Speaker 1: This is Bloomberg Daybreak Asia for this Monday, March twenty
Speaker 1: seventh in Hong Kong, Sunday March twenty sixth in New York,
Speaker 1: and coming up today, Minneapolis Fed chief Neil Kashkari says
Speaker 1: recent bank turmoil has boosted the risk of a US recession.
Speaker 1: The US may boost emergency help for banks, and Credit
Speaker 1: Suite could face a possible probe and discipline for how
Speaker 1: the bank was run even before its collapse. Putin talks
Speaker 1: establishing basis for tactical nuclear weapons. Taiwan loses Hon Doris
Speaker 1: as an ally. Taiwan's President Tide to visit the US
Speaker 1: this week. Singapore President lad of Asit China. I'm Ed
Speaker 1: Baxter with Global News. That's all straight ahead on Bloomberg
Speaker 1: Daybreak Asia, the business news you need to start your
Speaker 1: day in just one fifteen minute podcast available on Apples, Spotify,
Speaker 1: the Bloomberg Business app and everywhere you get your podcasts.
Speaker 1: Good morning, I'm Brian Curtis and I'm Doug Prisoner. Here
Speaker 1: are the stories we're following today. Minneapolis Fed President Neil
Speaker 1: Kashkari saying the recent bank turmoil has increased the risk
Speaker 1: of a US recession. Is Kashkari speaking on CBS Face
Speaker 1: the Nation program right now. What's unclear for US is
Speaker 1: how much of these banking stresses are leading to a
Speaker 1: widespread credit crunch, and then that credit crunch would then
Speaker 1: slow down the economy. This is something we are monitoring
Speaker 1: very very closely. That's Neil Kashkari heard right here on Bloomberg.
Speaker 1: Kashkari said that the US banking system is sound and
Speaker 1: banks have strong capital positions and a lot of liquidity,
Speaker 1: but he added that he will take some time for
Speaker 1: the current problems to fully work themselves out. Kashkari also
Speaker 1: thinks it's too soon to judge what the bank crisis
Speaker 1: means for the economy and for monetary policy. The Fed
Speaker 1: will meet next on the second of May. Meantime, we
Speaker 1: are hearing US authorities are making moves to help all banks.
Speaker 1: This would include First Republic. That story from Bloomberg Susanna
Speaker 1: Palmer Our sources authorities are considering expanding an emergency lending
Speaker 1: facility for banks in ways that would give First Republic
Speaker 1: Bank more time to shore up its balance sheet. Officials
Speaker 1: have yet to decide on what support they could provide.
Speaker 1: First Republic if any, and an expansion of the Federal
Speaker 1: reserves offering is one of several options under consideration. Even
Speaker 1: short of that step, watchdogs see First Republic is stable
Speaker 1: enough to operate without any immediate intervention as the company
Speaker 1: and its advisers try to work out a deal to
Speaker 1: shore up the balance sheet. Representatives for the Fed, FDIC
Speaker 1: and First Republic decline to comment. Susanna Palmer Bloomberg Daybreak Asia.
Speaker 1: Former Treasury Secretary Larry Summers wants US regulators to pledge
Speaker 1: that they'll back uninsured deposits in any banks that fail.
Speaker 1: Summer has said that this would provide very substantial confidence
Speaker 1: to the banking system. They can do that within their
Speaker 1: existing authorities simply by being clear that in the event
Speaker 1: of failures, given the highly fevered environment with respect to
Speaker 1: contagion right now, they are prepared to use systemic risk
Speaker 1: exemptions to allow the FDIC to pay off depositors with
Speaker 1: assurance that those funds will come from the banking industry.
Speaker 1: Summers also said that officials should recognize that regulation now
Speaker 1: needs to take account of the digital banking and high
Speaker 1: interest rates that exist, because he says that's a condition
Speaker 1: where deposits can shift much faster than in the past.
Speaker 1: We are hearing two banks are both vying for what's
Speaker 1: left of Silicon Valley Bank. They are Valley National Bank Corp.
Speaker 1: And First Citizens Bank Shares. SVB collapsed earlier this month
Speaker 1: and then was seized by the FDIC. We are told
Speaker 1: these two regional banks submit that separate bids before a
Speaker 1: deadline last Friday. Now, the FDIC has been seeking to
Speaker 1: sell SVB for about two weeks. Now, a winner could
Speaker 1: be chosen before the end of the weekend. No final
Speaker 1: decision has been made, and the FDIC could decide to
Speaker 1: hold onto SVB or sell it to someone else Bran
Speaker 1: and to another troubled bank. Credit Swiss may face a
Speaker 1: probe and disciplinary action over how the bank was running
Speaker 1: the lead up to its collapse and its eventual takeover
Speaker 1: by UBS. That story from Bloomberg. Jevon Mehn, the Swiss
Speaker 1: banking regulator FIMMAH, told the Swiss German newspaper that Credit
Speaker 1: Suisse has a cultural problem. That problem translated into a
Speaker 1: lack of accountability. FIA president Marlene Amstead said it is
Speaker 1: not clear who is responsible for what policies and that
Speaker 1: led to a negligent handling of risks. She said disciplinary
Speaker 1: proceedings remain an open question. FIMMA has been accused of
Speaker 1: failing to act early enough, and said it denied that, saying, quote,
Speaker 1: we intervened early and intensively in Hong Kong. I'm von Mann,
Speaker 1: Bloomberg Daybreak Asia. I'm Brian Curtis, along with Doug Krisner. Doug,
Speaker 1: you know, there's a pretty big gap between what the
Speaker 1: equity markets are doing with the newsflow that appears to
Speaker 1: be screaming at us. We're taught to respect the price action,
Speaker 1: but it may be odd to some that the SNP
Speaker 1: five hundred was actually up last week. It's slightly up
Speaker 1: for the year, and it's still right in the middle
Speaker 1: of a range of thirty eight hundred to forty two
Speaker 1: hundred that we've been in for about ten months. And
Speaker 1: I would argue as well that the ten year treasury
Speaker 1: is also at about the same level that it was
Speaker 1: in September. So even though I mean, the real volatility
Speaker 1: is at the short end of the curve, and that's
Speaker 1: as investors try to price out this terminal rate, and
Speaker 1: that one has been moving and we have seen a
Speaker 1: lot of strength, I think I'll agree with this, Brian,
Speaker 1: in the tech space a big beneficiary, kind of a
Speaker 1: haven bit, I would argue, especially when you consider that
Speaker 1: some of these companies have very strong cash balance sheets
Speaker 1: or cash positions on their allan sheets, and in a
Speaker 1: time like this, where there's so much turbulence, so much uncertainty,
Speaker 1: particularly as it relates to the banks, tech has become
Speaker 1: a bit of a safe haven. And I think that
Speaker 1: makes the Fed's job a little easier because you can
Speaker 1: imagine how difficult it might be for the Federal Reserve
Speaker 1: to be continuing to raise interest rates if you had
Speaker 1: the SMP five hundred falling two percent every day. I
Speaker 1: wanted to mention as well that you probably pick up
Speaker 1: on this line from Neil Kashkari as I did, where
Speaker 1: he said that it will take time for the current
Speaker 1: problems to work themselves out, if only they would work
Speaker 1: themselves out well. And I think that's what Janet Yellen
Speaker 1: is trying to do. By sending the message to the
Speaker 1: market that the government in some shape or some form
Speaker 1: has the back of some of these banks. That would
Speaker 1: help to engender a bit of confidence. But on the
Speaker 1: inflation side, it's going to be very interesting to see
Speaker 1: what happens in the US at the end of the
Speaker 1: week with that personal consumption expenditures price index. It really
Speaker 1: may put the FED in an even more difficult situation
Speaker 1: with the volatility and the concern about the financial system
Speaker 1: on one hand, and this upward pressure that remains where
Speaker 1: the inflation story is concerned. Yeah, and I was only
Speaker 1: half joking about Kashkari's line. He probably didn't really mean
Speaker 1: that these will work themselves out. He's probably more in
Speaker 1: the camp that Powell and Yelling are in, as you
Speaker 1: suggest that some intervention will be needed and will be forthcoming.
Speaker 1: So that's kind of where we stand on this Monday morning.
Speaker 1: All right, it's time now for Global news. Russian President
Speaker 1: Vladimir Putin says that he is preparing to move tactical
Speaker 1: nuclear weapons into Belarus. At Baxter has Global News from
Speaker 1: the nine to sixty newsroom in San Francisco. Ed. Yeah,
Speaker 1: that's exactly what he's saying. Brian. Putin is saying that
Speaker 1: ten aircraft capable of carrying nuclear warheads have already been
Speaker 1: prepared in Belarus and the storage facilities for the weapons
Speaker 1: will be completed by July first. Putin says a US
Speaker 1: as long deployed tactical nuclear weapons on the territory its allies.
Speaker 1: US National Security Council spokesman John Kirby on CBS has
Speaker 1: heard here on Bloomberg says, although US intelligence reports no
Speaker 1: significant movement of nuclear weapons, yet he does see obviously
Speaker 1: we would agree that no nuclear war should be fought.
Speaker 1: No nuclear war could be one clearly that would cross
Speaker 1: across a major threshold, and the US says it sees
Speaker 1: no idea now to adjust its policy whatsoever. China has
Speaker 1: also brought up the discussion today, as Congressman Mike Gallagher says,
Speaker 1: the free world had better understand how the Putin She
Speaker 1: relationship works. You need to understand that Putin is she
Speaker 1: Jumping's junior partner. He is She's agent of chaos. Is
Speaker 1: tethered goat in Europe, and if we try and separate
Speaker 1: these these problem sets, I think we're gonna result in
Speaker 1: a jew political posture that's ineffective. Also in the region,
Speaker 1: there the head of the UN's Nuclear Agency will travel
Speaker 1: to this Operasorifia plant on Wednesday, and Russia's claiming a
Speaker 1: Ukrainian drum hit a town about one hundred forty two
Speaker 1: miles south of Moscow. The claim to date has not
Speaker 1: been verified. Taiwan's President Siang Wing to visit the US
Speaker 1: this week. An NSC spokesman, Kirby on CBS has heard
Speaker 1: here on Bloomberg with Margaret Brennan, says, in spite of
Speaker 1: China's protestations, this is nothing out of the norm. I
Speaker 1: think it's important to remember what this is. This is
Speaker 1: a transit, their normals. She's done sixth to long transit.
Speaker 1: She's done sixth Tension with China's never been this high.
Speaker 1: There we are and look, we understand that. And the
Speaker 1: president has said clearly he believes it's important to keep
Speaker 1: the lines of communication with China open. He wants to
Speaker 1: have another conversation with President. She will move in that direction.
Speaker 1: But these transits are normal, particularly for this particular president.
Speaker 1: So I will visit New York and California. Meanwhile, Taiwan
Speaker 1: has lost an ally of decades after Honduras sides with China.
Speaker 1: Honduras now saying it recognizes Taiwan as part of China.
Speaker 1: China Honduras will have no established, no diplomatic ties at
Speaker 1: the ambassarial level, effective immediately. Now it's China and Honduras.
Speaker 1: Brazil's President Luda da Silva has postponed his trip to China.
Speaker 1: His administration says health reasons. It says flu like symptoms.
Speaker 1: Singapore Prime Minister at Lee Sang Hung will begin an
Speaker 1: official visit to China today as scheduled. Itinerary includes meeting
Speaker 1: with President Hijimping. Federal officials are touring the devastation in
Speaker 1: Mississippi today, a town of two thousand absolutely leveled. Aerial
Speaker 1: pictures show a total flattening, looking like a bomb. This
Speaker 1: is a Governor Tate reeves the resources of the people
Speaker 1: here in Rolling Fork, in throughout Mississippi need the help
Speaker 1: is owned the way and a Homeland Security Secretary, Alejandro
Speaker 1: Mayorcas says, it appears these events will continue to happen.
Speaker 1: It is heartbreaking to hear of the loss of life,
Speaker 1: to see the devastation firsthand. It is also, as the
Speaker 1: governor expressed, inspiring to see the people of Mississippi come together.
Speaker 1: Myorcas says federal government will help in any way possible.
Speaker 1: So far, the death count there in Mississippi is twenty five.
Speaker 1: Global News powered by more than twenty seven hundred journalist
Speaker 1: and analysts over one hundred and twenty countries in San Francisco.
Speaker 1: I'm Ed Baxter and this is Bloomberg. I'm Brian Curtis
Speaker 1: in Hong Kong along with Rashad Salana. This is Bloomberg
Speaker 1: GAB Break Asia. Our guest is Carol Schleife, CIO at
Speaker 1: BIMO Family Office. Carol, great to have you with us,
Speaker 1: and thanks for the double duty, the extra duty of
Speaker 1: a Sunday evening to join us here on the program.
Speaker 1: As we were saying earlier, all things considered, the markets
Speaker 1: are remaining relatively calm. Why first up, thanks for having
Speaker 1: me on calm. I think a piece of it is
Speaker 1: is we're definitely in that waiting c mode, trying to
Speaker 1: figure out will there be more fallout from the regional
Speaker 1: or the midsized banking issues going on in the United
Speaker 1: States where there'll be more global issues. But on the
Speaker 1: other hand, we have strong economic numbers coming through. The
Speaker 1: construction numbers are good, Employment is solid, Inflation is coming down,
Speaker 1: not as fast as the fit or anybody else wants,
Speaker 1: but it is coming down. And it's important to remember
Speaker 1: too when we get into the back half of the year,
Speaker 1: the comparisons will be easier. Just by default, so the
Speaker 1: math will make it look like inflation is coming down,
Speaker 1: even though we might not feel it as much. But
Speaker 1: I think the markets are definitely taking a weight and
Speaker 1: see approach, are gonna look at a lot of the
Speaker 1: incoming data for a change, which we haven't. We were
Speaker 1: told a couple weeks ago we were going to be
Speaker 1: a lot more data dependent than we've been able to
Speaker 1: be in the last couple of weeks. And it's actually
Speaker 1: really delightful, as you also mentioned earlier, to have a
Speaker 1: weekend that isn't full of all kinds of coming part medos.
Speaker 1: So I think the markets are taking that weight. Is
Speaker 1: see approach just trying to see how it plays out,
Speaker 1: And if you've got a diversified portfolio, that's probably the
Speaker 1: thing to do, to just sit tight and let the
Speaker 1: news fall and make sure that you're staying adaptable at
Speaker 1: the edges, but to sit pretty tight and just watch
Speaker 1: it come in, Carol. But what's happening with the banks
Speaker 1: is something which is noteworthy. I mean, sure they probably
Speaker 1: be backstop, but that's not the point here. Small bank
Speaker 1: deposits continues to plunge. We've got perhaps in you know,
Speaker 1: the next age eight fighting which comes up as well,
Speaker 1: like you to see another another big, big fool in
Speaker 1: those deposits, especially these small banks, and you know this
Speaker 1: is providing selling us. There's a liquidity issue here, and
Speaker 1: it's clear to the Fed as well, But you know,
Speaker 1: what should they be doing? What's twenty five basis points
Speaker 1: of mistake? Last time? I'm not sure it was a mistake.
Speaker 1: Although they were pushing, probably pushing the envelope, we probably
Speaker 1: would have preferred to have seen them sit steady some
Speaker 1: of the day. Some of the incoming data is still
Speaker 1: conflicting on those banks, because we've seen some anecdotal stuff
Speaker 1: that it's stabilized a bit in the last week or so.
Speaker 1: MP people are starting to come around psychologically, some are
Speaker 1: to the thought of I still want my dollars to
Speaker 1: be circulating in my local economy as opposed to the bigger,
Speaker 1: broader banks. But it is tough because you know, it's
Speaker 1: important to remember that when we had the GFC, we
Speaker 1: didn't even have the iPhone then. So we've got a
Speaker 1: lot more transmission, a lot more rapid transmission, a lot
Speaker 1: more ability for people to be able to shift stuff around.
Speaker 1: But they also have to remember, regardless of what the
Speaker 1: Treasury does for backstopping the banks. Anything up to two
Speaker 1: fifties already covered. Yeah, yeah, for most people that's enough.
Speaker 1: But you had a lot of institutions, a lot of companies,
Speaker 1: a lot of vcs that had, you know, forty fifty
Speaker 1: sixty million in Silicon Valley Bank. Hey, I was just
Speaker 1: noticing here that in the swapt's market there's a twenty
Speaker 1: six percent chance that the FED would move to four
Speaker 1: point eight six and that is and would be the
Speaker 1: terminal rate for the years. So if you put that
Speaker 1: together and by the end of the year it's at
Speaker 1: three ninety seven, so that would appear to be three cuts.
Speaker 1: And a lot of people are saying, wow, that's really
Speaker 1: in conflict with what the FED is saying because j
Speaker 1: Pala said didn't anticipate any cuts. But they are data dependent, right,
Speaker 1: so a lot can change. You don't really need to
Speaker 1: take palace comments to the bank, not necessarily, but we
Speaker 1: don't see cuts by year and the futureist markets have
Speaker 1: been discounting cuts against the FED and fighting the FED
Speaker 1: for over a year and that hasn't necessarily to be
Speaker 1: very prophetic either. And so I think a piece of
Speaker 1: it is is it's just in a long career. It's
Speaker 1: really interesting to me to see the dichotomy between the
Speaker 1: equity traders and the fixed income traders and the fixed
Speaker 1: income traders and what the Feds saying, because they tend
Speaker 1: to go more hand in hand and we just don't
Speaker 1: see that cut. I mean, that would imply a really
Speaker 1: seems like it would imply a really serious recession in
Speaker 1: order to get those cuts at the back end, and
Speaker 1: the curves all come down, and that's yeah. I mean,
Speaker 1: even the bond market has the two year at three
Speaker 1: point seven six percent, so that's fully one hundred basiness
Speaker 1: points below where the Fed funds rate is well. And
Speaker 1: the interesting thing is is depending on where banks price
Speaker 1: or deposits, that may slow the outflow of deposits because
Speaker 1: one of the things that a lot of points is
Speaker 1: I've looked at it as they said, look, banks aren't
Speaker 1: paying me to sit in deposits, so I'm going to
Speaker 1: move it into a money market to counter a short
Speaker 1: term treasury letter, and it's a short term treasury letter
Speaker 1: doesn't yield what a bank will give you on the deposits. Now,
Speaker 1: that'll pressure some of those banks that are pressure than
Speaker 1: that interest margin because the banks are forced to pay
Speaker 1: more to hold the deposit. But so it's tricky, and
Speaker 1: I think that's what the Fed's trying to do, sort
Speaker 1: of imply that the Fed's going to cut with all
Speaker 1: of this this very narrow tight rope. It's almost as
Speaker 1: if they were on a regular size tight rope and
Speaker 1: now they're walking on a thread because they're well, tell
Speaker 1: me Carrol here, I mean, let's all forget you know,
Speaker 1: we're talking about the deposit side of things. I mean, certainly,
Speaker 1: but you know, if you want to get a load,
Speaker 1: it's going to be much much harder, going to need
Speaker 1: more collateral. You're probably going to see spreads wide. Not
Speaker 1: on top of that, rejection rates are lightly to rise,
Speaker 1: and you know that could also spread the non banks
Speaker 1: and the consumer lending that that's focused on. So in
Speaker 1: a sense, that's in a way doing the fred's job
Speaker 1: as well, is it not. I think a piece of it,
Speaker 1: And I think it's important to remember that business goes
Speaker 1: on anyway. I mean, two people are my very two
Speaker 1: younger millennials are my very narrow circle of folks around
Speaker 1: me have signed mortgages in the last month, closed moved
Speaker 1: in the last couple of weeks and stuff still happened.
Speaker 1: You've still got you still got yes and no. I
Speaker 1: mean there are at the point too, because demographically you've
Speaker 1: got a whole big segment of the economy that's walking
Speaker 1: at it. Say, unless they were over seven percent, now
Speaker 1: they're down to six six and a half percent, and
Speaker 1: what if they go to eight or nine and were
Speaker 1: we want out of the city and we want a
Speaker 1: yard and a grill and a dog and yeah, so
Speaker 1: you know, and so you've got that piece. But you've
Speaker 1: also got businesses are still going to do stuff done
Speaker 1: because demographically you've got people in their businesses that said, look,
Speaker 1: I was in to sell this business in twenty twenty
Speaker 1: the pandemic hit, so I held off. Now I might
Speaker 1: not get quite what I want, but the buyer has
Speaker 1: some financing lined up, and stuff's still going to happen,
Speaker 1: not just as exuberantly as it would have if we
Speaker 1: were as the early days out of the pandemic. And
Speaker 1: so I think, okay, it just six system tightens itself up.
Speaker 1: Let's distill this down, Carol, in thirty or forty seconds
Speaker 1: into what you're doing in the markets. Where do you
Speaker 1: put fresh money to work? I think the short term
Speaker 1: treasury letters are still pretty attractive. I think looking globally
Speaker 1: at some things because you've been having a diversified folio,
Speaker 1: being looking again at MidCap small cap being not being
Speaker 1: a hero and taking too much risk, but having balanced
Speaker 1: and we actually like a lot of the industrial renaissance
Speaker 1: kinds of companies and where the spending is teeming up
Speaker 1: in a lot of those more traditional value oriented things.
Speaker 1: This is Bloomberg Daybreak Asia, your morning brief on the
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