WEBVTT - Meta Soars and Fed Slows

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<v Speaker 1>This is Bloomberg Daybreak Asia for this Thursday, February two

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<v Speaker 1>in Hong Kong, Wednesday February one in New York and

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<v Speaker 1>coming up this hour, Chair J. Powell says the Fed

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<v Speaker 1>has made progress in fighting inflation, but he is warning

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<v Speaker 1>more rate hikes are still needed. Meta reports better than

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<v Speaker 1>expected sales as Facebook gains more users and Donnie Enterprises

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<v Speaker 1>will not go ahead with its record two point four

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<v Speaker 1>billion dollar share sale. McCarthy says he feels he and

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<v Speaker 1>the President can find common ground on the dead ceiling.

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<v Speaker 1>Former US Defense secretary says plan for a real possibility

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<v Speaker 1>of conflict with China. I'm at Baxter with Global News

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<v Speaker 1>Manchester United moves one step closer to its first trophies

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<v Speaker 1>since two thousand seventeen on Dan Schwartzman. I'll have that story.

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<v Speaker 1>More coming up in Bloomberg Sports. That's all straight ahead

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<v Speaker 1>on Bloomberg Daybreak Asia on Bloomberg eleven and three on

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<v Speaker 1>New York, Bloomberg, Washington, d C, bloom one six one, Boston,

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<v Speaker 1>Bloomberg nine six, San Francisco, Sirius x M one nineteen

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<v Speaker 1>and around the world on Bloomberg Radio dot Com and

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<v Speaker 1>via the Bloomberg Business app. Good morning, I'm dead prisoner

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<v Speaker 1>and I'm Brian Curtis. Here are the stories we're following today.

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<v Speaker 1>The FED slowed its drive to rein in inflation policymakers,

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<v Speaker 1>lifting the Fed's target for the benchmark rate but twenty

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<v Speaker 1>five basis points to a range of four and a

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<v Speaker 1>half to four and three quarters per cent. The smaller

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<v Speaker 1>move followed a half point increase back in December and

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<v Speaker 1>four jumbo sized bases point hikes prior to that. The

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<v Speaker 1>Fed noted that inflation has eased somewhat but remains elevated.

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<v Speaker 1>After the decision, chere J. Powell was asked whether he

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<v Speaker 1>was worried about the recent market rally creating easier financial

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<v Speaker 1>conditions that could hamper his fight against inflation. He chose

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<v Speaker 1>not to push back hard. It is important that overall

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<v Speaker 1>financial conditions continue to reflect the policier strength that we're

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<v Speaker 1>putting in place in order to bring inflation at two percent,

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<v Speaker 1>and of course financial conditions have it tightened very significantly

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<v Speaker 1>over the past year. I would say that our focus

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<v Speaker 1>is not on short term moves, but on sustained changes

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<v Speaker 1>the broader financial conditions, and it is our judgment that

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<v Speaker 1>we're not yet in a sufficiently restrictive policy stance, which

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<v Speaker 1>is why we say that we expect ongoing hikes will

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<v Speaker 1>be appropriate. Peal added that it's gratifying to see the

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<v Speaker 1>disinflationary process now getting underway, but he said that officials

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<v Speaker 1>would need substantially more evidence that inflation was on a

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<v Speaker 1>sustained downward path before they could declare victory. Very interesting

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<v Speaker 1>that he chose to use the word disinflation a number

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<v Speaker 1>of times today, and I think Brian to be fair,

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<v Speaker 1>if you take a broader view, you'll see that financial

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<v Speaker 1>conditions are notably tighter than they were about a year ago. Now.

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<v Speaker 1>The Chairman may have intended to emphasize the need to

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<v Speaker 1>do a lot more when it comes to taming inflation,

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<v Speaker 1>but as we indicated earlier, markets today simply weren't buying it. Here,

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<v Speaker 1>as black rocks Jeff Rosenberg, there's a real disconnect between

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<v Speaker 1>you know, what he said, what the statement said, maybe

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<v Speaker 1>what he wanted to say, and what the markets heard.

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<v Speaker 1>But what the markets heard was this issue of the

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<v Speaker 1>conflict between financial conditions easing and whether or not that

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<v Speaker 1>would impact the FEDS policymaking. He dismissed it, so let's

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<v Speaker 1>be polite. Then, I think it's fair to say that

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<v Speaker 1>markets are doubting the FEDS projections. FED funds. Now see

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<v Speaker 1>the FED only getting to five percent in so far

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<v Speaker 1>as a terminal rate. And then and then here's the

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<v Speaker 1>interesting thing, cutting by fifty basis points between now and

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<v Speaker 1>the end of the year. On the other hand, the

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<v Speaker 1>FED things that can get to a rate of around

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<v Speaker 1>five and a quarter percent and then hold it there

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<v Speaker 1>through the remainder. Does some corporate news meta platforms reporting

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<v Speaker 1>better than expected sales during the holiday quarter. We get

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<v Speaker 1>that story from Bloombridge Charlie Pillett. Met Us saw strong

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<v Speaker 1>demand for advertising. Has it attracted more users to its

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<v Speaker 1>Facebook social network, it said. Revel You for the fourth

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<v Speaker 1>quarter was thirty two point two billion dollars. That compared

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<v Speaker 1>with Wall Street estimates of thirty one point six billion.

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<v Speaker 1>CEO Mark Zuckerberg said Matta is making progress with its

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<v Speaker 1>investments in artificial intelligence, particularly for improving the videos that

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<v Speaker 1>shows users on Facebook and Instagram. The company is recovering

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<v Speaker 1>from the worst year for its stock in history. In

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<v Speaker 1>New York. Charlie Pellett Bloomberg Daybreak, Asian all right, Charlie.

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<v Speaker 1>So it's all about earnings. We get that. Today Morgan

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<v Speaker 1>Stanley chief US equity strategist Mike Wilson was saying investors

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<v Speaker 1>could see several more quarters of disappointing results, and he

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<v Speaker 1>told us the first quarter is where we could see

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<v Speaker 1>an acceleration. Earnings are disappointing everywhere. Okay, this is one

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<v Speaker 1>of the worst streets and earnings we've seen in quite

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<v Speaker 1>a while. And people are now saying, oh, it's better

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<v Speaker 1>than feared in this end the other that's like saying

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<v Speaker 1>a tornado ripped through your house and saying, oh, we

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<v Speaker 1>only knocked out the bedroom. I mean you earns are

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<v Speaker 1>bad and you need to be honest about at and

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<v Speaker 1>you need to say, do I really want to own

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<v Speaker 1>a company where the margins are degrading like this and

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<v Speaker 1>I don't really know where the bottom is yet. I'm

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<v Speaker 1>just gonna trust it's going to get better. That's a

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<v Speaker 1>that's not a great investment philosophy in our but you

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<v Speaker 1>particularly give where evaluations are now. Alright, so what do

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<v Speaker 1>earnings mean for the overall market? Well, think back s

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<v Speaker 1>and P five hundred was up more than six percent

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<v Speaker 1>of the month of January and Wilson is essentially saying

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<v Speaker 1>that people were lured into believing reality is different than

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<v Speaker 1>what it is. He also compared last month's move to

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<v Speaker 1>the beginning of two thousand one, when the market also

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<v Speaker 1>saw a rerating of tech stocks. You know, Doug, I

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<v Speaker 1>think that the FED chief was not really devish today,

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<v Speaker 1>insomuch as I think he was less hawkish than what

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<v Speaker 1>people had feared, and he did actually talk about a

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<v Speaker 1>soft landing. He hasn't really talked that much about it.

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<v Speaker 1>He's only talked about conquering inflation. And yes, he did

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<v Speaker 1>not scold markets because financial conditions have eased a little bit.

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<v Speaker 1>And actually what you said is two. He did say

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<v Speaker 1>that that financial conditions were tougher now than they were

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<v Speaker 1>a year ago. He even said they're not much easier

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<v Speaker 1>than at the time of the last FED meeting. Now

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<v Speaker 1>the consensus as will stocks have been running higher, but

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<v Speaker 1>the SMP five D right now is almost where it

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<v Speaker 1>was two months ago in December around So yes, we

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<v Speaker 1>had a big fall in December and then we had

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<v Speaker 1>a big rise in January, but net net were almost

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<v Speaker 1>at the same level. And I think the other point

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<v Speaker 1>of contention between what the FED is saying, and what

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<v Speaker 1>the market is indicating is that rate cuts are on

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<v Speaker 1>the table between let's say, before the end of the year.

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<v Speaker 1>Powell seemed to push back against that notion pretty aggressively today,

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<v Speaker 1>Although if the economy were to somehow collapse or kind

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<v Speaker 1>of move into a recession that was so deep, maybe

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<v Speaker 1>the FED wouldn't have a choice but to do that. Yeah,

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<v Speaker 1>he said, their data dependent, and I think everybody believes it.

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<v Speaker 1>Now we've got a lot more ahead. We'll be talking

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<v Speaker 1>about this with Chris Konstantino's coming up from Riverfront Investment

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<v Speaker 1>and a little bit more time to flesh out exactly

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<v Speaker 1>where the Fed's head is at the moment. Time for

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<v Speaker 1>Global News US House speaking, Kevin McCarthy says he feels

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<v Speaker 1>his first budget meeting with President Joe Biden was very

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<v Speaker 1>positive and Baxter has Global News in the nine News

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<v Speaker 1>at San Francisco, ed. Yeah, exactly right. Brian McCarthy says

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<v Speaker 1>he and the President found areas of agreement as well

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<v Speaker 1>as disagreement, and their first meeting today regarding the dead

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<v Speaker 1>ceiling and the budget, I can see where we can

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<v Speaker 1>find common ground. I think the American public would appreciate that,

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<v Speaker 1>and we look. I've been very I've been very clear

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<v Speaker 1>the current path way on we cannot sustain. We got

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<v Speaker 1>to change the directory to put ourselves on a path

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<v Speaker 1>to balance how we get there will be our discussions now.

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<v Speaker 1>White House spokes and when Karine Jean Pierre says a

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<v Speaker 1>position on raising the dead ceiling is very clear. We

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<v Speaker 1>see this as a constitutional obligation that they that they

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<v Speaker 1>have the Congress has to act. Yeah, so at least

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<v Speaker 1>they've had their first discussion. US Ambassador of the United

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<v Speaker 1>Nations Linda Thomas Greenfield, is calling for an overhaul of

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<v Speaker 1>the Security Council in the U n to blunt Moscow's impact.

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<v Speaker 1>Exclusively here on Bloomberg. Greenfield said the body has been

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<v Speaker 1>able to move power outside the Council to accomplish a

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<v Speaker 1>number of things. One an overwhelming vote condemning their annexations

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<v Speaker 1>are attempted annexations. UH In Ukraine, we kicked them off

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<v Speaker 1>of the You and Human Rights Commission, and we're continuing

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<v Speaker 1>to put pressure on them and isolate them in New York. Meanwhile,

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<v Speaker 1>the US as it will supply Ukraine with long Arrange

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<v Speaker 1>artillery ammunition as part of a new two billion dollar

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<v Speaker 1>package of military assistance, and Greenfield also commented briefly on

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<v Speaker 1>China and human rights, saying that it is exerting inordinate

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<v Speaker 1>pressure on human rights discussions among nations. Former US Defense

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<v Speaker 1>Secretary Mark Esper says the US, along with Taiwan, need

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<v Speaker 1>to prepare for the real possibility of war with China.

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<v Speaker 1>Asper on Bloomberg's balance of powers, as Taiwan has already

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<v Speaker 1>started working on ground defenses. We want to avoid a

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<v Speaker 1>fight with China for all kinds of reasons military, economic, political,

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<v Speaker 1>and so on. But if it comes to that, then

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<v Speaker 1>we we need to have folks on the ground. The

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<v Speaker 1>Taiwan's need to stock powder goods because the West will

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<v Speaker 1>not be able to resupply them like we we like

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<v Speaker 1>we've been able to with with Ukraine. Asper says, China

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<v Speaker 1>has been watching what is going on in Ukraine very carefully,

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<v Speaker 1>and the football goat the greatest of all time. Tom

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<v Speaker 1>Brady has retired again, he says, for now for good,

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<v Speaker 1>so monetarily, he doesn't need any pity parties if you're

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<v Speaker 1>thinking about planning when Bloomberg. Scarlet Food says three hundred

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<v Speaker 1>seventy five million dollars with Fox over ten years and

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<v Speaker 1>even waiting for him because it was signed after his

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<v Speaker 1>first retirement, and you know it's for whenever he decides

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<v Speaker 1>to stop playing. But what's interesting about that deal is

0:09:53.040 --> 0:09:56.720
<v Speaker 1>it's more money than he's made playing football. So he's

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<v Speaker 1>going to be the highest paid sports broadcaster, maybe the

0:09:59.360 --> 0:10:03.000
<v Speaker 1>highest pain caster period. Scarlett says. Uh. Scarlett says that

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<v Speaker 1>they have been constant focus on Fox all the way

0:10:05.720 --> 0:10:08.839
<v Speaker 1>through the season, so next year, so we won't get

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<v Speaker 1>tired of him. Right in San Francisco, I'm met by

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<v Speaker 1>Extra Global newspower by more than twenty journalists and analysts

0:10:15.640 --> 0:10:19.520
<v Speaker 1>and over one hundred twenty countries. This is Bloomberg. This

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<v Speaker 1>is Bloomberg Debra Kaja and Brian Curtis along with Rashad

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<v Speaker 1>Salamat and our guest is Chris Constantino's chief investment strategist

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<v Speaker 1>at Riverfront Investment Group. So Chris the FED chief talked

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<v Speaker 1>about disinflation in goods, that it's it's real. He talked

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<v Speaker 1>about seeing disinflation likely to be coming in housing services

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<v Speaker 1>but none yet in core services ex housing, and what

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<v Speaker 1>he's talking about there is basically wages. But it was

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<v Speaker 1>good because he's talking about a soft landing your general

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<v Speaker 1>impression from what you got today from the Fed in

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<v Speaker 1>the chief. Yeah. Sure, and by the way, thanks guys

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<v Speaker 1>for having me today. Um yeah, I think my take

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<v Speaker 1>on the FED today, the general read was a little

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<v Speaker 1>bit of a dubbish surprise maybe. UM. I think for

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<v Speaker 1>two reasons, and you mentioned earlier on the program quite rightfully.

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<v Speaker 1>The first one is, you know his quote around our

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<v Speaker 1>focus is not on short term moves, but on sustained

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<v Speaker 1>changes to financial conditions. You know, the markets ripped started

0:11:22.080 --> 0:11:25.719
<v Speaker 1>to RiPP not long after that, because it sounded to

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<v Speaker 1>listeners like Powell was kind of shrugging off the risks

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<v Speaker 1>of of that financial conditions tightening we've talked about. The

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<v Speaker 1>second thing, maybe more important, was you know, you're you're

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<v Speaker 1>exactly uh your reference to his use the word disinflationary,

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<v Speaker 1>this disinflationary process. So you know, you could view that

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<v Speaker 1>as debbish. But I think there's also potentially a third

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<v Speaker 1>read here, which is that you know, the markets may

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<v Speaker 1>have misunderstood him a little bit because we've seen this

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<v Speaker 1>happen uh to uh FED chairman's before, We've seen it

0:11:57.559 --> 0:11:59.520
<v Speaker 1>happen to power before, where you know, he's tried to

0:11:59.520 --> 0:12:02.439
<v Speaker 1>communicate a message and and and markets heard what they

0:12:02.440 --> 0:12:04.520
<v Speaker 1>wanted to hear, and then usually over the next forty

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<v Speaker 1>eight hours, markets kind of sort back through um the statements,

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<v Speaker 1>and then of course a bunch of other FED governors

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<v Speaker 1>come out and kind of get trotted out to help

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<v Speaker 1>massage the message of the markets get their head around it. Um.

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<v Speaker 1>One thing I'm pretty sure of is that how doesn't

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<v Speaker 1>want to be known as the FED share who allowed

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<v Speaker 1>inflation to become ingrained. And so I still think he's

0:12:23.800 --> 0:12:25.480
<v Speaker 1>he's trying to walk that tight rope, and I think

0:12:25.480 --> 0:12:28.440
<v Speaker 1>he's gonna eventually air on the side of being you know,

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<v Speaker 1>maybe overtightening versus under Chris Chrise. I mean, it's there's

0:12:31.520 --> 0:12:34.080
<v Speaker 1>also a situation where you know, the markets just don't

0:12:34.120 --> 0:12:35.800
<v Speaker 1>want to believe him in some ways, and you know,

0:12:35.920 --> 0:12:38.360
<v Speaker 1>the thing is probably not it's probably better to get

0:12:38.400 --> 0:12:41.280
<v Speaker 1>your desired results by misleading them. I mean, could you

0:12:41.400 --> 0:12:43.720
<v Speaker 1>argue that the FED is perhaps done raising rates and

0:12:43.760 --> 0:12:47.200
<v Speaker 1>it wants to keep it just wants people out there

0:12:47.200 --> 0:12:51.760
<v Speaker 1>to believe otherwise. M that's an interesting theory. UM. It's

0:12:51.760 --> 0:12:56.080
<v Speaker 1>certainly sort of a three dimensional chess match, if you will, UM,

0:12:56.160 --> 0:12:57.880
<v Speaker 1>But I don't know. I mean, I think the modern

0:12:57.920 --> 0:13:00.960
<v Speaker 1>FED has tried to be as transparent as possible. I

0:13:01.000 --> 0:13:03.560
<v Speaker 1>think back in the Greenspan days and earlier, there was

0:13:03.640 --> 0:13:05.760
<v Speaker 1>you know, three and four dimensional chess going on with

0:13:05.760 --> 0:13:07.960
<v Speaker 1>what they said and didn't say. But I think the

0:13:08.000 --> 0:13:10.400
<v Speaker 1>modern FED or this FED is trying to be as

0:13:10.440 --> 0:13:13.440
<v Speaker 1>transparent as they can. Um. But you can only be

0:13:13.480 --> 0:13:15.880
<v Speaker 1>so transparent in a you know, a short presser, right.

0:13:16.320 --> 0:13:20.080
<v Speaker 1>I think I think many of many investors would see

0:13:20.120 --> 0:13:22.360
<v Speaker 1>him is still hawkish because even though we talked about

0:13:22.360 --> 0:13:25.240
<v Speaker 1>the disinflation and goods and that disinflation was coming in

0:13:25.320 --> 0:13:27.880
<v Speaker 1>housing services, he said that's less than fifty percent of

0:13:27.920 --> 0:13:33.000
<v Speaker 1>the total. The other no disinflation, and so that means

0:13:33.040 --> 0:13:36.319
<v Speaker 1>that they will stay vigilant. M I agree. I think

0:13:36.320 --> 0:13:39.040
<v Speaker 1>that the bugaboo here is going to come down to wages.

0:13:39.120 --> 0:13:42.440
<v Speaker 1>Right for most small and medium sized businesses in America,

0:13:42.559 --> 0:13:47.120
<v Speaker 1>that is their number one cost input and um, you know,

0:13:47.160 --> 0:13:48.920
<v Speaker 1>and this is the place where I think businesses have

0:13:49.000 --> 0:13:52.560
<v Speaker 1>struggled because wages, particularly on the lower end, you know,

0:13:52.640 --> 0:13:57.240
<v Speaker 1>demand for workers is so dramatic still in those areas

0:13:57.480 --> 0:14:00.640
<v Speaker 1>that um, you know, it's a big constraint for or businesses,

0:14:00.720 --> 0:14:03.760
<v Speaker 1>so um, you know, the data I like to track.

0:14:03.800 --> 0:14:05.760
<v Speaker 1>You know, the n f I b M has a

0:14:05.800 --> 0:14:09.600
<v Speaker 1>propensity to raise wages survey that they've been putting on

0:14:09.640 --> 0:14:11.840
<v Speaker 1>for decades now, and that's data that here at Riverfront

0:14:11.880 --> 0:14:14.240
<v Speaker 1>we like to track. You know, that has moderated a

0:14:14.320 --> 0:14:17.760
<v Speaker 1>little bit recently, but it's still really really high relative

0:14:17.800 --> 0:14:20.480
<v Speaker 1>to history. And that suggests to me that wage you know,

0:14:20.480 --> 0:14:23.880
<v Speaker 1>wages are going to remain um, you know, pretty pretty

0:14:23.880 --> 0:14:26.840
<v Speaker 1>sticky for the type being. So tells Chris, how you

0:14:27.000 --> 0:14:29.000
<v Speaker 1>the moment trading to the market. Um, I think that

0:14:29.040 --> 0:14:34.800
<v Speaker 1>you have something called patty and it's not a woman. Correct. Yeah,

0:14:34.840 --> 0:14:38.040
<v Speaker 1>that's thanks for bringing that up. That's the acronym that

0:14:38.120 --> 0:14:41.160
<v Speaker 1>I've been using to try to communicate that. I think

0:14:41.200 --> 0:14:43.800
<v Speaker 1>we're in a new era. UM. If the old era

0:14:44.040 --> 0:14:46.960
<v Speaker 1>was of stock investing, was you know, own as much

0:14:47.240 --> 0:14:49.240
<v Speaker 1>as much growth stocks as you can stand and then

0:14:49.280 --> 0:14:51.960
<v Speaker 1>buy more. You know, Tina, there is a non alternative

0:14:52.000 --> 0:14:55.640
<v Speaker 1>to growth stocks in a very very low uh nominal growth,

0:14:55.720 --> 0:14:58.600
<v Speaker 1>low interest rate environment. I think the new era is patty,

0:14:58.640 --> 0:15:01.640
<v Speaker 1>which stands or pay attention to yield. I think for

0:15:01.680 --> 0:15:03.720
<v Speaker 1>the next foreseeable future, and I think this could be

0:15:03.720 --> 0:15:06.240
<v Speaker 1>with us for years to come. Um, a little bit

0:15:06.240 --> 0:15:08.640
<v Speaker 1>like the nineteen seventies. I think that investors are going

0:15:08.680 --> 0:15:11.240
<v Speaker 1>to get a fair amount of their total return in

0:15:11.320 --> 0:15:13.960
<v Speaker 1>stocks and fixed income from the compounding of the yield

0:15:13.960 --> 0:15:16.680
<v Speaker 1>and not so much from betting that. You know that

0:15:16.800 --> 0:15:19.840
<v Speaker 1>valuation multiples are going to go higher, and so I

0:15:19.840 --> 0:15:22.160
<v Speaker 1>think in this era you want to focus on on

0:15:22.280 --> 0:15:25.600
<v Speaker 1>business models that generate cash flow and tend to consistently

0:15:25.600 --> 0:15:30.880
<v Speaker 1>return those two shareholders and Meta jump to almost after hours.

0:15:31.160 --> 0:15:33.080
<v Speaker 1>Part of that was the stronger sales part of it

0:15:33.200 --> 0:15:39.800
<v Speaker 1>to buy back which one is more important? Um? Great question. Um.

0:15:39.840 --> 0:15:41.840
<v Speaker 1>You know, my my compliance department doesn't like me to

0:15:41.880 --> 0:15:44.120
<v Speaker 1>talk about individual stocks, but I will talk about the

0:15:44.160 --> 0:15:47.520
<v Speaker 1>Internet sector of the whole. And I think my personal

0:15:47.600 --> 0:15:49.520
<v Speaker 1>view on this is I think the market is laser

0:15:49.560 --> 0:15:53.880
<v Speaker 1>focused on toplight growth here because you know, financial engineering

0:15:53.920 --> 0:15:55.480
<v Speaker 1>tends to get a lower multiple, but if you can

0:15:55.520 --> 0:15:57.840
<v Speaker 1>generate higher revenue, which has been an issue for any

0:15:57.840 --> 0:16:02.320
<v Speaker 1>of these types of companies. This is Bloomberg Daybreak Asia,

0:16:02.400 --> 0:16:04.960
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