Speaker 1: Bloomberg Audio Studios, Podcasts, radio news. This is Bloomberg Business
Speaker 1: Wait inside from the reporters and editors who bring you
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Speaker 1: and Tim Stenebeck from Bloomberg Radio.
Speaker 2: Carol Master along with Tim Steneek live here in our
Speaker 2: Bloomberg studio at Bloomberg Headquarters. Obviously, the main event is
Speaker 2: what we just heard from Fed Chair JP Howell up
Speaker 2: on Capitol Hill. Charlie breaking down some of those key
Speaker 2: points the Fed Chair reiterated to lawmakers at the US
Speaker 2: Central Bank, no rush to cut interest rates. Feel like Tim,
Speaker 2: we got a little bit of everything, and the Fed
Speaker 2: Chair really pointing out the importance of not going too
Speaker 2: soon and also not going too late in terms of
Speaker 2: making moves to cut rates.
Speaker 3: Yeah, here's what he said. We believe that our policy
Speaker 3: rate is likely at its peak for this tightening cycle.
Speaker 3: Repeated language you said his last press conference just at
Speaker 3: the end of January. He also repeated his claim from
Speaker 3: the January press conference that rate cuts are likely to
Speaker 3: be appropriate at some point this year. And you know,
Speaker 3: I think the market's reacting accordingly.
Speaker 2: All right, So let's get to it with more on
Speaker 2: Shair Powell's comments and US financial market reaction. Delighted to
Speaker 2: have with us Bloomberg News International Economics and Policy correspondent
Speaker 2: Michael McKee. He's there in our DC bureau. He's been
Speaker 2: listening all morning, so too has Bloomberg News Markets reporter
Speaker 2: Abigail Doolittle. She's here in our studio, and Mike, I
Speaker 2: want to start with you. It does feel like we
Speaker 2: understood the message at the last FOMC meeting, and I
Speaker 2: feel like we got a lot of that as well.
Speaker 2: But what for you? Was there anything that was new, nuanced,
Speaker 2: a little bit different from the FOMC meeting? What is
Speaker 2: it that was so important in terms of what we
Speaker 2: got from the FED chair today?
Speaker 4: I appreciate your asking, but this was the functional equivalent
Speaker 4: of Wall Street hoping for a new suit and getting
Speaker 4: hand me down with the same old, same mold from
Speaker 4: the FED chair. You know, he really can't say anything
Speaker 4: else at this point. It was more explanatory than anything else.
Speaker 4: And it's a story that traders have heard now for
Speaker 4: some weeks from Chair Powell and many other members of
Speaker 4: the Open Market Committee. But what did stand out today,
Speaker 4: and what was maybe a little bit of a surprise,
Speaker 4: was how much bipartisan anger there was at the Basel
Speaker 4: three end Game bank regulations that the FED is looking
Speaker 4: at right now. These grow out of an international effort
Speaker 4: to raise capital levels and regulation standards in banks around
Speaker 4: the world. The US hasn't implemented it yet. They've put
Speaker 4: together a pro process for putting it in place, and
Speaker 4: they put it out for comment, and they've gotten a
Speaker 4: lot of negative comment from the banking industry who have
Speaker 4: also sent comments, apparently to their local representatives. Republicans didn't
Speaker 4: like it, but today we really got an earful from
Speaker 4: some Democratic representatives as well. They think it's going to
Speaker 4: result in less lending to the banks from the banks
Speaker 4: in their districts. Their banks will be less profitable. In
Speaker 4: other words, the message from the representatives is this is
Speaker 4: bad for business, so it's bad for the economy. J.
Speaker 4: Paul was receptive. He was one of four FED members
Speaker 4: who originally said they had problems with the issue. He
Speaker 4: made that clear. He said that they are looking at it,
Speaker 4: they're still digesting all the comments. But as he said,
Speaker 4: what we could see is broad and deep changes in
Speaker 4: the regulations before they come out, and he went so
Speaker 4: far as to say that it is possible they would
Speaker 4: withdraw the proposal altogether. So the congressmen were heard today
Speaker 4: at least on that issue.
Speaker 2: Well, thank you very much, Thank you very much, Mike,
Speaker 2: because you kind of open the door to where we
Speaker 2: need to go with Abigail, because yep, we want to
Speaker 2: talk about more markets generally, but most importantly what's going
Speaker 2: on with New York Community Bank or if we may
Speaker 2: abigail because as the Fed Chair j. Powell was getting
Speaker 2: lots of detailed questions, as Mike said, on banking regulation,
Speaker 2: how to prevent another crisis? Developing news on New York
Speaker 2: Community Bank card which is halted as we speak, but
Speaker 2: it was down as much as forty seven percent before
Speaker 2: that halt.
Speaker 5: Yeah, it's pretty incredible here, this beleaguered regional bank. The
Speaker 5: news just can't get worse. It just keeps getting worse
Speaker 5: and worse, it seems. And to your point, they did.
Speaker 5: They are saying that they're trying to raise equity capital.
Speaker 5: That's been the big question with all the headlines that
Speaker 5: have come out recently in terms of they're talking about
Speaker 5: the poor oversight of loans, and then we had a
Speaker 5: couple of downgrades. One of the downgrades was key because
Speaker 5: it was a downgrade of basically a certain poor portion
Speaker 5: of their business to junk and they suggested that if
Speaker 5: that happen that they could see outflows. One thing they
Speaker 5: have not updated investors on through all of this are
Speaker 5: their deposits. So in February deposits and liquidity was very
Speaker 5: helpful or healthy. But to not make that update through
Speaker 5: all of this, you know, you could take it one
Speaker 5: way or the other that it's either really bad they
Speaker 5: don't want to share that, or they want to pull
Speaker 5: a rabbit out of the hat. So it's can to
Speaker 5: be interesting to see what comes on the other side
Speaker 5: of this.
Speaker 3: Hey, Abigail, I want to broaden this out a little
Speaker 3: bit and just talk about the equity market reaction in
Speaker 3: a general to what we heard from J. Powell earlier.
Speaker 3: We do see stocks hire by eight tens of one percent,
Speaker 3: the nasdak can posit up by one percent, the Dow
Speaker 3: up by half a percentage point. Any surprising moves from
Speaker 3: you after yesterday's sell off given what we heard from Powell.
Speaker 5: Not really, I mean the biggest surprise is actually Apple
Speaker 5: it's down ever so slightly. I mean, it's not down
Speaker 5: a lot, but you would think that we'd start to
Speaker 5: have a snap back for that stock at some point,
Speaker 5: and some of them more mental indicators suggested that given
Speaker 5: the fact that it is down about fourteen percent from
Speaker 5: its peak, you would think that it would also be
Speaker 5: participating in this rally. But this rally is a nice
Speaker 5: snap back from yesterday selloff. To your point, the S
Speaker 5: and P five hundred of about nine tens of one percent,
Speaker 5: chips doing really well, up three point two percent, So
Speaker 5: a big rally there, I think very interesting to take
Speaker 5: a look at his bonds, we have yields down just
Speaker 5: a little bit, so this tells you. I mean, my
Speaker 5: take on this on FED chair Powell's testimony so far,
Speaker 5: to Mike's point, you know, nothing new here, but I
Speaker 5: think that there was probably a little bit of fear
Speaker 5: was would Powell suggest that there would be no cuts
Speaker 5: this year? Now, if that had happened, I think we
Speaker 5: would have seen, you know, yields spike sharply higher and
Speaker 5: stocks tumble. The fact that the worst case scenario didn't happen,
Speaker 5: we seem to have this relief rally doesn't mean it's
Speaker 5: going to continue, not really because you actually put a
Speaker 5: little bit of near term technical damage for stocks, but
Speaker 5: investors feel a little bit more sure of themselves today.
Speaker 2: You know, our New York team also reporting that treasury
Speaker 2: yields hit a new session low after that initial Wall
Speaker 2: Street Journal report about New York Community Bank Orp looking
Speaker 2: to raise equity capital. We've also reported this story out.
Speaker 2: And I was looking at kind of the KRE Regional
Speaker 2: bank ETF. It's down about two percent, and it looked
Speaker 2: like it took a dip as well on concerns, And
Speaker 2: I do wonder, you know, when we think about the
Speaker 2: broader market, we always, Abigail talk with you about the
Speaker 2: importance of the megacap tech names in terms of momentum,
Speaker 2: whether it's Apple or some of the others. And you
Speaker 2: laid out some of the move to the upside that
Speaker 2: we've seen. How important is it to what we see
Speaker 2: in the financial sector, broadly in the regional bank sector,
Speaker 2: to the overall market trade.
Speaker 5: Well, you know, it's interesting to see the simply that
Speaker 5: we do see in the KRE. So the biggest decliner,
Speaker 5: not surprisingly was NYCBB four. It was halted. I'm looking
Speaker 5: right now only three members are up out of one
Speaker 5: hundred and forty, so we have one hundred and thirty
Speaker 5: seven banks down. But what's so interesting is as I've
Speaker 5: dug into the commercial reel and it is trading again
Speaker 5: now KR or excuse me, and yet it's not. Sorry,
Speaker 5: I was looking at KRI, got a little bit excited
Speaker 5: to see we have a.
Speaker 2: Lot of screens up right now.
Speaker 5: Yeah, we have a lot a lot of screens here.
Speaker 5: But as I've been digging into this, so of the
Speaker 5: twenty five top regional banks, they have maybe thirteen fourteen
Speaker 5: percent exposure to commercial real estate, and apparently they are
Speaker 5: well funded enough that there shouldn't be an issue. The
Speaker 5: smaller regional banks they have roughly forty four percent. So
Speaker 5: there could be some other blow ups. But I was
Speaker 5: talking to an expert yesterday and he was saying, it's
Speaker 5: not going to be the saving and loans crisis back
Speaker 5: in the nineteen nineties. It's not going to be you know,
Speaker 5: hundreds of banks. If anything, it's not even going to
Speaker 5: be dozens he said it. He said, maybe it would
Speaker 5: be a dozen. So the fact that you have this
Speaker 5: contagion trade here right now in terms of stocks down,
Speaker 5: now that even though the bulk of them are down.
Speaker 5: The next biggest one to NYCB is down five point
Speaker 5: nine percent, which is a sizeable decline. That's South Side
Speaker 5: Bank Shares. But I guess what I'm saying is that
Speaker 5: the contagion may not be. It's headline contagion as opposed
Speaker 5: to actual fundamentals. A lot of folks don't think it's.
Speaker 6: Going to be.
Speaker 2: It's important to understand the fundamentals of each of these names.
Speaker 5: I want to go bactly.
Speaker 3: Yeah, I want to go back to Mike McKee on
Speaker 3: this and stay on New York Community Bank because there
Speaker 3: are there are some parts of this that are tied
Speaker 3: to the FED and two regulators might just weigh in
Speaker 3: on this with your observations.
Speaker 4: Well, it's interesting. J. Powel was certainly asked about banks
Speaker 4: and commercial real estate, and he said it's going to
Speaker 4: be a problem that can be worked out. They're not
Speaker 4: particularly worried about it, but it's going to take years
Speaker 4: for all this to go through the system, and there
Speaker 4: will be losses. But he was not direct directly asked
Speaker 4: about NYCB, either because members of Congress didn't know what
Speaker 4: was happening today or because they realized that the FED
Speaker 4: does not regulate NYCB. It's the Officer of the Controller
Speaker 4: of the Currency that is NYCB's regulator. And one of
Speaker 4: the interesting things Abby was talking about the deposit base.
Speaker 4: Most of their deposit base is insured, so it's not
Speaker 4: like SVB was where people felt like they were going
Speaker 4: to lose their money. And the other thing about their
Speaker 4: deposit base is about a year ago they bought Flagstar Bank.
Speaker 4: They moved all their deposits into it, and apparently the
Speaker 4: deposits from Signature Bank when they took that over also
Speaker 4: went into Flagstar. Now who knows that Flagstar is owned
Speaker 4: by NYCB, So the average person isn't rushing to pull
Speaker 4: their money out of Flagstar because they don't know the
Speaker 4: connection there greatly.
Speaker 3: It sounds like the members of Congress god gets some
Speaker 3: terminals if they don't know that. During the FED we
Speaker 3: did get where they subscribe to the terminal.
Speaker 2: I did thought I heard a few call outs there, Mike.
Speaker 4: Yes, I mean more than I think any other news
Speaker 4: organization to brag a little bit, but two or three
Speaker 4: times members cited stories from Bloomberg when they were prefacing
Speaker 4: their questions.
Speaker 2: Abigail Let's brought it out a little bit too. I mean,
Speaker 2: as we continue to track the trade after we've been
Speaker 2: concerned a lot. Yesterday there was a lot of conversations about,
Speaker 2: you know, overvaluations and whether or not we were kind
Speaker 2: of maybe a new trend line and so on and
Speaker 2: so forth. You know, we're gonna go back to Mike
Speaker 2: in a moment because we've had a lot of economic
Speaker 2: news and obviously Jay Powell covering a lot of the
Speaker 2: economic backdrop, if you will. Having said that the trade,
Speaker 2: the momentum behind the groups that are moving to the upside,
Speaker 2: is it some momentum behind it.
Speaker 5: So overall the momentum for the markets is down. We've
Speaker 5: been talking about this for a while, the R side,
Speaker 5: the momentum indicator. The last time we saw high it
Speaker 5: was last year. So all of these record highs that
Speaker 5: we've had recently not today, but they've been made on
Speaker 5: less good momentum. And I think some of that does
Speaker 5: have to do with the Apple trade, the fact that
Speaker 5: that stock is in a correction now relative to the breadth.
Speaker 5: Today it's much better because we have most we might
Speaker 5: even at this point we have all eleven s and
Speaker 5: P five hundred sectors higher, So it is broad based
Speaker 5: from a volume standpoint, Let's see how excited investors are
Speaker 5: about this relief from Powell that it's not going to
Speaker 5: be a year of no cut. So it's a little
Speaker 5: bit above a little bit above average, so it is
Speaker 5: somewhat healthy. I would say, though it's the consolidation that
Speaker 5: we saw yesterday for big tech, the worst day at
Speaker 5: one point going back to the last year.
Speaker 4: It's healthy.
Speaker 5: So it wouldn't be a bad thing to see a
Speaker 5: little bit more.
Speaker 2: And it was interesting because we saw buying into the
Speaker 2: clothes yesterday, which was really significant. Hey, Mike, back to you.
Speaker 2: In terms of the economic backdrop, it's still I think
Speaker 2: back to the last FOMC meeting where Ja Powell several
Speaker 2: times in the press conference is like, folks, it's good
Speaker 2: out there the US economy. Do we get that message
Speaker 2: very strongly as well?
Speaker 4: Oh, well, you put it that way. We got the message,
Speaker 4: but not very strongly. There wasn't a whole lot of
Speaker 4: focus on it. It was in his opening statement that
Speaker 4: job creation has been strong, inflation's been coming down. Overall,
Speaker 4: things looked pretty good in the US economy. Later in
Speaker 4: the hearing, he was asked about the possibility of recession,
Speaker 4: and he says there doesn't seem to be any indication
Speaker 4: that there's any short term risk of recession in the
Speaker 4: US economy. A couple of the Democrats used their time
Speaker 4: to talk about how good the economy was, maybe from
Speaker 4: a political stance, but the economy was not front and
Speaker 4: center today. Interesting also not front end center was the
Speaker 4: stock market. You would think that maybe he would have
Speaker 4: gotten asked about asset prices being overvalued or something like that,
Speaker 4: and that didn't really come up either. Members were more
Speaker 4: concerned about things like whether the Fed is getting involved
Speaker 4: in climate change. The housing market maybe the closest thing
Speaker 4: to the economic issues that were talked about. And basically
Speaker 4: all Poul could say is, yeah, we raised rates, but
Speaker 4: as rates come down, the housing it should loosen.
Speaker 7: Up, all right.
Speaker 2: So having said that, we do also get a lot
Speaker 2: of economic data points. We have been over the last
Speaker 2: couple of weeks, some data today as well. Jolt's always
Speaker 2: an important number to watch. We're gonna have the Beige
Speaker 2: Book in about forty five minutes or so, give us,
Speaker 2: you know, remind us Mike about the backdrop that we
Speaker 2: continue to get in terms of some of the data points.
Speaker 4: Well, that's the key thing. If FED says it's going
Speaker 4: to be data dependent, they're going to look at all
Speaker 4: broad range of indicators, including jobs, and we get the
Speaker 4: jobs report on Friday. It's expected to show a relatively
Speaker 4: strong job creation continued during the month of February. They'll
Speaker 4: be looking at average hourly earnings, wanting to see if
Speaker 4: there's an inflation problem there. And then next week we
Speaker 4: get another CPI report. Seems like only yesterday, doesn't it.
Speaker 4: We'll get a CPI report. They'll be looking at that
Speaker 4: and then PPI and we'll see where inflation is. The
Speaker 4: FED meetings the week after that on the twentieth, they've
Speaker 4: already said they're not going to move in so then
Speaker 4: the focus turns to the May first meeting and we'll
Speaker 4: see what the numbers add up to by then. But
Speaker 4: right now it looks pretty good. The question is does
Speaker 4: inflation keep going down? That's going to be the one
Speaker 4: major point to trade upon.
Speaker 3: Hey, Mike, how does this set things up for j.
Speaker 3: Powell tomorrow when he's in front of the Senate. Do
Speaker 3: we have any indication that the line of questioning will
Speaker 3: be similar? I hear more about Basel three and questions
Speaker 3: about that.
Speaker 4: I think that's what you'll get. Senate questioning tends to
Speaker 4: be more detailed, more specific, less political, and so probably
Speaker 4: some more questions about when they might cut interest rates.
Speaker 4: But then I would imagine a lot of people are
Speaker 4: going to be on both sides of the issue tomorrow
Speaker 4: in the Senate on banking, because you can bet Elizabeth
Speaker 4: Warren is going to let the chairman know they should
Speaker 4: be as tough as possible on the banks. That's been
Speaker 4: her position. So we may get some interesting cross arguments
Speaker 4: from members of the committee.
Speaker 1: Tomorrow.
Speaker 4: May get more on climate change. That's also been an issue.
Speaker 4: How far is the FED allowed to go in what
Speaker 4: it's doing on climate change. There was one question today
Speaker 4: about the FED and its balance sheet, but it wasn't
Speaker 4: really about when they're going to start running it down.
Speaker 4: It was more about the Fed's losses, Jay poll saying
Speaker 4: doesn't affect our operations. It's really just a bookkeeping exercise.
Speaker 4: So we might see more of that as well. I
Speaker 4: wonder if we'll see much more political posturing. We really
Speaker 4: didn't today, which is something you usually get from members
Speaker 4: of the House.
Speaker 3: We did see some questions about housing affordability Mike, which
Speaker 3: I found interesting given that things aren't necessarily going the
Speaker 3: way that economists typically think they'll go. When rates go higher,
Speaker 3: home prices should go down because mortgages become more expensive.
Speaker 3: That got thrown out the window over the last couple
Speaker 3: of years. What did you make of the line of
Speaker 3: questioning around housing affordability, because as the point that you've
Speaker 3: made many times before is the idea with the FED
Speaker 3: raising rates is things do get more expensive, so demand
Speaker 3: goes down.
Speaker 4: Well, that's the problem here is we're in a different
Speaker 4: environment with housing than we've been in that anybody could remember.
Speaker 4: Because rates got so low, a lot of people out there,
Speaker 4: I think something like forty to fifty percent have rates
Speaker 4: under four percent, and right now we're over seven percent.
Speaker 4: So nobody wants to sell their house because they don't
Speaker 4: want to have to buy a more expensive mortgage. It
Speaker 4: was different if you were selling a seven percent mortgage
Speaker 4: and you're looking at a six or an eight percent mortgage.
Speaker 4: It's not that much different, But now it would be
Speaker 4: a huge difference in monthly payments. So everybody's just sitting there.
Speaker 4: There's no inventory on the market of existing homes. There
Speaker 4: aren't enough new homes being built so the price goes
Speaker 4: up simply supply and demand. They need to get interest
Speaker 4: rates down, mortgage rates down. Then maybe pent up demand
Speaker 4: to move will take over and we'll see some additional
Speaker 4: inventory come on the market. But this may be a
Speaker 4: one time significant jump in home prices that doesn't go away, Hey, Mike.
Speaker 5: Theoretically, at least, the FED is not supposed to be
Speaker 5: looking at the stock market or stock prices. But one
Speaker 5: stock that's really tough to not watch is in Nvidia,
Speaker 5: and of course for that AI play. You know, a
Speaker 5: lot of people are thinking that AI is going to
Speaker 5: juice the economy in a massive, massive way. You know,
Speaker 5: if not this year or a couple of years. How
Speaker 5: much did Fetcher J. Powell speak about AI and the
Speaker 5: possible influence on the economy.
Speaker 4: Not very much. He was starting to get asked about
Speaker 4: it when the questionnaire ran out of time, and they
Speaker 4: really didn't come back to it all that much. The
Speaker 4: fence position is, it seems to be something that will
Speaker 4: add to productivity, but we're going to have to watch
Speaker 4: it and make sure and see where the productivity comes
Speaker 4: from and what downrange impacts that has, who loses jobs,
Speaker 4: who gets jobs, That sort of thing they're not really
Speaker 4: ready to comment on that. There was a big conference
Speaker 4: on Friday of FED officials in New York City and
Speaker 4: that was one of the major topics, but it didn't
Speaker 4: come up as much as you might have thought today
Speaker 4: on Capitol Hill.
Speaker 5: Maybe tomorrow.
Speaker 2: One of the few people who aren't just talking about AI. Hey, Mike,
Speaker 2: just real quickly thirty seconds. One thing that struck me
Speaker 2: is Fetchaer J. Powell saying, the pandemic still writing the
Speaker 2: story of our economy right now, and we should be
Speaker 2: prepared to be surprised with the next chapter. A reminder
Speaker 2: that we still don't know how this all ends.
Speaker 4: We don't, and if you keep up with some of
Speaker 4: the medical literature, the doctors are all warning it's still
Speaker 4: out there. There's still mutations and we have to be careful.
Speaker 4: We've also changed our inventory systems, and the supply chains
Speaker 4: that we have have been modified, but have they been
Speaker 4: modified enough for the next occurrence. Those are the kind
Speaker 4: of things that FED has to worry about.
Speaker 5: YEP.
Speaker 2: It's why we're data dependant and just kind of finding
Speaker 2: our way through. Hey, guys, thank you so much. A
Speaker 2: lot of news obviously on this Wednesday, great breakdown fetcher J.
Speaker 2: Powell his testimony first of two days, and of course
Speaker 2: the market reaction are thanks to our Bloomberg News International
Speaker 2: Economics and Policy correspondent Michael McKee and DC and Bloomberg
Speaker 2: News Markets reporter Abigail Doolittle write in studio, We're coming
Speaker 2: back in just a moment.
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Speaker 2: Just to rehash our top story, I would say safe
Speaker 2: to say here on this Wednesday, New York Community Bank
Speaker 2: are planning to announce an equity investment of more than
Speaker 2: a billion dollars led by Steven Mnusi's Liberty Strategic Capital,
Speaker 2: Hudson Bay Capital, and Reverence Capital Partners. According to a
Speaker 2: spokesperson for the bank, Liberty will be investing four hundred
Speaker 2: and fifty million, Hudson Bay two hundred and fifty million,
Speaker 2: Reverenced two hundred million as part of the transaction. Also,
Speaker 2: NYCB will add new directors to its board, including Steven
Speaker 2: Manus and Joseph Adding, a former Comptroller of the Currency,
Speaker 2: the board of NYCB to be reduced to nine members
Speaker 2: and this transaction to close on or around March eleventh,
Speaker 2: and a quick check in terms of shares of New
Speaker 2: York Community Bank still halted, but we are getting some
Speaker 2: more details here. We'll continue to follow it as they
Speaker 2: cross the Bloomberg.
Speaker 3: The New York Community Bank also to sell an issue
Speaker 3: shares at two dollars per share and named Joseph Adding
Speaker 3: as the company's CEO. For more, let's bring in Herman Chan,
Speaker 3: Bloomberg Intelligence, Senior analyst for US Regional Banks. Herman, A
Speaker 3: lot has happened just in the moments that you've sat
Speaker 3: down in our studio this afternoon. Is this infusion enough
Speaker 3: to save New York Community Bank?
Speaker 7: It does offer a lifeline for them, especially given the
Speaker 7: way the stock is traded in the past few days.
Speaker 7: That being said, the existing equity shareholders have been massively diluted.
Speaker 7: We're talking about a bank that has a bit over
Speaker 7: one billion dollar in market cap and they're raising over
Speaker 7: a billion dollars with this equity infusion. So it's a
Speaker 7: tough pill to swallow for the for the shareholders that
Speaker 7: we're riding it. But it does give them some time
Speaker 7: to shore up all the issues that we've talked to.
Speaker 3: Explain what this does to existing shareholders of the bank.
Speaker 3: If you're offering new shares at two dollars per share
Speaker 3: and at a billion dollar value, what does it due
Speaker 3: to existing shareholder right.
Speaker 7: So basically your ownership of the earning stream is now
Speaker 7: down by fifty percent. So it's great for the company
Speaker 7: that it can still operate given all the uncertainty, But
Speaker 7: it's just the changing of the guard and changing of
Speaker 7: the shareholders.
Speaker 2: Getting a billion dollar lifeline. Does that guarantee that this
Speaker 2: is a bank can continue to exist? And I don't
Speaker 2: want to be inflammatory, I want to be smart here,
Speaker 2: but a billion dollars is a lot of money. Is
Speaker 2: that enough to fix the balance sheet and the risks
Speaker 2: that are out there?
Speaker 7: It really depends on what's going to happen with the
Speaker 7: deposits right now. It should placate a lot of folks
Speaker 7: that were maybe a little bit uncertain about what the
Speaker 7: past is ahead. But we've changed the management team yet again.
Speaker 7: There's a new CEO now with Joseph Adding. He's got
Speaker 7: a lot on his to do list to shore up
Speaker 7: its capital even more reduce their exposure to commercial real
Speaker 7: estate and make sure their employees and customers stay within
Speaker 7: the bank. That's a lot.
Speaker 3: We just had a new CEO New York Community Bank,
Speaker 3: Sandra Denello.
Speaker 7: Right, So Sandra looks like he's out now and Joseph
Speaker 7: Adding is has been announced the new CEO. Sandra will
Speaker 7: remain as the non executive chairman of the board.
Speaker 2: Can I ask you when we've talked about this before
Speaker 2: when we initially got that headline, just was it a
Speaker 2: couple of days ago or so about material weaknesses and
Speaker 2: we talked, We had this conversation that that's what a
Speaker 2: bank's supposed to do, right in terms of risk oversight.
Speaker 2: So I mean, do we know whether or not that
Speaker 2: they've fixed that problem? Does a cash infusion just fix
Speaker 2: that problem?
Speaker 7: It doesn't. So that's also I should have mentioned earlier
Speaker 7: on the to do list.
Speaker 2: And forgive me about thirty thirty seconds here.
Speaker 7: Sure, And so that's something you know, Joseph Adding was
Speaker 7: a former head of the OCC and they're regulated by
Speaker 7: the OCC. So that should give them a good plan
Speaker 7: to go ahead and make sure their regulatory issues are
Speaker 7: dealt with in a proper manner.
Speaker 2: We should also mention another headline crossing investors include Citadel Security.
Speaker 2: So reaching out to a bunch of members of kind
Speaker 2: of the financial community. That's right, all right, what's next.
Speaker 7: On your radar? You know this has taken up so
Speaker 7: much time, so we're just looking for the fallouts ahead.
Speaker 7: We've got a webinar going on tomorrow about the year
Speaker 7: after with USBB.
Speaker 2: All right, going to look forward to that, Herbin Chan,
Speaker 2: thank you so much. A member of our Bloomberg Intelligence
Speaker 2: team watching these regionals for US again. Shares of NYCB
Speaker 2: not trading yet. This is Bloomberg Business Week.
Speaker 1: You're listening to the Bloomberg Business Week podcast. Listen live
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Speaker 3: Well here on Bloomberg Business Weekend. Bloomberg News. We follow
Speaker 3: for in direct Investment very closely because each year countries
Speaker 3: around the world compete for more than a trillion dollars
Speaker 3: in FDI flows. Multinational corporations must weigh the shifting landscape.
Speaker 3: The evolving risk return profile of countries, will governments and
Speaker 3: international trade bodies laid down foundations and incentives to compete
Speaker 3: for their investments.
Speaker 2: Maggie sweet Tech a senior director of the Milk and
Speaker 2: Institute's Research department. She focuses on access to economic opportunities
Speaker 2: in the US and around the globe. She joins US
Speaker 2: from Santa Monica, California. Maggie, great to have you here.
Speaker 2: A busy day, but we did want to include your
Speaker 2: report that you've got a new report about the most
Speaker 2: attractive countries for foreign direct investment. And what struck us
Speaker 2: is that they are all advanced economies. Just briefly go
Speaker 2: over kind of some of the key findings here.
Speaker 8: Yes, absolutely so. In the report that we just put out,
Speaker 8: we use our Global reportdu in the index. So what
Speaker 8: the Global Report do in the index really does, said
Speaker 8: It's court. It provides a benchmark for country's attractiveness to
Speaker 8: international investors. And the way we do it is we
Speaker 8: use one hundred different indicators that we classify in to
Speaker 8: fight different categories that our business perception, economic fundamentals, financial services,
Speaker 8: international standards and policy, and institutional framework. And so in
Speaker 8: the report itself, we find the findings for we com
Speaker 8: pair the findings from the Global Opportunity Index together with
Speaker 8: capital movements around the globe, and what that does is
Speaker 8: it really provides a comprehensive overview of opportunities for investors
Speaker 8: outside of their local markets as well as it provides
Speaker 8: information to countries that are interested in improving their business
Speaker 8: environments by letting them see, you know, what are the
Speaker 8: factors that they could work on in order to become
Speaker 8: more attractive to investors. So what you mentioned there is
Speaker 8: that the countries that tend to perform among the top
Speaker 8: twenty URL advanced economy. So this is actually something that
Speaker 8: is not surprising.
Speaker 2: I was going to say that seems to be expected, right,
Speaker 2: we think because in terms of all those metrics you
Speaker 2: laid out, you know, it's interesting. And here we are
Speaker 2: focused on new your community bank COORT today and there's
Speaker 2: been lots of concerns surrounding this bank over the last
Speaker 2: few weeks in particular, in the last week in particular,
Speaker 2: and yet you know, there are the means often sometimes
Speaker 2: from investors to kind of help out the situation. And
Speaker 2: I think about in the developed economies that is available
Speaker 2: versus some of the emerging economies where that's not likely
Speaker 2: are as easily done.
Speaker 8: Yes, no, and so absolutely these countries, these top twenty
Speaker 8: countries and our index, they're really strong and institutional framework.
Speaker 8: They have a good business perception, which again as you mentioned,
Speaker 8: is not surprising. These advanced economies really do attract the
Speaker 8: majority of capital inflows. They attract around sixty five percent
Speaker 8: there our top twenty countries of capital inflows from around
Speaker 8: the world, so it's also not surprising again as you
Speaker 8: mentioned that they're on the top. However, what we say
Speaker 8: in the report and what we also highlight is that
Speaker 8: in addition to paying attention to these advanced countries, which
Speaker 8: are increasing their attractiveness as interest rates are remaining high
Speaker 8: among the advanced economies, investors should really also keep a
Speaker 8: lookout on the emerging countries and emerging and developing regions.
Speaker 8: And the reason why is because those are for well
Speaker 8: two reasons. First of all, of all, they can offer
Speaker 8: high growth returns, right and also yeah, and also at
Speaker 8: the same time, these are countries that really need capital, right,
Speaker 8: I want.
Speaker 3: To talk about That's exactly what I want to talk about,
Speaker 3: and sort of the idea of the risk profile. So
Speaker 3: if we remove some of the criteria that you include,
Speaker 3: but only look at where there's a potential for ag
Speaker 3: a bigger return for these investments. How does that profile
Speaker 3: change when it comes to advanced economies versus not advanced economies.
Speaker 8: So yeah, so definitely among the non advanced economies, that's
Speaker 8: really where the growth is still remaining. So we see
Speaker 8: we have a lot of investment moving nowadays into Latin America,
Speaker 8: especially in twenty twenty two. So we know that emerging
Speaker 8: and developing Asia is really the region that captures a
Speaker 8: lot of the capital and flows in general. However, in
Speaker 8: twenty twenty two, we saw a movement of capital a
Speaker 8: little bit out of Emerging and Developing Asia into Latin America.
Speaker 8: And there's really a lot of growth potential in Latin America.
Speaker 8: And when we talk about Latin America, there's really two
Speaker 8: countries that stand out. It's Mexico and Brazil, right, these
Speaker 8: are the two major economies in Latin America. However, there's
Speaker 8: also other countries such as Chile, which is a slightly
Speaker 8: smaller economy but still considerable economy, and Latin America.
Speaker 2: Hey, Maggie, one thing I want and I'm glad you
Speaker 2: talked about Latin America because we've certainly spent more time
Speaker 2: year at Bloomberg focusing on what is happening there in
Speaker 2: terms of investment opportunities. Having said that, we spend a
Speaker 2: lot of time on another country economy that is so
Speaker 2: important to global growth, and that is China, and we've
Speaker 2: done a fair amount of story about investors not so
Speaker 2: keen to be putting money into that country. What can
Speaker 2: you tell us on that front? Because when we think
Speaker 2: about China, right the second most important economy to global growth.
Speaker 8: Yes, no, and so China actually continues to score high
Speaker 8: in our index its course, at number thirty nine. We're
Speaker 8: considering that it is still an emerging and developing economy
Speaker 8: as classified by the IMF is relatively high. In China,
Speaker 8: we have still a very strong innovation economy that is
Speaker 8: continuing to be paying off. However, what we did see
Speaker 8: and exactly what you're saying, is that in twenty twenty two,
Speaker 8: for the first time in a long time, capital inflows
Speaker 8: into China became negative, which means that more money left
Speaker 8: China than entered. So that is what we are seeing there.
Speaker 8: So when we think about the factors that really are
Speaker 8: strong in China are financial services. They have a very
Speaker 8: developed or relatively developed for an emerging nation financial services sector,
Speaker 8: and precisely this innovation economy, which tends to prop it
Speaker 8: up in the institutional framework. Right However, innovation as we
Speaker 8: know it has been in the past observed to be
Speaker 8: stifled by excessive government intervention. So to the extent that
Speaker 8: that becomes an issue in China in the long term,
Speaker 8: investors are can anticipate that and start moving their capital out.
Speaker 8: What I want to say is also this is something
Speaker 8: that we're observing right now. Whether or not discontinues into
Speaker 8: the future is another question.
Speaker 2: We're going to leave it there. Maggie, Thank you so much.
Speaker 2: Maggie Sweetech. She's senior director at Milkin Institute's Research department.
Speaker 2: Joining us from Santa Mank, Monica, California.
Speaker 6: Bromco Journal.
Speaker 8: How about you let me drive, honey, please, I want
Speaker 8: to drive. It's a good question.
Speaker 1: Of the trum. This is good drive to the globeng
Speaker 1: TM thing well, build don on Bloomberg Radio.
Speaker 2: All right, everybody, just about eighteen and a half minutes
Speaker 2: left in today's trading session. Carol Master along with Tim Stenevik,
Speaker 2: Charlie of course, breaking down the trade here, we're definitely
Speaker 2: off our best levels of the day when it comes
Speaker 2: to the equity trade, but green across the board, albeit
Speaker 2: kind of small moves here, but we do have Yeah,
Speaker 2: the Nasdaq one hundred looks like beating the major equity
Speaker 2: averages on a percentage basis, up about six tensive a percent.
Speaker 3: Okay, So what does our next guests have to say
Speaker 3: about all of this? She focuses on bonds.
Speaker 2: Not like Ivie was going on today.
Speaker 3: Yeah, exactly like that, everything was going on, joined Bianco's
Speaker 3: investment partner and client portfolio manager at Bond Blocks. It's
Speaker 3: an etf issu. We're focused on fixed income, about two
Speaker 3: point six billion dollars in assets. She joins us from Chicago. Carol,
Speaker 3: I want to toss it over to you because you
Speaker 3: got a really good question. That's very timely for Joanne.
Speaker 2: Joanne, great to have you here with Tim and myself,
Speaker 2: and we just want to start with the news of
Speaker 2: the day. And we're kind of a little obsessed, but
Speaker 2: rightfully so, watching New York Community Bank Corp. Stock is
Speaker 2: up about five percent here, quite wild swings, but on
Speaker 2: a day where they raised over billion dollars in an
Speaker 2: equity investment, a handful of investors, well known investors. As
Speaker 2: we heard from our Matthew Monks, US Deals reporter earlier,
Speaker 2: having said that with this one billion dollar equity investment,
Speaker 2: would you buy the debt of New York Community Bank Corps.
Speaker 6: That's a really good question. It's definitely a very fast
Speaker 6: moving situation, and it's obviously a very good news for
Speaker 6: them to receive this billion dollar equity investment. It's certainly
Speaker 6: a vote of confidence. You know, we don't think that
Speaker 6: their troubles translate yet into a more worrisome contagion effect,
Speaker 6: but it's just going to be a matter of time
Speaker 6: to see if this does give the market the confidence
Speaker 6: that it needs to be willing to invest in their debt.
Speaker 2: So is that a no, you wouldn't buy their debt
Speaker 2: at this point?
Speaker 6: No, it's a tough question.
Speaker 3: Well when when would you What would you need to
Speaker 3: see from from the bank and from the balance sheet
Speaker 3: in order to say, okay, yeah, I would do this.
Speaker 6: I think you you would want to see that this
Speaker 6: really does stabilize the situation. So something this, this equity
Speaker 6: investment would be such that it's big enough such that
Speaker 6: it does really shore up their capital situation. And so
Speaker 6: I mean, I'm just not close enough to the situation
Speaker 6: to really know for sure what it means.
Speaker 2: No, that's fair enough. But when you look okay, so wide,
Speaker 2: Now let's just stick with before we get into kind
Speaker 2: of J Powell, which was how we kicked off our
Speaker 2: broadcast a few hours ago, coming off of his testimony
Speaker 2: up on Capitol Hill. But when you broaden out more
Speaker 2: broadly in kind of the corporate bond space, what's attractive
Speaker 2: at this point? Where do you find opportunities?
Speaker 6: Well, we're at elevated yields for corporate bonds because of
Speaker 6: you know, the interest rate scenario that the market is
Speaker 6: faced with and so and also a very resilient economy
Speaker 6: which has translated into strong fundamentals that continue for corporations.
Speaker 6: So we like corporate credit, both investment grade and high yield.
Speaker 6: But within investment grade, corporate bonds were particularly constructive. On
Speaker 6: the triple B rating category. We feel like, why why
Speaker 6: shouldn't investors take advantage of the increased yield until return
Speaker 6: potential and triple bs.
Speaker 2: So across the board in terms of so nothing in
Speaker 2: terms of sector industry specific.
Speaker 6: Well, there's you know, there's a number of sectors that
Speaker 6: we like as well. I mean, the energy sector has
Speaker 6: been very strong, really good credit quality. There's been a
Speaker 6: lot of focus on balance sheet management there, and you know,
Speaker 6: the price of oil and it has been very helpful
Speaker 6: in terms of the type of cash flow that those
Speaker 6: companies can generate because of current commodity pricing. So that's
Speaker 6: definitely something we like. We also like companies in the
Speaker 6: core industrial sector as well. It's just again, the resilience
Speaker 6: in the economy. Resilience is not an overused word to
Speaker 6: describe the economic conditions that corporations are based with.
Speaker 3: You know, we talked a lot of our program, and
Speaker 3: at least in the first special hour that we did
Speaker 3: following j. Powell testifying in front of the House, he'll
Speaker 3: be in the front of the Senate tomorrow of course,
Speaker 3: talking a lot about the raid environment and the way
Speaker 3: rates move to change. Rates may change this year. What
Speaker 3: happens when to your business when rates do fall.
Speaker 6: Well, there could be a total return tailwind for investors
Speaker 6: in fixed income. Prices would go up of the securities
Speaker 6: that they hold, So it would be a good thing there.
Speaker 3: What about new money coming into the ets, Yeah, what
Speaker 3: about new flows coming into the ETFs though in a
Speaker 3: lower rate environment.
Speaker 6: Again, you know, we're still we're not expecting that rates
Speaker 6: are going to go back down to the really low
Speaker 6: near zero levels that they were at before. So there's
Speaker 6: still going to be a place for fixed income and
Speaker 6: fixed income ETFs and people's portfolios in terms of the
Speaker 6: type of attractive opportunities that will be available.
Speaker 2: I do want to ask you about your thoughts on
Speaker 2: what FED Shair J. Powell had to say today. Basically,
Speaker 2: you know, our analysis with our in house group and
Speaker 2: externally is that basically we got a lot of what
Speaker 2: Ja Powell said at the last FED meeting and so
Speaker 2: not necessarily any new surprises. Didn't talk a ton about
Speaker 2: the economy, but the FED of course concerned about going
Speaker 2: too soon when it comes to cutting rates, but also
Speaker 2: we're you know, concerned about staying where they are too
Speaker 2: long and the impact it could have longer term economic growth.
Speaker 2: What was key for you if there was anything here
Speaker 2: that you thought was constructive, especially when it comes to
Speaker 2: the investment environment in your world.
Speaker 6: Well, I mean, he definitely reiterated that there is no
Speaker 6: rush for the FED to cut rates, that they definitely
Speaker 6: want to continue to watch the data that comes in.
Speaker 6: I don't think that, you know, it was I think
Speaker 6: positive for the market, positive for fixed income and equities
Speaker 6: that he was saying that we're at peak rates, you know,
Speaker 6: because that obviously it would be if we expected rates
Speaker 6: to have to be increased significantly from here, that would
Speaker 6: be something that would be probably more negative, certainly for
Speaker 6: the equity market, possibly could be harder on the economy
Speaker 6: as well.
Speaker 3: Would you just in the last ninety seconds that we
Speaker 3: have with you, last minute, I should say, well, what
Speaker 3: would have to happen, in your opinion for the FED
Speaker 3: share to not follow through with the idea that we're
Speaker 3: at peak rates right now? Like what would have to
Speaker 3: happen in the economy for the Fed to raise rates
Speaker 3: one more time? Like we heard posited from Larry Summers
Speaker 3: a few weeks ago.
Speaker 6: Well on a reacceleration in inflation that sustained. Okay, I
Speaker 6: mean that's a short answer and the long answer.
Speaker 3: Well, look, I mean you bring up a good point.
Speaker 3: We're getting we're getting the February jobs numbers on Friday,
Speaker 3: and if that's you know, comes in way past expectations.
Speaker 3: CPI happens next week also and if that number comes
Speaker 3: in once again hot, then I think people might start
Speaker 3: asking those questions.
Speaker 1: Carol.
Speaker 2: Yeah, absolutely all right, good to leave with there. Hey,
Speaker 2: Joe Anne, thank you so much. Really appreciate your input
Speaker 2: here today. Joeanne Bianco, She's an investment partner and client
Speaker 2: portfolio manager of at Bondbox, joining us in Chicago.
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