MARIA: WELCOME BACK.
FUTURES INDICATING A DECLINE AT
THE START OF TRADING THIS
MORNING AS WE LOOK AHEAD TO MORE
RETAIL EARNINGS THIS WEEK, THE
DOW INDUSTRIALS DOWN 86, S&P
DOWN 21, NASDAQ DOWN 85, THREE
QUARTERS OF 1% LOWER ON NASDAQ.
WE’RE WAITING ON BEST BUY,
NORDSTROM, DICK’S SPORTING
GOODS, DOLLAR FREE, TREE, ALL ON
THIS WEEK.
JOINING US NOW, STEVE CHAVERONE.
HOW WOULD YOU CHARACTERIZE THE
RETAIL EARNINGS WE’VE SEEN, I’M
TALKING WALMART, HOME DEPOT,
MACY’S AND WHAT ARE YOU
EXPECTING FROM THIS WEEK’S
BATCH?
>> THE CONSUMER LOOKS LIKE IT’S
UNDER SOME PRESSURE SO YOU’RE
SEEING A TRADEDOWN TRADEDOWN, HE
RETAILERS SEEM TO BE DOING
BETTER THAN HIGHER END
RETAILERS.
YOU’RE SEEING THE SAME AMOUNT OF
SPEND AT THE STORE BUT LESS IN
THE BASKET SO YOU’RE GETTING A
LOT LESS FOR YOUR MONEY WHICH IS
CONSISTENT WITH THE INFLATION
STORY THAT WE KNOW AND MORE
IMPORTANTLY, THE CONSUMERS ARE
REALLY DIGGING INTO THEIR CREDIT
CARDS.
UP UNTIL THIS YEAR, YOU HAD
NEVER SEEN AN 18 MONTH INCREASE
IN CREDIT CARDS OF GREATER THAN
$90 BILLION.
WE’RE UP 197 BILLION OVER THE
LAST 18 MONTHS.
THIS IS THE BIGGEST INCREASE IN
OUTSTANDING CREDIT BALANCES
EVER, ALMOST TIMES TWO.
MARIA: WOW.
SO ARE YOU EXPECTING THINGS TO
GET WORSE IN 2023 IN TERMS OF
THE MACRO STORY?
>> WELL, LOOK, IF YOU’RE GOING
TO GET INFLATION DOWN TO 2%
WHICH IS -- OBVIOUSLY THE FED’S
GOAL, YOU’LL NEED WAGE INFLATION
TO COME DOWN TO 3.
THAT ONLY HAPPENS WITH AN
INCREASE IN UNEMPLOYMENT.
ANAN EQUILIBRIUM LABOR FORCE HAS
6 MILLION LESS JOBS THAN WE HAVE
NOW.
THAT’S WHEN THE DAM BREAKS.
ONCE UNEMPLOYMENT MOVES HIGHER
YOU’LL SEE CONSUMER SPENDING
START TO TRACK.
TO ME THERE WERE THREE COMPANIES
THAT ANNOUNCED LAYOFFS THAT HAVE
MY ATTENTION.
YOU HAD A TRUCKING COMPANY, CH
ROBINSON, FED EX AND AMAZON.
THEY ANNOUNCED IT A WEEK BEFORE
BLACK FRIDAY.
THAT PROBABLY TELLS YOU THERE’S
SIGNS OF CONSUMER WEAKNESS TO
COME.
MARIA: YEAH.
IT’S A GREAT POINT.
LET ME GET YOUR TAKE ON DISNEY,
STOCK IS UP THIS MORNING ON THIS
BREAKING NEWS OVERNIGHT, BOB
IGER IS BACK AS THE CEO OF
DISNEY.
HE’LL REPLACE HIS SUCCESSOR, BOB
CHAPEK, AFTER LESS THAN A YEAR
AWAY FROM THAT ROLE.
THE CHANGE FOLLOWING DISNEY’S
LOWER THAN EXPECTED EARNINGS
REPORT.
THE STOCK THIS MORNING IS
BOUNCING BUT OF COURSE IT HAS
TRADED DOWN THIS YEAR.
IT IS DOWN 40% YEAR-TO-DATE AND
THIS MORNING SHOWING A DWAYNE GA
AND-A-HALF PERCENT.
WHAT’S YOUR REACTION TO THIS
STOCK AS WELL AS THE NEWS THAT
BOB IGER IS BACK?
>> MEET THE NEW BOSS, SAME AT
THE OLD BOSS, RIGHT?
MARIA: RIGHT.
>> I DON’T NECESSARILY THINK IT
WAS A SHOCK THAT IGER CAME BACK.
THE RUMORS WERE SWIRLING.
INVESTORS LIKE IT, A STEADY
HAND.
THE CHAPEK TENURE HAS BEEN LET’S
CALL IT VOLATILE THE AT LEAST
AND I THINK IGER IS COMFORTABLE.
MARKET’S COMFORTABLE WITH HIM
AND I THINK THE STOCK’S HE
REFLECTING THAT.
I THINK THAT’S A STOCK SPECIFIC
STORY.
I WOULDN’T NECESSARILY READ
ANYTHING THROUGH TO THE OVERALL
ECONOMY THERE.
MARIA: I MEAN, DAGEN, BOB IGER
WAS CEO FOR 15 YEARS.
AND THEN BOB CHAPEK TAKES OVER.
HE HAS A BIG FIGHT WITH RON DE
SANTIS AFTER DISHE ANY TRIED DIS
INVOLVED IN PARENTS NOT WANTING
CRT IN THEIR SCHOOLS FOR THEIR
KIDS.
>> .DAGEN:
KIDS.
DAGEN: THAT WAS ONE OF CHAPEK’S
SCREW-UPS, ONE OF MANY.
I’LL POINT OUT THAT DISNEY’S
RECENT EARNINGS ANNOUNCEMENT WAS
A DISASTER THAT INVESTORS, WALL
STREET BLIND-SIDED BY HOW BAD
THE RESULTS WERE.
ONE AND-A-HALF BILLION DOLLARS
INS LOSSES AND ITS STREAMING
DIVISION BECAUSE OF HIGHER
PRODUCTION, MARKETING AND
TECHNOLOGY COSTS AND EVEN ON THE
CALL HE -- CHAPEK SOUNDED KIND
OF -- HE WAS TALKING ABOUT THE
GREAT RESPONSE TO MICKIE’S NOT
SO SCARY HALLOWEEN PARTY AND HE
WAS WARNED AHEAD OF THE CALL TO
NOT SOUND SO CHEERY, LIKE HELLO,
MOUSEKETEERS WHEN YOU FOULED UP
YOUR EARNINGS REPORT.
ONE OF THE MOST ASTONISHING
THINGS, SPEAKING TO CHAPEK’S
INCAPABILITY OF RUNNING THE
COMPANY, DURING THE SUMMER WHEN
THEY WERE TALKING ABOUT THE
THEME PARK BUSINESS, HE REFERRED
TO THE, QUOTE, UNFAVORABLE
ATTENDANCE MIX AT DISNEY WORLD,
MEANING -- HE WAS SPEAKING TO
PEOPLE WHO HAVE ANNUAL PASSES
FOR DISNEY, THAT IS RIGHT UP
THERE WITH BASKET OF
DEPLORABLES.
[LAUGHTER]
DAGEN: WHEN HE TALKED ABOUT THE
UNFAVORABLE ATTENDANCE MIX,
ESSENTIALLY ACCUSING PEOPLE WHO
HAVE ANNUALS PASSES TO DISNEY AS
BEING UNFAVORABLE BECAUSE THEY
DON’T SPEND ENOUGH MONEY WHEN
THEY GO INTO THE PARK.
I’M SURPRISED IT TOOK THIS LONG
FOR THE BOARD TO FIRE HIM.
MARIA: YEAH.
NO, IT’S A GOOD POINT, WHEN BOB
IGER SENT THE E-MAIL TO
EMPLOYEES OVERNIGHT APPARENTLY
MANY WERE AT AN ELTON JOHN
CONCERT WHERE BOB CHAPEK WAS
SUPPOSED TO BE INTRODUCING ELTON
JOHN.
WE DON’T KNOW IF HE WAS THERE
BUT THAT’S WHEN THE E-MAIL CAME
IN AND SOME OF THE EMPLOYEES
WERE SHOCKED BY IT.
HE WRITES DEAR FELLOW,
EMPLOYEES, I AM RETURNING TO THE
WALT DISNEY COMPANY AS CHIEF
EXECUTIVE OFFICER.
IS THIS A REASON TO BUY THE
STOCK, STEVE?
>> WELL, I MEAN, I THINK IT’S A
REASON FOR OPTIMISM.
CERTAINLY, THE IGER KIND OF
TENURE WAS A BETTER ONE FOR
SHAREHOLDERS THAN WHAT YOU’VE
GOT OR HAD OVER WITH CHAPEK.
I MEAN, LOOK, THERE’S STILL
CHALLENGES IN THE BUSINESS THE
THAT YOU NEED TO GO THROUGH.
YOU NEED TO GET STREAMING RIGHT,
THERE WERE CHANGES IN THE PARKS
THAT WEREN’T NECESSARILY
FAVORABLY RECEIVED.
SO AGAIN, I THINK ALL THINGS
BEING EQUAL, MARKET’S GOING TO
FEEL MORE COMFORTABLE WITH
MR. IGER.
DAGEN: HOW DOES IT FEEL TO GET
FIRED AND THE STOCK RALLIES 8%?
HOW DOES THAT FEEL?
MARIA: PROBABLY NOT SO GOOD.
STEVE, LET ME ASK YOU ABOUT THE
FED BECAUSE ATLANTA FEDERAL
RESERVE PRESIDENT SAID
YESTERDAY, QUOTE, IN TERMS OF
PACING, ASSUMING THE ECONOMY
EVOLVE AS I EXPECT IN THE COMING
WEEKS I WOULD BE COMFORTABLE
STARTING TO TO MOVE AWAY FROM 75
BASIS POINTS INCREASES AT THE
NEXT MEETING.
THE FINAL FED HE MEETING IS NEXT
MONTH, AND MOST INVESTORS ARE
EXPECTING 50 BASIS POINT HIKE
INSTEAD OF 75.
WHAT HAS BEEN THE EFFECT OF THE
TIGHTEN UNDERWAY AND DO YOU
THINK IT’S PRICED INTO THE
MARKET ALREADY?
>> I THINK IT 50.
THE FED’S GONE OUT OF ITS WAY TO
SIGNIFY 50.
I THINK IT IS A DEVIL’S BARGAIN.
YOU HE SLOW FROM 75 TO 50 BUT GO
TO A HIGHER TERMINAL RATE.
MAYBE BEFORE THAT WOULD BE 475
TO 5, I THINK THAT NUMBER NOW IS
SOMEWHERE 5, 5 AND A QUARTER,
MAYBE 5 AND-A-HALF.
SO IT’S A SLOWER ROAD TO HIGHER
RATES.
BUT ULTIMATELY MAKE NO MISTAKE
ABOUT IT, WITH ALL RESPECT TO
FED GOVERNOR BOSTIK, THE FED’S
BEEN EXPECTING AN EASIER
INFLATION PATH FOR TWO YEARS NOW
SO WE HAVE TO SEE THE DATA
CONTINUE TO COME IN AND ONE DATA
POINT THEY DOES NOT MAKE A TRADE
IN ORDER TO GET INFLATION DOWN,
YOU NEED THE FEDERAL FUNDS RATE ABOVE THE CORE INFLATION RATE.
ABOVE THE CORE INFLATION RATE.
WE THINK THAT 5 AND A QUARTER, 5
AND-A-HALF.
WE’LL HAVE RATE HIKES THROUGH
2023.
MARIA: THANKS SO MUCH.