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

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Speaker 1: We bring you insight from the best in economics, finance,

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Speaker 1: investment 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. The

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Speaker 1: Third Pillar, how markets in the state leave the community

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Speaker 1: behind is an extraordinary effort and hugely anticipated by Robin Roger,

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Speaker 1: and a guy named Hilarion writes a blurb about it's

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Speaker 1: some guy Yale Schiller, Uh, yelling. I think she was

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Speaker 1: with a fed for a while, Professor Rogoff, But I

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Speaker 1: think what's most moving for me. John Farrow is a

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Speaker 1: Marches sen of Harvard who with Jock dish Bagwaddy to

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Speaker 1: find Indian excellence and academics for me. Says a strikingly

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Speaker 1: insightful analysis. Uh, and that barely describes. Why don't you

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Speaker 1: bring in Professor Rogin on the third pillar, formerly of

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Speaker 1: the Reserve Bank of India. It's great to have you

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Speaker 1: with us, Rug and I want to talk about the

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Speaker 1: third pillar. And typically when you go into post grad

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Speaker 1: and you do a political economics course, political economy outsandy

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Speaker 1: with the relationship between the state and the economy and

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Speaker 1: community doesn't come up, and in the first couple of

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Speaker 1: pages of your book, this is something you address. How

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Speaker 1: important is that? Extremely important? Because I think when we

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Speaker 1: look at the success of liberal market democracies post World

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Speaker 1: War Two, we typically talk about the markets, uh, and

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Speaker 1: if you're from Chicago, that's all you want to talk about.

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Speaker 1: If you're from elsewhere, you talk about the government and

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Speaker 1: its role in protecting property rights and contracts. What we

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Speaker 1: neglect is the role of the community, both in preparing

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Speaker 1: people for markets, in supporting them when they fall off

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Speaker 1: the markets, but also in pushing for democratic engagement which

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Speaker 1: keeps the markets open for all. I think these rules

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Speaker 1: are critical in the liberal market democracies, and when we

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Speaker 1: look at countries like China where it doesn't occur, you

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Speaker 1: sort of wonder will they have the system that can

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Speaker 1: stay at the frontiers in the future. What are you

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Speaker 1: worried about in China specifically right now? Well, right now?

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Speaker 1: Most immediately it is, of course, the enormous pile up

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Speaker 1: of debt and how they keep growth going without pressing

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Speaker 1: the old buttons of pushing debt still some more, pushing

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Speaker 1: fixed asset investment and creating more problems for the future.

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Speaker 1: China needs to keep its growth going because that's where

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Speaker 1: the Communist Party gets its legitimacy from. But at the

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Speaker 1: same time they realize that what they've been doing in

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Speaker 1: recent years is essentially borrowing from the future. Something we've

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Speaker 1: discussed on this program over the last couple of weeks

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Speaker 1: is the diminishing marginal return of that additional unit of

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Speaker 1: debt that is being ejected into the Chinese economy. Have

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Speaker 1: we reached the point where they are pushing on a

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Speaker 1: string in your view, well, I think they're pretty close,

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Speaker 1: which is why they're trying desperately to not do it

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Speaker 1: this time. What they call it is irrigating the fields

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Speaker 1: rather than flooding them. They don't want to flood it

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Speaker 1: with a whole lot more debt. But it is an

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Speaker 1: economy which has gotten used to fixed asset investment as

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Speaker 1: the way to grow, and fixed asset investment fueled by credit,

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Speaker 1: and of course, as you said, it has diminishing returns

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Speaker 1: marches and is known for a tone of capitalism sharply

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Speaker 1: different from the lacky and individualism of the United States

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Speaker 1: of America. Howard emerches s and and how would Roger

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Speaker 1: rog And describe this arch socialism that has reigned supreme

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Speaker 1: in early two thousand nineteen. We all understand it's not

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Speaker 1: real socialism. But what is this tinge of democratic socialism

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Speaker 1: we've see in America today? Well, it is from people

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Speaker 1: who have not participated in the growth that we've seen

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Speaker 1: across the industry world post recession. It's people saying what

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Speaker 1: about me? Why have I been left behind? But it's

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Speaker 1: not just about the current situation. It's not just about

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Speaker 1: whether they have jobs or not. It's about the quality

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Speaker 1: of jobs going forward for themselves. Do I see progress?

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Speaker 1: And equally important, do I see progress my kids? Are

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Speaker 1: my kids going to have as good? It's going to

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Speaker 1: lead that charge. I mean, nobody can figure out how

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Speaker 1: to pay for this program or that program or the

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Speaker 1: next program. I mean to go back to our marches

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Speaker 1: nineteen sixty where there was techniques that were discussed. What

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Speaker 1: is the new technique of rock and Rogings capitalism? Well,

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Speaker 1: I would like more localism. I would like to push

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Speaker 1: more decision making back to the local ator to learn

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Speaker 1: that that the Reserve Bank of Indios that's that's that's

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Speaker 1: my view of capitalism, which is devil are you still

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Speaker 1: in this from Luigis and we debate a lot. We

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Speaker 1: debate a lot. Do you guys argue what do you

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Speaker 1: argue about a lot of things? We we do argue,

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Speaker 1: for example, of new tech companies, why is it that

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Speaker 1: they're so dominant? And what should we have done about

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Speaker 1: them going forward? Because they produce a really good product,

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Speaker 1: but they do control a lot of the economy going forward.

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Speaker 1: Speaking of control and control of the economy, let's just

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Speaker 1: wrap up by talking about the threat to central bank independence,

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Speaker 1: perhaps more specifically in in India and at the Reserve

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Speaker 1: Bank of India, Governor Patel stepping down unexpectedly. Um largely

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Speaker 1: speculated that it was forced out by the government there.

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Speaker 1: You yourself had your own issues there too. Do we

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Speaker 1: face the very real prospect that central bank independence could

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Speaker 1: become something of the past? Well, central banks are in

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Speaker 1: natural part of the elite establishment, and therefore there is

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Speaker 1: a lot of concern about them from populous movements. Why

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Speaker 1: are they raising interest rates when I don't see inflation insight?

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Speaker 1: Why is it that they don't flood the economy with

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Speaker 1: more money, because, after all, just print money and we

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Speaker 1: can spend so the easy answers. You have to explain

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Speaker 1: why you're not doing that, why in act it would

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Speaker 1: be a bad idea to continue printing money. Uh, you know,

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Speaker 1: we have a bunch of theories now. I think it's

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Speaker 1: called modern monetary theory, where printing and finance whatever you want.

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Speaker 1: So central banks now have the responsibility of explaining what

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Speaker 1: you do. Great to see you, rag Aram ran Jan

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Speaker 1: of Chicago, formerly at the Reserve Bank of India. Could

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Speaker 1: you bring it Nursting, guys, I can. He's a B

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Speaker 1: T I G. Which means he's wired into the oscars?

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Speaker 1: Is he really? Why is that they're Rich Greenfield? In

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Speaker 1: the whole entertainment Rich Rich would have watched and walt

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Speaker 1: it as apple the differences. Walter watched it, Julian watched it.

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Speaker 1: I watched it. But Rich really watched it and enjoyed it.

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Speaker 1: That's the difference. I think in a man he well

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Speaker 1: enjoyed it too. He joins us. He runs their equity

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Speaker 1: and derivative strategy, and it's great to have you with

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Speaker 1: the studio. So we've had a massive run up in

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Speaker 1: a V shaped recovery, not just in stocks, but across

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Speaker 1: a variety of asset classes. What's behind it in your mind, Judean,

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Speaker 1: And why are we going to have the energy and

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Speaker 1: the fuel for this to continue. Well, the catalyst, aside

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Speaker 1: from you know, the deep, profound oversauld at the end

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Speaker 1: of last year, is that you know, when they do

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Speaker 1: the Oscars next year, the guy that should win the

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Speaker 1: Best Actor is probably Jerome Powell given his performance in

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Speaker 1: in January. Uh. There's no question about the fact that

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Speaker 1: when you look at the FED changing tack that that

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Speaker 1: is a very material tail when for stocks globally, for

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Speaker 1: the FX markets UM, and ultimately for someone like China

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Speaker 1: who is in their own easing mode uh, sort of

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Speaker 1: competitively more able to do so because they're getting flexibility

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Speaker 1: from the FED. The question is too far, too fast. Uh.

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Speaker 1: We'd actually like to see a little bit of of

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Speaker 1: a break in the rally. UM. It's it's getting to

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Speaker 1: the point where you could get a performance chase. UM.

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Speaker 1: And when we think about performance chases that have happened

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Speaker 1: early in the year, we think about, you know, times

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Speaker 1: like two thousand seven, they didn't end terribly well. Um.

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Speaker 1: What we want to see is a little bit more

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Speaker 1: perhaps decorum coming into the market and let the data

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Speaker 1: catch up to where the fundamentals could be and where

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Speaker 1: the asset prices. Have a base case that the data

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Speaker 1: does validate some of the moves we've seen. Uh, it

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Speaker 1: it will in our view, but it may not happen

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Speaker 1: until late in the second quarter or even into the

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Speaker 1: third quarter. This is a soft patch, John, this is

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Speaker 1: so important. I've been using the number and sort of

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Speaker 1: the December down and up a percentage move. I just

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Speaker 1: did it from October with the SMP five hundred and John,

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Speaker 1: down and up has been a thirty six point round

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Speaker 1: test the full range. Full range, that's five hundred nineties

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Speaker 1: seven SMP points down, four hundred spive. I've never I

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Speaker 1: can honestly say, I've never seen that outside of recessionary conditions.

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Speaker 1: It's wild in America, which makes it even more fascinating.

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Speaker 1: We've had a few of days, Julian over the Psycho

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Speaker 1: fifteen sixteen and the experience of eighteen nineteen. Why is

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Speaker 1: this one different? It is definitely different. First of all,

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Speaker 1: as as Tom pointed out, the speed and the ferocity

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Speaker 1: both to the upside and the downside. And actually, you know,

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Speaker 1: using our our derivatives knowledge, what was amazing to us

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Speaker 1: is at the end of last year, downside put protection

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Speaker 1: actually got cheaper. In my experience, I've never seen that

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Speaker 1: because that what that tells you is that it was

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Speaker 1: just straight out liquidation of everything, of stocks, of commodities,

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Speaker 1: of of option protection, and so the you know, by

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Speaker 1: that standard, the corresponding rebound, given the fact that the

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Speaker 1: FED helped catalyze it, has been appropriately strong. I'm always

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Speaker 1: really interested by what the consensus is, how the consensus shifts,

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Speaker 1: what informs it is the consensus view quickly becoming you

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Speaker 1: need to fight this strength, and therefore is the pain

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Speaker 1: trade the ultimately this market can continue grinding higher. What

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Speaker 1: do you think of that, Julian, The pain trade is

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Speaker 1: definitely that the market can continue higher, no question about that.

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Speaker 1: UM in general sort of again starting the year, people

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Speaker 1: came in under invested. People continue to be under invested.

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Speaker 1: Very cautious, particularly since the data, if anything, has deteriorated

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Speaker 1: at the margin. But Julian, I don't want you to

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Speaker 1: come in and Macy's particularly, I know you don't do

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Speaker 1: individual stocks, but you look at the creative destruction and retail.

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Speaker 1: Now all you need to know of Folks is venerable

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Speaker 1: Macy's to streamline management structure in productivity plan and they're

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Speaker 1: putting a positive spin on it. But let's just say

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Speaker 1: there's basic chaos and retail as a general statement as well,

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Speaker 1: how do you, as a general strategist synthesize the creative

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Speaker 1: destruction going on industry? The industry? CVS ETNA the other day,

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Speaker 1: were you long craft? You know, I'll leave that to

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Speaker 1: the world's Yeah, okay, you'll leave that to the world's

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Speaker 1: creative Oh did you hear that shot about CDs? No craft?

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Speaker 1: Now Macy's with a massive upper management restructuring as well.

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Speaker 1: How do you do creative structure to creative destruction when

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Speaker 1: you're a generalist strategist. Well, it's been the story of

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Speaker 1: the last probably fifteen years. Uh uh, certainly with the

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Speaker 1: rise of technology. And you know, the question is this

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Speaker 1: far in to the cycle. You know, do you have

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Speaker 1: a company where you feel that management is developing a

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Speaker 1: strategy or a series of alternatives given the shift in

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Speaker 1: the landscape? Number one and number two is your evaluation

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Speaker 1: not only is a general strategy just American corporations, do

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Speaker 1: they have the ability to cut costs or are they

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Speaker 1: so tight to the bone they can't cut anymore? Now

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Speaker 1: we think there's still an ability to cut costs, but

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Speaker 1: as you've seen, the desire would be not to do that. Uh,

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Speaker 1: particularly since there's enough cash to be able to fund growth.

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Speaker 1: The problem is that we've got to clear up some

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Speaker 1: of the politics. I'm increasingly frustrated by the corporate happy talk, streamline,

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Speaker 1: the management structure and a productivity plan. Is that is

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Speaker 1: that job cuts? What is that? But they won't say

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Speaker 1: they just wanted they just say it. What is that?

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Speaker 1: It's it certainly is job cuts. It's you know, it's

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Speaker 1: a sound antized version. But look at the look at

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Speaker 1: the labor market. Those people are going to find jobs elsewhere.

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Speaker 1: They have a hundred and thirty thousand employees. But to

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Speaker 1: your point, John, I'm looking at the four or five

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Speaker 1: paragraphs here and it's sort of like Brexit. I really

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Speaker 1: can't figure out the extension of the It's too difficult.

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Speaker 1: But I think it touches on an important theme through

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Speaker 1: this year. People's estimates for sales on the SMP five

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Speaker 1: hundred actually haven't come down as dramatically as the estimates

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Speaker 1: for earnings, and there seems to be a big focus,

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Speaker 1: a laser focus on judy and on margins. And cutting

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Speaker 1: costs out and focusing on margins. Why is margins such

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Speaker 1: a big issue for Well, there's been this ongoing UM

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Speaker 1: obsession with the tightness in the labor market, um, which

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Speaker 1: we think is actually sort of an over over obsession.

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Speaker 1: We think the Fed agrees with that. But at the

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Speaker 1: end of the day, if you're uncertain about where your

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Speaker 1: growth is going to come from, and you know that

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Speaker 1: you've got to deliver or you know, a better bottom

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Speaker 1: line year on year, you've got to think about cutting

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Speaker 1: very quickly. To John's good question, are we miss judging

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Speaker 1: margins as we've done for the last twenty years, or

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Speaker 1: are we miss judging the revenue get over the next

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Speaker 1: twelve months. Well, I think margins have been one of

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Speaker 1: those issues. It's it's sort of like, you know, the

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Speaker 1: demise of China or the the implosion moment we've been looking, right,

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Speaker 1: We've been looking for for ten years it hasn't come,

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Speaker 1: or you know, the demise of the dollar as the

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Speaker 1: world's reserve currency. Margins continue to stay elevated because ultimately companies,

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Speaker 1: as to your point earlier, are finding ways of adapting

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Speaker 1: to the twenty one century. You didn't get to see

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Speaker 1: you chief equity derivative strategist Always Rights catch Elpy Julian

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Speaker 1: is our next guest of Chica Spring Training, Diane Swamp.

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Speaker 1: I think, so, oh, thank you. That's the privilege, pleasure,

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Speaker 1: thank you. You don't know cubbies white socks and you

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Speaker 1: don't know Diane, that we argue over who's going to

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Speaker 1: bring you in the commercial break. Yeah, I appreciate and

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Speaker 1: Tom Tom is letting me so thank you, Diance Swamp.

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Speaker 1: Grant Thornton, Chief Economist, Diana, what happened in December, Well,

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Speaker 1: you know, we knew it was going to be a

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Speaker 1: soggy month. We had a real collapse and build build

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Speaker 1: their confidence over the course of two thousand and eighteen

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Speaker 1: and twenty. In December numbers were horrible, So this really

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Speaker 1: matches builder confidence. The good news is in February were

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Speaker 1: now much ahead of the actual data because of the

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Speaker 1: government shutdown in the delays we saw there is better

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Speaker 1: data supposedly out their builders whnning a lot more confident

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Speaker 1: now that mortgage rates have come down to sort of

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Speaker 1: their lowest levels in about a year, and that helping

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Speaker 1: them out a bit. But these losses, looking at them

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Speaker 1: across the board really in multi family market heavily, but

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Speaker 1: also in single The one place that's really interesting is

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Speaker 1: how big the losses were everywhere, from the Northeast, the West,

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Speaker 1: the Midwest, the South didn't have his battle losses, which

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Speaker 1: is really important because that's our lion share of housing

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Speaker 1: starts out there, and that's the backbone of the housing

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Speaker 1: market in terms of sales and construction. But let's face it,

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Speaker 1: it's hard to put Listick on this pig. Yeah, it

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Speaker 1: is a pig. It looks real ugly housing starts just

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Speaker 1: collapsing really in December, and this corresponding with some really

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Speaker 1: really ugly price section and financial markets at the back

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Speaker 1: end of last year. How does all of this inform

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Speaker 1: the Federal reserves current state and its patience. Well, they'll

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Speaker 1: have a lot of it, and I'll be able to

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Speaker 1: ask Raphael Bostick about that of the ATLANTIFA on Friday

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Speaker 1: at the NAVE conference. But it is really interesting is

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Speaker 1: the data that's come out. When they were in that

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Speaker 1: data void, they had the only thing they had with

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Speaker 1: the spectacular employment data, which are really important. That's great,

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Speaker 1: but the data we've gotten since then really shows a

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Speaker 1: lot of ugly data. Retail sales really disappointing for the

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Speaker 1: month of December. We're still way you know, in January

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Speaker 1: retail sales when we had a polar vortex and a

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Speaker 1: government shutdown. Industrial production disappointing in January. So a lot

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Speaker 1: of the data that we've gotten durable goods orders are

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Speaker 1: treating out again tomorrow has been disappointing, and the FED

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Speaker 1: it makes them until we get more data that turns around, Okay,

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Speaker 1: we will. They got to be paid. Can you explain

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Speaker 1: well meaning market economists who have a faith that things

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Speaker 1: will pick up? Where does that faith come from well

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Speaker 1: meaning market economists? Well, um, I guess I'm glad I'm

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Speaker 1: the longer than financial sector. Um. I think the faith

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Speaker 1: is on the employment data, and the employment data has

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Speaker 1: been strong. You know, I'm the one one of those

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Speaker 1: ones that was the first one out there to call assion.

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Speaker 1: So it's not like I'm you know, very agreed, agreed,

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Speaker 1: But but the optimists have a faith that things pick up.

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Speaker 1: And I mean John Ferrell gets like ten times a

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Speaker 1: mail I get. But the fact is the mail we

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Speaker 1: get as like, really, what's the faith of the you know,

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Speaker 1: I have faith that will pick up, not as much

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Speaker 1: as others. And I also think the FEDS on hold

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Speaker 1: the entire year and we'll be cutting next year. The

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Speaker 1: real issue is there's a blind faith, I think in

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Speaker 1: China's ability to do a one eight. And you know,

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Speaker 1: China's pulled a rabbit ale the hat a lot of times,

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Speaker 1: but even good magicians slip up sometimes, And I think

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Speaker 1: what we're looking at in China now is that their

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Speaker 1: ability to provide growth on command and just say we're

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Speaker 1: going to stimulate the economy. The transmission mechanisms aren't what

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Speaker 1: they once were in China, and so far they've been

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Speaker 1: unable to The trade issue is important, and sidelining additional

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Speaker 1: tariffs is very important, but so far we've not removed

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Speaker 1: any tariffs that we've invoked except for one steel company

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Speaker 1: in Russia. Other than that, all the tariffs are still

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Speaker 1: on that we put in place, even after we come

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Speaker 1: to tentative trade agreements with Mexico and Canada. And I

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Speaker 1: think it's very important to understand that it's not just

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Speaker 1: trade that's hitting China, it's China, and it's odd model

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Speaker 1: that's hitting China, and they're not able to stimulate the

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Speaker 1: same way they once did with debt through the private sector,

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Speaker 1: and you've threatened people are going to go to jail

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Speaker 1: if they take on too much debt. It's hard to

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Speaker 1: get him to do it again. And you have touched

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Speaker 1: on what I think is the issue for nineteen What

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Speaker 1: holds the key to performance in markets through the rest

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Speaker 1: of the year. It's not the trade story, It's not

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Speaker 1: what the Fed does. It's the faith in China's ability

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Speaker 1: to stabilize this economy. When will that faith actually be tested?

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Speaker 1: I think it's really going to be tested in the

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Speaker 1: second half the year. So as we moved through, people

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Speaker 1: will sort of say, oh, it's trade noise, and I'll

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Speaker 1: be willing to discount weakness which will not show up

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Speaker 1: in the Chinese data, which are now making up even

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Speaker 1: more data than they once did. My friends that are

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Speaker 1: much better experts than I on China our time, you know,

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Speaker 1: they're they're ripping out new they're inventing data series that

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Speaker 1: don't even have a base, like your your retail sales

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Speaker 1: growth at no levels, you know, kind of strange point

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Speaker 1: out this is a real issue for the second half

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Speaker 1: the year. I think we're going to be disappointed. And

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Speaker 1: that's why I'm worried about twenty Monny, Diane, thank you

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Speaker 1: for the update. Thank you Grant Thornton Yeoman's duty on

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Speaker 1: uh FED Day as well from Diane Swank of Grant

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Speaker 1: Thornton as well. What is the most famous of what's

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Speaker 1: called a dog and pony show? Paul Sweeney and I

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Speaker 1: are trying to figure out the number of dog and

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Speaker 1: pony shows we've been too combined over the years and

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Speaker 1: rubber chicken lunches. Famous number, Yeah, that number can't count high.

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Speaker 1: Pulling a short straw one, Taylor Riggs joins us from

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Speaker 1: the Banking Dog and Pony, which is a JP Morgan day. Taylor,

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Speaker 1: what's the what's the body language? What's the chemistry in

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Speaker 1: the room? Is? JP Morgan Management pitches their story? Yeah,

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Speaker 1: you know, it's a little bit bitter sweet, as you know. Tom.

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Speaker 1: It's the last time that we'll have the investor Day

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Speaker 1: here at the headquarters before they move all the employees out,

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Speaker 1: tear down the building and rebuild it and then bring

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Speaker 1: about twelve thousand employees back. So that's sort of how

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Speaker 1: we started it out. I'm running in and out of

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Speaker 1: conference rooms. I came out of the latest panel that

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Speaker 1: we're in to chat with you. Guys. But it's it's good,

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Speaker 1: you know, it's uh sort of cordial. I think they're

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Speaker 1: striking sort of a cautious optimistic tone. You know that

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Speaker 1: they're the Fortress balance sheet there number one for a reason.

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Speaker 1: But some caution that I'm hearing more than what we

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Speaker 1: heard on the earnings call in January. Um just sort

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Speaker 1: of preparing for some slowing growth perhaps on the horizon.

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Speaker 1: Slowing growth perhaps on the horizon, which means that Fortress

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Speaker 1: Diamond is linked into the American economy. What is the

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Speaker 1: backdrop of the economy that they see as they bank

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Speaker 1: forward the next twelve months. Yeah, they kicked it off.

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Speaker 1: Maryan like the CFO by talking about j. Powell, and

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Speaker 1: she quoted him directly, and she's said that they feel

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Speaker 1: exactly the way he does. That the balance of risks

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Speaker 1: is harder to characterize, and in preparation of that, they

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Speaker 1: are seeing some risk to deposit beta's. They like the consumer,

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Speaker 1: they think it's a healthy consumer, but they are preparing

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Speaker 1: for slower growth, and in anticipation that they're looking at

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Speaker 1: only two percent low growth, they want to go up

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Speaker 1: into higher quality loans. They get nervous a little bit

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Speaker 1: about auto loans, some mortgages, some of the credit card loans,

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Speaker 1: so again sort of focusing on higher quality, but they

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Speaker 1: like the consumer. I don't want to paint a too

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Speaker 1: pessimistic picture, but typically of all the banks, JP Morgan

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Speaker 1: on these earnings calls has been so optimistic about the

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Speaker 1: consumer and the retail bank. And this was sort of

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Speaker 1: the first time at least from the CFO Marian Lake,

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Speaker 1: that she said, we think it will be an interest

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Speaker 1: rate hike before an interest rate cut, but we don't

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Speaker 1: really go right now. And I think that uncertainty is

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Speaker 1: sort of overall in the global backdrop of how now

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Speaker 1: where they where they go into a night right in

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Speaker 1: Paul sw I don't know if you missed that, but

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Speaker 1: that's cf A talk their deposit betas, yes, you can

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Speaker 1: absolutely could do cost of capital with you all day

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Speaker 1: long and deposit baba regular beta. We won't commit that.

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Speaker 1: On radio, paulse save us. So Taylor one of the

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Speaker 1: odd things and just noting that the stock opened up

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Speaker 1: down about one and a half percent today, So I

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Speaker 1: think Taylor, that note of caution coming out of management

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Speaker 1: is kind of being reflected in the stock. But one

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Speaker 1: of the headlines I thought was interesting was that they

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Speaker 1: are going to increase the number of retail branches across

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Speaker 1: the country to reach I think they said about of

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Speaker 1: the US population, which seems odd. It seems like more

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Speaker 1: and more people are doing more and more banking online.

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Speaker 1: What's the need for an absolute bricks and mortar branch

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Speaker 1: right well, embedding on the consumer, and I think that's

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Speaker 1: the key here. And when you talk about opening up

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Speaker 1: more retail branches, I think the key with JP Morgan

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Speaker 1: it's usually how they have to spend to grow. And

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Speaker 1: I think the biggest part here is usually hear this

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Speaker 1: from Bank of America about responsible growth, and this is

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Speaker 1: actually the first time we're hearing this from JP Morgan

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Speaker 1: two that we have to spend to grow to maintain

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Speaker 1: our market share, but how do we sort of do

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Speaker 1: that in a in a responsible way? And I think

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Speaker 1: as you talk a lot about the consumer and the

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Speaker 1: retail branches, they're also shifting this right into your world, Paul,

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Speaker 1: about increasing their spending on tech and the mobile payments.

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Speaker 1: And we're just in a wholesale payments panel now that

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Speaker 1: I ran out of, and you probably saw the headline

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Speaker 1: that the tech spending is expected to grow by about

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Speaker 1: two point two billion dollars to get up to about

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Speaker 1: thirteen billion dollars. They're the fifth largest tech spender, so

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Speaker 1: they're focused on the actual physical branches, but they also

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Speaker 1: realized that they have to increase in the cloud and

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Speaker 1: the mobile payments. And I mean they're the fifth largest

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Speaker 1: tech spender after Amazon, Alphabet, Walmart and Microsoft. When was

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Speaker 1: the last time that you had a noble major bank

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Speaker 1: spending this much money like Amazon on tech. That's where

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Speaker 1: the merger of BB and T and suntrack. Yes, I

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Speaker 1: mean it's sorry, it's like you and me a million

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Speaker 1: years ago, the E. F. Hunton when I lived at

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Speaker 1: A G. Edwards. I mean, the bottom line is if

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Speaker 1: you don't spend the money on tech and spend it correctly,

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Speaker 1: you lose. Yeah, and it's consistent what Taylor is reporting today.

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Speaker 1: We heard we've heard from Lloyd blank find and Goldment

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Speaker 1: Sects for years that they are he envisions. You know,

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Speaker 1: he viewed Golden Sects as a tech company. So so Taylor.

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Speaker 1: One thing, you know, a lot of international uncertainty out there.

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Speaker 1: JP Morgan obviously a global wholesale and investment bank. Is

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Speaker 1: there any commentary coming about how they feel about their

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Speaker 1: global business. They're non US business. Yeah, you know, we

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Speaker 1: have not heard and this is to my relief, any

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Speaker 1: comments about brexit UM, so we're not getting any of

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Speaker 1: those yet. I think they're really focused on, as I mentioned,

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Speaker 1: in terms of responsible growth, efficiency ratios like r o

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Speaker 1: E and sort of how to even in times of

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Speaker 1: uncertainty and perhaps some global uncertainty, how to still maintain

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Speaker 1: that balance sheet and those efficiency and profit ratios. So

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Speaker 1: they're bringing not to total le nerd out keeping that

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Speaker 1: r o WE, that return on equity Paul, you know

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Speaker 1: what that is, Tom, you know what that is, really

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Speaker 1: keeping that at sevent It was interesting that we spoke

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Speaker 1: with Mike Mayo, he covers DPM. What did he say.

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Speaker 1: He was saying that that r o WE is below

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Speaker 1: where they were pre crisis when it was but on

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Speaker 1: a risk adjusted basis, they have lower rent, So seventeen

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Speaker 1: percent r o WE is still good. Don't compare it

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Speaker 1: to her it was pre crisis, because that was a

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Speaker 1: different regime shift. Taylor Riggs, we gotta go because of

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Speaker 1: ratio clock. We just went off in our interactive Brooker Studios.

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Speaker 1: If you quote five ratios in an interview, you are done.

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Speaker 1: Taylor Riggs at the JP Morgan Conference today with just

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Speaker 1: a wonderful academics there on these dynamics. 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 Keane before the podcast. You

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