Versus value. We had the nasdaq earlier this week trading at record highs. We have not really seen the other indexes get back to those record highs. Wayrussell 2000 is a mild is a mile away from its record highs. Are you comfortable with this idea that we only have a relatively small cohort of companies and sectors pushing this market higher, or do you want to see broader participation . I think it helps make sense of the market action. Thinking through, where would you want to put capital to work . What is driving this vshaped recovery . I think it would be quite irrational given what is going on with the pandemic and the broader economy. Investorson here for is where do you put capital to work from here on out. These positions within technology, there are some unstoppable trends like digitization, cybersecurity, which are really interesting given the work from home environment. Some of that, we do believe would continue to move higher. An area that you like. That not just the fact they have over performed in the pandemic. Equities, tocap the tune of 45 to 50 over the past five years. In terms of an entry point, we are seeing investors put capital to work and something we are inviting them to do. Caroline the playbook on its head when we are seeing money flowing into the Technology Stocks obviously because work from home but at the same time, this defensive play. Playbook . Ur the highyield riskier assets . , looking atof yield clients in investors making capital work with high yields, a massive amount of support for the market. A couple of options actually. Preferred are something that we find interesting obviously looking at the pricing of preferreds over the past several whene see a lot of we put this capital to work thinking, what were the yields two months ago, instead of what were the yields compared to the riskfree rates . Investment grade exposure, a lot of tax benefits to the yield. Area wew, that is an like given the historically low Interest Rate environment we are in. Taylor what is the biggest risk . Yesterday, we were talking about trade tensions. Joe biden winning the election. Covid19. The biggest risk when it comes to the market is covid19. Understanding the spread of the pandemic. Just understanding the acceleration of cases. One of the things we have done at Citi Private Bank is making sure we are analyzing this not just anecdotally but really using the data. A covid19 index. Essentially, we are looking at areas,litan statistical defined by the census as population clusters integrated on a population basis as well as a social basis. These represent about 80 of u. S. Gdp. What we are studying right now is how many of those areas are an acceleration in cases versus deceleration. Right now, it is over 50 . So you have to take that a step , los angeles, 4 of gdp, which may be a more significant indicator than other areas. It is the most significant indicator of whether or not this economic recovery and Market Recovery really does have legs. Caroline one to watch. City private Bank Americas head of capital markets, kristin bitterly. That does it for the closing bell. Whatd you miss . Is next when we will looking at the latest fed stress test results. This is bloomberg. Caroline from bloomberg World Headquarters in new york, i am caroline hyde. Romaine this is whatd you miss . Caroline markets late stage rally, higher by a percentage point. The reason, huh, go figure. Arizonas new infections increased at double the weekly average. We hear from the fed. The Central Bank Releases the results of its annual stress test. Shares surge on news of a regulatory rollback. That and much more coming up. Taylor, you have the breakdown, the update of the coronavirus pandemic. Coming fast in many states. Taylor lets move into some of the data. There is some good news and bad news. Some of the bad news is that daily new virus cases still continuing to climb. That is in white. In blue, deaths falling on a longterm basis, although i would notice a longterm spike that you see on the righthand side of the screen. Houston hospitals earlier saying that they are at capacity but we are also getting some late headlines that a group of ceos said on a virtual News Conference that they had plenty of hospital capacity. Here to break down all of the headlines is dr. Peter hotels, the Baylor School of medicine professor. Great day to have you. Hospitalization rates here as some of the key reopen the start to economy . Dr. Hotez in texas, we are cna steep acceleration of covid19 and an exponential increase in some of the cases. Over a thousand cases a day in houston. Could be three or four times that by july 4 weekend. Unless we begin to dial back the opening. Today, the governor announced he is going to put a pause on it, and that is a good first step. But i am not confident that a pause will be adequate. We have learned anything over the past few weeks with these reopenings, there are folks who just want to get out and be sociable again in public. That brings us to the issue of vaccines, whether we get to a point where having a vaccine will make people more comfortable. Or are we just putting too much hope in stock and a vaccine of being that proverbial Silver Bullet here . Dr. Hotez what has happened with the white house, in the u. S. , they tend to veer toward magical solutions. First it was hydrochloric when, then remdesivir, now vaccines. We also have a vaccine that we are developing, although it is a Global Health vaccine. If you look at the first vaccines, they are likely to be partially protected, meaning they would not do everything you hoped a vaccine would. But they will make a difference and better and new vaccines would follow, that is one possible scenario. Practically speaking, vaccines will be a Companion Technology at least the beginning to help us open up things more but we still are going to have to maintain some level of masks, social distancing, all of the things we are currently doing. It is kind ofk at a spectrum. Each passing month will have new and improved technologies. First, the convalescent antibodies. Of antibodye treatments going into clinical trials. I am pretty excited about those. Maybe some new small molecule drugs. The thing that will come last is probably the vaccine. You sort of look on social media in amazement of some of the memes being made by people who do not seem to see the efficacy of masks, people trying to call them out. Of much of it is a hindrance it stopping the spread of this virus if people could not believe the facts put in front of them . Dr. Hotez you are right. In the u. S. , and the u. K. As well, there is a pretty aggressive antivaccine movement. Where i am not only a scientist and pediatrician but the parent of an adult daughter with autism. How vaccinesticle do not cause autism. The gave me a name, original gangster villain, the og fillon. Og villain. So you are talking to the og villain today. Some from the far right are protesting against contact tracing, social distancing, the few tools that we have. Especially in some of the states, texas, oklahoma, the american southwest, things can get you bad. Peter, great to have you on. The baylorotez of college of medicine. We are still on the lookout, waiting earnings crossing the wire. Looking for nike. Caroline they have come out with a fourthquarter loss per share. We are seeing them again as much as 1. 6 . Currently off by 3 . Fiscal they come off fourthquarter growth margin well below what had been expected. So, bloomberg really bring down this news in terms of earnings. It looks like it is quite a significant myth significant miss in terms of revenue. For once, nike, which usually gets things so right, getting it wrong. Numbers their china were down as well significantly. We will talk more nike i had. We will talk a lot of other things. Back in a moment. This is bloomberg. Romaine earnings just crossing the wire for nike, disappointing on quite a few metrics. Shares moving lower in afterhours trading. The q4 gross margin came in a little bit weaker at 37. 3 . In china, the revenue actually declined to put 9 yearoveryear. There were expectations that the china revenue would stabilize in the most recent quarter. Caroline europe looking around us. 46 looking horrendous. 46 drop yearoveryear and revenue. Deeper intowill get nike earnings. First, we want to go back to that big interview. Nba superstar lebron james and his Business Partner maverick carter, getting some Big Investments in their media company. Ebron success looks like educating people on the ground in these cities that we are tackling. We have had Voter Suppression for so long. People not understanding how they can vote, when they can vote, if there vote really counts. In the black community, you always hear go out and vote. What you dont understand is, who in my voting for, where can i vote, how many people in my voting for, what do these votes mean, what do they stand for . The education side is what we are most proud about. That is success for us, where we are actually getting these communities out to vote. They are even more educated on who they are voting for, how they can vote, where they can vote. They have that power. There is a lot of people who believe that they cannot vote because they have had previous convictions with the law or they have been to jail or they have vote doesthat there not get submitted and things of that nature, which is not true and a lot of states we are tackling. To educate and make aware of the people on the ground has a lot to do with the future of our country, that is one of the success we can have. Wonder, to speak to this moment of where we are given this position to do this, what are the conversations that are in coming to you, whether it is from studios, from ceos of companies. Are your calls getting returned more . Is there more interest in what you are doing given that the world does seem to be moving in this moment . Yes. And you keep calling it a moment. Hopefully it is not just a moment. This is what is needed. This is more like what this country should be, what this road should be. It does not feel at all like a moment to me. I have been black my whole life. Empower allto people and specifically black people my entire life. If you look at what we may long before this time, we made selfmade on netflix, we made shut up and dribble on showtime. We have always been about empowering people that feel like us, that come from the community we come from. Hascontent we have created always been about that. I think for us, as a company, people already understood, felt, understood the essence of what we were doing. It is obviously a bit magnified now. The conversations internally are pretty much the same. We are getting some external calls like, if you guys have ideas and want to help us, sure. I personally am getting a lot of calls from ceos. I happen to serve on the board of live nation, so i spend a lot of time with them. Of thee lebron james l. A. Lakers and his Business Partner, maverick carter, ceo of springhill company. Romain, i know you are keen to coverage. It is friday. Enthusiastic romain, all about not just lebron james but also nike reporting revenue that really missed. It was below expectations. Margin looking weaker than expected. Europe is off by a lot. A miss and the shares are reflecting that. They did this across all fronts. Top line was down. Only 6. 3 billion versus the estimate of 7. 3 billion. Gross margins were down substantially. This is where i think the trends can continue. Inventories were up. I think there is still some margin risk to the story. On the sales front, i do see improvement from here onwards. The quarter they just reported was probably the steepest slide in sales. Dependent is nike on the physical retail locations. It seems that the narrative for the past few quarters had been the companys expansion of the digital presence and the direct to Consumer Digital model they had taken on. You would be surprised. Even though nikes Digital Sales are strong, it is still in the low double digits. Between 10 and 15 . When you include wholesale of a probably 15. For the recent quarter, it was 30 of revenue. That was because stores were closed and you have a lower denominator to work with. Dolor how much lower margins have to go, if an that you have to be issuing sales and discounts to clear up that inventory . I think you will continue to see discounts if sales do not accelerate. Pressure notmargin just from their own inventory but also when you think about the Retail Business overall and the landscape. There is a lot of inventory across all the brands. In order to compete for the market, sometimes you have to be promotional. It is a combination of higher inventory and the marketplace. Caroline i just sigh headline that they are suspending share buybacks for march 2 maximize liquidity. What else might you be looking for on the call, in terms of any sort of guidance, being difficult to navigate any environment for business right now . I think, one, how they will manage inventory. Two, how are the stores performing that are now open. 90 in north america and elsewhere. How are those stores performing . We have heard from retailers anywhere from 50 to 75 of last years sales. The other thing, just how the direct business is expected to be as these stores open. Open . Hey seen that just to get an idea of how things will settle on the digital side. Romaine great to get your thoughts. Get a quick check of the latest business flash headlines out there right now. Another sign on the u. S. Recovery. The number of americans seeking on Employment Benefits was higher than forecast. Continuing claims fell more than expected to 19. 5 million. Macys is going to cut about 3009 hundred corporate and management jobs. They are struggling from the impact of the coronavirus. The ceo said the company will be smaller for the foreseeable future. Forcard has filed insolvency. The arrest of the ceo and disappearance of 2 billion from the balance sheet. Wirecard decided to much debt. Down 80 inares frankfurt. Coming up, we are going to be looking at the banks. Waiting on the bank results. We will give you some insight and whether it is the dividends and buybacks, whether they will main in place. This is bloomberg. You doing okay . Yeah. This moving thing never gets any easier. Well, xfinity makes moving super easy. I can transfer my internet and tv service in about a minute. Wow, that is easy. Almost as easy as having those guys help you move. We are those guys. Thats you . The truck adds 10 pounds. In the arms. Okay. Transfer your Service Online in a few easy steps. Now thats simple, easy, awesome. Transfer your service in minutes, making moving with xfinity a breeze. Visit xfinity. Com moving today. Romaine comprehensive capital analysis and review by the fed. It basically determines much capital banks need to hold and how much capital they will be able to disperse to investors. The fed has found that u. S. Banks and foreign affiliates are wellcapitalized and generally in good shape. Share buybacks will be suspended for the third quarter. Dividends are capped. Is important to know that there are several twists to this years stress tests. They combine the two. The fed announces this time aced on the most severe stress scenario. 33 banks were tested. I think we have a chart that shows some of the bigger banks. And what their capital would diminish to under this severe scenario. You are supposed to have at least 40 . All of them do but some of them come close. They need combined tier one and tier two capital. , it iscapital buffer going to be different from each firm. That is not going to be disclosed today. The banks are being told that starting next week, they can let us know what their Additional Capital requirement is but they dont have to declare dont have to disclose it until august. Of fed added another layer examinations onto the process that they are calling Sensitivity Analysis. What happened not to individual banks but banks in aggregate. Ushape recovery and a wshaped recovery. Aggregate capital ratios would decline from 12 in the Fourth Quarter of 2019 to between 9. 5 and 9. 7 . Most firms remained wellcapitalized but several what approach minimum capital levels. That ordersdecided are suspended for quarter three. They have got to continue suspending them for the third quarter. Income for banks over the prior four Fourth Quarters. Banks are going to be required to reassess capital plans. The fed may do additional stress test analysis this year. Sometime in the late summer or fall, we will find out when and if the banks will increase their payouts. The bank may decide to leave the suspension in place. We should note one member of the fed strongly dissented. They said this is a time for large banks to preserve capital. I do not support giving the green light for large banks to deplete capital, which raises the risks that they will have to tighten credit or rebuild capital during the recovery. The fed vice chairman in charge of supervision said that he thinks this system works, it is prudent, it makes the banks conserve some capital while still requiring them to put out some of their capital to shareholders. Caroline we are looking at moves after hours where the banks are starting to fall. Perhaps there was some euphoria earlier today wendy roback when the rollback was announced with the focal rule. But do you think this will be one that means that bigs have to take a more cautious approach then they would have done otherwise . It seems to be the message that the fed is sending. The fed wants banks to be careful. They note that under these stress test scenarios, the Sensitivity Analysis shows that they could, some of them at least, get to the minimum capital level relatively quickly. They want to make sure that they retain enough capital to do that. They are basically going to sit back and wait, see what happens with how the virus and economy responds, then make decisions on how banks can pay out Additional Capital after that. Caroline great breakdown on all things fed stress tests. Morewe are going to get Bank Reaction from none other Capital Management ceo bill smead. Was this a surprise to you . Was lack of majority view a surprise . Bill no, it is not a surprise. Hatednks were the most forprofit businesses in the United States from 2007 through maybe two or three years ago. Draconian Capital Requirements on them and now we have had a once in a 30 or 40 year event come along to cast out the reasons they did that. So, when you are valuing companies, whether you paid a 50 dividend inor . 20 the next 90 days doesnt do much to the net present value of the company. Watching people trade these up today, sell them off after the close, is symptomatic of a market that is going to be down the momentum in the most shortterm way. Romaine when you look at these bank stocks, we were below one on the pricetobook during that march selloff. It still has recovered somewhat. How do you value these companies at this point . Why do you pile in if youre making a decision . What exactly are you buying here . We started with bank of america in early 2012. Jp morgan on the whale trade in june of 2012. We have owned wells fargo, in my ore, going back to 1991 1992. So, what youve got to understand is that investing is a marathon. These companies are the cheapest relative to the s p, the cheapest relative to almost any measuring tool. And are in wells fargos case, as cheapest they were at the bottom, we thought they were the problem and the whole Financial System was going down. Taylor if you say marathon in an answer, that you have my ears perked up and i will respond to that analogy. I believe it was james gorman of Morgan Stanley who said he wanted to continue paying dividends because it was a steady stream of income to investors who had lost their jobs during this pandemic. Investor like you, is that valid or are we just drinking the koolaid . Bill the baby boomer generations, the youngest are maybe 58 and the oldest are 74. I actually have Three Sisters who are older than me and we pretty much spanned that group. Many of those people live off their dividends they get from common stocks. We have high ownership of common stocks, especially among people 50plus years old. Valiant aly a valid thing. The system was built on people getting the chance to take risks and gain a reward. Are meddlingents in a lot of businesses on an anticipatory basis. They have to be real retard thenot American Economy more than it with what isrded going on with covid19. Caroline they want banks to remain resilient amid the uncertainty and therefore hold back capital. A purchaset more of right now . Is it a buy the dip opportunity . Bill i lost sound. Seem to have a technical issue with bill sneed. Banks have been selling off to the tune of 2 . Lets get you the first word news. Mark the number of new coronavirus cases in the United States stood at 34,000 today, just short of the alltime high reached in late april. While greatly expanded testing probably accounts for some of the increase, experts say other measures indicate the virus is making a comeback. Daily deaths, hospitalizations, and the percentage of tests coming back positive have also been rising in parts of the country, mostly the south and west. Texas and arizona are among the states seeing a spike. Under mounting pressure to free a huawei executive, canadian Prime Minister Justin Trudeau made it clear today that he will not give way even if it means two canadians remain in jail in china. Our responsibility is to make sure that we are connecting canadians into the future. Bythey realize that arbitrarily arresting random canadians, they can get what they want out of canada politically, well that makes an awful lot more canadians who traveled around the world vulnerable to that kind of pressure. Mark Prime Minister trudeaus comments come in the face of rising comments from leaders, including those in his own party. Diplomatsigned by 19 and academics urged trudeaus government to end the proceedings to bring the men home. U. S. , increasing the governments ability to deport people who come into the country illegally. Justices sided with the trump administration. The case involved a sri lankan man arrested near the mexican border. He had tried to persuade immigration officials that he faced harm if he returned to his country. Pro basketball star lebron james has put together his most ambitious deal yet. He and Business Partner maverick carter have launched a company with a 100 million investment. James spoke to businessweek about the country and about the company and a number of other issues. People in the community, because those are the real ones. Those walking in the streets, being racially profiled, being judged, they are the ones that need to be heard. They are being heard right now. Ofk you can watch all bloomberg businessweeks conversation with lebron james and maverick carter on friday, here on bloomberg television. Global news 24 hours a day on air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in over 120 countries. Im mark crumpton. This is bloomberg. Romaine the news crossing the wire now, this on ground strike, the big Cybersecurity Software company said to be placing shares in a private placement of fiat barclays. Shares more than doubled from the start of the year, more than tripled since june of last year. Taking advantage of that price. The shares closed earlier today at 105. 71. Caroline a programming note. If you have not and excited enough by our lebron coverage, you have got to be excited about bloombergs annual broadcast of the boston pops spectacular, carrying on the orchestras fourth of july tradition in the comfort of your own home. You cannot miss it. This is bloomberg. Found, tedious negotiations with a lot of uncertainty, under the leadership of ken feinberg as a mediator, a process and structure that will bring closure to the investigation. Our shareholders are relieved. Our customers, shareholders, and people in the cut in the company are relieved that we can put this behind us and set course for the future. Availablee will be Going Forward both to professional farmers, which is very important, and also for the consumer on the back of the recent epa ruling that it has been and continues to be a product that is safe for its intended use and, importantly, is not carcinogenic. Do you think there will have to be further financial settlements, and if so come on one scale . Scale . O, on what the range yesterday, from 10. 1 to 10. 9 billion, we have signed agreements with about 75 of all claims out there, which includes the entire leadership and almost all of the cases that would otherwise go to court over the next, lets say, 18 months. The cases that yet have to be settled. We are in negotiations with the remaining and we are optimistic that can bring these to a good closure over the next month to come. 1. 25 billionut to cover those future cancer claims. How confident are you that that is really going to be the limit . We have always talked about the need to take the assessment of glyphosate, the safety of the product come out of the hands of lehman apostle of laymans juries and really to the arena of science. With the support of the plaintiff sides, the plaintiff lawyers who are looking after the interests of future claimants, we have agreed that ,here will be a Science Panel top scientists that will look at the body of science and regulatory documentation and reallife evidence to assess whether life estate is a safe product and whether it is carcinogenic. We take great comfort in the fact that we are back to scientific discussion. Both parties are bound by the assessment. It will take a few years before they render their assessment and we will take it from there. But we have a high level of comfort. The body of regulatory evidence and support around the world that has confirmed and actually reconfirmed over and over again that glyphosate is actually not carcinogenic. Does that mean that you are not going to be making any ingredient changes . Can i infer that from what you are saying . Yes. The active ingredient and the formulations are both safer use. They do not cause cancer. There has been and will continue to be available, our farmers are in desperate need of the product. Because it is safe, there is no reason why we should withdraw or change the formula. The same holds true for consumers that are relying on the product. Bayer ceo. Quick check on the headlines. Shareholders approve a live tons of bailout by the government. Disney is being pressured to delay the reopening of its theme parks in florida. Actors union wants the same thing for disney world in florida. They say it is unclear how disney could responsibly open as coronavirus cases keep soaring. Reopen julyposed to 11. That is your business flash update. Romaine a quick programming note. After our show, Bloomberg Technology comes up next including an allstar panel with eo. Vox ceo and slack c 5 10. This is bloomberg. Romaine welcome back. I know you are tired of looking at me, caroline, and taylor. Lets bring in joe weisenthal. What have you been watching today . Joe you cant avoid noticing that initial jobless claims have kind of stalled out. In worse, they came than expected. Same again this week. We are at 1. 4 8 million weekly claims, not a number that is rapidly caroline it feels as though we are going to go in fits and starts with the economic data. Whereess in terms of next in terms of sign posting . Texas, arizona, california, the data command much could this really damage what signs of an economic comeback we have . Joe i dont see how it could not damage. It was already going to be difficult. Going back to april, no one was really optimistic that we could have a true vshaped recovery. No one thought that was plausible. Then people started to believe. But that was before we got this situation where total virus cases for the country are essentially at their worst level ever now. Thatnk it is unavoidable it will slow down even if policy policymakers policy measures are taken. The governor of texas today talking about once again putting a halt to nonessential medical procedures in major cities to keep up hospital capacity. Who knows . Will we go into total lockdown again . I dont really know. But essentially, we are getting to the point where we are starting to see official pauses in the reopening. There is no way that can be great for economic activity. Taylor the last time you were on, we were talking about the surprise index. It still looks like the u. S. Is leading. What does that bode for the rest of the data we could get this week . Joe i think that is a great question and great observation. It is not just leading. It is at its highest level in history. I think the question is twofold. One, does this represent that the economy is doing better than expected, or just that the economy opened earlier than expected . They are kind of different questions. Mathematic a increase in activity by just opening the doors. Does not mean it is durable. Caroline for now, that is it for whatd you miss . Romaine this is bloomberg. Welcome to Bloomberg Technology. Im emily chang in san francisco. Apple is shutting down 10 of stores in the u. S. Again, including almost all of its stores in florida. More than 30 apple stores have been recently reopened, with new Safety Measures and placed, but they are close now. Acrossf covid19 spiking the country, especially in florida, california, and texas. Texas and florida have halted th
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