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Speaker 1: Ye, Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane

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Speaker 1: jay Ley. We bring you insight from the best in economics, finance, investment,

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Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud,

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Speaker 1: Bloomberg dot Com, and of course on The Bloomberg and

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Speaker 1: The Gentleman. Jenny, I want you to jump it off

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Speaker 1: here with Julian Emmanuel b t I G. And I

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Speaker 1: will only say that he's one of the few that

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Speaker 1: is steadfastly participated in this great bull market by writing

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Speaker 1: thoughtful pieces. He's not just going own stocks, you know,

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Speaker 1: go go go. He's really tried to construct a theory

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Speaker 1: to stay in the stout at the year as one

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Speaker 1: of the biggest equity market bulls on the street out

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Speaker 1: of all the strategists. We said, and I just wonder

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Speaker 1: whether we've hit his price target already. Julian and Manuel

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Speaker 1: at BT I G jointing us right now, Jillian to

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Speaker 1: have you with us. Just want me through that what

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Speaker 1: do you cite to clients after the runny we've already

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Speaker 1: had to just stout a year. Well, our theory has

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Speaker 1: been that this could be a year where you know,

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Speaker 1: first of all, the backdrop is twenty plus percent. Years

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Speaker 1: like we had in tend to be followed by positive years.

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Speaker 1: That maybe counterintuitive. The average gain is around sort of

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Speaker 1: sort of twelve to fourteen So from our point of view,

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Speaker 1: in an environment where as we've said numerous times, the

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Speaker 1: public has not really fully engaged in the equity markets.

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Speaker 1: You look at flows. Flows have been going into money

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Speaker 1: market funds. Flows have been going into bond funds very

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Speaker 1: consistently for the last five years. Um, this could be

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Speaker 1: the year where you get upside beyond our thirty four

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Speaker 1: fifty price target based on the public actually becoming an

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Speaker 1: active buyer of stocks. So our messages, you know, it's

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Speaker 1: it's been a very good two weeks, it's been a

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Speaker 1: very good four months. A stay patient, uh, you know,

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Speaker 1: don't be aggressive buyers into moves this far, this stretched,

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Speaker 1: because you could have a pullback at any time, but

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Speaker 1: just be patient. Well, message a retail now, Julian, let's

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Speaker 1: talk about it. Tom and I started the program by

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Speaker 1: discussing valuations. How much higher could they go? If you

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Speaker 1: look at this market right now and you have a

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Speaker 1: retail client sitting in front of you that's missed down

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Speaker 1: on this rally of the last twelve months or so,

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Speaker 1: and they ask you, what's the one valuation metric at

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Speaker 1: the moment that you're looking at that says green light?

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Speaker 1: Get back in good old fashioned price earnings. Okay to

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Speaker 1: us at what we expect sort of equality eighteen and

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Speaker 1: a half to nineteen times. Uh, it feels high, But

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Speaker 1: if you look at the last thirty years of history,

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Speaker 1: it's really only slightly above mid range UM. And in

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Speaker 1: a backdrop where we do expect long end yields to

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Speaker 1: gradually creep higher UM, that is not necessarily at all

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Speaker 1: ahead when, And in fact we would argue it's a

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Speaker 1: tail when because the absolute level of rates are low.

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Speaker 1: And again we do think there could be this psychology

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Speaker 1: shift to the extent that you start poking above two

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Speaker 1: percent in the ten year yield in the US and

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Speaker 1: and and zero above zero in in the German tenure yield,

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Speaker 1: that the psychology becomes even more pro Would you know, I

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Speaker 1: I want to pick you up on the forward multiple

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Speaker 1: If you take the thirty year history as an example,

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Speaker 1: isn't that skewed by the excesses of two thousand, Bio

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Speaker 1: six Bio seven as well? And if you look at

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Speaker 1: the last ten years in this bull market. Eighteen and

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Speaker 1: a half times forward earnings is the upper range of evaluations,

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Speaker 1: isn't it based on the last ten years. But again

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Speaker 1: I think for us we've looked at it sort of

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Speaker 1: Cold War essentially, the thirty years prior to nine and

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Speaker 1: post Cold War UM and and you can sort of

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Speaker 1: best fit the data. But from our point of view,

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Speaker 1: sort of Night nine onwards really repre sense the time

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Speaker 1: when the embracing of equity investing is something that's permeated

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Speaker 1: popular culture and permeated the average person's portfolio. That sort

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Speaker 1: of justifies where we're thinking. You're just joining us now,

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Speaker 1: Julian Emmanuel with his b T I G. He's in

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Speaker 1: the interactive broker studios at our world headquarters, Lectington and

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Speaker 1: fifty nine John fare and I asconced, I say it

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Speaker 1: investsco our annual visit to the good offices of Investo

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Speaker 1: here in a vibrant downtown Manhattan, Lower Manhattan. We're thrilled

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Speaker 1: to with us coast to coast and worldwide as well. Julian,

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Speaker 1: I want to go back to March of nine. This

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Speaker 1: is a few years ago and in Barns, Tom Gelvin,

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Speaker 1: the legend of d LJ talking a price to sells.

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Speaker 1: I love the article dowst sixteen thousand question mark. I mean,

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Speaker 1: explain the punditry of the market and the strategy of

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Speaker 1: the market versus just being in the market and participating

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Speaker 1: in nineteen ninety nine, what is that twenty I can't

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Speaker 1: keep you twenty one years ago, twenty one years ago down?

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Speaker 1: Thank you and Galvin And Galvin nails it by saying,

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Speaker 1: you know, extrapolate out they're gonna get the sixteen thousand

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Speaker 1: by two thousand six with Bony bullis absolutely nailed the call.

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Speaker 1: Should we just throw all this away, Julian and just

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Speaker 1: own stocks for the long term? Well, we will go

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Speaker 1: with that tried and true saying it is never different

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Speaker 1: this time. And part of what we're looking at is

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Speaker 1: if we do get to a point of you know,

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Speaker 1: real public enthusiasm sort of you know, that irrational exuberance

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Speaker 1: that clearly we saw at the end of in the

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Speaker 1: beginning of two thousand and you'll know if there is

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Speaker 1: significant multiple expansion um that would be a caution sign

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Speaker 1: to us. Okay, what's a bt I G exuberance meter

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Speaker 1: this morning? I mean, is the irrational out there are

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Speaker 1: we are we rationally bullish, So in the short term

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Speaker 1: there is definitely a little bit of froth. But when

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Speaker 1: we look at the medium and the long term, what's

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Speaker 1: fascinating to us is the options market is actually telling

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Speaker 1: you that the degree of caution, particularly over the election term,

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Speaker 1: is very, very high. This is really important. What you

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Speaker 1: just heard from Julian Emmanuel there, thank you so much.

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Speaker 1: Julian Emmanuel would be t I g to get thank you,

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Speaker 1: and I've lost on on the screen here. I can't

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Speaker 1: see it through the plates of avocado. I I lost there.

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Speaker 1: We are futures up, eight down, futures up seventy, Ellen

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Speaker 1: may and go away, which means you've got to get

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Speaker 1: back in at some point. Do you want to sound

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Speaker 1: generally go away and go away and maybe look things

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Speaker 1: down for a little What I mean? These are important decisions,

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Speaker 1: and I would suggest that research shows it's not the

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Speaker 1: selling action, it's a getting back into the market action.

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Speaker 1: If you've missed this, Ronny, I think it's really difficult

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Speaker 1: to find a point in entry right now. See see

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Speaker 1: Christina how he says that with meanness because he knows

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Speaker 1: I'm in the triple leverage all cash fund. Shall we

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Speaker 1: introduce Christina Probably we're in her house. Okay, we're Christina

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Speaker 1: Hooper welcoming us today at Invesco. We're thrilled to be here.

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Speaker 1: She is the head of it all, the chief global

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Speaker 1: market strategists. And she has one of the coolest degrees

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Speaker 1: in America, which is if you are minted in labor

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Speaker 1: economics high above Cayugas rotters. That is really really cool.

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Speaker 1: It's one of the most prestigious degrees in America to

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Speaker 1: have a master's and labor economics from Cornell. We take

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Speaker 1: that academics to the full and imployed America right now,

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Speaker 1: knowing that John and I are number one emails and

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Speaker 1: messages and handwritten letters from people is no, it's not

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Speaker 1: fully employed. Well, I think what we're seeing is the

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Speaker 1: effects of having a very week job recovery for so long. UM.

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Speaker 1: When we think about the post global financial crisis environment,

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Speaker 1: it's one in which really the job recovery lagged everything else.

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Speaker 1: And so yes, now we're at full employment, but we're

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Speaker 1: in a different kind of employment environment, one in which

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Speaker 1: there are more UM folks who are deriving income from

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Speaker 1: multiple areas of employment, you know, pulling together, you know,

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Speaker 1: sort of a task grab at economy. And so of

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Speaker 1: course we've seen really unimpressive wage growth for years now.

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Speaker 1: So so this is a very different environment than a

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Speaker 1: typical um labor recovers. More wank economic questions, John's joint

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Speaker 1: to ask you about, you know, the market of nine

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Speaker 1: seven on the delt. We're on the delta. I don't

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Speaker 1: do that, okay, I'm on one more question in debt?

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Speaker 1: Does tepid wage growth go right over to inflation? Is

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Speaker 1: the reason Chairman Paul struggling within relations simply because of

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Speaker 1: an odd labor economy with tepid wage growth. I think

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Speaker 1: that's certainly part of the problem. I know that for

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Speaker 1: Janet Yellen it was a very big focus, right, She

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Speaker 1: had that uh you know, nineteen point labor conditions indicator

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Speaker 1: that she would use because there is, you know, a

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Speaker 1: school of thought that believes that wage growth has so

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Speaker 1: much to do with inflation. So what's the basic argument

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Speaker 1: I hear from you at the moment, Because the recovery

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Speaker 1: has been shallow, it can go on a whole lot longer.

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Speaker 1: I think, so, um, it's certainly going to be a

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Speaker 1: somewhat modest recovery. I think we're going to see a

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Speaker 1: little steam loss this year, but we'll probably at the

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Speaker 1: end of the year, uh see growth at about two

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Speaker 1: in the United States. I think this is a time

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Speaker 1: where we're going to see uh, you know, an improving

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Speaker 1: growth environment in Asia e M, especially China. I think

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Speaker 1: people comfortable this year in a way they weren't twelve

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Speaker 1: months ago. That the biggest risk this year is not

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Speaker 1: economic risk, it's market risk because of valuations. Coming into

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Speaker 1: a year where we've already had a massive rally and

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Speaker 1: we tried to eight seen plus times forward earnings. Your

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Speaker 1: message to people at the moment, Tom and I have

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Speaker 1: asked multiple people about it over the last week and

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Speaker 1: already this morning. If people missed now on this rally

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Speaker 1: over the last twelve months, was the one metric you

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Speaker 1: look at right now that says green light come back

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Speaker 1: in Well, I think it's looking at long term returns.

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Speaker 1: That we know that, especially when we look at valuations,

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Speaker 1: they are not predictive over the shorter term. Yes, over

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Speaker 1: the long run, valuations are predictive of performance, but you

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Speaker 1: can have extended valuations for an extended period of time.

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Speaker 1: Uh And And the reality is that the biggest issue

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Speaker 1: that most of the investors face is not participating in

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Speaker 1: the equity market. But this is really really important. When

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Speaker 1: you said it goes to the heart of all of

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Speaker 1: financial study and academics. Ratios don't matter short term, then

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Speaker 1: what does? So? What does? Certainly what we're seeing in

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Speaker 1: this environment, the dominant factor has been and continues to

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Speaker 1: be central banks, particularly the FAT. I think we can't

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Speaker 1: underestimate the power of the FED, especially when it came

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Speaker 1: out and made very clear in the fourth quarter of

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Speaker 1: that the bar is extremely high on raising rates after

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Speaker 1: giving markets three insurance cuts uh in environment when many

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Speaker 1: where many could argue that there were they weren't necessary.

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Speaker 1: I'm going to ask you this question because your General

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Speaker 1: Council is going to get angry at me and cut

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Speaker 1: off the avocad of toast. John Ferrell instead said, I'm

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Speaker 1: going to ask you, since what is it the job

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Speaker 1: of the Central bank to support equity markets? For the

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Speaker 1: last ten years, they've decided that financial conditions matter a

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Speaker 1: whole lot more and that they're in the driving seat

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Speaker 1: for financial conditions. Let's have some sympathy with the idea

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Speaker 1: back end of in December of that year, of the

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Speaker 1: primary market for credit in the United States completely seizes

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Speaker 1: up because people are worried about the economy and the Fed.

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Speaker 1: Fed's got a job to do. They've got to get

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Speaker 1: the money markets back open, and that was the job

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Speaker 1: they had to do that in the financial crisis. And

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Speaker 1: I'm not saying things we were as bad as that

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Speaker 1: twelve months ago. I'm sutadly not even going there, Christina.

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Speaker 1: But the FED season is their job to support financial conditions.

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Speaker 1: The argument I would make at this point is that

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Speaker 1: do they really need to be supporting financial conditions to

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Speaker 1: the extent they are at the moment. Well, that's a

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Speaker 1: great question. Uh, they believe it is, and it's within

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Speaker 1: their purview. You know, one could argue that if you

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Speaker 1: poorted J. Powell to the Bank of England there would

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Speaker 1: be a few insurance cuts there too, just given the

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Speaker 1: high level of economic policy uncertainty. But it is certainly

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Speaker 1: within the purview of the FED to define its role

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Speaker 1: and and focus on financial conditions. And there's a good

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Speaker 1: argument for it in that in the United States, at least,

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Speaker 1: the fortunes of the stock market tend to be somewhat

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Speaker 1: correlated with the fortunes of the economy. If you're just

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Speaker 1: joining us, John Fair on time, Keene. One of our

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Speaker 1: favorite efforts of the year to wander downtown and the

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Speaker 1: dark frozen warning, it is cold, it is cold. It's

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Speaker 1: always find it colored downtown. Then in midtown that's the

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Speaker 1: wind water, just Hudson River, you know, Washington across the

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Speaker 1: downtown the college. Is this the second time? Police? The

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Speaker 1: police picked up the entourage your on the Bentley and said,

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Speaker 1: why is he downtown? Christina Huper here, she is our

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Speaker 1: chief global market strategist in Investco and we're thrilled to

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Speaker 1: be with investco this morning. What are the fist fights

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Speaker 1: right now in your strategy meetings in Investco? What's the

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Speaker 1: biggest point of debate? Because one of the hallmarks of Investco.

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Speaker 1: She get in the room and everybody argues some houses

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Speaker 1: do that, but Investco is codified constructive argument. What's a

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Speaker 1: single argument right now at Investco. Well, one of the

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Speaker 1: conversations that we've had, um uh, you know, quite frequently

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Speaker 1: sort of an extended debate has been about where are

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Speaker 1: we going to see strong growth this year? And certainly

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Speaker 1: the US there have been question marks. We've even debated

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Speaker 1: how much volatility we expect to see this year. How

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Speaker 1: much economic policy uncertainty we'll see. Keep in mind we've

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Speaker 1: got US presidential election where there is just no no

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Speaker 1: visibility on who the Democratic candidate is going to be,

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Speaker 1: so uh, you know, some of us expect a fair

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Speaker 1: amount of volatility this year, especially if we see um

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Speaker 1: more progressive candidates. When high profile primaries, you could see

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Speaker 1: short term sell offs in particular industries that are expected

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Speaker 1: to be more heavily regulated. UM. But I think there's

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Speaker 1: general consensus and and a lot of excitement around Asia

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Speaker 1: e M, particularly China that that's a really important topic.

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Speaker 1: We'll cover that with Investco this morning. Are you still

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Speaker 1: very quickly here, are you still international based overweight international

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Speaker 1: with your expertise, Well, we are definitely UM more bullish

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Speaker 1: on asia EM. We're we're very selective outside of the

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Speaker 1: US UM modestly bullish on the US UM, but where

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Speaker 1: we would focus is Asia EM, especially China. Christina Christina

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Speaker 1: Christina Hooper, she is chief global market strategist And let's

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Speaker 1: go question of the moment. George Evans is exceptionally qualified

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Speaker 1: to answer the question. His world has been asleep for

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Speaker 1: ten years. It woke up in Q four. Now what

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Speaker 1: which is his head of global equities and portfolio manager

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Speaker 1: for Investco, and I have your international growth fund. We

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Speaker 1: simply asked him about finally international investment has come to like,

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Speaker 1: let's look back quickly here, George, with all your decades

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Speaker 1: of experience, how far behind was the international investment in

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Speaker 1: the last two, five, even seven years. What if you

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Speaker 1: go back to the early seventies, that was a basically

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Speaker 1: flip flopped every two to four years between between US

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Speaker 1: leadership and non US leadership. The last uh twelve years

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Speaker 1: has been absolutely exceptional, with the SMP leading the a

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Speaker 1: every year but one. So we are way due for

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Speaker 1: a sort of an inflection point to turn towards international.

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Speaker 1: Why did that happen, What effected the change, and what

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Speaker 1: was in all the textbooks you and I read about

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Speaker 1: a cyclic field to it to a structural shift to

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Speaker 1: buy US or a structural shift to not choose to

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Speaker 1: buy international. Well, I think the first thing to point

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Speaker 1: out is that the the US sort of had leadership

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Speaker 1: and a lot of the key global sectors over the

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Speaker 1: last ten years, so I think the fangs by attach

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Speaker 1: things of that nature. The other thing was the US

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Speaker 1: did a much better job in grappling the problems with

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Speaker 1: the financial system post global financial crisis, which the Europeans

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Speaker 1: really failed to do. I think the third thing to

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Speaker 1: point out would be that the emerging markets, A lot

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Speaker 1: of the emerging markets are very much led by commodities.

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Speaker 1: We had that huge commodity boom two thousand two to

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Speaker 1: the end in two Chinaman. But also you know, all

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Speaker 1: of Latin America, all of Africa, a lot of Southeast

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Speaker 1: Asia's commodity oriented. So you just can't get away from that.

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Speaker 1: So where are we now after a queue for was

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Speaker 1: it a pup that will fade away or is there

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Speaker 1: something substantial here to allocating more to international versus wheld

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Speaker 1: we've been for a decade. Well, I think there are

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Speaker 1: a few things that are very supportive. The first thing

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Speaker 1: is that if you look at the dials of risk,

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Speaker 1: a lot of those risk dials that were up through

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Speaker 1: the basically the third quarter of last year have come down.

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Speaker 1: So Europe is much more oriented towards global trade, and

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Speaker 1: global trade was clearly negatively affected by the trade spat

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Speaker 1: which lasted a year and a half. So global trade

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Speaker 1: getting better is really good for more open economies Europe

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Speaker 1: and Asia. Uh, the second thing is that you've got

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Speaker 1: really good valuations. We've got risks that everyone's been aware of,

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Speaker 1: particularly around Brexit, which are likely to be resolved in

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Speaker 1: very short order. So risk down valuations are good, and

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Speaker 1: you've got the potential for an acceleration of g d

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Speaker 1: P in a lot of these more open economies. Can

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Speaker 1: I buy the George Evans world by buying multinationals? That

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Speaker 1: used to be a game in itself. So, I mean,

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Speaker 1: the thing that everyone's got to realize is that pretty

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Speaker 1: much every index is a multinational index now. So about

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Speaker 1: more than fifty of the revenues and earnings of the

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Speaker 1: SMP come from outside, more than I did not know

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Speaker 1: that I thought it was less. So you have very

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Speaker 1: much an international orientation of most of the big companies.

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Speaker 1: Extra financials um in most of the world. So the

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Speaker 1: US has many excellent global companies that are addressing global

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Speaker 1: growth opportunities. There are excellent global companies that happen to

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Speaker 1: be based in Europe and Japan. So if you want

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Speaker 1: to buy luxury goods, which is a really good sector,

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Speaker 1: you've basically got to be in Europe. Now. Loui Viton

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Speaker 1: is European. I didn't reached more as European Louis vite

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Speaker 1: is buying Tiffany really, um so there's a huge opportunity

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Speaker 1: for uplift there. What is it about luxury which explained

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Speaker 1: to me the mob, I mean, I mean we talk

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Speaker 1: about Apple and the rest. Do you look at the

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Speaker 1: ratios of luxury is out of kilter? Is what we

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Speaker 1: see in selected thing and tech stocks. Luxury is a

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Speaker 1: very very good area to invest because there's incredible growth

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Speaker 1: dynamic which is like to last a long time, and

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Speaker 1: they are really profitable because in many cases the prices

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Speaker 1: the product, so they're able. You know, if you go

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Speaker 1: into an air Miss store, No, that would never happen

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Speaker 1: wearing about Boti folks. Okay, if you went into an

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Speaker 1: air Miss store today, five years ago, ten years ago,

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Speaker 1: they're all lots of very expensive goods and really the

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Speaker 1: only thing that really changes is the price. So they

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Speaker 1: just moved the price up about two to every year.

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Speaker 1: No fashion risk, fantastic. George Evans with us with Investco

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Speaker 1: is a creator into Friday and the weekend and what

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Speaker 1: I'm going to do this week into salvage going away

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Speaker 1: to Switzerland for one week. I'll talk Gucci Garden in Florence.

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Speaker 1: I mean you look at luxury goods and the branding

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Speaker 1: of it in those valuations. You mentioned Tiffany in the

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Speaker 1: takeout in Van Cleave at fifty seventh and fifth Avenue

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Speaker 1: and all that. The branding seems to be exquisite and

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Speaker 1: on the revenue stream there do we underestimate the persistency

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Speaker 1: of the revenue stream whether it's Gucci Garden or Tiffany

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Speaker 1: at Fifth Avenue. Well, Uh, the the amazing thing with

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Speaker 1: luxury goods is the degree to which emerging market consumers

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Speaker 1: are buying luxury its. So over fifty percent hasn't abbed

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Speaker 1: with the China slowdown thet There was a there was

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Speaker 1: a bit of an ad when they had that Austarity

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Speaker 1: package when people weren't allowed to gift each other ten

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Speaker 1: and twenty thousand, thirty thousand dollar watches and things like that.

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Speaker 1: But there's a relentless growth in the addressable market as

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Speaker 1: emerging market consumers get wealthy. So over fifty of the

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Speaker 1: sales of luxury goods emerging market consumers. The more unequal

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Speaker 1: the incomes are in any country, the more people like

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Speaker 1: to signal where they are on the TOTEM Pole, So Scandinavians,

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Speaker 1: you know, lower lower propensity to buy luxury goods. People

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Speaker 1: from Brazil, Russia, China, very high propensity to buy luxury goods.

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Speaker 1: So there has been, as it's been an incredible sort

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Speaker 1: of revenue growth over the last ten twenty years, which

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Speaker 1: we think is going to go on. Uh, the returns

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Speaker 1: on capital employed are very very high. Is this sector

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Speaker 1: over or under owned by institutions? I mean, this is

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Speaker 1: a raging debate on ample and the rest right now,

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Speaker 1: but but is it over owned? I haven't sort of

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Speaker 1: looked at the top ownership, but I you know, I

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Speaker 1: think that you know, this is clearly a sector which

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Speaker 1: has on a global basis, it is fantastically profitable, great

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Speaker 1: growth dynamic, and I think there's going to be you know,

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Speaker 1: it's one of those sectors where there's going to be

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Speaker 1: consistent buying pressure. Okay, one final question, and we're going

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Speaker 1: to have you back here to really go into some

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Speaker 1: of the idiosyncrasies that we see at worldwide. Is the

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Speaker 1: United States of America part of international investing? If you

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Speaker 1: buy international, do you bring in the United States? You

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Speaker 1: to really stay discreet from that. So international investing world

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Speaker 1: means everything but the US. So the term global is everywhere.

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Speaker 1: So our global funds have forty two in the US.

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Speaker 1: The international funds are completion. So that's anywhere, but the US.

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Speaker 1: George Evansworth, US is fascinating. We're gonna come back and

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Speaker 1: some of the indiosyncrasies, I know Paul Sweeney's got questions,

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Speaker 1: and some of the unique and eleven and economies as well.

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Speaker 1: Is it wy to speak to Margaret Brennan the history

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Speaker 1: that we have observed in the last forty eight hours.

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Speaker 1: I could do it one hour conversation Margaret with you.

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Speaker 1: You're going to enjoy a one hour discussion face the nation.

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Speaker 1: See it on CBS Sunday morning. You could hear it

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Speaker 1: on Bloomberg Radio Sunday afternoon. Margaret, I'm going to cut

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Speaker 1: to the chase four inch headlines in the Times, in

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Speaker 1: the Post. As a certain elite riveted. Is the rest

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Speaker 1: of the nation engaged in what we're seeing in Washington?

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Speaker 1: You know, I think when you see John Roberts, Chief

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Speaker 1: Justice in Supreme Court, getting sworn in, and you see

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Speaker 1: the decorum enforced centers not being able to speak on

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Speaker 1: the floor, it's a good reminder of what we're watching

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Speaker 1: being historic and not just the usual Washington fighting with

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Speaker 1: itself moment. I think sometimes it's hard for the rest

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Speaker 1: of the country to believe that or get perspective on it,

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Speaker 1: because it just always seems like the part of bickering

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Speaker 1: is constant. But our country has literally hardly ever done

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Speaker 1: this before. This is the third time, um, and so

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Speaker 1: I think it is worth pumping the brakes, taking a

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Speaker 1: moment and saying this has tremendous gravity. You just said

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Speaker 1: the House of Representatives, is you a vote to no

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Speaker 1: confidence in the present, And now you have the Senate

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Speaker 1: debating his removal, even though we know it is far

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Speaker 1: from likely to get two thirds of the Senate to

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Speaker 1: vote to do that, to eject the president. This is

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Speaker 1: politically damaging, It is lasting, and it is politically a

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Speaker 1: huge moment. In the Washington Post, folks with a terrific

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Speaker 1: article on the background of the Justice during impeachment hearings

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Speaker 1: and on Justice Roberts is, Well, Margaret, what is the

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Speaker 1: back and forth between the senator from Maine and the

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Speaker 1: Senator from Kentucky. What will be that back and forth

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Speaker 1: in the coming days? Well, this gets fundamentally to the

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Speaker 1: question of whether the Senate trial will allow for witnesses

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Speaker 1: and evidence to be introduced. How Democrats acknowledge that their

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Speaker 1: investigation was incomplete. In fact, one of the articles of

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Speaker 1: impeachment is obstruction of justice because the president attempts to

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Speaker 1: block witnesses and to not hand over documents. So the

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Speaker 1: hope had been in the Senate for Democrats that they'd

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Speaker 1: be able to get that handed over. Susan Collins of

431
00:25:22,880 --> 00:25:26,720
Speaker 1: Maine has indicated that she does think maybe it's worth

432
00:25:26,760 --> 00:25:29,240
Speaker 1: hearing from some of these people with firsthand knowledge, like

433
00:25:29,400 --> 00:25:32,240
Speaker 1: John Bolton, the former National security advisor to the President.

434
00:25:32,640 --> 00:25:35,080
Speaker 1: And so she's indicating that when it comes up for

435
00:25:35,160 --> 00:25:39,320
Speaker 1: a vote, uh, that she might be actually voting alongside

436
00:25:39,320 --> 00:25:42,280
Speaker 1: Democrats to say, I want to hear exactly what it

437
00:25:42,440 --> 00:25:44,760
Speaker 1: is that happened from somebody who was in the room,

438
00:25:44,840 --> 00:25:48,320
Speaker 1: because we haven't heard from any of those firsthand witnesses. Right,

439
00:25:48,600 --> 00:25:51,520
Speaker 1: Republicans complain about that process in the House not involving

440
00:25:51,560 --> 00:25:55,240
Speaker 1: firsthand witnesses. Now some Republican senators say, okay, well let's

441
00:25:55,240 --> 00:25:57,840
Speaker 1: hear from some of them. Now, Um, that's the fight.

442
00:25:58,359 --> 00:26:00,919
Speaker 1: Mitch McConnell, the Republican leader in the Senate, wants to

443
00:26:00,960 --> 00:26:03,600
Speaker 1: help the White House get what it has set out

444
00:26:03,720 --> 00:26:07,240
Speaker 1: as their hope for the fastest impeachment trial in American history,

445
00:26:07,520 --> 00:26:09,640
Speaker 1: that it could be just a matter of a quick

446
00:26:09,720 --> 00:26:13,320
Speaker 1: few weeks rather than drawn out eleven weeks or more

447
00:26:13,359 --> 00:26:17,399
Speaker 1: as it was during John's period of trial. Margaret News yesterday,

448
00:26:17,400 --> 00:26:20,480
Speaker 1: the General Accountability Office says that the White House broke

449
00:26:20,600 --> 00:26:23,080
Speaker 1: the law and withholding aid to Ukraine. How important is

450
00:26:23,119 --> 00:26:26,920
Speaker 1: that to the whole impeachment process. Well, it's not as

451
00:26:26,960 --> 00:26:29,280
Speaker 1: material as saying new evidence, but it's a it's an

452
00:26:29,280 --> 00:26:32,760
Speaker 1: exclamation point on a on a talking point that Democrats

453
00:26:32,800 --> 00:26:35,960
Speaker 1: are are using to say, Look, this wasn't the President

454
00:26:36,040 --> 00:26:40,120
Speaker 1: making a Palacey choice on his own. This was essentially

455
00:26:40,240 --> 00:26:44,399
Speaker 1: him trying to overwhelm the uh sending powers that remember

456
00:26:44,400 --> 00:26:46,639
Speaker 1: of Congress has the power of the purse and the

457
00:26:46,680 --> 00:26:49,199
Speaker 1: will and intent of Congress, when they had already allocated

458
00:26:49,480 --> 00:26:53,679
Speaker 1: these funds um and so that there was this withholding

459
00:26:53,720 --> 00:26:55,680
Speaker 1: of money that had already been allocated in a way

460
00:26:55,720 --> 00:26:59,560
Speaker 1: that is a violation of law. So it certainly helps

461
00:26:59,560 --> 00:27:02,560
Speaker 1: the Democrat makes their point that this isn't just a

462
00:27:02,600 --> 00:27:06,439
Speaker 1: political witch hunt, that there is actually some um, you know,

463
00:27:06,640 --> 00:27:12,159
Speaker 1: relevant legal and constitutional um issues here, but it's really

464
00:27:12,240 --> 00:27:15,879
Speaker 1: things like text messages and documents from individuals like Left Harness,

465
00:27:16,000 --> 00:27:20,960
Speaker 1: who as the business associate indicted UM, business associated really Giuliani,

466
00:27:21,359 --> 00:27:24,080
Speaker 1: and that kind of evidence that many Democrats would like

467
00:27:24,119 --> 00:27:26,560
Speaker 1: to see introduced in the Senate trial. Margaret Brown, and

468
00:27:26,560 --> 00:27:29,760
Speaker 1: tell us about Face the Nation Sunday morning. We will

469
00:27:29,760 --> 00:27:32,199
Speaker 1: be digging into a lot of this with one of

470
00:27:32,240 --> 00:27:35,480
Speaker 1: the top Republican leaders, Senator John Cornyn of Texas. We

471
00:27:35,520 --> 00:27:38,240
Speaker 1: will press him on exactly what the public can expect

472
00:27:38,960 --> 00:27:40,760
Speaker 1: and what we will see because not all of this

473
00:27:40,880 --> 00:27:43,320
Speaker 1: will be done in front of the camera. Um. We

474
00:27:43,359 --> 00:27:47,000
Speaker 1: will talk to him about how it will be proceeding

475
00:27:47,400 --> 00:27:50,080
Speaker 1: on Tuesday, and we'll also talk to essentially one of

476
00:27:50,080 --> 00:27:54,199
Speaker 1: the prosecutors, Gerry Nadler, Democrat from New York, chairman of

477
00:27:54,240 --> 00:27:58,440
Speaker 1: the Powerful House. Interesting. We'll talk to him about the strategy.

478
00:27:58,520 --> 00:28:01,440
Speaker 1: And we have Gary cone Um coming on to talk

479
00:28:01,480 --> 00:28:04,040
Speaker 1: about the economic outlook and what that might mean to

480
00:28:04,080 --> 00:28:08,840
Speaker 1: the president's re election. Very good, Margaret, Thank you. On CBS.

481
00:28:08,960 --> 00:28:11,960
Speaker 1: See it Sunday morning on the CBS television network here

482
00:28:11,960 --> 00:28:14,879
Speaker 1: at on Bloomberg Radio. We did that two pm in

483
00:28:14,920 --> 00:28:17,879
Speaker 1: New York, Washington and Bloomberg one or six one Boston

484
00:28:18,280 --> 00:28:22,080
Speaker 1: Newbery Report. That's Face the Nation this Sunday at two

485
00:28:22,720 --> 00:28:40,960
Speaker 1: Bloomberg Radio. In this odd time and with the raging

486
00:28:41,000 --> 00:28:44,160
Speaker 1: debates of the weekend, it is important to speak to

487
00:28:44,240 --> 00:28:46,600
Speaker 1: Mr Whalen because he wrote a jewel of a book

488
00:28:46,680 --> 00:28:51,480
Speaker 1: years ago, Inflated, How Money in Debt Built the American Dream.

489
00:28:51,600 --> 00:28:53,280
Speaker 1: This is one of those books where you opened up

490
00:28:53,320 --> 00:28:56,320
Speaker 1: Noi Rabini wrote the introduction, and Paul you opened it

491
00:28:56,400 --> 00:28:59,040
Speaker 1: up and you go yeah, yeah, yeah, And it was

492
00:28:59,360 --> 00:29:04,360
Speaker 1: abs absolutely riveting on the financial history of the country

493
00:29:04,800 --> 00:29:09,920
Speaker 1: of the nation going back two hundred years. An extraordinary book.

494
00:29:10,240 --> 00:29:13,920
Speaker 1: And Chris Whalen's got a twisted perspective Paul Sweeney on

495
00:29:13,960 --> 00:29:17,640
Speaker 1: where we are exactly. Chris Whalen, thanks for so much

496
00:29:17,680 --> 00:29:19,680
Speaker 1: for joining us. Chris as the chairman of Whaling Global

497
00:29:19,720 --> 00:29:23,520
Speaker 1: Advisors and co founder of Institutional Risk Analytics. All right,

498
00:29:23,560 --> 00:29:27,800
Speaker 1: so we had Goldman, Sachs, Morgan, Stanley, JP, Morgan, Bank

499
00:29:27,800 --> 00:29:29,920
Speaker 1: of America, a whole bunch of the big money centers.

500
00:29:31,200 --> 00:29:35,680
Speaker 1: They seem pretty good easy comps. What's my takeaway? The

501
00:29:35,760 --> 00:29:39,640
Speaker 1: takeaway is at the consumer side did much better than

502
00:29:39,640 --> 00:29:43,480
Speaker 1: the institutional side. The bank's side, if you will, of

503
00:29:43,560 --> 00:29:47,000
Speaker 1: JP Morgan, it's only half bank. Uh, it's having a

504
00:29:47,040 --> 00:29:50,240
Speaker 1: tough time. And that interest income fell again, which is

505
00:29:50,280 --> 00:29:53,320
Speaker 1: a legacy of the normalization of the money markets. Right.

506
00:29:53,520 --> 00:29:56,640
Speaker 1: On the other hand, the banks, the investment banking, trading,

507
00:29:56,840 --> 00:29:59,840
Speaker 1: all of that did well. Uh, good volumes on more,

508
00:30:00,200 --> 00:30:02,640
Speaker 1: they get a gain on sale on every mortgage they

509
00:30:02,680 --> 00:30:05,480
Speaker 1: sell into the agency market. So you know, all of

510
00:30:05,520 --> 00:30:08,840
Speaker 1: those things were good. But the thing I cautioned and

511
00:30:08,920 --> 00:30:11,240
Speaker 1: have been cautioning people on for two years is that

512
00:30:11,880 --> 00:30:15,080
Speaker 1: after the FED pushed down the cost of funds so dramatically,

513
00:30:15,360 --> 00:30:17,760
Speaker 1: it had to come back and we're still only at

514
00:30:17,800 --> 00:30:20,680
Speaker 1: eight percent where we were before the crisis. But the

515
00:30:20,680 --> 00:30:25,200
Speaker 1: banking industry is bigger, so there's still a huge subsidy

516
00:30:25,320 --> 00:30:28,320
Speaker 1: embedded in cost of funds. And as they lose that

517
00:30:28,440 --> 00:30:32,640
Speaker 1: over time, Uh, you're gonna have spreads squeezed. Give us.

518
00:30:32,800 --> 00:30:35,280
Speaker 1: I want to go ask you something about regulations. I know,

519
00:30:35,320 --> 00:30:38,960
Speaker 1: post financial crisis, a whole series of regulations layered on

520
00:30:39,000 --> 00:30:42,520
Speaker 1: top of the financial services industry. Uh, you know, having

521
00:30:42,600 --> 00:30:45,640
Speaker 1: negative impact on the returns that those banks can generate.

522
00:30:45,920 --> 00:30:47,400
Speaker 1: Are we at a point in time where we can

523
00:30:47,440 --> 00:30:51,600
Speaker 1: expect meaningful rollback of some of those regulations. I know

524
00:30:51,640 --> 00:30:53,120
Speaker 1: there's been some talk about it in the last six

525
00:30:53,160 --> 00:30:56,240
Speaker 1: or twelve months. Well, I hope, led by Randall Corals

526
00:30:56,320 --> 00:30:59,480
Speaker 1: at the Photo Reserve Board, they try and rationalize them.

527
00:30:59,520 --> 00:31:01,880
Speaker 1: You know, you're ago people got together in Washington, the

528
00:31:01,960 --> 00:31:04,920
Speaker 1: different regulatory agencies, and they had lunch and they said,

529
00:31:04,960 --> 00:31:08,080
Speaker 1: what do we want? What has Congress told us? And

530
00:31:08,120 --> 00:31:10,920
Speaker 1: how do we implement that in a rational way, because

531
00:31:10,960 --> 00:31:13,960
Speaker 1: you don't want to hurt business. You know, all this fuss,

532
00:31:14,000 --> 00:31:18,040
Speaker 1: for example, about non bank companies posing systemic risk, okay,

533
00:31:18,040 --> 00:31:22,160
Speaker 1: which is pretty silly, uh, you know, misses the fact

534
00:31:22,160 --> 00:31:24,280
Speaker 1: that we have a banking system that pretty much has

535
00:31:24,320 --> 00:31:27,320
Speaker 1: a monopoly on short term funding. Years ago, when we

536
00:31:27,320 --> 00:31:30,320
Speaker 1: were kids, mortgage companies could sell pass through as the

537
00:31:30,360 --> 00:31:33,120
Speaker 1: money market funds. But we don't let them do that anymore.

538
00:31:33,360 --> 00:31:36,640
Speaker 1: So what we've done with each crisis is diminished the

539
00:31:36,840 --> 00:31:40,240
Speaker 1: freedom and diminished the utility of the markets, thinking that

540
00:31:40,240 --> 00:31:43,680
Speaker 1: that will protect us. And so you saw the most

541
00:31:43,720 --> 00:31:47,320
Speaker 1: recent experience with RepA. And yet the strange thing is

542
00:31:47,360 --> 00:31:49,960
Speaker 1: we still is. My good friend Ralph Deilchi likes to

543
00:31:50,000 --> 00:31:53,120
Speaker 1: remind we have a shortage of collateral even though the

544
00:31:53,120 --> 00:31:56,800
Speaker 1: Treasury is issuing moroward amounts of debt. You know, Chris Whalen,

545
00:31:56,880 --> 00:31:59,640
Speaker 1: your charm has been you've not been a critic of

546
00:31:59,680 --> 00:32:02,160
Speaker 1: the bank banks, but you've been very aware of balance

547
00:32:02,240 --> 00:32:06,160
Speaker 1: sheet risks, almost old school risk. And you've also said

548
00:32:06,480 --> 00:32:08,800
Speaker 1: I want to participate in the banks. You've done that

549
00:32:08,800 --> 00:32:12,480
Speaker 1: through preferred shares after a bang up year and the

550
00:32:12,560 --> 00:32:16,959
Speaker 1: Keith Briett index out near where it was two thousand six.

551
00:32:17,760 --> 00:32:20,920
Speaker 1: Can you be comfortable owning the common shares of these

552
00:32:20,920 --> 00:32:23,520
Speaker 1: two big to fail banks? Can you be comfortable with

553
00:32:23,600 --> 00:32:26,840
Speaker 1: their preferred securities with a greater yield? Or does of

554
00:32:26,880 --> 00:32:29,920
Speaker 1: course Gray Whalan cut it and run no No. I

555
00:32:29,960 --> 00:32:33,240
Speaker 1: own US Bank common and preferred. I owned City Trumps

556
00:32:33,560 --> 00:32:36,800
Speaker 1: the nine and three quarters, which are wonderful. I owned

557
00:32:36,800 --> 00:32:40,200
Speaker 1: Bank America preferreds by and large. I view the equity

558
00:32:40,280 --> 00:32:42,760
Speaker 1: right now is pretty pretty well valued. You know, JP

559
00:32:42,960 --> 00:32:45,720
Speaker 1: is almost two times. But I want to be clear, Christmas,

560
00:32:45,760 --> 00:32:48,480
Speaker 1: you get hit like a pinata by people saying you're

561
00:32:48,520 --> 00:32:53,560
Speaker 1: anti bank owned bank paper even while you're looking at

562
00:32:53,560 --> 00:32:57,280
Speaker 1: the dynamics inside banks. Correct, But I am anti big

563
00:32:57,320 --> 00:33:02,880
Speaker 1: bank and I'm anti sloppy badly directed bank. Smaller institutions

564
00:33:02,920 --> 00:33:06,160
Speaker 1: like US Bank Corps, which has always maintained the same size,

565
00:33:06,520 --> 00:33:09,440
Speaker 1: they refuse to get bigger. They like half a trillion

566
00:33:09,440 --> 00:33:11,760
Speaker 1: dollars that lets them sleep at night. Are you suggesting

567
00:33:11,840 --> 00:33:14,880
Speaker 1: James Diamond should not get bigger. I don't think the

568
00:33:14,920 --> 00:33:17,840
Speaker 1: big guys need to get larger. But ironically, as our

569
00:33:17,880 --> 00:33:21,200
Speaker 1: system grows in terms of debt and liquidity, which the

570
00:33:21,360 --> 00:33:25,920
Speaker 1: entire world uses to function, this is the great conundrum. Uh,

571
00:33:25,960 --> 00:33:28,680
Speaker 1: you know that that will change. Banks have to get

572
00:33:28,720 --> 00:33:32,960
Speaker 1: bigger in a way. They have to expand, the currencies expanding.

573
00:33:33,280 --> 00:33:35,600
Speaker 1: But Chris, you look at their operating income build out

574
00:33:35,640 --> 00:33:37,360
Speaker 1: over the last five years, and I know they're going

575
00:33:37,400 --> 00:33:39,560
Speaker 1: to build. I mean, you're gonna get an entire floor

576
00:33:39,640 --> 00:33:42,160
Speaker 1: on Park Avenue when they build a new skyscraper, right.

577
00:33:44,640 --> 00:33:47,080
Speaker 1: I don't know. You know, I've had a few institutions

578
00:33:47,160 --> 00:33:49,680
Speaker 1: contact me about getting back in the game, but I'm

579
00:33:49,720 --> 00:33:52,480
Speaker 1: affiliated with Cohen and Company, and a neat thing about

580
00:33:52,520 --> 00:33:55,800
Speaker 1: those guys is they provide mortgage finance. We run a

581
00:33:55,840 --> 00:33:59,560
Speaker 1: ten billion dollar plus book of agency securities and whole loans.

582
00:34:00,080 --> 00:34:02,160
Speaker 1: And what do you see there? Well, well, you saw

583
00:34:02,200 --> 00:34:05,320
Speaker 1: the repot crisis, we saw instability in the middle of

584
00:34:05,360 --> 00:34:08,160
Speaker 1: a month, which is supposed to not happen, and these

585
00:34:08,200 --> 00:34:10,759
Speaker 1: were the early warning silence that should have told the

586
00:34:10,800 --> 00:34:12,560
Speaker 1: Fed that we had a problem. This is back in

587
00:34:12,640 --> 00:34:16,600
Speaker 1: June and July. By the time everybody came home from holiday,

588
00:34:16,760 --> 00:34:20,479
Speaker 1: you know, in September, it was too late to fix it. Chris.

589
00:34:20,480 --> 00:34:24,440
Speaker 1: I'm looking at your institutional risk analysis note recent one

590
00:34:24,480 --> 00:34:27,200
Speaker 1: and I see a chart hair the I r a

591
00:34:27,360 --> 00:34:31,640
Speaker 1: bank deadpool. I'm a little nervous to ask what that is.

592
00:34:31,920 --> 00:34:34,399
Speaker 1: I'm assuming I don't want to be on that list. Yes,

593
00:34:34,520 --> 00:34:39,600
Speaker 1: those are four banks Deutsche, HSBC, Goldman, and City that

594
00:34:39,760 --> 00:34:43,040
Speaker 1: have underperformed. You know, the financials are as expensive as

595
00:34:43,040 --> 00:34:45,520
Speaker 1: they have ever been, and I think the only Goldman

596
00:34:45,600 --> 00:34:48,239
Speaker 1: of that group is now at book value. Um the

597
00:34:48,239 --> 00:34:51,000
Speaker 1: rest are at a discount. And that tells you a

598
00:34:51,000 --> 00:34:55,040
Speaker 1: couple of things, but particularly their efficiency in creating revenue.

599
00:34:55,040 --> 00:34:58,359
Speaker 1: Look how efficient Wells Fargo still is. Those guys make

600
00:34:58,440 --> 00:35:02,880
Speaker 1: money even though they're under a out US bank. Amazing

601
00:35:02,960 --> 00:35:05,600
Speaker 1: performance for an institution. It's large. But once you get

602
00:35:05,680 --> 00:35:09,480
Speaker 1: really big Bank of America, for example, who by the way,

603
00:35:09,480 --> 00:35:12,840
Speaker 1: I applaud this quarter they rallied you know interesting story

604
00:35:12,920 --> 00:35:16,800
Speaker 1: time you like this. Jamie Diamond went long duration last December.

605
00:35:17,200 --> 00:35:19,440
Speaker 1: He wrote it down. But it looks like Bank America

606
00:35:19,520 --> 00:35:22,040
Speaker 1: missed that trade. And yet by the fourth quarter they

607
00:35:22,040 --> 00:35:24,560
Speaker 1: had rallied and they dropped their cost of funds when

608
00:35:24,600 --> 00:35:29,080
Speaker 1: everybody else's funding costs is going on. That's the inside

609
00:35:29,080 --> 00:35:31,560
Speaker 1: baseball from Chris Whalen about the business is still being

610
00:35:31,600 --> 00:35:33,799
Speaker 1: done like it used to be done. Chris, let's let's

611
00:35:33,840 --> 00:35:35,440
Speaker 1: let's shift gears here a little bit. I want to

612
00:35:35,440 --> 00:35:38,080
Speaker 1: talk about wealth management. James Gorman is the glory god

613
00:35:38,080 --> 00:35:40,920
Speaker 1: of the moment. We will speak with Mr Gorman, Ian Davos,

614
00:35:40,960 --> 00:35:42,960
Speaker 1: I was really looking forward to a set of important

615
00:35:43,000 --> 00:35:47,440
Speaker 1: interviews with Moynihan, Corbett, Gorman and Mr Solomon over In

616
00:35:47,520 --> 00:35:51,200
Speaker 1: goldn Sachs. But tell me about wealth management, Chris, because

617
00:35:51,239 --> 00:35:53,800
Speaker 1: it used to be an afterthought, and now it seems

618
00:35:53,800 --> 00:35:56,560
Speaker 1: like everybody wants to, in honor of the late Mr

619
00:35:56,640 --> 00:36:00,359
Speaker 1: Marin be like Pain Webber, do wealth management do net

620
00:36:00,360 --> 00:36:04,600
Speaker 1: worth blah blah blah. Can those margins actually be sustained

621
00:36:04,640 --> 00:36:08,160
Speaker 1: if everybody wants in the pool? I think it can,

622
00:36:08,320 --> 00:36:11,600
Speaker 1: but it's certainly competitive. So when Goldman, for example, says

623
00:36:11,640 --> 00:36:14,240
Speaker 1: that they're going to go in and essentially take share

624
00:36:14,239 --> 00:36:19,120
Speaker 1: in that market. That's a tough proposition. Many banks ups,

625
00:36:19,120 --> 00:36:22,840
Speaker 1: a number of them made the decision, much like Morgan Stanley,

626
00:36:23,040 --> 00:36:25,680
Speaker 1: to go all in on the advisor side because there's

627
00:36:25,680 --> 00:36:28,560
Speaker 1: a low risk and the investment banking side. Dudes were

628
00:36:28,560 --> 00:36:31,640
Speaker 1: not top tier investment banks, to be fair, but they

629
00:36:31,680 --> 00:36:33,520
Speaker 1: knew to get it. But come on, this is on

630
00:36:33,560 --> 00:36:35,839
Speaker 1: a microeconomic basis. It's like the way you're in your

631
00:36:35,840 --> 00:36:39,080
Speaker 1: book Inflated, you explain into the financial crisis. It's about

632
00:36:39,080 --> 00:36:41,520
Speaker 1: those seven You either make money there you don't. Oh,

633
00:36:41,560 --> 00:36:45,480
Speaker 1: come on, I'm suggesting, Mr Whalen. There's too many players.

634
00:36:45,800 --> 00:36:49,160
Speaker 1: Everybody's going to dive in a in a somewhat perfectly

635
00:36:49,200 --> 00:36:54,640
Speaker 1: competitive milieu, can wealth management sustain these ginormous twenty five

636
00:36:54,680 --> 00:36:58,920
Speaker 1: percent margins in the mainstream fat portion of it? Two

637
00:36:58,960 --> 00:37:01,799
Speaker 1: smaller accounts know, but there is a clientele out there

638
00:37:01,840 --> 00:37:04,000
Speaker 1: that wants high touch and as you know, I know

639
00:37:04,120 --> 00:37:08,240
Speaker 1: a certain lovely redhead from Uruguay who's in that business. Um,

640
00:37:08,239 --> 00:37:10,759
Speaker 1: and I you know it can be done in it?

641
00:37:10,960 --> 00:37:14,239
Speaker 1: What is this? A sales kid always have to put

642
00:37:14,239 --> 00:37:16,000
Speaker 1: a plug in for the white well that's good. You

643
00:37:16,040 --> 00:37:19,760
Speaker 1: always say good morning to Mrs Whalen as well. Paul Sweeney.

644
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Speaker 1: You know you're a high net worth kind of guy, Paul,

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Speaker 1: You've been following this for years. Can they maintain those

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Speaker 1: Gorman like margins. That's a great question, Tom, because you

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Speaker 1: hear it from you know, Morgan Stanley's Tom mentioned made

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Speaker 1: a big push under Gorman, you know, several years ago,

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Speaker 1: taking Morgan Stanley from a swashbuckling trading culture to more

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Speaker 1: of a you know, a wealth management credit. Swiss at

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Speaker 1: the same time gets out of it, and they're both

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Speaker 1: still in banking, but in in spots where they really

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Speaker 1: have a comparative advantage structured finance for credit Sweetz Gorman,

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Speaker 1: for example, has a great aircraft business, big aircraft leasing deals.

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Speaker 1: Morgan Stanley is the first stop. So they picked their spots.

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Speaker 1: But it's not like the old days when the broker

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Speaker 1: tried to do everything, gave away lots of stuff, and

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Speaker 1: those were the days, Tom, Those are those were the days.

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Speaker 1: Chris Whale and thank you so much, greatly appreciate it

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Speaker 1: today with Whale and Global Advisers and important conversation, always

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Speaker 1: controversial conversation on the American banking system. Thanks for listening

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Speaker 1: to the Bloomberg Surveillance podcast. Subscribe and listen to interviews

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Speaker 1: on Apple Podcasts, SoundCloud, or whichever podcast platform you prefer.

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Speaker 1: I'm on Twitter at Tom Keene before the podcast. You

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Speaker 1: can always catch us worldwide. I'm Bloomberg Radio