1 00:00:02,400 --> 00:00:06,760 Speaker 1: Bloomberg Audio Studios, Podcasts, radio news. 2 00:00:11,600 --> 00:00:15,440 Speaker 2: This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along 3 00:00:15,440 --> 00:00:18,400 Speaker 2: with Lisa Bromwitz and a Marie Hordern. Join us each 4 00:00:18,480 --> 00:00:21,360 Speaker 2: day for insight from the best in markets, economics, and 5 00:00:21,400 --> 00:00:24,720 Speaker 2: geopolitics from our global headquarters in New York City. We 6 00:00:24,760 --> 00:00:27,400 Speaker 2: are live on Bloomberg Television weekday mornings from six to 7 00:00:27,480 --> 00:00:31,000 Speaker 2: nine am Eastern. Subscribe to the podcast on Apple, Spotify 8 00:00:31,200 --> 00:00:33,479 Speaker 2: or anywhere else you listen, and as always, on the 9 00:00:33,479 --> 00:00:37,000 Speaker 2: Bloomberg Terminal and the Bloomberg Business app. Karen Murphy of 10 00:00:37,040 --> 00:00:40,320 Speaker 2: Castra Investment Management, writing, we are modestly overweight equities, with 11 00:00:40,400 --> 00:00:42,800 Speaker 2: lower exposure to mega camps in favor of mid cap, 12 00:00:43,080 --> 00:00:46,000 Speaker 2: a tilt towards non us, and a focus on owning's growth. 13 00:00:46,159 --> 00:00:48,640 Speaker 2: Kara joins us now for more. Kara, good morning, Good morning. 14 00:00:48,680 --> 00:00:50,520 Speaker 2: Let's get to their last line earnings growth. 15 00:00:50,600 --> 00:00:52,160 Speaker 3: Where are you seeing it? Where's it coming from? 16 00:00:52,479 --> 00:00:54,920 Speaker 4: So I think we definitely had a pause heading into 17 00:00:54,960 --> 00:00:56,600 Speaker 4: second quarter, and that's sort of what we're going to 18 00:00:56,640 --> 00:00:58,520 Speaker 4: be chewing through over the next couple of weeks as 19 00:00:58,560 --> 00:01:02,040 Speaker 4: we make our way through earnings season. But what is 20 00:01:02,080 --> 00:01:04,800 Speaker 4: so important and what is usually important in earnings season 21 00:01:05,080 --> 00:01:07,000 Speaker 4: is getting the view of the second half. And I 22 00:01:07,000 --> 00:01:09,679 Speaker 4: think what we're finding is that CEOs are coming in 23 00:01:09,720 --> 00:01:12,320 Speaker 4: a little bit bolder about what the second half looks like. 24 00:01:12,600 --> 00:01:13,759 Speaker 1: They're able to sort of like. 25 00:01:15,200 --> 00:01:17,520 Speaker 4: Take that slower growth in the second quarter, but then 26 00:01:17,560 --> 00:01:20,039 Speaker 4: see a real reacceleration into the second half of. 27 00:01:20,040 --> 00:01:22,720 Speaker 3: The year where they getting cloarnity on policy from. 28 00:01:22,680 --> 00:01:24,360 Speaker 1: I don't think they are saying it. 29 00:01:24,480 --> 00:01:26,040 Speaker 3: Lisa is not saying, you saying. 30 00:01:26,120 --> 00:01:27,880 Speaker 4: I think what they're able to do. And this is 31 00:01:27,920 --> 00:01:31,040 Speaker 4: where time is all of our friend. Right when tariffs 32 00:01:31,040 --> 00:01:33,720 Speaker 4: are first introduced in early April, it was this huge 33 00:01:33,800 --> 00:01:36,880 Speaker 4: change and people didn't really understand even what the implications 34 00:01:36,880 --> 00:01:39,800 Speaker 4: were for their supply chains. Over the last couple of months, 35 00:01:40,000 --> 00:01:43,440 Speaker 4: many CEOs have been able to sharpen their pencils, understand 36 00:01:43,440 --> 00:01:46,920 Speaker 4: where those implications are, sometimes diversify their supply chain so 37 00:01:46,959 --> 00:01:49,080 Speaker 4: that they're less sort of behold UNTI let's say China, 38 00:01:49,120 --> 00:01:52,200 Speaker 4: where that's sort of been ground zero for tariffs, and 39 00:01:52,280 --> 00:01:54,840 Speaker 4: also be able to forecast different scenarios. So again, this 40 00:01:54,880 --> 00:01:57,520 Speaker 4: doesn't say that policy isn't an impact. I think policy 41 00:01:57,560 --> 00:02:01,040 Speaker 4: uncertainty is still a really big challenge, but being able 42 00:02:01,080 --> 00:02:03,680 Speaker 4: to have that time to work through it really makes 43 00:02:03,720 --> 00:02:05,400 Speaker 4: it much easier, be able to manage through. 44 00:02:05,800 --> 00:02:08,680 Speaker 5: Is the air getting very rare for some of these stocks, 45 00:02:08,760 --> 00:02:11,880 Speaker 5: and John was asking for the whole the totality of 46 00:02:11,919 --> 00:02:15,240 Speaker 5: the morning saying, you know, not good enough, not good enough, 47 00:02:15,320 --> 00:02:17,520 Speaker 5: and that seems to be the read through from bank stocks. 48 00:02:17,560 --> 00:02:19,840 Speaker 5: Is that a sort of wider spread phenomenon throughout the 49 00:02:19,880 --> 00:02:20,600 Speaker 5: stock market. 50 00:02:20,800 --> 00:02:21,680 Speaker 3: So when we. 51 00:02:21,600 --> 00:02:24,200 Speaker 4: Came into earlier this year, one of the main risks 52 00:02:24,240 --> 00:02:27,760 Speaker 4: that we saw were high valuations in a very concentrated market. 53 00:02:28,080 --> 00:02:30,440 Speaker 4: With the rebound that we've had more recently, we still 54 00:02:30,480 --> 00:02:32,679 Speaker 4: have those same exact risks and so that's really a 55 00:02:32,720 --> 00:02:35,040 Speaker 4: big reason why we're leaning a little bit more into midcaps, 56 00:02:35,040 --> 00:02:37,280 Speaker 4: a little bit more into non US. So, yes, I 57 00:02:37,280 --> 00:02:40,000 Speaker 4: think that's a challenge, but it's a challenge for certain names. 58 00:02:40,440 --> 00:02:42,680 Speaker 4: And then you mentioned financials. I think that's a really 59 00:02:42,680 --> 00:02:46,520 Speaker 4: interesting area where these names got some really nice lift recently. 60 00:02:46,880 --> 00:02:50,400 Speaker 4: So I think some of the maybe like lackluster reaction 61 00:02:50,560 --> 00:02:53,520 Speaker 4: to the earnings is more a reflection of what the 62 00:02:53,560 --> 00:02:56,720 Speaker 4: stocks have done recently. And I think importantly, as we 63 00:02:56,760 --> 00:02:59,640 Speaker 4: look through those bank earnings, what we see is pretty 64 00:02:59,680 --> 00:03:03,519 Speaker 4: decent and underlying economic growth, and I think again that 65 00:03:03,760 --> 00:03:05,720 Speaker 4: augurs well for second half earnings growth. 66 00:03:05,760 --> 00:03:07,480 Speaker 1: In general, it feels very volatile. 67 00:03:07,600 --> 00:03:09,400 Speaker 5: There's been a lot of volatility at a headline level. 68 00:03:09,400 --> 00:03:11,280 Speaker 5: When you actually look at the move index, which is 69 00:03:11,280 --> 00:03:14,480 Speaker 5: implied volatility and treasure yields, it's pretty low. When you 70 00:03:14,520 --> 00:03:16,399 Speaker 5: take a look at the average BIX, it's come down 71 00:03:16,440 --> 00:03:19,040 Speaker 5: pretty significantly. Do you just sort of sit on your hands, 72 00:03:19,240 --> 00:03:21,880 Speaker 5: decide what you like, buy it, go on vacation. 73 00:03:23,480 --> 00:03:25,320 Speaker 4: I like to describe the first half of the year 74 00:03:25,320 --> 00:03:26,880 Speaker 4: as the Van Winkle market. 75 00:03:26,960 --> 00:03:27,120 Speaker 5: Right. 76 00:03:27,160 --> 00:03:29,600 Speaker 4: If you had gone to bed on January first, woken 77 00:03:29,680 --> 00:03:31,080 Speaker 4: up at the end of June, you'd be like, I 78 00:03:31,120 --> 00:03:32,280 Speaker 4: did a great job, Like. 79 00:03:32,280 --> 00:03:33,240 Speaker 3: I feel really good. 80 00:03:33,680 --> 00:03:37,560 Speaker 2: I wish I had, right, don't We always? 81 00:03:36,480 --> 00:03:42,120 Speaker 5: Many levels carry on, right, But the challenge is that 82 00:03:42,160 --> 00:03:43,440 Speaker 5: we all lived through that. 83 00:03:43,760 --> 00:03:45,720 Speaker 1: The jury is is that experience. 84 00:03:45,800 --> 00:03:48,360 Speaker 4: That experience helped us sort of live through what we're 85 00:03:48,360 --> 00:03:50,600 Speaker 4: going through now. And I think over the weekend, we 86 00:03:50,600 --> 00:03:53,080 Speaker 4: saw this new introduction of tariffs and the market just 87 00:03:53,120 --> 00:03:56,120 Speaker 4: didn't react, right. The market has reacted less and less 88 00:03:56,160 --> 00:03:59,520 Speaker 4: with every new tariff announcement because and this is important, 89 00:03:59,560 --> 00:04:03,400 Speaker 4: because the assumption is that the Trump administration is not 90 00:04:03,440 --> 00:04:06,520 Speaker 4: going to accept a recession in exchange for its trade agenda. 91 00:04:07,000 --> 00:04:09,640 Speaker 4: If that breaks, then I think we have a very 92 00:04:09,640 --> 00:04:12,360 Speaker 4: different market. But as long as that holds, the market's 93 00:04:12,360 --> 00:04:14,120 Speaker 4: going to be like, Okay, you can tinker at you 94 00:04:14,240 --> 00:04:16,280 Speaker 4: as you will, but we're not going to face a recession. 95 00:04:16,360 --> 00:04:18,680 Speaker 3: So all is good. How do you justify the tilt 96 00:04:18,760 --> 00:04:20,120 Speaker 3: and non US at the moment? 97 00:04:20,440 --> 00:04:23,279 Speaker 4: So this has been a challenge for US investors for 98 00:04:23,320 --> 00:04:25,040 Speaker 4: a very long time, and we talk with a lot 99 00:04:25,080 --> 00:04:28,560 Speaker 4: of investors who are frustrated with owning anything outside the 100 00:04:28,600 --> 00:04:31,480 Speaker 4: S and P. Five hundred and Over the years, you've 101 00:04:31,520 --> 00:04:34,920 Speaker 4: seen again higher and higher concentration US stocks around the world, 102 00:04:35,240 --> 00:04:38,680 Speaker 4: higher and higher evaluation differentials between those. But it's been 103 00:04:38,760 --> 00:04:41,960 Speaker 4: largely justified because of stronger growth in the US. I 104 00:04:41,960 --> 00:04:45,719 Speaker 4: think as we're moving from a very unipolar free trade 105 00:04:45,760 --> 00:04:48,960 Speaker 4: world to a multipolar world where maybe US is a 106 00:04:49,000 --> 00:04:51,400 Speaker 4: little bit less dominant, I think we start to see 107 00:04:51,400 --> 00:04:54,040 Speaker 4: capital flows outside of the US, and then on top 108 00:04:54,120 --> 00:04:56,080 Speaker 4: of that you have maybe a little bit of a 109 00:04:56,240 --> 00:04:58,240 Speaker 4: narrowing of the differential and growth rates, a little bit 110 00:04:58,279 --> 00:05:00,279 Speaker 4: of a narrowing of that valuation different. 111 00:05:00,120 --> 00:05:02,920 Speaker 2: What is the European growth story? I can get excited 112 00:05:02,920 --> 00:05:04,040 Speaker 2: about what is it? 113 00:05:04,120 --> 00:05:06,520 Speaker 4: So it's like it's a little bit better than what 114 00:05:06,600 --> 00:05:08,800 Speaker 4: it was before, and that's what's important. So they do 115 00:05:08,920 --> 00:05:11,279 Speaker 4: there is a lot of infrastructure spending that's happening, and 116 00:05:11,320 --> 00:05:14,279 Speaker 4: so it's just that incremental growth. It's not necessarily that 117 00:05:14,320 --> 00:05:17,279 Speaker 4: it's going to take off going forward, but it's priced 118 00:05:17,320 --> 00:05:19,599 Speaker 4: for a slower growth environment than what I think we 119 00:05:19,640 --> 00:05:20,760 Speaker 4: see in the next couple of years. 120 00:05:20,800 --> 00:05:22,960 Speaker 5: The growth story is fewer holidays, that's what we're learning 121 00:05:23,120 --> 00:05:26,240 Speaker 5: for us. For us, sure, yeah, but in France right 122 00:05:26,279 --> 00:05:28,039 Speaker 5: the idea that you're going to take two holidays out. 123 00:05:28,200 --> 00:05:29,800 Speaker 1: I just wonder, you know what this horde of. 124 00:05:29,800 --> 00:05:32,480 Speaker 5: Debt management and sort of when debt is too much discussion, 125 00:05:32,520 --> 00:05:33,919 Speaker 5: whether that's really going to come into. 126 00:05:33,720 --> 00:05:35,320 Speaker 1: Play with bond vigilantes. 127 00:05:35,360 --> 00:05:38,040 Speaker 5: It seemed to be picking on Germany, even though German's 128 00:05:38,080 --> 00:05:40,240 Speaker 5: debt to GDP ratio is really good. It's not as 129 00:05:40,279 --> 00:05:43,400 Speaker 5: though they're particularly overly indebted, and yet you've seen yields 130 00:05:43,400 --> 00:05:44,680 Speaker 5: on the long end climb there too. 131 00:05:45,279 --> 00:05:47,920 Speaker 4: I think if there's anybody who needs the finger pointed 132 00:05:47,960 --> 00:05:51,600 Speaker 4: out that has a debt problem, it's the US, and 133 00:05:51,640 --> 00:05:55,360 Speaker 4: as I think about, one of the largest challenges that 134 00:05:55,440 --> 00:05:58,040 Speaker 4: the US faces, and a really intractable problem, is the 135 00:05:58,120 --> 00:06:00,760 Speaker 4: amount of debt that we have. And clear it is 136 00:06:00,839 --> 00:06:03,440 Speaker 4: Republicans and Democrats who have contributed to this. This is 137 00:06:03,480 --> 00:06:05,520 Speaker 4: not a political issue. This is an American issue. We 138 00:06:05,600 --> 00:06:07,880 Speaker 4: like to spend money, and so far the debt markets 139 00:06:07,880 --> 00:06:10,360 Speaker 4: have given us a pass right. For many, many years, 140 00:06:10,440 --> 00:06:13,560 Speaker 4: we have really really low interest rates. Now that's changed, 141 00:06:13,600 --> 00:06:16,400 Speaker 4: and that's why the equation really has to change. But 142 00:06:17,000 --> 00:06:18,800 Speaker 4: I don't think we're going to tackle it anytime soon. 143 00:06:18,960 --> 00:06:20,720 Speaker 3: Kara, it's good to see you. Thanks for dropping by. 144 00:06:20,920 --> 00:06:33,640 Speaker 2: Karen Murphy there of Chestra Investment Management, PARTO GOO of 145 00:06:33,680 --> 00:06:35,719 Speaker 2: New Street Research joins us now with a by rating 146 00:06:35,760 --> 00:06:38,839 Speaker 2: on Nvidia and a price target of two hundred per 147 00:06:38,960 --> 00:06:40,799 Speaker 2: joins US now pre welcome to the program. 148 00:06:40,839 --> 00:06:41,839 Speaker 3: It's a change of policy. 149 00:06:42,080 --> 00:06:43,919 Speaker 2: What kind of change does it make, what kind of 150 00:06:43,920 --> 00:06:46,960 Speaker 2: difference does it make for this company? 151 00:06:47,360 --> 00:06:50,360 Speaker 6: Well, John, is literally a change of twenty See when 152 00:06:50,400 --> 00:06:52,760 Speaker 6: you look at the last couple of years, Nvidia has 153 00:06:52,800 --> 00:06:56,360 Speaker 6: been able to ship chips in China. 154 00:06:57,880 --> 00:06:58,720 Speaker 3: On enough. 155 00:07:00,120 --> 00:07:04,880 Speaker 6: As like the ex force rules varied over time. So 156 00:07:05,360 --> 00:07:07,640 Speaker 6: like earlier this year, we had like a very strict 157 00:07:07,680 --> 00:07:11,160 Speaker 6: like tightening of the rule that created a potential shortfall 158 00:07:11,240 --> 00:07:16,320 Speaker 6: for Nvidia of like eight ten billion dollars, you know, 159 00:07:17,560 --> 00:07:20,800 Speaker 6: over what was left of the year. And now there 160 00:07:20,840 --> 00:07:24,240 Speaker 6: is an easy and again of these of these restrictions. 161 00:07:24,240 --> 00:07:26,320 Speaker 6: We had a similar situation last year and the year 162 00:07:26,400 --> 00:07:29,520 Speaker 6: before lust So I would say this is back and forth. 163 00:07:29,560 --> 00:07:32,000 Speaker 6: You shouldn't read too much into it. I think the 164 00:07:32,040 --> 00:07:36,880 Speaker 6: reality is that you have a situation with three major metrics. 165 00:07:37,000 --> 00:07:41,960 Speaker 6: One is making sure we protect like the US leadership 166 00:07:42,120 --> 00:07:45,960 Speaker 6: in AI. The second one is making sure we don't 167 00:07:45,960 --> 00:07:49,920 Speaker 6: completely cut off the relationship with China, because as Brandon mentioned, 168 00:07:50,600 --> 00:07:53,760 Speaker 6: China has very important elements into the AI race, like 169 00:07:54,720 --> 00:07:57,960 Speaker 6: the are rare smart adioles. And the third one is 170 00:07:57,960 --> 00:08:00,640 Speaker 6: that of course the US government, the US insestion is 171 00:08:00,720 --> 00:08:04,520 Speaker 6: very careful to protect the interest of US companies, and 172 00:08:04,600 --> 00:08:08,240 Speaker 6: so this situation always creates a back and forth. It's 173 00:08:08,240 --> 00:08:14,000 Speaker 6: good sometimes to tighten the rules to slow down like 174 00:08:14,040 --> 00:08:16,720 Speaker 6: the progress of China, but at the same time doing 175 00:08:16,760 --> 00:08:20,280 Speaker 6: too much of that favors China is developing their own 176 00:08:20,320 --> 00:08:23,400 Speaker 6: supply chain, and it's good to maintain the leadership of 177 00:08:23,560 --> 00:08:26,480 Speaker 6: US companies globally. So it's good, as Jensen said that 178 00:08:26,560 --> 00:08:30,160 Speaker 6: they keep selling in China and you have like the 179 00:08:30,280 --> 00:08:35,000 Speaker 6: right balance to find over time, and that would be 180 00:08:35,040 --> 00:08:36,360 Speaker 6: the way I look at it. 181 00:08:36,559 --> 00:08:40,240 Speaker 5: Pierre, how much is in Video's fay really dependent on 182 00:08:40,280 --> 00:08:43,320 Speaker 5: the close relationship that Johnson one has with President Trump 183 00:08:43,400 --> 00:08:45,800 Speaker 5: and the fact that move over Tim Kirk, he's the 184 00:08:45,840 --> 00:08:48,160 Speaker 5: new tech ambassador for the United States. 185 00:08:50,360 --> 00:08:52,600 Speaker 6: Well, you could almost invert the question. You know, how 186 00:08:52,600 --> 00:08:54,800 Speaker 6: important is it for President Trump to make sure that 187 00:08:54,840 --> 00:08:57,079 Speaker 6: he has like a strong ally in Yensen, like the 188 00:08:57,200 --> 00:09:00,320 Speaker 6: number one or let's say one of the number ones 189 00:09:00,360 --> 00:09:04,720 Speaker 6: you know, tech uh, tech tech leaders and uh. And 190 00:09:04,760 --> 00:09:07,360 Speaker 6: we know that the relationship with Ilan musk Is is 191 00:09:07,400 --> 00:09:09,720 Speaker 6: a bit south these days, so I think it's very 192 00:09:09,760 --> 00:09:14,000 Speaker 6: important to to maintain strong relationships and uh. And yes, 193 00:09:14,080 --> 00:09:19,120 Speaker 6: I think there is no real situation where the US 194 00:09:19,160 --> 00:09:23,640 Speaker 6: administration wouldn't have a careful here to the concerns of Jensen, 195 00:09:23,840 --> 00:09:27,560 Speaker 6: because the success of Nvidia is what matters the most 196 00:09:27,679 --> 00:09:33,400 Speaker 6: to the US maintaining their leadership in AI development. And 197 00:09:33,440 --> 00:09:35,720 Speaker 6: I think that that's what we have read in the 198 00:09:35,840 --> 00:09:38,680 Speaker 6: in the trip to China our Fiens and his comments 199 00:09:38,679 --> 00:09:41,120 Speaker 6: and his ability you know to speak before the White 200 00:09:41,160 --> 00:09:43,560 Speaker 6: House and commitments from the White House tells you a lot. 201 00:09:43,720 --> 00:09:47,400 Speaker 6: But how much darkening power he has in the in 202 00:09:47,480 --> 00:09:49,080 Speaker 6: the conversation, But. 203 00:09:49,240 --> 00:09:51,240 Speaker 2: A lot, apparently, Pierre, quite a lot based on the 204 00:09:51,280 --> 00:09:54,040 Speaker 2: experience of the last few days. Per favorite of New 205 00:09:54,120 --> 00:10:06,960 Speaker 2: Street Research pre thank you, sir, Devon run As Citizens 206 00:10:07,000 --> 00:10:10,040 Speaker 2: down grading goldment sanks to market perform ahead of the results, 207 00:10:10,040 --> 00:10:12,480 Speaker 2: writes in quote, the bar is now much higher for 208 00:10:12,559 --> 00:10:15,600 Speaker 2: another lego, Devin joins us. Now for more, Devin, We've 209 00:10:15,600 --> 00:10:17,320 Speaker 2: come a long way. We've had a big rally for 210 00:10:17,440 --> 00:10:19,760 Speaker 2: most of these banks coming into this earning season. 211 00:10:19,800 --> 00:10:21,160 Speaker 3: What do you make of what you've heard so far? 212 00:10:22,679 --> 00:10:25,800 Speaker 7: Yeah, hey, Jonathan, good quarter. We thought it would be 213 00:10:25,800 --> 00:10:27,560 Speaker 7: a good quarter. We were quite a bit above the street, 214 00:10:27,679 --> 00:10:30,600 Speaker 7: but they still beat our numbers. And so what we're 215 00:10:30,640 --> 00:10:33,880 Speaker 7: seeing is terriffs were actually pretty good for trading, and 216 00:10:33,920 --> 00:10:36,160 Speaker 7: so we'll have to see now that kind of the 217 00:10:36,240 --> 00:10:38,840 Speaker 7: terriff volatility has died down a little bit, what the 218 00:10:38,880 --> 00:10:40,439 Speaker 7: back half of the year looks like for trading. But 219 00:10:40,480 --> 00:10:43,320 Speaker 7: then on the other side, investment banking activity is really 220 00:10:43,320 --> 00:10:46,400 Speaker 7: re excelerating. Remember in April we were questioning whether this 221 00:10:46,520 --> 00:10:49,040 Speaker 7: is a pause or a break for investment banking right now, 222 00:10:49,040 --> 00:10:50,959 Speaker 7: it looked like it was clearly a pause. And now 223 00:10:51,040 --> 00:10:52,960 Speaker 7: all that activity that was kind of put on the 224 00:10:53,000 --> 00:10:55,000 Speaker 7: back burner is now moving to the front burner. So 225 00:10:55,040 --> 00:10:58,880 Speaker 7: we're seeing a pretty substantial reacceleration. Announced MINA volumes are 226 00:10:58,880 --> 00:11:01,719 Speaker 7: tracking up twenty percent every year, even with losing a 227 00:11:01,760 --> 00:11:04,800 Speaker 7: couple of months. IPO number of IPOs in the US 228 00:11:04,800 --> 00:11:07,560 Speaker 7: are up eighty percent, So we feel really good. You know, Goldman, 229 00:11:07,640 --> 00:11:09,480 Speaker 7: we just we put a buy on it at two 230 00:11:09,520 --> 00:11:11,840 Speaker 7: hundred dollars back in twenty twenty, so now it's seven 231 00:11:11,960 --> 00:11:14,200 Speaker 7: hundred dollars. You know, the bar is higher. And that 232 00:11:14,280 --> 00:11:15,280 Speaker 7: was really what the call was. 233 00:11:15,400 --> 00:11:17,440 Speaker 3: Do you see enough in the numbers this morning? At last? 234 00:11:17,480 --> 00:11:19,400 Speaker 3: The question the Dan right, Devin, or are you sticking 235 00:11:19,400 --> 00:11:20,120 Speaker 3: with the thesis? 236 00:11:20,880 --> 00:11:24,760 Speaker 7: Yeah, we're sticking with the thesis. Listen, it's a great company. 237 00:11:25,120 --> 00:11:27,320 Speaker 7: And our thesis was, you know, they're taking market share 238 00:11:27,360 --> 00:11:29,560 Speaker 7: and people don't really realize it. And then also they're 239 00:11:29,600 --> 00:11:32,840 Speaker 7: growing their asset management business, particularly in alternatives, and people 240 00:11:32,880 --> 00:11:35,680 Speaker 7: don't appreciate how much assets they're raising. And so I 241 00:11:35,679 --> 00:11:38,440 Speaker 7: felt like we had a differentiated call. And now we've 242 00:11:38,440 --> 00:11:41,839 Speaker 7: become more consensus. So we're just looking for opportunities where 243 00:11:41,880 --> 00:11:44,520 Speaker 7: we still have differentiated calls. But listen, you had a 244 00:11:44,600 --> 00:11:47,760 Speaker 7: great quarter and I actually think the outlook again trading 245 00:11:47,840 --> 00:11:48,880 Speaker 7: is going to be a little bit of a question 246 00:11:48,920 --> 00:11:50,680 Speaker 7: market in the back half of the year because the 247 00:11:50,760 --> 00:11:54,319 Speaker 7: Terra volatility did help. But Goldman Sachs and Morgan Stanley too, 248 00:11:54,320 --> 00:11:57,079 Speaker 7: they're gaining market share, so you have the market backdrop 249 00:11:57,120 --> 00:11:59,959 Speaker 7: which your volatility helps. Then on top of that, both 250 00:12:00,160 --> 00:12:02,480 Speaker 7: firms are actually taking market share and trading you Goldman's 251 00:12:02,520 --> 00:12:04,920 Speaker 7: really leaning in on their prime brokerage business. So we 252 00:12:04,960 --> 00:12:07,680 Speaker 7: feel really good about the tone of the business. We 253 00:12:07,720 --> 00:12:10,880 Speaker 7: want to reevaluate on the stocks here and consolidate some 254 00:12:10,960 --> 00:12:11,840 Speaker 7: of these games we've seen. 255 00:12:11,920 --> 00:12:14,000 Speaker 5: We've heard a pretty study story across all the bank 256 00:12:14,000 --> 00:12:16,760 Speaker 5: earnings about how study the consumer is, how businesses are 257 00:12:16,800 --> 00:12:20,320 Speaker 5: gaining confidence, and there's a feeling that everything is chugging 258 00:12:20,400 --> 00:12:22,439 Speaker 5: along with a greater degree of certainty. 259 00:12:22,040 --> 00:12:23,199 Speaker 1: Than on April. 260 00:12:23,360 --> 00:12:26,679 Speaker 5: Second, I'm just wondering if this is a broader economic 261 00:12:27,120 --> 00:12:29,560 Speaker 5: kind of read through, as John's been asking all morning, 262 00:12:29,640 --> 00:12:31,800 Speaker 5: or if this is something that really indicates the banks 263 00:12:31,800 --> 00:12:33,760 Speaker 5: have been much more cautious with who they led to 264 00:12:34,080 --> 00:12:36,280 Speaker 5: the credit worthiness of all of their clients. 265 00:12:37,840 --> 00:12:40,120 Speaker 7: Yeah, I mean, I think what we're seeing and what 266 00:12:40,160 --> 00:12:43,960 Speaker 7: we're hearing is that, you know, there's obviously always tail 267 00:12:44,000 --> 00:12:46,280 Speaker 7: risks here, and I think people are cautious to make 268 00:12:46,280 --> 00:12:49,560 Speaker 7: sure that there's a lot of macro events that are 269 00:12:49,559 --> 00:12:52,600 Speaker 7: occurring at tariffs are still uncertainty there, there's geopolitical risks, 270 00:12:52,640 --> 00:12:55,520 Speaker 7: and so I think there's obviously a sense of, you know, 271 00:12:55,640 --> 00:12:58,720 Speaker 7: cautiousness just to be careful that you're not getting yourself 272 00:12:58,720 --> 00:13:01,280 Speaker 7: in trouble. But overall, the trendsit I think banks are 273 00:13:01,280 --> 00:13:04,080 Speaker 7: seeing right now and that we're talking to both investors 274 00:13:04,080 --> 00:13:07,559 Speaker 7: and CEOs about, is that things are good out there. 275 00:13:07,600 --> 00:13:09,839 Speaker 7: You know, the consumer is in still a very good spot. 276 00:13:10,160 --> 00:13:12,840 Speaker 7: The low end of the consumer is being more affected 277 00:13:12,840 --> 00:13:16,120 Speaker 7: by inflation, and there's maybe a little more challenges here, 278 00:13:16,120 --> 00:13:18,640 Speaker 7: but more broadly, the consumer is in a great spot. 279 00:13:18,679 --> 00:13:21,400 Speaker 7: And then companies, as you see an investment banking activity 280 00:13:21,440 --> 00:13:23,439 Speaker 7: or leaning back in so they're going back on offense, 281 00:13:23,840 --> 00:13:26,040 Speaker 7: m and A volumes are picking up. Companies are feeling 282 00:13:26,040 --> 00:13:28,240 Speaker 7: good about raising capital, their stock prices that are at 283 00:13:28,240 --> 00:13:30,560 Speaker 7: all time high. So I think there's a really good 284 00:13:30,600 --> 00:13:33,240 Speaker 7: sense of kind of optimism in the market right now 285 00:13:33,280 --> 00:13:35,520 Speaker 7: from both corporates and consumers, and that's what I think 286 00:13:35,520 --> 00:13:38,679 Speaker 7: we're going to hear from virtually all banks through earning season. 287 00:13:38,720 --> 00:13:40,600 Speaker 5: Here, there's really a question about whether this is a 288 00:13:40,600 --> 00:13:42,920 Speaker 5: pivot point where some of these banks that have been 289 00:13:43,000 --> 00:13:45,560 Speaker 5: treated as other utilities for the past ten years can 290 00:13:45,600 --> 00:13:49,840 Speaker 5: become more growthy, especially if they start to get deregulated 291 00:13:49,880 --> 00:13:52,080 Speaker 5: to the point where they can compete more aggressively with 292 00:13:52,200 --> 00:13:53,559 Speaker 5: private asset managers. 293 00:13:54,080 --> 00:13:55,720 Speaker 1: Do you see that as a likelihood this year? 294 00:13:56,800 --> 00:13:59,240 Speaker 7: Well, I mean, if you listen to JP Morgan's call yesterday, 295 00:13:59,280 --> 00:14:01,439 Speaker 7: a lot of questions on fintech, a lot of questions 296 00:14:01,520 --> 00:14:04,840 Speaker 7: on stable coins and tokenization. So I think the conversation 297 00:14:05,040 --> 00:14:07,720 Speaker 7: is evolving a little bit. You know, banks are still 298 00:14:08,720 --> 00:14:11,600 Speaker 7: I think obviously, you know, steadier types of business models 299 00:14:11,640 --> 00:14:12,960 Speaker 7: and they're not going to take a lot of risk. 300 00:14:13,040 --> 00:14:16,400 Speaker 7: But this this world of kind of less regulation, I 301 00:14:16,400 --> 00:14:18,640 Speaker 7: think is starting to creep in and I think it's 302 00:14:18,679 --> 00:14:20,400 Speaker 7: going to be a tailwind for banks over the next 303 00:14:20,400 --> 00:14:22,520 Speaker 7: couple of years. And then on top of that, I 304 00:14:22,560 --> 00:14:25,360 Speaker 7: think another catalyst here is consolidation. You're starting to see 305 00:14:25,600 --> 00:14:27,240 Speaker 7: a little bit of bank mergers. It's going to be 306 00:14:27,280 --> 00:14:29,240 Speaker 7: in the kind of the small mid sized banks, but 307 00:14:29,520 --> 00:14:32,000 Speaker 7: I think that's going to be very valuation enhancing and 308 00:14:32,040 --> 00:14:33,440 Speaker 7: I'd look to the back half of this year to 309 00:14:33,480 --> 00:14:35,320 Speaker 7: start to see some of that, and I think that 310 00:14:35,360 --> 00:14:37,720 Speaker 7: will be a catalyst for the broader group, something that 311 00:14:37,760 --> 00:14:39,520 Speaker 7: we really haven't seen over the past four years. 312 00:14:39,600 --> 00:14:41,560 Speaker 2: So Devin just drove down on some of that. As 313 00:14:41,560 --> 00:14:44,400 Speaker 2: you mentioned earlier, some of these ideas became very consensus, 314 00:14:44,400 --> 00:14:47,160 Speaker 2: Goldman being one of them, and it's certainly performed. If 315 00:14:47,160 --> 00:14:49,400 Speaker 2: you were looking for something non consensus, something a little 316 00:14:49,400 --> 00:14:52,480 Speaker 2: bit different in this sector, maybe the broader industry group, 317 00:14:52,600 --> 00:14:53,360 Speaker 2: what would you look for. 318 00:14:54,520 --> 00:14:56,680 Speaker 7: Yeah, so we're kind of some of the large cap 319 00:14:56,800 --> 00:14:59,120 Speaker 7: names I think are pretty well owned right now. You know, 320 00:14:59,160 --> 00:15:01,280 Speaker 7: it's kind of the index plays. So we're looking at 321 00:15:01,280 --> 00:15:03,720 Speaker 7: some of our mid cap coverage show company like Stiefel, 322 00:15:03,960 --> 00:15:05,920 Speaker 7: which kind of looks like Morgan Stanley in terms of 323 00:15:05,960 --> 00:15:10,160 Speaker 7: wealth management and institutional exposure, but you know, much more 324 00:15:10,240 --> 00:15:13,680 Speaker 7: reasonable valuation at kind of eleven times our exit twenty 325 00:15:13,720 --> 00:15:16,320 Speaker 7: twenty six earnings level, you know, but still get some 326 00:15:16,360 --> 00:15:19,040 Speaker 7: of those really good exposures. Then they also have a 327 00:15:19,120 --> 00:15:21,600 Speaker 7: pretty good leverage to Bank m and A with their 328 00:15:21,640 --> 00:15:24,280 Speaker 7: KBW business, so kind of that theme that we just 329 00:15:24,320 --> 00:15:26,440 Speaker 7: talked about. So that would be one. A small cap 330 00:15:26,720 --> 00:15:29,800 Speaker 7: advisory boutique called Pirella. Weinberg is a name we really like, 331 00:15:29,840 --> 00:15:32,680 Speaker 7: so we want to be selective here just after these 332 00:15:32,720 --> 00:15:34,880 Speaker 7: really big runs. And then i'd also in regional banks, 333 00:15:34,920 --> 00:15:39,960 Speaker 7: as I just mentioned, with bank consolidation and deregulation, I 334 00:15:39,960 --> 00:15:42,200 Speaker 7: think that could have a bigger impact on their business 335 00:15:42,280 --> 00:15:44,760 Speaker 7: models as well. So broadly that is a kind of 336 00:15:44,760 --> 00:15:45,720 Speaker 7: an index play. 337 00:15:45,600 --> 00:15:47,600 Speaker 2: I Devin, appreciate it. Thanks for giving us some time, 338 00:15:47,600 --> 00:15:49,440 Speaker 2: busy money for you. I know they haven't run there 339 00:15:49,560 --> 00:16:02,280 Speaker 2: as citizens joining us around the table a potential candidate. 340 00:16:02,280 --> 00:16:05,040 Speaker 2: They form a wealth bank president David Maltcas David and morning, 341 00:16:05,240 --> 00:16:07,240 Speaker 2: good Mornington. Would you like to be considered? 342 00:16:08,360 --> 00:16:08,920 Speaker 3: Of course. 343 00:16:09,040 --> 00:16:11,960 Speaker 8: So it's a huge job and really important, really important 344 00:16:12,000 --> 00:16:15,120 Speaker 8: to the Trump changeover that's going on in the world, 345 00:16:15,200 --> 00:16:18,920 Speaker 8: saving the country. So but it means a lot of 346 00:16:19,040 --> 00:16:21,880 Speaker 8: change at the FED. I think they've been making many 347 00:16:21,960 --> 00:16:26,600 Speaker 8: mistakes and we can enumerate them and correct them and 348 00:16:26,640 --> 00:16:29,960 Speaker 8: that will mean more growth and especially more growth and 349 00:16:30,120 --> 00:16:34,280 Speaker 8: median income. If the FED were allowing more small business growth, 350 00:16:34,320 --> 00:16:37,880 Speaker 8: there'd be more jobs that are that are new jobs 351 00:16:37,880 --> 00:16:40,880 Speaker 8: for people across the across the country, not just in 352 00:16:41,040 --> 00:16:41,600 Speaker 8: urban areas. 353 00:16:41,640 --> 00:16:43,119 Speaker 3: Let's get into some of the details. 354 00:16:43,360 --> 00:16:45,320 Speaker 2: Walk us through a couple of the examples where you 355 00:16:45,320 --> 00:16:47,800 Speaker 2: think they've made mistakes and the remedies for them. 356 00:16:47,840 --> 00:16:48,480 Speaker 3: How it correct? 357 00:16:48,480 --> 00:16:52,640 Speaker 8: Course, you know, I didn't like que think about QUI 358 00:16:52,800 --> 00:16:54,920 Speaker 8: that the Fed and its wisdom is going to go 359 00:16:55,000 --> 00:16:57,840 Speaker 8: buy bonds. So how did that work out? They've lost 360 00:16:57,880 --> 00:17:01,080 Speaker 8: a trillion dollars. They'll lose much more than that before 361 00:17:01,120 --> 00:17:05,440 Speaker 8: they're done with the losses on the bonds. In addition 362 00:17:05,520 --> 00:17:10,680 Speaker 8: to that, remember they've paid out in interest constantly since 363 00:17:10,720 --> 00:17:14,600 Speaker 8: two thousand and nine. They've paid one point three trillion 364 00:17:14,720 --> 00:17:19,440 Speaker 8: dollars of tax payer money to banks and to money 365 00:17:19,480 --> 00:17:22,719 Speaker 8: market funds. That's the source of funding that they have 366 00:17:22,880 --> 00:17:25,119 Speaker 8: to buy the bonds. So this has been the worst 367 00:17:25,200 --> 00:17:29,920 Speaker 8: hedge trade in history. So that's a big mistake. It's 368 00:17:29,920 --> 00:17:34,760 Speaker 8: also led to inflation because the federally allowed a merger 369 00:17:34,800 --> 00:17:41,280 Speaker 8: of fiscal policy and central banking or monetary policy by 370 00:17:41,320 --> 00:17:45,160 Speaker 8: buying bonds, as the government was really jacking up the deficit. 371 00:17:45,240 --> 00:17:47,119 Speaker 2: So you're rather running go ready because I have to 372 00:17:47,160 --> 00:17:50,159 Speaker 2: say isn't that exactly what the president would like to see? 373 00:17:50,920 --> 00:17:51,480 Speaker 1: What would he like? 374 00:17:51,560 --> 00:17:53,719 Speaker 2: President Donald Trump would very much like to see minitary 375 00:17:53,720 --> 00:17:55,399 Speaker 2: policy and fiscal policy very well allowed. 376 00:17:56,359 --> 00:17:59,119 Speaker 8: No, I think he wants to see them both improved, 377 00:17:59,160 --> 00:18:03,040 Speaker 8: and is already doing that. The reconciliation built improves fiscal 378 00:18:03,119 --> 00:18:08,760 Speaker 8: policy and the separation. What we need is lower interest rates, 379 00:18:08,800 --> 00:18:10,879 Speaker 8: and you can't do that if you've got the FED 380 00:18:11,000 --> 00:18:15,480 Speaker 8: carrying the load of all this fiscal deficit that Congress 381 00:18:15,560 --> 00:18:16,200 Speaker 8: is generated. 382 00:18:16,280 --> 00:18:20,040 Speaker 5: So in the near term, as a candidate yourself, what 383 00:18:20,080 --> 00:18:22,480 Speaker 5: do you do as a potential new FED shair to 384 00:18:22,520 --> 00:18:24,720 Speaker 5: the composition of the Fed and the approach that you think. 385 00:18:24,640 --> 00:18:25,119 Speaker 1: Right size is? 386 00:18:25,720 --> 00:18:28,240 Speaker 8: I think really important is people to see the flaws 387 00:18:28,280 --> 00:18:32,120 Speaker 8: of the inflation targeting model. I've been writing about this 388 00:18:32,240 --> 00:18:36,800 Speaker 8: since then, literally since the eighties, that if you target 389 00:18:36,960 --> 00:18:40,920 Speaker 8: inflation as your goal, it's backward looking and it doesn't 390 00:18:41,000 --> 00:18:44,399 Speaker 8: comprehend all of the prices within the economy. It's just 391 00:18:44,440 --> 00:18:47,800 Speaker 8: a flawed indicator. But that is the basis of how 392 00:18:47,840 --> 00:18:50,679 Speaker 8: the FED sets interest rates. So one of the things 393 00:18:50,960 --> 00:18:53,639 Speaker 8: is you switch and you say the dual mandate is 394 00:18:53,680 --> 00:18:57,760 Speaker 8: to have price stability. That's very different from CPI inflation, 395 00:18:58,560 --> 00:19:02,400 Speaker 8: which waivers around and gives you false signals. That's what's 396 00:19:02,400 --> 00:19:06,160 Speaker 8: happening right now. So you need lower interest rates because 397 00:19:06,200 --> 00:19:10,159 Speaker 8: of the strength of the US economy. I think that's 398 00:19:10,200 --> 00:19:12,720 Speaker 8: something that I understand a lot from working all over 399 00:19:12,760 --> 00:19:16,480 Speaker 8: the world and in Wall Street in financial markets, that 400 00:19:16,520 --> 00:19:19,399 Speaker 8: the US is the giant power and people want to 401 00:19:19,480 --> 00:19:22,639 Speaker 8: invest in the US even at lower interest rate. 402 00:19:22,680 --> 00:19:24,159 Speaker 1: Okay, this is a fascinating argument. 403 00:19:24,240 --> 00:19:26,600 Speaker 5: It's one that President Trump has talked about, the idea 404 00:19:26,880 --> 00:19:28,639 Speaker 5: that it should be almost a credit rating of the 405 00:19:28,720 --> 00:19:31,760 Speaker 5: United States that backs what our interest rates should be. 406 00:19:31,800 --> 00:19:34,560 Speaker 5: So like Microsoft or an Apple, the borrowing costs should 407 00:19:34,600 --> 00:19:37,440 Speaker 5: be very low. People are pegging it to inflation, and 408 00:19:37,480 --> 00:19:40,200 Speaker 5: they're pegging it to growth. I'm just wondering the market 409 00:19:40,200 --> 00:19:42,399 Speaker 5: doesn't see it that way, right. We're not there yet, 410 00:19:42,480 --> 00:19:46,159 Speaker 5: So at this point, how potentially perilous is this discussion 411 00:19:46,520 --> 00:19:49,800 Speaker 5: at a time where the market associates lower interustrates with faster. 412 00:19:49,600 --> 00:19:51,960 Speaker 1: Inflation and frankly higher borrowing costs For the United. 413 00:19:51,800 --> 00:19:56,080 Speaker 8: States, the market's inbred with the FED, and so as 414 00:19:56,119 --> 00:19:58,879 Speaker 8: long as the FED is the sheriff of the land, 415 00:19:58,960 --> 00:20:01,800 Speaker 8: the market is going to say, oh, we operate on 416 00:20:01,920 --> 00:20:04,560 Speaker 8: that model. But as you change to a model that 417 00:20:04,640 --> 00:20:08,439 Speaker 8: makes more sense, one that's based on the growth and 418 00:20:08,520 --> 00:20:11,560 Speaker 8: credit of the US has something to say about what 419 00:20:11,600 --> 00:20:14,160 Speaker 8: the interest rates are that we should pay. That can 420 00:20:14,200 --> 00:20:17,960 Speaker 8: be a smooth, safe transition, but it has to be explained. 421 00:20:18,200 --> 00:20:21,440 Speaker 8: Markets adjust. Think of what's going on on tariffs now, 422 00:20:21,480 --> 00:20:26,919 Speaker 8: there was a giant panic that didn't materialize. The change 423 00:20:26,960 --> 00:20:29,399 Speaker 8: in the FED system is as big as the change 424 00:20:29,440 --> 00:20:32,000 Speaker 8: that we need in the trading system, and it will 425 00:20:32,040 --> 00:20:36,000 Speaker 8: work better for growth and especially better for the forgotten man. 426 00:20:36,119 --> 00:20:40,440 Speaker 8: The median income has been doing very poorly over these 427 00:20:40,560 --> 00:20:43,600 Speaker 8: maybe twenty years, and so if you have a new 428 00:20:44,320 --> 00:20:49,200 Speaker 8: system that's very focused on defending the dollar, the dollar 429 00:20:49,280 --> 00:20:53,480 Speaker 8: is the global reserve currency, and then people flooding into dollars, 430 00:20:53,880 --> 00:20:56,080 Speaker 8: that's actually supportive of markets. 431 00:20:56,320 --> 00:20:59,240 Speaker 3: Seconds left. Have you spoken to the president about the role? 432 00:21:01,080 --> 00:21:05,400 Speaker 8: I don't want to talk about the process. What I 433 00:21:05,440 --> 00:21:08,479 Speaker 8: really want people to focus on is the models that 434 00:21:08,600 --> 00:21:11,400 Speaker 8: need to be changed. We can have a much faster 435 00:21:11,560 --> 00:21:15,040 Speaker 8: growth economy with different FED models, and it can be 436 00:21:15,119 --> 00:21:18,760 Speaker 8: done with the confidence that is absolutely necessary. 437 00:21:18,800 --> 00:21:20,680 Speaker 2: We can have a longer conversation about that next time. 438 00:21:20,720 --> 00:21:22,879 Speaker 2: Sarah appreciate your time. Thanks and best the luck the 439 00:21:22,880 --> 00:21:26,920 Speaker 2: former World Bank President David Malpass. 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