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Let's See how Much Sleep byby Sam Stowell got He's chief investment strategist at CFIA, joining us on this Friday. There is so much to talk about, Sam, as we get ready to wrap up a wild year one for the textbooks. I feel like in so many ways, as you sit here on this December, as we get ready for the last trading day here in the United States, how are you thinking about the year that was? In the year that might.
Be, Well, good morning, Carol, and good morning everybody. I'm basically thinking that looking forward to twenty twenty four also being a good year. History tells us that great years traditionally are followed by good years that gains in excess of twenty percent in one calendar year. Lead to double digit gains in the second year, basically a three hundred basis point improvement over the long term average with a
ten percentage point increase in the frequency of advance. So basically you letting your winners ride from one year to the next.
So every day we've got to come up with a new way to ask you whether you want to belong the MAC seven relative to the breadth of the There are four hundred and ninety three other stocks, so find.
Another version of it.
If you think you're going to get a double digit return, The question is then within MAC seven they are expected to see their earnings growth rise by twenty two percent next year. That's twice the S and P five hundred advance. I mean there's an airrevocability of having to have MAC seven as a portion of your equity exposure. So is it still over exposed to MAC seven or do you go for breadth?
I think you go for breath.
But what you do is you broaden out and then those sectors that have done so well. Again, going back to nineteen ninety, if you were to be holding onto the three best performing sectors from an up year into the new year, you ended up beating the market seventy percent of the time, and the focus being that now you drift down into the second maybe third tier level. So semiconductors having one hundred and five percent improvement on a sub industry level within the S and P fifteen hundred,
you would stick with that group. But you might instead of looking at Nvidia, you might be looking at Broadcom, you might be looking at Marvel Technology, et cetera. So you stick with the winning sectors, but you might broaden out to the second and third tier companies.
Can I ask you, though, Sam, why not stay with Nvidia? I feel like you know what manis if we talk about AI chips, that is still the company that everybody says has to beat. I was listening to something from Ian King overnight. You know we're waiting for their you know, accelerator chips that are about to come. I mean, why not go with the leader?
Oh, we still recommend In video, Angelo Zeno, ar tech specialist is saying that this is a company that is likely to be a leader for quite some time. I think that what I was saying is that we're also going to see others. Maybe we turn it into the Magnificent fourteen or so. But we basically broaden out those groups that are likely to benefit.
And it's interesting that you say tier three, tier three going from in Vidia two hundred and thirty eight percent performance to broadcoalm at one hundred percent. But I get your point. How much exceptional breath would you take? We caught up with not Alliance Bernstein yesterday and they talked about a sweet spot for junk at sweet spot for many of these slightly riskier markets. How much risk do you want to put into portfolios next year? How much breath?
I mean they talk about jump being in a sweet spot. What's the equivalent for you in the equity world.
Well, when you deal with risk, I guess it depends on the individual. I like to say I'm so conservative, I wear a belt and suspenders, But I think when you look to historical precedent and you see that we are in an election year for a first term administration, the market has gained one hundred percent of the time since World War Two, with an average total return of fifteen and a half percent. We're in the second year of a bull market, typically up twelve and a half percent,
rising eighty five percent of the time. And as I just mentioned whenever we're in a year following a twenty plus percent advance, the market has done exceptionally well in
that second year. So I would tend to say that if you have added to the risk in this fourth quarter, stick with that higher risk, And if you do believe that there is more risk potential for twenty twenty four, I think we're a bit overbought right now, and once we get into the new calendar year, when people can take their profits and then defer taxes for another year, then I would say look to buy on those dips.
Well, let's talk about this from a sector perspective, Because you write in your notes that following up years, it's best to let your winners ride. I want to talk about the other side of that. Do you let your losers continue to lose? You take a look at utilities, energy staples leading losses this year. Do you just stay away from them in twenty twenty four.
Well, obviously we do have recommendations in all three of those sectors, but from a waiting perspective, we would continue to recommend underweighting these groups, mainly because there's an awful lot of overhead resistance and if there is the emphasis toward growth, toward risk, etc. Investors are going to continue
to focus on those growth leaders. So I would tend to say that while you could see a drifting hire of some of these groups, from a relative strength perspective, they're likely to be underperformers yet.
And I want to get specific here and run through some names because I'm taking a look at the socks that you've specified in financials.
Charles Schwab.
Schwab is a really interesting name to me because obviously it was one of the babies perhaps thrown out with the bathwater, and what we saw with margin, it really hasn't recovered. You take a look at shares down about sixteen percent for twenty twenty three. What's the thinking around Charles Schwab at this juncture.
Well, I like to say that fundamentals tell you what, but technicals tell you when and how far. So I like to combine CFIA equity analyst recommendations along with our lowry research technical assistance area, so you know, seeing where the momentum relative strength happens to be. So Charles Schwab, basically it's an extreme undervaluation situation. It's almost trading at about half of what it normally trades. Also, we're looking at an environment in which the concern I think is
just totally overblown. So with the prospect of another good year in the marketplace benefiting the investment banks and brokers, one that is over sold and really has not reached its potential is.
Schwab Hey sam our most read story in the Bloomberg. It's a story put together by a bunch of our reporters, and it says Wall Street's best and bright is flopped once again in twenty twenty three, basically saying that at the end of twenty twenty two, everyone, it seem was game planning for the recession they were convinced was coming. There's a lot of things that came out seemingly from nowhere. Regional banking, the concerns there Russia Ukraine, that war continuing,
then of course the Middle East conflict. As you look ahead and you obviously have laid out your scenario, you know, what are the things though, that we must keep on our radar that maybe could just kind of come out of nowhere.
Well, as Mannis was saying early on in the program, is when will the FED start to cut and by how much our belief is that they're going to cut three times in twenty twenty four, starting in the second quarter, mainly because the FED doesn't want to make the mistakes that they did in the late seventies. They want to ensure that inflation, like a campfire, is fully doused before
they start to cut interest rates. So our belief is that only if we end up with a hard landing rather than a soft landing will the FED be more
aggressive from a rate cutting perspective. Also, adding geopolitical issues, should we find that there's a broadening of the Middle East tensions and conflict and the total shutdown of the Red Sea, we still are having some shipping firms that are willing to venture in there, but a total shutdown, a jump in oil prices, those could obviously upend the year ahead forecast.
Yeah, already a full play, it feels like for the new year. Hey, Sam, thank you so much. Happy New Year. I always appreciate all the time you give us here at Bloomberg Sam Stovell over at CFRA a lot to talk about. I mean, Apple's had a very good year. The stock is up to I think just shy a fifty percent here in twenty twenty three, so and a lot of stories and a lot of concerns this week in terms of litigations stopping sales of the Apple Wash
but coming back on board. So no offense. Guys, I'd love to talk to you, but I really want to talk to Mark German about it. Is Bloomberg Chief correspondent Apple Expert has written a bunch about Apple always, but also this week. Mark, good to have you here. We know it's early. I think you're on the West coast, so it is kind of early. Talk to us about the watch, specifically in terms of the back and forth pulling it off the market, putting it back on the market,
patent litigation. I feel like when it comes to technology companies, it's kind of a given. But how should we be thinking about it, at least for the investment side and the investor audience.
Sure, thank you so much for having me. So I'll start off by saying that the Apple Watch, one of Apple's most premiere products being pulled from sale in the US. That's unprecedented. That just doesn't happen. When the ITC said in October that Apple would have to pull the watch from store shelves after a sixty day review period, That's how we ended up with this happening during the week between Smiths and New Year's. I think a lot of people believe that there would be no way Apple would
get to this point. Either Apple would figure out some sort of settlement, either they would issue a software update, they would convince the Biden administration to veto the order from the Trade Commission. I think it was very surprising, including to myself, when these things actually got pulled from
store shelves. Now the Van, for all intentsive purposes, really only lasted a few days because Apple just a couple of days ago got an emergency order through an appeals court in DC that got them to put the Watch back on the market. Now this is temporary, right. Apple still has to put a software fix in place or another type of fix, and that fix is being reviewed by the US Customs Agency. There was actually a hearing
yesterday on Thursday. We don't know how the hearing went at this point because it's all closed door stuff, but by mid January we should have some sort of answer from the Customs Agency whether or not the fix via software that Apple has proposed for the Watch is sufficient and to no longer in their view violate the patents from a company called Massimo, a medical device company that say Apple and fringed and got the ITC to pull the watch from Apple stores in the US.
Hey, Mark, are we naive to just assume that Apple's going to figure this one out and they'll be able to keep their watches on shelves in the future.
I think we were naive to believe that this wouldn't happen. I think we're less naive to believe that Apple is on the verge of figuring this out. There's going to be a resolution here sometime in January. I believe if the US Customers Agency accepts Apple's software fix, it's game over right. This watch is back on sale. Masno will go after Apple again. The two companies have been in court. They have a round two of their trial related to patents and trade secret theft that's kicking off in late
October of twenty twenty four. For those unfamiliar, Massimo sued Apple in twenty twenty over patent infringement. There was actually a trial this year ended in a mistrial due to a hung jury. For this type of trial, you needed all the jurors to be in agreement. One way or another, but it was actually six to one in Apple's favor. So both Apple and Moss of a loss.
So they've got history and they've got form, they've got form on that. Can we just sort of because those legal rankers are going to continue If you look at the wearable as part of the business, I know there's a number of the kdes keeping an eye and the wearables is ten percent of the revenue. We had Dan ives with us a little bit earlier in the week. Can he evangelize had a four trillion dollar valuation on Apple A. How quickly do you think it could make
that valuation? But more importantly, how important is China too that because again there's regulatory sniping from the Chinese on the ownership of iPhones, and iPhones are seventy seven percent of the of the revenue lineup for Apple.
Yeah, I'll tell you this. You can be quite successful by constantly betting that Apple's going to be okay long term and their market cap is going to keep growing. So you know, I see every scenario in the book that Apple gets the four trillion. I'm not sure it'll be in twenty twenty four, but it will happen. Eventually, and it's typically a bad bet to go against Apple.
Right.
In terms of China, there have been these reports from US and others about the government banning the iPhone and other non Chinese made devices in certain offices, in certain organizations within the country. I think it's really going to take until Apple reveals its first quarter results at the tail end of January or early February to see what revenue is like in China to get a full scope of that impact. The last revenue results that we got for Apple, that was the fourth quarter, they did okay
in China. They really didn't decline much. It was pretty solid overall. That The issue for us in terms of trying to determine what that means is that it only incorporated very few days of iPhone fifteen sales in the overall Q four earnings. So it's really difficult to know until Apple actually puts those numbers out because otherwise we're just guessing.
So a lot of the time, the detractors of Apple would say the scale and the speed of radical innovation, radical product product development has perhaps slowed down. Where do they what does Apple need as where to get to four trillion? Does it need multiple refreshes which we get or does it need something perhaps more damascene esque.
That's undoubtedly true that the pace of device redesigns has slowed down to an incredible degree. If you look at the iPhone fifteen Pro, sure it has pretty great new materials, It has a very advanced processor, the first three and animeter chip to ship in volume in a smartphone. But if you put that thing in a case, or even if you don't put it in a case, it's going to, for the most part, look and feel almost the same as an iPhone you bought three or four years ago.
But that doesn't necessarily matter. It's the ecosystem, it's the lock in, it's the services, it's the attached products like the AirPods, the Apple Watch, the Apple TV and others, which has really created this mode for the company that's going to help it continue to grow. And I think for twenty twenty four you have some pretty cool products on the roadmap. The Apple Vision Pro, their first mixed reality headset that's going to go on sale in about
one month from now. That's not going to drive a lot of revenue for Apple, but it's probably going to add for the next two years. Probably between two and five billion an annual revenue, and on a quarterly basis, that could be the difference between a couple percent growth or a couple percent decline. So that could be important in the short term, but critical in the long term.
You're going to see larger iPhones in the fall. They're moving from a six point one inch to a six point three inch on the smaller phone, and from six point seven inches to six point nine inches on the bigger phone. Now to your questions about China, that's very important because in China, lots of consumers are shifting to one instead of having an iPad, iPhone, mac, i'll watch,
et cetera. A lot of people are just buying phones and they want the biggest ones that they can get their hands on, and so that six point nine inch iPhone sixteen Promax, that's going to be pretty important for that market.
I really don't understand the desire for a larger phone, but I want to talk about the Vision Pro a little bit. I'm sure you remember the video of when they unveiled the Prison Pro and they read out the price of it and the audience gasped. It was a viral moment.
It was pretty funny.
Who's going to buy these? Is this just people who love Apple? Apple enthusiasts, and are we going to see the price tag come down from several thousands of dollars.
Yeah, you're going to see software developers who want to develop for the platform. You're going to see mixed reality enthusiasts. You're going to see not the early adopters. I think the early adopters are the people who buy the new iPhones the first day or week they come out. But I think you're going to see the early, early early adopters. Right, that is an even more niche audience. I'm not expecting
lines outside of Apple stores. You know, they believe over the course of a year they're only going to sell a couple of these at most a day in each of its retail stores. Right, So this is a niche product, probably in the same spectrum as people who would buy a Mac prow or high end Mac Studio. Those are the company's most expensive max right, you're talking thirty five hundred dollars plus five hundred dollars in task in the US.
Yeah. Not for the lighthearted or the small pocketbooks. Mark always appreciate it. Mark is always my go to. Is it time for me to upgrade a watch a phone? That's who I talk to, Mark German, Thank you so much, Happy New Year, Bloomberg's own Markerman. When it comes to Apple, I must read here at Bomber.
Let's take these discussions too. On next guests, Terry Haynes, is they find at off Pangaea policy? Very good morning to you. I mean you lay it out very punchally, so well done to you. This is what you say about Washington. Let's just start with the geopolitical situation there, because they haven't funded Ukraine and they're reluctant to fund Israel.
They've got two hot wars. But you say this, Washington's lazy burn minimum approach on everything, whether it's border security, foreign aid, or building fiscal crisis of great concern to markets won't cut it in twenty twenty four, Not for markets, not for the US national and international interests. We've ignored markets have essentially ignored these faux pas, these grand faux pas. We've ignored them. Is that our folly to ignore these and which is the biggest tail risk?
Well, I think what you've got, manis here is a situation where you haven't seen in fifty years, where you've got a combination of probably the highest geopolitical risk and probably the highest domestistical risk as well, those things combine. I think what markets ignore is that going into twenty twenty four with that combination very simply is you know, they tend to see political issues by and large as
spices one way or the other. You know, things that the things that are fundamental to the markets but provide some some minor upper down action, when what they should consider is that lower geopolitical risk and lower domestic political risk in the United States are both foundational to the markets. And and you know, we haven't really had a main conflict in the United States the shook markets since the
Second World War. But when it did, you know, the markets went down by twenty percent in the first six months after Pearl Harbor. And you know, I'm talking about a conflict that happened almost eighty years ago, in a conflict in which you know not as today more than half of the United State citizens are invested in the markets. So the foundational risks here, I think generally are in the volatility.
Terry. Let's get more specific, though, play it out. If markets are ignoring geopolitical risks, what what might likely happen in twenty twenty four. When it comes to the geopolitical risks, and we've kind of laid them out all throughout the week, Obviously we continue to watch what's going on in the Middle East and concerns about escalation. You still have Russia and Ukraine, We're looking at China and Taiwan, and then
you know you've got an election coming up. I think there's some concerns nervousness to here, so play it out specifically what you think likely could happen that investors have to be wary of.
I think fundamentally, there will be a temptation to think that the three major conflict areas geopolitically that you just pointed out Ukraine, Israel, Taiwan are going to be somehow handled, when in fact they're going to continue on for months. I mean, there's no easy end to the Ukraine War. The Israelis say that the Moss War will go on for months, and I don't see anything there to stop it.
And there's a lot of volatility around Taiwan, which I think, frankly is underappreciated by markets who think that Biden and chi Jinping have some sort of an agreement after their recent summit, when in fact, what China is doing is pushing on kind of undeterred and and probably has more rather than less incentives to act thanks to their more powerless politicals or excuse me, economic situation.
So there's all that, and.
Then you and then you're going to have a lot of points in the in domestic politics, with primaries coming up over the next several months. Who are going to be the non cominee? Will there continue to be rising third party challenge? Jesus, I've thought and continue to think there will be, you know, exactly what is the direction of the United States, both domestically and in terms of
its own foreign policy. Those will play out in you know, in specific points, you know, at least once or twice a month through the year, and I think have the opportunity to put additional volatility into the market. Says I'm sure about the future direction of the Unity Terry.
I don't want to be inflammatory. I just want to be smart here for our audience when we talk about a third world war. When I look at our Bloomberg intelligence team and when they're putting out research when it comes to what we need to watch on the global economy, and top of the line or top of the headline is about war. So how do we need to think about the possibility of a third World war?
You know? In some ways, and I'm not trying to be inflammatory either, I'll give you a different way of thinking about it. Though in a lot of ways we already are are. You know, there are at least three regional conflicts. Uh, there's there's cyber war. There's a concern about how the the contending parties move into space. There is there their concerns about how they they're moved around in even in the Arctic for example.
So you know, you've got.
Kind of a slow moving conflict right now. And I'm not trying to be inflammatory or push it push it too far either, but what I will say is that anybody that's looking at the current three spots as solely regional conflicts and not representative of a larger conflict isn't thinking about this enough. And the economic consequences alone, as you all just noted, on supply chains and in the Red Sea and many other things, could be very substantial.
So you know, we are in a very We're in a very volatile situation already, even though markets don't fully understand it, realize it, or appreciate it.
So there's a lot to worry about on the global front. Let's go back to mestic though, because you write in a recent note you talk about Washington's out of control fiscal spending increasing debt service costs. Maybe we saw some of those concerns play out in the treasury market in the summer, but looking at the state of play right now, it seems like that.
Was a blip.
But what's the trajectory there when you think about the fiscal side of the equation.
Washington.
Washington always thinks that they understand the markets, and the markets always think they understand Washington, and that Washington is responsive to markets. I've never thought that was true, and we've probably got the biggest gap between Washington and the markets in some time. Increasingly markets are asking you when and whether the United States government is going to be able to get its fiscal spending under control, and there's no movement at all towardwards.
Do that?
You know, you have a.
Situation in Washington right now where the most the people are banging their fists on the table, the most to control spending. Are people that are ironically to some extent conservative Republicans, But really what they're doing is talking about as much as one percent out of thirty percent the discretionary part of the overall federal budget. And that's a blip,
and that's by no means what anybody expects. So the discrepancy between what markets want in terms of more sustainable fiscal policy and what Washington can deliver, there's a huge gap, and there's no there's no indication that Washington even understands what markets want or expect.
There, Terry, we'll have to see how these negotiations go down to the war this month in regards to the potential risks, and as you say, there is a great disconnect between markets and Washington. Let them rule, we rule our own way at say the bond equity commodity traders. Terry Hans Pangaea Policy.
Angela Stent is here with us. She's a non resident senior Fellow at the Brookings Institution. She's author of Putin's World. She understands Vladimir Putin so well. She has worked done national intelligence for Russia and Eurasia the National Intelligence Council. So really understands a lot when it comes to geopolitics, Angela, good to have you here as we get ready to wrap up twenty twenty three. This latest barrage by Russia shows that what to you, that this war is long from over.
Oh yes, this war is going to continue well into twenty twenty four. Despite stories that occasionally appear in our media about being willing to negotiate, he's defined this as an extential existential issue for him, the survival of his regime. And as we saw today, this was I think the deadliest attack again hitting civilian targetssly and you know, anger that the Ukrainians were able to destroy this amphibious Russian warship in Crimea this week. This was a major game
for the Ukrainians. But still there they are fighting very hard to maintain their position.
Angela, I do wonder that geopolitically, there's a lot going on around the world, to say the least, it's an understatement with what's going on in the Middle East, and I do wonder how global allies are preoccupied with so much and how that might impact their support of something like the Russian war in Ukraine.
Right, So for.
Putin, you know, the Israel Hamask war has been a godsend. Attention is being diverted to what's happening in the Middle East, away from Rsian Ukraine. And then of course you have the debates within the United States. Our Congress couldn't agree on a major sixty billion dollar aid package for Ukraine. They went away. They may be able to agree on it in January, but it's of course tied to all
these issues of border security. The European Council was unable to vote on a fifty billion euro tranch of financial support for Ukraine because Victor Orbam Hungarian Prime Minister venoed it. They're also trying to get round this, but the Ukrainians are our saying that they cannot pay pensions going forward if they don't get this money from the European Union.
So allies are distracted, They're dealing with their own domestic issues, and so the outlook for Ukraine for the next year is really very sober.
Angew good morning. When you talk about the lack of robust support from the US and from Europe, is Victor orban of course, who is the spoiler in that narrative? Does this embolden putin to deliver killing blow as he has today. I mean it is one of the missile record, missile barrage killing eighteen people. This is breaking news this morning. He's attacked Kiev live, Odessa are under attack. Do you think that this prevarication by the United States and by the part in part Europe emboldens Putin?
Oh, it certainly does. If you watch the nightly Russian TV shows, they are gloating both about the debates within Congress and the Republicans who don't want to give any more money to Ukraine, and they're gloating about a disunited European Union. Of course it emboldens them because Hutin's calculation is a defeat. Waits this out Western support will further erode. He is waiting for Donald Trump to be re elected next November and hoping that then US support for Ukraine will.
Can I ask you if Trump, I mean this is this is projection. This is projection. But I want you to reflect on certain moments in the previous administration when Trump was in power. He went to meet Kim Jong ung, He he got on planes, he sort of you know, grand standard, and it did a great deal of theater.
Is that our risk here that if there's a shift in politics in the United States of America, is this campaign, Is this Russia war going to play in the polls for Trump towards the campaign later this year.
Well, I think it will. I mean Trump has said that he could end this one in twenty four hours. I would be interested to understand how he's going to do that. But it's clearly going to play in the election campaign in the United States. The whole question of why we're supporting Ukraine and how important it is, as he said before during his presidency, to have a good relationship with Russia.
And before we get, of course to the twenty twenty four US presidential election, we have to get through the winter. And you write in your notes that the winter will be very challenging for the Ukrainians walk us through that. The reality on the ground is, of course, the calendar year flips here, right.
So the Ukrainian counter offenship that began in June did not achieve one of the Ukrainians and I think what we and the Europeans hoped that what they want able to take back a significant amount of territory, they need to mobilize more soldiers, their generals have said that now they need more US weapons, and if they don't get the weapons from the US, which is quite possible given the debates in Congress, it will be much more difficult for them to push back if they don't get the
financial assistance both from the US and for the European Union. Again, they're the mystic situation. Their economic situation will deteriorate, and Russia still has millions of people that it could mobilize. So far, Putin, who's running for re election in March, has said that there won't be another mobilization and maybe there won't be at least until after the election. And
the Russians, you know, they've survived the sanctions. The sanctions have not had the impact that the West hoped that they would, so Russia appears to be in a stronger position now and Ukraine really is very challenged to keep pushing back against the Russian.
Forces well on the AID conversation. Of course, on the US side, we've been talking about it on the program this week, about a compromise needed when it comes to the southern border, and the expectation seems to be there that that will be achieved in January, but when it comes to the EU. You mentioned, of course Victor Orbn's opposition. Is there a path for the EU around Hungary's veto?
I think there is, and the EU, the European Council, they're discussing this, and they've said that they hope in January that they can somehow avoid having to have, you know, organ vote on this and find another way of getting the money to Ukraine. But it still has been I
think much more challenging for them. I think the other thing we should realize is that right now the G seven countries are seriously thinking about how they can deploy the frozen, frozen Russian assets three hundred billion dollars of them, maybe not the principle, but the interest to help Ukraine. And this is a conversation that has now gained momentum, So that might be a way around some of this in the next year.
Hey, Angela just got about thirty seconds left here. There is a way though to peace, but maybe it's after the presidential elections.
I mean, there's always a way to peace. But the question is are the Russians interested in negotiating and how much would the Ukrainians have to agree to give up if there were to be peace negotiations, and I think we have to be quite clear idea that as long as Putin is in power, even if there were peace negotiations, they would probably only be temporary because he has not given up his goal of trying to conquer all of Ukrain.
All right, going to leave it on that note, Angela, thank you so much, Really appreciate your insight. Angela's stent of the Brookings Institution shares a Carnival corporation. They are the seventh best performer in the S and P five hundred, one hundred and thirty two percent year in to day and we were delighted to have with us on this Friday. Carnivals. Josh Weinstein, he's president, CEO and chief Climate Officer, joining
us here on set in New York in town. Welcome, Welcome, Welcome, almost Happy.
New year, Happy new day, everybody, Thanks for having me.
How are you thinking about the year. I mean, you guys have had a great one in terms of a stock run. You're working on a lot of things in terms of pairing down debt. Talked to us you just reported earnings last week. Some pricing power talked to us about the kind of the business environment.
Yeah, so the twenty twenty three you know, we wrapped in November on November thirtieth, and you know, the one word that we like to use as a as a summary is record. We had record demand, record yields, record pricing, record bookings, forward bookings, record on board spending level. So really across the board, our business has really thrived in twenty twenty three, and we expect much more in twenty twenty four.
It could continue because you're such a great gauge of how customers are feeling. You know, you have several brands, but you really kind of speak to, you know, the everyday US can consumer if you will, and you just have a great read on it. Are they continuing to spend? Are they continue to do advanced bookings and then once they're on their ships, Josh, continuing to spend as well.
Yeah, that is exactly what we see. You know. As a matter of fact, our Q four was from a pricing standpoint, the highest all year. So it's accelerating, it's not decelerating. And when we look when we look forward, we're actually two thirds booked for all of twenty twenty four already. It's nice visibility, it's not too bad. We were about ten points higher than we were last year.
And on top of the ticket bookings, we've actually started pulling forward on board spend, so we have about a more or less about a third of our onboard spend being prepaid in advance. So we have a really good amount of visibility. And those booking trends, they just haven't slowed down. You know, every quarter this year, you know, people expected it's got to slow down, it's gotta we're gon we're going to see something. The consumer is going to get impacted, and the fact is, with our business,
we haven't seen it. It's record after record. As a matter of fact, we just ended the two weeks of you know, Cyber Monday and Black Friday at more records. And it's not just coming from one brand. It's not coming from the United States. It's global. It's with our global portfolio of brands, which is really really encouraging.
Do you think we're moving Good morning, good to me. Do you think we're moving from many CEOs similar to yourself that I've sat with that run global airlines and global businesses have said we've lived through a period of revenge tourism. We were all locked up for a period of time. This is something we had this parabolic reopening and you had a parabolic rebooking. Are we evolving into some kind of new cycle? You said, there's no end
insight in this demand. So if we've ended revenge tourism, how do you describe the next evolution?
Yeah, that's a great question. So we don't think this is revenge anymore. This is not pent up demand. It's two years on from when we really got back in full as a corporation. This is people who have decided what's meaningful for them. How do I want to spend my life? And experiences are what they're looking for, you know, unforgettable memories and creation with friends and family. And that's exactly what cruising has to offer.
And that's why I sat down at the a course and he said, look, I haven't got enough hotel rooms and I haven't got enough high end staff to help me run this business, which then takes me to the cruise is the high end hotel. But to what extent are those packages off ship and on shore those additional spans are they critically important to the expansion and the turnaround from the loss that you've had, do they add incrementally or significantly?
So, I mean, when we think about our business, we're a little bit different from from when you're looking at hotel companies. You know, I'm staying in a hotel in New York and I won't tell you which one it is, but I'll tell you the service is not very good. And we've learned how to live with that. As a society. It's almost a tacit acceptance. No, we should not. And a cruise industry, our brands did not deviate from service level. Our guests have high expectations and we aim to exceed them.
We do not close off floors, we do not shut areas down, We do not skimp on the services that we used to offer. It is full steam ahead and that's what people expect and that's what they're willing to pay for, and that's what we're seeing.
And let's talk a little bit about the fact that you are a global brand. Of course, a global company that goes many places in the world. I don't need to tell you that the geopolitical landscape very fraud right now. Two hot wars and of course conflict in the Red Sea has that impacted at all where you can go and are you seeing any inflationary pressures from some of the things that we're talking.
About here, So the second question is, no, we haven't seen anything of note. Obviously, we pay attention to crude prices, which is a good barometer of a lot of things. With respect to the impact on our business, we had about less than one percent of our business touching Israel in one way or another, not necessarily homeporting, but it might be one transit stop on a world cruise or something of that nature. We may changes some time ago.
We actually don't have any ships transiting the Red Sea area for several months, and so obviously safety first, and we will we have mitigation plans should we need to adjust where those ships would be transiting, but as of now, we're to watch and learn mode.
Let's also talk about your bond book, because it was interesting seeing just last week actually SMP coming out and upgrading Carnival not quite back to investment grade territory, but you're getting closer to not just higher, to not just higher. On Earning's day, actually you think back and the chief financial officer of Carnival said that there's a real possibility that Carnival will come back to the debt markets in
twenty twenty four. Where is your current thinking on that and what would actually bring you back to the debt market.
Well, really, the only thing that would bring us back to the debt market as far as we can see, is if there's opportunity to refinance on more favorable terms rates. Yeah, lower rates. We're not or managing our maturities, but we're not looking to lever up. As a matter of fact, as you said in the intro, we've managed to cut down our debt load by about five billion dollars so far, and we expect much more of that as we go forward.
You know, that's priority one, two and three when it comes to our capital structure.
De lever So, hey, you know one of the things and it kind of ties together geopolitical but also kind of you know, we're thinking about growth. Soa story. I think it was today or in the last twenty four hours that the first domestically built ship in China getting ready to hit the high seas. But it's a joint venture.
It's you guys are involved in this, and I think about how important China is for you guys, but also geopolitically concerns about China It's ambitions with Taiwan and whether or not there's going to be some problems there down the road.
Sure, well, we're very happy for the folks at the China JV. We actually unwound the JV earlier this year.
We did.
We did so we've been providing shipbuilding expertise support for them and we were very happy to do that work.
O story still says you guys are involved, but go ahead, Well, that could be.
How we're involved at this point. But from our perspective, we got a portfolio of world class brands all over the world and that's where our focus is. You know, it's great for the cruise industry that China has opened up and it will be opening up for international cruise companies. We're not going to be one of them that's going back in. We've got our assets where we want them.
We've we've changed our assets strategy, we've moved ships to different brands to accommodate the change in China and they're doing very very well. So we'll uh, we'll take a wait and see approach on that as well.
But not a market you need to be in, right now just.
No, it's definitely not all right.
Gonna leave it there. Listen, so appreciate it. You know you're spending some time with family, but great to get you.
While you're my pleasure. Thanks and happening to her.
Yes, the New York Hotel, you should be get an upgrade.
The same experience in some hotels. I don't think they have the workers.
They do not.
You need.
We do have all the workers that we need, and I'd encourage everybody come come book a cruise before we run out of inventory for twenty twenty four because it's going pretty fast.
Josh Weinstein, the Presidency of Carnival. Thank you so much, So appreciate it. Subscribe to the Bloomberg Surveillance Podcast on Apple, Spotify, and anywhere else you get your podcasts. Listen live every weekday starting at seven am Eastern on Bloomberg dot Com, the iHeartRadio app, tune In, and the Bloomberg Business app. You can watch us live on Bloomberg Television and always.
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Thanks so much for listening. I'm Carol Master and this is Bloomberg