Taiwan Semiconductor, Meta get bullish calls: Catalysts

On today's episode of Catalysts, Hosts Seana Smith and Madison Mills break down some of the biggest stories dominating the trading week, from the 2024 election to bullish tech sector calls.

While many Wall Street firms are boosting their forecasts on the S&P 500 (^GSPC), Piper Sandler is dropping its year-end price target for the S&P 500 altogether. Piper Sandler co-chief investment strategist Michael Kantrowitz breaks down the call, explaining, "If you're bullish on the S&P 500 this year for an institutional investor that's not buying the index, well, how does that really help them? Because you look at the market this year, we're up 16 [or] 17%. Typically, that much of a rally would come along with massive risk on leadership."

President Biden faces mounting calls for him to drop out of the 2024 presidential race. AGF Investments chief US policy strategist Greg Valliere notes that Democrats are in disarray over the possibility of not just another Trump presidency but the potential to lose a congressional majority and governorships across the nation. "That would be a bloodbath for the Democrats, and that's a plausible scenario if [Biden] is still on the ticket,” he states. Because of these high stakes, Valliere believes that there is a solid chance that vice president Kamala Harris could take the reins as the Democratic nominee.

The tech sector is getting bullish calls as Taiwan Semiconductor Manufacturing Company (TSM) shares hit an intraday high, surpassing a $1 trillion market cap. Wall Street firms are lifting their price targets on the chipmaker. Similarly, Wells Fargo lifted its price target on Meta (META) from $593 to $625 per share, citing its robust second quarter ad performance.

While Big Tech continues to drive markets to new highs, former Chairman of the US Federal Communications Commission (FCC) Tom Wheeler joins the show to discuss how Big Tech should be regulated.

"When we look at AI, we've got to recognize that all of the things that have happened in the last 12 months that have our heads spinning are probably the least amount of change that we will see in our lifetimes. And so the question becomes, how do we deal with that? How do we transform from an industrial economy that was overseen by industrial-era style regulation to a digital economy to an AI economy that has oversight to protect the public interest? And the challenge thus far is that at least in the United States, our policymakers have failed to step up to that challenge," Wheeler says.

This post was written by Melanie Riehl

Video transcript

Just after 10 a.m. here in New York City.

I'm Shana Smith alongside a Madison Mills.

Let's dive into the catalyst moving markets today that is in focus this week.

As fed chair J Powell said to give his semi annual testimony before Congress on Tuesday and Wednesday.

That's going to be followed by key inflation data out Thursday.

Investors will be watching all that for any clues that thats path forward and Boeing pleading guilty to criminal fraud charges in connection with two fatal crashes of the 737 max J.

We discuss what comes next for the troubled maker and another critical week for President Biden as he prepares to host NATO members ahead of a planned press conference on Thursday with Congress back in session.

Democrats are reportedly discussing the status of his campaign for president.

We're going to discuss what's in the race.

But first, we got to talk about market the S and P 500 up over 16% so far this year closing Friday at its 34th record high of the year that run as many firms boosting their year and targets for the S and P 501 bank has decided to drop coverage of the index all together, actually dropping their coverage of their year end target for the behind that call.

We have Michael Krowitz.

He's Piper Sandler's Co Chief Investment Strategist, Michael.

Thanks so much for being here.

I want to pull up a quote from your note on this.

You say talking about the S and P 500 to communicate investment insights to investors has become an exercise in futility.

I was giggling when this note came out because you definitely sound a little bit peeved by the A I rally.

Is that what drove this call?

No, no, no, not at all.

And, and, and it's not a change to my views.

You know, we've been bullish all year and I'm still constructive on, on larger cap equities.

It's more about, you know, in the last few months, as I was trying to think about raising my target again.

Um I didn't really feel that comfortable being intellectually honest saying that I can have a high conviction view of where the S and P is going to end up.

Nor do I did.

I think it really adds value to our clients who are institutional investors, who it's not about whether the market is going up or down, but really what you have to own and what you have to avoid.

And we've seen correlations of stocks within the S and P 500 drop to about a 25 year low.

Uh compared to the 500.

So there's really this diminishing value in talking about the market because uh again, most stocks are not trading like the market.

And Michael given that, I guess for investors out there trying to figure out what happens next, you are still constructive on us equities, you do still see opportunities.

So if it's not within or you don't think maybe it's helpful for investors to have a bull versus bear uh call right now on the S and P 500 what should investors be looking for?

What are some of the more helpful views that you think at this point?

That tells a better story about where that opportunity is?

Sure.

Yeah, and again, it's not, I think you have to have a bullish and bearish view and, and we are bullish.

Um But, you know, again, if I covered Apple or Microsoft and I was bullish on Apple or Microsoft and said, you know, you know, the conclusion is clear, go buy Apple or Microsoft.

If you're bullish on the S and P 500 this year for an institutional investor, that's not buying the index.

Well, how does that really help them?

Because you look at the market this year, we're up 16 17%.

Typically that much of a rally would, would come along with massive risk on leadership, small caps, outperforming and small caps as we sit here, year to date have, have returned zero.

Uh And so we've been focused on where to invest.

And for the last two years, we've been big bulls on larger quality, profitable names that essentially if economies of scale that can sustain their businesses, uh the the best amidst this higher interest rate environment.

Uh And so it's still very much a large cap growth call avoiding smaller companies with weaker fundamentals.

Yeah, I I heard you mention quality and I wanna jump in on that because you say that you continue to emphasize quality at a reasonable price.

Where does that exist?

Because isn't part of the problem?

The fact that quality valuations have really been bit up since the bottom in late 2022.

Yeah.

Well, much of the the the increase in valuations from late 2022 was just a recapture of the valuations that were lost during that bear market.

So really that was much of 23 was just kind of a give back uh on the 2022 bear market from here, we haven't seen as much of a rapid improvement in valuations this year at the index level.

Again, certain stocks have seen pe expansion.

So we're looking for companies that have continued to outpace their peers in terms of earnings growth uh that are of the highest level of profitability.

And we're looking for those two types of attributes along with companies that have valuations that are not, not the most expensive.

So it's you kind of have to sacrifice a little bit of growth perhaps and quality to find names that aren't, uh, egregiously expensive, but it's that sweet spot, which we call quality a reasonable price.

And, and we've got, uh, in the S and P 550 names that have beaten the index this year and it's not just about all A I or all tech.

Well, Michael, given the, uh, high bar that has been set this earnings season, are you cautious on the upside?

Just given the fact that the reaction that we could see for these reports that even do exceed Wall Street expectations?

Yeah, I, I think, you know, the big question for investors has been, you know, when will breadth improve in the equity market?

And I think we've already had two surges in breadth, uh already one in 20 the beginning at the end of 2022 as inflation started to come down.

The second surge in breadth at the beginning or the end of last year as the fed pivoted and from here to get wildly bullish on equities here, you have to think bread's gonna continue to, to improve.

And the likeliest catalyst that's gonna come from is earnings.

We don't think that's gonna happen though.

Uh instead we're actually seeing bread for earnings, the earnings backdrop deteriorate.

So if I was, you know, very bullish at the beginning of this year, because I still thought there was a lot more upside from lower interest rates and the fed eventually cutting.

Uh, I think we've priced that in so far.

So I don't think pe S are going any higher from here and it's really gonna be about companies earnings.

Uh, and so I think, you know, and that's why we're starting to see not only relative outperform of large cap growth stocks, but absolute outperforms.

The equal weighted S and P 500 has been down in the last five or six weeks while large cap growth has continued to go up.

So we're not wildly bullish because we're kind of moving along this uh evolution of a slowdown.

And it's going to become, I think even more narrow as we go forward.

I want to end on the macro with you because I know you expect unemployment to continue to drive higher, you call it softy locks.

When does that start to become a significant problem for this economy?

Yeah.

Well, that, that's the top question.

Uh we get from clients.

So what we do is we, what we did last week is we threw it back to clients and said, well, at what level of the unemployment rate are you going to get nervous?

Because when you can look, you can look throughout history and there is no magic number where payrolls or the unemployment rate or initial claims hit and the market just all of a sudden turns over each cycle is a little different with this cycle.

There's still a pretty big focus on inflation coming down and the fed cutting rates.

Uh and, and we think the unemployment rate will continue to move higher, but at the same slow pace, it's been moving higher, give or take about 10 basis points a month.

And, and so we think that level is closer to 4.5% at the low end.

Uh And the average client or the most popular answer from clients was 5%.

I don't know if we can see a, a another 90 basis point increase in the unemployment rate without a broad sell off.

But I don't think that's an issue right now as we sit here today.

All right, Michael Kantrowitz.

Always great talking to you.

Thanks so much for taking the time to join us here this morning.

Piper Sandler's co Chief of Investment strategist.

Thanks so much Michael.

Well, President Biden, responding to pressure to drop out of the presidential race with a letter to congressional Democrats this morning.

This comes after a handful of Democrats have called on the president to step aside as a presumptive democratic nominee for more on the state of the race.

We want to bring in Greg Valliere.

He's a GF Investments Chief US Policy strategist Greg.

It's great to see you.

So it's been what about a week and a half since we last spoke?

And when I last talked to you, we were discussing about whether or not or the likelihood that maybe we could see the Democratic Party nominee, another candidate if President Biden were to step aside.

But here we stand this morning and at least taking a look at that letter from President Biden to congressional Democrats.

It doesn't look like he has any plans to do so.

Should he though?

I think it's going to be a process that will last a while longer.

I don't think we're at any kind of resolution yet.

He's got a big press conference on Thursday as you know, he's got the G 10 meeting here in Washington for the next three days.

So I, I think people will watch him very, very carefully without making any decision.

This could drag on until the Democrats convention in Chicago in mid August Greg.

Would that be the final moment in this question of whether or not he is officially going to be on that ballot in November?

Or could we continue to see questions about it even after that?

It could be the latter.

I got to tell you, I think if Biden makes another gaffe or says something that upsets people, uh at some point, he's going to have to go.

So I'm not positive that he is going to make it.

I think in the last 48 hours, maybe the pendulum has shifted a little bit toward him.

But we're, we're still a long, long way to go.

And I got to tell you the big concern among Democrats on Capitol Hill is quite clear.

They think they could lose the House, the Senate, the White House and lots of governorships that would be a bloodbath for the Democrats.

And that's a plausible scenario if he is still on the ticket, Greg, give me a number here.

Quickly.

What percentage chance would you put on Biden not being on the ticket come November.

I'm going to stick to my guns.

It, it's one of the most difficult calls in my career.

But I think there's the chances are better than 5050 that he will not be on the ticket.

That Kamala Harris at some point in the fall will wind up on the ticket.

Is she the best option for the Democrats at this point?

Oh, yeah, they, they have to take her.

I, I think it would infuriate African American Democrats, female Democrats.

So she, she would be the replacement.

I think a lot of people have gotten a little bit more excited by her, but, but again, I would reiterate, this is not over yet and Biden's not out of the woods, but it could be weeks in weeks before we get a clarity on who is the nominee.

Well, Greg, I think the question here is, what do you think is going to get President Biden to step aside in this race?

And is it one particular lawmaker?

Is it someone that is going, that comes out and says that publicly that he should step aside that is going to make him change his mind.

Good question.

I think, you know, maybe if Chuck Schumer and Nancy Pelosi come out together and say he has to step down, that would have clout.

Maybe if Biden's polls really took a slide, his polls are off a little but they're not horrible compared to a month or so ago.

Maybe he has another episode where he freezes up and doesn't appear to know what the answer is.

So there are lots of things that could happen that could change this.

But I, I'd say the polls in particular, especially the polls for the Senate and the House because you've got a lot of really nervous senators and house members.

Yeah.

Well, you had President Biden sending a letter to congressional Democrats this morning saying that he does still believe he is the best candidate to beat President Trump.

And the first policy he cites in that letter is his economic policy talking about adding jobs.

His economic vision.

Who do you think is better for this economy, Trump or Biden Biden?

I think his, his proposals have worked pretty well.

I think a lot of what Trump is going to be doing would add to inflation.

Trump wants a big fat tax cut.

I'm not sure we need a big fat tax cut.

Uh Both of them want tariffs, which I think is a dumb idea.

But I think when you look at the two of them together, I'd say that Biden has had a pretty good run.

He's done fairly well on the economy and I think that he um he would lead Trump eventually on that subject.

And Greg, let's talk a little bit more about those tax cuts because I think initially investors are looking at that saying, hey, that this could actually be a good thing here for the markets, especially when you take into account, maybe what the Republicans want to do when it comes to the corporate tax rate.

And there has been talk that has been pushed within that party to lower the corporate tax tax rate all the way down to 15%.

Why should this bring some pause for investors there when you talk about it, adding, adding to the uh to the deficit right now, higher debt.

Why is that so pro in your view, I, I'd cite two reasons.

Number one, I'm not sure the economy needs a tax cut right now.

We did four years ago and we got one that had been too big, but the big thing that I think the markets are going to have to start worrying about is paying for it.

I mean, an extension of the truck tax cuts that passed in 2017.

If, if we extend them for another decade, we're talking four or $5 trillion.

I'm not sure we have the money for another big tax cut.

What does that mean for Wall Street then?

Which of these potential candidates is better for investors, institutional investors.

Yeah.

Good question.

II, I think as long as Jerome Powell sticks around the Wall Street will be happy.

Unfortunately, Powell and Trump do not get along as, you know, and I think if there's real friction between the two and Powell Lee is his term, doesn't expire until the end of 2026.

But I think friction between Powell and Trump would not be well received The markets, Greg.

I'm curious from your view because we've heard and there's been lots of coverage on this over the last week and a half about donors now starting to pressure and starting to speak about President Biden stepping aside.

How closely does President Biden and the administration look at this?

How much weight do they actually have in what is ultimately going to happen?

Yeah, I, I think that, well, both of them have a ton of money.

No, they're, they're not going to be uh scrounging around for loose change.

They've got plenty of money.

But I, I think that if one of the candidates probably Biden tends to see ad increase of fundraising, that's not a good sign.

I think that's a sign that he is losing confidence with the financial community, with Silicon Valley.

There are a lot of sources of money that could dry up and that would not look good for Biden.

All right, Greg Beer, a GF Investments Chief US Policy strategist.

Thanks so much for making the time to join us here.

Keep it right here on Yahoo Finance.

We've got much more of your market action ahead.

Stay tuned.

You're watching Catalysts shares of TS MC jumping over 3% the company hitting $1 trillion in market value after Morgan Stanley and several other brokers boosting price targets on this chip maker.

Prior to their earnings report, optimism does continue to rise over the company's A I chips heading into the second quarter results extending its rally more than 70% so far this year.

And this is clearly a bullish signal, of course, for the NVIDIA of the world as well.

T MC, the sole supplier of apple and Nvidia's most important chips.

So that is making, you know, this bullish signal, not just apply to TS MC, but also those other names.

It could be an indicator of those other names.

Now we had Morgan Stanley raising its price target on this stock by about 9%.

So that is a significant raise there.

They expect the chip maker to raise for your sales estimates and their earnings announcements coming out here in the coming weeks.

The broker also seen TS MC hiking their way for price that is a key portion of chips due to strong bargaining power and really the fact that TS MC is the only one at their level in this market right now, putting them in a position to have that strong pricing power similar to what we see with NVIDIA, but again, TS MC, the only supplier for some of those big names like an apple, like an NVIDIA, really positioning them well here.

Exactly when you take a look at this, a lot of that driven by the pricing power that you were just talking about.

And again, this move to the upside this morning really adding to this massive momentum that we've seen TS MC shares really since the start of the year and going back even earlier.

But since January 1st is massive run up in the stock, you're looking at gains here over the last seven months or so of just around 80%.

I believe there it is on the screen 82%.

When you take a look at some of their uh outlook here at TS MC may raise its 2020 2024 full year revenue growth guidance, the mid 20% level that was versus the previous guidance of the low to mid 20% level, citing that insatiable demand that we see for A I and when you talk about that growth going forward, it doesn't look like anything is going to slow it down.

So that com that coupled with the pricing power and projections here that they actually might be able to raise prices by as much as 5% versus that previous assumption of a 2% growth.

There really showing that there might still be some runway on the stock ahead but we will see if Wall Street is right at this point.

All right, another call out this morning, we want to bring your attention to Meta Wells Fargo raising its price target meta to 625 bucks a share that's up from 593 and taking a look as to why they are a bit more bullish on this name.

They said that their checks suggest robust, adds the performance in the second quarter.

Analysts.

They are telling investors uh in that most recent research note, they also expect Q three revenue guidance of 38 to 40.5 billion that applies six points here of constant uh four X deceleration at the mid point.

So again, some upward movement within meta, they're saying that that's going to support their view as they see it in terms of where they are in that Capex cycle and some of those potential gains here.

But again, they're saying that they have solid momentum, keeping that overweight rating and raising the price target to 625 a share.

Yeah, and interesting that they talk about it being a Capex cycle, not an Opex cycle, which is interesting.

This is also not the only call that we are getting on meta here.

We should mention that we also have this call from We Bush happening a little bit earlier prior to the Wells Fargo call that you were talking about sea, but we Bush raising their price target on me.

This is Scott De It from 54 82 5 70 that implying an over 5.5% increase from their latest price.

So it should be interesting to see particularly given that meta in the last earnings cycle that it was really their first print where they had kind of backed off from a defensive only strategy on their balance sheet being a little bit more offensive using some of that free cash flow on their balance sheet to invest back in the company's growth, whether or not the street continues to reward them, even though they are shifting that strategy to using that cash on hand instead of just continuing to be defensive moving forward, Shana.

All right, let's take a look at shares, the solar edge getting a boost on an upgrade to neutral from under perform at Bank of America B of A sending a more appealing valuation for investors.

Since the stock is already pricing.

In quote worst case scenario, when it comes to inventory write downs and monetization issues, you again of just about 9% back up up 27 bucks a share.

They raised their price target to or at least looks like their new price target on the stock is 29 bucks a share.

So again, seeing some upside there, given the fact that the worst case scenario, including those inventory write downs already been priced into the stock, they expect to see some modest recovery and a return to profitability in 2025.

Actually, the price target was lowered to 29 from 44 bucks a share.

Yeah, it's interesting because the words to watch here are both in inventory, right?

So obviously the valuation for the stock being something key to watch here.

And that's certainly coming up with the Bank of America and, but they do talk about a worst case scenario including inventory, write downs and liquidity constraints.

We also heard this from city saying that for the stock to work in the near term management has to reduce that inventory.

So that being a clear challenge and that the company is long term and sustainable profitability also continues to be a question city this stock neutral in response to those question marks about sustained profitability debt issuance for the company.

And of course, the concerns around inventory being a little bit just too robust and concerns about managing that inventory moving forward.

We know that this is a stock that pops up on our trending ticket from time to time here on Yahoo Finance because it is that kind of solar name.

That is an interesting play in an interest rate hiking cycle, but interesting to see this commentary coming out.

Well, coming up, it is all about earning season here.

We're going to discuss what analysts need to hear from the big banks kicking off second quarter results on Friday.

That's next on cats.

It's already time for another cycle of earnings here as we've got the unofficial kickoff for second quarter earnings starting up on Friday with the big banks.

You've got JP Morgan Wells, Fargo and City all expected to report then.

But first, we got some consumer names coming out here on Thursday.

You've got Delta, Con Agra and Pepsi Co all set to report here.

Now, expectations for 2nd, 2nd quarter earnings are very high consensus forecast for the S and P 500 you see earnings growing by eight 0.8% compared with a year ago.

And that would be the highest growth rate since the first quarter of 2022 according to fact that, so what are analysts expecting to hear specifically from the big banks on Friday to kick off this earnings cycle here?

We've got Max guys, a manager at the belly funds to discuss that.

Great to speak with you here.

Earnings expectations have grown across the board, but of course, that also applies to the big banks.

How confident are you that they're going to be able to deliver on Friday?

Right?

I think the setup is pretty good for the reporting season starting, as you mentioned on Friday, a couple of weeks of banks.

Um You know that if you look at the asset levels in the markets, the SS and P is up about 5% for the quarter.

So that's gonna lift, you know, asset and wealth management earnings, um especially at the, the big money centers.

Um and then you also have a, you know, a slight decline in the 10 year which will help the marks on the M BS security.

So, you know, you'll have a little bit of a positive for a tangible book, uh rising plus the operating capital contribution and, and to net worth and et cetera.

So uh we, we see continued steady progress here.

Um Also intra quarter, we had a couple of banks already highlight investment banking, be proved strong.

Jp Morgan said fees will be up, you know, 30% year over year.

So that's, that's a pretty good outlook and you know, that translates into the other firms such as Goldman and Morgan, et cetera.

Uh So we, you know, we're pretty positive the, the the banks have had a good run here, you know, some of them are up over 20% this year.

Uh But fundamentally we think they're uh chugging along and, and in good shape when it comes to the expectation for deposit loan growth metrics, you expect that to remain muted here in the second quarter.

It's gonna be all about the guidance.

What's it gonna take to see some improvement here in the second half of the year?

Right.

Well, I, I think there was, you know, some dynamics with taxes, et cetera.

There's more elevated this year than we have the, the movement kind of the money market funds and out of the market, et cetera.

So uh lots going on there in terms of those dynamics.

But I, I think, you know, well, we know that the overall industry, we see muted dynamics across the different platforms.

Uh but it would be nice to see kind of a, a gradual increase there and, you know, and, and growth going forward.

And so you get that leverage uh for ni I in terms of a bigger balance sheet.

So that's the one of the things we're looking to be looking for a little guidance there um movement, you know, and, and certainly the big banks have been beneficiaries of flows so far.

One thing I'm interested in is the read through that we get on the consumer from these big bank earnings.

And it was interesting last earnings cycle, we had a lot of the banks indicating that they are giving us a read through of consumers in a certain income group, particularly higher income with a bank like Bank of America, really only lending to folks with excellent credit.

For example, here are the big banks still a signal of consumer health at this point or is it a specific type of consumer?

Right.

So there's a a couple of dynamics there and I know there's been pressure on the kind of the lower end and you know, that is inflation and job growth, et cetera.

Uh But, you know, we continue to see pretty strong metrics out of the higher end if you just look at American Express in terms of their consumer, which is, you know, mass affluent, you know, that continues to do well, travel, et cetera.

You can see that, you know, some of the retailing names that we've followed tangentially, you know, have been impacted uh by the, you know, the changing consumer patterns.

But I think overall uh deposit levels uh and consumer activity uh look at charge, um use of credit card balances, et cetera, still pretty healthy slowing, but, you know, still pretty good for the for the big banks ma when it comes to who is best positioned.

So within your financial services uh opportunities ETF looks like you own Bank of America JP Morgan, Morgan Stanley Wells Fargo State Street to just name a few.

Where do you see the most value today?

11 stock we like is uh Wells Fargo.

Uh you know, it's kind of a unique situation, you know, they had some trouble a few years ago, Charlie Sharp's been turning around simplifying the business.

And here you have a bank on its way to a 15% Roe trading in a forward tangible book of about 1.4 times.

Uh and then you have this ultimate catalyst in the asset cap being lifted.

So they've made some progress towards that with some of the other consent orders over the last couple of years.

And again, you know, it's, it's a pretty simple platform, they're making progress in banking card uh in terms of growth areas.

Uh and we see still very good value here in Wells.

It's interesting to me that city is not included in that ETF why is that?

So my colleague actually really likes Citigroup, uh I tend to favor the companies that have little higher Roes.

And so, you know, city is, is sub 10 Roes.

Uh So, you know, I tend to favor the, the companies that really generate capital like JP Morgan, uh Wells Fargo as it improves uh some of those institutions.

So I think it's not so much not liking City.

It's just we're finding more value in, in uh Wells Fargo.

At this point, there is one of the uh issues or challenges or concerns like have been, however, you wanna phrase it raised amongst investors over the last several quarters have been the exposure among banks to CRE to commercial real estate.

And a lot of that focus has been placed on the smaller, maybe more regional uh plays within the sector.

But I'm curious from a big bank perspective, is that something that you're worried about?

And I guess the levers that they have pulled the positioning that they have uh altered as a result of some of the trouble that we are seeing within CRE are they in a much better position than maybe we were a couple of quarters ago?

Well, I think they've managed their risk to that owner of the market much better than, you know, the, the smaller regionals, et cetera.

They have a lot more exposure to CRE and we've, we've seen the, uh, the stress there and, and it's, you know, this great refinancing way that's gonna go through America will affect a lot of these properties and, you know, we'll see how that works out.

Um, but obviously the kind of the smaller banks have underperformed the bigger, uh, ones and, and, and that's partly a reflection of that better credit book and with respect to CRE and, and, uh, you know, I think when you're a bank like Wells or JP Morgan, you're writing pretty significant loan sizes and, you know, uh so there's a lot more due diligence, et cetera, uh that goes into some of this stuff and they're very sophisticated platforms.

So I think in terms of manners in the overall book, they've done a good job, they're very well capitalized, uh, they're on top of their credits.

Uh And so I, I think just the exposure being sub 10% for a lot of these companies and also being in specific areas of CRE they're doing better.

Uh, you know, I think they're well positioned to do that and, and you've seen that in the results this year, what is the single biggest thing that I can be looking at in these earnings reports on Friday to indicate how consumers are holding up?

Well, I think just there's a host of great leaders, uh Moynihan, Jamie Diamond, uh Charlie Shariff, all these are, you know, the great insight, great wide uh access to economics across their platforms.

And so you just look for that management commentary and you get it and then, you know, Bank of America is a wonderful deck.

You know, they list a host of different components to their uh balance sheet and their customers, et cetera.

So there's lots of good stuff that comes out of these calls that you can kind of really sum up to get an understanding of the economy.

And they also give some uh forecasts and and foresight too as well and in what they're seeing, you know, in a quarter and and what they expect to have to happen, right, Max Sykes and portfolio manager with Celli and Fund.

Thanks so much for joining us.

Thank you for having me.

Well, coming up, we're gonna dive deeper into commercial real estate.

We'll discuss why empty offices, vacant properties are big concern for Wall Street.

That's next.

Some of the biggest names in the tech world from Meta to Apple continue to face scrutiny from European regulators.

So will this wave of regulation abroad lead to more domestic legislation on this?

To give us his take.

We've got Tom Wheeler here, former FCC chairman and author of the book Tech Lash who makes the rules in the digital gilded age.

Tom, it's great to speak with you.

Thank you so much for being here with us.

Obviously A I makes the regulation of tech question even more prescient.

I'm curious from your perspective, if you can just give us some context about what is at stake here.

What is your base case for the consequences if no real A I legislation and regulation comes to fruition here in the US.

Well, first of all, thank you very much for inviting me to be with you today.

You know, I think when we look at A I, we've got to recognize that all of the things that have happened in the last 12 months that have our heads spinning are probably the least amount of change that we will see in our lifetimes.

And so the question becomes, how do we deal with that?

How do we transform from an industrial economy that was overseen by industrial era style regulation to a digital economy to an A I economy that his oversight to protect the public interest.

And the challenge thus far is that at least in the United States, our policymakers have failed to step up to that challenge and we are seeing the rules being developed by other nations and by States in the United States, both of which will create new problems for um those tech companies who rely on a uniform market.

Mr I guess what more specifically do those problems do those issues look like?

And you talk about the fact that some others outside of the US have been taking the steps is what Europe is doing is that, are they saying a good example?

Should the US be following in Europe's footsteps when it comes to this?

I think Europe is inventing a new paradigm if you will, where they are.

They have said, first of all, we're going to step up and do something to ensure competitiveness and fairness in the market, something that American regulators have failed to do.

And they've said, and we're gonna do, do it in a new manner.

We're not going to clone the old industrial era style regulation, which was micromanagement.

Instead, we're gonna say here are the goals, here are the four corners of what we expect for companies behavior and the companies knowing that are going to be expected to show us how they are complying.

And um and that is a whole new approach.

It is a much more agile approach.

It is a approach that continues to encourage innovation and investment and it is setting the standard for how we should approach things in the United States if we will ever get to that point with a congress that has a hard time making any decisions.

Well, another key part of that, of course is who is in the executive branch from your perspective, who is better suited to oversee tech regulation from the White House Biden or Trump?

Oh, I think it's pretty clear that uh that Joe Biden um has uh a thoughtful set of policies.

Whereas when we watched the Trump administration for four years, they were bouncing from this policy to that policy depending upon apparently uh what the President was feeling that day.

How confident are you?

It doesn't sound like you're too confident.

But if we do see some sort of gridlock in Washington following these results, what does that then tell us about the likelihood that we will actually make any progress on these types of regulations against Big Tech?

And I'm from your perspective, what needs to be done or what would your advice be for lawmakers here?

Given the fact that this has been an issue that has been brought up on both sides of the aisle yet either side can't seem to agree with each other on exactly how to address these issues.

Well, first you said against Big Tech and I'm, I am I am not proposing we do things against Big Tech.

What I'm suggesting is that we need to have a countervailing force that, you know, for the last 25 years, you had a wonderful lead in to this segment about the history of meta for the last 25 years.

We have said, ok, innovators, you make the rules and we the public were just taking those.

I mean, who decided that we would have no rules about protecting privacy, who decided what the structural kinds of issues could be?

Who decided that we will see the kind of uh aberrations in truth and trust that we have seen what we need are a set of counterbalancing expectations, not the micromanagement that we saw in the industrial era, but expectations that set the behavioral standards for these incredibly important companies.

And um and I think it requires a whole new way of uh of thinking about this.

You were, you were kind enough to mention my book, Tech Lash.

Uh That's what the theme, that's what the conclusion of that book is that we need to take an entirely new look at how we structure our oversight, that we have to have oversight of this uh incredibly powerful, important and contributory, new set of technologies.

Um And that like the technologies innovators themselves, we must become equally innovative in how we create guard rails to protect consumers, to protect competition.

And it is a good point.

What, what, what, what you raise the issue with my question just saying against Big Tech.

And I think that goes to this reframing of the conversation, right?

So I'm curious from, also, from your perspective, what do you think the involvement should look like from those within the industry when we're talking about how best to regulate the tech industry?

I think the key is participation rather than um standing in front and saying no.

And that, that, you know, the first rule in Washington is it's always easier to kill something than to pass something.

And um and I would hope that what we could begin to see is the uh the tech leadership sit down and say we need new rules.

Let's work together to draft them.

You know, Brad Smith, the president of Microsoft and Mark Zuckerberg, um, who you just did a piece on have both endorsed the idea that we need a new digital platform agency with new approaches to regulation.

Let's move beyond that.

Let's sit down and start talking legislation, Senators Bennett and we have introduced a proposal like that in the Senate.

Let's get specific um and start talking about really how do we create these guardrails in this new era, Tom Wheeler.

Unfortunately, we have to leave it there.

Former chairman of the FCC.

Thanks so much for taking the time to join us and congratulations on your new book.

Thanks.

Keep right here on Yahoo Finance coming up, we're taking a deep dive into commercial real estate, whether or not the worst is over for the sector.

We will be speaking with the CEO of Marcus and Millichap.

Next four years later, the commercial real estate market is still reeling with the aftermath of the pandemic, the rise of hybrid work, higher interest rates and also mass layoffs posing a series of challenges for real estate executives but also for the bank loans tied to them with more landlords dealing with vacant properties.

Banks are starting to increase reserves for future losses while some investors choose to pull out or seek alternative strategies of commercial real estate funds here to weigh in.

We want to bring in Hassan, Naji, he's Marcus and Mila Chaps, Eo Hassan.

It's great to have you in the studio.

Thanks for coming in.

Thanks for having me on.

Great to be here.

So let's talk about where things are, where things stand today within commercial real estate.

I think a lot of investors are trying to figure out whether or not the worst is over in the next couple of quarters is going to remain challenging.

What do you expect?

Well, broadly speaking, we've had four years of ups and downs that would equate to what would normally occur in a 10 to 12 year cycle.

From the pandemic itself to the very, very sharp recovery post pandemic and then two years of fed tightening in ways we haven't seen since 1980.

That's a lot to digest for an industry that is very interest rate sensitive and very supply demand sensitive.

So on the supply demand side of the equation, which is the most important part, the industry as a whole is doing great.

We have an overbuilt in the cycle.

There are pockets of over building in multifamily and industrial but broadly, we are not overbuilt and we are basically under demolished.

If you think about it in some sectors like retail was 1520 years ago when e commerce took over now applying to the office sector.

But even within the office sector, it's the older urban assets that are really suffering, showing loan delinquencies, seeing significant discounts of distressed assets being sold into the marketplace.

And then the suburban assets office assets across the country are doing much, much better or newer properties are doing much, much better.

So there's a lot of generalization that goes on about commercial real estate.

It has 16 different branches, self storage, seniors housing, home parks, retail, of course, even within retail, there's single tenant and at least there is multi tenant shopping centers, self storage and of course apartments and hotels.

So each one of these niches has its own cycle, has its own supply demand and therefore investor demand.

Right now, we're seeing a lot of opportunities to capital that's been waiting for the price corrections to start to come back into the market because we've had two years of pressure from interest rates lowering values.

How does the hopefully for investors impending rate cut cycle play into this?

It's a very encouraging uh piece of news that hasn't materialized just yet.

And what I'm really interested in in seeing is the encouragement that we're seeing already uh with capital coming off the sideline, buying asset assets at 15 to 20% discounts, which is pretty much uh what's occurred in the marketplace in general.

Uh ahead of the interest rate reduction cycle, it will come at some point that's only gonna boost the activity level that we're already seeing the beginning of, of the pick up for, I'm curious what you think this recovery is going to look like?

Because you're right.

A as we say, I think a lot of people lump CRE together when there are a number of different verticals within it, right?

Is it so it's not a blanket weakness that you can call it across the board.

But when we talk about the, the areas of it that have struggled, what does that recovery look like?

And you mentioned some of those opportunities.

Where are you seeing the most demand today?

Great question in that with in each of the sectors uh that uh broad brush is creating a lot of opportunity for smart investors because as a lot of people go went on the sideline, the student investor was in the market making offers maybe not executing transactions but being in the front end of where the prices would adjust to the point where they make sense.

If you look at multi family, for example, we've seen a 20 25% price correction.

In most cases, if you just look at on an apples to apples basis from peak to today, and those prices are below replacement cost, it's getting so expensive to build commercial real estate of any kind and they're below peak by about 20 25%.

So when you see a good asset in a market, you wanna be in as an investor at those price points, you almost don't care about the interest rate.

You almost don't care about the fact that uh the loan that you would take on it would be at a much higher interest rate today than 2.5 years ago because interest rates will come in at some point and over the long term, you know, that asset is going to do very, very well and it will be very much harder to replace down the road.

Hassan, thank you so much for joining us.

We really appreciate it.

That was great to be here, Naji.

He is the Ceo of Marcus and Mili.

Thank you so much.

Thanks for having me.

Well, coming up, we've got wealth dedicated to all of your personal finance needs.

Our very own.

Brad Smith is gonna have you right here for the next hour.

So stay tuned for more.