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Speaker 1: This is Bloomberg Surveillance. Historically, we have never seen oil

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Speaker 1: prices come off this far, this sharply without seeing a

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Speaker 1: production response of a significant magnitude. I think banks are

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Speaker 1: gonna have a very tough goal of it, and the

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Speaker 1: only way you're gonna make money over the next twelve

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Speaker 1: months to trade them. You wonder whether there's now a

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Speaker 1: case beginning to be built to say we need fiscal

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Speaker 1: stimulus around the world, and maybe the IMAP should begin

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Speaker 1: to help that process. Bloomberg Surveillance your link to the

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Speaker 1: world of economics, finance, and investment on Bloomberg Radio. Good Morning.

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Speaker 1: Michael McKey along with Tom keenan as promised City Group

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Speaker 1: has reported, and they have reported as we suggested they

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Speaker 1: might better than the estimates of analysts, coming in at

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Speaker 1: a dollar ten per share. The consensus forecast was for

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Speaker 1: a dollar three revenue of seventeen point six billion dollars,

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Speaker 1: is a little bit better than the seventeen five that

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Speaker 1: analysts had thought they might do. The story in the

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Speaker 1: headlines at the moment seems to be pretty similar to

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Speaker 1: what we have seen from other banks this week. Allison

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Speaker 1: Williams covers the banking industry for Bloomberg Intelligence and Allison.

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Speaker 1: I'm seeing headlines that say, you know, UM trading trading

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Speaker 1: revenue is down significantly, and uh, that's UM the weighing

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Speaker 1: on what the banks are able to do. So it

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Speaker 1: looks like UM the trading is weighing on the revenue.

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Speaker 1: But it does look like fixed income might have come

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Speaker 1: in a little better than expected, Equities UM a little weaker. UM.

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Speaker 1: You need to go through the numbers just a little

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Speaker 1: bit to make sure that excludes valuation adjustments. But I

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Speaker 1: think UM expectations were very negative coming into the quarter.

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Speaker 1: We saw the earnings revisions. I think it was like

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Speaker 1: a revision to earnings in the month. Heading into these reports,

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Speaker 1: we had City Group based Sickly saying at the end

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Speaker 1: of February they thought their trading was gonna be down,

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Speaker 1: fees down. JP Morgan gave sort of even more dire

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Speaker 1: down in trading and they beat that number. And I

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Speaker 1: think we're seeing the same thing from City Group to time.

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Speaker 1: Investment banking revenue million also comes in light also one

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Speaker 1: of the stories on Wall Street this quarter, that is

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Speaker 1: one of the stories, and I think the other story

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Speaker 1: is energy losses. So not necessarily a Wall street story. Um,

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Speaker 1: but a story more behind the bread and butter business

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Speaker 1: of lending. And City Group is one of the biggest

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Speaker 1: energy holders. They already did. Uh, they pre announced that

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Speaker 1: they were going to be taking reserve build four energy

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Speaker 1: and we're seeing that and the results. The other thing, um,

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Speaker 1: that I'm looking at is expenses, and I want to

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Speaker 1: sort of take a deeper look, not just at what

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Speaker 1: the headline number is, but cost control is important. Even

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Speaker 1: the fed outlook has been pushed out for further rate hikes,

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Speaker 1: investors are really more anxious on what are these banks

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Speaker 1: going to do on costs? How are they going to

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Speaker 1: protect the bottom line? Well, before I let you go,

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Speaker 1: let me let me expand on that, is it what

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Speaker 1: the banks are going to do or what they have

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Speaker 1: already done. They knew this was a bad quarter, So

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Speaker 1: have they already taken the steps they need to because

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Speaker 1: they wanted to have a better bottom line than it

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Speaker 1: appeared from their earnings. Well, I think the focus on

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Speaker 1: expenses is really how is this going to affect earnings

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Speaker 1: beyond the quarter? So, um, you know at City Group,

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Speaker 1: you saw the repositioning charge. They had sort of flagged

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Speaker 1: us ahead of time, basically talking about making changes to

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Speaker 1: to be able to bring down some costs while being

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Speaker 1: able to invest back in the business and to the

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Speaker 1: question is sort of what is the run rate? From here,

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Speaker 1: Alison Williams will let you go back and dive deeply

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Speaker 1: into the City Group numbers for those of you who

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Speaker 1: subscribe to Bloomberg Intelligence and of course everybody should. She'll

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Speaker 1: have her report out for you later today. City Group

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Speaker 1: net income falls twenty seven percent to three and a

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Speaker 1: half billion dollars, works out to a dollar ten a share.

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Speaker 1: That is better than the dollar three consensus forecast of analysts,

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Speaker 1: and that's being reflected in Cities share price early trading.

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Speaker 1: City stock up by two point seven percent. Bloomberg Surveillance

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Speaker 1: we should mention brought to you by kone Reisnick Accounting

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Speaker 1: Tax Advisory. During times of growth, crisis or economic uncertainty,

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Speaker 1: your business needs the cone Reisnick Advisory Group for the

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Speaker 1: strategies to move forward. Find out more at kne Reisnick

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Speaker 1: dot com. Well, along with the bank earnings, this week,

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Speaker 1: we have the Doha Summit meeting on oil prices. Ail

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Speaker 1: prices lower this morning as RAND says they will not

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Speaker 1: send their oil minister to this summit, and we have

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Speaker 1: the I m F World Bank sitting back observing all

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Speaker 1: of it and issuing somewhat pessimistic predictions about where we

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Speaker 1: might go in the second quarter. Down in Washington, we

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Speaker 1: find our friend Carl Weinberg. He's the chief economist, founder

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Speaker 1: of High Frequency Economics, there to observe all that happens

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Speaker 1: between the I m F and World Bank meetings. And Carl,

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Speaker 1: as you survey the world, are you as gloomy as

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Speaker 1: the initial sort of forecasts that we're getting from the

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Speaker 1: I m F from Mr Austin, from Madame Legarde? Oh sure,

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Speaker 1: my good morning. Yeah, I'm at least as looomy as

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Speaker 1: they are. And uh, I think that they're doing a

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Speaker 1: better job of pointing out some of the faults in

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Speaker 1: the world economy. You know, working in the political environment

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Speaker 1: that they're constrained to, they sometimes can't come out and

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Speaker 1: say everything that the staff might want to say. But

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Speaker 1: they've hit the nail on the head, I think, with

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Speaker 1: concerns about the the impact of falling commodity prices and

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Speaker 1: falling energy prices on developing country eas and the impact

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Speaker 1: of their problems feeding back onto the developed world. You know,

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Speaker 1: they their headline, I think captures at all. World growth

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Speaker 1: has been too slow for too long, and there's more

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Speaker 1: trouble lying ahead. Time to do something about it with

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Speaker 1: other policies than monetary policies. Though, we just had on

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Speaker 1: al from a Dell tech who said he thought the

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Speaker 1: I m F is behind the curve. In January, we

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Speaker 1: saw oil prices at twenty nine dollars, twenty seven dollars.

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Speaker 1: Now we're looking at forty forty four dollars. Even though

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Speaker 1: the price of oil is off today, commodities seem to

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Speaker 1: have bottomed. Is the I m F is high frequency

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Speaker 1: economics looking in the mirror? Well, I think the I

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Speaker 1: m F is a rather slow adjuster, all right. And

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Speaker 1: anyone who watches the I m F and reads the forecast,

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Speaker 1: I think knows that it takes them a while to

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Speaker 1: get to where the world is going. So they are

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Speaker 1: very much a lagging indicator of what's happening in the world.

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Speaker 1: And high frequency is you well known, Mike. We've been

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Speaker 1: very barished on the world economy for some time now,

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Speaker 1: words specifically about commodity prices, words specifically about repercussions of

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Speaker 1: problems originating in commodity producing countries reflecting back onto the

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Speaker 1: world economy through trade. And I've been talking with you

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Speaker 1: and Tom about trade problems in the world economy. But

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Speaker 1: as far back as last summer, so high frequency, we're

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Speaker 1: doing okay. We're staying ahead of the curve. As far

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Speaker 1: as the I m F is concerned, they're getting there.

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Speaker 1: And I think right now they're certainly sending the right

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Speaker 1: message to policymakers, which is they have to do more

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Speaker 1: on the fiscal side, and monetary policy may not be

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Speaker 1: working well. Where is the curve taking us from here? Well,

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Speaker 1: in terms of the world, I think that commodity prices,

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Speaker 1: as you point out, you know, they've got to be

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Speaker 1: pretty close to a bottom. I think it's time to

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Speaker 1: start looking for them to turn around. But even if

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Speaker 1: they level off where they are right now, we're still

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Speaker 1: at levels that are too low to support production of

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Speaker 1: many commodities even at current levels, And we're still at

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Speaker 1: levels that gently levels of commodity prices that generate income

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Speaker 1: of commodity producing countries that aren't enough to cover their

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Speaker 1: outstanding expenses. They're fiscal budget deficits. So the problems will

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Speaker 1: persist even if the commodity prices stopped falling. And unless

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Speaker 1: you can predict recovering commodity prices, and I surely am

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Speaker 1: not prepared to do that, um, then you're going to

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Speaker 1: see these problems continue to fester, starting in the emerging

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Speaker 1: world and then reflecting out. In other words, we're in

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Speaker 1: it for a while, Mike. The emerging world has been

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Speaker 1: able to watch the headlines for a very long time.

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Speaker 1: Have they reacted to the kinds of forecast the I

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Speaker 1: m F and and you are giving O our people

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Speaker 1: making the kind of adjustments they need to make in

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Speaker 1: emerging markets. Well, Mike, I think they're they're trying, or

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Speaker 1: they recognize the need. But you heard Madame mcguard's comments yesterday.

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Speaker 1: You know Brazil is in big trouble then, as well

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Speaker 1: as in big trouble, and Nigeria is a very scary case.

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Speaker 1: I mean, when your terms of trade turn against you,

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Speaker 1: there's a limit to what you can do, especially if

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Speaker 1: you're an emerging economy. So I think that you know

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Speaker 1: there are problems and there are facts, and the fact

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Speaker 1: is that this dropping commodity prices caused by excess supply,

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Speaker 1: not by shortfoll of demand, but by excess supply put

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Speaker 1: online over the last five years. This fallen commodity prices

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Speaker 1: makes the world a poorer place and there's going to

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Speaker 1: be losses of incomes, both on the developed and the

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Speaker 1: developing side of the equation. Well, how long does it

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Speaker 1: take to ring that excess supply out of the economy. Well,

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Speaker 1: that's the question. We don't know, Mike, and it seems

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Speaker 1: to me it took us five years to get into it.

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Speaker 1: It's not going to go away overnight. But there's no

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Speaker 1: resolution to this other than reducing the supply of the

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Speaker 1: potential supply of commodities that's out there. So, you know,

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Speaker 1: we see it in the oil market. You know, we've

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Speaker 1: seen you production of shells going down. We saw the

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Speaker 1: i A report yesterday that all looks very good. Shell

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Speaker 1: is going to come offline, but the potential is still

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Speaker 1: there for shale to come back as quickly as it

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Speaker 1: came offline, which is to say they're slacking the energy

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Speaker 1: energy industry, and any increase in price will just bring

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Speaker 1: those producers back online again. So we really have to,

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Speaker 1: you know, exhaust the supply and wait for demand to

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Speaker 1: match it or for supply to be really scrapped. And

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Speaker 1: there's no sign of that. Happening quickly, so I think

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Speaker 1: we're in it for a while. Here. We've got a

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Speaker 1: gloomy outlook and that's what the I'm of is telling us.

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Speaker 1: And kudos for them for coming out and saying it.

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Speaker 1: Kyl Weinberg of High Frequency Economics will continue our conversation.

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Speaker 1: He's nice enough to stay around for another fifteen minutes

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Speaker 1: or so before he gets in lines for Capital's tickets

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Speaker 1: on Saturday night. As the NHL playoffs continue, Tom Keene

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Speaker 1: is still searching for a team. His Montreal Canadians haven't

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Speaker 1: twenty four years since they won the Cup. He's gonna

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Speaker 1: go with Pittsburgh this year. Anyway, We'll be back here

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Speaker 1: on Bloomberg Surveillance. Time to check in now with Michael

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Speaker 1: Bahr and get the latest world in national headlines. Mike,

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Speaker 1: thank you very much. President Obama has sent you into

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Speaker 1: the Brexit debate. Eight. The President will visit the UK

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Speaker 1: next weekend, will call for Britain to remain part of

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Speaker 1: the European Union. President Obama's advisors told reporters on a

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Speaker 1: conference call that a vote to leave would diminish Britain's

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Speaker 1: influence in the world. Elite report critical of airport security

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Speaker 1: has apparently caused Belgium's Transport minister her job. According to

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Speaker 1: the Prime Minister, she resigned the revelations game after the

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Speaker 1: attacks in Brussels skilled thirty two people. Boston is marking

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Speaker 1: the third anniversary of the marathon bombings with a subdued remembrance.

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Speaker 1: Survivors will lay a wreath at the marathon finish line.

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Speaker 1: This morning. Global News twenty four hours a day, powered

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Speaker 1: by our twenty four hundred journalists more than a hundred

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Speaker 1: fifty news bureaus from around the world. On Michael bar Mike,

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Speaker 1: thank you, Michael Well. Kyle Weinberg is talking about oil

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Speaker 1: prices still being depressed, and they are down today West

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Speaker 1: Texas ATTT three off two point six percent, Brent one

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Speaker 1: off two point six percent. That's weighing on future is

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Speaker 1: future is lower. This news update brought to you by

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Speaker 1: Bermuda dot com for more DTLS Glombo Business News twenty

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Speaker 1: four hours a day at Bloomberg dot Com, the radio

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Speaker 1: plus mobil and on your radio. This is a Broomberg

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Speaker 1: business flash and I'm Karin Moscow. And futures are lower

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Speaker 1: this morning. Let's go to the First Word breaking news

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Speaker 1: desk for today's morning call, and here's Bill Maloney. Good

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Speaker 1: morning Bill, Good morning Karen. That's right. Modest losses in

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Speaker 1: the US futures today. Doubt you is currently lower by

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Speaker 1: twenty four points, has to be futures dropped four and

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Speaker 1: as that futures declined by eight US ten yell at

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Speaker 1: one point seven seven percent, and European markets are also

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Speaker 1: trading lower this morning, led by losses in Italy and France.

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Speaker 1: On the US economic front at eight thirty, Empire Manufacturing

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Speaker 1: at nine fifteen, industrial production at at ten o'clock, Michigan

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Speaker 1: sentiment as mid ninety two in deal news might tell

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Speaker 1: the by Polycom and a cash and stock deal valued

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Speaker 1: at one point nine six billion, and another news bats

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Speaker 1: Global Markets thirteen point three million shares priced at nineteen

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Speaker 1: at the top of the range Regarding earnings this morning,

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Speaker 1: City Group beat shares a trading higher by two point

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Speaker 1: six percent pre market, finding some early walsheet upgrades and downgrades,

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Speaker 1: Jet Blue raised over way to Barkley's three D Systems

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Speaker 1: cut to sell over at City Group, foot Locker cut

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Speaker 1: to market before my Cowen and a Darker raised over

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Speaker 1: wait at Jape and Morgan and Mikron raised a strong

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Speaker 1: by over at Rim and James Live from the first

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Speaker 1: Breaking news desk on bou Maloney. Karen, thanks Bill to

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Speaker 1: hear live breaking news over your Bloomberg type squawk go

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Speaker 1: and your terminal, that's sq you a w K go

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Speaker 1: and that's a Bloomberg business flash, Tom and Mike, Karen Mosco,

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Speaker 1: thank you very much. Surveillance correction. Carl Winberg has not

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Speaker 1: got into Washington yet. He's actually paying somebody to stand

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Speaker 1: in line for Capital's tickets for us. He's going to

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Speaker 1: be down there for the I m F World Bank

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Speaker 1: meetings they get underway today. Down there, um, we'll also

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Speaker 1: see finance ministers from the G seventy getting together and

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Speaker 1: all kinds of international bankers in Washington as they try

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Speaker 1: to figure out where the world is going. Right now,

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Speaker 1: we're seeing stocks going lower as we get ready for

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Speaker 1: this last day of trading this week. It's been an

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Speaker 1: up week overall, but SMP futures right now are down

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Speaker 1: four points, two tenths of a percent. DAL futures are

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Speaker 1: off by twenty three points, about a tenth of a percent,

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Speaker 1: and we're off in Europe by a point now just

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Speaker 1: under half a percent of the stocks six So, Carl,

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Speaker 1: when you are in Washington eventually for the meetings this weekend,

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Speaker 1: what is it that you want to hear and see?

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Speaker 1: Your forecas ut is already about as pessimistic as they got.

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Speaker 1: What do you think, uh, you can learn when you

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Speaker 1: attend these meetings, Well, Mike, but I try to do

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Speaker 1: is I try to talk to people about the needs

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Speaker 1: for fiscal policy and the need for fiscal stimulus. I

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Speaker 1: know that's out of the control of most of the

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Speaker 1: people who are at these meetings, but I think that

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Speaker 1: central banks have done so much to push the world

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Speaker 1: economy forward. Um, I think they've reached the limit of

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Speaker 1: what they can do, and it's time to be realistic

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Speaker 1: and either get the persuade urge the governments to do

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Speaker 1: more to get the economies moving forward with a little

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Speaker 1: bit of deficit spending and a little bit of Kymesian

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Speaker 1: policy push, or to prepare the world for a few

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Speaker 1: years of not so good economic performance to step away

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Speaker 1: from the fact that you know, we can do whatever

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Speaker 1: is needed to get the job done, and that maybe

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Speaker 1: we can't do that and we just have to accept

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Speaker 1: a lower outcome. Carl, I'd love to win the lottery,

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Speaker 1: and it's not gonna happen. Uh, ciscal policy, it's not

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Speaker 1: going to happen. So when you say prepare the world,

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Speaker 1: what what do you see as preparing for what? What's

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Speaker 1: what's the outlook? Yeah? I think the outlook Mic is

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Speaker 1: that in terms of the aggregive growth numbers that were

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Speaker 1: used to looking at, we're going to see growth disappoint

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Speaker 1: about the standards of the post war period. And if

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Speaker 1: politicians are judged against that, then um, as the I

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Speaker 1: m F points out, there's the possibility of a political

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Speaker 1: and social upset in some places in the world. I

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Speaker 1: think we're going to see income per capita in the

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Speaker 1: commodity producing world actually declined over the next few years

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Speaker 1: as countries adjust their standards of living to the realities

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Speaker 1: of what their resources in the ground can provide for them. Um.

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Speaker 1: And I think we're going to see a very stable

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Speaker 1: price regime moving forward, you know, not talking specifically about

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Speaker 1: the US where the the inflation question is on an

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Speaker 1: entirely different plane than it is saying in a place

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Speaker 1: like Nigeria or venezuel or Brazil, where we've seen enormous

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Speaker 1: disruptions in economic stability caused by currency adjustments in an

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Speaker 1: attempt to forestall this eventual decline in real incomes. Where

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Speaker 1: do you think we see currencies adjust to a lot

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Speaker 1: of speculation that the G twenty, when I met back

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Speaker 1: in January, reach some sort of tacit agreement UH to

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Speaker 1: keep the dollar from strengthening too much. Twenty gets together

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Speaker 1: again down in Washington. Is there any you do you

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Speaker 1: find any veracity in that conspiracy theory? No? I don't

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Speaker 1: think so, Micha. I think if you talk to any

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Speaker 1: G twenty central bank governor, what they tell you is

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Speaker 1: that the exchange rate is a price, and that they

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Speaker 1: can't affect that price, that they accept that price as

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Speaker 1: an important price, and they analyze the implications of changes

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Speaker 1: in the price of a currency as they put their

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Speaker 1: policies together. But the exchange But I don't think any

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Speaker 1: central banker out there really views themselves as being able

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Speaker 1: to make a substantial change engine the value of their

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Speaker 1: currency for any long period of time, perhaps in emerging

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Speaker 1: economies and relatively smaller markets and specific individual cases. Yes,

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Speaker 1: a right, Russia kend the value it's ruble. Brazil's real though,

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Speaker 1: is down just as much because the market wants it

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Speaker 1: to even more so than because the central bank would

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Speaker 1: like to get it there. Well, does the dollars stay

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Speaker 1: I don't want to say down, because it's still relatively strong,

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Speaker 1: but it has stopped strengthening. The second derivative is it

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Speaker 1: is the other way UH to to bring tom into

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Speaker 1: this um does it? Does that continue? Well? I'm looking

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Speaker 1: forward to as strong as dollar moving ahead here, and

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Speaker 1: I think that the United States is relatively immune to

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Speaker 1: a lot of these global headwinds. Although trade, as we know,

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Speaker 1: is one of the weakest parts of the current US

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Speaker 1: economic outlook, But relatively speaking, it's a storm that we

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Speaker 1: can weather. We have very strong domestic fundamentals, and we

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Speaker 1: have a central bank that's going to be tightening monetary conditions,

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Speaker 1: which is relatively unusual out there. Meanwhile, commodity prices, i'm

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Speaker 1: guessing are going to not come back quickly. That means

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Speaker 1: there will be economic problems in the commodity producing world.

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Speaker 1: As an argument for a stronger dollar. So putting all

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Speaker 1: the pieces together, I think there's an argument to suggest

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Speaker 1: the dollar will continue to appreciate Historically. You know, we're

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Speaker 1: in the middle of our range of experience on the dollar.

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Speaker 1: You know, we're not particularly strong and we're not particularly weak.

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Speaker 1: We're just stronger than we were recently. And I think

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Speaker 1: we're going to continue to see the dollar gain attraction

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Speaker 1: is we moved through this tough career ahead. Karl Weinberg

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Speaker 1: from High Frequency Economics enjoy Washington. Will be interesting to

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Speaker 1: see how much attention with the Stanley Cup playoffs underway,

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Speaker 1: the I m F World Bank meetings yet, but we

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Speaker 1: will certainly be following them here on Bloomberg Surveillance. That

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Speaker 1: in the Doha Oil meetings this weekend, and then the

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Speaker 1: impeachment vote del Maroussa down in Brazil. It's gonna be

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Speaker 1: a very busy Newsy weekend. Stay tuned to Bloomberg Radio

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Speaker 1: for all of it. Now, the with all due respect,

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