1 00:00:00,040 --> 00:00:13,760 Speaker 1: Bloomberg Audio Studios, podcasts, radio news. This is the Bloomberg 2 00:00:13,800 --> 00:00:17,880 Speaker 1: Surveillance Podcast. Catch us live weekdays at seven am Eastern 3 00:00:18,200 --> 00:00:21,960 Speaker 1: on Apple CarPlay or Android Auto with the Bloomberg Business App. 4 00:00:22,320 --> 00:00:25,640 Speaker 1: Listen on demand wherever you get your podcasts, or watch 5 00:00:25,760 --> 00:00:26,960 Speaker 1: us live on YouTube. 6 00:00:27,040 --> 00:00:29,760 Speaker 2: What we'd love to do is, particularly at a shop 7 00:00:29,840 --> 00:00:32,040 Speaker 2: like the Royal Bank of Canada, when we get too 8 00:00:32,760 --> 00:00:37,000 Speaker 2: aligned and too highly competent, to say the least, it's 9 00:00:37,040 --> 00:00:39,320 Speaker 2: fun to get them both in the studio just to 10 00:00:39,360 --> 00:00:43,600 Speaker 2: get a window into the day to day grind. I mean, Paul, 11 00:00:43,680 --> 00:00:45,600 Speaker 2: I mean you look at Lori Kelvasina, you look at 12 00:00:45,640 --> 00:00:49,120 Speaker 2: Amy Wos Silverman. They're talking to two different audiences. 13 00:00:49,520 --> 00:00:51,920 Speaker 3: And if I'm a salesman at RBC Capitol, I'm making 14 00:00:52,000 --> 00:00:52,360 Speaker 3: bank off. 15 00:00:52,479 --> 00:00:53,199 Speaker 2: It's a gift. 16 00:00:53,479 --> 00:00:54,440 Speaker 3: It's a gift anytime. 17 00:00:54,560 --> 00:00:57,600 Speaker 2: Joining us now for the first time ever, Amy was 18 00:00:57,800 --> 00:01:01,080 Speaker 2: Silverman Lori Kelvasina of the Royal Bank of Canada. Let 19 00:01:01,120 --> 00:01:02,400 Speaker 2: me just get this out of the way. Are the 20 00:01:02,400 --> 00:01:03,680 Speaker 2: two of you on speaking terms? 21 00:01:04,240 --> 00:01:05,800 Speaker 4: Well, we talk all the time. 22 00:01:05,840 --> 00:01:06,600 Speaker 5: It's my work wife. 23 00:01:06,760 --> 00:01:09,840 Speaker 2: When you talk about work from the quant area of 24 00:01:09,880 --> 00:01:13,920 Speaker 2: Amy wou over to your incredible power points showing the 25 00:01:13,959 --> 00:01:17,320 Speaker 2: texture of the market. What's the number one talking point. 26 00:01:17,800 --> 00:01:19,800 Speaker 6: I think we've been talking a lot about tech lately. 27 00:01:19,920 --> 00:01:22,479 Speaker 6: I mean it's it's just the conversation you can't get 28 00:01:22,520 --> 00:01:24,360 Speaker 6: away from. And by that, I mean, you know, sort 29 00:01:24,400 --> 00:01:27,080 Speaker 6: of the you know, the hyperscalers are mostly in a 30 00:01:27,080 --> 00:01:29,720 Speaker 6: different sector, to be honest, but the you know, sort 31 00:01:29,760 --> 00:01:31,840 Speaker 6: of semis and the momentum trade, I think is what 32 00:01:31,880 --> 00:01:34,760 Speaker 6: we've been largely talking about, and what our work is 33 00:01:34,800 --> 00:01:37,200 Speaker 6: showing on the semis is that you've hit the average 34 00:01:37,240 --> 00:01:39,160 Speaker 6: valuation levels if you look at sort of a five 35 00:01:39,240 --> 00:01:41,800 Speaker 6: or thirty five year average. We had been hearing a 36 00:01:41,800 --> 00:01:43,960 Speaker 6: lot of clients saying they thought the momentum wine was 37 00:01:44,040 --> 00:01:45,959 Speaker 6: late innings close to done. It's gone on a little 38 00:01:45,959 --> 00:01:48,440 Speaker 6: bit longer, frankly than I would have thought. But I 39 00:01:48,480 --> 00:01:51,320 Speaker 6: would say that's really the genesis of a lot of 40 00:01:51,320 --> 00:01:53,480 Speaker 6: the conversations of late amy. 41 00:01:53,560 --> 00:01:56,240 Speaker 3: When you for your clients, are they it's a big 42 00:01:56,240 --> 00:01:58,960 Speaker 3: week for earnings, a big tech week for earnings. How 43 00:01:59,000 --> 00:02:01,000 Speaker 3: are your clients in need futures and options? Are they 44 00:02:01,080 --> 00:02:04,680 Speaker 3: leaning into these earnings? Are they saying, like as Laurie said, 45 00:02:04,760 --> 00:02:07,120 Speaker 3: maybe that a menta thing is kind of coming to 46 00:02:07,160 --> 00:02:07,520 Speaker 3: an end. 47 00:02:07,840 --> 00:02:10,720 Speaker 7: It's so interesting because ahead of this week, you know, 48 00:02:11,000 --> 00:02:15,880 Speaker 7: Big four reporting huge concentration. Tom's favorite word, skew. You know, 49 00:02:15,960 --> 00:02:19,400 Speaker 7: it's pretty flat, meaning people are not really deciding to 50 00:02:19,560 --> 00:02:22,200 Speaker 7: hedge in front of any of these stocks, which actually 51 00:02:22,240 --> 00:02:23,119 Speaker 7: fairly sanguine. 52 00:02:23,360 --> 00:02:23,560 Speaker 3: Look. 53 00:02:23,639 --> 00:02:25,440 Speaker 7: Part of that is we already had a big move 54 00:02:25,480 --> 00:02:28,400 Speaker 7: in sympathy with Alphabet last week, so some of that's 55 00:02:28,400 --> 00:02:32,200 Speaker 7: taken it off the table. But to give you an example, meta, 56 00:02:32,280 --> 00:02:35,560 Speaker 7: you know it's implied move on earnings days about seven percent. 57 00:02:35,680 --> 00:02:37,840 Speaker 7: This thing moves plus or minus ten percent the last 58 00:02:37,880 --> 00:02:40,640 Speaker 7: four quarters. So the fact that it's an inexpensive move 59 00:02:40,720 --> 00:02:41,520 Speaker 7: is pretty shocking. 60 00:02:41,560 --> 00:02:43,400 Speaker 2: The magic of you two as your worker bees, I mean, 61 00:02:43,400 --> 00:02:46,520 Speaker 2: you're out there hugely seeing clients. Do clients have a 62 00:02:46,520 --> 00:02:49,240 Speaker 2: bet lori on the market right now? Are they placing 63 00:02:49,240 --> 00:02:52,000 Speaker 2: a bet out into twenty twenty seven? 64 00:02:52,160 --> 00:02:54,440 Speaker 6: You know what's really interesting Tom, and this has gone 65 00:02:54,480 --> 00:02:56,560 Speaker 6: back a couple of months now, is you know, I 66 00:02:56,600 --> 00:02:58,880 Speaker 6: go into the meeting and I have my price target 67 00:02:58,960 --> 00:03:01,760 Speaker 6: and the methodology and five models and YadA YadA YadA, 68 00:03:01,800 --> 00:03:04,520 Speaker 6: and people do want to talk about the valuation earnings 69 00:03:04,520 --> 00:03:07,600 Speaker 6: model because that's fairly unique in our process. But by 70 00:03:07,639 --> 00:03:09,720 Speaker 6: a large time, people don't want to talk about market direction. 71 00:03:09,800 --> 00:03:12,320 Speaker 6: They want to talk about, let's look at all the sectors, 72 00:03:12,520 --> 00:03:15,280 Speaker 6: where's their opportunity. There's been this view, I would say, 73 00:03:15,280 --> 00:03:18,240 Speaker 6: the last couple months, I've had plenty of AI, I've 74 00:03:18,240 --> 00:03:20,360 Speaker 6: had plenty of tech, I've had plenty of semis. 75 00:03:20,360 --> 00:03:21,600 Speaker 4: What else should I be looking at? 76 00:03:21,639 --> 00:03:23,639 Speaker 6: And frankly, a lot of the choices haven't been that 77 00:03:23,720 --> 00:03:26,480 Speaker 6: interesting to people. So you get kind of stuck in those. 78 00:03:26,440 --> 00:03:29,280 Speaker 2: Cots over your world. And let's say it's more alternative, 79 00:03:29,320 --> 00:03:33,480 Speaker 2: more hedge funds, more leverage bets using mathematics. Do they 80 00:03:33,520 --> 00:03:37,080 Speaker 2: have the same feeling of us? So let's go yes 81 00:03:37,120 --> 00:03:37,320 Speaker 2: and no. 82 00:03:37,520 --> 00:03:39,800 Speaker 7: There's a little bit of nervousness. For instance, you know 83 00:03:39,880 --> 00:03:42,440 Speaker 7: last week what we talked about is this whole levered 84 00:03:42,440 --> 00:03:45,880 Speaker 7: ETF sphere. There's a lot of you know what, tail 85 00:03:45,920 --> 00:03:49,000 Speaker 7: will wag the dog because we've had you know, my 86 00:03:49,040 --> 00:03:51,520 Speaker 7: favorite term, the paddling duck on the surface. But you've 87 00:03:51,520 --> 00:03:55,680 Speaker 7: had these huge multi standard dvtion drawdowns and momentum factor. 88 00:03:56,440 --> 00:03:59,000 Speaker 7: You have a lot of leverage piled onto these ETFs 89 00:03:59,000 --> 00:04:01,120 Speaker 7: that are accumulating, and then if you get a burst 90 00:04:01,120 --> 00:04:03,440 Speaker 7: of correlation. What does that mean to the market. It's 91 00:04:03,480 --> 00:04:06,200 Speaker 7: a little bit of nervousness, But when you look at 92 00:04:06,200 --> 00:04:10,400 Speaker 7: the hyperskiller specifically option sentiments, pretty sanguine, Laurie. 93 00:04:10,480 --> 00:04:12,520 Speaker 3: These earnings we've been having over the last several quarters, 94 00:04:12,560 --> 00:04:16,839 Speaker 3: including this quarter, have been just extraordinary. I mean, it's 95 00:04:16,839 --> 00:04:19,040 Speaker 3: almost August here. I think I need to start thinking 96 00:04:19,080 --> 00:04:21,159 Speaker 3: about twenty twenty seven. Are comps going to be like 97 00:04:21,839 --> 00:04:22,960 Speaker 3: really brutally tough. 98 00:04:23,279 --> 00:04:25,400 Speaker 6: Well, I think in terms of, you know, kind of 99 00:04:25,440 --> 00:04:28,160 Speaker 6: two Q versus two Q, there's going to be some walkiness. 100 00:04:28,960 --> 00:04:30,680 Speaker 4: But I think the reality is. 101 00:04:30,600 --> 00:04:32,880 Speaker 6: That companies, you know, have done a beautiful job of 102 00:04:32,920 --> 00:04:35,839 Speaker 6: managing through all the challenges we've you knows, as a 103 00:04:35,839 --> 00:04:39,840 Speaker 6: society have thrown at them so far. That doesn't always last. 104 00:04:40,080 --> 00:04:42,240 Speaker 6: And so one thing we've been highlighting to people is 105 00:04:42,279 --> 00:04:44,240 Speaker 6: that sort of a risk we see in the coming 106 00:04:44,279 --> 00:04:45,839 Speaker 6: months is at some point you may need to pull 107 00:04:45,880 --> 00:04:48,000 Speaker 6: down twenty twenty seven earnings forecasts. 108 00:04:48,400 --> 00:04:50,520 Speaker 4: And that's not so much about the comps. 109 00:04:50,160 --> 00:04:52,080 Speaker 6: But it is the idea that you look at the 110 00:04:52,080 --> 00:04:55,760 Speaker 6: Iran war, for example, the buffers, the inventories, the hedges, 111 00:04:55,960 --> 00:04:57,640 Speaker 6: those things that are kind of getting you through the 112 00:04:57,640 --> 00:04:59,600 Speaker 6: next couple quarters where you're going to have to reset those, 113 00:04:59,640 --> 00:05:02,239 Speaker 6: you're going to have to replenish those. We even heard 114 00:05:02,360 --> 00:05:06,240 Speaker 6: last week one rail talking about how plastics inventories were 115 00:05:06,279 --> 00:05:07,960 Speaker 6: starting to be rebuilt. Those are going to be done 116 00:05:08,000 --> 00:05:10,880 Speaker 6: at higher prices. So I think that you know, kind 117 00:05:10,880 --> 00:05:13,040 Speaker 6: of the idea of what you were able to manage 118 00:05:13,080 --> 00:05:15,279 Speaker 6: through this year. If you have lingering impact, next year 119 00:05:15,560 --> 00:05:16,760 Speaker 6: might just not be so easy. 120 00:05:16,839 --> 00:05:20,320 Speaker 2: Across America this morning and in Canada as well, Amy 121 00:05:20,400 --> 00:05:25,320 Speaker 2: was Silverman Laurie Kelvisena together from RBC Capital America's Paul 122 00:05:25,360 --> 00:05:32,320 Speaker 2: Sweeney with the ladies who they lunch the dinner they're 123 00:05:32,360 --> 00:05:34,760 Speaker 2: in airplane terminals a lot. 124 00:05:35,040 --> 00:05:38,839 Speaker 3: Yep, yep, exactly right. I remember those those days. Amy. 125 00:05:40,440 --> 00:05:43,480 Speaker 3: Are you surprised that we're not seeing more hedging in 126 00:05:43,520 --> 00:05:46,680 Speaker 3: your world? I would think on margin we hear about 127 00:05:46,680 --> 00:05:48,760 Speaker 3: the Wall of Warrior, I would think, we have had 128 00:05:48,800 --> 00:05:52,160 Speaker 3: a pretty good year here. Earnings can't get any better 129 00:05:52,200 --> 00:05:52,920 Speaker 3: than this, can they? 130 00:05:52,960 --> 00:05:53,279 Speaker 1: Really? 131 00:05:53,400 --> 00:05:55,159 Speaker 3: Are you surprised? But maybe you're not seeing more hedging 132 00:05:55,200 --> 00:05:55,960 Speaker 3: at all in your world? 133 00:05:56,000 --> 00:05:58,120 Speaker 7: You know? I try to talk my book and to 134 00:05:58,200 --> 00:06:01,680 Speaker 7: talk about how hedging is still relative inexpensive. I think 135 00:06:02,040 --> 00:06:04,880 Speaker 7: there's this element here of people still remember back to 136 00:06:05,040 --> 00:06:07,880 Speaker 7: April second, they still remember back to Liberation Day. They 137 00:06:08,560 --> 00:06:10,920 Speaker 7: know there's this kind of cohort of retail who likes 138 00:06:10,920 --> 00:06:13,080 Speaker 7: to step in, they like to buy the dip. It's 139 00:06:13,160 --> 00:06:15,640 Speaker 7: changed a lot of relationships in our market. This idea 140 00:06:15,640 --> 00:06:16,720 Speaker 7: of spot goes up and. 141 00:06:16,839 --> 00:06:17,719 Speaker 4: Volatilely goes up. 142 00:06:17,760 --> 00:06:19,599 Speaker 7: You know, that's a little mind blowing for someone like 143 00:06:19,680 --> 00:06:22,039 Speaker 7: me who's been in the market when that's not true. 144 00:06:22,360 --> 00:06:24,760 Speaker 7: But there is that hesitancy. I do think as we 145 00:06:24,839 --> 00:06:27,360 Speaker 7: kind of cross out of earnings, maybe into mid terms, 146 00:06:27,680 --> 00:06:30,599 Speaker 7: you start getting more overall correlation and pick up risk, 147 00:06:30,960 --> 00:06:33,520 Speaker 7: maybe some more geopolitics. That does start to change. 148 00:06:34,200 --> 00:06:37,760 Speaker 3: So I don't know. I mean, I'm thinking about this loric. 149 00:06:38,640 --> 00:06:40,680 Speaker 3: Are there sectors here? I got to get away from 150 00:06:40,680 --> 00:06:43,440 Speaker 3: the AI trade at some point? Where do I go? 151 00:06:43,560 --> 00:06:46,160 Speaker 3: I mean, do I buy financials? Healthcare? Well? 152 00:06:46,160 --> 00:06:51,120 Speaker 6: Look, increasingly, right, AI is penetrating everything you know. Back 153 00:06:51,160 --> 00:06:53,520 Speaker 6: at our energy conference in June, I went to one 154 00:06:53,560 --> 00:06:55,320 Speaker 6: day of it and heard a lot about how the 155 00:06:55,400 --> 00:06:58,760 Speaker 6: energy companies are powering data centers. I mean, but look, 156 00:06:58,800 --> 00:07:01,159 Speaker 6: I do think that if you look at outside of tech, 157 00:07:01,520 --> 00:07:03,920 Speaker 6: we've been overweight financials for quite some time. We've been 158 00:07:03,920 --> 00:07:07,360 Speaker 6: sticking with that, reiterating that the valuations still look reasonable. 159 00:07:07,600 --> 00:07:10,560 Speaker 6: I wouldn't say they're cheap. Earnings revisions are very strong. 160 00:07:11,200 --> 00:07:13,360 Speaker 6: And look last week, you know, I was sort of 161 00:07:13,400 --> 00:07:16,520 Speaker 6: responsible on the team for reading the financials companies, and 162 00:07:16,640 --> 00:07:19,200 Speaker 6: I was just really struck by all the innovation that's 163 00:07:19,240 --> 00:07:22,520 Speaker 6: coming out of certain companies, not necessarily just the big banks, 164 00:07:23,080 --> 00:07:25,200 Speaker 6: you know, but seeing companies talk about things like prediction 165 00:07:25,320 --> 00:07:28,720 Speaker 6: markets and how that appeals to their client bases. Seeing 166 00:07:28,720 --> 00:07:31,840 Speaker 6: the retail brokerages talk about this new retail investor and 167 00:07:31,880 --> 00:07:35,440 Speaker 6: how we've really changed who's participating in the market. There's 168 00:07:35,480 --> 00:07:38,520 Speaker 6: a lot of really interesting stuff going on in financials 169 00:07:38,560 --> 00:07:39,600 Speaker 6: besides AI right now. 170 00:07:39,840 --> 00:07:42,000 Speaker 2: Naming the people that you talk to like they're all. 171 00:07:42,680 --> 00:07:45,400 Speaker 2: The difference here is they all drag maseratis, you know, 172 00:07:45,480 --> 00:07:48,400 Speaker 2: and fancy cars like that. Laurie's talking to people they 173 00:07:48,440 --> 00:07:52,480 Speaker 2: got you know, they get the range rope. There's difference 174 00:07:52,480 --> 00:07:55,680 Speaker 2: here in terms of cars, the fancy people you talk to, 175 00:07:55,840 --> 00:07:59,080 Speaker 2: like Coop, you know, who's on your Friends and Neighbors 176 00:07:59,080 --> 00:08:02,200 Speaker 2: on TV? Are they in the market now? Are they 177 00:08:02,280 --> 00:08:05,560 Speaker 2: cruising through the summer? What's the intensity right now? 178 00:08:06,200 --> 00:08:09,680 Speaker 7: I would say, you know, prior to maybe two weeks ago, 179 00:08:09,720 --> 00:08:11,760 Speaker 7: there was kind of a positioning clean out, and a 180 00:08:11,760 --> 00:08:14,320 Speaker 7: lot of people felt like that shakeout was good coming 181 00:08:14,400 --> 00:08:17,720 Speaker 7: into earnings because it gave people clean slate. Now, I 182 00:08:17,760 --> 00:08:19,960 Speaker 7: would say, when you look at the flows, people are 183 00:08:19,960 --> 00:08:23,480 Speaker 7: fairly involved. And I guess one warning signal for me 184 00:08:23,800 --> 00:08:27,640 Speaker 7: is that both credit, both fixed income, both rates. You know, 185 00:08:27,720 --> 00:08:30,640 Speaker 7: they haven't been flagging the same awesomeness that you've seen 186 00:08:30,640 --> 00:08:33,880 Speaker 7: in equity. You really see that in CDs spreads against 187 00:08:33,880 --> 00:08:37,120 Speaker 7: equity exactly, you know, and that always makes me nervous 188 00:08:37,160 --> 00:08:39,560 Speaker 7: as an ex fixed income person. I don't know, Tom, 189 00:08:39,600 --> 00:08:42,240 Speaker 7: you decide who's smarter, but the signals in the market 190 00:08:42,280 --> 00:08:45,040 Speaker 7: they're currently not telling you the same things. But people 191 00:08:45,080 --> 00:08:46,120 Speaker 7: are fairly all in on it. 192 00:08:46,240 --> 00:08:49,400 Speaker 2: Now. I totally take that. So this leverage pulled back 193 00:08:49,520 --> 00:08:53,000 Speaker 2: because they're starting to see whispers in the fixed income market. 194 00:08:53,360 --> 00:08:55,440 Speaker 7: Yeah, I mean, I would say they're not even whispers. 195 00:08:55,440 --> 00:08:58,400 Speaker 7: They've been fairly loud for quite a long time. You know, 196 00:08:58,400 --> 00:09:00,960 Speaker 7: people in fixed them are not happy about the denshuents. 197 00:09:01,080 --> 00:09:03,360 Speaker 7: You see that in the widening CDA spreads. You see 198 00:09:03,360 --> 00:09:06,400 Speaker 7: that in the change in rates, volatility and obviously Wednesday, 199 00:09:06,559 --> 00:09:08,920 Speaker 7: we got a big one in terms of what worsh 200 00:09:09,000 --> 00:09:11,520 Speaker 7: will say even if nothing occurs. So I think that 201 00:09:11,640 --> 00:09:13,000 Speaker 7: might reprice a few things. 202 00:09:13,520 --> 00:09:17,160 Speaker 3: Tom. Your SpaceX has got a one ten bid premarket. 203 00:09:17,280 --> 00:09:17,600 Speaker 2: Tom. 204 00:09:17,800 --> 00:09:19,199 Speaker 3: So yeah, you're not happy about. 205 00:09:19,000 --> 00:09:21,920 Speaker 2: That, Laura, say to me. She called me up. She said, 206 00:09:22,000 --> 00:09:25,240 Speaker 2: don't take the eight thousand shares, Laurie. 207 00:09:25,320 --> 00:09:28,120 Speaker 3: What's the market? Just generally speak, when you see a 208 00:09:28,160 --> 00:09:31,920 Speaker 3: big monster deal like SpaceX come out, trade up initially 209 00:09:32,480 --> 00:09:35,320 Speaker 3: A boy, it's been really heavy since then. I mean, 210 00:09:35,679 --> 00:09:38,240 Speaker 3: we got Anthropic presumably going to come public in the fall. 211 00:09:38,679 --> 00:09:40,839 Speaker 3: As a strategist, what's it tell you about just the 212 00:09:40,880 --> 00:09:42,480 Speaker 3: new issue marketing? What that doess aboutening? 213 00:09:42,800 --> 00:09:44,959 Speaker 6: So look, I would say for me, you know, I 214 00:09:45,240 --> 00:09:47,319 Speaker 6: sort of relate this question to market frost and when 215 00:09:47,320 --> 00:09:49,600 Speaker 6: I think about you know, and unfortunately I just can't 216 00:09:49,640 --> 00:09:52,559 Speaker 6: really get into the IPO dynamics. But if you go 217 00:09:52,760 --> 00:09:55,199 Speaker 6: and look at like a lot of different gauges, we 218 00:09:55,360 --> 00:09:57,760 Speaker 6: see some evidence that the retail investor has looked a 219 00:09:57,760 --> 00:09:59,560 Speaker 6: little bit frothy if you look at the conference board 220 00:09:59,600 --> 00:10:01,480 Speaker 6: data on stock market optimism. 221 00:10:01,880 --> 00:10:04,440 Speaker 4: But if you look at things like AAII, if you look. 222 00:10:04,280 --> 00:10:07,559 Speaker 6: At things like CFTC futures positioning. We're not seeing those 223 00:10:07,600 --> 00:10:11,520 Speaker 6: same signals. So I understand the concerns people have, but 224 00:10:11,559 --> 00:10:14,880 Speaker 6: I'm not seeing reason to panic across a wide variety 225 00:10:14,920 --> 00:10:15,520 Speaker 6: of indicators. 226 00:10:15,679 --> 00:10:18,320 Speaker 2: Lerid kevilseen and Amy was silver with us a special 227 00:10:18,400 --> 00:10:21,880 Speaker 2: treat in the studio together. I mean, you know, they 228 00:10:22,000 --> 00:10:26,360 Speaker 2: have to you know, I think uh President mister Carney 229 00:10:26,480 --> 00:10:28,719 Speaker 2: of ottawas involved as well. They can't be in the 230 00:10:28,760 --> 00:10:32,640 Speaker 2: same room together. A pretty cool treat. Amy. 231 00:10:32,760 --> 00:10:34,480 Speaker 3: We've got a lot of people that have been telling 232 00:10:34,520 --> 00:10:38,079 Speaker 3: me for a long time that election years, Dicey, you 233 00:10:38,200 --> 00:10:41,880 Speaker 3: got to be careful here. Are you seeing people maybe? 234 00:10:42,440 --> 00:10:43,960 Speaker 3: Do you think you're gonna see on your desk people 235 00:10:44,040 --> 00:10:46,400 Speaker 3: trying to buy some hedge and going into these elections? 236 00:10:46,480 --> 00:10:48,600 Speaker 3: Is that typically what you see? Or not so much? 237 00:10:49,360 --> 00:10:52,000 Speaker 7: I would say yes this year, I'll tell you we 238 00:10:52,240 --> 00:10:54,480 Speaker 7: have Laurie and I have been doing quite a few 239 00:10:54,520 --> 00:10:56,760 Speaker 7: marketing sessions together, and one thing that has been coming 240 00:10:56,880 --> 00:11:00,439 Speaker 7: up in terms of sentiment change is especially those that 241 00:11:00,880 --> 00:11:03,839 Speaker 7: midterms isn't going to be about gas prices. It's not 242 00:11:03,920 --> 00:11:06,319 Speaker 7: necessarily going to be about inflation. It's going to be 243 00:11:06,400 --> 00:11:09,800 Speaker 7: about anti AI. I remember in one meeting. We step 244 00:11:09,880 --> 00:11:11,839 Speaker 7: in and the first thing the client asks is, you know, 245 00:11:11,920 --> 00:11:14,040 Speaker 7: what do you think of this data center moratorium? What 246 00:11:14,080 --> 00:11:16,559 Speaker 7: does that mean? And so the point I'm trying to 247 00:11:16,600 --> 00:11:19,760 Speaker 7: make is, look, what if anti AI sentiment becomes more 248 00:11:19,800 --> 00:11:23,240 Speaker 7: than just an election story becomes a market story. That's 249 00:11:23,280 --> 00:11:25,679 Speaker 7: something to me that can really reflate correlation in the 250 00:11:25,720 --> 00:11:28,160 Speaker 7: market because it touches all aspects in the markets. The 251 00:11:28,200 --> 00:11:31,120 Speaker 7: search protector plugged into itself, right like, we know a 252 00:11:31,160 --> 00:11:34,080 Speaker 7: lot of these these things have tentacles, and that's something 253 00:11:34,120 --> 00:11:35,360 Speaker 7: that we're watching quite closely. 254 00:11:35,600 --> 00:11:39,120 Speaker 2: So talk to Laurie now and our audience worldwide amy 255 00:11:39,200 --> 00:11:42,720 Speaker 2: with Silverman, what do the left and right tell tales? 256 00:11:42,880 --> 00:11:46,920 Speaker 2: Tell you? Right now? It redound over to Laurie's world 257 00:11:47,080 --> 00:11:48,280 Speaker 2: of long term investment. 258 00:11:48,800 --> 00:11:51,120 Speaker 7: So one of my favorite Lori charts in the whole 259 00:11:51,160 --> 00:11:54,040 Speaker 7: world is her four tiers of Fear. And I can 260 00:11:54,120 --> 00:11:55,839 Speaker 7: tell you that the left tails. 261 00:11:55,600 --> 00:11:57,240 Speaker 2: Let the children to go to bed. 262 00:11:57,600 --> 00:11:59,320 Speaker 4: Yeah yeah, yeah, well that too. 263 00:11:59,760 --> 00:12:03,400 Speaker 7: But you know, we're not pricing in tiers of fear 264 00:12:03,480 --> 00:12:06,439 Speaker 7: on that left tail, and we're still pricing in kind 265 00:12:06,480 --> 00:12:09,480 Speaker 7: of exuberance on the right hill. In particular, when you 266 00:12:09,559 --> 00:12:12,240 Speaker 7: look at some of not semi specifically, but when you 267 00:12:12,280 --> 00:12:14,719 Speaker 7: look at the hyperscalers that haven't changed that much, and 268 00:12:14,800 --> 00:12:17,640 Speaker 7: to me, it's interesting when you see that start to flag, 269 00:12:18,080 --> 00:12:20,840 Speaker 7: then I think that sentimentially, so Laurie is very. 270 00:12:20,800 --> 00:12:25,000 Speaker 2: I concrete would call it the financialization of the system, 271 00:12:25,480 --> 00:12:28,959 Speaker 2: the amy Will Silverman slice and dice tranches and all 272 00:12:29,120 --> 00:12:34,240 Speaker 2: that the foundation is still America's nominal GDP over to inflation, 273 00:12:34,679 --> 00:12:37,959 Speaker 2: and that when you talk to the derivative crews, what 274 00:12:38,080 --> 00:12:40,640 Speaker 2: do you tell them about the foundation of hers? 275 00:12:41,000 --> 00:12:43,160 Speaker 6: So we do kind of go to this Tiers of 276 00:12:43,240 --> 00:12:45,480 Speaker 6: Fear page and it's basically Tier one is five to 277 00:12:45,600 --> 00:12:48,920 Speaker 6: ten percent garden variety, pullback, Tier two, growth scare, Tier 278 00:12:49,040 --> 00:12:51,240 Speaker 6: three recession, interest rate shock, Tier four. 279 00:12:51,320 --> 00:12:53,200 Speaker 4: We don't talk about those. We all know what those are. 280 00:12:53,679 --> 00:12:55,760 Speaker 6: And you know, we saw this back in March. We 281 00:12:55,840 --> 00:12:58,360 Speaker 6: did a round of marketing together and we put putting 282 00:12:58,440 --> 00:13:00,320 Speaker 6: that table in front of people and I said, look, 283 00:13:00,360 --> 00:13:02,280 Speaker 6: if you don't think recession is on the table, you're 284 00:13:02,320 --> 00:13:04,720 Speaker 6: sticking to tier one. If you think it's a recession 285 00:13:04,800 --> 00:13:06,600 Speaker 6: near miss. This was, you know, when the Iran war 286 00:13:06,760 --> 00:13:10,160 Speaker 6: was still escalating and markets were still falling. I was like, look, 287 00:13:10,160 --> 00:13:11,600 Speaker 6: if you think it's a growth scare, and we're going 288 00:13:11,679 --> 00:13:13,480 Speaker 6: to fear recession but not actually have one. 289 00:13:13,520 --> 00:13:14,240 Speaker 4: You go to tier two. 290 00:13:14,280 --> 00:13:15,719 Speaker 6: If you think it's actually a recession, you go to 291 00:13:15,760 --> 00:13:18,400 Speaker 6: tier three. And the hedge ones kept pointing to tier 292 00:13:18,440 --> 00:13:20,240 Speaker 6: two and saying, I think at worst it's going to 293 00:13:20,320 --> 00:13:22,880 Speaker 6: get to this, but we're probably in tier one. And 294 00:13:23,000 --> 00:13:25,079 Speaker 6: that was probably the most valuable thing we learned in 295 00:13:25,200 --> 00:13:27,520 Speaker 6: March was that people were nervous, they were watching the 296 00:13:27,600 --> 00:13:30,559 Speaker 6: market fall, but the fast money was not looking to 297 00:13:30,679 --> 00:13:33,640 Speaker 6: bake in recession, and that helped us, you know, sort 298 00:13:33,679 --> 00:13:37,040 Speaker 6: of really understand when the pivot happened that it was 299 00:13:37,160 --> 00:13:37,840 Speaker 6: really the pivot. 300 00:13:38,200 --> 00:13:40,120 Speaker 3: I don't know either of you two are both are 301 00:13:40,200 --> 00:13:43,439 Speaker 3: hedge ones net long today or they net short? 302 00:13:43,480 --> 00:13:45,040 Speaker 2: Do you think? So? 303 00:13:45,520 --> 00:13:48,839 Speaker 7: I would say there was this clean out prior maybe 304 00:13:48,960 --> 00:13:50,599 Speaker 7: like a week and a half two weeks ago, and 305 00:13:50,679 --> 00:13:53,199 Speaker 7: then I think in terms of flows, most folks have 306 00:13:53,360 --> 00:13:55,920 Speaker 7: gotten back in and there's a little bit of tentativeness 307 00:13:56,040 --> 00:13:58,480 Speaker 7: right now because we have a big concentration week. But 308 00:13:58,559 --> 00:14:00,559 Speaker 7: there was sort of a clean out I would say 309 00:14:00,600 --> 00:14:02,480 Speaker 7: a week and a half ago where people had taken 310 00:14:02,480 --> 00:14:03,520 Speaker 7: a lot of risk off the book. 311 00:14:03,760 --> 00:14:06,599 Speaker 6: Really, I think in my world, right, you know, the 312 00:14:06,679 --> 00:14:09,840 Speaker 6: long only space, you're always invested, right, it's a question of. 313 00:14:09,880 --> 00:14:11,880 Speaker 4: Whether you're up quality or down quality. 314 00:14:12,640 --> 00:14:14,839 Speaker 6: I think it's very funny because I do think, you know, 315 00:14:14,880 --> 00:14:16,280 Speaker 6: as I've been out on the road talking to the 316 00:14:16,320 --> 00:14:18,360 Speaker 6: long only is everybody's kind of talking their books. So 317 00:14:18,480 --> 00:14:20,480 Speaker 6: the people who need rotation to work are in the 318 00:14:20,560 --> 00:14:23,480 Speaker 6: pro rotation argument, and the growth funds, who are really 319 00:14:23,520 --> 00:14:25,800 Speaker 6: more all in on the AI trade, you know, are 320 00:14:25,920 --> 00:14:28,480 Speaker 6: more sort of talking about that's going to bottom out 321 00:14:28,480 --> 00:14:30,680 Speaker 6: pretty soon. Sound a little bit more like the hedge funds. 322 00:14:31,440 --> 00:14:33,280 Speaker 6: But I do think, you know, kind of going back 323 00:14:33,280 --> 00:14:36,000 Speaker 6: to the midterm conversation earlier, It's just coming up in 324 00:14:36,080 --> 00:14:37,920 Speaker 6: more and more meetings, and I'm not getting a sense 325 00:14:37,960 --> 00:14:39,760 Speaker 6: of what trades people want to do yet, but they 326 00:14:39,800 --> 00:14:41,560 Speaker 6: are starting to want to talk about it after a 327 00:14:41,640 --> 00:14:43,480 Speaker 6: year of not wanting to talk about stuff like that. 328 00:14:43,600 --> 00:14:45,600 Speaker 2: I hope we can do this again. I'm seeing like 329 00:14:45,680 --> 00:14:48,600 Speaker 2: post Labor Day, this would be fabulous. Lord kelvisena Amy 330 00:14:48,680 --> 00:14:52,960 Speaker 2: was silverman together from the Royal Bank of Canada. Stay 331 00:14:53,040 --> 00:14:56,760 Speaker 2: with us. More from Bloomberg Surveillance coming up after this. 332 00:15:04,160 --> 00:15:07,680 Speaker 1: You're listening to the Bloomberg surveillance podcast. Catch US live 333 00:15:07,800 --> 00:15:10,920 Speaker 1: weekday afternoons from seven to ten am Eastern Listen on 334 00:15:11,040 --> 00:15:14,640 Speaker 1: Applecarplay and Android Auto with the Bloomberg Business app, or 335 00:15:14,840 --> 00:15:16,280 Speaker 1: watch US live on YouTube. 336 00:15:16,400 --> 00:15:19,120 Speaker 3: One of the many reasons why we like our next 337 00:15:19,200 --> 00:15:22,040 Speaker 3: guest because it's not mince words. See, it's not full punches, 338 00:15:22,400 --> 00:15:25,320 Speaker 3: particularly when it comes to the Federal Reserve. Take this 339 00:15:25,480 --> 00:15:29,360 Speaker 3: sentence as an example. It would be incredibly stupid for 340 00:15:29,480 --> 00:15:31,920 Speaker 3: the FED to raise Rach this year. That's our friend 341 00:15:32,000 --> 00:15:35,800 Speaker 3: Jay Hatfield, CEO FEDER and portfolio manager Infrastructure Capital Partners. 342 00:15:36,040 --> 00:15:39,320 Speaker 3: So I guess Jay, tomorrow, you're not expecting to Fed 343 00:15:39,400 --> 00:15:41,280 Speaker 3: to raise Rachel. You don't think they should? And why 344 00:15:41,360 --> 00:15:41,720 Speaker 3: or why not? 345 00:15:42,920 --> 00:15:46,200 Speaker 8: Thanks for having me back fall on Tom, Well, what 346 00:15:46,360 --> 00:15:50,280 Speaker 8: we have right now is essentially the polar opposite of 347 00:15:50,680 --> 00:15:54,600 Speaker 8: what we had in early twenty twenty one. So then 348 00:15:55,080 --> 00:16:00,360 Speaker 8: the intra sensitive sectors were exploding with inflation twenty percent 349 00:16:00,640 --> 00:16:04,360 Speaker 8: year of a year increases, rents up ten reported numbers too, 350 00:16:04,960 --> 00:16:10,240 Speaker 8: because they're massively flawed, and the FED did nothing and 351 00:16:10,360 --> 00:16:13,720 Speaker 8: claimed it his transitory. Here we have the situation where 352 00:16:14,440 --> 00:16:19,320 Speaker 8: rents are flat, housing prices are flat. The thirty year 353 00:16:19,480 --> 00:16:23,400 Speaker 8: treasuries at six' eighty. There's no inflation coming from the 354 00:16:23,480 --> 00:16:29,640 Speaker 8: intersensitive sectors, and we just have solely inflation coming from energy, 355 00:16:30,320 --> 00:16:34,080 Speaker 8: and we completely one hundred percent reject the expectations theory 356 00:16:34,120 --> 00:16:38,840 Speaker 8: of inflation. Really expectations are deflationary because they raise long 357 00:16:38,960 --> 00:16:42,280 Speaker 8: term rates and tighten financial conditions. So we think the 358 00:16:42,640 --> 00:16:46,680 Speaker 8: FED is living in the past at least those supporting increases. 359 00:16:47,040 --> 00:16:49,960 Speaker 2: Yeah, the first paragraph I've seen that actually think these 360 00:16:50,080 --> 00:16:52,960 Speaker 2: task forces can go. First of all, we're surprised. J 361 00:16:53,120 --> 00:16:56,520 Speaker 2: Hatfield isn't not a task Yes, start with that expect 362 00:16:56,760 --> 00:17:00,280 Speaker 2: but you're suggesting that they can actually change the the 363 00:17:00,360 --> 00:17:03,640 Speaker 2: FED interprets inflation. There's a lot of people that don't 364 00:17:03,640 --> 00:17:04,480 Speaker 2: agree with that state. 365 00:17:05,880 --> 00:17:09,200 Speaker 8: Well, I would be an extraordinarily bad bureaucrat. So that's 366 00:17:09,240 --> 00:17:11,200 Speaker 8: a good reason I'm not on those task forces. But 367 00:17:12,840 --> 00:17:16,560 Speaker 8: the main thing that needs to be done is to 368 00:17:16,760 --> 00:17:20,240 Speaker 8: reform these horrible, horrible indicies that get put out that 369 00:17:20,320 --> 00:17:26,080 Speaker 8: are complete fantasy. They believe that portfolio management inflation is 370 00:17:26,200 --> 00:17:30,560 Speaker 8: twenty two percent year over year. That is just completely okay. 371 00:17:30,560 --> 00:17:32,119 Speaker 2: So the review of this, folks, it's all happened in 372 00:17:32,240 --> 00:17:36,040 Speaker 2: nineteen forty seven, was codified across the fifties in the sixties, 373 00:17:36,080 --> 00:17:39,560 Speaker 2: and we're living forty years on to your point, and 374 00:17:39,680 --> 00:17:44,560 Speaker 2: you want to see very present sensitive inflation statistics right, 375 00:17:44,720 --> 00:17:45,800 Speaker 2: which you can easily get. 376 00:17:45,840 --> 00:17:49,320 Speaker 8: There's other services that do we put out just adjusting 377 00:17:49,400 --> 00:17:52,320 Speaker 8: for the complete nonsense, and that's really low. It was 378 00:17:52,440 --> 00:17:54,359 Speaker 8: too and now it's a little bit above two. But 379 00:17:54,480 --> 00:17:57,240 Speaker 8: there's even ones that come from pure internet data that 380 00:17:57,320 --> 00:18:00,480 Speaker 8: are absolutely real time. There's no re and to do 381 00:18:00,640 --> 00:18:04,880 Speaker 8: surveys that are six months delayed, it's completely incompetent. It's 382 00:18:04,960 --> 00:18:08,800 Speaker 8: as if you gave market updates that were six months old. 383 00:18:09,200 --> 00:18:11,520 Speaker 2: I mean, how long we do be careful now we 384 00:18:11,640 --> 00:18:11,879 Speaker 2: do it. 385 00:18:13,240 --> 00:18:15,960 Speaker 3: So your S and P target, you've got a range 386 00:18:16,040 --> 00:18:19,679 Speaker 3: between eight thousand and nine thousand. What's driving that differential there? 387 00:18:19,760 --> 00:18:22,440 Speaker 8: It's very simple and it's it's all in the numbers, 388 00:18:23,040 --> 00:18:25,680 Speaker 8: so earning's estimate and you can I get them on 389 00:18:25,720 --> 00:18:27,240 Speaker 8: the terminal, and you should get them on the terminal 390 00:18:27,240 --> 00:18:31,919 Speaker 8: because that's consensus. That's the defined consensus have gone up 391 00:18:31,960 --> 00:18:35,040 Speaker 8: fifteen percent since the beginning of the year. So we 392 00:18:35,200 --> 00:18:37,439 Speaker 8: seem like we've been inconsistent because we started with an 393 00:18:37,480 --> 00:18:41,119 Speaker 8: eight thousand target. We raised it to nine. But I 394 00:18:41,280 --> 00:18:44,000 Speaker 8: remember now I got a C plus and Iranian studies, 395 00:18:44,480 --> 00:18:48,399 Speaker 8: so I didn't realize the IRGC would fire missiles at 396 00:18:49,320 --> 00:18:51,600 Speaker 8: the ships right after the Piece agreement. I thought we 397 00:18:51,640 --> 00:18:53,600 Speaker 8: would kick the count down the road and not agree 398 00:18:53,640 --> 00:18:56,679 Speaker 8: on the nuclear side. And so that's why we normally 399 00:18:56,720 --> 00:18:59,440 Speaker 8: don't have two targets. But we're at eight thousand, which 400 00:18:59,480 --> 00:19:02,880 Speaker 8: is a twenty month multiple, and consistent with treasuries being 401 00:19:03,000 --> 00:19:05,720 Speaker 8: sort of here like four to seventy five. Every twenty 402 00:19:05,760 --> 00:19:10,119 Speaker 8: five basis points from a theoretical perspective increases or it 403 00:19:10,280 --> 00:19:15,640 Speaker 8: decreases the theoretical multiple, so you're twenty three times nine 404 00:19:15,680 --> 00:19:18,600 Speaker 8: thousan twenty times eight thousand roughly it's actually twenty two 405 00:19:18,600 --> 00:19:20,480 Speaker 8: and a half now, But so you kind of pick 406 00:19:20,520 --> 00:19:24,920 Speaker 8: your poison. But earning's estimates are continuing to rise. They're 407 00:19:25,080 --> 00:19:28,200 Speaker 8: very robust, and so it is a good market. But 408 00:19:28,359 --> 00:19:30,760 Speaker 8: because of the war, right now, we're just rotating instead 409 00:19:30,800 --> 00:19:31,200 Speaker 8: of rallying. 410 00:19:31,440 --> 00:19:35,159 Speaker 2: Jay Hatfield with its infrastructure, capital and management here around 411 00:19:35,320 --> 00:19:39,040 Speaker 2: presumed economic data reped around a FED meeting tomorrow, rept 412 00:19:39,040 --> 00:19:43,200 Speaker 2: around an earning season as well. I mean, as you know, 413 00:19:43,359 --> 00:19:46,720 Speaker 2: inventory's advanced because I guess I don't care. Case Schiller 414 00:19:46,720 --> 00:19:49,359 Speaker 2: will be out here at nine am. What Paul Sweeny 415 00:19:49,400 --> 00:19:53,120 Speaker 2: will have conference board data at ten am. But you know, Jay, 416 00:19:53,640 --> 00:19:56,760 Speaker 2: I'm looking at all this and the answer is there's 417 00:19:56,800 --> 00:20:01,679 Speaker 2: still stimulus one, stimulus two. Olivia Blanchard and others call 418 00:20:01,720 --> 00:20:04,439 Speaker 2: it the Biden stimulus on the back end, and then 419 00:20:04,560 --> 00:20:08,000 Speaker 2: further stimulus that we've seen with President Trump in company. 420 00:20:08,440 --> 00:20:10,320 Speaker 2: Does that end? Does it? 421 00:20:10,480 --> 00:20:13,280 Speaker 8: Ebbel Way, Yeah, I wouldn't really call it stimulus because 422 00:20:13,280 --> 00:20:16,200 Speaker 8: we believe in unlike Keynesians and crowding out, so it 423 00:20:16,280 --> 00:20:20,200 Speaker 8: doesn't actually help economic growth. But there's going to be 424 00:20:21,320 --> 00:20:25,399 Speaker 8: consistent fiscal irresponsibility. We have a track record of that 425 00:20:25,480 --> 00:20:29,080 Speaker 8: since Bill Clinton was president. He was not, but since then, 426 00:20:29,640 --> 00:20:33,000 Speaker 8: and so we assume five percent deficits on ongoing basis. 427 00:20:33,040 --> 00:20:36,639 Speaker 2: Do you assume a four percent nominal GDB plus The 428 00:20:36,720 --> 00:20:37,760 Speaker 2: answer is yes, yes. 429 00:20:37,920 --> 00:20:40,040 Speaker 8: If we get rates down to the neutral rate, which 430 00:20:40,119 --> 00:20:42,800 Speaker 8: is seventy five basis points lower, should be able to 431 00:20:42,800 --> 00:20:43,840 Speaker 8: grow at four percent of year. 432 00:20:44,040 --> 00:20:46,119 Speaker 3: In previous life, you had a lot of experience and energy. 433 00:20:46,200 --> 00:20:50,080 Speaker 3: What's your energy call? These days, we have. 434 00:20:50,200 --> 00:20:56,040 Speaker 8: Been correctly bearish about oil prices. In fact, our target 435 00:20:56,119 --> 00:20:59,240 Speaker 8: right now is eighty to one hundred, assuming the Strait 436 00:20:59,400 --> 00:21:02,119 Speaker 8: is closed, and it's like really closed right now, it's 437 00:21:02,119 --> 00:21:02,960 Speaker 8: completely closed. 438 00:21:03,440 --> 00:21:04,879 Speaker 2: But we're at the bottom of the range. 439 00:21:05,160 --> 00:21:08,359 Speaker 8: And we had been, unlike most others, saying that if 440 00:21:08,480 --> 00:21:12,960 Speaker 8: Straight reopened, we would rapidly rebuild inventories and we can 441 00:21:13,040 --> 00:21:15,800 Speaker 8: all re see from the market moves like Straight was 442 00:21:15,840 --> 00:21:17,720 Speaker 8: open for five days and we got the sixty eight dollars, 443 00:21:17,760 --> 00:21:20,520 Speaker 8: so we could get the fifty if the Straight reopens, 444 00:21:20,840 --> 00:21:23,679 Speaker 8: And that is super bullish for more than nine thousand 445 00:21:23,720 --> 00:21:26,760 Speaker 8: target and the eight thousand target, because then gates start 446 00:21:26,840 --> 00:21:29,959 Speaker 8: dropping to four, start to pricing rate cuts, and then 447 00:21:30,000 --> 00:21:32,280 Speaker 8: you get flows into the market. It's kind of a 448 00:21:32,359 --> 00:21:35,600 Speaker 8: frustrating market because one day it's chips, the other day 449 00:21:36,560 --> 00:21:39,840 Speaker 8: it's the hyperscaler is the third day it's everything else, 450 00:21:40,160 --> 00:21:42,800 Speaker 8: and nothing ever really happens to the overall average. 451 00:21:43,800 --> 00:21:45,320 Speaker 3: I got to ask you because it's in your notes 452 00:21:45,359 --> 00:21:49,520 Speaker 3: and Tom and I are fascinating SpaceX. What do you 453 00:21:49,560 --> 00:21:51,800 Speaker 3: make of it? I mean, you've been on the banking side, 454 00:21:51,840 --> 00:21:52,280 Speaker 3: You've taken a. 455 00:21:52,280 --> 00:21:53,800 Speaker 2: Ton of structure. 456 00:21:54,000 --> 00:21:56,320 Speaker 3: Yeah, I'm throwing it at you. What do you make 457 00:21:56,320 --> 00:21:59,399 Speaker 3: of a company like SpaceX? The fact that it priced 458 00:21:59,480 --> 00:22:01,320 Speaker 3: it trade and where we're trading today. 459 00:22:01,359 --> 00:22:05,200 Speaker 8: Well, the key insight is guess how you win IPOs? Okay, 460 00:22:05,760 --> 00:22:09,520 Speaker 8: you pitch really high valuations and then you jam them 461 00:22:10,080 --> 00:22:11,000 Speaker 8: onto Wall Street. 462 00:22:11,280 --> 00:22:14,520 Speaker 3: It's the former back and then if you're really. 463 00:22:14,400 --> 00:22:18,359 Speaker 8: Smart, you get convinced to NASDAC to include it before 464 00:22:18,440 --> 00:22:21,240 Speaker 8: the lockups come out. We add a lot of value 465 00:22:21,240 --> 00:22:25,200 Speaker 8: in our qball ETF because we didn't include SpaceX. So 466 00:22:25,280 --> 00:22:28,119 Speaker 8: you should have a managed QQQ because they don't have 467 00:22:28,240 --> 00:22:31,920 Speaker 8: a requirement for a possibility. But so it's going to 468 00:22:31,960 --> 00:22:34,840 Speaker 8: be Actually, they have great technology, unlike Tesla, which has 469 00:22:34,920 --> 00:22:37,879 Speaker 8: sort of generic technology, and they are going to be 470 00:22:37,920 --> 00:22:41,080 Speaker 8: a valuable company. We have one hundred dollars aggressive target 471 00:22:41,720 --> 00:22:43,920 Speaker 8: and you have a catalyst, which is this lockup. Like 472 00:22:44,000 --> 00:22:46,240 Speaker 8: that's a ton of stock. Like it's one thing to 473 00:22:46,280 --> 00:22:48,439 Speaker 8: get the deal done, it's another to absorb the one 474 00:22:48,480 --> 00:22:51,200 Speaker 8: point five trillion of stock that's come back. 475 00:22:51,040 --> 00:22:54,720 Speaker 2: To Jaffield with a CEO infrastructure with eight nine thousand 476 00:22:55,160 --> 00:22:59,200 Speaker 2: on spis really appreciated. Stay with us. More from Bloomberg 477 00:22:59,359 --> 00:23:01,280 Speaker 2: Surveillance coming up after this. 478 00:23:08,640 --> 00:23:12,200 Speaker 1: You're listening to the Bloomberg Surveillance podcast. Catch us Live 479 00:23:12,280 --> 00:23:15,399 Speaker 1: weekday afternoons from seven to ten am Eastern. Listen on 480 00:23:15,520 --> 00:23:18,880 Speaker 1: Apple Karplay and Android Auto with the Bloomberg Business app, 481 00:23:19,119 --> 00:23:20,800 Speaker 1: or watch us live on YouTube. 482 00:23:21,080 --> 00:23:24,800 Speaker 2: Loor Mayfield with us right now we talk about granular 483 00:23:25,000 --> 00:23:29,240 Speaker 2: m h. I mean, this is folks. It's like Econobabbel 484 00:23:29,320 --> 00:23:36,080 Speaker 2: blah blah blah. Her notes are exquisite value perception is 485 00:23:36,160 --> 00:23:40,760 Speaker 2: between choosing dining and Chili's rather than door dash Chipotle, 486 00:23:41,600 --> 00:23:46,160 Speaker 2: or getting water instead of a baja a Baja blast 487 00:23:46,400 --> 00:23:50,480 Speaker 2: mountain dew to wash down those one dollar and currito's 488 00:23:50,800 --> 00:23:53,800 Speaker 2: at Taco Bell. How about that research. 489 00:23:53,480 --> 00:23:55,600 Speaker 5: You did, Let us free in curritos. 490 00:23:56,240 --> 00:23:59,720 Speaker 2: Let us free in curritos. Are the kids asking for water? 491 00:24:00,119 --> 00:24:02,480 Speaker 2: Doubt it? They want the baja, the the Baja blast. 492 00:24:02,520 --> 00:24:04,320 Speaker 9: I was going to bring you a Vaja Blast freeze, 493 00:24:04,359 --> 00:24:06,479 Speaker 9: but the machine wasn't running yet. 494 00:24:06,800 --> 00:24:09,240 Speaker 2: That's okay, We're putting them into the food court here. 495 00:24:09,359 --> 00:24:13,400 Speaker 2: I mean, the granularity you do is second to none. 496 00:24:13,520 --> 00:24:16,120 Speaker 2: What does it tell you about the American consumer? 497 00:24:16,359 --> 00:24:18,520 Speaker 9: I think you have to have a granular look at 498 00:24:18,600 --> 00:24:21,960 Speaker 9: the consumer when you're trying to understand what's happening. The 499 00:24:22,080 --> 00:24:25,560 Speaker 9: aggregate data just doesn't tell the full picture. There are 500 00:24:25,720 --> 00:24:29,440 Speaker 9: so many disparate storylines within the aggregate data. You have 501 00:24:29,680 --> 00:24:33,480 Speaker 9: consumers overall they are seeking value, but that means a 502 00:24:33,680 --> 00:24:36,680 Speaker 9: very different thing to high income, middle income, low income 503 00:24:36,720 --> 00:24:38,320 Speaker 9: borrow or low income consumers. 504 00:24:38,680 --> 00:24:40,400 Speaker 5: And it doesn't mean they're not spending. 505 00:24:40,560 --> 00:24:43,080 Speaker 9: We see in the data they are continuing to spend, 506 00:24:43,520 --> 00:24:47,200 Speaker 9: but that first for value in this in this environment, 507 00:24:47,520 --> 00:24:49,920 Speaker 9: it looks very different across the income spectrum. 508 00:24:50,400 --> 00:24:52,879 Speaker 3: How are people at the lower end. We talk so 509 00:24:52,960 --> 00:24:55,080 Speaker 3: much about the case shaped economy, and the lower end 510 00:24:55,119 --> 00:24:56,800 Speaker 3: of the case seems to be more and more pronounced. 511 00:24:57,280 --> 00:24:59,760 Speaker 3: How are they funding the data day? Is it just paycheck? 512 00:24:59,800 --> 00:25:01,600 Speaker 3: The ay check? Is a credit card's not? Are they're 513 00:25:01,600 --> 00:25:01,760 Speaker 3: doing that? 514 00:25:01,960 --> 00:25:03,240 Speaker 5: I think it's all of the above. 515 00:25:03,280 --> 00:25:08,120 Speaker 9: We're seeing a very scrappy, resilient consumer, as they always are, 516 00:25:08,600 --> 00:25:11,399 Speaker 9: and they're using all available tools. We've seen an increase 517 00:25:11,440 --> 00:25:14,320 Speaker 9: in adoption of buy now, pay later options, which by 518 00:25:14,400 --> 00:25:18,080 Speaker 9: the way, are a great payment method for consumers. 519 00:25:18,119 --> 00:25:19,240 Speaker 5: They don't charge interest. 520 00:25:19,560 --> 00:25:22,720 Speaker 9: The merchant or retailer covers the cost of that, so 521 00:25:22,960 --> 00:25:26,159 Speaker 9: in some ways it's a favorable alternative to credit cards 522 00:25:26,320 --> 00:25:30,400 Speaker 9: for consumers. We're also seeing them, i think, use delinquency 523 00:25:30,600 --> 00:25:32,320 Speaker 9: as a cash flow management tool. 524 00:25:32,600 --> 00:25:35,879 Speaker 5: We're seeing a lot of borrowers, subprime borrowers. 525 00:25:35,440 --> 00:25:38,720 Speaker 9: In the auto loan space fall delinquent, but then live 526 00:25:38,920 --> 00:25:41,320 Speaker 9: in that state of link delinquency. They can't afford to 527 00:25:41,400 --> 00:25:43,919 Speaker 9: catch back up the current, but they're also not flowing 528 00:25:44,000 --> 00:25:47,000 Speaker 9: through to charge off. So I think we're seeing a 529 00:25:47,160 --> 00:25:51,120 Speaker 9: very scrappy, resilient consumer that's in problem solving mode. 530 00:25:51,359 --> 00:25:54,160 Speaker 2: We are guilty pause, I'm guilty of this. I'm guilty 531 00:25:54,359 --> 00:25:58,520 Speaker 2: of only talking Lotti DA. You're talking about an America 532 00:25:59,560 --> 00:26:03,320 Speaker 2: within the phrase flat on their back? What percentage of 533 00:26:03,400 --> 00:26:08,560 Speaker 2: America is micromanaging the boneless meal deal for two at 534 00:26:08,600 --> 00:26:09,280 Speaker 2: wing and stop. 535 00:26:10,119 --> 00:26:12,520 Speaker 5: I think it's probably more than you might expect. 536 00:26:12,560 --> 00:26:15,680 Speaker 2: I agree strongly with that half of America. 537 00:26:16,840 --> 00:26:17,119 Speaker 4: Maybe. 538 00:26:17,560 --> 00:26:21,399 Speaker 9: I think when you look at the increase and energy costs, 539 00:26:21,560 --> 00:26:24,600 Speaker 9: when you look at the Bloomberg's got this great data 540 00:26:24,720 --> 00:26:28,960 Speaker 9: series on very granular real time consumer spending, and when 541 00:26:29,000 --> 00:26:32,760 Speaker 9: you look at weeks where gasoline spending has increased just 542 00:26:32,840 --> 00:26:36,240 Speaker 9: because of the volatility in prices, there you see a 543 00:26:36,400 --> 00:26:39,760 Speaker 9: direct impact on other categories that are going down, whether 544 00:26:39,840 --> 00:26:43,720 Speaker 9: that's clothing sometimes even grocery spending. I've seen offset the 545 00:26:43,840 --> 00:26:47,520 Speaker 9: increase in gasoline spending. I think the consumer, a lot 546 00:26:47,600 --> 00:26:50,960 Speaker 9: of the consumer is they're they're doing okay, but they're 547 00:26:51,119 --> 00:26:52,560 Speaker 9: they're really trouble. 548 00:26:52,640 --> 00:26:55,159 Speaker 5: They're problem solving on a day to day basis. 549 00:26:55,400 --> 00:26:57,960 Speaker 3: So in your world of asset BAC securities, where do 550 00:26:58,000 --> 00:26:58,439 Speaker 3: you see that. 551 00:26:59,320 --> 00:27:00,399 Speaker 5: We see it a cross. 552 00:27:00,640 --> 00:27:03,720 Speaker 9: You know, there are prime consumer receivables in our market, 553 00:27:03,800 --> 00:27:05,880 Speaker 9: there are subprime consumer receivables in our market. 554 00:27:06,080 --> 00:27:08,000 Speaker 5: We see it a lot in the subprime data. 555 00:27:08,600 --> 00:27:13,400 Speaker 9: We see servicing practices have an outside impact on loan 556 00:27:13,480 --> 00:27:17,560 Speaker 9: performance across pools. Some of the higher touch consumers require 557 00:27:17,640 --> 00:27:19,880 Speaker 9: more servicing to get that cash flow to come through 558 00:27:20,200 --> 00:27:23,440 Speaker 9: because those borrowers, they're choosing which bills to pay and 559 00:27:23,560 --> 00:27:25,439 Speaker 9: which ones to let slide past the due date. 560 00:27:25,680 --> 00:27:29,560 Speaker 2: Laura Mayfield with this just exquisite here at Port Washington 561 00:27:29,680 --> 00:27:34,560 Speaker 2: Investment Advisors, granular research like nothing I've seen the phrase 562 00:27:34,680 --> 00:27:38,560 Speaker 2: paycheck to paycheck. There's like the way we perceive it, 563 00:27:38,680 --> 00:27:42,560 Speaker 2: and there's even paycheck to paycheck of people making six 564 00:27:42,720 --> 00:27:46,760 Speaker 2: figures discuss the emotion of paycheck to paycheck. 565 00:27:47,280 --> 00:27:50,720 Speaker 9: Yeah, I think again it comes back to consumers trying 566 00:27:50,760 --> 00:27:54,840 Speaker 9: to solve for the priority of payments, which I think 567 00:27:55,520 --> 00:27:58,040 Speaker 9: has evolved over the years. If you remember back to 568 00:27:58,080 --> 00:28:02,160 Speaker 9: the GFC, we saw consumers prioritize car payments over home payments, 569 00:28:02,560 --> 00:28:05,959 Speaker 9: and the notion was, you can live in your car, 570 00:28:06,080 --> 00:28:08,440 Speaker 9: you can't drive your house to work. But I think 571 00:28:08,640 --> 00:28:11,359 Speaker 9: you know, with the increased cost of living across the board, 572 00:28:11,440 --> 00:28:17,840 Speaker 9: whether that's housing affordability, rent increases, car expenses, you know, childcare, 573 00:28:18,280 --> 00:28:23,240 Speaker 9: every category just about has has raised the threshold of 574 00:28:23,560 --> 00:28:26,240 Speaker 9: what it means to live on a paycheck to paycheck basis. 575 00:28:26,920 --> 00:28:32,200 Speaker 3: The labor market, I guess if we're fully employed economy, 576 00:28:32,280 --> 00:28:35,120 Speaker 3: so I mean that's a big part of consumer behavior, 577 00:28:35,160 --> 00:28:37,919 Speaker 3: consumer spending. I guess that's the good news out there 578 00:28:37,960 --> 00:28:38,680 Speaker 3: as it relates to. 579 00:28:38,720 --> 00:28:42,120 Speaker 9: The consumer, absolutely, and I think that's the critical piece 580 00:28:42,200 --> 00:28:46,600 Speaker 9: that has helped encourage the consumer to continue spending and 581 00:28:46,800 --> 00:28:49,880 Speaker 9: aggregate that Conference Board data, which is more a labor 582 00:28:49,960 --> 00:28:52,720 Speaker 9: force metric, has been stronger relative to the University of 583 00:28:52,760 --> 00:28:53,440 Speaker 9: Michigan conference. 584 00:28:53,520 --> 00:28:55,240 Speaker 2: I doing ten other questions. You got to come back 585 00:28:55,320 --> 00:28:58,280 Speaker 2: soon Soonilar Mayfield, Thank you so much. Stay with us 586 00:28:58,640 --> 00:29:01,720 Speaker 2: more from Bloomberg to coming up after this. 587 00:29:09,120 --> 00:29:12,640 Speaker 1: You're listening to the Bloomberg Surveillance podcast. Catch us live 588 00:29:12,760 --> 00:29:15,880 Speaker 1: weekday afternoons from seven to ten am Eastern. Listen on 589 00:29:16,000 --> 00:29:19,320 Speaker 1: Apple Karplay and Android Auto with the Bloomberg Business app, 590 00:29:19,560 --> 00:29:21,280 Speaker 1: or watch us live on YouTube. 591 00:29:21,600 --> 00:29:24,920 Speaker 2: Meredith Whitney with us right now. We're thrilled to have 592 00:29:25,040 --> 00:29:28,800 Speaker 2: her in here, and I should say shockingly well timed 593 00:29:28,800 --> 00:29:30,880 Speaker 2: as well. Meredith. I'm going to go back. This is 594 00:29:31,120 --> 00:29:33,080 Speaker 2: you were in school back then, two thousand and eight. 595 00:29:33,480 --> 00:29:37,280 Speaker 2: But I look at Visa here and I'm sorry, people 596 00:29:37,320 --> 00:29:41,479 Speaker 2: don't understand. Back almost eighteen years is up twenty one 597 00:29:41,560 --> 00:29:44,480 Speaker 2: point six percent per year, and I remember you and 598 00:29:44,560 --> 00:29:48,560 Speaker 2: your you standing up on a cable screaming by Visa. 599 00:29:48,960 --> 00:29:52,240 Speaker 2: What is the Visa history and management now where they 600 00:29:52,280 --> 00:29:54,040 Speaker 2: say we got to lay off seven percent of the 601 00:29:54,120 --> 00:29:55,880 Speaker 2: people because the rules have changed. 602 00:29:56,960 --> 00:30:00,160 Speaker 10: Well, I mean Visa has been a great demutualization story, right, 603 00:30:00,360 --> 00:30:02,479 Speaker 10: So the banks owned it, they spun it off. There 604 00:30:02,600 --> 00:30:05,320 Speaker 10: was a lot of there's a lot of operating leverage 605 00:30:05,680 --> 00:30:08,480 Speaker 10: achieve and it's just the whole process of cash to 606 00:30:08,880 --> 00:30:13,920 Speaker 10: to to plastic conversion. But like any large company, you've 607 00:30:13,960 --> 00:30:16,120 Speaker 10: got to right size. And I think a lot of 608 00:30:16,160 --> 00:30:19,040 Speaker 10: companies that had that hadn't right size, that had over 609 00:30:19,200 --> 00:30:24,440 Speaker 10: hired during COVID have to face the reckoning that you know, 610 00:30:24,920 --> 00:30:27,800 Speaker 10: the only way to achieve operating leverage now is to 611 00:30:28,800 --> 00:30:31,040 Speaker 10: is to get rid of it, is to downsize. And 612 00:30:31,080 --> 00:30:33,760 Speaker 10: I think you've seen everybody do it. The banks haven't 613 00:30:33,880 --> 00:30:37,600 Speaker 10: really done it, but every tech company has done it. 614 00:30:38,520 --> 00:30:41,960 Speaker 10: That's certainly the they're not They're not an outlier on that. 615 00:30:42,280 --> 00:30:45,080 Speaker 3: I remember the early days of fintech maybe wasuse somebuddy, 616 00:30:45,120 --> 00:30:47,960 Speaker 3: tell me you want to play fintech, just by v SE, MasterCard. 617 00:30:48,200 --> 00:30:49,560 Speaker 3: I mean, all the stuff's got a ride on those 618 00:30:49,560 --> 00:30:50,720 Speaker 3: platforms at some point. 619 00:30:50,640 --> 00:30:52,600 Speaker 10: They were the ogs of fintech way back when. 620 00:30:52,880 --> 00:30:56,840 Speaker 3: Exactly I'm looking at JP Morgan all time high today, 621 00:30:57,360 --> 00:31:00,280 Speaker 3: I mean, what are these banks and all their stocks 622 00:31:00,320 --> 00:31:01,880 Speaker 3: have been ripped. I'm looking at the year to date 623 00:31:01,880 --> 00:31:04,440 Speaker 3: and it's what trailing twelve month performance. Stocks have had 624 00:31:04,480 --> 00:31:07,240 Speaker 3: great runs. What did bank stocks do? What do banks 625 00:31:07,320 --> 00:31:09,880 Speaker 3: do when their stocks are trading at are near all 626 00:31:09,920 --> 00:31:12,840 Speaker 3: time high school? Do they turn cash? Do they buy stuff? 627 00:31:12,880 --> 00:31:13,720 Speaker 2: What do they do? Usually? 628 00:31:14,000 --> 00:31:19,400 Speaker 10: Historically pre Great Financial Crisis, remember the nineties two thousands, 629 00:31:19,440 --> 00:31:22,160 Speaker 10: when bank stocks valuations were trading at all time highs, 630 00:31:22,480 --> 00:31:26,200 Speaker 10: they would do transformational deals. There was massive m and 631 00:31:26,240 --> 00:31:32,080 Speaker 10: a massive consolidation this cycle. Since the crisis, they well, 632 00:31:32,200 --> 00:31:37,800 Speaker 10: once they got out of you know, effectively regulatory prison, 633 00:31:38,040 --> 00:31:40,720 Speaker 10: they started buying back shares. They increased dividends to a 634 00:31:40,720 --> 00:31:43,680 Speaker 10: certain extents, but their favored route was buying back shares. 635 00:31:43,880 --> 00:31:47,240 Speaker 10: And you would think that makes sense in low the 636 00:31:47,280 --> 00:31:50,920 Speaker 10: stocks are trading with low valuations, but the banks have 637 00:31:51,160 --> 00:31:55,840 Speaker 10: still bought back shares at high valuations close to three times. 638 00:31:56,120 --> 00:31:58,480 Speaker 10: And it's not as if you know, the brokers used 639 00:31:58,480 --> 00:32:00,400 Speaker 10: to you remember the days they used to buy back 640 00:32:00,440 --> 00:32:05,520 Speaker 10: shares to offset their stock compensation. They've done that at 641 00:32:05,680 --> 00:32:10,680 Speaker 10: exponential levels to their stock compensation. So historically you'd think, well, 642 00:32:11,000 --> 00:32:14,560 Speaker 10: at all time high, all time high valuations, priced to 643 00:32:14,640 --> 00:32:17,160 Speaker 10: tangible book, they would do some type of M and A, 644 00:32:17,680 --> 00:32:21,040 Speaker 10: and I say they're just pussy putting around with buy 645 00:32:21,160 --> 00:32:25,520 Speaker 10: backs and divide increases. I think the one outlier, the 646 00:32:25,640 --> 00:32:28,560 Speaker 10: one bank stock that has the one bank and one 647 00:32:28,640 --> 00:32:32,040 Speaker 10: ceo that has the temerity actually do a deal is 648 00:32:32,360 --> 00:32:34,360 Speaker 10: none other than Jamie Dinald frame. 649 00:32:34,160 --> 00:32:37,400 Speaker 2: An example deal, an what example deal? 650 00:32:37,760 --> 00:32:41,400 Speaker 10: I think when people thought that Jamie Diamond would retire 651 00:32:41,720 --> 00:32:45,280 Speaker 10: with their new headquarters, that time came and went. He's 652 00:32:45,600 --> 00:32:47,560 Speaker 10: he wants to do something big, and by big, I 653 00:32:47,600 --> 00:32:51,720 Speaker 10: don't mean State Street Northern Trust. I think he does 654 00:32:51,800 --> 00:32:57,800 Speaker 10: something fintech, but major fintech, which is over one hundred 655 00:32:57,800 --> 00:32:59,680 Speaker 10: and fifteen billion dollar valuation of Revolute. 656 00:33:00,000 --> 00:33:03,320 Speaker 2: Okay, of Revolute is an example. Okay, what you do, folks? 657 00:33:03,320 --> 00:33:05,760 Speaker 2: So way we rock on YouTube. You can see this 658 00:33:06,000 --> 00:33:09,240 Speaker 2: when Meredith Whitney walks in the studio. I use the 659 00:33:09,480 --> 00:33:15,120 Speaker 2: HP twelve c. Apple just hit five trillion dollars. I 660 00:33:15,240 --> 00:33:17,440 Speaker 2: went back to the beginning of the boom after you 661 00:33:17,520 --> 00:33:20,240 Speaker 2: know the jobs and all that, just the long tim 662 00:33:20,320 --> 00:33:23,160 Speaker 2: cook log boom. Of course, from Meredith Whitney, I went 663 00:33:23,280 --> 00:33:27,720 Speaker 2: logarithmic in even one standard deviation below the long term trend. 664 00:33:28,360 --> 00:33:31,240 Speaker 2: In June of twenty twenty eight, it hits six trillion. 665 00:33:31,800 --> 00:33:35,080 Speaker 2: We don't extrapolate like that, do we. We don't. We're 666 00:33:35,200 --> 00:33:37,000 Speaker 2: so wrapped up in the day to day go to 667 00:33:37,120 --> 00:33:40,680 Speaker 2: cash and all that. We just don't do simple extrapolations 668 00:33:41,000 --> 00:33:42,520 Speaker 2: of Visa or Apple. 669 00:33:42,280 --> 00:33:46,840 Speaker 10: Dewey No or the all time greatest stock is Microsoft, 670 00:33:47,000 --> 00:33:49,960 Speaker 10: right in terms of the all time greatest compounder, which 671 00:33:50,040 --> 00:33:52,680 Speaker 10: is Microsoft. I mean, I think that we're all so 672 00:33:52,920 --> 00:33:55,600 Speaker 10: short term and the short term. I mean I took 673 00:33:55,640 --> 00:33:58,640 Speaker 10: a long term view of the banks. I took over 674 00:33:58,680 --> 00:34:00,920 Speaker 10: the last few weeks to see what their real earnings 675 00:34:00,960 --> 00:34:03,920 Speaker 10: power was and how they were growing or how they 676 00:34:03,960 --> 00:34:08,160 Speaker 10: weren't growing tangible book and most of the earnings growth 677 00:34:08,400 --> 00:34:10,920 Speaker 10: has been through share buybacks. So if you look at 678 00:34:10,960 --> 00:34:15,400 Speaker 10: City for example, their tangible equity is below what it 679 00:34:15,680 --> 00:34:22,000 Speaker 10: was before the Great Financial Crisis, so they've just been 680 00:34:22,040 --> 00:34:25,839 Speaker 10: buying back shares. Otherwise they would have negative earnings growth. 681 00:34:26,600 --> 00:34:32,120 Speaker 10: WELLS Fargo has barely grown so ten percent in terms 682 00:34:32,200 --> 00:34:35,760 Speaker 10: of tangible equity. You know, JP Morgan again an outlier. 683 00:34:35,840 --> 00:34:39,560 Speaker 10: These guys aren't growing. You know, the outliers are by 684 00:34:39,640 --> 00:34:42,760 Speaker 10: comparison to a Microsoft or an Apple that have genuine, 685 00:34:42,840 --> 00:34:46,600 Speaker 10: real earnings growth. The banks just haven't haven't had it, 686 00:34:46,920 --> 00:34:50,120 Speaker 10: and so they can get it through some transformational deals. 687 00:34:50,239 --> 00:34:51,920 Speaker 10: But you're sitting in. 688 00:34:52,520 --> 00:34:54,880 Speaker 2: Predicting basically, is that the roll up continues. 689 00:34:55,120 --> 00:35:00,560 Speaker 10: Well, I'm thinking that the other banks don't have will 690 00:35:00,640 --> 00:35:02,759 Speaker 10: I will be a lady here. They don't have the 691 00:35:03,440 --> 00:35:06,880 Speaker 10: hood spot to actually lead and do a deal. Whereas 692 00:35:06,960 --> 00:35:10,799 Speaker 10: I think JP Morgan is the only bank followed by 693 00:35:10,880 --> 00:35:15,120 Speaker 10: probably P and C that has the real confidence and 694 00:35:15,280 --> 00:35:18,600 Speaker 10: confidence of the board to lead doing deals, and then 695 00:35:18,680 --> 00:35:19,480 Speaker 10: others may follow. 696 00:35:19,920 --> 00:35:23,520 Speaker 3: Where are the banks in terms of getting out of 697 00:35:23,560 --> 00:35:25,560 Speaker 3: the doghouse that they found themselves in after the Great 698 00:35:25,600 --> 00:35:28,279 Speaker 3: Financial Crisis? Are they completely out? Are they are we 699 00:35:28,400 --> 00:35:31,560 Speaker 3: back to kind of pre financial crisis in terms of 700 00:35:31,600 --> 00:35:35,759 Speaker 3: their ability to return capital, make acquisitions just from regular persons. Yeah. 701 00:35:35,760 --> 00:35:37,360 Speaker 10: I think that this is a whole new world. This 702 00:35:37,400 --> 00:35:39,800 Speaker 10: administration is a whole new world. So JP Morgan and 703 00:35:39,800 --> 00:35:42,200 Speaker 10: Goldman Sachs got out of the doghouse in twenty ten 704 00:35:42,320 --> 00:35:44,600 Speaker 10: and started buying back. They were the first, and then 705 00:35:46,400 --> 00:35:51,680 Speaker 10: Bank America City Wells that was twenty fifteen. But they've 706 00:35:51,719 --> 00:35:54,160 Speaker 10: been slow and I think, you know, Wells just got 707 00:35:54,200 --> 00:35:57,640 Speaker 10: over it just got out from under its asset cap. 708 00:35:58,000 --> 00:36:01,480 Speaker 10: So I think they're out, But I think they've got PTSD. 709 00:36:01,560 --> 00:36:05,399 Speaker 10: I mean the M and A that occurred during during 710 00:36:05,480 --> 00:36:08,879 Speaker 10: the financial crisis and right after that financial crisis left 711 00:36:08,880 --> 00:36:10,920 Speaker 10: a lot of the banks with PTSD. So you look 712 00:36:11,000 --> 00:36:17,359 Speaker 10: at Washington Mutual and bear Stearns, traumatic for JP Morgan, countrywide, 713 00:36:17,680 --> 00:36:21,440 Speaker 10: traumatic for Bank of America, and green Sky just an 714 00:36:21,520 --> 00:36:24,520 Speaker 10: egg on face for Goldman Sacks. So, and you know, 715 00:36:24,600 --> 00:36:28,719 Speaker 10: Morgan Stanley Great E Trade acquisition, but it's still digesting. 716 00:36:28,800 --> 00:36:31,600 Speaker 2: With the bank were read to go here. But Meredith, 717 00:36:31,760 --> 00:36:36,000 Speaker 2: within the Meredith Whitney five years or even ten years, 718 00:36:36,640 --> 00:36:39,879 Speaker 2: do the banks have the profit in free cash flow 719 00:36:39,960 --> 00:36:43,239 Speaker 2: to still raise dividends and deploy cash to shareholders? 720 00:36:43,440 --> 00:36:44,719 Speaker 10: I think if they did the right thing, I mean, 721 00:36:44,760 --> 00:36:48,560 Speaker 10: I think that if JP Morgan is an outside, an outlier, 722 00:36:48,600 --> 00:36:51,520 Speaker 10: but it can. It can if it does something big, 723 00:36:51,640 --> 00:36:54,640 Speaker 10: which I think it will do absolutely. 724 00:36:54,080 --> 00:36:55,600 Speaker 2: Well, the government constrain them. 725 00:36:57,040 --> 00:36:59,000 Speaker 10: It's up to the E. I think it's more the 726 00:36:59,160 --> 00:37:02,600 Speaker 10: EU allowing that deal to go inter then the I 727 00:37:02,640 --> 00:37:04,719 Speaker 10: don't think the US government's going to constrain them. And 728 00:37:04,840 --> 00:37:07,960 Speaker 10: by the way, this administration with just barely two years, 729 00:37:08,120 --> 00:37:09,880 Speaker 10: you know, just over two years left, the time is 730 00:37:09,960 --> 00:37:10,560 Speaker 10: now we. 731 00:37:10,600 --> 00:37:12,839 Speaker 2: Got to run. This has been fabulous Meredith Whitney, thank 732 00:37:12,880 --> 00:37:16,319 Speaker 2: you so much for joining us today. Meredith Whitney at 733 00:37:16,400 --> 00:37:19,239 Speaker 2: group here, really really interesting on the banks always and 734 00:37:19,640 --> 00:37:23,160 Speaker 2: a major shout out to her call on visa literally 735 00:37:23,400 --> 00:37:25,200 Speaker 2: a decade and a half ago that has been a 736 00:37:25,360 --> 00:37:27,160 Speaker 2: juggernaut winner for here. 737 00:37:27,840 --> 00:37:32,640 Speaker 1: This is the Bloomberg Surveillance podcast, available on Apple, Spotify, 738 00:37:32,800 --> 00:37:37,080 Speaker 1: and anywhere else you get your podcasts. Listen live each weekday, 739 00:37:37,239 --> 00:37:40,200 Speaker 1: seven to ten am Easter and on bloomberg dot Com, 740 00:37:40,600 --> 00:37:44,359 Speaker 1: the iHeartRadio app, tune In, and the Bloomberg Business app. 741 00:37:44,719 --> 00:37:47,800 Speaker 1: You can also watch us live every weekday on YouTube 742 00:37:48,120 --> 00:37:50,120 Speaker 1: and always on the Bloomberg Terminal