WEBVTT - Surveillance: Lieber on the Israel-Hamas War 0:00:05.080 --> 0:00:07.200 This is the Bloomberg Surveillance Podcast. 0:00:07.680 --> 0:00:08.280 I'm Lisa A. 0:00:08.320 --> 0:00:11.640 Bromwoods, along with Tom Keane and Jonathan Ferrow. Join us 0:00:11.680 --> 0:00:15.280 each day for insight from the best in economics, geopolitics, 0:00:15.320 --> 0:00:19.480 finance and investment. Subscribe to Bloomberg Surveillance on demand on Apple, 0:00:19.600 --> 0:00:22.840 Spotify and anywhere you get your podcasts, and always on 0:00:22.880 --> 0:00:26.400 Bloomberg dot Com, the Bloomberg Terminal and the Bloomberg Business App. 0:00:26.720 --> 0:00:29.159 Okay, my art theme here, folks, is the change and 0:00:29.200 --> 0:00:32.199 the changes the media, the immediacy of the imagery. What 0:00:32.240 --> 0:00:35.080 we see on social media, what we're seeing with all 0:00:35.080 --> 0:00:38.640 the modern technology, makes for a different conflict, a different 0:00:38.720 --> 0:00:42.200 war with wonderful perspective on this as John Lieber, head 0:00:42.200 --> 0:00:46.400 of Research Managing Director at Eurasia for the United States, 0:00:46.520 --> 0:00:48.800 has worked with a Senator from Kentucky for years on 0:00:48.840 --> 0:00:51.080 the hill. Hey, John, honor to speak to you. I 0:00:51.120 --> 0:00:53.560 want to go back to your classroom at Tufts University 0:00:53.680 --> 0:00:56.680 years ago. You and I lived, You and I studied 0:00:56.760 --> 0:01:02.960 nineteen sixty seven, in nineteen seventy three. This is totally different. 0:01:03.480 --> 0:01:05.640 And yet are we fighting the last war? 0:01:07.520 --> 0:01:10.800 I mean, this conflict has been raging for decades and 0:01:11.040 --> 0:01:13.240 you know the difference right now, of course, is Israel 0:01:13.319 --> 0:01:15.800 is targeting Hamas in Gaza and trying to wipe out 0:01:15.840 --> 0:01:19.679 their leadership. So it's an enemy that doesn't have tanks 0:01:19.680 --> 0:01:22.360 and doesn't have planes. It's an enemy that they're trying 0:01:22.400 --> 0:01:25.720 Toy're going to have to go into civilian areas to target, 0:01:26.280 --> 0:01:29.839 and you know, the Israeli defense forces over the years 0:01:30.080 --> 0:01:35.400 have become have been attacking these lands and it's really 0:01:35.440 --> 0:01:37.399 difficult to get after Hamas that way. I think one 0:01:37.440 --> 0:01:39.200 of the big questions is the Webinar. There's going to 0:01:39.240 --> 0:01:43.160 be a ground invasion anytime soon, and I suspect that 0:01:43.240 --> 0:01:45.480 one of the things Biden is in the Middle East 0:01:45.560 --> 0:01:49.040 trying to hold off on is that ground invasion because 0:01:49.040 --> 0:01:53.040 of the risks of these horrible atrocities that happened against 0:01:53.040 --> 0:01:55.960 civilians in times of war. And that's got to be 0:01:56.000 --> 0:01:58.640 one of Biden's main objectives, in addition to trying to 0:01:58.640 --> 0:02:02.440 stabilize the region and make sure that most importantly Aron 0:02:02.480 --> 0:02:03.080 stays out of this. 0:02:03.320 --> 0:02:05.120 Joem, we know what is for our's objective is the 0:02:05.160 --> 0:02:07.800 automate objective you alluded to it wipe out her mass. 0:02:08.120 --> 0:02:10.639 Let's talk about how difficult that is to achieve. Where 0:02:10.760 --> 0:02:13.799 is the leadership of a mass, where's the financing full 0:02:13.800 --> 0:02:16.120 ha mass come from. How do you wipe out her 0:02:16.160 --> 0:02:19.360 mask purely just by going into Gasa and having a 0:02:19.360 --> 0:02:20.359 full ground invasion. 0:02:22.320 --> 0:02:23.560 Well, obviously you can't. 0:02:23.639 --> 0:02:25.800 And I think what time is shown is that when 0:02:25.880 --> 0:02:29.080 going after these terrorist organizations, even when you go after 0:02:29.120 --> 0:02:31.680 the head of the head, when you successfully take out 0:02:31.720 --> 0:02:34.400 the head of these organizations, there's other leaders who will 0:02:34.480 --> 0:02:38.519 rise up. The US has been targeting Hamas financing networks 0:02:38.520 --> 0:02:43.639 for decades through money laundering efforts. They're going after their 0:02:43.680 --> 0:02:46.800 ability to conduct financial transactions in crypto. 0:02:48.000 --> 0:02:50.079 But it's unlikely to. 0:02:50.040 --> 0:02:54.000 Me that even if the Israelis are completely successful in 0:02:54.040 --> 0:02:57.240 this campaign, that the thread on their borders is going 0:02:57.280 --> 0:02:59.200 to go away because of the fact that there's so 0:02:59.360 --> 0:03:04.640 much history and anger here and you know, getting rid 0:03:04.680 --> 0:03:06.520 of Hamas probably means somebody else comes up. 0:03:06.600 --> 0:03:08.960 Especially given all of the protests and anger. There's been 0:03:09.000 --> 0:03:11.799 some fiery rhetoric out of Iran over the past couple 0:03:11.880 --> 0:03:16.200 of days threatening some full scale invasion of Israel. If 0:03:16.360 --> 0:03:21.080 there is any kind of ground escalation into Gaza, how 0:03:21.120 --> 0:03:24.160 can you read between the lines to understand just how 0:03:24.240 --> 0:03:27.320 much resolved there is by Iran to get more intimately 0:03:27.360 --> 0:03:31.320 involved to order has blowed troops to come in from 0:03:31.320 --> 0:03:31.760 the north. 0:03:33.040 --> 0:03:34.760 Yeah, that's one of the big questions in this war 0:03:34.840 --> 0:03:37.360 right now is does has Blah get involved? Does the 0:03:37.400 --> 0:03:41.320 war expand Israel's northern border. I think it's notable and 0:03:41.400 --> 0:03:44.520 interesting that the US and Israel have really gone out 0:03:44.520 --> 0:03:46.760 of their way to say, you know, we don't think 0:03:46.760 --> 0:03:50.120 Iran was directly involved in the attacks against Israel that 0:03:50.120 --> 0:03:54.920 occurred last weekend. Of course, Aaran is complicit in financing Hamas, 0:03:54.920 --> 0:03:58.360 financing Habola and giving them support over the years. So 0:03:58.920 --> 0:04:00.960 right now it looks like, you know, the US goal 0:04:01.000 --> 0:04:03.200 and the Israeli goals to keep the Iranians out of it. 0:04:03.480 --> 0:04:06.040 That doesn't mean you won't see, over a longer period 0:04:06.080 --> 0:04:08.800 of time kind of a shadow war that the Israelis 0:04:08.840 --> 0:04:12.040 a big conducting against Iran continue. That may not mean 0:04:12.120 --> 0:04:15.920 direct armed conflict, but it could mean cyber attacks, potentially 0:04:16.000 --> 0:04:20.120 targeted assassinations and things like that. So far, Iran's giving 0:04:20.120 --> 0:04:21.919 no indication that it wants to be involved, but is 0:04:21.960 --> 0:04:25.039 sending really strong warnings that if the Israelis escalate, they 0:04:25.160 --> 0:04:27.640 could get involved and that is really what makes the 0:04:27.640 --> 0:04:28.920 situation such a powder cake. 0:04:29.279 --> 0:04:32.320 John and Tom earlier this morning, we're really rightly pointing 0:04:32.360 --> 0:04:35.159 out how little we actually know, how difficult it is 0:04:35.200 --> 0:04:38.120 to ascertain with any clarity the facts on the ground 0:04:38.200 --> 0:04:41.479 in a fast moving war with a lot of sort 0:04:41.560 --> 0:04:46.039 of people of varying dependency giving information. John, how much 0:04:46.080 --> 0:04:49.279 has the landscape shifted over the past twelve to eighteen hours, 0:04:49.520 --> 0:04:52.440 given all the protests, given the outrage, given the statements 0:04:52.440 --> 0:04:58.600 from Egyptian and Cutter and Saudi Arabian leaders, spawning at. 0:04:58.560 --> 0:05:01.159 The hospital was obviously a maj your event in the 0:05:01.160 --> 0:05:04.279 course of this short war so far. But you know, 0:05:04.320 --> 0:05:06.520 there's a lot of ambiguity about who did it, how 0:05:06.520 --> 0:05:09.039 many people were killed, and it's really really difficult to 0:05:09.040 --> 0:05:11.840 ascertain the facts because there's no there's not a lot 0:05:11.880 --> 0:05:14.120 of independent media on the ground. It's not like a 0:05:14.160 --> 0:05:17.479 lot of forensic investigators can get into Gaza to figure 0:05:17.480 --> 0:05:20.200 out what actually happened. Some of the photographic evidence that 0:05:20.240 --> 0:05:23.279 came out this morning suggests the blast wasn't as large 0:05:23.320 --> 0:05:25.839 as initially said. But I think the key point here 0:05:26.160 --> 0:05:30.239 is that with Israel launching attacks on civilian populated areas, 0:05:30.320 --> 0:05:32.800 If it wasn't this hospital attack, it would have been 0:05:32.839 --> 0:05:34.880 something else. And it was only a matter of time 0:05:35.200 --> 0:05:39.760 before anger at the Israeli defense forces spilled over into 0:05:39.800 --> 0:05:43.000 the you know, the Arab streets and led to some 0:05:43.080 --> 0:05:46.159 blowback on Israel just because of the nature of these operations. 0:05:46.160 --> 0:05:49.880 And so you've got a very uncertain information environment and 0:05:49.920 --> 0:05:56.520 a very deadly military environment, and that the battle of 0:05:56.520 --> 0:05:58.840 the narrative is going to be really, really difficult for 0:05:58.880 --> 0:06:01.440 any one side to win in this situation. 0:06:01.640 --> 0:06:03.720 John, Let's talk about the military aspect of this as well, 0:06:03.760 --> 0:06:07.360 and let's finish there just going through this major monster 0:06:07.440 --> 0:06:09.760 de terrance that the US has been building gap in 0:06:09.800 --> 0:06:13.560 the Eastern Mediterranean. In addition to two aircraft carriers and 0:06:13.600 --> 0:06:16.360 the ships escorting them. Had a report from the Washington 0:06:16.360 --> 0:06:19.400 Post yesterday, the US is also sending an amphibious task 0:06:19.480 --> 0:06:23.719 force aboard warships. John, How meaningful is that as a 0:06:23.760 --> 0:06:25.560 deterrance in the Eastern met. 0:06:27.200 --> 0:06:29.599 I mean, militarily, nobody can defeat the United States, right, 0:06:29.600 --> 0:06:31.800 I mean, it's the most powerful army that's ever existed. 0:06:31.839 --> 0:06:36.040 It's got vast, seemingly limited resource, limitless resources. There's some 0:06:36.120 --> 0:06:38.760 question as the what ability they'd have to fight and 0:06:38.800 --> 0:06:41.720 to you know, support the Ukrainian effort and support the Israelis. 0:06:42.000 --> 0:06:44.560 But I think that the real question, uh, if I'm 0:06:44.680 --> 0:06:46.520 one of the regional players who are looking at getting 0:06:46.520 --> 0:06:49.000 involved in this in this conflict, is does the US 0:06:49.040 --> 0:06:51.760 have the political will to get involved in such a conflict. 0:06:52.200 --> 0:06:55.400 And I mean, you know, it's it's difficult. It's difficult 0:06:55.440 --> 0:06:58.400 to see the US committing troops on the ground here, 0:06:58.720 --> 0:07:02.080 but they obviously so are been supporting the Israelis, And 0:07:02.160 --> 0:07:03.839 I think what this really is is a show of 0:07:03.880 --> 0:07:06.480 force that's meant to deter any action. So there's no 0:07:06.640 --> 0:07:09.600 question that if there were to be any additional strikes 0:07:09.640 --> 0:07:13.880 beyond Gaza, that the US could get involved and win 0:07:13.920 --> 0:07:14.680 this decisively. 0:07:14.840 --> 0:07:17.560 Hi, John, going to get your perspective. We'll catch up soon, hopefully, John. 0:07:17.640 --> 0:07:18.080 Leave there. 0:07:18.240 --> 0:07:20.040 If you write a group on the current situation on 0:07:20.080 --> 0:07:22.240 the ground in Israel and across the Middle East of 0:07:22.280 --> 0:07:28.480 the moment, we do have to focus. 0:07:28.240 --> 0:07:30.320 On oil, given that we have seen that as the 0:07:30.320 --> 0:07:32.800 place that people are expressing some of their concern about 0:07:32.800 --> 0:07:38.720 the unrest percolating around some of the attacks, the explosions, 0:07:39.080 --> 0:07:41.600 the situation in the Middle East. Joining US now is 0:07:41.600 --> 0:07:44.600 Bloomberg's Will Kennedy in London, and Will, I just want 0:07:44.640 --> 0:07:46.960 to get your sense of what people in the oil 0:07:46.960 --> 0:07:50.400 market are looking at to understand how to play a 0:07:50.560 --> 0:07:53.920 fraud and very unclear story. 0:07:55.480 --> 0:07:57.520 Fort and unclear, I think is exactly right. And I 0:07:57.520 --> 0:08:00.160 think that the old market feels out of something, and 0:08:00.200 --> 0:08:02.640 I think the word I would use is twitchy. As 0:08:02.640 --> 0:08:06.400 things stand, there is no particular reason that oil flow 0:08:06.400 --> 0:08:08.680 should be disrupted or the oil should go a lot 0:08:08.760 --> 0:08:12.680 higher than here, although there were scenarios where things become 0:08:12.720 --> 0:08:15.840 a lot more drastic, and that's what is making people 0:08:16.800 --> 0:08:21.000 slightly twitchy. As I say. The most extreme scenario is, 0:08:21.040 --> 0:08:24.640 of course, Iran's involvement in a broader conflict, and that's 0:08:24.640 --> 0:08:27.480 why some of the headlines today where Iran said that 0:08:27.520 --> 0:08:33.480 they would embargo Israeli oil imports got the market going. Now, 0:08:33.880 --> 0:08:37.839 it's a rhetorical device. Iran imports very little oil two 0:08:37.880 --> 0:08:40.280 hundred thousand dollars a day. It gets it from non 0:08:40.280 --> 0:08:44.600 Middle Eastern countries, places like Azerbaijan and Kazakhstan, and other 0:08:44.640 --> 0:08:46.920 people wouldn't join in the embargo anyway, so it's not 0:08:47.240 --> 0:08:51.560 a fundamentally important piece of news. But this increasing rhetoric 0:08:52.320 --> 0:08:53.480 gets the market excited. 0:08:53.720 --> 0:08:56.840 Will the map about in nineteen sixty seven and nineteen 0:08:56.920 --> 0:09:00.120 seventy three is something like one hundred and forty miles 0:09:00.480 --> 0:09:04.720 from the southern edge of Gaza into Egypt, spilled into 0:09:04.800 --> 0:09:08.680 Egypt down to the Suez Canal. In any of this 0:09:09.240 --> 0:09:11.319 is the Suez Canal at risk. 0:09:13.280 --> 0:09:15.680 I don't think that's a fundamental concern for oil traders, 0:09:15.679 --> 0:09:18.960 but I think that shipping is a concern in more 0:09:19.040 --> 0:09:22.280 extreme and so the place, so the place that people 0:09:22.320 --> 0:09:24.920 worry about, the straits of all moves the gap of 0:09:25.000 --> 0:09:28.320 the the place at which the Persian Gulf joins the 0:09:28.320 --> 0:09:31.560 Indian Ocean, through which all the a exports from southern Iraq, 0:09:31.800 --> 0:09:34.240 from Iran, from Q eight, from Saudi Arabia, from the Oe. 0:09:34.760 --> 0:09:39.760 They all go through this pinch point, over which Iran 0:09:39.840 --> 0:09:43.160 has a big amount of control. So the most extreme 0:09:43.240 --> 0:09:46.520 MiG scenario that people worry about, the scenario that would 0:09:46.559 --> 0:09:50.199 send oil way past one hundred and fifty dollars, is 0:09:50.559 --> 0:09:53.559 if shipping became impeded through the straights formats. Now it's 0:09:53.600 --> 0:09:56.000 not likely. I don't think people need to worry about 0:09:56.000 --> 0:09:59.480 that right now. But that is the extreme case, the 0:10:00.080 --> 0:10:04.080 worst case scenario that people think about as this situation develops. 0:10:04.600 --> 0:10:07.920 Interesting to see, Will Kennedy, If I look then at oil, 0:10:08.080 --> 0:10:12.000 here are you it's Jave Blast and your entire team, 0:10:12.080 --> 0:10:15.600 particularly the team and the trenches here of hydrocarbons? Are 0:10:15.600 --> 0:10:18.440 you framing out a path to one hundred? Are you 0:10:18.520 --> 0:10:21.760 even able to do that with this geopolitical uncertainty? 0:10:22.880 --> 0:10:25.320 I think it's quite binary. I think the main scenario 0:10:25.480 --> 0:10:28.360 is that we stay in the sort of eighty to 0:10:28.480 --> 0:10:31.440 ninety five range. There's a sort of five dollars risk 0:10:31.520 --> 0:10:33.640 premium in the market. Now, that's what a senior oil 0:10:33.679 --> 0:10:36.080 trader described to me in a conversation yesterday, that this 0:10:36.120 --> 0:10:40.120 whole crisis has probably added five bucks. But in most scenarios, 0:10:40.160 --> 0:10:43.480 there's not significant disruption to oil flows and things carry 0:10:43.520 --> 0:10:45.880 on pretty much as they are, and there's concerned about 0:10:45.880 --> 0:10:48.840 the macro and the buypack. But there is a binary 0:10:48.840 --> 0:10:52.240 scenario that there's an extreme but unlikely scenario quas go 0:10:52.360 --> 0:10:54.719 much higher. And one interesting thing we've seen is some 0:10:54.800 --> 0:10:57.880 activity in the options market where people are buying calls 0:10:57.920 --> 0:11:00.480 well above one hundred dollars, which shows that they're people 0:11:00.520 --> 0:11:05.400 who are buying protection against those unlikely but sevia scenario. 0:11:05.440 --> 0:11:07.880 Well, Kennedy, stay where this is, Lisa. The emotion of 0:11:07.920 --> 0:11:11.959 the President of the United States speaking to people first 0:11:11.960 --> 0:11:15.760 responders and people who are directly associated with the horror 0:11:16.240 --> 0:11:18.960 in the Eastern Mediterranean, in Israel and in Gossom. 0:11:19.160 --> 0:11:22.480 This comes after a reported meeting between President Biden and 0:11:22.520 --> 0:11:26.080 the war cabinet, including but you mean Natanyahu. A big 0:11:26.200 --> 0:11:29.959 question around what the focus was given. A diplomacy has 0:11:30.040 --> 0:11:33.600 really been at least put on pause, if not shattered 0:11:34.040 --> 0:11:37.840 due to some of the reactions overnight. Now President Biden 0:11:38.240 --> 0:11:41.520 going around and meeting with some of those in Israel 0:11:41.640 --> 0:11:44.120 in the show of support that he is that he 0:11:44.200 --> 0:11:44.839 is demonstrated. 0:11:45.200 --> 0:11:47.959 It's a diplomatic issue here. But what I find so 0:11:48.640 --> 0:11:52.960 fundamental is the immediacy of this new war or the 0:11:53.000 --> 0:11:56.760 immediacy you know, to take it away from more of conflict, 0:11:56.880 --> 0:11:58.920 and that the film is in real time and it 0:11:59.000 --> 0:12:02.720 adjusts the diploma see and the optionality in real time. 0:12:02.920 --> 0:12:05.560 There's a question also about any kind of escalation, which 0:12:05.559 --> 0:12:07.960 is what people in the market have been watching. I 0:12:08.040 --> 0:12:11.160 am curious, will Kennedy with us still here and I 0:12:11.200 --> 0:12:14.439 am curious from your vantage point. How you interpreted some 0:12:14.520 --> 0:12:17.280 of the Iranian rhetorics saying that they were going to 0:12:17.960 --> 0:12:21.480 call for an Israeli embargo on oil, talking about the 0:12:21.480 --> 0:12:25.720 potential for escalation. How are people in your industry reading 0:12:25.800 --> 0:12:30.400 through this to understand what's real, what's potentially disruptive, and 0:12:30.440 --> 0:12:30.800 what's not. 0:12:32.440 --> 0:12:35.480 I think the comments from Iran today were rhetoric. I 0:12:35.520 --> 0:12:38.520 don't think they will have much real world impact. As 0:12:38.559 --> 0:12:42.440 I said, Iran sorry, Israel imports just over two hundred 0:12:42.440 --> 0:12:45.000 thousand dollars a day. That's minuscule in the context of 0:12:45.000 --> 0:12:48.880 the global market. It gets that oil mostly from countries 0:12:48.920 --> 0:12:53.000 in the form of Soviet Union. But the rhetoric matters here, 0:12:52.760 --> 0:12:57.600 the background matters here, and as the situation deteriorates, as 0:12:58.880 --> 0:13:04.679 Iran's words become more severe. I think that Wabi's trade 0:13:04.760 --> 0:13:08.360 is that they have to think about worst case in AliOS, 0:13:08.400 --> 0:13:11.360 as I said earlier, and that's the background they're looking at. 0:13:11.400 --> 0:13:14.520 Any signs wise, I'm about it. I stepping out up. 0:13:14.679 --> 0:13:17.200 Well, Kennedy, thank you for the oil brief from you 0:13:17.320 --> 0:13:32.720 and your team, particularly in Europe and in Dubai. Joining 0:13:32.760 --> 0:13:35.880 us now with decades of perspective on the shifts in 0:13:35.920 --> 0:13:39.560 Global Wall Street. Gerard Cassidy to say he's large bank 0:13:39.679 --> 0:13:44.560 analyst at Canada's RBC Capital Markets, barely describes a perspective. 0:13:44.960 --> 0:13:46.920 Gerard to rephrase. 0:13:46.440 --> 0:13:49.640 My question to Shanali where she beat me down and said, Tom, 0:13:49.679 --> 0:13:51.680 you don't know what you're talking about. Let me go 0:13:51.720 --> 0:13:54.360 to you, Gerard, to save the day. And that is 0:13:54.520 --> 0:13:59.000 I'm sensing a new Global Wall Street. They really want 0:13:59.080 --> 0:14:03.720 persistent cares. Is James Gorman showing the future to the 0:14:03.800 --> 0:14:04.920 other banks. 0:14:05.040 --> 0:14:08.200 Tommy, I think you're really onto something. And you've got 0:14:08.200 --> 0:14:12.280 to give James Gorman credit. He's really changed Morgan Stanley 0:14:12.600 --> 0:14:15.280 from where it was back in two thousand and nine 0:14:15.480 --> 0:14:19.520 when it was heavily reliant on trading and investment banking, 0:14:19.560 --> 0:14:23.840 and diversified into the wealth management or retail brokerage business 0:14:23.840 --> 0:14:25.960 if you want, as well as asset management. 0:14:26.200 --> 0:14:29.280 And it really comes down to consistency. 0:14:28.520 --> 0:14:31.800 Of earnings or consistency of cash flow, as you point out, 0:14:32.000 --> 0:14:34.640 and that's what Golman tried to do with their expansion 0:14:34.760 --> 0:14:38.600 into the consumer banking business, which has failed miserably, of course, 0:14:38.800 --> 0:14:41.840 and they're exiting that now. They want the model like 0:14:41.880 --> 0:14:45.280 a JP Morgan, which is diverse fight revenue or Morgan Stanley, 0:14:45.440 --> 0:14:47.760 which is less diverse fight than JP Morgan, but it's 0:14:47.800 --> 0:14:50.360 still more diverse fight than where it was back in O. 0:14:50.480 --> 0:14:52.600 Nine, Jodas you know, banks have been a pretty lousy 0:14:52.640 --> 0:14:55.440 investment in the stock market this year. Is JP Morgan 0:14:55.520 --> 0:14:58.560 versus everyone else? JP Morgan up here today by ten percent? 0:14:58.640 --> 0:15:02.200 Everybody asked down the down hard, Jeff. What separates what's 0:15:02.200 --> 0:15:04.200 happened at JP Morgan from the rest. Is it just 0:15:04.280 --> 0:15:05.040 First Republic? 0:15:05.440 --> 0:15:06.720 John, That's part of it. 0:15:06.760 --> 0:15:09.800 But the performance for JP Morgan, even prior to them 0:15:09.840 --> 0:15:13.080 acquiring First Republic, was better than the back And I 0:15:13.120 --> 0:15:16.000 think what you have here is a flight to quality. 0:15:16.080 --> 0:15:19.920 Everybody knows JP Morgan is one of the premier US 0:15:19.960 --> 0:15:23.960 global bank. He's demonstrated that with very good results, strong 0:15:24.080 --> 0:15:27.960 leadership of course under Jamie Diamond and his senior management team. 0:15:28.360 --> 0:15:30.880 And every time John we go out and talk to 0:15:30.960 --> 0:15:35.960 institutional investors, the scar tissue from March and May is 0:15:36.040 --> 0:15:39.040 very thick and people are underweight the banks, and when 0:15:39.040 --> 0:15:41.320 we talk to them, they always tell us we're underweight 0:15:41.400 --> 0:15:42.680 the banks, but we own one. 0:15:42.560 --> 0:15:45.360 Bank, JP Morgan. JP Morgan is owned around the world. 0:15:45.800 --> 0:15:47.440 When we look back at this period your ard, Are 0:15:47.440 --> 0:15:48.920 we going to say that this was the year the 0:15:49.040 --> 0:15:52.480 JP Morgan consolidated its heft at the expense of a 0:15:52.520 --> 0:15:53.520 lot of smaller banks. 0:15:53.960 --> 0:15:56.560 I always say, Lisa that what JP Morgan has done 0:15:56.640 --> 0:16:00.520 has shown that the diversity of revenue and very sharp, 0:16:00.800 --> 0:16:05.160 you know, very focused management by the Jamie Diamond and 0:16:05.160 --> 0:16:09.120 his senior team really has demonstrated really strong numbers. We 0:16:09.120 --> 0:16:11.800 were talking a moment ago, Tom mentioned return on equity 0:16:12.080 --> 0:16:15.080 and if you look at the consumer banking business for 0:16:15.440 --> 0:16:18.480 Bank America on the morning hand Diamond at JP Morgan, 0:16:18.720 --> 0:16:22.680 the consumer banking businesses are earning close to forty percent 0:16:22.800 --> 0:16:26.840 return on equity and as we all know, that's incredibly 0:16:26.920 --> 0:16:28.480 I for banking businesses. 0:16:28.600 --> 0:16:29.560 That's what's driving it. 0:16:29.680 --> 0:16:32.280 And JP Morgan as well on the leaders in consumer 0:16:32.320 --> 0:16:33.880 banking such as in Bank. 0:16:33.720 --> 0:16:37.560 America, they are though the leading players at a time 0:16:37.640 --> 0:16:40.560 when they can be selective for the top rated consumers. 0:16:40.640 --> 0:16:40.800 Right. 0:16:40.800 --> 0:16:43.320 And this is something that we pointed out according to 0:16:43.360 --> 0:16:47.080 Shanelli Bosik or own Hinelli Bossic yesterday this morning. What 0:16:47.120 --> 0:16:50.600 we're not talking about citizens financial missing on net interest income, 0:16:50.720 --> 0:16:54.320 United Community missing on net interest income. Ally financial missing 0:16:54.360 --> 0:16:58.600 on net interest in margin and also having fewer Autoland originations, 0:16:58.600 --> 0:17:02.240 and previously thought, how much is this story dividing even 0:17:02.320 --> 0:17:05.520 further between the biggest banks and the regionals that are 0:17:05.520 --> 0:17:07.200 still in a world of hurt. 0:17:07.240 --> 0:17:09.439 Liza, it's a good point because some of them have 0:17:09.600 --> 0:17:12.520 this she picked out amongst the big regional bank citizens 0:17:12.520 --> 0:17:15.080 it's actually the only one that has missed today when 0:17:15.080 --> 0:17:18.040 you look at mnt US Bancorp. 0:17:19.080 --> 0:17:21.400 And others, their in line is slightly better. 0:17:21.400 --> 0:17:24.239 But you're right about certain banks have missed and it 0:17:24.280 --> 0:17:26.040 has to do with and you touched on it in 0:17:26.080 --> 0:17:30.239 your earlier comments about the non interest bearing deposits. The 0:17:30.280 --> 0:17:33.520 banks with the non interest bearing deposits are going to 0:17:33.560 --> 0:17:36.360 do very well in this higher rate environment because those 0:17:36.400 --> 0:17:40.800 deposits don't pay any just obviously, but they don't move either. 0:17:41.400 --> 0:17:45.040 People need operational accounts personally, we all do, as you know, 0:17:45.359 --> 0:17:48.439 as well as companies, and that money is gold in 0:17:48.520 --> 0:17:51.160 an environment like today, and the banks with the higher 0:17:51.280 --> 0:17:54.600 levels of non interest bearing deposits will do pretty well. 0:17:54.800 --> 0:17:57.440 Jared, I have to admit, whenever the comments from Brian 0:17:57.480 --> 0:18:01.480 Monahan with David Westone, I was kind of surprised job 0:18:01.520 --> 0:18:03.280 because he was talking about the consumer slow down. 0:18:03.320 --> 0:18:04.240 Can we just finish there. 0:18:04.600 --> 0:18:08.360 Retail sounds look great yesterday, really broad based, big upside surprise. 0:18:08.680 --> 0:18:10.600 Then the Bank for America boss comes out and says, 0:18:10.600 --> 0:18:12.560 the FED is basically achieve what it wanted to achieve. 0:18:12.560 --> 0:18:14.960 We've got a consumer slow down, jod, Is that consumer 0:18:15.040 --> 0:18:17.240 slowed down for Bank for America or is that a 0:18:17.280 --> 0:18:19.760 broader story for the economy? Which one is it? 0:18:20.240 --> 0:18:21.080 John good point? 0:18:21.280 --> 0:18:23.600 And the cross currents today, it's always easy to say 0:18:23.640 --> 0:18:26.440 today is more challenging than ten years ago or during 0:18:26.480 --> 0:18:29.560 the financial crisis. It's always challenging. But the cross currents 0:18:29.560 --> 0:18:32.159 today are pretty strong. And you just summed it up 0:18:32.240 --> 0:18:35.560 very well. So we're hearing from some folks the consumer 0:18:35.680 --> 0:18:37.720 is slowing down. But then you see the retail sales 0:18:37.800 --> 0:18:40.200 number and it was quite impressive. And if you look 0:18:40.200 --> 0:18:42.720 at the real GDP now number which comes out of 0:18:42.760 --> 0:18:45.400 the Atlanta FED, which is the current estimate for real 0:18:45.480 --> 0:18:49.200 GDP this quarter third quarter is over five percent. 0:18:49.760 --> 0:18:51.920 Is crazy. But I would say that it's not Bank 0:18:51.960 --> 0:18:53.360 America specific, and. 0:18:53.320 --> 0:18:55.720 I would say morning hand and response to my question 0:18:55.800 --> 0:18:58.080 on the call, actually he was pointing out that he 0:18:58.160 --> 0:19:00.919 thinks it's going to stay around this level. The higher 0:19:00.960 --> 0:19:03.720 spending a year ago was unusually strong for them, high 0:19:03.760 --> 0:19:06.680 single digits. Now it's a round four percent should drop 0:19:06.720 --> 0:19:09.359 out about these levels, but it's still positive growth. 0:19:09.480 --> 0:19:11.960 They've been more selective about the clients they serve at LEASTA, 0:19:11.960 --> 0:19:13.560 and I've been talking about this for the last twenty 0:19:13.560 --> 0:19:15.280 four rounds actually off the back of the data that 0:19:15.280 --> 0:19:19.080 Shnadi shared with us. These credit scores of these customers, 0:19:19.160 --> 0:19:21.960 Gerard are so so high. Who are they serving in 0:19:22.040 --> 0:19:26.159 this country just a really small slice of the economy. 0:19:26.240 --> 0:19:28.560 I think they're serving guys like you, John, and they're 0:19:28.680 --> 0:19:31.840 deserving all the you know, the higher propity credits. 0:19:32.119 --> 0:19:34.879 So it's close to way hundred Yerrard, don't disrupt it. 0:19:35.040 --> 0:19:38.560 Yeah, I am at two forty, very focused on it. 0:19:38.600 --> 0:19:43.159 How's your credit RNGWO? It doesn't quick but. 0:19:43.240 --> 0:19:45.920 Quickly, John, You're bringing up a really good point, and 0:19:46.000 --> 0:19:48.240 I recommend. I know you guys are busy, but look 0:19:48.280 --> 0:19:50.960 at their slide they put in their deck Bank America 0:19:51.000 --> 0:19:54.280 where they compare themselves today to two thousand and nine, 0:19:54.800 --> 0:19:58.040 totally different company d risk and you put your thumb 0:19:58.040 --> 0:19:58.280 on it. 0:19:58.400 --> 0:20:01.840 You're going, you know, higher score consumer as well as corporates. 0:20:02.240 --> 0:20:04.639 Joe Cassidy John go to catch up always, says a 0:20:04.760 --> 0:20:05.239 zombie SI. 0:20:09.960 --> 0:20:12.840 He is senior vice president of Stability at Deutsche Bank. 0:20:12.880 --> 0:20:16.199 Binkram Chada joins US now chief Global Strategist head an 0:20:16.280 --> 0:20:20.119 asset allocation as well. What an urge to go to 0:20:20.280 --> 0:20:24.120 cash right now? Or go to five and point x 0:20:24.320 --> 0:20:27.919 x percent money market fund? Describe how you tell the 0:20:27.960 --> 0:20:32.359 Deutsche Bank world don't go to kesh. 0:20:32.440 --> 0:20:34.679 I think that you know, if you think about the 0:20:34.680 --> 0:20:40.200 equity market, you think about earnings most important, basically fundamental 0:20:40.720 --> 0:20:44.440 near and medium term. I would argue, and the story 0:20:44.480 --> 0:20:48.720 with earnings is a very simple story. They bottomed in 0:20:48.760 --> 0:20:52.280 the fourth quarter of last year. We've had solid sequential 0:20:52.320 --> 0:20:55.639 growth in the first quarter. Is the second quarter, we 0:20:55.680 --> 0:20:58.399 are pretty constructive. When we get in the third quarter 0:20:58.720 --> 0:21:02.359 so far, what we've gotten better than our constructive. 0:21:01.800 --> 0:21:03.200 View is the way I would put it. 0:21:03.920 --> 0:21:06.119 How did but I went back yesterday, Benkie, and I 0:21:06.160 --> 0:21:07.840 looked at World War two and I went right for 0:21:07.960 --> 0:21:09.639 you can do this on the Bloomberg folks. You look 0:21:09.720 --> 0:21:12.919 right from Pearl Harbor out the VJ Day and it 0:21:13.000 --> 0:21:16.199