WEBVTT - US Treasuries Slide in Worst Selloff Since 2019 0:00:02.720 --> 0:00:10.520 Bloomberg Audio Studios, podcasts, radio news. You're listening to the 0:00:10.560 --> 0:00:14.520 Bloomberg Intelligence podcast. Catch us live weekdays at ten am 0:00:14.560 --> 0:00:17.840 Eastern on Apple Corplay and Android Auto with the Bloomberg 0:00:17.880 --> 0:00:21.000 Business App. Listen on demand wherever you get your podcasts, 0:00:21.320 --> 0:00:23.040 or watch us live on YouTube. 0:00:23.880 --> 0:00:26.320 You know, there's another worry for Wall Street the safe 0:00:26.320 --> 0:00:30.160 haven status of US treasures, and add to that, even 0:00:30.200 --> 0:00:34.040 the US dollar could be in question. Let's discuss now 0:00:34.080 --> 0:00:38.600 with the Bloomberg Intelligence Chief antest rates strategist, Ira Jersey. 0:00:38.680 --> 0:00:43.160 He's joining us from our offices in Princeton, New Jersey. Hi, Ira, 0:00:43.600 --> 0:00:44.680 is this really a thing? 0:00:46.280 --> 0:00:49.040 So first, I'm actually working from home today. Someone has 0:00:49.040 --> 0:00:50.800 to walk the dog while my kids are on spring 0:00:50.840 --> 0:00:52.959 break because I had to cancel my spring break thanks 0:00:53.000 --> 0:00:53.959 to everything that's going on. 0:00:55.880 --> 0:00:57.959 I have a feeling you're to be working this weekend. 0:00:59.240 --> 0:01:01.600 I have no doubt the Yeah. 0:01:01.640 --> 0:01:03.240 I think it is a big worry. Right. 0:01:03.320 --> 0:01:07.280 So, if if we're not exporting as many dollars because 0:01:07.319 --> 0:01:11.840 of you know, trade imbalances getting more in line, then 0:01:12.160 --> 0:01:16.480 the incentive for other, for overseas investors to buy US 0:01:16.520 --> 0:01:19.600 treasuries goes down somewhat. And I think that is, at 0:01:19.680 --> 0:01:22.840 least the market action seems like that may be what's 0:01:22.840 --> 0:01:25.640 happening now. Unfortunately, we won't get the data to confirm 0:01:25.720 --> 0:01:28.760 that for like six or eight weeks, and so a 0:01:28.760 --> 0:01:32.479 lot of this is speculative. But the market action does 0:01:32.520 --> 0:01:37.000 suggest that that foreign investors, particularly foreign private investors, are 0:01:37.120 --> 0:01:40.480 lightening up on their US dollar risk. And I think 0:01:40.560 --> 0:01:43.759 also US domestic investors are probably thinking that those foreign 0:01:43.840 --> 0:01:47.240 investors will be taking those actions, so therefore they also 0:01:47.319 --> 0:01:49.440 lighten up in those same parts of the yield curve. 0:01:49.480 --> 0:01:52.480 So I think this is pretty rational, you know, and 0:01:52.800 --> 0:01:55.200 these moves are big, John, But I have to say 0:01:55.240 --> 0:01:58.240 something I've been looking at this morning is comparing this 0:01:58.320 --> 0:02:01.960 to March of twenty twenty two and May of twenty thirteen. 0:02:02.160 --> 0:02:05.320 And what you see is this is on the magnitude 0:02:05.320 --> 0:02:08.680 of those periods of time, and interestingly, interest rates are 0:02:08.760 --> 0:02:14.000 higher now, so actually in dollar price terms, bond prices 0:02:14.040 --> 0:02:16.720 are going down slower than they were back in twenty 0:02:16.720 --> 0:02:19.960 twenty two and twenty thirteen. So again it's a huge move, 0:02:20.000 --> 0:02:21.800 don't get me wrong, And it's something that you need 0:02:21.840 --> 0:02:23.320 to pay attention to and have to figure out when 0:02:23.320 --> 0:02:26.560 it's going to end. But it's not like it's not 0:02:26.639 --> 0:02:29.040 insane in a historical context. 0:02:29.800 --> 0:02:35.600 So foreign investors selling out of treasuries, how I guess 0:02:35.639 --> 0:02:38.040 how big of a deal is that? How much do 0:02:38.800 --> 0:02:41.080 treasury holders need to be concerned about? 0:02:41.520 --> 0:02:44.000 And how many you know, how much do the foreign 0:02:44.120 --> 0:02:47.320 investors have in their holdings right in US treasuries? 0:02:48.040 --> 0:02:50.720 Yeah, so in aggregate, about one third of the treasury 0:02:50.760 --> 0:02:52.920 market is held outside of the United States. Now, some 0:02:52.960 --> 0:02:54.880 of that's in hedge funds and the like. So actually 0:02:54.919 --> 0:02:57.760 the beneficial owners of those hedge funds might be Americans, right, 0:02:57.840 --> 0:03:01.480 but you still have a signific and portion that's held 0:03:01.520 --> 0:03:05.680 by foreign central banks, by insurance companies, pension funds, and 0:03:05.720 --> 0:03:09.520 sovereign wealth funds that that that these countries are going 0:03:09.600 --> 0:03:11.720 to make decisions and the companies are going to make 0:03:11.760 --> 0:03:14.560 decisions that that that hold these securities as to what 0:03:14.600 --> 0:03:17.280 they're going to do in going forward. Now, I suspect 0:03:17.320 --> 0:03:20.720 a lot of the the insurance companies and pensions that 0:03:20.800 --> 0:03:24.080 might hold US treasury securities, their first step is not 0:03:24.200 --> 0:03:26.760 going to be to actually go out and outright sell. 0:03:27.160 --> 0:03:29.760 But if they're not buyers, then someone else has to 0:03:29.800 --> 0:03:33.200 become the incremental buyer and to become the incremental buyer. 0:03:33.240 --> 0:03:35.680 That means that the securities involved have to cheap and 0:03:35.800 --> 0:03:38.680 probably the lower in a new buyer base. So that 0:03:38.720 --> 0:03:42.400 means you have higher yields, lower dollar prices, and more 0:03:42.680 --> 0:03:45.400 volatility in the market. And I suspect that all of 0:03:45.440 --> 0:03:48.840 this is happening in very short order. You know, meanwhile, 0:03:48.840 --> 0:03:54.000 this is happening in a time when when when securities dealers, 0:03:54.040 --> 0:03:57.680 you know, the large primary dealers are very full of securities. 0:03:57.680 --> 0:04:00.000 In fact, just two weeks ago they had the most 0:04:00.120 --> 0:04:03.360 held the most treasury securities they've ever held in their history. 0:04:03.720 --> 0:04:06.800 So another reason for some of this volatility, I think 0:04:06.960 --> 0:04:09.000 is just that they're full, right, they just don't want 0:04:09.040 --> 0:04:12.960 to take more treasury risk without cheapening up the market 0:04:13.000 --> 0:04:14.520 because they already own a lot of them. 0:04:14.720 --> 0:04:17.359 Well, what did the auctions this wee? We had thirties 0:04:17.600 --> 0:04:24.200 yesterday and what was a two years? Threes, tens and threes? Okay, 0:04:24.360 --> 0:04:26.560 what did the take up there tell you? 0:04:27.520 --> 0:04:30.599 Yeah, so that was those were among the more interesting 0:04:30.680 --> 0:04:34.000 auctions that we've had. You know, auctions are really boring 0:04:34.080 --> 0:04:37.120 until they're not, and you know, this week certainly did 0:04:37.160 --> 0:04:40.240 not have any boring auctions. So so Tuesday, we had 0:04:40.240 --> 0:04:42.960 a three year auction and that that was pretty pretty abysmal. 0:04:43.040 --> 0:04:44.920 Quite frankly, it was one of the worst three year 0:04:44.920 --> 0:04:48.720 auctions that we've had, you know, since twenty twenty and 0:04:48.800 --> 0:04:51.160 the so I think what happened after that, and one 0:04:51.160 --> 0:04:54.200 of the reasons you saw the markets very volatile thereafter 0:04:54.880 --> 0:04:57.640 was there were dealers and other investors who tried to 0:04:57.680 --> 0:05:01.440 make room so basically manage your portfolio, so they were 0:05:01.480 --> 0:05:05.640 able to bid for the longer duration, higher risk assets 0:05:05.720 --> 0:05:09.000 later in the week. And so the tenure on Wednesday 0:05:09.120 --> 0:05:13.479 and the and the thirty year yesterday actually went really well. 0:05:13.320 --> 0:05:15.359 We have a grading system that we use, you know, 0:05:15.560 --> 0:05:20.200 DTA A plus, and yesterday's while the three year got 0:05:20.240 --> 0:05:23.040 a D, the ten year got an A plus and 0:05:23.080 --> 0:05:24.919 the thirty year got an A, so, you know, really 0:05:24.960 --> 0:05:28.720 solid auctions. They had very good bitterer metrics, there were 0:05:28.720 --> 0:05:31.440 a lot of people involved, but also didn't stick. And 0:05:31.480 --> 0:05:34.680 I think that that's another a worrying sign in terms 0:05:34.680 --> 0:05:37.360 of where the market might head to and in terms 0:05:37.360 --> 0:05:39.880 of yields, yields might continue to move higher because even 0:05:39.880 --> 0:05:42.599 though you had strong auctions, a lot of times strong 0:05:42.640 --> 0:05:46.440 auctions turn the market and that that turn in the 0:05:46.480 --> 0:05:50.200 market to lower yields did not stick by any stretch 0:05:50.200 --> 0:05:52.240 of the imagination, and you're seeing the follow on from 0:05:52.279 --> 0:05:52.839 that today. 0:05:53.120 --> 0:05:56.160 That's the smart money, Ira Jersey, Bloomberg Intelligence, see if 0:05:56.160 --> 0:05:58.480 the US interest rates strategist always a pleasure. 0:05:58.520 --> 0:06:03.920 Ira, you're listening to the Bloomberg Intelligence podcast. Catch US 0:06:03.960 --> 0:06:07.000 Live weekdays at ten am Eastern on Apple, Cocklay and 0:06:07.000 --> 0:06:10.280 Android Auto with the Bloomberg Business App. Listen on demand 0:06:10.320 --> 0:06:14.320 wherever you get your podcasts, or watch US live on YouTube. 0:06:14.600 --> 0:06:18.000 So C plus G plus. I. You know that formula. 0:06:18.160 --> 0:06:20.839 It adds up to growth in the United States or 0:06:20.920 --> 0:06:25.000 lack of growth. Gdp C is the consumer Joe Ann 0:06:25.040 --> 0:06:28.400 Shou the director of the University of Michigan surveys of consumers. 0:06:28.920 --> 0:06:31.080 Joe and the latest data at the top of the hour, 0:06:31.360 --> 0:06:32.599 how are the consumers feeling? 0:06:34.480 --> 0:06:37.039 They are not feeling great about the outlook of the economy. 0:06:37.520 --> 0:06:41.680 We've had multiple consecutive months now of sentiment and particularly 0:06:41.760 --> 0:06:47.440 expectations really taking a nosedive. Consumers are seeing weaknesses on 0:06:47.520 --> 0:06:51.120 many different dimensions of the economy, business conditions, personal finances, 0:06:51.160 --> 0:06:57.160 their own incomes, inflation, labor markets. This is something that 0:06:57.200 --> 0:06:58.320 should be very concerning. 0:07:00.360 --> 0:07:03.239 Tell us a little bit more about just how backward 0:07:03.279 --> 0:07:07.000 looking is this data, how much is it incorporating the 0:07:07.320 --> 0:07:10.240 recent tariff I guess flip flopping that we've been seeing 0:07:10.320 --> 0:07:10.760 this week. 0:07:12.400 --> 0:07:14.800 So we started collecting data about two and a half 0:07:14.800 --> 0:07:17.920 weeks ago for this release and we closed on Tuesday. 0:07:18.040 --> 0:07:23.560 So it captures the April second announcement of the reciprocal tariffs, 0:07:23.720 --> 0:07:26.800 but does not include the reversal, the partial reversal that 0:07:26.920 --> 0:07:30.520 happened on Wednesday of this week. It's pretty clear that 0:07:30.680 --> 0:07:33.240 every single time over the last few months we've seen 0:07:33.480 --> 0:07:37.760 a tariff announcement or a change in tariff policy, escalation 0:07:37.840 --> 0:07:42.080 of tariff's, consumer sentiment has taken a dip, and inflation 0:07:42.160 --> 0:07:46.200 expectations have gone up, but we have actually haven't seen 0:07:46.320 --> 0:07:49.320 much relief come when those tariff announcements. 0:07:48.880 --> 0:07:53.680 Are reversed or tariffs or are reversed. 0:07:53.360 --> 0:07:57.440 Or taken back. So it's not really clear how much 0:07:57.520 --> 0:08:00.400 relief consumers are actually going to feel from Wednesday's announcement, 0:08:00.720 --> 0:08:04.440 particularly given that tariffs with China remains sky high. 0:08:04.520 --> 0:08:08.679 Yeah, the one year inflation expected these are ipoppers six 0:08:08.720 --> 0:08:12.040 point seven percent. That's the one year, the longer term. 0:08:12.080 --> 0:08:16.000 The five tier to ten year inflation expectation four point 0:08:16.040 --> 0:08:19.520 four percent. That's about the prior reading it, just a 0:08:19.600 --> 0:08:23.080 tenth of a percent higher than what the survey was for. 0:08:23.800 --> 0:08:27.000 Are these sort of self fulfilling prophecies? 0:08:28.680 --> 0:08:32.079 They can be, so when people expect higher inflation in 0:08:32.120 --> 0:08:35.200 the future, they may believe that you should buy big 0:08:35.200 --> 0:08:37.920 things now in order to avoid those price increases in 0:08:37.960 --> 0:08:40.200 the future. And indeed we're seeing a lot of news 0:08:40.240 --> 0:08:44.800 stories about people stockpiling, but we see this more broadly 0:08:44.840 --> 0:08:47.720 than that. In November, as soon as the election finished, 0:08:47.920 --> 0:08:50.400 a lot of people were expecting Trump to go ahead 0:08:50.800 --> 0:08:54.080 and implement more aggressive tariff policy when inaugurated, and so 0:08:54.120 --> 0:08:56.559 many consumers were telling us on the interviews back in 0:08:56.600 --> 0:08:59.360 November and December, now is the right time to buy 0:08:59.440 --> 0:09:03.240 a car, to buy durable goods, because you're going to 0:09:03.360 --> 0:09:05.280 get hit by high prices in the future. And indeed 0:09:05.320 --> 0:09:08.360 we saw robust sales figures in Q four for exactly 0:09:08.400 --> 0:09:11.760 that reason. One of the things that helps prevent things 0:09:11.760 --> 0:09:14.520 from becoming a self fulfilling prophecy on the inflation front 0:09:14.559 --> 0:09:17.160 is that consumers feel so weak on other elements of 0:09:17.160 --> 0:09:20.200 the economy. Their income expectations are down, and they're worried 0:09:20.200 --> 0:09:22.360 they're going to lose their jobs, and so they might 0:09:22.400 --> 0:09:24.679 not rewilling to front load their purchases that they might 0:09:24.720 --> 0:09:28.840 otherwise might otherwise have done, And they don't really have 0:09:28.920 --> 0:09:31.920 the support for the robust consumer spending that we saw 0:09:32.600 --> 0:09:34.480 in the years following the pandemic. 0:09:34.640 --> 0:09:37.920 In like thirty seconds, what's the history of consumer spending 0:09:37.960 --> 0:09:40.760 following numbers like this? Do they really do pull back? 0:09:41.679 --> 0:09:44.640 Typically they pull back, and it's a high probability this time, 0:09:44.679 --> 0:09:49.160 particularly because higher income consumers are feeling just as dour 0:09:49.200 --> 0:09:51.800 as their lower income counterparts, and higher and come consumers 0:09:51.840 --> 0:09:54.120 generate so much of consumer spending. 0:09:54.040 --> 0:09:56.200 Right, Joey and always a pleasure appreciated, Join and show 0:09:56.240 --> 0:09:59.280 the director of the University of Michigan surveys of consumers 0:09:59.280 --> 0:10:02.920 again the Universe City of Michigan Sentiment Index fifty point eight. 0:10:03.800 --> 0:10:07.680 The survey expectation was for fifty three point eight. Those 0:10:07.720 --> 0:10:09.560 are not good numbers. 0:10:11.400 --> 0:10:15.120 You're listening to the Bloomberg Intelligence Podcast. Catch us live 0:10:15.200 --> 0:10:18.280 weekdays at ten am Eastern on Apple, Cocklay and Android 0:10:18.280 --> 0:10:21.600 Auto with the Bloomberg Business app. Listen on demand wherever 0:10:21.679 --> 0:10:24.920 you get your podcasts. Or watch us live on YouTube. 0:10:25.240 --> 0:10:28.640 I'm John Tucker along with Emily GRIFFEO. We were in 0:10:28.679 --> 0:10:34.719 for Paul and Alex Bloomberg Intelligence today. You know, volatility 0:10:34.800 --> 0:10:38.199 drives everybody else crazy, drives me crazy, but it's actually 0:10:38.280 --> 0:10:42.520 good for banks. Alison Williams this our banking analysts from 0:10:42.600 --> 0:10:46.920 BI Allison just how did the banks do based on 0:10:47.160 --> 0:10:49.040 market volatility and trading? 0:10:49.640 --> 0:10:49.840 Right? 0:10:49.880 --> 0:10:53.200 So trading really knocking it out of the park at 0:10:53.280 --> 0:10:56.439 JP Morgan and Morgan Stanley really setting up the bar 0:10:56.559 --> 0:10:59.040 for Goldman on Monday. But we saw you know, gains 0:10:59.080 --> 0:11:02.439 of almost by half equities training, so that's benefiting from 0:11:02.440 --> 0:11:06.000 the volatility. I would say, you know, fees fit was 0:11:06.080 --> 0:11:08.520 a little bit like in line to weaker. You know, 0:11:08.559 --> 0:11:11.800 fees were fine, but we know that there's risk ahead there. 0:11:12.200 --> 0:11:13.480 We actually saw some. 0:11:13.600 --> 0:11:15.760 We say fixed You got to explain it to people 0:11:15.760 --> 0:11:21.520 who think, like you know, a German Shepherd fixed income currency. 0:11:21.120 --> 0:11:26.800 So trading rates, trading credit, currency and commodities. 0:11:27.320 --> 0:11:30.280 All right, So I want to go to loan loss 0:11:30.320 --> 0:11:33.120 provisions for some of the major banks because that's kind 0:11:33.160 --> 0:11:36.360 of an indication what they think about what's ahead for 0:11:36.400 --> 0:11:38.199 the economy and the consumer. 0:11:38.840 --> 0:11:40.800 It is and that was really the key thing that 0:11:40.840 --> 0:11:43.679 we were looking for this quarter, and what you saw 0:11:43.960 --> 0:11:48.960 was JP Morgan about a billion dollars of loss reserve building, 0:11:49.679 --> 0:11:53.440 and that's really looking at the economic uncertainty ahead. So 0:11:53.520 --> 0:11:56.400 keep in mind, we have not seen any we're not 0:11:56.440 --> 0:11:59.680 really seeing signs of weakness yet. In fact, if anything, 0:11:59.720 --> 0:12:02.200 well a little bit of front loading on the consumer 0:12:02.400 --> 0:12:06.280 or retail. Analysts ANDBI have been talking about that. But 0:12:06.800 --> 0:12:10.440 JP Morgan, you know, being conservative and guess what those 0:12:10.520 --> 0:12:12.960 trading gains we just talked about. That's how they can 0:12:13.040 --> 0:12:17.040 afford to be conservative because their trading upside was about 0:12:17.040 --> 0:12:19.800 a half a billion. They also had a gain related 0:12:19.840 --> 0:12:22.760 to First Republic, remember that acquisition from a. 0:12:22.720 --> 0:12:23.720 Couple of years ago. 0:12:25.480 --> 0:12:30.120 So basically after some conversations with the government, they recognize 0:12:30.160 --> 0:12:32.839 the gain there. So those two items really helping them 0:12:32.880 --> 0:12:34.840 to fund that conservative. 0:12:34.880 --> 0:12:37.880 Look. By contrast, Wells Fargo did not. 0:12:38.240 --> 0:12:40.320 We did not see the same trend, and you see 0:12:40.320 --> 0:12:44.440 the stocks sort of reacting to these today because what 0:12:44.480 --> 0:12:47.800 this means is that JP Morgan has less earnings risk 0:12:48.000 --> 0:12:52.080 if things do deteriorate, where as well as Fargo is 0:12:52.120 --> 0:12:55.720 not as well prepared with the provision building. 0:12:55.440 --> 0:12:57.680 Emily, as you pointed out, this doesn't even capture the 0:12:57.880 --> 0:12:59.480 volatility that we just saw recently. 0:12:59.559 --> 0:13:03.880 Right, this week is the historic week. We had a 0:13:04.000 --> 0:13:07.160 fifth day in a row marking last week of yesterday 0:13:07.200 --> 0:13:09.240 of an inter day range of more than six percent 0:13:09.360 --> 0:13:11.160 for the S and P five hundred. We haven't seen 0:13:11.200 --> 0:13:15.199 a streak like that since COVID and the global financial crisis. 0:13:15.559 --> 0:13:17.760 What did we get though, from. 0:13:18.040 --> 0:13:18.720 Just the outlook? 0:13:18.760 --> 0:13:21.800 I mean, Jamie Diamond has been pretty vocal about his 0:13:22.240 --> 0:13:26.160 economic outlook. Did we get any guidance from these banks 0:13:26.160 --> 0:13:28.720 about what to expect? So? 0:13:28.880 --> 0:13:32.120 I think it's prepare for the unexpected, right, And so 0:13:32.240 --> 0:13:35.880 I think that's what you know. Jamie Diamond is known 0:13:35.920 --> 0:13:39.000 for giving his views, but he's also known for saying, look, 0:13:39.040 --> 0:13:40.360 this is how we manage the bank. 0:13:40.400 --> 0:13:41.840 We prepare for the worst. 0:13:42.520 --> 0:13:44.880 And so I think that that's what we saw today 0:13:45.160 --> 0:13:48.400 was there were a few items that helped them to 0:13:48.520 --> 0:13:54.520 set aside this money depending on what happens. And you know, 0:13:54.600 --> 0:13:58.720 as you pointed out, we saw lots of we've seen 0:13:58.760 --> 0:14:02.200 lots of trading, We've seen lots of volatility. Expectations are 0:14:02.760 --> 0:14:05.880 that we're going to continue to see or could continue 0:14:05.880 --> 0:14:07.680 to see a benefit at least based on what we've 0:14:07.679 --> 0:14:11.320 seen in April US cash equities volumes, I mean really 0:14:12.240 --> 0:14:17.000 setting new records. And the question is that when it 0:14:17.000 --> 0:14:19.440 comes to the end of the quarter in June, you know, 0:14:19.520 --> 0:14:23.640 will we be closer to some certainty around tariffs. If so, 0:14:23.840 --> 0:14:27.520 we can get those reserves back so they can release 0:14:27.560 --> 0:14:28.720 those back into earnings. 0:14:28.880 --> 0:14:31.040 Am I right when I say Wells Fargo is more 0:14:31.160 --> 0:14:33.200 sort of consumerly related? 0:14:33.320 --> 0:14:35.480 So Wells Fargo does not have that. 0:14:35.640 --> 0:14:38.840 You know, they have a trading business which also participated, 0:14:39.160 --> 0:14:42.240 but certainly not to the size of JP Morgan, who is, 0:14:42.800 --> 0:14:44.920 you know, one of the leaders in equities trading, the 0:14:45.040 --> 0:14:48.040 leader in FIIC trating by revenue. On the Wells Fargo 0:14:48.200 --> 0:14:50.560 side of things, we actually did see that interesting coome 0:14:50.560 --> 0:14:54.120 coming in a little softer. We also saw non interesting 0:14:54.200 --> 0:14:57.080 come coming in a little softer and some sighting of 0:14:57.440 --> 0:14:59.840 weaker loan demand, and so I think those are also 0:15:00.000 --> 0:15:01.800 contributing to some weakness and the shares. 0:15:01.920 --> 0:15:03.760 Okay, because at the top of the hour, we took 0:15:03.840 --> 0:15:09.280 to the University of Michigan sentiments survey, and that looks 0:15:09.360 --> 0:15:12.040 like consumers that just might be raining, and that's the 0:15:12.080 --> 0:15:14.880 signal there, So what is that going to mean going 0:15:14.920 --> 0:15:16.400 forward for Wells Fargo. 0:15:16.920 --> 0:15:21.640 So, for Wells Fargo and for JP Morgan, certainly not 0:15:21.760 --> 0:15:27.760 good right to the extent that sentiment stops consumers from 0:15:28.360 --> 0:15:32.720 making purchases, going on those trips, et cetera. And as 0:15:32.760 --> 0:15:35.280 I said, you know and JP Morgan I think alluded 0:15:35.320 --> 0:15:37.600 to this, there has been a little frontload of spending. 0:15:37.960 --> 0:15:40.360 All that being said, the credit card business, which is 0:15:40.400 --> 0:15:45.960 the highest loss ratio business and can be sort of 0:15:45.960 --> 0:15:50.480 the most susceptible to discretionary spending, is a much bigger 0:15:50.520 --> 0:15:52.600 business for JP Morgan. 0:15:53.120 --> 0:15:54.640 On the commercial side of. 0:15:54.600 --> 0:15:58.359 Things, where I think you have seen I think already 0:15:58.600 --> 0:16:03.360 some stagger and activity in terms of businesses like you know, 0:16:03.560 --> 0:16:05.640 not executing on things. 0:16:05.440 --> 0:16:06.120 They would have. 0:16:07.160 --> 0:16:10.360 Wells Fargo has a little bit more exposure to those 0:16:10.400 --> 0:16:13.680 sort of traditional businesses as a mix of their business, 0:16:13.760 --> 0:16:16.960 just because they are more focused on the bread and 0:16:17.000 --> 0:16:17.600 butter lending. 0:16:17.920 --> 0:16:21.520 What about deal making because coming into the year, a 0:16:21.520 --> 0:16:22.960 lot of sources I spoke to you said this is 0:16:23.000 --> 0:16:26.280 going to be a big year for investment banking because 0:16:27.160 --> 0:16:29.560 Trump will be supportive of that environment. What did we 0:16:29.560 --> 0:16:30.160 see in these ere. 0:16:30.240 --> 0:16:32.000 Yes, So a couple of things there. 0:16:32.040 --> 0:16:34.880 To your point, coming into the year, I think everyone 0:16:35.000 --> 0:16:38.040 was excited. We've been talking about this investment banking feever, recovery. 0:16:38.440 --> 0:16:42.680 Bankers have been looking forward to that. M and A 0:16:42.680 --> 0:16:46.800 also benefiting from some of the lesser you know, a 0:16:46.880 --> 0:16:50.600 lighter regulatory environment as you spoke of, but we really 0:16:50.640 --> 0:16:53.400 have not seen the benefit of that, and that is, 0:16:54.040 --> 0:16:58.680 you know, largely due to CEO sentiment and having a 0:16:58.760 --> 0:17:02.680 view towards the future really does impact M and A right, 0:17:02.760 --> 0:17:05.640 because if you think the value of your business could 0:17:05.680 --> 0:17:10.840 significantly change in the next few months, or if you 0:17:10.880 --> 0:17:13.240 think something a business that you want to purchase could 0:17:13.280 --> 0:17:16.879 be a significantly different in value, chances are you're probably 0:17:16.880 --> 0:17:17.399 going to pause. 0:17:17.400 --> 0:17:19.280 And that's what we've seen on the M and A front. 0:17:19.760 --> 0:17:24.119 Equities IPOs also we saw that started strong in January, 0:17:24.480 --> 0:17:26.960 completely stalled out. We see all these deals on hold 0:17:27.280 --> 0:17:30.600 debt fees actually the one area where you're continuing to 0:17:30.640 --> 0:17:34.760 see some strength, but again the volatility early this quarter 0:17:34.840 --> 0:17:36.920 is likely to hamper all of that revenue. 0:17:37.240 --> 0:17:41.440 I get like forty five seconds left so Monday, what's up? 0:17:42.119 --> 0:17:46.080 So Monday? And this more about bragging rights than anything. 0:17:46.200 --> 0:17:48.920 We'll be looking to see if Goldman can increase their 0:17:48.960 --> 0:17:51.360 trading revenue by at least twenty five percent to keep 0:17:51.400 --> 0:17:54.800 them starting at the top of the trio. But I 0:17:54.840 --> 0:17:57.760 would fully expect that they are going to participate in 0:17:57.960 --> 0:18:01.400 the equity derivatives trading ran Brokeridge that really drove those 0:18:01.400 --> 0:18:04.520 forty to five to fifty percent gains at JP Morgan 0:18:04.640 --> 0:18:11.119 and Morgan Stanley. Well, so we expect better trading, fix trading, 0:18:11.200 --> 0:18:14.560 maybe in line fees probably a bit weaker. They are 0:18:14.680 --> 0:18:16.560 typically the leader in M and A, so that is 0:18:16.600 --> 0:18:17.840 going to war them a little bit. 0:18:18.320 --> 0:18:19.280 What happened on the. 0:18:19.160 --> 0:18:22.840 Compensation front, we did see Morgan Stanley with Severn charges 0:18:23.840 --> 0:18:25.560 that sort of confirmed some of the things we saw 0:18:25.600 --> 0:18:28.960 from Bloomberg News that they were letting bankers go because. 0:18:28.640 --> 0:18:31.600 We're not seeing that fee recovery, as you noted. 0:18:31.720 --> 0:18:33.000 All right, Alison, thanks a lot. 0:18:34.640 --> 0:18:38.320 You're listening to the Bloomberg Intelligence podcast. Catch us live 0:18:38.440 --> 0:18:41.520 weekdays at ten am Eastern on Apple, Cockley and Android 0:18:41.520 --> 0:18:44.840 Auto with the Bloomberg Business App. Listen on demand wherever 0:18:44.880 --> 0:18:49.639 you get your podcasts, or watch us live on YouTube. 0:18:49.080 --> 0:18:53.000 Mirror Mirror on the wall. Who's the biggest asset manager 0:18:53.160 --> 0:18:53.440 of them? 0:18:53.480 --> 0:18:56.080 All, and the stock is in the green. 0:18:56.640 --> 0:19:01.480 Black Rock Neil Sides Bloomberg Intelligence Financials and Analys follows Blackrock. 0:19:01.840 --> 0:19:05.560 The metric we care about is it the assets under management. 0:19:06.359 --> 0:19:09.960 It is the assets under management. Almost more importantly now, 0:19:10.080 --> 0:19:13.800 the bigger that Blackrock gets is the organic growth, and 0:19:13.840 --> 0:19:16.240 that's sort of measuring the net new assets that are 0:19:16.240 --> 0:19:19.760 coming into Blackrocks funds. And that's the question investors have 0:19:19.800 --> 0:19:22.439 always had, is the bigger they get, the harder it 0:19:22.560 --> 0:19:24.840 is to continue to grow at the pace that they 0:19:24.880 --> 0:19:27.199 have been over a long period of time. And what 0:19:27.200 --> 0:19:29.960 we've seen is that sort of five percent growth that 0:19:29.960 --> 0:19:32.879 Blackrock has consistently put up, which by the way, is 0:19:32.960 --> 0:19:35.800 well above the industry. That's break even or one to 0:19:35.880 --> 0:19:39.280 two percent. That continues to be the case. In the 0:19:39.320 --> 0:19:41.879 first quarter it was a little bit light. It does 0:19:41.960 --> 0:19:43.720 appear that a lot of that had to do with 0:19:43.800 --> 0:19:48.480 perhaps some institutional rebalancings to start the year and perhaps 0:19:48.520 --> 0:19:50.679 some impacts later in the quarter. 0:19:50.920 --> 0:19:55.399 But aum up eleven percent year over year, eleven zero 0:19:55.440 --> 0:19:58.840 point five eight trillion dollars assets under management. 0:19:58.880 --> 0:20:02.920 After wow, this is like what strike looms like me or 0:20:03.240 --> 0:20:06.000 like the big guys whose money is it? 0:20:05.680 --> 0:20:09.880 It's certainly both its institutional and retail dollars. You talked 0:20:09.880 --> 0:20:12.199 about the growth rate in assets under management. You know, 0:20:12.240 --> 0:20:15.040 they highlighted on the call today that sixty percent of 0:20:15.080 --> 0:20:18.119 that AUM growth is actually from new dollars. Right, So 0:20:18.480 --> 0:20:21.120 if you measure markets versus a year ago, I think 0:20:21.160 --> 0:20:23.800 you're still going to see that we're up. But you know, 0:20:23.880 --> 0:20:27.960 importantly they're continuing to garner assets from their clients over time. 0:20:28.000 --> 0:20:31.240 And as we look forward in a much choppier environment 0:20:31.280 --> 0:20:34.639 into April and frankly, who knows what's coming down the 0:20:34.680 --> 0:20:38.520 road in the next few weeks, that organic growth becomes 0:20:38.560 --> 0:20:42.200 increasingly more important. And that's something that Blackrock has shown 0:20:42.440 --> 0:20:45.320 in periods of dislocation. You look back at twenty twenty, 0:20:45.600 --> 0:20:47.880 you look back at the challenging environment in twenty two, 0:20:47.920 --> 0:20:51.679 when the FED started increasing rates, blackrocks five percent. Organic 0:20:51.680 --> 0:20:55.719 growth continued through that cycle. When you looked at competitors 0:20:55.720 --> 0:20:59.040 that have less of a bread across the spectrum of 0:20:59.040 --> 0:21:02.000 asset classes and products could not keep up. 0:21:02.359 --> 0:21:04.520 Do they have like a fund for everybody? 0:21:05.960 --> 0:21:08.400 I mean, they'll have a fund for everybody pretty much, 0:21:08.440 --> 0:21:11.760 touching any asset class, any region, any geography that you. 0:21:11.800 --> 0:21:15.320 Want, and those are all They're not all ETFs, or 0:21:15.359 --> 0:21:15.880 are they They. 0:21:15.840 --> 0:21:19.400 Won't all be ETFs, but increasingly that's where investors want 0:21:19.440 --> 0:21:23.199 to allocate their dollars. Obviously that's become a very priced 0:21:23.200 --> 0:21:26.840 competitive product. The value for money, we know, that's a 0:21:26.920 --> 0:21:29.760 trend that's been in asset management for the past decade 0:21:29.800 --> 0:21:33.760 plus is the flows are increasingly traveling towards the funds 0:21:33.760 --> 0:21:37.439 that have the lowest cost associated with them. If you 0:21:37.480 --> 0:21:41.040 look inside the ETF category, you know, over the past 0:21:41.040 --> 0:21:43.960 decade we've seen you know, two thirds plus of all 0:21:44.000 --> 0:21:47.080 flows into ETFs are going to that low fee bucket 0:21:47.359 --> 0:21:51.240 between zero and ten basis points. So increasingly we're following 0:21:51.320 --> 0:21:52.480