WEBVTT - Meredith Whitney Talks Iran War's Market Impact & Consumer Health

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<v Speaker 1>Bloomberg Audio Studios, podcasts, radio news, and it's the right.

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<v Speaker 2>Place, the right time to speak to Meredith Whitney, who's

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<v Speaker 2>seen ups and downs, to say, Alice, how do you

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<v Speaker 2>stay invested given the day to day madness of these

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<v Speaker 2>war headlines?

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<v Speaker 1>I think you do what most investors are doing, which

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<v Speaker 1>is ignore it. I mean, there's not to be a

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<v Speaker 1>Debbie downer, but it's it's it's unrealistic to think that

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<v Speaker 1>this war gets sewn up in you know, in days

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<v Speaker 1>or even months, and we and if even if it does,

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<v Speaker 1>the terms don't even seem very agreeable. So we're gonna

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<v Speaker 1>have elevated prices for a long time.

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<v Speaker 2>You know.

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<v Speaker 1>I think the financials have been horrible performers this year.

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<v Speaker 1>The AA stocks, which are agnostic of of this, have

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<v Speaker 1>have carried the market. So how do you stay invested?

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<v Speaker 1>You know, you you take a big gulp on the

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<v Speaker 1>stuff that's down and course and the stuff that's.

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<v Speaker 2>A gulp of what isn't shaken her stir exactly.

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<v Speaker 3>So, Meredith, what are the banks saying about the consumer,

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<v Speaker 3>you know, in terms of credit cards and all. That's

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<v Speaker 3>kind of the first place that we see stress in

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<v Speaker 3>the marketplaces. If the consumer stressing on the credit front.

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<v Speaker 3>What are the banks telling?

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<v Speaker 1>That has historically always been the case. You saw delinquencies

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<v Speaker 1>rise into every recession. It's not the case this time.

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<v Speaker 1>And my contention is that even though there was an

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<v Speaker 1>article in the Wall Street JOURNALI this week that said

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<v Speaker 1>delinquency ninety day punks delinquencies was over ten percent, and

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<v Speaker 1>some really smart people posting forward to the that's based

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<v Speaker 1>not based in reality, and not based on that bank.

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<v Speaker 2>Why is that article which I did not retweet because

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<v Speaker 2>I agree with you, tell our audience why that article

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<v Speaker 2>was off the market.

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<v Speaker 1>Okay, so the New York Fed has the thirteen point

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<v Speaker 1>one two delinquency ninety day delinquencies. It does not comport

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<v Speaker 1>with any bank figures. So I'll give you an example.

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<v Speaker 1>The largest credit card operator is now Capital One because

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<v Speaker 1>if it's merger with Discover there.

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<v Speaker 2>It's because of of what's his saying, the basket couple,

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<v Speaker 2>Charles Barkley, that's why there's success the Capitol One guy.

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<v Speaker 1>But their thirty days, so they just report thirty days

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<v Speaker 1>are three point two seven percent. The second largest credit

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<v Speaker 1>card company that does report ninety days is JP Morgan.

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<v Speaker 1>Their ninety delinquencies are one point one percent, So you've

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<v Speaker 1>got to forty percent of the market with those two companies.

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<v Speaker 1>And so then I look at I'll look at a

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<v Speaker 1>subprime masure, which is oh and by the way, Capital

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<v Speaker 1>One has twenty seven percent subprime customers and it's three

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<v Speaker 1>point twenty seven. So the thirty day bucket for your listeners,

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<v Speaker 1>it encompasses thirty sixty ninety.

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<v Speaker 2>Well, you just heard their bottle at Classic Meredith Whitney

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<v Speaker 2>Paul and it rhymes with Michelle Meyer of MasterCard, who

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<v Speaker 2>is adamant those numbers weren't what they're seeing at MasterCard.

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<v Speaker 3>So how do you view the consumer these days?

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<v Speaker 4>It's bifurcated. So if you look at so all.

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<v Speaker 1>The major credit card companies, which are regulated entities have

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<v Speaker 1>de risked, pulled back from the lower income lower five

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<v Speaker 1>go score a consumer dramatically, and that's Cap One.

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<v Speaker 4>They started doing it twenty twenty two, all of the issuers.

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<v Speaker 1>So you've got forty five percent of households that are

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<v Speaker 1>considered less than prime or subprime. They're going to things

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<v Speaker 1>like payday lending, like payday lending or pay on demand,

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<v Speaker 1>which has grown through the roof. They don't qualify for

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<v Speaker 1>home equity loans, so they're selling a piece of their

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<v Speaker 1>equity to a private company that the equity interest accrues

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<v Speaker 1>over time. And so these are adverse situations for any consumer.

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<v Speaker 1>So the consumer on the lower end, forty five percent

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<v Speaker 1>of households are not living paycheck to paycheck. They're living

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<v Speaker 1>payday to pay day. And you don't see how bad

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<v Speaker 1>it is because these companies in the shadow banking market

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<v Speaker 1>are all private.

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<v Speaker 2>Meredith Whitney with us here on banking, here on finance

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<v Speaker 2>as well, you're so good and we're not going to

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<v Speaker 2>have the subprime reducts of collective memory of seven. Oh

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<v Speaker 2>wait when you see the securitization out there, now bring

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<v Speaker 2>it over to his Pall's done better than mean. Private credit.

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<v Speaker 2>Are there shadows out there you're worried about?

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<v Speaker 1>Well, today would erase those shadows because software is doing

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<v Speaker 1>well and private credit worries were over loans to software.

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<v Speaker 1>But I think in large part there'll be some there'll

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<v Speaker 1>be some, you know, isolated incidents, but it's certainly the

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<v Speaker 1>market's not big enough to have any type of stomach risk.

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<v Speaker 1>And these this is what these guys do, So they're

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<v Speaker 1>good lenders. So I think that the market looks pretty

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<v Speaker 1>clean from a credit quality standpoint. I mean, in the

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<v Speaker 1>consumer sector it's pristine.

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<v Speaker 3>I bet before the war, I mean one of the

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<v Speaker 3>key topics for this marketplace was the private credit market

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<v Speaker 3>and was some of the credit issues there was that

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<v Speaker 3>systemic or not? What's your call today?

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<v Speaker 1>It's such a small I mean, it's a trillion dollar

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<v Speaker 1>market maybe, like if you want to get really aggressive,

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<v Speaker 1>it's a trillion and a half dollar market.

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<v Speaker 4>But it's just not big enough to make a difference.

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<v Speaker 3>So what are we thinking here? If if you're JP

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<v Speaker 3>Morgan here, you're some of these big banks here, is

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<v Speaker 3>it loan growth? Is that the story to grow your

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<v Speaker 3>business these days? Or do you just is it all

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<v Speaker 3>capital markets? These days?

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<v Speaker 1>It's for the banks, it's been mostly capital markets, and

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<v Speaker 1>but for JP Morgan, which is spending a lot, it's

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<v Speaker 1>been cost cutting and just general efficiency. But the banks

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<v Speaker 1>really aren't growing that much. I mean, if they have

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<v Speaker 1>big quarters, they haven't only grown for ten years in

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<v Speaker 1>terms of a loan. From a loan perspective, Let's leave

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<v Speaker 1>JP Morgan out of the equation. Because they pull off

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<v Speaker 1>I don't know how they do it. But everybody else

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<v Speaker 1>has been either flat or.

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<v Speaker 4>Declining. And Bank of America's trunk. It's consumer effort.

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<v Speaker 2>I've got with Scarlett food, Bloomberg money. Look for that, folks.

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<v Speaker 2>It's Friday twelve noon, you know, Meredith, I'm getting inundated

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<v Speaker 2>everybody that has a family office. Meredith Whitney on family offices.

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<v Speaker 2>They weren't like a big deal fifteen years ago.

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<v Speaker 4>Were There's just so much more money out there. So people,

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<v Speaker 4>do you have a family office?

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<v Speaker 2>Are you?

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<v Speaker 1>I am the family office and walking exactly. But these

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<v Speaker 1>family offices are huge now. And I have a lot

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<v Speaker 1>of friends who run family offices.

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<v Speaker 2>And are they regulated? Is there a form adv like

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<v Speaker 2>an investment advisor?

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<v Speaker 1>I don't think so, but they get they get shown notes.

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<v Speaker 1>The family offices now are the for all the wealth

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<v Speaker 1>management businesses. I mean JP Morgan courts these family offices

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<v Speaker 1>all day long, and they're they're like.

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<v Speaker 2>A prime broker. JP Morgan is like a prime broker

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<v Speaker 2>with them.

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<v Speaker 1>Yes, and you know, with loans with everything. And so

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<v Speaker 1>if you're Tom, I'm sure you have a family office.

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<v Speaker 1>So all of your properties have to be managed, your

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<v Speaker 1>all your various accounts, Swiss accounts, all in cash, have

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<v Speaker 1>to be managed, and you don't have time, especially with

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<v Speaker 1>your new TV show, so you're going to hire her family.

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<v Speaker 4>Office are on the side.

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<v Speaker 2>Actually, folks, in my family office is called Tuition Inc.

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<v Speaker 4>Believe it.

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<v Speaker 2>Meredith, thank you, thank you, thank you so much. Meredith,

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<v Speaker 2>be there.