WEBVTT - US Inflation Cools Offering Hope Fed Can Wrap Up Hikes 0:00:01.360 --> 0:00:05.680 This is Bloomberg Business Wait inside from the reporters and 0:00:05.880 --> 0:00:09.440 editors who bring you America's most trusted business magazine, plus 0:00:09.520 --> 0:00:13.680 global business, finance and tech news. The Bloomberg Business Week 0:00:13.720 --> 0:00:19.000 Podcast with Carol Messer and Tim Stenebeck from Bloomberg Radio. 0:00:20.280 --> 0:00:23.880 We are going to stay with definitely inflation and the 0:00:23.880 --> 0:00:26.439 inflation print today, so let's continue with it. We talked 0:00:26.440 --> 0:00:30.560 about on the headline and the core certainly an improvement, 0:00:31.440 --> 0:00:34.040 a cooling, if you will, So let's get to We've 0:00:34.040 --> 0:00:35.960 also heard from a lot of FED speakers, so let's 0:00:35.960 --> 0:00:39.120 get to. Bloomberg News International Economics and Policy correspondent Michael 0:00:39.200 --> 0:00:42.520 McKee on zoom from the Rocky Mountain Economics Summit in Idaho. 0:00:43.159 --> 0:00:44.800 Yes he's had his hat. 0:00:46.880 --> 0:00:49.519 We love, we Love, we Love, and Bloomberg News Economics 0:00:49.600 --> 0:00:52.640 editor Mollie Smith in our Bloomberg Interactive Broker student without 0:00:52.640 --> 0:00:53.360 our hat, but. 0:00:53.320 --> 0:00:54.840 Still we love, we Love, we love. 0:00:55.200 --> 0:00:58.760 All right, Mike, First of all, gosh, is everybody there 0:00:58.760 --> 0:01:01.160 talking about this? I mean, is every there yet? 0:01:02.480 --> 0:01:04.560 Not everybody is there yet, but a good number of 0:01:04.600 --> 0:01:09.600 people are. And it's not that the data released itself, 0:01:09.920 --> 0:01:12.680 but overall business conditions that people have been talking about. 0:01:12.880 --> 0:01:15.760 And the interesting thing is that it sort of mirrors 0:01:16.120 --> 0:01:18.679 the story that's been told nationwide. I was sitting with 0:01:18.720 --> 0:01:21.760 a table of CEOs last night and they were all saying, 0:01:21.800 --> 0:01:26.840 business is really good, surprisingly good, but we can't find employees, 0:01:27.240 --> 0:01:29.720 and so a strong labor market is still going to 0:01:29.760 --> 0:01:33.600 keep the FED worried. And that's one reason that we'll 0:01:33.600 --> 0:01:35.880 get this July rate increase, and it'll keep it on 0:01:35.920 --> 0:01:39.280 the table for the future unless we get some additional 0:01:39.319 --> 0:01:42.680 inflation information that really drops down. But I think the 0:01:42.760 --> 0:01:47.319 labor market strength is what is paramount for most of 0:01:47.319 --> 0:01:49.680 the people running companies in America today. 0:01:49.920 --> 0:01:54.040 And I guess, Ollie. I was looking at ECFC the 0:01:54.080 --> 0:01:59.840 economic forecasts on the Bloomberg terminal, and it's showing that 0:02:01.240 --> 0:02:05.560 I guess economists are forecasting six months of negative non 0:02:05.600 --> 0:02:08.800 farm payrolls in a row starting in October. So is 0:02:08.840 --> 0:02:09.880 this thing going to turn around? 0:02:09.880 --> 0:02:10.160 Big? 0:02:10.800 --> 0:02:13.880 I find that really hard to believe where things are 0:02:13.919 --> 0:02:16.320 at right now, But don't hold me to it if 0:02:16.360 --> 0:02:19.120 six months from now I'm wrong. But I think you know, 0:02:19.200 --> 0:02:22.040 the only explanation I would really have for that is 0:02:22.040 --> 0:02:26.160 if you're really taking the FEDS unemployment forecast to heart, 0:02:26.200 --> 0:02:27.720 and that would really be the only way for them 0:02:27.800 --> 0:02:28.720 to materialize. 0:02:28.840 --> 0:02:30.040 That you would have to have. 0:02:30.280 --> 0:02:34.560 That much job like job many job losses between now 0:02:34.600 --> 0:02:36.720 and then to get to that kind of unemployment rate. 0:02:36.800 --> 0:02:38.799 Mike, we talk about things being sticky, right, We've talked 0:02:38.800 --> 0:02:41.240 about this before when it comes to inflationary pressures. I'm 0:02:41.240 --> 0:02:43.399 just gonna tell everybody, I went to buy deodorant last night, 0:02:43.639 --> 0:02:47.480 nineteen dollars for once little stick I'm sure no, I 0:02:47.560 --> 0:02:49.040 was out of there. I was out of there. I 0:02:49.040 --> 0:02:50.960 am wearing deodorant, but I did not buy it. It 0:02:51.040 --> 0:02:56.920 was ridiculous. But some things, like what wages sheltered, they're sticky. 0:02:57.360 --> 0:02:59.480 They are sticky, but a zero fault for buying that 0:02:59.560 --> 0:03:07.000 Kardash stuff. But yeah, sticky prices are what concerns the 0:03:07.040 --> 0:03:10.360 FED because the easy stuff has gone away. One reason 0:03:10.400 --> 0:03:12.519 we saw a big drop in the year over year 0:03:12.600 --> 0:03:16.360 numbers for CPI headline number is because energy prices have 0:03:16.480 --> 0:03:19.560 fallen so much that stuff has gone We're getting down 0:03:19.560 --> 0:03:22.480 into the range between two and three percent, which is 0:03:22.480 --> 0:03:25.560 going to be much harder to bring down. Because prices 0:03:25.600 --> 0:03:29.120 are sticky, things don't come down as fast as they 0:03:29.160 --> 0:03:34.240 do in some other areas, but the Atlanta Sticky wage 0:03:34.320 --> 0:03:37.480 tracker does show some progress in that area, and other 0:03:37.760 --> 0:03:41.520 wage trackers have as well that we're not seeing declines 0:03:42.080 --> 0:03:45.160 in pay, but we're seeing a leveling off of what 0:03:45.240 --> 0:03:48.280 companies are paying, and I think that is going to 0:03:48.320 --> 0:03:52.920 contribute to the numbers on a statistical basis. And then 0:03:53.000 --> 0:03:57.080 the question becomes this was it was a topic today 0:03:57.800 --> 0:04:00.920 at breakfast at the summit. Then it becomes how do 0:04:01.000 --> 0:04:05.280 people feel about the economy, And that's going to become 0:04:05.320 --> 0:04:09.480 a really interesting question because it will affect whether or 0:04:09.520 --> 0:04:11.600 not we have recession, but it also will have a 0:04:11.600 --> 0:04:14.840 big impact on the elections next year. So it's going 0:04:14.920 --> 0:04:17.360 to be interesting to see whether people start to feel 0:04:17.400 --> 0:04:19.680 better as these good numbers keep coming in. 0:04:19.839 --> 0:04:23.200 You talk about sentiment a lot, man, Yes, I think 0:04:23.240 --> 0:04:25.559 sentiments really important, and I think the FED also pays 0:04:25.680 --> 0:04:29.320 very close attention, especially to inflation expectations. 0:04:29.400 --> 0:04:31.400 Right, yeah, I think you know, to the point of 0:04:31.440 --> 0:04:34.120 how people feel about this, Like, of course, it's one 0:04:34.120 --> 0:04:36.280 thing when you see that inflation was nine point one 0:04:36.279 --> 0:04:38.440 percent a year ago and it's three percent today. 0:04:38.480 --> 0:04:40.880 No one's like progress to me, pretty amazing, and. 0:04:40.760 --> 0:04:44.640 No one's discounting that but that's not somebody's lived experience 0:04:44.800 --> 0:04:47.320 of inflation, right. The fact is that that hamburger that 0:04:47.440 --> 0:04:50.320 used to cost you sixteen dollars now maybe cost you 0:04:50.360 --> 0:04:52.800 twenty five dollars. And even though it's not going up 0:04:53.080 --> 0:04:55.520 five dollars a month, it's maybe still going up two 0:04:55.560 --> 0:04:57.840 dollars a month. So the fact is prices are. 0:04:58.040 --> 0:05:00.040 The oldant was that I would. 0:04:59.800 --> 0:05:05.320 Love to know native deodorant in those materials. It's like, yeah, 0:05:05.320 --> 0:05:08.520 but then I went to Amazon it was still sixteen bucks. 0:05:08.560 --> 0:05:09.800 It's not usually been that. 0:05:10.120 --> 0:05:11.120 Checked out old spice. 0:05:11.400 --> 0:05:15.560 Yeah, now I know actually likes old spies, but no, 0:05:16.000 --> 0:05:19.720 it's just it's kind of crazy. I agree, like you know, Molly, Mike, 0:05:19.920 --> 0:05:21.800 we Mike, I keep looking at you and I think 0:05:21.800 --> 0:05:23.680 I'm watching Yellowstone. I'm just gonna tell you. 0:05:24.880 --> 0:05:25.960 That is a compliment. 0:05:26.160 --> 0:05:31.039 It is a compliment. But so I don't know, Mike, 0:05:31.720 --> 0:05:35.120 So it does feel like things are still so expensive. 0:05:35.240 --> 0:05:36.480 Help me out here. 0:05:36.480 --> 0:05:39.680 Well, that's that's the Fence issue, and it will be 0:05:39.720 --> 0:05:43.840 an issue for the Democratic incumbents in the Senate and 0:05:44.080 --> 0:05:46.840 for President and the Republicans on the House side. Is 0:05:47.160 --> 0:05:51.520 people relate to their own personal experience and their personal experiences. 0:05:51.880 --> 0:05:54.720 Either gas prices are going up or down, food prices 0:05:54.760 --> 0:05:56.839 are going up or down, and it takes a while 0:05:57.000 --> 0:06:00.160 for even those things to penetrate. People have been complating 0:06:00.160 --> 0:06:02.120 about food prices, but food prices are only up a 0:06:02.160 --> 0:06:05.360 tenth of a percent this past month. And then you 0:06:05.480 --> 0:06:08.760 have the things that are stick here, and people don't 0:06:08.800 --> 0:06:12.800 realize that inflation doesn't getting rid of inflation doesn't mean 0:06:12.920 --> 0:06:14.800 prices are going to go back down. So you're going 0:06:14.880 --> 0:06:16.320 to go in and you're going to pay that nineteen 0:06:16.360 --> 0:06:18.920 dollars for the deodorant, and next year you're still going 0:06:19.000 --> 0:06:21.480 to pay that nineteen dollars, if not more. And so 0:06:21.600 --> 0:06:25.640 you're going to say, inflation's terrible, even though it's not rising. 0:06:25.440 --> 0:06:28.000 It it is terrible. I mean, the price of a 0:06:28.120 --> 0:06:34.120 Jeep Grand Wagoneer that starts at ninety thousand dollars before delivery, No, 0:06:34.279 --> 0:06:35.040 thank you. That's why. 0:06:35.120 --> 0:06:38.040 Yeah, that's why you buy a Tesla now because Tesla 0:06:38.120 --> 0:06:39.040 keeps cutting prices. 0:06:39.200 --> 0:06:40.680 That's true, that's so true. 0:06:40.960 --> 0:06:43.200 That's very a great story about Scott Painter. Yeah, I 0:06:43.279 --> 0:06:45.840 know I need to do Lomberg terminal because he started 0:06:45.880 --> 0:06:49.400 a business buying Tesla's and now he has an eighty 0:06:49.480 --> 0:06:52.520 five million dollar fleet that's only worth fifty seven million dollars. 0:06:52.600 --> 0:06:54.120 Thank you you, Molly. 0:06:54.240 --> 0:06:56.720 What do you and your team watch most closely as 0:06:56.760 --> 0:07:01.720 an indicator to tell you whether or not this economy 0:07:01.880 --> 0:07:02.240 is going. 0:07:02.200 --> 0:07:02.799 To keep growing? 0:07:02.960 --> 0:07:05.560 Because if you look at five hundred and twenty five 0:07:05.640 --> 0:07:08.360 basis points of rate hikes, you know at some point 0:07:08.440 --> 0:07:10.600 those long and variable lags are going to catch up 0:07:10.600 --> 0:07:11.920 and they're going to hit us pretty hard. 0:07:12.520 --> 0:07:14.240 I mean, that's what people have been saying at some 0:07:14.360 --> 0:07:16.800 point for a long time now, and it still hasn't 0:07:16.800 --> 0:07:19.280 happened yet. I think, you know, really at the center 0:07:19.360 --> 0:07:21.280 of all this is still the labor market. That's what's 0:07:21.360 --> 0:07:24.440 really keeping the whole economy going right now. So that 0:07:24.560 --> 0:07:28.840 would be, you know, as a total, the leading indicator 0:07:28.920 --> 0:07:31.680 right now, whether you're looking at that based on payrolls, 0:07:31.720 --> 0:07:36.480 on unemployment claims, job openings, the unemployment rate. So that would, 0:07:36.480 --> 0:07:39.640 for me, would be where the cracks really need to 0:07:39.720 --> 0:07:42.120 be substantially forming for us to get a slow down 0:07:42.160 --> 0:07:45.080 in consumer spending and therefore growth as well. 0:07:45.280 --> 0:07:47.120 Mike, do you feel like Jay Pal's feeling pretty good 0:07:47.160 --> 0:07:52.680 though about this report and where things are moving well? 0:07:52.720 --> 0:07:55.240 He has to feel pretty good about it, but he's 0:07:55.280 --> 0:07:57.760 also got to be wary. We've played and I think 0:07:57.800 --> 0:08:00.679 we mentioned this the last time we played Whackable with inflation, 0:08:00.960 --> 0:08:03.200 something goes down and then the next month that goes 0:08:03.280 --> 0:08:05.560 back up again. And what they want to see his 0:08:05.720 --> 0:08:09.520 things continuously going down. But I don't know if you 0:08:09.600 --> 0:08:11.880 saw Paul Krugman's column today in the New York Times, 0:08:11.920 --> 0:08:15.680 The headline was, Dude, where's my recession? Because people have 0:08:15.760 --> 0:08:18.400 been predicting it for so long. And it was one 0:08:18.520 --> 0:08:21.920 year ago at this event that FED Governor Chris Waller 0:08:22.400 --> 0:08:26.400 said we can't have inflation come down without a big 0:08:26.520 --> 0:08:29.680 rise in unemployment. And if you remember, Larry Summers and 0:08:29.680 --> 0:08:32.320 Olivier blons Chard got really mad about that and they 0:08:32.400 --> 0:08:34.800 posted a paper that said Waller is wrong, and then 0:08:34.880 --> 0:08:37.120 Waller wrote a retort to that, and they went back 0:08:37.200 --> 0:08:39.839 and forth for a while. Well, I just spoke with 0:08:39.920 --> 0:08:42.840 a FED official here who grinned had said Waller's winning. 0:08:43.679 --> 0:08:50.640 I love an economist fight. Yeahs, I'll take care. I'll 0:08:50.640 --> 0:08:52.400 take this curve and up one curve. 0:08:52.520 --> 0:08:55.720 I just feel like you've got to give these lags time, 0:08:55.840 --> 0:08:58.199 right if they're supposed to take to twelve to eighteen months, 0:08:58.240 --> 0:09:00.360 it's only been a year or a year and a 0:09:00.360 --> 0:09:01.320 half of increases. 0:09:01.760 --> 0:09:01.920 Yeah. 0:09:02.000 --> 0:09:04.880 Well, I think another reason though to be wary building 0:09:04.920 --> 0:09:08.319 out what Mike was saying there is that, remember, this 0:09:08.520 --> 0:09:10.800 is where the so called base effects are going to 0:09:10.840 --> 0:09:13.280 start to get a lot less favorable going forward. We're 0:09:13.360 --> 0:09:15.959 right now at the peak of where we're comparing to 0:09:16.040 --> 0:09:18.880 June twenty twenty two when inflation was at the high. 0:09:19.280 --> 0:09:22.360 So as long as all of those increases from June 0:09:22.400 --> 0:09:25.600 twenty two forward, we're lower, we're comparing to a lower 0:09:25.760 --> 0:09:28.040 year over year print, so we're not going to see 0:09:28.280 --> 0:09:30.520 as many of these big drops going forward. 0:09:30.559 --> 0:09:33.120 To Mike, come on in, Well, I was going to 0:09:33.200 --> 0:09:36.200 just point out that Laurie Logan from the Dallas Fed 0:09:36.960 --> 0:09:40.959 just said this past week, but she thinks that the 0:09:41.120 --> 0:09:45.400 lags have already expired because the markets, now, with information 0:09:45.559 --> 0:09:48.760 being what it is, they started pricing FED rate increases 0:09:49.080 --> 0:09:52.599 before the FED started raising rates, So you already have 0:09:52.840 --> 0:09:55.439 an effect of higher rates on the economy. 0:09:55.760 --> 0:09:56.520 And the St. 0:09:56.559 --> 0:09:59.000 Louis Boys, Jim Bullard and Chris Waller, that's one of 0:09:59.040 --> 0:10:02.240 the arguments that they make for being more hawkish, because 0:10:02.559 --> 0:10:06.120 if we're at this level now and we've already had 0:10:06.440 --> 0:10:10.760 maybe eighteen months for the policies that they've done to hit, 0:10:11.080 --> 0:10:13.160 then that probably means they need to do more. 0:10:13.360 --> 0:10:15.640 I'm going to take a guess a Goolsby and Bostic 0:10:15.840 --> 0:10:16.760 don't feel that way. 0:10:19.440 --> 0:10:22.160 I know Raphael doesn't feel that way. I think Austin's 0:10:22.160 --> 0:10:23.079 been hedging his bets. 0:10:23.600 --> 0:10:25.360 It's interesting. Then there was a guest on surveillance this 0:10:25.440 --> 0:10:29.079 more and talk about rate hikes right cuts like in 0:10:29.160 --> 0:10:30.920 the first half of the next year. I know, I know, 0:10:31.040 --> 0:10:33.720 I know, all right, Mike McKee and of course Molly Smith. Guys, 0:10:33.760 --> 0:10:37.080 thank you so much Gidea app. Mister McKee, this is Bloomberg. 0:10:38.880 --> 0:10:42.400 You're listening to the Bloomberg Business Week podcast. Catch us 0:10:42.480 --> 0:10:45.760 live weekday afternoons from three to six Eastern Listen on 0:10:45.880 --> 0:10:49.880 Bloomberg dot com, the iHeartRadio app and the Bloomberg Business app, 0:10:50.200 --> 0:10:51.880 or watch us live on YouTube. 0:10:53.200 --> 0:10:55.199 Really exciting to you. If you got big bank earnings 0:10:55.240 --> 0:10:57.800 coming up, they start on Friday, they follow off into 0:10:57.960 --> 0:11:01.720 next week as well, common tax among them. So what's 0:11:01.800 --> 0:11:04.520 up with GS? Because as we do get ready for 0:11:04.600 --> 0:11:06.960 their results among the others, they seem to be working 0:11:07.000 --> 0:11:10.240 over time to lower expectations and to unimpress. This story 0:11:10.760 --> 0:11:12.640 is one our most read on the Bloomberg today. I 0:11:12.640 --> 0:11:14.280 think it's like number two or number one. It's kind 0:11:14.320 --> 0:11:14.800 of been going. 0:11:14.679 --> 0:11:15.120 Back and forth. 0:11:15.240 --> 0:11:19.640 Bloomberg News Senior financial Reproductriya Rajan wrote it, He's here 0:11:19.679 --> 0:11:22.560 in our Bloomberg Interactive broker studio what's up with GS? 0:11:23.000 --> 0:11:26.280 And rightfully, they're working hard to try and lower expectation 0:11:26.400 --> 0:11:28.920 because the results that they will post next week will 0:11:29.000 --> 0:11:31.240 not be great. I mean that much is clear. They 0:11:31.280 --> 0:11:33.880 have dropped enough deliberate clues in the market in the 0:11:33.960 --> 0:11:37.599 last several weeks to highlight some of the issues. Some 0:11:37.840 --> 0:11:40.520 of them are things that affect the broader industry and 0:11:40.679 --> 0:11:43.599 some are very specific to Goldman Sax. What affects the 0:11:43.640 --> 0:11:47.360 industry the slowdown in the investment bank, investment banking, deal making, 0:11:47.800 --> 0:11:49.480 capital markets training. 0:11:49.559 --> 0:11:50.560 They're not alone in that one. 0:11:50.600 --> 0:11:52.440 They're not alone in that, but they are the best 0:11:52.480 --> 0:11:55.560 at what they at that part of the business better 0:11:55.640 --> 0:11:57.480 than anyone else. So when there is a slowdown in 0:11:57.520 --> 0:12:00.120 that space, it tends to have an outsized impact on 0:12:00.240 --> 0:12:03.280 Goldman Sacks. But when you step beyond that, there are 0:12:03.360 --> 0:12:07.040 also Goldman's own you know, missteps, if you may. The 0:12:07.120 --> 0:12:10.880 consumer banking expansion that they're trying so hard to unwind, 0:12:10.880 --> 0:12:12.800 they're going to take a hefty right down tied to 0:12:12.920 --> 0:12:16.680 this Green Sky lending platform that they're now looking to sell. 0:12:16.960 --> 0:12:19.120 It was one of the biggest acquisitions in two decades 0:12:19.160 --> 0:12:21.920 when they bought it just over a year ago. There 0:12:21.960 --> 0:12:24.640 are big real estate markdowns that they'll have to take 0:12:24.760 --> 0:12:28.319 because not only does Goldman lend to that sector, it 0:12:28.480 --> 0:12:30.800 also has a lot of equity investments in that space 0:12:30.840 --> 0:12:33.480 where it uses principle from its balance sheet. So when 0:12:33.559 --> 0:12:37.559 you add all of those things together, it kind of 0:12:37.800 --> 0:12:40.920 becomes a bit of a dismal quarter. And we had 0:12:41.080 --> 0:12:43.679 Mike may Or, the dean of banking analysts, tell us 0:12:43.800 --> 0:12:46.600 that there are about half a dozen things in Goldman's 0:12:46.600 --> 0:12:48.680 earnings this quarrel. They'll be weak, bad, or ugly. 0:12:48.920 --> 0:12:52.679 Yeah, I saw that, and it made me sort of question, 0:12:53.120 --> 0:12:57.000 is Goldman just downplaying their results so that they can 0:12:57.080 --> 0:13:01.280 beat You know, companies have been doing that decades now, 0:13:01.360 --> 0:13:03.880 which is why seventy six percent of companies in the 0:13:04.280 --> 0:13:06.679 S and P five hundred routinely beat analyst estimates. Or 0:13:07.400 --> 0:13:10.839 is this a really bad quarter for Goldman or is 0:13:10.920 --> 0:13:11.320 it both? 0:13:11.880 --> 0:13:14.120 It could be both, right, it could be a terrible quarter. 0:13:14.240 --> 0:13:16.679 Analysts could expect your profits to be down fifty percent 0:13:16.720 --> 0:13:19.640 and you're down just forty nine percent. Technically that is 0:13:19.679 --> 0:13:22.600 a beat, but that's nothing to write home about, right, Well. 0:13:22.640 --> 0:13:25.319 Are we had they pre announced? Technically they really have 0:13:25.480 --> 0:13:26.599 it right, but it feels like it. 0:13:27.280 --> 0:13:29.439 That's what Mike Mayo seems to think. And part of 0:13:29.480 --> 0:13:31.679 the reason why it's different is actually, if you look 0:13:31.720 --> 0:13:34.839 across the landscape, most other banks do a reasonably good 0:13:34.960 --> 0:13:38.520 job of providing intra quarter guidance. The reason we found 0:13:38.520 --> 0:13:41.040 this surprising and it's actually interesting, it's clear after having 0:13:41.080 --> 0:13:43.800 spoken to a number of executives at Goldman Sachs, having 0:13:43.800 --> 0:13:45.880 spoken to a number of investors analysts who speak with 0:13:45.960 --> 0:13:49.079 Goldman Sacks, that it is a very concerted effort on 0:13:49.120 --> 0:13:51.280 the part of the bank to do something that they're 0:13:51.320 --> 0:13:55.680 not used to doing. Because Goldman has been famously reticent 0:13:55.760 --> 0:14:00.800 about quantifying a trading performance, a banking performance it's mid quarter, 0:14:01.120 --> 0:14:03.839 or identifying how much of a hit they could have 0:14:03.960 --> 0:14:07.959 in certain this sector or that sector. They've never done that. 0:14:08.160 --> 0:14:10.320 They're doing that here, and you've got to think about 0:14:10.320 --> 0:14:13.760 the bigger picture. What happened in January when they reported earnings. 0:14:14.400 --> 0:14:17.080 It was bad performance for them for Q four twenty 0:14:17.160 --> 0:14:18.920 twenty two, But on the day of earnings the stock 0:14:19.040 --> 0:14:21.000 was down six and a half percent. That is a 0:14:21.120 --> 0:14:24.000 lot for a bank stock. What made things worse the 0:14:24.200 --> 0:14:28.760 same day, Morgan Stanley there are trival reported earnings and 0:14:28.960 --> 0:14:32.280 that stock shot up six percent. That can easily make 0:14:32.320 --> 0:14:35.480 anyone's blood boil inside goldman sack. So that wasn't good them. 0:14:35.600 --> 0:14:39.720 Came around April. Their trading division, They're mighty trading unit, 0:14:39.840 --> 0:14:42.880 didn't quite live up to expectations. But again the stock 0:14:43.000 --> 0:14:44.520 was punished, and if you look over the stretch of 0:14:44.560 --> 0:14:48.440 those four or five earnings days in April, Goldman significantly 0:14:48.520 --> 0:14:50.440 underperformed the rest of the market. So they want to 0:14:50.560 --> 0:14:54.160 avoid a trifecta of earnings day misery if you want, 0:14:54.480 --> 0:14:57.440 by guiding expectations lower, by making it clear to the 0:14:57.560 --> 0:15:01.160 market that there is no way that they're posting earnings 0:15:01.200 --> 0:15:03.200 of eight dollars per share. It's going to be much 0:15:03.280 --> 0:15:06.320 lower than that, and you're likely seeing that when they 0:15:06.360 --> 0:15:07.640 report numbers on Wednesday. 0:15:08.160 --> 0:15:14.960 Is David Solomon, Goldman's Bob Jaypek, I mean, did Lloyd 0:15:15.000 --> 0:15:18.880 blank Find, you know, win a five year version and 0:15:19.160 --> 0:15:23.160 David Solomon is the loser, or did blank Find set 0:15:23.240 --> 0:15:26.120 Solomon up for this? Was it blank Find's you know 0:15:26.320 --> 0:15:29.440 plans that sent Goldman into the I don't know if 0:15:29.440 --> 0:15:31.640 it's a tailspin, but into the situation that it's in. 0:15:31.760 --> 0:15:34.040 So your first question, I'll ask you, is Bob Chapek 0:15:34.160 --> 0:15:36.840 a DJ and a kite surfer? I think not, So 0:15:36.960 --> 0:15:38.760 there is no comparison there, Matt. 0:15:38.800 --> 0:15:42.000 So, I mean those things are awesome, right, I don't 0:15:42.040 --> 0:15:45.040 know is that is that taking too much of Solomon's 0:15:45.080 --> 0:15:47.240 attention away or is he working on No? 0:15:47.360 --> 0:15:49.160 I think, look, those things stick out, but I think 0:15:49.160 --> 0:15:50.840 it would be unfair to say it's taking too much 0:15:50.880 --> 0:15:52.960 of a attention. Clearly he's focused on the business and 0:15:53.040 --> 0:15:54.640 he wants the business to do well when he took 0:15:54.680 --> 0:15:56.880 over five years ago. And this goes back to your 0:15:56.920 --> 0:15:59.720 other question, the more important question of whether it's blank 0:15:59.760 --> 0:16:03.640 Fine legacy or this is David Solomon's doing. We're five 0:16:03.720 --> 0:16:07.520 years into the tenure of David Solomon. There is very 0:16:07.600 --> 0:16:09.920 little here that you could pin down on Lloyd blank Fine. Now, 0:16:10.000 --> 0:16:12.520 everything that happens at the firm David Solomon over well. 0:16:12.440 --> 0:16:15.080 The consumer facing plans were laid by Blank, fined. 0:16:15.440 --> 0:16:19.840 By Blank, fine, but David Solomon completely embraced it, double 0:16:19.920 --> 0:16:21.600 down on it. At one point said that they would 0:16:21.640 --> 0:16:23.920 be a leader in consumer banking just the way they 0:16:23.960 --> 0:16:26.560 are in investment banking and training. They had to do 0:16:26.680 --> 0:16:29.360 a big about turn on that, and you know what, 0:16:30.040 --> 0:16:33.160 perhaps that's also a sign of good leadership. Acknowledging your mistake, 0:16:33.560 --> 0:16:36.560 not sticking with it out of embarrassment, but willing to say, Okay, 0:16:36.600 --> 0:16:38.400 we've gotten too much heat on this. It's not doing 0:16:38.480 --> 0:16:41.160 what we hoped it would. Let's cut our losses and 0:16:41.440 --> 0:16:42.520 sell a new story. 0:16:42.760 --> 0:16:44.800 And that's what they're trying to sign. A good leadership. 0:16:44.880 --> 0:16:46.239 I mean more leaders should. 0:16:46.160 --> 0:16:47.040 Do that, right. 0:16:47.160 --> 0:16:49.360 Yeah, And they have now committed to a new strategy. 0:16:49.920 --> 0:16:52.160 The good news for them, perhaps is over the last 0:16:52.240 --> 0:16:54.960 five years, the stock never got re rated. They never 0:16:55.080 --> 0:16:57.280 got that higher multiple, which was one of David Solomon's 0:16:57.360 --> 0:17:01.120 goals when he took over as CEO in October twenty eighteen. 0:17:01.240 --> 0:17:04.480 I'll tell you why that's important. Book value at that time, 0:17:04.560 --> 0:17:07.960 whatever it was, has expanded pretty well in the last 0:17:08.000 --> 0:17:10.520 five years because their core businesses of banking and trading 0:17:10.600 --> 0:17:13.600 did so well through the pandemic that allowed access earnings 0:17:13.640 --> 0:17:16.280 to flow into book value, expand their book value, and 0:17:16.400 --> 0:17:19.359 the stock kept pace with that. But what has not 0:17:19.640 --> 0:17:23.320 changed is on day one, David Solomon and his leadership 0:17:23.359 --> 0:17:26.760 team told you told investors to ADL analysts that are 0:17:26.880 --> 0:17:29.879 priced to book multiple. There's no reason why we should 0:17:29.920 --> 0:17:33.560 be at like a one point one multiple to book value. 0:17:33.760 --> 0:17:36.119 It should be much higher multiple. Where are we today? 0:17:36.280 --> 0:17:39.600 We're below one, So clearly that rerating has not happened. 0:17:39.960 --> 0:17:42.639 And that's also where there lies a silver lining for 0:17:42.760 --> 0:17:45.239 Goldman Sachs that in five years of the stock has 0:17:45.320 --> 0:17:48.399 not been re rated. You could argue that there is 0:17:48.520 --> 0:17:51.399 limited downside from here and on the opportunity app and 0:17:51.480 --> 0:17:54.040 if they actually go ahead and finally execute, even if 0:17:54.080 --> 0:17:56.159 it's five years too late, if they actually execute and 0:17:56.240 --> 0:17:59.560 convince markets that they can execute, you will also see 0:17:59.600 --> 0:18:00.879 them to pull expansion. 0:18:01.000 --> 0:18:02.760 What's going on internally, and I bring that up you 0:18:02.840 --> 0:18:04.640 write this in the story. Larry Fink had a black 0:18:04.720 --> 0:18:07.320 Rock TV interview last week here at Bloomberg or I 0:18:07.320 --> 0:18:08.840 don't know if it was ours, maybe something was. 0:18:09.359 --> 0:18:09.880 It was on Fox. 0:18:09.920 --> 0:18:13.880 Sorry, okay, sorry. TV interview last week, he talked about 0:18:13.880 --> 0:18:17.879 a schism within the organization. Is that though something that 0:18:18.560 --> 0:18:19.600 has got to be fixed? 0:18:20.359 --> 0:18:22.720 Is he right? First of all, this a is clearly 0:18:22.760 --> 0:18:24.159 a lot of noise. You know, a lot of the 0:18:24.200 --> 0:18:26.800 people we talked to clearly indicate there is a lot 0:18:26.840 --> 0:18:31.680 of internal squabbling, bickering, complaints about leadership. But that's not 0:18:31.800 --> 0:18:33.400 a story of the last two month. That's the story 0:18:33.440 --> 0:18:35.720 of the last two en off. It is surprising when 0:18:35.760 --> 0:18:38.840 someone as prominent as Larry Fink. That's why it's publicly 0:18:38.880 --> 0:18:40.800 willing to say, Look, it's obvious there is a schism 0:18:40.840 --> 0:18:42.920 within the organization that can never be a good look. 0:18:43.440 --> 0:18:45.000 To be fair, he does go out and say that 0:18:45.160 --> 0:18:47.240 he's supportive of Solomon, thinks he's done a good job, 0:18:47.280 --> 0:18:49.600 thinks he's elevated the firm. But still when we heard 0:18:49.680 --> 0:18:51.399 that comment, when he goes on air and says, it's 0:18:51.440 --> 0:18:54.520 obvious there is a schism in the organization that makes 0:18:54.560 --> 0:18:56.440 you sit up and take notice. And that's what we've 0:18:56.520 --> 0:18:58.560 heard from a lot of executives of the film. They're saying, 0:18:58.600 --> 0:19:01.480 when we're talking to clients, we're actually spending a decent 0:19:01.560 --> 0:19:03.880 junk of our time trying to explain the tensions inside 0:19:04.000 --> 0:19:07.399 Goldman Sachs instead of devoting all our time into discussing business. 0:19:07.680 --> 0:19:10.800 If you said that, they'd start canceling interviews. 0:19:12.720 --> 0:19:13.240 No comment. 0:19:14.840 --> 0:19:16.879 No, it's just kind of interesting, And you know, you 0:19:16.960 --> 0:19:19.200 do wonder did David's oly pick up the phone? Hey, Larry, 0:19:19.320 --> 0:19:22.720 Hey got a problem to be so public and a 0:19:22.800 --> 0:19:24.360 voice like that to come out and say, it's kind 0:19:24.359 --> 0:19:24.880 of interesting. 0:19:26.000 --> 0:19:27.640 We got a run. I'd love to say in Wall 0:19:27.680 --> 0:19:30.640 Street hierarchy, Larry Fingers died a few steps above mister 0:19:30.720 --> 0:19:31.680 David Solomon right. 0:19:31.600 --> 0:19:34.359 Now, I would say so too. All right, Shinatarajan, thank 0:19:34.359 --> 0:19:36.320