Q3 2024 SoftBank Group Corp Earnings Call

February 8, 2024

Yoshimitsu Goto: Now let me start our highlights for the quarterly results announcement. Q3 2023, we have 5 highlights. First, significant improvement in consolidated results, with JPY 950 billion net income. Profit in quarter for a while, and I'm a bit relieved to have such a news for you. Acquired JPY 1.1 trillion T-Mobile shares for no additional consideration. Three, net asset value increased JPY 2.8 trillion quarter over quarter to JPY 19.2 trillion driven by the increased value of Arm. Fourth, portfolio shift from Alibaba to AI with Arm as the core. We've been working on this for past few years. Our asset was mainly focused on Alibaba, but now that we are clearly shifting to AI. Last but not least, a significant improvement in Vision Fund performance.

Now let me start our highlights for the quarterly results announcement. For the third quarter 2023, we have five highlights.

So let me start our highlights for the quarterly results announcement.

Third quarter 2023, we have pipe highlights.

First significant improve being consolidate the results.

First, a significant improvement in consolidated results, with 950 billion yen net income. So profit has been in Kota for a while, and I'm a bit relieved to have such good news for you. And also acquired 1.1 trillion yen in T-Mobile shares for no additional consideration. And three, net asset value increased 2.8 trillion yen quarter over quarter to 19.2 trillion yen driven by the increased value of BAHM. Third, a fourth, for their shift from Adibaba to AI, with arms as the core. We've been working on this for the past few years. Our assets were mainly focused on Alibaba, but now that we are clearly shifting to AI, last but not least, a significant improvement in vision fund performance. And now I'd like to start with the consolidated results.

With 950 billion yen net income.

So profit Oh.

Speaker Change: And quota for a while and I'm relieved.

Speaker Change: Relieved to have such a news for you.

Speaker Change: And also I'll call. It 1.1 trade Union T mobile shares for no additional consideration.

Speaker Change: And three.

Speaker Change: Net asset value increased two point, they trade union quarter over quarter to $19 two tiered union driven by the increased value of bomb.

Speaker Change: Third or fourth.

Speaker Change: Portfolio shift from Alibaba to AI.

Speaker Change: With as the core.

It would be working on this for past few years.

Although I said it was mainly focusing focused on alibaba, but now that the we are clearly shifting to.

Speaker Change: Yeah.

Speaker Change: Last but not least.

Speaker Change: A significant improvement in vision fund performance.

Yoshimitsu Goto: Now I'd like to start with consolidated results. As you see, I want you to look at the net income, JPY 950 billion. JPY 1.7 trillion of the increase compared to last quarter, same quarter last year. The driver for that is actually 424 billion yen of the growth and gain in investments. And this was increased by JPY 936 billion. Gain and loss on investments and net income here. The lines are the quarterly changes. In the past four quarters, we've been seeing the net loss. This quarter, we are able to show you the big improvements here.

Speaker Change: And now I'd like to start with consolidated results.

As you see... Want you to look at the net income, 950 billion yen. 1.7 trillion yen of the increase compared to last quarter, same quarter last year. And the draper for that is actually 424 billion yen because of growth and gain in investments. And this was increased by 936 billion yen, gaining a lot from the investments and net income here. But the lines, the quarterly changes, and in the past four quarters... We've been seeing a net loss, but this quarter, we are able to show you the big improvements here. And the main driver for that is the orange lines, which are the gain and loss on investments. Especially this first quarter to second and third quarter, we are making a very steady improvement quarter by quarter.

Speaker Change: As you see.

Speaker Change: Once you do look at the net income 950 billion yen.

Speaker Change: 1.72.

Speaker Change: Two union of the increase compared to last quarter same quarter last year.

Speaker Change: And the day before that is actually.

Speaker Change: 424 billion yen of the growth in our gang and investments and this was increased by 936 video in yen.

Speaker Change: Gain and losses on investments and net income here.

Speaker Change: Chuck.

Speaker Change: Lines are the quarterly changes and in the past four quarters.

Speaker Change: We've been seeing the net loss.

Speaker Change: But the difficult that we are able to show.

Chuck: Sure you the big improvements here.

Yoshimitsu Goto: The main driver for that is the orange lines, which is the gain and loss on investments, especially this Q1 to Q2 and Q3, we are making a very steady improvements quarter by quarter. I would like to be a little bit more detailed in terms of the gain and loss on investments. We have SBG investments, and also we have a Vision Fund investment. In this slide, you can see the breakdown in between those two. Blue portion is the Vision Fund investments activities, and orange are the investment from the holding company, SoftBank Group. You see pink lines, this is the consolidated results. JPY 424 billion of the gains are recorded this time.

Chuck: And that being a driver for that is the orange lines.

Which is to gain and also on reimbursements, especially this first quarter.

Chuck: Second and third quarter, we are making a very steady improvements quarter by quarter.

Speaker Change: I would like to be a little bit more details in terms of the gain and loss on investments. So we have SPG our investments and also we have a visual and fund investment.

I would like to be a little bit more detailed in terms of the Gagnon-Lawson investments. So we have SBG investments, and we also have a vision fund investment. And on this slide, you can see the breakdown between those two. So the blue portion is the vision fund investment activities, and orange is the investment from the holding company, SoftBank Group. And you can see

Speaker Change: And this site you can see the breakdown in between those two so blue portion is the visual funding business activities and Orange are the investment from the holding company Softbank group.

Speaker Change: And you see.

Pink Lines, This is T's Consolidated Results and the $424 billion in gains recorded this time. On the next agenda... is the acquisition of 1.12 million of the T-Mobile shares. Eh, what happened?

Speaker Change: Pink lines.

Speaker Change: This is the consolidated results.

Speaker Change: And the 424 billion.

Speaker Change: Of the AR games recorded at this time.

Yoshimitsu Goto: The next agenda is the acquired JPY 1.1 trillion of the T-Mobile shares. What happened was that originally we invested in Sprint, and after the merger between Sprint and T-Mobile, we had several discussion, negotiation with the counterpart, and this is one of the contingent consideration. T-Mobile share, when the condition of the trailing 45-day VWAP was over $149.35, then that leads to our 48.8 million shares equivalent. This is the earn-out term, and this was actually achieved as a result. As of the present share price, it was JPY 1.1 trillion, and we are able to acquire those. Sprint investment, we had suffered a lot as well after the announcement of acquisition.

Speaker Change: And the next agenda.

Speaker Change: Is the acquired 1.12 Union of the T Mobile us yes.

Speaker Change: And what happened.

Speaker Change: Was that.

was that originally, we invested in Sprint. And after the merger between Sprint and T-Mobile, we had several discussions and negotiations with the counterpart, and this is one of the contingent considerations, a tenth of our share when the condition of the trading 45-day VWAP was over $149.35. Then that led to about 48.8 million shares equivalency. So this is the earn-out term. And this was actually achieved.

Speaker Change: Originally we embedded in sprint.

Speaker Change: And after the merger between sprint and T mobile.

Speaker Change: We had a several discussion negotiation, which they count up but this is one of the contingent consideration.

Speaker Change: T Mobile's share.

When the condition of the trading 45 day lever up.

Speaker Change: Russ.

Speaker Change: Over $149 three or $5.

Speaker Change: Then that leads to a 48.8 medium and she has agreed balance.

So this is the earn out term.

Speaker Change: And this was actually achieved.

As a result, as of the present share price, it was 1.5 trillion yen, and we were able to acquire those, making the investment. We suffered a lot as well after the announcement of the acquisition. Many considerations were made from many people, and many complaints or criticism was also there as well.

Speaker Change: As a result as of the prison.

Speaker Change: Present share price.

Speaker Change: He was one point right to Union and we were able to acquire those.

Speaker Change: Spring investments.

Speaker Change: We had suffered a lot as well after that announcement about condition.

Yoshimitsu Goto: Many considerations were made from many people, or the many complaints or criticism was also there as well. Masa management team and actually the actual hands-on people be working on to make this investments better one. Back then, actually, that we knew it's gonna take a longer time, but also actually that increase or enhancing the value was dramatic after the acquisition. Originally, JPY 3.3 trillion of the investment was made, and the return as of the end of December, this rose to JPY 5 trillion. Equity return was JPY 3.4 trillion. Equity IRRs are 26%. MOIC or multiple of investment capitals was 8.2 times. I believe this project or this investment was very good in terms of economy.

Speaker Change: Any consideration was made from many people on the many complaints or criticism was also that as well and also Oh My site management.

And also, MASA's management team and actually the actual hands-on people have been working on to make these investments a better ones. And back then, actually, we knew it was going to take a longer time. But also, actually, that increase or enhancement of value was dramatic after the acquisition. So originally, 3.3 trillion yen of the investment was made and returned as of the end of December. This rose to 5 trillion yen.

Speaker Change: Management team and actually the actual hands on people be working on to make this our investments but that one in the back then actually that the we knew it's going to take a longer time, but also actually that the AR increase hunting nobody was.

Speaker Change: Yeah.

Speaker Change: The dramatic after graduation, so originated $3 three trillion yen up the investment was made.

Speaker Change: And return as of the end of December This rose two five trillion yen.

The equity return was 3.4 trillion yen. So equity IRIs are 26 percent. MOIC, or Multiple Investment Capitals, was 8.2 times. So, I believe, uh... This project, or this investment, was very good, in terms of the economy, and also recent figures, as of the recent share price, actually, is slightly improving as well, for U.S. Telecom. I want to share with you some... History. Right before the acquisition of Sprint in 2012, AT&T was king, and Verizon was very much a second player. Sprint was far behind, and actually, T-Mobile was even smaller back then. So the third, number three player, and number four player were merged together.

Speaker Change: We can redeem return was 3.4 trade union, so aggregate I a rise of 24, 6%.

Speaker Change: A M I C or a multiple of our investment kept those.

Speaker Change: Oh It was eight two times.

So I believe.

Speaker Change: This project or this investment was a very good.

Yoshimitsu Goto: Also, recent figures wise, as of the recent share price was actually improving slightly as well. US telecoms that I want to share with you some history. Right before the acquisition of Sprint 2012, AT&T was a king and Verizon was very much a second player. Sprint was far behind and actually T-Mobile was even smaller back then. The third, number three player and number four player merged together. As of December 31, you can see the result, what happened on your right-hand side. A new T-Mobile has actually surpassed AT&T and Verizon.

Speaker Change: In terms of economy and also risa.

Speaker Change: <unk>.

Speaker Change: She goes twice.

Speaker Change: As of the our recent share price was actually even slightly improving as well.

Speaker Change: So you is telecoms.

Speaker Change: I want you to share I want I want to show is the are you the some.

Speaker Change: History.

Speaker Change: Right before the acquisition of spring 2012, AT&T wasn't king and Verizon.

Speaker Change: Was a very much a say guns play a sprint was far behind and actually T. Mobile is even smaller about then so the third number three player in them before they are was much much together, but that'll be a December 31st.

But as of December 31st... You can see the result, what happened on your right-hand side. New T-Mobile has actually surpassed AT&T and Verizon. And not only that, in the United States, but also in the world. Actually, the T-Mobile market cap is number one in the world, as well as in the United States.

Speaker Change: You can see the result of what happened on your right hand side, a new T mobile has actually said.

Speaker Change: Past AT&T and Verizon.

Yoshimitsu Goto: Not only that in United States, but also in the world, actually the T-Mobile market, by market cap, it is the number one in the world as well as in the United States. I believe that the management is doing great job in T-Mobile, and the Deutsche Telekom, T-Mobile is there. They are also having a great effort into the T-Mobile too. T-Mobile share price 2020, it was $82. Record high since IPO was $165. It was up by 99% since the merger. I believe that this was a great result from the great management's efforts. Here are the key indicators. One of the most important KPIs are net asset value, loan to value, and cash position.

Speaker Change: And not only that in the United States, but also in the world actually that that the T mobile market by market cap. It is the number one in the world as well as in the United States.

I believe that the management is doing a great job in T-Mobile, and Deutsche Telekom T-Mobile is there. They are also putting great efforts into the T-Mobile network, too. And T-Mobile's share price, in 2020, was $82, and its record high since IPO was $165. It was up by 99% since the merger, so I believe that this was a great result from the great management effort. And here are the key indicators. One of the most important KPIs is net asset values. Lawn2Value, and Cash Position.

Speaker Change: Believe that the management is doing great job in T mobile.

Speaker Change: And I thought your telecom T. Mobile is there they're also having a great day for its into the T mobile Youtube and T mobile share price 2020, it was $82.

Speaker Change: And.

Speaker Change: Record the highest since IPO was $165.

Speaker Change: Was up by 99% since the merger. So I believe that this was a great result from the great management efforts.

Speaker Change: And here are the key indicators.

Speaker Change: Yeah.

Speaker Change: But one of the most important kpis are.

Speaker Change: Net asset value.

Speaker Change: Two bodies.

Speaker Change: Yes.

Speaker Change: And cash position.

Yoshimitsu Goto: Net asset value, as of the end of December, JPY 19.2 trillion. We believe that asset grow quite largely. Loan to value 11.5%, continuously keeping a very safe level. Cash position slightly decreased because we have some investment activities, but still JPY 4.4 trillion. As a finance policy to cover at least 2-year equivalent of the debt redemption, actually, this cash position covers over 4 years of the debt redemption. This is also another safe level of the KPI. Net asset value, JPY 2.8 trillion increased, and I want to discuss a little bit about the breakdown.

The net asset value, as of the end of December, was 19.2 trillion yen. So we believe that the assets will grow quite a lot. Loan-to-value 11.5%, continuously keeping a very safe level; cash position, slightly decreased because we have some investment activities, but still 4.4 trillion yen. And as a finance policy, to cover at least two-year equivalence of the debt redemption, actually, this cash position covers over four years of the debt redemption. So this is also another safe level of the KPI.

Speaker Change: It doesn't bother us.

Speaker Change: As of the end of December 19 point due to the onion.

Speaker Change: So we believe that I said grow a quite large the loan to value of 11.5% continuously keeping a very safe level.

Speaker Change: Cash position.

Speaker Change: Slightly decrease because we have some investment activities, but still four four trillion yen.

Speaker Change: And as a finance policy.

Speaker Change: To cover at least two year equivalence of the debt redemption actually this cash position covers over four years of the debt redemption. So this is also another safe Liberals there can't be a Nit does it bother you two eight trillion yen increased.

Net asset value increased by 2.8 trillion yen, and I want to discuss a little bit about the breakdown. The share price increase, 4.2 trillion was from the share price increase, mainly driven by arm growth, 3 trillion yen, and the 0.4 trillion yen is from T-Mobile and some others. In the past three months, from October to December, the yen, $2, actually changed the trend from yen depreciation to yen appreciation, so that is negative for the net asset value calculation-wise, and this was minus 1.1 trillion yen. And still, the 2.8 trillion yen of the increase has been secured for net asset value. So I believe that the share price was a main and very important driver. Now, let me talk about the arm.

Speaker Change: And I want to discuss a little bit about the break them. So share price increased $4 two trillion from the share price increase are mainly driven by growth.

Yoshimitsu Goto: Share price increased. JPY 4.2 trillion was from the share price increase, mainly driven by Arm growth, JPY 3 trillion, and the JPY 0.4 trillion is from T-Mobile and some others. In the past three months from October to December, yen-to-dollar actually changed the trend from the yen depreciation to yen appreciation. That is negative for the net asset value calculation-wise, and this was why -JPY 1.1 trillion. Net still the JPY 2.8 trillion of the increase has been secured for net asset value. I believe that the share price was a main and very important driver. Now let me talk about Arm. Earlier today, in Japan time, they announced their financial results.

Speaker Change: Three trillion yen and the data points with two unions from T mobile and some others.

Speaker Change: Okay.

Speaker Change: In the past three months from October to December.

Speaker Change: Yeah, two dollar actually was a change that trend from that yen depreciation to yen appreciation. So that is not therefore, the net asset value calculation wise and his first why now minus 1.1 trillion yen and net net still the two point into union of the increase has been.

Speaker Change: Seek you out one that doesn't value.

Speaker Change: So I believe that the share price was the main and very important driver.

Speaker Change: Now, let me talk about the argument.

Speaker Change: Earlier today in Japan time, they announce their financial results.

Earlier today in Japan time, they announced their financial results, and the share price exceeded $78, which is a record high since IPO, and today's price is about the same. IPO price was $51, so the share price increased by 54.1% in a very short period of time. Great performance.

Yoshimitsu Goto: Share price exceeded $78, which is record high since IPO, and today's price is about the same. IPO price was $51, so Arm share price saw increase by 54.1% in a very short period of time. Great performance. This has a significant positive impact on our share price, especially today. Let me talk about investment return on Arm, like I explained about T-Mobile earlier. In 2016, I believe we made an investment at JPY 3.3 trillion, but equity portion was bigger. We had a great cash position, so we didn't have to borrow too much. Equity was JPY 2.3 trillion plus some leverage.

Speaker Change: And.

Speaker Change: Share price exceeded $78.

Speaker Change: Which is a record high since I P O and at today's price is.

Speaker Change: About the same.

Speaker Change: IPO price was $51. So shelf price so increased by 54, 1% in a very short period of time great performance.

Speaker Change: And this <unk>.

And this has had a significant positive impact on our share price, especially today. Let me talk about investment return on ARM, like I explained about T-Mobile earlier. In 2016, I believe, we made an investment of 3.3 trillion yen, but the equity portion was bigger. We had a great cash position, so we didn't have to borrow too much.

Speaker Change: Has that.

Speaker Change: Significant positive impact on our share price, especially today.

Let me talk about the investment return on our armour like I explained about T. Mobile earlier in 2016 I believe it we made an investment at three three children him, but equity portion was bigger we had a great cash position. So we didn't have to borrow too much and.

And equity was 2.3 trillion yen plus some leverage. That was when we made the investment. As of December 31st, we got 11 trillion yen of return, and equity grew from 2.3 to 10 trillion.

Speaker Change: <unk> equity was $2 three trillion yen plus some leverage.

Yoshimitsu Goto: That was when we made investment as of 31 December, JPY 11 trillion of return and equity grew from JPY 2.3 trillion to JPY 10 trillion, equity IRR 21% and MOIC 4.2x, which is a great performance for a big ticket item. Not only that, until the end of 31 December, looking at most recent share price which was up. Equity IRR even increased more. For Arm, we expect more growth from Arm and Arm.

Speaker Change: And that was when we made investment as of December 31st.

Speaker Change: Put it in yen a richer on them and equity grew from two three to 10 trillion equity I, Oh, 21% and a M. R. I C. Four two times.

Equity IRR 21% and MOIC 4.2 times, which is a great performance for a big ticket item. Not only that... and the three, excuse me, until the end of December 31st, looking at the most recent share price, which was up. So equity even increased more. And for ARM, we expect more growth from ARM, and ARM is the biggest contributor to the global AI evolution.

Speaker Change: Which is a great performance.

Speaker Change: For a big ticket item.

Speaker Change: Not only that.

Speaker Change: Yeah.

Speaker Change: And the three excuse me until the end of December 31st looking at the most recent share price.

Speaker Change: MS up so equity Ah even increase them more.

Speaker Change: And for our Army <unk>.

Speaker Change: Expect more growth from arm and arm.

Yoshimitsu Goto: is the biggest contributor to global AI evolution. We have the highest expectation from Arm than anybody else. Looking at SoftBank Corp., which is the mobile carrier in Japan, they announced the financial result yesterday. Not only their business performance, but also their share price performance have been very good. In fact, mobile market is on a good trend in Japan at the moment. IPO price of SoftBank Corp. was 1,500 JPY. The record high since IPO was 1,900. Slightly declined recently, but still a record high price was up by 33% since IPO. Right after IPO, maybe we had caused some concerns among investors, but SoftBank Corp. focuses on dividend yield, which is 4.9%. SBG, in fact, received a dividend almost JPY 1 trillion.

Speaker Change: Is the biggest contributor to global and I.

So we have the highest expectations from ARM than anybody else. And looking at SoftBank Corporation, which is the mobile carrier in Japan, they announced their financial results yesterday. Not only their business performance but also their share price performance has been very good. And, in fact, the mobile market is on a good trend in Japan at the moment. And the IPO price of SoftBank Corporation was 1,500 yen, and the record high since IPO was $1,900. It has slightly declined recently, but the record high price was still up by 33% since IPO.

Evolution, so we have the highest expectation from arm.

Speaker Change: Does anybody else.

Speaker Change: Yeah.

Speaker Change: And looking at the Softbank Corporation, which is the mobile carrier in Japan, They announced a find a financial result yesterday now the only there are their business performance, but also their share price performance have been very good.

Speaker Change: And in fact, the mobile market is on the good to trend in Japan at the moment.

Speaker Change: And the IPO price of Softbank Corporation was 1500 T M.

Right after the IPO, maybe we caused some concerns among investors, but SoftBank Corporation focuses on dividend yield, which is 4.9%, and SPG, in fact, received a dividend of almost 1 trillion yen. So not only the share price but also the dividend we receive have been the value that we have been enjoying with SoftBank Corporation. Now, the Vision Funds. For three consecutive quarters, they made a profit, which is really reassuring. Two years ago, we had some tough times. But since then, right after the tank, if you will, they have been steadily improving their performance. Cumulatively speaking, again, we have seen improvement continuously, and it's been recovering to what negative 2.9 trillion is almost, almost there. So again, this is a cumulative number, including Vision Fund, too. That's all, man.

And the record high since I T O was 1900.

Speaker Change: Slightly declined recently, but still.

Speaker Change: Our record of high price was up by 33% since I P O right. After I P. O. Maybe the had caused some concerns among investors, but softbank.

Corporation.

Speaker Change: Focus is on dividend yield which is four 9%.

Speaker Change: And S. P. G. In fact received a dividend.

Speaker Change: Almost one Julian him.

Yoshimitsu Goto: Not only the share price, but also the dividend we receive have been the value that we have been enjoying with SoftBank Corporation. Now, Vision Fund. For the 3 consecutive quarters, they made a profit, which is really reassuring. Two years ago, we had some tough time, but since then, right after tank, if you will, they have been steadily improving their performance. Cumulatively speaking, again, we have seen improvement continuously, and it's been recovering to negative 2.9 trillion JPY. Almost there. So again, this is cumulative number, including Vision Fund two and Latam. Loan to value. In the last 12 months, we have been very low level, which is good because we focused on defense. In the last 12 months or so, the LTV have been about 10%.

Speaker Change: So not only does she have price, but also the dividend we received have being our the value that we have been enjoying with the Softbank Corporation now our vision fungi.

Speaker Change: For the three consecutive quarters are they made a profit which is really reassuring.

Speaker Change: Two years them go we had some tough time.

Loan to Value, In the last 12 months, we have been very at a low level, which is good because we focused on defense. So in the last 12 months or so, the LTV has been about 10%. But our policy or guide line is 25 percent. 25 percent itself is very safe; less than half of 25 percent is the current level.

Speaker Change: But the since then.

Speaker Change: Right after.

Speaker Change: If you want <unk> they have been steadily improving their performance cumulatively speaking them again, we have seen improvement continuously.

Speaker Change: And it's being recovering Chi was negative $2 nine Julia almost there almost there so again.

Speaker Change: This is cumulative number including our vision fund two and.

We will come back to the point about what we're going to do with this low LTV as an investment company. We have more opportunity for investment. I think that's what the numbers can tell.

Speaker Change: And at that time.

Speaker Change: Yeah.

Speaker Change: Loan to value.

Speaker Change: Yeah.

Speaker Change: In the last 12 months.

Cash Position, we maintain a high level. Continuously, we keep a high level. Of course, as an investment company, we want to have a good cash position to make sure we are not going to miss investment opportunities as an investment company again. We will finance, and we will invest in the mid-long term. Sometimes we may focus on return, and sometimes we may focus on making an investment. But we make sure that we maintain a certain level of cash position always. The impact of Forex, as of the end of September, $1 was 149 yen, but as of December 31, it was 141 EM.

Speaker Change: We have been very at low level, which is good because we are focused on.

Speaker Change: Defense.

Speaker Change: So in the last 12 months or so the L. T V have being about 10%, but our policy or our guide.

Yoshimitsu Goto: Our policy or guideline is 25%. 25% itself is very safe. Less than half of 25% is current level. We will come back to the point what we're gonna do with this low LTV as an investment company. We have more opportunity for investment. I think that's what the number can tell. Cash position. We maintain high level. Continuously, we keep high level. Of course, as an investment company, we want to have good cash position to make sure we are not gonna miss investment opportunity. As an investment company, again, we will finance and we will invest in mid long term. Sometimes we may focus on return, and sometimes we may focus on make investment, but we make sure that we maintain a certain level of cash position always. Impact of Forex.

Your line is 25% 20 pies sent 25% itself is very safe well less than half of a 25%.

Speaker Change: If current level, we will come back to the point, what we're going to do with this little L. T beam as an investment company.

Speaker Change: We have more opportunity for investment I think that's what are the number I can tell.

Speaker Change: Okay.

Speaker Change: Yeah.

Speaker Change: Cash position.

Speaker Change: We maintain high level continuous V b.

Sohya Yen has an impact on NAB by 1.1 trillion yen on the accounting side. The higher yen had a negative impact on equity, but a positive impact on consolidated net income. By the way, In January, the yen has been weakened, so I think it's around 148 yen per dollar.

Speaker Change: Keep a high level of course as an investment company B.

Speaker Change: Once you have.

Speaker Change: Good cash position.

To make sure we are not going to Miss investment opportunity.

Speaker Change: As an investment company again.

Speaker Change: Be well financed and we will invest and meet long term.

So, at the moment, this negative impact might have been, gone. Now shift from Alibaba to AI. In the past, our portfolio was mainly built by Alibaba. But we have been shifting assets from Alibaba to others. And I think now we are at the stage of completion of that shift.

Speaker Change: Sometimes we may focus on the churn and sometimes getting their focus on make investment but are we make sure that we maintain a certain level of cash position always.

Speaker Change: Impact of Forex.

This chart compares as of December 31st, 2019 and December 31st, 2023. So, four years ago... Alibaba accounted for 50% of assets held. ARM, 9%, and Vision Fund, 12%. That was four years ago.

Yoshimitsu Goto: As of the end of September, 1 dollar was 149 yen. As of 31 December, up to 141 yen. Higher yen has an impact on NAV by JPY 1.1 trillion. On accounting side, the higher yen had negative impact on equity, but positive impact on consolidated net income. By the way, in January, the yen has been weakened, so I think it's around 148 yen per dollar. At the moment, this negative impact might have been gone. Now shift from Alibaba to AI. In the past, our portfolio was mainly built by Alibaba. We have been shifting the assets from Alibaba to others, and I think, now we are at the stage of completion of shifting.

Speaker Change: As of the end of September.

Speaker Change: One dollar was 149 E M, but as of December 31 up 241, yeah.

Speaker Change: So higher yen.

Speaker Change: Has an impact N V by 1.1, Chilean him on accounting side.

And as of December 31st, four years later, Alibaba effectively zeroed its arm account for 32%, up from 9%. Vision Fund, likewise, as they have been investing more, increased from 12% to 38%, in terms of the percentage of our assets held. So we have made a dynamic shift.

Speaker Change: The higher yen had negative impact on equity, Jim, but the positive impact on consolidated net income by the way.

Speaker Change: In January the yen has been weakened so I think it's around 140 Yaden ATM per dollar.

Even though net asset value or growth asset value has not changed dramatically, the content has changed dramatically. What it means is... We have gone through a shift from a from an over to an AI-centric portfolio. Arm, obviously, and Vision Fund have been investing in opportunities for businesses that contribute to the AI evolution, and SoftBank Corporation, although they are a mobile operator, they are... Really?

Speaker Change: So at the moment.

Speaker Change: This negative impact might be.

Speaker Change: Have been.

Speaker Change: Gong.

Speaker Change: Now she's from Alibaba to AI.

Speaker Change: Yeah.

Speaker Change: In the past.

Speaker Change: Our portfolio was mainly built by Alibaba.

Speaker Change: But we have been shifting the assets.

Speaker Change: From Alibaba to others and I. Thank God now we are at the stage of the completion of all the.

Speaker Change: Shifting.

Yoshimitsu Goto: This chart compared as of 31 December 2019 and 31 December 2023. Four years ago, Alibaba accounted for 50% of assets held. Arm 9%, Vision Fund 12%. That was four years ago. As of 31 December, four years later, Alibaba effectively 0%. Arm accounts for 32%, up from 9%. Vision Fund, likewise, as they have been investing more, increased from twelve percent to thirty-eight percent in terms of percentage of our assets held. We have done dynamic shift. Even though net asset value or gross asset value have not changed dramatically, but the content changed dramatically. What it means is we have gone through a shift from Alibaba to AI centric portfolio. Arm obviously, and Vision Fund have been investing in opportunities for businesses that contribute to AI evolution.

committed to themselves to become an AI-centric company, and we can deliver synergies from those invested businesses. And that should bring us an opportunity to make new investments, at the same time as the AI industry grows. Those businesses should grow along with AI evolution going forward. And talking about Alibaba. When we had a lot of Alibaba before, we were China-centric. But now we have gone through a shift. The regional competition changed dramatically.

Speaker Change: This chart compared as of December 31st 2019, and December 31st 2023.

Speaker Change: So four years ago.

Alibaba accounted for 50% of assets held them on 9%, but you don't fund, 12% that it was four years ago.

Speaker Change: And as of December 31st four years later Alibaba effectively zero.

Speaker Change: Arm account for.

Speaker Change: 32% up from 9%.

So we have been able to mitigate the risk of being China-centric. Four years ago, 54% accounted for for the regional competition, the red part, China, and now only 8%. And 43% EMEA, including ARM, and also Japan, the APEC, 15% and 9% respectively. So we are well balanced in terms of geography. By the way, North America, 21%.

Speaker Change: Vision fund likewise.

Speaker Change: As they have been investing more increase from 12% to 13, 8% in terms of percentage of our assets out. So we have done di.

Speaker Change: Dynamic shift.

Speaker Change: Even though net asset value or gross asset value has not changed dramatically but up.

Speaker Change: Content change dramatically.

Speaker Change: What it means is.

So, looking at those changes from different angles. Looking back at the history, as you can see, Alibaba has been going down, whereas Arm has been going up, so it shows a shift, an obvious shift from Alibaba to Arm. And about net asset value, another important aspect of NAV is... as follows. The timeline starts from 1998 through 2023. I joined SoftBank in 2000.

Speaker Change: We have gone through a shift from afar.

Speaker Change: From.

Speaker Change: I know about the AI centric portfolio.

Obviously and the vision fund have been investing in opportunities for.

Speaker Change: Businesses that contribute to AI evolution.

Yoshimitsu Goto: SoftBank Corp., although they are mobile operator, they are really committed to themselves to become AI centric company. We can deliver synergies from those invested businesses, and that should bring us an opportunity to make new investment. At the same time, as AI industry grows, those businesses should grow along with AI evolution going forward. Talking about Alibaba. When we had a lot of Alibaba before, we were China-centric, but now we have gone through the shift. The regional composition changed dramatically, so we have been able to mitigate risk of being China-centric. 4 years ago, 54% accounted for regional composition, the red part China, and now only 8%. 43% EMEA, including Arm and also Japan, other APAC, 15% and 9% respectively. We are well balanced in terms of geography. By the way, North America 21%.

Speaker Change: And Softbank Corporation, although they are mobile operator they.

Speaker Change: Ara.

Speaker Change: Really.

Speaker Change: Committed to their myself to become AI centric company.

I think this is the history of mine in SoftBank, if you will. I have seen ups and downs. The important message here is... We are on an upward trend recently. Not only...

Speaker Change: And.

Speaker Change: We can deliver synergies from those invested of businesses and that should bring us the opportunity to make a new investment.

Cute, but also market conditions and the future outlook have been very positive, and that has had a positive impact on us as well. We expect, we hope at least that the next 12 to 24 months should be growth. Chairman.

Speaker Change: At the same time as AI industry.

Speaker Change: Grows those business should grow along with AI evolution going for other.

Speaker Change: Yeah.

Speaker Change: And talking about Alibaba.

Speaker Change: Well, we had a lot of Alibaba before we were a China centric.

And not only NAV but also market cap is another important indicator that we need to always keep in mind. And NAV discount is 52%. NAV is 19.2 trillion yen, but market cap was only 9.2 trillion, so again NAV discount is 52%, which is, really, a Syria thing that we need to look at.

Speaker Change: But now we have gone through the shift.

Speaker Change: The regional competition changed dramatically.

Speaker Change: So we have been able to mitigate the risk all but being China centric.

Speaker Change: Four years ago.

Speaker Change: 4% accounted or.

Speaker Change: For the regional competition, the Red part in China, and now on the 8% and 43% E M E a including arm and also Japan, other APAC, 15% and 9% respectively. So we are well.

But today's share price was $7,350. And at that rate, now the discount would be 40-something percent, but, of course, NAV itself should increase even more as ARM grows, so we have to keep watching NAV discount, and we need to figure out how we can narrow the width of NAV discount. From here on, we would like to discuss arms.

Speaker Change: Balanced in chew myself or geography.

Speaker Change: By the way North America, 21%.

Yoshimitsu Goto: Looking at those changes from a different angle. Looking back at the history, as you can see, Alibaba have been going down, whereas Arm have been going up. It shows a shift, obvious shift from Alibaba to Arm. About net asset value. Another important aspect of NAV is as follows. The timeline starts from 1998 through 2023. I joined SoftBank 2000s. I think this is the history of mine in SoftBank, if you will. I have seen ups and downs. Important message here is we are on upward trend recently, not only to SoftBank Group, but also market condition and the future outlook have been very positive. That have had a positive impact to us as well. We expect, we hope at least that next 12 to 24 months should be growth term.

Speaker Change: Yeah.

Speaker Change: So looking at those changes from different angle.

Looking back at the history as you can see.

Speaker Change: In one word, it's doing great. You see the results announcements and the..., you may also check the numbers announced this morning, Japan time, the cumulative number of shipments of... Exponential graph is something that very much overlaps with what is actually was our expectation and very happily that they were able to show these great numbers of the arm-based ships and also great strategy discussions with industry leaders making progress. This is just one example, three examples to be more specific. For example, Renesas Electronics adopted ARM-based technology for the high-performance microcontroller, which delivers real-time operation. Also, Mediatheque adopted ARM-based CPU and GPU for the Dimensity 9300 chip for high-performing smartphones.

Alibaba had been going down, whereas have being going up so it shows a shift obvious shift from Alibaba to arm.

Speaker Change: Yeah.

Speaker Change: And about a net asset value is another important aspect of our NAV is.

As a follow up.

Speaker Change: The timeline starts from 1998 or through 2023 I joined Softbank two <unk> I think this is the history.

Speaker Change: Mine and Softbank, if you want.

Speaker Change: I haven't seen ups and down important message here is.

Speaker Change: Yeah.

Speaker Change: We are on.

Speaker Change: I bought a trend.

Speaker Change: Recently.

Speaker Change: It'll only.

Speaker Change: To Sop.

Speaker Change: Softbank group, but also market condition and the future outlook have been very positive.

Speaker Change: Microsoft also announced that it developed its first CPU for cloud servers, which is ARM-based and performs 40% higher than the current generation. So with those major players in the industry, we are able to have great discussions and make good progress in strategic moves with such great progress. Ktari revenue is continuously reaching record highs, in 824 million dollars, and also loyalty revenue. For the quarterly basis, this is the highest ever, and the Quarterly Non-Gap Operating Income, a quota of 17% increase, and earlier this morning, also disclosed the guidance and business forecast, and as a result of this guidance, was updated.

Speaker Change: And that.

Speaker Change: <unk> had a net positive impact to us as well.

Speaker Change: Yeah.

Speaker Change: We expect the hope at least that next.

Speaker Change: 12 to 24 months.

Speaker Change: Should it be.

Speaker Change: Growth.

Jeremy.

Yoshimitsu Goto: Not only NAV, but also market cap is another important indicator that we need to always keep in mind. The NAV discount is 52%. NAV is JPY 19.2 trillion, but market cap was only JPY 9.2 trillion. Again, NAV discount is 52%, which is really a serious thing that we need to look at. Today's share price was at 7,350. At that rate, NAV discount will be 40-something%. Of course, NAV itself should increase even more as Arm grows. We have to keep watching NAV discount, and we need to figure out how we can narrow the width of NAV discount. Here on, we would like to discuss about Arm.

Speaker Change: And then not only never but also market cap is another important indicator that we need to always keep in mind.

Speaker Change: And enough of a discount.

Jeremy: Yeah, it's 52%.

Jeremy: Nab is $19 two trillion, but market cap it was only 9.2 children.

Jeremy: So again now a discount as 52% which is.

Speaker Change: The range is between $3,155 million to $3,205 million, and very steadily making a performance and very much expecting that it's going to be following as it has guidance. And this is the guidance for the business performances announced earlier and Poole's Coda. Revenue is expected between $850 million to $900 million full year basis, $3.1 billion to $3.2 billion. You have some parentheses, and blackets underneath.

Jeremy: Really.

Jeremy: Us serious.

Jeremy: Thing that we need to look at.

But today's share price was up 7350.

Jeremy: And Oh, that's made it now or discount to be 40, something percent, but though of course.

Jeremy: Nab itself shouldn't increase even more of them as growth. So we have to keep watching NAV discounts and we just figure out how we can narrow our the width of NAV discount.

Speaker Change: This is the prior guidance range. And actually, the upper range was just about $3 billion. And actually, this time, the range of the smaller one is exceeding what was previously announced as the upper range of the prior guidance. So this is great news and great guidance that we are very happy to hear such great progress and how, and what kind of growth driver will be the kind of player for the arm's future. And there are four big agendas. One is the Royalty Livin' You.

Jeremy: Here on our we would love to discuss about arm.

Yoshimitsu Goto: In one word, it's doing great. You see the results announcements and, you may also check the numbers announced, this morning Japan time. The cumulative number of shipments of chips. Actually, this graph is actually we were using when we were discussing to acquire Arm. This was the kind of picture we were seeing at the time of the acquisition. This exponential graph is something that very much overlap with what its actual was, with our expectation, and very happily that they were able to show these great numbers of the Arm-based chips shipped. Also great strategy discussion with industry leaders making progress. This is just one example, that three example to be more specific.

Jeremy: In one word it's doing great you see the results and announcements in the.

Jeremy: You May also checked the numbers announced this.

Jeremy: This morning, Japan time, the cumulative number of shipments of chips.

Jeremy:

Jeremy: Study. The this graph is actually what we are really while using when we were discussing to acquire and this was a kind of a picture we were seeing at the time of their condition and this.

Speaker Change: And next is the subsystem, which I will be putting some more color on this later, and Compute for AI. And also, the world's largest ecosystem to support these three agendas. So these are the kind of main driver for the future growth of ARM. First, royalty revenue. Because of the increasing demand for semiconductors, we expect a 7% growth for the industry itself in this industry. Um, actually... reaching a variety of markets, not only for smartphones, for example, PC. Automotive, Infrastructure, those can be a very attractive market, and that can be another market share that the Army is going to be able to aim for. In addition to that... loyalty rates are increasing, and that's another expectation we'll be able to add on the various devices. Complicated computing is required, such as generative AI and so on, and that requires even more higher-quality chips, and along with the need for higher quality chips, rates for loyalty are also going to be increased.

Jeremy: Exponential growth is something that the very much overlap with what is extra it was a really smart way. So my expectation and very happy that they are able to show this great numbers of the based chips shipped.

Jeremy: And also great strategy.

Jeremy: Discussions with industry leaders are making progress.

Jeremy: This is just one example of that the three example to be more specific.

Yoshimitsu Goto: For example, the Renesas Electronics adopted Arm-based technology for the high-performance microcontroller, which delivers real-time operation. MediaTek adopted Arm-based CPU and GPU for Dimensity 9300 chip for high-performing smartphone. Microsoft also announced that it developed its first CPU for cloud servers, which is Arm-based and performs 40% higher than current generation. With those major players in the industry, Arm is able to having great discussions and making good progress in a strategic move. With such great progress, quarterly revenue is continuously reaching record high in $824 million. Also the royalty revenue for the quarterly basis, this is the highest ever. The quarterly non-GAAP operating income quarter-to-quarter 17% increase.

Jeremy: For example, Darrin that says that's true.

Jeremy: Adopted him based technology for.

Jeremy: Oh, the HIFU of hormones microcontroller rich.

Jeremy: Which delivers real time operation, though so maybe ethics.

Adopted do based CPU and GPU for diminished D 9300 chip for high performing smartphone Microsoft also announced that the developed its a first see beautiful clubs hub of which is base and performs 40% higher than current generation.

Speaker Change: So the quantity is going to increase. And at the same time, loyalty rates are going to increase. As a result, you see good growth in loyalty revenue, and subsystems, or the growth from subsystems, for the designing of the semiconductor chip is becoming even more complicated, for those licensees are designing, are using such.., and such needs are increasing, and users will be able to minimize the time necessary by having such a subsystem.

Jeremy: So as those major players in the industry are where you are is able to having great discussions and making a good progress in our strategic move.

Jeremy: We had such a great progress.

Jeremy: Our quarterly dividend you.

Jeremy: It's continuous leaching record high.

Jeremy: And $824 million.

Jeremy: And also the loyalty revenue.

Jeremy: For the quarterly basis. This is the highest ever.

Jeremy: Yes.

Jeremy: And of course totally non-GAAP operating income.

Speaker Change: And for those, using this subsystem does not require developing from each individual IP so that you'll be able to reduce the cost and also the time to market. And right now, um..., is having a great contract with five companies so far, of which are Microsoft. Microsoft's Azure Cobalt CPU for cloud servers is developed using ARM-based subsystems, which delivers 40% higher performance per watt.

Speaker Change: Oh cool.

Speaker Change: What I'll do.

Over a course that 17% increase.

Yoshimitsu Goto: Earlier this morning, also disclosed the guidance and business forecast. As a result of this, guidance updated the range in between JPY 3,155.5 million to 3,205 million. Very steadily making on the performance and very much expecting that it's gonna be following as it has guidance. This is the guidance for the business performance announced earlier. Q4 revenue is expected between JPY 850 million to 900 million. Full year basis, JPY 3.1 billion to 3.2 billion. You have some parentheses, brackets underneath. This is the prior guidance range. Actually the upper range was just about JPY 3 billion.

Speaker Change: And earlier this morning.

Speaker Change: Also disclosed the guidance.

Speaker Change: Business focused and as a result of this our guidance up they did.

Speaker Change: The range in between 3155 5 million to 3205 medium.

And very steadily making them for four months and are very much expecting that there's going to be foregoing of it it has guidance.

Speaker Change: Even with other customers, they were able to reduce the time to market and also be able to still develop the complicated chip. And third, growth from compute for AI. To do the generative AI developments or machine learning, energy efficiency is even more important, and many more on BaseChip have been used because of such energy efficiency.

Speaker Change: And this is D. A guy does.

For the business about four months is announced earlier and.

Fourth quarter.

Speaker Change: Revenue.

Speaker Change: Is expected between 850 to 900 million who lease basis.

Speaker Change: <unk> three.

Speaker Change: $3 1 billion to $3 2 billion.

Speaker Change: For example, recently, Samsung in Korea just announced the smartphone using the latest chip, the base chip, that actually enables live translations or high-quality computing performance with such. Elements. Actually, we have the largest ecosystem to support that, and Arm has built out the world's largest collection of companies who work together to make ARM-based chip design successful. Many companies are actually communicating closely together, and this ecosystem is built, and with those companies collaborating, and have all the parts and processes ready, then we'll be able to have this ship. So inter-compatibilities with the other company's parts are also very important. So not only the licensees but also for those customers who are not our licensees, we are actually providing the compatible test, free of charge, so we are trying to build the infrastructure which can run an AI-based chip properly right now. About 70% of the world population is using ARM-based products in many ways. The Smartphone probably is the easiest example, and not only that, many devices around you are actually using ARM-based chips or ARM-based products, like Design, and DeVelo.

Speaker Change: You have some practices are blankets underneath this is the prior guidance range.

Speaker Change: And actually the.

Speaker Change: Ah Ah Ah Wrench was just about 3 billion.

Yoshimitsu Goto: Actually this time, the range of the smaller one is exceeding what was previously announced as the upper range of the prior guidance. This is great news and great guidance that we are very happy to hear, such a great progress. How and what kind of growth driver will be the kind of player for Arm's future? There are four big agenda. One is the royalty revenue, and next is subsystem, which I will be putting some more color on this later, and compute for AI. Also the world's largest ecosystem to support such three agenda. These are the kind of the main driver for the future growth of Arm. First, royalty revenue.

Speaker Change: And actually this time the range of the smaller one is exceeding what was previously announced as the upper a range of the probably our guidance. So this is a great news and great guidance that we are very happy to hear such a great progress.

Speaker Change: And how.

Speaker Change: And what kind of growth driver will be the kind of a player for the future and there are four big agenda.

Speaker Change: One is the royalty you live in you.

Speaker Change: And next is sub system.

Speaker Change: I will be putting some more color on this later and compute for you and also the world's largest ecosystem.

Speaker Change: Support such three agenda. So these are the kind of the main driver for the future growth of bump first royalty revenue.

Okay.

Yoshimitsu Goto: Because the demand is increasing in semiconductor, it is expected a 7% growth for the industry itself. In this industry, Arm actually reaching to variety of the markets, not only to the smartphones, for example, PC, automotives, infrastructure, those can be very attractive market, and that can be another market share that Arm is going to be able to aim for. In addition to that, royalty rates itself is increasing, and that's another expectation we'll be able to add on. On the various devices, complicated computing is required, such as generative AI and so on, and that requires even higher quality chip. Along with the needs for the higher quality chip, rates for the royalty is going to be also increased. The quantity is gonna increase. At the same time, royalty rates increase.

Speaker Change: Because of the amount is increasing as semiconductor we are expect it is expected the 7% growth for the industry itself.

Speaker Change: In this industry.

Speaker Change: I'm actually.

Speaker Change: Reaching to variety of the market not only to the smartphones for example P C.

Speaker Change: So those people who are in the process of developing. Thank you. We are successfully producing, or we are successfully providing ARM-based chips. In the beginning, I mentioned the share price of Boehm, and recently, We've been seeing a great development in the share price as an investor in ARM, but in the future, actually, we are hoping and we are expecting that there is even more room to grow for ARM's future, in ARM's business future. Rene, Umbam's CEO, recently attended and spoke at CES, and he said AI is everywhere, and you can't run AI without an arm.

Speaker Change: The motives infrastructure those can be a very attractive market and that can be another market share that the army is going to be able to aim for.

Speaker Change: In addition to that.

Speaker Change: Loyalty rates itself.

Speaker Change: Is increasing and that's another expectation, we'll be able to Adam.

Speaker Change: So on the various devices.

Speaker Change: Complicate the computing is required such as general debate and so on.

Speaker Change: And that requires even more higher quality chip.

Speaker Change: And along with our needs for the high a quality chip.

Speaker Change: I believe this is really the kind of time now that we're seeing such a trend, and we are very much convinced that AI is really essential in many ways. Now I would like to turn to investment strategy and also to vision funds. The Vision Fund's gain and loss on investments in the past three months, Vision Fund 1, Vision Fund 2, and LATAM Fund. The major part is from Vision Fund 1 and 2, but those three funds are actually showing us a very good and steady performance here. We've thought of those three funds over. 600 billion yen or above of the gain, and for breakdowns for Vision Fund One, compared to Vision Fund 2. Each ticket size of each portfolio is relatively large and also mainly invested in later stage unicorns. There have been many successful cases in the past. For example, ARM is one of them.

Speaker Change: Rates for the loyalty is going to be also increased.

Speaker Change: So the content is going to increase.

Speaker Change: And at the same time loyalty rates increase.

Yoshimitsu Goto: As a result, you see the good growth in royalty revenue. The growth from subsystems for the designing of the semiconductor chip is becoming even more complicated. For those licensees are designing are using such design, but not all of the each individual IPs, but Arm provides integrated and verified configurations of Arm IP, and such needs are increasing. Users will be able to minimize the time necessary by having such a subsystem. For those that are using this subsystem does not require developing from the each individual IP, so that you'll be able to reduce the cost and also the time to market. Right now, Arm is having a great contract with five companies so far, one of which is Microsoft.

Speaker Change: As a result, you see a good growth in royalty revenue.

Speaker Change: Yeah.

Speaker Change: Yes.

Speaker Change: And sub systems or the gross from sub systems.

Speaker Change: For the designing of the semiconductor chip is becoming even more complicated.

Speaker Change: For those licensees.

Speaker Change: Designing using such.

Speaker Change: Design, but not all.

Speaker Change: Oh, the each individual piece, but the provides integrated and verify the configurations of I P.

Speaker Change: And such knees are increasing and our users will be able to minimize the time necessary.

Speaker Change: Having such a subsystem.

Speaker Change: And for those.

Speaker Change: That using give sub system does not require to the building from the each individual IP, so that you'd be able to reduce the cost and also the time to market.

Speaker Change: Coupon is also a good example. And now that we're seeing good and strong performance from ByteDance, so ByteDance, and Vision Fund One, are recording $1.9 billion of their gain. Vision Fund 2 raised $1.7 billion of the gain. And this is mainly due to the share price rise in public assets and also having up rounds of the financial rounds. Those are the major drivers for this result of Vision Fund 2, in terms of latent share price rise in public gossip. For Vision Fund 2, I would like to add a little bit more color because Vision Fund One has a longer history.

Speaker Change: And right now.

Speaker Change: Is having a great construct two is defined companies, so far have which other Microsoft.

Yoshimitsu Goto: Microsoft's Azure Cobalt 200 for cloud servers are developed using Arm-based subsystem, which delivers 40% higher performance per watt. Even with other customers, they'll be able to reduce the time to market and also be able to still develop the complicated chips. Third, growth from compute for AI. To do generative AI developments or machine learning, energy efficiency is even more important. Server to PC, to camera, smartphones, in anywhere Arm-based chip has been used because of such energy efficiency. For example, recently, Samsung in Korea just announced a smartphone using the latest edge Arm chip, Arm-based chip. That actually enables live translations or the high quality computing performance. With such elements, actually, we have the largest ecosystem to support that.

Speaker Change: Microsoft's Ado cobalt see beautiful cloud sub adds that developed using arm based subsystem reached at about 40% higher performance per watt.

Speaker Change: Even in with other customers.

Speaker Change: They'll be able to reduce the time to market.

Speaker Change: Vision Fund Two was about three years ago that we started, actually, trying to distribute the money for investments in many places. We had some difficulties because of the environment and the market situation. But if you look at this slide, on the right-hand side, this is the current situation. When you see the improvement in value... That's the blue bar. And those marked down were the red bar on the far right.

Speaker Change: And also be able to still develop the complicated chips.

Speaker Change: And third grows from compute for AI.

Speaker Change: Yes.

To do the J D V I developments all mushy.

Speaker Change: Machine learning are energy efficiency is even more important.

Speaker Change: So save two P C two camera smartphones in anywhere.

Speaker Change: Markups public companies are, eight companies, and in Dollar Tom, 1,158, a million dollars. Actually, the more companies are marked up, and also the more amounts are marked up compared to markdown, and private companies. 88 companies, 88 private companies' value is increased in dollar terms, $1.7 billion. Meltdown Companies in private, and 74 companies..., ponies, in dollar terms, $929 million. So compared to the second quarter of 2023.

Speaker Change: Based chips.

Speaker Change: How it's being used because of such energy efficiency for example, recently Samsung in Korea.

Speaker Change: Just announced the smartphone using did they just it's chip arm based chip.

Speaker Change: The extra leap enables.

Speaker Change: Our lives translations or the high quality E computing performance.

Speaker Change: We had such a.

Speaker Change: Elements actually we have the largest ecosystem to support that.

Yoshimitsu Goto: Arm has built out the world's largest collection of companies who work together to make Arm-based chip design successful. Many companies actually communicating closely together, and that this ecosystem is built. With those companies collaborating, and have all the parts and process ready, then that they will be able to have this chip. Intercompatibilities with the other companies' part is also very important. Not only the licensee, but also for those customers who are not our licensee, actually, we are providing the compatible test free of charge so that we are try to build the infrastructure which can run AI-based chip properly. Right now, about 70% of the world population are using Arm-based products in many ways.

Speaker Change: And has built out the world's largest collection of companies.

Speaker Change: Who work together to make based chip design successful many companies.

Speaker Change: Actually communicating closely together.

Speaker Change: We have largely improved the quality of the portfolio companies. The main driver for the private company, ValueUp, is the... Some improvements in business, also the peers' improvement as well, but actually, the main driver was the round-up of the financial rounds. And this is the bi-quota of the gain and loss on investment in the past three quarters consecutively that are increasing or improved. And cumulatively, we are almost above the water, so very close to being above the water now. Cumulative investment return. This is for Vision Fund One. They invested $89.6 billion in total, and the cumulative return is $106. Of that, 64 students exited.

Speaker Change: And this ecosystem is build.

Speaker Change: And with those companies collaborating.

And how about all the parts and process really then that they will be able to have this chip.

Speaker Change: So in the compatibility with the other companies are part is also very important so not only the lunch and see but those are for those customer who are not our licensee extra D. We are providing the compatible this free of charge. So that we are trying.

Speaker Change: To build the infrastructure, which can run our AI based chip properly.

Speaker Change: Right now.

Speaker Change: About 70% of the world's population are using based products in <unk>.

Speaker Change: Many ways.

Yoshimitsu Goto: Smartphone probably is the easiest example, and not only that, many devices around you are actually using Arm-based chip or Arm-based products. Those people who are in the process of developing, developers involved in developing Arm-based chip are 15 million or above. At the same time, more than 1,000 partner companies are involved in shipping Arm-based chip. With such a great collaborations and a great ecosystem, we are successfully providing Arm-based chip. In the beginning, I mentioned about the share price of Arm, and recently we've been seeing a great development of the share price as an investor of Arm. In future, actually, we are hoping, and we are expecting that there are even more room to grow for Arm future and Arm's business future.

Speaker Change: 18 public companies, investment before exit. We are looking at great performance, and the Vision Fund chooses cumulative investment return, as shown here, investment costs of. 52 billion, and the cumulative investment return, 33 billion.

Speaker Change: Smartphone probably ease of.

Speaker Change: Is this example, and not only that.

Speaker Change: Many devices around you are actually using based chip or arm based products.

Speaker Change: And design.

Speaker Change: And develop.

Speaker Change: So the performance is, well, underperforming, but... It's been improving in the latest three months, backed by positive market conditions. We believe that Vision Fund 2's performance will get even better when we talk about the funding round. This chart shows funding rounds of private portfolio companies in 2023. They raised $8 billion, and 41 rounds took place, and the up round was 48 percent, almost a half, of the companies, which is great. Buh-bye! Businesses that did not get financing or funding down round? Well, it's not bad either.

Speaker Change: So those people who are oh in the process of developing.

Speaker Change: They've been a bars are involved in developing Gombe ship is 15 million are in the book and at the same time more than thousand partner companies are involved in shipping best chip, so with such a great collaborations and a great ecosystem.

Speaker Change: We are.

Speaker Change: Successfully producing Oh, yeah successfully providing based chip.

Speaker Change: In the beginning that I mentioned about the share price a bomb in recently.

Speaker Change: We've been seeing a great developments of the share price as a new message in this talk of arm, but in future actually we are hoping and we are expecting that there even more room to grow for future and business future.

Speaker Change: Even though it was a down round, it means that they got trust from future investors, which is, I think, great in itself. Sometimes It's good to finance even though the down round because you cannot finance at all is the worst. So, the private equity market has turned around, and that has had a positive impact on those private portfolio companies' funding rounds. The investment amounts are shown here. In the third quarter, we invested only 2.3 bullion because we did not see many opportunities. But as a policy... We want to capture investment opportunities as much as possible. That's why we have turned to offense mode as opposed to defense mode.

Yoshimitsu Goto: Rene Haas, Arm CEO, recently attended and spoke at the CES, and he said AI is everywhere, and you can't run AI without Arm. I believe this is really the kind of time now that we're seeing such a trend, and we are very much convinced that the AI is really essential for many ways. Now I would like to turn to investment strategy and also about Vision Fund. Vision Fund, gain and loss on investments in the past three months, Vision Fund 1, Vision Fund 2, and Latam Fund. Major part is from the Vision Fund 1 and 2, but those three funds are actually showing us a very good and steady performance here. With total of those three funds, over JPY 600 billion or above of the gain.

But isn't it a M. Baum CEO recently attended and spoke at the C. E S and that he said as everywhere and you can't run yeah without.

Speaker Change: I believe this is really the kind of a time now that we are seeing such a trend and we are very much convinced that there is really essential for many way.

Speaker Change: And now I would like to turn to investment strategy and also about the vision fund.

Speaker Change: We don't fund a gain and loss on investments in the past three months vision fund one they don't find too.

Speaker Change: We have already resumed investment. The important thing is to actively make investments. Of course, that requires a lot of analysis, and also requires a lot of communication. That groundwork is important before actually making investments. One or two investment examples here recently. One of them is Tractable, and the other is Cato.

Speaker Change: And let them funds.

Speaker Change: A major major part is from the original fund one and two but those three funds are actually showing us a very good density per four months here.

Speaker Change: It's total of those three funds over.

Speaker Change: 600 billion yen or above of the game.

Speaker Change: The left-hand side is tractable, which is AI-powered automation of insurance claims and damage assessment enabling real-time condition assessments and accurate repair estimates via smartphone images. This is, I think, a very unique business model. And the right-hand side is Cato Network. This is... Security Access Service Edge optimally and securely connects all enterprise locations, users, and clients.

Yoshimitsu Goto: For breakdowns for Vision Fund 1 compared to Vision Fund 2, ticket size of each portfolio is relatively large and also mainly invested in late stage or unicorns. There are many successful cases in the past. For example, Arm is one of them. Coupang is also the good example. Now that we're seeing a good and strong performance from ByteDance, so ByteDance, so Vision Fund 1 is recording $1.9 billion of the gain. Vision Fund 2, $1.7 billion of the gain. This is mainly due to share price rise in public assets and also having up rounds of the financial rounds. Those are the major driver for this result of Vision Fund 2. In terms of Latam, share price rise in public assets is a good contributor.

Speaker Change: And for breakdowns for vision fund one.

Speaker Change: Compare the visual one too.

Speaker Change: Each ticket size of the each portfolio is relatively large.

Speaker Change: And also a main default invested in later stage of unicorns.

Speaker Change: There are many successful cases in the past for example arm is one of them.

Speaker Change: Coupons is also a good example.

Speaker Change: There are many more investments we have made recently, but those are just what I wanted to pick up today. Last but not least, I need to talk about this financial strategy before closing. For FY23, we keep this financial strategy adherent to financial policy, financial management adaptable to both defense and offense policy. We have kept this policy for a long time.

Now that the we are seeing a good and so performance from but does so does our sort of vision fund one.

Speaker Change: Is recording a $1 $9 billion of D. A game.

Speaker Change: You don't want to one 7 billion of the game.

Speaker Change: And this is mainly due to share price rise in a public assets and also having a branch of the financial rounds.

Speaker Change: Why don't you change policy depending on conditions some people suggest, for example, 25% of two-year worth of bond redemption. Why don't you change those numbers? Yeah. Some people criticize our policy. I think a simple policy like this is important because it is... Peace!

Those are the major driver.

Speaker Change: For the this result, our vision fund two.

Speaker Change: In times of a lot of them are share price rise in a public got it.

It's a good contributor.

Yoshimitsu Goto: For Vision Fund 2, I would like to add a little bit more color because Vision Fund 1 has a longer history. Vision Fund 2 was about 3 years ago that we have started, and actually we tried to distribute the money for all investments in many places. We had some difficulties because of the environment and the market situation. If you look at this slide on your right-hand side, this is the current. When you see the improvement in value, that's the blue bar, and those marked down were the red bar on the far right. Markup public companies are 8 companies and in dollar term $1,158 million. In marked down, the bottom of the red bar, you see 9 companies has marked down. In dollar term $287 million.

Speaker Change: For vision fund two I would like to add a little bit more color.

Speaker Change: Killer, For us to express ourselves, we are stable and we are reliable, and retail investors and retail end-users. We need to make sure that they understand what we are doing easily. So again, maintaining LTV below 25 percent in normal terms, maintaining at least two-years worth of bond redemption in cash, and securing recurring distributions and dividend income from SVF and other subsidiaries. That remained our policy, to respond to defense and offense.

Speaker Change: Because visuals on the wire has a longer history be jumped one two was about three years ago. Oh do we have a start then the extra the the the try to distribute the money for or investments in many places we had some difficulties because of the environments and the market situation.

Speaker Change: But if you look at this site.

Speaker Change: On your right hand side. This is the current.

Speaker Change: When you see the improvement in value.

Speaker Change: We need to... make sure that we have a strong policy in place so that it will allow us to be either defense or offense. And talking about capital allocation now, what would you like to... use a capital four? The slide shows new investments, shareholders' returns, and financial policy at the bottom. What we want to do is to have an equal view of shareholders and the debt holders. And in order for the company to grow, we need to make an investment. Otherwise, we cannot grow.

Speaker Change: That's the Blue bar.

Speaker Change: And are those smoke them well the red bar on the far right.

Speaker Change: Yeah.

Speaker Change: Mark of public companies are.

Speaker Change: Eight companies and in dollar Com AR 1158.

Speaker Change: The $1.

Speaker Change: Mark Zone there.

Speaker Change: At the bottom of the Red Bar, you see nine companies has deep amongst them.

Speaker Change: In the other time.

Yoshimitsu Goto: Net, actually the more companies are marked up and also the more amounts are marked up compared to marked down. In private companies, 88 companies. 88 private companies' value are increased. In dollar term, $1.7 billion. Marked down companies in private, 74 companies. In dollar term, $929 million. Compared to Q2 2023, we have largely improved the quality of the portfolio companies. The main driver for the private company value up is some improvements in business. Also the peers improvement as well. Actually the main driver was round up of the financial rounds. This is the by quarter of the gain and loss on investment, and in the past three quarters consecutively that the increasing or improved.

Speaker Change: 287 million so net net.

Speaker Change: Actually that the more companies are marked up and those are the more amounts are marked up compared to most of them.

Speaker Change: And private companies.

Speaker Change: The eight companies a D H private companies value are increased in dollar terms, one 7 billion.

Speaker Change: So we need to strike a good balance, even going deeper. Net Asset Value, whether it is growing or not, that shows a track record of corporate growth. And the NAV discount, which we showed you earlier. So the gap between NAV and market cap, why there is a discount. There should be a reason why there is a discount, to put simply. Trust, whether it's

Speaker Change: Milk don't companies and private citizens before them.

Speaker Change: Please.

Speaker Change: In <unk> $929 million.

Speaker Change: So compared to the second quarter 2023.

Speaker Change: We have largely improved the quality.

Speaker Change: Of the portfolio companies.

Speaker Change: Yes.

Speaker Change: The main driver for the public company Baidu App is D. A.

Speaker Change: Strong or weak, in terms of in which direction NAVAGO is going forward. So I think the message here is that we need to communicate more about what we are doing to address this discount. And what we can do to increase corporate value one way is through share buyback. Please take a look at this graph. We have done 4.5 trillion yen worth of shareholder buyback in total, sometimes 0.6 trillion, 2.5 trillion, and 1.4 trillion. When we did the share buyback, the share price went up, but right after the share buyback, the share price went down to the pre-share buyback level. It was not sustainable, to be very honest with you. Why? Shouldn't we do something about it?

Speaker Change: Some improvements in business.

Speaker Change: Also other peers improvement as well, but the actually the main driver was a round up of the financial rounds.

Speaker Change: Yeah.

Speaker Change: And this is the by quota of the gain and loss on the investment and in the past three quarters three quarters configured differently that the increasing our improved and accumulative wise, we are almost above the order so very close to the of the order now.

Yoshimitsu Goto: Cumulatively, we are almost above water, so very close to above water now. Cumulative investment return. This is for our Vision Fund 1. Invested JPY 89.6 billion in total and cumulative return is JPY 106 billion. Of that, 64 exited. Eighteen public companies investment before exit. We are looking at great performance, and Vision Fund 2's cumulative investment return is shown here. Investment cost JPY 52 billion and the cumulative investment return JPY 33 billion. The performance is, well, underperforming, but it's been improving in the latest three months. Backed by a positive market condition, we believe that Vision Fund 2's performance will get even better. Talking about our funding rounds.

Speaker Change: Our cumulative investment return this as for Vision fund one.

Speaker Change: Okay.

Speaker Change: Invested $89 6 billion.

Speaker Change: In total.

Speaker Change: And.

Speaker Change: Cumulative return is 106.

Speaker Change: We understand that share buyback is an important tool to return to shareholders, and CEO Masa himself has over 30% of a stake in the business. So the importance of shareholder returns is well understood not only by the management but also by CEO Masa himself.

Speaker Change: Of that 64 existed.

Speaker Change: 18 public companies.

Speaker Change: Investment before exit.

Speaker Change: We are looking at the great performance and visual funded choose a cumulative investment return is shown here.

Speaker Change: Investment costs.

Speaker Change: Nav is done, something that can show corporate growth. In order to grow NAV, increase NAV, we need to be active in investment. So what we should do is..., here.

Speaker Change: 52 billion and the cumulative investment to return 33 billion. So the performance is well underperforming but.

Speaker Change: It's been improving.

Speaker Change: We have 4.4 trillion in cash position, and we have 19 trillion in net asset value. So, while we are using cash position... backed by different types of assets, we can structure different leveraged financing. In order for us to increase NAV, we need to make new investments for growth, and we need to focus on new investments at the moment, but, as an investment company, we need to return to shareholders while this investment cycle is running well. Increasing NAV is the first step we should take before returning to shareholders. But again, let me repeat, we have done 4.5 trillion in share buyback in the last five years.

Speaker Change: And the latest three months.

Speaker Change: Backed by.

Speaker Change: A positive tyva market condition, we believe that we don't fund twos.

Speaker Change: Performers will get even better.

Speaker Change: I'm talking about our funding.

Speaker Change: Round.

Yoshimitsu Goto: This chart shows funding rounds of private portfolio companies. In 2023, they raised $8 billion and 41 rounds took place, and up round was 48%. Almost half of the companies, which is great. Businesses that did financing or funding down round, well, it's not bad either, even though it was down round, it means they got trust from future investors, which is I think great itself. Sometimes it's good to finance even though down round, because you cannot finance at all is the worst. Private equity market has turned around and that has had a positive impact on those private portfolio companies' funding rounds. The investment amount is shown here. In Q3, we invested only $0.3 billion. Because we did not see many opportunities. As a policy, we want to capture investment opportunities as much as possible.

Speaker Change: This chart shows our funding rounds of private portfolio companies.

Speaker Change: Incentive 23.

Speaker Change: <unk> raised $8 billion.

Speaker Change: And.

Speaker Change: Fortune, one round took place and our brand was 48%.

Speaker Change: Almost half.

Speaker Change: Of the.

Speaker Change: The companies, which is great.

Speaker Change: Yeah.

Speaker Change: But.

Speaker Change: Businesses.

Speaker Change: That.

Speaker Change: They had a financing or funding down round well its not bad either even though it was down rounder it means that they got.

Speaker Change: This trend; we want to keep the trend while making proactive investment. And as an investment company, for us to grow going forward, we will run a good cycle of investment and reinvestment and make sure we return to shareholders.

Speaker Change: Trust or from a future investors, which is I think a great itself.

Speaker Change: Sometimes.

Speaker Change: Net income, 950 billion yen. And in the last quarter, we have done a lot of things, and we have moved forward. Thank you very much for your attention, and that's all for my presentation. Now we'd like to have questions from you.

Speaker Change: It's good to.

Speaker Change: Finance, even though down round, because you cannot finance at all as the worst.

Speaker Change: So.

Speaker Change: Private equity market.

Speaker Change: Hats.

Speaker Change: Turned around and that that has had a positive impact on those private portfolio of companies funding rounds.

Speaker Change: Thank you very much. Now we would like to take questions. First, we would like to take questions from the floor. Please wait for the microphone and start with your name and affiliation. For those that wish to make questions over Zoom, please access Zoom using the prior method explained. And if you are accessing Zoom, please make sure to refrain from connecting to other live streams to avoid any echoing. Please also wait and press the raise hand button if you wish to make any questions and wait for your name to be called.

Speaker Change: The investment amount is shown here in the third quarter, we invested only.

Speaker Change: 0.3 Bouillon.

Speaker Change: Yeah.

Speaker Change: Because we did not see many opportunities.

But as a policy.

Speaker Change: We want to capture investment opportunities as much as possible. That's why we have churned chi.

Yoshimitsu Goto: That's why we have turned to offense mode as opposed to defense mode. We already reduced investment. Important thing is to actively make investments. Of course, that require lot of analysis, also requires lot of communications. Those groundwork is important before actually making investments. One or two investment examples here recently. One of them is Tractable, the other is Cato. Left-hand side is Tractable, which is AI-powered automation insurance claims and damage assessments, enabling real-time condition assessments and accurate repair estimate via smartphone images. This is, I think, a very unique business model. The right-hand side is Cato Networks. This is Secure Access Service Edge optimally and securely connects all enterprise locations, users, and clouds. There are many more investments we did recently, but those are just what I wanted to pick up today.

Speaker Change: Yeah.

Speaker Change: Offense mode as opposed to defend smoother, we already read Jude.

Speaker Change: If you would like to ask a question, please press the lower hand button. If you are on Japanese Zoom, please make your question in Japanese as well. We would like to take up to two questions per person so that we can take questions from as many people as possible. Now we would like to take questions from the floor. Left, on the front line, gentlemen, please.

Speaker Change: Investment important thing is to actively make investments.

Speaker Change: Of course that require.

Speaker Change: Analysis also requires a little bit communications those a groundwork is important to before actually making investments.

Speaker Change: One or two.

Speaker Change: Investment are examples here recently, one of them is trucks up all the other S caito.

Speaker Change: Thank you. I am Shikata from the Nikkei newspaper. I have two questions, so one by one. First, a great performance.

Shikata: There are any changes to your strategy for SBG? Any AI strategy has been highlighted, but any changes or any updates on your AI strategy for SBG? Yes, the share price increase is a kind of a short-term performance here. But, what we are very much focusing on is AI, which is the most discussed agenda, and actually Arm is the company who can make the best contribution to such an AI movement.

Speaker Change: Left hand side as Chuck the ball.

Speaker Change: Which is AI powered automation insurance claims and the damage assessment, enabling real time, a condition assessments and accurate repair estimate via smartphone images.

Speaker Change: Yeah.

Speaker Change: This is I think a very unique business model.

Speaker Change: And the right hand side escaped on networks.

Speaker Change: This S.

Speaker Change: Security access service edge optimally and securely connect all enterprise applications users and clients. There are many more investments. We did recently, but those are just what I wanted to pick up to James last but not the least I need to talk about the financials.

Shikata: And I believe that that has been valued because we have our army in our group. We will be able to address Boo in a variety of ways, and also having ARM in our group means that we'll be able to make a very specific step towards the AI strategy. MASA is actually discussing exploring the AI strategy. He's trying to.

Yoshimitsu Goto: Last but not the least, I need to talk about this financial strategy before closing. For FY 2023, we keep this financial strategy adherent to financial policy, financial management adaptable to both defense and offense policy. We have kept this policy for a long time. Why don't you change policy depending on conditions? Some people suggest, for example, 25% of net worth of bond redemption. Why don't you change those numbers? Well, some people criticize our policy. I think a simple policy like this is important because it is the pillar for us to express ourselves. We are stable, and we are reliable. Retail investors and retail end users, we need to make sure that they understand what we are doing easily.

Speaker Change: Strategy before closing.

Speaker Change: For FY2023 we keep this financial strategy and their herring to financial policy financial management adaptable to both defense and offense policy.

Shikata: I do many things, but anything that he liked to do always led to our base, our teams, or our technology. So that's something that we always reminded ourselves that how armed it is is important for our next steps or next progress. And I believe that that has been interpreted in the shape of the share price. My, so, uh, AGI or strategy, can be more involved because of the good results. And the next question is about the net asset value discount. You also show some slides.

Speaker Change: We have kept the this policy for a long time.

Speaker Change: Why don't you change policy, depending on conditions some people.

Suggest for example, 25% to your water bond redemption, why don't you change those numbers.

Shikata: So 19 trillion yen of asset value. And I believe you have about 2 trillion yen in debt. So less debt is 17 trillion yen; that's my assumption. And about 8 trillion at the end of March. About 8 trillion yen of the gap would be made between net asset value and market cap. It may not be a simple question or simple answer, but the vision fund, 7 trillion yen in size. And it looks like it's not counting the Vision Fund at all. And I believe that there is kind of an intransparency in the Vision Fund or the... People may not be trusting the Vision Fund performance enough or the Vision Fund's growth. That's probably one of the reasons for the discount.

Speaker Change: Well.

Speaker Change: Some people criticize our policy.

Speaker Change: I think the simple policy like this is important because it is.

Speaker Change: D.

Speaker Change: Pillar.

Speaker Change: For us to express ourselves, we are a stable and we are reliable.

Speaker Change: And retail investors and retail and the users we need to make sure that they understand what we are doing easily so again, maintaining LTV below 25% in normal times, maintaining at least two years worth of bond redemption in cash and securing recurring.

Yoshimitsu Goto: Again, maintaining LTV below 25% in normal terms, maintaining at least 2 year worth of bond redemption in cash, and securing recurring distributions and dividend income from SVF and other subsidiaries. That remained our policy. To respond to defense and offense, we need to make sure that we have a strong policy in place so that it will allow us to be either defense or offense. Talking about capital allocation now, what would you like to use capital for? The slide shows new investment, shareholders' return, and financial policy at the bottom. What we want to do is to have equal view on shareholders and the debt holders. In order for the company to grow, we need to make an investment, otherwise we cannot grow. We need to strike a good balance.

Speaker Change: Jones and dividend income from S V F and other subsidiaries that remained a policy.

Speaker Change: Do you have any message or do you have any comments about the Vision Fund activities going forward? The Biddleman Fund's strategy... I believe it's very clear and simple, as an investment fund. Focusing, setting the vision for AI, I believe the world will be utilizing AI in a variety of ways. And there are companies who are going to focus on AI or developing with AI, and that's kind of the target for a vision fund to invest in. And there are teams that are making every effort. Of course, a year ago, two years ago... There was a time that we had to stop for a little bit of time for the offense.

Speaker Change: She respond to defense and offense.

Speaker Change: We need to.

Speaker Change: Make sure that we have a strong a policy in place so that it will allow us to be.

Speaker Change: E the defense or offense.

Speaker Change: And talking about capital allocation now what would you like G E.

Speaker Change: Use of capital for.

Speaker Change: That's why I chose new investment shareholders' return and a financial policy at the bottom.

Speaker Change: What does he want to do is choose.

Speaker Change: This year, we are kind of... Shifting. But because we have experienced difficult moments in the past two years, that is why we have to be a little bit more careful, have to be a little bit more conservative. So that's why, as a result, that we are not showing more big numbers from the Vision Fund. And because performance comes along after our activities, that's why it comes even later, but not now.

Speaker Change: Have a equal view on <unk>.

Speaker Change: Shareholders and debt holders.

Speaker Change: And you know the Florida company to grow we need to make an investment otherwise we cannot the girl.

Speaker Change: So we need to strike a good balance.

Speaker Change: Yeah.

Yoshimitsu Goto: Even going deeper, net asset value, whether it is growing or not, that shows a track record of corporate growth. The NAV discount which we showed you earlier. The gap between NAV and market cap. Why there is a discount? There should be a reason why there is a discount. To put simply, trust, whether it's strong or weak in terms of in which direction NAV goes forward. I think the message here is that we need to communicate more about what we are doing to address this discount. What we can do to increase corporate value, one way is share buyback. Please take a look at this graph. We have done JPY 4.5 trillion worth of shareholder buyback in total, 0.6 trillion, 2.5 trillion, 1.4 trillion.

Speaker Change: Even going deeper.

Speaker Change: Net asset value.

Speaker Change: Whether it is growing or not them.

Speaker Change: And I believe the biggest message for investors... I believe the most important thing for the fund is performance, showing you the performance, which is not happening now, but the size is exceeding 2 billion yen. And also, we would like to spend enough time during the investment period to show you the performance. Next question. M.J. from Broom Garga.

Speaker Change: That shows a track record of corporate growth.

Speaker Change: And then I have a discount which we showed you earlier.

Speaker Change: So the gap between our NAV and market cap.

Speaker Change: Why there S a discount.

Speaker Change: That should be a reason why there's a discount to put simply.

M.J.: First question about armor. I have a question about how you treat assets. You have about 90% of the shares. If you are using ARM shares and going forward, you may want to sell a little bit of ARM ownership, or using ARM shares, you may want to do asset-backed financing to make new investments. So which way or what kind of idea do you have in terms of how you use ARM assets? Yes, ARM is a public company. Whether to sell or not, buy or not... In principle, I will not make comment on that, but I would just say the arm in our group company is the most important. Company, for us. Like I keep saying, we are the company that has the biggest confidence in arms growth potential, and we want to value our assets. Of course, we can utilize our assets in different ways. For example, using arm's shares for margin loans.

Speaker Change: Trust, whether it's.

Speaker Change: Strong or weak.

Speaker Change: In tumor salvo in which direction now that goes going forward them.

Speaker Change: So I think the message here is that we need to communicate more.

Speaker Change: About what we are doing to address this discount.

Speaker Change: And so what we can do to increase corporate value one way is share buyback.

Speaker Change: Please take a look at this graph.

Speaker Change: We have done four five trillion with shareholder buyback in total sometimes 0.6 Trillium two points I'm truly on 1.4 children. One did do share buyback share price went up but right. After the share buyback the share price went down to pretty.

Yoshimitsu Goto: When we did the share buyback, share price went up, but right after the share buyback, the share price went down to pre-share buyback level. It was not sustainable to be very honest with you. Why? Shouldn't we do something about it? We understand that share buyback is an important tool to return to shareholders, and CEO Masayoshi Son himself has over 30% of stake in the business. The shareholder returns importance is well understood, not only by the management, but also CEO Masayoshi Son himself. NAV is the thing that can show corporate growth. In order to grow NAV, increase NAV, we need to be active in investment. What we should do is here. We have JPY 4.4 trillion cash position, and we have JPY 19 trillion of net asset value.

Speaker Change: Share buyback level it.

Speaker Change: It was not sustainable to be very honest with you why.

Speaker Change: Shouldn't we do something about it.

Speaker Change: We understand that the share buyback as an important tool to return to shareholders.

M.J.: So Arm Share as an asset, from a financing perspective, is easier for us to utilize. So I think that there are a lot of options that we can select. Thank you, support investment from a financing perspective. Again, it's a great asset for us. I think that's something I can say now.

Speaker Change: And C E O Martha himself.

Speaker Change: Has over 30% of a stake in the business.

Speaker Change: So the.

Speaker Change: Shareholder returns importance is well understood or not only by the management, but also see E or muscle he myself.

M.J.: Maybe for Navneet about the Vision Fund, we see that the investment figure is still very small, actually smaller than the previous quarter. We want to know when, if at all, the pace of investment could pick up later this year or in the future. Thank you. Thank you, MJ.

Speaker Change: And.

Speaker Change: Nova is done.

Speaker Change: Thing that can show corporate growth in order to grow NAV increase Nava, we need to be active in investment. So what we should do is.

Speaker Change: Here.

Navneet: We remain very focused on looking at opportunities in the AI space, but at the same time, we're being very prudent about finding the right opportunities at the right valuation. So our focus is on AI investing across all AI verticals, but there's a very high bar for it, and we're also focused on unlocking our portfolio value. So part of the earlier question about the discount in net asset value and market cap. Division funds and LATAM funds have a fair value of $146 billion, and we want to make sure that the value is unlocked.

Speaker Change: We have $4 four trillion cash position and we have 19 Chilean of net asset value.

Yoshimitsu Goto: While we are using cash position, backed by different types of assets, we can structure different leverage financing. In order for us to increase NAV, we need to make new investments for growth, and we need to focus on new investment at the moment. As investment company, we need to return to shareholders while this investment cycle is running well. Increasing NAV is the first step we should take before returning to shareholders. Again, let me repeat, we have done JPY 4.5 trillion of share buyback in the last 5 years. This trend, we want to keep the trend while making proactive investment. As investment company, for us to grow going forward, we will run a good cycle of investment and reinvestment, and making sure we return to shareholders. Summarize. Net income JPY 950 billion.

So while we are using cash position.

Speaker Change: Backed by different types of assets.

Speaker Change: We can structure different about financing.

Speaker Change: In order for us to increase NAV, we need to make in your investments for growth.

Speaker Change: And.

Speaker Change: We need to focus on new investments at the moment, but.

Speaker Change: As an investment company.

Speaker Change: Chi.

Speaker Change: Return to shareholders, while this investment cycle is running well.

Speaker Change: In Christian Nab is the first step we should take before returning to shareholders, but again, let me repeat we have done four five trillion of a share buyback in the last five years. This trend we want to keep the trend while.

Navneet: And it also includes disciplined and consistent monetization. So it's not just investing in new opportunities but also unlocking value and monetizing our portfolio. But recently, in the second half of 2023, we made investments in companies like Travel Perk, Tractable, and Cato Network. So we are ready to deploy capital when we see the right opportunities. Thank you. Any other questions, please? ??.. the very front row in Red Tonsei, thank you.

Speaker Change: Making a proactive investment and as an investment company for us to grow going for the Mi War ran a good cycle of investment and reinvestment and making sure we return to shareholders summer right.

Speaker Change: Yeah.

Speaker Change: Net income of 950 billion yen.

Yoshimitsu Goto: In the last quarter, we have done a lot of things, and we have moved forward. Thank you very much for your attention. That's all for my presentation. Now we'd like to have questions from yourself. Thank you very much.

Speaker Change: And in the last quarter, we have done a lot of things and the V have moved to Florida and.

Navneet: Yamaguchi from Mainichi newspaper. It may be difficult for you to answer this question. I'd like to speak about Rakuten, another company. So in the coming two years, 800 billion yen of bond redemption is expected, and they are refinancing. And as a CFO, how do you look at Rakuten's status? And also, as a general opinion?

Speaker Change: Thank you very much for your attention and that's all for my presentation now we'd like to have a questions for me yourself. Thank you very much.

Yoshimitsu Goto: Now we would like to take questions. First we would like to take questions from the floor. Please wait for the microphone and start with your name and affiliation. For those that wish to make questions over Zoom, please access Zoom with the previously explained. If you are accessing Zoom, please make sure to refrain from connecting to other live stream to avoid any echoing. Please also wait and press raise hand button if you wish to make any questions and wait for your name to be called. If you would like to withdraw your question, please press lower hand button. If you are on Japanese Zoom, please make a question in Japanese as well. We would like to take up to two questions per person so that we can take questions from as many people as possible.

Operator: Now we would like to take questions. First we would like to take questions from the floor. Please wait for the microphone and start with your name and affiliation. For those that wish to make questions over Zoom, please access Zoom with the previously explained. If you are accessing Zoom, please make sure to refrain from connecting to other live stream to avoid any echoing. Please also wait and press raise hand button if you wish to make any questions and wait for your name to be called. If you would like to withdraw your question, please press lower hand button. If you are on Japanese Zoom, please make a question in Japanese as well. We would like to take up to two questions per person so that we can take questions from as many people as possible.

Speaker Change: Now we would like to take questions.

Speaker Change: Okay.

Speaker Change: First of all we would like to take questions from the floor.

Speaker Change: Please wait for the microphone and start with your name and affiliation.

Speaker Change: For those that wish to make questions all of us of them.

Navneet: What is anything that you can comment on that you care about? Commenting to other companies is really difficult. It can be very rude.

Speaker Change: Please access Doosan is the.

Speaker Change: Ali explained.

Speaker Change: And if you are accessing to zoom. Please make sure to refrain from connecting to other live stream to avoid any occurring.

Speaker Change: I don't want to make any comments about others, but I can talk about our company. So you mentioned that JAK-10 is expecting 800 billion yen for the bond redemption. So when you speak of bond redemption, I can probably talk about our position on bond redemption. For example, in our case, as an issuer. We are quite a large issuer in terms of bonds, and especially for retail bonds, retail investors, we have quite a large issuance as well. And for them... We don't want them to feel any risk at all when it comes to redemption.

Speaker Change: Please also wait and press our raise hands button, if you wish to make a new questions and wait for your name to be called if you like to withdraw. Your question. Please press law hitting the bottom. If you are on Japanese Sim, Please make a Christian in Japanese as well.

Speaker Change: We would like to take up to two questions per person. So that we can take questions from as many people are supposed to go.

Yoshimitsu Goto: Now, we would like to take questions from the floor. Left on the front line, gentleman, please. Thank you. I am Shikata from Nikkei Newspaper. I have two questions, so one by one. First, great performance. Are there any changes to your strategy of SBG? Any AI strategy has been highlighted, but any changes or any updates on your AI strategy for SBG? Yes. Share price increase is a kind of a short-term performance here, but what we are very much focusing is the AI, which is the most discussed agenda. Actually, Arm is the company who can make the best contribution to such an AI movements.

Operator: Now, we would like to take questions from the floor. Left on the front line, gentleman, please.

Speaker Change: No. We will then take questions from the floor.

Speaker Change: So when you see the redemptions, that I want them to invest in us again, that's something that I would like them to feel. So that's why I believe it's important to show you what the source for the redemption is. So that's why we have a financial policy of cash position, keeping cash positions to cover at least two years of the bond redemption, because we have expiries every year, so we have to show you what the source for the redemption is. You have expiry dates. We have money here. We can redeem you.

Speaker Change: Left enough frontline a gentleman please.

[Analyst] (Nikkei Newspaper): Thank you. I am Shikata from Nikkei Newspaper. I have two questions, so one by one. First, great performance. Are there any changes to your strategy of SBG? Any AI strategy has been highlighted, but any changes or any updates on your AI strategy for SBG?

Speaker Change: Thank you.

Speaker Change: I am Scott from Nikkei newspaper I have two questions. So one by one.

Scott: First great performance.

Scott: Yeah.

Scott: There are there any changes to your strategy of SPG any <unk> strategy has been highlighted but any changes or any updates.

Scott: Updates on your strategy for his B G.

Yoshimitsu Goto: Yes. Share price increase is a kind of a short-term performance here, but what we are very much focusing is the AI, which is the most discussed agenda. Actually, Arm is the company who can make the best contribution to such an AI movements.

Speaker Change: Yes, sure price increase.

Speaker Change: Ah is a kind of a short term performance here.

Speaker Change: We can pay you back, or would you like to invest in us again? Do you want us to prepare the same kind of instrument so that you can invest in us once again? As long as you can show you the source of the redemption, investors will feel more safe.

Speaker Change: But.

Speaker Change: What we are.

Speaker Change: Very much focusing.

Speaker Change: Is the.

Speaker Change: Yeah, It which is the most discussed agenda and actually arm is a company who can make the best contribution to such on the IDE movements.

Speaker Change: And happy, if you don't have any other way to manage your assets, then you'll be able to invest in us again. I think that's very important. And if you go the other way, that's going to be very tough.

Yoshimitsu Goto: I believe that has been valued, and because we have Arm in our group, we will be able to address AI move in a variety of the way. Also having Arm in our group that we will be able to make a very specific steps towards the AI strategy. Masa is actually discussing, exploring AI strategy. He's trying to do many things, but anything that he would like to do always lead to Arm base or chip or Arm technology. That's something that we always reminded ourselves that how Arm is important for our next steps or next progress. I believe that has been interpreted in the shape of share price, I believe. Our AI strategy can be more involved there because of the Arm good results.

Speaker Change: And I believe that that has been valued and because we have all of our group.

Speaker Change: We will be able to address.

Speaker Change: We did experience a little bit of difficult times in the past as well. So that is why we would like to show you that we have more than enough room there to redeem. Because we are an investment company, that is going to be even more important. And I think that we would like to keep that kind of policy.

Speaker Change: A I.

Speaker Change: Move.

Speaker Change: In a variety of the way.

Speaker Change: And also having arm in the boat group that we would be able to make a very specifics steps.

Speaker Change: Two towards the AI strategy Masa.

Speaker Change: It's actually.

Speaker Change: Discussing exploring Ah yeah, so that the G. He should I do.

Speaker Change: And now, also, another question to Navneet. India Oil, the IPO is expected, when do you think it's going to be the time? I think that they are postponing the IPO timing. We're very pleased with our Indian portfolio.

Speaker Change: Do many things, but anything that he'd like to do always lead to base or a chip or disc neurology. So that's something that we always remind ourselves that the how army is important.

Speaker Change: In fact, Forced Cry and Ola Electric filed for a listing in December of 2023. As you pointed out, OYO is also expected in the coming year or so to go public. www.softbankgroup.com. I don't know, George, or what? Any reason why they are postponing the IPO event itself? There is no rush.

Speaker Change: For our next steps on its progress.

Speaker Change: And I believe that that has been interpreted.

Speaker Change: In the shape of share price I believe my so our AGM.

Speaker Change: E G I R strategy.

Can be more involved for the because of the good results.

Yoshimitsu Goto: Next question is about the net asset value discount. You also show some slides, so JPY 19 trillion of the asset value, and I believe you have about JPY 2 trillion of debt. Less debt is JPY 17 trillion, that's my assumption, and about JPY 8 trillion at the end of March. About JPY 8 trillion of the gap would be made between net asset value and market cap. It may not be the simple question or simple answer, but the Vision Fund, JPY 7 trillion size. Looks like it's not counting Vision Fund at all. I believe that there are kind of a intransparency of the Vision Fund or the. The people may not be enough trusting the Vision Fund performance or Vision Fund's growth. That's probably one of the reason for the discount.

Speaker Change: And our next question is about the net doesn't bother with discount you also show some slides so 19, two junior and of the asset value.

Speaker Change: For all of our portfolio companies, they will go public when the time is right. And that means when they can give, they have the right controls in place, they have sustainable financial performance, and they are either on the path to profitability or are already profitable. So the timing will depend on that. Thank you. Thank you very much.

Speaker Change: And I believe you have about that off to a trade union. So less debt is <unk> 17 trillion yen.

Speaker Change: The assumption and about eight trillion at the end of much about eight trillion yen of the gap would be made between that does anybody in the market kept it may not be the simple question simple answer, but the visual in fund seven two junior in size.

Speaker Change: Any other questions from the floor? If not, let me move on to June. Again, please refrain from connecting to other live streams to avoid any echoing. And if you join Zoom's Japanese channel, please ask us questions in Japanese. First question, Nagoshi-san from NHK.

Speaker Change: It looks like it's not counting a visual found at all and that I believe that there are kind of buy in transparency of Debbie Jones fund or the.

Nagoshi-san: Please unmute and speak, please. Thank you for taking my question. My name is Nagoshi from NHK in the last quarter, third quarter of last year.

Speaker Change: With people may not be enough trusting the mutual funds' performance of mutual funds growth, that's probably one of the reasons for the discount do you have any more.

Yoshimitsu Goto: Do you have any message or do you have any comments about the Vision Fund activities going forward? The Vision Fund strategy, I believe, is very clear and simple as an investment fund focusing, setting the vision for AI and believe in the world to be utilizing AI in a variety of the ways. There are companies who are going to focus on AI or developing with AI, and that's the kind of the target for a Vision Fund to invest in. There are teams that are making in every effort. Of course, a year ago, two years ago, there were a time that we have to stop a little bit of time for the offense.

Nagoshi: Masa does not attend the financial results announcement anymore, so he has been focusing on the growth of the business. I believe that I wonder if you can share with us the update on Masa, what he has been doing lately.

Speaker Change: Mrs. You'll do you have any comments about the visual fund activities going forward.

Speaker Change: Yeah.

Speaker Change: The visual and fund strategy.

Speaker Change: I believe it's very clear and simple.

Speaker Change: As an investment fund.

Speaker Change: Focusing.

Speaker Change: Sitting the vision for AI.

Nagoshi: I didn't mention in the presentation. I think that what Masa is doing is one of the most interesting things you could do. Every day, as you can imagine, he is pretty busy, as you can imagine. Although he isn't... Not in front of you, but he is in the office. Every day, if necessary, I see him, I talk to him, and I listen to him.

Speaker Change: In.

Speaker Change: Believe are in the world to be utilizing yeah in the variety of the ways.

Speaker Change: And.

Speaker Change: Though there are companies out there who are going to focus on AI or developing with AI and that's the kind of the qatargas four abuse, you'll want to invest in and there are teams that are making the library of fourth of course, a year ago two years ago.

Nagoshi: There is a lot of amazing stuff going on. In the last presentation he had in front of you, at that time, he mentioned that he wanted to ensure arms growth and arms evolution, and arms growth should be linked to the growth of society. And that kind of broad, vast subject. In fact, not only one but also multiple broad, big subjects are something that he is working on. It may take time before bearing fruit, and it's been some time since he stopped showing himself to you. I hope he will come back to you sooner rather than later.

Speaker Change: There are a lot of time that we have to stop a little bit of time for the offense. This year that we kind of.

Yoshimitsu Goto: This year that we kind of shifting, but because we have experienced the difficult moment in the past two years, so that is why we have to be a little bit more careful, have to be a little bit conservative. That's why, as a result, that we are not showing more big numbers from the Vision Fund. Because performance comes along after our activities, that's why that, it comes even later, but not now. I believe the biggest message for investors, I believe it's the most important thing for the fund is performance, showing you the performance, which is not happening now, but the size is exceeding JPY 1 trillion. We would like to spend enough time for the investment periods to show you the performance. Next question.

Speaker Change: Shifting.

Speaker Change: But because we have the experienced the difficult moment in the past two years. So that is why we have to be a little bit more careful has to be did a bit of a conservative. So that's why as a result that we are not showing more big numbers from the vision fund.

Speaker Change: And because by four months comes along after our activities. That's why that it comes even later.

Speaker Change: I cannot. I can't say when, but I hope that you look forward to seeing him once again in person sooner rather than later. I believe that what he is doing should contribute a lot to SoftBank's corporate value, and we appreciate your patience. Thank you. A different question, if I may. In the last quarter's financial results announcement, you mentioned several investments by SoftBank Group, including the autonomous vehicle business. I wonder, from SoftBank Group, are there any specific themes or subjects where you focus on investment? And can you share with us how many companies that you have made an investment as a SoftBank Group company? Well, I am not.

Speaker Change: But no no and I believe the biggest misses fall in this stuff.

Speaker Change: I believe the most important things for the phone is performance showing you the performance, which is not happening now.

Speaker Change: But the size.

Speaker Change: Is exceeding two deal in yen.

Speaker Change: And also where you would like to spend enough time for the investment periods to show you the performance.

Operator: Next question.

Speaker Change: Yeah.

Speaker Change: Next question.

Yoshimitsu Goto: MJ, from Bloomberg. First question about Arm. I have a question about how you treat Arm as assets. You have about 90% of Arm shares, and going forward, you may want to sell a little bit of Arm ownership or using Arm shares, you may want to do asset-backed financing to make new investment. Or which way or what kind of idea do you have in terms of how you use Arm assets?

Michael Mackenzie: MJ, from Bloomberg. First question about Arm. I have a question about how you treat Arm as assets. You have about 90% of Arm shares, and going forward, you may want to sell a little bit of Arm ownership or using Arm shares, you may want to do asset-backed financing to make new investment. Or which way or what kind of idea do you have in terms of how you use Arm assets?

Speaker Change: And Jay from Broome Gogga.

Jay: Our first question about the army.

Jay: I have a question about how you treat as assets you have about 90% of our.

Jay: Shares and going forward.

Jay: You may want to sell the other bit of arm ownership or using all Michelle you may want to do asset backed financing to making your investment so obituary or what kind of idea do you have in Germany, Hobbit you'd use arm assets I guess as a public company.

Speaker Change: Updated, as recent as now, but maybe automated. Warehouse. Business was something that we invested in. And AI is one of the biggest topics that we are looking at, obviously, and Gen AI and logistics. Manufacturing, talking about logistics, including transportation, and Autonomous Driving, from the factory, through transportation to the final destination.

Yoshimitsu Goto: Yes. Arm is a public company, and whether sell or not, buy or not, in principle, I will not make comment on that. I would just say, Arm in our group company is the most important company for us. Like I keep saying, we are the company that has the biggest confidence in Arm's growth potential, and we want to value Arm asset. Of course, we can utilize Arm assets in different ways. For example, using Arm shares for margin loans. Arm share as an asset from financing perspective is easier for us to utilize. I think there are a lot of options that we can select to support investment from financing perspective. Again, Arm is a great asset for us. I think that's something I can say now.

Michael Mackenzie: Yes. Arm is a public company, and whether sell or not, buy or not, in principle, I will not make comment on that. I would just say, Arm in our group company is the most important company for us. Like I keep saying, we are the company that has the biggest confidence in Arm's growth potential, and we want to value Arm asset. Of course, we can utilize Arm assets in different ways. For example, using Arm shares for margin loans. Arm share as an asset from financing perspective is easier for us to utilize. I think there are a lot of options that we can select to support investment from financing perspective. Again, Arm is a great asset for us. I think that's something I can say now.

Jay: And with us, so or not buy or not.

Speaker Change: In principle, I will not make a comment on that but.

Speaker Change: And when it comes to manufacturing specific cars or vehicles or robots, there are a lot of... can be presented to you as a result of AI evolution. And those are the subjects that we are looking at, but an investment opportunity does not come in order. We are looking at a wide variety of areas, but at the same time, whenever we have attractive business opportunities, we are not slow in talking to those founders. And if we want to have a long-term relationship, we use our balance sheet to make an investment in those businesses. And I think that kind of stance will remain the same for some time. Well, follow-up question. Investment by the SoftBank Vision Fund and investment by the SoftBank Group may be different by nature, but as a SoftBank Group, going forward, the investments that you make. Will you run your business going forward after investing in those businesses? Yes, that is one option.

Speaker Change: I would just say.

Speaker Change: Arm.

Speaker Change: In our group company.

Speaker Change: Is the most important.

Speaker Change: Company.

Speaker Change: For us.

Speaker Change: Like I keep saying.

Speaker Change: We are the company that has the biggest comfort us enormous growth potential and we want to value our asset of course, we can utilize our assets in different ways. For example are using arm she has for margin loans.

Speaker Change: So I'm sure as an asset from a financing perspective, it is easier for us to utilize so I think there are a lot of options that we can select.

Speaker Change: Two.

Speaker Change: Support investment from a financing perspective again is a great asset for US I think that's something that I can say now.

Min-Jeong Lee: Maybe for Navneet about Vision Fund. We see that the investment figure is quite still very small, actually smaller than the previous quarter. We want to know if, when, if at all, the pace of investment could pick up, later this year or in the future. Thank you.

Speaker Change: E V for enough neat about vision fund, one and we see that the investment cigarettes quite still a very small actually smaller than the previous quarter. We want to know if when if at all of the pace of investments could pick up later this year or in the future.

Speaker Change: Those invested companies can work with us as a long-term partners, or maybe we will build a joint venture with them, and eventually, we will have them as a group company. Even though the invested companies keep running the business and as a holding company, we may manage them as an investment, and we may transfer them to Vision Fund, or the SoftBank investment may be transferred to us. So we are open to different options that we can take. Thank you very much. Arigatou gozaimasu.

Speaker Change: Thank you.

Navneet Govil: Thank you, MJ. We remain very focused on looking at opportunities in the AI space, but at the same time, we're being very prudent about finding the right opportunities at the right valuations. Our focus is on AI investing across all AI verticals, but there's a very high bar for investing. We are also focused on unlocking our portfolio value. Per the earlier question about the discount in net asset value and market cap, the Vision Funds and Latam Funds have a fair value of JPY 146 billion, and we want to make sure that the value is unlocked. It also includes disciplined and consistent monetization. It's not just investing in new opportunities, but also unlocking value and monetizing our portfolio. Recently, in H2 2023, we made investments in companies like TravelPerk, Tractable, Cato Networks.

Speaker Change: Thank you M J.

Speaker Change: We remain very focused on looking at opportunities.

Speaker Change: My space.

Speaker Change: At the same time, we're being very prudent about finding the right opportunities at the right valuations.

Speaker Change: So our focus is on investing across all.

Speaker Change: Articles, but theres, a very high bar for investing.

Speaker Change: Thank you. Next question from Mr. Hugo from Bloomberg. Yes, this is Hugo from Bloomberg. Thank you very much for your presentation today.

Speaker Change: Also a focus on unlocking our portfolio values.

Speaker Change: Per the earlier question about the discount in net asset value and market cap.

Hugo: In the beginning, you mentioned that you turned a profit, and you were relieved. So, do you think that this is the next stage? You are in the next chapter?

Speaker Change: The vision funds in Latam funds have a fair value of 146 billion and we wanted to make sure that the value is unlocked and it also includes disciplined and consistent monetization. So its not just.

Hugo: because the investment amount for the third quarter was relatively small. I believe that it was because of the prudent manner, but is it because you couldn't find any good targets for the investments, or you couldn't find good investments, or? There are private equity investments and AI investments happening here and there. Why was the third quarter investment amount relatively small? And also, what is your pipeline right now for the next quarter? Is it going to be, again, a small amount for the fourth quarter? Or can you share any pipelines that you have right now for the coming quarters?

Speaker Change: Investing in new opportunities, but also.

Speaker Change: Unlocking value in monetizing our portfolio.

Speaker Change: But recently in the second half of 2023, we've made investments in companies like troubled Park Tractable Caito networks. So we are ready to deploy capital when we see the right opportunities.

Navneet Govil: We are ready to deploy capital when we see the right opportunities.

Min-Jeong Lee: Thank you.

Speaker Change: Thank you.

Yoshimitsu Goto: Thank you. Thank you very much. Any other questions, please? The very front row, in right-hand side. Thank you.

Speaker Change: I think that's what was I missed that thank you. Thank you very much any other questions. Please.

Hugo: So for this third quarter, the actual amount for the investment is small, like you said. However, I believe this happened to be a small, or coincident, I would say, because... many of our team members, or look for a good target; there are many discussions coming into Masa's office as well. We do see quite a large number of pipelines too, but when it comes to the actual investment itself and also the decision making for the investments and the actual execution of the amount, so. This is the amount that we have executed at the very last stage, which happened to be relatively small.

Does that mean, you don't need in each month, the very front row in a write down side. Thank you.

Yoshimitsu Goto: Yamaguchi from Mainichi Shimbun. It may be difficult for you to answer this question. I'd like to speak about Rakuten, other company. In the coming two years, JPY 800 billion of the bond redemption is expected, and they are refinancing. As a CFO, how do you look at the Rakuten status? Also as a general opinion wise, what is anything that you can comment that you care about? Commenting on the other companies is really difficult. It can be very rude. I don't want to make any comments about others. I can talk about our company. You mentioned that Rakuten is expecting the JPY 800 billion of the bond redemption.

[Analyst] (Mainichi Shimbun): Yamaguchi from Mainichi Shimbun. It may be difficult for you to answer this question. I'd like to speak about Rakuten, other company. In the coming two years, JPY 800 billion of the bond redemption is expected, and they are refinancing. As a CFO, how do you look at the Rakuten status? Also as a general opinion wise, what is anything that you can comment that you care about? Commenting on the other companies is really difficult. It can be very rude. I don't want to make any comments about others. I can talk about our company. You mentioned that Rakuten is expecting the JPY 800 billion of the bond redemption.

Speaker Change: Yamaguchi from mining genius paper.

Yamaguchi: It may be difficult for you to answer this question I would like to speak about the extent of the company. So in the coming two years 800 video and you end up the bond redemption is expected then they are refinancing again as a CFO. How do you look at the Ducks didn't status and also as a general opinion wise.

Yamaguchi: What what is anything that you you can comments are that you care about.

Hugo: We may see the next quarter or next quarter on that these that we are preparing and working on can be coming. So because we cannot really control the investment timings or investments, because we don't have an investment budget, many people ask us, but we in SoftBank Group don't have a budget for the investments because there is nothing good about setting a budget for investments. When we have good preparation, when we have a good target, and good investors, then we do execute the investments. And that process was actually small this quarter. That's the kind of reason why, in Japan, you found only five or six investees from the Vision Fund in Japan.

Yamaguchi: Common to the other companies.

Speaker Change: It's really a difficult it can be very rude I don't want to.

Speaker Change: To make any comments about the others are I can't talk about our company.

Speaker Change: So you mentioned that the Doctor in Israel are expecting the 800 would be unions of the bundle redemption. So when you speak of bond redemption, probably I can talk about our position for the bond redemption for example.

Yoshimitsu Goto: When you speak of bond redemption, probably I can talk about our position for the bond redemption. For example, our case as an issuer, we are quite a large issuer in terms of bonds, and especially for the retail bonds, retail investors, we have quite a large issuance as well. For them, we don't want them to feel any risk at all when it comes to redemption. When you see the redemptions, I want them to invest in us again; that's something that I would like them to feel. That's why I believe it is important to show you what is the source for the redemption. That's why we have a financial policy of cash positions, keeping cash position to cover at least two years of the bond redemption.

[Analyst] (Mainichi Shimbun): When you speak of bond redemption, probably I can talk about our position for the bond redemption. For example, our case as an issuer, we are quite a large issuer in terms of bonds, and especially for the retail bonds, retail investors, we have quite a large issuance as well. For them, we don't want them to feel any risk at all when it comes to redemption. When you see the redemptions, I want them to invest in us again; that's something that I would like them to feel. That's why I believe it is important to show you what is the source for the redemption. That's why we have a financial policy of cash positions, keeping cash position to cover at least two years of the bond redemption.

Speaker Change: Our case.

Speaker Change: I was in Asia.

Speaker Change: We are quite a large issue in terms of bumps.

Speaker Change: And especially for the retail bonds retail investors, we have quite a large issuance as well.

Speaker Change: And for them we.

Speaker Change: We don't want them to feel any risk at all when it comes to redemption.

Speaker Change: Do you see any potential or any good possibility that you may be able to find good investees in Japan from the Vision Fund investment point of view? Goto-san, do you see any opportunities here in Japan? I don't specifically talk about any company's name or anything, but I think there are many attractive companies in Japan. And also, of course, my expectation, my feeling wise, we want to have more investments in Japan, too. We hope that we will be able to support more and more Japanese companies, too. We have energy.

So when you see the redemptions that I want them to invest US again, that's something that they would like them to field. So that's why that I believe it is important to show you what is the source for the redemption.

Speaker Change: So that's why we have a financial policy of cash positions keeping the cash position for two two to cover two at least two year of the bond redemption, because we have expiries every yeah. So that we have to show you. What is the source for the redemption you hope I expiry dates we have money here, we can redeem your weekend or pay you back.

Yoshimitsu Goto: Because we have expiries every year, so that we have to show you what is the source for the redemption. You have a expiry date. We have money here. We can redeem you. We can pay you back. Or would you like to invest us again? Do you want us to prepare same kind of instrument so that you can invest with us once again? As long as we can show you the source of the redemption, then the investors feel more safe and happy. If you don't have any other way to manage your assets, then that you'll be able to invest us again. I think that's very important. If you go this other way, that's gonna be very tough. We did experience a little bit of difficult time in the past as well.

Speaker Change: Of course, that is going to be distributed to the world. And also, as you said, the number of investments that we have made in Japan is still small, so I hope that the good entrepreneurs in Japan are going to grow going forward. Thank you very much.

Speaker Change: Or would you like to invest US again do you want us to prepare a same kind of instrument. So that you can invest unless once again as long as you can show you.

Speaker Change: That's all from... Questions from Zoom. Thank you very much.

Speaker Change: The source of the redemption, then that the the and besides his feel more safe.

Speaker Change: That concludes the SoftBank Group Corporation's Earnings Results Announcement for the nine months period ended December 31, 2023. The video footage of this meeting will be distributed on demand from our corporate website. Thank you very much once again for joining the SoftBank Group Coop earnings results announcement for the nine-month period ended December 31st, 2023. Here in New York City, I'm Shawna Smith, alongside Brad Smith.

Speaker Change: And happy if you don't have any other way to manage your assets then that you'd be able to even business again I think that's very important and if you go the other way that's gonna be Veritas, we did experience a little bit of a difficult time in the past as well so that is why.

Yoshimitsu Goto: That is why we would like to show you, we have more than enough room there to redeem. Because we are investment company, that is gonna be even more important. I think that we would like to keep that kind of policy. Now also another question to Navneet. Indian Oyo IPO is expected. When do you think is going to be the time? I think that they are postponing the IPO timing.

Speaker Change: We would like to show you, we have more than enough room there.

To redeem.

Speaker Change: Because we are investment company that is going to be even more important.

Speaker Change: This is Yahoo! Finance's flagship show, The Morning Brief, the ultimate guide to help investors make smarter decisions for their portfolios. We're tracking early session volume while bringing you today's top market themes and highlighting Yahoo! Finance's most popular newsletter. That's right. We've got a packed Monday show for you today. Fed Chair Jerome Powell, the dashing host of a March race cut, once again in his Sunday evening 60 Minutes interview talking about balancing the risk of moving too quickly; moving too soon would set off inflation again. You could, or you could just halt the progress.

Speaker Change: And I think that the way you would like to keep that kind of a policy and then also another question did not need.

Speaker Change: India oil.

Speaker Change: Our ideal is expected when do you think is going to be the time I think that they are postponing the IPO timing.

Navneet Govil: We're very pleased with our India portfolio. In fact, FirstCry and Ola Electric filed for a listing in December 2023. As you pointed out, Oyo is also expected in the coming year or so to go public.

Speaker Change: We're very pleased with our India portfolio in fact forced cry in all our electric filed for listing in December of 2023.

Speaker Change: As you pointed out <unk> is also expected.

Speaker Change: In the coming year or so to go public.

Yoshimitsu Goto: Any reason why that they are postponing IPO event itself?

Speaker Change: On Georgia.

Speaker Change: Any reason why that they are postponing IPO event yourself.

Speaker Change: I think more likely that if you move too soon, you'd see inflation settling out somewhere well above our 2% target. If you move too late, then you might, policy would be too tight, and that could easily weigh on economic activity and on the labor market. And we'll hear commentary from a number of Fed officials. Among the list of Fed presidents speaking this week are Austin Goolsbee, Raphael Bostic, and Loretta Messner. Plus, we've got commentary from Susan Collins. And as hope for an early rate cut fades, pressure is on earnings to keep the market's momentum going. Let's get right to it.

Navneet Govil: There is no rush. For all of our portfolio companies, they will go public when the time is right, and that means they have the right controls in place, they have sustainable financial performance, and they are either on the path to profitability or are already profitable. That timing will depend on that.

Speaker Change: There is no rush for all of our portfolio companies. They will go public when the time is right and that means when they can give they have the right controls in place they have sustainable financial performance.

Speaker Change: And there either on the path to profitability or are already profitable so that timing will depend on that.

Yoshimitsu Goto: Thank you. Thank you very much. Any other questions from the floor? If not, let me move on to Zoom. Again, please refrain from connecting to other live stream to avoid any echoing. If you join Zoom's Japanese channel, please ask us question in Japanese. First question, Nagoshi-san from NHK. Please unmute and speak, please. Thank you for taking my question. My name is Nagoshi from NHK. In the third quarter of last year, Masa did not attend financial result announcement anymore. So he has been focusing on the growth of the business. I believe that I wonder if you can share with us, the update on, Masa. What Masa is doing lately? Well, what I didn't mention in the presentation, I think that what Masa is doing is one of the most interesting you may have.

Speaker Change: Got it.

Speaker Change: <unk>.

Speaker Change: Yeah.

Speaker Change: Thank you very much.

Speaker Change: Any other questions from the floor.

Speaker Change: If not let me move on to agenda.

Speaker Change: Yeah.

Speaker Change: Again.

Speaker Change: Please refrain from connecting to other by the stream to avoid any inkling.

Speaker Change: The three things that you need to know on this Monday morning, your roadmap for the trading day, Yahoo! Finances. Reporters Josh Schaefer, Alexander Canale, and Jared Blickery have more.

Speaker Change: And if you join a gym Jack.

Speaker Change: Japanese channel. Please ask a question in Japanese them first question and I'll go sound from NHK. Please a mute and speak please.

Speaker Change: Hey, Shawna, equity futures pulled back from record highs today after Federal Reserve Chair Jerome Powell sat down with television show 60 Minutes on Sunday night, reiterating the FOMC will move carefully with interest rate cuts and that Fed officials want to see more good data to prove inflation is moving in the right direction before cutting rates. And McDonald's missing sales expectations as a conflict in the Middle East weighs on the burger chain's international traffic. McDonald's CEO acknowledged the challenged consumer environment in the earnings release, writing, "We remain confident in the resilience of our business and the macro challenges that will persist in 2024." And Boeing's woes continue. The aerospace giant found another issue in its 737 jet that could delay deliveries of about 50 aircraft. The manufacturing problem originated in Boeing's fuselage supplier, that would be Spirit Aerosystems.

[Analyst] (NHK): Thank you for taking my question. My name is Nagoshi from NHK. In the third quarter of last year, Masa did not attend financial result announcement anymore. So he has been focusing on the growth of the business. I believe that I wonder if you can share with us, the update on, Masa. What Masa is doing lately? Well, what I didn't mention in the presentation, I think that what Masa is doing is one of the most interesting you may have.

Speaker Change: Thank you for taking my question My name is now going to shift from NHK.

Speaker Change: In the last quarter or third quarter without G up Martha.

Martha: Did it not attend a financial result announcement anymore. So he hasn't been focusing on the growth of the business I believe that I wonder if you can share with us.

Speaker Change: The update on Masa, what Martha is doing lately.

Speaker Change: Well.

Speaker Change: What I.

Speaker Change: Didn't dimension in the presentation I think though what muscle is doing is one of the most interesting you may have.

Yoshimitsu Goto: Every day, he has been pretty busy, as you can imagine. Although he is not in front of you, but he is in the office. Every day, if necessary, I see him, I talk to him, and I listen to him. There are a lot of amazing stuff going on. The last presentation he had in front of you, at that time, he mentioned that he wanted to ensure Arm's growth and Arm's evolution. Arm's growth should be linked to the growth of the society. That kind of broad, vast subject, in fact not only one, but also multiple broad, big subjects are something that he is working on. It may take time before making them bearing fruit, and it's been some time since he stopped showing himself to you. I hope he will come back to you sooner rather than later.

[Analyst] (NHK): Every day, he has been pretty busy, as you can imagine. Although he is not in front of you, but he is in the office. Every day, if necessary, I see him, I talk to him, and I listen to him. There are a lot of amazing stuff going on. The last presentation he had in front of you, at that time, he mentioned that he wanted to ensure Arm's growth and Arm's evolution. Arm's growth should be linked to the growth of the society. That kind of broad, vast subject, in fact not only one, but also multiple broad, big subjects are something that he is working on. It may take time before making them bearing fruit, and it's been some time since he stopped showing himself to you. I hope he will come back to you sooner rather than later.

Speaker Change: Every day has been pretty busy.

Speaker Change: As you can imagine.

Speaker Change: Although he isn't.

Speaker Change: Not in front of you, but he is in office.

Speaker Change: Both stocks are falling in pre-market trading. You, Well, our top story today is stock futures edging slightly lower after Fed Chair Jerome Powell says the time for rate cuts is coming, but the central bank needs to see more good data showing inflation moderating towards 2%. Powell made the comments on 60 Minutes Sunday night. It comes after the January Fed meeting where Powell poured cold water on the first rate cut coming in March. Only around 15% of traders are now pricing in that cut, and here you're taking a look at the CME FedWatch probability. Josh Schaefer joins us now to talk through this a little bit more. Brad, do you think he said that much differently than what he said on Wednesday? Not too much different. I don't think he said too much differently.

Speaker Change: Uh huh.

Speaker Change: Every day if necessary I.

Speaker Change: See him I talked to him.

Speaker Change: And I listen to him that a lot of amazing stuff going on.

Speaker Change: The last presentation. He had in front of you at that time and he mentioned that he wanted to cheer insurer arms growth and honest evolution, a squirrel cause ship.

Speaker Change: The link to our the growth of the society.

Speaker Change: And that kind of.

Borough the vast subject in fact, not only one but also multiple broad big subjects are something that he is working on it and it takes time before making them are bearing fruit and it's been some time since he stopped showing them himself to you.

Speaker Change: Yeah.

Speaker Change: I hope they will come back to you sooner rather than later I cannot.

Yoshimitsu Goto: I cannot say when, but I hope that you look forward to seeing him once again in person sooner rather than later. I believe that what he is doing should contribute a lot to SoftBank's corporate value, and we appreciate your patience. Thank you. A different question, if I may. At the last quarter's financial results announcement, you mentioned several investments by SoftBank Group, including autonomous vehicle business. I wonder from SoftBank Group, are there any specific themes or subjects where you focus on investments, and can you share with us how many companies that you have made investment at SoftBank Group? Well, I am not updated as recent as now, but maybe automated warehouse business was something that we invested in. AI is one of the biggest topics that we are looking at, obviously.

[Analyst] (NHK): I cannot say when, but I hope that you look forward to seeing him once again in person sooner rather than later. I believe that what he is doing should contribute a lot to SoftBank's corporate value, and we appreciate your patience. Thank you. A different question, if I may. At the last quarter's financial results announcement, you mentioned several investments by SoftBank Group, including autonomous vehicle business. I wonder from SoftBank Group, are there any specific themes or subjects where you focus on investments, and can you share with us how many companies that you have made investment at SoftBank Group? Well, I am not updated as recent as now, but maybe automated warehouse business was something that we invested in. AI is one of the biggest topics that we are looking at, obviously.

Josh Schaefer: No. Right? I think there was one point in the interview that was interesting, and Goldman Sachs highlighted this. Jan Hansi's team, in their note today, essentially said, well, 60 minutes indicated that maybe off-camera Powell might have said, maybe we'll cut midway through the year, which if we're really extrapolating what midway through the year means, I don't even know. But that, in theory, could be June, and in theory, it could be later than June. But it was also interesting that in that they took out that the Fed could also cut 25 or maybe 50 basis points at a time, so perhaps steeper cuts. But the thing here, I still think the takeaway is when you look at, we just mentioned the March cuts, right?

Speaker Change: St One, but I hope that you look forward to seeing him I'll once again in person.

Speaker Change: Sooner rather than later I believe that what he is doing should contribute to a lot of cheer so banks corporate value and we appreciate your patience.

Speaker Change: Thank you.

Speaker Change: Different question, if I may.

Speaker Change: At the last quarters financial results announcement, you mentioned several investment the buy up.

Speaker Change: Softbank group, including our autonomous vehicle business I Wonder from Softbank Group. We are are there any specific themes or subjects, where you focus on investments and can you share with us how many companies that you have made an investment as a softbank group.

Josh Schaefer: But look broader at the interest rate cut bets that we take a look at for the year. When you look at that graph and interest rate cuts for the overall year in 24, it hasn't changed that much. So when you look at that darker orange line, we're getting into the color thing here, Shauna, that we love to do. We'll go darker orange is the bottom, and yellow is the middle, right?

Speaker Change: Well I am not.

Speaker Change: They did.

Speaker Change: As recent as now, but Ah Ah maybe automated.

Warehouse business was something that we invested in <unk>.

Speaker Change: And I asked one of the biggest topics that the other peanuts, obviously and our journey II and logistics.

Yoshimitsu Goto: GenAI and logistics, manufacturing. Talking about the logistics, including transportation and autonomous driving. From factory through transportation to the final destination. When it comes to manufacturing, specific cars or vehicles or robots. There are a lot of things that can be presented to you as a result of AI evolution, and those are the subject that we are looking at. Investment opportunity does not come in order.

Josh Schaefer: Darker orange was December when we really had the soft landing trade take off. Yellow is right after the Fed meeting. This is as of Friday. The picture of where we end this year hasn't changed that much, and that's been the big takeaway from most economists and strategists over the last couple of days. You can argue about March or May until your face turns blue, but if we're still going to get down to about 4% on the benchmark interest rate by the end of the year, that's what matters the most. Yeah, exactly.

Speaker Change: Manufacturing.

Speaker Change: Talking about the logistics.

Speaker Change: Including transportation.

Speaker Change: And autonomous driving.

Speaker Change: From factory.

Speaker Change: Yeah.

Speaker Change: Through transportation to the final destination.

Speaker Change: And when it comes to manufacturing a specific cause of vehicles of Roberts.

Speaker Change: So there are a lot of.

Speaker Change: Things.

Speaker Change: That.

Speaker Change: Can be presented to you as a result of AI, well lithium and those odd the subject that we are looking at but investment opportunity does not come in order. So.

Speaker Change: And Josh, it's very similar to what we've heard from a number of economists, strategists, and even on our program over the last several weeks, that there's way too much talk about the timing of that first cut. Obviously, we love to talk about it in the media, but really, from a strategist's perspective, it's all about the pace of the cuts and exactly what that rate is going to look like by the end of the year. But let's just focus on the short term, right? Because there are a lot of traders out there, a lot of our viewers are trying to figure out what the next couple of weeks are going to look like. Now, how much pressure is on these earnings reports to live up to expectations, or exceed expectations, given the fact that we might not be seeing a rate cut anytime soon? No, you definitely put more pressure on the fundamentals, right? Because that's really one of the only, I guess, quote unquote, positive parts that you could have in the overall story right now.

Yoshimitsu Goto: We are looking at wide varieties of area, but at the same time, whenever we have attractive business opportunities, we are not slow in talking to those founders and if we want to have a long-term relationship, we use our balance sheet to make an investment in those businesses. I think that kind of stance will remain the same for some time.

Speaker Change: We are looking at the wide variety of area, but at the same time whenever we have an attractive business opportunities. We are not slow in talking to those found us and if you want to have a longer term relationship that we use our balance sheet that you may.

Speaker Change: Investment in those businesses and I think that's kind of a status that will remain the same for some time and well follow up question investment by Softbank Vision Fund investment by Softbank group may be different by nature, but as a Softbank group.

Yoshimitsu Goto: Well, follow-up question. Investment by SoftBank Vision Fund, investment by SoftBank Group may be different by nature, but as a SoftBank Group, going forward, investment that you make, will you run your business going forward after investing in those businesses?

Speaker Change: Going for the investment that you make.

Really you.

Speaker Change: Iran. Yes.

Speaker Change: Your business going forward after investing in those businesses, yes that is one option.

Yoshimitsu Goto: Yes, that is one option. Those invested companies can work with us as a long-term partner or maybe we build a joint venture with them and eventually we will have them as a group company, even though invested companies keep running the business and as a holding company, we may manage them as investment. We may transfer them to Vision Fund or SoftBank investment may be transferred to us. We are open to different options that we can take.

Speaker Change: Those invested companies can work with us as a long term partner or maybe we built a joint debenture with them.

Speaker Change: And eventually we will have them as a group company, even though our invested companies keep running of the business and as a holding company, we may manage them as I.

Speaker Change: If you were someone that was betting on rate cuts to then increase earnings, you know, coming out three, four quarters from now, well, that's not coming necessarily right now. So you're looking at what's happening right now. We have seen a little bit of a turn here, guys.

Speaker Change: Investment.

Speaker Change: And even we may transfer them to vision fund or Softbank investment may be transferred to us.

Speaker Change: So.

Speaker Change: We are open.

Speaker Change: Choose a different options that we can take.

Yoshimitsu Goto: Thank you very much.

[Analyst] (NHK): Thank you very much.

Speaker Change: Thank you very much.

Yoshimitsu Goto: Thank you.

Yoshimitsu Goto: Thank you. Next question from Mr. Hyuga from Bloomberg.

Speaker Change: I think that the only thank you.

Speaker Change: I mean, when we take a look broadly, I was sitting here a week ago and we were saying you kind of need big tech to turn the story around, right? We have overall S&P 500 earnings per share negative right now. And then you look at what big tech did, and they were positive again for the quarter.

Speaker Change: Next question from Miss the sugar from Bloomberg.

Yoshimitsu Goto: Yes, this is Hyuga from Bloomberg. Thank you very much for your presentation today. In the beginning, you mentioned that you turned to profit and you are relieved, you said. Do you think that this is the next stage? You are in the next chapter? Or because the investment amount for the Q3 was relatively small, I believe that it was because of the prudent manner, but is it because you couldn't find any good target for the investments or you couldn't find good investments, or there are private equity investments and AI investments are happening here and there. Why the Q3 investment amount was relatively small? And also, what is your pipelines right now for the next quarter? Is it going to be again the small amount for the Q4?

Takashi Hyuga: Yes, this is Hyuga from Bloomberg. Thank you very much for your presentation today. In the beginning, you mentioned that you turned to profit and you are relieved, you said. Do you think that this is the next stage? You are in the next chapter? Or because the investment amount for the Q3 was relatively small, I believe that it was because of the prudent manner, but is it because you couldn't find any good target for the investments or you couldn't find good investments, or there are private equity investments and AI investments are happening here and there. Why the Q3 investment amount was relatively small? And also, what is your pipelines right now for the next quarter? Is it going to be again the small amount for the Q4?

Speaker Change: Yeah.

Speaker Change: Yes. This is Hugo from Bloomberg. Thank you very much for your presentation today.

Hugo: In the beginning you mentioned that the you turned to a profit and you I believed you said.

Hugo: So.

Hugo: Do you think that this is the next stage you are in the next chapter.

Speaker Change: A lot of people made things about the Microsoft and Alphabet earnings. Obviously, the stocks didn't do that well, but it was interesting to see that, in their note, they still beat estimates. They still beat the high bar.

Hugo: Sure.

Hugo: Because the investment amount for the third quarter was relatively small I believe that leave us because of the prudent manner, but the is it because you couldn't find any good targets for the investment so all.

Speaker Change: It just didn't really work for investors based on where the stock price is. But what we're seeing in earnings right now has been pretty solid. Sabina Subramanian, I'm looking at her note right now from this morning, highlighting a 6% beat, saying it's, quote, debunking the bears. And I think overall, you're seeing a decent narrative play out. Of course, not everyone has been a

Hugo: You couldn't find good investments or.

Hugo: There are private equity investments in the E. R investments are happening here in there why the third quarter investment amount was real play believes small.

Speaker Change: And also what is your pipeline right now for the next quarter is it going to be again, the small amount for the fourth quarter or what do you can you share any pipelines that you have right now for the coming quarters.

Speaker Change: Debunking the bears. I like that. All right, Josh, thanks so much for teeing this up for us. And the conversation continues to move forward here. We were talking about earnings. Let's talk a little bit more about McDonald's, the Golden Arches, whatever you want to call them. Call them down right now by about 1.4%. Shares are sliding this morning after global same-store sales rose 3.4% during the fourth

Yoshimitsu Goto: Can you share any pipelines that you have right now for the coming quarters? For this Q3, actual amount for investment is small, like you said. However, I believe this happened to be small or coincident, I would say, because many of our team members are looking for the good target. There are many discussions coming into Masa's office as well. We do see quite a large number of the pipelines too, but when it comes to the actual investment itself and also the decision making for the investments and actual execution of the amounts, this is the amount that we have executed at the very last stage is shown here, which happened to be relatively small.

Takashi Hyuga: Can you share any pipelines that you have right now for the coming quarters?

Speaker Change: Yeah.

Yoshimitsu Goto: For this Q3, actual amount for investment is small, like you said. However, I believe this happened to be small or coincident, I would say, because many of our team members are looking for the good target. There are many discussions coming into Masa's office as well. We do see quite a large number of the pipelines too, but when it comes to the actual investment itself and also the decision making for the investments and actual execution of the amounts, this is the amount that we have executed at the very last stage is shown here, which happened to be relatively small.

Speaker Change: So for this third quarter actual amount for investment is small like you said.

Speaker Change: However, I believe this happened to be a small or coincident I would say because.

Speaker Change: Many of our team members.

Speaker Change: Oh.

Speaker Change: That fell short of estimates, though. The fast food giant is also facing setbacks from conflicts in the Middle East. Yahoo!

Speaker Change: Look for the good target there are many.

Speaker Change: Discussion coming into my says office as well.

Speaker Change: Finance electric. Alexandra Canal has the top takeaways here. Sorry, I was thinking about this company that's usually electric. Usually, it is. Not so much today. Not so much. Like you said, that surprise same-store sales miss dragged down the stock today. We also saw revenue come in lower than expected. We did see a beat on the bottom line, but it's that same-store sales miss that analysts and Wall Street investors are really going to be focused on here. Same-store sales, also known as comparable sales, is one of the most important metrics for restaurants and fast food chains.

Speaker Change: We do see a quite a large number of the pipelines too, but when it comes to the actual investment yourself and also the decision making for the investments.

Speaker Change: And the actual execution of D M ounce.

So.

Speaker Change: This is the amount that they would have executed at the very last stage is shown here, which happened to be relatively small.

Yoshimitsu Goto: We may see the next quarter on that we are preparing or we are working on can be coming out. Because we cannot really control the investment timing, investments, because we don't have an investment budget, many people ask us, but we, SoftBank Group or SoftBank, doesn't have a budget for the investment because there is nothing good about setting the budget for investment. Because when we have a good preparation, when we have a good target, good investment, investees, then we do execute the investments. That process was actually small this quarter. That's the kind of reason why. In Japan, we only found 5 or 6 investees in Japan from the Vision Fund.

Speaker Change: But.

Speaker Change: We may.

Speaker Change: See the next go though a next quarter on that these that the we are preparing or where youre working on can be coming.

Speaker Change: [noise] out so because we cannot really control the investment timing. So investments are because we don't have the investment budget. Many people ask us baidu ease after my group or Softbank doesn't have a budget for this and because there is nothing good about fitting the budget for investment because.

Speaker Change: McDonald's has consistently outperformed in that area, but we're seeing that miss in both the U.S. and international markets. So global same-store sales clocked in at 3.4%, that's lower than the expected 4.79% jump, while U.S. sales growth came in at 4.3%.

Speaker Change: Where do we have a good preparation when we have a good target good investment our Investees, then we do execute the mismatch and that.

Speaker Change: That's just shy of the 4.45% increase Wall Street had expected. So, still growing, just not at the rate that analysts were looking for. And a big reason for that stemmed from the conflicts that are going on right now in the Middle East.

Speaker Change: The process was actually small this oh this quarter, that's a kind of a reason why.

Speaker Change: In Japan.

Speaker Change: Whereas on the you found on the five by six our Investees in Japan from the Vision Fund do you see any potential for any good possibility that that you may be able to find a good investees are in Japan from mutual fund investment point of view, but also do you see any opportunities here in Japan.

Yoshimitsu Goto: Do you see any potentials or any good possibility that you may be able to find a good investees in Japan from Vision Fund investment point of view? Goto-san, do you see any opportunities here in Japan? I don't specifically talk about any company's name or anything, but I think there are many attractive companies in Japan. Also, of course, my expectation, my feeling-wise, we wanna have more investments in Japan too. We hope that we'll be able to support more and more in Japanese company too. We have energies, of course, that is going to be distributed to the world. Also, as you said, that the number of the investments that we have made in Japan is still less, so hope that the good entrepreneurs in Japan is gonna grow going forward.

Speaker Change: This is something that CEO Chris Kempchinski alluded to prior to the earnings report. He had a LinkedIn post back in early January saying, quote, "Several markets in the Middle East and some outside the region are experiencing a meaningful business impact due to the war and associated misinformation that is affecting brands like McDonald's. There's also been boycotts over the chain's perceived pro-Israel stance." The call is currently underway right now.

Speaker Change: I don't.

Speaker Change: Specifically they talk about the new company's name or anything that I think there are many attractive companies in Japan.

And also of course my expectation my feeling wise, we want to have more investments in Japan to we hope that we'll be able to support more and more are in Japanese company too.

Speaker Change: So I'm sure the Middle East conflict and how McDonald's plans to handle this moving forward is going to be a big emphasis on the call here. But let's get to some good news, because McDonald's loyalty program is still very strong and a big reason why we saw that beat on the bottom line there. Loyalty members brought in $6 billion in sales across 50 markets, more than $20 billion when you look at the whole fiscal 2023. That's a 45% jump compared to 2022. So loyalty remains strong.

Speaker Change: We have images.

Speaker Change: Of course that is going to be distributed to the world and also as you said that the number of the investments that we have made in Japan, you still list or hope that the good and the entrepreneurs in Japan is going to grow going forward.

Yoshimitsu Goto: Thank you very much. That's all from questions from Zoom. Thank you very much. That concludes the SoftBank Group Corp.'s earnings results announcement for 9-month period ended December 31, 2023. The video footage of this meeting will be distributed on demand from our corporate website. Thank you very much once again for joining the SoftBank Group Corp earnings results announcement for the 9-month period ended December 31, 2023.

Speaker Change: Thank you very much.

That's all from me.

Speaker Change: Questions from the gym.

Speaker Change: Thank you very much that concludes the Softbank Group Corporation earnings results announcement for nine months ended December 31st 2023. The video footage of this meeting will be distributed on demand from our corporate website.

Speaker Change: The consumer is also apparently strong in the face of price hikes and those larger check sizes due to inflation. McDonald's said in that release, quote, "We've remained confident in the resilience of our business amid macro challenges that will persist in 2024." So despite all of this, I think Wall Street is overall very bullish on McDonald's as a company. But again, we'll see how they handle this same-store sales. Because it's not something we normally see.

Speaker Change: Thank you very much once again for joining the Softbank Group Corp earnings results announcement for the nine month period ended at December 31st 2023.

Speaker Change: Yeah.

Seana Smith: Here in New York City, I'm Seana Smith alongside Brad Smith, and this is Yahoo Finance's flagship show, The Morning Brief, the ultimate guide to help investors make smarter decisions for their portfolio. We're tracking early session volume while bringing you today's top market themes and elevating Yahoo Finance's most popular newsletter.

Here in New York City, Amazon has meant alongside Bradman This Yahoo finance and flagship show. The morning brief the ultimate Guy to help investors make smarter decisions for their portfolio. We're tracking early fashion volume on Breo today's top market themes and elevating Yahoo. Finance is most popular newsletter drivers that affect Monday show, bringing today venture grown Pal.

Speaker Change: Yeah, we don't normally see that, and I think this might have taken the street maybe by surprise just a little bit, given the fact that McDonald's is one of these names that has been relatively resilient. When you talk about the fact that consumers are trading down, they're still going into McDonald's. I'm curious also, Ali, about some of the softness that maybe we could see looking out to the rest of 2024. If we're already seeing a little bit of weakness, a lot of that being driven by the Middle East, and we're not getting potentially that rate cut anytime soon, putting maybe more pressure on Americans, what would that mean for a name like McDonald's?

Brad Smith: That's right. We've got a packed Monday show for you today. Fed Chair Jerome Powell dashing hopes of a March rate cut once again in his Sunday evening 60 Minutes interview, talking about balancing the risk of moving too quickly.

Speaker Change: Dashing hopes of a March right Scott once again Sunday evening 60 minutes interview talking about balancing the risks of moving too quickly.

Brian Levitt: Moving too soon would set off inflation again.

Speaker Change: Moving to soon would shut off inflation again, you could or you could just hold the progress I think more likely if you move to soon you'd see inflation settling out somewhere well above our 2% target. If you move too late then you might you might policy would be too tight and that could easily weigh on economic activity.

Jerome Powell: You could, or you could just halt the progress. I think more likely if you move too soon, you'd see inflation settling out somewhere well above our 2% target. If you move too late, policy would be too tight, and that could easily weigh on economic activity and on the labor market.

Brad Smith: We'll hear commentary from a number of Fed officials. Among the list of Fed presidents speaking this week is Austan Goolsbee, Raphael Bostic, and Loretta Mester. Plus, we've got commentary from Susan Collins.

Speaker Change: And on the labor market.

Speaker Change: We will hear commentary from a number of fed officials among the list of fed President speaking this austan Goolsbee Rafael Boston and provide a master boss, who got commentary.

Seana Smith: As hope for an early rate cut fades, pressure is on earnings to keep the market's momentum going. Let's get right to it. The three things that you need to know on this Monday morning, your roadmap for the trading day. Yahoo Finance's reporters Josh Schafer, Alexandra Canal, and Jared Blikre have more.

Speaker Change: Colin.

Ali: Yeah, we already saw McDonald's hike prices in 2023. It's very possible we could see those price increases increase this year, especially as you were saying, if we don't get that rate cut, if there's more pressure on these businesses. And the Middle East conflict is not going away anytime soon.

Speaker Change: However in early Railcard fades pressures on earnings and keep the markets momentum going let's get right to the three things that you need to know and as my name warning. Your roadmap were they trading day Yahoo Finance This reporter's Joshua for Alexandra Canal, and gerbil Hickory have more.

Josh Schafer: Hey, Seana. Equity futures pulling back from record highs today after Federal Reserve Chair Jerome Powell sat down with television show 60 Minutes on Sunday night, reiterating the FOMC will move carefully with interest rate cuts, and that Fed officials wanna see more good data to prove inflation is moving in the right direction before cutting rates.

Speaker Change: Shona equity futures pulling back from record highs today after federal reserve character, Ron Paul sat down with TV shows 60 minutes on Sunday night, reiterating the epilepsy will move carefully with interest rate cuts and that's beneficial monitoring more good data to prove inflation is moving in the right direction before cutting rates and.

Ali: And I think some of that pressure that we saw in the fourth quarter is likely going to continue in Q1, and hopefully, we get some answers there. But I do think there are overarching risks here for the company. No pun intended. Overachievement for the golden arches, right, Ali? Thanks so much.

Alexandra Canal: McDonald's is missing its sales expectations as the conflict in the Middle East weighs on the burger chain's international traffic. McDonald's CEO is acknowledging the challenged consumer environment in the earnings release, writing, quote, "We remain confident in the resilience of our business amid macro challenges that will persist in 2024.

Speaker Change: Donald mid tier sales expectations as a conflict in the middle East weighs on the Burger King International traffic Mcdonald's CEO acknowledging the challenged consumer environment in the earnings release, writing quote we remain confident in the resilience of our business and the macro challenges that will persist in 2024 and boeing's woes. They continue.

Speaker Change: Let's get to another top trending ticker here at Yahoo Finance, and that is Caterpillar shares on track to hit an all-time high in pre-market trading, or they're set to open at an all-time high here as we see this move higher in pre-market trading, the company beating the street's expectations here with revenue of $17.1 billion in its fourth quarter. Adjusted profit per share of $5.23. You're looking at gains here ahead of the open of about 4.5%. Digging into these numbers just a bit here. It's clear, my takeaway, at least, Brad, is that demand has stayed relatively resilient, especially when you look at these North America numbers. Retail sales are up about 11%. They raised their margin target here by 100 basis points, also saying that they expect to reach that in the top half of the new range in 2024. Early street reaction looks to be pretty pleased with these results.

Jared Blikre: Boeing's woes, they continue. The aerospace giant found another issue in its 737 jets that could delay deliveries of about 50 aircraft. Manufacturing problem originated in Boeing's fuselage supplier, that would be Spirit AeroSystems. Both stocks are falling in pre-market trading.

Speaker Change: Aerospace giant found another issue and a 737 jets that could delay deliveries of about severe aircrafts manufacturing problem originated if boeing fuselage fuselage supplier that would be spirit Aero systems, both stocks are falling and pre market trading.

Speaker Change: [noise] or top story today stock futures edging slightly lower after fed chair Jerome Powell says the time for rate cuts is coming but the central bank needs to see more good data showing inflation.

Brad Smith: Well, our top story today, stock futures edging slightly lower after Fed Chair Jerome Powell says the time for rate cuts is coming, but the central bank needs to see more good data showing inflation moderating towards 2%. Powell making the comments on 60 Minutes Sunday night. It comes after the January Fed meeting where Powell poured cold water on the first rate cut coming in March. Only around 15% of traders are now pricing in that cut, and there you're taking a look at the CME FedWatch Tool probability. Josh Schafer joins us now to talk through this a little bit more. Hey, Josh.

Speaker Change: Moderating towards 2% power, making the comments on 60 minutes Sunday night and comes after the January fed meeting, where Pal poured cold cold water on the first rate cut coming in March all around 15% of traders in our pricing in that card and they're taking a look at the CME fed watch probability Joshua joins US now to talk through this a little bit more.

Josh Schafer: Brad, do you think he said that much different than what he said on Wednesday?

Speaker Change: Josh.

Brad Smith: Not too much different.

Joshua: Brian if it he said that looks different from what he said on Wednesday that semester I don't think it's something much different right. I think there was one point in the interview that was interesting and Goldman Sachs highlighted this yard houses have team in there now today, essentially saying well 60 minutes indicated that maybe off camera Powell Might've said, maybe we'll cut midway through the year, what's your firm.

Josh Schafer: I don't think he said too much different, right?

Brad Smith: No.

Josh Schafer: I think there was one point in the interview that was interesting, and Goldman Sachs highlighted this, Jan Hatzius, his team, in their note today, essentially saying, well, 60 Minutes indicated that maybe off camera, Powell might have said maybe we'll cut midway through the year, which if we're really extrapolating what midway through the year means, I don't even know. That in theory could be June, it in theory could be later than June. It was also interesting that they thought that in that they took out the the Fed could also cut 25 or maybe 50 basis points at a time, so perhaps steeper cuts.

Speaker Change: TD Callen is calling it a strong quarter here for the company. Yeah, favorable price realization is what the company brought up a couple times in this release. Now, take a look at this while we've got it up on the screen. The construction sales by region, and actually, if you cascade even further down, you'll see some of the consolidated sales and revenues by region. North America really was the only bright spot on a regional basis.

Really extrapolating, what midway through the year means I don't even know but that in theory could be June it in theory. It could be later than June but it was also interesting that they thought that in that they took out the pick it up if I could also cut 25, or maybe 50 basis points at a time, so perhaps deeper cuts, but the thing here I still think the takeaway is when you look at.

Brad Smith: Mm-hmm.

Josh Schafer: The thing here I still think the takeaway is when you look at, we just mentioned the March cuts, right? Look broader at the interest rate cut bets that we take a look at for the year. When you look at that graph and interest rate cuts for the overall year in 2024, it hasn't changed that much. When you look at that darker orange line, we're getting into the color thing here, Shana, that we love to do. We'll go darker orange is the bottom and yellow is the middle, right? Darker orange was December when we really had the soft landing trade take off. Yellow is right after the Fed meeting. This is as of Friday.

Speaker Change: Everywhere else, you're looking at declines. However, one of the huge things that kind of jumped out to me as the company gave just a little bit more of the details around this is that North America specifically saw that favorable price realization that I was mentioning earlier offset by lower sales volume. So that's interesting there.

Joshua: We just mentioned the March cuts right, but look broader at the interest rate cut batch that we take a look out for the year. When you look at that graph in interest rate cuts for the overall year in 'twenty four it hasnt changed that much. So when you look at that darker Orange line, we're getting into the color thing here and there.

Joshua: We'll go dark Orange is the bottom in yellow is the middle right darker.

Joshua: Darker Orange was December when we really had the soft landing trade take off yellow is right. After the fed meeting this is as of Friday.

Speaker Change: So despite that lower sales volume, which they're saying is kind of driven by some of the impact from dealer inventories, they also still did see higher sales of equipment to end users. So all this considered, dealer inventory did increase during the fourth quarter of 2022 compared with a decrease during the fourth quarter of 2023. So improvement on the inventory side, but at the end of the day, looking at Asia Pacific, lower sales volumes, decreased sales volume driven by the impact of changes in dealer inventories as well. You got to think about the spending on certain construction projects as well within that region, especially as we've been monitoring the liquidation of one of the largest property developers within that region, how that cascades through to the number of projects that actually get greenlit to get started as of right And so that's something, of course, will be interesting to see if the company comments on it specifically in the earnings call. Yes, sir.

Josh Schafer: The picture of where we end this year hasn't changed that much, and that's been the big takeaway from most economists and strategists over the last couple of days. You can argue about March or May until your face turns blue, but if we're still gonna get down to about 4% at the benchmark interest rate by the end of the year, that's what matters the most.

Joshua: Picture of where we end this year hasnt changed that much and that's been the big takeaway from most economists and strategies over the last couple of days you can argue about March or may until your face turns blue, but if we're still going to get down to about 4%.

Joshua: The benchmark interest rate by the end of the year, that's what matters. The most exactly and Josh was very similar to what we've heard from a number of economists strategists, even on our program over the last several weeks that there's way too much talk about the timing of that first got obviously, we love to talk about it in the media, but really in terms of from a strategist perspective, it's all about the pace of the cuts him exactly what that rate is going to look like by the end.

Seana Smith: Yeah, exactly. Josh, it's very similar to what we've heard from a number of economists, strategists.

Josh Schafer: Mm-hmm

Seana Smith: Even on our program over the last several weeks, that there's way too much talk about the timing of that first cut. Obviously, we love to talk about it in the media.

Josh Schafer: Mm-hmm

Seana Smith: ... really in terms of from a strategist perspective, it's all about the pace of the cuts. I mean, exactly what that rate is gonna look like by the end of the year. Listen-

Alexandra Canal: Just focus on the short term, right? Because a lot of traders out there, a lot of our viewers, are trying to figure out what the next couple of weeks are going to look like. How much, now, how much pressure is on these earnings reports to live up to expectations, to exceed expectations, given the fact that we might not be seeing a rate cut anytime soon?

Joshua: For the year, but let's just focus on the short term right because a lot of traders out there a lot of our viewers are trying to figure out what the next couple of weeks are going to look like how much now how much pressure is on these earnings reports to live up to expectations to exceed expectations. Given the fact that we might not be seeing a rate cut anytime soon no you definitely puts more pressure on the fundamentals right because that's really.

Josh Schafer: No, you definitely, it puts more pressure on the fundamentals, right? Because that's really one of the only, I guess, quote, unquote, "positive parts" that you could have in the overall story right now if you were someone that was betting on rate cuts to then increase earnings, you know, coming out 3, 4 quarters from now. Well, that's not coming necessarily right now, so you're looking at what's happening right now. We have seen a little bit of a turn here, guys. I mean, when we take a look broadly, I was sitting here a week ago and we were saying you kinda need big tech to turn the story around, right? We have overall S&P 500 earnings per share is negative right now. Then you look at what big tech did, we're positive again for the quarter.

Joshua: One of the only I guess quote unquote positive parts that you could have in the overall story right. Now if you were someone that was betting on rate cuts to then increase earnings coming out three four quarters from now well that's not coming necessarily right now so youre looking at what's happening right now we have seen a little bit of a turn here guys. I mean, when we take a look broad.

Speaker Change: And they were going to be talking to an analyst here later in the hour, getting their perspective on what we're hearing from the conference call taking place right now. All right, let's talk about another stock here, and that is Boeing. The problems are continuing here for the company now finding misdrilled holes in some fuselages of its 737 MAX jets and causing some reworkings here for 50 planes that have not yet been delivered.

Joshua: <unk> I was sitting here a week ago, when youre, saying your economy Big tact to turn the story around right. We have overall S&P 500 earnings per share is negative right now and then you look at what Big Tech did.

Josh Schafer: A lot of people made things about the Microsoft and Alphabet earnings. Obviously, the stocks didn't do that well. It was interesting FactSet pointing out in their note, they still beat estimates. They still beat the high bar. It just didn't really work for investors based on where the stock price is. What we're seeing in earnings right now has been pretty solid. Savita Subramanian, I'm looking at her note right now from this morning, highlighting a 6% beat, saying it's, quote, "debunking the bears." I think overall you're seeing a decent narrative play out. Of course, not everyone has been a winner.

Joshua: We're positive again for the quarter a lot of a lot of people made things about the Microsoft and alphabet earnings obviously, the stocks didn't do that well, but it was interesting facts at pointing out in there now they still beat estimates they still beat the high the high bar. It just didn't really work for investors based on where the stock prices, but what were seeing in earnings right now has been pretty solid Sabina supermini in them.

Speaker Change: Now, this latest setback for Boeing could cause a further delay in deliveries, which is one of the reasons why you're looking at a loss of about three percent here ahead of the open. It is just another issue, another challenge that Boeing and its leadership team and its employees are having to navigate up until this point here, Brad. We talked about the fact that they're still dealing with the fact that they're not able to expand production on the 737 MAX 9 because of the issues stemming from the door that was blown off mid-flight on the Alaskan Airlines flight several weeks ago. We've heard more and more commentary from Boeing's earnings release last week, also from a number of the leading airliners, just about how they're thinking about the latest developments out But again, this issue only affects so far 50 undelivered planes from what we are learning here from Boeing, but certainly a challenge here.

Joshua: At her no right now from this morning, highlighting a 6% be saying its quota bunking the bears and I think overall, you're seeing a decent narrative play out of course, not everyone has been a winner.

Brad Smith: Debunking the bears. I like that. All right, Josh, thanks so much for teeing this up for us, and the conversation continues to move forward here. We were talking about earnings here. Let's talk a little bit more about McDonald's, the golden arches, whatever you wanna call them. They're down right now by about 1.4%. Shares sliding this morning after global same store sales rose 3.4% during Q4. That fell short of estimates, though. The fast food giant also facing setbacks from conflicts in the Middle East. Yahoo Finance's Alexandra Canal has the top takeaways here. Sorry, I was thinking about this company that's usually electric.

Joshua: In comparison.

Joshua: Josh Thanks, so much art in the Sop off for us in the conversation continues to move forward here, we were talking about earnings, let's talk a little bit more about Mcdonald's the golden arches, whatever you want to call them calmed down right now by about 1.4% sure slides. This morning. After global same store sales rose three 4% during the fourth quarter that fell short of estimates, though the fast food giant.

Also facing setbacks from conflicts in the Middle East Yahoo finances Electric Alexandra Canal as the top takeaways there sorry, I was thinking about this company individually electric.

Alexandra Canal: Usually is.

Brad Smith: Not so much today.

Alexandra Canal: Not so much. Like you said, that surprise same store sales miss dragging down the stock today. We also saw revenue come in lower than expected. We did see a beat on the bottom line, but it's that sales same store sales miss that analysts and Wall Street investors are really going to be focused on here. Same store sales, also known as comparable sales, it's one of the most important metrics for restaurants and fast food chains. McDonald's has consistently outperformed in that area, but we're seeing that miss in both the US and international markets. Global same store sales clocking in at 3.4%. That's lower than the expected 4.79% jump. While US sales growth came in at 4.3%. That's just shy of the 4.45% increase Wall Street had expected. Still growing, just not at the rate that analysts were looking for.

Alexandra Canal: So much today NASA lives like you said that surprise same store sales meds dragging down the stock today. We also saw revenue come in at lower than expected. We did see a V on the bottom line, but at that sale. Our same store sales mass that analyze and wall Street investors are really going to be focused on here at same store sales also known as comparable sales. It's one of the most important metrics.

Speaker Change: That's just another setback for Boeing. What's also interesting is what's coming out in some of the lawsuits as well as the clarity and detail that we're getting about what's taking place at Spirit Aerosystems, which is the company that is responsible for some of the processes to build this plane. And at the end of the day, it is really the manufacturer or the supply chain part where the holes get drilled as well. And the fact that one of the employees who has since been let go, it sounds like, as part of the lawsuit, offered some additional context and color about the operations internally, about these Pizza Fridays that were essentially driven by not having as many of the reported issues. So you think about days without incidents, well, days without a report and what was driven by that. At the end of the day, it sounds like they were incentivized to not report certain things. And if they did, then, well, they would have some type of retaliatory effort, which in itself is retaliation. And anybody who's gone through an HR training course knows that you should not be let go for something like that, especially when it's within the realm of your job.

Alexandra Canal: For restaurants, and fast food chain Mcdonald's has consistently outperformed in that area, but we're seeing that mess in both the U S and international markets. So global same store sales clocking in at 3.4% that's lower than the expected $4 seven 9% jumped while U S sales growth came in at 4.3% that's just shy.

Alexandra Canal: Of the 4.45% increase wall Street had expected so still growing just not at the rate that analysts were looking for and a big reason for that stemmed from the complex that are going on right now in the middle East that is something that CEO, Chris can shinskie alluded to you prior to the earnings report he had a linkedin posts back in early January saying quote.

Alexandra Canal: A big reason for that stemmed from the conflicts that are going on right now in the Middle East. This is something that CEO Chris Kempczinski alluded to prior to the earnings report. He had a LinkedIn post back in early January saying, quote, "Several markets in the Middle East and some outside the region are experiencing a meaningful business impact due to the war and associated misinformation that is affecting brands like McDonald's." There's also been boycotts over the chain's perceived pro-Israel stance. The call is currently underway right now, so I'm sure the Middle East conflict, how McDonald's plans to handle this moving forward is going to be a big emphasis on the call here. Let's get to some good news because McDonald's loyalty program, still very strong, and a big reason why we saw that beat on the bottom line there.

Alexandra Canal: Several markets in the middle East and some outside the region are experiencing a meaningful business impact due to the war and associated misinformation that is affecting brands like Mcdonald's Theres also been boycott over the chain port perceived pro Israel stance at the call. It currently underway right now as I'm sure the middle East conflict.

Alexandra Canal: Mcdonald's plans to handle that moving forward is going to be a big emphasis on the call here, but let's get this is good news because Mcdonald's loyalty program still very strong and a big reason why we saw that be on the bottom line there are or loyalty members, bringing $6 billion in sales across 15 markets more than 20 billion.

Speaker Change: All that aside, Spirit Aerosystems, they're set to report earnings later this week, I believe tomorrow, so we'll see what they have to say about this on the call. They still have their statement up from earlier this year, or actually in January as well.

Alexandra Canal: Loyalty members bringing in $6 billion in sales across 50 markets. More than $20 billion when you look at the whole fiscal 2023. That's a 45% jump compared to 2022. Loyalty remains strong. The consumer also apparently strong in the face of price hikes and those larger check sizes due to inflation. McDonald's saying that, in that release, quote, "We remain confident in the resilience of our business amid macro challenges that will persist in 2024." Despite all of this, I think Wall Street is overall very bullish on McDonald's as a company. Again, we'll see how they handle the same store sales miss, 'cause it's not something we normally see from this company.

Alexandra Canal: And when you look at the whole fiscal 2023, that's up 45% drop compared to 2022. So loyalty remains strong the consumer also apparently strong in the face of price hikes in those larger check sizes due to inflation Mcdonald's thing that in that release quote we remain confident in the resilience of our business and then macro.

Speaker Change: Coming up, everyone, Estee Lauder is getting a big boost on the back of its results. We'll speak with an analyst from Canaccord Genuity on the other side of the break. Transcribed by www.otter.ai www.softbankgroup.com www.softbank.com, Shares of Estee Lauder companies skyrocketed after the beauty brand announced a restructuring plan reducing the company's workforce by 3 to 5 percent. The announcement came in the company's second quarter earnings report, which showed a beat on the top and bottom line, revenue coming in at $4.28 billion versus $4.23 billion that was This still represents a 7 percent decline from the prior year. Adjusted earnings per share in the second quarter were 88 cents versus the 55 cents that were estimated.

Speaker Change: Does that will persist in 2020 four so despite all of this I think wall Street is overall very bullish on Mcdonald's as a company, but again, we'll see how they handle their same store sales Miss because it's not something we normally see yeah. We don't normally see and I think it might have taken the street made me by surprise just a little bit given the fact that Mcdonald's is one of these names that have been relatively resilient.

Brad Smith: Yeah, we don't normally see, and I think it just might have taken the Street maybe by surprise just a little bit given the fact that McDonald's is one of these names that has been relatively resilient. When you talk about the fact that consumers are trading down, they're still going into McDonald's. I'm curious also, Ally, what the Street's saying about some of the softness that maybe we could see looking out to the rest of 2024, right? If we're already seeing a little bit of weakness, a lot of that being driven by the Middle East, and we're not getting potentially that rate cut anytime soon, putting maybe more pressure on Americans, what that would mean for a name like McDonald's.

Speaker Change: And when you're talking about the fact that consumers are trading down they're still going into Mcdonald's I'm curious also alley, what the street, saying about some of the softness and maybe we could see looking out to the rest of 2024 right. If we're already seeing a little bit of weakness a lot of that being driven by the middle East and we're not getting potentially that rate cut anytime soon putting even more pressure on American.

Alexandra Canal: Yeah, we already saw McDonald's hike prices in 2023. It's very possible we could see those price increases increase this year, especially as you were saying, if we don't get that rate cut, if there's more pressure on these businesses. The Middle East conflict, it's not going away anytime soon.

Alley: What that would mean for a name like Mcdonald, Yeah, we already saw mcdonalds hike prices in 2020 three it's very possible, we could see those price increases increase this year, especially as you are saying if we don't get that rate cut if there's more pressure on these businesses and the middle East conflict, that's not going away anytime soon and I think some of that pressure that was all in the fourth quarter.

Speaker Change: For more on the results, let's turn to Susan Anderson, who is the Canaccord Genuity Managing Director. Susan, I mean, you look across several different elements of this report, and it wasn't a standout report, but it seems like the market is just saying better than expected, I guess, relief that it's not as bad as it could have been. I think it's better than feared.

Brad Smith: Yeah.

Alexandra Canal: I think some of that pressure that we saw in Q4, it's likely going to continue in Q1, and hopefully we get some answers there. I do think there are overarching risks here for the company, no pun intended.

Alley: It's likely going to continue in Q1, and hopefully we get some answers there, but I do think there there are over arching risks here for the company no no pun intended.

Seana Smith: Overachievements for the golden arches, right, Ally? Thanks so much. Let's get to another top trending ticker here at Yahoo Finance, and that is Caterpillar shares on track to hit an all-time high in pre-market trading. They're set to open at an all-time high here as we see this move higher in pre-market trading. The company beating the street's expectations here. Revenue $17.1 billion in its Q4. Adjusted profit per share of $5.23. You're looking at gains here ahead of the open of about 4.5%. Digging into these numbers just a bit here, it's clear my takeaway at least, Brad, is that demand has stayed relatively resilient, especially when you look at these North America numbers. Retail sales there up about 11%.

Susan Anderson: You know, they beat on the bottom line, which was nice to see. They did, you know, bring down the bottom line guide a little bit, but I think overall, investors may think that's conservative. So, you know, it looks like saying, well, China is still not positive growth, and travel retail is not positive growth. It does look like, maybe on easy comparisons, but things are getting a little bit better there. They're starting to work through inventory in the travel retail channel. So I think, you know, on low expectations, all of that was positive.

Alley: Ally Bank, so much let's get to another top turning tegra here at Yahoo, Finance and that is caterpillar shares on track to hit an all time high in pre market trading or they're all they're set to open at an all time high here as we see it doesn't move higher in pre market trading the company, beating the street's expectations here revenue $17.1 billion in its fourth quarter adjusted <unk>.

Alley: <unk> per share of $5 and 23 Central again gains here ahead of the open of about 4.5% digging into these numbers in just a bit here. It's clear my takeaway at least Brad is that demand has stayed relatively resilient, especially when you look at the North American numbers retail sales are up about 11% a raise our margin target.

Susan Anderson: Susan, when we come to, or I guess when we dig down into some of the weaker parts of this report, clearly, it shows that consumers are under pressure. They're struggling in some of their key regions. Is that going to be a trend that you think is going to continue to weigh on the company, and weigh on sales here for the remainder of 2024? Yeah, well, we have a hold rating on Estee Lauder mainly due to the issues in China, which we don't really see improving much over the next couple of quarters. So that's mainly going to be dragging down business as they continue to try and improve things in that region. But given the macro issues in China, we think it's still going to be tough for a while. In travel retail, just on easy comparisons, I think things could sequentially get better, but it's still pretty tough in travel retail, too. So those are the main two issues. I think all the other regions are doing better. North America, they did note, though, was down mainly due to the department store channel.

Seana Smith: They raised their margin target here by 100 basis points, also saying that they expect to reach that in the top half of the new range in 2024. Early street reaction looks to be pretty pleased with these results. TD Cowen-Callan calling it a strong quarter here for the company.

Alley: Here by 100 basis points also saying that they expect to add to resetting the top half of the new range in 'twenty 'twenty four early street reaction looks to be pretty pleased with these results TD, calling calling calling it a strong quarter here for the company Yeah favorable price realization is what the company brought up a couple of times within this release now take a look at this while we brought it up.

Brad Smith: Yeah, favorable price realization is what the company brought up a couple times within this release. Now take a look at this while we've got it up on the screen. The construction sales by region, and actually if you cascade even further down, you'll see some of the consolidated sales and revenues by region. North America really was the only bright spot on a regional basis. Everywhere else, you're looking at declines. However, one of the huge things that kinda jumped out to me as the company gives just, like, a little bit more of the details around this. North America specifically saw that favorable price realization that I was mentioning earlier offset by lower sales volume. That's interesting there.

On the screen the construction sales by region and actually a few cascade, even further down you'll see some of the consolidated sales and revenues by region North America really was holding right spot on a regional basis everywhere else. We're looking at declines. However, one of the huge things that kind of jumped out to me as the company gives just like a little bit more of the details.

Alley: Around this north America, specifically saw that favorable price realization that I was mentioning earlier offset by lower sales volume. So that's interesting there so despite that lower sales volume and which they are saying, it's kind of driven by some of the impact from dealer inventories. They also still did see higher sales of equipment to end users. So all of this considered dealer.

Brad Smith: Despite that lower sales volume, which they're saying is kind of driven by some of the impact from dealer inventories, they also still did see higher sales of equipment to end users. All this considered, dealer inventory did increase during the Q4 of 2022 compared with a decrease of the Q4 of 2023. Improvement on inventory side, but at the end of the day, looking at Asia-Pacific, lower sales volumes. Decreased sales volume driven by the impact from changes in dealer inventories as well. You gotta think about what the spending into certain construction projects as well within that region, especially as we've been monitoring the liquidation of one of the largest property developers within that region, how that cascades through to the number of projects that actually get green-lit to get started as of right now as well.

Alley: Sorry did increase during the fourth quarter of 2022, compared with a decrease of the fourth quarter 2023, so improvement on inventory side, but at the end of the day looking at Asia Pacific Lower sales volumes decreased sales volume driven by the impact from changes in dealer inventories as well you got to think about what the spending into certain construction projects as well within that.

Susan: But beyond that, everything else did see positive growth. So overall, here, for investors that are trying to understand the strength of the little luxuries trade, how strong is that still, according to Estee Lauder, but plus all of the other kind of top picks that you have in the industry?

Alley: And especially as we've been monitoring the liquidation of one of the largest property developers in that region, how that cascades through to the number of projects that actually get greenlit to get started as of right now as well and so that's something of course will be interesting to see if the company comments on it specifically in the earnings call is there and they were gonna be talking to an analyst here later on in the hour Guinea.

Speaker Change: Yeah, so we're still seeing strength in beauty, particularly prestige beauty. Luxury beauty also continues to be strong. So, you know, I think the difference between luxury beauty and maybe some other luxury items such as handbags is that you can buy a luxury beauty item or a prestige item for a lot cheaper.

Brad Smith: That's something, of course, that will be interesting to see if the company comments on it specifically in the earnings call.

Seana Smith: Yes, certainly. We're gonna be talking to an analyst here later on in the hour, getting their perspective on what we're hearing from the conference call that's taking place right now. All right, let's talk about another ticker here, and that is Boeing. The problems continuing here for the company. Now finding misdrilled holes in some fuselages of its 737 MAX jets, and it's causing some reworkings here to 50 planes that have not yet been delivered. Now, this latest setback for Boeing could cause a further delay in deliveries, which is one of the reasons why you're looking at a loss of about 3% here ahead of the open. It is just another issue, another challenge that Boeing and its leadership team and its employees are having to navigate up until this point here, Brad.

Alley: Their perspective on what we're hearing from the conference call is taking place right now alright lets talk about a another a taker here and that is Boeing the problems continuing year for the company now finding Mr old holes in fuselages of its 737, Max jet and causing some re workings here to 50 airplanes that had not yet been deliberate now this latest setback.

Speaker Change: So a lipstick costs $50, or $100. And typically, you know, in weaker macro times, consumers look to beauty to make them feel better. So it does stand up well, even if consumers are pinched elsewhere. So we expect that to continue this year. We're not expecting the strong double-digit growth we saw last year in prestige, but continued strength and beauty. Susan, when it comes to some of the trends that we've been seeing with Estee Lauder, they're losing some market share to their rival, L'Oreal, yet these up-and-coming brands like Elf that are really, uh, connecting with a lot of the younger users, at least, and people are no longer buying What is, or can Estee Lauder compete with some of these newer rivals that are out there? What do you think they need to do in order to win back that market share? Yeah, so they do own The Ordinary, which is still very strong for them.

Alley: For Boeing could cause a further delay in deliveries, which is one of the reasons why you're looking at a loss of about 3% here ahead of the open. It is just a another issue another challenge at Boeing and its leadership team and its employees are having to navigate up until this point here, Brad we talk about the fact that theyre still dealing with the fact that they're not able to expand production on the 700.

Seana Smith: We talk about the fact that they're still dealing with the fact that they're not able to expand production of the 737 MAX 9 because of the issues stemming from the door that was blown off mid-flight on the Alaska Airlines flight several weeks ago. We've heard more and more commentary from Boeing's earnings release last week, also from a number of the leading airlines, just about how they're thinking about the latest developments out of Boeing, how they're navigating those challenges. Again, this issue only affecting so far 50 undelivered planes from what we are learning here from Boeing. Certainly a challenge here that's just another setback for Boeing.

Alley: These are the Max nine because of the issues stemming from the door that I was blown off mid flight in Alaska Airlines, a flight several weeks ago, we've heard more and more commentary from Boeing's earnings release Lastly, also from a number of the leading airliners just about how they're thinking about the latest developments out of Boeing how they're navigating those challenges but it.

Alley: Again this issue only affecting so far 50 undelivered our planes from what we are learning here from Boeing but certainly a challenge here. That's just another setback for buying what's also interesting is what's coming about in some of the lawsuits as well and the clarity of the detail that we're getting about what's taking place with the spirit Aero systems, which is the company that is responsible for.

Brad Smith: What's also interesting is what's coming about in some of the lawsuits as well.

Seana Smith: Yeah

Brad Smith: The clarity, the detail that we're getting about what's taking place at Spirit AeroSystems, which is the company that is responsible for some of the process to build this plane. At the end of the day, it is really the manufacturer or the supply chain part where the holes get drilled as well.

Speaker Change: It is one of the fastest growing brands that they have. And it's more in that, you know, lower price point prestige category, and it really caters to that younger consumer.

Alley: For some of the.

Alley: Process to build this plane and at the end of the day is really the manufacturer of the supply chain part, where the holes get drilled as well and the fact that one of the employees who has since been let go it sounds like as part of the lawsuit had offered some additional context and color about the operations internally about these pizza Fridays that were essentially driven.

Seana Smith: Mm.

Brad Smith: The fact that one of the employees who has since been let go, it sounds like as part of the lawsuit, had offered some additional context and color about the operations internally, about these Pizza Fridays that were essentially driven by not having as many of the reported issues. When you think about days without incidents, well, days without a report and what was driven by that, at the end of the day, it sounds like they were incentivized to not report certain things. If they did, then, well, they would have some type of retaliatory effort, which in itself is retaliation. Anybody who's gone through an HR training course knows that you should not be let go for something like that, especially if, when it's within the realm of your job.

Speaker Change: So I think things like that, where they can, you know, maybe snap up some of these brands that are responding very well with the younger consumer. And then also, I think they're doing a good job with Mac, kind of rolling out new products; they're really staying on top of the trends. So brands that I think still can resonate with the younger consumer, such as Mac, I think they can really increase the innovation there to drive growth. All right, Susan Anderson, great to get your thoughts here, your insight this morning. And SA Water Shares are jumping in pre-market trading. Thanks, Susan.

Alley: By not having as many of the reported issues. So when you think about days without incidence wall of days without a report and what was the trigger by that at the end of the day. It sounded like they were incentivized to not report certain things and if they did then what they would have some type of retaliatory effort, which in itself is retaliation.

Alley: And anybody who has gone through an HR training course knows that you should not be like or something like that especially when it's within the realm of the drop all that aside our spirit Aero systems, They're set to report earnings later on this week I believe tomorrow. So we'll see what they have to say about this on the call. They still have their statement up from earlier this or actually in January as well coming up everyone Este Lauder getting a big boost.

Brad Smith: All that aside, Spirit AeroSystems, they're set to report earnings later on this week, I believe tomorrow. We'll see what they have to say about this on the call. They still have their statement up from earlier this, or actually in January as well.

Seana Smith: Mm.

Brad Smith: Coming up, everyone, Estée Lauder getting a big boost on the back of its results. We'll speak with an analyst from Canaccord Genuity on the other side of the break. Shares of Estée Lauder Companies skyrocketing after the beauty brand announced a restructuring plan, reducing the company's workforce by 3% to 5%. The announcement coming in the company's Q2 earnings report, which showed a beat on the top and bottom line. Revenue coming in at $4.28 billion versus $4.23 billion that was estimated. This still represents a 7% decline from the prior year. Adjusted earnings per share in the Q2, $0.88 versus the $0.55 that was estimated. For more on the results, let's turn to Susan Anderson, who is the Canaccord Genuity Managing Director.

Speaker Change: All right, time for some trending kickers here. And we've got Novo Nordisk shares climbing higher after its parent company, Nova Holdings, inked a $16.5 billion deal to buy manufacturing giant Catalan, now Novo Nordisk, purchasing three of the newly acquired U.S. plants for $11.5 billion to keep up with increasing demand for obesity drugs. So drilling down into what exactly this means for Novo Nordisk, which to remind you is Yahoo Finance's company of the year, this is all a play on meeting that demand for their weight loss drugs. But that's what we've been talking about time and time again.

Alley: On the back of its result, with frequent and analysts from Canaccord genuity on the other side.

Alley: [noise].

Alley: Mhm.

Alley: Okay.

Alley: Yeah.

Speaker Change: Yes, we have seen a surge in demand, and as a result, we've seen a surge in the company's market cap and shares over the last several months. But they're struggling to keep up with that demand.

Alley: [noise].

Alley: Yes.

Alley: Yeah.

Alley: Shares of Este Lauder companies Skyrocketing after the beauty brand announced a restructuring plan, reducing the company's workforce by 3% to 5% the announcement coming in the company's second quarter earnings report, which showed a beat on the top and bottom line of revenue coming in at four.

Speaker Change: They're hoping that this new transaction, the newest transaction, I would say, would help them better do that. It is important to point out that this isn't going to have an immediate impact on the company when it comes to increasing production manufacturing capacity. It's going to be a 2026 play and onward.

Alley: Two $8 billion versus $4 to $3 billion that was estimated still represents a 7% decline from the prior year adjusted earnings per share in the second quarter 88 cents versus the 55 cents that was estimated for more on the results, let's turn to Susan Anderson, who is the Canaccord Genuity managing director Susan.

Brad Smith: Susan, I mean, you look across several different elements of this report, and it wasn't a standout report, but it seems like the market.

Speaker Change: But again, it shows the fact that Nova Nordisk is taking action, doing all it can to try and meet that demand, which has really propelled the stock over the last year. Yeah, they actually acknowledge that this acquisition could have a low single-digit negative impact on operating profit growth in both 2024 and 2025. But you mentioned it, and you're spot on.

Susan Anderson: I mean, you look across several different elements of this report and there wasn't a standout report, but it seems like the market to say better than expected I guess relief, but it's not as bad as it could have been.

Susan Anderson: Yeah.

Brad Smith: is just saying better than expected, I guess? Relieved that it's

Susan Anderson: Yeah.

Brad Smith: Not as bad as it could have been.

Susan Anderson: I think it's better than feared. You know, they beat on the bottom line, which was nice to see. They did, you know, bring down the bottom line guide a little bit, but I think overall, you know, investors may think that's conservative. You know, it looks like saying, while, you know, China's still not positive growth and travel retail's not positive growth, it does look like, you know, maybe on easy compares, but things are getting a little bit better there. They're starting to work through inventory in the travel retail channel. I think, you know, on low expectations, all of that was a positive.

Susan Anderson: I think it's better than feared.

Susan Anderson: On the bottom line, which was nice to see they did bring down the bottom line guide a little bit, but I think overall in our investors may think that's conservative. So you know it looks like things Wow, you know China is still not positive growth and travel retail is not positive growth. It does look like.

Speaker Change: It is about this long-term growth trajectory that the company sees within some of the obesity and diabetes treatments as well, enabling some of the expansion and scaling up for that manufacturing capacity is what they're talking about. And it seems like this is really targeted at three sites that employ about 3000 people. So we'll see how creative this is able to become for the business long term, and additionally, where this essentially allows them to try and stave off any other market competition that we know is revving up fast, and certainly, as we heard from the CEO when he joined us after being named Yahoo Finance's company of the year, that they're just scratching the surface when it comes to their role in weight loss and demand in the community there for that drug So we'll see what exactly the future holds when they're making a big bet like this in order to try and meet that demand. All right.

Susan Anderson: You know maybe on easy compares but things are getting a little bit better there, they're starting to work through inventory in the travel retail channel. So I think you know on low expectations. All of that was a positive Susan when you when we come to our I guess, when we dig down into some of the weaker parts of this report clearly it shows that consumers are under pressure they are struggling and some of their key regions is that.

Seana Smith: Susan, when we dig down into some of the weaker parts of this report, clearly it shows that consumers are under pressure. They're struggling in some of their key regions. Is that going to be a trend that you think is going to continue to weigh on the company, to weigh on sales here for the remainder of 2024?

Susan Anderson: Going to be a trend that you think is going to continue to weigh on the company to weigh on sales here for the remainder of 2024.

Susan Anderson: Yeah. Well, we have a hold rating on Estée Lauder, mainly, you know, due to the issues in China, which we don't really see improving much over the next couple quarters. You know, that's mainly, I think, gonna be dragging down the business as they continue to try and, you know, improve things in that region. Given the macro issues in China, we think it's still gonna be tough for a while. In travel retail, you know, just on easy compares, I think things could sequentially get better, but it's still pretty tough also in travel retail. Those are the main two issues. I think all the other regions are doing better. North America, they did note, though, was down mainly due to the department store channel, but beyond that, everything else did see positive growth.

Susan Anderson: Yeah, well, we have a whole rating on Este Lauder, mainly due to the issues in China, which we don't really see improving much over the next couple of quarters and so that's mainly I think can be dragging down the businesses. They continue to try and.

Susan Anderson: Improved things in that region, but given the macro issues in China, We think it's still going to be tough for a while and travel retail you know just on easy compares I think things can sequentially get better, but it's still pretty tough also in travel retail. So those are the main two issues I think all the other regions are doing better in North America. They did note that it was down.

Speaker Change: Well, coming up, we've got the opening bell on Wall Street again. You're looking at pressure across the board, with all three of the major averages set to open the day lower.

Speaker Change: More on that when we come back, www.softbank.com, Let's take a look at our stock to watch in that Goldman Sachs feeling bullish on NVIDIA, raising their price target on the stock to 800 bucks a share from 625, reiterating their buy rating. Yahoo Finance's Madison Mills on the floor of the New York Stock Exchange with the details there. Maddie, we're looking at 3% move to the upside ahead of the open, a huge upside for this name that's likely to hit another record as of the opening bell coming up at 9 30 here and exactly like you said Shauna that is because of this giant upgrade to the semiconductor giant that is Nvidia coming out from Goldman Sachs this morning upping their price target to $800 that implies an over 20 percent gain from their previous price target for Nvidia which was at 625.

Susan Anderson: Mainly due to the department store channel, but beyond that everything else did see positive growth. So overall here for investors that are trying to understand the strength of the little luxuries trade. How strong is that still an according to Este Lauder, but plus all of the other kind of top picks that you have in the industry.

Brad Smith: Overall here, for investors that are trying to understand the strength of the little luxuries trade, how strong is that still? According to Estée Lauder, but plus all of the other kind of top picks that you have in the industry.

Susan Anderson: Yeah. We're still seeing strength in beauty, particularly, prestige beauty continues to be very strong. Luxury beauty also continues to be strong. You know, I think the difference between luxury beauty and maybe some other luxury items, such as handbags, is that you can buy a luxury beauty item or prestige item for a lot cheaper, so a lipstick for $50, $100. Typically, you know, in weaker macro times, consumers look to beauty to make them feel better, so it does stand out well, even, you know, if consumers are pinched elsewhere. We expect that to continue this year. We're not expecting the strong double-digit growth we saw last year in prestige, but continued strength in beauty.

Susan Anderson: So we're still seeing strength in beauty, particularly prestige beauty continues to be very strong luxury beauty also continues to be strong. So you know I think the difference between luxury beauty and maybe some other luxury items such as handbags is that you can buy a luxury beauty item our prestige item for a lot cheaper, though ellipse.

That for $50 $100 and typically you know in weaker macro times consumers look to beauty and make them feel better. So it does stand out wow, even in a country, where consumers are pinched elsewhere. So we expect that to continue this year, but we're not expecting the strong double digit growth. We saw last year in prestige, but continued strength.

Seana Smith: Susan, when it comes to some of the trends that we've been seeing with Estée Lauder, they're losing some market share to their rival L'Oréal. You have these up-and-coming brands like e.l.f. that are really connecting with a lot of the younger users at least, and people are no longer buying Estée Lauder products and instead are buying some of those cheaper products. What is or can Estée Lauder compete with some of these newer rivals that are out there? What do you think they need to do in order to win back that market share?

Susan Anderson: And beauty Susan when it comes to some of the trends that we've been seeing with Este Lauder, they're losing some market share to the rival l'oreal, yet these up and coming brands like all of that are really I.

Madison Mills: I also want to point out the average analyst estimate for this name in terms of the price target which was 679.64 so over a hundred dollars above that average analyst estimate and if you take a look at the yahoo finance platform you can see that Nvidia is at the very top of its 52 week trading range so that could be an indication of bullishness across our audience of retail investors on this name as well we're also hearing bullishness from the likes of Stanley Duckenmiller saying that this is not only going to be a good play for this year it's going to be a good play heading into 2025 and 2026 as well so seeing a long-term story here now why is that that is because we have some questions about whether or not the data center demand was there for Nvidia and we've already gotten some clues in previous earnings that that demand story is stable right we heard obviously great earnings report from Meta on Friday great earnings from Microsoft as well two of the big customers for Nvidia's data centers so that is a bullish signal for Nvidia also it's continuing to be a bullish story across the chip sector when you look at earnings from I think about an IBM even strong demand there is going to indicate strong demand for Nvidia moving forward and that is what they noted in this Goldman Sachs report talking about positive earnings from SMCI as a bullish indicator for Nvidia moving forward the big final question I have is what is the demand going to look like out of China that made up about a fifth of Nvidia's revenue in 2023 are they going to be able to continue that we'll find out more in their earnings print on the 21st all right Maddie thanks so much again in just about 30 seconds here until the opening bell on the street and Brad this is going to be one to watch because we are set up for what is going to be a very busy week of earnings it's going to give us a little bit of a better sense just at the health right now of corporate America midpoint of the fourth quarter of earnings season in fact that says and rightly points out here take a look at the opening bell on Wall Street there at the NYSE you've got well we had them up on the screen a moment ago let's go to Nasdaq you've got Cognite bringing the opening bell there hey some funfetti on a Monday why not there you see it up in the air and now we've got the NYSE back up element solutions ticker symbol ESI fun bunch of folks up there all right get it done let's go Yahoo finances Maddie Mills is on the floor of the New York Stock Exchange Jared Blick reads standing by at the interactive after Fed Chair Jerome Powell's comments in 60 minutes yesterday investors hoping of a March rate cut are nearly lost here so Maddie how are the markets moving following that news that's exactly right of you to point out Brad because Fed Chair Powell pulling pouring more cold water on the idea of a March rate cut he reiterated that this is just seven weeks away which crazy to think that that next Fed meeting is in just seven weeks here but he said quote uh we just want some more confidence before we take that very important step of beginning to cut interest rates so what does that look like right more of that to handle on the interest print the inflation prints that we've been getting rather right more of that two percent range when it comes to the super core pce print that is what they are looking for moving forward having said that i'm taking a look at what we're seeing here in the trade this morning the dollar obviously up as we are anticipating a higher for longer move from the federal reserve but seeing right across the screen when i look at the major indices the nasdaq the s&p and the dow that is an indication to me that meta stellar print on friday is not going to be driving today's trade it's actually about chair powell's statements that's going to be driving our monday morning here and it's interesting in a week that we don't have a ton of economic data so i'm curious to see whether the earnings prints this week are going to be driving the trade moving forward i think about a mcdonald's missing so much this morning and comparing that to meta meta adding the uh entirety of mcdonald's market cap to its own market cap on friday is that big tech rally going to be able to continue to lift this market all right mattie we of course will be watching that let's head over to jared blickery who's standing by with a closer look at some of the movement that we're seeing to the downside jared yeah a little bit of a down draft not huge but the dow is leading down four-tenths of a percent and uh if you're taking into consideration the small caps that's actually the worst by far it's down 1.4 percent and we'll get more on the general market in a second just want to check in early on the sector action we're seeing some strength in the chip space a little bit of software so we're seeing tech in the green for four uh five-tenths of a percent but for the most part lots of red as you can see uh the dollar has been heading higher materials is weighing down that's down over two percent real estate and utilities those are interest rate sensitive uh excuse me sectors and uh consumer discretionary as well and now energy all of those down more than one percent and um let me just get a let me just show an interesting comparison here because with the disruption trade really faltering today uh i've been seeing this around uh twitter here here's one of two berkshire hathaway versus arc innovation this year alone berkshire up nine uh nine percent arc down about 12 last three years look at this berkshire up 65 arc down 69 and then meta versus tesla this year alone meta up 32 a lot of that coming friday tesla down 26 and there's another long-term story for you there but the bottom line is we're seeing a little bit of weakness we're seeing yields kind of screaming higher here and also the dollar the dollar is finally weighing on stocks once again, All right, Jared, thanks so much. Let's continue to talk about the movement that we are seeing here as we start the trading week. Stocks are lower here shortly after the open yields, moving to the upside.

Susan Anderson: Connecting with a lot of the younger users at least and people are no longer buying a lot of products that are buying some of those cheaper products what is or can este lauder compete with some of these newer arrivals that are out there what do you think they need to do in order to win back that market share.

Susan Anderson: Yeah. They do own The Ordinary, which still is very strong for them. It is one of the fastest growing brands that they have. It's more in that, you know, lower price point prestige category, and it really caters to that younger consumer. I think things like that, where they can, you know, maybe snap up some of these brands that are resonating very well with the younger consumer. Then also, I think they're doing a good job with MAC, you know, kind of rolling out new products. They're really staying on top of the trends. Brands that I think still can resonate with the younger consumer, such as MAC, I think they can really increase the innovation there to drive growth.

Speaker Change: Yes, so they do out of the ordinary which.

Speaker Change: Still is very strong for them at group one of the fastest growing brands that they have and it's more than that you know lower price point of prestige category and it really caters to that younger consumer so I think things like that where they can you know maybe snap at some of these brands that are resonating very well with the young.

Speaker Change: Consumer and then also I think they're doing a good job with Mac, you know kind of rolling out new products, there really staying on top of the trends.

Speaker Change: L brands that I think still can resonate with the younger consumers such as Mac I think they can really increase the innovation there to drive growth.

Seana Smith: All right. Susan Anderson, great to get your thoughts here, your insight this morning. Estée Lauder shares jumping in pre-market trading. Thanks, Susan.

Speaker Change: Is there anything great to get your thoughts here inside this morning, and if a lot of shares jumping in pre market trading. Thanks Susan.

Susan Anderson: Thanks.

Seana Smith: All right, time for some trending tickers here. We've got Novo Nordisk, the shares climbing higher after its parent company, Novo Holdings Inc., inked a $16.5 billion deal to buy manufacturing giant Catalent. Now Novo Nordisk purchasing three of the newly acquired US plants for $11.5 billion to keep up with increasing demand for obesity drugs. Drilling down into what exactly this means for Novo Nordisk, which to remind you, is Yahoo Finance's company of the year. This is all a play on meeting that demand for their weight loss drugs. What we've been talking about time and time again, yes, we have seen a surge in demand, and as a result, we've seen a surge in the company's market cap-

Speaker Change: Alright time for them trending takers here and we've got Novo Nordisk a shares climbing higher after its parent company Novo Holdings, Inc. Into 16, and a half billion dollar deal to buy manufacturing giant Catalan now Novo Nordisk purchasing three of the newly acquired U S. Plants for 11 5 billion to keep up with increasing demand for obesity drugs so drilling.

Speaker Change: Down into what exactly this means for Novo Nordisk whichever mind yours Yahoo Finance as company of the year. This is all of the play are meeting that demand for their weight loss jobs, but we've been talking about time and time again, yes, we have seen a surge in demand and as a result, we've seen a surge in the companys market cap and shares over the last several months are struggling to keep up with that demand and are hoping that this new.

Brad Smith: Yeah

Seana Smith: shares over the last several months. They're struggling to keep up with that demand. They're hoping that this new transaction, newest transaction I would say, would help them better do that. It is important to point out that this isn't gonna have an immediate impact on the company when it comes to increasing production, manufacturing capacity. It's gonna be a 2026 play and onward. Again, it shows the fact that Novo Nordisk is taking action, doing all it can to try and meet that demand, which has really propelled the stock over the last year.

Speaker Change: New transaction newest transaction I would say would help them better and do that it is important to point out that this isn't going to have an immediate impact on the company. When it comes to increasing production manufacturing capacity, it's going to be a 'twenty 'twenty six play and onward, but again. It shows the fact that Novo Nordisk is taking action doing all it can to try and meet that demand which is really for.

Brad Smith: Yeah, they actually acknowledge, contingent on the timing of closing, so this acquisition actually could have a low single-digit negative impact on operating profit growth in both 2024 and 2025. You mentioned it and spot on, it is about this long-term growth trajectory that the company sees within some of the obesity and diabetes treatments as well, enabling some of the expansion and scaling up for that manufacturing capacity is what they're talking about. It seems like this is really targeted on three sites that employ about 3,000 people. We'll see how accretive this is able to become for the business long term, and then additionally, where this essentially allows them to try and kinda stave off any other market competition that we know is revving up fast and furious.

Speaker Change: <unk> the stock over the last year, yeah, they actually acknowledged contingent on the timing of closing. So this acquisition actually could have a low single digit negative impact on operating profit growth in both 2024 and 2025, but you mentioned it and spot on it is about this long term growth trajectory that the company sees within some of the obesity and diabetes.

Speaker Change: <unk> treatments as well, enabling some of the expansion and scaling up for that manufacturing capacity is what they're talking about and it seems like this is really targeted on three sites that employ about 3000 people. So we'll see how accretive this is able to become for the business long term and then additionally, where this essentially allows them to try and stave off any.

Speaker Change: Other market competition that we know is rubbing off past and certainly as we have in the as CEO. When he joined US after being named Yahoo Finance as company of the year that they're just scratching the surface when it comes to their role in the weight loss in demand in the community there for that drug So we'll see what exactly future hold when they're making a big bet like this in order to try and meet that demand.

Seana Smith: It certainly is. We heard from the CEO when he joined us after being named Yahoo Finance's Company of the Year, that they're just scratching the surface-

Brad Smith: Yeah

Seana Smith: ... when it comes to their role in the weight loss and demand in the community there for that drug. We'll see what exactly future holds when they're making big bets like this in order to try and meet that demand. All right, well, coming up we've got the opening bell on Wall Street. Again, you're looking at pressure across the board. All three of the major averages set to open the day lower. More on that when we come back. Let's take a look at our stock to watch and that's Goldman Sachs feeling bullish on NVIDIA, raising their price target on the stock to $800 a share from $625, reiterating their buy rating. Yahoo Finance's Madison Mills on the floor of the New York Stock Exchange with the details there.

Speaker Change: We've got the opening Bell on Wall Street again, you're looking at pressure across the board all three of the major averages set to open a day of lower more on that when they come back.

Speaker Change: [noise].

Speaker Change: Yes.

Speaker Change: [noise].

Speaker Change: Yes.

Speaker Change: Mhm.

Speaker Change: Yeah.

Speaker Change: [noise].

Speaker Change: Okay.

Let's take a look at our stock to watching that Goldman Sachs feeling bullish on Nvidia raising their price are you on the factor 800 Bucks a share from 625, reiterating, thereby righting Yahoo finance is not at the mills on the floor of the New York Stock exchange with the details there Matti, we're looking at 3% moved to the upside I had to be open.

Seana Smith: Madison, we're looking at 3% move to the upside ahead of the open.

Speaker 14: A huge upside for this name that's likely to hit another record as of the opening bell coming up at 9:30 here. Exactly like you said, Seana, that is because of this giant upgrade to the semiconductor giant that is NVIDIA coming out from Goldman Sachs this morning, upping their price target to $800. That implies an over 20% gain from their previous price target for NVIDIA, which was at $625. I also wanna point out the average analyst estimate for this name in terms of the price target, which was $679.64. So over $100 above that average analyst estimate. If you take a look at the Yahoo Finance platform, you can see that NVIDIA is at the very top of its 52-week trading range.

Sara Senatore: A huge upside for this name that's likely to hit another record as of the opening bell coming up at 9:30 here. Exactly like you said, Seana, that is because of this giant upgrade to the semiconductor giant that is NVIDIA coming out from Goldman Sachs this morning, upping their price target to $800. That implies an over 20% gain from their previous price target for NVIDIA, which was at $625. I also wanna point out the average analyst estimate for this name in terms of the price target, which was $679.64. So over $100 above that average analyst estimate. If you take a look at the Yahoo Finance platform, you can see that NVIDIA is at the very top of its 52-week trading range.

A huge upside for this name that's likely to hit another record as of the opening Bell comment up at 930 HERA in exactly like you said, China that is because of this giant upgrade to the semiconductor giant that is nvidia coming out from Goldman Sachs that morning.

Matti: They're priced target to $800 that implies an over 20% gain from their previous price target for Nvidia, which was at 625 I also want to point out the average analyst estimate for this name in terms of the price target, which was 670 964, so over $100 above that average analyst.

Matti: Estimates and if you take a look at the Yahoo Finance platform you can see the Nvidia is at the very top of its 52 week trading range, so that could be an indication of bullishness across.

Speaker 14: That could be an indication of bullishness across our audience of retail investors on this name as well. We're also hearing bullishness from the likes of Stanley Druckenmiller saying that this is not only gonna be a good play for this year, it's gonna be a good play heading into 2025 and 2026 as well. Seeing a long-term story here. Now why is that? That is because we had some questions about whether or not the data center demand was there for NVIDIA, and we've already gotten some clues in previous earnings that that demand story is stable, right? We heard obviously great earnings report from Meta on Friday, great earnings from Microsoft as well, two of the big customers for NVIDIA's data centers. That is a bullish signal for NVIDIA.

Matti: Ross our audience of retail investors on this name as well. We're also hearing bullishness from the license family Duck and all are saying that this is not only going to be a good play for this year, it's going to be a good play heading into 2025 and 2020 as well has seen a long term story here now why is that that is because we have a question about <unk>.

Matti: Whether or not the data center demand was there for Nvidia and we've already gotten some clearer than previous earnings that that demand story is stable right. We heard obviously gray earnings report from matter on Friday, Great earnings for Microsoft as well two of the big customers for Nvidia data centers. So that is a bullish signal.

Speaker 14: Also, it is continuing to be a bullish story across the chip sector when you look at earnings from, I think, IBM even. Strong demand there is going to indicate strong demand for NVIDIA moving forward, and that is what they noted in this Goldman Sachs report talking about positive earnings from SMCI as a bullish indicator for NVIDIA moving forward. The big final question I have is what is the demand gonna look like out of China? That made up about a fifth of NVIDIA's revenue in 2023. Are they gonna be able to continue that? We'll find out more in their earnings print on the 21st.

Jared Blikre: Also, it is continuing to be a bullish story across the chip sector when you look at earnings from, I think, IBM even. Strong demand there is going to indicate strong demand for NVIDIA moving forward, and that is what they noted in this Goldman Sachs report talking about positive earnings from SMCI as a bullish indicator for NVIDIA moving forward. The big final question I have is what is the demand gonna look like out of China? That made up about a fifth of NVIDIA's revenue in 2023. Are they gonna be able to continue that? We'll find out more in their earnings print on the 21st.

Core and video also.

Matti: Continuing to be a bullish story across the chip sector. When you look at earnings from I think about an IBM even.

Matti: Demand there is going to indicate strong demand for and video moving forward and that is what they know that there's a Goldman Sachs report talking about positive earnings from F. N B I as a bullish indicator for Nvidia moving forward. The Big final question I have is what is the demand going to look like out of China that made up about a third of Nvidia as revenue in 2012.

Madison Mills: Traders scaling back their bets on an early rate cut. Fed Chair Jay Powell reinforcing his message that it is unlikely the central bank is going to see enough evidence that inflation is moving sustainably down to the Fed's 2% target by the next meeting in March. We want to bring in Brian Levitt, joining us here at the desk, Invesco Global Market Strategist. Brian, it's great to have you here.

Matti: Three are they going to be able to continue that well find out more in their earnings.

Brad Smith: All right.

Seana Smith: All right, Maddy, thanks so much. Again, just about 30 seconds here until the opening bell on the Street. Brad, this is going to be one to watch because we are set up for what is going to be a very busy week of earnings. It's gonna give us a little bit of a better sense just at the health right now of corporate America.

Speaker Change: Alright, thanks, so much again and just about 30 seconds here until the opening bell on the freedom. Brad This is going to be one to watch because we are set up for what is going to be a very busy week of earnings if you're going to give us a little bit of a better sense to us at the health right now of corporate America mid point of the fourth quarter of earning season effect.

Brad Smith: Midpoint of the Q4 of earnings season, in fact, as Ann rightly points out here. Take a look at the opening bell on Wall Street. There at the NYSE, you've got. Well, we had them up on the screen a moment ago. Let's go to the Nasdaq. You've got Cognex ringing the opening bell there. Hey, some fun Friday on a Monday. Why not? There you see it up in the air. Now we've got the NYSE back up. Element Solutions, ticker symbol ESI. Fun bunch of folks up there. All right. Get it done. Let's go. Yahoo Finance's Madison Mills is on the floor of the New York Stock Exchange. Jared Blikre is standing by at the Interactive after Fed Chair Jerome Powell's comments on 60 Minutes yesterday. Investors hoping for a March rate cut are nearly lost here.

Speaker Change: You pointed out.

Speaker Change: Look at the opening Bell on Wall Street.

Brad: Sir at the NYSE, you got mostly have them up on the screen a moment ago, but figured out that you've got calculated.

Brad: For instance, the opening Bell there Hey from fund setting on a Monday why not there you see it up in the air and that we've got the NYSE backup element solutions ticker symbol E F I Fund budge.

Brad: Up there all right get it done let's go Yahoo Finance as many mills is on the floor of the New York Stock exchange very blurry spending by the interactive after fed chair Jerome Powell comments on 60 minutes yesterday investors, hoping of March rate cut our newly launched here. So matti how are the markets moving following that news.

Brian Levitt: So I'm curious just to get your reaction to what we heard from Powell, not only at the press conference last Wednesday but also what we heard in 60 Minutes last night and what that means in terms of your expectation for a rate cut. Well, first and foremost, I'm thrilled that we're done with the tightening cycle, right? That is critical.

Brad Smith: Madison, how are the markets moving following that news?

Speaker 14: That's exactly right of you to point out, Brad, because Fed Chair Jerome Powell is pouring more cold water on the idea of a March rate cut. He reiterated that this is just 7 weeks away, which is crazy to think that the next Fed meeting is in just 7 weeks here. He said, quote, "We just want some more confidence before we take that very important step of beginning to cut interest rates." What does that look like, right? More of that 2 handle on the interest prints, the inflation prints that we've been getting rather, right? More of that 2% range when it comes to the super core PCE print. That is what they are looking for moving forward. Having said that, I'm taking a look at what we're seeing here in the trade this morning.

Sara Senatore: That's exactly right of you to point out, Brad, because Fed Chair Jerome Powell is pouring more cold water on the idea of a March rate cut. He reiterated that this is just 7 weeks away, which is crazy to think that the next Fed meeting is in just 7 weeks here. He said, quote, "We just want some more confidence before we take that very important step of beginning to cut interest rates." What does that look like, right? More of that 2 handle on the interest prints, the inflation prints that we've been getting rather, right? More of that 2% range when it comes to the super core PCE print. That is what they are looking for moving forward. Having said that, I'm taking a look at what we're seeing here in the trade this morning.

Matti: That's exactly right to point out Brad because fed chair Powerpoint pouring more cold water on the idea of a march rate cut. He reiterated that this is just seven weeks away, which crazy to think that that next fed meeting in just seven weeks here, but he said quote.

Matti: We just want some more confidence before we take that very important step of beginning to cut interest rates. So what does that look like right more of that to handle oddly interest.

Brian Levitt: I think the market's priced in too quickly for the six interest rate cuts. And that rally, that cyclical all-everything rally in November and December, I wish it would have lasted a little longer. So now we're recalibrating. Basically, what we heard is that don't expect the six. We are done tightening.

Matti: Placement trends that we've been getting rather write more of that 2% range. When it comes to the Super core PCE print that is what they are looking for moving forward, having said that I'm, taking a look at what we're seeing here and the trade. This morning. The dollar obviously up as we are anticipating a higher for longer move from the federal reserve.

Speaker 14: The dollar obviously up as we are anticipating a higher for longer move from the Federal Reserve. Seeing red across the screen when I look at the major indices, the Nasdaq, the S&P, and the Dow, that is an indication to me that Meta's stellar print on Friday is not going to be driving today's trade. It's actually about Chair Powell's statement. That's gonna be driving our Monday morning here. It's interesting in a week that we don't have a ton of economic data, so I'm curious to see whether the earnings prints this week are gonna be driving the trade moving forward. I think about a McDonald's missing so much this morning and comparing that to Meta. Meta adding the entirety of McDonald's market cap to its own market cap on Friday.

Brian Levitt: We'll slowly bring down rates, but we'll be data dependent as a result of it. To me, it's not a huge issue for markets, but just a shift in leadership, so to speak. What's the real number of rate cuts that you believe that we're going to get this year? Probably looking more around two or three rather than six.

Matti: The rat across the three when I look at the major indices. The NASDAQ the S&P and the Dow that has an indication to me that met our stellar prey on Friday is not going to be driving today of trade. It's actually about chair Powell statements, that's going to be driving our Monday morning here and it's interesting in a week that we don't have a ton of economic data, but I'm curious to see.

Matti: Whether the earnings print does make are going to be driving the trade moving forward I think about a mcdonald's methane. So much this morning, and comparing that to matter matter, adding the entirety of mcdonalds market cap to its own market cap on Friday is that big Tech rally going to be able to continue to let the market alright matter we of course will.

Speaker Change: Yeah, I think the market went to six because that would have normalized the yield curve. And at some point, if you don't need a five and a quarter funds rate, if we're not going to be a 5% nominal growth country, which we're not, so at some point, you normalize it. But I think the big challenge for investors now is the normalization of the yield curve, which typically means a weaker dollar. It means small and mid-cap values. That all happened in two months.

Speaker 14: Is that big tech rally going to be able to continue to lift this market?

Jared Blikre: Is that big tech rally going to be able to continue to lift this market?

Seana Smith: All right, Madison, we of course will be watching that. Let's head over to Jared Blikre. He's standing by with a closer look at some of the movement that we're seeing to the downside, Jared.

Matti: I'll be watching and Alex had over to Jarrod blurry as anybody with a closer look at some of the movement that we're seeing to the downside Jerry yeah, a little bit of a downdraft not huge but the Dow is leading down four tenths of a percent and if you are taking into consideration of small cats, that's actually the worst by far it's down one 4% and we'll get more on the general market in a second just wanted to check.

Jared Blikre: Yeah, a little bit of a downdraft. Not huge, but the Dow is leading down 0.4%. If you're taking into consideration the small caps, that's actually the worst by far. It's down 1.4%. We'll get more on the general market in a second. Just wanna check in early on the sector action. We're seeing some strength in the chip space, a little bit of software, so we're seeing tech in the green for 0.5%, but for the most part, lots of red. As you can see, the dollar's been heading higher. Materials is weighing down. That's down over 2%. Real estate and utilities, those are interest rate sensitive sectors, and consumer discretionary as well.

Matti: In early on the sector action, we're seeing some strength in the chip space a little bit of software. So we're seeing tech and the green for four five tenths of a percent, but for the most part lots of Red as you can see the dollar has been heading higher materials is weighing down that took down over 2% real estate and utilities those are interest rate sensitive to us.

Speaker Change: And so now you're getting a bit of an unwind of that stronger dollar rates and a little bit more tech outperformance. So that may be tripping investors up for a little bit. I would say if you're looking over the next one to two years, focus on that normalization of the yield curve because it is going to come. So how do you bring up the small cap discussion, right?

Matti: Excuse me sectors and consumer discretionary is Walt and no energy all of those down more than 1% and let me just get a let me just show an interesting comparison here because with the disruption trade really faltering today I've been seeing this around Twitter here, here's one of to Berkshire Hathaway versus arc innovation this year alone.

Jared Blikre: Now energy, all of those down more than 1%. Let me just show an interesting comparison here because with the disruption trade really faltering today, I've been seeing this around, Twitter here. Here's one of two, Berkshire Hathaway versus ARK Innovation. This year alone, Berkshire up 9%, ARK down about 12%. Last three years, look at this, Berkshire up 65%, ARK down 69%. Then Meta versus Tesla. This year alone, Meta up 32%, a lot of that coming Friday, Tesla down 26%, and there's another long-term story for you there. The bottom line is we're seeing a little bit of weakness. We're seeing yields kind of screaming higher here, and also the dollar. The dollar is finally weighing on stocks once again.

Speaker Change: Because we've been talking a lot about the fact that maybe a lot of that optimism had already been priced in. We have not seen that trade really take off, at least since the start of the year, given the outperformance that we've seen in tech. What do you think the volatility that we've seen within that plan, we have the Russell 2000 up on the screen right now, tells us about some of that price action that we could see in the coming months? Well, we were up 20% in small caps and the Russell 2000 in two months. So you've got a bull market in the blink of an eye. And for people like me who write investment outlooks in October, that's your call for the whole year, right? And it happened in the blink of an eye. So what do small caps need?

Matti: Brochure up nine 9% arc down about 12% last three years look at this Berkshire up 65 arc down, 69% and then metal versus Tesla. This year alone meta up 32% a lot of that coming Friday, Tesla down 26% and there is another long term story for you there, but the bottom.

Matti: One is we're seeing a little bit of weakness, we're seeing yields kind of screaming higher here and also the dollar. The dollar is finally weighing on stocks once again.

Brad Smith: All right, Jared, thanks so much. Let's continue to talk about the movement that we are seeing here as we start the trading week. Stocks are lower here shortly after the open. Yields are moving to the upside. Traders scaling back their bets on an early rate cut. Fed Chair Jerome Powell reinforcing his message that it is unlikely the Federal Reserve is going to see enough evidence that inflation is moving sustainably down to the Fed's 2% target by the next meeting in March. We want to bring in Brian Levitt, joining us here at the desk, Invesco Global Market Strategist. Brian, it's great to have you here.

Speaker Change: They typically need easier policy. They need a cyclical upturn in economic activity, so you are getting that soft landing feel.

Matti: Alright, Jared thanks, the mussels continue to talk about the movement that we're seeing here as we start the trading weeks stocks are lower here. Shortly after the open yields moving to the outside traders scaling back their beds and an early ray Cod Fed chair Jay Powell reinforcing the message that it is unlikely the central bank is going to see enough evidence in inflation is moving sustainably down the feds.

Speaker Change: Now you're just pricing some of it out by not pricing out a soft landing but recalibrating where interest rates are going to be. So small caps fall under some near-term pressure. But again, small caps do very well as the Fed eases as you normalize the yield curve. So we still have that ahead of us. We're just in a patch right now that's favoring megacaps again.

Matti: 2% target by the next meeting in March we want to bring him Brian Levitt joining us here at the desk Invesco global market strategies, Brian if you're going to have you here. So I'm curious just to get your reaction to what we heard from power not only at the press conference last Wednesday, but also what we heard in 60 minutes last I know what that means in terms of your expectation for a rate cut well first and foremost I'm sorry.

Brad Smith: I'm curious just to get your reaction to what we heard from Powell, not only at the press conference last Wednesday, but also what we heard in 60 Minutes last night and what that means in terms of your expectation for a rate cut.

Speaker Change: Internationally, as you kind of look across the global scene here, where are the pockets of pressure that you're seeing that are cascading into portfolios where investors should be making some type of pivot? Well, I think what investors probably are missing in places like China and in Europe, growth has already deteriorated pretty significantly, and you're actually, you're below trend in those parts of the world, but actually, maybe starting to improve a little bit. Now, don't get me wrong; a stronger dollar is disruptive of that, so you will need some carry-through in terms of, you know, rate differentials between the U.S. and the rest of the world narrowing. So the dollar under a little bit of pressure right now hurts international trade, again, in the near term.

Brian Levitt: Well, first and foremost, I'm thrilled that we're done with the tightening cycle, right? That is critical. I think the market's priced in too quickly, the 6 interest rate cuts. You know, that rally, that cyclical all everything rally in November and December, I wish it would've lasted a little longer. Now we're recalibrating. Basically, what we heard is that don't expect the 6. We are done tightening. We'll slowly bring down rates, but we'll be data dependent as a result of it. To me, it's not a huge issue for markets, but just a shift in leadership, so to speak.

Brian Levitt: But we're done with the tightening cycle right that is critical I think the market's priced in too quickly. The six interest rate cuts and you know that rally that cyclical all everything rally in November and December I wish. It would have lasted a little longer. So now we're recalibrating basically what we heard is that don't expect to six we are done tightening.

Brian Levitt: We'll slowly bring down rates, but will be data dependent as a result of it to me, it's not a huge issue for markets, but just a shift in leadership so to speak what's what's the real number of rate cuts that you believe that we're going to get this year.

Speaker Change: I hate to keep saying the same thing, but thinking out over the next couple of years, will we finally be out of this COVID cycle? Will we finally have a normal yield curve, reasonable growth, and normal inflation? I would say yes. And that's, to me, when you start thinking about beyond the U.S. megacap. What does that normalization look like, though, right?

Brad Smith: What's the real number of rate cuts that you believe that we're gonna get this year?

Brian Levitt: Probably looking more around 2 or 3 rather than 6.

Brian Levitt: Really looking more around two or three rather than six.

Brad Smith: Yeah.

Brian Levitt: Yeah, I think the market went to 6 because that would've normalized the yield curve, and at some point, if you don't need 5.25 funds rate, if we're not gonna be a 5% nominal growth country, which we're not, so at some point you normalize it. I think the big challenge for investors now is the normalization of the yield curve typically means weaker dollar. It means small caps, mid caps, value. That all happened in two months. Now you're getting a bit of an unwind of that.

Brian Levitt: The market went to six because that would have normalized the yield curve and at some point, if you don't need five and a quarter funds rate, if we're not going to be a 5% nominal growth country, which were not so at some point you normalize it but I think the big challenge for investors now as the normalization of the yield curve typically means a weaker dollar.

Speaker Change: When we talk about moving beyond the movements that we've seen and the astonishing activity that we saw during COVID, getting back to those more normalized rates, what exactly does that look like? Well, if we think about it, I mean, what a crazy four-year period, right? And so you shut down the global economy, put a lot of money in people's pockets before the world is ready for it, raise interest rates 525 basis points, and now we're battling back and forth, "soft landing," "no landing," "hard landing." What does it mean? It means that over time, the Federal Reserve has to ease policy in a more normalized way – we're not going back to 9% inflation. Inflation's coming into the twos. We don't need five-and-a-quarter Fed funds, right, with inflation in the twos?

Brian Levitt: It means small caps mid caps value that all happen in two months and so now you're getting a bit of an unwind of that stronger dollar rates up a little bit more tech outperformance. So that may be tripping investors up for a little bit I would say if youre looking over the next one to two years focus on that normalization of the yield curve because it is going to come.

Brad Smith: Mm.

Brian Levitt: Stronger dollar, rates up a little bit more, tech outperformance. That may be tripping investors up for a little bit. I would say if you're looking over the next 1 to 2 years, focus on that normalization of the yield curve because it is gonna come.

Brad Smith: I'm happy you brought up the small cap-

Susan Anderson: I'm happy you brought up the small cap-

Brian Levitt: Mm-hmm.

Brad Smith: Right? Because we've been talking a lot about the fact that maybe a lot of that optimism had already been priced in. We have not seen that trade really take off, at least since the start of the year, given the outperformance that we've seen in tech. What do you think the volatility that we've seen within that play, and we have the Russell 2000 up on the screen right now, tells us about some of that price action that we could see in the coming months?

Susan Anderson: Right? Because we've been talking a lot about the fact that maybe a lot of that optimism had already been priced in. We have not seen that trade really take off, at least since the start of the year, given the outperformance that we've seen in tech. What do you think the volatility that we've seen within that play, and we have the Russell 2000 up on the screen right now, tells us about some of that price action that we could see in the coming months?

Brian Levitt: Bobby you brought up the small cap discussion right because we've been talking a lot about the fact that maybe that a lot of that that optimism had already been priced and we have not seen that trade really take off at least since the start of the year given now performance that we've seen in <unk>. What do you think the volatility that we've seen within that play and we have the Russell 2000 up on the screen right now tells us about some of that price action that we could see in the coming months, we were up to.

Brian Levitt: Well, we were up 20% in small caps, Russell 2000 in two months. You got a bull market in a blink of an eye and, you know, for people like me who write outlooks in October, that's your call for the whole year, right? It happened in a blink of an eye. What do small caps need? They typically need easier policy. They need a cyclical upturn in economic activity. You are getting that soft landing feel. Now you're just not pricing out soft landing, but recalibrating where interest rates are going to be. Small caps fall under some near-term pressure. Again, small caps do very well as the Fed eases, as you normalize the yield curve. We still have that ahead of us.

Bobby: 20% in small caps Russell 2000 in two months, so you've got a bull market in a blink of an eye and you know for people like me, who write outlooks in October that's your call for the whole year right and it happened in a blink of an eye. So what is small cats need they typically need easier policy they need a cyclical upturn in economic activity. So you.

Speaker Change: And so we're going to slowly bring down rates, and we're going to get back to an environment where short rates are below long rates, the way it's supposed to be, and that'll reinvigorate credit and reinvigorate economic activity. In order to get back to that normalization, we're going to have to move through one of the biggest election years worldwide that we have ever seen. What type of headwind, what type of volatility, could that ensue? My message to investors for years has been that focusing too much on politics or the government is not a great investment strategy. In fact, the way we used to say it was hating the government is not an investment strategy. In the U.S., there's going to be a lot of focus on Trump v. Biden, which we assume will be the race. If you go back and you look historically – you can go back to Eisenhower – just about every president experienced positive returns over their term.

Bobby: Were you were getting that soft landing feel now you're just pricing some of it out with my pricing out soft landing, but recalibrating, where interest rates are going to be so small caps fall under some near term pressure, but again small caps do very well as the fed eases as you normalize the yield curve. So we still have that.

Brian Levitt: We're in a patch right now that's favoring mega cap again.

Bobby: Ahead of us.

Brian Levitt: We're in a patch right now that's favoring mega cap again.

Bobby: We're just in us if we're in a patch right now that's favoring Mega cap again internationally as your as you kind of look across the global senior whether the pockets of pressure that you're seeing that are cascading into portfolios, where investors should be making subtype of pivot.

Brad Smith: Internationally, as you kind of look across the global scene here, where are there the pockets of pressure that you're seeing that are cascading into portfolios where investors should be making some type of pivot?

Speaker Change: For all the focus on 2016 and 2020, if you look, Biden was elected something like 820 market days ago. The market is up 46%, 47% since that election. What do you think the market was up in the first 820 days after Trump was elected? About 51%. So, they're just about neck and neck. These things don't matter nearly as much.

Brian Levitt: Well, I think what investors probably are missing in places like China and in Europe, growth had already deteriorated pretty significantly and you're actually below trend in those parts of the world, but actually may be starting to improve a little bit. Now, don't get me wrong, stronger US dollar is disruptive of that. So you will need some carry through in terms of, you know, rate differentials between the US and the rest of the world narrowing. So the US dollar under a little bit of a pressure right now hurts international, again, in the near term. I hate to keep saying the same thing, but thinking out over the next couple of years, will we finally be out of this COVID cycle? Will we finally have a normal yield curve, reasonable growth, normal inflation?

Speaker Change: Well I think what investors probably are Michigan places like China and in Europe growth had already deteriorated pretty significantly and you're actually you're below trend in those parts of the world, but actually may be starting to improve a little bit now don't get me wrong stronger dollar its disruptive of that so you will need some carry through.

Speaker Change: So in terms of rate differentials between the U S and the rest of the world narrowing so the dollar under a little bit of a pressure right now Hertz International again in the near term.

Speaker Change: I would focus far more on the Federal Reserve than I would focus on what outcome we get in the executive branch. Brian, always great to get your insights and context here. Thanks for joining us. My pleasure.

Speaker Change: I hate to keep saying the same thing, but thinking out over the next couple of years will we finally be out of this COVID-19 cycle. When we finally have a normal yield curve reasonable growth normal inflation.

Speaker Change: Brian Levitt, Invesco Global Market Strategist, everyone. Coming up, McDonald's seeing global sales fall short of expectations by touting a resilient business. We're going to speak with an analyst from Bank of America next, www.softbank.com. McDonald's shares are falling in early trading off just about three percent. The company is missing on global same store sales. It fell short of the street's expectations, rising just three point four percent

Brian Levitt: I would say yes, and that's to me when you start thinking about beyond the US mega cap.

Speaker Change: Inflation I would say, yes, and that's to me when you start thinking about beyond the U S. Mega cap what is the normalization look like though right. When we talk about the five moving beyond the movements that we've seen and the astonishing activity that without during COVID-19 getting back to those more normalized rate because what exactly does that look like to you.

Brad Smith: What does that normalization look like though, right? When we talk about the fact moving beyond the movements that we've seen and the astonishing activity that we saw during COVID, getting back to those more normalized rates, I guess, what exactly does that look like to you?

Susan Anderson: What does that normalization look like though, right? When we talk about the fact moving beyond the movements that we've seen and the astonishing activity that we saw during COVID, getting back to those more normalized rates, I guess, what exactly does that look like to you?

Brian Levitt: Well, if we think about it, I mean, what a crazy 4-year period, right? You shut down the global economy, put a lot of money in people's pockets before the world's ready for it, raise interest rates 525 basis points, and now we're battling back and forth, soft landing, no landing, hard landing. What does it mean? It means that over time the Federal Reserve has to ease policy in a more normalized way. We're not going back to 9% inflation. Inflation's coming into the 2s. We don't need 5.25 Fed funds, right, with inflation in the 2s. We're gonna slowly bring down rates and we're gonna get back to an environment where short rates are below long rates, the way it's supposed to be, and that'll reinvigorate credit and reinvigorate economic activity.

Speaker Change: We think about it I mean, what a crazy four year period, right and so you shut down the global economy put a lot of money in People's pockets before their read before the world's ready for it raise interest rates 525 basis points and now we're battling back and forth soft landing no landing hard landing what does it mean it means that over time the federal.

Speaker Change: One of the big challenges for the company in the quarter was disruption and the ongoing conflict war in the Middle East. We want to bring in Sarah Senator, Bank of America's senior restaurant analyst. Sarah, it's good to see you.

Sarah Senator: So taking a look at at least the early action, early reaction to this report, shares are off just about three percent. When we focus in on the disruption in the Middle East, the ongoing war that is happening out there, how big of a challenge do you see that for McDonald's in the future? Yeah, well, thank you for having me.

Speaker Change: We'll reserve has the ease policy in a more normalized if we're not going back to 9% inflation inflation's coming into the twos, we don't need five and a quarter fed funds rate with inflation in the twos and so we're going to slowly bring down rates and we're going to get back to an environment, where short rates are below long ridge the way it's supposed.

Sarah Senator: And I think the impact of, you know, what we're seeing is broader than just the stores in the Middle East. As a percentage of the McDonald's IDL, International Development License Market, those are only about 10% of stores. So I think we're seeing, you know, the implications of those geopolitical tensions much more broadly. And that's why you saw such a sharp deceleration in that IDL segment since your sales. And so all these things considered, I mean, McDonald's moving forward from this point, they're still going to be looking at some of that international expansion where they can continue to move that forward. You know, how does navigating this environment, what does it look like on the other side if McDonald's gets this right versus getting this wrong? And where do they have to kind of introduce some categorical shifts, perhaps, even within the menu items that they take into those regions?

Speaker Change: To be in metal reinvigorate credit and reinvigorate economic activity in order to get back to that normalization, we're going to have to move through one of the biggest election years worldwide, we have ever seen us what type of headwind what type of volatility could that ensue or my message to investors for years has been focusing too much on policy.

Brad Smith: In order to get back to that normalization, we're gonna have to move through one of the biggest election years worldwide.

Brian Levitt: Yeah, yeah.

Brad Smith: that we have ever seen.

Brian Levitt: Yes.

Brad Smith: What type of headwind, what type of volatility could that ensue or incur?

Brian Levitt: Well, my message to investors for years has been that focusing too much on politics or the government is not a great investment strategy. In fact, the way we used to say it was hating the government is not an investment strategy. You know, in the US there's gonna be a lot of focus, Trump v. Biden, which we assume will be the race. If you go back and you look historically, you can go back to Eisenhower, just about every president experienced positive returns over their term. For all the focus since 2016 and 2020, if you look, Biden was elected something like 820 market days ago. The market is up 46, 47% since that election. What do you think the market was up in the first time, 820 days after Trump was elected? About 51%. They're just about neck and neck.

Speaker Change: So the government is not a great investment strategy in fact, the way we used to say it was hitting the government is not an investment strategy.

The U S. There's going to be a lot of focus Trump biden, which we assume will be the race. If you go back and you look historically you can go back to Eisenhower just about every president experienced positive returns over their term.

Speaker Change: And for all the focus in 2016 and 2020, if you look by <unk> was elected something like 820 market days ago. The market is up 46, 47% since that election, what do you think the market was up in the first one 820 days after Trump was elected about 51% so they're just above.

Sarah Senator: Yeah, I think the issue is probably broader. So from the perspective of just the Middle East tension, you know, I think McDonald's articulated and probably the right view, which is it's going to be very hard for McDonald's or really any American brand to change things dramatically as this conflict or these tensions continue. I mean, there are obviously marketing and messaging changes that they can make to affect perceptions. But I think right now, the focus will be on the things that they can control and their broader footprint, which is primarily about value. So we are seeing, you know, we saw some softening in France, even to some extent related to the value proposition. I think what we've seen in the US is an intent to broaden out their value, just to address the fact that consumers are still feeling under pressure. And this is a kind of global phenomenon, at least in the US. For the lower income consumer; the middle and upper income consumer still seems to be spending pretty robustly.

Brian Levitt: These things don't matter nearly as much. I would focus far more on the Federal Reserve than I would focus on what outcome we get in the executive branch.

Speaker Change: Neck and neck. These things don't matter nearly as much I would focus far more on the Federal Reserve then I would focus on what outcome, we get and the executive branch, Brian always great to get your insights the context here. Thanks for joining us plenty of Brian Levitt Invesco global market strategist, everyone coming up Mcdonalds seeing global sales fall short of expectations for touting our.

Brad Smith: Brian, always great to get your insights, the context there. Thanks for joining us in the studio.

Brian Levitt: My pleasure. Thank you.

Brad Smith: Brian Levitt

Brian Levitt: Thank you.

Brad Smith: Invesco Global Market Strategist, everyone. Coming up, McDonald's seeing global sales fall short of expectations, but touting a resilient business. We're gonna speak with an analyst from Bank of America next.

Speaker Change: <unk> business, we're going to speak with an analyst from bank of America.

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Speaker Change: Yes.

Speaker Change: So what's your read on the consumer from these results? And more specifically, I bring that up just because of the price action that we've seen, the price increases, excuse me, I should say, from McDonald's being able to offset some of those inflationary pressures. When it comes to the consumer's ability, though, to keep paying some of those higher prices, especially on the lower income side, how are you factoring that into the potential risk or challenges that that could pose to McDonald's? Yeah, so one of the things that we keep in mind is that, you know, we've seen inflation across the broader economy, and certainly we've seen it within food in aggregate. So we saw it in grocery stores as well.

Speaker Change: Yeah.

Speaker Change: [noise].

Speaker Change: Okay.

[noise] Mcdonald's yours are falling in early trading off just about 3% the company missing on global same store.

Seana Smith: McDonald's shares are falling in early trading, off just about 3%. The company missing on global same-store sales. It fell short of the street's expectations, rising just 3.4%. One of the big challenges for the company in the quarter was disruption in the ongoing conflict war in the Middle East. We wanna bring in Sara Senatore, Bank of America's senior restaurant analyst. Sara, it's good to see you. So taking a look at least the early action, early reaction to this report, shares off just about 3%. When we focus in on the disruption in the Middle East, the ongoing war that is happening out there, how big of a challenge do you see that for McDonald's in the coming quarters?

Speaker Change: Our sales that fell short of the street's expectations rising just 3.4% one of the big challenges for the company in the quarter was disruption in the ongoing conflict war in the Middle East we want to bring in Sara Senator or bank of America's Senior restaurant analyst Sarah It's good to see is we're taking a look at least the early action early reaction to this report shares off just.

Speaker Change: So as we think about, you know, the high single-digit price increases that McDonald's took in the quarter, it's in the context of, you know, relatively still relatively high inflation, or at least, you know, up until very recently, relatively high inflation. I think the key will be for McDonald's pricing to get more in line with that inflation. So to the extent that inflation has come down pretty meaningfully, you know, the goal, I think, for McDonald's is to make sure that they're not running ahead of that, so their relative value proposition stays strong. And to your point, you know, the lower income consumer is the one that's been under the most pressure because they are feeling the impact of inflation in a more pronounced way.

Sara: About 3% when we focus in on the disruption in the Middle East the ongoing war that is happening out there how big of a challenge do you see that for Mcdonald's in the coming quarters.

Speaker 16: Yeah. Well, thank you for having me. I think the impact of, you know, what we're seeing is broader than just the stores in the Middle East, as a percentage of the McDonald's IDL, International Development License market. Those are only about 10% of stores. I think we're seeing, you know, the implications of those geopolitical tensions much more broadly, and that's why you saw such a sharp deceleration in that IDL segment same store sales.

Sara Senatore: Yeah. Well, thank you for having me. I think the impact of, you know, what we're seeing is broader than just the stores in the Middle East, as a percentage of the McDonald's IDL, International Development License market. Those are only about 10% of stores. I think we're seeing, you know, the implications of those geopolitical tensions much more broadly, and that's why you saw such a sharp deceleration in that IDL segment same store sales.

Sara: Yeah, well. Thank you for having me and I think the impact of what we're seeing is it's broader than just the stores in the middle East as a percentage of that Mcdonalds IDL International developmental license markets does are only about 10% of stores. So I think we're seeing you know the implications after those geopolitical tension.

Speaker Change: But we are starting to see real wage growth turn positive for that consumer. And I think, again, as long as McDonald's and other restaurants can maintain a value proposition that is attractive relative to what else is out there, we are seeing resilience among the consumer. So then, do you think McDonald's could potentially lower their prices in order to, like you were saying, be better in line and more balanced with the trends that we're seeing within inflation? Yeah, I mean, typically, we don't see menu prices come down. That's sort of a phenomenon, you know; menu prices only kind of go in one way.

Sara: Much more broadly in Nash why you saw such a sharp deceleration in that ideal segment same store sales and so all these things considered I mean mcdonalds moving forward from this point, they're still going to be looking at some of that international expansion.

Brad Smith: All these things considered, I mean, McDonald's moving forward from this point, they're still gonna be looking at some of that international expansion, where they can continue to move that forward. You know, how does navigating this environment. What does it look like on the other side if McDonald's gets this right versus gets this wrong? Whether do they have to kind of introduce some categorical shifts, perhaps even within the menu items that they take into those regions?

Sara: Where where they can continue to move that forward how does how does navigating this environment what does it look like on the other side, if Mcdonald's gets us right versus gets this wrong and warehouse today, where do they have to kind of introduce some category shifts, perhaps even within the menu items that they've taken to those regions.

Speaker 16: I think the issue is probably broader. From the perspective of just the Middle East tension, you know, I think McDonald's articulated and probably the right view, which is it's gonna be very hard for McDonald's or really any American brand to change things dramatically as this conflict or these tensions continue. I mean, there are obviously marketing and messaging changes that they can make to affect perceptions, but I think right now the focus will be on the things they can control and their broader footprint, which is primarily about value. We are seeing, you know, we saw some softening in France even to some extent related to value proposition.

Speaker Change: But what you can see is the realized price coming down. So that means, you know, more promotions, whether it's, you know, digital couponing or a national price point promotion that is temporary in nature. So I think that's what we'll probably expect to see.

Sara Senatore: I think the issue is probably broader. From the perspective of just the Middle East tension, you know, I think McDonald's articulated and probably the right view, which is it's gonna be very hard for McDonald's or really any American brand to change things dramatically as this conflict or these tensions continue. I mean, there are obviously marketing and messaging changes that they can make to affect perceptions, but I think right now the focus will be on the things they can control and their broader footprint, which is primarily about value. We are seeing, you know, we saw some softening in France even to some extent related to value proposition.

Speaker Change: Yeah you.

Speaker Change: The issue is probably broader ourself from the perspective of just the middle East our attention.

Speaker Change: I think Mcdonald's articulate and probably the right.

Speaker Change: It'll be very hard for them or Mcdonald's or really any of them are brand.

Speaker Change: Change things dramatically.

Speaker Change: And frankly, that is what we have seen in the past; whenever we see inflation come down, especially if you get into a case of deflation, you do tend to see more value competition. Sarah, while we have you, I mean, we've been firmly within this tenor of buying on the dips, more largely in the market. There's a dip in McDonald's year to date, at least as of right now, for investors that are trying to figure out if they should add the golden arches to their portfolio. Can they feel comfortable buying this dip with what the company has put forward in this earnings result? You know, we're neutral on the stock, and that's primarily because this is a very stable earnings model, which cuts both ways.

Speaker Change: This conflict tensions continue I mean, they are obviously marketing and messaging changes that they can make <unk> a perception, but I think right now the focus will be on the things. They can control in that broader footprint, which is primarily about values. So we are seeing you know we saw some softening in France, even to some extent.

Speaker 16: I think what we've seen in the US is an intent to broaden out their value, just to, I think, address the fact that consumers are still feeling under pressure and this is a kind of a global phenomenon, at least in the US for the lower income consumer. The middle and upper income consumer still seems to be spending pretty robustly.

Sara Senatore: I think what we've seen in the US is an intent to broaden out their value, just to, I think, address the fact that consumers are still feeling under pressure and this is a kind of a global phenomenon, at least in the US for the lower income consumer. The middle and upper income consumer still seems to be spending pretty robustly.

Speaker Change: Related to our value proposition and I think what we've seen in the U S is an attach it broaden out their value just to I think address the fact that consumers are still feeling under pressure in the system.

Speaker Change: Global phenomenon at least in the U S. A lowering for consumer the middle and upper and some are still seems to be spending pretty robustly.

Seana Smith: Sara, what's your read on the consumer from these results? More specifically, I bring that up just because of the price action that we've seen and the price increases, excuse me, I should say, from McDonald's being able to offset some of those inflationary pressures. When it comes to the consumer's ability, though, to keep paying some of those higher prices, especially on the lower income side, how are you factoring that into the potential risk or challenges that that could pose to McDonald's?

Speaker Change: What's your read on the consumer from these results in more specific labor in that up just because of the price action that we've seen in the price increases excuse me I should say from Mcdonald's aiming able to offset some of those inflationary pressures when it comes to the consumer's ability, though you keep paying some of those higher prices, especially on the lower income side, how are you factoring that.

Speaker Change: So, on the one hand, you don't typically get a lot of upside from earnings, and certainly, you know, there are some headwinds on the top line that'll be harder to get. On the other hand, you also don't see a lot of variability to the downside. And I think we saw this quarter that G&A was run very tightly so that McDonald's could achieve earnings growth in line with consensus, even with a slight same-source sales miss. All right. Fair enough. Net neutral.

Speaker Change: Got into the potential risk or challenges of ACA posed to mcdonalds. Yeah. So I think you know one of the things that we have to keep in mind is that you know we've seen inflation across the broader economy and certainly we've seen it with the <unk>.

Speaker 16: Yeah. I think, you know, one of the things that we have to keep in mind is that, you know, we've seen inflation across the broader economy, and certainly we've seen it within food in aggregate. We saw it in grocery stores as well. As we think about, you know, the high single digit price increases that McDonald's took in the quarter, it's in the context of, you know, still relatively high inflation, or at least, you know, up until very recently, relatively high inflation. I think the key will be for McDonald's pricing to get more in line with that inflation. To the extent that inflation has come down pretty meaningfully, you know, the goal I think for McDonald's is to make sure that they're not running ahead of that, so their relative value proposition stays strong.

Sara Senatore: Yeah. I think, you know, one of the things that we have to keep in mind is that, you know, we've seen inflation across the broader economy, and certainly we've seen it within food in aggregate. We saw it in grocery stores as well. As we think about, you know, the high single digit price increases that McDonald's took in the quarter, it's in the context of, you know, still relatively high inflation, or at least, you know, up until very recently, relatively high inflation. I think the key will be for McDonald's pricing to get more in line with that inflation. To the extent that inflation has come down pretty meaningfully, you know, the goal I think for McDonald's is to make sure that they're not running ahead of that, so their relative value proposition stays strong.

Speaker Change: Sarah Senatore, who is the BofA Security Senior Restaurant Analyst. Sarah, thanks so much for the time and the insight. I appreciate it. Thank you. Coming up, Caterpillar jumping this morning after blowing analysts' expectations for the fourth quarter earnings out of the water. We'll dive into those results next, www.softbank.com. Caterpillar shares surged to an all-time high, up just about 3 percent after the company beat on fourth quarter profit expectations. Construction giant is seeing equipment volumes and international construction sales fall, but higher prices made up for some of that decline. We want to bring in Michael Schliske.

Speaker Change: In aggregate so we saw it in grocery stores as well so as we think about you know the high single digit price increases that mcdonalds check in the quarter and within the context of you know.

Speaker Change: Relatively show relatively high inflation or at least you know up until very recently relatively high inflation I think the key will be for Mcdonald's pricing to get more in line with that inflation. So to the extent that inflation has come down pretty meaningfully goal I think for mcdonalds is to make sure that they're not running ahead, that's what their relative value proposition.

Speaker 16: To your point, you know, the lower income consumer is the one who's been under the most pressure because they are feeling the impact of inflation in a more pronounced way. We are starting to see real wage growth turn positive for that consumer. I think, again, as long as, you know, McDonald's and other restaurants can maintain a value proposition that is attractive relative to what else is out there, you know, we are seeing resilience in the consumer.

Sara Senatore: To your point, you know, the lower income consumer is the one who's been under the most pressure because they are feeling the impact of inflation in a more pronounced way. We are starting to see real wage growth turn positive for that consumer. I think, again, as long as, you know, McDonald's and other restaurants can maintain a value proposition that is attractive relative to what else is out there, you know, we are seeing resilience in the consumer.

And to your point at a lowering whereas when it's been under the most pressure because they are feeling the impact of inflation and a more pronounced way, but we are starting to see real wage growth turn positive for that sure I think again as long as the mcdonalds and other restaurants can maintain a value proposition that is attractive relative to what else is out there.

Michael Schliske: He's DA at Davidson, Managing Director of Equity Research. It's great to have you here, Michael. Let's talk about this report, because yes, we are seeing shares move to the upside, up just another 3 percent today, demand staying resilient, yet there was some weakness, especially when you look at the international component. Yes, there was some weakness.

Speaker Change: Yes, we are seeing resilience in the M C.

Brad Smith: Sara, do you think McDonald's could potentially lower their prices in order to, like you were saying, be better in line and more balanced with the trends that we're seeing within inflation?

Seana Smith: Sara, do you think McDonald's could potentially lower their prices in order to, like you were saying, be better in line and more balanced with the trends that we're seeing within inflation?

Speaker Change: When do you think Mcdonald's could potentially lower their prices in order to like you were saying be better in line and more balanced with the trends that we're seeing within inflation yes.

Speaker 16: Yeah. I mean, typically, we don't see menu prices come down. That's a sort of a phenomenon. You know, menu prices only kinda go in one way. What you can see is realized price come down. That means, you know, more promotions, whether it's, you know, digital couponing or national price point promotions that are temporary in nature. I think that's what we'll probably expect to see. Frankly, that is what we have seen in the past. Whenever we see inflation come down, especially if you go into a case of deflation, you do tend to see more value competition.

Sara Senatore: Yeah. I mean, typically, we don't see menu prices come down. That's a sort of a phenomenon. You know, menu prices only kinda go in one way. What you can see is realized price come down. That means, you know, more promotions, whether it's, you know, digital couponing or national price point promotions that are temporary in nature. I think that's what we'll probably expect to see. Frankly, that is what we have seen in the past. Whenever we see inflation come down, especially if you go into a case of deflation, you do tend to see more value competition.

Michael Schliske: Certainly North America still drives the Busset Caterpillar business, so there seems to be not much of a slowdown there, particularly in construction, where obviously they're one of the strongest players, if not the strongest globally. Outside the US, though, they did mention some slowdown in Asia, excluding China, as well as in China itself. They think that China will be a somewhat weak year, 25-10% of sales, but certainly if that's going to be an additional weak year here, probably their third in a row, internationally, there's going to be a challenge for the new term. So with that in mind, they mentioned favorable price realization. But how much additional price can they push through? Well, the last couple of years, Brad, it's been well over 5-10% of the price on average. It's getting a lot more normalized, especially in the first half of the year. We get a few percent; it might turn flattish or just slightly up in the back half of the year. That's probably a good thing.

Speaker Change: I mean, typically we don't see menu pricing should come down as a hunter hub phenomenon. You know many brands are only kind of go in one way, but what you can see here is realized price come down. So that means you know more promotion, whether it's you have digital couponing or a national price pointed promotion that are temporary in nature. So I think that's what we'll probably expect to see them frankly.

Speaker Change: That is what we have seen in the past whenever we see inflation come down.

Speaker Change: Especially I think the inflation.

Brad Smith: Sara, while we have you, I mean, we've been firmly within this tenor of buying on the dips more largely in the market. There's a dip in McDonald's year to date, at least as of right now. For investors that are trying to figure out if they should add the golden arches to their portfolio, can they feel comfortable buying this dip with what the company has put forward within this earnings result?

Speaker Change: Tend to see more value competition. So while we have you I mean, we have been firmly within this tenor of buying on the dips more largely in the market. There's a dip in Mcdonald's year to date at least as of right now for investors that are trying to figure out if this should add the golden arches to their portfolio can they feel comfortable buying this step with what the company has put forward within this earnings result.

Speaker 16: You know, we're neutral on the stock, and that's primarily because this is a very stable earnings model, which cuts both ways. On the one hand, you know, you don't typically get a lot of upside from earnings, and certainly, you know, there is some headwinds on top line that'll be harder to get. On the other hand, you know, you also don't see a lot of variability to the downside. I think we saw this quarter, G&A was run very tightly so that McDonald's could achieve earnings growth in line with consensus, even with a slight same-store sales miss.

Sara Senatore: You know, we're neutral on the stock, and that's primarily because this is a very stable earnings model, which cuts both ways. On the one hand, you know, you don't typically get a lot of upside from earnings, and certainly, you know, there is some headwinds on top line that'll be harder to get. On the other hand, you know, you also don't see a lot of variability to the downside. I think we saw this quarter, G&A was run very tightly so that McDonald's could achieve earnings growth in line with consensus, even with a slight same-store sales miss.

Speaker Change: Neutral on the stock and that's primarily because this is a very stable model, which cuts both ways. So on the one hand, you know you don't typically get a lot of upside earnings in short lean up there is some headwinds.

Speaker Change: Headwinds on topline that'll be harder to get on the other hand, you know you also don't see a lot of variability to the downside and I think we saw this quarter, our G&A, which was run very tightly so that Mcdonald's could achieve earnings growth in line with consensus even with a slight same store shelf mesh alright fair enough net neutral Sara Senator who is the Bofa securities.

Michael Schliske: They have much better visibility on their manufacturing costs. They have much better visibility on the use of inventories. And so having a somewhat muted, low, modest decrease in price over the prior year probably is not the worst thing in the world for Caterpillar at this point. Michael, supply chain constraints have been one of the storylines for Caterpillar in the last several quarters. What does that look like?

Brad Smith: All right. Fair enough. Net neutral. Sara Senatore, who is the BofA Securities Senior Restaurant Analyst. Sara, thanks so much for the time and the insight. Appreciate it.

Speaker Change: Senior restaurant analysts there. Thanks, so much for the time and the insight I appreciate it. Thank you.

Speaker 16: Thank you.

Sara Senatore: Thank you.

Brad Smith: Coming up, Caterpillar jumping this morning after blowing analysts' expectations for the Q4 earnings out of the water. We'll dive into those results next.

Speaker Change: Coming out of Caterpillar jumping this morning, after blowing analysts' expectations for the fourth quarter earnings out of the water well dive into those results.

Michael Schliske: Has that started to ease significantly? It's starting to ease, mainly. However, there's one area that they will be expanding in, and that's their large engine business, which has been capacity constrained. They've had great demand there across most of their end markets, mining, oil, and gas, heavy industry, etc. You're not going to spend the next year or two investing more in that capacity. But yes, otherwise, it has largely caught up. Does Caterpillar have an artificial intelligence play, Michael? It feels like we hear so much from industrial companies and construction companies about where that can be embedded even into some of their equipment that they're trying to put into the market. Is there a story there at all? There is definitely a story that I've read that is probably a few years away, two areas where they're kind of looking at it. One is in safety.

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Speaker Change: Wow.

Speaker Change: Okay.

Seana Smith: Caterpillar shares are surging to an all-time high, up just about 3% after the company beat on Q4 profit expectations. Construction giant seeing equipment volumes and international construction sales fall, but higher prices made up for some of that decline. We wanna bring in Michael Shlisky. He's D.A. Davidson Managing Director of Equity Research. It's great to have you here, Michael. Let's talk about this report because, yes, we are seeing shares move to the upside, up just another 3% today. Demand staying resilient, yet there was some weakness, especially when you look at the international component.

Speaker Change: Caterpillar shares are searching to an all time high up just about 3% after the company beat on our fourth quarter profit expectations construction giant sea equipment volumes in international construction sale fall, but higher prices made up for some of that decline. We wanted to bring him Michael Slutsky of D. A Davidson managing director.

Michael Schliske: So, what's been a challenge is trying to find workers that can actually use these complex machines. If you make some of the safety areas of the equipment easier to use, you can perhaps widen the labor pool. So that's certainly one area. The other is asset tracking. So, they have some of these, I think, on there already, but it's helping to position the machines for optimal performance in the field. So, yes, it's not this year, but certainly over the next two to five years, I would think we'd see a lot more autonomy in their portfolio. Michael, Caterpillar is often looked at as an economic bellwether, right? When you take into account the demand that they're seeing for the machines, normally or many times, looked at as a leading indicator. What do you think this tells us about what we will likely see play out for the rest of the sector this earnings season? Well, it certainly sounds like there's a lot of confidence out there among US construction companies and their various fleets, whether their own fleets or if they are rented.

Michael Slutsky: <unk> of equity research, it's great to have you here, Michael Let's talk about this report because yes, we are seeing shares move to the upside up just another 3% today demand staying resilient. If there was some weakness, especially when you look at the international component.

Speaker 17: Yes, there was some weakness. Certainly, North America still drives the bus at Caterpillar. So there seems to be not much of a slowdown there, particularly in construction, where obviously they're one of the strongest players, if not the strongest globally. Outside the US though, they did mention some slowdown in Asia excluding China, as well as China itself. They think that China will be a somewhat weak year. 25 to 10% of the sales, but certainly that's gonna be an additional weak year here, probably their third in a row. Internationally, there's gonna be a challenge for the near term.

Michael Shlisky: Yes, there was some weakness. Certainly, North America still drives the bus at Caterpillar. So there seems to be not much of a slowdown there, particularly in construction, where obviously they're one of the strongest players, if not the strongest globally. Outside the US though, they did mention some slowdown in Asia excluding China, as well as China itself. They think that China will be a somewhat weak year. 25 to 10% of the sales, but certainly that's gonna be an additional weak year here, probably their third in a row. Internationally, there's gonna be a challenge for the near term.

Michael Slutsky: Yes, there was some weakness certainly north America still drives the bus of caterpillar.

Michael Slutsky: It seems to be not much of a slowdown there, particularly in construction, where it honestly the one of the strongest players if not the strongest globally outside of the U S. So they did mentioned some slowdown.

Michael Schliske: So it does suggest, as you would expect, that people are confident about making investments in 2024 in equipment, even in a higher interest rate environment. If we start seeing rates go lower, I wouldn't be surprised to see even more confidence, I think, from the construction sector. Michael Schliske, who is the D.A.

Michael Slutsky: Asia, excluding China as well as China itself is.

Michael Slutsky: Somewhat we get 25, 10% of sales and certainly that's going to be.

Michael Slutsky: An additional week here here, probably the Gordon row internationally, there's going to be a challenge for them.

Brad Smith: With that in mind, they've mentioned favorable price realization. How much additional price can they push through?

Michael Schliske: Davidson, Managing Director of Equity Research. Michael, thanks so much for taking the time to be here with us today. Thank you.

Michael Slutsky: So with that in mind, they they've mentioned favorable price realization how much additional price can they pushed through.

Speaker 17: Well, the last couple of years, Brad, it's been well over 5-10% of price on average. It's getting a lot more normalized, especially in H1 of the year. We get a few percent. It might turn flattish or just slightly up into H2 of the year. That's probably a good thing. They have much better visibility on their manufacturing costs. They have much better visibility on those inventories, and so having a somewhat muted, low, modest decrease in price over the prior year probably is not the worst thing in the world for Caterpillar at this point.

Michael Shlisky: Well, the last couple of years, Brad, it's been well over 5-10% of price on average. It's getting a lot more normalized, especially in H1 of the year. We get a few percent. It might turn flattish or just slightly up into H2 of the year. That's probably a good thing. They have much better visibility on their manufacturing costs. They have much better visibility on those inventories, and so having a somewhat muted, low, modest decrease in price over the prior year probably is not the worst thing in the world for Caterpillar at this point.

Michael Slutsky: Well the last couple of.

Michael Schliske: Absolutely. We've got all your markets action ahead. Stay tuned, www.softbank.com. Good morning, everyone. I'm Brad Smith, alongside Shauna Smith.

Michael Slutsky: Of years, Brian.

Brian Levitt: Well over 10%.

Brian Levitt: Price on an average its getting a lot more a lot more normalized especially in the first half of the year, we get a few percent it might've been flattish or just slightly up in the back half of the year, that's probably a good thing.

Michael Schliske: We're about 30 minutes into the trading day. Let's take a look at how things are shaping up right now as we hit the top of the 10 a.m. hour. Stocks are slightly lower.

Michael Schliske: After comments from Federal Reserve Chair Jerome Powell signaled rate cuts not coming in March, here you're taking a look at the S&P 500 down by about a quarter of a percent here this morning. Shares of Citizen Financial were relatively flat this morning after Citigroup upgraded the stock to buy from Neutral.

Brian Levitt: On their manufacturing costs.

Brian Levitt: Visibility on the Joseph of inventories and so having a somewhat muted, though modest decrease in price over the prior year. It probably is not the worst thing in the world for Caterpillar.

Seana Smith: Michael, supply chain constraints has been one of the storylines for Caterpillar over the last several quarters. What does that look like? Has that started to ease significantly?

Brian Levitt: At this point Michael supply chain constraints has been one of the storylines for caterpillar over the last several quarters. What does that look like has that started to ease significantly.

Michael Schliske: Now, the analysts there are telling investors to play offense rather than defense in the current environment for banks, exclaiming that the best time to own bank stocks in terms of valuations goes from late cycle to early cycle multiples. But again, the stock, though, is still down about three-tenths of a percent. And B. Reilly downgrading shares of Six Flags from buy to neutral. Analyst Eric Wold sees the merger between Six Flags and Cedar Fair as a better play for Cedar Fair regardless of the outcome. The analysts explain that it does not matter if the deal goes through or not; Cedar Fair will come out as a winner. And it turns out Barbie might not have been enough for Mattel. JP Morgan downgraded shares to neutral from overweight, citing a smaller tailwind from the Barbie movie than initially anticipated.

Speaker 17: It's starting to ease mainly. However, there's one area that they will be expanding in, and that's their large engines business, which it has been capacity constrained. They've had great demand there across most of their end markets, mining, oil and gas, heavy industry, et cetera. They are gonna spend the next year or two investing more in that capacity. Yes, otherwise, it has largely caught up.

Michael Shlisky: It's starting to ease mainly. However, there's one area that they will be expanding in, and that's their large engines business, which it has been capacity constrained. They've had great demand there across most of their end markets, mining, oil and gas, heavy industry, et cetera. They are gonna spend the next year or two investing more in that capacity. Yes, otherwise, it has largely caught up.

It's starting to ease mainly however, there's one area that there will be expanding in them and that's their large engine business has been capacity constrained in great demand there across most end markets mining.

Brian Levitt: Oil and gas heavy industry et cetera.

Brian Levitt: And the next year or two investing more in that capacity, but yes, otherwise has largely caught up.

Brad Smith: Does Caterpillar have an artificial intelligence play, Michael? It feels like we hear so much from the industrial companies about, and construction companies about where that can be embedded even into some of their equipment that they're trying to put into the market. Is there a story there at all?

Brian Levitt: Does caterpillar have an artificial intelligence by Michael It feels like we're here. We're here so much from the industrial company is about and construction companies about where that can be embedded even into some of their equipment that they are trying to put into the market is there a story there at all.

Speaker 17: There is definitely a story there, Brad. It's probably a few years away. Two areas where they're kind of looking at it. One is in safety, so what's been a challenge is trying to find labor that can actually use these complex machines. If you make some of the safety areas of that equipment easier to use, you can perhaps widen the labor pool. So that's certainly one area. The other is in asset tracking. So they have some of these already, I think, on there already, but it's helping to position the machines for optimal performance in the field. So yes, it's not this year, but certainly over the next two to five years, I would think we'd see a lot more autonomy in their portfolio.

Michael Shlisky: There is definitely a story there, Brad. It's probably a few years away. Two areas where they're kind of looking at it. One is in safety, so what's been a challenge is trying to find labor that can actually use these complex machines. If you make some of the safety areas of that equipment easier to use, you can perhaps widen the labor pool. So that's certainly one area. The other is in asset tracking. So they have some of these already, I think, on there already, but it's helping to position the machines for optimal performance in the field. So yes, it's not this year, but certainly over the next two to five years, I would think we'd see a lot more autonomy in their portfolio.

Speaker Change: There is definitely a store there is probably a few a few years away two areas, where they're kind of looking at it one is in safety. So whats. The challenge is trying to find labor that can actually use. These complex machines. If you make some of the safety areas of equipment easier to use you can.

Michael Schliske: Now, the analyst is explaining that the duration of the Barbie boom was, quote, unexpectedly short and created a significant wall of worry for investors. Now, the analyst is also listing weak holiday sales, a shorter holiday season, and unexpected freight costs as other reasons for caution surrounding the stock. They're looking at pressure of just about three and a half percent.

Speaker Change: Perhaps widen your labor pool. So that's certainly one area. The other is an asset tracking so they have somebody.

Michael Schliske: But again, this report is really going to give us a solid reading on the consumer, what demand looks like during or looks like during that critical holiday season. And that's what they were pointing to here in this call from JP Morgan, just the fact that, hey, maybe it didn't live up to those expectations, and we could see further pressure on the stock here later this week. I respectfully disagree with this call, and here's why.

Speaker Change: I think on the array of his position.

Steve.

Speaker Change: Machine for optimal performance in the field. So yes, it's not this year, but certainly over the next two to five years, we see a lot more autonomy in their portfolio, Michael Caterpillar often looked at as an economic bellwether right. When you take into account the demand that they're seeing for the machines I normally or many times looked at as a leading indicator raising.

Seana Smith: Michael, Caterpillar often looked at as an economic bellwether, right? When you take into account the demand that they're seeing for the machines, normally or many times looked at as a leading indicator. What do you think this tells us just about what we will likely see play out for the rest of the sector this earnings season?

Michael Schliske: At the end of the day, you had so many people buying Barbie Corps, buying Barbie products, buying Barbie everything ahead of the movie a year before it even came out, before we even got the full trailer. So it is already priced in at the end of the day. And so for us to expect it to just continue to be this ultimate every year, people should just keep buying into Barbie. There is some normalization that would happen afterwards.

Speaker Change: This tells US just about what we will likely see play out for the rest of the sector this earning season.

Speaker 17: Well, it certainly sounds like there's a lot of confidence out there among US construction companies and their various fleets, whether their own fleets or if they are rented. It does suggest, as you would imply, that people are confident with making investments in 2024 in equipment, even in a higher interest rate environment. If we start seeing rates go lower, I wouldn't be surprised to see even additional confidence, I think, from the construction sector.

Michael Shlisky: Well, it certainly sounds like there's a lot of confidence out there among US construction companies and their various fleets, whether their own fleets or if they are rented. It does suggest, as you would imply, that people are confident with making investments in 2024 in equipment, even in a higher interest rate environment. If we start seeing rates go lower, I wouldn't be surprised to see even additional confidence, I think, from the construction sector.

Speaker Change: Well it certainly sounds like there's a lot of confidence out there among among U S. Construction companies.

Speaker Change: Here and there and there are and there are various skus further off lease or if they are rented.

Speaker Change: Does suggest as you wish.

Speaker Change: You would apply that people are constantly making investments in 2024 in equipment, even in a higher interest rate environment. If you start to see rates go lower I wouldn't be surprised even even additional confidence I think from the construction sector.

Michael Schliske: And we should have expected that. And at the end of the day, we'll see how many people keep wearing pink everywhere. Look, I got some pink socks in the craze and dressed up to go to a movie.

Brad Smith: Michael Shlisky, who is the D.A. Davidson & Co. Managing Director of Equity Research. Michael, thanks so much for taking the time here with us today.

Michael Schliske: But at the same time, I'm not going to be drinking the same amount that I was leading up to the dress up as Ken to go to the movie. Yeah, yeah, yeah. Like a Tyler Perry movie, Ken.

Speaker Change: Michael Slutsky, who is the D. A davidson managing director of equity research Michael Thanks, So much for taking the time here with US today. Thank you absolutely.

Speaker 17: Thank you.

Michael Shlisky: Thank you.

Brad Smith: Absolutely. We've got all your markets action ahead. Stay tuned. You're watching Yahoo Finance. Good morning, everyone. I'm Brad Smith, alongside Seana Smith. We're about 30 minutes into the trading day. Let's take a look at how things are shaping up right now as we hit the top of the 10:00AM hour. Stocks slightly lower after comments from Federal Reserve Chair Jerome Powell signaled rate cuts not coming in March. Here you're taking a look at the S&P 500 down by about a quarter of a percent here this morning.

Speaker Change: We got all your markets that can have stay tuned youre watching Yahoo finance.

Michael Schliske: How did I not know this? Oh, I got the picture ready for this segment because I would really make it. But again, well, that shows the fact that it really did start this whole revolution. When you talk about what this would mean for Mattel stock going forward, it's what they're going to do with their other IPs that they have. Right. Exactly so. Right. Exactly so. That's one of the movies that they will be making here in the future.

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Speaker Change: Yeah.

Michael Schliske: So it's whether or not it's going to spark any sort of excitement that was similar to what we saw play out with Barbie. We'll be right. We'll be buying race cars leading up to that. But people are not going to get dressed up as a toy race car to go see a movie. But hey, you might wear some race car colors.

Speaker Change: Yeah.

Speaker Change: Yes.

Speaker Change: Yeah.

Yes.

Speaker Change: Yes.

Yeah.

Speaker Change: Okay.

Michael Schliske: You never know. We'll see what happens. We'll workshop it out there. And a bonus trending ticker for you. Palantir set the earnings report earnings after the bell.

Speaker Change: Yeah.

Speaker Change: [music].

Speaker Change: Good morning, everyone umbrella, so everyones got Charles Smith for about 30 minutes into the trading day, let's take a look at how things are shaping up right now as we hit the top of the 10 a M. Our stock slightly lower after comments from federal reserve charge their own power signaled rate cuts not coming in March are you, taking a look at the S&P 500 down by about a quarter of a percent of it.

Michael Schliske: Investors are looking to see if the big company and their big bets on artificial intelligence will pay off. Wall Street remains cautious on what the company will release in terms of revenue and profit. Analysts are seeing rising competition and macro headwinds for Palantir. There you're taking a look at shares that are down by about seven tenths of a percent. Don't look at that screen.

Seana Smith: Shares of Citizens Financial are relatively flat this morning after Citigroup upgraded the stock to buy from neutral. Now, the analyst there telling investors to play offense rather than defense in the current environment for banks, explaining that the best time to own bank stocks is when valuations go from late cycle to early cycle multiples. Again, stock though still down off about 0.3%.

Speaker Change: Mark.

Speaker Change: Here's a citizen financial relatively flat. This morning after citigroup upgraded the stock to buy from neutral now the analysts, they're telling investors to play offense rather than defense in the current environment for banks is claiming that the best time to own bank stock valuations go from late cycle to early cycle multiple but against that though still down off about three tenths of a percent and be.

Michael Schliske: But hey, look at me. Ultimately, at the end of the day, this is one of our top trending tickers on the Yahoo Finance platform. Yeah, just going to give us a better sense of exactly the impact that AI is having specifically on Palantir because a lot of that optimism has arguably already been priced in. You're looking at shares up 100 percent over the last year. So under a bit of pressure here today ahead of these results, what we hear from the CEO, whether or not that is going to live up to those expectations. Citi Out, they have a sell rating on the stock. They're cautious ahead of this report in that they expect federal deal activity to underwhelm here in the quarter, and it's not going to be enough to offset some of the strains that they are seeing in U.S. commercials.

Brad Smith: B. Riley downgrading shares of Six Flags from buy to neutral. Analyst Eric Wold seeing the merger between Six Flags and Cedar Fair as a better play for Cedar Fair, regardless of the outcome. The analyst explaining that it does not matter if the deal goes through or not, Cedar Fair will come out as a winner.

Speaker Change: Wiley downgrading shares of six flags from buy to neutral analysts Eric Wold seeing the merger between six flags and Cedar Fair is a better play for Cedar fair, regardless of the outcome. The analysts explaining that it does not matter if the deal goes through or not Cedar fair will come out as a winner.

Seana Smith: It turns out Barbie might not have been enough for Mattel. JP Morgan downgrading shares to neutral from overweight, citing a smaller tailwind from the Barbie movie than initially anticipated. Now, the analyst there explaining that the duration of the Barbie boom was, quote, "Unexpectedly short and created significant wall of worry for investors." Now, the analyst also listing weak holiday sales, a shorter holiday season, and unexpected freight costs as other reasons for caution surrounding the stock. You're looking at pressure of just about 3.5%.

Speaker Change: And in terms of Barbie might not be a bad enough for metallic jpmorgan downgrading shares to neutral from overweight fading a smaller tailwind from the Barbie movie than than initially anticipated and now the analysts there explaining that the duration of the Barbie boom was caught unexpectedly short and creating significant wall of worry for investors now the analyst.

Michael Schliske: It won't be enough there in order to really propel this stock here to continue moving forward to the upside. So some of that optimism already priced in more of a show me story, at least from the streets, an early take ahead of these results. They don't expect too much. Absolutely. Well, speaking of show me stories, show me Ghostface Chiller. Put them up on the screen here.

Also lifting week holiday sales, a shorter holiday season, and unexpected freight cost is the other reason for caution surrounding the soccer looking at pressure of just about three and a half for sand, but again. This report is really going to give us a solid reading on the consumer what demand looks like during or looked like during that critical holiday season, and that's what.

Seana Smith: Again, this report is really going to give us a solid reading on the consumer, what demand looks like during or looked like during that critical holiday season, and that's what they were pointing to here in this call from J.P. Morgan, just the fact that, hey, maybe it didn't live up to those expectations, and we could see further pressure on the stock here later this week.

Speaker Change: They were pointing to here in this call from J P. Morgan just the fact that hey, maybe it didn't live up to those expectations and we could see further pressure on the stock here later this week I respectfully disagree with this call and here is why at the end of the day, you've got so many people buying Barbie core buying Barbie products spine Barbie everything ahead of the movie a year before it even came out before we even got.

Michael Schliske: Snap, the latest tech company to announce job cuts, said it would cut 10 percent of its global headcount to free up capital to invest in its long-term growth plan. This comes just ahead of the company's fourth-quarter results tomorrow. Shares are edging lower this morning.

Brad Smith: I respectfully disagree with this call, and here's why. At the end of the day, you had so many people buying Barbie core, buying Barbie products, buying Barbie everything ahead of the movie, a year before it even came out. Before we even got the-

Seana Smith: It was already priced in.

Michael Schliske: Joining us now is Rohit Kulkarni, who is the Roth MKM managing director here. Rohit, what is this set up for what the company will say once they do release earnings? Hey, thanks for having me.

Brad Smith: Full trailer. Yes. Already priced in at the end of the day. For us to expect it to just continue to be this ultimate every year, people should just keep buying into Barbie. There is normalization that would happen afterwards, and we should have expected that. At the end of the day, we'll see how many people keep wearing pink everywhere. Look, I got some pink socks even in the craze and dressed up to go to the movie, but at the same time, I'm not gonna be drinking rosé.

Speaker Change: It was already a faithful trailer, yes, so already priced than at the end of the day and so for us to expect it to just continue to be this ultimate every year people should just keep buying into Barbie. There is normalization that would happen afterwards, and we should have expected that and at the end of the day, we'll see how many people keep wearing pink everywhere look I've got some pink.

Rohit Kulkarni: And I would say that expectations for Snap have been rising, given what Facebook, Amazon, and Google told us last week. But again, advertising remains strong. I think expectations have been going up, while Snaps remains in somewhat of a slow recovery mode. I would just put it that way, that they are trying to recover from all the changes that Apple inflicted on them, plus their loss of executives during all of 23, and now they are losing more employees. So I think it still is a prolonged turnaround story, in my opinion, and I think we remain cautious heading into earnings tomorrow, given expectations are going higher, and their cutting off employees doesn't bode an encouraging sign for the demand curve that they may be seeing right now. That's the only time you would probably cut employees by 10% or more.

Speaker Change: <unk>, even in the craze and dressed up to go to the movie, but at the same time I'm not going to be drinking rose at the same amount that I was leading up to this new dress up of Ken to go to me there are like a like a toddler Paragon how did I not know there's a lot of the pigs are ready for that segment, because I would have really made it but again well that puts the bad that it really does that that whole revolution, when you're talking to.

Seana Smith: Did you really?

Brad Smith: the same amount that I was leading up to this movie.

Seana Smith: Did you dress up as Ken to go to the movie?

Brad Smith: Yeah.

Seana Smith: Did you?

Brad Smith: like a Tyler Perry Ken.

Seana Smith: How did I not know this?

Brad Smith: I got photos.

Seana Smith: Well, I wish we had the picture ready for this segment because that would have really made it. Again, well, that points to the fact that it really did start this whole revolution. When you talk about what this would mean for Mattel's stock going forward, it's what they're gonna do with their other IPs that they have.

Speaker Change: What does it mean from a telephone going forward and that's what they're going to do with the other.

Brad Smith: Well, right.

Seana Smith: Exactly.

Brad Smith: Hot Wheels, right?

Seana Smith: Exactly.

Brad Smith: Yeah.

Seana Smith: That's one of the movies that they will be making here in the future. It's whether or not it's going to spark any sort of excitement that was similar to what we saw play out with Barbie.

Speaker Change: Right exactly exactly that's one of the.

Speaker Change: Movies that they will be making here in the future so as to whether or not it's going to spark any sort of excitement that was similar to what we saw play out with part of what we write what will be behind race cars, leading up to that the people I'm not going to get dressed up as Ed.

Brad Smith: We'll be buying race cars leading up to that. People are not gonna get dressed up as a-

Seana Smith: Totally different.

Brad Smith: ...as a toy race car to go see a movie, but hey, you might wear some race car color shoes.

Speaker Change: Toy race car to go see a movie, but hey, you might word from race car colors, right now well see well see what happens what workshop it out there and the bonus trending ticker for your pounds. There set the report earnings after the Bell investors looking to see if the big company and they are big bets on artificial intelligence will pay off Wall Street remains cautious on what the company will release in terms of revenue and profit analyst.

Seana Smith: You never know.

Brad Smith: We'll see. We'll see what happens. We'll workshop it out there. A bonus trending ticker for you. Palantir set to report earnings after the bell. Investors looking to see if the big company and their big bets on artificial intelligence will pay off. Wall Street remains cautious on what the company will release in terms of revenue and profit. Analysts seeing rising competition and macro headwinds for Palantir. There, you're taking a look at shares. They're down by about 0.7%. Don't look at that screen, but hey, look at me. Ultimately, at the end of the day here, this is one of our top trending tickers on the Yahoo Finance platform.

Speaker Change: Rohit, so comparing Meta to Snap, and I realize it's not an apples-to-apples comparison, but I bring this up because of what we heard from Meta last week, the ad recovery story, clearly the driver there, and the results, and also the reaction that we saw post-results. When you compare what's happening at Meta to what's happening or not happening at Snap, what do you think Snap needs to do in order to better benefit from the recovery in the ad space that we are seeing play out in some of their competitors? I hate to play this buzzword bingo with you guys, but it's AI.

Speaker Change: Rising competition and macro headwinds, we're calling tier there youre, taking a look at shares are down by about seven tenths of percent don't look at the screen, but hey look at me ultimately.

Speaker Change: The end of the day. This is one of our top trending tickers on the Yahoo Finance, Yeah, just going to give us a better sense of exactly the impact that AI is having specifically on palin dear because a lot of that optimism has arguably already been price and youre looking at shares up over the last year of 100% so under a bit of pressure here. Today ahead of these results, while we hear from the CEO, whether or not that is going to be.

Seana Smith: Yeah. Just gonna give us a better sense of exactly the impact that AI is having specifically on Palantir because a lot of that optimism has arguably already been priced in. You're looking at shares up over the last year of 100%, so under a bit of pressure here today ahead of these results. What we hear from the CEO, whether or not that is going to live up to those expectations. Citi out, they have a sell rating on the stock. They're cautious ahead of this report, saying that they expect the federal deal activity to underwhelm here in the quarter, and it's not gonna be enough to offset some of the strength that they are seeing in U.S. commercial.

Speaker Change: Live up to those expectations city out there we're celebrating on the soccer cautious how did this report then that they expect.

The federal deal activity to Underwhelm here in the quarter and is that going to be enough to offset some of the strengths are that they are seeing in the U S commercials or won't be enough.

Speaker Change: I think what Facebook has done since, say, late 21, all of 22 and half of 23, they have invested in AI in a way that they can recover some of the lost signals from all the changes that Apple and all the privacy changes have been happening in the ecosystem. So I would put it that Facebook is probably maybe 6, 9, 12 months ahead of a company like Snap when it comes to fixing what was broken because of Apple and ecosystem changes. In the meantime, Snap is facing its own issues. They are losing a lot of executives. They are losing some key people on the team.

Seana Smith: It won't be enough there in order to really propel this stock here to continue moving forward to the upside. Some of that optimism already priced in. It's more of a show-me story.

Speaker Change: There are two in order to really propel their stock here to continue moving forward to the upside so some of that optimism already price and it's more of a show me story at least from the street that early take ahead of these results they don't expect too much.

Brad Smith: Mm-hmm.

Seana Smith: At least from the Street's early take ahead of these results, they don't expect too much-

Brad Smith: No

Seana Smith: to come from them.

Brad Smith: No, absolutely. Well, speaking of show-me stories, show me GoSpaceChilla. Put him up on screen here. Snap, the latest tech company to announce job cuts. The social media giant saying it will cut 10% of its global headcount to free up capital to invest in its long-term growth plans. This comes just ahead of the company's Q4 results tomorrow. Shares are edging lower this morning. Joining us now, we've got Rohit Kulkarni, who is the Roth MKM Managing Director here. Rohit, what is this set up for what the company will say once they do release earnings?

Speaker Change: Absolutely well speaking of a show me story show Me go space show or put them up on screen here snapped the latest tech company to announce job cuts the social media Giants, saying, you will cut 10% of its global head count to free up capital to invest in its long term growth plans. This comes just ahead of the company's fourth quarter results Tomorrow shares are edging lower this morning.

Speaker Change: And while that is happening, they're falling a little bit behind on their quest to become a direct response, which is kind of the bottom of the funnel, real secret sauce, large addressable market advertising play. So I would probably give them six, nine months, in my opinion. If they can fix it, they'll be able to fix it in that time. So does that mean that Facebook or Meta and how they're operating right now, are they perhaps a social media anomaly in just the size that they are, the scale that they have as well, and the amount of advertising dollars that flow into them versus some of the other social media and digital advertising plays out there? I think so.

Speaker Change: Joining us now we've got Rohit Kulkarni, who is the rock N K a managing director here what is the set up for what the company will say once they do release earnings.

Speaker 18: Hey, thanks for having me. I would say that expectations for Snap have been rising, given what Facebook, Amazon, Google told us last week. Again, advertising remains strong. I think expectations have been going up while Snap's remains in somewhat of a slow recovery mode. I would just put it that way, that they are trying to recover from all the changes that Apple inflicted, plus their loss in executives during all of 2023, and now they are losing more employees. I think it still is a prolonged turnaround story, in my opinion, and I think we remain cautious heading into earnings tomorrow.

Rohit Kulkarni: Hey, Thanks for having me.

Rohit Kulkarni: I would say that our expectations with snap have been rising given mod.

Rohit Kulkarni: Facebook Amazon, Google told Us last week.

Rohit Kulkarni: Again.

Rohit Kulkarni: <unk> remained strong I think our expectations have been going up one.

Rohit Kulkarni: Snaps remains in.

Rohit Kulkarni: Somewhat of a slow recovery mode I would just put it that way.

They are trying to recover from all the changes that Apple inflicted plus the Lawson executives during all of 2003 and now theyre, losing more employees. So I think it still is a prolonged turnaround story in my opinion and I think we remain cautious heading into earnings tomorrow given expectations on.

Speaker 18: Given expectations are going higher and they're cutting off employees doesn't bode a kind of encouraging sign for the demand curve that they may be seeing right now. That's the only time you would probably cut employees at 10% or more.

Speaker Change: I think Facebook is out-executing absolutely everybody else in the ecosystem. Facebook probably lost a lot of market share during 2021 and 2022, and they are showing that they can regain most of that lost market share and, plus, probably gain more market share because of the way they're executing, the way they're investing in AI, and the way they're investing in surfaces that could be monetized at a much higher rate. So again, Facebook is gaining share, and that's why they're putting up the numbers that they are doing. The ad market has recovered, but not completely recovered in a way that we are in the hunky-dory days of back in 2021. So probably we are somewhere in between, and that's where smaller companies like Snap continue to hurt as they see some volatility in some of their customers. Rohit, so let's compare this to what we could hear from Pinterest because that's another stock that has risen substantially over the last six months, up 43%. What do you expect to hear from Pinterest?

Rohit Kulkarni: Going higher and.

Rohit Kulkarni: Cutting off employees doesn't border.

Rohit Kulkarni: Encouraging signs for the demand that we're seeing right now that's the only time you would probably cut employees.

Seana Smith: Rohit, comparing Meta to Snap, and I realize it's not an apples to apples comparison.

Speaker Change: All right.

Speaker Change: Furthermore, it took them bearing meta to SAP and I realize it's not an apples to apples comparison, but I bring this up because of what we heard from metal last week. The AD recovery story clearly the driver there and the results and also the reaction that we saw post our results when you compare what's happening in meta to what's happening or not happening at snap what do you think snap and needs to do in order to be.

Speaker 18: Mm-hmm.

Rohit Kulkarni: Mm-hmm.

Seana Smith: I bring this up because of what we heard from Meta last week, the ad recovery story. Clearly the driver there.

Speaker 18: Mm-hmm.

Rohit Kulkarni: Mm-hmm.

Seana Smith: the results and also the reaction that we saw post results. When you compare what's happening at Meta to what's happening or not happening at Snap, what do you think Snap needs to do in order to better benefit from the recovery in the ad space that we are seeing play out in some of their competitors?

Speaker Change: Benefiting from the recovery in the AD space that we are seeing play out in some of their competitors.

Speaker 18: I hate to play this buzzword bingo with you guys, but it's AI. I think what Facebook has done since, say, late 2021, all of 2022 and half of 2023, they have invested in AI in a way that they can recover some of the lost signals from all the changes that Apple and all the privacy changes have been happening in the ecosystem. I would put it that Facebook is probably maybe 6, 9, 12 months ahead of a company like Snap when it comes to fixing what was broken because of Apple and ecosystem changes. In the meanwhile, Snap is facing its own issues. They are losing a lot of executives. They are losing some key people on the team.

Rohit Kulkarni: I hate to play this buzzword bingo with you guys, but it's AI. I think what Facebook has done since, say, late 2021, all of 2022 and half of 2023, they have invested in AI in a way that they can recover some of the lost signals from all the changes that Apple and all the privacy changes have been happening in the ecosystem. I would put it that Facebook is probably maybe 6, 9, 12 months ahead of a company like Snap when it comes to fixing what was broken because of Apple and ecosystem changes. In the meanwhile, Snap is facing its own issues. They are losing a lot of executives. They are losing some key people on the team.

I hate to play this buzzword bingo with you guys, but it's.

Speaker Change: Thank you.

Speaker Change: Facebook has done since say late 'twenty, one all of greater than half of <unk> III. They have invested in AI in a way that they can recover some of the lost signals from all the changes that Apple and all the privacy changes have been happening in the ecosystem. So I would put it.

Facebook is probably maybe six 912 months ahead of a company like snap when it comes to.

Speaker Change: Fixing what was broken.

Speaker Change: <unk>.

Speaker Change: Ecosystem changes.

Rohit Kulkarni: Will it live up to those expectations? That looks like it's been priced in. Yeah, I think I would say if Snap's expectations have gone up from, say, 0 to 4, Pinterest's expectations have gone up from 0 to 10. So the expectations for Pinterest to have a very significant beat and raise are much higher right now. That means for the stock to move on up from where it is right now, they need to put up really solid numbers. And some of that is because of what investors have started to believe around the partnership between Pinterest and Amazon. So they have been working towards getting more Amazon ad dollars into Pinterest, and it's been a positive, really positive step. But whether it is a significant positive to move the numbers on Pinterest remains to be seen. And that's whether Amazon drives Pinterest ad revenues much above and beyond. The Bulls believe that is going to be the case in 4Q and 1Q. We are on the sidelines.

Speaker Change: In the Meanwhile, snap is facing its own issues. They are losing a lot of executives. They are losing some key people on the team and while that is happening.

Speaker 18: While that is happening, they're falling a little bit behind on their kind of quest to become a direct response, which is kind of the bottom of funnel, real secret sauce, large addressable market advertising play. Probably give them 6 to 9 months, in my opinion. If they can fix it, they'll be able to fix it in that time.

Rohit Kulkarni: While that is happening, they're falling a little bit behind on their kind of quest to become a direct response, which is kind of the bottom of funnel, real secret sauce, large addressable market advertising play. Probably give them 6 to 9 months, in my opinion. If they can fix it, they'll be able to fix it in that time.

Speaker Change: Following a little bit behind on the <unk>.

Speaker Change: And our quest to become a direct response, which is kind of the Baltimore phone real secret sauce large addressable market advertising play so probably give them six to nine months in my opinion.

Speaker Change: They can fix it there'll be able to fix that.

Brad Smith: Does that mean that Facebook or Meta and how they're operating right now, are they more of perhaps a social media anomaly in just the size that they are, the scale that they have as well, and the amount of advertising dollars that flow into them versus some of the other social media and digital advertising players out there?

Speaker Change: So does that mean that Facebook or meta and how they're operating right now are they more of perhaps a social media anomaly and just the size that they are the scale that they have as well in the amount of advertising dollars that flow into them versus some of the other social media and digital advertising plays out there.

Speaker 18: I think so. I think Facebook is out-executing absolutely everybody else in the ecosystem. Facebook probably lost a lot of market share during 2021 and 2022, and they are showing that they can regain most of that lost market share and plus probably gain more market share because of the way they're executing, the way they're investing in AI, and they're investing in services that could be monetized at a much higher rate. Again, Facebook is gaining share, and that's why they're putting up the numbers that they are doing. Ad market has recovered, but not completely recovered in the way that we are in the hunky dory days of back in 2021.

Rohit Kulkarni: I think so. I think Facebook is out-executing absolutely everybody else in the ecosystem. Facebook probably lost a lot of market share during 2021 and 2022, and they are showing that they can regain most of that lost market share and plus probably gain more market share because of the way they're executing, the way they're investing in AI, and they're investing in services that could be monetized at a much higher rate. Again, Facebook is gaining share, and that's why they're putting up the numbers that they are doing. Ad market has recovered, but not completely recovered in the way that we are in the hunky dory days of back in 2021.

Speaker Change: I think so I think Facebook is oak executing.

Speaker Change: Absolutely everybody else in the ecosystem.

Speaker Change: Failed, probably lost a lot of market share during.

Speaker Change: 2021 and 'twenty, two and they're showing that they can begin most of that lost market share and plus probably gain more market share.

Speaker Change: Because of Davita executing davita investing in AI and Theyre investing in surfaces.

Speaker Change: That could be monetize at a much higher rate. So again Facebook is gaining share and that's why they're putting up the numbers that they are doing.

Rohit Kulkarni: We think Pinterest is priced for perfection right now. Snap or Pinterest, or maybe even Meta, are any of them well positioned to capitalize on the fallout that we're seeing right now from TikTok and Universal Music Group and some of the end users, daily active users that have used that service as well? I think, in my opinion, the way eyeballs or share of mind goes always goes to the larger player first.

Speaker Change: AD market has recovered but not completely recovered in a way that we are in the hunky-dory days of back in 'twenty. One so while we are somewhere in between and that's where a smaller company like snap continue to work as they season water delivery and some of the.

Speaker 18: Probably we are somewhere in between, and that's where smaller companies like Snap continue to hurt as they see some volatility in some of their customers.

Rohit Kulkarni: Probably we are somewhere in between, and that's where smaller companies like Snap continue to hurt as they see some volatility in some of their customers.

Seana Smith: Rohit, let's compare this to what we could hear from Pinterest, because that's another stock.

Speaker Change: Customers right. So let's compare this to what are we going to hear from Pinterest, because that's another thought that has risen substantially over the last six months up 43%. What do you expect to hear from Pinterest well at live up to those expectations that looks like it's been priced in.

Speaker 18: Mm-hmm.

Seana Smith: that has risen substantially

Rohit Kulkarni: Mm-hmm.

Seana Smith: that has risen substantially

Speaker 18: Yep.

Rohit Kulkarni: Yep.

Seana Smith: Over the last six months, up 43%.

Speaker 18: Yep.

Rohit Kulkarni: Yep.

Rohit Kulkarni: So I would be surprised if Facebook remains the primary beneficiary, probably followed by a little bit of Snap. But that's how I would see that the majority of the incremental share of mind or the time spent probably moves towards Facebook, if there is any, and then perhaps a little bit of the kind of user base overlap that exists between TikTok and Snap. Some of those users gravitate towards Snap a little bit more, but the majority would still be Facebook or Instagram. All right.

Seana Smith: What do you expect to hear from Pinterest? Will it live up to those expectations that looks like it's been priced in?

Speaker 18: Yeah. I think I would say if Snap's expectations have gone up from, say, 0 to 4, Pinterest's expectations have gone up from 0 to 10. The expectations for Pinterest are to have a very significant beat and raise are much higher right now. That means for the stock to move up from where it is right now, they need to put up really solid numbers. Some of it is because of what investors have started to believe around the partnership between Pinterest and Amazon. They have been working towards getting more of Amazon ad dollars into Pinterest. It's been a positive, really positive step. Whether it is a significant positive to move the numbers on Pinterest, that remains to be seen.

Rohit Kulkarni: Yeah. I think I would say if Snap's expectations have gone up from, say, 0 to 4, Pinterest's expectations have gone up from 0 to 10. The expectations for Pinterest are to have a very significant beat and raise are much higher right now. That means for the stock to move up from where it is right now, they need to put up really solid numbers. Some of it is because of what investors have started to believe around the partnership between Pinterest and Amazon. They have been working towards getting more of Amazon ad dollars into Pinterest. It's been a positive, really positive step. Whether it is a significant positive to move the numbers on Pinterest, that remains to be seen.

Speaker Change: Yes, I think.

Speaker Change: I would say if snaps expectations have gone up from zero to four interest expectations have gone up from zero.

Speaker Change: So expectations footprint just to have a very significant beat in <unk> are much higher right now.

Speaker Change: That means the stock for the stock the more one up from where it is right now they need to put up really solid numbers and some of it is because of what.

Rohit Kulkarni: Well, we'll hear from Snap on Tuesday, and Pinterest on Thursday. Rohit Kulkarni. It's always great to get your insight. Roth MKM. Thank you.

Speaker Change: Investors are starting to believe.

Speaker Change: On the partnership between interest and Amazon. So they have been working towards getting more of Amazon AD dollars into Pinterest and extreme.

Rohit Kulkarni: All right, well, Chinese policymakers vowing to prevent, quote, abnormal market fluctuations after last week's brutal sell-off in Chinese stocks. Investors, though, might need more convincing with wild swings continuing in equities to start the week. We've seen about $7 trillion erased from the values of equities in China and Hong Kong since their peaks in early 2021. Jared Blokry takes a closer look at some of the moves that we're seeing. Jared?

Speaker Change: A positive really positive step, but whether it is.

Speaker Change: Significant positive to move the numbers on Pinterest that remains to be seen and Thats fair.

Speaker 18: That's where whether Amazon drives Pinterest ad revenues much above and beyond. Bulls believe that is going to be the case in Q4 and Q1. We are on the sidelines. We think Pinterest is priced for perfection right now.

Rohit Kulkarni: That's where whether Amazon drives Pinterest ad revenues much above and beyond. Bulls believe that is going to be the case in Q4 and Q1. We are on the sidelines. We think Pinterest is priced for perfection right now.

Speaker Change: Amazon drives interest revenues much above and beyond what was believed that is going to be the case in full gear and <unk>. We are on the sidelines we think.

Brad Smith: Is Snap, Pinterest, or maybe even Meta well-positioned to capitalize on the fallout that we're seeing right now from TikTok and Universal Music Group and some of the end users, daily active users that-

Speaker Change: Interest is priced for perfection right now snap.

Speaker Change: Snap or pinterest or or maybe even meta are any of them well positioned to capitalize on the fallout that we're seeing right now from tick Tock and Universal music group and some of the end users daily active users that have used that service as well.

Rohit Kulkarni: Blame the short sellers. That is where we are in this playbook, and we're seeing the Chinese Securities Regulatory Commission come down in quite a hard way on not only short sellers but also sellers that are engaged in a market-neutral strategy. So that's long-term, short-term.

Speaker 18: Mm-hmm.

Rohit Kulkarni: Mm-hmm.

Brad Smith: have used that service as well?

Speaker 18: I think, in my opinion, the way eyeballs or share of mind goes is always to the larger player first. I would be surprised if Facebook remains the primary beneficiary, probably followed by a little bit of Snap. That's how I would see that majority of the incremental share of mind or the time spent probably moves towards Facebook, if there is any. Perhaps a little bit of kind of user base overlap that exists between TikTok and Snap. Some of those users gravitate towards Snap a little bit more, but majority would still be Facebook or Instagram.

Rohit Kulkarni: I think, in my opinion, the way eyeballs or share of mind goes is always to the larger player first. I would be surprised if Facebook remains the primary beneficiary, probably followed by a little bit of Snap. That's how I would see that majority of the incremental share of mind or the time spent probably moves towards Facebook, if there is any. Perhaps a little bit of kind of user base overlap that exists between TikTok and Snap. Some of those users gravitate towards Snap a little bit more, but majority would still be Facebook or Instagram.

Speaker Change: Thank you.

Speaker Change: In my opinion.

Speaker Change: The way.

Speaker Change: <unk> order share of mind causes.

Speaker Change: Always boasted logically enforced so I wouldn't I would I wouldn't be surprised if feasible.

Rohit Kulkarni: At the end of the day, all this means is the Chinese government has lost complete control over their stock market. Now, we are seeing some reaction to the upside here. Not a lot, but we've seen this before. You take the totality of the year to date, and these are the members of the NASDAQ Golden Dragon China Index, we're seeing some serious losses here. I'll sort by performance. You can see the middle stock here; the median stock is actually down 20% or more. And if I go back one year, it will be worse.

Speaker Change: The primary beneficiary, probably followed by a little bit of snap, but that's how I would.

See the majority of the incremental.

Speaker Change: <unk>.

Speaker Change: Our share of mind, all the time spend probably moves towards Facebook. If there is any and then.

Speaker Change: Perhaps a little bit of our user.

Speaker Change: User base overlap that exists between pick doctors now some of those users gravitate towards snap a little bit more but majority will still be Facebook or Instagram.

Seana Smith: All right. Well, we'll hear from Snap on Tuesday, Pinterest on Thursday. Rohit Kulkarni, always great to get your insight. Roth MKM, thanks so much for joining us.

Speaker Change: We'll hear from snap on Tuesday, Pinterest on Thursday, Rohit Kulkarni always great to hear your inside Roth MK and thanks, so much for joining us. Thank you.

Rohit Kulkarni: You can see the median stock is down about 43%, 44%, 45%. So almost half of the value is wiped off for the median stock here. What can the Chinese government do going forward? Not a whole lot.

Speaker 18: Thank you.

Rohit Kulkarni: Thank you.

Seana Smith: All right. Well, Chinese policymakers vowing to prevent, quote, "abnormal market fluctuation," after last week's brutal sell-off in Chinese stocks. Investors, though, might need more convincing. Wild swings continuing in equities to start the week. We've seen about JPY 7 trillion erased in values of equities in China and Hong Kong since their peaks in early 2021. Jared Blikre has a closer look at some of the moves that we're seeing. Jared.

Speaker Change: I will Chinese policymakers valley to prevent port abnormal market fluctuation after last night's brutal selloff in the in Chinese docs investors, though might need a more convincing wild swings continuing in equities to start the weakness seen about seven trillion are raised in values and equities in China and Hong Kong cents. There are peaks in early 2021 dry bulk.

Rohit Kulkarni: They've been engaged in a piecemeal strategy trying to target specific areas of the economy, and that includes real estate. It also includes the stock market, but it has been failing, and we can see that evidenced by these numbers here. The real problem for the Chinese government is that if they stimulate too much, their currency gets devalued, and that's what they're trying to prevent, because then you get capital outflows, all kinds of negative knock-on effects. But here's the U.S. dollar versus the Chinese yuan. If it's going higher, that means the yuan is weakening, and it has been weakening. And, by the way, those are multi-year highs up there. Let me put a max chart in.

Speaker Change: Ray has a closer look at some of the moves that we're seeing Jared blame the short sellers. There that is where we are in this our playbook and we're seeing the Chinese Securities Regulatory Commission comedown in quite a hard way on Douglas' short sellers, but also sellers that are engaged in a market neutral strategy so that.

Jared Blikre: Blame the short sellers. That is where we are in this playbook. We're seeing the China Securities Regulatory Commission come down in quite a hard way on not only short sellers, but also sellers that are engaged in a market-neutral strategy. That's long some, short some. At the end of the day, all this means is the Chinese government has lost complete control over their stock market. Now, we are seeing some reaction to the upside here, not a lot, but we've seen this before. You take into totality of the year to date, and these are the members of the Nasdaq Golden Dragon China Index, we're seeing some serious losses here. I'll sort by performance, and you can see the middle stock here.

Speaker Change: Long some short some AR at the end of the day all of this means is the Chinese government has lost complete control over the stock market now we are seeing some reaction to the upside here not a lot, but we've seen this before but you're taken to a totality of the year to date and these are the members of the NASDAQ Golden Dragon China Index.

Rohit Kulkarni: These highs are what we're up against here, and the thinking is that if the market were to go higher, the yuan weakening, that would only accelerate to the upside. So that's what the Chinese government is trying to prevent. If you want to see any inkling of how much China is a drag on emerging markets, just look over the last three months. Here's EEM.

We're seeing some serious losses here I'll sort by performance and you can see the middle stock here. The median stock is actually down 20% or more and if I go back one year. It gets worse you can see the median stock down about 43 44, 45%. So almost half of the value was wiped off for the median stock here.

Jared Blikre: The median stock is actually down 20% or more, and if I go back 1 year, it gets worse. You can see the median stock down about 43, 44, 45%, so almost half of the value wiped off for the median stock here. Now, what can the Chinese government do going forward? Not a whole lot. They've been engaged in a piecemeal strategy trying to target specific areas of the economy, and that includes real estate. It also includes the stock market, but it has been failing, and we can see that evidenced by these numbers here. The real problem for the Chinese government is that if they stimulate too much, their currency gets devalued, and that's what they're trying to prevent because then you get capital outflows, all kinds of negative knock-on effects then. Here's the US dollar versus the Chinese yuan.

Rohit Kulkarni: This is iShares EM ETF versus iShares EM X China. X China is up 7.6%, still underperforming the S&P 500 by 13%. But nevertheless, there are some gains out there, but you've got to remove China from the equation. All right, Jared.

Speaker Change: Now what can the Chinese government do going forward not a whole lot they've been engaged in a piecemeal strategy trying to target specific areas of the economy and that includes real estate. It also includes the stock market, but it has been failing and we can see that evidenced by these numbers here the real the real problem for the <unk>.

Jared: Thanks so much for breaking that down for us. Certainly good things for investors to keep in mind for today. All right, well, coming up, why Nike might be the strongest bet in retail stocks this year. We will be speaking with Adrian Lee, Barclays Consumer Discretionary Senior Analysts, next. A new generation of retail traders is flocking to options trading as an alternative to plain vanilla stock investing. But the options arena can be complex to maneuver, and there are also pitfalls to avoid. So we're starting off with the basics in Yahoo Finance's Options Week 101. Well, it's important to remember, Jared, that it is that it is a right.

Speaker Change: Annie's government is that if they stimulate too much there currency gets devalued and that's what they're trying to prevent because then you get capital outflows all kinds of negative knock on effects, then, but here's a U S dollar versus the Chinese Yuan, if it's going higher that means the U N is weakening and it has been weakening.

Jared Blikre: If it's going higher, that means the yuan is weakening, and it has been weakening. By the way, those are multiyear highs up there. Let me put a MACD chart in. These highs are what we're up against here, and the thinking is that if the market were to go higher, yuan weakening, that would only accelerate to the upside. That's what the Chinese government is trying to prevent. If you wanna see any inkling of how much China is a drag on emerging markets, just look over the last three months. Here's EEM. This is iShares' EEM ETF versus iShares' EM ex China. Ex China is up 7.6%, still underperforming the S&P 500 of 13%. Nevertheless, there are some gains out there, but you gotta remove China from the equation.

Speaker Change: The way those are multiyear highs up there let me put a Max chart. In these highs are what we're up against here and the thinking is is that if the market were to go higher U N weakening that would only accelerate to the upside. So that's what the Chinese government is trying to prevent but if you want to see any inkling.

Speaker Change: And that's where the word option comes from, as opposed to, let's say, a futures contract or actually buying the stock where you're obligated to own that underlying security. As a result, the price tends to be lower. But the very important parts are you have to get that target price correct because of this, because there's a predetermined price, and you have to get the time frame correct. If you get into options, number one, it requires a certain degree of focus and activity because options expire all the time.

Speaker Change: Inkling of how much China is a drag on emerging markets just look over the last three months here is E. M. This is ice shares E M ETF versus I assure the ex China ex China is up seven 6% still underperforming the S&P 500 of 13%, but nevertheless, there are some games out there, but you got to have removed China.

Seana Smith: All right, Jared. Thanks so much for breaking that down for us. Certainly, good things for investors to keep in mind for today. All right. Well, coming up, why Nike might be the strongest bet in retail stocks this year. We will be speaking with Adrienne Yih, Barclays Consumer Discretionary Senior Analyst, next.

Speaker Change: From the equation alright, Jerry thanks, so much for breaking that down for US certainly a good thing for investors to keep in mind for today, alright, well coming out of the why Nike it might be the strongest bet in retail stock. This year, we'll be seeing you have Adrian Lee at Barclays consumer discretionary senior analysts.

Speaker Change: And the other would be to understand your risk before you enter into any position structured as defined risk, if you're brand new to these markets. But most importantly, understand what that risk is, and what it looks like for various outcomes. And what we're looking at here is just a sample of ideas that one can do based on the implied volatility environment that we are in currently. So you don't want to just buy a call if you're bullish or buy a put if you're bearish. You want to take implied volatility into consideration to stack the edges in your favor.

Jared Blikre: A new generation of retail traders is flocking to options trading as an alternative to plain vanilla stock investing. The options arena can be complex to maneuver, and there are also pitfalls to avoid. We're starting off with the basics in Yahoo Finance's Options Week 101.

Speaker Change: A new generation of retail traders is flocking to options trading as an alternative to plain vanilla stock investing but the options are really can be complex to maneuver and there are also pitfalls to avoid so we're starting off with the basics and Yahoo finances options week 101, so it's important to.

Speaker 19: Well, it's important to remember, Jared, that it is a right, and that's where the word option comes from. As opposed to, let's say, a futures contract or actually buying the stock, where you're obligated to own that underlying security. As a result, the price tends to be lower, but the very important parts are you have to get that target price correct because there's a predetermined price, and you have to get the timeframe correct.

Adrienne Yih: Well, it's important to remember, Jared, that it is a right, and that's where the word option comes from. As opposed to, let's say, a futures contract or actually buying the stock, where you're obligated to own that underlying security. As a result, the price tends to be lower, but the very important parts are you have to get that target price correct because there's a predetermined price, and you have to get the timeframe correct.

Remember Jared that is that it is a right and that's where the word option comes from as opposed to let's say a futures contract or actually buying the stock we are obligated to own that underlying securities as a result of the price tends to be lower but.

Speaker Change: We have to focus on risk versus reward. So whenever we're buying a stock, the most that we can lose is the most that we spend.

Speaker Change: The very important parts of our Europe, you have to get that target.

Speaker Change: But when we're trading, we always have a price target in mind. And these are very essential components when we talk about options. We've got that layer of complexity because it's a derivative of more than just the underlying security. We've got time and implied volatility as well. Never hold an option till expiration. That's the worst thing you can do.

Speaker Change: <unk> correct because of this because there is a predetermined price anyhow forget the timeframe correct. If you get into options number one it requires a certain degree of focus and activities because often dickmeyer all of them all the time and the other would be understand your risk before you enter into any position structured as defined risk if you're brand new to these markets, but more.

Speaker 20: If you get into options, number one, it requires a certain degree of focus and activity because options expire all the time. The other would be understand your risk before you enter into any position. Structure it as defined risk if you're brand new to these markets. Most importantly, understand what that risk is, what it looks like for various outcomes.

Speaker Change: Importantly understand what that risk is what it looks like for various outcomes and what we're looking at here is just a sample of of ideas that one can do based on the implied volatility environment that we're in currently.

Speaker 21: What we're looking at here is just a sample of ideas that one can do based on the implied volatility environment that we are in currently. You don't wanna just buy a call if you're bullish or buy a put if you're bearish. You wanna take implied volatility into consideration to stack the edges in your favor.

Speaker Change: I've done this before, by the way. It's a risk. If you are, if you hold the option, you lose giving up the time value. And then if you are short the option, then you actually have what's called gamma risk, and you have a huge issue of being unprofitable very quickly. So trade small, trade often, as they say at TastyTrade, www.softbank.com. I'm not going to be here tomorrow.

Speaker Change: You don't want to just buy a call if you're bullish or buyer put up your bearish you want to take it by volatility into consideration to stack the edges in your favor or we have to focus on risk versus reward. So whenever we're buying our stock than most that we can live with as the most that we sent right, but when we're trading we always have a price target in mind.

Speaker 22: We have to focus on risk versus reward. Whenever we're buying a stock, the most that we can lose is the most that we spend, right? When we're trading, we always have a price target in mind, and these are very essential components when we talk about options. We just add that layer of complexity because it's a derivative of more than just the underlying security.

Speaker Change: And that's not going to make a difference. There's nothing I can do. I can't take it anymore. I'm not going to. Barclay's out with a note on Nike, reiterating its overweight rating on the stock and price target for the retailer. Now, the analyst behind that call, Adrian Yee, naming Nike its best idea for 2024. In this call, coming as Nike has really failed to regain some of its momentum over the last several months since the start of the year, the stock off just about 7% over the last year. We're looking at declines of just over 20%. It's also falling another 1% today. We want to bring in Adrian Yee, Barclay's consumer discretionary senior analyst, to discuss more.

Speaker Change: Various until components when we talk about often when you said that layer of complexity because of the derivative of more than just the underlying security, we've got time and implied volatility as well never holding off until exploration. That's how we're thinking of.

Jared Blikre: Yeah.

Speaker 22: We've got time and implied volatility as well. Never hold an option till expiration. That's the worst thing you can do.

Jared Blikre: I've done this, by the way.

Speaker 22: It's a risk if you're holding the option, you lose, giving up the time value.

Speaker Change: It's at risk. If you are if you hold the option you were giving up the time value and then if you are short the option. Then you actually have what's called gamma risk and you have a huge issue of being unprofitable very quickly so trade small trade off and as I say it tastes to hear it.

Jared Blikre: Mm-hmm.

Speaker 22: If you are short the option, then you actually have what's called gamma risk, and you have a huge issue of being unprofitable very quickly. Trade small, trade often, as they say at tastytrade.

Speaker Change: Okay.

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Speaker Change: Okay.

Yes.

Adrian Yee: And Adrian, when you take a look at this name, you're still bullish about what Nike maybe is going to prove in 2024. What are the catalysts ahead for this stock? The catalysts are really, number one, that they absolutely have their inventory. So the supply side of things is inarguably fixed. And so that's half the battle, right?

Speaker Change: Yeah.

Speaker Change: Oh.

Speaker Change: Yeah.

Speaker Change: Yes.

Speaker Change: Yeah.

Speaker Change: Yes.

Speaker Change: Yeah.

Speaker Change: Yes.

Speaker Change: Okay.

Speaker Change: Yes.

Seana Smith: Barclays out with a note on Nike, reiterating its overweight rating on the stock and price target for the retailer. Now, the analyst behind that call, Adrienne Yih, naming Nike its best idea for 2024. This call coming as Nike has really failed to regain some of its momentum over the last several months since the start of the year. The stock off just about 7% over the last year. We're looking at declines of just over 20%. It's also falling another 1% today. We want to bring in Adrienne Yih, Barclays Consumer Discretionary Senior Analyst, to discuss more. Adrienne, when you take a look at this name, you're still bullish about what Nike maybe is going to prove in 2024. What are the catalysts ahead for this stock?

Speaker Change: Barclays out with a note on Nike reiterating it's overweight rating on the stock and price target for the retailer and now the analysts behind that call Adrian he naming making its best idea for 'twenty 'twenty four and this call coming as Nike.

Adrian Yee: So they want to get to a pull market where their wholesale channel partners are ordering, replenishing, and restocking from them. And that's a guaranteed sort of plus to revenue. But we don't think that's happening in the first half of the year at all.

Speaker Change: Is really fail to regain some of this momentum over the last several months since the start of the year the stock up just about 7% over the last year, where we had declines of just over 20% in south of buying another 1% today, we want to bring in Adrian He Barclays consumer discretionary senior analysts to discuss more on Adrian when you take a look at this name or still bull.

Adrian Yee: We already know that all the retailers are still buying down and very conservative, but you have to have a replenishment cycle of newness. And that's where the innovation comes in. The catalysts are a whole slew of innovations coming this year, the likes of which we haven't seen in two years. And I can go through those in a second, but those are really the two catalysts.

Adrian Lee: <unk> about one Nike maybe is going to prove in 2024, what are the catalysts ahead for the stock.

Speaker 23: The catalysts are really, number one, that they absolutely have their inventory, so the supply side of things is, inarguably fixed. That's half the battle, right? They wanna get to a pull market where their wholesale channel partners are ordering, replenishing, restocking from them. That's a guaranteed sort of plus to the revenue. We don't think that's happening in the H1 at all. We already know that all the retailers are still buying down and very conservative, but you have to have a replenishment cycle of newness, and that's where the innovation comes in. The catalysts are a whole slew of innovations coming for this year, the likes of which we haven't seen in two years.

Adrienne Yih: The catalysts are really, number one, that they absolutely have their inventory, so the supply side of things is, inarguably fixed. That's half the battle, right? They wanna get to a pull market where their wholesale channel partners are ordering, replenishing, restocking from them. That's a guaranteed sort of plus to the revenue. We don't think that's happening in the H1 at all. We already know that all the retailers are still buying down and very conservative, but you have to have a replenishment cycle of newness, and that's where the innovation comes in. The catalysts are a whole slew of innovations coming for this year, the likes of which we haven't seen in two years.

Adrian Lee: So the catalysts are really number one that they absolutely have their inventories in the supply side of things is.

Adrian Yee: Innovation to drive the top line; supply is tight. Adrian, when you mentioned innovation, I was just reading in on that new Air Max DN platform, and it really seems interesting where for a shoe company that's had so much success with the retros, that gets everybody clicking, that gets people going onto a sneakers app and crashing the dang thing all the time, where they're balancing innovation and need to balance innovation with what people have just flocked to in the past. And so what is the correct way that investors should be grading the company on how they do that?

Adrian Lee: And arguably fixed and so that that's half the battle right. So they want to get to a pull market where there are wholesale channel partners are ordering replenishing restocking from them and that's a guaranteed sort of plus to that to the revenue. We don't think that's happening in the first half of the year at all are we already know that all the retailers ourselves buying down.

And very conservative, but you have to have a replenishment cycle of newness and that's where the innovation comes in on the catalysts are a whole slew of innovations coming for this year the likes of which we haven't seen in two years and I can go through those in a second but that's really the two catalyst innovation to drive topline supply is tight.

Speaker 23: I can go through those in a second, but that's really the two catalysts, innovation to drive top line, supply is tight.

Adrienne Yih: I can go through those in a second, but that's really the two catalysts, innovation to drive top line, supply is tight.

Brad Smith: Adrienne Yih, when you mention innovation, I was just reading in recently on that new Air Max DN, that platform particularly. It really seems interesting where for a shoe company that's had so much success with the retros, that gets everybody clicking, that gets people going on to a sneakers app and crashing the dang thing all the time, where they're balancing innovation and need to balance innovation with what people have just flocked to in the past. What is the correct way that investors should be grading the company on how they execute that?

Adrian: They should be grading the company on what is new and the incremental unit newness. So what's going to get the consumer to spend the money on a new pair of shoes? I can appreciate the retro side of things, but that's been the problem with Adidas, with Vans, and with Nike. They're selling the same things over and over, and it's getting, quite frankly, kind of boring. They sort of missed out on what I call the Soul Wars, like on HOKA, these high-profile platforms.

Adrian Lee: Adrian when you mentioned innovation that I was just reading in recently on that New Air Max D N that platform, particularly in and it really seems interesting where for a shoe company that had so much success with the retro as that gets everybody clicking that gets people going onto sneakers, app and crashing the dang thing all the time, where they're balancing.

Adrian Lee: Innovation and need the balance innovation with what people have just walked to in the past and so what is the correct way that investors should be grading the company on how they execute that.

Speaker 23: They should be grading the company on what is new and the incremental unit newness. What's gonna get the consumer to spend, you know, the dollars on a new pair of shoes? I can appreciate the retro, you know, side of things, but that's, you know, that's been the problem with Adidas, with Vans, and with Nike. They're selling the same things over and over, and it's getting quite frankly kind of boring. They sort of missed out on what I call the sole wars, like On, Hoka, these high-profile platforms. The Air Max Dn coming in March on Air Max Day, 26 March, mark your calendars. Right after that, they're gonna have the Pegasus 41, the Pegasus 41, which is a whole new form factor. That's brand new. Then they're gonna follow with Copa América in June and then the Paris Olympics.

Takashi Hyuga: They should be grading the company on what is new and the incremental unit newness. What's gonna get the consumer to spend, you know, the dollars on a new pair of shoes? I can appreciate the retro, you know, side of things, but that's, you know, that's been the problem with Adidas, with Vans, and with Nike. They're selling the same things over and over, and it's getting quite frankly kind of boring. They sort of missed out on what I call the sole wars, like On, Hoka, these high-profile platforms. The Air Max Dn coming in March on Air Max Day, 26 March, mark your calendars. Right after that, they're gonna have the Pegasus 41, the Pegasus 41, which is a whole new form factor. That's brand new. Then they're gonna follow with Copa América in June and then the Paris Olympics.

Adrian Lee: They should be granted the company on what is new and the incremental unit newness, So what's gonna get the consumer to spend.

Adrian Lee: <unk> on a new pair of shoes I can appreciate the retro side of things, but that's yeah. That's been the problem without it off with vans and with Nike Theyre selling the same things over and over and it's getting quite frankly kind of boring they sort of missed out on what I call. The sole wars like on HOKA. These high profile.

Adrian: The Air Max BN is coming in March, on Air Max Day, March 26, mark your calendars. Right after that, they're going to have the Peg 41, the Pegasus 41, which is a whole new form factor. So that's brand new. And then they're going to follow with Copa America in June, and then the Paris Olympics.

Adrian Lee: The platforms the air Max Dia and come in in March on Air Max Day March 23rd Mark Your calendars right after that they're going to have the page 41. The peg. It says 41, which is a whole new form factor. So so that's brand new and then they're going to follow with Copa America in June and then the Paris Olympics, all this newness and innovation and what else.

Speaker 23: All this is newness and innovation. What I'll say is when you have the newness, the people don't immediately buy, but this is the first time we've seen kind of the leadership, right, led new by Heidi O'Neill, that is just focused on speed, hustle at scale.

Adrienne Yih: All this is newness and innovation. What I'll say is when you have the newness, the people don't immediately buy, but this is the first time we've seen kind of the leadership, right, led new by Heidi O'Neill, that is just focused on speed, hustle at scale.

Adrian: All this is newness and innovation. And what I'll say is, when you have newness, people don't immediately buy it. But this is the first time we've seen kind of leadership, led by new CEO Heidi O'Neill, that is just focused on speed, and hustle at scale.

Adrian Lee: Hey, when you have the newness that people don't immediately by but this is the first time, we've seen how the leadership right leg new by Heidi O'neil that is just focused on speed hustle at scale.

Seana Smith: Adrienne, what do you think the margin recovery story looks like? More specifically, you and I have talked so much just about the inventory levels with Nike. There has certainly been a lot of improvement over the last several quarters, but where do you think they stand as we look out towards year-end in terms of that continued improvement that many analysts have been calling for?

Adrian: Adrian, what do you think the margin recovery story looks like? And more specifically, you and I have talked so much just about the inventory levels with Nike. There has certainly been a lot of improvement over the last several quarters, but where do you think they stand as we look out towards year end in terms of that continued improvement that many analysts have been calling for? So fiscal year end for them is May, and this is a pretty anemic company; they just lowered their guidance. Plus 1% of top line sales, consensus is looking for a 12.3% operating margin. That's below the 10-year average of 13%, right?

Speaker Change: Adrian what do you think the margin recovery story looks like and more specifically when you and I have talked so much about the inventory levels with Nike. There has certainly been a lot of improvement over the last several quarters, but where do you think they stand as we look out towards the year end in terms of that continuing improvement that many analysts have been calling for.

Speaker 23: Fiscal year-end for them is May, and this is a pretty anemic. They just lowered guidance. +1% top-line sales. Consensus is looking for a 12.3% operating margin. That's below the 10-year average of 13%, right? What we always say is they just got their inventory clean sort of at the end of July. Clearly at the end of November, it takes about two quarters for it to percolate into the system and run through the income statement and the margins. We're seeing kind of the back half of this calendar year, but certainly for FY 2025, 150 to 200 basis points coming just from cleaning up the inventory, not spending money on storage, losses and damages.

Adrienne Yih: Fiscal year-end for them is May, and this is a pretty anemic. They just lowered guidance. +1% top-line sales. Consensus is looking for a 12.3% operating margin. That's below the 10-year average of 13%, right? What we always say is they just got their inventory clean sort of at the end of July. Clearly at the end of November, it takes about two quarters for it to percolate into the system and run through the income statement and the margins. We're seeing kind of the back half of this calendar year, but certainly for FY 2025, 150 to 200 basis points coming just from cleaning up the inventory, not spending money on storage, losses and damages.

Adrian Lee: So fiscal year end for them is may.

Adrian Lee: And this is a pretty anemic, they just lowered guidance plus 1% topline sales consensus is looking for a 12, 3% operating margin that's below the 10 year average of 13% right. So this is you know so.

Adrian: So this is, you know, what we always say is they just got their inventory clean sort of at the end of July, clearly at the end of November. It takes about two quarters for it to percolate into the system and run through the income statement and the margins. So we're seeing, you know, kind of the back half of this calendar year, but certainly for FY25, 150 to 200 basis points coming just from cleaning up the inventory, not, you know, spending money on storage, losses, and damages, just all those kind of ghost inefficiencies and all the friction that comes with just being supply chain and inventory inefficient. And so we haven't even put in the top line recovery.

Adrian Lee: So what we always say is they just got their inventory clean sort of at the end of July clearly at the end of November It takes about two quarters for it to percolate into the system and run through the income statement in the margin. So we're seeing.

Adrian Lee: Kind of the back half of this calendar year, but certainly for FY 'twenty five 150 to 200 basis points coming just from cleaning up the inventory not spending money on storage of losses and damages. There's all those kind of goes inefficiencies and all the friction that comes with just being supply chain and inventory inefficient.

Speaker 23: Just all those kind of ghost inefficiencies and all the friction that comes with just being supply chain and inventory inefficient. We haven't even put in the top line recovery. If we wanna talk about top line recovery over the course of 2025, 2026, 2027, we think there's probably 400 basis points, right? 200 mid near term from below the top line, another 200 basis points from leverage. 12%, 13% high-teens margins over the next 2 to 3 years.

Adrienne Yih: Just all those kind of ghost inefficiencies and all the friction that comes with just being supply chain and inventory inefficient. We haven't even put in the top line recovery. If we wanna talk about top line recovery over the course of 2025, 2026, 2027, we think there's probably 400 basis points, right? 200 mid near term from below the top line, another 200 basis points from leverage. 12%, 13% high-teens margins over the next 2 to 3 years.

Adrian Lee: And so we haven't even put in the top line recovery, if we weren't talking about top line recovery over the course of 'twenty five 'twenty six 'twenty seven we think Theres, probably 400 basis points 200 men. They are charged from below the top line. Another 200 basis points from leveraged so 12%, 13% high teen margins over the next two to three years.

Adrian: If we want to talk about top line recovery over the course of 25, 26, 27, we think there's probably 400 basis points, right? 200 mid and near term from below the top line, and another 200 basis points from leverage. So 12%, 13%, high team margins over the next two to three years. Adrian, while we have you, one of our producers brilliantly wrote up last week that City Boys are up, as Lululemon is coming out with their new men's shoes here. We think across the city-verse, the casual shoe, of course, that is set to start things off, plus the performance styles.

Brad Smith: Adrienne, while we have you, one of our producers brilliantly wrote up last week that City Boys are up as Lululemon is coming out with their new men's shoes here. We think across the Cityverse, the casual shoe, of course, that is set to start things off, plus the performance styles. What is a successful entry into that performance and just overall footwear market in men's look like for Lulu from your perspective?

Speaker Change: Adrian while we have you one of our producers brilliantly wrote up last week that city boys are up as Lulu Lemon is coming out with their new men's shoes here, we think across the city versus the casual shoe of course that is set to start things off plus the performance styles. What is a successful entry into that performance and just overall.

Adrian: What would a successful entry into that performance and just overall footwear market in men's look like for Lulu from your perspective? So Lulu is, as you said, very new. It's gotten good PR on websites, et cetera. We're really excited about this piece of the business. But just remember, for Lulu, men's and women's, the entire footwear is a low 2% of their five-year plan. So I love Lulu because they take these big risks, but then they don't put the execution is not a big risk on the P&L. We're very hopeful that it completes sort of that whole head-to-toe outfitting, and it opens up new cam categories.

Speaker Change: Footwear market in men's look like for Lulu from your perspective.

Speaker 23: Lulu is, as you said, you know, very newly launching. It's gotten, you know, good kind of PR on websites, et cetera. We're really excited for this piece of the business. Just remember, for Lulu men's and women's, the entire footwear sort of is a low like 2% of their five-year plan, right? I love Lulu because they take these big risks, but then they don't put. The execution is not a big risk on the P&L. We're very hopeful that it completes sort of that whole head-to-toe outfitting. It opens new TAM categories. You know, Lulu is just excellent and has been excellent at kind of keeping that innovation pipeline. Remember, the launch of the shoe is a five-year investment for them.

Adrienne Yih: Lulu is, as you said, you know, very newly launching. It's gotten, you know, good kind of PR on websites, et cetera. We're really excited for this piece of the business. Just remember, for Lulu men's and women's, the entire footwear sort of is a low like 2% of their five-year plan, right? I love Lulu because they take these big risks, but then they don't put. The execution is not a big risk on the P&L. We're very hopeful that it completes sort of that whole head-to-toe outfitting. It opens new TAM categories. You know, Lulu is just excellent and has been excellent at kind of keeping that innovation pipeline. Remember, the launch of the shoe is a five-year investment for them.

Speaker Change: So it really is as you've done in a very newly launching its gotten you know good good kind of PR on websites et cetera. We're really excited for this piece of the business, but just remember for a loop men's and women's the entire footwear. So it is a low like 2% of their five year plan right. So so I loved a little because they take.

Speaker Change: These big risks, but then they don't put the execution, it's not a big restaurant. The P&L, we're very hopeful that it complete started that whole head to toe outfitting that opens new Tam category.

Adrian: Lulu is just excellent and has been excellent at kind of keeping that innovation pipeline. And remember, the launch of the shoe is a five-year investment for them. So through and through the pandemic, they never let up on that product design and development. And so they're winning. And June, I feel like you and I could have a really good sneaker podcast one day.

Speaker Change: Lulu is just excellent and has been actually that kind of keeping that innovation pipeline and remember the the launch of the shoe is a five year investment for them. So it's driven through the pandemic. They never let up on that product design and development and so their wedding, Andrew and I feel like you and I could have a really good sneaker podcast, one day I'm just going to throw that out.

Speaker 23: Throughout the pandemic, they never let up on that product design and development, and so they're winning.

Adrienne Yih: Throughout the pandemic, they never let up on that product design and development, and so they're winning.

Brad Smith: Adrienne, I feel like you and I could have a really good sneaker podcast one day. I'm just gonna throw that out there. Do with that what you will. At the end of the day here for Lulu, I mean this really kind of in the category itself, the contribution, what should investors expect for how early this can be a contributor to the company and the broader pillars that they've laid out?

Adrian: I'm just gonna throw that out there; do with that what you will. But at the end of the day here for Lulu, I mean, this really kind of in the category itself, the contribution, what should investors expect for how early this can be a contributor to the company and the broader pillars that they've laid out. So, you know, if we think about apparel companies that have entered footwear, right? It's tough,

Speaker Change: Their deal with that with what with what you will but at the end of the day here for Lulu I mean, this really kind of in the category itself. The contribution what should investors expect for how early this can be a contributor to the company and in the broader pillars that they've laid out.

Speaker 23: You know, if we think about apparel companies that have entered footwear, right? It's tough, right? Footwear kind of going to apparel, you kind of have that brand out there, but lululemon already has that brand. You know, if we think about long term, right? It would not be unusual to think about 60%, two-thirds of the business coming from their core apparel and 25% over time, kind of coming from this footwear and accessories piece of the business. That's obviously a long time away. But the fact of the matter is when you have such a strong brand and then you platform that onto footwear is the kind of completer, particularly with men, they I always like to say this, boys and men like to dress from the feet up, right?

Adrienne Yih: You know, if we think about apparel companies that have entered footwear, right? It's tough, right? Footwear kind of going to apparel, you kind of have that brand out there, but lululemon already has that brand. You know, if we think about long term, right? It would not be unusual to think about 60%, two-thirds of the business coming from their core apparel and 25% over time, kind of coming from this footwear and accessories piece of the business. That's obviously a long time away. But the fact of the matter is when you have such a strong brand and then you platform that onto footwear is the kind of completer, particularly with men, they I always like to say this, boys and men like to dress from the feet up, right?

Speaker Change: So if we think about apparel companies that have entered footwear right. It's tough right footwear kind of go into apparel, you kind of have that brand out there, but lulu already has that brand. If we think about long term right. So it would not be unusual to think about 60% two thirds of the.

Adrian: Footwear is kind of going to apparel and kind of having that brand out there, but Lulu already has that brand. You know, if we think about the long term, right? So it would not be unusual to think about 60%, two-thirds of the business coming from their core apparel and 25% over time kind of coming from this footwear and accessory piece of the business. That's obviously a long time away, but the fact of the matter is when you have such a strong brand and then you platform that onto footwear, footwear is the kind of completer, particularly with men. I always like to say this, boys and men like to dress from the You spend a lot of money on your feet and then, I don't know, kind of not a lot everywhere else. Look, you're not lying.

Speaker Change: Business coming from their core apparel and 25% over time I'm coming from this footwear and accessories piece of the business. That's obviously, a long time away but.

Speaker Change: But the fact of the matter is when you have such a strong brand and the new platform that onto footwear, but where is the kind of complete or particularly with men. They I always liked it the boys and men like to just from a fee up right. You spent a lot of money down on their feet, and then and now kind of not a lot.

Speaker 23: You spend a lot of money down on your feet, and then, I don't know, kind of not a lot everywhere else.

Brad Smith: Look, you're not lying. I feel personally attacked almost, or just, you know, really seen right now. Adrienne Yih, Analyst, Barclays, thanks so much for joining us here today. Always a pleasure.

Speaker Change #100: We're all good.

Speaker Change #101: Look they're not line I feel personally attacked almost of arb or just you know really seen right now.

Adrian: I feel personally attacked almost, or just, you know, really seen right now. Adrienne Yee, Barclays Consumer Discretionary Senior Analyst. Thanks so much for joining us here today. Always a pleasure. Great to see you.

Speaker Change #101: Barclays consumer discretionary senior analyst. Thanks, so much for joining us here today always a pleasure.

Speaker 23: Great. Great to see you.

Brad Smith: See ya. We've got market action for you up ahead. The sell-off is accelerating here across the major averages. You've got a look at it in the corner of your screen here before we go to break. Maybe overly optimistic is what these markets are telling us perhaps. We're gonna be joined by Tiffany Wilding, PIMCO Managing Director and Economist, after the break. Really, you're only missing NVIDIA in terms of massive tech companies to report this week. Really, guys, I think the story here is understanding how big this is gonna be for the overall market.

Speaker Change: We've got market action for you up ahead. The selloff is accelerating here across the major averages. You've got to look at it in the corner of your screen here before we go to break.

Thank you Sue.

Speaker Change #101: We've got market action for you up ahead, the sell off is accelerating here across the major averages you've got to look at it in the corner of your screen here before we go to break maybe overly optimistic is what these markets are telling us perhaps we're gonna be joined by Tiffany wildly who's the pimco managing director and economists after the break.

Speaker Change: Maybe too optimistic is what these markets are telling us, perhaps. We're going to be joined by Tiffany Wilding, who is the PIMCO Managing Director and Economist, after the break. Really, you're only missing NVIDIA in terms of massive tech companies to report this week. And really, guys, I think the story here is understanding how big this is going to be for the overall market. Another year of overcoming a lot of challenges. As we think about 2024, it really is a year of execution for us.

Speaker Change #101: So really your only missing in video in terms of the massive tech companies to report this week and really guys. I think the story here is understanding how big this is going to be for the overall market as another year of overcoming a lot of challenges as we think about 2024.

Speaker 24: It's another year of overcoming a lot of challenges. As we think about 2024, it really is a year of execution, for us. We've got the roadmap. We talked about 200 to 300 thousand EVs being produced this year. We've got confidence of getting to variable profit positive, in H2 on our journey getting to mid-single digit margins by 2025.

Speaker Change #101: It really is a year of execution for us we've got the roadmap we talked about 200 to 300000 Evs being produced this year, we've got confidence of getting to variable profit positive in the second half of the year on our journey of getting to mid single digit margins by 2025 people are really focused on this move degenerative AI.

Speaker Change: We've got the roadmap. We talked about 200,000 to 300,000 EVs being produced this year. We've got confidence of getting to variable profit positive in the second half of the year on our journey getting to mid-single-digit margins by 2025. People are really focused on this move to generative AI, and that seems to be a very big focus longer term for the street, where Google has basically a monopoly on search with generative AI. You've got different players, at least trying to dethrone them in some way.

Speaker 25: People are really focused on this move to generative AI, and that seems to be a very big focus longer term for the street. Where Google's had basically a monopoly on search with generative AI, you've got different players at least trying to dethrone them in some way.

Speaker Change #101: It seems to be a very big focus longer term for the street.

Speaker Change #101: We're google's had basically a monopoly on search regenerative AI, you've got different players at least trying to disrupt them in some way.

Speaker 26: Generative AI is one year old. We're one year into this new AI cycle. Microsoft, they disclosed their AI business actually doubled sequentially. It's now a $4.4 billion run rate business in year one.

Speaker Change: Generative AI is one year old. Over one year into this new AI cycle, Microsoft disclosed that their AI business actually doubled sequentially. It's now a $4.4 billion run rate business in year one. We had a strong quarter in Q1, and it was really driven by our most loyal customers remaining engaged across the globe. And so as we think about going forward, as we look to some maybe more near-term and transitory headwinds, what we're really focused on is continuing to drive customers into our rewards program. The fact that there's no guide here isn't really a suspension, so far as I can tell, and I would attach that to not wanting to get ahead of the FAA.

Speaker Change #101: Or do they all is one year old we're one year into this new AI cycle.

Speaker Change #101: Microsoft They disclose their AI does is actually doubled sequentially. It's now a $4 4 billion dollar run rate business in year, one, yes strong quarter in Q1, and it was really driven by our most loyal customers remaining engaged across the globe and so as we think about going forward you know as we.

Speaker 27: We had a strong quarter in Q1, and it was really driven by our most loyal customers remaining engaged across the globe. As we think about going forward, you know, as we look to some maybe more near term and transitory headwinds, what we're really focused on is continuing to drive customers into our rewards program.

Speaker Change #101: Look too so maybe more near term and transitory headwinds what really focused on is continuing to drive customers into our rewards program. The fact that Theres No guide here isn't really a suspension so far as I can tell and I would attach that to not wanting to get ahead of the FAA. The FAA is Ashford freeze on the 737 arguably the most.

Speaker 23: The fact that there's no guide here isn't really a suspension so far as I can tell, and I would attach that to not wanting to get ahead of the FAA. The FAA has asked for a freeze on the 737, arguably the most important product they do, and I think they're just being smart and not trying to get ahead of the regulator.

Speaker Change: The FAA has asked for a freeze on the 737, arguably the most important product they do, and I think they're just being smart and not trying to get ahead of the regulator. We're really happy and very proud about the results we delivered this morning. Being able to grow the company by 36% is historic in our context, and in an industrial context in the pharmaceutical industry, growing 36% in an industry growing to the tune of 4% is also very, very special.

Speaker Change #101: Important product they do.

Speaker Change #101: I think they're just being smart and not trying to get ahead of the regulators.

Speaker 28: We're really happy and very proud about the results we delivered this morning. Being able to grow the company by 36% is historic in our context and in an industrial context in the Arm tooling industry. Growing 36% in an industry growing to the tune of 4% is also very special.

Really happy I'm very proud about the results we deliver this morning.

Speaker Change #101: Being able to grow the company by 36%.

Speaker Change #101: Historically in our context and in an industrial context in the pontoon industry growing 36% and an industry core growing to the tune of fault incentive is.

Speaker 23: When people buy a new phone, they're buying a more expensive phone, and so we're seeing this tremendous mix shift.

Speaker Change #101: Also very very special when people buy a new phone they are buying a more expensive phones and so we're seeing this tremendous mix shift towards more expensive devices towards more expensive chips and that shows up in our revenue growth. The strong guidance for Q1 got it essentially above the street for revenues for Q1, and then the <unk>.

Speaker Change: And so we're seeing this tremendous makeshift towards more expensive devices, towards more expensive chips, and that shows up in our revenue growth. We had strong guidance for Q1, got it essentially above the street for revenue growth in Q1. And then the dividend, obviously investors are going to like that, showing continued expense at this point on their part. And so we think investors are really more focused on the guidance and the dividend for Meta. At $13.2 billion, which is what they did in the quarter, you have a trajectory that's leading the company towards kind of a 10% bogeyman in 2025 now, which is not something that investors were expecting. The number is a bit disappointing, but I think it's not a major disaster because it's all about the future here going forward, how they get generative AI into their whole mix and all that. So there are a lot of other levers that they can pull, but at this point, it is definitely a disappointment that two areas that we were concerned about did disappoint.

Speaker 29: towards more expensive devices, towards more expensive chips, and that shows up in our revenue growth.

Speaker 30: The strong guidance for Q1 got it essentially above the street for revenues for Q1, and then the dividend, obviously, investors are going to like that, showing continued expense discipline on their part. I think investors are really more focused probably on the guidance and the dividend for Meta.

Speaker Change #101: Dividend, obviously vessels are going to like that showing continued expense discipline on their part.

Speaker Change #101: We think investors are really more focused on the guidance and the dividend per for meta.

Speaker 31: At JPY 132 billion, which is what they did in the quarter, you have a trajectory that's, you know, leading the company towards kind of a 10% bogey in 2025 now, which is not something that investors were expecting.

Speaker Change #101: <unk> 2 billion, which is what they did in the quarter you have a trajectory that's leading the company towards kind of a 10% bogey.

Speaker Change #101: In 2025, now which is not something that investors were expecting the number isn't business overall, but I think it's not a major disaster because it's all about the future here going forward.

Speaker 29: The number is a miss overall, but I think it's not a major disaster because it's all about the future here going forward, how they get the generative AI into their whole mix and all that. There's a lot of other levers that they can pull. At this point, it is definitely a disappointment that two areas that we were concerned about did disappoint.

Speaker Change #101: He gets degenerative AI into their own mix and all that so they don't have other.

Speaker Change #101: Levers they can pull but at this point it is definitely a disappointment that two areas that we were concerned about the disappointment.

Speaker Change #101: Yeah.

Speaker Change #101: Oh.

Speaker Change #101: [music].

Speaker Change #101: Okay.

Speaker Change #101: [music].

Speaker Change #101: Yeah.

Speaker Change #101:

Speaker Change #101: Sure.

Speaker Change #101: [music].

Speaker Change #101:

Speaker Change #101: Mhm.

Speaker Change #101:

Speaker Change #101: Uh huh.

Speaker Change #101: [music].

Speaker Change #101: Okay.

Speaker Change #101: Yeah.

Speaker Change #101: Yes.

Speaker Change #101: Yeah.

Speaker Change #101: Okay.

Speaker Change #101: Yeah.

Speaker Change #101: Yes.

Speaker Change #101: No.

Speaker Change: ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? Optimism for seeing a Fed rate cut in March is dropping significantly, down around 15% from 46% last week, according to the CME FedWatch tool. This comes after the strong jobs report and Federal Reserve Chair Powell's comments. Let's bring in Tiffany Wilding, who is the PIMCO managing director and economist, to discuss what we could see from the Federal Reserve ahead of March. Tiffany, just walk us through your timing, your thesis as to what this next few months, especially as we continue to think about the upcoming meeting schedule, what they could signal about the pace of some of their cuts. Yeah, well, all of those are really good questions.

Speaker Change #101: Yeah.

Speaker Change #101: Okay.

Speaker Change #101: Yes.

Speaker Change #101: Okay.

Speaker Change #101: Yes.

Brad Smith: Optimism for seeing a Fed rate cut in March is dropping significantly, down around 15% from 46% last week, according to the CME FedWatch Tool. This comes after the strong jobs report and Federal Reserve Chair Powell's comments. Let's bring in Tiffany Wilding, who is the PIMCO Managing Director and Economist, to discuss what we could see from the Federal Reserve ahead of March. Tiffany, just walk us through your timing, your thesis as to what this next few months, especially as we continue to think about the upcoming meeting schedule, what they could signal about the pace of some of their cuts.

Speaker Change #101: Optimism for seeing a fed rate cut in March is dropping significantly down around 15% from 46% last week. According to the CME Fed watch tool. This comes after the strong jobs report and Federal Reserve Chair Powell.

Speaker Change #101: Comments, let's bring in Tiffany wildling, who's the pimco, managing director and economists to discuss what we could see from the Federal Reserve ahead of March Tiffany just walk us through your timing your thesis as to what this next few months, especially as we can tell you to think about the upcoming meeting schedule, what they could signal about the pace of some of.

Speaker 32: Yeah. Well, all of those are really good questions. I think as, just taking a step back, you know, really what the Fed is trying to balance right now, obviously, is the risk that, you know, maybe the job isn't done, inflation settles somewhere above target, with the risk that they're going to do too much, and sort of needlessly weaken the economy. The data, quite frankly, you know, hasn't really been that useful. Well, obviously the data is useful, but there's been some question that's arisen from the data because on the one hand, we have very strong growth, and what we would argue a still tight labor market, although it's eased versus last year, while on the other hand, inflation has come down.

Tiffany: Their cuts.

Tiffany: Yeah, well all of those are really good questions and I think as I'm, just taking a step back.

Tiffany Wilding: And I think as I'm just taking a step back, you know, really what the Fed is trying to balance right now, obviously, is the risk that, you know, maybe the job isn't done, inflation settles somewhere above target, with the risk that they're going to do too much and sort of needlessly weaken the economy. And the data, quite frankly, haven't really been that useful. Well, obviously, the data is useful, but there are some questions that have arisen from the data because, on the one hand, we have very strong growth and what we would argue is still a tight labor market, although it's eased versus last year, while, on the other hand, inflation has come down. You know, so obviously, this has been almost a too good to be true kind of experience.

Speaker Change #103: Really what the fed is trying to balance right now.

Tiffany Wildling: Obviously as the risk that maybe the job isn't died inflation settles somewhere above target with the risk that they're going to do too much and sort of needlessly weaken the economy and the data quite frankly, you know hasn't really been that useful it well obviously the date as usual, but but there there's been some question that's arisen from the data because all.

On the one hand, we have very strong growth.

Tiffany Wildling: We would argue is still tight labor market, although it's eased versus last year, while on the other hand inflation has come down.

Speaker 32: You know, obviously this has been almost a too good to be true kind of experience, and I think the Fed, you know, just wants to be sure that inflation's coming down in a sustainable way. What does all that mean? Well, we had been arguing that March was probably a little bit too early. Chair Powell confirmed that at the most recent FOMC meeting. We think FOMC officials themselves are looking more like a mid-year, maybe a June timeframe for the first cut. After that, you know, their own forecast suggests that every other meeting pace could be likely.

Tiffany Wildling: Obviously this has been almost too good to be true kind of experience and I think the fed just wants to be sure that inflation is coming down in a sustainable way. So what does all that mean well we had been arguing that March was probably a little bit too early a chair Powell confirmed that at the most recent F. O C meeting, we think F O M C official.

Tiffany Wilding: And I think the Fed, you know, just wants to be sure that inflation is coming down in a sustainable way. So what does all that mean? Well, we had been arguing that March was probably a little bit too early.

Tiffany Wilding: Chair Powell confirmed that at the most recent FOMC meeting. However, we think FOMC officials themselves are looking more like a mid-year, maybe a June timeframe, for the first cut. But then after that, you know, their own forecast suggests that every other meeting pace could be likely. But when we look historically, what we found is that in rate-cutting cycles that were not coinciding with recessions, something like every meeting pace is, you know, maybe more likely. So maybe they get going a little later, but they start to go. And when they do, they go a little faster than their current projections.

Tiffany Wildling: Those themselves are looking more like a mid year, maybe a June time frame for the first cut.

Tiffany Wildling: But then after that you know their their own forecast suggest that every other meeting pace could be likely but when we look historically, what we've found is that in rate cutting cycles that were not coinciding with recession sums.

Speaker 32: When we look historically, what we found is that in rate cutting cycles that were not coinciding with recession, you know, something like in every meeting pace, you know, is maybe more likely. Maybe they get going a little later, but they start to go. When they do go, they go a little faster than their current projections.

Tiffany Wildling: Something like in every other hour excuse me in every meeting pace is maybe more likely so maybe they get going a little later, but they start to go when they do go they go a little faster than their current projections.

Seana Smith: Tiffany, what does all this mean then for the jobs market? Because just looking back at Friday's number, obviously much hotter than what the street had been anticipating, what many economic forecasters have been expecting to see on that print. Will we be able to or will the Fed be able to orchestrate and pull off this soft landing without causing too much harm to the labor market?

Tiffany Wilding: Tiffany, what does all this mean then for the jobs market? Because just looking back at Friday's numbers, obviously much hotter than what the street had been anticipating, and what many economic forecasters had been expecting to see on that print? Will we be able to, or will the Fed be able to orchestrate and pull off this soft landing without causing too much harm to the labor market? Well, you know, so I think that is really the key question.

Tiffany Wildling: Does all this mean for the jobs market because just looking back on Fridays number obviously much hotter than what the street had been anticipating what many economic forecasters have been expecting to see on that Brent will we be able to or will the fed would be able to orchestrate.

Tiffany Wildling: And pull off the soft landing without causing too much harm to the labor market.

Speaker 32: Well, you know, I think that is really the key question, and obviously the Federal Reserve officials believe that they can. You know, and one of the things that we would just note here is that, for the unemployment rate to stay constant, the number, the kind of the neutral level of jobs that the economy can create is about 100K per month. Now we've been creating much more than that, you know, 250, 300K in the Q4. You know, it is well above that. Eventually that kind of job gain should put some downward pressure on the unemployment rate.

Speaker Change #105: Well, yeah. So I think that is really the key question and obviously the federal reserve officials believe that they can and one of the things that we would just note here is that.

Tiffany Wilding: And obviously, the Federal Reserve officials believe that they can, you know, and one of the things that we would just note here is that for the unemployment rate to stay consistent, to stay constant, that the number of new jobs that the economy can create is about 100k per month. Now, we've been creating much more than that, you know, 250, 300k in the fourth quarter. You know, it is well above that.

Speaker Change #105: The unemployment rate to stay at his stake.

Speaker Change #105: Insistent to stay constant there are a number of kind of the neutral level of jobs that the economy can create it's about 100 K per month.

Speaker Change #105: Now, we've been creating much more than that [laughter].

Speaker Change #105: The 250 to 300 K in there in the fourth quarter.

Speaker Change #105: It is well above that so eventually that kind of job gain should put some downward pressure on on the unemployment rate and that's you know that's a hot economy that should result in in and support of inflation.

Tiffany Wilding: So eventually, that kind of job gain should put some downward pressure on the unemployment rate. And that's, you know, that's a hot economy that should result in support of inflation. You know, so I think the Fed really wants to be careful here. I do think you need some weakening in the labor market and labor demand. One of the reasons why we haven't seen the unemployment rate increase as a result, despite the fact that jobs have been strong, is because we've had a labor supply that's come back. You know, some of the folks that maybe took a time out after the pandemic have come back, and obviously, immigration has been quite strong this year.

Speaker 32: That's, you know, that's a hot economy that should result in support of inflation. You know, I think the Fed really wants to be careful here. I do think you need some weakening in the labor market and labor demand. One of the reasons why we haven't seen the unemployment rate increase as a result, despite the fact that jobs have been strong, is because we've had labor supply that's come back. You know, some of the folks that maybe took a time out after the pandemic have come back, and obviously immigration has been quite strong this year. You know, ultimately those factors, you know, they look set to fade.

Speaker Change #105: The fed really wants to be careful here I do think you need some weakening in the labor market and labor demand one of the reasons why we haven't seen the unemployment rate increase as a result, despite the fact that jobs have been strong has been because we've had labor supply that's come back.

Speaker Change #105: All of the folks that maybe took a time out after the pandemic have come back and obviously immigration has been quite strong this year, but ultimately those factors you know they look set to fade and so we really kind of need some cooling off of the labor market here in our view in order to get inflation sustainably back to target. There's all the data right now say soft landing or.

Tiffany Wilding: You know, but ultimately, those factors, you know, they look set to fade. And so we really kind of need some cooling off of the labor market here, in our view, in order to get inflation sustainably back to target. Does all the data right now say a soft landing, or does it say a no landing? And what does a no landing look like, Tiffany?

Speaker 32: We really kind of need some cooling off of the labor market here in our view, in order to get inflation sustainably back to target.

Brad Smith: Does all the data right now say soft landing or does it say no landing? What does a no landing look like, Tiffany?

Speaker Change #105: Or does it say no lending and what doesn't know lending looked like Tiffany.

Speaker 32: Well, you know, I think it's all a matter of timing, right? You know, the markets are gonna trade, you know, data, economic data, can certainly lead markets to trade one way or the other. You know, I think ultimately our own view is that probably over time, over the long run, no landing is really not an option. Chair Powell has said, you know, that, you know, in not so many words that he doesn't wanna be Arthur Burns. They're not gonna stop until they get the job done. You know, that's why they're being very careful here.

Tiffany Wilding: Well, you know, I think it's all a matter of timing, right? You know, the markets are going to trade, and data, economic data, you know, can certainly lead markets to trade one way or the other. You know, I think ultimately, our own view is that, over time, in the long run, no landing is really not an option. Chairman Powell has said, you know, that, in not so many words, that he doesn't want to be Arthur Burns.

Tiffany: Well you know I think it's all a matter of timing right. You know the markets are going to trade you know data economic data can certainly lead markets to trade one way or the other you know I think ultimately our own view is that probably an over over time over the long run no landing is really not an option chair Powell.

Tiffany: <unk> has said you know that not so many words that he doesn't wanna be Arthur Byrnes, they're there, they're not going to stop until they get the job done and so that's why they are being very careful here and as I mentioned you know that.

Tiffany Wilding: They're not going to stop until they get the job done. And so, you know, that's why they're being very careful here. And as I mentioned, you know, I think that the balance of risks here is that they maybe wait a little bit too long. They're delayed in cutting, but then they have to cut a little bit faster than they're currently projecting. So I think eventually we will get back to two, you know, but right now, the economy looks strong, and it looks like maybe the Fed has a little bit more work to do in terms of remaining restrictive. Tiffany, what you're reading on sectors of the economy, like the housing market, which could potentially suffer a bit more if the Fed, in fact, doesn't cut rates until the middle of the year.

Speaker 32: As I mentioned, you know, I think that you know, the balance of risks here is that they maybe wait a little bit too long, they're delayed in cutting, but then they have to cut a little bit faster than they're currently projecting. I think eventually we will get back to two, you know, but right now the economy looks strong and it looks like maybe the Fed has a little bit more work to do in terms of remaining restrictive.

Tiffany: Think that ballot you know the the balance of risks here is that they maybe wait a little bit too long, they're delayed and cutting but then they have to cut a little bit faster than they're currently projecting because I think eventually we will get back to you you know, but right now the economy looks strong and it looks like maybe the fed has a little bit more work to do in terms of remaining restrictive.

Seana Smith: Tiffany, what's your reading on sectors of the economy, like the housing market, which could potentially suffer a bit more if the Fed in fact doesn't cut rates until the middle of the year?

Tiffany: To me, what's your reading on sectors of the economy like the housing market, which could potentially suffer a bit more if the fed in fact does it cut rates until the middle of the year.

Speaker 32: Yeah. The housing market is a little bit tricky in some sense for the Fed. The reason is because, you know, after the 2008 financial crisis, obviously we had a housing boom. We had big levels of inventories of housing as a result of that. After the great financial crisis, we just stopped building in the United States, and years and years of under-building have resulted in actually a housing shortage, specifically an affordable housing shortage, which we're dealing with today. The problem with Fed policy or the kind of conundrum with Fed policy is that when you raise rates, real investment, real residential investment, so the supply of housing, you restrict just as much as demand.

Tiffany Wilding: Yeah, so the housing market is a little bit tricky in some sense for the Fed. And the reason is that, you know, after the 2008 financial crisis, obviously, we had a housing boom, and we had big, big levels of inventories of housing as a result of that. But after the great financial crisis, we just we just stopped building in the United States.

Tiffany: Yeah. So the housing market is a little bit tricky and in some sense for the fed and the reason is because you know after the 2008 financial crisis. Obviously, we had a housing boom, we had a big big levels of inventories of housing as a result of that but after the great financial crisis. We just we just stopped building in the United States and.

Tiffany Wilding: And years and years of underbuilding have resulted in a housing shortage, specifically an affordable housing shortage, which we're dealing with today. And the problem with Fed policy or the kind of conundrum with Fed policy is that we raise rates, real investment, real residential investment, so the supply of housing you restrict just as much as demand. So, you know, in terms of the longer-term housing shortage issue that the US is facing, it's not actually clear that higher interest rates are helping that. And so that could be a little bit of an inflationary headwind for the Fed. Moving forward, you know, now, we do think if rates fall, you will see a pickup in housing activity pretty quickly as a result of that housing shortage. And of course, you know, the Fed, you know, that's not something that the Fed wants either.

Tiffany: Years and years of under building have resulted in actually a housing shortage, specifically at affordable housing shortage, which we're dealing with today.

Tiffany: The problem with fed policy had a kind of a conundrum of fed policy is that we raise rates.

Real investment real residential investment so the supply of housing you restrict just as much as as demand. So you know in terms of the longer term housing shortage issue that the U S is facing its not actually clear that higher interest rates are helping that.

Speaker 32: In terms of the longer term housing shortage issue that the US is facing, you know, it's not actually clear that higher interest rates are helping that. That could be a little bit of actually an inflationary headwind for the Fed, moving forward. You know, now we do think if rates fall, you will see a pickup in housing activity pretty quickly as a result of that housing shortage. Of course, you know, the Fed, you know, that's, you know, that's not something that the Fed wants either. Housing's a little bit tricky for the Fed right now.

And so that could be a little bit of actually an inflationary headwind for the fed move.

Tiffany: Moving forward you know now would you think if rates fall you will see a pickup in housing activity pretty quickly as a result of that housing shortage and of course, you know the fed.

Tiffany: You know that's not something that the fed wants either so housing is a little bit tricky for the fed right now all.

Seana Smith: All right. Tiffany Wilding, always great to get your insight. Thanks so much for joining us here this morning, PIMCO's Chief Economist. Thanks, Tiffany. All right, let's take a look at oil and gold, both on the move this morning. Lots of speculation about what exactly a delayed rate cut is going to mean for these commodity trades. Ines Ferre is standing by at the big board with a closer look at some of the downward pressure that we've seen on prices this morning, Ines.

Tiffany Wilding: So housing is a little bit tricky for the Fed right now. All right, Tiffany Wilding, always great to get your insight. Thanks so much for joining us here this morning, PIMCO's Chief Economist.

Tiffany: Alright, Tiffany routing always great to get your entire thanks, so much for joining US here. This morning, Pimco Chief economist think Tiffany.

Speaker Change #106: All right, let's take a look at oil Angola, both on the move up this morning, a lot of speculation about what exactly delayed rate cut is going to mean for these commodity trades and asked for a if anybody at the big worth a closer look at some of the downward pressure that we've seen on prices. This morning on a yes or no and we are seeing downward pressure on W. T I and Brent crude futures I do.

Tiffany Wilding: All right, let's take a look at oil and gold, both on the move this morning. Lots of speculation about what exactly a delayed rate cut is going to mean for these commodity trades. And that's for a standing by at the big board.

Speaker 33: Yeah, Shawna, we are seeing downward pressure on WTI and Brent crude futures. I do wanna point out the US dollar index. This is at a three-month high, so this is also causing pressure on commodities which are invoiced in US dollars. Let's take a look at the board where we're seeing WTI down about 0.8%. We're also watching Brent crude that is down about 0.6%. I'm gonna pull up a six-day chart here so you can see the decline that we also saw on Friday as well. You do have those comments over the weekend from Jerome Powell, basically saying that a rate cut in March is unlikely. That is putting pressure on commodities because if you cut rates, then economic activity goes up, and so therefore you would see demand for oil going up.

Speaker Change #106: Do want to point out the U S. Dollar index. This is at a three month high. So this is also causing pressure on commodities, which are invoiced in U S. Dollar. So let's take a look at the board, where we're seeing the only OTI down about eight tenths of a percent. We're also watching Brian crude that is down about six tenths of a percent I'm going to pull.

Tiffany Wilding: A closer look at some of the downward pressure that we've seen on prices this morning. Yeah, Shauna, and we are seeing downward pressure on WTI and Brent crude futures. I do want to point out the U.S. dollar index.

Speaker Change #106: A six day chart here. So you can see the decline that we also saw on Friday as well you do have those comments over the weekend from Jerome Powell basically, saying that a rate cut in March is unlikely. So that is putting a pressure on commodities, because if you cut rates than economic.

Speaker Change: This is at a three-month high, and this is also causing pressure on commodities which are invoiced in U.S. dollars. So let's take a look at the board, where we're seeing WTI down about eight-tenths of a percent. We're also watching Brent crude, which is down about six-tenths of a percent. I'm going to pull up a six-day chart here so you can see the decline that we also saw on Friday. And you do have those comments over the weekend from Jerome Powell basically saying that a rate cut in March is unlikely. So that is putting pressure on commodities because if you cut rates, then economic activity goes up, and so, therefore, you would see demand for oil going up. So that's why we're seeing some of the pressure here with crude oil. You also have the U.S. that is pushing for a truce in Gaza.

Speaker Change #106: He goes up and so therefore, you would see demand for oil going up. So that's why we're seeing some of the pressure here with crude oil you also do have the U S that is pushing for a truce in Gaza.

Speaker 33: That's why we're seeing some of the pressure here with crude oil. You also do have the US that is pushing for a truce in Gaza. I also wanna note that one analyst is saying that we haven't really seen much of a supply disruption, despite what has been going on in the Middle East because US producers have been outputting a record amount of oil in the market. We are seeing all of any tensions from the Middle East, what we have seen in the Red Sea, all of that is basically priced into oil right now. Then just following up with gold futures. We are seeing gold that is up about $2,033 per ounce.

Speaker Change #106: I also want to note that one analysts are saying that we haven't really seen much of a supply disruption. Despite what has been going on in the middle East because U S producers have been outputting a record amount of oil in the market. So we are seeing all of any any tension.

Speaker Change #106: The middle East, what we saw who have seen in the Red Sea all of that is basically priced into oil right. Now and then just following up with gold features we are seeing goal that is up about 2033 per ounce analysts are expecting this to maintain above the 2000 level, but again the U S. Dollar index going up also.

Speaker Change: I also want to note that one analyst is saying that we haven't really seen much of a supply disruption despite what has been going on in the Middle East because U.S. producers have been outputting a record amount of oil into the market. So all of any tensions from the Middle East, what we have seen in the Red Sea, all of that is basically priced into oil right now. And then just following up with gold futures, we are seeing gold that is up about $2,033 per ounce. Analysts are expecting this to remain above the $2,000 level. But again, the U.S. dollar index going up is also putting pressure on gold as well, guys. Ines, excellent coverage there.

Speaker 33: Analysts are expecting this to maintain above the 2000 level, but again, the US dollar index going up, also putting pressure on gold as well. Guys?

Speaker Change #107: Putting pressure on gold as well as excellent coverage there. Thanks, so much for tracking this for US everyone. We've got all your markets action straight ahead stay tuned youre watching Yahoo finance.

Brad Smith: Ines, excellent coverage there. Thanks so much for tracking this for us. Everyone, we've got all your markets action straight ahead. Stay tuned. You're watching Yahoo Finance.

Speaker Change #107: [music].

Seana Smith: Americans are still struggling with sticky inflation as prices remain well above the Fed's 2% target. Now, despite those higher costs, inflationary pressures have been easing just a bit, and it's enough for consumers to feel better about the economy. Consumer sentiment soaring to the highest level that we've seen in about 2.5 years in January. The latest forecast from the National Retail Federation's chief economist is saying that they expect consumer spending in 2024 is going to continue to grow. How are retailers navigating this challenging environment? We want to bring in Michelle Kelly, CEO of Lilly Pulitzer, joining us now. Brands like Lilly Pulitzer, Tommy Bahama, and Southern Tide are under a parent company, Oxford Industries. Michelle, it's great to have you. Thanks so much for joining us here this morning.

Speaker Change #107: Yes.

Speaker Change #108: Uh huh.

Speaker Change #108: [music].

Speaker Change #108: Yeah.

Speaker Change #108: [music].

Speaker Change #108: Yes.

Speaker Change #108: Uh huh.

Speaker Change #108: [music].

Speaker Change #108: Hum.

Speaker Change #108: Yes.

Speaker Change #108: Yeah.

Speaker Change #108: Oh.

Speaker Change #108: Yeah.

Speaker Change #108: Yes.

Speaker Change #108: Okay.

Speaker Change #108: Yes.

Speaker Change #108: Yeah.

Speaker Change #108: No.

Ines: Thanks so much for tracking this for us. Everyone, we've got all your markets actioned straight ahead. Stay tuned. You're watching Yahoo Finance. And I'll see you in the next one.

Speaker Change #108: Yeah.

Speaker Change #108: Okay.

Ines: Americans are still struggling with sticky inflation as prices remain well above the Fed's 2% target. But now, despite those higher costs, inflationary pressures have been easing just a bit, and it's enough for consumers to feel better about the economy. Consumer sentiment soared to the highest level that we've seen in about two and a half years in January. The latest forecast from the National Retail Federation's chief economist is saying that they expect consumer spending in 2024 is going to continue to grow.

Speaker Change #108: Yes.

Yeah.

Speaker Change #108: Americans are still struggling with sticky inflation as prices remain well above the fed's, 2% target on despite those higher cost inflationary pressures have been easing just about it's enough for consumers to feel better about the economy consumer sentiment sorting to the highest level that we've seen in about two and a half years in January and belief in the later.

Speaker Change #108: Forecast from the National Retail Federation, Chief economists are saying that they expect consumer spending in 2024 going to continue to grow. So how are retailers navigating this challenging environment and we want to bring in Michelle Kelly CEO of Lilly Pulitzer joining us now in brands like Lilly Pulitzer, Tommy Bahama and southern tide are under our parent company Oxford.

Ines: So how are retailers navigating this challenging environment? We want to bring in Michelle Kelly, CEO of Lilly Poulter, joining us now. Brands like Lilly, Tommy Bahama, and Southern Tide are under a partnership company, Oxford Industries.

[noise] industries, Michelle it's great job he thinks that youre joining us here this morning.

Michelle Kelly: Michelle, it's great to have you. Thanks so much for joining us here this morning. Thank you for having me. It's great to be with you.

Speaker 34: Thank you for having me. Great to be with you.

Seana Smith: Let's talk about how challenging this setup is for names like Lilly Pulitzer for your company. How are you navigating this challenging environment right now, trying to obviously preserve your margins, but also make your clothing, make your product affordable enough for consumers?

Michelle Kelly: Thank you for having me great to be with you. So let's talk about how challenging the setup is for names like Lilly Pulitzer for your company. How are you navigating this challenging environment right now trying to obviously preserve your margins, but also maker clothing made your product affordable enough for consumers.

Michelle Kelly: So let's talk about how challenging this setup is for names like Lily Poulter for your company. How are you navigating this challenging environment right now, trying to obviously preserve your margins but also make your clothing, your product affordable enough for consumers? It's a great question.

Speaker 34: It's a great question, and you phrased it to really get at the heart of some of our challenges right now. We are optimists at heart. The Lilly Pulitzer brand is really all about creating one sunshine. That's our brand positioning that we use internally as well as with our customers. And so we really believe in that notion of when life hands you lemons, you're finding a way to squeeze the juice and maybe come up with an entire brand as a side circumstance, which is how the Lilly Pulitzer brand got started 65 years ago. We are, you know, really focused. We're just focused, I would say, is the way to answer that question.

Speaker Change #110: It's a great question and you've raised that to really get at the heart of some of our challenges right. Now we are optimists at heart. The Lilly Pulitzer brand is really all about.

Michelle Kelly: And you phrased it to really get at the heart of some of our challenges right now. We are optimists at heart. The Lilly Pulitzer brand is really all about creating one sunshine.

Speaker Change #110: Greeting one Sunshine, that's our brand positioning that we use internally as well as with our customers and and so we really believe in that notion of when when life hands, you lemons Dear finding a way to squeeze the juice and maybe come up with an entire brands as aside inside a circumstance which is high.

Michelle Kelly: That's our brand positioning that we use internally as well as with our customers. And so we really believe in that notion of when life hands you lemons, you find a way to squeeze the juice and maybe come up with an entire brand as a side business, which is how the Lilly Pulitzer brand got started 65 years ago. So we are really focused. We were just focused, I would say, on the way to answer that question. We're focused on finding ways to create value for our customers, create great experiences for them, beautiful products, and consistent great service despite some of the cost pressures that we are seeing. Where have you needed to spend further into specific product categories underneath the Lilly Pulitzer brand in order to not just retain but attract new customers as well? And how are some of those efforts paying off from what you're seeing right now? Great question.

Speaker Change #110: Oh, the Lilly Pulitzer got brand got started at 65 years ago. So we are really focused where we were just focused I would say is the way to answer that question, we're focused on finding.

Speaker 34: We're focused on, you know, finding ways to create value for our customers, create great experiences for them, beautiful product, and consistent great service despite some of the cost pressures that we are seeing.

Speaker Change #110: Finding ways to create value for our customers that create great experiences for them beautiful product and the consistent great service. Despite some of the cost pressures that we are saying where have you needed to spend further into specific product categories underneath of the the Lilly Pulitzer brand in order to not just <unk>.

Brad Smith: Where have you needed to spend further into specific product categories underneath of the Lilly Pulitzer brand in order to not just retain, but attract new customers as well? How are some of those efforts paying off from what you're seeing right now?

Speaker Change #110: But attract new customers as well and how are some of those efforts paying off from what Youre seeing right now.

Speaker 34: Great question. Thank you. We are really focused on innovation and keeping things fresh. I think for the past almost 4 years now, it's been really hard to anticipate which product categories were going to serve the customer's needs best in her life because her lifestyle has been changing so much, ups and downs, and inside, outside, things like that. So we have really been focused on innovation for the past, I mean, always, but certainly for the past 12 months. We've been finding ways to innovate within all of our categories. We've been focused on, you know, trying to find that balance of how we can address her needs. We have a higher degree of product newness coming in the next 12 months than we did in the past 12 months.

Speaker Change: Thank you. We are really focused on innovation and keeping things fresh. I think for the past almost four years now, it's been really hard to anticipate which product categories we're going to serve the customer's needs best in her life because her lifestyle has been changing so much, with ups and downs and inside and outside, things like that. So we have really been focused on innovation for the past, I mean, always, but certainly for the past 12 months, we've been finding ways to innovate within all of our categories. We've been focused on, you know, trying to find that balance of how we can address her needs.

Speaker Change #111: Great question. Thank you we are really focused on innovation and keeping things fresh I think for the past almost four years now it's been really hard to anticipate which product categories. We're going to serve the customer's needs best in her life because her lifestyle has been has it been changing so much and ups and downs and.

Speaker Change #111: Inside outside things like that so we have really been focused on innovation for the past I mean always but certainly for the past 12 months, we've been finding ways to innovate within all of our categories. We've been focused on you know with trying to find that balance of how we can address her needs and we really we have a high.

Speaker Change: And we really have a higher degree of product newness coming in the next 12 months than we did in the past 12 months. We're very excited about that. And then we also have a few new categories that are really entirely new to our customers, and that should be exciting. We have expanded into the home and gift area, just knowing how important it is to our customers that they have the perfect gift when they are going to see their family, friends, and loved ones. And, of course, the world of her athletic pursuits continues to evolve.

Speaker Change #111: Your degree of product newness coming in the next 12 months than we did in the past 12 months were very excited about that.

Speaker 34: We're very excited about that. Then we also have a few new categories that, you know, are really entirely new for our customer that should be exciting. We have expanded into the home and gift area, just knowing how important it is to our customers that they have the perfect gift when they are going to see their family, friends, and loved ones. Of course, the world of her athletic pursuits continues to evolve, and we've got some exciting things coming this year on the pickleball front.

Speaker Change #111: And then we also have a few new categories that you know are a really entirely new for a customer that should be exciting we've expanded into the home and gift area just knowing how important it is to our customers that they have the perfect gift when they are going to see in their family friends and loved ones and of course the world of.

Speaker Change #111: Her athletic pursuits continues to evolve and we've got some exciting things coming this year on the pickle ball front Michel when it comes to our product innovation that registers or whether you're going to see where how do you balance that in terms of that pricing strategy going back to where we started here with the inflationary environment still causing consumers a great deal of stress.

Speaker Change: And we've got some exciting things coming this year on the pickleball front. Michelle, when it comes to product innovation that registers with your consumer, how do you balance that in terms of that pricing strategy, going back to where we started here with the inflationary environment still causing consumers a great deal of stress? How have you, at all, had to raise your prices, or how are you offsetting some of the higher input costs that you're seeing at your business? We are, it's in the details; the team is working really hard to, again, keep costs down in other areas of the company and the business that don't touch the customer directly. That helps offset some of the cost pressures we see in the product inputs, like you said. We also are, I think, just again trying to adapt to her lifestyle and make sure that we're offering the products that she is willing to spend on.

Brad Smith: Michelle, when it comes to product innovation that registers with your consumer, how do you balance that in terms of that pricing strategy, going back to where we started here with the inflationary environment still causing

Speaker 34: Mm-hmm

Brad Smith: Are consumers under a great deal of stress? Have you at all had to raise your prices, or how are you offsetting some of the higher input costs that you're seeing at your business?

Speaker Change #111: How have you have you at all had to raise our prices or how are you offsetting some of the higher input costs that you're seeing at your business.

Speaker 34: It's in the details. The team is working really hard to, again, keep costs down in other areas of the company and the business that don't, you know, touch the customer directly. That helps offset some of the cost pressures we see in the, you know, product inputs, like you said. We also are, I think, just, again, trying to adapt to her lifestyle and make sure that we're offering the products that she is willing to spend on. It's a little bit more of assortment shifts than necessarily pricing changes in, you know, like for like products. That has been a huge area of focus for us.

Speaker Change #112: We are and.

Speaker Change #113: He doesn't it is in the details the team is working really hard to again keep costs down in other areas of the company and the business that don't touch the customer directly that helps offset some of the cost pressures, we see in the product and puts like you said. We also are I think just again trying to adapt to.

Speaker Change #113: Her lifestyle and make sure that we're offering the products that she is willing to spend on so it's a little bit more of assortment shifts than necessarily pricing changes in like for like products, but that has been a huge error.

Michelle Kelly: So it's a little bit more of an assortment shift than necessarily pricing changes in like-for-like products, but that has been a huge area of focus for us. We have seen this year, despite the overall caution that we've seen and the selectiveness we've seen from the customer, she is excited, not just willing to, but excited to, spend money on things that make her feel great. They do have to be really special, really beautiful, you know, knock her socks off or her sandals off, in our case.

Speaker 34: We have seen this year, despite you know overall caution that we've seen and the selectiveness we've seen from the customer, she is excited, not just willing to, but excited to spend money on things that make her feel great. They do have to be really special, really beautiful, you know, knock her socks off or her sandals off, in our case. That is you know kind of a forever challenge that we will work on. How do we adapt to what she is spending money on? We have adapted. We have put a little bit more effort into some of our special occasion pieces. We're really working on finding ways to delight her in that you know every day, but in an elevated way in terms of her closet.

Speaker Change #113: Are you a focus for us we have seen this year. Despite the overall caution that we've seen in the selective and as we've seen from the customer. She is excited not just willing to bet excited too.

Speaker Change #113: Spend money on things that make her feel grades they do have to be really special really beautiful knock our socks off her sandals up in our case, but that is you know kind of a forever challenge that we will work on how do we adapt to what she is spending money on them and we have adapted we have put a little bit more effort into some of our specialty.

Michelle Kelly: But that is, you know, kind of a forever challenge that we will work on. How do we adapt to what she is spending her money on? And we have adapted; we have put a little bit more effort into some of our special occasion pieces. We're really working on finding ways to delight her in that, you know, every day, but in an elevated way in terms of her closet. When you think about the performance, roughly 50% e-commerce, one-third brick and mortar, correct me if I'm wrong. And then you think about some of the wholesale partnerships as well that you have, you know, as we're kind of thinking through where companies are trying to navigate, where inventories are moving through, how are you engaging with those wholesale partners who are also trying to figure out where they can right-size the inventory that they're taking on Agility has been the name of the game.

Speaker Change #113: And he says we're really working on.

Speaker Change #113: New ways to delight her in that.

Speaker Change #113: You know every day, but in an elevated our way in terms of her closet. When you think about the performance roughly 50% E Commerce, one third brick and mortar or correct me if I'm wrong and then you think about some of the wholesale partnerships as well that you have you know as we're kind of thinking through where companies are trying to navigate where.

Brad Smith: When you think about the performance, roughly 50% e-commerce, 1/3 brick-and-mortar, correct me if I'm wrong, and then you think about some of the wholesale partnerships as well that you have. You know, as we're kind of thinking through where companies are trying to navigate, where inventories are moving through, how are you engaging with those wholesale partners who are also trying to figure out where they can right-size the inventory that they're taking on in order to have that move through their own either brick-and-mortar or online capacities?

Speaker Change #113: Trees are moving through how are you engaging with those wholesale partners, who are also trying to figure out where they can rightsize the inventory that theyre, taking on in order to have that moved through their own either brick and mortar online capacities.

Speaker 34: Agility has been the name of the game, and it's a great question, top of mind for myself and certainly for other counterparts, anyone in my role. Our wholesale partners are critical to our business, and in a lot of cases, it feels like we're really in the boat together. We do take a pretty collaborative approach. We're very fortunate that almost, I mean, everyone I can think of within our wholesale area, you know, we've been in business together for a long time for the most part. You know, I think that lets us have a little bit of a, you know, bend not break when things get difficult. But there's no question we are all, you know, managing and trying to manage through some similar and parallel challenges.

Speaker Change #114: Agility has been the name of the game and it is a very it's a great question top of mind for myself and certainly for other counterparts anyone in my role and our wholesale partners are critical to our business and in a lot of cases it feels like we're really in the boat together. So we do.

Speaker Change: And it is a very, it's a great question, top of mind for myself, and certainly for other counterparts, anyone in my role. Our wholesale partners are critical to our business. And in a lot of cases, it feels like we're really in the boat together. So we do take a pretty collaborative approach. We're very fortunate that almost, I mean, everyone I can think of within our wholesale area, you know, we've been in business together for a long time, for the most part.

Speaker Change #114: Take a pretty collaborative approach, we're very fortunate that almost I mean, everyone. I can think of it within our wholesale area. You know we've been in business together for a long time for the most part and you know isn't that lets us have a little bit of a band not break when when things get difficult, but theres. No question. We are all managing I'm trying.

Speaker Change: And, you know, I think that lets us have a little bit of a, you know, bend but don't break when things get difficult. But there's no question we are all managing and trying to manage through some similar and parallel challenges. Michelle Kelly, CEO of Lilly Pulitzer. Thanks so much for taking the time here this day. I'm going to be watching out for that pickleball segment that you mentioned. So I'll keep my eye on the paddles out there for sure.

Speaker Change #114: To manage through some similar in parallel challenges.

Brad Smith: Michelle Kelly, CEO of Lilly Pulitzer, thanks so much for taking the time here on the day. I'm gonna be watching out for that pickleball segment that you mentioned, so, I'll keep my eye on the paddles out there for sure. Thank you.

Speaker Change #114: Michelle Kelly CEO of Lilly Pulitzer. Thanks, So much for taking the time here on the day are going to be watching out for that are that pickle ball segment that you mentioned, so I'll keep my eye on the panels out there for sure. Thank you excellent. So you're on the court has definitely got all your markets action straight-ahead stay tuned and watch me I'll find out.

Speaker 34: Excellent. See you on the court.

Brad Smith: Definitely. We've got all your markets action straight ahead. Stay tuned. You're watching Taylor Swift has no bad blood with the Grammys. Swift breaking the record for most wins in the Album of the Year category this week and announcing a new album coming out in April. It was as much about what they weren't saying plus what they were saying, and we'll break that down here a little bit more because there were some who were a little bit more adamant to talk about the TikTok, UMG, talk about the history of the Grammys. It was Jay-Z up on stage who rightly pointed out some of the incorrect labeling of some artists in categories. He himself winning the Dr.

Speaker Change #114: [music].

Speaker Change #114: Mhm.

Speaker Change #114: Uh huh.

Speaker Change #114: [music].

Speaker Change #114: Okay.

Speaker Change #114: Yeah.

Speaker Change #114: Yes.

Speaker Change #114: Yeah.

Speaker Change #114: Yes.

Michelle Kelly: Thank you. Excellent. See you on the court.

Speaker Change #114: Yeah.

Michelle Kelly: We've got all your markets action straight ahead. Stay tuned. You're watching out finance. Transcribed by https://otter.ai, www.softbankgroup.com, Taylor Swift has no bad blood with the Grammys, breaking the record for most wins in the album of the year category this week and announcing a new album coming out in April.

Speaker Change #114: Okay.

Speaker Change #114: Yeah.

Speaker Change #114: No.

Speaker Change #114: Oh.

Speaker Change #114: Yes.

Speaker Change #114: Okay.

Speaker Change #114: Yes.

Speaker Change #114: Okay.

Speaker Change #114: Taylor Swift has no bad blood with the Grammys Swift breaking the record for most wins in the album of the year category. This week and announcing a new album coming out in April. So it was as much about what they weren't saying plus what they were saying well break that down here a little bit more because.

Michelle Kelly: So it was as much about what they weren't saying plus what they were saying. And we'll break that down here a little bit more because there were some who were a little bit more adamant to talk about TikTok, UMG, and the history of the Grammys. It was Jay-Z up on stage who rightly pointed out some of the incorrect labeling of some artists in categories, while he himself won the Dr. Dre Global Impact Award. And at the end of the day, putting some attention back on the fact that, hey, his wife, Beyonce, has been mislabeled in categories before and has still had the record of most Grammys won.

Speaker Change #114: There were some who were a little bit more adamant to talk about the tick Tock U M. G talk about the history of the Grammy. This it was Jay Z up on stage, you rightly pointed out some of the the incorrect labeling of some artist and categories. He himself a winning the Dr. Dre global.

Brad Smith: Dre Global Impact Award and at the end of the day, putting some attention back on the fact that, hey, his wife Beyoncé has been mislabeled in categories before and has still had this record of the most Grammys won. At the end of the day, there is some larger questions that still swirl around this entire music industry, but none more so perhaps right now than the award selection process itself here right now.

Speaker Change #114: <unk> Award and at the end of the day, putting some attention back on the fact that his wife Beyonce has been mislabeled and categories before and has still had this record of the most room is one and so at the end of the day. There is some larger questions, but still swirl around this entire music industry, but none more so perhaps.

Michelle Kelly: And so, at the end of the day, there are some larger questions that still swirl around this entire music industry, but none more so perhaps right now than the award selection process itself here right now. Yeah, the award selection process was one of the big takeaways and something that is still being discussed here the morning after, and I'm sure it will be as we look ahead to some of the changes that need to take place within the industry. Also, just putting the spotlight on Taylor, clearly she has had a lot of focus on her, to say the least, over the last several months, but her influence and how much she is dominating right now were on full display last night, not only because of the number of awards that she won but also the announcement that she made while accepting one of those awards, hinting at a new album later this year.

Speaker Change #114: Right now than the award selection process itself here right. Now is the word selection process that was run at the big takeaways and something that is still being discussed here in the morning, after and I'm sure. It will be as we look ahead to some of the changes that need to take place within the industry.

Seana Smith: Yeah, the award selection process, that was one of the big takeaways and something that is still being discussed here the morning after, and I'm sure it will be as we look ahead to some of the changes that need to take place within the industry. Also, just putting the spotlight on Taylor. Clearly, she has had a lot of focus on her, to say the least, over the last several months. Her influence and how much she is dominating right now, the entire industry was on full display last night, not only because of the number of awards that she won, but also the announcement that she made while accepting one of those awards, teasing a new album later this year.

Speaker Change #114: Putting the spotlight on Taylor clearly she has had a lot of focus on or do they believe over the last several months, but her influence and how much. She is dominating right now the entire industry was on full display last night not only because of the number of awards that you won but also the announcement that you made well except in one of those awards.

Speaker Change #114: Teasing a new album of later this year and I bring that up because we talk so much about the impact that she has had any number of publicly traded names and you've got a thing you got to take a look at Spotify when you.

Brad Smith: Mm.

Seana Smith: I bring that up because we talk so much about the impact that she has had on a number of publicly traded names, and you gotta think and you gotta take a look at Spotify when you think about the potential impact that this new album could have on that business here in the year ahead. Taylor Swift was crowned Spotify's top artist of the year this past year, 26 billion streams worldwide, and this is a stock that has had tremendous amount of momentum to the upside over the past year with shares up nearly 80%. If you get a big name like Taylor, a lot of other key albums that are set to be released this year, you would think it would mean at least position some of these names like Spotify pretty well for the remainder of the year.

Michelle Kelly: And I bring that up because we talked so much about the impact that she has had on a number of publicly traded companies. And you gotta take a look at Spotify when you think about the potential impact that this new album could have on that business here in the year ahead. Taylor Swift was crowned Spotify's top artist of the year this past year, with 26 billion streams worldwide.

Speaker Change #114: Think about the potential impact that this new album could have on that business here in the year ahead Taylor Swift the transplant device top artists of the year. This past year 26 billion streams worldwide and this is a stock that has had a tremendous amount of mentum to the upside over the past year with shares up nearly 80%. So if you get a big name La.

Michelle Kelly: And this is a stock that has had tremendous amounts of momentum to the upside over the past year, which has gained nearly 80%. So if you get a big name like Taylor, and a lot of other key albums that are set to be released this year, you would think it would mean at least position some of these names like Spotify pretty well for the remainder of the year. Yeah, purportedly 25 billion of those 26 billion streams were from a Reline producer. One of the huge things as well for this album coming out April 19th, as she so correctly notes, is the fact that you're gonna see a lot more artists try to figure out, okay, within this music realm, where I'm trying to figure out how many plays I get, not just on streaming, but how many plays I get on social media, how that And she corrects me and says she was her number two artist actually, which only means that the Jonas Brothers were ahead of Taylor Swift this year.

Speaker Change #114: Tailor a lot of other key album better set to be released this year you would think it would mean.

Speaker Change #114: At least position some of these names like Spotify are pretty well for the remainder of this year.

Brad Smith: Yeah, purportedly 25 billion of those 26 billion streams were from a relied producer. One of the huge things as well for this album coming out 19 April, as she so correctly notes as well, is the fact that you're gonna see a lot more artists try to figure out, okay, within this music realm where I'm trying to figure out how many plays I get not just on streaming, how many plays I get on social media, how that gets circulated, how those things go viral as well. She corrects me and says she was her number two artist actually.

Speaker Change #114: <unk> reported a 25 billion of those 26 billion streams, where from a relying producer.

Speaker Change #114: One of the huge things as well for this album coming out April 19th as she took correctly notes as well is the fact that youre going to see a lot more artists to try to figure out okay. Within this music realm, where I'm trying to figure out how many plays I get not just on streaming how many players that get on social media, how that gets circulated how those things go viral as well.

Speaker Change #114: And.

Speaker Change #114: She correct me and says she was our number two artists actually.

Seana Smith: Mm

Brad Smith: which only means that the Jonas Brothers were ahead of Taylor Swift this year. All that, these things considered, one huge thing is how much these musicians, these artists now do rely and model some of their own either artistry or how much fanfare they're gonna get and perhaps even tour schedules off of that social virality of a song too.

Seana Smith: Mm

Speaker Change #114: The only means that the Jonas brothers were ahead of Taylor Swift this year, but all these things considered one huge thing is how much. These musicians. These artists now do rely and model some of their own either artistry or how much fanfare theyre going to get and perhaps even tour schedules off of that social virality of a song too.

Michelle Kelly: But all these things considered, one huge thing is how much these musicians, these artists now rely on and model some of their own either artistry or how much fanfare they're gonna get and perhaps even tour schedules off of that social virality of a song too. Yes, especially and that's so important given this day and age and exactly how so much of this marketing is done on many of these social media platforms. If you're banned, obviously, that could have a real impact on sales going forward. I wish we had a control room camera so that I could at least give her a chance to rebut what I'm saying here. Well, she's gotta join us next time.

Seana Smith: Yes, especially, and that's so important given this day and age and exactly how so much of this marketing is done.

Speaker Change #114: Yes, especially in that all important given this day and age and exactly how much of this marketing is done on many of the social media platforms. If you ban obviously that could have a real impact on sales going forward and I wish we had a control room camera so that.

Brad Smith: Yeah

Seana Smith: on many of these social media platforms. If you're banned, obviously that could have a real impact on sales going forward.

Brad Smith: I wish we had a control room camera so that I could at least give her the chance to rebut what I'm saying here.

Speaker Change #115: Please go ahead.

Seana Smith: Well, she's gotta join us next time, Taylor Swift and Taylor.

Speaker Change #115: From a bottom there I'm, saying her when she's got to join US next time, they walk in Dalian, We got theater or their resident expert in house.

Brad Smith: We got seats.

Seana Smith: We have a resident expert in the house. All right, let's do one quick check of the markets here, 90 minutes into the trading day. You're still looking at red across the board. The Dow off 400, just over 400 points. You've got the Nasdaq off nearly 1% as well. Keep it right here on Yahoo Finance. Much more coming up next hour.

Michelle Kelly: We're talking Taylor. We have seats. Yeah, resident expert in the house. All right, let's do one quick check of the markets here. 90 minutes into the trading day, and you're still looking at red across the board.

Speaker Change #116: Hey, one quick check on the market here 90 minutes into the trading day, so looking at right across the board the Dow off of 400, just over 400 points, you've got the NASDAQ off nearly 1% as well keep right here on Yahoo finance much more coming up next hour.

Speaker Change: The Dow is off by 400, just over 400 points. You've got the NASDAQ off nearly 1% as well. Stay right here on Yahoo Finance. Much more coming up next hour. All right, thanks for watching. We'll see you next time. Take care.

Speaker Change #116: [music].

Speaker Change: Bye-bye. Bye-bye, www.softbank.com. Thanks for watching! Welcome to Yahoo Finance Live. It's 11 a.m. on the East Coast, 8 a.m. on the West. I'm Rochelle Acufo, alongside Akiko Fujita.

Speaker Change #116: Yes.

Speaker Change #116: [music].

Uh huh.

Speaker Change #116: [music].

Speaker Change #116: Yeah.

Speaker Change #116: Yes.

Speaker Change #116: Yeah.

Rochelle Acufo: Here's what we're watching this morning. A jam-packed earnings week continues ahead. Over 100 S&P 500 companies are reporting earnings this week, according to FactSet.

Speaker Change #116: Yeah.

Speaker Change #116: Hum.

Speaker Change #116: Oh.

Speaker Change #116: Yeah.

Speaker Change #116: Okay.

Rochelle Acufo: We'll get a check on what's ahead for the markets as Fed Chair Powell tempers expectations further of a rate cut in March. And keeping an eye on financials, regional banks under pressure after New York Community Bancorp's post-earning slump. Is this just the beginning of fresh regional bank pressure? And the IPO market looking to recover this year after a rebound never quite materialized in 2023? We'll dig into 2024 expectations as investors watch out for highly anticipated candidates like Reddit. First, though, let's do a check on all three majors right now, 90 minutes into the trading day.

Speaker Change #116: Okay.

Yes.

Speaker Change #116: Okay.

Speaker Change #117: [noise] welcome to Yahoo, Finance live at 11, a M on the East Coast <unk> have on the West are Michel Cousteau alongside a kickoff vegeta, here's what we're watching this morning, a jam packed earnings went continues ahead over one half.

Speaker 35: Welcome to Yahoo Finance Live. It's 11:00AM on the East Coast, 8:00AM on the West. I'm Rochelle Akuffo alongside Akiko Fujita. Here's what we're watching this morning. A jam-packed earnings week continues ahead. Over 100 S&P 500 companies reporting earnings this week according to FactSet. We'll get a check on what's ahead for the markets as Fed Chair Powell tempers expectations further of a rate cut in March.

Speaker Change #117: The S&P 500 companies reporting earnings this week. According to Factset will get a check on what's ahead for the market, especially at Powell tempers expectations further of a rate cut in March.

Speaker 36: Keeping an eye on financials, regional banks under pressure after New York Community Bancorp's post-earnings slump. Is this just the beginning of fresh regional bank pressures?

Speaker Change #117: And keeping an eye on financials regional banks under pressure after New York community Bancorp's posts, earning slump is this just the beginning of fresh regional bank pressures.

Rochelle Acufo: And we are seeing a bit of a sell-off here to start the trading week. Take a look at where the Dow is right now, down more than 400 points. The S&P 500 is down thirty five, and the Nasdaq is down one hundred and twenty eight.

Speaker 35: The IPO market looking to recover this year after a rebound never quite materialized in 2023. We'll dig into 2024 expectations as investors watch out for highly anticipated candidates like Reddit.

Speaker Change #117: And the IPO market looking to recover this year after a rebound never quite materialize in 2020, Threep will dig into 2024 expectations as investors watch out for highly anticipated, Kansas like Rabbit.

Speaker 36: First though, let's do a check of all three majors. Right now, 90 minutes into the trading day, we are seeing a bit of a sell-off here to start the trading week. Take a look at where the Dow is right now, down more than 400 points. The S&P 500 down 35, and the Nasdaq down 128. A broad-based sell-off we're watching here, although materials and consumer discretionary stocks taking the biggest hit, but the story of the day all about bond yields. Take a look at where the Treasury market is right now. All of this in reaction to those comments we got from Fed Chair Jerome Powell in that interview with CBS' 60 Minutes here, really quieting any expectation of that rate cut come March.

[Analyst]: First though, let's do a check of all three majors. Right now, 90 minutes into the trading day, we are seeing a bit of a sell-off here to start the trading week. Take a look at where the Dow is right now, down more than 400 points. The S&P 500 down 35, and the Nasdaq down 128. A broad-based sell-off we're watching here, although materials and consumer discretionary stocks taking the biggest hit, but the story of the day all about bond yields. Take a look at where the Treasury market is right now. All of this in reaction to those comments we got from Fed Chair Jerome Powell in that interview with CBS' 60 Minutes here, really quieting any expectation of that rate cut come March.

Speaker Change #117: First of all let's do a check of all three major right now 90 minutes into the trading day, and we are seeing a bit of a sell off here to start the trading weeks I can look at what the Dallas right now down more than 400 points. The S&P 500 down 35, and the NASDAQ down a 128 are broad based off we're watching here, although materials and consumer discretionary stocks, taking the biggest hit.

Rochelle Acufo: A broad-based sell-off we're watching here, although materials and consumer discretionary stocks taking the biggest hit. But the story of the day is all about bond yield. Take a look at where the Treasury market is right now. All of this is in reaction to those comments we got from Fed chair Jay Powell in that interview with CBS's 60 Minutes here, really quieting any expectation of that rate cut come March. And you take a look at where things are right now. Yields are rising across the yield curve here. The 10 year yield is up about 14 basis points, four point one seven percent is where it's trading at right now, and the 30 year yield is at four three five. That is the top story that we are watching today.

Speaker Change #117: But the story of the day, all about bond yields take a look at where the treasury market is right now all of this in reaction to those comments, we got from Fed Chair Jay Powell in that interview with C. B S. As 60 minutes here really quieting any expectation of that rate cut come March and you take a look at where things are right now.

Speaker 36: You take a look at where things are right now, yields rising across the yield curve here. The ten-year yield up about 14 basis points, 4.17% is where it's trading at right now, and the thirty-year yield at 4.35. That is the top story that we are watching today, surging Treasury yields. We see yields all moving higher as bets on a March rate cut dwindle to just 16%. You know, it's interesting to me to see this reaction because in many ways, when you think about what we heard from Jerome Powell yesterday in that 60 Minutes interview, it was a reiteration of what we heard from him at that press conference last week post-FOMC decision. The Fed Chair making it very clear that he doesn't expect a rate cut come March.

[Analyst]: You take a look at where things are right now, yields rising across the yield curve here. The ten-year yield up about 14 basis points, 4.17% is where it's trading at right now, and the thirty-year yield at 4.35. That is the top story that we are watching today, surging Treasury yields. We see yields all moving higher as bets on a March rate cut dwindle to just 16%. You know, it's interesting to me to see this reaction because in many ways, when you think about what we heard from Jerome Powell yesterday in that 60 Minutes interview, it was a reiteration of what we heard from him at that press conference last week post-FOMC decision. The Fed Chair making it very clear that he doesn't expect a rate cut come March.

Speaker Change #117: Rising across the yield curve here, the 10 year yield up about 14 basis points for one 7% as we're trading at right now in the 30 year yield at 435.

Speaker Change #117: That is the top story that we are watching today surging treasury yields we see yields all moving higher as Beth on our March rate cut window to just 16%. Then you know it's interesting to me to see this reaction because in many ways. When you think about what we heard from Jerome Powell yesterday in that 60 minutes interview it wasn't a reiteration of what we heard from.

Rochelle Acufo: Surging Treasury yields. We see yields all moving higher as the best on a March rate cut dwindles to just 16 percent. And, you know, it's interesting to me to see this reaction because, in many ways, when you think about what we heard from Jerome Powell yesterday in that 60 Minutes interview, it was a reiteration of what we heard from him at that press conference last week after the FOMC decision, the Fed chair making it very clear that he doesn't expect a rate cut come March. But, you know, you could argue, Rochelle, there's a bit of a shift in stance, if you will, from the Fed going from defense, really chasing inflation to try to bring it down back to that two percent level, to maybe playing a little more offense.

Speaker Change #117: Him at that press conference last week post F. O M. C decision that the fed you are making it very clear that he doesn't expect a rate cut come March but you could argue rochelle theres a bit of a shift in stance. If you will from the fed going from defense really chasing the inflation to try to bring it down back to that too.

Speaker 36: You know, you could argue, Rochelle, there's a bit of a shift in stance, if you will, from the Fed going from defense, really chasing the inflation to try to bring it down back to that 2% level, to maybe playing a little more offense. When you think about what we heard from the Fed Chair yesterday, he said, essentially, Given recent economic strength, we feel like we can approach the question of when to begin to reduce interest rates carefully. They've got a bit more of a buffer is sort of the translation I took away here, and the economic data today that we got this morning sort of reiterates that, right? The ISM Non-Manufacturing Index pointing to US services sector coming in hotter than expected. We're talking about 13 straight months of gains now.

[Analyst]: You know, you could argue, Rochelle, there's a bit of a shift in stance, if you will, from the Fed going from defense, really chasing the inflation to try to bring it down back to that 2% level, to maybe playing a little more offense. When you think about what we heard from the Fed Chair yesterday, he said, essentially, Given recent economic strength, we feel like we can approach the question of when to begin to reduce interest rates carefully. They've got a bit more of a buffer is sort of the translation I took away here, and the economic data today that we got this morning sort of reiterates that, right? The ISM Non-Manufacturing Index pointing to US services sector coming in hotter than expected. We're talking about 13 straight months of gains now.

Speaker Change #117: That level, so maybe playing a little more offense when you think about what we heard from the fed chair yesterday. He said essentially given the recent economic strength, we feel like we can approach. The question of when to begin to reduce interest rates carefully they've got a bit of more of a buffer.

Rochelle Acufo: When you think about what we heard from the Fed chair yesterday, he said, essentially, given recent economic strength, we feel like we can approach the question of when to begin to reduce interest rates carefully. They've got a bit more of a buffer. It's sort of the translation I took away here, and the economic data that we got this morning sort of reiterates that, right? The ISM non-manufacturing index points to the U.S. services sector coming in hotter than expected. We're talking about 13 straight.

Speaker Change #117: The translation I took away here and the economic today data that we got this morning sort of reiterates that RIDEA I assume nonmanufacturing index pointing to U S services sector coming in hotter than expected, we were talking about 13th straight months of gains now.

Speaker 35: I thought it was interesting that in that 60 Minutes interview, it wasn't so much what Powell said because he, I mean, he did obviously has been telegraphing that, you know, March was not their base case for a rate cut. Some of the commentary came up in this Goldman Sachs note. They said that during the interview, the interviewer told the audience that Powell suggested to us the likely time for the first interest rate cut would be in the middle of the year and a few months before the election, and that cuts would likely be a quarter, maybe half a percentage point at a time. They're seeing this greater chance of a later but steeper path when it comes to these rate cuts that goes beyond May.

Rochelle Acufo: I thought it was interesting that in that 60 Minutes interview, it wasn't so much what Powell said, because he obviously had been telegraphing that March was not their base case for a rate cut. But some of the commentary came up in this Goldman Sachs note. They said that during the interview, the interviewer told the audience that Powell suggested to us the likely time for the first interest rate cut would be in the middle of the year and a few months before the election, and the cuts would likely be a quarter, maybe half of a percentage point at a time. So they're seeing this greater chance of a later but steeper path when it comes to these rate cuts that goes beyond May.

Speaker Change #117: And I thought it was interesting in that 60 minutes into it it wasn't so much what Paul said, because I mean, you did obviously has been telegraphing that.

Speaker Change #117: March it was not their base case for a rate cut but some of the commentary that came up in this Goldman Sachs note.

Speaker Change #117: He said that during the interview the interview with told the audience. The power suggested to US the likely time for the first interest rate cut would be in the middle of the year and a few months before the election and it cuts would likely be a quarter, maybe half a percentage point at a time. So the thing is greater chance of a later, but steeper path when it comes to these rate cuts.

Speaker 35: Even though Goldman Sachs is still pricing in 5 cuts in 2024, 3 in 2025, the idea that we might not see that until even past March, past May, certainly having some concern here and perhaps contributing to the sell-off that we're seeing as well.

Speaker Change #117: And it goes beyond may and so even though Goldman Sachs, So pricing and five cuts in 2024, three and 2025 the idea that we might not see that and so even post March path makes.

Rochelle Acufo: And so even though Goldman Sachs is still pricing in five cuts in 2024, three in 2025, the idea that we might not see that until past March, past May, certainly raises some concern here and perhaps contributes to the sales that we're seeing as well. On the flip side, Richelle, you've got some analysts who've said, look, the market is making too much of the timing of that rate cut. The fact that we are now firmly in position for a rate cut this year, whether that is in March or May or a little later, certainly should lead to cash coming back off the sidelines back into play here. So I mean, there are a number of debates here about to what extent we should change the timing.

Speaker Change #117: Having some concern here and perhaps contributing to the cells that were seeing as well.

Speaker 36: On the flip side, Rochelle, you've got some analysts who've said, Look, the market is making too much of the timing of that rate cut. The fact that we are now firmly in position for a rate cut this year, whether that is in March or May or a little later, certainly should lead to cash coming back off from the sidelines back into play here. So I mean, there's a number of debates here about to what extent, you know, we should make of the timing. Bottom line, though, higher for longer is what we're looking at right now in the market. By the way, we did get some commentary from Minneapolis Fed President Neel Kashkari today that sort of kind of points to what we're hearing from the Fed Chair as well.

[Analyst]: On the flip side, Rochelle, you've got some analysts who've said, Look, the market is making too much of the timing of that rate cut. The fact that we are now firmly in position for a rate cut this year, whether that is in March or May or a little later, certainly should lead to cash coming back off from the sidelines back into play here. So I mean, there's a number of debates here about to what extent, you know, we should make of the timing. Bottom line, though, higher for longer is what we're looking at right now in the market. By the way, we did get some commentary from Minneapolis Fed President Neel Kashkari today that sort of kind of points to what we're hearing from the Fed Chair as well.

Speaker Change #117: On the flip side Rochelle, you got some analysts who've said look the market is making too much of the timing of that rate cut. The fact that we are now firmly in position for a rate cut this year, whether that is in March or may or little later, certainly should lead to cash coming back off from the sidelines back into play here.

Speaker Change #117: So I mean, there's a number of debates here about to what extent are you know we should make up the timing bottom line, though higher for longer is what we're looking at right now in the market by the way we did get some commentary from Minneapolis had precedent neel kashkari today that sort of kind of points to what we're hearing from the fed chair.

Rochelle Acufo: Bottom line, though, higher for longer is what we're looking at right now in the market. By the way, we did get some commentary from Minneapolis Fed President Neal Kashkari today that sort of points to what we're hearing from the Fed chair as well. In the case of Kashkari, specifically questioning how restrictive the policy in place right now is, he did post some commentary this morning saying the implication is

Speaker 36: In the case of Kashkari, specifically questioning how restrictive the policy in place right now. He did post some commentary this morning, saying the implications-

[Analyst]: In the case of Kashkari, specifically questioning how restrictive the policy in place right now. He did post some commentary this morning, saying the implications-

Speaker Change #117: Chair as well.

Speaker Change #117: In the case of cash card, specifically questioning how restrictive the policy in place right now he did post some commentary this morning, I think the implication.

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