT CELSIUS HOLDINGS, MAKER OF ENERGY DRINKS. CHER IS RUNNING LOW ON FUEL AFTER A NOTE FROM MORGAN STANLEY FLOGGING A SLOWDOWN IN SALES GROWTH THIS MONTH. ABIGAIL DOOLITTLE JOINS US TO TALK ABOUT THE WORST INTRADAY DROP GOING BACK TO 2021 FOR THE STOCK. THE THING ABOUT THE NOTE, THE ANALYST CITED A DROP IN SALES IN THE MOST RECENT WEEK. AND WE GOT A 13% SETTLE UP ON THAT? WHAT AM I MISSING? ABIGAIL: WHAT’S GOING ON HERE. IT DOESN’T MAKE ANY SENSE. ON THE ONE DAY BASIS, WE HAVE THE STOCK DOWN 10% TODAY. DOWN DOUBLE DIGITS IN THE LAST FEW DAYS. IF YOU LOOK AT THE DATA THE LAST MONTH, WE ARE LOOKING AT GROWTH OF 11 .6%, UP FROM 11.4% THE PREVIOUS MONTH AND ALSO OF 3.2% ON A YEAR-OVER-YEAR BASIS. SO AGAIN, A BIG HEAD SCRATCHER I. THINK WHAT’S GOING ON FOR THIS TALK OVER THE LAST FIVE YEARS OR SO, INTO THE SELLOFF, UP 50%. IT IS PRICED FOR PERFECTION. I THINK PEOPLE WANTED A BIT MORE GROWTH. ROMAINE: I MEAN, WHEN YOU LOOK AT THE UPTICK IN THE SHARES IN THE LAST YEAR, AND I THINK THAT PE IS SOMETHING LIKE 70X. ALIX: ALSO I WONDER, IT LOOKS LIKE THERE PROBABLY WAS A LOT OF SHORT COVERING IN MARCH AND FEBRUARY IF YOU LOOK AT THE SHORT INTEREST AND IT LOOKS LIKE THE SHORT INTEREST IS PRETTY LOW NOW SO I WONDER WHAT HAPPENS TO IT. ABIGAIL: GREAT POINT, I THINK THERE IS DEFINITELY A SHORT PLAY ON THE STOCK. IN TERMS OF THE LONG-TERM UPTREND, IF YOU LOOK AT IT, THE STOCK GOES UP, UP, UP, THEN COMES BACK DOWN TO THE 200-DAY MOVING AVERAGE. I THINK WE WILL GO BACK TO THE 100 DAY MOVING AVERAGE WHICH I THINK IS $73 — OR THE 200-DAY MOVING AVERAGE AT AROUND 65 DOLLARS. A DOLLARS. A,, ALL-NATURAL ENERGY DRINKS, APPARENTLY THEY ARE VERY PURE, THEY HAD A CONTRACT WITH PEPSICO, 500 MILLION DOLLARS IN PREFERRED STOCK FOR A DISTRIBUTION DEAL ACROSS THE COUNTRY. THEY WERE NO LONGER JUST IN THE SPECIAL COMPANIES. BIG DISTRIBUTION. THAT IS ONE REASON WHY THE STOCK IS UP SO MUCH. THAT’S RIGHT, THEY STARTED POPPING UP EVERYWHERE. EVERY STORE IN NEW YORK. THAT WAS PROBABLY BECAUSE OF THE DEAL WITH PEPSI. ROMAINE: HAVE YOU TRIED THESE THINGS? ABIGAIL: I HAVE NOT. ROMAINE: WE INTERVIEWED THE CEO, A VERY CHARISMATIC GUY. YOU KIND OF SEE WHERE THE MARKETING POINT WENT INTO IT. BUT AT THE END OF THE DAY, THERE ARE SO MANY ENERGY DRINKS ON THE MARKET. SO MANY CHOICES. ALIX: WHICH TO YOUR POINT ABOUT THE NUMBERS, THEY AREN’T TERRIBLE, BUT CONSIDERING THE PARTNERSHIP WITH PEPSI, MAYBE IT LOOKS A LOT WORSE. ABIGAIL: THE THING THAT DISTINGUISHES THEM BILL IS APPARENTLY THEY ARE ALL-NATURAL. ROMAINE: HAVE WE VERIFIED THAT? ABIGAIL: WELL THAT IS WHAT I WAS TOLD BY AN ANALYST. ROMAINE: DO YOU LIKE ENERGY? ABIGAIL: I LOVE IT IN A COFFEE. I HAVE HAD RED BULL. NOT [LAUGHTER] REALLY MY THING. [LAUGHTER] ALIX: HAVE YOU HAD THE CELSIUS DRINK? ROMAINE: I DON’T DRINK THAT MUCH CAFFEINE, BUT I’VE HAD IT. IT’S NOT SOMETHING I WOULD PUT INTO MY DAILY — WAS THAT THE STOCK BEING UP OVER 7500 POINTS? [LAUGHTER] ROMAINE: THEY ARE EVERYWHERE. SO I GET WHY THERE HAS BEEN SO MUCH ENTHUSIASM AROUND THE STOCK. ROMAINE: THIS IS THE "COUNTDOWN TO THE CLOSE." ROMAINE BOSTICK ALONGSIDE ALIX STEEL. KIND OF A MIXED DAY ON WALL STREET. ALIX: WITH IT IS, WE STILL HAVE A RECORD FOR THE S&P 500 AND THE NASDAQ, BUT IT’S NOT THAT INTERESTING. S&P IS DOWN 0.1%. YES, TECH IS LEADING AT HIGHER, BUT SO IS ENERGY. ONE PERSON. A POWER COMPANY IS THE TOP PERFORMER IN THE ENERGY SECTOR. ROMAINE: THE VICKS RIGHT NOW IS TRADING AROUND 13. A BIT ELEVATED. IN THE PAST FEW WEEKS AND EVEN THE PAST COUPLE OF YEARS, IT HAS BEEN SUBDUED, TO SAY THE LEAST. WE HAD A CHANCE TO CATCH UP WITH MANDY XU EARLIER AND ASKED HER ABOUT WHY VOLATILITY HAS REMAINED SO MUTED. MANDY: WHY VOLATILITY IS LOW, IT IS LARGELY ON THE BACK OF MACROECONOMIC FUNDAMENTALS AND THE FED TAKING THE WIND OUT OF THE SALES OF THE VOLATILITY MARKETS WITH THEIR LAST MEETING WITH THE PATIENTS THEY HAVE EXPRESSED WITH RELIEF. FOR INFORMATION TO REACH THE TARGET. ROMAINE: THAT WAS THE HEAD OF THE RELATED STRATEGY AT CBOE, HELPING TO KICK US OFF TO THE CLOSE. HERE TO HELP TAKE US TO THE CLOSING BELLS IS KATRINA DUDLEY, PORTFOLIO MANAGER AND INVESTMENT STRATEGIST AT FRANKLIN MUTUAL SERIES. GREAT TO SEE YOU HERE. WE WERE TALKING WITH MANDY EARLIER ABOUT HOW SOME DUDE VOLATILITY HAS BEEN, BUT IS NOT A TRUE REFLECTION? SURE, VOLATILITY IS SUBDUED. BUT THERE ARE TRAITORS WHO STILL SEEM TO BE PULLING THEIR HAIR IS OUT WONDERING WHEN THEY WILL BE ABLE TO GO AWAY FOR SUMMER VACATION. KATRINA: TAKE A LOOK AT THIS MARKET. NUMBER ONE, WE HAVE A FED ACTUALLY GIVING US CLARITY AND TELLING THE MARKETSX, TELEGRAPHING WHAT THEY ARE GOING TO DO. WHEN YOU HAVE PEOPLE TELEGRAPHING WHAT THEIR ACTIONS WILL BE, IT TAKES AWAY THE UNCERTAINTY. SO THE NEXT COUPLE OF MONTHS, IT IS JUST THAT WE ARE WAITING FOR THE DATA ON INFLATION. WE WILL HAVE THE PRINT AT THE END OF THIS WEEK’S. WHAT WILL CAUSE UNCERTAINTY, THOUGH, IS THE NOVEMBER ELECTION, IT CAUSE A SPIKE IN VOLATILITY. ROMAINE: WHEN WE TALK ABOUT THE ELECTION AND HOW THAT GETS PRICED INTO THE MARKET, DO YOU THINK IT WILL BE ACTIVE, A LOT OF ACTIVITY, OR WILL IT JUST BE MORE PEOPLE MOVING TO THE SIDELINES? KATRINA: I THINK PEOPLE EITHER MOVED TO THE SIDELINES, WHICH IS A BIT IN THE WEAKNESS — A BIT OF WEAKNESS IN THE MARKET, OR THEY WILL GO TO THE SECTORS WHICH WILL BENEFIT BASED ON WHO IS AHEAD IN THE POLLS. AT THE MOMENT, NO ONE IS SURE WHAT WILL HAPPEN SO NO ONE IS LOOKING TO POSITION THEMSELVES. NUMBER TWO, WE KNOW THAT LEADING INTO ELECTIONS, MARKETS TEND TO UNDERPERFORM AND THAT UNDERPERFORMANCE IS A REFLECTION OF GREATER UNCERTAINTY. WE ARE EXPECTING THAT GOING INTO NOVEMBER, AND THEN ONCE WE HAVE THE RESOLUTION OF THE UNCERTAINTY, WE WOULD EXPECT THE MARKET IN ITS ENTIRETY TO GO UP. BUT WE DON’T KNOW EXACTLY WHICH SECTORS, BECAUSE IT WILL DEPEND ON WHO WINS IF YOU LOOK. ALIX:. ALIX: AT THE VICKS CURVE, AS WE WERE TALKING EARLIER, IT REVERTS QUICKLY. THERE IS A SPIKE AROUND THE ELECTION, THEN IT REVERTS IT’S NOT A PROLONGED PERIODS OF RISK. KATRINA: YES. BUT TALKING OF SUMMER VACATIONS, PEOPLE WILL HAVE AN OPPORTUNITY TO TAKE SOME OF THOSE SUMMER VACATIONS. THE FED HAS BEEN CLEAR IN TELEGRAPHING THAT IT WILL BE A COUPLE OF MONTHS BEFORE THEY REALLY SEE INFLATION UNDER CONTROL. AND WHEN I LOOK AT INFLATION, WE TALK ABOUT WEIGHT LOSS DRUGS, BUT EVEN WITH WEIGHT LOSS, WHEN YOU GET THE FIRST POUNDS OFF, THEY ARE THE IS USED ONCE. IT’S THE LAST BITS AS YOU GET CLOSER TO YOUR TARGET THAT ARE TOUGHER. IT WILL BE MUCH SLOWER FOR US TO GET TO THE TARGET INFLATION. ALIX: SHE IS THE ONE PERSON THAT LIKES THE FED SPEAK. [LAUGHTER] TALKING ABOUT THE SECTORS DOING WELL, IT’S NOT JUST TECH, RIGHT, ITS UTILITIES, POWER COMPANIES, ET CETERA. WHERE ARE THE BETS THAT CAN BE MORE IMMUNE TO RATE CUTS, HIKES, WHATEVER? KATRINA: IF YOU LOOK AT NVIDIA AND THEIR EARNINGS, YOU HAD A VERY STRONG PRINT. BUT AI DOESN’T JUST BENEFIT CHIPMAKERS. YOU NEED POWER. THE AMOUNT OF POWER TO POWER SOME OF THESE NEW CHIPS IS SIGNIFICANT. SO EVEN FOR A VALUE INVESTOR, A VALUE SECTOR SUCH AS UTILITIES ACTUALLY HAS AN OPPORTUNITY TO BENEFIT FROM THIS HIGH GROWTH SECTORS, BECAUSE OF THE USE OF AI AND ITS INCREASED DEPLOYMENT WILL BE A MUCH GREATER DRAW. ROMAINE: YOU THINK THAT WILL BE A LONG-TERM STRUCTURAL TRADE OR MORE TACTICAL? KATRINA: LONG TERM STRUCTURAL TREND TO SUPPORT THESE COMPANIES. WHEN YOUR UTILITY — YOU ARE A UTILITY AND YOU HAVE TO FORWARD VISIBILITY? YOU INVEST CAPITAL TODAY, THEN YOU ARE IN THE REGULATED RETURNS. SO WE THINK THE STRUCTURAL CASE IS ABOUT GIVING FORWARD VISIBILITY. ROMAINE: THE STRUCTURAL THEME HAS BEEN A BIG THING IN THE MARKETS AND WILL CONTINUE TO BE. A COUPLE OF MINUTES AGO YOU USED THAT ANALOGY OF WEIGHT LOSS. I WANT TO ASK YOU ABOUT WEIGHT LOSS DRUGS BECAUSE WE TALK ABOUT THAT AS UNINVESTABLE OPPORTUNITY. DO YOU SEE THAT AS SOMETHING THAT IS ALSO STRUCTURAL AND LONG-TERM IN NATURE? KATRINA: I THINK WE NEED TO HAVE THE REIMBURSEMENT AVAILABLE FOR A MUCH GREATER PORTION OF THE POPULATION. FOR THE INVESTMENT CASE TO CONTINUE TO WORK, I THINK THAT HAS BEEN A LOT OF FOCUS ON THOSE COMPANIES WHICH ARE NOT BENEFITING OR ARE LOSING OUT, THE SUGARY DRINKS COMPANIES, THE CANDY COMPANIES. I THINK AS WE GET TO A SETTLED STAGE, YOU WILL HAVE PEOPLE WHO USE THE DRUGS AND THEN HOPEFULLY COME OFF THEM. I KNOW THAT IS A BIG AREA OF DEBATE, BUT I THINK THAT’S WHAT I SEE AS A SUSTAINABLE FUTURE. AND THEREFORE, WILL TAKE A LOOK. SOME OF THESE COMPANIES DISPROPORTIONATELY BEING PUNISHED. THERE’S TIMES WHERE THE MARKET GETS OVERLY NEGATIVE ABOUT HOW DAMAGING THESE THINGS CAN BE AND THAT CREATES AN INVESTMENT OPPORTUNITY. ALIX: DO YOU LIKE BONDS? DO YOU LIKE THE TWO YEAR? TO SIT, BE HAPPY? KATRINA: IF YOU HAVE CASH SITTING ON THE SIDELINES GETTING 5% — TWO YEARS AGO WE WERE TALKING 0%. THERE IS A GOOD OPPORTUNITY THERE. THE MARKETS ARE RELATIVELY FULLY VALUED. SO YOU JUST SITTING THERE AND HAVING MORE OF A BALANCED PORTFOLIO MAKES SENSE. I THINK THE MARKET IS PRICING IN PROBABLY TWO RATE CUTS GOING INTO THE END OF THE YEAR. WE ARE PROBABLY MORE IN THE CAMP OF ONE RATE CUTS. SO YOU HAVE MORE THERE TO COME BEFORE YOU CAN START DOING THINGS. ROMAINE: KATRINA, GREAT INSIGHTS AS OWNERS, KATRINA DUDLEY AT FRANKLIN MUTUAL SERIES, HELPING US COUNT YOU DOWN TO THE CLOSING BELLS. SEEING A SMALL BID, TO THE MARKET FOR TECH STOCKS. THE NASDAQ, THE COMPOSITE AND THE PHILADELPHIA SEMI CONDUCTOR INDEX. ALIX: WHEN GUESTS THAT ARE WE JUST GOING TO CHASE THE RALLY, OR TAKE YOUR PROFITS? THOSE ARE THE TWO CHOICES. CHASE OR PROFIT THEN WHAT IS THE CATALYST GOING TO BE? ROMAINE: THE FED? ALIX: I AM ASSUMING IT WILL BE JOBS DAY. IF THE DATA IS STILL STEADY AS SHE GOES, WHAT WILL IT BE? ROMAINE A FULL BREAKDOWN OF ALL THE MARKET COVERAGE COMING UP HERE ON BLOOMBERG AS WE TAKE YOU TO THE BELL AND BEYOND. >> "BEYOND THE BELL," BLOOMBERG’S COMPREHENSIVE CROSS-PLATFORM COVERAGE OF THE U.S. MARKET CLOSE STARTS RIGHT NOW. ♪ ROMAINE: RIGHT NOW WE ARE TWO MINUTES AWAY FROM THE END OF THE TRADING DAY. ROMAINE BOSTICK ALONGSIDE ALIX STEEL. WE ARE COUNTING YOU DOWN TO THE CLOSING BELL. AND HERE TO HELP TAKE US "BEYOND," IT’S OUR GLOBAL SIMULCAST WITH CAROL MASSAR AND TIM STENOVEC, BRINGING TOGETHER OUR AUDIENCES ACROSS FROM OUR BLOOMBERG PLATFORMS, TELEVISION AND RADIO AND OUR PARTNERSHIP HERE ON A TEPID TRADING DAY, CAROL MESSER. CAROL: CAROL: IT’S NOT FRIDAY YET. ROMAINE: WHAT IS HAPPENING? CAROL: I DON’T KNOW, IT’S JUST THAT KIND OF DAY. TIM: CAROL SAID IT WAS FRIDAY. CAROL: WE’RE JUST WAITING FOR MORE ECONOMIC DATA. MORE FED SPEAK BEFORE THEY STOPPED TALKING AHEAD OF THE UPCOMING FED MEETING. TIM: COUNTDOWN TO THE BACK OF PERIOD CONTINUES. ALIX: I’M DISAPPOINTED BY THE HOLDOUTS. KATRINA DUDLEY DOESN’T SEEM TO MIND OF THE TALK, SHE LIKES THE FACT THAT THEY ARE BEING CLEAR AND THEY ARE TALKING AND THAT IS WHY VOLATILITY RELATIVELY SUBDUED. TIM: IT GIVES US SOMETHING TO TALK ABOUT WHEN THEY TALK. WHAT DO YOU TALK ABOUT, WERE MEN, WHEN THERE IS A BLACK COUCH PERIOD? ROMAINE: WHAT DO WE TALK ABOUT? WE TALK ABOUT THE FED BEING IN A BLACKOUT PERIODS. BUT GOING THROUGH THINGS, WE HAVE KASHKARI WHO HEARD FROM. YOU HAD COOKED SPEAKING TODAY. I DON’T KNOW WHAT THEY ARE SAYING OTHER THAN WHAT THEY SAID MAYBE YESTERDAY? LAST WEEK, OR THE WEEK BEFORE. ALIX: THAT IS A GOOD POINT. IT’S NOT ACTUALLY MOVING MARKETS AT THE END OF THE DAY. AT LEAST THEY ARE ALL CLEAR. [CLOSING BELL RINGING AND CHEERS] ROMAINE: MAYBE THE FACT THAT THEY ARE IN HAS BEEN GOOD FOR THE MARKET. THE S&P 500 SPENT A GOOD PORTION OF THE DAY IN THE RED AND THEN SLIPPED INTO THE GREEN. THESE NUMBERS TAKE A WHILE TO SETTLE SO TAKE IT WITH A GRAIN OF SALT. S&P IN THE GREEN, BUT IT TAKES A WHILE FOR IT TO SETTLE. THE NASDAQ WILL END IN THE GREEN. NASDAQ COMPOSITE OF ENDPOINTS, 0.6%. NASDAQ 100 OF 61 POINTS, ZERO POINT 3%. THE DOW MEANWHILE, DOWN ZERO POINT 5%. RUSSELL 2000 WILL CLOSE THE DAY LOWER BY 0.1%. CAROL: MOST NAMES IN THE S&P 500 ARE LOWER, 367 TO THE DOWNSIDE. WHAT WAS GOOD IS TO BE A SEMICONDUCTOR NAME. IT WAS UP 1.9%, A LOT OF IT HAVING TO DO WITH NVIDIA WHICH I WILL TALK ABOUT IN THE. ALIX: LOOK AT THE IMAP FUNCTION ON THE TERMINAL. IT SHOWS THE BREAKDOWN. I.T. OUTPERFORMING, UP 1%, BUT IT’S NOT JUST THAT, ENERGY OUTPERFORMING AS WELL, UP 1%, FOLLOWED BY COMMUNICATIONS, SERVICES, EXXON IS THE BEST PERFORMER IN THE ENERGY SECTOR. ON THE DOWNSIDE YOU HAVE FINANCIALS, HEALTH CARE AND INDUSTRIALS, ALL DOWN OVER 1%. CAROL: SECTOR PLAY ON THIS TUESDAY. LET’S GET TO THE SEMICONDUCTOR SPACE, NVIDIA, A GAIN OF MORE THAN 7%, THE NUMBER ONE GAINER IN THE S&P 500 AND THE NASDAQ 100, UP SIX DAYS IN A ROW. AT LAST CHECK, IT WAS UP MORE THAN 20% IN THE LAST SIX DAYS. AND THAT A RECORD HIGH TODAY, CONTINUING TO FOR THEIR LOVE FOR NVIDIA. TRIPLE MOMENTUM SCREENERS SCIENCE STOCKS INCLUDING NVIDIA, NUMEROUS ANALYSTS SAYING THAT THE STOCK IS WORTH PAYING FOR, SAYING THE COMPANY’S 69% MARGIN ON THE BASIS OF EARNINGS BEFORE INTEREST AND TAXES, THE ANALYST CALLS THAT NOTHING SHORT OF EXTRAORDINARY. MEANTIME, AND VIDEO STOCK WILL SURGE 258% FROM CURRENT LEVELS, HITTING IT $10 TRILLION MARKET VALUATION BY 2030, ACCORDING TO ANOTHER ANALYST. AND MAYBE WE GOT A BOOST FROM ELON MUSK’S AI STARTUPS WHICH RAISED MANY IN A BID TO CHALLENGE NVIDIA. SO MUCH LOVE AROUND NVIDIA. GAMESTOP, TALK ABOUT LOVE, IT’S UP 40%, FINISHING THE DAY WITH A 25% GAIN. THE COMPANY SAID IT BROUGHT IN NEARLY $1 BILLION FROM ITS SHARE SALE PROGRAM AMID RENEWED INTEREST FOR THE SO-CALLED MEME STOCK THE VIDEO GAME RETAILERS THAT IS CAPITALIZED ON A FLURRY OF TRADING EARLIER THIS MONTH BY SELLING 45 MILLION SHARES TO RAISE JUST ABOUT $1 BILLION PERMIT FOR AMC WAS ALSO UP. I AM COMING! TIM: MEANS OBAMA ARE UP AGAIN. [LAUGHTER] CAROL: I KNOW. IT WAS KIND OF LIKE FROM THE SUBLIME TO THE SILLY. ROMAINE: WHAT JUST HAPPENED? [LAUGHTER] TIM: JUST SAYING IT’S A LITTLE CRAZY. INSMED, UP ALMOST 110% IN TODAY’S SESSION. CAROL: THE DRUG DEVELOPER SAID A LATE-STAGE STUDY FOR ITS EXPERIMENTAL THERAPY FOR LUNG DISEASE MET ITS PRIMARY GOAL AS WELL AS SEVERAL SECONDARY ENDPOINTS. THE COMPANY STOCK IS UP 50% NOW, UP ALMOST 120% IN TODAY’S SESSION. TIM: THANK YOU. I’VE GOT THE DECLINERS, STARTING WITH MODERNA, AMONG THE WORST PERFORMERS, FOLLOWING MORE THAN 8%. AHEAD OF THIS THOUGH IT WAS OF A RECORD 10 DAYS IN A ROW, REACHED THE HIGHEST LEVEL SINCE FEBRUARY OF 2023. IT PARED SOME OF THE EARLIER LOSSES, AT ONE POINT IT WAS THE BIGGEST DROP SINCE FEBRUARY OF 2022. BUT IT IS UP SO FAR THIS YEAR MORE THAN 54%. AND THEN SHARES OF DRAFTKINGS FUNDING THE MOST INTRADAY GOING BACK TO NOVEMBER OF 2020 A PROGRESSIVE TAX ON ONLINE SPORTS BETTING FAST IN THE ILLINOIS SENATE. ANALYSTS SAY THE PETITION FOR OTHER STATES TO FOLLOW THROUGH IS A PRIMARY CONCERN FOR INVESTORS. IF IT IS APPROVED IN THE HOUSE, THE TAX WOULD TAKE EFFECT STARTING JULY 1, AND OPERATORS WOULD BE LIABLE FOR INCREASED TAX RATES SO THEY COULD END UP BEING BETWEEN 20% AND 40% BASED ON REVENUE THRESHOLDS, COMPARED WITH THE CURRENT 15% RIGHT NOW SO IT WOULD AFFECT THEIR BOTTOM LINES. THE ONE I WANT TO TALK ABOUT IS SOPHIA’S HOLDINGS, DROPPING THE MOST SINCE MAY OF 2022 SINCE — SINCE HOLDINGS. THAT SHARES TUMBLED AS 19% INTRADAY EARLIER — S CELSIUS HOLDINGS. NIELSENIQ DATA SAID IT’S STILL’S GROWTH SLOWED OVER THE WEEKEND OF MAY 18 COMPARED TO EARLIER IN THE MONTH. SALES SLEWING IS CONCERNING INVESTORS. IT WAS UP 57 PERCENT LAST YEAR, 37% IN 2022, 48% IN 2021, 900 40% IN 2020. SO IT WAS UP 5800% IN THE LAST FIVE YEARS. ALIX: THAT IS A MOVE. TIM: IT’S A MOVE. A BIT OF A FULLBACK TODAY. ALIX: LOOKING AT THE BOND MARKET, WE HAD A TWO YEAR AND THE FIVE-YEAR AUCTION. THEY WEREN’T THAT GREAT. USE KIND OF PUSHED HIGHER ACROSS THE CURVE, PARTICULARLY ON THE BACK END. TOMORROW WE GET THE SEVEN YEAR, 40 BILLION DOLLARS WORTH. WE ARE TAKING DOWN SUPPLY, BUT YOU DON’T HAVE TO GO HIGHEST. ROMAINE: YOU TALK ABOUT HOW THAT FOLDS OVER INTO THE MORTGAGE MARKET. I KNOW THAT CAROL AND TIM, YOU HAVE BEEN KEEPING A NIGHT ON THE INTERESTING STORY HERE ABOUT MORTGAGE RATES ACTUALLY CLIMBING BACK UP? IN I READING THAT RIGHT? CAROL: EXACTLY. YOU HAVE A YOUNGER GENERATION FOR THE MOST PART, INDIVIDUALS RETHINKING WHETHER OR NOT BUYING A HOME MAKES SENSE ANYMORE. THE FULL IDEA OF YOU WENT TO SCHOOL, YOU GOT A JOB, MAYBE YOU GOT MARRIED AND FOUND A PARTNER AND YOU BOUGHT A HOME, IT’S THE AMERICAN DREAM FOR GENERATIONS. MAYBE HE DOESN’T FINANCIALLY MAKE SENSE ANYMORE. TIM: I KIND OF HAD THE REALIZATION WHEN READING THE STORY AND LOOKING AT EXAMPLES OF THE FOLK THAT THE AUTHOR SPOKE TO. THE FACT THAT YOU CAN RENT IN WESTCHESTER FOR $3500 A MONTH WHICH IS A FRACTION OF WHAT THIS GUY WOULD BE PAYING IF YOU TOOK A MORTGAGE ON AND HAD HOMEOWNER’S INSURANCE AND ALL THE OTHER OWNERSHIP COSTS ASSOCIATED, WITH IT AND NOW HE IS USING THE DOWN PAYMENT TO INVEST IN A 5% SAVINGS ACCOUNT, MAKING IT GUARANTEED 5% ON THAT. MADE ME THINK WAIT A SECOND, IT MAY BE OWNING A HOME IS NOT THE BEST DECISION RIGHT NOW LIKE IT USED TO BE IF YOU CAN INVEST THAT DOWN PAYMENT, IT ABSOLUTELY MAKES SENSE TO RENT RIGHT NOW. ALIX: IT’S ACTUALLY A GOOD POINT IN A DIFFERENT WAY OF ACCUMULATING WEALTH. THAT IS HOW YOU THINK ABOUT WHO MORNING, YOU BUY AND UPGRADE AND SELL AND THAT IS HOW YOU BUILD WEALTH BUT IF IT CAN SIT IN A FIVE YEAR FOR 5%, MAYBE THAT IS BETTER. IT’S INTERESTING WITH THE NEW WHOLESALE MARKET, YOU HAVE HAD A LOT OF BUILDERS CONTINUING TO OFFER CONCESSIONS IN THE HOPES THAT YOU WILL DRAW IN THOSE NO BUYERS. THERE STILL IS A LACK OF SUPPLY. ROMAINE: SO I SHOULDN’T INVEST IN THE HOME, BUT MAY BE IN CDS, ALYX: WHAT ABOUT INVESTING IN MOVIE THEATER COMPANIES? ALIX: NOT IF THE DATA OVER THE WEEKEND HAD ANYTHING TO SAY ABOUT IT. [LAUGHTER] DID YOU SEE THIS? FU RIOSA, THE LATEST INSTALLMENT OF THE MAD MAX SAGA, DIDN’T DO SO WELL. GARFIELD OF THE MOVIE ACTUALLY DID BETTER. TIM: I HAVEN’T HEARD OF EITHER OF THEM. I HAVE HEARD OF THE FIRST "MAD MAX," — ALIX: IT WAS THE LATEST ONE IN A LONG SAGA OVER DECADES. CAROL: MAY BE THE SAGA HAS TO END. THE ONE IN THE DESERT WHERE THEY DRIVE REALLY FAST. IT WAS A FEW YEARS AGO. WAS IT BEFORE YOUR TIME? CAROL: YEAH. MAYBE WE WOULD RATHER BE OUTSIDE. NOT EVERY MOVIE IS GOOD ROMAINE: . IT WASN’T JUST THIS MOVIE. THERE WERE A COUPLE OF OTHERS THAT ALSO UNDERPERFORMED. . I DON’T KNOW IF IT WAS JUST THE QUALITY OF THE FILM. ALIX: IT’S SUPPOSED TO BE GOOD! CAROL: THERE IS A LOT OF GOOD STUFF ON STREAMING AND I AM PAYING A LOT OF GOOD DOLLARS ON STREAMING CHANNELS, SO I WILL JUST WATCH THAT. [LAUGHTER] ALIX: THAT IS GOOD POINT. ROMAINE: I AM TRYING TO SAVE SOME MONEY. TRYING TO BUY A HOME IN WESTCHESTER. [LAUGHTER] CAROL: ALRIGHT, THAT’S A WRAP. HOW MANY MORE DAYS UNTIL FRIDAY? RAVI: PROF. SEGAL: WRAP FISH SEE YOU FISH ROMAINE: MORE COVERAGE IS COMING UP HERE ON TELEVISION. WE WILL DIG INTO THE RETAIL SECTOR, A BIG WEEK UP AHEAD. STICK WITH US. THIS IS "THE CLOSE" ON BLOOMBERG. WELCOME BACK. ROMAINE: REMAIN BUSTEDROMAINE: WITH A CLOSER LOOK AT HOW MARKETS DOESN’T REMAIN BUSTED WITH A CLOSER LOOK AT HOW MARKETS PERFORMED. VOLUME WAS LATER THAN NORMAL. ONE OF THE BIG BRIGHT SPOTS HAS BEEN A BIG BRIGHT SPOT ON THE YEAR, CHIP STOCKS. THE PHILADELPHIA SEMICONDUCTOR INDEX HIGHER BY 2% TO A FRESH RECORD HIGH. IT YIELDS MOVING SLIGHTLY ON THE DAY. A BIT OF A PULLBACK IN THE CRYPTO SPACE. SOME ON THE INDIVIDUAL MOVEMENT — SOME OF THE INDIVIDUAL MOVERS ON THE CHIPS ACT ARE, NVIDIA LEADING THE S&P IN TERMS OF GAINERS, MODERNA LEADING THE DECLINERS WITH AN 80% DROP, CONTINUING TO SLIDE. MEANWHILE,, INSMED SAW THE LATEST RESULTS FROM ITS STUDY INVOLVING A DRUG FOR A RARE LUNG DISEASE, SHARES DOUBLING. AND DRAFTKINGS PULLING BACK, ONE OF ITS WORST DAYS SINCE AUGUST OF LAST YEAR, CONCERNS ABOUT A NEW TAX IN THE STATE OF ILLINOIS. OUR BIG STORY TODAY IS A FOCUS ON EARNINGS FROM RETAILERS. COMING OFF MIXED REPORTS FROM LAST WEEK OUT OF TARGET, MACY’S AND TJX, THIS WEEK BEEN WITH US MORE INCLUDING ABERCROMBIE AND FITCH, KOHL’S, NORDSTROM, GAP AND OTHERS EARNINGS ARRIVING AMID FRESH DATA SHOWING GOOD CONFIDENCE IN THE ECONOMY FROM CONSUMERS HAS IMPROVED. THE CONFERENCE BOARD GAUGE OF SENTIMENT INCREASING TO 102 FOR THE MONTH GETTING ALL ECONOMISTS’ ESTIMATES. CONSUMERS CONCERNED ABOUT ECONOMIC CONDITION CLIMB FOR THE FIRST TIME SINCE JANUARY AND THEIR VIEW OF FUTURE CONDITIONS JUMP TO THE MOST SINCE JULY. THERE IS STILL ECONOMIC ANXIETY OUT THERE WITH MORE CONSUMERS THINK A RECESSION IS VERY LIKELY NEXT YEAR, BUT FOR NOW, THEIR VIEWS ON THE LABOR MARKET AND BUSINESS CONDITIONS OFFER A BRIGHT SPOT FOR DEPARTMENT STORES, APPAREL MAKERS AND OTHER MAKERS ARE DISCRETIONARY ITEMS LOOKING TO KEEP THOSE CASH REGISTERS RINGING. JOINING US NOW TO OFFER INSIGHTS IS DANA TELSEY, TELSEY ADVISORY GROUP CEO, TO TAKE A CLOSER LOOK AT THE RETAIL SPACE. THIS SEEMS LIKE MORE OF A MIXED BAG. I KEEP HEARING THAT APPAREL MAKERS ARE DOING OK BUT SUCK IT DEPENDS WHAT YOU ARE SELLING. DDANA: FIRST OF ALL, THANK YOU FOR HAVING ME. THE CONSUMER IS SQUISHY BECAUSE THERE IS ABSENT DOWN FROM US WE HAVE SEEN DENIM JEANS DO WELL GIVE IN THE WESTERN LOOK, FAVORING LEVI’S. WE WILL GET ABERCROMBIE AND AMERICAN EAGLE AFTER THE CLOSE, 40% OF SALES COMES FROM DENIM. WE HAVE BEEN ON A TEAR WITH ABERCROMBIE AND WE THINK WE WILL CONTINUE TO SEE VERY SOLID RESULTS WITH IMPROVEMENT IN HOLLISTER AMERICAN EAGLE, THEIR INTERMITTENT BUSINESS HAS BEEN SOLID. THEY PUT IN A NEW GAME PLAN UPDATED FOR THE AMERICAN EAGLE OUTFITTERS BRACKET THAT IS EXPECTED TO TAKE HOLD AS WE GO THROUGH THE YEAR. THAT WILL BE SOMETHING TO WATCH TOMORROW. ROMAINE: WHEN WE GET EARNINGS WE ARE ALSO EXPECTING GAP LATER THIS WEEK. TRADITIONALLY WHEN I THINK OF DENIM, YOU THINK OF GAP, PEOPLE OF A CERTAIN AGE. IS THAT STILL APPROPRIATE? DANA: IT REPORTS LATER. THE BUSINESS USED TO BE A LOT OF LEVI’S NOW GAP IS ITS OWN BRAND. YOU HAVE A NEW CEO IN PLACE LOOKING TO MODERNIZE AND MAKE THE BRANDY YOUNGER WITH COLLABORATIONS THAT HAVE GONE ON, THE HIRING OF A NEW CREATIVE DIRECTOR. THEY ARE LOOKING TO RE-ENERGIZE THE BRAND. THERE IS STILL WORK TO DO ON BANANA REPUBLIC AND ALSO ON ATHLETA . OLD NAVY SHOULD HAVE AN APPEAL FOR THOSE CONSUMERS WATCHING THEIR WALLET. ROMAINE: CURIOUS ABOUT DEPARTMENT STORES PERMIT WE GOT NORDSTROM, WE HAVE ALREADY GOT MACY’S SO WE GOT A PEEK INTO THE DEPARTMENT STORE MODEL. THESE COMPANIES HAVE THEIR OWN IDIOSYNCRATIC ISSUES, BUT THE DEPARTMENT STORE MODEL, IS THAT SOMETHING INVESTORS SHOULD STILL BE EMBRACING? DANA: IT’S BEEN CHALLENGING FOR THEM. WHEN YOU HAVE THE STRENGTH OF BRANDS HAVING THEIR OWN WEBSITES, OFF-PRICE GAINING SHARE, THERE HAS BEEN A LOT OF MARKET SHARE SHIFTS AWAY FROM DEPARTMENT STORES INTO OTHER VENUES. THEY NEED TO GET YOUNGER. NORDSTREAM IS LUCKY. NORDSTROM RACK IS WHERE THE GROWTH IS. THE MACY’S NEW CEO HAS A NEW BOAT STRATEGY THAT STILL HAS TO PROVE ITSELF OUT OVER TIME. ROMAINE: I HAD THE CHANCE TO CATCH UP WITH THE CEO OF MACY’S LAST WEEK AND HE TOUTED THE STRENGTH OF BEAUTY PRODUCTS SPECIFICALLY BECAUSE MEDICS AS WELL AS PERFUMES. IT IS THAT A BROADER TREND? DANA: IT IS THE CATEGORY OF STRENGTH WHEN YOU HEAR FROM OTHERS LIKE DILLARDS OR MACY’S. YET ULTA, WHICH WILL REPORT ON THURSDAY, THEY HAVE SEEN SOME CATEGORIES MODERATION. YOU WILL NOT HAVE DOUBLE DIGIT INCREASES IN THE SEGMENT, BUT YOU WILL STILL HAVE A GOOD CATEGORY WITH FRAGRANCE AND SKINCARE. NEW INNOVATION ON THE MAKEUP IN ORDER TO DRIVE DEMAND IS THE FOCUS. ROMAINE: IN THE BEAUTY SPACE, IS THAT RECESSION-RESILIENT? SOME OF THESE CEAS ARE TOUCHING THE 8-YEAR THAT NO MATTER WHAT, WE WILL STILL LURCH ON PERFUMES AND THINGS LIKE THAT. DANA: YOU ARE STILL SEEING STRENGTH AND BEAUTY. BUT THE NEW ELEMENT OF BEAUTY IS PEOPLE’S DAUGHTERS ARE ALSO SPENDING A LOT OF MONEY ON SKINCARE, THEY ARE GETTING STARTED AT AN EARLIER AGE. GEN Z AND THE YOUNGER AUDIENCE THEY ARE FOCUSED ON BEAUTY. GIVEN BATH AND BODY WORKS, MEN’S HAIR AND LAUNDRY HAS BEEN AN AREA THAT HAS GROWN IN SALES. ROMAINE: LUXURY. CAPRI , A U.S. HOMEGROWN LUXURY BRAND, THAT SHOULD BE RECESSION PROOF, SHOULD IT NOT? DANA: NO, LUXURY IS NOT RECESSION-PROOF. IT DEPENDS ON WHO YOU ARE CATERING TO. MICHAEL KORS, WHO THEY CATER TO, YOU HAVE TO COME OUT WITH A NEW AND INNOVATIVE PRODUCT ALL THE TIME TO DRIVE DEMAND. FOR CAPRI OVERALL WHICH IS IN THE MIDST OF A TAPESTRY AND CAPRI POTENTIAL COMBINATION, IT IS TAKING LONGER FOR THE YOU HAD STRONGER RESULTS THAN WHAT YOU HAVE SEEN AT MICHAEL KORS, AND I EXPECT THAT TO CONTINUE. ROMAINE: WHEN WE TALK ABOUT LUXURY BRANDS, NOT JUST CAPRI FEAR, IS THE RESILIENCY GOING TO BE FOUND IN THE U.S. CONSUMER? I KNOW A LOT OF THESE BRANDS ARE VERY DEPENDENT ON FOREIGN CUSTOMERS. IS THAT THE GROWTH OVERSEAS? DANA: THE HIGHEST INCOME LEVEL CONSUMERS ALWAYS CONTINUE TO EXPAND. THAT IS WHY HERMES AND BRUNELLO CUCINELLI ARE STILL DOING WELL. LUXURY GOODS SALES WHICH ARE UP OVER 50% SINCE 2019 ARE NOT SHOWING THE SAME THE RATE OF INCREASE ON A YEAR-OVER-YEAR BASIS. ROMAINE: DANA TELSEY OVER AT TELSEY ADVISORY GROUP WITH A CLOSER LOOK AT THE BIG EARNINGS OUT OF RETAILERS THIS WEEK. BE SURE TO TUNE IN TOMORROW ON THE CLOSE, WE HAVE A CONVERSATION WITH THE CEO OF OF ABERCROMBIE AND FITCH, FRAN-. ALL RIGHT, WITH THE HUGE SLATE OF RETAILER EARNINGS OUT THIS WEEK, LET’S LOOK BACK ON STATE HISTORY. IN 1951 AT ONE OF THE BIGGEST RETAIL PRICE WARS EVER LODGED, MACY’S AND GIMBLE’S, THE TITANS OF THE TIME, HAD BEEN IN INTENSE COMPETITION, EVEN HOSTING A RIVAL THANKSGIVING DAY PARADES, IN PHILADELPHIA, MACY’S IN NEW YORK. THEY WOULD UNDERCUT EACH OTHER ON PRICE SUCH AS IN 1930 WHEN GIMBLE STARTED TO SELL A TOY AT A LOW MARKET COST OF $.19. MACY’S WAS SELLING THE SAME TOY AT $.50. THE RIVALRY INTENSIFIED OVER THE NEXT DECADE AND WAS A MAJOR POINT IN THE CLASSIC FILM "MIRACLE ON 34TH STREET." BUT THE LAWS OF THE TIME LIMITED WHICH ITEMS COULD BE DISCOUNTED AND BY HOW MUCH. THE MAIN LAW IN THE U.S. LINK BACK TO THE GREAT DEPRESSION WHEN THE U.S. FIXED PRICES ON NUMEROUS ITEMS TO STABILIZE BUSINESSES FROM SUBSEQUENT LAWS AND REGULATIONS EXPANDED ON THAT IDEA, GIVING STATES THE POWER TO SET MINIMUM PRICES. THE MOST RESTRICTIVE OR SO-CALLED "FAIR TRADE LAWS" ADOPTED BY 45 STATES WHERE IF ONE STORE AGREED TO BY VIA A MANUFACTURER’S MINIMUM SELLING PRICE, THE GOVERNMENT THEN REQUIRED ALL MERCHANTS TO ABIDE BY THAT MINIMUM AS WELL. THAT ALREADY CAME CRUMBLING DOWN ON MAY 21, 1951, WHEN THE U.S. SUPREME COURT RULED IN FAVOR OF USING THOSE FAIR TRADE REGULATIONS. A WEEK LATER ON MAY 28, MACY’S CUT ITS PRICE IS 60% ACROSS-THE-BOARD THE BOARD ON ALMOST 6000 FAIR TRADE ITEMS. WHEN GIMBLE SMASHED THE CUT, MACY’S BEEN SLASHED PRICES ANOTHER 6% AND SO ON AND ON. MEN’S SUITS THAT HAD BEEN SELLING FOR $32, DROPPED TO $19 AND A MATTER. KITCHEN PANS WENT 1040 FIVE CENTS FROM $1.40. EMERGING 60% PRICE DROPS ON THOUSANDS OF ITEMS ALL AT ONCE, OUTSIDE OF THE HOLIDAY SEASON. IT CREATED A FRENZY. STORES DIRECTED INVENTORY CHARTS IN THEIR LOBBIES AND WINDOWS AND THEY WOULD CROSS OUT AND WRITE NEW PRICES ALMOST ON THE HOUR. CUSTOMERS WOULD CROWD AROUND UNTIL THEY SAW NEW PRICES. EACH STORE DEPLOYED UNDERCOVER SHOPPERS TO GO TO REBEL LOCATIONS AND CHECK PRICES AND THEN RETURN TO THE HOMEBASE TO MARK DOWN WHATEVER THEY FELT WOULD UNDERCUT THEIR COMPETITOR. THE PRICE COMPETITION DRAGGED IN OTHER RETAILERS INCLUDING BLOOMINGDALE’S, SAKS, AND OTHERS. OF COURSE THIS WOULDN’T GO UNNOTICED BY REGULATORS IN WASHINGTON. IN JULY OF THAT YEAR, THE FTC HAD FIELDED NUMEROUS COMPLAINTS. ULTIMATELY THOUGH THE PRICE WARS ENDED FOR MORE PRACTICAL REASONS PREVENT HEAVY DISCOUNTING OBVIOUSLY BOOSTS SALES, BUT OFTEN AT THE EXPENSE OF PROFIT MARGINS. AS THE YEAR WORE ON, MACY’S MADE A DECISION TO CHOOSE PROFITABILITY AND PEACE RATHER THAN CONTINUING TO FIGHT THAT PRICE WAR. WHILE DISCOUNTING DIDN’T END, IT REVERTED BACK TO MORE SEASONAL AND NORMAL DISCOUNTS RATHER THAN THAT FRENETIC ANYTHING GOES KALE STIRRED UP IN LATE SPRING OF 1951. THAT WAS A LOOK BACK AT HISTORY. WE WANT TO BRING YOU BACK TO THE HERE AND NOW AS WE ARE GETTING EARNINGS INCLUDING FROM THE CASUAL CHAIN CAVA, LEADING SALES AND PROFIT ESTIMATES AND LIFTING ITS ANNUAL SALES OUTLOOK, BUT AS YOU CAN SEE, INVESTORS ARE APPARENTLY NOT THAT PLEASED. WE WILL LOOK AT THE STOCK WHEN WE COME BACK HERE ON "THE CLOSE" ON BLOOMBERG. ROMAINE: LET’S GET MORE INSIGHT ON THE RESULTS OUT OF CAVA. EPS AT $.12 A SHARE. REVENUE 28% ON THE QUARTER. COMP SALES BEING GUIDED HIGHER. BLOOMBERG NEWS’ RESTAURANT INDUSTRY REPORTER JOINS US NOW. DESPITE THESE GOOD NUMBERS, DANIELLE, SHARES ARE LOWER IN AFTER-HOURS TRADING. TALK TO US ABOUT EXPECTATIONS COMING INTO THIS EARNINGS SEASON. WHEN I SEE GUIDANCE FOR SIX POINT 5% COMP SALES GROWTH FOR A FAST CASUAL RESTAURANT, WHY IS THAT NOT GOOD? DANIELLE: IT’S AN EXCELLENT QUESTION PARTICULARLY IN THE CONTEXT OF WHAT WE’RE SEEING IN RESTAURANTS. A LOT OF OTHERS ARE STRUGGLING. BUT, I WAS ALREADY UP 93% THIS YEAR. COMPARE IT TO RESULTS OF SOME OF ITS PEERS LIKE CHIPOTLE, CHIPOTLE ACTUALLY, GREW TRAFFIC SWEET GREEN HELD TRAFFIC. BUT CAVA SAYS TRAFFIC PULLED BACK A BIT. THEY SAID IT WAS BECAUSE OF THE WEATHER WHICH OTHER RESTAURANTS HAVE ALSO POINTED TO, BUT THAT IS PERHAPS NOT SITTING WELL WITH INVESTORS. ROMAINE: WHEN YOU TALK ABOUT STRATEGY, WE HAVE TALKED ABOUT, STRATEGY OF LOCATING RETAIL LOCATIONS AND THEIR GROWTH STRATEGY DO YOU THINK THAT MIGHT HAVE CONTRIBUTED TO SOME OF THE REACTION WE ARE SEEING? DANIELLE: INTERESTINGLY, CAVA IS ONE OF THE RESTAURANT THAT IS LOCATED IN SUBURBAN AREAS, THAT IS THEIR LONG-TERM STRATEGY. THEY EVEN SAID THEY WERE GOING TO BUILD A COUPLE MORE RESTAURANTS THAN THEY EXPECTED AT THE BEGINNING OF THE YEAR. WHAT WE ARE SEEING IS THAT PEOPLE ARE RETURNING TO WORK, BUT STILL STICKING TO WORKING FROM HOME AND THAT IS BENEFITING RESTAURANTS THAT ARE IN THE SUBURBS. IN FACT, SWEET GREEN IS FOLLOWING ON THE STRATEGY. ROMAINE: WHAT IS NOT FOR THIS COMPANY? MANY ARE COVERING THIS COMPANY AND THINKING ABOUT WHAT WE WILL END UP TALKING ABOUT TWO QUARTERS FROM NOW, WHAT IS THAT GOING TO BE? DANIELLE: WE ARE KEEPING A CLOSE I-405 SCHEDULE CHANGE WHEN IT COMES TO TRAFFIC. THEY HAVE DONE WELL ESPECIALLY COMPARED TO THEIR FAST FOOD PEERS, THE LIKES OF — THEY ARE LOSING CUSTOMERS PARTICULARLY ON THAT. BUT IN FAST CASUAL, PEOPLE ARE STILL GOING EVEN THOUGH IT IS TECHNICALLY MORE EXPENSIVE THAN FAST FOOD. BUT THE PRICE GAP HAS GOTTEN A LOT SMALLER SO PEOPLE PREFER TO PAY A COUPLE EXTRA DOLLARS THERE. HOWEVER, IT WILL HELP WITH THEIR SAME-STORE SALES. ROMAINE: WELCOME BACK TO THE CLOSE. TURNING OUR ATTENTION TO THE GROWTH OF ALTERNATIVE INVESTMENTS. TAKE PRIVATE CREDIT AS ONE EXAMPLE. ASSETS UNDER MANAGEMENT HAVE GROWN TO $1.7 TRILLION AS OF LAST YEAR. THAT HAS CREATED A LOT OF OPPORTUNITIES FOR THOSE FOLKS LOOKING TO PAIR UP AND MATCH MAKE WITH INVESTORS. MATT BROWN JOINING US NOW. FOUNDER AND CEO OF CASE. A PLATFORM THAT CONNECT INDEPENDENT FINANCIAL ADVISORS WITH ALTERNATIVE ASSET MANAGERS. GREAT TO HAVE YOU HERE. THE COMPANY STARTED A FEW YEARS AGO BEFORE ALL ATTENTION REALLY TURNED TO THIS SPACE. YOU ARE LOOKING PRETTY PRESENT AND SMART RIGHT NOW. WHAT GIVE YOU THE IMPETUS TO THINK YOU COULD GO DOWN THIS ROAD AND BE SUCCESSFUL WHEN YOU STARTED THIS COMPANY? >> THANK YOU FOR HAVING ME. IT HAS BEEN QUITE A JOURNEY. 2009 WITH THE GLOBAL FINANCIAL CRISIS, WE TOOK A PAUSE, MY PARTNERS AND I AND ASKED THE BIGGEST NEEDS WE NEED. ANY OF THE PUBLIC MARKET SECURITIES ARE HAVING A PRETTY CHALLENGING TIME. WE LOOKED AT THE WEALTH MANAGEMENT CHANNEL AND THEIR LACK OF ACCESS TO ALTERNATIVE INVESTMENT STRATEGIES. THAT REALLY KIND OF KICKED OFF THIS CHARIOT WE HAVE BEEN ON. IT HAS NOT BEEN UNTIL THE LAST FIVE YEARS WHERE I THINK A LOT OF THE MARKETS CAUGHT UP TO THE VALUE. I ALWAYS LOOK AT FOR SO LONG, WE WERE ASKING THE ADVISORS TO ADOPT OUR PLATFORM WHEN THEY WERE ASKING WHY ALTERNATIVE INVESTMENTS. NOW THEY ARE SAYING HOW ALTERNATIVES. THE CASE PLATFORM IS STEPPING INTO SOLVE THE PROBLEM. ROMAINE: LET’S TALK ABOUT TYPES OF ALTERNATIVES. WE MENTIONED THE UMBRELLA BASKETS, PRIVATE CREDIT AND PRIVATE EQUITY. WHAT IS THE GENERAL BREAKDOWN THROUGH YOUR PLATFORM AS TO WHICH ONES THEY ARE INVESTING IN? >> THE PLATFORM OFFERS ALL ALTERNATIVE INVESTMENTS. THE GROWTH WE HAVE SEEN THE LAST 12 MONTHS IN DIFFERENT STRATEGIES IS QUITE REMARKABLE. PRIVATE CREDIT IS LEADING THE PACK. OVER 45% IN THE LAST 12 MONTHS IN TERMS OF VOLUMES ON OUR PLATFORM, MEANING FINANCIAL ADVISORS ACTUALLY WANTING TO ALLOCATE TO THAT STRATEGY. HOWEVER IF YOU COMPARE IT WITH PRIVATE EQUITY, IT’S ONLY 20% TO 30% OF THE SIZE OF THE PRIVATE EQUITY MARKET. PEOPLE TALK ABOUT THE SIZE OR THE GROWTH OF THE PRIVATE CREDIT MARKET. REALLY COMPARED TO THE PRIVATE EQUITY MARKET, IT HAS A LONG WAY TO GO. ROMAINE: ON PRIVATE EQUITY SIDES, HAS IT GONE DOWN? >> THEY ARE GOING QUITE RAPIDLY. THINK ABOUT WHO WE SERVE, FINANCIAL ADVISORS THAT LARGELY NEVER HAD ACCESS TO ALTERNATIVE INVESTMENTS. THEY HAVE BEEN LIVING WITH A 60/40 PORTFOLIO. NOW WITH PLATFORMS BEING ACCESSED, EDUCATION AND WORKFLOW TOOLS TO MAKE IT EASIER TO UNDERSTAND THE STRATEGIES AND IMPLEMENT THEM IN CLIENT PORTFOLIOS, THE MODERN PORTFOLIO HAS ARRIVED. THE TYPICAL PORTFOLIO IS GOING TO BE SOMEWHERE CLOSER TO 50, 30, 20. 20 BEING THE ALTERNATIVE INVESTMENTS. >> OUTSIDE OF PRIVATE EQUITY AND PRIVATE CAPITAL, WE USED TO TALK ABOUT THOSE, WE DON’T TALK ABOUT THEM MUCH ANYMORE. I KNOW THEY DON’T GRAB THE HEADLINES. PEOPLE ARE STILL INVESTING IN THOSE, OUTSIDE OF STRAIGHT PRIVATE EQUITY AND PRIVATE CREDIT. >> PRIVATE REAL ESTATE, FOR EXAMPLE, IS A POPULAR ASSET CLASS. MORE CHALLENGING IN THE INTEREST RATE ENVIRONMENT. THE FLOWS ARE DOWN IN THAT AREA. ROMAINE: MORE DIRECT INVESTMENTS INTO REAL ESTATE PROJECTS? >> WE ARE SEEING THAT. BUT OUR PLATFORM DOESN’T OFFER DIRECT INVESTMENT OPPORTUNITIES. JUST INTO THE FUNDS OF ASSET MANAGERS. FOR EXAMPLE, APOLLO OR BLACKSTONE, ARIES, CARLISLE, THOSE FIRMS. WE ALSO ARE SEEING A BUMP IN THE HEDGE FUND WORLD WITH HIGHER INTEREST RATE ENVIRONMENTS. THE SHORT BOOK IS PRODUCING MORE INCOME. AND MULTI-STRATEGY HEDGE FUNDS ARE KIND OF NAVIGATING THESE TURBULENT TIMES WITH AN ELECTION COMING UP, A FEW CRISIS BREWING IN EUROPE AND THE MIDDLE EAST. IT TENDS TO BE A LOT OF AREAS IN THE PLATFORM GETTING THE INTENTION OF ADVISORS. THE ALLOCATION RATE WHICH HISTORICALLY HAS BEEN ONLY SINGLE DIGITS, IS GROWING TOWARDS DOUBLE DIGITS. INSTITUTIONAL INVESTORS ARE AT 40%, SO NOW THE WEALTH MANAGEMENT CHANNEL IS GAINING STEAM. ROMAINE: DO YOU THINK WE WILL SEE THAT ON THE INDIVIDUAL INVESTOR SIDE WHERE WE GET NOT IN THE SEVERELY INTO 50%, BUT THE HIGHER DOUBLE DIGITS? >> OUR FIRST STOP IS 10%, 15% ON THE AVERAGE CLIENT PORTFOLIO. ILLIQUID ASSETS NEED TO BE PROPERLY ALLOCATED IN ANY CLIENT PORTFOLIO. BUT FOR THE RIGHT CLIENT, THE RIGHT OBJECTIVES, ALTS ARE MAKING A HUGE IMPACT ON PORTFOLIO PERFORMANCE. THE PRIVATE EQUITY RULE IN THE ALTERNATIVE INDUSTRY OVERALL OVER THE PAST TWO YEARS HAS INSTITUTIONALIZED SO MUCH. THEIR ABILITY TO CREATE AND MANUFACTURE PRODUCTS, SPECIFICALLY FOR WEALTH, BUILD EDUCATIONAL PROGRAMS SO ADVISORS CAN GET SMARTER ON HOW TO ALLOCATE ALTS, AND HAVE TEAMS GO EDUCATE AND WORK WITH ADVISORS. IT HAS BEEN A BIG TREND. ROMAINE: TALK ABOUT WHAT INCREASES ACTIVITY ON THE PLATFORM. WE TALK ABOUT WHAT MOVES THE MARKET, SOME GEOPOLITICAL ISSUE, JAY POWELL SAYS SOMETHING THAT RATTLES PEOPLE, DO THOSE DAY TO DAY EVENTS HAVE IMPACT WHERE PEOPLE ARE COMPLETELY IGNORED AND FOLLOW ON THEIR LONG-TERM STRATEGY IN CLIENT GOALS? >> PUBLIC MARKET VOLATILITY HAS SOME IMPACT. WE ARE IN A BIT OF A MOMENT IN TIME WHERE YOU HAVE A MULTITRILLION DOLLAR NETWORK OF ASSETS THAT HAVE ZERO PENETRATION LARGELY TO THE ALTERNATIVE INVESTMENT COMMUNITY. WHAT WE ARE SEEING IS STEADY GROWTH AND ADOPTION MONTH OVER MONTH, QUARTER OVER QUARTER. IF WE WERE FULLY ALLOCATED, PROBABLY MORE CONVERSATIONS ABOUT PUBLIC VERSUS PRIVATE, BUT WE ARE NOWHERE CLOSE TO THAT. ROMAINE: THERE HAS BEEN SO MUCH TALK AND JOKES ABOUT THE CASH ON THE SIDELINES. WE KNOW A LOT OF PEOPLE ARE SITTING ON CASH OR CASH INSTRUMENTS. THERE ARE QUESTIONS TO WHERE THE MONEY WOULD GO WHEN THOSE PEOPLE ARE COMFORTABLE ENOUGH TO INVEST IT IN SOMETHING WITH MORE OF A RISK PROFILE. DOES IT GO TO THE PUBLIC MARKET, PRIVATE MARKETS? >> WHAT IS HAPPENING IS THE NEW MODERN PORTFOLIO IS NO LONGER JUST 60/40. A TRUE PORTFOLIO ALLOCATION NOW IS FIXED INCOME, EQUITIES, AND ALTERNATIVE INVESTMENTS. THAT IS WHAT WE ARE SEEING. THE TOP FINANCIAL ADVISORS IN THE U.S. ARE LEADING WITH THAT. IT IS BENEFITING THEIR OWN COINS. ROMAINE: GREAT CONVERSATION, REALLY APPRECIATE THIS TOPIC. MATT BROWN, FOUNDER AND CEO OF CASE. WE DO WANT TO GET BACK TO ONE OF OUR TOP STORIES ON THE DAY. THE U.S. STOCK MARKET GOING BACK TO ONE-DAY SETTLEMENTS FOR THE FIRST TIME IN A CENTURY. A LOT HAS CHANGED OVER THE LAST 100 YEARS. THERE IS POTENTIAL FOR SOME HICK UPS, A SPIKE IN VOLATILITY. POTENTIAL FOR SOME FAILED TRADES. LARRY JOINS US NOW, HEAD OF MARKET STRUCTURE RESEARCH [INDISCERNIBLE] AT BLOOMBERG INTELLIGENCE. [INDISCERNIBLE] [INAUDIBLE] — MARKET STRUCTURE RESEARCH APP BLOOMBERG INTELLIGENCE. I WANT TO GET YOUR THOUGHTS, THEY TALK ABOUT HOW PREPARED THEY ARE, WE TALKED WITH BANK CEOS WHO ARE PREPARED FOR THIS. ANY CHANCE WE CAN SEE SOME MATERIAL HICCUPS HERE? >> WE COULD SEE SOME HICK UPS. BUT I’M NOT SURE IT WILL BE VERY TRANSPARENT. THE ISSUE WILL BE A LOT OF THE PROBLEMS WILL BE BORROWING A LITTLE BIT MORE, THERE WILL BE GREATER TRADES. IT WOULD BE ODD TO ME TO SEE A MASSIVE BLOW UP AND THE FED HAVING TO PROVIDE MASSIVE AMOUNTS OF LIQUIDITY. THERE WILL BE CASES AND A LOT OF THE CHALLENGES ON — ROMAINE: THERE HAS BEEN TALK ABOUT THE BENEFITS, THE BUYERS AND SELLERS EITHER GET THEIR MONEY OR THEIR SHARES A LOT QUICKER. BROKERS AND THEORY WILL HAVE LOWER MARGIN REQUIREMENTS, ASSUMING THE RISK GOES DOWN. ARE THERE UNDER — OTHER BENEFITS I’M MISSING? >> THOSE ARE THE MAJOR ONES, FOLKS WILL GET THEIR MONEY QUICKER, THE PROCESS WILL BE SLIMMED DOWN, THERE WILL BE LESS MARGIN. HOPEFULLY LESS ROOM FOR ERROR. THERE’S A LOT OF MANUAL STUFF THAT GOES ON STILL. EVEN PROCESSING. THINK OF A LARGE ASSET MANAGER DOING SHARES, THE AVERAGE TRADE SIZE IS AROUND 150 SHARES PER TRADE. THAT GETS BROKEN UP INTO 150 SHARE INCREMENTS. THEN IT HAS AGGRAVATED AND AVERAGE COSTS. IF YOU EXECUTE THEM ALL SEQUENTIALLY PEOPLE GETTING IN SOONER GET A LOWER PRICE IF THEY ARE BUYING, AND GUYS LAST GET THE WORST PRICE. EVERYTHING IS AVERAGE PRICE. THERE’S A LOT OF MECHANICS. ALSO ISSUES ABOUT LENDING, GETTING BACK SECURITIES QUICKER NOW FOR THE AMAZONS AND APPLES AND MICROSOFTS WILL PROBABLY BE NOT HARDER. BUT THERE’S A LOT TO BORROW SECURITIES NOW. MOSTLY SMALL AND MID-CAP. THEY NEED FOR THE CUSTODIANS TO GET THEIR HANDS ON. I THINK YOU TALK ABOUT FOREIGN EXCHANGE, EVERYONE TRADING OVERSEAS WILL STILL GENERALLY TAKE TWO DAYS TO SEND MONEY. BUT THE SECURITIES TRADE SETTLE IN ONE DAY. THEY EITHER HAVE TO BORROW PRE-MOOD CASH, WHICH IS AN OPPORTUNITY, OR HAVE CHALLENGES. ROMAINE: ANOTHER FACT OF THIS, GETTING PAST THIS ADOPTION AND ADAPTATION PERIOD, IS IT HEALTHY FOR THE MARKETS TO GO FROM TWO DAYS TO ONE-DAY? WILL THERE BE A MATERIAL BENEFIT TO THE HEALTH OF THE MARKET BY DOING THIS? >> I THINK ONCE EVERYBODY GETS THEIR OPERATIONAL HOUSE IN ORDER, IT WILL BE POSITIVE. YOU WILL SEE PEOPLE WILL BASICALLY GET THEIR FUNDS QUICKER AND SECURITIES FASTER. IT WILL STRESS BROKERS AND CUSTODIANS AND PRIVATE BROKERS FUNDS OUT A LITTLE BIT WHILE THEY GET THEIR ACT TOGETHER. BUT WITHIN A YEAR OR SO, I EXPECT THESE ISSUES TO GO AWAY. A COUPLE OF MONTHS. WE DON’T ANTICIPATE THEM LASTING LONG. IT COULD TAKE A COUPLE OF MONTHS FOR PEOPLE TO REALIZE I’M BORROWING MORE, MY BROKERAGE COSTS ARE GOING UP, I NEED TO FIGURE OUT WHY THAT IS HAPPENING AND FIX THEIR SYSTEM. ROMAINE: LARRY, HEAD OF MARKET STRUCTURE RESEARCH OVER AT BLOOMBERG INTELLIGENCE. IT WAS A RELATIVELY LOW VOLUME DAY. NO INTERRUPTIONS FROM THE MOVE TODAY. THE S&P FRACTIONALLY HIGHER. I DO MEAN FRACTIONALLY. THE BIG WINNERS ON THE DAY WERE THE NASDAQ AND NASDAQ COMPOSITE AND NASDAQ 100. THE PHILADELPHIA SEMICONDUCTOR INDEX. A BIG GAIN BY NVIDIA. WE DID SEE A PRETTY MATERIAL SELLOFF IN THE TREASURIES, WHICH PUSHED YIELDS HIGHER UP ABOUT THREE BASIS POINTS ON THE TWO-YEAR YIELD. A BIT OF A PULLBACK IN THE CRYPTO SPACE. BACK IN A MOMENT. THIS IS THE CLOSE ON BLOOMBERG. ROMAINE: PROSECUTORS ARE CURRENTLY DELIVERING THEIR CLOSING ARGUMENTS IN DONALD TRUMP HUSH MONEY TRIAL IN NEW YORK CITY. THE JURORS COULD BE HANDED THE CASE SOMETIME THIS WEEK AND REACH A VERDICT A MATTER OF DAYS AFTER. FOR MORE, WE ARE JOINED BY JOE MATHIEU, THE HOST OF BALANCE OF POWER. THE CASE HAS BEEN GOING ON. IT IS ANYONE’S GAZE — IT IS ANYONE’S GUESS HOW IT COULD END. BUT WE ARE NEAR THE END. >> THIS IS THE FINAL STAGE BEFORE HE GOES TO THE JURY. LEGAL EXPERTS THINK THE JURY MIGHT MAKE QUICK WORK OF THIS. SIX WEEKS AND 22 WITNESSES LATER. THAT COULD HAPPEN AS SOON AS TOMORROW. THE PROSECUTION SPEAKING FOR THE PROSECUTION RIGHT NOW IN CLOSING ARGUMENTS. TRYING TO REBUILD THE FRAMEWORK OF THIS PAYMENT STRUCTURE THEY HAVE TALKED ABOUT FOR STORMY DANIELS. HE’S CONNECTING THE DOTS WITH DAVID PACKER’S TESTIMONY AND MICHAEL: BECAUSE THE JURY HAS BEEN OUT FOR A NUMBER OF DAYS. HE COULD BLEED INTO TOMORROW. THE JURY CAN OF THE CASE BY THE END OF WEDNESDAY. WE COULD BE TALKING ABOUT A VERDICT THIS WEEK. ROMAINE: I’M CURIOUS AS TO WHAT THE FORMER PRESIDENT HAS BEEN DOING NOW THAT THE CASE IS WRAPPING UP. DOES HE GET BACK OUT ON THE CAMPAIGN TRAIL? >> GREAT QUESTION. HE’S BEEN TALKING A LOT ABOUT IT. REMEMBERING DONALD TRUMP WAS NOT DOING A LOT OF RALLIES TO BEGIN WITH. THERE WAS NOT MUCH TRAVEL IN THE EARLY STAGES OF HIS CAMPAIGN. WE WILL SEE AS JOE BIDEN TAKES ADVANTAGE OF THE TIME DONALD TRUMP HAS BEEN THERE. HE’S BEEN DOING MORE TRAVELING, EVEN WENT TO FLORIDA. ON HIS WAY BACK TO PENNSYLVANIA THIS WEEK. I THINK NO MATTER THE VERDICT, YOU WILL SEE A NEWS CONFERENCE FROM DONALD TRUMP, IF NOT, A RALLY. HE HAS A BIG HISTORY OF HOLDING RALLIES WITH SUPPORTERS AT BEDMINSTER OR MAR-A-LAGO TO CONGRATULATE HIM ON A BIG DAY. IN MANY CASES, THE WORST DAY IN HIS LEGAL CAREER. WE WILL SEE HOW IT GOES. >> I WANT TO PIVOT FROM THE TRIAL TO TALK ABOUT THE SITUATION. SPECIFICALLY IN GAZA. BLOOMBERG REPORTING STILL SAYING ISRAELI TROOPS ARE MOVING DEEPER INTO THAT CITY. WE GOT COMMENTARY OUT OF U.S. OFFICIALS ABOUT HOW THEY FEEL ABOUT THIS ADVANCE. WHAT DO WE KNOW? >> IT WOULD BE THE ACHILLES’ HEEL FACING JOE BIDEN IF WE LOOK AT IT FROM A POLITICAL STANDPOINT. YOU ARE RIGHT. THE STRIKE BY ISRAEL THAT KILLED 45 CIVILIANS IS A GREAT PROBLEM POLITICALLY SPEAKING FOR JOE BIDEN. ALL WE HEARD FROM THE ADMINISTRATION, JOHN KIRBY AT THE WHITE HOUSE, THE STATE DEPARTMENT, IS THE ADMINISTRATION IS BEHIND ISRAEL. I THINK WE ARE WAITING FOR RESULTS FROM THE IDF WHO SAY THEY CANNOT EXPLAIN THE FIRES WE SAW FOLLOWING THE STRIKES AFTER A COUPLE OF HAMAS LEADERS. THERE IS A THOUGHT THERE MAY HAVE BEEN A DEPOT OF WEAPONS OR SOMETHING THAT CREATED A GREATER EXPLOSION THAN THEY WERE PLANNING FOR. POLITICALLY SPEAKING, IT IS A HORRIBLE LOOK AS TANKS ROLLED INTO THE CENTER OF RAW FOR. JOE BIDEN SAID HE HAD A REDLINE ON THE INVASION OF RAW FOR. LOOKS LIKE WE ARE IN THE MIDDLE OF ONE. ROMAINE: I WILL ASK A QUESTION YOU MAY NOT BE ABLE TO ANSWER, BUT IS IT A MATERIAL ISSUE IN THE U.S. ELECTION? >> GREAT QUESTION. GEOPOLITICS TENDS NOT TO PLAY INTO ELECTIONS LIKE THIS. WHEN YOU LOOK AT THE REACTION FROM PROGRESSIVE DEMOCRATS WHO ARE CALLING THIS GENOCIDE IN GAZA, THE CONCERN IS NOT SO MUCH THEY VOTE FOR DONALD TRUMP, BUT THEY DON’T SHOW UP AT ALL. JOE BIDEN MAY NOT HAVE ONE IN 2020 IF IT NOT WERE THE VOTES. ROMAINE: JOE MATHIEU, YOU CAN CATCH HIM AT THE TOP OF THE HOUR ON BLOOMBERG TELEVISION WITH DEEPER DETAILS ON THE SITUATION IN ISRAEL AND THE U.S. RESPONSE TO IT. WE DO HAVE TO GO BACK TO SOME BREAKING NEWS INVOLVING AMERICAN AIRLINES. THE COMPANY UPDATING ITS GUIDANCE FOR THE SECOND QUARTER. THAT GUIDANCE GOING DOWN. THE COMPANY CUTTING ITS SECOND-QUARTER ADJUSTED EPS FORECAST TO $1.15 A SHARE. PREVIOUSLY HE SAID IT WOULD POST $1.15 TO $1.45. THE LOW END OF THE PREVIOUS RANGE IS ON THE TOP END OF ITS CURRENT RANGE. THE COMPANY ALSO SAYS OPERATING MARGIN WILL BE ABOUT 8.5% TO 10% FOR THE SECOND QUARTER. THEY ARE LOOKING AT -5% TO -6%. PREVIOUSLY, THEY WERE LOOKING AT -1% TO -3%. SHARES MOVED LOWER BY ABOUT 4% IN AFTER-HOURS TRADING. UPDATED GUIDANCE TO THE DOWNSIDE FOR AMERICAN AIRLINES. WE WILL CATCH YOU UP ON THE OTHER THINGS OVER THE NEXT 24 HOURS IN OUR WATCH TO WANT — WHAT TO WATCH SEGMENT ON BLOOMBERG. ♪ ROMAINE: ONE BIG THING INVESTORS WILL BE WATCHING TOMORROW, SOUTH AFRICA’S ELECTION. THE COUNTRY’S RULING PARTY HAS BEEN SUCCESSFUL IN KEEPING THE LIGHTS ON FOR MORE THAN 50 DAYS. TOMORROW’S VOTE THREATENS TO ERODE THE OUTRIGHT MAJORITY FOR THE FIRST TIME. JENNIFER ZABASAJJA REPORTS FROM CAPE TOWN, THE SECOND-LARGEST CITY TRYING TO WEAN ITSELF OFF OF THE NATIONAL ELECTRICITY SUPPLIER. >> SOUTH AFRICANS HAVE BEEN USED TO THIS. DINNER BY CANDLELIGHT, PULLING UP TO TRAFFIC LIGHTS THAT GO DARK. ALL DUE TO FREQUENT ELECTRICITY CUTS THAT HAVE DISRUPTED LIVES, IMPACTING ECONOMIC GROWTH AND PROMPTING CRITICISM FROM MINING COMPANIES TO RETAILERS. LAST YEAR, THE POWER UTILITY COMPANY COULD ONLY KEEP THE LIGHTS ON FOR THE EQUIVALENT OF 82 DAYS. WITH AN ELECTION ON THE HORIZON, SOUTH AFRICANS HAVE ENJOYED A RARE STREAK OF UNINTERRUPTED ELECTRICITY SUPPLY. OPPOSITION PARTIES HAVE USED THE POWER CRISIS AS CAN OF FODDER IN THE RUN-UP TO THE POLE. VOTERS HAVE BECOME SUSPICIOUS AS TO WHAT LIES BEHIND THE SUDDEN RECOVERY. NEARLY TWO THIRDS OF SOUTH AFRICANS CONSIDER NOT VOTING FOR THE RULING BECAUSE OF POWER CUTS. PERHAPS IT IS NO SURPRISE THE GOVERNMENT IS TRUMPETING THIS WINNING STREAK. BUT THE IMPROVEMENTS HAVE COME AT AN ENVIRONMENTAL COST. THE STATE HAS QUADRUPLED THE AMOUNT IT SPENDS ON DIESEL TO RUN EMERGENCY POWER GENERATORS. STILL, THE GOVERNMENT INSISTS THE IMPROVEMENTS ARE DUE TO AN INCREASE IN GREEN POWER, INCLUDING SOLAR THROUGH A PUBLIC-PRIVATE PARTNERSHIP. WHAT THEY HAVEN’T SAID IS FOR HOW LONG THE LIGHTS WILL STAY ON AFTER THE ELECTION. ROMAINE: REPORTING FROM KATE DOWN ON THOSE AFRICAN — SOUTH AFRICAN ELECTIONS. ONE OF THE BIG THINGS WE WILL KEEP AN EYE ON THAT COULD MOVE THE MARKET. THAT ELECTION TAKING PLACE MAY 29. THE RESULTS TO BE — RESULTS TO BE ANNOUNCED WITHIN SEVEN DAYS. IN THE U.S., THE FED’S PAGE BOOK, THE ANECDOTAL EVIDENCE OF ECONOMIC CONDITIONS ACROSS THE 12 MAJOR DISTRICTS. IT COMES OUT AT 2:00 P.M. WASHINGTON TIME. KEEP AN EYE ON BHP GROUP AND THE DEADLINE FOR IT TO COMMIT TO ANGLO AMERICAN POC’S MERGER PROPOSAL. THAT DEADLINE ABOUT 19 HOURS AWAY FROM NOW. ABOUT 5:00 P.M. IN LONDON. THAT DEAL IS FAR FROM A SURE THING. BACK IN THE U.S., WE WILL GET EXXON MOBIL’S ANNUAL GENERAL MEETING. A COUPLE OTHER MEETINGS AS WELL, INCLUDING FROM CHEVRON AND META. SOMETHING TO WATCH AS EXXON MOBIL ALSO LOOKS TO ADDRESS SOME OF THEIR OWN M&A ISSUES. QUITE A FEW EARNINGS AS WELL. EARNING SEASONS CONTINUE TO ROLL ON IN THE U.S. BEFORE THE BELL. SOME NAMES LIKE CHILLY, DICK’S SPORTING GOODS, ABERCROMBIE AND FITCH. WE HAVE A SIT DOWN WITH THAT CEO TOMORROW. A CLOSER LOOK AT THE RETAIL SPACE. AFTER THE BELL, MORE EARNINGS FROM THE PAROL SPACE. AMERICAN EAGLE SET TO REPORT, AS IS CAPRI. BIG TECH EARNINGS AS WELL. INCLUDING HP AND SALESFORCE.