WEBVTT - Silvergate Implosion and SVB Security Sale Spur Bank Selloff

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<v Speaker 1>This is Bloomberg Daybreak Asia for this Friday, March tenth

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<v Speaker 1>in Hong Kong, Thursday March ninth in New York and

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<v Speaker 1>coming up today, US equities sell off, notching their worst

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<v Speaker 1>day in two weeks as bank stocks tumble. Traders look

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<v Speaker 1>to tomorrow's jobs report and whether it might prompt more

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<v Speaker 1>hawkish action from the FIT and the Bank of Japan

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<v Speaker 1>may stand pat during Governor Harihiko Kuroda's final meeting, Biden

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<v Speaker 1>budget has increase in defense spending aimed at the end

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<v Speaker 1>of Pacific. The budget would increase US tax on wealthy

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<v Speaker 1>and corporations. Heads of US Intelligence say they don't believe

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<v Speaker 1>China wants to fight a war over Taiwan. I'm at

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<v Speaker 1>Baxter with Global News. That's all straight ahead on Bloomberg

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<v Speaker 1>Daybreak Asia, the business news you need to start your

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<v Speaker 1>day in just one fifteen minute podcast available on Apples, Spotify,

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<v Speaker 1>the Bloomberg Business app and everywhere you get your podcasts.

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<v Speaker 1>Good morning, I'm de Prisoner and I'm Brian Curtis. Here

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<v Speaker 1>are the stories we're following today. Traders getting that US

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<v Speaker 1>payrolls data for the month of February to be released

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<v Speaker 1>at eight thirty in the morning on Friday, Wall Street

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<v Speaker 1>Time Bloomberg's Michael McKee with a preview. January's jobs report

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<v Speaker 1>turned the financial world on its head. More than half

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<v Speaker 1>a million jobs created the government said, almost three times

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<v Speaker 1>what was forecast. The FEDS slowing the pace of rate

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<v Speaker 1>increases is now expected to tighten more and faster unless

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<v Speaker 1>the February numbers reverse course, and that is possible. Economist

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<v Speaker 1>say the January report was boosted by unexpectedly good weather

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<v Speaker 1>and annual statistical adjustments. It might be revised lower and

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<v Speaker 1>estimates put February's job gains back at trend. Another surprise, though,

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<v Speaker 1>and expect a lot of market turmoil. Michael McKee, Bloomberg Daybreak. AJA.

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<v Speaker 1>Well after the bell, we heard from Oracle. The company

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<v Speaker 1>reported quarterly sales pretty much in line with estimates. However,

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<v Speaker 1>the cloud business really failed to meet expectations for higher growth.

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<v Speaker 1>We have more from Bloomberg's Charlie Pellet. Fiscal third quarter

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<v Speaker 1>revenue increased eighteen percent to twelve point four billion dollars,

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<v Speaker 1>just short of analysts average estimate of twelve point four

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<v Speaker 1>one billion, according to data compile by Bloomberg. Cloud revenue

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<v Speaker 1>the highly watched segment that Oracle has been trying to expand,

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<v Speaker 1>rose forty five percent to four point one billion dollars

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<v Speaker 1>in the period ending February twenty eighth. While Oracle's cloud

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<v Speaker 1>infrastructure business renting computer power and storage has been a

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<v Speaker 1>relative laggard in the market, analysts have been optimistic the

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<v Speaker 1>services are gaining customers and helping accelerate growth in New York.

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<v Speaker 1>Charlie Pellet Bloomberg Daybreak Asia Well, a former Goldman Sachs banker,

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<v Speaker 1>has been sentenced in the one MDB International massive fraud

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<v Speaker 1>scheme that story from Bloomberg's and Kates Roger Ang has

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<v Speaker 1>been sentenced to ten years in prison after being convicted

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<v Speaker 1>last April of conspiring to violate US anti bribery laws

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<v Speaker 1>and a launder money. The fifty one year old former

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<v Speaker 1>gold managing director and as one time boss were accused

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<v Speaker 1>of conspire with a financier to pay tens of millions

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<v Speaker 1>of dollars to officials to win business with One Malaysia,

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<v Speaker 1>a state controlled economic development company. The deals were arranged

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<v Speaker 1>by Goldman, which later paid eight billion dollars in penalties

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<v Speaker 1>for its role in the scam and is still subject

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<v Speaker 1>to criminal charges in Malaysia, in Washington and Kate's Bloomberg

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<v Speaker 1>Daybreak Asia and in the States, the nation's largest bank

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<v Speaker 1>has been ordered to turnover records connected to an alleged

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<v Speaker 1>sex trafficking ring more from Bloomberg's Tom Busby. JP Morgan

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<v Speaker 1>Chase has been ordered to turn over more records from

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<v Speaker 1>its CEO, Jamie Diamond, in relation to a lawsuit by

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<v Speaker 1>the US Virgin Islands, which accuses the bank of being

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<v Speaker 1>complicit and facilitating the late Jeffrey Epstein's sex trafficking ring.

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<v Speaker 1>A Manhattan federal judge issued the order on Thursday, a

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<v Speaker 1>day after the bank sued a former top executive, Jeff Staley,

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<v Speaker 1>whose relationship with Epstein is at the center of that

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<v Speaker 1>suit by the US Virgin Islands, as well as another

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<v Speaker 1>by some of Epstein's victims. Now, Epstein killed himself in

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<v Speaker 1>jail while awaiting sex trafficking charges in New York back

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<v Speaker 1>in twenty nineteen. JP Morgan Chase says Diamond is quote

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<v Speaker 1>not relevant to what it calls specious claims by the

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<v Speaker 1>US Virgin Islands, Tom Busby, Bloomberg Daybreak Asia. The Bank

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<v Speaker 1>of Japan will keep its stimulus unchanged most likely in

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<v Speaker 1>this last policy meeting before Governor Harihika Coroda steps down.

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<v Speaker 1>We get that preview from Bloombergs David in Glaze Phil.

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<v Speaker 1>Governor Coroda is known for shock and au tactics, many

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<v Speaker 1>economists do not expect him to deliver one this time.

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<v Speaker 1>The thinking is that Coroda will want to give his successor,

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<v Speaker 1>Kazoo Auieda an open hand when he takes over in April.

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<v Speaker 1>The BOJ will likely hold a short term rate at

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<v Speaker 1>minus point one percent and continue capping a tenure JGB

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<v Speaker 1>yield at half of one percent. Both Coroda and Ueida

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<v Speaker 1>have stated that the two percent inflation target has not

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<v Speaker 1>yet been secured. But further to the surprise angle, Goldman, Sachs, HSBC, NBNP,

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<v Speaker 1>Paraba are among the few that think that Coroda might

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<v Speaker 1>just do it, that he might adjust are scrapped the

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<v Speaker 1>yield curve controlled policy. Will learn more later today. In

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<v Speaker 1>Hong Kong, I'm David Ingless bloom Rick Day Brick Asia.

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<v Speaker 1>The KBW Bank Index down seven point seven per Sad

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<v Speaker 1>and Doug. Investors will naturally worry that this SVB story

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<v Speaker 1>might be some sort of canary in the coal mine story,

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<v Speaker 1>but two points on that the top six banks in

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<v Speaker 1>the country and even the next biggest twenty have been

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<v Speaker 1>forced by regulators to maintain very high levels of capital,

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<v Speaker 1>so many in the industry analysts like Mike Mayo would

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<v Speaker 1>say the overall structure is very strong, and two that

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<v Speaker 1>this is very speculative area that SVB was loaning into

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<v Speaker 1>startups and vcs and smaller banks are like any other company.

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<v Speaker 1>I mean, they can run into trouble, making bad decisions,

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<v Speaker 1>their stocks can even go to zero. That's just the

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<v Speaker 1>way the system works. Painful for the company and as investors,

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<v Speaker 1>but perhaps not too far beyond that. Well, yeah, you

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<v Speaker 1>have a situation too where money that these startups raised

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<v Speaker 1>from venture capital firms get to posited at the bank

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<v Speaker 1>and as they burn through cash, which is becoming an

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<v Speaker 1>increasingly elevated situation. These cash burn rates are creeping up

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<v Speaker 1>as the economy slows down, more difficult to drive business. Right,

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<v Speaker 1>That's going to leave banks a little bit more exposed,

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<v Speaker 1>particularly in an environment where interest rates are rising and

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<v Speaker 1>there are concern over rising deposit cost and the bank

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<v Speaker 1>CEO Greg Becker held a conference call advising clients to

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<v Speaker 1>stay calm. However, the venture Capital firm founders. This is

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<v Speaker 1>the firm co founded by Peter til he advised companies

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<v Speaker 1>to take money out of SVB. Yeah, again an individual story,

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<v Speaker 1>but like you say, it does have a huge impact

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<v Speaker 1>on the banks generally because these higher bond yields, investors

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<v Speaker 1>have been pulling money out of the banks and investing

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<v Speaker 1>in US treasuries. And one of the reasons is the

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<v Speaker 1>banks have been slow to raise the interest that they

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<v Speaker 1>pay on deposits. So how they are managing that transition

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<v Speaker 1>is really important and it will shine the light in

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<v Speaker 1>the bank going forward. And we'll get more on this

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<v Speaker 1>when we get to our guest, Sheena Sistle, coming up

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<v Speaker 1>in a few moments. That will be after we get

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<v Speaker 1>to Global News our US President Joe Biden firing off

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<v Speaker 1>his opening budget bid amounting to some six point nine

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<v Speaker 1>trillion dollars. Head back to it with Global News in

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<v Speaker 1>the nine sixty News from at San Francisco, Eduardo, Yeah, Brian,

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<v Speaker 1>there's very targeted emphasis on China competition here. A major

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<v Speaker 1>increase of investments in the Indo Pacific part of the

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<v Speaker 1>Pacific Deterrence initiative from six point one billion to nine

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<v Speaker 1>point one billion. That being said, Congress appropriated eleven point

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<v Speaker 1>five billion for this year, so next year maybe even more.

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<v Speaker 1>It includes money for missile defense systems in Guam and Hawaii.

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<v Speaker 1>The whole package sets up a heated battle in the

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<v Speaker 1>US of our debt ceiling and government funding overall. Bloomberg

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<v Speaker 1>Joe Mathew runs through some of the asks twenty five

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<v Speaker 1>the tax on billionaires, a near doubling of the capital

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<v Speaker 1>gains tax, a hike in the corporate tax rate back

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<v Speaker 1>to twenty eight percent, and a higher personal income tax

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<v Speaker 1>rate of thirty nine point six percent for people making

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<v Speaker 1>over four hundred thousand dollars a year. The president says

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<v Speaker 1>those making less will not see tax hikes. So the President,

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<v Speaker 1>in a campaign type stump address in Philadelphia, says he's

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<v Speaker 1>seeking fairness around six hundred and fifty billionaires in America.

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<v Speaker 1>I was over a thousand, you know, with the average

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<v Speaker 1>tax they pay federal tax three, and he says they

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<v Speaker 1>should not pay less than a teacher or a firefighter.

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<v Speaker 1>Also said he would protect the so called entitlement programs

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<v Speaker 1>so security. My budget will not cut benefits, and it

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<v Speaker 1>will definitely won't sunset programs like some of my Niger

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<v Speaker 1>Republican friends want to do secure medicare through two and

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<v Speaker 1>fifteen beyond now. The President says he's proposing some deficit

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<v Speaker 1>reduction measures, but Bloomberg math says in twenty twenty four

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<v Speaker 1>would increase from one point six to eight one point

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<v Speaker 1>eight billion, from one six to one eight. His request

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<v Speaker 1>well has little chance of passing in this form didn't

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<v Speaker 1>even pass democratic legislature. Heads of US intelligence today are

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<v Speaker 1>saying they do not believe China wants a war over

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<v Speaker 1>Taiwan today. It is a House Intelligence Committee, and Director

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<v Speaker 1>of National Intelligence Avril Haynes, along with CIA Director William Burns,

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<v Speaker 1>says President she has taken notice of the Allied response

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<v Speaker 1>to Ukraine and says it would hurt his growth, but

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<v Speaker 1>then turned and said, never underestimate China intentions when it

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<v Speaker 1>comes to what it calls unification of Taiwan. US Treasury

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<v Speaker 1>Department says five Chinese companies are directly implicated and supplying

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<v Speaker 1>parts for Iranian drones that wind up in Russia killing Ukrainians.

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<v Speaker 1>It has imposed sanctions on them and Kiev. Dozens of

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<v Speaker 1>missiles launched all over Ukraine today, some eighty missiles, and

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<v Speaker 1>White House spokesman John Kirby says about forty percent of

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<v Speaker 1>Kiev now is without power and says that could well

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<v Speaker 1>just be the beginning. Do you think the next four

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<v Speaker 1>to six months is going to see more vicious fighting

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<v Speaker 1>on the ground in Ukraine? Yeah, the IAEA chief. Meanwhile,

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<v Speaker 1>I was asking for a safe so and be established

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<v Speaker 1>around the nuclear plants in the future and vote today.

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<v Speaker 1>NPC expected to easily back President Chi Jinping for his

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<v Speaker 1>third term. Global News powered by more than twenty seven

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<v Speaker 1>hundred journalist and analysts and over one hundred twenty countries.

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<v Speaker 1>In San Francisco, I'm at Baxter and this is Bloomberg.

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<v Speaker 1>I'm Bryan Curtis along with Paul Allen, and this is

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<v Speaker 1>Bloomberg Daybreak Asia. Our guest is shanea Sistle, President of

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<v Speaker 1>ben Reyan Capital. So Shana A lot going on the

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<v Speaker 1>jobs report, the Fed's interest rate policy, in light of

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<v Speaker 1>this SVB story, the BOJ meeting. What has your attention

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<v Speaker 1>the most this morning? I think the jobs report more

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<v Speaker 1>than anything. It's kind of interesting. The SVB story has

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<v Speaker 1>coming at such an interesting time because we just had

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<v Speaker 1>Herman Powell testifying in front of Congress talking about how

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<v Speaker 1>he's going to continue to be aggressive, that the economy

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<v Speaker 1>remains resilient and the job market remains tight, and then

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<v Speaker 1>all of a sudden you have this major news and

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<v Speaker 1>all the banks sell off, and all of a sudden

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<v Speaker 1>there's genuine people genuinely concerned about run on the bank.

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<v Speaker 1>And this is a large bank, this isn't a small bank.

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<v Speaker 1>And then there's the job report tomorrow, and with all

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<v Speaker 1>the panic around the banking system, if the job report

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<v Speaker 1>is good, that's not good for markets. Yeah, it's a

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<v Speaker 1>very interesting situation, isn't it? And how does this play

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<v Speaker 1>into your opinion about the chances of a recession and

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<v Speaker 1>if there is one, are we going to look back

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<v Speaker 1>on this moment as being somewhat pivotal. Well, I've always

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<v Speaker 1>been of the belief that we are going to have

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<v Speaker 1>a recession. I've been pretty consistent in believing that we're

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<v Speaker 1>going to have a shallow recession. There wasn't and I

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<v Speaker 1>still don't believe there's a lot of cracks in the

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<v Speaker 1>financial system that would warrant it being truly a devastating

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<v Speaker 1>type of recession like we saw after the Financial crisis.

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<v Speaker 1>But I do think that when you're starting to see

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<v Speaker 1>contagion because if you think about this, all kind of

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<v Speaker 1>started with the crypto custodians and then the banks that

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<v Speaker 1>dealt with crypto, and then a lot of the moneys

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<v Speaker 1>in crypto, in blockchain, and so that you're seeing, you know,

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<v Speaker 1>things spread. And I think Silicon Valley Bank is a

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<v Speaker 1>very unique situation. They are the biggest player in the

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<v Speaker 1>venture space. There's not really anybody else that has that

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<v Speaker 1>kind of exposure. But anytime you see a very large

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<v Speaker 1>bank of that caliber come under this kind of stress,

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<v Speaker 1>it can lead to additional stress kind of becoming pervasive

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<v Speaker 1>in the financial markets. And and so I think now

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<v Speaker 1>that's why I'm so concerned about the jobs report, because

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<v Speaker 1>if it's good, and all indications are it's going to

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<v Speaker 1>be a strong job report, it kind of puts the

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<v Speaker 1>feed in the corner. They kind have to stay with

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<v Speaker 1>the policy that they've they've been communicating. It may beg

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<v Speaker 1>this story about whether investors are more concerned now about

0:13:10.240 --> 0:13:14.520
<v Speaker 1>recession than they are runaway inflation. I think that that's

0:13:14.559 --> 0:13:18.320
<v Speaker 1>that's very true. I think so for instance, if you

0:13:18.320 --> 0:13:20.439
<v Speaker 1>get a week number, if you get if you get

0:13:20.440 --> 0:13:22.560
<v Speaker 1>a weak job's number, would that be good or bad

0:13:22.600 --> 0:13:25.800
<v Speaker 1>for the equity complex. I think that would be good

0:13:25.800 --> 0:13:29.800
<v Speaker 1>for the equity complex because I think that is one

0:13:29.840 --> 0:13:32.160
<v Speaker 1>of the key indicators that the FED is looking at

0:13:32.160 --> 0:13:35.360
<v Speaker 1>when making policy decisions. And one of the reasons why

0:13:35.400 --> 0:13:39.040
<v Speaker 1>they have started to look again at becoming more aggressive

0:13:39.040 --> 0:13:41.520
<v Speaker 1>and talking about fifty basis points instead of twenty five

0:13:42.080 --> 0:13:47.960
<v Speaker 1>is because they have not seen the labor markets become

0:13:48.000 --> 0:13:50.680
<v Speaker 1>weaker in any way continuously, a lot of tightness in

0:13:50.679 --> 0:13:56.240
<v Speaker 1>the labor markets, which impacts inflation. Where are you putting

0:13:56.240 --> 0:13:58.439
<v Speaker 1>money to work at the moment, and in particular, I'm

0:13:58.480 --> 0:14:01.600
<v Speaker 1>curious about your cash position. So I'm not a big

0:14:01.760 --> 0:14:06.959
<v Speaker 1>in using cash tactically, although I am using an HF.

0:14:07.360 --> 0:14:11.160
<v Speaker 1>The ticker is THHY. It's the agility shares TAY is

0:14:11.280 --> 0:14:14.240
<v Speaker 1>tactical income because I want to take advantage of yield

0:14:14.240 --> 0:14:16.040
<v Speaker 1>in the market, but I want to have some risk

0:14:16.200 --> 0:14:19.240
<v Speaker 1>management there. And that's a n HF that actually offers that.

0:14:19.560 --> 0:14:22.800
<v Speaker 1>There's another mutual fund, by counterpoint, that does something similar,

0:14:23.520 --> 0:14:26.080
<v Speaker 1>because I think there's a real opportunity, as you pointed

0:14:26.120 --> 0:14:29.440
<v Speaker 1>out earlier in your comments about the banks aren't really

0:14:29.480 --> 0:14:33.880
<v Speaker 1>paying any yield and so cash is not a good

0:14:33.880 --> 0:14:35.920
<v Speaker 1>place to be. That's a losing battle. You want to

0:14:35.920 --> 0:14:39.840
<v Speaker 1>be in fixed income, even if it's short duration, and

0:14:39.880 --> 0:14:41.520
<v Speaker 1>so I'm looking at ways that I can do that

0:14:42.120 --> 0:14:46.080
<v Speaker 1>and have some some risk management there. That said, you know,

0:14:46.080 --> 0:14:49.280
<v Speaker 1>the market seems to have positioned itself for fears to

0:14:49.320 --> 0:14:52.280
<v Speaker 1>the upside for interest rates and inflation. If we do

0:14:52.360 --> 0:14:54.320
<v Speaker 1>get a weak jobs report, as you say, it might

0:14:54.360 --> 0:14:57.360
<v Speaker 1>be actually very good for the stock market. Is it

0:14:57.400 --> 0:15:00.440
<v Speaker 1>possible that that, because of positioning, that you get a

0:15:00.480 --> 0:15:03.280
<v Speaker 1>real big bounce on let's say one hundred thousand jobs

0:15:03.280 --> 0:15:05.760
<v Speaker 1>created instead of you know, more than two hundred. I

0:15:05.800 --> 0:15:08.760
<v Speaker 1>think very well, we very well could. And the job

0:15:08.880 --> 0:15:11.760
<v Speaker 1>market and the tightness of the labor markets really does

0:15:11.920 --> 0:15:14.920
<v Speaker 1>kind of make it difficult for inflation to come down.

0:15:15.040 --> 0:15:19.160
<v Speaker 1>People are employed, people are spending. There's a number of

0:15:19.160 --> 0:15:23.680
<v Speaker 1>other you have to increase incomes and salaries in order

0:15:23.680 --> 0:15:25.880
<v Speaker 1>to attract people to jobs because there's not a lot

0:15:25.880 --> 0:15:28.400
<v Speaker 1>of people looking. There's a number of reasons why having

0:15:28.400 --> 0:15:32.000
<v Speaker 1>tight labor conditions is not a good thing, especially for inflation.

0:15:32.160 --> 0:15:35.120
<v Speaker 1>So if it's a weaker than expected jobs to report,

0:15:35.200 --> 0:15:37.040
<v Speaker 1>that would I would not be surprised to see a

0:15:37.080 --> 0:15:38.920
<v Speaker 1>bounce in the markets that would be seen as the

0:15:38.960 --> 0:15:42.440
<v Speaker 1>markets as a positive thing because it would take some

0:15:42.680 --> 0:15:45.080
<v Speaker 1>wind out of the FED sales. If you will and

0:15:45.160 --> 0:15:48.920
<v Speaker 1>make it, then I think closer about what they do

0:15:48.960 --> 0:15:53.960
<v Speaker 1>this month with their red hyke. This is Bloomberg Daybreak Asia,

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