WEBVTT - Surveillance: Banks In Focus With CFRA's Leon

0:00:09.880 --> 0:00:13.800
<v Speaker 1>Welcome to the Bloomberg Surveillance Podcast. I'm Tom keene Jailey.

0:00:13.960 --> 0:00:17.560
<v Speaker 1>We bring you insight from the best in economics, finance, investment,

0:00:18.000 --> 0:00:23.520
<v Speaker 1>and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud,

0:00:23.600 --> 0:00:27.280
<v Speaker 1>Bloomberg dot Com, and of course on the Bloomberg Ken

0:00:27.360 --> 0:00:30.120
<v Speaker 1>Leon a c fr A joins us. Now, Ken Leon,

0:00:30.360 --> 0:00:35.000
<v Speaker 1>what does Jamie Diamond need from President Biden? He needs

0:00:35.080 --> 0:00:38.479
<v Speaker 1>really to really set the tone for confidence for the

0:00:38.560 --> 0:00:42.600
<v Speaker 1>country and to make sure that we're going back to

0:00:42.680 --> 0:00:46.320
<v Speaker 1>a period of normalcy. As it relates to help people

0:00:46.440 --> 0:00:49.920
<v Speaker 1>think and live. As it relates to the economy, the

0:00:49.960 --> 0:00:53.400
<v Speaker 1>stimulus is coming. That's going to help the consumer and

0:00:53.479 --> 0:00:57.400
<v Speaker 1>small business probably will see that benefit by the second

0:00:57.480 --> 0:01:01.720
<v Speaker 1>quarter UM. And again this rear mirror of COVID nineteen,

0:01:02.160 --> 0:01:06.640
<v Speaker 1>we did see a reserve release of two point nine

0:01:06.680 --> 0:01:10.000
<v Speaker 1>billion after building up to thirty three point eight billion.

0:01:10.480 --> 0:01:14.400
<v Speaker 1>That tells me that other than distressed industries and energy

0:01:14.800 --> 0:01:19.000
<v Speaker 1>were in leisure, the economy has strong footing for twenty one.

0:01:19.400 --> 0:01:23.560
<v Speaker 1>Banks are going to benefit from that. When Ms Bazik

0:01:23.640 --> 0:01:26.360
<v Speaker 1>walked into the studio kenn Ley On, the first thing

0:01:26.360 --> 0:01:30.680
<v Speaker 1>out of her mouth was give us scope and scale

0:01:30.840 --> 0:01:35.880
<v Speaker 1>on that startling tangible number. That's enormous and it really

0:01:35.920 --> 0:01:41.000
<v Speaker 1>speaks to um the build up of capital, for one thing,

0:01:41.560 --> 0:01:44.800
<v Speaker 1>and the opportunity of return of capital with buyback and

0:01:44.880 --> 0:01:49.080
<v Speaker 1>dividends to shareholders. And banks are total return investments. So

0:01:49.440 --> 0:01:54.360
<v Speaker 1>with yield and cash flow and that type of return UM,

0:01:54.400 --> 0:01:58.520
<v Speaker 1>it's obviously going to you know, flow to investors. Can

0:01:58.560 --> 0:02:02.920
<v Speaker 1>they sustain that, It's questionable, and certainly you want to

0:02:02.960 --> 0:02:08.280
<v Speaker 1>be above certain regulated capital ratios, which they are, but

0:02:08.400 --> 0:02:11.440
<v Speaker 1>certainly there's a chance to both invest in the business

0:02:11.760 --> 0:02:15.720
<v Speaker 1>and to return capital the shareholders. That's a positive story

0:02:15.800 --> 0:02:18.079
<v Speaker 1>for this year. We did not have that last year.

0:02:18.520 --> 0:02:21.440
<v Speaker 1>So just to refresh where we're at right now, JPMorgan

0:02:21.520 --> 0:02:23.440
<v Speaker 1>shares a little change ahead of the open. They just

0:02:23.480 --> 0:02:27.720
<v Speaker 1>reported earnings that blue way expectations with adjusted revenue in

0:02:27.760 --> 0:02:29.400
<v Speaker 1>the fourth quarter, just to give you some size of

0:02:29.440 --> 0:02:32.679
<v Speaker 1>scope here of thirty point two billion dollars versus he

0:02:32.840 --> 0:02:36.800
<v Speaker 1>estimated a point seven billion dollars. There is a question

0:02:37.200 --> 0:02:40.440
<v Speaker 1>of how long the trading boom can last ken especially

0:02:40.480 --> 0:02:43.960
<v Speaker 1>as we see volatility dampened by fiscal and monetary policies.

0:02:44.360 --> 0:02:47.080
<v Speaker 1>Do you sense and they are the expectations that the

0:02:47.120 --> 0:02:50.280
<v Speaker 1>debt trading and the equity chading revenues and beats will

0:02:50.280 --> 0:02:55.000
<v Speaker 1>continue for we're in the risk on environment, which means

0:02:55.160 --> 0:02:58.919
<v Speaker 1>that for both corporate issuers equity and debt, and also

0:02:59.000 --> 0:03:03.000
<v Speaker 1>for investors it will continue certainly for the first half

0:03:03.040 --> 0:03:06.880
<v Speaker 1>of this year. Earlier Alison mentioned about a more normal

0:03:06.960 --> 0:03:11.480
<v Speaker 1>second half, but we are seeing acceleration in main street banking.

0:03:11.919 --> 0:03:15.520
<v Speaker 1>Non interest revenue in the fourth quarter was up nearly

0:03:15.560 --> 0:03:19.120
<v Speaker 1>two billion, even though net interesting come with lower rates

0:03:19.120 --> 0:03:22.960
<v Speaker 1>was down nine million. You continue that trend, we can

0:03:23.080 --> 0:03:27.280
<v Speaker 1>keep capital markets kind of flat from a high level

0:03:27.760 --> 0:03:31.320
<v Speaker 1>um and certainly the equity market does not reward bank

0:03:31.440 --> 0:03:36.240
<v Speaker 1>stocks just for having the capital markets firing on all cylinders.

0:03:36.560 --> 0:03:38.680
<v Speaker 1>So I think it's really going to be back to

0:03:39.200 --> 0:03:43.840
<v Speaker 1>traditional lending and how they're contending with getting the wallet

0:03:43.920 --> 0:03:47.960
<v Speaker 1>chair from the consumer and business with fintech coming into

0:03:48.080 --> 0:03:51.160
<v Speaker 1>the market. When you talk about traditional lending, can I'm

0:03:51.200 --> 0:03:53.800
<v Speaker 1>looking at the fourth quarter provisions for credit losses that

0:03:53.880 --> 0:03:56.280
<v Speaker 1>actually were more than expected at one point eight nine

0:03:56.320 --> 0:03:59.520
<v Speaker 1>billion versus the estimated one point three nine billion. Is

0:03:59.520 --> 0:04:01.520
<v Speaker 1>there anything we can take away from this in terms

0:04:01.520 --> 0:04:04.160
<v Speaker 1>of what they are seeing on the ground with consumers

0:04:04.200 --> 0:04:07.840
<v Speaker 1>in the fourth quarter as the coronavirus pandemic continue to worsen.

0:04:09.200 --> 0:04:11.440
<v Speaker 1>The only thing that I think still remains in the

0:04:11.440 --> 0:04:17.640
<v Speaker 1>shadows is, you know, the related to mortgage payments and

0:04:18.160 --> 0:04:24.080
<v Speaker 1>whether collections have improved or there's been either with state regulation,

0:04:24.760 --> 0:04:28.640
<v Speaker 1>UM forgiveness in terms of payments for a period of time.

0:04:29.400 --> 0:04:32.279
<v Speaker 1>But when you go through the provisions and allowance for

0:04:32.400 --> 0:04:36.440
<v Speaker 1>loan losses, UM, you know it's not alarming at all.

0:04:36.720 --> 0:04:42.120
<v Speaker 1>And uh again, I'm actually seeing UM in the fourth quarter,

0:04:42.760 --> 0:04:46.080
<v Speaker 1>UM somewhat of an improvement, you know with home lending.

0:04:46.440 --> 0:04:51.599
<v Speaker 1>Home lending has been great, but also for new mortgage origination. UM.

0:04:51.640 --> 0:04:54.719
<v Speaker 1>I don't see any risks with Carter Auto. And then

0:04:54.920 --> 0:04:57.719
<v Speaker 1>it really gets back to the consumer with that narrative

0:04:57.720 --> 0:05:01.839
<v Speaker 1>of can they meet their monthly payments? Uh. I again

0:05:02.040 --> 0:05:04.960
<v Speaker 1>see this more as a rear mirror issue unless there's

0:05:05.000 --> 0:05:07.560
<v Speaker 1>going to be some surprise where both the economy and

0:05:07.560 --> 0:05:11.880
<v Speaker 1>the consumer moved to a weaker position earlier this year.

0:05:11.920 --> 0:05:15.039
<v Speaker 1>And I don't say that can hugely valuable kenth Leon

0:05:15.120 --> 0:05:17.919
<v Speaker 1>where US was cfr A just greatly appreciated this morning.

0:05:17.920 --> 0:05:20.800
<v Speaker 1>And again more bank earnings to come, not only here

0:05:20.839 --> 0:05:26.800
<v Speaker 1>but in Europe as well. We have been getting a

0:05:26.839 --> 0:05:29.760
<v Speaker 1>consensus on Wall Street the banks are the place to be.

0:05:29.920 --> 0:05:33.719
<v Speaker 1>Daniel Morris, BNP part about asset management, senior investment strategist

0:05:33.800 --> 0:05:36.640
<v Speaker 1>joining us now based on what we're seeing, Daniel, do

0:05:36.680 --> 0:05:39.520
<v Speaker 1>you see that that reflationary trade, that idea of banks

0:05:39.560 --> 0:05:43.200
<v Speaker 1>being a sweet spot in one is still the right

0:05:43.240 --> 0:05:47.920
<v Speaker 1>call um? We we do think so if we look

0:05:48.000 --> 0:05:52.040
<v Speaker 1>at forward rates, assuming forward levels for fortenuer treasuries and

0:05:52.080 --> 0:05:55.920
<v Speaker 1>markets looking for about one point three over the next year.

0:05:56.000 --> 0:05:58.360
<v Speaker 1>So the important thing is is that's an upward trend.

0:05:58.960 --> 0:06:02.040
<v Speaker 1>Another key driver for value our performance has been what's

0:06:02.040 --> 0:06:04.919
<v Speaker 1>happening with commodity prices, oil in particular, and there's probably

0:06:04.960 --> 0:06:07.880
<v Speaker 1>still some upside there um. So it's something that we're watching.

0:06:07.960 --> 0:06:09.839
<v Speaker 1>It's not going to be a multi year trend in

0:06:09.880 --> 0:06:12.400
<v Speaker 1>the same way that you had growth out performing value

0:06:12.440 --> 0:06:15.000
<v Speaker 1>for years and years, but now we think at least

0:06:15.040 --> 0:06:18.039
<v Speaker 1>the momentum is still on the value side. Daniel, Thank

0:06:18.080 --> 0:06:19.919
<v Speaker 1>you so much for joining today. In the middle of

0:06:19.920 --> 0:06:22.480
<v Speaker 1>bank earnings. I know it's inappropriate for a gentleman from

0:06:22.480 --> 0:06:25.000
<v Speaker 1>a French bank to talk about American banking, so we'll

0:06:25.080 --> 0:06:29.280
<v Speaker 1>leave that to Hinale here she massages city group earnings.

0:06:29.360 --> 0:06:32.800
<v Speaker 1>Daniel Morris, how have you adjusted your view off of

0:06:32.880 --> 0:06:39.200
<v Speaker 1>democratic president, a Democratic House, and a Democratic Senate. Well,

0:06:39.240 --> 0:06:42.360
<v Speaker 1>it's it's a bit of plus and minus. On one hand,

0:06:42.400 --> 0:06:46.680
<v Speaker 1>Certainly everyone is ratchet up their expectations for physical stimulus,

0:06:46.680 --> 0:06:49.760
<v Speaker 1>and that's certainly what we're seeing, broadly speaking reflected in

0:06:49.839 --> 0:06:52.560
<v Speaker 1>treasury yields. It will be a question of how much

0:06:53.200 --> 0:06:56.800
<v Speaker 1>UH President elect Biden is actually able to obtain relative

0:06:56.880 --> 0:06:59.680
<v Speaker 1>to his initial proposal, but nonetheless it should be more

0:07:00.080 --> 0:07:01.839
<v Speaker 1>then we thought would have been the case a month

0:07:01.960 --> 0:07:04.760
<v Speaker 1>or so ago. At the same time, the market is

0:07:04.760 --> 0:07:08.360
<v Speaker 1>pretty enthused about that. So actually we've reduced our allocation

0:07:09.000 --> 0:07:12.360
<v Speaker 1>UH for equities from an overweight to neutral, just perhaps

0:07:12.360 --> 0:07:15.120
<v Speaker 1>waiting for a better entry point. We all know there's

0:07:15.120 --> 0:07:18.000
<v Speaker 1>always going to be something upsetting that happens. At some

0:07:18.080 --> 0:07:20.080
<v Speaker 1>point we'll have a pullback in the markets, and we

0:07:20.120 --> 0:07:22.480
<v Speaker 1>think that's going to be the better time to go back,

0:07:22.640 --> 0:07:25.600
<v Speaker 1>likely to an overweight position. Well, you know, it's like tina.

0:07:25.680 --> 0:07:27.440
<v Speaker 1>I don't know how you spell tina in French, but

0:07:27.560 --> 0:07:29.360
<v Speaker 1>we'll go with it. I mean, you need to pull back.

0:07:29.400 --> 0:07:32.680
<v Speaker 1>When you get a pullback, people are massaging this outpast

0:07:33.080 --> 0:07:36.320
<v Speaker 1>fourth of July. Daniel, that's a holiday in America. They're

0:07:36.360 --> 0:07:38.440
<v Speaker 1>going out to July and into the summer. Do you

0:07:38.440 --> 0:07:43.360
<v Speaker 1>know when that pullbacks can occur? Well, the most likely trigger,

0:07:43.920 --> 0:07:46.240
<v Speaker 1>at least of the of the risk that we're cognizant of,

0:07:46.320 --> 0:07:49.239
<v Speaker 1>clearly it's going to be something around the pandemic. And

0:07:49.320 --> 0:07:53.600
<v Speaker 1>unfortunately we have plenty of distressing news there. So at

0:07:53.640 --> 0:07:57.480
<v Speaker 1>some point, if it accumulates sufficiently to the point where

0:07:57.560 --> 0:08:00.960
<v Speaker 1>people start to rethink their forecast, either for earnings or

0:08:01.000 --> 0:08:03.560
<v Speaker 1>for GDP, that could be something that would likely cause

0:08:03.640 --> 0:08:06.240
<v Speaker 1>things to turn around, at least briefly. Daniel Moore is

0:08:06.280 --> 0:08:08.200
<v Speaker 1>too short of visit. We'll do this again. But we've

0:08:08.200 --> 0:08:11.320
<v Speaker 1>got some interesting bank developments here for Global Wall Street.

0:08:11.400 --> 0:08:20.040
<v Speaker 1>Mr Morris would the MP perry, but a busy, busy day.

0:08:20.080 --> 0:08:22.280
<v Speaker 1>Not only are we getting the retail sales that came

0:08:22.320 --> 0:08:25.840
<v Speaker 1>in highly disappointing, but banks have been reporting earnings. JP

0:08:25.960 --> 0:08:28.640
<v Speaker 1>Morgan the leader when it comes to a top line

0:08:28.640 --> 0:08:32.520
<v Speaker 1>earnings per share growth as well as the trading revenues.

0:08:32.559 --> 0:08:35.560
<v Speaker 1>And yet there shares down one point four percent ahead

0:08:35.559 --> 0:08:39.120
<v Speaker 1>of the open. Wells Fargo shares tumbling after disappointing. Alison

0:08:39.120 --> 0:08:42.560
<v Speaker 1>Williams tracking at all Blueberg Intelligence, senior banking analyst, and Allison,

0:08:42.920 --> 0:08:45.839
<v Speaker 1>as you peruse all of the reports, what stands out

0:08:45.880 --> 0:08:49.840
<v Speaker 1>to you? So before the reports we said we'd be

0:08:49.880 --> 0:08:53.319
<v Speaker 1>looking for three key things trading and capital markets for momentum,

0:08:53.720 --> 0:08:57.360
<v Speaker 1>interest income troughing, UH provisions peaking. So I think we

0:08:57.840 --> 0:09:02.400
<v Speaker 1>got evidence again about that, oddly, but some differences across

0:09:02.400 --> 0:09:05.480
<v Speaker 1>the piers. I think the one key story that's developing

0:09:05.559 --> 0:09:08.760
<v Speaker 1>across not just banks but financial services, as we saw

0:09:08.840 --> 0:09:13.040
<v Speaker 1>black Rock yesterday, is higher spending. So JP Morgan had

0:09:13.160 --> 0:09:17.040
<v Speaker 1>increased their estimates for investment spending at a December conference,

0:09:17.120 --> 0:09:20.439
<v Speaker 1>they raise that again. They also do expect higher net

0:09:20.440 --> 0:09:24.199
<v Speaker 1>interest income, so there's some offset there. Wells Fargo, everybody's

0:09:24.240 --> 0:09:27.240
<v Speaker 1>been um watching the cost number. That's the big opportunity

0:09:27.280 --> 0:09:30.240
<v Speaker 1>over the next several years. Their guidance for costs is

0:09:30.360 --> 0:09:34.439
<v Speaker 1>higher than consensus expected, while as their net interest income

0:09:34.520 --> 0:09:37.800
<v Speaker 1>expectation is lower, So that's the negative um but again

0:09:37.960 --> 0:09:42.079
<v Speaker 1>spending more on investments. UH City Group. We haven't seen

0:09:42.120 --> 0:09:45.439
<v Speaker 1>the net interest income guidance, but their trading revenue did

0:09:45.480 --> 0:09:48.160
<v Speaker 1>come in a little bit light fick worse that's their

0:09:48.160 --> 0:09:52.000
<v Speaker 1>bigger business equities better UM. But again they're spending on

0:09:52.120 --> 0:09:55.120
<v Speaker 1>costs not just for investments, but related to some of

0:09:55.160 --> 0:09:59.880
<v Speaker 1>their regulatory issues. And black Rock I referenced earlier stellar quarter. Yes,

0:10:00.000 --> 0:10:03.480
<v Speaker 1>today great new business record assets, UM. But the fact

0:10:03.559 --> 0:10:05.120
<v Speaker 1>that they said that they're going to be spending more

0:10:05.160 --> 0:10:08.560
<v Speaker 1>on investments across a lot of different items UM, I

0:10:08.600 --> 0:10:11.720
<v Speaker 1>think was a negative takeaway for investors. Allison, do we

0:10:11.760 --> 0:10:15.719
<v Speaker 1>have too many big banks? Well, it feels it might

0:10:15.760 --> 0:10:18.520
<v Speaker 1>feel like that on a day like today, but actually

0:10:18.600 --> 0:10:22.000
<v Speaker 1>the US banking system is still rather fragmented. So we

0:10:22.080 --> 0:10:24.640
<v Speaker 1>do have these big banks, but we still have a

0:10:24.720 --> 0:10:27.880
<v Speaker 1>number of smaller banks, and we do think that UM

0:10:28.000 --> 0:10:31.400
<v Speaker 1>consolidation will be a continuing trend. I think it's it's

0:10:31.440 --> 0:10:34.040
<v Speaker 1>interesting when you look across the banking system. If if

0:10:34.040 --> 0:10:37.439
<v Speaker 1>we looked past, you know, multiple decades in the nineties,

0:10:37.480 --> 0:10:40.440
<v Speaker 1>we saw tons of mergers, but we saw bank branches

0:10:40.480 --> 0:10:44.120
<v Speaker 1>still growing, and that happened basically up until the crisis.

0:10:44.679 --> 0:10:47.680
<v Speaker 1>Since then, over the past decade or so, we start

0:10:47.720 --> 0:10:49.760
<v Speaker 1>to see those branches come in and that's really the

0:10:49.800 --> 0:10:52.960
<v Speaker 1>digital story. UM. You know, we we all talk about

0:10:52.960 --> 0:10:55.160
<v Speaker 1>a lot of the acceleration and the digital story that

0:10:55.200 --> 0:10:59.240
<v Speaker 1>we've seen during the pandemic, will that lead to a

0:10:59.320 --> 0:11:02.959
<v Speaker 1>lesser branches? So again, supply not it's just about the

0:11:03.040 --> 0:11:05.800
<v Speaker 1>number of banks, but about the number of actual branches.

0:11:06.400 --> 0:11:09.120
<v Speaker 1>I mentioned this with this Bessic earlier, the idea the

0:11:09.160 --> 0:11:11.480
<v Speaker 1>Bank of America was flat on their back and moining,

0:11:11.520 --> 0:11:15.320
<v Speaker 1>and clearly his turn Bank of America around. What does

0:11:15.440 --> 0:11:19.840
<v Speaker 1>James Fraser need to do to do a mooint ahead? Well,

0:11:19.840 --> 0:11:23.680
<v Speaker 1>the number one I think issue with City over the

0:11:23.720 --> 0:11:27.200
<v Speaker 1>past decade and perhaps even the past two decades is

0:11:27.240 --> 0:11:31.320
<v Speaker 1>operating leverage. And you know that's really been UM the

0:11:31.360 --> 0:11:34.560
<v Speaker 1>focus of investors and I think where the disappointments have been.

0:11:34.760 --> 0:11:36.680
<v Speaker 1>And again, if you take a very long term view

0:11:36.679 --> 0:11:39.600
<v Speaker 1>in terms of how City Group was created, you know

0:11:39.760 --> 0:11:43.160
<v Speaker 1>it was a lot of different entities brought together UM

0:11:43.200 --> 0:11:48.040
<v Speaker 1>after the financial crisis, UH corebat did. UM make efforts

0:11:48.080 --> 0:11:51.520
<v Speaker 1>to simplify, but it still is such a more complex

0:11:51.600 --> 0:11:55.160
<v Speaker 1>organization just in terms of UM the broad footprints. So

0:11:55.440 --> 0:11:59.160
<v Speaker 1>they definitely slimmed down their businesses. UM. They divested the

0:11:59.200 --> 0:12:01.840
<v Speaker 1>retail brokerage to Morgan Stanley, which has actually been a

0:12:01.840 --> 0:12:05.040
<v Speaker 1>win for them. They've cut geographies, they've gotten simpler. So

0:12:05.160 --> 0:12:08.679
<v Speaker 1>I think Jane really just needs to um continue that

0:12:09.000 --> 0:12:13.400
<v Speaker 1>journey in terms of more simplification and then just really

0:12:13.480 --> 0:12:17.559
<v Speaker 1>getting the cost structure right. And I think that the

0:12:17.760 --> 0:12:21.600
<v Speaker 1>regulators have sort of indicated that that's their frustration UM

0:12:21.800 --> 0:12:24.240
<v Speaker 1>with a group just in terms of um, you know,

0:12:24.280 --> 0:12:27.760
<v Speaker 1>the risk management and getting that sort of overview together

0:12:27.960 --> 0:12:31.040
<v Speaker 1>Elison Williams and celebrating a new Bloomberg function m O

0:12:31.160 --> 0:12:33.000
<v Speaker 1>d L. I really want to bring into your attention

0:12:33.040 --> 0:12:35.439
<v Speaker 1>for those of you that are global Wall Street pros

0:12:35.480 --> 0:12:40.000
<v Speaker 1>like JP Morgan, JPM Equity, m O d L is

0:12:40.040 --> 0:12:45.440
<v Speaker 1>a whole new financial analysis with the leadership of Alison Williams.

0:12:48.880 --> 0:12:50.760
<v Speaker 1>You're gonna finish strong to sell. This is what our

0:12:50.760 --> 0:12:53.839
<v Speaker 1>Control Room does well, team surveillance, wiring us up with

0:12:53.960 --> 0:12:56.320
<v Speaker 1>Mr Rdholt. We're gonna do that right now. Of course

0:12:56.360 --> 0:13:02.400
<v Speaker 1>it's wonderful podcast, longer conversations, harder conversations, masters in business,

0:13:02.400 --> 0:13:06.160
<v Speaker 1>and of course occasionally buying stock. Barry, we got eight

0:13:06.160 --> 0:13:08.000
<v Speaker 1>ways to go here. I want to get through this

0:13:08.080 --> 0:13:09.840
<v Speaker 1>quickly because I think I've got to go to Europe.

0:13:09.840 --> 0:13:12.360
<v Speaker 1>In a couple of minutes of Control Room will tell

0:13:12.360 --> 0:13:18.520
<v Speaker 1>me Berry a firm thirty forty one, opens at ninety,

0:13:18.640 --> 0:13:22.239
<v Speaker 1>gets up to one thirty seven, comes down the specs

0:13:22.400 --> 0:13:25.439
<v Speaker 1>and all that. How do you frame to your clients

0:13:26.040 --> 0:13:30.240
<v Speaker 1>the what I'm gonna call Internet mania wrapped around tech.

0:13:30.440 --> 0:13:34.240
<v Speaker 1>Is it a manufactured hype or is it real? So

0:13:34.280 --> 0:13:38.680
<v Speaker 1>there's a spectrum, there's a continuum. You know. The Bitcoin

0:13:39.120 --> 0:13:44.320
<v Speaker 1>is really the poster child for just pure speculation. UM

0:13:44.679 --> 0:13:49.480
<v Speaker 1>Tesla has some real great fundamental underlying technologies, but a

0:13:49.480 --> 0:13:51.520
<v Speaker 1>lot of speculation in that, and then you work your

0:13:51.559 --> 0:13:56.160
<v Speaker 1>way down, uh the speculative ladder. The problem with SPACs

0:13:56.760 --> 0:14:01.760
<v Speaker 1>is that they follow Sturgeons law, which is everything is crap.

0:14:01.840 --> 0:14:06.920
<v Speaker 1>So if you can get into UM Martin Franklin spack,

0:14:07.040 --> 0:14:11.200
<v Speaker 1>or if you can get into UM A bill Acman spack,

0:14:11.920 --> 0:14:16.000
<v Speaker 1>you the odds are tilted slightly in your favor. But

0:14:16.200 --> 0:14:19.000
<v Speaker 1>look at how many SPACs came out last year and

0:14:19.000 --> 0:14:22.760
<v Speaker 1>how poorly they performed. You have to really be very selective.

0:14:23.080 --> 0:14:26.520
<v Speaker 1>Are they by prospectives? Is this the fleecing of retail

0:14:26.640 --> 0:14:31.000
<v Speaker 1>because they're not codified off of security Zack thirty three

0:14:31.000 --> 0:14:35.600
<v Speaker 1>and thirty four. Well, it's a great back door around that. UM,

0:14:35.720 --> 0:14:39.440
<v Speaker 1>we'll give us your money for a venture Uh to

0:14:39.560 --> 0:14:42.440
<v Speaker 1>be determined later. Reminds a little bit of the Great

0:14:42.440 --> 0:14:45.320
<v Speaker 1>South Sea bubble. Uh. And that's why you have to

0:14:45.400 --> 0:14:48.160
<v Speaker 1>go to people with a track record who have done

0:14:48.240 --> 0:14:52.400
<v Speaker 1>this before. Hey, um, Social Capital that's done a number

0:14:52.400 --> 0:14:54.920
<v Speaker 1>of home runs. You have to say, they seem to

0:14:54.960 --> 0:14:59.960
<v Speaker 1>be really good at identifying things with with hidden value.

0:15:00.560 --> 0:15:02.680
<v Speaker 1>On the other hand, who were there, like two hundred

0:15:02.720 --> 0:15:08.400
<v Speaker 1>spacks last year? Uh? You know when everybody the genius

0:15:08.440 --> 0:15:12.040
<v Speaker 1>of any of these new or or revamped asset classes

0:15:12.600 --> 0:15:16.600
<v Speaker 1>is they identify a market inefficiency and the first few

0:15:17.480 --> 0:15:21.120
<v Speaker 1>get to a profit from that, they find alpha. But

0:15:21.360 --> 0:15:25.280
<v Speaker 1>when everybody else piles into the space, Hey, that inefficiency

0:15:25.360 --> 0:15:29.160
<v Speaker 1>gets arbitraged away and there's no more upside left. So

0:15:29.280 --> 0:15:31.920
<v Speaker 1>it's like the old days when someone would find a

0:15:31.920 --> 0:15:34.800
<v Speaker 1>little bit of gold and that stream. It was great

0:15:34.840 --> 0:15:37.200
<v Speaker 1>for the first two panners. By the hundredth guy that

0:15:37.280 --> 0:15:40.960
<v Speaker 1>shows up, it ain't nothing but pebbles and and fish poop.

0:15:41.320 --> 0:15:45.160
<v Speaker 1>That is not how you make money in the markets. Consistently,

0:15:45.600 --> 0:15:46.960
<v Speaker 1>very good, very We've got to leave it there with

0:15:47.000 --> 0:15:49.360
<v Speaker 1>breaking news, very rittle, too short of visit. Look for

0:15:49.400 --> 0:15:53.680
<v Speaker 1>his podcast out on Bloomberg. It is exceptionally strong Thanks

0:15:53.680 --> 0:15:57.920
<v Speaker 1>for listening to the Bloomberg Surveillance podcast. Subscribe and listen

0:15:58.160 --> 0:16:03.480
<v Speaker 1>to interviews on Apple Podcasts, SoundCloud, or whichever podcast platform

0:16:03.600 --> 0:16:07.880
<v Speaker 1>you prefer. I'm on Twitter at Tom Keene before the podcast.

0:16:07.960 --> 0:16:11.440
<v Speaker 1>You can always catch us worldwide. I'm Bloomberg Radio