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Speaker 1: lot about some of the big banks today. Understandably so
Speaker 1: shares of JP Morgan Chase their higher following earnings also
Speaker 1: had a Wells Fargo out as well, their earnings taking
Speaker 1: another big litigation hits. So let's break it down. Let's
Speaker 1: start with JP Morgan. Here to go over the quarter,
Speaker 1: Arnold Cucuta, banking and credit analyst at our in house
Speaker 1: research group. They're known as Bloomberg Intelligence. He's in our
Speaker 1: Bloomberg eleven three oh studio on the phone in New
Speaker 1: York City, Ken Leon Equity Alice at cf are a
Speaker 1: research Arnold, I do want to start with you. Let's
Speaker 1: go to JP Morgan. The quarter, the stocks up about
Speaker 1: a percent. How would you sum up the quarter? What
Speaker 1: are the key points? Yeah, I know it's um, I
Speaker 1: guess you know, it's all about the taxes and you
Speaker 1: know how it kind of muddy the quarter. I guess
Speaker 1: you know it's it's raining in New York today, and
Speaker 1: I guess you know the tax impacts is similar. You know,
Speaker 1: it kind of dampens everything. You're you're all walking, it's
Speaker 1: kind of muddy. You're trying to get through it. It's annoying.
Speaker 1: But what it does is it clears late for next year.
Speaker 1: So um. You know, so taxes had like a two
Speaker 1: and a half billion impact, um, but you know next year,
Speaker 1: you know, profits should be hired because the lower tax rate.
Speaker 1: But are we just hearing about taxes a lot because
Speaker 1: we had the overhaul? Correct? Yep. And then but looking
Speaker 1: at the fundamental though, it's it's kind of the continuation
Speaker 1: of what we've seen from the prior quarter. So you know, um,
Speaker 1: you know, consumer like kind of the boring banking stuff. Consumer,
Speaker 1: you know banking as well as you know, lending to
Speaker 1: two commercial clients. You know, that's been going pretty well.
Speaker 1: Asset management, you know on fire, Um, but you know
Speaker 1: the real kind of the the weak spot you know
Speaker 1: again was in the trading area. So fixed income down,
Speaker 1: which is uh, you know a little bit worse than
Speaker 1: kind of what analysts expected. And and that that you know,
Speaker 1: that low volatil environment, you know, it looks to continue.
Speaker 1: Kenny Lee on what's up with the big loss that
Speaker 1: Jporgan in the trading? Uh? What do we tell me?
Speaker 1: What tell me? For our listeners are onto the story,
Speaker 1: tell it, tell us the story and then giving your
Speaker 1: speculation what might have happen. So since the financial crisis,
Speaker 1: it's always been the debate of is this weaker secular
Speaker 1: or cyclical? And I think analysts are getting more comfortable
Speaker 1: that it's something that structurally could be more permanent. We
Speaker 1: got low volatility, tighter credit spreads. Uh, depending on the
Speaker 1: makeup of the trading products and fixed income, currency and
Speaker 1: commodities or their customer base. But thirty four percent down
Speaker 1: for JP Morgan was a disappointment. Um, hopefully, But there
Speaker 1: was one bad deal in the right the one deal
Speaker 1: had one deal had to be marked to market. That
Speaker 1: that was of look like it was just they backed
Speaker 1: one traders thus far really bad loss. Yeah, that's I mean,
Speaker 1: that's part of it. But I think, UM, the willingness
Speaker 1: to put risk capital on the desk for derivatives, UM
Speaker 1: is there's not that kind of appetite for the major
Speaker 1: banks and the tax reform at really doesn't help further
Speaker 1: on that, especially on cross border derivatives. So where should
Speaker 1: in your view, UM, can JP Morgan be spending the
Speaker 1: big windfall that they're going to have by a lower
Speaker 1: tax rate. So the overall businesses did well in the
Speaker 1: fourth quarter, UM, and that's going to give runway for
Speaker 1: two thousand eighteen. Uh. They're going to be investing globally
Speaker 1: where there's opportunities for profitable market share gains. An area
Speaker 1: that didn't get a lot of attention on the calls,
Speaker 1: but it's a big rebound from eighteen months ago. Is
Speaker 1: Europe and the US banks are much stronger like JP
Speaker 1: Morgan today versus the European banks that have retrenched investment,
Speaker 1: banking and trading. Arnold come on in on the conversation again, UM,
Speaker 1: JP Morgan. They also had a conference calling. There a
Speaker 1: lot of questions that that was peppered. What in particular
Speaker 1: did animals want to know about well, yeah, you know,
Speaker 1: I think it's you know, just really about the taxes.
Speaker 1: And you know when when you know, if you look
Speaker 1: at it, you know, this year's um prof um earnings
Speaker 1: and if you kind of backed in the tax and
Speaker 1: new tax rate, you have an extra three and a
Speaker 1: half billion. So would that really fall straight to the
Speaker 1: bottom line or you know, is that gonna be competed away.
Speaker 1: You know, people wanted to get get engaged on you know,
Speaker 1: what would happen there, but um, you know, it was
Speaker 1: kind of like maybe in the first year you might
Speaker 1: have that a lot of that fall into the bottom line,
Speaker 1: but over time and that's going to get computed away
Speaker 1: either to you know, you have to give your lower
Speaker 1: level employees raises. Um, you might have to do more
Speaker 1: for the community, need to make you know, the president
Speaker 1: happy as well as you know kind of maybe the
Speaker 1: the you know, loan pricing and stuff. You can get
Speaker 1: a little bit more aggressive. There's a fun story on
Speaker 1: the Bloomberg. I'm gonna put it out on Twitter at
Speaker 1: Carol mass at Corey TV, and it just says the
Speaker 1: fight begins at JP Morgan and Wells Fargo over the
Speaker 1: surprise tax bananza and It's just exactly what you just
Speaker 1: said is does it go to employees, does it go
Speaker 1: to buy backs and dividends? Does it go to better deals, um,
Speaker 1: you know, better pricing when it comes to borrowers and loans,
Speaker 1: or does it get invested in communities Corey, There's a
Speaker 1: lot of stuff. Yeah, And and I guess that's a question.
Speaker 1: I wonder Ken, what what you expect them to do
Speaker 1: in terms of you know, what we know from the
Speaker 1: last tax repages and holiday is money goes right into
Speaker 1: buy backs and dividends and not into paying employees. Well,
Speaker 1: that's right, and that's where I'm going because you know
Speaker 1: the large banks are going to be following with the
Speaker 1: Federal Reserve. There are two thousand eighteen capital plans for
Speaker 1: the stress tests, and it's better, as Jamie Diamond said,
Speaker 1: to hold on to these went full earnings into capital
Speaker 1: um and I would say at least half or more
Speaker 1: will be a win for on dividend growth and buy backs.
Speaker 1: Those would be announced by the banks wants to find
Speaker 1: approves these plants in June, so that would be in
Speaker 1: the August September period. That's where I would be looking
Speaker 1: as an investor. Wells Fargo. We really haven't talked too
Speaker 1: much about Wells Fargo, um Arnold, what do we need
Speaker 1: to know about that? That stocks down about one percent? Yeah,
Speaker 1: I mean it's it's really just the continuation of you know,
Speaker 1: when can we get over this account account scandal thing?
Speaker 1: And uh, I mean this was the perfect quarter to
Speaker 1: do so in terms of just throw it in. Yeah. Well,
Speaker 1: because unlike other banks, um well As Fargo is unique
Speaker 1: in that it has a differ tax liability. So other
Speaker 1: tanks that other banks have a deferred tax asset because
Speaker 1: they had big losses during the financial crisis. Well As
Speaker 1: Fargo is profitable. So when you when you just not
Speaker 1: for the tax new tax rate, they actually recognized the
Speaker 1: gain of three and a half billion. So you look
Speaker 1: at the kind of litigation of cruel that they did
Speaker 1: magically three and a half billion, so you know that
Speaker 1: that litigation are cruel and most of that is for
Speaker 1: the kind of the legacy mortgage of things. But then
Speaker 1: and also you know they also threw in some stuff
Speaker 1: for kind of a continued kind of um, you know,
Speaker 1: sales practice issues. So this is a great quarter to
Speaker 1: kind of take that expense. All right, interesting, just the
Speaker 1: beginning to a big banks. We'll get more next week
Speaker 1: including Goldman, Sachs and a few others. Arnold Cacuda, He's
Speaker 1: are banking and credit to analysts Bloomberg Intelligence or in
Speaker 1: house group of analysts in our New York studio. And
Speaker 1: Ken Leonard thanks to you as well, equity analyst at
Speaker 1: CFR A research on the phone in New York store.
Speaker 1: A Big changes a foot at Facebook, a comic post
Speaker 1: by Mark Zuckerberg, CEO and founder of the company suggesting
Speaker 1: big changes in the Facebook feed that cond amentifications across
Speaker 1: the world of advertising and certainly at Facebook itself. Joined
Speaker 1: us to discuss this right now. Scott Devon and media
Speaker 1: analysts Stephle and the tender Wall Bloomberg Intelligence global Internet
Speaker 1: analysts back from a global adventure of his own. Uh, Jay,
Speaker 1: glad to have you back. Let me start, Scott, Scott.
Speaker 1: What did Mark Zuckerberg say? Well, you know the company
Speaker 1: is going to be I think going back to its
Speaker 1: roots and focusing on connecting users to friends and family, um,
Speaker 1: which is what the service was originally intended to do,
Speaker 1: and removing focus on amplification and in integration into the
Speaker 1: news feed of of of media content. Video is another
Speaker 1: more commercial content. The the effects of this, you know,
Speaker 1: likely could mean lower levels of engagement for a period
Speaker 1: of time and potentially lower levels of monetization. And that's
Speaker 1: why I think you've seen the response in the stock
Speaker 1: the way you have, right, and we should point that
Speaker 1: out that the stock is down more than eight bucks
Speaker 1: a d seventy nine dollars about thirty cents of share
Speaker 1: here um to Chandra, come on in on this, because
Speaker 1: I've been looking at to investor commentary on Facebook's news
Speaker 1: and some of them are saying, you know, I expect
Speaker 1: the time that people spent on Facebook and some measures
Speaker 1: of engagement will go down. Is this potentially a big
Speaker 1: hit to Facebook's model and how it all works. Actually,
Speaker 1: what they're trying to do is solve this long term
Speaker 1: problem of like the last couple of years, you've seen
Speaker 1: the total time spent on the network come down, and
Speaker 1: that's happening in part due to you know, more content
Speaker 1: coming from businesses and news stories and also more Instagram usage.
Speaker 1: So the steps that they're taking should actually help them
Speaker 1: in the long term, but in the near term there
Speaker 1: might be a sales impact well, and and that impact
Speaker 1: on sales at Facebook. I mean is Facebook is not
Speaker 1: deriving revenue from these media placements, are they No, But
Speaker 1: it's it's more about engagement at inventory and things like that.
Speaker 1: So the offsets over here is Instagram, whose revenues are
Speaker 1: expected to about double uh this year. They have more
Speaker 1: leverage leverage over there at pricing that's been going up
Speaker 1: um and and more pushed towards the videos. So more
Speaker 1: quality time could lead to more art pricing and the
Speaker 1: odd inventory that might train, which may slightly impact revenues.
Speaker 1: But I think the bigger problem is for the ecosystem
Speaker 1: than it is for Facebook. Scott talked to us a
Speaker 1: little bit about your call today on Facebook. You've got
Speaker 1: a hold rating on the name, Yeah we did. We
Speaker 1: downgraded to hold today on the back of this news.
Speaker 1: But you have been focused on this actually in front
Speaker 1: of Mr Zuckerberg's post as well, and that Look, this
Speaker 1: is the first crisis this company has faced in the
Speaker 1: public markets since the mobile monetization transition. I mean, what
Speaker 1: about the crisis about privacy or the crisis about the
Speaker 1: fake news itself and testifying before Congress, and you know,
Speaker 1: I feel like the companies actually bene got up against
Speaker 1: it a few times Corey. It's it's all, it's all,
Speaker 1: it's all one and the same. They're all connected, and
Speaker 1: I think fake news, Congress and this it's it's all
Speaker 1: culminated in this moment where the company has finally been
Speaker 1: forced to acknowledge that there's problem. And so you know,
Speaker 1: if there weren't a problem, none of this would be
Speaker 1: going on. And the question I think that some some
Speaker 1: investors should ask, is this all being organically generated that
Speaker 1: the company is coming in and fixing the business, or
Speaker 1: is it because these external entities have come at them?
Speaker 1: You know that they've been forced to do it. And
Speaker 1: so when I when I talk about a crisis, I'm
Speaker 1: speaking to those events collectively relatives to when the company
Speaker 1: went through that mobile monetization transition back in two thousand
Speaker 1: and twelve. Right, and you've got right folks, representatives of Facebook,
Speaker 1: I think Google, UM and Twitter going before Congress again
Speaker 1: is it next week to talk about terrorism? Right? So
Speaker 1: they continue to be in the spotlight, Um Scott about
Speaker 1: their role at all of this. That's right, and you
Speaker 1: know these are not all self inflicted wounds. But but
Speaker 1: I think that you know, one could make the case
Speaker 1: that is the company did begin to grow up in
Speaker 1: the public markets, it started to focus more on ad
Speaker 1: products and add monetization, as you do when you shift,
Speaker 1: you know, is a for profit from merchant missionary to
Speaker 1: mercenary over time, and with that lost some focus on product.
Speaker 1: And I think at the core of what's happening here
Speaker 1: is a doubling back down on product, which has been
Speaker 1: said is likely good for the franchise long term. It
Speaker 1: sustains the terminal value of the company, but it can
Speaker 1: certainly be problematic when investors look at on the short
Speaker 1: term earnings impact. We won't really have any assessment of
Speaker 1: that until the company speaks again on its earning call
Speaker 1: on January one. Uh, tender, you're taken on this sort
Speaker 1: of focus on product. I mean, I've seen other analysts
Speaker 1: out there say there's actually be good for Facebook a
Speaker 1: better user engagement going forward. Yeah, I think long term
Speaker 1: it should be. And um, you know, some of the
Speaker 1: other properties also give them some leverage. You know what
Speaker 1: you have WhatsApp Messenger is still not yet figured out
Speaker 1: how to monetize that, but they can pull some of
Speaker 1: these levers hopefully. But Instagram is still sort of underestimated
Speaker 1: in terms of how much it can expand quickly given
Speaker 1: the engagement there. What's your expectation for Instagram and say
Speaker 1: three years out it should be significantly bigger than what
Speaker 1: it is right now. In fact, you know, one interesting
Speaker 1: thing that's happening with these new phones that are coming out.
Speaker 1: The camera quality has improved so much. Uh, it's like
Speaker 1: it's making everybody a photographer and posts more on Instagram
Speaker 1: and things like that. So, uh, continue tailman for them, Scott,
Speaker 1: what's the one question you'd be asking Mark Zuckerberg a
Speaker 1: Facebook right now? We've got about thirty seconds left here.
Speaker 1: I think that that ultimately it would it will be
Speaker 1: important for investors to understand, you know, exactly the changes
Speaker 1: that are going to be made and what that's going
Speaker 1: to lead to in terms of improvement over time and
Speaker 1: the experience that consumers have or as he says, making
Speaker 1: them happy. And then and then secondly, you know, truly
Speaker 1: what the what the you know you said one, but
Speaker 1: truly what the longer term you know implications are on
Speaker 1: the business model from an economic standpoint, which we may
Speaker 1: likely more here from from a financial officer than Mr
Speaker 1: Zuckerberg themselves. But but I think those are the two
Speaker 1: topics that are of critical and apartments at the moment.
Speaker 1: All right, we're gonna leave it on that note, gentlemen,
Speaker 1: thank you so much. Scott Devitt, lead Internet and media
Speaker 1: analysts at Steple Financial, on the phone in New York
Speaker 1: City to tender a world global Internet and consumer Electronics
Speaker 1: analyst a Bloomberg Intelligence Boo Radio. Everyone loves blockchain right now.
Speaker 1: That's a chain that seems unbreakable, Edge Sims, the founder
Speaker 1: Bold Star Adventures, And that's gonna look with us at
Speaker 1: what's going on in the world of blockchain. Certainly lots
Speaker 1: of excitement ed as we see companies talk about partnerships
Speaker 1: with with companies that are doing blockchain things or bitcoin
Speaker 1: like things and are redubbing themselves blockchain companies in the
Speaker 1: stocks accelerate. But you know, we had the case this
Speaker 1: week of Kodak, of the serious year old company involved
Speaker 1: in technology from day one that sees blockchain. I talked
Speaker 1: to the CEO on the phone yesterday we tried to
Speaker 1: get to the show before the power went out of
Speaker 1: see s and he said, this is a serious technology.
Speaker 1: It solves a problem for us, and we're going to
Speaker 1: put this to use within the next ninety days. It's
Speaker 1: pretty incredible. I put a tweet out yesterday on added
Speaker 1: sim and has said the rule for from a venture
Speaker 1: perspective and even now a public company perspective is what
Speaker 1: can be blockchain will be blockchain, and that it doesn't
Speaker 1: necessarily mean it's all a good thing. I do believe
Speaker 1: that fundamentally in the next five to ten years, it's
Speaker 1: it's almost like a new Internet, like a distributed Internet.
Speaker 1: But at the same time, I think there's a lot
Speaker 1: of garbage and noise out there, so companies like Kodak
Speaker 1: you are taking the example from Long Island Iced Tea.
Speaker 1: I think it's definitely exciting, but I still have a
Speaker 1: lot of questions and I'm quite skeptical about it. You know,
Speaker 1: how is a company that has no software experience, you know,
Speaker 1: building on the blockchain and launching out this new I
Speaker 1: c L So, you know, I think it's gonna be
Speaker 1: very important for investors, whether your public investors or even
Speaker 1: venture capital investors, to try to find the signal from
Speaker 1: the noise and all of this excitement. Our thinks the
Speaker 1: moving a little fast when it comes to valuations of
Speaker 1: digital currencies UH and futures when it comes UH digital
Speaker 1: digital currencies and so on. Do you feel like it's
Speaker 1: moving a little too fast without us really as investors
Speaker 1: understanding it completely. I think that's a great question, and
Speaker 1: it's it's a parallel in my own mind to the nineties.
Speaker 1: I've been a DC for every twenty years, and do
Speaker 1: you remember just kind of the insanity of all the
Speaker 1: ideas back in the day? Yes, and the only Yeah.
Speaker 1: The big difference though, is that you know you own
Speaker 1: stock or equity and it could be worth something or nothing.
Speaker 1: And if you think about Amazon as an example, Amazon
Speaker 1: was a darling and then was garbage, and then now
Speaker 1: look at Amazon today. I feel the same way about
Speaker 1: cryptocurrency today, is that there's a lot of people that's
Speaker 1: going to make money for the next kind of you know,
Speaker 1: eighteen months kind of day trading and jumping in and out.
Speaker 1: It's almost like that whole a trade day trading phenomenon.
Speaker 1: You've got all these younger folks who never invested in
Speaker 1: stocks that are all of a sunnen excited. I have
Speaker 1: a high school or that I know that started a
Speaker 1: hedge fund, a hedge fund for crypto. It's insane right now.
Speaker 1: So yes, the answers, it's crazy, but I like to
Speaker 1: separate it out because we're enterprise investors. Is the underlying
Speaker 1: technology of the blockchain I think is transformative, and that's
Speaker 1: why we partnered with IBM and Comcast Ventures to create
Speaker 1: our own kind of accelerator around enterprise blockchain adoption, separate
Speaker 1: from cryptocurrency. So we brought in the seasoned operator named
Speaker 1: Rob Bailey, who you know, ran a company called Data
Speaker 1: Sift and was CEO of one of our company's customer.
Speaker 1: And we're helping entrepreneurs who have phenomenal ideas understand and
Speaker 1: how to engage with the fortune and fundamentally, five years
Speaker 1: from now, we want to make sure that these are
Speaker 1: the underlying new businesses, the underlying new infrastructure business for
Speaker 1: the future. ED, how do you see the practical uses
Speaker 1: of something like blockchain kind of playing out potentially? Yeah,
Speaker 1: I'll give you some great example. So if you look
Speaker 1: at kind of what IDM has been doing with you know,
Speaker 1: hyper Ledger Fabric, which is their open source blockchain UM.
Speaker 1: They they announced kind of a food tracking initiative from
Speaker 1: source of food all the way to shelf. And I
Speaker 1: think they've partnered with Kroger and maybe next Lee, Walmart
Speaker 1: and some others. So I think it's an amazing opportunity
Speaker 1: for supply chain to track and trace kind of UM
Speaker 1: goods from creation all the way down to authenticity to
Speaker 1: where it's located. That's an example. The other example could
Speaker 1: be back office kind of payment systems look at look
Speaker 1: at Ripple for example. Ripple allows you to kind of
Speaker 1: transfer currencies cross border on the back end without actually holding,
Speaker 1: so it speeds up the whole process into seconds instead
Speaker 1: of days. So those tremendous amount of opportunity kind of
Speaker 1: if you if you dig in correctly and right now.
Speaker 1: The problem is that the crypto perspective, the financial perspective
Speaker 1: has way overtaking kind of what's needed to understand what's
Speaker 1: driving the you know, these these triptos with the technology itself.
Speaker 1: It seems to me that that a lot of the
Speaker 1: discussion is about sort of c o s and and
Speaker 1: and cryptocurrencies that will be good for one singular purpose. Right,
Speaker 1: So Kodak will have a cryptocurrency that's good for monitoring
Speaker 1: of photos now, and I should say the CEO imagines
Speaker 1: other uses for this as well, but monitoring the the
Speaker 1: replication of and usage of the payment for photos that
Speaker 1: there are lots of other i CEOs that are sort
Speaker 1: of vertically focused in individual industries, And it seems to
Speaker 1: me that that there's a counter argument for UM at
Speaker 1: one or two really big widely used currencies that can
Speaker 1: so you can take the money you make in a
Speaker 1: photo and spend it to get a pizza. Yeah. So,
Speaker 1: so I think those are all great points. I mean,
Speaker 1: Kodak is not the only one tracking and tracing kind
Speaker 1: of ownership of photos. And there are other companies out
Speaker 1: there right now, there's like three or four. And what
Speaker 1: happens if like a shutter Stock decides to kind of
Speaker 1: do something with the blockchain. So just because you're on
Speaker 1: the blockchain doesn't mean Codak should be up. They have
Speaker 1: a lot of work to do. And in fact, if
Speaker 1: you look at a lot of the I c o s,
Speaker 1: most of them have no product, just an eighteen page
Speaker 1: white paper talking about what the token provides you, talking
Speaker 1: about what the incentives are. I think it's very important
Speaker 1: for investors to understand. The first thing is who is
Speaker 1: the founding team? Are they absolutely incredible? Are they absolutely
Speaker 1: credible UM? Is it an idea or is it or
Speaker 1: is there a product? UM? Are there any customers? And
Speaker 1: what are the token incentives? Are they doing this just
Speaker 1: because they want to make money? Are they doing it
Speaker 1: because it makes fundamental sense for the business and you,
Speaker 1: as the end user, get to participate. So I think
Speaker 1: a lot of these actually don't answer all of these questions,
Speaker 1: which is why I think they'll be a lot of
Speaker 1: kind of people losing money as well. And Sam's founder
Speaker 1: Bold Star Adventures, based right here in New York City.
Speaker 1: Listen to Bloomberg Markets and Bloombergradam Cory Johnson at Corey TV.
Speaker 1: She's at Carol mass on Twitter, Carol Masser in real life,
Speaker 1: and this is Bloomberg come ro journal now drive Oh no, no, no, no, honey, please,
Speaker 1: I'll do the run. I want to drive driving baby,
Speaker 1: good question. This is the drive to the close commune. Thanks,
Speaker 1: we'll drive us the down on Bloomberg Radio. Indeed, comes
Speaker 1: Carol Master here thinking about what's going to do with
Speaker 1: the markets here in the final moments of trading of
Speaker 1: the week. Chris Gooderrow Joint is right now CEIO Region
Speaker 1: Atlantic that we're running about three and a half billion
Speaker 1: dollars at Morristown, New Jersey. And uh, Chris, I wonder
Speaker 1: for you as you look forward here, we've got our
Speaker 1: first full week of trading almost under our belts here,
Speaker 1: and and it looks like much of the same. Yeah,
Speaker 1: And that's what that's what I see for for the year.
Speaker 1: And you know, I know, I know, I can't predict
Speaker 1: what the price of the market is going to do.
Speaker 1: But where I've got a stronger prediction is on earnings.
Speaker 1: And last year we saw double digit growth and earnings,
Speaker 1: and I think this year we'll probably see double digit
Speaker 1: growth and earnings again. And I think that that will
Speaker 1: really um give the prices enough fuel to keep up
Speaker 1: and keep going like we've seen them. And Chris, according
Speaker 1: to your research, you say, we al sso be sending
Speaker 1: a thank you note. Those of us in equity investments
Speaker 1: bullish on equity investments, We should all send a thank
Speaker 1: you note to the President and Congress for tax overhaul. Yes,
Speaker 1: you know that the new tax law making us more
Speaker 1: more competitive on the top Rate's just is just that
Speaker 1: tax savings just flows right through to corporate earnings. Uh.
Speaker 1: And that's a and that's a really positive thing for
Speaker 1: the markets. And that's why I think in part, while
Speaker 1: we've seen you know, continue to strength out of the
Speaker 1: market two part question. I'll start with the first part. Uh,
Speaker 1: if how do you expect the company is to spend
Speaker 1: this money? And what investments are you changing with? Whatever
Speaker 1: your expectation is, So I the what I hope for
Speaker 1: them to do is I don't I would rather than
Speaker 1: take take take this, take this savings and just pass
Speaker 1: it out to shareholders, UM. Passed out the shareholders. The
Speaker 1: best possible way is by stock buybacks, because it's the
Speaker 1: most tax efficient UM. But also nice dividend yields are
Speaker 1: are are encouraged to what I What I fear is
Speaker 1: that corporations with too much money on their books, they
Speaker 1: end up usually doing something stupid with it. And uh
Speaker 1: so I'd hate for it to be just spent in
Speaker 1: wasteful acquisitions or really bad exactly. And and HP before them,
Speaker 1: you know, uh yeah, and we just kept watching HP
Speaker 1: until they would run out of money, so they stop
Speaker 1: doing silly things. Um. And and that's and and so
Speaker 1: I corporation corporations that pay healthy dividends and and pass
Speaker 1: this money out and don't leave money sitting on their books,
Speaker 1: I think they run a better fiscal ship. So I'd
Speaker 1: rather see them pass this out to sharehold Well, there's
Speaker 1: nothing like that. There's nothing like that like buy backs
Speaker 1: to Chris to kind of keep the momentum right, you're
Speaker 1: just reducing the outstanding shares. You know, that would certainly
Speaker 1: provide even more support to the market. And for those
Speaker 1: you know, executives whose compensation is tied to UH earnings
Speaker 1: per share or you know, take a look at what
Speaker 1: the stock does. I mean, that's a good thing for
Speaker 1: them too. Yeah, yeah, there, yeah, I was. If I
Speaker 1: was if I was running a large corporation and I
Speaker 1: had a bunch of options, I totally want to share
Speaker 1: price higher before I pushed out more dividends, and I'd
Speaker 1: be doing buy backs. The buy backs are also good
Speaker 1: for the individual investor. You know are most of our
Speaker 1: clients live in New Jersey. This tax law was not
Speaker 1: friendly for New Jersey cookes. So I'd like to see
Speaker 1: share buy backs, which are much more tax efficient than
Speaker 1: cash dividends special one time dividends. That's interesting. So, so
Speaker 1: the notion is the the the individuals. So the corporate
Speaker 1: tax break, which someone said it on the backs of
Speaker 1: the individual taxpayer as a result, might have led to
Speaker 1: one time special dividends. But your suggestion is that's actually
Speaker 1: because of the way the one's being financed, which is
Speaker 1: through of course an extra trillion millars in debt according
Speaker 1: the Congressonal Budget Office, and um taxes on individuals and
Speaker 1: high tax areas on the coast, you might not see
Speaker 1: as many special dividends. You think, Yeah, well, I'm I
Speaker 1: would rather be in share buybacks. And I hope that
Speaker 1: I hope that corporations get that because of listening to
Speaker 1: my clients, this this tax law is stinging them, because
Speaker 1: the wealthy, your clients on the coast are bearing the
Speaker 1: brunt of the um you know, of the s I
Speaker 1: am thank you, rubbing inquire. I guess I do want
Speaker 1: to ask you, Chris, go back twelve months, because I
Speaker 1: think no one anticipated that was going to be as
Speaker 1: bullish as it was for the equity markets. It's pretty remarkable.
Speaker 1: What did we miss? What can we learn you know
Speaker 1: from a year ago? Uh and kind of maybe apply
Speaker 1: it to this year? Well, yeah, I think the the
Speaker 1: what was there was it was earnings that were that
Speaker 1: really drove the market. Um, the the you know, the
Speaker 1: the the elect and the and the and the new
Speaker 1: president that that was that was the catalyst, or or
Speaker 1: maybe that was just a um and unknown to get
Speaker 1: out of the way. But once the election was over,
Speaker 1: it certainly was was earnings that kept things going because
Speaker 1: we really didn't see anything substantially change until the very
Speaker 1: end of the year when we got the tax law.
Speaker 1: So it is howevery one time change is tax law.
Speaker 1: Do you expect the games to you know, peter out
Speaker 1: sort of a year from now. Yeah, it's at some
Speaker 1: you know, at some point this all gets this all
Speaker 1: gets priced in. So I think we'll see strong earnings
Speaker 1: in eighteen and uh, and then I would be concerned
Speaker 1: about where do we go after that, because you have
Speaker 1: to know that prices are you know, the valuations are
Speaker 1: are pretty high, and so in our portfolios, we're looking
Speaker 1: to buy stocks that have that have some real earnings
Speaker 1: behind them, because when you get a pull back and
Speaker 1: the flour drops out below you, it's profits that holds
Speaker 1: you up. Got office people least got something to lean
Speaker 1: back on and fightser world that Shell and Chub among
Speaker 1: those that kind of reflect your views there at Regiona Atlanta.
Speaker 1: Chris Corderio, he's the chief investment officer at Region, Move Around,
Speaker 1: Mortengray Promotion, Uppely Earth, Move On the you move like
Speaker 1: they do. I've never seen anyone move that fast. Five people,
Speaker 1: Let's move like you've got a purpose. He's called movers
Speaker 1: and shakers. They cost a little more about that name
Speaker 1: cracked me up. Bloomberg Markets Movers and Shakers with Carol
Speaker 1: Messer and Corey Johnson on Bloomberg Radio. Right everybody, time
Speaker 1: for your movers and shakers, winners and losers on this
Speaker 1: Friday afternoon. I'm Carol Masser along with Corey Johnson, SMP
Speaker 1: five hundred. Let's start there. Three d fifty six names
Speaker 1: in the SNP five hundred hired today, forty six lower,
Speaker 1: three unchanged. The number one decliner in the SNP five
Speaker 1: hundred is a flack and that stock down more than
Speaker 1: seven percent seven point four percent, six dollars seventy five
Speaker 1: cents a share, closing at eighty four cents a share,
Speaker 1: uh plummeting after the company was alleged to have quote
Speaker 1: exploited workers, manipulated its accounting, and deceiving shareholders and customers. Investigative,
Speaker 1: a news site, The Intercept, first broke the news, interviewing
Speaker 1: nine former employees who have sued the company over the
Speaker 1: claims afflack meantime, also coming out releasing a statement calling
Speaker 1: the allegations false. The insurance that it had investigated the
Speaker 1: claims and quote found them to be without merit. It
Speaker 1: intends to file for a dismissal of that lawsuit. But again,
Speaker 1: Affleck shares the number one decliner in the SNP five
Speaker 1: d as I mentioned, down more than seven percent. The
Speaker 1: stock now down more than three percent in an earlier
Speaker 1: Facebook down five percent today or four point four and
Speaker 1: a half percent if you want to be exact about
Speaker 1: things after Mark Zuckerberg, the founder and CEO of the company,
Speaker 1: writing in a blog post that he wants to change
Speaker 1: the way the story feed and Facebook, the primary product
Speaker 1: of Facebook, works and have it less focused on things
Speaker 1: from the media and more focused on things from your
Speaker 1: friends and family and Facebook friends and specifically uh and
Speaker 1: the concern that that's going to have an impact on
Speaker 1: Facebook's revenues and that people's experience on Facebook now is
Speaker 1: going to change dramatically. That concern sending shares a Facebook
Speaker 1: down quite a bit five uh for Facebook and uh UM,
Speaker 1: I think you know it. We've been talking about a
Speaker 1: little bit in the show today, and I think that
Speaker 1: one of the things that it's maybe overrests or underestimates
Speaker 1: or overestimates importance Facebook with and Facebook, and underestimates the
Speaker 1: importance of things like Instagram, where a lot of the
Speaker 1: revenue growth has come from in the last year, and
Speaker 1: the Instagram itself might continue to grow the restimates. I
Speaker 1: would that say, three years and Instagram will be doing
Speaker 1: eleven billion dollars in annual revenues UH and of course
Speaker 1: at a cruise right to Facebook's top and bottom line. Nonetheless,
Speaker 1: the growth rate for facebooks or revenues UM has slowed
Speaker 1: a little bit this year UH a year ago illustrating
Speaker 1: about averaging about fifty of revenue increase a year of
Speaker 1: a year only this year. Concerns that could decline substantially,
Speaker 1: weighing on the stock today UM though I should say
Speaker 1: over the last twelve months the stock was up forty
Speaker 1: two percent even after today, so off alright. Viacom shares
Speaker 1: a Viacom the number one gator in the SNP five
Speaker 1: today up nine point six percent. Viacom CBS vice chair
Speaker 1: Sherry Redstone, of course, daughter of Sumner Redstone, the founder
Speaker 1: pursuing merger of the two companies. The Rock reported this
Speaker 1: siting unidentified people with knowledge of the matter timeframe on
Speaker 1: clear three individuals with knowledge saying Redstone quote actively moving
Speaker 1: in that direction. CBS chair less moon Vis is said
Speaker 1: to be open to the possibility. Viacom declined to comment
Speaker 1: to the rap UH. CBS and National Amusements had no
Speaker 1: comment as well, but still enough to give investors maybe
Speaker 1: some you know, bullet more of a bullish feel if
Speaker 1: you will, on a possible combination. Certainly on chairs of
Speaker 1: Viacom again they were up that nine and a half percent,
Speaker 1: and just if I can throw out Lows as well,
Speaker 1: because that was the number two decliner, up more than
Speaker 1: five percent, and the stock was the kind of mill
Speaker 1: all day Corey. Then a little bit after two thirty
Speaker 1: headline cross that talked about D E. Shaw investor D E.
Speaker 1: Shaw has built an active stake in Lows, according to
Speaker 1: people familiar with the matter, UH, their specific plans um
Speaker 1: for the investment can immediately be learned, but nonetheless showing
Speaker 1: some interest by that investor and got all investors more
Speaker 1: interested in shares of loads. It's really quick. A little
Speaker 1: company based in Massachusets called Atlantic Power, so it shares
Speaker 1: a four percent today it's got about a billion three
Speaker 1: market capital's a it's a power generation companies that got
Speaker 1: some non utility electric generating facilities that operate primarily in
Speaker 1: the United States. One of their shareholders made an activist
Speaker 1: like but strange suggestion that they use their excess capacity
Speaker 1: for power to mind bitcoin and that this is actual
Speaker 1: investor I think that they will gain that their excess
Speaker 1: power actually could be more useful than just burning it
Speaker 1: off or not using it. That they should use their
Speaker 1: power generation facility to make some bitcoin, and that had
Speaker 1: the stock up of four percent. Interesting that since it's
Speaker 1: it's it's a power company, it's principally a debt instrument
Speaker 1: with about ninety billion debt so as at one point
Speaker 1: three billion dollar enterprise value just a two d and
Speaker 1: seventy million dollar market cap with the stock and uh,
Speaker 1: the stockover up today on that news that it could
Speaker 1: become a bitcoin mine, or at least one of its
Speaker 1: investors wants it to be. Looks like Apple too, closing
Speaker 1: um with billion dollar market cap for the first time ever.
Speaker 1: Let's quickly get to the vix vix on this Friday
Speaker 1: at two points six percent, closing at ten point fourteen
Speaker 1: for the week. The VIX is up ten percent. This
Speaker 1: is Bloomberg Radio. All right, Dave here, uh hi, my
Speaker 1: name is Dave. Just what do you think you're doing.
Speaker 1: We'll go for the price will floor, Dave, Dave, Dave
Speaker 1: Wilson Joyce is right now with his stock of and
Speaker 1: that would be a A R company. If you go
Speaker 1: back to the nineteen fifties was Alan Aircraft Radio. The
Speaker 1: aircraft part of that name still fits. They provide aviation
Speaker 1: services to commercial and military customers. It fits so well
Speaker 1: it's actually their stock ticker the first three letters anyway.
Speaker 1: Air A I R A R shares have had four
Speaker 1: major swings in the past four decades. They peaked in
Speaker 1: two thousand and seven and again last month when they
Speaker 1: rose to a record a R, then slipped as fiscal
Speaker 1: second quarter orties were disappointing, and CEO David Storch, who's
Speaker 1: run the company since, said he would retire May thirty one. Today,
Speaker 1: broader rebound thanks to credit sweets. Analyst Roberts spring Arm
Speaker 1: raised his A A R rating for the first time
Speaker 1: since he began covering the company almost three years ago.
Speaker 1: He's now at the equivalent of buy rather than neutral,
Speaker 1: and he also increased A twelve months share price estimate
Speaker 1: by to forty nine dollars are closed at forty one
Speaker 1: seventy three cents today after rising seven point three percent,
Speaker 1: the stock's biggest gain in sixteen months. Very cool story.
Speaker 1: Dave Wilson with his Stock of the Day gave ticker
Speaker 1: is a I R and the company is a A R.
Speaker 1: Thanks for listening to Coast to Coast. You can subscribe
Speaker 1: to this podcast on iTunes, SoundCloud, or Bloomberg dot com.
Speaker 1: You can also listen to our radio show weekdays two
Speaker 1: o'clock Eastern only on Bloomberg Radio and follow us on Twitter.
Speaker 1: She's at Carol Masser. I'm at Corey TV.