Speaker 1: Bloomberg Audio Studios, Podcasts, radio News.
Speaker 2: This is Bloomberg Daybreak Weekend, our global look at the
Speaker 2: top stories in the coming week from our Daybreak anchors
Speaker 2: all around the world. Straight Ahead on the program, a
Speaker 2: look at earnings from the biggest banks on Wall Street.
Speaker 2: What they'll tell us about the health of the US economy.
Speaker 2: I'm Nathan Hager in Washington.
Speaker 3: I'm Caroline Hetkin. We away considering how climate change is
Speaker 3: hitting Europe the hottest.
Speaker 2: Plus this week's fresh record for Goal. What's ahead for
Speaker 2: everyone's favorite metal in the final months of the year.
Speaker 1: That's all straight Ahead on Bloomberg Daybreak Weekend on Bloomberg
Speaker 1: eleventh three year, New York, Bloomberg ninety nine to one, Washington, DC,
Speaker 1: Bloomberg ninety two nine, Boston, DAB Digital Radio, London, Serrius
Speaker 1: XM one T one, and around the world on Bloomberg Radio,
Speaker 1: dot Com and the Bloomberg Business app.
Speaker 2: Good day to you. I'm Nathan Hager, and we begin
Speaker 2: today's program with earnings from the biggest banks on Wall Street.
Speaker 2: JP Morgan, Chase, Goldman, Sachs, City Group and Wells Fargo
Speaker 2: kickoff big bank earning season with Bank of America and
Speaker 2: Morgan Stanley not too far behind. For more of what
Speaker 2: to expect, we're joined by Alison Williams, Senior analyst for
Speaker 2: Global Banks and Asset Managers at Bloomberg Intelligence. Allison, thanks
Speaker 2: for being with us. Let's just get into it what
Speaker 2: to expect, especially now that we've heard some comments from
Speaker 2: JP Morgan Chase CEO Jamie Diamond himself. What are you
Speaker 2: looking for from the big banks?
Speaker 4: Thanks for having me. Three key things that we're looking
Speaker 4: for for the big banks this week. First, the strength
Speaker 4: of markets is going to translate into further revenue and
Speaker 4: profit momentum, both for the third quarter and the outlook.
Speaker 4: We expect this could be a record year for capital
Speaker 4: markets revenue and that benefits all of the banks, especially Goldman,
Speaker 4: Sachs and Morgan Stanley, but JP Morgan the leader in
Speaker 4: absolute revenue. Second, we have the out of tail wind
Speaker 4: of improving coordinate interest income as RAY expectations are moving lower,
Speaker 4: while loan growth and in particular commercial loan growth is
Speaker 4: picking up. Third, credit remains solid and we will see
Speaker 4: some provisioning We expect for normalization and loan growth, but
Speaker 4: not much change to economic assumptions underlying reserves. So based
Speaker 4: on these three core trends, putting them together, we think
Speaker 4: their earnings could beat with upward revisions to estimates for
Speaker 4: twenty twenty five and twenty twenty six. We are seeing
Speaker 4: some estimate increases for the quarter, some positive revisions going
Speaker 4: into results, but notably when it comes to trading, which
Speaker 4: we think is going to be very strong. Analyst estimates
Speaker 4: do tend to be conservative, so we think there is
Speaker 4: room for upside there.
Speaker 2: Are you looking for any big shifts in market share
Speaker 2: when it comes to trading, because it seems like all
Speaker 2: of these banks are really good going after each other
Speaker 2: on that front, and we have seen this torrid rally
Speaker 2: in the stock market from the April low.
Speaker 4: We do think that the big are going to continue
Speaker 4: to get bigger. So the ship that we've seen over
Speaker 4: time is that, you know, banks like Goldman Sachs, Morgan Stanley,
Speaker 4: and JP Morgan have gained share. We've also seen Bank
Speaker 4: America and City Group gain over the very long term.
Speaker 4: But we think that this is going to be a
Speaker 4: quarter where we see outperformance, especially in the equity trading
Speaker 4: business from Goldman Sachs, who is the leader in that business,
Speaker 4: and absolute revenue Goldman is also the leader in M
Speaker 4: and A and we also expect them to have a
Speaker 4: quarter in that business. One of the key businesses that
Speaker 4: that has been helping the banks is prime brokerage and
Speaker 4: some of the larger hedge funds and the asset levels.
Speaker 4: You know, when we look at some of the largest
Speaker 4: hedge funds and we look at things like record equity
Speaker 4: prices around the globe, we do think that there's going
Speaker 4: to be some help to that business. We also saw
Speaker 4: record trading volume. You know, when we look at the
Speaker 4: underlying trends to trading, the equities trading business should be
Speaker 4: supported by continued strength and prime brokerage we saw some
Speaker 4: record balances last quarter. We think we're going to see
Speaker 4: new records this quarter. We also saw a record in
Speaker 4: US exchange trading volume, so that's a big business for
Speaker 4: the banks. But we're also going to see strength on
Speaker 4: the fixed income side of things, both within rates and
Speaker 4: spread trading. So really broad based strength at the banks
Speaker 4: and we think that that's really going to help all
Speaker 4: the competitors.
Speaker 2: And what are you looking for when it comes to
Speaker 2: commentary from these banks on the resilience of the consumer.
Speaker 2: That has been the driver for this economy, even when
Speaker 2: we're starting to see, you know, cracks in the labor market.
Speaker 2: When you think about banks like Bank of America and
Speaker 2: City Group that have more of a focus on households,
Speaker 2: what could they tell us when it comes to credit quality.
Speaker 4: To your point, we always do get an eye into
Speaker 4: the consumer for these banks. The one interesting thing that
Speaker 4: we're seeing at the industry level is the commercial side
Speaker 4: of low growth picking up. It really has been the
Speaker 4: credit card business that's been driving growth, especially at these
Speaker 4: large banks in recent years. But we are seeing a
Speaker 4: little bit of a shift to that on the commercial side,
Speaker 4: and we do think that that's healthy on the credit
Speaker 4: quality side of things. As I said, I do think
Speaker 4: that we see some normalization, but we don't expect to
Speaker 4: see big changes in economic assumption. So we think that
Speaker 4: the reserve building should be relatively modest.
Speaker 2: And when it comes to banks with a sort of
Speaker 2: a big wealth management focus, I'm thinking of Morgan, Stanley, Goldman, Sachs,
Speaker 2: those kind of firms. Is the bar high for them?
Speaker 4: The bar is high, but we think that they are
Speaker 4: going to deliver on that bar because, as I mentioned,
Speaker 4: we've seen global equity prices and global equity market capitalization
Speaker 4: hit a new record towards the end of September. We've
Speaker 4: seen new highs already in this fourth quarter, and that
Speaker 4: is very good for wealth and banking fees, both for
Speaker 4: the third quarter and the outlook going into this quarter.
Speaker 2: All right, well, we'll see as that big bank earning
Speaker 2: season kicks off early next week. That's Alison Williams with
Speaker 2: US senior analysts for global banks and asset managers at
Speaker 2: Bloomberg Intelligence. Alison, thank you. We move next to earnings
Speaker 2: from some of the regional banks, Citizens Financial, First, Horizon,
Speaker 2: PNC Financial Services. They're among the flood of lenders opening
Speaker 2: their books this week. Let's bring in Herman Chan to
Speaker 2: preview those results. Herman's a senior analyst for US regional
Speaker 2: banks at Bloomberg Intelligence. These banks have been in the
Speaker 2: spotlight Herman. Of course, these results are coming off the
Speaker 2: heels of the fifth Third Bank deal for Co America
Speaker 2: that we all remember so much about. So should we
Speaker 2: be looking for more consolidation chatter when the banks report
Speaker 2: this week?
Speaker 5: I think that's going to be the top question within
Speaker 5: the annas community is which banks are going to be
Speaker 5: acquisitive and which banks potentially are you thinking about selling themselves.
Speaker 5: We've seen, as you mentioned, the Fifth Third co America deal,
Speaker 5: and that comes on the heels of P and C
Speaker 5: buying a bank in Colorado, Club First Bank, which really
Speaker 5: boosts their Denver presence, and also Huntington, which is an
Speaker 5: Ohio based lender that's going into Texas with It's a
Speaker 5: very text deal. So there is definitely some consolidation that's
Speaker 5: brewing and we'd expect that continue going forward.
Speaker 2: And of course Fifth Third and co America are both
Speaker 2: going to be among those banks opening their books. What
Speaker 2: are you expecting specifically from those results?
Speaker 5: Yeah, so Fifth Third specifically has talked about some strong
Speaker 5: lending trend, so that's great to see, and we'd expect
Speaker 5: some further improvement in their top line. What was the
Speaker 5: surprise for a lot of the investment community is that
Speaker 5: Fifth Third mentioned that they are ensineered in this Tricolor bankruptcy,
Speaker 5: so that's going to create a fairly large credit loss
Speaker 5: for them, which will hit the third quarter numbers. We
Speaker 5: view that as more of a one off issue that
Speaker 5: shouldn't reverberate throughout the entire loan book and throughout the industry,
Speaker 5: but it is something that will affect their their three
Speaker 5: key reporting. In terms of America, co America has been
Speaker 5: one of the banks that has taken a bit longer
Speaker 5: to recover from the SVB issues a couple of years back,
Speaker 5: and so they're they're along the way of trying to
Speaker 5: shore up their balance sheet in terms of their deposits
Speaker 5: and deposit repricing and growing loans, but that'll be more
Speaker 5: steady or going forward, and get the fact that they're
Speaker 5: going to do this deal for fifth third, I think
Speaker 5: that's going to be less of a priority for a
Speaker 5: lot of the analysts and investors.
Speaker 2: Are there some other banks reporting this week that could
Speaker 2: be in a similar situation as co America and potentially
Speaker 2: be acquisition targets themselves.
Speaker 5: Yeah, that's a good question. That's one of the things
Speaker 5: that we'll try to suss out. There are banks that
Speaker 5: in our coverage that we think are probably better buyers
Speaker 5: than sellers at this point. So banks like Regents, which
Speaker 5: operates in the Southeast and has a really strong valuation
Speaker 5: multiple that has the currency to really do deals. Another
Speaker 5: bank based in Buffalo, New York, M and T Bank
Speaker 5: also has a track record of doing deals and has
Speaker 5: a strong currency to do deals. So those are the
Speaker 5: ones that I think the market's going to focus on
Speaker 5: in terms of they're going to be the next to
Speaker 5: potentially be inquisitive.
Speaker 2: You mentioned one earlier, PNC Financial talking about their expansion
Speaker 2: plans in the Southwest in particular. Do you expect that
Speaker 2: to show up in the results and bolster the balance sheet?
Speaker 5: At this point, that deal needs to be closed, But
Speaker 5: I think the next question for P and C in
Speaker 5: particular is what's next for them. They've been vocal about
Speaker 5: potentially doubling their balance sheet to over a trillion dollars
Speaker 5: in assets, and this deal, while helpful, it's not going
Speaker 5: to get them there anytime soon. So there's going to
Speaker 5: be some organic growth, but really there's going to be
Speaker 5: more consolidation over the next several years. Where do they
Speaker 5: go next. They've done the deal with First Bank, They've
Speaker 5: acquired BBVA USA, which really is the jump start for
Speaker 5: their south West and Sunbelt expansion into California as well,
Speaker 5: and now what's a coast to coast lenders? So where
Speaker 5: do they grow from here? That's going to be the
Speaker 5: next question.
Speaker 2: Interesting Now, one other big I mentioned earlier has been
Speaker 2: coming off its own deals as well. What are you
Speaker 2: looking for from Citizens? Yeah.
Speaker 5: Citizens has done a string of deals over the past
Speaker 5: few years. They really filled in their market footprint which
Speaker 5: was missing in the New York City metro area with
Speaker 5: Investors Bank Corp. And New Jersey and then they acquired
Speaker 5: the branches from HSBC in the New York City metro area,
Speaker 5: so that really fills out there their traditional Northeast New
Speaker 5: England footprint with the mid Atlantic footprint. So they're comfortably
Speaker 5: at Wisconsin the northeast. And do they expand more outside
Speaker 5: where a lot of the its large competitors have moved
Speaker 5: into the southeast as well, So that's going to be
Speaker 5: a top of mind and a good question for them.
Speaker 5: There's some scuttle but in the investor community if Citizens
Speaker 5: is going to be a seller or a buyer. So
Speaker 5: that's an ongoing question, particularly as larger banks try to
Speaker 5: get bigger to compete with the likes of jpmworking and
Speaker 5: ba AA.
Speaker 2: All right, well, looking forward to regional bank earning season.
Speaker 2: Thank you for this, Herman, Thank you. That's Herman Chan,
Speaker 2: senior analyst for US regional banks at Bloomberg Intelligence. Coming
Speaker 2: up on Bloomberg Day Break weekend, we look at how
Speaker 2: climate change is hitting Europe the hardest. I'm Nathan Hager,
Speaker 2: and this is Bloomberg. This is Bloomberg Daybreak WEEKND our
Speaker 2: global look ahead at the top stories for investors in
Speaker 2: the coming week. I'm Nathan Hager in Washington. Up later
Speaker 2: in our program after a fresh record for gold, what's
Speaker 2: ahead for bullion heading into November. But first in the
Speaker 2: coming days, global climate bankers, forecasters, and government ministers will
Speaker 2: gather in London for the annual New Energy Finance Summit.
Speaker 2: The number of extreme weather events keeps rising and the
Speaker 2: economic damage they cause going up too. With the US
Speaker 2: pushing the EU to stop buying Russian gas and to
Speaker 2: cut back on green regulation, many are asking if the
Speaker 2: continent's green plans for the future are still intact for more,
Speaker 2: let's go to London and bring in Bloomberg Daybreak Europe
Speaker 2: anker Caroline Hepger.
Speaker 3: Nathan, Europe is getting hotter two point four degrees celsius
Speaker 3: hotter than before the Industrial Revolution. That's four and a
Speaker 3: half degrees fahrenheit For our US listeners. That means the
Speaker 3: continent is warming faster than any other region on Earth,
Speaker 3: which in turn is disrupting the continent's weather. It's also
Speaker 3: getting harder to predict when power grids need more energy
Speaker 3: to cope. That hasn't stopped some European politicians from calling
Speaker 3: for the rollback of green pledges as they grapple with
Speaker 3: high costs of living. Greg Jackson is chief executive officer
Speaker 3: of the UK's largest energy retailer, Octopus Energy. He told
Speaker 3: us that's a knock on effect of the shift in America.
Speaker 6: You can't ignore what happened in the US. You know,
Speaker 6: you went from an administration that passed the ira you know,
Speaker 6: one of the biggest commitments to government support for a
Speaker 6: specific set of industries in history world changing to an
Speaker 6: administration that use the phrase drill, baby, drill. I think
Speaker 6: that has really set the tone in a bunch of
Speaker 6: European countries, including the UK, where there is now an
Speaker 6: intense debate about our future of energy.
Speaker 3: That was October's Energy CEO Greg Jackson there on this
Speaker 3: week's Zero podcast, So what does the future of power
Speaker 3: look like? Well, in the next few days, the European
Speaker 3: Union's Energy Commissioner and Portugal's Energy Minister will be joining
Speaker 3: executives right here in London for the annual BNF summit.
Speaker 3: Joining me now as Ben Vickers, who is our chief
Speaker 3: editor of Bloomberg NEF, and Joe Wurtz, our weather and
Speaker 3: climate reporter here in London. Welcome to both the Joe,
Speaker 3: can I start with you? Firstly? We're thinking about climate change.
Speaker 3: Summers in Europe have seen record breaking heat waves with
Speaker 3: really serious consequences. I wonder when you think about your work,
Speaker 3: your job as a weather and climate reporter, how has
Speaker 3: that changed?
Speaker 7: Well, I mean isn't that the joke right that the
Speaker 7: weather is always always changing? You know, my job has
Speaker 7: changed quite a bit, you know really as I started
Speaker 7: as a climate and environment reporter, and increasingly that became
Speaker 7: more and more about extreme weather. And you know, extreme
Speaker 7: weather really shapes how people, businesses, you know, power, energy
Speaker 7: move across the world. It dictates trade, economy and people's lives,
Speaker 7: and that's increasingly you know, the story that that we're
Speaker 7: focusing on.
Speaker 3: Ben, how are Bloomberg's n EF teams looking at this
Speaker 3: changing world? The impact of climate change are kind of
Speaker 3: big big thought?
Speaker 8: Yeah, I was going to say, that's a very very
Speaker 8: big question. So, I mean, basically, what we do. We're
Speaker 8: a data supplier and we do analysis on the back
Speaker 8: of that, and we're looking at the shift in the
Speaker 8: economy's worldwide to basically a lower carbon economy for everyone. Now,
Speaker 8: climate adaptation and climate risk have come to the fall,
Speaker 8: So we're adding new areas of research to help companies
Speaker 8: and policymakers sort of navigate not just the climate risk
Speaker 8: and the need for climate adaptation, but also how to
Speaker 8: keep businesses going, keep them profitable as we go down
Speaker 8: the roots, energy transition.
Speaker 3: Really energy transition.
Speaker 8: Yeah, it's very much a changing picture as well. It's
Speaker 8: not as bad as the weather, but yeah, the shifting.
Speaker 3: Well, thinking about that weather element, Joe. In the winter months,
Speaker 3: Europe has had in the past fears that a sudden
Speaker 3: cold snap would cause gas prices to spike. This in
Speaker 3: amidst all of the other kind of energy challenges that
Speaker 3: we have, is there also a similar concern about that
Speaker 3: this year?
Speaker 7: Yes, absolutely, We've already seen an early season snap. We
Speaker 7: had had a big one in Eastern Europe already, and
Speaker 7: you know, traders and governments are really locked in right now.
Speaker 7: This is basically like cold snap hunting season for for
Speaker 7: governments and traders there. Their eyes are on the forecasts,
Speaker 7: they're they're they're they're watching for any sign that a
Speaker 7: drop in temperatures could really throw off balance the sort
Speaker 7: of fragile state of the energy markets right now, you know,
Speaker 7: increase competition for for for for gas, and so you know,
Speaker 7: any any any deviation there, any any cold snap can
Speaker 7: really raise demand and create ripple effects.
Speaker 3: And gas storage has also been an issue. It's been
Speaker 3: an issue in the UK and across Europe in past winters.
Speaker 3: Is it equally bad this time around?
Speaker 7: So you know, UPE did a did a good job
Speaker 7: stockpiling gas over the summer. It's still that stockpiling was
Speaker 7: below what is is historically the summer you know norm
Speaker 7: for stockpiling, but it did beat some expectations for that stockpiling.
Speaker 7: So they you know, we started the natural gas winter essentially,
Speaker 7: which starts in October. So started that's with about eighty
Speaker 7: three percent of the stockpiles four which was better than
Speaker 7: a lot of people expected, but still not as good
Speaker 7: as it could be. But we've already seen with that
Speaker 7: first cold snap we had recently in Eastern Europe that
Speaker 7: some European countries are already having to tap into that
Speaker 7: gas suppli absolutely.
Speaker 3: Now, of course, there have been incidents of blackouts in Europe,
Speaker 3: and I think this is going to be quite crucial
Speaker 3: when you speak to Portugal's energy minister, who is speaking
Speaker 3: actually at the Bloomberg NEF Summit just in the next
Speaker 3: few days. I'm sure there'll be a lot of interest
Speaker 3: in understanding what she has to say about how the
Speaker 3: country dealt with that blackout. It has been blamed both
Speaker 3: on the power grid and also on renewable energy, and Ben,
Speaker 3: you're going to be interviewing her, what are you going
Speaker 3: to try to ask and find out.
Speaker 8: Well, there's a couple of things. There's obviously the human
Speaker 8: side to this, because being energy minister and waking up
Speaker 8: more morning with the lights off, not just in your
Speaker 8: house or down the street, but across the country. It
Speaker 8: is probably a nightmare. So there's that personal experience of
Speaker 8: finding yourself in the hot seat. And well, three months
Speaker 8: after that April twenty eighth blackout, the minister presented thirty
Speaker 8: one measures to basically address all the problems they've been
Speaker 8: able to identify, and some of those obviously within her remit,
Speaker 8: those are the ones she's trying to address. But there's
Speaker 8: a bigger, bigger issue of interconnections basically between European power markets,
Speaker 8: and for a long time Spain and Portugal have been
Speaker 8: asking France to improve the connections between those countries, and
Speaker 8: there's a sort of a little bit of a tift
Speaker 8: between them and allegations that their interests for the nuclear
Speaker 8: power plants were able to sell their power rather than
Speaker 8: allowing solar from Spain to come in really cheaply and
Speaker 8: so on, So there's a little bit of EU negotiation
Speaker 8: to go on there as well. But they're investing one
Speaker 8: hundred and thirty seven million in their grid to upgrade
Speaker 8: that they're putting in a couple of new power stations
Speaker 8: that are going to light up in January, which are
Speaker 8: what they call they call them black start stations, which
Speaker 8: is basically when everything goes off, these switch on automatically
Speaker 8: and sort of a first line of defense. But there's
Speaker 8: actually quite a thirty one of these measures. So we're
Speaker 8: going to be talking to her a lot about what
Speaker 8: the plans are.
Speaker 3: What the plans are on what she's delivering and how
Speaker 3: quickly and so on. Yes, I think that will be
Speaker 3: really fascinating in terms of though the other major theme
Speaker 3: surely is about the backlash against green energy. I mean
Speaker 3: a little bit of that comes through in the discussion
Speaker 3: around Portugal and the spending required Joe for climate adaptation.
Speaker 3: This is a significant issue in the US. It has
Speaker 3: also rippled across Europe. Is it gaining traction in particular
Speaker 3: parts of Europe or for particular areas in the energy space.
Speaker 7: You know, it really seems to be gaining traction in
Speaker 7: all sorts of different corners across Europe. The context here
Speaker 7: is that Europe's energy grid energy markets are increasingly renewable
Speaker 7: and increasingly rely on the weather. They're dependent on how
Speaker 7: much sun is shining, how much wind is blowing, and
Speaker 7: also comes with all the you know, international competition for
Speaker 7: gas and other factors. Geopolitics can influence the supply side
Speaker 7: of that equation. So you know, increased pressure on all
Speaker 7: those markets are definitely, uh, you know, raising the stakes.
Speaker 7: And in each of these countries, you know, these ambitious
Speaker 7: climate targets that they set up have have really been challenged.
Speaker 7: You know, last month was supposed to be a big milestone, right,
Speaker 7: Europe was supposed to get together and come to this
Speaker 7: big agreement, this final agreement on their on their long
Speaker 7: term twenty forty targets, and and and they kicked that
Speaker 7: can down the road, and and now those countries are
Speaker 7: fighting about that. There's more domestic spending demands on each
Speaker 7: of these countries. In some cases, these countries are wanting
Speaker 7: to siphon off more money for defense spending and things
Speaker 7: like that, and and and and more political uh unease
Speaker 7: with some of the ambitious spending targets that go along
Speaker 7: with these these green goals.
Speaker 3: And if that wasn't enough, you just have to throw
Speaker 3: in artificial intelligence, which we have spent months thinking about,
Speaker 3: you know, the big build out of our sovision intelligence
Speaker 3: the Energy demand ben that is going to also really
Speaker 3: underline some of the difficulties in the energy space. How
Speaker 3: do you think that the impact of AI is going
Speaker 3: to affect your forecast when it comes to power demand?
Speaker 3: How are you thinking about this oncoming technology.
Speaker 8: So there's a mass of amount of interest in the
Speaker 8: impact that AI is going to have on power demand,
Speaker 8: on prices more generally as well for consumers. Yeah, we've
Speaker 8: been looking at what the likely development of AI data
Speaker 8: centers basically the hyperscals, but we're looking at out to
Speaker 8: twenty thirty five the power demand from data centers. We're
Speaker 8: expecting to have quadrupled from where it is right now.
Speaker 8: That's only actually four point four percent of all the
Speaker 8: electricity demand worldwide, So it's a small proportion of the
Speaker 8: electricity worldwide, but it's where it happens and when it happens,
Speaker 8: I suppose, which is really important. Now, if in twenty
Speaker 8: thirty five you put all the data centers together, they
Speaker 8: would be and to look at them as if they
Speaker 8: were a country, they would be the fourth largest country
Speaker 8: in the world, behind the US, China, India. Then there's
Speaker 8: data centers that sort of a demand center. So it
Speaker 8: is good, it is going to be very big. That said,
Speaker 8: as one of the one of the ten executives in
Speaker 8: one of the AI compies are saying this week, you know,
Speaker 8: if there's only one thing you really need to know
Speaker 8: about AI, which is it's changing so fast and we
Speaker 8: don't quite know what's going to happen. So so the
Speaker 8: forecasting here is going to be is obviously going to
Speaker 8: be quite tricky. Yeah, short term, we expect the demand
Speaker 8: to be demand for power to be supplied by a
Speaker 8: rather traditional sources, so it is going to be cold
Speaker 8: and gas coming in. That's in the short term because
Speaker 8: the buildout is so rapid so places in the US
Speaker 8: like Virginia and Oregon, Texas and Ohio which have classically
Speaker 8: I've been able to have been able to supplied again
Speaker 8: to benefit from the immediate demand, but longer term than
Speaker 8: renewables have an opportunity to move in here.
Speaker 7: Yeah, and that's that's a turn that we see, you know,
Speaker 7: generally in such a type market like Europe. Is that
Speaker 7: not just with data centers, which are traditional sources of
Speaker 7: demand for for for for electricity. When the demand gets
Speaker 7: high and the prices spike or maybe the supplies can
Speaker 7: you know, constrained, they switch on the traditional sources of
Speaker 7: of of of power to supplement that grid. That means,
Speaker 7: you know, switching on a gas plant and using what
Speaker 7: can be switched on more reliably than maybe the wind
Speaker 7: or the solar, which you know might not be coming
Speaker 7: in the middle of a cold, dark day.
Speaker 3: EF's Ben Vickers and Bloomberg's Jay Wurtz thank you so much.
Speaker 3: We'll have full coverage of the upcoming bn EF summit
Speaker 3: on the fourteenth and fifteenth of October across Bloomberg platforms.
Speaker 3: I'm Caroline Hepge here in London and you can catch
Speaker 3: us every weekday morning for Bloomberg Daybreak you at beginning
Speaker 3: at six am in London. That's one am on Wall Street.
Speaker 2: Nathan, Thanks Caroline. Then coming up on Bloomberg Daybreak Weekend,
Speaker 2: Gold retreats from a fresh record, we speak to one
Speaker 2: of Wall Street's biggest names about the future for everyone's
Speaker 2: favorite metal. I'm Nathan Hagar, and this is Bloomberg. This
Speaker 2: is Bloomberg Daybreak Weekend Global look ahead at the top
Speaker 2: stories for investors in the coming week. I'm Nathan Hager
Speaker 2: in Washington. This week, gold prices topped four thousand for
Speaker 2: the first time ever. This year has seen a meteoric
Speaker 2: rise for the precious metal. Year to date, it's up
Speaker 2: a whopping fifty percent, and that gain is catching the
Speaker 2: eye of one of Wall Street's biggest names. Ken Griffin,
Speaker 2: the CEO of Citadel, says the surgeon gold could point
Speaker 2: to a move away from the dollar, and he says
Speaker 2: that's concerning. Ken Griffin sat down for a wide ranging
Speaker 2: interview with Bloomberg's Francine Loqua to way in on gold's
Speaker 2: future and the prospects for a US recession on the horizon.
Speaker 2: Let's listen into that conversation now.
Speaker 9: Let's just cut to the chase.
Speaker 10: Inflation is substantially about target and substantially above target in
Speaker 10: all forecasts for next year. I mean, it's part of
Speaker 10: the reason the dollars depreciated by about ten percent in
Speaker 10: the first half of this year. It's the single biggest
Speaker 10: decline in the US dollars six months in fifty years.
Speaker 10: Gold is that record highs and the appreciation in other
Speaker 10: dollar substitutes, to use that word loosely, and items like
Speaker 10: crypto for example, is unbelievable. So we're seeing substantial asset
Speaker 10: inflation away from the dollar as people are looking for
Speaker 10: ways to effectively de dollarize or de risk their portfolios
Speaker 10: visa vus sovereign risk.
Speaker 11: Are you really seeing that?
Speaker 9: Just check the price of goal. Well, I mean, I
Speaker 9: don't have to look very hard.
Speaker 11: Its own, it's a life of its own.
Speaker 9: Gold, No, but it's a life of its own.
Speaker 10: As you see sovereigns around the world, there's central banks
Speaker 10: around the world, as you see individual investors around the
Speaker 10: world go, you know what, I now view gold as
Speaker 10: a safe harbor asset in a way that the dollar
Speaker 10: used to be viewed. That's what's really concerning to me
Speaker 10: and There's been plenty of published research in recent weeks
Speaker 10: months about foreign investors now when they buy US equities,
Speaker 10: hedging the returns back to their local currency. So that
Speaker 10: again is a bifurcation of I'm going to bet on
Speaker 10: American business, but I want to immunize some of my
Speaker 10: sovereign exposure to the United States.
Speaker 11: Can the previous panels talking about the shutdown, given where
Speaker 11: we are in the shutdown, can the FED properly do
Speaker 11: its job at the end of the month in these
Speaker 11: circumstances where we may not have enough data.
Speaker 10: I don't think the data over a few weeks should
Speaker 10: really be that determinative to the FED.
Speaker 9: I mean, that's sort of over.
Speaker 10: Overgrandized, is what the impact or importance to that data is,
Speaker 10: particularly with the sampling errors that's intrinsic in how that
Speaker 10: data is produced and compiled for the FED. I just
Speaker 10: think that's a bit of a misplaced warrior concern.
Speaker 11: Do you worry about the shutdown full stop?
Speaker 9: Look?
Speaker 10: Shut down a symbolic of a different problem, which is
Speaker 10: the dysfunction between the Republican and Democratic Party on resolving
Speaker 10: issues with respect to the budget of the United States
Speaker 10: of America, and to be clear both parties today are
Speaker 10: guilty of just profligate spending. You know, as I said
Speaker 10: at the start, the US fiscal situation is that of
Speaker 10: a nation that's trying to work its way out of
Speaker 10: a recession.
Speaker 9: Except the reality is we're.
Speaker 10: Multiple years into a very high period of growth. This
Speaker 10: is where we should be running a deficit of you know,
Speaker 10: in the Clinton day, as we ran a surplus at
Speaker 10: this point in the business cycle, We're now running a
Speaker 10: deficit of close to six to seven percent, depending upon
Speaker 10: on where a number of things land. That is just
Speaker 10: completely irresponsible. And so what's amazing is we're having a
Speaker 10: shutdown debate over the scheme of things a relatively small
Speaker 10: amount of money, and neither party is stepping up the
Speaker 10: plate to deal with or grapple with the reality that
Speaker 10: the United States needs to endure a fair amount of
Speaker 10: fiscal reform to be in a path for long term sustainability.
Speaker 11: Why is it not being talked about?
Speaker 10: It's politically unpopular, and unfortunately politics have gotten shorter and
Speaker 10: shorter and shorter in horizon. You know, can you imagine that,
Speaker 10: like I said, in the Clinton day, as they signed
Speaker 10: a budget with a surplus, and yet that was in
Speaker 10: our lifetime. It's been a long time since we've seen
Speaker 10: that level of discipline in Washington around managing the affairs
Speaker 10: of the US economy.
Speaker 11: You worry a lot about debt, or you worry about debt,
Speaker 11: what's the way I don't.
Speaker 10: I mean you must also, like we all have to
Speaker 10: worry about the level of debt we have in the
Speaker 10: United States, and the market is pretty.
Speaker 9: Cool about it. The market is we'll look past it
Speaker 9: for a few years.
Speaker 10: But if you go out with anybody to talk about
Speaker 10: what they worry about.
Speaker 9: With respect to the US economy, the.
Speaker 10: Fiscal situation is almost always top of the So you know,
Speaker 10: I think there's one thing to keep in mind, which
Speaker 10: is acid prices reflect a level of exuberance that we
Speaker 10: see today.
Speaker 9: But I got to tell you, if you're out with.
Speaker 10: With anybody who's the asset manage of business top of
Speaker 10: his concerns, the level of spending in Washington is always
Speaker 10: top three, if not.
Speaker 9: Number one, on the list.
Speaker 11: What's the way out?
Speaker 9: Well, the way out is we need I mean, first
Speaker 9: and foremost.
Speaker 10: Growth is an important part of the way out, and
Speaker 10: this is where the Trump's administration focus on deregulation is
Speaker 10: so important. It's so important in terms of creating an
Speaker 10: environment in which growth can exist, like really important. Unleash
Speaker 10: unleashed the animal spirits in America. And the one thing
Speaker 10: about this country different than most countries is the entreal
Speaker 10: class in this country is incredibly ambitious and it's really
Speaker 10: able to make profound changes happen.
Speaker 9: I mean, if you look at if you look across
Speaker 9: our investment.
Speaker 10: Portfolios, a substantial portion of all the money we invest
Speaker 10: is in business has started in the last fifty years.
Speaker 10: I mean, it's it's remarkable the wealth created in this
Speaker 10: country by newly formed businesses.
Speaker 9: It's just stunny. It's the envy of the world.
Speaker 10: And the Trump administration is certainly taking steps to help
Speaker 10: encourage that continued American success story. But we also need
Speaker 10: to give real consideration to tax policy and to spending policies.
Speaker 10: And I think that the the how are they rebranding,
Speaker 10: rebranding the Big Beautiful Bill at this point?
Speaker 9: Do you know what the rebranding is going to be? Yet?
Speaker 11: How would you rebrand it?
Speaker 9: Well?
Speaker 10: I mean, I don't think there's a nice way to
Speaker 10: put lipstick on that pig. I mean, it's it's a
Speaker 10: it's a pro cyclical tax cut late in the in
Speaker 10: the economic cycle, and you know, everybody in this room, like,
Speaker 10: let's be clear, no one wants to pay more in taxes.
Speaker 10: But if you're not on a sustainable set of tax
Speaker 10: policies in the best of times, what policies.
Speaker 9: Will that unleash in the worst of times?
Speaker 10: You know, for example, the United States head towards a
Speaker 10: wealth tax when the inevitable bills come due, will be
Speaker 10: head towards tax rates that we last saw in Europe
Speaker 10: sixty seventy eighty percent as the inevitable bills come do, Like,
Speaker 10: what is the long term consequence of these policies.
Speaker 9: Right here, right now?
Speaker 10: And I think people are very concerned about what that
Speaker 10: might be in ten or fifteen or twenty years. How
Speaker 10: to inheritance taxes have to change in light of the
Speaker 10: tremendous amount of wealth held by the baby boomers and
Speaker 10: the tremendous amount of debt that their generation was a
Speaker 10: part of. So I think these are going to be
Speaker 10: really interesting policy debates that will merge seven years, ten years,
Speaker 10: fifteen years down the road, which could have some pretty
Speaker 10: adverse consequences. I mean, particularly for America. Not furialism today
Speaker 10: is not sure. You're like, if I build a great business,
Speaker 10: I will get to keep a substantial amount of wealth
Speaker 10: I create. If you go back to a world of
Speaker 10: seventy percent tax rates that we had in this country
Speaker 10: in this last century, maybe throwing a wealth tax for
Speaker 10: good measure you may really impact that zeitgeist that is
Speaker 10: so powerful in terms of our economic prosperity.
Speaker 11: And where do you see the animal spirits in the
Speaker 11: US Because a lot of chief executives say, look, they
Speaker 11: like some of the policies, but there are also a
Speaker 11: lot of policies it could be visas or others, and
Speaker 11: because they're uncertain where the next one comes from, they're
Speaker 11: a little bit reluctant to spend.
Speaker 10: Right now, Well, I mean, let's be clear that the
Speaker 10: Trump administration has been able to give us a lot
Speaker 10: that we love and a lot that we hate. Right,
Speaker 10: They're an equal opportunity giver. And on the pro side
Speaker 10: is clearly the push for deregulation is clearly a message
Speaker 10: to American whether it's small business owners or entrepreneurs, that
Speaker 10: this country wants to see our commercial class succeed. That's
Speaker 10: like a foreign language to the Biden administration. I mean
Speaker 10: they had no connectivity with American business. The Trump administration
Speaker 10: is very connected in a very different and profound way.
Speaker 9: But having said that, the terror policy has.
Speaker 10: Had incredibly uneven impacts across the commercial landscape.
Speaker 9: I mean, I really do feel sorry for the small.
Speaker 10: And medium sized businesses that are single source in terms
Speaker 10: of their goods from from Asia who are now seeing
Speaker 10: tariffs that are at levels that are unimaginable in the
Speaker 10: context of their business model. They're really going to be
Speaker 10: in a world of hurt over the months ahead, and
Speaker 10: they're not going to have the flexibility that a large
Speaker 10: conglomerate will have and being able to re architects, supply
Speaker 10: chains and navigate around these issues.
Speaker 9: So that's an.
Speaker 10: Area that's that's quite painful to watch. The impact on farmers.
Speaker 10: I mean that the Chinese have voted very clearly to
Speaker 10: buy their food products from other countries, and it's really
Speaker 10: hitting the American farming community quite hards. That's painful to
Speaker 10: watch play out. The immigration policies, I must say, I
Speaker 10: scratch my head over we as a nation are facing
Speaker 10: a birth rate that's below that required to maintain our population.
Speaker 10: So unless the United States actually wants to shrink in size.
Speaker 10: Over the next fifty years, we're going to have to
Speaker 10: permit immigration, and I would think that our policies would
Speaker 10: be around trying to encourage the best and brightest around
Speaker 10: the world coming to the United States and building careers
Speaker 10: and building families and building roots in our country. You know,
Speaker 10: I've long said every single student in the United States
Speaker 10: with a STEM degree should get a green card, staple
Speaker 10: that diploma and a path to citizenship. You know, roughly
Speaker 10: fifty percent of all the Silicon Values startups are started
Speaker 10: by immigrants. I mean, it's just remarkable how this country
Speaker 10: has won in the global war for talent, and.
Speaker 9: We should continue to pursue that aggressively. And then on
Speaker 9: the millions of people who came.
Speaker 10: Across the borders in the last several years, you know,
Speaker 10: I applauded the President for controlling our borders. It was
Speaker 10: really important to stop that flow of illegal immigration. And unfortunately,
Speaker 10: as you and I both know, a number of countries
Speaker 10: in South and Central America didn't send us their best
Speaker 10: and brightest. They did empty their prisons and send people
Speaker 10: to the United States that we really should not have
Speaker 10: welcomed warmly. So I applaud the President for starting the borders.
Speaker 10: But those who've come to this country, who have placed
Speaker 10: roots here, who are working and contributing to our economy,
Speaker 10: we should find a path for them to be able
Speaker 10: to stay here and continue to contribute. They're important in agriculture,
Speaker 10: they're important construction, they're important in the leisure industries. They
Speaker 10: do a lot of jobs that will be damn near
Speaker 10: impossible for us to fill with American American born labors.
Speaker 9: That's just gonna be really tough.
Speaker 10: And what gets lost in some of the debate is
Speaker 10: they're not taking jobs from Americans buy and large, they're
Speaker 10: actually playing critical roles at help.
Speaker 9: American businesses thrive and succeed that.
Speaker 10: Allow us to employ more people at higher wages across
Speaker 10: the broader economy. So I think when it comes to
Speaker 10: immigration at large, I think we've come off the rails
Speaker 10: and we really do need to rethink our policies.
Speaker 2: That's Citadel CEO Ken Griffin speaking with Bloomberg's franc Sine Laqua.
Speaker 2: The conversation was part of this week Citadel Securities conference
Speaker 2: in Manhattan, and for more you can catch the full
Speaker 2: interview on the Bloomberg Podcasts YouTube channel. And that does
Speaker 2: it for this edition of Bloomberg day Break Weekend. Join
Speaker 2: us again Monday morning at five am Wall Street Time
Speaker 2: for the latest DOUN, markets overseas, and the news you
Speaker 2: need to start your day. I'm Nathan Hager. To stay
Speaker 2: with us. Top stories and global business headlines are coming
Speaker 2: up right now.