1 00:00:02,480 --> 00:00:06,800 Speaker 1: Bloomberg Audio Studios, podcasts, radio news. 2 00:00:08,280 --> 00:00:12,160 Speaker 2: You're listening to the Bloomberg Intelligence Podcast. Catch us live 3 00:00:12,240 --> 00:00:15,320 Speaker 2: weekdays at ten am Eastern on Apple card playing Android 4 00:00:15,360 --> 00:00:18,480 Speaker 2: Auto with the Bloomberg Business App. Listen on demand wherever 5 00:00:18,520 --> 00:00:22,120 Speaker 2: you get your podcasts, or watch us live on YouTube. 6 00:00:23,079 --> 00:00:26,000 Speaker 3: Let's get right to these Youmish sentiment data. So basically, 7 00:00:26,000 --> 00:00:28,560 Speaker 3: we're looking at a fall for you Mish for the 8 00:00:28,600 --> 00:00:31,080 Speaker 3: first time in three months, and you have the high 9 00:00:31,120 --> 00:00:34,280 Speaker 3: cost of living really offsetting any sort of sanguine views 10 00:00:34,320 --> 00:00:36,600 Speaker 3: on the job mark, kind of the opposite of what 11 00:00:36,760 --> 00:00:38,400 Speaker 3: the FED was sort of looking at over the last 12 00:00:38,440 --> 00:00:41,440 Speaker 3: few weeks. Joan Shue, University of Michigan Surveys of Consumer 13 00:00:41,520 --> 00:00:45,680 Speaker 3: Director joins us now walk us through the decline here 14 00:00:45,720 --> 00:00:46,960 Speaker 3: and the whys behind it. 15 00:00:48,280 --> 00:00:51,760 Speaker 4: Absolutely so, I would point out that this decline is 16 00:00:51,840 --> 00:00:54,480 Speaker 4: not statistically significant. We should see this as you know, 17 00:00:54,520 --> 00:00:57,880 Speaker 4: inching down a very very small change. We're still higher 18 00:00:57,880 --> 00:01:01,680 Speaker 4: than we were two months ago. Being said, consumers are 19 00:01:02,680 --> 00:01:04,520 Speaker 4: you know, I think reacting to the same data that 20 00:01:04,880 --> 00:01:08,000 Speaker 4: we saw on the CPI print yesterday. Inflation is slowing, 21 00:01:08,080 --> 00:01:11,280 Speaker 4: but it's not slowing down as quickly as one would like. 22 00:01:12,000 --> 00:01:15,399 Speaker 4: I'll note that the long term inflation expectations actually came 23 00:01:15,440 --> 00:01:17,240 Speaker 4: down a little bit, so, you know, sort of mixed 24 00:01:17,319 --> 00:01:20,520 Speaker 4: views on inflation, on inflation expectations, and. 25 00:01:20,520 --> 00:01:21,440 Speaker 5: On labor markets. 26 00:01:21,520 --> 00:01:23,400 Speaker 4: You know, I think consumers are feeling a little bit 27 00:01:23,440 --> 00:01:26,520 Speaker 4: more confident this month. We had been seeing a week 28 00:01:26,640 --> 00:01:28,920 Speaker 4: a bit of a weakening and labor market expectations the 29 00:01:29,000 --> 00:01:31,280 Speaker 4: last few months, but they did expect the Fed to 30 00:01:31,319 --> 00:01:33,760 Speaker 4: step in they did last month, and so consumers are 31 00:01:33,760 --> 00:01:35,280 Speaker 4: feeling a little bit more staple there. 32 00:01:36,319 --> 00:01:38,920 Speaker 6: How does just interest rates coming down? Is that just 33 00:01:39,080 --> 00:01:42,320 Speaker 6: too much of a macro Wall Street thing to really 34 00:01:42,319 --> 00:01:43,440 Speaker 6: impact the UMISH data. 35 00:01:45,400 --> 00:01:48,680 Speaker 4: I don't think that the FOMC announcement necessarily moves the 36 00:01:49,440 --> 00:01:50,800 Speaker 4: UMISH data at all. 37 00:01:50,800 --> 00:01:52,160 Speaker 5: It doesn't really move consumers. 38 00:01:52,280 --> 00:01:55,520 Speaker 4: That being said, consumers are fully aware of the interest 39 00:01:55,600 --> 00:01:58,840 Speaker 4: rates around them, and when we ask them about buying 40 00:01:58,840 --> 00:02:02,400 Speaker 4: conditions for a large large purchases like cars or durable 41 00:02:02,440 --> 00:02:07,160 Speaker 4: goods or homes, the spontaneous mentions of high interest rates 42 00:02:07,200 --> 00:02:10,080 Speaker 4: has fallen this month, So consumers are perfectly aware that 43 00:02:10,160 --> 00:02:13,560 Speaker 4: interest rates are going to have been falling, and fifty 44 00:02:13,600 --> 00:02:16,480 Speaker 4: four percent of consumers expect interest rates to continue following 45 00:02:16,680 --> 00:02:18,000 Speaker 4: falling In the year ahead. 46 00:02:18,520 --> 00:02:20,760 Speaker 5: So this is something that's on the minds of consumers. 47 00:02:20,919 --> 00:02:23,280 Speaker 3: The narrative yesterday when we got the CPI data initial 48 00:02:23,360 --> 00:02:26,160 Speaker 3: jobless claims, is that which one is the FED look at, right, 49 00:02:26,240 --> 00:02:30,160 Speaker 3: higher jobless claims or an inflation narrative, that disinflation narrative. 50 00:02:30,200 --> 00:02:33,360 Speaker 3: That's not as steep as we had thought. It feels 51 00:02:33,400 --> 00:02:36,320 Speaker 3: like from the report consumers are looking at those two things. Also, 52 00:02:36,480 --> 00:02:38,080 Speaker 3: job's okay, inflation not okay. 53 00:02:39,600 --> 00:02:42,880 Speaker 4: Absolutely, I mean I think that in terms of inflation, 54 00:02:43,400 --> 00:02:46,399 Speaker 4: and also high prices, that is absolutely. 55 00:02:45,840 --> 00:02:47,840 Speaker 5: The number one factor on consumers' minds. 56 00:02:48,200 --> 00:02:52,400 Speaker 4: We have over forty percent of consumers spontaneously telling us 57 00:02:52,400 --> 00:02:56,040 Speaker 4: that high prices are eroding their personal finances. And it's 58 00:02:56,080 --> 00:02:59,160 Speaker 4: been that way for quite some time, and so consumers 59 00:02:59,160 --> 00:03:02,680 Speaker 4: are really concerned about that. With labor markets, you know, 60 00:03:02,720 --> 00:03:07,040 Speaker 4: consumers are not super concerned about unemployment. They are aware 61 00:03:07,080 --> 00:03:10,079 Speaker 4: that labor markets have been strong for the last couple 62 00:03:10,080 --> 00:03:10,600 Speaker 4: of years. 63 00:03:11,560 --> 00:03:12,760 Speaker 5: They are, you know. 64 00:03:12,680 --> 00:03:15,720 Speaker 4: Watching their incomes very closely, of course, but they aren't 65 00:03:15,720 --> 00:03:17,919 Speaker 4: really afraid of losing their jobs in the year ahead. 66 00:03:18,360 --> 00:03:20,440 Speaker 6: All right, Joan, thank you so much. I really appreciate that. 67 00:03:20,520 --> 00:03:24,280 Speaker 6: Joanne Shu, She's a Surveys of consumer director for the 68 00:03:24,400 --> 00:03:27,400 Speaker 6: University of Michigan's they don't make just good football players 69 00:03:27,400 --> 00:03:29,959 Speaker 6: out there. They make some good economists. It's good economic 70 00:03:30,080 --> 00:03:30,640 Speaker 6: data out there, and. 71 00:03:31,000 --> 00:03:31,600 Speaker 5: They make cars. 72 00:03:31,800 --> 00:03:33,960 Speaker 6: They make cars, but not necessarily at the university. 73 00:03:34,160 --> 00:03:35,200 Speaker 7: Okay, I see the distinction. 74 00:03:35,280 --> 00:03:37,960 Speaker 6: See what you're seeing. So that's all good stuff there. 75 00:03:38,000 --> 00:03:39,800 Speaker 6: So you missed data coming in a little bit weaker 76 00:03:39,840 --> 00:03:40,440 Speaker 6: than expected. 77 00:03:41,960 --> 00:03:45,840 Speaker 2: You're listening to the Bloomberg Intelligence Podcast. Catch us live 78 00:03:45,920 --> 00:03:48,960 Speaker 2: weekdays at ten am Eastern on Apple car Play and 79 00:03:48,960 --> 00:03:51,880 Speaker 2: Android Auto with the Bloomberg Business App. You can also 80 00:03:51,960 --> 00:03:55,160 Speaker 2: listen live on Amazon Alexa from our flagship New York 81 00:03:55,200 --> 00:03:59,560 Speaker 2: station Just say Alexa playing Bloomberg eleven thirty. 82 00:04:00,120 --> 00:04:01,960 Speaker 7: What's really driving here? Are banks? 83 00:04:02,040 --> 00:04:05,000 Speaker 3: I mean JP Morgan having like a tremendous move. Paul, 84 00:04:05,000 --> 00:04:08,000 Speaker 3: you got the KBW bank index also arise in the 85 00:04:08,040 --> 00:04:10,320 Speaker 3: most since December fourteenth. 86 00:04:11,480 --> 00:04:13,520 Speaker 7: You've been talking people on morning. Did you find any 87 00:04:13,560 --> 00:04:14,120 Speaker 7: cracks here? 88 00:04:14,400 --> 00:04:16,800 Speaker 6: Well, I mean, you know, people were on the call 89 00:04:16,880 --> 00:04:19,919 Speaker 6: talking about net interest margines, net interest incoming. Finally, Jamie 90 00:04:19,920 --> 00:04:22,320 Speaker 6: Thymond's like, hey, guys, we put up some great numbers. 91 00:04:22,320 --> 00:04:24,279 Speaker 6: Just lighten up about this, and that's interesting. 92 00:04:24,320 --> 00:04:24,840 Speaker 2: I'm with him. 93 00:04:24,920 --> 00:04:27,920 Speaker 6: I mean, and then I saw the Wells Fargo. Being 94 00:04:27,920 --> 00:04:29,719 Speaker 6: a former investment banker, I go right to the investment 95 00:04:29,760 --> 00:04:32,359 Speaker 6: banking lie man, they killed it, yeah, I don't you know. 96 00:04:32,600 --> 00:04:34,400 Speaker 3: And Rolls Fargo they haven't been able to grow in 97 00:04:34,440 --> 00:04:36,200 Speaker 3: the same way because the asset cap. So if they 98 00:04:36,240 --> 00:04:38,880 Speaker 3: killed it, now, imagine when the cap is finally lifted. 99 00:04:38,880 --> 00:04:39,640 Speaker 3: Someone smiling here. 100 00:04:39,640 --> 00:04:40,520 Speaker 7: And I don't know if that's a good. 101 00:04:40,440 --> 00:04:40,760 Speaker 6: Or bad thing. 102 00:04:40,760 --> 00:04:43,760 Speaker 3: As Alison Williams, Bloomberg Intelligence, Senior Analyst for Global Banks 103 00:04:44,000 --> 00:04:46,680 Speaker 3: and Asset Managers. Allison, what was your biggest takeaway from 104 00:04:46,680 --> 00:04:48,040 Speaker 3: these two guys. 105 00:04:48,040 --> 00:04:50,480 Speaker 8: I mean, things are good, right, and then we got 106 00:04:50,520 --> 00:04:53,159 Speaker 8: the PPI numbers. I think that's also giving a list 107 00:04:53,400 --> 00:04:57,800 Speaker 8: lift to the stocks. You know, JP Morgan is fascinating 108 00:04:57,839 --> 00:05:01,840 Speaker 8: because they you know, beat the interest income. The guidance 109 00:05:01,839 --> 00:05:05,159 Speaker 8: looks better for fourth quarter, but Jamie making him point 110 00:05:05,160 --> 00:05:08,839 Speaker 8: to talk down the interest income guidance for next year, 111 00:05:08,839 --> 00:05:11,279 Speaker 8: and as you pointed out, really just getting annoyed with 112 00:05:11,320 --> 00:05:16,040 Speaker 8: people like focusing so much on every little thing. He 113 00:05:16,080 --> 00:05:19,520 Speaker 8: did make comments about the expenses as we were discussing 114 00:05:19,560 --> 00:05:23,280 Speaker 8: earlier this morning, just pointing out that look expenses are 115 00:05:23,320 --> 00:05:27,919 Speaker 8: investments and investments in the future. But generally, you know, 116 00:05:28,080 --> 00:05:31,919 Speaker 8: showing you know, charge offs coming in better than expected, 117 00:05:32,000 --> 00:05:35,839 Speaker 8: but building the reserve. I think that reflects conservatism. Wells 118 00:05:35,920 --> 00:05:40,680 Speaker 8: Fargo also, you know they're they're actually releasing reserves. So 119 00:05:40,720 --> 00:05:44,159 Speaker 8: what that means is that generally a better economic view 120 00:05:44,200 --> 00:05:46,080 Speaker 8: on a lot of different things. They did build some 121 00:05:46,279 --> 00:05:48,080 Speaker 8: for card and for commercial real estate. 122 00:05:48,240 --> 00:05:50,320 Speaker 6: A right one of the many reasons I am not 123 00:05:50,400 --> 00:05:53,159 Speaker 6: a bank analyst because I focus on all the wrong things. 124 00:05:53,200 --> 00:05:56,800 Speaker 6: Here's my question for Wells Fargo. Wells Fargo's CEO, they've 125 00:05:56,839 --> 00:05:59,800 Speaker 6: refurbished more than four and sixty branches this year. I 126 00:05:59,800 --> 00:06:04,200 Speaker 6: have been in a branch since well before the pandemic. 127 00:06:04,720 --> 00:06:07,159 Speaker 6: I'm like, mister, I got my app I'm cruising on 128 00:06:07,160 --> 00:06:10,000 Speaker 6: my APP. I can do everything. Why are banks still 129 00:06:10,000 --> 00:06:10,520 Speaker 6: have branches? 130 00:06:10,839 --> 00:06:12,440 Speaker 7: They get cash in your pocket, I see you take 131 00:06:12,440 --> 00:06:12,839 Speaker 7: it out. 132 00:06:12,880 --> 00:06:14,840 Speaker 6: Yeah, but I've at four or five hundred bucks because 133 00:06:14,880 --> 00:06:16,080 Speaker 6: you never know when you're going to walk by a 134 00:06:16,080 --> 00:06:20,240 Speaker 6: crap game. So talk to us about branches and how 135 00:06:20,240 --> 00:06:21,920 Speaker 6: they what do they mean for the Wells Fargos and 136 00:06:21,960 --> 00:06:23,240 Speaker 6: the Bank of Americas of the world. 137 00:06:23,600 --> 00:06:26,920 Speaker 8: So banks are still building branches there's two reasons. So 138 00:06:27,040 --> 00:06:30,719 Speaker 8: banks such as like Wells Fargo, Bank of America JP Morgan, 139 00:06:30,760 --> 00:06:33,720 Speaker 8: there is a cap in terms of what you can buy, 140 00:06:33,760 --> 00:06:36,560 Speaker 8: so you have to organically build. So any states that 141 00:06:36,560 --> 00:06:40,000 Speaker 8: they're not in that they think are attractive markets, they 142 00:06:40,000 --> 00:06:42,360 Speaker 8: are building in those markets. But what they have been 143 00:06:42,480 --> 00:06:46,800 Speaker 8: doing is reconfiguring those branches, so focusing. 144 00:06:46,400 --> 00:06:47,360 Speaker 9: More on wealth. 145 00:06:48,000 --> 00:06:51,120 Speaker 8: So the branch may not be that you know, if 146 00:06:51,160 --> 00:06:53,159 Speaker 8: you walked into a branch, you might not recognize it. 147 00:06:53,800 --> 00:06:56,720 Speaker 8: There is a JP Morgan branch in the middle of 148 00:06:56,839 --> 00:07:02,400 Speaker 8: Summit which hasn't changed very much, but but a lot 149 00:07:02,440 --> 00:07:06,440 Speaker 8: of the branches and select markets are just making them smaller, 150 00:07:06,520 --> 00:07:09,640 Speaker 8: more sales focused, focusing more on the wealth management business, 151 00:07:09,680 --> 00:07:12,880 Speaker 8: so not necessarily your your branch of the day of old, 152 00:07:13,000 --> 00:07:16,920 Speaker 8: where the focus was on deposits. Hopefully everyone's doing those 153 00:07:16,960 --> 00:07:21,040 Speaker 8: on their phone because the cost to banks of processing 154 00:07:21,080 --> 00:07:22,520 Speaker 8: those is pennies. 155 00:07:22,160 --> 00:07:22,600 Speaker 1: On the dollar. 156 00:07:22,680 --> 00:07:24,720 Speaker 6: John, you know, you can deposit a check by taking 157 00:07:24,760 --> 00:07:26,480 Speaker 6: a photo of the check and then. 158 00:07:26,360 --> 00:07:28,960 Speaker 7: I actually have done that. But there are things like 159 00:07:29,440 --> 00:07:32,720 Speaker 7: they're doing everything they can to make me go paperless. 160 00:07:32,960 --> 00:07:34,200 Speaker 2: I absolutely refuse. 161 00:07:34,640 --> 00:07:36,560 Speaker 7: Really, I want it to be so much easier. Big 162 00:07:36,600 --> 00:07:37,600 Speaker 7: of a drag. 163 00:07:38,440 --> 00:07:40,120 Speaker 3: And then you wonder why we make you out to 164 00:07:40,160 --> 00:07:41,960 Speaker 3: be a curmudgeon, and we're like, we don't do it, 165 00:07:42,120 --> 00:07:43,120 Speaker 3: you do it to yourself. 166 00:07:43,240 --> 00:07:44,440 Speaker 7: I fully admit it. 167 00:07:45,960 --> 00:07:47,960 Speaker 3: What would be your questions now, so we got to 168 00:07:48,080 --> 00:07:50,640 Speaker 3: this quarter, et cetera, what's your biggest question for JPM 169 00:07:50,720 --> 00:07:51,560 Speaker 3: and for Wells Fargo? 170 00:07:51,840 --> 00:07:54,360 Speaker 8: I mean, when is longerth can you get a little 171 00:07:54,360 --> 00:07:57,640 Speaker 8: bit better? So that is I think one of the 172 00:07:57,640 --> 00:08:00,560 Speaker 8: benefits of interest rate cuts that you're not sartly going 173 00:08:00,600 --> 00:08:04,040 Speaker 8: to see in their projections, right because I think they're 174 00:08:04,080 --> 00:08:06,560 Speaker 8: going to want to see more evidence of that loan demand. 175 00:08:07,440 --> 00:08:10,800 Speaker 8: Card has been really strong, and the reason why we're 176 00:08:10,800 --> 00:08:13,960 Speaker 8: seeing reserves for card is really not we have some 177 00:08:14,360 --> 00:08:17,360 Speaker 8: normalization of credit, but it's really the growth. So when 178 00:08:17,360 --> 00:08:19,560 Speaker 8: are the other areas going to pick up? 179 00:08:20,680 --> 00:08:20,840 Speaker 1: You know? 180 00:08:20,880 --> 00:08:23,640 Speaker 8: The other thing is fees. Fees have been helped by 181 00:08:23,640 --> 00:08:26,160 Speaker 8: the super strong markets, and I think that's if you 182 00:08:26,160 --> 00:08:29,320 Speaker 8: look at Wells Fargo's stock today, Yes, that interesting comes 183 00:08:29,400 --> 00:08:32,920 Speaker 8: softer in the quorder, but next quarter looks fine and 184 00:08:33,120 --> 00:08:36,120 Speaker 8: the markets are doing better. You know, that's that's not 185 00:08:36,160 --> 00:08:39,160 Speaker 8: necessarily a question that management can answer, but it's something 186 00:08:39,200 --> 00:08:41,199 Speaker 8: that we think is going to continue to benefit the bag. 187 00:08:41,480 --> 00:08:43,319 Speaker 6: I have my checking account what Wells fargos, So I 188 00:08:43,320 --> 00:08:45,720 Speaker 6: don't think I'm prepared to ask this question. Explain to 189 00:08:45,800 --> 00:08:49,120 Speaker 6: us what the regulatory and legal issues are still above 190 00:08:49,120 --> 00:08:50,640 Speaker 6: Wells Fargo and when do they hope to get out 191 00:08:50,640 --> 00:08:51,120 Speaker 6: from under that. 192 00:08:51,800 --> 00:08:55,640 Speaker 8: I mean, the so the asset cap is unprecedented. Is 193 00:08:55,720 --> 00:08:59,440 Speaker 8: an asset basically after you know, if we go way 194 00:08:59,440 --> 00:09:03,120 Speaker 8: way back to twenty sixteen, they were they were fined 195 00:09:03,200 --> 00:09:07,080 Speaker 8: for some different sales practices. They had to make some improvements, 196 00:09:07,160 --> 00:09:10,679 Speaker 8: they weren't making them fast enough. So within about a 197 00:09:10,800 --> 00:09:13,719 Speaker 8: year or so, they got this asset CAUP which said, look, 198 00:09:13,760 --> 00:09:16,120 Speaker 8: you're not allowed to grow from where your assets are 199 00:09:16,120 --> 00:09:19,240 Speaker 8: today until you know, you fix the things that we 200 00:09:19,280 --> 00:09:23,000 Speaker 8: want to fix. And that had never happened before, and 201 00:09:23,080 --> 00:09:25,800 Speaker 8: so initially the thought was, oh, this will be a 202 00:09:25,840 --> 00:09:30,560 Speaker 8: few months. So many many years later they are still 203 00:09:30,600 --> 00:09:34,640 Speaker 8: working to fix that. And you know, since then, you know, 204 00:09:34,679 --> 00:09:37,760 Speaker 8: that was a prior CEO. So we had a change 205 00:09:37,760 --> 00:09:39,560 Speaker 8: at the top in terms of management, we had the 206 00:09:39,600 --> 00:09:44,120 Speaker 8: board turnover, We've had tons of processes changing. There was 207 00:09:44,120 --> 00:09:49,000 Speaker 8: a Bloomberg excuse me, a Bloomberg News article recently about 208 00:09:49,360 --> 00:09:52,640 Speaker 8: you know, sending to regulars, all the changes that they've made, 209 00:09:53,679 --> 00:09:57,360 Speaker 8: but at this point it makes less of a difference. 210 00:09:58,200 --> 00:10:01,480 Speaker 8: The Really it really hurt them during the pandemic because 211 00:10:01,480 --> 00:10:05,200 Speaker 8: they were limited in terms of the deposits they could add. 212 00:10:06,000 --> 00:10:09,199 Speaker 8: But it is really about sentiment and flexibility. Should there 213 00:10:09,240 --> 00:10:11,920 Speaker 8: be another big opportunity for them created, they want to 214 00:10:11,960 --> 00:10:13,400 Speaker 8: make sure that they have that flexibility. 215 00:10:13,440 --> 00:10:15,839 Speaker 3: And if you talk to management, they're like, it's it's 216 00:10:15,840 --> 00:10:18,120 Speaker 3: a process, Like they can't give a data or a 217 00:10:18,160 --> 00:10:21,160 Speaker 3: time because it's about transparency and rules. So like when 218 00:10:21,679 --> 00:10:24,000 Speaker 3: they keep making the transparency and rules happen, at some 219 00:10:24,080 --> 00:10:28,920 Speaker 3: point that will be lifted. Thirty seconds. Which bank now 220 00:10:28,960 --> 00:10:31,200 Speaker 3: that is left to report? Do you think does well 221 00:10:31,240 --> 00:10:32,120 Speaker 3: based on these results? 222 00:10:32,720 --> 00:10:36,800 Speaker 8: Gulben Sachs, Golvin Sachs, and Morgan Stanley. So Morgan Stanley 223 00:10:36,880 --> 00:10:40,160 Speaker 8: is more skewed towards the equity's business right They're trading 224 00:10:40,200 --> 00:10:44,840 Speaker 8: has more exposure there equities trading super strong at JP Morgan. 225 00:10:45,600 --> 00:10:47,880 Speaker 8: Those three banks are the top in the business and 226 00:10:47,960 --> 00:10:50,680 Speaker 8: so we expect to see more strength next week. 227 00:10:52,480 --> 00:10:56,360 Speaker 2: You're listening to the Bloomberg Intelligence Podcast. Catch us live 228 00:10:56,440 --> 00:10:59,520 Speaker 2: weekdays at ten am Eastern on Apocarplay and then roud 229 00:10:59,520 --> 00:11:02,800 Speaker 2: Otto with Bloomberg Business app Listen on demand wherever you 230 00:11:02,840 --> 00:11:05,880 Speaker 2: get your podcasts, or watch us live on YouTube. 231 00:11:07,000 --> 00:11:08,480 Speaker 7: So here's a story I don't understand. 232 00:11:08,559 --> 00:11:10,559 Speaker 3: So it's a great story to then talk to Bloomberg 233 00:11:10,600 --> 00:11:13,440 Speaker 3: Intelligence about a TD Bank is going to pay almost 234 00:11:13,440 --> 00:11:16,240 Speaker 3: three point one billion dollars in fines and other penalties 235 00:11:16,360 --> 00:11:19,720 Speaker 3: and face a cap on its US retail banking assets. 236 00:11:20,040 --> 00:11:22,520 Speaker 3: This is after pleading guilty to failing to prevent money 237 00:11:22,600 --> 00:11:25,560 Speaker 3: laundering by drug cartels and other criminals. We got the 238 00:11:25,640 --> 00:11:28,480 Speaker 3: legal side, we got the business equity side for you here. 239 00:11:28,520 --> 00:11:32,240 Speaker 3: Elliot Stein is Bloomberg Intelligence Litigation analyst and Paul Goldberg 240 00:11:32,360 --> 00:11:35,880 Speaker 3: is Bloomberg Intelligence Senior equity analyst. Elliott start with you 241 00:11:36,280 --> 00:11:38,199 Speaker 3: explain to me the legal story here. 242 00:11:38,480 --> 00:11:42,400 Speaker 10: Right, So, yesterday TD Bank became the largest bank in 243 00:11:42,520 --> 00:11:45,360 Speaker 10: US history to plead guilty to money laundry and virations. 244 00:11:45,800 --> 00:11:48,720 Speaker 10: They paid three billion dollars, which is now the most 245 00:11:48,840 --> 00:11:52,120 Speaker 10: any bank has ever paid for money laundry and virations, 246 00:11:52,480 --> 00:11:54,480 Speaker 10: and they are now only the second bank to have 247 00:11:54,520 --> 00:11:58,199 Speaker 10: an asset cap imposed on them, after well as Fargo over. 248 00:11:58,040 --> 00:11:58,640 Speaker 5: Six years ago. 249 00:11:58,679 --> 00:12:01,320 Speaker 10: Although it should be noted that the asset cap on 250 00:12:01,360 --> 00:12:04,520 Speaker 10: TD Bank is only limited to its US retail bank operations, 251 00:12:04,600 --> 00:12:07,120 Speaker 10: so it's sort of a smaller asset cap than one 252 00:12:07,200 --> 00:12:08,040 Speaker 10: imposed on Wills. 253 00:12:08,360 --> 00:12:11,560 Speaker 6: Hey, Paul, how much does this impact what investors kind 254 00:12:11,600 --> 00:12:14,079 Speaker 6: of their view of TD? Three billion dollars is a 255 00:12:14,080 --> 00:12:16,160 Speaker 6: big number, Elliott says, But they got one hundred and 256 00:12:16,160 --> 00:12:18,560 Speaker 6: twenty billion a market cap, So what do you think? 257 00:12:18,640 --> 00:12:22,520 Speaker 9: Yeah, all right, Paul, three billion dollars is not a 258 00:12:22,600 --> 00:12:25,480 Speaker 9: big that big of a deal for them as a bank. 259 00:12:25,520 --> 00:12:30,360 Speaker 9: They have thirteen percent of capital ratio, and they reserved 260 00:12:30,600 --> 00:12:32,600 Speaker 9: most of it for most of it already just shy 261 00:12:32,640 --> 00:12:36,840 Speaker 9: have a few dollars there. The asset cap is a 262 00:12:36,880 --> 00:12:41,120 Speaker 9: bigger issue, and it's going to impede growth the now. 263 00:12:41,240 --> 00:12:44,280 Speaker 9: They gave some ins and outs what they're going to 264 00:12:44,400 --> 00:12:48,840 Speaker 9: do trying to accommodate the new requirements from the regulators. 265 00:12:49,200 --> 00:12:51,640 Speaker 9: They're going to cut their US assets for those retail 266 00:12:51,640 --> 00:12:53,840 Speaker 9: banks by about ten percent. It's going to be an 267 00:12:53,840 --> 00:12:57,479 Speaker 9: additional one and have billion dollar charge. And even excluding 268 00:12:57,559 --> 00:13:00,880 Speaker 9: that charge, some of the actions that we saw when 269 00:13:00,880 --> 00:13:02,920 Speaker 9: we ran the numbers, it could be as much as 270 00:13:02,960 --> 00:13:05,720 Speaker 9: another thirty cents in the earning, So another few percent 271 00:13:05,840 --> 00:13:07,480 Speaker 9: of the earnings are going to get shaved in the 272 00:13:07,520 --> 00:13:09,719 Speaker 9: next year. And how long is it going to take 273 00:13:09,760 --> 00:13:11,600 Speaker 9: to unwind? It's going to take some time. 274 00:13:12,080 --> 00:13:14,640 Speaker 3: This might be a silly question, Elliott, but like what 275 00:13:14,720 --> 00:13:17,160 Speaker 3: was what did they actually do and how they actually 276 00:13:17,160 --> 00:13:17,760 Speaker 3: fixed that. 277 00:13:17,800 --> 00:13:18,240 Speaker 5: Part of it? 278 00:13:18,320 --> 00:13:19,560 Speaker 6: Like who launders money anymore? 279 00:13:19,640 --> 00:13:19,920 Speaker 4: I know? 280 00:13:20,000 --> 00:13:24,040 Speaker 10: Yeah, so the laundering here was by Chinese drug cartels 281 00:13:24,040 --> 00:13:26,400 Speaker 10: and other drug cartels as well. And I think what's 282 00:13:26,480 --> 00:13:31,640 Speaker 10: notable is that TD Bank employees were accepting bribes from 283 00:13:31,640 --> 00:13:36,600 Speaker 10: these cartels. Yeah, Ale a couple of them were indicted previously, 284 00:13:36,679 --> 00:13:38,840 Speaker 10: a couple of TD Bank employees. So I think that's 285 00:13:38,880 --> 00:13:40,680 Speaker 10: what made this sort of a more egregious case because 286 00:13:40,840 --> 00:13:43,720 Speaker 10: you know, usually with banks, you see that their AML 287 00:13:44,040 --> 00:13:49,240 Speaker 10: processes are deficient. Here you have bank employees participating in 288 00:13:49,280 --> 00:13:52,240 Speaker 10: the crimes and that can get imputed to the bank itself, 289 00:13:52,280 --> 00:13:53,600 Speaker 10: and that's what made it the worst case. 290 00:13:53,960 --> 00:13:56,240 Speaker 6: Paul Goldberg, I'm looking at the stock kind of you know, 291 00:13:56,360 --> 00:14:00,600 Speaker 6: flat on the year. What's the call on a bank 292 00:14:00,679 --> 00:14:03,200 Speaker 6: like TD and maybe just Canadian banks in general. 293 00:14:04,880 --> 00:14:07,800 Speaker 9: Canadian banks are sort of sitting at the crossroads. Has 294 00:14:07,960 --> 00:14:11,800 Speaker 9: the Bank of Canada started cutting the interest rates ahead 295 00:14:11,800 --> 00:14:15,960 Speaker 9: of the Federal Reserve. Here they've done three cuts already. 296 00:14:17,040 --> 00:14:20,640 Speaker 9: They kind of sitting in between the two worlds. One 297 00:14:20,800 --> 00:14:24,240 Speaker 9: is the slower growth and risk of actual recession, which 298 00:14:24,320 --> 00:14:27,680 Speaker 9: is kind of minimized at this point, and the other 299 00:14:27,800 --> 00:14:31,560 Speaker 9: one is a profitability. The long growth slowed quite dramatically 300 00:14:31,600 --> 00:14:36,320 Speaker 9: in Canada and somewhat in the US, and their mortgage 301 00:14:36,360 --> 00:14:38,480 Speaker 9: market is a little bit different than the US when 302 00:14:38,520 --> 00:14:42,400 Speaker 9: mortgage is repriced to a higher rate, which exposes consumer 303 00:14:42,480 --> 00:14:45,440 Speaker 9: to a very different risk. And about seventy five percent 304 00:14:45,480 --> 00:14:48,720 Speaker 9: of mortgages overall, and a lot of them that were 305 00:14:48,760 --> 00:14:52,440 Speaker 9: issued at a very low rates during the pandemic due 306 00:14:52,480 --> 00:14:54,600 Speaker 9: to the price in twenty five and twenty six, So 307 00:14:55,120 --> 00:14:57,960 Speaker 9: a lot of what's going on and what might happen. 308 00:14:58,160 --> 00:15:00,560 Speaker 9: People are looking at the Bank of Canada how well 309 00:15:00,600 --> 00:15:05,120 Speaker 9: it can actually prevent that from spilling over into consumer pains. 310 00:15:05,440 --> 00:15:06,920 Speaker 3: So then based on that, when you take a look 311 00:15:06,920 --> 00:15:10,640 Speaker 3: at the stock is down by about over two percent today, 312 00:15:10,800 --> 00:15:12,560 Speaker 3: do we see it was down about six percent? I 313 00:15:12,560 --> 00:15:15,720 Speaker 3: think yesterday. What part of this is reflected in the stock, 314 00:15:15,920 --> 00:15:18,240 Speaker 3: How much of the macro Bank of Canada, and then 315 00:15:18,280 --> 00:15:20,280 Speaker 3: how much of this kind of legal fees, etc. 316 00:15:21,920 --> 00:15:24,080 Speaker 9: So I think the macro has been reflected in the 317 00:15:24,120 --> 00:15:28,240 Speaker 9: stock for quite a while because the relative to Peers 318 00:15:28,280 --> 00:15:32,200 Speaker 9: has been under performing all year, and the story on 319 00:15:32,280 --> 00:15:37,480 Speaker 9: the whole kind of DML story has been around for 320 00:15:37,520 --> 00:15:39,440 Speaker 9: over a year as well, so a lot of been 321 00:15:39,760 --> 00:15:43,040 Speaker 9: reflected as well. I think what people were not really 322 00:15:43,080 --> 00:15:46,000 Speaker 9: expecting is the asset cap. And even though as Elliott said, 323 00:15:46,040 --> 00:15:49,280 Speaker 9: it's only the US retail operations, so the assets of 324 00:15:49,320 --> 00:15:51,640 Speaker 9: those two operations are only about thirty percent of the 325 00:15:51,680 --> 00:15:55,480 Speaker 9: total bank assets, it's still kind of unexpected and that's 326 00:15:55,520 --> 00:16:00,240 Speaker 9: what's pressing the stock. They gave sort of claire in 327 00:16:00,360 --> 00:16:02,520 Speaker 9: what might be the pressure in twenty five, But the 328 00:16:02,640 --> 00:16:04,680 Speaker 9: question is, and this is kind of goes back to 329 00:16:04,720 --> 00:16:07,680 Speaker 9: Wells Fargo where every quarterly poll people are asking when 330 00:16:07,680 --> 00:16:09,320 Speaker 9: they're going to be down with the cap. And we've 331 00:16:09,320 --> 00:16:13,680 Speaker 9: been out there for seven years already, So what's priced 332 00:16:13,720 --> 00:16:17,160 Speaker 9: in there in that respect is kind of hard to tell. 333 00:16:17,360 --> 00:16:21,120 Speaker 6: Hey, Elliet this asset cap, which I just learned about 334 00:16:21,240 --> 00:16:23,320 Speaker 6: like fifteen minutes ago, and Alison Williams explained it to 335 00:16:23,360 --> 00:16:25,080 Speaker 6: me the context to Wells Fargos, and now I think I. 336 00:16:25,040 --> 00:16:26,120 Speaker 2: Know all about it. 337 00:16:26,160 --> 00:16:30,280 Speaker 6: This seems like a real deterrent for regulators to rein 338 00:16:30,360 --> 00:16:35,640 Speaker 6: in banks behavior here. I mean, writing a check is easy, 339 00:16:35,640 --> 00:16:37,720 Speaker 6: they can reserve for it, no big deal. This seems 340 00:16:37,760 --> 00:16:39,120 Speaker 6: like it could really have some tea. 341 00:16:39,240 --> 00:16:41,040 Speaker 10: Yeah, and I think it's sort of a new wave 342 00:16:41,440 --> 00:16:46,520 Speaker 10: of enforcement weapons that regulators are bringing because you did 343 00:16:46,640 --> 00:16:49,360 Speaker 10: have Wells Fargo's asset cap almost seven years ago, but 344 00:16:49,400 --> 00:16:54,880 Speaker 10: more recently we've seen the OCC imposed different business limitations 345 00:16:54,920 --> 00:16:59,640 Speaker 10: on Wells by requiring them to get OCC approval if 346 00:16:59,640 --> 00:17:02,760 Speaker 10: they're going to expand into new products or new markets. 347 00:17:02,400 --> 00:17:05,439 Speaker 10: And we saw that with TD Bank yesterday as well, 348 00:17:05,600 --> 00:17:09,440 Speaker 10: because in addition to the asset cap, if TD's US 349 00:17:09,480 --> 00:17:12,240 Speaker 10: operations want to expand into new markets or open new branches, 350 00:17:12,240 --> 00:17:14,560 Speaker 10: they have to get OCC approval as well. So we're seeing, 351 00:17:15,280 --> 00:17:18,280 Speaker 10: you know, new tools that regulators are using beyond just 352 00:17:18,359 --> 00:17:21,600 Speaker 10: monetary penalties, which you know, critics say, are you know, 353 00:17:21,720 --> 00:17:23,280 Speaker 10: just the cost of doing business. 354 00:17:23,080 --> 00:17:25,679 Speaker 3: Which so for Wells Fargo, part of it is for 355 00:17:25,760 --> 00:17:29,000 Speaker 3: the broader asset cap lift. It's sort of like you know, 356 00:17:29,119 --> 00:17:30,880 Speaker 3: when you see it like it's nothing, you can point 357 00:17:30,920 --> 00:17:32,280 Speaker 3: to that like they're going to fix this and then 358 00:17:32,320 --> 00:17:35,040 Speaker 3: all will be well that that's sort of just transparency 359 00:17:35,160 --> 00:17:36,840 Speaker 3: and rules. They have just clean up and they have 360 00:17:36,880 --> 00:17:40,640 Speaker 3: to do better. What is it for TD It's. 361 00:17:40,440 --> 00:17:42,720 Speaker 10: Similar to what Wells Fargo went through, but you know, 362 00:17:42,800 --> 00:17:46,520 Speaker 10: there's no that that's the problem moments sort of exactly, 363 00:17:46,560 --> 00:17:49,439 Speaker 10: it's up to the OCC. There are steps that the 364 00:17:49,440 --> 00:17:51,159 Speaker 10: bank has to take along the way, right, They have 365 00:17:51,200 --> 00:17:53,600 Speaker 10: to put in the plan that the OCC approves, Then 366 00:17:53,600 --> 00:17:55,080 Speaker 10: they have to implement a plan. Then they have to 367 00:17:55,119 --> 00:17:58,120 Speaker 10: get a third party independent reviewer to sort of sign 368 00:17:58,160 --> 00:18:01,240 Speaker 10: off on it, and then that third part already presents 369 00:18:01,240 --> 00:18:04,320 Speaker 10: it to the OCC, and then the OCC signs off 370 00:18:04,359 --> 00:18:08,560 Speaker 10: on it. But there's no crystal clear moment. It's interesting, yeah, 371 00:18:08,600 --> 00:18:09,439 Speaker 10: where it gets lifted. 372 00:18:09,640 --> 00:18:10,159 Speaker 7: It's interesting. 373 00:18:10,160 --> 00:18:12,560 Speaker 3: Also, it's like, how do you prove that your workers 374 00:18:12,600 --> 00:18:13,800 Speaker 3: are no longer taking bribes? 375 00:18:13,840 --> 00:18:14,320 Speaker 7: Like what is that? 376 00:18:14,800 --> 00:18:14,879 Speaker 4: Like? 377 00:18:14,960 --> 00:18:15,639 Speaker 7: What does that look like? 378 00:18:15,720 --> 00:18:19,000 Speaker 3: Right? No, we promise, Yeah, it's like proving a negative exactly. Guys, 379 00:18:19,040 --> 00:18:20,639 Speaker 3: a really interesting story. We thank you both. That was 380 00:18:20,680 --> 00:18:24,320 Speaker 3: really fun. Elliott Stein, Bloomberg Intelligence Litigation analyst and Paul Goldberg, 381 00:18:24,600 --> 00:18:29,160 Speaker 3: Bloomberg Intelligence Senior equity analyst, talking about TD Bank. 382 00:18:30,760 --> 00:18:34,639 Speaker 2: You're listening to the Bloomberg Intelligence podcast Catch US live 383 00:18:34,720 --> 00:18:38,240 Speaker 2: weekdays at ten am Eastern on applecar Play and Android 384 00:18:38,280 --> 00:18:41,040 Speaker 2: Otto with the Bloomberg Business at You can also listen 385 00:18:41,160 --> 00:18:44,240 Speaker 2: live on Amazon Alexa from our flagship New York station 386 00:18:44,640 --> 00:18:47,399 Speaker 2: Just Say Alexa playing Bloomberg eleven thirty. 387 00:18:49,119 --> 00:18:51,760 Speaker 3: So we had the PPI which seemed pretty benign. You 388 00:18:51,800 --> 00:18:53,719 Speaker 3: have nothing really happening in the front end. Long end 389 00:18:53,720 --> 00:18:56,440 Speaker 3: though still selling off joining us now as Priam isra 390 00:18:56,720 --> 00:19:00,600 Speaker 3: chief fixed income portfolio manager at JP Moore again asset 391 00:19:00,640 --> 00:19:01,679 Speaker 3: management joining us. 392 00:19:01,680 --> 00:19:04,720 Speaker 7: There prea what is going on with the long end? 393 00:19:05,080 --> 00:19:08,199 Speaker 3: Why the selloff? Is there something fundamental? Is it repositioning? 394 00:19:08,520 --> 00:19:09,359 Speaker 3: Is it something else? 395 00:19:10,440 --> 00:19:12,320 Speaker 11: I think it's a combination of a couple of things. 396 00:19:12,320 --> 00:19:14,200 Speaker 5: So we have this really strong jobs report. 397 00:19:14,240 --> 00:19:17,680 Speaker 11: Now I know it's one report, it is subject to revisions, 398 00:19:17,680 --> 00:19:20,480 Speaker 11: but I think the broad based strength of that report 399 00:19:20,880 --> 00:19:24,119 Speaker 11: I think is making the market consider exactly where is 400 00:19:24,200 --> 00:19:26,720 Speaker 11: neutral rate? And I think that neutral rate if you 401 00:19:26,760 --> 00:19:29,199 Speaker 11: were thinking the Feds around two point nine, you know 402 00:19:29,200 --> 00:19:30,960 Speaker 11: what if it's three and a half, what if it's four. 403 00:19:31,000 --> 00:19:32,679 Speaker 11: I think that's part of it. So we saw that 404 00:19:32,720 --> 00:19:36,320 Speaker 11: repricing starting with that report. The other one is we 405 00:19:36,359 --> 00:19:38,760 Speaker 11: have an election in less than a month out and 406 00:19:39,119 --> 00:19:41,919 Speaker 11: I think, you know, we can debate, you know, the 407 00:19:41,920 --> 00:19:46,359 Speaker 11: makeup of Congress, the presidency, but fiscal restraint is not 408 00:19:46,680 --> 00:19:49,240 Speaker 11: something either party is talking about. Even in a divided 409 00:19:49,280 --> 00:19:51,680 Speaker 11: government scenario. I think there's a case to be made 410 00:19:51,760 --> 00:19:54,159 Speaker 11: that the taxes will get extended, a lot of the 411 00:19:54,160 --> 00:19:57,159 Speaker 11: spending will continue. So I think the market is reassessing 412 00:19:57,200 --> 00:20:00,840 Speaker 11: that term premium. You know, now we're not worrying about growth, 413 00:20:01,000 --> 00:20:03,479 Speaker 11: We're worried about what is the outlook after the election, 414 00:20:03,640 --> 00:20:06,800 Speaker 11: and with all this fiscal question mark out there, I 415 00:20:06,840 --> 00:20:10,679 Speaker 11: think we're reassessing how much will the FED cut and 416 00:20:10,720 --> 00:20:13,240 Speaker 11: what should be that term premium? How much more should 417 00:20:13,280 --> 00:20:15,040 Speaker 11: you get paid if you're giving the government money for 418 00:20:15,119 --> 00:20:17,520 Speaker 11: two years versus ten years. And I think it's the 419 00:20:17,600 --> 00:20:20,760 Speaker 11: combination of the two, along with probably some positioning. I 420 00:20:20,760 --> 00:20:24,560 Speaker 11: think market was long given the previous two payroll reports. 421 00:20:24,760 --> 00:20:27,639 Speaker 11: We were long into that payroll report. That's why the 422 00:20:27,680 --> 00:20:30,720 Speaker 11: long end has sold off. I think we're starting to 423 00:20:30,720 --> 00:20:33,520 Speaker 11: see some value, but before the election outcome and before 424 00:20:33,560 --> 00:20:36,359 Speaker 11: realizing what's happening on the fiscal front, I think people 425 00:20:36,400 --> 00:20:38,760 Speaker 11: are going to be nervous to step in and really 426 00:20:38,800 --> 00:20:39,560 Speaker 11: buy the long end. 427 00:20:40,400 --> 00:20:44,280 Speaker 6: All right, pria. In terms of credit, how much credit 428 00:20:44,359 --> 00:20:47,840 Speaker 6: risk do you want to take these days? Because again 429 00:20:47,880 --> 00:20:50,360 Speaker 6: you can sit in a two year treasury you get 430 00:20:50,520 --> 00:20:51,639 Speaker 6: close to four percent. 431 00:20:51,400 --> 00:20:55,199 Speaker 11: Year, right, I think, and credit spreads are tight on 432 00:20:55,320 --> 00:20:58,200 Speaker 11: any historical metric. You could argue I'm not getting paid 433 00:20:58,280 --> 00:20:59,040 Speaker 11: up enough for credit. 434 00:21:00,080 --> 00:21:00,960 Speaker 5: Here's why I'm going to. 435 00:21:00,920 --> 00:21:05,359 Speaker 11: Argue that high quality credit or owning high quality corporate paper, 436 00:21:05,480 --> 00:21:08,399 Speaker 11: even with these tidespreads make sense. So two points on 437 00:21:08,400 --> 00:21:10,320 Speaker 11: that number one you talked about, I can be in 438 00:21:10,359 --> 00:21:13,160 Speaker 11: the very front end and still earn four percent. Well, 439 00:21:13,200 --> 00:21:15,679 Speaker 11: we think the Fed's going to continue to cut. The 440 00:21:15,800 --> 00:21:19,080 Speaker 11: urgency for fifty is clearly not there. But I think 441 00:21:19,119 --> 00:21:22,040 Speaker 11: a gradual pace of twenty five getting close to a 442 00:21:22,160 --> 00:21:24,520 Speaker 11: three or three and a half on FED funds. 443 00:21:24,680 --> 00:21:27,359 Speaker 5: So that front end or money market. 444 00:21:27,160 --> 00:21:30,280 Speaker 11: Yield where you may have it's felt great to be there, 445 00:21:30,600 --> 00:21:33,200 Speaker 11: that yield is going to go down over time. Secondly, 446 00:21:33,200 --> 00:21:35,879 Speaker 11: look at corporate America. I mean we're in a soft landing. 447 00:21:36,000 --> 00:21:38,520 Speaker 11: This is the time when you should be picking up 448 00:21:38,520 --> 00:21:40,840 Speaker 11: a little bit more spread. You have to be careful, 449 00:21:40,880 --> 00:21:43,360 Speaker 11: you know what you're buying. But in the investment greate 450 00:21:43,440 --> 00:21:45,960 Speaker 11: corporate market, I would even go as far as the 451 00:21:46,080 --> 00:21:48,960 Speaker 11: high quality high eyel market, so the double be even 452 00:21:49,040 --> 00:21:52,560 Speaker 11: some single bee look attractive. I mean, look at balance sheets. 453 00:21:52,600 --> 00:21:54,840 Speaker 11: What are companies doing with the debt that they're issuing. 454 00:21:55,000 --> 00:21:57,760 Speaker 11: They are not relevering up. This is not end of 455 00:21:57,840 --> 00:22:03,640 Speaker 11: cycle behavior from corporate America. You know, there has been issuance, 456 00:22:03,680 --> 00:22:06,400 Speaker 11: but there's it's been taken down really well. The issuance 457 00:22:06,480 --> 00:22:08,840 Speaker 11: is all pre funding maturities that are coming up. So 458 00:22:09,080 --> 00:22:12,160 Speaker 11: companies are very smartly trying to push out that maturity wall. 459 00:22:12,560 --> 00:22:14,320 Speaker 11: So I would say, if you're picking up one hundred 460 00:22:14,359 --> 00:22:18,200 Speaker 11: basis points in high quality IG investment grade or two 461 00:22:18,320 --> 00:22:22,520 Speaker 11: hundred in high quality HYGIEL, it makes sense as long 462 00:22:22,560 --> 00:22:24,840 Speaker 11: as we stay in a soft landing, pick up that 463 00:22:24,960 --> 00:22:26,000 Speaker 11: yield and. 464 00:22:26,040 --> 00:22:28,119 Speaker 5: Extend out the curve. You know, maybe thirty years too 465 00:22:28,160 --> 00:22:29,600 Speaker 5: far out. Five year five year. 466 00:22:29,560 --> 00:22:31,879 Speaker 11: Corporate bonds I think make a lot of sense as 467 00:22:31,920 --> 00:22:33,919 Speaker 11: long as we stay in the soft landing and the 468 00:22:34,040 --> 00:22:36,720 Speaker 11: data or FED policy is telling you that the soft 469 00:22:36,800 --> 00:22:38,240 Speaker 11: landing should be our base case. 470 00:22:38,480 --> 00:22:40,280 Speaker 3: It's just so crazy because I feel like in the 471 00:22:40,320 --> 00:22:42,520 Speaker 3: beginning of August it was a growth scare, and then 472 00:22:42,560 --> 00:22:45,480 Speaker 3: it was a soft landing, and now there's some talk 473 00:22:45,520 --> 00:22:48,399 Speaker 3: about are we actually reaccelerating here and the FED is 474 00:22:48,440 --> 00:22:51,520 Speaker 3: going to have to pause now that conversation, like Bostic pointed, 475 00:22:51,600 --> 00:22:55,760 Speaker 3: our Ophil Bostic this week, supported that this is just 476 00:22:55,920 --> 00:22:59,159 Speaker 3: such a weird time, like how do you manage that 477 00:22:59,280 --> 00:23:00,480 Speaker 3: kind of narrative shift? 478 00:23:01,560 --> 00:23:02,840 Speaker 5: I completely hear you, Alex. 479 00:23:02,880 --> 00:23:05,320 Speaker 11: I think the market flips from one narrative to another 480 00:23:05,440 --> 00:23:08,359 Speaker 11: very quickly every data point base. I think part of 481 00:23:08,400 --> 00:23:10,800 Speaker 11: it is the FED keep selling us that they are 482 00:23:10,840 --> 00:23:14,040 Speaker 11: not data point dependent, but there is no forward guidance. 483 00:23:14,640 --> 00:23:17,880 Speaker 11: And we went from pricing in twenty five to fifty 484 00:23:17,960 --> 00:23:21,440 Speaker 11: within a week to now pricing less than twenty five 485 00:23:21,480 --> 00:23:24,520 Speaker 11: at the next meeting. So I think the market's clearly 486 00:23:24,560 --> 00:23:27,360 Speaker 11: treating FED policy as data point dependent. But here's where 487 00:23:27,359 --> 00:23:30,520 Speaker 11: it come boils down to the data is mixed. I 488 00:23:30,520 --> 00:23:32,960 Speaker 11: mean there's some signs of slowing. I think we don't know. 489 00:23:33,080 --> 00:23:34,399 Speaker 11: I think the last time I was on I was 490 00:23:34,400 --> 00:23:37,359 Speaker 11: telling you I don't know if we're slowing to potential 491 00:23:37,480 --> 00:23:39,800 Speaker 11: or below potential. I think we're still in that same 492 00:23:40,280 --> 00:23:42,840 Speaker 11: place before the payroll report. There you could point to 493 00:23:42,880 --> 00:23:44,960 Speaker 11: a couple of data points on the labor market, and 494 00:23:45,000 --> 00:23:46,800 Speaker 11: I think it will come down to the labor market, 495 00:23:46,840 --> 00:23:49,760 Speaker 11: so watch claims. And here's the bad news on this. 496 00:23:49,920 --> 00:23:52,199 Speaker 11: We're not going to have very reliable data in the 497 00:23:52,240 --> 00:23:54,879 Speaker 11: next few months because the impact of the strikes, the 498 00:23:54,880 --> 00:23:57,240 Speaker 11: impact of the hurricanes. So we're going to have to 499 00:23:57,320 --> 00:23:59,920 Speaker 11: look at the totality of data as the FED is doing, 500 00:24:00,359 --> 00:24:03,560 Speaker 11: and then see is it convincingly leading. 501 00:24:03,359 --> 00:24:04,120 Speaker 5: Us one way or the other. 502 00:24:04,160 --> 00:24:07,119 Speaker 11: I think the market's overdoing the moves on boat directions. 503 00:24:07,359 --> 00:24:09,800 Speaker 11: We didn't think a recession was very likely early August. 504 00:24:10,359 --> 00:24:13,159 Speaker 11: I don't buy there's no landing scenario right now. I 505 00:24:13,160 --> 00:24:16,200 Speaker 11: think we're slowing we Here's the thing. Soft landings are rare. 506 00:24:16,320 --> 00:24:18,680 Speaker 11: The FED hasn't really been able to pull it off before, 507 00:24:18,960 --> 00:24:21,960 Speaker 11: so I think it's understandable why the market's skeptical. 508 00:24:22,520 --> 00:24:23,680 Speaker 5: But maybe this is the. 509 00:24:23,600 --> 00:24:27,320 Speaker 11: One time where somehow they're able to cut rates too 510 00:24:27,400 --> 00:24:32,040 Speaker 11: neutral or to whatever is their estimate of economy's estimate 511 00:24:32,080 --> 00:24:34,399 Speaker 11: of neutral at the same time as the economy slows down. 512 00:24:34,400 --> 00:24:36,800 Speaker 11: So perhaps this is the one time where we'll be 513 00:24:36,840 --> 00:24:39,359 Speaker 11: in soft landing. But I think we should be careful 514 00:24:39,400 --> 00:24:41,560 Speaker 11: not to swing from one end to the other end 515 00:24:41,600 --> 00:24:44,120 Speaker 11: the market is and I think that's where we get opportunities. 516 00:24:44,119 --> 00:24:47,240 Speaker 11: I think if the market prices out any more cuts 517 00:24:47,240 --> 00:24:49,480 Speaker 11: in the front end, we'd be looking to buy the 518 00:24:50,200 --> 00:24:52,800 Speaker 11: two years. I don't think the FED stops the easing cycle, 519 00:24:53,200 --> 00:24:55,440 Speaker 11: but the market can certainly run with the narrative in 520 00:24:55,800 --> 00:24:56,399 Speaker 11: one direction. 521 00:24:57,680 --> 00:25:01,080 Speaker 6: Are there any sectors industry sectors that screen well for 522 00:25:01,160 --> 00:25:02,280 Speaker 6: you given that background? 523 00:25:03,520 --> 00:25:03,760 Speaker 5: Sure? 524 00:25:03,800 --> 00:25:07,080 Speaker 11: So there's these growth sectors utilities, for example. It was 525 00:25:07,119 --> 00:25:09,560 Speaker 11: not necessarily I would have said that that's a growth 526 00:25:09,600 --> 00:25:13,120 Speaker 11: sector two years ago, and here we are electrification AI. 527 00:25:13,560 --> 00:25:16,120 Speaker 11: So I think within the investment grade sector, I would 528 00:25:16,119 --> 00:25:20,359 Speaker 11: say utilities make sense. There's areas in communication, in the 529 00:25:20,440 --> 00:25:23,240 Speaker 11: high yields space where we think, you know, the sector 530 00:25:23,280 --> 00:25:25,840 Speaker 11: might have been beaten down a little bit, we think 531 00:25:25,840 --> 00:25:29,919 Speaker 11: there's value there. Financials now, financials have done well, but 532 00:25:29,960 --> 00:25:31,679 Speaker 11: we still think that there's value. I mean, I'm going 533 00:25:31,720 --> 00:25:33,800 Speaker 11: to be looking at the earning and the earning season 534 00:25:33,840 --> 00:25:36,160 Speaker 11: starting out, and we just got the banks. What I'll 535 00:25:36,200 --> 00:25:40,800 Speaker 11: be watching is do margins stay strong, because you know, 536 00:25:40,800 --> 00:25:43,159 Speaker 11: if revenue growth, if the economy is slowing, I mean, 537 00:25:43,720 --> 00:25:46,720 Speaker 11: we may we're likely slowing to trend or just below trend, 538 00:25:46,760 --> 00:25:50,160 Speaker 11: not recession. But if we're slowing and companies have already 539 00:25:50,520 --> 00:25:53,560 Speaker 11: gotten a lot of productivity out of you know what 540 00:25:53,640 --> 00:25:56,240 Speaker 11: they could do to keep costs slow. It's going to 541 00:25:56,320 --> 00:25:58,280 Speaker 11: come down to how much further can they do on 542 00:25:58,320 --> 00:26:01,840 Speaker 11: the productivity side. And so if margins remain strong, I 543 00:26:01,880 --> 00:26:04,160 Speaker 11: think then there's a lot of sectors you can look at. 544 00:26:04,359 --> 00:26:06,280 Speaker 11: I mean there's certain sectors. I think you have to 545 00:26:06,280 --> 00:26:09,840 Speaker 11: look at valuations too. I think many sectors make sense, 546 00:26:10,080 --> 00:26:13,080 Speaker 11: but if the market's already priced that in, we stay 547 00:26:13,119 --> 00:26:15,520 Speaker 11: away from that. Industrials in our view look rich from 548 00:26:15,520 --> 00:26:19,200 Speaker 11: a valuation standpoint, but financials utility is there's a bunch 549 00:26:19,240 --> 00:26:22,480 Speaker 11: of sectors. Securitized credit, I think people look at CMBs 550 00:26:22,520 --> 00:26:26,320 Speaker 11: and get nervous. Commercial real estate we look at single 551 00:26:26,320 --> 00:26:30,200 Speaker 11: family rental housing is still very unaffordable, so people are 552 00:26:30,680 --> 00:26:34,199 Speaker 11: forced into the rental market. You have a job, you're earning, 553 00:26:34,240 --> 00:26:37,360 Speaker 11: you're making your rent payment. That's a sector that makes 554 00:26:37,400 --> 00:26:40,200 Speaker 11: a lot of sense. It's positive cash flow so across 555 00:26:40,240 --> 00:26:42,399 Speaker 11: the Unlike equities, where I think you have to have 556 00:26:42,440 --> 00:26:45,159 Speaker 11: a viewed tech, I think in fixed income it's like 557 00:26:45,200 --> 00:26:46,600 Speaker 11: making me pick between my children. 558 00:26:46,640 --> 00:26:47,359 Speaker 5: It's hard. 559 00:26:47,480 --> 00:26:50,119 Speaker 11: There's opportunities in many sectors. 560 00:26:50,920 --> 00:26:53,280 Speaker 7: We appreciate it. Thank you so very much. We always 561 00:26:53,320 --> 00:26:54,080 Speaker 7: love when you join us. 562 00:26:54,080 --> 00:26:57,639 Speaker 3: Priam Israel joining us at JP Morgan Asset Management. She 563 00:26:57,760 --> 00:26:59,920 Speaker 3: is a fixed income portfolio manager. 564 00:27:01,720 --> 00:27:05,600 Speaker 2: You're listening to the Bloomberg Intelligence podcast. Catch us live 565 00:27:05,680 --> 00:27:09,200 Speaker 2: weekdays at ten am Eastern on applecard Play and Android 566 00:27:09,240 --> 00:27:12,000 Speaker 2: Auto with the Bloomberg Business app. You can also listen 567 00:27:12,119 --> 00:27:15,200 Speaker 2: live on Amazon Alexa from our flagship New York station 568 00:27:15,560 --> 00:27:18,359 Speaker 2: Just Say Alexa playing Bloomberg eleven thirty. 569 00:27:19,520 --> 00:27:21,720 Speaker 6: I'm saying really over the last couple of three years 570 00:27:21,800 --> 00:27:24,159 Speaker 6: that the regulatory hand of the ghost governments got a 571 00:27:24,200 --> 00:27:28,520 Speaker 6: little heavier on the shoulders of big tech companies, and 572 00:27:28,520 --> 00:27:32,240 Speaker 6: that includes our good friends at Google. Jennifer re joins 573 00:27:32,280 --> 00:27:34,960 Speaker 6: us here. She's a senior at litigation analyst for Bloomberg 574 00:27:35,000 --> 00:27:39,120 Speaker 6: Intelligence Alecuit. You rights here. If the US Justice Department 575 00:27:39,160 --> 00:27:42,080 Speaker 6: asks Alphabet's Google to divest part of its business as 576 00:27:42,119 --> 00:27:45,560 Speaker 6: a remedy for illegally maintaining monopolies in general search related 577 00:27:45,640 --> 00:27:49,160 Speaker 6: ad markets, we think the dj will probably fail. Jen, 578 00:27:49,600 --> 00:27:52,200 Speaker 6: what's the thinking behind that? Because there is some increasing 579 00:27:52,240 --> 00:27:55,399 Speaker 6: talk here that the Department of Justice may in fact 580 00:27:55,480 --> 00:27:58,879 Speaker 6: ask for some type of breakup of Alphabet. 581 00:27:59,200 --> 00:28:01,680 Speaker 12: Yeah, and they've suggested that they are going to ask 582 00:28:01,680 --> 00:28:04,119 Speaker 12: for that will find out mid November. But the reason 583 00:28:04,119 --> 00:28:05,800 Speaker 12: why I think this, and I'm sorry because I'm going 584 00:28:05,840 --> 00:28:06,920 Speaker 12: to have to get a little nerdy with you. 585 00:28:07,000 --> 00:28:10,040 Speaker 1: Yeah, bring it all right, get ready. 586 00:28:10,040 --> 00:28:13,119 Speaker 12: Here on this judge has adhered so closely to the 587 00:28:13,160 --> 00:28:17,320 Speaker 12: old Microsoft monopolization decision back in early two thousand, the 588 00:28:17,480 --> 00:28:19,920 Speaker 12: entire litigation, he said, that is his blueprint, and all 589 00:28:19,960 --> 00:28:23,720 Speaker 12: through his decision on liability, he cited Microsoft, Microsoft, Microsoft, 590 00:28:23,800 --> 00:28:27,080 Speaker 12: And what Microsoft says is that the standard for finding 591 00:28:27,080 --> 00:28:29,840 Speaker 12: that the conduct and here it was these default agreements 592 00:28:29,920 --> 00:28:32,719 Speaker 12: that Google had to put Search and all basically all 593 00:28:32,760 --> 00:28:36,720 Speaker 12: the distribution channels right in the Internet. That to find 594 00:28:36,800 --> 00:28:39,840 Speaker 12: liability you just have to find that it's reasonably probable 595 00:28:40,320 --> 00:28:44,080 Speaker 12: that these agreements contributed to maintaining the monopoly, to maintaining 596 00:28:44,120 --> 00:28:47,120 Speaker 12: the monopoly in search. But what Microsoft said is for remedy, 597 00:28:47,320 --> 00:28:50,200 Speaker 12: if you're going to use divestiture, that standard is much higher. 598 00:28:50,360 --> 00:28:52,040 Speaker 12: In other words, you need to kind of have a 599 00:28:52,080 --> 00:28:53,440 Speaker 12: butt four standard. 600 00:28:53,760 --> 00:28:54,360 Speaker 1: You have to be. 601 00:28:54,440 --> 00:28:58,400 Speaker 12: Really certain that but for those agreements, Google wouldn't have 602 00:28:58,480 --> 00:29:00,800 Speaker 12: the position in search it has today. And that this 603 00:29:01,040 --> 00:29:03,280 Speaker 12: judge said over and over that Google got to this 604 00:29:03,360 --> 00:29:07,080 Speaker 12: monopoly position by having a better product, not by behaving badly, 605 00:29:07,160 --> 00:29:10,360 Speaker 12: but by basically innovating and making this great search product 606 00:29:10,360 --> 00:29:12,960 Speaker 12: that people loved. It got to this monopoly position, and 607 00:29:13,040 --> 00:29:15,760 Speaker 12: it was only after it attained that position that it 608 00:29:15,800 --> 00:29:19,200 Speaker 12: behaved badly to maintain that spot. So I think given 609 00:29:19,240 --> 00:29:22,880 Speaker 12: this much higher standard for what's called causation in the 610 00:29:22,920 --> 00:29:25,960 Speaker 12: Microsoft case, and this judge is adherence to Microsoft, he's 611 00:29:26,000 --> 00:29:26,960 Speaker 12: not going to go that far. 612 00:29:27,400 --> 00:29:30,400 Speaker 3: So that was a pretty nerdy assessment, but I kind 613 00:29:30,400 --> 00:29:33,920 Speaker 3: of got that that definitely works for me. What about 614 00:29:33,960 --> 00:29:37,120 Speaker 3: behavioral remedies and and what does that mean? 615 00:29:37,560 --> 00:29:39,280 Speaker 12: Yeah, I think we're going to see quite a lot 616 00:29:39,320 --> 00:29:41,280 Speaker 12: of that because the DJ kind of threw in just 617 00:29:41,320 --> 00:29:45,400 Speaker 12: about everything that's possible here. Behavioral remedies means you can 618 00:29:45,520 --> 00:29:47,360 Speaker 12: or can't. We are going to make you do things 619 00:29:47,480 --> 00:29:50,120 Speaker 12: or tell you can't do things, right, it's just how 620 00:29:50,160 --> 00:29:52,120 Speaker 12: you conduct your business and how we're going to tell 621 00:29:52,160 --> 00:29:54,320 Speaker 12: you you have to conduct your business. So in this case, 622 00:29:54,720 --> 00:29:56,920 Speaker 12: very likely it's going to be Google can't pay Apple 623 00:29:57,280 --> 00:30:00,400 Speaker 12: to insert Google Search as the default behind Safari, can't 624 00:30:00,400 --> 00:30:04,400 Speaker 12: pay the OEMs like Samsung making the Android phones or 625 00:30:04,840 --> 00:30:07,960 Speaker 12: require them as a condition to having Google Play or 626 00:30:08,000 --> 00:30:10,480 Speaker 12: YouTube or some other really desirable app that the OEMs 627 00:30:10,480 --> 00:30:13,600 Speaker 12: want to pre install. You can't condition that access to 628 00:30:13,640 --> 00:30:16,440 Speaker 12: Google Play on also putting Chrome or Search front and 629 00:30:16,480 --> 00:30:19,400 Speaker 12: center and keeping all the other rivals in Browser and 630 00:30:19,440 --> 00:30:20,520 Speaker 12: Search off the phone. 631 00:30:20,680 --> 00:30:21,360 Speaker 1: Things like that. 632 00:30:22,120 --> 00:30:25,560 Speaker 12: Also possibly some data sharing, because what this judge found 633 00:30:25,600 --> 00:30:27,520 Speaker 12: is that over the years, through the volume of searches 634 00:30:27,600 --> 00:30:30,800 Speaker 12: Google had, they had the scale to developing become better, 635 00:30:31,080 --> 00:30:32,960 Speaker 12: whereas bing and Duct, dot Go and some of the 636 00:30:33,000 --> 00:30:36,240 Speaker 12: other new rivals didn't have that scale and couldn't improve. 637 00:30:36,600 --> 00:30:38,680 Speaker 12: And that data is super important, as well as the 638 00:30:38,720 --> 00:30:40,800 Speaker 12: indexing of the web and the crawling of the web 639 00:30:40,800 --> 00:30:43,480 Speaker 12: and all of everything Google did to create this great 640 00:30:43,520 --> 00:30:45,440 Speaker 12: search engine. So Google may have to share some of 641 00:30:45,440 --> 00:30:47,720 Speaker 12: that data with some of these search rivals to help 642 00:30:47,760 --> 00:30:50,160 Speaker 12: them try to get better timing. 643 00:30:50,880 --> 00:30:52,880 Speaker 6: I know, you guys bill by the hour, so timing 644 00:30:52,920 --> 00:30:56,400 Speaker 6: is very important. I just think just screams appeals and 645 00:30:56,640 --> 00:30:58,200 Speaker 6: years and years and years. But give us a sense 646 00:30:58,200 --> 00:30:59,480 Speaker 6: of how you think the timing might play out. 647 00:30:59,560 --> 00:31:00,800 Speaker 1: This is going to take a long time. 648 00:31:01,000 --> 00:31:03,280 Speaker 12: I mean, I don't think we see any real impact 649 00:31:03,280 --> 00:31:06,200 Speaker 12: on Google soon, So the final remedies won't be decided 650 00:31:06,240 --> 00:31:08,000 Speaker 12: till August, so we have a long time before we 651 00:31:08,120 --> 00:31:10,440 Speaker 12: even know what the judge orders. At that point, Google 652 00:31:10,480 --> 00:31:13,320 Speaker 12: will be able to appeal. They will appeal, they've already 653 00:31:13,360 --> 00:31:15,680 Speaker 12: said so. And what they'll do is ask for a 654 00:31:15,720 --> 00:31:17,840 Speaker 12: stay of this injunction. In other words, just freeze it 655 00:31:17,840 --> 00:31:20,440 Speaker 12: in place pending our appeal. We don't have to do anything, 656 00:31:20,520 --> 00:31:23,280 Speaker 12: We don't have to change anything. Usually a company does 657 00:31:23,320 --> 00:31:25,200 Speaker 12: win that kind of thing, right, If we look at 658 00:31:25,240 --> 00:31:27,640 Speaker 12: Epic Games versus Apple, where Apple lost on just a 659 00:31:27,720 --> 00:31:30,480 Speaker 12: very slim piece of that case, and there was a 660 00:31:30,680 --> 00:31:33,480 Speaker 12: limited injunction that got stayed for two and almost two 661 00:31:33,480 --> 00:31:35,720 Speaker 12: and a half years. So it was issued in September 662 00:31:35,800 --> 00:31:38,800 Speaker 12: twenty twenty one, didn't go into effect until this past January, 663 00:31:39,360 --> 00:31:41,600 Speaker 12: so it was a long time before Apple had to 664 00:31:41,600 --> 00:31:43,120 Speaker 12: do anything. And I think we're going to see the 665 00:31:43,120 --> 00:31:43,760 Speaker 12: same thing here. 666 00:31:43,960 --> 00:31:47,280 Speaker 3: Does this ruling change if someone else is in the 667 00:31:47,280 --> 00:31:48,960 Speaker 3: White House, I mean, even if it's a President Harris 668 00:31:49,000 --> 00:31:50,720 Speaker 3: and she takes a different approach to this kind of stuff, 669 00:31:50,760 --> 00:31:51,600 Speaker 3: Does this change? 670 00:31:51,800 --> 00:31:54,920 Speaker 12: No, It's absolutely a possibility. Now I tend to doubt it, 671 00:31:54,960 --> 00:31:58,280 Speaker 12: but it is a possibility because we will have different 672 00:31:58,320 --> 00:32:01,800 Speaker 12: peak decision makers of the DOJ very likely, and those 673 00:32:01,840 --> 00:32:05,200 Speaker 12: different decision makers could just decide to discuss settlement. This 674 00:32:05,280 --> 00:32:08,240 Speaker 12: is exactly what happened in the Microsoft case. After Microsoft 675 00:32:08,480 --> 00:32:10,920 Speaker 12: partially one on appeal, but at least the order by 676 00:32:10,920 --> 00:32:13,400 Speaker 12: a trial court in that case to break up Microsoft 677 00:32:13,480 --> 00:32:17,000 Speaker 12: was reversed on appeal, and later we had a new 678 00:32:17,000 --> 00:32:20,680 Speaker 12: administration George W. Bush, and the case settled. It's possible. 679 00:32:20,800 --> 00:32:24,200 Speaker 12: We have heard from former President Trump and JD. 680 00:32:24,320 --> 00:32:26,160 Speaker 1: Vans. They're both not a friend to Google. 681 00:32:26,320 --> 00:32:28,640 Speaker 3: They've been pretty It's like this is like maybe one 682 00:32:28,680 --> 00:32:31,080 Speaker 3: area where both sides actually weirdly agree, but they won't 683 00:32:31,120 --> 00:32:31,440 Speaker 3: say it. 684 00:32:31,800 --> 00:32:32,520 Speaker 1: I think that's right. 685 00:32:32,560 --> 00:32:34,000 Speaker 12: They won't really say it, but I do think they 686 00:32:34,000 --> 00:32:36,400 Speaker 12: weirdly agree, And I don't really think such a high 687 00:32:36,440 --> 00:32:38,160 Speaker 12: profile case that either one of them are going to 688 00:32:38,200 --> 00:32:40,840 Speaker 12: back off and have some slap on the wrist settlement. 689 00:32:41,720 --> 00:32:43,840 Speaker 6: Remind us what else does Google have out there that 690 00:32:44,160 --> 00:32:46,160 Speaker 6: would interest you? 691 00:32:46,800 --> 00:32:49,320 Speaker 12: So we have the ad tech case too, different markets. 692 00:32:49,400 --> 00:32:52,160 Speaker 12: This is the ad tech stack, right demand side and 693 00:32:53,000 --> 00:32:56,200 Speaker 12: sell side options for publishers and advertisers to come together 694 00:32:56,280 --> 00:33:00,400 Speaker 12: and sell advertising on the Internet. And that trial extended 695 00:33:00,600 --> 00:33:03,440 Speaker 12: at the end of September and that is moving really fast. 696 00:33:03,520 --> 00:33:05,360 Speaker 12: So the weird thing here, Paul is we could have 697 00:33:05,400 --> 00:33:07,560 Speaker 12: a decision and a remedy in that case before we 698 00:33:07,600 --> 00:33:10,000 Speaker 12: have one in the Search case. So you know, it's 699 00:33:10,080 --> 00:33:12,840 Speaker 12: very which a year ago, September, a year ago finished up. 700 00:33:14,640 --> 00:33:17,200 Speaker 12: My colleagues's been following that, and he does also think 701 00:33:17,240 --> 00:33:19,680 Speaker 12: there will be a ruling against the DJ on liability. 702 00:33:19,920 --> 00:33:22,080 Speaker 12: But just like I see the Search case, he doesn't 703 00:33:22,120 --> 00:33:25,360 Speaker 12: see the remedy ultimately being a divestiture or some forced 704 00:33:25,360 --> 00:33:27,320 Speaker 12: sale of let's say Double Click, which is part of 705 00:33:27,360 --> 00:33:29,960 Speaker 12: the Google ad stack business. 706 00:33:31,360 --> 00:33:32,280 Speaker 1: So we have that. 707 00:33:32,560 --> 00:33:35,120 Speaker 12: Europe is also looking at Google obviously, they're looking at 708 00:33:35,160 --> 00:33:36,360 Speaker 12: the tech stack as well. 709 00:33:36,600 --> 00:33:37,920 Speaker 1: They've talked about a breakup. 710 00:33:38,240 --> 00:33:40,960 Speaker 12: I'd be surprised if Europe went that far, if the 711 00:33:41,040 --> 00:33:44,520 Speaker 12: United States courts don't go that far. But you know, 712 00:33:44,640 --> 00:33:47,480 Speaker 12: Europe has a tendency to impose really really big fines 713 00:33:47,960 --> 00:33:50,280 Speaker 12: and we've seen that, so that could still happen down 714 00:33:50,280 --> 00:33:50,640 Speaker 12: the road. 715 00:33:51,480 --> 00:33:51,920 Speaker 3: Interesting. 716 00:33:51,960 --> 00:33:54,720 Speaker 6: Boy, this Lena Kaye person was FTC. 717 00:33:56,120 --> 00:33:56,720 Speaker 7: But different from. 718 00:33:58,400 --> 00:34:02,400 Speaker 6: But she's all out there. Yeah she's very aggressive, correct. 719 00:34:02,160 --> 00:34:05,200 Speaker 1: I mean, yes, very aggressive, especially in merger challenges. 720 00:34:05,480 --> 00:34:05,680 Speaker 2: Yeah. 721 00:34:05,760 --> 00:34:09,000 Speaker 12: Yeah, DJ has been less aggressive in the merger challenge side. 722 00:34:09,640 --> 00:34:12,920 Speaker 12: She has her monopolization cases against Amazon and Meta still pending, 723 00:34:13,320 --> 00:34:14,920 Speaker 12: but a lot of merger challenges. 724 00:34:15,040 --> 00:34:17,600 Speaker 7: Yeah, you have to wonder does that like continue too. 725 00:34:17,719 --> 00:34:20,880 Speaker 3: I mean in that even if she's not had the FTC, 726 00:34:21,560 --> 00:34:23,239 Speaker 3: when we wind up getting a new president, like say 727 00:34:23,320 --> 00:34:27,799 Speaker 3: President Harris, Yeah, it takes the Is this still a 728 00:34:27,840 --> 00:34:29,920 Speaker 3: sea change in how we look at anti trust? Still 729 00:34:29,920 --> 00:34:31,320 Speaker 3: a sea change of how we look at M and 730 00:34:31,400 --> 00:34:33,960 Speaker 3: A versus a one off, which I think could be something. 731 00:34:34,080 --> 00:34:35,160 Speaker 1: I think there's a change. 732 00:34:35,239 --> 00:34:37,200 Speaker 12: I don't see us going back to where we were 733 00:34:37,239 --> 00:34:39,040 Speaker 12: five years ago, when it was kind of assumed the 734 00:34:39,120 --> 00:34:41,959 Speaker 12: most problematic deals would settle with remedy. I just don't 735 00:34:41,960 --> 00:34:44,720 Speaker 12: see us going back to that. I think more aggressive 736 00:34:44,719 --> 00:34:47,799 Speaker 12: anti trustforcement has taken root, and I think it's here. 737 00:34:48,000 --> 00:34:51,080 Speaker 12: Could there be some easing a little bit of less rigidity, Yes, 738 00:34:51,200 --> 00:34:52,200 Speaker 12: I think that's possible. 739 00:34:52,320 --> 00:34:56,839 Speaker 2: This is the Bloomberg Intelligence podcast, available on Apples, Spotify, 740 00:34:57,040 --> 00:35:00,239 Speaker 2: and anywhere else you get your podcasts. Listen by each 741 00:35:00,280 --> 00:35:03,759 Speaker 2: weekday ten am toanoon Eastern on Bloomberg dot com, the 742 00:35:03,920 --> 00:35:07,359 Speaker 2: iHeartRadio app, tune In, and the Bloomberg Business app. You 743 00:35:07,360 --> 00:35:10,560 Speaker 2: can also watch us live every weekday on YouTube and 744 00:35:10,719 --> 00:35:12,320 Speaker 2: always on the Bloomberg Terminal