Finance

David Tepper says the Fed has to cut rates at least two or three more times to keep credibility

Published

2 months ago

September 26, 2024

Business Finance News

David Tepper, founder and president of Appaloosa Management.

David Orrell | CNBC

Appaloosa Management’s David Tepper said investors should believe the Federal Reserve when it says it will lower interest rates because the central bank has now to keep credibility.

“You just read what these guys are saying,” Tepper said on CNBC’s “Squawk Box” Thursday. “Powell told you something… He told you some kind of recalibration. He has to follow through somewhat. I’m not that smart. I just read what they say and do they have conviction. They usually do what they say, especially when they have this level of conviction.”

The Fed last week sliced half a percentage point off benchmark rates, starting its first easing campaign in four years with an aggressive move despite a pretty stable economy. In addition to this reduction, the central bank indicated through its “dot plot” the equivalent of 50 more basis points of cuts by the end of the year.

Fed Chairman Jerome Powell said the cut was a “recalibration” for the central bank and did not commit to similar moves at each upcoming meeting.

“Probably two or three interest rates, 25 basis point cuts, they have to do, or they lose credibility,” Tepper said. “They’re going to do something besides the 50. You know, another 25, 25, 25 seems like it’s going to have to be done.” (1 basis point equals 0.01%)

‘I don’t love the U.S. markets’

Still, Tepper said the macro setup for U.S. stocks makes him nervous as the Fed eases monetary policy in a relatively solid economy like it did in the 1990s. The super-sized rate cut last week came despite most economic indicators looking fairly solid.

“It was around the 90s in that market where the where the Fed cut rates into Y2K in a good economy,” he said. “Rich in ’97 ….richer after long term credit, and bubble mania in ’99 early 2000 so I don’t love this. I’m a value guy.”

Gross domestic product has been rising steadily, and the Atlanta Fed is tracking 3% growth in the third quarter based on the resilience in consumer spending. Meanwhile, most gauges showed inflation is still well ahead of the Fed’s 2% target. However, there has been a slowdown in the labor market, which partly prompted the oversized rate reduction.

‘Sure as heck won’t be short’

The widely followed hedge fund manager said while the central bank’s move gave him hesitation, he certainly is not betting against U.S. equities because of the immediate benefits of easy policy.

“I don’t love the U.S. markets on a value standpoint, but I sure as heck won’t be short, because I would be nervous as heck about the setup with easy money everywhere, a relatively good economy,” Tepper said. “It would make me nervous, not to be somewhat long the U.S.”

Tepper, who is also the owner of National Football League’s Carolina Panthers team, revealed that he’s going all in on China on the back of a rate cut and a flood of support measures the government recently announced to shore up a flailing economy.

He added that he prefers Asian equities and European equities to U.S. stocks.

Finance

China’s Tencent sees opportunity in female Honor of Kings mobile gamers

Published

48 minutes ago

November 18, 2024

Business Finance News

Tencent’s Honor of Kings mobile game drew a record 33,000 fans to watch a final competition in Beijing on Nov. 16, 2024.

CNBC | Evelyn Cheng

BEIJING — Chinese gaming giant Tencent is betting on a rise in female players worldwide for its mobile game Honor of Kings, which rolled out to the U.S. and other countries in June.

Already a hit in China, the game drew a record 33,000 fans to a Beijing stadium on Saturday to watch two teams compete for a $3 million grand prize.

Surprisingly, many in the crowd were young women, reflecting how interest in mobile games has broadened out from the stereotypical male player in the days of console and PC gaming.

Launched in China in November 2015, the game’s appeal lies in its easy learning curve and relatively short sessions of around 15 minutes. Anyone with a smartphone can play for free in real time, on the go.

“Honor of Kings became an important way for me to socialize,” said Tianyun Gao, according to CNBC’s translation of her spoken Mandarin. She started playing the game in 2017 as a sophomore in college and became a professional commentator for the game’s competitions a year later.

Gao, an English major from Shanghai, has moderated Honor of Kings’ competitions in two languages, including an international event held in Riyadh, the capital of Saudi Arabia, in August. She said her hope is to see esports become as mainstream as traditional sports, noting that one of her inspirations is a Chinese soccer commentator.

Saudi Arabia aims to become a global hub for gaming and esports: Saudi Esports Federation

Tencent ramped up its global expansion plans for Honor of Kings this year, with its subsidiary, Level Infinite, in February announcing a $15 million investment in developing the game’s tournament worldwide.

An international version of the game has been available since 2016 under different names such as Arena of Valor, but the latest global push for Honor of Kings began in 2022. The game didn’t reach the Middle East until earlier this year and only launched in the key markets of North America, Europe and Japan in June.

Less than a month later, the game topped 50 million downloads outside China, according to the company.

Overwhelmingly mobile-focused

Growth in gaming among women stems largely from their preference in playing on their smartphones, without having to invest in consoles and other technology.

“Nearly half of female players play only on mobile platforms so we have a huge addressable audience,” said Jackie Huang, head of the Honor of Kings global esports division within Tencent Games’ TiMi L1 Studio. “Women make up a significant part of our player base but we want to see this continue growing.”

He said that 45% of gamers globally are women, and that the gender composition of Honor of Kings’ users is “relatively balanced. “We strive to provide users, no matter how they identify, with [a] high quality gaming experience,” Huang said.

Gaming is Tencent’s biggest revenue driver, with international games accounting for around 28% of the its overall gaming business in the third quarter.

The company also owns Riot Games, a developer whose PC-based League of Legends has become one of the most popular names in global esports with its own annual competition. Honor of Kings, which claims 100 million players a day, uses a similar format with two teams of five players each.

Such multiplayer games are the second-most popular category for female gamers, behind puzzles, said Xiaofeng Zeng, China-based vice president at gaming research firm Niko Partners. His analysis found that 95% of women prefer mobile games.

If Honor of Kings can hold first place in China, and achieve that position overseas, then Tencent can generate half its revenue from international markets, Zeng said. He said the game’s top overseas markets by revenue are the U.S., India, Malaysia, and Indonesia.

And in the key market of Southeast Asia, Zeng said that due to a low base, female players are growing two to three times more quickly than male gamers. A newly branded Honor of Kings global championship was held last month in Jakarta, Indonesia’s capital, with Malaysian team Black Shrew Esports winning the $300,000 first prize.

Early stages

For now, no matter how popular Honor of Kings may be among women, the competitions remain dominated by men. The two teams competing in Beijing on Saturday consisted only of male players.

Huang pointed out that the global championship this year featured a female player from France’s Team Vitality, which is also managed and coached by women.

He attributed the Honor of King’s popularity among women to the game’s playable characters that are also female. Many of the figures, each with different powers, are based on Chinese historical or mythological figures.

In 2021, organizers of the Honor of Kings competition in China also launched a tournament for female players. This year’s womens finals are set to take place in December, with a prize of around $41,000 for the winning team.

“The pandemic was a large accelerator of females into the games space and we have continued to see increased engagement from female gamers,” said Chirag Ambwani, SVP, gaming and entertainment, at SensorTower, which focuses on mobile games.

Reasons include specialized and easy to access content, he said, adding that gaming participation grew overall.

As for Honor of Kings’ global expansion, Ambwani said SensorTower research showed “healthy growth,” with average revenue of more than $5 per user in the U.S. and Canada.

Finance

Druckenmiller bought regional banks but health-care pick is his biggest bet

Published

6 hours ago

November 18, 2024

Business Finance News

Key Points

Billionaire investor Stanley Druckenmiller built a sizable position in regional banks and made one health-care name his biggest position last quarter.
Druckenmiller bought $115 million worth of shares in the SPDR S&P Regional Banking ETF in the third quarter, making it the firm’s seventh-biggest holding.