China trade tension selloffs a buying opportunity for investors?


OUR TOP STORY THIS HALF HOUR, U.S.-CHINA TRADE DOUBTS, FUTURES POINTING TO A STEEP DECLINE THIS MORNING AS UNCERTAINTY BETWEEN THE U.S. AND CHINA RISES. THE CHINESE YUAN PLUMMETING TO A POINT NOT SEEN IN MORE THAN A DECADE, A MOVE MANY SEE AS A RESPONSE TO PRESIDENT TRUMP’S PLANNED TARIFFS AND A SIGN ANY TRADE AGREEMENT BETWEEN WASHINGTON AND BEIJING IS ON HOLD. JOINING US NOW WEALTH PORTFOLIO MANAGER, MICHAEL LEE. GOOD MORNING, MICHAEL. WHAT DO YOU MAKE OF THIS? IS IT SHORT-LIVED THIS MARKET REACTION OR ARE WE IN STORE FOR A VERY UGLY AUGUST?>>WELL, I CAN TELL YOU THAT EVERY SINGLE SELLOFF FROM A TRADE FEAR OR TRADE SPAT HAS BEEN A GREAT BUYING OPPORTUNITY OVER THE LAST 18 MONTHS OR SO. I SEE THIS AS NO DIFFERENT. THESE TARIFFS THAT WE PUT ON CHINA HAVE HAD LITTLE EFFECT ON THE U.S. ECONOMY. AND THE EFFECT THEY’RE HAVING ON THE OTHER SIDE IS NOT SO MUCH THEIR DAY-TO-DAY ECONOMY, IT’S MOVING THE SUPPLY CHAIN OFFSHORE, IT’S STEMMING THE FLOW OF DIRECT FOREIGN INVESTMENTS INTO THEIR COUNTRY AND CHINA IS IN A REAL STRUCTURAL ISSUE AND DEVALUING THE CURRENCY IS ONLY ADD GAS TO THE FIRE. THEY NEED FOREIGN CURRENCY. THEY ARE 15% OF THE WORLD’S ECONOMY, YET LESS THAN 1% OF INTERNATIONAL SWIFT TRANSACTIONS ARE SETTLED IN THEIR LOCAL CURRENCY. BY DEL VALUING THEIR CURRENCY, THERE WILL BE MORE CAPITAL FLIGHT OUT OF THAT COUNTRY SO IT’S ONLY GOING TO MAKE IT WORSE. WHEN SUPPLY CHAIN AND MANUFACTURING DECISIONS ARE MADE ON INVESTMENTS INTO CHINA, IF YOU DECIDE TO GO TO VIETNAM OR SOUTH AMERICA OR EVEN IN THE U.S., THAT’S A 10 OR 15 YEAR DECISION THAT CAN’T BE EASILY REVERSED. YOU TELL ME NOW IF YOU’RE A FORTUNE 500 COMPANY AND THINKING ABOUT INVESTING IN CHINA TO HAVE A GLOBAL SUPPLY CHAIN OUT OF THERE, ARE YOU GOING TO PICK SOMEWHERE ELSE OR CHINA RIGHT NOW? THAT’S THE REAL POINT OF THE TARIFFS. WE HAVEN’T SEEN ANY IMPACT FROM THESE TARIFFS ON THE CONSUMER IN THE U.S. YOU GUYS WERE TALKING ABOUT THIS EARLIER. CONSUMER SENTIMENT, CONSUMER COMFORT, CONSUMER FEELINGS, ALL YEAR 20 YEARS HIGHS. TOUCHING BACK ON THE TARIFF PART OF IT, WE’VE SEEN SOME SOFTNESS IN MANUFACTURING SURVEY DATA BUT WE ADDED 16,000 NEW MANUFACTURING JOBS LAST MONTH. I SAY THE SELLOFFS AND THE SPATS ARE A GREAT TIME TO BUY STOCKS, PARTICULARLY WITH THE 10 YEAR TREASURY AT 175 AND DIVIDEND YIELD IN THE S&P 500 AT 18 A 5. WE KNOW THE ANSWERS TO THE TESTS. WE’VE SEEN IT BEFORE. IT’S TIME TO GET IN THE MARKETS.>>I FEEL LIKE THIS ONE FEELS A LITTLE BIT DIFFERENT WHEN THE PRESIDENT HAS BEEN THREATENING TARIFFS, IT SEEMED TO BE MORE OF A NEGOTIATING STRATEGY, LIKE GAME OF CHICKEN AND USUALLY WORKED OUT FOR US. THIS FEELS DIFFERENT. THIS FEELS LIKE FAILED CONVERSATIONS, THERE WAS A STANDOFF AND HE’S GONE AGAINST ADVICE AND HE’S DONE IT. THIS FEELS DIFFERENT. YOU DON’T SEE IT THAT WAY?>>NO. EVERY TIME IT HAPPENED WE’RE IN UNSHARE ‘ UNCHARE ‘ UNCHARTE’ UNCHARTERED TERRITORY. NOW, WE HAVE THE WIND AT OUR SAILS. THE U.S. CONSUMER IS 70% OF THE GDP. THE DATA IS THE GREAT OFT AND STRONGEST SINCE Y2K, ESSENTIALLY, I THINK WE CAN KEEP GOING AND WE CAN KEEP STEPPING PRESSURE UP AND CHINA DEVALUING THEIR CURRENCY, IT MAY BE A TEMPORARY FIX TO TRY TO GET A BETTER NEGOTIATING TACTIC. IF THEY DO THIS, THIS WILL MAKE IT WORSE FOR THEM. DAGEN: LET ME PUSH BACK ON THAT TO LEE’S POINT. LET’S TALK ABOUT BUSINESS INVESTMENT. BUSINESS INVESTMENT FELL A SEASONALLY ADJUSTED 8/10 OF 1% IN THE SECOND QUARTER. JOB GROWTH HAS BEEN SOFTENING. FACTORY ACTIVITY HAS FALLEN. THE FACTORY SECTOR SLOWED FOR FOUR STRAIGHT MONTHS ENDING WITH JULY. AGAIN, THAT UNCERTAINTY IS HARD TO QUANTIFY BUT I’VE BEEN TALKING ABOUT IT LITERALLY SINCE THE TRADE WAR STARTED AND IF IT IMPACTS JOB GROWTH, IF IT IMPACTS INVESTMENT IN THE UNITED STATES, THAT IS GOING TO BE UGLY.>>I’M GOING TO PILE ONTO THAT. THE REASON WHY THE FED LOWERED RATES WAS TO NOT STIMULATE THE ECONOMY TO JACK’S POINT THROUGH THE CONSUMER, IT’S REALLY THROUGH BUSINESS. RIGHT. SO IF BUSINESS INVESTMENT IS OFF, WHAT CAUSED THE SELLOFF WAS THE FED’S ACTION ON WEDNESDAY, NOT NECESSARILY TRUMP’S TWEET ABOUT TARIFFS. SO THE THING THAT CONCERNS ME, I’M WITH DAGEN, IS BUSINESS INVESTMENT JUST SEEMS LIKE IT’S WANING. THIS DOESN’T HELP.>>THE CON ARGUMENT WAS BUSINESS INVESTMENT WAS SO MUCH SUBSTANTIALLY HIGHER IN 2017 AND 2018 THAT MAYBE WE’RE DUE FOR A SLIGHT PULLBACK. AND AGAIN, MAYBE JOB GROWTH HAS SLOWED A LITTLE BIT BUT WAGE GROWTH, YEAR OVER YEAR I THINK WE’RE UP 3.2%. DAGEN: WHICH IS LOWER THAN IT WAS IN FEBRUARY.>>IN FEBRUARY. BUT PRIOR TO THE 12 MONTHS PRIOR, FROM 2017 TO 2018, WE’RE UP 2.8%. DAGEN: THE FASTEST RATE IN A DECADE, ROUGHLY.>>WE’RE IN REALLY, REALLY GOOD SHAPE. THE CONSUMER, THAT FUELS OUR ECONOMY, THE SAVINGS RATE IS UP CLOSE TO 8%. WE’RE HAVING ALL THIS SPENDING, HAVE ALL THIS CONFIDENCE, A ROBUST LABOR MARKET AND THE SAVINGS RATE IS DOUBLE WHAT IT WAS GOING INTO THE CRISIS.>>THE STRONG CONSUMER, THE MANUFACTURING IS NOT SO HOT, THERE’S NOT A LOT OF EARNINGS GROWTH. YOU SAY THIS IS A BUYING OPPORTUNITY FOR STOCKS. I DON’T KNOW THAT YOU’RE WRONG. WITH STOCKS LOOKING PRETTY FULLY PRICED HERE, WHERE DOES THAT NEXT LEG UP FROM THE MARKET COME? DOES IT COME BECAUSE BOND YIELDS ARE SO LOW THAT WE’LL PUSH IT UP TO 18 TIMES EARNINGS OR WILL WE HAVE A RESUMPTION OF EARNINGS GROWTH IN A FUTURE QUARTER.>>COUPLE GOOD POINTS THERE. EARNINGS NOT LOOKING SO GOOD THIS YEAR. LOOKING BETTER NEXT YEAR. WE’LL SEE HOW IT PLAYS OUT. I WOULD SAY EARNINGS ARE SECONDARY TO MACRO SENTIMENT AND WITH THE CONSUMER BOOMING AND INTEREST RATE AS ULTRA LOWS, WE’VE SEEN THIS BEFORE. WE’VE HAD PERIODS WITH LOW RATES WHERE EARNINGS HAVEN’T LOOKED THAT GREAT AND STOCKS HAVE DONE WELL BECAUSE THERE’S NOWHERE ELSE TO GO. YOU HAVE THE REST OF THE WORLD GOING TO NEGATIVE INTEREST RATES. I THINK THIS STORY HAS BEEN PLAYED OUT ON MULTIPLE FRONTS. YOU HAVE A CLEAR PATHWAY IN FRONT OF YOU AS TO WHAT’S GOING TO HAPPEN NEXT. DAGEN: IT’S ANOTHER BIG WEEK FOR EARNINGS. DISNEY, CVS, UBER AND LYFT AMONG THOSE ON TAP TO REPORT. WHAT ARE YOU WATCHING FOR THIS WEEK? WHAT IS GOING TO BE THE BIG TELL, JUST TO YOUR POINT, S&P 500 EARNINGS ARE STILL EXPECTED TO SLIP 6/10 OF 1%. 77% OF COMPANIES IN THE S&P REPORTED AND EARNINGS ARE UP 2.7% — I MEAN 77%, YEAH, HAVE REPORTED, 74 HAVE BEATEN EPS.>>WITH THE COMPANIES YOU MENTIONED, DISNEY, EVERYONE IS WAITING FOR NOVEMBER WHEN THEY LAUNCH THE STREAMING SERVICE. CVS, EVERYBODY IS WAITING TO SEE IF THERE’S EXPANSION OF THE MEDICAL SERVICES. TYSON, IT’S NOT ON THE TOP OF EVERYONE’S MIND, THAT’S QUARTER TO QUARTER WITH EARNINGS. I’M WAITING TO SEE IF THEY MAKE A MOVE INTO MEATLESS BURGERS, LIKE BEYOND BURGER.>>BEYOND CHICKEN.>>WHATEVER IT IS. TYSON TALKED ABOUT GETTING INTO THAT BUSINESS. I’M WAITING TO SEE IF THEY TALK THAT UP IN THEIR EARNINGS CALL. I’M LOOKING FOR MATERIAL MISSES TO THE DOWNSIDE, SOMETHING A THAT WOULD CHANGE THE OVERALL THESIS THAT THE ECONOMY IS DOING GOOD. IF WE’RE ROUGHLY IN LINE, YOU HAVE ULTRA LOW EXPECTATIONS AND WALL STREET IS LITERALLY PERFECT AT SETTING EXPECTATIONS REALLY, REALLY LOW AND JUST BEATING THEM AND SAYING LOOK HOW GOOD I AM, SO I THINK WE’RE GOING TO GET MORE OF THAT THIS QUARTER AND THEN SOME ACCELERATION IN THE END OF THIS YEAR AND INTO NEXT YEAR. DAGEN: TO DEAN JOHNSON ON TWITTER WHO IS WATCHING THE PROGRAM WHO CALLED ME A DOOM SAYER, NO, I’M NOT A DOOM SAYER. THE MARKET LAST WEEK, WORST WEEK FOR THE BROAD MARKET THIS YEAR. FUTURES THIS MORNING, DOWN, BAD. THAT’S NOT DOOM SAYER. THAT’S FACT. THANK YOU SO MUCH, DEAN. [ LAUGHTER ] DAGEN: I JUST WANTED TO SAY THAT. AGAIN, CONSUMER IS AWESOME. BUSINESS INVESTMENT –>>70% OF THE ECONOMY. 70% OF THE ECONOMY. DAGEN: A LITTLE SHAKY.

Oracle CEO: AI is integrated into our autonomous database


SLOWING IN THE U.S. AND WE ARE RIGHT ON THE DOORSTEP OF EARNINGS. I SPOKE WITH ORACLE’S CEO, MARK HURD EARLIER, I SAT DOWN WITH HIM YESTERDAY TO DISCUSS THE U.S. AND EUROPEAN ECONOMIES, WHY ORACLE IS BUYING BACK SO MUCH STOCK AND WHERE HE SEES GROWTH NOW BECAUSE WE ARE ON THE DOORSTEP OF EARNINGS. I’M WANTED TO GET A SENSE FROM HIM ABOUT THE INTERNATIONAL SLOWDOWN THAT WE’RE TALKING ABOUT. BUT WE BEGAN WITH NET SUITE, ORACLE’S INVESTMENT IN THE APPLICATIONS MARKET AS WELL. TELL US WHAT YOU’RE GETTING FROM YOUR CUSTOMERS THIS WEEK THERE IN LAS VEGAS AND ABOUT NET SUITE.>>SURE. THANKS, MARIA. YOU’RE RIGHT, WE’VE INVESTED A LOT IN THE APPLICATIONS MARKET. WE’VE INVESTED IN BIG AND SMALL SEGMENTS OF THE MARKET, BIG CUSTOMERS AND SMALL CUSTOMERS. WE ACQUIRED NET SUITE, GOSH, I DON’T KNOW, PROBABLY TWO AND-A-HALF YEARS AGO NOW AND IT’S REALLY BEEN AN AMAZING SUCCESS, TO YOUR POINT. THERE’S, I DON’T KNOW, LESS THAN 10,000 BUT ROUGHLY THAT NUMBER OF CUSTOMERS HERE FOR OUR EVENT. IT IS VERY EXCITING. WHEN WE BOUGHT NET SUITE, MARIA, THE COMPANY WAS GROWING ABOUT 15, 16% IN REVENUE. WE’VE INVESTED A LOT IN R&D. WE’VE INVESTED A LOT IN TAILORS THE TAE TAILORING THE APPLICATION FOR MORE INDUSTRIES. WE’VE ADDED SALESPEOPLE AND IT’S RESULTED IN JUST INCREDIBLE GROWTH. STARTING REALLY ABOUT A YEAR AGO. SO ABOUT A YEAR INTO THE ACQUISITION WE BEGAN TO REALLY GROW OUR BOOKINGS AND THAT’S TRANSLATED TO REVENUE. SO LAST QUARTER WE REPORTED REVENUE THAT WAS ALMOST DOUBLE THE REVENUE GROWTH WE HAD COMING INTO THE ACQUISITION. MARIA: YOU’RE SEEING IT IN THE NUMBERS. THE APPLICATIONS BUSINESS IS SOARING RIGHT NOW AT ORACLE, AS YOUR CUSTOMERS MOVE FROM ON-PREMISE TO CLOUD. TAKE US BEHIND THE CURTAIN THERE. WHAT KIND OF COMPANIES ARE MOVING FROM ON-PREMISE TO CLOUD? HOW DO YOU CONTINUE GETTING THEM TO SWITCH OVER INTO THE ORACLE CLOUD? AND HOW SIGNIFICANT IS THIS IN TERMS OF THE APPLICATIONS BUSINESS AT ORACLE?>>THERE’S A COUPLE HE’LL THINGS>>THERE’S A COUPLE HE’LL THINGG>>THERE’S A COUPLE HE’LL THINGI>>THERE’S A COUPLE HE’LL THINGG ON. THE A APPLICATIONS MARKET IS $25 BILLION, SPENT PRIMARILY ON APPLICATIONS. MOST OF IT TODAY IS SPENT ON ON ON-PREMISE APPLICATIONS. THE MARKET CHANGES SIGNIFICANTLY AS IT MOVES TO CLOUD. AS IT MOVES TO CLOUD, THE SUBSCRIPTION YOU PAY FOR THE CLOUD INCLUDES NOT ONLY THE APPLICATION BUT INCLUDES ALL THE HARDWARE, IF YOU WILL, THE SERVERS, THE STORAGE AND SO IT BECOMES A BIGGER MARKET JUST BY THE VERY NATURE OF THE MIGRATION OF THE APPLICATION TO SAAS. INSIDE THE INSIDE THAT, $75 BILLION IS BACK OFFICE, THAT WOULD BE DESCRIBED AS THINGS LIKE GENERAL LEDGER ACCOUNTING, SUPPLY CHAIN AND PROCUREMENT AND H.R. AND THE OTHER 2 A 5 OTHER 25A 5 OTHER 25 T5 OTHER 25 TO 30% IS FRONT OFFICE, SALES AND MARKETING AUTOMATION. NET SUITE IS IN THE MID-MARKET, SMALLER CUSTOMER SIZE OF THE BACK OFFICE MARKET AND IT’S HAD EXPLOSIVE GROWTH. WHEN YOU ASK WHO IS MOVING, IT’S EVERYBODY FROM THE BIGGEST GUYS, WHETHER THOSE BE AS BIG AS AN AT&T, ON AN EXTREME, I COULD GO THROUGH MANY OTHERS, TO YOUR SMALLEST STARTUP. MARIA: ARE YOU TRYING TO GET THIS APPLICATIONS OF COMPANIES TO MOVE JUST TO THE ORACLE CLOUD OR ARE YOU TRYING TO GET ALL APPLICATIONS TO MOVE TO THE CLOUD OR ARE YOU JUST LOOKING AT THE ORACLE PORTIONS OF THE BUSINESS? HOW DO YOU GROW THIS EVEN MORE IS REALLY THE BOTTOM LINE?>>SO IF YOU LOOK TODAY, HALF OF THE CLOUD APPLICATION CUSTOMERS WE HAVE WERE ROUGHLY OR HALF OF OUR REVENUE, THAT’S A BETTER WAY