WEBVTT - Bloomberg Surveillance TV: April 10, 2025 0:00:02.400 --> 0:00:06.760 Bloomberg Audio Studios, Podcasts, radio news. 0:00:11.600 --> 0:00:15.440 This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along 0:00:15.440 --> 0:00:18.400 with Lisa Bromwitz and am Marie Hordern. Join us each 0:00:18.480 --> 0:00:21.360 day for insight from the best in markets, economics, and 0:00:21.400 --> 0:00:24.720 geopolitics from our global headquarters in New York City. We 0:00:24.760 --> 0:00:27.400 are live on Bloomberg Television weekday mornings from six to 0:00:27.480 --> 0:00:31.000 nine am Eastern. Subscribe to the podcast on Apple, Spotify 0:00:31.200 --> 0:00:33.479 or anywhere else you listen, and as always on the 0:00:33.479 --> 0:00:37.160 Bloomberg Terminal and the Bloomberg Business app. A wild start 0:00:37.240 --> 0:00:39.720 of the week in financial markets, Ross coasterriokat Black Rock 0:00:39.800 --> 0:00:41.680 joins us now for more RUSS A big change, and 0:00:41.720 --> 0:00:43.519 you turn from the President of the United States. Is 0:00:43.560 --> 0:00:45.920 it making more bullish on equities or on bonds? 0:00:47.360 --> 0:00:52.080 I say it right now, it makes us cautious. Good morning, Johnathan. 0:00:52.520 --> 0:00:55.600 We've been pulling in risk for a while. Clearly yesterday 0:00:55.720 --> 0:00:58.880 was the relief. Market took it as such. But you know, 0:00:58.960 --> 0:01:01.240 as I just looking at a fourth this morning, you're 0:01:01.240 --> 0:01:05.720 often get these big rallies during periods of turbulence. Our 0:01:05.800 --> 0:01:08.720 view is that you're still in an environment where policy 0:01:08.800 --> 0:01:13.399 uncertainty is heightened. You're also an environment that whatever you 0:01:13.600 --> 0:01:17.520 came into twenty twenty five, whatever your economic assumptions were, 0:01:17.920 --> 0:01:20.160 they've got to be lower today. So if we've got 0:01:20.200 --> 0:01:25.360 a world of higher uncertainty, probably higher volatility, slower growth, 0:01:25.440 --> 0:01:28.280 you've got to adjust the portfolio accordingly Russ. 0:01:28.319 --> 0:01:30.440 In the past, that would mean going to bonds. This 0:01:30.560 --> 0:01:33.919 time around, is that still true, Well. 0:01:33.760 --> 0:01:37.480 We have been raising our allocation to bonds. We were underweight, 0:01:37.880 --> 0:01:39.520 as you might remember. You know, over the last few 0:01:39.560 --> 0:01:42.559 years have been talking about it generally modestly underweight bonds, 0:01:42.600 --> 0:01:44.640 particularly on the long end of the curve. We've been 0:01:44.640 --> 0:01:47.600 bringing that back closer to benchmark. And I'd say that 0:01:47.800 --> 0:01:50.960 is more of a reflection of the economic environment than 0:01:51.040 --> 0:01:53.400 trying to make a bet on policy. And now, if 0:01:53.400 --> 0:01:55.720 you do have an environment where growth is going to 0:01:55.720 --> 0:01:59.480 be slower, it's not crazy that your bond allocation is 0:01:59.480 --> 0:02:01.480 going to be closed their home. But by the way, 0:02:01.480 --> 0:02:03.640 we've done a similar thing in equities. We brought our 0:02:03.680 --> 0:02:07.920 equity allocation down closer to benchmark. So what's happened generally 0:02:08.040 --> 0:02:11.440 lowering the risk of the portfolio in this type of environment. 0:02:12.160 --> 0:02:14.000 Rather than a strong bed on you want to be 0:02:14.040 --> 0:02:16.440 in bonds and equities you want to bring risks down. 0:02:16.680 --> 0:02:20.720 Maybe the larger question is US assets versus XUS assets. 0:02:20.760 --> 0:02:22.720 At a time where the source of volatility is the 0:02:22.800 --> 0:02:25.160 United States, and this has to do with bonds, but 0:02:25.320 --> 0:02:29.440 more broadly with dollar denominated assets, does it make you 0:02:29.800 --> 0:02:33.760 rethink some of what you have in your portfolio based 0:02:33.800 --> 0:02:37.120 on where the source of volatility has been coming from. 0:02:37.600 --> 0:02:39.679 This is a great question. I think this is actually 0:02:39.760 --> 0:02:41.840 a harder question to answer. But what I would say 0:02:41.880 --> 0:02:44.200 is I don't think you have a Kneiser reaction to 0:02:44.280 --> 0:02:47.720 move away from dollar assets. A couple points. First of all, 0:02:47.800 --> 0:02:51.400 we might remember twenty eleven during the debt sealing crisis, 0:02:51.680 --> 0:02:55.120 the US gets downgrade and the epicenter of the crisis, 0:02:55.320 --> 0:02:59.520 what happens, Treasury bonds go up. The dollar is still 0:02:59.560 --> 0:03:01.799 the reserve currency. We can debate what's going to happen 0:03:01.840 --> 0:03:04.200 in five or ten years. It is still a safe 0:03:04.280 --> 0:03:07.640 haven asset, and I do think that you've got to 0:03:07.639 --> 0:03:11.040 be skeptical about calling the end of dollar dominance. The 0:03:11.120 --> 0:03:12.760 other point, in the equity side, you know we are 0:03:12.840 --> 0:03:16.200 still modestly overweight the US. Now, why would you do 0:03:16.240 --> 0:03:19.160 that with all the turbulence. Going on simple answer, we 0:03:19.240 --> 0:03:23.000 still find better companies in the US. We think about 0:03:23.000 --> 0:03:25.520 what do we want in this environment. We want profitability, 0:03:25.800 --> 0:03:29.240 We want companies that can generate consistent earnings. Still find 0:03:29.320 --> 0:03:32.320 more of those companies in the US rather than Europe 0:03:32.360 --> 0:03:35.640 or Japan. So to my mind, even with the turbulence, 0:03:35.680 --> 0:03:38.240 from a bottom up perspective, still in an argument to 0:03:38.280 --> 0:03:40.440 be modestly overweight the US. 0:03:40.640 --> 0:03:44.040 Given all the uncertainty, even whether or not Trump decides 0:03:44.080 --> 0:03:47.040 to blank walk off the cliff, give these reprieves. 0:03:47.080 --> 0:03:48.120 Do you still like gold? 0:03:49.280 --> 0:03:50.120 We do like gold. 0:03:50.600 --> 0:03:52.320 You know again, they have to trade around it. It's 0:03:52.320 --> 0:03:56.080 been a huge move. We like gold back six months ago. 0:03:56.200 --> 0:03:59.040 We definitely like it today. A couple of reasons. First 0:03:59.080 --> 0:04:02.000 of all, you know m range, as you suggest, still 0:04:02.120 --> 0:04:05.320 a asset that works during times of turbulence. You look 0:04:05.360 --> 0:04:08.320 at the performance of gold when volatilities rising again. I 0:04:08.320 --> 0:04:10.240 think it's safe to say we'll probably in a more 0:04:10.320 --> 0:04:13.920 vol environment, generally does very well of over stocks. The 0:04:13.960 --> 0:04:18.159 other argument is the long term fiscal picture. One of 0:04:18.160 --> 0:04:20.640 the reasons we like gold is you can't print more 0:04:20.680 --> 0:04:23.360 of it. It is a store of value. It's still 0:04:23.400 --> 0:04:26.920 not obvious that there's going to be a significant improvement 0:04:26.920 --> 0:04:29.479 in the fiscal picture. If we are an environment of 0:04:29.520 --> 0:04:33.160 these two trillion dollars structural deficits, They're not necessarily going 0:04:33.160 --> 0:04:37.160 away having something that can't you can't increase the supply. 0:04:37.640 --> 0:04:39.479 It is a store of value of the portfolio. We 0:04:39.520 --> 0:04:41.920 think that makes sense over the longer term. 0:04:42.040 --> 0:04:43.680 Russ just wanted to jump in with some news now 0:04:43.760 --> 0:04:46.120 to the European Union. The headline just crossing the Bloomberg 0:04:46.200 --> 0:04:50.600 terminal that the EU is considering pausing counter tariffs against 0:04:50.600 --> 0:04:53.160 the United States for ninety days, in line with that 0:04:53.240 --> 0:04:56.159 ninety day pause that the President announced just yesterday. Just 0:04:56.200 --> 0:04:59.080 taking the temperature down just a bit more this morning. 0:04:59.240 --> 0:05:01.320 And I also think the European Union is looking around 0:05:01.320 --> 0:05:03.279 the room and saying, look what's going on with Japan, 0:05:03.360 --> 0:05:05.680 Look what's going on in South Korea. They are pushing 0:05:05.680 --> 0:05:07.680 out all of branches. They are saying they want to 0:05:07.680 --> 0:05:10.080 do deals with this president. He's come out and said, 0:05:10.080 --> 0:05:12.200 you're going to get a ninety day reprieve, So why 0:05:12.240 --> 0:05:15.479 should we escalate at this moment? Maybe we should send 0:05:15.480 --> 0:05:17.840 a team over and try to de escalate and come 0:05:17.880 --> 0:05:18.840 to a trade agreement. 0:05:18.960 --> 0:05:20.919 The lyceis headline from the team here at Bloomberg that 0:05:20.960 --> 0:05:24.160 the European Union is considering pausing counter tariff against the 0:05:24.240 --> 0:05:27.159 United States on metals for ninety days. Russ. Just to 0:05:27.160 --> 0:05:28.760 bring it back into the conversation as we take the 0:05:28.800 --> 0:05:31.880 temperature down worldwide, how close did we come to an 0:05:31.880 --> 0:05:34.400 accident in this bond market? What did you see developing 0:05:34.839 --> 0:05:36.960 in the previous few days coming into the announcement from 0:05:37.000 --> 0:05:40.520 the President just yesterday afternoon. Well, I think the. 0:05:40.480 --> 0:05:43.160 Bond market move was definitely something we're paying attention, and 0:05:43.200 --> 0:05:45.680 it was not just the treasure market. You'll remember that 0:05:46.240 --> 0:05:49.760 during the initial phases of the selloff, credit markets were 0:05:49.800 --> 0:05:53.520 remarkably well behaved. That all started to change on Friday. 0:05:53.760 --> 0:05:56.719 We saw spreads back up dramatically. I think that gave 0:05:56.760 --> 0:06:00.160 a lot of people pause because now it's not just 0:06:00.200 --> 0:06:02.240 a matter of growth, it's a matter of liquidity. It's 0:06:02.279 --> 0:06:05.840 a matter of what's happening with the availability of credit, 0:06:06.040 --> 0:06:09.680 and that was something that definitely unnerved investors. If you 0:06:09.720 --> 0:06:14.240 see the bond market calming down, it's definitely development that's 0:06:14.240 --> 0:06:16.159 going to give a little bit more comfort to the 0:06:16.200 --> 0:06:17.400 equity side of the market. 0:06:17.560 --> 0:06:19.599 Things setting down in the bond market this morning. Ross 0:06:19.600 --> 0:06:32.560 appreciate your time. Rouss Costrict of Bland Troup, rita's center 0:06:32.560 --> 0:06:35.719 of Energy Aspects, writing, Trump needs higher supplies to lower 0:06:35.720 --> 0:06:38.160 oil prices in a manner that can provide a tailwind 0:06:38.160 --> 0:06:41.719 for global growth as an offset to his tariff policies. Instead, 0:06:42.040 --> 0:06:45.799 tariff will lead to lower oil prices by hurting demand growth. 0:06:45.920 --> 0:06:48.039 And Rita joined us now for more and Rita, welcome 0:06:48.080 --> 0:06:50.000 to the program. You made some headlines in the past 0:06:50.040 --> 0:06:52.520 few days on some very very low numbers in the 0:06:52.520 --> 0:06:54.520 crude markets. So what do you expecting now. 0:06:57.080 --> 0:07:00.720 Well, I think the prices, the general trajectory is still lower. 0:07:01.400 --> 0:07:03.120 I know there's been a ninety day pause. We saw 0:07:03.160 --> 0:07:05.360 a little bit of a bounce, but ultimately, if you 0:07:05.400 --> 0:07:11.000 look at the trade weighted tariffs reciprocal tariffs globally on 0:07:11.040 --> 0:07:13.800 the second of April, it was actually nineteen point one percent. 0:07:14.400 --> 0:07:18.160 Yesterday it was twenty six point two percent despite the pause, 0:07:18.680 --> 0:07:21.880 because of just how much the China bit has escalated. 0:07:22.160 --> 0:07:24.520 It just tells you that that is ultimately the one 0:07:24.560 --> 0:07:27.080 that matters the most when it comes to kind of 0:07:27.080 --> 0:07:30.560 global growth. Of course, it's better news for some of 0:07:30.600 --> 0:07:32.760 the countries some of those tariffs have been paused, but 0:07:32.840 --> 0:07:34.640 like you guys were saying just now as well, there 0:07:34.680 --> 0:07:38.360 is there is definitely no certainty that they will remain off. 0:07:39.200 --> 0:07:41.440 We are hearing more and more from our clients that 0:07:41.520 --> 0:07:46.200 consumer and a particularly business sentiment has completely come to 0:07:46.240 --> 0:07:49.920 a stall. Nobody's investing, there's no capex investment, and we're 0:07:49.920 --> 0:07:52.120 going to see a pretty big demand hit. We've just 0:07:52.200 --> 0:07:54.680 reduced our oil demand number for the second half of 0:07:54.680 --> 0:07:57.400 the year by four hundred and fifty thousand barrels per day, 0:07:57.440 --> 0:08:00.000 the same for twenty twenty six. So I just don't 0:08:00.120 --> 0:08:02.480 see how oil prices are going to start moving higher 0:08:02.520 --> 0:08:05.239 anytime soon until we see the supply response. 0:08:05.360 --> 0:08:07.280 How loo are we talking, Amerta, Do you think oil 0:08:07.320 --> 0:08:08.040 prices can go? 0:08:10.760 --> 0:08:10.840 So? 0:08:10.920 --> 0:08:14.040 Look, the difference now versus in the past cycles is 0:08:14.040 --> 0:08:17.000 that the shale breake events are higher. And when I 0:08:17.080 --> 0:08:19.120 was there just last week as well, I would say 0:08:19.120 --> 0:08:22.000 my biggest takeaway was that outside of the Permian, all 0:08:22.000 --> 0:08:24.920 the other basins you're talking about like in the sixties, 0:08:24.960 --> 0:08:27.960 well into the high sixties in some basins which are 0:08:27.960 --> 0:08:30.400 now their break events. At the Permian it's in the fifties, 0:08:30.680 --> 0:08:33.880 but that is effectively the flaw. The difference is it's 0:08:33.920 --> 0:08:34.840 the timing of it. 0:08:35.000 --> 0:08:35.160 Right. 0:08:35.200 --> 0:08:38.240 We need to be here for one whole quarter before 0:08:38.280 --> 0:08:41.920 supply response, and the response will be significant this time around. 0:08:42.000 --> 0:08:44.240 You are going to lose a few hundred thousand barrels 0:08:44.240 --> 0:08:47.120 per day pretty quickly. But it is just that timing 0:08:47.200 --> 0:08:50.880 like in that within that timeframe, prices can continue to 0:08:50.920 --> 0:08:54.240 go lower. I remember there's positioning driven. A lot of 0:08:54.240 --> 0:08:57.200 this is positioning driven, and people are just liquidating positions. 0:08:57.200 --> 0:09:00.080 So then it just becomes a number. But ultimately the 0:09:00.080 --> 0:09:02.360 floor should be around where we are now, maybe a 0:09:02.360 --> 0:09:06.120 couple of dollars lower. But I don't necessarily see sustained 0:09:06.200 --> 0:09:10.079 prices in the forties or the fifties, but we can 0:09:10.160 --> 0:09:12.439 absolutely test the four handle in the short term. 0:09:12.720 --> 0:09:15.200 I know that opek plus in Saudi Arabia says they 0:09:15.200 --> 0:09:18.840 do not target price, but given this environment you're describing, 0:09:18.960 --> 0:09:21.280 why did they go further and add even more barrels 0:09:21.280 --> 0:09:21.920 to the market. 0:09:24.280 --> 0:09:26.480 Yeah, I mean, look, the timing of it is obviously 0:09:26.559 --> 0:09:29.319 left to plenty of rumors about like, you know, were 0:09:29.360 --> 0:09:31.920 they doing this on the back of tariffs or to 0:09:31.960 --> 0:09:34.720 a peace. President Trump ahead of his visit to the Kingdom. 0:09:35.040 --> 0:09:38.600 In reality, OPEK just has its own timelines for doing things. 0:09:38.840 --> 0:09:41.480 The Saudi OSB always comes out around the fifth of 0:09:41.520 --> 0:09:43.959 the month, so they had to take the decision before that. 0:09:44.200 --> 0:09:46.840 So it was an unfortunate timing. But the decision was 0:09:47.000 --> 0:09:50.520 entirely to do with internal OPEC dynamics. As we've been saying, 0:09:50.840 --> 0:09:53.319 you know, we have seen laggards, a couple of you know, 0:09:53.880 --> 0:09:57.400 ops in Middle Eastern countries itself, but it's mainly Kazakhstan. 0:09:57.440 --> 0:10:00.000 If you look at Kazakhstan's production, four hundred thousand barrels 0:10:00.040 --> 0:10:02.560 bit higher than where they are meant to be, and 0:10:02.640 --> 0:10:05.400 they are just not showing any signs of coming off. 0:10:05.440 --> 0:10:08.400 And I think that is where I worry even for 0:10:08.480 --> 0:10:11.680 next month, regardless of price, because if this is about 0:10:11.760 --> 0:10:16.440 getting cohesion and getting the message across that everybody needs 0:10:16.480 --> 0:10:19.800 to do their bit, then it will not matter until 0:10:19.840 --> 0:10:22.600 Anonilyst Prince Abdilacy sees that compliance number. 0:10:22.600 --> 0:10:24.120 Pick up, let's put. 0:10:24.000 --> 0:10:26.439 That into English. Basically, this is all designed to punish 0:10:26.960 --> 0:10:30.679 Kazakhstan with lower oil prices for a margin grab unless 0:10:30.679 --> 0:10:32.520 they're into compliance and then there can be some sort 0:10:32.559 --> 0:10:33.080 of agreement. 0:10:36.120 --> 0:10:38.400 Yes, I think long story short, that's it, and not 0:10:38.400 --> 0:10:40.439 just Kassakhs and the few of the laggods. But yes, 0:10:40.480 --> 0:10:43.240 it's to say that cuts need to be equitable. It 0:10:43.280 --> 0:10:45.760 can't just be Saudi Arabia that carries the cuts for. 0:10:45.720 --> 0:10:47.720 Everybody at a certain point. 0:10:47.920 --> 0:10:50.600 There's also a knock und effect that this potentially could 0:10:50.640 --> 0:10:54.239 become punitive at that kind of level for US jail producers, 0:10:54.440 --> 0:10:58.319 for the US oil ex board system. That has been 0:10:58.559 --> 0:11:00.320 one of the drivers of a lot of growth that 0:11:00.320 --> 0:11:03.160 we've seen in the United States and the GDP here for. 0:11:03.080 --> 0:11:04.199 The past decade. 0:11:04.280 --> 0:11:08.400 I'm just wondering at what point that factors in as well. 0:11:08.559 --> 0:11:08.760 Well. 0:11:08.760 --> 0:11:10.559 That's what I was saying just now. Right, the shale 0:11:10.720 --> 0:11:13.760 break events are significantly higher narn, which is why I 0:11:13.800 --> 0:11:17.520 was saying that I don't see prices sustainably going below 0:11:17.920 --> 0:11:20.839 fifty five to sixty or even sixty five. But in 0:11:20.880 --> 0:11:22.840 the short term it could be because even at these 0:11:22.880 --> 0:11:25.760 price levels, we are hearing from our shale producer clients 0:11:25.960 --> 0:11:28.680 that they have just stopped drilling, or they're planning to 0:11:28.679 --> 0:11:31.600 stop drilling. They could even drop rigs. You're going to 0:11:31.640 --> 0:11:35.720 see a very significant turned down in shale production very quickly, 0:11:36.000 --> 0:11:38.200 and like you said that, and we forget this. We 0:11:38.240 --> 0:11:40.520 tend to talk about the US as a consumer nation. 0:11:40.960 --> 0:11:44.800 Production and given how much US production is, production is 0:11:44.840 --> 0:11:46.920 a huge part of US GDP. 0:11:47.080 --> 0:11:49.480 Right now, I'm Rachel just quickly. We've seen commodities drop 0:11:49.520 --> 0:11:51.760 across the board over the past week or so. See 0:11:51.840 --> 0:11:54.800 some evidence that particularly with copper, Chinese buyers might be 0:11:54.800 --> 0:11:57.080 stepping back in I had of stimulus, so you're seeing 0:11:57.120 --> 0:12:01.079 anything like that. With crude, we've. 0:12:00.920 --> 0:12:03.320 Seen a little bit here and there, but I do 0:12:03.360 --> 0:12:07.160 think right now there's just a bit more panic because 0:12:07.640 --> 0:12:10.080 it's still a moving target. They have come out with 0:12:10.120 --> 0:12:12.600 an SBR program as well, saying that we need to 0:12:12.600 --> 0:12:15.480 stalk pile, but that's really from July onwards. The biggest 0:12:15.520 --> 0:12:17.360 hit is actually going to be on lpg F in 0:12:17.440 --> 0:12:21.560 in particular, and propine foods still okay, but the physical 0:12:21.559 --> 0:12:23.840 market is actually still very strong, even in the East. 0:12:23.840 --> 0:12:25.880 It's you know, stocks are still drawing. But it is 0:12:25.960 --> 0:12:27.920 really about the fear of the future. 0:12:28.160 --> 0:12:30.559 Got it, and Racha appreciate the update. Thank you and 0:12:30.720 --> 0:12:42.400 Rach to send there of energy aspect Erica and a 0:12:42.480 --> 0:12:45.160 Jeron of UBS writing management teams are between a rock 0:12:45.280 --> 0:12:47.800 and a hard place, as any outlook seen as quite 0:12:47.840 --> 0:12:51.600 bearish could also punish the sector. Erica joins a snapper 0:12:51.640 --> 0:12:53.520 more Erica always good to see you get to see. 0:12:53.640 --> 0:12:55.280 What do they tell us the Morrow monic? What can 0:12:55.320 --> 0:12:55.880 they tell us? 0:12:56.200 --> 0:12:58.360 What can they tell us that will matter? A lot 0:12:58.400 --> 0:13:01.760 of investors are thinking that whatever they'll say, which is 0:13:01.800 --> 0:13:04.280 actually not so bad, is going to be seen as 0:13:04.320 --> 0:13:07.679 backward looking. Now, I think there are really two things 0:13:07.720 --> 0:13:12.120 that investors are looking for. Number One, are activity levels 0:13:12.160 --> 0:13:15.440 now just permanently impaired from both the corporate side and 0:13:15.480 --> 0:13:19.480 the consumer side. So clearly we had this animal spirits 0:13:19.679 --> 0:13:22.040 economy that we really wanted to come through. 0:13:22.679 --> 0:13:25.880 And if you're a corporation, how do you make decisions 0:13:25.960 --> 0:13:27.559 in this environment? 0:13:27.760 --> 0:13:28.000 Right? 0:13:28.440 --> 0:13:31.640 And so as you think about investment, banking and loan 0:13:31.679 --> 0:13:34.400 growth and commercial you would think that has to be 0:13:34.520 --> 0:13:35.640 at least delayed. 0:13:35.960 --> 0:13:37.080 Although I wonder. 0:13:36.800 --> 0:13:40.600 If the equity market continues to rally obviously not today, 0:13:41.120 --> 0:13:43.280 but I wonder if there's some deals that it's going 0:13:43.320 --> 0:13:45.640 to get pushed through the pipeline over the short term. 0:13:45.960 --> 0:13:49.440 On the consumer, you know, American Express is not normally 0:13:49.480 --> 0:13:52.559 seen as a bell weather report, but given that ten 0:13:52.600 --> 0:13:56.160 percent of Americans account for or high end Americans that 0:13:56.240 --> 0:13:58.400 make two fifty account for fifty percent of the spend. 0:13:58.800 --> 0:14:01.240 All of a sudden, there a bell the report because 0:14:01.280 --> 0:14:04.600 if they're slowing down, that's not good for consumer activity 0:14:04.600 --> 0:14:05.520 for the rest of the year. 0:14:05.640 --> 0:14:07.200 So the banks are the best data points we have 0:14:07.240 --> 0:14:09.240 at the moment. It's the best real time data. We'll 0:14:09.280 --> 0:14:11.040 get a lot of people look at payrolls and just 0:14:11.080 --> 0:14:13.280 set that old news. When you were in touch with 0:14:13.320 --> 0:14:15.280 the management teams over the past few days, you put 0:14:15.320 --> 0:14:18.240 together a picture of where things are act currently. What 0:14:18.240 --> 0:14:20.240 are they telling you about activity at the moment? If 0:14:20.240 --> 0:14:21.280 things slowed down. 0:14:21.480 --> 0:14:22.160 Things are slow. 0:14:22.360 --> 0:14:24.560 If you look at the regulatory data and you catch 0:14:24.640 --> 0:14:28.080 up with the banks and commercial activity, it's slow, it's 0:14:28.160 --> 0:14:31.640 quite flat. And if you look at the geologic data, 0:14:31.680 --> 0:14:35.760 I mean it's depressing. The whole capital markets renaissance is 0:14:35.840 --> 0:14:39.600 just not quite happening. But trading, you know, as you 0:14:39.600 --> 0:14:42.400 can imagine, given all this volatility. 0:14:41.800 --> 0:14:44.680 Trading could be lights out for this quarter. Okay, hold 0:14:44.720 --> 0:14:45.280 on a second. 0:14:45.400 --> 0:14:47.200 I remember when we used to get volatility and it 0:14:47.240 --> 0:14:49.240 was good volatility, and then it was bad volatility. And 0:14:49.320 --> 0:14:51.160 volatility isn't always a good thing. So is this good 0:14:51.200 --> 0:14:53.680 volatility or bad volatility in terms of bank profits? 0:14:53.720 --> 0:14:56.800 So so far again, you know, speaking about backward looking. 0:14:56.880 --> 0:14:58.520 If you think about the month of March and think 0:14:58.520 --> 0:15:02.720 about the equity market volatility, sell side desks are typically 0:15:02.720 --> 0:15:04.360 long volatility, so that could. 0:15:04.160 --> 0:15:04.840 Be good for them. 0:15:05.040 --> 0:15:07.160 Now it makes me nervous, is what's been happening to 0:15:07.200 --> 0:15:10.880 the treasury market in terms of dealer capacity. So the 0:15:10.960 --> 0:15:13.800 key question for the month of April is, you know, 0:15:13.920 --> 0:15:17.080 is there something going to happen? Is there bad volatility 0:15:17.120 --> 0:15:20.200 now happening in the fixed income markets? That is not 0:15:20.280 --> 0:15:22.320 going to be good news for the second quarter. 0:15:22.480 --> 0:15:24.640 So going forward, what do you think is going to 0:15:24.720 --> 0:15:26.960 potentially be the bigger driver? Is it going to be 0:15:27.040 --> 0:15:28.960 the trading side of things, or is it going to 0:15:28.960 --> 0:15:31.000 be the m and a wave that doesn't come to pass, 0:15:31.320 --> 0:15:33.520 or is it going to be deregulation which we've seen 0:15:33.600 --> 0:15:36.320 some of but not necessarily the full package. 0:15:36.400 --> 0:15:41.560 So investors just never really value trading earnings. 0:15:41.200 --> 0:15:43.800 Much, right, it's super volatile. It's like throwing a dart 0:15:43.840 --> 0:15:47.680 on the board. Who knows in any given quarter, right, I. 0:15:47.640 --> 0:15:51.960 Think what they're really looking for is, you know, honestly, 0:15:52.160 --> 0:15:55.480 any signs of credit at this point, because the reaction 0:15:55.800 --> 0:16:00.600 of banks up until yesterday really told me that investors 0:16:00.600 --> 0:16:03.520 were starting to worry about recession rather than just to 0:16:03.560 --> 0:16:07.400 slow down in activity levels. And so how they frame 0:16:07.520 --> 0:16:10.720 that in terms of preparedness having the earnings power to 0:16:10.840 --> 0:16:11.960 protect their capital. 0:16:12.320 --> 0:16:16.320 Let's say, if credit. 0:16:15.360 --> 0:16:18.920 Costs go up in anticipation of a tougher economy, I 0:16:18.960 --> 0:16:21.120 think that's what the market sort of needs to hear 0:16:21.480 --> 0:16:25.080 for now. On the deregulatory point, what's gotten lost in 0:16:25.200 --> 0:16:28.520 all of this is I feel like the deregulatory momentum 0:16:28.560 --> 0:16:31.160 and Trump two point zero is actually much stronger than 0:16:31.200 --> 0:16:31.800 Trump one point. 0:16:31.800 --> 0:16:31.880 Oh. 0:16:31.920 --> 0:16:33.000 I mean we went to that lunch. 0:16:33.000 --> 0:16:36.400 I mean he started off Secretary Besson started off with 0:16:36.440 --> 0:16:39.920 bank deregulation at this lunch with the Economic Club in 0:16:39.960 --> 0:16:42.080 New York, and everybody just wanted to talk about tariffs, 0:16:42.120 --> 0:16:44.880 and he started off with bank deg But for now, 0:16:45.000 --> 0:16:48.400 until we understand you know that they range of outcomes 0:16:48.400 --> 0:16:53.320 for the economy, the macro volatility uncertainty will trump the 0:16:53.520 --> 0:16:55.800 deregulatory positive catalyst. 0:16:56.040 --> 0:16:57.880 But do you even believe these CEOs when they come 0:16:57.880 --> 0:16:59.600 out and potentially say we're not gonna have a recession 0:16:59.680 --> 0:17:03.160 or we Goldman Sachs pulled their call yesterday after Trump 0:17:03.240 --> 0:17:03.720 came out and. 0:17:03.640 --> 0:17:07.720 Blanked again Rock in a hard place. Right. 0:17:07.840 --> 0:17:11.960 So, you know, if you think about how banks set 0:17:11.960 --> 0:17:13.920 credit costs, they think about the future, they think about 0:17:13.920 --> 0:17:16.639 the outlook, and they're saying to themselves, well, I have 0:17:16.680 --> 0:17:18.240 no you know, I don't. 0:17:18.000 --> 0:17:19.000 Know what the outlook is. 0:17:19.480 --> 0:17:23.000 So perhaps they're going to build reserves a little bit, 0:17:23.240 --> 0:17:25.479 but you don't have an inventory of losses that are 0:17:25.520 --> 0:17:25.920 coming down. 0:17:25.960 --> 0:17:26.639 The pipeline. 0:17:26.760 --> 0:17:30.920 Card delinquencies are actually flat to down, and commercial delinquents 0:17:31.080 --> 0:17:33.840 or non performing loans are pretty flat and improving. 0:17:34.400 --> 0:17:35.560 And so it's tough. 0:17:35.600 --> 0:17:39.320 But they have to talk defensively or else investors will 0:17:39.320 --> 0:17:40.720 think they're baring their head in the sand. 0:17:41.240 --> 0:17:43.040 It's an important point you brought up about Scott Besson 0:17:43.080 --> 0:17:44.560 at the Economic cub of New York where we saw 0:17:44.560 --> 0:17:47.480 each other last because he wanted to talk about deregulation 0:17:47.600 --> 0:17:49.359 and tax cuts, but the entire room wants to talk 0:17:49.359 --> 0:17:51.480 about tariffs. At the moment, there was all this unsurgerty 0:17:51.560 --> 0:17:52.280 what they were going to. 0:17:52.200 --> 0:17:52.840 Do with trade. 0:17:53.000 --> 0:17:57.119 When you take the entire policies of the Trump administration, deregulation, 0:17:57.240 --> 0:18:00.080 tax cuts, and tariffs. How much more constructive is that 0:18:00.160 --> 0:18:01.360 for banks towards your end? 0:18:02.320 --> 0:18:07.399 So deregulation is super super constructive, right, particularly as we 0:18:07.480 --> 0:18:10.600 start thinking about changes in the stress test, which I 0:18:10.600 --> 0:18:13.320 think could be a twenty twenty six catalyst. I know 0:18:13.359 --> 0:18:18.439 it's not five minutes from now, as we like, So deregulation. 0:18:17.800 --> 0:18:19.280 I think is a big catalyst. 0:18:19.520 --> 0:18:23.840 You know, tax cuts obviously, the continuation of you know, 0:18:24.119 --> 0:18:26.159 the tax cuts and jobs that would be you know, 0:18:26.240 --> 0:18:30.040 beneficial for corporate activity, But that's something that's already embedded, right, 0:18:30.119 --> 0:18:33.040 It's already baked in the base case. So just extending 0:18:33.040 --> 0:18:36.000 that isn't necessarily going to pump up activity, which goes 0:18:36.040 --> 0:18:39.359 back to trade. Right, it's like the big overhang that 0:18:40.160 --> 0:18:43.080 is overshadowing everything else that's good. 0:18:43.640 --> 0:18:44.360 So did the big. 0:18:44.200 --> 0:18:47.240 Banks benefit the most from deregulation and an uncertain regime 0:18:47.240 --> 0:18:49.240 where they consolidate a lot of trading volumes? 0:18:50.160 --> 0:18:52.720 So I think that in a deregulatory environment you get 0:18:52.760 --> 0:18:55.400 to unlock a lot of excess capital, and I think 0:18:55.480 --> 0:18:58.240 that's great. But if there's not a lot of demand 0:18:58.280 --> 0:19:01.439 for that capital other than trade, what good is it 0:19:01.520 --> 0:19:02.880 to unlock excess capital? 0:19:03.200 --> 0:19:04.400 Right? And by way. 0:19:04.760 --> 0:19:08.360 Remember, buybacks tend to be very pro cyclical, like if 0:19:08.359 --> 0:19:11.040 we're staring down the barrel of what we stared at 0:19:11.119 --> 0:19:13.480 last week. You know, I don't feel like bank management 0:19:13.480 --> 0:19:15.360