Speaker 1: This is Bloomberg Business Week. I'm Carol Masser and I'm
Speaker 1: Bloomberg Quick Takes Tim Stanobek. We're here every day bringing
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Speaker 1: we've got our team back in New York. We're in
Speaker 1: San Francisco. Now we're going to head Tare Bureau in
Speaker 1: Atlanta because we've got one of the smart voices when
Speaker 1: it comes to J. Powell and the Federal Reserve. J K. J. Powell's,
Speaker 1: you know, speaking at Brookings taking questions. So let's bring
Speaker 1: in Bloomberg News Economic reporters Steve Matthews. He is in
Speaker 1: our Atlanta bureau, So Steve, good to have you here.
Speaker 1: Let's talk about J. Powell. What was the most important
Speaker 1: thing he said today, whether it was in his speech
Speaker 1: or in his Q and A, Well, I think the
Speaker 1: a couple of things. I mean, what the markets took
Speaker 1: away from this was obviously kind of locked in on December.
Speaker 1: You're gonna get a fifty basis point. Like he didn't
Speaker 1: say that specifically, but if you read between the lines,
Speaker 1: he all but said that, yes, we're gonna get fifty.
Speaker 1: It's time to start slowing the pace of of rate hikes.
Speaker 1: But he also said, you know, he repeated, and these
Speaker 1: are themes from the past press conference at the November meeting,
Speaker 1: that you could have rates that are higher than what
Speaker 1: they had been expecting before. So you could have in
Speaker 1: the dot plot in December rates moving up a bit
Speaker 1: from where they were in September. To me, the thing
Speaker 1: that jumped out was the way he was framing the
Speaker 1: fight against inflation. He said, they're basically three types of inflation.
Speaker 1: You have goods inflation, where there's been a lot of progress.
Speaker 1: There was COVID disruption, now that is easying. You have
Speaker 1: housing uh inflation and you know that's going to continue.
Speaker 1: But if you look at new leases that they've already
Speaker 1: started to come down. So there's was a lot of
Speaker 1: optimism there and then the third area with services inflation,
Speaker 1: and that was the area where there was, you know,
Speaker 1: a very uncertain outlook that whether things are going to
Speaker 1: get better or not, and that often, uh was you know,
Speaker 1: that was where I was talking about the labor market.
Speaker 1: There were being too tight labor market and that contributing
Speaker 1: to wage pressures and inflation. Well, that's exactly where I
Speaker 1: want to go, Steve, because something that stuck out to
Speaker 1: me from Palace comments was what he said about the
Speaker 1: labor market, the idea that immigration is well below pre
Speaker 1: pandemic levels, we still got workers on the sidelines due
Speaker 1: to COVID. And then there was this the what millions
Speaker 1: of Americans who left the workforce early during the pandemic,
Speaker 1: these so called pandemic era retirements. What stuck out to
Speaker 1: you from the perspective of the supply side here because
Speaker 1: it seems like he needs to bring down demand rather
Speaker 1: than increased supply when it comes to labor, because that's
Speaker 1: just not happening. Yeah, that was really fascinating because he
Speaker 1: was saying, if you look at where the Congressional Budget
Speaker 1: Office was projecting the size of the labor force before
Speaker 1: the COVID pandemic that where they are right now is
Speaker 1: several million jobs short of where they were expected to be,
Speaker 1: and there are lots of reasons for that. Early retirements
Speaker 1: was one, the amount of COVID deaths, and long COVID
Speaker 1: was another area. But that and immigration, as you point out,
Speaker 1: was has been disappointing, and he was He was kind
Speaker 1: of called on Congress too and fiscal policymakers to do something.
Speaker 1: He said, we could affect the demand, we can't affect
Speaker 1: labor supply. And I'm not going to endorse any specific idea,
Speaker 1: but it's something that would really help the economy if
Speaker 1: coal policymakers would address the supply of labor. So, you know,
Speaker 1: we'll see if that happens. Steve, you and I have
Speaker 1: been around the block a few times. Tim as too
Speaker 1: a little bit, but I do think they But I
Speaker 1: do think the immigration story is something we've talked about
Speaker 1: for years in terms of, you know, change it, make
Speaker 1: it legal, bring them into the economy. There are a
Speaker 1: lot of jobs that immigrants coming to the United States
Speaker 1: would love to have that we're not able to fill
Speaker 1: at this point. So, like it's been an old thing,
Speaker 1: but it requires legislation and policy, and I don't know
Speaker 1: if we're going to get that. Yeah, you know, we
Speaker 1: we all have been around for quite a long time
Speaker 1: because this has been a constant theme. I mean I
Speaker 1: remember Ben Bernanky talking about it, and the Richard Fisher,
Speaker 1: the former Dallas Fed president, made controversial remarks basically calling
Speaker 1: for more immigration. And and clearly there are jobs that
Speaker 1: you know are going unfilled because they're not being filled
Speaker 1: by American workers. Americans don't want these particular jobs, are
Speaker 1: are not skilled for them. And you know why we're
Speaker 1: not bringing more people in. It's just it's it's it's
Speaker 1: not a mystery. It's because Congress is you know, decided
Speaker 1: not to do anything about it, and right now it's
Speaker 1: it's just they're just continuing debate, alright. So I know
Speaker 1: it's like, you know, what have you done for me today?
Speaker 1: Or what have you done for me lately? We got
Speaker 1: through j Pal very important. We saw the markets react.
Speaker 1: How important is Friday's jobs report based on what we
Speaker 1: heard from J Powell today? I think it is. It
Speaker 1: is important, and it's not important for the December rate hike.
Speaker 1: It's really now they're setting expectations for what happens in February.
Speaker 1: The next big debate you're gonna hear the FED is
Speaker 1: not about December. That's pretty much a done deal, abs
Speaker 1: there being some shock, but it's about do you do
Speaker 1: fifty basis points in February or do you do And
Speaker 1: you know, if you do, then that kind of sets
Speaker 1: at least the possibility that you could pause for a
Speaker 1: while or or do another twenty five. So you know,
Speaker 1: the next debate is going to be very much about
Speaker 1: the early February meeting. Alright, I gotta dig into something
Speaker 1: you said, pause for a while. It makes me think
Speaker 1: of what j Powell said, you know, staying at restrictive
Speaker 1: levels for some time, and the way he ended his speech,
Speaker 1: we still have more work to do. What does sometime mean? Yeah,
Speaker 1: that's a good that's a really good question, because it's
Speaker 1: like they are setting up the idea that UH rate
Speaker 1: hikes are going to slow, but they're going to continue,
Speaker 1: and what's important is how high do they go and
Speaker 1: for how long? And they're kind of trying to set
Speaker 1: the narrative that it's going to be higher for longer,
Speaker 1: but they're not really defining that. But you know, you
Speaker 1: will get some definition in the December dot plot, which
Speaker 1: will suggest that they plan to hold rates very high
Speaker 1: for at least all of three So I think that
Speaker 1: that is how they are looking at it. A difference
Speaker 1: to what Gina marn Adams told us yesterday where she
Speaker 1: thinks that they'll see a cut of fifty basis points
Speaker 1: due to a recession. Carol, Yeah, that's interesting. So where
Speaker 1: do we go with that? Steve? What are you hearing
Speaker 1: about in terms of he was asked about certainly the
Speaker 1: economic outlook and recession. He seems to believe that he
Speaker 1: can still get a soft landing. So how do you
Speaker 1: think about it? And the reporting that you were doing
Speaker 1: on the FED. Well, it's interesting they're talking about a
Speaker 1: soft landing because we're still having three point seven percent
Speaker 1: unemployment right which is a very tight labor market. If
Speaker 1: you look at GDP now, the Atlanta Feds GDP tracker,
Speaker 1: it's tracking at over four percent for the fourth quarter.
Speaker 1: It was interesting, he was The Big Book came out
Speaker 1: today as well. It was pointing towards fairly, you know,
Speaker 1: dismal growth in in the most recent period, but that's
Speaker 1: not what the GDP trackers are showing. So, I mean,
Speaker 1: I think the case for a soft landing is there's
Speaker 1: so much momentum right now. Uh, the labor market can
Speaker 1: take some hits and will still continue to grow. And
Speaker 1: there's so much excess cash one on household balance sheets, uh,
Speaker 1: still from from the COVID cutbacks and from stimulus and
Speaker 1: on state and local governments, that you know that there's
Speaker 1: reason to believe that there's gonna be a lot of momentum.
Speaker 1: Uh into heyconds, Steve left with you. What economic data
Speaker 1: have we gotten recently that is not working in the
Speaker 1: feds favor? Because Jolts certainly is uh. And then a
Speaker 1: slowdown in job gains on Friday will work in its favor.
Speaker 1: But what hasn't worked in its favor? You know that
Speaker 1: that's an interesting uh question. I mean, I would say,
Speaker 1: really the big thing is the headline inflation numbers have
Speaker 1: not come down. They continued to be disappointing that you've
Speaker 1: had a S pointed out one good month, but uh,
Speaker 1: you know you're still seeing much higher inflation, and and
Speaker 1: while jobs are showing some improvement in moderation, Uh, it's
Speaker 1: still running, you know, twice as high as the payrolls
Speaker 1: are running, twice as high as as the FED would
Speaker 1: like yeah, and the Fed lucky that at least the
Speaker 1: labor market is held on to strength that gives them
Speaker 1: still some room to work on those inflation number. Steve Matthews,
Speaker 1: thank you so much. As always, he's economic supporter of
Speaker 1: Bloomberg News. Joining us from our bureau in Atlanta. This
Speaker 1: is Bloomberg Business Week with Carol Messer and Bloomberg Quick
Speaker 1: Takes Tim Stinovic on Bloomberg Radio. We do want to
Speaker 1: get though to the cover of Bloomberg Business Week, which
Speaker 1: also happens to be this week's Bloomberg Big Take, or
Speaker 1: I should say Today's Bloomberg Big Take. And to say
Speaker 1: it's a troubling story is certainly an understatement. The story
Speaker 1: Tim about TikTok It's viral challenges that children are actually
Speaker 1: dying front with more. We're joined by Bloomberg Business Week
Speaker 1: editor Joel Weber, who joins us on the access line
Speaker 1: from Brooklyn, New York. So with us is Bloomberg News
Speaker 1: investigative reporter Olivia Carville. She's with us from the Bloomberg
Speaker 1: Interactive Broker's studio in Manhattan. Joel, I want to start
Speaker 1: with you the blackout challenge. It's something that children are
Speaker 1: dying from the question Olivia tried to answer here is
Speaker 1: why isn't the world's most popular app We're talking TikTok
Speaker 1: here doing more to protect them. Yeah, so blackout challenge
Speaker 1: um has been this viral um uh sensation really that
Speaker 1: it's taken off on social media, and you know, TikTok
Speaker 1: is not the only platform where it's been a thing.
Speaker 1: But what makes TikTok and the story really troubling is
Speaker 1: the algorithm that has really turned TikTok into the world's
Speaker 1: most popular app is incredibly value, very very powerful, and
Speaker 1: it's so good at servicing content. Um. But TikTok itself
Speaker 1: extremely popular, popular with young kids, but had no way
Speaker 1: of determining whether or not a kid is actually old
Speaker 1: enough to be using the app, and that's led to
Speaker 1: some really, really frightening situations. And personally, it's one of
Speaker 1: these stories. After I read it, I took away my
Speaker 1: son's devices and was like, you will never see the
Speaker 1: internet ever again. And I feel I say that lighthearted,
Speaker 1: but for real, like this is one of these things
Speaker 1: that everyone just assumes, um that you you you know,
Speaker 1: the kids are are not going to find themselves in
Speaker 1: places that they're not supposed to be and just truly harolding.
Speaker 1: How scary some of these corners can become. Um, Olivia,
Speaker 1: bring us into how you went about reporting this story,
Speaker 1: because um, it really involves some tragic, tragic elements. Yeah,
Speaker 1: it does. I started reporting this pace by trying to
Speaker 1: get a sense of what happens inside TikTok. After a
Speaker 1: child dies participating in an online challenge, and maybe there's
Speaker 1: been a headline and some local news reports connecting TikTok
Speaker 1: to that death, how does the company respond and what
Speaker 1: happens internally? And the way to answer that question was
Speaker 1: to try and build sources on their trust and safety team.
Speaker 1: This is the team that is built within TikTok to
Speaker 1: handle the worst case scenarios. These are the fixes of
Speaker 1: the Internet, the people who come in and clean up
Speaker 1: the mess, protect the company's reputation, but also try and
Speaker 1: protect users. And I spoke to more than two dozen
Speaker 1: current and former trust and safety insiders to get a
Speaker 1: sense of what happens at TikTok in the aftermath of
Speaker 1: a really tragic incident like this, and that's how we
Speaker 1: were able to tell the story is really through the
Speaker 1: lens of that trust and safety team. Well, speaking of
Speaker 1: the tragic side of this, your piece starts out with
Speaker 1: just the tragic story of Ariannia Royo. Can you share that,
Speaker 1: share her story and what her family has gone through.
Speaker 1: Arianni was a nine year old girl. She lived down
Speaker 1: in Milwaukee, Wisconsin, and she loved TikTok. You know, this
Speaker 1: is the most popular app in the world, and it
Speaker 1: is hard to deny the success of um of this company.
Speaker 1: Seventy percent of teenagers in America are using TikTok and
Speaker 1: they're using it more than all of the other apps
Speaker 1: out there, Facebook, Snapchat, YouTube, Twitter. So Ariane, like most kids,
Speaker 1: fell in love with TikTok and she was using the
Speaker 1: platform on a daily basis, and she really enjoyed participating
Speaker 1: in the trending challenges. She would do things like hold
Speaker 1: water in her mouth until you start giggling, really kind
Speaker 1: of harmless, fun joking challenges. But in February of last year,
Speaker 1: she attempted the Blackout challenge, which is where children try
Speaker 1: and choke themselves with household objects until they black out
Speaker 1: and then filmed the adrenaline rush or the high they
Speaker 1: get regaining consciousness. But at the age of nine, Ariani
Speaker 1: unfortunately was unable to help herself or to save herself.
Speaker 1: She had choked herself with a metal dog leash and
Speaker 1: she tragically died. So Olivia obviously TikTok is aware that
Speaker 1: there's a challenge here and that these have happened, there's
Speaker 1: been lawsuits. What does the company have to say about it?
Speaker 1: And and what's their what's their official response? And then
Speaker 1: what what are what are others saying about that response? Yeah,
Speaker 1: I mean, these these dangerous challenges bounce across platforms. They
Speaker 1: exist on TikTok, but they exist on all the others
Speaker 1: as well, and users actually try and sidestep safety restrictions
Speaker 1: by doing things like misspelling keywords. So rather than writing
Speaker 1: blackout challenge, which has been banned on TikTok, they'll right
Speaker 1: black out with a zero and try and get around
Speaker 1: the the artificial intelligence or the systems that have been
Speaker 1: set up to try and protect kids. So TikTok really
Speaker 1: doesn't want this content on its platform. It's done what
Speaker 1: it can to train its moderators to take down any
Speaker 1: content relating to the blackout challenge, and it also prevents
Speaker 1: anyone from being able to search for Blackout Challenge related
Speaker 1: content in the app, and it's set those um those
Speaker 1: features in place, those safety restrictions in place at the
Speaker 1: start of last year after the first ten year old
Speaker 1: girl died attempting this particular challenge. But unfortunately, kids are
Speaker 1: smart and they know how to get around these and
Speaker 1: you know, these safety restrictions, and they're doing that, and
Speaker 1: that means that the challenges continuing to spread across social
Speaker 1: media platforms. And the most recent cases that we could
Speaker 1: find of deaths associated to the blackout challenge was August
Speaker 1: of this year. So despite all of those safety features
Speaker 1: being implemented, the deaths have kept happening. Olivia have to say,
Speaker 1: I've had a million questions come to mind, the responsibility
Speaker 1: of the company, you know, making sure kids aren't there,
Speaker 1: you know, platform and having access to content that they
Speaker 1: shouldn't have, and where are the martyr readers like watching
Speaker 1: all of this. We're a regulator, so where do you
Speaker 1: think we need to go from here to get on
Speaker 1: top of this. Well, that question of age verification is
Speaker 1: like the elephant in the room. This is one of
Speaker 1: the hardest things for these social media platforms to do.
Speaker 1: How can you tell the exact age of the person
Speaker 1: who was on the app, you know, using that device,
Speaker 1: and don't forget that children's content is allowed on TikTok.
Speaker 1: You can film your children or your siblings who are
Speaker 1: under the age of thirteen and post about it. Every
Speaker 1: social media platform in the US at least has a
Speaker 1: rule that says you have to be over the age
Speaker 1: of thirteen to use the product. This, you know, they
Speaker 1: call it within the industry the age gate, and it's
Speaker 1: very hard to enforce that, so these companies are trying
Speaker 1: to find ways around it. But this is one of
Speaker 1: the biggest challenges that social media platforms face. An incredible
Speaker 1: story this is Bloomberg has been this week with Carol
Speaker 1: Messer and Bloomberg Quick Takes Tim Stinovic on Bloomberg Radio.
Speaker 1: One thing we wanted to get to is a story
Speaker 1: that's also in Bloomberg Business Week in the upcoming new issue.
Speaker 1: And what's interesting is this has to do with um Avatar,
Speaker 1: which I think is kind of interesting. Tim coming off
Speaker 1: getting to go into our plane yesterday right at JFK,
Speaker 1: they're spending money on advertising. There were tons of posters
Speaker 1: about the Avatar sequel, and and you and I started saying, yeah,
Speaker 1: go ahead, Well we were saying, wait, is this a
Speaker 1: Fox movies? This a Disney movie? Well, this gets to
Speaker 1: a story. It's a confusing but a lot changed about
Speaker 1: three years ago. Let's get to it with Felix Gillette,
Speaker 1: Media Entertainment and Telecom editor for Bloomberg Business Week. He's
Speaker 1: also the author of It's Not TV, The Spectacular Rise, Revolution,
Speaker 1: and Future of HBO. He joins us live from the
Speaker 1: Bloomberg Interactive Broker Studio. First of all, Felix, I had
Speaker 1: no idea until I read your piece that this was
Speaker 1: the top grossing movie of all time. Uh. I saw
Speaker 1: it and I don't even remember what it was about.
Speaker 1: That's how much of an impact. Why was this Why
Speaker 1: was this movie so hot? Uh? You know, I think
Speaker 1: part of it was the technology at that point. Everyone
Speaker 1: was so excited to see it in three D and
Speaker 1: people were making all these grand predictions about there would
Speaker 1: never be anything except three D movies in the future
Speaker 1: based on this movie, and that didn't reappen, but people
Speaker 1: did see it in droves. One thing I do remember,
Speaker 1: I'm not joking. The thing I remember about it as
Speaker 1: I saw it in New York City before I even
Speaker 1: moved to New York. It was like twenty five dollars
Speaker 1: to see it in three D and in imax and
Speaker 1: that was what two thousand nine I think yep, thirteen
Speaker 1: years ago. So okay, so breakfast forward to today. Yeah.
Speaker 1: So now this is a big moment, uh, for the
Speaker 1: Avatar franchise. This is the first if it goes well.
Speaker 1: James Cameron, the director, has said he's going to make
Speaker 1: five of these. Um and the Avatar three has already
Speaker 1: been partly shot. Um, you know, every two years will
Speaker 1: be another Avatar sequel and uh, it's a huge bed
Speaker 1: for now Disney. The first one was made by Fox
Speaker 1: and then since then Disney has acquired Fox. And it's
Speaker 1: this crazy moment for Disney where you know, the share
Speaker 1: price has been down this year. They just got rid
Speaker 1: of their former CEO, brought back his predecessor, bibe Igor.
Speaker 1: Bob Iger is the one who made the deal to
Speaker 1: acquire Fox, which brought Avatar into the Disney family. Um,
Speaker 1: so this is a big moment. They spend a huge
Speaker 1: amount of money. I think four hundred million dollars is
Speaker 1: on the production alone, plus a couple hundred million more
Speaker 1: to market this, and uh it better be huge. Yeah.
Speaker 1: I was just gonna say, let's do some simple math.
Speaker 1: So if it made about three billion back in two
Speaker 1: thousand nine, Disney paid wet Felix seventy one billion to
Speaker 1: bring twenty one century Fox into the Magic Kingdom three
Speaker 1: years ago. So what have we got to do three
Speaker 1: into seventy one? So we're talking about twenty movies or
Speaker 1: so forty years to have one of these every two years. Um, yeah,
Speaker 1: I mean they think, you know, James Cameron has this
Speaker 1: incredible track record of movies, Blockbusters, Titanic, True Lies, Terminator,
Speaker 1: so it's it's a good it's always good to bet
Speaker 1: with James Cameron. Um. You know, this is an odd
Speaker 1: one because it's unusual for a really successful movie to
Speaker 1: go thirteen years before a sequel comes out. Um, it
Speaker 1: was delayed several times COVID among other things. And there's
Speaker 1: not a huge um amount of you know, there's no
Speaker 1: TV shows, there's nothing, there's not a lot of merchandise
Speaker 1: out there for Avatar, So in some ways it is unusual. Yeah, well,
Speaker 1: sorry to jump in. One thing that I'm a little
Speaker 1: confused about is the relationship between Avatar and Disney pre
Speaker 1: the assets of twenty century Fox that were sold your
Speaker 1: twentieth century Fox that were sold to um Disney. Yeah,
Speaker 1: Disney actually made based on licensing the Avatar I p
Speaker 1: in Florida, and which is one of the ways that
Speaker 1: I think that they, you know, wanted to acquire Fox.
Speaker 1: I mean it made sense get Avatar under the Disney roof. Fully.
Speaker 1: That park is you know, still pretty popular, um and
Speaker 1: it's pretty much the existing you know. You go and
Speaker 1: see Pandor, which is the moon where Avatar, you know,
Speaker 1: this world that Avatar brought to life, and they think
Speaker 1: that's what James Cameron brings. Don't give it away, Felix
Speaker 1: Carol hasn't seen it yet. Kind of sound like an Avatar.
Speaker 1: It's not Smurf, so the small blue people. So that's
Speaker 1: the you know, we gotta make that first leap. Um.
Speaker 1: But yeah, it brings this whole exist, this whole world
Speaker 1: to life. This one is underwater. That's the big new
Speaker 1: thing that's different from the first one. They've released three
Speaker 1: trailers that look super cool. They invented all sorts of
Speaker 1: cameras that cast learned how to do deep diving and
Speaker 1: hold their breath for minutes. Um. But it's gonna be
Speaker 1: crazy special effects, a big universe. Yea, so maybe Nemo
Speaker 1: can meet Pandora like underwater? Is there like is that
Speaker 1: where we see the collaboration? Got ten seconds left? Is
Speaker 1: this a kind of franchise though that they can do parks,
Speaker 1: they can do merchandizing really quickly. Yes, they want to
Speaker 1: do it all. They want to expand this thing and
Speaker 1: expand it, expand it and alright. Felix Gelette, Media Entertainment
Speaker 1: and Telecom editor for Bloomberg Business Week. Also check out
Speaker 1: his new book, It's Not TV. The Spectacular, Rise, Revolution
Speaker 1: and Future of HBO. We've got a trip. We'll go
Speaker 1: see the movie together. You're listening to Bloomberg Business Week
Speaker 1: with Carol Messer and Bloomberg Quick Takes Tim Stinovic on
Speaker 1: Bloomberg Radio. All Right, everybody, just about twelve minutes to go,
Speaker 1: just under until we get to that closing bell. We'll
Speaker 1: talk with our TV colleagues for simulcast coverage. But in
Speaker 1: the meantime, stocks, as you just heard from Charlie, they're
Speaker 1: holding on to their best levels. We've got quite a
Speaker 1: rally under way of stocks have come roaring back following
Speaker 1: j Powell's comments, and we've seen yields which backed off
Speaker 1: as a result of potentially maybe an easing in terms
Speaker 1: of the size of those rate increases, we've seen yields
Speaker 1: come down significantly. Let's see what Nicole Webb has to say,
Speaker 1: Senior vice president and a financial adviser at the Wealth
Speaker 1: Enhancement Group. But she joins us live from our Bloomberg
Speaker 1: Interactive Broker studio in New York. Nicole, good to see you,
Speaker 1: Good to hear you this afternoon. How are you. I'm
Speaker 1: doing well. How are you? We're doing pretty well. I mean,
Speaker 1: the equity markets are doing really well today. Off of
Speaker 1: those comments from Fed Jair J. Powell a little earlier today.
Speaker 1: How are you reading into his commentary? Is the market
Speaker 1: getting a little ahead of itself? You know, it's really interesting.
Speaker 1: I actually our firm had anticipated that there was perhaps
Speaker 1: a bit of a validity rally come the December announcement,
Speaker 1: if we do get the fifty basis points that people
Speaker 1: believe have been already embedded into the stock market. UM.
Speaker 1: I think his sentiment today was perhaps that validation that
Speaker 1: the tapering, the slow down of the rate increases was
Speaker 1: to be expected, and so I do think some of
Speaker 1: that is playing out in today's market. Here the second
Speaker 1: half of the day. But is it warranted? Gosh, I
Speaker 1: am part of the consensus here. You know, from our
Speaker 1: best estimates, what we're seeing is that when supply chain
Speaker 1: fully normalizes, we expect inflation to sit around four per
Speaker 1: cent um, and the amount of demand destruction necessary to
Speaker 1: get down to that two percent target um suggests that
Speaker 1: rates will have to either go above five or that
Speaker 1: higher terminal rate will have to last a bit longer.
Speaker 1: And we do think that that could impose a bit
Speaker 1: of an earning shock, all right, So that leads me
Speaker 1: to a question to call that higher rate environment, Right,
Speaker 1: you get to find out which companies are really resilient
Speaker 1: and set for the long term and which are not,
Speaker 1: and that speaks to what we'll see in earnings. So
Speaker 1: when you think about that, what kind of companies, what
Speaker 1: kind of sectors would you expect, or what kind of
Speaker 1: balance sheets should investors be looking at right now to
Speaker 1: maybe commit some new money. Yeah, the end of the
Speaker 1: today's trading day is interesting. And you know, one point
Speaker 1: that we've seen play out actually this week consistently is
Speaker 1: that you know, I wouldn't say that some of these
Speaker 1: names are necessarily a shift in trends. So when we
Speaker 1: think about duration assets kind of popping here at the
Speaker 1: end of the day of the technology firms, we're not
Speaker 1: ready to go back that way. This seems to be
Speaker 1: a bit of maybe a rearranging before your end where
Speaker 1: we're still looking at some of those revenue stability firms
Speaker 1: coming into the new year. So one specific name that
Speaker 1: comes to mind is Costco. We love the membership fees.
Speaker 1: They don't carry many skews UM, so they carry a
Speaker 1: strong competitive edge there. Uh, and they really have a
Speaker 1: long track record of earnings per share growth that we like. Okay,
Speaker 1: before we get to some other picks, I just want
Speaker 1: to go back to your commentary about where we are
Speaker 1: in the market right now. So if you're saying that
Speaker 1: rates are going to have to go about five or
Speaker 1: that we'll see a higher terminal rate for longer to
Speaker 1: try to bring inflation down below what you see is
Speaker 1: you know, four percent after supply chains do normalize. UM,
Speaker 1: what does that mean for where the sp I Guess
Speaker 1: the question that I'm asking is is are we off
Speaker 1: of the lows of I don't want to say the year,
Speaker 1: but of this this cycle. Yeah, with some confidence, we
Speaker 1: would say that the trading range next year is a
Speaker 1: bit narrow. So you have this convergence of two themes
Speaker 1: that generally carry their own kind of predominant thematic trading.
Speaker 1: Those two themes being in a stall in a stall
Speaker 1: out of a higher terminal rate, so one the compression
Speaker 1: to earnings there. But then secondly, markets tend to do
Speaker 1: quite well in a disinflation environment. And so as you
Speaker 1: continue to navigate those two against one another, you know,
Speaker 1: our best guess is that the market does trade in
Speaker 1: this tight range with suppressed earnings. But um, we too
Speaker 1: are a bit in the camp of it doesn't have
Speaker 1: to be a catastrophe. And Powell, you know, shared those
Speaker 1: same sentiments today. I love that you come though with
Speaker 1: company names and stocks I want to go back, and
Speaker 1: you mentioned at Costco and that makes sense to me.
Speaker 1: T j X is another one which we know people
Speaker 1: love the bargain hunt. Right at t j X. We
Speaker 1: know their latest earnings. It wasn't so much about the
Speaker 1: home anymore and their own goods component, but about apparel
Speaker 1: and other areas. They showed some strong results. Yeah, we've
Speaker 1: been a bit dismissive of retailers this year, certainly, um,
Speaker 1: but we love t J Max And look, we don't
Speaker 1: believe that a disinflation environment means that inflation is going
Speaker 1: away across the board. We know that we have some
Speaker 1: threats to energy costs, We have looming inflation that will
Speaker 1: be a bit persistent. And so you couple that with
Speaker 1: you know t J's bargain hunting. But then also um
Speaker 1: inventory excess, we know it exists, it's coming to them cheaply.
Speaker 1: And then also you have freight and transportation costs coming down,
Speaker 1: all helpful to their bottom line. What else you have
Speaker 1: your eye on? What else are you? Let's talk Amazon?
Speaker 1: Like Amazon? I do like Amazon. Um, this isn't one
Speaker 1: where I would say, you know, if you're managing a
Speaker 1: p m L day to day, it's probably not helpful.
Speaker 1: But looking out into we expect that you know, it's
Speaker 1: going to start to shine again for a lot of reasons.
Speaker 1: But their management is highly focused on free cash flow.
Speaker 1: They seem to be investing in the right areas. UM,
Speaker 1: they're responding to trends and themes around them. Their excess inventory,
Speaker 1: you know, they really doubled down on what they were
Speaker 1: able to fulfill during COVID, and so let's hurt them
Speaker 1: a little bit on the backside. Um. But again that
Speaker 1: they too will be will be helped over the last
Speaker 1: couple of quarters with shipping in freight costs coming down
Speaker 1: as well. Do you think we see Jeff Bezos pull
Speaker 1: a Bob Iger or Howard Schultz a little bit of
Speaker 1: a boomerang? Um? I love a boomerang CEO story. My
Speaker 1: favorite is Starbucks and now maybe Disney. Um, yes, yes,
Speaker 1: I actually do. I think, Um, hindsight is a little
Speaker 1: bit and sometimes I think when someone steps away, I
Speaker 1: think about Bob Iger in this way. Um, he did
Speaker 1: not invest in DTC or the direct consumer business and
Speaker 1: probably now has spent a it amount of time focusing
Speaker 1: on those Kudo would have should us and and comes
Speaker 1: refreshed and able to perhaps maneuver with more clarity. I
Speaker 1: think Basils might be able to bring that to the table.
Speaker 1: I don't know, It's just just a thought, all right.
Speaker 1: Just got about twenty seconds left here real quick on
Speaker 1: Apple and why you think it's something to buy right now.
Speaker 1: Consistently it proves to be shareholder friendly in terms of
Speaker 1: the way that it focuses on its stock buy back program. Um.
Speaker 1: I think that's interesting for retail investors to focus on UM,
Speaker 1: and it's highly efficient. It's return on invested capital continues
Speaker 1: to prevail. UM. They're just a great company overall. Alright,
Speaker 1: we're gonna leave it on that note. Really some great
Speaker 1: companies to think about, certainly in this environment. And it's
Speaker 1: safe to say that I think all of these names
Speaker 1: because pretty much everything seems to be rallied coming off
Speaker 1: of the comments from j Pal Nicole Webb, thank you
Speaker 1: so much. He's senior vice president, financial advisor at the
Speaker 1: registered investment advisory firm Wealth Enhancement. Joining us back in
Speaker 1: our Bloomberg in directive broker studio that's of course, in
Speaker 1: our New York City headquarters. Thanks for listening to Bloomberg
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