WEBVTT - SURVpodcast_07-12-24 0:00:00.080 --> 0:00:07.400 Bloomberg Audio Studios, Podcasts, radio News. 0:00:11.960 --> 0:00:15.560 This is the Bloomberg Surveillance Podcast. I'm Tom Keene along 0:00:15.600 --> 0:00:18.960 with Paul Sweeney. Join us each day for insight from 0:00:18.960 --> 0:00:23.119 the best in economics, finance, investment, and international relations. You 0:00:23.160 --> 0:00:26.520 can also watch the show live on YouTube. Visit the 0:00:26.520 --> 0:00:31.280 Bloomberg Podcast channel on YouTube to see the show weekday 0:00:31.280 --> 0:00:34.320 mornings from seven to ten am Eastern from our global 0:00:34.360 --> 0:00:39.000 headquarters in New York City. Subscribe to the podcast on Apple, Spotify, 0:00:39.360 --> 0:00:42.920 or anywhere else you listen and always I'm Bloomberg Radio, 0:00:43.080 --> 0:00:47.159 the Bloomberg Terminal, and the Bloomberg Business App. All we're 0:00:47.200 --> 0:00:49.120 gonna do is dive into earnings on a Friday. We've 0:00:49.120 --> 0:00:51.360 got three earnings coming out City Group later, which in 0:00:51.400 --> 0:00:54.480 itself will be fascinating. It was a reverse ten for 0:00:54.520 --> 0:00:57.080 when stock split fifteen years ago, and they're still trying 0:00:57.120 --> 0:00:59.720 to figure out to move forward. Wells Fargo with a 0:00:59.800 --> 0:01:03.959 very different platform, always challenged Damiens chomping at the bit 0:01:04.000 --> 0:01:07.000 to ask Allison Williams about that, But I'm gonna start 0:01:07.040 --> 0:01:12.600 with Fortress Diamond. It just keeps continuing, Allison, you have 0:01:12.680 --> 0:01:16.800 lived this. Harrison was running JP Morgan in this young 0:01:17.000 --> 0:01:20.720 Turk Jamie Diamond at Bank one and the Midwest was 0:01:20.760 --> 0:01:23.160 going to come in and save the day, Save the day. 0:01:23.200 --> 0:01:27.320 He's built a juggernaut. Let's start with the JP Morgan distinction. 0:01:27.880 --> 0:01:30.199 Why are they different this Friday morning. 0:01:31.080 --> 0:01:34.640 I think they just continue to reap the benefit of 0:01:34.720 --> 0:01:37.440 their investments. I think one of the things that JP 0:01:37.560 --> 0:01:41.520 Morgan has done is, you know, being willing to spend 0:01:41.520 --> 0:01:43.480 the money. You know, keep in mind, a couple of 0:01:43.560 --> 0:01:45.640 years ago they said, look, we need to invest. We're 0:01:45.680 --> 0:01:49.520 investing in technology. People were very upset about the operating costs. 0:01:49.600 --> 0:01:54.600 But they're proving, and they're proving that those investments are 0:01:54.840 --> 0:01:56.080 yielding results. 0:01:56.520 --> 0:01:59.639 Trading at a twelve thirteen multiple, they're up sixteen percent 0:01:59.640 --> 0:02:02.720 per year for the last ten years. Nobody's even close. 0:02:03.200 --> 0:02:07.360 And I got a headline JP Morgan notch's profit on 0:02:07.680 --> 0:02:10.600 visa gain is at the SaaS summer House north of 0:02:10.720 --> 0:02:12.840 New York City, killing it for Jamie. 0:02:13.000 --> 0:02:15.120 This is how they're paying for all the great things 0:02:15.120 --> 0:02:17.800 that Damien was just referencing. So they had they had 0:02:17.840 --> 0:02:23.200 an eight billion dollar gain related to tendering some visa shares. 0:02:23.240 --> 0:02:27.160 They announced this actually even prior to their investor day. 0:02:27.200 --> 0:02:30.440 So I think for the most part, investors saw this coming. 0:02:30.560 --> 0:02:33.080 But you know, you sometimes you don't know who's watching 0:02:33.160 --> 0:02:36.120 the stock and if they're seeing this extra billion and 0:02:36.240 --> 0:02:38.520 expenses related to that gain, and if there could be 0:02:38.560 --> 0:02:41.280 some negative reaction to that. But we think it's smart. 0:02:41.280 --> 0:02:44.320 So they have this big eight billion dollar gain, they're 0:02:44.360 --> 0:02:47.920 gonna pull forward some of their charitable contributions by you know, 0:02:48.480 --> 0:02:51.400 funding that funding those contributions with shares, So we know 0:02:51.480 --> 0:02:55.720 that that's a great tax advantage. But that is upping 0:02:55.720 --> 0:02:59.320 their costs for the year by a billion, So we 0:02:59.400 --> 0:03:01.520 think that that that's a smart move. I think on 0:03:01.560 --> 0:03:04.640 the more negative side, Wells Fargo guiding up on their 0:03:04.680 --> 0:03:07.639 cost which our investors are not going to be happy about. 0:03:08.360 --> 0:03:11.920 These operating losses or not operating losses as they refer 0:03:12.000 --> 0:03:16.200 to them, the customer remediation costs that relate to the 0:03:16.280 --> 0:03:19.360 ongoing issues the asset cap that have been sort of 0:03:20.280 --> 0:03:22.000 going on since about twenty sixteen. 0:03:22.280 --> 0:03:26.480 I mean, look, Amy, net interest margin, op X, credit quality. 0:03:26.520 --> 0:03:29.240 Who cares? All we care about are banking revenues and 0:03:29.280 --> 0:03:32.440 trading results. Talk to us about fix trading, equity trading. 0:03:32.480 --> 0:03:34.400 I mean it's been a pretty good quarter. No, I mean, 0:03:34.400 --> 0:03:36.720 what's going on at JP Morgan. My man Matty Kolakowski 0:03:36.840 --> 0:03:39.120 and securitized sales over there said he had a big quarter. 0:03:39.200 --> 0:03:39.880 Is he getting paid? 0:03:40.840 --> 0:03:43.200 Well, it is a good quarter. I mean, I think 0:03:43.520 --> 0:03:47.120 there's one of the things that investors are really keying 0:03:47.200 --> 0:03:50.320 on is the investment banking revenue. And perhaps that's just 0:03:50.360 --> 0:03:54.680 because it relates to all of our businesses, because the 0:03:55.080 --> 0:03:59.040 revenue itself, just investment banking is a huge lever for 0:03:59.160 --> 0:04:02.880 JP Morgan, but does help trading, which is a bigger lever. 0:04:03.520 --> 0:04:07.200 And we saw better than expected results two point five 0:04:07.200 --> 0:04:09.560 billion on the investment banking revenue side, and that helped 0:04:09.600 --> 0:04:14.880 fix trading better than expected, equities trading better than expected. Really, 0:04:14.920 --> 0:04:18.000 we're seeing the lift from those strong equity markets as 0:04:18.040 --> 0:04:19.600 well as credit trading on the fixed side. 0:04:19.800 --> 0:04:21.159 So you know, I'm just kidding, right, I mean, it 0:04:21.160 --> 0:04:22.920 does matter, but it matters more for Wells Fargo when 0:04:22.920 --> 0:04:25.120 we're looking at op X and we're looking at fundamentals. 0:04:25.200 --> 0:04:26.920 So talk to us a little bit about why that's 0:04:26.960 --> 0:04:28.719 different there. I mean, this is something that's been going 0:04:28.720 --> 0:04:29.720 on since twenty sixteen. 0:04:29.839 --> 0:04:33.600 No, it's been forever. I mean when we think back 0:04:34.240 --> 0:04:37.400 and they first announced these issues, and you know, for 0:04:37.440 --> 0:04:42.360 those not familiar, there was a fake account scandal. We've 0:04:42.400 --> 0:04:46.400 seen a complete turnover of management. We've seen a couple 0:04:46.480 --> 0:04:49.800 of CEOs, the board's turnover, just years and years of 0:04:49.839 --> 0:04:52.359 trying to get it right. This has never happened to 0:04:52.360 --> 0:04:52.760 a bank. 0:04:52.800 --> 0:04:53.120 This this. 0:04:54.640 --> 0:04:57.960 You know, sort of the regulatory backlash, and so no 0:04:58.000 --> 0:04:59.640 one knows when it's going to end. It just keeps 0:04:59.640 --> 0:05:02.640 getting longer and longer, and we just keep seeing these 0:05:03.120 --> 0:05:05.960 these costs and so we should be getting to the 0:05:06.000 --> 0:05:08.200 tail end of those. But the fact that you know, 0:05:08.240 --> 0:05:10.040 there's two things, so the costs are going to be 0:05:10.320 --> 0:05:13.400 more than expected. The net interest income they've been guiding 0:05:13.480 --> 0:05:16.640 down seven to nine percent, and now they're saying that 0:05:16.680 --> 0:05:19.320 it's going to be on the higher end of that range. 0:05:19.640 --> 0:05:23.120 Some of the banks that have more trading and have 0:05:23.320 --> 0:05:26.200 talked about like there's an impact there kind of goes 0:05:26.240 --> 0:05:28.680 out in the wash with fees. But we're going to 0:05:28.720 --> 0:05:30.800 want to hear more detail from Wells. Why are they 0:05:31.520 --> 0:05:32.320 a little bit more now? 0:05:32.440 --> 0:05:38.279 You brought notes in Friday, we do Bloomberg Surveillance. 0:05:38.520 --> 0:05:42.120 With Alison Williams. Come on prepared Alison. You know, look, 0:05:42.160 --> 0:05:43.800 I mean for me, you know, I'm a fixed income guy, 0:05:43.800 --> 0:05:46.000 and you know, for me, it's about credit quality. And 0:05:46.040 --> 0:05:48.080 you know, I'm curious what are your takeaways here? I mean, 0:05:48.120 --> 0:05:49.800 are they provisioning more? I mean, we're at that tail. 0:05:49.839 --> 0:05:51.719 I mean one would think we're in the eleventh inning 0:05:51.760 --> 0:05:53.800 of this of this of this cycle here in the US. 0:05:53.839 --> 0:05:56.360 I mean, does anything stand out to you in terms 0:05:56.360 --> 0:05:58.840 of credit quality on that end of the equation so far? 0:05:58.920 --> 0:06:01.440 I mean, we haven't done fully into it, but it 0:06:01.480 --> 0:06:04.640 looks like what we had expected, which is we're seeing 0:06:04.720 --> 0:06:07.080 provisions for the credit card business and a lot of 0:06:07.080 --> 0:06:10.640 that just relates to growth. You know, charge offs looked 0:06:10.680 --> 0:06:12.560 like they were in those are kind of today's cause 0:06:12.640 --> 0:06:16.280 they're as expected. But as those portfolios grow, you have 0:06:16.320 --> 0:06:18.680 to reserve for the life of the loan, and cards 0:06:18.720 --> 0:06:20.960 have the highest a loss rate of all the categories. 0:06:20.960 --> 0:06:22.680 As you know, I want to go bigger, broader here. 0:06:22.720 --> 0:06:25.000 Both of you got you know, a lot of experience 0:06:25.080 --> 0:06:26.880 on this, and of course the carnage of the Great 0:06:26.920 --> 0:06:31.000 Financial Crisis and that day where Jamie Diamond brought the 0:06:31.000 --> 0:06:33.480 bear Stearns building for what ten bucks or one buck 0:06:33.560 --> 0:06:39.359 or whatever it was, Allison Williams. JP Morgan has global aspirations. 0:06:40.279 --> 0:06:44.400 Are the governments Allison Williams going to let JP Morgan 0:06:45.000 --> 0:06:48.400 expand and be America's bank abroad. 0:06:49.120 --> 0:06:52.920 I think the key thing from a regulatory standpoint really 0:06:52.960 --> 0:06:56.520 relates to the capital standard. And you know, this is 0:06:56.560 --> 0:06:59.080 something that all the US banks have been complaining a 0:06:59.120 --> 0:07:02.599 little bit about because they look tougher than the implementation 0:07:03.000 --> 0:07:07.160 of some other regions. So after the crisis, BOSEL came 0:07:07.200 --> 0:07:11.160 out with some guidelines. All the different jurisdictions have implemented 0:07:11.200 --> 0:07:14.400 them in their own way, and the US rules are 0:07:14.400 --> 0:07:17.440 pretty tough. You know, we call it gold plating. In 0:07:17.560 --> 0:07:18.120 terms of. 0:07:19.920 --> 0:07:23.040 Five years, do you see JP Morgan dominant in Europe? 0:07:23.840 --> 0:07:27.119 I mean they're pretty strong there now. Exactly, they're pretty 0:07:27.160 --> 0:07:31.360 strong there now. So I think that the most interesting 0:07:31.360 --> 0:07:33.840 thing for JP Morgan on the international front. People don't 0:07:33.840 --> 0:07:36.360 talk a lot about, but they're looking to expand their 0:07:36.360 --> 0:07:39.120 retail presence. They're looking to span their retail presence in 0:07:39.160 --> 0:07:39.840 the UK. 0:07:40.000 --> 0:07:42.920 The digital retail experiment in the United Kingdom work. 0:07:43.120 --> 0:07:46.120 Yes, well, they haven't talked about it a lot, but 0:07:46.840 --> 0:07:48.680 from what we hear, it's been meeting their metrics. 0:07:48.720 --> 0:07:50.480 Ellison, thank you so much. We can't wait for you 0:07:50.520 --> 0:08:03.680 to publish at Bloomberg Intelligence. If you're in the money business, 0:08:03.720 --> 0:08:08.240 there is exactly one Whitney. He is Whitney Tilson. And 0:08:08.280 --> 0:08:11.360 to put things in perspective, we'll sit over a beverage 0:08:11.360 --> 0:08:13.440 of our choice and go, gee, someday I think I'll 0:08:13.440 --> 0:08:16.400 climb kill him in Jarrow. Right, he's actually climb kill 0:08:16.440 --> 0:08:21.160 him in Jarrow. The academics are bulletproof. He's a Baker scholar. 0:08:21.560 --> 0:08:25.080 Which it's like planning for Billy Clearot at Harvard Hockey. 0:08:25.280 --> 0:08:29.600 I mean yeah, it's like a Baker scholar. And he's 0:08:29.640 --> 0:08:33.480 been on fire. The author of Poor Charlie's Almanac, The 0:08:33.480 --> 0:08:37.319 witt and Wisdom of Charles T. Monger, Whitney Tilson has 0:08:37.360 --> 0:08:40.600 been on fire about his Democratic Party. Let me make 0:08:40.679 --> 0:08:45.840 clear he is a supporter of Democratic politics. Whitney, thank 0:08:45.840 --> 0:08:47.600 you so much for joining. You've been a voice of 0:08:47.640 --> 0:08:51.720 sanity for Republicans and Democrats out on Twitter. How'd the 0:08:51.720 --> 0:08:53.040 president do last night? 0:08:55.120 --> 0:08:58.880 Well, let me give you a football analogy. If I 0:08:58.960 --> 0:09:02.040 told you that, hey, your favorite quarterback your favorite team 0:09:02.360 --> 0:09:05.040 just completed a ten yard pass, you'd say great, moves 0:09:05.080 --> 0:09:07.520 the chains one step closer to victory. But what if 0:09:07.559 --> 0:09:11.319 I told you that you're down by fourteen with two 0:09:11.360 --> 0:09:13.360 minutes to play at the fifty yard line, and your 0:09:13.440 --> 0:09:16.640 quarterback has an obviously sprang dannkle if not a broken leg, 0:09:16.880 --> 0:09:18.880 then you'd say, oh my god, that's terrible news that 0:09:18.920 --> 0:09:21.960 we completed a ten yard pass. Because it's a hopeless situation. 0:09:22.080 --> 0:09:24.960 Our only chance of victory is a couple hail Mary passes, 0:09:25.040 --> 0:09:28.680 So completing a ten yard pass actually reduces our chances 0:09:28.679 --> 0:09:31.679 of victory. So I hope that's not too complex of 0:09:31.720 --> 0:09:35.040 an analogy. But Biden was solid last night. Couple little gaffs. 0:09:35.160 --> 0:09:38.400 But the problem is is it did nothing to dispel 0:09:38.720 --> 0:09:42.360 the concerns of eighty percent of American people that he's 0:09:42.480 --> 0:09:46.960 too old for the job, and basically the belief of 0:09:47.120 --> 0:09:50.120 now every single Democrat in Congress that he needs to 0:09:50.120 --> 0:09:52.280 step aside to give us any chance of beating Trump. 0:09:52.280 --> 0:09:56.520 In November, Whitney I observed first and the Kennedy Klan 0:09:56.880 --> 0:10:00.880 at a Democratic invention in Boston garden across at a 0:10:00.960 --> 0:10:04.720 senator from Illinois, a kid from Chicago take the trophy. 0:10:04.960 --> 0:10:09.760 This is when Obama rose to national presidents versus an 0:10:09.840 --> 0:10:14.920 elderly aging Ted Kennedy as well, that dialogue, that tension, 0:10:14.960 --> 0:10:18.720 Whitney Tilson of the Democratic Convention as in Chicago soon 0:10:19.240 --> 0:10:24.960 seems to have evaporated into an elite, almost tribal class. 0:10:25.280 --> 0:10:27.680 Now you're on the edges of that, you're a donor, etc. 0:10:28.520 --> 0:10:32.199 But does your party, and frankly the Republicans, do they 0:10:32.360 --> 0:10:35.160 need to get back to an older and more fractious 0:10:35.600 --> 0:10:36.800 convention process. 0:10:38.760 --> 0:10:43.040 Well, look, I'm what I'm actually looking forward to when 0:10:43.080 --> 0:10:45.480 Biden steps aside, And at this point it's a question 0:10:45.920 --> 0:10:49.400 not of if, but when I think it's now ninety 0:10:49.440 --> 0:10:52.880 five percent likely that he will step aside, And then 0:10:53.400 --> 0:10:56.400 I think it would be a disastrous decision to simply 0:10:56.440 --> 0:11:02.400 anoint Kamala Harris. I'm for supporting her if she earns 0:11:02.440 --> 0:11:05.320 it and can demonstrate that she's got the idea's vision, 0:11:05.760 --> 0:11:08.959 can capture the imagination of the American people and one 0:11:09.160 --> 0:11:12.760 beat Donald Trump and two be a great president. But 0:11:12.880 --> 0:11:15.200 they're also at least it does and if not twenty 0:11:15.240 --> 0:11:18.280 other people whose names are being tossed around, and I 0:11:18.280 --> 0:11:22.360 think there should be an incredibly exciting free for all. Yes, chaotic, 0:11:22.440 --> 0:11:25.080 but it would rivet the attention of the nation, energize 0:11:25.080 --> 0:11:28.199 the Democratic Party, and then in the next five weeks 0:11:28.240 --> 0:11:30.880 going into the convention, hopefully we've narrowed that down and 0:11:30.960 --> 0:11:33.559 what we're looking for. To your point, there is someone 0:11:33.559 --> 0:11:36.400 who catches lightning in a bottle the way Obama did 0:11:37.160 --> 0:11:40.920 and can becomes the clear front runner, can ride that 0:11:41.520 --> 0:11:44.080 to not just I don't want to just beat Donald Trump. 0:11:44.160 --> 0:11:45.680 I want to beat him like a rented mule and 0:11:45.679 --> 0:11:47.880 throw him on the dustbin of history where he belongs. 0:11:48.400 --> 0:11:51.160 So that's what I'm looking for. Now. Maybe we don't 0:11:51.160 --> 0:11:53.800 get that, but right now I think Biden's got a 0:11:53.840 --> 0:11:57.520 fifteen percent chance of beating Trump. If you just told me, hey, 0:11:57.520 --> 0:12:00.120 we can find somebody who gives makes it a jump ball, 0:12:00.160 --> 0:12:04.080 it's fifty to fifty. That's a massive improvement from sticking 0:12:04.080 --> 0:12:07.240 with the You know, I want to switch horses if 0:12:07.280 --> 0:12:09.320 I can shift the odds that much. But maybe we 0:12:09.360 --> 0:12:11.080 can get it up to eighty or ninety percent and 0:12:11.200 --> 0:12:12.120 really beat Trump. 0:12:12.360 --> 0:12:14.680 Well, Waitney Tilts, then what you're suggesting here is that 0:12:14.720 --> 0:12:17.920 the Democratic Party will not go to its backup quarterback. 0:12:17.960 --> 0:12:19.640 I mean, that's interesting. So then what do they do? 0:12:19.640 --> 0:12:21.160 Do they go to the free agency. I mean, do 0:12:21.240 --> 0:12:23.680 they go to tilt, I mean Pritzker, I mean Newsome. 0:12:24.440 --> 0:12:26.440 Who do you suggest here? Who's the favorite? 0:12:27.720 --> 0:12:27.880 You know? 0:12:28.000 --> 0:12:31.840 Honestly, I don't know, and I probably know half of 0:12:31.880 --> 0:12:33.880 the twenty candidates who might throw their hats in the 0:12:33.960 --> 0:12:38.720 ring personally, but all twenty are incredible. The Democrats have 0:12:38.760 --> 0:12:41.560 an incredible bench. So to use a football analogy, again, 0:12:42.080 --> 0:12:44.199 we've got a chance to hit the reset button and 0:12:44.240 --> 0:12:46.679 instead of being down by fourteen with two minutes to play, 0:12:46.760 --> 0:12:48.920 we can start the game all over again. So right there, 0:12:48.960 --> 0:12:52.520 that's great news. Secondly, our quarterback with a broken leg 0:12:52.679 --> 0:12:54.559 is out, so we got to find a new quarterback. 0:12:54.640 --> 0:12:58.160 Now we've got a long time backup, but a lot 0:12:58.200 --> 0:13:01.680 of questions about what there that that backup is the 0:13:01.720 --> 0:13:04.320 best quarterback. So what We've got five weeks to have 0:13:04.360 --> 0:13:06.920 a training camp and we put the word out anyone 0:13:06.960 --> 0:13:09.640 who thinks they can be quarterback of our team come 0:13:09.679 --> 0:13:12.319 to our training camp and we're gonna show us what 0:13:12.360 --> 0:13:15.840 you got. And if Kamala Harris can you know, emerge 0:13:15.920 --> 0:13:19.400 us from that process as that one most likely to 0:13:19.400 --> 0:13:21.600 beat Trump and most likely to beat the Great, the 0:13:21.600 --> 0:13:25.400 Great President, then I'm all in, But she or whoever 0:13:25.440 --> 0:13:27.080 earns that job, they have to earn it. 0:13:27.360 --> 0:13:29.160 Wait, I got to be quick here. It's a huge news. 0:13:29.280 --> 0:13:31.280 I got to get to Michael Barr. You and Michael 0:13:31.360 --> 0:13:36.480 Porter were definitive in studying how to jumpstart inner cities. 0:13:36.760 --> 0:13:41.240 The Democrats are losing black and Hispanic youth to Republicans. 0:13:41.600 --> 0:13:44.839 How does President Bidener, whoever runs, how do they get 0:13:44.880 --> 0:13:48.000 back at the margin black and Hispanic youth. 0:13:49.920 --> 0:13:52.439 Yeah, now it's a good question. At the end of 0:13:52.520 --> 0:13:56.560 the day, I think young and especially young minority voters 0:13:57.080 --> 0:14:02.040 are inclined to vote on the Democratic ticket, but they 0:14:02.080 --> 0:14:05.040 share the same concerns that eighty percent of Americans share 0:14:05.160 --> 0:14:09.320 that you know, a year ago, the majority of voters said, 0:14:09.320 --> 0:14:12.199 we don't like either of these guys. Both. The message 0:14:12.240 --> 0:14:15.280 to both parties was give us somebody fresh and new 0:14:15.320 --> 0:14:17.280 and exciting. We don't like either of these guys. And 0:14:17.320 --> 0:14:21.040 now only one party has the opportunity to deliver on 0:14:21.160 --> 0:14:23.320 to give the American people what they've asked for. So 0:14:23.400 --> 0:14:27.040 I think if we do that, a wide swath of voters, 0:14:27.120 --> 0:14:30.120 not just young and minority voters, are going to vote 0:14:30.120 --> 0:14:32.040 Democrat and carry us to victory. In November. 0:14:32.120 --> 0:14:35.040 Wennie Tilson, thank you so much for joining us today. 0:14:35.160 --> 0:14:39.000 Clearly a democratic donor and supporter of course, legendary with 0:14:39.040 --> 0:14:42.000 a hedge fund work and also is academics out of 0:14:42.040 --> 0:14:50.160 Harvard University. Right now on the equity markets in America. 0:14:50.320 --> 0:14:54.000 Thrilled to bring Cam Dawson new edge wells. She'll be 0:14:54.040 --> 0:14:58.360 spending both Saturday and Sunday at Brooklyn Crab having the 0:14:58.400 --> 0:15:03.240 Crab cakes in Brooklyn. Kim Dawson yesterday was odd. Let's 0:15:03.240 --> 0:15:08.080 not go over the details. Small caps win mag seven hammered. 0:15:08.200 --> 0:15:12.360 Was it nothing more than a constructive adjustment on the 0:15:12.400 --> 0:15:13.040 way higher? 0:15:14.080 --> 0:15:17.720 Well, we do know that positioning got incredibly skewed, where 0:15:18.040 --> 0:15:21.920 hedge funds were very positioned into large caps in tech 0:15:22.040 --> 0:15:25.560 and growth and very underweight and short in small caps. 0:15:25.840 --> 0:15:28.640 So part of this is just a positioning snap and 0:15:28.680 --> 0:15:31.640 then a chase of that short covering. The question is 0:15:31.760 --> 0:15:34.960 can it continue, and that really depends on the path 0:15:35.000 --> 0:15:38.080 of yields. It's good to remember that small caps rally 0:15:38.160 --> 0:15:41.920 twenty percent in November and December last year because the 0:15:41.960 --> 0:15:45.640 tenure yield felled one hundred basis points. If yields can 0:15:45.680 --> 0:15:48.960 continue to fall, small caps likely can continue to rally, 0:15:49.240 --> 0:15:51.600 but maybe it only lasts a month or two because 0:15:51.600 --> 0:15:56.360 there's still profitability issues, balance sheet issues, so a lot remainspeaki. 0:15:55.960 --> 0:15:57.920 Yah, that's great, but the reality is a month or 0:15:57.960 --> 0:15:59.720 two is long term for Damien. 0:16:00.920 --> 0:16:02.400 Well, Cam, you know, talk to me a little bit 0:16:02.400 --> 0:16:04.160 about you know what we just kind of take away 0:16:04.160 --> 0:16:06.160 from this latest CPI print. I mean, are we really 0:16:06.200 --> 0:16:07.960 thinking the Fed's going to move here in September? And 0:16:08.000 --> 0:16:10.000 if it does, what's the dollar going to do off 0:16:10.040 --> 0:16:10.440 the back of that. 0:16:11.400 --> 0:16:13.840 Well, now we got this PPI print this morning that 0:16:13.960 --> 0:16:16.360 came in hotter than expected, So now there's a big 0:16:16.480 --> 0:16:19.840 question mark about where PCEE comes in, which is the 0:16:19.880 --> 0:16:23.760 Fed's preferred inflation metric. So we think that the odds 0:16:23.840 --> 0:16:27.360 of a September hike certainly went up after yesterday's data. 0:16:27.480 --> 0:16:29.960 But if we have a couple more data points that 0:16:30.040 --> 0:16:32.880 look like that PPI, maybe we do get pushed out 0:16:32.920 --> 0:16:36.520 to November. So this is still a very data dependent FED, 0:16:36.720 --> 0:16:40.120 and we could see this kind of saw pattern within 0:16:40.640 --> 0:16:43.560 inflation data, which could keep us kind of in an 0:16:43.640 --> 0:16:44.440 uncertain place. 0:16:44.520 --> 0:16:46.640 Well, Kam, what I'm really asking is September December, it 0:16:46.640 --> 0:16:50.040 doesn't matter. When the FED does eventually cut, what do 0:16:50.120 --> 0:16:52.400 you think the dollar will do? Will it finally start 0:16:52.440 --> 0:16:55.320 to depreciate relative to G ten and EM. 0:16:55.680 --> 0:16:58.320 It certainly seems so, and we saw that in some 0:16:58.400 --> 0:17:01.120 of the price action yesterday of US. The dollar dropped 0:17:01.160 --> 0:17:04.280 a lot, and we saw a perking up of EM stocks. 0:17:04.720 --> 0:17:07.040 And it's still very much in a down trend if 0:17:07.040 --> 0:17:09.320 we look at EM versus S and P five hundred, 0:17:09.680 --> 0:17:12.480 but there is some movement and action there. So if 0:17:12.520 --> 0:17:15.320 there is follow through and the FEED is cutting more 0:17:15.440 --> 0:17:18.440 and being more dubvish than other central banks, then yeah, 0:17:18.440 --> 0:17:20.919 it could set up for a week er dollar. The 0:17:21.040 --> 0:17:23.600 question is, though, if other central banks are having to 0:17:23.760 --> 0:17:26.720 cut further, then the dollar may still be the best 0:17:26.880 --> 0:17:27.639 game in town. 0:17:28.080 --> 0:17:28.280 Kim. 0:17:28.720 --> 0:17:32.040 Yesterday we had some diminished organic revenue growth, right, I 0:17:32.080 --> 0:17:35.880 mean Dawson's house, it's just loaded with freedom Lake. Oh 0:17:36.119 --> 0:17:43.520 Dorito's She's like the queen we had cam Yesterday's some 0:17:43.640 --> 0:17:48.840 organic revenue growth shortfalls outside of the mag seven. Does 0:17:48.880 --> 0:17:53.560 a pro like you extrapolate that revenue shortfall over to 0:17:53.600 --> 0:17:57.440 those seven wonder stocks or is it discrete and separate. 0:17:58.440 --> 0:18:01.480 I think this is so important and maybe the most 0:18:01.520 --> 0:18:05.359 important trend or theme going into twenty twenty five is 0:18:05.359 --> 0:18:09.520 that we're seeing pricing power fade. And it's really interesting 0:18:09.560 --> 0:18:13.200 because as long as CPI remains weak, this is effectively 0:18:13.280 --> 0:18:17.200 the market or the economy saying that companies cannot pass 0:18:17.240 --> 0:18:21.119 through price increases to their end consumer. Look at the 0:18:21.240 --> 0:18:24.480 chart of shipping costs and durable goods prices in twenty 0:18:24.520 --> 0:18:27.040 twenty and twenty twenty one. They went right up together, 0:18:27.200 --> 0:18:30.119 meaning that as shipping costs went up, durable goods prices 0:18:30.160 --> 0:18:33.160 went up because it got passed through to the end customer. Now, 0:18:33.280 --> 0:18:37.199 shipping costs are soaring, but durable goods prices aren't moving higher. 0:18:37.359 --> 0:18:39.560 This means that companies are having to absorb them in 0:18:39.600 --> 0:18:42.399 their margins, which means that there is very much risk 0:18:42.480 --> 0:18:44.680 to the margin forecast in twenty twenty five. 0:18:44.720 --> 0:18:47.560 APS estimates Why I'm so happy you brought up affordability, 0:18:47.560 --> 0:18:49.440 and we know that home affordability here in the US 0:18:49.480 --> 0:18:51.040 is really really poor right now. But I mean, if 0:18:51.040 --> 0:18:53.000 you just look at some of the other other autos 0:18:53.040 --> 0:18:54.960 for example, I mean or Travel for that matter, I 0:18:54.960 --> 0:18:57.600 mean CAM talk to us about you know, just generally speaking, 0:18:57.680 --> 0:18:59.879 FT back out all of those fixed costs, all of 0:18:59.880 --> 0:19:02.680 the discretionary you know, what's left for the consumer today? 0:19:02.720 --> 0:19:04.159 Have any spending power left? 0:19:04.800 --> 0:19:08.560 We're certainly seeing or hearing anecdotes of them getting pinched. 0:19:08.560 --> 0:19:11.199 Look at Delta's earnings from earlier this week saying that 0:19:11.359 --> 0:19:14.920 they're seeing fading pricing power. I was at JFK yesterday. 0:19:15.040 --> 0:19:18.760 Certainly seemed no evidence of a waning in demand, but 0:19:18.920 --> 0:19:22.679 certainly there is signs that consumers are getting pinched. We 0:19:22.800 --> 0:19:26.119 continue to hear this wonderful word choicefulness out of the 0:19:26.240 --> 0:19:26.560 likes of. 0:19:26.560 --> 0:19:27.720 People like j Walmart. 0:19:29.320 --> 0:19:30.080 Come on, stop? 0:19:30.480 --> 0:19:33.520 Was choicefulness in Graham, Dot and Koddle when you read 0:19:33.560 --> 0:19:34.280 it in gam. 0:19:35.640 --> 0:19:39.280 Certainly not. But again this is a reflection of consumers 0:19:39.359 --> 0:19:41.760 hitting a wall as far as how much more price 0:19:41.840 --> 0:19:44.760 increases that they can take, which means that companies are 0:19:44.800 --> 0:19:45.840 taking it on the chin. 0:19:45.920 --> 0:19:48.800 In margin Cam, it's Friday. I got to quote Doug 0:19:48.840 --> 0:19:51.199 cass in a moment. Help me here, what's your new 0:19:51.240 --> 0:19:54.840 adjustment off yard Denny's fifty eight hundred on SPX? Can 0:19:54.880 --> 0:19:56.840 I get us six thousand aut of you this morning? 0:19:58.119 --> 0:19:59.960 The one thing I'd note is that if we trade 0:20:00.119 --> 0:20:02.280 to fifty eight hundred by the end of the year 0:20:02.480 --> 0:20:05.320 and assuming that the market is right for their two 0:20:05.359 --> 0:20:08.280 hundred and seventy seven dollars a share for twenty twenty 0:20:08.280 --> 0:20:11.520 five earning sestiments, you would be training at a higher 0:20:11.520 --> 0:20:14.840 pe multiple on the year head forward than you were 0:20:14.960 --> 0:20:16.600 at the peak in twenty twenty one. 0:20:17.160 --> 0:20:17.359 Thank you. 0:20:17.480 --> 0:20:19.480 Never to say never, but that's pretty high. 0:20:19.600 --> 0:20:22.000 Gotta go, Kim Dawson, Thank you so much for will 0:20:22.040 --> 0:20:36.320 talking fifty eight hundred is well. This is a joy 0:20:36.400 --> 0:20:39.639 and always an honor. Joining us. Iconic at Golden Sachs 0:20:39.680 --> 0:20:42.720 for years is Robert Hormantz. He has a book I'm 0:20:42.720 --> 0:20:45.720 going to mention here in a moment, but his work 0:20:45.840 --> 0:20:51.320 has been profound on America's relationships, particularly across the broader 0:20:51.520 --> 0:20:54.399 Middle East into China, where he'll be traveling too soon. 0:20:54.840 --> 0:20:58.679 Ambassador Horrmantes joins us and do everything I can, Bob 0:20:58.800 --> 0:21:00.919 not to say what do you have think think about Biden? 0:21:01.160 --> 0:21:03.800 We don't have time to waste on that. I got 0:21:03.800 --> 0:21:06.440 to go back to your book. It is the best 0:21:06.640 --> 0:21:11.760 book on the domestic and fiscal responsibility of this nation. 0:21:12.560 --> 0:21:16.080 Is we project a foreign policy? The only one that 0:21:16.119 --> 0:21:21.360 can tire shoelaces is Richard Haas, who reformulated the consul 0:21:21.359 --> 0:21:25.280 and foreign relations. With this debt and deficit, how do 0:21:25.359 --> 0:21:27.760 we prosecute a foreign policy? 0:21:28.520 --> 0:21:30.600