Turning The Camera on CNBC's David Faber, Co-Anchor of Squawk on the Street
Willy Walker: It's a real pleasure to have my friend David Faber here with us tonight. I have wanted to turn the camera on David for a while. Given that David every day does so much work on the markets and has to ask those great questions that he asks on CNBC of all the major actors in the markets. But you never get to sit there and say, “Well, what do you think about this?” Because he's always asking the questions of the people who are in the markets. So it's the opportunity to turn it around. So David, thank you very much for joining us tonight.
David Faber: Pleasure. I have no thoughts about anything, that's why I just ask questions. So this could be very short.
Willy Walker: He's got lots of thoughts and I wish we'd had drinks brought in here because you've got those little armrests now that you can lower. I think it's like being on a plane, you can lower your tray table and get ready to take off here.
So let me start here, David. Somewhere where I don't think anyone in the room would think I would start. You had an interview with the head of the PGA and the Saudi PIF in June, where the two of them said a deal is imminent, we're going to get this done and bring the PGA Tour and LIV together – maybe not so much. What's your take on that? You've been tracking that since then because Jon Rahm just jumped over to LIV. And it doesn't look like we're going to have a unification of the PGA and LIV or maybe we are?
David Faber: You know, Monahan was on a stage with my colleague Andrew Sorkin last week, and I was actually there at least enough to listen. I had been doing reporting on it. Willy's referring to back in June when they made the stunning announcement that they were going to merge essentially the way it was played in many ways is really that PGA was getting sold to the Saudis. That wasn't necessarily the case, but it stunned a lot of people. I broke that story, and then I had Yasir Al-Rumayyan, who runs the PIF for Saudi Arabia and Jay Monahan with me for an interview. Jay in particular, you know. It was very curious as to why they chose to communicate in the way that they did. They had told the players literally just I think, minutes before, I don't even think it was hours. And the rollout I think Monahan fully admits at this point was disastrous. And since then, I've been tracking it, but I haven't really said much at all on air because I haven't found anything concrete enough to say other than this thing is taking forever. It may still happen in some form, it’s the sense I'm getting from people who are involved for a period of time. You had a lot of potential other bidders who wanted to put money in who feel like there is a real opportunity there. Some of them have gone away. Endeavor is not going to do it. There was a group associated with Henry Kravis that's not going to do it.
Willy Walker: Redbird?
David Faber: The Redbird guys, what?
Willy Walker: Has Liberty looked at doing it?
David Faber: Yes, they have. As you know.
Willy Walker: I'm allowed to ask questions without you telling everyone that I know the answer to the question.
David Faber: Well, we don't know whether they're really going to bid. I think Greg Maffei, who runs Liberty, is interested, but they're always interested. But whether they're actually going to be there in a significant way, I don't know. And Redbird, I think is perhaps one of the more, if not more substantial potential bidders. But LIV is still there, and the players have become much more important, as they should have been from the very beginning in the whole process. So it's Tiger and…
Willy Walker: Rory?
David Faber: Rory. It's been fascinating to just watch since then. Randall Stephenson stepped down. There's been a lot of tumult and it'll be interesting to see what actually occurs. They keep saying they want to try and get something done before the end of the year as we all know that's looking less likely.
Willy Walker: So you mentioned, David, that you broke that news but then have subsequently gotten a lot of, if you will, chatter that hasn't been substantiated enough to put on the air. How do you get your news? And then also, how do you fact-check it before you bring it on the air?
David Faber: Well, it depends. As you know, every situation is somewhat different. But I mean, in the sense of this, there are a lot of people chasing the story. I do know many of the players and I am checking in with them somewhat regularly. Sometimes they won't say anything to me. Other times they may share some things, but nothing where I feel like I'm really advancing the story in a way that I need to.
On this in particular, remember this is of wide interest, I think, to a certain audience. But it's not public companies. My audience, if there was something incremental that really mattered and would move the stock price, I'd be more likely to do the incremental story. And this one, I've been less likely Willy because I sort of feel like, well, if I can get when there's really a deal and I can be the first to report that, great. But otherwise, I don't think it's something that at least for me, as moving the needle enough for me to sort of go with something that's kind of wishy washy or incremental or they're almost there, but they're not quieter.
Willy Walker: You're sitting on set, you get a text from a friend who's at a desk at a hedge fund saying, we've got chatter that this is happening or what have you. How do you then stop and either say, I got to fact check it, I got to triangulate it. I gotta send it to my research team. What I'm wondering about is you've broken a lot of news, how do you not take everything you hear and just put it on national television?
David Faber: I'm not taking almost anything I hear.
Willy Walker: Talk us through the process because, well, who fact checks it for you?
David Faber: Me!
Willy Walker: You?
David Faber: Yeah, of course. It's only me. I don't rely on anybody else. Which is why I don't break a lot of stories these days. You got to work really hard to break a story. It means calling everybody and feeling absolutely 100% that you're right when it's something of great significance.
Again, a stock moving because of X is not the same thing as company X buying company Y for $50 Billion. Or a well-known CEO stepping down or I mean, name your sort of important situation in those kinds of cases. If I do, I'm lucky enough to sort of get something. I'm going to call as many people as I possibly can and think about who would be in a position to actually know.
The hardest thing these days after doing this, as long as I have, is frankly trying to remember who it is. I know who might know something, and that's very difficult now for me. I'm waiting for generative A.I. to really help me.
Willy Walker: Hahaha!
David Faber: Tell me who, because I've forgotten, like who and half the time and then, you know, I'm like, Oh, yeah, of course. Why didn't I call this person or that person? Because of course they would have known about this. But on something of substance or significance, those are the kinds of calls I'll make until I'm satisfied that it's absolutely true. And thankfully, rarely in the last 30 years have I not been right in a situation like that.
Willy Walker: So go to Company X buying Company X. You went down to Austin to do an interview with Elon Musk this past summer.
David Faber: Yeah, in May, actually.
Willy Walker: In May, yeah. You saw Elon's interview last week with Andrew?
David Faber: I did. I was there, actually.
Willy Walker: You were there. What's your take on it?
David Faber: Anybody else in this room at that conference last week, or no? What's my take on what? What's the question? I'm going to get you better at this.
Willy Walker: Hahaha! Yeah. Pointed questions.
Willy Walker: Pointed questions. Did Elon's comment to his advertisers on X surprise you?
David Faber: Yes. I'm sure you may have seen the news where Elon Musk said they can go f*ck themselves, and I'm just quoting him. He actually said that.
Willy Walker: And he actually said that did that surprise you?
David Faber: He kind of called out Bob Iger. They weren't quite the same sentence. I was there. He did say “Bob, are you in the audience?” after he'd said to advertisers can go f*ck themselves. I think it was shocking. Andrew was surprised. I know that.
Willy Walker: Andrew was so surprised he didn't know how to react.
David Faber: He didn't really. I mean my favorite part of the whole interview, though, is when Elon said, “Yeah, we're old friends, John.” He called him John. That was so funny. I’m sorry. And Andrew said, “Uh Andrew.”
Willy Walker: But what's it like to sit down with someone like Musk? I mean, you've sat there in a studio right in front of him.
David Faber: Yeah, live on television.
Willy Walker: I know. Live on television. But, I mean, I don't know how many people in this room have met Elon Musk, but what's it like? Is he a difficult person to interview?
David Faber: Well, he's difficult in a way and he's also the best person you could possibly interview because nothing is off limits at all. Ask me anything. He will answer what you ask him without his PR person in his head, without his general counsel in his head, without anybody in his head.
And so that makes for an interview that is almost always going to have something like what occurred with Andrew last week or frankly, also was very similar with me where we had this 12 second pause. You count 12 seconds on live television, it's a long time. And where then he's misquoted, but quoted The Princess Bride, if you recall, and then basically said very similarly, though not quite with the curse words about his advertisers. I don't care. I'm going to say what I want, even if it costs me money. That's what he said to me back in May. He obviously continues to feel that way.
But Musk is endlessly fascinating from my perspective. Obviously incredibly controversial at this point. Unfortunately, I think in some ways. He continues to be what I see on TV all the time, because I think it happens to be the case, the most consequential businessman on the planet. You know, it's not just like he's some guy you can get in a chair, and he'll say crazy things. He's incredibly important. And so we care what he says. It makes it even more chilling in a sense how the storm going on in his brain is sometimes to hear. But it's fascinating to sit with him.
And it was the best part about that actually, that whole process for me with Musk was the setting up of the interview because when we sat down, Willy, he sat down. He had his two year old son X who was with him everywhere. I knew he was finally there because we were waiting last week and then I saw X. I saw and I was like, Oh, Elon's here because his kid came in first. But I thought he was going to sit down with his son on his lap and then he didn't. He left him outside the room. I was like, oh, thank you. But then he just sat down, and we started the interview. I guess my point is that my real interactions with Musk were in the months prior to the interview where the phone calls that we had were the discussions we had prior to that.
Willy Walker: Yeah, another person who you mentioned in that is Bob Iger, someone you know very, very well. I guess the first question on Bob, you came out to Sun Valley last summer and did an interview with Bob that broke some news. a) That he was a little tone deaf to the screenwriters and actors’ guild and got himself in a lot of trouble after his comments to you. But then the second thing was that they were going to spin off cable. A couple of questions to Iger. First of all, was round two on his leadership of Disney as effective as he was on round one?
David Faber: I think the jury's still out. I think it's harder than he thought it was going to be in some ways as he indicated to me. Willy's referring to this interview that I did with Iger last summer in July, where we were in Sun Valley and. He unloaded on any number of things. And he and I do know each other well and we're very comfortable with each other. But it went even beyond what I might have anticipated.
He did say at the time, at least, that certainly ABC was potentially a sale candidate. He indicated that ESPN was something that they'd want to find a partner for, though he did clearly state at the time. And that continues to be the case, that it's not for sale (ESPN) but that there were non-core assets. He talked about though at the time as well, Willy, that things were even worse than I thought. And I do think he meant that. I think that he had an anticipation when he came back a little over a year ago that things weren't great at all. But it's even more challenging.
And by that I think he means, that's the world I live in too is the dissolution of the cable ecosystem, which is just going away very quickly. It has been going away quickly, but we all thought it would sort of slow. Instead, it sped up. And that's putting a lot of pressure on the business. Obviously, all of these companies are trying to develop a direct to consumer business, can really make money and have a real margin. Netflix is the only one that can do it right now. So he's under a lot of pressure. And I think the jury's still out on whether or not round two is how he'll be judged.
Willy Walker: So you watch the media industry very, very well. You report it very closely. The content wars, Amazon, Netflix, Apple, the amount of money that they're pouring into content – is this sustainable or did they all wake up one day and say, guess what, we're not getting the return of all this. And all of us as consumers don't have the myriad of options that we have today as it relates to the depth of content we're getting out of Hollywood.
David Faber: Yeah. I mean, we ask this question a lot again in the media world, because when you're competing against an Apple or an Amazon or an Alphabet, you can't even really call it competition. They can do whatever they want. And I don't know the answer.
A number of Amazon shareholders through the years have said to me, if they just stopped doing content, would people really not take Prime and they would save $10-12 Billion a year, Boom, right to the bottom line, potentially.
It does get back to a larger question, I think, which we should all be thinking about to a certain extent, not with Netflix as much, but with those three other companies is just how enormous they are. Yeah, it boggles. I do talk about it on air occasionally. Just try and stop and get people to focus. I mean, Apple has a $3 trillion market value and does well over $100 billion in earnings a year. All the numbers, the CapEx numbers from Alphabet, from Amazon, from Microsoft, these companies are so enormous. I don't even know how you regulate them in a way. We all know the FTC and the DOJ are being tough, but their platforms, their power, their size, and influence is so enormous. So the media business is just this little thing for them. Apple doesn't even move the needle on what they spend.
Willy Walker: So I want to talk about how much time you and (Jim) Cramer spend focusing on the "Magnificent 7", the FANG plus three, whatever you want to call it. But before I get to that, one final question on media and cable. You work for a diversified media company, but at the end of the day, Comcast is a cable company. How long until we cut the cord? How long until no one in this room has a cable running into their house? A decade?
David Faber: Well, you'll always have cable running into your house because that's broadband and that's life. So we're broadband companies and Brian Roberts, I mean, and Chris Winfrey at Charter, now the CEO, they're the two largest cable providers. I mean really, it's not the cable side and video that is at issue. If you were to say to Comcast, you can only have broadband subscribers, everybody cuts their video would be fine. Where it hurts is NBC, right? It's all the subsidies.
It's why we're all going trying to figure out all sorts of different revenue models or ways to raise revenue. And obviously, somebody you're going to direct to consumer general entertainment. So you'll always have broadband. In fact, you're going to want more and more and more and more of it to do what you need to do. Broadband is being threatened a little bit right now by fixed wireless 5G, Fixed wireless. Verizon offers it. T-Mobile offers it, but it's capacity constrained. They offer it, you have to give them your address specifically, and they offer it where they know that they have a lot of capacity. Maybe they got a lot of towers, they don't have a lot of subscribers. But over time, they're going to want to sell more subscriptions to the phone because the margins on this are not nearly as good.
So that's going to peter out. But right now it's competing. And then you've got the Over Builders, which is the AT&Ts of the world, which are building fiber. Again, not to deliver video per se, but what's broadband these days? Broadband is everything. So. So, no, I mean the cable business, so to speak, that you're talking about where I have cable and I pay for a package, and I get all these channels that I don't watch that's going away – every day more and more.
Willy Walker: But on that, just final, final thought on that. Basically, we've gone down to two newspapers in the United States, The New York Times, and The Wall Street Journal. You all have differentiated yourselves as the go to business channel. Does it all consolidate down to that? And you guys I mean, in the sense isn’t there something of the brand of CNBC that says that you are the winner there? And kind of depending on, I mean, I watch a lot of you streaming to my iPhone. I'm not sitting at home plugged into my television. I'm getting it on my iPhone, but I'm still getting your content.
David Faber: Yeah. I mean, that's the challenge. And yeah, I would hope that our brand, like other brands in certain areas, will take us to this new world. We're getting there. But the transition for all of these businesses is very hard because the cable ecosystem and I was out in Denver with Malone recently as well, sort of the father of it all in some ways. It was an incredible business for 25 years.
CNBC, for example, we had all these people who don't watch us. So paying us, that's the beauty of that business, right? You got 100 million subscribers at the height of cable, let's call it. Most of them were not watching CNBC, but they were all paying us our $0.30-$0.40 a month. And now you go to a world where you only actually are operating with the audience that watches you. Well, they have to pay a lot more, but what's the willingness and how much and how in and how are you reaching them? And how in any way can you possibly replicate the kind of profit margins you had under the old system? That's the basics of what's happening in this business. And it's hard. It's really hard.
Willy Walker: Talk for a moment about that half an hour that you have with Karmer in the morning. You focus a lot on equities and also the magnificent seven. And then in the next, when Sarah comes on at the top of the hour, the two of you focus more on macro. A) is that all by design or is it you and Kramer talking about Alphabet and whether Alphabet is a good company to invest in? Or you and Sarah talking about Fed speak and whether rates are going up or going down?
David Faber: I base what I report on and what I am interested in based on what my sources, the people that I talk to, are interested in. That tends to be Hedge Fund guys and ladies, investment bankers, CEO’s and the like. So, I go sort of where they go. Kramer is talking about anything. But typically it is stock related. He does do an enormous amount of work.
Willy Walker: Those stacks of paper. This morning I literally watched him, are those analyst reports that he is reading?
David Faber: Yep. Pretty much mostly analyst reports. Some are transcripts, especially at earnings season.
Willy Walker: The back and forth between the two of you, completely natural?
David Faber: Yes, there is nothing scripted in the show that we do the first hour, actually in the second hour either really. But to answer your question, we play, Jim’s there, he obviously talks about stocks. I’m gonna try and go a little deeper on things that I may have found some things out and provide context some analysis around. Sarah loves macro, and so I am like, great have at it. I like to listen to what she has to say and follow up with questions to her.
Willy Walker: and the Andrew/Joe relationship in the morning? Scripted?
David Faber: We are not scripted at all. The only thing I have in front of me is an introduction to a guest or a number that just came out, economic number, something along those lines. But our back and forth, never. We know what we would kind of like to hit during the course of the show, but frankly we go all over the place. It is nice, it is a great freedom, it makes it fun. It frankly something we started with Joe Kernen 28 years ago when we launched Squawk Box. Then it was sort of unique. Now, everybody does it but then we petrified but let’s just talk and let’s not rely on something being written. That was sort of a unique moment, I think. It was before Morning Joe, it was before a lot of these kind of shows.
Willy Walker: You went down and did a special on ExxonMobil. I want to talk about oil generically, but two questions on that. One, will you keep doing those types of large, long format analysis of companies like ExxonMobil, does that format work on cable these days?
And then second of all, when you went down to tour and see ExxonMobil, what was the most impressive thing you saw as you toured their operations, or they took you out to see a drilling field or whatever else? I mean, I don't think most people in this room get to go see the inside of an operation like ExxonMobil. Was there something you saw that just was like, wow, this is what a massive corporation with massive capabilities can do?
David Faber: Yes. I mean, I was so happy to finally do that and get Exxon to agree to allow me to do a documentary on them. It's a while ago already we reported this, let's call it in early 2022, but the first half of 2022, and it aired in June of ‘22. I actually do have Darren Woods, the CEO of Exxon tomorrow, joining me on set, sort of as a hopefully a good interview to check in on. They put out some new goals in terms of low carbon solutions. I do those because they're the best thing you can do in terms of as a journalist. I feel like when they work, they are also collaborative and they're the most fun because you have cameramen, people you write it with, your producers, you have editors. It brings together so many different people. And there's nothing more gratifying than when you have a big group of people who can do a piece of work that really stands the test of time. And so I've done many of these documentaries through the years for CNBC. I don't do them as often now.
Willy Walker: Including just so everyone in the room remembers – he's the one who went down and did the MCI piece.
David Faber: It was after the fraud. Bernie Ebbers.
Willy Walker: Yeah, you ran across him in his old hometown.
David Faber: Yeah, Brookhaven, Mississippi.
Willy Walker: Yeah. You're, like, walking along with a camera crew.
David Faber: We were doing the finale of this documentary on fraud at WorldCom. And we went down to the town in Brookhaven, where he lives. But really, it was just my summation. We had all these cameras. It was beautiful. And then Bernie Ebbers pulled into town in his pickup truck. I'd been trying to interview him for nine months! And then he said, “Hey, David, welcome to Brookhaven.” I was like, “Hi, Bernie.” It was a moment. I said, “Bernie, how about an interview?” He's like, “No, I can't do that, David. You know I can’t.” And my producer, Glen, smartly said, “Why don't you take him for a walk?” It was the weirdest thing. We walked through this little town past the barbershop, and I had a cameraman in front of me with a boom mic. And then we had this other camera on a… what they call it. Words escape me now, it's not good when you're on TV, you can't. Way up high in the air and sort of capturing the whole town because this was for my summation, we were going to have a long shot and then close up. Anyway, we did this walk through town where I asked him all these questions. And of course, then they ended up using that interview in the trial that convicted him and sent him to prison for 25 years.
Willy Walker: Wow.
David Faber: Yeah, He got let out and he passed away not long ago. And he didn't deserve 25 years. Not at all. Right here downtown.
Willy Walker: So you said you have Darren Woods tomorrow morning. Oil's at $70 interestingly, since the Hamas terrorist attack…
David Faber: We talk about oil all the time. I'd never been to the Permian. I don't know if you've ever been to the Permian Basin where almost all of our oil comes from at this point. I mean, the Bakken is still in Dakota, but mostly it's the Mideast of the United States. I sit there talking about it every day. I was like, I got to go. I've got to see it. And so there's nothing that can replace that, seeing how what's going on there, their facilities, the size and scope. You don't want to be there, by the way. It's really not a particularly hospitable place.
We're on the Mexico side. It's Mexico and Texas. But it was great because now I know, I kind of have a much better sense of how it works. I also went to Guyana, which is becoming one of the largest oil producers in the world, and we flew out to what you call a rig. Oh, I forget. I always forget the acronym, but it was unlike anything I've ever seen. I mean, you cannot imagine the size and scope of these projects. And you know, lights are on, right? That's all we really care about. Or there's gas at the pump or whatever it may be. What has to happen and what goes on to make life run properly is incredible. And so it does take me closer to that. And it was helpful.
Willy Walker: So you won't ask Darren Woods tomorrow morning where oil is going to go, but we're at 70 bucks…
David Faber: I might actually, because it's down so much lately.
Willy Walker: Yeah, it's down.
David Faber: And he won't have a great answer, I'm sure.
Willy Walker: But what's so interesting about it, I think, is that you look at it since the Hamas terrorist attack on Israel and it's done nothing but come down from there. A lot of people when that happened said we've got conflict in the Middle East. We're going to think back to 1972 when Saudi embargoed the United States and didn't send oil over here. Obviously, the relationship between the United States and Saudi Arabia is dramatically different today. But at the same time, it's unbelievable. If you look at the chart literally from that point to now, it's just do nothing but come down. By the way, so is the ten-year. But we'll get to that in a second. Anything on that, I mean, is it just because of our domestic production that you just talked about coming out of the Bakken?
David Faber: Do you know how many barrels a day we're producing right now in this country? 13.2 million. Yeah, that's the new high.
Willy Walker: And our needs are at 17?
David Faber: We're almost very close, if not above.
Willy Walker: I think we were at 20 million a day in ‘22. 17 today.
David Faber: Usage. We've never been higher in production. That helps. 13.2 million helps. We could be doing more, but we're doing a lot.
OPEC is sort of trying to, it's also about people's view of future demand right now. That's why the January contract, I think, is trading where it is. And there is still a view that things are slowing or not a view things are slowing. The question is, will we have a recession? So that's still sort of working its way through. And obviously it's a very different world than it was in 1973. So anybody who sort of was taking the template from 50 years ago, that really isn't the way things are right now. That said, doesn't mean this isn't a dangerous situation that could result in a very different price for oil. You know, Iran is obviously pumping, but we know where their oil goes – to China.
Willy Walker: But they're only about 2 million barrels a day.
David Faber: They are. China's obviously getting it from Russia, too. And then they got a lot of other suppliers potentially and then generating, obviously, electricity there is still a lot of coal, although they are also the biggest solar in the world.
Willy Walker: You mentioned soft landing, hard landing. Talk for a moment. You speak to everyone. You speak to bank CEOs. You speak to real estate developers. You speak to tech CEOs. Right now, you had Brian Moynihan yesterday from Bank of America. Moynihan gave a pretty sanguine, I would say, view of BofA right now says soft landing for 2024. Are you hearing anything to the contrary?
David Faber: In the financial world, the one who stood out for being perhaps a little more concerned is Jamie Dimon. We call him Hurricane Jamie, you may recall, nine months ago. I'm not even sure, maybe even more. He's like he said, there's a hurricane coming and he's very concerned. He's talked about rates potentially hitting as high as I think it was six or even seven.
Willy Walker: Seven, I thought was what he said.
David Faber: Otherwise, many of the bank CEOs certainly have been much more positive. And he's downgraded his hurricane to like a tropical storm. Generally, nobody is saying things are bad. Pretty much across the board unless you're sitting on a big building in midtown that's an office space, you know, then things are bad.
Willy Walker: Know your audience, David. Careful.
David Faber: That's for you guys to tell me about. Not me to tell you about or me to ask you about. Well, because obviously, you know, you've forgotten more about this than I know. But when it comes to the general economy and speaking of CEOs, as often as we do, I have to say for them almost entirely, you're going to hear more or less consumers are still holding up.
Willy Walker: Your colleague Steve Liesman has been excellent on that one. Steve has been saying all year long, everyone's been saying the U.S. consumer is going to falter. And on that you add your split screen on the day that the CPI print came out three and a half weeks ago, and there was Steve saying everyone's been calling for the consumer to fail and the consumer has not failed yet.
David Faber: No, and they haven't yet. And we're all looking at excess savings and everybody measures excess savings to try to understand how much firepower is left, the lowest end. And by that, I mean people who sort of live paycheck to paycheck. There is stress there. I'm hearing that more often.
And the credit card data isn't always a great tell there because frankly, a lot of those people still use cash. So there's that weakening. That's it. Otherwise, from what I hear, at least from my vantage point, generally quite positive.
I think CEOs are preparing for things to get tougher. We had the Walmart CEO on this morning was my interview. Doug McMillon. But they’re a pretty good barometer.
Willy Walker: I think the quote was that the consumer is watching their spending more closely today than they were.
David Faber: Yes, But not in any way dire or even, frankly, particularly worrisome right now.
Willy Walker: One of the things that I've heard a lot of recently that I've been checking consistently with bank analysts is this narrative that the consumer is failing, and the credit card debt has gotten to $1 trillion of outstanding and that their credit card defaults are going on all over the system.
David Faber: Mm hmm.
Willy Walker: They're not. I mean, you look at the credit card portfolios of Discover, the Amex, JPMorgan Chase, and everybody. And right now, the default ratio is up at 2.4% of outstanding, which is still 120 basis points below the historic average over the last 30 years. Now, it's up from 1.2% last year because we were coming out of the pandemic, and everyone had gotten their checks from the federal government and was paying their credit card bills on time. So it looks like it's doubled, which it has, which scares people. But as far as the normalized 30 year average, it's 120 basis points below it. And so, yeah, the consumer is worse off today than it was a year ago. But still, from a historical standpoint, it's still hanging very strong.
David Faber: All true.
Willy Walker: Yeah.
David Faber: In fact, I rely on you to provide those kinds of statistics to me. Sometimes during the show, Willy will text me, which I always enjoy.
And just fill me in on little things. It's helpful, actually. I get a lot of texts during the show, which is kind of fun from various CEOs or other people, and it helps make me seem much smarter.
Willy Walker: I would say one of the great joys, I will say, one of the great joys for me is to be because I'm in Denver and I'm waking up in the morning watching him to send him something saying, you ought to ask him this. And all of a sudden, about three minutes later, I hear so what do you think about this? David would say It's a great question. It was great.
I want to get a couple predictions from you before I then open up for a couple of questions and then let everyone get back to having a drink. The first thing is you're typically asking these questions. We've got a Dow at 36,000 roughly today. Go out a year from now. Are we up, down, or sideways? Come on.
David Faber: No, I will not do it. I won't. What I have to say about the market is useless.
Willy Walker: It's not. You engage and talk to the most insightful people anywhere.
David Faber: Yes, Thank you. And I have no idea what's going to happen to the stock market. None. And I'm sure I would be wrong.
What I would offer is this, though, I think and I'm starting to hear this more often and it's something we all should be thinking about. Although public markets are not great. They're not working that well. I don't think they are as reflective of fundamentals as they should be. The power and size of these algorithmically driven firms, the Citadels, the DE Shaws, the Two Sigma’s, the Renaissance, Millennium, those algorithms, I mean, some days I'm like, I don't know what's going on here. This doesn't make sense. And I'm sure I know that it's the quants. It's algorithms that are doing this. And that's only going to increase. The fact you asked earlier, why do we talk about seven stocks? Because they represent 30% of the S&P's market value. That's also not great.
There's some market structure issues that's what I will tell you. We're going to be hearing more about that next year than we did this year.
Willy Walker: Do you think we'll hear about that? Do you think Gary Gensler and Elizabeth Warren will get the memo?
David Faber: I don't know. It's a good question. You tell me, is Gary Gensler going to still be standing in front of his fireplace?
Willy Walker: I'd love that. Gary Gensler has a very nice fireplace in northwest Washington, DC, in his home, which every time he goes on CNBC, you see is the backdrop. And it's sort of like, isn't the federal government supposed to be back at work? And there's Gary Gensler passing regulation after regulation on publicly traded companies and making life harder and harder for us with seemingly no engagement with the outside world.
David Faber: I mean, they're still not back in the office really, I don't think very regularly.
Willy Walker: No, no.
David Faber: He hasn't been on lately. I gave him a lot of you know, I actually asked him, I'm like, are you ever going to get out from in front of the fireplace? And he gave all these reasons why they're operating great in the SEC and everything's working well and everybody's happy.
Willy Walker: And then he hasn't come back on.
David Faber: No, not with me. Yeah, I don't know that we are going to hear more about market structure concerns or the power of these algorithmically led firms. I mean, listen, they're doing well. The money flows to them to a certain extent. Mutual funds continually underperform. Hedge funds underperform, at least those that are not as I'm describing.
Willy Walker: The whole issue on private capital versus public capital is a very big one. And what you're getting Washington doing is driving more and more companies to stay in the private market or be bought by a private equity firm versus going public.
The burden that they're putting on publicly traded companies is making it so fewer companies want to be public. And then the irony of the whole thing is that someone like Elizabeth Warren wants the common shareholder to be able to benefit from the equity markets, but she's blocking that out by making them all stay as qualified investors in private equity funds.
David Faber: All true. And then you've got the enormous growth of private credit, right. Which is now enabling so many companies, as you point out, to stay private forever.
Willy Walker: Right.
David Faber: Or to go private. That's only going to continue. Private credit has gotten a lot more. It's getting more scrutiny. Obviously, the banks are yelling and screaming about it because it's disintermediated them in a lot of different areas. And they're talking about a lack of regulation. But, you know, the private credit guys are coming back with some pretty strong arguments as to why they don't deserve the same level of regulation. Again, I think that will be more of a that will continue to ramp up in terms of focus next year.
Willy Walker: So my final question then and then I'm going to open up to a couple of questions and then let everyone get back to it is if you won't give me whether the equities are going to go up or the ten year is going to go down, anything your friend Steve Liesman is saying that is contrary to the narrative right now that says that we get into ‘24 and the Fed starts cutting?
David Faber: No. Crisis is always very difficult to predict, right? We didn't, I mean, the bank that many banking crisis we had that we obviously got passed yet more seem to have gotten passed like that came out of nowhere. Literally nowhere. So I can't say that we're not going to have something that changes everything. And who knows, next year is going to be an election year.
Willy Walker: Oh, yeah. I was going to ask you that. I was going to ask you my final question: is it Trump, Biden, or somebody else?
David Faber: Don’t ask about that. Get a show of hands. Do you think I have any idea?
Willy Walker: All right. Show of hands. A lot of people like somebody else.
Willy Walker: I'll do a show of hands here. I'll ask it in the exact same way. Trump, Biden, or somebody else? Show of hands. Wow. (Audience unanimously said, somebody else.) You can mention that on air tomorrow morning.
David Faber: You're all making me feel better. A little bit better. I hope that's true. It's going to be a tumultuous year, most likely in some ways, certainly in that arena. But, you know, we seem like we're on a pretty good path. It seems impossible, though, that Powell will engineer a soft landing. Like it's just hard to do, right?
Willy Walker: 100%. And quite honestly, I don't think he's getting enough credit for having done it. But time will tell whether we actually do have the soft landing.
I would say the one other thing on the Trump-Biden thing, I saw Biden in Denver last week. Because he didn't go to the environment conference, they filled up his calendar. And I got a phone call from Senator Hickenlooper saying, “Hey, can you come to this thing with Biden?” And so I had a little bit of time with the President before he went out and gave public remarks. And he was extremely nice and engaging in private. But then he got out to talk to an audience that was no bigger than this. There was no energy, and I mean zero energy in the room.
As someone said to me, the issue he faces is that that doesn't change over the next year. So in other words, like, you can sit there and say, Russia can call up tomorrow and say, we're out of Ukraine. The economy can go 4.5% GDP growth between now and the election. And unemployment can go from 3.7% down to 2.5%. He still isn't going to change the one factor that's holding people back from voting for him. Which is a very interesting calculus, if you will, as it relates to an incumbent. I don't know that any incumbents ever faced something that they can't in any way manage.
David Faber: Right. I know. Well, we haven't had an 81 year old President before. And unfortunately, or however you view your politics are one that is fully 81, you know. Yeah. And I was in the White House as well on Friday at the press party. I went with my wife, and it was a big group, and I couldn't even hear him.
Willy Walker: Neither could I. My parents were sitting next to me in a room this big. And they were right there, and they couldn't hear him. Both my parents are hard of hearing. They have hearing aids. But they turned to me afterwards and said, we didn't hear a thing he said, it is a little tough to run for president when you can't be heard. Anyway, enough on all that. Let me open it up to a couple of questions.
David Faber: I was encouraged, though, by the vast majority that there's going to be something different.
Willy Walker: If you look at Robert Kennedy, he put something out yesterday saying, I'm polling better than any independent ever has. I don't know whether that's actually factual or not. Questions?
Ivy Zelman: Great to see you. With respect to the amount of fiscal debt and therefore annual interest expense our government has to obviously finance thinking about what the impact that will be on the Treasury, you know, long, long duration treasuries. And you guys talk about that because I think we're all looking at rates and assuming the Fed cuts, that means the long rates are going to come down. But what about all the supply that needs to be issued?
David Faber: You know, it's funny. We spent a few weeks there, particularly as we were heading towards 5% where Sarah and I talked about this every day. I don't know if you guys followed Jeffrey Gundlach at all from DoubleLine Capital. He was a guest and he posited that the Fed is going to be forced to lower rates, otherwise the US budget will be swamped and that'll be it. Now, if you ask Chair Powell, he's going to be like, I have nothing to do with fiscal decisions. I'm only focused on two things, right?
Willy Walker: And you asked the head right across the thing. You said, hey, what about this thing that we just heard? And he looks at you and goes, Not my issue.
David Faber: Not my issue. The numbers are the numbers. I mean, if we stay anywhere near our current interest rate, given the amount of refinancing we have to do, not to mention the deficits that we have to finance. We're going to look at $2 trillion interest costs within five years. It'll be well more than double what the defense budget. How are we going to deal with that? What are we going to do? I mean, what are we gonna do?
Ivy Zelman: I just challenge the idea that you have a soft landing with that backdrop with understanding fiscal debt and therefore the government issuing all of these long duration bonds to finance it. So I don't know how you get a soft landing if the government can't finance itself well.
David Faber: I mean, we all look at the auctions more closely than we had previously, and we remember the market went up when we saw the maturity schedule not that long ago. I mean, who's focusing on the maturity schedule that the Treasury is going to be issuing? That said, they're still selling the stuff. There hasn't been a day when it isn't actually selling. Maybe that day will come.
Willy Walker: There was a failed 30 year auction two weeks ago, one where they went, and it gapped out by 50 basis points, and they have to stop the auction when it caps out by 50 basis points. And so it was a failed auction on 30 year bonds. But that's I think one of the main reasons for that is that everyone's moving towards the short duration because they think that you can go buy a two year treasury and you can get the Fed cutting and that's going to look really good because you're gonna be in the money on the shorter paper. So money is moving toward shorter paper rather than the long end of the curve.
David Faber: Yeah, it's a great question. It is something that at least we're aware of. And like everybody, I have no idea. But it's something we're not probably talking about as often as we should, although we are at least trying. I mean, I try to engage the Fed. I mean, he was having none of it.
Willy Walker: No, it was amazing. He literally looked right at David. I watched it because I was sitting there just shooting him some stuff for the interview. And he goes, what about this? And he just looks right at David and goes, “Not my issue. Not my issue at all.” Yeah.
Audience member question: So we started today talking about Elon Musk as the biggest name in business news. 30 years ago when you started, that was probably Jack Welch. We've seen a lot of people sit in that most talked about seat in that 30 year span. It tends not to end well. Whose fall from grace has shocked you the most from that business pinnacle to where they finished up.
David Faber: Wow. It's a great question. And when somebody says it's a great question to the questioner, it means I have no idea.
Willy Walker: But you do.
David Faber: I do?
Willy Walker: Yeah. I mean, is it Mike Milken? Is it Bernie Ebbers?
David Faber: Milken I think of is an incredible story because it was the fall. And that was sort of when I was beginning my career in journalism then started in ‘87 and that was ‘89, ‘90. The fall and then the rise, which I mean, I would love to tell that story. If any of you are close to Michael Milken, put a good word for me. I mean, I do talk to him, but he's never wanted to actually discuss the fall.
Willy Walker: Yeah.
David Faber: That's a great point. Yeah, I mean. Immelt No because it was so slow and steady…
Willy Walker: He only destroyed $400 billion in market cap. That's all he did.
David Faber: He made a lot of poor decisions. You know, when you keep paying too much for stuff and selling stuff, for too little. It catches up with you eventually. I don't know. I mean, I'm going to think about that. It's not something right off the top. Of course we all watched Sam Bankman-Fried, but I could care less about him. He wasn't like anybody in my world at all. I had no sense. And he certainly didn't occupy any position for any period of time that we cared about.
I think of Welch differently. You know, you may say that it was a fall, and it certainly was, although I don't think of it as a complete fall from grace in some ways. I think (Elon) Musk is singular in how consequential he is, even more than (Steve) Jobs. Even more. I mean, maybe not his impact per se, but right now he's connected in so many different ways. Obviously, Tesla sells more models than any car in America and sells clearly more EVs than any company. He's launching satellites all the time. He is basically the main provider of those services to NASA and on and on from there – I mean, he's so critical to the effort in Ukraine because of StarLink. He's sort of unique. And obviously I forgot about Twitter. He still has great influence potentially. So are we watching his decline? I do think I wonder whether he's going to like something bad is going to happen with him.
Willy Walker: The one thing your interview with Musk brought out was his statements about autonomous vehicles and how he believes that autonomous vehicles can be worth 5X what a normal vehicle is because of the time it frees up, but because it's going to drive you to the office and then it's going to go work while you're in the office. I just think about that and the implications for parking. Because all the people in this room are in the real estate industry. We're all building buildings as far as multifamily, as well as office and retail that have a certain number of parking spaces per user. If his vision comes true and by the way, you pushed him on this in your interview and you said, “When do we have fully autonomous vehicles?” And he said, “This year.”
David Faber: I know, but he said it every year for the last seven years.
Willy Walker: Exactly. No, no doubt.
David Faber: And it will happen eventually. And whether or not his vision of robo axis essentially where you pay more for it, but basically, you're splitting revenues with Tesla which just increases the margin dramatically because it's when you're not using it, it's out there being used. Whether that ever comes to fruition, I think, is unclear.
I remember it's at least 6 or 7 years ago Travis Kalanick. Remember that name? He was the founder of Uber. And I was having a meeting with him, and he was in an office somewhere. He's looking out the streets of Manhattan. He said, “There’s not going to be any garages.” It was like 2017, it was before they went public. So I don't remember, frankly. But it's like, “Next year or two years,” He was promising, “By 2020 or 21, the streets of Manhattan would be full of autonomous vehicles. Think of it, no garages.” And then he also said something “At the hospitals, nobody's going to get injured in car accidents. The emergency rooms are going to be empty.” I was like, that's weird. I don't know if that's true, but so we're still waiting and obviously I don't know what he's up to anymore.
Willy Walker: All right on that, David. Thank you.
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