WEBVTT - BI Weekend: US Banks, Domino’s, LVMH Earnings 0:00:00.280 --> 0:00:11.480 Bloomberg Audio, Studios, podcasts, radio news. This is Bloomberg Intelligence 0:00:11.560 --> 0:00:13.640 with Scarletfoo and Paul Sweeney. 0:00:13.720 --> 0:00:15.840 How do you think the FED is looking at tariffs? 0:00:15.960 --> 0:00:17.160 The uncertainty of terriffs. 0:00:17.280 --> 0:00:19.680 Let's take a look at the sectors and how they performed. 0:00:19.760 --> 0:00:22.760 A lot of investors getting whipsaled every day by news events. 0:00:22.520 --> 0:00:26.239 Breaking market headlines and corporate news from across the globe. 0:00:26.280 --> 0:00:28.880 Could we see a market disruption of market events? 0:00:28.960 --> 0:00:30.960 So people just too exuberant out there? 0:00:31.120 --> 0:00:33.640 You see some so called low quality stocks driving this 0:00:33.760 --> 0:00:34.520 short term rally. 0:00:34.560 --> 0:00:40.040 Bloomberg Intelligence with Scarletfoo and Paul Sweeney on Bloomberg Radio, YouTube, 0:00:40.080 --> 0:00:41.440 and Bloomberg Originals. 0:00:42.520 --> 0:00:44.800 On today's Bloomberg Intelligence Show, we dig inside the big 0:00:44.840 --> 0:00:47.120 business stories impacting Wall Street and the global markets. 0:00:47.159 --> 0:00:49.239 Each and every week, we provide in depth research and 0:00:49.320 --> 0:00:51.199 data on some of the two thousand companies and one 0:00:51.280 --> 0:00:54.000 hundred and thirty industries that are analysts cover worldwide. 0:00:54.040 --> 0:00:56.440 Today, we'll look at why Wall Street's Vegas Banks report 0:00:56.520 --> 0:01:00.240 quarterly earnings that surpassed almost all analyst expectations. 0:00:59.600 --> 0:01:02.040 Plus look at how the tech company Oracle will commit 0:01:02.080 --> 0:01:04.039 to the widespread use of AMD chips. 0:01:04.160 --> 0:01:06.000 But first, We begin with some big news in the 0:01:06.040 --> 0:01:07.200 tech sector because. 0:01:06.920 --> 0:01:10.240 This week the AI research and development company OpenAI signed 0:01:10.280 --> 0:01:13.480 a multi year agreement with Broadcom. It is to collaborate 0:01:13.480 --> 0:01:15.640 on custom chips and networking equipment. 0:01:15.880 --> 0:01:18.199 The plan is to add ten gigawats worth of AI 0:01:18.319 --> 0:01:21.520 data center capacity, with the companies beginning to deploy racks 0:01:21.520 --> 0:01:23.920 of service containing the gear in twenty twenty six. 0:01:24.160 --> 0:01:27.560 OpenAI will design the hardware and work with Broadcom to develop. 0:01:27.280 --> 0:01:29.959 It for more. We were joined by mandeep Seeing Bloomberg Intelligence, 0:01:30.000 --> 0:01:33.040 senior tech industry analyst. You first asked man Deep, first 0:01:33.080 --> 0:01:34.320 take on the latest deal. 0:01:34.600 --> 0:01:39.720 Look, OpenAI is going after heading as much compute capacity 0:01:39.760 --> 0:01:43.840 as they can, and they did. First ten gigawatts with Nvidia, 0:01:44.120 --> 0:01:48.760 six gigawatts with AMD, and now ten gigawats with Broadcom. 0:01:48.800 --> 0:01:53.120 And the difference here is with Broadcom they get to 0:01:53.400 --> 0:01:57.280 use their own chips. Nvidia and AMD are what we 0:01:57.360 --> 0:02:01.720 call merchant silicon. I mean that's basically generalized chips where 0:02:01.800 --> 0:02:05.400 you can deploy the workload you want, whether it's from 0:02:05.440 --> 0:02:08.919 OpenAI or Microsoft or any other vendor. In the case 0:02:08.960 --> 0:02:12.679 of custom silicon, which is what Broadcom does, a company 0:02:12.919 --> 0:02:17.840 like open AI or Google. Google makes up almost you know, 0:02:18.000 --> 0:02:22.200 fifty percent plus of Broadcom's AI revenue. So Google has 0:02:22.240 --> 0:02:26.760 their chip called TPUs. They use it for everything run 0:02:27.120 --> 0:02:31.239 on Google's platform, whether it's YouTube, whether it's AI, whether 0:02:31.320 --> 0:02:35.560 it's cloud. Everything inside Google's run on their TPU. So 0:02:36.080 --> 0:02:40.080 OpenAI's strategy here is to use an approach which is 0:02:40.120 --> 0:02:43.400 similar to Google TPUs because it saves you a lot 0:02:43.400 --> 0:02:47.200 of money. I mean, imagine, an Nvidia AI chip costs 0:02:47.200 --> 0:02:52.320 you thirty grand. A custom silicon that Broadcom is making 0:02:52.360 --> 0:02:57.080 for Google costs you six grand. That's the cost differential 0:02:57.120 --> 0:03:01.760 we are talking about. And it's not because has to 0:03:01.840 --> 0:03:04.000 spend thirty grand to make that chip. They have a 0:03:04.080 --> 0:03:06.720 seventy five percent gross margin on the chip that they're 0:03:06.760 --> 0:03:09.880 selling to the customer. So Nvidia's cost is also low, 0:03:10.080 --> 0:03:12.920 but they mark up the price of their silicon. Same 0:03:12.919 --> 0:03:15.720 thing with AMD. In the case of Google, they are 0:03:15.760 --> 0:03:18.680 going directly to Broadcom to make that chip at a 0:03:18.720 --> 0:03:21.600 far lower price, and it's for their own use, which 0:03:21.680 --> 0:03:23.560 is why they don't have to pay the markup to 0:03:23.639 --> 0:03:27.400 Nvideo or AMD. And that's why having your custom silicon 0:03:27.480 --> 0:03:31.480 strategy is so good because it really saves you so 0:03:31.600 --> 0:03:34.960 one gigaw with Nvidia silicon would cost you about forty 0:03:35.000 --> 0:03:38.480 to fifty billion. One gigawat with a Broadcom open Ai 0:03:38.600 --> 0:03:42.360 silicon would cost you twenty five to thirty billion. So 0:03:42.400 --> 0:03:44.920 if you're talking about you know, thirty to forty percent 0:03:44.960 --> 0:03:47.720 cost differential, and it's huge, I mean in the context 0:03:47.760 --> 0:03:49.840 of what these guys are trying to do, you know, 0:03:49.880 --> 0:03:51.040 scaled infrastructure. 0:03:51.520 --> 0:03:55.080 In addition to that distinction, there's also no investment or 0:03:55.120 --> 0:03:58.520 stock component to this open Ai Broadcom deal, which makes 0:03:58.520 --> 0:04:01.360 it different from the deal that it struck with Nvidia 0:04:01.520 --> 0:04:04.280 and AMD. So I guess my question is how would 0:04:04.320 --> 0:04:08.640 open Ai finance the purchase or the chips in general? 0:04:08.920 --> 0:04:11.360 That's a great question because right now they have to 0:04:11.400 --> 0:04:14.000 do a lot of financing. It's one thing that's a 0:04:14.120 --> 0:04:17.960 common thread in the Invidia transaction where even though Invidia 0:04:18.040 --> 0:04:21.920 is putting ten billion dollars in open Ai, they still 0:04:21.960 --> 0:04:25.440 have to find the remainder of the money. So if 0:04:25.520 --> 0:04:28.680 you imagine, you know, forty to fifty billion dollars per gigawatt, 0:04:29.520 --> 0:04:34.440 ten gigawatts costume around five hundred billion, Nvidia is only 0:04:34.680 --> 0:04:37.520 investing up two hundred billions, so they still have to 0:04:37.560 --> 0:04:39.960 figure out the remainder of four hundred billion in the 0:04:40.000 --> 0:04:43.080 case of AMD, I mean, yes, they are getting some stock, 0:04:43.520 --> 0:04:46.120 but you still have to figure out the financing for that, 0:04:46.360 --> 0:04:49.359 you know, three hundred billion or so. Here, it's the 0:04:49.400 --> 0:04:53.160 same thing. You need the money. And open eyes bet 0:04:53.240 --> 0:04:56.080 is if we keep ramping up our revenue, that is 0:04:56.120 --> 0:04:58.800 obviously a big source of the funding. We'll do a 0:04:58.800 --> 0:05:01.600 lot of private deals because we already have the buy 0:05:01.680 --> 0:05:06.080 in from these big player whether it's Nvidia or Microsoft 0:05:06.120 --> 0:05:10.960 and other sovereign providers. And I think it's a lot 0:05:11.160 --> 0:05:14.240 of scale game right now, because once we keep hitting 0:05:14.240 --> 0:05:17.240 our milestones, we'll keep raising more money. And that's the 0:05:17.320 --> 0:05:18.920 hope when it comes to open air. 0:05:19.320 --> 0:05:21.960 One name I hadn't heard during all this dance between 0:05:22.000 --> 0:05:25.080 all these tech companies is Apple. Yeah, what's going on there? 0:05:25.320 --> 0:05:27.560 Glaring absence exactly. 0:05:27.600 --> 0:05:29.840 I think that's the right way to frame it. And look, 0:05:29.880 --> 0:05:32.359 at some point, I think they are going to go 0:05:32.520 --> 0:05:36.159 the broadcom route. Out of the three partnerships that Openei 0:05:36.320 --> 0:05:39.960 has had, a company like Apple will never go for 0:05:40.040 --> 0:05:42.200 merchant silicon. I mean, look at what they have done 0:05:42.200 --> 0:05:46.039 in their own devices. It's all custom silicon. And that's 0:05:46.120 --> 0:05:49.279 where if I had to pick a strategy for Apple, 0:05:49.880 --> 0:05:53.560 it will likely be custom Silicon using Broadcom or Marvel 0:05:53.760 --> 0:05:56.680 or one of these asay providers. But the hard thing 0:05:56.760 --> 0:05:59.120 for them is because they have missed out all the 0:05:59.240 --> 0:06:02.360 action in the past last three years, it's so hard 0:06:02.440 --> 0:06:05.000 to catch up. Even if you throw money and you 0:06:05.040 --> 0:06:08.960 know your capex dollars, the time is off the essence, 0:06:09.000 --> 0:06:12.200 and the longer they delay this, I feel either is 0:06:12.240 --> 0:06:16.039 Broadcom or a partnership with Google now that antitrust is behind, 0:06:16.120 --> 0:06:20.279 so they may very well adopt Google's LM across their 0:06:21.279 --> 0:06:25.000 huge That will be huge, But I think you know, 0:06:25.200 --> 0:06:28.440 with the regulatory overhand going away, that could be a 0:06:28.520 --> 0:06:29.599 very likely strategy. 0:06:29.600 --> 0:06:31.960 Apple has a ton of cash. It can't buy its 0:06:32.000 --> 0:06:32.760 way to a solution. 0:06:32.839 --> 0:06:34.680 Here, what do you buy? 0:06:34.800 --> 0:06:38.719 I mean these are all scale players, a broad coom. 0:06:39.040 --> 0:06:41.720 Maybe you could say Marvel is a smaller player, but 0:06:41.800 --> 0:06:44.719 you need the best and chips. That's why everyone is 0:06:44.760 --> 0:06:48.599 buying Nvidia because they have the highest performance per what. 0:06:49.240 --> 0:06:51.960 So you can't really get a second or a third 0:06:51.960 --> 0:06:55.080 player because then you compromise on the performance per what. 0:06:55.520 --> 0:06:58.920 When the biggest constraint out there is power, so you 0:06:58.920 --> 0:07:00.800 know you need the leading later and it comes to 0:07:00.880 --> 0:07:02.040 the chip side of the equation. 0:07:02.760 --> 0:07:05.440 Our thanks to Man Deep Saying, Bloomberg Intelligence senior tech 0:07:05.440 --> 0:07:06.320 industry analysts. 0:07:06.360 --> 0:07:09.400 We moved next to corporate earnings from the pizza chain Dominoes. 0:07:09.800 --> 0:07:12.640 Dominoes reported better than expected third quarter earnings this week. 0:07:12.720 --> 0:07:15.640 They were fueled by demand for promotions and the stuffed 0:07:15.640 --> 0:07:16.680 crust pizza. 0:07:16.360 --> 0:07:18.680 From where we were joined by Michael Haylen, Bloomberg Intelligence 0:07:18.720 --> 0:07:20.320 Senior restaurant and food service analyst. 0:07:20.440 --> 0:07:23.000 We began by asking Michael to break down the latest results. 0:07:23.320 --> 0:07:24.160 It was a great quarter. 0:07:24.240 --> 0:07:26.960 I mean five point two percent same star sales in 0:07:27.040 --> 0:07:30.440 the US, and everyone knows quick service restaurants, you know, 0:07:30.760 --> 0:07:33.760 have been struggling due to low income consumer weakness. 0:07:34.320 --> 0:07:36.320 They did it with stuffed crust pizza. 0:07:36.360 --> 0:07:40.040 They were the only major national pizza chain that did 0:07:40.080 --> 0:07:43.040 not have stuff crust pizza. So they added that to 0:07:43.080 --> 0:07:48.360 the repertoire and this year and that that's boosted sales value. 0:07:48.960 --> 0:07:53.920 This quarter was the best deal ever nine ninety nine 0:07:53.960 --> 0:07:56.360 for any pizza and no matter how many toppings you 0:07:56.400 --> 0:07:59.160 want on it, right, So giving people a discount that 0:07:59.200 --> 0:08:03.200 they really want on an item they really want, and 0:08:03.240 --> 0:08:05.800 then you know DoorDash, George is the first quarter they 0:08:05.840 --> 0:08:09.440 were fully rolled out on door Dash and that has 0:08:09.560 --> 0:08:12.360 really helped them take a chunk of that third party 0:08:12.920 --> 0:08:16.360 delivery aggregator business, boosting same source sales. 0:08:16.560 --> 0:08:20.080 Okay, that all makes sense, but is that sustainable, especially 0:08:20.160 --> 0:08:23.680 the promotions like nine ninety nine, which definitely sound appealing 0:08:23.720 --> 0:08:26.080 in this day and age. I mean, these campaigns might 0:08:26.200 --> 0:08:30.400 drive volume, but at some point don't they erode profitability? 0:08:30.480 --> 0:08:30.680 Well? 0:08:30.920 --> 0:08:33.920 I think you know what we saw was margins were flat, 0:08:34.000 --> 0:08:38.719 you know, so to your point, you know, but what 0:08:38.760 --> 0:08:41.960 Madgeman said and what they're right about is that you know, 0:08:41.800 --> 0:08:44.760 you don't take margin to the bank, you take dollars 0:08:44.760 --> 0:08:45.319 to the bank. 0:08:45.400 --> 0:08:45.600 Right. 0:08:45.640 --> 0:08:47.680 And so they did this nine ninety nine deal and 0:08:47.679 --> 0:08:50.679 they actually ran it longer than expected because franchises were 0:08:50.679 --> 0:08:54.640 making so much money off of it, right, And so yeah, 0:08:54.679 --> 0:08:57.760 they're willing to sacrifice a little bit of margin expansion 0:08:57.840 --> 0:09:02.520 here for that track because it's making franchisees happy and 0:09:02.600 --> 0:09:06.440 that's the key when running, when being a franchise or so, yeah, 0:09:06.559 --> 0:09:08.480 I think this is sustainable, right. 0:09:08.360 --> 0:09:08.840 They are. 0:09:09.160 --> 0:09:12.600 They have only a fraction of the third party delivery business, right, 0:09:12.600 --> 0:09:14.560 but they have a third of the pizza market in 0:09:14.600 --> 0:09:19.320 the US. So that's a huge slug of business that 0:09:19.440 --> 0:09:21.600 we think is a great opportunity that's going to continue 0:09:21.640 --> 0:09:23.760 to build over time. You know, Uber Eats, it took 0:09:23.800 --> 0:09:26.880 them quite some time to build some momentum there. This 0:09:27.040 --> 0:09:30.360 was just the first quarter of being fully rolled out 0:09:30.360 --> 0:09:32.360 on door dash, So we think it's going to have 0:09:32.400 --> 0:09:36.200 a big impact over the next three quarters. But it 0:09:36.280 --> 0:09:39.280 sounds like it can continue to build stuff Cruss Pizza, right, 0:09:39.320 --> 0:09:41.520 this is something that's a permanent menu item. This is 0:09:41.559 --> 0:09:45.000 not something that is you know, just a limited time 0:09:45.040 --> 0:09:47.280 offer that's going to be run for a few weeks, right. 0:09:47.480 --> 0:09:49.720 And then value, they have a bunch of different value 0:09:49.760 --> 0:09:54.440 things they do these boost weeks, and they have a 0:09:54.480 --> 0:09:58.880 tip promotion and so they run different value at different times. 0:09:58.920 --> 0:10:01.880 But what they've done has been able to like, you know, 0:10:02.400 --> 0:10:05.800 create a name for themselves and are owning certain type 0:10:05.840 --> 0:10:08.520 of discounts that they run throughout the year. And so 0:10:08.720 --> 0:10:12.439 I think that is important for national pizza players. It's 0:10:12.600 --> 0:10:15.520 it's a business that's heavily weighted towards low income consumers, 0:10:15.559 --> 0:10:18.160 and you know, to my point earlier, they're struggling right now. 0:10:18.240 --> 0:10:21.640 So Mike, explain the economics or explain the strategy of 0:10:22.760 --> 0:10:25.520 using these third party delivery of folks like Uber Eats 0:10:25.600 --> 0:10:28.400 or door dash. What changed for Dominoes, for example? Why 0:10:28.440 --> 0:10:31.520 would they not use them but then make the decision 0:10:31.559 --> 0:10:32.079 to use them. 0:10:33.280 --> 0:10:35.800 Yeah, great question. So you know, at first it was 0:10:35.840 --> 0:10:40.600 really about the cost, right, And you know years ago 0:10:40.840 --> 0:10:45.640 third party delivery companies were charging thirty percent plus Dominos 0:10:47.000 --> 0:10:50.520 number one, they waited till the prices came down. Also, 0:10:50.720 --> 0:10:53.560 their business is really just using the marketplace. They're still 0:10:53.679 --> 0:10:56.959 using their own delivery drivers, right, and so they're able 0:10:57.000 --> 0:11:01.520 to use door dash on for their marketplace and play 0:11:01.559 --> 0:11:06.120 a much much lower vig to the company for the listing, right. 0:11:06.200 --> 0:11:09.959 And so they were the last of all the major 0:11:10.080 --> 0:11:13.720 pizza players and QSR names. They were the final holdout. 0:11:13.760 --> 0:11:15.240 A big part of it was they were just so 0:11:15.400 --> 0:11:17.920 big in delivery and they didn't want to cannibalize the 0:11:18.000 --> 0:11:21.120 margin on that business. But what we're seeing is it 0:11:21.200 --> 0:11:25.200 really dry transactions. This quarter, we saw positive same store 0:11:25.280 --> 0:11:28.240 sales growth with carry out as well as delivery. They 0:11:28.280 --> 0:11:31.600 saw same store sales growth with every income cohort. It 0:11:31.640 --> 0:11:33.400 was a very strong quarter across the board. 0:11:34.080 --> 0:11:35.679 You can count on people to not want to get 0:11:35.720 --> 0:11:38.880 off their couch and always order in, and that's guaranteed 0:11:38.880 --> 0:11:39.240 money made. 0:11:39.320 --> 0:11:41.640 The only offspring that's still on my dole is my 0:11:41.720 --> 0:11:44.640 last guy. He's in college, and he knows he has 0:11:44.760 --> 0:11:47.319 to call me, text me. Does he to get pre 0:11:47.400 --> 0:11:51.040 approval to use any third party deliveries because I hate 0:11:51.080 --> 0:11:51.600 that cost? 0:11:51.920 --> 0:11:54.600 Yeah, I mean, well as Gen xers and older, you know, 0:11:54.720 --> 0:11:57.480 the thought of paying out extra for someone to deliver 0:11:57.520 --> 0:11:58.400 food too is just so. 0:11:58.440 --> 0:11:59.880 I haven't heard from him in like six months. 0:12:00.200 --> 0:12:05.560 That's good progress. So, Michael, is Domino's attracting higher income 0:12:05.600 --> 0:12:08.480 consumers who are perhaps trading down and looking for those 0:12:08.520 --> 0:12:11.120 deals like the nine ninety nine pizza, and I wonder 0:12:11.679 --> 0:12:14.040 how much more market share they can pick up that way. 0:12:15.280 --> 0:12:17.520 Well, same store sales, to your point, did grow with 0:12:17.640 --> 0:12:21.160 higher income consumers. They didn't talk about whether that's a 0:12:21.280 --> 0:12:26.040 trade down naturally, though. You will see that from increasing 0:12:26.120 --> 0:12:29.839 your third party delivery sales, right because those customers tend 0:12:29.920 --> 0:12:32.760 to skew younger and skew more affluent. 0:12:32.880 --> 0:12:34.880 So we do know that's kind of card. 0:12:35.559 --> 0:12:36.840 Yeah, yeah, exactly. 0:12:37.440 --> 0:12:40.319 Thanks to Michael Halen Bloomerg Intelligence Senior restaurant and food 0:12:40.320 --> 0:12:41.160 service analysts. 0:12:41.320 --> 0:12:44.000 Coming up look at how the luxury goods maker LVMH 0:12:44.160 --> 0:12:46.439 unexpectedly returned to sales growth last quarter. 0:12:46.679 --> 0:12:49.319 You're listening to Bloomberg Intelligence on Bloomberg Radio, providing in 0:12:49.360 --> 0:12:51.520 depth research and data on two thousand companies and one 0:12:51.559 --> 0:12:52.640 hundred and thirty industries. 0:12:52.960 --> 0:12:56.079 You can access Bloomberg Intelligence via bi go on the terminal. 0:12:56.160 --> 0:12:57.240 I'm Scarlet Foom. 0:12:57.040 --> 0:12:57.959 And I'm Paul Sweeney. 0:12:58.040 --> 0:12:59.120 This is Bloomberg. 0:13:03.800 --> 0:13:08.319 This is Bloomberg Intelligence with Scarlett Foo and Paul Sweeney 0:13:08.640 --> 0:13:09.960 on Bloomberg Radio. 0:13:10.800 --> 0:13:12.520 Return next to US bank earnings. 0:13:12.679 --> 0:13:15.319 This week, Wall Street's biggest banks reported third quarter earnings 0:13:15.320 --> 0:13:17.520 that surpassed almost all analyst estimates. 0:13:17.720 --> 0:13:20.360 They included Goldman Sachs, Bank of America, Morgan Stanley, JP, 0:13:20.440 --> 0:13:24.000 Morgan Chase, and Wills Fargo. The results were driven by deals, investment, banking, 0:13:24.040 --> 0:13:25.040 and market volatility. 0:13:25.120 --> 0:13:27.440 For a closer look at Bank of America and Morgan Stanley, 0:13:27.480 --> 0:13:30.680 we were joined by Alison Williams, Bloomberg Intelligence, senior analysts 0:13:30.679 --> 0:13:32.200 for global banks and asset managers. 0:13:32.320 --> 0:13:35.559 First asked Alison what she made of Morgan Stanley's quarterly results. 0:13:36.120 --> 0:13:39.120 Obviously, it's a strong environment for equities, especially the third 0:13:39.160 --> 0:13:43.200 quarter was a very strong environment. We hit records multiple times, 0:13:43.240 --> 0:13:46.040 including in the end of September. We had new records 0:13:46.080 --> 0:13:50.360 earlier this quarter. But you know, as we know, when 0:13:50.440 --> 0:13:52.880 you manage a team, when you have that strong environment, 0:13:52.920 --> 0:13:54.800 you want people that are going to take advantage of it. 0:13:54.880 --> 0:14:00.120 And I mean equities trading really jumping. We saw we 0:14:00.120 --> 0:14:03.840 saw strong growth actually at JP Morgan and Morgan Stanley. 0:14:03.920 --> 0:14:07.600 Goldman trailing a bit so, raising maybe some questions about 0:14:07.600 --> 0:14:10.760 what happened there, but also equity fees Morgan Stanley doing well. 0:14:10.800 --> 0:14:11.760 And then the wealth. 0:14:11.520 --> 0:14:15.040 Business, I mean that's really the focus for investors. Those 0:14:15.080 --> 0:14:16.520 flows really strong. 0:14:17.240 --> 0:14:19.560 Yeah, wealth management net revenue of eight point two to 0:14:19.600 --> 0:14:22.560 three billion, it was estimated to increase seven percent to 0:14:22.600 --> 0:14:24.600 seven point seven to eight billion, So that was a big, 0:14:24.640 --> 0:14:26.440 big beat. And this is the part of the business 0:14:26.440 --> 0:14:30.280 that Morgan Stanley has really been focused on to kind 0:14:30.280 --> 0:14:32.600 of separate it from Goldman Sex because this is the 0:14:32.640 --> 0:14:36.520 steady eddy business where it's fee generated, it's recurring, you're 0:14:36.560 --> 0:14:41.000 not dictated by the whims of the market and volatility 0:14:41.080 --> 0:14:42.960 and anything that could happen in any quarter. 0:14:43.040 --> 0:14:43.240 Right. 0:14:43.520 --> 0:14:46.880 So, yeah, So to your point, that wealth and asset 0:14:46.880 --> 0:14:49.840 management tends to be more favored by investors because it 0:14:49.840 --> 0:14:52.280 does tend to be more of a recurring revenue model. 0:14:52.400 --> 0:14:55.240 You know, obviously if the market goes down twenty percent 0:14:55.360 --> 0:14:58.160 or up twenty percent, that has an impact on fees, 0:14:58.560 --> 0:15:02.960 but it's not parable to something like the underwriting or 0:15:03.000 --> 0:15:06.800 the pure transactional business. Recall the pandemic when things completely 0:15:06.840 --> 0:15:10.880 shut down. I mean, granted they recovered, but the fact 0:15:10.920 --> 0:15:15.320 of the matter is like it's less volatility, more recurring revenue. 0:15:15.920 --> 0:15:20.480 Investors like that fee income and they like sort of 0:15:20.480 --> 0:15:23.720 the relative stability of that business. 0:15:24.080 --> 0:15:26.480 So one thing that really jumped out at me, Allison, 0:15:26.520 --> 0:15:28.360 when I was looking at the earnings is the fact 0:15:28.360 --> 0:15:32.520 that all the bank's provision for credit losses Japan, Morgan 0:15:32.600 --> 0:15:35.160 set aside more than what analysts thought it would set aside. 0:15:35.200 --> 0:15:38.840 Golden Sacks set aside less. Morgan Stanley was estimated to 0:15:38.920 --> 0:15:41.200 have set aside ninety seven million. It ended up setting 0:15:41.240 --> 0:15:44.840 aside zero zero for bad losses bad loan losses. What 0:15:44.880 --> 0:15:46.320 does that say they did? 0:15:46.360 --> 0:15:48.800 And I mean for Morgan Stanley, lending is such a 0:15:48.800 --> 0:15:51.920 small part of their business. It's the least out of 0:15:51.960 --> 0:15:53.440 all the banks, So if you're going to see zero, 0:15:53.520 --> 0:15:56.640 you would see it there. But the one question we 0:15:56.720 --> 0:15:58.640 do have, which I think will become clear as we 0:15:58.680 --> 0:16:01.680 see many of the other bank report is you know, 0:16:01.800 --> 0:16:04.280 we're seeing a very strong consumer at these big banks, 0:16:04.680 --> 0:16:07.920 but is there differentiation in terms of the high end 0:16:07.960 --> 0:16:11.440 consumer or lower income consumer? A lot of these banks, 0:16:11.440 --> 0:16:14.280 you know, the focus really is on the higher end consumer. 0:16:14.840 --> 0:16:18.360 JP Morgan. They're despite a lot of the headline figure 0:16:18.560 --> 0:16:21.720 or headlines that came out from Jamie's comments. We look 0:16:21.760 --> 0:16:24.560 at the credit card business and the credit trends in 0:16:24.600 --> 0:16:28.080 that business super strong. Their charge off rate, they actually 0:16:28.160 --> 0:16:32.440 guided it down because they had to because the delinquencies 0:16:32.440 --> 0:16:35.000 are coming in, you know, so much lower. We know 0:16:35.040 --> 0:16:37.920 that JP Morgan really focuses on that Sapphire card, that 0:16:38.000 --> 0:16:41.600 high end card. So they are seeing a strong consumer. 0:16:42.120 --> 0:16:45.120 But will we see something different when we see some 0:16:45.160 --> 0:16:47.160 of the other card companies report. 0:16:47.360 --> 0:16:48.840 You know, when you think about it, the drivers of 0:16:48.880 --> 0:16:52.800 the investment banking business are pretty darn simple. Listen to 0:16:52.960 --> 0:16:56.240 chief executive chief financial Officer Alistair Borthwick. Here's what he 0:16:56.240 --> 0:16:59.120 told analyst on Wednesday. Quote, we've seen more certainty now 0:16:59.160 --> 0:17:02.120 around trade and tear and around taxes as well. It's 0:17:02.160 --> 0:17:05.680 a louder client base to make longer term decisions. That's 0:17:05.720 --> 0:17:08.960 reflected in our investment banking activity. Yeah, it's as simple 0:17:09.000 --> 0:17:12.000 as that, but again it's hard to predict kind of 0:17:12.000 --> 0:17:14.120 what those macro trends are going to be. Switching gears 0:17:14.200 --> 0:17:17.600 to the Bank of America, their bankers did really well, 0:17:18.240 --> 0:17:20.080 not that that's a surprise, but they put us a 0:17:20.119 --> 0:17:20.879 big growth. 0:17:20.640 --> 0:17:23.120 Rate, they did, and you know, to your point, Paul, 0:17:23.200 --> 0:17:26.280 I mean, you've been in this business, right, so the 0:17:26.720 --> 0:17:30.560 having clarity is generally helpful for the investment banking business. 0:17:30.880 --> 0:17:33.800 That's why we did see sort of a fall off midyear. 0:17:34.200 --> 0:17:37.480 But what we've heard from the banks and their bankers 0:17:37.640 --> 0:17:41.000 is that, look, clients are beginning to accept that there 0:17:41.080 --> 0:17:43.119 is some level of uncertainty they'll have to deal with. 0:17:43.200 --> 0:17:46.560 It's not going away necessarily anytime soon. So if you 0:17:46.760 --> 0:17:49.880 need to come to market now, it's probably a good time. 0:17:49.920 --> 0:17:53.520 And by the way, record equity prices fed cutting rates, 0:17:54.040 --> 0:17:56.399 you know, those are also helpful and bringing some of 0:17:56.400 --> 0:17:58.600 those deals to market. Bank of America, by the way, 0:18:00.040 --> 0:18:03.480 talking about their backlog up very strongly for the fourth quarter. 0:18:03.600 --> 0:18:08.200 So this momentum into this next quarter is likely to 0:18:08.240 --> 0:18:10.800 show up again in the in the fourth quarter results. 0:18:11.000 --> 0:18:13.560 So for Bank of America, it feels like investors were 0:18:13.680 --> 0:18:17.879 singularly focused on the net interest income number because it 0:18:17.960 --> 0:18:20.360 had not done so well just a year ago, and 0:18:20.520 --> 0:18:23.160 Bank of America was really focused on improving that. This 0:18:23.280 --> 0:18:25.959 was a big beat on the NII number here and 0:18:26.000 --> 0:18:28.920 they actually guided higher for the fourth quarter. The bank 0:18:29.000 --> 0:18:31.280 is going to hold its first investor day I think 0:18:31.320 --> 0:18:34.479 since twenty eleven next month. How does this set up 0:18:34.480 --> 0:18:36.160 Bank of America for this investor day? 0:18:36.520 --> 0:18:38.439 So I think they are set up well for the 0:18:38.480 --> 0:18:40.879 investor day. And keep in mind investor Day will be 0:18:40.920 --> 0:18:43.400 focused I think on the long term trends. We have 0:18:43.840 --> 0:18:48.400 gotten some management changes, some announcements related to succession planning, 0:18:48.440 --> 0:18:51.000 and I think, you know, Brian moynihan has done a 0:18:51.040 --> 0:18:53.720 great job with the bank. I think the investor day 0:18:53.760 --> 0:18:55.640 is really going to be focused on, you know, what 0:18:55.760 --> 0:19:00.280 is the look forward? And AI is something that we've 0:19:00.280 --> 0:19:02.440 heard a little bit about Bank of America talking about 0:19:02.480 --> 0:19:05.800 that this quarter, Goldman Sachs bringing out their three point 0:19:05.840 --> 0:19:08.879 zero program. Morgan Stanley actually had been talking about that 0:19:08.920 --> 0:19:12.320 with their cuts last year. How is AI going to 0:19:12.359 --> 0:19:17.199 contribute to the structural profitability of Bank of America? You know, 0:19:17.320 --> 0:19:22.640 so cyclical, some very strong trends' quarter structural they've done 0:19:22.640 --> 0:19:25.320 a good job, but what is next for the bank? 0:19:25.600 --> 0:19:27.919 I mean, I just forgot how big Bank of America is, 0:19:27.920 --> 0:19:30.679 and they meet They grew through so many acquisitions, two 0:19:30.800 --> 0:19:33.840 hundred and thirteen thousand employees. It's got a market cap 0:19:33.880 --> 0:19:38.040 of almost four hundred billion dollars. They seem like they've 0:19:38.040 --> 0:19:39.640 got the right mix of assets at this point. 0:19:40.480 --> 0:19:44.280 Yeah, So to your point, they did grow a lot 0:19:44.359 --> 0:19:47.639 through acquisitions under prior managements. And I think you know 0:19:47.800 --> 0:19:50.760 what Brian oinnihan has come in and said was they're 0:19:50.760 --> 0:19:54.159 really going to focus on organic growth. They focused on 0:19:54.160 --> 0:19:58.320 this strategy responsible lending. There's some noise around that when 0:19:58.320 --> 0:20:00.439 times are good, right because everyone said, well, are you 0:20:00.480 --> 0:20:03.920 being too conservative? But then when times are bad, that 0:20:04.080 --> 0:20:06.560 is really helpful to managing the downside. And that's one 0:20:06.600 --> 0:20:09.640 of the things that I think can give investors come 0:20:09.680 --> 0:20:13.680 for as we worry about recession risks in the coming quarters. 0:20:14.240 --> 0:20:17.399 Our thanks to Alison Williams, Bloomberg Intelligence, Senior Analyst for 0:20:17.480 --> 0:20:19.080 Global Banks and Asset managers. 0:20:19.119 --> 0:20:22.240 We move next to earnings from the luxury goods maker LBMH. 0:20:22.400 --> 0:20:25.399 This week, LVMH reported third quarter earnings that beat analyst 0:20:25.480 --> 0:20:29.160 estimates in all five business units after two quarters of declines. 0:20:29.400 --> 0:20:32.000 The rise of revenue and China sales also suggest that 0:20:32.000 --> 0:20:34.240 the slump and luxury demand might be easy. 0:20:34.520 --> 0:20:36.120