Arm set to set trading in the next few hours. The biggest imo of the year. Stock pricing at 51 a share. It was at the top end of the anticipated range giving it a market cap of 54 billion, 95 million shares were sold. Lets kick it off with leslie as they build towards that first trade. The indications coming in, interesting. You know, they started the morning at about 62. That was the first indication. Fell to about as low as 57, which implies a 12 gain relative to that 51 ipo price. And now its kind of around 57, 58. Still have time before it starts trading. We could expect another hour, hour and a half before its open and off to the races for arm. But its interesting, nonetheless, just to kind of see where these indications are coming on because just kind of gathering some color from investors and bankers and so forth. There was some dispute over exactly where to price this. Softbank doing all of the selling here. The question was, do you price it above the range or do you price it at the high end of the range . Ultimately, they chose that 51 at the high end of the range in order to hopefully garner some sort of day in the green here. Well see if theyve achieved that goal. So far indications are above handily above that 51 price. Again, we still have time. Well see where things go. Absolutely. The way its shaping up right now in terms of this anticipated gain at the open, its pretty much in the range of where underwriters will usually look to target, no . Yeah, absolutely. I mean, when you talk to bankers, kind of the ipo pricing 101, you dont want too big of a pop. Because that indicates that it was priced too low. You left money on the table. But you also dont want it to go down on the first day of trading because that affects sentiment and it can affect the ability for that stock price to get back to those ipo levels, which leaves a lot of the investors who bought in at the ipo price under water. There are a lot of dynamics at play. Softbank selling. Then you also have the customers that are buying into this deal, so you dont want to price it too high that you upset your customers either. So, there really is a delicate balance, especially when you think about the incentives of all the various players that are participating in this deal in particular. Leslie, stay with us. Lets bring in david who spoke with masa son and rene haas. Its an important day not just for arm but for the overall ipo market. Certainly if its seen as a success. As for the fundamentals of the company, theres no way even at 51 you could say it was cheap based on the last 12 months of earnings. And i did ask Ceo Rene Haas about that lack of growth year over year and why he believes it will ratchet higher. The yearonyear growth was not that great. If you look back over the last three years as we pivot strategy, were 3 yearonyear Going Forward for the last three years. But Going Forward, again, when you look at these mega trends of efficiency, software, complex a. I. , all having to run off batteries or low power devices, this is huge growth for us. Again, grace hopper is a great example of the kind of devices that can only be built on arm. Masa, it wasnt that many years ago that you were selling this company to nvidia, or at least had plans to sell this company to nvidia. That obviously did not happen. The price tag then was 40 billion. A lot of it was made up of nvidia stock. Whats changed between then and now . We did not want to really sell arm it was the covid that really made me go into the protective mode. So, i have to go protective mode and i have to choose the more conservative, careful operation of softbank. So we were selling to nvidia. The deal was actually onethird cash, twothirds was exchange of nvidia shares, a combined company of nvidia and arm. And i believe the combination of the two companies will be enormous. I believe in the future of a. I. And its really now getting proved. This is the beginning of big a. I. Time. Arm is going to have a big role in that. Of course, the question can be for somebody who believes so strongly in the future of a. I. , you know, does he have enough profits to show for it, mike. Even if that nvidia deal had gone through, given the enormous increase in price there, it would have been as much as 100 billion just on the stock portion for softbank, not to mention, obviously, Division Fund and whether and what they decided to do or not do when it came to at least generative a. I. , for example, which theyve not been involved with. Yeah. The struggle is when it comes to arm, its interesting as a potential investor. Very known quantitity, mature level, not a lot of growth at the moment but there are a category of stocks that are industry utilities or that provide some Industry Standard on an information look at the fico score company. The fair share makes you weep or msci and s p global. I think of these companies as Industry Standard, industry like network utilities. So, i dont know if arm qualifies but of its ip or if thats the way people are thinking about it. Its not really a chip play with the same kind of cyclical dynamics. Right. As they say, theyre in virtually everything and certainly 99 of phones, which is the key market for them. The continued question is can they successfully pivot to being a key part of the a. I. Future. And those chips powering it. Especially with others doing the same thing. Lets bring in deirdre bosa. Obviously, a longtime masa watcher, dee, and you said he needs a winner. He certainly does. Theres been a question hanging around masa for the last ten years, is he a really great investor or just lucky . It goes back to the dotcom boom and bust of 2001 and the bet he made on a little known chinese ecommerce company, alibaba that turned into more than 200 billion, seen as one of the greatest investments of all time. That has sort of created this legend and stature around masa son that enabled him to come back into the Venture Capital markets with a vengeance with vision fund 1 and vision fund 2, but he hasnt been as lucky since then, since about 2006. Hes had some highprofile losses like wework. He needs this. I was listening to your discussion. Is this going to be sort of is arm going to be the play that proves that he knows what hes doing in Artificial Intelligence . There are many cases to show that he hasnt been able to execute on this vision. Certainly hes been talking about Artificial Intelligence for many, many years before many others in the market were talking about it but he made an investment in nvidia in 2017 and sold it a year later. He made more than 3 billion. That would have been tens of billions of dollars had he held on or had he got through that acquisition, nvidia of arm. So, a lot is on the line for him. He sort of introduced this idea in Venture Capital markets of spray and pray. He had 100 billion to play with with that first vision fund. And the idea was invest in as Many Companies that supports your thesis as possible. And one of them is going to turn out to be this outsized winner like an alibaba. Thats what hes been doing. We havent seen that quite yet. Theres also a difference between Artificial Intelligence and generative a. I. This whole shift in the magnificent seven, the huge upside weve seen in markets so far this year has been around generative a. I. Is it enough that arm may be a. I. Adjacent, not a. I. Centric. Some other bets as well like cruz, one of the leading robo taxi companies. He sold out of that so he does need this. I wonder how hell be judged given his duration, right, his management duration. Weve joked about it. Longer than most. Yeah. He said hes solely focused on a. I. You heard his comments in terms of what he believes society will look like. Hes have positive on that. You know, listen, i mean, dont forget, sprint obviously owned that successfully after many attempts, merged it with tmobile, benefitted from that deal. Remember, they had a softbank, also, a very important provider of Wireless Services in their home of japan. But deirdres points are important and salient ones. You know, hes not put up the numbers you would have anticipated. Particularly given he seemed to be in the right area, kind of had the right expectation but didnt seem to execute on it. Mike, is it like the yankees where this seasons tough but you got a lot of rings . The yankees had the final win in like 14 years. Generally, having extreme and persistent techno optimism and spreading your bets around is going to get you a win in the type of market phase weve been in for a while. Not being particularly value sensitive. Not necessarily trying to trade in and out. I also think we have to keep in mind how even the concentration of appreciation in the nasdaq has been from kind of the acknowledged winners. Microsoft is the Second Largest Company in the s p 500. You know, it was the second biggest 25 years ago probably, right . So, its not as if looking for the next new thing has been the way to stay ahead of the question is today the manifestation of green shoots the street has been talking and wishing for for the last six months. Yeah, it cant hurt, carl. Obviously, if this deal the stakes are high. If this deal doesnt go well and investors who purchased that ipo at the ipo price are suddenly under water, that doesnt bode well for the other deals that are marketing their road shows currently and the other ones who have recently filed. It could open the possibility for others to dip their toes in as well. Its distinguished with how this company is structured versus other ones out there. This isnt your quintessential total Addressable Market seeking growing top and even bottom lines. Both are currently shrinking, at least for the First Six Months of the year. Venturebacked company. This is a this company was taken private back in 2016. Its it was founded in 1990. Its not growing. So, its not holistically indicative of what we tend to see with venturebacked companies, as we did during the last peak in 2021. But that said, it definitely is something bankers, investors, startups and other companies are looking at in terms of whether or not to start that process and really open that ipo window in earnest. Yeah. Dee, it seems like as often as the case, when the cycle cranks up again, youre going to get those companies that, you know, have a certain level of maturity, feel like its time in their life cycle to get public. Were going to get instacart. If you were looking for the longshot, maybe they have the technology that can catch lightning in a bottle, theres a couple hundred ipos sitting on the nasdaq that have been wallowing for a while that you might be able to shop among. We talked about this yesterday. The idea of a blockbuster ipo and retail investors, its like an arm, 99 of all smartphones. Retail investors want a piece of it, but history has shown getting in on that first day, especially that first day pop hasnt been a particularly good investment. The last ten that weve seen over the last four years or so have underperformed the s p from that peak and are still in the red. Its worth remembering for an arm. Leslie set that up really well. This is a more mature business. In that sense, revenue is shrinking and so is its profitability for the trailing 12 months. When you look at that valuation, it does require a leap of faith to buy it at this level. Its trailing 12month pricetoearnings ratio paints it as an ipo play. It puts it at almost an nvidia valuation. Certainly well above a qualcomm or the Semiconductor Industry as a whole. Thats sort of what the ipo is. Its a little leap of faith. Youre getting in at the start of trade so you can embark on the upside. When Companies Stay private for so long, the question should be asked, are its best growth days behind it . Obviously, arms got that core of predictability and then you have a lot of argument about the Growth Prospects outside of what they already have in hand. Thank you very much. Well continue to watch as we click towards the open. Still to come, oakmark on why he says health care looks attractive for the first time in a while. Hell join us to tell us a few of the names hes been buying. A lot me oron arm as we count down to the opening trade at the nasdaq with the stock indicated to open at 58 right now. Stay with us. Every day, businesses everywhere are asking is it possible . With comcast business. It is. Is it possible to use predictive monitoring to address operations issues . We can help with that. Can we provide health care virtually anywhere . We can help with that, too. Is it possible to survey foot traffic across all of our locations . Yeah absolutely. With the advanced connectivity and intelligence of global secure networking from comcast business. Its not just possible. Its happening. Heres why you should switch fo to duckduckgo on all your devie duckduckgo comes with a built n engine like google, but its pi and doesnt spy on your searchs and duckduckgo lets you browse like chrome, but it blocks cooi and creepy ads that follow youa from google and other companie. And theres no catch, its fre. We make money from ads, but they dont follow you aroud join the millions of people taking back their privacy by downloading duckduckgo on all your devices today. Welcome back. Our next guests fund has nearly doubled the s p year to date but he is in focus on the magnificent seven heading into the fourth quarter. The fund is leaning further into value names including energy and health care. Joining us oakmark portfolio manager. Tony, its good to see you here. If in general your orientation is to look stock by stock for stuff that hasnt necessarily kept up with the market and looks relatively inexpensive, theres probably plenty to choose from in this market thats been narrowly led. Where is that taking you . Well, thanks for having me. Youre absolutely right. The market has become incredibly narrow. While the s p looks rather expensive a little over 20 times earnings, underneath the covers theres a lot of value to be had. One of the things we look at is just valuation dispersions in general. If they take the top in the s p and compare them to the bottom decile, how much do you pay for the highest price paid companies than the lowest, historically its been a four times premium for the highest pe companies. Today its over seven. Which is back to where it was in 2021. That means theres a lot on sale out there and were trying to do our best to take advantage of it at oakmark. How do you get around the possibility that what the market is doing is simply, i guess, giving too generous valuation to those upper end preferred names and, therefore, the premium is high but it doesnt necessarily mean that the cheaper stocks are cheap on an absolute basis. Youre absolutely right. At oakmark we take an intrinsic approach to valuation which means growth is a component of value. Its not exclusionary from our universe. So, for instance, we own google. Google on a just straight pe basis looks trades right around in line with the market. Doesnt look expensive, but then when you peel back the onion and back out the cash, like cloud and other bets, it ends up your paying a pretty low multiple for search. So some of these Big Companies that have led the market this year, continue to look undervalued to us. As a broad, broad strokes, the more traditional value names are where weve been more actively buying yeartodate. Tony, hope you dont mind, one more on alphabet. He can asked bill about this all summer long, especially when microsoft appeared to be needling on a. I. , it looks like a great call to stick with it. I wonder how you think about that and the degree to which theyre being challenged in court, especially this week. Yeah, im not up to speed on whats exactly going on in court on the antitrust suit. So, i cant really comment on that. You know, microsoft and google both have great a. I. Capabilities. What we know today is its all very early. Things are happening very quickly. Its unpredictable. But we love we get to pay this price for a company like google that has a leadership position in a. I. We just dont feel like were paying for it here. We did mention, tony, you were finding some things that look pretty ripe in health care. Where particularly in that very Diverse Group . Youre right, it is a Diverse Group. You have drug stocks trading here that are alltime low relative to the s p over the last ten years. Same for biotechnology companies. Were seeing more new idea flow. Thats why i mentioned that. Ill give you an example. Thats iquvia holdings. A Contract Research organization or cro. Theyre one of the largest in that. What those companies do is help the Drug Companies throughout the trial process. And manage those trials. And they have a unique advantage in that they own the traditional ims business, which is the prescription data business. And that helps them move Pharma Companies through the trials quicker and more precisely target trial candidates for drugs. And that has led to market share gains over time. So today were paying about a market multiple for a company that grows high Single Digits with virtually infinite returns on invested capital because there isnt much capital in this business. A ceo that owns 250 million in stock and is just a phenomenal manager who truly thinks like an owner. Interesting. We also did nod to your energy exposure. So, youve owned some for a while now. Its clearly a leadership part of the market. Whats the premise there in terms of whether you need the Commodity Prices to keep going up or what parts of energy do you continue to like . Yeah, great question. As far as needing the energy price to go up, we underwrite at 70 a barrel price. The reason we do that, thats longterm price. The reason we do that is because thats where it appears to us that the marginal cost of a barrel is. Thats where capital comes in and out of the industry. That seems for a longterm minded shareholder like oakmark, thats the price we use to price the energy companies. What we see at that price and even more so today is predigous cash flow. Conocophillips, we look at them at this price, youll get your investment back over ten years. In other words, theyll produce the market cap in ten years at this price at a minimum. Meanwhile, growing production in the low and mid Single Digits. You get your money back over ten years. Your protection is 40 , 50 higher ten years from now. Its a risky industry. Oil prices move all over the place. With that sort of setup in price, we feel like it really protects our investors. Yeah, a little bit of a cushion there. Great to catch up with you. Thanks much. Thanks for having me. We are continuing to watch arm as we get closer to the first trade. Now indicated on 57 a share. Highlights from our conversation with citadels ken griffin. One of the biggest Market Makers in the country. His outlook on stocks, the fed and the ipo market when we come back. T just need ai, it needs the right ai for your business. Introducing watsonx a platform designed to multiply output by tailoring ai to your needs. When you watsonx your business, you can train, tune and deploy ai, all with your trusted data. Lets create the right ai for your business with watsonx. Ibm. Lets create. Ah, these bills are crazy. She has no idea shes sitting on a goldmine. Well she doesnt know that if she owns a Life Insurance policy of 100,000 or more she can sell all or part of it to coventry for cash. Even a term policy. Even a term policy . Even a term policy find out if youre sitting on a goldmine. Call Coventry Direct today at the number on your screen, or visit coventrydirect. Com. music the walking tree is said to change its entire location in pursuit of sunlight where could reinvention take your business . Accenture. Let there be change. Explore endless design possibilities. To find your personal style. Endless hardie® siding colors. Textures and styles. Its possible. With james hardie™. With your hearing, if you start having a little trouble, youre concerned that its going to cost you money. To this day i only paid what i had to pay for the device. When i go back everything is covered. Theres so much youre missing by not having hearing aids. well find you a hearing aid that fits your lifestyle and budget. Unlock your riskfree trial during ourime sounds of autumn event. Call 1800miracle to book your appointment today. Lets get over to phil lebeau live indetroit for the ongoing uaw battle. Scott, we have received some information from a source familiar with the uaws plans for the plants that it will plan on striking come midnight tonight if they do not reach an agreement with ford, gm and stellantis. This is our understanding of the plants that will be announced tonight, 10 00 is when we will get the official announcement from the uaw. Lets start with gm motors, romulus powertrain, toe lied dough. For ford, they plan to strike at livonia transmission plans, lima engine plant and cleveland engine plant. For stellantis they will walk out at kokomo transmission plant. We have reached out to the uaw for confirmation this is the plan. We have not heard back but our source says this is the game plan for the uaw in terms of the targeted strikes. One last thing, if you look at all of these plants, the engine and transmission plants, what do they provide transmissions to . The most profitable vehicles, the pickup trucks, fullsize pickup trucks as well as suv, most profitable Combustion Engine products. Well find out if this is actually the plants the uaw walks out of tonight if, in fact, we hear a strike is announced. Guys, back to you. Phil, appreciate that. Washington post also with a piece looking at the white house preparing for some possible emergency aid for suppliers. Well watch that closely. Thats our phil lebeau. Important day. Meantime, citadels founder and chief ken griffin sat down with sara eisen, covered a lot of ground, why the arm debut is a barometer, why the feds 2 is not worst the cost of getting there and the anxiety over whether this market rally can continue. Its been a really good year for the market, particularly with the back drop of higher real Interest Rates. So if you look at both the yield on the tenyear bond and more importantly the real yield, for example, on the fiveyear tips bond, weve seen, again, an increase in real rates and nominal rates, and yet the stock markets been resilient. Thats a really interesting year to see the resiliency of our stock market against this back drop that would usually be very challenging for equities. Think it can continue . Im a bit anxious that this rally can continue. Obviously, one of the big drivers of the rally has been the just frenzy over generative a. I. , which is powered many of the big tech stocks. I like to believe this rally has legs. Im a bit anxious. Were sort of in the seventh or eighth inning of this rally. Part of it has been the soft landing story. Are you a buyer of that, we havent gone into recession despite 500 basis points of tightening. It takes about a year to two years for an Interest Rate hike to work its way through the economy. Its not instantaneous. Were now at the point where well see the impact of these hikes really start to play out. Were starting to see the job market start to weekaken. Theres been a number of news stories about how companies are willing to pull back with their pain for starting roles. Were seeing signs that consumers have had enough in terms of price increasing, theyre starting to walk away from products, theyre trying to push through price increases. There are signs here that were heading very quickly into hopefully the soft landing. Potentially more difficult scenario moving into mid to late last year in terms of an actual recession. He did go on to say, powells been dealt an incredibly tough hand with the way fiscal policy has collided with monetary policy. He said overall, a good job. If he could talk to powell, he would say stay on message. Clearly much more concerned about the fiscal push weve gotten and the longterm trajectory. Although that point about real rates now being around 2 , inflationadjusted longterm yields, that is a hurdle for stock valuations for the economy. People have made reference to that. Although its one that takes us back to the pre2000s kind of setup when stocks and bonds moved together, all the other stuff. I dont think anyone has it figured out. He didnt pretend to. Right eaahd, what the arm ipo means for the Venture Capital market and the ipo window. Back in two as we await the first trade. G coworkers rock stars. Look, its great that you use workday to transform your business. But it still doesnt make you a rock star. So unless you work with an actual rock star. Hi, im ozwald. Hello ozwald. Pam, you are a rock i wasnt going to say it. This is cynthia suarez, cfo of gogo foodco. , an Online Food Delivery service. Business was steady, until. Gogofoodco. Go check it out. Whaatt . overnight, users tripled. Which meant hiring 20 new employees and buying 20 new laptops. So she used her American Express business card, which gives her more membership rewards points on her business purchases. Somebody ordered some laptops . Cynthia suarez. Cfo. Mvp. Built for cynthias business. Built for your business. Amex business. New projects means new project managers. You need to hire. I need indeed. Indeed you do. When you sponsor a job, you immediately get your shortlist of quality candidates, whose resumes on indeed match your job criteria. Visit indeed. Com hire and get started today. For todays techcheck lets circle back to the arm ipo and implications for the vc space. Our next guest sees a range of benefits that could arise from a successful arm offering today, including increased capital for private semi names. Joining us, shaheem farsi. What is riding on this open and say things go well, what would you be looking for next . So, successful ipo, carl, will certainly create investor interest in venture companies. Naturally, arms strong Stock Performance postipo could further embolden early stage investors who could use arm as a comparable when underwriting investments in new companies. Would that be looking to enter same space as arm . Thats right. Chip companies cover a wide variety of functions ranging from basic processors to accelerators to mixed signal for analog to digital conversion and managing analog signals all the way to wireless and infrastructure communication. So, its a very, very broad space. But certainly arms success in this market will embolden investors to continue investing in this space. Is the perceived barrier to entry any higher than it has been in the past . It seems theres so much capital already flowing into this area, very welldefined winners in different categories, i just wonder if the landscape is a bit different. Even the basis for the potential appeal of arms ipo is just defensivible position over the long term in a certain part of the business. Mike, absolutely. The barriers are far higher for a number of reasons. One reason is that the nre, the nonrecurring engineering or the cost associated with developing and manufacturing a semiconductor has probably gone up by an order of magnitude over the past ten years. In addition to that, Building Hardware alone is not sufficient. You have to build a very, very Large Software stack so your customers, whether theyre developers, other chip companies, Hardware Companies like apple, can make use of your products. And then in addition to that, you have this very, very stiff competition. So, the barriers have absolutely gone up, but we remain optimistic there are Great Companies that will be the arms of the future. Given that, what are people saying about the valuation or the impliem fundamentals to great storytelling. If i can convince the market with a great story that will capture the demand with a. I. Compute with attractive economics, like nvidia, you can see great growth for the stock from here. Finally, we havent in our coverage this morning, weve touched on china. But we havent dwelled on the notion that they would, perhaps, turn inward or that there would be some kind of socalled silicone wall go up and the west could be cut out. Would you argue thats a material component of todays discussion . Well, as it relates to arm, that certainly is a significant risk or uncertainty moving forward. Arms business in china is large. I think it accounts for probably a low double digit percentage of its revenue, of its business. As you know, a lot of chinas Domestic Semiconductor Manufacturing capabilities have been demonstrated to be very, very meaningful and strong. And so one must keep in mind that theres a lot of technology that arm has built thats fundamental to a lot of what everybody does globally that will make it very relevant regardless of whether china chooses to raise this wall. But we should expect moving forward that chinas going to become more and more independent as it builds a lot of this technology in house. Right. Well see what happens as we await this trade. Appreciate the guidance and the color. Good to see you. Good to see you, carl. Thanks, mike. Kkrhes nry mcvey is next and why he says theres a regime change going on in the markets right now. S p and do you up twothirds of 1 . Day, businesses everywhere are asking is it possible . With comcast business. It is. Is it possible to use predictive monitoring to address operations issues . We can help with that. Can we provide health care virtually anywhere . We can help with that, too. Is it possible to survey foot traffic across all of our locations . Yeah absolutely. With the advanced connectivity and intelligence of global secure networking from comcast business. Its not just possible. Its happening. Welcome back. Inflation is a major focus this week as we saw stubborn numbers from todays ppi reading. Our next guest sees the trend continuing, saying he expects a higher resting heart rate for inflation, which has imreply cases for asset allocation. Joining us, henry mcvey. Also a partner at kkr, head of global macro. Great to see you, henry. Great to be here. How are we doing . The last couple of days were on suspense on the cpi number, ppi number, and to me its all about the bond market decides if this is okay or not, right . Weve been fixated on every basis point in the treasury market for what thats going to mean for equities. Your relationship on this, how do you see it. A couple thoughts. One i would say is the Services Inflation is going to stay stickier for longer. You have had goods inflation come down, but when you think about the direct correlation between wages and inflation, thats the place to focus. And i think our thesis weve laid out for quite some time has been this higher resting heart rate. So, weve really shifted our own capital, so as you mentioned, our 28 billion balance sheet, we moved from about 18 real assets to 25 . So, what does that mean . Thats real estate credit, infrastructure, climate. Those type of things that actually benefit from contractive revenues where if inflation moves up, your revenues move up, too. Thats a big change from the last ten years, get long growth, get Long Duration and fixed income. This is a different playbook. Thats where were positioned. So the premise, in part at least, bonds will not offer the same kind of diversification benefit to stocks because stock and bond prices are kind of linked because of inflation is the key variable . Yeah. Whats happened sloction weve been talking, you always had a shock absorber in your portfolio, thats breaking down. Even though inflation is peaking and coming down, the relation between stocks and bonds is staying the same. What i would premise is think about banks in the u. S. Got 700 billion in unrealized losses and the fed has 1. 1 trillion of unrealized losses in their bond portfolio. Every time you get a rally in bonds, theyre going to be that overhang theyre going to sell. And one of the things i picked up in japan is we talked about this last time. They are exiting deflation. Guess who the biggest owner of u. S. Bonds is . Japan. You have increased supply, second forces, you have banks in the fed with being underwater on their bond portfolio. Ultimately you have japan where they can buy more bonds. That setup, you have to take things differently. Thats what were trying to do with our clients. Probably the place people are underweight is around infrastructure, asset based finance, housing, those type of things as well as real estate credit. So, those wishing for a three handle on the tenyear, you just dont see it . I dont see it. I think whats going to happen is the fed and ecb will probably pause but well have this higher for longer type of thing. The fact we get bailed out by rates going down doesnt work any more. Most fed governors in the ecb and bank of japan, they would say in the past they were trying to use qe to give you a road map, were going to be very productive of rates going up. Today they dont have that visibility. Wages, energy transition, geopolitics and fiscal. One thing were learning in the United States is from the different regions is theres just more money in the system. It keeps popping up. I think going into the 24 election, im not sure i believe either Political Party will want to see us go into a recession. Yearend tenyear, 3. 75 . I think thats what weve talked about. Weve talked about the short end being the price. Weve put forth the long end is mispriced. Thats not just a u. S. Comment. There are areas around the world where we look at developed markets and i think there will be more upward basis. Its definitely sticker shock if we get to that number in the short term. Longer term, weve been talking before this. From the mid90s, if you go before 2000, stock prices and bond prices were more positively correlated and you had positive real rates for the most part. And the real threshold for whether inflation was a big problem for stocks is more like 4 , not 2 . I totally agree. By the way, banks have been suffocating under qe. So, they actually can now make a positive spread. So, lets say that the fed and the ecb end up, you know, easing a little on the short end. You get a positive slope. Financials will perform a lot better. And thats where i think well go. I think next year, i heard the interview with ken griffin, i would agree. Real rates are going to bite into the economy more than this year. Even though theyve been raising rates. Real rates are just turning positive. That will hit us. What weve been saying is a little less boom, less bust in 23. Everybodys been super negative but maybe less boom in 24 as real rates take hold. I dont think we should fear 3 to 4 long bonds or inflation. I just think its the transition period you got to work through. Yeah. A little friction. Kkr and citadel on the same side of this one. You heard it here. Thanks, henry. Appreciate it. Still to come this morning as the autoworkers strike atoeesy potentially approach, wh ds that mean for the auto names and how long might a strike last . Well break down which names could suffer the most in a moment. A potential autoworkers strike is looking inevitable as detroits big three are still at odds today. Jim farley issued a statement saying theyve given the union four proposals with no genuine counteroffer,his words, and that, quote, if there is a strike, its not because ford didnt make a great offer. Joining us with his outlook, Research Analyst garrett nelson. Its great to have you back. The setup has confounded people who thought there would be a classic pattern style cycle and if, in fact, they do go to this Standing Strike method, how intriguing is that to you, and what does it mean for the industry . Sure, thanks for having me again. These targeted strikes could really turn into a logistical nightmare for the detroit three. Just because it keeps them guessing, they dont know which plants the uaw is targeting for strikes, and it really could complicate the supply chain, create a lot of problems for the automakers. People dont realize the average automobile has over 30,000 parts, and the Automotive Supply Chain is amongst the most complex supply chains of any industry. So this could really wreak havoc on automakers production and do a lot of damage. Its really an unconventional method that the uaw is taking here if, in fact, that is what they do. Again, what weve seen is nothing has been conventional so far from the uaw from the newly elected president shawn fain to live stream videos to negotiating with all three automakers at once to these reported targeted strikes. We just dont think its realistic there will be a deal here in the next 12 hours before the deadline. Are you of the belief ford has made the best offer so far and has the least to lose . Between ford and gm, theyve both raised their offer significantly. We think gm has the most to lose just because inventories of their vehicles you look at the four major vehicle brands, chevy, cadillac, gmc and buick. Theyre below average compared to ford, they wouldnt be hurt as much in the event of a strike as gm which would be looking at a fairly low inventory levels fairly quickly. Garrett, assuming once we get to an agreement, it is going to involve certainly more compensation. We dont know how much, but it seems as if that will be a likely outcome. What is that going to mean for each of the big three companies in terms of their ability to continue to finance a transition to evs . Management is in an interesting spot because theyve been telling wall street we can do this. We have the resources to actually do this transition, and they have to go to the union and say, hey, guys, dont ruin this for us. The detroit three are all making aggressive transition to evs. What we would say they already are at a cost advantage relative to tesla which the market leader, of course, tesla vehicles account for over twothirds of all evs sold in the United States. And so their labor costs of the detroit three will be higher. Its just a question of how much higher as a result of a deal that might be struck. So thats the big question. Its really going to strengthen teslas competitive advantage relative to the detroit three longer term. And tesla turns out is going to be the big winner from this deal whenever it might be struck, which we think could be weeks, perhaps even stretching into months. Interesting. Well be talking if, in fact, tonight goes, what the strike fund will allow the union to do. Garrett, thanks. Well talk soon, im sure, garrett nelson, cfra. Thank you. Getting closer to the first trade for arm. Live coverage of the arm ipo will continue after the break. D. [please confirm requesting backup. ] changing route. Go. Roadblock ahead. Back up, back up. Reverse reverse next level moments, were 30 seconds out. Need the next level network. [north corridor, hurry ] coming through or 3, lets go. The network more businesses choose. Transplant received. At t business. sfx stone wheel crafting the biggest ideas inspire new ones. 30 years ago, state street created an etf that inspired the world to invest differently. It still does. What can you do with spy . Welcome back. I want to get you caught up on consumer focused calls after this mornings hotter than expected retail sales print. Morgan stanley reiterates overweight on amazon. The firm sees 20 to 60 upside from here as profitability on the retail side increases. Amazon today 13week high. Wolfe ups etsy, recovery and consumer spending, maybe margin improvement and carnival and norwegian to buy. The u. S. Over 65 population grows. All of that in the face of deltas downward guidance which some argue is not as bad as americans and spirits. Downgrades of expectations, airlines and restaurants continue to decelerate. The amazon call, the interesting part of it is based on going to get to gaap earnings, finally, maybe a few years after they thought so. 27th or 28th year as a public company. Consolidating events and also costs. It seems like with ecommerce, the etsy call, they have levers to just get better on margins because its now a big priority. Meanwhile, 4500 has been sticky. The vix almost a 12 handle this morning, right . Well get some rebalancing tomorrow. And today is kind of a majority of the stock is up, not like the past couple of days, the index has been holding together. Theres been a deceleration, a loss of momentum. It is one that has also not seen a real rush for the exit. A series of higher lows on the s p 500 has some people saying the market is situated okay but late september especially after that september options expiration gets further chopped. Well see how it plays out. Two days in a row treasury yields do not panic well see if that can continue. A weak week next week. As we close out the hour, the arm ipo as we await the first trade, the range has been all over. 10 , bob. Not too crazy in either direction. The judge is back in the house. Lets get to the half. Carl, thank you very much. Welcome to the halftime report. Im scott wapner. Front and center this big day in the markets and, indeed, it is one. The arm ipo is set to open anytime now. Well see if any of our Committee Members want a piece of the action, that along with a nice move in stocks following the ppi. We have our eyes all over the place. Joining me amy raskin, steve weiss, jason snipe, jim lebenthal. Check the markets, we have a good day brewing. The do